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Operator: Good morning, ladies and gentlemen, and welcome to the Serica Energy plc Full Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself; however, the company can review all questions submitted today and will publish responses where it's appropriate to do so. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Serica Energy plc, Chris. Good morning, sir. Christopher Cox: Good morning, and welcome to our 2025 full year results presentation. I'm joined as usual by Martin Copeland, CFO; and Andrew Benbow, our Head of Investor Relations. Thank you to everyone who has submitted questions ahead of the call, but please feel free to post any further questions you have during the presentation. And should we not get time this morning, then please contact Andrew directly. We will respond promptly to every question we receive. Martin and I will now run through a short presentation and then answer as many questions as we can in the time available. This slide is a reminder of our strategy and our purpose. We're here to produce hydrocarbons safely and efficiently while creating value for shareholders and also helping to deliver energy security, jobs and investment for the country. You may be aware that this has been our purpose unchanged for some time now. And I know that such statements can sometimes sound like typical corporate speak. But as we speak today against the backdrop of the terrible events in the Middle East, the importance of our contribution to domestic energy security has never been more apparent. We are unapologetic about the role we play in providing much-needed energy products for society. We have a two-pronged strategy for creating value. Our DNA is taking on mid- to late-life assets and then extending their field life and optimizing production. We've been delivering on that strategy recently with a number of M&A transactions, and we expect that to continue. And we are well positioned at present with a highly cash-generative production portfolio with organic growth options fighting for capital allocation. Our strong positioning is partly as a result of strategic delivery last year. We invested in our existing portfolio, carrying out significant work on resilience and asset life extensions as well as completing a highly successful 5-well drilling program around Triton. These wells will help retain robust production at the FPSO, and the success of that campaign gives us confidence to continue to exploit multiple organic investment opportunities elsewhere in our portfolio. As we continue investing, we also continued our track record of shareholder distributions with dividends amounting to 16p per share. As announced today, these distributions are continuing in 2026, as we recommend a 10p final dividend in respect of last year, continuing to strive to offer investors a compelling mix of growth and returns. And of course, key to our strategic delivery in 2025 were multiple acquisitions. We were one of the more active M&A players in the U.K. sector last year, announcing multiple acquisitions that increased and diversified our portfolio, enhanced cash flows and added to our opportunity set. In total, we increased our reserves by 19%, adding some quality long-life fields to our portfolio. The impact on production will also be material, adding over 20,000 barrels a day to our production capacity. The deals were done at very attractive prices with reserves added at a low cost of $3.30 per barrel. The acquisitions, which we have completed, being Prax Upstream and now TotalEnergies, which completed today, have resulted in the net receipt of cash by Serica amounting to $75 million in aggregate. And the ones still to be completed, from ONE-Dyas and Spirit Energy, will also result in net cash receipts or only limited cash paid out on completion. Hence, these acquisitions will be cash flow accretive this year, thereby supporting further portfolio investment and returns to our shareholders. Looking ahead, our strategy remains unchanged as we seek to acquire assets that may be non-core to others, but can be enhanced by Serica through extending field life and delivering further value, both corporately and through the subsurface. We will continue to look for potential acquisitions in the U.K., although the amount of recent consolidation means there may be fewer opportunities in the near term. As a result, and as we previously signaled, we will continue to explore opportunities overseas, but only in areas where we are confident that we can deliver our clear value creation strategy. As we grow, we are ensuring that the capabilities of our team grow with us. We are confident in our strategy and confident that we have the right team to deliver it. Since joining, I felt there were some areas in which Serica lacked the expertise required to excel as a North Sea producer. And as our portfolio has grown, the need to strengthen our capability has grown with it. We've made a number of targeted senior appointments that have materially improved our decision-making, our talent management and our ability to deliver for shareholders. We have established a quality executive leadership team and are putting in place the wider organizational structure and processes to position us to deliver on our strategic and operational goals. We are not finished, but I believe we are close to achieving the goal of establishing the right team to lead a top-performing FTSE 250 company. We need a team with depth and breadth, as we are now building a broader and more complex business. Our portfolio is more diverse and robust with assets that will encompass the entirety of the U.K. continental shelf from the West of Shetland to the Southern North Sea. Our new assets will significantly enhance the predictability and quality of our overall production and cash flows with less reliance on the 2 main hubs and the number of producing fields set to more than double. By the end of the year, we will have equity in a total of 26 producing fields. We are growing our presence in the basin and keen to continue growing. We now operate around 10% of the U.K.'s natural gas production. And today, having assumed control of the Shetland Gas Plant, we have the potential to play a key enabling role in the most prospective gas basin in the UKCS. The projected decline in North Sea production, we often see reported, is one enforced by policy and not geology. As our Chairman has said today, we urge the government to unblock the logjam in its approval of the development of new oil and gas fields, change its stance to the award of new licenses, scrap the onerous and counterproductive EPL and replace it with the already announced OGPM as soon as possible and to change its tone towards the sector. The opportunities in our portfolio alone show there is more to be delivered from the UKCS, much of which is short cycle in nature, and we're keen to play our part. And we are set to increase our production materially in 2026. As you can see from the chart on the right, our expectation for 65,000 barrels a day by the end of the year is not aspirational. It is, in fact, less than what we would be delivering today had all the asset transactions completed. That figure does include Lancaster with production scheduled to cease in May as expected, when the FPSO moves on to its next project. But of course, we need to actually own these assets first. And I'm pleased to say that completions remain on track with the previously stated timetables. We targeted the end of the first quarter for the TotalEnergies acquisition, and that completed today, slightly ahead of schedule. This transaction brings into the portfolio over 5,000 barrels a day of unhedged gas production. We also remain on track for midyear completion for the ONE-Dyas transaction and later in the second half of the year for Spirit Energy. On our Core portfolio, production has increased in 2026 year-to-date compared with Q4 last year, but it's still not where we would want it to be. Production at the Bruce Hub has largely been robust, and we are regularly producing 20,000 barrels a day net from the hub, which is a real positive given the current gas prices. Unfortunately, some further unscheduled maintenance at Triton needed to be carried out in February and early March that required a shutdown for just over 3 weeks. The operator, Dana, concluded that due to overdue maintenance on some production and power generation systems, they could not wait until the summer shutdown to complete work on those systems. They, therefore, took the proactive step to fix the issues immediately rather than to continue to run the equipment that could potentially fail. This work was completed on the 9th of March, and Triton has been running continuously since that time. As indicated in our January trading statement, we also lost production from Orlando for much of the period due to wave damage caused to the Ninian host platform, but this is now also back online and producing over 3,000 barrels a day. Since production restart at Triton, we have seen a fortnight of stable production averaging over 50,000 barrels a day in that period. Over the last few days, we have also seen the first production from Belinda, the last field in the U.K. to receive development consent. It is too early to determine a stable rate for Belinda, but early indications are promising. Triton is currently running with a single gas export compressor as the second compressor is offline awaiting a spare part. Maximum production in this operating mode is roughly 25,000 barrels a day net to Serica. And as we now have excess well capacity, we can anticipate being able to flow at that rate at least through the end of 2027. Once the second compressor is available, we will need to decide with Dana whether it makes sense to keep the second compressor as a backup to give more stability at 25,000 barrels a day or to run the 2 compressors in parallel at a higher rate, but with more vulnerability to downtime. Our production guidance of significantly over 40,000 barrels a day was based on very conservative uptime, effectively building in a weaker month of downtime at Triton. As such, with a significant production uplift to come, we are comfortable in retaining our guidance is unchanged. Going forward, the predictability of our production will be enhanced by the new assets coming in with some, notably GLA and Cygnus having historically very high uptime. But for now, we continue to be focused on delivering improved performance from our existing assets where there's still plenty to do. We are working to embed a culture of operational excellence, where we are not satisfied if we produce anything less than the maximum possible on any given day. In the last few years, there have not been enough maximum production days, and we are reenergizing our entire workforce to pull together to deliver more. There is also work to be done this year to help deliver production well into the future. At the Bruce Hub, there is exciting subsurface potential, and we are doing the necessary work this year to prepare for potential drilling in 2027. At Triton, we are working closely with Dana, and the focus is very much on delivering stability of operations. Dana have been taking many of the same actions that we have taken at Serica to improve performance, in particular, with strengthening of their team with new offshore installation managers, maintenance team leaders and safety advisers as well as bringing in-house some key technical specialist roles, which were previously outsourced. We are also, of course, working hard to integrate our new assets, and I am delighted to welcome our new colleagues from TotalEnergies into Serica and those transferring across to our operations and maintenance contractor, px, today. Even without the addition of reserves from new assets, I'm pleased to say that our reserves replacement effectively achieved 100% in 2025. This was achieved through the excellent work of our subsurface team and largely by 10.2 million barrels being moved from resources into 2P reserves due to the maturation of the Kyle redevelopment, which has now been renamed Kyla. This effectively offset the 10.1 million barrels of production in the year. With the addition of the newly acquired assets, our 2P reserves rise 19% on a pro forma basis. We will continue to be balanced between oil and gas. But on completion of the acquisitions, we will become slightly more gas-weighted as our acquisitions are mostly gas fields. I'm pleased to say we have also delivered a 16% increase in 2C resources, indicative of our attractive opportunity set. This increase was driven by the extensive work on maturing the potential Bruce drilling program as additional infill well opportunities delivered an 18.2 million barrel increase in 2C resources. This outweighed the relinquishment of the Mansell license and transfer of Kyla to reserves. The addition of Wagtail, which we announced during the year, also provided an uplift of 8 million barrels of 2C resources. In total, we now have over 100 million barrels of 2C resources, constituting a diverse and attractive opportunity set. These are projects of various types and across our asset base, but are all tangible and deliverable opportunities. With prudent investment, there is plenty in the hopper to sustain our production at or above current levels into the next decade. We are continuing to high-grade the suite of opportunities and plan to share considerably more detail on these at a Capital Markets Day in early June. We are focusing at present on those opportunities that have the potential for rapid payback, and there are a number of projects that fit that description. One that we have talked about before is Bruce. Bruce is a huge field, and there is plenty of remaining potential there, as can be seen by the increase in resources we have been able to share today. There has been no drilling on Bruce since 2012, and drilling on the field, which sits with our -- within our subsidiaries that do not have tax losses, would be highly tax efficient. First hydrocarbons are possible within 1 year of drilling, and we see a first phase of wells that could add over 10,000 barrels a day to production. This is a significant opportunity to deliver greater production of critical gas supply to the U.K. in a relatively short-term time frame. This opportunity is the result of work done over more than a year now across the integrated disciplines within our exceptional subsurface team, which, as I may have mentioned before, is the best in the business. Market screening for a rig is currently underway to enable us to potentially take an investment decision later in the year, which could enable drilling to begin in 2027. There is still more work to be done, and there are other opportunities also battling for capital. Kyla also offers a material production uplift. This was a previously producing field, which ceased production due to the host infrastructure being decommissioned. A horizontal well drilled into the best part of the reservoir and producing into Triton could also, therefore, add 10,000 barrels a day to our portfolio. And then, we have the opportunities just welcomed into or to be brought into our portfolio via acquisition. Glendronach is a compelling opportunity, and there are others not even mentioned on this slide that we look forward to discussing at the Capital Markets Day. And we are very excited by the overall potential West of Shetland. I realize this is quite a busy map, so let me give you a quick overview. We've acquired the acreage, which is shown in blue, which includes the Laggan and Tormore and other producing fields as well as a number of exploration prospects plus the associated pipelines in orange and the Shetland Gas Plant. Further west and north of our acreage is an extensive area colored in gray. This acreage is owned by Adura and Ithaca, 2 of the largest U.K. producers who are bullish about the drilling prospects in the area. The industry consultant, Westwood Global Energy, recently published a report identifying that the West of Shetland Basin holds an estimated 5 trillion cubic feet of gas. Of course, that sounds like a big number, and it is. In fact, it's equivalent to supplying every household in the U.K. for 5 years. And yet some people continue to say that the amount of gas we can produce in the U.K. is not significant. With 1.5 billion barrels of discovered and prospective resources situated within tieback distance of our existing infrastructure, this is an area of material potential for the industry and for Serica. And the Shetland Gas Plant is an asset of strategic importance to the country. While we are not primarily a third-party infrastructure company, as well as processing our own gas through the plant, we are currently processing gas for Adura from their Victory field, which only started producing last September. And we hope soon to be doing the same for Ithaca and Adura, Tornado field, which they are looking to move to final investment decision by the end of the year. But as well as exciting third-party opportunities, which all add value for Serica, there are also opportunities for the GLA joint venture to develop and add value from the assets on which we have completed today. These include the Glendronach tieback and a possible infill well at Tormore. And now that these are in our portfolio, they will be assessed and ranked against the other development opportunities we have in the battle for capital allocation, about which, again, we will give more detail at our Capital Markets Day. And with that, I will hand over to Martin to give you more on our finances and how we are seeing things in the near-term market situations. Martin Copeland: Thanks, Chris. As we largely preannounced with our January trading statement, the story of last year is mostly that despite a challenging year operationally, our relative financial strength and our confidence in the resolution of those issues enabled us to continue delivering on investment in the portfolio and on healthy shareholder returns, including maintaining the full year dividend at 16p, inclusive of the 10p proposed final dividend we are announcing today. When it comes to how we generated and used cash during the year, this waterfall chart shows the picture of what actually happened to gross cash from our year-end 2024 to our year-end 2025 position. But the real story of the business potential lies in understanding what the deferred production cost us in foregone 2025 revenues from the unscheduled Triton interruptions. Based simply on adjusting for what would have happened if Triton had delivered operating efficiency in line with our 2025 budget and factoring in the actual prices of oil and gas, which prevailed, we estimate we missed out on some $250 million of revenues last year. And because those missed revenues were at Triton, where not only do we still have material tax losses, but we were also investing heavily, which is the key method of sheltering the EPL and that our cost base is very largely fixed in nature, those foregone revenues would have flowed almost directly to additional free cash flow generation. We were, however, helped last year by the receipt of $63 million tax rebate in respect of overpaid taxes from 2024, but also from a low cash tax bill during the year, given we were able to factor in the impact of group relief into the installment payments made during the year. These are the reasons why the tax bar is, in fact, a positive on this chart. So we very much do not see 2025 as representative. And indeed, as we indicated in January, we are confident of material free cash flow generation this year, and that outlook has, of course, only improved in the current market conditions. In fact, as it says on this page, with the completion of the TotalEnergies deal today, we have more than halved our net debt as compared to the year-end level and are on track to be in a net cash position by the end of H1. Turning in a little more detail to the income statement. While realized prices were generally not materially different than in 2024, being marginally lower in oil, but higher in gas, our revenues of $601 million were down 20% from the prior year, essentially in line with the lower volumes. But the truer comparison of the impact of Triton issues can be seen in the comparison with the 2023 pro forma levels. On this basis, production was down some 4.5 million barrels or approximately 30%. Our hedge book was in the money at year-end and delivered unrealized hedging gains of $75 million and just under $8 million in realized gains, as we benefited especially from protection against the lower prices seen in Q2 in the wake of the liberation day tariff announcements. Operating costs were roughly 10% higher than 2024, largely as a result of increased maintenance activity at the Bruce platform, as we sought to reduce maintenance backlogs, but also because of a slight weakening of the dollar versus our largely pound-denominated costs. G&A costs were up by just under $2 million, as we made choices to add capabilities to set us up for future success, and we incurred transaction costs of $5.5 million associated with the extensive M&A activity. Despite the challenges in the year, we still delivered a profit before tax of $80 million, but at half the level of the prior year. Our current tax charge was only $2 million, as we benefited from in-year group relief associated with losses made in the Triton subsidiaries. However, in common with all our North Sea peers, and as we also reported in our H1 results last year, we had a material deferred tax charge of $130 million, including a $65 million charge relating to the enactment in Q1 of the extension of the EPL from 2028 to 2030. The result of these noncash accounting impacts is that we reported a book tax charge of 165% and posted a loss after tax of $52 million for the year. Turning now to the balance sheet and notable changes in the year, which result mostly from acquisitions. Our exploration and evaluation balance doubled to $43 million, primarily as a result of the completion of the Parkmead acquisition, as we became operator and brought into a greater share of the Skerryvore exploration prospect. We also consolidated the acquisition of Prax Upstream, which completed on the 11th of December as a business combination. As preannounced in January, we ended the year with net debt of $200 million, being effectively 1x EBITDAX. But as already explained, we see this as something of an anomaly and would have been net cash pro forma for the deferred cash flow from the Triton issues. And as already noted, we have more than halved our net debt since the balance sheet date. Finally, inclusive of the impact of new drilling at Belinda and Evelyn as well as bringing Lancaster into the portfolio from the Prax Upstream business, we ended the year with the exceptionally low level of decom provisions of less than $2 per 2P barrel of oil equivalent. While we always update on our hedging with our results, given the dramatic events in commodity markets year-to-date, we felt that a slightly deeper dive is merited today. Before turning to how we positioned -- we are positioned and what we expect to be doing in the future, we wanted to give a bit of background on what's been happening in oil and U.K. wholesale gas markets year-to-date. We came into the new year with all market fundamentals in terms of physical supply of oil and, to a lesser extent, gas pointed to a weak Brent prices during 2026 and medium-term weakness in gas prices. Bearish sentiment was evident in the market, and this was apparent in that despite unusually low European storage levels, U.K. gas prices averaging around 84p per therm for January and February were roughly half the level of the equivalent mid-winter period in 2025. However, of course, things changed dramatically after the war in Iran commenced on the 28th of February. For the 3 weeks of March so far, NBP day-ahead pricing has averaged 127p per therm, and Brent has averaged $103 per barrel. But as the charts on this page, which show the shape of the forward curve for Brent and for NBP at various dates since early January right up to a week ago on the 19th of March, things really elevated in reaction to the de facto closure of the Strait of Hormuz and the physical attack on the Ras Laffan and Pearl GTL plants in Qatar. But although near-term prices, the front end of the curve have risen sharply, the prices further out in time have not risen nearly as much, and the forward curve for both oil and gas are in very steep and, in fact, unprecedented backwardation. These forward prices should not be seen as predictors of future prices, but they do represent the levels at which Serica would be able to hedge in the market through swaps. So with this backdrop in mind, we turn to where our hedge book stands today. We've been building our hedges materially during the first quarter, and the reason for that goes to the reasons why we hedge. Firstly, we have an ongoing requirement by our banks to hedge a certain amount on a rolling basis, being 50% of the current year and 30% of the following year. But beyond that, we are always striving, appreciating that we cannot predict events and prices to find the Goldilocks solution, not too little and not too much. On the one hand, we seek to ensure that we protect downside sufficiently to ensure that we can cover our cost base in tougher times as well as to support our capital allocation priorities, including the dividend. This also includes maximizing the liquidity available to us through the borrowing base under our RBL. But on the other hand, we do not want to overhedge so that events, even if they are the kind of tail risk events we have seen this month, which cause prices to spike, can benefit our shareholders. So we were always looking to protect the downside, but leave as much as possible of the upside potential. In common with our peers, we do this both by imposing policy limits on our absolute amount of hedging and by the choice of instruments that we use for hedging. As shown on this table, Serica is currently hedged for about 60% of our forecast production in 2026 and about 50% in 2027, which is inside our policy limits. When we combine the impact of the unhedged part with the use of zero-cost collars, which retain an element of upside exposure, we retain about 40% upside exposure in 2026 and around 55% in 2027. The position in gas is actually more exposed to upside than in oil with only around 50% of our gas volumes hedged this year and less than 40% for next year. While we have built the book since the beginning of the year, about 50% of the hedges we've built have been taken on since the start of facilities from the 2nd of March, and we've been able to capture some very attractive opportunities. For instance, although the table show averages for the quarter, we have, in fact, recently placed some swaps for March at levels up to $111 per barrel for oil, which is especially pleasing given our most recent Triton lifting concluded only earlier this week. We appreciate that it can be confusing to understand the intricacies of hedging approaches. And although we hope the floor prices are quite clear on this table, it is tough to figure out what the foregone upside price implications are. So, as a bit of a guide, we estimate that our current hedge book for 2026 with oil prices at a notional $100 a barrel, we realized roughly $80 a barrel. And at 150p per therm for gas, we realized roughly 130p per therm. Taking a look at this slide, you may think you've seen this before, and that is because you have. We're pleased to say that we are simply reiterating our guidance across production, OpEx and CapEx at the levels we set forth with our trading statement in January. What we have though updated on this page is the carry-forward tax loss balances that we've reported today as of the 31st of December 2025. As you can see from a combination of our own activities during the year as well as M&A that we completed during 2025, we ended the year with essentially double the level of tax losses as we started with. We now have roughly $2 billion of corporation tax and SCT losses and roughly $500 million of EPL losses. And using the simple math that we've applied before of corporation tax loss times 30%, SCT times 10% and EPL times 38%, then the notional value of these losses is around $1 billion. Finally for me, I wanted to say a few words to add what Chris has already covered in relation to the M&A we announced in the year. In my previous career as a banker, we would tend to consider that the M&A was done when the deal was signed. But what I've since learned is that to ensure we deliver value, we need not only to be capable of efficiently delivering complex operated asset transactions through to completion, but also to ensure that the businesses are integrated efficiently into Serica and set up to realize their value potential. Serica has, therefore, invested in human capital to ensure that we have the skills and processes that are needed to be successful in an M&A growth strategy. This includes being agile and opportunistic in the execution phase and ensuring that we always do what we say we will do. So we sustain Serica's good reputation in the M&A market as a credible and trustworthy counterparty. That also means having the people, processes and systems that are set up to deliver in a repeatable way to coordinate and drive forward the multiple work streams needed to get to completion and day 1 in the fastest possible time, all while also ensuring safe and reliable continuous operation of high-sensitivity assets and complex IT systems. The process we have just completed to see GLA and the Shetland gas plant come under our control today is a great example of this. Finally, this also means doing the necessary work upfront to protect value from the transaction and to ensure that the people and systems can be integrated as smoothly as possible to ensure that the value can be realized in practice. One example of this is the approach we've taken with the Spirit Energy deal, which is not yet completed. Although we only assume completion from around end September, we know that future gas prices were key to value realization on this deal. So based on a very constructive relationship with Spirit Energy and with their parent, Centrica Energy, we have been able to put in place deal contingent hedging for roughly 50% of the production, but on a basis which protects the value of our deal, but still leaves ample upside potential for Serica to enjoy. This was made possible in part thanks to Centrica Energy being a leading participant in gas markets and working through the complexities of a structure like this with us. With that, I will hand back to Chris for some concluding remarks. Christopher Cox: Thank you, Martin. This is another slide that should look quite familiar, and that's because our focus areas remain unchanged. Safety is, of course, the #1 priority and delivering reliable production this year that will generate material free cash flow. We are integrating acquisitions, progressing organic growth projects and still looking in the market to continue prudently adding to the portfolio to deliver for our shareholders. In addition, we continue to plan to move from AIM to the main market of the London Stock Exchange during the year. We are very excited by the opportunities ahead and look forward to updating you on progress throughout the year. And with that, I will hand over to Andrew to run the M&A (sic) [ Q&A ]. Andrew Benbow: The M&A, I hope not. Christopher Cox: Q&A, the Q&A. I'm sorry. Andrew Benbow: I think we'll keep other people with the Q&A -- with the M&A. Andrew Benbow: Right. So the first question actually is about the last thing that you mentioned. When are you anticipating being admitted to the main market? And what impact do you think this might have on the share price? Martin Copeland: So probably I'll take that one. Yes, we -- I think we put in our detailed announcement today that we expect now that will be in Q3. It's -- the work is ongoing for it. There's a lot of process. And I know, as Andrew often says, a surprising amount of process just to move from one part of the London Stock Exchange to another. But nonetheless, there is, and we are working it hard. We expect it will be during Q3 of this year. So very much on track to get there during the year. In terms of what it will do for the share price, I mean, it's very -- obviously, our main reason for wanting to do that is to get a greater degree of exposure for Serica to investors generally. And the wider the exposure we get, the better it is generally for support for our share price. And in particular, certainly at anything around our current market capitalization, we would be very comfortably inside the FTSE 250. So one of the 350 biggest companies in the U.K. And the benefit of that is once you get into the FTSE 250, there are a lot of tracker and index funds that have to follow stocks in that segment. So that's one of the main reasons why we see a benefit in moving to the main board, and we remain very much on track to make that move during the course of the year. Andrew Benbow: Moving on to Triton. We've had a few questions come in unsurprisingly. So I'll try and amalgamate in a way that makes sense. There's kind of 3 questions really. One is, why couldn't the maintenance have been done last year? Second is a similar one, which is, will the work at Triton reduce the maintenance period later this year? And then the general question, which I think is the one that everyone wants to know is, how much should the reliability of Triton concern shareholders? Christopher Cox: Thank you. I'll try and address all 3 of those. So the work that had to be done in February and March was not something that we actually even knew about when the last shutdown took place. What happened was in doing some inspections of key equipment, Dana discovered that they could not vouch for the status of some of that equipment. They could not prove that they've been maintained properly or inspected properly, and they didn't have the records to be able to prove that. So there wasn't necessarily evidence that there was anything wrong with the equipment. They just couldn't show from their maintenance systems that it had been inspected when it should have been inspected and maintained properly. And so what that meant was when they put all of that together, they felt that there was a risk that was intolerable and equipment could break before it got to the next shutdown. And so rather than take that risk, they took the decision that they would shut down and fix it now. I think you asked, does that shorten the shutdown in the summer? It doesn't because some of the things they discovered that need maintenance, they haven't done now and they haven't to the summer shutdown. However, I will say that in our planning for the year, we assumed that Triton would be off essentially for 3 months in the summer, whereas Dana is planning for a 65-day outage. So we've built in a buffer there to some extent. And as I said during the presentation, we've also assumed a week's downtime on Triton as we go through the year outside of that summer shutdown window. So we think we've made some fairly conservative estimates around Triton for the year. So how much should shareholders be concerned about Triton? Look, it's still not as reliable as we want it to be. That's clear. And we are working with Dana on a number of things to try and improve the reliability. And the key is, frankly, it's the power turbines and the compressors where we're reliant on one of each at the moment, and there are 2 of each on the vessel. And we need to get to a point where we've got 2 power turbines and 2 compressors available. And that's -- it's going to take a few months before we're in that position. In the meantime, we're quite vulnerable to outages. But as I've said, I think we've been quite prudent and put in place some fairly conservative assumptions this year such that we're confident with the production guidance that we've given. And we're going to be part of -- Dana has just formed a compression improvement task force, which is targeting getting 90% efficiency with a single compressor and figuring out what else needs to be done in order to have 2 compressor operations. And we're going to be involved in that work ourselves. So I think, as we move forward, things will get better. But for now, it's -- we still have that vulnerability. We can't shy away from it. Andrew Benbow: And just briefly to clarify, our guidance takes in effectively 1 week of downtime each month over the course of the year. Keeping on Triton for another one, would you be comfortable bringing Kyla into the FPSO? Christopher Cox: So -- yes, I'll take that one. So, Kyla, just to be clear, we've announced that we've moved the barrels from Kyla into reserves as of the end of last year. That doesn't mean we've taken a sanctioned decision on it yet. As I mentioned during the presentation, it's fighting for capital with a lot of opportunities in our portfolio. And we will make a decision on which ones we're going to pursue in which kind of time frame as we go through the year, and more detail at the Capital Markets Day. So we haven't taken FID on Kyla yet, but it's mature enough. We know enough about it. We like it as a development. So we were at a point where we could move it from resources into reserves. Now, of course, we're not going to bring in another field into Triton until we're comfortable that we can produce it safely and efficiently. And the fact is we've only just brought on Belinda in the last few days. And we had anticipated that at the end of January, and it didn't happen because we had a shutdown. So there's no way we're bringing another development into Triton until we get stable operations there. But as I've said, I think Dana is doing a lot of the right things to achieve stable production and 2 compressor operations. And I'm hopeful that we get to the point where, yes, we can sanction Kyla and bring it into Triton. Andrew Benbow: Somebody on the side actually has just said that they're a bit bored of talking about Triton's compressor... Christopher Cox: Me too. Me too. I'm fed up with talking about it, too, but it's what we get asked questions about and for good reason. Andrew Benbow: They do have a question with it as well, which is -- which I think I'll take the time to broadly think about it, which is what percentage of group production will come from Triton in 2027? Now, we obviously haven't guided for 2027 as yet. But if you look at analyst expectations, it's probably somewhere in between 1/4 and 1/3 of production will come from Triton next year. So it clearly becomes of significantly less importance to the portfolio, albeit still being highly cash generative. Next question, I think, is one for Martin, actually. Why do companies who acquire assets from [ TotalEnergies ] sometimes pay Serica rather than Serica paying for the assets? I presume they're concerned about the decommissioning costs at the end of field life. What value is it that you can see that vendors can't? Martin Copeland: Good question. So yes, there's a bunch of things embedded in that, obviously. One is companies like TotalEnergies makes a strategic decision that they basically want out of an asset like this. And you can understand why because we think it's got amazing potential, we're buying it as it is, but they thought it was going to be a lot bigger than it actually is. And so it's kind of got -- it's been something that's been strategically on the decision to exit. So, therefore, price is not the most important thing. But add to that, yes, why -- they're not -- obviously, they're a commercial and sensible company, and we are too. And therefore, they -- whilst we're receiving cash, that's because the effective date, the historic date at which the deal we economically owned it was the 1st of January 2024. So the $57 million odd that we received today is basically the after-tax cash flow from that asset for that period until today. So that effectively, we economically owned it, and we receive it today because we've legally completed today. And then, when you think about how that works, yes, we are taking on the decommissioning liability associated with that asset in the future. The thing about decommissioning liabilities are that they are obviously an obligation to decommission in the future, but the timing of that decommissioning, and indeed, the absolute amount of the cost of it are not certain. And absolutely, our objective, which is different than that of, say, TotalEnergies when they owned it, is to continue to invest in the portfolio through some of the things that Chris talked about, like maybe Glendronach, maybe a Tormore well, but also getting the benefit of third-party gas into the plant like Victory that's already there and Tornado that we hope to come in the not-too-distant future. All of those things would just push out the time at which decommissioning happens. And all of that is very significant in terms of additional value for us. So for us, it's about delivering on those things, which TotalEnergies was not going to do because the capital investment associated with them just didn't screen for them relative to all the other global opportunities they have. It does screen for us, and we, therefore, look forward to doing it. And it's a case of, again, as Chris indicated, it's right assets, right hands, and it's just the natural kind of food chain, I would say. One other little point is there's also a tax differential. And TotalEnergies was being fully taxed on it under their ownership. And indeed, the receipt of cash we've had today is after it's been taxed for that whole period at 78%. But when in our hands, we're buying it into some of the entities we acquired through Prax Upstream, and that means it will be sheltered from a large amount of the tax now as of from today when it comes into our ownership. So there's a different valuation reference point for us as well. So I hope that answers the question. And that's just using GLA as an example, but you could play that across to other things as well. Andrew Benbow: And speaking of some of the other things that we're acquiring, given the context of very high commodity prices, could you talk about the expected payments on closing of the acquisitions of the ONE-Dyas and Spirit's assets? Assuming oil and more particularly gas prices stay where they are, those payments could be very favorable to Serica. Martin Copeland: Yes. I mean, clearly, they will -- we do -- as we track them, they're going to be up versus where our original planning for them was when we did the M&A because we weren't planning for prices where they are right now. So yes, the net impact of that is going to be that we expect to get higher payments than we would have done or in the case of Spirit Energy to essentially probably the net payment by us will probably be lower. The exact numbers of those is obviously something that needs to be worked through based on what actually happens to commodity prices between now and when we actually complete. The only other cautionary note I'd say is that, again, just as I mentioned for TotalEnergies in the case of both ONE-Dyas and Spirit Energy, under their ownership, they're being fully taxed with the full EPL rate. And so whatever the increment is, it's going to have a higher tax rate against it than it would under us. So that does help to dampen the impact of higher prices a little bit. Andrew Benbow: A more general question on the M&A landscape in the North Sea. How is the current market? And how has the M&A dynamics changed after Adura and NEO NEXT+? Martin Copeland: Yes. I mean, I think Chris alluded to that in his remarks that -- we'll have to say that we think the opportunity set in the U.K. this year is going to be down on last year. And I guess, it's kind of easy to say that because there was a hell of a lot of activity last year, right? So the bar would be very high to be able to repeat the level of activity in the basin this year that we saw last year. But that impact of the significant consolidation that we've seen is probably a reason why we think there'll be less M&A this year. It doesn't mean to say there won't be any. And I do think in time, as the likes of an Adura or a NEO NEXT+ and some of the others, Ithaca, as they look at their portfolios, they may well see that there are assets within there that in the normal course, they look to divest and move on. And that's kind of normal course business that we would expect to carry on. But overall, we just think the activity in the U.K. is likely to be down. The other cautionary note on M&A is that whilst we see these very high prices, high -- not just high, but volatile prices, prices that move all over the place are very difficult to transact M&A in, right? It just makes doing deals really hard when prices are moving really fast. So that's not a comment specifically about the U.K. It's just a general comment about doing M&A in the upstream. Andrew Benbow: And while we're on the discussion about U.K. M&A, then how about overseas? You mentioned it's something that you're looking at. So what kind of areas could people expect an acquisition to be made in? Christopher Cox: Do you want me to take that one? So look, we are starting to look overseas and get a bit more serious about that. And there's really a couple of reasons for that. One is what Martin just mentioned, there are fewer and fewer opportunities in the U.K. We're still working on a few opportunities, but not as many as they were a year ago. And we want to have a sustainable business. And at some point -- the U.K. is in decline. And at some point, you'll get to a point where there's not enough production left for us to maintain the kind of size of business that we are. So sooner or later, we have to look overseas anyway if we want to have a sustainable business. So look, we don't want to limit ourselves too much to where we might go. We do quite like Southeast Asia. So why would that be of interest? Really, it's an area where we can see playing out our strategy in a similar way to we do in the North Sea. Southeast Asia in general is a bit less mature than the North Sea, but it's -- most of the fields are kind of mid- to late life now. So you're getting to the point where a number of the majors are thinking about exiting fields there or just reducing their exposure in the area. So we're at that point now where -- probably where we were in the North Sea 10 or 15 years ago, frankly, where opportunities are coming available for companies like us to go in. And as we said, push out the decommissioning, extend the life of fields, drill more wells, find more reserves. So we just see that it's a ripe area for that kind of an opportunity. Yes. And I don't really want to comment too much on other areas because as soon as we say we're ruling something out, and then, an opportunity comes up, who knows where we could go. So never say never, but I think Southeast Asia is probably first on our list of places that we like for the reasons I've just mentioned. Andrew Benbow: I'm aware we're running out of time. We've got quite a lot of questions still to go through, so I'll try and group them together. Dividends, quite a lot of people have asked about dividends. So a question for Martin. Do we see a return to dividend growth? The dividend looks quite small considering the free cash flow to come. Martin Copeland: It's a really good question. And look, the way we think about the whole capital allocation piece is we've got to balance the dividends to shareholders with investment in the portfolio and with M&A growth. And it's the -- we're not alone in that. That's kind of the conundrum for all of us and our peers that are involved in this. It's probably going to sound a bit like a stuck record in saying, wait for the CMD, but we are definitely planning to give a great deal more detail about how we balance all of those things at the Capital Markets Day. I guess, it's a sign of confidence we felt to show that we were able to continue the dividend at the same level as before despite the fact we had a challenging year last year, but -- now, but we expect to give a lot more clarity. And we've got to -- and show the really interesting and exciting returns can come from the investment in our portfolio, but it always while ensuring that we also pay a sensible amount of dividend. So I know that's not going to directly answer your question, but that's probably what we can give for now. Andrew Benbow: Another quick one for you, Martin, about tax losses. How long do you think they'll last for? And which of your assets do they cover? Martin Copeland: Really good question. And we -- you probably noticed that we've sort of stopped giving guidance on how long we think they're going to last for, and that's because we used to give it. And then, we found that they lasted for a lot longer. And as it happens last year, we created a lot more losses either through our own activity because the silver lining on Triton performance was that, as I probably indicated, we actually added to the loss pool there rather than reducing it during the year. But then, of course, we also did some transactions that brought some losses with them. So in terms of -- and then, of course, how quickly use it is also a function of what happens to the commodity price, which is incredibly difficult to predict. So it sounds like a bit of a cop out. We've got a lot of losses now. They basically will -- are reasonably balanced across our portfolio with the exception of Bruce, Keith and Rhum, which is in the entities that basically don't have any losses. But that, as Chris indicated, is one of the key areas we're looking to make investment into. And investment is not only needed to bring short-cycle gas to the U.K., which it desperately needs, but is also efficient when it comes to the use of tax because if we can invest, we get still strong capital allowances against the 78% tax rate that applies there. So we have a strategy which is kind of fit for all seasons in that respect. Andrew Benbow: And speaking of tax rates, I think we should finish with politics and apologies to people whose questions we haven't got around to, but please do e-mail them over to me directly if you'd like a response. Are you talking face-to-face with Ed Miliband or Rachel Reeves? With such pressure from so many sources, do you feel the logic of the message is getting through? And are there any milestones going forward? And do you feel more positive in the stance of Whitehall? Christopher Cox: So we're speaking with everybody that will listen, both individually and as part of industry bodies. I was personally in the meeting with Rachel Reeves, #11, whenever that was, just around the spring statement time. The message is definitely getting through about the need to stimulate the North Sea before it's too late. We have a tax regime that's been designed by this government in consultation with the industry. And yet, as we sit here today, that won't come into force until 2030. And our argument is just bring that in now. Treasury absolutely get that. I guess all I'll say is there are other parts of the government that are not necessarily sold on that idea. So I'm not going to try and predict where we'll end up on that because at the moment, I don't think anybody in government really knows where we're going to end up on that. Andrew Benbow: Martin, anything you want to add? Martin Copeland: No. I think Chris has covered it very well. I mean, look, everyone in this call will know, we've seen the volume of really quite broad-based sentiment now to recognize the importance of security of supply. And that's an argument that we've clearly been supporting for a long time. We just hope that a sense of pragmatism, the recognition of the importance of security of supply from a sort of defense and just national security perspective will begin to carry more weight than it perhaps does -- has done in recent times. Andrew Benbow: And with that, Chris, would you like to give any closing remarks? Christopher Cox: Well, just that we've got another exciting year ahead of us. We are integrating new assets into our portfolio. We're seeking to do more M&A still on top of that. We will be growing production as we go through this year, both on our existing portfolio and the new assets. We will be moving to the main market this year. And we've got lots of exciting investment opportunities in our portfolio, about which we will speak at the Capital Markets Day, which is the next time we will see you. Operator: Perfect, guys, if I may just jump back in there. Thank you very much indeed for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback. On behalf of the management team of Serica Energy plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.
Operator: Good morning, ladies and gentlemen, and welcome to the Charlotte's Web Holdings, Inc. 2025 Fourth Quarter Conference Call. [Operator Instructions] This call is being recorded on Tuesday, March 31, 2026. I would now like to turn the conference over to Cory Pala, Director of Investor Relations. Please go ahead. Cory Pala: Thank you, and good morning, everyone. Thank you for joining us today for Charlotte's Web Q4 2025 earnings conference call -- provide some color around the recent developments around BAT transaction, the Medicare opportunity, regulatory momentum and other progress. Afterwards, we will take questions from our analysts. As always, before we begin, please note that certain statements made during this call, including those regarding our future financial performance, business strategy and plans, constitute forward-looking information within the meaning of applicable security laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially. We direct you to review the cautionary language in this morning's earnings release as well as the risk factors and other important considerations that are detailed in our regulatory filings, particularly in our most recent Form 10-K report. During the call, we will also refer to supplemental non-GAAP accounting measures, including adjusted EBITDA, which do not have standardized meanings prescribed by GAAP. Please refer to the earnings press release for descriptions of these measures and reconciliations to their most directly comparable GAAP financial measures. And with that, I'll now hand over the call to Charlotte's Web's CEO, Bill Morachnick. William Morachnick: Thanks, Cory. Good morning, and thank you for joining us today. I want to say right up front that this is not business as usual for Charlotte's Web. We've had several key announcements that have tremendous positive impact on our business that I'm excited to share with you. So let me also add that this includes another quarter of demonstrated progress for our push towards achieving scalable profitability. But first, let me start with the most recent development. Last night, we announced a financial transaction with British American Tobacco in relation to its existing convertible loan note. This transaction has 2 primary components. First is the conversion of BAT's outstanding $55 million convertible debenture, plus approximately $10 million in accrued interest in the common shares of Charlotte's Web at a conversion price of CAD 0.94 per share. This eliminates our largest balance sheet liability entirely and avoids approximately $3 million in future annual interest for the next 3.5 years. The second component is a new equity investment of $10 million through a private placement. This is fresh capital coming into the business to support the execution of our key strategic initiatives, including our upcoming participation as a leader in the CMMI Medicare pilot programs. So in total, BAT's combined equity commitment under this transaction is approximately $75 million. And following completion, BAT will hold approximately 40% of the company on a non-diluted basis. Among other things, this transaction provides clarity and stability around BAT's existing investment decision. Let me also provide some additional background on why we believe this is the right transaction at the right time and appropriate in the current circumstances. The original debenture was issued in November 2022 at a conversion price of CAD 2 per share. Due to several issues, including the ongoing federal regulatory delays around consumable hemp, it was extremely unlikely that BAT would voluntarily convert its debt anytime soon. If this debt burden were left unaddressed and continued to accrue interest at 5% per year, the company would have faced an additional $12 million or more in aggregate interest from now through the maturity date in November 2029. This transaction eliminates all of that. The net effect is a dramatically simplified equity-based capital structure. We go from carrying significant debt obligations to a clean balance sheet with a well-capitalized long-term investor. The additional $10 million in fresh capital strengthens our working capital position and provides flexibility to pursue multiple exciting growth opportunities. All right. So now let me turn to our most exciting recent growth opportunity the Center for Medicare & Medicaid Innovation pilot program, or CMMI. Under the CMMI pilot program, for the first time, seniors gained access to science-backed CBD products through a federally authorized Medicare pilot, and Charlotte's Web is positioned to be a participant within this program. Just 10 days ago, CMS, which is the Center for Medicare and Medicaid Services issued additional guidance that significantly clarifies and strengthens this opportunity. CMS established the Substance Access Beneficiary Engagement Incentive or Substance Access BEI, which will be the specific mechanism through which the pilot will operate. Notably, the guidance confirmed that the hemp-derived CBD products, including nonintoxicating full-spectrum products containing up to 3 milligrams per serving of naturally occurring THC are eligible under the program. This means our core portfolio of full-spectrum CBD wellness products qualifies under this federally authorized program. Under the Substance Access BEI, participating health care organizations primarily accountable care organizations, or ACOs, and oncology providers may purchase eligible hemp-derived CBD products for the Medicare patients with up to $500 per beneficiary annually available. To provide some clarity, it's important to note that Medicare does not directly reimburse these products. Rather, the ACO purchases hemp CBD products directly and furnishes them to its patients. The economic rationale is that if these products contribute to lower utilization of higher-cost services, the ACO may benefit through reduced total cost of care. As a result of that, the ACO may have an incentive to support adoption of the Substance Access BEI. Participants in the ACO REACH Model and the Enhancing Oncology Model are anticipated to begin offering the Substance Access BEI beginning April 1, which is tomorrow with the ACO LEAD Model expected to follow in January 2027. I want to be really clear about what this means. This represents an established health care integration pathway. It operates with CMS authorization, physician oversight, patient support through the program's partner Realm of Caring and structured outcomes data collection. To facilitate the pilot, Charlotte's Web will offer products intended to support eligible patients through a secure online health care portal. The initial phase is focused on senior patients receiving care through the ACO REACH provider. Over time, this type of model has the potential to be applied more broadly within the Medicare population, which currently includes approximately 67 million beneficiaries. And looking ahead, there is a second potentially much larger Medicare pathway development. In November, CMS proposed for the first time, allowing Medicare Advantage plans to be included -- to include hemp-derived CBD products in their benefit design. That is a separate program from the CMM pilot and it represents a potential expansion of CBD access into the broader Medicare Advantage system, which covers roughly half of all Medicare beneficiaries. The timing of additional details for this program are still being finalized, but we remain confident that our quality standards and compliance infrastructure position us well for this potential opportunity. All right. Let me take a moment now to talk about the federal regulatory status. Despite ongoing challenges, recent federal policy developments are showing progress for hemp-derived CBD. Congressman Morgan Griffith, who's the Chairman of the House Energy and Commerce Subcommittee on Health, which oversees the FDA, advanced the Hemp Enforcement, Modernization and Protection Act known as the Hemp Act. This proposed legislation would establish a science-based federal framework for hemp-derived products under the FDA oversight. We are actively working with our one hemp partners through the markup process. The Hemp Act is expected to proceed through regular order in the House Energy and Commerce Committee this year with potential pathways for advancements for broader legislative vehicles, including Congress' continuing resolution in September. At the same time, we recognize that multiple legislative approaches to hemp regulation are under active consideration in Congress. And we remain actively engaged with policymakers and stakeholders across these efforts and will support the most effective path forward to achieve a durable science-based federal framework. It's clear that a broader federal solution is critical. Recently issued Substance Access BEI guidance explicitly permits hemp-derived CBD products containing up to 3 milligrams of THC per serving under the CMS program. This would certainly seem to be a direct signal from the federal government that full spectrum products are considered safe and appropriate. Okay. Now let me turn to DeFloria, which is one of our most compelling long-term potential opportunities outside of our core consumer business. This is our collaboration with Aragen Bioscience and British American Tobacco. Last year, DeFloria received FDA clearance to proceed with Phase II clinical trials for its investigational new drug. This botanical IND is for the treatment of irritability associated with autism spectrum disorder. It represents a natural alternative to pharmaceuticals that are often poorly tolerated. It uses our proprietary full spectrum CBD extract derived from a patented hemp cultivars and we believe it represents the most advanced cannabinoid drug program utilizing the FDA's botanical drug pathway. Building on favorable results from Phase I, which established the dosing parameters for the Phase II program, DeFloria has been actively preparing for entry into Phase II clinical trials. Preparations are substantially advanced, and the program is expected to initiate midyear, subject to the customary development activities and resource alignment. Phase II consists of multiple studies across distinct patient populations. These studies will evaluate safety and tolerability and provide early signals of therapeutic effectiveness to inform a subsequent Phase III program. A reminder, as stated in this morning's press release, the potential strategic value to Charlotte's Web shareholders is significant. Clinical advancement through FDA regulated pathways validates the therapeutic potential of our proprietary genetics and strengthens the scientific foundation underlying our entire consumer business. We also hold exclusive commercial manufacturing rights to ultimately receive FDA approval which is clearly a significant long-term revenue opportunity. And we currently own approximately 1/3 of DeFloria, providing us with direct exposure to massive value creation as the program advances. With that high-level update, I'll now ask Erika to walk us through the Q4 and full year financials, and I'll return after her remarks to discuss our business execution and outlook. Erika Lind: Thank you, Bill, and good morning, everyone. As Bill noted, our 2025 financial results reflects 2 years of disciplined execution to stabilize the business return to growth and fundamentally restructure our cost base to drive to profitability. Let me walk through the key metrics, and I'll keep this concise so we can focus the balance of our time on the strategic discussion. Consolidated net revenue for Q4 2025 was $13.3 million. Q4 delivered a strong sequential rebound of 15.8% recovering from the Q3 dip driven by the planned B2B restructuring. Q4 also came in up 4.7% versus the prior year's $12.7 million in revenue. Growth was driven by continued direct-to-consumer momentum across our diversified botanical wellness portfolio, including expanded sleep and functional gummy mushroom offerings, the Brightside low-dose hemp THC gummy line and new minor cannabinoid formulations. Gross profit for Q4 was $5 million with a gross margin of 37.5%, and I want to provide important context around this number. The reported margin was significantly impacted by a nonrecurring $1.3 million inventory charge related to the disposal of legacy gummy products that did not meet our quality standards, which alone reduced gross margin by about 10 percentage points. Excluding this item, the underlying gross margin performance improved meaningfully. In-house manufacturing, net of onetime inventory charges contributed approximately 400 basis points of margin benefit in the quarter, validating our vertical integration strategy. We also saw improvements in the B2B channel mix following our Q3 restructuring driven by a reduction in trade spend. Our direct-to-consumer promotional efficiency improved as we shifted from broad discounting to targeted cohort-based campaigns. We expect gross margin to normalize toward our historical 50% range as we lap transitional items and as production efficiencies continue to scale. Total SG&A expenses were $10.6 million in Q4, consistent with the prior year and slightly higher than Q3. The quarter included several discrete nonrecurring items that impacted comparability, including a $600,000 state sales tax audit accruals and certain contract termination and timing adjustments. Excluding these items, our underlying operating expense base remained consistent with the structurally lower cost profile established throughout the year. Total net loss for the fourth quarter was $11.4 million or $0.07 per share compared to a net loss of $3.4 million or $0.02 per share in Q4 of 2024. Looking at full year results. Consolidated net revenue of $49.9 million increased 0.5% year-over-year, modest but significant as it was our first annual revenue increase since 2021. Full year SG&A expenses were $42 million, a 21.2% decrease from $53.3 million in 2024. This reflects the successful execution of our comprehensive cost optimization strategy, which has now reduced annualized SG&A by approximately $33.6 million or 44.5% over the past 2 years. We believe our cost restructuring is now largely complete. Going forward, we expect quarterly SG&A for the core business to remain in a normalized range of approximately $10 million to $11 million. Excluding anticipated launch spend for the previously mentioned Medicare coverage program. Net loss for the full year was $29.7 million or $0.19 per share compared to $29.8 million or $0.19 per share in 2024. This year, the full year net loss included a noncash change of $6.4 million in the fair value of the company's debt derivative and our investment in DeFloria. However, notably, our operating loss for 2025 improved by more than 36% to $20.3 million, a significant improvement from the $32 million operating loss in the prior year further demonstrating the impact of our cost restructuring. Turning to our cash flow and liquidity. Fourth quarter net cash used in operating activities decreased to $1.9 million compared with $5.5 million in the prior quarter and $1.8 million in Q4 of 2024. For context, quarterly cash change reflects the timing of cash outlays relative to accrual-based expense recognition so there is a natural variability quarter-to-quarter. In addition, our third quarter expenses always experienced a greater cash outlay than other quarters due to the timing of business insurance renewals. That said, the Q4 result demonstrates continued progress. Cash and working capital as of December 31, 2025, were $8 million and $21.7 million, respectively. It is important to note that this cash position does not reflect the BAT private placement, which adds $10 million in fresh capital, strengthening our liquidity and working capital position heading into this next critical phase. Before I hand it back to Bill, I do want to underscore the financial significance of the BAT transaction, which fundamentally changes our financial position. The transaction is transformational for our balance sheet eliminating material liabilities and adding fresh working capital. We are evolving from a company carrying significant debt obligations into one with a clean equity-based capital structure and a highly aligned strategic partner with a stable operating base, improving gross margins from in-house manufacturing and the capital to pursue the growth opportunities now emerging, we are well positioned for the next chapter. With that, I'll turn the call back to Bill to discuss our business execution and outlook. William Morachnick: Thanks, Erika. All right. So let's bring this all together. 2025 was a defining year for Charlotte's Web. We stabilized the business. We returned to annual revenue growth for the first time in 4 years, reduced our cost base by 44% over 2 years. Launched our boldest product innovations to date and laid the operational groundwork for what comes next. And I want to share one more data point that speaks directly to operational readiness. This month Charlotte's Web completed its annual NSF dietary supplement good manufacturing practices audit and received zero findings. For those unfamiliar, that's the gold standard of manufacturing compliance for dietary supplements. And achieving zero findings is an exceptional result. It reflects the discipline and the rigor of our quality team and validates the manufacturing infrastructure that underpins everything we do, from the products on our website to our qualification for federal health care programs. When we say Charlotte's Web is built to meet the standards that regulated health care requires, this is exactly what we mean. Let me share with you quickly what excites me about what's ahead. The CMMI Medicare pilot program, the presidential executive order, bipartisan legislative momentum for a rational federal framework, the advancement of DeFloria through FDA clinical trials and now a clean balance sheet with a well-capitalized strategic partner standing behind us. These are not speculative possibilities. They are real catalysts unfolding now that have the potential to fundamentally transform the scale and scope of our business. We built Charlotte's Web for moments exactly like this. Our brand, our science, our manufacturing capabilities and our regulatory engagement have positioned us to be at the forefront of the hemp industry's integration into mainstream health care. I want to take a minute to thank all of our shareholders for your continued confidence and patience. I know this has not been an easy ride, but the work of the past 2 years is now converging with the most favorable external environment our industry has ever seen, and we intend to capitalize it. Operator, we're now ready for questions from our analysts. Operator: [Operator Instructions] First question comes from Pablo Zuanic from Zuanic & Associates. Pablo Zuanic: Good morning, everyone. Look, I obviously have a lot of questions that I want to ask here given all the very positive news and of course, positive performance. Let me start with the CMS program. A few questions there. Precisely, when we talk about participating centers, what are these participating centers in the CMMI program? Which type of companies, are these established doctor offices or are these new setups, can Charlotte's Web own some of these participating centers. If you can give more color in terms of what are the participating centers in the CMMI program? Mindy Garrison: Well, good morning, Cory. This is Mindy Garrison here with Charlotte's Web, and thank you so much for your question. The participating centers are health care organizations that are already enrolled in specific CMS Innovation models. There are 3 actual models at play right now. The first 2 are ACO REACH and Enhanced Oncology Model or the EOM program, both of which can begin offering CBD, the Substance Access BEI hemp-derived products starting tomorrow, April 1. The third is an ACO LEAD Model, which is expected to launch in January of 2027. So these are not actually new facilities created for this program, they are established physician practices, health care systems, all combining together under an accountable care organization that are managed -- managing Medicare patient populations. The initial cohort under ACO REACH and the Enhanced Oncology Model, address approximately 2 million Medicare beneficiaries. Over time, as additional models come online, particularly the LEAD model and potentially the Medicare Advantage model, the addressable population will expand significantly towards a broader 67 million Medicare beneficiary base. And please excuse my mistake Pablo. Again, I really appreciate your question. Pablo Zuanic: And then just a follow-up on the same subject. Who is going to fund the $500 per patient per year under the BEI. Is that Medicare? Or is someone else funding that? And as part of that question, I'm assuming that the participating center will issue a prescription and the patient will go on your portal and order the product from you. So if you can just clarify in terms of who funds the $500 and then the logistics in terms of how the patients can access the product. Mindy Garrison: All right. Thank you, Pablo. Another really great question. And there's an important distinction here in that Medicare is not directly reimbursing these products. The participating ACOs and EOMs that I just talked about a few moments ago, will purchase the eligible hemp-derived CBD products using its own funds and furnishing them to its Medicare beneficiaries as part of their broader care strategy. The economic rationale for an ACO to participate in the Substance Access BEI and the hemp-derived products is that it will contribute to better patient outcomes, lower total cost of care, reduced hospitalizations, fewer high-cost interventions and lower pharmaceutical utilization. So they benefit through the savings under the CMS model. So the $500 per beneficiary annually represents a maximum of amount that the ACO can invest per patient, funded from the ACO's own program economics, not from a Medicare fee-for-service system is a value-based care incentive, not a traditional reimbursement. To get to your second question about logistically how will this work? Charlotte's Web has built a portal specifically for ACO and EOM programs to access the hemp-derived products that will be eligible under the Substance Access BEI program. They will order the products as if you were issuing a subscription to a pharmacy, except it would be through our portal. And those products would then be drop shipped to the patient's home. So it is a little bit different in that it's actually not a prescription. It's a recommendation from a health care provider to begin utilization of hemp in the service of helping their patients become healthier and live healthier lives. Pablo Zuanic: That's very helpful. And then on the same subject, what revenues does Charlotte's Web will expect from CMMI pilots in 2026 and 2027. I'm not sure if you can talk about guidance here. And as I ask that question, I wonder whether the participating centers will be able to buy from other companies or is Charlotte's Web were the only one pretty much in the pilot. But any guidance the company can give would be helpful. William Morachnick: Yes, sure. Pablo. So I think the way to think about it without giving you a ton of specificity around modeling is this is really early days in the pilot program. So I think I mentioned earlier, it literally starts tomorrow. For that TAM that Mindy just referenced that 1.7 million, 1.8 million folks in the ACO, the patients in there and then another couple of hundred thousand in EOM. I don't foresee massive revenue opportunity for, let's say, the balance of this year. We have to build out the education for the participants. I'm going to frame it as the channel participants, which are these medical and health care practitioners and networks. So they've got to understand the value proposition that CBD represents. They've got to get comfortable with it before they're going to make the recommendations that Mindy referred to. So it's going to be a gradual build over the next 12, 18 months. And we're really positioning ourselves for how this program scales out. So we'll see an uptick, say, in that 2 million TAM over coming quarters, not a whole lot initially. And then as the Medicare Advantage program progresses, then you're talking about a very large number, I think I referenced it in my earlier talk there, Medicare Advantage is about half of the 67 million participants in overall Medicare so that turns into a very large TAM. But we've got to see the specifics around that program and how it's going to flow and what the economics are. In terms of who else is participating, there is no exclusivity. But presumably, there are going to be continuing standards that have to be followed for anyone participating in the program around quality, around safety, around efficacy. So we really like the way we're positioned because we believe we're at the highest standard as that goes. And we've got a really fulsome robust go-to-market strategy immediately to do the kind of training that I was referring to earlier as well as establishing the portal for both the consumer and the health care practitioner. So we feel very confident about the way it's going to scale, but I think it's just -- it's too premature to start modeling around that for your purposes. Pablo Zuanic: No, that's great color, Bill. And one last question on the CMS program. How is the CMS program going to be reconciled with the potential hemp ban that's going to become effective November 12, 2026. William Morachnick: Yes. You always ask the hard question, Pablo. So here's where it stands at the moment, as you're aware, but for all the folks listening. At this current time, we've got the "Hemp ban" that could trigger in November of this year. That's the way that the language in the Ag [ Appropriations ] Bill that was inserted in the continuing resolution in the fourth quarter of last year [ reads ] such that if we're capped -- if the industry is capped at 0.4 milligrams of THC per container, it basically demolishes the CBD industry as we know it. At the same time, talk about cognitive dissidence that makes your head blow up. We are deploying a program for seniors that has a 3-milligram THC cap per serving. So dramatically different scenarios. We're working very closely through our resources in Washington, D.C. and beyond to come up with a very meaningful science-backed approach to where these things can get synchronized to where there is federal regulation that has a consistency that can operate across the country that can deliver the level of efficacy that's required. So at this moment in time, it exists in a way that you framed it, if I may, that we have a potential ban on the horizon. At the same time, we're deploying a program to address seniors that have dramatically different product components to it. So we have to see how the next several months play out but we're feeling good and confident that the Griffith's bill as well as the way the FDA is looking at things is going to land in a place that is much more like the Substance Access BEI is trending as opposed to the language that we saw at the end of last year. Pablo Zuanic: I guess, Bill, before I move on, maybe just a quick follow-up. I mean, would there be a concern that maybe the participating centers will wait to have clarity on the ban before they start getting involved or not necessarily? William Morachnick: It's a fair concern and I can only share with you in the conversations that we've had thus far because we've already done our outreach to potential participants. So ACOs and EOM practices, we're seeing -- I would categorize it as a reasonably high level of enthusiasm for what we have to offer. They're very intrigued by the power that CBD brings to their patients for those need states that we talked about, that their patients suffer to a large degree from. So lack of sleep, anxiety and pain, and they're looking at CBD with a very high level of curiosity and open mind in this of how this can be a phenomenal alternative, both from a cost perspective and an efficacy perspective. So again, I think it's too early to know if I was to say, I don't have a big enough sample set to say where that will go directionally. But early indicators are leaning much more towards we want to get on board with this now because we want to provide these solutions to our patients as soon as possible. Pablo Zuanic: That's good. Look, I'll just move on to some questions about the quarter. Obviously, congratulations on the 16% quarter-on-quarter sales growth. Give more color in terms of what drove that. I know you had something in the prepared remarks, but more color in terms of what drove that? And is that sustainable? Erika Lind: Pablo, this is Erika. Thanks for the good question there. So obviously, for the increase that we had, there were several factors. We have had continued D2C momentum because our portfolio continues to diversify, and we're doing much more targeted campaigns to broaden the top of the funnel. We also purposely restructured our B2B channel so that we removed a lot of the underperforming accounts. And we also think because of that, we've got some retail customers who transitioned to our D2C portal, which has been very positive for us. And then Q4 also benefits from a strong holiday season as with many companies. So it's really the combination of those things that produce really the strongest growth we've had in quite some time. Pablo Zuanic: And then just in terms of your balance sheet, obviously, I'm looking here at the year-end '25, right, $8 million cash, you still have negative -- I mean, negative operating losses. But you do have the BAT transaction now. Maybe just to address on a pro forma basis, the state of the balance sheet and your path forward on cash management and also cash flow generation, specifically I'm asking CapEx there. Erika Lind: Sure. And I appreciate the question, and I -- and the chance to really provide context because I know it's something that people are really sensitive about right now. So obviously, we had $8 million in cash to end the year, but it does not reflect that $10 million in fresh equity through the private placement. That placement clearly significantly strengthens our liquidity and cash position. So -- but I think it's really as important to note that this conversion eliminates our $55 million in the debt principle plus the $10 million in interest and prevents us from having to pay another $12 million for the balance of the note. So that really gives us a lot of optionality. On the operating side, as you know, we worked really hard to rightsize this business. Over the past few years, we've reduced OpEx by 44.5%. That's significant. And obviously, we're going to maintain that cost discipline because that's the norm for us now. We will have some launch costs related to the Medicare pilot program, but our leaner cost structure, improved margins, the steady consumer demand that we're seeing and the additional working capital for the BAT transaction, really strengthens everything for us. And I do want to stress to shareholders that the completion of this transaction requires approval from the majority of the shareholders. BAT obviously does not vote on it. So the decision rests entirely with the independent shareholders. And I strongly want to remind everyone that their vote matters. I encourage you to enter your vote as soon as you receive your proxy, it only takes a minute online. And that would make a huge difference for us and our consumers. Pablo Zuanic: Right. And on the same subject, in terms of the BAT transaction, why did management and the Board think this was the right time to do it at this point? Erika Lind: I'll expand a little bit on Bill's commentary on that. Obviously, we have some extraordinary opportunities ahead of us. And the Medicare pilot programs DeFloria FDA pathway require us to be properly capitalized. We have to be unencumbered by debt, and we have to be positioned to execute. In this case, the opportunity drives the transaction. I -- to talk numbers a little bit, I do recognize that the conversion price is lower than the original CAD 2. But the implied enterprise value per dollar of revenue is actually higher today than it was in '22 and I think it's important for people to understand that. The lower share price reflects the company's reduced revenue base and the industry headwinds. It does not give preferential treatment to BAT. The current transaction is struck at a higher implied EV to revenue multiple at about 3.5x compared to the original '22 deal, which was at about 2.1 to 2.5x. Even though the share price is lower, the enterprise value per dollar of revenue is actually higher today. BAT is paying more per dollar of revenue and not less. And I think that's a reflection of CMMI and the DeFloria catalyst that didn't exist back then. I also know that there are some dilution realities to this. The debenture reduces the debt but it's -- the conversion reduces the debt, but that's not new money. And in terms of enterprise value, that's approximately neutral. The market capitalization increase while debt decreases by the same amount. And what fundamentally changes is the company's risk profile. The debenture overhang, the interest burden and the refinancing risks are all eliminated. This clean balance sheet all else being equal, justifies a lower risk premium, which means the same enterprise value translate to a higher fair value for equity holders over time. And the private placement represents the incremental dilution from new capital, which is approximately 5% of post-conversion shares. We believe that is a modest cost for meaningful working capital at a critical time to capitalize on our growth opportunities. Pablo Zuanic: Yes. And the only comment I would make is that, obviously, I agree that this was a source of overhang, right? I mean the stock -- your stock is up 14% up today. So seems that it was an overhang. So the clarity is helping and investors are responding positively to that. The last question on the subject. BAT now is going to own around 40% of Charlotte's Web, right? We know that BAT also own stakes in Organigram. They own stake in Sanity Group, which was acquired by Organigram. Can BAT own more than 50% of Charlotte's Web at some point or are there restrictions given that they are U.K.-based. Erika Lind: So a couple of important points on that. There are no restrictions based on the fact that they're U.K.-based. The investment is made through BT DE investments or what we call BDI. And that's a Delaware incorporated subsidiary. They will be the direct holder of the shares. However, in the agreement, there is a part 49% cap of ownership and anything beyond that would have -- would be a subject to the applicable securities laws, TSX rules and also potentially shareholder approval depending on the circumstances. So we did build into the agreement of 49% cap that protects us from that. Anything else would have to go through some measures. BAT has been very supportive. They're a noncontrolling strategic partner. And there's a governance framework in the investment rights agreement that's designed to preserve the Board independence and the management autonomy regardless of BAT's ownership. Pablo Zuanic: Right. Understood. Look at the very last question. There were some headlines this week about the FDA submitting a CBD Compliance and Enforcement policy to the White House for review. What do you expect from this week's OIRA meetings? William Morachnick: It's -- I haven't been successful thus far, Pablo speculating where these things are going to land. I want to give this a little bit of time to see how it plays out. We're really head down focused on this transaction was just completed and how we ramp up our readiness for the CMMI program. There's just so much noise in the system right now between federal regulatory, state regulatory, CMMI versus the other things that you brought up. I want to give this a beat to play out a little bit. We've got contingency plans under any potential outcome. But I think it's just -- it's too early and too speculative right now. Pablo Zuanic: Right. And if I may just ask a quick follow-up, right? So I mean, given the way the headline reads, CBD compliance and enforcement policy, is this something to make it consistent with the CMS program? Or is this something to address this hemp ban in November because I guess, I'm confused in terms of the timing and what does it relate to specifically? Because it has repercussions for both, right, in theory, for the CMS program and for what the ban may be in November. And I know maybe it's too early to say, but thank you. William Morachnick: Yes. I mean you're raising the root of why I have an upset stomach most mornings trying... Cory Pala: Bill, your line is disconnected or muted. I'm in a different office, so I can't tell if they've completely disconnected. Pablo, are you still there? Pablo Zuanic: Yes, I am, but we can leave it for a separate follow-up call if you want, Cory. Yes. Cory Pala: Yes. At the end of the day, it's too soon to know exactly where these meetings are going to go in the next few days. We are encouraged that they're occurring but too soon to speculate on exactly where that's going to go. But at the end of the day, we are seeing a convergence of policy. So that's encouraging. Okay. Well, then with that, we seem to have technical difficulties on our end, but that was your final question, I think. So we'll close it off here. I would like to thank everybody for participating on the call today. Pablo, thanks as always for your in-depth questions. And we will look forward to speaking to you all again in the coming months. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.
