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Markets are closed Friday, but we'll still get the March jobs report in the morning. Nicole Bachaud and John Blank both agree that "30,000 is the new zero" when it comes to job improvement, believing persistent inflation raises the bar for employment.
Operator: Good morning, and welcome to the Acuity Fiscal 2026 Second Quarter Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead. Charlotte McLaughlin: Thank you, operator. Good morning, and welcome to the Acuity Fiscal 2026 Second Quarter Earnings Call. On the call with me this morning are Neil Ashe, our Chairman, President and Chief Executive Officer; and Karen Holcom, our Senior Vice President and Chief Financial Officer. Today's call will include updates on our strategic progress and our fiscal 2026 second quarter performance. There will be an opportunity for Q&A at the end of the call. As a reminder, some of our comments today may be forward-looking statements. We intend these forward-looking statements to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as detailed on Slide 2 of the accompanying presentation. Reconciliations of certain non-GAAP financial metrics with their corresponding GAAP measures are available in our 2026 second quarter earnings release and supplemental presentation. both of which are available on our Investor Relations website at www.investors.acuityinc.com. Thank you for your interest in Acuity. I will now turn the call over to Neil Ashe. Neil Ashe: Thank you, Charlotte, and thank you all for joining us today. We demonstrated strong execution in our second quarter of fiscal 2026. We grew net sales, we expanded our adjusted operating profit and adjusted operating profit margin, and we increased our adjusted diluted earnings per share. We generated strong cash flow and allocated capital effectively. In Acuity Brands Lighting, we are managing our business aggressively in a soft lighting environment. We are aligning our cost structure to current market dynamics while continuing to serve customers effectively. Over the last 5 years, we've made meaningful progress accelerating our strategy of increasing product vitality, elevating service levels using technology to improve and differentiate both our products and how we operate the business and driving productivity. These efforts have expanded capacity in our manufacturing network and given us greater flexibility to evaluate our production costs. As a result, this quarter, we took certain actions, including targeted labor cost reductions, which Karen will discuss later in the call. We are managing gross profit margin through the combination of strategic pricing and product and productivity improvements. This enables us to deliver in this market environment and positions us well for the future. Now I want to spend a moment on our growth algorithm, which is designed to ensure that we outgrow the lighting market. We enter new verticals, we take share, and we grow with the market. Last year, we strengthened our floodlight portfolio with the acquisition of M3 Innovation. These solutions are used in education, municipalities and infrastructure and are designed to reduce total installation costs and enhance the user experience. We have won several notable projects that include retrofit and new construction across verticals, including parks and rec and education. One of our larger projects was an installation at Baldwinsville High School in New York. This project retrofitted an existing football field and installed our solution at a new athletics field. Combined with our lighting controls, we created dynamic control capabilities for a high-impact gameday environment across both facilities, all managed from a single control device. The industry continues to recognize the strength of our products and the value they bring our customers. This quarter, several products in our portfolio were awarded the Architecture MasterPrize by the Farmani Group, including the Eureka Junction, a made-to-order luminaire that can be configured to create custom installations that are compatible with our nLight controls for use in large shared interior spaces such as lobbies, atriums, reception areas and event venues. Multiple products were also awarded Product Innovation Awards by Architectural Products magazine, including the Juno Trac Linear Ambient family in our Design Select portfolio, that offers architects, lighting designers and installers versatile options for combining accent and ambient illumination within a single system, simplifying specification and expanding creative possibilities. Now switching to Acuity Intelligence Spaces, which continued to deliver strong sales and margin performance. Atrius and Distech control the management of the space, and QSC manages the experiences in the space. And over time, we will use data from both to enhance productivity outcomes through data interoperability. Taken together, this is how we can make spaces autonomous. Both Distech and QSC performed well this quarter. Within Distech controls, our Eclipse portfolio is a strategic differentiator. It is a comprehensive building automation platform that unifies hardware and software into a cohesive ecosystem for intelligent building management. The portfolio includes hardware devices and software used to manage how a building operates, including HVAC control, lighting and refrigeration. During the quarter, we released the ECLYPSE retrofit solution. a building controls upgrade designed for use in buildings with legacy wiring and control architectures. This solution allows newer ECLYPSE-based control capabilities to be deployed, providing IP-based performance, embedded edge intelligence and modern user interfaces without the associated cost or disruption of completely rewiring the space. We are also expanding our addressable market at QSC. Q-SYS is building the industry's most innovative full-stack AV platform that unifies data, devices and a cloud-first architecture to deliver real-time action, experiences and insights. Historically, the Q-SYS solutions were developed for use in large rooms and spaces. This quarter, we expanded our Q-SYS solution into smaller and medium-sized collaboration spaces with the introduction of the room suite modular system. This gives customers the option to increase their room capabilities using audio, video and integrated networking, all supported by Q-SYS Reflect. AIS continues to gain industry recognition. Earlier this quarter, the Q-SYS Room Suite modular system won the Best of Show Award at the ISE 2026 in Europe, the largest AV trade show in the world. While Q-SYS Loud speakers won in both the NAM Best of Show Award and in the NAM TEC awards. Distech Controls received the 2025 Global Company of the Year for excellence and integrated smart building solutions by Frost & Sullivan and won the smart HVAC Product of the Year category at the U.K. HVR Awards for our move. Now moving to our outlook. Acuity Brands Lighting remains the best-performing lighting company in the world. Given our performance year-to-date and our expectations for the lighting market for the remainder of the year, we now expect our full year ABL sales performance will be flat to down low single digits year-over-year. We will continue to control what we can control. We are focused on product vitality, elevating service levels, using technology to improve and differentiate both our products and how we operate the business and driving productivity. We are executing on our growth algorithm. We are managing gross profit margin through the combination of strategic pricing and product and productivity improvements. This positions us well for today and for the future. Acuity Intelligence Space is strategically differentiated. We have unique and disruptive technologies that are driving productivity for people experiencing spaces and for the people providing those spaces. Our focus will continue to be on growth. and we have the opportunity to expand margins over time. We are confident in the long-term performance of both the lighting and spaces businesses. We have demonstrated that we have dexterity in how we operate, enabling us to continue to execute in dynamic market conditions. Now I'll turn the call over to Karen, who will update you on our second quarter performance. Karen Holcom: Thank you, Neil, and good morning, everyone. Our strong execution delivered solid performance in the second quarter of fiscal 2026. We grew net sales, improved adjusted operating profit and adjusted operating profit margin and increased our adjusted diluted earnings per share. For total Acuity, we generated net sales of $1.1 billion which was $49 million or 5% above the prior year. This was driven by growth in AIS, which included an additional month of QSC sales, partially offset by revenue declines at ABL. During the quarter, our adjusted operating profit was $176 million, an increase of $13 million or 8% from last year. Adjusted operating profit margin during the quarter was 16.7%, an increase of 50 basis points from the prior year, with margin improvement at both ABL and AIS. Our adjusted diluted earnings per share was $4.14, which was an increase of $0.41 or 11% compared to the prior year. primarily reflecting higher profitability and to a lesser extent, lower diluted shares outstanding. ABL sales of $817 million decreased $23 million or 3% versus the prior year driven by declines in the direct sales channel. This was due in part to several large projects in the same period last year that did not repeat. Despite the sales declines, ABL delivered gross profit margin of 45.7%, an increase of 70 basis points compared to the prior year, driven largely by strategic pricing and product and productivity improvements. Adjusted operating profit increased $1 million to $142 million, and we delivered adjusted operating profit margin of 17.3%, which was an improvement of 50 basis points compared to the prior year. This is a result of the improvement in gross profit margin. As Neil mentioned earlier, this quarter, as a result of our productivity improvements, we took certain actions, including the reduction of labor. This resulted in a $6 million special charge. Now moving to Acuity Intelligence Spaces. Sales for the second quarter were $248 million, an increase of $77 million driven by strong growth in Distech and QSC, and as a result of the inclusion of an additional 1 month of QSC compared to last year. AIS delivered adjusted gross profit margin of 59.1%, an increase of 60 basis points compared to the prior year. Adjusted operating profit in Intelligent Spaces was $48 million, with an adjusted operating profit margin of 19.3%, which was up 60 basis points compared to the prior year. Now turning to our cash flow performance. In the first half of fiscal 2026, we generated $230 million of cash flow from operations which was $38 million higher than the same period in fiscal 2025, primarily due to higher profitability. During the quarter, we repaid another $100 million of our term loan, bringing the total repaid this year to $200 million. We now have $200 million of the debt remaining from the financing of the QSC acquisition. We increased our quarterly dividend during our January shareholder meeting by 18% to $0.20 per share, and we allocated $106 million to repurchase 318,000 shares. In summary, our execution remains strong. ABL is driving margin improvement in the current market environment and AIS continues to perform. We continue to generate strong cash flow and allocate capital effectively, aggressively taking advantage of market dislocations. Thank you for joining us today. I will now pass you over to the operator to take your questions. Operator: Our first question comes from Joe O'Dea at Wells Fargo. Joseph O'Dea: Can we just start on demand trends? And so when you think about what you've observed in ABL year-to-date and the prior outlook for up low single digits, you're now seeing kind of flat to down low single digits. Just additional color on these demand trends and in particular, what you're seeing in independent sales network, where things have trended softer regionally by end market? And then on the direct sales network side of things, the project business that didn't recur, whether you had line of sight to that or if that was a surprise? And then long-winded question, but just what you're seeing on market share trends with respect to kind of the softer market you see versus peers. I guess some questions out there, whether price has any impact on demand trends for you. Neil Ashe: Joe, anything else you want to add before we get started? Joseph O'Dea: I got a follow-up too. Neil Ashe: We'll save that for after we started. So let's first talk about general demand trends and I'd highlight really 2 things that we think are going on. The first, we've been highly consistent about, which is we believe that the market is looking for consistency or at least consistent direction around policy, around tariffs, around rates, et cetera. . The second is the impact of data centers and their flow-through on everything else. So they're creating a bit of a crowding out, both from a labor perspective, and I'm sure we'll talk about memory at some point in the call, but their impact on the market is being felt. The way that manifests is that we -- on the lighting side is there are a significant number of projects that or in queue and either our independent sales network or our direct sales network which are releasing at slower paces than they have historically. So our conversion rates are about the same, but the time to release is increasing. So we've talked about this in other quarters where we think there's sort of a gumming up that's going on in the marketplace. And that's really what we're seeing from a demand perspective. Second, yes, on the direct sales network, we expected this. We had large projects last year, as Karen mentioned in the prepared remarks, which did not repeat. There are -- and there are large projects in the future, which will come along. So those are largely infrastructure projects. We do think that those were at least mildly impacted. So this is not -- this obviously does not affect year-over-year, but they were mildly impacted by the government shutdown because basically, decisions, permitting and funding were stalled for a while. So there's a little bit of ripple effect that's going through that. And I believe your third question was around market share and price. So we have no indication that we are down in market share. And as we've talked about in strategic pricing, what strategic pricing means for us generally is that we price our products to the value that they deliver to the market. number one. Number 2 is we don't have necessarily a universal pricing strategy. In other words, at places in the market where we choose to be very competitive, we will be very competitive, and other places where we choose to take price, we will take price. The net of which is we're managing the relationship between top line and profitability while maintaining our market leadership position. So I think those were the 3 questions. Did I miss anything? Joseph O'Dea: No, you got all 3 parts, so I appreciate the color there. And then just a separate topic on the tariff side of things. Some news last night on potential for a presidential proclamation that finished products made with imported steel and aluminum could be tariffed at 25% instead of 50% on just the steel and aluminum content. I'm sure things that are in process in terms of working through but how you're thinking about that? It seems like something that would not have USMCA compliance protection. There's perhaps a 15% threshold below which you'd be exempt. So just big picture, how you're thinking about this development, any potential impact, are most of your products below that 15% steel and aluminum content? Neil Ashe: Yes. Obviously, we're reading about this at the same time everyone else is, and we haven't seen whatever the order would be. So this would be speculation. But let me take a step back and talk about tariffs generally because I think it's a topic worth diving in a little bit about. We have, in our opinion, the most dynamic, well-executed supply chain in the industry. So our ability to manage through the tariffs has largely been attributed to, a, strategy, b, hard work and c, kind of location and direction. So we've been able to manage through the process so far, largely through qualifying new suppliers, identifying appropriate location, reengineering products. In short, a tremendous amount of work by our team here. And as a result, I think we're in a really strong position versus our opportunity. So when things like this change, we adapt to whatever that change is. And what we've demonstrated is that we can adapt very, very quickly. Big picture, most of our steel and aluminum 232 does go through USMCA. So that would continue. And a large portion of our products are unaffected -- so because of the thresholds you described. Having said that, we haven't seen it yet. So that remains up for potential change if we see the order and it's somehow different than we expect. Operator: Our next question comes from Chris Snyder with Morgan Stanley. Christopher Snyder: I wanted to ask on ABL gross margin. I don't think anyone would have expected ABL gross margins to be up 70 basis points year-on-year despite volume declines and a lot of the very clear tariff pressure in the market. So can you maybe unpack a little bit the drivers there. I would imagine it's a combination of productivity and price cost. Kind of how is the company achieving that in an industry that's known to be so competitive, and then I guess just looking forward, what gives you confidence that ABL gross margin can continue to grow after all the expansion we've seen already in the last 3 years? Neil Ashe: Yes, Chris, I'll start, Karen, dive in if I leave anything out. So big picture, kind of this time last year, around this time last year, we talked about the impact of tariffs and our need to basically take a year to work through the productivity necessary to regain kind of where we were. So the quick summary, Chris, is that we're working through the productivity as we described to catch up the year of tariff impact on our gross profit margin. So sort of similar to the tariff answer I gave a second ago, it's a lot of hard work around product and productivity improvements. So that is the redesigning of products, that's the redesigning of our manufacturing footprint, that's the inclusion of some automation, it's a combination of things which are driving that. So as we look forward then around our product and productivity improvements, we're confident in our ability to continue down this path. So -- and it's not magic. It's hard work, but there's a lot that goes into that. So it's the impact of some of the technology investments that we're making in the line, it's the better smarter, faster operating system and how we reengineer basically everything that we do. So as we look forward, the combination of product changes of productivity in our facilities, of our material productivity will continue to drive the increases in gross profit margin. Christopher Snyder: I appreciate that. And I want to follow up on, I guess, it's been going on for a while, this intersection of kind of technology and industrials and it's -- I think it's intensifying now with AI and what that can mean. And I wanted to just ask you, Neil, just given your background, what does this intersection of AI and I guess, specifically building controls, what does it mean for Acuity? Do you view it as more opportunity than risk? And ultimately, why do you think Acuity is positioned to win as AI more increasingly penetrates the building? Neil Ashe: Yes, thanks for that question. I think I'll take a big picture perspective on this and then dive into the impact on both AIS and ABL. So as you mentioned, I've been through these transformations before, and they rhyme if they're not always completely consistent. And you've heard the truism that the impact in the short term is generally overestimated and the impact of the long term is underestimated. And my view is that, that will be true in spades in AI. I would say I and we are AI maximalist. We are incredibly positive on the impact it's going to have on our business. that I do believe, though, that with AI, it will be -- the benefits will be spread across everyone, so everyone will get some benefit and declare victory. There will be a subset, though, that have tremendous benefit. And those are the companies and organizations that have the scale, the resources and, most importantly, the ability to use technology to change their businesses. And the hard part is changing the business, and that's what we're really good at. So I think that, that positions us extremely well. Then the impact of that technology manifests itself really in 2 ways. It manifests itself in the products that we present to our customers and end users and in how we operate the business. So specifically to your question around AIS, that would be a good example of where the AI inserts into the products and services that we present to customers and end users. That will drive the data integration between Atrius, Distech and QSC. It will drive the data integration among the different components of each of Distech and QSC, for example. And we're well underway with that process now. Second, around ABL. This gives us a new tool to your -- the first half of your question to continue to drive the impact on the business through the reengineering of the processes which are core to the execution of the business. And that's a process we're underway with now, we're at the beginning stages of as well. So if you take the 2 together, then we have the opportunity to impact the -- both the products that -- and services that we provide to customers and users as well as driving the productivity in our business. So we're net very, very positive. I think the negative cases that are talked about generally, at least as it relates to kind of where we live in the market, put software aside for a second, are built on the premise that AI can do anything. And while that may be true, just because you can doesn't mean you should or you will. And so if we think about where our end users and customers are going to devote their resources, it's probably not going to be figuring out how to dim lights or connect cameras and displays in their corporate conference rooms or in their entertainment parks or in their NFL stadiums. So we feel really, really good about where we sit, number one, about our ability to capitalize on AI number 2 and number three, the ultimate defensibility of both of those. Operator: Our next question comes from Ryan Merkel with William Blair. Ryan Merkel: Neil or Karen, can you comment on if you're seeing any cost pressures? And are you considering raising prices in the second half of the year? Karen Holcom: Yes, Ryan, let me start with what Neil was talking about with the impact of data centers first. So with the impact of data centers, obviously, that's had some impact on labor availability, which is impacting demand, but it's also impacting memory availability. So when we think about that, we think about it as a supply shock, just like others that we've had in the past. And here's what we're focused on, similar to what we've done around tariffs. First, we want to make sure we have the right availability of components for our customers. And then second, we will make sure we cover the dollar impact of any of those increases. And then finally, over time, we'll make sure to address any margin impact just like we've done and Neil described with the tariff situation. So that's really where we're seeing a little bit of the pressure right now, but we will manage through it as we've done before. Ryan Merkel: All right. Got it. And then my second question is on AIS. Can you just comment on if the outlook has changed and what kind of demand signals you're seeing right now? Neil Ashe: Yes, I'll take that one, Ryan. The short answer is no. But the longer answer is we feel really good about how this business is coming together. So we are now anniversarying QSC as part of our organization. So it's kind of hard to believe it's only been a year. But they are fully integrated now as part of AIS. They are -- we are seeing the benefits. They are seeing the benefits of being part of Acuity. We are seeing the benefits of putting Atrius, Distech and QSC together. So we feel really, really good about where they stand. In terms of kind of long-term opportunity, both in the building space -- well, in the building space, in the integrated AV space and then in the consolidated space, we feel exactly the same as we have before. So the short answer is we feel really good about where we are. If we take the first half they're spot on from a top line perspective where we expect them to be, and we feel good about where they're positioned for the future. Operator: Our next question comes from Christopher Glynn with Oppenheimer. Christopher Glynn: A lot of interest in ground covered here today. I had a question on the ABL outlook for kind of flat to down now. That arguably suggests the second half shows a little more resilience in the year-over-year versus the second quarter or probably no worse. But it might be intuitive that the data center draw on the rest of the market might be intensifying. So just wanted to put some qualitative on that kind of top line indication you gave for ABL. Neil Ashe: Yes, I'll take that one and then Karen, if I leave anything off. So first, I'd say, basically, for the first half of the year, ABL is basically down about 1%, and we have really tough comps from all of the order ahead from this time last year, now that we're starting to anniversary. So that's the synopsis basically of what's going on at ABL. I think going into the year, it's fair to say we had expectations that then became hopes, which now we don't count on anymore that the market would start to normalize and free up a little bit. So you know everything that's happened between when we made that plan and where we are from a global macro perspective at this point. So that's largely what's going on. And then we're executing through that. I'd tell you an anecdote to explain kind of the impact of data center. So I was talking to one contractor who is actually a Distech supplier, a mechanical contractor who does a lot of data center work. And what he said to me was, I think, 3 things, which I found really interesting. The first is that they could devote 100% of their capacity to data centers, and they have twice the margin on data centers that they have on anything else. The second thing he said was they're not going to do that, though, because he recognizes that data centers won't last forever, and he doesn't want to alienate all his existing customers for the next stage. So people are starting to see or to balance for that. And then finally, he said, basically, all of his controls people, their business at this point is to rip everything else out and replace it with Distech because they think Distech performed so well. And the reference project he gave me was the at Atlanta Hartsfield. So it's the first time in 25 years, anything other than the legacy provider has been in Hartsfield and now Distech is. So that's a quick synopsis and the color of like the texture of how this is playing out on the ground. Christopher Glynn: Nice anecdote on Distech there. And then I just wanted to follow up on capital allocation. With the stock going down, it might have guessed you buy back more shares. You see really intent on eliminating the Distech debt, but optically, at least the leverage is negligible. So just curious how you're thinking about that. And then the third component that I didn't mention would be the pipeline. Neil Ashe: Yes. So spot on. When -- as Karen indicated in her prepared remarks, when we see an opportunity, we attempt to realize it on the share repurchase perspective. So yes, we're -- we've obviously blown through what we had set as our original expectations. And obviously, we will continue to do that as we see the stock where we think it's kind of at attractive levels. The second on the pay down of debt, that simply is a function of we have that much cash. So there's no reason to have a negative carry while we're there. We would be completely comfortable operating with leverage where we do find the appropriate use for that leverage, which gets me to the third point, which is acquisition pipeline. So we continue to have strong pipeline opportunities. Our focus continues to be on expanding AIS and making it a continuingly large part of the business. So our priorities remain the same. We'll invest to grow the current businesses. And that kind of through things like CapEx, made me through things like OpEx if we want to accelerate organic product development, number one. Number two, as you saw, we increased the dividend in January for the year. Number three, we have a strong pipeline for acquisitions. And then number four, when we see ourselves in situations like this where the multiple compresses so dramatically, we see an opportunity to repurchase and we do. Operator: Our next question comes from Brian Lee with Goldman Sachs. Tyler Bisset: This is Tyler Bisset on for Brian. I guess just first, can you provide any additional commentary on the cross-selling opportunity with QSC? And I guess, what has been the early customer feedback so far? And how are you envisioning the continued rollout of this product? Neil Ashe: Yes. So let me start first and foundationally, they are the leading full stack AV provider in the world. So we highlighted the ISE Best & Show Award because that literally the global center of the industry, which basically says they're -- that's the industry saying they're the best in the industry. So there's a strong foundational opportunity to continue to grow what they currently have. The opportunity for cross-sell is then kind of the cherry on top, if you will. So that is coming through in examples we highlighted in the last call, where, for example, we integrated some Distech products, the recent move with Q-SYS and the broader Q-SYS kit to provide a unique office solution in India. So second, we have, interestingly, a large overlap of customer base. So I like to -- I used to like to say about Distech and now I can say the same thing about Q-SYS which is that the smartest customers buy our products. So our end-user councils end up being a lot of the same folks. Interestingly, though, even in those, it's not necessarily the same individuals who are making those decisions. So we believe that the cross-sell opportunity ultimately is end user driven where the companies start to realize the benefit at a more senior level than these individual products have historically been evaluated. And that's what we mean when we talk about driving productivity for the people in the spaces and the people who are providing those spaces. So that's -- we see good traction on that. And then finally, we also see some traction around AIS and ABL cross-sells, which will be a topic for a later conversation. Operator: Our next question comes from Jeffrey Sprague with Vertical Research Partners. Jeffrey Sprague: I wonder if you could just kind of come back to the question of memory, and certainly, the color on data center crowding out contracting is certainly very interesting. I'm kind of more curious just on the kind of core supply side of memory, sort of the nature of memory that you yourself need for your business and whether or not you actually do have a secure source of supply here as things get much tighter. Neil Ashe: Yes. Thanks for the question, Jeff. As Karen mentioned, this is a supply shock, and we're starting to see a continuing cadence of supply shock. So I guess pretty soon, we're not going to have to call the shocks anymore, but we'll call them supply something else. In this case, and our playbook for dealing with this is, first, to ensure that we have availability, second, to cover the dollar cost impact through multiple ways. That's productivity and price. And then finally, regain the margin, and you kind of watched us do that with ABL. We're doing the same thing here. So yes, we've started by ensuring that we have availability. It's a dynamic market. This is a market that's changing on a monthly basis. But we are generally very well positioned for availability. And that's obviously the primary thing that we're going to be focused on. So our long-term view, I don't know that we have a different long-term view or any greater insight than what you've heard from the general market. I would say that our general view is that while it's really, really tight right now, it is still very fluid. So it is -- we expect it to be bumpy. So we've done things like extend some purchasing in advance, funding in advance so that we make sure that we have availability. And we're going to ride out a little bit to see where availability and price goes over the next kind of 6 to 12 months. Jeffrey Sprague: Is the reduction in your top line forecast specifically tied to not having as much memory as you would have needed to make that other forecast? Neil Ashe: No, there's no impact. Most of the memory would be at AIS, not at ABL. Jeffrey Sprague: Okay. Great. And then I was just wondering if you could maybe elaborate a little bit more on the restructuring actions. Is this another one of many that might be coming? Or should we view this as sort of a one-off action here? And what kind of payback do you see on the actions that you took here in the quarter? Neil Ashe: I'll start, Karen, you clean up. So big picture, I want to emphasize that we've done a lot -- this is all ABL related. We've done a lot over the last 6 years to increase our productivity. That increase in productivity has increased our -- as a result, has increased our capacity. So we have significant capacity. That positions us well for 2 things. One is to realize some short-term benefits when the market presents us with the need to, and then the second is to meet whatever opportunity is there is going forward. So specifically this time, we started to reduce some of the labor in our manufacturing facilities as a result of this productivity improvements and the current demand levels. That's the primary piece of what we did. Second, we changed a little bit of how we're operating the sum of parts of the go-to-market as well. which was more minor. So those are -- this was not an isolated action. So we will continue to view how our manufacturing network and our supply chain are positioned given this increase in productivity. But that will take us years, not quarters. Operator: Our next question comes from Robert Schultz with Baird. Robert Schultz: I'm on for Tim this morning. Neil, earlier in the call, you referred to the gap between quoting activity and releases. What do you think we really need to see for that gap to close? And just how would you frame current sentiment from agents within your independent sales network today? Neil Ashe: So I want to contextualize this and then I'll answer your specific question. So contextually, our conversion rate is basically the same that it's always been. So that's a 15-year observation, not a 2-quarter observation. So having said that, the time between quote and release of the projects is -- has gotten longer through this period than it has been in the past. So if you deconstruct that, that says, effectively, there's still a lot of projects in the pipeline and they're releasing at a slower rate. Our hypothesis is that this is related to things like labor and crowding out that we talked about earlier and maybe some uncertainties around the policies, tariffs, et cetera. So that's the nuts and bolts of how it happens or how it is happening. In terms of the independent sales network, their view is generally relatively positive. So we survey them regularly. We talk to them even more regularly. They are still in hiring mode, so they're adding headcount, which they are -- remember, they're independent small-, medium-sized businesses. So that comes out of their pocket. So I would say that their general view is that we will -- this will improve over time. Robert Schultz: Got it. And then just as it relates to the ABL guide and the revision in sales there. Is there any changes to what you guys are thinking about SG&A spend in the back half of the year? Neil Ashe: Well, obviously, we've already taken some actions around SG&A. And as we indicated, as Karen indicated in our prepared remarks, we are managing SG&A really aggressively through this period. So Karen, would you add anything to that? Karen Holcom: Yes. No, I think that's fair. As Neil mentioned, the charges that we took this quarter at ABL will impact a little bit of the SG&A spend as well, and we just continue to manage aggressively in this market. Neil Ashe: We also, though, will continue our investment in technology. So just to finish that point, Rob, we will continue our investment in technology. Obviously, I covered that pretty extensively earlier, but we will continue that investment. Operator: Our next question comes from Joe O'Dea with Wells Fargo. Joseph O'Dea: This one is a quick one. But just on the guide, you talked about ABL. Just in terms of AIS revenue, are you still looking for low to mid-teens growth there for the year? And then any change to the EPS guidance range? Karen Holcom: Yes, Joe, thanks for asking. Yes, no change to AIS growth still low to mid-teens and no change in EPS as well. Operator: And I'm showing no further questions in queue at this time. I'd like to turn the call back to Neil Ashe for any closing remarks. Neil Ashe: Great. Well, thank you all for joining us this morning. I would say that I am pleased and proud of the execution that our company is showing through this dynamic market environment. At ABL, we are clearly the market leader. We are managing gross profit margin despite lower sales. At AIS, we are differentiated and we continue to grow and change the industry. So I feel really good about where we are going forward, and we look forward to talking to you again in another quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to the Cheche Group Second Half and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Crocker Coulson, Investor Relations. Please go ahead. Crocker Coulson: Thank you, Betsy. Hello, everyone. Thank you for joining us to review Cheche's second half and full year 2025 results. This morning, Cheche posted both the earnings release and a related updated investor presentation to our website, which you can find at ir.chechegroup.com. I'm very pleased to say that with us on the call today, we have Lei Zhang, Cheche's Founder and CEO; and also Sandra Ji, Cheche's CFO. After the prepared remarks are concluded, we're going to open up the call for your questions, and I'll be happy to address them. But before we begin, I'd like to remind you that some statements in this teleconference will be forward-looking within the meaning of the federal securities laws. Although we believe these statements are reasonable, we can provide no assurance that they will prove to be accurate because they're prospective in nature. Actual results could differ materially from those we discuss today. So we encourage you to review the most recent filings with the SEC for risk factors that could materially impact our future results. As I mentioned, the earnings release is available for you at ir.chechegroup.com. And again, we also encourage you to review the reconciliations of certain non-GAAP financial measures contained within that we're going to discuss on the call today. With that, it's my great pleasure to turn the call over to Lei Zhang, Cheche's Chief Executive Officer. Lei, over to you. Lei Zhang: Thank you, Crocker. Greetings, everyone. Thank you for joining us today to review Cheche's second half and full year 2025 results. 