加载中...
共找到 17,517 条相关资讯
Operator: Good morning. My name is Bailey, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2025 Fourth Quarter Conference Call. This call is being recorded. Operator: All lines have been placed on mute to prevent any background noise. Operator: After the speakers' remarks, there will be a question and answer period. Participants today, it is now my pleasure to turn the floor over to Vice President of Investor Relations, Michael W. Barker. Michael W. Barker: Good morning, and thank you for joining us. I am pleased to be here today with President and Chief Executive Officer, Kyle T. Larkin, and Executive Vice President and Chief Financial Officer, Staci M. Woolsey. Please note that today's earnings presentation will be available on the Events and Presentations page of our Investor Relations website. We begin today with a brief discussion regarding forward-looking statements and non-GAAP measures. Some of the discussion today may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are estimates reflecting the current expectations and best judgment of senior management regarding future events, occurrences, opportunities, targets, growth, demand, strategic plans, circumstances, activities, performance, shareholder value, outcomes, outlook, guidance, objectives, committed and awarded projects or CAP, and results. Actual results may differ materially from statements made today. Please refer to Granite Construction Incorporated’s most recent 10-Ks and 10-Q filings for a more complete description of risk factors that could affect these forward-looking statements. The company assumes no obligation to update forward-looking statements, except as required by law. Certain non-GAAP measures may be discussed during today's call, from time to time by the company's executives. These include, but are not limited to, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, and cash gross profit. The required disclosures regarding our non-GAAP measures are included as part of our earnings press releases and in company presentations, which are available on our website graniteconstruction.com, under Investor Relations. Now I would like to turn the call over to Kyle T. Larkin. Good morning. Before we turn to the segment discussions, I would like to discuss the progress we have been making to deliver on our strategic priorities. In 2025, we continue to focus on bidding and building the right work, investing in our materials business, and expanding our geographic footprint through targeted M&A. Our strategy to drive consistent, predictable financial performance across the company is working. We remain highly selective in the work we pursue, emphasizing best value and high-quality bid-build opportunities in our home markets where we believe we can earn an appropriate return for the risk we assume in constructing these projects. This disciplined approach, combined with a strong funding environment, underpinned our efforts to build a strong project portfolio even as we grew our CAP to a record $7,000,000,000 at year end 2025, the highest in our history. Since 2020, our teams across the company have focused on pursuing the projects where we can leverage our home market advantages and consistently deliver higher margin work. This strategy enabled us to drive significant improvement in profitability from 8.8% Construction segment gross profit margin in 2020 to 15.7% in 2025, all while demonstrating the ability to organically grow the top line across our footprint. As I look at the landscape of the construction business entering 2026, I believe there are still significant public and private opportunities Kyle T. Larkin: to capture work in our home markets, even as we maintain discipline and work to continually drive excellence in execution in the bid room and every day on our job sites. During 2025, we also continue to invest in our Materials business, both through acquisitions and CapEx. We have now completed the second year following our internal reorganization where we restructured our businesses to place Materials leaders over our Materials business. This change has allowed these teams to direct our strategy across the segment as we work to unlock value through market-based pricing and through application of efficiencies across the segment. Over the last several years, we have focused our CapEx spend on the Materials segment to improve plant performance, acquire additional aggregate reserves, and expand our footprint. We have improved Materials segment cash gross profit from 19% in 2023 to 26% in 2025. The return on our investments has been exceptional. The team has many more initiatives in process, including partnering with our Construction teams to drive more tons to our plants by leveraging our vertical integration, and we expect to spend another $50,000,000 in strategic CapEx in the Materials business in 2026 to continue the strong momentum we built. In 2025, we completed three acquisitions, both expanding and strengthening our Southeast platform with the Warren Paving acquisition and strengthening the home markets in California and Nevada with the acquisitions of Pappage Construction and CinderLite. These margin-accretive acquisitions in strong, growing markets are representative of the acquisitions I expect to continue to complete in 2026. We expect acquisitions will continue to be a major component of our growth that should enhance the performance of the business in existing home markets and expand our footprint to new geographies. We expect to drive further gains and deliver significant shareholder value as we continue to execute on our strategic plan. We will continue to build a larger, higher-quality project portfolio even as we invest in and grow our vertically integrated model. These efforts position Granite Construction Incorporated for continued organic growth, margin expansion, and strong cash generation. We believe we are on track to achieve our 2027 financial targets supported by favorable market conditions, robust infrastructure funding, and consistent execution across the business. Turning now to the Construction segment. First, I want to say how excited I am about the performance of our Construction teams across the company. Their execution throughout the year was outstanding and a key driver of our strong finish to 2025. We entered the fourth quarter with record CAP, and despite some delays on certain projects and wet weather at the end of the quarter, year-over-year revenue growth accelerated as expected. We continue to see sustained market strength and a healthy bidding environment across our footprint, with California and Nevada leading the way. With several significant awards in the quarter, CAP increased sequentially by $632,000,000, ending the year with $7,000,000,000, a new record. In California, the newly proposed California budget for the 2026 to 2027 fiscal year represents a significant increase in the key capital outlay projects and local assistance components for the transportation funding for the original 2025 to 2026 budget, which itself was increased significantly in the latest January forecast update. Stable and protected funding for transportation infrastructure in California continues to grow despite concerns about overall deficits. The strength of state transportation budgets is broad, and we see many meaningful opportunities across our regions to continue to grow CAP in 2026 and throughout the year. Best value work continues to grow as a percentage of our portfolio, ending the quarter at 48% of CAP. Michael W. Barker: As we discussed in past quarters, Kyle T. Larkin: best value procurement plays to Granite Construction Incorporated’s home market strengths. These projects tend to be awarded to teams with strong qualifications. The process is designed to promote risk mitigation during design and reward collaboration, thereby enabling us to better manage construction risk, reduce disputes, and deliver high-quality, complex projects more efficiently. Best value construction remains a key driver of our sustainable margin expansion strategy. This growth in best value work has been a core contributor to our de-risked project portfolio and has allowed us to achieve consistent, predictable increases in our Construction margins over the past several years, and we expect that trend to continue as more states adopt these procurement methods. The high-quality CAP portfolio we have built helped deliver the gross profit margin increase that we expected in 2025. We expect continued gross profit improvement in 2026 consistent with our 2027 financial targets. Overall performance in this segment has improved meaningfully, and with record-level, higher-quality CAP and favorable market conditions, we expect continued revenue growth and Construction margin expansion in 2026 in line with our long-term financial targets. Moving to the Materials segment, 2025 was a transformational year for our Materials business. We delivered both organic top-line and bottom-line growth, and we significantly expanded our addressable market through acquisitions, most notably through the acquisition of Warren Paving, which significantly expands our reserves and resources in the Southeast. This was our first full quarter including Warren Paving, and we see numerous opportunities as we continue to integrate it into our Southeast platform. We expect to continue growing this platform organically as we work to expand its distribution network, improve logistics efficiency, and leverage Warren’s marine and river-based transportation capabilities. Expansion opportunities include potentially adding additional aggregate yards and acquiring strategic assets to enhance both scale and margin profile of the platform. With the addition of Warren, along with the acquisitions of CinderLite and Pappage Construction, our aggregate reserves and resources increased 34% year over year to 2,100,000,000 tons, more than doubling Granite Construction Incorporated’s reserves in the last five years. This growth in long-life reserves provides a strong foundation for sustained margin expansion in the Materials segment. We expect the growth of our Materials business to continue throughout 2026 and in the years to follow, supported by strong market conditions, our proven vertically integrated operational model, and our ongoing commitment to disciplined investment. Now I will turn it over to Staci M. Woolsey to review our financial performance for the quarter. Staci M. Woolsey: Thanks, Kyle. Operator: 2025 was a tremendous year of growth with year-over-year increases in a number of areas. Revenue increased 10% to $4,400,000,000. Gross profit increased 24% to $711,000,000. Adjusted net income increased 29% to $276,000,000. Adjusted EBITDA increased 31% to $527,000,000, and operating cash flow increased 3% to $469,000,000. Our teams have done a great job executing and positioning Granite Construction Incorporated for continued organic growth, margin expansion, and cash generation in 2026 and beyond. Now let us discuss our results for the quarter. In the Construction segment, revenue increased $119,000,000, or 14% year over year, to $940,000,000. Throughout the year, CAP gradually increased and we expected revenue conversion to accelerate in the second half of the year. In the fourth quarter, we saw this dynamic with organic revenue growth of 7% year over year as projects ramped up. In addition, our newly acquired companies, Warren Paving and Pappage Construction, contributed $59,000,000 in Construction segment revenue. The significant increase in revenue drove a $15,000,000 improvement in Construction segment gross profit to $143,000,000, with segment gross profit margin of 15%. The improvement in our portfolio mix continues to translate into higher margins, and we expect further expansion in 2026 consistent with our 2027 financial targets. In the Materials segment, revenue increased $69,000,000 year over year to $225,000,000, with gross profit up to $25,000,000. The increase in Materials revenue was primarily due to the acquired businesses. Cash gross profit for the quarter increased $10,000,000 year over year to $47,000,000, or 21% of revenue, despite wet weather conditions in certain geographies. For the full year, cash gross profit margin improved 490 basis points year over year to 26%. For the year, volumes for both aggregate and asphalt and aggregate cash gross profit per ton increased significantly, primarily due to the addition of Warren Paving in August 2025. Adjusted EBITDA for the full year grew $125,000,000 to $527,000,000, or an adjusted EBITDA margin of 11.9% compared to 10% in 2024. Turning to cash flow. We had another outstanding quarter of cash generation and ended the year with operating cash flow of $469,000,000, or 10.6% of annual revenue. Our disciplined focus on profitability and working capital efficiency is producing consistent, high-quality cash flow that we are reinvesting to drive long-term value. Our 2025 operating cash flow benefited from the collection of a long outstanding contract retention balance and receipt of payment for several disputed claims in 2025. Excluding these non-recurring cash collections, in 2025, our operating cash flow as a percent of revenue was in line with our original target of 9%. With our expected profitability improvement in 2026 and sustained working capital management, our 2026 target for operating cash flow margin is 10% of revenue. In 2025, we executed on our capital allocation priorities with CapEx of $138,000,000, acquisitions of $778,000,000, and dividends of $23,000,000. We also repurchased 300,000 shares under our Board-approved share repurchase program to offset dilution from our stock-based compensation. We ended the year with $650,000,000 in cash and marketable securities, debt of $1,300,000,000, and $583,000,000 in availability under our revolving credit facility. Going into 2026, our cash generation and strong balance sheet position us well to continue investing organically and through acquisitions while maintaining financial flexibility. We have a robust pipeline of acquisition opportunities that may either bolt on to an existing home market or further expand our geographic footprint. While we are selective in our pursuits, we expect to achieve our goal of completing several strategic acquisitions in 2026. Now let us turn to our 2026 guidance. We expect revenue to grow to a range of $4,900,000,000 to $5,100,000,000. This reflects our record CAP balance and the strong macro environment and places organic growth at the high end of our 2027 target CAGR of 6% to 8%. This range includes a full year of the acquisitions completed in 2025. As we grow, driving efficiency to manage SG&A continues to be a top priority. We expect our SG&A to be in a range of 8.5% to 9% of revenue, inclusive of an estimated $48,000,000 in stock-based compensation expense. We expect our adjusted EBITDA margin to be in the range of 12% to 13% of revenue. With our high-quality CAP portfolio, strong market, and high-performing Materials business, we expect continued adjusted EBITDA margin expansion in line with our 2027 financial target of 12.5% to 14.5% of revenue. Finally, we expect to invest in our business through CapEx in the range of $140,000,000 to $160,000,000. Similar to 2025, this range contemplates approximately $50,000,000 in strategic Materials investments to expand reserves as well as investments in additional automation projects as we work to grow the Materials business. Now I will turn it back over to Kyle. Kyle T. Larkin: Thanks, Staci. I will close with the following points. I have strong confidence in the future of Granite Construction Incorporated. I believe Granite Construction Incorporated is in position to capitalize on the numerous opportunities in both of our segments as we work towards sustainable, long-term value creation, and as we focus on growing revenue and driving margin and cash flow expansion. The strong public construction market is fueling our CAP growth. We have the bidding opportunities ahead of us to enhance portfolio quality and support disciplined CAP expansion in 2026. In addition, while CAP growth has been concentrated in the public market, I believe our private markets, such as rail and commercial site development, remain robust and represent attractive incremental growth avenues for our Construction segment. In the Materials business, we have made outstanding strides over the last two years, and I believe that will continue in 2026. With the addition of Warren Paving, Pappage Construction, and CinderLite for the full year, I expect meaningful increases in revenue and profit in this segment in 2026. I believe we are on track for our 2027 financial targets for adjusted EBITDA margin and operating cash flow margin, with 2026 being another important step in demonstrating consistent performance against our long-term targets. Finally, as we are integrating the acquisitions of 2025, I expect to add several more acquisitions in 2026 that will further strengthen our competitive position and support our ability to achieve our 2027 financial targets. We are evaluating bolt-ons in our existing markets and expansion opportunities in new markets as we continue to strengthen our position as America's infrastructure company. Operator, I will now turn it back to you for questions. Operator: We will now begin the question and answer session. Please pick up your handset before pressing the keys. Our first question comes from Brent Edward Thielman with D.A. Davidson. Please go ahead. Brent Edward Thielman: Great. Hey, thanks. Good morning. Michael W. Barker: Hey, Kyle. Some of your peers have offered some comments just in terms of thoughts on federal Kyle T. Larkin: legislation. Obviously, IIJA expiring here in September, maybe your latest thoughts on, Brent Edward Thielman: what you are hearing, when we can get maybe more detail on what is coming? Maybe you would start there. Michael W. Barker: Yeah. Good morning, Brent. Kyle T. Larkin: So I think as we spoke before on previous calls, the IIJA expires, I think everybody knows now, in September. And all the funds we expect to be allocated out. Now the spend to date is right around 50%. That is as of November, so there is still a really nice runway of spending to go. So that will last, luckily, for a few more years. I think what we hear really from industry today is that there is still bipartisan support. There is still a huge focus on coming up with another investment mechanism. And I think the really good news is the investment amount is significantly higher, at least that is what is in discussions today, than what is in the IIJA. So it is all positive. In terms of timing of when we might hear, I think we are going to start getting maybe some updates, I would say, around March, April if they can get a draft bill put in place for the Transportation and Infrastructure Committee to review. So I think that is kind of the next step in terms of when we get the next update. Brent Edward Thielman: Got it. Appreciate that, Kyle. And I guess my follow-up, Kyle, just in terms of you have got a great sort of book of business here that seems to continue to build or looks like it will continue to build. Can you talk about some of the direct federal opportunities that are out there that you have spoken about before? What does that pipeline look like? Are you optimistic that there could be some meaningful things that could get picked up there this year? Michael W. Barker: What do you mean federal Kyle T. Larkin: Are you talking a few more around the border infrastructure, Brent, or just kind of the federal program in general? Brent Edward Thielman: Yes. I mean, I guess, infrastructure or anything beyond that, directly related to federal government contracting. I think we have spoken about some large things before there. Michael W. Barker: Right. So we do have quite a bit of work with the federal Kyle T. Larkin: government in Guam, and that work continues to be going very well. We believe we will continue to pick up work in Guam as part of that program. With regards to the border, there is a huge border infrastructure program that is probably just in about $40,000,000,000, and there are around 11 contractors or so pursuing that work, and we are one of them. And we actually have one contract today in southeastern Texas that is just under $200,000,000. We started that work last November. So there is a huge program and opportunity in front of us. One of the things that changed is the government's looking to get that work out and awarded, we believe, midyear. So sometime around June, July, and to help with that, these contracts are getting larger than what we originally contemplated. So the risk profile is changing a little bit on those to one that is just giving us reason to be more disciplined in our pursuits and ensuring that we can not only just win the work, but be successful in delivering it for ourselves and for our clients. So we will see. What I can tell you is we do not have any additional border infrastructure work in the guidance that we provided you today. Brent Edward Thielman: Okay. Thank you. I will pass it on. Michael W. Barker: Thank you. Operator: Our next question comes from Steven Ramsey with Thompson Research Group. Please go ahead. Steven Ramsey: Hi. Good morning, everyone. Operator: I wanted to think high level that you are tracking to your 2027 targets. Did you expect CAP to be at this level when you laid those targets out, or would you say those targets were predicated on a CAP level that was lower or higher than this, Steven Ramsey: I guess I am trying to get a sense of how CAP-dependent those targets are. Kyle T. Larkin: Yeah. I do not know if we necessarily came out and said, here is what our CAP needs to be in order to hit those 2027 targets simply because it is a balance of bid-build and best value. And obviously, the burn rates on those two are very different, one being a lot shorter burn of a couple years, and the best value could be up to about a five-year burn. In the CAP today, it is back to about 50/50 between those two, which we think is very healthy. So that gives us a lot of confidence not just in our ability to hit our numbers from an organic growth rate of around 8% in 2026, but it should allow us to continue to have that growth rate into 2027. So I think the best way to answer is we feel really good about the CAP. The $7,000,000,000 is a really high-quality CAP. The margin profile within our CAP continues to improve, and that is going to also get to those 2027 targets. So I think our CAP is right on track to where we want to be. Steven Ramsey: Okay. That is helpful. Operator: And then wanted to think about the CapEx, the strategic CapEx of $50,000,000 geared towards the Materials segment? Steven Ramsey: Can you Operator: talk a bit about how much of that is in the legacy Western markets? How much of that is the Steven Ramsey: recently acquired Warren assets? And Operator: maybe to tag along with that, Steven Ramsey: how the Warren integration is going and how that is shaping up for growth in both sales and profits within the Southeast business? Michael W. Barker: Hey, Steven. I will start if Operator: talk a little bit about the strategic Materials CapEx of $50,000,000. That is more heavily weighted towards the legacy business and expanding reserves and doing automation projects. Michael W. Barker: There. Operator: And also in our acquisitions from a couple of years ago with Raymond Roberts and the stone and gravel, and doing some investment there. So but really more heavily weighted towards the legacy Granite business. And then as we think about the Warren integration, they have performed really well so far this year in the five months that we have had them on board, and we are really excited about that and feel good about that going forward. And then the opportunity that is going to present to continue to expand in the overall health Kyle T. Larkin: Yeah. Maybe I will add a little bit to the integration. We made an investment, so we have dedicated resources, our integration team today, to help with these acquisitions and Warren Paving is off to a strong start similar to Pappage Construction and CinderLite. So all three of our acquisitions last year are performing very well, if anything, outperforming where we thought they were going to be. Again, we are excited about the teams that came with those companies, the leadership that came with those companies, and the markets that they are in continue to be healthy and growing. So we really look forward to having them in our full year of business this year in 2026. Operator: Great. That is great color. Thank you. Kyle T. Larkin: Thank you. Operator: Our next question comes from Kevin Gainey with Thompson Davis. Please go ahead. Operator: Good morning, Kyle and Staci. Great quarter, guys. Maybe if you wanted Kevin Gainey: to dive into the project Adam Bubes: bidding opportunities and more so maybe by vertical, I am just kind of interested in what you guys are seeing out there for mining, rail, maybe renewables, water? Adam Bubes: Sure, you know Kyle T. Larkin: in general, the market is strong. It has been strong. It remains strong. You think over the last six months, we did more work, we captured more work with slightly higher margin. So that is kind of the high-level really good news and obviously driving a very strong CAP for us. The public market with the IIJA is still a big, big part of our business, around 85% or more today. And so I think that is more a reflection of a really strong IIJA and public funding. We see mining continue to be strong, whether it is our involvement on the process water side or actually just doing work for the miners on site development side of things. Rail is an opportunity. We continue to see intermodal opportunities in our future, and hopefully, we will continue to capture some of those that could maybe shift things back a little bit more weighted towards private than public as an overall company. Renewables stay strong. We are seeing solar projects continue to come out, and we continue to pursue them. And I think we are going to continue to grow that part of our segment in Construction in the next year or two. So I think all in all, we feel really good about the market. You know, we do not participate a whole lot in the residential market. But the markets that we are in on the private side outside of that continue to be really strong. I would say we are starting to look a little bit harder at some of the data center work. We do do data center projects up in the Pacific Northwest and Nevada today. We are pursuing some projects outside of those markets down into Texas and even in Ohio. So there are some new opportunities for us that we can capture in the future here. Operator: And then as we sit here and we Adam Bubes: think about the $7,000,000,000 CAP, do you guys have any concerns operationally or from maybe whether it is labor, equipment, or anything like that that could cause you an issue in executing on a project pipeline? Michael W. Barker: Not at all. Yeah. That $7,000,000,000 of CAP, again, half Kyle T. Larkin: of that is best value, half of it is bid-build. So the progression and burns can vary a little bit. Historically, we have been as high as, if you look at bringing up our contract backlog in any given year, close to 50% of our CAP. This year is going to be closer to just over 40% Michael W. Barker: of our CAP. So we do not have any ESG concerns at all in that regard. Adam Bubes: That sounds good. And then maybe just one more just on the EBITDA guidance for margins. What would it take to be able to get to the high end of that range? And maybe if you could talk about the low end as well. Kyle T. Larkin: Well, in any given year there are a few factors. Obviously, we talked before about weather. Q1, Q4 weather can always be an opportunity or it can be a hindrance for us. So far in Q1, it has been okay. There were some big weather issues Michael W. Barker: in the Southeast, as we all know, earlier this year, Kyle T. Larkin: we do not think that is going to impact our ability to hit our guidance. We will have to see how the rest of this quarter shakes out as well as Q4. We still have to win and actually bid and build some of the work that we are going to need this year to hit our revenue numbers. So it is always a risk in the first half of the year of actually capturing that work and getting started on that work. And then execution, that is an opportunity for us and a risk as well. We have to perform. But I think today, our operational excellence is at a really high level and a very different business than what we were several years ago. And I see execution as more of an opportunity today than a risk. We tend to outperform our projects more than we underperform today. And then there are some unknown unknowns, and we will have to see if any of those show up. But I feel as though the things that we control, we are in really good shape, and it should be a really nice year for us. Adam Bubes: That sounds good. I appreciate all the color. I will turn it over. Kyle T. Larkin: Thank you. Michael W. Barker: Thank you. Operator: Our next question comes from Michael Stephan Dudas with Vertical Research Partners. Please go ahead. Michael Stephan Dudas: Yes. Good morning, Staci, Mike, Kyle, Michael W. Barker: Good morning. Kyle, best value Michael Stephan Dudas: practice backlog getting close to 50%, very helpful. And you mentioned in your prepared remarks, other states are engaging in those types of contracts. Maybe you could share a little bit more how much of a percentage of your backlog could that type of contract be, Kyle T. Larkin: And given how it is Michael Stephan Dudas: allocated and let throughout the process, Michael W. Barker: because of the building, is that going to Michael Stephan Dudas: provide some more project or award opportunities or revenue opportunities Adam Bubes: a little longer in the cycle Kyle T. Larkin: given that Michael Stephan Dudas: it has been built up so high and that could give some more visibility to later this year into next year and beyond because of Michael W. Barker: how Michael Stephan Dudas: big and how large that part of the backlog will grow. Kyle T. Larkin: Yeah. So maybe you are breaking up a little bit. Let me see if I think I can answer the question based on what I Michael W. Barker: think I Kyle T. Larkin: you said there, Mike. But if I get it wrong, let me know. You know, the question has come up before around what is the right balance between best value and bid-build. Michael W. Barker: And Kyle T. Larkin: you know, I do not think we necessarily know the answer to it. I think we like what we have today, is that 50/50 feels pretty good. And to your point, as more states pass legislation to allow CM/GC or CMAR or progressive design-build, we could see that increase. I think that is okay. It allows us to do some more complex Adam Bubes: larger contracts in a de-risked manner, and we tend to perform very well on those. So Kyle T. Larkin: I think that if that progression happens, that would be a good thing for us. I think that is the future of contracting, to be more collaborative, to be partners with our clients, and it really fits us well as we have a home market strategy. So we like to know the customers that we are working for and having the resources to ensure that we could deliver these projects for them the way that we both would expect us to. So if it does increase, I think that is a good thing. I think another good thing about our CAP being about 50% best value is it gives us some insight into the future. And so we know that we are going to progress through a portion of that work this year. But it gives us confidence as we start working towards those 2027 numbers and beyond. So I think we feel really good about our CAP today, and we will have to see what happens in terms of this best value over time. Michael Stephan Dudas: Yes. That is perfect. Thank you for that answer, Kyle. And my follow-up is on the Materials side. Since your reorganization of the business, certainly the pricing and volumes have been quite good, organic and your acquisitions. How do you feel you are relative to pricing two years later with this change relative to the market? Is there still upside relative to market in certain regions? And what are you anticipating or budgeting for aggregate and asphalt pricing generally Kyle T. Larkin: 2026? Yeah. I would say in 2026, we will start with the pricing first, mid-single-digit price improvements on the aggregate side and low single digit on the asphalt. You know, every market is different. We look at every project, every market uniquely and discreetly. And so I think that there are still opportunities. I think our team consistently looks at that. And one of the things we did with the reorg a couple years ago is we bring some of that sales strategy and feedback loop up to a higher level. And so we can look at things a little bit more broadly and ensure that we are looking at things with maybe a little bit less emotion. And so I think there is still work to be done. I think that our team has done a fantastic job. I am impressed with what they have done. They have obviously unlocked a tremendous amount of value in our Materials business, but I think there is still some more to do. In the 2027 targets, we have talked about another 3% or better cash gross profit over the next two years. So we expect to continue to see that this year. That is contributing to our EBITDA margin expansion this year. And so I think we are right on track with all that. Michael Stephan Dudas: And just quick follow-up on your costs. What about your cost, what you are budgeting in the Materials business on a percentage basis relative to the Kyle T. Larkin: pricing you are sharing? We have done a really, really nice job in legacy business keeping costs under control. I think that is one of the real highlights that our team has. Costs year over year have actually been flat in the last two years. So I think the automation efforts we put in place, standardization of our Materials playbook, I think all that is paying off for us as well. Obviously, there are some cost inputs, some of the variable costs that would go up with inflation. But all in all, last year, mix-adjusted, I think we ended up close to about 8%. Michael W. Barker: Excellent. That is 8% net pricing Kyle T. Larkin: increase. Michael W. Barker: And net Michael Stephan Dudas: 8% price increase overall. I appreciate it. Thanks, Kyle. Kyle T. Larkin: Yeah. Thank you. Operator: Our final question comes from Adam Bubes with Goldman Sachs. Please go ahead. Adam Bubes: Hi, good morning. Can you help us think through the 2026 versus 2025 margin outlook? I think the guide is just over 50 basis points of margin expansion at the midpoint. How much of that margin expansion is coming from price versus better execution versus I know you have some favorable M&A rollover, and then what are some of the offsets? I think you had a favorable claim last year. Looks like maybe slightly outsized equipment sales this year that you could be lapping. Just trying to think through the puts and takes. Michael W. Barker: Yeah. Yeah. I think, Adam, Kyle T. Larkin: I think the easiest way to look at it is we have been talking about a 1% Construction margin improvement over the next two years and split really between 2026 and 2027. So it was around 50 basis points improvement in our Construction margins. Materials, we have been talking about at 3% over the next two years, so about a percent and a half each year. So on a weighted average basis, that is around 20 basis points. You put the two together, that is around 70 basis points improvement between Construction and Materials. As Staci mentioned in her remarks, there is about a 50 basis points improvement on SG&A. So it is about a 120 basis points improvement in margin. But then you have to net out the things you talked about. So we had some claim recoveries. We had a little bit larger gain on sale. And so that nets out to about a 50 basis points improvement, if that answers that question. I think the other thing to think about is to get to the midpoint of our 2027 EBITDA margin guidance. It is about a 100 basis points improvement from here. So we are right on track with where we thought we would be this year and right on track getting to that midpoint of our EBITDA margin in 2027. Adam Bubes: Terrific. And then can you just talk about, it sounds like the M&A pipeline is still pretty robust. What is the range of outcomes that you are contemplating for M&A in 2026? And can you just talk about how you view M&A in context of leverage as well, if there are larger opportunities out there. Would you feel comfortable moving above the leverage target of 2.5, or nothing of size that would really move the needle in the medium term on that front? Kyle T. Larkin: Well, I mentioned previously, all three of the recent transactions have gone very well. It gives us a lot of confidence as we move forward and look to do more deals. We have invested in our corporate development team, which has been great. So we can really vet through a whole lot of opportunities that come our way. We can also self-source a lot of our deals. So I do expect, and we expect, to get several things done this year. I think from a leverage perspective, we are still targeting that 2.5 times net debt. If there was something larger that came out, we would probably go up from there with a plan to obviously come back down. But I think that that leverage target kind of still holds. And, yeah, we are busy. I think our team is busy. I hope that we come back sometime in Q2 and provide you with some sort of update there. Adam Bubes: Great. Thanks so much. Michael W. Barker: Yep. Operator: This concludes our question and answer session. I would like to turn the conference back over to Kyle T. Larkin for any closing remarks. Kyle T. Larkin: Okay. Well, thank you for joining the call today. As always, we want to thank our teams for everything they did to make 2025 such a success. Most importantly, we would like to thank our teams for making 2025 our safest year yet. We are an industry leader in safety, and we expect to get even better in 2026. Thank you for joining the call and your interest in Granite Construction Incorporated. We look forward to speaking with you all soon. Operator: The conference has now concluded. Operator: Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to the Lincoln Electric 2025 Fourth Quarter Financial Results Conference Call. All lines have been placed on mute and this call is being recorded. It is my pleasure to introduce your host, Amanda Butler, Vice President of Investor Relations and Communications. Thank you. You may begin. Thank you, Colby, and good morning, everyone. Welcome to Lincoln Electric's Amanda H. Butler: fourth quarter 2025 conference call where we will be covering our fourth quarter and full year 2025 financial results, as well as our new 2030 targets. We released our financial results earlier today, and you can find our release and this call slide presentation at lincolnelectric.com in the Investor Relations section. And joining me on the call today is Steven B. Hedlund, Chairman and Chief Executive, as well as Gabriel Bruno, our Chief Financial Officer. And following our prepared remarks, we are happy to take your questions. But before we start our discussion, please note certain statements made during this call may be forward-looking and actual results may differ materially from our expectations due to a number of risk factors and uncertainties, which are provided in our press release and in our SEC filings on Forms 10-Ks and 10-Q. In addition, we discussed financial measures that do not conform to U.S. GAAP. A reconciliation of non-GAAP measures to the most comparable GAAP measure is found in the financial tables in our earnings release, which again is available in the Investor Relations section of our website at lincolnelectric.com. I will now turn the call over to Steven B. Hedlund. Steve? Steven B. Hedlund: Thank you, Amanda. Good morning, everyone. Turning to slide three, I am proud to report record 2025 performance. Despite challenged end markets, our sales increased 6% to a record $4,200,000,000 from acquisitions and price. We maintained last year's record adjusted operating income margin, increased adjusted EPS to a record $9.87, and generated strong cash flows from operations. This resulted in record cash returns to shareholders. Disciplined cost management and the agility of our supply chain team mitigated unprecedented levels of inflation, finishing the year at our neutral price-cost target. In addition, our savings programs generated an incremental $31,000,000 of permanent savings. These achievements, combined with solid commercial and operational execution, culminated in top quartile ROIC and total shareholder return performance versus our peers. On behalf of the board and leadership team, I would like to thank our global team for delivering these superb results. Their commitment, focus, and agility continue to position the company to outperform in the years to come. Turning to slide four to cover demand trends in the fourth quarter. Organic sales grew 2.5% from price which was largely offset by weaker volume performance. As discussed on earlier calls, we faced a challenging prior year comparison in our automation portfolio which magnified volume declines. Excluding automation, organic sales would have increased approximately 8%. The growth reflects price contributions in consumable and equipment, as well as relatively steady volume performance in our welding consumables in Americas and international welding. 2025 was a challenging year for automation due to lower capital spending and project Amanda H. Butler: deferrals. Steven B. Hedlund: Automation sales were $240,000,000 in the quarter, 11% decline versus a record prior year. And on a full year basis, we achieved $870,000,000 which is a mid single digit percent decline. We are encouraged by strong order rates and a solid back in our automation business in the fourth quarter. This is expected to drive growth in 2026. Due to seasonality and the timing of revenue recognition, we expect first quarter sales to be steady with prior year levels and then pivot to growth starting in the second quarter. This follows the typical seasonality cadence of a 40-60% split between the first and second half of the year. Looking at end markets in the quarter, three of our five sectors grew with an acceleration in December. Notably in Americas Welding. And excluding automation due to its challenging prior year comparison, all five end markets were flat to up. This momentum combined with a return to more normalized customer productive production activity, OEM announcements of higher capital spending plans for 2026, and the manufacturing PMI pivoting to growth in January are all encouraging signs that we may be in the stages of an industrial recovery. A few highlights to note are the continued outperformance in energy, which is due to strong project activity in both Americas and Asia Pacific. General industries achieved double digit growth in Americas, but was impacted by lower HVAC activity in the quarter. We are seeing HVAC demand start to normalize in January. And our nonresi structural steel sector was flat globally, but up mid teens percent in Americas on strength in both North and South America from a range of projects. The two challenged sectors were automotive and heavy industries, and both were impacted by automation's prior year comparison. Transportation, excluding automation, grew at a mid to high single digit percent rate largely from consumable demand for vehicle production. Heavy Industries organic sales excluding automation was higher year over year as construction and ag sector production activity continued to improve resulting in solid consumable volume growth. So we are well positioned with strong backlog levels and broadening pockets growth in Americas and Asia Pacific to drive growth in the year ahead. Now I'll pass the call to Gabriel Bruno to cover fourth quarter financials in more detail. Thank you, Steve. Moving to slide five, our fourth quarter sales increased 5.5% to $1,079,000,000 from 8.9 higher price, 1.9% favorable foreign exchange translation, a 1.1% benefit from acquisitions. These increases were partially offset by 6.4% lower volumes. Gross profit dollars increased approximately 1% to $374,000,000, and gross profit margin compressed 140 basis points to 34.7%. A $3,000,000 benefit from our savings actions as well as diligent cost management and operational initiatives was offset by lower volumes and a $3,000,000 LIFO charge in the quarter. SG&A expense decreased approximately $3,000,000 versus the prior year from the benefit of $5,000,000 of permanent savings and lower employee costs, which were partially offset by unfavorable foreign exchange translation and higher discretionary spending. SG&A expense as a percent of sales declined 130 basis points to 17%. Reported operating income increased 4% to $184,000,000. Excluding special items primarily related to acquisitions as well as rationalization and asset impairment charges, adjusted operating income increased 4% to $194,000,000. Our adjusted operating income margin declined 20 basis points to 18%, reflecting a 15% incremental margin. We reported an effective tax rate of 21.2% which is five ten basis points higher versus prior year. Gabriel Bruno: Our effective tax rate reflected an approximate $3,000,000 special item tax expense from the election of provisions for the One Big Beautiful Bill Act. This election also reduced tax payments by approximately $25,000,000 in the quarter which we expect to realize again in 2026. Excluding special items, our effective tax rate was 19.8%, which was 300 basis points higher versus the prior year's adjusted effective tax rate which benefited from a favorable mix of earnings and the timing of discrete items. We reported fourth quarter diluted earnings per share of $2.45. On an adjusted basis, earnings per share increased 3% to $2.65. Our earnings per share results include a $0.07 benefit from share repurchases and a $0.01 favorable impact from foreign exchange translation. Moving to our reportable segments on slide six. Americas Welding sales increased approximately 4% driven by 10.4% higher price and 60 basis points of favorable foreign exchange translation. Volumes declined approximately 7% primarily from the automation portfolio which had a challenging prior year comparison. While automation order rates accelerated in the fourth quarter, and the segment has a strong backlog entering into 2026, revenue recognition is not expected to begin to ramp until the second quarter. The price increase reflects prior actions taken to address rising input costs. We anticipate price levels to hold sequentially in the first quarter prior to substantially anniversarying in the second quarter. We will continue to monitor trade policy decisions and take appropriate actions as needed. Americas Welding segment's fourth quarter adjusted EBIT increased 7% to $141,000,000. The adjusted EBIT margin increased 90 basis points to 20% primarily due to effective cost management, favorable mix, and $5,000,000 in permanent savings. We expect Americas Welding to continue to operate in the mid 18 to mid 19% EBIT margin range in 2026. Moving to slide seven, the 7% as a 5% benefit from our alloy steel acquisition, a 5% favorable foreign exchange translation and 50 basis points of price were partially offset by 4% lower volumes. Volume compression reflected the continued challenges in European industrial demand trends, which were partially offset by pockets of growth in Asia Pacific and in the Middle East. Adjusted EBIT decreased approximately 4% to $31,000,000. Margin compressed 100 basis points to 11.8% as the benefits of our alloy steel acquisition, effective cost management and a $3,000,000 of permanent savings were offset by the impact of lower volumes. We expect International Welding's margin performance to be in the mid 11 to mid 12% margin range in 2026. Moving to the Harris Products Group on slide eight. Fourth quarter sales increased 11% driven by 18% higher price and 170 basis points of favorable foreign exchange translation. As expected, volumes compressed 9% due to the decline in HVAC sector production activity in the quarter. Price continued to increase on metal costs and price actions taken to mitigate rising input costs. Adjusted EBIT increased 8% to $23,000,000 as margin declined 30 basis points on lower volumes and mix. The Harris segment is expected to operate in the 18 to 19% margin range in 2026. Moving to slide nine. We generated solid cash flows from operations in the quarter, aided by lower tax payments. Average operating working capital rose 100 basis points versus the comparable prior year period to 17.9%, primarily due to higher inventory levels and reflects top quartile performance compared to peers. Moving to slide 10. We continue to execute on our balanced capital allocation strategy, with high quartile returns. In quarter, we invested $44,000,000 in growth reflecting an acceleration in CapEx investments and $94,000,000 to shareholders. We generated an adjusted return on invested capital of 21.3%. Moving to slide 11 to discuss our operating assumptions for 2026. While conditions remain dynamic in many of our regions from ongoing trade negotiations and geopolitics, we are encouraged by recent OEM commentary on capital spending plans and growing infrastructure project commitments. This gives us cautious optimism that we may be in the early stages of an industrial sector recovery that would translate to broader demand momentum in our business in the second half of the year. While domestic distribution channel demand and consumer volumes have remained resilient, demand for our equipment and automation portfolios has been choppy. We will be looking for consumable volumes to inflect to consistent growth which is typically followed by an acceleration in capital spending after one to two quarters. Once we see those drivers, we are confident that our channel mix, diversified end markets, and portfolio solutions positions us well to capitalize on accelerating growth. Our full year 2026 operating framework assumes the sales growth rate in the mid single digit percent range with organic sales split fifty-fifty between volume and the 2025 price actions that carry over to 2026. We expect volume growth rates to improve starting in the second quarter and through year end. Price is expected to be strongest in the first quarter especially in the Americas Welding segment before largely anniversarying last year's price actions in the second quarter. Our price assumption does not include dynamic metal price adjustments in our Harris Products Group segment due to the volatility of metal markets. Our 2025 alloy steel acquisition is expected to provide an approximate seven basis point contribution to sales. These assumptions support our first quarter sales estimate that is similar to fourth quarter sales results. We will continue to pursue a neutral price-cost posture and expect a mid 20% incremental operating income margin from volume growth and enterprise initiatives, which will result in a modest improvement in our operating margin for the full year. In the first quarter, we expect a seasonal sequential increase of approximately $10,000,000 in incentive costs as we reset incentive targets and issue long-term incentives. This will impact margins and cash flow performance as we start the year. For the full year, we are confident in strong cash flow generation supports our capital allocation strategy and helps compound earnings performance through the cycle. We will continue to maintain an elevated level of capital spending with a target range of $110 to $130,000,000 as we invest across a range of safety, growth, and productivity-oriented projects to drive long-term value. Our expected tax rate and interest expense are generally in line with last year, at a low to mid 20% rate and in the range of $50 to $55,000,000 respectively. And now I'll pass the call back to Steve to cover our RISE strategy new 2030 targets. Thank you, Gabe. Turning to slide 13. Our next strategy builds upon the success of our Higher Standard strategy, which concluded in 2025. Steven B. Hedlund: And despite a volatile five year period that no one could have predicted, Gabriel Bruno: we are proud to have advanced the business and achieved most of our strategic targets. Reaffirming our strong say-do reputation and our commitment to deliver on our goals. This is a testament to our incredible global team, the agility of our operations, and the tremendous support of our and shareholders. So on behalf of the leadership team and the board of directors, thank you for your support. Steven B. Hedlund: Turning to slide 14, each reportable segment may Gabriel Bruno: progress during the Higher Standard strategy. Steven B. Hedlund: Most notably in profit contribution without the benefit of significant operating leverage. Gabriel Bruno: Diligent cost management, savings programs, and operational improvements were all drivers to segment improvement. Steven B. Hedlund: Key highlights are the doubling of our automation sales and EBIT margin over the five years Gabriel Bruno: the outperformance of Harris Products Group's margins, Steven B. Hedlund: and the groundwork we laid in leveraging the scale and scope of our enterprise to drive higher returns. Gabriel Bruno: The persistent drive for continuous improvement has delivered superior returns for our shareholders as highlighted on slide 15. With a 122% total shareholder return rate, which is over double proxy peers in the last strategy cycle. Turning to slide 16. For 130 years, we have consistently operated with a value framework Steven B. Hedlund: that balances being people focused with growth, continuous improvement, and financial discipline. Gabriel Bruno: Our unwillingness to trade off one element for another is what sets us apart and is foundational to our culture and success. It has also delivered superior returns for our shareholders. What has evolved over time is how the work gets done in each of these areas. This is driven by changes in technologies, processes, and organizational structures. Steven B. Hedlund: In the next five years, we will further evolve how we operate Gabriel Bruno: under a new strategy named RISE. This next phase of our development is focused on Steven B. Hedlund: structurally aligning the global organization to drive even greater efficiency and agility in our operations. Gabriel Bruno: Further differentiating our technologies and solutions Steven B. Hedlund: exposing the business to broader growth opportunities, Gabriel Bruno: and generating value for our employees, customers, and shareholders. Let's walk through the key themes of RISE on slide 17. The R stands for reimagining how work gets done over the next five years. Steven B. Hedlund: We will be completing the transition from regionally led businesses to center-led functions that will drive higher levels of efficiency Gabriel Bruno: across one standard enterprise. I stands for innovating to differentiate. We are challenging our R&D, product management, and M&A teams to further differentiate our portfolio to accelerate wins. Steven B. Hedlund: Whether that is through internal development Gabriel Bruno: external partnerships, or techquisitions, we see great opportunities to expand our market impact Steven B. Hedlund: by amplifying the value we bring to customers' operations. Enrotech is an excellent example of a recent techquisition. Gabriel Bruno: Technology is being integrated into our first autonomous automation solution that uses vision and AI to weld with precision while adjusting the variables just like a human welder would. We believe this, among other innovations, will redefine productivity expectations for Steven B. Hedlund: customers in the years ahead. S stands for serve. Today, customers tell us that our service outperforms industry peers but we know that we can do better. We have identified opportunities to improve supply and service levels across the business which can be a growth driver for us in the next five years. And finally, we will be investing to elevate our team. We are renowned for our industry-leading technical sales reps, engineers, application experts, automation specialists, and a strong operating and supply chain organization. But we want to achieve best-in-class engagement with our employees. New development programs combined with more proactive career planning will help ensure our team is engaged, upskilled, and that we are attracting and retaining industry-leading talent to help us grow. Looking at the 2030 financial targets starting on slide 18, we are maintaining a high single digit to low double digit percent sales growth rate framework. Our growth stack consists of organic sales increasing in a mid single digit percent rate. We are well positioned to benefit from cyclical growth in key growth drivers. Our customers need partners that can offer the expertise and the solutions to address the shortage of skilled welders that support greater safety and productivity in their operations, enable reshoring and capacity expansions, and deliver the right engineered solutions for electrification and infrastructure investments whether for energy, AI data centers, or for civil infrastructure projects. We also have a long-standing position servicing defense contractors predominantly in the maritime industrial base, and have added some exposure to aerospace through recent acquisitions. So favorable macro trends coupled with innovation, a targeted expansion of our TAM where we can add value, share gains, and 300 to 400 basis points of sales growth from acquisitions, are all catalysts that give us attractive growth opportunities to leverage. During the next five years, we expect higher contribution from growth at an average high 20% incremental operating income margin. This compares with a mid 20% rate in our prior cycle. Turning to slide 19. We expect varying rates of organic sales growth across our reportable segments, reflecting regional dynamics and segment strategies. Americas Welding will lead with a mid to high single digit percent organic growth rate. Strong regional positioning will allow the team to capitalize on cyclical and secular trends. In addition, the majority of our automation portfolio is in region, and we continue to expect automation's organic sales growth at twice the rate of the core business. In international, we are pursuing a two-pronged approach to growth. We will be pursuing accelerated growth in portions of the Middle East and Asia Pacific which have high levels of project activity and where we can invest to expand our reach. In core industrial Europe, we are assuming a low growth given macro trends, but we will monitor European industrial trends to ensure we are aligned with customer needs and can capitalize on any growth opportunities which could offer upside to our model. We are expecting a mid single digit percent growth rate in Harris Products Group from ongoing HVAC sector growth, a strategic expansion of fabricated solutions for targeted industrial applications, and expectations for an improvement in residential and retail channel trends. While operating leverage from volume growth is important to our strategy, enterprise initiatives are also a driver of higher incremental margin performance. On slide 20, we highlight four keys enterprise initiatives that are being implemented in conjunction with local continuous improvement projects and our safety and environmental initiatives, which are highlighted in the appendix. Together, we expect all of these initiatives to drive approximately one third of the improvement in our higher incremental operating income margin performance through the strategy cycle. Our first key initiative is our shift from a more regional structure to a global enterprise of center-led functions. This allows us to align our work on standardized tools, datasets, and establish highly efficient core processes. It will also enable us to leverage our scale and reduce complexity in our structure. In addition, standardization supports increased digitization, automation, and the use of AI bots to drive supply chain and administrative efficiency. Second, we will continue to invest in factory automation and modernize our production platform to improve safety, productivity, sustainability, and lower conversion costs in our operations. Third, we have piloted what we call our spotlight process over the last couple of years in our Harris business. And we will be deploying this process more broadly across the enterprise. We have demonstrated that modest adjustments to our operating posture can result in improved service for customers helping us gain market share while also generating internal efficiencies and productivity. And finally, we regularly shape our footprint to ensure utilization, quality, and service are aligned with any shifts in demand. During the Higher Standard strategy, we generated approximately $60,000,000 in permanent savings from optimization projects. While the opportunity list is shorter, we will continue our disciplined approach which will contribute to margin performance. And now I'll pass the call to Gabe to cover margin targets, cash flow, and capital allocation. Gabriel Bruno: Turning to slide 21. As Steve mentioned, we expect a step up in our incremental margins on average operating income to high 20% range. This is about two thirds from volume leverage and one third from enterprise initiatives. This will increase our average operating income margin to 19% across the cycle which is a 300 basis point improvement compared to the percent average in our last strategy. This is a step up from our typical 200 basis point improvement that we have historically achieved cycle to cycle. Amanda H. Butler: Our new framework targets a peak consolidated operating income margin Gabriel Bruno: of 20 plus percent. By segment, all segment target EBIT margin ranges have increased from their 2025 levels based on their growth plans, enterprise initiatives, and segment specific action plans. In addition, we are targeting a mid teens percent EBIT margin contribution from our acquisitions, and our automation portfolio, which is largely in the Americas Welding segment. Moving to slide 22, we have improved our working capital performance over time to top decile levels. While our ratio increased in the last few years as we have strategically increased inventory during supply chain challenges, we continue to operate at top decile levels versus peers. As we execute our RISE strategy, we will continue to optimize working capital and target a 16% to 17% ratio to sales over the next five years. Cash flows from operations have also improved over each cycle with improved margin and working capital performance. We expect to generate over $3,700,000,000 in cash flows from operations at a 100% cash conversion ratio through 2030. This will allow us to continue to fund growth and return excess cash to shareholders through the cycle. Turning to slide 23 in our capital allocation strategy. We have followed a balanced capital allocation strategy which you can see on the right side of the slide with approximately 48% invested in growth, and 52% returned to shareholders over the last cycle. We will be maintaining this balanced approach moving forward. Our growth investments include internal CapEx and R&D initiatives as well as acquisitions. Internal investments yield our highest returns and we target M&A returns in the mid teens percent by year three. We will also continue to return capital to shareholders. We expect to return approximately 30% of net income to shareholders through the dividend. And as a dividend aristocrat with 30 years of consecutive annual dividend increase, we remain committed to our dividend program. In addition, we will continue to repurchase shares to prevent dilution at approximately $75,000,000 a year and will then opportunistically buy back shares using excess strategic cash. Our capital allocation strategy allows us to effectively fund growth and generate superior returns for our shareholders through the cycle. To summarize our 2030 financial targets on slide 24, we are targeting growth that will position sales above $6,000,000,000 in 2030. Profit margins will expand at high 20% incremental operating income margin, which would generate an average operating income margin that is 300 basis points higher than the last cycle's average. We are expecting a peak 20 plus percent operating income margin in this cycle. Earnings per share is expected to grow at a mid teens percent CAGR reflecting improved performance and capital deployment. Cash flow from operations is expected to expand to over $3,700,000,000 which will fund growth and shareholder returns while allowing us to maintain a solid balance sheet profile. This strategy is expected to maintain top quartile ROIC performance and elevate Lincoln Electric to consistently higher levels of performance as we continue to shape the company for another 130 years of success. And now we will pass the call to the operator to take questions. Operator: Ladies and gentlemen, at this time, we will be conducting a question and answer. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, simply press star one again. To ensure that everyone has an opportunity to participate, we ask that you ask one question and one follow-up question, and then return to the queue. We will pause just for a moment to compile the roster. Your first question comes from the line of Angel Castillo with Morgan Stanley. Your line is open. Hi, good morning. Thanks for taking my question. I wanted to start a little bit more on the longer term dynamic, particularly on the high 20s incremental margins. You laid out some very compelling factors as we think about, I think, 20 with how you can continue to kind of drive toward those higher incrementals. Could you talk a little bit more about the timeline of how we should think about these levers being achieved? Is this all starting out to drive the business in 2026? Or should we think about some of those investments in areas like automation or levers really starting to show through more, you know, over a longer period of time. Then related to that, just how should we think about the push and pull of the role of M&A and innovation in driving faster kind of differentiated growth? But the potential kind of dilutive nature of that versus your portfolio and whether that is kind of essentially factored in and how we should think about that within the incremental margins? Steven B. Hedlund: Yeah. Great question, Angel. So as you noted, when we talk about the improvement in our incremental margins, we pointed to a part of that being driven by volume growth and leverage on the volume growth, part of that being driven by the enterprise initiative. So let me talk to the enterprise initiatives. We have a variety of initiatives in flight in various stages of maturation. I think the transformation of our finance function is probably the furthest along and Gabe, the team have done a great job there leveraging shared service and process bots and the like to make that function much more efficient. I would say next behind that is probably and then HR. And then if you look at things like purchasing and R&D, you know, much earlier in their maturation cycle. So I think I would expect to start to see benefits from the enterprise initiatives flowing in fairly steadily over the course of the five year period as each of those functional initiatives, you know, reaches their full potential. So it is not a big bang that all happens at the end of the strategy period. It is also not going to be very quick to get all the benefit at the front end. So I would model it as being fairly smooth over the course of the five years. Gabriel Bruno: Angel, just to add your comment in terms of M&A and the impact on incrementals, you know, we have incorporated all that into our model. And when you look at our targets, as you point to an ROIC, I mean, we are at 18 to 20%. So we do not want to limit our ability to grow by driving target ROI above where we are currently at. I want to introduce acquisitions there in that mid teens type of returns by year three, and that kind of fits nicely for us. You have seen that historically, that is how we have performed. And we expect to continue to execute on that kind of dynamic. Operator: That is very helpful. Thank you. And then maybe just on the more near term side, wanted to talk about your guide for net sales of mid single digits. Apologies if I missed this, but did you break down exactly, I guess, what your expectation is for organic growth within that? And related to that, could you just maybe provide a little bit more color on the specific kind of order trends? You mentioned accelerating orders in automation, but just curious what you are seeing in quarter to date in January, February for the rest of the business in terms of orders and kind of the cadence for organic growth there? Gabriel Bruno: Yes. So Angel, so when you think about the organic assumptions that we provide, you know, mid single digit type of growth split, fifty fifty between price volume. What we have assumed for pricing, it reflects all of the 2025 pricing actions that we have placed into our business responsive to the acceleration of input costs. And we will see that largely in the first quarter and then begin to anniversary largely in the second quarter. So we have confidence that based on the strength of orders and backlog, particularly in our automation business, that we will see a pivot to growth beginning in the second quarter. So as the year progresses, we expect to see less pricing, see that more in the first half of the year, and more volume in the back half of the year. And the confidence level we see because of order levels and back and automation really drives that volume assumption. As we have mentioned, the consumables business has held steady from a volumes perspective. So that is good posture to be in when you think about the production levels across the end markets we serve. But we do want to see more consistency in order patterns from a capital investment perspective. So the volume assumptions are anchored on what we have seen to date, particularly in our automation business. Steven B. Hedlund: And Angel, just to add some further color to that. What we saw in the fourth quarter in automation was that we won some very large project orders, which we were very pleased to capture that business and to see some of the large end users start to release capital. What we have not seen yet is the more small to mid sized fabricator in the general industry segment really start to deploy capital, whether that is automation or for our standard welding equipment. We are encouraged that the consumable, which is the shortest cycle portion of our business and typically is a good bellwether for where the industry is headed, has held stable. And we are hopeful that as the PMI continues to inflect and as business confidence improves, we will see the consumable volume start to grow and that will then translate typically with a one to two quarter lag to more capital spending on standard automation, standard equipment. Operator: Very helpful. Thank you. Amanda H. Butler: Mhmm. Operator: Your next question comes from the line of Nathan Hardie Jones with Stifel. Your line is open. Good morning, everyone. Steven B. Hedlund: Good morning, Nate. Operator: I guess I will do first question on the automation business. You talked last quarter about being more confident in that in the order progression on that. You sound more confident again today talking about, you know, having a better backlog. I think you said the automation business was $840,000,000 in 2025. Can you talk about the expectations for that in 2026? Maybe size the increase in orders in '25. I understand the lag. Gabriel Bruno: And so we will see that start to ramp up in the second quarter. Just any more color you can give us around that would be great. Thanks. Yeah, Nathan. So as we said, our sales levels for our automation business were $870,000,000 in 2025, and that reflected mid single digit decline. The order of magnitude in how we are seeing volumes, is large driven by the automation business, is to essentially recover a lot of that organic softness we saw in 2025. So think about a mid single digit type of growth trajectory potentially in automation based on what we have seen in order levels in our backlog. And our confidence will continue to increase as we see less choppiness in the order patterns. And as Steve mentioned, Amanda H. Butler: some really strong good orders. We would to see more activity on the short Gabriel Bruno: cycle type of business. Operator: Excellent. Thanks for that. I guess my second question is around some of the center-led functions that you talked about. Just changing the org structure, I guess, and operational structure of the business a little bit. Can you talk about some of those functions? You know, what the benefits are that you are going to get from centralizing those things. Are you targeting Asia and Middle East? Does that require a more centrally led business? I think, generally, you need to have kind of local content there, especially in the Middle East to their investments you need to make there. I will leave it there. Thanks. Steven B. Hedlund: Yeah. Sure, Nate. I think it is important to note that we use the term center-led, not centralized. And the objective of this approach is to try to get the benefits of our scale and scope by having highly standardized, simplified, and automated processes for running the business. And unfortunately, given how we have evolved the business over the number of last decades, we tend to run our core business processes just slightly different everywhere. So the way we do demand forecasting, order entry, supply chain planning, just slightly unique in every different part of the company, and that frustrates our ability to try to use process automation, you know, chat bots, shared services, things like that to get much more efficient at running those processes. So it is a lot of work around, you know, standard old-fashioned business process redesign to enable us to take advantage of those opportunities while still trying to retain the local agility. So we have teams that are based in Europe, for example, that are doing, you know, demand forecasting and supply planning. We want them to be able to the best automated tools, but still be very responsive to the local market. So we are trying to get the best of both worlds between a pure regionally autonomous and a pure centralized approach. Operator: Your next question comes from the line of Mircea Dobre with Baird. Your line is open. Thank you. Good morning. And I will start with a near term question, and then a longer term follow-up. So from a near term perspective, if I understand your comment correctly, in terms of pricing for 2026, you are not baking in any of the metal inflation that is coming through in Harris, and the pricing that is reflected in the guidance is just carryover from 2025. So I guess the question is this, clearly, there is metal cost inflation in Harris. Is that flowing through the P&L? How should we think about the impact that that pricing element has on EBIT dollars, margin, however you want to frame it, Gabe? And bigger picture as we think about 2026 pricing, is there an argument to make that, you know, you will need to put through a 2026 price increase generally speaking, not just carryover from 2025. Gabriel Bruno: So, Mig, I will answer the last part of your question first, is we will take pricing actions as conditions require. Our price-cost strategy is to be neutral. Currently, we go and come into this new year, we have held steady on pricing actions largely, but we will be responsive to how we see any dynamics in the markets. In terms of Harris, you know, we have a mechanical adder that is built into our pricing methodology. You have seen what is happened with silver and copper, for example. And it obviously has an impact on the brazing side of our business. And so we do not feel that is going to have a significant impact on margins because that is all incorporated into our adder and our movement and adjustments on pricing. But it has been pretty volatile. So we cannot and want to try to outline what silver or copper markets will do, but we do have a pricing mechanism, as you know, that is more mechanical in nature. Operator: But the impact on EBIT or on operating income from the price, does that carry any contribution to your EBIT or not? Gabriel Bruno: Yes. It is not dilutive to the overall Harris margin. Operator: Okay. Thank you for that. And then the longer term question is on, obviously, the RISE strategy. You sound very bullish, constructive on the growth opportunity in automation, and I guess maybe all of us would agree on that. But at least for now, the reality is that this portion of the business is dilutive from a margin standpoint. So in your targets, you are obviously aware of that, and you are capturing it. But I guess my question is, how do you think about the opportunity for truly driving higher margin in this business? Because if you are offering something that is differentiated to your customers, and value added, presumably, there is opportunity to price accordingly. And as you think about M&A, you know, you talk about techquisitions. I guess that is a new term that I learned today. Presumably, that is geared towards the automation component of the business. Is there a way for you to do the kind of M&A that would actually be accretive to margin rather than dilutive to margin as I guess, a previous question assumed they would? Thank you. Steven B. Hedlund: Yeah. Mig, great question. I will give you, you know, a basic framework as to how to think about it, and then let Gabe fill in some details for you. You are right. The automation business is dilutive to the overall portfolio at the moment. And it has been particularly challenged over the last eighteen months by the environment we have been in that has caused customers to be very cautious on capital spending. We still really like the automation portfolio. We think it is a great fit for us strategically. We see that the world is only going to demand more and more automation going forward. So where the endpoint target for the margin structure of the business will remain to be seen, but the first step is to get it to be non-dilutive. Once we get it to be non-dilutive, then we can talk about how high is high from an accretive standpoint. But the journey right now is get the business back to where it was supposed to be prior to all this disruption. Regarding technology, you are absolutely right. I mean, to the degree that we can provide capability that do not exist in the world that are differentiated from what other vendors can supply and that solve a real customer pain point, you know, we expect to get paid for that. And so we look at the techquisitions of things like Enrotech that bring in an ability, help us create something that is new to the world, you know, we are going to expect to get paid for that and portion of the business for sure should be accretive. Gabriel Bruno: Yeah. So, Mig, just to add a couple of points, just keep in mind, historically what we have done in the last two years, as you know, have been pressured by the capital investment cycle, but we started off 2025 at about a $400,000,000 level of business, and we increased our business to $940 or so million in 2023 or so. When we achieved low teens type of profile and our target is, as you heard in my comments, is to be mid teens. So that is our objective. We were not that far away when we were talking about the $900 or so million of business at a target of $1,000,000,000. So we did have pressure in the last couple of years on capital investment, but we are confident that we can achieve that mid teens type of profile. And that is what is incorporated into our 2030 model. Operator: I appreciate it. Thank you. Gabriel Bruno: Mhmm. Operator: Your next question comes from the line of Robert Stephen Barger with KeyBanc Capital Markets. Your line is open. Thanks. Good morning. Gabriel Bruno: Good morning, Amanda H. Butler: Morning. Operator: You referenced some large product project orders you won in April. Is that primarily automotive, or are you seeing some opening up in other industries? And just more broadly, does it feel like inbound calls are starting to accelerate or is this sales work that you did last year, which is now starting to monetize? Steven B. Hedlund: Yeah. So the large projects we won in the fourth quarter were primarily automotive. And I think part of that is driven by just the nature of their business and the need to have product refresh on a defined cycle. What we are really looking for is, you know, greater willingness across the portfolio of customers to invest capital on the business. So whether that is heavy fab, structural steel, general fab, there is still a fair amount of caution out there. The funnel of opportunities has probably never been better. The challenge just becomes converting those high probability opportunities that we feel fairly confident we are going to eventually win. Can we get them over the finish line sooner rather than later? And again, that really is a customer confidence driven discussion less so than, you know, are they satisfied with our solution or us as a supplier? I do not think that is the issue. It is just are they ready, willing, and able to finally pull the trigger on releasing the capital. Got it. Operator: And the automation strategy has, you know, obviously increased your OEM exposure and cyclicality. And you have done a great job managing margin through what has been a tough environment for the last four or six quarters. But is there a thought to balancing exposure to more products and services that show less volatility through cycles, or is that increased volatility just the price you pay for the direction you want to take the company? Steven B. Hedlund: Yeah. I think about it, Steve, more as where are there problems that are pain points for that we can solve and get paid for solving? The recent acquisition we did in alloy steel is really all around providing solutions for abrasion and wear in a mining application. So if you are mining stuff with an excavator, the excavator's parts are going to wear and you need some way of either replacing or refurbishing those. That is a great business for us that we picked up. Very excited about that. Look to continue to grow and expand that business. We look at automation opportunities the same way. How that then affects our overall cyclicality is something we will deal with as long as we believe over the course of a cycle, we can get fairly compensated for the value we are creating. Operator: Understood. Thanks. Your next question comes from the line of Chris Dankert with Loop Capital Markets. Your line is open. Steven B. Hedlund: Hey, morning. Thanks for taking the questions. Operator: I guess just to circle back, fully appreciate, you know, we do not want to get into, you know, handicapping silver and steel and copper prices in the guide here. But I guess, given the level of volatility, we are halfway through the first quarter. Can you give us just a sense for what that metals impact would be on 1Q as of today, not obviously for the full year, but just for the first quarter? Gabriel Bruno: So because I do not want to get that specific, you know, as you are tracking silver, I mean, we saw a point for silver topped at $110 a troy ounce and dropped back to the eighties and that. So as you are looking at the mix of our business, we have got about 40% of our business tied into HVAC, which is tied into brazing consumables. So we do expect an escalation in average pricing but it has been choppy. But overall, it has been on an increasing level of trend when you look at it year over year. You could just use that as a framework from year over year perspective. But it can move as you know. Steven B. Hedlund: Yeah. Yeah. Thank you for the color there. Operator: I guess to circle back on a bigger picture thinking about international, any sense for kind of the planning around margin expansion there? I guess, how much of that kind of 2025 to 2030 improvement is based on just volume recovery versus, say, you know, cost actions or efficiency gains or mix? Just any way to kind of size those two components of the margin expansion in international? Steven B. Hedlund: Yeah, Chris. I will give you some color and then let Gabe fill in details. When we think about the international business, we really want to focus our efforts and our future investments in places that have good macroeconomic conditions where we have a good value proposition and where we feel like we can win and profitably grow the business. So we are looking at, you know, portions of the international portfolio, particularly in Middle East, Africa, parts of Asia. Core Europe really is the open question mark. You know, it has been a long tough slog in Europe, due to the macroeconomic conditions there. You know, there is some talk about increased defense spending. We will see whether that actually comes through to fruition. But our targets over the five year period for international really are not predicated on there being a significant recovery in Europe. Operator: Hey, Chris. Just to add that is very helpful. Gabriel Bruno: Yeah. Broader comment in terms of when you say volume, demand levels in general. When you look at the organic sales growth rates that we have shared by segment, we do not incorporate a significant level pricing. Historical pricing will be between 100, 200 basis points. And that is kind of what we assume broadly. So our assumptions are largely driven by expansion in our foot acceleration in demand, for example, as we talked about automation. Steve mentioned the strength we would expect into Asia, Middle East, and international. So they outlined and we have shared in terms of growth strategies is anchored on real increase in presence throughout the markets, not on pricing. Pricing will be modest. Operator: That is really helpful context, fellows. Thank you. Gabriel Bruno: Mhmm. Operator: Our last question comes from Walter Scott Liptak with Seaport Research Partners. Your line is open. Steven B. Hedlund: Hi. Thanks. Operator: Yeah. I wanted to just circle back on that January question. Steven B. Hedlund: And, you know, you guys mentioned the reference to PMI a couple times in January. I did not it was not clear to me. Did you guys see a pop in January with some of your general industrial either consumables, or equipment? Operator: Yeah. And and Steven B. Hedlund: what we would lag the any improvement in the PMI. So we are encouraged by the published number, and as we said before, our volume has been steady, but we have not seen an inflection in consumable volume. Gabriel Bruno: So that is pretty key, Walt. Right? As we are seeing studying this, in the consumable volume level business. That ties into production levels and really want to see an escalation in capital investment. Operator: Okay. Great. And then maybe, you know, sort of a high level one. Steven B. Hedlund: I wonder if there is a difference with the way that you guys went after the 2030 RISE targets versus the way that the 2025 Higher Standards were put in place. Like, the business has been evolving. You know, you have some factory consolidation in those impressive profit margin targets. You have got some impressive organic growth targets. Is there something that is kind of structurally changed Operator: I wonder if you just talk to, you know, the, you know, how Lincoln's evolved. Steven B. Hedlund: Yeah. Well, great question. We really think about the RISE strategy is a continuation and evolution of the Higher Standard and really trying to build upon the momentum and the progress that we have created over the last five years. And again, what has been a fairly interesting, shall we say, you know, market environment with a lot of headwinds and a lot of disruption from COVID, a few hot wars around the world, a global trade war, fairly unpredictable, you know, trade policy emanating at the U.S. So we are hoping that, you know, we may see a somewhat of a return to normalcy in the outside world, but that and it is when we say we are cautiously optimistic about the future, the caution is really around the external environment. Our optimism is driven by what the team has been able to accomplish over the last five years, and the opportunities that we know are in front of us that we see every day and that we are committed to addressing and making the business even stronger going forward. So, I do not see it as a radical departure from the Higher Standard strategy. Okay. Great. Thank you. Operator: This concludes our question and answer session. I would like to turn the call back to Gabriel Bruno for closing remarks. Gabriel Bruno: I would like to thank everyone for joining us on the call today and for your continued interest in Lincoln Electric Holdings, Inc. We look forward to discussing our RISE strategy and the progression of our initiatives as we advance to our 2030 targets in the future. Thank you very much. Operator: This concludes today's conference call. You may now disconnect.