Operator: Good morning, and thank you for your participation. [Operator Instructions] As a reminder, this conference call will be recorded. I would now like to turn the call over to Lee Roth, President of Burns McClellan, Investor Relations Adviser to LENSAR. Mr. Roth, please go ahead. Lee Roth: Thanks, Josh. Once again, good morning, everyone, and welcome to the LENSAR Fourth Quarter and Full Year 2025 Financial Results and Strategic Update Conference Call. Earlier this morning, the company issued a press release providing an overview of its financial results for the fourth quarter of 2025. This release is available on the Investor Relations section of the company's website at www.lensar.com. Joining me on the call today is Nick Curtis, Chief Executive Officer; and Tom Staab, Chief Financial Officer of LENSAR, who will provide an overview of recent developments, our go-forward strategy and our Q4 financial results. Following these prepared remarks, we'll turn the call back over to the operator to answer your questions. Before we begin, I'd like to remind you all that today's conference call will contain forward-looking statements, including statements regarding our future results, unaudited and forward-looking financial information as well as information on the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied on this call. We caution you not to place any undue reliance on these forward-looking statements. For additional information, including a detailed discussion of the risk factors, please refer to our documents filed with the Securities and Exchange Commission, which can be accessed on the website. In addition, this call contains time-sensitive information accurate only as of the date of this live broadcast, March 31, 2026. LENSAR undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this live call. With that said, it's now my pleasure to turn the call over to Nick Curtis, Chief Executive Officer of LENSAR. Nick? Nicholas Curtis: Thank you, Lee. Good morning, everyone. I appreciate you joining us today. It is no doubt an understatement to say 2025 was a unique and unprecedented year for LENSAR. We take great satisfaction knowing that the leading eye care company in the world, Alcon, publicly recognized the value of ALLY and LENSAR given the joint acquisition announcement made in March of 2025. This validates our statement that ALLY is the best next-generation technology, delivering significant and relevant performance improvements in each of the critical elements of laser-assisted cataract surgery, including advanced ergonomics, efficiencies, imaging and automated treatment planning with a dual modality laser. ALLY is the only system that employs machine learning and compute power during treatment planning and optimized treatment to deliver outcomes that are better than any first-generation competitor. The termination of the acquisition agreement was a mutual pragmatic decision made after a year of focused effort and considerable expense from both sides. While this acquisition was approved overwhelmingly by our stockholders, ultimately, we made the decision to terminate because the Federal Trade Commission would seek to enjoin the merger. While both parties work towards offering acceptable accommodation to allow it to close, it became clear the FTC was not open to changing their position. We were disappointed in the outcome. However, the upside of this process is the validation of the ALLY Robotic Laser Cataract System superiority compared to all other first-generation lasers available today as well as the value attributed to LENSAR based on the success the product has achieved since its launch and its future potential. Therefore, with new resolve and new purpose, we're excited to emerge and reengage as an independent company, picking up where we left off 12 months ago. We've spent the last 2 weeks working on initiatives and jump-starting relationships with key stakeholders. I'll briefly discuss the last 2 weeks and share our high-level go-forward strategy today. Relationships are important. And before I present our strategy, I would like to take a minute to thank our partner vendors, agents and suppliers who not only provided excellent support and counsel, ultimately shared that disappointment and financial burden with us through granting reductions in fees as well as extended payment terms. These partnerships are beneficial in LENSAR returning to our prior operating cadence, allocating more of our financial resources and attention to operations. We can immediately start getting back to our business as usual and smooth return to focusing on growth and expanding our presence with increased installed base and procedures. We appreciate their collaboration and contribution to our future success. Additionally, in association with the termination of the acquisition, we received the $10 million transaction deposit that had been in escrow. In the last 3 quarters of 2025, we operated with an increasing degree of uncertainty among our partner customers, potential partner customers and distributors regarding our future and the timing of the close of the acquisition. Despite the uncertainty that delayed U.S. customer decision-making on ALLY and LENSAR and halted OUS distributor activities and purchasing systems, we expanded the ALLY installed base by nearly 50% compared to year-end 2024, while achieving 20-plus percent year-over-year growth in procedure volume for both the fourth quarter and full year 2025. There's no question the last 9 months of 2025 were negatively impacted by the acquisition process and extended time line and not just by the increased SG&A expenses associated with supporting the transaction. While our 2025 results include a 9% revenue growth, I need to be transparent and clear. We expect through the next several quarters of 2026, a gradual return to our historical operating performance. When you consider our longer-term growth metrics, the trajectory has been impressive. Our full year 2025 procedure volumes are up 50% compared to 2023, the first full year of ALLY commercial availability. By reflecting on a longer-term vantage point, you get a much better picture of what we see as the future opportunity for LENSAR and ALLY. Since the launch in August of 2022, we grew our installed base to approximately 200 ALLY systems and grew our procedure volume, gaining market share from 14% procedure share in the U.S. to 23.4% as of the end of 2025. I want to say we gained almost 9.5% of market share points in 3.5 years. These market share gains come from 3 specific areas. First, it comes from competitive accounts, replacing first-generation lasers with our ALLY Robotic Laser Cataract System accounts for the largest gain in share. Second, the gain in share is demonstrated by what happens after we replace a competitive system. LENSAR on average performs 27% more procedures annually than the national average per laser, providing evidence that we are growing the overall market for robotic laser cataract procedures. Third, nearly 50% of our systems in Q4 2025 were from Femto-naive surgeons, further expanding the market for laser cataract-assisted surgery. The data provides evidence LENSAR is addressing the shortcomings of the first-generation laser-assisted cataract surgical lasers by delivering the most technologically advanced next-generation robotic laser for cataract surgery in multiple ways. Significantly improving efficiencies and patient throughput, allowing for more procedures with faster treatments and fewer staff interactions, leading to the potential for fewer mistakes, less anxiety and a better overall patient experience. Second, customizing precise, specific reproducible treatments optimized by utilizing features such as machine learning and surface anatomy recognition, imaging and optimizing data for treatments by communicating with preoperative devices in the surgeon offices, leading to better outcomes in refractive cataract surgery using astigmatism management. To put in perspective, our competitors have the ability to bundle more products using cataract procedures, more feet on the street and much deeper financial human and operational resources. Despite this, we've been incredibly successful in increasingly growing ALLY's market share. Why? LENSAR is a small, nimble and resilient organization. We're known for innovation that aligns with surgeons' practices and patients' objectives. LENSAR is and always will be a surgeon and practice-centric organization. We have extensive clinical evidence that is giving surgeons the confidence to make the decision to implement ALLY in their practice. Over the last 3 years, ALLY's performance, placements and procedure volume speaks for itself. All I can say as we start the second quarter of 2026, we expect to compete as we have in the past. Listen here, we are back. I'd like to spend a few moments talking about our business outside the United States. As a reminder, while LENSAR started commercializing ALLY in the U.S. in August of 2022, it wasn't until 2 years later that we received the European certification and began to sell ALLY internationally. Looking at the time line, ALLY had been on the market outside the United States for roughly 7 months when the transaction was announced. The uncertainty over the post-acquisition ALLY distribution landscape had a greater impact on our outside United States distributors than our U.S. customers, and that uncertainty caused a meaningful slowdown in our international business expansion over the last year. With our distributors, the ALLY launch got off to a very successful start, quickly gaining acceptance with new sites and meaningful momentum, which came to a hard stop. After meeting with the distributors post-acquisition termination announcement, I believe we will begin to return to significant system growth in these international markets over time. Most, if not all, the distributors were both happy and relieved with the termination of the merger. Although they have all indicated their enthusiasm and are ready to support the business going forward, their conservative immediate forecast indicate this will take some time. We will work together on the transition timing to regain the lost momentum and begin to contribute to an increase in worldwide system and procedure market share. I'm confident in our ability to drive long-term success and create value for our surgeon partners in the United States, our distribution partners overseas, our global customers, the patients they serve and our shareholders. We also continue to rely on our long-term existing physician partners and private equity groups as they are our partners in success. These partners recognize we are working hard to deliver and provide the most responsive service, support and best product in the market. Going forward, we'll be focusing on a few key areas. Continuing to grow our procedure volumes and recurring revenue will be critical to our success. This will come through a combination of additional system placements and increased utilization on the 200 ALLY systems currently in the field. Our procedure revenue is recurring in nature. It is stable. It has a predictable trajectory following an install and importantly, carries a significantly higher margin than system revenue. The acceleration of system growth discussed in my remarks will contribute to significant long-term growth in procedure volumes, which will further strengthen our recurring revenue base. An important statistic to consider here is system utilization rates, another area where we are well positioned for success and driving overall market growth. Once again, LENSAR systems in the U.S. perform an average of 27% more procedures than the national annual average of lasers currently installed. There is not another robotic femtosecond laser available in the marketplace. We're excited to speak with you, answer your questions, and we appreciate the confidence and support you put into the LENSAR team. Now let me turn the call over to Tom, and he'll cover our financial highlights for the quarter. Tom? Thomas Staab: Thank you, Nick. I'd like to discuss our fourth quarter and fiscal 2025 results. However, my remarks will be succinct and pointed for 2 reasons. One, our fourth quarter and 2025 results were impacted by conducting our operations under the previously contemplated acquisition by Alcon; and two, we start the second quarter as a stand-alone company tomorrow. So I'll highlight the relevant aspects of Q4 and our 2025 results as they relate to our future results and operations. In association with the termination of the merger, there are some significant adjustments to our future financial statements that I'd like to highlight. First, the $10 million merger deposit that was being held in our bank account becomes ours. Thus, the cash that we report at December 31 of $18 million is ours with full title and the $10 million deposit liability will be eliminated in our first quarter 2026 results. Second, we recorded $17.1 million in total acquisition costs in 2025, with $14 million of those expenses unpaid as of December 31. With the termination of the merger, approximately $4.3 million of the unpaid balance will be eliminated or written off by concession of our acquisition advisers and then $5 million of the remaining liability will be payable starting in May 2027, a significant payment deferral. Lastly and importantly, as Nick has mentioned, we have reengaged with our key stakeholders, including our distributors, and we start today with the help of these key stakeholders to reestablish our stand-alone operations at an operating cadence more similar to prior to the announcement of our acquisition. Our performance in the fourth quarter was solid with a total revenue of $16 million, representing a 4% decline year-over-year, primarily as a result of lower system sales. As you look at regional sales, U.S. ALLY sales were 12 systems, increasing 1 system from Q4 2024. However, there was only 1 ALLY sale outside the United States in the fourth quarter of 2025 compared to 10 ALLY systems sold outside the United States in the fourth quarter of 2024. We attribute the fluctuation in ALLY unit sales year-over-year, largely due to our distributors' uncertainty as to when their collaboration with ALLY and LENSAR would end. You can understand our excitement as initial conversations with distributors demonstrated their willingness and enthusiasm to reengage. This will be an important growth driver to top line revenue, recurring revenue as well as enhanced cash flow. The quicker our distributors reach out to potential ALLY customers and reengage in ALLY's promotion, the faster our operations outside the United States begin to meaningfully contribute to our total system sales and enhance our cash flow. Another important aspect of our business is recurring revenue. While total 2025 revenue increased a respectable 9% over 2024, 2025 recurring revenue increased 15% over 2024, offsetting the decrease in system sales for the year. The decrease in system sales for 2025 was entirely due to sales outside the United States, decreasing to 20 systems in 2025 from 23 systems in 2024. This is especially noteworthy as 8 systems, 40% of our fiscal 2025 system sales occurred in the first quarter of 2025 prior to the acquisition announcement. And the comparable 2024 period, as Nick mentioned, was only 5 months of activity as we did not receive regulatory approval and launch in Europe and Taiwan until August 2024. Recurring revenue grew 17% in the fourth quarter 2025 to $12.7 million, annualizing to over $50 million, and we exited the full year 2025 at $46.3 million, up 15% compared to the $40.1 million in 2024. This performance reflects the continued expansion of our installed base as well as increased system utilization with procedure volume remaining a key driver. Fourth quarter procedure volume increased approximately 20% year-over-year and full year procedures grew 22%, surpassing 206,000 globally. We placed 15 ALLY systems in the fourth quarter, bringing the installed base to just over 200 ALLY systems, up 48% year-over-year, while our total combined installed base of ALLY and LLS systems grew to approximately 435, an increase of 13%. We exited 2025 with a backlog of 13 systems pending installation. Gross margin for the quarter was $6.9 million and represented a gross margin percentage of 43% compared to a 42% gross margin in the fourth quarter of 2024. Our gross margin for the full year was 46% versus 48% for fiscal 2024. The decline in margin percentage represents the impact of inflationary cost increases to our raw materials and production processed accompanied by tariffs assessed in 2025. We did not pass on tariff costs to our customers. We are forecasting an increase in our gross margin percentage and expect it to be in the 46% to 49% range for fiscal 2026. The more successful we are with system sales, the lower we will be in this gross margin range. However, increased system sales will have a more beneficial impact on our recurring revenue as gross margin percentage and recurring revenue factors are inversely correlated when it comes to ALLY sales. Other than the recurring revenue, another important aspect of our 2025 results is that we maintained a positive adjusted EBITDA for the year with a fourth quarter adjusted EBITDA of $595,000, thereby indicating operating cash flow positive operations, excluding any working capital impact. We are proud of our positive adjusted EBITDA operations for the year, considering we operated 9-plus months under the pending acquisition. And during that period, we were missing top line revenue and cash flow from our typical system sales outside the United States. From an expense perspective, our fourth quarter results were impacted by approximately $3.5 million in merger-related costs, which drove a 51% increase in SG&A year-over-year to $10.3 million and a 41% increase in total operating expenses to $11.9 million in the fourth quarter. Going forward, we expect that the underlying expense profile of the business will become more stable with our cash-based operating expenses being a reasonable guide for 2026 with us expecting no more than a 10% increase in cash-based operating expenses and the majority of this increase devoted to commercial activities. As we look ahead, our focus is on transitioning from this 12-month period of disruption to one of execution and growth with 3 clear priorities: first, accelerating revenue growth. We expect continued expansion of our installed base and increasing system utilization, thereby increasing recurring revenue. Second, maintaining our cost discipline. This priority continues and has been a focus since launching ALLY. Third, enhancing cash flow, especially as it relates to increasing system sales, particularly outside the United States. We believe that the combination of cash on hand as well as the discounted and extended payment terms of acquisition costs provide us with the necessary flexibility and financial resources to effectively restart our operations and return to our previous growth run rate and operating success. We would now like to turn the call over to Josh for Q&A. We're happy to answer your questions. Operator: [Operator Instructions] Our first question comes from Frank Takkinen with Lake Street Capital Markets. Frank Takkinen: A lot to cover. So maybe I'll start with the distributor commentary, Nick, it sounds like the conversations you've had over the last few weeks have been really positive, but I did hear the comment of exercising a little conservatism as you reengage with those folks and think about kind of how that's going to actually translate to OUS system revenues. What more can you tell us there? And how should we be thinking about reading into that commentary and applying it to our models as we think about growth reaccelerating throughout 2026 or 2027? Nicholas Curtis: Sure. Frank, good to hear from you. It's been a while since we've done these calls. So the business outside U.S. is different in a lot of cases, particularly in a few of the countries where you don't have as many private practice and, let's say, ambulatory surgery center owners where they can make the decision or a private equity group that makes the decision, for example, in Germany, where we have a large private equity group, and we are one of the primary suppliers there. And so in some of the -- particularly Southeast Asia, some of these go on tenders. And given the uncertainty, they were hesitant to engage in a tender because they're over an extended period of time. So for example, they'll start reengaging in these tenders and those tenders take time. And quite frankly, we may have lost a few renewals in the short term from some of these deals, not our deals where they had our systems, but where we had an opportunity to, let's say, quickly replace a competitive system. And so I just expect that it's going to take us several quarters to really reinvigorate, get out and assess where some of those tenders are, where we have opportunities and begin to do that as well as participating in some of the various conferences like we do here. And so I just caution to say that -- because we had this massive quick start when we got the ALLY approved 2 years later, now essentially, there's been 0 activity for the last 9 months and so there'll be some restart-up. And it's not like there's a backlog sitting there because essentially, these distributors didn't -- again, we're planning for life without LENSAR that they didn't expect to be distributing on a going-forward basis. So they're really enthused. And I just say it's going to take us a little time to get back to that sort of momentum that we had in the last quarter of 2024. Frank Takkinen: Yes. Very helpful. And then as we think about placements going forward, it's -- to me, it seems like there's 2 phenomenons going on. OUS likely more capital placement oriented. And then in the U.S., with each incremental placement, it gets incrementally harder. So maybe there's less upfront payment and more kind of lease-based placements. How should we think about that throughout the year and a mix of maybe kind of more lease-based or usage-based placements versus actual capital sales throughout the year? Nicholas Curtis: Yes, great question. So as you know, and as Tom had indicated, when we sell a system outside the U.S., when it leaves our dock, we essentially we recognize revenue on the system sale itself. And so it's a very quick recognition. In the U.S., the rev rec is different. You have to get the system installed. You have to begin training and the system is accepted by the customer, the end user, before you begin to recognize revenue. And on procedure deals or when we do placements and really even when we sell a system in the U.S., usually, you're looking at in the neighborhood of close to 60 days before you really start getting into the revenue phase that they get to some normal procedure volume because you're training people and you're getting the systems put up in place and procedures and whatnot. Traditionally, we've been in the neighborhood of somewhere north of 50% sold systems in the U.S. and, let's say, 50-50 or perhaps even a little bit more on the sold versus the placed. And I would expect that, that's probably going to drop a little bit. What we've seen is that the competition, they lack the system, they go out with procedures, and they try to drive a price competitive versus what we do with the value proposition with a much more efficient, faster, better treatment overall. So I think that over the next couple of quarters, you'll see us go from that sort of 50%, 55% sales sold systems versus placed systems in the U.S. to a lower percentage, particularly as OUS takes a little time to sort of ramp up there. Does that help you in terms of the percentage? Frank Takkinen: Yes. No, that's very helpful. I appreciate that. And then maybe just the last one for Tom. I heard the comment, a 10% increase in cash OpEx. So I just want to make sure I understand that. Essentially, if we look at 2025 OpEx and back out the $17.1 million of M&A-related expense and then grow that 10%, -- is that what you're inferring? So you would be in the neighborhood of kind of $38 million, $39 million of operating expense for 2026? Thomas Staab: That's exactly right, Frank. The only thing that I'll say is the way we look at things is cash-based operating expenses. So we threw out sort of amortization as well as stock-based comp and then it's the 10% off that base. But yes, you're correct. Operator: Our next question comes from Ryan Zimmerman with BTIG. Ryan Zimmerman: So maybe just to start, I don't think I heard the procedure growth was still really good worldwide. And I'm wondering if you could comment, Nick, on U.S. procedure growth because I think you also faced a tougher comp there. We saw a bit of a slowdown in cataract volumes through much of 2025. Maybe you could just comment on kind of where that stands? And then as you think about the business going forward, I appreciate that the system dynamics will be choppy as you kind of get the train out the station. But talk to us about the recurring revenue side of things, particularly around procedures and how you think that will kind of function as we look ahead to 2026? Nicholas Curtis: Yes. Thanks. Good to hear from you, Ryan. I appreciate your questions. So as Tom had mentioned, we exited the year with $46 million, approximately $46 million in recurring revenue, and that was ramping closer to $50 million when you look at the fourth quarter and on a rolling forward basis. And so we're really -- our business is becoming very healthy on the recurring revenue side. It was 79% of our revenue in the fourth quarter. And so as we go forward, we expect that those 200 installed systems will continue to produce. We're doing approximately about 600 procedures a year or so on average on the ALLY units in the U.S. on a going-forward basis on average. And so that's quite a bit higher than what the average installed base is. We expect that, that's actually going to continue. And because of what we do with astigmatism management, we started to see more femtosecond laser naive, we refer to as femto-naive, which represented 50% of our new business in the fourth quarter. So we expect that to continue and to continue to grow as well. Now those accounts of caution take a little bit longer to get to the -- they take longer to ramp because they've never done lasers before and they're putting in a new system and they're getting trained and they have to train staff and educate patients and whatnot. So that will take us a quarter, 2 quarters to get those folks sort of up to speed as more new customers come on, but representing a pretty large segment and a lot of -- particularly when you look at cataract surgery reimbursements and the need to deliver better outcomes, our astigmatism management over 65% of procedures that we do involve some form of astigmatism management. So I think you'll see the mix of customers that heretofore are replacing older competitive devices and so on average, we do 20%, 27% more procedures than the national average 0of systems. And so we take about a 60-day ramp and you see those procedures coming up to where our averages are or more. And then you'll see a mix of newer customers and maybe some of the office-based surgery centers, which is trending moving into office-based suites, where those are lower volume accounts take a little more time. So you may see the average number of procedures drop slightly, but you'll see more systems doing those and whereas the current installed base will continue to grow. Ryan Zimmerman: Okay. Very helpful. Just to circle back, Tom, on expenses. I appreciate the math and commentary that you gave. It's very helpful. But I guess my question is, in this transitory period, I imagine expenses came down artificially. Now you do also need to kind of, again, get the train up the station, if you will. And so when you think about kind of the cadence of expenses and appreciating kind of where it's going, shouldn't we see some type of kind of acceleration, foot on the gas pedal, if you will, to get things -- get kind of operations coming again. I'm just wondering if the 10% is the right number as I think about kind of into '27 and beyond, I guess. I know it's a little premature, but it just seems like there's kind of multiple vectors here, cross currents around operating expenses for '26. Thomas Staab: So very astute question and a very good observation, Ryan. I mean, yes, we're -- our expenses did go down over the last 13 months just because of being under the acquisition process. And with the -- even though our advisers discounted and extended the payment terms, that's still a big nut for us to cover as a small company. And so we're being very judicious in our expenses and the increases are all going to be commercial for the most part in 2026. And then as our distributors come online and we see a larger contribution of sales outside the United States and more cash flow coming in, I fully envision ramping up our commercial activities in 2027 well beyond 10% -- but we're kind of in this moderation phase until we're certain and how quickly our distributors can come back after this 13-month lag where they effectively put their pencils down. Ryan Zimmerman: Right. No, understood. And when you think about kind of what's entail, and this is more direct to that, Nick, I guess, like yes, you've had conversations with the distributors outside the U.S. They understand where you guys are at as a company now, not going through with the merger. Does your thinking around your OUS efforts change? Does it -- do you see bigger opportunities than maybe you thought about before? And is there room to go beyond kind of the markets that you were in kind of premerger. Some of those approvals were really good. We saw a really good uptake in Europe. But now the question is, as a stand-alone, does your aperture change, I guess, particularly outside the U.S. Nicholas Curtis: Yes. So a really, really great question. So you're starting to delve a little bit into some strategy here. So I've seen -- it's really interesting because in terms of especially replacing some of the older systems from competition that are out there. And so I've seen some interest in a few other countries that heretofore, we have not gone into. And so I'm going to be looking at a few opportunities such as Australia and New Zealand, in particular, where there's actually quite a bit of interest in replacement of older systems there. And that would be one market that we haven't been into that we may look into. I think that we'll see in Southeast Asia, our activity come back there. Like I said, there's more of a tender business there. And so it's going to take us a little more time where I see there'll be some systems there this year. But I think that really as we get into 2027 into first, second quarter of 2027, we'll see quite a bit more growth in that Southeast Asia market. And I think there's a lot more expansion growth in Europe into countries where heretofore, we haven't been in because, again, not to underemphasize or overemphasize, ALLY addresses a lot of the shortcomings as to the reasons why people abandon femtosecond laser-assisted cataract surgery before. And because we have this good installed base in the U.S. and our business is growing, it's almost been an advantage getting the approvals later outside the U.S. because it's helpful for the distributors where they see that there's uptake here in the replacement of competitive devices. And so there's a lot of systems outside U.S. where they're sitting in accounts that are just not very productive. And I feel like competitive systems. And so we'll have some opportunity there. I don't see the opportunity coming back in South Korea anytime soon. As you know, they've got big issues around reimbursement and insurance company reimbursement there, but that's been away from us for quite a while. So it doesn't impact our business negatively or positively, if you will. And I think we probably need to look at some other markets in South America, Latin America, where heretofore, we haven't been either. But I think now we can address some of these things. But those are longer term. I think we'll see Europe come back, and we'll have some opportunity outside of Germany that we hadn't really gone after before. I think our distributors are interested in doing that, and we've made some additional relationships there. And I think we'll see Southeast Asia in various countries there we do business come back strong, and then we'll look at a few of these other markets. Ryan Zimmerman: Okay. I appreciate it. I know this -- again, this call was a maybe change in plan from what everyone expected, but it's good to hear from you guys, and we'll get the dust off and move forward. Nicholas Curtis: Ryan, you know what, that's life and life throws your curves. And the reality is what you do to adjust and how you pivot and how you decide to move from there. You've got 2 choices. You can quit or you can come out fighting. And I've never quit, and I have to come out fighting so. Operator: Thank you. I would now like to turn the call back over to Nick Curtis for any closing remarks. Nicholas Curtis: I really appreciate everyone joining us today. It's been invigorating to do a call after not having the call for about a year now. While the termination of the merger was not the outcome that we anticipated, I think it really positions us to -- the positive there is it positions us to move forward with a much greater focus and control as an independent company. As a stand-alone company, we certainly know we have the best product available. I think it was -- came out loud and clear through the process here, and we're ready to capitalize on the significant market opportunities that lie ahead. Rebuilding momentum is going to take several quarters, but our priorities are very clear, and I believe our team is aligned to deliver. We're confident that on the path it really is enabling us to unlock even greater long-term value for our surgeons, patients and shareholders, and we look forward to sharing our progress with you all as we move forward. And so in closing, I just want to say once again, LENSAR is back. Thank you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Sean Peasgood: Good afternoon, and thank you for joining us for Intermap Technologies conference call to discuss its financial results for the fourth quarter and full year 2025. [Operator Instructions] Certain information in this presentation constitutes forward-looking statements, including statements regarding revenue growth, conversion of government awards, timing of revenue recognition, expansion of recurring commercial revenue, capital deployment, and future operating performance. Forward-looking statements are identified by words such as anticipate, expect, project, estimate, forecast, continue, focus, will and intend. These statements are based on current assumptions and involve risks and uncertainties, including availability of capital, revenue variability, timing and the structure of government contracts, customer concentration, economic conditions, competitive dynamics, technology risk, cybersecurity and other factors described in Intermap's public filings. Actual results may differ materially. The company undertakes no obligation to update forward-looking statements except as required by law. With that out of the way, I'd like to pass the call to CEO, Patrick Blott. Go ahead, Patrick. Patrick Blott: Thank you, Sean. Good afternoon, ladies and gentlemen, and welcome to Intermap's financial results conference call for the fourth quarter and full year 2025. I'm Patrick Blott, Chairman and CEO. Today, I'll provide highlights from the year, along with a business update and outlook. I'll then turn the call over to Jennifer to review our financial performance in more detail. Revenue was $10.6 million compared to $17.6 million in 2024. Fourth quarter revenue was $1.6 million compared to $7.4 million in the fourth quarter of 2024. As has been previously detailed, the decline in total revenue reflects delays with follow-on awards for Indonesia and U.S. government programs. Meanwhile, our commercial revenue grew strongly year-over-year, driven by customer adoption of our technology advances, including proprietary AI capabilities. In our Czech market, the beta introduction of the Risk Assistant saw 8 leading insurers representing more than 90% market share of the multi-perils market adopt Intermap's AI-assisted risk platform with major providers such as Generali already expanding their usage throughout Europe. Our precise object level evaluation supports more informed underwriting and reinsurance decisions at scale and with automation. We estimate this to be a $1.2 billion addressable market globally given the large protection gaps. Indonesia is progressing through a World Bank-sponsored procurement process, and we have been down selected across all 4 remaining lots, representing a potential $200 million opportunity. Intermap has positioned itself through advances in its commercial business and technology as a leader in the technologies required to achieve data sovereignty, provenance and custody objectives for governments as they increase focus on their national security. This is also happening in Indonesia. Governments around the world are worried about their sovereignty. They're worried about their data security, and Intermap is one of a small number of contractors that has both past performance and an installed base where we can provide military-grade data with assurances. We are also in final contracting on several U.S. government programs that were delayed due to the federal budget process. These are funded programs where we have a strong visibility toward award. Similar to our proven commercial offerings, these data solutions offer assured position, navigation and timing at scale with quality that is investment grade and suitable for large-scale automated deployments. Together, these government delays account for essentially all of the year-over-year revenue decline. The business itself is stronger than ever. Subscription and data revenue grew 29% to $5.2 million and is now our largest revenue category. We invested significantly in the business with over $1.8 million in technology upgrades, people, fixed asset and capacity expansion and $3.9 million to reduce liabilities and improve our working capital position and credit profile, lowering our cost of capital. Excluding currency fluctuations, working capital and the fixed asset investment, cash flow from operations improved 30% compared to last year. The business operated at cash flow breakeven while we invested in growth. We strengthened the balance sheet, ending the year with $22.5 million of cash and $24.6 million of shareholders' equity. We upgraded our audit to the more rigorous PCAOB standard and hired MNP to see Intermap through its road map towards an uplisting to the NASDAQ and a U.S. registration at the appropriate time. The underlying business is growing, scaling and better positioned than at any point in its history. We affirm our guidance of $30 million to $35 million revenue with a 28% EBITDA margin. And with that, I'll turn the call over to Jennifer to walk through the financials in more detail. Jennifer? Jennifer Bakken: Thank you, Patrick. As a reminder, we report our financial results in U.S. dollars. As Patrick mentioned, revenue for 2025 was $10.6 million compared to $17.6 million in '24. As we previously discussed, the decline was entirely attributable to delays in the follow-on work on Indonesia and U.S. government programs rather than any loss of existing programs. Operating loss for the year was $6.9 million compared to operating income of $2.5 million in the prior year. Net loss was $6.7 million compared to net income of $2.5 million in 2024. The year-over-year change was primarily driven by lower revenue related to contract timing, along with increased fixed costs as we continue to invest in our infrastructure and capacity to support expected growth in 2026. Turning to the balance sheet. We ended the year with cash of $22.5 million compared to $400,000 at the end of '24. Shareholders' equity increased to $24.6 million from $3.7 million over the same period. Our current ratio, which is defined as current assets divided by current liabilities, improved significantly to 5.2x at year-end '25 compared to approximately 1x at the end of the prior year, reflecting the substantial strengthening of our balance sheet and capital structure. These improvements were driven by financings completed during the year as well as the timing of government program execution and related revenue recognition. Overall, we believe our improved liquidity and capital position provide a solid foundation to support our expected growth in 2026. I'll now turn the call back to Patrick. Patrick Blott: Thank you, Jennifer. We're on Slide 5. The revenue mix shifted towards recurring and subscription data. Subscription and data revenue grew 29% to $5.2 million and represented 49% of total revenue. That growth was driven by expansion of our insurance analytic platform and broader enterprise adoption of our subscription offerings. While Acquisition Services declined due to the timing of large government programs, the overall business continues to shift towards recurring, higher-margin subscription and data revenue. During the year, we made substantial progress across the business. We strengthened the balance sheet through financings completed in February and September. We advanced large government opportunities, including with Malaysia, Indonesia and the U.S. government. We expanded our commercial insurance analytics platform. We deployed the AI-enabled Risk Assistant. We also completed infrastructure upgrades, including GPU capacity and security enhancements to support scalable delivery. In terms of priorities, we're focused on converting a large and growing government pipeline into contracted awards, particularly in Southeast Asia, starting with Indonesia and Malaysia. We're converting contracts in task orders for the U.S. Defense Department and FedCiv customers, and we're expanding geographically into South America and Europe. We're scaling recurring subscription data and analytics revenue, leveraging the Risk Assistant framework to accelerate adoption, growing deeper into the market opportunity globally, expanding into additional vertical markets that leverage our military-grade technologies and autonomous navigation and telecommunications. And we're allocating capital with discipline, both in partnership with previously announced DARPA programs that fund emerging dual-use geospatial technologies and while supporting key internal growth pursuits and product development with a focus on high-margin API-enabled recurring revenue. And we're leveraging our strengthened balance sheet to compete for larger, longer duration programs. We're now ready to move to the Q&A section of the call, and I will pass the call back to Sean. Sean Peasgood: Great. Thanks, Patrick. [Operator Instructions] First question, there are several questions on Indonesia. So do you have any color that you can share with respect to the drivers of the delays in the process? It looks like the technical component of the evaluation was completed last Thursday based on the publicly available schedule. How do you feel about the remaining milestones? And do you have any color on the competitors that cleared the technical component? Patrick Blott: Yes. I've mostly shared as much as we can share, but I can say that, I mean, it's a big program for them and us, but it's a big program for them. And it involves the World Bank. It involves layers of decision-making and approvals and a process that's new, and it's -- that's the driver of the delays. Sean Peasgood: Okay. And then no comment on the competitive side of things at this point. You don't have that information or not able to comment? Patrick Blott: Yes. Yes, we're not commenting on the competitive stuff. Sean Peasgood: Okay. Yes. So if that's it on the Indonesia stuff, I think we really don't have limited things that we can talk about. So on the Malaysia flood mapping contract, can you discuss if any revenue from Q4 was recognized from that contract? And then any insight of further opportunities from that initial contract in Malaysia? Patrick Blott: Yes. I mean that is actually several awards under a program there, which we've announced the award of one, but that is 2026 revenue, all of it. Sean Peasgood: Sorry, these questions are still coming in here. Can you speak about the uplift in the U.S.? Maybe just give everybody an update on that. Patrick Blott: Yes. I said before, I mean, it is a priority for the company. It is a strategic objective. And we're on a road map. There's a lot of things logistically that need to get done. A couple of big ones have occurred, including the foreign private issuer filings, the uplifted audit to the PCAOB standard, but the registrations and the uplisting are something that we're going to get done. Valuation is a factor. So it's going to get done at the appropriate time. Sean Peasgood: Can you -- while you can't talk about competitors, do you still feel that Intermap is the only company in the world that meets the technical capability to take on the contract? I'm assuming the Indonesia one is what they're referencing. Patrick Blott: I believe that. And most certainly, that applies to the past performance. Sean Peasgood: On the commercial side, obviously, there's a bunch of growth there. Can you talk about anything outside of insurance? Are there other drivers other than insurance in the commercial business that people should be looking at? Patrick Blott: Yes. I mean again, large-scale data problems, right? We sell it similarly. The customers consume it in a very similar fashion, but they consume it for different use cases. And -- but large-scale data problems, particularly things like autonomous navigation, which is a big one and also communications and signals, signals monitoring signals propagation, that's another big one. And so there's a variety of verticals that are benefiting greatly from the availability of what was once just high side classified military data. And now it's being used to solve big problems and at scale. So where there's commercial big problems at scale, that's where our data may be a good fit. Sean Peasgood: Next question. Given that AI companies seem to be eclipsing software companies these days. Where and how do you characterize Intermap on the spectrum of software versus AI? Patrick Blott: Yes. I mean that's a good question. I was invited to a government-led conference for mostly a government audience just a couple of weeks ago, military and intelligence where people are very focused on that and essentially leveraging the AI because from our perspective, where we use it, and we use it in about 5 different work streams at Intermap in terms of both product development and capability development. And then we market it, we have actually marketed and sold a product that is a agentic AI product. So we're pretty familiar with it. We've been working with machine learning and AI for a long time. We've had the GPUs in place for years now as we -- because we have one of the largest commercial archives in the world, right? We have training data that's unmatched at global scale. And so this is a capability that isn't new to Intermap. But what's happening is it is making our people much more effective, and it's making our customers and the products that we sell them much more accurate. And so speed and accuracy is where we focus and AI is helping us move the football there. But what -- I mean, Intermap fundamentally is a data company, right? People are consuming points. The more the more points I sell, the more money we all make. We're not -- people consume through various software features. And if I can find ways to make points easier to consume, especially for nonexpert users, I'm expanding my markets. So AI for us has been a huge help in terms of adoption, especially with new data sets as we try to get our customers to adopt more data and new data and integrate different data, AI has helped us do that. And I think it's a good thing. So that's where we -- I mean, we do definitely have software coders, but the software coders are using it, and it's making them more effective and faster. And we have also very strict -- I mean, it's not a consumer quality AI. We're dealing with, again, mil-spec data and some government and strict requirements. So things are happening pursuant to rules, and they're happening in ways that are very closely monitored as well. Sean Peasgood: Okay. Great. I had a few people asking this. So just back to Indonesia, this question says, Indonesia had a fairly limited number of bidders to begin with. So what does down selection mean in this context? And maybe just -- I don't know if you just described your term, down selection, but I did have some other people ask me right after the news release went out. Patrick Blott: It's a great question because it is a silly word. I mean it; means selection. How it became down selection, I'm not sure, but that's the universal term in government land, both in the U.S. and Canada and everywhere else when you get -- when you go through a process and you compete and you get selected, they call it down selected. Sean Peasgood: Right. Okay. Great. Just on the pipeline. So on other national mapping programs, what does the pipeline look like? And are any of these opportunities looking like a 2026 contract time line? Or should we think about those in 2027? And how important is winning Indonesia to winning these further programs? Patrick Blott: They're separate, not important at all, I would say, to the other programs. And they are in Southeast Asia, but also in other areas of the world. And there's a lot of activity going on. So I think the answer to the question is, yes, 2026, and they're not -- they're correlated in the sense that past performance matters everywhere, right, especially with larger programs. Nobody really wants to -- especially in governments, which tend to be risk-averse, they don't want to take a flyer on providers that have never done it before when the dollars are large. They might take a flyer for small dollars, but for large dollars, they want past performance. And so past performance matters. And to that extent, there's correlation there because it extends our past -- the first phase of Indonesia extends Intermap's past performance at an extremely high specification that then a lot of people around the world look at. So that's -- to that extent, they're correlated. But otherwise, they're not related at all. Sean Peasgood: Okay. Great. I do have a follow-up from the AI question. So how likely are large AI companies to replicate Intermap's technology? What is your competitive advantage in this regard? Patrick Blott: Yes. Again, I'll say it again, we're fundamentally a data company. So AI can't create data. And if it does create data, that's what we would call synthetic. So a synthetic data, you can't use for many things that our customers use data for, like you don't want to fly an airplane with a synthetic data. So it's not -- how we deliver and consume, we do try to make the consumption of our data as easy as possible. We use software to do that. And also, we want to do it at scale, right? Think of 1,000 points of light. We want to be able to deliver data into automated systems. Our insurance underwriters are pulling in excess of 5 million points a month. That's huge -- a human can't do that, right? Like a human can't look at a screen and underwrite risk at that scale. So in order to consume the data, we take every advantage we can in terms of software, AI, whatever that allows our customers to do their job in larger and larger ways. That also affects the military. Anybody can pick up the front page of any news recently and just see the evolution of targeting from looking for a bad dude in the war on terror 10 or 15 years ago to looking at literally hundreds concurrently in the current -- it's all about scale, it's all about automation. We're right in the sweet spot of all of that. AI is our helper. It's not particularly a threat because at the end of the day, people -- we want people to consume as much data as possible. Sean Peasgood: Okay. Next couple of questions on U.S. defense contracts. So have you got any traction on the key U.S. defense contracts? I know you mentioned it in your opening remarks, but any other comments there? And then are you -- again, on the pipeline there in the defense side, are there other opportunities that you haven't talked to that you're working on? Patrick Blott: Yes. And we'll announce when we can -- I mean, I can say this, we're in funded programs, and we're in contracting. So I have a pretty decent visibility, and we'll announce as soon as we can, but it's got to be inked. Sean Peasgood: Okay. This one on the World Bank. Does the World Bank have a time line on when the allocated funds need to be spent? Patrick Blott: That is a very good question. It's above my pay grade. That is a government to government Indonesia to World Bank. It's not us. Sean Peasgood: All right. I'm just looking here if there's anything else in here that we haven't hit on. Well, how many aircraft are you currently operating? And how many do you have in your fleet? Patrick Blott: We're not disclosing that, but we have more than we need, and it's not just aircraft. Sean Peasgood: Okay. Oh, from the revenue guidance for 2026, can you talk to how much of Indonesia is reflected in that 2026 number? Patrick Blott: I mean the way that we do it is we take a whole array of the pipeline, which is a factored pipeline, which is coming in from a whole bunch of different sales reps focused on a whole bunch of different things. And so it funnels through that and gets probability weighted and is basically a multi -- at the end of the day, becomes a multi-pathway. Any one of -- Indonesia is published -- it's a published budget. It's a published requirement. It's a published schedule. I'm pulling -- I don't have these numbers right in front of me, but 20% to 30% upfront of Indonesia is at least $40 million to $50 million a day the contract signed. So like pulling out any particular one is not the way that we do it, and I don't think it's the right way to do it. Sean Peasgood: So assuming you won Indonesia would be conservative. Okay. I don't think there's any other questions. And if there are, people can e-mail us if I've missed any. There are a lot in here, but a lot of them are just more on Indonesia, which we're not going to comment on or specific customers, which we're also not going to comment on. So I think with that, Patrick, I'm going to pass it back to you for closing remarks. Patrick Blott: Struggling with my mute here. Thank you for joining the call today. We look forward to updating you on progress in future quarters. Sean Peasgood: This concludes Intermap's Fourth Quarter of 2025 Conference Call. We thank you for joining us.