2025 was a defining year for Cheche Group, one that validated both the resilience of our business model and the power of the strategy transformation we have been executing despite ongoing fee rate compression driven by rapid growth of NEV premiums within our revenue mix. We delivered gross profit growth, dramatically reduced the operating losses and for the first time, achieved adjusted net profitability on a full year basis. They are not incremental results. They marked an inflection point on our evolution from a transactional insurance platform to an AI-powered intelligent insurance ecosystem. Let me begin with that I believe is the most meaningful headline from this period. Cheche Group achieved adjusted operating profitability for the full year 2025 and delivered positive net income in the second half of 2025. Our adjusted net income reached RMB 11.6 million or USD 1.7 million for the full year compared to an adjusted net loss of RMB 24.8 million in the prior year. That is a swing of more than RMB 35 million achieved while we focus on new capabilities and adopt a meaningful structural change on our revenue mix. This reflects disciplined cost management across every line of operating expenses, which we reduced in total by more than 19% year-over-year, even as we grew total written premiums placed by 11% and the total policies insured by 3 million. We demonstrated that scale and efficiency can do and work together [ at Cheche ] and we intend to continue building that foundation in 2026. The profitability story also has a structural dimension. NEV premiums, which carry a lower service fee risk than traditional auto insurance now represent 23% of our total written premiums for the full year, up from the 13% in the prior year. This shift initially creates revenue headwinds as we are mentioning, but it also drives higher gross margins as our AI-powered tools allow us to capture higher take rates in the NEV insurance market and deploy capabilities that command premium pricing. We expect the margin profile to continue improving. I also want to highlight the significant process -- progress we have made in translating our AI strategy into operational capability. We are actively deploying AI pricing model in the collaboration with several of China's leading insurance companies as well as through the data partnerships with intelligent connected vehicle manufacturers. Our insurance anti-fraud and risk control model, which was recognized in the prestigious Top 100 AI product of the 2024 last year is one example that integrates big data, artificial intelligence and the biometrics enabling insurers to identify fraud early, price risk more precisely and process claims with greater efficiency. This partnership position us to expand our footprint in the renewal insurance market. Beyond our insurer-facing tools, we are developing and testing AI agent to the fundamental change we engage with the car owners at the point of renewal. With AI agent, we can standardize scale and improve the dialogue with the car owners, deploying consistent intelligent real-time outreach that is more effective than traditional method and significant more cost efficiency. On the R&D side, our team leverage AI tools and LLM to accelerate product development and [ short development CIRCLES ]. AI tools are expanding our capability road map without proportional increase in the headcount and spending. Looking further ahead, we intend to extend the operational and analytical capability across the full auto insurance value chain from pre-policy risk assessment and pricing through in the policy risk monitoring and intervention to claims survey and loss assessment. Combined with our growing advantage in the driving behavior data from NEV ecosystem, we believe that position us to move the industry from the static pricing towards dynamic risk management and to build data-driven competitive mode and strength over time. The quality of our OEM partnership continue to deepen. We currently have a partnership with 16 NEV manufacturers. And as our business and relationships mature, our strategy focus on shifting from adding new relations to the deepening existing ones. That means expanding the [indiscernible] and the models we serve within the partnership and in the dealer channel progress and maximizing renewal premiums captured across installed base vehicles we already service. Our work with Volkswagen reflects our ability to partner with both domestic champions and the global automakers operating in China's intelligent connected vehicles market. We are building the full life cycle relationships with these partners, not transactional arrangements and the depth of those relationships is what creates the durable and recurring value for the CCG and our shareholders. Looking ahead, we expect to share additional partnership news in coming months that we believe will further demonstrate the strength of our position within China's most intelligent [ connected vehicles ] system. We are also preparing to announce a significant advance in our AI-driven auto pricing capabilities, a development that reflects our capabilities with data science and risk model and that we believe significantly expand our addressable market in the renewable reinsurance segment. We look forward to sharing more details in the near term. Let's turn to the progress we are making internationally, which represents one of our most important long-term growth vectors. Chinese automakers now export over 8 million vehicles annually. And as expanded globally, the demand for intelligent driving insurance and financial services infrastructure follows. Cheche Group is uniquely positioned to meet that demand, bringing the digital insurance capabilities and the financial technology capabilities we have built in China's most demanding market to automotive ecosystem around the world. We are also advancing our international road map across the border, Asia Pacific and Latin American markets, leveraging our fintech solution for automakers abroad, a toolkit our digital insurance and finance services infrastructure designed to support the Chinese automakers and their global partners as they build out new market operations. To summarize, 2025 demonstrated what the Cheche Group is capable of. We achieved adjusted profitability, deepen our AI capabilities, formed a landmark partnership with a global automotive leader and took our first meaningful step into the international markets. We entered 2026 with clear priorities, continue growing renewal insurance penetration through the AI-powered tools, expand our platform relationships with Huawei, Volkswagen and other NEV partners and invest selectively in the international expansion where we see the clearest path to profitability. We are confident in the trajectory of the business and grateful for the support of our investors and partners. I will now turn the call over to our CFO, Sandra Ji. Thank you. Wenting Ji: Thank you, Lei. I'd like to begin by touching on our second half and full year 2025 operational and financial highlights before taking any questions. First, as our operational update. Our total written premium placed for the second half 2025 increased 16.9% year-over-year to RMB 15.5 billion or USD 2.2 billion. For the full year 2025, the total written premium increased 11% to RMB 27 billion or USD 3.9 billion. The total number of policies issued increased from 9.3 million in the prior year period to 12 million in the second half 2025. For the full year, total policies issued grew from 17.3 million to 20.3 million. On the NEV side, our 16 partnerships generated 1.2 million embedded policies and RMB 3.7 billion in corresponding written premiums in the second half 2025, representing year-over-year growth of 61.8% and 63.9%, respectively. For the full year 2025, NEV embedded policies reached 2.0 million and corresponding premium reached RMB 6.3 billion, growing 85.3% and 91.0%, respectively. Our NEV premiums represented 24.1% of total written premium placed in the second half of 2025, up from 17.2% in the prior year period and 23.4% for the full year 2025, up from 13.6% in the prior year. Next is our financial results. The total -- the net revenues for the second half 2025 were RMB 1.7 billion or USD 237.5 million, representing a 9.4% year-over-year decrease. As Lei just mentioned, this decline reflects the higher proportion of NEV premiums within our mix, which carry lower service fee rates. We are actively managing this structural transition through AI enhanced pricing capabilities and the renewal market penetration. For the full year 2025, net revenues were RMB 3.0 billion or USD 430.4 million, a decrease of 13.3% year-over-year, driven by the same NEV mix dynamics. For the second half 2025, cost of revenues decreased 10% year-over-year to RMB 1.6 billion or USD 224.0 million, driven by lower net revenues and continued improvement in our gross margin profile. For the full year 2025, cost of revenues decreased 14% year-over-year to RMB 2.8 billion or USD 407.5 million from the prior year. The gross profit in the second half increased 0.5% to RMB 94.6 million or USD 13.5 million despite the lower net revenues, which is a direct result of our improved business structure. This is an important signal like even as revenue compresses through the fee rate transition, our gross profit is still growing. Gross margin expanded as the higher-margin NEV business represents an increased share of the mix. For the full year, the gross profit increased 1% to RMB 160.4 million or USD 22.9 million, with gross margin expanding as NEV business grew as a proportion of the mix. For second half 2025, the selling and marketing expenses decreased 18.1% to RMB 31.0 million or USD 4.4 million. General and administrative expenses decreased 16.5% to RMB 38.5 million or USD 5.5 million. Research and development expenses decreased 2.5% to RMB 18.9 million or USD 2.7 million. The total operating expenses decreased 14.4% to RMB 88.4 million or USD 12.6 million, while the adjusted total operating expenses decreased by 22.2% to RMB 77.1 million, which is USD 11.0 million. The total operating expenses for the full year decreased 19.6% to RMB 181.2 million or USD 25.9 million, while adjusted total operating expenses decreased 17.0% to RMB 156.9 million or USD 22.4 million. Operating income for the second half 2025 was RMB 6.1 million or USD 0.9 million compared to an operating loss of RMB 9.3 million in the prior year period. Adjusted operating income was RMB 18.5 million or USD 2.6 million compared to an adjusted operating loss of RMB 1.5 million in the prior year period. Operating loss for the full year 2025 narrowed dramatically by 68.6% to RMB 20.9 million or USD 3.0 million. The full year adjusted operating income was RMB 5.6 million or USD 0.8 million compared to adjusted operating loss of RMB 28.2 million in the prior year. Net income for second half 2025 was RMB 7.8 million or USD 1.1 million compared to a net loss of RMB 6.4 million in the prior year period. Adjusted net income was RMB 22.2 million or USD 3.2 million compared to adjusted net loss of RMB 0.3 million in the prior year period. Net loss for the full year 2025 was RMB 17.8 million, representing an improvement of 71.0% from RMB 61.2 million in the prior year. Adjusted net income was RMB 11.6 million or USD 1.7 million compared to an adjusted net loss of RMB 24.8 million in the prior year. This marks the first full year adjusted profitability in Cheche's history as a public company. Let's turning to our balance sheet. We reported RMB 160.8 million (sic) [ RMB 170.8 million ] or USD 24.4 million in cash, cash equivalents, restricted cash and short-term investments as of December 31, 2025. Looking ahead to the full year of 2026, we are anticipating an approximate range of RMB 3.0 billion to RMB 3.2 billion for net revenues, a range of RMB 28.0 billion to RMB 30.0 billion for total written premiums, a range of RMB 10.5 billion to RMB 12.0 billion for NEV written premiums. And we also expect adjusted net income to multiply several fold compared to the full year of 2025. I think that concludes our remarks. Next, we'll be happy to take any of your questions. Thank you. Operator: [Operator Instructions] Wenting Ji: Hello, operator, please go ahead. Operator: The first question comes from [indiscernible]. Unknown Analyst: [Foreign Language] Operator: It appears we've lost that questioner. The next question comes from Allen Klee with Maxim Group. Allen Klee: Congratulations on your progress and advances with NEV's and moving to profitability. In your guidance, you said that you're projecting 2026 NEV premiums increased between 66.7% to 90.5% year-over-year. Can you just highlight what in your offerings is going to result in such strong adoption, maybe highlighting how you're helping with pricing, risk and fraud? Lei Zhang: Okay. Thank you, Allen. This question, first, we think AI as a key tool for upgrading the company's innovation and operational capabilities. First at the R&D level, AI is being integrated across the entire workflow from requirements analysis and development testing and delivery, significantly improving our overall infancy and stability of outcomes. The second, at the business application level, our company will continue to promote the coordinated use of multiple AI tools and further leverage our advantage in the driving behavior data within the NEV ecosystem. This will gradually extend AI capabilities across the full insurance value chain from the pre-underwriting risk assessment and pricing to in-policy risk monitoring and intervention and intelligent claims inspection and loss assessment. Through this initiative, we aim to drive transformation of auto insurance from static pricing to the dynamic risk management while continuously strengthening our long-term competitive advantage. Allen Klee: Thank you very much. You also said on the call that internationally, there's a large demand, and you said you're going to advance across Asia and Latin America with fintech solutions. Could you explain what you mean -- what your fintech solutions are? Lei Zhang: Okay. In terms of global expansion, company has formed a strategic partnership with several automotive brands that focus on international growth. We have already established a solid presence in markets such as Australia, New Zealand, Latin America and the Middle East have successfully launched business operations in the collaboration with partners, including Guangzhou Auto Company and Chery and BYD and Great Wall Motor. By supporting Chinese automakers in their overseas expansion, we leverage our mature digital insurance capabilities and the financial technology capabilities to bring our technology to the international markets as a China solution, helping build a global financial and insurance ecosystem in such countries. Allen Klee: I just can comment. I was talking to somebody from Australia yesterday, and they said the demand for Chinese electric vehicle cars is dramatic, the waiting list, especially with what's going on with oil prices. Crocker Coulson: Lei, do you want to tell, Allen, where you're joining us from? Lei Zhang: Yes. Because the oil price has increased. Crocker Coulson: So Lei is actually in Australia today. Lei Zhang: Yes. Yes. I traveled to Australia for the Grad Wall Motor and Chery Auto into Australia. Operator: The next question comes from [indiscernible] with CITIC. Unknown Analyst: I'm curious about your ability to leverage AI internally to reduce operating costs. I'd also appreciate an update on how AI solutions are supporting internal operations. And any comments on plans for international expansion? Lei Zhang: [Foreign Language]. Operator: This concludes our question-and-answer session. I would like to turn the conference back over for any closing remarks. Crocker Coulson: Well, we'd like to thank everyone for joining us today. If you didn't have a chance to ask your questions or if you'd like to have a follow-up call with management, please feel free to reach out to me or the Cheche Investor Relations team, and we'll be more than happy to arrange a Zoom call at mutual convenience. Thanks, everyone, for joining us, and I look forward to coming back to you with future updates. Thank you, operator. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to the Newsmax Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Chris Odeh, Riveron Investor Relations. Chris, you may begin. Chris Odeh: Good afternoon, and welcome to Newsmax's Fourth Quarter 2025 Earnings Conference Call. I'm joined today by Chris Ruddy, Chief Executive Officer; and Darryle Burnham, Chief Financial Officer. On this call, Chris and Darryle will provide some prepared remarks on the most recent quarter and full year results, and then we will take some questions from the investment community. A recording of this conference call will be available on our Investor Relations website shortly after the call has ended. Please note that this call may include forward-looking statements regarding Newsmax's financial performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated due to certain factors identified on today's call and in the company's SEC filings. Additionally, this call will include certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures are included in the earnings release and our SEC filings, which are available in the Investor Relations section of our website. I will now turn the call over to Chris Ruddy, Chief Executive Officer of Newsmax. Chris? Christopher Ruddy: Thank you, Chris, and welcome, everyone, to our fourth quarter and full year 2025 earnings call. Fiscal year 2025 was a defining year for Newsmax and marked our first year as a public company. While many legacy television companies faced challenges in a nonelection year when audience levels, engagement and advertising demand typically normalize across the industry, Newsmax delivered strong growth and performed at the high end of our guidance range. This performance reflects the strength of our brand, the loyalty of our audience and the momentum of our multi-platform strategy. During the year, we expanded our distribution and reinforced our position as the fourth highest-rated cable news network while finishing #6 among all cable channels in total day ratings across the hundreds measured by Nielsen. We also exited the year with a strong debt-free balance sheet, providing a solid foundation to invest behind accelerated growth in 2026. For the full year, revenue increased 10.7% to $189.3 million, and broadcast revenue, which is key for us, grew 17.3%, driven by growth across advertising, affiliate fees, subscriptions and licensing. Affiliate fees specifically were up a solid 14.9%. This performance highlights the strength of our diversified revenue model and the sustained demand for independent values-driven journalism across all our platforms. We continue to see Newsmax as a high-growth company. At a time when many media businesses are contracting, our growth stands out, and we expect that momentum to continue into 2026. This performance is driven by our differentiated multi-platform model. We're not just a cable channel. We're not just a streaming FAST channel. We're not just a streaming plus service. We're not just a web digital company. We're all of these things and much more. We figured out how to integrate the digital media with the legacy TV media and how to move our brand across several platforms and do so synergistically, creating a scalable ecosystem poised for growth. This approach allows us to meet audiences wherever they are and leveraging our expanded distribution to further monetize engagement across multiple channels. While this model differs from traditional media businesses and may not always be fully reflected in how companies in our sector are evaluated, we believe continued execution and consistent growth will increasingly demonstrate the strength and durability of our unique multi-platform model. To put these results in context, it is helpful to revisit the priorities that guided us throughout 2025 and the progress we made against them. First, we expanded our cable and TV distribution footprint significantly. This year, we deepened domestic MVPD carriage agreements and relationships while accelerating international growth with Newsmax available in more than 100 countries by end of year. We expect this international licensing growth to continue throughout the year. In the fourth quarter of last year alone, we announced a slate of new international agreements, including launches in France, Israel and Cyprus as well as a brand license agreement to launch Newsmax Ukraine in the first half of 2026, which is currently underway. We also launched on Hulu TV and renewed our multiyear agreement with YouTube TV. Maintaining Newsmax in its base package and expanding Newsmax+ distribution through YouTube prime time channels beginning in 2026. Second, we scaled our audience and engagement across our various platforms. Newsmax, our cable channel, reached more than 58 million total viewers in 2025 according to Nielsen data. And we reach 50 million Americans regularly across all our platforms. We clearly are a top U.S. media property. We remain the fourth highest-rated cable news channel in the country, driven by consistent programming and a loyal diverse audience. That strong ratings performance fuels advertising demand and reinforces our distribution relationships. As our reach and ratings continue to grow, affiliate contracts are renewing at higher rates, another key driver of long-term growth. As our cable channel keeps getting stronger, we have seen encouraging growth on our streaming side with Newsmax2, our dedicated FAST channel. This channel is carried free on our app, on TV and on OTT streaming platforms such as Xumo, Pluto, Samsung Plus and almost all major platforms. Newsmax2 is also carried over the air as a Diginet channel in 64 markets across the U.S. We expanded into 18 additional markets in 2025 and are now present in 14 of the top 20 U.S. markets. We continue to invest in our programming, adding top-tier news talent, expanding broadcast hours and deploying other key resources with the goal of becoming the #1 news streaming channel. Legacy broadcasters lack both the capital and strategic focus to invest meaningfully in streaming news, positioning us in a very good position to capture this growing audience. Then there is our plus service, Newsmax+, our paid on-demand offering, which ended the year with more than 260,000 paid subscribers. This plus service not only benefits from our Newsmax and our Newsmax2 shows and talent, but also the addition of over 200 hours of new on-demand programming. This programming includes documentaries, films and family-friendly content, and we believe there is real space in the market for news and family-friendly entertainment app. Lastly, there is also our broader digital ecosystem with our social media following now surpassing 24 million, growing more than 17% year-over-year. Our third priority in 2025 was positioning Newsmax for long-term success as a public company. While the IPO process required significant time and resources, we completed it successfully while continuing strong operational growth. During the year, we also resolved a key legal settlement that removed a substantial overhang and absorbed much of the upfront costs associated with our transition to public ownership. These milestones give us improved visibility into our underlying cost structure. Combined with a strong cash position, they provide a solid foundation to invest and grow in 2026 and beyond. Looking ahead, we see meaningful opportunities in today's evolving media landscape. There remains significant white space for independent reliable journalism that resonates with audiences who have lost trust in Legacy Media. Our engagement metrics demonstrate that Newsmax has become a trusted alternative, gaining share and building a highly loyal audience. That loyalty reinforces our ratings, strengthens our distribution relationships and supports monetization across affiliate, advertising and subscription revenue streams. Newsmax has a proven track record of expanding its audience and growing revenue across both strong and more challenging market environments. While doing so with a more efficient cost structure than many of our peers. While traditional cable remains a vital part of our business and an important driver of audience growth across our ecosystem, we recognize that the future of news consumption is evolving rapidly. Viewers are increasingly turning to streaming and on-demand platforms, and Newsmax is uniquely positioned to lead in that environment. As mentioned, we were born as a digital media company, and that digital backbone continues to be one of our greatest competitive advantages. It was really key to us becoming a major cable property when others entered and failed. As the media landscape continues to shift, we will remain nimble and find and meet audiences where they are, delivering trusted values-driven journalism on all platforms for all people. Although we are encouraged by the growth of our free streaming platforms and digital presence, Newsmax+ remains a strategic focus as we work to unlock its full potential. We are not satisfied with our current subscription trajectory. However, we felt it need better content from our channels and more on-demand video content, and we have been moving those pieces into position. While we view the current pace of subscriber additions as a short-term headwind rather than a structural issue, we are taking deliberate steps to improve engagement, strengthen retention and translate expanded premium content into accelerated subscription growth. Investments in exclusive programming, product and tech enhancements are helping with expanded distribution and are central to this effort. Despite near-term subscription softness, we expect 2026 to mark a year of accelerated revenue growth for Newsmax. Notably, this acceleration is driven by underlying business fundamentals rather than political cycles. As we move beyond the transition year and gain improved cost visibility, we also anticipate stronger operating leverage and better alignment between revenue growth and our investment strategy. Our long-term vision is to establish Newsmax as one of the most trusted and influential news brands in America and around the world. We are building a multi-platform media company that started in digital, grew successfully into cable, the only company to do so and now engages massive audiences across streaming, mobile apps, social media, publishing and international markets. We entered 2026 from a position of strength with financial flexibility, improved cost transparency and a disciplined growth strategy. We are confident in the foundation we have built and in our ability to execute in the years ahead because, frankly, we have incredible support from our readers, our viewers, our advertisers and you, our shareholders. We are thankful to you and to them. I now turn it over to Darryle to walk through the financial performance. Darryle Burnham: Thank you, Chris, and thank you, everyone, for joining us today. As Chris highlighted, we delivered full year revenue at the high end of our guidance range and closed 2025 with solid momentum. Importantly, we exited the year with $131 million (sic) [ $131.3 million ] in cash and short-term investments and no debt, providing meaningful financial flexibility. With the majority of IPO-related and other onetime costs now behind us, we have improved visibility into our underlying operating structure. That clarity, combined with continued strength across affiliate revenues, supports our expectation for accelerated growth in 2026 and positions us to deploy capital with confidence. Turning to our full year results. In fiscal year 2025, we delivered $189.3 million in total revenues, representing a 10.7% increase year-over-year. Turning to our reportable segments. Total broadcasting revenues grew 17.3% year-over-year to $153.3 million in fiscal year 2025. Growth in broadcasting was driven by an increase in advertising revenue due to increased demand and pricing, expanded distribution, increasing reach across our streaming platforms, continued affiliate fee growth from new and renewed agreements with higher rates and incremental contribution from Newsmax+ subscriptions. Total digital revenues decreased 10.9% year-over-year to $35.9 million in fiscal year 2025. The decreases in advertising and subscription revenue are largely due to a more challenging prior year election comparison, partially offset by growth in product sales. As a reminder, our digital segment generates revenue from a mix of online advertising, including display, e-mail, other online placements and print, subscription products such as our health and financial newsletters, Newsmax magazine and membership programs and e-commerce primarily through the sale of nutraceuticals and books. Now turning to our revenue by component. Total advertising revenues increased to $120.3 million, a 10.2% year-over-year gain by higher linear television advertising resulting from increased demand and pricing, supported by expanded audience reach, partially offset by lower digital advertising following the election cycle. Affiliate revenues increased 14.9% year-over-year to $30.6 million due to new contractual relationships as well as rate increases to existing ones. Subscription revenues of $27.5 million were up 2.6% year-over-year with increases to Newsmax+, offset by reductions in digital publication subscriptions. Product sale revenues increased 20.7% year-over-year to $7.3 million, primarily driven by increased book sales, reflecting stronger performance across key titles within the company's publishing business. Other revenues, which largely represent licensing was $3.6 million, up from $2.3 million from the prior year, primarily driven by new international license deals. We reported a net loss of $99.5 million for the full year 2025, a 37.8% decline compared to a net loss of $72.2 million in the prior year, primarily reflecting $78.6 million in legal settlement expenses, along with stock-based compensation costs, noncash derivative and warrant liability adjustments and higher production and programming investments, partially offset by higher revenues and affiliate and licensing fee growth. Full year adjusted EBITDA was a loss of $6.5 million compared to a positive adjusted EBITDA of $10.2 million last year, reflecting continued strategic investments in content, talent, technology and public company infrastructure. We ended the year with $20.4 million in cash and cash equivalents and $110.9 million in investments, bringing our total cash and investment position to approximately $131.3 million. This compares to $82.4 million at the end of 2024 and reflects the strength of our balance sheet following our initial public offering and related financing activities. Now turning to our fourth quarter results. We delivered $52.2 million in total revenues, representing a 9.6% increase year-over-year. Breaking this down by revenue stream for the quarter, first, starting with our reportable segments. Total broadcasting revenues grew 12.6% year-over-year to $42.5 million in the fourth quarter of 2025, underscoring continued growth even in a nonelection year. Our growth in broadcasting was driven by affiliate fee revenue growth, increased demand and pricing for broadcasting ad revenue and licensing growth. Total digital revenues declined 2% year-over-year to $9.7 million in the fourth quarter of 2025. Growth in product sales was more than offset by declines in advertising and subscription revenue. Now turning to our revenue by component. Advertising revenues increased to $33.9 million, a 5.9% year-over-year gain, mainly due to an increase in our audience reach as we expanded our MVPD partnerships, offsetting a lower digital advertising coming out of an election year. Affiliate revenues increased 17.9% year-over-year to $7.8 million, driven by new contractual relationships as well as rate increases that went into effect earlier this year. Subscription revenues of $6.6 million were down 7% year-over-year, driven primarily by the post-election cycle normalization. Product sale revenues increased 64.2% year-over-year to $2.6 million, primarily driven by increased book sales. Other revenues was $1.2 million, up from $400,000 in 2024, attributed to expanded international licensing deals compared to the prior period. We reported a quarterly net loss of $3 million, a 56.5% improvement compared to a net loss of $6.9 million in the prior year quarter. This improvement in net loss was driven primarily by higher strategic investments in headcount, programming and production capabilities to support the ongoing expansion and enhancement of our content offering, stock-based compensation costs, offset by higher broadcasting advertising, affiliate fees, book sales and licensing revenue. Our quarterly adjusted EBITDA was $1.3 million loss, a decrease of $3.8 million from the amount reported in the same quarter last year, reflecting higher production and programming expense, increased personnel, legal, consulting and public company costs. Turning to our fiscal year 2026 full year guidance. We expect full year 2026 revenue to be between $212 million to $216 million, representing 13% growth year-over-year at the midpoint of the range, an acceleration on the growth we realized in 2025. It is important to note that we anticipate this growth to be structural and not cyclical. We do not anticipate political advertising to be a meaningful contributor to our outlook. Instead, growth is expected to be primarily driven by structural momentum, including affiliate fee expansion, reflecting rate increases and new distribution channels. At the same time, we will continue investing in premium content and digital monetization initiatives to support further upside across our platforms. From a profitability standpoint, we anticipate an improved operating profile driven by reduced legal and public company transition expenses. In closing, we are proud of the progress we've made in our first year as a public company and the strong finish to 2025. As we enter the new year, we remain focused on disciplined execution, thoughtful investment and driving long-term shareholder value. With our diversified revenue streams, scalable multi-platform strategy and enhanced access to capital, we believe Newsmax is well positioned to build on this momentum and deliver sustainable growth in the years ahead. Thank you for your time today. We look forward to updating you on our continued progress during the next quarter's earnings call. Now we would like to open the line for analyst questions. Operator? Operator: [Operator Instructions] And the first question today is coming from Thomas Forte from Maxim Group. Thomas Forte: So Chris and Darryle, congrats on a strong quarter and year. I have one question and one follow-up question. So my first question is, Chris, when you look at the current media environment, what gives you confidence you can continue to take market share and grow ratings? Christopher Ruddy: Tom, thank you for that question. If you look at this country and the media landscape right now, the country is clearly divided politically. We see it in the polling numbers of President Trump and major issues impacting the country. It's almost a 50-50 divide. On the left side of that divide, you see a lot of media organizations all competing for that