Operator: Welcome to the Curtiss-Wright Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions following the presentation. In the interest of time, we ask that you limit yourself to one primary question and one follow-up. Lastly, if you should require operator assistance, please press 0. I would now like to turn the call over to James Ryan, Vice President of Investor Relations. Please go ahead. James Ryan: Thank you, Jamie, and good morning, everyone. Welcome to Curtiss-Wright Corporation’s fourth quarter and full year 2025 earnings conference call. Joining me on the call today are Chair and Chief Executive Officer, Lynn M. Bamford, and Executive Vice President and Chief Financial Officer, K. Christopher Farkas. A copy of today's financial presentation and the press release are available for download through the Investor Relations section of our website at curtisswright.com. A replay of this webcast will also be available on the website. Our discussion today includes certain forward-looking statements that are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC. As a reminder, the company's results and guidance, including adjusted non-GAAP view, that excludes certain costs in order to provide greater transparency into Curtiss-Wright Corporation’s ongoing operating and financial performance. GAAP to non-GAAP reconciliations are available in the earnings release and on our website. Now I would like to turn the call over to Lynn to get things started. Operator: Thank you, Jim, and good morning, everyone. Lynn M. Bamford: As you saw in last night's results, the momentum continues to build at Curtiss-Wright Corporation. I would like to begin by acknowledging our 9,100 hardworking employees for driving another record year of financial performance. We continue to deliver on our pivot to growth strategy, which resulted in strong growth in sales, profitability, free cash flow, and new orders in 2025. Our performance reflects the critical positioning of our technologies across our A&D and commercial markets, our ongoing pursuit of operational and commercial excellence, and our commitment to delivering exceptional results for our shareholders I will start with highlights of our fourth quarter 2025 results Overall, of $947,000,000 increased 15% year over year, highlighted by strong organic growth of 11% and the solid contribution from our I&C Solutions acquisition. We delivered 16% growth in our aerospace and defense markets, which exceeded our expectations driven by an acceleration of Ground and Naval Defense revenues into 2025. Of note, growth in our A&D markets reflected our continued strong alignment to U.S. Military priorities and accelerated pace of growth in NATO and allied funding. While commercial aerospace sales increased more than 20% Growth in our commercial markets was also impressive, up 13% year over year, primarily driven by higher revenues in the Power and Process market. Operating income increased 14% and included higher R&D investments to drive future organic growth, while operating margin was strong at 19.7%. We delivered diluted earnings per share growth of 16% year over year, slightly ahead of our expectations, was primarily driven by higher A&D sales. Free cash flow was strong at $315,000,000 up 13%, which reflected a 224% conversion. Regarding our order book, new orders increased 18% in the fourth quarter, reflecting nearly 1.2 times book to bill were driven by continued solid demands within our naval defense and commercial nuclear markets. Next, I will highlight our full year 2025 results. We delivered another record financial performance with higher growth in revenue and operating income across all three segments reflecting the underlying demand and the momentum that continues to build across our portfolio. We delivered exceptional margin expansion up 110 basis points year over year to reach a new record of 18.6%. This performance reflected the strong growth in sales the benefits of our operational excellence initiatives, and the savings generated by our restructuring actions. Furthermore, we continue to accelerate investments in research and development across the portfolio to support future organic growth and reinforce our commitment to grow R&D faster than sales over time. Diluted earnings per share increased 21% year over year, driven by improved operational performance as well as a lower share count. Adjusted free cash flow also reached a record $554,000,000 which reflected strong conversion of 111% based on the growth in earnings and near record level of working capital efficiency. We achieved these strong results despite a nearly 50% increase in capital expenditures in 2025 to support growth investments across all three segments. Turning to our full year 2025 order book. Strong overall demand in our A&D and commercial markets yielded a new record of $4,100,000,000 up 10% year over year and a book to bill of nearly 1.2 times. Starting with our A&D markets, continued strong demand for nuclear propulsion equipment supporting submarine programs in naval defense was partly offset by lighter than anticipated demand within our aerospace and ground defense markets due to delays resulting from the continuing resolution government shutdown. This principally impacted timing of orders with some of our short cycle Defense Electronics businesses including Tactical Communications. As a result, we delivered a book to bill of 0.96 times in Defense Electronics initially leading us to take a more conservative 2026 guide in our overall ground defense market. However, looking across the pipeline of opportunities for these businesses, our customers have expressed their confidence that this is timing Our programs remain in good standing and our technologies closely aligned with the modernization priorities of The U.S. And our allies. Wrapping up our A&D markets, in Commercial Aerospace, we remain aligned with the anticipated production ramps across the major OEM platforms which continues to drive demand for our products. Within our commercial markets, we concluded the year with tremendous growth in commercial nuclear. Driven by strong demand for aftermarket equipment supporting scheduled plant outages and restarts as well as continued advancement across leading SMR designs. Additionally, we continue to see stabilization across two of our consistent watch areas, process and industrial, each of which recognized solid order demand to close to conclude the year. Overall, the healthy growth in orders builds on Curtiss-Wright Corporation already strong backlog, which increased 18% in 2025 to reach a new record of in excess of $4,000,000,000 and provides greater confidence in our future top line growth. Another important takeaway from this past year was our disciplined approach to capital allocation to ensure deployment towards the highest return opportunity in order to enhance shareholder value. We executed a record $465,000,000 in total share repurchases in 2025 and we increased our annual dividend for the ninth straight year. Now, I would like to briefly introduce our full year 2026 guide. Overall, we are projecting organic sales of 6% to 8%. Supported by growing momentum in our overall order book and our commitment to continued investment in the business. Operating income growth is once again anticipated to outpace sales growth and reflects 30 to 60 basis points in operating margin expansion this year to range from 18.9% to 19.2%. As a result, diluted EPS is expected to grow 11% to 15% Furthermore, we anticipate another year of record free cash flow generation and continue to expect strong conversion in line with our long term targets. In summary, Curtiss-Wright Corporation is poised to deliver an outstanding performance in 2026 And as we will discuss later in our remarks, we have line of sight to exceed the three year financial targets that we issued at our 2024 Investor Day. Now, I would like to turn the call over to Chris to provide a more in-depth review of our financials. James Ryan: Thank you, Lynn. Turning to Slide four, I will begin by reviewing the key drivers of our fourth quarter 2025 performance. I will start with the Aerospace and Industrial segment where overall sales increased 5% and was in line with our expectations. In the segment's commercial aerospace market, our results reflected solid OEM sales growth supporting increased production on both narrow body and wide body platforms. Within the segment's defense markets, we experienced increased demand for EM actuation equipment supporting ground based mobile launcher systems. And in the general industrial market, sales were essentially flat overall, but outpaced the global macro conditions affecting industrial vehicle markets. Turning to the segment's fourth quarter operating performance, we delivered a strong operating margin of 20.1% and benefited from favorable absorption on higher A&D sales the overall profitability was tempered by a less favorable mix of business mainly due to higher customer funded R&D. Next, in the Defense Electronics segment, sales growth of 17% exceeded our expectations. Mainly due to timing within Ground Defense as embedded computing revenues accelerated into the fourth quarter. We also experienced solid year over year growth in sales of tactical communications equipment as well as increased turret drive stabilization systems supporting international customers. Within the segment's aerospace defense market, higher direct foreign military sales of embedded computing and flight test instrumentation was offset by the timing of domestic fighter jet and UAV programs In this segment's commercial aerospace market, our results reflected solid growth in flight data recorder sales as well as higher avionics equipment supporting various helicopter programs. Regarding the segment's operating performance, we delivered a strong 25.9% operating margin up 160 basis points and in line with our expectations. Reflecting favorable absorption on higher revenues and the benefits of our ongoing operational excellence initiatives. Those increases were partially offset by higher investments in research and development, Turning to the Enablement Power segment, Overall sales increased 21% and were well ahead of our expectations. This performance was once again driven by strong revenue growth in Naval Defense following continued improvements in the supply chain and an acceleration of production on submarine programs. We also experienced an increase in aftermarket revenues supporting naval shipyards through fleet services work, Within this segment's aerospace defense market and as expected, we experienced a strong sequential and year over year increase in revenues for a arresting systems products principally supporting international programs. In the power and process market, our results reflected a strong contribution from our INC Solutions acquisition, which contributed to higher sales in both our commercial nuclear and process markets. On an organic basis, growth in commercial nuclear sales reflected the continued ramp up in development across several SMR designs as well as higher government nuclear revenues. Additionally, strong growth in the process market was driven by higher MRO valve sales where demand continued to improve throughout 2025 providing us with increased optimism for growth in 2026. Regarding the segment's operating performance, operating income grew 13% while operating margin was solid at 17.9%. Our results reflected favorable absorption on higher sales, which was more than offset by unfavorable mix including higher research and development supporting next generation SMR designs. To sum up Curtiss-Wright Corporation’s fourth quarter results, we delivered teens growth in sales and operating income which resulted in an overall strong operating margin of 19.7%. Building on our strong performance in 2025, I would like to take the next few minutes to review our full year 2026 guidance. I will begin on Slide five with our end market sales outlook where we total sales to grow 6% to 8% driven by continued strong organic growth in our A&D and commercial markets. In Aerospace Defense, our outlook for 9% to 11% growth mainly reflects the alignment of our technologies to the FY 2026 U.S. Defense budget including key military priorities such as aircraft modernization and Golden Dome. This in turn is driving increased demand for embedded computing solutions across numerous applications from communications and radar to various mission packages supporting both existing and next generation platforms. Within Ground Defense, we anticipate anticipate sales to decline 4% to 6% As a reminder, this follows a strong pace of mid teen sales growth in both 2024 and 2025. Based on the acceleration of computing revenues into 2025 and the delays in the orders for tactical communications equipment that Lynn referenced in her opening remarks, we are beginning the year with a more conservative outlook in this market. Aside from those timing delays, we expect continued growth in embedded computing towards radar and strategic missile defense applications across a wide number of programs, In addition, we expect increased EM actuation sales supporting the U.S. Army's IFPC program and higher sales of turret drive stabilization systems supporting international ground vehicles through our relationship with Rheinmetall, In Naval Defense and building upon our strong performance this past year, growth of 5% to 7% mainly reflects higher revenues on the CVN-eighty one aircraft carrier and Virginia class submarine programs. Looking more broadly across all three defense markets, based on our strong backlog across key platforms globally and the alignment of our technologies to support NATO and allied countries, we expect direct foreign military sales to remain a key contributor to our overall defense growth in 2026. Turning to Commercial Aerospace, our outlook for 10% to 12% sales growth reflects the high teens growth in our order book this past year and the anticipated ramp up in OEM production on narrow body and wide body aircraft. Lynn M. Bamford: To wrap up our aerospace and defense James Ryan: outlook, we project total sales in these markets to increase 5% to 7%. Moving on to our commercial markets. In Power and Process, our outlook for 12% to 14% sales growth reflects mid teens growth in our commercial nuclear market along with low double digit growth in process. Our outlook in commercial nuclear reflects continued strong U.S. Demand driven by a step up in year over year outages well as higher revenue supporting both plant life extensions and restarts of existing plants. In addition, we anticipate higher international aftermarket sales mainly from Canada and South Korea. Our guidance also reflects strong growth in SMR revenues as we begin to transition from development to the initial prototype stage for critical systems on the Xenergy Advanced Reactor including both the helium circulator and reactivity control and shutdown systems. Please note that our initial guidance does not include an AP1000 order that we continue to anticipate that we will receive an order for reactor coolant pumps in 2026. And in the process market, our outlook is mainly driven by improving demand for our severe service valves as well as higher sales of instrumentation solutions from our I&C business. Lynn M. Bamford: Lastly, in the general industrial market, while we anticipate sales to be James Ryan: flat once again in 2026, we saw signs of improvement in our Q4 2025 order book and entered 2026 with a solid backlog. Looking deeper, we expect modest growth in medium duty industrial vehicle sales this year as well as a small benefit from international growth. We remain cautiously optimistic that conditions within our overall industrial vehicle business will improve through the year and into 2027. Wrapping up our total commercial markets, we are targeting strong full year sales growth of 7% to 9%. Moving on to our full year 2026 financial outlook by segment on Slide six. I will begin in Aerospace and Industrial, where we expect sales to grow 5% to 7% overall reflecting strong growth in commercial aerospace and ground defense as well as flat sales in general industrial. Regarding the segment's profitability, we project operating income growth of 11% to 14% and operating margin expansion of 90 basis to 110 basis points ranging from 18.3% to 18.5%. This outlook reflects our expectations for higher sales the benefits of our operational excellence initiatives and the savings generated by our restructuring while we continue to accelerate investments in R&D. Next in Defense Electronics, we expect sales to grow 4% to 6% mainly driven by strong growth in Aerospace and Defense partially offset by the timing of orders in Ground Defense. Regarding the segment's profitability, we expect operating income growth of 4% to 6% and operating margin to be flat to up 20 basis points to a new all time high range of 27.3% to 27.5%. Of note, this outlook reflects our expectations for higher sales and the savings generated by our restructuring actions as well as $4,000,000 in incremental investments in internally funded R&D. In Enable and Power, we expect sales to grow 8% to 9% reflecting the strength of our orders and backlog in both our naval defense and commercial nuclear Regarding the segment's profitability, we expect operating income growth of 10% to 13% and operating margin expansion of 30 to 50 basis points. Estalgic reflects our expectations for strong revenue growth and the savings generated by our restructuring actions while we continue support investments in both internal and customer funded development programs. To summarize our 2026 outlook, overall, we anticipate total Curtiss-Wright Corporation operating income to grow 8% to 11% and expect operating margin to range from 18.9% to 19.2%, up 30 to 60 basis points. Next, to aid in your quarterly modeling, we expect first quarter 2026 sales to grow by high single digits relative to the 2025 and we are targeting low double digit growth in operating income with solid year over year operating margin improvement across all three segments. Continuing with our financial outlook on Slide seven, I wanted to provide some color on a few non operational items. I will start with other income, which we expect to increase by approximately $3,000,000 to $4,000,000 this year based upon our strong free cash flow generation and the resulting impact on interest income. Looking ahead to December, we will pay down $200,000,000 in senior notes coming due, which will have a minor benefit and lower interest expense. Regarding our 2020 tax rate, we are targeting a slight reduction to 21.5% which reflects our ongoing success in reducing our effective tax rate. Lynn M. Bamford: Turning to our EPS guidance, James Ryan: we expect full year 2026 diluted EPS to range from $14.70 to $15.15 up 11% to 15% reflecting strong profitable growth within our operations and a reduction in our share count following record share repurchases in 2025. For 2026, to start the year, we anticipate $60,000,000 in standard share repurchases as we continue to offset dilution. To aid in your quarterly modeling, we expect first quarter EPS to reflect high teens growth relative to the 2025 mainly driven by a strong operational performance with a supplemental benefit of $0.10 from a lower year over year first quarter tax rate. And similar to last year, we expect sequential quarterly EPS improvement with the fourth quarter being our strongest, And lastly, we are projecting a record full year free cash flow of $575,000,000 to $595,000,000 reflecting our expectations for strong growth in earnings in our continued focus on working capital management, more than offsetting increased growth investments in capital expenditures. As Lynn mentioned earlier, we delivered near record levels of working capital in 2025 reaching 19.2% of sales. And for 2026, we expect to further improve upon that and to reach a new record level of performance. Beyond that, our outlook for $110,000,000 to $120,000,000 in capital expenditures represents an increase of more than 25% year over year which follows last year's nearly 50% increase and reflects our ongoing investments to support future growth. Lynn M. Bamford: Overall, as we accelerate investments across our operations this year, James Ryan: we continue to expect free cash flow in excess of earnings and a healthy free cash flow conversion rate of approximately 105%. Now I would like to turn the call back over to Lynn. Lynn M. Bamford: Thank you, Chris. And turning to Slide eight, where I will wrap up today's prepared remarks. Curtiss-Wright Corporation has demonstrated strong growth in financial financial performance over the past two years since our May 2024 Investor Day event and we are well positioned to continue that momentum by delivering strong profitable growth again in 2026. I will spend the next few minutes providing a few insights insights into the increasingly favorable industry tailwinds for two of our largest end markets, defense and commercial nuclear. Which are benefiting from positive market forces and provide us with increased confidence as we look into the future. I will also provide some additional color on a few of our targeted growth initiatives across the portfolio. Then I will conclude today's presentation by reviewing our progress against the major 2024 Investor Day financial targets shown at the bottom of the slide. I will start with Defense. Curtiss-Wright Corporation is primed to benefit from the tremendous acceleration in global defense spending driven by a record U.S. Budget of approximately $1,000,000,000,000 including reconciliation funding and the increased commitments from NATO and Allies. Starting in Naval Defense where we continue to benefit from strong demand and the call for accelerated production across the U.S. Navy's most critical platforms. As a key supplier of nuclear propulsion equipment, our decades long relationships along with capacity to take on additional business uniquely positions Curtiss-Wright Corporation to secure new content across existing and future platforms. In Defense Electronics, we stand to benefit from the administration's focus on commercial solutions and agile contracting and also through our strong alignment to the DOW top strategic priorities. These include areas such as next generation fighters, Golden Dome and aircraft modernization just to name a few. Our broad offering of embedded computing products are used in a wide number of ARC and ground based systems and are an integral part of mission critical applications such as comms, networking, threat detection, jamming, targeting and fire control. Curtiss-Wright Corporation continues to make purposeful and focused investments in research and development to advance our technology portfolio. To name a few significant examples, we are designing and building ruggedized computing solutions with NVIDIA's GPUs ranging from the high end Blackwell to the swap optimized store, tailoring them to match the compute needs of those different applications. Additionally, our Fabric 100 family of products provides industry leading 100 gigabit connectivity enabling the highest performance in deployable computing systems today. Also, we recently announced our ruggedized servers are now validated as part of Microsoft Azure ecosystem, bringing the enterprise class computing to the tactical edge. These solutions and others uniquely position Curtiss-Wright Corporation as a leader in defense technology. Supporting next generation applications while ensuring our alignment to the US government's most standard and highest priorities. Operator: Overall, this is but a sample Lynn M. Bamford: of our ongoing investments in and development of new technologies help ensure Curtiss-Wright Corporation maintains a strong position on leading defense programs today and well into the future. On the international front, there is a clear recognition of the need and movement by our NATO allies to strengthen their defense capabilities. This year NATO committed to boost defense spending from 2% of GDP per year to upwards of 5% by 2035. Similar to our market position in The U.S, we have a very broad reach across a large number of platforms. As a result, over the past few years, we have recognized mid teens plus growth in our direct FMS revenues and we continue to solidify our positions with technologies that support operational readiness such as embedded tactical computing ground based arresting systems, and Navy aircraft handling systems. In addition, we remain well aligned with Brian Mittal, where we expected growth in ground vehicle platforms affords us the opportunity to supply our turret drive stabilization systems technology to thousands of new vehicles over the coming decade. These represent just a few of the many ways the Curtiss-Wright Corporation stands to benefit from the continued acceleration of global defense spending. Turning to Commercial Nuclear. During the last two years, the momentum and pace of activity has accelerated globally. Broadening the near and long term scope of opportunities for Curtiss-Wright Corporation in the Operator: industry. Lynn M. Bamford: Here in The U.S, the President's executive orders issued last May are providing tremendous uplift by advancing support for the industry at large and in keeping with the focus on U.S. Nuclear energy dominance. These directives are already advancing the speed at which approvals for reactor licensing are being completed particularly for plant life extensions of U.S. Reactors. This in turn is creating a pathway for a broad acceleration across our customers' business models while further supporting the administration's goal to quadruple U.S. Nuclear generation capacity to 400 gigawatts by 2050. Additionally, and perhaps the largest potential boost for Curtiss-Wright Corporation is the administration's $80,000,000,000 commitment to support the construction of 10 new Westinghouse AP1000 reactors This expanded scope across The U.S. Builds upon the existing AP1000 opportunities in Europe, particularly in Poland and Bulgaria, which continued to demonstrate steady progress. Overall, we remain aligned in those these pursuits and continue to expect our next order this year. Meanwhile, the SMR development continues to evolve in The U.S. And globally, including Canada, The UK and Europe. And we expect to benefit as these efforts transition from ongoing design activities to building prototypes before shifting to production later in the decade. Of note, we have maintained a steady pace of investment to support Curtiss-Wright Corporation’s growth as we work to enhance our relationships and expand our content across the leading 300 megawatt plus SMR developers. Overall, Curtiss-Wright Corporation is extremely well positioned to capitalize on the expected surge in demand and future growth in this industry providing us with increased confidence in our ability to deliver on our growth targets in commercial nuclear. Next, I will review our progress against our three year Investor Day targets. Starting with sales, we are currently on track to deliver an organic revenue CAGR of approximately 8.5% well ahead of our target of 5% and a clear acceleration relative to our historical top line growth rates. In addition, we are consistently delivering operating income growth in excess of revenue growth, which is a foundational premise under the pivot to growth strategy that opens funding for reinvestment back into the company Since 2023, we have grown R&D at a faster pace than sales and at the same time are driving towards operating margin expansion of 170 basis points over the three year span. This year, we expect to reach a new milestone with the potential to deliver an operating margin of 19% which firmly entrenches our position as a top quartile margin performer relative to our peers. We are also well positioned to expand our EPS growth target by more than 700 basis points and are on track to deliver a 17% EPS CAGR over the three year period. Through a combination of strong operational performance and our dedication to a balanced capital allocation strategy, we are compounding earnings at a mid teens pace over time. And finally, we are driving record levels of free cash flow across our business. We are tracking well ahead of our expectations while more than offsetting increased growth investments in CapEx and expect to generate 110% average free cash flow conversion over the three year period. Our strong free cash flow generation helps to fuel organic and inorganic investments across the business that drive efficiency, expand capacity and help enhance our overall customer offering. Along with our commitments to returning capital to shareholders. In closing, we look forward to the year ahead and achieving another record financial performance in 2026. Looking on this year, I am very excited about the medium and long term prospects for Curtiss-Wright Corporation that will continue to provide momentum under our pivot to growth strategy drive long term value for our shareholders. Thank you. And at this time, I would like to open up today's conference call for questions. Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press 1 on your telephone Thank you. Our first question will come from Kristine Liwag with Morgan Stanley. Please go ahead. Hey, good morning, everyone. And Lynn, thank you for the details you provided on the different growth vectors in defense. I wanted to dive a little bit deeper on missiles. We have seen multiyear agreements that increased volume by 300% to 600% on certain programs at Lockheed and at Raytheon. I was wondering, can you provide more color regarding your exposure to this? Is it in your radar or sensors business or defense electronics? How do you think about the potential opportunity of this specific growth sector? And what is your exposure? Lynn M. Bamford: Thank you for that question, Christine. So we have some content directly on the missiles, but it is relatively minor. It is telemetry and flight test instrumentation type of content. Which can be meaningful revenue, but maybe not deployed across every single missile that is produced. So just to level set that you know, focus in our portfolio. However, as the demand and the belief that we need to restock pile is all connected to the Golden Dome and very many things that are related to the defense of our country where we have fantastic exposure. So we have talked about in Golden Dome, there is kind of you think of it in three technology buckets, the sensors, the networking of those sensors, and then the effectors to combat any incoming threats. And across all three of those areas, we are very well positioned and have very many active developments mean, system will be built up of existing capabilities. That our long history has us well positioned on. We are very well positioned in the networking with the various standards that are going to be used for the command and control across it. And on top of the existing platforms, are engaged in quite a few exciting new developments across industry to provide some upgrades into those systems and deliver new capability. So just broadly speaking, the overall growth of defense I would say we are very well positioned not just here in The U.S. But across Europe. Operator: Great. Super helpful, Lynn. If I could do a follow-up question on, no surprise, the AP1000. So you guys mentioned that you are expecting an order in 2026. But it is not in the financial outlook. I wanted to clarify, one, which customer do you expect this to come from? Is this Poland, Bulgaria, a U.S. Customer? And the second question to that is, how many are you expecting in this order for 2026? And the third one would be, if you do get this order, and noted that it is not in your 2026 guidance, how do we think about potential moving pieces Alexandra Eleni Mandery: to your outlook for the full year? Sorry, I know that is three questions into one, but basically an AP1000 question, Dylan. Lynn M. Bamford: So it is a topic we definitely anticipated being asked about. And so really, mean, the first orders could come from either a European customer Poland or Bulgaria or from The U.S. How this $80,000,000,000 that, the government has committed to jumpstart the build out of AP1000 reactors in The US is gonna flow is still something I think everybody's coming to understand. And for us, our customer is Westinghouse. We work very hard to stay aligned with Westinghouse. We are definitely communicating with them on different scenarios. Of production ramp and are just committed to being a great supplier to Westinghouse. And working with them. So I do not think at this time we can give any color on the size of the first order. It could be different quantities and really until Westinghouse decides how they want to do that, I do not think we would get ahead of what that would mean for Curtiss-Wright Corporation. Operator: Great. Thank you very much. Alexandra Eleni Mandery: I am sorry. Go ahead. James Ryan: I was just going to add, you had asked about the financial impact. And I think, Tito, as you think about timing of the order and when that hits us during the year, There is going to obviously be some labor that we are going to incur upfront in the contract, but we mentioned the bell curve and that taking place over a five year period. So there will be a little bit of Lynn M. Bamford: a startup. James Ryan: And then as we are able to place orders for material, and start to see that material come in the door, which I would expect a greater portion of that material to start coming in this next year. We will see some uplift in the revenues. That is when we will really start to accelerate within the bell curve. And then just from the cash perspective, I mean, we are in negotiations with Westinghouse. We are here ensure that they are successful in their deployment of BAP1000. But think you can see from our focus on working capital and what we have demonstrated in free cash flow that the team is dedicated to ensuring that we continue to improve upon that. So I think that there will hopefully be some good news of that in that area as we progress through the year. Alexandra Eleni Mandery: Wonderful. Thank you very much, Chris. Operator: We will move now to Myles Alexander Walton with Wolfe Research. Please go ahead. James Ryan: Hi, good morning everyone. This is Greg Galberg on for Myles. I wanted to start on the free cash flow guidance just because you have seen you know, big step up in CapEx in 2025 and you are calling for it again in 2026. With minimal impact to free cash flow conversion. And Chris, I know you mentioned the working capital performance in your prepared remarks. So I was curious if you could just kind of put a finer point on what is actually happening with the working capital to enable this? Like are you getting better advances from your customer? Or kinda can you just talk through the dynamics there? Sure. So I mentioned on the call that we were 19.2% working capital as a a percentage of sales in 2025. And if you take a look at our financial statements, you are going to see that our deferred income has been increased K. Christopher Farkas: gradually over the past several years. A lot of that has to do with the team's focus on commercial excellence and success that they have had in negotiating contracts. And kind of supports the the way that our sales are growing, a lot of naval defense work, a lot of strong commercial nuclear growth ahead of us. So the team has been doing a good job in that regard. This last year, we had higher DPO. We did some good things with supply chain, ensure that they were protected at the same time, participate participating in our cash flow goals. But as we head into this next year, we are going to continue to improve upon collections. We have got opportunity across the board whether it is DSO, inventory turns, DPO. We will be targeting a working capital percentage of sales of the approximately 18% That will be a record. I think if you step back to the years when we had the last AP1000 contract, we were somewhere in that high 18s rate and we are expecting to beat that this year. The team outside of commercial excellence and negotiating with contracts has done a lot of good systems work. We talked about that at Investor Day. We have new levels of information at our disposal regarding daily billings, and progress on cash flow across the corporation. That scales all the way from Lynn and myself down to the business unit level. We have done some good things there to improve the systems that help to enable improved cash flow management. James Ryan: Got it. And then just quickly on the C-17 order you guys announced earlier this week. Was that order booked for you in 4Q just because I think that is when Boeing got the order? Or is that a 1Q order? And if not, we expect the relatively quick snapback in Defense Electronics bookings, just giving what seems to be a timing issue Lynn M. Bamford: Yes. So it is we definitely saw delayed bookings and we mentioned in the script the 0.96 book to bill. In Defense Electronics, and that was very much affected by the delay. So to be clear, was a Q1 order for us and it is a very exciting new platform for us, but it is also very indicative of the the bookings we clearly saw that we believe would come in 2025 that were delayed, partly due to the CR, some structure changes within the government. And so it is a very meaningful example of one of those and a platform we are pretty excited about. Alexandra Eleni Mandery: Great. Thank you. Operator: We will turn now to Peter John Skibitski with Citi. Please go ahead. K. Christopher Farkas: Great. Thank you. This is Bradley Oyster on for John Gaudin. James Ryan: Thank you for taking my question. Just want to dial a little bit in on the aerospace and industrial and sorry, naval and power headwinds that you called out for fourth quarter. Particularly around mix. Is this something that is more of a K. Christopher Farkas: seasonality item here? Or is it more structural? And how should we think about that James Ryan: going to '26 with the guide that you have? K. Christopher Farkas: Yes. So as we enter into 2026, we are going to continue to see a heavy ramp up in not only naval defense and as I mentioned on the script that will be work in performance to accelerate where we are on the CDN 81, but also the Virginia Class submarine program. But we are also accelerating in commercial nuclear and our process markets. The process markets, I will start there first. We saw a healthy order book and continued growth in the order book here later in the year in 2025 and that is positioning us really well in 2026 for MRO growth. And there is some accompanying margin benefits to higher concentration of MRO valves. But we also had mentioned in the script that commercial nuclear is going to accelerate quite a bit here in 2026 The fourth quarter order growth in commercial nuclear alone was up 50% year over year A lot of orders coming in relative to SMRs and work that is beginning to transition from development to prototype, which is happening this year in 2026. So that work does represent a little bit more of a challenge for us from a margin As you would imagine, it is not production work. Eventually, it will transition there and that convert into stronger margins. But we are also underpinned by a strong increasing footprint in global aftermarket content and that will help as we move through the year as well. So thematically, think process and maybe the the transition into prototyping are probably the two things that you can think about as we go into 2026. Got it. I appreciate all the color. Thank you. Pass it along. Operator: We will turn now to Nathan Hardie Jones with Stifel. Please go ahead. K. Christopher Farkas: Hello, everyone. This is Andres on for Nathan Jones. I wanted to talk a little bit about operational and commercial excellence. Obviously, that was a big part of driving margin expansion over the last three years. How should we think about these initiatives moving forward? And what was the contribution the last three years? Lynn M. Bamford: Maybe I will start off and talk about some of the efforts and such and K. Christopher Farkas: I will let Lynn M. Bamford: Chris speak to what he can about the contribution. But when you run a complex business, there is a lot of things that go into how you expand margins and it is you cannot always completely bucketize them from one thing to the next. But our operational growth platform has really become a fundamental part of the company and how the teams evaluate themselves. And it has a robust set of focus areas with everything from the commercial excellence and which includes pricing and making sure we can analyze that. Aspect with as there has been inflation in the world. And such that making sure we are really understanding how we are pricing our products is very critical. And we have become much more sophisticated in how we can do that. So not people do not always think about that as part of operational excellence, but it is very much how we manage the company. But we continue to do things in our supply chain We have added commodity managers at a corporate wide level is just one example. That are helping making sure we maximize the buying power across the organization. And achieving the best results there to ever ongoing activity on integrating robotics into our operations. So I will just pull those out as some examples. It is very widespread and the team has made great successes over the past three years. But we have a clear list of things that are still in our windshield that we are going to go after. And in no way shape or form does this end. So it is definitely still an ongoing focus and something that is part of our DNA at this point. K. Christopher Farkas: Yeah and maybe I will not go all the way back to 2024 at this point in time. But if I just kinda start with what happened here in 2025 as a base, We had close to $12,000,000 of commercial and operational excellence roll through our P&L this last year. The operational growth platform is affecting all James Ryan: the K. Christopher Farkas: all entities and the greater portion of that was really operational excellence, but still some pricing successes this last year. Additionally, we have been conducting restructuring programs, restart restructuring for growth in many areas of the business, but also efficiency and you saw some of that benefit come through in 2025. Now as we enter into 2026, we are going to continue to see some of that restructuring benefit from the programs that we started in prior year continue to roll through our P&L. You will see some uplift from that and operational excellence and pricing initiatives again not quite at the same pace. But as Lynn had mentioned, there is plenty of opportunity in front of us and we will continue to kind of drive towards that opportunity. But overall, looking at Curtissite margins for this next year, we are going to have a good strong incremental contribution margin on sales of roughly 25%. We will benefit from all those initiatives that are helping us in the P&L and that is going to more than offset what is happening in our increase in IR&D and CRAD this next year. So pleased to be able to come on out of the gate with a guide of 30 to 60 basis points of expansion. Awesome. Thank you so much for that context. Also, a quick one here. With 4Q power and process benefiting from strong growth in industrial valve sales. Called that out earlier. Are you seeing any improvements in the underlying process mark Maybe an update there. Yes. I think we are seeing some improvement in the underlying process market. I mean, as you look forward in twenty twenty North America MRO is really projected to grow in that low single digit to mid single digit range. We are seeing some good benefits across North America related to CapEx. I think the and that is particularly in the oil and gas side of things. When you look at the chempetrochem, the global growth is going to be a little bit below GDP. North America will probably be in line with GDP. But I think one of the things that is important to point out and really just kind of credit back to the team is that they have done an exceptional job really focusing on customer satisfaction, being able to tighten lead times, get product in the hands of the customer sooner, heavy focus on quality and at the same time kind of expanding some of those sales channels globally so that they could take advantage and gain some market share in the process. So really doing some good things and I think that is going to help us kind of beat the overall industry market growth rates as we head into 2026. I appreciate it. Thank you. I will jump back in the queue. Operator: We will move now to Michael Frank Ciarmoli with Truist Securities. Please go ahead. James Ryan: Hey, morning guys. Nice results. Thanks for taking the questions. Lynn or Chris, I think I know the answer to this, but figured I would ask it anyway. Mentioned some of the timing in defense, but you have got pretty big deceleration in just your pure defense revenue growth. I think you have averaged 13% over the past three years. The guide points to six I think naval growth is down too. And again, tough comps, I understand what you are lapping. You did talk about the strong direct foreign military sale. But anything else George Anthony Bancroft: going on beside timing and just kind of what has been a strong kind of prior trajectory? I know you talked about the bookings in Defense Electronics being below one, but any other color there? James Ryan: So Lynn M. Bamford: we feel very strongly optimistic about our ability to continue to grow our defense business at a pace that matches or beats what The U.S. Is doing. And that does military sales are part of that, but we are very well aligned here in The U.S. And there can be just some timing issues and having a multi multi month CR and then the shutdown definitely had an impact And so we have taken a bit of a conservative stance, as Chris mentioned, in our ground guide that we think now that we have a budget, we expect the normal order flow would begin in 60 to 90 days. But we are watching that. We thought it was a great sign to see that the C-17 order come in so quickly after the appropriations. Broadly speaking across Defense Electronics specifically, we can clearly have line of sight of over $100,000,000 of orders we fully expected to get in twenty five. That have been pushed into 2026 and that C-17 is one of the first ones that has landed. And again, we are very close contact with our customers. There is nothing going on that is disruptive to the long term. We are very well positioned with our technologies. And I think of things that the team is doing and whether it is the Fabric 100 we have got over 20 or what 20 MOSSA, CMOS compliant products to to market in 2025. We will exceed that number in 2026. Our relationship with NVIDIA is just at its beginning for being a growth factor vector. The Microsoft Azure is also just at the beginning. And those are the things we made public in 2025 and the team continues to do things that will provide other differentiated capabilities that are unique to Curtiss-Wright Corporation and bring those to And so whether it is that portion, our alignment with the systems around Golden Dome, and we are aligned in our shipbuilding. I think regardless of the shipbuilding, to your comment there, fact that at our Investor Day, had $15,000,000 of maritime industrial based funding and that is up to $55,000,000 now. That is a clear indication that of how the Navy sees Curtiss-Wright Corporation is a critical supplier and they want to assure we are ready for the growth that is coming our way. And so that is a tangible thing we can point to tied to the Navy. So there is no concerns looking out to '27 and potentially having a $1,000,000,000,000 budget is very exciting and we are doing the things make sure we are ready for the growth that our customers are signaling to us. George Anthony Bancroft: Okay, perfect. That is really helpful. And then maybe just totally shifting gears back to nuclear. You have given us sort of the end market waterfall detail for 2025 and '26. So we can probably back into what looks to be maybe $60,000,000 of OE revenue on new nuclear builds this year growing close to 40% over last year. Is anything else you mentioned ex energy transitioning into prototype build. Are there any other SMR reactors that are expected to transition to drive that growth? Or can you point to other specific platforms or partnerships that are kind of driving that sort of SMR growth this year? Alexandra Eleni Mandery: So we have Lynn M. Bamford: made some announcements on our partnership with Rolls Royce. We continue to build out the capabilities of what we are going to do with Rolls Royce and some of those will turn into early prototyping types of revenue in 2026. You are well positioned with TerraPower, we really work across the gamut, and everyone is maturing in their designs and working hard to be bringing plants online in the 2030s. So without getting ahead of our customers, I do not think I would say anything else. But the revenues from these three restarts to the trying to build out and complete some of the reactors that were stalled All in all, these things are all very active, very real and our teams doing real work and gaining real business opportunities across the industry. And so thing I like is it is very widespread. It is not one thing. And, as we said, the AP1000 work is still in our futures. The order we believe strongly is coming in 2026. And that will be pretty dramatic when it comes in a very, very good way. K. Christopher Farkas: And Mike, would just add one other one other kind of interesting data point as you think about this because we get a lot of questions about newbuilds and AP1000 and SMRs. But we also have content on other reactors. As you look at the ATR 1,400 out of South Korea, and we talked about $10,000,000 to $20,000,000 of content per new build there. Now those are multiyear projects. We did have some order activity here in the fourth quarter for new build in South Korea. So some content there that is affecting the new build splits as well. George Anthony Bancroft: Perfect. That is helpful. Thanks, guys. I will jump back in the queue. K. Christopher Farkas: Thanks, Mike. Operator: We will turn now to Louie DiPalma with William Blair. Please go ahead. James Ryan: Lynn, Chris and Jim, good afternoon. Lynn M. Bamford: Hey, Louie. K. Christopher Farkas: In December, the Secretary of the Navy, John Phelan, announced the implementation of the shipbuilding operating system powered by Palantir to use AI to achieve supply chain efficiencies for for submarine construction. And and Phelan indicated that 30 key suppliers were on the platform. Has this software platform had any impact on Curtiss-Wright Corporation in terms of volumes and the impressive margin expansion that you are seeing. Lynn M. Bamford: So very much in tuned with what is going on and have had discussions with Palantir around that topic. I would say today it is definitely still in the forming stage. So no, I would not say there is any impact to date, but it is something that is an initiative by the Navy and Curtiss-Wright Corporation will participate as is appropriate for us as a business. And those discussions have begun. Makes sense. Thanks, Lynn. And K. Christopher Farkas: is there the potential another topic that has been in the news, is there the potential for Curtiss-Wright Corporation to be involved in the development for a lunar nuclear reactor. The secretary of NASA discussed the need for like, nuclear propulsion in space and a nuclear reactor to provide consistent power generation. Do you view these opportunities as viable over the long term? Or is it just something that is just too early to provide a specific opinion on. Alexandra Eleni Mandery: So there is different ways that we potentially will have an impact. And, you know, we Lynn M. Bamford: when we talk about our nuclear footprint, we tend to talk and focus and we have as a company on the 300 megawatt and larger reactors. But we do work with a variety of the more microreactors And there are a few names that are more in the press. And we have content with a lot of those. It is not something that is ever gonna it it appears today anyways, you know, be as significant to Curtiss-Wright Corporation revenue wise as say, what is going on with AP1000. But we do work with them. Our our capability and quality as you put something into space and wanting to assure you are gonna have that generations of reliability that fits into Curtiss-Wright Corporation's sweet spot. So we will see on top of electronics capabilities in that space. So nothing specific to mention yet, but there could be relevance. Alexandra Eleni Mandery: Great. And Lynn M. Bamford: as it relates to your K. Christopher Farkas: to the last question and answer, do you expect to announce Bryce Sandberg: more SMR content agreements similar to what you announced with Rolls Royce and X Energy and and TerraPower? Lynn M. Bamford: Yes. I do. I mean, we it is we are continuing to develop and expand our content across some of the providers and or most of the providers. And believe we will have more announcements in 2026 of new systems that we have reached a level of confidence with our customer that they are okay with us talking about it publicly. And again, we really work very hard to be a great supplier into our customers and not get ahead of them with things that were announced seeing. But there is a lot more activity going on and there will definitely be more announcements. Bryce Sandberg: Fantastic. Thanks, Lynn. Thank you. Operator: We will move now to George Bancroft with Gabelli Funds. Please go ahead. James Ryan: Hey, Ken. Congratulations, Lynn and Chris and team on all your accomplishments. Very well done. George Anthony Bancroft: There has been a lot of discussion, you heard major OEM, commercial OEM talking about supply chain improvements. And on the other side, you have seen maybe some countervailing commentary that there is still a lot of need in especially further down the supply chain just you know just difficulties in in getting getting those up to up to speed. What are you seeing maybe in your supply chains? And is there any opportunities, to, for for M&A where it would make sense to be accretive for you to have that and be internalized and obviously, you know, opportunities there with that. Any thoughts on that, Lynn? Lynn M. Bamford: Yes. So I think broadly speaking, supply chain remained fairly stable in 2025 and there was not a lot of disruption. But that is not to say we do not have watch items. One thing that is very much in the news is memory, high bandwidth memories and storage parts. As tie as their common things used in this AI infrastructure build out. And then there is some raw materials in rare earths that are watch items for us. But really what I for Curtiss-Wright Corporation, we have learned a lot as a and it started in during COVID, we have implemented many, many new tools that we use across the organization in all three segments. And have added these centralized resources that I mentioned a moment ago to really assure we are driving the best performance we can broadly across where we are leveraging the supply chain. We do things like we look for getting dual sources, We very much leverage our government high priority ratings, which is very often we are able to do with a lot of our naval work and even some of our defense electronics work. And so that keeps us at the front. And we spend a lot of time in with our supply chain working with them. So the team does a great job and is really staying on top of it, but, you know, it is something you have to continuously be in tune to and work. An acquisition standpoint, it is not something that is currently a high priority for us that does not our strategic priorities But it is not to say, I would never say never to a lot of things that there was an opportunity, it could be something we would consider if we were looking for global diversification to be able to be better aligned to end markets where they want low localization would be an example where it really opened up the ability for you to have a good active business in an end market. And so I would not say never, but team does a great job managing it. George Anthony Bancroft: Great job. Thank you, Lynn. Operator: And ladies and gentlemen, in the interest interest of time, that will conclude today's Q&A session. I would like turn the floor back over to Lynn M. Bamford, Chair and Chief Executive Officer, for any additional or closing remarks. Lynn M. Bamford: Thank you, everybody, for joining us today, and we look forward to speaking to you either on the road or we release our first quarter results. Have a good day. Operator: Thank you. This concludes today's Curtiss-Wright Corporation earnings conference call. Please disconnect your line at this time and have a great weekend.
Operator: Good day, and thank you for standing by. Welcome to the Fifth Year Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising a hinge phrase. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your first speaker today, John Ragazino, external investor relations for Bitdeer Technologies Group. Please go ahead. Yujia Zhai: Thank you, Operator, and good morning, everyone. Welcome to Bitdeer Technologies Group Fourth Quarter 2025 Earnings Conference Call. Joining me today are Jihan Wu, Chief Executive Officer; Matt Kong, Chief Business Officer; and Haris Basit, Chief Strategy Officer. Haris will provide a high-level overview of Bitdeer Technologies Group's fourth quarter 2025 results and discuss the company's strategy, provide a detailed business update, and review the financial results for the quarter. Jihan, Matt, and Haris will be available for questions after the formal remarks. To accompany today's call, we have provided a supplemental investor presentation available on Bitdeer Technologies Group’s investor relations website under Webcasts and Presentations. Before management begins their formal remarks, I would like to remind everyone that during today's call, we may make certain forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially. For a more complete discussion on forward-looking statements and the risks and uncertainties related to Bitdeer Technologies Group's business, please refer to the company's filings with the SEC. In addition to discussing results calculated in accordance with International Financial Reporting Standards, or IFRS, we will also reference certain non-IFRS financial measures such as adjusted EBITDA and adjusted profit and loss. For more detailed information on our non-IFRS financial measures, please refer to our earnings release published earlier today, which can be found on Bitdeer Technologies Group’s IR website. With that, I will now turn the call over to Haris. Thank you, John, and good day, everyone. Haris Basit: It is great to be with you today. The 2025 marked a defining period of execution and strategic progress for Bitdeer Technologies Group. Achieved critical milestones across our three strategic pillars, and position the company for sustained growth as a vertically integrated Bitcoin and AI infrastructure company. I will start with a brief overview of our financial performance for the quarter. Fourth quarter total revenue reached $225,000,000, up 226% year over year and 33% sequentially. Gross profit totaled $10,600,000, adjusted EBITDA was $31,200,000 for the quarter. While both metrics declined sequentially, the results primarily reflect a combination of lower average Bitcoin pricing, modestly higher electricity costs, substantially higher depreciation expense due to the rapid expansion of our self-mining capacity, and further investment in new talent to support our growing AI HPC initiatives. I will discuss these factors in greater detail later in the call. Let me begin with a brief review of our power and infrastructure portfolio. We continue to make meaningful progress during the quarter, advancing a global portfolio of sites that we believe are well suited to support both large-scale Bitcoin mining and next-generation AI and HPC workloads. Across regions, our focus remains on developing power-rich, capital-efficient infrastructure that provides flexibility, speed to market, and long-term strategic optionality. From an energy infrastructure perspective, execution during the quarter remained on track. At the January, we had over 1.66 gigawatts of capacity online, and a total global power pipeline of three gigawatts. We believe this represents one of the most attractive and AI-suitable power portfolios in the industry and provides us with a vast opportunity as the demand for such capacity continues to grow. Over the past several months, have seen a significant shift in market dynamics around AI data center development. Demand for large-scale colocation capacity has increased substantially and we have responded by refining our approach to better align with this opportunity. Therefore, we are currently prioritizing colocation services provided to Norway and the United States that are suitable for large-scale AI HPC deployments. Let me walk through a few sites and where we stand with our development plans. First, Teadle, Norway, represents our most near-term colocation opportunity. This 225-megawatt facility was originally constructed to Tier III data center specifications, which puts us in a favorable position for conversion to AI workloads. We estimate the retrofit will require much less incremental capital expenditure to add uninterruptible power supply systems, backup batteries, and generation, as well as some additional cooling capacity compared to industry benchmarks for greenfield Tier III data center development, which typically run in the $8,000,000 to $12,000,000 per megawatt range. The site benefits from hydropower with attractive economics; independent 100-megawatt transformers provide redundancy. We are currently in lease discussions with multiple counterparties and expect to be in a position to announce a signed lease agreement for Teadle as soon as possible in 2026, although the exact timing is very difficult to predict. This site should be capable of supporting initial test GPU deployment late 2026 and first production GPUs expected in early 2027. Second, our 570-megawatt site in Clarington represents one of the larger AI data center development opportunities in the United States. Have made progress on two fronts here. First, the local utility has accelerated our interconnection timeline. Second, we are currently in discussion with multiple prospective tenants. These are well recognizable companies in the space, and the discussions are progressing. While litigation has recently been filed that could potentially delay development at this location, believe that we have meritorious claims and a strong defense and will pursue an expedient solution. Given the scale of this site, even a partial or first phase lease would represent a significant milestone for Bitdeer Technologies Group and would provide substantial contracted revenue while derisking our development capital. Third, at Rockdale, we are pursuing a strategy that allows us to maintain our current Bitcoin mining operations while developing new HPC capacity. We are evaluating the acquisition of adjacent land to our existing facility we could potentially construct a purpose-built HPC data center. This approach would minimize disruption during data center development to our 563-megawatt mining operation, which continues to generate revenue. The greenfield HPC build would be designed from the ground up for AI workloads. The Rockdale site benefits from its location in the ERCOT market, provides operational flexibility. We are currently talking with prospective colocation tenants for this site. The dual-track approach, maintaining Bitcoin mining while developing HPC capacity, reflects our commitment to both businesses and our ability to optimize our power portfolio across use cases. While we are prioritizing colocation for our larger sites, continue to see opportunity in GPU-as-a-service for targeted markets. We are expanding our cloud platform in Malaysia by 10 to 15 megawatts, building on the success we have had in Singapore serving customers in biomedical, robotics, and gaming sectors who need fully managed orchestrated infrastructure. In the United States, we are planning to add 10 megawatts of GPU capacity in Washington state and are evaluating a partial conversion of our Knoxville site from Bitcoin mining to GPU cloud. I want to be clear that the scale of our long-term US GPU-as-a-service expansion is predicated on signing customer contracts. Do not anticipate deploying large speculative capacity. Expect all major GPU deployments will be backed by committed revenue from enterprise customers who are seeking meaningful capacity with comprehensive managed services. This disciplined approach ensures we are deploying capital we have revenue certainty. A key element of our strategy is how we are approaching data center development. We have built an internal development team with experience in very large data center construction and we are augmenting that team through strategic hires, working with experienced EPC contractors and general contractors on a fee basis rather than through joint venture arrangements. This gives us greater control over timelines and specifications, and importantly, it allows us to retain more of the economic value these assets generate. As we look ahead, the growth will continue to be anchored by our three strategic pillars, between mining, ASIC development, and HPC AI. Together, these represent a vertically integrated, highly defensible platform that leverages our deep technology expertise, proprietary chip design capabilities, and extensive global power portfolio. The supply-demand imbalance for AI compute continues to widen, and we expect this shortage to persist well into 2027. Time to power is a critical variable, and we believe Bitdeer Technologies Group is exceptionally well positioned to serve customers seeking both near-term and midterm capacity. On the Bitcoin mining side, the rapid expansion of our self-mining platform continues. We exited the year with more than 55 exahash per second of self-mining hash rate, and in the month of January alone, we brought another eight exahash per second online, exiting the month of January at over 63 exahash per second. This firmly establishes Bitdeer Technologies Group as one of the largest publicly listed Bitcoin miners by total hash rate under management. Supported by the disciplined rollout of our SealMiner fleet, accelerated deployment of SealMiner rigs has driven material improvements in fleet-wide efficiency. The SealMiner A2 and A3 being actively deployed in our self-mining business operate at approximately 15 to 16.5 joules per terahash and 12.5 to 14 joules per terahash respectively, and represent industry-leading power efficiency. As these next-generation rigs replace legacy third-party equipment, our blended fleet efficiency continues to improve, with our overall fleet-wide efficiency currently standing at 17.5 joules per terahash as of 01/31/2026. As SealMiner penetration increases throughout 2026, we expect our overall fleet-wide efficiency to continue to improve, enhancing our mining margins. Looking ahead, our self-mining operations are not plateauing. Our investments in chip design are delivering tangible results. During the quarter, we commenced mass production of the SealMiner A3 series. Initial shipments began in November, and we have deployed a total of 8.7 exahash of our SealMiner A3 to date. As we continue to retire older-generation third-party rigs, we expect the A3 series to continue to meaningfully contribute to our fleet efficiency improvements and growth throughout 2026. On the R&D front, our CLO4-1 chip was completed back in September. The CLO4-1 represents a meaningful step forward in efficiency and positions Bitdeer Technologies Group to maintain technological leadership as the industry continues its relentless drive towards lower power consumption per unit of hash rate. Mass production of mining rigs based on the CLO4-1 chip will begin in Q1 2026. CLO4-2 chip design remains under development at our US-based design center. Additionally, we have successfully taped out a new Litecoin chip, SEAL-DL1, designed for Doge and Litecoin mining. The initial test results of SEAL-DL1 have exceeded comparable rigs in both energy efficiency and hash rate. On the recent market conditions, the CLDL1 generates higher fiat-based returns per megawatt than our SealMiner A2. Preparation for USA SealMiner manufacturing remains in progress. This initiative is a core component of our vertically integrated strategy and aligns with both operational resilience objectives and evolving trade and supply chain dynamics. Now let me walk through our detailed financial results for the quarter. Before I begin, I would like to remind everyone that all figures I refer to today are in US dollars. Fourth quarter consolidated revenue was $224,800,000, up 225.8% year over year and up 32.5% sequentially. The year-over-year growth and sequential growth in revenue was primarily driven by significantly higher self-mining hash rate as a result of continued CLMiner deployment, as well as contributions from SealMiner sales, offset in part by slightly lower Bitcoin prices for the quarter. Self-mining revenue was $168,600,000, compared to $41,500,000 in Q4 2024 and $130,900,000 in Q3 2025, representing year-over-year growth of 306% and a sequential growth of 28.7%. Continued growth from Q3 2025 levels reflects a significant increase in average operating hash rate and associated Bitcoin production during the quarter, offset in part by 13% lower average Bitcoin prices quarter on quarter. SealMiner sales revenue was $23,400,000, up 105.4% over the $11,400,000 reported in Q3 2025. Total gross profit for the quarter was $10,600,000, reflecting a gross margin of 4.7%, versus 7.4% in Q4 2024 and $40,800,000 or 24.1% in Q3 2025. Significant decline in gross margin reflects the combined impact of several drivers during the quarter. First, obviously, we experienced 13% lower Bitcoin prices during the quarter along with the gradual increase of the global hash rate. Second, on the cost side, experienced an approximately 5% increase in average electricity costs per unit during the quarter when compared to Q3 2025, mainly due to the seasonal winter pricing dynamics at Norway sites. Third, the growth in our self-mining hash rate comes with a concurrent noncash depreciation expense associated with this fleet of new miners. Additionally, during the quarter, we changed our methodology for calculating depreciation expense to reflect a more conservative approach. Now depreciate rigs using a three-year straight-line method versus our prior assumption of a five-year depreciable life for hardware. Total operating expenses for the quarter were $66,300,000 compared to $42,500,000 in Q4 2024 and $60,500,000 in Q3 2025. The sequential increase in operating expenses was primarily driven by the following factors compared to Q3. We added more headcount to support both mining site operations and our AI infrastructure expansion, incurred additional holiday season compensation, along with an increase in year-end general corporate activities. These expenditures reflect the operational requirements of our growing infrastructure footprint and the resources necessary to execute on our strategic initiatives. Other operating expenses for the quarter was $43,800,000 compared to $3,700,000 in Q4 2024 and other operating income of $26,500,000 in Q3 2025. This was largely attributable to the fair value change of Bitcoins pledged for the Bitcoin-collateralized loan since Q3 2025. Other net gain for the quarter was $208,900,000 compared to other net loss of $4 and $79,800,000 in Q4 2024 and $238,500,000 in Q3 2025. This was largely attributable to noncash fair value change of derivative liabilities related to the convertible senior notes issued in November 2024, June 2025, and November 2025. Adjusted net loss was $82,600,000 versus $37,400,000 in Q4 2024 and $36,300,000 in Q3 2025. The increase in loss was primarily due to higher energy and depreciation costs, higher operating and interest expense, partially offset by the year-over-year higher revenue. Adjusted EBITDA was $31,200,000, versus negative $4,300,000 in Q4 2024 and positive $39,600,000 in Q3 2025. The sequential decline was primarily driven by higher energy costs and higher operating expenses attributed to salaries and wages for recent additions to our headcount, as well as a number of elevated costs associated with year-end holiday allowance and year-end general corporate activities. To provide a better sense of our G&A expense on a run-rate basis, our Q4 2025 results reflect approximately $3,000,000 of salary, wage, and benefits expense which will largely be recurring, as well as another $6,000,000 to $7,000,000 in consulting, legal, and travel expenses which can vary significantly from quarter to quarter. Net cash used for operating activities was $599,500,000, primarily driven by SealMiner supply chain and manufacturing costs, electricity costs from the mining business, general corporate overhead, and interest expense. Net cash generated from investing activities was $97,900,000, which includes $50,700,000 of capital expenditures relating to data center infrastructure construction, GPU equipment procurement, and tariffs and freight for mining rigs delivered to the data centers, and $150,600,000 of proceeds from the disposal of cryptocurrencies. Net cash generated from financing activities for the quarter $454,500,000, which resulted primarily from $388,500,000 of proceeds from the issuance of convertible senior notes, $168,000,000 in borrowings from a related party, and $141,500,000 of proceeds from shares sold under our ATM and ELOC program, free offset by $171,100,000 of repayments of borrowings. For the full calendar year 2025, capital expenditures for the continued build out of our global power and data center infrastructure totaled $176,000,000. Looking to full year 2026, we anticipate total infrastructure spend in the range of $180,000,000 to $200,000,000 for crypto mining data center construction. Please note that this guidance covers power and crypto mining data center infrastructure only and does not include CapEx for SealMiners and GPU. AI cloud and colocation capital expenditures are also not included. Turning to our balance sheet and financial position. We exited the year with $149,400,000 in cash and cash equivalents, $83,100,000 in cryptocurrencies, held at cost less impairment, $135,600,000 in cryptocurrency receivables held at fair market value, and $1,000,000,000 in borrowings excluding derivative liabilities. Derivative liabilities were $501,100,000, relate to the November 2024, June 2025, and November 2025 convertible senior notes. This represents $171,400,000 reduction compared to the prior quarter, reflecting a noncash fair value adjustment driven by the change in our stock price and settlement for partial principal of November 2024 convertible senior notes. As I mentioned earlier, this does not impact our liquidity or operations. Regarding our outstanding ATM and ELOC facility, we received approximately $143,600,000 in gross proceeds during the quarter. Approximately 6,700,000 additional shares issued. We have exercised disciplined capital allocation throughout the year using the ATM and ELOC opportunistically to support our growth initiative while minimizing dilution. As a final note to our financial update, we wish to note that starting in Q1 2026, we will begin to use GAAP instead of IFRS as our accounting standard. In summary, we are proud of our team's execution this quarter and throughout 2025. I want to express my deep pride what our team has accomplished this year. Established Bitdeer Technologies Group as one of the world's largest publicly listed Bitcoin mining operators by total hash rate under management. Our leadership position in self-mining and our proprietary SealMiner technology provide multiple paths to value creation that few, if any, competitors can match. Our pipeline of developed and contracted power capacity gives us a meaningful competitive edge in serving a variety of customers. The colocation opportunity ahead of us is immense, we are pursuing it proactively. We enter 2026 with strong operational momentum, a differentiated asset base, and a team that has proven its ability to execute at scale. Excited about what lies ahead and remain committed to delivering long-term value for our shareholders. Thank you, Operator. Please open the call for questions. Operator: Thank you. We will now open for questions. As a reminder, to ask a question, you will need to press *11 and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from the line of Nick Giles of B. Securities. Your line is now open. Nick Giles: Yes. Thank you so much, Operator. Good morning, everyone. Haris, really appreciate the comprehensive update, especially on the colocation side. And my first question was just, and I am sure you are speaking to a range of customers, and you know, at this point of negotiations or discussions, what is really the main items that are being discussed? Is it down to price, duration, timing? There is still a lot of work ongoing around design. Just any additional color on where you stand in the process. Haris Basit: It is different with different potential counterparties, and we are all of those things that you mentioned are being discussed, maybe not with the same counterparty, but you know, I hesitate to say too much about these discussions. They are sensitive, and you know, very active at this time. So you know, we feel pretty confident that we are going to get colocation deals done in the near future. Predicting that time frame is going to be hard. And, you know, the discussions are pretty intense with several counterparties. Nick Giles: No. Understood. That is helpful, and just my second question was, we think about financing, you made some important comments there on having a larger share of the economics. But should we be expecting in terms of debt cost of capital and what kind of credit enhancements are you looking at, if any? Haris Basit: Cost of capital for these projects, for the colocation projects, will be very much determined by the counterparties and exact terms of the deal. So I think that that is hard to predict right now until we, you know, announce which of these deals are done with which counterparties. Was that responsive to your question? I am not sure if that is what you were. Nick Giles: Asking. Haris Basit: I mean, that is an important part of any deal. And, you know, it is because it does determine the cost of development to a large extent. And so we are, you know, we are looking at many different approaches here. It is a very important part of getting the deal done right. So it is something that we are focusing on as well. I cannot really say which ones are better or worse. It depends a lot on the counterparty, and it depends on, you know, there is a number of ways to do this. Most of them have been already done in the Marketplace. And know, I do not think you will see anything too dramatically different from those when we announce. Nick Giles: Got it. Understood. Well, again, I appreciate the update, and continue. Best of luck. Jihan Wu: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Mike Colonnese of H.C. Wainwright & Co. Your line is now open. Mike Colonnese: Today. First one for me on the infrastructure piece. It sounds like you are pretty far along in negotiations for a potential colo deal at the Teadle site. Curious what type of customers you are in discussions with specifically at that campus. And, Haris, if I heard correctly, it sounds like the full retrofit for the 225 megs could be completed by the end of this year. There a PUE you guys are assuming that number? I know it is built with Tier III standards in mind, but any additional color would be helpful there. Haris Basit: Yeah. That is correct. We do expect completion of that Teadle Norway site in at the end of this year and then installation of production GPUs at the beginning of next year. And the PUE at that site is actually very low, which is one of the biggest advantages of that site. It is, you know, it is 100% hydropower. It is a nice cold climate. And there is chilled water available from a nearby lake. So the PUE there, for estimation purposes, is around 1.1. It is dramatically better than most locations. Mike Colonnese: Got it. And then, the typical customer profile for that site specific, I know you are in discussions with the range of customers across the portfolio. I would be just curious with that international facility, the type of customers you are looking at. Haris Basit: Yeah. I mean, there is some difference, but, you know, there is still a lot of overlap with the customers there versus customers in the United States. So but, you know, I really do not want to say too much about who we are talking to and the exact nature of those deals. They are fairly sensitive negotiations at this point. Understood. Understood. And then as it relates to the Bitcoin mining business, you guys are one of the few public miners that continue to rapidly expand your self-mining capacity. How should we think about growth in this business in 2026? Particularly as you look to pursue these AI infrastructure deals across parts of the portfolio? Haris Basit: So one thing to say is that we are long-term believers in Bitcoin. And, of course, Bitcoin is in a little bit of a down cycle right now. But long term, we believe in Bitcoin. And we will continue to invest in our Bitcoin mining capacity. We have not given any projections for what the total hash rate for our company might be by the end of this year or in any future quarter yet. We are still evaluating that and we may project that at a later time. But at this time, we do not have any projections to share publicly for future growth of our hash rate. Mike Colonnese: Got it. Thanks for the color, Haris, and best of luck with these opportunities. Operator: Thank you, Mike. Thank you. One moment for our next question. Our next question comes from the line of Kevin Cassidy of Rosenblatt Securities. Your line is now open. Kevin Cassidy: Yes. Thanks for taking my question. And congratulations on all this capacity you have activated. But maybe along those lines that was asked before, with the lower Bitcoin prices, is there a price where you slow your mining activity because costs are higher versus what the hash price would be? Haris Basit: I am sure there is such a price, so we just have not reached it yet. So you know, our efficiency of our fleet keeps improving. And, so it also, you know, as price goes down, it be the entire fleet. Some parts of the fleet, you know, because of the efficiency and because of the energy price at that location, can continue to operate for quite some, you know, in quite some even further decrease beyond here. And then you will, some of the older machines that have been around for several years, those could be turned off first. Right? In fact, just in our normal upgrade cycle, we will be replacing those. So there is, you know, we have not reached that point now, and I do not anticipate that we will. But, you know, of course, there is such a price. It is just much lower than what we are at now. Kevin Cassidy: Okay. Great. That is good information. I guess as you keep lowering your costs, then you can handle lower Bitcoin prices. But just as another topic, is the GPU-as-a-service, is there a good market for the, say, N minus one GPU clusters rather than spending money on the very leading edge of GPUs? Is there still a need for GPU-as-a-service for the older GPUs? Haris Basit: Yes. There is. We are, though, however, typically pursuing the latest and greatest GPUs. But I mean, we still get demand for, you know, even our oldest H100s that we have in Singapore. Kevin Cassidy: Okay. Great. Thanks. Operator: Thank you. One moment for our next question. Our next question comes from the line of Darren Aftahi of ROTH. Your line is now open. Darren Aftahi: Yes, good morning. Good evening. Thanks for taking my questions. Haris, could you dive a little bit more into sort of the scale and scope of the hires you have made for digital infrastructure towards the end of the year that you spoke to, and then kind of the cadence of continued investment in maybe Q1 and into 2026? I guess, at what point do you feel like you have an adequate team to kind of attack this opportunity? Haris Basit: Yeah. I mean, we are very pleased with some of our recent hires. We have hired people with direct expertise in AI, in cloud services. And a lot of those folks have been in the United States, but also in Asia. The team is, you know, the number of people dedicated to this has grown dramatically. I do not think I have an exact number. But we continue to hire. I do not think we have reached, you know, a place where we think we have enough folks yet. But we are still looking for people, especially on the side of the engineering part of building data centers with still open racks there. So no. I expect that we will continue to hire throughout the year. And a lot of those folks will be in the United States. But, you know, we have also done significant AI hiring in Asia. Darren Aftahi: Got it. And then same question on the Rockdale site is sort of twofold. In terms of land acquisition for that, kind of where are you, and what is the timeline on process? And then I know Oncor is supposed to put another substation in, and I think you guys have spoken to additional capacity there. I think it is in the 100-some plus megawatts. But in light of kind of the seesaw that is going on with ERCOT and decision on batching, just kind of curious about your thoughts about prospects of Rockdale actually growing as a site. Thanks. Haris Basit: The recent, you know, information around ERCOT and power allocation in that region, we do not believe that applies to the growth at Rockdale. So the 179, up to 179 megawatts that we anticipate we could add there, should not be affected by that. And I say it that way because, of course, we do not know what the exact regulations will be. They are just still under discussion. So we do expect that we will get most of that, if not all of that additional capacity. The land acquisition there is moving forward. You know, it is not done until it is done, but we are, we are, yeah. I am not sure how to characterize where we are in that process, but, you know, we are actively pursuing it. And we expect that we will finish it. But until we do, it is hard to say exactly when that is going to happen. Great. Appreciate the insights. Thanks. Operator: Thank you. One moment for our next question. Next question comes from the line of Greg Lewis of BTIG. Your line is now open. Greg Lewis: Hey. Thank you, and good morning. Good open. Hey, I guess first, I mean, on published numbers, I guess you guys are the bitcoin miner of the listed companies by XFASH. So congrats on that. I did want to talk a little bit about the GPU business. You noted about potential expanse. You should a mouthful. The potential expansion in Malaysia. Know, just kind of curious, is that infrastructure that we are building, are we leasing? And then just kind of how should we think about, you know, the rollout of that, I guess, I think you mentioned 15 megawatts in Malaysia for the GPUs. Haris Basit: Yeah. That is infrastructure that we are leasing. I welcome Matt or Jihan to add to that. They want. But what was the second part of your question? How should we think about the rollout of bringing those 15 megawatts online and generating revenue from that? I mean, we have proactively purchased some, I think, the GB200 NVL72 and installed it just recently there. So that is in place right now. In terms of additional machines there, do not think we have made any announcements at present. So that is actually. Greg Lewis: Okay. But it is, but it sounds like it sounds like we could start seeing revenue maybe in the second quarter, and then maybe that scales up sequentially for a couple of quarters? Haris Basit: Yeah. I think, John and Matt are closer to that than I am. So I do not know if, is that a, is that a correct statement that you have? Jihan Wu: I think we will be able to deploy GPUs into those infrastructures at the fourth quarter or third quarter of this year. It depends on when that infrastructure will be ready. We will no tests. It will be ready around June. But, and maybe there will be one or two month delays. So I sent 2024 can be more conservative estimation. Greg Lewis: Okay. Super helpful. Alright. Hey, everybody. Thanks for the time, and have a great day. Jihan Wu: Thank you, Greg. Operator: Thank you. One moment for our next question. Our next question comes from the line of John Todaro of Needham. Your line is now open. John Todaro: Hey, great. Thanks for taking my question and the all the extra hash, bro. I guess, can we just get a bit more color on Clarrington? Like, do you need litigation results before signing an HPC customer there? You view that differently. Maybe any guardrails on timeline there? And then I have a follow-up on the mining piece. Haris Basit: So because it is litigation, we have to be sort of, you know, more careful in what we say here. You know, our attorneys feel very strongly that we have a very good case here, and the litigation has little merit, and we will, you know, prevail here. And on the business side, we are, you know, exploring alternative that can mitigate the impact of the litigation. I do not really want to say a lot more than that. You know, as we said in our scripted remarks, we do anticipate that there will be, you know, some potential delay. But, you know, we are still confident in the site overall. But it is early days, and we, you know, we are looking at some significant alternatives. Jihan Wu: Yeah. I think the alternative, alternative here, we have multiple alternative options. Creating alternative options is to solve those problems. I believe it is very critical solving those problems. And at a company level, Clarrington, Rockdale, and our lower chin size, we would be able to have lots of alternatives. Other than Carrington. This is the company level. And under the Clariton level, we believe we have several solutions. So I do not think that we are really caught at this kind of litigation. John Todaro: Okay. Understood. Thank you for that. And then on the that latest tape out for the Dogecoin and Litecoin mining, do you anticipate mining some of these other assets? Alongside Bitcoin? And maybe I was looking at some of the margin profile. It looks like there is still some margin there. But maybe the opportunity in those as well. Jihan Wu: Well, I think 99% or 98% will still be Bitcoin mining. This autochrome mining operations cannot really be scalable very much due to the market cap. So we count into a very small size operations. But on those, on those capacity, we deploy those manual rates yield out of from those capacity will be significantly improved. So I think it is worth the effort to add some, add some. And then, by the way, this is our first b commanding chip and the manual machines that are designed and manufactured totally depends on our Singapore and the Malaysia office. And the Malaysia operation as well. Malaysia operation, we started to build since last year or earlier. I think that this product, it also means that our supply chain center in Malaysia has been quite mature. So Malaysia and Vietnam, we will have two supply chain center. For companies. Think it is very strategic and important for the resilience of our business in the future. Haris Basit: Understood. That is helpful. Thank you, gentlemen. Appreciate it. Thanks, John. Operator: Thank you. One moment for our next question. Our next question comes from the line of Brett Knoblauch of Cantor Fitzgerald. Your line is now open. Brett Knoblauch: Hi, guys. Thank you for taking my question. Maybe now that we are several weeks into the year, I am curious if you have any insights into what wafer allocation is going to look like this year compared to last year? And on the back of that, with Bitcoin price coming down, network cash staying resilient, hash price going to kind of near all-time lows, does that, you know, more incentivize you guys to use manufacturing capacity for, call it, internal use rather than sell external? Or how should we kind of look at the split between what you guys manufacture for yourselves Versus sell this year? Thank you. Jihan Wu: We cannot tell the exact number or situation with the different allocation, but we have a really good relationships. And even though the we all know that the demand for AI business is huge, several times. Then take them to rehab, but we will get some co coda from additional capacity. And the hash price drops to historically due now recently. And it became very difficult for sending the money works with profit. But we have our own capacities or electricity cost is one of the lowest on the market. And our CapEx, so perhaps combined together, we are the lowest on the market. So our self money definitely became kind of very defensive, very safe strategy for our companies to make sure that even though in this kind of environment, our Bitcoin mining operations will be profitable. So self deployment will be a very important strategy in 2006, especially in the kind of a very bearish marketplace. I think our market share for the Bitcoin mining output will continue to grow. Into something. Haris Basit: Perfect. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Mike Grondahl of Northland. Your line is now open. Mike Grondahl: Hey, thank you. Hey, Haris, I just wanted to ask, on the November call, there was a significant emphasis on, you know, GPU rental, and that is what Bitdeer Technologies Group wanted to do. And now it seems like you are adjusting that a little bit on some of the larger sites, you know, colocation. Can you just talk about pivot away or why you are seemingly deemphasizing GPU rental at some of those large sites? Haris Basit: Maybe, Jihan, do you want to do that answer first, and then I can chime in if there is still. Jihan Wu: Yes. I as an on the very live site, colocation is kind of very natural and good choice for a company. And for GPU rental, we have a smaller size Washington State and Tennessee State. We can absolutely handle that ourselves. And maybe a larger capacitors for a lot of interest is besides, like, 10 megawatts or 50 megawatts. They want the nitrocytes anyway, and the nitrocytes in before company better to have some coefficient deal. Haris Basit: Do you have another question, Mike? Mike Grondahl: No. So hey. Just so I understand, you have just sort of the larger sites, you will go colocation. The smaller ones, you go GPU rental. I guess that was kinda my takeaway. Is that fair? Haris Basit: Yes. That is correct. Got it. Operator: Okay. Thank you. Thank you. One moment for our next question. Our next question comes from the line Steven Glagola of KBW. Your line is now open. Steven Glagola: Hey, thanks for the question. I have two. First for Haris. I would like to clarify whether Bitdeer Technologies Group’s US AI cloud expansion and potential expansion in Washington and Tennessee is dependent on securing multiyear reserve capacity agreements? And if so, one of those commitments would primarily be for bare metal deployments. That is one. And then second, for Jihan and Matt, you know, it would be helpful to hear your perspective on why USA cloud expansion is strategically attractive at this stage. You know, how do you think about sort of long-term competitive advantages in AI cloud as you broaden beyond your current Asia-centric footprint? Thank you. Haris Basit: So the first part, our expansion of GPU in the United States is dependent on, you know, signing contracts, at least any significant large-scale expansion is. You know, we can speculatively do small expansion in the United States. But as we said in the statement, anything significant would be backed by contracts. Jihan Wu: And we have our own data centers. I think that is very important advantage right now in the US market. Means that under the end of this year, we will be able to deploy the H300 and about rubings with our own data centers. In the United States right now is the center of AI innovation globally. The demand in US market is so much stronger than any other market. And also the US customers also just one. Capacity on US soil. So we have this kind of capacity in US. And we are going to build it, and then we can build it. We will finish it. I think this will be the most important advantage on the market right now. Operator: Thank you. Thank you. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, everyone. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome you to the Ameren Corporation fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Andrew Kirk, Senior Director of Investor Relations and Corporate Modeling. Andrew Kirk: Thank you, and good morning. On the call with me today are Martin J. Lyons, our Chairman, President, Chief Executive Officer, and Michael L. Moehn, our Executive Vice President and Chief Financial Officer. As well as other members of the Ameren Corporation management team, including Michael Moehn, Group President of Ameren Utilities. This call contains time sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited. We have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on page two of the presentation, comments made during this conference call may contain statements about future expectations, plans, projections, financial performance, similar matters, which are commonly referred to as forward looking statements. Please refer to the forward looking statements section in the news release we issued yesterday as well as our SEC filings for more information about the various factors that could cause results to differ materially from those anticipated. I will now turn the call over to Martin J. Lyons. Thanks, Andrew. Morning, everyone, and thank you for joining us. Martin J. Lyons: Beginning on page four, here we highlight some of the key updates we will cover today. We will walk through our 2025 financial results, recap key accomplishments, and discuss how we are well positioned for 2026 and the years ahead. Specifically, we delivered 2025 adjusted earnings of $5.03 per share which represents 8.6% growth over adjusted 2024 results. And we affirmed our 2026 earnings per share guidance range of $5.25 to $5.45. I am also pleased to report that this week, we signed 2.2 gigawatts of large load electric service agreements in Missouri. We continue to take meaningful steps towards supporting significant economic development opportunities emerging across our service territory while also continuing to provide strong value for all our customers and our communities. Andrew Kirk: I am proud Martin J. Lyons: not only the strong operational and financial results we delivered as an Ameren team, but also our strategic plans and accomplishments, that we expect will lead to competitive long term returns for our shareholders in the years ahead. Today, we issued 6% to 8% earnings per share growth guidance for the period 2026 to 2030, and we continue to expect year over year results near the upper end of that range. Turning now to page five. As always, at the center of everything we do, is creating value for the 2,500,000 electric and 900,000 natural gas customers, that we have the privilege to serve. Our three pillar strategy investing in rate regulated infrastructure, advocating for constructive regulatory and legislative frameworks, and optimizing our business, continue to guide our work for customers, communities, and shareholders. This year, the Ameren team accomplished all of the key strategic objectives we outlined a year ago. Shown on page six. This included investment of more than $4,000,000,000 in electric, natural gas, and transmission infrastructure, we installed nearly 26,000 electric distribution poles, 283 miles of upgraded transmission and distribution lines, and underground cable, 750 smart switches, and 31 new or upgraded substations. We also made significant progress on the development of new generation resources. On the regulatory front, we received constructive orders in both Missouri and Illinois electric and natural gas rate reviews. And legislatively, the enactment of Missouri Senate Bill 4 provides support for economic development, and investment in reliable energy for years to come. To further advance economic development and ongoing reliability, we updated our Ameren Missouri preferred resource plan last February and immediately began executing on the accelerated components. Speaking of economic development, 2025, we worked with stakeholders across Missouri and Illinois to support more than 70 projects that are expected to bring an estimated $3,600,000,000 of capital investment and approximately 3,700 jobs to our service territory from new or expanding businesses. Fueling regional economic growth for years to come. These businesses represent the diverse set of industries operating across our states. Including health care, manufacturing, distribution, warehousing, alternative energy, and food production. We also work closely with stakeholders to design and obtain approval of a new rates structure for large load customers to support fair cost allocation reliable service as customer energy needs evolve. I am proud of our team's performance in 2025. Collectively, we focused on safely providing a electric and gas service to our customers battling through challenging weather events, building more reliable and resilient infrastructure, and maintaining disciplined cost management. As a result of strong execution of the company's strategy, and solid operating performance, we delivered 2025 adjusted earnings of $5.03 per share. Up 8.6% from 2024 adjusted earnings of $4.63 per share. Turning to page seven. Here, we highlight the value we deliver for our customers and communities. In 2025, severe weather events tested our system. As we experienced approximately 30% more storms than average over the past ten years. The severe storms and tornadoes as well as extreme temperatures experienced in our territory, highlighted the value of our investments which are designed to bolster reliability and resiliency, and the value of our team members. Who braved these challenging conditions to safely restore service when our customers needed us most. In the face of this elevated storm activity, our system and teams performed exceptionally well. Reliability and resiliency remained strong. Benchmarking in the first quartile for safety performance and second quartile for safety performance. In 2025, our investments to strengthen the grid prevented more than 56,000,000 minutes of potential customer outages across Missouri and Illinois. More than double the prevented outage minutes from last year. Investments to strengthen the reliability of our system, are also the foundation for economic growth and strong customer satisfaction. Notably, a recent economic impact study shows our operations in Missouri and Illinois generate more than $20,000,000,000 in annual economic activity, in addition to other benefits to the communities where we live and work. At the same time, we continue improving the day to day experience for customers. By leveraging technology and streamlining service processes, we have given customers more control and transparency with regard to energy use in billing, and a quicker path to assistance, reducing our average call handle time by 21% and total call volume by 12% since 2023. These improvements are resonating with customers. Who have rated their satisfaction at approximately 4.6 out of five stars, on average after interacting with us across all our service channels. Including call center, website transactions, and field service. Moving to page eight, we recognize that our critical infrastructure projects represent significant investments. Which is why we prioritize the projects that are most beneficial for customers and maintain a sharp focus on keeping rates as low as possible. Through disciplined cost management, we have been able to keep our Ameren supplied residential rates in Missouri and Illinois on average below both national and Midwest averages. Importantly, percentage of the average customer's income spent on electricity has remained stable, generally tracking the rate of inflation over the last decade even as we have made substantial investments in critical infrastructure. Ameren invests hundreds of millions of dollars each year to support our customers and communities through energy efficiency programs, demand response initiatives, and substantial energy assistance funding. In addition to funding Ameren developed programs, we also partner with a wide range of organizations to connect customers with available federal, state, and local assistance. Turning to page nine. Disciplined execution of our strategy, has delivered strong and consistent results over time. Weather normalized adjusted earnings per share have risen at an approximate 7.4% compound annual growth rate since we divested our merchant business in 2013 while annual dividends per share have increased 78% through 2025. This performance has resulted in a total shareholder return of greater than 300% over the same period significantly outperforming utility index averages. As we look ahead, we believe execution of that same strategy putting customers and community value at the center, will continue to drive strong returns. Moving to page 10, we turn our focus to our 2026 key strategic objectives, which continue to be focused on resource adequacy, reliability, affordability, and supporting local economic growth. This year, we plan to invest approximately $5,500,000,000 in electric, natural gas, and transmission infrastructure to bolster the safety, security, reliability, and responsiveness of the energy grid. As we execute our generation plan over the coming years, we will continue to file CCN requests for new generation resources. And we expect to file our triennial Missouri Integrated Resource Plan by late September which will outline updated generation plans for the next twenty years. Further, last month, we filed the required Ameren Illinois integrated grid plan detailing electric investments needed for 2028 through 2031 and we are seeking ICC approval of the plan by the end of this year. We continue to evaluate regionally beneficial transmission investment opportunities in MISO. We submitted bids for two Tranche 2.1 competitive projects last month and are evaluating two other bidding opportunities. As always, while we work to accomplish the key highlighted on this page, we remain focused on operating as efficiently and effectively as possible. With a goal to hold O&M growth below the rate of inflation, and as low as prudently possible over our five year plan. We have a number of initiatives underway to continuously improve and optimize our performance. On page 11, we outline how the execution of our strategy is expected to drive strong total shareholder return over the next five years. Today, we are rolling forward our five year investment plan and as you can see, we expect to grow our rate base at a 10.6% compound annual rate from 2025 through 2030. This strong expected rate base growth will be driven by $31,800,000,000 of planned infrastructure investment, a 21% increase in our five year capital plan compared to the plan laid out last February. With the increase primarily due to robust expected generation investment needed to serve anticipated load growth and support system reliability. We continue to expect 2026 earnings to be in a range of $5.25 per share to $5.45 per share. The midpoint of this range represents 8.1% earnings per share growth compared to our original 2025 earnings guidance midpoint. Building on our proven strategy, and track record of strong earnings growth, we continue to expect to deliver 6% to 8% compound annual earnings per share growth from 2026 through 2030, using the midpoint of our 2026 guidance of $5.35 per share as the base. More specifically, we expect consistent earnings growth near the upper end of this range in 2027 through 2030. In addition, last week, Ameren's board of directors approved a quarterly dividend increase of 5.6%. Equating to an annualized dividend rate of $3 per share. This represents our thirteenth consecutive year of increasing our dividend. We continue to expect dividend growth in line with our long term EPS growth guidance and we expect our dividend payout ratio which today is approximately 56%, to be maintained within a range of 50% to 60%. Combined, our earnings and dividend growth expectations support our strong long term total shareholder return proposition. On page 12, we provide an update on the Ameren Missouri large load rate structure, which the Missouri PSC approved last November. This rate structure is in accordance with Missouri state law which requires data centers to pay for cost to connect them to our system and for them to pay their share of ongoing cost of service. Under the large load rate structure, customers requesting 75 megawatts or more will pay a base rate which at this time is approximately 6.2¢ per kilowatt hour, and agree to additional terms and conditions under an ESA. The additional terms will include a service commitment of twelve years after ramp, a minimum demand charge of 80% of contracted capacity, termination provisions, and collateral requirements all designed to protect existing customers. In addition, new customer programs will allow qualifying customers to elect to advance their clean energy goals by supporting the carbon free energy resource of their choice through incremental payments which would be used to help offset cost of service for other customers. Turning to page 13, I will provide an update on the large load data center opportunities in our service territory. In the coming years, these projects are expected to bring in jobs, tax revenues, and investment and to drive long term economic growth. Just this week, Ameren Missouri executed ESAs with large load customers that cumulatively represent 2.2 gigawatts of new demand to be served in the future. Executing these ESAs is an important milestone. Of course, there are a number of other project milestones still to be achieved, including the customer project announcements, groundbreaking, and construction. Still, these agreements are an exciting development. Our five year financial plan laid out today assumes 6.2% compound annual sales growth from 2026 through 2030, which includes a base assumption of 1.2 gigawatts of new load growth by 2030, consistent with our preferred resource plan and is depicted by the blue line on the chart on the right hand side of this page. The 2.2 gigawatts of executed ESAs represent upside to our sales and earnings forecast. Developers continue to evaluate Missouri and Illinois for additional future large load projects. In Missouri, this pipeline includes projects with transmission interconnection construction agreements, representing a total of 3.4 gigawatts of potential new demand inclusive of projects associated with the executed ESAs. And in Downstate Illinois, this pipeline includes projects construction agreements representing a total of 850 megawatts of new demand. We have now received approximately $46,000,000 in nonrefundable payments from developers in Missouri and Illinois to cover the cost of transmission upgrades related to these construction agreements. These payments reflect developers' confidence in and commitment to their projects. Turning to page 14 for an update on our generation build out. The integrated resource plan filed last February called for development of 5.3 gigawatts of new generation resources between 2025 and 2030, we have made strong progress on development of these resources over the last year, nearly 2.7 gigawatts of new generation in progress. In December, we placed Vandalia Energy Center, a 50 megawatt solar facility in service. And the Bowling Green and Split Rail Solar Energy Centers, totaling 350 megawatts began final testing in January. Further, as part of strengthening our existing fleet, dual fuel conversion work is expected to be completed by the end of the year at our Audrain Energy Center to add 700 megawatts of capacity on the coldest winter days when gas is otherwise unavailable. We continue to advance our new natural gas generation projects as well. Yesterday, the Missouri PSC approved the certificate of convenience and necessity for the 800 megawatt Big Hollow Natural Gas Energy Center and accompanying 400 megawatt battery storage facility both scheduled to be in service in 2028. Proactive strategic supply chain work for all of our plan generation resources continues. We have procured long lead time components such as turbines and transformers for our planned near term energy centers and we have executed gas supply contracts and awarded labor contracts for both simple cycle natural gas facilities. We continue to actively plan for the construction of a 2.1 gigawatt combined cycle facility included in our IRP having secured production slots for the three necessary turbines. We anticipate filing our CCN request with the commission later this year for this combined cycle facility, which we expect to be placed in service in 2031. These efforts keep us on track to maintain a balanced energy mix to meet growing demand affordably and reliably. Targeting approximately 70% generation from on demand resources and 30% from intermittent resources by 2040. Moving now to page 15 for a transmission update. As we look ahead, there is a significant transmission investment needed to support new large load customers as well as energy resources to supply this new demand reliably. In addition, we remain focused on executing our assigned tranche one and 2.1 long range transmission projects and developing strong proposals for tranche 2.1 competitive projects. In January, we submitted joint bids for two Illinois projects and we expect MISO to select the developers for the projects this summer. Bids for two additional MISO projects are due mid 2026 and we are evaluating those opportunities. Recall that we do not include competitive projects in our capital plan or ten year pipeline, until projects are awarded. Now turning to page 16, for an update on investment opportunities in our service territory over the next decade. Our pipeline continues to grow. Standing today at more than $70,000,000,000. These investments will strengthen the safety, reliability, and resiliency of the energy grid powering the quality of life for families and businesses and supporting thousands of jobs, driving economic growth across our communities. Moving to page 17 to sum up our value proposition. We are confident that the execution of our strategy in 2026 and beyond will continue to deliver superior value to our customers and shareholders. Solid operating performance and prudent infrastructure investment along with a strong balance sheet and strong credit ratings, supports safe cost efficient, and reliable service for our customers. Robust infrastructure investment is needed in each of our business segments to ensure safe, reliable service and to meet the demands associated with exciting economic development opportunities. These infrastructure investments are anticipated to drive compound annual rate base growth, of 10.6% which along with sales growth provides the foundation for our 6% to 8% compound annual earnings growth expectation. Continuing our long track record of delivering strong earnings growth, coupled with an attractive and growing dividend, will result in a compelling total return story for those seeking a high quality utility investment opportunity. I am confident in our team's ability to effectively execute our investment plans and other elements of our strategy across all four of our business segments. Again, you all for joining us today. I would now like to welcome our recently appointed Chief Financial Officer, Michael L. Moehn. Michael L. Moehn: Thanks, Marty. I am glad to be here with you today. I will begin on page 19 of our presentation with our 2025 earnings results. Yesterday, we reported 2025 adjusted earnings of $5.03 per share. Compared to earnings of $4.63 per share in 2024. Our 2025 adjusted earnings exclude certain tax benefits at three of our business segments: Ameren Transmission, Ameren Illinois Natural Gas, and Ameren Illinois Electric Distribution. These tax benefits were recorded in response to IRS guidance issued to another taxpayer and associated regulatory orders issued by FERC and the Illinois Commerce Commission regarding treatment of net operating loss carry forwards. Pursuant to this guidance and these orders, we decreased income tax expense by a total of $86,000,000 in 2025 resulting in a $0.32 per share benefit. On page 20, we summarize key drivers impacting adjusted earnings at each segment. As Marty outlined, we achieved strong earnings growth supported by strategic infrastructure investments, and robust retail sales at Ameren Missouri. Weather normalized sales at Missouri grew 1% overall with 0.5% and 1.5% growth for our residential and commercial class respectively. We also experienced favorable weather across our service territory. At the same time, we funded incremental and maintenance activities in Missouri to improve grid and energy center reliability for the benefits of our customers. Of course, disciplined cost management remains core to our way of doing business. Process improvements across both states help us start jobs sooner and complete work faster, delivering tangible benefits for customers. For instance, in the past two years, we achieved $20,000,000 in recurring O&M savings from energy delivery process improvements including enhanced fieldwork scheduling that were implemented has improved productivity by about 25%. Looking ahead, continued efforts to simplify and standardize processes are expected to drive efficiency, improve customer experience, and help keep rates low as possible. With that, let us move to page 21 for a brief update on the constructive orders in both of our Illinois rate reviews in late 2025. In November, the Illinois Commerce Commission approved a $79,000,000 annual base rate increase at our natural gas distribution segment which reflected a higher return on equity of 9.6% and a 50% equity ratio. New rates were effective in December. In December, the ICC also approved a $48,000,000 reconciliation adjustment to the 2024 revenue requirement that was approved as part of the multiyear rate plan with new rates effective January 2026. This annual adjustment aligns customer rates with actual costs. Both orders were largely consistent with the administrative law judge's recommendations. Finally, in January, Ameren Illinois filed its required multiyear grid plan for 2028 through 2031 with the ICC, which outlines continued infrastructure investments needed for reliable, safe energy in Downstate Illinois. We would expect an order from the ICC on the proposed grid plan later this year. Turning to page 22. We look to our company wide capital plan for the next five years. As Marty highlighted, we see robust investment opportunities ahead. The plan we are releasing today calls for $31,800,000,000 in capital expenditures from 2026 through 2030, an increase of more than 20% compared to our investment plan issued last year. The increase in our capital plan primarily reflects the roll forward of our plan from 2029 to 2030 and the firming up of cost estimates and project timing. The investments themselves primarily reflect critical upgrades to strengthen and maintain an aging grid across all jurisdictions, significant new generation investments at Ameren Missouri, and expanded transmission capabilities to support resource adequacy, across the region. We expect this investment to drive 10.6% compound annual rate base growth. Which is outlined by business segment, on this page. For more detail on the electric investment underlying our capital plan, you may reference the Ameren Missouri Smart Energy Plan just filed with the Missouri PSC, as well as the multiyear grid plan filed recently with the Illinois Commerce Commission. Turning to page 23. Here, we outline the expected funding sources for investments noted on the prior page. Our balance sheet is strong, and we remain committed to funding our investment plan in a way that supports strong investment grade ratings, and long term financial strength. Our primary source of funding will continue to be cash from operations, which we expect to increase as sales grow and rates are updated. Remaining funding needs will be financed in a balanced manner consistent with our past practices. We expect to issue approximately $4,000,000,000 of equity from 2026 through 2030. We will fulfill our 2026 equity needs with $100,000,000 of forward sales agreement that we expect to settle near the end of the year. We expect above average equity issuance in 2027 and 2028 aligned with the timing of our new generation investments. The amount and timing of our equity needs will ultimately be a function of the timing of cash flows, including cash flows from data center sales. Timing and amount of which we expect to have further clarity on over the course of this year. A portion of our equity needs could be satisfied through issuance of hybrid debt securities at the parent company, which receive 50% equity credit from Moody's and S&P. We expect to continue to issue long term debt to fund the remaining cash requirements, to fund maturing obligations, and a portion of the $5,500,000,000 of planned investment. We expect debt issuances totaling approximately $2,850,000,000 in 2026. Expected timing of these issuances is shown on this page. Moving to page 24 of our presentation for our 2026 earnings guidance. Today, we are affirming our 2026 diluted earnings per share guidance range of $5.25 per share to $5.45 per share, midpoint of which represents approximately 8.1% growth compared to the midpoint of our 2025 original EPS guidance range. The earnings drivers are summarized on this page and remain largely consistent with those discussed on our third quarter earnings call. Through disciplined cost management, we will target limiting consolidated O&M expenses to less than the rate of inflation over the five year plan. Finally, turning to page 25. I am encouraged by the opportunities we have at Ameren to make lasting impact in our communities and shape the energy future for our customers. This is an exciting time in the industry, one that I could never have fully imagined when I started my career over thirty years ago. We remain confident in and excited about our long term strategy. One that we believe will continue to consistently deliver for shareholders. Our investment positions us to strengthen reliability, for all customers and attract and support economic growth in our communities. And our disciplined cost management and strong customer growth pipeline position us to do so while keeping customer rates low as possible. We expect that our strong earnings per share growth paired with our attractive dividend will provide a compelling total shareholder return that will compare favorably to the growth of our peers. That concludes our prepared remarks. We will now open for questions. Operator: We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found on the bottom of your webinar application. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Our first question comes from Julien Dumoulin-Smith with Jefferies. Hey. Good morning. Can you guys hear me okay? Martin J. Lyons: Yes, Julien. Good morning. Hey. Love that it works. Excellent. Hey. Well, look. Julien Dumoulin-Smith: Nicely done all around. I have to hand it to you guys. Just a couple questions real quickly. First off, on the 2.2 gigs of executed ESAs, any caveats on why not to include it here? I mean, obviously it is relatively recent. And then separately, can you talk a little bit about the commentary about being at the upper end of the six to eight? Just how does that reconcile with the 2.2? How do you think about, for instance, CapEx reconciling with that and how that would position you here? I will leave it there. Martin J. Lyons: Yes. That is fine, Julien. I will try to, this is Marty. Obviously, I will try to answer those, those questions. Yes. Look. We are off to an exciting start to 2026, February in particular. You know, it has been this month that we have been able to sign these 2.2 gigawatts of ESAs. And as we talked about on the call as well, just this week, the Public Service Commission in Missouri approved our Big Hollow 800 megawatt simple cycle gas plant as well as some battery energy storage of 400 megawatts. And it is been an exciting month and a great start to the year. You know, as we think about our guidance and the sales growth looking ahead, as you know, what has been baked into our guidance over the past year has really been about 1.2 gigawatts of new demand by 2030. And as we talked about in our IRP last year, up to about a gig and a half by 2032. But for purposes of guidance, that 1.2 gigawatts by 2030 is certainly relevant. That, of course, was sort of the baseline that was in our preferred resource plan that we filed with the commission this past year and is shown on page 13 of the slide deck we posted today. But importantly, that 1.2 gigs, was in the guidance we provided, that 6% to 8%. And as we guided last year and we continue to guide, we really expect to be able to deliver near the upper end of that range over the five year period. So as you look at this 2.2 gigawatts of ESAs, that certainly represents upside to the sales growth that has been embedded in that 6% to 8% guidance. And in our assertion, we expect to deliver near the upper end of that range. So it does represent upside. Now as you mentioned, we just got these ESAs signed here in February, and there is a lot of milestones ahead with respect to the development of those data centers associated with those ESAs. You know, things like actual customer announcements, project announcements, groundbreakings, the construction of those data centers. So, again, I would say that the ESAs that we signed and the two point gigawatts, certainly gives us greater confidence with respect to our ability to deliver over this time period towards that upper end of that 6% to 8%. And I would say, depending upon the ramp rates, gives us the potential to even achieve above that. So we are very excited about it. It has been a great start to the year. Hopefully, that answers your questions. Julien Dumoulin-Smith: Absolutely. Thank you very much. I appreciate that. And then just if I can quickly follow up, you made reference here to hybrid securities real quickly. How do you think about that as being part of the plan? I mean, clearly, is. Do you think about that strategically here? And is that accretive to the plan when you talk about being near the upper end of six to eight? Is that an incremental source of latitude here just to come back to what is in versus out of the plan? Martin J. Lyons: Yes. I think as you think about utilization of these securities versus straight equity, it might be slightly accretive in the short term. I think over time, we would have to evaluate whether it is or is not from that standpoint. Obviously, there is the interest cost associated with those securities. So it may be more of a neutral, over time, but something that we are going to evaluate as we think about the financing plans we have ahead. Obviously, one of the things that we have really utilized over time are these ATM issuances to fulfill our equity needs. I think we will continue to lean on that heavily, that kind of approach as we think about our financing plans. But always want to keep our options open. Julien Dumoulin-Smith: Awesome, guys. Alright. I will leave it there. Thank you so much. Michael L. Moehn: Our next Operator: question comes from the line of Shahriar Pourreza with Wells Fargo. Please unmute your line and ask your question. Andrew Kirk: Good morning. It is actually Andrew Kadavy on for Shar. Thanks taking my questions. Julien Dumoulin-Smith: Morning, Andrew. With your rate base CAGR at Andrew Kirk: 10.6% and your EPS CAGR at 6%–8%, there is a healthy amount of lag. How much of that is financing versus how much is structural? And how much can you narrow the lag in time and put upward pressure on the 6%–8%? Martin J. Lyons: I am just trying to follow you. So maybe repeat that question for us. Yes. So there is a Julien Dumoulin-Smith: a little bit of lag between your rate base growth and your earnings growth, and I just want to know how that breaks down between financing and maybe other structural issues. And then is there Andrew Kirk: there a way to narrow that lag? Martin J. Lyons: Yes. No. I have got you. Look. I think if you look at our rate base growth, about 10.6%, and you think about the amount of equity that we plan to issue, and think about the dilution from that, that is the primary difference between the 10.6% rate base CAGR and where we plan to deliver from an EPS perspective, which, as I just said a moment ago, is consistently towards the upper end of that 6% to 8% range. I think the other thing to think about over this time period is as these sales come better into focus, from the hyperscalers that we are working with in these ESAs, that too can help to reduce any differential that we have between allowed ROEs and earned ROEs that also can help from an earnings perspective. So those are some of the big drivers that come to mind. And then I would just say, we are obviously a fully rate regulated business. And as you well know, there can be lag as you think about over time during the periods between rate reviews. And so those are just some of the things to think about in terms of the earnings growth, the earned ROEs, etcetera. Andrew Kirk: Thank you. Very helpful. Switching gears a little. We have seen some data center developers cancel projects despite having signed ESAs in place in other states. Carly S. Davenport: Are there any concerns on your end about the potential for cancellations with your ESAs? And could you give us a little color on when the large load take or pay provisions in the ESA became binding for the customer? Martin J. Lyons: Yes. All really good questions. First of all, with respect to these ESAs, the counterparties and the terms of these, and the ramp rates are all highly confidential. So cannot get into any of that. I would not say that we have any concerns with respect to these ESAs or the projects coming to fruition. That said, I mentioned there is significant milestones ahead in terms of project announcements, the groundbreaking, the construction. So certainly recognize those uncertainties as we look ahead. But, again, our 6% to 8% EPS growth guidance, our expectation of delivering near the upper end, again, was really based on about 1.2 gigawatts of sales growth between now and 2030. ESAs we have signed represents upside. And I think that speaks to the conservatism that we have in our overall guidance range. Given again some of the uncertainties ahead. But we certainly do not have any concerns as we sit here today. Yes. I did. This is Michael. I agree with I agree with everything that Marty is saying. I think beyond that, there are a number of provisions, obviously, in the tariff itself and the ESA that are protective to customers. In terms of termination provisions, minimum monthly payments, Julien Dumoulin-Smith: security, Martin J. Lyons: requirements, etcetera. So a number of links have gone numbers have gone to great lengths here to make sure that we are protecting customers at the end of the day as well in case that would happen. Yes. Those are great points, Michael. And, while we cannot speak to the specifics of individual ESAs, you can see some of that outlined on slide 12 that, as Michael mentioned, are all part of our large load tariff design. Carly S. Davenport: Thanks. I will leave it there. Operator: Our next question comes from the line of Diana Niles with JPMorgan. You may now unmute your line and ask your question. Hey. Good morning. Thank you so much for taking my questions today. Michael L. Moehn: Hey. So how do you Martin J. Lyons: Good to have you. Operator: Thanks. So looking at your infrastructure investment pipeline, are there timing considerations? To some of the future opportunities there? Thinking about how much might fall within the five year plan period or how much visibility you have beyond 2030? Martin J. Lyons: Yes. Are you really getting to the CapEx and how we see that playing out? At a high level, we talked about over the ten year plan, really about $70,000,000,000 of investment opportunities, and we laid that out in our slide. And then, during the five year period, expecting $31,800,000,000 of infrastructure investments. And largely being driven by generation investments in Missouri. As we think about transitioning our fleet over time. But that may not be specifically answering your question if you want to dive a little deeper. Operator: Yes. I guess sort of asking there, like, maybe how to think about the cusp between like, the five year plan of 2030 and beyond. Like, we are seeing continued smooth investment there, or are you thinking about filling more opportunities in? Martin J. Lyons: Yes. I think look. We try to smooth things out over time. I think it is something that is certainly good for customers as you think about bringing those investments into rate base over time. And making a stable investment profile overall. At times, it will be a bit lumpy, though. As we especially as you think about some of the infrastructure investments we have with respect to generation resources, they can certainly be more significant investments and create some lumpiness in the investment profile. And so, a couple things we have got coming up. As you can see in our slides, we have got some significant investments in simple cycle gas fired generation that are coming into service in 2027 and 2028. If you look at our integrated resource plan, we have a pretty significant combined cycle facility, 2,100 megawatts that we plan to bring into service in the 2031 time frame. So there is certainly some lumpiness there. The other thing I would say just to watch for did not emphasize it necessarily on this call, but did highlight it, which is that later this year, we do expect to make our triennial integrated resource plan filing in Missouri. And in that plan, we will certainly be looking at any opportunities to accelerate generation investments. Specifically maybe looking at things like batteries, perhaps renewables. But as you move into that 2030 to 2040 time frame, also looking at the need and potential additional investments in dispatchable generation facilities. I do not want to front run that process. It is a comprehensive update. We will look comprehensively at sales, generation options, costs. We will get stakeholder input. And, but, again, that will be a meaningful filing we will have later this year. The other thing I would maybe point you to is, today, we also, in Missouri, announced our updated Smart Energy Plan. If you look into the details of that filing you can kinda see some of the year by year investments, that are planned in Missouri. Similarly, if you look over in Illinois, Michael L. Moehn: earlier this year, we made our updated grid plan grid investment plan filing. There too, you can see some of the planned investments on a year by year basis. So those are a couple of resources you can look to that are out there publicly. Operator: Great. Thank you very much. Our next question comes from the line of William Appicelli with UBS. You may now unmute your line and ask your question. Martin J. Lyons: Yes. Hi. Good morning. Carly S. Davenport: Morning, Bill. Andrew Kirk: Just a couple of quick Michael L. Moehn: On the theme of affordability, can you just maybe outline Brian J. Russo: how you guys view this updated plan in terms of customer bill impact? I guess, particularly in Missouri. And whether or not the benefit of the ESAs would help to defray some of that impact? Martin J. Lyons: Yes, Bill. Affordability is certainly a key concern of ours on an ongoing basis across Michael L. Moehn: both of our jurisdictions in Missouri and Illinois. And, as you know, really focusing on disciplined cost control, has been a focus, a long time focus of this company. In fact, as you look back even over the past five years, I think our O&M CAGR was something like 2.8% at the same time that consumer prices went up about 4.6%. So we have got a history of really looking to continuous improvement at the company to really take costs out to produce productivity enhancements and optimize. But that work is never done. Certainly, there is always the benefit of new technologies, new ways of doing things. And, we are continuing to keep a sharp focus on continuous improvement and process improvement. We call them transformation activities internally. We have got a number of efforts going on right now that, again, we expect to be able to continue to bend that cost curve. And as we said on the call, really look to keep O&M costs as low as prudently possible and really deliver under that rate of inflation. And I say prudently because there are times we are going to want to invest back in the system. We have done that with things like tree trimming, investments in our power plants, things that really keep our resources reliable and produce good reliability for our customers. So we are going to keep a good focus on all of those things. As we think about this incremental sales opportunity we have, a key focus of Senate Bill 4 in Missouri last year was really to require that at the end of the day, we design a tariff that really is focused on making sure that these new data centers are paying for the cost to connect them to the system. And paying their fair share for the cost to serve them. Really providing reasonable assurance that there is no burden being borne by the rest of our customers. So that was a focus of the legislature. And certainly a focus of the Missouri commission as they approved the tariff that we will be utilizing to serve these customers. It was a focus of ours as we went through the negotiation of the ESAs that we announced earlier today, and I think it will be a continuing focus as we go through our rate review proceedings in the future. But again, the goal is for them to pay their fair share, the cost of providing them service, and at a minimum, to not have a burden fall on the rest of our customers. And we are certainly hopeful that over time, as these sales increase, that there would actually be benefits for the remainder of our customers. So again, affordability has been and will continue to be a big focus for us. Brian J. Russo: Okay. That is very helpful. And then just a point of clarification. The 3.4 gigawatts of construction agreements, I guess, that is inclusive of the 2.2 ESAs, right? So does that imply that there is about 1.2 gigawatts of sort of advanced negotiations around additional large load customers? Michael L. Moehn: You know, some are advanced, some are not. I would just say that, that is you are correct, by the way. The 3.4 is inclusive of the 2.2. And they are in various stages of development. Brian J. Russo: Okay. And then just to an earlier question about rolling in the benefits of the ESAs. Is that something you would look to do on a future quarterly call, or would that need to wait until, you know, sort of your next full reset, you know, maybe on Q3? Martin J. Lyons: Yes. Look. I think we will monitor over time. You know? Michael L. Moehn: I mentioned some of the milestones ahead with respect to the development of these data centers and getting clarity in terms of a sales forecast. I also mentioned other drivers that might be out there. For example, we have an update to the integrated resource plan later this year in Missouri. I think there will be a number of things that will come into greater focus over the course of the year. I would not rule out an update as part of a quarterly conference call. Obviously, things are moving at a faster pace than they historically and we will need to think about being more nimble as well in terms of the guidance we provide. Brian J. Russo: Alright. Great. Thanks very much. Michael L. Moehn: Our next Operator: comes from Carly S. Davenport with Goldman Sachs. Please unmute your line and ask your question. Good morning. Thanks for taking the questions. Carly S. Davenport: Maybe one just on Missouri. I know we are still pretty early in the legislative session there, but I think there have been some bills introduced, around data centers and other. So just curious if you have any early thoughts on potential impact there or if there is any other legislation that you have been watching. Michael L. Moehn: Hey, Carly. It is Michael. Yes. There are a number of bills floating around. There are a couple of bills related to solar. We continue to engage with stakeholders, sponsors around that. It is early innings. I think people are open to discussion. Again, with all resources, there is always certain concerns. My sense is that we can find a path forward on this. Maybe related to some solar setbacks or some changes in local taxing authority, but look, solar is an important resource, combined with Brian J. Russo: everything else that we are doing from a natural gas and nuclear or coal perspective. Michael L. Moehn: As we just indicated, Marty just went through eloquently, we need all of this generation. So we engage with the stakeholders around this, and, hopefully, we can land in a good spot. Beyond that, not a lot of, you know, we had some success, obviously, last year with Senate Bill 4. The focus really has been on the implementation of that Senate bill. There were a number of provisions in there around future test years for water and gas utilities. Those rulemakings are active and we are participating in that process. That is important. We get that right. I think that could be a framework for us going forward on the electric side. And beyond that, we will just continue to evaluate the session. Carly S. Davenport: Got it. Great. Thank you for that. And then just a question as you think about the financing path. Any sense how much of the equity you could look to satisfy with the hybrids? And then outside of that, is the ATM still the sort of preferred method of issuance? Michael L. Moehn: Hey. Good morning, Carly. Thanks for the question or Sophie. Carly. I am sorry. Thanks for the question. As we said in the plan, we have not specified what amounts we are going to be using. But the plan, if you think back at the $4,000,000,000 over the five years, it is on average $800,000,000 a year. Remember, 2026 was completed with a forward sales agreement. We have had success with ATMs over the year. And we will continue to leverage that throughout the plan. Hybrids are part of the solution, and we will continue to make determination as we progress throughout the year. Carly S. Davenport: Great. Thank you so much for the color. Operator: Our last question comes from Sophie Karp with KeyBanc. Please unmute your line and ask your question. Hi. Good morning. Thank you for taking my questions. Michael L. Moehn: So Sophie Karp: Hi, Sophie. Was hi. I was wondering how you guys William Appicelli: see your role in, I guess, educating the communities, particularly in Missouri, on the benefits of having the data center under the special tariff and whether it is actually any benefits to them. Because what we see is a lot of pushback on it, because of the media coverage that data centers receive and all of communities without maybe that there might be a benefit to them begin to oppose these developments. So my question is, do you see yourself having a role in actively educating these communities to prevent those outcomes? Michael L. Moehn: Well, I think we have a role specifically with respect to clarifying the impacts on reliability, affordability of energy services. And so I think with respect to the broader benefits to the community in terms of jobs, economic development, impacts on other aspects. I think, again, it would be up to really the data centers developers, the hyperscalers, to provide clarity with respect to broader impacts of their operations. We think it is, again, important for us to be there and be engaged and to be able to speak to the legislation that has been put in place, the terms and conditions of our tariffs, the ESAs that we are signing, also important, the generation resources that we have available, the generation resources that we are building. And the fact that we do believe we can serve these additional customers reliably. And as I said earlier in my remarks, provide service to them in a way that they will be paying for the cost to connect them to the system, and they will be paying for the cost to serve them. And the reasonable assurance that can be provided to the rest of our customers that they will not be negatively impacted by the service provided to these customers. And so I do think we have a role in speaking to that. William Appicelli: Alright. Thank you. And then maybe on Illinois a little. Do you, I guess Illinois has been kind of not on the forefront of your investment plan lately. Can you talk a little bit about the regulatory climate in that state? How it has been evolving? And is there a potential for upside from the multiyear grid plan or some other pending regulatory proceedings? In Illinois. Michael L. Moehn: Yes. So, yes. Look. Illinois does remain, obviously, an important part of our business. And, I would say, we do continue to invest significantly in Illinois. As you see in our five year plan about $3,600,000,000 in electric distribution, we have got $1,900,000,000 going into Illinois natural gas. And they are growing at somewhat of a slower growth rate than we are seeing with respect to our transmission operations and Missouri but continues to be a significant place for investment. And I think if you look at the regulatory environment over there, I would tell you, I feel like it is stabilizing, and, in some cases, improving. If you look at this past year end and you can see some of this on slide, I think, 21 that we provided, but the commission approved the reconciliation for our last multiyear rate plan. In December. In November, we got an order in our gas case that we had pending. And, what you saw there is both an increase in average rate base going from $2,850,000,000 to $3.2, and you saw an ROE move from 9.44 up to 9.6. And so, I think, it is a place that I know there were concerns over the past couple years, and I am not saying those concerns have completely dissipated in the investment community. But I think we have seen a stabilization, I would say, constructiveness with respect to the recent decisions. We have got this multiyear grid plan filing that is out there. We just made that in January. In that filing, we look to listen to feedback we have gotten from commissioners and other stakeholders in the past. We look to really support the investments that we are making there. We think they are the right investments to make for our customers. And we will look to engage with stakeholders over the course of this year and expect an ICC decision in December. Hey, Sophie. It is Michael. Yes. I agree with everything that Marty said there. But, in addition to that, I think the other thing that came out of this recent legislation, this surge of legislation that was filed, this construct of an IRP. The state of Illinois. I think that it really is a very good constructive step forward to give a clear picture of the resource adequacy issues, in both PJM and MISO. Hopefully, within a framework to begin to deal with this from a long term reliability. So we look forward to engaging in that. And think it does continue to add to Marty's comments around the stability of the state. Sophie Karp: Great. Thank you. Appreciate the comments. Operator: There are no more questions at this time. I would now like to turn the call over to Martin J. Lyons for closing remarks. Michael L. Moehn: Well, again, thank you all for joining us today. I think you can tell we are off to an exciting start here in 2026 as a company. I want to once again thank the entire Ameren team, for all of their hard work serving our customers, serving our communities, and delivering the results that we have been able to deliver. And with that, for all of you that joined us today, please be safe, and we look forward to seeing many of you as we get out on the road in the months ahead. Michael L. Moehn: Thank you.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Inc. Reports Fourth Quarter 2025 Results. Just a reminder, this call is being recorded. At this time, you are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question, please press 1 on your touch tone phone. I would now like to turn the call over to Aaron Reddington. Please go ahead, sir. Good morning, everyone. Aaron Reddington: And thank you for joining us for Belden Inc.'s fourth quarter and full year 2025 earnings conference call. With me today are Belden Inc.'s President and CEO, Ashish Chand, and Executive Vice President and CFO, Jeremy Parks. Ashish will provide a strategic overview of our business and then Jeremy will provide a detailed review of our financial and operating results followed by Q&A. We issued our earnings release earlier this morning, and have prepared a slide presentation that we will reference on this call. The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Turning to Slide 2. I would like to remind everyone that today's call will include forward-looking statements which are subject to risks and uncertainties as detailed in our press release and most recent Form 10-Ks. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website. I will now turn the call over to our President and CEO, Ashish Chand. Ashish Chand: Thank you, Aaron. And good morning, everyone. We appreciate you joining us. Let us begin with Slide 4, which highlights our key accomplishments and messages for the fourth quarter and full year. My comments today will refer to adjusted results. We are very pleased to report an outstanding close to 2025, with both our fourth quarter and full year results exceeding expectations and setting new records. For the fourth quarter, we delivered record revenue of $720,000,000 which exceeded the high end of our guidance range. Our adjusted EPS came in at a record $2.08, also surpassing the high end of our guidance. The strong finish capped off a truly exceptional year. For the full year 2025, we achieved record revenue of approximately $2,700,000,000, up 10% year over year, and record adjusted EPS of $7.54, a 19% increase year over year. These results were driven by continued solutions growth and strong execution across our business. Our order momentum was also robust, with record full year orders. For the fourth quarter, orders were up 12% year over year and 5% quarter over quarter. Healthy free cash flow generation continued, enabling disciplined capital deployment. For the year, we generated $219,000,000 in free cash flow and we repurchased 1,700,000 shares for $195,000,000, further reducing our share count. These record results underscore the success of our strategy and as we look ahead, we will capitalize on market opportunities to ensure this momentum continues. A key indicator of our strategic progress is the accelerating adoption of our solutions offerings. For the full year 2025, solutions wins as a percentage of total revenue crossed 15%. This represents a meaningful increase from where we stood just a year ago and was a major driver of our success this year. This growing contribution from our solutions portfolio reinforces our confidence in our ability to continue to grow earnings and strengthens our conviction in achieving our 2028 solutions target which we set on our last Investor Day. To further accelerate our solutions transformation, enhance the customer focus, and unlock even greater future value, we are undertaking a significant strategic evolution at Belden Inc. Effective 01/01/2026, Belden Inc. transitioned from a legacy business segment structure to a unified functional operating model that applies across the entire enterprise, from executive leadership to our functional teams. This fundamental shift organizes us around core functions, rather than separate businesses, to better align resources and accountability with our continued solutions transformation. As IT and OT increasingly converge, realigning our organizational structure enables us to sell and deliver converged solutions more efficiently and consistently. Ultimately, this new model empowers us to leverage our full product portfolio for customers, speed decision making, clarify accountability, and simplify the delivery of customer-centric integrated solutions. This is not our first step in this direction. Over the past few years, we have consistently worked to break down internal silos to improve our solutions capabilities, including the successful combination of the sales teams in 2025. The current operating realignment is the next natural evolution of that journey, further enhancing our ability to deliver integrated solutions. This strategic realignment is the right move for our business, positioning Belden Inc. to maximize long-term growth and deliver on our financial targets. For a review of our executive leadership team under the new functional structure, please refer to page 15 of today's materials. Now to illustrate the power of this unified approach, and the benefits of IT/OT convergence, please turn to Slide 5. We highlight our evolving customer engagement model through our work with a major U.S. grocery store chain. This customer operates a complex network encompassing everything from the retail stores and gas stations to the warehouse distribution centers and manufacturing facilities. Historically, Belden Inc. for this customer was primarily a supplier of cabling products for their IT network. However, as we proactively worked to break down internal silos, our solutions team has been able to significantly expand this relationship. Our deepened engagement now includes OT products servicing their manufacturing processes and fiber solutions connecting their fuel stations. This evolution from a component supplier to a more comprehensive solutions partner is precisely what a solutions-first strategy is designed to achieve. This is where our functional operating model and integrated business structure proves so critical. In the past, this customer might have encountered multiple Belden Inc. sales teams creating a fragmented experience. Now our integrated teams are empowered to bring in our full product portfolio to address the most pressing challenges, providing a seamless, single point of contact. This not only enhances the customer's experience, but also allows us to solve for their most complex IT/OT challenges more effectively. This example powerfully demonstrates how our organizational realignment directly translates into greater value for our customers and underscores its critical importance to Belden Inc.'s future success. With that strategic context, I will now briefly highlight another key solutions win for the quarter. Please turn to Slide 6 for another compelling example of a solutions-first approach, highlighting our work with a major urban transit system. The strategic challenge this customer faced was significant: maintaining reliable, real-time, high-definition video feeds from trains moving at high speeds, all while navigating complex wireless environments prone to interference. They also required unified control and management across both operational and security networks. These are the kinds of complex, mission-critical problems that demand more than just products. They demand integrated solutions. In our solutions portfolio, Wi-Fi products play a critical role, enabling high performance and reliable connectivity essential for IT/OT convergence across various industries. Belden Inc. stepped in with an advanced integrated solution. We leveraged the latest Wi-Fi technology and roaming capabilities to ensure seamless connectivity. Further, we provided a proprietary centralized management system to unify all disparate data sources. What truly set Belden Inc. apart and secured this win were our superior roaming capabilities, which delivered flawless surveillance feeds even in the most challenging environments. Complementing this, our holistic, unified management platform simplified the entire operational landscape, significantly reducing complexity and maintenance demands. This outcome is a testament to our strategy. We have positioned Belden Inc. as an end-to-end strategic partner delivering critical value by enhancing passenger safety, security, and operational efficiency. This provided simplified, more cost-effective management of their complex infrastructure, demonstrating the power of advanced IT/OT converged solutions. I will now request Jeremy to provide additional insight into our financial performance. Jeremy Parks: Thank you, Ashish. My comments today will cover our fourth quarter and full year results, a review of our segments, the balance sheet and cash flow, and finally our outlook. As a reminder, I will be referencing adjusted results today. Now please turn to Slide 8 for our fourth quarter performance. As Ashish noted, our solid execution this quarter drove consistent top-line growth which translated into record performance for the business. Revenue for the quarter was $720,000,000, up 8% year over year and ahead of expectations set forth in prior guidance. Revenue was up 5% organically on a year-over-year basis, with Automation Solutions up 10% and Smart Infrastructure Solutions flat. Orders continued to perform well across the business, up 12% year over year and 5% sequentially. EBITDA was $122,000,000, up 7% year over year. Net income for the quarter was $83,000,000, up 5% from $79,000,000 in the prior-year quarter. And lastly, EPS was a record $2.08, up 8% from $1.92 and ahead of expectations set forth in prior guidance. Now please turn to Slide 9 for our full year performance. For the full year, we achieved record revenue of approximately $2,700,000,000, up 10% compared to last year. Revenue was up 6% organically, driven by Automation Solutions with organic growth of 11% and Smart Infrastructure Solutions with organic growth of 1%. EBITDA was $459,000,000, up 12% from $411,000,000 last year. Gross profit margins were 38.5%, a 40 basis point improvement versus the prior year. And EBITDA margins were 16.9%, a 20 basis point improvement versus prior year. As we discussed throughout the year, we proactively managed pricing in 2025 to offset the impact of copper inflation and tariffs and protect our overall profitability and earnings per share. Despite a full recovery of these incremental costs, the pass-through actions resulted in some dilution to reported margin percentages and somewhat obscured our strong underlying operating performance. Excluding the impact of these pass-throughs, gross profit margins improved 160 basis points and EBITDA margins improved 80 basis points year over year driven by our growing solutions mix. Additionally, again excluding the impact of pass-throughs, incremental EBITDA margins were approximately 28%, in line with our long-term targets. Net income was $303,000,000, up 15% from $263,000,000 last year. And lastly, EPS was a record $7.54, up 19% from $6.36 last year. Before reviewing our historical segment performance, I want to touch on the organizational realignment that Ashish discussed earlier. Turning to Slide 10, you will see that effective in 2026, we will transition to a single consolidated reportable segment. This reporting change is a direct outcome of our new functional operating model and leadership structure designed to accelerate our solutions strategy and enhance our customer focus. For modeling purposes, the reporting change has no impact on our historical consolidated financial results. And going forward, while we will no longer report separate segments, we will continue to provide valuable insights and commentary on our performance across our market-level categories and key verticals. We are confident the strategic realignment is the right move for our business, and it reinforces our ability to deliver on the long-term financial targets we outlined at our last Investor Day. So with that context on our future segment reporting structure, let us turn to Slide 11 for a review of our segment performance for the full year 2025. Our Automation Solutions segment delivered another solid year, demonstrating continued recovery and steady execution. Revenue reached nearly $1,500,000,000, a 14% improvement compared to the prior year, with EBITDA increasing 16%. Margins improved by 50 basis points to 21% reflecting our effective management of the pass-throughs of tariffs and copper. Order trends also remained robust, with orders up 16% compared to the prior year. This strong order activity drove the segment's 11% organic growth, with positive contributions in all regions. This broad-based momentum extended into our core verticals which all grew for the year, including double-digit growth in discrete manufacturing and energy. Revenue for Smart Infrastructure Solutions topped $1,200,000,000, a 7% improvement compared to the prior year with EBITDA increasing 6%. Margins decreased by 10 basis points to 12.1% reflecting headwinds from the pass-throughs of tariffs and copper. Within our markets, smart buildings grew 5% organically for the year driven by strength in our key growth verticals as we continue to advance our solutions offerings. Broadband experienced a softer back half of the year due to a temporary moderation in MSO capital deployments. However, we anticipate stabilization and a rebound in 2026 driven by the adoption of new fiber products and the acceleration of DOCSIS deployments among our major MSO customers. Please turn to Slide 12 for our balance sheet and cash flow highlights. Our balance sheet remains a source of significant strength and flexibility, enabling our disciplined capital allocation strategy. Our cash and cash equivalents balance at the end of the year was $390,000,000 compared to $370,000,000 in the prior year. Our financial leverage stood at a reasonable 1.9 times net debt to EBITDA, consistent with our expectations. We target approximately 1.5 times net leverage over the long term, though this may fluctuate as we pursue strategic opportunities aligned with our capital allocation priorities. For the trailing twelve months, our free cash flow was $219,000,000. For the full year, we repurchased 1,700,000 shares, or $195,000,000, further reducing our share count which is now more than 11% lower than it was in 2021. At the end of the year, we had $145,000,000 remaining on our existing repurchase authorization. Our capital allocation priorities remain unchanged: investing internally in opportunities to advance organic growth, pursuing disciplined M&A, and returning capital to shareholders through buybacks. While the current financial market environment is dynamic, we continue to evaluate M&A opportunities with rigor and remain committed to deploying capital in ways that create long-term value. Early this year, we completed a successful debt refinancing by issuing €450,000,000 of 4.25% senior subordinated notes due in 2033. This transaction allowed us to redeem all of our 2027 notes, effectively extending our overall debt maturity profile. Our debt remains entirely fixed with an average rate of approximately 3.9%. Please turn to Slide 13 for our first quarter 2026 outlook. Following a strong 2025, we are well positioned for the long term, leveraging secular trends like digitization and IT/OT convergence. While there is ongoing market uncertainty, our growing solutions adoption and resilient operating model enable us to effectively manage near-term variability. Our first quarter guidance reflects these dynamics and our typical seasonality as we remain focused on our solutions transformation and long-term value creation. Assuming the continuation of current market conditions, revenues for the first quarter of 2026 are expected to be between $675,000,000 and $690,000,000. Adjusted EPS is expected to be between $1.65 and $1.75. That concludes my prepared remarks. I would now like to turn the call back to Ashish. Ashish Chand: Thank you, Jeremy. Now please turn to Slide 14. To summarize, 2025 was truly a milestone year for Belden Inc. A record fourth quarter and full year performance clearly reflect the strength and resilience of our business and the accelerating progress of our solutions transformation. We delivered outstanding results in a dynamic environment marked by consistent order activity, record earnings, and healthy cash generation. Our performance is not an anomaly. It directly reflects our strategy's success in delivering tangible results. From 2019 through 2025, we achieved a revenue CAGR of 5% and an adjusted EPS CAGR of 12%, demonstrating powerful and consistent value creation over multiple years. The strong track record, coupled with the fact that solutions wins as a percentage of total revenue crossed 15% for the year, provides clear evidence that a solutions-first strategy is resonating in the marketplace and driving our financial success. Our progress builds a powerful foundation as we continue to execute our strategic evolution. The transition to a unified functional operating model is the right move for our business. It is designed to further accelerate a solutions-first strategy, enhance the customer focus, and unlock even greater future value by aligning our entire enterprise to deliver integrated solutions more efficiently and consistently. We remain incredibly confident in our long-term trajectory. The fundamental secular trends driving our business—digitization, IT/OT convergence, and the increasing demand for data-driven efficiency—are intact and building momentum. Belden Inc. is exceptionally well positioned to capitalize on these trends. Our solutions transformation is already expanding our addressable market and driving consistent growth and margin expansion. Through disciplined execution and thoughtful capital allocation, we are committed to ensuring we create lasting value for our shareholders. Before I conclude, I want to extend my sincere gratitude to the entire Belden Inc. team. Your dedication, hard work, and commitment to our solutions transformation have been instrumental in achieving these record results and positioning us for continued success. Thank you all for joining us today. We appreciate your continued interest in Belden Inc. That concludes our prepared remarks. Operator, please open the call for questions. Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please press 1. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press 1 to ask a question. The first question is going to come from Mark Trevor Delaney from Goldman Sachs. We will pause for just a moment to allow everyone the opportunity to signal for questions. Mark Trevor Delaney: And what Belden Inc. has seen with demand trends. You already talked about how orders grew both sequentially and year on year in the fourth quarter, but can you share more on your view on demand trends by end market and what you are seeing so far in 2026? Ashish Chand: Yeah. Sure. So good morning, Mark. First of all, if I look at the total solutions pipeline, that has grown by 26% at the '25 compared to the '24. Right? So that itself is a pretty good indicator at an aggregate level. Obviously, there is a lot on demand we are seeing on the automation side, especially true in energy, discrete as well as process. And then we have seen a fair amount of demand in hospitality, which is more of an integrated IT/OT opportunity for us. These are all typically in the double-digit growth areas, these markets. We saw a little less robust growth in broadband, but we did see fiber, you know, growing and the demand for fiber growing there. So really strong, you know, some of the fundamental verticals that you would expect—energy, discrete, process, hospitality—are doing really well for us. Overall, you know, one quarter growth in our funnel for solutions, so we feel pretty good. Mark Trevor Delaney: It is very helpful. My second question was about supply chain. And from a few dimensions, I guess, for one, does Belden Inc. think it can procure enough metals and also enough semiconductors in particular? And then two, as you think about what you are seeing in supply chain with the rising input costs, the company did well to offset the dollar pressure in the fourth quarter. Do you think you can continue to offset the input cost inflation as you think about this year? Thanks. Ashish Chand: Yeah. No. I think, Mark, that is a very important question at this point. I think we are well positioned. The way we have, you know, looked at manufacturing as a whole and supply chain is we have de-risked it quite a bit by going more regional. Obviously, we are still dependent on certain commodities and certain electronic components with certain regions. But we have taken certain actions. For example, we are doing more surface mount now than we did before. So we have kind of, you know, we have removed some of the points of consolidation in that supply chain so that we have more direct control over that. And then, of course, you know, with copper, from our side that is a global commodity. You will see a higher mix on both fiber and wireless. I think that was anyway happening as part of technologies, but it is getting accelerated. But at this point in time, just given how we are placed and, you know, how copper is not that large portion of our COGS, we feel pretty good about being able to pass on because of the value we offer beyond the commodity. And you know, we have had discussions with some of our customers and our partners about how this scenario might change, and we have not heard anything that causes us concern right now. So yeah. So much like we did in Q4, we remain confident that we will protect our dollar margins by being able to pass on. Mark Trevor Delaney: Thank you. I will pass it on. Operator: And our next question is going to come from William Stein from Truist Securities. William Stein: Great. Thanks for taking my questions. Aside from the rebound in MSO spending that you highlighted in the broadband business, are there any other clues that we should pay attention to when we are contemplating modeling 2026 beyond Q1 that could drive above or below typical seasonality? Ashish Chand: So there is a temporary, let us say, slowdown in certain architectural upgrades in that market that, you know, we dealt with in Q3 and Q4. That we know now has been largely resolved because there were some interoperability issues that those, you know, their engineering teams are working through. So we expect that to start ramping up. Second, there was an overall inventory overhang that, you know, just even beyond that architectural changes in DOCSIS that were true in that market, which I think have all been, you know, they have all bled out. And then, of course, there is the BEAD dynamic. We know for sure that BEAD money will flow in 2026. So I think there are kind of two more neutral and one more positive trend that, you know, is there. But the other thing to keep in mind is our fiber content as a percentage of total broadband revenue has gone from 40% at the '24 to 50% at the '25. Right? Fiber is growing and there is an increasing demand for both fiber connectivity and cabling in that market. And we have launched some new products that are fairly differentiated that are protected with IP and that allow us to take share, both in that market. So I think there are the three kind of more macro items, and then there is one Belden Inc.-specific fiber growth dynamic. And all of these should help us model the growth. William Stein: Thank you for that. I was hoping to hear an extension of that into any other end markets or the other segment that might clue us in. Because I think you said this recovery, I would expect in MSO to drive some above seasonal performance. But what about in the rest of the business as we go through the year? Ashish Chand: So just to clarify, Will, are you talking about the broadband portion of the business or product? William Stein: No. No. I am talking about the whole, the whole thing because I think you gave us the comment on broadband. So I was hoping that you might extend that to the rest of the entire business. Ashish Chand: Okay. No. I am sorry. I misunderstood your question. William Stein: It is all good. So I think first of all, you know, automation, very, very positive performance in 2025, you know, with 14% growth, 11% organic. We saw double-digit growth even in Germany, the DACH region, and China. And very strong expansion in verticals like discrete manufacturing and energy. So, you know, so I think those will continue. We see more and more engagement around physical AI, and this is especially happening in warehousing and smart manufacturing environments, especially in the U.S. And just as a reminder, right, we enable very closed-loop physical AI systems in collaboration with companies like Accenture, NVIDIA, etcetera, where we combine vision, digital twins, real-time data orchestration. We have a deterministic secure architecture that is based on a time-sensitive networking protocol that delivers very low latency synchronized connectivity. So these are all being appreciated. We saw very strong interest in those discussions. A number of pilots have commenced. So if I look at just the vertical, you know, let us say the fact that certain verticals are very robust and that we have this additional layer of IT/OT convergence including physical AI, we feel pretty good about the demand environment in that space. Interestingly, our smart buildings business has done extremely well once we started offering these IT/OT converged solutions. So here is an interesting statistic. Our growth verticals in smart buildings—which are essentially around hospitality, health care, education, data centers—are now one third of our total smart buildings revenue. Commercial real estate has become 10%. And at some point, it used to be the flip of that. Right? So there has been a very marked interest in these converged solutions. So we are obviously doing better in smart buildings environments where it is not plain vanilla office space, but it is more demanding, you know, health care, hospitality kind of or warehouse kind of environments. So I think these verticals are the ones that will drive growth. I think the U.S. continues to be the leading market in terms of geographical expansion, but obviously, it is good that China and Germany have also recovered. We see continued growth in infrastructure in India, especially for energy and mass transit rail. So, yeah, those are the growth areas we are excited about. William Stein: If I can have one follow-up, I was hoping to ask about the organizational realignment you referred to in the press release and in the prepared remarks. Should we anticipate that having any effect on the P&L in terms of either reduced costs overall because of the, I guess, simplification that I would imagine you would get? Or any restructuring costs that we should prepare for? Ashish Chand: So to me, you know, to be fair, Will, when we planned this realignment, one of our goals was not necessarily cost reduction. It was more aligned around the solutions-first strategy and also, if you notice, we have created a role around digital and operations leadership, which essentially means that we want to drive IT/OT convergence within Belden Inc. much the same way we are enabling it for many of our customers. So, you know, I expect the benefits of this first and foremost to be around us becoming more customer-centric. And then, you know, really pooling resources to build functional strength, whether it is in technology development or commercial skills, etcetera. Having said that, obviously, this is going to lead to efficiency. For example, when we combine all the disparate R&D centers across the world under common leadership, right? Or when we bring more commercial resources together. So, yeah, we will see more efficiency. We will see more leverage on those costs. We feel that we will continue to reinvest some of those efficiency savings. So the goal really is not to, you know, model some kind of restructuring saving at this point. Operator: Thank you. And our next question is going to come from Steven Bryant Fox with Fox Advisors. Steven Bryant Fox: Hi. Good morning. I guess, first, I had a big picture question. You highlighted how some of the inflation in materials is impacting your business, which is very helpful. And I was just curious, there are inflation considerations across a lot of bill of materials, and there seems to be some better demand for '26. How concerned are you about just projects being negatively impacted, whether it is just the absolute level of spending dollars available or timing of projects based on what is going on in supply chain as you think out for the full year? And then I had a follow-up. Jeremy Parks: Hey, Steve. Good morning. So in terms of end demand or inflation impacting end demand, I cannot say that we have seen any evidence of that up to this point. Obviously, copper has been particularly volatile. The price of copper has been everywhere from $4 to $6 just over the past maybe four or five months. So there has been a lot of volatility. We have been dealing with it. Customers are still placing orders. So I think that is positive. We would not expect it to have any material impact on demand. But like Ashish said, we are also concentrated on fiber and wireless and other technologies because we can sell all of those as part of our solution. So I do not think it is a major concern. We will keep passing it on in terms of price, and we do not expect it to have a major impact on end demand. Steven Bryant Fox: Got it. And then just— Ashish Chand: Yeah. Sorry. Just one point. Right? Keep in mind that inflation is what is actually driving a lot of customers to look at automation. And so if anything, you know, when I look at our sales pipeline, I see a lot of cases where even customers who were not, you know, initially identified as, let us say, priority markets or priority customers for higher-end automation have now entered that pipeline, and they are coming in talking about autonomous systems and more convergence. So I think it is actually a bit of a tailwind, frankly, unless, you know, there is something crazy going on with commodities, which, you know, we cannot control. Steven Bryant Fox: Right. No. That is good food for thought. And then just from a cash flow standpoint, Jeremy, like you mentioned, the price of copper is pretty volatile. How do we think about your free cash flows for the year? Like, is there a working capital impact that comes and goes depending on prices, etcetera? Anything we should keep in mind there? Thanks very much. Jeremy Parks: Yeah. I would not expect it to have a material impact on our cash flows. As long as we are successful recovering through price. But it does impact inventory. So if you look at our inventories from 2024 to 2025, a significant portion of the inventory growth is just copper getting repriced. And the way it works is, obviously, we are buying copper. We have got a couple months of inventory of copper at any given point in time. And that gives us a few months to raise prices. So there is always maybe a slight lag between when we raise prices and when we realize higher input costs. It does not impact the P&L typically, but you are right. There is maybe a small impact on working capital. But I do not think at this point it is significant enough to really impact our view on free cash flow for the full year. Steven Bryant Fox: Understood. Thank you very much. Ashish Chand: Sure. Operator: And our next question is going to come from David Neil Williams at Benchmark. David Neil Williams: Hey, good morning, and thanks for letting me ask a few questions here. I guess, maybe first, just kind of thinking about the transition to the solutions approach. You have talked about it being about 15% of the business. But thinking about the leverage there, how do you think about the pace of growth in that solutions mix as we think about that maybe through the next twelve to twenty-four months? Ashish Chand: Yeah. So we had, you know, articulated this longer-term goal of being at least to 20% by 2028. I think we are well on our way to, you know, achieving that goal, even surpassing that goal. The reality is that the 15% that we have achieved right now has involved, you know, a little bit of brute force because we were not organized internally exactly, you know, to service customers on a unified basis. I think with this realignment in the orgs and operating model, we are now fully aligned, and the biggest benefit we now have is that we can scale. So if you think about that 15% base that we have right now, there is a fair amount of bespoke one-off, you know, solutions designs that we have done. And we have not necessarily been able to either get both the IT/OT converged portion of the opportunity or kind of repeat and scale the reference architecture once it has been established. And that is what we are changing now. So, you know, obviously, you should expect acceleration in that solutions mix. And we should expect leverage on our fixed cost because we have already built the architecture and now we are going to take it out to more customers. So it is not like we had not found, you know, as we mentioned on the call, we had already started the journey a few years ago. We combined our go-to-market teams, and we combined certain other supporting teams. But we made progress in that direction, and I think this is very definitive now. And it is clear across the organization to all our customers that we are accountable to them for one combined answer. David Neil Williams: Very good. Thank you. And then maybe just on the physical AI, that is certainly an area that has gained a lot of attention more recently. Just kind of curious what you are hearing in terms of customers and maybe the activity going on from their perspective in terms of physical AI and that transition. Thanks. Ashish Chand: Yeah. So, you know, at the very, very basic level, how customers are looking at these solutions is that they integrate cameras, edge computing, AI platforms, you know, industrial Ethernet, enable some real-time perception, simulation and action, real-time root cause analysis. And they are very interesting for both brownfield and greenfield situations. You know, we have a number of active discussions going on in both categories, especially in factories and warehouses. So a lot of interest. I think the kind of sobering moment for customers comes when they realize that they have not built the foundation to get to physical AI. So in our mind, you know, we think of four steps required where the ultimate fourth step is autonomy. So you have to start with digitization—you know, everything is connected and is digital. You then have to go to harmonization, where all these connected systems are able to communicate with each other seamlessly using the same protocol—the same language, so to speak. Then there is convergence, where these systems that are more on the operating side and are speaking with each other can also speak with historical data and connect to databases on the IT side, and, you know, that is a two-way bidirectional process. And then you get to autonomy, where you can actually have this real-time, you know, perception and actuation. So a number of customers come to us now and say, I want an autonomous system in my manufacturing plant or my warehouse. And then we have to guide them through that journey. And I would say, you know, that journey typically can take between twelve to eighteen months depending on the existing digital maturity of that customer. But a number of those journeys have started. Actually, I would say, we have had more interest than even I expected at this stage. And part of that is driven by just the environment around, you know, bringing back manufacturing, using more automation, dealing with the shortage of labor, etcetera. So I think it is in a very good place. But it is not a market that is going to give results next quarter. And I think we are invested in this for the long term. And our customers clearly have understood that they have to go through these steps. Operator: Thank you. And our next question is going to come from Robert Gregor Jamieson from Vertical Research Partners. Rob, can you hear us? You may have your mute function on. Robert Gregor Jamieson: Sorry about that. I was on mute. Morning, all. Just wanted to get a quick update on the data center gray area opportunity and pilot that you mentioned a couple of quarters ago—some of the power and cooling capabilities. Just given it is to help automate. You know, we saw huge orders from, you know, a liquid cooling provider earlier this week. I am just curious, you know, how conversations are going with maybe some of the other hyperscalers, how that pilot has gone, and then just any kind of color around sizing or how big you all see that opportunity growing over time? Ashish Chand: Yeah. So we see that, you know, integrated white space/gray space opportunity for data centers, especially for the AI data centers, as a very significant opportunity. It is one of our top growth areas. In fact, we have, you know—we have kind of expanded that team literally by 2–3x over the last couple of quarters. Right? So there is that much demand. The approach we are taking really is to cover both IT and OT. And, you know, this obviously includes the critical module of cooling systems that we have previously highlighted. So, you know, that pilot actually went very well. It is now expanded into a larger commercial relationship where they want us to do the same thing for multiple data centers. And those negotiations are underway right now. And they are really, you know, heading in the right direction, very positive. And then since then, we have worked with about, let us say, half a dozen more large accounts. Some of them are more in the early piloting stage. But some of them have said, you know, you can replicate what you have done in that other case. And we did, you know, actually orders and revenue in Q4. They were not as big as that first case we talked about. But the pipeline is certainly, you know, two to four times larger. So more to come here, Rob, but very, very positive engagements underway. Again, these discussions, because they go across, they straddle IT and OT, they take a little longer, you know, because you are really addressing certain foundational aspects of their infrastructure. But I would expect some, you know, positive news in 2026, and we will certainly share that with you. Robert Gregor Jamieson: That is great. Very helpful update. And it makes a lot of sense with everything that you discussed today with the, you know, simplified reporting structure. And just on the 1Q guide, just one housekeeping item. And sorry if I missed this. I have bounced around between calls this morning. What is embedded in there for FX on your top-line guide there, just given some of the dollar weakness that, you know, we saw in early January, probably around the time you guys had already finished your guidance and planning. So just curious what is embedded in there for FX at the moment? Jeremy Parks: Yeah. Let me grab that for you, Rob. So FX should be actually a benefit for us year over year of, call it, roughly 2% of revenue. Robert Gregor Jamieson: Okay. That is great. Thanks so much. Jeremy Parks: Sure. Operator: And our next question is going to come from Christopher M. Dankert from Loop Capital Markets. Christopher M. Dankert: I guess with the updated reporting structure here, I think that makes a lot of sense given the solutions approach being very holistic on its face. The one maybe sticking point, I guess, I do not generally think of broadband as being kind of a part of that solution sale. Maybe can you enlighten us? Is there more solutions opportunity inside of broadband? Is that operated more separately? Just any kind of color you can give us on that structure would be helpful. Ashish Chand: Oh, no, Chris, because that is a very astute observation, and I think you are right. So first of all, we are committed to this functional organization, and even broadband is set up functionally. So within broadband, that is a functional organization. But we have indeed, you know, kept broadband a little separate because they service OEM customers that are different to the more solutions-oriented, project-oriented customers we have for the rest of Belden Inc. Having said that, products and technologies in broadband are available to our solutions teams to take to all their customers. So for example, we talked about this with this large grocery chain win that we had recently, and we talked about it in today's call. That contains a few different products out of broadband which are IP-protected fiber products that are pretty unique. And similarly, we have talked in the past about a warehousing win, an automation win—we talked about that two or three quarters ago. That contained, you know, some content from broadband fiber. So the way to think about it is broadband continues to operate fairly independently within that functional organization. They continue to focus on their core customers, which are especially in the MSO space. But broadband technologies are available to our different vertical teams to take to their customers, and this is becoming especially true in hospitality and health care, but a little bit also in warehousing and logistics. Christopher M. Dankert: Got it. That is extremely helpful. Thank you for that. And then on the solutions sales, obviously, this is going to help accelerate that pathway. But I am curious before everything kind of gets a little bit combined here, can you give us the percent of solution sales by Automation Solutions versus Smart Buildings kind of as we are heading into this transition? Because I know we have been seeing extremely strong success on industrial, a little bit tougher conversion on the smart buildings. Can you just kind of give us some split there? Ashish Chand: Yeah. So we are in kind of the low twenties right now in automation. That is up, you know, percentage of solutions in their revenue. It has become mid single digits for smart buildings. So that is actually impressive given that, you know, they were literally zero at the beginning of 2025. So they have really ramped up, and a lot of that has come out of hospitality, health care, and then taking some of the smart buildings offerings into combined verticals. And then, obviously, you know, we do not really think of broadband—we do not measure broadband solutions percentage. So 20% plus for automation, mid single digit for smart buildings. Christopher M. Dankert: Got it. Thank you so much for the color there. And I guess if I could just sneak one last one in here. It sounds like there is a very nice opportunity pipeline on the data center front. But as we look at it today, it is a fairly small portion of the business. We are talking about less than 5% of sales. And please correct me if I am wrong there. Ashish Chand: Yeah. No. It is small. And, you know, part of that has been our own doing, so to speak. Right? Which is why I made a remark about the fact we had to grow the team two to three times. So we may have allocated fewer resources to data centers, let us say, pre-'25 than we should have. Part of it was because, you know, the hyperscalers tend to be more cyclical. There is a little bit of margin pressure there. It is only '25 that we figured out this more integrated white space/gray space opportunity. And we actually were able to build, you know, an architecture and pilot it that made sense. So I expect that percentage to grow quite a bit. But you are right. We are starting off a smaller base because we did not invest in it in the past. Christopher M. Dankert: Got it. Well, super helpful. And, you know, again, thanks, and good luck into 2026 here. Ashish Chand: Thank you. Operator: There are no further questions at this time. I will now pass it back over to Aaron Reddington. Please go ahead. Aaron Reddington: Thank you, operator, and thank you everyone for joining today's call. If you have any questions, please contact the IR team here at Belden Inc. Our email address is investor.relations@belden.com. Thank you very much. Operator: Thank you, ladies and gentlemen. This concludes our call for today. You may now disconnect from the call, and thank you for participating.
Operator: Greetings. Welcome to Primerica, Inc.'s fourth quarter 2025 earnings webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note that this conference is being recorded. At this time, I will turn the conference over to Nicole Russell, Head of Investor Relations. Thank you, Nicole. You may begin. Nicole Russell: Thank you, Operator. Good morning, everyone. Welcome to Primerica, Inc.'s fourth quarter earnings call. A copy of our earnings press release issued last night, along with other materials relevant to today's call, are posted on the Investor Relations section of our website. Joining our call today are our Chief Executive Officer, Glenn Williams, and our Chief Financial Officer, Tracy Tan. Our comments this morning may contain forward-looking statements in accordance with the safe harbor provisions of the Securities Litigation Reform Act. We assume no obligation to update these statements to reflect new information and refer you to our most recent Form 10-K filing, as may be modified by subsequent Forms 10-Q, for a list of risks and uncertainties that could cause actual results to materially differ from those expressed or implied. We also reference certain non-GAAP measures, which we believe provide additional insight into the company's financial results. Reconciliations of non-GAAP measures to their respective GAAP numbers are included in our earnings press release. I will now turn the call over to Glenn. Glenn Williams: Thank you, Nicole, and thanks, everyone, for joining us this morning. 2025 proved to be another record year for Primerica, Inc., evidenced by solid earnings growth and strong cash flows that reflected the strength, stability, and balance of our business model. Our sales force also set records in several areas, including $968 billion in total in-force protection for our clients, and a new high watermark as client asset values reached $129 billion. Stockholders were rewarded with 79% capital return through a combination of share repurchases and dividend payments along with a 200 basis point increase in ROAE. Highlights of our financial results included a 16% increase in fourth quarter adjusted net operating income and a 22% increase in diluted adjusted operating income per share. On a full-year basis, adjusted net operating income increased 10% to $751 million while diluted adjusted operating income per share of $22.92 increased 16%. Glenn Williams: Let's take a look at distribution results. Both recruiting and licensing activity were down compared to 2024 and on a full-year basis. These results reflected the uncertainty associated with the 2025 economic environment as well as challenging comparisons to 2024's record-setting activity. We ended the year with 151,524 life-licensed reps, largely unchanged from the prior year-end level. Included in this group were 25,620 representatives who hold a securities license enabling them to assist clients with their long-term savings and retirement goals. As we start 2026, we see our business opportunity continuing to resonate with new recruits, particularly its appeal for supplementing household income. We expect full-year growth in both recruiting and licensing, which should translate into approximately 1% growth in our life sales force in 2026. Glenn Williams: Turning next to production. Sales results were mixed in 2025 with headwinds from higher cost-of-living pressures adversely impacting demand for term life insurance coverage while investment and savings product sales continued to set new records. Starting with Term Life, we issued 76,143 new policies during the fourth quarter, providing $26 billion of new term life protection for our clients. On a full-year basis, the number of new policies issued declined 10% compared to the prior year record levels, while estimated annualized issued term life premiums, which include coverage additions as well as newly issued policies, declined 7% compared to the twelve months ending 12/31/2024. We believe it is useful to look at annualized issued premiums to get a more complete understanding of the financial impact of our Term Life business. Glenn Williams: As we look at 2026, we believe cost-of-living pressures have started to ease as wage growth begins to outpace inflation. We see small but consistent monthly improvements in the primary household budget index data. Our sales force is well positioned to help middle-income families who could benefit from U.S. tax relief as well as moderating inflation and real wage gains in both the U.S. and Canada. We continue to support our representatives with targeted sales training to enable them to better assist clients in prioritizing financial needs, and we believe these efforts will result in productivity improvements over time. Until we see clear evidence that these trends are materializing, we are maintaining a conservative outlook for full-year policy growth during 2026 in the 2% to 3% range. Glenn Williams: Turning next to ISP results. Performance remains very strong, reflecting the importance of the financial education provided by our investment-licensed representatives helping clients stay focused on long-term goals and saving for the future. During the fourth quarter, investment and savings product sales of $4.1 billion grew 24% compared to 2024. Results for the full year were just as strong with total sales of $14.9 billion, up 24% on a year-over-year basis. ISP growth continued to be driven by strong demand across all major product lines. This momentum is supported in part by favorable demographic trends as clients approaching retirement seek annuity solutions that provide income stability and protection, as well as by increased interest in the broader range of investment options now available on our managed account platform. We also see greater engagement from our sales force as representatives recognize the opportunity in this product line and the benefits of diversifying their business. Client asset values ended the year at $129 billion, up 15% compared to 12/31/2024, on solid annual net inflows of $1.7 billion and sustained momentum in the equity market throughout most of the year. Looking ahead, we believe favorable demographic trends will remain supportive for several years. We also recognize that this business is sensitive to equity market conditions and that uncertainty remains elevated. Preliminary January results reflected continued growth. We remain mindful of a possible market downturn and maintain a conservative approach to our full-year sales projection. We currently expect sales growth of around 5% to 7% during 2026. Glenn Williams: Finally, we remain well positioned to help middle-income families obtain a new mortgage or refinance, consolidate consumer debt. In the U.S., we ended the year with nearly 3,500 licensed representatives who closed more than $500 million in mortgage loan volume in 2025, a 26% increase compared to full-year 2024. We also bring refinancing opportunities and new mortgages to our Canadian clients with a mortgage referral program that saw more than 18% growth in volume on a year-over-year basis. As we approach our fiftieth anniversary next year, we are already laying the groundwork for our 2027 convention, which we expect to be our largest event ever. We kicked off 2026 with a senior leadership meeting that included over 1,000 participants. We used this forum to reinforce our long-term vision, including the importance of building a balanced business by going across all major product lines while also strengthening recruiting and licensing to expand our distribution footprint. All our efforts in 2026 will be focused on accelerating momentum. We are optimistic about the opportunities ahead. With that, I will hand it over to Tracy for the financial results. Tracy Tan: Thank you, Glenn, and good morning, everyone. Overall, we delivered very strong financial performance in 2025, outperforming on all major fronts including record adjusted operating revenues of $3.3 billion, up 8%, record net operating income of $751 million, up 10%, and record earnings per share of $22.92, up 16% compared to full-year 2024 results. This performance reflects the benefit and balance of all of our fee-based businesses and our Term Life business, which exhibits financial characteristics similar to a fee business. They also demonstrate our capital efficiency and consistent execution. The strength of our model was also evident in a 200 basis point increase in our return on adjusted equity to 33.1% this year, led by accelerating growth in the investment and savings product segment. Tracy Tan: The ISP segment has performed exceptionally well with pre-tax operating income growing at a compound annual rate of 21% over the last two years, and we continue to see meaningful opportunities ahead driven by retirement savings needs. The financial results in ISP are entirely fee-based, with sales commissions and advisory fees driving revenue growth. In the Term Life segment, a substantial portion of revenues continue to be driven by recurring premium on a large in-force block of life insurance policies. When combined with our use of reinsurance to substantially eliminate mortality risk, the income profile of this segment drives sustainable earnings performance, resulting in a stable business with characteristics similar to those of a fee-based model. Tracy Tan: Adjusted direct premiums continued to drive Term Life revenue growth to a total of $457 million in the fourth quarter. Pre-tax income for the quarter was $147 million, up 5% compared to the prior-year period, driven by the impact of a remeasurement gain in the current period compared to a remeasurement loss in the prior period. Keep in mind that even with a 15% decline in the number of issued policies during the fourth quarter, both direct premiums and ADP still grew in the period, reflecting the stability of our in-force block and the benefit of a substantial portion of revenue being generated by recurring premium payments. Tracy Tan: Turning to our key financial ratios, the benefits and claims ratio for the quarter was 57.8% compared to 58.6% in the prior period. Benefits and claims in the current-year period included a $5 million remeasurement gain, reflecting a combination of favorable mortality experience and lower persistency. Lapse rates remained elevated relative to our long-term reserve assumptions, although stable on a year-over-year basis. We believe that persistency will gradually normalize as middle-income families adjust to current economic pressures, and we will continue to monitor our assumptions as policyholder experience continues to evolve. The DAC amortization and insurance commissions remained stable at 12.2%, while the insurance expense ratio at 8.5% was up modestly compared to 8% in the prior-year period, primarily due to expense timing and ramp-up on technology investment at the end of the year. Finally, the Term Life operating margin for the quarter was stable at 21.5% compared to 21.3% in the prior period. Tracy Tan: Looking ahead to 2026, we believe the fundamentals of our business remain strong. We expect adjusted direct premiums to grow approximately 4% as the benefit of the coinsurance agreement continues to fade. Key financial ratios should remain stable with the benefit and claims ratio at around 58% and the DAC amortization and insurance commissions ratio at around 12% to 13%. We expect full-year operating margin to be around 21% with some possible seasonal variation between quarters. Tracy Tan: Turning to the investment and savings product segment, our fastest growing segment and an increasingly meaningful contributor to consolidated results. To put this in perspective, ISP represented 32% of consolidated operating revenues in 2022, now increasing to 38% of revenues in 2025. Focusing on fourth quarter results, operating revenues were $340 million, up 19% compared to the prior-year period. Pre-tax income increased 23% to $101 million. Sustained equity market appreciation continued to support strong sales activity and pushed client asset values higher. Sales-based revenues increased 21%, slightly outpacing the 17% increase in commissionable sales, primarily driven by strong demand for variable annuity. Asset-based revenues were up 21% year over year compared to a 14% increase in average client asset values, reflecting a favorable mix shift towards product that generated higher recurring fee-based revenues. We continued to experience higher demand for U.S. managed accounts due to the increased appeal of these products and Canadian mutual funds sold under the principal distributor model, which was introduced a few years ago. Commission expenses for both sales- and asset-based products increased relatively in line with revenues. The continued growth of our fee-based ISP business has accelerated the company's overall growth profile with recurring commissions and investment advisory fees driving strong returns on invested capital. Tracy Tan: In the Corporate and Other Distributed Product segment, we recorded a pre-tax adjusted operating loss of $300,000 during the quarter compared to a loss of $1 million in the prior-year period. The largest factor contributing to the year-over-year change was higher net investment income from growth in the portfolio, partially offset by higher operating expenses. Finally, consolidated insurance and other operating expenses were $163 million during the quarter, up 7% year over year. The growth in expenses was driven by a combination of higher variable growth-related costs in the ISP segment and the ramp-up in technology investments at year end. We expect full-year 2026 consolidated expenses to grow around 7% to 8%. The first quarter expenses on a dollar basis are expected to come in a little higher than other quarters due to annual equity compensation vesting and towards the lower end of the first-year guidance percentage range. Tracy Tan: Our invested asset portfolio has a duration of 5.2 years. The portfolio remains well diversified with an average quality of A. The average rate on the new investment purchases in our life companies was 4.92% for the quarter with an average credit rating of A+. The net unrealized loss in our portfolio has modestly improved, ending December with a net unrealized loss of about $113 million. We believe that the remaining unrealized loss is a function of interest rates and not due to underlying credit concerns, and we have the intent and ability to hold these investments until maturity. Tracy Tan: We continue to generate strong excess cash, driven by superior growth of our fee-based ISP business and the steady premium contribution from our large in-force block of insurance policies. Our holding company ended the quarter with $521 million in cash and invested assets. Primerica Life’s estimated RBC ratio was 455%. In 2025, we returned approximately 79% of net operating income through a combination of share repurchases and dividend payments, a level that is typically well above life and health insurance peers, underscoring our capital-light and disciplined approach to capital deployment. In closing, we are in a strong financial position. In both good and bad economic times, Primerica, Inc. has been able to deliver solid earnings, strong cash conversion, and superior return on equity. With that, Operator, please open the line for questions. Operator: Thank you. We will now open for questions. The first question comes from the line of Joel Robert Hurwitz with Dowling & Partners. Please proceed with your questions. Nicole Russell: Good morning, Joel. Joel Robert Hurwitz: Hey, good morning, Glenn. How are you? Glenn Williams: Doing great. Good. I wanted to start on your term sales outlook, the 2% to 3% growth for 2026. Just want to understand what is driving that because it would suggest pretty strong growth off of the sales levels that we have seen in 2025. Glenn Williams: Yes. And Joel, I think you will see that emerge over the years, that increasing momentum is what we are anticipating as the year goes by. We do believe that we saw some unusual circumstances in 2025 with a lot of economic and policy uncertainty, as well as the continued cost-of-living pressures. I think some of that uncertainty, I do not know whether it is clarifying or not, but it is probably being accepted if nothing else. And we do believe there is a little good news on the purchasing power front in middle-income families as we are seeing in our own household budget index that I referenced in my prepared remarks. We saw it up consistently last year 10 to 12 months. In midyear, it crossed over the 100% mark, which is the baseline to determine that purchasing power is now outstripping the cost of living in those kind of narrow contexts that we use for middle-income families. So that is a good leading indicator, we believe. As I said, we want to see that work its way through the system, and that may take some time. But overall, I do think that middle-income families are going to have just a little more flexibility in their budgets. We are working hard to get out and be the good news bearers of that to make sure middle-income families see that and, before that money is put to use, or just not recognized, put it to use toward protecting families and investing for the future. So we do think the conditions are a little different in 2026 externally in the environment and we are working hard to play into those advantages. So we do think we will see some increasing momentum as the year goes by. Joel Robert Hurwitz: Got it. That is helpful. And then I guess just sticking to sales. It is, term has been a little challenged in the back half. ISP continues to be very, very strong. I guess any theory on your part on why there are the diverging trends in the two businesses? Is it change in the targeted consumer for both? Is it shifting more towards retirement? Just any thoughts on why you are seeing those trends in the two businesses? Glenn Williams: Yes. I would say that within our middle-income market, there are segments of the market that react differently to the conditions. Our investment business is helped. There is a tailwind from money in motion being moved from retirement accounts, as Tracy mentioned in her remarks, particularly to annuities that have income guarantees as we all age and get closer to retirement. So you have got one segment of the market that is kind of looking at their month-to-month budget. They are the buyers of term insurance for the first time and often those that are beginning to invest systematically. And then you have a separate segment that is moving money to a more appropriate place that they have accumulated over their lifetimes. And so you get two different sets of behaviors. Unfortunately, that is what I love about our business model because they often complement each other. And when one is weak, the other is very strong. And that is exactly what we are seeing now. So, it is not both being driven by people investing $25 to $100 a month or buying insurance with $25 to $100 a month. The investment segment is being driven more by the big dollars in motion right now. And that has a different set of stresses and is more driven by the demographics, I think the good work that we have done in preparing with our product sets and training, expansion of our sales force, also the market returns, the strong market returns are clearly a tailwind for us. Operator: Got it. Joel Robert Hurwitz: Thank you. Glenn Williams: Absolutely. Thank you. Operator: Our next question is from the line of Wilma Burdis with Raymond James. Please proceed with your question. Glenn Williams: Thanks for joining us, Wilma. Wilma Burdis: Yes, thank you for having me. Could you talk a little bit about the potential impact of AI on your business model, given this is a hot topic in the markets right now, especially as it regards to salespeople? Thanks. Glenn Williams: Certainly. It certainly is the hot topic and of course we are monitoring that as we see the discussions going on and are well aware of it. We see AI as an opportunity for improvement of our business. We do think we can increase efficiencies and reshape workflows both in our home office processing as well as in our sales process, and make the sales process more intuitive for the reps and the clients. So there are a lot of opportunities to use. In fact, we already have AI in play in a number of areas. For example, in licensing, we have got AI-powered training tools, personalized study paths to help us improve pass rates. We have got employee productivity tools. We have got AI language tools to help in translation to our various market segments that speak different languages. So we are clearly seeing benefits from that and have plans to use it to improve our financial needs analysis and our quoting system as well as our client app. So we are very positive on the impact of AI. Glenn Williams: The negativity that we have seen in recent days or weeks is a question of can AI replace our business model of what we do or the other business models that are being negatively impacted? And I think it is interesting because in looking at the discussion that I see, the term insurance, I think, the insurance side, it is seen to be a more simple product, and easier to understand, which is true. And often, someone comes to the conclusion that it is easy pickings for AI to take that out because that is the simpler type of life insurance product. But it is not necessarily a simpler sales process. There is still the evaluation of a client's family’s need, the personalization of the solution, most of all, the motivation to act. And we see that as our clear advantage. It is an advantage with current models. I think it will continue to be an advantage as AI becomes more prominent. Because we have the advantage of the relationship with clients. Remember that most of our reps are dealing with clients that had a preexisting relationship. The empathy that those reps have as well as the common life experience and ultimately the motivation. And we do not see that as a threat of AI anytime in the near future. So we think we can benefit from it, but we think we are insulated from the downside. The uniqueness of our relationship business probably gives us an edge in the marketplace that maybe others might not have. So we do not feel threatened by it, but we are looking for the opportunities we can create around it. Wilma Burdis: Great. Thank you. Could you dig in a little bit more on some of the distractions that you are seeing in the middle market? Is it equity market volatility? Changing political, even more financial? And can you just talk about are you seeing some of these letting up near term? Just maybe give us a little bit more color. Glenn Williams: Well, as I said, if you look at the two extremes of the middle market that we serve, you have got those with extremely tight budgets. And we do believe that we are seeing a little more economic breathing room in those budgets. And that is the main distraction is, we go into homes and help people find money within their budget to reprioritize and repurpose because almost nobody has had extra money in their budget over the last three or four years in the middle market. So we have to help them reprioritize and move, let go of less important purchases in order to prioritize protecting their family and investing for the future. And we are starting to see some of that cost-of-living pressure ease as wages outstrip the increasing cost of living. That increases their purchasing power. But also some of the other distractions, the uncertainty of everything from tariffs to other governmental policies and economic policies, I think people are starting to get a little more, I do not know, comfortable, but at least used to them. And they are not frozen in their tracks quite as much. And so that is what we are anticipating may give us a little running room on the term side of the business. Glenn Williams: On the investment side, we have been in a strong market for a long time. So we are a little hesitant just to project that market returns are going to continue at the rates they have in the past throughout the year. So we are stepping back a little bit, just to accommodate any kind of market correction that might occur. But as far as the demand for the product other than that, we see that demand continuing. We think we have got the right products in the right place at the right time for the money in motion and the movement. And I would say that the industry is experiencing, we are not unique, the industry is experiencing similar trends. So I think we have got some running room on the ISP side unless the market returns change radically during the year. Wilma Burdis: Thank you. Operator: Thank you. Our next question is from the line of Daniel Basch Bergman with TD Cowen. Please proceed with your question. Daniel Basch Bergman: Good morning. Just maybe following up on the Term Life sales. I think last quarter you mentioned a number of initiatives such as product changes, faster underwriting and issuance, and more salesforce training with the aim of offsetting some of those external pressures in improving the term sales. Just hoping for an update on how those initiatives are progressing and any updated thoughts on maybe how soon we might expect them to have an impact on the sales trajectory? Glenn Williams: Yes, I think all of that, Dan, is tied to the previous discussion. It is a little bit different sales approach when budgets are extremely tight. And what we try to do is change our messaging and our training to help our representatives understand how to navigate that with families. Probably a little different flavor now as we see and anticipate that the purchasing power of middle-income families will improve, we are trying to play into that. We are trying to be an early arrival and be the first to let families know that we see this coming overall, not happening to every family, obviously, but families ought to be looking at their budgets. They will be looking at their incomes and seeing if a little breathing room is emerging at around tax time. We only anticipate that there will probably be some larger tax refunds than people anticipated. What we want to do is equip our reps to have that discussion with families so that that money just does not flow through their budget almost unnoticed, which can happen in anybody's budget. And so now we are talking with our reps and challenging them to be out early, be having this discussion. Do not wait on a client to call and say, hey, I suddenly see room in my budget. Can you come help me? They may never see it. And so we need to be proactive and get out to them. It is very early. And so how to measure the impact of that is still too early to tell. But we are anticipating that will be a positive during the year. So that is a change. And as we message to our reps and train them around this, and message to our clients, we are trying to take all that in consideration. Daniel Basch Bergman: Got it. That is very helpful. And then just on the salesforce, I think growth was flat last year following a period of elevated growth in the past couple of years. I think you guided to 1% growth in 2026 in the prepared remarks. Just any more color on how confident you are in the ability to grow the sales force from the current base, about 150,000 agents? And do you still expect a higher level of growth beyond this year and over time? And as we think about those drivers, do you feel that improved recruiting, the licensing rate, or retention, which of those would be the biggest potential opportunity? Glenn Williams: Yes, we do believe overall, Dan, that there is a much larger market out there that we are addressing. And that means that there is no limit that we can see in sight on our opportunity. So we always get the question because our sales force is so large, and a larger sales force is a little hard to grow percentage-wise. We have been asked, can we grow any larger since we crossed 100,000? And we continue to believe that we can. Now, some years are going to be more positive than others, as we have seen, according to what the conditions around us are. But we believe there is a demand for our opportunity. It is certainly very successful. Our existing reps were more successful last year than they have ever been before. And the financial rewards from the opportunity we offer are very attractive both on a part-time basis to offset the expenses of families. It is a great part-time opportunity, but it is also a great career. We have got a tremendous track record on both fronts. So we think we can continue to grow. Glenn Williams: Obviously, the bigger we get, the more lift that takes. We replace the attrition first. Our attrition rates are very stable. We do not see that those have changed very much, although they do tend to fluctuate a little bit year for year based on previous year's licenses. Normally licenses in the U.S. renew every two years. So we will be renewing this year the 2024 record, seven growth in the sales force in 2024 is coming through as life renewals in 2026. And so that just means we will have to give extra effort to that because it is a larger number. We do not really anticipate the nonrenewal percentage of total sales force to change radically. But we see it, we are aware of it, and we are dealing with it. So, we do think that our opportunity is attractive. We think that we can get that message out there and demonstrate track record. We think that the lack or the more certainty, I do not think things are certain, but I think they are more certain this year in the marketplace as far as economic and governmental policy, less disruption, all of that probably helps us. We think we will get back on the growth track this year. Daniel Basch Bergman: Got it. That is super helpful. Thank you. Operator: Certainly. Our next question is from the line of Jack Matten with BMO Capital Markets. Please proceed with your question. Glenn Williams: Hello, Jack. Jack Matten: Hey, good morning. Just one more on the Term Life and the growth outlook. The cost-of-living pressure is starting to ease. Are you seeing that play out so far this year in any of your sales or recruiting growth metrics? Or is it really more that just the kind of the leading macro indicators are getting better that gives you more confidence in the outlook for this year? Glenn Williams: Yes, it is very early, Jack. Our January results, which were still tough comparisons because we had extraordinary momentum only during the calendar year of 2024, but it was really through January 2025 before we started to see real headwinds slow our momentum down in both distribution building of our sales force and the term business. But we had a strong January, an encouraging January, and I think it is very early, but we do believe there is an opportunity to play into this. And again, we were conservative in our projections because we do not know exactly how long it takes to be able to get some traction around it. So we are being conservative in our approach, but we do believe it is real and we do believe there is opportunity here we can take advantage of. Jack Matten: Got it. That is helpful. Thanks. And then maybe follow-up on the Term Life margin outlook. I think, Tracy, you mentioned 21% as the guide for this year. I think it is a little bit below Primerica, Inc. has been running over the past few years. So just hoping you could unpack some of the moving pieces there. Is there anything around mortality trend assumption that you are seeing, maybe that the DAC and insurance commission run rate expected is a bit higher? I guess just wondering about the moving pieces in the margin outlook there. Tracy Tan: Yeah. Good morning, Jack. So when I look at the Term Life business, I see that it is very stable. When you look at the margin, one thing I will definitely point out is as we see the benefits and claims ratio. The first thing I will point out is that that ratio is overall stable. The one item to consider is that as the insured attained age increases, obviously the reserve aligned with it would typically go a little bit higher. But the net investment income is there to offset some of that time value of money, and our investment income is in another segment. So when you put it back into where the benefit ratio would be, the benefit ratio is actually pretty much stable, no change at all. So that is one thing to just think about is the fact that we do not marry the investment income against the benefit reserve that typically otherwise when combined is really a very stable piece. Tracy Tan: In terms of the DAC, that is to a degree a function of the growth as well. For example, the commission last year, as Glenn has talked about earlier, we had a little bit slower growth on the recruiting, for example. So fourth quarter, our commission dollars that were not put into DAC was very light in fourth quarter. So when you start to see some growth going on, you are going to have a little bit more commissions going in, is one of the things to think about. And then that also is a function of how fast ADP grows. And the faster the ADP growth, the higher the DAC ratio. So some of those are some of the detailed elements to it, but overall, if you put in the net investment income back, it is still relatively stable. And a very sustainable piece of growth because most of the premium is really recurring. So even when we did not have a whole lot of policy growth in the fourth quarter, we still see the ADP growing at a reasonable rate. Hope that helps. Jack Matten: It does. Thank you. Operator: Our next question is from the line of Mark Douglas Hughes with Truist Securities. Please proceed with your questions. Mark Douglas Hughes: Good morning. Glenn Williams: Hello, Glenn. Mark Douglas Hughes: Glenn, any way to judge that substitution effect you have been talking about, some of these shifting demographics between the two groups, people getting ready for retirement, putting money in their ISP accounts? I think you have talked in the past about how the reps kind of go where the opportunity is. And so there is a natural kind of internal shift in addition to those maybe demographic trends. Any sense of what the magnitude of that might be? Again, just people spending their time on ISP rather than Term Life. Glenn Williams: Yes. It is pretty hard to measure, Mark. I think you are right. I think what has momentum, what is succeeding, is attractive, and you see people shifting their attention that direction. And because of the unique dynamic in our business where, as I mentioned before, one of those major segments is often strong when the other is weak, it keeps business diversified. It keeps people looking at both sides. And so we are going through a period right now where obviously the ISP is so strong, it is very attractive. But at the same time, I do not think that is unhealthy. I actually think it is healthy because it smooths out the ups and downs of our overall business, for the company as well as for our representatives. So we are seeing a lot of interest in our ISP business. That gives us some tailwinds. Although that licensing process is much different than life and much more difficult than life, we are seeing more people stepping up to get their license. We are seeing more productivity of those with licenses. You would expect that with that kind of success. Glenn Williams: At the same time, that is a more experienced group of our sales force. And so you really enter the investment business generally after a few years with us, and then as you age and your peer group gets closer to retirement, you tend to service more of them and over time move that direction. But still, we are attracting a tremendous number of young entrepreneurs of the future to our business, and they really drive the other side of our business too, generally a little bit younger, as well as earlier in their evolution as a financial family on their journey. Those that are younger and establishing families, generally, money is a little bit tighter. So they are more likely on the protection side. So it is a very natural movement. It is something we have seen over our fifty years of service as well. We do always remind our sales force that the business that you are not focusing on right now is still an important business, and that is part of the opportunity we have to, when the pendulum swings back toward life insurance, is to pick up some momentum there, which we think it will over time. But giving you specifics of a certain set of numbers how the trend works is a little difficult because of the diversity and age of our sales force. Mark Douglas Hughes: Understood. And Tracy, I am sorry if I missed this, but could you just give an expense outlook for the full year? Tracy Tan: Yes. Good morning, Mark. Our expense outlook for the full year is about 7% to 8% on a full-year basis. And then first quarter typically on a dollar basis is a little bit higher than other quarters because of the compensation vesting of incentive. But on a percentage basis it is still on the lower end of that full-year guidance. Now on the expense side, one thing I will point out is because of our strong capital position and how much we expect our growth potential is during the long run, we are making proactive organic investments. Those investments, some are highlighted by Glenn already on sales training. We are actually already actively deploying very modern technology to enhance a lot of the areas, and we also are further investing in our technology so that we can really help support the productivity for our home office to handle the growth. Think about how much we have grown in securities business. We basically doubled that business in two to three years and the volume has exploded. So we continue to invest in our infrastructure, our ability to handle our clients with the best service levels, and also investing in our support for our clients’ policy handling, claims handling, their transactions on the securities side. We expanded our security product to more than 50-some new products on managed accounts and we obviously moved to a new platform a few years ago. So all of those are investments we are making. So for 2026, we continue to make those investments so that we can support that tremendous growth. We continue to expect securities over the long run and then our growth in term, which we do think when we turn 50 there will be even more momentum that we would be expecting. So we are investing in our business. That drives some of that expense growth. Mark Douglas Hughes: Appreciate that. Thank you. Operator: The next question is from the line of Suneet Kamath with Jefferies. Please proceed with your question. Glenn Williams: Good morning, Suneet. Suneet Kamath: Hey, good morning, Glenn. Good morning, Tracy. Glenn, I wanted to first ask about your money-in-motion comment, which I happen to agree with. But I think there are two things that could become headwinds for what you are describing, and so I just want to pick your brain on them. The first is that a lot of 401(k) companies are now rolling out wealth management businesses to presumably offer to clients the same solutions that your folks do. Then second, and this is probably more of a longer-term risk in my view, but if we do get a lot more usage of in-plan guarantees, you know, automatically in the 401(k) plans, is that something that could negatively impact your sales outlook? Glenn Williams: Thanks, Suneet. That is a great question. I do think that every company in this space is looking at how to take advantage of the opportunities that are emerging. And that flight to guarantees or that movement to guarantees—I am not sure it is flight—as people age is an obvious one. And I do think the 401(k) providers are going to try to do what they can to preserve their business. But the other side of that, again, it is a little bit the AI question. The advantage that we have is that we have deep relationships with our clients, personalized service, often at the kitchen table or across the desk in the Primerica, Inc. office, face to face. And what we see is that is a more powerful lever than the 401(k) provider sending an email and saying, if you have got questions, or even calling and saying we now have wealth management. There is just not that natural relationship there. And so the relationship and the personalized service and the motivation that one human provides to another is really our advantage. And I do not think that changes with 401(k) providers trying to step into that gap. Because that is what they are doing. They are seeing why the money is moving out of 401(k)s, and it is because people want a broader wealth management view or there are guarantees they can get elsewhere that are not in-plan. And so they are going to try to stand in that gap. But I do not think that is going to make a huge negative impact. It will be part of a series of headwinds and tailwinds that we will manage. I think the way we overcome is with our relationships, personalized advice. It has served us well and it continues to overcome all those innovations we see in the marketplace. So we think we can compete on that front and overcome that should it arise. Suneet Kamath: Okay. That is helpful. And then the second one, maybe going the other way, is we are hearing from the annuity writers that there is a lot more competition. And I would think if that continues to develop, it would presumably put the ball more in the court of the distributors, like yourselves. And so I am just wondering, is that an opportunity for you if there is more competition? Do commissions typically change? And could that benefit your financial results at ISP? Glenn Williams: Yeah, I do agree that the competition makes for better product sets. And as we have said before, we keep a fairly narrow shelf of a handful of providers. We do not try to have a distribution relationship with every provider out there. But as innovations are created by companies that we do not represent, they are often adopted by companies that we do represent because we believe we represent the best of the best. And they have done an excellent job at improving their products over the recent years. So I think, absolutely, as that becomes an even bigger part of the overall wealth management business, then companies are going to continue to step up and provide a better product. Usually, we see that in terms of better value for the consumer. Compensation often does not change radically. There is a pretty tight band of compensation among products, a lot of supervision and regulation around that. So I do not think that you are going to see an annuity company suddenly come out with significantly higher compensation that is going to attract everybody over there. I think what they will do is pass those improvements through on client value, and clients will get better guarantees, better flexibility in the products, and so forth. That is where I would expect to see it. Suneet Kamath: Okay. That makes sense. Thanks, Glenn. Glenn Williams: Certainly. Operator: The next questions are from the line of John Bakewell Barnidge with Piper Sandler. Please proceed with your question. Nicole Russell: Good morning, John. John Bakewell Barnidge: Good morning. Thanks for the opportunity. You talked about cost-of-living pressures improving, which is fantastic to see. And then I think you talked about encouragement with January's performance. I know there are some tough comparables. But was the growth rate in January greater than the 2026 guidance assumes across ISP and Term Life? Glenn Williams: Yes. I do not think we are ready to put that out until we get to our quarterly assessment because there are a lot of ways of measuring that. And so it was an encouraging January. And we continue to see momentum, particularly in the ISP business, continue to be strong. But I think we will give you the detail around that at the first quarter report. Thank you. John Bakewell Barnidge: And then maybe on free cash flow conversion—and I know you put out the $4.75—but earnings have been emerging quite strong in the last several quarters. There is some dislocation in the stock. Do you ever opportunistically consider increasing the level of free cash flow conversion during those times? Thank you. Tracy Tan: Yes. Good morning, John. I think on the cash conversion front, we have very consistent performance in terms of converting our cash in a pretty narrow band, and historically we have converted in the recent past around 80%. And so we typically, obviously, make decisions looking at multiple years out. Obviously, the Board is going to be actively involved in any decision to make any changes, but we are confident, John, that we provide superior, on the high end of the conversion and return, when we look at in the peer group. So I think we are going to focus on continued strong, consistent performance. Obviously, any change with the Board's involvement. Operator: Thank you. The next question is a follow-up from the line of Joel Robert Hurwitz with Dowling & Partners. Please proceed with your question. Joel Robert Hurwitz: Hey, thanks for taking the follow-up. Tracy, sort of following up on John's capital. Last quarter, you talked about having plans to draw down excess capital from the life subs. It looked like that may have occurred in the quarter. Can you just elaborate on what you did there? And I guess the expected uses of that capital, right? I think you said your HoldCo liquidity is now over $500 million as of year end. Tracy Tan: Yes, good morning, Joel. Yes, you are absolutely right. We have been actively managing our cash conversion. So for 2025, we had certainly a good amount of planning and activity. We were giving an indication in the third quarter release that we may be stepping up on the conversion from the life side of the companies, and we were able to arrange a loan between our PLIC, our key U.S. life company, with the HoldCo. So we were able to have some excess conversion coming out that helped the HoldCo cash amount, and as I mentioned, we continue to step up our return to our stockholders, and we stepped up our buyback from $4.50 to $4.75, and that is certainly a need to continue to support that. And then we also increased our dividend by 15% on the dividend payout that is coming out that we just announced. So all of those are part of the reason, and more importantly, we are also going to continue for our organic growth as we have mentioned just previously earlier. So all of this management is to make sure that we have a high conversion and contribution to our continued confidence in our business and organic investment for the long-term growth. Joel Robert Hurwitz: Okay, thank you. Operator: Thank you. This now concludes our question-and-answer session and will also conclude today's conference. Thank you for your participation. You may disconnect, and have a wonderful day.