Stuart Smith: Welcome, everyone, to the KULR Technology Group Fourth Quarter and Full Year 2025 Earnings Call. I'm your host today, Stuart Smith. In just a moment, I'm going to be joined by the Chief Executive Officer for the company, Michael Mo, as well as the Chief Financial Officer for the company, Shawn Canter. Both of those officers will be giving their opening remarks, and that will be followed by a question-and-answer section with management. And again, we want to thank you for those questions. Now before I begin, I would like you to listen to the following safe harbor statement. This call contains certain forward-looking statements based on KULR Technology Group's current expectations, intentions and assumptions that involve risks and uncertainties. Forward-looking statements made on this call are based on the information available to the company as of the date hereof. The company's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include the risk factors disclosed in KULR Technology Group's Form 10-K filed with the Securities and Exchange Commission on March 31, 2026, as may be amended or supplemented by other reports the company files with the Securities and Exchange Commission from time to time. Forward-looking statements include statements regarding the company's expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may, should and would or similar words. All such forward-looking statements that are provided by management on this call are based on the information available at this time, and management expects that internal expectations may change over time. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, the company assumes no obligation to update the information included on this call, whether as a result of new information, future events or otherwise. Now with that, I'm going to turn the call over to Michael Mo, Chief Executive Officer of KULR Technology Group. Michael, the call is yours. Michael Mo: Thank you, Stuart. Good afternoon, everyone. Thank you for joining. 2025 was a difficult year for our shareholders and for our company. Share price declined significantly, and we recorded a net loss of approximately $62 million. The majority of this loss was driven by onetime and noncash items, but it was still a loss. Our investors, shareholders, internal team members and I all felt the effects of this loss. We recognize the impact this has had, not just on our investors and shareholders, but also on our employees and partners who are deeply invested in our success. I feel that way alongside all of you. I want to acknowledge this directly. Equally as important, I want to separate what affected performance in 2025 from what matters most to the business going forward. In 2025, KULR continued to grow and invest in its core business, the KULR ONE battery platform for energy storage systems. Adversity brings clarity. It sharpens our focus, reinforce our discipline and remind us exactly what must be done. We're taking these lessons forward with urgency and intent. Our foundation is strong, our direction is clear, and we committed to executing with precision and accountability in 2026. What I want to do today is go through what we built in 2025, what we believe is the right foundation and what realistic 2026 growth execution looks like. KULR designs and builds advanced battery systems for autonomous platforms, digital infrastructure, electric transportation and space exploration. KULR ONE is our battery platform. Our progress in 2026 will be judged by core battery revenue growth and improvements in gross margin as volume and automation increase. The mission for 2026 is clear: eliminate distractions and execute with discipline. Our singular focus is to build and sell more KULR ONE batteries. That's the work, and we will do it relentlessly. I would now like to walk you through some of the 2025 financial reportings and the situation surrounding them. Shawn Canter will provide a full financial summary during his portion of the call. Under GAAP accounting, KULR recognized an unrealized mark-to-market adjustment of $13.8 million on its Bitcoin holdings for 2025. The adjustment reflects the change in Bitcoin price at the end of 2025. While this is an expense, it's not a cash expense. We have maintained our Bitcoin treasury of approximately 1,082 Bitcoins without selling any coins. We invested in and formed a distribution relationship with a private exoskeleton company. In late 2025, that company filed for insolvency. We took the full write-off of approximately $6.9 million. Clearly, this investment did not work out. The investment and the distribution relationship with this entity have been ended and the full account is in the 10-K. The lesson is clear. We must be disciplined in how we allocate capital and resources, prioritizing the growth of our core battery platform and focusing on opportunities where we have greater operational control, strong commercial visibility and direct alignment with our strategic priorities. Battery platform revenue, which is product sales plus contract services was $7.3 million in 2025. That's the commercial baseline we're scaling from in 2026. Revenue was $16.1 million, up 51%. Most of that growth came from Bitcoin mining and battery research grant dollars. The number that matters most to us in 2026 is the battery platform revenue. That's the business we're building KULR ONE around, and that's where we need to demonstrate growth. $7.6 million is where we start. I would also like to address the product sales gross margin of 1% in 2025. KULR ONE gross margin at current production volume reflects the economics of an early-stage manufacturing ramp. Three factors are driving the current cost structure. First, material pricing at current volume is high. Second, the fixed facility costs are spread across a production base that has not yet reached high throughput. Third, each new customer program carries engineering and design costs that are concentrated in early production runs before volume scales. As programs mature and volume increases, those program level costs will be absorbed across a larger number of units. All 3 of these factors compressed margin at the start of a production ramp. They will improve as volume grows. To address these, 3 actions are already in motion. First, programs that began as early prototypes are transitioning to production. Many KULR ONE Air drone battery programs are moving along that curve. Each program that crosses from prototype to volume production shifts from a cost center to a margin contributor. Second, we're installing an automated production line in second half of 2026. Automation reduced per unit labor cost and improves yield consistency at scale, both of which will directly impact gross margin. Third, the KULR ONE platform itself is maturing. As more programs are built on the same modular architecture, engineering and design work required to onboard new customers decrease. That ratio continues to improve as platform accumulates application experiences across defense, aviation, telecom and data center use cases. In summary, we do not view 2025 margin profile as the end state of the business. We view it as the current economics of low-volume production before programs mature, automations in place and production volume grows. What we built in 2025 is the foundation for our growth in 2026. Our headquarters facility is a vertically integrated battery production center from design, prototyping, cell screening, qualification test to volume production. We're working with domestic battery cell suppliers to strengthen our NDAA compliant supply chain and our customer base has grown across 6 diverse industries. We have an experienced and dedicated team, solid financial resources and a broad customer base to grow our business. We have learned the difficult and valuable lessons. We're now focused on execution, ship more batteries. You may ask the question, why now? Why 2026 is the year for change? High-growth markets that KULR serves, autonomous platforms, direct energy systems, digital infrastructure, they all share a common technical constraint, power density. The demand for high-power battery pack has emerged, and that's the biggest growth driver for us. The requirement is not simply to store more energy, but to deliver at high C-rates than the standard battery. Oftentimes, this must be done in challenging environments that include extreme temperatures, high G-force, vacuum conditions and underwater pressure without thermal failure. That's not a commercially available battery problem. That's a specialized battery problem. It requires a battery architecture specifically designed for high-power and thermal stress operation. Simply put, these customers often cannot rely on off-the-shelf battery packs. They need high performance, safety and reliability, all in one package that can deliver fast at commercial prices. KULR ONE is built to that specification. It starts with building the right architecture and then select the right battery cell partners. KULR ONE is a modular and customizable architecture to meet customer needs across multiple end markets. We currently have over 30 active customer development programs in KULR ONE Air, KULR ONE Space, Guardian and Triton, which is our new maritime platform. Those programs are at different stages from evaluation to development through more advanced commercialization work. They represent a broad pipeline of revenue growth for KULR ONE as we move these customers from design into production revenue in 2026 and beyond. KULR's cell partnership reflect the same focus. We have worked with both Amprius and Molicel for a long time. They focus on high-power and high-energy density batteries. Those partnerships are a deliberate long-term strategy to maintain access to the most capable battery cell technology available as power density requirements with KULR's markets continue to advance. The combination of KULA ONE system architecture and advanced power cells from our partners give our platform a development road map that extends well beyond the current production configurations. Next, I'll give you an update on our KULR ONE Air. KULR ONE Air, which was launched last year to support the drone industry is now expanded beyond just air-based autonomous systems. Just in the KULR ONE Air category, we have over 20 active engagements to develop specialized battery systems for many high-profile unmanned systems companies that operate in the air, ground and maritime markets. The intensive work accomplished in 2025 to ramp our engagement with these demanding customers will start to become apparent in 2026 as their programs and system evolve from development to deployment. Let me share with you why KULR ONE Air is the right platform for this market. Autonomous systems like drones and robots operate by executing rapid and high-intensity physical action. Their motors accelerate a takeoff. Gimbals stabilize under heavy load. Sensors are firing at the same time and their control systems respond in milliseconds. Each of these actions demand a large amount of current and power delivered instantaneously. Energy batteries, the kind of optimize for energy density and releasing it gradually over a long period of time cannot respond fast enough and sustain the discharge rate, these actions require without overheating or collapsing the voltage. A power battery is designed around the opposite priority. It's built to deliver power at 5 to 20x faster than energy batteries. It also needs to sustain that output through repeated high demand cycles, and it needs to manage the heat generated by the power without failure. For autonomous system where the motor, the sensors and the computers are all cranking at peak current at the same time, only a power optimized architecture can keep up. The engineering challenge of a power battery is not simply to build a bigger or stronger version of an energy battery where heat and thermal stress is manageable. For power batteries, heat dissipation becomes the primary engineering constraint. The design needs to be lightweight enough for the platform to fly and high component and manufacturing quality to sustain the performance. For example, a single defect in welding and soldering joints will result in such a high-energy battery creating a resistance point that at high discharge rate generates enough localized heat to drive the entire pack into thermal runway. KULR ONE address each one of these constraints through a combination of engineering expertise, proprietary technology, thermal control, component integrity and build precision. That's what separates KULR ONE battery that perform in the field from one fails under operational load. Our current engagements span agriculture, survey, law enforcement, defense drone programs and surface and subsea maritime vehicles. The breadth of the applications reflect the platform's configurability. It's the same KULR ONE architecture adopted to the specific power, weight and certification requirements for each platform. KULR has shipped thousands of these drone battery packs to date. We're engaged with 2 of the leading unmanned aerial system companies in the United States with a combined production volume target to approach 10,000 packs per month in second half of 2026. These are active engineering partnerships with production time lines, pack configuration and qualification schedules already in place. Another point -- another important point I'd like to make is about supply chain resilience, namely NDAA compliance that stands for National Defense Authorization Act. The NDAA compliance is a procurement requirement for government and defense adjacent customers. KULR entered a joint development collaboration with Hylio to design, prototype, qualify and manufacture NDAA-compliant battery systems in Texas. Hylio is a Texas-based designer and manufacturer of drones for agriculture and public sector programs where NDAA compliance becomes important. Both the batteries and the drones are made in the United States. Next, I'll give an update on our other KULR ONE programs. KULR ONE Space and KULR ONE Guardian are the 2 programs that set the performance standards for the entire KULR ONE portfolio, both operating environments where battery failure is not recoverable, human space flight, deep space missions and active military operations. The engineering standards that we develop for these programs are what the rest of the KULR ONE platform is built on. Every performance requirement met in the spacecraft or combat system, propagation resistant, thermal stability under extreme conditions, certification under scrutiny raised the engineering baseline that KULR ONE Air, Max and Triton inherit. Customers in defense drones, electric aviation, AI data center programs are buying into this architecture that has already been qualified in the most demanding operating environment. KULR continue to see adoptions across the space sector. The XLT and the Reach series batteries are in active use across multiple satellites in both LEO and GEO applications. The Reach series currently is in multiple unit deployment on 4 partner satellites. Next, I'll talk about what are the competitive advantages of the KULR ONE platform. The #1 competitive advantage for the KULR ONE platform is the performance, safety and quality standards the platform was built to. KULR ONE's core IP originated by the work we've done with NASA Johnson Space Center. The architecture was designed for human-rated spaceflight applications, environments where battery failure is not a recoverable event. Zero propagation failure has a propagation containment. That heritage is the engineering foundation that makes KULR ONE the correct choice for applications where performance and safety are both nonnegotiable. A perfect example of that advantage is our partnership with Robinson Helicopters. Robinson Helicopter Company has manufactured more civil helicopters than any other company in the world in its 50-year history. They have manufactured more than 14,000 helicopters. The procurement standards for safety critical systems are established and rigorous. They valued KULR ONE and selected to be their next electric aviation platform. That decision is important because it further validates the engineering standards KULR ONE was built to. Under this co-development agreement, KULR will design and integrate a lightweight, high-performance battery architecture for the eR66 battery-electric helicopter demonstrator. We're building a dual life architecture, which means that each pack is engineered from day 1 for 2 years. First for primary flight cycle and a certified second life energy storage application. This model creates 2 revenue streams for KULR. The primary use case are rapid organ and tissue transport, emergency response and short-haul operations where zero emission performance and low acoustic signature are operational requirements. Second life energy storage is for industrial and digital infrastructure applications. Execution speed is another KULR ONE advantage. Not speed is a marketing claim, but speed as a demonstrated and repeatable engineering capability. In November 2025, we received a purchase order for a 400-volt battery system to power a Counter-UAV (sic) Counter-UAS direct energy platform. Five weeks later, we developed -- we delivered a complete design package to work in prototype. Achieving that time line was made only possible because of the deliberate engineering foundation we built in 2025, including model-based electrical and thermal simulation, proprietary cell selection, design for safety architecture and in-house integration running electrical, mechanical and firmware developed, all in parallel. This system is scheduled to enter production in 2026. Next, I'll provide an update on KULR ONE platform for digital infrastructure and AI data center applications. Our digital infrastructure strategy addresses 2 distinct but related segments, telecom network backup and AI data center power. Both require battery systems that must perform reliably, but in different operating environments. Telecom sites face grid instability across diverse geography, while AI racks increasingly require battery integration closer to the compute equipment itself rather than rely on centralized UPS systems. Telecom operators depend on the battery backup as a primary protection against grid interruptions. 5G infrastructure laws are raising the performance and uptime requirements for those systems beyond what legacy lead acid installation can meet. In January 2026, KULR was awarded a 5-year preferred battery supply agreement from Caban Energy, a Miami-based company that deliver energy as a service to telecommunication operators across 12 countries. As part of that transaction, KULR has taken full control of the battery manufacturing equipment and process, and we've commenced production. Production battery packs were delivered to Caban in Q1 of 2026. We plan to consolidate full operation into our Texas facility in Q2 to improve efficiency, reduce overhead and centralize operation as we grow. We now have the supply chain set up for the 48-volt 100-amp hour battery production and the focus is to deliver batteries to meet growing Caban demands. Beyond that agreement, we're in active engagements with telecom operators and service providers directly with our KULR ONE battery as a Service offering. These are separate from the Caban channel and represent KULR's effort to build direct recurring revenue relationships in the telecom segment. Data centers have traditionally handled battery backup the same way with large power systems installed in a dedicated room, separate from the computing equipment they protect. That model is changing. As AI workloads grow and hardware running them becomes more power intensive, the industry is moving towards battery backup installed directly inside the computing rack. The battery is no longer just a facility utility. It's become part of the compute infrastructure itself. That shifts create a different set of requirements. A battery that operates inside the rack next to the processor, it protects needs to meet much higher safety standards and need to handle higher voltages and respond much faster than conventional backup systems. At the end of last year, KULR joined the Open Compute Project as a Platinum member. OCP is an industry body whose specifications define how hyperscalers and large cloud operators build their infrastructure. Platinum membership places KULR in the working groups writing the next generation of power standards and position us inside the relevant technical working groups and help us to build a product in line with where the market is going. In the same month, KULR created a joint development collaboration with a leading global battery cell manufacturer to develop the KULR ONE MAX BBU for AI scale data centers. KULR leads the system design, safety engineering and certification, while the cell partner supplies the battery cell platform for the life of the commercial program upon certification. The opportunity is significant, and it depends on certification, qualification and customer adoption time lines. The same trend that are driving record level battery demand in large data centers is also driving demand at the edge. AI inference, the process of running AI models to generate response is moving out of the central data centers into network itself closer to the end user. That means that the computer hardware and the battery backup protecting it must operate in telecom facilities, cell towers and distributed network nodes. The environmental and reliability requirements at these locations are more demanding. This is where the AI data center opportunity and the telecom opportunities converge. The battery requirements are related, the customer base overlap and KULR ONE is the same architecture to save both. Next, Shawn Canter will discuss financial highlights. Shawn? Shawn Canter: Thanks, Mike. 2025 was an important year for KULR. As Mike mentioned, it marked a transition to a scalable product-focused model. Let me touch on a few points from 2025 before we get to the Q&A. KULR generated over $16 million in revenue in 2025. This is a 51% increase over the prior year. As we have previously discussed around our focus on product, our product revenue increased and our service revenue declined. Product revenue was up 39%, while service was down 50%. Again, while we expect to have some service business, we anticipate continued growth to come from the product side of the business as we scale into the large end markets Mike discussed earlier. Product revenue came from 47 customers in 2025. Revenue per customer was approximately $108,000 or 56% higher than 2024. Services revenue came from 34 customers, the same as 2024. Services revenue per customer in 2025 was approximately $65,000 or 50% lower than 2024. Mike touched on gross margins earlier. We have set out in detail information about gross margin, R&D and SG&A in the Form 10-K filed today. KULR recorded an approximately $62 million net loss for the year. There is an aggregate of approximately $33 million of noncash expenses on the income statement that contribute to the net loss. These represent almost 55% of it. As Mike mentioned, the largest of these is an approximately $14 million mark-to-market expense due to the decline in the price of Bitcoin. As a reminder, in the second and third quarter, Bitcoin's ascending price contributed a noncash gain to those quarter's results. Now let's get to the Q&A. Back to you, Stuart. Stuart Smith: All right. Thank you very much for that, Shawn. And as mentioned, that now takes us into the question-and-answer portion for our call today. And here's the first question. Can management speak to which markets are seeing the most momentum today and where early customer interest is starting to turn into repeat business and meaningful revenue? Michael Mo: Yes, Stuart, I'll take that one. I would say the KULR ONE Air for the autonomous platforms are the clearest near-term production momentum. It has expanded beyond the airborne drones to surface and subsea maritime applications as well as land applications. We now have over 20 active customer development agreements or programs across our KULR ONE Air platform. Thousands of battery packs have already been shipped and 2 of the leading drone companies in the U.S. have active production time line with us, pack configurations, qualification schedules in place, and we're looking at over 10,000 battery packs per month later 2026. I would say that's the market has the highest momentum these days. Stuart Smith: Thank you for that, Michael. Here's the next question. Could you give an update on where KULR is positioned in the AI data center backup power market? And what investors should be watching for to know whether this can become a meaningful source of growth? Michael Mo: Yes. We start developing our AI data center BBU product in 2025. And at the end of 2025, we joined the OCP platform membership and which positions us inside the working group that writes the next generation of the power standard for these hyperscaler infrastructures. So now we're building products to meet where the market is heading for the next cycle of growth. 2026 is the year that we really need to work with our BBU cell providers on the UL 9540 certification and work with the hyperscaler customers on integration work. And I would say that 2027 is the year that we can see revenue opportunities. Stuart Smith: Next question. Where do things stand in telecom and energy infrastructure? And what still needs to happen before those opportunities can start contributing in a bigger way? The Caban announcement was a great start. Michael Mo: Yes. We've taken control of the battery manufacturing equipment and process from Caban, and we've commenced production. Production battery types have been delivered to the customer, and we plan to consolidate that into our Webster facility in Q2 and improve efficiency to reduce costs and also centralize operation as we grow. We now have supply chain set up for the 48-volt 100-amp hour battery production, and the focus is now to deliver batteries to meet the customers' needs. In addition, we are in active engagements with telecom operators and service providers directly to provide KULR ONE batteries as a battery as a service offering that's separate from the combined channels. So we're starting to test the water to offer that as the battery as a subscription service. And the goal is to lower the total cost of ownership for operators to replace the lead acid batteries into lithium-ion batteries. Stuart Smith: Michael, since KULR is involved in several areas like aerospace, defense, telecom, e-mobility and data centers, where is management most focused right now? And where will most of the company's attention and resources go over the next year? Michael Mo: Yes. The focus for 2026 is simple, build and sell more KULR ONE batteries. The management is most focused right now on the KULR ONE Air platform. That's the one that shows the highest growth with our customers. I think I repeated it now that we have over 20 active customer engagements for the autonomous systems for air, land and maritime, and we shipped thousands of the battery packs for the customers. And this is the one that we see the highest growth in 2026. Stuart Smith: Looking at the rest of 2026, what are the biggest goals and milestones investors should be on the lookout for? And what would management consider a successful year? Michael Mo: Well, I think that the -- across our portfolio, the KULR ONE Space and Guardian products will continue to gain customer traction. As you know, the private space exploration and the DLW the market is also very growing very quickly. The telecom batteries, we're shipping volume to our customers to meet their demands. We have some new telecom operators that hopefully will get contracts in 2026 for Battery as a Service. Keep in mind that these operating engagements can take some time, but I think it could be a very good recurring revenue business for us. The first is the -- but the most important is the KULR ONE Air product that's going to ramp and scale with our customers. And I think the baseline is 10,000 packs per month as we get our automated production line going. So I think these are the big ideas for our goals. Stuart Smith: Okay. Excellent. Next question then, how stable and repeatable is the KULR ONE platform revenue base becoming? Michael Mo: Yes. Like I said in the prepared remarks, what has fundamentally changed for KULR in 2026 compared to previous years is that the need for power battery pack has emerged for these very fast-growing new markets, autonomous platforms, digital infrastructure and direct energy. KULR ONE is engineered from the ground up to serve this paradigm shift. And our customer engagements are now broader industry coverage. The customers are very diversified in different markets. And we also have a lot more customers and they all have their programs that's running, and we're customizing our solutions specifically for their programs. And these customers have their own road map to ramp in volume in 2026. And that gives us more confidence and build our production capability to serve these customers on schedule. We're certainly moving to a more stable and repeatable product sales business model in 2026. Stuart Smith: All right. Michael, next question is, as space-based AI data centers become more of a long-term discussion point, does KULR see a potential role there given its background in space applications, thermal management and battery safety? Michael Mo: Well, first of all, I think this is a long-term conversation, and it is not something KULR can focus on in 2026. But the space-based AI data center is probably one of the biggest and the hardest idea right now. Elon Musk talked about it. He believes that the best way to solve the difficulties of building AI data center on earth is to move them into space. And at GTC 2026, NVIDIA launched the Space-1 Vera Rubin module along with their Thor and Jetson platform. And these are engineered to deliver AI performance for the open data centers. And on top of that, how to cool chips in space is still an unsolved problem. These data centers will definitely need to use space-proven batteries. And some of these private space companies that NVIDIA is working with for space AI data centers are already KULR customers. So I think there might be opportunities, but not particularly a focus for us in 2026. Stuart Smith: Understood. Here's the next question. You have recently announced drone partnerships with Hylio, a backup power partnership with Caban Energy and a standards body looking to modularize AI data center building blocks. These 3 initiatives represent a large market opportunity, but how much, if any, will you see in 2026? Michael Mo: Yes. Hylio and Caban are both 2026 revenue contributors, Caban in production by now and grow for the remainder of 2026. Hylio is an active engineering collaboration right now and revenue will follow qualification and production milestones as program move from prototype to volumes. And we do expect that the Hylio revenue in second half of 2026. The AI data center BBU business, as I talked about, it will be more like a 2027 business for us. Stuart Smith: Michael, here's the final question for today's call. In regards to your ability to power drones. Given the recent developments globally, are you aligning yourself with companies that plan to rapidly increase output as a result? Michael Mo: Yes. KULR ONE Air for drone, autonomous platform is the focus for KULR 2026. We have many active engagements for air, land, maritime applications. And many of them will go to production in 2026. And we're setting up an automated production line for those platforms, for those batteries in -- to be in operation in second half 2026. Also related to the drone is the counter drone direct energy systems, and we develop a 400-volt battery for a customer in 5 weeks' time from when we receive the PO. And that's actually a record time for a system like that. And these systems will go into production in 2026. Another one that's really important is NDAA compliant. So that's for domestic production. A lot of times, that's a structural requirement for government drone programs. And this is why we partnered with Hylio to build made in U.S.A. batteries and drones together. So we are very well positioned to serve many of these customers that's growing very fast for both defense and commercial applications in 2026. Stuart Smith: Well, as mentioned, that's our final question for today's call. I do want to point out, as we do in all of these calls that all you need to do is pull up the press release that came out for this call, which came out March 26, and continue to send your questions in throughout the quarter leading up to our next call. We appreciate all of those who did submit calls for questions for today's call. And I would like to thank Michael Mo, CEO for KULR Technology as well as Shawn Canter, the CFO for KULR Technology Group for joining us here today. That concludes our call, and I will now turn the call over to our operator. Operator: Thank you. This does conclude today's webcast and conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the Constellation Energy Corporation Business and Earnings Outlook Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to introduce your host for today's call, Tim Flottemesch, Vice President, Investor Relations. You may begin. Tim Flottemesch: Thank you, Carmen. Good morning, everyone, and thank you for joining Constellation Energy Corporation's Business and Earnings Outlook. Leading the call today are Joe Dominguez, Constellation's President and Chief Executive Officer; and Shane Smith, Constellation's Chief Financial Officer. They are joined by other members of Constellation's senior management team who will be available to answer your questions following our prepared remarks. We issued a presentation and 8-K this morning, all of which can be found in the Investor Relations section of Constellation's website. The release and other matters, which we discuss during today's call, contain forward-looking statements and estimates regarding Constellation its subsidiaries that are subject to various risks and uncertainties. Actual results could differ from our forward-looking statements based on factors and assumptions discussed in today's material and comments made during the call. Please refer to today's 8-K and Constellation's other SEC filings for discussions of risk factors and other circumstances and considerations that may cause results to differ from management's projections, forecasts and expectations. Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures. Please refer to information contained in the appendix of our presentation for reconciliations between non-GAAP measures and the nearest equivalent GAAP measures. I'll now turn the call over to Joe. Joseph Dominguez: Thanks, Tim. Thanks, Carmen, for getting us started. Good morning, everyone. Thank you for joining us, and thank you for your continued interest in Constellation. We're thrilled to be speaking with you for the first time since closing the Calpine transaction. As you can imagine, both companies are filled with people who just want to get on with it. And so we talked for a while and getting on with it is fun for us. We're excited to be where we are. As always, I want to start by thanking the 16,000 women and men across the combined companies for all the hard work that brought us to this moment. We couldn't be here without them. Let's begin on Slide 6. Today, Shane and I intend to do more than provide 2026 guidance. We're going to provide a longer-term and more comprehensive update on the business, describe what makes Constellation special and explain why we think Constellation has unmatched opportunities to grow, beginning with a 20% CAGR on base earnings growth through 2029. As you will see, this longer-term visibility into how we see our earnings through 2029 admittedly uses some conservative assumptions. But what we're trying to do here is establish a baseline and then quantify and describe for you some of Constellation's many actionable opportunities to improve earnings materially beyond this baseline and ultimately to repeat double-digit annual base earnings growth into the next decade. In his part of today's talk, Shane will walk you through some of the EPS sensitivities that we think you will find very interesting. Before we move into the business update though, I want to say that we're not going to be announcing a new data economy deal today, nor can I comment much on Amazon's community night last week in Maryland, where they described a large data center project next to our Calver Cliffs Clean Energy Center. I recognize that the last time we spoke, I indicated that we expected to be done with an important transaction by this call, but we're not ready to announce anything today. There are 2 reasons for this. First, there is clearly more scrutiny on data center development. And so we think it's really important that data center announcements occur when all stakeholders, including supportive policymakers and community leaders, are present and prepared to discuss the elements of these important transactions so that all of the community benefits are clearly understood. Obviously, earnings calls give us a limited opportunity to do that. Second, since our last call, and as you're aware, hyperscalers have announced a new pledge in response to President Trump's executive order, which required us to rethink and renegotiate some of the terms of the PPAs we were working on to anticipate any outcomes of the PJM rule-making process. With regard to President Trump's executive order and the resultant PJM regulatory proceedings, our sense is that data center development will benefit from regulatory clarity, and we now have strong momentum to get just that. All of you know regulatory clarity helps deals get done. Importantly, for you, our owners, we're not waiting on regulatory clarity or certainty. Regardless of how the PJM proceedings resolve, Constellation can structure deals now to power America's growth in AI with our firm and clean nuclear power. But not every deal is going to look the same because our customers are expressing different approaches to how they intend to manage future regulatory requirements. Some of our customers will meet future regulatory requirements by pairing our nuclear power with Constellation's ability to bring incremental capacity through batteries, demand response, upgrades and gas-fired generation. I'll talk a little bit more about that capacity in a moment. This combination gives customers the clean firm power and price certainty they want and also allows them to meet any new regulatory requirement for peak energy capacity. Other customers are willing to pay for backstop capacity from PJM and buy power and attributes from us. This is the way we typically contract with our C&I customers where they buy capacity from the PJM market and buy energy and attributes directly from us. Finally, some customers are willing to flexibly respond or curtail during peak hours by using on-site backup generation or by reducing demand. And what excites us is that the very AI technology that we're powering is now being used to better dispatch the power system and manage data center load at peaks. You might have seen an announcement we made with NVIDIA, Emerald AI and other companies last week, where we are pioneering new technology that will allow the data centers to move data projects from one data center to another at a peak. So for example, if you have a data center operating in Philadelphia and you're approaching a peak demand hour, you would transfer that work through -- at the speed of light through fiber optics to other data centers around the country that aren't in a region that's experienced a peak energy demand. So we think these companies are evolving in the way they're able to manage their demand at peak through a lot of different resources. And it's important to get this right because there have been a number of recently released studies, the Brattle Group put out one just this last month, that says that the best way we can make bills more affordable for all customers is by ensuring that the grid is better utilized during the 99% of the hours of the year when there's surplus wires and generation capacity, while at the same time, providing flexibility during these less than 1% of the hours when system demand is at its highest. According to Brattle, getting this right can unlock tens of billions of dollars in annual consumer savings, and we believe will result in a paradigm shift in how policymakers and customers view data center development, changing the perception of data centers from cost causers to potentially cost reducers. Although sometimes it seems longer, we have to keep in mind that we remain in the early stages of the AI data center boom. People naturally question the durability of the demand and strategies like ours, from DeepSeek to FERC's rejection of the [ Talen ] interconnection agreement and now the executive order, we've had bumps in the road where enthusiasm and value momentum either stalls or retrenches. We see this as the natural course of things. But it's important that in each instance, we and our partners found solutions and momentum resumed. Two things are occurring simultaneously that give us great confidence. First, the growth we're seeing is like nothing we've seen before. And second, the cost of replacement megawatts for any kind of firm power generation is now multiples of what it was less than a decade ago. You're going to see this in one of our later slides. I talked in a previous earnings call about combined cycle machines having replacement costs at around $2,500 a [ KW ]. I now see that more like $3,000 based on what I'm hearing at CERA and other conferences. And we think both the demand being real and the cost of replacement generation means that an incumbent coast-to-coast fleet of the best and most unique assets like ours are going to do exceptionally well. And that's what we have here. Constellation's industry-leading balance sheet also gives us a competitive advantage in serving customers and protecting against increases in the cost of debt. We have the ability to opportunistically grow through M&A and fund growth capital projects [ like our operates ] that easily exceed 10% unlevered IRRs. Finally, our balance sheet and strong cash flows give us the ability to return value to you in the form of more buybacks. Today, I'm pleased to share that Constellation's Board has approved an increase in our buyback authority to $5 billion, underscoring our confidence in the strategy. The path ahead is exciting. The demand is real, and our competitive position is excellent. We're excited about the future we're building and confident in our ability to deliver. Turning to Slide 7. While market attention understandably focuses on the large hyperscaler deals, the value of nuclear energy is not limited to any single customer segment. That value is broadly accessible, and recent developments in New York reinforce that point. Since we last spoke, Governor [ Hochul ] in the State of New York extended the Zero Emission Credit Program, recognizing both the value of nuclear energy and the essential role that our Upstate facilities play in meeting New York's climate and reliability goals. This extension preserves more than 3,000 megawatts of clean, reliable energy that will power New Yorkers through at least 2050. This is a meaningful development, and the average pricing, which is shared in our appendix, is an important validation of the long-term value of our nuclear fleet to ordinary families and businesses as well as the data economy customers. As I mentioned at the outset today, we want to give you a baseline for Constellation's performance through 2029 as if we did nothing more, in the way of hyperscaler deals and the way of contracting investing growth, buybacks or refining our Calpine synergies. But of course, we expect to do more on all of these fronts. We know that signing long-term deals is a focus for our investors, and it's our focus too, and we will execute. We think our historic performance in executing these contracts is the best indicator of future results. So we show here on this slide that Constellation and Calpine have executed deals for over 10,000 megawatts of our fleet, serving a wide range of customers, all at compelling prices that provide the reliability and price visibility our customers are looking for, as well as the revenue certainty that we desire. These deals are not concentrated in 1 region or 1 type of customer. They span multiple generation technologies, deal configurations, customer types and markets. But it shows here that we have a proven ability in our teams to structure long-term agreements, particularly when it comes to clean megawatts. We have now signed long-term agreements with multiple hyperscalers, commercial customers, the U.S. government, the State of New York and municipal and utility customers across America. This is a level of customer diversity that reinforces the strength and flexibility of our platform. Our natural gas fleet has added even more optionality, and you saw that in some announcements from Calpine. We have successfully delivered solutions at both ends of the spectrum to meet speed to power and grid connection for data economy customers for long-term capacity and reliability agreements for our end-use customers. And while no deal is the same, all deals share 2 defining characteristics. First, trust. Customers trust that we're going to be able to deliver for decades. Second, fair and premium value. Each agreement reflects a tailored solution that meets a specific customer need and solutions that solve real problems in returning -- in return for good pricing. Moving to Slide 8. Over the past year, we have reached agreements for an additional 36 million megawatt-hours of our clean energy that will flow in 2030. As you see in this update, we've increased the total amount of energy we will have under long-term contract in 2030, from 12 million megawatt-hours to 48 million megawatt-hours or roughly 25% of our available clean firm output. But even after that, we still have about 147 million megawatt-hours available for contracting, an opportunity no one else can match. Indeed, if you combined all of the available nuclear power owned by all of the other competitive market participants in the U.S., the total amount would be about half of what Constellation still has available for clients. As we move forward and integrate Constellation and Calpine commercial teams this year, we're bringing together under one roof 2 of the preeminent teams in the business when it comes to meeting clients' needs with tailored long-term contracts. And clearly, they're going to have plenty of megawatts to work with. I would ask that you bear a few additional points in mind as you wait for this opportunity to manifest. First, all of our contracted nuclear generation is supported by the production tax credit which grows with inflation and is guaranteed by the federal government. This structure ensures stable, predictable revenue regardless of near-term economic conditions or market volatility, while at the same time allowing us to retain the optionality to fully participate in market upside as supply-demand fundamentals continue to improve. Second, as we face potentially higher inflationary environmental drivers, the PTC automatically adjusts for inflation, making Constellation stock a unique and safe investment in a pro-inflationary environment. The baseline of earnings growth that we're showing you today conservatively assumes 2% inflation. But if instead of 2% inflation were 3% or 3.5% as some are predicting in light of the Iran contract, the PTC cap for 2031, for example, would move from $50.88 per megawatt-hour to $52.88 at 3% and $56 at 3.5% inflation, a more than $5 a megawatt-hour jump in the tax credit available to our full open position. The third factor I'd like you to keep in mind is that the demand is real. And it's so big that really smart people are literally discussing shooting data centers into space to solve for energy and infrastructure constraints. I could assure you that despite some of the PJM rule-making complexities, we have far more efficient and achievable solutions than launching data centers into outer space. Fourth, we think the climate imperative is not going to go away. There is enduring value for being clean and being able to provide firm and clean energy together. Large customers are not wavering on their long-term commitments to clean and no one can better serve that need than Constellation. Moving to Slide 9. The quality and diversity of our agreements demonstrate our flexibility place megawatts where they create the greatest value. And I fully expect the team to continue reaching agreements with customers in multiple ways. For hyperscalers and data center developers, our offerings include virtual [ PDAs ] or co-located data centers at our site. If customers need load enabling support whether through new supply demand response or transitional power, we have the ability to answer that call. For enterprise-wide C&I customers, we offer long-term contracting options at scale that help them meet their sustainability goals with dependable zero carbon power. We can provide long-term energy capacity and clean energy agreements for states, utilities, government and co-op customers that desire visibility. Taken together, this is the broadest and most capable suite of energy solutions available in the competitive market today, and it gives us multiple pathways to place our clean megawatts at a premium. Turning to Slide 10, I want to pivot here to PJM. As I mentioned at the top of the call, there's a need for regulatory certainty. And we're finally seeing greater alignment among stakeholders on core priorities that need to be addressed. We see an engaged FERC that's rightly pushing for clarity on the rules. And we see a visible time line for resolution this year. We all agree on some key points. Demand forecasts have to be accurate. We need to ensure that large load customers cover their infrastructure costs. We need to provide avenues for competitive solutions, understanding that utilities alone can't do this. And we know that customers need to be flexible at peak. We're on a path between PJM and FERC to have these core issues resolved. We are also seeing efforts underway at EPA to alleviate constraints on the use of backup generation so that data centers can better manage peaks and agree to curtail at peaks. But make no mistake, as we await regulatory clarity, customers are moving forward, and we have solutions available that anticipate any reasonable outcome, from providing backstop generation to simply incorporating a PJM backstop capacity cost in our agreements. Moving to Slide 11. At the top of the call, I spoke about the importance of managing peak energy demand while taking advantage of the surplus we have in wires and generation capacity that exists in the system about 99% of the time. This chart shows PJM's low-duration curve and illustrates the point that the system has massive unused capacity for most hours of the year. Last year, half of all hours saw more than 40% of available generation sitting idle. And 80% of the time, 30% of our resources were unused. The same is true for the wire system where transmission capacity is designed, as you know, for a handful of peak hours, and therefore, by definition, is vastly underutilized when the system is not at peak. The Brattle report that I mentioned shows how small improvements in system utilization could drive meaningful benefits for existing customers, extrapolating that a mere 10% improvement in system utilization could yield up to $17 billion of annual utility bill savings. These are huge numbers for American families and businesses. The shadow box explains Brattle's point in their own words. So basically, what they're modeling here is spreading, like peanut better, some of the fixed costs of the system, whether they be wires [ or ] generation among many more kilowatt hours. And the reason we want to make you aware of these studies is because obviously, there's this growing narrative that data centers are bad for customers. It's based on the peak energy power issues we've been talking about. And that negative reaction is causing policymakers and investors to worry about grid-connected data centers. But we think that's an overreaction. We think a more nuanced view is that if we do this right, the opposite is true, that data centers could actually bring costs down. And I'm pleased to see this message starting to go through the policymaker communities. Turning to Slide 12, it's all about bringing solutions at peak, and Constellation is willing to bring new megawatts to the grid and Constellation has and will continue to do its part. Last year alone, we placed 750 megawatts of battery storage, renewable resources and expanded geothermal capacity into service. Calpine brings us that ability to use batteries and other devices we weren't fully using at Constellation. Looking at just the balance of the decade, we have the flexibility to add new megawatts through multiple channels. I'm not going to drain this, but you could see here the license extensions. You see Crane. I'm going to talk about Crane a little bit more here in a moment. We have 400 megawatts of new gas generation coming online this year, plus another 1,400 megawatts of idled turbines. We have 1,100 megawatts of uprates. We have 9,600 megawatts of additional batteries we could deploy. And we're trying to get to 1,000 megawatts of demand response that is actionable for data center customers to reduce peak demand concerns. On Crane, we talked this week about PJM studies that indicate interconnection could be delayed into the 2030s. I want to assure you we are working on that with PJM, and we continue to expect to start this unit in 27. Today we will be filing at FERC a request to be able to transfer capacity injection rights from our [ Eddystone ] unit to Crane to facilitate restart in '27 according to our plan. David Dardis is here and can talk more about that to the extent anyone has questions. But taken together, Crane and all of our capabilities have the inherent ability to add about 10 gigawatts of support to the grid at exactly the right moment. And we're excited to be able to offer this to our data center customers to pair with our clean and firm nuclear power. Now moving on to the next slides. Before I turn it over to Shane, I want to use the next few slides to remind you of the capability and scale we have at Constellation post the Calpine acquisition. Starting with integration, our efforts are well underway, and the enthusiasm across both teams is tremendous. The energy and engagement we're seeing gives us real confidence in what we're going to be able to accomplish together. With the combination, we now have true coast-to-coast scale and a platform that is the envy of every other player in the market. That reach, paired with the quality of our assets and duration of our assets, gives us a great foundation for growth. Our leadership team is aligned and moving quickly. A top priority is capturing the best of both organizations, aligning operational and commercial best practices to elevate performance across the board. This includes finding new ways for our commercial platforms to give customers unique and innovative solutions. And we're already realizing the benefits of upgrading Calpine's credit profile. Beyond lowering borrowing costs that Shane will talk about, an investment-grade balance sheet allows us to pursue commercial opportunities that were previously out of reach for the Calpine commercial team. In short, integration is progressing as planned. The momentum is real. The teams are energizing, and we're ahead of schedule. Turning to Slide 15, this chart shows you what being the most important player in every market looks like. We are the unrivaled leader in serving commercial and industrial customers, delivering more than 190 million megawatt-hours of energy, nearly twice as much as the next largest supplier in the competitive market. We serve more than 80% of the Fortune 100. These are strategic customers, and they want a partner who could solve complicated challenges in multiple jurisdictions for firm, low and zero carbon energy. And that's exactly what our platform delivers. Our suite of solutions, from short or long-term carbon offerings, access to renewables through our core product, or innovative demand response participation with partnerships with [ Grid Beyond ] and others, gives us strategic capability to meet regulatory requirements as well as customer needs. We can meet customers wherever they are on their sustainability journey. And importantly, demand for these advanced offerings continues to grow. Compared to 2024, we saw a 300% year-over-year increase in carbon-free product placements, a clear signal that our product offerings are appealing to the customers that need these services. Turning to Slide 16. Constellation is now the largest private sector power producer in the world, generating nearly 300 million megawatt-hours annually, with 2/3 of that being carbon-free. We produce over 35% more carbon-free firm power than the next largest producer whose output includes intermittent clean renewables. Importantly, even after integrating the largest natural gas portfolio, we still maintain the lowest carbon intensity among the top 10 power producers in the country. The reason for that is our nuclear assets as well as the fact that the assets that we bought from Calpine are efficient machines. This is a special portfolio of assets that provides a foundational competitive advantage that's durable for the long term. Moving to Slide 17. Everything we do at Constellation is supported by the bedrock of operational excellence, and it applies to everything we do. For our nuclear fleet, we run these assets better than anyone. We've been doing that for well over a decade, and we consistently outperform the industry in both capacity factor and outage duration. And that operational excellence delivers real tangible value to the grid and to our owners. On a fleet of our size, outperforming the industry's average capacity factor by roughly 4 percentage translates into roughly 8 million megawatt-hours of additional clean reliable generation every single year. That's effectively the output of 1 nuclear unit. And that's what happens when scale meets world-class operations, backed by a culture to keep doing it every single day. And we're not just running our plants better, we're innovating too. In 2028, Constellation will begin using new fuels to transition its remaining fleet of 8 pressurized water reactors from 18-month refueling cycles to 24-month refueling cycles, significantly reducing future O&M costs for outages and increasing the amount of power available on the grid. And pending NRC regulatory approvals in 2028, Constellation will load the first full core of accident-tolerant fuel, fulfilling a long-term promise that industry has made to America. Moving to Slide 18, I want to talk a little bit more about the gas fleet and some opportunities we see here. On the left-hand side of the slide, you'll see that 80% of our natural gas fleet is comprised of modern combined-cycle and co-gen assets. These are highly efficient, low heat rate units that operate far more hours than traditional peaking resources, and they form the backbone of the flexibility of the grid. As system conditions change, whether driven by load growth, renewable variability or tightening reserve margins, this is the fleet that's uniquely positioned to respond, delivering reliable, cost-effective power precisely when it's needed. On the right-hand side of the chart, I want to share an opportunity we see. Today, combined-cycle units across the ERCOT system have excess capacity roughly 90% of the time. That underscores the point I just made that these units today are underutilized. But as new load comes on, particularly these large baseload data centers, CCG utilization is expected to move significantly higher by 2030. This increase benefits the system by meeting rising demand in the most efficient way while also providing upside for us through increased economic output. That represents a significant value-enhancing shift for assets that have more to contribute to the grid, and Shane will quantify that sensitivity in his remarks. Over time, that increased utilization and improved dispatch economics translate into meaningfully higher and durable earnings. With that, I'm going to turn it over to Shane to provide the financial update. Shane Smith: Thanks, Joe, and good morning, everyone. Before I turn to the financial update, I want to take a moment to acknowledge our 2025 results. Last year, we delivered adjusted operating EPS of $9.39, that once again exceeded the midpoint of the guidance range we set at the beginning of the year. That marks 4 consecutive years every year since becoming a public company that we have beat. With 2025 now behind us, I also want to echo my appreciation for the collective effort of our teams that make these results possible, working tirelessly to position Constellation for long-term success. Beginning on Slide 20, we are initiating our 2026 adjusted operating EPS guidance at $11 per share to $12 per share. This range is consistent with the $2 of EPS accretion we shared when we announced the Calpine deal. But it doesn't tell the full story. Our underlying business is performing better than originally projected, allowing us to overcome 2 headwinds related to the acquisition. First, as part of the settlement with the DOJ, we were required to divest more assets than we originally anticipated, notably the highly efficient York 2 and Jack Fusco stations that are both meaningful earnings contributors. We are also assuming all of the asset sales close in the third quarter versus our original assumption of year-end, creating a bit of an earnings hole. Second, depreciation expense related to purchase accounting is higher than we expected at deal case as we had to mark the acquired assets to fair value at the time of close. As we have all seen, the value of generation assets has increased considerably since we announced the transaction in January of 2025 and that higher value is resulting in higher noncash depreciation expense. When we announced the deal, we also targeted at least $2 billion of annual incremental free cash flow, which we continue to expect even absent the cash flow from the additional asset sales. I'm also excited to share that we are increasing our share repurchase authorization to $5 billion, enabled by our strong balance sheet and significant free cash flow while still growing our dividend and reinvesting $3.9 billion in growth projects that deliver compelling returns of at least 10% on an unlevered basis. The increase in the buyback is a strong vote of confidence in the outlook for our business. Finally, Moody's and S&P reaffirmed our credit ratings, supported by our strong cash generation, long-term contracted cash flows and clear deleveraging trajectory. We remain committed to returning the balance sheet to our target credit metrics by the end of 2027. On the following slides, I will walk through our base and enhanced earnings outlook that now includes Calpine, how to think about upside earnings opportunities and our capital allocation strategy. Turning to Slide 21, I want to provide a short review of our base earnings framework and discuss how we are incorporating the Calpine portfolio. The goal of base EPS is to highlight our earnings that are consistent, visible, straightforward to calculate and that will grow over time. The components of our base earnings are well defined. First, long-term contracts from our generation fleet that provide durable and predictable cash flows. Second, our available nuclear generation that is priced at the PTC 4, assuming a 2% inflation adjustment over time. Third, for our nonnuclear fleet, we anchor to minimum expected gross margin and volume grounded in historical experience. And finally, commercial unit margins and volumes that use a 10-year historic and forward weighted average. Taken together, these elements provide a transparent and repeatable foundation that supports visibility today and growth over time. Detailed modeling tools for base earnings can be found starting on Slide 32 in the appendix. Constellation's enhanced earnings capture value generated above our base assumptions that we will constantly deliver but is not always easily modeled as a P times Q. This portion of earnings reflects contributions from a variety of sources, such as revenues from power and capacity above the PTC floor for our nuclear output, higher spark spreads in our base assumptions, commercial margins above the 10-year average and a host of other opportunities that come with the scale and depth of our portfolio and customer-facing business. In 2026, enhanced earnings will represent approximately 40% of total EPS. Over time, we expect enhanced earnings to represent more like 30% to 35% as base EPS grows, and hence, it contributes less on a relative basis. Turning to Slide 22, our base earnings are expected to grow from a range of $6.65 per share in 2026 to a range of at least $11.40 per share to $11.90 per share in 2029, representing at least a 20% compound annual growth rate over the period. As we have discussed in prior guidance updates, our growth will not be linear. Year-to-year results will fluctuate based on the timing of long-term contracts going into effect, the roll-off of Illinois CMCs, inflationary adjustments to the PTC and the impact of our nuclear refueling outages, which vary in number and costs depending on the year. Despite that variability, we have a highly visible path to base EPS growth at a 20% CAGR over the next 3 years and continued growth of at least 10% compounded annually on a rolling 3-year basis. Importantly, this outlook reflects only the long-term agreements for our nuclear and natural gas units that have already been announced, the base assumptions discussed on the prior slide and current market conditions for enhanced earnings. The optionality embedded in our fleet, which represents a meaningful upside opportunity, is not reflected in this guidance. Turning to Slide 23. Let me provide context and add dimension to the optionality that remains in our business beyond our base earnings starting point. Long-term contracts for our nuclear natural gas generation command a market premium from customers seeking reliable megawatt-hours, supported by the depth and strength of our portfolios. To put that into perspective, a deal on each gigawatt of nuclear could increase our base earnings between $0.40 per share and $1 per share at full run rate, translating to a 1% to 3% increase to our growth rate over the period. A reminder that the assumption in base earnings is at the PTC 4, so the sensitivity being reflected here is relative to that price, not to the forward curve. Our natural gas portfolio has significant optionality as well. Contracting an additional gigawatts through long-term agreements could also result in an incremental $0.20 to $0.50 of base earnings per share, adding another 1% to 2% to the growth rate. Additionally, as Joe discussed earlier, in a period of increased load growth, grid needs will be increasingly met through higher utilization across our fleet driven by dispatch economics. A modest 1% to 2% increase in natural gas fleet capacity factors would lift base EPS by $0.10 to $0.20, which is roughly 1% to our growth rate. This higher utilization translates directly into stronger and more durable earnings while also improving overall grid efficiency. As demand continues to grow, we expect more customers to see clean megawatt-hours and reliability solutions, both of which are in high demand, yet of finite availability. The optionality of our fleet, including the ability to combine clean generation with natural gas solutions, is unmatched, and it is a key reason for bringing Calpine onto the Constellation platform. Similarly, expanding the adoption of premium-priced products and cross-selling opportunities across our commercial business can drive higher unit margins that could have a meaningful impact on our 2029 base earnings and growth rates. The nuclear PTC inflation adjustment, a unique protection backstop by the U.S. government and particularly valuable in the current market environment, could provide a meaningful tailwind if inflation remains above 2%. A 100 basis point increase to our 2% inflation assumption would add approximately 100 basis points to EPS CAGR through 2029. Continued investment in compelling growth projects alongside disciplined share repurchases has the potential to drive meaningful value creation in a relatively short period of time. We are actively working to execute across all of these levers to deliver results beyond our current projections. Turning to Slide 24. Constellation's disciplined approach to capital allocation has been a hallmark of our success over the past 4 years. Since our time as a public company, we have consistently demonstrated an ability to create shareholder value while preserving the financial flexibility required to pursue strategic opportunities as they arise. This balanced approach has also allowed us to navigate evolving market conditions, address regulatory requirements and invest in growth at compelling returns. It also strengthens the long-term durability of the business. Going forward, we will continue to apply the same principles that have guided our decisions to date: maintaining balance sheet strength, prioritizing growth at double-digit unlevered returns, and returning capital to our owners through dividends and share repurchases. This continuity reflects both our confidence in the strategy and the results it has delivered. On Slide 25, the portfolio we own and operate today is significantly larger and more diverse than where we started 4 years ago, and we are confident we can deploy growth capital organically and through strategic acquisitions at compelling returns. Our strategic acquisitions of Calpine and the South Texas project have expanded our generation fleet, increased scale and enhanced our ability to serve a broader and more diverse customer base. We are growing organically through the restart of the Crane Clean Energy Center, nuclear uprates and operating license extensions, reinforcing our commitment to delivering clean, reliable and dispatchable power. These investments are particularly important as demand accelerates across a more data-driven and increasingly electrified grid where reliability, carbon-free electricity and long-term price certainty are becoming increasingly valued by customers. Looking ahead, our growth capital plan remains firmly anchored in value creation. We expect to invest approximately $3.9 billion during 2026 and 2027 to add new megawatts and enhance performance and longevity of the existing fleet across all fuel types. In addition to the nuclear investments, we are placing more than 600 megawatts of new natural gas, battery, wind and solar capacity into service in 2026, further diversifying our portfolio and supporting growing customer demand. Collectively, these investments reflect our continued focus on capital efficiency, asset optimization and long-term earnings durability while continuing to strengthen our unique position in the market. Turning to Slide 26. Our strong free cash flow over the next 2 years has some unique characteristics related to the acquisition. Let me take a minute to walk through 2026 and 2027 and then explain how to think about it on a forward basis. When accounting for the expected after-tax proceeds from the sales of the PJM and ERCOT assets, we expect to have $13.6 billion to deploy over the next 2 years. I spoke to the $3.9 billion of identified growth that will be accretive to long-run base EPS CAGR. Additionally, we will continue to grow our dividend at 10% per annum, and we have earmarked $3.4 billion to delever the Calpine debt stack to meet target consolidated credit metrics by the end of 2027. We then have authorization of -- we then have authorization for $5 billion in share repurchases, which, for planning purposes, we assume to happen by the end of 2027. We of course retain flexibility on execution, especially as we continue to prospect for strategic and accretive growth opportunities. On a forward basis, we expect free cash flow before growth to follow the trajectory of our base EPS. After rightsizing the balance sheet by year-end 2027, we expect to have additional leverage capacity supported by increasing cash from operations while maintaining our Baa1 and BBB+ leverage profile. Turning to Slide 27. We have long highlighted our investment-grade balance sheet as a core competitive advantage, one that enables us to capitalize on market opportunities and execute complex transactions. We have seen 2 recent tangible examples of how this strength continues to differentiate Constellation. In January 2026, as part of the $2.75 billion issuance to replace Calpine sub-investment grade debt at the Constellation level, we issued a 40-year tranche with a 5.75% coupon. This is certainly unique in the competitive power sector, demonstrating the strong vote of confidence from fixed income investors in the long-term cash flow generation and risk profile of Constellation. An additional vote of confidence came from the U.S. Department of Energy in its $1 billion loan in support of the historic restart of the Crane Clean Energy Center. The DOE highlighted Constellation's financial strength as a key determining factor in the award and underscores continued federal support for nuclear energy as a critical source of clean and reliable power. Finally, as expected, S&P and Moody's affirmed Constellation's credit ratings, reflecting the combined company's strong cash generation and our clear plans to deleverage by 2027. In addition, Calpine's ratings were upgraded to investment grade following the close of the transaction. The rating agencies emphasize the geographic diversification, irreplaceable asset base and the strength of the combined portfolio, as well as Constellation's track record of disciplined capital deployment and commitment to balance sheet targets. While expected, these favorable assessments position us well to pursue additional strategic opportunities going forward. Thank you all for your time today. 2026 marks the beginning of another new and exciting chapter for Constellation. I think we have a truly unique investment thesis, a highly visible and predictable trajectory for base earnings to grow 20% on a compounded basis through 2029, a coast-to-coast fleet of nuclear, gas-fired and geothermal generation assets ideally positioned to meet growing customer demand, and growing free cash flow that can continue to be deployed to create value for our owners, whether -- or both via accretive growth and by via returned to owners via buybacks and dividends. Put all this together and you can see why we have a truly compelling growth story into the next decade. With that, I will now turn the call back to Joe. Joseph Dominguez: Thanks, Shane. Good job. So folks, we couldn't be more excited about where Constellation is headed. We're built on a foundation of strong growth, unmatched scale, geographic reach and truly irreplaceable assets, all supported by a commercial platform that sets us apart. Our base earnings will grow more than 20% through 2029. And as Shane said, we intend to replicate double-digit growth after that. And we see a number of meaningful opportunities even through 2029 to improve and outperform our trajectory. We'll continue to take a disciplined, practical approach to capital allocation, deploying our substantial free cash flow in ways that create long-term value for you. We'll keep executing with customers across the data economy and beyond, securing durable premium price agreements for our clean reliable megawatts. We'll expand the contributions of our natural gas fleet, meeting customer needs in ways that were not possible before. We will preserve and expand generation supply in the markets we participate. And we will keep working closely with federal, state and local policymakers and market regulators to drive common sense solutions, solutions that will allow America to grow and also reduce the burden on American families. Thanks for your time. We have the whole management team here, and we look forward to your questions. Operator: [Operator Instructions] Our first question is from David Arcaro with Morgan Stanley. David Arcaro: Joe, could you maybe comment on, in maybe a little bit more detail, if you could, just what's the status of discussions you're having with other hyperscalers? You did mention 1 that may be possible opportunity in Maryland here. But just more broadly, if you could touch on what's the status, how close, how advanced how broad across your portfolio that you're in discussions here for in terms of data center contracting? Joseph Dominguez: Well, I want to avoid, David, promising delivery dates here because we all know that there are bumps that, unexpected and otherwise, that occur in these transactions. But I think it's fair to say that there continues to be strong interest in clean and reliable power. But look, the data economy customers are very conscious of either being flexible at peak, using backup generation, some of the AI technologies that move data demand around. And so we're certainly seeing that in our conversations. I think there could be a point in time where the flexibility that data centers have at peak will be substantially greater than what we've seen historically. And then we have ongoing conversations with customers that just want to buy energy and capacity from us. They'll absorb whatever the backstop proposal is. And here's what I would say. I would say that those conversations grew more complicated after the executive order as we found solutions, and delayed some of the transactions. But I see the momentum resuming. David Arcaro: Got it. That's helpful. And a bit of a follow-up on your comments there too. Is flexibility and/or additionality, is that really the path forward here? Curious if -- as we maybe think about the backstop procurement, just how does that interact with the potential to bring new megawatts onto the grid or being flexible? Joseph Dominguez: Yes. I think it is, David. I think there has been, since we announced the strategy, overhang of do we have enough peak capacity in the system. And so that ambiguity is going to be addressed, hopefully, here by FERC in a way that gives our customers clear line of sight that if they're going to rely on the backstop capacity auction, what the cost of that is going to be and what the terms are going to be for them. Other customers are going to look at the ability to either bring batteries, demand response, new gas-fired generation or some of this AI flexibility I just mentioned into play to manage the peaks. But if you manage the peaks, right, what we're really talking about is the capacity slice of what we have to offer. And I see a potential where we're going to do the same thing we've been doing with C&I customers historically. And that is we sell our capacity into the market, and our customers are buying a capacity product from PJM. That could be that backstop capacity, or they could bring their own capacity or flexibility, as I mentioned. But what is uninterrupted is the other 99% of the hours, the energy and the attributes they need to meet their goals for firm and reliable and clean power. Operator: Our next question comes from Steven Fleishman with Wolfe Research. Steven Fleishman: I'm sure there'll be other questions on that topic, so let me just maybe move to a different one. Capital allocation, so one point of clarity. In the plan to '29 and outlook that you have, what are you assuming or doing with cash in '28 and '29, just in the plan, the growth rates, et cetera? Yes. Shane Smith: Steve, it's Shane. There's nothing planned with regard to accretion relative to that free cash flow. So that's all upside opportunity for how we deploy it. It's essentially earning interest income at the current assumption. Steven Fleishman: You're just having it sitting cash effectively. So any use of capital better than that is accretive. . Shane Smith: That's right. Joseph Dominguez: Correct. Shane Smith: That's what leads to the $0.50 upside you see on the sensitivity table, is we think there's a meaningful opportunity to find opportunities above that low threshold. Steven Fleishman: That's helpful. And then maybe related to that then, Joe, over the last 3, 6, 9 months, you've mentioned renewables a couple of times. You did talk again here a little bit about nuclear. Could you just, maybe on those specific topics or others other than new gas, that you could talk to kind of what are you seeing there, what are -- how are you looking at that? Yes. Joseph Dominguez: No, no, I'm sorry, complete your question. I thought you were... Steven Fleishman: No, no, that's it. I'll leave it there. Joseph Dominguez: Okay. Yes. So look, on new nuclear, we're continuing to look at both large reactors and small modular reactors. I think the last time we talked, I commented that we have to have really clarity on 3 things. One is, what's it going to cost and what the schedule is going to be? Obviously, a number of the new reactor designs, particularly on SMR, still have a bit of work to be done in their design and regulatory approval journey. We've got to get to the other side to make sure that we understand that. We need to understand the operating cost of these machines. And while we continue to chip away at that, I am not yet at a confidence level where I could say to you that we are committed on a path to new nuclear. I think we just -- we need a lot more data before we could get there, and some of that is just going to have to play out over time. In the case of renewables, what I'm really looking for here, Steve, is to have the capability with battery storage and other renewables as well as gas-fired gen, to really facilitate these transactions that are the core of our growth strategy, these deals with hyperscalers and C&I customers. So what we're thinking about there is capability that gives us some peak capability or some incremental new capability. That is a deal sweetener. And that's kind of our focus on renewables, what platforms might we add to the business that give us that incremental capability to do the things our customers want. It is a secondary objective to have another means of deploying some of the vast amounts of free cash flow that Shane alluded to. But I've said this before and I stick with it, the returns on renewables are often underwhelming when we're looking at some of these deals. So in other -- in order for a platform to be something we're going to want, it has to come with it the ability to unlock our essentially contracting of 147 million megawatt-hours of nuclear. And that's where we see some potential value. But I don't yet see a platform that is attractive enough and is going to meet our threshold for 10% unlevered IRRs. We'll continue to search for that opportunity, but we're not there. Steven Fleishman: I have one last question on the capital allocation and I'll then turn it to others. Just going back to -- so obviously, your free cash 2029, you're just leaving in cash. How about just like balance sheet targets? Because your EBITDA is going up a lot, '28, '29, so just what should we be using? Because there could be just balance sheet cash or leverage capability too that grows. Just any view of kind of leverage targets? Shane Smith: Yes. I mean we'll continue in the long run kind of -- I think it's fair to assume that 2x debt to EBITDA, Steve. So with that rising EBITDA that will -- to follow the base EPS trajectory, if you will, from your modeling, you can assume that if we're levering at 2x EBITDA, we'll have significantly more leverage capacity in '28 and '29 than were reflected in '27. Operator: Our next question comes from Shar Pourezza with Wells Fargo. Constantine Lednev: It's actually Constantine here for Shar. You noted 9 gigawatts of additionality including the nuclear relicensing. Do you see that as enough offering for hyperscalers looking to contract? And maybe is there a rule forming around matching new and existing capacity 1:1? Or is there a lower mix [ palatable ] similar to the [ Vistra ] deal earlier this year? Joseph Dominguez: Yes. I think on what's going to ultimately come out of the PJM process, I think we're still -- we're going to still await clarity, I think it's more about just managing the peak and whether the customer is willing to take interruptible service or not. As to whether the 10 gigawatts is enough, I think there's going to be instances where we'll partner with another party. We've shown that with [ DR ], for example, where they bring the incremental capacity. And we have another company that's partnering with Constellation. I could see that happening with natural gas development projects or other things, where we'll be more aggressively working with other companies that have acute position in a particular area. And then we're going to fill in our energy and our attributes into that contract. So in answer to your question, I'm not sure that the 10 gigawatts is enough or rightly placed. We may have to supplement that. And I spoke a moment ago in response to Steve's question about continuing to search out platforms, renewable battery storage platforms, that may add some incremental capabilities. So I think it's a hell of a good start, but I don't think it's a finished story. Constantine Lednev: Excellent. And in regards to the 147 million megawatt-hours that you called out, obviously, a really big number, is there kind of a level of interest that you would highlight in more immediate term versus long term and maybe an order of preference by region, especially, as you mentioned, with the kind of reforms going on at PJM? Joseph Dominguez: I don't think we could get into that level of detail here yet. There's interest in kind of across the board in different places, and it's different types of interests that we get. But we don't yet have, hey, this is the number of megawatts we're going to be able to do at this point in time in a particular geography. Constantine Lednev: And maybe just quick follow-up on PJM, is there kind of a level of interest in the reserve backstop auction? What's CEG's position kind of going into the potential procurement later part of the year? Joseph Dominguez: Yes. I would simply say I think there is certainly a level of interest in it, but we have to see the details. Operator: Our next question comes from Angie Storozynski with Seaport. Agnieszka Storozynski: So my first question is about the free cash flow generation. I'm just wondering what kind of assumptions you're making about cash taxes in that $8.4 billion free cash flow assumption for '26 and '27? Shane Smith: We're in the low teens from an overall effective cash tax rate in the front 2 years, Angie. Agnieszka Storozynski: Okay. I mean that low teens as in like based on net income? So... Shane Smith: Yes. Actually, if you convert -- instead of using your book tax rate, if you use the cash tax rate, it would essentially be at that lower -- in the low teens. Agnieszka Storozynski: Okay. Because that number looks a little bit low, just as I was looking at your free cash flow generation for Constellation standalone, you were already in around, I think, $3.5 billion range on average per year. So the Calpine accretion with some tax benefit should have been -- should have boosted the free cash flow generation more. I mean so what am I missing? Is it the interest expense? Is it that there are no tax efficiencies related to this transaction? Shane Smith: Yes. I think one, the 3.5% is probably a little bit too high. Two, there's still some ongoing CTAs regarding the integration in the front years that we need to be mindful of. Three, there might be probably higher maintenance CapEx than you may have had in your model. So those are a few of the variables that I think are leading to some of that delta. But it's not off of what we anticipated. Agnieszka Storozynski: Okay. And then secondly, when I'm looking at Slide 32, the assumptions, the modeling assumptions for '26 and '27, so just wondering how you flow through the sale of PJM assets. It doesn't seem like it's having any benefit on either O&M or other like cost items. Is it just because, again, you're taking an additional time for Calpine's ownership and thus higher cost? Because I would have expected that there is some cost benefit by divesting these assets. Shane Smith: Yes, there's a little bit of a lumpiness year-to-year on O&M for some onetime things. It's dependent upon nuclear fuel outages and things like that. So it's not always easy to look at just a 2-year view and say, "Well, if these are coming out, I wouldn't see this material delta year-over-year." So there's some more intricacies to it that create some lumpiness besides just looking at 2 years and trying to adjust for inflation. Agnieszka Storozynski: Okay. And then just one big picture question, Joe. I mean we've had a lot of announcements -- semi-announcements about new build in PJM. How do you see those potential capacity additions? I mean as you said, the cost basis is pretty high. And I'm not quite sure if there is offtake agreement behind this potential CapEx on the gas-fired side. But are you concerned that there could be some, I don't know, noncompetitive entrants into the PJM market, which in turn would suppress both energy and capacity prices? Joseph Dominguez: Yes, Angie, I think 2 things have happened in that space. We saw kind of a wave of interest in legislation that would allow the utilities to return to building generation. And I thought that was a risk to the market. I think favorably, we haven't really seen that gain traction anywhere, and people seem to be rejecting that idea. So since the last time we talked, probably improvement in terms of that risk vector. There have been announcements for things that are, at least based on what we understand about the projects, that are going to exist off the grid. And so there doesn't seem to be to us any meaningful impact that those things will have on energy and capacity markets. But we're still looking at that. Frankly, what we have on some of this stuff is just press releases and not much more. So a more fulsome answer would require us to kind of understand what's going on. And I don't know what's real or not real. There's a lot of press release activity going on all over the place about different things that, I think you correctly point out, might add some noncompetitive supply, whether energy and capacity into the market. But who knows how long it's going to take to actually build that stuff or, frankly, whether it's real and it has offtake agreements yet. We're seeing the same thing, but I can't really give you anything meaningful on that because I don't understand the details yet. Operator: Our next question comes from James West with Melius Research. James West: Joe, thanks for all the great details this morning. One of the things I wanted to ask about that I think gets under-recognized by the market overall is the increased demand on your capacity is leading to much better durability in your earnings. And I wonder if you could comment on that. And one, if you agree with that. But two, if you could comment on how that creates -- is creating durability and how we should think about that durability. Joseph Dominguez: Yes. I mean -- so I think about it in a few ways. On the nuclear side, you all understand what we're doing. We're taking the production tax credit and we're modeling that as the base earnings. So there's obviously -- what we're seeing is power prices in certain regions exceeding that, and so giving us some additional opportunity above the production tax credit floor price. So we're seeing a bit of that. We're also seeing it in terms of the gas-fired generation being dispatched more often. So that would translate into what I would think of as a tailwind for enhanced earnings more than for base earnings. Where it kind of converges though is that in long-term contracting, in the mind of the customer, ultimately, it's about doing better than they're going to do over the long term with the variability in the market. So I think that -- I think the fundamentals that you're talking about are actually driving people to want to secure long-term contracts at prices that we would then put into base earnings and making the base earnings more durable in that sense. But I really think the way we've explained it here is probably the best way. And that's to give you this baseline that we think of as durable and then quantify for you some additional opportunities on top of that. And in terms of the way I kind of simply think about the stock and the value we're trying to deliver to owners is we're taking a look at the S&P, and we're saying, what's the average multiple in that S&P? And then underneath that, what are the growth rates for different companies? What are their cash flow capabilities? What's their long-term durability to have assets that are going to be around for decades? And that's where we're trying to distinguish ourselves, as always being better than that average. That's the philosophy of the company. So that when we show up and we present to you, look, in a very conservative way, we see a 20% CAGR. What we're saying is go look for other opportunities in the S&P, and we bet that our opportunity is going to be better than other things that you could find. And then you layer on top of that kind of catalysts for even better performance, some of which would land in base earnings, like PTC increases as a result of inflation, some of it would land in enhanced earnings. But to give you a page here, and Page 23 does this, to say, look, here are the opportunities we're going after. And if we realize those opportunities, here's what it's going to mean on top of what we just talked about. James West: Okay. Makes sense. And then maybe just a quick, Joe, a quick follow-up for me. You've mentioned the PJM clarity. When do you expect to have clarity in that market? I mean I know you're very close and you're working with the federal government and all state regulators and everybody is trying to come to that moment. When do you expect to see that happen? Joseph Dominguez: Look, I expect to see that this year. I mean that -- again, these things are out of Constellation's control. But what I'm seeing is a FERC that's highly motivated to get this done and administration that believes that leading in the data economy and this important part of innovation is essential to America going forward. So they want to have this clarity. And then obviously, have other market participants like us, the utilities, everybody's pushing for some clarity here so we know the rules of the road going forward. And so look, I'm hoping all of that pressure drives us to a place where we get that clarity from FERC this year and it clears up questions in the minds of customers and others. Operator: Our last question comes from Julien Dumoulin-Smith with Jefferies. Julien Dumoulin-Smith: A couple of things real quickly. First, some of the nuances here. I think it says that '27 assumes average shares outstanding are held flat. Are you guys assuming this $5 billion buyback is executed in the core EPS? I just want to clarify that real quickly. And then separately, I think Steve got at this a little bit, but how do you think about capital allocation and further buybacks as maybe a policy for beyond the '27 period, like '28, '29? Is there a ratio? Is there a payout? Is there something that -- to give people a heuristics on that front? And then I got a quick follow-up. Shane Smith: Julien, it's Shane. So let me take the first part. I mean we did not reflect an assumption on how many shares we would repurchase, in part to not overly signal to the market what our strategy is here. We want to preserve flexibility there. So I trust you all can make some assumptions on how we would probably allocate that over the next 21 months or so. But our '27 share count is not reflected on an assumption of what we take out before year-end '26. Secondly, let me make sure I hit your question there. But I think it's consistent with what we've done to date. I mean we're -- as Joe hit on, we think we have a number of opportunities to bring new megawatts to the grid in a variety of different areas. We obviously are looking for some policy clarity here as well as customers that want the long-term contracts. And so our priority is on identifying growth at double-digit unlevered returns. To the extent that doesn't present itself as an opportunity, we're very comfortable acquiring our shares at this price. And we think we have a lot of cash flow ultimately to end up doing both. But we won't make an ill-informed investment decision because we feel the money has got to go somewhere. We're very confident in reacquiring our shares. Julien Dumoulin-Smith: Awesome. So the EPS guidance per se doesn't include the buyback, but the 20% EPS CAGR in the more -- in the broader sense does. And then if I can, just to follow up on this, you have this 10% rolling CAGR. Can you describe a little bit about how to think about that? And obviously, you talked about a base EPS number there too. Is this 10% rolling supposed to be like off of that '29 that we should be thinking about, implicitly growing 10% from '29 onwards? Or is this more, hey, next year, when you roll the plan from '27 to 2030, you should be kind of thinking about it being more in the 10% ZIP code? I just want to clarify how you're thinking about that. I think I get the concept, but I want to make sure we're crystal clear about what you're suggesting here is growth kind of implied beyond '29. Shane Smith: Sure. So let me clarify on your first point, there is no benefit in the 20% base EPS CAGR from capital allocation for the share repurchase. So that is all upside. That's all reflected in the $0.50 upside on Slide 23. Secondly, when we recalibrated the base EPS CAGR of 20% on a 3-year view, we are projecting to roll that forward and a commitment to essentially grow base EPS CAGR at 10% each rolling 3-year cycle. And that's kind of our minimum target, Julien. What I'd say is, again, that Slide 23 that shows the optionality, we're assuming that we're going to execute on some of those levers and ideally have a higher growth rate than the 10%. But we're saying we have great line of sight that if you start next year, looking at following 3 years and so forth, that we have good line of sight into a rolling 3-year view of a 10% base EPS CAGR. Julien Dumoulin-Smith: All right. Perfect. So again, stress, no buyback reflected in any of this '26 onwards. More to the point, the rolling piece is truly genuinely a rolling 3-year average, and that's the minimum here. But if you thought about '27 to 2030 here, again, obviously, you've got a plus at the end of that 10%. Don't necessarily take it too literally. Shane Smith: I think you've got it. Julien Dumoulin-Smith: Awesome. All right. Excellent, guys. I really appreciate it. Operator: This concludes the Q&A session, and I will turn it back to Joe Dominguez for closing comments. Joseph Dominguez: Great. Well, thank you, again, all of you for joining us. We've got a lot of work still in front of us to integrate Calpine. The future is very bright. Hopefully, we've given you something here this morning that allows you to understand what the baseline strategy is for the company and what we intend to return to our owners in terms of value and the many upside opportunities. Thanks again for participating, and have a great day. Operator: And ladies and gentlemen, thank you for participating in today's call. This concludes today's program. You may all disconnect. Everyone, have a great day.