audience. On the right side of that divide, especially in the television media world, the cable world, there's really only 2 competitors, Fox News and Newsmax, and it's a huge market. It's half the country. And so we think that there's huge market share for us to gain Fox is a very powerful player in that market. It was an early on started 30 years ago, over 30 years ago. The founder of Fox famously said, people said I was a genius, Roger Ailes. He said people said I was a genius. I said there should be a media organization that serves half the country. And Newsmax's view is that there can be more than one competitor in that field and we've proven it, and we continue to grow. So I think there's a lot of reasons that we're growing. But the fact that there's not blue ocean, but pretty darn close to blue ocean for us to grow in is really very positive for us. Thomas Forte: Excellent. And then for my follow-up, Darryle touched upon this in his comments on the outlook. But at a high level, how should we think about your operating performance in a year where there's midterm elections? Darryle Burnham: Well, any time there's elections in this country, there's a lot of engagement. The presidential, we always call the Super Bowl of elections that happens every 4 years. But remember, it's really already started in some ways. It used to start a few months before the primary period. Now it's almost continuous, but we're going to really see a ramp-up of the presidential. And the congressionals are going to be a huge battle. There's already indications. The Democrats are doing pretty good in the polls. The Republicans have a lot of work to do, but that's going to translate into a lot of dollars at both the local level, and we think some money will come into the national level. But we benefit not so much by the amount of money that comes in because of political advertising. A lot of that in the congressional election, frankly, goes into the state and local media. But we benefit by the huge amount of engagement that happens across the country because we're covering all of the elections in 50 states. So we think it will be a big, big benefit for us. Operator: And the next question will be from Michael Kupinski from NOBLE Capital Markets. Michael Kupinski: Congrats for a great finish for the year. Just a couple of questions here. In terms of your revenue guide for 2026, I know that you mentioned affiliate fee growth. I was wondering if you could just give us a sense of how much of the revenue growth is being driven by affiliate fee versus advertising revenues? And just maybe add some color in terms of the biggest delta affecting the revenue growth guide there. And then if you could just talk a little bit about your renegotiation cycles for your affiliate fees and maybe give us a sense of how many subscribers are coming up for renewals in 2026? Christopher Ruddy: I'm going to let Darryle answer that, but I will just say that most cable companies, cable channels get 70% to 80% of the revenues from affiliate fees and a very smaller share from advertising, some even do less than 20% in advertising. Newsmax has built our whole channel, our whole network almost entirely on advertising in the first 10 years of the company's history. It's only in recent years that we started getting cable fees. People said we would not get any cable fees. Every cable operator want every major system and everyone pays us a cable license fee. And those fees continue to grow. So we believe there's a lot of room for us to continue to grow, and Darryle can give a little more insight into that. But it's a very positive trend for us. Darryle Burnham: Thank you, Chris. Thank you, Michael, for the question. Yes, as Chris said, we actually believe that affiliate fees is a very positive contributor to us, especially for our guidance for 2026. The momentum in affiliate fee revenue is going to be coming from a lot of the renewals that we've been working with that really is kind of showing with our investment over the last several years. Now one of the things that I think is key is when you look at the affiliate fee momentum, it's clearly the biggest driver that we're looking at for 2026. As we've talked about in the past, a lot of our contracts dated back to when we first started having affiliate fees in 2023, and that gives us the opportunity for multiyear repricing when they come up for renewal, even in the declining ecosystem. Live news is still a very important component of the MVPDs trying to retain their subscriber base, and that is also something that works to Newsmax's advantage when we're going through the negotiations on the renewal of these affiliate fees. Now there is delays in monetization due to launch timing and subscriber availability and adoption. But overall, affiliate fees is definitely one of the major drivers for 2026 guidance. But we also think that there's going to be more than one revenue stream that's going to provide benefits to 2026. We think that continued growth in advertising is going to be important, as Chris said, that even though we're not going to get a huge expectation for political advertising for midterms, it does drive an overall increase in engagement in the news, and that should increase overall demand. And then we are seeing some opportunities with licensing as well. Michael Kupinski: Got you. And then I know that, obviously, your investment in programming has obviously been paying off. Obviously, your ratings have improved, your audience engagement has gone up. I was just wondering if you could just talk a little bit about the trajectory of programming and programming costs over the next 12 to 18 months. I know that you have interest in expanding field offices and going after some higher profile content and so forth. I was just wondering if you could just talk a little bit about your thoughts of the programming cost as you go into 2026. Christopher Ruddy: Well, we're not completely sold on the idea that if you pay somebody a huge contract that might be famous, they're suddenly going to bring a large audience. And there's very few individuals out there that are of the type and level that can bring audience. I think even Bill O'Reilly, who left Fox had a premium value at the time he left Fox and he his declined quite a bit since then. He sort of had some health issues and semi retired. So there's not many people like him. But if you look back at the founding of Fox, Bill O'Reilly was not a national name. He had been on a TV syndicated program, but he was not known, certainly in the news in the hard news genre of cable. Sean Hannity had never even been on television before. And many of the people at Fox were known names. In fact, the most famous person of Fox had the lowest rating was Paula Zahn and she only lasted about a year. So there's -- it's a funny thing where people are looking for really exceptional content now, we believe. Exciting personalities are looking for fresh personalities, and we are constantly on the look for those where we've been changing our lineup, taking some of our own talent and promoting them. Carl Higbie has been vying for #1 on our network. He starts at 6:00. He's a former Navy Seal, extremely popular in social media. Rod Schmidt is still #1 in our Nightly program. He was not famous before he came to Newsmax. Now he's very famous. So we feel like growing our own talent organically and matching them with people that are veteran journalists like Greta Van Susteren, who leads our 4:00 evening news program or after late afternoon news program is the best way for us to continue growing that. You're going to see more moves on our streaming channel, Newsmax2, we see a lot of potential growth for that channel. We also have a talent lineup there. So we're excited about it, but we're not necessarily buying into the concept that you just pay a big contract and you get an immediate audience. Darryle Burnham: And I might add a little bit Michael, but, I'm sorry, go ahead. Michael Kupinski: No, go ahead. I'm sorry. Darryle Burnham: I was going to say I might add a little bit that we do view 2026 as continued investment in programming and content. As Chris has detailed, and I think really as our results have detailed, the investment in the programming really pays off in a number of different areas. So we've talked in the past about how investment in programming on our N1 channel has a number of benefits across multiple revenue streams, right? It helps in terms of building the overall ratings and demand for the channel, which is going to increase advertising dollars. It helps because then the product that we're putting out for Newsmax+ is a higher quality product, and that would be something that people are also interested in. And we've talked a number of times about continuing to investment in N2, right, because N2 has a long-term strategic value to the company with FAST channels, and we continue to see investment in that. So Newsmax1 we get the benefit of not only the demand for advertising and the Newsmax+ subscription potential to make that a better value-driven product, but it also helps because then the higher ratings help with any kind of affiliate fee renewal negotiations. And then investment in Newsmax2 is obviously a long-term strategic objective for the company. And as Chris said, for Newsmax+ want to be the leading streaming platform on the national news level, and we've added over 200 hours of programming to that. So we do view continued investment in 2026 is important to the overall strategy of the company. And I think that some of the results that we've had in 2025 kind of bear out the fact that those investments are strategically important to the long-term future of the company. Christopher Ruddy: I would add that if you look at the investment of Newsmax into talent so far, we've been pretty darn good. Considering last year, as I mentioned in my introductory remarks, we were #6 of cable in total day. There's hundreds of cable channels rated by Nielsen. We were #6. We did not spend the billions of dollars that other cable channels did to build out their ecosystem. We spent a fraction of what Fox spent in its initial years. So I think we're on the right path, and we've shown and demonstrated by the ratings independent of us that we're doing the right thing, which is focusing on quality talent that resonates with the audience. We're going to do the same thing, as Darryle said, in our Newsmax+ service and the Newsmax2 channel, continuing finding talent that resonates with the audience. Michael Kupinski: It's certainly remarkable. Just if I may, just 2 quick questions. I was just wondering if just to chat a little bit about the litigation with Fox. And I know that you might not be able to comment specifically on the litigation. But I was just wondering if in terms of the litigation itself, if there were ancillary benefits to the litigation that maybe it shined a light on some of the industry practices that have happened in the industry and maybe that has helped you a little bit in your negotiations with affiliate fees and so forth. Christopher Ruddy: Well, I'm not sure it's helped with affiliate negotiations that we've had, but we've had a situation where we know that Fox was so fearful of us. They put in their agreements with other cable and MVPDs that they couldn't put Newsmax into their basic tier. And if they did, they had to pull down a lot of other Fox channels like Fox Business that have very little ratings and pay high fees. So -- and we know that was true in a number of these, especially the virtual MVPDs, companies like Sling and Hulu and others that they apparently have these agreements called drag-down rights, which were blocking mechanisms to -- if a company like Sling took us down in their basic tier, they'd have to spend $20 million or $30 million in fees to Fox to take all these channels that people didn't watch. And so they were very clever on how they did it. They didn't do it with all the operators, but they did it with some of the virtual MVPDs and we'll find out where else as we go through the litigation. We think it's extremely important to let Fox know that these bullying tactics won't work, that we're not afraid. We will take them on, and we want to ensure that in the future, we will be protected. We are seeking very significant damages as we prove that they had engaged in these practices, we believe are anticompetitive. And I might mention that if we do -- if we are found to be vindicated in the court proceedings, they will -- Fox will have to pay triple damages trouble damages to us. So we do see and we have a very respected law firm, Kellogg, one of the leaders in the antitrust area that's leading the litigation. So we think it's important for a number of reasons, including the future that we're not blocked, but also to make sure that we get reparations for any of the dealings that they did over the past 10 years to try to stop us. Michael Kupinski: One last question. You indicated you expanded to over 100 countries. I was just wondering what's the monetization strategy internationally? And when do you think international becomes a meaningful revenue contributor to the company? Christopher Ruddy: Well, the -- we have a two-pronged approach to licensing. One is we take our American channel, Newsmax and allow other cable and other operators and distributors around the world to run it. And in return, they would give us a share of their advertising or fees. So every deal is different and every country is different situation. The second option for us is people like the Newsmax brand, and there are countries where they want to have a Newsmax channel in local language. And we started this in Serbia with United Cable and it's morphed into Telecom. Serbia bought the license, which is the largest telecom company in the Balkans. And they have a channel that's the #1 rated, as I understand it, cable news channel in the Balkans is Newsmax Balkans. And we are very excited about the growth and potential there of additional licenses. We get much higher fees for the use of our name, and we cooperate with them on news, especially international news and other help. And we are looking forward to growing the number of those type of branded licenses in 2026. And we have a number of things in the works, obviously, but we do think that it will continue to grow. I mentioned in my introductory remarks, it's an area where we see a lot of activity right now, and I'm hoping to report to investors soon on some developments there that will be very positive. Operator: Thank you. This does conclude today's Q&A session, and it is also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Bassett Furniture Industries First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mike Daniel. Please go ahead. John Daniel: Thank you so much, Latanya, for the introduction. Welcome to Bassett Furniture Industries Earnings Call for the First Quarter of fiscal 2026, which ended February 28, 2026. Joining me today is our Chairman and CEO, Rob Spilman. We issued our news release and Form 10-Q yesterday after the market closed, and it's available on our website. After today's remarks, Rob and I will be open for questions. We will also post a transcript of this call on Bassett Investor Relations website following the call. During this call, certain statements we make may be considered forward-looking statements and inherently involve risks and uncertainties that could cause actual results to differ materially from management's present view. These statements are made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. The company cannot guarantee the accuracy of any forecast or estimate nor does it undertake any obligation to update such forward-looking statements. Other filings with the SEC describing risks related to our business are available on our corporate website under the Investors tab. Now I'll turn things over to Rob. Rob? Robert Spilman: Okay. Thanks, Mike. Good morning, everyone. First, I'll provide some perspective on the quarter and then lay out our initiatives going forward to grow the Bassett business. After a solid start to the first 7 weeks of fiscal 2026, the pace of business slowed abruptly in mid-January. As a result, consolidated sales declined by 2.2% due to a variety of factors. Against the backdrop of ongoing weak residential housing activity, severe weather interrupted both wholesale and retail sales as well as product distribution flow due to warehouse closures. We rely heavily on retail traffic during weekends. More than 50% of the retail fleet was closed due to weather through one weekend in January, followed by more than 25% of our locations being closed the following weekend. On the positive side, we benefited from changes to our marketing strategy this year, which expanded our President's Day promotional event to 3 weeks. This helped us drive retail sales up for the back half of February. While written sales were essentially flat for the first quarter, we had a double-digit increase in written orders for the back half of February. These sales will be delivered in the second quarter. We had margin pressure on our retail business from our decision to eat the tariff impact until midway through the quarter. In fact, retail gross margins were down 170 basis points because we did not pass this along on goods sold in the fourth quarter that were delivered in the first quarter. With the tariff costs now included in the retail pricing, we expect to see improved retail margins going forward. Wholesale margins decreased slightly primarily due to lower volume in our domestic upholstery operation. Mike will cover the details on the financials shortly. We've been conservative in designing our plan, but SG&A for the quarter remained higher than we like for the revenue we delivered, and we're addressing this. We're operating in a macro environment of challenging housing, higher political tensions, which continue as headwinds for our top line. To combat this, we have several initiatives in the works that are projected to save between $1.5 million and $2 million annually starting late in the second quarter. Looking ahead, we have organized our strategic thinking around 5 key initiatives to grow the Bassett business. The first is to generate comp store growth. We have a strong brand in Bassett. We feel good about the product offerings we have in place, and we're excited about what we have coming. Consumer response to our updated case goods collections has been good. We've also had good reception to the recent introductions of the Z4 Sleeper and the HideAway dining programs. Customers continue to love our true custom upholstery program, the most significant piece of our business, which showed a 6% increase in retail written sales in the first quarter. At the upcoming April High Point Market, Bassett will introduce new opening price point upholstery collections that offer excellent value with customized options for the consumer. As we shared previously, the Bassett Outdoor line has been absorbed into the Lane Venture brand to further leverage the strong reception and rich history behind Lane Venture, which is now more than 50 years old. Since we acquired Lane Venture in 2017, Bassett invested in domestic manufacturing infrastructure to offer custom options and to improve lead times. In addition to our teak and wicker offerings, our domestic aluminum product now represents 45% of our outdoor sales. Second, we expect further growth to come from investing to open additional retail store locations, both corporate and licensed. As we announced, we will open corporate stores in Cincinnati and Orlando this year and we will relocate a store on Long Island. The Cincinnati store is under construction, and we will begin work on our new Orlando location next week. Given the escalation of retail rents and construction costs since COVID, we will meticulously research the sales potential of future locations before we commit to a new store. Both the Cincinnati and Orlando locations have taken almost 2 years to come online by the time they open later this year. Also, we have opportunities to convert some current licensed location to corporate stores as owners retire and exit the business. We have just finished this kind of conversion in the greater Philadelphia market. The retirement of independent furniture operators with no succession plan is a trend that has picked up steam in the past several years, and Bassett licensed stores are not an exception. Under the right circumstances, this trend represents an opportunity for us to continue growing in existing markets by leveraging customer relationships and our brand. Third, we are investing to increase e-commerce sales and build a successfully integrated omnichannel experience. Retail customers are responding well to the enhancement in our e-commerce site, allowing them to see the full breadth of our offerings. The investments we've made in presentation and functionality allow us to reach many more markets where we don't have physical locations. And late last year, we began national home delivery to previously unserved geography. While overall traffic was down in the first quarter, more customers are generating more -- frequent transactions. Conversion was up 130% for the quarter, resulting in a 28% increase in orders. Our goal is to use our website to reach younger, higher income demographics to represent a strong growth opportunity. Fourth, we are enhancing the model for Bassett Design Centers, which remain a critical part of our wholesale growth strategy. With a footprint of 3,000 to 5,000 square feet, the BDC is the best representation of our brand outside of a Bassett Home Furnishing store. During the first quarter, we added 2 Bassett Design Centers and currently seek to improve the visual merchandising standards and marketing programs for the BDC fleet this year. The little sister Bassett Custom Studio concept at 1,000 feet serves as a wholesale gateway for us as we have opened 60 studios in the 2 years since its inception. The custom studio product offering focuses exclusively on the merits of our true custom upholstery program. No inventory is required and the turnaround time is short. The studio model is a great way for the open market to test the Bassett brand. We aim to convert the best customers under the Studio into full Bassett Design Centers and recently completed 3 such conversions. Fifth, we are focusing on building the interior design channel. We believe that the styling of our assortment and our ability to customize our products beautifully fit the needs of today's interior designer. We are enhancing our technology platform to cater to designers, and we are working with our independent wholesale sales force to equip them with the tools and mindset to adapt to the current world of design. To showcase our brand in a more design-centric fashion, this summer, we plan to relocate our wholesale showroom to better target this growing channel in time for the October fall market. Demolition is now progressing and extensive renovations are already taking place. This new consolidated showroom will include the Lane Venture brand, which historically has had showroom space separate from Bassett. In concert with the design effort, we are developing the hospitality and commercial channel by leveraging the quality and brand equity behind the Bassett name. The launch of the Bassett Hospitality division is underway, and we will go after contract business across various commercial areas from hotels to senior living. We have put the team in place, but this will take time to gain traction. This 5-point strategy articulates the blueprint that our management team is employing to ensure a bright future for Bassett. The challenging macro environment that we have experienced since the COVID boom makes for a difficult balance between investing to grow while controlling or cutting operating expenses. In short, we are doing both, reshaping our organization and technology to compete in a changing world and deliver improved shareholder returns. With that, I'll turn things over to Mike for details on the first quarter results. John Daniel: Thank you, Rob. In my commentary, the comparisons I'll discuss will be the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025, unless otherwise noted. Total consolidated revenue was $80.3 million, a decrease of $1.8 million or 2.2%, this consisted of a $700,000 decrease in revenue from our retail stores and a $1.1 million decrease to our external wholesale customers, primarily due to the impacts of winter weather on store operations and retail and wholesale logistics. Gross margin at 56.2% represented an 80 basis point decrease when compared to the prior year, primarily driven by lower margins in both the retail and wholesale business. Selling, general and administrative expenses, excluding new store preopening costs were 54.7% of sales, 70 basis points higher than the prior year, reflecting reduced leverage of fixed costs due to lower sales levels. Operating income was $1.2 million or 1.4% of sales as compared to income of $2.5 million or 3% of sales in the prior period. Diluted earnings per share were $0.13 versus $0.21. Now let me cover more details on our wholesale operations. Net sales were $53 million, essentially flat to last year. Net sales were impacted by a 0.6% increase in shipments to our [indiscernible] network and a 2.6% increase in Lane Venture shipments to wholesale customers, partially offset by a 5.3% decrease in shipments to the open market. As previously discussed, we introduced the Lane Venture brand in the Bassett Home Furnishing stores during the first quarter of 2026 and have included those shipments in the above change in the 0.6% increase for the retail stores. Including those shipments in the total Lane Venture brand, shipments of that brand increased 32%. Shipments were negatively impacted by winter weather because our major distribution centers were closed for multiple days during the quarter. Gross margins decreased 50 basis points from prior period as margin decreases in custom upholstery operations due to reduced leverage of fixed costs that were partially offset by improved margins in the Bassett Casegoods operations due to improved pricing strategies. SG&A expenses as a percent of sales were essentially flat compared with the prior year period. Now moving on to our retail store operations. Net sales of $52.5 million represented an $800,000 or a 1.4% decrease, again, primarily due to the impacts of the winter weather. Written sales, the value of sales orders taken but not delivered decreased 0.2%. Gross margin at 51.5% represented a decline of 170 basis points due to lower margins on in-line goods as we did not institute a price increase related to the increased tariff cost until mid-January. Total SG&A expenses as a percent of sales increased 20 basis points, primarily due to the preopening costs associated with the new stores in Cincinnati and Orlando and reduced leverage of fixed costs due to lower sales levels, partially offset by improved efficiency in the warehouse and delivery operation. Prior to opening a new store, we incur such expenses as rent, training costs and other payroll-related costs. These costs generally range between $200,000 to $400,000 per store depending on the overall rent cost for the location and the period between the time when we take physical possession of the store space and the time of the store opening. These costs should be higher in the second quarter. Now let me address our liquidity position. Our liquidity remains solid with $51 million of cash in short-term investments. With the first quarter historically being the lowest in cash generation, operating cash flow was a negative $5.5 million, which also included certain negative working capital changes, which were expected. As we previously mentioned, we plan to open 2 new stores, relocate another store and move our existing High Point showroom during the year, which will result in additional capital spending for tenant improvements. As a result, we expect total capital expenditures to be between $8 million and $12 million for 2026, considerably more than the $4.5 million we spent last year. We continue to pay our quarterly dividend and repurchase shares opportunistically. We spent $1.7 million on dividends and $147,000 on share buybacks in the quarter. We remain committed to delivering shareholder returns through dividends and when appropriate, share buybacks. Our Board also approved a $0.20 dividend to be paid May 29. Now we'll open up the line for questions. Latanya, please provide instructions to do so. Operator: Certainly. [Operator Instructions] And our first question will be coming from the line of Anthony Lebiedzinski of Sidoti. Anthony Lebiedzinski: So just thinking about the retail margins, can you help us better understand the impact of the delayed price increases that you took in mid-January and how that should impact the second quarter? Robert Spilman: Well, that's unfolding as we speak, Anthony, but we have seen since we implemented that. The tariff thing last year was difficult for the whole industry to deal with, and everybody had their own take on it. And of course, we've got a wholesale consideration and a retail consideration. So I'm giving you a little bit of the logic behind our decision. So we increased wholesale and retail prices in July. And then there were some further adjustments to the tariffs. And at that point in the fall, we said, given the environment, we don't want to put on another price increase within 60 days of what we just did. So we elected to go with it. And as we've mentioned already and you're asking about, we had that 170 basis point decline. But I can't predict exactly how these margins will come through in the quarter, but they will be closer to what we had last year than what we just reported. And so I can't give you any more insight than that. Mike, maybe you can help. I don't know if we'll get all the way back up to 170 basis points, but we are seeing improved margins so far this quarter since we have implemented the increase. Anthony Lebiedzinski: And so given the recent spike in fuel prices, are you thinking about potential additional pricing actions and/or surcharges to offset the higher delivery and shipping costs? Just wondering how you guys are thinking about what's been going on since your quarter ended. Robert Spilman: Well, in our -- on our retail side, we have a captive freight situation with J.B. Hunt, and we're receiving surcharges weekly on that depending which fluctuates with diesel prices. So yes, that's already happening. And we're also getting increases from petroleum derivative products such as foam and poly and that kind of thing. And those are fairly significant, and we will have to pass those along in the next -- they actually have not been implemented yet, but there is a -- the various dates in the next few weeks that these things will take effect. And we will have to adjust for those increases. John Daniel: And Anthony, yes, on the freight surcharge -- fuel surcharge side, we do turn-in and build back from a wholesale perspective, the freight -- or the freight surcharge that we are charged from our freight partner. So yes, that fluctuates along -- that surcharge that we bill out fluctuates with what we're getting charged from our partner. Anthony Lebiedzinski: Got you. Got it. Okay. And then just wondering if you can comment on the trends that you've seen in the business since the end of your quarter, which coincides with the start of the conflict in Iran, whether you've seen any noticeable differences in trends. I know your target customer is generally a higher income consumer, so maybe not as much impacted by fuel prices as lower income consumers. But obviously, we've seen a stock market react negatively since then. So just wondering if you could talk at a high level as to what you've seen so far the first few weeks of the -- of your current quarter. Robert Spilman: Pretty much more of the same, I would say, Anthony. We haven't had a tremendous decline, but we haven't had an uptick either. So it's still grinding it out pretty much the way I would describe it. We -- obviously, this is Easter weekend, and we're closed on Sunday and the week around Easter is always a tough week. So we're going to deal with that. But more of the same is what we're seeing. Not a lot up or down. Operator: And our next question will be coming from the line of Doug Lane of Water Tower Research. Douglas Lane: Staying on the conflict in the Middle East, are you seeing any -- are you expecting price increases? You mentioned foam and some of the plastic derivatives. What about accessibility? Do you have any -- are you worried about accessibility to some components, maybe even aluminum, a lot of aluminum goes through that part of the world. Just what's the outlook for accessibility to your materials in the near future? Robert Spilman: Doug, the only thing that really goes through that area and the Hormuz over there is product from India. And for us, and we really haven't had a noticeable issue on this, and we haven't seen container prices spike. I think that's just because of overall tepid demand across our industry and other consumer goods since all this stuff has started. But at the moment, I haven't seen an accessibility issue. Douglas Lane: Okay. Fair enough. Then switching over to the retail margins, segment margins down about $1 million. Second quarter, I guess, we benefit from better pricing, but we still have new store openings. Can you give us a feel for just directionally where we're going? Are we going to continue to have some losses on the retail side until the back half of the year, maybe even the fourth quarter when those stores come online and start producing sales and profits? How does that look? Robert Spilman: That's probably accurate. I think we can do better than we did this quarter with the better margins, and that will help quite a bit. But we've only baked in one of the store opening costs so far, and now we're going to have 2 coming this quarter. And then in our model, we don't have things on the shelf. The -- we have -- 80% of the time, we have to go make the furniture when they buy it. And so that takes another 4 weeks or 5 weeks to turn into revenue. So yes, we'll be dealing with that the rest of the year, but we're certainly not budgeting to have the margin that we just had in the first quarter. John Daniel: Right. And just to clarify what Rob said, so what happens, store opens, we'll have a couple of 3 months of losses, as Rob said, kind of filling that pipeline before we get to a steady state. So that's just the nature of the beast the way our model is. Douglas Lane: Got it. And have you talked about the potential for any tariff refunds with the Supreme Court decision, how did that decision impact the tariff landscape for 2026? Robert Spilman: I would say we don't know. Yes, we've had some conversations on that, but I don't have anything definitive to answer that question, Doug. Douglas Lane: Okay. Fair enough. Then you mentioned weather. And just help me understand, I get that the weekends is bad timing and you had 2 weekends in a row, you were impacted. But are those actually lost sales or just deferred sales? Robert Spilman: We certainly hope they're deferred, but they seem to be lost. And I've talked to a couple of guys on our Board who have been in retail and we were kind of crying in our beer about that. But yes, I mean, look, December is our weakest month of the year for written business. People don't buy a lot of Bassett Furniture or other furniture in the month of December around the holidays. So January becomes a very important month and February as well. That really starts the year off, and we're going to -- we need it. And so we started the year off pretty well until we got this. So we did mention that we had a nice increase in February. I can't really say that it was making up for what happened in those last 2 weeks of January. It's hard to point to that. But I mean, it hurt us and also hurt our deliveries quite a bit in the quarter. So I -- it feel like they're lost. I hope they're deferred, but they feel like they're lost. Douglas Lane: Okay. Fair enough. John Daniel: A little bit more -- to give that a little bit more color. So for that first 7 weeks, we were up retail written mid-single digits -- low to mid-single digits. And then after that 2-week period, for that 9-week period, we went from up low to mid-single digits to down almost double digits for that 9-week period. So that 2-week period that we had the weather pretty dramatic on retail written sales and wholesale orders. Douglas Lane: No, that was impactful. No kidding. Just one more for me. On the e-commerce sales, they're up 28%, continues to be a strong channel for you. What -- how much does e-commerce represent of your sales? And is this something you would consider breaking out separately when you report in the future? Robert Spilman: We haven't done that in the past and we'd have to think about doing it. It's still a small number, but we've had -- I think, 6 quarters now, 5 or 6 of nice double-digit growth in this. And so we're excited about it, and we continue to work on all the little nuances to improve the navigation of the site. But we haven't to date expected to break that out. Operator: And I'm showing no further questions at this time. I would now like to turn the conference back to Rob for closing remarks. Robert Spilman: Well, thank you for attending today, and I hope everybody has a good holiday weekend, and we will talk to you again in late June. So thank you very much. Operator: And this concludes today's program. Thank you for participating. You may now disconnect. Have a good day.