Operator: Greetings, and welcome to the Genesis Energy, L.P. Fourth Quarter 2025 Earnings Conference Call and Webcast. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Dwayne R. Morley, Vice President, Investor Relations. Please go ahead, Dwayne. Good morning, and welcome to the 2025 fourth quarter conference call for Genesis Energy, L.P. Dwayne R. Morley: Genesis Energy, L.P. has three business segments. The offshore pipeline transportation segment is engaged in providing the critical infrastructure to move oil produced from the long life of world class reservoirs in the deepwater Gulf of Mexico to onshore refining centers. The marine transportation segment is engaged in the maritime transportation of primarily refined petroleum products. The onshore transportation and services segment is engaged in the transportation, handling, blending, storage, and supply of energy products, including crude oil and refined products, primarily around refining centers, as well as the processing of sour gas streams to remove sulfur at refining operations. Genesis Energy, L.P.’s operations are primarily located in the Gulf Coast states and the Gulf of Mexico. During this conference call, management may be making forward-looking statements within the meanings of the Securities Act of 1933 and the Securities Exchange Act of 1934. The law provides safe harbor protection to encourage companies to provide forward-looking information. Genesis Energy, L.P. intends to avail itself of those safe harbor provisions and directs you to its most recently filed and future filings with the Securities and Exchange Commission. We also encourage you to visit our website at genesisenergy.com, where a copy of the press release we issued this morning is located. The press release also presents a reconciliation of non-GAAP financial measures to the most comparable GAAP financial measures. At this time, I would like to introduce Grant E. Sims, CEO of Genesis Energy, L.P., who will be joined by Kristen Jesulaitis, Chief Financial Officer, and Chief Legal Officer Ryan Sims, President and Chief Commercial Officer, and Louis Niccol, Chief Accounting Officer. I will now turn the call over to Grant. Grant E. Sims: Thanks, Dwayne, and good morning to everyone. Thanks for listening to the call. As noted in our earnings release this morning, our fourth quarter results came in slightly ahead of our internal expectations, as our offshore pipeline transportation segment saw strong growth driven by steady base volumes, a full quarter of volumes from Shenandoah well above its minimum volume commitment, along with continued ramping volumes from Salamanca. Our marine transportation segment returned to a more normalized level of operating performance as our refinery customers increased runs of heavy crude oil which drove higher volumes in their intermediate black oil available for transport. In addition, the transitory market conditions and supply pressures that impacted our Bluewater fleet last quarter now appear to be behind us. Grant E. Sims: All of which should provide for a constructive outlook for our marine segments as we look ahead. The strategic actions we took in 2025 combined with the strong operating performance from our underlying businesses, new offshore volumes enabled us to exit the year with effectively zero outstanding under our $800,000,000 senior secured revolving credit facility at the end of the year after giving effect to cash on hand. With ample liquidity, and an increasingly clear line of sight ahead of us, the Board made the decision to increase our quarterly common unit distribution to $0.18 per unit, representing a 9.1% increase year over year. Furthermore, just last week, we opportunistically purchased an additional $25,000,000 of our corporate preferred units in a privately negotiated transaction. Taken together, these actions demonstrate our disciplined approach to capital allocation. As we look ahead to 2026, assuming our other businesses perform as expected, the Genesis Energy, L.P. story at this point is largely a deepwater Gulf of Mexico growth story. Grant E. Sims: Based on our ongoing discussions with our offshore producer customers, and the conversations we have with them during their year-end budgeting cycle, we have been provided with lots of information including expected production volumes for 2026 and beyond, along with current and future expected drilling schedules. We were also notified of certain planned and routine turnarounds they have scheduled for 2026, a couple of which will take place at production facilities where we handle the hydrocarbon molecules more than once and that is going to be more financially impactful. While we benefited from no significant turnarounds in 2025, these are absolutely normal and customary and in some cases unfortunately, they can last upwards for 30 to 45 days each. These are their plans. And as I believe everyone can appreciate, we ultimately do not control our customers' operations, nor the precise timing of them drilling, completing, and bringing new high impact wells online. We fully understand the plans and schedules of offshore change. Deepwater drillship schedules change, weather throughout the year changes. Planned turnarounds can be delayed, or extended for a variety of reasons outside our control. What is important though is that despite all of this, and a heavier than normal marine dry docking schedule, which we will go into more detail in 2026, we still reasonably expect to deliver sequential growth in adjusted EBITDA of plus or minus 15% to 20% over our normalized 2025 adjusted EBITDA of $500,000,000 to $510,000,000. We obviously hope to exceed the top end of that range in 2026. And quite frankly, we could easily make a case for such an outcome. To the extent our actual results differ in any significant way, we would simply view that as more of a timing issue with ultimate cash flows just sliding to the right rather than any fundamental degradation in the long-term cash flows expected from the fields contracted to access our offshore infrastructure. Even if certain offshore activity slips to the right, 2027 should be meaningfully stronger than 2026. Based upon our producer customers' current development plans that we have seen, and as a result, the opportunities available to us in 2026 become even more compelling in 2027 and beyond. With that, I will go into a little more detail on each of our business segments. As noted in our earnings release, our offshore pipeline transportation segment delivered another quarter of strong sequential growth, with both segment margin and total volumes increasing across our CHOPS and Poseidon pipelines, rising approximately 19% and 16% respectively versus the third quarter, marking the third consecutive quarter of sequential improvement. In fact, from the first quarter of 2025, segment margin increased by roughly 57% with total volumes across both systems growing approximately 28%. These results were driven by steady volumes from our legacy fields, strong contributions from Shenandoah, and the continued ramp up in volumes from Salamanca. During the quarter, volumes from the Shenandoah FPU remained steady as the facility continued to operate at or near its 100,000 barrel per day target rate from four Phase One wells. At Salamanca, volumes continued to ramp from its first three wells, and we remain encouraged by both reservoir performance and the remaining development plans. An additional well at Salamanca is scheduled for completion in the second quarter with the potential for a fifth well as early as the fourth quarter. Together, these wells are expected to result in total production of 50,000 to 60,000 barrels per day from the Salamanca production facility. Looking ahead, we expect the Monument development, a two-well subsea tieback to Shenandoah, to be completed and flowing through our facilities by late this year, certainly early 2027. Following Monument, a fifth well at Shenandoah is scheduled to be drilled, which could increase total throughput across Shenandoah FPU to as much as 120 KBD with potential upside of an additional 10,000 to 20,000 barrels per day in early 2027. In addition to the five development wells between Salamanca and Shenandoah, we are aware of at least eight additional development or subsea tieback wells at legacy production facilities served exclusively by our pipeline infrastructure that are planned to be drilled over the next 12 to 15 months. Taken together, this activity underscores that producers in the Gulf of Mexico continue to prioritize long-cycle, high-return deepwater developments. We remain actively engaged in commercial discussions around future tieback and development opportunities that could access our offshore systems as projects are sanctioned. Given the competitive economics and long planning cycles associated with these developments, we do not expect near-term commodity price volatility to materially impact offshore development activity in the Gulf. As we look beyond 2026, we would be remiss not to highlight the results of BOEM's most recent lease sale Big Beautiful Gulf One, or BBG-1, which was held on 12/10/2025. The outcome of this sale further reinforces our view, and that of the broader upstream industry, that there remains strong long-term interest in the Central Gulf of Mexico. BBG-1 generated over $300,000,000 in high bids for 181 tracks covering approximately 1,000,000 acres in federal waters, with roughly 65% of the acreage located in the Central Gulf of Mexico. When combined with Lease Sales 259 and 261, which took place in March 2023 respectively, more than 4,400,000 acres have been leased in federal Gulf waters over the past three years, approximately 2,400,000 acres or 53% of the total of which are located in the Central Gulf where our offshore pipeline infrastructure is located and has existing capacity. The breadth of current development activity, the scale of recent lease sales, and the long-cycle nature of deepwater investment all underscore our conviction that the Gulf of Mexico remains a world-class basin with decades and decades of existing inventory. We believe Genesis Energy, L.P. is uniquely positioned as the only truly independent third-party provider of crude oil pipeline logistics in the region, offering producers flow assurance and downstream market optionality along the Gulf Coast. Our differentiated asset footprint, deep customer relationships, and decades of existing and future inventory ahead position us for continued growth and decades and decades of opportunity in this world-class basin. Grant E. Sims: Our marine transportation segment returned to a more normalized level of operating performance during the quarter. Market conditions across both our brown water and blue water fleets stabilized as refinery runs of heavy crudes increased and broader equipment utilization improved. Demand for our inland or brown water fleet recovered as Gulf Coast refiners responded to the widening of light-to-heavy differentials and increased runs of heavy crude oil, which allowed the supply of intermediate black oil needing to be transported to return to more normalized levels. Looking ahead, we remain optimistic that our marine transportation segment could benefit over time from additional volumes produced in the Gulf of Mexico and incremental crude imports into the Gulf Coast, including volumes from Canada, the resumption of exports from Kirkuk, Iraq, and the potential for additional volumes from Venezuela should they all materialize. At a minimum, all of these additional heavy or medium sour volumes showing up on the Gulf Coast should cause heavy-to-sour differentials to continue to widen, providing refiners the incentive to process increasing volumes of heavier crudes. To the extent these additional heavy volumes come to fruition, this should result in additional intermediate refined products volumes that need to be kept heated and moved from one refinery location to another, which should drive demand for our inland heater barges, providing a constructive backdrop for increasing rates as we move through the year and into next year. Recent commentary from Gulf Coast refiners would reaffirm they are in fact starting to see additional heavy sour discounts as additional volumes arrive on the Gulf Coast. To quote from Valero's recent earnings call, looking at differentials not only with Venezuela, but we have had several beneficial factors that have occurred to kind of help move this market weak. After last year with discounts fairly tight, most of these market moves are making differentials increasingly favorable for refiners, with high complexity refiners such as ours pushing to maximize heavy crude processing in the system going forward with better differentials. Meanwhile, conditions in our Bluewater fleet have normalized as incremental capacity that migrated from the West Coast to the Gulf Coast and Mid-Atlantic trade lanes has largely been absorbed by the market. As we noted in our earnings release, 2026 is expected to be a higher maintenance year for our Bluewater fleet with four of our nine offshore vessels scheduled to undergo regulatory dry dockings in the first half of the year. These planned shipyard periods will temporarily reduce vessel availability and may mute the near-term benefit of any improvement in day rates. Importantly, however, we expect these vessels to reenter the market against a more constructive backdrop and be well positioned to recontract at day rates that are consistent with or modestly above their current levels when they exit the shipyard. In addition, the American Phoenix remains under contract through early 2027. Based upon prevailing market rates for comparable assets, we would expect the American Phoenix to recontract at a higher day rate than our current charter when that contract expires. Overall, we remain confident in the long-term fundamentals of the marine transportation sector. With effectively zero net new supply of our classes of Jones Act vessels, and the high cost and long lead times required to construct new equipment, the market remains structurally tight. As demand continues to improve across both our brown and blue water fleets, we expect our marine transportation segment to deliver stable to modestly growing contributions in the years ahead. Grant E. Sims: Our onshore transportation and services segment performed in line with our expectations during the quarter. Throughput volumes continued to increase across both our Texas and Raceland terminals and pipelines as new offshore volumes ramped and moved onshore through our system. Our legacy refinery services business also delivered results largely consistent with our expectations. As we have mentioned in the past, our refinery services business has faced certain structural headwinds over the past several years. Specifically, we have been supply constrained in part because refineries moved to run more light sweet crudes as a result of the shale revolution over the last 10 to 15 years. As shale production is peaking, and/or the gas-to-oil ratios are increasing from the shale plays, and as the heavy sours we mentioned above are returning to the Gulf Coast, we believe we should have the opportunity to make more NaHS, sodium hydrosulfide, at several of our existing facilities in future periods. We, generally speaking, can sell every ton we make, and we look forward to restoring some of our supply flexibilities. As our financial performance continues to strengthen over the coming years, and we generate increasing amounts of free cash flow, we will continue to reduce debt in absolute terms, redeem our high-cost corporate preferred securities, and thoughtfully evaluate future increases in our quarterly distribution to common unitholders over time. Importantly, we will pursue these objectives while maintaining the flexibility to evaluate future organic and inorganic opportunities as they may arise. Finally, I would like to say that the management team and the Board of Directors remain steadfast in our commitment to building long-term value for all of our stakeholders, regardless of where you are in the capital structure. We believe the decisions we are making reflect this commitment and our confidence in Genesis Energy, L.P. moving forward. I would once again like to recognize our entire workforce for their individual efforts and, importantly, unwavering commitment to safe and responsible operation. I am extremely proud to be associated with each and every one of you. I will now turn the call over to the operator for questions. Operator: Thank you. We will now be conducting a question and answer session. Our first question today is coming from Michael Jacob Blum from Wells Fargo. Your line is now live. Michael Jacob Blum: Thanks. Good morning. Grant E. Sims: Good morning, Michael. So I wanted to start with the guidance for 2026. If I simplistically just annualize Q4 2025 EBITDA and compare that to the midpoint of the 2026 guidance, there is a delta there of, call it, $35,000,000 to $40,000,000. So I am wondering if you can just give us a rough ballpark for how much of an EBITDA deduct you are assuming for typical hurricane disruptions, and then the higher-than-typical marine maintenance? Because if I just remove those, you know, and do not even assume volume growth, which the offshore, which I am sure you will have. Just wanted to get a sense of like where the low end of guidance could come. Thanks. Yes. No, I mean, it is a good question. And as we basically try to explain, we think that we are being conservative, especially based upon some of the things that we have been told by our producing customers. But again, yes, we are assuming 10 days’ worth of anticipated downtime for, in essence, treating the third quarter as an 82-day quarter instead of a 92-day quarter for our offshore business. We probably net expect $5,000,000 to $10,000,000 on the segment margin line, if you will, from the heavy dry docking schedule on the marine side. So I think that as I said in the commentary that I just gave that we fully expect and we can make a case that we can comfortably exceed it, but we are the only reason that we are not pulling out a larger number, the primary reason is basically just taking into account that things can happen beyond our control, and try to emphasize to make sure that everybody understands that it is really just a timing of recognition of the future cash flows out of the Gulf of Mexico and has nothing to do with structural issues or subsurface issues. So hopefully it will turn out to be a conservative range that we throw out. Michael Jacob Blum: Great. Appreciate that. And then on capital allocation, really have like a two-part question. First, can you just remind us where you would like to take the leverage ratio and what timeframe you think you will get there? And then as it relates to distribution growth, how do we think about the cadence of increases going forward? Is this something you will be evaluating once a year every fourth quarter? And will the growth in EBITDA, is that a good proxy for how we should think about growth in distribution? Grant E. Sims: Well, I mean, again, on a bank-calculated basis, I think at 12/31 it was 5.12. So as we continue to use our increasing amounts of free cash flow to pay down debt in absolute terms at the same time that we are seeing increases in our calculated LTM EBITDA, I think that in essence debt ratios are going to improve because we are paying down the numerator while at the same time the denominator is increasing. So our long-term target has always been in the neighborhood of four and, again, we have a pretty clear line of sight on it. Michael Jacob Blum: And assuming that Grant E. Sims: everything holds up and the producers do, you know, the quicker they do things the quicker that we will hit those targets. But it is pretty obvious that we can get there. So depending upon, you know, that performance dictates the time schedule under which we get there. Relative to distribution growth, it is something that the Board discusses every quarter. There is no hard and fast program that in essence we can talk about at this point. But I do think that it is clear that the Board is committed, as is the management team, to kind of an all-of-the-above approach. As you, as we said, we were also successful in negotiating a redemption of another tranche, on a negotiated basis, of the outstanding corporate preferred. So, we will evaluate it on a quarterly basis and let the market know how things are going at that point in time. So Operator: Thank you. Next question today is coming from Wade Anthony Suki from Capital One. Your line is now live. Wade Anthony Suki: Thank you, operator, and good morning, everyone. Appreciate you all taking my questions. Just wanted to, it is a question I have probably asked of you guys before, but, you know, repetition is always a good teacher. But wondering if you might be able to sort of revisit how you think about potential opportunities to pick up, let us say, the remaining interests in some of these offshore systems that you have, you know, how that might fit with your longer-term priorities and, of course, appreciate any insight you might have there or, you know, how the counterparties might be looking at it. But, yeah, to the extent you can sort of clarify or revisit that for us, that would be great. Thank you. Well, you know, again, we are not going to comment in one form or another, as you would expect, on the potential for M&A activity or other things. I mean, obviously, you can understand from our enthusiasm that we very much like our existing position. To the extent that, from an ownership position, it would be possible to increase that exposure, that is something that we would be very comfortable with. But as I want to point out, and you mentioned repetition is a good thing, that repetition, we have substantial existing capacity on our two major pipelines, 64% owned and operated Poseidon Pipeline and 64% owned and operated CHOPS Pipeline. And so we are in a very comfortable position and arguably an enviable position that depending upon developments in the right place that we could have substantial increases and see substantial increases in segment margin and basically flowing to the bottom line in terms of incremental EBITDA without spending any capital. So it is a good runway of continued opportunities in the Central Gulf that we think that we have positioned ourselves for. No question. I appreciate that color. Just to switch gears a little bit. I think I know the answer here, but obviously some M&A among a customer or maybe two customers. Just wondering if you could sort of speak to impact expectations. I would expect some maybe acceleration potential, but any kind of longer-term impact you might see from that would be great. Thanks again. Can you repeat it? I am sorry. I did not quite fully understand the question. I apologize. No. I was asking about some of the consolidation we have seen among your customers in the Gulf. Oh. And I think there is soon to be one more possibly. So just wondering what the implication would be for you all longer-term. I imagine positive acceleration and whatnot, but love to hear your thoughts on that. Yeah. No. It is a very good question and I think that, you know, a transaction just closed yesterday, was basically Harbor Energy out of the UK closed on the acquisition of LLOG. LLOG is obviously an extremely important customer of ours. To the best of my knowledge, we actually move 70% of LLOG’s operated production through our pipelines, with most of those coming through our Sygna lateral and then downstream transportation, which is downstream transportation on our 64% owned Poseidon line. It is in the public domain, as Harbor said, that it is their intent to double that production from the asset base that they are acquiring in the LLOG acquisition, to double that between now and 2028. So that is a positive read-through on things. So if anything, we view that as an extreme positive of a significantly large public company acquiring a private company and with the full intent of doubling its production over the next two years, a very good outcome for us especially given our existing relationship with LLOG. Perfect. Thanks so much. Appreciate it. Thank you. Operator: Thank you. Next question today is coming from Elvira Scotto from RBC Capital Markets. Your line is now live. Hey, good morning, everyone. I just wanted to go back to the guidance. And can you maybe provide a little more detail around what specifically are you embedding in off Shenandoah? Then you also mentioned kind of the development of eight additional tieback wells planned at legacy facilities? Like is any of that in your 15% to 20% guidance? I will stop there, then I have some follow ups. Grant E. Sims: Yeah. Grant E. Sims: Yeah. I mean, basically, Elvira, again, yes, based upon what we have been able to ascertain in terms of talking to our producer customers that we are extremely comfortable that we will meet or achieve the 15% to 20% off of the baseline that we talked about. So, and again, we are trying to set expectations to under promise and over deliver on a prospective basis, and to make sure that, to reemphasize, that to the extent that there is any failure to achieve overperformance it really is just a timing issue and not an underlying ultimate value consideration. So that is the approach that we are taking as opposed to formal guidance, it is more of an informal guidance that we could easily construct a case, as I said in the prepared remarks, based upon what we know to significantly exceed that range that we just, we threw out there. Elvira Scotto: Okay, great. And then just going back to the dry docking, I think you said the expectation there is $5,000,000 to $10,000,000 kind of impact to margin. Is there an impact to maintenance CapEx on that? Grant E. Sims: Yes. I think we made reference to it in the earnings release itself. But because of that, yes, we would expect this to be a heavier maintenance capital year than we experienced in 2025. Elvira Scotto: Is there any quantification of the impact that you can provide? Grant E. Sims: I think, generally speaking, that if you looked at a $15,000,000 to $20,000,000 increase that would be within the ballpark. Elvira Scotto: Okay, great. And then just one last question for me. So you mentioned how the refineries are increasing runs of heavier crude and importing more Venezuelan crude. What do you think, how much incremental inland barge utilization could this drive this year? Grant E. Sims: Well, utilization has remained fairly high, which is the necessary condition before rates start going up. So as we anticipate, whether or not we gave a specific example of Valero, but P66 and others have also mentioned it, that as we see more and more of heavies run, whether or not it is Venezuela or incremental Gulf of Mexico medium sours or other imports, Canadian and other things, that total black oil pool or the total supply of intermediate refined products, which we were specifically designed to meet, will go up. And so in an already, in essence, close to 100% if not practically 100% utilization world, we anticipate being able to move prices up, day rates up, as we progress through this year and on into next. Elvira Scotto: Great. Elvira Scotto: Thank you very much. Operator: Thank you. We have reached the end of our question and answer session. I would like to turn the floor over to Grant for any further closing comments. Grant E. Sims: Well, as always, appreciate everybody listening in, and we look forward to delivering more good news as we progress through 2026. So thank you very much. Operator: Thank you. That does conclude today’s teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Good morning and welcome to the Hyatt Fourth Quarter and Full Year 2025 Earnings Call. All participants are in a listen-only mode. After the speakers’ remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Adam Rohman, Senior Vice President, Investor Relations and Global FP&A. Thank you. Please go ahead. Adam Rohman: Thank you, and welcome to Hyatt Hotels Corporation’s fourth quarter 2025 earnings conference call. Joining me on today’s call are Mark Hoplamazian, Hyatt Hotels Corporation’s President and Chief Executive Officer, and Joan Bottarini, Hyatt Hotels Corporation’s Chief Financial Officer. Before we start, I would like to remind everyone that our comments today will include forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our Annual Report on Form 10-Ks, Quarterly Reports on Form 10-Q, and other SEC filings. These risks could cause our actual results to be materially different from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued today, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. In addition, you can find a reconciliation of non-GAAP financial measures referred to in today’s remarks under the Financials section of our Investor Relations website and in this morning’s earnings release. An archive of this call will be available on our website for 90 days. Additionally, we posted an investor presentation on our Investor Relations website this morning containing supplemental information. Please note that unless otherwise stated, references to occupancy, average daily rate, and RevPAR reflect comparable system-wide hotels on a constant currency basis, and closed hotels in Jamaica are excluded from comparable metrics in 2026. Percentage changes disclosed during the call are on a year-over-year basis unless otherwise noted. With that, I will now turn the call over to Mark. Thank you, Adam. Good morning, everyone, and thank you for joining us today. I want to begin by expressing my sincere gratitude for, and pride in, the entire Hyatt Hotels Corporation family. Our teams around the world navigated a dynamic macro environment in 2025. Guided by our purpose, we advanced our evolution to a more brand-focused organization, one that uses sharper brand positioning and deeper insights to go to market in a more meaningful and differentiated way. This approach allows us to serve our guests and customers on more stay occasions and become an even more attractive brand choice for owners. We closed 2025 with momentum, and we believe we are better positioned than ever to create lasting value for our shareholders. Now turning to operating results. This morning, we reported fourth quarter system-wide RevPAR growth of 4%, driven by the continued strength of our luxury brands. Leisure transient RevPAR increased approximately 6% to last year, as our guests continue to prioritize leisure travel. This was especially true across our luxury brands where we saw leisure transient RevPAR grow by 9% with strong growth across the world. Business transient RevPAR declined 1% in the fourth quarter, driven by select service hotels in the United States, while full service hotels delivered low single-digit growth led by hotels in international markets. Group RevPAR increased 3% compared to last year, in line with our expectations and supported by a more favorable calendar in the United States. We continue to see exceptional engagement from our World of Hyatt loyalty members, a key driver of our commercial performance. The World of Hyatt program is consistently recognized in the industry as best in class. We are proud to have been recently recognized as NerdWallet’s best hotel rewards program and The Points Guy’s best hotel elite status in the industry. World of Hyatt continues to grow in both scale and significance. We ended 2025 with over 63,000,000 members, an increase of 19% compared to the end of 2024, and World of Hyatt members accounted for nearly half of total occupied hotel rooms across the world in 2025. As we have sharpened our brand focus, we are seeing loyalty drive not just scale, but higher-value demand, particularly among our most frequent and loyal guests. In 2025, we saw a 13% increase in room nights from members who stayed with us for 50 or more nights over the course of the year. It is clear that the value proposition of our loyalty program resonates with current and prospective members, which we believe makes Hyatt Hotels Corporation very attractive to hotel owners and developers as they look to brands that are growing in value to them. Turning to development. We achieved industry-leading growth for the ninth consecutive year with net rooms growth of 7.3% in 2025. Excluding acquisitions, net rooms growth was 6.7%, a meaningful acceleration from 2024. During the fourth quarter, we surpassed 1,500 open hotels and resorts globally and welcomed several notable openings including the Parquet Cabo del Sol and Andaz One Bangkok. Our newest upper midscale brands are starting to make an impact, marked by the second Hyatt Studios hotel opening along with the debut of our first Hyatt Select hotels. Both brands provide the foundation for our upper midscale expansion in the United States. We also welcomed several Unscripted by Hyatt hotels during the quarter, and we are excited about the opportunity to grow this brand across the world. We ended 2025 with a record development pipeline of approximately 148,000 rooms, up more than 7% compared to the end of 2024. In the United States, we achieved the strongest year of signings in the past five years, with 50% of those signings in markets where Hyatt Hotels Corporation does not currently have a brand presence. Our three new brands, Unscripted by Hyatt, Hyatt Studios, and Hyatt Select, accounted for nearly two-thirds of the signings in the United States, demonstrating the compelling value proposition for owners and developers and the clear opportunity for Hyatt Hotels Corporation to expand into new markets. Outside the United States, we continue to see strong interest in our brands, and we expect Greater China and India to be significant drivers of future growth. In Greater China, we are seeing strong interest across our select service brands, with signings growing by more than 50% compared to 2024. In India, we are seeing great interest in our full service offerings. Our strong pipeline and momentum in upscale and upper midscale brands reinforce our confidence in achieving durable and capital-efficient fee growth well into the future. Now shifting to an update on transactions. On December 30, we sold the remaining 14 hotels in the Playa portfolio to Tortuga Resorts for approximately $2,000,000,000 and entered into long-term management agreements for 13 of those properties. This transaction strengthens our position as a global leader in luxury all-inclusive offerings and is another example of delivering on our commitments and emerging with a value-accretive, asset-light platform. During the quarter, we also completed the sale of three Alua properties in Spain, which we acquired in late 2024. As part of this transaction, we entered into long-term management agreements, and the new owner plans to invest additional capital into those properties. We continue to make progress on the sale of additional owned properties. We currently have three hotels under purchase and sale agreements. We expect to close these transactions in 2026, subject to certain closing conditions, and we will provide further updates as these transactions progress. We are also evaluating opportunities to sell additional assets beyond those assets already under contract. Since announcing our first asset sell-down commitment in 2017, we have realized over $5,700,000,000 of real estate disposition proceeds at an average multiple of 15 times, and we have invested approximately $4,400,000,000 into asset-light platforms at a blended multiple of less than 10 times. We have returned $4,800,000,000 to shareholders over this period of time, proving that we can return significant capital to shareholders while also investing in growth that creates long-term value. We are now fully transformed into an asset-light business and we expect asset-light earnings of 90% in 2026. As I reflect on the year, I am incredibly proud of what we have accomplished. We achieved strong operating results and organic growth, advanced our brand-focused organization, and completed the Playa transaction in a fully asset-light manner. But what stands out most to me is how our purpose has remained our North Star. While Hyatt Hotels Corporation has evolved significantly over the past decade—expanding our portfolio, entering new markets, and transforming our business model—what has never changed is the foundation that drives our decisions and defines our culture. Our purpose is embedded in the way our colleagues care for each other, our guests, and our owners every day around the world. It is what enables us to meet people where they are, to lead with empathy, and to deliver differentiated experiences. Our purpose shapes how we invest in our brands and loyalty program, where we choose to grow, and how we allocate capital. We have been deliberate about investing in the parts of our portfolio where we see the strongest demand, the best owner economics, and the greatest returns. That discipline has strengthened the durability of our fee-based earnings and increased our scale over time. As we look ahead, we believe this positions Hyatt Hotels Corporation as the most responsive, innovative, and ultimately the best-performing hospitality company—one that can continue delivering consistent performance, capital-efficient growth, and long-term value for our shareholders. I would like to close by thanking each of our colleagues around the world who bring our purpose to life and deliver value to our stakeholders every day. I will now turn the call over to Joan Bottarini for the financial results. Joan, over to you. Joan Bottarini: Thanks, Mark, and good morning, everyone. In the fourth quarter, RevPAR exceeded our expectations, increasing 4% compared to last year. As Mark noted, and consistent with the trends we have seen throughout the year, high-end chain scales produced the highest growth. In the United States, RevPAR increased 0.5% compared to last year. Full service RevPAR increased 2%, benefiting from a more favorable calendar, while RevPAR declined for select service hotels, reflecting softer business transient demand. Outside the United States, RevPAR performance remained strong, led by leisure transient travel. Asia Pacific, excluding Greater China, led all regions with RevPAR growth of more than 13%, fueled by international inbound travel. Greater China had the strongest quarter of RevPAR growth for the year, with domestic travel up in the mid-single digits—a positive shift compared to trends we saw earlier in 2025. Europe continued to deliver great results, supported by high-end leisure demand. Our all-inclusive resorts finished an exceptional year, growing net package RevPAR 8.3% compared to 2024, with excellent performance in both the Americas and Europe. Our results reflect sustained trends seen throughout 2025: outperformance in luxury and full service brands, strength in international markets, and growing demand for premium all-inclusive experiences. Turning to our financial results, gross fees in the fourth quarter increased approximately 5% compared to the same period last year to $307,000,000. Gross fees for the full year increased 9%, finishing at $1,198,000,000. Our fee business has become the engine behind Hyatt Hotels Corporation’s earnings model, and this is especially true when it comes to organic fee growth. From 2017 through 2025, organic gross fees have grown by almost 8% on a compounded annual basis, demonstrating the strength of our underlying core fee business. In the fourth quarter, Owned and Leased segment adjusted EBITDA declined by approximately 2% adjusted for both asset sales and the Playa transaction, while Distribution segment adjusted EBITDA declined versus the prior year due to Hurricane Melissa and lower booking volumes from four-star and below hotels. Fourth quarter adjusted EBITDA growth was solid despite headwinds from Hurricane Melissa, and on a full-year basis, we achieved another strong year of adjusted EBITDA growth, increasing over 7% after adjusting for assets sold in 2024 and Playa-owned hotel earnings. As of December 31, we had total liquidity of approximately $2,300,000,000 including $1,500,000,000 of capacity on our revolving credit facility. Adam Rohman: During the quarter, Joan Bottarini: we repaid the notes due in 2026 and issued $400,000,000 of notes due in 2035. We used proceeds from the Playa real estate sale transaction to fully repay the outstanding balance under our $1,700,000,000 delayed draw term loan in accordance with the terms of the agreement. In the fourth quarter, we repurchased $114,000,000 of Class A common stock, and for the full year of 2025, returned approximately $350,000,000 to shareholders through share repurchases and dividends. We ended the year with $678,000,000 remaining under our share repurchase authorization. We remain committed to our investment-grade profile, and our balance sheet is strong. Before I cover our full-year outlook for 2026, I would like to highlight that beginning in 2026, we are updating our definition of adjusted EBITDA and will no longer include Hyatt Hotels Corporation’s pro rata share of owned and leased adjusted EBITDA from unconsolidated joint ventures. We believe this change not only aligns our definition with our peers, it reflects our strategy and evolution of our business. To help you with modeling our outlook for 2026, we have provided bridges from 2025 reported results to our 2026 outlook on pages 18 and 19 in the investor presentation published this morning. As we have turned the calendar to 2026, we are encouraged by full-year forward booking trends. Group pace for full service hotels in the United States is up in the mid-single digits for this year and is expected to benefit from large-scale events such as the World Cup. We continue to hear positive feedback from our group and corporate customers about their intent to travel this year, particularly for customer-facing travel. Pace for our all-inclusive resorts in the Americas is up over 9% in the first quarter, reflecting the continued strength of leisure travel. We expect full-year system-wide RevPAR growth between 1% to 3%, and we anticipate trends in 2026 will be similar to 2025. This includes higher growth in international markets compared to the United States, and luxury to be the strongest chain scale. In the United States, we expect full-year RevPAR growth between 1% to 2%, led by our full service hotels. We expect net rooms growth of 6% to 7% with continued momentum behind our new brands, driving another year of strong organic growth. Gross fees are expected to grow between 8% to 11% in the range of $1,295,000,000 to $1,335,000,000. Our outlook reflects strong contribution from our core business and incremental fees from the Playa Hotels, along with the impact of temporarily closed hotels in Jamaica and moderate headwinds from properties in Mexico. Adjusted EBITDA is expected to grow at a very strong 13% to 17% when adjusting for the removal of pro rata JV EBITDA and asset sales, in the range of $1,155,000,000 to $1,205,000,000. This reflects strong fee growth and a net positive benefit from the extended co-branded credit card terms. Our outlook assumes continued pressure in the Distribution segment, which we expect will decline by approximately $10,000,000 compared to 2025. Adjusted free cash flow is expected to increase 20% to 30% in the range of $580,000,000 to $630,000,000 and reflects a conversion of adjusted EBITDA to adjusted free cash flow of at least 50%. Finally, we expect to return between $325,000,000 and $375,000,000 of capital to shareholders through share repurchases and dividends. For the first quarter of 2026, we expect global RevPAR growth around the midpoint of our full-year range, with international markets growing at a higher rate than hotels in the United States. Gross fees could grow in the mid-single digit range, and adjusted EBITDA could grow in the low-single digit range compared to what we reported in 2025 after removing pro rata JV EBITDA. As a reminder, we are lapping a very strong 2025, and expect approximately half of the impact from Hurricane Melissa to our fee business and Distribution segment in the first quarter. To close, our 2025 results reflect the strength of our asset-light business model, the power of our brands, and the disciplined execution of our strategy. As we look ahead, we expect our competitive advantage will continue to expand, fueled by the attractiveness of our network and the opportunities to grow across geographies and chain scales. We enter 2026 with confidence, supported by the best team in the business and a clear focus on driving meaningful value for our owners, guests, and shareholders. This concludes our prepared remarks, and we are now happy to take your questions. In the interest of time, we ask that you please limit yourself to one question. Our first question comes from Dan Pitzer from JPMorgan. Dan Pitzer: Hey, good morning, everyone, and thank you for taking my questions. Mark, I wanted to touch on the net unit growth at the 6% to 7% that you gave. I think it was last quarter you talked about maybe being more glass half full here. I wanted to check if that is still the case. And then maybe you can talk about the drivers for this outlook—its conversion, midscale—and then along with that, your appetite for larger partnership deals within this guidance? Thanks. Mark Hoplamazian: Yes, glass is still half full. I feel really good about the momentum that we have seen. We had a really significant signing quarter in the fourth quarter and have tremendous momentum in the newly launched brands. So in Hyatt Select’s case, for example, we went from having nine hotels to 32 in the pipeline. And of those, we have some new construction, by the way, in the Hyatt Select brands. Some are prototypical new construction, but most of them are conversions. So we have three under construction, but we have 27 under design. Many of those will be conversions. Studios went from five under construction to 10, but we also have 31 under design, and so they will advance and get shovels in the ground soon. And Unscripted went from nothing to having 0 open and eight in the pipeline right now—three under design, three under construction—so of the eight, six are advancing quickly. And then YourCove, we have 72 hotels open by the end of the year and 93 in the pipeline. So the entirety of the upper midscale side of the equation has tremendous positive momentum, and I am particularly encouraged to see the advancement of so many projects through design into construction for Studios. So that is one piece of the equation. The other piece of the equation is that our mix, as you know, is about 70% luxury and upper upscale in existing open hotels. It is also true that that is the mix of our pipeline. Seventy percent is luxury and upper upscale, and 70% of the total pipeline is outside the U.S. where we are seeing less sensitivity to new builds. So we are opening new projects in China, throughout Southeast Asia, in Europe, and even in the Americas. We opened the Parquet at Los Cabos just this past quarter, and we have other openings in Mexico that are not the all-inclusive resort side of the business, but EP hotels coming this year. So I feel like there is great momentum and that the positioning that we have got—yes, financing is still difficult in the U.S. Yes, construction costs have gone up, but frankly, that has already been taken into account in large measure. You might have seen some recent articles about housing starts actually lagging and housing construction actually lagging. I think that might change, but right now it takes a little bit of pressure off of construction materials costs and factor costs themselves. And we are working really hard to uncover other sources of financing to help our developers who are under design get under construction. So we have got so many levers that are all working right now in a positive manner that I feel really good about the overall growth profile organically looking forward. In terms of portfolio deals, which was your last question—yes, we continue to look at portfolio deals. We are very focused on making sure that they are real, meaning we are not happy to just affiliate. We want to have a deeper relationship and make sure that we are under contract in a way that is providing the owners the best value proposition, which is really to be plugged into our systems and under a franchise arrangement or under a management arrangement. So we have got several discussions underway right now on portfolio transactions. Some are quite large, and they would be full-blown management or franchise agreements. Others are smaller. We are still working hard to fill in Europe on the full service side. It feels like a refrain every quarter, but it remains a focus of ours. I feel really good about where we stand. Dan Pitzer: I appreciate all the detail. Thanks so much. Operator: Our next question comes from Benjamin Nicolas Chaiken from Mizuho. Please go ahead. Your line is open. Benjamin Nicolas Chaiken: Hey, good morning, and thanks for taking my question. Mark, at risk of getting too technical, for AI travel, how do you envision the ranking system working as consumers search for hotels? To the extent you have a view, do you think this will be a traditional kind of CPC auction model where traffic goes to the highest bidder, or do you have a sense that order will be determined purely on the relevancy of the search? Obviously, it is early, but what would be your opinion on how this plays out? Thanks. Mark Hoplamazian: It is interesting. I think the answer is we will see. I actually do not know yet. What I would say is we began last year building an intent-based search natively into our own digital channels because we recognized early that guests actually wanted to search in prose as opposed to city, state, and availability-date framework. It is very much language-based, and that has been live on hyatt.com for some time. Secondly, we are one of the very few hotel companies that has already launched an app live on ChatGPT, and we are learning a lot just watching and learning from how people are actually using that app in relation to search. We are studying it. What I would say is that our architecture—so a little bit of history—we have been at this, AI enablement, for two full years. Starting in January 2024, I actually chaired the effort. We put together a steering committee, we set up our infrastructure and built it, we set up governance, we set up our control environment, and we identified use cases, four of which have already been executed as large-scale agentic platforms. We are moving forward on a number of different initiatives at the same time. With respect to search specifically, we have been working with OpenAI for months, which is why we have advanced to getting an app up and running with them so quickly. Of course, everybody in the world is at the table with Google and others. You can assume that all suppliers are engaged with all providers of LLM-based platforms. I personally think that the natural language search capability is going to grow in popularity, and we have longitudinal data over a couple of quarters which clearly demonstrate that the booking conversion rate and the total revenue being generated through the native intent-based search capabilities that we built into hyatt.com are having a positive impact. We are seeing higher conversions, higher revenues per booking, and longer length of stay. We are seeing the evolution of search translate into value. It is hard to extrapolate that to an app within ChatGPT, although if you access that app, you will see that there is a live link to hyatt.com so you can complete your booking on hyatt.com because ChatGPT has never indicated that they are prepared to be a merchant of record, and you cannot complete the reservation in that environment. That is fine with us because it brings us into hyatt.com. If I had to guess, I would say there is a more than 50% chance it will be attribute-based and intent-based as opposed to strict value. I would also say that we are cognizant that both will have some place in the ecosystem, and we are prepared for both. This is something that we have been working very intensively on for a long time, and I thought you would benefit from a little bit more context. Benjamin Nicolas Chaiken: Very helpful. Thank you. Operator: Our next question comes from Shaun Clisby Kelley from Bank of America. Please go ahead. Your line is open. Good morning, everyone. Mark, at risk of going even further down the rabbit hole, I think that AI and generative AI is clearly the topic across a lot of different sectors right now. Can you talk a little bit more about your actual relationship with OpenAI or ChatGPT? What do you get from that in terms of your ability to see behavior? What do you own versus what do they own in that relationship? How do you monetize it, or how is that different than traditional SEO-based, open browser search? How is this fundamentally different when you see what people are doing on the app? Mark Hoplamazian: I am trying to think about how to best order my answer. First of all, you are asking specifically about OpenAI, so let me address that. Then let me expand, because OpenAI is just one of the LLMs that we are using for our agentic platforms. We have in-licensed others—Microsoft, Google, Anthropic, and OpenAI—for use in different agentic platforms that we have already built and that are live in production at the moment. The way it basically works is the infrastructure that we have built is all private cloud-based. You in-license an LLM, and that LLM is in your environment, and you are paying a license fee to whomever provided it. But that is the LLM that is used that we then apply our own training to. We train that model to be ours, and it remains ours within our environment in a protected way. The reason why you use different LLMs is because different LLMs have different attributes, both in terms of how they have been trained, but also their trainability. We have, for example, an agentic platform for our group sales force, and it has allowed them to value every piece of business. A few years ago, I think I may have mentioned this on a prior call, we responded to over one and a half million RFPs, and we wanted to automate a lot of what we are doing. Now we have the ability to value every single piece of business that comes in, rank-order them in terms of desirability from a total revenue perspective and profitability flow-through perspective, but also take into account our overall relationship with the party that is requesting space for a meeting. If it is a top-five customer but a relatively small meeting, it gets prioritized because we want to maintain greater share with the biggest and most important customers to us. What that has allowed is for us to grow group market share every month since we launched this. We are realizing higher revenue per group booking and we picked up almost 20% productivity for the group sales force folks at the hotel level. That is a day a week, if you can imagine how significant that is. That is just one of several examples. I am not going to go through all of them. Among other things, there are some competitively sensitive ones that I am not interested in sharing. With respect to the app, what is going to end up happening is you will have several agentic interfaces. We have fully thought through agent-to-agent booking, where you end up with individual travelers or even corporate travel managers or meeting planners that have their own agents, and being able to have agents on our side that interface and can complete reservations without any intervention whatsoever. We are prepared for that. We already built the capability to do it, and that is what we are advancing at this point. We are deliberate about which LLMs we use. We are going to work with everybody, and I think the advancements have yet to come. We are just seeing the beginnings of this on the agentic side, and Google is probably the one that is continuing to really focus their time and attention on this, and yet they have yet to really disclose the full suite of options that they will have. We are paying close attention to that and are in discussions with them every day. All of what I just described is revenue-focused. We have also implemented some agent platforms that are very much efficiency-focused, and both are in play right now for us. Shaun Clisby Kelley: And maybe just as a very short follow-up, you had a very strong G&A program this year to keep costs under control. Are some of the efficiency gains that you are seeing here directly related to some of these AI initiatives? The group sales force comment you made does seem really tangible. Are we seeing that directly, or is that a little aggressive to connect those two dots? Mark Hoplamazian: No. It is not aggressive. Some of the things that you are seeing in G&A are enabled by automation. We have already deployed a number of things that allow us to do better. It is not just about saving cost, by the way. It is about elevating the quality, robustness, and fidelity of the data and the analytics and the insights that can be derived from the data. It is about being better, not just being more efficient. Secondly, there are a whole bunch of things that we have already realized through automation—mostly machine-learning applications as opposed to true agentic AI, although some through agentic AI too—in our call center operations, for example, which have already had a significant impact in our cost structures with respect to our hotel services, which do not show up in our G&A. We spend hundreds of millions of dollars every year supporting our hotels, and we have freed up capacity within those funds to be able to invest further in AI enablement, automation, and machine learning. That is exactly what we are doing. You are not going to see that in G&A, but it is a significant unlock for additional value creation within our chain services environment. Operator: Our next question comes from Richard J. Clarke from Bernstein. Please go ahead. Your line is open. Richard J. Clarke: Thanks for taking my question and for bringing it a bit more back to the Brazil. In 2024, you were able to guide to a 54% conversion of EBITDA into free cash flow and then an 89% conversion of free cash flow into capital return. Those are worse for 2026 than they were for 2024, despite you being more asset light. Help us bridge why that has dropped down and also the disconnect on RevPAR between your commentary of mid-single digit growth, positive on all segments, and a low to midpoint of 1% to 2%. Is there anything in there like refurbishments that are going to weigh RevPAR to get you down to that level? Joan Bottarini: Richard, let me take these one at a time. The cash flow commentary that you provided—we expect in 2026 to be back to those levels of conversions, which is low to mid-fifties. If you look at the percentages that I described in my prepared remarks, we are absolutely back there. We also have opportunity above and beyond that. We are looking to have some delevering over the next couple of years to get us back into our investment-grade ratios. That will take some interest expense out of the equation, and there is obviously opportunity because of our asset-light position now and where we expect to grow, including the contribution from the credit card into 2026 and into 2027 as we previously described. On RevPAR, we provided a bridge so that you could see very clearly how we anticipate RevPAR to grow. The top-line expectations that we provided in the outlook is 8% to 11%. If you look at the contribution of Playa and the impact of the restructuring of the credit card earnings into our co-brand earnings into our results, we end up with a midpoint of core fee growth that is exceptionally strong. It is 7.5% at the midpoint. We also provided in the materials that we distributed this morning that we have had a core growth in our fees since 2017 on a compounded basis of almost 8%. We are exceptionally proud of how our core growth in fees has been growing and we expect will continue to grow. We wanted to make sure that highlight was well understood, which is why we provided the breakdowns that we have. I hope that answers your question. Richard J. Clarke: One final part. On the capital returns at the $350 million midpoint, am I able to understand that it is because you will be deleveraging this year, and so hence some of the free cash flow goes to deleveraging rather than capital return? Joan Bottarini: As we sit here at this point in the year, our capital allocation strategy has not changed. We expect to invest in growth for the platform and return excess cash to shareholders as appropriate, and of course retain our investment-grade profile. As we sit here now, we think that the healthy start to the year—and as you have seen us do time and again for the past decade—we have returned capital to shareholders when there is excess cash. I would point to when we had the signing bonus in 2025, we did what we said we were going to do, which was return that directly to shareholders as excess cash. That will be how we proceed with this year as well. Richard J. Clarke: Understood. Thank you. Operator: Our next question comes from Brandt Montour from Barclays. Please go ahead. Your line is open. Brandt Montour: Good morning, everybody. Thanks for taking my question. The industry has largely cited a better December than expected, and that was the best month of the quarter for most folks. You did a really impressive 4% globally for the fourth quarter overall. If I look at the first quarter guidance, you are pointing to the midpoint of your full-year guidance, so you are looking for, let us say, 2% in the first quarter after doing 4% in the fourth quarter. With the context that one of your larger peers yesterday called out a real-time firming within business transient—they are seeing some first-quarter pickup, essentially December and the first quarter—are you seeing that? Is there anything else in the first quarter that we should think about quarter-over-quarter in terms of comparisons? Joan Bottarini: Brandt, why we ended up at that midpoint of the range is that we are seeing a continuation of trends. We are absolutely seeing that package RevPAR is very strong in the first quarter, so leisure transient is as we described. January has come in a little bit better than our range, at the top end of our range. With respect to the breakdown of that, BT has improved slightly, still a little bit flat in January. It has been an interesting comparison because, of course, last year we had the inauguration. As we look at the quarter and we consider the conversations that we are having with our big customers, we are absolutely hearing that they are still intending to travel. It is just that as you look at the booking windows, BT remains the shortest. We are about flattish in January. The overall for January is at the high end of our range, and that package RevPAR is really strong, which is a great sign for leisure. Mark Hoplamazian: There are two things that I would say are true. First, do not forget we are lapping inauguration last year, so that has some impact. Excluding Washington, our U.S. BT would have been better, because U.S. BT overall was down. It would have been better by a significant measure because of the comparison in D.C. The second thing I would say is that our pace, such as it is—it is short term—is positive in both February and March. Even though the total revenues that are booked right now are not huge proportions of total BT expected revenues, they are up in both cases above the top end of our RevPAR range for the year. So BT looks like it is going to be firming for the remainder of the first quarter. Leisure, as Joan pointed out, is very strong, especially at our all-inclusive resorts with pace up around 10%. We are looking at a situation where, as much as we can tell at this point, it looks like we have more positive momentum on the BT front in the near term at least. Anything beyond two months out is not really relevant because the booking window is so short. We are also going to be lapping Liberation Day. We will see what impact that has in terms of the comparisons when we hit April. Brandt Montour: Thanks, everyone. I will leave it at one. Operator: Next question comes from Smedes Rose from Citi. Smedes Rose: Hi. Thank you. I wanted to ask a little more on your decision to no longer include EBITDA from nonconsolidated joint ventures in your definition. I know you said part of it aligns with peers, but it also, I think you said, reflects strategy and evolution. I assume these are minority interests that you hold. Would it make strategic sense to go to your partners and try to get bought out over time as a way to get more simplicity in your overall model? I guess the benefit of these nonconsolidated JVs will just come to you through the EPS line, which I think most people focus less on relative to peers because for lots of reasons it is very difficult to model just getting to an EBITDA number. Could you talk about that decision a little more? Mark Hoplamazian: A good question is one for which I have an answer. A great question is one in which I get an idea thrown at me that we are actually already implementing. Thank you. In 2017, when we started going down the path of the program to sell down more methodically the asset base, we concurrently really shifted our strategy. Up until then, we were actively using real capital. We had allocated $200,000,000 back in 2015, 2016, and 2017 to fund JV interests to help propel getting Hyatt Centric open in great locations with great partners. Those investments turned out to be good investments. Many of them, other than a couple, have already been monetized. The same was true for a few Hyatt Place properties in key locations like Austin and Nashville. We have used capital through JVs to help propel and accelerate growth for individual brands. We will find other opportunities to do that, but it is not a proactive strategy that we are pursuing. We are actually pursuing what you described, which is looking at monetization of all of our JVs over time. As you say, in some cases, we have the ability to actually control an exit. In other cases, we have bought out partners so that we can control the hotel and then be able to pursue a sale. There are several examples of that where those owned hotels are currently in our portfolio—JV partners have been bought out. Finally, we have one public situation, which is Juniper. I think the market cap of our holdings is somewhere in the $240,000,000 to $250,000,000 range, which is a staggering return because we only put in maybe $40,000,000 into that investment to begin with. That is after a significant decline in the Indian market. We believe that value will recover because performance in India continues to go from strength to strength, and we will look to monetize that over time. Your suggestion is accepted. The mandate is set, and we are going to work. Joan Bottarini: I would just add that similar to the program for asset sales, we have retained management and franchise contracts on every single transaction, and this portfolio is also of a very high quality. We have high-quality partners. As we consider all of the future actions we might take that Mark laid out, we would retain management and franchise contracts on all of these. Smedes Rose: That is helpful. Thank you. Can I just ask a quick follow-up separately? You mentioned the impact of Hurricane Melissa. It is in your numbers. Do you have any business interruption insurance claims, or is there anything that might offset that? Joan Bottarini: Yes, we sure do, Smedes. As you can imagine, in these parts of the world, this is a risk that we are faced with. As owners, while we were owning the Playa Hotels, and our owners also have good insurance in this location. We have not included that in the outlook, if that was your next question. We are not sure when those proceeds will come in. We will keep you posted. Smedes Rose: But that impact could be modified somewhat by insurance? I know the timing is always difficult, and the amount is always difficult. Mark Hoplamazian: It will be, but the amount and timing is what is still under discussion. Smedes Rose: Thank you. I appreciate it. Operator: Our next question comes from Steven Pizzella from Deutsche Bank. Please go ahead. Your line is open. Good morning, everyone, and thank you for taking my question. Mark, I wanted to ask about how you think about the ALG Vacations benefit to the business today—whether that is something you would consider selling outright to a partner similar to UVC; you can manage the business. I am more curious broadly about how you think about the benefits to the broader business. Is it an acquisition tool for new all-inclusive resorts because you can tell owners you will drive people to your destination? Is it just that integral to the existing portfolio that you like maintaining the control? Mark Hoplamazian: The answer is yes and yes. Let me give you some data first. The HIC portfolio has outperformed the overall market every year since we have owned ALG, and part of the reason that is true is because of ALGV’s capabilities. I think that plus UVC members, who are the most dedicated and loyal, are driving outperformance for our HIC hotels. Finally, World of Hyatt is growing significantly across our all-inclusive resorts in terms of penetration. It is up 290 basis points year over year in terms of penetration, and I think we have a lot more room to go. Over time, you will see World of Hyatt also be a major contributor. Between those three avenues, which are wholly owned, we have real ability to drive business where and when we need it. The underlying business itself is a profitable and really good distribution platform. For context, HIC represented about 30% of ALGV’s total hotel revenue in 2025, and ALGV represented about 16% of HIC’s total rooms revenue in 2025. It is a channel that represents fully 16% of our total net package RevPAR. Our own portfolio represents about 30% of ALGV total volume. So the answer is yes, it is extremely helpful in new property acquisition. Yes, it is extremely helpful and vertically integrated into how we sell currently. The other major benefit is that we get tremendous visibility into lift. We represent something like 13% of all the plane lifts in Cancun Airport, the largest market share of anybody, and we are similarly number one in Punta Cana. We have an incredible relationship. We buy hundreds of millions of dollars of airline tickets every year from all the major airlines, and we are plugged in in a way that gives us great visibility to route planning and to flow. To your question—yes, my answer is we are always open and always evaluating potential strategic alternatives for ALGV, but there are certain conditions. One, we have to maintain the strategic attributes that I just described. Two, it really needs to be something that would be an enhancement of their business model, not just a financial transaction, because there are many players, you can imagine, that would bring different dimensions to ALGV’s business, whether that be geographic expansion or product type expansion. Finally, ALGV has for the last two straight years been working on AI enablement, and we believe that they have made some great advances. We have a lot more to do this year, but I think we are going to end up seeing some real opportunities there to improve the internal economics of the business itself, but also improve the market positioning of ALGV. There is opportunity to do better with what we have, and yes, we are open to strategic alternatives meeting those conditions that I just mentioned. Joan Bottarini: Maybe, Steve, I will just add with respect to the guidance that I provided in my prepared remarks. I mentioned that there would be about a $10,000,000 headwind for 2026 related to the business, and that is in part because of the impact of Jamaica and in part because of what we are experiencing with the four-star and below demand. In addition to that $10,000,000 for the year, we expect on a net basis that full amount to be recognized in the first quarter because we are lapping such a strong quarter relative to 2025. As you look at the rest of the year, we moderated post-Liberation Day, so Q2 and Q3 may be a little bit down, with an upside in Q4. That is how you can think about it across the year, which we think would be helpful because I think there have been some questions about how to model the business. Mark Hoplamazian: We are not running the company for the first quarter of this year. This Jamaica impact is a 2026 issue. We have plans with the owner, Tortuga, and the other owners in Jamaica—it is primarily Tortuga. They have a fantastic insurance program, as we had. They will have the money. I met with the Minister of Tourism two weeks ago in Spain, and they have assured—and we know—that airports are open, roads are open, the potable water supply is restored, the grid is restored. They did this in record time—just remarkable. In addition to that, the government is taking action to facilitate getting building products brought in without undue tariffs and taxes, and labor. They are really supporting. The government is backing up the truck to make sure that all of the reconstruction can be done in the most cost-efficient and fastest way possible. So yes, we are going to take a hit in 2026. We have been very explicit about what that is. The real point is what does that position us for in 2027? We are going to have fully refreshed, newly rebuilt and renovated and upgraded hotels, and Jamaica is going to have a very strong year because the government is going to make sure it does. There are too many jobs dependent on this industry for the government not to throw everything they have at this for 2027. 2026 is what it is. It is not a persistent issue. It is not a fundamental structural issue. It is a point in time. 2027 has the opportunity for us to far exceed what our own underwriting was out of those resorts when we did the deal and sold the properties. I am excited about the prospects for Jamaica. I am excited about the financial prospects for those properties as we head into 2027. If you are here to buy the stock for what we are going to do in the first quarter, you probably should not. That is a trading question, and I am not going to engage in trading questions. This is about an investment. The profile sets up beautifully for a great 2027. Steven Pizzella: That is very helpful. Thank you. Operator: Our next question comes from Lizzie Dove from Goldman Sachs. Please go ahead. Your line is open. Lizzie Dove: I want to go back to rooms growth. You mentioned earlier, to Dan’s question, about being open to portfolio deals. Just to confirm, is your assumption then that the 6% to 7% would not necessarily be all organic? You also mentioned some of the newer brands where you have traction—Hyatt Select, etc. How big do you think those can be over time as a contributor? Mark Hoplamazian: Thanks. We believe that the 6% to 7% is the organic growth number, just to be clear. The fact that we have brands that are designed for conversion is taken into account. Portfolio deals are different, though. When we are building Hyatt Select’s pipeline, which has expanded dramatically, and when we are building the Unscripted pipeline, that is one-by-one hotel. Sometimes we do mini portfolios. We brought Wink Hotels in Vietnam—six hotels that joined Unscripted in December. That is a mini portfolio deal, but it is really treated like a regular-way development deal. Our organic growth includes the brand portfolio that we currently have, which includes conversion brands. You can expect that is how we think about that. The portfolio deals that I am talking about are larger and have more infrastructure associated with them. These are management platforms, either because of geography or type of hotel, where we would do a deal, bring on a larger number of hotels either under its own brand or to be included under one of our collection brands or to be rebranded. We would also bring on capabilities and people who are engaged if it is in a geography in which we have relatively modest representation, which is exactly the kinds of deals we should be doing. In order to grow our reach and our points of service to all of our guests and how we care for our guests, we end up focusing on the places where we do not have representation. One of us mentioned that 50% of the signings were in new markets. That shows the strategy in the data as well. Thank you for that, Lizzie. I want to thank all of you for your time this morning. As you have heard throughout today’s call, we are really proud of what we have accomplished. We are really proud of the Hyatt Hotels Corporation family, and we are really excited about the momentum that we have in the business. The fee-based aspect of our business is going from strength to strength. I think there has only been one year in the past ten years where we have not led the industry in RevPAR growth. I would focus everyone’s attention on the fact that yes, we have done a lot of M&A over this period of time. Yes, as the headlines have continued to point out, there are some moving pieces. We have been very explicit about what they are. We provided bridges. We provided all the information to simplify so that people can understand what we have done and where we are headed. But do not mistake that significant value growth through inorganic activity. Do not let that distract you from the fact that the core business is extremely strong. Our cash flow conversions are going up. Our returns to shareholders will continue to go up, and our ability to delever and open up more capacity in the future—or relever and return more to shareholders—is before us. Stay tuned. We appreciate your continued interest in Hyatt Hotels Corporation, and we certainly look forward to welcoming you into our hotels. For any of you who are not members of World of Hyatt, please join. It is a phenomenal program, and you can read about it on any blog. People love this program. Do not take my word for it—just go read about it. Thank you, and have a great day ahead. Operator: This concludes today’s conference call. Thank you for participating, and have a wonderful day. You may all disconnect.
Operator: Good day, and welcome to the Trinity Industries, Inc. Fourth Quarter and Full Year Ended December 31, 2025 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then 0 on your telephone keypad. After today's presentation, to withdraw your question, please press star then 2. Please note this event is being recorded. Before we get started, let me remind you that today's conference call contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and includes statements as to estimates, expectations, intentions, and predictions of future financial performance. Statements that are not historical facts are forward-looking. Participants are directed to Trinity Industries, Inc.’s Form 10-K and other SEC filings for a description of certain of the business issues and risks, a change in any of which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. I would now like to turn the conference over to Leigh Anne Mann, Vice President of Investor Relations. Please go ahead. Leigh Anne Mann: Thank you, Operator. Good morning, everyone. We appreciate you joining us for the company's fourth quarter and full year 2025 financial results conference call. Our prepared remarks will include comments from E. Jean Savage, Trinity Industries, Inc.’s Chief Executive Officer and President, and Eric R. Marchetto, the company's Chief Financial Officer. We will hold a Q&A session following the prepared remarks from our leaders. During the call today, we will reference certain non-GAAP financial metrics. The reconciliations of the non-GAAP metrics to comparable GAAP measures are provided at the appendix of the quarterly investor slides and are accessible on our Investor Relations website at www.trin.net. These slides are under the Events and Presentations portion along with the fourth quarter earnings conference call event link. A replay of today's call will be available after 10:30 a.m. Eastern Time through midnight on 02/19/2026. Replay information is available under the Events and Presentations page on our Investor Relations website. It is now my pleasure to turn the call over to E. Jean Savage. E. Jean Savage: Thank you, Leigh Anne, and good morning, everyone. Our 2025 results demonstrate the durability of Trinity Industries, Inc.’s business model and the effectiveness of our strategy across the cycle. We are intentionally structured to generate resilient earnings, strong cash flow, and attractive returns in a wide range of market conditions, and this year's performance reinforces that positioning. For the full year, we delivered earnings per share of $3.14, representing a 73% year-over-year increase, and achieved an adjusted return on equity of 24.4%, up 67% from the prior year. These results reflect the strength of our leasing platform, disciplined execution in the secondary market, and resilient manufacturing performance in a low-volume environment, and a significant year-end transaction that not only enhanced earnings, but also highlighted the substantial embedded value of the railcar assets on our balance sheet. Looking ahead to 2026, we are introducing an EPS guidance range of $1.85 to $2.10. Our guidance reflects confidence in the durability of our earnings and the visibility of our leasing cash flow. Lease rates continued to trend higher, supported by healthy demand, even as the pace of growth moderates in certain railcar categories. The buying and selling of railcars is a key value driver of Trinity Industries, Inc.’s business model. We expect industry deliveries of approximately 25,000 railcars in 2026, well below replacement levels but reflective of current industry backlogs. Importantly, despite lower delivery volumes, we expect solid operating margins driven by disciplined execution and the realization of the cost actions we have implemented. Eric will walk through our expectations for 2026 in more detail shortly. I will begin with a brief market overview followed by a closer look at our fourth quarter and full year performance. The North American railcar fleet continued to rationalize in 2025 with retirements exceeding new deliveries, resulting in a net fleet contraction. In 2025, approximately 31,000 railcars were delivered, while more than 38,000 older cars were retired. At the same time, rail network fluidity has shown meaningful and sustained improvements. As efficiency has improved, railcars in storage rose above 21% for the first time since 2021, reflecting faster cycle times and the normalization of carload demand. While our 2026 delivery expectations are muted, we are optimistic about the pickup we have seen in inquiry levels and orders in the fourth quarter. We remain disciplined in our order intake while maintaining readiness to respond as demand strengthens. In 2026, agriculture, energy, and nonresidential construction end markets are showing strength. Headwinds remain in key consumer and chemical markets, like automobiles and chlor-alkali. I will now highlight segment performance for the quarter, beginning with the Railcar Leasing and Services segment, which includes leasing, maintenance, and digital and logistics services. The Leasing and Services business remains the foundation of Trinity Industries, Inc.’s earnings stability. Full year revenues increased 5.5% year over year driven by higher lease rates and net fleet growth. Net lease fleet investment totaled $350,000,000 at the high end of our guidance range, and we used the secondary market effectively as both a buyer and a seller to strategically grow and strengthen the composition of our lease fleet. Segment operating profit increased 53% year over year supported by the railcar partnership restructuring we completed with Napier Park in December, recording a $194,000,000 noncash gain in the segment. Additionally, we recorded $56,000,000 in gains on railcar sales in the fourth quarter, resulting in a full year gain of $91,000,000. Fleet utilization remained strong at 97.1% with renewal success of 73% in the fourth quarter. While the future lease rate differential, or FLRD, moderated to 6% as renewal growth normalized, renewing rates were 27% higher than expiring rates. We believe there is still significant room for lease rate increases and remain very positive about this business. Eric will walk through the financial impact of our recently completed railcar partnership restructuring, but I did want to highlight the change in fleet composition. The transaction simplified our ownership structure, resulting in approximately 17,100 railcars removed from the partially owned railcar category. We assumed full ownership of 235 railcars. The remaining railcars moved from partially owned to investor owned, which will reduce reported revenue and operating profit, but this impact is largely offset by a corresponding reduction in minority interest. The restructuring simplified our ownership structure, increased transparency, and improved earnings while maintaining economic value. Rail Products delivered a full year operating margin of 5.2%, within guidance despite deliveries declining 46%. Cost discipline, automation, and workforce actions enabled profitability in a low-volume environment. Additionally, the headcount rationalization decisions we made in 2025 have right-sized the organization for the current reality and allow us to maintain profitability. With an aging fleet and continued net retirements, we expect demand to return over time allowing meaningful margin expansion as volumes recover. In the fourth quarter, we recorded a onetime credit loss related to a customer receivable within Rail Products. This charge was included in SG&A and reduced the Rail Products Group operating margin by 190 basis points for the quarter. This was an isolated incident and not reflective of ongoing performance. Before I hand it over to Eric and 2026 guidance to provide more details on our 2025 financial performance, I want to reiterate that Trinity Industries, Inc. is designed to perform in a wide range of demand environments. Our results and guidance clearly demonstrate the actions we have taken over the last several years have strengthened our business and lowered the breakeven point. For example, we have been investing in AI as a core operating capability, not as a standalone technology initiative. Working with partners like Palantir and Databricks, we have embedded AI directly into our manufacturing, logistics, and financial workflows. Practically, that means we are using AI to recover and redeploy material that historically would have been scrapped, improving margin. We have extended those same models into accounts receivable, reducing disputes and accelerating collections. The cumulative impact has been improved working capital, higher productivity, and more predictable execution across the enterprise. Importantly, these are not pilot programs. They are embedded in how we run the business today, and they continue to scale. We are excited at the impact these initiatives are having on our business now and in the future. I will now turn the call over to Eric R. Marchetto, who will talk through financial results and our guidance for 2026. Eric R. Marchetto: Thank you, Jean, and good morning, everyone. Before I talk through our financial statements, I want to take a moment to walk through our recent strategic railcar partnership restructuring and what it means for Trinity Industries, Inc. Prior to this transaction, approximately 23,000 railcars held in our TRIP and RIV partnership vehicles were partially owned but fully consolidated on our balance sheet and carried at cost. As part of a new fund raised by Napier Park, we began simplifying the fleet structure. We took full ownership of the TRP 2021 fleet, approximately 6,235 railcars, and Napier Park assumed full ownership of the TRIUMPH fleet, approximately 10,850 railcars. The transacted value of the TRIUMPH fleet was significantly higher than our book value, which resulted in a $194,000,000 noncash gain on the disposition. Our railcar leasing fleet now consists of 101,000 railcars on our balance sheet, and 45,000 railcars under management as part of our railcar investment vehicles, or RIVs. Our RIV program provides servicing revenue of approximately $20,000,000 per year, which is part of our leasing operations. The RIV program also provides scale for our platform, which enhances the unique view we have of the North American railcar market. Furthermore, this railcar partnership transaction underscores the embedded value in our assets. We have over 101,000 railcars on our balance sheet carried at a cost of $6,300,000,000. We estimate that the market value of these railcars will be approximately 35% to 45% higher than the carrying value, which demonstrates the estimated 3% to 4% annual appreciation we have seen in railcar values over the last 20 years. While lease rates have increased, they have not increased at the same pace as railcar asset appreciation. We can choose to generate value from our railcars over the long term by holding them in our fleet as lease rates continue to rise or by selling them. This gives us conviction in the long-term returns of the business. Moving to the income statement. We ended the year with fourth quarter revenue of $611,000,000 and full year revenue of $2,200,000,000. This was down year over year due to lower external Rail Products deliveries. Our fourth quarter earnings per share of $2.31 reflects a strong end of the year and an impact of approximately $1.50 from the fourth quarter RIV partnership restructuring. Full year EPS of $3.14 was up 73% year over year, in line with our guidance of $3.05 to $3.20. Before the impact of the RIV partnership restructuring, our 2025 performance was above the midpoint of our previous guidance. Moving to the cash flow statement. Our full year cash flow from continuing operations was $367,000,000. Our full year net lease fleet investment was $350,000,000 at the top of our guidance range, reflecting our conviction in deploying capital in our own fleet. Additionally, we returned $170,000,000 in 2025 to our shareholders through dividends paid and share repurchases. In December, we raised our quarterly dividend to $0.31 per share, marking seven consecutive years of dividend growth with an annualized growth rate of 9%. This reflects Trinity Industries, Inc.’s commitment to returning capital to shareholders. We are ending the year with a strong balance sheet. We have liquidity of $1,100,000,000 through cash, revolver availability, and our warehouse. Our loan to value for the wholly owned lease fleet is 70.2%. The increase in our LTV was a result of the debt restructuring we completed in October as well as the addition of the TRP 2021 fleet to our wholly owned fleet. We are very comfortable with the leverage on our fleet and are regularly refinancing our railcars as our debt amortizes to keep our debt in an appropriate range. Our balance sheet gives us the flexibility we need to effectively deploy capital and run our business. I will now talk about our expectations for 2026. As Jean noted, we are expecting industry deliveries of about 25,000 railcars, and we expect to maintain our historical market share of those deliveries. Despite the lower level of new railcars, we expect to maintain a Rail Products segment operating margin of 5% to 6% for the full year. We expect the secondary market to remain active and anticipate gains of $120,000,000 to $140,000,000 in 2026. We see an opportunity to further simplify our fleet structure and contribute the remaining partially owned railcars to our managed Napier Park fleet in the second quarter. While this transaction is not complete, we have included the anticipated gains in our full year guidance. We expect Leasing and Services full year segment margins of 40% to 45%, including the impact of gains and any further railcar partnership restructuring activities. In addition to the gains, we expect higher lease rates to contribute to a higher operating margin, offset by higher fleet maintenance activity in 2026. We expect a full year net lease fleet investment of $450,000,000 to $550,000,000, reflecting new lease originations, secondary market sales and purchases, and fleet modifications and sustainable conversions. We expect operating and administrative CapEx of $55,000,000 to $65,000,000, which includes further investment in automation, technology, and modernization of facilities and processes. We expect slightly lower SG&A costs in 2026. We expect a full year tax rate of approximately 25% to 27% for the full year. And finally, we expect a full year EPS of $1.85 to $2.10. We have made structural changes to our business over the last few years that have improved our profitability and returns throughout the economic cycle. With our 2026 guidance, I would also like to close with an update on our three-year targets we set at our 2024 Investor Day. As you recall, we introduced three enterprise KPIs with targets over the 2024 to 2026 time frame: net lease fleet investment, cash flow from operations with net gains on lease portfolio sales, and adjusted return on equity. First, our three-year net lease fleet investment target was $750,000,000 to $1,000,000,000 over the three years. To date, we have invested $531,000,000 and with our 2026 guidance, we will be at the top end of this range. Second, our cash flow from operations with net gains on lease portfolio sales target was $1,200,000,000 to $1,400,000,000 over the period. To date, we have achieved $1,100,000,000 and with our current guidance, we expect to exceed this range. It is important to note this excludes noncash gains. Finally, we set an adjusted ROE target of 12% to 15%. We ended 2024 with an adjusted ROE of 14.6% and ended 2025 with an adjusted ROE of 24.4%, averaging 19.5% over the first two years of the planning period. These targets were introduced with the overall guidance of approximately 120,000 industry railcar deliveries over the period. Our current outlook reflects deliveries of approximately 100,000 units. Importantly, this demonstrates the strength and flexibility of our operating model. We have proactively aligned our business to match evolving market conditions while continuing to deliver on our financial commitments. As Jean noted, our 2025 results underscore the strength and resilience of our platform and our ability to deliver attractive returns in a more challenging operating environment. As we look ahead to 2026, we remain highly confident in our trajectory. With disciplined execution, continued cost rationalization, and a flexible platform, we believe we are well positioned in the market. These strengths give us the foundation to navigate uncertainty and, more importantly, the capacity to generate meaningful, sustainable value for our shareholders over the long term. Operator, we are now ready to take our first question. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Harrison Bowers with Susquehanna. Please go ahead. Harrison Bowers: Hi, Jean, Eric. Thanks for taking my question. E. Jean Savage: Maybe just to start off high level on what you are seeing in demand. Can you sort of talk about if you are seeing improving inquiry levels? And if conversion times to actual firm orders are improving at all, beginning to compress, just what the latest you are hearing from customers broadly about tariffs, broader trade clarity, and some expectations for demand as the year progresses? Thank you. Good question, Harrison. So customers are engaged but the decision cycles are still longer than they have been in the past. It appears to be delaying orders. It is not destruction of the demand. When you look at the replacement demand fundamentals, they are still there. We have over 200,000 railcars that are over 40 years old. And when you look at current inquiry levels, they are increased, which is encouraging. But as you heard, our expectations for 2025, excuse me, 2026 are only 25,000. So we are seeing inquiry pick up. We think that may lead to return to replacement level demand in 2027, but still expect 2026 to be a little bit lower. Thanks. And could you maybe touch on what your expectations are for improving inquiry levels in, you know, and how many incremental orders you might need to see to maybe backfill some space, you know, embed and what your guidance is for the year? Sure. So when you look at what is going on in the marketplace right now, with the lower demand, you are seeing some builders not being quite as disciplined. And so we are seeing some pressure on those margins and having to fight pretty hard. On our typically the specialty cars, we do really well, and some of the other ones. So all the work we have been doing to lower our breakeven is really playing through and what you are seeing in our Rail Products Group margin, and then for 2026, we are still calling for the 5% to 6%. But it is aggressive out there. We are still being disciplined on what we are taking in and making sure that they are good orders that make sense for us to do. When you look at what we have to fill, we still have room in the back half of the year. So we will continue to see that progress as we go through the different quarters, the first half of this year. Thanks. And could you maybe level set what you had expect margin cadence and maybe deliveries throughout the year, even if directional, just to get a sense if there is anything, if any quarters are, you know, well above or below that 5% to 6% range that you called out. Yes. So we do not give quarterly guidance, but I would expect it to be fairly even throughout the year. Great. Thank you. Can you maybe speak a little bit more to the sort of easing FLRD but also seeing the really positive renewals versus expiring, and just what maybe sequential lease rates are and how you expect for those to perform throughout the year? Sure. So the FLRD remains positive for the eighteenth consecutive quarter. And when you are looking at the renewal rates like you talked about, they are materially above expiring rates at 28.6% for the fourth quarter. And utilization improved quarter over quarter. What you are seeing from the moderation on the FLRD is really lapping prior strong repricing that we have had. But when you look at the value of these assets, we think it supports continued lease rate upside. Eric R. Marchetto: I think you asked about quarterly and annually. Our average lease rate continues to go up quarter over quarter and year over year. So we are still seeing positive results there and expect to still have some headroom. Harrison Bowers: Thanks. And maybe taking a step back on leasing. Can you maybe speak to your expectations on the potential for additional leasing consolidation, whether, you know, in the form of some of the partnership or reorganization that you have talked about, or if you would expect, you know, some further consolidation in the space, and maybe what the level of private capital of this space, just to maybe general overview on the competitive dynamics with regards to the leasing space? Eric R. Marchetto: Sure. Hey, Harrison, it is Eric. I will take that one. We have seen some consolidation in the leasing space over the last few years, and that just speaks to the attractiveness of the asset class. We have seen capital looking to come in to the space. As you get out and speculate on what could happen in the future, I know there is capital there that would like to do things. But it takes two. And so I am not anticipating anything in the near term. But there is still very active trading at more at the portfolio level and the asset level, and we would expect that to continue. When you talk about the partnerships, some of the private capital, you know, that there is always possibility with that, but it seems like there is still an appetite to grow from that private capital standpoint. Harrison Bowers: Great. Thanks. I will hop back. I will pass it over and hop back in the queue if I have other questions. Thank you. Operator: The next question comes from Andrzej Tomczyk with Goldman Sachs. Please go ahead. Andrzej Tomczyk: Hey, good morning, Jean, Eric, and Leigh Anne. Appreciate you taking my questions. Just wanted to start bigger picture as well. If we could just talk a little bit more about the guidance range that you laid out. Could you help translate sort of the low end versus the high end of the range relative to your expectations for customer demand through 2026? It might have been asked a little bit earlier, but I guess specific to the manufacturing deliveries, maybe what it means in terms of absolute levels of deliveries throughout the year, and then what you are expecting for ordering activity in the first half of this year in order to get to your full year targets? Thanks. E. Jean Savage: Yes. So Andrzej, thanks for the call. Let me see if I can help you through that. When you look at, you know, we talked about 25,000 deliveries for the industry. We have not given any more detail on our deliveries other than it would be in our normal range of 30% to 40%. So that would imply, you know, that you can imply what you get from that from the math. When you look at just the guidance range, so that is what you are going to get from Rail Products. And also, we gave you the margin of 5% to 6% there. And so that is kind of the big piece of it. You know, when you look at the range that we provided, you know, pretty big range on the gains of $120,000,000 to $140,000,000. So that is also going to provide some of the spacing between the low end and the high end. Andrzej Tomczyk: Got it. That is helpful. And I think you called out a 190 basis point margin headwind in manufacturing in the fourth quarter, if I had that right. So I just wanted to clarify that point first. And then just what we should expect sort of off of that run rate, if that is sort of an adjusted number. I think it would be closer to, like, 6.5% if I have that right for the fourth quarter for manufacturing. How do we think about, is it still just the 5% to 6% through the year, but maybe the first quarter starting off closer to the low end of that range? Or do we think relative to that adjusted number? Eric R. Marchetto: So we did not adjust. We just called out the difference in the reserve that we took. But when you think about it, as Jean mentioned, it should be relatively smooth. We did have, as we talked about in the third quarter, on some of the specialty mix that we had, on the tank car side in the third quarter. Some of that carried through in the fourth quarter, so you got a little bit of benefit there. As we get to more of a traditional mix going forward, that is where we are, the 5% to 6%. You know, the 5% to 6% also with the volume that we are talking about that we have, we are happy with that, especially with, you know, as you mentioned, the amount of unsold space. And you talked about order cadence. I guess I did not answer that previously. But, you know, last quarter, there were industry orders were about 5,800 units. And so that is kind of what we would expect going forward in the near term to get to that 25,000 units for the year. Andrzej Tomczyk: Understood. And it seems like we have a firm grasp on sort of the volume picture for manufacturing this next year. Curious if you could help out on the sort of revenue per unit in manufacturing. Are there any sort of notes to consider around mix in 2026 from a revenue per delivery perspective? Eric R. Marchetto: You will get a, I mean, at the lower levels, there is a little more tank car mix than freight car mix. Generally, those are a little higher unit pricing. As Jean mentioned, it is a competitive environment out there. So you have a little bit of pricing pressure on the top end. And then we are trying to take, we have our initiatives to take the cost out to preserve as much of the margin as we can at these lower volume levels. These are low volume levels that we are operating in. So every bit helps. Andrzej Tomczyk: Yep. That makes sense. Maybe just shifting to leasing. Just curious if you could dig in a little more on the initial feedback of the partnership restructuring deal that you completed in the fourth quarter, and then just the moving parts of that into 2026 regarding the level of your owned lease fleet through the year and then revenue per unit and leasing would be helpful as well. And then just on that, the moving parts, sort of the minority interest that you mentioned in 2026, maybe what level we should be thinking there or what you are baking in? Appreciate it. Eric R. Marchetto: Yeah. Okay. I will start there. Let me just reset. Napier Park, they have been a partner of ours since 2013. They are our longest RIV partner, railcar investment vehicle partner. And as part of a new fundraise that they did, we divided these assets up in December. What we really like about it is we think it really demonstrates the value of the fleet. And recall, when you look at our fleet, our fleet for the most part, most of our assets are at manufacturing cost. And so when you apply a market value against the manufacturing cost basis, you get the types of gains that we saw in the fourth quarter. This increases our RIV program to about 45,000 railcars, so a significant piece of our fleet. As I mentioned in my script, that provides about $20,000,000 a year in fee income, which we really like. It also provides a lot of scale for our business. 45,000 railcars that we are the lessor on, that we run through our shops. It just provides a lot of scale for our business. Also, you mentioned the minority interest. This will help simplify our balance sheet. We will have less partially owned and less minority interest that comes out. So it will be simpler from an outside perspective. As we look ahead in 2026, we see an opportunity to do something similar with the remaining partially owned assets. We are including that in our gains guidance of $120,000,000 to $140,000,000. We would expect that to close in the second quarter. We do not have a price yet agreed to. We do not have a transaction structure agreed. But we do have line of sight to that happening. And Napier Park, while they have not been a buyer of assets for the last several years, with this new fund, we would see them as a potential buyer in the future of assets and kind of revive them as a buyer of assets. More to come on that. But I said a lot there. So just to kind of sum it up, it demonstrates the value of our fleet, especially when you compare market value to cost, and it is going to create opportunities for us going forward both in terms of fee income and then potential transactions down the road. Andrzej Tomczyk: That is very helpful color. Just maybe to clarify on the one point then, is it fair to say in the second quarter, we should expect more of the gains to occur relative to the full year target? Or is that still sort of— Eric R. Marchetto: That is what I am saying. Yes. That is what I am saying. Andrzej Tomczyk: And then just one more broad question from my end to close out. Not sure how far you guys want to venture out, but however you can talk about this would be helpful. Just curious sort of your level of confidence on 2026 marking a bottom for customer ordering activity or maybe industry delivery activity. If your customers are giving any indication that that could be true. And I guess the question is what could, you know, what could cause the prolonged downturn to linger into 2027 from a risk perspective? Or is it just tough to envision that at this point, just given how long in the tooth it feels we are in this industrial slowdown or freight recession. Thanks again for the time. E. Jean Savage: Yes. Thank you, Andrzej. So when you look at what we are seeing in 2026, the rail traffic had improved besides the weather that we saw. So with carloads, we are improving. That is a good thing. We just heard the manufacturing hiring. The jobs report was up. So even though we are not calling victory, we are saying we are starting to see signs that it is stabilized or bottomed out and starting to improve from there. The timing of that, your guess is as good as mine, but we really think that 2026 may be that bottom and start to come out from there for 2027. Andrzej Tomczyk: For all the time this morning. Appreciate it. E. Jean Savage: Yep. Thank you. You. Operator: This concludes our question and answer session. I would like to turn the conference back over to E. Jean Savage for any closing remarks. E. Jean Savage: Thank you. So Trinity Industries, Inc. is structurally stronger, more resilient, and better positioned today than in prior cycles. We will remain disciplined and focused on continuing to drive improvements in our business. We are intentionally structured to generate resilient earnings and strong cash flow through disciplined lease pricing, active portfolio management, and balanced capital deployment. Thank you for joining us today on today's earnings call. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Brookfield Corporation Fourth Quarter 2025 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ms. Katie Battaglia, Vice President, Investor Relations. Please go ahead. Welcome to Brookfield Corporation’s Fourth Quarter and Full Year 2025 Conference Call. On the call today are Bruce Flatt, our Chief Executive Officer, Nick Goodman, President of Brookfield Corporation, and Sachin Shah, Chief Executive Officer of our wealth solutions business. Bruce will start off by giving a business update, followed by Nick, who will discuss our financial and operating results for the year, and finally, Sachin will provide an update on our wealth solutions business. After our formal comments, we will turn the call over to the operator and take analyst questions. In order to accommodate all those who want to ask questions, we request that you refrain from asking more than two questions. I would like to remind you that in today’s comments, including in responding to questions and in discussing new initiatives in our financial and operating performance, we may make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and U.S. securities laws. These statements reflect predictions of future events and trends and do not relate to historic events. They are subject to known and unknown risks, and future events and results may differ materially from such statements. For further information on these risks, and how they and their potential impacts on our company, please see our filings with the securities regulators in Canada and the U.S., and the information available on our website. In addition, when we speak about our wealth solutions business or Brookfield Wealth Solutions, we are referring to Brookfield’s investments in this business that supported the acquisitions of its underlying operating subsidiaries. With that, I will turn the call over to Bruce. Bruce Flatt: Thank you, Katie, and welcome to everyone on the call. 2025 was a very active year for the business. We advanced a number of strategic initiatives and delivered strong financial results. Our cash flows are now supported by our large-scale capital base, which totals $180,000,000,000 and the diversification of our platform across asset classes, geographies, and capital sources, all of which provide multiple avenues for growth and position our business to remain resilient and grow across economic cycles. In the last twelve months, we raised $112,000,000,000 of capital, financed nearly $175,000,000,000 of assets, completed $91,000,000,000 of asset sales, and deployed $126,000,000,000 of capital while growing our insurance asset base to $145,000,000,000. That all allowed us to deliver record financial results with distributable earnings before realizations of $5,400,000,000 and total distributable earnings of $6,000,000,000. Nick will cover financial results in more detail, and Sachin will spend some time discussing our wealth solutions business shortly. Before they speak, I will add a few things. Looking back to 2025 in the stock market, our stock generated a 21% return for shareholders. That increased our thirty-year track record to an annual compound return of 19%. That is a $1,000,000 with us over that period would be worth $285,000,000 today. Of course, that is the miracle of compounding good results. Turning briefly to the market environment, business fundamentals are strong. Capital markets have been. Liquidity has returned, both in debt and equity markets. Interest rates have started to come down globally and transaction activity has picked up. In this environment, real assets should continue to outperform, offering investors the opportunity to earn excellent returns while taking moderate risk. As our platform has grown, so has the scale of the work we do with our partners. Increasingly, we are partnering with the highest quality organizations on large-scale sophisticated projects that are critical to both national and corporate priorities. Recently, that has included partnerships with NVIDIA, Microsoft, JPMorgan, the United States, French, Swedish, and Qatar governments, among others. Our ability to work with counterparties of this caliber underscores the strength, resilience, and global reach of our platform. It also reflects a deliberate long-term approach to building our business with great partners. We believe long-term business success requires many things but three in particular stand out. Together, they make the difference between good and great long-term returns. First, it starts with identifying business that can endure and evolve. For decades, we focused on building the backbone of a global economy, and while that focus has remained consistent, long-term success requires evolving as the economy itself evolves. Second, when a business is well positioned and well run, compounding becomes the dominant driver of value creation. Over long periods of time, small differences in annual returns can lead to very large differences in outcomes. And third, and maybe most important, avoiding disruption to the compounding process and business success is critical. Compounding works best when capital is allowed to be remained invested for long periods of time. For us, that means that we must always keep excess capital to ensure that we can ride through any market cycle. And our balance sheet strength, as Nick will indicate later, gives us flexibility to do just that. It allows us to stay focused on long-term value creation, allocate capital selectively, and take advantage of dislocations when others are more constrained. Real estate illustrates this well. Over the past forty years, we have invested in, operated, and monetized real estate across many market cycles. Our approach has always been grounded in fundamentals. We acquire assets for value, finance them conservatively, and manage them actively. In the most recent cycle, dislocation was driven largely by capital markets and shifting sentiment, rather than a deterioration in underlying fundamentals. While many stepped back, we remained active, continuing to invest, develop, and reposition assets. And today, this sentiment is beginning to realign with fundamentals. New supply across core markets is very muted. Demand is growing, and asset values are set to rise substantially. We enter this next phase from a position of strength, owning the highest quality real estate in supply-constrained markets, operating it through our leading platforms. And as we have seen across cycles, great real estate owned and managed well always wins over time. That same long-term mindset applies to our other businesses, including how we think about our structure in the public markets. Over the last fifteen years, as many of you know, we have offered listed versions of our investment strategies through what we refer to as our listed partnerships. To broaden accessibility for global investors, neither are later paired with sister corporate entities. And when we created our insurance business five years ago, we followed the same approach, establishing it as a listed sister company to Brookfield Corporation trading under the symbol BNT. These structures have served our business extremely well. But as markets evolve and with the continued expansion of index investing, splitting market capitalization has become suboptimal. As a result, we are now focused on streamlining and consolidating our market capitalization. As an initial step last year, we announced the combination of Brookfield Business Partners with its sister company, Brookfield Business Corporation. This transaction creates a single listed entity that is index eligible for the entire market capitalization, and it now reflects the full scale of the business in one company. Building on that momentum, this year, we intend to work on merging Brookfield Corporation with its paired sister insurance entity, BNT. This will streamline our structure and enable the next evolution of Brookfield, bringing together our insurance and our balance sheet investment activities into one single entity. This will also add substantial capital to our insurance operations, supporting growth in that business that is under by our real asset focused investment strategy, while our excess capital will enable us to operate at industry-low operating leverage. In closing, we have strong momentum across all of our businesses, significant access to capital, and a long runway of growth. We are well positioned and confident in our ability to continue to deliver financial results and compound value for shareholders. 2026 should be another strong year. Thank you all for your continued support and interest in Brookfield. I will now turn it over to Nick. Thank you, Bruce, and good morning, everyone. We delivered record financial results in 2025 supported by strong momentum across each of our core businesses. Nick Goodman: Distributable earnings, or DE, before realizations for the year were $5,400,000,000, or $2.27 per share, representing an 11% increase over the prior year. Total DE, including realizations, was $6,000,000,000, or $2.54 per share, and total net income was $3,200,000,000 for the year. Our asset management business delivered record results in 2025, generating $2,800,000,000 of distributable earnings, or $1.17 per share. We raised $112,000,000,000 of capital during the year across a diversified set of strategies, reflecting continued investor demand for our fund offerings. Fee-bearing capital increased by 12% to over $600,000,000,000 and drove a 22% increase in fee-related earnings to $3,000,000,000. Looking ahead, with strong fundraising visibility, including the launch of our latest flagship private equity fund and our inaugural AI infrastructure fund, and with the announced acquisition of Oaktree, our asset management business is well positioned to deliver another year of meaningful earnings growth. Our Wealth Solutions business delivered strong results in 2025, generating $1,700,000,000 of distributable earnings, or $0.71 per share, representing a 24% increase over the prior year. Our results were driven by continued growth in our insurance platform with $20,000,000,000 of annuity sales during the year, alongside improved profitability in our P&C business. On the investment side, we deployed $13,000,000,000 into Brookfield-managed strategies, supporting a sustained 15% return on our equity while generating a 2.25% gross spread. And Sachin will expand on this in more detail in his remarks. Our operating businesses continued to deliver stable and growing cash flows, generating distributable earnings of $1,600,000,000, or $0.68 per share for the year. This performance was supported by strong underlying fundamentals across the platform. Operating funds from operations in our renewable power and transition and infrastructure businesses increased by 14% over the prior year, and our private equity business continues to contribute recurring high-quality cash flows. Within our real estate business, we have seen sentiment realign with the strong underlying fundamentals that have been in place for some time now. The environment today reflects several years of limited new supply across major global markets, while tenant demand has continued to grow, translating into strong leasing activity and meaningful rent growth for high-quality assets. During the year, we signed nearly 17,000,000 square feet of office leases globally, with net rents averaging 18% higher than expiring leases across our super core and core plus portfolios. A few portfolio highlights include: in New York, we signed 2,400,000 square feet of leases at rents 20% higher than those expiring; in Canada, leasing activity picked up meaningfully over the year, we signed 2,400,000 square feet of leases at rents 10% higher than expiring levels; and in London, we signed nearly 800,000 square feet of leases at rents close to 10% higher than those expiring. This leasing activity reflects strong demand from large, creditworthy tenants such as Moody’s and Visa, who are relocating their regional headquarters to our properties, alongside many of our other high-quality tenants that executed long-term renewals and expansions. At the same time, properties that we delivered or substantially repositioned over the past few years, including office assets in major global markets, are now nearly fully leased and achieving some of the highest rents on record. As a result, our portfolio finished the year in a very strong position, with our super core and core plus portfolios more than 95% occupied and poised to continue delivering robust NOI growth in 2026. Turning to monetizations, 2025 was a record year, advancing $91,000,000,000 of sales across the business at attractive returns, including $24,000,000,000 in real estate, $22,000,000,000 in infrastructure, $12,000,000,000 in renewable power, and $33,000,000,000 from private equity and other investments. Substantially all sales were at or above carrying values, realizing meaningful value for our clients. During the year, we realized $560,000,000 of carried interest into income and ended the year with $11,600,000,000 of accumulated unrealized carried interest. And with a strong pipeline of planned asset sales across the business, we expect carried interest realized into income to accelerate over time. Moving on to capital allocation, in addition to investing excess cash flow back into the business, we also returned $1,600,000,000 to shareholders in 2025 through regular dividends and share buybacks. We repurchased more than $1,000,000,000 of Class A shares in the open market at an average price of $36, which represents nearly a 50% discount to our view of intrinsic value, including approximately $150,000,000 repurchased since last quarter. We also maintained strong access to capital markets during the year and executed approximately $175,000,000,000 of financings across the franchise, including $53,000,000,000 in infrastructure, $43,000,000,000 in real estate, $37,000,000,000 in renewable power, and more than $40,000,000,000 in private equity and other businesses. At the corporation, we issued C$1,000,000,000 of seven- and thirty-year notes at favorable spreads in December, and subsequent to year end, our real estate business completed an $800,000,000 fixed-rate financing at a super core office property in Manhattan at very attractive spreads, further underscoring lender appetite for high-quality assets. Lastly, we ended the year with a conservatively capitalized balance sheet, strong liquidity, and record deployable capital of $188,000,000,000. Taken altogether, the strategic initiatives we advanced in 2025 have fueled meaningful momentum. With a $180,000,000,000 permanent capital base, strong liquidity, and multiple avenues for growth, we are well positioned to continue compounding shareholder value in 2026 and over the long term. With that, I am pleased to confirm that our Board of Directors has declared a 17% increase in the quarterly dividend to $0.07 per share, payable in March to shareholders of record at the close of business on March 17, 2026. I thank you for your time. And with that, I will now pass the call over to Sachin. Sachin Shah: Thank you, Nick. Bruce Flatt: And good morning, everyone. I am pleased to join the call this quarter. Nick Goodman: To provide an update on Brookfield Wealth Solutions. 