Operator: Good morning, everyone. Thank you for standing by. Thank you. Faten Freiha: Good morning. This is Faten Freiha, VP of Investor Relations. Thank you for joining today's call. While our original plan was to review McCormick's first quarter fiscal 2026 earnings results, today's discussion will focus on our announced combination with Unilever Foods and the strategic rationale for the transaction. Please note that this call is being recorded. The press release and accompanying slide presentation related to today's announcement along with the materials for our first quarter fiscal 2026 results are available on our Investor Relations website, ir.mccormick.com. With me this morning are Brendan Foley, Chairman, President and CEO of McCormick, and Fernando Hernandez, CEO of Unilever; and Marcos Gabriel, Executive Vice President and CFO at McCormick. In our comments, certain percentages are rounded. Please refer to our presentation for complete information. Today's presentation contains projections and other forward-looking statements. Actual results could differ materially from those projected. The company undertakes no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events or other factors. Please refer to our forward-looking statements on Slide 2 for more information. I will now turn the discussion over to Brendan. Brendan Foley: Thank you all for joining our call. Marcos and I are pleased to have Fernando join us this morning as well. Today marks a major milestone for McCormick. We are bringing together 2 leading organizations, McCormick and Unilever Foods, to create a strong, scaled and growth-oriented company that will be flavor-focused and exceptionally well positioned to succeed in today's dynamic environment. We have always seen the logic of this combination. We're excited by the opportunity to deliver end-to-end flavor experiences to even more people around the world, bringing the taste that inspire, connect and brings joy to kitchens and tables everywhere. Before we go further, I want to quickly provide an update on McCormick's first quarter 2026 results. For the quarter, we delivered strong growth in sales, adjusted operating income and adjusted earnings per share, supported by our McCormick de Mexico acquisition and organic growth across both Consumer and Flavor Solutions. In a dynamic environment, we drove margin expansion through strong top line, acquisition accretion and disciplined cost management. While our remarks and other materials from our results can be found on our IR website, as Faten noted, I want to underscore that consistent and strong core financial performance from both McCormick and Unilever Foods is foundational as you think about today's announcement. Now turning back to today's announcement, starting on Slide 5. McCormick and Unilever Foods are strategically and culturally aligned organizations. We each bring iconic brands in attractive categories spanning herbs, spices, seasonings, [indiscernible], condiments and sauces. Bringing these portfolios together creates an opportunity to execute multiple growth levers, such as expanded distribution, accelerated innovation, brand premiumization and a scaled dual-engine Food Service platform. At the same time, we see significant clearly actionable cost synergies layered on to an already strong structural margin profile, creating capacity for continued [indiscernible] and attractive shareholder returns. Beyond strategy, our organizations share a common mindset, a passion for flavor, a belief in the power of people and relentless focus on quality and innovation and strong investment behind our brands. Turning to Slide 6. The pillars of the combined organization [indiscernible] like distinct and complementary strengths across geographies, channels and categories. Together, we create a focused global favor powerhouse, scaled, resilient and uniquely concentrated on flavor. Our balanced geographic and channel footprint enhances durability across economic cycles and market conditions. The breadth of the combined company, diversifies our growth across emerging and developed markets and retail and commercial channels. In addition, this combination meaningfully expands McCormick's presence in structurally advantaged categories aligned with enduring consumer trends, more flavorful, convenient and focus on health and wellness. We will continue to flavor calories while others compete for them, giving us a strong tailwind and aligning us to favorable consumption and growth trends. All of this results in a best-in-class margin profile that supports sustained industry-leading reinvestment behind brands from global leaders like McCormick, NOR, Hellman's and French's to high-growth potential brands like Frank's RedHot, Cholula and MAI, along with strong regional favorites where we see exciting potential. Moving to Slide 7. We see a clear path to unlock incremental growth, grounded in the complementary strengths of our geographic footprints and go-to-market capabilities. Unilever Foods brands can benefit from McCormick's focus and strength of retail execution in the North America flavor aisle. At the same time, McCormick is positioned to expand more meaningfully in high-growth emerging markets by leveraging Unilever's established scale, deep local infrastructure and proven route to market. In Food Service, the strategic pick is particularly strong. McCormick's front of house brand equity and tabletop presence combined with Unilever Foods, deep back of house experience and operator relationships. Together, we create more complete end-to-end solutions for customers, strengthening relevance and deepening partnerships. Innovation is a shared strength. Both organizations have proven expertise in flavor development and format expansion across consumption occasions, complemented by Unilever's robust culinary capabilities and chef-to-chef engagement model. Before I expand on these growth opportunities, I will turn it over to Fernando for his perspective. Fernando Fernández: Thank you, Brendan. We are very enthusiastic about this combination, and about our partnership with McCormick. We are confident it delivers a compelling outcome for all stakeholders. As Unilever over the past several years, we sharpened our strategic focus, we have reshaped our portfolio to our high-growth categories and strengthen our operational foundation. This transaction is a natural extension of our strategy leading to value creation, while giving our shareholders meaningful participation in the upside of the scaled global flavor-focused [indiscernible] with a strong growth and margin profile. Importantly, this is a transaction anchored in a strategic and cultural fit. Both organizations operating attractive categories, our brands, innovation and execution matter. Both bring disciplined capital allocation, a strong cash generation and a consistent track record of volume-driven growth and both are driven by performance of intercultural with the commitment to quality and customer partnership. We believe the combination strengthens the competitive position of the business enhances its growth prospects and create a more focused platform to lead in flavor globally. With that, I hand it back to Brendan. Brendan Foley: Thank you, Fernando. Moving to Slide 9. I'd like to begin by reinforcing why Flavor is a structurally advantaged category. When you think about food, we strongly believe Flavor is the best place to be. It is the #1 purchase driver across dishes, trends and occasions. It transcends age, culture, dietary preferences and income levels, making it both resilient and highly relevant in a dynamic consumer environment. Importantly, Flavor is fully aligned with today's health and wellness priorities as consumers increasingly focus on cooking-at-home, adding more protein and produce and pursuing healthier lifestyles, Flavor plays a critical role in elevating those choices. Younger consumers, particularly Gen Z, are notable contributors to these trends. Taken together, these favorable flavor tailwinds position us well to drive sustainable growth as a combined company. The highly complementary nature of this combination gives us multiple ways to capitalize on these tailwinds. The clear tangible and many growth levers we see across this combination create real excitement for all of us here. Let me highlight our four priority areas of focus on Slide 10. Maximizing our reach by leveraging expanded distribution in a highly complementary portfolio across markets, unlocking incremental growth by scaling high-growth potential brands across new geographies, channels and consumer occasions, integrating McCormick's Flavor Solutions and Unilever's Food Solutions enhances our dual-engine model with a scaled globally distributed platform with strong brand equity among chefs and operators, accelerating innovation at scale by leveraging our shared R&D and technology, lead the future of flavor and stay ahead of evolving consumer preferences. These areas of focus are actionable growth levers for the combined company. Moving to Slide 11. Together, we have an end-to-end flavor proposition, from cooking to condiments with brands that have minimal overlap and maximal adjacency. Our iconic globally recognized brands, Knorr and McCormick will enable us to be part of more cooking occasions across more markets. At the same time, our Condiments portfolio, including hot sauces, mustard and mayonnaise, allow us to be present in even more kitchens and on more table tops meaning consumers growing needs for healthy flavorful meals. Moving to Slide 12. Beyond adjacency, the combination also accelerates the opportunity for high-growth potential brands. The brands on the slide as well as the number of brands in our portfolio enjoy high consumer loyalty, connection to consumer trends and global appeal, particularly with young consumers. For example, we have the leading share in hot sauce in the U.S. with Cholula and Frank's. We have begun expanding in EMEA where we have seen great success in highly competitive markets. For example, Cholula in France, and through Unilever's capabilities, we'll be able to accelerate expansion, not just in EMEA, but also in Latin America and Asia Pacific. With Unilever's Food's strong presence in these regions, these brands will have substantial opportunities to expand their distribution and reach new consumers. Another unique opportunity is MAI. An almost 280-year-old French brand deeply connected to French culinary tradition as a French -- as a prestige mustard and mayonnaise brand. We see opportunities to scale its presence across a number of new large markets, similar to what we have done with Cholula. This is just one example of many that we see across the portfolio. In addition to retail expansion, Slide 13 highlights the power of our combined Food Service platform. Together, we will strengthen the scale business-to-business leader with approximately $6 billion in pro forma annual sales, positioning us among the largest global food service players. Unilever's Food Solutions brings global presence with deep back-of-house capabilities and culinary expertise and breadth that meaningfully expands McCormick's reach across multiple food service operators. Complementing that strength, McCormick offers a powerful branded front-of-house presence and an extensive partnership network, particularly across independent noncommercial and chain operators. This creates significant cross-selling opportunities. We see clear potential to elevate key Unilever Foods brands while utilizing our partnerships to drive awareness and trial. In turn, this visibility will reinforce retail demand and brand equity, creating a virtuous cycle across channels. Supporting all of these growth opportunities is innovation. Slide 14 outlines how we will leverage our combined technology and R&D capabilities, an essential strategic pillar and long-term competitive advantage. Together, we bring leading capabilities in R&D and flavor science, underpinned by deep consumer insight, culinary expertise and advanced technology platforms. By combining our resources, we meaningfully expand our capacity to innovate, accelerate speed to market, and drive differentiated solutions across retail and food service. Our capabilities are highly complementary. We bring our leadership in seasonings and heat and our expertise in natural ingredients. Unilever bringing [indiscernible] technology, which enhances texture and their ability to leverage protein as a flavor. All of this positions us to support customers to deliver on consumers' evolving dietary needs as well as accelerate innovation across the portfolio. By combining our technology, culinary and scientific expertise, we are building a differentiated flavor innovation engine designed to sustain growth and reinforce category leadership over the long term. As Fernando noted, McCormick is the natural home for Unilever Foods brands. We have long thought about this combination, and we'll bring it to lessons learned from our own M&A journey, which has been deliberate and strategic. As you can see on Slide 15, we focus on strengthening our leadership in heritage herbs and spices, expanding internationally, building scale in condiments and sauces and growing our business-to-business flavor solutions platform. Each transaction has aligned with our long-term vision and disciplined capital allocation strategy. And this combination with Unilever is no different. While this transaction is larger than prior deals, the core drivers of success are the ones we are familiar with. This will be my top priority, and we are approaching with confidence -- we are approaching it with confidence and humility. We have already begun integration planning in partnership with the Unilever team. Let me share some of the details on Slide 16. We are building a detailed integration plan well ahead of close, positioning us to execute efficiently and with strong governance, dedicated leaders from both companies have clear responsibilities, supported by experienced external integration partners. Unilever brings significant carve-out expertise and remains financially invested, including 2 years of Board representation, ensuring alignment. Business continuity is central to our approach with comprehensive TSA support across key functions. In addition, we have tremendous respect for the talent at Unilever Foods, and they are integral to the success of this integration and long-term value creation. We are defining the target operating model early and executing market-by-market to balance speed with precision. Synergy targets are aligned back by a structured delivery road map and a detailed IT transition plan is already in motion to ensure secure and seamless integration. At the same time, we are proactively shaping the commercial agenda to unlock the growth potential of this portfolio from the outset. We know what works. Welcoming extraordinary talent from Unilever Foods, retaining key capabilities and applying proven playbooks to scale brands and accelerate innovation. This disciplined integration paired with intentional growth acceleration, a combination designed to deliver value while maintaining operational continuity from day one. Before turning it over to Marcos, let me highlight why this transaction makes so much sense right now on Slide 17. We have long seen the benefits of the overwhelming strategic fit between the two businesses. Both businesses are in a strong and growing position, benefiting from structural tailwinds. Together, we will create a company that is stronger, more resilient and ready to deliver on its full potential in a dynamic environment. With that, I will turn it over to Marcos to discuss the combined company's financial profile. Marcos Gabriel: Thank you, Brendan. This transaction represents a significant milestone for both companies. Together, we're creating a global flavor leader with expanded scale and capabilities, positioning attractive high-growth categories and supported by a strong and compelling financial profile. Let's begin on Slide 19 with an overview of the transaction structure, which was also outlined in our press release. This combination has been thoughtfully designed to create long-term value for each set of shareholders. The transaction is structured as a Reverse Morris Trust as we are issuing a fixed number of McCormick shares as consideration for Unilever Foods upon closing. This issuance is expected to result in pro forma ownership of the combined company's equity of 65% for Unilever and its shareholders and 35% for McCormick shareholders. Unilever will also receive $15.7 billion in cash, subject to customary closing conditions. This is the optimal combination of debt and equity, that allows McCormick shareholders to realize significant value from the transaction, supported by the borrowing capacity of the combined company, which is expected to generate strong operating cash flows. The transaction implies an enterprise value for Unilever Food of approximately $44.8 billion and approximately $21 billion for McCormick representing a multiple of approximately 13.8x calendar year 2025 EBITDA for both companies based on a 1-month volume-weighted average share price. From a governance and leadership standpoint, Brandon and I will continue in our current roles, ensuring continuity of strategy and execution. McCormick will remain globally headquartered in Hunt Valley, Maryland, reinforcing our commitment to our heritage while building a scaled global flavor leader. In addition, the combined company's international headquarters will be in the Netherlands, where a substantial presence will be retained in areas like R&D, among others. Now moving to the financial profile of the combined company on Slide 20. On a pro forma 2025 basis, annual net sales are $20 billion supported by volume-driven growth and a best-in-class operating margins of 21%. Building from this foundation, we see clear opportunities to further enhance the profile through meaningful revenue and cost synergies. We plan to reinvest incremental revenue and cost synergies back into the business to accelerate growth. Specifically, approximately $100 million will be reinvested into our brands through increased marketing to support and innovation, fueling sustained volume growth and strengthening our competitive position. In addition, we anticipate $600 million in annual run rate cost synergies, representing approximately 8% of McCormick's 2025 pro forma sales, including McCormick de Mexico. The synergy expectations are compelling given the limited overlap and existing efficiency levels of both organizations and reinforce our confidence in the value creation potential of this combination. Importantly, synergy delivery will be supported by a proven capabilities in partnership with the Unilever team. Our comprehensive continuous improvement program, or CCI, has consistently delivered cost discipline, productivity gains and operational efficiency across the organization. By applying this established framework to the combined business, we're well positioned to execute with rigor and translate scale into sustainable margin expansion and long-term value creation. Turning to Slide 21. We outlined the key areas where we see clear opportunities to unlock cost savings across the combined company. Through a comprehensive diligence process, leveraging cross-functional teams from both organizations we have identified actionable savings across procurement, media, manufacturing, logistics and SG&A. This resulted in a balanced set of opportunities across cost of goods and SG&A. We expect to realize the $600 million in synergies by year 3 with approximately 2/3 captured by the end of year 2, reflecting a disciplined and phased integration plans. Turning to Slide 22. When you combine the strength and momentum of both stand-alone businesses with the impact of these revenue and cost synergies, the result is a structurally advantaged best-in-class financial profile. This is about focus on scale and profitable growth. The combination is expected to deliver meaningful accretion in the first full year across sales growth, adjusted operating margin and adjusted earnings per share. By year 3, as synergies are realized, we expect sustainable organic sales growth of 3% to 5%, supported by deliberate reinvestment in our brands and an enhanced innovation engine. At the same time, operating margins are expected to expand to approximately 23% to 25%, reflecting structural efficiencies, procurement scale, supply chain optimization and SG&A leverage. Together, this creates a higher growth, higher-margin platform with stronger cash generation, position the combined company for durable long-term value creation and sustained profitability. Moving to Slide 23. The combined company will maintain a solid and resilient balance sheet, underpinned by strong, consistent operating cash flow and a disciplined capital allocation framework. This foundation supports meaningful de-leveraging while enabling McCormick's long-standing practice of returning capital to shareholders through dividends for the combined company. Both McCormick and Unilever have long-standing commitments to shareholder returns and historically have divided payout ratio of approximately 60%. We expect the combined company to maintain a dividend consistent with this history. The strengthening the balance sheet is a clear priority we expect net leverage to be at or below 4x at closing and plan to reduce it to approximately 3x within 2 years, supported by robust cash generation and disciplined execution. Throughout this period, we expect to maintain our strong investment profile and preserve the financial flexibility that has long differentiated McCormick. With that, I'll turn the call back to Brendan. Brendan Foley: Thank you, Marcos. Before I wrap up, Fernando and I would like to summarize the benefits of this deal for our respective shareholders. Strategically, this combination meaningfully expands our portfolio with iconic, high-growth potential and local favorite brands, strengthens our presence in attractive geographies and enhances our scale with customers around the world. McCormick becomes a preeminent global flavor powerhouse, advancing our vision to be a global leader in flavor. Financially, the combination is compelling for our shareholders. We expect it to be accretive to McCormick growth, adjusted operating margin and adjusted earnings in just the first full year with continued long-term growth and upside to our financial performance. We expect to maintain a strong balance sheet supported by disciplined capital allocation and clear de-leveraging priorities, and our commitment of returning cash to shareholders through dividends remain unchanged. Ultimately, McCormick shareholders gain access to a larger, more diversified business with faster growth, a stronger margin profile and continued commitment to shareholder returns. Fernando Fernández: For United shareholders, this is about unlocking scrap value, giving shareholders exposure to a pure-play home and personal care company and to the upside in the global flavor leader. Brendan Foley: Thank you, Fernando. To wrap up on Slide 25, we hope that you take away from our call today is the following. This combination is strength plus strength, with two highly complementary flavor leaders coming together. Together, we are creating a scaled global flavor focused company with leading brands in attractive advantaged categories. We see multiple levers to accelerate growth, while leveraging the power of leading iconic brands, high-growth potential brands and local fabrics. At the same time, we have plans to deliver clear achievable cost synergies and building on best-in-class finance building on a best-in-class financial profile with meaningful accretion, strong margins and a compelling return profile, supporting our continued investments in growth. We recognize that the integration is crucial and recognized -- and recognize the work ahead. We are prepared to execute, supported by [indiscernible] integration plan, positioning us to execute efficiently and with strong governance. And through it all, McCormick will be McCormick, grounded in 137 years of leadership and guided by a passion for flavor. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Andrew Lazar with Barclays. Andrew Lazar: Maybe to start off, McCormick's track record on M&A and integration, as you mentioned, is admirable. But obviously, this one is just many, many times larger and the industry's track record with larger deals, it's pretty mixed. What gives you the comfort in taking such a big swing on this one? And really, what are you doing maybe differently on this one from an integration standpoint, just given the sheer scale. Brendan Foley: Well, thanks for the question, Andrew. And we're ready to take on the integration at this level of scale, and we recognize, though, more importantly, what we're taking on. First, there are a couple of important steps to have to complete before close. So we need to do regulatory filings to prepare for a shareholder vote, but also Unilever's needs to separate its Food business from the overall Unilever organization. So those are certain things that have to happen in advance, obviously, during this period of time. We are arranging our playbooks to make sure that we have the right integration approach. And I would just maybe break it down in three broad areas. I mean, the first starts with a best-in-class external partner to help guide this. And so we already have that type of a firm on board to really help us think through the best way to approach integration. Now we've done that in the past. It's been very successful, and it's kind of kept us really, I think, executing against our expectations on that. And as you know, in all the integrations very recently, we tend to over-deliver on our objectives there. But we also have a year or more to thoughtfully develop a disciplined plan. And that's really an important period of time, obviously, to make sure that we get this right. And during that period of time, there are dedicated leadership that will be on this, but it's also a combination of not only McCormick leaders being a part of this, but also Unilever leaders too, because they're also committed to this being a successful integration. We're also planning brand acceleration at the same time against that agenda to deliver the growth potential. And so there are examples where we've done this, obviously, is French's and Frank's, but I would even look to [indiscernible], where we take -- we modify the integration approach based on business. We don't execute necessarily a standard [indiscernible] on every one of them because each business is different. They present different opportunities. And sometimes there are different ways of working in how you go to market. We certainly found that with [indiscernible]. And so we very -- took a very deliberate approach on that one. And then you can see the success that we've had. So I think part of what we -- I think the magic in terms of how we look at this thing is not approaching everything as a nail and a hammer. We really make sure that we have the right approach, I think, to each individual situation. And I think region by region, this will probably play out that way. Then we do have to execute a thoughtful separation. It will be supported by TSA agreements, and we have a very experienced partner in Unilever are doing this. Unilever employees are remaining with the business. And that's an important, I think, concept to think about, which is there might be many regions which simply McCormick doesn't operate. So you can imagine the Unilever employee base and talent really becomes part of that business. So there's sort of minimal disruption in that context. And so we're able to still run the business very effectively. Overall, I would just say we're really admitted and we have an invested partner in integration. We have dedicated leadership, best-in-class advisers, ample time to plan. And this is going to be our approach in going into this. Andrew Lazar: And then maybe second, just quickly. Unilever Food EBIT margins are already in the sort of the low 20s level. Not many food companies have been able to reach, let alone sustain. And I understand much of this is due to the two scaled brands that are part of that portfolio. But I guess, are you comfortable that the brands have been appropriately invested in such that margins like these are, in fact, sustainable and maybe Fernando can comment on it as well. Brendan Foley: Let me open it up and then I'll ask Fernando to add some context there. When you look at both of our companies, you see robust support for the brands from a standpoint of brand support and innovation. we've definitely -- I think that's where we are very much aligned in terms of how we think about how to drive growth against this portfolio. And it's not only that we're going to be -- we still have sort of a strong baseline that we're walking into this with, but we're going to add to it. Fernando Fernández: Thank you, Brendan. We have been investing around 10% in brand marketing investment behind our Food business. So it's probably one of the best supportive business in the industry, and of course, ensuring the benefit of [indiscernible] case, north EUR 5.5 billion, 10 months, EUR 2.5 billion. So very, very size [indiscernible]. Gross margin in the mid- to high 40s. So all these has built the [indiscernible] of circles. And really, we have here a very, very well supported ramp for a very long period of time. So [indiscernible] thesis [indiscernible] of the features that we share with McCormick and we are [indiscernible] how to rebrand and a real belief in investing [indiscernible] our best assets. Marcos Gabriel: And I would add to what Fernando just said is that as we said in my prepared remarks, we are going to continue to invest going forward, particularly the synergies, cost and sales synergies, we are going to invest back in the business I mentioned about $100 million incremental targets that we have, that's going to be used to be invested back in the business. So that momentum will continue going forward. Operator: Our next question comes from the line of Steve Powers of Deutsche Bank. Stephen Robert Powers: Brendan and maybe this -- maybe Fernando, you can weigh in here, too. I guess my understanding is that Unilever Food and HPC operations are pretty well integrated in certain markets around the world. And so as part of the integration plan Brendan you mentioned TSA agreements, I guess could you speak at a high level to the scope anticipated duration of those agreements? And maybe also the costs associated over time with McCormick standing up its own operations? Brendan Foley: Yes. I think from a TSA agreement standpoint, it's probably going to be -- not in more than just one form overall. So when you think about from an IT system perspective and separation there and unhooking part of the business and then rehooking it with us, so there's sort of TSA considerations overall in that. But then also when you think about sort of our TSA agreements as we hand over and we sort of have that first year integration line together as a company, we're going to have TSA agreements there, too. Fernando, you want to add to that? Fernando Fernández: Yes. Well, as you know, since 2022, Unilever has moved into an organizational model in which we have separated our 4 key business groups. And they run fundamentally as a stand-alone organization. The reason for that at that time was to really ensure that we were building the capabilities required to compete with peer play in each of these industries, but at the same time, even have the flexibility to main separations of this magnitude or the previous we have done, in acting acting in a kind of relatively short time frame and with significant disruption. So our Foods business is in more than 80% on external organization, with their own manufacturing setup, their own distribution set up, their own route-to-market, salesforce. So we really believe that we can support business with significant -- without significant disruption here in the time frame that we have established. Stephen Robert Powers: Great. And then, Marcus, if I understand the deal structure correctly, it looks like you're going to be financing the transaction with new financing and new debt versus absorbing any debt from Unilever. I guess maybe if you can just talk to the drivers there. Are there restrictions from Unilever signing its existing debt or just the rationale of going to the market new? Marcos Gabriel: No. The rationale is really a combination of stock and cash deal. It's an RMT. Think about it as an RMT like transaction, in which we are providing a fixed number of McCormick shares as consideration for the Unilever Foods business, and they will own 65% Unilever and its shareholders. And McCormick will retain McCormick -- McCormick's shareholders will retain the 35% which is the remaining piece, and then in addition, we are providing $15.7 billion of cash to Unilever as part of this deal. And that takes us to a 4x leverage at cost. And what we feel very comfortable about is that the margin profile of this business will -- it's very strong. And we will be able to lever very rapidly from 4x to 3x in about 2 years. So it was part of the overall consideration of this transaction. It puts us the company or the transaction at 13.8x EBITDA multiple, which is [indiscernible] with McCormick. So it was the overall consideration being equity and cash as part of this transaction. Operator: Our next question comes from the line of Tom Palmer with JPMorgan. Thomas Palmer: You noted the combined organic sales growth last year of 2.4% in the view of 3% to 5% longer term. At CAGNY, Brendan, you gave some reasons why you anticipate sales re-acceleration over the next couple of years? Maybe we could kind of do a smaller exercise for the combined company, in particular, thinking through how much of that acceleration is more industry conditions versus maybe more self-help type initiatives? Brendan Foley: Sure. Thanks, Tom, for the question. When combined, you have to think about the fact that we're 1/3 of the equation right now and the Unilever Foods business is 2/3 of the equation. And as we bring these businesses together, we do see stronger growth in that -- in the range that we had on the slide there 3% to 5%. These are businesses both that have been delivering volume-driven growth pretty consistently over the last several years. So we start with confidence in the base business, and so when we take a look at broadly at that growth overall, we see the 2 businesses kind of combined together, growing in that 2% to 3% range. As we think about towards that year 3, as we outlaid on that slide, we see incremental growth coming from those businesses together. And so that is more about self-help than it is about the sort of the industry getting better with itself. This is really, I think, the maybe the core of your question is we think this combination drives the opportunity to drive a stronger growth profile together, and that's why we sort of laid it out that way, the way we talked about it there, comparing sort of our commentary to CAGNY. I can go on further on growth, but I thought I'd stop there, Tom, just to make sure if I've answered the core of your question? Thomas Palmer: Yes, you did. And just a follow-up on the Mayonnaise side. You do have McCormick de Mexico now consolidated Unilever obviously has a very large Mayonnaise business. Just wanted to ask on the overlap and if there might be any limitations to consider in combining these? Brendan Foley: Yes. It's -- right now, it's too early to speculate on that type of a thing. And we just look forward to working with the regulatory authorities on making sure that we review this transaction, and we'll be able to talk about that at a later date. Operator: Our next question comes from the line of Alexia Howard with Bernstein. Alexia Howard: Can I start off with -- you talked about the deal being meaningfully accretive to earnings and I think earnings per share was mentioned from the outset. Are you able to put a number or an order of magnitude around that? And what source of that accretion might be? Marcos Gabriel: Well, at this moment, we are not putting a number there. I mean it is meaningfully accretive in year 1 post-close across all lines of the P&L, including obviously, EPS. And as we get close to the close, we'll be able to provide more information, specific information as we continue to learn about the business. But it is a very substantial margin profile that this business has. We talked about growth just now. Gross margin is very healthy, and we'll be investing back in the business as we have done in the past, both organizations and driving operating profit from 21% currently to a range of 23% to 25% with the synergies of $600 million flowing through to the bottom line. So it's a very meaningful accretion across the P&L. But we will give more information about the exact as we get near the close. Alexia Howard: Okay. And then just looking around the world, where do you see the revenue synergies being most significant? I imagine Brazil might be a place where the McCormick brand could be strengthened simply because of the strength of the Mayonnaise brands from Unilever over there. But there other parts of the world where the revenue synergies could be significant. Brendan Foley: Yes. I'm going to make a couple of comments here and ask Fernando also to provide his perspective. I see it as not necessarily dedicated to like one or two different regions. I would say it's really across many different -- so if you think about North America, Latin America, EMEA and Asia Pacific, in each region, we see opportunities overall. If you think about in the Asia Pacific region, there are a number of markets that Unilever is in, that we're not in, as an example, or in markets that we're both in, we see opportunities obviously to drive even stronger growth in a market like [indiscernible] for example. When you jump over to EMEA, we see opportunities to really -- there are a number of markets where McCormick doesn't have presence. And so we see opportunities and revenue synergies there. If you jump over to North America, we see opportunities really, I think, to even strengthen the performance of both brand portfolios. Latin America is, I think, one of those opportunity areas when you think about Brazil, I think you're right. It's -- and so we don't have McCormick presence there. While we have a really strong presence in Mexico or parts of Central America, I think the Southern Cone is an area that Unilever has quite a bit of strength, and so we see synergy opportunities there. Fernando Fernández: Yes. I feel on top of the shared strength of the [indiscernible] portfolio, I believe that McCormick brings an incredible product range and new river greens an incredible distribution globally. And when you can leverage these two things, you have huge opportunities. I agree Asia, Latin America and obvious geographic opportunities. I would like to highlight also the opportunities in Food Service. McCormick is a leader in the top of the table, let's call it, and in back of house, Unilever Food Service brings a lot of [indiscernible] we think, particularly in Chinese cuisine that is a growing trend. So big opportunities are both in retail and in Food Service. I would say, also in expanding the range in our core brands, making some of the [indiscernible] growth runs -- shine and of course, expanding the food service opportunity of these [indiscernible]. Operator: Our next question comes from the line of Peter Galbo with Bank of America. Peter Galbo: Just one quick clarification. I believe the Unilever India subsidiary had talked about maybe not including the Food business in the transaction. So maybe you could just clarify for us, will the transaction include India Foods or is that kind of excluded from current thinking? Brendan Foley: Yes. To be certain, the transaction does not include India Foods. Peter Galbo: Okay. Perfect. And I know Fernando just gave a bit of an overview on kind of some of the Food Service opportunities. For Brendan, it would be helpful, I think, to hear from you just to expand on where you see -- is it bringing more of the Unilever assets into front of house and foodservice. Is it more Unilever helps McCormick get more into back of house, just where you see kind of the revenue synergies on the foodservice side? Brendan Foley: Thanks for question, Peter, on Food Service. Food Service is an exciting area. Let's talk front-of-house first. When I think about the brand portfolio for Unilever, the opportunity, as we see it right now and Fernando and I have talked about it, is really about the Hellman's brand, really having more front-of-house presence. And so that is a good opportunity, I think, for this combined portfolio as we think about that. And so we see that continued growing presence that we have on tabletop and front-of-house and even on menu, we've had a lot of success getting and partnering with operators, particularly sort of the regional chain type operators on getting on menu with our brands. And so we see that as an opportunity. The Knorr brand is a very strong back-of-house. And I think that let's kind of maybe transit from just a U.S. perspective around this. You have to really have a global perspective because I think the strength of Unilever's Food Service presence is definitely very strong globally. And so we see McCormick opportunity in that because we have a lot of strength here in North America as an example, but we have an opportunity to accelerate our growth in Food Service at a global level. And so that's another area where we see synergy and opportunity to drive growth. Back-of-house, the McCormick brand name is back there, obviously, with spices and seasonings, as is the Knorr brand. But the Knorr chef-to-chef or Unilever, rather chef-to-chef coverage model and having really sort of strong relationships with the person making the menu decisions back-of-house is a coverage model that is quite significant. And so we see that as an opportunity, obviously, to bring in sort of more of the McCormick type of expertise in cooking, which is not an overlap with Knorr. And so I think that, that's another area of opportunity. So I would oversimplify. I think global is an area think front-of-house opportunities for Unilever brands but also think back of house, sort of the coverage model there is an important way to establish penetration and strength within the Food Service channel. Operator: Our next question comes from the line of Robert Moskow with TD Cowen. Robert Moskow: I think this is a question for both management teams, but it's going to take a year for this transaction to close theoretically. Fernando, maybe you could talk about what you learned in the process of separating ice cream, how you were able to keep people on that team focused on executing their operating plan? And I guess the same question for the McCormick team. Fernando Fernández: Well, thank you, Robert. Yes, we have a recent experience of separating ice cream, that was a big business. It's an $8 billion business, not a small business and establishing that company in 57 countries. I feel -- in this case, we have the advantage of separating foods and integrating that into an established organization like McCormick, that simplifies things a bit. In our case, we have had a team of experts with a lot of capabilities. That team is now at the service of McCormick to make this separation happen and to support in the integration also. I believe we learned a lot with previous experiences like [indiscernible] spreads in which the separation didn't take into account really sorting of the [indiscernible] costs in ice cream, we did that much better, and we have the opportunity at the same time of accelerating our growth performance, delivering the [indiscernible] of ice cream and increasing our margins. So of course, it takes a lot of leadership from the front, and this doesn't happen without planning without good external support. Brendan has put that in place already. And of course, in our side, we will provide all the necessary support. There will be transitional service agreements in place for around 2 years also in different areas like IT, distribution in order to ensure that this is a smooth transition, and there is no disruption in the case of our Food business transfer to McCormick. Brendan Foley: Rob, I think from a McCormick perspective, there are maybe two perspectives I'd love to share. The first is being able to continue to driving the business performance right now. We have a really strong team. And so as we put dedicated leadership and teams on this on this work. We also have been a great talented organization for those people to step up and really continue leading the business. And so we see our ability to do that is being very strong and high and -- and obviously, we feel like we have a very disciplined approach to this in the past because we have done integrations, although the scale is different, and we acknowledge that. But I think that the element of that is really going to come through in this planning and making sure that we are very, very specific and precise in terms of how we make sure that we continue really strong support against the current business while we also take on -- was a pretty important initiative. There was a question earlier in the call, which I'm not sure I fully answered as I kind of reflect back on my reply, and that was what's different about this than the other ones? And I think what's really different here, and I really want -- hopefully, everyone to appreciate this is when you look at traditional sort of an acquisition of transaction, you've got a company taking over something else. And that company's employees sort of then go over and take over the business, so to speak. This is very different. This is a combination of two companies already with the support and the discipline and the knowledge of running the business, coming together to execute this integration. And so I think that element of Unilever being a partner in this is not a temporary point. It's a sustainable point. When we think about that employee, those employees, a part of that organization becoming part of McCormick. And so we see a lot of strength in that. And that's a lot of -- if you had to compare on a principle, what may feel different in this, I think that would be one of the key points I would call out. Operator: Our next question comes from the line of Max Gumport with BNP Paribas. Max Andrew Gumport: Thanks for the question. You've quantified synergies and discussed some of the considerations with regard to the separation, such as TSA agreement. But I'm wondering if there's been any considerations for dis-synergies that could arise from the separation and if so, and the initial quantitation of those dis-synergies and also how they might split across the ever RemainCo and the Foods business? Fernando Fernández: I can answer this. We don't see any revenue dis-synergies here. We don't see in the case of Unilever, basically, as I mentioned before, these are a stand-alone business. Our Food business has on self [indiscernible] their own manufacturing, their own operations and logistics. So basically, we don't see any fundamentals of dis-synergies in our side. Max Andrew Gumport: Great. Very helpful. And then, Brendan, Marcos, with regard to the multiple, the 13.8x EBITDA multiple, can you just talk a bit more about the the conversations that went into determining what was the right multiple to pay? It seems like there is some focus on not paying more than more than McCormick 13.8x that you also quoted. But just any color or consideration that went in determining the right multiple, it would be appreciated. Marcos Gabriel: Yes, Max. I would say that both businesses are great businesses and Unilever Food is a fantastic addition as you think about these two companies coming together. So the way that we were assessing this deal was, in our parity in terms of the multiple between the 2 companies, in [indiscernible] brings a lot not only the scale but healthy margins and McCormick, as you know, is very differentiated as well in terms of volume growth over the last few years and our margin profile as well, we play in an advantaged category. So when you put those two companies together, we felt like the parity multiple would be adequate, in terms of this transaction. So that's kind of the high level of rationale for being at the same 13.8x. Operator: Our final question this morning comes from the line of Scott Marks with Jefferies. Scott Marks: The first one I just wanted to touch on, understand all the synergy potential and the overlap between some of the portfolio, but just wondering if you can kind of help us understand if the current backdrop in the food world or in the staples world in general, has kind of changed your time line for this or giving you any sense of urgency to get this done? Or if it has had any impact anyway. Brendan Foley: Yes. I think obviously, there's a lot going on in the world right now. So that's important to kind of keep in mind. But I think we've always viewed Unilever Foods as a great strategic fit. So we're in this moment where you can pick another year, something is going to be going on. But it still comes back to is this really strategically a strong fit and does it make sense? And when an opportunity presents itself like this, we think that it then becomes the right time. This transaction is about long-term potential of the combination, and where we see multiple levels of growth in established and emerging markets and across channels and brands. So I think I would also then really kind of emphasize the long-term nature of our thinking and our planning has to really sort of drive your thought process on something like this. We're certainly aware of the near-term pressures facing not just the food industry, let's say, but broadly, you think about the conflict in the Middle East and the broader CPG space. So each of us are taking steps to manage our business accordingly. However, we continue to believe in just the long-term fundamentals that really underpin the confidence in this combination, such as structural flavor tailwinds and emerging growth opportunity. And so in the meantime, sort of call it within the short term right now, we're both laser-focused on managing our businesses to deliver our plans. I think that's the best context I could give you because obviously, there is a lot of headlines in the news. Scott Marks: Understood. Appreciate that. And then maybe just last one. Given everything going on in the Middle East, just wondering how some of those dynamics impact your thinking on this, whether it's in terms of realizing some of those synergies or getting this deal complete or any other dynamics that could be impacted by what's happening across the world. Brendan Foley: No. I can't call out a specific element of that, that caused us to think about this differently or faster or slower. I'd just go back to my long-term commentary, and our thought process on that. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Freiha for any final comments. Faten Freiha: Thank you so much. Thank you, everyone, for joining our call today. If you have any further questions regarding today's information, please feel free to reach out to me, and this concludes our conference call for this morning. Thank you. Operator: Thank you. Ladies and gentlemen, you may disconnect your lines. Thank you for your participation.
Operator: Now, and then I will start at the top. Thank you. Great. Good day, and thank you for standing by. Welcome to the FactSet Research Systems Inc. second quarter earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Toomey, Head of Investor Relations. Please go ahead. Kevin Toomey: Thank you, and good morning, everyone. Welcome to FactSet Research Systems Inc.'s second quarter fiscal 2026 earnings call. Before we begin, the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website at factset.com. A replay of today's call will be available on our website. After our prepared remarks, we will open the call to questions. The call is scheduled to last one hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions which we will take if time permits. Before we discuss our results, I encourage all listeners to review the legal notice on slide two. Discussions on this call may contain forward-looking statements. Such statements are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. Additional information concerning these risks and uncertainties can be found in our Forms 10-Ks and 10-Q. Our slide presentation and discussions on this call will include certain non-GAAP financial measures. For such measures, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today, both of which can be found on our website at investors.factset.com. During this call, unless otherwise noted, relative performance metrics reflect changes as compared to the respective fiscal 2025 period. Joining me today are Sanoke Viswanathan, Chief Executive Officer, Helen Shan, Chief Financial Officer, and Goran Skoko, Chief Revenue Officer. I will now turn the discussion over to Sanoke Viswanathan. Sanoke Viswanathan: Thank you, Kevin, and good morning, everyone. Thank you for joining us. ASV growth accelerated in Q2 for the fourth consecutive quarter, 6.7%, to $2.45 billion. It accelerated across all geographies and has grown year over year in each of retention, expansion, and new business. Adjusted operating margin was 35% and reflects the investments we are making this year. Adjusted diluted EPS was $4.46, up 4% year over year. These results confirm that FactSet Research Systems Inc.'s foundational strengths are increasingly valuable in an AI-intensive environment: our connected data, embedded workflows, best-in-class service, and broad distribution. Customer wins from this quarter illustrate the breadth and depth of our data and product capabilities. First, following the multiyear renewal of our relationship with a major global investment bank, we expanded into their international corporate bank. This was driven by the depth and differentiation of our deep sector content. Similarly, our private capital data assets were central to our new mandate with a leading Australian private equity fund. These wins show dealmakers continue to value our differentiated data. Second, one of our largest international wealth clients selected our proposal generation solution as an extension of their existing use of FactSet Research Systems Inc. for portfolio monitoring. A major Canadian wealth manager adopted our real-time exchange data feed product. These expansions showcase demand for our products that span the whole investment lifecycle, including portfolio construction, ongoing oversight, and end-client engagement. Third, Capital Group expanded their use of our Portware trading platform, which also achieved several new wins with other large asset managers. In addition, our new order management solution, LiquidityBook, is gaining significant traction with hedge funds and other institutional buy-side clients. Based on our strong first half performance, we are raising our ASV, revenue, and EPS outlook ranges for fiscal 2026. This reflects sustained momentum across all client types and geographies. We are maintaining our guidance range for operating margin as we continue to balance investments and productivity improvements. Last quarter, I outlined three priorities: driving commercial excellence, delivering productivity improvements, and solidifying our long-term strategy for sustainable growth. We have made strong progress on all three. We are bolstering the health of our client franchise, making our core operations more efficient, and redeploying our resources to fund strategic investments to drive further growth and structural investments to deliver better operating leverage in the medium term. First, on commercial excellence, we are rolling out new pricing and packaging, are infusing AI throughout the sales life cycle, and have realigned sales and customer success incentives. With disciplined pricing and packaging, our revenue base is becoming more durable. Our direct seat-based exposure now represents less than 20% because of appropriate minimums and bundling into enterprise agreements. In Q2, the majority of our renewed ASV was in the form of enterprise agreements or contracts that are more than three years duration. On average, these renewals extended in length by more than 30%. Our focus on client health has led to a five-point Net Promoter Score improvement just this quarter amongst our investment banking users. This is helping drive ASV retention and expansion. Our overall ASV retention continued at over 95% in Q2. 86% of our top 200 clients use five or more of our solutions, up from 78% three years ago. In Q2, Data Solutions grew by double digits across all firm types, including the highest expansion we have seen since 2023. Today, 48 of our top 50 clients are using at least three of our AI solutions, with several more in trials. In Q2, new business growth accelerated. Our marketing leads increased 11% year over year. And with stronger lead scoring and more targeted outreach, win rates for these opportunities improved by 29% year over year. Corporates and private capital wins were particularly strong, with double-digit growth in both. First half productivity initiatives have already captured more than half of the 100 basis points of productivity improvement we targeted for the year. We have made real changes in technology, data operations, and client support, our largest three operating cost centers. We have consolidated all FactSet Research Systems Inc. technology under our newly appointed CTO and are converging on standard tools and platforms to deliver efficiency. For example, our internal development platform that standardizes tooling and software deployment will allow engineers to spend more time on product development. AI coding assistance now author nearly one fifth of our successful code commits and free up a quarter of our engineers' capacity in those teams. This includes over 90% reduction in efforts spent on business-as-usual activities like software upgrades and patching. Some teams have radically reduced time to market for new product development by fully automating the delivery life cycle and collapsing a month-long cycle to one day. We see ample scope to scale this transformation. In data operations, we are seeing rapid transformation as we drive down unit cost and time to value and expand our content universe. Our Rubik's private company classification project to deepen coverage from four to six levels is a great example. We have quadrupled classification capacity year over year while keeping costs flat, capturing scale economies in our business. This quarter, we have deployed four distinct AI tools across different parts of our data operations, generating 25%+ reduction in manual curation on average. We are expanding this systematically across all our data, while maintaining high quality standards. The text-to-formula agent that we launched in October 2025 has fundamentally changed how we handle client inquiries. Our help desk experiences double-digit monthly growth in formula support requests. But the volumes handled by our client service representatives have now started to decline as the agent absorbs an increasingly large share of these inquiries each month. This allows our support colleagues to focus on higher-level activities, such as custom client implementations, advanced analytics support for fixed income and quant workflows, and outbound engagement to expand our reach. We are lowering the variable cost of serving each client while increasing our capacity to engage and retain our highest-value accounts. Beyond these three areas, we are systematically identifying further cost savings across the business. These include streamlining procurement and lead-to-cash processes, consolidating legacy software contracts, and optimizing our third-party data agreements. These productivity gains will make us a structurally more efficient company, flattening the cost curve as we scale and freeing up resources for high-return opportunities. We have made substantial progress on developing our medium- to long-term strategy. I will share it in detail, along with the business plan, at an investor event after the end of this fiscal year. Let me reiterate that we are well positioned to be a winner in an AI-intensive world and to deliver attractive ongoing financial returns. To give you some insights now, a key element of our strategy is to be a leading data and workflow infrastructure provider for AI-enabled institutional finance. What we are seeing so far is clear. As clients move AI into production, they are pulling FactSet Research Systems Inc. deeper into their operations, not replacing us. Our foundational strengths include connected data and embedded workflows, and these make us more valuable to clients as they implement AI in their environments. We are wired into our clients' operations so the relationship deepens with every transaction. Five key factors make our data differentiated and trusted, and thereby integral to financial institution clients that have zero error tolerance. Data depth and coverage. We collect and refine data sourced directly from over 300 stock exchanges, millions of public and private company websites, thousands of data partners, and clients themselves. For example, broker research. FactSet Research Systems Inc. holds the commercial and legal rights to access these proprietary datasets and licensed content. Data cohesiveness. We seamlessly integrate the data from one time period to another to provide holistic company time-series data from annual, quarterly, and preliminary reports going back over 40 years. Data comparability. We provide data that is comparable within and across industries with considerations to different accounting standards, market and company specific presentations, reporting practices, and regulatory requirements. Data traceability. Clients can view the data source of each data point through document tracebacks. This creates data transparency, credibility, and reliability. Data quality. We apply quality checks to data, and apply in-tool checks at every step of our collection pipelines. We have automated logical validation rules augmented by audits conducted by humans. After all this, we conduct product checks by our experts to ensure our data products are fit for use in each of our end markets. Over the past three years, we have tripled our data assets while maintaining these high quality standards. But it is not just data alone. It is how deeply we integrate FactSet Research Systems Inc. data with client data and deliver value that is how we support the sophisticated decisions our clients make every day. FactSet Research Systems Inc.'s Office add-ins are woven into clients' daily research and reporting, and the custom models they have built on our data have grown by 17% just this quarter. Our buy-side analyst clients store over two million research notes in our database, and this has been growing at over 35% per year for the last three years. Investment committees use this research to make decisions. Compliance teams run regulatory checks against our outputs. And the longitudinal analyses stored and reported from our analytics book of record are essential to communicating the definitive source of portfolio performance and the characteristics of millions of funds managing trillions in assets. The number of institutional portfolios integrated into FactSet Research Systems Inc. grew by 20% in the last year, to almost 8,000,000. Let me use a value-at-risk calculation for a multi-asset class portfolio to illustrate the mission-critical nature of our embedded workflows. When a portfolio manager looks at a value-at-risk number, they scrutinize the output of tens of thousands of simulations across hundreds of risk factors driven by millions of data points: position attributes, historical return series, yield curves, volatility surfaces, correlations, and many, many more. All of which must be correct, consistently sourced, and temporally aligned. If even a single data node is wrong, the entire risk calculation silently misstates the riskiness of a portfolio. This is not a theoretical concern. It is a daily operational reality for every institutional investor managing risk at scale. The data checks we conduct across our multi-asset class portfolio analytics suite alone have grown by 29% in just the last year, underscoring the importance of our robust infrastructure. AI accelerates aggregation and finds patterns in the data, but it cannot substitute our trusted, reconciled, data production and modeling infrastructure that underpins these risk, valuation, and compliance workflows. Our AI strategy will leverage these foundational strengths and build more integrated solutions at all levels of the emerging AI stack. Partnerships for growth are an important component of our strategy. For example, partnerships with Snowflake and Databricks enable clients to seamlessly combine FactSet Research Systems Inc. data with their own sources and operate AI-driven workflows in the secure cloud environments they already use. We are also actively partnering with Anthropic, OpenAI, and other leading frontier labs to ensure that FactSet Research Systems Inc. datasets are readily available in their marketplaces to facilitate rapid development of new AI solutions. And we are infusing agentic capabilities across our workstation so that users can operate more effectively inside our governed, trusted workflows. Our newly announced partnership with Finster will accelerate our agentic platform for banking, meeting the growing demands of our dealmaker clients. We have strong traction and are seeing rapid adoption and use of our solutions as AI workloads take root at our clients. One illustration: our MCP Server that is built on a robust ecosystem of content APIs was launched in December and already has over 120 clients actively engaged. API call volume is steadily growing as well, with March volumes at three times the February level. We expect this success to be replicated across our AI solutions in all layers of the stack. As AI continues to reshape financial institutions, FactSet Research Systems Inc. is becoming more central to clients' mission-critical workflows. We are in the early innings of sector-level technological change and are building on our current foundational strengths to continue creating value for our clients in the future. Let me close by thanking every FactSet Research Systems Inc. team member for their continued focus and commitment to delivering for our clients. We are winning competitive mandates and expanding relationships from a position of strength. Now I will hand over to Helen Shan to discuss our Q2 performance and updated guidance in more detail. Helen Shan: Thank you, Sanoke Viswanathan. Great to be here with everyone today. The second quarter, organic ASV accelerated to 6.7%, an increase of $38 million. Growth was balanced across all regions and fueled by three key drivers: strong client expansion, new business wins, and higher pricing capture from our annual price increase in The Americas. Let us walk through our performance by region. In The Americas, organic ASV grew 7%, up from 6% in Q1. Asset management continued to be a bright spot with growth driven by both trading and middle-office solutions. Dealmakers contributed with competitive displacements in banking and uplift from successful renewals in sell-side research. An increase in new business logos was powered by hedge funds and corporates. A competitive managed services win in EMEA, organic ASV grew 4%, in line with Q1. Higher demand for Data Solutions in wealth, and a large banking renewal that included PitchCreator and our new MCP solution, drove the positive results. These wins helped offset softness with asset owners, partly due to pension reform in The Netherlands. In Asia Pacific, organic ASV accelerated to 10%, up from 8% last quarter. Improved demand from asset managers and hedge funds for middle-office and trading solutions, coupled with stronger banking retention, drove the region's performance. Now turning to our results by firm type. On the institutional buy side, we delivered 5% organic ASV growth, up from 4% last quarter. This reacceleration was driven in part by higher trading volumes fueled by additional Portware installations, increased data demand by hedge funds, and continued strength in managed services linked to our performance solutions. In wealth, organic ASV maintained a 10% growth rate, despite the challenging year-over-year comparison given our landmark UBS win a year ago. This performance was driven by higher demand for our wealth platform as we further integrate into clients' daily work with our proposal generation and adviser dashboard solutions. In dealmakers, organic ASV grew 8%, up from 6% in Q1. Competitive displacements and successful enterprise renewals added momentum in banking. Our investments in deep sector, aftermarket research, and banker productivity solutions position FactSet Research Systems Inc. as the trusted enterprise partner. Both corporates and private capital accelerated to double-digit growth this quarter, with new business and competitive wins fueled by demand for our data. The organic growth in market infrastructure accelerated to 8%, up from 7% in Q1, with robust sales in real-time data and higher retention. In addition, strong issuance activity supported the positive results for CUSIP. We continue to expand our client and user base. In Q2, we added 98 net new clients, bringing our total to 9,101, led by corporates and wealth. Our user base increased to over 241,000, with additions largely in wealth and dealmakers, reflecting a 10% annual growth rate. Lastly, we continue to have solid retention rates at 91% for clients and above 95% for ASV. These results reflect the mission-critical nature of our business as the world's leading financial institutions continue to trust FactSet Research Systems Inc. Turning now to our financial results. Second quarter revenues grew 7.1% year over year to $611 million, or 6.8% organically, excluding impact from foreign exchange and M&A. Adjusted earnings per share was $4.46, up 4% year over year, driven by higher revenue and a lower share count, partially offset by a higher tax rate. Adjusted operating margin came in at 35% for the quarter, as compared to 36.2% in Q1 and 37.3% a year ago. In line with our plan, this reflects the timing of strategic investments, driven by three main factors. First, higher people expense due to year-over-year compensation adjustments and full impact from merit increases. Second, accelerated technology spend on cloud infrastructure and AI tools, and third, higher professional fees from increased project work in the quarter. The midpoint of our full-year margin guidance reflects expected investment pacing through the second half in technology infrastructure, professional services, and product development. AI is playing a dual role, enhancing client value through new capabilities while driving productivity gains. We remain committed to long-term growth, maintaining our track record of capital discipline. As highlighted last quarter, we are investing to differentiate our data, deepen client workflows, and modernize our platforms, with approximately two thirds directed towards growth initiatives and one third on enhancing our internal infrastructure. Funding will come from productivity improvements and disciplined cost management. With the first half now complete, let me connect our investments to the early outcomes we are seeing. Our investments in data expansion are delivering. We now offer our core datasets through MCP Servers, giving clients flexibility to access our data in their preferred environments. Workstation users are benefiting from optimized real-time data delivery, driving both efficiency and cost effectiveness for clients. And we are meeting client demand by integrating premier research firms like JPMorgan, Barclays, and Kepler directly into our platform. These are expanding our addressable market and enhancing the value we deliver to clients. Our workflow investments are receiving market validation, expanded our long-standing Schroders relationship to provide a managed service to enable greater scale. As highlighted earlier, Capital Group selected us as their trading platform because of our hyperscalable platform and high-volume capabilities. And the year post acquisition, demand for a LiquidityBook order management system and FactSet Research Systems Inc. Plus and cross-sell expansion. Erwin Investor Relations solution is driving meaningful new logo growth. These all showcase our ability to scale from point solutions to enterprise-wide partnerships. On the structural side, we are executing across four priorities. First, modernizing our tech stack and cybersecurity to strengthen platform resiliency as we integrate agentic capabilities into the workstation. Second, deploying AI to scale our content operations as mentioned by Sanoke Viswanathan earlier. Third, strengthening our brand with our Fluent in Finance campaign that is generating strong top-of-funnel growth. Lastly, freeing up engineering capacity with AI, enabling us to accelerate new projects with existing talent. We expect these benefits to accelerate through next fiscal year and beyond. We are also on track to capture our intended in-year expense savings by automating manual processes through AI, optimizing cloud usage, and streamlining our portfolio through product life cycle rationalization. For example, we have been able to reduce the cost of vectorizing client data by 80% while delivering faster and more accurate results. Of our planned 100 basis points in savings, we have already secured more than half and remain on track to deliver the full benefit in H2. This improving operational efficiency combined with consistent free cash flow generation gives us flexibility to deploy our capital. Our framework prioritizes organic investments followed by strategic M&A, returning excess capital to shareholders. Our balance sheet remains strong with gross debt leverage at 1.4x, providing capacity across all three priorities. At current valuation levels, we see our buyback program as a compelling use of capital. In Q2, we repurchased approximately 652,000 shares for $163 million and year to date deployed over $300 million to repurchase shares at attractive prices. To put this into context, in the past two quarters alone, our accelerated pace of buybacks has resulted in a 3% reduction in total shares outstanding. At quarter end, we had approximately $700 million remaining under our upsized $1 billion authorization. Based on our strong first half performance and improved visibility, we are raising our fiscal 2026 guidance. ASV growth is now expected at $130 million to $160 million, representing approximately 5.4% to 6.7% growth, an increase of $20 million at the midpoint. We are targeting GAAP revenue at $2,150 million to $2,470 