Operator: Good morning, and welcome to the AngioDynamics Fiscal Year 2026 Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. The news release detailing AngioDynamics' fiscal 2026 third quarter results crossed the wire earlier this morning and is available on the company's website. This conference call is also being broadcast live over the Internet at the Investors section of the company's website at www.angiodynamics.com. A webcast replay of the call will be available at the same site approximately 1 hour after the end of today's call. Before we begin, I'd like to caution listeners that during the course of this conference call, the company will make projections or forward-looking statements regarding future events, including statements about expected revenue, adjusted earnings and gross margins for fiscal year 2026 as well as trends that may continue. Management encourages you to review the company's past and future filings with the SEC, including, without limitation, the company's Form 10-Q and 10-K, which identify specific factors that may cause the actual results or events to differ materially from those described in the forward-looking statements. The company will also discuss certain non-GAAP and pro forma financial measures during this call. Management uses these measures to establish operational goals and review operational performance and believes that these measures may assist investors in analyzing the underlying trends in the company's business over time. Investors should consider these non-GAAP and pro forma measures in addition to, not a substitute for or as superior to financial reporting measures prepared in accordance with GAAP. A slide package offering insight into the company's financial results is also available in the Investors section of the company's website under Events and Presentations. This presentation should be read in conjunction with the press release discussing the company's operating results and financial performance during this morning's conference call. Unless otherwise noted, all metrics and growth rates mentioned during today's call are on a pro forma basis, which exclude the results of the Dialysis and BioSentry businesses that were divested in June 2023. The PICC and Midline products that were divested in February 2024 and the Radiofrequency and Syntrax support catheter products that we discontinued in February 2024. Also, unless otherwise noted, all comparisons will be the third fiscal quarter of 2026 versus the third fiscal quarter of 2025. Now I would like to turn the call over to Jim Clemmer, AngioDynamics' President and Chief Executive Officer. Mr. Clemmer? James Clemmer: Thank you, operator. Good morning, everyone, and thank you for joining us for AngioDynamics' Fiscal 2026 Third Quarter Earnings Call. Joining me on today's call is Steve Trowbridge, AngioDynamics' Executive Vice President and Chief Financial Officer. Our third quarter was strong across the board, and I am proud of how our team continues to execute. We maintained our trend of driving top line growth, led by impressive growth in our Med Tech segment. Beyond the top line, we continued to deliver strong profitability by expanding our adjusted EBITDA. Our performance continues to show that our strategy to drive profitable growth in our high-margin, large Med Tech markets is working. Based on that, we are once again raising our full year guidance for net sales and adjusted EBITDA. That is our third consecutive quarter of raised guidance, and Steve will touch upon the details shortly. I am very proud of the resilience we have built into the business. We've developed this company around cardiovascular and oncology markets with 3 product portfolios that we are really excited about. Along the way, we've had to work through a manufacturing transition, deal with tariffs and manage through a lot of macro uncertainty. None of that has slowed us down. That is because we have great people who know how to get the job done and the results we are putting up are not because 1 thing went right, it is years of work coming together. Within our Med Tech business, Auryon continued its strong momentum with the 19th consecutive quarter of double-digit year-over-year growth, which is a track record we are very proud of. We have consistently driven revenue growth by leveraging our superior technology to take share and our push into the hospital market keeps paying off driving both top line growth and better economics. And it is not just about taking share with our AMBITION BTK study, we are not only winning in the current market, we are working to make the market larger. Internationally, we are seeing continued traction following our CE Mark approval. Turning to our Mechanical Thrombectomy business. We loved what we saw this quarter. Our combined portfolio of AlphaVac and AngioVac grew approximately 18% over the prior year, demonstrating the superior clinical performance of this portfolio. AlphaVac in particular, had an outstanding quarter, delivering strong year-over-year growth and driving the largest sequential revenue increase we have seen since its launch. New accounts are coming on, more hospitals are bringing us through the VAC process and into inventory. And utilization within existing accounts keeps increasing. The physician feedback on this product is consistently strong. Our training and clinical education programs continue to be well received, and we are seeing strong demand from physicians who want to learn how to use this technology and bring it into their practice. On the regulatory front, we have enrolled our first patients in the APEX-Return pivotal trial, evaluating the AlphaReturn Blood Management System when used with the AlphaVac for treating acute PE. That is an important milestone, and we expect it to be a catalyst for accelerating adoption. We continue to strive to complete the approval process during the first quarter of calendar 2027. AngioVac continues to see strong demand. Together, these 2 products give us a differentiated position that we believe is unmatched in Mechanical Thrombectomy and the portfolio selling approach keeps paying off. Our sales teams are doing a great job positioning both products based on clinical need and physician preference, and we expect to see continued strong growth from the combined thrombectomy portfolio going forward. Finally, NanoKnife. We had a very strong quarter for both disposables and capital. As you know, our CPT 1 Code became effective on January 1. And what we have seen thus far has been positive. There is continued opportunity to broaden coverage across both public and private payers, and our market access team remains focused on that. With respect to the patients being treated, what our physicians are seeing in practice lines up with what our PRESERVE Study showed, in particular, excellent quality of life outcomes. We continue to see lots of organic interest in NanoKnife. And as a result, more patients are being treated each month. During the quarter, we also announced expanded European indications for NanoKnife to include soft tissue ablation for tumors of the liver, pancreas, kidney and prostate. This expanded indication supports our broad-based market in Europe and positions NanoKnife as a true multi-organ platform internationally. Our Med Device segment keeps delivering as expected, and the team running this business does a terrific job competing across multiple markets simultaneously. I am really proud of where this company is today. 5 years ago, we set out to transform AngioDynamics into a faster growing, more profitable company by getting into larger markets with better products. We've reshaped the portfolio, built the teams to support it and figured out how to make it all work. And that is what you're seeing in our numbers. Three consecutive quarters of raised guidance does not happen by accident. It is the right people doing the right things every day, and we are just getting started. With that, I'll turn the call over to Steve Trowbridge, our Executive Vice President and Chief Financial Officer, to review the quarter. Stephen Trowbridge: Thanks, Jim, and good morning, everybody. As always, before I begin, I'd like to direct everyone to the presentation on our Investor Relations website summarizing the key items from our quarterly results. Unless otherwise noted, all metrics and growth rates mentioned during today's call are on a pro forma basis, which exclude the results of the Dialysis and BioSentry businesses that we divested in June 2023, the PICC and Midline products that we divested in February 2024 and the Radiofrequency and Syntrax support catheter products that we discontinued also in February '24. Additionally, unless otherwise noted, all comparisons will be the third fiscal quarter of 2026 versus the third fiscal quarter of 2025. Company top line revenue performance was strong again in the quarter. Revenue increased 8.9% to $78.4 million, driven by growth across both our Med Tech and Med Device segments. Med Tech revenue was $37.3 million, a 19% increase. Year-to-date, our Med Tech segment is up 19.1%. For the third fiscal quarter, our Med Tech platforms comprised 48% of our total revenue compared to 44% of total revenue a year ago, reflecting the ongoing shift in our business mix. When digging into our Med Tech segment, our Auryon platform contributed $16.3 million in revenue, growing 17.9% compared to last year. Auryon has now delivered double-digit year-over-year growth for 19 consecutive quarters. Beyond what Jim mentioned, we have continued to invest in product line extensions based on what we are hearing directly from our physicians including our radio access and 1.7 millimeter catheters. That focus on listening to our customers and improving the platform is a big part of why Auryon keeps winning. Mechanical Thrombectomy revenue, which includes AngioVac and AlphaVac sales, increased 17.9% year-over-year with revenue of $11.5 million. In the quarter, AlphaVac revenue was $4.4 million, a 47.4% year-over-year increase and a greater than 24% sequential increase over Q2 of this year. AngioVac revenue was $7.2 million, a 5% year-over-year increase. In Mechanical Thrombectomy, we are seeing strong adoption driven by new accounts, increasing utilization within existing accounts and the continued expansion of our dedicated sales force. AngioVac revenue returned to growth in the quarter, and we remain pleased with the sustained procedure volumes and demand for this product. Total NanoKnife revenue was $7.6 million, an increase of 21% with probes growing 20%. Probe sales are primarily driven by demand for NanoKnife in prostate care. NanoKnife capital sales grew 24.9% and were bolstered by strong demand for new systems as new physicians and providers adopt the technology. As these systems are placed and new physicians and providers experience the improved patient outcomes our technology enables, we expect them to drive increased probe utilization going forward. The leading indicators are encouraging. Demand for our training programs is strong and the procedural trends we track give us confidence in where this business is headed. In the third quarter, our Med Device segment increased 1.1% year-over-year. Year-to-date, our Med Device segment is up 3%. This business generates consistent cash and profitability, allowing us to keep investing in the growth of our Med Tech platforms. Now moving down the income statement. Our gross margin for the third quarter of FY '26 was 52.9%, a 110 basis point decrease from the third quarter of FY 2025. As we discussed during our last earnings call for our Q2 results, the year-over-year decrease was primarily driven by the impact and timing of tariffs, inflation and certain costs associated with our manufacturing transition. These expected structural elements were partially offset by continued product mix shift towards Med Tech sales and pricing initiatives across both Med Tech and Med Device. Total operating expenses in the quarter were $54.4 million, representing 69% of sales compared to $48.8 million or 68% of sales last year. Turning to R&D. Our research and development expense was $7.1 million or 9% of sales compared to $6.9 million or 10% of sales a year ago. We remain committed to investing in R&D initiatives to support the long-term growth of our Med Tech segment and are targeting approximately 10% of sales going forward. SG&A expense for the third quarter of FY 2026 was $38.2 million, representing 49% of sales compared to $36 million or 50% of sales a year ago. This result illustrates our strategy of simultaneously investing in sales and marketing to support sustained growth, while driving operating leverage. Our adjusted net loss for the third quarter of FY 2026 was $3 million or an adjusted loss per share of $0.07 compared to an adjusted net loss of $3.1 million or an adjusted loss per share of $0.08 in the third quarter of last year. Adjusted EBITDA in the third quarter of FY '26 was $1.8 million compared to adjusted EBITDA of $1.3 million in the third quarter of '25. This year-over-year improvement is largely attributable to our Med Tech revenue growth and the success of our gross margin and operating efficiency initiatives. We've done all this while absorbing tariff costs that were not there a year ago. Now touching briefly on tariffs. Tariff expense of $1.3 million in Q3 was again in line with our expectations. As we discussed last quarter, while the tariff landscape remains dynamic, we continue to expect to incur between $4 million and $6 million of tariff expenses for the full fiscal year 2026. As a reminder, there were no tariff-related expenses in our fiscal third quarter last year. At February 28, '26, we had $37.8 million in cash compared to $41.6 million in cash at November 30, 2025. In the third quarter of fiscal '26, the company used $3.1 million of cash, slightly better than our expectations. Turning now to guidance. Based on another strong quarter and our expectations for the balance of the year, we are raising multiple components of our full year fiscal 2026 guidance. We now expect net sales to be in the range of $313.5 million to $315.5 million raised from our previously issued range of $312 million to $314 million. This increased range represents growth of between 7.1% and 7.8% over fiscal 2025 revenue of $292.7 million. On a segment basis, we are raising Med Tech net sales growth to 15% to 17% and now expect Med Device sales to grow at approximately 1%. For fiscal 2026, we continue to expect gross margin to be in the range of 53.5% to 55.5%. This is inclusive of our reiterated estimate of $4 million to $6 million tariff impact for the full year. We now expect adjusted EBITDA to be in the range of $10 million to $12 million, up from prior guidance of $8 million to $10 million, again, inclusive of our estimated tariff impact. As a reminder, adjusted EBITDA will be lower in the second half of the year than the first as our planned investments in clinical data development hit the P&L as well as the structural gross margin impacts I previously discussed. We now expect adjusted loss per share in the range of $0.30 to $0.23, improving from our prior guidance of a loss of $0.33 to $0.23. Turning to cash. We remain on course to illustrate that our business model will be cash flow positive as we expect to generate substantial cash in the fourth fiscal quarter, in line with historical trends. During the third fiscal quarter, we were advised by our sterilization vendors of their plan to implement 2 upcoming temporary shutdowns to perform maintenance activities during the fourth quarter. To proactively address this and avoid any potential commercial disruptions, we are planning to increase inventory levels for certain products during the fourth quarter. The net result will be the acceleration of the use of approximately $3 million to $5 million of cash to build inventory in the back half of this fiscal year, which normally would have been used in future periods. Now this may result in cash flow for FY '26 being slightly negative, but there is literally no modification to the positive cash generation pathway we have been on in the cash generation profile of our business. We maintain a strong balance sheet with 0 debt. With that, I'll turn the call back to Jim. James Clemmer: Thanks, Steve. And looking to the fourth quarter, we remain focused on finishing the year strong. We have built this company with a new portfolio aligned with the market and where the market is growing. We have built tremendous technologies. Every day, we bring value to our customers and the patients they serve. We are committed to grow our company in a really important way. We are committed to our shareholders to grow our value along the way. Before turning the call over to Q&A, I want to provide a quick update on the leadership transition. The Board has formed a search committee and has engaged a leading executive search firm. The process is moving forward on the time line we laid out until my successor is appointed, Steve and I will continue leading the team, driving the company's strategic and financial initiatives. And I am committed to making sure we have a seamless transition. With that, I'll turn the call back for questions. Operator: Our first question comes from the line of John Young with Canaccord Genuity. John Young: Congratulations on the quarter. I first want to start on AlphaVac, the sequential growth there was really impressive. Any additional color on the drivers? I know it was a bit subsequent to the quarter, but are you seeing any benefit today from the PE guidelines that were released in February? And maybe just how do you expect that to benefit the company in fiscal Q4 and in the following fiscal year? James Clemmer: Thanks, John. Good question. John, it's really going through according to what we expected. Each quarter that goes by, we're able to get our product into new hands or hands of a physician who heard from his partner another KOL, how well the product performs. You saw the APEX data that was generated to get our product on label. What we do is remove more clot faster and in a safe, really safe manner. So that's becoming more exposed day-to-day, John. This is normal business cycle that we expect to grow our share. Two primary ways we're doing that are more hospitals approving us through their VAC process or VAC, for everybody not knowing, is Value Analysis Committee or term, whatever each hospital uses. That basically means we pass their test to get into inventory, get on the shelf to be utilized. And usually with 1 or 2 of the other products in the market, let physicians choose. And then second, John, also, we're getting physicians who've now used it a few times getting really comfortable in the innovative features we've built into the product and getting more comfortable and choosing it over the other competitive products. So John, we expect the product to grow sequentially going forward, because it's a great design, and it's a really good market. We have 2 good competitors, as you know, but we'll win more than our share going forward. John Young: Great. And then, Steve, just on the guidance. Given the climate we're in, I think investors are probably also curious, have you baked in any impact from higher energy costs? Are you seeing any impact yet in terms of rising supplier costs? And are you giving any specific buffer for that, for the fiscal fourth quarter? And if costs do rise, what's the ability for Angio to pass on those costs to customers? Stephen Trowbridge: Yes. Thanks, John. Absolutely. We're living in a dynamic environment, as you know that. You talked about inflation, you talked about energy costs. We mentioned tariffs in the prepared markets. All of those elements definitely have an impact on the business, and they're all very hard to predict. We have built into our guidance, our expectations of the best we know today of how we're going to manage all of those different dynamic elements. So if you think about the guidance that we have, both in terms of EBITDA, profitability, as well as gross margin, we're expecting that we're going to have an impact that's embedded in there, both in terms of inflationary costs, which could include the energy increases that you've talked about as well as tariffs. And again, that remains dynamic, but it's our best guess of where things are going today. In terms of rising prices and passing on to our customers, I did mention in the prepared remarks around gross margin. We are seeing a benefit from our ability to raise prices in certain areas. That is not specifically tied to these dynamics of inflation or tariffs. It's more our ability, which is within the natural course of the commercial dealing to be able to take price with some of our superior products, both in Med Tech as well as in Med Device. We'll continue to take price where we can, but we haven't been able to explicitly take price related to some of those rising costs. So that's really up to -- it's up to us to continue to manage through the way that we have been. Operator: Our next question comes from the line of Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: I was hoping to also a follow-up on AlphaVac, just given how strong the number was there. As we think about future quarters and any gyrations in ordering patterns, should we kind of view this $4.4 million as a new baseline to grow off of? Or was there potentially some pull ahead into the quarter that could have that number step back as we go forward? I know historically, we've seen it pretty consistently grow sequentially. Just curious if that is expected to continue to be the trend going forward for the last quarter as well as into '27? Stephen Trowbridge: Frank, thanks for the question. We expect AlphaVac to continue to grow sequentially. As we've talked about, we think this is one of the drivers of growth for AngioDynamics this year as well as heading into future periods. We're very excited about the product that we have. We're very excited about being in this market. It's a huge market that's going to continue to grow. We're going to continue to take share as well as grow along with the market. So I would expect you would see AlphaVac continue to grow sequentially heading into the future periods. Frank Takkinen: Perfect. Very helpful. And then just for my second one, I was hoping to follow up on Auryon a little bit more. Any color you can provide on volume versus price and progress hospital versus OBL, would be really helpful. Stephen Trowbridge: Yes. As we've mentioned over the last number of quarters, moving into the hospital site of care has been a strategic imperative of our company. It helps us, as you mentioned, on price, it helps us on the nature of the customers, but it also helps us on setting the stage for the future. We talked about Auryon as a platform technology moving into areas like coronary. And so it's important for us to be in the hospital setting. Our team has done a great job, changing that dynamic of moving from being very OBL-centric, which is where we started due to the time frame when we launched this product. That was during COVID. We can get into the OBLs, you couldn't get into the hospitals. But now making that shift and focusing on the hospital side of care. But they've also done a great job making sure that we continue to grow that OBL business. So if you look at the Auryon results, it's being driven by both elements. The price that we're seeing by having a higher percentage of our overall revenue base in the hospital, but also by driving additional procedure volume in the OBL. We expect to continue to do that. Now we expect to continue to do that because of the product that we have, the versatility that the Auryon laser has in treating calcification, both above and below the knee. It can do things that no other product can do. So we're excited about the continued future, which is why we said we expect Auryon to be a grower as we continue to head into future years, even though we're getting to much larger revenue base than we had when we first started launching the product. Operator: Ladies and gentlemen, our final question this morning comes from the line of Yi Chen with H.C. Wainwright. Unknown Analyst: This is Katie on for Yi. I had 2 quick follow-on questions for supply chain, things that have come up. Could you give us a sense of what proportion of Med Tech cost of goods are still exposed to China sourcing of components? And how much of that is kind of addressed by the Costa Rica transition? And then if you could also provide a little color on how continuous the sterilization shutdowns might be? Is that something that will happen annually? Just something how we can think about that in terms of the supply chain? Stephen Trowbridge: On the first one on the supply chain, we haven't historically had a significant risk to component sourcing coming from China. So over the years, we didn't necessarily get some of the benefit that you may have expected in 3, 4 years ago, but we don't have the risk as we sit here today. So we don't identify component sourcing out of China as a big risk for us, either in Med Tech or our Med Device products. Inflationary impacts, we have talked about in terms of the supply chain, but it's not necessarily what I would call a China exposure. On your question around the sterilization shutdown, is it continuous. Look, these happen. It's not something that happens all the time. The reason we called it out was more because there was a little bit of a stack tolerance going into our inventory buildups as we were finishing the supply manufacturing agreement with Spectrum, which is who we sold the PICC and Midline business to, while we were continuing to our move from the rest of the products that we had out of Queensbury down to Costa Rica. So you had a couple of things that were stacking on top of this. The reason we bring it up is, it is going to be a little bit of a use of cash ahead of our expectations in the quarter. But we're doing exactly what you expect us to do. We're managing the business. That's why we have a very strong balance sheet to start with, with really good quick and current ratios. If you go through the assets and the liabilities that we have, we have a significant net cash position. We're going to generate significant cash in the fourth quarter, along with historical trends and along with our current business model updates. It allows us to be able to do what we're talking about doing and mitigate any potential disruption from sterilization shutdowns. They happen, we're going to stay close to our sterilizers. I wouldn't think of it as something that is going to be derailing in the future. We're just calling it out because we're managing our business. We're doing what everyone would expect us to do, and we're making sure there's no disruptions because of the strong position that we're in. Operator: Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Mr. Clemmer for any final comments. James Clemmer: Thank you, and thanks for joining us today and hope you got insight to what makes AngioDynamics special and shows how we can compete and win in this marketplace today, tomorrow and going forward for a long period of time. I'd like to thank our employees for really making this happen. We have a great team of people at work. But I also want to mention here at Angio this week, we lost an important member of our team. We want to recognize Jim Culhane for his work as a leader, one of our research and development leaders. Jim really lived our culture of patients first. Jim helped to build products like the AlphaVac. His great design work, the team he led really enables patients today to get better and get healthier due to our products. Jim Culhane was an important leader here, and we express our condolences to his family and friends with his recent passing. Thank you for joining us today. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the AirSculpt Technologies, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Allison Malkin of ICR. Allison, please go ahead. Allison Malkin: Good morning, everyone. Thank you for joining us to discuss AirSculpt Technologies results for the fourth quarter and 2025 fiscal year. Joining me on the call today are Yogi Jashnani, Chief Executive Officer; and Michael Arthur, Chief Financial Officer. Before we begin, I would like to remind you that this conference call may include forward-looking statements. These statements may include our future expectations regarding financial results and guidance, market opportunities and our growth. Risks and uncertainties that may impact these statements and could cause actual future results to differ materially from currently projected results are described in this morning's press release and the reports we file with the SEC, all of which can be found on our website at investors.airsculpt.com. We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During our call today, we will also reference non-GAAP financial measures. We use non-GAAP measures in some of our financial discussions as we believe they more accurately represent the true operational performance and underlying results of our business. A reconciliation of these measures can be found in our earnings release as filed this morning and in our most recent 10-K, which will also be available on our website. With that, I'll turn the call over to Yogi. Yogesh Jashnani: Thank you, Allison and good morning, everyone. I will begin with a review of our fourth quarter and fiscal year performance, followed by our progress on our strategic priorities, which have returned the business to stabilization and beginning in February inflected to positive same-store sales growth. I'll then provide an overview of our strong liquidity position reinforced by the actions we have taken over the past few months. Michael will then review our fourth quarter and fiscal 2025 financial performance and provide the 2026 outlook. Michael will also discuss what led to the delay in our 10-K filing. In the fourth quarter, we delivered sequential improvement in same-store sales versus the first 9 months of the year and higher adjusted EBITDA compared to Q4 2024. We also saw improvements in our lead and consult volumes, which has continued into 2026 and is now converting into improved revenue trends. Stepping back, 2025 represented a year of rebuilding and transformation. We added talent, improved business processes, implemented a new go-to-market strategy and added new procedures that expanded our market potential. In addition, we strategically exited our only clinic outside of North America to streamline operations. Finally, we strengthened our balance sheet, issuing equity and utilizing our ATM to meaningfully reduce our net debt. The result of this work is already evident. Our core business has stabilized with same-store sales improving from down 22% at the start of 2025 to positive in Feb 2026. Our trends continued favorably in March, and we expect Q1 same-store sales to be flat, which would be the midpoint of the revenue range previously provided. As we prepare for our busiest quarter, we are seeing broad-based improvement in revenue across our centers. This improvement is tied directly to the actions we took starting in Q4. Our achievements reflect strong progress advancing our strategic priorities. As a reminder, these include: first, introducing new services to capture our GLP-1 market opportunity; second, enhancing our sales and marketing strategy; and third, maintaining strong financial discipline, both with margins and capital allocation. Let me share an update on each. First, introducing new services to capture our GLP-1 market opportunity. GLP-1 medications have fundamentally reshaped how consumers' approach weight loss and wellness. They have also created demand for aesthetic procedures such as skin tightening, contour restoration and overall reshaping after weight loss, all of which play into our existing brand and capabilities. Fat removal and skin tightening represent some of the largest opportunities in aesthetics today. According to the American Society of Plastic Surgeons, skin tightening and skin removal market is as large as fat removal when measured in terms of procedures done in 2024. This gives us a $100 million-plus sales opportunity long term. You might recall, we rolled out stand-alone skin tightening to all centers in the second half of last year and introduced a skin excision pilot, also known as skin removal in Q4. Skin removal procedures represent another proof point of our expanded revenue opportunity. And while early, we are pleased with the performance of these additions. Patients are seeing great results, which is giving us terrific exposure as a destination for these procedures. Skin removal provides us with more levers to grow center productivity and utilization. Just in Q4 2025, we have completed more than 100 skin removal surgeries, and we expect this to ramp in 2026 as we expand this capability across all locations. We have also deployed marketing efforts to raise awareness of our unique positioning to serve these patients. These new procedures strengthen our body contouring service and revenue streams using our existing base of centers and clinic talent. Second, enhancing our sales and marketing strategy. Starting Q4 2025, we implemented an enhanced marketing strategy that is beginning to show measurable results. This included expanding into new mediums such as connected TV, increasing influencer engagement, launching focused campaigns for skin tightening and skin removal, improving website functionality and conversion flows and optimizing spend towards higher-value audiences. These marketing enhancements directly contributed to the recent improvement in volume trends, and we expect the momentum to continue. We have also improved our patient financing options to further drive conversion while maintaining our policy of full upfront payment. Turning to our third area of focus, maintaining strong financial discipline, both in our margins and capital allocation. As mentioned in the past, debt reduction has been the focus of our capital allocation strategy. We repaid over $30 million of debt over the last 5 quarters, bringing our leverage below 2.5 as of the current date. Operationally, we simplified the business and reduced costs, generating over $4 million in annualized savings in 2025 while reinvesting selectively in growth initiatives and talent. Speaking to talent, in the first quarter, we added highly experienced executives across finance, legal and operations with significant expertise in managing multiunit operations. These additions, along with our existing sales and marketing organization, provide us with a strong leadership team and the right structure to execute and deliver on our growth goals. In summary, the work completed in 2025 meaningfully repositioned the company, setting the foundation to support long-term sustainable growth by building the engine, infusing talent and strengthening our processes. Our strategy is starting to pay off. In 2026, we are experiencing accelerating sales and demand trends. Our priority is to execute consistently, build on this momentum and drive disciplined growth in order to create value for our shareholders. And with that, I will now pass it over to Michael. Michael Arthur: Thank you, Yogi, and good morning, everyone. I'm pleased to join you today on my first conference call as CFO of AirSculpt. This morning, I will share my background and then provide perspective regarding the delay in our 10-K filing. Following this, I will review our 2025 fourth quarter and fiscal year results and 2026 outlook. I come to AirSculpt with experience across public, consumer and lifestyle businesses, most recently serving as Chief Financial Officer of Inspirato, a luxury subscription travel company. During my 3 years there, I helped lead a comprehensive turnaround, strengthening operating disciplines, improving margins and restoring profitability, which ultimately culminated in a take-private transaction at a 50% premium to the prevailing trading price. I chose to join AirSculpt for 2 primary reasons; first and foremost, the underlying economics and long-term opportunity of the business is highly compelling. AirSculpt combines strong unit level performance, a differentiated offering and a brand with the right to win in a growing aesthetics market. With attractive clinic level contribution margins and a significant white space for expansion, both geographically and across adjacent procedures, the platform is well positioned for sustained scalable growth; second, I was drawn to the team and the culture. There's an alignment across the organization to improve operational discipline, ensure accountability and create long-term value. It is clear the leadership team understands the opportunities ahead and the work required to unlock them. That level of focus and commitment is energizing to step into as the CFO. We have the right strategic initiatives underway to advance our turnaround, and I'm excited to partner with Yogi and his team to accelerate those efforts. Before I discuss business performance, I want to address a few reporting items that came up at year-end. During the close process, we identified a reconciliation matter related to intercompany transactions, which led us to conduct a broader review of certain accounting treatments, including lease accounting under ASC 842. As a result of that review, we recorded immaterial changes to prior year balances in our 10-K filing. This had no impact to revenue, cash or our day-to-day operations, and we remain fully compliant with our bank covenants. The correction included the gross up of our ROU asset and lease liability by approximately $3.8 million and $3.5 million, respectively, for the prior year ending December 31, 2024. Additionally, there was corrections to prior year rent expense that decreased expense by $239,000 in 2023 and $233,000 in 2024. We recognize these issues should have been identified earlier and hold ourselves accountable. We are taking steps to strengthen our financial processes and controls going forward. Now let me turn to a review of our fourth quarter. Revenue for the quarter was $33.4 million, down approximately 15% versus the prior year quarter. Same-store revenue, which excludes centers opened for less than a year, declined 16%. The decline in revenue reflects lower case volume amidst a challenging consumer spending environment. The percentage of patients using financing to pay for procedures was approximately 50%. As a reminder we received full payment for all procedures upfront, and we have no recourse related to patients who financed their procedures with third-party vendors. Cost of services decreased $3.1 million to $13.7 million, a decline of 18% compared to prior year period, contributing gross margin expansion of roughly 2% to approximately 59%. The Selling, General and Administrative expenses were approximately $18.2 million, a decline of approximately $5 million in the quarter compared to the same period in fiscal 2024. SG&A decline was primarily a byproduct of the cost initiatives taken throughout 2025, as Yogi called out earlier. Our customer acquisition cost for the quarter was roughly $3,300 per case flat to prior year quarter. Adjusted EBITDA was $2.5 million or 7.4% of revenue, an increase of $0.6 million and 2.8% margin expansion versus prior year, driven by gross margin expansion and operational leverage in SG&A. For the full year, we reported revenue of $151.8 million, a decrease of approximately 15.8% than fiscal 2024. Adjusted EBITDA was approximately $15 million, resulting in an adjusted EBITDA margin of approximately 10%. This compares to adjusted EBITDA of approximately $21 million or an adjusted EBITDA margin of 12% in fiscal 2024. Turning to our balance sheet. As of December 31, 2025, cash was $8.4 million. We paid down $19 million of debt in 2025, $14 million on the term loan and $5 million on the revolving credit facility. Gross debt outstanding was $56 million at year end. Under our credit agreement, our leverage ratio was below 3x and we are in compliance with all covenants at year-end. Furthermore, as Yogi mentioned, we