2025 was a strong year. We finished with over $140,000,000,000 insurance assets, generated $1,700,000,000 of distributable earnings, and delivered a return on equity above our mid-teens target. Bruce Flatt: As we look ahead to 2026, Nick Goodman: We are very well positioned to deliver continued growth across both our retirement and protection businesses. Bruce Flatt: As always, our ability to invest into the broader Sachin Shah: Investment platforms continues to be a key advantage for us. Access to long-duration, real asset, equity, and credit strategies that provide stable, recurring cash flow growth and attractive returns provides a differentiated foundation for driving the business forward. On our current trajectory, expect to end 2026 with circa $200,000,000,000 of insurance assets, over $2,000,000,000 of distributable earnings to Brookfield, and a capital base exceeding $20,000,000,000, well above our regular regulatory targets. Nick Goodman: Importantly, Sachin Shah: This growth is supported by a highly diversified business across multiple scale geographies, high-demand retirement products, and a growing protection franchise, which together provide multiple avenues to source long-duration low-cost liabilities. We have a number of important priorities in 2026, and I will highlight a few of them now, which we believe will drive stable, reliable earnings growth over the next decade and should lead to continued growth in the value of our business. First, we are focused on closing, integrating, and scaling our U.K. acquisition. Over £50,000,000,000 of pensions are expected to come to the U.K. risk transfer market in 2026, and over £500,000,000,000 of pensions will come to the market over the next decade. This represents a large and growing opportunity set. We have made substantial investments in the pension markets, acquiring platforms for value, building out operational capabilities required to scale. Our recently announced acquisition of the Just Group in the U.K. is expected to close in 2026, and we are already advancing plans to grow that business and execute on over £5,000,000,000 of pension opportunities annually. At the same time, we are working to grow our footprint in Asia, where savings products continue to be in high demand as populations age, and retirement income is highly desirable. Japan’s life and savings insurance market is one of the globally, with approximately $3,000,000,000,000 of assets on insurer balance sheets today, reflecting the depth of long-term savings and retirement liabilities that create significant opportunities for retirement income and growth-oriented solutions in the region. More broadly, across Asia Pacific, demographic shifts are driving a rapid increase in financial assets, with life and pension savings representing an increasing share of household wealth. We are in the early stages of building our business in Japan and broader Asia, having completed our first transaction in Japan at the 2025. We have a strong pipeline of opportunities ahead of us, which should translate into $3,000,000,000 to $5,000,000,000 of annual flows over time. In the U.S., we are expanding our retirement distribution capabilities to drive in excess of $30,000,000,000 of inflows into the business annually over time. U.S. fixed annuity demand exceeded $300,000,000,000 in 2025 as aging populations continue to look for stable retirement income. A significant portion of that demand flows through large bank and broker-dealer channels, which have been a key area of focus for us. On average, these channels account for two-thirds of U.S. retail annuity sales, whereas they have only represented about one-third of our sales historically. Given the sustained demand through these channels, we have been investing into these relationships. We have expanded our offerings on one such platform already this year, are on track to launch a second before the end of this month, and expect to launch two additional platforms within the calendar year. Given our expansion, our annualized organic inflows should comfortably grow to over $25,000,000,000 in the near term. As it relates to our protection franchise, we are prioritizing and identifying opportunities for scale as markets soften through selective M&A, organic growth, and expansion of our reinsurance capabilities. Our protection business delivered $8,000,000,000 of float to manage in 2025, at virtually no cost to funding. We have made tremendous progress to date, focusing the business on reducing risk, exiting low-profitability lines of business, and positioning for softer markets ahead, which we believe will lead to more compelling growth opportunities over time. Lastly, are continuing our pivot towards equity-oriented strategies to enhance investment returns, using our strong capital base to deliver higher-quality earnings with lower operating leverage. In 2025, we deployed $13,000,000,000 into Brookfield-originated strategies at an average net yield of 8% to 8.5%. We also made additional commitments to Brookfield-sponsored private funds, which will be further accretive to our earnings as those funds call and deploy capital over the medium term. To bring this together, the strategic initiatives we have executed to date together with our priorities outlined for 2026 position the business for continued earnings growth. We have a platform that benefits from diversification across distribution channels, geographies, and product types, allowing us to access the most competitive risk-adjusted cost of capital. With a strong pipeline of real asset investments across Brookfield’s various strategies, we feel confident in our ability to continue compounding our capital at well above our mid-teens targets. Thank you for your time, and with that, I will turn the call over to the operator for questions. Sachin Shah: Thank you. Operator: As a reminder, to ask a question, please press *11. And our first question will come from the line of Kenneth Worthington with JPMorgan. Your line is open. Sachin Shah: Hi, good morning, and thanks for taking the question. You have spoken in the past about scaling the P&C business. And today, you called out the protection business and the improved profitability a number of times in the prepared remarks. So I was hoping you could flesh out your comments and talk about where the business stands today, maybe a bit more on how you plan on scaling it from here, and then lastly, what is the right relative size of the P&C business to the life and annuity business for you. Nick Goodman: Sure. It is Sachin here. So you are right. We have talked a lot about our P&C protection business, as we call it. I would say the last few years, and you would know this just from the general market backdrop, has been a very hard market. You have seen record profits in established P&C platforms. And during that period, to acquire businesses for value was very difficult. Owners would expect significant multiples on book capital, and not everyone had a great platform or has a great platform, yet valuation expectations were tremendously high. Our approach during that period was to acquire platforms where we felt we could acquire them at a significant discount to book, work on repositioning them, and really orient them to the next cycle that will come, softer markets, and ensure that we have a good risk culture, a good cycle management culture, and that we could grow them organically even if markets start to soften, which we are seeing pretty significantly right now, in particular on the property side. Where that leaves us is we now have a business that is generating strong profits. We have been able to reposition our investment portfolios much more to equity-oriented strategies. We are breakeven on underwriting profit, and will be generating underwriting profits going forward. We now have a platform that as markets soften, we think that we can pursue M&A; there will be some platforms who struggle in this environment. We think we can build out reinsurance capabilities, and we can continue to diversify our lines. So I think from the outlook perspective, the business has a very strong outlook ahead. In terms of size, we have about $3,000,000,000 of capital that supports our protection business, $8,000,000,000 of float, and I think we could comfortably see a path to $20,000,000,000 to $25,000,000,000 of float by the end of the decade. I will pause there. Great. Thank you. Operator: One moment for our next question. And that will come from the line of Bart Dziarski with RBC Capital Markets. Your line is open. Sachin Shah: Wanted to ask around the decision to simplify the structure and collapse BNT. So I know you called out a few reasons in the letter, but can you maybe unpack the decisioning there, why now, and the expected time frame? Sachin Shah: Thanks. Nick Goodman: Hey, Bart. Morning. It is Nick. I think in the letter and then in Bruce’s comments, we provided a lot of the background. What I would add to that is we have seen an evolution in public markets, and as our business has evolved, we do believe at this point in time it makes sense to streamline and simplify. And we have seen the benefits of that play out for BBU. And as we think about BN, when we set up BN originally as—sorry—BWS, when we started investing in insurance, we did so thinking it was a very attractive stand-alone investment opportunity. And to stand it up on its own two feet, we set up a paired security, BNT, that added value and provided optionality as we continued to scale the business. I think as, you know, as we have discussed, we see things quite differently now. The insurance business has scaled meaningfully. There is great growth potential ahead for that business. And as it has grown, we have realized the tremendous synergies that it has with overall Brookfield. And therefore, it has increasingly become more integrated with the corporation. And today, the business fully benefits from the investment ecosystem of BAM, offering ideal investment solutions to back the liabilities that we have. We think the next step is to also allow the business to fully benefit from the capital base of the broader Brookfield, the full $180,000,000,000 of capital that we have, to back its growth while allowing it to maintain low operating leverage. So what that means for the business is that we are working on a plan to combine BN and BNT into a single listed company, one security. We would see no change to the governance, the management team, the investment processes, the risk framework within the business, but the end result would be a streamlined structure that provides investors with simpler access to our business and will sustain and ultimately enhance the long-term growth profile of the. So we will continue to work on that, and as we said in the letter, we would like to think we can execute it within the next twelve months. Sachin Shah: Great. Very helpful. Thanks for that color, Nick. And then just sticking with, I guess, Brookfield Wealth Solutions, very strong ROE. It looks like it is north of 15%. I think we get it on the asset side as to how the strategy is differentiated. Is anything on the liability side that is also contributing to that? And what is the outlook there in terms of preserving that ROE this year? Thanks. Hi, Bart. It is Sachin. Yeah. On the liability side, we have really been focused on diversification of product type. You know, that started with simple annuities and a small P&C business. It has really morphed into geographic expansion, a multitude of retirement products that we sell through all of our businesses, getting into the pension markets and scaling there, and broadening out our P&C business. What that really means in practice is at the top of the house, we can look at where our capital is allocated, and we can allocate it to where the cost of funding is the lowest. And therefore, we can move our capital around by geography, by product type, and ensure that as competition increases in one area, we move away to an area where we see better value. We couple that with our investment franchise at Brookfield, and that leads to really robust spread and really robust total returns for the business. Great. Thanks, Sachin. Operator: One moment for our next question. And that will come from the line of Alexander Blostein with Goldman Sachs. Your line is open. Sachin Shah: Thank you. Thank you. Good morning, everyone. Bruce Flatt: Just maybe another one around P&C. Definitely seems like—and you guys have been hinting to that for a couple of quarters now—but it definitely feels like you are leaning into that more aggressively, both organically and perhaps inorganically. How are you thinking about the risk that that brings to the BAM platform as a whole? Quite different than the annuities business. When we think about the opportunity that that creates for BAM, as far as incremental assets that could be managed or fall under the IMA, what would be the implications for the management fee business? Sachin Shah: I will start with just the balance sheet of the P&C business. As you know, it is a lower leverage business. So I think, you know, it requires capital to grow, but you do not get the same operating leverage as you do in annuity business. And for that reason, you do not get the same projected asset going over to BAM. That being said, our annuity business is very large. It is global. And we really have focused the last five years on scaling that. So we have a regular flow of capital coming into the group. On the P&C side, the real benefit for us is there will be times where that business we see opportunities to drive our funding costs down that do not have as much competition. And remember, the annuity market today is very competitive, all of our peers are in that space. Many small asset managers have gone into it, and all the incumbent insurers are very aggressively growing their retirement business as well. So it was prudent for us to build other levers to drive funding costs down, and to be able to allocate capital in parts of the business that have less competition. Bruce Flatt: Got it. Alright. That is helpful. Okay. Second question for you guys, maybe pivot to real estate. The fundamentals in the business look like continue to improve. If we look at NOI, FFO, any of the metrics you guys put out, it looks like it is been a nice improvement over the last couple of quarters now. But help us maybe unpack what has been driving that, and within that, I believe there is quite a bit of floating rate debt that still benefits the cash flows of your real estate franchise. Maybe help with some sensitivity around, kind of, I do not know, 25 basis point cut in rates, how much does that impact the cash flows across the entire BPG real estate franchise? Yeah. Hi, Alex. Nick Goodman: Listen. I think we have talked at length about the fundamentals and the market dynamics going on in global real estate right now, and they are continuing to build momentum. And I would say that is across the highest quality office and retail. If you look at the office markets in global gateway cities, there is very low to no new supply coming on market. New supply is not expected for, you know, in large scale anytime soon, and yet tenant demand continues to grow. And we have seen that inflection point in that business in the last couple of years, this year accelerating, still going on, with the number of tenants we are actively engaged with through very large requirements for high-quality space. We, you know, we signed two of the largest leases in downtown last year. I think it is the largest ever move of tenant in the downtown core, definitely for some time, into a trophy building, and we can see that momentum continue. You look in London, one of the tightest markets globally now, setting record rents with each lease we sign in the city. Tenant demand in Canary Wharf, the strongest we have seen. So those are the underlying drivers for the growth in the NOI in office. Now as we move those tenants in and we vacate space, it takes time to come through the numbers, but the underlying momentum and the valuation appreciation is coming through the numbers. And in retail, the sales continue to be very strong. We had a very strong seasonal performance in our assets this year, strong total year, and again expect sales growth this year with strong tenant growth. And all of these assets continue to sign leases at very strong positive spreads to the leases that are expiring. So that is driving the NOI growth, and we see that trend continuing. The capital markets are incredibly supportive of these assets. We just completed the financing in downtown New York last week, and the debt stack was 10 times oversubscribed up and down the stack. The capital markets are incredibly constructive. We continue to drive in spreads. So that is driving the NOI performance. On the FFO, you are right. We have some floating rate debt. We are probably right now about 75% to 80% fixed rate, but that floating rate movement, 25 basis points, probably roughly about $35,000,000 to FFO on an annualized basis. I would say there is more going on than just rates coming down. We have the benefit of tightening spreads, and we have the benefit of some delevering come through the P&L. So I think the FFO trajectory continues to look positive from this point forward. Bruce Flatt: Alright. Thanks, Ed. Operator: And that will come from the line of Michael Cyprys with Morgan Stanley. Your line is open. Sachin Shah: Good morning. Thanks for taking the question. Wanted to ask about BWS. I heard the helpful commentary around some of the globally. I was hoping maybe we could double-click on Asia, and if you could maybe elaborate a bit on some of the steps you are taking to grow your footprint in Asia, what we can expect from Brookfield here, ’26 and over the next couple of years. I think you mentioned a pipeline. Can you just elaborate on that pipeline, what that looks like? And then in Europe, as we move past the Just deal and we look out to later this year into ’27, can you speak to some of the steps that you are going to be taking to capture the opportunity set in Europe? Thank you. Sure. It is Sachin here. So first on Japan, I would say our pipeline, we have been pretty active for the last three years in the Japanese market with teams on the ground, focused on relationship building, leveraging the broader Brookfield brand. And as you know, there has been a pretty steady history of Japanese insurers undertaking reinsurance with foreign counterparties. And we have been able to build trust. We have been able to get onto the list of acceptable counterparties. We completed our first deal, as we have announced last year, with Dai-ichi Frontier Life. I would say we now have strong relationships with half a dozen of the top insurers in Japan, all of whom are advancing discussions with us about entering into partnership deals on both flow and in-force reinsurance. Not all of them will hit, but we expect a number of them will, and we feel pretty good that we will have a recurring steady flow of reinsurance relationships in the country. Beyond Japan, we are actively looking at markets like Korea and Hong Kong, Taiwan, where you have a similar savings dynamic that is occurring and, you know, aging populations that really are not earning a proper yield in their savings products and look to insurance products to supplement returns for themselves. And I would say we are actively conducting outreach in those markets as well, looking to build on our pipeline. Europe, I would say, is a bit more of a challenge. We have spent a lot of time in Europe on the annuity side and on the protection side. But I would say on the annuity side, the market there is much more regulated around what is called the with-profits business. And what it effectively means is your ability to generate spread is very limited by regulatory constructs. So I think if we are going to advance our business in Europe, we are going to do it very slowly, very carefully, and make sure that we do not end up in a situation where the things that we are good at at Brookfield, investing in real assets, are not able to be done. That would be problematic for us. Great. Thank you. And then just a follow-up question, if I could, on carry. I was hoping you might be able to help carry, how are you characterizing the outlook here for carry into ’26 relative to ’25? Nick Goodman: Yeah. Thanks, Mike. So I think we had a good performance in 2025, probably slightly ahead of plan for the year, and I know we have talked in the past about seeing an inflection point coming this year. The pipeline for monetizations continues to be very strong as we look out this year. And I would say it is active in the right areas as it relates to carry. It is active specifically in the funds that are relevant for realizations across infra, real estate, and within Oaktree. So I think we feel good about where we are today. Obviously, we feel very good about the valuation of the assets we are bringing to market. Timing is slightly outside of our control. But if we had to estimate, we think we would see it start to step up in the second half of the year and then continue to scale into ’27 and ’28, as we have talked about before. So the valuations are good. The processes are going. The pipeline is strong. And it just depends on timing now. Sachin Shah: Great. Thank you. Operator: One moment for our next question. And that will come from the line of Mario Saric with Scotiabank. Your line is open. Sachin Shah: Hi, good morning. Just wanted to talk about the dividend increase. The $0.07, 17% was the largest in some time. It is kind of double five-, ten-year CAGRs. Sachin Shah: The largest among the Brookfield publicly traded companies this year. Bruce Flatt: I am pretty sure it is not a result of lack of investment opportunities as we are hearing on the call. So I am curious whether Sachin Shah: The increase is kind of a shift in dividend growth Angela Yulo: Policy that better mirrors expected underlying cash flow per share growth going forward. Nick Goodman: Yeah. Hey, Mario. It is Nick. No. I think it is more simple than that. Obviously split the shares, and at BN, we have not done fractions of a penny increases. We stuck with a penny. The payout ratio is still very low, as you know. So whilst it looks like a high increase on paper, and it is a nice increase, the payout ratio is still very low, and it is not a change in strategy. We still are focused on reinvesting capital back into the business. And when we return capital to shareholders, we look to do it opportunistically through buying back shares. So I do not think it is a significant change in strategy. It is more a product of the fact that we split the shares this year. Last year. Angela Yulo: Got it. Okay. Makes sense. And my second question, in the letter to shareholders, you talk about identifying themes that enable investment growth. You have talked a lot about digitalization, decarbonization, and deglobalization that maintains over the past decade. Associated with your commentary about the need of an organization to evolve over time, if you have to guess, you know, what are some themes that you may be discussing at your investor day five years from now that may or may not be different than what you are talking about today? Nick Goodman: Listen. I think the themes that we have today have a long runway ahead of them. We are in the very early stages of the buildout of supporting the growth of AI and this revolution. And I think the themes will still be anchored by the same fundamental principles. You know, they are anchored today by the same principles we were talking about ten and fifteen years ago. It is very hard to predict exactly what we will be talking about five years from now. But I think it will be anchored on the same core fundamentals. But we do expect a very long runway from the current themes that are driving the growth of the business. Angela Yulo: Okay. Those are my two. Thank you. Sachin Shah: Question? Operator: And that will come from the line of Jaeme Gloyn with National Bank. Your line is open. Sachin Shah: Yes. Thanks. Just a Sachin Shah: Question on the North American residential portfolio. Bruce Flatt: Just looking at the operating FFO this Dean Wilkinson: Quarter stepping up from Q3, was there any increase in activity on sales this quarter versus the prior quarter? Or is that just more reflecting some of the seasonality in the business? And then you could maybe talk through some of the outlook around that portfolio into 2026. Nick Goodman: Yeah. Hi. It is very much due to seasonality. The best way to analyze the performance of that business would be comparing the quarter performance with the prior-year quarter, as opposed to the prior quarter. There tends to be seasonality and strong performance in Q4, and when you look at it compared to Q4 of last year, we did have a one-time gain on a sale of a large lot. So there is an outsized gain in last year’s numbers. I think that, listen, the trend in that business continues to be what we have talked about for a while. It is a very well-performing business for us, very well run. It generates good cash flow. But for sure, we are seeing muted activity in the housing markets in Canada and the U.S. for now. We expect that over time, the performance will improve, as we see a shortage in housing. We are very well placed with a very nimble platform. And if you think back to Q1, we did derisk that investment by pulling out $1,000,000,000 of capital by exiting a few of our master-planned communities, and we have positioned that more as an asset-light business now, and we continue to scale the land servicing and land management businesses for our clients, generating fees for Brookfield Asset Management. But I think as we look forward, we do see muted performance at the start of this year, but very well positioned to benefit when the market improves. Dean Wilkinson: K. And then, following in the same theme around the real estate assets, if I kind of go back to a couple of investor days, the view would be that real estate assets would sort of decline through the 2029, 2030 period. But we have kind of seen that tick up over the last several quarters. So I guess, is that a reflection of just hanging onto the assets for now until better monetization opportunities present themselves? And do you see that sort of accelerating in the early part of the year, second part of the year? Or is it maybe more of a ’27 story when you see that start to unfold and see the, you know, the capital levels start to drift lower. Nick Goodman: Yeah. Listen. I would not say that we have necessarily been aggressively acquiring, as in stepping up from acquisition, but we have obviously been holding onto the assets. We have been focused on operational improvement and performance. And we have seen that. And as I said, the operating fundamentals have been strong for a while now, and that growth is only accelerating. Capital markets get stronger by the day, and I think we are seeing market sentiment and broad market sentiment, out of those really involved in the business day to day, really start to appreciate what is going on in the office market and the durability of high-quality office in this cycle and in long-term growth. And I think as that sentiment and acceptance broadens, you are going to see transaction activity really pick up. We have seen it more broadly for real estate businesses that we sold last year around the world, and we expect it to pick up for high-quality assets. Exact timing is always hard to give you, but I do think it is close to coming back in a meaningful way. And when it does come back, we will be poised to monetize a number of assets in the portfolio. Sachin Shah: Great. Thank you. Operator: And our next question will come from the line of Cherilyn Radbourne with TD Cowen. Your line is open. Thanks very much, and good morning. With respect to the plan to merge BN and BNT, if I recall correctly, there were some tax advantages associated with holding BNT. So I am curious if losing those is effectively the cost of simplification, and to the extent that these were just paired securities, maybe you can elaborate a little bit more on how the insurance business was not previously benefiting from the full capital base of Brookfield. Nick Goodman: Yeah. Hi, Cherilyn. It is Nick. Listen. I think we will be very focused as we work through this process over the next twelve months on preserving and maintaining all the operational benefits we have in the business. So you can be assured that we are focused on preserving that. I think today, it is a paired security, but it is technically, under insurance, a separate ownership structure. So while paired, the ownership chain is slightly different. So as we have looked to capitalize BWS since inception, it has involved us actually moving capital over the business off the BN balance sheet. And I know that is a subtle difference, but having them under the single ownership will allow us to put the business under the total capital base of the organization. So it is a slight structural nuance. It served a lot of benefits as we have grown the business from inception. But there is a clear benefit now to putting them together and realizing that full potential. Sachin Shah: Okay. That makes sense. Operator: And then question on BWS and the reallocation of the flow to BAM-managed strategies. I think you reallocated $13,000,000,000 in 2025 versus annuity inflows of $20,000,000,000. So I assume that still results in some timing-related pressure on the spread. Does that $13,000,000,000 need to step up in 2026? And can it step up as BAM holds first closes on three large flagships? Sachin Shah: Cherilyn, it is Sachin. So first, the $13,000,000,000 that we invested into BAM strategies, that represents the illiquid private portion of our total asset base, which today is about 50% liquid, 50% private, and will stay in that range. So I would say, in fact, as we have been rotating the asset portfolios from companies that we have acquired, we are exceeding our 50% target because we started with a very large liquid base of assets. So as money comes in, you should think of it that in general, half the money will stay in liquid cash and liquid securities, and half the money will go into Brookfield private fund strategies, or other opportunities that come into the Brookfield investment universe. So I am not worried that we will not be able to keep pace. In fact, we have been exceeding the run-rate pace that we need to achieve. Cherilyn Radbourne: Okay. So if I understand that correctly, basically, $10,000,000,000 of the $20,000,000,000 should have gone into private strategies. And so the $3,000,000,000 is kind of a catch-up on the liquidity that you had entering the year. Is that a good way to think about it? Sachin Shah: Yeah. That is correct. If you were to keep it very simple, that is a correct way to think about it. Cherilyn Radbourne: That is all for me. Thank you. Operator: And one moment for our next question. And that will come from the line of Sohrab Movahedi with BMO Capital Markets. Your line is open. Sohrab Movahedi: Sachin, I wonder if you could just unpack something you said a little bit earlier. I think in response to kind of managing the cost of funds, you were talking about having the flexibility or the ability to kind of allocate capital to the lowest kind of cost-of-fund, I guess, jurisdictions to generate the returns. When I look at your cost of funds throughout the year, presumably, you have been doing that. So is this as good as it gets, or can cost of funds come lower from here? And how quickly can you pivot from one jurisdiction to another in the capital allocation? Sachin Shah: Hi, Sohrab. So first of all, it is not as good as it gets. I think there is always room to do things better in a business. I think Japan, in general, is a low funding cost market. So as we build out there, that should help us drive our funding cost down. The P&C business is one, when run well, and you saw it in this year’s results, we had zero cost of funds. So they meaningfully drive down your funding cost. And as we grow both of those areas of the business, you should see that help drive the weighted average cost of funding down. In terms of the speed at which you can move, you know, we are in the market every day. We have products that get repriced on the annuity side monthly, and so we can pull back pretty quickly. Pension markets are bid on as individual transactions, and when they get too expensive for us, we pull back on bidding on them. And P&C float has a shorter duration, so you can quickly shrink your book if you feel like the markets there are either softening too much or there is too much capital chasing deals. So for us, it was important to have that level of diversity, and we think we can be pretty nimble. Sohrab Movahedi: Okay. Sachin, that is excellent. And given that flexibility and nimbleness, is it aspirational of me to think you could move that 15% ROE hard higher, or is that 15% target given everything you just said? Sachin Shah: I think the way I would look at it is we are trying to maintain a pretty conservative balance sheet. We are trying to keep leverage levels low, and we are trying to keep capital base high. All of those things go against higher returns, as you can imagine, but they lead to a safer balance sheet and a higher quality of earnings. If you couple that with our investment strategy and our ability to drive funding costs down, that is why we say mid-teens is our target. If we ran at the same operating leverage as maybe some of our peers in the space, the returns would be higher, but we would be taking more risk to do so. So I would look at it as if we are trying to build a business for a very long-term horizon, we are trying to do so where we have got a lot of excess capital, and we are pretty comfortable that mid-teens is just a good target for us to maintain. Sohrab Movahedi: Thank you for taking the questions. Operator: Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call back over to Ms. Katie Battaglia for any closing remarks. Cherilyn Radbourne: Thank you everybody for joining us today. And with that, we will end the call. Operator: Ladies and gentlemen, thank you for participating. This concludes today’s program. You may now disconnect.
Operator: Good morning. Thank you for standing by. Welcome to Sylvamo Corporation’s fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, you will have an opportunity to ask questions. To ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw a question, press star 1 again. As a reminder, your conference is being recorded. I will now turn the call over to Hans Bjorkman, Vice President, Investor Relations. Hans, the floor is yours. Thanks, Kate. Hans Bjorkman: Good morning, and thank you for joining our fourth quarter and full year 2025 earnings call. Our speakers this morning are John Sims, Chief Executive Officer, and Donald Devlin, Senior Vice President and Chief Financial Officer. Slides two and three contain important information, including certain legal disclaimers. For example, during the call, we will make forward-looking statements that are subject to risks and uncertainties. We will also present certain non-U.S. GAAP financial information. Reconciliations of those figures to U.S. GAAP financial measures are available in the appendix. Our website also contains copies of the earnings release as well as today’s presentation. With that, I would like to turn the call over to John. Thank you, Hans, and good morning, everyone. John Sims: I am glad that you are joining our call. You referenced them on slide four. Before we begin discussing full year and quarterly results, I want to start by sharing with you my vision for Sylvamo Corporation, a vision that is fully embraced by our board and our leadership team. My vision is Sylvamo Corporation will be legendary. Yes, legendary. To be legendary is to defy expectations, create lasting value, and inspire others. And what will we be legendary for? We will be legendary for the way we relentlessly Hans Bjorkman: pursue John Sims: and achieve world-class excellence in all that we do. This will create substantial and lasting value for our employees, customers, and shareholders and will enable us to be the employer, supplier, and investment of choice. Let us move to slide five. We will strive to achieve world-class standards in the areas that define our success. These are safety and well-being. We will foster a resilient safety and well-being culture in which serious injuries are eliminated and every team member returns home safe every day. Employee engagement. We will be admired for cultivating a workplace where employees feel valued, empowered, and inspired. Inspirational leaders at every level of Sylvamo Corporation will unite their teams around our vision and amplify each individual employee’s talent by listening to them and engaging them to drive continuous improvement. We are passionate about making paper that educates, connects, and enriches lives, and we will set high standards to achieve world-class performance together. Customer centricity. We will set a new standard for customer experience and loyalty, striving to be truly outstanding. Our commitment is to deliver superior value and service to our customers, earning their trust and loyalty. This is critical to our strategy. Operational excellence. We will achieve best-in-class levels of efficiency, reliability, and performance in our mills and supply chain, ensuring that our operations consistently deliver to the highest standard. Cost leadership. We will attain industry-leading cost effectiveness through disciplined management and continuous improvement, strengthening our competitive position and ensuring sustainable results. Finally, sustainability. We will operate responsibly, protecting and enhancing forests, uplifting communities, and improving our planet’s future through sustainable practices. Let us go to slide six. As Sylvamo Corporation’s CEO, my commitment to you is to allocate capital wisely and to focus on long-term value creation. I will communicate transparently, providing context, rationale, and honest assessment of our decisions and performance while making disciplined data-driven decisions that position the company for sustainable success and strengthen Sylvamo Corporation for decades to come. We seek to attract and retain high-quality long-term shareowners who share our vision for disciplined capital allocation and sustainable value creation. In 2024, following extensive dialogue with our long-term shareowners, we discontinued providing full-year adjusted EBITDA and free cash flow guidance. That decision reflected our belief that long-term value creation is best supported by disciplined capital allocation rather than focusing on short-term earnings targets. After careful consideration, we decided to discontinue providing quarterly adjusted EBITDA outlook. We believe this change further aligns our external communications with how we manage the business and our goal to attract and retain high-quality long-term shareholders who share our vision of long-term value creation. And, Pauline, this decision does not represent a reduction in transparency. As you will see, we will provide a lot of detail throughout this call. We also will continue to provide selected financial metrics, as outlined on slide 25 in the appendix. Now let us discuss the full-year results. Turning to slide seven, you can see that in 2025, we generated 12% return on capital as we executed our strategy during challenging industry conditions. We maintained a very strong financial position and balance sheet, achieving a net debt to adjusted EBITDA of 1.6 times. We earned $448,000,000 in adjusted EBITDA, generated $44,000,000 in free cash flow, and returned $155,000,000 in cash to shareholders. We reinvested $224,000,000 across our manufacturing network and our Brazil forest lands to strengthen our low-cost position. We also accelerated development of high-return capital investment. We are committed to being the investment of choice and believe we can generate significant shareholder returns in the future by executing our strategy. Slide eight highlights our 2025 full-year key financial metrics. Our adjusted EBITDA was $448,000,000 with a 13% margin. We generated $44,000,000 of free cash flow, and our adjusted operating earnings were $3.54 per share. Operator: Let us move to slide nine. John Sims: Our fourth quarter highlights include commercial success, with our uncoated freesheet sales volume increasing quarter over quarter by 9%. Our operational teams also executed well and our paper machines’ productivity continued to improve. We took advantage of a planned maintenance outage at our Eastover mill to begin the upgrades to our paper machine project and significantly advance the work on our woodyard project. Let us move to the next slide. Slide 10 shows our fourth quarter key financial metrics. In the fourth quarter, we earned adjusted EBITDA of $125,000,000 with a margin of 14%, and free cash flow was $38,000,000. We generated adjusted operating earnings of $1.08 per share. I will now turn the call over to Donald Devlin to review our performance in more detail. Thank you, John, and good morning, everyone. Donald Devlin: Slide 11 contains our fourth quarter earnings bridge John Sims: versus the third quarter. Donald Devlin: In the fourth quarter, we earned $125,000,000 of adjusted EBITDA compared to $151,000,000 in the prior quarter. Pricing/mix was unfavorable by $21,000,000, primarily due to mix across the regions, as well as lower paper prices in Europe and some of our Brazilian export markets. Volume increased by $18,000,000, largely due to Latin America and North America. Operations and other costs were unfavorable by $4,000,000, primarily due to seasonally higher costs in Europe. Planned maintenance outage costs were unfavorable by $17,000,000 as we executed an outage at our Eastover mill after having no planned outages in the prior quarter. John Sims: Input and transportation costs were slightly unfavorable by $2,000,000. Let us move to slide 12. Donald Devlin: The overall European industry supply and demand environment continues to be challenging. However, market conditions have started to show signs of improvement, as pulp prices began to rebound in the fourth quarter and the improvement continues into the first quarter. Our European cut-size paper prices exited 2025 €100 per ton below where we exited the year in 2024. We communicated paper price increases to our customers and expect the realization to begin in the second quarter. Wood costs in southern Sweden are starting to ease, although there is typically a three- to six-month lag before we see relief in our operations. In Latin America, demand is moving from the seasonally strongest fourth quarter to the seasonally weakest first quarter. This is also negatively impacting our geographic mix in the first quarter. We communicated paper price increases to our customers in Brazil and have started to see realization in January. We also communicated paper price increases to our export customers across other Latin American countries as well as the Middle East and Africa region, and are starting to see some realization in those regions in February. Turning to North America, industry operating rates are improving. After peaking in June, imports into North America have declined significantly throughout 2025. We communicated paper price increases to our customers and expect the realization to begin in the second quarter. John Sims: 2026 will be a transition year for North America as we work through short-term capacity constraints Donald Devlin: with the Riverdale supply agreement exits and the execution of the Eastover investments. The next few slides will provide the details and context for how this will impact this year’s financial results. Slide 13 shows our capital spending outlook, which is expected to be $245,000,000 in 2026 as we execute the majority of the $145,000,000 investments at our Eastover mill. We expect 2027 to return to prior levels as we wind down these strategic Eastover investments, and we are prioritizing strategic projects with the fastest payback so that 2027 and beyond reflects lower costs, higher efficiency, and stronger cash conversion potential. Let us go to slide 14. To provide an update on our Eastover investments, these high-return strategic projects will add 60,000 tons of uncoated freesheet, reduce costs, and improve our mix and efficiency. The paper machine optimization project is on schedule, with the bulk of the work to be completed in the fourth quarter during a 45-day planned maintenance outage. This outage is about 30 days longer than a typical maintenance outage. A brand-new state-of-the-art sheeter will replace an existing cut-size sheeter. It is also on schedule and will be installed at the same time as the paper machine optimization work. The woodyard modernization project is on track, and we will be ramping up a hardwood operation in the second quarter. We are planning to start up the softwood operation in 2027. Again, we are investing in high-return projects like these to generate future earnings and cash flows. On slide 15, let me walk you through how we see the North American sales volume bridging from 2025 to 2026. First, we expect to receive about 100,000 tons from Riverdale this year, which is 160,000 tons less than 2025. Second, the extended planned maintenance outage at Eastover will result in 30,000 fewer tons this year. To narrow this gap, we will be sourcing about 80,000 tons from our European operations. This will have a negative adjusted EBITDA impact to our European business of about $20,000,000 due to tariffs and freight costs. We expect to gain another 35,000 tons productivity year over year. We will also bring some additional external volume into our system to ensure we continue to serve our customers during this transition. The net difference is around 55,000 tons of lower sales volume in North America. John Sims: With the majority occurring in the first quarter as we use our capacity to build inventory. Donald Devlin: As a result, we will have an approximate $20,000,000 negative adjusted EBITDA impact in North America in the first quarter due to lower sales volume. On top of these items, we will have some additional impacts, which I will provide more detail on in the next slide, 16. We have a clear plan to meet our most valuable customer needs during this transition. We are building inventory ahead of the extended Eastover outage in the fourth quarter, importing from our European operations, and we will use external conversions to supplement our internal sheeting capacity. We will then draw down inventory as we move through the second half of the year, as the Riverdale supply agreement winds down John Sims: and the strategic investments at Eastover are implemented in the fourth quarter. Donald Devlin: In 2026, we will expect a negative $45,000,000 adjusted EBITDA impact in North America from the combined sourcing mix, external conversion, freight impacts, and one-time outage costs. Working capital timing over the course of the year nets to a negative $25,000,000 overall. It is related to inventory build and drawdown throughout the year and the settlement of our payable to International Paper for the Riverdale tons we buy. Let us go to slide 17 to pull all of this together. So here is a summary of the year-over-year adjusted EBITDA cash impacts that we expect to incur John Sims: over the course of 2026. Donald Devlin: North America adjusted EBITDA impacts will total approximately $65,000,000 across these three items: $20,000,000 from lower sales volume of 55,000 tons, $20,000,000 from external sourcing, John Sims: conversion costs, and freight, Donald Devlin: and $25,000,000 from Eastover one-time outage costs. John Sims: Not related to this transition, but we also expect Donald Devlin: a $10,000,000 charge in the first quarter from International Paper due to unusually high energy costs resulting from the recent cold weather that impacted the Riverdale mill. Europe adjusted EBITDA impacts will total approximately $20,000,000 due to U.S. tariffs and freight on the 80,000 tons we will be shipping to the U.S. From a free cash flow standpoint, in addition to the flow-through of these adjusted EBITDA impacts, we should expect a negative $25,000,000 impact related to working capital. In summary, 2026 is a transition year for North America, and the $85,000,000 of one-time costs will largely not repeat in 2027. John Sims: You will also not have the one-time $10,000,000 charge Donald Devlin: from Riverdale for the cold weather impacts that I mentioned. We are doing all of this in order to serve our valuable customers and be able to ramp up the Eastover volumes in 2027. After we gain the additional 60,000 tons of paper machine optimization project and 30,000 tons from the non-repeat of the extended outage, we will benefit from the additional tons from Eastover, the efficiency and flexibility and lower cost of the new sheeter, as well as low cost from Eastover. On slide 18, John Sims: this illustrates our planned maintenance outage schedule for the full year Donald Devlin: by region and by quarter. Unlike last year, when we had major planned maintenance outages in both mills in Europe, this year we only have a major outage at the Nymölla mill and it is in the fourth quarter. 2026 is also different than in the past few years where we had more than 80% of the total annual planned maintenance outage cost in the first half. This year, we have more than 50% of the total cost in the fourth quarter, as we complete the Eastover investment. John Sims: Strive to create long-term shareholder value by executing our strategy and delivering on our investment thesis. Donald Devlin: Keeping a strong financial position is the cornerstone of our capital allocation framework. This allows us to reinvest in our business, to strengthen our competitive advantages through the cycle and increase future earnings and cash flow. John Sims: Since becoming an independent company just over four years ago, Donald Devlin: we have earned $2,500,000,000 in adjusted EBITDA. We invested over $800,000,000 to strengthen our business, generated over $960,000,000 in free cash flow, John Sims: reduced debt by more than $675,000,000, and returned over a half $1,000,000,000 of cash to shareowners. Donald Devlin: I will now turn the call back to John on slide 20. John Sims: Thank you, Don. Our flagship growth strategy remains unchanged. We will invest in low-risk, high-return projects to strengthen our uncoated freesheet capabilities and grow earnings and cash flow. This strategy is underpinned by three fundamental beliefs. The world will continue to rely on uncoated freesheet to communicate and entertain for years to come. Our North American and Latin American operations offer returns on smart investments in our assets and business processes that are well above cost of capital. Our competitive advantages—low-cost assets, iconic brands, strong customer relationships, global footprint, and talented teams—position us successfully to deliver on our strategy. Our capital allocation philosophy also remains unchanged. We will deploy every dollar with the goal of improving our competitive position and delivering the best possible shareowner returns every time. We will continue to maintain a strong balance sheet, reinvest in our business with discipline to strengthen operations and customer experience, and return cash to shareowners. Let us go to slide 21. As I stated in my CEO letter to shareowners a few weeks ago, 2025 and 2026 will be low points in our free cash flow generation as we weather the cyclical industry downturns, particularly in Europe, and complete investments at our Eastover mill. We are focused on our long-term value creation, which will generate strong and sustainable results by diligently executing our flagship growth strategy, adhering to our disciplined capital allocation principles, becoming more customer centric, institutionalizing lean management principles, and digitally transforming our business operations. As industry conditions turn, our capital spending normalizes, and benefits from our investments begin to materialize, we have the potential to generate annually greater than $300,000,000 of free cash flow and greater than 15% returns on invested capital. I will conclude on slide 22. We seek to attract and retain high-quality long-term shareholders who share our vision for disciplined capital allocation and sustainable value creation. We look forward to deepening our dialogue at Investor Day later this year, where we will share more details on our strategy, capital allocation priorities, and progress towards achieving our vision. I will now turn it over to Hans. Thank you, John, and thanks, Don. Hans Bjorkman: Alright, Kate. We are ready to take questions. Operator: If you would like to ask a question, please press star then the number 1 on your telephone keypad. To withdraw a question, press star 1 again. Thank you. Our first question is from Daniel Harriman with Sidoti. Your line is open. Daniel Harriman: Hey, guys. Good morning. Thank you so much for taking my questions. I will start with two regarding operations in Europe, and then I will get back into the queue. But first, you called out wood costs in Sweden, John Sims: then I was hoping you could update us on your efforts to improve mix and win new customers in the region. I believe you called out a few of those items on the third quarter call. And then similarly, with cut-size pricing down in the region versus the prior year, when we think about potential margin improvement in Europe, in fiscal 2026 and into 2027, how dependent is that improvement on price realization versus some of the internal levers you can pull? John Sims: Hey, Daniel. Thanks for your question. It is John Sims. In terms of the efforts around improving mix, one key driver to that was an investment we made at the Säffle mill, which was successfully started up and implemented in the last part of the fourth quarter. And I can tell you that what that does is it drives us, allows us to produce and sell more roll business into the converting markets versus commodity cut-size out of the Säffle mill. And I can tell you that our order books are full in terms of that segment, and so we are executing well against our plan to improve the mix at our Säffle mill. In terms of pricing, it has been a very tough market in Europe. It has been a long, probably one of the longest downturns that we have seen. Margins are very compressed. We have been significantly working to reduce costs at all our facilities, focusing on fixed costs at our Säffle mill and improving operational performance at our Nymölla mill. We exceeded our targets last year. We are going well with that. We have got additional plans. However, we do need the market to improve, and we are seeing that. So we talked about it. Pulp prices are going up in Europe. We have announced price increases to our customers in Europe as well as the export markets that we serve out of Europe. Those prices will be—we will start to realize that, though, in the second quarter. We will not see that in the first quarter, and that is going to be important to the margin improvement in Europe. We need to have prices go up. Current margins just are not sustainable at the current level. Daniel Harriman: Great. Thanks so much, John. Operator: Our next question is from George Staphos with Bank of America. John Sims: Hi. Donald Devlin: Thanks for taking my question. Good morning, everybody. Appreciate the details. My two questions, and I will go back in queue, are a little bit longer term to start. George Staphos: John, we appreciate the review of your vision. Donald Devlin: And your shareholder letter. There is a lot of focus on capital allocation and returns and in some ways, defending what the company has been doing. John Sims: And that is all well and good. Just if you could tell us, have you been getting more investor questions on that topic in the last Donald Devlin: couple of quarters that prompted the discussion from you on your capital allocation? What is your discussion with investors, to the extent that you can comment, regarding that topic? Second point, as you think about Europe, John Sims: how do you see Nymölla fitting? It is easy to get Donald Devlin: down on a business at the trough. Right? And your George Staphos: charge Donald Devlin: as leaders is to see and look longer term. And we get that. How does Nymölla fit? Säffle looks like it is doing great. Nymölla probably has been a bit disappointing. How do you see that fitting along the long-term picture for Sylvamo Corporation? Thank you. John Sims: Yeah. Good morning, George, and thanks for those questions. I think when it comes to the capital allocation question that you are asking, it is really the questions that we have gotten from investors. We have not gotten many questions. We have gotten a lot of support in terms of alignment and agreement with our capital allocation priorities. I think one of the things that I have been focusing on as the new CEO is to reassure with investors what is going to change and what is not going to change going forward. And one of the things that we are stressing is we are not changing our strategy. We are going to be focused on our uncoated freesheet, nor will we be changing our capital allocation strategy. The priorities will be maintaining a strong balance sheet, reinvesting back in the business where it makes sense that we can generate high returns, and then returning cash to shareowners. And so just reaffirming that. I mean, I will take an opportunity. What is going to change, I think, is really we are going to transform the business. We are going to go through a lean transformation. Why? Because we want to focus on becoming much more customer centric with that, and we want to be able to drive continuous improvement, accelerate it, and reduce our cost, meeting customer needs while eliminating all waste. So we are going to be going through that transformation, if you will. We are going to be leading that off in Latin America, and then we will be driving that across all the businesses. Your next question, George, is around Nymölla and how that fits. You know, Europe has always been a bet on the future in terms of business. The market has been very difficult. We talked about it. The down cycle has been longer and deeper than what we expected. The other thing with Nymölla is the wood cost, which has made it much more challenging. The wood cost increased significantly more than what we expected going in there. That is turning, finally. We are starting to see some reductions in the wood cost, which Don mentioned. Now, it takes about three to six months for us to start to see that, and we will start to get the impact of that more toward the second quarter of the year. But as we look at Nymölla’s fit for us George Staphos: is John Sims: has always been a good fit for us because, number one, it is solely focused on uncoated freesheet. The cost position is good if the wood cost can get back down to where it needs to be, not where it is at right now. So the other thing is the mix for Nymölla Donald Devlin: is very attractive because it John Sims: serves both the cut-size as well as the printing communication. So it has the capability to serve both of those markets, which was a good fit and also very synergistic for us. But as we said, you know, as I said, we are evaluating everything we can do in terms of around Europe to improve our performance there. We talked about that, I think, on the last call. We believe we have the right strategies for both facilities. George Staphos: We believe that we have made a management change there. John Sims: We have got the right leadership. We have got very talented teams. We have got a really good focus on trying to improve those businesses. We are looking at all options, if you will, as we try to focus on improving our businesses in Europe. Donald Devlin: Hey, John. Just a quickie, and I will turn it over. Related to wood cost, I would not expect it would be the case, but is there any sense to maybe looking at purchased pulp John Sims: and taking the, you know, the Donald Devlin: the pulp line offline per period? Or not? Thanks. I will turn it over. John Sims: Yeah, George. I mean, yes, we are looking at all options, whether that makes sense or not. And does it currently? We are still evaluating that. Donald Devlin: Okay. Interesting. Alright. Thank you. Operator: Before going to the next question, again, if you would like to ask questions, please press star then the number 1 on your telephone keypad. To withdraw a question, press star 1 again. Our next question is for Matthew McKellar with RBC Capital Markets. Your line is open. Matthew McKellar: Good morning. Thanks for taking my questions. I would like to just follow up on George’s last question about fiber costs. Kind of a related question. I think Lenzing wants to scale up production at the TreeToTextile facility at Nymölla. Will that have any direct or indirect impacts to your operations and cost there? Any kind of read-through to fiber costs kind of over the longer term? Appreciate some perspective there. Donald Devlin: Thank you. Yeah. Matthew, thank you. This is Don. So Hans Bjorkman: that will not have an impact on our fiber cost there for Nymölla. That project. John Sims: Great. That is straightforward. Thank you. Matthew McKellar: And just shifting over to the shareowners’ letter and some of the messages today, John, you are talking about lean management, digital transformation. Could you help us get a sense of the size of the opportunity you are thinking about here either in terms of profits or capital efficiency, and how that interacts with the digital—what kind of investments are John Sims: required to advance to the state you envision, Matthew McKellar: I think there is a comment that you are kicking off some of these initiatives in Latin America. Are you able to help us understand why that region is where you are focused first? Thanks. John Sims: Yeah. No. First, when it comes to the lean transformation, it is really driving an employee-driven continuous improvement. And we want to double in terms of the improvement that we have been getting across our facilities in terms of cost but also in terms of satisfying our customers’ needs. And, really, part of our strategy and key to our strategy is increasing customer loyalty in all our regions. And we need to become more flexible to meet our customers’ needs. We need to reduce lead times. We need to increase our perfect order in terms of delivering to them. And so, yes, it is hard to quantify right now in terms of absolute dollars what we believe and expect, but the expectation is high. We are raising the bar in terms of our improvement initiatives. And we believe that Lean principles will be a key driver of that. And, you know, I just had a discussion with the Latin America team about them leading this effort for us and why we are starting with Latin America as leading, and because we think they will have the greatest success. We will have the greatest success in launching this with them. Why do we do that? Because we believe that if you look at the past performance of our Latin American team, a lot of it has been driven by using the Lean tools, if you will, and where we want to get in terms of world-class performance in our operations and servicing our customers. They have been there. We want them to get there again, and they can pave the way for Sylvamo Corporation. Great. Thanks for that detail. Matthew McKellar: And then last one for me, I will turn it over. I am a bit surprised to see you paused share repurchase in the quarter. Apologies if I missed something in your opening remarks. Is there anything keeping you out of the market? I think you mentioned some interaction with a significant shareholder. Please correct me if I have captured that incorrectly. Or is that maybe in recognition of just a heavier CapEx year in 2026? Thanks. Donald Devlin: Yes, Matthew, good question. So when we think about capital allocation, we also have to consider the cash flows that we expect. And so as we look into John Sims: 2026, the plans we have, the capital intensity plus the inventory build that I discussed earlier and the cash required for that. We thought it was prudent not to make share repurchases in the quarter. Donald Devlin: And John Sims: Okay. Think about what Donald Devlin: Okay. Yeah. Matthew, when you think about what we did in the year, between dividends and share repurchases, it was $155,000,000 in 2025. So it was George Staphos: 350% of our free cash flow for the year. So we felt like we were sufficient in the year Donald Devlin: and, thinking forward, we are prudently managing cash. John Sims: Thanks very much. I will turn it back. Operator: Before going to the next question, if you would like to ask questions, please press star then the number 1 on your telephone keypad. To withdraw a question, press star 1 again. Thank you. Our next question is from George Staphos with Bank of America. Your line is open. John Sims: Thanks for taking my follow-ons. Donald Devlin: I will ask three questions and turn it over. So John Sims: John, Don, the $10,000,000 additional George Staphos: I assume that is in addition to the $85,000,000 net negative from the footprint realignment, if you will, Donald Devlin: for 2026. So in reality, it is a—I realize it goes away, but it is a $95,000,000 negative. Would that be correct? George Staphos: Number one. Number two, John Sims: companies do Donald Devlin: analyst days, investor days, when they have something to share that is above and beyond what you have talked about over the course of quarters. And, you know, actually, credit to you, you have done a lot over the last couple of quarters. You talked about your vision, talked about your capital allocation, talked about the projects that are coming. So what are you hoping to convey that has not already been conveyed in your last couple of quarters in an analyst day that will come up in 2026? Lastly, John Sims: we appreciate the detail on the effect of outages on Riverdale, Donald Devlin: on Eastover, etcetera, and the impact that is having on costs and also on working capital, George Staphos: yet Donald Devlin: I am curious why you think John Sims: providing guidance, even quarterly guidance, Donald Devlin: encourages more of a short-term nature? George Staphos: You know, speaking for Donald Devlin: analysts, investors on this call, we ultimately come up with our own forecast. We appreciate the detail. We would like to know what is in the assumptions. And I am just curious why you view George Staphos: providing no guidance Donald Devlin: as a benefit to longer-term investors and analysts as opposed to providing the guidance. Thank you. Good luck in the quarter. So, John, I will take the—George, thank you for the questions. I will take John Sims: the first one. Donald Devlin: There on the $10,000,000. So, yeah, that was related to Riverdale and it is in addition to the $85,000,000. John Sims: So you are correct. It is $95,000,000. Donald Devlin: And it is one-time cold weather. The gas prices spiked and, you know, so you are basically thinking peak prices and with very short-term notice. John Sims: So that was our portion of Donald Devlin: the cost associated with Riverdale, and it would be a non-repeat. And relative to Investor Day, I will start, and then John, of course, add in. As you think about Investor Day and what we want to share, if you think about John’s vision and our road back to $300,000,000 in cash flow and 15% return on invested capital, we are going to share the path to get there. Right? We will share the things that we are going to do, you know, across our business for lean, the things we are going to do digital John Sims: and the things we are going to do for customers to drive value Daniel Harriman: in operations. And I think that is above and beyond, especially considering where we are today. John, would you add? Yeah. John Sims: Just to add to that, you know, we really have not had an Investor Day since we spun from International Paper, which is a long time ago now. But we felt, with the transition to me as the new CEO, it is very appropriate to be able to come out and have meetings with investors where we can talk about, as Don said, what is our strategy. I think it is pretty clear. We said we have not changed it, but now how do we execute by region, and what are these initiatives that we are just talking about in terms of lean, digital transformation, and other efforts that we believe support and execute our strategy to grow earnings and cash flow. So that is the reason we are going to do that. And then, you know, finally, back to your question around dropping the quarterly guidance. I think it really still goes back to why we even dropped the full-year guidance. We are going to continue to provide a lot of detail like we did even in this call. But we believe that we manage the business on a long-term basis. That is how we focus, not on a quarterly basis. Of course, we are measuring and following our results daily in terms of how we are tracking against our longer-term plans, but our belief is that this aligns more with what we are seeking, which is quality long-term shareholders who share our vision for long-term value creation. Donald Devlin: Hey, John. I take the answers, and ultimately, you know, it is up to you to run the company as you and the board see fit. But running a company on a long-term basis and providing guidance, frankly, are two separate George Staphos: topics. Donald Devlin: And, you know, again, respectfully, George Staphos: you should trust that the investor and analyst take your assumptions and your guidance, and then we come up with our own forecast. So I do not think one means you run the company any Daniel Harriman: differently than you would have otherwise. For what it is worth. But we appreciate the time. We appreciate the detail. Just want to make that comment. And we will let you go. Good luck in the quarter. John Sims: Appreciate your comment. Thank you, George. Operator: I will now turn the call back over to Hans Bjorkman for closing comments. Hans Bjorkman: Alright, John. A lot we covered. I will give you one more shot to close up and wrap up the day. John Sims: Thank you. And I thank again everybody for joining this call. I think 2026 is going to be an exciting year for us. We will be executing our most significant investment in our Eastover mill that will drive a lot of value in the years to come. We are also beginning our lean transformation, focusing on exceeding our customers’ expectations and driving improvement across our operations, as well as making significant progress on our digital transformation. As I said, we are focused on long-term value creation and will generate strong and sustainable results by diligently executing our flagship growth strategy and adhering to disciplined capital allocation principles. As industry conditions turn, and they are, our capital spending normalizes and the benefits from our investments begin to materialize. We have the potential to generate annually greater than $300,000,000 of free cash flow and greater than 15% return on invested Daniel Harriman: capital. John Sims: Thank you again for joining the call. Hans Bjorkman: Thanks, everybody. We appreciate your interest, and we look forward to the continued dialogues over coming weeks and months. Have a great day. Operator: Once again, we would like to thank you for participating in Sylvamo Corporation’s fourth quarter 2025 earnings call. You may now disconnect.
Operator: Hello, and welcome to Exelon Corporation's Fourth Quarter Earnings Call. My name is Gigi, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's webcast is being recorded. During the presentation, we will have a question-and-answer session. If you would like to view the presentation in full-screen view, click the full screen button by hovering your computer mouse cursor over the PowerPoint screen. Press the escape key on your keyboard to return to your original view. Finally, should you need technical assistance, as a best practice, we suggest you first refresh your browser. If that does not resolve the issue, please click on the help option in the upper right-hand corner of your screen for online troubleshooting. It is now my pleasure to turn today's program over to Ryan Brown, Vice President of Investor Relations. The floor is yours. Great. Thank you, Gigi. Ryan Brown: Morning, everybody. Thank you for joining us for our 2025 fourth quarter earnings call. Leading the call today are Calvin G. Butler, Exelon Corporation's President and Chief Executive Officer, and Jeanne M. Jones, Exelon Corporation's Chief Financial Officer. Other members of Exelon Corporation's senior management team are also with us today, and they will be available to answer your questions following our prepared remarks. Today's presentation, along with our earnings release and other financial information, can be found in the Investor Relations section of Exelon Corporation's website. I would also like to remind you that today's presentation and the associated earnings release materials contain forward-looking statements, which are subject to risks and uncertainties. You can find the cautionary statements on these risks on slide two of today's presentation or in our SEC filings. In addition, today's presentation includes references to adjusted operating earnings and other non-GAAP measures. Reconciliations between these measures and the nearest equivalent GAAP measures can be found in the appendix of our presentation and in our earnings release. With that, it is now my pleasure to turn the call over to Calvin G. Butler, Exelon Corporation's President and CEO. Thank you, Ryan, and congratulations on the new role, and good morning to everyone. We appreciate everyone joining us today for our fourth quarter earnings call. As we reflect on another successful year and celebrate the close of our twenty fifth anniversary, we are proud to once again deliver exceptional results for our customers, employees, and investors. Across Exelon Corporation, our companies bring more than eight hundred years of collective experience. Even with that long view, this moment stands out. The industry is changing at a speed and scale rarely seen. With that comes both great responsibility and opportunity. Calvin G. Butler: I have never been more confident that Exelon Corporation has the people, the discipline, and the platform to continue to lead the energy transformation and meet this unprecedented demand. This is underscored by our recent results. As you saw from this morning's release, we delivered another strong year. For 2025, we reported adjusted operating earnings per share of $2.77, delivering above expectations. This continues our track record of exceeding the midpoint of guidance in each year as a standalone utility. Since 2021, we have achieved a 7.4% annual earnings growth rate and 8% rate base growth in 2025, highlighting our ability to navigate changes and consistently execute. This steady performance is a direct result of a continued focus on affordability and our ability to deliver investments that directly benefit our customers, providing above-average performance at below-average rates. It was also another exceptional year operationally. Exelon Corporation continues to set the standard for the industry. Our utilities maintained top quartile reliability metrics once again, and we are ranked one, two, four, and seven amongst our peers based on 2024 benchmarking data. This level of performance is nothing new. In fact, we have delivered top quartile reliability for over a decade. It is who we are and central to our mission. But do not get me wrong. Consistency does not come easy. It is the direct result of a culture of continuous improvement, innovation, and a steadfast focus on targeted investments that maximize value for our customers. These investments not only prevent outages and deliver best-in-class service, but they directly benefit local economies, with every $1 million invested creating eight jobs or $1.6 million of economic output. I am truly humbled by the commitment and sacrifice of our employees that make this level of service possible. Recently, their dedication was on full display during Winter Storm FERN. Despite record low temperatures, our investments withstood heavy snow and icing across our territories, maintaining strong reliability with only minimal disruptions. Fewer than 1% of our customers experienced outages, even as the extreme weather impacted our regions. This reflects the tremendous work of our employees over the past decade to invest in the safety, reliability, and resiliency of our system. The performance is remarkable when accounting for the scale of the storm, as well as the demand put on the grid. FERN resulted in the PJM RTO experiencing five days in a row of peak load ranging from 135 to 140 gigawatts, reaching 97% of the all-time winter peak. Our investments, combined with our employees’ around-the-clock dedication, kept nearly 11 million electric and gas customers safe and warm when they needed us most. I would like to express my gratitude to all of our employees who have supported storm restoration efforts locally and afar. Thank you for all that you do. Over the last quarter, we also made significant progress on the regulatory front. As Jeanne will detail shortly, it has been an active few months. We have achieved several key milestones, including final settlements for the Atlantic City Electric and Delmarva Gas rate cases, reconciliation orders at ComEd and BGE, and the filing of ComEd's second multiyear grid plan. This progress is built on a foundation of hard-earned trust. We work collaboratively with stakeholders and our communities to ensure that our investments align with the specific goals and needs of the states we serve. Looking ahead, we now expect to invest $41.3 billion of capital to support our customers, with more than 70% of the plan-over-plan increase driven by transmission, where we continue to have a unique opportunity and significant momentum. Our size and scale, multistate footprint, and operational expertise position our utilities to capitalize on the growing need for transmission investments in reliability and resiliency, accelerated by the pace of new business growth. This progress is further evidenced by our success in the recent PJM reliability window results, where $1.2 billion of incremental Exelon Corporation investment was recommended, including a jointly developed solution with NextEra. This comes on the heels of other recent large-scale transmission awards including Brandon Shores, Tri County, and the MISO Tranche 2.1 project. You should expect us to be active in future windows within PJM and other ISOs, leveraging our competitive advantages where appropriate. We continue to see robust demand in our jurisdictions, with anticipated load growth exceeding 3% through 2029. This is further reinforced by our large load pipeline, which is now further supported by an increasing number of signed transmission security agreements, or TSAs. Overall, our pure transmission and distribution capital plan is unique and truly differentiated. It is highly diversified across seven regulatory jurisdictions including FERC, with no one jurisdiction greater than 30% and no single project comprising more than 3% of the plan. It is also actionable. We have line of sight to each project that comprises the $41.3 billion, with a significant pipeline of incremental projects over the next five to ten years and the size and scale to execute efficiently. With continued returns on equity in the 9% to 10% range, we expect rate base growth of approximately 8% and annualized earnings growth of 5% to 7% through 2029, with the expectation of being near the top end of that range. We will continue to fund investments in a balanced and disciplined manner that maintains a strong balance sheet. For 2026, we are initiating operating earnings guidance of $2.81 to $2.91 per share. Our continued progress is clearly demonstrated by the scorecard on slide five, where we have once again met or exceeded every goal we set at the start of the year. At Exelon Corporation, commitments made are commitments meant. Ryan Brown: That discipline and credibility Calvin G. Butler: define who we are and shape how our teams operate every day. In addition to strong operational and financial performance, we continue to lead on customer affordability, which remains a top priority. We continuously drive cost out of the business through efficiency and innovation, maintaining a track record of cost growth well below inflation. In the past year, we executed a $60 million customer relief fund to support low- and moderate-income customers facing higher supply costs. We advanced innovative TSAs that prioritize large loads while ensuring existing customers remain protected. Our award-winning energy efficiency programs continue to deliver meaningful savings. We expanded connections of distributed resources, giving customers more ways to participate and save. We are steadfast in introducing innovative tools and processes to connect customers to low-income assistance. We continue to focus on actions like these that are directly within our control in addition to delivering safe, reliable energy while keeping bills as low as possible. In the meantime, we are also actively partnering with federal, RTO, and state leaders to address high supply prices and emerging reliability risk. The supply challenge is real, but not insurmountable. We are encouraged by the growing national focus, including the recent announcement from the White House and our state governors advancing policies to incent new generation and improve affordability. As we have said before, we firmly believe it is going to require an all-of-the-above strategy that includes utility-generated, demand-side, and merchant solutions. This was further supported by the study released last week by Charles River Associates. The report is an urgent call to action, highlighting the risk of the status quo and the cost and reliability benefits of utility-generated energy. Specifically, they note that utility-generated power could have saved total PJM customers $9.6 to $20 billion in the 2028–2029 delivery year, while reducing the risk of potential future outages from energy shortages by approximately 85%. We are committed to continue to work with all stakeholders to advance policies that strengthen energy security as quickly and cost effectively as possible. Finally, I want to take a moment to reiterate why our platform and approach are best positioned for the years to come. As highlighted on slide six, our foundation is based upon a customer focus and industry-leading operations. With our size and scale, constructive regulatory frameworks, and diversified footprint and capital plan, we have a disciplined and defensive foundation that is resilient. Yet at the same time, we are well positioned to capture credible, meaningful opportunities for sustainable growth. We are excited about where we are headed. Our platform is designed to deliver an attractive risk-adjusted return and long-term value for all stakeholders. I will now turn the call to Jeanne to dive deeper into our 2025 results and share more details on our updated long-term plan. Jeanne? Thank you, Calvin, and good morning, everyone. Jeanne M. Jones: Today, I will cover our fourth quarter and full-year results, key regulatory developments, and updates to our financial disclosures, including 2026 guidance. Starting on slide seven, as Calvin noted, since becoming a standalone utility, we have continued to execute, and 2025 adds to that track record. In 2025, we delivered $2.73 per share on a GAAP basis and $2.77 per share on a non-GAAP basis for the full year, reflecting strong year-over-year growth. For the quarter, Exelon Corporation earned $0.58 on a GAAP basis Jeanne M. Jones: and $0.59 on a non-GAAP basis. Jeanne M. Jones: Full-year earnings Jeanne M. Jones: above our guidance range primarily benefited from favorable weather and storm conditions and the resolution of certain regulatory proceedings. Throughout the year, we also managed costs well across the platform, ensuring we could accommodate a range of outcomes while monitoring regulatory activity and weather in the fourth quarter. Quarter-to-date and year-to-date drivers relative to prior year can be found on appendix slides 37 and 38. Turning to slide eight, we are initiating 2026 operating earnings guidance of $2.81 to $2.91 per share. With much of our growth aligned with completed rate cases and continued strong cost management, the 2026 implied midpoint relative to the midpoint of our 2025 estimated guidance range is ahead of previous disclosures, reflecting midpoint-to-midpoint growth above 6%. Our performance in 2025 underscores our ability to deliver strong financial results amid uncertainty, all while operating at industry-leading levels and innovating to find new and creative ways to support our customers. We have executed operational efficiencies, capitalized on our growth opportunities, and identified more ways than ever to support our customers. We look forward to furthering this progress in 2026. Jeanne M. Jones: Looking ahead to the first quarter, we expect earnings Jeanne M. Jones: to be approximately 31% of the midpoint of our projected full-year earnings guidance range, which is in line with historical averages. This accounts for completed regulatory filing, anticipated revenue shaping, and O&M timing, as well as normal weather and storm conditions throughout the quarter. Turning to slide nine. We executed another busy regulatory calendar in 2025, marking significant milestones and reaching final resolution on open reconciliation and key rate cases, providing cost recovery for the next several years. Starting with Atlantic City Electric, in November, the New Jersey Board of Public Utilities approved a settlement supporting the recovery of $54 million associated with grid improvements and modernization investments in line with New Jersey's energy master plan and the Clean Energy Act at a 9.6% ROE. New rates went into effect at the end of December 2025. Also, in December, the Delaware Public Service Commission issued a final order on the Delmarva Power Gas rate case, approving a settlement that supports the $21.5 million revenue requirement and 9.6% ROE, recovering various reliability investments and LNG plant upgrades, which protect customers from price volatility during peak periods. Rates went into effect at the beginning of this year. In addition to closing out base rate case activity, we also received final orders in our open reconciliations at BGE and ComEd in December, gaining clarity on the recovery of our investments from 2023 and 2024. While we were disappointed to receive about half of the BGE reconciliation, we realigned capital accordingly. Finally, moving to our core regulatory activity for 2026, the Pepco Maryland base rate case continues to progress according to the procedural schedule with intervenor testimony filed at the end of last month. A final order is expected in August. In December, Delmarva Power filed an electric base rate case in Delaware, requesting a net revenue increase of $44.6 million to support system reliability investments, storm remediation, and storm damage costs. DPL also requested to implement a bill stabilization adjustment, which will offer customers more predictability as seasonal temperatures grow increasingly volatile. DPL expects to be able to implement interim rates in effect on July 9. Finally, on January 16, ComEd filed its multiyear grid plan in Illinois requesting an approval of an investment plan covering 2028–2031 in support of the priorities laid out in the state's CEJA and CRGA bill. A final order is expected in December, and the company expects to file its next rate filing in 2027. On slide 10, we provide updated utility CapEx and rate base outlook through 2029. We plan to invest almost $10 billion in 2026 and a total of $41.3 billion over the next four years, an increase of $3.3 billion or 9% from the prior four-year planning period. Incremental investments reflect updates to align with recently approved rate cases and jurisdictional priorities and an increase in transmission investment. Of the overall increase, approximately 70%, or $2.3 billion, is attributable to incremental transmission investments driven by the structural trends that underpin the energy transformation in our jurisdiction: increased demand for high voltage investments and capacity expansion to support large load growth, evolving generation supply, and the reliability and resiliency needs of grid customers to withstand increasingly volatile weather. Jeanne M. Jones: In fact, a majority of the additional transmission relates to continued Jeanne M. Jones: system performance and capacity expansion across our platform, supporting incremental data center load in addition to the gradual replacement of an aging network. Our plan also includes an additional year of investment of our two largest transmission projects, Brandon Shores and Tri County, going into service in 2028 through 2030, along with the early spend of the MISO Tranche 2.1 project, which goes into service in 2034. Our annualized rate base growth of 7.9% over the next four years reflects an increase from the prior year plan, with a projected addition of nearly $23 billion in rate base from 2025 to 2029. Having executed within 2% of our capital plan since 2023, we are confident we will execute this next stage of growth, driving progress towards economic and energy goals and always prioritizing our customer needs in everything that we do. Moving to slide 11, our size and scale, award-winning reliability, and expertise in owning and operating 765 kV lines uniquely position us to capitalize on additional transmission opportunities that enable us to grow our transmission rate base CAGR by over 15% from 2025 through the end of the guidance period. Coupled with our strength in execution, we now have line of sight to an additional $12 billion to $17 billion transmission opportunities over the next decade that strengthen and lengthen our plan, of which over 60% includes projects associated with our existing infrastructure, supporting continued reliability, generator deactivations, and providing additional operational flexibility and efficiency. This upside also includes an estimated $1 billion of transmission-associated high-density load projects with signed TSAs, where we now have a foundation for additional certainty in our pipeline. Agreements are presented to customers coming out of our cluster study process. We also remain optimistic about the work associated with MISO Tranche 2.1, with over $1 billion of investment in our ComEd service territory, which is now getting a cost allocation filing at FERC. Beyond these opportunities, we anticipate additional investment required to support our state public policy goals, particularly as our jurisdictions assess energy security and economic development needs. For example, achieving CEJA's goals amid growing economic development in Illinois will likely require billions in transmission investments. Finally, as we discussed in prior quarters, success in winning competitively bid projects offers additional upside. From our success in winning the Tri County project to the $1.2 billion in Exelon Corporation investment PJM has recommended in this recent window, our size, scale, and expertise position us well to pursue competitive opportunities outside of our service territories within and outside of PJM. Our ability to deploy almost $10 billion of capital annually over the next four years is only possible with a rigorous focus on cost management and delivering value through those investments, supporting customer bills at rates 19% to 20% below national averages. This focus is saving our customers approximately $580 million in O&M annually relative to what it would have been growing at a standard inflation level over the last decade. We feel confident we can continue to keep our expense growth well below inflation levels, demonstrating nearly flat expense growth from 2024 to 2026 and targeting no more than 2.5% adjusted O&M growth through 2029. As we talked about last year, our institutionalized team and a One Exelon culture are committed to delivering value. We have taken advantage of our focused operations along with our size and scale to continue to standardize and streamline our structure and operations. Driving out $580 million in annual O&M savings is no small feat, but it is something our customers and shareholders have come to expect. Exelon Corporation's unique platforms and industry best practices enable us to build upon these savings with a line of sight to additional opportunities. As investment needs grow to meet unprecedented load growth and reliability needs, our customers remain our top priority. Since 2021, Exelon Corporation's portion of the average customer bill as a percent of median income has remained relatively flat, growing only 10 basis points while maintaining top quartile reliability, which saved customers $1 billion in avoided outage costs last year alone. We have reduced annual customer interruptions by nearly 2 million since 2021 and made significant economic impact in our communities. Since 2021, we have employed 20,000 people, sustained 50,000 jobs, and have fostered nearly $60 billion in economic activity in our communities. Bringing value to our customers is foundational to what we do, and it is why we invest in the grid. That is why we have committed to keeping our O&M costs relatively flat from 2024 to 2026 and, in partnership with our jurisdictions, committed to support our customers through nation-leading programs and advocacy efforts. Conversely, the supply side of the average monthly residential bill in the Mid-Atlantic has increased up to 80% or more over the last five years. Customers are now paying more for less. Since July 2024, PJM customers have paid more than $32 billion as supply in the market declined 1.2 gigawatts. That is why we continue to be at the forefront of advocating for our customers across federal, PJM, and state levels, ensuring that every dollar our customers spend can be tied to additional value they receive. We are pleased that federal discussions proposed the extension of the PJM capacity auction collar, saving customers tens of billions of dollars through 2030. But our advocacy efforts do not stop there. We are committed to advocating for other policies, such as queue and rate design reforms that protect customers and support economic development. Our first-of-its-kind transmission security agreements filed at FERC do just that, providing a clear path to interconnection while protecting existing customers. We believe all solutions are required to support energy security and drive affordability. This includes encouraging state-procured solutions such as utility-generated power, which can bring certainty that the supply will be there, offer our states control, and ultimately benefit our customers. Turning to slide 14, with prudent O&M spending and $41.3 billion of projected capital spend driving 7.9% rate base growth, along with earning ROEs of 9% to 10%, we are projecting compounded annual earnings growth near the top end of 5% to 7% from our 2025 guidance midpoint of $2.69 per share through 2029. We continue to build momentum across our jurisdictions as we make progress on Pepco and Delmarva rate cases, the ComEd grid plan, and as BGE prepares to file later this year. We look forward to working with our stakeholders to align on the investments that benefit our customers, enable us to maintain and improve upon our operational excellence, all at a fair return. Maintaining our commitment to transparency, we have provided assumptions associated with our expected annual growth in earnings through 2029 on appendix slide 23. As you can see, we expect to deliver the out years near the top end of the 5%–7% range, allowing for flexibility of rate case timing and keeping us on track to deliver near the top end of our 5% to 7% annualized growth rate from 2025 to 2029. We also continue to project an annual dividend growth at 5% and anticipate paying out a dividend of $1.68 per share in 2026 in line with that growth. Finally, turning to slide 15, I will conclude with a review of our balance sheet and financing activity, where we have continued to de-risk and secure cost-effective capital to invest for the benefit of our customers. In December, Exelon Corporation corporate issued $1 billion in convertible debt, pulling forward over half of our planned long-term corporate debt needs for 2026. Through 2029, we expect to fund the $41.3 billion capital plan with $22 billion of internally generated cash flow, $13 billion of debt at the utilities, and $3 billion of total debt at the holding company, with the balance funded with a modest amount of equity. As a reminder, our policy is to fund incremental capital needs approximately 40% with equity. Specifically, our total equity needs of $3.4 billion over the four-year plan implies approximately $850 million of annualized equity needs, less than 2% of Exelon Corporation's annual market cap. We have already made progress on 20% of these equity needs, having priced $700 million in 2025 using forward contracts under our ATM. Our financial plan has been designed to accommodate the issuance of other fixed-income securities that receive equity credit in place of senior debt at our holding company, identifying opportunities to mitigate risk and maintaining a strong balance sheet continues to be core to our strategy. Ending 2025, our average credit metrics of 13.5% exceeded our downgrade threshold of 12% at Moody’s by 150 basis points. With our balanced funding strategy in place, target credit metrics of 14% over the planning period provide 100 to 200 basis points of financial flexibility on average over our downgrade thresholds at S&P and Moody’s throughout our guidance period. We also continue to advocate for language that incorporates all tax repairs for calculating the corporate alternative minimum tax, which is now reflected in our disclosures. As a reminder, without the implementation of tax repairs deduction, our anticipated consolidated credit metric would average over the plan closer to 13%. Supported by our history of execution, I want to close by reiterating our confidence not only in the plan we have laid out, but also in the broader opportunity we have to deliver value for our customers and our shareholders for another twenty-five years and beyond. I will now turn it back to Calvin for his closing remarks. Calvin G. Butler: Thank you, Jeanne. As we look ahead to 2026, our priorities are clear and aligned with what matters most to our customers, communities, policymakers, and investors. We have a track record of meeting our commitments, and we will continue to focus on what we do best: executing our capital plan efficiently and maintaining industry-leading operational performance to benefit our customers; driving affordability through disciplined cost management, prudent investment, and active stakeholder engagement; and pursuing growth and innovative customer solutions. We have the right people, platform, and strategy to continue delivering on these commitments. In 2026, we expect to deploy $10 billion in capital, earning a consolidated 9% to 10% operating ROE. We anticipate delivering operating earnings of $2 and 81 to $2.91 per share with the goal of being midpoint or better. Finally, we will execute a balanced funding strategy that maintains and strengthens our balance sheet. Serving approximately 11 million customers across some of the largest and most economically vital metropolitan areas in the country is a responsibility we do not take lightly. Our infrastructure is essential to the economic future of the regions we serve, and we honor that responsibility through disciplined execution, operational excellence, and a relentless focus on the people who depend on us every day. We are proud of our track record of execution. The sector continues to evolve at a breakneck pace, but Exelon Corporation remains steadfast in its priorities, consistently delivering as a proven leader. Gigi, we can now open it up for questions. Operator: Thank you. If you would like to ask a question, simply press 1-1 on your telephone keypad. Our first question comes from the line of Nicholas Campanella from Barclays. Calvin G. Butler: Good morning, Nick. Hey, Nick. Nicholas Campanella: Hey. Good morning, everyone. Thanks for the updates. Appreciate it. Always. So great to see the five to seven outlook refreshed near the upper end here. I just maybe could you comment quickly on, you know, the rate base growth is near 8%. You do have financing lag against that, you know, which maybe would be greater than 1% financing lag between equity needs and debt funding. So just what is the tailwind to the plan to kind of keep you at the high end of the 5%–7% outlook? Jeanne M. Jones: Yeah. I think I will start with, kind of, you know, what we have done, right, which is if you look back since 2021, we have had actual rate base growth of about 8% and earnings growth of 7.4%. So I think it is really just a continuation of that track record. If you look at where rate base is at the end of 2029 and you kind of assume, you know, half equity, and then you look at our earned ROEs over the last four years, I think you can get, you know, to an EPS number that then, to your point, you have to back off financing costs. But I think if you look at the equity needs, sort of assume an average, you know, debt cost. But then I think what you might be missing is the AFUDC associated with transmission capital. If you look at that and how much we are growing transmission over that period, that will get you to kind of the near top end, Nick. Nicholas Campanella: Okay. Great. Great. And then I know that you probably are assuming a range of regulatory outcomes here, but maybe you can just kind of comment on, given so much focus on Pennsylvania, how you are thinking about regulatory strategy for 2026? Whether you would file in 2026 or wait until 2027, and then any kind of considerations there for the timing of rate cases and how that can kind of impact where you are within this five to seven? Thank you. Calvin G. Butler: Yeah. No problem, Nick. I will tell you this: we are constantly in conversations with all of our stakeholders, and that goes from the governors to the regulatory bodies to talk about what makes sense for the jurisdictions and our customers. With affordability front and center in all of our jurisdictions, we lean into that first. But we also recognize that we have to maintain a reliable and resilient grid. So to your point, we are looking at what we are going to do in Pennsylvania, what we are going to do in Maryland. I think in our documents, we have already laid out that we are filing in Maryland this year, and we are considering what is the best approach to action in Pennsylvania. We will keep you updated on that, but right now, please keep in mind, everything centers on affordability and maintaining a reliable system. Jeanne M. Jones: Yeah. And to your point, Nick, the disclosure kind of accommodated a variety of scenarios. So looking at a variety of scenarios around rate case timing, we felt confident in that. You know, the 8% rate base growth, the earned ROEs, and the, you know, sort of manageable amount of equity delivers that, you know, five to seven years at top end. Nicholas Campanella: Great. And then just, you know, Calvin, if I could squeeze one more in, you talked about in your prepared remarks just supply being a real challenge and I know this RBA process is in its early innings at PJM, and we have all seen the comments from the IPPs and what they are looking for. But just maybe what are the T&Ds advocating for here, and how do you see that process shaping up? Do you expect it to still be on time for, you know, a September auction? If you could comment at all there. Calvin G. Butler: Do you want to take Jeanne M. Jones: Certainly. Good morning, Nick. Thank you for the question. We have really been focused on engaging not only at PJM, but Jeanne M. Jones: with our regulators. We were really pleased to Jeanne M. Jones: see the administration’s, to Calvin’s point, the administration’s focus on this issue. We do support the development of this reliability backstop option. We really endeavored also to bring a bit of clarity to the discourse. That is why we enlisted Charles River Associates’ support in helping us crystallize what we are dealing with. We need to focus on supply because we know it will lower customer electric costs. We know that we will also see improved reliability. To the point on costs, as Calvin mentioned, utility-generated power, which, you know, is something we are very focused on, but because if no one else is going to build, we know that supply costs are an ever-increasing portion of the customer bill. So we really have to be focused on driving more builds, and as this report Jeanne M. Jones: report Jeanne M. Jones: outlaid, Jeanne M. Jones: utility-generated power could reduce PJM customer costs by between $9.6 billion and $20 billion in the 2028–2029 delivery year. So while we are focused on supporting the RBA, we also have to, in the near term, focus on extending the price cap, getting more supply on the grid, and, as Calvin mentioned, improving reliability. Jeanne M. Jones: We know that those things will bring greater price stability Jeanne M. Jones: and ultimately help address affordability, which is an ever-growing concern in each of our jurisdictions. Nicholas Campanella: Thanks for the update. Calvin G. Butler: Hey, Nick. I know she does not need an introduction, but that was Colette Honorable. Since you are Nicholas Campanella: Alright. Calvin G. Butler: Alright. Thank you very much. Ryan Brown: You are welcome. Thank you. Operator: Thank you. Our next question comes from the line of Shahriar Pourreza from Wells Fargo. Calvin G. Butler: Good morning, Shah. Hey, Shah. Calvin. Morning, guys. Just on Colette’s Shahriar Pourreza: maybe a quick question for Colette. I mean, obviously, you know, there is a lot of affordability things out there, whether you are looking at Maryland, New Jersey, Pennsylvania, Delaware. We saw that in, obviously, Shapiro’s budget speech. There are several bills out there in Pennsylvania, Maryland, and New Jersey around resource adequacy. I guess a little bit more specifically, how are the conversations going on the legislative fronts? Like, can you strike a middle ground in a state like Pennsylvania with the IPPs around the new generation PPA structure, which is currently being proposed under the House and Senate bills, or the conversations are just too wide apart right now? Thanks. Calvin G. Butler: Hey, Shar. So this is Calvin. I will jump in first and just say, first and foremost, we understand where Governor Shapiro was coming from, because we are all frustrated with the affordability limit that is hitting all of our customers and his constituents. So at the forefront, we start from a foundation of alignment, that we all have to do something together. You notice our approach is always an all-of-the-above approach. How can we help deliver solutions that satisfy everyone? So to your direct question, is there an opportunity to have conversations and engage with IPPs? Absolutely, because we have never said we are going to do this on our own. But we do believe it must involve everyone. I think you talked about Governor Shapiro, but Governor Moore in his State of the State even talked about an all-of-the-above. It requires everyone to come together to solve this problem. We are committed to that. So when you talk about the House and Senate bills, it is always in the details. But please know that we are showing up every day in the capital and with the governor and the PSC to talk about delivering solutions. You notice from us, it is not one-and-done. It is everyone coming through, and it is an all-of-the-above approach. Colette, anything you would like to add there? Jeanne M. Jones: Thank you, Calvin. Good morning, Shar. I would add, it will, I hope, put in better context Jeanne M. Jones: why we showed up as a company the way we did around colocation issues. Colocation can be a great solution. We knew when we saw this headed our way that we needed to focus on affordability. Now you see others jumping in with us. It is great to see, and we need these discussions because this is how we will solve the problem. We have been very active, to your question, Shar, not only in Pennsylvania, on the ground there, on the ground with the governor. If you know, we joined Governor Shapiro in the filing at FERC Jeanne M. Jones: on extending the Jeanne M. Jones: podcast. We will continue to partner with him, his administration, and engage heavily in the legislature. Not only in Pennsylvania, we are having the same discussions Jeanne M. Jones: in Maryland, in Delaware, in New Jersey. Ryan Brown: And I think that, for instance, in the Jeanne M. Jones: the address by Governor Moore, you could see very clearly he has a view on what needs to happen. Jeanne M. Jones: Take a look at New Jersey with Governor Sheryl stepping in and really focusing on the solutions that need to come about in PJM. This is heartening to see, and you will continue to find us engaging in each of our jurisdictions to help solve this issue of affordability. Let me close by saying we are bringing solutions. We have been focused, if you know, on our customer relief fund that we developed last year, and then we further supplemented ahead of the winter season in anticipation of these issues. We will continue focusing on low-income discounts in our jurisdictions. We have those well underway, as well as focusing on longer-term solutions such as utility generation. So we are very active in our jurisdictions, and we will continue to be active. Thank you. Shahriar Pourreza: And is it fair to just assume that there is some level of collaboration with the generators, or is that bid-ask too wide apart? I am just trying to tease that out. Is that the right price? Jeanne M. Jones: Right? I think we are always going to be our customers’ advocate. So I think right now, what is the problem right now is our customers are paying more for less. So we have to get to the right place where there is actual new generation at the right price. If they want to build it at the right price, wonderful, right? But at the end of the day, to Colette and Calvin’s comments, the Charles River report was really helpful because it said, you know, if we had been doing this and we had the generation needed in 2028 and 2029, that costs would have been, you know, $10 to $20 billion lower. We cannot go back in time and build that generation, but we can take action now. That is what we are focused on, getting the generation built at the right price. Shahriar Pourreza: Got it. And then just last question here. Just to tease out Nick’s question around the CAGR. There is not a lot of delta between rate base growth and the EPS growth, so that sort of makes sense where you are. But I know, Jeanne, clearly from the slide this morning, there is plenty of incremental upside, whether you are looking at, you know, PJM RTEP, or MISO tranches, data center TSAs, resource adequacy. I guess, what is the correct podium to step-function change the trajectory, which has been out there for some time? Is it as simple as we need a few more quarters to execute? I guess, how do we sort of think about the upsides that are evident on these slide decks, whether, and will it be incremental to rate base growth? Will it be incremental to EPS growth? I guess, what do you need to see that step-function change to that five to seven? Thanks. Jeanne M. Jones: Yeah. No. Good question. I think, at the end, we feel like it is kind of progressing, right? So your last rate base CAGR was 7.4%. You are sitting at 7.9% now off of that 7.4%. You know, we delivered above expectations through 2025. So I think we are seeing continued progress there. I think, given the deconcentrated plan, in addition to progress, it is really executable. We, as I mentioned in my prepared remarks, have delivered within our capital within 2% since separation. You look at our rate base this year within 1%. That is no small task on $64 billion of rate base. So we feel not only is it really executable, you should feel confident in that growth, but it is continuing to ramp. We are not going to be the flashy, right? It is not going to go up double digits, but it is going up, and it is highly executable, defensible, and we are not going to give you a number that I cannot sit here and say that. So I think that is how we should think about it. Shahriar Pourreza: Okay. Yeah. That is actually a perfect answer. Thanks, guys. Appreciate it. Congrats, Calvin. Bye. Calvin G. Butler: Thank you, Shar. Appreciate you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Paul Andrew Zimbardo from Jefferies. Calvin G. Butler: Good morning, Paul. I Paul Andrew Zimbardo: Good morning, team. Calvin G. Butler: Kudos. Nicely done. Paul Andrew Zimbardo: Thank you. To Paul Andrew Zimbardo: to continue the theme a little bit from Nick and Shar, just Paul Andrew Zimbardo: almost asking an inverse. It seems like rate base growth is pretty consistent with historical, the 7.9%, and you did grow at 7.4% despite some headwinds in Illinois and elsewhere and, of course, tailwinds too. Paul Andrew Zimbardo: What Paul Andrew Zimbardo: why could you not grow at that kind of ZIP code, the same seven-and-a-half percent growth rate? Again, doing even better than the top then. Like, is it kind of the conservatism, like you are mentioning, or just getting more comfort? If you could elaborate a little bit more. Jeanne M. Jones: Sure. I mean, I think we are always going to strive to exceed expectations. But I think, again, giving you a number you can count on, I think, you know, financing costs are increasing, right? So you have to account for that. But, you know, we are investing more in transmission, and so that gives us confidence in the, you know, that we can continue with the strong earned ROEs that we have had. So I think Jeanne M. Jones: you know, I think it is Jeanne M. Jones: it is Paul Andrew Zimbardo: defensible Jeanne M. Jones: is growing. I think, you know, but you have to think about giving a number that is defensible that we can manage, but also accounts for the associated financing costs. But we are always going to strive to exceed your expectations, Paul. Calvin G. Butler: No. And you have been. So Paul Andrew Zimbardo: if you give a mouse a cookie, you always have to ask for more. Calvin G. Butler: I noticed that, Paul. Thank you. Paul Andrew Zimbardo: The last one I want to ask just on the incremental financing cost. So you definitely made a lot of progress on the balance sheet. How should we think about financing incremental capital opportunities as they come? Should we be using kind of that 40% in this roll forward or maybe a lower number? Jeanne M. Jones: No. It is the 40%. We want to maintain and, you know, keep that cushion we have worked so hard to get on the balance sheet. So what that results in is about the $3.4 billion over the four-year period. On an annual basis, it is less than 2% of market cap, manageable. As you probably saw, we have already made good progress on that. We priced $700 million of that $3.4 billion. So on an annual basis for 2026, you know, it is a small amount to do. Given our ATM and our trading activities, it is very manageable. But we are going to stick with that 40%. Calvin G. Butler: Okay. Thank you very much, team. Mhmm. You, Paul. Operator: Thank you. One moment for our next question. Our next question will be from the line of Steve Fleishman from Wolfe. Good morning, Steve. Ryan Brown: Hey. Good morning. So just maybe on the, with the move to more transmission continuing, that 9% to 10% earned ROE range Steve Fleishman: are we seeing some kind of Calvin G. Butler: movement up within that range? Helps kind of put all these pieces together? On the growth rate. Jeanne M. Jones: Yeah. I think, you know, it is a guess. Jeanne M. Jones: Yeah. Yeah. If we go back to, I think, since separation, 2022 to 2025, our average earned has been somewhere around 9.4%. To your point, as we have been turning the shift towards transmission, I think you can expect that, if not slightly better, but it is going to take some time for some of these, you know, transmission projects to close. You have some longer-dated ones, the big ones. But we are, that is the direction we are headed. Steve Fleishman: Okay. Ryan Brown: Okay. And then on the CAMT that you mentioned, just when do you expect to actually have that, like, full clarity on that? Sometime, this sounds like sometime this year? Jeanne M. Jones: Yes. Yeah. We are hopeful that we have final, final resolution here in the near term. Steve Fleishman: Okay. Calvin G. Butler: And then lastly, just tying up some loose state stuff that Steve Fleishman: are we going to get a Maryland lessons learned Ryan Brown: at some point? Calvin G. Butler: Or Steve Fleishman: yeah. Is there any chance they just say kind of we are moved on to Calvin G. Butler: No. We are Steve Fleishman: I do not know. Patience. Calvin G. Butler: Yeah. Yeah. Steve, I hear in your voice my frustration, so thank you. It is, we do believe we are going to get a lessons learned. I know the team has been talking to the commission and the new chair. We have worked with him as a former state senator. He understands the need for this. We do believe we will get a lessons learned, and I wish I could give you a timeline, but we do believe it will happen in 2026. Steve Fleishman: Okay. Ryan Brown: But you will file BGE Steve Fleishman: you know, probably before you get it? Calvin G. Butler: Yes. Yes. Yeah. Jeanne M. Jones: We are going to file in probably the first half and, you know, would love to accommodate whatever is in there. But to Calvin’s point, we have been, you know, transparent with the commission around the fact that the rates expire in 2027, and so we have to do something here. Ryan Brown: And then a last quick one. I know New Jersey is not your, of your larger states, but just Steve Fleishman: curious your take so far under the new governor. Calvin G. Butler: Absolutely. Not, to your point, not one of our largest, but it is very important. Tyler Anthony, the CEO of Pepco Holdings, has spent time with the other EDCs with Governor Schirle. Michael A. Innocenzo, our Chief Operating Officer, has spent time, and I will let Mike elaborate further on New Jersey if you would like to, Mike. Michael A. Innocenzo: I would just say, you know, it certainly got a lot of headlines during the election campaign. But if you look at the content of the executive orders, we think that they are very constructive. They are things that we can live with. I would say behind the scenes, the conversations are focused on the right areas, which is, you know, if we are really going to go after affordability, we need to bring more supply in an affordable way and an efficient way. We fully support those discussions. Calvin G. Butler: Great. Thank you. Thank you, Steve. Operator: Thank you. Thanks to all our participants for joining us today. This concludes our presentation. You may now disconnect. Have a good day.