million, representing an increase of $25 million at the midpoint. We are maintaining our guidance ranges for GAAP operating margin and adjusted operating margin, accounting for the potential higher performance-based compensation given the strong commercial outlook. The effective tax rate remains unchanged. Our guidance range for GAAP EPS is now $14.85 to $15.35, an increase of $0.20 at the midpoint. For adjusted EPS, our range is now $17.25 to $17.75, representing an increase of $0.25 at the midpoint. This revised outlook reflects improved visibility in client demand, accelerating commercial momentum, and realized benefits from our productivity initiatives. Our priorities are clear: deliver innovation, deepen client relationships, and invest with discipline. With that, I will turn it back to the operator for questions. Operator: Thank you. As a reminder, to ask a question, please press star 11. To withdraw your question, please press star 11 again. We ask that you please limit yourself to one question. Please standby while we compile the Q&A roster. We will now open for questions. Our first question comes from the line of Kelsey Xu with Autonomous Research. Your line is now open. Kelsey Xu: Hi, good morning. Thanks for taking my question. If you transition all of your workstation ASV into Data Solutions ASV and apply usage-based pricing on top of that, what would that look like? Because I think end users are using FactSet Research Systems Inc. Workstation to get access to your data anyway, just curious how you think about the business model in the quote unquote, wholesale world. Especially as data consumption is expected to increase meaningfully. How important is it for FactSet Research Systems Inc. that it continues to own the user interface product, especially for research analysts? Thanks a lot. Sanoke Viswanathan: Thank you, Kelsey. I appreciate the question, and it is an important question for not just us, for the whole industry. We, at the moment, are seeing strong growth across all our channels. So we are seeing continued growth in our workstation, which Helen already talked about. We are also seeing tremendous growth in our Data Solutions both through data feeds, APIs, and increasingly through our newest channel, which is the MCP Server, which allows for opening up of new TAMs inside our clients'. So we are seeing user persona shifting from just the traditional users who continue on the workstation to also include technology teams, data science teams, and the broad enterprise user across our clients, which happen to be very large financial institutions for the most part. So we are seeing actually a real compounding of this at the moment. Your question is a speculative question about the future, where, you know, all these channels disappear and we are just in the data business. The way we are working through that, at early stages in this evolution of the market, is we are developing our strategy by working jointly with our customers to effectively look carefully at our pricing and packaging, and we are striking enterprise contracts with them that gives both them and us a lot of flexibility in how to continue to deliver value to them in the future. So what, and you have seen the results. We have had great success in this quarter alone in restructuring some of our contracts, and we are seeing a real extension of almost 30% or over 30% in our enterprise contracts. And also, a significant share of our contracts are now enterprise agreements or, you know, agreements that are really long term in nature. So with that, we give ourselves and our clients flexibility to consume our data in any number of ways: through the workstation, through data feeds, through MCP, and frankly, any new channels that open up in the new context. We are very optimistic about the future of this multichannel mix business, if you will. Because remember, the core of all of this is our data, which is highly valuable in whatever context our clients consume it. And, you know, we have given you quite a lot of evidence of how important it is for us to deliver strong, high-quality, concorded data. And, Goran, do you want to add anything to that? Goran Skoko: Yeah. Kelsey, you know, the concept of utilizing our content or components of FactSet Research Systems Inc. is not new to us. You know, over the past seven, eight years, we have been talking about open approach and servicing clients where they are, meeting them where they really need our solutions. So in terms of owning that interface or really enriching the interface so the clients can properly, you know, complete their workflow has been our approach for years. In terms of, as Sanoke Viswanathan touched on, enterprise level agreements, and as we, in which we are entering with more and more clients into, and consumption laid on top of that, which we think will more than compensate to any type of attrition on the workstation side going forward. Helen Shan: Thank you. Operator: Our next question comes from the line of Ashish Sabadra with RBC Capital Markets. Your line is now open. Ashish Sabadra: Hi, thanks for taking my question. Really strong momentum in the business. My question was focused on the sales pipeline, demand environment as well as sales cycle, particularly in the context of these geopolitical, evolving geopolitical concerns. Any color that you can provide on that front? Thanks. Sanoke Viswanathan: Sure, Ashish. We are seeing broad-based demand and a really strong pipeline through the rest of the year. We are seeing improved retention, continued expansion, and also really strong new business growth. So it is across the board. What is driving our sales cycle now is we are seeing asset managers consuming a lot of our Data Solutions. As you know, we have been making investments in real-time data, pricing and reference data, and private capital data. All of this is resonating and it is driving a significant interest in our buy side. Middle-office solutions are, again, resonating very well with the managed services overlay. That is particularly getting even more exciting in an AI-intensive world where we can add agentic workflows on top of that. And our trading solutions are growing strongly as well. So broadly, I would say the sales cycle has not changed. The macro conditions are not affecting us. We see traction across all of our client groups. What I can say is when it comes to AI solutions, the sales cycle is considerably faster. Clients are eager and enthusiastic to try out new solutions. And you might have seen we even announced yesterday a new partnership with Finster on our banking agentic platform. Again, we are being very client-demand driven, and we see tremendous demand and enthusiasm from clients to try these solutions. And our MCP solution, which we launched just in December, again, to reiterate, has been our fastest-growing solution in the market. Operator: Thank you. Our next question comes from the line of Manav Patnaik with Barclays Capital. Manav Patnaik: Thank you. Good morning. I just wanted to focus on, I think you mentioned your middle office and trading solutions growing really strong as well. And I noticed in the prepared remarks, that came up a lot in terms of the accelerated growth. So I was just hoping you could double click on that, maybe just help us appreciate, you know, how big those two solutions are, and maybe what are the keys to the, you know, key sub solutions, I guess, within those that are selling really well nowadays? Sanoke Viswanathan: Thank you, Manav. Yes. This is our, you know, one of the crown jewels in our business, which is we are deeply, deeply entrenched in providing some of the critical support to large buy-side clients. It starts with sort of the essential ingredients of what we do in portfolio analytics, which is performance analytics, attribution, and risk management. And these are mission-critical processes for our clients. And in, you know, as we said in our prepared remarks, millions of funds depend on the immutable data that is stored and distributed from our analytics book of record, which delivers these quality, high-grade analytics year after year after year over the last several decades. And so it is a very important part of the core investment operations of our client. The parts of that that are particularly growing in, you know, especially in this quarter, and we see this trend continue, is clients continuing to shift into multi-asset class portfolios and starting to really demand a total portfolio view that mixes private and public positions, normalizes risk across these asset classes, and looks at what-if scenarios cutting across, you know, different types of risk analyses that you run on all of those portfolios. Events like the, you know, in recent markets around private credit and the like, only increase the relevance of these risk analyses and make our business even more sticky to our clients. We are seeing strong progress in our managed services that help clients operate these large platforms, transform their data, ensure that it is deeply integrated into our systems, and the output of it is reported downstream into multiple different sources, whether it is compliance teams that are doing regulatory checks, end clients that are demanding progress on performance, and also investment committees who are using all of that research and analytics to make asset allocation, both strategic and dynamic asset allocation, decisions. Manav Patnaik: Thank you. Operator: Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open. Shlomo Rosenbaum: Hi. Thank you very much for taking my question. Excuse me, Sanoke Viswanathan. Can you talk a little bit about what has changed so much in the last couple of quarters? We were seeing kind of the company's organic growth slowing down, kind of meandering. You came in a few quarters ago. Usually, we do not see a real acceleration with the change that happens instituted by the top within just two quarters. And I was wondering if you can kind of point to a few critical parts about what seems to be clicking, what is there because, you know, maybe you have some incentives that really realign things? Or what are things that were going on beforehand that seemed to have hit their stride? So we can just kinda get in a sense as to, you know, the picture of the reacceleration of the revenue growth and what might be the runway for that going forward. Sanoke Viswanathan: Thank you. It is a very important question, and something that we, you know, we spend a lot of time on. And we believe that we are just at the start of this inflection. There is a number of things that are landing well for us. I will start by saying that prior to my showing up, the company had started making very targeted and focused investments in the right areas that are areas where we see huge headroom for growth. I will start with data. Data is the foundational strength of the company. We have certainly had, you know, many decades of success in building our datasets and continuing to build the kind of client franchise that we have today. And yet there are, you know, big parts of the data environment that, you know, we are still early in the game. And we have the smallest market share amongst our competitors, and we see huge headroom for growth. A great example is real-time data. So real-time data, we now have capabilities that are competitive and comparable to our larger competitors. An investment that has been made over the years and accelerated in the last couple of years. And that has allowed us to win very significant clients. For example, one of the largest global asset managers is a client of ours. They went live about a year ago. And we, you know, displaced hundreds of different internal solutions, and we developed and delivered a world-class market data solution, real time with delayed data distributed across the entire asset management estate of this client. So that is one example of something that is clicking. That is a marquee win in the space. And just off the back of that, we are seeing huge traction across the buy side and the sell side. Real-time data. I will just rattle off a few other investments like that that we have been making that are all clicking now. So clearly, our AI investments are working. We are, you know, we are doing well across these various layers of the AI stack, AI-ready data, the MCP Server, our agentic platforms, and our AI solutions that are infused inside the workstation, that, like we said, 48 of our top 50 clients use at least three of our AI solutions, and I expect that number to be quite a bit higher in future quarters. Third, our investments in content beyond real time, which are really relevant for dealmakers and wealth managers—so pricing and reference data, as well as the data in private capital or private company-related data—and other datasets, obviously, our historical, you know, hallmark has been supply chain data, reviewer data, etcetera. These are all coming together nicely and opening up lots of new opportunities for us. And when I look at the penetration of Data Solutions distributed beyond the workstation amongst our client base, we still have huge room to just continue to increase cross-sell within our existing client base. So, I mean, certainly, our efforts at commercial excellence, to your point, Shlomo, in the last couple of quarters are helping. We see a terrific energy in our sales and customer success teams. And that is, of course, adding value to our retention and expansion. But even more, it is all of these targeted investments that have been made over the last few quarters starting to click, and I see a lot of runway ahead of us. Helen, do you want to add any more? Helen Shan: Yeah. Maybe one thing just to add, Shlomo, because you are absolutely right. Things take a little bit of time to get leverage. But I think back to what Sanoke Viswanathan was saying, the core of what we are is really important. Our open platform is perfect in this new environment as we are talking about AI, which is why AI is a tailwind for us. And that is why you are seeing double-digit growth in data across all the various firm types, whether it is banking or wealth or on the buy side. So I think that is a really important point that our investments we made have helped both retention and then why new business is growing as well. Shlomo Rosenbaum: Thank you. Operator: Our next question comes from the line of Jason Haas with Wells Fargo. Your line is now open. Jason Haas: Hey, good morning and thanks for taking my question. I wanted to focus on the expense side of things. I am curious if there has been any change into how you are thinking about expenses through the year. I think previously you had said that the investment plans were more second half weighted. So I was curious if that is the case. And then maybe, like, more big picture, I appreciate you are making investments in the business, and it is clearly showing up in better ASV growth. Are you planning to, I guess, moderate some of the pace of investments or the expense growth so you can start leveraging expenses next fiscal year? Do you want to kinda keep pushing there and drive the ASV higher? Thank you. Sanoke Viswanathan: Thanks, Jason. As you can tell, we are very pleased with the execution we have seen in the first half of the year. And the guidance range for what we have given on operating margin is a reflection of the fact that we see all of these opportunities to make high-ROI investments, both in growth as well as structurally to improve the company's success going forward. And you are right. I mean, we do expect a heavier investment second half. At the same time, we are being very disciplined and, you know, we will moderate spend based on what we see in terms of ROI, the opportunities we see to invest. So we are keenly focused on our earnings. Our intent is to grow earnings going into next year and beyond. Right? So our investments are going to be very tailored to highest-ROI investment opportunities. And we think we can achieve both because we are seeing all of these promising productivity improvement opportunities. We gave a flavor for those earlier in our presentation, and I believe we are still at the very, very early stages of capturing productivity gains. And as those accelerate, they will serve as a nice offset to these investments, and we will be able to deliver operating leverage as well. Operator: Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open. Andrew Nicholas: Hi, good morning. Appreciate you taking my question. Appreciate all the color again this quarter on your strategic priorities and the foundational strengths, and I thought slide eight was particularly helpful in terms of the uniqueness and value of the data. But I am curious, just as you think about where FactSet Research Systems Inc. sits in the ecosystem relative to newer competitors or even the model providers, maybe address what you think are some of the disadvantages you have from being a legacy provider? And to what extent are those disadvantages addressable, whether it is the organic investment or partnerships or M&A? I just understand all the reasons why people will stick with you or clients are sticking with you or investing more in your product. Just curious what you are defensive to in investing in as a result. Thank you. Sanoke Viswanathan: Sure. We have a number of advantages, and I think you have registered those. I think those are exciting, and we see lots of runway to grow with those advantages. What you will also see is that where we see complementarity, we have been actually one of the players that has been most forward-leaning in partnerships across the ecosystem. It starts first and foremost, again, with data. So we have always had really strong, in-depth, multiyear commercial and technical partnerships with a number of other content providers. They are increasingly looking to us, given our technology prowess, to aggregate more of their data and to deliver more of the data through new channels that we are able to open up for them. So that is number one. We work with content providers across the stack, and that is an important part of our traditional strategy, and we will continue to accelerate that. Number two, to your point about new capabilities from AI natives and hyperscalers, as you would have noticed, we have a strong partnership with Anthropic. We are one of the prominent financial services connect on the cloud marketplace. And I must say it is our fastest-growing marketing channel. I think of it as a marketing channel because the business model is very synergistic. We make gains when clients connect through Claude into our datasets, consume more and more of our data, and our contracting is directly with our clients. And Anthropic does well when that happens because those agents that the clients may be deploying use more and more tokens, and that is good for Anthropic. So I am just using that example to illustrate why our partnership model is a win-win here. To Helen's point before, we have always been an open architecture company. And it is really coming into its own in this AI environment. So those are a couple of examples. I do not view these as disadvantages as much as market opportunities that are opening up that our business model is uniquely positioned to take advantage of. Helen Shan: For broad solutions, many of the AI-native firms can be very good in their point solution. But for clients who want something that is integrated, and they do not want to have multiple solutions, we are really best positioned to be able to deliver that. Andrew Nicholas: Thank you. Operator: Our next question comes from the line of David Motemaden with Evercore ISI. Your line is now open. David Motemaden: Hey, thanks. Good morning. Sanoke Viswanathan, you had mentioned a few areas of further cost savings across the business. Yeah. I think we are streamlining procurement, legacy software, optimizing third-party data agreements. Could you just talk about what sort of the runway is on those? And, you know, how we should think about that creating, you know, margin opportunities as we head into, you know, next year? It sounds like you guys are making good progress this year, but I am more thinking in the fiscal 2027. Thank you. Sanoke Viswanathan: Sure. What we have indicated today is that we have already captured over 50% of the 100 basis points of productivity improvements that we targeted for this year. And while we gave you examples of the early impact that we are seeing from the application of AI in engineering, in data operations, and customer success, I must say those are early days, and in fact, I see tremendous scope for growth of the AI-based opportunities. What you see in the value capture to date is more along the lines of what you are describing, which is procurement, legacy software consolidation, data contract optimizations. Effectively, just looking across the company and making sure that we are, you know, leaving no rock unturned, ensuring that we are being efficient about our usage of third-party services, and just running a better company. So we are getting all of that done, which can be done faster. And these AI programs are just taking root. We see a lot of opportunity to expand the scope going into next year. And as I said, our focus is going to be very much on improving earnings going into 2027 and beyond. And we will balance these productivity gains with the continued high-ROI investments we want to make in the future growth opportunities. Operator: Thank you. Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open. George Tong: Hi, thanks. Good morning. You talked about introducing new pricing and product packaging initiatives. Can you elaborate on this a bit more? What year-over-year price performance was in the U.S.? Sanoke Viswanathan: Sure. I will start with the conceptual effort, what we are doing across pricing and packaging. Helen is going to give a little bit more color on the specific progress of price improvements we have seen. I would start by saying we have a very strong shelf of really good products. Customers really love our products. We have gotten great feedback. Our NPS scores are very high. And despite that, we are continuing to invest in growing NPS across different segments. This gives us strong pricing power. So when we look across our estate and we look at how we are packaging and bundling our products, we are doing a thorough review. And where appropriate, we are making changes. We are rebundling. And we are restructuring these enterprise agreements with different client types. And as I said earlier, to give them and us flexibility, so we can evolve into this new world where it will be a combination of seats. It will be a combination of data delivery and it will be a combination of consumption. Right? So it will be all of that, and we are ensuring that we are retaining the flexibility and clients are retaining the flexibility. With that, I am going to hand over to Helen to describe how that pricing power translated in this quarter. Helen Shan: Yeah. No. Thank you, Sanoke Viswanathan. As we do every year, the annual price increase in The Americas actually contributed more this year than last year, so it is up slightly. Which reflects really that our pricing strategy is grounded in the value that we deliver. So clients are valuing the product. It is supported by the price realization that we are seeing, and it is, quite frankly, clients are accepting the increases due to the value and the workflow integration we are providing. Now that is driven in part through the fact that we have a larger ASV base. We have had improved retention increases as well. And as noted, the shift to enterprise also contains some contractual escalators. So we have been very pleased with how we have been able to continue to leverage and build on capturing price this year. George Tong: Thank you. Operator: Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open. Jeff Silber: In noticing some of the statistics that you released on client count and user count, it seems that users per client seem to be escalating at a greater rate. Is there something driving that? Is that a mix shift maybe towards wealth, or is there anything else going on there? Sanoke Viswanathan: Yeah. I think the, I mean, I would caution us in, you know, I would say reading too much into our client count. As you know, we have 9,000+ clients. And there is always a long tail of clients in our sorts of businesses. So we had a very good quarter. We added a significant number of new clients. At the same time, we also significantly expanded our presence in our top clients, in our top 100, our top 200, which drive significant chunks of our business. So I would not draw too much into the client count itself. What I would say is it is important to understand that corporates, wealth managers, private equity, and these sort of client segments drive a lot of new client expansion. Because remember, we have a huge, huge penetration with the largest global banks, largest global asset managers, and the largest global wealth managers. So the tail, by definition, is smaller firms around the world. And that is certainly what is driving our client count. With user count, wealth management is a significant driver because we have, as we win large wealth managers, we win a large number of advisers. And that adds to the user count as well. So I just want to caution you not to read too much into those numbers because they tend to be the long tail. Operator: Thank you. As a reminder, to ask a question at—Our next question comes from the line of Scott Wurtzel with Wolfe Research. Your line is now open. Scott Wurtzel: Hey. Good morning, and thank you for taking my question. I am just wondering if you guys can talk about the pace or degree of AI product adoption in the wealth channel. I am just trying to kind of understand, given that wealth is still, I think, ongoing this digitization journey, if, you know, this could be a potential longer tail opportunity? Thanks. Sanoke Viswanathan: Yeah. I think you read that right, Scott. You know, wealth is, you know, a more heterogeneous environment for us amongst our end markets. We have large firms. We have midsized firms. We have RIAs. There is a whole range. International private banks and international wealth managers have their own dynamics. So we are seeing a gradual pickup in AI adoption in wealth. It is certainly behind what we have seen in the sell side, in the buy side, but we see it picking up, and I expect it to be an important growth driver as we go into the next few quarters. I do not know, Goran, if you want to add anything to that and— Goran Skoko: You know, some of the AI solutions that we see adoption involve are around prospecting. So we have some of our largest clients adopting our intelligent prospecting and monitoring solution that is something that drives new business for our clients. We are rolling out some of our AI solutions with two of our largest clients currently. So the adoption is increasing, but I would agree with Sanoke Viswanathan. It is trailing investment banking and other areas of the business. Operator: Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners. Your line is now open. Craig Huber: Thank you. Just wanted to just touch on here this AI concern out there. There is obviously a lot of concern as AI evolves here over time, that the white collar workforce takes pressure, fewer needs for human beings to run operations and stuff. When you drill down on that, if that does play out here, and say you have a 10% or 15% pullback in the number of white-collar workforce at the buy side, sell side, talk to us, if you would, please, about the vulnerability for your pricing, revenues you can gain here in that sort of environment. Obviously, you are trying to move more and more enterprise-wide pricing as you have been doing that for many, many years. But how vulnerable are you do you feel, you and your peers, if that does play out there? Thank you. Sanoke Viswanathan: Yeah. Thanks, Craig. What I would start by saying is to imagine a scenario where you have that kind of headcount reduction in our end markets, we have to then appreciate that the agentic workflows have become such high grade and high quality that they are able to really displace the humans who do those jobs today. So that is an assumption that we would have to make. If that were to be right, I would say those agents are going to need very, very high-quality inputs in order to be able to execute the job that we expect those agents to do at that point. I shared the example of the value-at-risk calculation, and that is one of those ways in which we think our data, our connected data, and the embedding that we have in these workflows just becomes exponentially more valuable in a world where agents are becoming the primary call on that data. So we believe that, you know, we are very well positioned to capture the upside in that kind of scenario. And it will all come down to the optimization of pricing between the seats that those humans may have adopted versus the data consumption that the agents will have in the future. And this is exactly the point I was making earlier, which is we are working very closely with our clients. And I can tell you there is huge appetite and conviction among our clients to partner with us on rewriting these contracts to create flexibility for themselves and for us, and we see us capturing an ability to continue to hold our pricing power and to capture the upside from that transition if and when it happens. Operator: Thank you. I would now like to turn the call back over to Sanoke Viswanathan for closing remarks. Sanoke Viswanathan: Thank you, operator. Thank you, everybody, for joining the call today. We continue to execute with discipline. Accelerating ASV growth, strengthening commercial performance, and measurable productivity gains position us well for 2026 and beyond. In May, we will welcome clients to FactSet Research Systems Inc. Focus, where they will experience firsthand the innovation we are delivering across our platform. Operator, this concludes today's call. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good morning. My name is Warren, and I will be your conference operator today. I would like to welcome everyone to the TD SYNNEX Corporation First Quarter Fiscal 2026 Earnings Call. Today's call is being recorded, and all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. At this time, for opening remarks, I would like to pass the call over to Nate Friedel, Head of Investor Relations at TD SYNNEX Corporation. Nate, you may begin. Nate Friedel: Thank you. Good morning, everyone, and thank you for joining us for today's call. Joining me on today's call are Patrick Zammit, our CEO, and David Jordan, our CFO. Before we continue, let me remind you that today's discussion contains forward-looking statements within the meaning of the federal securities laws, including predictions, estimates, projections, or other statements about future events, including statements about our strategy, demand, plans and positioning, growth, cash flow, capital allocation, and stockholder return, as well as our financial expectations for future fiscal periods. Actual results may differ materially from those mentioned in these forward-looking statements as a result of risks and uncertainties discussed in today's earnings release, in the Form 8-Ks we filed today, in the risk factors section of our Form 10-K, and our other reports and filings with the SEC. We do not intend to update any forward-looking statements. Also, during this call, we will reference certain non-GAAP financial information. Reconciliations of GAAP to non-GAAP results are included in our earnings press release and the related Form 8-K available on our Investor Relations website ir.tdsynnex.com. This conference call is the property of TD SYNNEX Corporation and may not be recorded or rebroadcast without our permission. I will now turn the call over to Patrick. Patrick Zammit: Thank you, Nate, and good morning, everyone. Thank you for joining us today. We are very pleased with how we started fiscal year 2026. In the first quarter, we delivered record non-GAAP gross billings and non-GAAP earnings per share while continuing to expand profitability and build on the execution and momentum established over the past year. Our results reflect strong performance across both our distribution and Hive businesses, as well as the continued alignment between our strategy and the needs of our partners. Together, this reinforces the strength of our operating model and our ability to create long-term value for our shareholders. Before turning to our operating results in more detail, I want to start by discussing my rationale for updating our reportable segments. These changes better reflect how I manage the business and allocate capital and resources. Going forward, we will primarily discuss our performance and strategies through two businesses: Distribution, comprised of our three regional distribution segments, and Hive. Each business has a distinct value proposition and operating model, with clear drivers of growth, profitability, and returns. We believe this structure provides clearer insight into how our businesses perform and how we create long-term shareholder value. With that context, I will start with our Distribution business. Within Distribution, we delivered a strong start to the year, with excellent results across all geographies and key technology categories. Performance was supported by continued customer investment in infrastructure, software, and security, as well as notable strength in infrastructure and PCs as we help partners navigate an inflationary cost environment and a dynamic supply chain. Leveraging our global reach, diversified sourcing, and close vendor partnerships, we are helping our customers manage supply chain constraints, navigate pricing, improve availability, reduce uncertainty, and plan deployments with greater confidence while helping vendors efficiently extend their reach and activate demand across markets. Our accelerated growth was accompanied by expanding gross and operating margins driven by favorable geography and product mix and disciplined cost management. These results underscore the strength and value proposition of our global Distribution business, delivering attractive returns today while positioning us to capture opportunity tomorrow. Last quarter, we outlined four strategic pillars that define how we compete, create value across our portfolio, and differentiate ourselves in the channel, and these continue to shape where we invest and how we execute moving forward. These pillars are omnichannel engagement, specialized go-to-market, best-in-class enablement, and expanding our brand visibility. I will highlight a couple of examples of how we are bringing this to life. Starting with omnichannel engagement, we are making it easier for customers to engage with TD SYNNEX Corporation in the ways that best fit their workflows. This approach is powered by our partner-first platform and suite of digital services that integrate billions of customer, vendor, and end-user data points to drive demand at scale, supporting continued growth within our SMB customer market globally. Our capabilities are translating into tangible results. By embedding predictive AI directly into our onboarding and go-to-market motions, we are meaningfully increasing the number of customers onboarding new vendor portfolios each quarter, helping vendors expand their reach within our ecosystem and accelerating profit-generating activity across the ecosystem. Our agenting AI systems are now supporting customers and internal teams across complex workflows, from multi-vendor solutions aggregation to intelligent quoting and cross-sell recommendations, helping shorten deal cycles and improve attach rates. Paired with our relationship-driven model, this allows us to scale expertise and engagement globally without compromising the high-touch experience that differentiates TD SYNNEX Corporation. This quarter, our progress was reinforced by achieving Microsoft Frontier Distributor designation across all of our regions globally, a recognition of excellence in support, security, channel enablement, platform innovation, and technical delivery. This designation highlights our ability to bring technologies to market in a consistent, scalable way across regions and digital platforms, marketplaces, and high-touch engagement models, and to do so consistently as customers move from AI experimentation to deployment. Building on that foundation, our specialized go-to-market strategy continues to deliver tangible results, particularly in security. Earlier this month, TD SYNNEX Corporation was named Palo Alto Networks fiscal year 2025 Distributor of the Year in North America, recognizing our ability to drive above-market growth while expanding customer participation and accelerating new customer acquisition. Importantly, this recognition reflects the value of our specialized distribution model. By combining deep market expertise by technology and customer segment with our global reach, we enable vendors to reach new customers, activate customers more effectively, and drive growth beyond what they can achieve on their own. Capabilities such as inventory management, seamless customer transitions, pre- and post-sales support, and higher levels of automation enable our vendors and customers to scale with speed and consistency, reinforcing the long-term benefits of leveraging the distribution channel. Now turning to Hive. We delivered an impressive quarter, driven by continued demand for cloud- and AI-enabled data center infrastructure across our hyperscale customers. Growth was broad-based across our programs and customer base. Our integrated engineering, manufacturing, and supply chain capabilities enabled efficient deployment of sophisticated rack-level solutions at scale, which translated into meaningful year-over-year operating income growth. These results reinforce Hive’s strategic opportunities within this fast-growing market. Building on this momentum, Hive is focused on evolving its strategy over time toward more complete system-level solutions across traditional compute, accelerated compute, networking, and storage offerings. Through targeted investments, engineering and manufacturing capabilities are helping customers simplify design, accelerate deployment, and reduce total cost of ownership. These ongoing investments have attracted a growing pipeline of opportunities, including signing programs with two new hyperscale customers in 2026, which we expect to contribute to results in future quarters. We have already started to ramp our third U.S.-based hyperscaler, and with these two wins, we now have at least one program secured with each of the top five U.S.-based hyperscalers. To close, we remain very confident in the long-term value creation opportunities across both Distribution and Hive. The addressable markets we serve are continuing to expand, and we believe our differentiated value proposition and strategy position us to capture a growing share of that opportunity while delivering attractive returns for shareholders. Now I will pass it to David to go over the financial performance and outlook in more detail. David? David Jordan: Thanks, Patrick, and good morning, everyone. We are pleased to report a strong start to our fiscal year with first-quarter results that exceeded our expectations across all key metrics. Walking through the numbers, our non-GAAP gross billings for the first quarter were $25.8 billion, increasing 24% year over year, or 20% year over year in constant currency, and exceeded the high end of our guidance range, driven by accelerated growth in both Distribution and Hive. Non-GAAP operating income was $590 million, an increase of 48% year over year, or 44% year over year in constant currency. Non-GAAP earnings per share were $4.73, an increase of 69% year over year, and above the high end of our guidance range. GAAP operating income was $489 million, an increase of 61% year over year, or 57% year over year in constant currency. GAAP earnings per share were $4.04, an increase of 104% year over year, and also above the high end of our guidance range. Together, these results demonstrate our ability to convert strong top-line growth into operating leverage and meaningful shareholder value. Turning to quarterly performance for each of our businesses, Distribution generated non-GAAP gross billings of $22.0 billion, increasing 17% year over year and exceeding our expectations, driven by broad-based strength across both product categories and geographies. Endpoint Solutions increased 14% year over year, supported by ongoing PC refresh activity and strong demand for premium devices. Advanced Solutions increased 19% year over year, driven by continued strength in infrastructure, security, and software. Distribution non-GAAP operating income was $431 million, increasing 42% year over year, and non-GAAP operating margin as a percentage of gross billings was 2%, an improvement of 34 basis points year over year. Overall, we estimate the Distribution gross margins benefited by approximately 10 to 15 basis points during the quarter, driven by incremental profit from strategic inventory purchasing. In addition, we estimate that approximately 2 percentage points of year-over-year gross billings growth were attributed to higher average selling prices and modest pull-forward activity, as we partnered with OEMs to pass through higher memory and component cost. Moving to Hive, Hive generated non-GAAP gross billings of $3.8 billion, increasing 95% year over year and exceeded expectations, driven by broad-based strength across both manufacturing and supply chain services. Manufacturing and assembly increased in the mid-70% year over year on a gross billings basis, driven by demand increases from all major customers in each of the major programs we support. Supply chain services grew in excess of 100% year over year on a gross billings basis, driven by increased demand for components supporting our customers' AI infrastructure deployments. Margins in this business can vary quarter to quarter depending on mix. Hive non-GAAP operating income was $159 million, increasing 66% year over year, and non-GAAP operating income margin as a percentage of gross billings was 4.2%, decreasing 72 basis points year over year, primarily driven by mix as discussed earlier. We are in a period of accelerated growth; however, we continue to remain disciplined in our cost management approach. Our teams are focused on driving operating leverage while ensuring we make investments that position both Distribution and Hive for sustained long-term growth. Shifting to cash flow and capital allocation, free cash flow usage for the quarter was approximately $929 million, consistent with our first quarter in the prior fiscal year. Over the trailing twelve months, we have generated $1.2 billion of free cash flow and returned $723 million to shareholders, demonstrating the strength of our model and our disciplined approach to capital allocation. As the business grows, we are focused on ensuring we maximize net-income-to-free-cash-flow conversion on an annualized basis. Return on equity is also a key financial priority for us, and beginning this quarter, we are highlighting return on equity as a key metric that we are focused on improving over time. During the first quarter, we returned $118 million through share repurchases and dividends. Net working capital ended the quarter at $4.2 billion, with a gross cash conversion cycle of 16 days, an improvement of 4 days year over year, reflecting our continued focus on strong cash conversion and efficient working capital management. We ended the quarter with $1.6 billion of cash and cash equivalents, and our leverage ratio finished at 1.5x, modestly below our medium-term framework, providing ample flexibility to invest in the business while continuing to return meaningful cash to shareholders. In addition, our Board of Directors approved a cash dividend of $0.48 per common share, payable on 04/29/2026 to shareholders of record as of the close of business on 04/15/2026. Turning to our outlook for 2026, we expect non-GAAP gross billings of approximately $25.1 billion, plus or minus $500 million, representing a year-over-year increase of approximately 16% at the midpoint; a gross-to-net adjustment of approximately 34%; revenue of approximately $16.5 billion, plus or minus $400 million; non-GAAP net income of approximately $322 million, plus or minus $20 million; non-GAAP diluted earnings per share of approximately $4.00, plus or minus $0.25, based on approximately 79.8 million diluted shares outstanding, representing a year-over-year increase of approximately 34% at the midpoint; and share repurchases to increase from the amount purchased in our first quarter. To close, we are encouraged by our start to the year and believe we are well-positioned to execute on the opportunities in front of us. Our global reach, differentiated capabilities, and expanding portfolio position us to perform well across IT market cycles and deliver long-term value to shareholders. With that, I will turn it over to the operator. Operator? Operator: We will now begin the question-and-answer session. We request that you limit yourself to one question and one short follow-up to allow time for the other participants to ask their questions. If there is remaining time, you are welcome to requeue with additional questions. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Paige with RBC Capital Markets. Your line is open. Please go ahead. David Paige: Hi, good morning, and thank you for taking my question. Congrats on the really great results here. I was wondering if we could just double tap into the Hive solution growth. Billings were up 95%, so I was curious if that was concentrated in your two main customers or was it more broad-based across the five hyperscaler programs? And then just as a quick follow-up, I think you mentioned two new customers coming on board, one maybe in 2026. But I guess, could you just size that opportunity relative to your other two large customers? Thank you. Patrick Zammit: Okay. Good morning, David. Thanks for the question. We are very pleased with the performance this quarter in Distribution and, of course, Hive. Yes, the growth came from the two main customers. As I mentioned, the diversification has started, but the ramp-up of the programs we won is going to take a little bit of time. We believe that we are going to see the impacts of the ramp-up more towards the end of fiscal year 2026 and in 2027. David Paige: That is great. Thank you. Maybe if I could stick one more in. I know the first quarter seems a seasonally weaker free cash flow quarter, but cash conversion did get better. So I was just wondering what all-in or inventory build you were seeing in PCs might need to benefit from higher ASPs. But just, I guess, puts and takes on how you are seeing the PC demand market evolve throughout the year. Thank you. David Jordan: Good morning, David. When you think about working capital and cash flow for Q1, there are a couple of dynamics. You rightfully pointed out that on a gross cash days basis year over year, we made significant improvements. With that being said, we also made sure in our first quarter that we had the right amount of inventory. We recognized that some products are on allocation and could potentially be short in supply, and so we went long on inventory to try and make sure we had adequate supply to support all of our customers on the Distribution side. On the Hive side, we are continuing to make investments in working capital as that business continues to grow. But overall, when you put the two together, we are quite pleased with the cash days that we were able to land given the growth rates in the business. Patrick Zammit: And on the PC side, we had a strong quarter on PCs. For Q2, we continue to be reasonably optimistic about the PC dynamic. A few thoughts. We continue across the world in all the regions, including Latin America and across the other regions, to be very focused on continuing to grow faster than the market when it comes to PCs, and we are seeing clear success there. I also want to mention that we are focused primarily on B2B when it comes to PC, and that is important because in the coming quarters, we are going to see a strong tailwind coming from the ASP increases. Obviously, it raises the question about the impact on elasticity on volumes. We foresee some reduction in units, but we think the reduction in units should be significantly less than in the consumer space. All in all, PCs should continue to be a good category for us in the coming quarters. David Paige: Thanks, Patrick. Thanks, David. Congrats again. Thanks. Operator: Your next question comes from the line of Adam Tindle with Raymond James. Your line is open. Please go ahead. Adam Tindle: Okay, thanks. Good morning. David, I just wanted to start, obviously, congrats on such a strong start to the year. As we think about the typical financial model for TD SYNNEX Corporation from an EPS progression standpoint, normally you kind of see sequential growth in earnings from here, but if we roll that out, we are going to be in the neighborhood of $18 or so of EPS for the year. I just do not want to get ahead of ourselves given the trajectory that you have been on. I guess the question would be maybe just helping to level set. I understand you are not seeking to give annual guidance, but maybe some color for us to think about our models, what might be similar or different this year from that normal EPS progression that we are used to, just so we can understand the models? And I have a follow-up after that. Thanks. David Jordan: Great question, and thanks for asking. For Q1 and Q2, we have provided guidance for Q2. We are not providing guidance beyond that. What I would share, which I think will help, is that for the moment, demand remains strong in our business. However, we are cautiously optimistic for the second half, and we will just remind people that the second half of last year for us was very strong. Thinking about the second half on a longer-term basis using the Investor Day framework that we laid out is a good place to start. It is true for the moment: Hive and our Distribution businesses are performing quite well. But given the broader macro environment, we are cautiously optimistic for the second half, and we do believe both businesses will grow. Adam Tindle: Okay, that is helpful. Patrick, just a follow-up. I am getting this question a lot, and it is related to core Distribution and the impact of inflation and memory costs and all those things to margins for the channel. There is a general fear from investors that the vendors will take margin away, and one of the big network vendors on their earnings call talked about changing contractual provisions with channel partners, and it kind of fired the gun on this fear. I thought this might be a good forum. I am looking at the Americas region results for Distribution, and there is clearly no evidence when I see gross and operating margin up meaningfully currently. But maybe just level set us on those comments that we are hearing from the vendors and what you are actually experiencing boots on the ground in the Distribution business? Patrick Zammit: Thanks for the question. Indeed, in Q1, there was no impact on margin. I would add that we built inventory at the end of last fiscal year to be able to smooth the introduction of price increases for our customers. We worked very closely with both the vendors and our customers in order for them to be in a position to anticipate some of the price increases and reflect them in their quotes. Across the board, we believe that the price increases will not impact our margin because of this close collaboration with vendors and customers. Adam Tindle: Thank you. Operator: Your next question comes from the line of Eric Woodring with Morgan Stanley. Your line is open. Please go ahead. Eric Woodring: Awesome. Thank you for taking my questions and congrats on a really strong quarter. More disclosures here. Patrick, I am unfortunately going to ask maybe a similar question that Adam just asked. My first-blush reaction to these results and guidance was it was almost too good to be true, right? Gross billings and revenue nearly 10% above the high end of your guide, growth accelerating across every technology category. Can you just help us understand how you ring-fence the risk around pull-forward? Because typically pull-forward and the ability to size that really is not clear until after the fact, and so when you talk about two points of benefit from ASPs and pull-forward, how do you come to that conclusion? What are you hearing from customers about their desire to accelerate purchases and whether that is a pricing dynamic or a supply dynamic? If you could maybe marry those two together, that would be super helpful. And then just a quick follow-up, please. Patrick Zammit: Good morning. Thanks a lot for the question. The approach we have taken is to look at seasonality in units. We compared, for example, sequentially between Q4 and Q1, how the units evolved for all our hardware categories and compared that with what we have seen in the past. That was the first indicator where we concluded that the seasonality was not skewed and was consistent with prior years. Second, we did a quick survey; we asked the teams to provide us some color, and we took it into account. Based on that, we believe that pull-forwards have been limited for Q1. The other thing I would add is to look at how fast the vendors are passing the increase of their component costs to the market, and today we have to deal with quote validity dates that are very short. The market had to react and adjust very rapidly. I think that has had an impact on some of the behaviors at the end users. At the moment, based on what we can see from our data and the feedback we receive from customers and the teams, that is the best we can share on pull-forwards. Eric Woodring: Okay, alright. Very fair. As my follow-up, Patrick, there is clear intent in breaking out Hive as a separate standalone. I am just curious: Today, Hive is 15% of gross billings; it is nearly 30% of operating income, at least in the last quarter. Is there a target that you have for either of those metrics if we think three years out—just the opportunity for growth and margin expansion at Hive? I am just curious, putting a longer-term hat on, how big do you think Hive can be for some of these key fundamental metrics? Thanks so much. Patrick Zammit: The reason we discussed Hive separately this year is that my management system is to empower my business unit owners and have a lot of autonomy, and it was justified to disclose Hive separately. We think it improves significantly the quality of the financial understanding of how results are being formed. When it comes to Hive, you should assume that Hive is going to continue to grow faster than Distribution. The margins—at the moment, we continue to invest in both engineering and manufacturing capabilities to cope with the rapid increase in demand—and the margins for the moment are relatively stable in that context. As we get more mature, investments will likely start reducing a little bit. For the foreseeable future, the margins you are seeing are reasonable. I should add that the operating expense for Hive is significantly lower than for Distribution structurally. The combination of that means the weight of Hive in the total business will continue to increase both on gross billings, revenue, and operating income. Eric Woodring: Awesome. Thank you. Best of luck. Operator: Your next question comes from the line of Joseph Cardoso with JPMorgan. Your line is open. Please go ahead. Joseph Cardoso: Hey, good morning. Congrats on the results, and thank you for the questions here. For my first one, I wanted to follow up on customer behavior relative to the Distribution business, but maybe less on pull-forwards and more on what you are seeing from customers placing orders much earlier relative to what they expect from deliveries as they navigate cost, and whether that is driving better visibility than you would typically see. And then I have a follow-up. Patrick Zammit: Backlog is increasing, so we are getting more visibility. Vendors have been very clear and explicit that price increases are going to continue over the year, driven in particular by both memory price increases and now also CPU price increases. Yes, we are getting more visibility. At the same time, end users have their budgets, and the timing of their budgets also has some influence on when they are going to place the orders. For the moment, we see very high activity in terms of quoting. We are trying to secure the prices as well as we can with some inventory to help our resellers serve their end users in the best possible way. Again, there is no indication of a major pull-forward at the moment when we look at our figures. It is not dramatic. Joseph Cardoso: Got it. Thank you, Patrick. Appreciate that color there. In light of the new Hive disclosures, which I think everyone is happy to see for sure, I wanted to touch on the strong variance between gross billings and revenue this quarter. It seems like a big change quarter over quarter, year over year, and I wanted to better understand whether that is being driven by the change in mix that you alluded to. As a second part of that question, how do you expect that to trend going forward? Given that you talked about new customers, any implications from a mix perspective we should think about as those start to onboard in the latter part of this year going into next year? Thank you. David Jordan: Joe, this is David. It is a good question, and I think you are thinking about it the right way. At a high level—and I am going to answer an additional question that you did not ask—when you look at Hive’s margins on a year-over-year basis, the decline was largely driven by mix. We put that in the transcript. The mix was related to some large GPU fulfillment deals that went through. A lot of those programs are recorded on a net basis, and so you have actually seen the opposite impact to margins on a net basis. For Hive, each one of the programs is set up slightly differently, and the gross versus net components can be different. That is why we have always looked at the business on a gross billings basis. Depending on how the mix will shift, you could have a higher margin on a net basis based on the relative weighting. We would likely expect as we move forward that some of these net programs are growing faster than the overall. Joseph Cardoso: Got it. Thank you, David. Appreciate the color, gentlemen. Operator: Your next question comes from the line of Catherine Murphy with Goldman Sachs. Your line is open. Please go ahead. Catherine Murphy: Thank you for the question. To ask another one on Hive, in the deck, you disclosed that supply chain services grew in excess of 100% year over year in the quarter. It would be helpful if you could talk more about the strength here. In the prepared remarks, you also noted a strategy pivot to selling more complete solutions in Hive. Is there any impact we should think about on the supply chain services business as it stands today? Thank you very much. Patrick Zammit: Good morning. Supply chain services is really a service we render to the customer. It is a relatively volatile business. The reason being that, taking into account the market environment, we may have more requests from our customers to support them in that space, buy inventory in advance, and store it. Clearly, there is a lot of demand at the moment driven by pricing volatility, and that explains why we had such growth in supply chain services. At the same time, you can see that our manufacturing activity is also growing extremely fast, and we believe faster than the market. I wanted to raise it here on the call. Catherine Murphy: Thank you very much. Patrick Zammit: I am sorry—and just to answer your second question, the growth through time. We are confident about the growth in manufacturing. It is more steady. You are talking about programs with better visibility. If the demand from the customer stays consistent, then we should continue to see stable growth in that space. Again, the supply chain segment is more volatile and really depends on the market environment. Here, I would be a little bit more cautious, and we will probably see more variations in the growth rates quarter by quarter, depending on the needs of the customers. Operator: Your next question comes from the line of Keith Housum with Northcoast Research. Your line is open. Please go ahead. Keith Housum: Good morning, gentlemen. Appreciate it, and thanks for the additional color here. As we think about the quarter and looking forward, investors are struggling with trying to understand the magnitude of price increases and the impact of demand destruction. David, as you look at the second-quarter guidance, how much does that grow in terms of what you think the impact is from the increased prices? The second part of the question is, at what point do you think we start seeing demand destruction? Is it when you hit 15% or 20% price increases? We have already seen a lot more than that in some different product categories right now. David Jordan: I will start and frame up the Q2 guidance, and then, Patrick, you can comment on unit elasticity. When we built the guidance for Q2, we did a full bottoms-up roll-up from the teams. What I can tell you is for the moment, demand remains strong. This is true both in the Distribution business and in Hive. One thing to think about as you consider price increases and how that makes its way into our P&L: we have a lot of revenue that is back-to-back, meaning it is billed, put into a backlog, and it might take two, three, four, five months to ship. You are not going to see a massive hockey stick into our P&L immediately from price increases. But we do expect as we move through the quarters to have price increases become slightly more meaningful than they were in the first quarter. Patrick, if you can provide a little bit of color on how you think about units and demand as it relates to the latter part of the year. Patrick Zammit: Let me look at the four main hardware categories for us. First, PCs. The refresh is not over, and that continues to be a tailwind for us. The other aspect is that the weight of AI PCs continues to increase. One of the drivers is that you will have more and more AI applications running at the edge. Having an AI PC is going to become more important in companies. For general compute—general servers—there is a refresh cycle going through at the moment, so it should continue to be a tailwind. Similar to PC, we see an acceleration of the purchase of AI-enabled servers. End users have now defined their use cases. They are starting to build their AI factories, and that is driving demand in the market, which we are benefiting from. For storage, this quarter we had a very good quarter. We believe that data center modernization has been a topic but not really materializing in previous quarters. Maybe we are going to see more of it going forward. Lastly, networking—after two very difficult years, networking is back. It is growing single to double digit depending on the regions, and I am quite optimistic when it comes to the networking category. Keith Housum: What we are hearing from some of our contacts is some of the equipment that you are selling is seeing price increases well beyond 20% to 30%, sometimes 60%, 70%, 80%. It would seem natural that there has to be some demand destruction, and people just going to the refurb market or pushing things off entirely. Are you hearing this from customers yet, and what are your thoughts or any color you can provide on the remainder of the year? Patrick Zammit: Based on what we see, and it is reflected in our guidance, our assumptions have been reflected. We have not seen demand destruction yet in Q1. We continue to be confident for Q2. For the rest of the year, I will leave you with this: there may be some demand disruption. Everyone is waiting to see how good or how bad the elasticity will be on volume. I shared some of the tailwinds which could mitigate the impact. From a revenue standpoint, when you have such ASP increases, the net between potential decline in units and the ASP increase should impact positively the growth in revenue. Keith Housum: Okay. Thank you. Operator: Your next question comes from the line of David Vogt with UBS. Your line is open. Please go ahead. David Vogt: Great, thanks for taking the question. I have two also. Patrick, historically, Hive has been a more traditional compute and networking-centric business in terms of billings and revenue. Can you share with us how that is evolving as you onboard incremental hyperscaler customers? You talked about having at least one program at the top five. How is that mix changing going forward to a more accelerated compute and networking mix? I will give David my question as well. David, when we think about the price increases, I know everyone is talking about PCs, but we are seeing incredibly strong development for traditional CPU-based servers generally in the industry right now. Would love to get a sense for how you are thinking about that demand ex the price increases because we are seeing relatively strong demand or hard-to-get CPU-based products. I would love to get your perspective on that. Thanks. Patrick Zammit: Good morning. Historically, Hive demand is driven by general compute and networking. Some of the wins will be accelerated compute wins, and we are going to start seeing that in the mix in the coming quarters. Zooming out, when you look at the Hive strategy for many quarters now—and we are starting to see the benefits—we had two objectives: diversify the customer base and go after the four main technologies we can serve, namely general compute, accelerated compute, networking, and storage. We have made investments in both our engineering and manufacturing capabilities to be well-positioned to go after those opportunities. Expect in the coming quarters to see a diversification of the customer base and diversification of the program types. David Jordan: David, to provide a little color on your question around general compute: we have worked hand in hand with both vendors and customers to raise pricing on a variety of infrastructure products. As Patrick said, for the moment, demand remains quite strong. It is true in some of these categories the price increases are double digits. Our current thesis is that while there will be some elasticity around unit demand, the price increases will more than offset that. We will continue to give you updates, but for the moment, demand remains strong, and there is less elasticity around pricing than people would initially have thought. David Vogt: Alright. Thank you. Operator: Your next question comes from the line of Ruplu Bhattacharya with Bank of America. Your line is open. Please go ahead. Ruplu Bhattacharya: Hi. Thank you for taking my question and thanks for all the details. Patrick, question on Hive. You mentioned that Hive has secured at least one program in the top five U.S. hyperscalers. Can you give us more details on what type of opportunities these are? Are they for full rack builds or for supply chain services? First, how should we think about CapEx for Hive? Do you have enough capacity to support these programs? Second, when I look at operating margin, it was 7.4% this quarter on a revenue basis. You said 4.2% on a billings basis. When we think about the AI server space and rack-building space, the industry itself is getting squeezed in terms of margins. Should we think that operating margin can take a dip initially as you ramp these new Hive programs, and what are you doing to offset some of that margin pressure? Thank you. Patrick Zammit: Thanks, Ruplu. I will answer the first question; David will take the second one. The programs we won are full racks, so it is really for the manufacturing segment. We also won some supply chain, but as I mentioned, the supply chain opportunities are more volatile. When we refer to those program wins, it is really for our manufacturing activity. Ruplu Bhattacharya: I was just going to follow up on that and ask about the CapEx question I had. Do you need capacity? Patrick Zammit: Obviously, we are constantly looking at our capacity requirements, and we are investing in increasing our capacity as we speak to be in a good position to serve our customers. Yes, CapEx is required. As you look at the amounts at stake, it is very reasonable. I want to insist on the fact that both Distribution and Hive continue to do a great job of reducing the cash days and improving working capital velocity. That is enabling us not only to finance the growth without any issues but also to finance investments in capital expenditure. No concerns from that point of view either. Ruplu Bhattacharya: Thanks. And then just on the margin side, David, do we expect any initial margin pressure from the ramp of these programs? How should we think about these margins going forward? Thanks for all the details. David Jordan: At a high level, when you think about Hive’s operating margins, we feel pretty good about where they are. It is true as you ramp new customers, especially in the early innings, there can be a slight headwind in operating margins as we make investments to get the programs up to speed. Each of these will ramp on a different timeline, and we will continue to provide updates. We feel very good about the current operating margins at Hive, the programs that they have, and how that will play out as we move forward. Let me clarify one thing for you, Ruplu. You mentioned accelerated compute. While we do have some accelerated compute programs, it is not the majority of our portfolio. Some of the margin pressure that you may have seen from others will not play out to the same degree in Hive just given the overall mix in the programs that we have. Ruplu Bhattacharya: Okay. That is helpful. Thanks, David. Operator: Your next question comes from the line of Vincent Colicchio with Barrington Research. Your line is open. Please go ahead. Vincent Colicchio: Yes. Can you talk to the relative distribution strength in Europe? Do you have legs there, and has there been any change in sentiment given the geopolitical environment? Patrick Zammit: Good morning, Vince. Thanks for the question. The market in Europe in Distribution grew mid-single digits in Q1. The market forecast for the rest of the year is between low- to mid-single-digit growth for the rest of the year. When you look at our results, we are growing at double digits. Market conditions continue to be positive, but most importantly, in that market environment, the team continues to grow much faster than the market. We have an end-to-end portfolio. We are very well-positioned on every technology, and we are well-positioned in all the key markets in Europe. We have a strong pan-European presence. We are taking advantage of some countries growing a little bit faster than the average in Europe. For example, Poland is growing faster; Spain is growing faster. It is a favorable mix, and we are well-positioned in those countries. Net-net, it explains the double-digit growth and the fact that we are growing significantly faster than the market. We have done so now for several quarters, and I am confident for the quarters to come. Vincent Colicchio: My follow-up is on acquisitions. What are your thoughts in terms of what you are looking at currently, and have the valuations come in with the more overall public markets? Patrick Zammit: M&A is at the core of the strategy. For us, M&A is a way to accelerate the execution of our strategy by geography, by technology, or to acquire vendors we are missing in some countries. We are looking at several opportunities in basically all the regions. In terms of valuation, we are very strict. Our objective is that the price we would have to pay would have the right return within two years of the acquisition and after completion of the integration. That is our north star when it comes to M&A. With that in mind, we are working on the projects, sticking to our strong financial discipline, and we will see if some of the opportunities materialize in the coming quarters. Vincent Colicchio: Thank you. Operator: Your next question comes from the line of Ananda Baruah with Loop Capital. Your line is open. Please go ahead. Ananda Baruah: Thanks, good morning. Thanks for taking the question. A couple if I could—apologies for any background noise here. First, Patrick, a few months ago, you talked about starting to see data center modernization. What customer base are you seeing that across? I would guess hyperscale, but also in non-hyperscale? Where are you seeing it as well—solo on-prem, other? Would love to get some context there, and then I have a quick follow-up as well. Patrick Zammit: Obviously, I am talking on-prem. We see enterprise but also the higher end of the mid-segment. We saw very promising activities. I am a little bit cautious, because that was not what we had seen in prior quarters, but this quarter we saw very solid demand. Ananda Baruah: Super helpful. The follow-up is just on Hive mix. Longer term, you are getting more into GPU-based. Is it as simple as saying over time, the mix begins to shift to include more of that, or would you also see more storage and networking as well given the resource requirements of AI builds? Also, just to add real quick, could Arm—given their announcement last week and the revenue ramp that they are talking about with CPU servers—become a Distribution partner of the company as well? That is it for me. Thanks. Patrick Zammit: Let me start with Arm. When you have a vendor who is changing its strategy and is starting to produce its own products, we believe that distribution in particular is a fantastic partner to accelerate the go-to-market. Nothing to disclose today, but in principle, if there is an opportunity to partner, we will absolutely do it. Back to Hive, what is important is that our customers are looking for support across all four technologies: general compute, accelerated compute, storage, and networking. That is why it is important for us to have the capabilities and expertise to respond to their needs and requirements. We will have more accelerated compute wins in our portfolio, but I think that going forward, general compute, networking, and storage will represent the majority of our total business. Ananda Baruah: Helpful context. I really appreciate it. Thank you. Operator: There are no further questions at this time. I will now turn the call back to Patrick Zammit, CEO, for closing remarks. Patrick Zammit: Thank you for joining us today. I want to close by thanking our coworkers around the world for their hard work and dedication, and our customers and vendors for the trust they place in us. To everyone on the call, thank you for your continued interest in TD SYNNEX Corporation. Have a great day. Operator: That concludes today's conference call. You may now disconnect. Have a nice day.