raised an additional $14.8 million from the at-the-market facility in Q1 and paid down an additional $11 million of debt principal in the period. We expect to refinance our term loan before it becomes current, targeting a net debt leverage ratio below 2.5x. The cash flow from operations for the year was $3.1 million compared to $11.4 million in fiscal 2024. Turning to our outlook. In 2026, we expect revenue in the range of $151 million to $157 million. We expect the business to build momentum as the year progresses, but the midpoint of our revenue range, reflecting approximately 3% comparable growth, excluding London from 2025. As a reminder, our London center contributed 1% to comps in 2025. We expect fiscal 2026 adjusted EBITDA in the range of $15 million to $17 million. This outlook incorporates the benefit of improved revenue growth and the annualization of our 25 cost actions. At the same time, we plan to reinvest a portion of these savings in the targeted growth initiatives to support top line expansion. As it relates to de novos, while we have plenty of runway ahead to open new centers, our guidance does not contemplate any openings this year as we continue to focus our efforts and resources on revenue growth in our existing base. As many of you are aware, helium plasma continue to perform skin tightening procedures. While we maintain a diversified network of suppliers, a meaningful portion of the global supply is currently offline due to the Iran conflict. We are monitoring the situation closely, and we will manage the business accordingly. Lastly, before I turn it back to Yogi, I want to reiterate how excited I am to be part of AirSculpt and the leadership team and to engage with our investors. There is significant opportunity ahead, and I look forward to helping unlock long-term value for all shareholders. And with that, back to Yogi for closing remarks. Yogesh Jashnani: Thank you, Michael. In conclusion, we begin 2026 with positive momentum and enhanced marketing strategy, strengthen liquidity and the opportunity for stronger future growth. With that, I'd like to turn the call over to the operator to begin the question-and-answer portion of the call. Operator: [Operator Instructions] Our first question is coming from Josh Raskin from Nephron Research. Joshua Raskin: I've got 2 here. I guess just first on the numbers. The guidance for 1Q, the revenues indicate a slight decline on a year-over-year basis, whereas full year 2026 revenue is expected to be up slightly. So I heard the building momentum commentary, but what's causing a little bit of that change in seasonality to make the revenues a little more back-end loaded this year? Yogesh Jashnani: Josh, this is Yogi. Thank you for the question. Look, we are being measured in how we guide over here. The trends have improved meaningfully, as we mentioned, exiting the year and our trajectory has gone from down 2022, '24 to positive comps. That underpins our confidence in the full year outlook. But at the same time, we do recognize that we must deliver consistent results to make sure that we can hit our numbers, and we are focused on execution at the moment. Joshua Raskin: Okay. Perfect. And then maybe if we could just take a step back, bigger picture on the body sculpting trends outside of GLP-1-related procedures, is there any way for you to isolate just sort of market-like trends for the core business prior to the skin tightening and skin removal in some of the new products? Yogesh Jashnani: Josh, great question. We continue to see that the core business around body contouring and fat removal is holding relatively steady. I think all of aesthetics saw a bit of a boom coming out of COVID. And our belief is now we're also starting to find a baseline. Now with this industry, there is constant change, and we do see GLP-1s being the next wave of that change where we are well positioned to take advantage of that. And the demand that arises from skin laxity or loose skin does play really well into our brand and our capabilities. That's why you hear the focus on GLP-1s. Operator: Thank you. Next question is from Sam Eiber from BTIG. Sam Eiber: Maybe I can start on the excisional procedures. I think I caught in the prepared remarks about 100 procedures in Q4 as part of that pilot. I guess I would love to hear what you're hearing from customers and surgeons that were part of the pilot phase and then how that maybe is going to inform the go-to-market as this rolls out into more of a broader launch across all your centers? Yogesh Jashnani: Sam, nice to talk to you as well. So what we are seeing is that we are able to provide excellent results for our patients. Our patients are coming in. They are getting good results from the procedures. We are -- as you know, for our procedures, it takes a few months before you see the final results, but the early signs are very encouraging. From surgeons as well, this is something that they are -- many of them are comfortable with. All of them are highly effective at it. So thus far, we are pleased with both the volume and also the quality of results that we are getting with the excisional procedures. As the year goes along, we would ramp it up. As a reminder, typically, these -- as I said, it takes about 3 months minimum to see the full results for a patient. So we want to make sure we look through those, make any corrections that are needed. Thus far, we've not seen anything major and then expand it from there. Sam Eiber: Okay. That's very helpful. And maybe I can just squeeze a follow-up here on a question on the balance sheet. I know you guys paid down some debt this quarter, leverage ratio is down to 2.5x. I guess how should we be thinking about capital allocation going forward, appetite for continued debt paydown versus the comfort right now at the 2.5x? Michael Arthur: Sam, this is Michael Arthur. Thanks for the question. Yes, we -- our #1 priority still is to get the balance sheet in a healthy position. And we've done a lot of that work over the last year or so. As I mentioned, we are in early stages, but looking to refinance the debt, but targeting around the levels we're at now and somewhere below net debt of 2.5x. Beyond that, the capital allocation strategy hasn't changed much, which is really investing back into the business, both on sales and marketing and then ultimately, probably not in 2025, but new de novos as well as we look to expand our clinic portfolio. Operator: We've reached end of our question-and-answer session. I'd like to turn the floor back over to Yogi for any further closing remarks. Yogesh Jashnani: Thank you, Kevin, and team, thank you for joining us this morning. I also want to thank the AirSculpt team and our network of surgeons that provide excellent care and results to our patients. Together, we are powering the next chapter in AirSculpt's growth. We look forward to sharing our progress when we report Q1 results. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Sven Doebeling: Good morning, everyone, and thanks for joining us for the Adler Group 2025 Results Call. Speakers today, as usual, are our CEO, Dr. Karl Reinitzhuber; and our CFO, Thorsten Arsan. Both will guide you through today's presentation and then answer your questions. Please note that this call is being recorded and will be made available on our website where you can also find today's presentation. For me, today marks my first results call with you since I took over the role as Head of Investor Relations and Communications at the end of 2025. I look forward to staying in close contact with you going forward. You will find my contact details on the last slide of this presentation. And with that, I'll hand it over to Karl. Karl Reinitzhuber: Good morning, everyone, and thank you, Sven. Before we start with the Q4 numbers, let me give you an overview of our recent asset disposals on Page 4. As communicated in our press release from 9 February, we continue to make good progress on the disposals of our development projects and Q4 was a particularly eventful quarter. In December '25, we closed UpperNord Tower, which had been signed in April. Furthermore, we closed Quartier Kaiserlei in January '26 and Benrather Garten in March '26, following their signing in Q4 '25. The proceeds from these 3 transactions were used to further reduce the first lien new money facility in the first quarter of '26. In addition, we signed Holsten Quartier in Hamburg during October '25. The first closing of this transaction happened yesterday. We have received more than 80% of the purchase price. The remaining proceeds for a smaller part of the plot will be received within -- with the second closing in the coming months. Sales efforts for the remaining projects will continue with high priority throughout the year. Some of the sales processes are well advanced, and we expect further signings in the coming weeks. As we continue to experience good momentum in the disposal of our development assets, let me reiterate my take on the market environment for residential development and new building in Germany from the Q3 investor presentation. Now my perception is that the environment for residential developers has continued to stabilize over the recent months. Municipalities are more supportive of new housing projects, while construction costs are not rising above the CPI. Financing remains challenging, but transactions get done. Just to be clear, we do not expect any material price uplift for our remaining developments. Still, we are building a solid track record of disposals through focused and competitive sales processes. The effect of the increased interest rates driven by the Iran war remains to be seen. But as of today, this seems not to immediately impact the German residential development business as their perspective is more long term. We made also progress in disposal of our nonstrategic yielding assets in Berlin. We sold Kornversuchsspeicher and 2 more buildings in Berlin for an aggregate amount of EUR 33 million. Parkhaus Loschwitzer Weg closed in December '25 and both Kornversuchsspeicher as well as Hedemannstrasse closed yesterday, and we received the purchase price. We continued the disposal of our noncore assets in Eastern Germany and North Rhine-Westphalia, thereby reducing the remaining units outside of Berlin from 117 down to 49. Further disposals of these noncore assets are in the pipeline. We also signed 6 condominium units in Berlin for a total sales price of EUR 2 million. With EUR 245 million, our disposal holdback basket remains almost fully filled, unchanged versus 3 months ago. We will return the net proceeds from the recent closings of approximately EUR 125 million in the coming days to the [indiscernible] investors and banks. Let me now turn to our key figures on Page 6. First, to the financial overview. Our net rental income came in at EUR 132 million. Compared to the prior year period, net rental income decreased substantially as a result of the disposals of BCP and the North Rhine-Westphalia portfolio early in '25. Net rental income for '25 came in well within our net rental income guidance in the range of EUR 127 million to EUR 135 million. The adjusted EBITDA from rental activities amounted to EUR 72 million with a slightly higher margin compared to last year. The adjusted EBITDA total was negative as the Development segment did not contribute positive earnings. As more and more development projects are being sold and we are downsizing the organization, the negative financial impact from the development business is becoming smaller as well. Our group's equity position stands at EUR 0.9 billion. The LTV increased slightly to 76.3%, in line with our expectations. Our cash position amounts to EUR 214 million. Thorsten will provide more color on financials later in the presentation. Next, to the portfolio performance. Overall, our Berlin-anchored yielding portfolio continued its strong operational performance, fully in line with what we have seen throughout the year. We are happy with the performance of our rental portfolio in the recent quarter, particularly with the 3.6% like-for-like rental growth. We'll have a closer look at all KPIs on the following slides. Let me first discuss our revaluation results realized in the second half of '25. We continue to see a different dynamic for yielding assets and for development projects similar to the first half. Valuations for our yielding assets continue to stabilize with another slight increase of 0.6% reported for HQ '25. On the other side, there was a negative like-for-like valuation of development assets of minus 6.5% in H2 '25. Values are still under pressure due to continuously rising construction costs as well as flat values for new build residential apartments in Germany. Let's now proceed to portfolio and operational performance on Page 8. At the end of December '25, we were holding on to 17,504 rental units. This is a decrease of 191 units compared to September, driven by the disposals in Q4, which I mentioned before. As a reminder, our portfolio is fully Berlin anchored with more than 99% Berlin assets. Only 49 units are located outside of Berlin, and we expect to sell these units within the coming quarters. In terms of value, the GAV of our yielding portfolio remained stable at EUR 3.5 billion with a marginal increase in valuations offsetting disposals. The GAV per square meter increased slightly to EUR 2,875, up from EUR 2,847 in Q3. Moving on to Page 9 to update you on yielding portfolio revaluation and rental. Now as in previous periods, our semiannual portfolio valuation was conducted by CBRE. After 3 consecutive years of like-for-like value declines, our portfolio recorded a positive like-for-like fair value change of 0.6% in H2 '25 following plus 0.4% in H1. In 2025, valuations have been marked up by an aggregated 1%, a further validation of the stabilization in the residential real estate market. Rental growth outpaces the development of valuations, leading to an increase in rental yield from 3.5% to 3.6%. Again, it remains to be seen how the interest rates and the real estate markets will move in the coming months with war in the Middle East and Ukraine and a rather fragile world economy. Let's now move on to Page 10 to further discuss our operational KPIs. We achieved 3.6% like-for-like rental growth year-on-year, well in our target of around 3% per year. This is substantially higher than the 1.8% we reported last year in December with 2024 being subdued due to the timing of Mietspiegel and CPI-related adjustments in '23 and '24. Rent increases for almost 1,000 rental units became effective in the fourth quarter. Over the last 12 months, we have increased the rents of over 9,000 of our residential units, thereof half CPI indexed and half Mietspiegel-based leases. This is more than half of our portfolio. The rental growth of 3.6% is a healthy and sustainable level that reflects increases on current rental contracts as well as ongoing reletting activities. We are confident to report a rental growth number north of 3% again at year-end '26. The government of the State of Berlin has announced recently that a new Berlin Mietspiegel will be published midyear '26. We can expect some tailwind for '26 and even more for '27 from that new Mietspiegel. Average rent increased from EUR 8.29 per square meter per month reported a year ago to EUR 8.61 in December '25. This is the first time that the average rent for last year is not distorted by the North Rhine-Westphalia portfolio, which had structurally lower rents compared to our Berlin assets. These units were excluded in the prior year figures. On a like-for-like comparable basis, the average rent grew from EUR 8.30 to EUR 8.61. Turning to our vacancy. Our operational vacancy rate remains at a very low level of 1.3%, matching the rate for our Berlin assets a year earlier. This confirms the continuous demand for rental apartments in Berlin, driven by continued population growth and the very limited new housing supply. Now I would like to hand it over to Thorsten, who will walk you through the financials, starting on Page 12. Thorsten Arsan: Thank you, Karl, and also a warm welcome from my side. At the end of 2025, our yielding portfolio was valued at EUR 3.5 billion and our development portfolio at around EUR 500 million based on externally appraised values. This brings our total GAV to EUR 4 billion at the end of December 2025, slightly down from EUR 4.2 billion in September 2025. This change was primarily driven by the signing and closing of 3 development projects, Holsten, Offenbach and Benrather Garten, as stated earlier. Moreover, as mentioned before, the development projects saw a like-for-like devaluation of minus 6.5% compared to the previous quarter. This lowered the GAV by around EUR 36 million compared to Q3 2025. In yielding assets, there was a slight decrease in value resulting from disposals of 68 of the remaining rental units based in Eastern Germany, 121 rental units in Berlin and 6 condominium units also in Berlin. The decrease in value resulting from disposals was more or less compensated by the positive revaluation result of plus 0.6% during the second half of '25. Let's now move on to the financial update on Page 13. Let me briefly walk you through the debt repayment update. As you know, we continue to use ongoing inflow of disposal proceeds to deleverage our capital structure. In Q4 2025, we made a partial redemption under the first lien new money facility, returning EUR 6 million to investors. This repayment was from proceeds received from condo sales in Berlin. We made further partial redemptions of the first lien new money facility in Q1 '26, amounting to EUR 51 million in total. This including EUR 11 million repaid on 2nd of January '26 following the closing of UpperNord Tower, EUR 17 million repaid on 15th of January from the closing of the Offenbach development project in Parkhaus and EUR 23 million repaid on 20th of March after the closing of Benrather Garten. As already mentioned by Karl, we will return net proceeds from the recent closings of approximately EUR 110 million in the coming days, alongside with the repayment of bank debt of EUR 15 million. Turning to the 2026 maturities. The remaining EUR 50 million Adler Real Estate bond falling due in April '26 have been repaid on March 16 from disposal proceeds in line with the new money facility. As already outlined in Q3, we also successfully completed the prolongation of a EUR 9 million secured bank loan, extending the maturity from March '26 to Q4 '28. This is another good example of constructive discussions with our lending banks, especially where assets in Berlin provide strong collateral. The remaining EUR 80 million of 2026 bank maturities discussions are well progressing. These are standard bilateral talks with the respective lenders. And based on the tone so far, we expect to reach prolongation agreements well ahead of maturity. Overall, the picture remains unchanged with the continuous inflow of disposal proceeds and supportive dialogue with banks. The 2026 maturity profile is largely addressed, and we remain focused on reducing the first lien facility with further disposal proceeds. Let's now move on to Page 14 and take a look at our current debt KPIs. With limited redemptions of the first lien new money facility in Q4, our total nominal interest-bearing debt remains at EUR 3.7 billion. Our LTV increased slightly to 76.3% as we had expected. The weighted average cost of debt decreased by 0.1% points to 7% at the end of December, and our average debt maturity is around 3.4 years with the vast majority of our financing maturing only in 2028 or later. Based on our request, S&P withdrew its rating of the remaining Adler Real Estate bond 2026 notes in Q4 2025. There was no obligation to maintain this rating, and the notes have been fully redeemed earlier this month. All other ratings, including the issuer rating of B- with stable outlook remain unchanged. Let's turn to the debt maturity schedule on Page 15. The debt maturity picture looks largely unchanged compared to 3 months ago. Looking ahead, our next significant maturity is in 2027, where we have a total of EUR 89 million secured loans. Discussions with the lenders of the 2027 bank maturities are progressing, and we are confident these will be addressed well ahead of maturity. As you can see on this slide, 97% of our financial debt matures in 2028 or beyond. Let's turn to LTV on the next page, Page 16. LTV increased this quarter by 280 basis points as anticipated, mainly due to the usual impact from interest expenses, both paid and accrued and CapEx. As always, as a reminder, kindly notice that our bond LTV covenant with a threshold of 90% is calculated differently, leading to a lower figure than stated here. Let's continue with cash on the next page, Page 17. At the end of the fourth quarter, our cash position stood at EUR 240 million, in line with our expectations. You see the development of the cash position in the usual format on this slide. On the cash inflow side, we realized proceeds from various disposals as discussed earlier. Yielding asset disposals include proceeds from the closing of condominium and smaller asset sales. Development asset disposals include proceeds from the completed sale of UpperNord Tower and office development projects. These were largely returns to investors of the first lien notes as highlighted earlier. The net decrease in our cash position resulted primarily from interest expense, debt repayments and capital expenditures spent on our development assets, particularly construction activities around our forward projects. And with that, back to you, Karl. Karl Reinitzhuber: Thank you, Thorsten. Let me now conclude this presentation with some final remarks and our guidance for 2026. Now for the year 2026, we expect net rental income in the range of EUR 124 million to EUR 129 million. As you can see in the bridge, this decrease compared to 2025 reflects the impact of our strategic disposals, particularly the North Rhine-Westphalia portfolio in February '25 and is partly offset by rental growth. Finally, let me summarize some key points relevant for '26. We have seen clear signs of stabilization and gradual recovery in yielding asset values over the last 18 months. As mentioned before, we cannot foresee the directions of interest rates and real estate markets on the back of the Iran war. We are delivering on our strategy. We continue to strengthen our Berlin portfolio. Disposals of development projects are progressing, and we adjust our organization to the small business. With no bond maturities until '28, Adler Group has good flexibility to determine its next strategic steps. The Board of Directors is being advised by Evercore, a leading international investment bank and strategy adviser to evaluate strategic options for the Berlin residential portfolio and the related financing structures. This open-ended review represents a key strategic focus for the company in '26, and we will keep you updated on this process. The debate on expropriation of private housing in Berlin is a growing concern in our reasoning. Even if the process of the expropriation initiative is not expected to commence before the Berlin election in September '26, we closely monitor the events and the legal assessment. And with that, I would like to thank you for dialing in. We are now looking forward to your questions. Sven Doebeling: Thank you Karl and Thorsten. And I hand it over to our operator [ Moritz ] to open up for Q&A. Operator: [Operator Instructions] So it looks like there are no questions. So I would now like to turn the conference back over to Karl Reinitzhuber for any closing remarks. Karl Reinitzhuber: Yes. Thanks, Moritz. Well, thanks, everyone, for joining today. We will publish our first quarter report on May 28, and the respective results presentation will take place on the same day. Thorsten and I look forward to speaking to you then. All the best for everyone. We close the call.
Operator: Good morning, and welcome to PEDEVCo's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Today's program is being recorded. I would now like to turn the call over to Laurent Weil of Elevate IR. Please go ahead, sir. Laurent Weil: Thank you, operator, and good morning, everyone. Welcome to PEDEVCO's Fourth Quarter and Full Year 2025 Earnings Call. With me today are Doug Schick, President and Chief Executive Officer; R.T. Dukes, Chief Operating Officer; and Bobby Long, Chief Financial Officer. Before we begin, I would like to remind everyone that today's discussion includes forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially. For more information, please refer to our 2025 Form 10-K and other SEC filings. The company undertakes no obligation to update or revise any forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA. Reconciliation to the most directly comparable GAAP measures are available in our earnings release and 10-K filing. These non-GAAP measures should not be considered in isolation or as substitutes for GAAP results. I would also note that all per share and share count figures referenced today reflect the company's 1-for-20 reverse stock split, which became effective on March 13, 2026, and has been applied retroactively for all periods presented. As of March 27, 2026, the company had 30,300,621 shares of common stock outstanding. As many of you know, this is PEDEVCO's first earnings call as a combined company following the completion of the Juniper merger on October 31, 2025. Today, you will hear about both the reported results and the normalized earnings power of the combined platform, which we believe is the more relevant lens for evaluating the company going forward. Here is today's agenda. Doug will begin with opening remarks outlining the company's strategy and investment case, followed by R.T. with an operational update, and then Bobby will walk through our financial performance. After our prepared remarks, the management team will open the call for questions. With that, I will turn it over to Doug. John Schick: Thanks, Laurent, and good morning, everyone. Thank you for joining us today for our first earnings call as a combined company. 2025 was a transformational year for PEDEVCO. Through the closing of our merger with the Juniper portfolio companies on October 31, we built a scaled Rockies-focused energy platform, which we believe is unique in the public oil and gas space due to its extensive development inventory relative to its market cap. We went from producing approximately 1,500 barrels of oil equivalent per day to a combined rate that averaged over 5,300 BOE per day in the fourth quarter. Our proved reserves nearly doubled to 32.1 million BOE or approximately $27 per share on a post-split basis. We hold over 310,000 net acres across the D-J Basin, Powder River Basin and Permian Basin with an approximately 88% liquids mix and well over a decade of identified inventory. Our independent reserve engineers' valuation of our proved reserves provides a useful floor for the asset value discussion. And that valuation does not include over 1,000 additional identified drilling locations, a vast majority of which are high-impact wells that can be pad drilled to multiple formations to maximize efficiency and cash returns on capital deployed. I also want to underscore the alignment at this company. Insiders, including the management team own a significant majority of PEDEVCO, so we are focused on maximizing the value of the shares while minimizing risk. Our largest investor, Juniper Capital, is a seasoned oil and gas private equity firm that has been investing in the space for over 20 years. Juniper invested approximately $18.6 million of new equity at the merger, which demonstrates their strong commitment to the company's success. Turning to our fourth quarter results. It's important to note that because the merger closed on October 31, our reported results only include a partial contribution from the acquired assets. In the fourth quarter, we generated $15.4 million of adjusted EBITDA on over 5,300 barrels of oil equivalent per day of production, reflecting an initial period of combined operations. Bobby will walk you through the full bridge and our 2026 outlook, but the headline is this. Adjusted EBITDA in the fourth quarter grew 203% year-over-year despite a 16% decline in realized crude oil prices, reflecting both the impact of the merger and the underlying operational strength. This merger wasn't just about getting bigger. It was about building scale and adding capabilities to the team, which will allow for efficiencies and additional growth. We now have production and cash flow base that allows us to operate the business more efficiently and generate strong margins while utilizing our internally generated cash flow to further develop our extensive asset base. Importantly, the core business stands on its own. We do not have to do deals to be a good company because we have such an extensive development inventory already. From here, acquisitions are about building on our strong foundation and our focus for any acquisition will be to build upon what we already have, which is an efficient company that generates significant cash flow and owns a large amount of attractive development opportunities. And we will weigh every potential acquisition relative to our existing opportunity set. We have significant development opportunities across all 3 basins, and we'll pursue that development at a pace that reflects financial discipline. The management team and our large shareholders are focused on maintaining a strong company that can thrive in any commodity price environment. Looking ahead, our focus is straightforward. First, we will continue to optimize the business, driving down costs and improving margins across the asset base. We are also focused on prioritizing our extensive development opportunity set with the goal of maximizing the risk-adjusted returns on our capital deployed over many years. With over 1,000 identified drilling opportunities across 3 basins in over a dozen different formations, we have substantial optionality on where to deploy capital. I want to give investors a clear message of what we are focused on. First, you will see our cash realized per barrel produced improve over the course of 2026 as our ongoing optimization projects continue to improve our cost structure. Second, you will see us execute on a capital plan that generates strong returns on capital while maintaining a strong balance sheet. Finally, you will see PEDEVCO maintain and grow its deep inventory of development opportunities, which we plan to more fully detail over the coming quarters. As we think about 2026, the macro environment has become more constructive in the recent weeks with geopolitical developments supporting higher oil prices. That said, our approach does not change. We're not building a plan that depends on commodity prices moving in our favor. Our focus remains on maximizing the efficiency of every barrel produced and every dollar spent while generating consistent cash flows across cycles. If the current price environment holds, it provides incremental upside, both in terms of cash flow and the pace at which we can execute our development plan. But we will remain disciplined in how we allocate capital and we'll scale activity in line with what our business can support. With that, I will turn it over to R.T. Dukes. Reagan Dukes: Thanks, Doug, and good morning, everyone. I want to start with what we view as the low-hanging fruit, high-return activity we began immediately after the merger closed, which is our cost optimization on our existing production base, and then I'll cover key operational highlights. As we look ahead to 2026, a key priority for us is indeed the execution of a comprehensive cost optimization program across our assets. When we completed the transformative merger with Juniper's Rocky portfolio late last year, it significantly increased the scale and production of our company, and it presented an opportunity to optimize our overall cost structure. Specifically, we have identified around $10 million to $13 million in capital projects that we believe will drive meaningful lease operating expense or LOE reductions. This includes things like converting high-cost jet pumps to more efficient rod pumps as well as compression optimization projects, recompletions and well cleanouts. We expect these projects to reduce our LOE by up to $1 million per month, equating to $10 million to $12 million in annual savings. To give you a sense of where we stand, we've begun executing on a number of these optimization initiatives in the DJ Basin, including initial pump conversions and well work. This is an active ongoing effort with identified projects and a clear plan of execution. As we move through 2026, we expect to make steady progress across these work streams and begin to see the impact in our cost structure and margins. We will report on that progress each quarter. Now turning to operations. The DJ Basin is the largest production base of the combined company. We hold approximately 100,000 net acres across Southeastern Wyoming and Northern Colorado. The DJ contributed the large majority of Q4 and full year production and is where majority of the current 2026 capital budget is currently expected to be allocated. During 2025, in the DJ Basin, we participated in 32 wells, of which 31 began contributing production in late 2025 and 1 operated well will be completed in 2026. Of the 31 new wells that came online in late 2025, 2 of these wells were operated and 29 were non-operated. In the Permian Basin, we drilled and completed 4 operated wells in 2025. On the production side, there are a couple of points worth highlighting. The development work initiated before and around the merger close is now being realized. 31 of the 32 wells that were in progress at closing are online and producing, and the development program is performing well. That activity is contributing to elevated production in Q1 2026 as those wells are still in their flush production phase. In fact, it's important to keep in mind that Q1 will likely be a peak production quarter for 2026. Given the number of wells brought online in a short period of time, this is not a run rate that should be annualized for us for the year. As those wells move through their decline curves, we would expect production to settle closer to levels consistent with the merger time rate of approximately 6,400 to 6,500 BOE per day before accounting for natural declines in new activity. Through the merger, we added over 200,000 additional net acres in the Powder River Basin. This is a longer-dated position with meaningful resource potential across multiple formations, including the Parkman, Sussex, Niobrara, Turner, Mowry, Teapot, Shannon and Frontier. With breakeven oil prices in some of those formations as low as $30 per barrel, other active operators in this area are targeting many of them already on offset acreage with some of the largest and most sophisticated oil and gas companies like EOG, Devon, Oxy and Continental, amongst others. Our development timing in the PRB will be driven by commodity prices, cash flows and our expected returns, which are continually being revised based on results of third-party drilling near our assets. In the Permian, we hold approximately 14,000 net acres on the Northwest Shelf with the San Andres formation as our primary target. This asset provides a long-term, low-decline oil concentrated asset, providing steady cash flow. Production continues to perform in line with expectations. Across the portfolio, our focus is on maintaining flexibility, controlling cost and allocating capital to the highest return opportunities. With those highlights, I'll turn it over to Bobby. Robert Long: Thank you, Ark, and good morning, everyone. I will cover 4 areas today: our financial results for the fourth quarter and full year 2025, our 2026 outlook, the balance sheet and liquidity framework and our capital program. Starting with our fourth quarter results. We generated $23.1 million of revenue, $15.4 million of adjusted EBITDA and production of 483,159 BOE. These results reflect 2 months of contribution from the acquired assets following the October 31 merger close and provide the most relevant view of the combined platform. On a GAAP basis, reported results reflect several items tied to the merger and transition. For the full year, we reported a net loss of $10.4 million, driven by $7.5 million of nonrecurring merger costs, $8.1 million of deferred income tax expense, $1.4 million of interest expense on our credit facility, a $1.4 million note receivable write-off and $2.8 million of additional accelerated share-based compensation. These were partially offset by gains on derivatives and asset sales. Adjusted EBITDA removes the noncash and nonrecurring items and gives you a clear view of operating performance. Regarding unit economics, full year direct LOE was $11.62 per BOE, up from $10.36 driven entirely by higher cost of the acquired assets. As the optimization efforts take effect, we expect per unit LOE to decline through 2026 with meaningful improvement visible by midyear. Cash G&A, excluding merger costs, should settle in the $3.50 to $4 per BOE range as a larger production base absorbs overhead. Turning to our 2026 outlook. As noted in our earnings release, we are projecting full year 2026 adjusted EBITDA of $60 million to $70 million. That range is based on average realized oil prices of $65 per barrel and average realized gas prices of $3.50 per Mcf, and it reflects our current expected capital program. I want to be clear about what is and is not in that range. It assumes the base production profile plus the benefit of our cost optimization work. It does not assume incremental operated development beyond what has been planned. If we elect to pursue additional high-return development, there will be upside to that range. This highlights the flexibility of the company. With our deep inventory, we have many levers to pull to increase returns to shareholders. On to the balance sheet. At December 31, we had $87 million drawn under our senior secured revolving credit facility led by Citibank. The facility has $120 million borrowing base under a $250 million maximum commitment that matures October 31, 2029. Since year-end, we drew an additional $11 million, bringing the total to $98 million as of February 5, 2026, with approximately $25 million of total liquidity remaining. Our spring redetermination will provide an updated view on borrowing base capacity. Turning to the capital program. Our currently known capital expenditures for 2026 are $16 million to $20 million, approximately $6 million to $7 million for DJ Basin drilling and completion capital, including approximately $3 million of 2025 carryover and approximately $10 million to $13 million for the optimization projects R.T. described. Approximately 90% of the current capital budget is allocated to the DJ Basin. However, as noted previously, the amounts and allocation are likely to be revised over time. We expect to fund the program through operating cash flow, existing cash and facility availability. At $65 oil, we project a leverage ratio of approximately 1.2 to 1.3x net debt to EBITDA by year-end. Any decisions to expand the capital program will be governed by commodity prices, cash flow and our commitment to conservative leverage. In general, we are focused on maintaining leverage of 1.5x or less using conservative commodity price assumptions. We are not committing to a second half development acceleration at this time, though we are evaluating operating development options. As our cost optimization reaches full run rate and the combined platform generates a full year of cash flow, we expect the financial profile of this company to strengthen meaningfully into 2027. Thank you all for your attention. I will now turn it back to the operator for questions. Operator: And our first question for today comes from the line of Nicholas Pope from ROTH Capital. Nicholas Pope: Kind of curious about the capital program. Obviously, prices have been pretty elevated here for the