Operator: Good day, everyone, and welcome to Crane NXT, Co. Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 11 again. Please note this conference is being recorded. Now it is my pleasure to turn the call over to the Vice President of Investor Relations, Matt Roache. Please begin. Matt Roache: Thank you, Operator, and good morning, everyone. I want to welcome you all to the fourth quarter and full year 2025 earnings call for Crane NXT, Co. Before we begin, let me remind you that the slides we will reference during this presentation can be accessed via the Investor Relations section of our website at cranenxt.com and a replay of today’s call will also be available on our website. Before we discuss our results, I encourage all participants to review the legal notice on slide two, which explains the risk of forward-looking statements and the use of non-GAAP financial measures. Additionally, we refer you to the cautionary language at the bottom of our earnings release and our Form 10-Ks and subsequent filings pertaining to forward-looking statements. During the call, we will also be using non-GAAP financial measures, which are reconciled to the comparable GAAP measures in the tables at the end of our press release and accompanying slide presentation, both of which are available on our website in the Investor Relations section. With me today are Aaron W. Saak, our President and Chief Executive Officer, and Christina Cristiano, our Senior Vice President and Chief Financial Officer. On our call this morning, we will discuss our 2025 highlights, our financial and operational performance, and our 2026 financial guidance and outlook. After our prepared remarks, we will open the call to analysts for questions. With that, I will turn the call over to Aaron. Thank you, Matt, and good morning. I appreciate everyone joining the call today. Aaron W. Saak: I would like to begin by thanking our Crane NXT, Co. team members around the world for their performance during Q4. We have an exceptional team, and I am proud of our accomplishments throughout 2025. Starting with our financial results, we had a strong end to the year, executing our strategy of accelerating organic revenue growth while maintaining strong margins and free cash flow. Sales growth was approximately 20% in the fourth quarter, and 11% for the full year. Adjusted EBITDA margin was approximately 25% in Q4 and 24% for the full year. Additionally, our strong free cash flow resulted in a conversion ratio of approximately 135% in the fourth quarter and 94% for the full year, in line with our expectations. Finally, we delivered adjusted EPS of $1.27 in the fourth quarter and $4.06 for the full year. We continue to build momentum in executing our strategy to accelerate organic growth, and I would like to highlight a few of our key achievements this year. We ended 2025 with a total of 20 new currency denomination wins specifying our micro-optics technology. This result exceeded our target range of 10 to 15 wins and is one reason why I am so positive about the long-term outlook for the currency business. Notably, the new wins include five new denominations for the nation of Fiji, which unveiled a new series of currency in December featuring micro-optics integrated into polymer substrates. With our currency team’s continued streak of wins, and organic backlog up more than 30% year over year, we are highly confident in our sales outlook for this business in 2026. Also in 2025, we successfully completed the final equipment upgrades to support the launch of the new U.S. currency series. With design and testing finalized, we are preparing for the release of the new $10 bill later this year. And we are excited, as I know many of you are, for the U.S. Treasury unveiling of the new design we think will likely be in mid-2026. In 2025, we also secured significant contracts in our Crane Authentication business across major customers, including the world’s most recognized sports leagues. As a reminder, earlier last year, we announced that we renewed our multiyear contract with the National Football League to provide physical product authentication and online brand protection services, and in Q4, we signed a multiyear agreement with Major League Baseball to provide security technology for their consumer products. We are confident that these partnerships, together with other contracts we have with some of the world’s most recognized brands, will continue to drive growth. We also continue to build upon our market-leading positions in authentication traceability technologies. In 2025, we further strengthened our leadership in global authentication through the creation of Crane Authentication, combining OPSX Security and De La Rue Authentication into one integrated business. We made significant progress executing on our synergies, including 80/20 initiatives, which will drive significant margin accretion in this business in 2026. Additionally, in the fourth quarter, we closed our initial equity investment in Antares Vision, a global leader in providing advanced detection systems and track-and-trace software, expanding our presence in higher-growth end markets, including life sciences and food and beverage. And we are on track to complete this acquisition and take the company private in mid-2026. Finally, to capitalize on increasing demand, we are investing in the future growth in our international currency business, and I will provide more details on this later in the call. In summary, throughout 2025, we continued to execute our strategy, accelerating revenue growth, building momentum in key strategic areas, and expanding our market-leading positions. We are taking meaningful steps to position the company for success, and we are in a strong position to deliver long-term shareholder value creation. So thank you again to our entire Crane NXT, Co. team for your dedication in 2025 and commitment to continued success in 2026. Now with that, let me hand the call over to Christina to review our fourth quarter and full year financial performance in detail, as well as our 2026 guidance. Matt Roache: Christina? Operator: Thank you, Aaron, and good morning, everyone. Christina Cristiano: I would also like to echo Aaron’s thanks to our associates for their continued hard work. I appreciate your contributions and your commitment to our customers and shareholders. Starting on slide four, sales were $477 million in the quarter, an increase of approximately 20% year over year, driven by acquisitions and continued strong performance in Crane Currency. Core sales increased approximately 5%, reflecting accelerating growth in SAT, partially offset by expected softness in CPI. Adjusted segment operating margin of approximately 26% declined approximately 120 basis points versus the prior year, reflecting additional costs and investments to support increased demand in international currency as well as unfavorable FX, which I will speak more about in a few moments. Adjusted free cash flow conversion was very strong at approximately 135%, underscoring our robust operating discipline, and we delivered adjusted EPS of $1.27. Moving to slide five. Full year sales were approximately $1.7 billion, an increase of approximately 11% year over year, with core sales growth of approximately 1%. Adjusted segment operating margin decreased approximately 260 basis points year over year, reflecting the expected impact of acquisitions and additional costs in international currency to deliver on increased demand. Finally, adjusted free cash flow conversion was approximately 94% for the full year and we delivered adjusted EPS of $4.06. Moving to our segments and starting with CPI on slide six. Core sales were flat compared with 2024, with double-digit growth in gaming offset by expected softness in other end markets, including vending. Adjusted operating margin improved approximately 340 basis points to approximately 32%, reflecting the impact of disciplined cost management and productivity initiatives. Finally, there was a modest increase in backlog sequentially and the book-to-bill ratio was above one. Turning to slide seven. For the full year, CPI core sales were in line with expectations, decreasing by approximately 4% year over year, reflecting the indirect impact of tariffs on demand in our vending end market, as pricing actions caused customers to delay orders. Results were also impacted by the final phase of the gaming dynamic we experienced during 2025. Through strong cost discipline and application of CVS to drive productivity, we maintained adjusted operating margin at approximately 29%. These results reflect excellent work by our CPI team. Moving to Security and Authentication Technologies on slide eight. In the fourth quarter, core sales were up approximately 11%, driven by strong performance in Crane Currency, where we achieved 11 new micro-optics denomination wins in Q4, bringing our full year total to 20 new wins. As a reminder, total sales growth of over 40% includes the acquisition of De La Rue Authentication, which closed in May. Adjusted segment operating margin decreased by 420 basis points from the prior year. Matt Roache: As shown on slide nine, Christina Cristiano: we had strong volume growth year over year, increasing our margins. However, this impact was partially offset by several items. First, we experienced unfavorable mix in our international business as compared to 2024, based on the specific shipments from our backlog to central banks. Second, we incurred additional costs to meet increased demand, including hiring and training of additional production staff, higher freight, procurement of substrates from third-party suppliers, and selected outsourcing of banknote printing. Additionally, there was an unfavorable FX impact on margin, as we experienced higher operating costs to manufacture in our international currency products in Sweden and Malta, incurring costs in Swedish krona and euro. We also made additional investments in Q4 to support anticipated future growth as we continue to execute the development of the next generation of micro-optic products with very high customer interest. Finally, the contribution from the acquisition of De La Rue and the execution of our synergies across Crane Authentication performed as expected in the quarter. Turning to slide 10, for the full year SAT delivered core sales growth of approximately 7%, driven by strength in currency, which exceeded our expectations. Crane Authentication performed as expected, with results including eight months of De La Rue Authentication in 2025. Adjusted operating margin decreased by approximately 380 basis points, driven by the expected impact of acquisitions and, as discussed earlier, the increased costs in international currency and the unfavorable impact of FX. Finally, backlog was up more than 50% year over year, which gives us high confidence in our growth outlook for SAT in 2026. Moving to our balance sheet on slide 11. We ended the year with net leverage of approximately 2.3 times. During the fourth quarter, we secured a term loan of roughly $500 million and drew approximately $130 million to fund the initial equity investment in Antares Vision. We expect to draw the remaining balance in 2026 to fund the rest of the Antares Vision transaction, which is on track to be fully completed in mid-2026. Looking ahead, we anticipate using our free cash flow to pay down our outstanding debt and end 2026 with net leverage of approximately 2.3 times. We have an excellent balance sheet, attractive fixed-rate long-term debt, and substantial liquidity. Our strong free cash flow generation enables us to invest in organic growth, pursue M&A to build on our leadership position, and maintain a competitive dividend. Continuing our commitment to a disciplined and balanced capital allocation strategy, yesterday we announced a 6% increase to our annual dividend, while preserving ample capacity to deploy capital toward acquisitions in the future that meet our financial criteria. Moving now to 2026 guidance on slide 12. I would like to highlight that this guidance only includes the interest expense associated with our initial approximately 32% investment in Antares Vision. We anticipate updating guidance in our first quarter earnings announcement after Crane NXT, Co. has a greater than 50% ownership stake in Antares Vision, at which time its results will be consolidated within Crane NXT, Co. In 2026, we expect full year sales growth of 4% to 6%. In SAT, we expect high single-digit growth, driven by high single-digit growth in U.S. currency from a favorable mix of banknote demand and low single-digit growth in international currency, even with a tough comparison to a very strong 2025. In Crane Authentication, we expect mid-single-digit core growth, including a full year contribution from the De La Rue Authentication acquisition. In CPI, we expect sales to be flat year over year, reflecting mid-single-digit growth in service, where we are expanding our offering, offset by approximately flat revenue year over year in our hardware businesses and a low single-digit decline in vending, as order softness continues following price increases to offset the impact of Chinese tariffs. Before I discuss our profit guidance, I would like to note that we have changed our profitability metric to adjusted EBITDA from adjusted operating profit. We believe adjusted EBITDA is a more meaningful measure of our operating performance, as it eliminates non-cash expenses, including depreciation, and we will be using this metric going forward. We expect adjusted segment EBITDA margin to be approximately 28%, which is approximately flat year over year. This reflects continued high profitability in CPI and the benefit of synergy realization in Crane Authentication, partially offset by actions we are taking to expand capacity for international currency. Continuing with full year guidance, we expect corporate expenses of approximately $58 million. We also expect non-operating expenses of roughly $60 million, which includes a noncontrolling interest associated with the Crane Authentication joint venture and interest expense associated with our initial stake in Antares Vision. We will update our guidance to reflect the impact from Antares Vision once we consolidate the company into Crane NXT, Co., and Aaron will be providing an update on this timing later in the presentation. Matt Roache: For the full year, we expect our tax rate to be consistent versus Christina Cristiano: 2025 at approximately 21.5%, and we expect to deliver full year adjusted EPS in the range of $4.10 to $4.40. Finally, we expect adjusted free cash flow conversion in the range of approximately 90% to 110%, recognizing that the specific timing of currency shipments can vary quarter by quarter. Turning to slide 13, I want to point out that the phasing of revenue in 2026 will be slightly higher in the second half of the year. In the first quarter, we expect to see revenue growth in the mid-teens, reflecting the impact of the acquisition of De La Rue Authentication and full operations in our U.S. currency business, which will drive 45% to 50% growth in SAT year over year. This growth will be partially offset by a mid-single-digit decline in CPI, reflecting timing of hardware shipments based on the expected customer order pattern. Adjusted EBITDA margin of approximately 19% will be flat in the first quarter year over year, reflecting the realization of acquisition synergies in Crane Authentication, partially offset by the flow-through impact of lower CPI volume, mix impact of the De La Rue acquisition, and increased currency costs to meet the higher demand. For the full year, we expect Crane NXT, Co. sales to grow in the mid-single digits in 2026, with adjusted EBITDA of approximately 25%. This reflects a continued high adjusted EBITDA margin in CPI of approximately 30% and an approximately 120 basis points improvement year over year in SAT to an adjusted EBITDA margin of approximately 25%. Now let me turn the call back to Aaron to provide further details about the actions we are taking to capture growth opportunities in international currency and an update on the Antares Vision transaction. Aaron W. Saak: Thanks, Christina. Turning to slide 14. I would like to take a few moments to discuss the investments we are making to capture organic growth opportunities in international currency. Demand continues to be very strong, with 20 new micro-optic wins in 2025 and organic backlog up over 30% year over year. This is a particularly exciting growth area for us, and we see tremendous potential for it to continue in the years ahead. Now as a reminder, we deliver value to our international currency customers through four primary offerings, as shown on the slide. These offerings include the designing of banknotes, substrate manufacturing, production of our proprietary micro-optics technology, and banknote printing. To capitalize on rising demand, we are taking a variety of actions to expand our Matt Roache: capacity. Aaron W. Saak: First, we are leveraging our CBS discipline, which we expect will continue to drive increased productivity annually from continuous improvement initiatives. Second, to supplement these productivity initiatives, we are adding resources to our design team and increasing staffing in our micro-optics and banknote printing facilities to increase capacity and move to 24/7 operations. Additionally, we are also increasing the amount of products and services we are procuring from a select group of suppliers and partners. This includes purchasing additional substrates beyond our current capacity and partnering with select government print works for banknote printing. We significantly increased these activities in Q4 and expect them to continue into 2026 to meet the growing demand. For 2026 in total, we expect additional cost of $4 million in SAT related to these actions, but reducing substantially in 2027 as our internal productivity programs are executed. Finally, we are investing in capacity expansion with new micro-optics production lines in our Nashua, New Hampshire facility and in our facility in Malta. Based on these investments in organic growth, we expect CapEx to increase to approximately 7% of currency’s revenue in 2026, even with these investments, we expect Crane NXT, Co.’s CapEx spending to continue to be in the range of 3% to 5% of sales in total. Additionally, for 2026, we expect approximately $4 million of added OpEx to support micro-optic product development, design, and these capacity expansion programs. In total, we expect adjusted EBITDA margins to improve by 120 basis points in SAT, and a more detailed bridge of the 2026 year-over-year SAT margins is provided in a slide in the appendix. In summary, we are excited about the long-term growth opportunities these actions will drive, and we will share more about those programs at our upcoming Investor Day. Moving to slide 15, I want to provide an update on the Antares Vision transaction. In Q4 2025, we completed the first step of the transaction, acquiring approximately 32% of the company from its largest shareholders. And I am happy to report that we have received approval from the Italian regulators to move forward with step two of the transaction. We will launch a mandatory public tender offer to all remaining shareholders in February. We expect this process will be completed by Q1, at which time we will own over 50% of the shares of Antares Vision and consolidate the results under Crane NXT, Co. As Christina mentioned earlier, we will provide updated 2026 guidance based on the consolidation of Antares Vision during our Q1 earnings in May. Finally, in Q2, we will start step three of the transaction to take the company private. As a reminder, Crane NXT, Co. has secured voting agreements with the largest shareholders of Antares Vision, which ensures our ability to take the company private after the completion of the mandatory tender process. We expect the take-private process will be completed in mid-2026. In closing, I want to reiterate a few key points from our call today. First, we are continuing to execute our strategy of accelerating growth while maintaining strong margins and robust free cash flow. Matt Roache: Second, Aaron W. Saak: we continue to build momentum in our strategic growth areas. Our team is ready for the launch of the U.S. new series of banknotes starting with the $10 bill in 2026. International currency’s strong performance is exceeding our expectations, and we are taking actions to drive further growth opportunities and expand our leadership in this market based on our technology. In Crane Authentication, we took actions in 2025 to accelerate the realization of synergies, and we expect to see significant margin accretion in 2026 as a result. And finally, the Antares Vision acquisition is on track, and we look forward to welcoming the entire Antares Vision team to Crane NXT, Co. in 2026. With all of these actions, I believe we are well positioned to accelerate growth in 2026 and beyond and deliver significant value creation to our shareholders. I look forward to seeing many of you at our upcoming Investor Day on February 25 in New York City, where we will share more details on our strategy, growth opportunities, and financial priorities. We will also be showcasing some of our advanced technologies and solutions during the event. So thank you again for your time this morning, and I would like to also thank our Crane NXT, Co. team members across the world for their commitment to our customers, our communities, and all of our stakeholders. And now, Operator, we are ready to take our first question. Operator: Thank you so much. Star 11 on your telephone and wait for your name to be announced. To remove yourself, press 11 again. We ask that you please keep your questions to one and one follow-up. One moment for our first question. Comes from the line of Matt J. Summerville with D.A. Davidson. Please proceed. Matt J. Summerville: Thanks. Morning. Aaron W. Saak: Good morning, Matt. Maybe just start with SAT. As I think about the margin performance in Q4, kind of sequentially, you got $30-plus million of additional revenue, $2 million less OP dollars. Matt J. Summerville: And I realize you had the investments. You called that out more in the waterfall chart. But I guess I am wondering why this business, if demand is that strong, cannot do more to test price elasticity in the market, given the nature of what you are selling and kind of the criticality, especially if this decisioning is being done through an 80/20 lens. Aaron W. Saak: Hey, thanks for that question, and good morning again. I would start by saying as you see in our prepared remarks and as you referenced the waterfall, we are really encouraged by the growth and the backlog that we have in international currency. We strongly believe and I am highly confident this is setting us up for sustainable growth. And that is why we are making these investments. Now to your point on pricing and the flow-through of that, just to remind you, Matt, most, if not all, of these contracts that we are delivering in any quarter have been put into our backlog well before. So we are executing this backlog. That is what gives us great visibility into 2026. This is not a book-and-ship business. And so with that being said, as we are looking forward here, as new contracts come into the backlog, we are very focused on ensuring we are maximizing our value and the pricing power we have with our leading technology. I feel confident that the team is doing that. Matt J. Summerville: And then as a follow-up, obviously, there are a few moving pieces. Two things. One, can you talk a little more explicitly about the EPS cadence as we move throughout the year, particularly given some of the pluses and minuses we see you referenced in the first quarter, and then you mentioned being able to see some cost recovery on these investments. If I look at and say $12 million in 2025 that you call out in waterfall, another $4 that you call out in the 2026 waterfall, that is $16. How much of that do you think can ultimately be recouped looking out to next year? Thank you. Christina Cristiano: Well, maybe I will start with that one, and then Aaron can jump in if he likes to. So just in total, we feel confident in our guidance for 2026 and the outlook that we set. And so our range of $4.10 to $4.40 reflects continued strength in currency and sales in authentication continuing at MSD, and softness in CPI driven mostly by the hardware businesses and vending, which continues to experience softness as a result of the tariff. In terms of the phasing, as we said, we will see accelerating growth throughout the year. And the results will be slightly skewed toward the second half from the first half. So specific to your question, Matt, EPS will accelerate through the first half and then level off a little bit in the back half of the year to get to that total of $4.10 to $4.40. Overall, the guidance is balanced, and we think we have taken a prudent approach, particularly with CPI, with our flat guide on sales for the full year. Aaron W. Saak: Matt, hey. I will add in too on the recovery of some of the cost or the read-through of that on a go-forward basis. I think you know, the right way to think about this is, as you have seen, we are going to increase adjusted EBITDA margins in the SAT segment by about 120 basis points in 2026. We should expect to see that kind of continued incremental improvement on a go-forward basis inside of SAT. Obviously, there is some mix there that will play, as you know, with our U.S. currency, and we will wait and see the volume distribution later in 2026. But I think that is the kind of frame I would put on it. So we are going to continue to be on this march now of increasing EBITDA margin and significant expansion in SAT on a go-forward basis. Highly confident of that. Matt J. Summerville: Got it. Thank you, guys. Operator: Thanks. Thank you. Our next question is from Mike Halloran with Baird. Please proceed. Mike Halloran: Hey, good morning, everyone. Aaron W. Saak: Good morning, Mike. Mike Halloran: Hey. Good morning. So a couple questions. Maybe you could just talk about the sequential CPI dynamics. Aaron W. Saak: What is happening in the first quarter maybe specifically and what type of recovery are you expecting? Seems a little light seasonally going into the first quarter. So Mike Halloran: you know, obviously, the gaming commentary Christina highlighted earlier, but is there any other destocking going on in the broader piece there? And how do you expect that dynamic to trend out through the year? Christina Cristiano: Hey, Mike. Thanks for that question. And I will just—it is worth repeating that CPI is expected to be flat in 2026 with a 30% EBITDA margin and continued very strong free cash flow conversion. And so if we just go through CPI overall, service will continue to grow at mid-single digits, and that will be consistent throughout the year. We expect vending to be down in the low single digits with that continued softness from tariffs, and that will improve in the second half based on the comp to 2025. If you remember, the tariff headwind that we experienced began really toward the back half of 2025. So we will get a better comp in 2026 as a result of that. Now lastly, our hardware businesses will be approximately flat for the full year, and the phasing here is more skewed to the back half of the year, and that is just based on customer order patterns. So, overall, we have high visibility into that hardware ordering pattern and feel confident in the full year guide. Q1 will be the lowest quarter, and we will see accelerating growth as the year progresses. Mike Halloran: Thank you. And then Aaron W. Saak: what is embedded in the expectations this year for the $10 bill onboarding? Is there an expectation for a second half ramp on that Mike Halloran: business specifically? And then secondarily and related, maybe could you just talk about how you are expecting the international business to Aaron W. Saak: to flow as you work through the year on the currency side? Specifically, as you are working with these outside vendors and you are ramping your own capacity, is that a constraint at all in the short term in meeting demand? And does that accelerate as you work through the year? Or because of these arrangements, are you allowed to maybe more level-load it and meet the need? Yeah. Yeah. Hey. Thanks for that, Mike. Why do I not take the U.S. question and Christina will jump in here on the international linearity Aaron W. Saak: question. We are very highly, you know, very highly confident here, Mike, that the U.S. Treasury is going to make an announcement mid-year on the Mike Halloran: $10. Aaron W. Saak: We are, ourselves, already working on the $50, and feel, you know, again, highly confident that that design will introduce sophisticated security features. And so when you think about our guide then, you know, I think we are just being prudent here on when they actually make the announcement. We look at it to be probably going into full consumer release more at the end of the year, call it Q4. And so that is what we have put in the guidance. We think that that is probably prudent for 2026. Christina Cristiano: Thank you. And just in terms Aaron W. Saak: I am sorry. We have a follow-up. I was just going to follow up on the Christina Cristiano: international phasing. As you know, we will have a very tough comp in 2026 based on the acceleration that we saw this year in Q4. So you will see that international demand accelerating in the year, but a very tough comp in the end of the year. And then just on cost, just a reminder that, you know, Q1 will have the lowest profit just based on these incremental costs, which are more heavily phased toward the first half of the year, and we will see that profitability improving as the year progresses. Aaron W. Saak: Hey, I will just add as we close out your question here, Mike. You know, with the actions we are taking both on productivity, the staffing, the capacity expansion, it is not really a limit to us. You know, we are going to see very nice growth in international currency. You know, just this Q4, which was exceptional for us, puts a pretty tough comp on the back half of next year. So, I think we are in a really good position to continue to meet the customer demand, and we see a very healthy pipeline of opportunities going forward. And that is what is also giving us a lot of confidence here for the investments and, you know, many years of sustained growth in this business. Operator: Thank you so much. Our next question is from Robert James Labick. Please go ahead. From CJS. Aaron W. Saak: Good morning, Bob. Yeah. So thanks for the incremental information on the Aaron W. Saak: kind of international currency capacity. I wanted to stick on that theme. I think Aaron W. Saak: the demand or your results for international currency growth have been stronger than expected, probably a year or two ago. And that is why you are adding this capacity, and we are talking about all this now. What are the drivers for the kind of faster growth in international currency for Crane? I guess it is question number one, how sustainable? And how does this impact your goal of 10 to 15 new micro-optics per year? Was there a pull-forward, or do you still think you can do that going forward? How are you seeing the market? Hey. Thanks, Bob, for that question. Well, when you think about what is driving this overperformance in our international currency business, it really comes down to three things. Number one is a market driver of increased counterfeiting that is Aaron W. Saak: occurring Aaron W. Saak: in the market, particularly in the emerging markets and with some of our core customers. And so that is forcing them in many ways to redesign their currency. They are always putting on higher security features, and we are simply number one. We have got the best set of security features in the market, and we are a natural net winner when that occurs. Secondly, is simply the growth in emerging economies coupled with the inflation that they are seeing. And remember, our international currency business is predominantly operating in emerging markets. Again, we are kind of a net beneficiary of that dynamic. And then finally, third is the time to redesign that most governments typically go through is accelerating. And that is a combination motivated by several factors. But in part of what is happening is one country redesigns their currency, the neighboring countries then start the process to do that. And we think the U.S. redesign process helps that as well, as new security features are going to get rolled out in the U.S. So we see all three of these—from increased counterfeiting, growth in emerging economies, and faster redesign times—as durable trends in this currency business. And it is why we see very strong, sustainable growth over the long term, and I would expect we will continue to be in that range of 10 to 15 wins, Bob, and that is the target we would put out. But I think as you saw this year, there is momentum in our business. And certainly, this year, we exceeded that target. Okay. Super. I appreciate that. And then on last call, you discussed international currency security-only, I believe, contract win with a Latin American country that you will tell us more about, I think, in the future. I guess, any update there? And are there, you know, many more security-only opportunities that you are bidding out on, or how does that play out? Hey. Thanks again for that, Bob. I will be the first to tell you I cannot wait to tell you what that country is, and we are just in a position given our contract with them that we cannot announce that. But it is a significant step forward for us, not only with the country, but with the security features that they have adopted that we think will be an exceptional reference customer for us going forward. But we are going to have to wait for that. As we move forward, remember, Christina Cristiano: our strategy inside of Crane Currency is to sell advanced security Aaron W. Saak: features. And those features are embedded in our micro-optics. They are the highest margin part of our business. And so we are out there pursuing several opportunities to sell those security features and get them into governments that may print their currency like we do here in the U.S., or print the currency for them, provided they incorporate our micro-optic features. And the pipeline here is as strong as it has ever been. And it is why we are making the investments that we have to make right now in our design capabilities and engineering capabilities to answer those tenders and win them in the future. So I feel more positive, quite frankly, Bob, than we ever thought we would feel versus, as you referenced, two years ago, based on what we see in the market. Christina Cristiano: Thank you. Operator: One moment for our next question. That comes from the line of Isaac Arthur Sellhausen with Oppenheimer. Please proceed. Isaac Arthur Sellhausen: Hi. Thank you very much. Great quarter. Aaron W. Saak: So the question would be on SAT. If we look at the fourth quarter, is there a way you could give us a breakout of maybe what the currency piece grew and maybe what the non-currency piece grew? I do not know if you have the exact number, but maybe just directionally, just trying to understand the different pieces in that segment. Thanks. Aaron W. Saak: Yeah. Sure. Sure, Isaac. If you look at it, currency was up high double digits in the fourth quarter. That was based really on the strength of international currency. And as I think you know, we have had headwinds on a comp basis with the U.S., just due to the volume in 2025. So the good news there is that, obviously, that corrects itself, and we are going to get to high single-digit growth next year on the full year for the U.S. currency. So, very strong high double-digit growth in currency. Christina Cristiano: Currency. Aaron W. Saak: Our De La Rue acquisition performed just as we planned. And we saw lower growth, call it in the legacy business, but that was really intentional because of the 80/20 work that we did and we talked about in the third quarter. I would say it performed kind of on our plan, and with the synergy activities that you see in the bridge, we actually read through some nice incremental margin simply on the execution of the synergies, which are coming in, as Christina said, ahead of our schedule. Isaac Arthur Sellhausen: Okay. Thanks. And then, as a follow-up, Michael J. Pesendorfer: on the $10 note, I know you talked a little bit about this, a lot about it. But, you know, how do we think about when it is going to reach run-rate production? And I guess when you are saying it is going to be back-end loaded, is it based on when the government announces the launch? You know, so what are kind of the goalposts we need to look at as far as what is being communicated by the government versus what is going on with your business? And I would imagine Aaron W. Saak: you might have a heads up on that because you would have to stock it preannouncement, or am I not thinking about that right? Thanks. No. You are Aaron W. Saak: you are, Isaac, good question. You are thinking about it exactly correctly. We are, you know, closely working with the Treasury on setting up the right levels of inventory ahead of the public launch. Aaron W. Saak: It does Aaron W. Saak: still depend on exactly when they decide to launch it. That is where, to the prior question, I would say we are being prudent to say we think that starts to really hit in Q4 of this year. That is what we put in our estimates and influenced our guide. Isaac Arthur Sellhausen: That is Aaron W. Saak: that is Aaron W. Saak: you know, going to get crystallized here, I would say, in the next three months, to be precise. And what I would say, Isaac, to probably the broader question that I know you are asking and others about the impact of the U.S. currency program and where it is at, that is something we are obviously going to spend a little more time and dive deeper into at our Investor Day, and provide some more insights of how we see the impact of that playing out. Operator: Thank you. Our next question comes from the line of Robert Brooks with Northland Capital Markets. Please proceed. Robert Brooks: Hey, guys, thank you for taking my question. Aaron W. Saak: First one I have got is just great to hear about the multiple professional sports leagues renewing secure authentication and security contracts. But I was curious if we could try to get a sense on the financial benefit from that. And then secondly, did those renewals see additional tech or services layered on? I am just trying to get a sense of maybe what the dollar-based net retention was of those leagues re-upping their contracts? Christina Cristiano: Hey, Robert. I will take that one. And, hey, we are super excited to continue a partnership with a flagship customer like the MLB, just like we announced with the NFL last year. These are great customers that we have long-standing relationships with. We cannot reveal much of the details, as you can imagine, about their contract. But in this case, we are providing product authentication and licensee management software, and it is a great recurring revenue stream because, as you know, once we get engaged with the customer, it is very sticky. It is a very sticky arrangement that drives future recurring revenue. So we are very excited about this, and we will continue to work with them to partner on our offerings and what more we can offer them as part of the portfolio, and just continue our relationship with them. Robert Brooks: Got it. Appreciate that color. And then could you remind us—so the 24-hour staffing for micro-optics production and the banknote printing, that is great to hear. But could you remind us, was that from, like, previously, were they just doing a 40-hour work week, or was it more like an 80-hour work week? And secondly, could you just remind us, like, when those transition to 24/7 shifts? Aaron W. Saak: Yeah. So it varied a little bit, Robert, based on each of the sites, quite frankly. You know, you could probably think of it as more of, like, 24/5 directionally. And we are in the process of ramping up to the 24/7, which we will be at here in Q1. Just a reminder, these are very highly complex and secure operations. So ramping up is not just something that happens with the flip of the switch. You know, we are hiring our direct labor. They have to go through a security clearance, as well as some fairly intense training to be operating on our micro-optics and banknote printing lines. So there is, with that, just a very natural ramp-up period to get us there. Again, expect that to be completed here as we exit Q1. And I feel very good we are on the track to that. But, you know, at that point then is why we are making the investments to add another line in Nashua and particularly excited about the expansion in Malta, which gives us more obvious capacity, creates redundancy in our operation, which is very good, and, quite frankly, puts us closer to our customers with a flag planted now in Europe for micro-optics, and very close to our emerging market customers, all of which we see as an excellent setup for sustaining the growth of this business long term. Operator: Thank you so much. And this will conclude our Q&A session for today. And I will pass it back to Aaron W. Saak, President and CEO, for closing comments. Matt Roache: Well, thank you, Operator. Aaron W. Saak: As we conclude today’s call, I again just want to thank everyone on the Crane NXT, Co. team for their strong efforts in 2025. I am excited about the direction of the company and the momentum we are building to accelerate growth. I look forward to seeing many of you at our upcoming Investor Day on February 25 in New York to tell you more about our plans for 2026 and beyond. And so until then, take care, and I hope you all have a great day. Operator: This concludes our conference. Thank you all for participating. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the US Foods Holding Corp. Q4 '25 Earnings Call. [Operator Instructions]. I would now like to turn the call over to Michael Neese, Senior Vice President, Investor Relations. Michael, please go ahead. Michael Neese: Thank you, Tiffany. Good morning, everyone and welcome to US Foods Fourth Quarter and Full Year Fiscal 2025 Earnings Call. On today's call, we have Dave Flitman, our CEO; and Dirk Locascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up. Our earnings release issued earlier this morning and today's presentation can be found on the Investor Relations page of our website at ir.usfoods.com. During today's call, and unless otherwise stated, we're comparing our fourth quarter and full year 2025 results for the same period in fiscal year 2024. In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our Form 10-K for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in forward-looking statements. Lastly, during today's call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules on our earnings press release as well as in the appendices to the presentation slides posted on our website. We are not providing reconciliations to forward-looking non-GAAP financial measures. Thank you. I'd like to turn the call over to Dave. David Flitman: Thanks, Mike. Good morning, everyone, and thank you for joining us. Let's turn to today's agenda. I'll start by providing highlights from 2025, including our team's strong execution during the first year of our 2025 to 2027 long-range plan. I'll then hand it over to Dirk to review our fourth quarter and full year financial results and provide our fiscal 2026 guidance. Starting on Slide 3. Our 2025 earnings exceeded the long-range plan we outlined at our June 2024 Investor Day. We delivered these strong results despite a softer macro environment by continuing to focus on controlling the controllables, something that we have been doing well for the past several years. These include capturing incremental market share across our target customer types, and executing our operational excellence and productivity initiatives. For the year, we grew adjusted EBITDA 11% to a record of more than $1.9 billion and expanded EBITDA margin by 30 basis points. At the same time, we delivered record adjusted earnings per share of $3.98. Our adjusted EPS growth of 26% led the industry and was more than twice our double-digit adjusted EBITDA growth rate. Now that we are 1/3 of the way through our long-range plan, I remain highly confident that we'll reach our 2027 goals. Highlights of our 2025 results driven by the continued progress of our operational excellence and margin initiatives include: delivering share gains across independent restaurants, health care and hospitality, our 3 target customer types; growing adjusted gross profit dollars 190 basis points faster than adjusted operating expenses; driving more than $150 million in cost of goods savings; expanding adjusted EBITDA margin by 30 basis points to a record 4.9%; extending our technology leadership position through new embedded AI capabilities; and executing our capital allocation strategy by repurchasing approximately $930 million of our shares and completing 2 small tuck-in acquisitions for more than $130 million. In short, 2025 was a strong start to our new long-range plan. Through the extraordinary dedication and focus of our 30,000 associates, we continue to execute our strategy, serve our customers well, capture profitable market share and strengthen margins. The momentum we carried into 2026 is a testament to their tireless efforts to deliver excellence to our customers. Let's turn to broader industry trends. Chain restaurant foot traffic as published by Black Box, was down 2.8% for the fourth quarter and decelerated 230 basis points from the third quarter. Our chain business was down approximately 3.4%. Headwinds from the government shutdown, winter storms in December and a challenged lower income and younger demographic affected industry demand. We were not immune to these events as they impacted the volume acceleration we were seeing coming out of the third quarter. While these headwinds created short-term pressure, we remain confident in continuing to grow the top line and capture profitable market share in what remains a highly fragmented industry. Despite fourth quarter foot traffic being the slowest of the year, we grew independent restaurant case volume 4.1% and which accelerated from the third quarter and resulted in our 19th consecutive quarter of share gains. In the fourth quarter, we delivered our strongest net new independent account growth of the year, increasing approximately 4.7% over the prior year. This marks our best performance since the second quarter of 2023. Healthcare and Hospitality, which together comprised more than 25% of our sales, grew 2.9% and 3.1%, respectively, in the fourth quarter. We continue to gain share in both customer types. And in fact, we just posted our 21st consecutive quarter of share gains in health care. Our 2026 case growth was strong in January until the widespread storms and weather-related closures at the end of the month and beginning of February. Although the weather meaningfully impacted the industry's case volume, we were encouraged by our start to the year and are optimistic volume will recover as the weather moderates. Turning to Slide 4. Let's review some of the key achievements our team delivered under our 4 strategic pillars in 2025. Our first pillar is culture. The safety of our associates is and always will be paramount. Our injury and accident frequency rates improved 16% from the prior year on top of our 20% improvement in 2024. I'm very proud of our team for these results, but we will not rest until we reach our goal of 0 injuries and accidents. Supporting our commitment to safety is the continued rollout of the center ride powered industrial equipment across our distribution centers. We are more than 60% through this deployment and expect to fully complete the rollout by the end of this year, dramatically reducing the potential for one of our most serious injury types. Finally, we also donated more than $12.5 million to hunger relief, culinary education and disaster relief efforts last year. This contribution included more than 5 million pounds of food and supply donations, the equivalent of approximately 4 million meals. Turning to our service pillar. We are striving to differentiate our customer service platform and provide a best-in-class delivery experience. We made strong progress with our operations quality composite, which measures our ability to deliver products to our customers without errors with performance improving by 15% for the full year. These results reflect our ongoing commitment to improving our customer service experience, and we expect further improvement in 2026. We remain excited about our ability to improve routing efficiency through our enterprise routing initiatives, including market-led routing and Descartes. In 2025, we completed the deployment of Descartes across our distribution network and achieved an approximately 2% improvement in cases per mile across our broad line deliveries compared to the prior year. And while we are pleased with this early success, more opportunities remain to further increase our routing productivity. Also in 2025, we made significant advancements in our MOXe platform, including additional AI capabilities. One example is the launch of our new AI-driven ordering feature, which enables customers and sellers to upload photos, PDFs and even handwritten notes directly into MOXe and seamlessly translate them into an order, saving them both time and effort. Now let's turn to our growth pillar. In 2025, net sales grew 4.1% to $39.4 billion through continued market share gains. Our go-to-market strategy and consistent addition of new seller headcount, which was up nearly 7% in 2025, remain at the core of our growth plan. Pronto, our small truck delivery service continues to expand and is now live in 46 markets with plans to launch in 10 to 15 additional markets in 2026. We also see excellent traction from Pronto next day, formerly known as Pronto Penetration, which we introduced in mid-2024. This service is already live in 24 markets and we expect to add approximately 10 markets in 2026. Last year, Pronto generated over $1 billion in sales, underscoring its importance as a long-term growth driver. Additionally, we remain focused on enhancing our center of plate protein and fresh produce offerings. Several years ago, we upgraded our assortment and focus on quality in these key product categories. Last year, we grew our fresh produce and center of plate categories with independent restaurants, approximately 150 basis points faster than the industry and nearly 400 basis points faster over the past 2 years. Moving now to our sales compensation change. As we discussed last quarter, we are transitioning to a 100% variable compensation structure for our local sales force which we believe will be an additional long-term growth driver and enable higher earnings potential for our sellers. For context, currently, a seller enters our company at a 100% base salary. From there, we execute a click down process at a pace specific to each individual that moves them to a 50-50 fixed and variable mix over time. Moving forward, we will transition our sellers to our new 100% variable commission plan following a similar individualized click-down process. We believe that managing this transition well is more important than getting everyone to full commission by a date certain. As a result, while we plan to launch the new compensation plan in the middle of this year, it may take us 2 to 3 years to get the majority of our sales force to the 100% variable commission structure. We strongly believe this thoughtful transition plan will enable us to effectively and fully support each of our sellers through this important change. We are currently piloting the plan in several areas across the company and feedback thus far has been very positive. And recently, through our sales leadership academy, we have trained all of our frontline sales leaders on the design and execution of the new compensation structure. Our sales leaders have given us great feedback and are excited for the launch of our new plan. Finally, we are highly confident the new compensation structure will drive stronger alignment to our business objectives and unleash our world-class sales force to help us further accelerate long-term growth. Finally, let's move to our profit pillar. Our strong execution and margin initiatives resulted in adjusted EBITDA margin expanding by 30 basis points to a record 4.9%. We continue to drive gross profit gains and offset a portion of operating expense inflation with supply chain and other productivity improvements. I'd like to highlight 4 key drivers of our industry-leading margin expansion. We continue to make progress on cost of goods through our strategic vendor management efforts, realizing more than $150 million in savings last year. Our execution and our win-win collaboration with suppliers are delivering more than we expected. We now believe we can deliver at least $300 million of cost of goods savings over our 3-year plan, compared to our original $260 million goal laid out at our 2024 Investor Day. We also remain focused on growing our private label brands where our full year penetration was up approximately 90 basis points to nearly 54% with our core independent restaurant customers. Private label growth remains a significant opportunity for U.S. Foods as we have ample room to drive penetration higher. Our enhanced inventory management process to eliminate waste resulted in an approximately $40 million gross profit benefit up from our prior $35 million estimate. We believe there is more to do in this area and expect to generate additional savings in 2026. Furthermore, we achieved approximately $45 million in indirect cost savings in 2025. This is another area where our initiatives are delivering greater benefits than we had originally anticipated. Based on the progress we've seen we now expect to generate over $100 million in indirect savings by 2027. Finally, for 2025. We accelerated our overall operating expense productivity gains as we make progress to our -- towards our 3% to 5% annual improvement goal. We remain committed to building a foundation that not only drives efficiency today but also positions us for sustained growth and value creation in the years ahead. Turning to Slide 5. As you can see, we are consistently driving sales growth, expanding margins and delivering double-digit earnings growth. When combined with our capital allocation framework, we are compounding that earnings growth to an industry-leading adjusted EPS growth of more than 20%. We have been and will continue to be prudent stewards of capital, consistently increasing our return on invested capital year after year which also underscores our commitment to creating long-term shareholder value. We remain confident in the earnings power of our operating model, and we believe we are well positioned to compound results for years to come, driving sustainable growth and reinforcing the strength, diversification and resilience of our business model. Before I hand it over to Dirk, I'd like to recognize our inventory adjustments team led by Jason Hall, our Senior Vice President of Transportation and Logistics. Jason led a cross-functional team that worked together to develop a strategy and implement solutions to reduce waste and improve our inventory health. As I alluded to earlier, this team, along with our field teams and our distribution centers across the country delivered more than $40 million in gross profit benefit in 2025. In addition to driving stronger profitability across the business, this team's efforts resulted in better in-stock performance, quality and freshness for our customers to support sales growth. Thank you, Jason and team for your commitment to delivering excellence through this important company-wide initiative. Let me now turn the call over to Dirk to discuss our fourth quarter results and our 2026 guidance. Dirk Locascio: Thank you, Dave, and good morning, everyone. Our fourth quarter performance capped off a solid 2025, underscoring the strength and resilience of our business model, profitable growth engine and disciplined capital allocation framework. Starting on Slide 7 in our financial results. Fourth quarter net sales increased 3.3% to $9.8 billion, driven by total case volume growth of 0.8% and food cost inflation and mix impact of 2.5%. Excluding the Freshway divestiture, total case growth was 1.2%. Our independent restaurant volume continues to accelerate and grew 4.1%, including 40 basis points from acquisitions. Healthcare grew 2.9% and hospitality grew 3.1%. Our chain restaurant volume was down 3.4%, primarily driven by slower industry traffic as well as the strategic exit we discussed in the second quarter, largely offset by new business wins. Broadly speaking, our chain volume was in line with the industry. Moving to our financial performance. We again delivered strong earnings growth and margin expansion, driven by continued operating leverage gains. Fourth quarter adjusted EBITDA grew 11% from the prior year to $490 million, driven by continued volume growth with our target customer types, increased gross profit and operating expense productivity. Adjusted gross profit dollars grew 250 basis points faster than adjusted operating expenses. As a result, adjusted EBITDA margin expanded 35 basis points to 5%. Finally, adjusted diluted EPS increased 24% to $1.04, demonstrating our continued ability to grow adjusted EPS significantly faster than adjusted EBITDA. We expect this trend to continue as we deploy our robust and growing cash flow towards share repurchases, which I will talk more about shortly. When we step back and look at the full year, our performance was strong. We grew adjusted EBITDA by 11% to more than $1.9 billion, expanded adjusted EBITDA margin by 30 basis points to 4.9% and increased adjusted diluted EPS by 26% to $3.98, all while navigating a difficult macro environment. Turning to Slide 8. We continue to drive significant gains in operating leverage, and we again grew adjusted gross profit per case faster than adjusted operating expenses per case. In the fourth quarter, adjusted gross profit per case increased by $0.23 or 2.9% compared to the prior year. We continue to gain leverage through improved cost of goods savings, reduced waste through better inventory management, and increased private label penetration. These focus areas led to success in 2025, and we expect further improvement in these areas for 2026. Adjusted operating expenses per case increased $0.02 or 0.3%. We continue to successfully mitigate a portion of operating cost inflation through disciplined cost management and initiatives focused on driving productivity gains. These include routing enhancements, greater process standardization in our operations and increased savings through indirect spend procurement. As a result, fourth quarter adjusted EBITDA per case increased by $0.22 to $2.34. Our fourth quarter and full year results demonstrate our ability to drive strong leverage through the P&L. For the full year, we grew adjusted gross profit per case, 180 basis points faster than adjusted OpEx per case, which is above the 100 to 150 basis point annual target that we highlighted as part of our long-range plan. In 2025, our adjusted EBITDA per case increased nearly 10%. Importantly, since 2019, we have increased our adjusted EBITDA per case by $0.65 or approximately 40% through continuous improvement across gross profit and operating expenses. Turning to Slide 9. Our robust and growing cash flow, coupled with our strong balance sheet enables us the financial flexibility to deliver on our capital allocation priorities. In 2025, we generated nearly $1.4 billion in operating cash flow and deployed that capital to fund strong investments in our business, execute share buybacks and pursue accretive tuck-in M&A. As Dave mentioned earlier, we are on track to deliver our 2025 to 2027 financial targets, including generating more than $4 billion of cumulative operating cash flow over that period. Over the past year, we invested $410 million in cash CapEx to support our business and enable organic growth, including enhancing our capacity and strengthening our technology leadership. Additionally, share repurchases and tuck-in M&A remain important components of our capital allocation strategy to drive shareholder value creation. In 2025, we repurchased 11.9 million shares for $934 million and completed 2 tuck-in acquisitions for $131 million. We have approximately $1.1 billion remaining under share repurchase authorizations. Since 2022, we have repurchased 36.1 million shares for $2.2 billion. Finally, we ended the year at 2.7x net leverage well within our 2x to 3x target range and our leverage profile is the strongest within our industry. I'm also pleased to report another positive development related to our credit rating. Our corporate credit rating was recently upgraded 1 notch by Moody's to Ba1 based on our continued solid operating performance and credit metric improvement. Moving on to Slide 10 and our guidance and modeling assumptions. Our fiscal year 2026 includes a 53rd week, which is expected to add approximately 1% to total case growth and adjusted EBITDA growth. This assumption is included in the fiscal year 2026 guidance we are providing today. We expect to grow total company net sales by 4% to 6% compared to the prior year driven by total case growth of 2.5% to 4.5%. We are projecting independent case growth of 4% to 7% for the full year. We expect a lower inflationary environment than we had for much of 2025 with sales inflation mix impact of approximately 1.5%. We expect to grow adjusted EBITDA 9% to 13% and adjusted diluted EPS 18% to 24%. The midpoint of our outlook for the full year assumes the macro environment remains largely unchanged. Now let's look at our first quarter outlook. Due to the severe and widespread weather-related issues that impacted the industry in January and February, many of our customers and our distribution centers in impacted areas, experienced closures and other disruptions, particularly in the Southeast, which is our largest region. We have already had approximately 35% more distribution center closure days in 2026 than all of Q1 of last year, which negatively impacts our volume and cost. As a result, we expect first quarter adjusted EBITDA will be upper single-digit growth over the prior year. We fully expect we will achieve our 2026 full year guidance despite the weather-related disruptions we experienced in January and February. Last year, we started with weather-related slower EBITDA growth in Q1 yet we ultimately delivered our full year adjusted EBITDA and EPS targets through strong execution in the remaining quarters, even against a softer macro backdrop. I remain confident in our ability to deliver solid top line performance and double-digit adjusted EBITDA growth. This isn't new for us. Over the past 4 years, we have consistently delivered strong profitable growth while significantly improving our return on invested capital. While consumer sentiment remains cautious, we are optimistic about 2026. We operate in a resilient industry and continue to run our proven playbook. We are executing our strategy to enhance the customer experience, drive profitable volume growth, improve supply chain productivity and return capital to shareholders, which enables our continued ability to compound double-digit earnings growth. In closing, I'm encouraged by our financial performance and the progress we've made completing the first year of our long-range plan. I'll now pass the back to Dave for his closing remarks. David Flitman: Thanks, Dirk. At its core, our story is one of growth, operational excellence and execution with a long runway of top and bottom line growth ahead of us. We will continue to run our proven playbook, execute our strategy with discipline, and deploy capital in ways that maximize value creation. As we enter 2026, I have strong conviction that we will deliver the remaining 2 years of our long-range plan and hit our financial targets. And we also believe we are positioning ourselves to deliver sustained growth well beyond 2027. Before we move into Q&A, I'd like to draw your attention to Slide 11, which highlights what truly differentiates US Foods from our competition. Our differentiated value proposition and meaningful scale across the 3 most profitable customer types in the industry, independent restaurants, health care and hospitality, an industry-leading digital ecosystem embedded with AI-powered features that enhances customer engagement, drives efficiency and strengthens loyalty. Substantial opportunities ahead to drive sustained profitable growth as we are in the early innings of our operational excellence journey. And finally, industry-leading adjusted EPS growth supporting our confidence in remaining a double-digit earnings compounder through 2027 and beyond. With that, Tiffany, please open up the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Edward Kelly with Wells Fargo. Edward Kelly: Congratulations on a good quarter and a choppy backdrop. Dave, I wanted to ask you, I mean, things have been all over the place between shutdown and weather certainly seems like Q1 was choppy to date. Could you just maybe, I guess, one, provide a little bit more color on quarter-to-date volumes and kind of what you're seeing? And then if you could parse out sort of like weeks without weather and give us maybe your thoughts on what the underlying momentum of the business. And I'm hoping that you can tie all of this to your outlook for 4% to 7% independent case growth for the year because obviously, that's an acceleration. David Flitman: Sure. Start off with a great question here. I appreciate it. But as I answer that, let me go back to the fourth quarter because I was very encouraged with the momentum that we saw. As you recall in my prior remarks about the momentum coming out of Q3 until we hit the government shutdown and the weather and choppiness there in December. We had a lot of good momentum there. The great news is we rebounded from that in the early part of January. Actually, the first several weeks were very strong, actually stronger than our exit from Q4 and then we hit the choppiness. The really good news is since we've gotten past the weather, we're right back to where we were in early January. So the rebound has been -- it's taken a little bit just with the cold weather and all the ice and snow. But I'm just really encouraged by the underlying momentum. I'd point out also, Ed, that the fourth quarter was our strongest organic independent case growth in 2 years. And as we've been talking about for a while, the bellwether of our growth to come is that net new independent account generation, which was the strongest in the fourth quarter, again, at Q3. It was the strongest also since the second quarter of 2023. So I give all the credit to our teams, they're focused on execution in driving our capability into the marketplace. So I'm really encouraged ex weather. None of us can control that, it ebbs and flows, but we're controlling the things we can control, and we will continue to do that in 2026. Edward Kelly: Great. And then maybe just a follow-up on the inflation guidance. I mean, obviously, we're seeing this inflation, maybe you could talk a little bit more about your expectations there, sort of key drivers. And I'm just curious -- on the surface, it seems like it would make it a little bit harder to grow gross profit per case, but that was always in the details. And I'm curious as how you think about that? And then have you needed to make any adjustments on the self-help side of the story in that backdrop? Or is the impact you really just kind of minimal. Dirk Locascio: Ed, it's overall, as we've said many times, you're not going to hear us talk about that as a key driver, our self-help initiatives are the large lion's share of our drivers of gross profits pretty much every quarter. So like the rest of the industry, disinflation had a bit of a negative impact in the fourth quarter. But again, we still put up strong results. I think the -- we are still seeing inflation year-over-year so far in the year. And it's going to be one where you're going to continue to see anything more of an impact on the top line and the bottom line, and we'll manage our way through it just as we have. Operator: Your next question comes from the line of John Heinbockel with Guggenheim. John Heinbockel: So Dave, 7% sales force expansion, what do you -- which is a big number for you, high end of your range. Maybe to talk about when you think about the maturation of that? Is that a key factor '26 local case growth, maybe tail end of the year, right? So is there a cadence that's later in the year? Is the sales force productivity from that 7% a key factor? And then maybe the last part of that would be, when you think about improving net account growth, how much opportunity do you think is still left in lost accounts, right? Because it just strikes me that that's still low double digit and that could be better. David Flitman: Yes, I appreciate the question. To the first part of it, that 7% included some of the internal transfers that we talked about last quarter. So if you back that out, we were right in the middle of our range in that 4% to 5% range in terms of external hires. So we executed exactly what we've been doing. To your point, I believe that the productivity of those sellers, particularly with the number that we've had internally shifted over, will ramp up and have a meaningful impact here in the back half of '26. Not to mention the consistent sales force hiring we've done over the last 3 years. I think you're starting to see that pay off. Every quarter last year, we accelerated organic independent case growth. We continue to accelerate net new. And I expect our growth will continue to accelerate as we go forward here. The second part of your question, sure, we run all parts of NOP. We look at all that. We've talked a lot about the penetration pressure that we've seen, just given the foot traffic lost is an opportunity. I will tell you that loss is fairly stable to improving. It hasn't increased at all. And the opportunity remains here to get that a bit lower. But again, given the pressure in the industry, our focus has really been on this net new, which is at the heart of our growth acceleration, and we're going to keep the team focused there. John Heinbockel: And maybe as a follow-up, right, you did phenomenally well on OpEx per case in the fourth quarter, right? But there's still an opportunity for Descartes to make a bigger impact in [ Yuma ] next year. So kind of what drove that in the fourth quarter? And I don't know how sustainable that is in your mind? Dirk Locascio: Yes. Well, we had -- we talked about a lot of the initiatives there in the prepared remarks that are getting traction. And so it's really more of the same. To your point, Aron, UMAs, we continue to implement that. We're about 80% implemented across the company now in our key markets. We'll finish the Humos rollout here by the middle of this year. And again, that's the template for consistency and roles and job functions in our operations, and it's had a meaningful impact. On Descartes specifically, we commented on a 2% increase in cases per mile. We think there's at least that much opportunity again now that we've got that fully deployed across the company going forward. So we're expecting continued and ongoing benefit from that rollout. David Flitman: And John, just as we talked about last quarter when OpEx was a little higher, you have shifts from year-to-year that can happen from quarters. So any order you can be higher or lower on cost. And really, I would think about -- if you look at all of 2025, we were up $0.10, $0.11. So you saw really come to fruition where we offset a portion of our cost inflation with the productivity things that Dave's talked about. Operator: Your next question comes from the line of Lauren Silberman with Deutsche Bank. Lauren Silberman: And congrats on the quarter. Dave, you talked that strong net new business -- of course, you talked about strong net new business growth this quarter, which is accelerating. Is the net new business primarily driven by your headcount growth or your existing salespeople expanding their book of business? And then are you seeing any change in the competitive environment? Are things getting more promotional? David Flitman: Yes, Lauren, I would say that it's coming from both. Our existing sales force being increasingly productive as well as -- and that's why I mentioned our consistency in hiring sellers over the past 3 years. That productivity continues to ramp up across all of our cohorts. And so this is our model, right, a mid-single-digit headcount increase year after year, continuing to do route splits effectively as they make sense, seeding new sellers with business. They build from that. The sales reps that you take that business from, you pay them for that business for a while as well to encourage them to make sure those transitions are smooth and then they go build a new book of business. And so that's the model, and it's working quite well for us. And I expect that to continue. To your second question around promotional activity, get ebbs and flows, Lauren, I would say the promotional activity we've seen, and I think there's been some talked about publicly here recently has been particularly at the QSR level and all that and some in chains. But I don't see that that's changed a lot here from the last quarter. I think we had -- saw similar effects, but I wouldn't see it increasing from here. We'll see what happens with foot traffic, but that promotional activity ebbs and flows. It's always there. I wouldn't point to anything significant right now. Lauren Silberman: Okay. And then just a follow-up on the sales comp change. I believe you mentioned it could take 2 to 3 years to transition everyone to the new structure it sounds a little bit more gradual than I think you were originally communicating. Is that a fair takeaway? And any sort of feedback or attrition that you may be seeing? Anything else that you could share. David Flitman: Yes. So actually, it's not a change. And what I'm trying to do here because I know there were a lot of questions about it when we first began to talk about it was just provide more clarity. And so the reason I commented specifically about how we bring people into the company today at 100% base is -- it takes a long time to get the majority of your sellers to the 50-50 commission today. It's very dynamic, as you would expect. We're always bringing new sellers in. We've always got retirements and all that. It's going to be the same thing going forward. It is no change in our plan. It's just the reality of how we operate the business, and I wanted to provide some clarity on that. So getting to 100% commission could take a couple of years for the majority of our sellers. That's fine. That's situation normal. It's the same game we've been playing for a long time. And then I'm very encouraged with the way the rollout is going, the feedback that we've gotten, particularly as I commented, with our sales leaders who we've had in here over the past several weeks. There's a lot of buzz and a lot of excitement. But I guess I would say I'm most encouraged looking at our turnover. Actually, since we started -- first started talking about this, all of our experienced cohorts, and we have different experience cohorts in different buckets. They've all improved since we've started to talk about this. So that's a very encouraging sign. And we'll continue to watch that closely and again, be very, very thoughtful about how we transition each individual here over time. Operator: Your next question comes from the line of Kelly Bania with BMO. Kelly Bania: Congrats on strong year. I wanted to also dive into the outlook for the case growth for this year, the 2.5% to 4.5%, maybe just with a little deeper dive in the customer types and then the cadence. Are those all similar ranges that you outlined kind of as part of your algorithm. Just kind of curious what you're assuming maybe within change, if you're assuming that gets back to flat or slightly positive. And any comments with new business wins in health care and hospitality. And then also within the independent cases of particular, should we expect that to kind of ramp throughout the year because the comparisons are also tougher as you pointed out, they've kind of really improved throughout this entire year. So just wondering if you had any comments on those points. David Flitman: Yes. So let me start with the IND guidance. That 4% to 7%, Dirk talked about the 1% of the 53rd week adds that takes it to 3 to 6. You add 200 basis points of that. That's right on the algorithm that we talked about at Investor Day when the foot traffic gets to what the basis was for that, which, as you recall, is about 2%. We haven't smelled 2% since we put that algorithm out there, it's been relatively flat to down. So it's right in the heart of what we committed to do. The total case growth takes into account health care and hospitality. And let me just talk about those for a second. We're very encouraged by -- when we talked last quarter about the $100 million of onboarding in both of those target customer types. We expect to have all of that fully onboarded by the end of the first quarter here. And I would also tell you that the pipelines for both of those have never been stronger. So I would expect more through the course of time. And then to the last part of your question around independent case growth, sure, the comps get a bit more challenging, but we're not deterred by that. We've got a lot of really good momentum. Our sales force has never been more focused. Our leadership knows what we need to achieve. And I give our team a lot of credit for the momentum that we've built thus far. And I would expect you would continue to see us ramp up our growth rate. That's the plan. Kelly Bania: That's very helpful. If I can just follow up on one more with the comp model change. It sounds like it's launching midway through the year. And so assuming maybe no real impact this year. Maybe correct me if that's wrong, but just wondering if you could talk generally about the kind of magnitude of unlock that you think that this could drive case growth over time over the next couple of years? David Flitman: Yes. It's hard to quantify it. But I really believe, as I said in my prepared remarks, this is going to really unleash our sales force through the course of time. I think this is the last major unlock. We've got all the process stuff right. We've got the organic growth going. We've got our head count plan consistent mid-single-digit headcount additions. This is the last piece that's been missing. And as I've talked about before, I'm contemplating this since the day I got here. I feel like with the strength we -- underlying strength we've built in the business over the last 3 years, this is exactly the right time to launch this plan going forward, and I'm really excited about what it's going to mean over time. Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Jacob Aiken-Phillips: So on the common transition, I'm curious how we should think about seller productivity throughout the 3-year multiyear transition. Would you expect it to dip a little bit towards the beginning and then heightened afterwards? Or should it be more neutral in the acquiring over time? David Flitman: Yes. Good question, Jacob. I think it will be the latter more than the former. And the reason for that is -- and that's why I emphasized it earlier, these are very individualized tailored conversations. When you make a change like this, you're going to have some people out of the gate that do better and some people that are more challenged. And that's the piece that we're working through with each individual. And that's why we're taking a very thoughtful and deliberate approach on these pilots. There's a lot -- when you got a sales force of over 3,000 people, you want to do this well and you want to have those individual conversations and make sure you're making the right decision. So I would not expect us to step back. I would expect us to be neutral to going forward with this as we implement it. Jacob Aiken-Phillips: Got it. And then separately, as you continue to layer in AI capabilities in MOXe and across your platform, should we think about that mainly as a cost productivity tool? Or do you see revenue and wallet share upside as well? David Flitman: Yes. Good question. I think it's both. And we've talked about since we implemented MOXe over 3 years ago that we've seen the customers that use MOXe buy more from us on average and they stick with us longer. So there is growth upside to it as well. An important part of it is ease of doing business with us, kind of taking the friction out of the relationship with our customers, which we've gotten very good traction with and importantly, also improving the sales force productivity because of things that the customer can now do self-serve in a very effective way within MOXe takes that burden off of our sales force and frees up time for them to go talk about our brands, find the next customer, drive further penetration within those customers, and that's where we want to see our sellers spending their time. And so it's really both within MOXe. Operator: Your next question comes from the line of Alex Slagle with Jefferies. Alexander Slagle: All right. And great work in 2025. The share gains, the execution, I mean, seemingly everything has been so strong across so many initiatives, but is there anywhere that's not where you want it to be, where execution is just not ramping like you hoped and maybe as an underappreciated opportunities that you want to highlight? David Flitman: Well, I'm glad our team is making it look easy because it's anything but this is hard work, and it takes consistency and focus. And simplification in the journey, and that's what we've done here. We've got a very focused team. I put our leadership team up against anybody anywhere in terms of knowing what we need to get done and ability to execute it. I'm one of these guys that's never satisfied in anything. And this theme of continuous improvement is real within our company and our organization. And so I just continue to see so much opportunity across the P&L for us to strengthen what we've got going on. We talk about all the good things that we have in the company, but there's plenty of opportunity to improve in areas that we've talked about this morning and in plenty of other areas of the company. In a company of 30,000 people and 75 distribution centers and $40 billion in revenue, there's a lot that needs worked on every single day. And that's why I'm so bullish on this continuous improvement journey and our ability to hit our targets. Everywhere I look, there's more opportunity for us to get better. Alexander Slagle: That's great. And on the CapEx increase for '26, how much of that is Pronto versus other initiatives that you're looking to do? David Flitman: It is a combination. So Pronto is a meaningful portion of that. And then the rest just comes from building spend, maintenance spends just across the board. And if you think of it just as our business continues to get bigger and we continue to invest in capability and capacity that's driving it. But overall, you see we still expect to have very strong EPS growth. So making sure that we're leveraging our investments into things that are paying off. Operator: Your next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Great. My first question is just on the M&A environment. I know you did a tuck-in with Shakes in the fourth quarter, and I think 2 transactions for the year. Both are relatively small compared to your business. I'm just wondering how you think about the opportunity for more sizable M&A in this challenged macro maybe any thoughts on what you've seen around availability or receptivity from potential targets or where multiples are versus historical? Just wondering where you think the greatest opportunity are to enhance the U.S. food platform that you could potentially consider pursuing? David Flitman: Thanks for the question, Jeff. I'll tag team this one with Dirk and I'll take the first part of your question. First of all, and just take you back to our strategy. Our strategy has been and will continue to be targeting tuck-in M&A. I love our footprint. We've got density in all the major MSAs across the country. And as you look back over the ones that we've acquired over the past 3 years, they've all been helping us with local market density in this tuck-in area. Putting a distribution center in the part of the market that either we haven't had a location in or that is growing faster than where we have our footprint. And it helps us get more productive, take miles out of our distribution network. And obviously, there's a lot of synergy around those. And that's our plan. It has been and it will continue to be going forward. Because given the fragmented nature of the industry, that's where the opportunity is. And thankfully, we don't need to do anything of scale. We just don't. Obviously, if something comes along that makes sense, we'll take a look at it, but it's not our day-to-day focus in M&A. Dirk? Dirk Locascio: And just our team continues to do outreach work on building the pipeline. And as many times and we've talked about it -- sometimes it takes many years of dialogue and engagement before things come to fruition. So that's -- again, that's why we continue to like the toggle that we can do between M&A and share repurchase, so that when that M&A comes to fruition with our strong cash flow, we can move ahead on it. And if not, we'll continue to buy shares back. As far as the multiples, we've not seen that be an inhibitor. People always want to get paid fairly for their business. But that's continued to be, I'd say, rational. Jeffrey Bernstein: Got it. And just one clarification. I think you mentioned in the press release and even on the call, I think you were talking specifically to EPS beyond '27 I think the reference was to sustain double-digit growth. I know currently, the EPS algo is for 20%. I'm just wondering whether you view that language similar to the 20% or maybe that's just a reminder that over time, 20% it's more realistic to think of double digits, but trying to just compare that to kind of the 10% EBITDA growth. So kind of how you think about things as we look past this current algo relative EBITDA versus EPS? David Flitman: Yes, I appreciate the question, Jeff. We'll talk about beyond 2027 when we get there. But our message here is quite clear. We are and we expect to be a double-digit earnings compounder for a very, very long time in the company. We're not messaging anything about something coming down or something going up. We've been doing this for a while, and we expect to continue to do it given the strength of our model and our focus on execution here. That's it. Operator: Your next question comes from the line of Jake Bartlett with Truist Securities. Jake Bartlett: My first question was on the macro outlook. You mentioned that you expect a similar macro environment than '25, but there's also been a decently strong start to the year, aside from the weather, some tailwinds from tax refunds, for instance. I guess I'm asking about your confidence on '26 and maybe whether you think that there should be some potential upside from kind of that base level. David Flitman: Yes. I just want to make one comment here. We've been operating in a very soft macro for the most part of my tenure here, and we've been executing extremely well. And we expect in a flat macro that we will continue to execute well and deliver results that are consistent with what you've come to expect out of U.S. Foods. Any tailwinds that come would be upside to that. And I'll let Dirk put it in a little more context for you. Dirk Locascio: Yes. Just as we said in the materials and the comments, so our -- we can provide a range like we always do, and the center point of that range really assumes status quo. So to the extent the environment is better from refunds, stimulus or anything like that, then that would benefit us as it does the industry, in addition to, of course, the end consumer. But in the meantime, we still even down the middle, expect to accelerate case growth and really coming from our own ability to drive share gains, as Dave pointed out. Jake Bartlett: Got it. And then my follow-up question was on the margin drivers in '26. Forgive me if I missed it, but I'm wondering if you can quantify some of those drivers, like the vendor management, there's $150 million to go between '26, and '27, how much you expect in '26 inventory management, indirect cost. If you can quantify those like you did in '25, that would be helpful. David Flitman: Well, in some of those we continue to expect meaningful growth. So we're not going to specifically lay out the components and the pieces. But hopefully, what you see is what we've generated and what we've called out just in those few examples of what we expect to there's not a clip, so to speak. So we expect to make more progress in '26 and then further in '27. But quarter after quarter, hopefully, you continue to glean from our commentary is when we talk about this portfolio initiative initiatives that continues to mature, advance some of them that come on, come off. That is how we're managing the business, and that's part of how continuous improvement works and driving that through gross profit through productivity. And so each of those will continue to generate significant value. But when you think about continuing to improve EBITDA margin, you see that concreteness that is there from specific things that we're doing and we've provided that level of transparency that is really unprecedented in the industry as far as where values are coming from. And we think that's important. So you and investors build that confidence that US Foods will continue to build upon. We've done in the last 4-plus years. Operator: Your next question comes from the line of Mark Carden with UBS. Mark Carden: So to start another one of the compensation shift. Just now that the news has been out there for a few quarters, have you seen any shifts in your ability to attract the kinds of salespeople you'd like to get from an experience standpoint. So by that, do you see a higher proportion of more seasoned salespeople perhaps peaking at the time before? Just any change in composition from the pool? David Flitman: Yes, Mark, I would say it's still early. We haven't had a lot of shift in that at this point. And recall that we don't typically hire competitive reps for the majority of our sellers. That's a minority of who we sell. I expect over time that will continue to be the minority of who we hire. But we do expect to be able to attract some experience over time. But really no shift. I think it's early days yet. But again, I would just underscore, we do not have trouble attracting new sellers to the company, continue to bring new ones in, have new cohorts every month. Mark Carden: Got it. Makes sense. It's helpful. And then on the OpEx front, there have been some recent labor contract announcements in the industry that included some meaningful bumps in compensation. Just how are you thinking about labor's impacting your OpEx per case in the year ahead? And then would you expect incremental productivity gains to be able to fully offset any pressure? Dirk Locascio: Sure. Mark, it's -- I'd say what we've seen is not that dissimilar to what we've seen over the last 3 or 4 years. In any given year, we have a number of contracts to come up. And we we reach agreements and levels of increases. In a number of cases, they're catching up with increases we've given other groups in prior years. So I don't expect it to be any meaningful change to what we've seen from an OpEx trajectory. And we still feel highly confident in our ability to grow GP dollars to 100 to 150 basis points faster than OpEx dollars. Operator: Your next question comes from the line of Karen Holthouse with Citi. Karen Holthouse: Congratulations on the quarter and the year. Just on the restaurant side, I feel like we're talking a lot about GLP-1s these days. Is there anything filtering up from the field in terms of what customers are concerned about, what they're asking for from an innovation standpoint and how that might play into your Scoop kind of strategy for the year? David Flitman: Yes. I think we haven't seen significant shifts. I think to the extent that that GLP-1 transition or it impacts healthier choices for customers and ultimately, our customers. It will play very well to our portfolio. And again, over 1/3 of what we sell is center of plate or produce. Actually, it's slightly more than that. And so we feel like we're well positioned. We can bring in whatever products we need. I think some of the early things that we've seen from customers is helped with menu design. There are things looking at portion sizes, healthier options and all that, I think, plays to our strengths. So while the impact remains to be seen fully in the industry, I don't expect a significant impact outside our realm of capabilities to deliver whatever our customers need. Karen Holthouse: And on the guidance for 4% to 7% independent case growth, if we think about what kind of pushes to the lower or higher end of that range, is that really more dependent on weather macro kind of the industry? Or are there things on more of the internal or self-help side, you could see pushing yourself towards one end or the other? David Flitman: Well, we'll continue to push the self-help consistently. I think as Dirk said, the midpoint of that, you would expect the macro to remain fairly consistent with what we saw coming out of 2025. any downside in foot traffic would probably pull us to the lower end and any upside on some of the things that we had in an earlier question could potentially push us higher. But I think down the middle is what we're planning for as we get into the year. Operator: Your next question comes from the line of Peter Saleh with BTIG. Peter Saleh: Great. Just one more question on the sales force compensation. Just curious if as we go through the year and you start to transition, is there any impact to the financials, any lumpiness as we do this? Any seasonality that we should be aware of in the model? Dirk Locascio: Peter. At this point, nothing of significance as we get further in the year, if there's any anomalies to call out, we'll do that. But really, it will be one sort of as we go, probably in the future years and you get more and more people on the plan. You may see some subtle moves quarter-to-quarter just based on the volume, but nothing of significance. Peter Saleh: Great. And then just -- I think you highlighted a couple of incremental cost savings that you guys have found on cost of goods and indirect costs. Can you just provide a little bit more color on where those are coming from? Do you think this is the top end of those cost cuts? Or do you think there could be more to come in the future? David Flitman: Well, I'll start with, we're very pleased with each of those examples. And in the cases, these -- the teams are really able to get more out of the initiatives than we had originally contemplated. And so what's exciting is it spans gross profit, various elements of OpEx. And it is healthy ways to improve GP, healthy ways to improve OpEx and so those are things that, as we go in, the teams are continuing to push for those opportunities, and they're sustainable, and they're part of that continuous improvement that Dave mentioned earlier. So for each of those, the top end, I mean, you're never going to hear me 1 year in and say that's the most we can do. And Dave talked about our lack of satisfaction is we want to recognize the good work the teams have done. But internally, we're doing what you would want us to do is continuing to identify where we can in a healthy way, continue to get more out of our different initiatives. So we're highly encouraged and again, that all adds to the confidence that we have in our ability to deliver this year in our long-range plan. Operator: Your next question comes from the line of Danilo Gargiulo with Bernstein. Unknown Analyst: Great. And once again, congratulations on a very strong quarter and year so far. I wanted to follow up on a question that was asked earlier regarding the guidance, but I want to take a slightly an and specific, I want to ask among what is it within your control what do you have to believe for you to hit the high end of your EBITDA guidance? And conversely, what you may need to believe for you to go to the low end of your guidance? David Flitman: It really comes down to just -- so there's the macro pieces that we've talked about. And then within ours, there's always the range of execution effectiveness. And that is that really is the primary variable. And no different than we've talked about the last few years. That is the part we would rather have the control over because we can influence that. And in each of those cases, we're going to continue to work on, again, the most that we can in a healthy way out of our initiatives, but we are confident in our ability to deliver the guidance that we've outlined. Unknown Analyst: Okay. And then earlier, you mentioned that the comp changes to your sales force is the last major unlock to drive case growth. So are we to assume lower case growth once the comp changes lapses? Or are you contemplating other major opportunities in the pipeline that will help you sustain very healthy case growth going forward? Dirk Locascio: Thanks all. not expecting anything to slow down. We think this will unleash our sales force to its fullest over the course of time. And both Dirk and I have expressed a lot of confidence here in our ability to drive both the top line and double-digit earnings for a long time to come in this company. And our sales force is strong. We believe this comp plan fully aligned to business objectives will unlock them to drive further growth. And make a lot more money individually in the process. And that's what we want to have happen here. Operator: Your next question comes from the line of Rahul Kro with JPMorgan. Rahul Krotthapalli: Question is on Pronto. In 46 markets now, and about half of them on proton next payer penetration. Can you share what kind of lift in independent case volumes and specifically wallet share increase are you seeing in existing customers or even when you onboard new customers in the markets with Pronto and extend penetration? Dirk Locascio: Sure, Rahul. So we haven't shared specific numbers, but we do see a meaningful uplift in those in both the the legacy Pronto and the Pronto next day. We look very closely in those markets to make sure that we're not seeing cannibalization of our broadline business. And we've seen meaningful typically it's double-digit levels of uplift on customers that are in there. And the great thing about that, just like on the Pronto legacy is when we first launched a Pronto Next Day market, it typically has 1 or 2 trucks. And so that's -- again, that's why we expect and believe that Pronto will continue to be a meaningful growth driver for US Foods for a lot of years. Rahul Krotthapalli: That's helpful. One follow-up. On the AI tools, in the context of sales force training and deployment, can you share some opportunities or challenges when you're onboarding new sales force or even like training the existing sales force, given the broad set of productivity enhancing tools you have talked about? And do you see a future where given this is a relationship business that maybe the number of clients like your sales force can handle, can double or like even like take a significant step-up from where we are today, given all the tools at disposal? Dirk Locascio: Yes. Well, with the second part of your question here, absolutely. And we're already seeing that in terms of productivity. That free freeing up of time for our sellers with the digital capabilities and the embedded AI helps with is real, and we're starting to see that. I mean we started a couple of years ago talking about automated order guides and taking something that took 3 to 4 hours for a seller to prepare down to 15 minutes. They're doing something with that freed up time and it's going to see more customers or spending more time with existing customers and trying to drive penetration. And we have a very thoughtful and deliberate sales onboarding process that includes a lot of face-to-face training over a long period of time. But as you think about areas where AI could help in that in the future, after the initial training things like product training and all of that could be an area of opportunity for AI, and we may or may not be already thinking about and doing some of that. So I believe the AI opportunities here are limitless with our digital technology, and we're continuing to explore ways to both drive productivity and help us accelerate our sales force productivity. Operator: Your next question comes from the line of Margaret Ma Binge talk with Wolfe Research. Unknown Analyst: I just wanted to ask, it seems like you guys are seeing some acceleration in private label penetration. As we look ahead into '26, can you give a little bit of color on the specific levers that you guys have to continue to push that penetration higher? David Flitman: Great question. We've been at this for a very long time in private label, and it adds a lot of value for our customer. Recall those products are cheaper, the manufacturer brands, importantly, they're designed with great quality in mind. We've been doing this for a very long time and are also more profitable for the company, which means our sales force gets comped higher when they sell that. So we feel like we've got the incentives right, that's obviously designed into our new sales compensation plan. What gives me confidence, and we talked about being at 54% penetrated with independent restaurants. And I keep saying this, and we talk about this a lot, that there really is no near-term ceiling. Here's a new data point. 25% of our independent restaurant customers have greater than 70% penetration with our brands. That's the key data point that gives me confidence to say that there's a lot more upside to come. And so our sales force has their arms around this. They're excited about our brands. Our innovation team brings out high-quality brands a couple of times a year here and puts new powder in the hands of our sales force to get in front of our customers with. So we've got a great machine built around our private label brands that's been accelerating penetration since I've been here, and we expect that will continue. Operator: That concludes our question-and-answer session. I will now turn the call back over to Chief Executive Officer, Dave Flitman, for closing remarks. David Flitman: Thanks a lot, Tiffany. We appreciate everybody's time this morning. Our team is focused. We're executing well, and we expect everything to continue that you've come to appreciate about US Foods. Thanks for your time. Have a great week. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Trond Johannessen: Good morning, and welcome to this presentation of Pexip's fourth quarter results. My name is Trond Johannessen, and I'm the CEO. Together with me here at Lysaker today, I have our CFO, Oystein Hem; and our Chief Revenue Officer, Asmund Fodstad. Together, we will take you through the highlights of the quarter and what we are focusing on going forward. The standard disclaimers apply as usual. First, a short overview of Pexip for those new to the company. Pexip was founded in 2012, and currently, we operate in 25 countries across the globe. We are a specialist video conferencing and infrastructure company focusing on interoperability and secure and custom meetings. We do software only delivered as a software or software delivered as a service. Pexip has unique and established relationships and partnerships with the leading companies in our industry. We complement and enhance their solutions and do not generally compete with them. Our customers are mainly large organizations in both the private sector and the public sector that have complex needs when it comes to video collaboration. The financial performance is strong and has been continuously improving over the last quarters. Now, to the highlights of the past quarter. Our annual recurring revenues, ARR, grew with USD 8.8 million during the quarter, and this gives us an ARR base of $131 million leaving Q4. This is the top end of the updated Q4 guiding we gave you in December. In Q4, we saw a significant improvement in the growth in Connected Spaces as a result of a couple of large deals that closed in the quarter. In our Secure and Custom business area, the positive development continues, driven by increased awareness around the need for secure and sovereign communication solutions. In Connected Spaces, we also see solid progress on our solutions for native rooms and the launch of Connect for Google Meet hardware in Q4 has been a success, both technically and commercially. EBITDA came in at NOK 94.2 million in the quarter and NOK 316 million for the full year. Free cash flow was NOK 71.9 million in Q4 and NOK 354 million for the full year. If we look at this Q4 performance in the context of the last 12 months, we see an accelerated development on all key parameters. Our total ARR continues to grow, and year-over-year, the growth rate was 16%. Our 12-month rolling EBITDA reached NOK 316 million, which is a 53% improvement since Q4 last year. This corresponds to a 26% EBITDA margin. And finally, the free cash flow in the last 12 months of NOK 354 million is 80% higher than at the same time last year. We take this performance as evidence that we are operating in attractive markets with relevant products and a strong market position. Pexip has 2 main solution areas. Pexip Secure and Custom is privately hosted video meetings that give complete privacy and data control with the desired level of customization. Pexip Connected Spaces is about video meeting interoperability by enabling any meeting room to connect to any meeting platform. Now, a few words about each of these business areas. In Secure and Custom, we are targeting a segment of the video conferencing market that is largely unserved by the major players like Teams, Zoom, Google and Webex. We are catering to those organizations that have limitations with respect to use of global cloud platforms like Azure, GCP or AWS. And consequently, they have a need for their conferencing software to run in controlled IT environments, either self-hosted or in private or sovereign clouds. This is a fast-growing market as a consequence of the geopolitical situation and the need to control data. Data sovereignty is increasingly relevant, in particular in Europe. Significant investments are being made in building sovereign IT infrastructure and solutions in many countries. Pexip has a unique position in this growing market with a modern and future-proofed solution that has the flexibility to be integrated and customized to the needs of the customers, while at the same time, being certified and tested to the highest standards in the market. Again, in this market, Pexip's offering is a secure video meeting platform that can be used exclusively or alongside, for example, Teams or Zoom. The solution includes security features such as tailored user authentication, clear meeting classification labeling and complete control over what data is stored and where. Integrating with chat is also an option. The Pexip platform can be installed in all relevant IT environments and gives complete control to the customers as no data needs to be shared with any external third parties. The secure meeting can easily be booked through the Outlook calendar or started through a chat session, exactly the same way as for Teams meetings. We're now starting to see that large organizations deploy more than one video meeting solution, and Pexip is very well positioned as a secure meetings alternative. Now to Connected Spaces. Here, we have basically completed the any-to-any vision and really deliver on the promise. In close partnerships with Google, Zoom, and of course, Microsoft, we provide the most comprehensive suite of interoperability solutions available in the market. In Q4, we launched a brand-new Connected Spaces product named Pexip Connect for Google Meet hardware. With this new product that we have co-developed with Google, all meeting rooms that have Google Meet hardware can now connect to Teams meetings with excellent quality. The market interest and resulting uptake is strong, and we have closed close to USD 1 million in new ARR on this product during Q4 alone. Now, let me leave it to Asmund for a more detailed sales update. Åsmund Fodstad: Thank you, Trond, and good morning, everyone. Pexip delivered a strong fourth quarter, reinforcing our momentum across both Secure and Custom and Connected Spaces. For Secure and Custom, Pexip added USD 2.9 million in ARR and reached USD 56.3 million for the end of the quarter. It's a solid 25% year-over-year increase. Growing focus on sovereign IT solutions across Europe strengthened our position. And our solutions for defense, government and healthcare continue to be key contributors to our momentum in Q4 and beyond. In Connected Spaces, Q4 ended as an exceptional strong quarter for us. ARR grew by USD 5.9 million, reaching USD 74.7 million, a solid 10% year-over-year increase. Growth in this segment is fueled by major customer wins as organizations transition across video platforms and rely on Pexip to ensure a seamless, consistent user experience. Let's look at a couple of wins. This quarter, we had so many large wins that we decided to share more of them with you and as well address the commonalities that strengthen our relevance and competitive position. So, across our global wins in the last quarters, we see 4 growth drivers that contribute to our success. Number one, the acceleration of sovereign IT solutions and the increasing need for data control. Governments across Europe, the Middle East and Asia are increasingly selecting Pexip as their standard for secure internal and cross-agency collaboration. Let me just use a few larger win examples. A central European state IT provider now powers all intergovernmental communication with a self-hosted sovereign Pexip solution. In Southeast Asia, the Ministry of Defense of a leading nation now powers all critical collaboration with a modern, integrated complete collaboration solution from Pexip. The second trend, successful adoption of Private AI. Pexip continues to demonstrate strong net retention in the Secure and Custom segment. A key growth driver is our Private AI offering, which is gaining significant traction across justice and healthcare sectors globally. A great example is one of the world's largest healthcare organization who now adopted Pexip Private AI resulting in a 30% upsell within an already major customer for Pexip. And thirdly, Pexip's unique position for classified and mission-critical environments. Pexip secured multiple wins across classified networks in Europe as well as deployments at the highest U.S. impact classification level IL-7, underscoring our unique suitability for sensitive environments. A couple of large wins here as well. A Nordic nation now powers all their classified and above communication with Pexip solutions across intelligence agencies, Ministry of Defense and National Security. And a U.S. IT provider for defense, intelligence and national security environments is now enabled with Pexip at Impact Level 4 and above. And remember, Pexip is the only Microsoft certified vendor at IL-4, 5, 6 and 7 that can meet the strict security regulations of the U.S. government. And lastly, interoperability as a strategic differentiator. As enterprises and government institutions shift technology platforms, Pexip's ability to deliver a consistent user experience remains essential. And recent wins prove our relevance and long-term competitive strength. A couple of large wins. One of the world's largest technology companies now uses Pexip for Google Meet across thousands of devices and meeting rooms worldwide, as they changed the video technology platform to Google. Another example is one of the world's largest biotech companies who have used Pexip Connect standard for years and now transition to Pexip solution for their native rooms, as they have changed the technology for devices in their meeting spaces. These 4 drivers are core to what makes Pexip unique, and they explain why we continue to win customer after customer in both Secure and Custom and in Connected Spaces. And lastly, I wanted to point out, as we came into this year with a solid pipeline across both business areas, we expect sustained strong traction in 2026 and beyond. And with that, I will hand over to Oystein for the financial details. Oystein? Øystein Hem: Thanks a lot, Asmund. For annual recurring revenue, as Trond mentioned, we increased our growth to 16% overall, up from 12% out of Q3. This is a combination of continued strong growth in Secure and Custom at 25% per year and Connected Spaces having a great quarter, delivering 10% growth year-on-year. The great growth come from customers in Enterprise, Government, Healthcare and Defense, and in particular, from the Americas. In terms of net retention and new sales, Connected Spaces saw an increase of 8.6% in the quarter, driven by strong new sales. The improvement compared to previous quarters was in particular from a couple of large customers that closed in the quarter. Secure and Custom continues to see strong growth, delivering 5.4% in the quarter and from a combination of strong new sales as well as positive net retention. Churn was slightly higher this quarter, as we saw a low renewal rate for support contracts in Asia that had an impact on churn overall. Such customers are a small part of our ARR base, hence, we expect this to be more of a onetime event. In terms of the P&L, recognized revenue came in, in line with last year. This is mostly due to the 10% decline in the U.S. dollar to Norwegian kroner exchange rate impacting our software revenues as well as a software deal slipping from Q4 and being delivered in Q1 of 2026. In U.S. dollar terms, revenue growth was 10%. For the year, revenue growth is in line with the ARR growth going into this quarter, while the contracts closed in Q4 will have revenue impact from Q1 and onwards. EBITDA increased in the quarter, benefiting from the same currency development, as it also reduces our costs. And for the year, we came in at an EBITDA margin of 26%, up from 18% in 2024. And the sum of our ARR growth and EBITDA margin is now at 42% for the year versus our long-term ambition of more than 40%. On costs, they were slightly down compared to Q4 of last year. Non-share-based salary expenses are down NOK 11 million, while share-based compensation is up NOK 9 million due to the share price increasing meaningfully during Q4. And other OpEx was down NOK 3 million. Looking at the year overall, Pexip increased our revenues with NOK 110 million and managed to convert 100% of that into incremental EBITDA. And this really shows the scalability of our software business, combining double-digit growth with good cost control. The EBITDA of NOK 316 million resulted in a free cash flow for the year of NOK 354 million, helped by a strong Q4. Q4 came in with a free cash flow of NOK 72 million, an increase of NOK 51 million compared to Q4 of 2024, with most of the improvement resulting from a better working capital development. Looking at the rest of the P&L, depreciation is in line with previous quarters and continues to be down year-on-year, while net financials is down compared to Q4 of 2024 due to lower gains on foreign exchange differences. In total, our profits before tax came in somewhat above 2024 with NOK 87 million. And to summarize the year, we grew revenues with 10% and had no significant changes to either of the cost categories above EBITDA. Depreciation is NOK 26 million lower, and hence, our EBIT margin has crossed 20% for the first time and came in at 21%. Lastly, an update on reporting. Pexip is currently reporting our annual recurring revenues in U.S. dollars as that is the primary currency we use with our customers. To make reporting more consistent and remove noise from currency fluctuations, we intend to consolidate all financial reporting using U.S. dollars in 2026, starting from Q1. We will provide pro forma historic figures for 2023 to 2025 in April, before the first report in the new reporting currency comes out in May. And with that, I hand it back to Trond. Trond Johannessen: Thank you, Oystein. Yes, looking good. Well, looking ahead, we have described earlier that we maintain a positive market outlook based on the key trends we see in our markets and the unique technology, strong market position and the solid industry partnerships we have. The expectation now is that we will end Q1 with an ARR in the range of USD 133 million to USD 136 million compared to the USD 131 million we had leaving Q4. This expectation reflects that the positive trends we have seen over the last quarters, they are expected to continue or even accelerate. The financial ambition we have is to consistently deliver above Rule of 40 performance across ARR growth and EBITDA margin. And the last 12 months, as Oystein mentioned, we were at 42% on this parameter. Now to capital distribution. Pexip's dividend policy is to distribute 50% to 100% of free cash flow. For the fiscal year 2025, we recommend a dividend of NOK 4 per share, up from the NOK 2.5 we distributed last year. As for last year, this total dividend is a combination of ordinary and extraordinary dividend, 3 plus 1. As always, this recommendation is subject to AGM approval in April with payment likely to happen in May. We believe that even with this sizable dividend, the company maintains a solid financial position and the ability to go after both short-term and long-term growth opportunities. Finally, before we go to Q&A, our AGM will be on April 17, and the Q1 presentation is planned for May 5. Now, Q&A. Welcome back my friends. Øystein Hem: We'll start with the questions from the analysts that are with us live, and we will start with Jorgen Weidemann from Pareto. Jorgen, can you hear us? Jørgen Weidemann: Yes, as always. Congratulations on yet another solid quarter. So if I may start with your increase or your guidance on ARR for the next quarter, on the midpoint that assumes $3.5 million ARR growth, which is more or less in line with the performance you saw earlier in '25. And -- but you did increase guidance quite a lot going into this quarter. So I was just wondering, could you elaborate a little bit on what sort of contracts that made you lift guidance or actually made the Q4 2025 ARR so much better than what you expected in Q3 earnings call? What sort of contracts those were? And also, what sort of visibility you have on guide or on ARR guidance when you guide the next quarter, for example, now into next quarter? Øystein Hem: Absolutely, Jorgen. So we try to give a -- the most realistic range that we see and with our best estimate as we stand here now being the midpoint of the range. And then, in Q4, in particular, we work with a number of large deals, and when, some of those hit and several of them land in the same quarter, that has a meaningful impact on the ARR development. And so instead of doing -- I think our midpoint was around $4 million, we delivered $8.8 million, which is obviously a significant beat in terms of incremental ARR. We always, in all quarters, work with large contracts. But then, also the larger the contract is the more difficult it is to make a meaningful range with sort of the outcome with it inside or outside. So there are at times sort of opportunities to go above the guiding range. But I think if you look at our track record for the past 12 quarters or so, we've been fairly consistent in landing roughly where we think we're going to land. Trond Johannessen: And commenting on your question around the midpoint, 3.5% on the Q1 guiding, is meant to reflect sort of a positive view from our side as this is -- the midpoint is above what we delivered in Q1 last year, which I think was 2.5% or -- so we are kind of quite a lot, so Q1 is normally not a very strong order intake quarter. But this year, as you can see in the guiding, we are kind of seeing a more positive Q1 than we delivered last year. Jørgen Weidemann: Great. And then also, if I may ask about costs. Once again, costs came in below our expectation, which obviously is good, but you keep the number of employees stable. And could you give some high-level reflections on when you believe you'll hit a size that makes the non-sales organization ripe for extra resources? Trond Johannessen: Yes. We're constantly reviewing the need for people in all parts of the organization. We are investing in technology development. We are investing in sales resources where that is needed. And there -- I think we have said that we think we will leave this year with maybe around 300 employees, which is up a little bit from where we are now, basically continuing to fine-tune, continuing to invest where needed, but also look at reductions where we see that being appropriate. So I think possibly the mix of employees and where we invest and where we reduce will give sort of the net will be an increase, but not a huge one. Jørgen Weidemann: Okay. Understand. And then finally, if I may. France now intends to ditch Teams in its government organizations and part of Germany has done the same earlier. So I was wondering if you could speak a little bit about changes you see in secure or geo-fenced video conferencing, and how you work to win contracts in situations like these when large countries are making such significant changes? Trond Johannessen: I can start, and Asmund, you can fill in. But in general, it's a very positive development for Pexip, the fact that the countries in particularly in Europe are seeing a need for not always replacing 100% the U.S. cloud platforms, but having something in addition to have backup, to have business continuity, to have an alternative to a fully U.S.-based infrastructure. So you see some countries that are building their own. You see other countries that are kind of taking other approaches to meeting these requirements. But the most important thing is the total market is growing. And then, Pexip has a pretty unique position on the video side here with our video engine and video platform that nobody really can match when it comes to the technical capabilities around catering to all endpoints, bringing meeting rooms into the mix, solving all the more complex use cases beyond just point-to-point PC-to-PC communication. So I think you will see that Pexip will be complementing some of the kind of more basic video solutions in many of these sovereign solutions that are popping up all over. And we have a lot of discussions these days in many countries around how Pexip can support this development. Åsmund Fodstad: Yes. I can add because I just came out of a meeting with one of the biggest ministries in France in Paris yesterday, and it basically confirms what you're saying. We have a very strong position with them. They might be forced into solutions on the desktop side, but again, just speaks to the relevance of sovereign solutions where they have complete control of the data. And then, it's hard for us to like what's really going to be the endgame here from a geopolitical standpoint. But all in all, this is very good news for Pexip. Øystein Hem: Also, I think we have plenty of good examples that commercial off-the-shelf software tends to outcompete and source build-it-yourself solutions over time. But of course, customers will try different venues as they go along. Thanks a lot, Jorgen. Then, we will move on to Markus Heiberg from SEB. Can you hear us, Markus? Markus Heiberg: Yes. So first one is on the Secure and Custom opportunities are obviously vast, but you have relatively stable growth quarter-over-quarter. When do you expect to see a sort of step up in that? Or do you expect to be at this pace? That's the first one. Trond Johannessen: I think in dollar terms, the percentages get more and more difficult to kind of match as the numbers get bigger. But in general, I think we have seen an acceleration in the dollar growth quarter-over-quarter in the Secure and Custom area. And these are, as we have also said sometimes before, processes that do take a little bit of time. Typically, you can have 18-month sales cycles in the public sector when it comes to changing platforms, replacing or adding to these complex solutions. So we think it will be a stable development steadily, sort of increasing with sort of at least in dollar terms increasing quarter-by-quarter growth in Secure and Custom. Markus Heiberg: All right. And then, maybe you can elaborate a bit more on the churn you saw in Secure and Custom this quarter is a bit higher than previous quarters. Øystein Hem: Yes. So as I commented on, the underlying development is fairly similar to previous quarters. Then, we did see an increase in churn for support contracts in Asia, where we've had a somewhat increase over the past couple of years on perpetual customers within Secure and Custom. There, they buy perpetual software. So there's -- that's not recurring revenues, but they also buy support contracts that are subscriptions, which is part of ARR. We did see an increase in churn on those. That had actually a meaningful impact on the total churn that we saw. And one, that's a very small part of our overall ARR base, as you can see from the share of revenue overall in APAC. And so we -- I do consider that somewhat of a one-off. And then, we are looking at how we can counteract that by making sure that we have multiyear commitments from customers when they're starting with those type of platforms. Åsmund Fodstad: And it's also been also kind of adapting to the HP partnership, where this is the model that they've been selling into Asia. And of course, we are trying to then just be complementary to them and make sure that we get into these customers. So we do also see a potential upside future here with these clients, but this hit us in Q4. Trond Johannessen: But generally, very, very sticky, the business we have in Secure and Custom. When you have implemented Pexip as a Secure Meetings solution, we have seen very few examples of organizations that are -- that replace us with something else. Markus Heiberg: And the final one for me is maybe on AI, and how you think about that across your offering now with a lot of new tools being released over recent months and the whole software sector is rethinking opportunities and risks, I would say? So how have you been thinking about this lately? And do you see any risk in, for instance, interoperability software that, that could be an area where, yes, things will change? Trond Johannessen: So I think the headline here is that we see more -- we see a lot of opportunities with AI for Pexip. We see the need for private AI solutions, the fear of data being lost, data being misused by large -- from large organizations that would like to have AI functionality, but that are afraid of what happens to the data. So we get inbound calls almost on a daily basis on this topic. So the way we provide AI in a private controlled context is really in demand these days. And that will continue to grow. And we see the upsell that was mentioned today by Asmund, it was a 30% upsell on an existing customer because they deploy AI functionality into their meeting solution. And then, to your second part of your question, can Pexip be replaced by AI? Obviously, anything could happen. But on the interoperability side, it's difficult to see how that would happen. A lot of the -- most of the APIs and SDKs that are being used to provide the interoperability solutions we have are not really well documented and available externally. And second, it has to do with certifications and approvals and partnerships with all these large technology companies, Teams, Zoom and so on and -- Google and so on, right? So even if AI would be able to make a solution, it wouldn't necessarily be able to be used because of the blocking or lack of approvals from one of these large organizations. So in that area, not particularly concerned. When it comes to can we use AI to more quickly create an alternative to Pexip in the market because you use AI to code faster or make solutions faster than before, obviously, but we can do the same, right? So we also use AI actively to bring technology to the market faster and be more competitive in that respect. So I think it's -- at least it's a balanced picture and not something that we're losing a lot of sleep over these days. Øystein Hem: Thanks a lot, Markus. Then, we will move over to e-mail, where we received a question from an investor on how is the release of the interoperability solution between Microsoft Teams and Google Meet hardware impacting Pexip? And so Pexip launched a product for Google Meet hardware in October, where we provide a premium interoperability between the Google Meet hardware device into a Microsoft Teams Meeting. That was -- Google and Microsoft introduced a direct guest join alternative now in February, which is the same sort of base level interoperability as you have with, for example, Zoom Rooms into Microsoft Teams or Teams Rooms into Microsoft or Teams Rooms into Zoom. So with this, our Google offering is in the same way as a -- our offering for Zoom Rooms, a premium interoperability solution that will have the sort of key features that you require so that your video room works well. But then, there is also a basic option for those that don't really have a lot of meetings on other platforms. So we think that we will have a good competitive position on Google Meet hardware as well, and then, we've enjoyed the first quarter of being the only solution, but that was never the long-term picture. Åsmund Fodstad: And to quote Google themselves, they referred to Pexip as the premium solution, right? So we have good -- still good traction with those opportunities. Øystein Hem: That concludes the Q&A session for this quarter. And thank you for watching, and see you again in 3 months. Åsmund Fodstad: Thank you. Trond Johannessen: Thank you.
Operator: Good day, everyone, and welcome to the Arca Continental Fourth Quarter 2025 Conference Call. [Operator Instructions] Please note, this call is being recorded. I will be standing by should you need any assistance. It is now my pleasure to turn the conference over to Melanie Carpenter of IDEAL Advisors. Please go ahead. Melanie Carpenter: Thank you, operator. Good morning, everyone. Thanks for joining the senior management team of Arca Continental to review the results for the fourth quarter and full year of 2025. The earnings release went out this morning. It's available on the company website at arcacontal.com in the Investor Relations section. It's now my pleasure to introduce our speakers. Joining us from Monterrey is the CEO, Mr. Arturo Gutierrez; the CFO, Mr. Emilio Marcos; the Chief Planning and Strategic Capabilities Officer, Mr. Jes�s Garc�a; and the Chief Operating Officer, Mr. Jean Claude Tissot. They're going to be making some forward-looking statements, and we just ask that you refer to the disclaimer and the conditions surrounding those statements in the earnings release or guidance. And with that, I'm going to go ahead and turn the call over to the CEO, Mr. Arturo Gutierrez, who is going to begin the presentation. So please go ahead, Arturo. Arturo Hernandez: Thanks, Melanie. Good morning, and thank you for joining us today to review our fourth quarter and full year 2025 results. 2025 was a complex and challenging year for our business. We faced extreme weather events, operational disruptions and a volatile macroeconomic backdrop. These factors influenced consumption patterns and weighed on traffic in several of our markets. Our teams responded with agility and discipline, delivering strong execution, sustaining profitability while continuing to invest in the long-term foundations of our business. In many respects, 2025 marked a transition year. We navigated heightened volatility while staying firmly focused on what we can control. We made meaningful progress scaling digital platforms and analytics to enhance commercial capabilities, strengthening our end-to-end supply chain and driving productivity across the organization. As a result, we closed the year with stronger fundamentals, greater operational flexibility and improved readiness to capture opportunities as conditions normalize. We are confident in the strength of our operating model and our readiness for the period ahead. Moving on to our consolidated results. For the fourth quarter, total consolidated volume declined 0.8% and for the full year, 2.1%. Consolidated revenues in the quarter were down 0.6%. For 2025, revenues increased 4.6%, supported by revenue management, effective portfolio mix and strong execution across channels. Consolidated EBITDA in the fourth quarter declined 4.5%, posting a margin of 21%. Full year consolidated EBITDA increased 3% to a record level, surpassing MXN 50 billion for the first time in the company's history, underscoring the resilience of our operating model and continued focus on profitability. Now let's review the performance of our operations. Our beverage business in Mexico ended the year on an encouraging note, delivering a gradual and sequential volume recovery in the second half, supported by our sophisticated revenue growth management capabilities, portfolio optimization and continued progress in returnable packaging initiatives. In the fourth quarter, unit case volume, excluding jug water, declined 3%, cycling exceptionally strong growth of 7.8% and 3.5% versus the same quarter in the prior 2 years. For the full year, total volume declined 3.4%, reflecting strong 2024 comps. Sparkling beverages declined 2.5% in the quarter, partially offset by outstanding sequential double-digit growth in Coca-Cola Zero. This momentum was supported by expanded coverage and affordable packages, including the 450-milliliter nonreturnable format. Remarkably, Coca-Cola Zero achieved a CAGR of 15.8% in the last 5 years. Stills increased 2.8%, led by teas, dairy, juices and nectars, driven by sustained momentum in the modern trade channel, mainly in supermarkets, which were up 6.3%. Net sales grew 1.2% in the quarter, with average price per case, excluding jug water, up 5%. For the full year, revenues rose 1%. EBITDA in the quarter increased 5.1%, reaching a margin of 23.9%. For the full year, EBITDA declined 1.7% with a 23.4% margin, supported by disciplined expense control, operational efficiencies, proactive hedging initiatives and favorable negotiations on key inputs. Looking ahead, we will continue to accelerate the deployment of digital capabilities to drive operational efficiency and improve visit frequency and effectiveness. Key initiatives include broader use of TUALI and the Suggested Order tools, along with new AI-driven inventory planning and predictive analytics to further strengthen execution. Turning to South America. Total volume during the quarter and the full year were broadly flat, reflecting softer results in Ecuador and Argentina, largely offset by growth in Peru. Total revenue declined 5.6% for the quarter, while increasing 3.1% for the full year. Fourth quarter EBITDA declined 14.9% with margins at 22.2%. On a full year basis, EBITDA increased 6.5%, reaching a margin of 19.6%. Overall, our results reflect the gradual and uneven recovery across the region with distinct dynamics by country. Taken together, the region remains on a constructive path characterized by modest growth, improving fundamentals and increasing confidence in the trajectory ahead. In Peru, our operations delivered a strong finish to the year, supported by resilient demand and solid execution across channels. Total volume in the fourth quarter was up 3%, cycling strong growth over the same quarter in each of the past 4 years. Notably, this was the highest quarterly volume since we assumed operations in 2015. Growth was broad-based across categories, led by sparkling up 1.9%, stills 1% and water at 10%. Core brands, Coca-Cola and Inca Kola delivered solid performance, with volumes up 2.7% and 3.1%, respectively. In stills, the water segment stood out, supported by double-digit expansion in brand San Luis. Sports and energy drinks also contributed, increasing 2.6% and 8.6%, respectively. Importantly, Powerade continued to build momentum following the rollout of its new formula, further enhancing its relevance within the category. For the full year, total volume increased by 0.5%, confirming a clear sequential recovery through the second half of the year. Volume growth was also supported by targeted market-focused investments. In 2025, our team in Peru installed nearly 44,000 cold drink units, reaching our highest coverage level to date. This momentum, combined with disciplined execution, drove value share gains in alcoholic ready-to-drink beverages across both sparkling and still categories. Moving on to Ecuador. Volume in our beverage business declined 5.4% in the quarter and 4.4% for the full year, reflecting a consumer environment that remains moderate, though constructive. Despite this backdrop, we sustained a solid competitive position, delivering value share gains in both sparkling and still beverages. These results were supported by affordability initiatives, particularly the expansion of returnable packages. Notably, the mix of returnables increased by 0.3 percentage points during the year. We also continued to strengthen our portfolio through innovation with the introduction of the Flashlyte brand to compete in the fast-growing rapid hydration segment. Looking ahead, we remain focused on sustaining profitability through disciplined cost management and efficiency optimization across the supply chain. Now lastly to Argentina. Fourth quarter volume declined 1%, while increasing 5.2% for the full year, supported by selective pricing and affordability initiatives with recovery led by the traditional trade. Our operation navigated this environment through strong end market execution and a continued focus on returnable packages. We also delivered value share gains in NARTD beverages, with single-serve packages gaining traction and driving a 1.1% improvement in mix during the quarter. These gains were led by a remarkable performance in the energy category, highlighted by the strong momentum of Monster. In addition, our digital agenda continues to advance with digital sales reaching 75%, supported by the rollout of our proprietary B2B platform, TUALI. Our beverage business in the United States delivered another year of strong financial and operating performance. In the fourth quarter, volumes grew 2.2% and transactions increased 3.5%, reflecting our focus on sustaining consumer engagement and driving interaction at the point of sale. For the full year, volume declined 1.2%. This quarter showed broad-based momentum across categories. Our low-calorie portfolio grew by 9% with Coca-Cola Zero up 11%, Diet Coke up 2% and Diet Zero Dr Pepper up 10%. Still beverages increased 3.7%, driven by strong performance by Monster, Fairlife and our water brands, supported by excellent holiday point-of-sale execution. Quarterly net sales rose 4.9% with average price per case up 2.8%. Full year net sales increased 3.3%. EBITDA in the quarter declined 4.3% with a margin of 17.5%. For the year, EBITDA increased 4.2% with a margin of 17.2%. This is the highest full year EBITDA margin since we acquired this operation in 2017, underscoring the strength of our operational model. Finally, we are pleased with the seamless integration of our recently acquired adjacent franchise territory in Oklahoma, which commenced operations on November 1, further strengthening our footprint and growth opportunities in the region. To conclude our review of operations, the Food & Snacks business delivered low single-digit sales growth for the full year, demonstrating strong execution despite a high single-digit decline in the fourth quarter. Disciplined pricing, portfolio optimization and operational efficiencies continue to support profitability and strengthen the position of our Food & Snacks business going forward. I will now hand it over to Emilio to discuss our financial results. Please, Emilio? Emilio Marcos Charur: Thank you, Arturo. Good morning, everyone, and thank you for joining us today to review our results. We're closing a year impacted by significant challenges not only for our business, but also for the global economy, which has faced multiple external pressures. Consistent with our historical approach, we remain focused on the factors within our control, our execution, operating discipline and effective management of costs and expenses. This sustained approach is reflected in our performance throughout the year. We delivered sequential volume improvement every quarter and achieved full year growth in both revenues and EBITDA, highlighting the solid fundamentals of our operations even in a highly complex environment. At the same time, disciplined cost and expense management enabled us to maintain our EBITDA margin within the 20% range despite the headwinds we faced. These results demonstrate our ability to manage volatility while reinforcing our business fundamentals. And they confirm that even in challenging times, disciplined execution and a clear approach enable us to deliver a solid performance. Now let me provide you with further details on our financial results. Consolidated revenues decreased 0.6% in the quarter to MXN 64.5 billion, mainly explained by the exchange rate effect given an exposure to U.S. dollar. For the full year, revenues grew 4.6% to MXN 247.9 billion, reflecting the consistent results derived from our successful RGM strategy. On a currency-neutral basis, revenues rose by 5.4% in the quarter and 3.6% for the full year period. During the quarter, SG&A expenses decreased 0.3% to MXN 20.4 billion, while the SG&A to sales ratio was fairly in line with fourth quarter '24 at 31.4%, reflecting our continued commitment to operational discipline. In the fourth quarter, consolidated EBITDA was MXN 13.5 billion, a decrease of 4.5% compared to the same period of 2024. For the full year, consolidated EBITDA rose 3% to reach MXN 50.2 billion. On a currency-neutral basis, EBITDA grew 1.3% for the quarter and 1.9% for the full year. EBITDA margin for the fourth quarter contracted by 80 basis points to 21.8%. The contraction is explained by the high comps in the U.S. and South America region in the fourth quarter of 2024 given the factors that we have disclosed in previous calls. At the same time, profitability in our Mexico business continued to improve sequentially, with the region delivering a 90-basis points margin expansion during the quarter. For the full year, EBITDA margin was 20.2%, reflecting a 30-basis points contraction. Despite the challenging environment and volume pressure, we successfully sustained margins within the 20% range, supported by our effective hedging strategy and disciplined expense control and ongoing operational initiatives to support margin stability. Now moving on to the balance sheet. As of December, cash and equivalents totaled MXN 28.6 billion, while total debt stood at MXN 62.3 billion, resulting in a net debt-to-EBITDA ratio of 0.7x, reinforcing the strength and flexibility of our balance sheet. In 2025, we distributed a total dividend of MXN 8.62 per share. This reflects a payout ratio of 75% of retained earnings and a dividend yield of 4.3%, consistent with our disciplined capital allocation approach. On February 4, we successfully completed the issuance of MXN 9,500 million in a local bond on the Mexican debt market in 2 tranches, one for MXN 6,240 million with a 7-year term at a fixed rate of 8.96%, and the other for MXN 3,260 million with a 3-year term at a variable rate equivalent to TIIE de Fondeo plus 40 basis points. With this issuance, we improved our debt structure profile. Looking ahead, we remain confident in our strategy. Our disciplined management of costs and expenses and a strong commercial and operational capabilities position us well to navigate uncertainty and continue delivering solid results. Thank you for your continued support as we remain committed on delivering sustainable long-term value. And with that, I will turn it back to Arturo. Please, Arturo. Arturo Hernandez: Thank you, Emilio. As we conclude today's call, I want to thank our exceptional team of associates. 2025 tested our execution and our teams rose to the challenge, delivering results in an environment that demanded agility, discipline and focus. This year reinforced what differentiates our model, the importance of adaptability in navigating unstable conditions across our markets and the operating leverage we continue to unlock to our digital capabilities. Even in a challenging year, we protected margins, stayed closely connected to customers and consumers and continued to strengthen the fundamentals of our business. For the full year, we anticipate consolidated revenue growth in the mid-single digits year-over-year, driven by balanced contributions from volume, pricing and mix. We will continue implementing pricing actions to at least offset inflation across our operations while remaining firmly committed to keeping our portfolio affordable and relevant for consumers. We plan to invest around 7% of total sales in capital expenditures with a disciplined focus on strengthening market execution, expanding and modernizing our production and distribution network and advancing our information technology and digital agenda. Looking ahead, we entered 2026 with better visibility and a more normalized operating environment. We also see incremental upside from major brand-building occasions, including the FIFA World Cup. With 24 matches hosted in 2 of our territories, we expect to drive incremental demand and deepen consumer engagement. 2026 also marks 2 historic moments for our company. We celebrate 100 years of Coca-Cola in Mexico, a brand that has become deeply embedded in the country's culture. This anniversary provides a powerful opportunity to reinforce local relevance, strengthen brand affinity, deepen our connection with consumers and communities, and recognize the enduring partnership that has shaped our shared success. At the same time, Arca Continental celebrates 100 years as a Coca-Cola bottler. This milestone honors a century of driving sustainable growth, continued investment, boosting the local economy and being a pillar for the communities where we operate. Most importantly, honoring the past is about preparing for the future. We entered 2026 with confidence and momentum. Profitability, efficiency and disciplined growth will continue to guide our decisions. With stronger capabilities, disciplined execution and solid fundamentals in place, we are confident in our ability to perform across business cycles and deliver sustainable value creation. Thank you for joining us today. Operator, please open the lines. We will be happy to take your questions. Operator: [Operator Instructions] We'll take our first question from Ben Theurer with Barclays. Benjamin Theurer: On Mexico, so fourth quarter profit finished clearly strong and probably a little bit stronger than what was initially expected. Could you elaborate what the drivers were towards the end of the year and how that positions you as we move into 2026, thinking broader picture around the backdrop of the adverse taxation that was put in place about a month ago. But then obviously, you've called about out the tailwinds from the World Cup, and then let's just hope for better weather. So just a little bit how we finished and how that sets us up for 2026? Arturo Hernandez: Yes. Thank you, Ben. Certainly, we're satisfied with our fourth quarter in Mexico, especially considering that we were cycling a 7% volume increase from last year. And so we had a good result, especially from the perspective of profitability. December was particularly very strong in the quarter, where we grew volume 2.1%. And we believe this validates the recovery potential of the business in Mexico, especially as we face new challenges in 2026. From the profitability standpoint, we continue balancing the pricing and affordability scenario and promoting growth across some of the priority categories in our portfolio. If you look at the categories in Mexico, Coke Zero grew more than 18%, stills grew volume, tea had spectacular growth at also 18%. Energy, juices, nectars, all those categories grew volume in the quarter. So the other thing is that we -- throughout the year, we adjusted our OpEx. We started '25 thinking that the consumer environment was going to be better than it turned out to be. So we were prepared for tailwinds throughout the year. So we had to adjust our OpEx. And at the end of the year, we were able to do that. So our margins continue to improve. And so as we face '26, we are tracking in line with expectations. We're managing the tax adjustment with our proven affordability and pricing tools. And we remain confident that we're going to be delivering a healthy performance throughout the year, especially protecting profitability. So I'm going to turn it over to Jean Claude to talk a little more about '26. Jean Claude Tissot: Yes. Thank you, Arturo. And to your point, we have prior experience with similar taxes with [ IEPS ] and the use of our tools. But something that I would like to emphasize is why we had a very good fourth quarter and that is going to be the base for 2026. But the local team and the leadership from the team in Mexico is that we are going back to basics. We are strengthening our foundation while embracing the future through our digital transformation. Going back to basics with a strong momentum with pricing and packaging as a lever to ensure competitiveness and transactions. We are expanding returnables. We are protecting entry-level packages and managing mix with a more differentiated zero sugar strategy. And we are embracing the future through our digital transformation that you saw through our digital capabilities and artificial intelligence tools with our B2B platform, TUALI. Our pricing copilot and TPO initiatives, both with an end-to-end approach with supply, with our forecasting, distribution network and warehouse automation. We worked together with the Coca-Cola Company to see the fast start in Mexico and the feedback that we received was really good. And yes, we are ready, as you are saying, for a great opportunity that we have in 2026, that is the World Cup. Operator: Our next question comes from Froylan Mendez with JPMorgan. Fernando Froylan Mendez Solther: Can you hear me well? Jean Claude Tissot: Yes. Fernando Froylan Mendez Solther: I would really appreciate if you could dig in into the guidance of next year on a country-by-country basis, obviously focusing a little bit more on Mexico. If anything has changed from your original expectations on the impact on volumes from the increased taxation and whatever extra pricing you would do for next year. So a little bit more detail on country, region-by-region basis volume, pricing outlook for next year, that would be highly appreciated. Arturo Hernandez: Sure, Froylan. Let me start by Mexico, as you requested. And the current environment, as you know, is that we're facing the price increase in line with what we anticipated. So we -- as Jean Claude explained, we're going back to basics in our operation. We're focusing on our traditional playbook, but at the same time, deploying our digital initiatives. So that will help us mitigate the impact of elasticity as we increase prices. So we've seen a constructive response from the consumer. Engagement remains very healthy across our core categories and channels. Modern trade particularly responds well to targeted promotions and competitive pricing. And the traditional trade remains resilient, especially as it is supported by digital execution in this market. So we are reinforcing affordability through returnables, entry-level packs, strengthening our execution or metrics for execution, cooler placement and as I said, leveraging digital tools, particularly our revenue management tools, pricing and promotions to fine-tune our decisions in the marketplace. These -- all these actions are helping us manage the transition very effectively and at the same time, maintain competitiveness. So we're confident that we're going to deliver on our guidance for Mexico. In the other markets, well, the U.S. has its particular challenges, but we also have the opportunity to capitalize on the World Cup, which is an extraordinary event in the year. And we're focusing on improving our execution, especially focusing on transactions and growth categories and also efficiency projects that we've been deploying in the last few months, and we're going to capitalize on those as well. In Peru, it's probably our most promising market in terms of growth -- of the growth potential. We have the opportunity to continue to win in the stills categories, which is a huge opportunity in Peru as well as the dual cola strategy within Inca Kola, which is a unique advantage that we have in that market. And if you look at the -- just the growth in coolers, we had a historic cooler placement in Peru last year, 43,000 units. We're going to continue to do that. The coverage is still quite low as compared to Mexico. And same thing in Ecuador. Ecuador faces different challenges. It's not as favorable the consumer environment, but we also have seen recovery in the last few months. In the case of Argentina, well, Argentina is recovering. As you know, we expect lower volatility, improving consumer confidence. And I would say, more predictable backdrop performance in 2026. We have reversed the negative trend we saw in the third quarter. The key in Argentina is we have competitive price points across key categories, focused on immediate consumption, single-serve and very importantly, an efficiency program to protect margins. We expect margins to recover in Argentina throughout the year. So every market has its particular challenges. There are some, I would say, basics in all of our markets, which we're going to be working on, digital deployment and the -- going back to our fundamentals or stick to our fundamentals and things we can control. So we're confident about our guidance in each of the markets. Fernando Froylan Mendez Solther: If I can follow up just quickly in Mexico. So should we still expect a low single-digit decline in volumes and still some additional pricing efforts throughout the year to reach at least inflation? And what about margins? Is this shifting to more profitable mix or higher-priced SKUs? Is that helping margins and changes anything on your margin outlook for Mexico? Arturo Hernandez: Yes. Well, we haven't seen anything in Mexico that would change our outlook and what we've mentioned before. And in terms of margins, we do anticipate -- and this was expected, we anticipate margin pressure from tax-related volume impacts and elasticity. But this will be also mitigated by volume tailwinds from major events as Jean Claude explained and digital rollouts and also the favorable comps with some unusual activity throughout 2025. So with efficiency initiatives and disciplined cost management, we're confident that we're going to be able to protect our margins throughout the year. Operator: We will move next with Felipe Ucros with Scotiabank. Felipe Ucros Nunez: So first, a quick one on IEPS. Just wondering if you can comment on whether an offset has been implemented in the market? And what type of volume evolution? If so, what type of volume evolution you've seen after the offset in the beginning months of the year? And then in second place, congrats on the M&A in the U.S. Just wondering if you can talk to us a little bit about the target and how it may impact the current operation in the U.S.? Anything you can give us in terms of size, margins and how things will change after this? Arturo Hernandez: I'll talk about Mexico, and then I'll turn it over to Chuy to talk about the M&A activity in the U.S. As I said, we haven't seen anything in Mexico that would change our view on what to expect for the year. We did have some favorable weather in the first part of the year. So it's hard to figure out how much of that will have an effect on what we're seeing in the market. Again, we are approaching the situation with the same discipline and the same playbook that has proven effective in previous cycles. So we have the experience of dealing with situations like this one. So we -- I think we have -- we're able to predict better and also to execute better. What are we doing is maintaining competitiveness through the best price pack architecture for the current situation. We are protecting our consumer affordability with returnable packages and very strategic price points. When this happens, you have the opportunity to kind of realign your price pack curves and architecture to promote the price points and the SKUs that are more favorable. And also, we're leveraging our tools, basically, pricing and promotional tools that also have proven very effective, and that is certainly an improvement as compared to 12 years ago when we faced similar a situation. So we do expect the volume decline derived from the tax in '26. But there are, as we've said, strong tailwinds that will be also mitigating that impact. So we haven't seen anything that would change our view in that regard. So we are going to be consistent with the playbook. And with that, I'll turn it over to Chuy. Jesús García Chapa: Thank you, Arturo, and thank you, Felipe, for your question. Our most recent transaction, the acquisition of Idabel Coca-Cola Bottling in Oklahoma in December of last year, reflects how we approach consolidation, adjacent territories, clear strategic fit and real opportunities to generate synergies. Idabel is a long-established small Coca-Cola bottler operating since 1911 with strong ties to its local community and previously owned by the Fulmer family. It is located next to our existing footprint, and it does not have a production facility as it was supplied by Coca-Cola Southwest Beverages as well as other nearby bottlers. This obviously makes integration simpler, and it lowers execution risk. Idabel also distributes Dr Pepper and Monster brands, which strengthens the overall commercial opportunity with our partners. I will summarize this as deals like this are representative of the type of consolidation we favor. They're focused, value-accretive and operationally aligned. So we're really excited to be serving a new set of clients and customers for Coca-Cola Southwest Beverages. Arturo Hernandez: So this is the natural thing that we think will be happening in the next few years in the U.S. marketplace. Operator: We will move next with Rodrigo Alcantara with UBS. Rodrigo Alcantara: Congratulations on the results. Also to Jean Claude for the appointment as COO. My question is precisely in the U.S., Jean Claude. Maybe to understand better, I mean precisely this playbook that is allowing you to deliver that volume growth in not necessarily such a friendly consumer environment in Southeastern region -- the South region in the U.S., right? I mean we have all these of this context right of the Spanish population. In addition to that we have the upcoming cups -- World Cup to the [ SNAP ]. So you already spoke very clearly about the tailwinds, right, that could lift your bonds like the World Cup, right? But it would be nice to understand precisely the playbook that is allowing you to navigate this challenging factor in the U.S. That will be my question. Jean Claude Tissot: Thank you, Rodrigo for the questions. And yes, obviously, I am biased and excited to talk about U.S. performance. Yes, we had a very good year. As you know, we won the Candler Cup in 2025. And the question is, why the good results. We are -- we have confidence in North America outlook. As you're saying, we finished with positive momentum. And even though we had the challenge of some fake news during the year, but recovering volume, share and transactions. Why? Something that we have been sharing with you that has been a priority in the U.S., the culture. The culture that we have with our frontline heroes on how we are working together with the Coca-Cola system, the Coca-Cola Company and the other bottlers. But also, we have been implementing what we have been sharing that we are doing in the rest of our countries. A simple formula that is going back to the basics, strengthening our foundation while embracing the future through digital transformation. Going back to the basics in the U.S. has been a focus on all 3 channels with a focus on solid fill rate and growing transactions. And in terms of the digital transformation has been our myCoke.com implementation that is like TUALI in Latin America. Also the tools that we are providing to our commercial teams that they have the information by store to see our execution and performance, working together with our customers, but with that end-to-end approach between supply and commercial, connecting the dots between those 2 areas. Then three pillars: culture, going back to the basics and the fundamentals of our business, and the digital transformation that we have been implementing together with our Digital Nest. Arturo Hernandez: So I think that Rodrigo, this is -- the U.S. for us is a story, not about what we're going to do in '26, but throughout the years, it's consistent, high-quality customer-focused execution. And that is based, as Jean Claude said, on a strong culture that has been transformed. Just -- and we don't talk about these metrics usually in some of these meetings, but when we came to the U.S., engagement score was in the 60s, and last year, it's in the high 80s with all of our associates. So this is the culture that we're talking about. So we think this delivers consistent results throughout the years, aside from particular things that we're going to have as headwinds or tailwinds throughout '26. Rodrigo Alcantara: Thank you, Arturo. Indeed very consistent results. Congrats. Arturo Hernandez: Thank you, Rodrigo. Jean Claude Tissot: Thank you, Rodrigo. Operator: We will move next with Alejandro Fuchs with Itau. Alejandro Fuchs: Congratulations on the results and also on the 100 years of Arca this year, pretty impressive milestone. I have just one very quick question for Emilio. I think the rest of the questions have been answered already. But for Emilio, there was a big net financial expense this quarter of almost MXN 2 billion. I was to see -- was there anything unusual this quarter there that explain a little bit of a higher financial expense? Or is this the level that we should expect going forward, especially for 2026. I think if you could provide some color there, that would be very helpful. Emilio Marcos Charur: Thank you, Alejandro. Yes, we're celebrating 100 years of being a franchise in Mexico. Thank you for your comment. Yes. Well, the main variation on the net interest expense is basically 2 reasons. One is the increase in the financial expenses, explained by a higher interest payment that we have since we have new debt in Mexico of around MXN 15,000 million associated with CapEx and the M&A activity that we had last year. And the second one is the decrease in financial income since interest rates were lower than last year and also, we had a lower cash position basically in Mexico and U.S. So what you're seeing on the financials is the net of expenses and income. So at the end, I think the short answer is higher debt in Mexico and U.S. Operator: We will move next with Fernando Olvera with Bank of America. Fernando Olvera Espinosa de los Monteros: It's a follow-up regarding the acquisition in the U.S. and I would like to hear your thoughts of what changed versus previous years that motivated this franchise to sell its business? And how can this cause other franchises to again, to be motivated to sell their business in the future? Arturo Hernandez: Well, we don't really know exactly what motivated them. We have been having conversations with the owners of the franchise for some months or maybe a couple of years. But I think at the end of the day, what we have to realize is that this is kind of the logical thing to happen as the business of Coke franchises becomes more a business of scale. If you think about this business throughout time, probably 30, 40 years ago, owning a Coke franchise, scale was not really the name of the game because you had a very local operation. You had kind of a obviously, most favored nation treatment by Coca-Cola. And you didn't require the sophisticated capabilities that you require now or you didn't have the large accounts. Now it's different. And one of the things that's changing is, particularly as we move into digital conversations with customers that we need to have, as I said, more modern tools for a lot of the commercial core processes, it makes sense to have more scale in the operation. It's not -- that's not specifically the reason in this case, but what it creates is the opportunity to share the value that will be created through consolidation. So that's why I've been arguing that consolidation is a positive thing for everybody in the system and Coca-Cola Company also believes that. And I think that is a trend that will continue. Exactly when that is going to happen, it's hard to predict because it depends on very personal decisions by franchise owners. But again, it's -- I think it's the logical thing to happen in the future. Operator: We will move next with Alvaro Garcia with BTG. Alvaro Garcia: Two on my side. One on the cost outlook for '26. We still saw some gross margin pressure, which I think probably had to do with the U.S. in this fourth quarter, but into '26. I was wondering if -- I mean if you can give some color on sort of key raw materials and what you're seeing in the context of obviously a pretty important affordability strategy in Mexico. And then my second question is on snacks. You mentioned this high single-digit decline in the fourth quarter. So any sort of update on sort of how you're thinking about allocating capital to this business strategically would be helpful. Arturo Hernandez: Sure, Alvaro. Let me turn it over to Emilio. Just mentioning first that as we look at margins going forward, I mentioned the challenges and opportunities we have in our operations, particularly in the case of volume in '26. We are confident about our pricing strategy. We're going to be consistent with what we've said and especially as we improve our tools for pricing and promotions. The raw material environment, Emilio can expand on that and a very strong focus on OpEx efficiency throughout '26. So Emilio, please. Emilio Marcos Charur: Thank you, Arturo, and thank you, Alvaro, for your question. Well, I would like to mention that despite the macroeconomic volatility, most of our key raw materials continued to show stable trends during the fourth quarter, and we expect that stability to continue this year. I would say that with the exception of -- for aluminum. Aluminum prices continue to rise, especially MWP component. So for that reason, we have fully hedged our LME, which is the other component of aluminum. So we have hedged 100% of our needs in Mexico and 97% of our needs in U.S. for LME, and both at a higher price than last year but lower than the current spot prices. So we are in a better position compared with the market as of today. In addition, we hedged 50% of our MWP requirements in the U.S. also above last year prices but below the current market prices. We have also covered 90% of our sugar needs in Peru at levels below 2025. So we are better than last year here. And 71% of our high fructose needs in Mexico in line with inflation and 43% in U.S. at the same levels of 2025. So as you can see, we are basically very well on the hedges with the exception of aluminum basically in U.S. Arturo Hernandez: With respect to snacks, well, the fourth quarter, we had a mixed performance in our snacks operations, some net sales declining in some markets like Mexico, U.S. and growing in Ecuador. And this reflects a varied market dynamics by country. So in some countries, we have more synergies. Your question was about snacks business, just confirming? Alvaro Garcia: Yes, it was about sort of how you're thinking about the business longer term, sort of how you think about... Arturo Hernandez: So yes, this -- we don't allocate a disproportionate amount of capital in this business, and we constantly evaluate strategic opportunities to strengthen the business and maximize volume. Let me tell you that we do regularly assess this business in our portfolio, including the U.S. Snacks division. And this is part of our commitment to long-term growth. As I said, in some cases, we have stronger synergies as in Ecuador. In other cases, it's not the same. And also the business is not connected to our beverage operation. It's quite independent. So we are very flexible to make decisions about this business in the future. Operator: Our next question comes from Ricardo Alves with Morgan Stanley. Ricardo Alves: I want to go back to the U.S. Besides frontline pricing, I wanted to go into more details on revenue management, your strategy longer term on revenue management. It would be super helpful for us maybe to illustrate your strategy on ground, if you can share some specific examples. Where is really the focus of the management in stuff that it's really going to move the needle on your unit revenues? Is it opportunity on a higher value mix, higher value brands? Is it more get more exposure or work better on your packaging and mix of packaging, use smarter promotion activity now with the digital. You mentioned digital in several fronts. So I wonder if maybe this is where the -- there are several ways in which we are able to think about how you are tackling new opportunities to improve even more the U.S. business, but it's difficult for us to really have a grasp on what really could move the needle, what are the practical examples that you are implementing right now. So I just wanted to understand a little bit better your longer-term strategy, what could be the upside in the U.S. Maybe it's efficiencies, right? You talked about efficiencies as well. I know that in the U.S., we talked in the past about route optimization, integration of distribution centers. There's many things in my mind right now. I just wanted to get from you what is really on top of your mind to improve even further the U.S. business? Arturo Hernandez: Thank you, Ricardo. I will turn it over to Jean Claude, just by saying that, yes, you pretty much described the many opportunities that we have in the market. Revenue management pricing has been a fundamental capability, and that's been a driver for value in that operation. And in every operation, as I've said, if there would be one commercial capability that we really want to get right, it's pricing and promotion. I think we've -- we're off to a very good start in the last few years. Efficiency is becoming more of a priority in the U.S. as well. We're investing for making our supply chain more efficient. And -- but I will turn it over to Jean Claude to provide details. Jean Claude Tissot: Thank you for the question, Ricardo. And indeed, RGM has been and will continue to be critical in our strategy in the U.S. What we have done? We have been focused on increasing transactions. 2025, despite all the challenges that we had at the beginning of the year due to the fake news, we were able to finish the year once again growing transactions. Why do we grow transaction is because we have been developing a new portfolio. We have strengthened our portfolio in terms of packages, but also in terms of categories, in terms of innovation. We have been -- you have seen the improvement that we have done with brands such as Core Power. But RGM is also how we are bringing our digital transformation and use the implementation of tools such as the price promotions and the copilot pricing. And pricing as well has been the alignment that we have with the Coca-Cola system with the Coca-Cola Company, the other bottlers and the customers. Then it's a combination of initiatives that are together with our execution, allowing us to grow the margins as you saw. Operator: We will move next with Renata Cabral with Citi. Renata Fonseca Cabral Sturani: My question is about the strategy on Coca-Cola Zero, we saw -- any standout growth in the quarter? And also, if you see the -- over the last 5 years, the CAGR has been around 16%. So my question is how much we can continue to see this trend over the Coca-Cola Zero. And if you can say for country, where do you see still the biggest opportunity to increase the portfolio? Arturo Hernandez: Yes. Thank you, Renata. I think Coca-Cola Zero is probably the biggest innovation we've had in the portfolio and in the Coca-Cola system in recent years. And it's been a very, very successful product as it captures new consumers, younger consumers and also consumers from Coke Original Taste that would prefer a zero-calorie version. So this has been relevant in every market. It's been growing . As I mentioned before, it grew 18% in Mexico. It's growing in the U.S. It's actually sustaining the sparkling segment in the U.S. and Coca-Cola brand. So we will continue to promote Coke Zero in every market. And one example of that is that in the case of Mexico, it will take center stage in all advertising and promotions tied to the '26 FIFA World Cup. This is a very powerful global platform that we will use to celebrate our iconic brand and showcase our commitment to offering this no-calorie versions of our products. So you're going to see a much more relevant presence of Coke Zero in all of our marketing activity. And also, it's obviously a very profitable product. So it helps to sustain our profitability as we grow into the zero-calorie segment. Operator: Our next question comes from Antonio Hernandez with Actinver. Antonio Hernandez: Just a quick follow-up on the Snacks business in Mexico, and particularly in the U.S. Obviously, the competitive environment and its performance being affected by consumer trends or any other highlights that you could provide? Arturo Hernandez: I'm sorry, just to clarify, your question is about consumer trends, competitive environment in Mexico and the U.S.? Antonio Hernandez: In the Snacks business. Arturo Hernandez: In the Snacks business. Okay. Yes, I will turn it over to Chuy to make some comments about Snacks. This operation now reports to Jean Claude, but it was supervised by Chuy last year. I can tell you that Snacks had a mixed performance in the fourth quarter. That reflects different dynamics in different countries. Much more challenging, I would say, in the U.S. than in Latin America. So we've been focusing on, again, being very profitable in this business, focusing on growth categories and also continue to invest in the brands that are more relevant for our consumers in each of the markets. And innovation is very important in this business. So I will let Chuy expand on that. Jesús García Chapa: Thank you, Arturo, and thank you, Antonio, for your question. I think the fourth quarter reflects what happened during the year. The Bokados performance as well as the Inalecsa performance was very good. Most of our challenges are in the U.S. market. I'll give you an example, in Mexico, our focus is basically on 3 categories, extruded snacks, tortillas and mixes. And the products in these categories for the most part, grow double digit. Ecuador has been facing some political and economic challenges. But at the same time, we have a very good position across channels, and we have been investing primarily on product displays and that has been very successful. As far as the U.S., we definitely see more aggressive pricing from competitors and ongoing category contraction in all segments. And we're basically continuing to strengthen our portfolio profitability through an optimized price package strategy. And we'll continue strengthening our innovation agenda, sponsorship strategies and expanded distribution network, particularly for Deep River in some of our key strategic accounts. Operator: We will move next with Carlos Laboy. Carlos Alberto Laboy: My question maybe is more directly for Jean Claude. Look, the passion and intensity for client service that your people in the U.S. have, I mean, I haven't seen anything like that anywhere in the world. But the revenue growth management tools that they operate with, right, for volume, price mix, trade discount, how do you see them in terms of their stage of development for where they need to be or where they can get to? And what's the upside that you have in terms of -- in 2026, 2027 for the efficiency, the capacity of these tools given how you see your IT projects in the pipeline moving along? Jean Claude Tissot: Thank you for the question, and thank you also for the nice words about our culture, something that make us super proud. Regarding our question about RGM is part of going back to the basics as well. As you know, we have that vision how to evolve to be a shelf replenisher, to be a market developer in U.S. market and RGM is essential. We have been developing tools to grow our transactions to expand our portfolio with single-serve packages in all the categories, not just in sparkling. The development of zero sugar and the tools -- and the digital tools, as you are saying, that we have to make sure that we connect our digital tools such as the TPO, pricing copilot with our supply tools as well to ensure that going back to the basics, we have the best fill rate. A lot of improvement working together with the Digital Nest with [ CONA ], but we are excited as well for what is coming. We cannot say that we are done with all our digital initiatives. We are excited about what is coming. To continue with that vision that is about culture, is about being a market developer, is about back to the basics, embracing the future through our digital transformation and all our RGM tools. Arturo Hernandez: And Carlos, I would say that the tools continue to evolve as the portfolio continues to evolve, and there's also an element of change management as we have to somehow involve our brand partners into the effort. I would say that in terms of promotional activity, there's still a lot of opportunity as we continue to refine the tools. Operator: Thank you. This concludes today's Q&A portion. I would now like to turn the conference back to Arturo Gutierrez for any additional or closing remarks. Arturo Hernandez: Thank you, and thank you again for your time and your continued interest in Arca Continental. If you have any additional questions, our Investor Relations team is always available. We look forward to connecting with you again in the next quarter. Have a great day. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance, please standby; your meeting is about to begin. Operator: Good morning, ladies and gentlemen, and welcome to Essential Properties Realty Trust, Inc. Fourth Quarter 2025 Earnings Conference Call. This conference call is being recorded and a replay of the call will be available three hours after the completion of the call for the next two weeks. The dial-in details for the replay can be found in yesterday's press release. Additionally, there will be an audio webcast available on Essential Properties Realty Trust, Inc.’s website at www.essentialproperties.com, an archive of which will be available for 90 days. On the call with us this morning are Peter M. Mavoides, President and Chief Executive Officer; Robert W. Salisbury, Chief Financial Officer; R. Max Jenkins, Chief Operating Officer; A. Joseph Peil, Chief Investment Officer; and Cheryl Call, Director of Financial Planning and Data Analytics. It is now my pleasure to turn the conference over to Cheryl Call. Please go ahead, ma'am. Cheryl Call: Thank you, operator. Good morning, everyone, and thank you for joining us today for Essential Properties Realty Trust, Inc. fourth quarter 2025 earnings conference call. During this conference call, we will make statements that may be considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we may not believe revisions to those forward-looking statements to reflect changes after the statements were made. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's filings with the SEC and in yesterday's earnings press release. In our earnings release last night, for the quarter, we reported GAAP net income of $68,300,000 and AFFO of $99,700,000. With that, I will turn the call over to Peter M. Mavoides. Peter M. Mavoides: Thanks, Cheryl, and thank you to everyone joining us today for your interest in Essential Properties Realty Trust, Inc. The fourth quarter capped off another year of solid performance by the team that delivered compelling earnings growth and solid returns for shareholders. It has been ten years since we started this company, and I am extremely proud of the team that we have developed, the dominant position that we have established as a real estate capital provider to middle market operators that are growing in our targeted industries, and most importantly, the returns that we have delivered for shareholders, and over 200% total shareholder returns since our IPO in 2018. In the fourth quarter, we continued to execute our differentiated investment strategy, sourcing 85% of our $296,000,000 of investments through existing relationships while continuing to add new operator relationships to our platform. This robust investment volume was generated with disciplined pricing, including an average initial cash yield of 7.7% and a compelling GAAP yield of 9.1%. This large spread to our cost of capital is a key driver of our earnings growth. Our portfolio once again demonstrated resilient tenant credit trends with same-store rent growth of 1.6%, strong rent coverage of 3.6 times, and an improvement in our watch list. With better-than-budgeted credit trends, and a large investment pipeline with cap rates consistent with past quarters, we have increased our 2026 AFFO per share guidance range to $1.99 to $2.04, which implies a growth rate of about 7% at the midpoint and 8% at the high end. Our year-to-date closed investments and our current pipeline are supportive of our previously communicated investment guidance of $1,000,000,000 to $1,400,000,000. While we continue to expect modest cap rate compression in the back half of 2026, competition appears to be stabilizing based upon our current visibility. Regarding our capital position, we started the year with pro forma leverage of 3.8 times and liquidity of $1,400,000,000, providing ample runway to fund our investment pipeline. Turning to the portfolio, we ended the quarter with investments in 2,300 properties that were leased to over 400 tenants. Our weighted average lease term continued to be approximately fourteen years for the nineteenth consecutive quarter, with just 5.2% of annual base rent expiring over the next five years. With that, I will turn the call over to A. Joseph Peil, our Chief Investment Officer, who will provide an update on our portfolio and asset management activities. AJ? A. Joseph Peil: Thanks, Pete. Overall, our portfolio credit trends remain healthy. With same-store rent growth in the fourth quarter of 1.6%, consistent with last quarter, and occupancy of 99.7% with only six vacant properties. Portfolio rent coverage remains robust at 3.6 times, reflecting durable cash flow generation across our asset base. Additionally, our credit watch list declined from last quarter to under 1%, and the tenants within our watch list remain current on all obligations. Realized credit events in the quarter were limited, with just one notable tenant issue in the home furnishing industry. American Signature represented about 20 basis points of our ABR as of September 30 across two sites. We expect our recovery to be within the normal range of outcomes, having fully anticipated this situation and incorporated it into our guidance range provided last quarter. A. Joseph Peil: On dispositions, during the fourth quarter, we sold 19 properties for $48,100,000 in net proceeds at a 0.9% weighted average cash yield. Disposition activity increased as we opportunistically capitalized on elevated buyer demand created by the reinstatement of bonus depreciation tax benefits for car wash properties, resulting in a continued reduction in our exposure to this industry to 13.7%. Over the near term, we expect our disposition activity to normalize and align with our trailing eight-quarter average, driven by opportunistic asset sales and ongoing portfolio management activity. Tenant concentration continues to decline with our top 10 tenants only 16.5% of ABR, and our top 20 representing only 27.1% of ABR at quarter end, which is industry leading. Tenant diversity is an important risk mitigation tool and a direct benefit from our focus on middle market operators. With that, I will turn the call over to R. Max Jenkins, our Chief Operating Officer, who will provide an update on our investment activities and the current market dynamics. R. Max Jenkins: Thanks, AJ. R. Max Jenkins: On the investment side, during the fourth quarter, we invested $296,000,000 at a weighted average cash yield of 7.7%. Our capital deployment was broad-based across most of our top industries with no notable departures from our investment strategy. During the fourth quarter, our investments had a weighted average initial lease term of nineteen point four years and a weighted average annual rent escalation of 2%, generating a strong average GAAP yield of 9.1%. Our investments this quarter had a weighted average unit-level rent coverage of 4.7 times, reflecting a conservative rent level and healthy unit profitability for our operators. R. Max Jenkins: We closed 34 transactions comprising 58 properties, of which 100% were sale-leasebacks. The average investment per property was $4,600,000 this quarter, consistent with our historical range, with our deal activity characterized by granular freestanding properties, one of the core elements of our strategy. R. Max Jenkins: Looking ahead, our investment pipeline remains strong. R. Max Jenkins: Supported by record subsequent-quarter investment activity of over $200,000,000. The cap rate environment remains stable today with our pricing and our pipeline in the high 7% range, which represents a compelling spread to our cost of capital and is consistent with our updated guidance range. With that, I would like to turn the call over to Robert W. Salisbury, our new Chief Financial Officer, who will take you through the financials for the fourth quarter. Robert W. Salisbury: Thanks, Max. Before I begin my prepared remarks, I would like to thank the Board of Directors for the exciting opportunity to lead the company's finance group alongside my partner, the company's Chief Accounting Officer, Tim Earnshaw. Robert W. Salisbury: As Pete mentioned earlier, our well-established platform is in a great position to deliver shareholder value, with the largest net investment spread in the industry today. Robert W. Salisbury: And half of our value creation comes from optimizing our cost of capital, Robert W. Salisbury: which is something my team has been and will continue to be laser-focused on over the coming years, in service to our focus on shareholder value creation over the long term. Turning to the fourth quarter results, our AFFO per share totaled $0.49, representing an increase of 9% versus 2024. This performance was consistent with the high end of our expectations, as reflected in our previous guidance range. Total G&A in the quarter was $8,400,000, representing a sequential decline due to a one-time compensation reversal related to an executive departure. Notably, this one-time benefit to net income of $2,400,000 is reversed out of our core FFO, AFFO, and cash G&A as a non-core item. For the year 2025, cash G&A was $28,800,000, which ended near the low end of our guidance range and represents just 5.1% of total revenue, down from 5.4% in 2024. We declared a cash dividend of $0.31 in the fourth quarter, which represents an AFFO payout ratio of 63%. Our retained free cash flow after dividends continues to build, reaching nearly $40,000,000 in the fourth quarter, representing a substantial source of internally generated capital to support our future growth. Turning to our balance sheet, our income-producing gross assets increased to over $7,000,000,000 at quarter end. The increasing scale and diversity of our portfolio continues to build, enhancing our credit profile. We, on the capital markets front, remained active on our ATM program in the quarter, completing the sale of approximately $170,000,000 of equity, all on a forward basis. We settled $359,000,000 of forward equity in the fourth quarter, with a portion of the proceeds utilized to repay our revolving credit facility balance. Our balance of unsettled forward equity totaled $332,000,000 at quarter end. We expect to utilize these funds in the near term to support our investment program and retain balance sheet flexibility by keeping capacity available on our revolver. Our pro forma net debt to annualized adjusted EBITDAre remained low at 3.8 times at quarter end. We remain committed to maintaining a well-capitalized and conservative balance sheet, low leverage, and significant liquidity to continue to fuel our external growth. Robert W. Salisbury: Lastly, Robert W. Salisbury: as we noted earlier, we have increased our 2026 AFFO per share guidance to a new range of $1.99 to $2.04, reflecting a growth rate of approximately 7% at the midpoint and 8% at the high end. With that, I will turn the call back over to Peter M. Mavoides. Peter M. Mavoides: Thanks, Rob. Congratulations on your promotion to CFO. I have appreciated your partnership over the last two and a half years, and we are all grateful for your leadership in the finance group and across the broader organization. In summary, we are happy with the fourth quarter and full-year results. The portfolio is performing well, the investment market remains compelling, and the capital markets continue to be supportive. Operator, please open the call for questions. Operator: Thank you, Mr. Mavoides. Ladies and gentlemen, at this time, if you do have any questions, please press 1 at this time. If you find your question has been addressed, you may remove yourself from the queue by pressing 2. Once again, that is 1 for questions. We will go first this morning to Michael Goldsmith of UBS. Michael, please go ahead. Michael Goldsmith: Good morning. Thanks a lot for taking my questions. Rob, you took the guidance range slightly higher at the bottom end. So can you just walk through what has changed over the month or so since you or since the third quarter, I guess, since you put out your initial guidance and how that has impacted the outlook for this year? Robert W. Salisbury: Hey, good morning, Michael. Thanks for the question. So as we have talked about in prior years, it is still really early in the year to do a whole lot of changes with our guidance range, just given we still have ten and a half months to go. That being said, as we updated all of our numbers and reviewed our portfolio credit trends, everything had been coming in a lot better on the portfolio credit side relative to our initial guidance back in October. We tend to be pretty conservative when we build that initial range. And so as a result, we are just feeling a lot better about the health of the portfolio. I think you saw some of the stats in the fourth quarter. Same-store rent growth of 1.6%. Credit watch list is down sequentially. So it was really in recognition of that. You saw the subsequent events that we have, a lot of acquisitions that we closed in the early part of this year, but it is still early in the year. And it felt appropriate to take the bottom end of the prior range off the table just given where portfolio credit is, but we will see how the rest of the year develops in terms of the pipeline and deployment. Michael Goldsmith: Thanks for that. And just quickly, you know, the initial remarks mentioned that the expected competition or you are seeing competition stabilize. So does that what is the impact of that? Do you see cap rates stabilizing from here? Or and then, like, I guess, also, does that mean that you would be willing to you know, I guess with a stabilizing cap rates or less competition, could also go with the safer tenant base. And so just trying to understand, like, what are the implications of that stabilizing competition comment made at the opening of the call. Yeah. And, Michael, this is Pete. I would say I certainly reject your premise that we are going with a safer tenant base. We feel pretty good comfort in our tenant base and the guys we are investing and the risk-adjusted returns we are getting, and we think the durability of the portfolio certainly has proven that out. But you are right. I think the stabilization in competition has really resulted in you know, a slower decrease in cap rate than we have anticipated. You know, certainly, we model some conservatism into our future cap rates, particularly as the ten-year comes in and capital markets stabilize. And, you know, as we indicated on the call, we are seeing cap Robert W. Salisbury: rates Peter M. Mavoides: kinda stable, which is great for us. And, you know, I think that is certainly gonna help drive earnings, but it is not gonna change the way we invest or how we think about risk. Thank you very much. Good luck in '20 Thanks, Michael. Operator: Thank you. We go next now to Greg Michael McGinniss at Deutsche Bank. Greg Michael McGinniss: Hey. This is, Greg McGinnis at Scotiabank. Peter M. Mavoides: Still. For the it is Greg Michael McGinniss: sorry. You have had a busy beginning to the year. Operator: Should we not be reading anything into that? Is that holdovers from Q4 that fell into the early part of this year? Mean, you know, at this trend, you are well over one and a half billion for the year and above the guidance range. I know you are telling us not to necessarily read too much into that, but this is a pretty strong start so far. So just kinda curious what the driver was to date on some of those transactions. Yeah. And, I think if we saw something different in our investment expectations, we would have bumped the guidance range and to Rob's comment earlier, certainly early in the year. Peter M. Mavoides: You know, the fourth quarter was kind of a little light relative to our trailing average, and so there is certainly some deal slippage that you would see. And so, you know, we feel great. We feel good that have a good start to the year. But, you know, a lot of year left to play. I think more encouraging driving, you know, earnings is just the stabilization and the cap rate Robert W. Salisbury: And just to dig into that a little bit more, are you seeing that is Operator: stabilization in cap in cap rate across all the industries that you tend to invest in? Or are there certain certain industries that are deviating from that norm? And on top of that, is there anything that you are kind of particularly looking to increase acquisitions in from an industry perspective? Peter M. Mavoides: Yes, I think it is stabilization across the entire industry set that we invest in. Obviously, there is a range of cap rates across our industry from a low of seven to a high of, call it, eight and a half depending on the specific industry. But there is good stabilization there. And I think that speaks to the broader capital markets. In terms of our targeted growth, you know, we are really following our relationships, which mirror our portfolio. You know, with 85% plus relationship business, we are gonna go where our relationships take us and where our reliability as a counterparty is rewarded. So I would not expect a material shift in the portfolio composition as we think about, you know, 2026. Great. Thank you. Thanks, Greg. Operator: Thank you. We go next now to Caitlin Burrows at Goldman Sachs. Caitlin Burrows: Hi. Good morning, everyone. I guess maybe just on portfolio credit Caitlin Burrows: the prepared remarks mentioned that you guys are feeling good on that topic right now. You also mentioned American Signature was the only credit event in 4Q. Could you give us any detail on how that played out versus your expectation and what that can kinda tell us about your process and your visibility? Peter M. Mavoides: Yeah. You know, I would start by that is still playing out. And you know, I think it certainly will come in within our expectations as we tend to be conservative. But, AJ, you want to tackle that? A. Joseph Peil: Yeah. Hey, Caitlin. As Peter mentioned, that bankruptcy happened late in Q4. And so we are early in the process of marketing the asset. I do believe, based on what we are seeing in the marketplace, that it is gonna be a normal outcome for us and recovery should be well within the range which we historically have disclosed. I would not expect that asset to be on our balance sheet. Robert W. Salisbury: It is vacant. A. Joseph Peil: For too long. Caitlin Burrows: Okay. Got it. And then, Rob, you mentioned how Essential Properties Realty Trust, Inc. generates, I think it was $40,000,000 of free cash flow now. So how do you think about or balance retaining more cash versus increasing the dividend? Would you expect dividend to grow in line with AFFO per share from here or more or less? Robert W. Salisbury: Yeah. Thanks, Caitlin. So as you point out, the retained free cash flow is certainly a great source of internally generated capital for our very accretive investment program. I think it is gonna be a Board decision as to where the dividend goes over time. But, from a broad standpoint, you know, it is certainly a balance between delivering current return to shareholders and retaining that capital. I think a reasonable expectation would be that our dividend payout ratio probably does not go down from here at 63%. And, you know, we seek to have a good balance between those two things and, as you know, having followed the REIT space for a long time, dividends are an important part of total shareholder return; we certainly recognize that. So I would expect the dividend to grow, but do not have a lot of guidance for you at this point. Caitlin Burrows: Thanks. Peter M. Mavoides: Thanks, Caitlin. Operator: Thank you. We will go next now to Jana Galan at Bank of America. Jana Galan: Thank you. Good morning. You know, just good to hear about that you are seeing this cap rate stabilization and just wanted to ask about your comment where you are saying you may see modest cap rate compression in the back half of the year. And then also curious on if there is anything else within the kind of sale-leasebacks you are discussing with your relationships in terms of term or escalators or other type of changes? Peter M. Mavoides: Yeah. I think, you know, we have been expecting a normalization in the capital markets, you know, a slight decline in the ten-year and an increase in competition to drive cap rates down. We have been expecting that for quite some time now, and, you know, as we sit today, we just really have not experienced it in a material way, which is great, but we continue to have some conservatism around those factors as we think about the business plan going forward. And as we said, that, you know, shades from a high sevens to a mid sevens sort of cap rate than our expectations. But, you know, obviously, where the market goes and the cap markets in the ten-year will ultimately drive that. You know, competition drives cap rate. It also drives the other terms that you refer to, Jana, like term and escalations. These are all sensitive terms to tenants, and they are also a key part of our economics, and you can see those kinda ebb and flow over time. I would expect, you know, some compression in our weighted average escalations. You know, certainly, you know, when we were seeing 2.2%, 2.3%, that is, you Peter M. Mavoides: know, kinda Peter M. Mavoides: pretty high relative to historical averages. And, you know, with the historical average kinda being 1.6%-ish. So we are seeing some downward pressure there, but again, nothing material. Thank you. A. Joseph Peil: Thank you. Operator: We will go next now to Eric Martin Borden at BMO Capital Markets. Eric Martin Borden: Pete, I just want to go back to your comments around the stabilization and competition. And in your view, what factors are driving the stabilization? And what would need to change for competitive intensity to increase from here. Peter M. Mavoides: You know, I think it is really driven by the access to debt capital, which is, you know, gonna be driven by cost of that capital and availability of that capital. And, ultimately, you know, that is pricing. You know, these are long-dated assets that people tend to finance in the ABS market. And so I think a large driver of that is gonna be the ten-year Treasury rate. So as we have said on prior calls, higher for longer on the ten-year is probably a better scenario for us. And certainly, you know, 4.2, 4.3, you know, 4.1 is helping. I think if you saw, you know, mid to high threes on the ten-year, you know, we would see a material amount of increase in competition. All that said, you know, we very much go to market with an investment strategy deliberately designed to avoid competition by doing granular deals, follow-on transactions with relationships, leaning into sale-leasebacks to deliver capital to operators that have a capital need. And so I think, you know, hopefully, we have built a moat around that competition by transacting in a differentiated, value-added way, and we will continue to focus on that. Eric Martin Borden: Thank you. And one for Rob. Congrats, by the way. How should we be thinking about the cadence of forward equity issuance this year as you manage that cushion between the unsettled shares and acquisitions? And then with the remaining $322,000,000 of unsettled equity, is there any near-term expiration or settlement constraints that we should be aware of? Robert W. Salisbury: Thank you. Thanks for the comments, Eric. Yeah, we do not have anything in the very near term from an expiration standpoint. So that is probably not going to be a consideration. From a funding standpoint, we tend to make an assumption that we fund equity first and then do debt later. However, as we sit here today with 3.8 times leverage at the end of the year and a ton of liquidity, I think as we have mentioned on prior calls, having just reentered the unsecured bond market over this past summer, we are very much focused on the unsecured bond market. That pricing today is pretty attractive relative to the high seven cap rate that Max mentioned in prepared remarks on the pipeline right now. So, you know, in the 5.3% to 5.5% territory for cost of debt, really big spread. So, you know, we will certainly be spending some time focusing on the unsecured bonds over the course of this year. And then from an equity standpoint, with the leverage capacity that we have right now, we really could go through the entire year without issuing any more equity and hit the midpoint of our acquisition targets. And that is a combination of just starting the year at a low point, but then we also have, you know, as we mentioned in the prepared remarks, over $150,000,000 retained free cash flow after dividends. We tend to do about $100,000,000 a year of dispositions. And, you know, we have lots of forward equity as well. So, from a liquidity and a leverage standpoint, we are in a really good spot. And from a modeling standpoint, you know, we would assume that that gets settled in the near term just as a conservative point, but we will see how everything plays out. Operator: Thank you. We will go next now to Smedes Rose at Citi. Thanks. It is Nick Joseph here with Smedes. Maybe just following up on that, Rob. Obviously, balance Nick Joseph: in a really good position, robust acquisition pipeline and volume thus far in the first quarter. Have you issued any ATM equity or forward ATM equity year to date? Robert W. Salisbury: Yeah. We did a little bit earlier in the year. I do not think it is part of our disclosure package, but there are a few days before we go into the black period. So it tends to never really be a huge amount in a particular quarter, but it was about $10,000,000 that we did at the beginning of the year. So extended the runway a little bit, but again, as we sit here today with such a low leverage point, we did not feel like we needed a whole lot. Nick Joseph: Got it. Thanks. And then just on rent coverage, obviously, it was flat, flat sequentially, well covered at 3.6 times. But the sub-one and sub-one-and-a-half buckets moved up a bit. What drove that? What moved into those buckets? Peter M. Mavoides: AJ, what do you got on that? Yeah. So it is a A. Joseph Peil: a good question. On the sub-one bucket, it really is within the range of over the previous four quarters where we have been as low as 2.7% and as high as 3.9%. So there are a few tenants that are always kinda migrating in and out of that category. More on the one to one-and-a-half bucket. Over the last few years, you have noted that we have done a lot of development deals. And as those deals come online and are entered into, oftentimes added to a master lease, it creates some noise around that coverage. So we had a couple of tenants where we had assets come online, pulled the coverage out of the 1.5 to 2 bucket into the 1 to 1.5. But I think what you will see over the coming quarters is they ramp and stabilize, and we revert back to our historical norm where that cohort tends to kinda range between 7% to 11%. So it is more of a timing issue. What I would say, to add to that, is it is a data point. But what you would really see if the credit was starting to erode is our watch list would be increasing. And, actually, quarter over quarter, it decreased by about 35 basis points. And to refresh you, the watch list is the intersection of shadow-rated B-minus and less than 1.5 times unit-level coverage. So that one to one-and-a-half bucket certainly increased. But it tends to be more of a timing issue when assets are coming online out of development than anything else. Nick Joseph: Thanks, AJ. Operator: Thank you. We will go next now to Richard Allen Hightower with Barclays. Richard Allen Hightower: Good morning, guys. Peter M. Mavoides: So I want to go, I guess, back to the transaction environment. I am just curious, you know, as we have kind of seen some hiccups in the broader private credit market kind of, you know, in different pockets, you know, does that help or hurt your business? Does it create opportunities that did not previously exist? Does it reduce, you know, sort of sponsor-backed deal flow in any way? How do we figure that out? Robert W. Salisbury: For your business? Peter M. Mavoides: Yeah. We really have not seen an impact over the last couple of years with the kind of advent and proliferation of private credit. I would say those borrowers tend to be of a size and a scale that are a little larger than we are focusing on and not generally in our industries. You know, certainly, you know, we are real estate investors and we are senior and, you know, our leases are in front of unsecured debt. But it really has not driven incremental investment opportunities. And, you know, to the extent that it dries up, I do not think it is gonna change our investment market. A. Joseph Peil: Okay. That is helpful. And then Peter M. Mavoides: you made a point to point out that you did dispose of a little more of your car wash exposure last quarter, and I would probably expect that to continue again based on some of the tax law particulars that kicked in on Jan 1. So where do you see that exposure ticking down to over time? What is sort of a longer-term target there? Yeah. I would not create the expectation that it is going down materially. You know, we have always operated with a soft ceiling of 15% for any one industry. Car wash has been a great industry from a risk-adjusted return for us perspective. So I would not expect it to, you know, we are not driving that down to 10%. And, you know, to the extent that we find compelling risk-adjusted opportunities in that sector, we can continue to grow it. So, you know, we will just have to see what the market brings. A. Joseph Peil: Got it. Thank you. Richard Allen Hightower: We will go over Operator: we will go next now to Haendel St. Juste with Mizuho. Hi there. Good morning. This is Ravi Vaidya on the line for A. Joseph Peil: Haendel. Hope you guys are doing well. Can you please describe the impact of the One Build Beautiful bill on the single-tenant transaction market? How do you think that is gonna impact broader industry pricing and volumes? And how are you guys seeing it within the sandbox that you are operating in going forward? Peter M. Mavoides: Did Haendel write that question for you? A. Joseph Peil: No. I wrote it. I sent it to him. Peter M. Mavoides: Come on. He approved it. Listen, you know, the bonus depreciation that I mentioned earlier has certainly had an impact. You know, I do not think that bill really is gonna have a material impact on our business or the way we operate. And so I really do not see anything material coming out of that that will impact us. Richard Allen Hightower: Is it creating A. Joseph Peil: maybe more liquidity in transaction markets? Are there buyers that are looking to take advantage of maybe bonus depreciation or anything like that that is leading to moves in cap rates? Peter M. Mavoides: Not materially. I mean, as AJ mentioned in his remarks, we were able to sell some car washes to tax-motivated buyers at the margin. But that is, you know, it is really at the margin and not a driver of our industry. A. Joseph Peil: Got it. Thank you. Operator: Thank you. We will go next now to William John Kilichowski at Wells Fargo. William John Kilichowski: Thank you. Good morning. Richard Allen Hightower: I would like to start by saying that Cheryl did a great job with the opening remarks A. Joseph Peil: and, Rob, congrats on the new role. Richard Allen Hightower: My first one is for you, Pete. You know, we have talked about the competitive landscape a lot on this call, but I guess I am curious. Who are the entrants that maybe you thought you would be seeing that you are not seeing Operator: right now? Richard Allen Hightower: You know, it is Caitlin Burrows: I would start, I do not want to name specifics Peter M. Mavoides: you know, because we just do not know. You see platforms stand up. You see, you know, capital commitments to those platforms, whether it is, you know, Apollo, TPG, Angelo Gordon, Black— you go down the list of big asset managers and you are just conservative about their ability around your assumptions of driving your business and their ability to, you know, take business away from you. And, you know, we fight hard to win deals. We fight hard to add value to our counterparties such that they choose to do business with us. And, you know, we are very protective of our relationships. So, you know, there is a bunch of new platforms out there. You saw Starwood motor platform. And, you know, it is just broad-based. Got it. And then my second one is just A. Joseph Peil: given the current macro environment, how is that affecting the way you are underwriting or influencing sectors you might be pivoting more towards or away from? Richard Allen Hightower: Yeah. Peter M. Mavoides: You know, as I mentioned earlier, with 85% repeat business, our relationships really drive our opportunity set. And, you know, we started this platform, you know, ten years ago. We had a very focused service- and experience-based sale-leaseback A. Joseph Peil: middle market model. Peter M. Mavoides: And we are really sticking to that. And, you know, current trends in the market really have not shifted that materially one way or the other. A. Joseph Peil: Very helpful. Thank you. Peter M. Mavoides: Thank you, John. Operator: We will go next now to Ryan Caviola with Green Street Advisors. Ryan Caviola: Thank you. Good morning, everyone. It looks like the average investment per unit was record high for this quarter. I know you mentioned still close to historical norms, but could you share any details there? Or is that simply a function of acquisition mix? Or is there a slight appetite to purchase larger asset classes going forward? What led to that? Peter M. Mavoides: Yeah. It is really gonna be transaction mix and industry mix. You know, some of our sectors like early childhood education, our industrial outdoor storage sites and service sites tend to have a higher price point than, you know, our QSR sites or casual dining sites. And so it is not a material move, and it really is not indicative of our change in our underwriting or our risk appetite for larger assets. Robert W. Salisbury: It is more just industry mix in that quarter. Ryan Caviola: Got it. Appreciate it. And then just a quick one. Could you remind us of the tenant credit assumptions included in the 2026 guide and just any, you know, color on Operator: if there is industries specific in there or if it is broad-based. And anything you can share on the tenant credit. Thanks. Peter M. Mavoides: Yeah. So we do not guide to tenant credit losses. You know, we guide to AFFO growth and investments. I would say we take a very sharp pencil to our credit assumptions, really looking at specific situations and properties where we may have a credit event that results in a loss in ABR. And that tends to be around our historical average and our norm. And then we make a generic assumption for unknown events that may come at us. And we run a range of scenarios Robert W. Salisbury: of the credit laws that support our guidance. So, you know, with a historical credit loss of 30 basis points, you can probably assume we are a little more conservative than that. But Peter M. Mavoides: there is a wide range of scenarios in underlying guidance. Ryan Caviola: Great. Appreciate the color. Peter M. Mavoides: Thank you. Operator: We will go next now to Jay Kornreich with Cantor Fitzgerald. Jay Kornreich: I guess just following up on your comments, A. Joseph Peil: sticking to your relationships, which make up 85% of business. Jay Kornreich: How do you assess kind of that balance between growing with current partners and forming new ones? Really, the point is, does the 85% provide enough runway for Operator: investments and earnings growth for multiple years into the future that do not need to rely on new relationships? Peter M. Mavoides: No. Listen. As I said in the past, we like to kinda be seventy-five/twenty-five, ideally, and we spend a lot of effort and make a lot of investments to source and build new relationships that we can grow with over time. Because we certainly see relationships grow out of us as they get bigger and establish, you know, access to more alternative forms of capital. It is a balance. And, you know, I think we have done a good job of balancing that and have an ample pipeline of opportunities. And I think we have demonstrated, you know, great ability to continue to source and deploy capital. Jay Kornreich: Okay. And I guess just following up on that, you know, the strong sourcing and ample opportunities. You also referenced some deal slippage in the fourth quarter. So I guess just wondering about the overall investment pipeline outlook. If your cost of capital were to improve throughout the year, Operator: do you feel like there is ample opportunity to expand the investment volume? Or is it a little bit more constrained as the outlook may have— Peter M. Mavoides: As we always say, you know, the opportunity set is not what is driving our investment volume; our desire to create compelling growth for shareholders is what drives it, and what we believe to be compelling is, you know, our current guidance both in terms of AFFO per share, with growth of, you know, call it 6% to 8% supported by investments of, you know, conservative investments of, you know, $1,000,000,000 to $1,400,000,000. And which is, you know, frankly, at the midpoint down from what we did last year. So, the opportunity set is not a constraint of ours. You know, really our appetite and our desire to create stable growth over a prolonged period of time is what is driving that. A. Joseph Peil: Understood. Okay. Thanks very much. Robert W. Salisbury: Thank you. Operator: We will go next now to Daniel Edward Guglielmo with Capital One Securities. Daniel Edward Guglielmo: Hi, everyone. Thank you for taking my questions. I know based on our conversation at REITworld that you all are focused on same-store metrics for your tenants. Have there been any diverging trends in kind of same-store between tenant types or any changes that you have noticed this year versus last Peter M. Mavoides: Yeah. Well, same-store ABR and same-store rent is really driven by the contracts and the leases that we have. And, you know, that can vary from, you know, low of 1.5% to a high of 2.3%, and that really more depends upon what we negotiate going into those deals and when we negotiated those deals than anything on an industry-specific basis. In terms of, you know, same-store improvement in sales and margin and EBITDA, you know, that is something we track across all our industries and all our tenants. And there, you know, there is a lot of ebbs and flows within each sector and each specific operator. I would say most of those ebbs and flows are idiosyncratic around the operator and less around the industry. But there is nothing really I would call out materially changing in that Daniel Edward Guglielmo: Okay. Great. Appreciate that color. And then I would, as I would make— Peter M. Mavoides: I would make a point on that and, you know, you know, with public comps in most of our industries, whether it be Mister Car Wash in car wash or the restaurant operators or KinderCare in childcare, you know, investors can look at those public comps and get a general read-through about what is going on in the overall industries that we invest in. And, you know, there tends to be a very strong correlation between those public comps and their performance and what is going on in our portfolio. Daniel Edward Guglielmo: Great. Yeah. That is very helpful. And then as a follow-up from one earlier, thinking about the size of the company with the kind of mid to high single-digit growth Peter M. Mavoides: each year? Daniel Edward Guglielmo: Is there a certain size down the road where it gets harder to source the right deals at kind of the volumes needed? And when you think about that, how far out is that? Peter M. Mavoides: Yeah. I would not put a number on that. I think we have, you know, five to ten years of solid performance and opportunity in front of us to continue to grow our relationships and our investable universe and our portfolio and generate that sort of growth. You know, as you get bigger, you gotta do more and, you know, I think we continue to invest in the team and the infrastructure to do that. I think this company has great runway, without really too much concern around that. A. Joseph Peil: Particularly, Peter M. Mavoides: because, as we have done, you know, not growing too fast. Right? And then, you know, growing moderately at a very measured pace over a long period of time has been our ambition, and I think we have great runway in front of us. Daniel Edward Guglielmo: Appreciate that. Thank you. Operator: We will go next now to John James Massocca at B. Riley Securities. John James Massocca: Good morning. We talked about it a little bit last quarter, but you added again the kind of the other industrial bucket, but it seems like the assets had a bit of a different kind of rent and footage profile per property. Just kind of curious maybe what those were in terms of acquisitions during the quarter. And I guess, with a couple of subsequent quarters of strong investment in that particular industry sector, what do you think is driving John James Massocca: that as a growth vehicle in the current market? Peter M. Mavoides: Yeah. You know, we just see good opportunities in the industrial outdoor storage space. Those assets tend to be granular, tend to have a large land component, and John James Massocca: you know, that the Peter M. Mavoides: rent per square foot in that space varies wildly depending upon the amount of building prorated over the size of the land. And so, you know, a 10-acre lot with a 20,000 square foot building is a whole lot different than a five-acre lot with a 20,000 square foot building. And so we see good opportunities there with middle market operators and, you know, it is not growing at an outsized pace. And we will continue to invest there. And we certainly like that space. John James Massocca: But the assets that were kind of acquired in the quarter, were those kind of industrial outdoor storage John James Massocca: type of properties? Yes, sir. John James Massocca: Okay. And then, you know, John James Massocca: may have mentioned before, so apologies. But given John James Massocca: the size of the subsequent John James Massocca: quarter investment volume and maybe kind of characterization of that being a little bit of, you know, transactions that maybe slipped from a 4Q closing, what was kind of the rough timing on that as we are thinking about modeling? Was it a little bit front-end loaded in the year, or was it kinda spread out over the quarter to date? Peter M. Mavoides: January 21, John. I need an hour, Pete. I am just kidding, Rob. You got a response to that? I— Robert W. Salisbury: you know, we are a month and almost a month and a half into the year. I would just assume that January is probably a reasonable ballpark estimate. John James Massocca: Okay. Robert W. Salisbury: I appreciate that. John James Massocca: That is it for me. Thank you. Peter M. Mavoides: Thank you, John. Robert W. Salisbury: Thank you. Enjoy your— Operator: We are, Mr. Mavoides. I will turn it back to you, sir, for any closing comments. Peter M. Mavoides: Great. Well, thank you all. We look forward to seeing you all. I know Citi's conference is right around the corner. And we will have a very active calendar down there. And stay warm. Talk to you soon. Operator: Thank you, ladies and gentlemen. Again, that will conclude the Essential Properties Realty Trust, Inc. fourth quarter earnings conference call. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.