Operator: Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Fourth Quarter 2025 Earnings Call. [Operator Instructions]. Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made on this recording are as of March 31, 2026, and Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued March 31, 2026. If you do not have a copy of today's press release, you may obtain 1 by visiting the Investor Relations page on the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, Chief Executive Officer and President of J.Jill. You may begin. Mary Coyne: Good morning, everyone, and thank you for joining us today. 2025 marks the beginning of a strategic evolution for J.Jill. We embarked on a period of testing and learning in order to build a strong foundation for our business by expanding our customer file through product evolution, enhancing the customer journey and improving the way we work as an organization. While we delivered fourth quarter results that exceeded the updated guidance we provided in January, the period reinforced why this evolution is essential. We had an early assortment that did not resonate as hoped. We came up against earlier and deeper competitive holiday promotions. And we watch our direct customer continue to migrate towards the promotional end of the spectrum, taking value and discount rather than engaging at full price. Against this backdrop, our teams remained agile and reacted in season to ensure we ended the period with inventories in a clean position. As we enter 2026, we are taking the steps to transition and position the business for long-term growth. To achieve our objectives, we must expand our customer files. This requires patience and precision. We're expanding into new categories and modernizing our aesthetics to appeal to a broader customer base. but doing so in a way that helps holds the quality, fit and values that our loyal customers expect and trust from J.Jill. That's why our test-and-learn methodology is so critical. It allows us to validate new concepts with both new and existing customers before scaling, ensuring we're building sustainable growth rather than simply pursuing short-term gains. As we move through 2026 and beyond, you'll see us continue this balanced approach. And we believe the investments and strategic shifts we are making, will position us well to achieve our objectives. This evolution will take time, and we should not expect the path to be linear. But we are committed to maintaining a disciplined operating model, carefully managing expenses and leveraging our strong financial position and strengthen balance sheet as we pursue this course. None of this transformation would be possible without a best-in-class team. A combination of strong internal leaders with deep knowledge of J.Jill, and outside leaders bringing relevant experience and new perspectives. Throughout 2025, we've made deliberate decisions to strengthen our leadership bench by recruiting proven talent with deep expertise in brand transformation. We brought Courtney O'Connor onboard in July as Chief Merchandising Officer to support our product evolution. And [ VIVREDKey ] in November as the company's first-ever Chief Growth Officer to lead our e-commerce and AI initiatives. As we grow, we will continue investing in talent that complements our existing strengths and supports new capabilities. Turning now to our 3 key strategic pillars. First, evolving the product. In 2025, we analyzed our assortment and identified areas in which we needed to streamline remove redundancy and evolve to capture a greater share of our customers' wardrobe. We began testing categories and concepts to expand the relevance of our product assortments. In Q4, for example, we successfully tested small capsules in areas where we saw potential but wanted to validate customer response before making larger commitments. We also piloted a localized merchandising strategy, adjusting our assortment to better reflect the lifestyle needs of specific markets. What became clear through those tests is that when we gave our customer the newness she wanted, she responded even in a highly challenging promotional environment. These learnings shaped how we approach our 2026 assortment and are informing our broader merchandising strategy going forward. As a reminder, our summer 2026 assortment, which will be introduced in Q2, we'll capture the first influence from our strengthened merchant and design team. and we expect continued improvements in assortment as we move throughout the year. There will be more newness with silhouettes and fabrics as well as the beginning stages of expansion into areas of accessories such as bags and belts. Our goal is to continue to provide our loyal customer the quality and value she knows and loves us for, while introducing relevant and compelling products focused on the new customers who we aim to attract. Our second pillar is enhancing the customer journey. This past fall, we began to look at our marketing strategy differently and how we think about customer acquisition and engagement. Historically, our marketing spend has been disproportionately focused on our existing customer base. And while customer retention remains important, we know this approach was limiting our ability to expand our customer file and drive the kind of growth we're targeting. In 2026 and beyond, we plan to continue to rebalance our marketing investments to address the top of the funnel, building broader brand awareness and capturing new customers who may not yet be familiar with J.Jill. We believe these awareness building initiatives will help us reach a larger, more diverse audience. Our third pillar is operational improvements. Throughout 2025, we focused on strengthening our operational capabilities and leveraging new technologies that we expect to support future growth. We successfully implemented our new OMS system, providing us with a more modern platform, and created the Chief Growth Officer role to fully maximize e-commerce NII to help drive long-term success. As an organization, we are embracing the capabilities and efficiencies that AI can enable. With every potential use case, we ask ourselves: Will it increase revenue, will it increase efficiency and will it drive speed to market. As we begin 2026, we are introducing several new tools across the organization and have kicked off a significant project, the implementation of a new merchandise planning and allocation tool from Anaplan. We plan to leverage this predictive AI powered forecasting model to optimize how we plan and allocate inventory across the business. Thanks to the hard work of our team, we are on track late in the second half of 2026 with meaningful benefits expected to begin in 2027 and we will continue to improve as the system learns and we scale it to drive better demand forecasting, smarter allocation by location. As we look forward to 2026, we are confident in our strategic direction while being realistic about the current consumer environment, the impacts of tariffs and the work ahead. While the quarter has seen a challenging start largely driven by continued price sensitivity, particularly in our direct channel, we are encouraged by the performance in our stores supported by trained associates, providing personalized guidance and tactile experiences that excite both existing and new customers around the brand's product evolution. Importantly, we are taking key learnings from these first few weeks of the year to inform our go-forward plan, all of which is reflected in our outlook, which Mark will review. In closing, we're viewing 2026 as a period of deliberate accelerated change to expand our customer file while maintaining our operational discipline. We remain committed to our methodical test-and-learn approach, building on validated successes around new initiatives before scaling investments. I am confident that this measured approach, combined with our strong balance sheet and operational rigor, will position us to achieve our objectives and deliver long-term shareholder value. And with that, I'll turn it over to Mark. Mark Webb: Thank you, Mary Ellen, and good morning, everyone. As Mary Ellen outlined, 2025 marked the beginning of a strategic evolution for J.Jill, a deliberate period of evaluation, testing and learning, that began to build the foundation for expanding our customer file. As we enter 2026, we are deploying these learnings which, while we expect will take some time to fully take hold, we are confident we'll position the business well for long-term sustainable growth. Before discussing our 2026 outlook, let me provide context on fiscal 2025, which demonstrated the resilience of our operating model even as we began this evolution and despite significant external headwinds. We generated $23.2 million in free cash flow in the year, maintained a solid gross margin rate of 68.7% despite incurring approximately $7.5 million of incremental net tariff costs, we opened 4 net new stores, successfully upgraded our order management system and delivered adjusted EBITDA of $84.3 million on sales of $596.5 million cash interest expense. We repurchased $10.4 million or about 638,000 shares of J.Jill stock and paid approximately $5 million in ordinary dividends demonstrating our ongoing commitment of returning cash to shareholders and supporting total shareholder return. These results reflect the operational discipline and agility of our organization in navigating a complex environment. The tariff policy enacted in April created unprecedented operational complexity and we experienced a slowdown in our customers' shopping behavior throughout the year, contributing to a 3% decline in comparable sales for the year. I want to thank our vendor partners for their support amidst these challenges and recognize and thank our cross-functional teams for their agility and resilience adapting their work and processes in response to the changing business requirements. Many of the same team members manage the successful March 2025 cutover to our new OMS system, a major modernization of our technology foundation. As we move into 2026, we are planning for a year of strategic investment and measured transition. We're building the foundation for sustainable, profitable growth by expanding our customer file modernizing our product offering and further strengthening our operational capabilities. This requires deliberate investments that will pressure near-term profitability, but position us for stronger performance in 2027 and beyond. Our financial approach doesn't change. We're being disciplined about where we invest, measuring returns carefully and maintaining financial flexibility to adjust as we learn. Our strong balance sheet and cash position provide flexibility to execute this strategic evolution while continuing to return capital to shareholders. With that context, let me walk through our fourth quarter performance and then provide our outlook for fiscal 2026. Total company sales for the quarter were $138.4 million down 3.1% compared to Q4 of 2024. Total company comparable sales for the fourth quarter decreased 4.8%, driven by the retail channel. Store sales for Q4 were down 9% versus Q4 2024, driven by soft traffic and conversion, which were partially offset by stronger average unit retails and average transaction values in the quarter. Net new stores contributed approximately $2 million in revenue. Direct sales as a percentage of total sales were 53.5% in the quarter, compared to the fourth quarter of fiscal 2024, direct sales were up 2.6%, driven by markdown sales, which benefited from ship-from-store capabilities. Q4 total company gross profit was $87.3 million compared to $94.8 million last year. Q4 gross margin was 63.1%, down 320 basis points versus Q4 2024, driven by approximately $4.5 million of net tariff costs incurred during the quarter and deeper year-over-year discounting amidst a very competitive promotional environment. These headwinds were partially offset by favorable freight costs this year compared to last. SG&A expenses for the quarter were about $87 million compared to $89.3 million last year as increased selling expense and G&A overhead were more than offset by lower marketing management incentive, nonrecurring costs and stock-based compensation. Adjusted EBITDA was $7.2 million in the quarter compared to $14.5 million in Q4 2024. Interest expense was $2.2 million in Q4, down about $500,000 compared to last year, driven by the term loan refinance completed in December. Adjusted net income per diluted share in Q4 2025 was a loss of $0.02 per share compared to earnings of $0.32 per share in Q4 2024. Average weighted diluted share count in Q4 this year of 15.3 million shares reflected the impact of repurchasing 637,700 shares in fiscal 2025. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations. Turning to cash. We ended the quarter and full year with $41 million of cash. For fiscal 2025, we generated $42.1 million of cash from operations and $23.2 million of free cash flow, defined as cash from operations less capital expenditures. We refinanced our $75 million term loan in December extending the term through December of 2030 and saving [indiscernible] approximately $10.4 million of share funded from cash on hand. As of January 31, 2026, a there was $14.1 million of availability remaining under the stock repurchase authorization that expires in December 2026. Looking at inventory. At the end of the fourth quarter, total inventory, excluding the impact of tariffs was about flat compared to the end of fourth quarter last year, including approximately $9 million related to net tariff costs reported inventory at end of Q4 was up 14% compared to end of Q4 inventory last year. Capital expenditures for the quarter were $10.1 million. Total capital expenditures for full year 2025 were $18.9 million focused on new store openings and the OMS project. With respect to store count, we opened 7 stores in the fourth quarter with no closures. We ended the year with 256 stores, a net increase of 4 for the year as 9 new store openings were offset by 5 closures. Turning to our expectations for fiscal 2026. As mentioned, we expect 2026 will be a year of deliberate investment. Our guidance reflects this along with the continued uncertainty in the consumer and geopolitical environment, the turbulent trade policy landscape and the expectation that it will take some time for new customers to respond to our evolving product assortments. As Mary Ellen mentioned, and as is reflected in our first quarter guidance, we have seen a softer start to Q1. We expect this performance to gradually improve in second quarter as the new assortment hit in their entirety [indiscernible] incurred and for products landed before for February 28, 2026, will expense through the P&L during the first half of 2026. As a reminder, these tariffs were an average rate of approximately 20% and net of vendor offsets are expected to result in about $5 million of added cost of goods sold in the first quarter compared to 0 tariffs incurred in Q1 2025. Going forward, we are now assuming 10% tariffs on goods received after February 28 through the end of the first quarter and 15% on goods received for the rest of the year. Given these rates we expect the second quarter to incur approximately $4 million of incremental net tariff costs compared to less than $1 million incurred last year in Q2 and Q3 and Q4 to incur approximately $3 million of net tariff costs each compared to $2.5 million and $4.5 million in Q3 and Q4 last year, respectively. Total tariff load net of vendor offsets in 2026 will be about $15 million compared to about $7.5 million incurred in 2025. Our assumptions related to tariff rates are all subject to any additional changes the U.S. may enact to global trade policies. Further, our guidance does not assume receipt of any refunds of tariffs paid to date. For the first quarter of fiscal 2026, we expect sales to be down approximately 5% to 7% compared to last year, with total company comp sales down approximately 7% to 9%. We expect adjusted EBITDA to be in the range of $15 million to $17 million, reflecting approximately $5 million of tariff pressure. For Q1, we expect gross margin to be down about 400 basis points compared to Q1 2025 as the annualized impacts of tariffs is incurred and product and marketing strategies are still evolving. While the quarter is off to a challenging start, as discussed, we are seeing relatively better performance quarter-to-date in our retail channel. For full year fiscal 2026, we expect sales to be down 2% to about flat compared to last year. Total company comp sales to be in the range of down 3% to down 1% and adjusted EBITDA of $70 million to $75 million. This guidance assumes full year gross margins down about 50 basis points compared to 2025 and as we expect headwinds related to tariffs in the first half to be partially offset by better full-price selling, lower promotions and lower year-over-year tariffs beginning in Q4. Regarding inventory, we will continue to take a prudent approach to inventory investments given the relative uncertainty we have discussed with unit purchases positioned down in the mid-single digits. Regarding store count, we continue to see opportunity to expand, but remain disciplined in our approach amidst our brand evolution. We are pleased with the performance of new stores opened to date and expect to grow net store count by about 5 stores by the end of fiscal 2026 of our planned openings, approximately half are in reentry markets. We expect reentry stores to ramp very quickly given the customer reception and brand awareness that exists in these markets, while new markets are experiencing a longer ramp period. We expect openings in new markets to experience about a 3- to 5-year ramp to maturity. New stores represent an attractive investment opportunity and we are excited to continue to expand our footprint at a disciplined pace. With respect to total capital expenditures, we expect to spend about $25 million in fiscal 2026 with investments focused on new stores and a new merch planning and allocation system that is projected to be completed toward the end of 2026. Regarding free cash flow, we expect free cash flow for fiscal 2026 of about $20 million. And finally, with respect to cash distributions we announced today that our Board of Directors approved a $0.09 dividend, reflecting a $0.01 or 12.5% increase in our ordinary dividend payable April 28 to shareholders of record as of April 14, and we have $14 million remaining on our fair repurchase program, which is authorized through December 2026. It is important to note that given the timing of year-end and Q4 earnings announcements, our Q1 repurchase window tends to be shorter than other windows during the year. In summary, we believe we are making the adjustments necessary to position the business for sustainable growth. We are confident the modernization and evolution of our product and marketing efforts will enhance and broaden the appeal and awareness of our incredible brand. And we believe the investments we are making in our front-end MP&A platforms will position us well and provide benefits into fiscal 2027 and beyond, all while continuing with our commitment to distribute excess cash to shareholders through our ordinary dividend program and share repurchases. Thank you. I will now hand it back to the operator for questions. Operator: [Operator Instructions]. Your first question comes from the line of Jonna Kim of TD Cowen. Jungwon Kim: Your customers are more sensitive to macro, how would you assess how much of the softness you're seeing in the first quarter is due to macro versus other factors? Would love any color there? And then second question, how will this year's Mother's Day differ from last year? What are key product and marketing changes ahead of the Mother's Day. Mary Coyne: Good morning Jonna, thanks for your question. So we are at the start of a very deliberate evolution. That being said, we do believe that Q1 had a challenging start was a midst of very tough macro backdrop, and we've talked about this consumer being impacted by that. We absolutely see that more in our direct channel, which is a continuation from what we saw in Q4. What is very encouraging to us is what we are seeing in stores with our talented store teams able to engage to have convert new customers and existing customers. But we do believe that the macro environment had an impact in this quarter for sure. With respect to Mother's Day, the marketing team has exciting initiatives in play. We are really focused on the timing of when we're launching our catalog when we are launching digital marketing. There is a whole program around it that we're super excited about, all backed up by product drop that is coming in the 10 days before. Operator: Your next question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: A lot of work underway. As you think about the product assortment and the test and learn that is put in place, what is changing bottoms, tops, sweaters, style, look, print patterns, what is changing? And what do you expect to see and when will the new full assortment be there? And then with the customer acquisition strategies, who do you want to capture now that's different than your old customer? And as you think of the balance of the business, how much should be new versus existing customers go forward? And then lastly, Mark, just on the components of margins. What are you seeing from energy prices and the impact of freight costs. Mary Coyne: Good morning Dana. I'll start with the first question, which is what is changing in the assortment. So we are taking this time to really test and learn coming out of Q4 going into Q1. And what we are focused on is both new and existing customers achieving more of her wardrobe. We are moving with what we are calling a more modern aesthetic, which is really addressing her lifestyle, and that lifestyle will be built with core things that she has known and loved from the J.Jill brand for years. accentuated by newness, and we see her really responding to newness, but it's how we give her versatile wardrobing pieces that take her through every aspect of her day and her life. We see it being a very balanced approach, both in product and in marketing with everything we do, really benefiting the 3 customer segments that you referred to, right? So as we think about customers, we are focused on retaining the customers we have, we are focused on attracting new, and we are focused on reactivating people who have not shopped the brand recently. When we think about this customer segment, -- we love this customer segment. She's loyal. She's responsive. She is -- has money and time to spend on herself. When we look at the segment today, we -- 45 to 65 is our target audience. Today, our customer sits at the higher end of that and we know we have tremendous opportunity to target the middle of that range and bring very qualified women into this audience. Mark Webb: Great. And with respect to the gross margin, Dana, as we discussed on the last question, the macro environment is obviously very volatile right now and evolving quite real time. what we've included in our guidance is anything that we have seen concrete as of now with respect to gas or oil prices, et cetera. What that means is that in sort of the ocean container rate environment, we've seen some momentary spikes here and there, but it seems to be normalizing itself fairly quickly. And so right now, what we're seeing is more flat ocean container rates maybe up a tiny bit that we would have factored in that I mentioned in Q4 was the first quarter in a while where we actually had great -- small freight savings. And now, as I mentioned, more flat, maybe a little bit of pressure, but still watching it closely and it's evolving real time. In the expenses, we've seen some of the carriers, including the USPS pass-through fuel charge surcharges and we've reflected that in our SG&A included in our guidance going forward. Mary Coyne: Yes. And I just want to circle back for 1 minute, Dana and just reiterate, while we know we have a great customer, we also are now the #1 priority for us is to appeal to a broader audience, and we're excited about some of the testing that we've done with performance indicators that are encouraging as we move forward. Operator: Your next question comes from the line of Corey Tarlowe of Jefferies. Corey Tarlowe: Great. Can you talk a little bit about trends by month? And any color on what you're seeing quarter-to-date? Mark Webb: Yes, Corey, it's Mark. With respect to Q4, we mentioned, overall, it was a pretty promotional quarter it was markdown driven, particularly in the direct channel. The month themselves, January was the strongest, and it was sequentially better than December, better than November. I think we messaged some of that in some of our inter-quarter remarks that we've made around the guidance. The January performance was heavily sale. It's a sale period. It was heavily markdown driven as well. So the cadence was, as I mentioned, but with a deepening markdown support later in the quarter. And then I would say quarter-to-date, we've seen a challenging start. We mentioned that in our remarks. It's very much in line with how we've guided the quarter overall. -- and are committed as we exit all of these quarters through this learning period to manage our inventory as necessary during the quarter to exit as clean as we can entering the new quarter. Corey Tarlowe: Understood. And I think you mentioned a new merchandise planning system. I know that there have been other initiatives that you've undertaken, whether it was the OMS project or other items. Can you talk a little bit about the benefits of this what the costs are and then how we should think about other incremental projects that are coming in, in this year, which I think you called it an investment year? Mary Coyne: I mean, Corey, I'll start just by saying we are so excited about the MP&A project through out of plan. It will allow us to take what is today a very manual Excel-based system and move it to predictive AI forecasting, which will allow us to have inventory optimized in the right location, in the right step at the right time. So we're very excited about what this means from a customer service -- customer experience because the inventory will be where they need it, but also from a revenue and margin driving initiative. Mark Webb: Yes. And Corey, the one of the great advantages of the OMS project was taking a very old system and modernizing it, which then enables you to bolt in these newer technologies. So excited to be leveraging the newer platform to now start enhancing front-end systems, as Mary Ellen mentioned. With respect to the investments, I would say the investments this year continue to be new stores. We mentioned we're opening net 5. We also have some relocations in the plan in 2026. And then the Anaplan project is a more targeted projects than an OMS project would be an LMS project is far region, which allows us within the capital guide that we provided to also invest in other smaller systems enhancements, benefits. Mary Ellen mentioned a few of them in her remarks around driving direct -- the direct business, et cetera. So that's kind of what's behind the expectation of it being and investment here with respect to capital. And then in the SG&A side of things, the investments really start with marketing more in Q2 and forward. and then obviously, payroll and some of the investments we've made in talent. Operator: Your next question comes from the line of Dylan Carden of William Blair. Unknown Analyst: This is Ann bingo on for Dylan Carden. So the guide implies a softer first quarter with improvement as the year progresses, which I believe is a similar setup to this time last year. What would you say is different this year versus last year that gives you the confidence in the back half inflection? And how much of that outlook depends on macro stabilization or improvement? Mary Coyne: So I'll start you for the question. as we're entering 2026, we are in a period of evolution, and we are testing and learning every day -- what I would say is we are sitting today with an incredibly talented team who are aligned on our vision and are committed to our journey. So as we move forward, we will see product improvements through Q2, 3, 4 we will see learnings from our marketing initiatives that we're attaching where we are rebalancing spend where we are trying new things. And moving forward, we'll see that growth as we lean into the things that are working and equally as we pull away from those tests that don't. Mark Webb: Sorry, I was just going to add with respect to the Q4, as Marion mentioned, the product, obviously, it's -- we're still pre the new assortments in -- and we're also in that period of unanniversaried tariffs. So the first half of the year, currently, as we outlined in my remarks, carries $9 million of tariffs against less than $1 million last year. And then that tariff load actually evens and becomes again, assuming the assumptions that we laid out that the tariff rates for the rest of the year around 15% post the Q1 receipts. -- that Q4 would then turn to a small tailwind. So just with respect to the years over years, there's some elements of just that structural component of tariff that supports that as well. Unknown Analyst: Understood. And then on pricing, do you guys see additional opportunity for targeted price increases in 2026? Is this reflected in the current guide? Or does the current consumer environment or a more cautious approach? Mary Coyne: We will be taking a very measured approach to pricing. As we've said in our remarks, we have seen the overall consumer and specifically our direct channel be more price-sensitive. We're seeing incredible promotion out there in the market. So we will be very measured about any increases we take in price. Operator: And your next question comes from the line of Janine Stichter of BTIG. Unknown Analyst: You've got Eaton Sage on for Janine. Can you just provide some more color on which categories performed well and which may have lagged in Q4 and quarter-to-date? Mary Coyne: Sure. So in Q4, what we saw was that newness and novelty were driving the business. So where we had repeat programs from a year prior or 2 years prior, they were very soft. We also saw success in some of the tests we had out there. We saw success in our travel capsule we saw success in expanded categories in outerwear, we saw the start of accessories, which has really moved into Q1 as a success story. -- and we tested some price points, particularly in sweaters with Casimir and soft success. As we moved into Q1, a we are seeing newness rebounding. We are -- but again, Q1 is not indicative of our 2 product evolution. -- where we really see that evolution is in Q2, where newness in fabric and silhouette and category mix really starts to evolve based on our learnings. Clearly, with the goal to drive full price selling in both channels because we know that we've really seen the retail channel working. We've seen things like our dress business turnaround. It's exciting to see what's happening there. Operator: With no further questions, that concludes our Q&A session and also concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the SoftwareOne Full Year 2025 Results Conference Call and Live Webcast. I'm Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Kjell Arne Hansen, Head of Investor Relations at SoftwareOne. Please go ahead. Kjell Hansen: [Audio Gap] presentation. My name is Kjell Arne Hansen, and I'm the Head of Investor Relations at SoftwareOne. Joining me today are our Co-COOs, Raphael Erb and Melissa Mulholland; and our CFO, Hanspeter Schraner. In terms of agenda, Melissa and Raphael will start with a summary of the year and the Q4 performance. Hanspeter will then take us through our detailed financial performance. And finally, Melissa will take us through the final section covering our AI opportunities within the business model as well as our financial outlook for 2026. Before handing over, please let me draw your attention to the disclaimer regarding forward-looking statements and non-IFRS measures on Slide 2 and 3. And with that, I will hand it over to Melissa. Melissa Mulholland: Thank you, Kjell Arne. Welcome to our full year 2025 presentation. 2025 was transformational. With the combination of SoftwareOne and Crayon, we have created a global software and cloud leader with unmatched reach and capabilities. Today, combined gross sales amount to CHF 14 billion. We serve over 70,000 clients across more than 70 countries, supported by 13,000 highly skilled colleagues. Our ecosystem is equally strong with more than 10,000 vendors and a network of 12,000 channel partners, providing reach to the SMB segment. This scale matters. It shows how we are one of a kind and a truly global partner for hyperscalers and ISVs. In addition, both Gartner and IDC have recognized us as a leader in software asset management. We are well positioned to capture the structural growth opportunity and customer demand based on our global scale and market position. Overall, we have delivered. We returned to growth with revenue up 1.4% year-over-year on a like-for-like basis, ahead of our initial expectation of broadly flat development. Profitability remained strong with an adjusted EBITDA margin of 20.9%, in line with our commitment to stay above 20%. At the same time, we maintained discipline on adjustments coming in below our guidance on below CHF 30 million, excluding the Crayon-related costs. Lastly, we made good progress on synergies, delivering CHF 43 million of run rate by the end of 2025. As of today, total run rate cost synergies amount to CHF 64 million. This was a year where we delivered on our promises while building the foundation for further improvement. Growth improved steadily throughout 2025, and by Q3, we were back to positive territory. And in Q4, we reached 11% revenue growth. We will continue to build off the foundation laid in 2025. The actions we are taking are working, putting us in a stronger position to drive momentum in 2026. Let me briefly comment on the full year performance. I'll focus on the combined like-for-like numbers as this best reflects the underlying development of the business. As stated earlier, we delivered 1.4% revenue growth for the full year, with a clear acceleration into Q4 where growth reached 11%. At the same time, profitability improved and we delivered an adjusted EBITDA margin of 20.9% for the year, an improvement of 0.5 percentage points compared to 2024. The key message is clear. We are improving our growth momentum, combined with continued strong margins. Hanspeter will explain the detailed IFRS numbers shortly. But as you can see, our business is on a path of continued growth. Looking at our 3 segments, we see a clear pattern of improving momentum across the business. In direct, the full year performance was impacted by the Microsoft incentive changes. However, we saw a clear rebound in Q4, supported by multi-vendor and continued CSP growth. Going forward, we see significant growth opportunities driven by our broad partner ecosystem across global software vendors, including AWS, Google, VMware and Adobe. Furthermore, the push for EU sovereign cloud increases demand for multi-cloud compliant cloud solutions, playing directly to SoftwareOne's strength in navigating complex vendor ecosystems and regulatory requirements. In channel, growth was strong at 18.7% for the full year, driven in particular by APAC, which represents 60% of the total channel revenue. At the end of February 2026, we became the first global authorized distributor for Google Cloud, enabling channel partners to access and resell Google. This is a strategic milestone allowing us to significantly expand our channel business through authorized distribution of Google Cloud services across 10 markets, covering Australia, India, the Nordics, Germany, France and the U.S., with additional countries to follow throughout the year. In services, we see solid momentum, supported by demand in areas like cloud and cybersecurity. Across all business lines, growth reflects our ability to capture new incentive opportunities introduced by Microsoft across CSP and services. While EA-related incentives were reduced, we have partially offset this by leveraging our combined service portfolio and strong CSP offering. Profitability improved across all business lines, driven by stronger growth, impact from cost savings and synergy realization. We see a strong and encouraging development with solid growth in channel and services and a recovering direct business entering 2026. I will now hand it over to Raphael to walk you through the regional performance. Raphael Erb: Thank you very much, Melissa. Welcome to everyone from my side. I will now take you through the regional performance. First, I want to highlight the change in our segment reporting going forward. Following the acquisition of Crayon, our operating segments have been reassessed. Given our significant presence in the Nordics and the CEE, the rest of Europe region has been restructured into 3 new operating regions: Nordics, Western Europe and CEE. In DACH, revenue grew 2.8% in 2025, driven in particular by a strong Q4 growth of 15.4%. Headwinds from Microsoft incentive changes on enterprise agreements negatively impacted revenue during the year, but this was offset by a successful transition to CSP as well as strong multi-vendor and public sector growth. Revenue in Western Europe increased 3.3%, driven by strong growth in multi-vendor sales and services, while also here partly offset by changes in Microsoft incentives. Similar to the performance in DACH, the year ended strong with 12.2% revenue growth in Q4. APAC grew 11.4%, driven by strong results across the region, with India performing particularly well. The largest contributor to growth came from services business as was driving by strong demand with data and AI and cloud services. I'm also pleased to share that during Q1 2026, payments commenced from a public sector customer in the Philippines on Crayon's previously outstanding receivables with USD 22 million collected as of today. The remaining amount is expected to be collected shortly, bringing this long-standing matter to a close. Nordics revenue grew 0.7% in 2025. During the year, growth in the direct business was positive and accelerated to double digit in the fourth quarter as the impact from Microsoft incentives ease. 2025 was a disappointing year in North America with revenue declining 12.6% year-over-year. The 2025 performance reflects the previous GTM-related sales execution challenges as well as impact from Microsoft incentive changes. The previously initiated turnaround measures are gaining traction, with internal sales metrics improving sequentially, supporting a recovery and return to growth in 2026. LATAM declined 4.4%, driven in particular by weakness in the direct business. We see strong growth opportunity across key markets like Brazil, Mexico and Colombia, and are confident in our capability to achieve profitable growth in the region. As part of the portfolio review and to support improved future performance, the company has decided to exit 4 nonstrategic countries in the region: Argentina, Uruguay, El Salvador and Nicaragua. Finally, CEE grew revenue with 14% in 2025 driven by strong double-digit growth across both the direct business and services business. Now I want to present a good example of our Google Cloud capabilities and how we support customers in a cloud migration and modernization project. Barton Peveril, a U.K.-based college with more than 5,000 students partnered with us to migrate to Google Cloud. They were facing a significant increase in on-premise hosting costs, alongside the need to modernize their IT environment and support new AI-driven learning tools. Together with SoftwareOne, they executed the full cloud migration over a relatively short period, followed by a managed service agreement to support ongoing operations. The outcome was solid, where they achieved meaningful cost savings, reduced operational workload and significantly improved the performance and security of their systems. Importantly, this also led to a 5-year managed service agreement where we support and maintain their cloud infrastructure going forward. This is a great example on how we combine cloud migrations with long-term services, creating both immediate customer value and recurring revenue streams for us. With that, I will now hand over to Hanspeter to walk you through the 2025 IFRS financial update. Hanspeter Schraner: Thank you, Raphael, and a warm welcome to everybody joining us today. In this section, we are presenting the IFRS figures in reported currency. As a reminder, the income statement includes 12 months of SoftwareOne and 6 months of Crayon. Year-over-year revenue growth of 22.5% mainly reflects the acquisition of Crayon closed on 2nd of July 2025. Reported EBITDA margin improved -- improvement is driven by benefits of the previously initiated cost reduction program and continuous cost control. The increase in depreciation, amortization and impairments from CHF 72.7 million to CHF 123.7 million is related to the acquisition and includes depreciation on fixed assets, amortization of intangible assets [Audio Gap] of right of use assets and CHF 17.8 million of impairments. The impairments comprise CHF 3.8 million on intangible assets, CHF 8 million on LATAM goodwill and CHF 6 million on right-of-use assets related to office closures due to integration. Net financial expense increased to CHF 54.4 million, significantly higher than prior year. This was mainly due to lower finance income and higher finance expenses. The decrease of finance income is largely reflecting a CHF 12 million lower fair value gain on Crayon shares in 2025 compared to prior year. Finance expenses increased driven by higher interest costs from acquisition financing and higher factoring costs in line with the increased use of factoring. In addition, other finance expense includes a one-off CHF 5 million make-whole payment related to the early redemption of Crayon bonds following the acquisition. Income tax expense is CHF 28.1 million, implying an effective tax rate of 95% compared with the expected average group tax rate of 23%. The main drivers of this gap are nondeductible expenses for tax purposes as well as unrecognized tax losses. Net profit for the period is CHF 1.4 million. In this slide, I will take you to the adjusted to reported EBITDA. Our reported EBITDA ended at CHF 207.6 million in 2025. 2025 adjustments to reported EBITDA of CHF 69.4 million in total were primarily related to Crayon transaction and integration costs totaling CHF 48.3 million. Excluding these costs, adjustments to reported EBITDA were CHF 21.1 million, well below the CHF 30 million target. Overall, we saw a significant reduction in adjustments with 2025 adjustments constituting around 30% of reported EBITDA in comparison to around 90% in previous year. The adjusted EBITDA margin in Q4 2025 was 23.4%, down 1.5 percentage points year-on-year, mainly due to significantly lower EBITDA adjustments compared with Q4 2024. Let me now walk you through the developments in adjusted OpEx on a like-for-like basis. This bridge shows the development on a combined like-for-like basis which we believe is the most relevant way to assess the cost development. Overall, OpEx remained broadly stable year-on-year, declining slightly to CHF 1.2 billion, reflecting strong cost discipline despite inflationary pressure and continued investments in the business. In '25, realized CHF 74 million of cost savings from the legacy SoftwareOne cost-saving program, which was completed in Q2 2025 as well as 16 million of in-year synergies corresponding to CHF 43 million of run rate synergies. Synergies from the Crayon acquisition are primarily driven by the elimination of publications, simplification of the organizational structure and efficiency gains across corporate functions. These effects helped offset underlying cost increases during the year. Compensation increased by CHF 42 million mainly due to salary inflation across the existing global workforce and the catch-up of social security contribution in India following legislative changes. In addition, we continue to invest selectively in sales and delivery capabilities to support future growth. Importantly, these investments are funded by realized synergies, allowing us to strengthen go-to-market and delivery capacity without diluting margins over time. We also saw higher third-party delivery costs in line with increased activity levels as well as some nonrecurring and other costs, and foreign exchange had a positive impact of approximately CHF 4.6 million. Overall, this reflects a balanced cost development with tangible synergy delivery, disciplined cost management and continued investment to support sustainable growth. Turning to the balance sheet. The most significant year-on-year changes reflect the impact of the Crayon acquisition, which is clearly visible across several line items. Cash and cash equivalents increased to CHF 419.1 million, while financial liabilities rose to CHF 788.4 million, mainly reflecting the CHF 575 million term loan, CHF 100 million utilization of the revolving credit facility at year-end and the CHF 100 million bridge loan, which was repaid in January 2026. As a result, net debt amounted to CHF 369.3 million compared to a net cash position in the prior year. Net working capital on 31st December 2025 was negative at CHF 564.4 million, primarily driven by the inclusion of Crayon and the continued use of factoring. The increase in intangible assets is mainly driven by the recognition of acquired technology and customer relationships from the Crayon acquisition as well as an increase in goodwill which primarily reflects the value of the assembled workforce and the expected synergies from combining the operations of Crayon. Equity increased to CHF 981.4 million driven by the acquisition of Crayon. Overall, this balance sheet reflects the step up in scale following the acquisition. Before I walk through the trade receivables 2025, I would like to briefly comment on a matter we decided to disclose proactively in today's press release. Preliminary legal proceedings have been initiated into potential forgery of documents by individuals relating to SoftwareOne's recording of certain overdue trade receivables in the first half of 2024. The proceedings are not directed against SoftwareOne, and they were triggered by allegations raised by a third party. I want to make it very clear. Internal audits performed an extensive retrospective assessment of trade receivables and related provisions of the first half of 2024 and concluded that they were accurately recorded. The assessment also confirmed that provisions were appropriate and consistent with subsequent write-offs and provisions. The slide presents the aging of trade receivables and the corresponding lifetime expected credit loss for 2025 and 2024. The acquisition of Crayon led to a material increase in trade receivables in '25. In accordance with IFRS, acquired trade receivables are recognized at fair value net of expected credit losses. The implied bad debt amounts to CHF 33 million included in the respective fair value and is largely allocated to receivable past due by more than 181 days. For like-for-like comparability, and on a cross presentation of the acquired trade receivables, the expected credit loss in the bigger than 180 days bucket would be approximately 50%, broadly comparable to the previous year. As of December 2025, Crayon's acquired trade receivables included USD 37 million related to a public customer in the Philippines. As Raphael already mentioned, USD 21.5 million of this amount was collected in March 2026. At year-end 2025 and next to the standard closing procedures, internal audit again performed an additional assessment of the trade receivables and related provision recognized at year-end 2025 and again concluded that they were accurately recorded. Further, the statutory audit of the 2025 full year accounts, which included a focused review of revenue recognition and the provisioning of overdue trade receivables provided further independent assurance regarding the appropriateness of the provisions recognized in the 2025 accounts and their compliance with applicable standards. Turning to the net working capital. Net working capital after factoring decreased by CHF 411.6 million year-on-year, mainly reflecting increased use of short-term factoring of approximately CHF 282 million as well as the positive impact from acquiring the negative working capital from Crayon. Given our business model, characterized by high gross sales volume and seasonal volatility, effective working capital management is key. As part of this, we use nonrecourse factoring as a flexible and economically attractive liquidity management tool applied in a disciplined manner. However, it's important to state that our primary focus remains on structurally improving underlying working capital over time. Net working capital before factoring decreased by CHF 129.5 million year-on-year, driven largely by the acquisition and consolidation of Crayon. Crayon entered the group with a strong negative working capital position which contributed positively to the balance sheet and reduced net working capital at the combined company level. On the right-hand side, we outlined key operational levers we are addressing across the end-to-end order-to-cash cycle, including faster and more accurate invoicing, reduction of overdue receivables, strong credit entry billing processes and better alignment of payment terms with vendors and customers. Together, these measures support our ambition to structurally strengthen working capital and, in turn, improve cash flow over time. Now turning to our cash flow statement. Working capital changes gave a cash inflow of CHF 130.6 million. However, as mentioned on the previous slide, this is significantly impacted by the use of factoring. Noncash items of CHF 169.6 million mainly reflect depreciation, amortization and impairments, together with the add back of the net finance results. CapEx came in at CHF 65.5 million, primarily driven by investments in internal IT, systems and platforms. The cash outflow related to the Crayon acquisition amounted to CHF 290.2 million, as presented in the cash flow statement, and shown net of cash acquired. Gross cash consideration totaled to CHF 504.8 million comprising CHF 419.4 million for the acquisition of Crayon shares and CHF 85.4 million for the subsequent squeeze out. This was partially offset by cash acquired of CHF 270.3 million. The remaining CHF 2.7 million relates to earn-out considerations to be paid in cash for Medalsoft and Predica acquisitions back in 2024 and 2022, respectively. Financing contributed a net inflow of CHF 273.4 million, driving by debt funding, partially offset by 2024 dividends of CHF 45.6 million and interest costs. We ended the period with a cash of CHF 419.1 million, giving us a solid liquidity position. Turning to the net debt development. The increase over the year was primarily driven by the cash outflow related to the acquisition of Crayon. The Crayon acquisition reflects net cash outflow of CHF 405 million as well as the impact of the derecognition of the Crayon shares. Excluding the acquisition effect, the underlying cash generation was driven by a positive contribution of CHF 277 million from adjusted EBITDA and the further CHF 130.6 million inflow from changes in working capital. Other cash outflows mainly relate to cash-effective portion of EBITDA adjustments, capital expenditures, interest and tax payments as well as dividends. As a result, net debt stood at CHF 369.3 million at year-end. Leverage measured on as net debt divided by adjusted EBITDA on an IFRS basis remains at a comfortable level of 1.3x. On a like-for-like basis, leverage would amount to 1.2x. Finally, let me turn to the dividend. Our dividend policy targets a payout ratio of 30% to 50% of adjusted net profit for the year. As a reminder, at our H2 '25 earnings release, we refined our policy by excluding transaction and integration costs related to the Crayon acquisition when calculating adjusted net profit used for dividends. This was made to better reflect the underlying earning power and dividend capacity of the business in a year of integration. For 2025, we proposed a dividend of CHF 0.15 per share, corresponding to a total distribution of CHF 33 million and the payout ratio of 37% of reported adjusted net profit. Excluding Crayon-related transaction and integration costs, the implied payout ratio is 71%. This dividend proposal reflects our continued commitment to delivering attractive shareholder returns while maintaining a balanced capital allocation. It also underlines our confidence that the actions implemented to strengthen net working capital and improve operational execution will translate into improved cash generation in 2026. With that, I will hand it back to Melissa, who will provide further insights in how our business model benefits from AI, followed by her closing remarks. Melissa Mulholland: Thank you, Hanspeter. Before I go into our outlook and closing remarks, I would like to address how we are positioned in a market that is now rapidly and fundamentally being changed by AI. AI is increasing software and cloud consumption, but also complexity, driving a much greater need for governance, optimization and services. At the same time, AI adoption is forcing customers to upgrade their software estates and invest in new tools while accelerating cloud migration and usage. This plays directly into our model. We thrive in helping our customers in maximizing return on investment in IT and simplifying complexity. We support customers across the full life cycle from sourcing and procurement to migration and cloud services to optimization and cost management and increasingly into data and AI solutions. And as customers become more AI ready, we see a clear increase in demand for higher-value services. From a hyperscaler perspective, the vendors see us as a clear driver of AI solutions. Given our customer proximity, AI capabilities that have been established since 2017 and our agility to market, we are uniquely positioned to help customers manage the complexity and spend through our AI solutions. AI is not just a technology shift. It is a structural growth driver for our business. Let me finally turn to our outlook for 2026. We expect revenue growth to accelerate to mid-single digits on constant currency on a like-for-like basis. We see growth driven by CSP, multi-vendor expansion, increasing demand for higher value services and continued channel growth. Expanding our AI capabilities alongside the sales force enables us to build and deliver AI-driven customer solutions, further accelerating consumption growth. At the same time, we expect further margin improvement with adjusted EBITDA margin above 23%, driven by operating leverage, synergies and continued cost discipline. On synergies, we remain on track to reach CHF 100 million run rate synergies, building on the strong progress already delivered in 2025. As already mentioned, by the end of March, the total realized cost synergies amounted to CHF 64 million. We enter 2026 with improving momentum, clear drivers for growth and a strong path towards higher profitability. Let me close with a few key takeaways. 2025 has been a transformational year, while the performance also demonstrates the strength of the combined company. We have executed with discipline, successfully integrated the business and delivered ahead of our synergy targets. At the same time, we have delivered on our financial commitments and strengthened our position and customer offering. Finally, we are uniquely positioned to capture the continued growth in software and cloud, supported by our global scale, strong vendor relationships and clear commercial focus. This is a business with improving momentum, a stronger platform and a clear path forward, and I'm looking forward to sharing more about our strategy and priorities on the Capital Market Day in June. Thank you. I'll hand it now back to the operator. Operator: [Operator Instructions]. The first question comes from Mao Ines from BNP Paribas. Ines Mao: Congrats for the strong result today. I have 2 questions. So the first one is the company is guiding for mid-single-digit revenue growth next year. Does this include a recovery of North America region already? My second question is, can you give us more color on why profitability improved so much year-over-year in Q4 in the Services segment? So we expect this margin level as the new normalized level, so to stabilize from here? Or is there more scope for margin expansion in the Services segment? And my final question is... Raphael Erb: Sorry, somehow your voice is not so clear. We can hardly understand. Ines Mao: Can you hear me better? Raphael Erb: Yes, now it's clear. Ines Mao: Okay. I'll restart. So my first question is about next year revenue growth guidance. Does this include the recovery of the North America region in this guidance? My second question is on the profitability level in the Services segment, which has improved quite significantly year-over-year in Q4. Should we expect this margin level as a new normal level, so to stabilize from here or more margin expansion in the Services segment? And my last question is, can you discuss the growth prospects for the Services segment in 2026? And any new offerings that will drive growth? Typically, in Microsoft E7, I understand it will be a readiness assessment conducting by SoftwareOne team. Would you recognize this as the Services revenue going forward? Raphael Erb: Thank you. Maybe I kick off with the first questions around North America. For sure, as we all know, 2025 has been a disappointing performance for us. However, we are making, as mentioned, also step-by-step progress, especially also around our GTM turnaround. Our internal sales metrics and KPIs clearly show that we are making progress. And with that, to answer your question, we are positive that 2026 is going to be more resilient actually and a more predictable year for us in North America, and we are positive that in that region, we will return into revenue growth for the full year 2026. Around the services margin, maybe also, I think if you look into the numbers and the development from 2024 into 2025, it has been a positive progress. So the margin overall has been increasing, and we are positive that this will continue. It will continue as our service portfolio is shifting more and more towards cloud-native capability, also higher value advisory and managed services and support services, which we are having in our offering. I think this will help to further improve and accelerate our overall margins in the services business. Melissa Mulholland: Thanks for your questions. Regarding E7, you're right to call it out. We see this as a strategic opportunity with our Microsoft portfolio as it combines, let's call it, the SKU capability along with AI through Copilot to simplify this for our customers. And we see this to be particularly attractive in the high end of corporate into the enterprise segment. So we're well positioned to capture additional growth opportunities from this. In terms of additional service areas of growth that are implied, certainly, we're going to continue our focus around AI as well as agents and continue to improve the, let's say, the efficiency of the overall services line, which is implied in terms of the overall margin improvement in Q4. Operator: The next question comes from Christian Bader from Zurcher Kantonalbank. Christian Bader: I have 3 questions, please, and I'd like to do them one after the other. First of all, you mentioned several times new business with Google Cloud. And I was wondering what is the revenue potential here? And is this business going to be margin accretive? Melissa Mulholland: Thanks for the question. So with Google and with our channel business in general, this is a new opportunity for us. As we've seen with our AWS channel expansion, it will take time for this to be able to really take effect in terms of the P&L. So we expect this to deliver additional upside in the back half of H2, but more likely in 2027 from a materiality perspective. From a margin standpoint, this is very accretive to our overall channel margins as the channel business is very highly dependent on our platform, Cloud IQ, which gives us more efficiency and scale. So we see this to be particularly attractive across the markets that we are ready to launch with more countries to come. From a margin standpoint, this is very accretive to our overall channel margins as the channel business is very highly dependent on our platform, Cloud-iQ, which gives us more efficiency and scale. So we see this to be particularly attractive across the markets that we are ready to launch with more countries to come. Christian Bader: Okay. My second question has to do with LATAM because you said that you exited 4 countries, Argentina and 3 others. So I was wondering how much of revenue is lost due to the exit of these 4 countries. Raphael Erb: The revenue impact is not significant because those markets are very, very small markets already. There actually the revenue impact from the revenue of 2025 has been very insignificant. Christian Bader: I see. All right. Okay. And then my last question is, is it possible to get some guidance for your investments, both in tangibles and intangibles for 2026? CapEx guidance, any CapEx guidance, please. Hanspeter Schraner: So as we are continuing to invest in our technology, especially in the platforms, the investments will maybe slightly increase, but for sure, have a similar level as in 2025. Operator: The next question comes from Florian Treisch from Kepler Cheuvreux. Florian Treisch: My question is around the Microsoft incentive changes, EA changes. I mean we discussed at length last year being a headwind for SoftwareOne. So the first question would be, have you actually, let's say, delivered better than expected on these kind of headwinds as you have mentioned or flagged that Q4 has clearly been driven by the CSP transition? And then looking into '26, how much of a tailwind can it become? Or would you still assume it's a slight negative impact on the overall business? Melissa Mulholland: Thank you so much for asking. So great question. In terms of Q4 and what we saw for the full year for 2025, yes, we delivered better than expected given the, let's say, negative effect of the EA changes. This was driven by the focus to CSP realization, which I'm pleased to say we delivered. In addition, we also saw the shift to services-based incentives as particularly accretive, and that's also demonstrated in the Q4 profitability improvement overall for services. As we go into 2026, we do not see any headwinds effect with related to the EA incentives. If anything, there will be stabilization of incentives as indicated also by Microsoft. So with that, we will further, let's say, accelerate the growth that we've had around CSP and services as we see that to drive more potential. Operator: The next question comes from Christopher Tong from UBS. Christopher Tong: Maybe 2 from my side. I was just wondering on exceptionals in 2026. What should we expect over here? Obviously, you'll have to take some further cost synergies, but is there anything else we should be mindful of? Hanspeter Schraner: I mean, look, as we already stated, our goal is to narrow the gap between the reported and adjusted EBITDA. So we said it's below CHF 30 million. And of course, you always have certain items to adjust which are non-recurring, but we stick to the below CHF 30 million and with a clear ambition to further decrease. This does not include the Crayon acquisition cost or cost related to the integration, to be clear. Raphael Erb: And maybe to add on, on the cost synergies, as we already mentioned, to date, we are at the CHF 64 million, and we are making further progress on that. We are very committed on our CHF 80 million to CHF 100 million target, which we mentioned. And through that, we should also -- this should also help to make a positive impact also going into H2 on our overall OpEx situation. Christopher Tong: Got it. And I guess maybe on just the outlook and the cadence of revenue growth for the year. You mentioned that profitability would probably be more weighted towards second half. I was just wondering if you think revenue growth would also be sort of second half weighted as well. Melissa Mulholland: Yes. I mean with the seasonality of our business, Q4 is the largest quarter. So you could certainly see that implied growth pick up on towards the back half of the year. Operator: Next question comes from Marc Burgi from Finanz und Wirtschaft. Marc Burgi: I only have one question concerning North America. You already talked about it in length, which is about the growth. Can we expect that in the second half? Or could you maybe be more precise about when that should occur? And just about the general market situation, how is the market -- how is your market position? Hanspeter Schraner: In general, as mentioned, I'm very confident that in North America 2026, we will return into growth overall as a company again, which is very good, given where we are coming from. I also expect in Q1 a better performance than in Q4. So from this perspective, I'm positive that the trajectory is going to improve, and we should see an improvement already in Q1 compared to Q4. Overall, I think the market for us is -- remains to be an attractive market. And again, with the combination of Crayon, I think we have a good chance now with a better overall setup also with the channel business as an additional business line for us. So we continue to be very focused on North America. Operator: The next question comes from Andreas Wolf from Berenberg. Andreas Wolf: Congratulations on the strong Q4. I have several questions. The first one is related to the assessment of the individual regions. Have you already fully assessed the region's performance? Or is there a possibility of impairments also in 2026? The second is related to AI and the adoption of use cases? Do you see opportunities associated with the deployment of on-site engineers to drive use case adoption and ultimately, your business? Question number three. How are AI providers such as OpenAI or Anthropic dealing with resellers? Does this -- does their growth offer business opportunities for you as well? And the last one is related to Microsoft price increases. What do you believe will be the tailwind from those in 2026? Hanspeter Schraner: Let me take the first question regarding the impairments. So what we did in 2025, we do the impairment test on CGU levels, which are the 7 regions. And obviously, there were no impairments based on the current business plans for all regions with the exception of LATAM. LATAM we impaired CHF 8 million. And we believe this is the right number based on what we know today. So based on what we know today, there are no further impairments expected in 2026. Otherwise, you would have impaired already at the end of 2025. Melissa Mulholland: Thanks for your question regarding AI. So I'll start with the first regarding the adoption of use cases. So this is something that we are very much focused on. We always believe that it's important to test internal use cases before we take them to market. And we're also finding ways to drive AI through internal adoption to increase more efficiency and scale also to reduce cost to make us quicker to market to customers. So this is something that, yes, we are focused on, and yes, we are also looking at ways to deploy our internal AI capability to both support customers, but also ourselves. In terms of your question regarding Anthropic, OpenAI, certainly, this is something that is quite exciting to see in the market. Anthropic is certainly an area where we see additional partner opportunity as they need partners like us to be able to deploy and also to help customers manage which AI models should they actually consider. This is where our business model really thrives around complexity. So we help guide our customers around which model makes sense for their data environment, but also how to implement and build those solutions. So we see business opportunity to come out of that. In terms of the Microsoft price increases, I always say Microsoft price increases help our business. So there's certainly a carryforward from that. It also positions us well to be able to support our customers in navigating that price increase as our business has always been focused around cost management overall. Hard to say what the actual implied impact will be, but certainly, we see this to be positive for 2026. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Kjell Arne Hansen for any closing remarks. Kjell Hansen: Thank you, and thank you, everyone, for joining the call. And as always, please don't hesitate to reach out to the IR team if you have any further questions. Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Welcome to the 2025 Annual Results Presentation of Singamas Container Holdings Limited. First of all, I'd like to introduce you to our management of the company, Mr. S. S. Teo, Chairman and Chief Executive Officer; Ms. Winnie Siu, Executive Director and Chief Operating Officer; and Ms. Rebecca Chung, Executive Director, Chief Financial Officer and Company Secretary. Mr. Teo will now present the company's annual results. All the financial figures in the presentation are in U.S. dollars, unless otherwise stated. Mr. Teo, please. Siong Seng Teo: Thank you. Good afternoon, friends, ladies and gentlemen. Thank you for joining us this afternoon. We will go through the presentation by looking into Singamas' corporate profile, industry dynamics, financial and business review. As an established container manufacturer, leasing, logistics and depot service provider, we currently operate 5 factories in China. Our total annual capacity is now at about 270,000 TEU of dry freight and ISO specialized container and about combined capacity of 21,000 units of tanks and customized containers. For leasing business, we currently own a fleet of about 180,000 TEU containers. Singamas is also operating 8 container depots across 7 major cities in China and 1 logistic company in Xiamen. This slide shows the ongoing upgrade of our Huizhou and Shanghai manufacturing plant designed to enhance capacity and capability of energy storage system ESS container orders. At Huizhou plant, the upgrade is aimed at boosting overall production capacity. The facility has been equipped with advanced robotic and automation application to meet the rising demand for ESS containers. At our Shanghai plant, we have expanded dedicated production line for high-value customized containers, including Battery Energy Storage System, BESS containers and AI Data Center containers. This has enabled elevated development of our integrated business. In year 2025, annual capacity for customized container at Shanghai plant has increased to 7,200 units. The next 3 slides, Slide 7 to 10, cover our product ranging from traditional dry freight and ISO specialized container to innovate customized container include customer containers for ESS, data center, car racks, housing and more. And we also provide a full range of container solution services. The core product of Singamas' customized container is ESS, energy saving system. This container facilitate efficient electricity storage and release, benefiting users by allowing electricity consumption at lower period. ESS container ensures stability in new energy power generation and are designed to withstand extreme condition for normal operation in challenging environment. Green Tenaga is our wholly owned subsidiary in Singapore, dedicated to accelerating the journey towards net zero emission and carbon neutrality. Through its BESS solution, it form a pivotal element in our commitment to delivering comprehensive green energy solution worldwide. In 2025, Green Tenaga partnered with Singapore A*STAR ARTC to co-develop an analytic power energy management system that enhanced battery health, energy efficiency and intelligent sustainability energy solution for BESS. In our collaborated in a collaboration with the Institute of Technical Education to co-develop an ESS training program for the youth in Singapore. With this program, Singapore Singamas contribute to its ESG goal through fostering new energy talent development, enhancing ESS safety standard and supporting low-carbon economy transition. Next, for our leasing business. Significant growth was recorded for the business this year. By the end of 2025, we own a fleet of about 18,000 TEU leasing containers, 18,000. Singamas is a major operator of 8 container depot in China. We maintain strong tie with key port operators in the countries and foster relationship with major global shipping and leasing company. Our logistics service business focused on enhancing warehousing capability, integrating multimodal transport resources, improving digital operational capabilities for efficiency and collaborating with service provider to expand network coverage. This slide shows Drewry's analysis of global dry freight container production and pricing trend of January 2026. For the year 2025, worldwide dry freight container production was 6.5 million TEU, far exceeding the initial market expectation. However, it has led to significant surplus worldwide. As the market is expected to regulate the surpluses in years to come, Drewry forecast the industry production for the year 2026 will decline sharply to 3.6 million TEU. On pricing, the average price of a 20-foot standard dry freight is expected to reach USD 1,710 for the year 2026, a year-on-year increase of 2.6%. This trend highlights a market transitioning from over production to caution rebalancing. According to Drewry, long-term lease rate for all standard dry freight containers dropped sharply during 4Q 2025, and leasing rates are projected to remain subdued in the next few years. This forecast from Drewry Q1 2026 provide a solid baseline for market stabilization. However, they were made before the major disruption from the Middle East war, including rerouting around the Cape of Good Hope, elevated fuel and insurance costs. These emerging factors or rather disturbing factors may affect short-term leasing rates and recovery trajectory in ways not reflected in the current forecast. That means the war in Middle East have created many issues, and this may affect what we forecasted. This chart shows Singamas' average selling price trend of 20-foot dry freight container and related steel costs over the years. Despite better-than-expected global trade volume and ongoing new container vessel order, U.S. tariff and trade policy continue to create market uncertainty, leading to softer container demand in the second half of 2025. Consequently, the average selling price of 20-foot dry freight container dropped 12% to USD 1,752 in 2025, meanwhile, container steel average cost dropped about 11%. Now let's move on to the financial review section. Revenue decreased by 17% to USD 481.5 million due primarily to soft market demand and overproduction in previous year. Consolidated net profit attributable to owners of the company decreased by 48% to USD 17.4 million. Basic earnings per share was USD 0.0073 for the year compared with USD 0.0143 in 2024. Net asset per share was USD 23.30 as a year of 2025, almost the same as previous year. We have decided a final dividend of HKD 0.02 per share proposed for the year 2025. Together with the interim dividend of HKD 0.03, total dividend for this year was HKD 0.05 per share, representing a payout of about 88%. Let's move on to business review section. First, manufacturing. It shows the performance of our manufacturing and leasing business. This segment achieved revenue of USD 447.8 million, which accounted for about 93% of our total revenue. Segment profit before tax and noncontrolling interest was about USD 18.1 million. This slide shows the breakdown of container units sold under different product categories and accordingly, the respective revenue generated. The table on the left shows that Singamas sold over 147,000 TEU of dry freight container during the year. The pie chart on the right shows that the sales of this dry freight container made up of 57% of the segment revenue compared to 72% in the previous year. For customized container, more than 13,000 units were sold during this year. As global interest in solar energy grows, revenue contributed by our ESS continued to increased drastically from 16% of 2024 to 33% in 2025. Leasing revenue accounted to 8% of the group total revenue during the year. Finance lease Finance lease interest income was USD 4.1 million, up 47% year-on-year, while operating lease income was about USD 15.6 million, up 176% year-on-year. This slide shows the performance of our logistics service business. Its revenue was USD 33.8 million and segment profit before tax and noncontrolling interest was USD 8.7 million. This slide represents our marketing and operating synergy strategy in the years to come. The political and tariff issue between U.S. and other countries, especially following the outbreak of the Middle East war will impact our operating environment. We believe many carriers will once again choose to avoid the Strait of Hormuz and the Suez Canal. While this rerouting could initially stimulate demand in dry freight container market, the current sizable dry freight pool of 55 million TEU is likely to temper the overall impact, leaving demand for dry freight container unpredictable in the first half of 2026. At the same time, the ongoing crude oil crisis is expected to accelerate global transition to new energy infrastructure, which could translate into further growth in market demand for our ESS containers. Faced with unpredictable demand in dry freight container, we maintain strict cost control and cautious capital expenditure. On the maintenance side, our focus remains on enhancing safety and environmental protection of our plants. On the growth side, we invest on high-growth customized container project and automation -- short payback automation initiative. This balanced strategy keep us agile, cost disciplined and well positioned to capture any new opportunities in this challenging market. The following appendices that show our income statement and the data of our factory and depot for your further reference. That concludes my presentation. If you have any questions, Winnie, Rebecca and myself will be happy to answer. Thank you very much. Operator: [Operator Instructions] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] New energy container [Foreign Language] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] tank container [indiscernible] ESS. [Foreign Language] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] barrier of entry is higher [Foreign Language] Unknown Analyst: [Foreign Language] Wai Yee Siu: [Foreign Language] renewable energy [Foreign Language] Siong Seng Teo: [Foreign Language] sustainable energy [Foreign Language] Unknown Analyst: [Foreign Language] Wai Yee Siu: [Foreign Language] 170 out of 481.. Pui King Chung: [Foreign Language] specialized container [Foreign Language] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] weekly service [Foreign Language] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] solar farm -- solar energy farm [Foreign Language] Unknown Analyst: [Foreign Language] Wai Yee Siu: [Foreign Language] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] Unknown Analyst: [Foreign Language] Wai Yee Siu: [Foreign Language] Siong Seng Teo: [Foreign Language] finished product like quality [Foreign Language] Unknown Analyst: [Foreign Language] Wai Yee Siu: [Foreign Language] economies of scale, productivity [Foreign Language] Siong Seng Teo: [Foreign Language] Singapore, Green Tenaga [Foreign Language] Unknown Analyst: [Foreign Language] Siong Seng Teo: [Foreign Language] Unknown Analyst: [Foreign Language] Wai Yee Siu: [Foreign Language] million dollar question [Foreign Language] Siong Seng Teo: [Foreign Language] Bangladesh, Sri Lanka [Foreign Language] it's not free, there's a cost involved. [Foreign Language] Operator: [Foreign Language] Thank you, everyone, for joining. Thank you Mr. Teo, Winnie and Rebecca.