commodities. I guess what would it take to pivot to more activity? I guess, specifically in the DJ Basin, like how drill-ready is PEDEVCO at this point to add more activity if kind of higher prices persist for longer and that becomes something you all would kind of like to pursue just more activity in the basin. What -- I guess, how ready are you? Are the pipes ready? Are the rigs ready? How long would it take to pivot to more activity if that's what you all decide to do at some point? John Schick: Yes. So Nick, considering the current price environment, we are doing extensive asset reviews on what our second half and 2027 development programs are going to look like. Particularly in the DJ Basin, there is flexibility to stand up a rig relatively quickly, like not in the next month, but in the next few months if that opportunity exists. Also, we have significant partner-operated type developments that could be coming at us in the second half and 2027 in the DJ Basin. So there's significant flexibility to increase the development program and CapEx program if prices warrant and if the curve -- if the backwardation in the curve kind of straightens out a little bit. Nicholas Pope: In terms of permitting, are you all -- what's the time frame to get prepared from a permitting standpoint? I guess maybe -- and is it different on both sides of that Colorado, Wyoming? John Schick: Yes, it's different on both sides of the border, right? In Colorado, it takes a lot longer, but we do have one permitted DSU, which is 6 to 7 wells that is actionable. And then we also have another DSU in progress right now. So that's 12 to 13 wells that could be ready in the next, call it, 6 months to 9 months. And then on the Wyoming side, we have some infill opportunities in our North Silo field. And then we also have all of our partner-operated projects in Colorado. That -- we don't necessarily control the development of those, but those -- some of those AFEs will likely be coming at us in the second half and into 2027 as well. Nicholas Pope: And kind of moving over to the Powder River Basin. I guess what steps are left in terms of evaluating the resource and the potential? I know, R.T. you hit a little bit on it, but I guess what risks remain in kind of understanding that resource? And maybe it sounds like maybe the 2027 or kind of beyond kind of plan to kind of target more activity up there. But curious what steps are remaining there to kind of understanding the potential. John Schick: There are some locations up there that are actionable sooner than 2027, '28. However, we're currently going through our asset reviews to really understand that asset and to -- we're working on a few different areas that we think are highly prospective, but we don't have any announcements on anything -- any development plan up there in the next 6 months. Operator: And our next question comes from the line of Dave Storms from Stonegate. David Joseph Storms: Just wanted to maybe start with some of the optimization initiatives. I know you mentioned the $10 million to $13 million that could be coming out this year. I guess how far along do you feel like you are in the identification of what can be taken out? Could we see other projects of this size over the coming quarters? And is there any place that you're looking -- maybe the first rock that you're looking under for those projects? John Schick: Well, the optimization projects began pretty much right before the beginning of the year. R.T., how -- what do you think the timing is on that? I mean we're -- we basically plan to have most of that work done by the third, fourth quarter of this year on the LOE side. On the G&A side, we're working through merger costs and things like that and combining the entities and getting everything rationalized. So that $13 million to $15 million of annualized EBITDA additions from optimization is really kind of a late 2026, 2027 event as we work through it through this year. Reagan Dukes: Yes, that's right, Doug. Really starting -- leading into winter, we backed off and then we're picking back up coming out of the winter up in Wyoming on our field optimization and continue throughout the year and into midyear 2027. David Joseph Storms: That's perfect. I really appreciate that. And maybe just following up on that. Post merger, you've had the company for a couple of months now. I guess maybe some of your thoughts around the scale and production capacity as it currently sits relative to maybe your expectations pre-merger. I know you mentioned that you're still at 6,400 to 6,500 BOE per day. But I guess, has anything else changed relative to where you thought you'd be, call it, last September, October? John Schick: Yes. I mean I think our -- when we did the merger, we had 32 wells in progress, right? And the majority of those wells have outperformed their type curves. So first quarter looks pretty good. As we stated in the script here, you can't extrapolate the first quarter over the entire year. However, we do think that we've got a very solid production base. And as far as growing the asset organically, for a small-cap E&P company, public E&P company this size, I don't think anyone has as large of an inventory as we do, a multiyear inventory, 10-year plus of inventory. As we stated earlier, most of the near-term stuff is going to be in the DJ Basin and then with the Powder Basin -- or the Powder River Basin kind of becoming our core focus in the next few years. David Joseph Storms: Understood. And if I could just maybe sneak one more in. I know you guys are still getting your arms around this acquisition. But would just love to hear what your thoughts are around any current M&A opportunities in the market. Has the macro environment made this less conducive? Do you have any appetite if you see something attractive? Just any thoughts around any future M&A. John Schick: Yes, sure. I mean when we partnered with Juniper to do this, our entire goal of the company was to consolidate a public company in the Rockies, right? And so we've got the DJ assets. We have the Powder River assets. There are extensive acquisition opportunities in the Powder River Basin, lots of small operators up there, lots of acreage that we could go acquire to build a much larger position, and we plan to do that. Of course, over time, as commodity prices change, acquisitions become either more difficult or less difficult. In higher price environments, you typically want to drill your own inventory a little more. In lower price environments, you want to be more -- you want to do more accretive acquisitions because you can kind of lock in your returns with hedging. So we're going to be active on all fronts, but acquisitions are opportunistic, right? And there are some out there, but we're going to be working to acquire, and we're going to be working to develop. Our goal here is to turn PEDEVCO from a small-cap company to a mid-cap company. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Doug for any further remarks. John Schick: Thank you, operator, and thank you all for your questions. 2025 was the year we built this platform. 2026 is the year we demonstrate its potential. We look forward to showing you our progress throughout the rest of the year. And thank you for your time, and thank you for your interest in PEDEVCO. Have a good day. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Sven Doebeling: Good morning, everyone, and thanks for joining us for the Adler Group 2025 Results Call. Speakers today, as usual, are our CEO, Dr. Karl Reinitzhuber; and our CFO, Thorsten Arsan. Both will guide you through today's presentation and then answer your questions. Please note that this call is being recorded and will be made available on our website where you can also find today's presentation. For me, today marks my first results call with you since I took over the role as Head of Investor Relations and Communications at the end of 2025. I look forward to staying in close contact with you going forward. You will find my contact details on the last slide of this presentation. And with that, I'll hand it over to Karl. Karl Reinitzhuber: Good morning, everyone, and thank you, Sven. Before we start with the Q4 numbers, let me give you an overview of our recent asset disposals on Page 4. As communicated in our press release from 9 February, we continue to make good progress on the disposals of our development projects and Q4 was a particularly eventful quarter. In December '25, we closed UpperNord Tower, which had been signed in April. Furthermore, we closed Quartier Kaiserlei in January '26 and Benrather Garten in March '26, following their signing in Q4 '25. The proceeds from these 3 transactions were used to further reduce the first lien new money facility in the first quarter of '26. In addition, we signed Holsten Quartier in Hamburg during October '25. The first closing of this transaction happened yesterday. We have received more than 80% of the purchase price. The remaining proceeds for a smaller part of the plot will be received within -- with the second closing in the coming months. Sales efforts for the remaining projects will continue with high priority throughout the year. Some of the sales processes are well advanced, and we expect further signings in the coming weeks. As we continue to experience good momentum in the disposal of our development assets, let me reiterate my take on the market environment for residential development and new building in Germany from the Q3 investor presentation. Now my perception is that the environment for residential developers has continued to stabilize over the recent months. Municipalities are more supportive of new housing projects, while construction costs are not rising above the CPI. Financing remains challenging, but transactions get done. Just to be clear, we do not expect any material price uplift for our remaining developments. Still, we are building a solid track record of disposals through focused and competitive sales processes. The effect of the increased interest rates driven by the Iran war remains to be seen. But as of today, this seems not to immediately impact the German residential development business as their perspective is more long term. We made also progress in disposal of our nonstrategic yielding assets in Berlin. We sold Kornversuchsspeicher and 2 more buildings in Berlin for an aggregate amount of EUR 33 million. Parkhaus Loschwitzer Weg closed in December '25 and both Kornversuchsspeicher as well as Hedemannstrasse closed yesterday, and we received the purchase price. We continued the disposal of our noncore assets in Eastern Germany and North Rhine-Westphalia, thereby reducing the remaining units outside of Berlin from 117 down to 49. Further disposals of these noncore assets are in the pipeline. We also signed 6 condominium units in Berlin for a total sales price of EUR 2 million. With EUR 245 million, our disposal holdback basket remains almost fully filled, unchanged versus 3 months ago. We will return the net proceeds from the recent closings of approximately EUR 125 million in the coming days to the [indiscernible] investors and banks. Let me now turn to our key figures on Page 6. First, to the financial overview. Our net rental income came in at EUR 132 million. Compared to the prior year period, net rental income decreased substantially as a result of the disposals of BCP and the North Rhine-Westphalia portfolio early in '25. Net rental income for '25 came in well within our net rental income guidance in the range of EUR 127 million to EUR 135 million. The adjusted EBITDA from rental activities amounted to EUR 72 million with a slightly higher margin compared to last year. The adjusted EBITDA total was negative as the Development segment did not contribute positive earnings. As more and more development projects are being sold and we are downsizing the organization, the negative financial impact from the development business is becoming smaller as well. Our group's equity position stands at EUR 0.9 billion. The LTV increased slightly to 76.3%, in line with our expectations. Our cash position amounts to EUR 214 million. Thorsten will provide more color on financials later in the presentation. Next, to the portfolio performance. Overall, our Berlin-anchored yielding portfolio continued its strong operational performance, fully in line with what we have seen throughout the year. We are happy with the performance of our rental portfolio in the recent quarter, particularly with the 3.6% like-for-like rental growth. We'll have a closer look at all KPIs on the following slides. Let me first discuss our revaluation results realized in the second half of '25. We continue to see a different dynamic for yielding assets and for development projects similar to the first half. Valuations for our yielding assets continue to stabilize with another slight increase of 0.6% reported for HQ '25. On the other side, there was a negative like-for-like valuation of development assets of minus 6.5% in H2 '25. Values are still under pressure due to continuously rising construction costs as well as flat values for new build residential apartments in Germany. Let's now proceed to portfolio and operational performance on Page 8. At the end of December '25, we were holding on to 17,504 rental units. This is a decrease of 191 units compared to September, driven by the disposals in Q4, which I mentioned before. As a reminder, our portfolio is fully Berlin anchored with more than 99% Berlin assets. Only 49 units are located outside of Berlin, and we expect to sell these units within the coming quarters. In terms of value, the GAV of our yielding portfolio remained stable at EUR 3.5 billion with a marginal increase in valuations offsetting disposals. The GAV per square meter increased slightly to EUR 2,875, up from EUR 2,847 in Q3. Moving on to Page 9 to update you on yielding portfolio revaluation and rental. Now as in previous periods, our semiannual portfolio valuation was conducted by CBRE. After 3 consecutive years of like-for-like value declines, our portfolio recorded a positive like-for-like fair value change of 0.6% in H2 '25 following plus 0.4% in H1. In 2025, valuations have been marked up by an aggregated 1%, a further validation of the stabilization in the residential real estate market. Rental growth outpaces the development of valuations, leading to an increase in rental yield from 3.5% to 3.6%. Again, it remains to be seen how the interest rates and the real estate markets will move in the coming months with war in the Middle East and Ukraine and a rather fragile world economy. Let's now move on to Page 10 to further discuss our operational KPIs. We achieved 3.6% like-for-like rental growth year-on-year, well in our target of around 3% per year. This is substantially higher than the 1.8% we reported last year in December with 2024 being subdued due to the timing of Mietspiegel and CPI-related adjustments in '23 and '24. Rent increases for almost 1,000 rental units became effective in the fourth quarter. Over the last 12 months, we have increased the rents of over 9,000 of our residential units, thereof half CPI indexed and half Mietspiegel-based leases. This is more than half of our portfolio. The rental growth of 3.6% is a healthy and sustainable level that reflects increases on current rental contracts as well as ongoing reletting activities. We are confident to report a rental growth number north of 3% again at year-end '26. The government of the State of Berlin has announced recently that a new Berlin Mietspiegel will be published midyear '26. We can expect some tailwind for '26 and even more for '27 from that new Mietspiegel. Average rent increased from EUR 8.29 per square meter per month reported a year ago to EUR 8.61 in December '25. This is the first time that the average rent for last year is not distorted by the North Rhine-Westphalia portfolio, which had structurally lower rents compared to our Berlin assets. These units were excluded in the prior year figures. On a like-for-like comparable basis, the average rent grew from EUR 8.30 to EUR 8.61. Turning to our vacancy. Our operational vacancy rate remains at a very low level of 1.3%, matching the rate for our Berlin assets a year earlier. This confirms the continuous demand for rental apartments in Berlin, driven by continued population growth and the very limited new housing supply. Now I would like to hand it over to Thorsten, who will walk you through the financials, starting on Page 12. Thorsten Arsan: Thank you, Karl, and also a warm welcome from my side. At the end of 2025, our yielding portfolio was valued at EUR 3.5 billion and our development portfolio at around EUR 500 million based on externally appraised values. This brings our total GAV to EUR 4 billion at the end of December 2025, slightly down from EUR 4.2 billion in September 2025. This change was primarily driven by the signing and closing of 3 development projects, Holsten, Offenbach and Benrather Garten, as stated earlier. Moreover, as mentioned before, the development projects saw a like-for-like devaluation of minus 6.5% compared to the previous quarter. This lowered the GAV by around EUR 36 million compared to Q3 2025. In yielding assets, there was a slight decrease in value resulting from disposals of 68 of the remaining rental units based in Eastern Germany, 121 rental units in Berlin and 6 condominium units also in Berlin. The decrease in value resulting from disposals was more or less compensated by the positive revaluation result of plus 0.6% during the second half of '25. Let's now move on to the financial update on Page 13. Let me briefly walk you through the debt repayment update. As you know, we continue to use ongoing inflow of disposal proceeds to deleverage our capital structure. In Q4 2025, we made a partial redemption under the first lien new money facility, returning EUR 6 million to investors. This repayment was from proceeds received from condo sales in Berlin. We made further partial redemptions of the first lien new money facility in Q1 '26, amounting to EUR 51 million in total. This including EUR 11 million repaid on 2nd of January '26 following the closing of UpperNord Tower, EUR 17 million repaid on 15th of January from the closing of the Offenbach development project in Parkhaus and EUR 23 million repaid on 20th of March after the closing of Benrather Garten. As already mentioned by Karl, we will return net proceeds from the recent closings of approximately EUR 110 million in the coming days, alongside with the repayment of bank debt of EUR 15 million. Turning to the 2026 maturities. The remaining EUR 50 million Adler Real Estate bond falling due in April '26 have been repaid on March 16 from disposal proceeds in line with the new money facility. As already outlined in Q3, we also successfully completed the prolongation of a EUR 9 million secured bank loan, extending the maturity from March '26 to Q4 '28. This is another good example of constructive discussions with our lending banks, especially where assets in Berlin provide strong collateral. The remaining EUR 80 million of 2026 bank maturities discussions are well progressing. These are standard bilateral talks with the respective lenders. And based on the tone so far, we expect to reach prolongation agreements well ahead of maturity. Overall, the picture remains unchanged with the continuous inflow of disposal proceeds and supportive dialogue with banks. The 2026 maturity profile is largely addressed, and we remain focused on reducing the first lien facility with further disposal proceeds. Let's now move on to Page 14 and take a look at our current debt KPIs. With limited redemptions of the first lien new money facility in Q4, our total nominal interest-bearing debt remains at EUR 3.7 billion. Our LTV increased slightly to 76.3% as we had expected. The weighted average cost of debt decreased by 0.1% points to 7% at the end of December, and our average debt maturity is around 3.4 years with the vast majority of our financing maturing only in 2028 or later. Based on our request, S&P withdrew its rating of the remaining Adler Real Estate bond 2026 notes in Q4 2025. There was no obligation to maintain this rating, and the notes have been fully redeemed earlier this month. All other ratings, including the issuer rating of B- with stable outlook remain unchanged. Let's turn to the debt maturity schedule on Page 15. The debt maturity picture looks largely unchanged compared to 3 months ago. Looking ahead, our next significant maturity is in 2027, where we have a total of EUR 89 million secured loans. Discussions with the lenders of the 2027 bank maturities are progressing, and we are confident these will be addressed well ahead of maturity. As you can see on this slide, 97% of our financial debt matures in 2028 or beyond. Let's turn to LTV on the next page, Page 16. LTV increased this quarter by 280 basis points as anticipated, mainly due to the usual impact from interest expenses, both paid and accrued and CapEx. As always, as a reminder, kindly notice that our bond LTV covenant with a threshold of 90% is calculated differently, leading to a lower figure than stated here. Let's continue with cash on the next page, Page 17. At the end of the fourth quarter, our cash position stood at EUR 240 million, in line with our expectations. You see the development of the cash position in the usual format on this slide. On the cash inflow side, we realized proceeds from various disposals as discussed earlier. Yielding asset disposals include proceeds from the closing of condominium and smaller asset sales. Development asset disposals include proceeds from the completed sale of UpperNord Tower and office development projects. These were largely returns to investors of the first lien notes as highlighted earlier. The net decrease in our cash position resulted primarily from interest expense, debt repayments and capital expenditures spent on our development assets, particularly construction activities around our forward projects. And with that, back to you, Karl. Karl Reinitzhuber: Thank you, Thorsten. Let me now conclude this presentation with some final remarks and our guidance for 2026. Now for the year 2026, we expect net rental income in the range of EUR 124 million to EUR 129 million. As you can see in the bridge, this decrease compared to 2025 reflects the impact of our strategic disposals, particularly the North Rhine-Westphalia portfolio in February '25 and is partly offset by rental growth. Finally, let me summarize some key points relevant for '26. We have seen clear signs of stabilization and gradual recovery in yielding asset values over the last 18 months. As mentioned before, we cannot foresee the directions of interest rates and real estate markets on the back of the Iran war. We are delivering on our strategy. We continue to strengthen our Berlin portfolio. Disposals of development projects are progressing, and we adjust our organization to the small business. With no bond maturities until '28, Adler Group has good flexibility to determine its next strategic steps. The Board of Directors is being advised by Evercore, a leading international investment bank and strategy adviser to evaluate strategic options for the Berlin residential portfolio and the related financing structures. This open-ended review represents a key strategic focus for the company in '26, and we will keep you updated on this process. The debate on expropriation of private housing in Berlin is a growing concern in our reasoning. Even if the process of the expropriation initiative is not expected to commence before the Berlin election in September '26, we closely monitor the events and the legal assessment. And with that, I would like to thank you for dialing in. We are now looking forward to your questions. Sven Doebeling: Thank you Karl and Thorsten. And I hand it over to our operator [ Moritz ] to open up for Q&A. Operator: [Operator Instructions] So it looks like there are no questions. So I would now like to turn the conference back over to Karl Reinitzhuber for any closing remarks. Karl Reinitzhuber: Yes. Thanks, Moritz. Well, thanks, everyone, for joining today. We will publish our first quarter report on May 28, and the respective results presentation will take place on the same day. Thorsten and I look forward to speaking to you then. All the best for everyone. We close the call.
Operator: Good morning, and welcome to Lumexa Imaging's Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to introduce Sue Dooley, Lumexa Imaging's Head of Investor Relations. Sue, please go ahead. Sue Dooley: Thank you, and good morning, everyone. We appreciate you joining us today. Leading today's call are our Chief Executive Officer, Caitlin Zulla; and Tony Martin, our Chief Financial Officer. Before we begin, I want to note that we will be discussing non-GAAP financial measures that we consider helpful in evaluating Lumexa Imaging's performance. You can find details on how these relate to our GAAP measures, along with reconciliations in the press release that is available on our website. We will also be making forward-looking statements based on our current expectations and assumptions, which are subject to risks and uncertainties, including factors listed in our press release and in our various SEC filings. Actual results could differ materially, and we assume no obligation to update these forward-looking statements. With that, I'd like to now turn the call over to Caitlin. Caitlin, please go ahead. Caitlin Zulla: Thanks, Sue. Good morning, and thank you all for joining us today on our first earnings call as a public company. The fourth quarter of 2025 marked a strong close to an important year for Lumexa Imaging, and we delivered steady and consistent growth in revenue and EBITDA that exceeds our preliminary earnings announcement. We generated consolidated revenue of $267.7 million, up 7.9% over Q4 of last year. Adjusted EBITDA of $63.8 million represented an 18.6% increase over Q4 of last year and delivered a 23.8% adjusted EBITDA margin. We completed 1.4 million advanced imaging exams system-wide in the quarter, which is a 7.7% increase year-over-year. 2025 was a year marked by several meaningful achievements for Lumexa Imaging. Here are a few of the highlights. We advanced our growth plans, achieving a record number of de novo openings and driving strong same-center growth. We launched a successful rebrand of the company, rolling out our new name, Lumexa Imaging to better represent our shared purpose, our innovative spirit and our commitment to bringing greater access and exceptional care to more patients and more communities. We completed our IPO, bringing greater awareness of our company to the investment community, broadening access to our value creation opportunity and by using proceeds to reduce our leverage profile, freeing up more cash to support our plans for profitable growth. I'd like to take a moment to reflect on the fundamentals of our business and the reason I believe we have a strong runway for continued growth. Our straightforward value proposition continues to resonate with patients, providers and payers as demonstrated by our high patient Net Promoter Scores, which are consistently over 90. We provide enhanced access to high-quality imaging that helps move patients through treatment in more convenient settings and at meaningfully lower cost than hospital outpatient department or HOPD sites of care. We benefit from several long-term demand tailwinds, including aging populations with complex and chronic conditions, new treatment paradigms that require advanced imaging, increasing rates of preventative screening and an ongoing migration from hospital and inpatient settings to outpatient imaging amidst a fragmented and capacity-constrained industry landscape. Our commercial efforts are directed at higher growth and higher reimbursing advanced imaging modalities, including MRI, CT and PET scans. We also offer routine modalities like X-ray and ultrasound, which are strategic and position us as a convenient and comprehensive solution for patients, even though those modalities are a less meaningful driver of our financial results. We are deploying a focused and disciplined profitable growth algorithm grounded in same-center growth, geographic expansion, strategic service line expansion and delivering efficiencies across our company, including select AI-enabled solutions. And by leveraging technology, including our existing tech stack as well as innovations being developed in coming months and years, we are well positioned to drive better outcomes and efficiencies. We turn the page to 2026 with confidence fueled by strong execution and a sense that at Lumexa Imaging, we are in the early innings of capitalizing on the opportunities ahead of us. We are inspired by our mission to expand access to high-quality imaging through elevated compassionate care, improving lives and advancing health care across the country. Next, I would like to take a moment to review the key strategic initiatives we have in our sights for 2026. First, driving same-center growth is our primary strategic focus. As a reminder, increased procedure volume generally accounts for approximately 2/3 of our revenue growth and the remaining 1/3 is attributed to rates, driven by both increases in both rate per unit and acuity mix or percentage of advanced modalities. Our commercial team is laser-focused on driving same-center growth. To bring this to life, I'll share a couple of examples from the fourth quarter. In Orthopedic, we launched a targeted marketing and sales outreach campaign, which drove incremental growth from one of our highest referring specialty provider categories during their peak surgical season. Another area where our teams are driving momentum is mammography. Approximately 85% of our screening volume comes from existing patients who returned for their annual exam, reflecting high levels of patient trust and retention. Leveraging our CRM capabilities and proactive scheduling during patient visits, we were able to meaningfully increase our annual screening compliance rate. We also initiated marketing efforts to drive a healthy increase in new mammography patients in 2025. When annual compliance rates increase, more instances of breast cancer are detected and treated early, saving lives and lowering the cost of health care. As we drive more demand within our existing centers, we are also taking steps to become more efficient to meet this growing outpatient imaging volume. Here are a few examples. With the benefit of an AI-enabled faster scanning technology, we increased schedule throughput by nearly 40% while also improving image clarity since introduction. Our FastScan integration and rollout was approximately 50% complete across all of our centers by the end of 2025, and we expect to reach about 2/3 adoption by the end of 2026. Another innovation we are integrating is virtual cockpit for remote MRI scanning. This technology allows us to minimize the impact of machine downtime, flex our staffing schedules and extend hours to serve our patients. Our next strategic priority for 2026 involves geographic expansion. We aim to achieve this through new de novo openings, JV partnerships and carefully selected M&A. We view de novo openings as foundational to driving future growth. In 2025, we opened nine new centers, a record for our company. As a reminder, our typical de novo ramps and reaches breakeven in about one year, and our 2024 and 2025 cohorts of centers are tracking right in line with those expectations. Looking ahead, we plan to open 8 to 10 de novos annually and are agnostic as to whether those are in wholly owned or joint venture structures. We opened our first de novo of the year in February and currently have very good line of sight to reaching our 2026 goal for new sites. We look forward to providing you with more details as the year unfolds. Joint ventures represent the next area of our strategic focus for 2026. Joint ventures are a key differentiator, aligning health system priorities with our expansion strategy. Health systems are increasingly seeking ways to participate in the rapid site of care shift to outpatient imaging and opportunities to grow their outpatient ambulatory footprint. Our JV model provides a highly effective entry point. Through the clinical, commercial and operational excellence we demonstrate, particularly in de novo development, Lumexa Imaging is well positioned to help systems execute against these ambitions while remaining focused on their broader enterprise priorities. In return, these partnerships accelerate our presence in any given market. We are cultivating a robust pipeline of potential partners with multiple ongoing conversations at various stages. I'd like to highlight a recent example that illustrates the power of our approach to joint ventures. In the back half of last year, we entered into a new partnership with the University of Pittsburgh Medical Center. Through this, we're working with UPMC to help them achieve their goals of providing access to lower cost, high-quality and more convenient imaging. At the same time, we are broadening our own footprint to include Pennsylvania, expanding our reach to 14 states. It's early on in our partnership, but we are actively advancing site location planning. We are energized to have been chosen as a partner by this results-oriented and forward-thinking health system. When it comes to M&A tuck-ins, we are continuously evaluating accretive opportunities and will remain very disciplined in our approach. At the end of the fourth quarter, we completed one small tuck-in acquisition of a new facility in North Carolina, an extension of our strong partnership with Atrium. Another strategic priority for 2026 involves offering new strategic service lines to drive acuity mix and achieve efficiencies through innovation. Two areas I'd like to highlight as examples are mammography with cardiac screening known as breast arterial calcification and PET. We recently launched breast arterial calcification or BAC screenings as a cash add-on assessment for cardiac health at our mammography locations in South Jersey. Cardiovascular disease is one of the leading causes of death for women with over 60 million women in the U.S. living with some form of heart disease. As noted in a study published in the Journal of the American College of Cardiology, BAC can be used as a biomarker to evaluate calcium buildup in the breast arteries, which may indicate increased cardiovascular risk. Acceptance of this add-on has been strong since inception. PET is another strategic area of focus for us and was a contributor to our growth and increase in acuity mix in 2025. Our Lumexa Alzheimer's Center of Excellence helps identify patients who may benefit from emerging onset dementia therapies with amyloid PET exams. Patients who receive this therapy need up to five MRIs for side effects monitoring. Improved pet access is a valuable way we can enable their care. Our full year PET volumes increased mid-teens on both a consolidated and system-wide basis. BAC and PET drive both volume and rate for us, and we're in the process of expanding these strategic service lines to other geographies. I'd like to take a moment to speak about our approach to innovation. At Lumexa, we take a partnering approach to leveraging technology and incorporating artificial intelligence across our business. We believe this approach allows us to accelerate adoption, benefit from reduced capital intensity and enjoy the flexibility to leverage the best proven solutions as they rapidly come to market. In the fourth quarter, we reached an agreement to partner with Ferrum Health, a leading AI convener. Simply put, Ferrum acts as an AI clinical imaging app store, providing us access to FDA-cleared apps through a single integrated pathway. Through this partnership, we can quickly turn on, evaluate and measure the effectiveness of hundreds of AI applications that we can implement across modalities and workflows while protecting our data and our insights. We're driving best-of-breed technology across our entire company. Our centralized back-office teams are also participating in this push for innovation as well, using emerging agentic and generative AI functions to increase efficiencies. Wrapping up, I'm pleased with our Q4 results, and our team is energized by the success to deliver on our strategic priorities for the year to come. We believe we're in the early stages of capitalizing on the significant opportunity ahead of us and that Lumexa is well positioned to deliver profitable growth this year and beyond. I want to say a huge thank you to our dedicated team members and our radiologists. Our accomplishments are a direct result of their hard work and commitment to providing the highest quality imaging experience for our patients who rely on us. I'll now turn the call over to Tony to review our fourth quarter in more detail. Tony? J. Martin: Thank you, Caitlin, and thank you all for joining us today to discuss our results. On today's call, I'll review the financial results and speak to some key drivers of our performance in the quarter. I will then provide our outlook for full year 2026. To supplement my review of our GAAP financials on today's call, I will cite some system-wide metrics to help you better understand our overall performance and the breadth of our business. System-wide metrics include all centers that we operate, including the 102 that we wholly own as well as the 86 centers that we operate in our eight joint ventures with health systems. Our health system JV centers' revenues and expenses are not included in our GAAP revenues and expenses due to our minority ownership position, but they are important drivers of our performance because we do record our pro rata ownership share of their net income and their cash flows in ours, and we pick up our pro rata share of their EBITDA and our adjusted EBITDA. Details of our JV financial performance are included in our quarterly financial statement disclosures. We ended 2025 with a strong Q4 performance, one that exemplified our long-term growth algorithm and our focus on advanced modalities, including MRI, CT and PET. Consolidated revenues for the full year of $1.023 billion increased 7.8% compared to 2024. System-wide revenues increased 8.2% compared to 2024. We also delivered adjusted EBITDA of $230.2 million, which increased 14.6% compared to 2024, representing an adjusted EBITDA margin of 22.5%. Our cash flows were strong and delivered a more than half turn reduction in leverage ratio during a year in which we opened a record 9 new centers, with leverage coming down an additional 2 turns to 3.5x levered in December as a result of our IPO and related debt refinancing. Turning to our fourth quarter financials, starting with revenues. In the fourth quarter, consolidated revenues came in at $267.7 million, an increase of 7.9% compared to the same period last year. This growth was most heavily driven by our return in network with a large payer in New Jersey. We also saw an increase in the volume of procedures in other locations and a continued mix shift toward advanced imaging, which has higher rates. We experienced strong system-wide performance across all of our outpatient sites, both wholly owned and in JVs. As shown in our financial tables, system-wide revenue growth was 10.6% in the quarter. Revenue per unit, which includes both scan and read revenue, also benefited from modest increases in contracted rates with payers who appreciate our lower price point compared to hospital-based services. Our outpatient revenues also grew as we ramped four sites added in 2024 and the nine new sites we opened across 2025. Additionally, our professional fee revenues, which comprise our second operating segment, were $66.8 million, reflecting growth of 10.6%. Finally, management fee and other revenues were $57.2 million. These revenues consist of two primary components. First, we're paid a management fee by each of our health system JVs to operate the outpatient centers in those JV structures. Second, we employ center employees and directly pay for certain IT and other