Operator: Greetings, and welcome to STAG Industrial, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Xiarhos, Vice President, Investor Relations. Thank you, sir. You may begin. Thank you. Steve Xiarhos: Welcome to STAG Industrial, Inc.'s conference call covering the fourth quarter 2025 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at stagindustrial.com under the Investor Relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties, and may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts for FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters. We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. STAG Industrial, Inc. assumes no obligation to update any forward-looking statements. On today's call, you will hear from William R. Crooker, our Chief Executive Officer, and Matts S. Pinard, our Chief Financial Officer. Also here with us today are Michael Christopher Chase, our Chief Investment Officer, and Steven Kimball, our Chief Operating Officer. They are available to answer questions specific to their areas of focus. I will now turn the call over to William R. Crooker. Thank you, Steve. Good morning, everybody, and welcome to the fourth quarter earnings call for STAG Industrial, Inc. We are pleased to have you join us and look forward to discussing the fourth quarter and full-year 2025 results. We will also provide our initial 2026 guidance. As I look back on 2025, it was arguably one of our more successful years. Operator: We outperformed almost all of our budgeted metrics, including occupancy, Steve Xiarhos: credit loss, leasing spreads, same-store cash NOI, development starts, and core FFO. We grew same-store cash NOI by 4.3% and grew core FFO per share by 6.3%. This growth was supported by an improved industrial supply backdrop with deliveries down almost 35% versus 2024. Most of the markets we operate in remain healthy from both a supply and demand standpoint, with positive rent growth across almost all of our markets. While many business leaders remain optimistic, we are seeing increased tenant activity across our markets. Economic growth has begun to improve, and meaningful investment has followed. William R. Crooker: We expect 180,000,000 square feet of deliveries or less this year, much of which will be driven by build-to-suit transactions. We anticipate that net absorption will improve in 2026, contributing to another year of positive rent growth across our markets. We expect national vacancy rates to peak in the first half of this year with an inflection point in the back half of 2026. 2025 was a high watermark for leasing volume at STAG. We expect 2026 to follow suit driven by a record amount of square footage expiring in a calendar year for our company. I am pleased to report that we have addressed 69% of the operating portfolio square feet we expect to lease in 2026. We project cash leasing spreads of 18% to 20% for 2026. This leasing success is a testament to the quality of our portfolio and a welcome sign of tenant engagement and commitment to their space. Q4 was the most active transaction quarter of 2025. This was due in part to less macro volatility which brought sellers to the market in the second half of the year. Acquisition volume for the fourth quarter totaled $285,900,000. This consisted of seven buildings, with cash, straight-line cap rates of 6.47%, respectively. These buildings are 97% leased to strong credits with weighted average rental escalators of 3.5%. Subsequent to quarter end, we acquired one building for $80,600,000 with a 6.1% cash cap rate. This is a Class A building leased to a strong credit for twelve years. In terms of our development platform, we have 3,500,000 square feet of development activity or recent completions across 14 buildings as of the end of Q4. 59% of 3,500,000 square feet are completed developments. These completed developments are 73% leased as of December 31. In the fourth quarter, we commenced a new development that was identified within our existing portfolio by our operations team. The 186,000 square foot project is located southwest of Kansas City in Lenexa, Kansas. The project has an estimated delivery date of Q1 2027. The building will have the flexibility to demise into suites of 60,000 square feet or less in a market with healthy fundamentals. We are projecting a cash yield of 7.2% on this project. Subsequent to quarter end, we executed a 78,000 square foot lease in one of our Charlotte development projects to a manufacturing and assembly company. The building is now 39% leased. We initially underwrote fully stabilizing the building in the first quarter 2027. Before I turn it over to Matts, I am pleased to say that after year end, we raised our dividend 4%, which is the largest raise we have had since 2014. This raise is a result of many years of reducing our payout ratio and retaining as much free cash flow as possible. In addition to raising our dividend, we have modified the dividend payment cadence from monthly to quarterly going forward. With that, I will turn it over to Matts who will cover our remaining results and guidance for 2026. Steve Xiarhos: Thank you, Bill, and good morning, everyone. William R. Crooker: Core FFO per share was $0.66 for the quarter, Steve Xiarhos: and $2.55 for the year, representing an increase of 6.3% as compared to 2024. Included in core FFO for the quarter are two one-time items that contributed approximately Matts S. Pinard: $0.10 to core FFO per share. During the quarter, we commenced 31 leases totaling 3,000,000 square feet which generate cash and straight-line leasing spreads of 16.3% and 27.4%, respectively. This leasing activity included five fixed-rate renewal options totaling 882,000 square feet, most of any quarter in 2025. Excluding these five fixed-rate leases, fourth quarter cash leasing spreads would have been 20%, an increase of 570 basis points. For the year, we achieved cash and straight-line leasing spreads of 24% and 38.2%, respectively. Same-store cash NOI growth was 5.4% for the quarter, and 4.3% for the year. We incurred 22 basis points of cash credit loss in 2025. Retention was 75.8% for the quarter and 77.2% for the year. As mentioned by Bill, we have accomplished 69% of the square feet we currently expect to lease in 2026, achieving 20% cash leasing spreads. Moving to capital market activity, on December 8, the company settled $157,400,000 of proceeds related to forward ATM sales that occurred throughout 2025. Net debt to annualized run-rate adjusted EBITDA was 5.0x at year end with liquidity of $750,000,000. 2026 guidance can be found on Page 20 of our supplemental package, which is available in the Investor Relations section of our website. Same-store cash NOI growth is expected to range between 2.75% and 3.25%. The components of our same-store cash NOI guidance include the following: retention to range between 70% and 80%; cash leasing spreads of 18% to 20%; average same-store occupancy for 2026 is expected to be between 96% and 97%. In consistent with previous years, 50 basis points of credit loss is included in our initial cash same-store guidance. Acquisition volume guidance is a range of $350,000,000 to $650,000,000 with a cash capitalization rate between 6.25% and 6.75%. Acquisition timing will be more heavily weighted to the back end of the year. Disposition volume guidance is between $100,000,000 and $200,000,000. G&A is expected to be between $53,000,000 and $56,000,000. Finally, the increase in interest expense from our recent refinancing of our $300,000,000 term loan will be a $0.03 headwind to core FFO per share growth in 2026. Incorporating these components, we are initiating a core FFO per share range between $2.60 and $2.64 per share. I will now turn it back over to Bill. Thank you, Matts. William R. Crooker: And thank you to our team for their continued hard work and outperformance of our 2025 goals. We are excited about the opportunities that are in front of us here at STAG Industrial, Inc., and we look forward to building off this momentum in 2026. We will now turn it back to the operator for questions. Operator: Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We ask that analysts limit themselves to one question and a follow-up so that other analysts have an opportunity to do so as well. One moment, please, while we poll for questions. Our first question comes from Craig Allen Mailman with Citi. Please proceed with your question. William R. Crooker: Just kind of curious on the leasing front. Craig Allen Mailman: You know, I know, Bill, you said you guys are not expecting vacancy nationally to peak until middle of the year. But just from commentary from peers and brokers, it feels like the leasing environment and velocity is picking up. So I am just kind of curious as you guys kind of contemplate the 100 basis points of occupancy decline, which I understand you guys have 20,000,000 square feet rolling. And so 25% of that nonrenewals is a fairly large amount. But I am just kind of curious how you guys thought about the pace of backfill activity in guidance and kind of what could be the upside to that if the momentum that we are seeing coming out of 2025 holds and is sustainable and maybe even ticks up a bit. William R. Crooker: Yeah. Thanks, Craig. And we had a really successful year 2025 with leasing and exceeded, as I mentioned, you know, most, if not all, of our budgeted metrics, including our leasing volume. If, you know, William R. Crooker: certainly, if that continues, you know, we could at least backfill product earlier in the year, and that would be upside. And the way we look at it and prepare our budgets, and we entered the year in 2026 at close to 98% occupancy rate. And so when you have 20,000,000 square feet rolling at our historical retentions, you have got a fair number of square feet that is going vacant. In our budgets and contemplated, you know, a nine to twelve month lease-up period for those assets. There is a number of examples where we outperformed that in 2025. For, you know, just one example. For example, we leased an asset in Savannah, Georgia. In 2025, it went vacant in the first quarter. We anticipated releasing that in 2026. We found a tenant, released that asset with no downtime. That was in a market that at that time had 10% vacancy rates. So some other options for the tenants ultimately decided to go with our building. And that is something when we budget, we are going to budget that, I think, prudently to lease up nine to twelve months, but our outcome was zero downtime. There are several other examples I could give you on that that happened in 2025. Those scenarios could pan out in 2026, but the way we budget, we try to be prudent, and we certainly do not budget zero downtime for our assets. But those things happen some years and certainly happened a lot in 2025, and we hope it continues in 2026. And then and just going back to our view on the overall industrial market, I mean, it is still pretty strong. Right? I mean, we have to chew through some of this supply. We think that happens, you know, peaks, you know, midway through 2026, and it starts to really improve as you move through the back half of 2026 and into 2027. So overall, really happy with the way 2025 played out. Really happy with the results. You are coming into the year with some really high occupancy. Some great trends. We hope it continues as we move through 2026, but we try to be, you know, prudent when we budget for 2026. Craig Allen Mailman: That is helpful. Then just on the acquisition front, you know, you guys came out of the gates with the $81,000,000, but you know, Matts had mentioned it is more heavily weighted to the back end. Could you just talk a little bit more about what you have visibility on today and kind of anticipated timing versus what is speculative in the guidance for acquisitions? William R. Crooker: Yeah. I mean, right now, all we have disclosed is the $81,000,000. We typically do not disclose any LOI acquisitions or on a contract acquisitions. You know, things do fall out of LOI. They do fall out of contract. We have been underwriting more deals, you know, frankly, this first quarter than we did last first quarter. The momentum from Q4 has continued into the first quarter. A typical transaction year, though, is usually slower in the first quarter, and then it starts to build as you move through the year. So we do expect first quarter to be slower, but we are underwriting more transactions now than we did in the first quarter of 2025. Our pipeline is strong. It stands at $3,600,000,000. Michael can certainly dive into the details of that if you would like. But overall, the transaction market is really healthy. We are seeing some portfolios come to the market. There just seems to be pretty healthy. There is, you can call it, pent-up seller demand that came to the market at the back half of 2025, and that has continued as we moved into 2026. Craig Allen Mailman: Great. Thank you. William R. Crooker: Thanks, Craig. Operator: Our next question comes from Michael Griffin with Evercore ISI. Please proceed with your question. Steve Xiarhos: Great, thanks. Bill, I appreciated the comments in Matts S. Pinard: prepared remarks around sort of increased tenant activity. I was wondering if you could unpack that a little bit. Are these customers, potential tenants you have been monitoring that are looking around for a deal? Or are they really, I guess, you know, closer to signing on the dotted line? And have you seen Steve Xiarhos: maybe more newer prospects come into the market that might have been holding off last year? William R. Crooker: Yeah. That is a good question. Interesting question. I mean, beginning of last year, certainly, after, you know, quote, unquote, Liberation Day, there were tenants hanging around the hoop looking into space, but it did not feel like real demand. This tenant activity is real demand. We are seeing tenants make decisions, lease space. We obviously had a lot of successes in 2025. Let us say the demand is pretty broad-based. We are seeing it from 3PL, seeing it from food and beverage. I would say something that is a little newer, a little more nuanced is seeing a fair bit of demand from data center tenants. So those are tenants that are either supplying generators to data centers or even some light manufacturing of data centers, storing other things for data centers, say data center developments. We looked at our portfolio. We have got 3,000,000 square feet leased to data center tenants for these are five-plus-year leases to good credits. In addition, we have got some prospects at some of our buildings for data center demand. So that is a newer demand. But with respect to overall tenant demand, it feels William R. Crooker: it feels real. William R. Crooker: It does not feel like they are just kicking tires. These are tenants that need space and are looking for space. You know, I think the caveat to all that is there is some supply that we need to chew through. So these tenants have options. Our portfolio, and I say this a lot, is we buy buildings, we add buildings to our portfolio, we make sure those buildings fit the submarkets that they operate in and fit them well. And because of that, we have historically and continue to maintain occupancy levels well above market occupancy levels. We expect that to continue. You know, we have been fortunate in 2025 to win deals when there were other options that tenants could have gone to, but we proved to be a very good landlord. And we proved to have very good product in our respective submarkets. So, we hope that continues, and just need to get through some of the supply, but the demand out there is real. And we expect absorption to increase as we move through the year. Great. That is certainly some helpful context. And then maybe just going back to Blaine Heck: sort of the outlook for supply, maybe to unpack that a little bit more. I mean, look, it seems like if trends are improving into 2026, if you expect vacancies to decline in the back half of the year, if others in the industry are seeing this as well, I guess, is there a worry that we could see a ramp back up in supply if the fundamental picture continues to improve? Or are there more governors or barriers to entry, whether it is elevated development costs that might preclude an overbuilding problem that we have had a couple of years ago. Yeah. I mean, I think the developers in industrial are generally William R. Crooker: prudent. We had a little bit of excess supply there, but I think really, the story there was just a falloff in demand. Right? So I think the supply was William R. Crooker: was Steve Xiarhos: okay. It was just that the William R. Crooker: falloff in demand. And as that picks back up and you start to look at your crystal ball and underwrite more market rent growth, more developments pencil out. Right? But I think those developments, if you have got a piece of land and you need a permit and entitle it and then build it, you are looking well into 2027 before any of these things come online. Right? So there is a window here where it is going to flip. And when it starts to flip, I think it is going to flip pretty quickly in the landlord's favor here. So with respect to new supply coming online and being a concern, I am not concerned about it. Our team is not concerned about it. And if that supply comes back on, it is going to come back on, I think, prudently, and I think middle to late 2027 or even later than that. Blaine Heck: Great. That is it for me. Thanks for the time. Thanks. Matts S. Pinard: Thank you. Operator: Our next question comes from Nicholas Patrick Thillman with Baird. Please proceed with your question. Blaine Heck: Good morning. Bill, just want to make sure you invest around talking turns after Sunday, but we can move out to some other things. Just overall on I understand there is a new organic growth story with STAG. And you had mentioned in our prior conversations looking to maybe even improve on that growth rate by potentially looking to do some more Matts S. Pinard: strategic exits of the individual markets that might cause some Blaine Heck: near-term dilution but would enhance the longer-term growth rate. I guess, has there been any changes in that conversation or any recent developments on the thought process there? And Matts S. Pinard: is any of that baked into some of the disposition guidance that is included in 2026? William R. Crooker: Yeah. I would say there is not a material shift to what we have been on the past Steve Xiarhos: five years. Right? There is William R. Crooker: every year, there are some non-core assets we dispose of, and every year, there are some opportunistic dispositions. Generally, we have a sense of the non-core dispositions to start the year. We do not really have a sense of the opportunistic because oftentimes, those are reverse inquiries that come in. And we had two of those in 2025. Two assets, one was in the first quarter, one was in the fourth quarter where there were assets that went vacant and we loved the leasing prospects. And we were planning on holding those assets and leasing them up, and we sold both those assets at what a market Matts S. Pinard: rate would be, market cap rate would be, market rent would be. William R. Crooker: Those were sold at a 4.9% cap rate. So just great execution from the team, but users wanted the space and did not want to lease it. So, great execution. So we anticipate having some, hopefully having some of those this year. But right now, the plan is what is in our guide is just some non-core dispositions. But nothing in excess of past years. I think, reflecting back on our conversation, Nick, that is just when you look at the map of STAG's portfolio, there might be one asset in a market. And if we do not feel like we can grow into that market over time, that is an asset that we will opportunistically dispose just to be a little bit more efficient on the operating side. But that is on the margin and not really that impactful to the numbers. Matts S. Pinard: Very helpful. And then maybe just appetite to hold land on the balance sheet for development opportunities, understanding that that is a growing part of the business and most of your development opportunities have been with JV partners. Blaine Heck: But just appetite on growing the land bank. William R. Crooker: Yeah. Certainly not part of our 2026 plan, but something that is part of our long-term development plan. We are going to step our way into that. Right now, we have got a fair amount of developments. I am very happy with how the development initiative has progressed. The results we are seeing, it is great to see that at least get signed in our Concord development. There are some good opportunities that we are looking at now with some other potential leasing on the development side. And with respect to newer development opportunities, hopefully, there are some things we can announce in the near future on that. And then, when you start to think about the longer-term view of markets, the land is not in our plan, as I mentioned. Holding land right now is not in our plan for 2026, but we are looking, it is early days, we are looking into some phased developments that may be an opportunity for us to Matts S. Pinard: you know, have a William R. Crooker: call it, quasi land position. But we are looking at a lot of those things as we grow this platform. Blaine Heck: Very helpful. Thank you. William R. Crooker: Thank you. Operator: Our next question comes from Blaine Heck with Wells Fargo. Please proceed with your question. Blaine Heck: Hey, thanks. Good morning. Can you just talk about how you are thinking about your overall cost of capital today and the spread between your cost of debt, or maybe more importantly cost of equity, and your required returns on investment? Matts S. Pinard: Yeah. Good morning, Blaine. This is Matts. So cost of debt is pretty easy. You know, if we were to go to the private placement market where we historically have been an issuer, spread there anywhere between 140 and 150 basis points over. If we would go to the public bond market, which we have been evaluating and have discussed on these calls, after our inaugural issuance, we would likely, we have been polled, receive a 25 to 30 basis point pricing benefit. So if we think about today in the market in which we are currently operating, it is, call it, 5.5% to 5.75% depending on tenor. Cost of equity, you can do that many different ways. From an implied cap rate base using one of our sell-side analysts' rubrics, you know, we are in the low 6s. But what is important is we are retaining, and Bill mentioned this in his remarks, we are retaining north of $100,000,000 of cash flows after dividend as well. So it is a different way to kind of go through the funding for 2026. If you look at the net acquisitions of $350,000,000, and that is obviously gross acquisitions less dispositions, factor in the $100,000,000-plus of retained earnings, we have the ability to operate this business plan without accessing the equity capital markets. Our leverage would be right in the midpoint of our range. Right now, we are at 5.0x levered. We operate this business plan for 2026 at the midpoint, so we would be at 5.25x leverage. Blaine Heck: Great. That is helpful color, Matts. Second question, you guys commented on the fixed-rate renewals weighing on spreads during the fourth quarter. Can you just tell us what percentage of your leases have those fixed-rate renewals incorporated in their terms, and whether there are any chunky ones that we should be aware of in the coming quarters. William R. Crooker: Yeah. It is single Blaine Heck: digits. William R. Crooker: Usually, we do not even call that out, Blaine. We just called it out in the fourth quarter because it looked like spreads were moderating in Q4, but it was really due to that. So every year, there is a few fixed renewal options, a handful, and they are just spread out throughout the year. So it is just part of our leasing plan. But because it was concentrated in the fourth quarter, it is why we called it out. So it is single digits and they are laddered. But the good thing is as you get through these, you work these off. It is not like they are unlimited fixed renewal options. Generally, there is one. And then you get through it, and then you are just pushing out the mark-to-market opportunity. Steve Xiarhos: Got it. Thanks, Bill. William R. Crooker: Thanks. Operator: Our next question comes from Vince Tibone with Green Street. Please proceed with your question. William R. Crooker: I was Blaine Heck: we think about potential development starts in 2026? And kind of what is your appetite to start new spec projects this year? Is it dependent on leasing current Eric Martin Borden: projects or just on a deal-by-deal basis? Curious how you are thinking about that and the amount that is maybe reasonable this year. William R. Crooker: Yeah. Hey, Vince. I mean, given where our development Matts S. Pinard: portfolio sits today, we are William R. Crooker: very eager to start some new spec projects. Right? Especially given our outlook for the industrial market in 2026 and into 2027. Right? It is just Steve Xiarhos: and we view it as a great time to start some projects. So William R. Crooker: for us, it is just whether we can source some more. We think we can. You know, this year, we are a little over $100,000,000 of kind of new projects sourced. Steve Xiarhos: You know, I think that is our William R. Crooker: that is what we have planned for this year. Hopefully, we can exceed that. Now that is not going to come in day one. Right? It is going to come in throughout the year. Steve Xiarhos: But William R. Crooker: it is something that is, Steve Xiarhos: it is an initiative that William R. Crooker: you know, I feel strongly that we continue to build on. The team feels strongly we can continue to build on it. And we think it is Steve Xiarhos: you know, it is something that we will be able to build on. William R. Crooker: But with respect to starting a new spec project today, very happy to do that, assuming the returns pencil up. Eric Martin Borden: No. Makes sense. Helpful color. And maybe just switching gears, could you talk a little bit broadly about the concession environment in your markets, like particularly free rent? Do you feel that free rent levels or TIs have really stabilized across the market among private players with some more vacancy potentially? Some of your peers have called that out as a headwind. The near-term growth does not look like that is an issue for your same-store guide. Just love to hear color on free rent trends and concessions in your market. Operator: Yeah. And we think they are very stable. William R. Crooker: They have been stable, really, since the beginning of 2025. But there are instances in markets, in our markets, where you will have a private landlord, I do not see it really with the public peers, but you have a private landlord that has been sitting on an asset and just saying, you know what? I am going to buy this deal. And I am going to give them whatever they need, and I am going to give them a bunch of free rent and Steve Xiarhos: but that is not market. Right? I mean, if you have got five buildings that are William R. Crooker: competing against one another and one is willing to just Blaine Heck: you know, William R. Crooker: give a ton of free rent and concessions, the other four are not. So generally, what we are seeing in a market that has vacancy rates five to 10%, you are seeing a half a month of free rent per year right now, but that has been stable since 2025. With respect to TIs, we have not seen a material change in TIs. What you do see sometimes is a tenant wanting additional dock doors. If there is not, you know, maybe LED lighting, generally, our buildings have that. But if there is not something like that, where it is more of a building upgrade, they may ask for that. And in those situations, you are seeing landlords in the market, and we would be willing to do it too, to put that capital in the building. But I do not view that as much a TI. It is like putting capital in your building, making your building more marketable and thankfully, more valuable. Much different than a tenant-specific TI. So I have not seen a big uptick in tenant-specific TI packages, which is what we really view as concessions. Matts S. Pinard: Great. Thank you. Steve Xiarhos: Thank you. Craig Allen Mailman: Our next Operator: question comes from Michael William Mueller with JPMorgan. Please proceed with your question. William R. Crooker: Yes. Hi. Just a quick one. What is baked into your 2026 guide for development leasing? Sorry. I missed that, Mike. What was that again? Matts S. Pinard: Yeah. Sorry. What is Craig Allen Mailman: baked into your 2026 guide for developing? Steve Kimball: Yeah. Hey, Mike. It is Steve Kimball here. We have guided for 907,000 square feet of leasing. Matts S. Pinard: And one of those is a build-to-suit that is in those numbers. Blaine Heck: We and Bill mentioned the Steve Kimball: Charlotte lease that was done after the quarter. Blaine Heck: So we would have Steve Kimball: after those two, we would be left with 530 square feet of leasing or about a half million square feet of leasing that we have projected to do in 2026. Operator: Got it. Thanks. Steve Kimball: Welcome. William R. Crooker: Thanks, Mike. Operator: Our next question comes from Brendan Lynch with Barclays. Please proceed with your question. William R. Crooker: Great. Thanks for taking my questions. Blaine Heck: Bill, maybe you could just walk through your markets and Steve Xiarhos: and highlight which ones are particularly strong right now and which ones are lagging. William R. Crooker: Yes. So we are seeing some really good demand in the Midwest markets. I mean, Craig Allen Mailman: similar to the last couple of quarters, William R. Crooker: Minneapolis remains strong. Chicago, Milwaukee. But what we have seen really in the past, I would say, four months is an increase in demand in some of the big bulk Midwest distribution markets, Indianapolis being one of them. And Louisville is really strong. Matts S. Pinard: Columbus has strengthened with a lot of bulk distribution William R. Crooker: leases getting done there. Matts S. Pinard: Southeast William R. Crooker: has been pretty strong. I would say on the other side of it where we are seeing a little bit more weakness, Matts S. Pinard: it is some of the Southeast port markets, frankly. It is Jacksonville, Savannah, William R. Crooker: Charleston, seeing some weakness there. Steve Xiarhos: And then but then when you think about William R. Crooker: continuing down, you go around to Texas, Houston is really strong. Dallas is really strong. So overall, some good fundamentals, but seeing some weakness in those Southeast port markets. Blaine Heck: Okay. Great. Thanks. That is helpful. Steve Xiarhos: And I believe you have suggested in the past that Blaine Heck: market rent growth would be kind of 0% to 2% throughout 2026. With that context in mind, in those markets that are particularly strong, how much are we seeing those stronger markets deviate from that 0% to 2% average? William R. Crooker: Yeah. I do not have all the numbers right in front of me, but I would say generally, it is a pretty tight band. Because you still have some vacancy in those markets. So you are getting a couple, 3% market rent growth in some of those stronger markets. But, like, for example, in Indy or Columbus, that has really strengthened lately, I do not think you are seeing a 3% rent growth there. Steve Xiarhos: But in Minneapolis and Milwaukee and William R. Crooker: Chicago, you might be seeing it there. And then on the other side, it is closer to that 0% to 1%. Steve Xiarhos: Okay. So the demand that you are seeing is roughly Blaine Heck: it is mostly coming through as absorption Steve Xiarhos: rather than Matts S. Pinard: pushing rents more aggressively. William R. Crooker: Yeah. I think what you are seeing, you are going to see the rent growth really start to accelerate as you move into 2027. Matts S. Pinard: Okay. Great. Thanks for the help. I think that is William R. Crooker: dynamic is, I think, why you are seeing some, and what we are seeing, I think others are too, is Matts S. Pinard: there are larger William R. Crooker: more sophisticated tenants coming to us well in advance to try to renew their leases. Try to get ahead of some of the market rent growth that Blaine Heck: is likely to come. Craig Allen Mailman: Okay. Matts S. Pinard: Thank you. Operator: Helpful. Thank you. Our next question comes from John Kim with BMO Capital Markets. Please proceed with your question. Thank you. You have had a healthy Matts S. Pinard: leasing activity recently. I am wondering if you could provide Blaine Heck: the leasing executed or signed during the quarter. And in particular, Matts S. Pinard: the volume versus the 3,500,000 square foot average that you had last year? And the lease spreads compared to your 18% to 20% guidance? William R. Crooker: There is a lot there, John. I do not have the executed leases in front of me, but with respect to what we are budgeting for this year, I think we are budgeting almost 18,000,000 square feet of leasing for 2026. It will be our largest Matts S. Pinard: absolute square William R. Crooker: footage of leasing for the year. So you look at our leasing spreads of 18% to 20%, from recollection, we see these leases getting signed. We get notified of everything. There is nothing that I see that is a big deviation one way or the other with respect to those spreads. You might see something a little bit lower because the lease is a little closer to market or something a little bit higher because the lease was a little bit below market. But it is not like we are seeing a trend one way or the other. And rent bumps are holding up, and we are signing rent bumps in the 3% to 3.5% Steve Xiarhos: range. Craig Allen Mailman: But just following up on that, I mean, if you expect 18,000,000 square feet of leasing, that is Jason Belcher: almost 30% more than what you did last year, yet you are expecting occupancy to go down. So is this a lot of early renewals? Or I am just trying to marry the lease activity versus the occupancy guidance. William R. Crooker: Yeah. It is because we had so much square feet rolling. That is the biggest factor. Right? So we had initially a little over 20,000,000 square feet rolling. And so when you have that and you have got your, call it, 75% retention rate, and these leases roll throughout the year. So we budget typically a nine to twelve month lease-up time for these. So if they roll halfway through the year, and it is a nonrenewal, just the absolute square footage is a little higher, but we are budgeting that that lease is going to be released in 2027. Right? So our occupancy guide is average. Matts S. Pinard: So William R. Crooker: that is what is impacting it, especially, you know, another example, if you have a nonrenewal happening March 31, Matts S. Pinard: and that is going to be William R. Crooker: vacant for nine months of the year. Right? Because we are budgeting that to lease up in 2027. Now, maybe there are some examples where we lease up earlier. We certainly had several of those examples in 2025. I gave one earlier on this call. But our budget is that that will lease up in 2027. So it really is a factor of having a large amount of square feet rolling in 2026, offset by high occupancy coming into 2026. So if our occupancy was lower, there is more opportunity to backfill some of that nonrenewal. And it was just an interesting dynamic that happened in 2026. Jason Belcher: But overall by your renewal. Operator: I William R. Crooker: high occupancy numbers, good leasing spreads. Really great year in 2025. Some great tailwinds with respect to development. We are seeing some good acquisition activity. I mean, I was just thrilled with how 2025 went and 2026, other than some of this occupancy loss, is shaping up to be, I am really happy with the projections that we are putting out. Jason Belcher: And a similar renewal rate than what you have achieved in prior years. Yeah. Right. William R. Crooker: Exactly. It is not like renewals are down. I think our midpoint of renewal guidance is 75%. Jason Belcher: Right. Okay. Thank you. William R. Crooker: Thanks. Operator: Our next question comes from Richard Anderson with Cantor Fitzgerald. Please proceed with your question. Blaine Heck: Thanks. Good morning. So just looking back, start of the year last year, your same-store guidance was 3.5% to 4%. You usually beat that, at 4.3%. You are starting this year at 3%. Not to belabor the 20,000,000 square feet rolling in 2026 and the 75% retention. But if you beat that retention, obviously, that is the main driver to beating your 3% same-store guidance, I assume, and you can answer that. Let me just finish the thought. Do you have a line of sight into some clarity that 25% is not going to renew, or is that just kind of going off of your history? Do you already have a sense of that vacancy Matts S. Pinard: level? Steve Xiarhos: Just curious if you can respond to that. Yeah. William R. Crooker: Yeah. So I will answer the second question first. We have line of sight for a lot of our lease expirations in the first half of the year. So there are certainly lease expirations in the back half of the year that we are saying, Steve Xiarhos: hey. These three are going to renew, and this one is going to vacate. Right? William R. Crooker: That is how we build up a budget. Right? The back half of the year, we are not certain with what is going to happen, but our team is close to our tenants. We have a sense. Craig Allen Mailman: We are usually William R. Crooker: within 5% of our retention guidance every year. But some of it is speculative. And with respect to outperformance or potential outperformance on same store, it is not just retention. Retention is a factor, right, if that goes up to 80% or 83%, that will help same store because you are not incurring any downtime on that additional 5% to 8%. But, really, we have lease-up projections where the new leasing is really heavily weighted to the back half of the year. So I think we have got about 3,000,000 budgeted for new leasing, most of which is expected to occur in the back half of the year. So if that leasing occurred sooner, that would be a benefit to same-store NOI. The other factor to same-store NOI, really, the components are leasing spreads, we have pretty good insight to that, and bumps in leases, we have got pretty good insight to that. But the last factor is credit loss. Right? We are budgeting 50 basis points of credit loss this year in our same-store pool. Last year, we budgeted 75, and we achieved, well, I do not know if achieved is the right word, we realized 20 basis points. So there is an incremental 30 basis points that we are budgeting for 2026. No new tenants on the watch list. It is more of a broad-based budget. It is not like we have allocated that specifically to one tenant like we did last year with some of our credit loss budgets. So, that is the other factor that could move same store one way or the other. Blaine Heck: K. Great. Great color. You mentioned early in the call deliveries down 35% versus 2024. Steve Xiarhos: And I think you mentioned 180,000,000 square feet Blaine Heck: 2026 deliveries. What would that equate to in terms of a draft downward versus 2025? And where do you think this all settles next year in terms of deliveries? Because, in response to an earlier question, perhaps there will be a reignited development activity, you know, maybe. We will see. But I am just curious, what is the cadence of things to 2027 as you see it right now from a delivery standpoint? William R. Crooker: Yeah. I will let Steve jump in on this one to kick it off. Yeah. So appreciate the question. We are looking at new deliveries in 2025 Steve Xiarhos: of about 225,000,000 square feet. Blaine Heck: Obviously, well down from previous years. William R. Crooker: When you go forward to 2026, as you mentioned or mark, Steven Kimball: we are looking at about 180,000,000 square feet. We think of a stabilized market, more 200,000,000 to 300,000,000 square feet of deliveries. So deliveries are going to be well below the average at the 180,000,000, and I think they start to pick back up in 2027 to some of the questions that came earlier in the call about is there going to be a little more activity around the development world and a little more interest in going spec? And I think that is probably the case. So we probably move back up into the 200,000,000 to 200,000,000-plus square feet in 2027. But I do not think there will be a big increase to the numbers that we saw a few years ago. Jason Belcher: And then the build-to-suit component of that is, like, William R. Crooker: 40% this year? Yeah. It is moved up, you know, from Steven Kimball: 30% to the 40%, but that is not abnormal. Right? Steve Xiarhos: Right. Jason Belcher: Okay. Blaine Heck: And last for me, and this is something I am trying to will to happen, but you mentioned the 78,000 square foot manufacturing-oriented lease in the first quarter. Steven Kimball: Can you sort of Eric Martin Borden: describe that, Blaine Heck: you know, is that a supplier? Is that a real manufacturing? Is there any kind of power issues, you know, just generally? I mean, we talk a lot about your markets and being a beneficiary of onshoring and so on. Steven Kimball: You get this question a lot, I am sure, but I am just wondering if there is any glimmer of manufacturing happening in your markets to a greater degree and how that might play a role longer term for STAG? Thanks. Yeah. I will let Steve answer it. And nice job William R. Crooker: sneaking in that third question. Jason Belcher: There, Rich. It is late in the call. I figured I am the last one. Steven Kimball: You are not the last one. I wanted to really appreciate the question. We do have a balance of demand, particularly in our development markets, where we have a balance between distribution and manufacturing, and we saw that in Nashville where half our building leased up to distribution, the other half to manufacturing. And that has boded well for the development pipeline. The lease we talked about for 78,000 square feet in the Charlotte market that we just inked, that is, they have a larger facility that is in the submarket. And that manufacturing is growing. And it is more around automotive, but specialty automotive and government uses. And so, yes, it is manufacturing related. We are seeing it grow in that market, and we are seeing it elsewhere. William R. Crooker: And I just want to characterize the manufacturing. It is really just light manufacturing. Yes. Steven Kimball: This, yeah, so that is a good point. So a lot of what we are seeing is the heavy manufacturing is doing well. These are relief valves in some cases where they need to either store raw materials or do some light assembly that is tertiary, you know, a part of their core business. William R. Crooker: Yeah. When we develop buildings, I mean, we develop buildings, and these ones in particular, these are developed as warehouse distribution buildings, but can also have some additional power that can be a solution for some of these ancillary manufacturing tenants. Steven Kimball: Perfect. Thanks very much. Jason Belcher: Thank you. Operator: Our next question is from Michael Albert Carroll with RBC Capital Markets. Please proceed with your question. Blaine Heck: Yes, thanks. Bill, I wanted to turn back to some of your comments on the acquisition market. I think throughout the call, did I hear you correctly that you are seeing more deals come across your desk right now? And if so, what is driving that increased activity? Are there more sellers coming back to the market? Or is that STAG doing something differently going forward? William R. Crooker: No. It is really sellers. And we saw that in the back half of 2025. You know, everything just came to a halt at the beginning of the year last year. Really from April to July. We saw a lot of sellers come back to the market in the back half of 2025. That was one of the reasons why we had such a successful acquisition quarter in Q4 2025. And those sellers are still in the market. And we are seeing a lot more portfolios start to come to market, even whispers of portfolios coming to market. We are just evaluating more transactions. So really, nothing that we are doing, just more opportunities that are in the market today. Blaine Heck: And then how competitive are these deals? I mean, I guess, who are you competing with, and has that changed? And, I mean, just looking at your acquisition cap rate guidance, I mean, 2026 is really in line with 2025. So are those cap rates kind of holding steady where they were last year? William R. Crooker: Yeah. I mean, depending on the product, you could see some cap rates compress. You know, for us, when we look at deals, one of the first things we have is, does this building fit the submarket it operates in? Right? And it checks that box and Craig Allen Mailman: so we need to make sure these deals William R. Crooker: are accretive to our portfolio and to earnings. And for us, our cap rate guidance is a little bit of a function of our cost of capital. So we bid to where we can buy deals accretively and if we do not get a deal, we are okay with that. So a little bit when you think about market color, yeah, we are seeing a little bit of cap rate compression. We are certainly seeing portfolio premiums are out there. But I would say, probably, similar to 2025 pricing, maybe slightly lower with respect to market. But because we operate in the CBRE Tier 1 markets, there are a lot of opportunities, and we can cast a pretty wide net. So we are looking at so many opportunities and we are able to pick off the ones that Steven Kimball: fit the submarkets well, but are also accretive to our portfolio. Jason Belcher: K. Great. Appreciate it. Thanks, Mike. Operator: We have reached the end of our question and answer session, which means that there are no further questions at this time. I would now like to turn the floor back over to William R. Crooker for closing comments. William R. Crooker: Yes. Thanks, everybody, again for joining the call and asking the questions. We look forward to another great year. Certainly really proud of the results we put forth in 2025. And we will see you all soon at the upcoming conferences. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to Watts Water Technologies, Inc. Fourth Quarter and Full Year 2025 Earnings Call. At the end of the presentation, we will open the line for questions. I will now turn the call over to Diane M. McClintock, Chief Financial Officer. Please go ahead. Thank you, and good morning, everyone. Joining me today is Robert J. Pagano, President and CEO. Before we begin, I would like to remind everyone that during this call, Diane M. McClintock: We may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts Water Technologies, Inc.’s publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Today’s webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to the presentation. With that, I will turn the call over to Bob. Robert J. Pagano: Thank you, Diane, and good morning, everyone. Please turn to slide three where I will recap 2025 and outline the key drivers for our 2026 outlook. I want to begin by expressing gratitude to the entire Watts Water Technologies, Inc. team for their dedication and meaningful contributions which made 2025 another outstanding year. We achieved record sales, operating margin, and earnings per share for both the fourth quarter and the full year. Organic sales rose 8% and reported sales were up 16% this quarter. Adjusted operating margin climbed 220 basis points to 19%. For the entire year, organic sales grew 5% and adjusted operating margin improved by 190 basis points to 19.6%, while we continued investing in strategic priorities. We generated a record $356,000,000 in free cash flow for 2025, up 7%, reaching a conversion rate of 100%. This strong cash flow supports our robust balance sheet and gives us flexibility to invest in future growth. Our capital allocation continues to focus on strategic M&A, high-return organic investments, competitive dividends, and steady share buybacks. Operator: Since our last earnings call, we completed two acquisitions. Robert J. Pagano: Superior Boiler, based in Hutchinson, Kansas, is a leading designer and maker of customized fire tube and water tube for commercial, institutional, and industrial uses. Superior’s mission-critical heating and hot water solutions expand our customer offerings. Superior has about $60,000,000 in annual sales. Saudi Cast, located in Riyadh, Saudi Arabia, manufactures high-quality cast iron and stainless steel drainage products for nonresidential and industrial markets. This acquisition grows our footprint in the fast-developing Middle East region. Saudi Cast annual sales are around $20,000,000. Both acquisitions are expected to be accretive to adjusted EPS in 2026 after accounting for added interest expense and normal purchase accounting adjustments. Integration efforts are already underway for both companies. As previously discussed, we regularly review our portfolio and phase out underperforming products under our 80/20 model within the One Watts performance system. Through this ongoing evaluation, we have identified $10,000,000 to $15,000,000 of European sales and $25,000,000 to $30,000,000 in The Americas, mainly in lower-margin retail and OEM channels that we intend to eliminate during 2026. We anticipate these changes will be neutral or potentially margin accretive in 2026. An overview of what will drive our 2026 outlook. We expect that pricing along with continued repair and replacement activity will fuel further growth in 2026. Global GDP, a proxy for our repair and replacement business, remains positive within our main end markets. In The Americas, indicators for nonresidential new construction present a mixed picture. The ABI remains below 50, suggesting subdued market conditions in 2026. However, the Dodge Momentum Index is slightly more optimistic, indicating potential growth in nonresidential projects. Most of this growth should come from strength in institutional and data center sectors, though it could be tempered by weaker segments such as offices, retail, warehouses, and recreation. We also anticipate a soft single family and multifamily residential construction market through 2026. Lastly, Europe’s new residential and nonresidential construction is expected to remain sluggish. Uncertainty surrounding inflation, trade policies, interest rates might continue to hamper new construction projects. Overall, we foresee market conditions similar to those experienced in 2025. We expect to benefit over $130,000,000 in incremental revenues from the acquisitions of EasyWater, Hawes, Superior, and Saudi Cast. Collectively, these additions are projected to dilute adjusted operating margin by about 50 basis points in 2026 as we implement the One Watts performance system and realize synergies. Now let me highlight a few strategic growth initiatives including our data center and M&A strategy. On slide four, you will see examples of solutions we have developed for both air cooled and liquid cooled data centers. Our most notable product is the cooling valves that control the flow of chilled water to sustain the required temperatures in data centers. Typically, these valves and related equipment are made of iron for air cooling and stainless steel for liquid cooling. Other important offerings include strainers, drainage, and our Cool Vault thermal storage tanks, which serve as emergency backups during chiller restarts. Our data center initiative spans the globe, and we estimate the addressable market exceeds $1,000,000,000. In 2025, sales from this sector represented just over 3% of total company sales and are growing at a double-digit rate. We will keep investing in new products and technologies to meet evolving customer needs and believe this market will continue expanding for years. Slide five covers our acquisitions over the past three years. We finalized eight deals deploying about $660,000,000 in cash and adding around $450,000,000 in annualized revenue. These acquisitions have broadened our product range, expanded channel access, and increased our geographic reach. Just as importantly, they diversified our end market exposure and shifted our mix toward higher-growth, higher-margin, nonresidential, institutional, and industrial segments. By leveraging the One Watts performance system, driving value through successful integration, synergy realization, and improving margins. Despite the typical early-stage margin dilution from acquisitions, we have expanded adjusted operating margin by 320 basis points in three years. We are proud of our performance and pleased to add such quality brands to our portfolio. With that, I will hand things back to Diane, who will discuss our Q4 and full year 2025 results and share the outlook for Q1 and all of 2026. Diane? Diane M. McClintock: Thank you, Bob. Let us now turn to slide six, which outlines our fourth quarter results. Sales reached $625,000,000 reflecting a 16% increase on a reported basis and an 8% increase organically. The Americas region delivered strong organic growth of 10% and reported growth of 17%, exceeding our expectations. This performance was supported by favorable price and volume, including the benefit of one additional shipping day and growth from data center sales. Acquisitions accounted for an additional $27,000,000 in sales, contributing seven percentage points to The Americas reported growth. In Europe, organic sales rose by 1% while reported sales increased 10%. Organic growth stemmed from favorable pricing and the extra shipping day, while reported sales also benefited from positive foreign exchange effects. In APMEA, organic sales grew 9% with acquisitions adding 6% for total reported sales growth of 15%. Adjusted EBITDA totaled $134,000,000, an increase of 28%, with an adjusted EBITDA margin of 21.4%, up 210 basis points year over year. Adjusted operating income of $119,000,000 increased 31% and adjusted operating margin improved 220 basis points to 19%. These improvements were primarily driven by favorable pricing and productivity gains, more than offsetting inflationary pressures, volume deleverage in Europe, tariffs, and acquisition dilution. Segment margins were as follows. The Americas increased by 150 basis points to 23.3%. Europe increased by 490 basis points to 15.1%, while APMEA decreased slightly by 20 basis points to 17.3%. Adjusted earnings per share equaled $2.62 representing a 28% year-over-year increase, with operational performance, acquisitions, and foreign exchange gains outweighing higher tax and net interest expense. Turning to full year results, please refer to slide seven. As previously noted, we achieved record operating results for 2025. Total company sales were $2,400,000,000, up 8% on a reported basis and 5% organically. Organic growth in The Americas and APMEA reached 8% and 5%, respectively, partially offset by a challenging year in Europe where organic sales declined by 5%. Acquisitions contributed $52,000,000 or 2% of incremental sales growth, and favorable foreign exchange added another 1%. Adjusted EBITDA for the year was $534,000,000, up 18%, and adjusted EBITDA margin improved by 180 basis points to 21.9%. Adjusted operating income rose 19% to $477,000,000 resulting in 19.6% operating margin, up 190 basis points. These increases reflect the benefit of price, volume, and productivity gains which more than compensated for inflation, European volume deleverage, tariffs, and acquisition-related dilution. Segment margin in The Americas increased to 24.5%, up 190 basis points. Europe increased to 13.3%, up 160 basis points. And APMEA remained flat at 18.3%. Adjusted EPS was $10.58, up $1.72 or 19% compared to prior year, with benefits from operations, acquisitions, favorable foreign exchange, and lower net interest expense exceeding higher tax costs. For GAAP reporting, after-tax charges of $22,300,000 were recorded related to restructuring and acquisition-related costs, partly offset by an $8,300,000 tax benefit from the reversal of a prior year tax liability. Free cash flow reached $356,000,000, a 7% increase from 2024, setting a new company record. This was primarily driven by higher net income, lower tax payments due to changes in U.S. tax regulations, and contributions from acquisitions, which more than offset higher inventory investment and capital expenditures. Free cash flow conversion was 105%. Our balance sheet remains strong and continues to support our disciplined approach to capital allocation. In 2025, we returned $83,000,000 to shareholders through dividends and share repurchases, increasing our annual dividend payout by approximately 20%. On slide eight, we will review our outlook for the first quarter and full year 2026. The outlook for 2026 is based on the anticipated market conditions discussed earlier. For the full year, we anticipate reported sales growth of 8% to 12%, and organic sales growth of 2% to 6%. Excluding the impact of product rationalization, our organic sales growth would be approximately 2% higher. Organic sales in The Americas are expected to increase by 3% to 7% driven by price and volume, especially within data centers, more than offsetting anticipated product rationalization headwinds of $25,000,000 to $30,000,000. Price contribution will be higher in the first half, particularly Q1, due to carryover effect of prior year tariff-related price increases. In Europe, organic sales are projected to range from a 4% decline to flat as favorable price is offset by lower volume, partly due to $10,000,000 to $15,000,000 in product rationalization. APMEA is expected to achieve organic growth between 4% to 8%. Additionally, we anticipate incremental sales from acquisitions of between $110,000,000 and $115,000,000 in The Americas and between $18,000,000 and $20,000,000 in APMEA, with foreign exchange favorability estimated at $18,000,000. We expect adjusted EBITDA margin to be in the range of 21.5% to 22.1%, and the adjusted operating margin between 19.1% to 19.7%. Margin expansion from price, volume leverage, and productivity and restructuring savings is expected to be partially offset by inflation and 50 basis points of acquisition dilution. Regionally, The Americas segment margin is anticipated to decrease by 50 to 110 basis points mainly due to approximately 100 basis points of acquisition dilution. Europe segment margin is expected to be down 30 basis points to up 30 basis points and APMEA is estimated to increase by 30 to 60 basis points. This guidance assumes no changes to the current tariff environment. We expect free cash flow conversion at or above 90% of net income for 2026 reflecting planned investments in automation in our core operations and with our new acquisitions, investments in our data center capabilities, and investment in our SAP implementation. Key considerations for Q1. Reported sales are expected to increase 12% to 16% with organic sales up 4% to 8%. We anticipate high single-digit growth in The Americas, low single-digit decline in Europe, and low single-digit growth in APMEA. These estimates incorporate a negative impact from product rationalization of approximately $1,000,000 in Europe and $6,000,000 in The Americas. Incremental sales from acquisitions projected at $25,000,000 to $30,000,000 for The Americas, and around $5,000,000 for APMEA, with a foreign exchange benefit estimated at $13,000,000. First quarter EBITDA margin is expected to be between 21.1% to 21.7%. Operating margin is expected to be between 18.6% to 19.2%. Price and volume leverage in The Americas and APMEA are anticipated to be offset by volume deleverage in Europe and acquisition dilution of approximately 70 basis points. Additional key assumptions for the first quarter and full year are available in the appendix of the earnings presentation. With that, I will turn the call back over to Bob before moving to Q&A. Operator: Bob? Robert J. Pagano: Thanks, Diane. Let us move to Slide nine, where I will summarize before taking questions. In 2025, we posted strong outcomes across the board: record Q4 and full year sales, operating income, EPS, and free cash flow. We continue investing in strategic growth and productivity programs including data center solutions, our Nexa digital strategy, and factory automation for enhanced efficiency. Five strategic acquisitions in 2025 further diversified our business and market reach. Our broad portfolio is resilient, and our teams are positioned to capitalize on growth opportunities, including institutional and data centers. Our model, driven largely by repair and replacement, ensures steady revenue and cash flow. Our balance sheet remains strong and provides flexibility to support our balanced capital strategies. The M&A pipeline is active, and we plan to pursue appealing opportunities to expand our solutions and global presence as we aim for sustainable profitable growth. With that, operator, please open the line for questions. Operator: We will now open for questions. To ask a question, press star then the number one on your telephone keypad. We ask that you please limit your questions to one and one follow-up. Our first question will come from the line of Nathan Hardie Jones with Stifel. Please go ahead. Robert J. Pagano: Good morning, everyone. Morning. Morning, Nathan. I am going to start with a question on M&A. Obviously, the level of M&A that you have done over the last couple years has picked up. And it looks to be something that is going to be a little more serial. Nathan Hardie Jones: And a little more of a contributor to the earnings growth over the next several years. So I am just interested in hearing a bit more about your philosophy around M&A, kind of, you know, on average over the next few years, what percentage of revenue you would like to be able to acquire, leverage targets that you would be comfortable going to. Just any more color you could give us around that given it is becoming a bigger piece of the value driver for Watts Water Technologies, Inc. Thanks. Robert J. Pagano: Thanks, Nathan. But as you can imagine, we certainly have a healthy balance sheet that does that. We cultivate acquisition targets for many, many years and sometimes they break. And certainly, this year, you know, five of them broke, which is exciting. So M&A has always been a key part of our strategy. It has to make strategic and financial sense, obviously, and it also has to fit our culture. And making sure the cultures work together. So we will continue to be active as we always have been. The teams are focused on this. Where it makes sense and where it makes financially attractive. But certainly, we would like to deploy capital. You know, we look at small, medium, and large acquisitions. Certainly, in this environment, we would not want to leverage more than two, two and a half at this point in time. But, again, it just depends on how fast cash flow, you know, drives repayment of debt. So anyways, those are philosophically what we are looking at, but team is focused on it where it makes sense. Nathan Hardie Jones: And do you need things that are going to be, yeah, accretive to earnings in the first year? Return on invested capital 10% by year three or year five, or what are the kind of hurdles that you are looking at when you are looking at these kinds of deals? Diane M. McClintock: Yeah, Nathan. Those are our key criteria. We like to have the acquisitions be accretive to EPS in year one. Try to get our EBITDA margins up to Watts Water Technologies, Inc. level between year three and year five. We have been pretty successful at that with the acquisitions we have had so far. You know, it is not, there are opportunities sometimes where you may not get your EPS accretive in year one, but those are certainly our key criteria. Nathan Hardie Jones: I will just sneak one in on data center seeing as you highlighted it in the deck. 3% of sales is a meaning amount. Bob, you talked about it growing double digits, which is a pretty wide kind of range. Any more color you can give us on what kind of a bit more narrow range for double digits and potentially what you think that business could get to over the next few years? Thanks, and I will pass it on. Robert J. Pagano: Yeah. I mean, it is the higher end of the double digits, would say. And certainly, it is a key focus of ours. You know, Asia Pacific was the leader of that several years ago. Now America is taking that, and America is over half of that. And, you know, as long as they continue to build, we will continue to be there and provide our products to support them. So it is our fastest growing initiative that teams are focused on. Nathan Hardie Jones: Very much for taking the questions. Robert J. Pagano: Thank you. Operator: Our next question will come from the line of Michael Halloran with Baird. Please go ahead. Michael Halloran: Good morning, everyone. Good morning, Mike. So first question, just want to make sure I understand moving pieces in the organic guide. I think the 80/20 revenue is included Robert J. Pagano: In that organic number? Just want to confirm. And then, how I think about price versus volumes. At the midpoint, are volumes roughly flattish embedded in the guide? Diane M. McClintock: Yeah, Mike. That is right. The 80/20 is included in the organic guide. So the organic growth would be two points higher excluding that 80/20. And from a price volume perspective, from a full year, we kind of expect price to be low single digits. There will be a little bit of volume. Maybe more in The Americas than in Europe. And most of that volume is going to be offset by the 80/20 efforts. Michael J. Pesendorfer: Great. Appreciate that. And then and then staying on the 80/20 piece, kind of a twofold question here. Maybe just discuss what you saw this year that gave the opportunity. I think Bob, you said it was retail. Robert J. Pagano: And then secondarily, I mean, I think it was a little more than I was expecting, probably more in The Americas at this point. How much opportunity do you see broadly over the next chunk of years here to continue to push on this type of thing to streamline the organization, products, etcetera. You know, I know Europe has always been a focal point for this more consistently. So I suppose the question is a little geared to The Americas on that side. Yeah, Mike. So we are always looking for productivity through the One Watts performance system. And certainly with tariffs and all the adjustments and refocus on more, let us call it faster growing, higher margin type businesses. So we make profit on some of this retail OEM business, but really it is about focus, keeping our team focused on the growing more types of business and reallocating resources in the organization. So we will keep looking at it and keep driving it. But certainly, you know, our expectations are to gain higher returns, higher margins, and we will continue to look at it. It presented an opportunity where our team said, hey. Let us focus more on data centers and on retail. And that is what we are doing. Thank you. Thank you. Operator: Our next question comes from the line of Jeffrey David Hammond with KeyBanc Capital Markets. Please go ahead. Robert J. Pagano: Hey. Good morning. Good morning, Jeff. Jeffrey David Hammond: So, Bob, we should put you down for 99% growth in data center. Is that Robert J. Pagano: That is a little high, Jeff. Jeffrey David Hammond: Just on maybe just a quick one on data center. One, if you look at that billion dollar TAM, I am just wondering, like, how much that really has expanded as we have shifted from just air cooling to liquid cooling. Just the liquid cooling opportunity, which seems, you know, early and nascent. And then as you shift to stainless, can you talk about how that impacts price mix within data center? Robert J. Pagano: Yeah. So certainly, the stainless steel is growing faster as you are seeing the shift there, and we are moving towards that. And stainless steel, because of its metallurgies and properties, is more of a solution. So it has higher margins. So the teams are focused on that. Driving that, and, you know, that will be accelerating our growth into the market. And we took that into consideration when we did develop the basically $1,000,000,000 plus market. Jeffrey David Hammond: Okay. And then I was at your HR booth, and a lot of excitement around Nexa, but also this EasyWater, which I know is small, but it seems like the technology is pretty disruptive and seems like they could benefit from your scale and manufacturing expertise. Maybe just talk about uptake on Nexa as you roll it out. And maybe a little more on this EasyWater deal and the opportunity there? Robert J. Pagano: Yeah. Well, Nexa is, you know, you certainly see the focus, the buzz is, you know, it is getting out there. We are excited about it. We are making very good progress. We completed the installation of a very large real estate investment group in their house with their hospitality properties and we are gaining, they have gained significant insights and benefits. And we are also growing in other hospitality and stadiums and multifamily. So we are excited about the growth. A lot of potential there. But I think as I have told many of you, that also supports selling our core products. And that is where we are focused on. In EasyWater, what they are known for is their salt and chemical free treatment solutions, which, you know, they are offsetting a lot of places that use chemicals. And certainly, you know, using less chemicals is obviously more environmentally friendly, etcetera. So that is an opportunity. It was something we had smaller versions of that in our portfolio, and now we are expanding that. So, yes, we are really excited about that. There are many opportunities. There are some new codes out there in the health care industry that are on things like medical device cleaning, etcetera, which should be a nice fit for that, you know, because there are no chemicals. So yeah, the teams are excited, and I am glad you saw the momentum inside the booth. Jeffrey David Hammond: Great. Thank you. Michael J. Pesendorfer: Thank you. Operator: Our next question comes from the line of James Kho with Jefferies. Please go ahead. Robert J. Pagano: Good morning. Thanks for taking questions here. I wanted to touch on the data center. Good morning. Yeah. I wanted to talk about the data center here again. You kind of talk about like, competitive landscape for cooling valves? And who are the main competitors, and what share do you estimate you have today? And what are kind of the risk if new competitors kind of enter into the market? Well, certainly, you know, we do not talk about competitors usually in general, but I would say there is a handful of competitors. In this market, it is about quality, delivery, and reputation and standing by the product. So we are, you know, I would say we are in the top three competitors in this area based on the products we sell. And I would say we have gained a great reputation based on our performance in the industry. And so different people can enter it, but you have to make sure you have the reputation. With our 151-year history, I think that gives us credibility, and we have been delivering on time and having great results with our customers. So that is a key area of focus for us, and, you know, we will continue to grow, and we believe it is a great opportunity in more working with the general contractors, the architects, and the entire value chain. And, you know, penetrating more into the hyperscaler. So it, you know, that just does not happen. It takes time to do that. And our multiyear effort here is starting to really pay off. Great. Thanks for the color. And I guess touching on the Europe margin here, Shashank Patel: Obviously, it improved pretty meaningfully this quarter in 2025. Looking at 2026, I think you are guiding for roughly flattish. So, does that kind of suggest that restructuring benefits are largely done, or are there still more margin opportunities remaining in that region. Diane M. McClintock: Yeah. Hi, James. Q4 really benefited from that extra shipping day and some of the volume leverage in Q4. We expect volume to be muted in 2026. We do expect to continue to get some of the restructuring savings, primarily really in the first quarter. And in the second quarter, it will trail off after that. But we are expecting to have some headwinds with the 80/20 as well and with volume deleverage. Also, a little bit of the mix is at play there. Michael J. Pesendorfer: So Diane M. McClintock: But we expect margins will be flat. As you know, we are always a little bit cautious on Europe when we are starting the year, and we will see how things go as we go through the year. Shashank Patel: Great. Thanks for taking questions. Robert J. Pagano: Thank you. Operator: Our next question comes from the line of Jeffrey Hammond with RBC Capital Markets. Shashank Patel: Good morning. Thanks for all the detail thus far. Andrew Jon Krill: It is really great to see the data center opportunity highlighted. I was hoping, can you just walk us through your go-to-market model in data centers? Are you selling through distribution directly to liquid cooling OEMs? Are you engaging with hyperscalers? And also, how customized are your solutions here versus more standardized? Robert J. Pagano: We are playing with all of those. We are leveraging our distribution chain as well as working with general contractors all the way through the value chains. We have to hit all of them for various reasons, and it depends on what type of product. I would say, for the most part, these are more standardized products. We are starting to work with them on more technical finite solutions on that, and that is as we grow with confidence in them in going up the value chain. So yeah, it has been an exciting ride and we are working very closely and with all of them. Andrew Jon Krill: That is great to hear. As you scale your data center deployments, is there a meaningful opportunity for Nexa or digital monitoring solutions here? Maybe how should we think about the long term opportunity? Robert J. Pagano: Yeah. That is an opportunity for the long run. Right now, they have their own systems that they have developed over many years. The last thing we want is a new system. But we are leveraging some of our smart and connected products where it makes sense with them. So those would be the next evolution we are working with them on that. And but right now, that is early innings on that. Andrew Jon Krill: Got it. Thank you. Robert J. Pagano: Thank you. Operator: Our next question comes from the line of Andrew Creel with Deutsche Bank. Please go ahead. Jeffrey David Hammond: Going back to the, you know, Michael J. Pesendorfer: Good morning. So 2026 organic Andrew Jon Krill: Sales guide for The Americas. I was hoping you could put a little finer point on the level of growth or declines you expect for some of your bigger verticals. You know, institutional, commercial, and then in resi, you know, single family multifamily, maybe just some help on how you are thinking about those different markets? Thanks. Robert J. Pagano: Yeah. So when we look at the residential, we are to be down, right? Single family, low single digits. Multifamily, mid single digits. Institutional, we are seeing up low single digits. Data centers up double digits, and I would say all the other commercial types of businesses would be down low single digits. So that is how we are kind of framing it. Very similar to what we saw here in last year in 2025. Kind of the markets are kind of about the same here, maybe a little more softness in residential than what we saw, but that is how we are framing it at this point in time. Shashank Patel: Okay. Diane M. McClintock: Great. That is helpful. And then going back to 80/20, you know, I think the Michael J. Pesendorfer: Acceleration to it being a two point headwind, you know, it had been, I think, a Andrew Jon Krill: Point or a little bit less in 2025. Just what Michael J. Pesendorfer: Were these existing businesses you just found new opportunities? Or like, what changed? And then as we look forward into 2027, do you think Andrew Jon Krill: This could flip to being more neutral or maybe it is even a positive as, you know, you start to overserve, you know, some of your better customers. Thanks. Robert J. Pagano: Yeah. So, again, we look at the portfolio. I think in the residential section, it has been more competitive, especially after all the tariffs and stuff. And, you know, we are always looking at making sure we have differentiated products and solutions that customers are going to pay for. Right? So in the end, we are trying to get rid of lower margin type products and focusing our teams on higher margin business. So we have identified a portion of that that, you know, it is just not worth us spending the time and effort, and it is better for us to reallocate our resources to the faster, higher growing margin businesses. So that is all it is. We took a second look, another look, especially after all these tariffs have settled down and pricing actions and looked at this and where we are going and said it is time to exit some of this business. Diane M. McClintock: And, Andrew, just a little more color on that. It is products and channels within our core Americas business. So it is not within the acquisition. It is our core Americas business. Retail and OEM. Shashank Patel: Thank you. Our next Operator: Question will come from the line of Ryan Michael Connors with Northcoast Research. Please go ahead. Jeffrey David Hammond: Good morning. Morning. Good morning, Ryan. I am not going to ask about data centers. Ryan Michael Connors: Although I would say your call is going to screen really well here with the AI bots on the data center mentions. So I might set a new record. But, yeah, back to the basics. You know, talk about price for a minute. I was a little bit surprised, underwhelmed, I guess, would be the word. Low single-digit price you mentioned, Diane, in 2026. When I think about copper year to date and the fact that we have set a new record there, I was just curious how that fits into the equation on these thoughts around price. I know we have taken a lot of price the last few years. Just kind of reset us with the move in copper, how we feel about price cost going forward. You know, just conceptually. Diane M. McClintock: Yeah. So we expect, certainly, we expect higher price in the first quarter as we carry over some of the price increases we had in the fourth quarter. So think about that as higher in Q1 and then ramping down over the year and probably averaging out to maybe low single digits. But we expect to be high single digits Q1 and then sequentially going down after that across the year. In terms of copper, we are watching that very carefully. Bob, do you want to add some color on that? Yeah. I mean, we are looking at copper just like you are, Ryan. And, as you know, we are not Robert J. Pagano: Bashful about pushing prices. So if this continues, we will probably be looking for another price increase mid-year. Operator: Yep. Ryan Michael Connors: Okay. Yeah. That is kind of what I figured. Okay. And then just a real quick one on, so you have talked quite a bit in the Q&A here about these product lines you are exiting. And I am just curious the mechanics on that. So these are not any kind of divestiture. There is no monetization here. We just literally stop taking orders, kind of just stop making the products, and let whoever else is out there take that share. I mean, is that what happens here? You just sort of just walk away? Robert J. Pagano: Or walk away from various channels. Of inventory. In other words, we will still make it and sell it through other channels, but some of the channels we are deemphasizing based on competitive nature and profitability in those markets. Ryan Michael Connors: Oh, I see. So it is not a product walk away. It is just on the channel. I see. Okay. Helps so much. Thanks for your time. Shashank Patel: Thank you. Hey, Ryan. Thank you. Operator: Our next question comes from the line of Joseph Craig Giordano with TD Cowen. Please go ahead. Michael J. Pesendorfer: Hi. Good morning. This is Chris on for Joe. Good morning, Chris. The fifth. Good morning. For the 2026 Americas guide, could you elaborate on how much growth is anticipated from repair, replace versus new construction? Robert J. Pagano: Yeah. I mean, we usually, you know, basically repair replace. We assume GDP, right? So around 2%. That is kind of what we are assuming on repair and replace. Got it. And Michael J. Pesendorfer: Could you elaborate on how you are set from a capacity standpoint to meet the demand from the data center end market? Robert J. Pagano: Yeah. So we are leveraging our global supply chain in our facilities around the world, whether it be in North America, Europe, and our facilities in Asia Pacific, and our global supply chain. So we have been adding capacity, building capacity, and, you know, we feel good about our ability to ramp up for this market. Michael J. Pesendorfer: Thank you very much. Robert J. Pagano: Thank you. Thank you. Operator: Again, that is star one for any questions, and our next question comes from the line of Brian Blair with Goldman Sachs. Brian, you might be on mute. Shashank Patel: Hello? Can you hear can hear you now. Good morning. Michael J. Pesendorfer: Okay. Sorry about that. Good morning. Yeah. Just a couple questions around the outlook. A lot has been covered already on the call. But when I look at the top line outlook here for 2026, Andrew Jon Krill: You know, it seem to be growing well ahead of many water peers at, you know, the 2% to percent organic, which actually, you know, two points lower due to the 80 as you mentioned, so even better than on paper. Maybe kind of walk us through what is Michael J. Pesendorfer: Driving some of that performance. Is it price? Is it geo? Is it specific end markets? Just seems like you guys even off of a good 2025 performance. Position better here in terms of growth versus peers? Robert J. Pagano: Yeah. I think it is a combination of all of the above. Right? We are leveraging the institutional market, the data center market, certainly price, repair and replacement is growing. Again, our new solutions, which are around Nexa and I would call some of our electrification products in our heating and hot water solutions group with our Aegis heat pump. So again, those are all growing and we are leveraging those capabilities. As you know, we have been investing a lot in R&D and we are starting to see the benefits of some of that new product even in difficult markets. Michael J. Pesendorfer: Yep. Fair enough. And then on the margin guidance here as well, you called out the 50 basis points of dilution due to acquisitions. Andrew Jon Krill: If you strip that out, I think you guys would have been guiding to basically a typical annual margin expansion targets that you have maintained for the past several years. How should we think about sort of the recapture of that margin into the out years Nicklaus Marin Cash: As you kind of realize some of these synergies. Is that something that comes right back in 2027? Robert J. Pagano: Yeah. I mean, that is our goal and focus as an organization. 30 to 50 basis points improvement on margins or operating income. Really at that point. And we will get that through leveraging the One Watts performance system, through factory automation, productivity initiatives, and some of our products that are, you know, we can charge higher prices because they are having better solutions to our customers. So again, it is not just one thing, it is a combination of things that give us confidence that we will continue to grow the 30 to 50 basis points on a go-forward basis. Nicklaus Marin Cash: Okay. Appreciate the color. I will pass it on. Thank you. Robert J. Pagano: Thank you. Operator: And that will conclude our question and answer session. I will hand the call back over to Robert J. Pagano for closing remarks. Robert J. Pagano: Thank you for joining us today. We appreciate your ongoing interest in Watts Water Technologies, Inc. and look forward to speaking with you again in May for our first quarter results. Have a great day, and stay safe. Operator: This concludes today’s call. Thank you all for joining. You may now disconnect.