Operator: Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Chagee's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. With that, I will now turn the call over to the first speaker today, Ms. Alicia Guo, Investor Relations Director of the company. Please go ahead, madam. Alicia Guo: [Interpreted] Thank you. Hello, everyone, and welcome to Chagee's Fourth Quarter 2025 Earnings Call. With us today are Mr. Junjie Zhang, our CEO; Mr. Dengfeng Yin, our COO, Global Executive President and CEO of Greater China region; and Mr. Aaron Huang, our CFO. The company's financial and operating results were released by the Newswire earlier today and are currently available online. Before we continue, I refer you to our safe harbor statements in the earnings press release. which applies to this call. Any forward-looking statements that we make on this call are based on assumptions as of today, and Chagee does not undertake any obligation to update these statements. Also, this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of non-GAAP measure to GAAP measure. With that, I will turn the call to our CEO, Mr. Junjie Zhang. Please go ahead, sir. Junjie Zhang: [Interpreted] Hello, everyone. Thank you all for joining Chagee's Fourth Quarter 2025 Earnings Conference Call. Over the past year, the market has experienced significant volatility and the competitive landscape has grown even more complex. As a new listed young company, we indeed encountered some ups and downs on our 2025 journey, took a few detours and a time faced moments of uncertainty in our decision-making. The management team has conducted a deep review and a reflection on these reviewing them as vital nourishment to drive the company's evolution and build long-term competitiveness. Looking back at our journey, 2023 to 2024 was a period of rapid expansion in Greater China market. Our primary strategy was quality tea house expansion with the core objective of securing prime location across major commercial districts nationwide, leveraging a standardized business model to achieve rapid scale. This strategy delivered significant results. We now have over 7,000 core tea house locations across Mainland China. And through Boya Tea Latte, our blockbuster product, we successfully pioneered the fresh tea leaf category and accumulated a total of nearly 240 million members registered with our membership program. These achievements have formed the foundation of our durable competitive moat. Over the past year, the market entered a new shape and consumers have shown a K-shaped divergence in spending habits. On side chasing extreme value, the other seeking premium experiences through superior products and service. The ongoing price war among the third-party delivery platforms has further intensified this divergence. For Chagee, we have a strong foundation in premium experiences with over 7,000 prime offline locations, a core fresh tea leaf latte driving over 90% of revenue and a loyal membership base. We underinvested here before. Now we are ready to expand categories and fully unlock our offline potential. Last year, Chagee foundation solidified and we entered high-quality development. We recognize that expansion phase inertia no longer met the demands of refined management and operational excellence. Starting the second half of 2025, we advanced a series of internal adjustments, including organizational restructuring and business model transition while strategically slowing down the pace of new product launches. This had a measurable impact on our revenue. We also underestimated delivery platform price on off-line sales. We stay true to our long-term strategy, avoiding short-term trends. Today, I would like to share the clear insights from these experiences and our definitive 2026 direction. We believe a team that faces problems head on, learns from them and sharpen its thinking deserves long-term trust. In this way, we aim to deliver enduring value to our shareholders, our consumers and society at large. I can now share with confidence that our internal realignment is largely complete, and we have returned to steady operations in order. Looking ahead to 2026, our core strategy will remain centered on high-value brand positioning and consumer value with focus on refining every day, every detail that shapes the consumer experience. Specifically, we will focus on 5 key areas: brand upgrade, product innovation, scenario expansion, experience enhancement and organizational improvements. These initiatives will bring us closer to our customers and support sustainable high-quality growth. At the brand level, we will launch new formats for regular and personalized tea houses, complemented by varied product lines to fill diverse occasions and emotions. We will elevate the offline experience, creating a true first space that connects emotionally with customers and showcases Chagee's unique term. We will stay true to the logic of product people. We will innovate across categories by anchoring our 18 to 30 demographic core demand and develop new offerings in special deals, tea latte and more, aligning our portfolio with consumers' multi-scenario lifestyle. We will penetrate new scenarios with morning and evening specific products such as energizing morning and evening low caffeine drinks. To complete our all-day lineup, we will also grow into workplaces, celebrations, birthdays, schools and wedding, leveraging scenario marketing to win lasting mind share and wave strategy into everyday and special occasions. Consumer experience and organizational strength underpin our strategy. We will enhance tea health environment through improved ambience and differentiated designs for flagship, Landmark and boutique tea houses. On service, we will overhaul after sales system, rolling out company-wide training, launch a SVIP hub line and create feedback channels that directly shape improvements based on real consumer input. Strong organizational capability is essential to delivering our core strategic goals. In 2026, we will advance digital tools, optimize processes and standardize best practices in operation, R&D, supply chain and beyond. This will create a leaner, more agile structure perfectly linked with our brand expansion and consumer needs. We understand that high-quality growth is a long-term process requiring patience and results, and we must consistently do what is right for the long term. In 2026, all of our strategic execution and resource allocation were centered on consumer value. We believe that only by truly understanding consumers, meeting their needs and creating value that exceeds their expectations can a brand achieve long-term steady development. We also look forward to working with all partners to advance these strategies and build on an even more vibrant strategy. Over 8 years, Chagee expanded from one tea house to 7,453 tea houses. This growth reflects the strength of our sustainable business model, adaptive organization and commanding brand equity. In 2025, due to the comprehensive organizational adjustments in the second half of the year and a deliberate pause in new product launches, we experienced a slower growth in top line. Our same-store sales in the fourth quarter declined by 25.5% year-over-year. This was indeed our biggest challenge in 2025. But what I want to emphasize is not just this number, but also the fact that despite short-term pressure, we did not resort to short-term tactics. Instead, we held firmly to our long-term plan. In 2023, recent domestic same-store sales showed sequential improvement, reinforcing our confidence in a full year trajectory of stabilizing in the first half and improving in the second. From a long-term perspective, we will continue to make overseas operations a powerhouse growth driver, and we are unwavering in our goal to evolve Chagee into a global key leader originating from China but resonating universally. With that, I will now turn the call over to our CFO, Aaron, who will provide detailed insights into the financials. Thank you. Hongfei Huang: Thank you, Junjie, and hello, everyone. Thank you for joining our earnings call today. And as Junjie outlined, we have gained valuable clarity from 2025 that position us well for 2026 execution. I will focus on remarks on the metrics that support this outlook. Before we begin, please note that all amounts are in RMB and all comparisons are on year-over-year basis, unless otherwise stated. For the full year 2025, total GMV reached RMB 31.6 billion, representing a 7.2% increase from RMB 29.5 billion in 2024. In the fourth quarter, total GMV was RMB 7,322.9 million, reflecting the challenging environment in our home market, but also strong growth momentum overseas. As of December 1, 2025, our tea house network totaled 7,453 locations across Greater China and overseas, a 15.7% increase from 6,440 a year ago. Specifically, our franchisee tea house accounts for 6,838 compared to 6,971 in the third quarter, while company-owned tea house reached 615, representing a net increase of 248 sequentially. This change was primarily because we converted some of our franchisee tea house into company-owned ones in China. In Greater China, average monthly GMV per tea house was RMB 337,000 in fourth quarter of 2025 and RMB 387,000 for the full year, consistent with same-store and the mix dynamic that Junjie discussed. At the same time, overseas GMV for the fourth quarter grew 84.6% year-over-year to RMB 371.9 million. And for the full year, our international market made an increasing meaningful contribution to overall growth. On the revenue line, fourth quarter 2025 net revenue were RMB 2,974.5 million compared to RMB 3,334.4 million in the same quarter of 2024. For the full year 2025, net revenue increased by 4% to RMB 12.9 billion. In the fourth quarter, net revenues from franchisee to tea houses were RMB 2,434.9 million, representing 81.9% of total net revenues compared to RMB 3,095.9 million a year ago. This reflects the cadence of the new product launch and the impact of subsidy competition on the delivery platform. Net revenue from the company-owned tea house were RMB 539.6 million, up 126.2% from RMB 238.6 million in the fourth quarter of 2024, mainly as a result of our deliberate development of the company-owned tea house network in both Greater China and overseas markets. Turning to margin. Our gross profit calculated by excluding cost of material, storage and logistics from net revenue reached RMB 1,581.9 million this quarter, resulting in a gross margin of 53.2%. This marks an improvement from 51.6% last year. The margin improvement results primarily from lower packaging material costs, equipment and supply chain costs. On operating expenses, share-based compensation expenses this quarter were RMB 66.1 million. This reflects our commitment to long-term employee engagement and aligning their goal with stakeholders. To provide greater clarity on underlying operational performance, we will reference non-GAAP operating results with full reconciliation available in our earnings release and the Form 6-K. We recorded an operating loss of RMB 35.5 million compared to operating income of RMB 642.5 million last year. Based on management accounts, the operating loss was mainly attributable to the operational change in the fourth quarter with an impact of approximately RMB 320 million, which includes organizational structure optimization and business model transition costs. Excluding share-based compensation expenses, non-GAAP operating income was RMB 30.5 million, representing a 1% margin. The above-mentioned margin differences reflects our step-up investment in talent recruitment for global expansion, including brand building to support new product launches, R&D to enhance our offering and digital infrastructure to elevate customer experience. Operating costs for company-owned tea houses were RMB 376.8 million, up 130.8% from RMB 163.2 million a year ago. As of December 31, 2025, we operated 615 company-owned tea houses, up from 169 at year-end 2024. Other operating costs increased by 26.9% to RMB 231.4 million, largely due to higher payroll supporting the expansion of our global tea house network. On a non-GAAP basis, other operating costs accounts for 7.6% of revenue compared to 5.5% a year ago. Sales and marketing expenses for the quarter were RMB 373.6 million, down 5.6% from RMB 395.7 million a year ago. On a non-GAAP basis, sales and marketing expenses representing 12.2% of revenue compared to 11.9% a year ago. General and administrative expenses reached RMB 635.6 million, up 89% year-over-year from RMB 336.3 million. This includes costs associated with a targeted organizational restructuring to position the company for more efficient, leaner operation going forward. The higher G&A reflects our continued investment in global corporate infrastructure and to support international expansion, alongside costs associated with ongoing initiatives to optimize internal process and resources allocation. On a non-GAAP basis, G&A expenses represented 19.7% of revenue compared to 10.1% a year ago. Beyond operating income, we generated positive financial income, reflecting interest earned on our current cash and investment balance as well as a position -- a positive other income, which was mainly comprised of government grants largely in line with prior year period. On a non-GAAP basis, excluding share-based compensation, our full year 2025 tax rate was 18.4%. Importantly, we delivered another profitable quarter on both GAAP and non-GAAP basis, making -- marking our 12th consecutive quarter of profitability at the net income level, even though this transitional period. GAAP net income was RMB 33.9 million. Non-GAAP net income, excluding RMB 66.1 million of share-based compensation expenses was RMB 100 million, with a non-GAAP net margin of 3.4% compared to 9.3% last year. For the full year 2025, GAAP net income was RMB 1,186.3 million and non-GAAP net income was RMB 1,909.9 million. For the fourth quarter, basic and diluted net income per ordinary share were both RMB 0.15. On a non-GAAP basis, basic net income per ordinary share was RMB 0.50 and diluted net income per ordinary share was RMB 0.49. For the full year 2025, basic net income per ordinary share was RMB 6.27 and diluted was RMB 6.18. On a non-GAAP basis, basic was RMB 10.21 and diluted was RMB 10.7. Turning to liquidity. We ended the quarter with RMB 7,892.4 million in cash and cash equivalents, restricted cash and time deposits, up from RMB 4,868.7 million at year-end 2024. This robust balance sheet provides ample flexibility to execute our growth investment while delivering shareholder return. In closing, our fourth quarter and the full year 2025 results demonstrate our durable profitability and our commitment to returning value to shareholders through disciplined capital allocation. This positions us strongly as we execute our 2026 priorities. With that, I will turn the call back to the operator to begin the Q&A. Operator, please go ahead. Operator: [Operator Instructions] Our first question comes from the line of Lillian Lou of Morgan Stanley. Lillian Lou: [Foreign Language] Junjie Zhang: [Interpreted] Thank you for your question. We conducted a deep review of our same-store performance, and we think it reflects both external challenges and our internal strategy adjustment pace. As you mentioned, we underestimate the complexity of a company who has over 3,000 employees, which has delayed our strategy rolling out for the year of 2025. For that, I apologize or I feel sorry for the market. Market competition in 2025 exceeded our expectation. The intense third-party platform competition impacted off-line operations and our short-term market tactics were not as strong as they needed to be. In this environment, we chose not to chase low-price traffic blindly. Instead, we stuck to our premium brand positioning. At the same time, we were very focused on internal adjustments and slowed our new product cadence, which did create short-term pressure on cup volume. Even so, we believe growth based on healthy business model is sustainable. Meanwhile, we are reflecting on how to actively adapt to market changes with flexible short-term tactics, while maintaining our high-value brand positioning. Honestly, we took some detours in new product launch rhythm and marketing execution, and we did not fully keep pace with how fast the market was moving. The positive side is that these lessons have made us more alert and agile. You can already see this in our Tianwen campaign in February, where we reached quickly and captured the opportunity, which shows the team's agility has getting back to the normal level. For 2026, we're not going to pursue growth for its own sake. We want to get back to a cycle of higher quality operations with same-store recovery as our top KPI. We will focus on 4 things: store operation, consumer experiences, product innovation and organizational efficiency. First, on operations, we will focus on existing tea houses. Slow new openings, we will moderate this year's expansion pace and prioritize healthy operations at current tea houses. For underperforming ones, we will keep optimizing and upgrading. And in parallel, we are building a full chain quality management system from sourcing all the way to after sales to lay a solid foundation for long-term operations. Second, on consumer experience, we are focused on enhancing brand value. We won't trade price cuts for traffic. Instead, we attract consumers through high-quality product innovation and superior in-store service experiences. Third, on innovation. On the one hand, we will keep innovating across multiple categories while reinforce our core fresh leaf milk tea franchise. Our new product, Signature Four Tea launched in December provides a strong example with a dormant membership reactivating rate as high as 51%, meaning in every 2 members buying this product than old members who had been consumer consumed by previous month. It drove 15.2 week-over-week GMV up in the launch week, significantly exceeding the historical average for all new products. This example proves that our product innovation capability is our driver for navigating cycles and we're broken for sale. On one hand -- on the other hand, we are exploring more consumer scenarios such as gatherings, wedding, birthday and other moments and extending to all the occasions to deepen the brand wars and temperature in consumers' life. Last on efficiency, we have now completed the major organizational adjustments, and we will continue to refine the structure so that we can maximize efficiency. Overall, we expect 2026 to be a year where we are very focused on high-quality growth rather than rapid expansion for scale. And our goal is to keep revenue and profit broadly flat year-on-year, while seeing same-store growth trend stabilize at the operating level. And we believe in the second half, the overall same-store sales and operation will be healthier. And also, we want to focus that our priority for this year is to secure the market share rather than for the net profit. So if we have a conflict -- we see the conflict between market share versus profitability, we will choose the former one. So to sum up, the priority for this year 2026 is to both elevate the user experiences and keep the same-store sales getting back to the healthy level. Operator: [Operator Instructions] Our next question comes from the line of Xiaopo Wei of Citi. Xiaopo Wei: [Interpreted] In your prepared remarks, you briefly touched base on the business model transition. And could you share with us what have been motivating you to execute such a business model transition? And could you give us more update on the status of transition? Hongfei Huang: Our model transition has one core motivation that is to build true shared risk, shared reward strategic partnership with franchisees. Last year, industry price was intensified. Franchisees faced the dual pressure of sales decline and rising costs. The old model offered insufficient buffer in downturns. So we restructured incentives, shifting from traditional supply relations to a GMV-based revenue sharing model. In the new model, brand fees do go up slightly, but those fees come with 2 strong offsets. First, we offer enhanced discount management through marketing intelligence and targeted campaigns. Second, we cut raw material cost ratio at franchisees and sharply. Now our revenue moves up and down with their GMV sales. When they succeed, we succeed. From 2026, we fully rolled out the new model. This unites our interest and goals. We look forward to even tighter collaboration to drive sustained GMV growth. Operator: Our next question comes from the line of Sijie Lin of CICC. Sijie Lin: [Interpreted] My question is that can you provide an update on the performance of our overseas markets? And what are your expansion plans in 2026 domestic and overseas markets? Junjie Zhang: [Interpreted] Thank you for your question. Let me start with our overseas performance in 2025. In the fourth quarter, our international markets showed strong and healthy growth. We added a net 83 houses, bringing the total to 345 in the overseas market. GMV grew 23.9% quarter-over-quarter and 84.6% year-over-year. More importantly, the average monthly GMV of tea house for overseas tea houses outperformed the domestic ones, preliminarily replicability and strong vitality of our business model overseas. In 2025, we entered 4 new markets: Indonesia, the United States, Vietnam and Philippines. Currently, our overseas footprint covers 7 countries: Singapore, Malaysia, Thailand, Indonesia, Vietnam, Philippines and the United States. In Vietnam, our first tea house opening generated over 20,000 cups across 3 tea houses in the first 3 days with brand voice rapidly climbing to second in the local tea category. At year-end 2025, our Hello Kitty IP co-branded Coco Oolong launched across 5 Southeast Asian countries, achieving a 75% new product sales share on launch date in Thailand and 38.3% in the Asia Pacific region over the first 3 days, helping regional tea brand voice. This achievement has demonstrated that Chagee's brand power can transcend broader. Our break 2026 strategy into domestic and international markets. For domestic market, we focus on existing prioritizing quality. This year, we will moderate domestic expansion pace and shift our focus to same-store sales growth and ensuring store level health and profitability. We plan about 300 net new tea house openings in strategic locations in Mainland China. The number is not the goal. We prioritize healthy profitability for each new tea house while supporting existing same-store growth through optimizing and reinforcing key location resources. Additionally, we may make strategic adjustments to our expansion pace based on our performance this year. Overseas expansion will continue at a steady pace. In the fourth quarter, we added 21 tea houses in Malaysia, 19 in Indonesia, 13 in Thailand, 12 in Vietnam and 11 in Singapore. This momentum carries into 2026. Thailand is now expanding from Bangkok to in Chiang Mai, and our Korea debut is planned for the second quarter, making it our eighth overseas market. 2026 is our foundation building year. We target about 200 net new tea houses overseas. More importantly, in every market we enter, we will continue to refine business model and build replicable template for future scale. Lastly, in terms of globalization, I have to add on a little bit of touch. We are doing something that is a must. This is something we have to do, but it's difficult. So we're not only investing the overseas market in the next several years, we're actually investing in the next decade, especially the market. And so we're not talking about a short-term sprint, but a long-lasting marathon for our global expansion. And we believe the thing -- the priority for our overseas market is to refine the business model as we go. And also the priority is to keep a healthy unit economics, especially for the U.S. market, which is the second largest market, except for China. So we believe there are a lot of business models that we can adopt like license or franchisee, but we choose the hard way to bring it out because we not only want to open dozens or hundreds stores in the U.S., but we want to bring the drinking habits of tea into the U.S. market like Starbucks has been doing for the past several years when they entered into the Chinese market. So we chose -- we chose a route that is more difficult and requires higher CapEx, and we might make mistakes. But I'm here to ask for the capital markets to give us more confidence and understanding about our overseas market expansion. Lastly, to add on a little bit, Chagee is not adopting the normal way to grow, especially as a listing company, but we believe we want to bring the higher value and make Chagee a high-value branding-oriented company in the future. In the short term, we believe most of the capital markets or investors is focused on P&L. In the long term, Chagee wants to grow the company as a new category pioneer, which not only provides freshly brewed drinks to our customers, but also to bring a new lifestyle to our customers such as RTD and also different scenarios of consumption. So in the short term, we might see volatility from our financial performance. But in the long term, we believe Chagee has the possibility to evolve from a freshly brewed maker to a lifestyle changer worldwide to the global consumers. So hopefully, we have your -- all the investors' long-term support, and we welcome your comments and your advices as well. Thank you. Operator: Our next question comes from the line of Jessie Xu of JPMorgan. Jessie Xu: [Interpreted] Jessie Xu from JPMorgan. 2025 was a tough year, but I think it's fair to say that the most difficult time seems already behind us. Investors have been looking forward to a marginal improvement in same-store sales trend. And I think 4Q trend already provides some reasons for investors to turn more positive from here. Management mentioned cost reduction initiatives on the earnings call last quarter. So could the management introduce the concrete measures? What did we do? How it's progressing? And any initial feedback or efficiency gains from these initiatives? And lastly, how should we think about the OpEx ratio for this year? Hongfei Huang: [Interpreted] Thank you for your question. Our cost reduction and efficiency efforts are not short-term fixes for a single quarter performance. They're part of a bigger long-term push to make the organization healthy overall. Things are moving forward well, and we are already seeing some early results. On the organization side, we've wrapped up Phase 1. That means combining mid- and back-office functions and cutting out duplicate work. As Junjie just mentioned, we opened a lot of new stores during the year of 2023 and 2024. And in 2025 alone, we opened more than 800 stores as well. So now we are focusing on the same-store sales and shifting more resources to the front lines for better execution and faster response. This is not about a smarter structure, not just training headcount. For expenses, we've put in stricter controls and better budgeting. It covers everything from targeted marketing spending down to daily operation. Looking at 2026, we expect our overall fee rate to stay stable, especially for sales and marketing, we'll keep investing in this area. And also, we'll keep investing in efficiency and controls without hurting core growth areas. The game is better quality inputs, leading to stronger output no matter the environment. For the G&A expenses, our goal is to keep optimizing the overall efficiency with the precondition that without impact our overseas market expansion. Operator, next question, please. Operator: As there are no further questions, I'd like to hand the conference back to management for closing remarks. Junjie Zhang: Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our IR website. We look forward to our next call with everyone. Have a great day ahead. Thank you. Operator: This concludes today's event. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to MiNK Therapeutics Fourth Quarter and Year-End 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this event is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the conference over to Stefanie Perna-Nacar, Chief Communications Officer. Please go ahead. Stefanie Perna-Nacar: Thank you, operator, and thank you all for joining us today. Today's call is being webcast and will be available on our website for replay. I'd like to remind you that this call will include forward-looking statements, including notes related to our clinical development, regulatory and commercial plans, time lines for data releases and partnership opportunities. These statements are subject to risks and uncertainties. Please refer to our SEC filings available on our website for a detailed description of these risks. Joining me today are Dr. Jennifer Buell, President and Chief Executive Officer; Dr. Terese Hammond, Head of Development; and Melissa Orilall, Principal Financial and Accounting Officer. I'd like to turn the call over to Dr. Buell to highlight our progress from this quarter. Dr. Buell. Jennifer Buell: Thank you, Stefanie. Good morning, everyone. For those new to MiNK Therapeutics, we are advancing a clinically validated allogeneic invariant natural killer T cell platform, one that is fundamentally differentiated in its ability to restore and coordinate immune function across diseases or even an immune failure. And unlike conventional cell therapies, our MiNK iNKT cells are off the shelf. They are administered without lymphodepletion, without HLA matching. And we've demonstrated clinical activity with a very favorable safety profile. MiNK cells are now in Phase II clinical trials in patients with solid tumor cancers and autoimmune inflammatory conditions like GvHD and severe lung disease. Clinically, in cancer, MiNK cells have demonstrated durable survival beyond 23 months with complete remission extending beyond 2 years in heavily pretreated refractory cancers. Cancer is expected with an expected survival of about 6 months. Outside of cancer, we're also seeing clinical activity in patients with hypoxemic pneumonia or otherwise called severe acute respiratory distress, reinforcing the broader applicability of our immune restoration cell product. We're excited to discuss with you today our upcoming trials. We have secured external funding to advance MiNK cells into graft-versus-host disease with the trial in the activation phase at University of Wisconsin. We have also externally funded a trial in Phase II in patients with gastric cancer with results presented last year at AACR and expected to be presented at a major conference in the first half of this year. And finally, our soon-to-be enrolling MiNK-sponsored randomized Phase II trial in patients with severe hypoxemic pneumonia or ARDS, a condition that affects approximately 200,000 to 300,000 patients per year. We'll talk more about that in just a few moments. Most importantly, we're doing this with a level of capital efficiency that's really uncommon in cell therapy. We're combining disciplined internal execution with non-dilutive funding through government and institutional partnerships, and we're manufacturing at a scale that appears to be the most efficient in cell therapy at this time. At the same time, we continue to build scientific validation through multiple data presentations and peer-review publications, many of which will be out in the first half of this year. Now history tells an important story here on execution. And looking back at 2025. It was a year that we moved really from promise to proof, establishing durability, validating our mechanism, demonstrating that this platform can be advanced with both rigor and efficiency. In 2022, we demonstrated that our results were really quite durable clinically and biologically. And at the Society for Immunotherapy of Cancer Annual Meeting in late 2025, just a couple of months ago, we presented updated clinical data in heavily pretreated checkpoint refractory solid tumor cancers. This is a substantial and growing population of patients. These were patients who had exhausted standard options. What we observed was meaningful. Median overall survival exceeding 23 months in combination with commercially available PD-1 therapies, complete remissions extending beyond 2 years, long-term survival across multiple solid tumor cancers, including gastric, thymoma, renal, adenoid cystic cancers and lung cancer. These outcomes matter, particularly in this patient population and importantly, because they have persisted over time. At the same time, we've deepened our understanding of how this is working. We saw activation and expansion of important immune cell populations, dendritic cell supporting antigen presentation, repolarization of macrophages towards pro-inflammatory antitumor states and reinvigorated or exhausted T cells with restored function. We also observed controlled increases in cytokines, such as interferon gamma, IL-2, TNF alpha, consistent with a productive immune response without systemic toxicity. The takeaway for us is very straightforward. The durability we're seeing clinically is supported by a coordinated immune activation state. This is not a single pathway effect, and it's what defines MiNK iNKT cells as our platform. In scientific validation beyond oncology, we asked how this biology goes beyond cancer. This year at the Keystone Symposia, Dr. Terese Hammond, our Head of Pulmonary Critical Care Medicine, presented human data showing significant depletion of iNKT cells in patients with end-stage idiopathic pulmonary fibrosis. This is important evidence of immune deficiency in patients with immune dysfunction. And when you see that forward, the path becomes really clear. Restore what's missing. This is how we're approaching expansion, follow the biology, validate in humans and then move into clinical execution. And we've taken this approach in patients with hypoxemic pneumonia or ARDS. This is a very serious condition. It's growing in prevalence and incidents and is affecting currently approximately 200,000 to 300,000 patients annually with a mortality rate of 30% to 40%, and no approved disease-modifying therapies. In our Phase I/II trial in this particular population, we dosed critically ill patients with respiratory distress. These patients were on mechanical ventilation and/or VV-ECMO. These patients are consuming substantial resources in our ICUs, and our results showed that we can get the cells into patients in community hospitals. We can dose to 1 billion cells without deleterious tox. As a matter of fact, the cells were tolerated quite well. We not only did not see cytokine release. We, in fact, dampened pro-inflammatory signals or harmful inflammation. We observed prolonged survival. 70% of patients alive compared to 10% of patients within hospital controls. We observed that these cells could locally modulate immune function in the lung, and they can restore function of lung tissue, specifically endothelial function and improved oxygenation in these patients. We saw rapid activation. We saw patients coming off of the most severe life support, VV-ECMO. We saw that these cells also not only cleared infectious pathogens, but also we saw a reduction in the onset of secondary infections. This is important because secondary infections are often the cause of death for patients in the ICU. As a result of these findings, we are now well on our way to announcing the first dosing of patients in our randomized Phase II study that's designed to expand to a Phase II/III study. This is a global program. It's designed very efficiently, and it's planned to launch with our colleagues at top centers in Ukraine and in the U.S. These are real-world environments that we are able to reach because of the practicality of our approach. We have an off-the-shelf therapy with a favorable safety profile and no requirement for complex infrastructure. We're working very closely with the Ministry of Health in Ukraine and the U.S. FDA to advance this program. With dosing starting imminently, we expect an initial clinical data in the second half of this year. These are very rapid trials. This will be our first randomized controlled study in pulmonary diseases designed for clinically meaningful and regulatory aligned end points. We believe this will enable MiNK to pursue rapid development pathways. Now in other disease settings, we've spoken to you about our graft-versus-host disease program already. We've shared more detailed foundation of this program and the study design, in fact, and our intent is to help patients undergoing hematopoietic stem cell transplantation, where more than half of the patients have graft failure and GvHD. We plan to not only improve engraftment success but prevent acute GvHD. The study is important. It's garnered the support of 2 distinct sources of nondilutive funding. The NIH NIAID STTR Award supports the development of preclinical and translational work while the Mary Gooze Clinical Trial Award directly funds the clinical trial execution at the University of Wisconsin, including patient enrollment and trial operations. The clinical trial is in final review with the university with clinical initiation targeted for the first half of this year. We believe we'll be dosing very soon. This structure allows us to advance into immune-mediated diseases in immune-tolerant settings without incremental capital burden. It's disciplined expansion. It's funded, targeted and aligned with our platform. Nondilutive funding is part of how we operate. In 2025, we secured multiple sources of nondilutive capital funding, including NIH funding, philanthropic support and consortium funding through C-Further most recently, which includes approximately over $1 million to get into our IND-enabling studies and meaningful double-digit downstream economics. The C-Further collaboration is particularly important, not just for the nondilutive funding to support IND-enabling development of a really important target, a PRAME-targeting iNKT TCR, but for what it represents strategically. This program was selected as one of the first within the C-Further consortium, an international pediatric oncology initiatives supported by Cancer Research Horizons, LifeArc and Great Ormond Street Hospital, reflecting external validation of both the maturity of our platform and its potential in high-need setting such as pediatric cancer. The collaboration advances our PRAME-targeted TCR-engineered iNKT program combining a well-characterized tumor antigen with our iNKT platform, which is designed to bridge innate and adaptive immunity and coordinate broader immune responses within the tumor microenvironment. And importantly, the program is structured to generate rigorous comparative preclinical data across multiple pediatric tumor models to support data-driven candidate selection and advance to first-in-human studies. From a strategic standpoint, the model allows us to advance the next-gen program in a high-need indication with nondilutive capital. It also allows us to leverage leading academic and translational experts without building that infrastructure or expanding it internally. MiNK gets to retain meaningful double-digit downstream commercial participation, and we preserve the platform flexibility through a nonexclusive structure. This is simply not a funding mechanism. It's really a way to expand the platform, derisk early innovation and create long-term value while maintaining capital discipline. So taken together, these sources of capital have enabled us to advance clinical programs and expand the pipeline and generate translational data while preserving shareholder equity. It's deliberate, and it's a repeatable part of how we're building MiNK. And on the financial discipline front, we're doing more with less. We strengthened our financial position over the year with our cash increasing to about $13.4 million from $4.6 million and our operating cost decreasing nearly 40% over the course of the year. The key takeaway is that we've increased cash while reducing burn and continuing to execute on important programs. With the scale and complexity of the work we're now undertaking, including randomized clinical trial execution, multi-program advancement and increasing external engagement, we've strengthened our financial leadership. We recently appointed Melissa Orilall as Principal Financial Officer. Melissa brings deep experience in financial operations planning and disciplined execution, including her work at the Whitehead Institute and in corporate banking. Her focus is on ensuring that our capital allocation, reporting and operational execution is tightly aligned as we advance through this next phase. Now on our expanded pipeline. As I've mentioned, we continue to advance our PRAME TCR NKT program by non-dilutive funding. Further, our MiNK-215, which is our CAR iNKT program targeting stromal resistance is very important. We've continued to build our translational data set on this asset as we responsibly bring it into IND enablement. These currently do not have a specific near-term catalyst, but we would expect to be announcing some within the next 3 to 5 months on our 215 program. And as our data set has strengthened, we have seen increased external interest in 797 and iNKT biology. Some of you have actually reached out to me specifically about third parties who have announced the combination of 797 in their clinical trials. And as I've mentioned now publicly, MiNK has not formally announced any of our strategic collaborations yet. We -- strategic partnering does remain core to our strategy, and we plan to continue to keep you apprised as these developments ensue. What to watch for in 2026? This year, we are focused on some substantial and measurable milestones which are really quite exciting. In the first half of 2026, as I mentioned, we expect to initiate our randomized Phase II, Phase II/III ARDS hypoxemic pneumonia study and the activation and dosing in our GvHD trial. In the second half of the year, we do expect to have initial clinical data from both of those programs, not only representing our first randomized data set in pulmonary diseases, but also early immune and translational readouts in GvHD as well as in lung disorders. In parallel, during the first half of '26, we'll continue to build scientific validation through multiple data presentations and peer-reviewed publications, extending the data sets presented at SITC and Keystone. And taken together, these milestones are designed to generate clear interpretable data that informs our next steps, both in development and in potential regulatory and strategic pathways. Now I'd like to turn the call over to Melissa to review our financials. Melissa? Melissa Orilall: Thank you, Jen. During 2025, we executed an at-the-market facility in a disciplined manner, ending the year with a cash balance of $13.4 million. Since year-end, we have raised an additional $3 million through this program, extending our runway through 2026 and supporting key clinical milestones. Our net loss for the fourth quarter of 2025 was $2.6 million or $0.56 per share compared to $2.5 million or $0.62 per share for the fourth quarter of 2024. For the full year, net loss was $12.5 million or $2.93 per share compared to $10.8 million or $2.86 per share in 2024. These results reflect continued focused investment in advance in our agenT-797 clinical programs while maintaining disciplined control over our operational spend. I will now turn the call back to Jen for closing remarks. Jennifer Buell: Thank you so much, Melissa. Thank you all for being here. I think just in closing, I'll just reiterate that for us, if you just step back, the story is pretty simple. In 2025, we demonstrated durability. We showed mechanistic validation of our technology as well as human disease relevance. Those data have now set the stage for what we're doing going forward. And in 2026, we're executing on an important randomized controlled clinical trial as well as signal detection and clinical advancement in very important disease settings, including GvHD. We'll be generating clinical data and publicizing that very quickly and advancing towards potential paths for regulatory approval. We have multiple readouts planned in the first half of this year with data from our upcoming trials and preliminary readouts in the second half of this year. We're excited and I look forward to your questions. I'll now turn the call back over to the operator. Operator: [Operator Instructions] Our first question comes from the line of Emily Bodner with H.C. Wainwright. Emily Bodnar: A couple for me. Maybe starting with the Phase II pneumonia and ARDS study. Could you kind of talk through how many patients approximately that trial is going to be? And what the appropriate control arm is here? And then you also talked about development in IPF, which sounds like it would need to be a separate trial. So maybe just talk about how you're thinking of these different indications. Jennifer Buell: Emily, thanks so much for your question. Absolutely. While we have not publicly posted the program in hypoxemic pneumonia, what I'm going to share with you is that currently in the disease population that we're pursuing, there are no approved therapies. Patients are treated with standard of care. This is the same state that we were in when we conducted our Phase I/II trial establishing the dose of these cells in this population of patients. What we've demonstrated is that patients are predominantly treated with steroid therapy with, of course, anti-infectives, antifungals, et cetera, but really physicians' choice in this disease setting. So we have 2 things that are really important. One, we've already observed and presented that these cells appear to be quite active in restoring immune functionality and clearing pathogens, independent of steroids being on board, which is unique. Many times, there's a concern about immunosuppression with steroid use, standard of care steroid use, and we're not observing that. So these cells appear to be sort of steroid-resistant. Their ability to modulate immune function, clear pathogens in the presence. We will be looking at physicians' choice as effectively standard of care. The cells will be added on top of standard of care versus the cells alone. And a critical piece of this is Dr. Terese Hammond is leading up our pulmonary disease programs. She's also clinically still seeing patients in the ICU. Terese is boarded in pulmonary critical care, neurocritical care medicine and has been treating patients with this disease profile for now decades of her life. For us to be able to have such a thoughtful leader on this program and such an informed clinician, it gives us a real opportunity to position these cells and to bring them forward into the patients who we believe they will be most effective in. And taking the cells plus or minus standard of care, gives us not only the differentiation of the cells, the added potential of the cells, but also maybe paradigm changing for these patients in the ICU. Emily Bodnar: Great. And maybe -- sorry, can I just ask one more. On the second-line gastric cancer trial, could you just remind us the status of that and when we may be able to see efficacy data from that study? Jennifer Buell: You will be seeing some efficacy data in the first half of this year at a major conference, which we'll be announcing relatively soon. And we're excited about that. But I did not answer your question about IPF, and this is, of course, a very important pulmonary fibrosis, end stage in particular, is another disease setting. It's effectively in immune-related condition. We've demonstrated that with our human data, and it's a substantial opportunity for us to develop the cells in IPF. We have some important preclinical observations as well as some new human data demonstrating that this is a pathway where we believe the cells can bring benefit. You're going to be hearing more about the design of that trial and the development path as we advance over the next couple of months. We will very likely host a special meeting in this disease setting. We have selected a scientific advisory boards, have informed clinicians in this space and have developed a program to advance. We'll be very responsible, though, about how we're going to be funding that program. So you'll hear more about that relatively soon. Operator: Our next question comes from the line of Mayank Mamtani with B. Riley Securities. Mayank Mamtani: I appreciate the comprehensive update. Just on the last point on IPF and even GvHD, what target patient population, Jen, you have in consideration? And wonder what differentiating aspects to some of the recently approved anti-fibrotic, anti-inflammatory approaches you aspire to have the cell therapy you positioned against. And then I have to ask some of the IL-15 iNKT cell combination trial launching on ct.gov. Could you help us understand how and what this 30 subject kind of total exposure would inform what you are looking to independently do with. It looks like the randomized controlled trial in the ARDS setting. I was not sure if the populations that you're exploring are overlapping across those combination and randomized trial settings. So if you could clarify that, that would be great. Jennifer Buell: Mayank, thank you for your questions. I just -- I want to make sure that I have them correct because you did cut out for just a moment. But I think on the randomized ARDS trial, the patient populations will be identified as hypoxemic pneumonia. There's a very specific global ARDS definition system that allows us to be very specific and selective about this patient population. So they will be selected and identified based on their oxygenation, so a very quantifiable way of interrogating this as well as important organ function states. So we will put a detailed eligibility criteria in clinical trials. And this is another program where we are going to be announcing very soon upon the announcement of the launch of the randomized Phase II as well as the dosing in GvHD. We'll be hosting a very special R&D meeting that will allow you to talk with our experts, our clinical development experts as well as review a deep dive of the programs and the eligibility of these patients. So in ARDS, there have been some -- there are currently no approved therapy. So this becomes standard of care, becomes really a physician's choice in this disease setting. There are no functional cell therapies in this setting. What we've been able to observe in our early stage development is that our cells really persist, and that they are not vulnerable to steroids. And that allows the cells to continue to modulate immunity in this setting. We observed that. We see we can administer the cells, 1 billion cells tolerably. We observed that the cells are in the peripheral system for some time, a number of days before they then home very specifically to lung tissue. We've been able to use a special technique that allows us, particularly in ventilated patients to take samples from the -- within the lung tissues called the bronchial lavage. This is the assessment that we can test in order to interrogate the immune cell, the local immune modulating capability of the cells. It gives us 2 opportunities. In addition to just radiologically looking at what's happening clinically for within a patient's lungs, we can start to see clearance of pathology, clearance of some inflammatory markers on, you could see this radiologically. But then also when we really dig into lung tissue, we're able to see what is actually happening. In these patients, we see the substantial pro-inflammatory signatures. And what we've publicly disclosed, and we'll be publishing even more this year in the first half will be some of the anti-inflammatory signals that we see here in this population of patients. So we're really dampening pro-inflammatory signals. We're eliminating fungal infections. We're eliminating some gram-negative bacteria, which is a major problem. And this becomes an even more substantial problem in some austere regions like war zones or places where we will be studying these cells where multidrug-resistant organisms are a substantial problem. Given that we've already been able to demonstrate, not only with our clinical trial that we published on, but also through emergency use that we've continued to help patients with, we've demonstrated that we can really do an impactful clinical activity and modulate some of these multidrug-resistant organisms, clearing them from patients with some of the most severe critical illnesses. This is such an important part of the work that we're doing right now. So you'll hear more about the eligibility of these patients, and I'm going to invite you specifically to talk with some of the experts in this disease setting. So I think that was a longer way of answering the simple question on standard of care and what will be adequate controls, which would be really just physician's choice in this population. Mayank Mamtani: I appreciate it. And I don't know if I missed that, or my question was cut out. If you could address the combination approach with the IL-15 agonist that trial, that launched on clinicaltrials.gov, what the rationale was? And how is that different than the study that you just referenced? Jennifer Buell: Mayank, thank you. Thank you very much. The study that I've referenced is the MiNK-sponsored randomized Phase II trial that we have not yet posted on clinicaltrials. We will be doing so. It's currently in review. The study that you're referring to, and I'm grateful that you brought it up. I've received a host of inbound inquiries about this from investors as well as from regulators. And I want to be very clear that MiNK has not formally announced any collaboration or any clinical trials with the IL-15 superagonist. And I think that's an important thing to understand. We will -- if we are to advance with these types of strategic collaborations, we will be very public about doing so. So at this time, strategic collaborations are really important to MiNK, and we have a number of discussions that are actively underway, not only for clinical trial combinations. There's a lot of excitement about 797, but also for broader strategic collaborations as well as minority financial investments in the company, none of which have we publicly disclosed at this time. We will do so when the -- during the appropriate time. Operator: At this time, we have no further questions. I will now turn the call back over to Dr. Jennifer Buell for closing remarks. Jennifer Buell: Thank you, operator, and thank you all so much for your participation today. Operator: Ladies and gentlemen, that concludes today's conference call. You may now disconnect your lines. Have a pleasant day.
Operator: Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the J.Jill Fourth Quarter 2025 Earnings Call. [Operator Instructions]. Before we begin, I need to remind you that certain comments made during these remarks may constitute forward-looking statements and are made pursuant to and within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 as amended. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements. Those risks and uncertainties are described in the press release and J.Jill's SEC filings. The forward-looking statements made on this recording are as of March 31, 2026, and Jill does not undertake any obligation to update these forward-looking statements. Finally, J.Jill may refer to certain adjusted non-GAAP financial measures during these remarks. A reconciliation schedule showing the GAAP versus non-GAAP financial measures is available in the press release issued March 31, 2026. If you do not have a copy of today's press release, you may obtain 1 by visiting the Investor Relations page on the website at jjill.com. I would now like to turn the conference over to Mary Ellen Coyne, Chief Executive Officer and President of J.Jill. You may begin. Mary Coyne: Good morning, everyone, and thank you for joining us today. 2025 marks the beginning of a strategic evolution for J.Jill. We embarked on a period of testing and learning in order to build a strong foundation for our business by expanding our customer file through product evolution, enhancing the customer journey and improving the way we work as an organization. While we delivered fourth quarter results that exceeded the updated guidance we provided in January, the period reinforced why this evolution is essential. We had an early assortment that did not resonate as hoped. We came up against earlier and deeper competitive holiday promotions. And we watch our direct customer continue to migrate towards the promotional end of the spectrum, taking value and discount rather than engaging at full price. Against this backdrop, our teams remained agile and reacted in season to ensure we ended the period with inventories in a clean position. As we enter 2026, we are taking the steps to transition and position the business for long-term growth. To achieve our objectives, we must expand our customer files. This requires patience and precision. We're expanding into new categories and modernizing our aesthetics to appeal to a broader customer base. but doing so in a way that helps holds the quality, fit and values that our loyal customers expect and trust from J.Jill. That's why our test-and-learn methodology is so critical. It allows us to validate new concepts with both new and existing customers before scaling, ensuring we're building sustainable growth rather than simply pursuing short-term gains. As we move through 2026 and beyond, you'll see us continue this balanced approach. And we believe the investments and strategic shifts we are making, will position us well to achieve our objectives. This evolution will take time, and we should not expect the path to be linear. But we are committed to maintaining a disciplined operating model, carefully managing expenses and leveraging our strong financial position and strengthen balance sheet as we pursue this course. None of this transformation would be possible without a best-in-class team. A combination of strong internal leaders with deep knowledge of J.Jill, and outside leaders bringing relevant experience and new perspectives. Throughout 2025, we've made deliberate decisions to strengthen our leadership bench by recruiting proven talent with deep expertise in brand transformation. We brought Courtney O'Connor onboard in July as Chief Merchandising Officer to support our product evolution. And [ VIVREDKey ] in November as the company's first-ever Chief Growth Officer to lead our e-commerce and AI initiatives. As we grow, we will continue investing in talent that complements our existing strengths and supports new capabilities. Turning now to our 3 key strategic pillars. First, evolving the product. In 2025, we analyzed our assortment and identified areas in which we needed to streamline remove redundancy and evolve to capture a greater share of our customers' wardrobe. We began testing categories and concepts to expand the relevance of our product assortments. In Q4, for example, we successfully tested small capsules in areas where we saw potential but wanted to validate customer response before making larger commitments. We also piloted a localized merchandising strategy, adjusting our assortment to better reflect the lifestyle needs of specific markets. What became clear through those tests is that when we gave our customer the newness she wanted, she responded even in a highly challenging promotional environment. These learnings shaped how we approach our 2026 assortment and are informing our broader merchandising strategy going forward. As a reminder, our summer 2026 assortment, which will be introduced in Q2, we'll capture the first influence from our strengthened merchant and design team. and we expect continued improvements in assortment as we move throughout the year. There will be more newness with silhouettes and fabrics as well as the beginning stages of expansion into areas of accessories such as bags and belts. Our goal is to continue to provide our loyal customer the quality and value she knows and loves us for, while introducing relevant and compelling products focused on the new customers who we aim to attract. Our second pillar is enhancing the customer journey. This past fall, we began to look at our marketing strategy differently and how we think about customer acquisition and engagement. Historically, our marketing spend has been disproportionately focused on our existing customer base. And while customer retention remains important, we know this approach was limiting our ability to expand our customer file and drive the kind of growth we're targeting. In 2026 and beyond, we plan to continue to rebalance our marketing investments to address the top of the funnel, building broader brand awareness and capturing new customers who may not yet be familiar with J.Jill. We believe these awareness building initiatives will help us reach a larger, more diverse audience. Our third pillar is operational improvements. Throughout 2025, we focused on strengthening our operational capabilities and leveraging new technologies that we expect to support future growth. We successfully implemented our new OMS system, providing us with a more modern platform, and created the Chief Growth Officer role to fully maximize e-commerce NII to help drive long-term success. As an organization, we are embracing the capabilities and efficiencies that AI can enable. With every potential use case, we ask ourselves: Will it increase revenue, will it increase efficiency and will it drive speed to market. As we begin 2026, we are introducing several new tools across the organization and have kicked off a significant project, the implementation of a new merchandise planning and allocation tool from Anaplan. We plan to leverage this predictive AI powered forecasting model to optimize how we plan and allocate inventory across the business. Thanks to the hard work of our team, we are on track late in the second half of 2026 with meaningful benefits expected to begin in 2027 and we will continue to improve as the system learns and we scale it to drive better demand forecasting, smarter allocation by location. As we look forward to 2026, we are confident in our strategic direction while being realistic about the current consumer environment, the impacts of tariffs and the work ahead. While the quarter has seen a challenging start largely driven by continued price sensitivity, particularly in our direct channel, we are encouraged by the performance in our stores supported by trained associates, providing personalized guidance and tactile experiences that excite both existing and new customers around the brand's product evolution. Importantly, we are taking key learnings from these first few weeks of the year to inform our go-forward plan, all of which is reflected in our outlook, which Mark will review. In closing, we're viewing 2026 as a period of deliberate accelerated change to expand our customer file while maintaining our operational discipline. We remain committed to our methodical test-and-learn approach, building on validated successes around new initiatives before scaling investments. I am confident that this measured approach, combined with our strong balance sheet and operational rigor, will position us to achieve our objectives and deliver long-term shareholder value. And with that, I'll turn it over to Mark. Mark Webb: Thank you, Mary Ellen, and good morning, everyone. As Mary Ellen outlined, 2025 marked the beginning of a strategic evolution for J.Jill, a deliberate period of evaluation, testing and learning, that began to build the foundation for expanding our customer file. As we enter 2026, we are deploying these learnings which, while we expect will take some time to fully take hold, we are confident we'll position the business well for long-term sustainable growth. Before discussing our 2026 outlook, let me provide context on fiscal 2025, which demonstrated the resilience of our operating model even as we began this evolution and despite significant external headwinds. We generated $23.2 million in free cash flow in the year, maintained a solid gross margin rate of 68.7% despite incurring approximately $7.5 million of incremental net tariff costs, we opened 4 net new stores, successfully upgraded our order management system and delivered adjusted EBITDA of $84.3 million on sales of $596.5 million cash interest expense. We repurchased $10.4 million or about 638,000 shares of J.Jill stock and paid approximately $5 million in ordinary dividends demonstrating our ongoing commitment of returning cash to shareholders and supporting total shareholder return. These results reflect the operational discipline and agility of our organization in navigating a complex environment. The tariff policy enacted in April created unprecedented operational complexity and we experienced a slowdown in our customers' shopping behavior throughout the year, contributing to a 3% decline in comparable sales for the year. I want to thank our vendor partners for their support amidst these challenges and recognize and thank our cross-functional teams for their agility and resilience adapting their work and processes in response to the changing business requirements. Many of the same team members manage the successful March 2025 cutover to our new OMS system, a major modernization of our technology foundation. As we move into 2026, we are planning for a year of strategic investment and measured transition. We're building the foundation for sustainable, profitable growth by expanding our customer file modernizing our product offering and further strengthening our operational capabilities. This requires deliberate investments that will pressure near-term profitability, but position us for stronger performance in 2027 and beyond. Our financial approach doesn't change. We're being disciplined about where we invest, measuring returns carefully and maintaining financial flexibility to adjust as we learn. Our strong balance sheet and cash position provide flexibility to execute this strategic evolution while continuing to return capital to shareholders. With that context, let me walk through our fourth quarter performance and then provide our outlook for fiscal 2026. Total company sales for the quarter were $138.4 million down 3.1% compared to Q4 of 2024. Total company comparable sales for the fourth quarter decreased 4.8%, driven by the retail channel. Store sales for Q4 were down 9% versus Q4 2024, driven by soft traffic and conversion, which were partially offset by stronger average unit retails and average transaction values in the quarter. Net new stores contributed approximately $2 million in revenue. Direct sales as a percentage of total sales were 53.5% in the quarter, compared to the fourth quarter of fiscal 2024, direct sales were up 2.6%, driven by markdown sales, which benefited from ship-from-store capabilities. Q4 total company gross profit was $87.3 million compared to $94.8 million last year. Q4 gross margin was 63.1%, down 320 basis points versus Q4 2024, driven by approximately $4.5 million of net tariff costs incurred during the quarter and deeper year-over-year discounting amidst a very competitive promotional environment. These headwinds were partially offset by favorable freight costs this year compared to last. SG&A expenses for the quarter were about $87 million compared to $89.3 million last year as increased selling expense and G&A overhead were more than offset by lower marketing management incentive, nonrecurring costs and stock-based compensation. Adjusted EBITDA was $7.2 million in the quarter compared to $14.5 million in Q4 2024. Interest expense was $2.2 million in Q4, down about $500,000 compared to last year, driven by the term loan refinance completed in December. Adjusted net income per diluted share in Q4 2025 was a loss of $0.02 per share compared to earnings of $0.32 per share in Q4 2024. Average weighted diluted share count in Q4 this year of 15.3 million shares reflected the impact of repurchasing 637,700 shares in fiscal 2025. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. Adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and free cash flow to cash from operations. Turning to cash. We ended the quarter and full year with $41 million of cash. For fiscal 2025, we generated $42.1 million of cash from operations and $23.2 million of free cash flow, defined as cash from operations less capital expenditures. We refinanced our $75 million term loan in December extending the term through December of 2030 and saving [indiscernible] approximately $10.4 million of share funded from cash on hand. As of January 31, 2026, a there was $14.1 million of availability remaining under the stock repurchase authorization that expires in December 2026. Looking at inventory. At the end of the fourth quarter, total inventory, excluding the impact of tariffs was about flat compared to the end of fourth quarter last year, including approximately $9 million related to net tariff costs reported inventory at end of Q4 was up 14% compared to end of Q4 inventory last year. Capital expenditures for the quarter were $10.1 million. Total capital expenditures for full year 2025 were $18.9 million focused on new store openings and the OMS project. With respect to store count, we opened 7 stores in the fourth quarter with no closures. We ended the year with 256 stores, a net increase of 4 for the year as 9 new store openings were offset by 5 closures. Turning to our expectations for fiscal 2026. As mentioned, we expect 2026 will be a year of deliberate investment. Our guidance reflects this along with the continued uncertainty in the consumer and geopolitical environment, the turbulent trade policy landscape and the expectation that it will take some time for new customers to respond to our evolving product assortments. As Mary Ellen mentioned, and as is reflected in our first quarter guidance, we have seen a softer start to Q1. We expect this performance to gradually improve in second quarter as the new assortment hit in their entirety [indiscernible] incurred and for products landed before for February 28, 2026, will expense through the P&L during the first half of 2026. As a reminder, these tariffs were an average rate of approximately 20% and net of vendor offsets are expected to result in about $5 million of added cost of goods sold in the first quarter compared to 0 tariffs incurred in Q1 2025. Going forward, we are now assuming 10% tariffs on goods received after February 28 through the end of the first quarter and 15% on goods received for the rest of the year. Given these rates we expect the second quarter to incur approximately $4 million of incremental net tariff costs compared to less than $1 million incurred last year in Q2 and Q3 and Q4 to incur approximately $3 million of net tariff costs each compared to $2.5 million and $4.5 million in Q3 and Q4 last year, respectively. Total tariff load net of vendor offsets in 2026 will be about $15 million compared to about $7.5 million incurred in 2025. Our assumptions related to tariff rates are all subject to any additional changes the U.S. may enact to global trade policies. Further, our guidance does not assume receipt of any refunds of tariffs paid to date. For the first quarter of fiscal 2026, we expect sales to be down approximately 5% to 7% compared to last year, with total company comp sales down approximately 7% to 9%. We expect adjusted EBITDA to be in the range of $15 million to $17 million, reflecting approximately $5 million of tariff pressure. For Q1, we expect gross margin to be down about 400 basis points compared to Q1 2025 as the annualized impacts of tariffs is incurred and product and marketing strategies are still evolving. While the quarter is off to a challenging start, as discussed, we are seeing relatively better performance quarter-to-date in our retail channel. For full year fiscal 2026, we expect sales to be down 2% to about flat compared to last year. Total company comp sales to be in the range of down 3% to down 1% and adjusted EBITDA of $70 million to $75 million. This guidance assumes full year gross margins down about 50 basis points compared to 2025 and as we expect headwinds related to tariffs in the first half to be partially offset by better full-price selling, lower promotions and lower year-over-year tariffs beginning in Q4. Regarding inventory, we will continue to take a prudent approach to inventory investments given the relative uncertainty we have discussed with unit purchases positioned down in the mid-single digits. Regarding store count, we continue to see opportunity to expand, but remain disciplined in our approach amidst our brand evolution. We are pleased with the performance of new stores opened to date and expect to grow net store count by about 5 stores by the end of fiscal 2026 of our planned openings, approximately half are in reentry markets. We expect reentry stores to ramp very quickly given the customer reception and brand awareness that exists in these markets, while new markets are experiencing a longer ramp period. We expect openings in new markets to experience about a 3- to 5-year ramp to maturity. New stores represent an attractive investment opportunity and we are excited to continue to expand our footprint at a disciplined pace. With respect to total capital expenditures, we expect to spend about $25 million in fiscal 2026 with investments focused on new stores and a new merch planning and allocation system that is projected to be completed toward the end of 2026. Regarding free cash flow, we expect free cash flow for fiscal 2026 of about $20 million. And finally, with respect to cash distributions we announced today that our Board of Directors approved a $0.09 dividend, reflecting a $0.01 or 12.5% increase in our ordinary dividend payable April 28 to shareholders of record as of April 14, and we have $14 million remaining on our fair repurchase program, which is authorized through December 2026. It is important to note that given the timing of year-end and Q4 earnings announcements, our Q1 repurchase window tends to be shorter than other windows during the year. In summary, we believe we are making the adjustments necessary to position the business for sustainable growth. We are confident the modernization and evolution of our product and marketing efforts will enhance and broaden the appeal and awareness of our incredible brand. And we believe the investments we are making in our front-end MP&A platforms will position us well and provide benefits into fiscal 2027 and beyond, all while continuing with our commitment to distribute excess cash to shareholders through our ordinary dividend program and share repurchases. Thank you. I will now hand it back to the operator for questions. Operator: [Operator Instructions]. Your first question comes from the line of Jonna Kim of TD Cowen. Jungwon Kim: Your customers are more sensitive to macro, how would you assess how much of the softness you're seeing in the first quarter is due to macro versus other factors? Would love any color there? And then second question, how will this year's Mother's Day differ from last year? What are key product and marketing changes ahead of the Mother's Day. Mary Coyne: Good morning Jonna, thanks for your question. So we are at the start of a very deliberate evolution. That being said, we do believe that Q1 had a challenging start was a midst of very tough macro backdrop, and we've talked about this consumer being impacted by that. We absolutely see that more in our direct channel, which is a continuation from what we saw in Q4. What is very encouraging to us is what we are seeing in stores with our talented store teams able to engage to have convert new customers and existing customers. But we do believe that the macro environment had an impact in this quarter for sure. With respect to Mother's Day, the marketing team has exciting initiatives in play. We are really focused on the timing of when we're launching our catalog when we are launching digital marketing. There is a whole program around it that we're super excited about, all backed up by product drop that is coming in the 10 days before. Operator: Your next question comes from the line of Dana Telsey of Telsey Group. Dana Telsey: A lot of work underway. As you think about the product assortment and the test and learn that is put in place, what is changing bottoms, tops, sweaters, style, look, print patterns, what is changing? And what do you expect to see and when will the new full assortment be there? And then with the customer acquisition strategies, who do you want to capture now that's different than your old customer? And as you think of the balance of the business, how much should be new versus existing customers go forward? And then lastly, Mark, just on the components of margins. What are you seeing from energy prices and the impact of freight costs. Mary Coyne: Good morning Dana. I'll start with the first question, which is what is changing in the assortment. So we are taking this time to really test and learn coming out of Q4 going into Q1. And what we are focused on is both new and existing customers achieving more of her wardrobe. We are moving with what we are calling a more modern aesthetic, which is really addressing her lifestyle, and that lifestyle will be built with core things that she has known and loved from the J.Jill brand for years. accentuated by newness, and we see her really responding to newness, but it's how we give her versatile wardrobing pieces that take her through every aspect of her day and her life. We see it being a very balanced approach, both in product and in marketing with everything we do, really benefiting the 3 customer segments that you referred to, right? So as we think about customers, we are focused on retaining the customers we have, we are focused on attracting new, and we are focused on reactivating people who have not shopped the brand recently. When we think about this customer segment, -- we love this customer segment. She's loyal. She's responsive. She is -- has money and time to spend on herself. When we look at the segment today, we -- 45 to 65 is our target audience. Today, our customer sits at the higher end of that and we know we have tremendous opportunity to target the middle of that range and bring very qualified women into this audience. Mark Webb: Great. And with respect to the gross margin, Dana, as we discussed on the last question, the macro environment is obviously very volatile right now and evolving quite real time. what we've included in our guidance is anything that we have seen concrete as of now with respect to gas or oil prices, et cetera. What that means is that in sort of the ocean container rate environment, we've seen some momentary spikes here and there, but it seems to be normalizing itself fairly quickly. And so right now, what we're seeing is more flat ocean container rates maybe up a tiny bit that we would have factored in that I mentioned in Q4 was the first quarter in a while where we actually had great -- small freight savings. And now, as I mentioned, more flat, maybe a little bit of pressure, but still watching it closely and it's evolving real time. In the expenses, we've seen some of the carriers, including the USPS pass-through fuel charge surcharges and we've reflected that in our SG&A included in our guidance going forward. Mary Coyne: Yes. And I just want to circle back for 1 minute, Dana and just reiterate, while we know we have a great customer, we also are now the #1 priority for us is to appeal to a broader audience, and we're excited about some of the testing that we've done with performance indicators that are encouraging as we move forward. Operator: Your next question comes from the line of Corey Tarlowe of Jefferies. Corey Tarlowe: Great. Can you talk a little bit about trends by month? And any color on what you're seeing quarter-to-date? Mark Webb: Yes, Corey, it's Mark. With respect to Q4, we mentioned, overall, it was a pretty promotional quarter it was markdown driven, particularly in the direct channel. The month themselves, January was the strongest, and it was sequentially better than December, better than November. I think we messaged some of that in some of our inter-quarter remarks that we've made around the guidance. The January performance was heavily sale. It's a sale period. It was heavily markdown driven as well. So the cadence was, as I mentioned, but with a deepening markdown support later in the quarter. And then I would say quarter-to-date, we've seen a challenging start. We mentioned that in our remarks. It's very much in line with how we've guided the quarter overall. -- and are committed as we exit all of these quarters through this learning period to manage our inventory as necessary during the quarter to exit as clean as we can entering the new quarter. Corey Tarlowe: Understood. And I think you mentioned a new merchandise planning system. I know that there have been other initiatives that you've undertaken, whether it was the OMS project or other items. Can you talk a little bit about the benefits of this what the costs are and then how we should think about other incremental projects that are coming in, in this year, which I think you called it an investment year? Mary Coyne: I mean, Corey, I'll start just by saying we are so excited about the MP&A project through out of plan. It will allow us to take what is today a very manual Excel-based system and move it to predictive AI forecasting, which will allow us to have inventory optimized in the right location, in the right step at the right time. So we're very excited about what this means from a customer service -- customer experience because the inventory will be where they need it, but also from a revenue and margin driving initiative. Mark Webb: Yes. And Corey, the one of the great advantages of the OMS project was taking a very old system and modernizing it, which then enables you to bolt in these newer technologies. So excited to be leveraging the newer platform to now start enhancing front-end systems, as Mary Ellen mentioned. With respect to the investments, I would say the investments this year continue to be new stores. We mentioned we're opening net 5. We also have some relocations in the plan in 2026. And then the Anaplan project is a more targeted projects than an OMS project would be an LMS project is far region, which allows us within the capital guide that we provided to also invest in other smaller systems enhancements, benefits. Mary Ellen mentioned a few of them in her remarks around driving direct -- the direct business, et cetera. So that's kind of what's behind the expectation of it being and investment here with respect to capital. And then in the SG&A side of things, the investments really start with marketing more in Q2 and forward. and then obviously, payroll and some of the investments we've made in talent. Operator: Your next question comes from the line of Dylan Carden of William Blair. Unknown Analyst: This is Ann bingo on for Dylan Carden. So the guide implies a softer first quarter with improvement as the year progresses, which I believe is a similar setup to this time last year. What would you say is different this year versus last year that gives you the confidence in the back half inflection? And how much of that outlook depends on macro stabilization or improvement? Mary Coyne: So I'll start you for the question. as we're entering 2026, we are in a period of evolution, and we are testing and learning every day -- what I would say is we are sitting today with an incredibly talented team who are aligned on our vision and are committed to our journey. So as we move forward, we will see product improvements through Q2, 3, 4 we will see learnings from our marketing initiatives that we're attaching where we are rebalancing spend where we are trying new things. And moving forward, we'll see that growth as we lean into the things that are working and equally as we pull away from those tests that don't. Mark Webb: Sorry, I was just going to add with respect to the Q4, as Marion mentioned, the product, obviously, it's -- we're still pre the new assortments in -- and we're also in that period of unanniversaried tariffs. So the first half of the year, currently, as we outlined in my remarks, carries $9 million of tariffs against less than $1 million last year. And then that tariff load actually evens and becomes again, assuming the assumptions that we laid out that the tariff rates for the rest of the year around 15% post the Q1 receipts. -- that Q4 would then turn to a small tailwind. So just with respect to the years over years, there's some elements of just that structural component of tariff that supports that as well. Unknown Analyst: Understood. And then on pricing, do you guys see additional opportunity for targeted price increases in 2026? Is this reflected in the current guide? Or does the current consumer environment or a more cautious approach? Mary Coyne: We will be taking a very measured approach to pricing. As we've said in our remarks, we have seen the overall consumer and specifically our direct channel be more price-sensitive. We're seeing incredible promotion out there in the market. So we will be very measured about any increases we take in price. Operator: And your next question comes from the line of Janine Stichter of BTIG. Unknown Analyst: You've got Eaton Sage on for Janine. Can you just provide some more color on which categories performed well and which may have lagged in Q4 and quarter-to-date? Mary Coyne: Sure. So in Q4, what we saw was that newness and novelty were driving the business. So where we had repeat programs from a year prior or 2 years prior, they were very soft. We also saw success in some of the tests we had out there. We saw success in our travel capsule we saw success in expanded categories in outerwear, we saw the start of accessories, which has really moved into Q1 as a success story. -- and we tested some price points, particularly in sweaters with Casimir and soft success. As we moved into Q1, a we are seeing newness rebounding. We are -- but again, Q1 is not indicative of our 2 product evolution. -- where we really see that evolution is in Q2, where newness in fabric and silhouette and category mix really starts to evolve based on our learnings. Clearly, with the goal to drive full price selling in both channels because we know that we've really seen the retail channel working. We've seen things like our dress business turnaround. It's exciting to see what's happening there. Operator: With no further questions, that concludes our Q&A session and also concludes today's conference call. Thank you for your participation. You may now disconnect.