services on behalf of the JV sites and essentially lease them back to the JV without an associated margin. We call these pass-through revenues. We disclosed the amount of pass-through revenues in a table accompanying our quarterly earnings release. Expenses related to the refinancing of our debt and other transaction costs in our IPO year resulted in a GAAP net loss of $28.7 million for the quarter compared to a net loss of $25.1 million in the fourth quarter of last year. Adjusted EBITDA for the fourth quarter was $63.8 million compared to $53.7 million in the same period last year, representing an increase of 18.6%. Adjusted EBITDA margin was a healthy 23.8%, up 150 basis points from the prior year fourth quarter, underscoring the scalability of our operating model and strong execution of margin expansion initiatives. I'll remind everyone that adjusted EBITDA reflects our pro rata ownership share of EBITDA of all our centers, both the ones we wholly own and those in health system JVs. A quick note on stock-based compensation. Our stock-based comp can be viewed in two components. First is the expensing of shares that were issued as part of the purchase price for some businesses we acquired during 2020 and 2021. These costs will be fully amortized during 2026. Second is the expensing of equity instruments granted to management and employees, which is expected to continue to be part of stock comp beyond 2026. Turning to the balance sheet. We ended the quarter with $58.8 million of cash and cash equivalents compared to $26.1 million at the end of 2024. We've materially strengthened our balance sheet. As I described earlier, we delevered over half a turn simply through the operation of the business during 2025 despite opening a record nine de novos. Then in December, we used $406 million of net IPO proceeds to pay down debt, which reduced our leverage ratio by 2 more turns. In December, we also received improved credit ratings from both S&P and Moody's to B+ and B2, respectively, and we refinanced our term loan at a more favorable interest rate. The result of this balance sheet strengthening activity is an anticipated annual cash savings of more than $50 million. Sometimes people ask about the debt of our unconsolidated health system JVs. We'll always disclose that figure in our quarterly reporting. But I'll note here that the total at year-end was $69 million, attributed mainly to financing of equipment purchases at the centers. That number is not included in our balance sheet or our computation of leverage ratios for lenders. But if we were to include our pro rata ownership share of this debt, our leverage ratio would only increase by about 0.15x. We consider our JVs to be capital-efficient business models that support our growth objectives and generate significant cash flows for us and our health system partners. Our business continues to generate strong cash flow. Before moving to guidance, I want to reiterate our three capital allocation priorities. First, we plan to fund de novo facility growth, equipment upgrades and investments in strategic service lines. Second, we may make carefully chosen strategic tuck-in acquisitions. While these are part of our growth matrix, our 2026 guidance is not dependent on future M&A. And third, over the longer term, we aim to reduce our leverage profile to below 3x. Given the durable cash generation of our business, we believe we're well positioned to execute on these three priorities. Put another way, we believe our business provides the flexibility to naturally delever even while fully funding our ongoing capital needs and growth strategy. Now turning to our outlook for full year 2026. Unchanged from our pre-announcement earlier this month, we continue to expect revenue to be in the range of $1.045 billion to $1.097 billion and adjusted EBITDA to be in the range of $234 million to $242 million, which includes approximately $7 million of public company costs that were not incurred in 2025. At the midpoint, the adjusted EBITDA growth rate, excluding the addition of these costs in our first full year of operations as a public company would be 7%. And today, we're adding guidance for adjusted EPS, which we expect to be between $0.71 and $0.77 per share. We expect continued growth in volumes with advanced modalities growing faster and representing an increasing share of the mix. This is important as advanced imaging drives higher revenue per procedure and higher margins. Other modalities impact our profits, but some drive profit more than others, and our marketing efforts reflect that. For example, X-ray volumes were 15% of our system-wide volumes in 2025, but only 5% of our revenues. We do not provide quarterly guidance, but as we think about Q1, I want to share some additional color that may be helpful in framing expectations. From a seasonality perspective, the first quarter is typically our lowest for revenue and adjusted EBITDA. And then our results ramp throughout the year with the fourth quarter consistently being our strongest, driven by patients seeking care ahead of annual deductible resets. With Q1 2026 largely behind us, we want to note some atypical timing dynamics. First, we believe our strong Q4 performance was in part due to some pull forward of volumes from January into December. Second, New Jersey, Texas and three other Southern states were impacted in Q1 by storms, causing some impact to volumes. While we were able to recover a portion of these volumes within the quarter, we anticipate these dynamics to result in Q1 adjusted EBITDA being approximately flat compared to Q1 of 2025. We believe we can make up the remaining lost volume throughout the course of 2026, and we remain confident in our full year guidance. As we set our sights on the longer term, in alignment with the discussions we had at the time of our IPO, we believe we're building a durable growth engine fueled by de novo growth, same-center sales expansion and expanding strategic service lines. We're in the early days of implementing our growth initiatives. And as new centers ramp and acuity mix shifts with industry tailwinds supporting our growth, we believe we can consistently deliver revenue growth at least in line with that of the market. Further, our attractive unit economics give us confidence we can consistently grow our adjusted EBITDA at a rate higher than our revenue growth. Wrapping up my review of our financials. 2025 was an exciting year of milestones and profitable growth, and we put the building blocks in place for long-term shareholder value creation. Echoing Caitlin, I'm pleased with our performance in the quarter, ending the year on strong footing. I also want to recognize that none of it would have been possible without the hard work of our dedicated team. Operator, would you please open the call to questions. Operator: [Operator Instructions] Our first question comes from the line of John Ransom with Raymond James. John Ransom: So as we think about 2026, how do we think about the growth in advanced imaging versus routine? Does it look like 2025? I know there was a distortion from the Blue Cross tuck-in. And then as you think about the rhythm of opening your new centers, how do we think about the quarterly rhythm of that as we move through the year? Caitlin Zulla: Thank you so much, John. Yes. So we remain focused on continuing the growth of our advanced imaging. We are incredibly proud of the strength that we were able to show in fourth quarter and throughout the year. As we said in our prepared remarks, throughout the year, advanced imaging grew 8% on a same-center basis, 7.1% on -- excuse me, on a consolidated basis and 7.1% system-wide. We will continue to see that growth at a rate higher than our routine. When we think about routine, it really is combined of three different modalities. You have your ultrasound, your mammography and your X-ray. X-ray, just by the nature of the speed and the accessibility, it is the largest end. It's the biggest number. It's the biggest piece. And obviously, we provide that for strategic reasons. But as Tony shared in his prepared remarks, it is not correlated to the overall performance of the business, and you saw that in Q4. So we'll continue to focus on the strength of advanced and excited to see that continue to grow. And then answer your questions about de novos, thrilled to say that we've already opened up this year, on track to deliver that 8 to 10. We've got really good visibility in terms of pacing, expect it to be more second half of the year weighted with more of the openings, but we will have some additional openings in the first half as well. Operator: Our next question comes from the line of Whit Mayo with Leerink Partners. Benjamin Mayo: Tony, any help on cash flow and CapEx for the year? And then how much of the CapEx is expected to be the equipment upgrades? Just any thoughts would be helpful. J. Martin: Sure, Whit. Yes, as I've discussed in the prepared remarks and previously, it's a strong cash-generating business, thankfully. We're able to carry out all of our growth initiatives while delevering each year. And that really sets us up, especially after the IPO, bringing down our debt and generating even more cash to be used in the future to kind of continue that delevering. As to how that's played out in 2025, we will be filing our 10-K not later than March 31, which will have more details on how -- what the spend consists of. But we do remain heavily focused on the de novos as a huge chunk of that spend, investing in the existing centers for growth. And then there is a maintenance component that is kind of the minority of the spend, but is necessary to ensure that we continue to have what we need at the existing sites. Benjamin Mayo: Okay. Well, just back on the cash flow this year, just trying to think about the bridge from '25 to '26. Would it be just simplistically easy to look at just the EBITDA growth and then adding back the $50 million of interest savings to get to a reasonable number? Or are there any other variables or considerations that we should think about? J. Martin: At this point, we're not really guiding on cash flow. And so I'll caveat whatever I say about that, at least for the moment in our young, early journey as a public company. But yes, high level, the company is experiencing the EBITDA growth you described, a lot of interest savings. 2026 will continue to be kind of a high capital spend year just because of the continuation of what we did in 2025 in terms of the growth CapEx and ensuring that the fleet is fully up to current needs for us. So we've spent a little more on maintenance than usual, and we'll probably continue to do that in 2026. But directionally, you're thinking about it the right way. Operator: Our next question comes from the line of Benjamin Rossi with JPMorgan. Benjamin Rossi: Just on the rate side within your 2026 guidance, what are you factoring for pricing in 2026? And how are you thinking about expectations for rate growth across your main books for commercial, Medicare and Medicaid payers this year? Caitlin Zulla: Thank you so much, Ben. Yes, Tony, maybe I'll let you talk a little bit about how we assume our growth algorithm. J. Martin: Sure. Sure. Over time, our growth is driven about 2/3 by volume and 1/3 by rate. And that kind of drives the 7%-ish same-site growth that we have in the outpatient segment. If you look at our consolidated financials, we show top line revenue growth a little bit less than that because we do have a second segment, which is a lot smaller than the outpatient segment, and it grows a little bit less, more like 5%. And we've talked about how that fits into our overall strategy to drive that business. So that creates a kind of a blended growth rate of more like 6% -- 5% to 6% top line. But that outpatient business is more like 7%, 2/3 of it by volume, heavily by growth in advanced modalities. So the growth in the advanced kind of -- it represents about half of what we experienced in terms of rate increase because those just reimburse higher, 3x to 4x higher. So as we have more business in that, it generates some rate growth. And then the kind of the remaining half of what we call rate growth is driven just by escalators in contracted rates in the commercial book. And that's -- we believe we're actually kind of thinking of that very conservatively at this point. Operator: Our next question comes from the line of Andrew Mok with Barclays. Andrew Mok: Just wanted to follow up on the cash flow and CapEx. Can you give us a sense for total system-wide CapEx expected for 2026? And help us understand how that's expected to flow through the P&L and cash flow statement, especially on the nonconsolidated portion. J. Martin: Sure. We're not, at this point, putting a number out there in terms of how much that's going to be numerically. I think it does flow through a combination of ways on our cash flow statement. For our consolidated sites, it's in our investing activities to the degree we use our own cash. There's also a supplemental disclosure that talks about CapEx that we fund just by capital leasing those assets, which involves no cash outlay. So you'll see that in our 10-K when we file in terms of what the 2025 numbers are. The amounts we spend on the health system JVs are burden the cash distribution that we get from them. So that's something we'll talk about more as we get a little bit more mature as a company. We're keeping our guidance metrics pretty limited at the moment, but we're going to be happy to show more about that in the future. Andrew Mok: If you're not giving 2026, can you share where total system-wide CapEx landed for 2025? J. Martin: I believe -- I don't know that that's going to be in our 10-K explicitly. But I think in our talks during the -- during our going public process, system-wide, we were spending something north of $100 million with our pro rata share of that being significantly less because for the part we spend in the health system JVs, we split it pro rata with our health system partner. Operator: Our next question comes from the line of Ryan Daniels with William Blair. Matthew Mardula: This is Matthew Mardula on for Ryan. So, in your prepared remarks, you touched up on this regarding Q4 results. But since a majority of patients come from referring physicians, how is the team positioned for this year to increase patient referrals to your imaging centers? And are you planning to do any more initiatives or changes to build as well as increase physician relationships for this year? Caitlin Zulla: Yes, Matt, thank you so much. So we have a strong engagement strategy with our referring physicians. We have over 120 sales reps that are embedded in our markets that engage with over 100,000 referring physicians. So incredibly engaged. When we think about -- we first focus on our highest referring specialties, your ortho, your neuro, your ENT, your pain, your urology and your gastro. We highlighted a specific campaign we did on orthopedics in Q4 in our prepared remarks, very much because that is their busy season as well. And so orthopedics need imaging, and we were able to provide that for them. We also have marketing efforts, specifically as we think through women who canceled their mammograms during the snow days in Q1. And so a very targeted outreach to make sure that we are rescheduling and getting our patients back on the schedule to get their mammograms. So we'll continue to have a high level of engagement with our referring physicians and making sure we've got targeted messaging and strategies to meet their needs. Operator: Our next question comes from the line of Stephen Baxter with Wells Fargo. Stephen Baxter: Thanks for the color on Q1. That's helpful. It would be great to potentially understand how you're thinking about it on potential volume impact or maybe same-store revenue impact from the weather and kind of pull-forward dynamics. And then as you're thinking about the balance of the year outside of Q1, any sense of how much you're assuming of the volumes that you haven't recovered yet that you might actually get versus what kind of just leaks out and doesn't ultimately occur? Caitlin Zulla: Yes. Thanks so much, Stephen. I appreciate the question. As we said a bit in the prepared remarks and obviously saw at SCA and USPI, Q4 was always our highest quarter related to deductible reset. And so really proud of the efforts that the team put in to drive strength in Q4. And obviously, we'll be replicating that as we think about 2026. We think about kind of the impact in Q1, about 50-50 kind of 50% acceleration in Q4 and then about 50% of it being about weather impact. Team is actively engaging. Certainly, we know any patients that had scans on the schedule and we're -- our call center -- centralized call center is reaching out to reschedule them. And then we have our sales team engaging with referring physicians who also had a backlog. So we feel really confident that we'll be able to continue to drive the volume growth. We're seeing strength post storm, especially in the advanced no growth. And the combination of our strong sales efforts as well as just the operational strength of our team, feel confident in the full year guidance. Stephen Baxter: Great. Yes, that's very helpful. And then maybe also if you could potentially provide a comment on maybe some of the current macro conditions. Obviously, people are watching closely when it comes to things like oil prices and gas prices and things of that nature. I guess how are you thinking about that? Like is there any exposure within your own P&L that we need to be mindful of? And then as you think about the money you're spending on capital, I guess, how are you thinking about potential downstream impacts to the capital projects that you might have? Caitlin Zulla: Yes. Thank you so much, Stephen. We are very much keeping an eye on all things macro and all things within our supply chain. And right now, we see no risk at all to Lumexa Imaging. We've specifically received some questions regarding helium. Just as an example, helium has actually been in shortage for several years, and we have strong service contracts with our original equipment manufacturers that give us fair pricing. We also have a number of secondary sources and all of those have fixed rates, same with gadolinium. And just in terms of context, some of the newer MRs require actually less helium than older models. And so the equipment refreshes that we've been doing intentionally over the last few years provide us further security. So no concerns at this time that you need to be thinking of. Operator: [Operator Instructions] Our next question comes from the line of Brian Tanquilut with Jefferies. Jack Slevin: You got Jack Slevin on for Brian. Caitlin, I wanted to ask some really interesting commentary around your rollout of FastScan and other throughput initiatives. Can you maybe talk a little bit about -- I heard the progression of we're going to get to 2/3 by the end of this year. But can you -- are there any early reads on sort of what that means from an efficiency standpoint or sort of the volume inflection you've been able to see as you've rolled that out across the first half of the portfolio? Caitlin Zulla: Yes. Thanks so much, Jack. Appreciate the question. So we are very excited about FastScan. It's an initiative that we have been working on over years, proud to be at 50% of our MRI fleet with FastScan at the end of last year. Very simply, FastScan truncates the amount of time it takes to do an exam. So, for an ankle MRI on a Siemens, it takes it from 22 minutes down to 8. It is better for the radiologist because the image is higher quality. And then it is better for the patient because they have to spend less time in the claustrophobic MRI tube. And then, of course, it's better for us because it opens up additional scheduling capacity, typically about 40%. We are very measured in all capital deployment and including FastScan, we can get FastScan capabilities either by acquiring a new machine or by providing bolt-on software. It's about $150,000. So obviously, a meaningfully lower price point. And we always want to make sure that we will be able to drive a strong IRR that will meet our investment thresholds. So we make sure we have that business case approved before we roll it out. So excited for the continued growth, and that's a big part of giving us the confidence that we'll be able to drive the insight growth in 2026 and beyond that we've shared in our growth algorithm. Operator: Our next question comes from the line of Pito Chickering with Deutsche Bank. Pito Chickering: I guess going back to sort of 1Q, you guided sort of flat EBITDA year-over-year, but your guidance was maintained for the year. So, originally, we're modeling quarterly guidance -- quarterly EBITDA growth of about 6.7% at the midpoint of the range, excluding the $7 million of public costs for every quarter this year. Now first quarter is flat. So just mathematically, we should be modeling sort of 9% quarterly EBITDA growth from 2Q to 4Q. I'm just sort of curious what you -- it seems like a big step up for the rest of the year with a flat first quarter. I guess what gives you guys conviction EBITDA growing at 9% for the rest of the year? Caitlin Zulla: Sure. I think, Pito, thank you for the question. I think broadly, we have great momentum in the business. So we have strength of our advanced mods. We have the record year of de novo openings in 2025 that are ramping well. The pacing of last year was more first weighted than second half, and we already have the one open in 2026. We also have multiple ongoing JV conversations at various stages. It gives us confidence in the broader need for our service and our model. And then we have the tuck-in acquisition that we shared in December, and we're building a pipeline of acquisition opportunities. And then on top of that, we've got conviction and proof points in advancing our strategic service lines like our breast arterial calcification, great uptake in New Jersey and great clinical results for our patients, first and foremost. And so we'll be thinking about how we expand that as well. Tony, anything else you'd add about how we think about pacing throughout the quarters? J. Martin: Yes. As we discussed, it is a seasonal business and ramps, and it happens in kind of different rates year-to-year depending on things like weather and depending on how significant deductible reset driven behavior is. So that will change, but we do ramp up every year quarter-by-quarter. And weather events and other disruptions in individual sites happen with referring physicians being closed down for a couple of days or us being closed down for a couple of days. So we have a playbook that we use to get that volume back. It's part of doing business in this space. All health care services providers have those playbooks, and we certainly do and have put them to work. So we do expect to kind of pull that rest of that volume in at some point, and that adds to our conviction in our annual guidance. Operator: Our last question is a follow-up from the line of John Ransom with Raymond James. John Ransom: Just a couple more for me. What was the professional fee revenue in the fourth quarter and for the full year? J. Martin: For the fourth quarter, it was $66.8 million. John Ransom: Okay. J. Martin: And the full year figure, I think I put in my prepared remarks, but I certainly have it. John Ransom: I can get that. I mean I can get that offline. J. Martin: Yes, and that will certainly be in our 10-K. We're going to be filing that not later than the 31st. But yes, we can certainly get that. John Ransom: And then my other -- and then what was the professional fee -- last year, fourth quarter professional fee? J. Martin: Yes. It -- the growth rate was 10.6% year-over-year. So I'll answer your question that way. John Ransom: Does professional grew that much? J. Martin: Yes. John Ransom: Okay. All right. And then secondly, we've kind of been back and forth on how to manage -- or excuse me, how to model management fee plus pass-through. So, in your disclosure, we had thought about management fees as being 10% of the revenue of your unconsolidated. So it looks like management fees are higher than that, and that probably includes some stuff in your other revenue segments. But how do we think about managing -- modeling management fees? And what kind of margin does that business generate? Because I know you don't break out the costs, but just help us model that versus the pass-through in 2026. J. Martin: Yes. Good question. And I'm glad we're able to highlight the pass-throughs because that's a big chunk of revenues that doesn't really drive anything in an EBITDA standpoint. So your question about what to focus on in terms of modeling it makes a lot of sense to me. I think what you've seen in the recent trend is the best indicator of the future on that. It is from a pure management fee standpoint, driven by a percentage of the revenues of the underlying JVs, which you can see the growth rates that are happening at that level. It is -- there is a little bit of other revenue in that as well for some other services we provide. So I think that combination is not likely to change a whole lot in terms of how it's growing and how you're looking at it. John Ransom: So grow it sort of in line with consolidated revenue growth -- or I'm sorry, with system-wide revenue growth? J. Martin: I think, generally speaking, that's how we look at it, yes. Operator: I would now like to hand the call back over to Caitlin Zulla for closing remarks. Caitlin Zulla: Thank you for the questions today, and thank you for your continued interest in Lumexa Imaging. As you've heard throughout the call, we are entering 2026 with strong momentum, a clear strategy and deep confidence in our ability to execute. Our team remains focused on delivering exceptional patient care, expanding access to high-quality imaging and driving disciplined, profitable growth. I want to close once again by thanking our dedicated team members and our radiologists. Their commitment to our mission and to the patients and the communities we serve continues to be the foundation of our success. We appreciate your time today and look forward to updating you on our progress in the quarters ahead. Thank you. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to the FitLife Brands Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] It's now my pleasure to turn the floor over to your host, Dayton Judd, CEO of FitLife Brands. Sir, the floor is yours. Dayton Judd: Good afternoon. I'd like to welcome everyone to FitLife's Fourth Quarter 2025 Earnings Call. We appreciate you taking the time to join us this afternoon. Joining me on the call is FitLife's CFO, Jakob York. Ryan Hansen, our EVP, who typically joins these calls, is on vacation this week. The fourth quarter is the first full quarter that includes the financial results for Irwin Naturals, which we acquired on August 8, 2025. As has been our practice, we will provide summary financial results, including revenue, gross profit and contribution for Irwin for approximately the first 2 years of our ownership. All of our previous acquisitions were completed more than 2 years ago. So the performance of all other brands is now reported under legacy FitLife. That said, we will continue to provide commentary about individual brands when it makes sense to do so. I will start by providing some general commentary about the full year 2025, after which I will provide commentary about the fourth quarter more specifically. And at the end of my prepared remarks, I will provide some high-level commentary on what we are seeing in the business so far during 2026. So to begin, first, for the full year 2025. 2025 was a strong year for all of our brand groupings other than MRC, whose challenges we have discussed previously. Legacy FitLife, excluding MRC and MusclePharm, delivered organic revenue growth of approximately 6%. Wholesale revenue was flat, although we did benefit during the first quarter of 2025 from the restocking of GNC's distribution centers. Online revenue for legacy FitLife during 2025 increased approximately 16%. MusclePharm delivered organic revenue growth of approximately 5% during 2025, with revenue growth occurring in both the wholesale and online channels. MRC revenue declined approximately 15% during 2025. And obviously, we are excited about the Irwin acquisition, which happened in August of last year. Although we didn't own Irwin for the full year of 2025, let me provide some historical numbers and context for how we are thinking about this business. First, Irwin previously generated a significant portion of its revenue from Costco in the United States. However, Costco U.S. discontinued the final Irwin product in early 2025, several months before the acquisition. Second, Irwin historically sold a meaningful amount of CBD products with gross revenue from CBD during the 12 months prior to the acquisition totaling approximately $4.8 million. Subsequent to our acquisition of the company, for a number of reasons, we made the decision to discontinue all CBD products. We have been selling our remaining inventory and expect to be completely out of CBD later in 2026. And third, Rite Aid, another major customer for Irwin, went into bankruptcy and liquidation prior to our acquisition of the company. If we remove Costco U.S., CBD and Rite Aid from the financials, Irwin's net revenue for the full year of 2024 would have been $54 million, and its revenue for the full year of 2025 would have been $54 million. In other words, if you normalize the numbers to reflect the customers and products that represent the go-forward business, the brand was flat from 2024 to 2025. If you do the same math just for the fourth quarter of 2025, which was our first full quarter of ownership, Irwin delivered organic growth of approximately 6% compared to the fourth quarter of 2024. So to recap, all of our brand groupings experienced organic growth in 2025 with the exception of MRC. Now regarding the fourth quarter of 2025. Total revenue was $25.9 million, an increase of 73%, primarily as a result of the acquisition of Irwin, partially offset by weakness in legacy FitLife. Wholesale revenue was $15.5 million or 60% of revenue, an increase of 213% compared to the fourth quarter of 2024. Online revenue was $10.5 million or 40% of total revenue, an increase of 4% compared to the fourth quarter of 2024. Excluding the amortization of the inventory step-up related to the Irwin acquisition, gross margin was 37.0% compared to 41.4% during the fourth quarter of 2024. The decline in gross margin is primarily due to the acquisition of Irwin, which has historically operated at a lower gross margin than most of our other brands. We expect Irwin's margins to increase over time and I'll provide more detailed commentary later in the call regarding the opportunities for improvement. Contribution, which we define as gross profit less advertising and marketing expense, increased 47%, driven primarily by the addition of Irwin, partially offset by lower contribution from legacy FitLife. Net income for the fourth quarter of 2025 was $1.6 million compared to $2.1 million during the fourth quarter of 2024, with the decline driven primarily by transaction-related expense and amortization of the inventory step-up associated with the acquisition of Irwin. Adjusted EBITDA was $3.5 million, a 14% increase compared to the fourth quarter of 2024. With regard to brand level performance, I'll start with legacy FitLife. We mentioned on our third quarter earnings call in mid-November that we were starting to see broad-based weakness across our portfolio of brands. That weakness accelerated late in the fourth quarter and into the first quarter. From a macro environment perspective, given the backdrop of economic and political volatility, we know there are broad-based consumer confidence concerns, particularly for discretionary products. Consumer sentiment remains near all-time lows and consumer discretionary spending has been declining since late last year and is at the lowest level it has been in the past 4 years. Total legacy FitLife revenue for the fourth quarter of 2025 was $13.3 million, of which 68% was from online sales and 32% was from wholesale customers. This represents a 14% year-over-year decrease in wholesale revenue and a 10% year-over-year decrease in online revenue or a 12% decrease in total revenue. The declines were primarily attributable to MRC and MusclePharm with the other legacy FitLife brands delivering organic growth of 4% during the fourth quarter. Gross margin for legacy FitLife declined slightly from 41.4% to 40.7%. Contribution declined 18% to $4.3 million and contribution as a percentage of revenue decreased to 32.5% compared to 34.9% in the same quarter of 2024. Excluding MRC and MusclePharm, the other legacy FitLife brands delivered higher revenue, higher gross margin and higher contribution as a percentage of revenue compared to the fourth quarter of 2024. Moving on now to Irwin. We don't report Irwin's historical performance prior to the acquisition in our financials. But as mentioned previously, normalizing for the loss of Costco U.S. and Rite Aid as customers and the decision to exit CBD, Irwin delivered organic growth of approximately 6% during the fourth quarter of 2025 compared to the same quarter in 2024. Total Irwin revenue was $12.6 million, of which $11.2 million or 89% came from wholesale customers and 11% came from online sales. Gross margin for Irwin during the fourth quarter was 28.0% and contribution as a percentage of revenue was 26.6%. Adjusting for the amortization of the inventory step-up, Irwin's gross margin and contribution as a percentage of revenue would have been 33.2% and 31.8%, respectively. We mentioned on our third quarter earnings call in November of last year that we began selling Irwin products on Amazon in mid-October. I am pleased to report that Irwin's Amazon business scaled nicely throughout the fourth quarter, delivering approximately $60,000 of revenue in October, $300,000 of revenue in November and almost $500,000 of revenue in December. Irwin's growth on Amazon has continued in the first quarter of 2026, but I'll provide more commentary on that shortly. Now let me provide a few additional high-level comments and some forward-looking remarks, and then we can move into Q&A. Regarding the balance sheet, we began paying scheduled amortization on our term loan during the fourth quarter. In total, we paid down approximately $1.9 million of debt during the fourth quarter, bringing our debt balance to $44.7 million. We further reduced the balance on our revolver by $1.4 million during the first quarter and we made another scheduled amortization payment on our term loan of approximately $1.5 million yesterday. We are ahead of schedule on our debt reduction, and we'll continue to deploy excess free cash flow to further reduce indebtedness. As mentioned previously, we have continued to experience weakness across most brands and channels during the first quarter. We have identified and are working on 5 priorities to address the recent soft performance that we expect will favorably impact revenue and cost in the future. First, we expect to be able to significantly improve Irwin's supply chain. Prior to the acquisition, we knew that Irwin's supply chain was one of its biggest challenges, but that also means it represents a significant opportunity. I will highlight a couple of specific areas. First, Irwin has historically had to dispose of approximately $2 million of obsolete inventory every year, which gets expensed through cost of goods sold. The primary driver of this is the combination of high MOQs, which are customary for softgel products and a short selling window driven by 2-year dating on Irwin's products. In the wholesale channel, retailers typically require a minimum of 12 months of shelf life for all products that are shipped to them. And if our products only have 24 months of shelf life at the time that they are manufactured, the selling window is only 12 months and realistically, a bit less than that when we take into account packaging time and shipping time. We are in the process of transitioning as many of our products as possible, particularly the slower-moving products to a 3-year shelf life, which will double the amount of time we have to sell the products from 12 months to 24 months and thereby significantly reduce the amount of obsolete inventory that the company has to write off. In addition, expanding online sales provides additional flexibility as most online marketplaces have less stringent requirements regarding shelf life for inbound products. As a result, continuing to ramp up on Amazon and other platforms will create additional flexibility for us in this regard. Dramatically reducing this inventory obsolescence has the potential to increase Irwin's gross margins by as much as 300 to 400 basis points with a corresponding dollar-for-dollar impact on EBITDA. Additionally, Irwin has historically faced and continues to face stockouts, the impact of which was particularly pronounced during the first quarter. We hired a new VP of Operations for Irwin in February, and we are confident that throughout the course of 2026, we will be able to meaningfully improve Irwin's supply chain. Second, we are increasing our focus on new product development at Irwin. New product launches are important to maintain relevance in the nutritional supplement industry. We have maintained a robust product development pipeline with our legacy FitLife brands, but Irwin lagged on this dimension during the company's financial distress and ultimate bankruptcy. We have 3 new products currently in production, which we expect to launch in the third quarter and are working to build out Irwin's longer-range product development pipeline. Third, we are focused on driving awareness and demand generation for our products off Amazon, which we believe will also drive improved performance on Amazon. We have previously discussed the challenges we began experiencing in early 2025 on Amazon with Dr. Tobias. Beginning late in 2025 and into 2026, we have been experiencing weakness on Amazon for other brands as well. In general, our product listing pages continue to convert at above average rates. So the challenge is traffic and not conversion. We believe a significant part of the weakness we are experiencing on Amazon relates to continued evolution of the Amazon algorithms. It would take a long time to address this in detail in my prepared remarks but for those of you who are interested in the evolving dynamics of e-commerce marketplaces, I would encourage you to Google the recent shift from Amazon's A9 algorithm to what the Amazon community refers to as the A10 algorithm. For obvious reasons, Amazon doesn't provide details about their algorithmic changes, but it is becoming increasingly clear that Amazon is now prioritizing listings that bring external traffic and organic engagement to their platform. In other words, until recently, success on Amazon was primarily the result of optimizing within the Amazon ecosystem, using tools such as pay-per-click and other on-platform advertising. Now, however, it is becoming increasingly clear that success on Amazon is primarily a function of driving incremental traffic to Amazon by building off-Amazon awareness. We are seeing the correlation of this shift in the performance of our individual brands on Amazon. For example, our brand with the highest off-Amazon awareness and distribution is Irwin. And the Irwin selling account is currently our fastest-growing Amazon account. Additionally, some of our other brands with strong off-Amazon distribution are showing growth on Amazon. At the other end of the spectrum, our worst-performing Amazon account is Dr. Tobias, which has been an Amazon exclusive brand with almost no off-Amazon exposure. In short, we are observing that the more dependent the brand is on Amazon, the more it is struggling on the platform. We have been working since last year to improve our off-Amazon awareness for the Dr. Tobias brand, primarily through TikTok via brand ambassadors and influencers. We also recently finalized a partnership between the Dr. Tobias brand and Joey Chestnut, the world record holding competitive eater, perhaps best known for his hot dog consumption on July 4. We are excited about the partnership with Mr. Chestnut and believe it will resonate with potential consumers of Dr. Tobias' Hero Colon Cleanse product. With the help of a new Chief Marketing Officer that we hired in early February, we continue to expand our off-Amazon efforts across our most important brands. This effort will take some time, but we expect it will bear fruit in the long run. Fourth, we continue to expect long-term revenue benefits from leveraging Irwin's sales team to cross-sell other FitLife products into the wholesale channel. The sales process in the wholesale channel generally takes time as most retailers reset planograms once or potentially twice a year. However, our efforts are slowly beginning to bear fruit. We recently gained placement of 6 MusclePharm SKUs in a regional grocery chain beginning in the second quarter. In addition, conversations with other retailers are underway, and we expect to announce additional distribution gains in future earnings calls. And fifth, as has traditionally been our practice, we will continue to look for ways to operate more efficiently with regard to our SG&A. As has been the case historically, this will be more the result of a number of small improvements over time as opposed to large onetime efforts. For example, we exited our office lease for MRC in the Toronto area when the lease expired this past January since most employees were already working from home. In addition, our office lease for Irwin expires later this year and we anticipate that the new lease will be for a smaller space and at a substantially lower cost per square foot due to softness in the office rental market in the Los Angeles area. None of these individual SG&A reduction opportunities is anticipated to be material on its own. But in total, we expect them to be compelling. I've talked a lot about some of the challenges we are facing and what we are doing to address them. Before closing, however, I want to touch on one bright spot in our business, which is Irwin's continued growth in online revenue. I mentioned earlier that monthly revenue increased to approximately $0.5 million by the end of the fourth quarter. We are encouraged that the growth has continued throughout the first quarter with monthly revenue now approximately $0.8 million. In other words, in a few short months, this has become a business with roughly $9 million to $10 million of annual revenue on a run rate basis with higher margins than our traditional wholesale business. In addition, we think there is further upside since some of our best-selling products in the wholesale channel are not yet on Amazon, and we have been hurt somewhat by the out-of-stock situations I previously mentioned. And although we continue to see declines in subscriber counts on Amazon across most of our other brands, as we mentioned on our third quarter earnings call, we are seeing very strong subscriber growth for the Irwin brand with subscribers increasing from approximately 500 at the beginning of 2026 to over 3,600 today. In terms of outlook for the full year, we are going to hold off on providing any kind of formal guidance at this point in time, given the weakness in the first quarter and our uncertainty about how long the exogenous challenges will persist and how quickly our internal efforts will bear fruit. The online growth we are experiencing at Irwin is encouraging, but at this point, we just don't know whether it will fully or only partially offset the weakness we are experiencing elsewhere. So with that introduction, I will conclude my opening commentary, and we can go ahead and open it up for questions. Operator: [Operator Instructions] The first question today is coming from Ryan Meyers from Lake Street. Ryan Meyers: First one for me, and I realize this might be a bit of a difficult question to answer. But if we think about the revenue headwinds that you called out, Dayton, both Amazon and then just kind of the broader macro pressures, I mean, is there any way to think about which one of those 2 dynamics is maybe impacting the business more? Or it's just the best way to think about it is, look, these are headwinds, and this is kind of where the softness in the revenue is coming from? Dayton Judd: Yes. So good question. I don't have a good answer. I don't know how to bifurcate them. I can give you some data points that may help. We have access to POS data for the retailers. Depending on the retailer, it's not always perfectly up to date. But we saw -- if you go back over the last 6 months, right, the growth rate, and this is for supplements overall as a category, has been declining for about 6 months, and it actually flipped negative here in the last several weeks. If you look at that as just a raw percentage, it's much smaller than kind of the declines we've been seeing. So there are some other variables coming into play. It's hard for me to -- our out-of-stocks are kind of hard to quantify. It's definitely in the hundreds of thousands. Yes. So I guess I don't have a great answer for you, Ryan, other than there clearly is some general weakness. And then there clearly are some areas where we're down, and I probably can't blame kind of the market overall. So I don't know if that's helpful or not, but that's kind of what I got. Ryan Meyers: No, that's helpful. Appreciate the color there. And then thinking about gross margin, I think you guys gave the adjusted gross margin number of 37%. Is that the right way to think about the business going forward with Irwin? Or do you think that given some of the priorities you guys laid out, do you think you guys can get back into that 40% margin? Just how we should be thinking about the gross margins going forward? Dayton Judd: Yes, 40% is probably a stretch. So Irwin has kind of historically been in the low 30%, so usually not 30%, but also not 35% I think we can get Irwin up into the certainly mid, if not high 30%. If you look at historically, the Legacy FitLife business, we tended to be more low 40%. So I think for the combined business, over time, again, not next quarter or the quarter after that, but as we're able to address some of these things like the supply chain and the 2-year dating issues that I brought up, I think something closer to the high 30% is reasonable. Operator: The next question is coming from Samir Patel from Askeladden Capital. Samir Patel: So first off, with the understanding that you're not providing guidance for the year, at the time of the acquisition, you kind of laid out, I think it was $120 million in revenue and $20 million to $25 million in adjusted EBITDA. I guess when you're saying that you're not sure if Irwin, the online sales are going to offset kind of the weakness you see elsewhere, should we interpret that as, obviously, the most recent quarter, even if you account for seasonality, kind of puts us below the low end of that range. Are you basically saying that if Irwin online continues to go well, then maybe that gets us back into that range. But if not, then we're below that range. Is that kind of how you're thinking about it? Dayton Judd: Yes. I mean I'll characterize it maybe a bit differently. Look, if I knew -- if I had any confidence in what 2026 would look like, I would certainly tell you guys. But let me just give you the data points I have. So if you look at Legacy FitLife, for 2025, you can look at our financials, and I think the number for the full year for revenue was $62 million. I kind of walked through the math for Irwin, again, making the adjustments for losing Costco and Rite Aid as well as taking out CBD, and that number was $54 million. So at the end of 2025, the combined business was about $116 million. We've got an online business now that should add to that. Although some of that online business, as you recall, we were previously selling to some third parties who are then reselling the products on Amazon. So you kind of have to back out, I don't know, a couple, $3 million of the $116 million, right? And then to that, call it, $113 million, you would add again the Amazon business, and this assumes everything else in the business is flat. The reality is right now, though, that everything in the business is not flat, okay? The other data point I'll give you all is Q1 is not better than Q4. In fact, I'd say we're pacing a little bit down in Q1 compared to Q4. So I certainly hope and I would expect that the rest of the year doesn't look like Q4 and Q1, but I just -- I can't definitively say that it's going to be a certain amount higher in Q2, Q3, Q4. I don't know when things in the world will change. I don't know the exact timing of when we'll get everything back in stock and we need to get back in stock. So that's why I hold off on giving a number. So if the online -- the incremental online business, if it stays kind of right where it is and you subtract the, call it, $3 million of wholesale revenue that we gave up, we'd be about $120 million. And again, I don't -- I'm not saying I expect that because Q1, right, is proving to be as challenging, if not a bit more challenging than Q4. So those are the data points. And because I don't know, I don't want to tell you guys what's going to happen. I'd rather give guidance when I have a reasonable degree of confidence what that number is going to be. Samir Patel: Okay. And just to clarify a little bit further, when you refer Q1 kind of tracking similar to Q4, are you saying like on a year-over-year basis? Or are you saying like we're not seeing the typical -- I know that Q4 is typically the weakest quarter for supplements in Q1, new resolution stronger. So are you saying that sequentially, you're expecting Q1 to be flat to down from Q4? Dayton Judd: Yes. Q1 looks a whole lot like Q4. Samir Patel: Okay. Understood. And maybe talk a little bit more about the decision to exit CBD. Is that a margin decision? Or what went into that? Dayton Judd: No. In fact, margin would be the reason to keep it. CBD is an incredibly complex as it relates to the legal environment. So federally, there are very challenging guidelines about what you need to do in order to be able to sell CBD, stuff like the farm bill and whatnot. But then on top of that, the state-level regulations are even more complicated. And so if you're selling online and you're selling into 50 states, you have to be aware of and keep up with all of the regulations in the different states, which in and of itself was pretty challenging. Further compounding it, I would say we were undecided when we bought the business. We certainly didn't buy Irwin because of the CBD. But in the -- I think it was either October or November when the latest spending bill was passed against federally, that bill in our interpretation, essentially makes it -- I don't want to say impossible, but certainly very difficult to legally sell CBD. And so it's just not worth the complexity. And so for that reason, we're choosing to get out. We've had CBD topicals and we've had CBD ingestibles. There is no retailer because of the legal environment and some of the challenges out there, there's no retailer, no major retailer, I should say, brick-and-mortar or online that sells ingestible CBD. You can't buy it at Target, Walmart, you can't buy it on Amazon. You can buy it in local health food stores and whatnot. And so topicals, the only place we sell CBD in kind of a major retailer is we sell topical CBDs in CVS. And so we're just -- given just the legal environment and the fact that it wasn't growing for us anyway, it was declining, and it's particularly challenging to keep up with. We just decided to move on and focus on kind of what we know best. Samir Patel: Makes sense. And the final one, you mentioned the various initiatives that you have ongoing, and thanks for kind of scoping those in terms of the potential impact. What would you say on timing? I think you clarified on some of the leases and SG&A items and the distribution. But as far as, for example, the 3-year shelf life, how long will that take to get done? How long before you can kind of stop losing that $2 million a year off Irwin's P&L? And I guess more broadly, if you could go a little bit deeper into the demand generation side outside of TikTok, maybe in the things that you're doing to try and get shelf placement for some of your legacy products and also drive more traffic to Amazon? Dayton Judd: Yes. So on the dating, I think you'll start to see the impact of that in Q2 and beyond. So we have received at this point now our first -- some of our first products with the 3-year dating. And just to give you a bit more color on how that works, you don't just get to decide to kind of change your expiration date on the bottle. You've got to be sure that the product when it hits the 2-year mark or the 3-year mark, if someone were to open it up and send it to a lab and test it, that it still meets the label claim. And so to go from 2- to 3-year dating, that entails revising, updating all of your formulas, making sure you have enough in there that it will not just get to 2 years, but we'll get to 3 years, right? So almost every single product we've had to kind of update the formula. And that takes time, and it takes time to get our manufacturers on board, right, because they are part of the process of approving kind of what they're making and stamping the 3-year shelf life on it. So that said, we have started to receive our first products with 3-year dating and we'll continue to do so. We're starting with the products that are slower movers for us, where we're more likely to have to throw products away. We've got some very, very fast-moving products where it doesn't matter like moving to 3-year dating won't really help us because we turn it so quickly. It's just not a priority right now. So I think you'll start to see that flow through the P&L, hopefully in Q2. And what you'd see it in is certainly higher margin, but also just lower charge-off to inventory, right, lower inventory reserve and therefore, higher COGS. Your second question on the off Amazon. What we're doing there, it just varies across brands. We have been focused on Dr. Tobias first because it has the biggest exposure to Amazon. But we've talked about TikTok, and I don't want to provide numbers that get people too excited because it's definitely slow going, but we continue to see increased engagement, increased kind of GMV, increased sales on TikTok. There clearly is some spill over value. So when you sell more on TikTok, you see more sales or you see more branded search and hopefully more sales on Amazon. So it just takes time to scale in some of these other channels. It's no different than kind of marketing 101, what we've been trying to do with all of our brands from the beginning, except again, something like Dr. Tobias, which has had an Amazon focus. So I think I mentioned in the comments, I don't think it's coincidental that if I graph percent of revenue coming off Amazon and the growth rate for that brand on Amazon, where it's like linear, where we're seeing the best growth is where we have the highest off Amazon distribution. So that said, it is still a black box, right? I wish I could knew exactly what to do and exactly how the algorithms work, but you just kind of have to figure it out as you go. So I don't know if that answers your question, but that's what our focus is right now. Operator: And the next question is coming from Sean McGowan from Roth Capital. Sean McGowan: A couple of questions here. Is the impact of the inventory step-up complete, largely complete, where are we on that? Dayton Judd: It is done. So that's been fully -- the last expensing of that was in Q4. So in the Q1 numbers and beyond, you will not see any amortization of inventory step-up. Sean McGowan: Okay. And circling back to an earlier question about the kind of the gross margin opportunity at Irwin. I think you ended that comment with something that you're talking about the high 30s not right now, but eventually, did you mean consolidated gross margin or just Irwin itself in the high 30s? Dayton Judd: Yes. I was thinking consolidated, right? I think Irwin can get -- FitLife has been -- legacy FitLife has been low 40s lately. I think Irwin, I can get 300, 400 basis points out of that, and I think they're roughly 50-50. So if Irwin is, call it, 37 and legacy FitLife is 41, you get to kind of the 39. Again, I have not modeled it out. I'm giving you approximate numbers. I know I can get it higher because of the -- look, the biggest thing that $2-plus million of just throwing away product every year is shocking. We carry a similar amount of inventory on the FitLife side of the business. our reserve on the FitLife side of the business is a fraction, like 10% of the reserve on the Irwin side of the business. And because of the shelf life flexibility that we have, most of our products on the FitLife side, I can probably count on 2 or 3 fingers the number of products we have that is less than 3-year shelf life. So that will create a bunch of flexibility. And then I think I mentioned it in my prepared remarks, but not in the response to the question. But the other thing is as you sell more retail, right, as you sell more online, that also helps to kind of bolster the margin of it. So that's why we're confident that over time we can do better for gross margins for Irwin. Sean McGowan: And on that shelf life issue, at the risk of getting too much into the weeds, I was just wondering, you've only had this business since August. If it was that easy for you to fix it, why wasn't it done before? They just didn't pay attention to it. Dayton Judd: I don't know. I don't want to point fingers or cast blame. I think people have different priorities and look, the stock out, I mentioned stock-outs, that's related to the shelf life issue because I mentioned you've got about a 12-month sell-through period, right? And so if you want to avoid throwing inventory away, you try and time the delivery of your next purchase order for right around the time you run out because if you get it 4 months too early, you're still selling the old stuff and then you only have to all the new stuff, right, before it expires. And so you get in this game of trying to time your inventory purchases, and then you've only got 12 months to sell it, right? If you order too early your reserve, your obsolescence goes up, if you order to late or if it shows up too late, I should say, because you always order on time, but there's variability in supply chain. If it shows up too late, then you're dealing with stock-outs. So we think kind of this transition -- and I mean me talking about it makes it sound easy. Like this is not easy. This is lots and lots of people spending lots and lots of hours, right, and revising formulas and spending tens of thousands of dollars on testing and -- it's a lot of work to get to that point, but it's unequivocally worth the effort. Sean McGowan: Yes. But okay. And then looking at it from a different perspective, how can you be -- how will you be able to be confident that it kind of stands the test of time or a 3-year shelf life, if you haven't been able to actually experience that amount of time. Is the testing accurate enough? Dayton Judd: Yes. And the reason is, most of these products we've been making for more than 3 years and it's called retains. You have to keep a certain number of every production lot of every product you've ever made. So we can pull something off of our internal storage shelves that were made 3 years ago. We can test it and we can see how it tests out and we can know what the deficiency is. And then that tells you, you now know how much more you need to put in it when you make it, you know kind of the decay is the wrong word, but the extent to which certain products diminish over time. Vitamins are very, very tricky. Vitamins diminish more rapidly over time. And it's very hard to get 3- or 4-year dating on a multivitamin that has a lot of ingredients, right? But on a lot of other products, you can get 3-year dating. So you have to put in -- you have to increase what's called the overages, right, in the initial production, which, by the way, can increase your cost a bit because more raw materials into the product, but you make up for it in not having to throw a product away over time. Sean McGowan: Right. Okay. A couple more then. On -- my notes just tell me that Irwin in the first quarter of '25 before you owned it did around $18 million, but that would include some of the things that we should exclude on a pro forma basis. Can you share with us what that would have looked like excluding the cost. Dayton Judd: Yes. The adjusted net revenue. So if you -- again, the same math I explained in the kind of commentary at the beginning of the call, adjusted net revenue taking out Costco U.S. CBD and Rite Aid was $14.3 million in Q1 of 2025. Sean McGowan: Okay. That's very helpful. And then my last question, I feel like we have this question every time, but what's going on in the MusclePharm and what's the remedy there? Dayton Judd: Yes. Yes. I think we gave or you can kind of figure -- I don't have the revenue number in front of me, but I gave -- you have 2024 revenue, and I gave you the organic growth number for 2025 of 5%. So again, growing online, growing in wholesale, slow going. I mentioned in the call, we've got some initial wins from this kind of cross-selling effort that we've got going on and are in discussions on some others. The other thing though I would say is MusclePharm continues to be impacted by the dynamics in the protein market. So again, MusclePharm is probably 80% protein. I spent a lot of time talking about protein in the third quarter, but you can't get protein now in the second quarter unless it's off spec. Third quarter protein is now $11 a pound, for WPC kind of whey protein concentrates. So I mean it's just astronomically gone up in terms of cost. Look, I turned down probably $1.5 million muscle farm purchase order during the first quarter from an international customer, we've done business with before, that they're just bottom fishing and it would -- at the lowest -- it would have been the lowest gross margin we would have ever kind of sold products. So part of what you're seeing in the business, too, is trying to protect margin as opposed to just -- I can give you guys higher revenue. I can deliver higher revenue, but it's going to come at a cost. So we're trying to be smart about kind of who we're selling it to and trying to protect margin somewhat. So it's continuing along, and I'd say nothing dramatic to report in Q1 other than we're preferring to sell product to people willing to pay a bit more than some of our customers. Operator: [Operator Instructions] The next question is coming from James Bogan from Legends Capital. Unknown Analyst: I also was going to just ask about MusclePharm. I'm not sure what you can add. But when I initially invested, I remember that MusclePharm used to be a brand that sold like $150 million of stuff a year more or less, and now it's down to single-digit millions or whatever. And so I consider your company kind of a leverage play on MusclePharm until you -- until the recent acquisition of Irwin, of course. And so I understand you have this problem with protein. And I'm just wondering assuming prices stay where they are, we move resurging inflation. I'm just wondering what is the game plan? I mean you can sell to the good customers for a while, but eventually have to sell to everybody and push product. So I'm just wondering how this might play out or how you're gaming it or what sort of volumes you can generate or what you can do about passing this on to your customer without killing sales? I'm just wondering what the game plan is as I view MusclePharm is such an important brand that you're in the midst of rebuilding. Dayton Judd: Yes. Yes, thanks for the question, James. I think I may have commented on this somewhat in the third quarter call. I think -- not I think, you mentioned $150 million. I think at its peak, it was about $175 million wholesale that was 10, 15 years it was a long time ago and then it was a consistent and steady decay until we bought it in bankruptcy. I think what we've learned from MusclePharm is that it's been a really -- it's been a challenge. And the reason it's been a challenge, and I contrast it with Irwin, which we also -- that was an asset purchase out of bankruptcy. When we bought MusclePharm, they had 0 distribution, they weren't on a single store shelf in the United States anymore out. We bought the intellectual property and about 120,000 of inventory, right? So this was -- this was literally buying a brand that was essentially dead, right? It had some online sales through a third party. And the goal was, can we revitalize this brand? Can we regain lost wholesale distribution? And we have been at it now for 2.5 years, and we've gotten some, right? I can't -- I mean you can go look and see where it's sold, right? But there's some customers where we're growing 100% year-over-year, right? It's just not on any major store shelves, right? We got it in The Vitamin Shoppe with the Pro Series and did okay and some of them are still there, and some of those SKUs are no longer there, right? So we'll keep trying. We're going to keep trying to sell it. But anyone that has any expectation that this is going to be $175 million brand again? I would just encourage you to temper, right, your enthusiasm, right, our intention is to grow it. Unknown Analyst: Right, but I thought even if you could achieve a fraction of 1/4 of that. Dayton Judd: Yes. Our plan is to grow like we still want to grow it, right? But the thought that we could buy it and just get back into everyone that used to sell it from Walmart to Costco U.S. to everybody else, it didn't happen, and not for lack of trying, right? So the world and buyers in particular, move on. So once they kick you off the shelf, they're not very keen to bring you back. So that's how I would characterize the kind of the MusclePharm. Now that said, again, I hopefully, in the next earnings call, we'll have a couple of SKUs. We've been told we have a couple of MusclePharm SKUs getting into a national grocery chain. It's not 100% confirmed. We've been told to expect POs and store counts, and we'll see if that comes through. I don't want to talk about it prematurely, probably within the next month or 2, right? There will be something like that, that are on the next earnings call, we'll have something we can talk about. But also, those are singles. It's not a home run. It's not going to double the size of the business overnight. Unknown Analyst: And what can you do about the cost -- the input cost, that protein is what it is. Dayton Judd: It is what it is. I cannot get -- I mean protein is a global commodity, right? I have -- everyone is going to be paying the same price. In hindsight, I -- well, I will never buy another brand that is IP only, and I will never buy another brand that is protein-dominant just given kind of what we've seen and what we experienced. Now that said, I'd probably stop short of saying MusclePharm was a bad acquisition or a horrible acquisition, but it certainly wasn't a great one, right? It's going to be okay, in terms of the multiple of what we paid. But it's -- it's not the type of acquisition we'd be looking for going forward. Operator: [Operator Instructions] And the next question is coming from [indiscernible] 2by2 Capital. Unknown Analyst: I had a couple of questions on Irwin. First, I know Irwin lost [ 2 ] SKUs at Costco U.S. in early 2025. I wanted to ask, just on that front that you guys had any conversations about relisting. Is there any thing kind of going on that front? And then the second question is around online sales. I think we've already mentioned you're running at $9 million to $10 million in online sales, and you still have some SKUs that you plan to list do you have an update to you on kind of online sales for Irwin as well? Dayton Judd: Yes. So let me take -- the first question was the Costco SKU. So they had if I'm remembering correctly, 2 SKUs in Costco U.S., sorry, I'm talking about Costco U.S. here. The first 1 was lost quite a while ago. The second one, the last one was lost in the -- was discontinued in early 2025. Have we had discussions with Costco? Yes. We're not getting back in there anytime soon, which is why I gave you guys the numbers without the adjustments. Similar Rite Aid, right? We're not getting back into Rite Aid because it doesn't exist. There's a couple of other retailers where Irwin lost distribution in the kind of bankruptcy period where there's a chance we might get them back. And so I didn't make any adjustments for those. But Costco U.S., you should not plan on us getting back in there anytime soon. and Rite Aid is obviously not going to happen. So -- and I was mentioning this a bit with MusclePharm, but Costco is the extreme example of if you get kicked out of Costco the likelihood of getting back in is incredibly low. And the reason why is they carry -- I'll use protein as an example. They carry 2 or 3 powdered proteins, right? And they carry 3 or 4, right, ready-to-drink protein and so when they kick someone out and they give someone else that spot, right, it's going to take something miraculous for them to say, "You know what, let me kick out somebody who's actually performing and take another shot with a brand that didn't perform. So we've learned through MusclePharm and now through Irwin that it is very unlikely, right, to restore distribution in Costco. Particularly in the U.S. Now we do still sell in Costco Canada, and we haven't had any loss of distribution or any loss of SKUs in Costco Canada since we bought the company. So we're still optimistic about that. But Costco U.S. is kind of different story. And then I think your second question was about online sales and the potential from kind of where we are. Is that right? Unknown Analyst: Yes. Yes. Just you're kind of already hitting the $9 million to $10 million and you still have some SKUs you haven't taken online yet. Dayton Judd: Yes. So there's -- yes, our focus has been obviously getting on the listings that were already set up so that there's a seamless transition from other people who are selling to us continuing to meet that need. Setting up new products on Amazon can take some time. And the main reason for that is, Amazon -- to their credit, actually, this is, I think, it's hard because we have to pay a lot of money, but it's a positive for the supplement industry as far as selling on Amazon. You have to get your products tested you have to send them to a third party approved by Amazon and then that third party sends the test results directly to Amazon, right? So that Amazon knows that what you say you're selling is actually what you're selling. So we have a number of products that are kind of in that testing phase and will hopefully be set up here pretty soon. Some of those products, again, have quite good wholesale distribution. So we're optimistic that we'll see good uptake on Amazon. That said, in some cases, there are variations. So like Green Tea Fat Burner is a product we sell a lot of, across tens of thousands of stores in the United States. Some of the products we're setting up maybe a size variation or a slight formula difference or something like that. We're out there selling Green Tea Fat Burner, just not all of the different variations. Another potential upside, I have no idea how big it's going to be is we're not yet selling on Amazon Canada. So Irwin has a number of products that are registered with Health Canada that are sold to retailers in Canada. A bunch of different retailers up in Canada. We're not selling anything up in Canada, but we're, I think, pretty close to being able to open a Canadian storefront. So I think there's still upside. I mean the growth is slowing. I mentioned we went from kind of 500,000 or so in December. Just kind of looking at the app here, it was kind of more than 600,000 in January and closer to 700,000 in February. And we'll probably be right around 800,000 for March. So we're still seeing growth, not as dramatic as we did in the early days. But I think, again, in the long run, we'll continue to see growth there. We are dealing with out of stocks on Amazon. We have, again, some -- unfortunately, some of our high-moving SKUs that we sell to very large retailers in the U.S. we're out of stock. And we don't send stock to Amazon if we're shorting kind of our biggest and most important customers. But in the long run, I think we'll get past that, and I think we'll see continued growth on Amazon, but I can't -- I don't have a number that I can guide you to. Operator: And the next question is coming from Tyler Hill, Tyler is a private investor. Unknown Attendee: Given The recent traffic headwinds for brands like Dr. Tobias, how is the company pivoting its social or organic media strategy to help drive direct engagement outside of paid affiliates alone, and specifically, are you seeing any shift in improvements in the LVT or retention rates of the MRC portfolio compared to legacy brands? Dayton Judd: Yes, I missed part of that last question. Have you seen any improvement in what? Unknown Attendee: Improvements in that. Yes, the customer lifetime value or retention rates within the MRC portfolio compared to the legacy brands. Dayton Judd: Yes. I haven't seen recent updates on that. Our challenge has not been retention, although let me come back and talk about subscribers here in just a bit because I think that might be an interesting point for some of you. It's really just it's traffic, right? Like our conversion is the same or up almost across the board on our listings. So the challenge is traffic. But to your first question about -- so what are we doing off Amazon? I talked about TikTok. I mentioned we've hired a new CMO we've completely kind of restructured our kind of marketing team actually centralized marketing because it was kind of embedded in kind of different brands and different kind of acquisitions that we've done. But we've got someone now a couple of people that are -- we're doing a whole lot more in e-mail marketing. We're doing a whole lot more on kind of Shopify our own websites. We're going to do a lot more, we're -- Irwin we're doing a lot on social media advertising, right? If you're out there on Instagram or Facebook Hopefully, you're seeing Irwin ads. And if you're not go to our website and then go back to Instagram and you'll probably start seeing ads, SMS, so it's still early days on a lot of that, but it's -- again, marketing 101 is just stuff that we historically never had to do with Dr. Tobias because it was an Amazon-focused brand. I don't have anything to report, but we -- if our hypothesis is correct, that off Amazon distribution will help on Amazon, then it would behoove us to be talking to some of the big retailers that we know about some of the Dr. Tobias products, right? We sell 10,000-plus units probably more than that a week of Dr. Tobias and some Dr. Tobias products on Amazon. That's pretty good movement that some wholesale retailers may be interested in. Again, nothing to report, nobody's kind of given us any indication that they're bringing it in. But it's that type of stuff that we're looking at as we work to kind of get that brand back on track. Also you talked about kind of customer retention to subscribers. I want to give maybe an update on that. I think I mentioned subscriber growth, at least for Irwin, right, it's strong, it's scaling very nicely, but I mentioned subscriber counts are down across the rest of the portfolio. I've talked on our third quarter earnings call about that, right, that we had seen starting in late September, subscribers across the board, literally every account declining. What we've kind of discovered since then is Amazon made a change where previously, before the change, if you went to a product listing page on Amazon, much of the time the buy box defaulted to subscribe and save. In other words, the consumer didn't actively select. I want to subscribe to this product, Amazon, if they clicked add to cart and buy, they were subscribed. Amazon flipped the switch and we think it was again late September. And now if you go to any listing on Amazon, you will see that the default is kind of onetime purchase. So they were effectively -- I'm not sure the right word to use. I don't want to say duping people, but they were -- people were unknowingly subscribing to products And so that was result as Amazon as the platform was growing as brands were growing, your subscriber count was growing. So that -- and by the way, we've talked to a number of brands, lots of brands who sell on Amazon and everyone is seeing kind of declines. With Irwin, we're seeing increases, which is good, but that all went onto the platform after that change was made in September. So just kind of give you all an update on subscribers. So Tyler, did that answer your question? Or do you have a follow-up? Unknown Attendee: Yes. So that was kind of the main -- important question there, and I wasn't sure how different the shift from the Amazon changes in their algorithm versus Google itself actually changing and how it's being addressed in multiple ways. Dayton Judd: Yes. I'm not familiar with any recent changes in Google and meta or social, just because we haven't done -- we have advertised there in years past with other brands, but it hasn't been a focus. But to the extent you see more ads from us on those platforms, they will either drive to our website or in some cases, they will push to Amazon because again, that's what Amazon is looking for people that are bringing traffic to them, and they'll reward you for that. In fact, they have I think it's called a brand referral bonus or something like that, where if the click -- if traffic is coming from off the Amazon platform, it's normally like a 15% -- for supplement a 15% referral fee commission that you pay to Amazon. They'll give you a discount off of that if you bring traffic to them from off Amazon. So those are the dynamics at play right now. Operator: And there were no other questions from the lines at this time. I would now like to hand the call back to Dayton Judd for closing remarks. Dayton Judd: Well, thank you all for joining the call and for your interest in FitLife. If you have any follow-up questions, feel free to reach out to us. Otherwise, we will talk to you all again here in a few weeks for our first quarter earnings call. Thank you. Operator: Thank you. This does conclude today's conference. You may disconnect your lines at this time, and have a wonderful day. Thank you for your participation.
CNBC host Jim Cramer warned on Thursday that surging crude prices could trigger a painful equity selloff, arguing that oil's parabolic move under President Donald Trump risks a 20% stock market drawdown.
Spoiler: Not great
The administration announced new levies and made changes to existing tariffs for two industries that have proved influential on the president's trade policy.
Bullish sentiment increased 1.5 percentage points to 33.6%. Neutral sentiment decreased 3.1 percentage points to 15.0%.
The U.S. economy is projected to show job gains of 59,000 for the month, an anemic rate by the standards of previous years this decade but enough to keep the unemployment rate at 4.4%. With the changes to the workforce, it's requiring ever-smaller payroll growth to keep the jobless rate steady.
Investors are heading into the first long weekend since the war in Iran began, and they have reason to be anxious.
I remain bullish on tech and gold for Q2 2026, expecting rebounds as the U.S.-Iran conflict stabilizes and market fear subsides. The SaaSpocalypse is overdone; software firms, especially AI-native names like Zeta Global (ZETA), offer compelling recovery potential as earnings remain resilient.
Despite the holiday-shortened week , Wall Street was not short on drama to wrap up March and welcome in April.