Eyal Cohen: So good morning, and thank you for making the time to join our full year 2025 results call. Joining me is Mr. Moshe Salzer, our Chief Financial Officer. And I'm pleased to report that '25 was an outstanding year for Bosch on multiple metrics, and I'm grateful to our team for the hard work and commitment in achieving these results. We delivered strong revenue growth throughout the year, setting multiple record quarters and increasing our outlook 3x. Ultimately, we completed the year '25 growing 27% year-over-year to a record $51 million in revenues -- and our net income grew year-over-year by 57% to a record $3.6 million, demonstrating our ability to drive profitable growth leverage in our model. Even with this growth, we exited the year with a substantial contracted backlog of $24 million, giving us good visibility into the year ahead. Looking forward, I want to share the key trends that shape -- that will shape our trajectory in 2026. Demand in the defense sector remains robust and is expected to continue driving growth in our Supply Chain and Robotics division throughout the year. We maintain strong backlog visibility and healthy customer relationships across this segment. Alongside that, we are taking steps to extend our geographic reach. In March 2026, we appointed an Indian company to represent Bosch in the Indian market as India is emerging as a growing subcontracting hub for global defense programs. This is a meaningful step in our global expansion strategy. On the product side, our organic growth model is built around continuously broadening the portfolio of manufacturers we represent and embracing the new technologies they develop. Because our manufacturing partners invest heavily in next-generation solutions, we benefit from self-relenishing flow of innovative products to bring our clients. Turning to our RFID division. The ongoing geopolitical tension in Israel since October '23 have continued to weigh on the Israeli commercial market, which represent the primary revenue base for this division. Therefore, we recorded goodwill impairment charges of $700,000 in 2024 and an additional $1.2 million in year '25. To reduce our exposure to geopolitically sensitive Israeli civil market, our 2026 strategic plan focuses on growing our business RFID business by entering the hospital segment, more stable and higher growth vertical within Israel. Successful penetration of this segment will require broadening our product offering, hiring personnel with relevant domain expertise and establishing new customer relationships. We expect to make this investment throughout 2026 with revenue contribution expected to begin in 27. On the currency front, the USD to Israeli shekel exchange rate opened 2026 at ILS 3.18 per dollar, reflecting an approximately 13% devaluation of the dollar against the Israeli shekel compared to start of 2025. As a result, we expect our Israeli shekel denominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. Another effect of the dollar's weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized this year, which arose from the revaluation of the Israeli shekel denominated balance sheet items following the sharp dollar decline. The gain is not expected to repeat in 2026, assuming the rate remains at approximately ILS 3.18 per dollar. Combined, these 2 currency-related items represent approximately $1.4 million in headwinds going into 2026. Separately, the $1.2 million goodwill impairment charge taken in 2025 is not expected to recur in 2026, which partially offset the leaving a net year-over-year drag of approximately $200,000. Our financial foundation has never been stronger. Cash and equivalents have grown to $11.8 million, up from $3.6 million at year-end 2024. Shareholders' equity amount to almost $29 million, up from $21 million at year-end 2024. We have positive working capital of more than $22 million and bank debt amounted to only $1.7 million. This strong balance sheet gives us the flexibility to capitalize on opportunities as they arise, supporting both organic growth and strategic acquisitions. We are actively evaluating a range of acquisition opportunities, each of which must meet our strict criteria, including a proven track record of profitability and high revenue visibility. Turning to our outlook. Consistent with our established policy of issuing conservative initial guidance with updates provided as the year progresses, we are projecting revenues of approximately $51 million and net income of approximately $3.6 million for 2026. We look forward to updating you as the year progresses and our momentum becomes clearer. On the Investor Relations front, in 2025, I conducted nondeal roadshow comprising 44 one-on-one meetings with potential investors and presented at 2 investor summits. Our stock appreciated 42% during that year, year '25, yet a significant valuation gap remains related to our benchmark index Russell 2000. Over the past 4 years, both delivered compounded annual earnings per share growth of 60% compared to 12% of the Russell 2000, 5x the rate of the index. Despite this performance, we trade near book value, while Russell 2000 trade at roughly 2.4x book value. And our price-to-earning ratio stands at approximately 9x compared to 20x for the index. We attribute much of this discount to limited market awareness. To address this, we will shift our IR strategy toward digital marketing starting this April, engaging alecommunication and Investor Relations firm specializing in digital investor outreach. We believe this approach will meaningfully expand our investor reach and visibility in a significantly shorter time frame rather than the traditional IR method. With that, we are happy to take your questions. Unknown Analyst: Congratulations on a really good year. This is Todd Felty. I was wondering if you could talk about the current conditions over there and how you expect your business impacted if the war, let's say, last another 30 days compared to what happens if it drags on for another 6 months with your various divisions. Eyal Cohen: Yes. So thank you, Todd. First, most of our business linked to the Defense segment. As you know, the supply chain, which was -- which is a primary growth driver of both -- most of its business is related to the defense segment and the Robotics division as well. So in that aspect, if the war will continue, it will positively affect the growth of those 2 divisions. In regard with the RFID division, currently, it's very sensitive to the geopolitical tension. And if the war will continue, it will negatively impact its business. But as I mentioned before, we are working to shift our sales resources and business development resources towards the new segments which are less sensitive or even the opposite are growing in such period like the hospitals in Israel, defense as well, but we will focus on the hospital segment in Israel. In addition, as you know, if the war will continue, we learn how to work with that. The economy will gradually return to its normal course of business despite several attacks a day. It's not new for us. We are in this situation for 3 years. And still, we are doing good. But hopefully, it will be ended. Unknown Executive: Okay. And there was a gentleman who asked a question in the chat, which is I thought a good question. He spoke about the growth rate you've achieved and why there is no growth anticipated in the guidance. I think your guidance is for $51 million, and that's basically what you did last year. So can you kind of give us some insight on that? . Eyal Cohen: Yes. First, we reached to a record level of revenues, $51 million revenues, compared to $40 million revenues in the previous year, it's phenomenal. Our revenue growth depends on the consumption of our components by the different segment, mainly and the Israel aircraft industry, and there are 100 subcontractors around the board. I believe that there is high potential for continuing growth because the warehouses are empty. But we currently have and at the end of year '25, we have like $24 million backlog, which covers 50% of our outlook for year '26. So we have to be -- as we did all the time to be conservative. And we will update, I believe we will upgrade the outlook quarter-by-quarter. According to the progresses. And we have to remember that we are in a very sensitive period in geopolitical tension. Every day, there are news and we have to be a little bit conservative. And I think that still with $51 million revenues and the $3.6 million net income and all the ratios that I illustrated before, that was illustrated before, compared to the index to the Russell 2000 Index, we -- there is no need for any growth to justify this current valuation. I think we are undervalued with the $51 million revenues and $3.6 million net income, and there is a great upside. Unknown Analyst: Okay. My last question is just on the M&A front. I see your cash position is up to $11.8 million, can you just kind of go over your M&A strategy? I believe in the past, you plan there would be no dilution on any M&A that you did and that any acquisitions you did would be immediately accretive to revenue and earnings. Is that still the case? And do you plan on investing some of that cash maybe in short-term notes or securities if there's no M&A on the immediate horizon. Eyal Cohen: Yes. So first, as we have the $12 million cash in hand, I think there are opportunities of M&A are increasing because we can acquire a larger company that can move the needle. So it's great -- it's a great tool to have on hand, and we have several acquisitions that we are evaluating. Hopefully, we will close an acquisition during the year '26. Until then, we invest the cash on hand on on security funds. And that bear like 4% to -- 4%, 5% interest per year, something like that. So the money is working and waiting for utilization. And regarding the dilution, it's not on the -- it's not included in the plan. There is no plan for dilution with $11 million to do an acquisition, it's nice acquisition. And if we want to increase it, we can leverage it with the -- if it's a profitable company, we can leverage it with bank loans, long-term bank loans and together to reach to a significant amount of acquisition. It could be one, it could be two, so I don't expect for any dilution in that aspect in M&A in -- by the way, in any other aspect as well. Scott Weis: I have 2 questions. This is Scott Weis. How are you? Eyal Cohen: Fine. Thank you, Scott. Scott Weis: Good. Thank you. Regarding India, can you comment on if you've seen revenue in India to date? And what kind of numbers are you expecting for 2026? We see flow of revenues from India. We saw flow of revenues in year '23, in year '24, in -- and we opened the -- we established the officer, the agency there in order to urge it and to have more foot on the ground in India in order to increase this number. we didn't provide any outlook for how many revenues, but hopefully, it will increase significantly. During the year, it's not investment for 1 year, it's for long-term investment, and we will expand our investment in India as its progress -- according to the progress. so this is the -- our addressable market overseas. Can you share 1 or 2 of the larger customers from the Indian markets? Eyal Cohen: Yes. we are -- our clients, I believe, the biggest -- 1 of the biggest -- or the top 5 subcontractors of assembly subcontractors of electronic systems. They are working with the II. They're working with the Boeing, they are working with a global organization. Among the names are Cosmos, Vinas, DCX. I believe there is a long list of subcontractors that we have not reached yet. And this is a primary reason for having foot on the groud in India in order to go to visit more manufacturers, more assembly company and to start to do business with them because if we have a good offering for 1 -- for the competitors. So I believe we can increase ourselves we can increase our client base in India with the same offer. Scott Weis: My second question is regarding the RFID investment, what kind of investment spend are you expecting to add to the hospital market? Eyal Cohen: What kind of investment. Scott Weis: Both. Eyal Cohen: According to the initial plan, I believe it won't be a significant amount in the size of both, but it will be a significant amount for the RFID, it could be around $800 million to -- it could be -- in share, could be like $300,000 in year '26. And then in year '27, this new segment will be in breakeven and in year '28 to start to be perfect. But it is for the long term because in the intervision every time there is a geopolitical tension, it got impacted directly and immediately. So we have to -- and because we don't believe that in year -- going forward, there will be a long-term peace period. So we have to be ready for that, and we have to do this move. Scott Weis: Do you have existing relationships in the hospital segment? Eyal Cohen: Currently, no. But we have several candidates that we can hire with the related connections. By the way, it could be also through M&A of companies that are already in that field, and to use our system to support the sales and the sourcing of the product to this segment. Scott Weis: Okay. My last question is regarding the guidance. I realize we've been, but the guidance suggests that you've seen a slowdown. And I just want you to flesh that out a little bit. Have you seen any changes from Q4 to Q1 to where we are today? Eyal Cohen: No. The opposite, I see that the backlog increased. The backlog of the group increased in the first quarter. Scott Weis: Thank you very much. Eyal Cohen: You are welcome and hope to see you soon in Israel, Scott. Unknown Analyst: Hello. This is Igor oarletzo. Good afternoon and good morning for me. I have a question, and I think somebody else had the same question about your guidance. So you're projecting the same revenue and the same net income as you had this year. So I understand the revenue part, the net income was affected by 2 things this year, which I assume will not be going forward or maybe it will be. The second part, you paid no taxes are going to pay the taxes next year. So maybe you can just walk me through and say, on the EUR 51 million, how do you get exactly the same metric 1 you had 2 significant items affecting it this year. Eyal Cohen: Yes. Thank you for your question. I think that Moshe described that we had to point that was impacted year '26 report. And Moshe can return on what you just said regarding the currency exchange, the weakness of the dollar and what what was the impact in '26 is 5%? And what do we expect in year '26? Moshe Zeltzer: Yes. In the financial income, in 2025 cause of the Bonacia in Jan, we accepted that our Israeli shekel dominated operating expenses to increase by approximately $600,000 in 2026 compared to 2025. So another effect of the weakness in 2025 was $800,000 in nonrecurring currency exchange income we recognized last year, which arose from the a revaluation of the denominated balance sheet items following the sharp dollar decline. This gain is not expected to repeat in 2026. So the about the impairment of the goodwill, it will offset by the impact of the Israel retains the dollar, which is not supposed to impact in '26 like it was in 2025. Eyal Cohen: So I agree. In summary, there was a charge of $1.2 million of goodwill in 25 million that we don't expect -- you're right. We don't expect it to recur in '26, okay? But on the other hand, there were some benefits in year '25 if that in the -- because of the weakness of the dollar, the operational expenses in year '25 will be higher by $600,000 than it was in year '25 because we opened the year at 26 with a very low currency rate of 3.1 million is per dollar as compared to something like 3.5 per door at the beginning of year '25. So we expect higher operational costs on by $600,000. And another thing that we recorded the year 25 financial income because of the weakness of the dollar of $800,000. And as long as the currency exchange rate of 26 will remain at 3.18%, we don't expect to record the same income. So the benefit in the currency exchanges in and offset by the goodwill impairment in year '25. So who you compare -- you can easily compare the years of '25 and '26, okay? Unknown Analyst: Okay. My other question is, it's a little bit difficult to break down if you're paying any taxes. And I know you referred to that you have a tax carryover build unrealized losses. So could you tell me what you expect your taxes are going to be like this year and next year? Eyal Cohen: Yes. We have a plan to -- the taxes are a little bit tricky because the taxes we're going to use to utilize all the carryforward taxes in both the parent company by the end of year '26, and all of it recorded as an asset in the balance sheet, but we see a level of tax assets in tax carryforward losses in the subsidiary of division that we want to utilize, and we are considering different kind of solution tax solution for that in order to utilize it. because so that all the profit of all the group will be offset by the carry taxes losses of the elevated division. So we don't expect to have any significant tax expenses in year '26. Unknown Analyst: Okay. And for your '27 is it a little bit too early? Or are you also saying that the taxes keep on carrying over into the next years? Eyal Cohen: Can you repeat, please, again? Unknown Analyst: For year '27 going forward, do you see that you're going to still have tax carryovers in your divisions? Or it's probably going to expire? Eyal Cohen: No, no, there is no expiry date for those losses. Unknown Analyst: I mean it was that sorry. Eyal Cohen: Okay. If you will utilize -- if you will execute the tax planning as we wish. I believe we won't have tax expenses in the coming -- in the several coming years. Unknown Analyst: Okay. And my last comment, when you cannot have to take us a question. you referred to in this call agrees with this. I think there is no better way to more buyback or to have the executive buy some of your own stock because I think it would benefit everybody. So this is just a comment. And I don't know if you agree with this, but that would be, I think, many people's minds. Eyal Cohen: Yes. I think because we have just $11 million, and we are a very small company -- we have to invest this money by acquiring company in order to support the growth of the company and not to do an artificial financial act to support the stock Personally, I don't believe in in buyback stock, it didn't impose itself according to what I have read in during all the years. And we are very small to activate such plan. companies in big sites that have hundreds of million on cash on hand, they can do it. They can allocate part of it just for public relations. We don't have the space for it. We have to -- we work very hard to gain this money. And we have a lot of opportunities for acquisitions. And I believe this is the best thing to do for the company for the long term. Regarding buying stocks by the officers of the company, I think I can tell you, I know what are the compensation package of those officers. I think they cannot afford to do buyback. They are not -- they don't have a compensation -- huge compensation that they can allocate it. The part of their compensation, its options instead of cash bonus. And I think it's a sign of support from the officer that they believe in the company. Unknown Analyst: I have a question. It's James -- can in New York. You were talking about India, and I was a little unclear. You said that if I understood it, there were revenues in '23, '24 to '25 in and you're expecting India to grow. But can you quantify how much of your revenue came from India in '23, '24 and '25. Eyal Cohen: Several million dollars. It's around $3 million on average during that year -- in those years. And we expect to -- following the trends in the market and following our investment in India to grow significantly during -- gradually during the years. Any further questions? Okay. So thank you all for your thoughtful questions today. They reflect exactly the kind of engaged dialogue we value with our investors. Let me close with the final thought, year '25 was a milestone for both record revenues, record net income and record cash on the balance sheet. We enter 2026 with a strong foundation, a clear strategic road map and a team that has demonstrated its liability to execute. We are committed to delivering long-term value for our shareholders. And I look forward to continuing that dialogue with you. Thank you again for your participation, and please feel free to reach out at any time. Have a great day. Thank you.
Stocks suffered their largest monthly loss since September 2022, driven by the Iran war and a 53% surge in oil prices. Energy outperformed, while defensive and growth sectors faltered; tech giants like Nvidia, Meta Platforms, and Microsoft now trade at discounted P/E ratios.
Operator: Good afternoon, everyone, and welcome to NIKE, Inc. Third Quarter Fiscal 2026 Conference Call. For those who want to reference today's press release, you will find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. I would now like to turn the call over to Paul Trussell. Thank you, operator. Paul Trussell: Hello, everyone, and thank you for joining us today to discuss NIKE, Inc.'s Third Quarter Fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott J. Hill, and EVP and CFO, Matthew Friend. Before we begin, let me remind you that participants on this call will make forward-looking statements based on current expectations, and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE, Inc.'s reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and nonpublic financial and information. Please refer to NIKE, Inc.'s earnings press release or NIKE, Inc.'s website, investors.nike.com, for comparable GAAP measures and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thank you for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, Elliott J. Hill. Elliott J. Hill: Thank you, Paul. Last quarter, we said we were in the middle innings of our comeback. Since then, we have continued to take meaningful actions to improve the health, quality, and foundation of our business. While we are not satisfied, I am confident that our progress in the areas we prioritized first through our Win Now actions point to where we are ultimately heading across our portfolio. Because of the scale and breadth of the NIKE portfolio, that progress will not happen all at once. We have approached this comeback deliberately across brands, sports, geographies, and channels, with some parts of the portfolio moving faster than others. One of the most important actions we took this quarter was further removing unhealthy inventory of our classic footwear franchises from the marketplace. That created roughly a five-point headwind to our reported results. It was intentional. It was necessary. And while it weighed on the quarter, it is improving the health of the marketplace, the quality of our revenue, and the foundation for more sustainable growth ahead. As we were removing unhealthy inventory, we focused first on the areas that create the greatest impact. We focused on our sport offense in Running, our largest performance sport, and in Football, the beautiful global game. We focused on athlete-centered innovation, building platforms that can scale across multiple sports and price points over time. We focused on our wholesale business, the environment where the majority of our consumers shop, where we needed to prove we could compete and win back market share. And we focused on paying it all off in North America, our largest geography that drives nearly half of our business. These are the dimensions that are furthest along, and each is absolutely essential to turning around this company. At the same time, other parts of the portfolio, including Greater China, Converse, and Sportswear, are still earlier in their comebacks. We have new leadership in place, clearer strategies taken straight, and structural changes underway designed to strengthen these businesses over the long term. We are moving with urgency. We are not simply fixing what needs to be fixed. We are building, brand by brand, sport by sport, country by country, partner by partner. We are reshaping our marketplace, rewiring how we operate, and investing in the technology platforms that we expect will help us serve more consumers better and run our business more effectively. These actions will continue to create near-term pressure, but we believe they are the right actions to strengthen NIKE for the long term and create more durable value for shareholders. This is complex work, and parts of it are taking longer than I would like. But the direction is clear. The urgency is real. And the foundation is getting stronger. By the end of the calendar year, we expect to have finished our Win Now actions. Aged inventory across the marketplace will be healthy, allowing our sports teams to consistently flow athlete-led, innovative, and coveted products in all sports across our three brands, including NIKE Sportswear and Jordan Streetwear. Our marketing teams will be creating even more locally relevant, inspiring stories in key countries and cities around the world. Our account teams will be elevating those stories and our brands at point of sale with consumer-right assortments and presentations, which will all result in more balanced, profitable, and sustainable growth across the integrated marketplace, owned and partnered, digital or physical. And because we are now far enough into the work and clear enough on the path ahead, this fall, we will share a more detailed long-term view of the business at an Investor Day at the Phil H. Knight campus in Beaverton. We look forward to sharing more about the future of NIKE later in the calendar year. Turning to the quarter. I will start with the dimensions that I consider to be progressing fastest in the comeback. NIKE Running was the first team to move into the sport offense. They created a clear product construct based on athlete insights, segmented and differentiated assortments across an integrated marketplace, and elevated our presence and storytelling at retail. The consumer is feeling the impact of the full offense, with NIKE Running up over 20% for the quarter. NIKE Running has created the roadmap for other sports to follow. Global Football is the next sport to fully transform into the sport offense. For the 2026 World Cup, it starts with our footwear construct that successfully launched the Tiempo in Q3, and we will unveil the new material in June. In apparel, we will deliver AeroFit kits for our competing NIKE federations, including a Jordan away kit for Brazil. We are also utilizing the World Cup as an opportunity to catalyze the Football marketplace for quarters to come. By the end of the tournament, we will have elevated our presentation in more than 5,000 Football doors around the world, with wholesale partners and NIKE Direct. Because winning in Football goes beyond winning the World Cup. We win through the clásicos, the derbies, and Copa, with colleges and youth clubs in every neighborhood, season after season. In innovative product, we are back to leading big ideas for our industry. In just one quarter, we delivered both footwear and apparel platforms with deep insights that leverage years of scientific research from our labs, owned IP, and advanced manufacturing. Our new NIKE MIND platform, with over 150 patents filed globally, was the highlight of the quarter. Designed to help athletes clear away distractions pre- and post-competition, the MIND won. Sold out. All geographies. We responded by doubling production of NIKE MIND over the next two seasons to meet demand from more than 2 million consumers who signed up for “Notify Me” on nike.com. Following NIKE MIND, we introduced several early-stage innovation platforms this quarter. We used NIKE Air for the first time ever as a self-inflated thermal layer in apparel, unveiled a new liquid Air Max platform that is low to the ground and moves naturally with the foot, and we delivered AeroFit for Football, our new elite apparel cooling platform that increases airflow by 200% over regular Dri-FIT. It will expand into multiple sports, including NIKE Running in the fall. These platforms are scalable foundations for growth that we can extend into multiple sports and price points over time. Recently, our leadership team reviewed our full innovation agenda for 2027 and 2028 by brand and by sport. That focus is showing up in sharper athlete insights and more complete head-to-toe solutions, and we are excited to share a vision for the future of sport with you this fall. And, yes, innovation sparks demand. But products alone do not deliver long-term growth. For years, we were running a NIKE Direct-first offense. Now we are rebalancing our offense through an integrated and elevated marketplace, and running a Key City offense. These moves require us to rewire our supply chain and upgrade our technology platforms. You saw the early signs of those actions this quarter, and it is a critical step in our return to double-digit EBIT margins. Many of our Win Now actions are being paid off first in North America. One of our strongest executions this quarter was the NBA All-Star Weekend, which connected us to consumers and drove full-price sell-throughs while deepening our wholesale partnerships in Los Angeles with Shoe Palace, Dick's, and Foot Locker. The experience set the tone for how we will show up in LA for the World Cup, Super Bowl, and the 2028 Olympics. Across all dimensions in North America, our wholesale momentum is accelerating. It is sporting goods. Dick's and Academy are leaning in with us to tell more sport performance stories. We are building long-term plans with Foot Locker and JD in athletic specialty. And we are fully committed to our partners in running specialty, Football specialty, and city specialty through our investments in product innovation and presentation. Ultimately, this is about creating a more profitable business model for both sides of the partnership. In NIKE Direct, we have elevated our own experiences, setting the standard for how our brands show up in the marketplace. We have intentionally cleaned the market in all channels. The teams are hyper-focused on consumer-right assortments and presenting them in environments that tell our best innovation stories, all with the goal of accelerating sell-through. If Running shows what our sport offense can do, North America shows the power of our complete portfolio in an elevated, integrated marketplace. From here, we expect that to translate into consistent growth in North America. I will finish with the areas of our business that are earlier in the journey, starting with our growing portfolio of emerging brands. This quarter, we tapped into the energy of the Winter Olympics in Milan and Cortina to build excitement around ACG. It was a world-class execution that showcased the ACG logo on all Team USA athletes. We executed creative brand marketing, including an experiential chain from Milan to the Alps called the All Conditions Express, and we elevated our presentation in more than 600 retail doors around the world, including a stand-alone ACG door in Beijing. The NIKE ACG team is committed to serving the outdoor athlete by creating the world's most innovative footwear, apparel, and accessories, building our presence authentically over time by supporting world-class racers and events, and building long-term partnerships with the retailers who authentically serve outdoor athletes. The outdoors is a tremendous opportunity for NIKE as we bring excitement and a fresh perspective to the consumers and the industry. In NIKE Sportswear and Jordan Streetwear, our teams are moving from playing defense to playing offense. Matt shared last quarter that by the end of this fiscal year, we will have intentionally reduced over $4 billion of revenue from the peak levels of classic footwear franchises. A cleanup of that scale is significant and has taken several quarters to execute. From here, we are investing in a more sophisticated city offense, one that incubates new styles through different consumers and channels, account by account. And as you know, there is both an art and a science to seeding, igniting, and scaling new Sportswear styles. A great example this quarter is the strong sell-through we drove around the globe with a more thoughtful approach to the reintroduction of the Air Max 95. That city-led approach is especially important in EMEA, where we lack a fully integrated marketplace and it has been one of our biggest hurdles. The team is responding with a more complete street-up model, working more closely with wholesale partners to improve point-of-sale storytelling and seeding in the community. In EMEA, you will see us show up more as a local NIKE. Greater China, too, will benefit from a more local approach and closer connection with the consumer on the ground. We have become clearer on the structural challenges in China and the channel dynamics in the marketplace. We are taking action to clean the marketplace, tighten execution across digital and physical retail, and rebuild the brand locally through sport. It will take time, but we remain confident that serving 1.4 billion potential athletes in China is one of the most powerful opportunities in sport. In Converse, the team took some decisive steps this quarter to bring the brand back to a healthy business. Converse is a beloved brand that serves a distinct consumer through their connection to creative culture, music, and youth. Converse will remain an important part of the NIKE, Inc. family, and we are excited about its long-term prospects. Overall, the work is not finished. But the direction is clear. Our teams are moving with focus and urgency, and our foundation is getting even stronger. I am going to pass it over to Matt, and I will come back on to close out the call. Matthew Friend: Thanks, Elliott, and hello to everyone on the call. As Elliott outlined, we are seeing real progress across the business. Our initial focus on sport was important because it sets a strategic repositioning of our brands. Momentum in Running continues to be strong, and we expect Football, Training, and Basketball to return to growth over the next few quarters. Yet sport dimensions currently represent less than half of our total portfolio, and Sportswear continues to be a headwind to revenue growth, as it declined low double digits in the quarter. In the marketplace, relationships with our wholesale partners are strong, and our ways of working look very different than they did 12 months ago. Order books are growing, and we are taking back shelf space. However, sell-through trends are not yet where we want them to be. Despite making progress versus a year ago, digital is still too promotional. Markdowns across the marketplace remain elevated. Our teams are pulling levers to manage inventory and protect brand health, but this continues to be a headwind to gross margin profitability. While our comeback is taking longer than we would like, we are confident we are on the right path, and we have a clear set of plans in place to complete our Win Now actions by the end of the calendar year. Now let me turn to our third quarter results. For this quarter, revenues were flat on a reported basis and down 3% on a currency-neutral basis. NIKE Direct was down 7%, with NIKE Digital declining 9% and NIKE stores down 5%. Wholesale grew 1%. Gross margins declined 130 basis points to 40.2% on a reported basis, primarily due to 300 basis points associated with higher tariffs in North America. SG&A was up 2% on a reported basis versus the prior year, due to employee severance charges we incurred in the quarter. We also had other income from legal settlements. Our effective tax rate was 20%. Earnings per share was $0.35. Inventory decreased 1% versus the prior year, with units down mid single digits. Let me provide some additional context on the $230 million charge we incurred this quarter due to employee-related severance costs, primarily in Supply Chain and Technology. During the pandemic, we accelerated investments across Supply Chain and Technology to support a larger digital and direct business. Those investments also resulted in a higher fixed cost base that weighed significantly on our EBIT margins as revenue came down. Given the strategic shifts we have made to serve a more balanced and integrated marketplace, we have begun to take meaningful steps to reset our cost base to improve NIKE's long-term profitability. Our specific actions in the Supply Chain will lower costs, streamline operations, and reduce capacity in our distribution network. Over time, we will shift our Supply Chain network to become more of a variable cost versus the higher fixed cost structure we have today. In Technology, we continue to optimize our workforce, rationalize programs, and leverage new advanced capabilities. We also right-sized operating costs at Converse this quarter, which was included in this charge as well. We continue to evaluate opportunities related to Supply Chain, which could result in additional financial impacts in future quarters. While we believe the actions taken this quarter will represent the largest financial impact, we expect benefits from these actions to begin in fiscal 2027 and continue to build through fiscal 2028. Now I will turn to performance in the geographies, including key highlights and actions we are taking to drive progress against our Win Now actions. In North America, Q3 revenue grew 3%. NIKE Direct declined 5%, while NIKE Digital was down 7%. NIKE stores were down 1%. Wholesale grew 11%. EBIT declined 11% on a reported basis. North America is leading our comeback and is well positioned to sustain the momentum as we move forward. Running and Global Football grew double digits, with Basketball up high single digits, while Sportswear declined double digits. Our digital business improved sequentially throughout the quarter, driven by strong launch and growth in key sports, as well as continued improvement in average retail discounts. Wholesale revenue growth was driven by new distribution and lapping marketplace management actions with existing partners in the prior year. While sell-through has been below plan, sell-through improved in February, and we drove positive growth in all channels in the geography for the first time in two years. Inventory dollars grew low single digits, while units were down high single digits, with the spread primarily due to tariffs. Closeout units remain low, and the mix is healthy. From a margin recovery perspective, North America gross margins declined 360 basis points versus the prior year, despite nearly 650 basis points of gross impact from new U.S. tariffs. Underlying profitability has now improved over three consecutive quarters, giving us confidence that we can recover the transitory headwinds to margin associated with our Win Now actions. And last, we are increasingly confident we are on track to return to balanced growth in North America across both NIKE Direct and wholesale channels in the near term. In EMEA, Q3 revenue was down 7%. NIKE Direct declined 13%, with NIKE Digital down 6% and NIKE stores down 20%. Wholesale was down 4%. EBIT increased 7% on a reported basis. EMEA presented both progress and challenges in the quarter, and the team continued to take action in a highly promotional marketplace. Our performance business continued to build momentum, led by double-digit growth in Running. Sportswear was down double digits, and sell-through has not tracked with sell-in expectations. Promotions across the marketplace were up versus the prior year as partners manage inventory. We were also more aggressive with promotions on NIKE Digital at the end of the season, which resulted in higher markdowns and a higher off-price mix. Inventory grew double digits versus the prior year, with units up mid single digits. Given the softness in Sportswear, traffic patterns, and promotions across Europe, as well as recent disruption in the Middle East, we anticipate ending the fourth quarter with elevated inventory. In Greater China, Q3 revenue declined 10%. NIKE Direct declined 5%, with NIKE Digital down 21% and NIKE stores up 1%. Wholesale declined 13%. EBIT increased 11% on a reported basis. This quarter, we made forward progress in Greater China. Running grew double digits in the quarter, and we also saw growth in Tennis, Golf, and ACG, and Kids was flat. Sportswear declined double digits as expected. Wholesale sell-in was managed down, while seasonal sell-through rates sequentially improved. We expanded our NIKE store pilot to 100 doors, including our House of Innovation door in Shanghai, obsessing store assortments, storytelling, and replenishment, and this resulted in traffic and comp sales improving versus the prior year. We implemented shifts to manage our brand presence differently across all digital platforms, pulling key styles off discounts, resulting in higher full-price realization for these styles. Inventory was down mid teens versus the prior year, with units down more than 20%, and partner inventory also declined double digits. With new leadership now in place, we expect to take additional actions to improve our position in the coming quarters. We will continue to reduce near-term sell-in to align with full-price demand, clean up the digital channel, and reduce the amount of aged inventory in the marketplace. We expect these actions will continue throughout fiscal 2027 and remain a headwind to revenue growth, while profitability should bottom sooner as marketplace management makes progress. In APLA, Q3 revenue was down 2%. NIKE Direct declined 8%, with NIKE Digital down 12% and NIKE stores down 3%. Wholesale was up 3%. EBIT declined 4% on a reported basis. In the quarter, we saw bright spots: Running up double digits and growth in Training and Football, while Sportswear declined double digits. We had a strong launch of NIKE Skims in Australia and Korea, and launched new Cricket footwear innovation at the T20 Cricket World Cup. NIKE flagship stores in Tokyo and Seoul drove positive growth for the quarter. While inventory grew high single digits versus the prior year, units declined low single digits, as the team made progress in certain countries. Closeout mix remains elevated, and the team is focused on the actions to address excess inventory over the coming quarter. We expect performance across territories in APLA to remain mixed in the near term. Now I will turn to our outlook. You heard Elliott say that while our comeback is taking longer than we would like, we have a clear set of plans in place, and we expect to complete our Win Now actions by the end of the calendar year. Over these next nine months, there will continue to be puts and takes across the revenue and gross margin lines of our business. At the same time, we are even more confident in where we are headed. Therefore, we want to provide greater visibility to how we see the business trend from here through the end of this calendar year. We expect revenues to be down low single digits versus the prior year, with gains in North America offset by declines in Greater China, driven by intentionally reduced sell-in and marketplace management actions over that period. While the tariff environment has been uncertain, assuming no significant changes, we expect Q2 fiscal 2027 to be the final quarter where higher tariffs continue to be a material year-over-year headwind to gross margin. We expect gross margin expansion to begin in the second quarter due to actions to mitigate tariffs and recovery of transitory impacts from Win Now. We expect earnings to be flattish with gross margins beginning to inflect and disciplined SG&A management, setting the foundation for earnings recovery from there. We also recognize that the environment around us has become increasingly dynamic, and we could experience unplanned volatility due to the disruption in the Middle East, rising oil prices, and other factors that could impact either input costs or consumer behavior. We are focused on what we can control, and these assumptions reflect the macro environment as it stands today. Now I will share a specific outlook for Q4 fiscal 2026. We expect revenues in Q4 to be down 2% to 4%, with modest growth in North America despite lapping a value liquidation in the prior year, largely offset by declines in Greater China and Converse. We expect Greater China to be down approximately 20% in the fourth quarter, reflecting reduced sell-in that we highlighted last quarter, as well as accelerated actions to clean up the marketplace. We anticipate a two-point benefit from foreign exchange. We expect sequential improvement in gross margin, with Q4 down approximately 25 to 75 basis points, including 250 basis points due to higher tariffs in North America. We expect Q4 SG&A dollars to be flat to down slightly. We expect other expense, net of interest income, to be an expense of $15 million to $25 million in the fourth quarter. And we expect our full-year tax rate to be in the low 20% range. And last, we will return to providing full-year and long-term guidance at our Investor Day in the fall. With that, I will pass it back to Elliott. Elliott J. Hill: Thanks, Matt. Before we move to your questions, I want to leave you with an image that stayed with me from this quarter. I was in Barcelona meeting with athletes and leaders from FC Barcelona, a partner of ours since 1998, and I stood on the pitch at Camp Nou. If you have ever been there, you know it is more than a stadium. It is one of the most imposing stages in sport, a place built for pressure, belief, and unforgettable moments. And right now, Camp Nou tells another story too. Above the pitch, there is scaffolding. In the corners, there are cranes. Entire sections are unfinished. The stadium is being rebuilt tier by tier, piece by piece, to accommodate over 100,000 supporters. The work is still underway, capacity right now is limited, and it requires patience and perseverance. And still, the supporters are in full voice. The players are still stepping onto the pitch, focused on competing and winning. And all around them, the work is transforming what their home, their club, will become. What stayed with me was the reality of both things being true at once: competing today while building for tomorrow. FC Barcelona did not choose between performing in the present and preparing for the future. They are doing both at the same time. Standing there looking up at the Hatfield Stadium, it occurred to me this is NIKE right now. We are taking deliberate actions that we believe will restore the health and quality of our business, even when these actions create pressure in the near term. We are removing what is not working. We are rebuilding parts of the foundation that needed to be rebuilt. And at the same time, we are continuing to innovate, to compete, and to create for the future. That takes conviction. It takes patience. It takes belief. And it takes focus. Camp Nou is being rebuilt not for the next match. It is being rebuilt for the next era. That is exactly how I think about the work we are doing at NIKE. I came back to help return this company to greatness and to build it the right way for the long term, to protect what has always made NIKE special, and to modernize it for a new generation of athletes and consumers. So while the work is not finished, the direction is clear. Our focus is clear. And our comeback is within reach. And this fall, we look forward to sharing a fuller view of that path ahead at our Investor Day. With that, let us open it up for questions. Operator: We will now begin the question and answer session. To ask a question, press star then the number one on your telephone keypad. We kindly ask that you please limit your initial question to one. Our first question will come from the line of Lorraine Hutchinson with Bank of America. Please go ahead. Lorraine Hutchinson: Thanks. Good afternoon. The performance in EMEA seems to have decoupled from some of the early successes you have seen in North America. How do you diagnose the problems, and what is the strategy to fix it? Matthew Friend: Well, Lorraine, as I highlighted, EMEA presented both progress and challenges in the quarter. And I think that as we have implemented the Win Now actions across that geography, we are seeing growth in performance. We are seeing Running up double digits, and we are really excited about the plans that we have got in place for the World Cup, as well as the way that we are setting up the marketplace for both upcoming product launches in both Running and in Training. This quarter, we highlighted that we did not see sell-in where we were hoping sell-in to be specifically on our Sportswear business, and it is really connected to a theme that we have been talking about for several quarters. We have highlighted some of the macro pressures that we have been seeing in EMEA over the last few quarters, and specifically that marketplace has seen challenges in traffic and also a higher level of promotional activity. And so this quarter, as we saw sell-through trending below our expectations, we saw our partners start to be more promotional, and we also were more promotional to manage inventory across this large marketplace. And this quarter, we also experienced traffic disruption from the Middle East, and we also are taking that into consideration as we are thinking about where this business stands and also as we look forward. So we have been aggressive, as I mentioned, with our teams pulling levers in order to keep this marketplace clean and healthy. Our closeout mix is at a really good level, and while we expect to exit the fourth quarter with elevated inventory in EMEA, we are confident, given the size of the issue and the way that our teams are responding, that we will be able to continue to work through the Win Now actions in this geography as well by the end of the calendar year. Elliott J. Hill: And, Lorraine, the only thing just to add to that, we do have a new leader in place. I have tremendous confidence in Cesar Garcia. He is a 25-year NIKE veteran. He has deep and broad product and market experience, and he is a tremendous leader. The team is really focused from a product perspective, and Matt touched on some of this, moving from being so Sportswear-reliant to also being really focused in on performance, where we have growth in Running, Training, and Football. So I like what they are doing there. They are now getting back to driving a more elevated and integrated market, and then they are focused on making sure we have the right assortments in those doors, elevating the presentation, and driving sell-through with our strategic partners. And so overall, I am really pleased with the actions that the team are taking. Operator: Our next question will come from the line of Adrienne Eugenia Yih-Tennant with Barclays. Please go ahead. Adrienne Eugenia Yih-Tennant: Thanks for the forward guidance, actually. That is my question. It is going to be so you are talking about the end of the calendar year, but your quarters kind of split the calendar year kind of in the middle. So I am wondering if we should be thinking about revenue, you said down low single digit for that horizon, with North America up and improving, which would suggest that Greater China is meaningfully negative, probably climbing from that negative 20. So just a little bit help there with the shaping and what is that? Is it February? The earnings being flattish would suggest, you know, 15% maybe haircut, you know, to where I mean, significantly more than where the Street is. So, again, is that flat for the fourth quarter on EPS through the February? And then should we think about the May of that year sort of having a big inflection? Sorry for all the kind of convoluted questioning, but thank you. Elliott J. Hill: Yeah. Adrian, I am going to jump in first. I see Matt wrote down all the questions, so I think he is ready. But here is what I want to make certain that everyone here is on the call. We are even more convinced now that the Win Now actions were and remain the right strategic moves. We have made meaningful progress improving the health, quality, and foundation of our business. We talked about that. And really, the areas that we said we were going to make the most progress, the ones that we knew made the most impact, are some proof points that the actions are working. If just at a high level to go through the actions, we first said culture was number one. We have the teams galvanized around sport and growth. Product was the second one. We are driving the sport offense. We just moved into sport offense in September. Spring 2027 will be the first quarter where we will have product flowing into the marketplace from the sport offense. And Running is a proof point this quarter. It is up double digits. NIKE Football is also getting back to growth. We have innovation coming. We talked about MIND and AeroFit. The wholesale business is back to growth. And we are paying it off in North America. So I am really pleased with those proof points that the Win Now actions are making an impact, and know that we are moving quickly against Greater China, Converse, and Sportswear. We have new leaders in place. We are creating thoughtful long-term strategies. And we are making structural changes. And what I want to leave you with before I hand it over to Matt is that these are deliberate actions. And we are not just fixing. We are building, brand by brand, sport by sport, country by country, and partner by partner. And I will acknowledge that parts of it are taking longer than I would like, but we believe in the direction. We are moving with urgency, and the foundation is getting stronger. So I feel great about that. Matthew Friend: And, Adrian, on the specific guidance question, what I would say is that we have been providing 90 days of guidance for the last five quarters since Elliott returned, and we have been consistently asked for greater visibility as we had confidence in the trajectory of the business. And, you know, while this comeback has taken longer than we would like, with North America's continued momentum and a clear plan in place through the remainder of the calendar year, our approach to providing guidance for the calendar year is really about pulling up at this moment and providing transparency to the financial trajectory of the business over the next nine months. So I think of it as it includes this quarter, and then it carries through over the next nine months. And we are lining that up with the timeline that we have set to complete the Win Now actions by the end of the calendar year. Specifically, your question about some of the elements of shaping, without getting into specifics of November versus December, what I would say is that we expect revenue to be down low single digits over this period. We do expect the momentum to continue in North America, and so we are planning for modest growth in North America, even as we continue to lap the value liquidation that we have been doing this year. That is going to be offset by headwinds in Greater China, and that is partly related to what we have been talking about, which is continuing to reduce the sell-in so that we would meet full-price demand, and also some of the actions that we are continuing to take in the marketplace in order to be able to clean it up. But I think the important point is that we expect margins to inflect, and that is a big moment, I think, in Q2 for us, as we have been navigating through the costs associated with the Win Now actions and dealing with the newly implemented tariffs. I think our confidence in margins inflecting positively in Q2, while we are managing SG&A tightly, really sets the table for inflection in earnings as we go from there. Operator: Our next will come from the line of Simeon Siegel with Guggenheim Securities. Please go ahead. Simeon Siegel: Thanks. Hey. Good afternoon, guys. Matthew Friend: Hey, sir. In the spirit of all this information, which, again, thank you. I know you guys do not normally give this detail, but any color you can share on DTC gross margins or just any way to think about the health of that channel? I know I have gotten a lot of questions around wholesale growth versus DTC declines. Just might be helpful to hear a little bit more about the quality of those DTC sales versus the reported declines, Elliott. And then, Matt, just could you quantify the severance booked into the operating overhead this quarter? The full $230 million? I am just trying to think through the change in operating overhead on a recurring basis, how you are thinking about operating overhead expenses next year as you further variabilize P&L? Thanks, guys. Elliott J. Hill: Yep. Thanks, Simeon. Let me jump in, and then, Matt, I will let you take the specifics around the DTC questions. But here is what I want to make sure that everybody on the call understands. We had been servicing our consumers with a direct-to-consumer model, and now we are moving to serve consumers wherever, however they choose to shop with us. We want to make certain that we are managing our business across a balanced and integrated marketplace. That is the strength of NIKE, when we are able to have a portfolio of places that we serve to consumers. And we are making certain that we segment and differentiate the assortments across multiple channels. NIKE Direct is certainly a part of that, but we are also making certain that we serve consumers in specialty sporting goods, athletic specialty, department stores, family footwear, and digital and physical. That is the power of NIKE, and I think we are doing a much better job of working directly with our partners, developing long-term plans, and making certain that we gain back shelf space and ultimately share. So again, yes, DTC is critically important to our success moving forward. I want to make sure you hear me say that. But, also, I want to make certain that you hear that an integrated and balanced marketplace is also critically important. Matthew Friend: And specifically to your question about the quality of the DTC business, what I would say, Simeon, is that North America is the geography where we saw the most improvement in the quality of the business in Direct, and specifically I am really talking about digital. We did, with our focus on sports, see strong results across our NIKE stores around the world, lining up against sport and getting behind key sport moments. But on the digital side in North America, we saw continued improvement in the gap between wholesale and Direct. And when we look at the quality of that business in North America, we continue to be encouraged. I mentioned a couple things on the call, but we saw sequential growth throughout the quarter driven by strong launch—that is across both NIKE and Jordan. We saw growth in key sports on digital, and we saw continued improvement in average retail discounts in North America. We saw demand on the NIKE app grow in Q3 in North America, and, as I mentioned, we saw sell-through overall in the marketplace in North America in February inflect up, and it was the first time in two years that we saw positive growth in all channels. So that includes wholesale and across Direct. And so we continue to be encouraged that as we are getting deeper into our Win Now actions, we are getting closer to balanced growth between wholesale and Direct in the North America marketplace. And that is the playbook that we intend to take, that we are taking, to Europe, to APLA, and to Greater China, and what we are focused on executing through the balance of the calendar year. Operator: Our next question will come from the line of Michael Binetti with Evercore ISI. Please go ahead. Michael Binetti: I guess just to clean up if the negative 2% to 4% in fourth quarter is reported or currency, and then I guess, bigger picture with revenues down 2% to 4% and North America growing modestly, China down 20%. You did not guide the EMEA in the fourth quarter, but it seems like triangulating somewhere close to down mid singles, down a bit, despite the World Cup. Maybe just the shape of the major puts and takes in EMEA in fourth quarter since the revenue rate changed so much in third quarter? And I guess the follow-up there is the margins in EMEA were surprisingly strong in third quarter despite the revenue decline. Could you just comment there on maybe any color on whether those positive offsets continue? Matthew Friend: Yeah. The comments that I made on EMEA in the third quarter definitely inform the way we are thinking about the fourth quarter. We expect to continue to see growth in the performance dimensions. We are incredibly excited about World Cup. I mentioned that we have got strong double-digit growth in Running, and we are excited about upcoming product launches in both Training and Running. Training is the second biggest performance category, and it is super important to continue to build momentum as we continue to drive our Training business across all sports. The real change in the quarter was sell-through on the Sportswear side. And so our outlook reflects a modification that takes this into consideration in terms of our expectation of the Sportswear business in Q4 because we are managing the marketplace carefully. We have also taken into consideration not only what we have seen in the Middle East as it relates to traffic, but also our expectations of the disruption of that in this marketplace based upon what we can see today. And so that is really the other factor that we have taken into consideration in this fourth quarter guidance. But we continue to be encouraged by the momentum in North America. We have got a strong order book for summer. We are seeing positive signs in sell-through. We are not seeing a consumer reaction to what is going on in the Middle East at this point in time in North America. And so our teams are continuing to work hard to connect with consumers and to continue to rebuild back brand momentum across that geography and the rest of the geographies. Operator: Our next question will come from the line of Brooke Roach with Goldman Sachs. Please go ahead. Brooke Roach: Good afternoon, and thank you for taking our question. Elliott, Matt, was hoping to get your latest thoughts on the opportunity to stabilize the Sportswear business. How much additional reset activity is needed in the Classics franchise by geography? Are you seeing any green shoots in the North America Sportswear portfolio that gives you confidence that the strength in performance can translate to better momentum in Sportswear over time? Thank you. Elliott J. Hill: Yeah. Thanks, Brooke. Here is how I would think about it, and I said it in the prepared remarks, but we are definitely moving from defense to offense in both NIKE Sportswear and Jordan Streetwear. We have to think about both of those, especially as you think about North America. Let me first start with where we prioritized, and we did prioritize our performance business. And we felt like we had to get performance products right because sport is what drives our authenticity. It is our important difference and distinction. It drives our best products and storytelling. And, ultimately, sport is what creates a halo over the Sportswear and Streetwear businesses. And so we really got after the sport business through the and Running, a complete offense, making sure that we had innovative product driven by athlete insights. And now, as you are hearing from Matt and me, we are paying it off across the integrated marketplace. So it is working on the sport side. In terms of how we are doing on the Sportswear and Streetwear side, here is what I would say. And I did use the specific, where we intentionally pulled back, which created about a five-point headwind this quarter, of removing unhealthy inventory from those Classics. And what I would say is that the Air Force 1 and the AJ 1, they stabilized this quarter. And so we are seeing month-to-month improvement in full-price realization in those two franchises. And I also want to make sure that you hear me say that we see that as a positive because we believe these icons will always be staples for the consumer. We are still stabilizing the Dunks. We have a little bit of work to do there. But at the same time, the green shoots, as you call them, we are starting to see the team create some buzz around our business this quarter. We had some really good and tremendous launches: AJ 11 Gamma, the AJ 5 Wolf Grey, the NIKE Air Max 95, and all of them had a high full-price realization and really strong sell-through. So the Sportswear team is moving to playing offense, and what you will see from us is that team taking insights from the consumers that they serve and focusing on creation around comfort, innovation, and, yes, we will continue to leverage our unmatched vault. And so I am really pleased with the progress that the Sportswear and the Streetwear teams are making. But we still have work to do. And I call that out that we still have work to do, but I am confident in the actions that we are taking and pleased with the way the consumer is responding. Operator: Our next question will come from the line of Brian William Nagel with Oppenheimer & Co. Please go ahead. Brian William Nagel: Hey, guys. Thanks for taking my questions. So, Elliott, the question I wanted to ask, I mean, you have mentioned several times in your comments that you are heading in the right direction, but the process is taking longer than you initially expected. So the question is, as you look at the reasons for that, is it more internal, or is it more external? The environment in the different geographies or whatever has proven more challenging for the turnaround efforts here. Elliott J. Hill: Brian, I think the easy answer for me to say is a little bit of both. Here is what I would say. The starting point for each geo or each country was at a different place. And, by the way, each marketplace has a different structure as well. And so we had to make certain that we truly understood where each country and each marketplace was in terms of their performance across the entire integrated marketplace—again, NIKE Direct all the way through the different channels. And so I think the easiest way to think about it is, the comeback is substantial, and, at our size and scale, building for the future takes time. And it has taken longer than I would like. But what I would tell you is we got our teams reorganized from a product perspective as well in September, and Spring 2027 will be the first time we see the fruits of those teams working together. But in the end, I am pleased with where we are headed. And I think everybody, when I came into this role, said, “Hey, it is going to take two years.” And that is what we are tracking right now. So a little bit of both, Brian. We do have some external factors that we are having to deal with while we are in a major comeback. But that is no excuse. We are controlling what we can control. We are getting our teams lined up internally around product and the consumer and storytelling. And then we are getting our country teams lined up around driving a more integrated and elevated marketplace. And, ultimately, that is what is going to pay dividends for us and build the foundation for future growth. Operator: Our final question will come from the line of Matthew Robert Boss with JPMorgan. Please go ahead. Matthew Robert Boss: Great. Thanks. So, Elliott, if we take a step back, just update us on health of the global Sportswear backdrop, or where does your outlook for the industry stand today relative to when you took the helm? And then, Matt, on low- to mid-single-digit constant currency revenue declines for the back half of the year, is there a way to parse out self-inflicted headwinds or maybe where you see underlying demand exiting this fiscal year, and what have you embedded for overall sell-through rates through the balance of the calendar year just relative to the pressure that you cited that you have experienced to date? Elliott J. Hill: Matthew, let me take—so I think the easiest answer on Sportswear is that it will remain a very large part of the overall industry, and it will be critical to our success moving forward. So we are taking a streets-up approach to this and making certain that we help this big, giant business feel more local. And, again, it takes time to seed, ignite, and scale product over time, but returning to a healthy Sportswear business is essential and vital to our comeback because it will continue to be a critically important part of the overall market and overall part of our growth. So, with that said, I am incredibly positive on the athletic industry overall, not just in Sportswear, and we see it as a tremendous opportunity for us to continue to drive growth in an expanding market. Matthew Friend: And then, Matt, to your question on sell-through assumptions—maybe let me hit revenue first. For the first half of next year, I think it is safe to look to the range we provided for Q4 as a guide for what we are expecting for revenue for those last two quarters. And I think it is really highlighted by the trends that we have talked about. It is North America continuing to sustain momentum. We expect to see more balanced growth across channels. Given where inventory is in the marketplace, we expect to continue to see improvement in underlying profitability in that geography, and the top line will be tempered a little bit, like we have been talking about, because we are anniversarying quite a bit of off-price liquidation in the prior year. But it is a healthier business. It is a more profitable business. And it is a sustainably growing business across all channels of the marketplace. As you go outside the U.S., I think that we have been clear that we believe that we can complete the Win Now actions in EMEA and APLA by the end of this calendar year. That is how you should read what we are communicating. I think that will continue to be us going deeper on cleaning up the marketplace, especially digital. And quarter by quarter, we are planning for improvements in sell-through. As it relates to Greater China, we are managing sell-in. And by managing sell-in, we expect to continue the trend, like we saw this quarter, of sequential improvement in sell-through rates. And so we are managing supply in order to be able to continue to shift the mix of inventory in that marketplace to be more full price and more healthy. And that is why I gave the commentary around, while the actions we are taking will create a headwind to revenue in Greater China, we do expect to see profitability bottom faster because it is going to be a healthier, more profitable business as we set that foundation for much more balanced growth as we go forward in China. Operator: And that will conclude the question and answer session and our call today. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, everyone, and thank you for participating on today's Fourth Quarter and Full year 2025 Earnings Conference Call and Webcast for Barfresh Food Group. Joining us today is Barfresh Food Group's Founder and CEO, Riccardo Delle Coste; and Barfresh Food Group's CFO, Lisa Roger. Following prepared remarks, we will open the call for your questions. The discussion today will include forward-looking statements. Except for historical information herein, matters set forth on this call are forward-looking within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about the company's commercial progress, success of its strategic relationships and projections of future financial performance. These forward-looking statements are identified by the use of words such as grow, expand, anticipate, intend, estimate, believe, expect, plan, should, hypothetical, potential, forecast and project, continue, could, may, predict and will and variations of such words and similar expressions are intended to identify such forward-looking statements. All statements other than the statements of historical fact that address activities, events or developments that the company believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions made based on experience, expected future developments and other factors that the company believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond control of the company. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those indicated by such forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of date they are made. The contents of this call should be considered in conjunction with the company's recent filings with the Securities and Exchange Commission, including its annual report on Form 10-K and the quarterly reports on Form 10-Q and current reports on Form 8-K, including any warnings, risk factors and cautionary statements contained therein. Furthermore, the company expressly disclaims any current intention to update publicly any forward-looking statements after this call, whether as a result of new information, future events, changes in assumptions or otherwise. In order to aid in understanding of the company's business performance, the company is also presenting certain non-GAAP measures, including adjusted gross profit, EBITDA, adjusted EBITDA, which are reconciled in the tables and business update release to the most comparable GAAP measures and certain calculations based on its results, including gross margin and adjusted gross margin. The reconciling items are nonoperational or noncash costs, including stock compensation and other nonrecurring costs, such as those associated with the product withdrawal, the related dispute, certain manufacturing relocation costs and acquisition-related expenses. Management believes that the adjusted gross profit, EBITDA and adjusted EBITDA provide useful information to the investors, because they are directly reflective of the performance of the company. Now with that, I will turn the call over to the CEO of Barfresh Food Group, Mr. Riccardo Delle Coste. Please, sir, go ahead. Riccardo Delle Coste: Good afternoon, everyone, and thank you for joining us for our fourth quarter and full year 2025 earnings call. I'm very excited to report that 2025 has been a transformational year for Barfresh. One that has fundamentally repositioned our company for sustainable growth and profitability. The fourth quarter capped off an exciting year, in which we achieved record revenue of $14.2 million, completed a strategic acquisition that gives us control of our own manufacturing capabilities and secured financing that positions us to unlock over $200 million in revenue capacity. Before I discuss our quarterly and full year results, let me provide context on the strategic milestones that have reshaped our business model. In early October, we completed the acquisition of Arps Dairy, which has fundamentally changed how we operate. This acquisition brought us an operational 15,000 square foot processing facility where we immediately commenced production, along with a 44,000 square foot state-of-the-art manufacturing facility in Defiance, Ohio. We're already realizing immediate benefits from enhanced supply chain control and operational efficiency with approximately 90% of our revenue mix now manufactured in-house, giving us the ability to deliver orders that we previously would not have been able to deliver without the acquisition. After years of being constrained by third-party manufacturers, which created operational challenges, revenue limitations and increased operating costs, we now have control over the majority of our production. Our updated time line for the remaining construction and equipment installation at our larger facility is extended to the fourth quarter of 2026 due to the timing of financing. In March of 2026, we secured a $7.5 million senior convertible note financing that delivers transformative benefits. These proceeds enable us to pay off the existing mortgage on the larger Defiance facility, meaning we now own our manufacturing plant, free and clear. The financing also accelerates construction completion, enabling us to move into the enhanced facility before the end of 2026. Additionally, as previously announced, we would approve for a $2.4 million government grant to install specialized equipment necessary for full-scale production operations. For the fourth quarter of 2025, we achieved record revenue of $5.4 million, representing a 94% year-over-year revenue growth. For the full year of 2025, we achieved record revenue of $14.2 million, representing a 33% year-over-year growth. The fourth quarter and full year revenue growth was driven by the inclusion of the newly acquired Arps Dairy. Growth in our base business for 2025 was limited by the supply constraints of our co-manufacturing model underscoring the strategic necessity of acquiring Arps Dairy. With the limited manufacturing supply we have been focused on maintaining results and working on recovering lost customers, but now as we move into 2026 with enhanced capacity coming online, we are also focused on acquiring new ones. We've seen strong uptake across our existing Twist & Go portfolio and our Pop & Go 100% juice freeze pops have gained meaningful traction with several large school districts. I'm particularly excited to highlight a significant win we announced recently that demonstrates our continued momentum and competitive strength in the education channel. We successfully secured a 7-year bid award, with the largest school district in Nevada, representing the fifth-largest school district in the entire United States. This district serves over 300,000 students across the region, making it one of the most substantial wins in the K-12 channel. This win is especially meaningful for several reasons. First, it validates our ability to compete successfully for and secure placements, with the largest school districts in the country. And second, with our enhanced manufacturing capabilities through the Arps Dairy acquisition and our expanded product lineup, we are well positioned to support this district's needs reliably and consistently. This represents a major milestone in our expansion within the K-12 education channel and strengthens our position as we continue pursuing similar large-scale opportunities nationwide. Despite wins like this fifth largest district in the nation, we remain at only approximately 5% market penetration in the education channel overall, which represents substantial runway for growth. And we have tremendous growth opportunities within the districts we currently serve. A key priority throughout the fourth quarter and into fiscal 2026 has been protecting our base business and rebuilding relationships with customers who are impacted by the supply constraints we experienced earlier in the year. We successfully brought back customers who had temporarily removed our products due to our earlier supply shortfalls with many reintroductions occurring in the fourth quarter. Our approach has been straightforward and relationship-focused. We've stayed in close contact with these school districts through our broader broker network and our own sales team, communicating transparently about our manufacturing progress and our transition to owned facilities. Because these customers are already familiar with our products and have seen the positive response from students, the reintroduction process is more streamlined. This focused effort to win back displaced customers while simultaneously pursuing new district opportunities, positions us well for sustained growth as we're both recovering lost ground and expanding our market presence. The manufacturing capacity issues that constrained our first half performance were mostly resolved by year-end with the acquisition of Arps Dairy's processing plant and the contribution from our smoothie bottle co-manufacturing partners, which provided additional production capacity, giving both existing and prospective customers confidence in our ability to deliver reliably. The combination of record fiscal 2025 revenue, successful school district penetration, including major wins like the fifth largest school district in the nation, and our expanding manufacturing capabilities positions us well as we execute on our fiscal 2026 plan. We've built significant operational momentum, and with our owned facility, providing enhanced control and capacity, we're ready to capitalize on the substantial market opportunities ahead. With that overview of our strategic progress and market momentum I'll now turn it over to Lisa to walk through the detailed financial results for the fourth quarter and full year. Lisa Roger: Thank you, Riccardo. Let me walk you through our fourth quarter and full year financial results in detail. Revenue for the fourth quarter of 2025 increased to $5.4 million, representing our highest quarterly revenue in company history. Revenue for the full year of 2025 was a record $14.2 million compared to $10.7 million in the same period of 2024. This growth was driven by our Arps Dairy acquisition, which contributed $2.9 million. Gross margin in the fourth quarter of 2025 was 3% compared to 26% for the fourth quarter of 2024. Adjusted gross margin for the fourth quarter of 2025 was 4%, compared to 30% in the prior year period. Adjusted gross margin for the full year of 2025 was 22% compared to 37% for the full year of 2024. The decrease in gross margin resulted from transitioning Barfresh production to the company's new facility to capture long-term operational efficiencies and scale benefits, which involves typical startup and implementation costs that temporarily impacted margins. Additionally, we continued Arps Dairy's existing milk processing business, which operates at different margin profiles than our core business and can experience commodity pricing fluctuations that may impact revenue, but provide stable milk supply and support production and diversification. These are strategic investments in our long-term growth and opportunities. We expect incremental margin recovery to occur throughout the year and accelerating in the second half of 2026 when the equipment enhancements are completed and the new facility is commissioned. Net loss for the fourth quarter of 2025 improved to $763,000 compared to a net loss of $852,000 in the fourth quarter of 2024. Net loss for the full year of 2025 was $2.7 million compared to a net loss of $2.8 million in the prior year period. Selling, marketing and distribution expenses were $783,000 compared to $872,000 in the fourth quarter of 2024. Selling, marketing and distribution expenses for the full year of 2025 were $3.2 million compared to $3.1 million in the same period of 2024. G&A expenses for the fourth quarter of 2025 were $922,000 compared to $607,000 in the same period last year. G&A expenses for the full year of 2025 were $3.2 million compared to $3 million in the same period of 2024. Adjusted EBITDA for the fourth quarter was a loss of approximately $1.1 million compared to a loss of approximately $563,000 in the prior year period. For the full year of 2025, our adjusted EBITDA was a loss of approximately $2.1 million compared to a loss of $1.3 million in the same period of 2024. We expect to achieve positive adjusted EBITDA in fiscal year 2026 as we realize the full benefits of our integrated manufacturing model and complete our facility optimization. Turning to our balance sheet. As of December 31, 2025, we had approximately $2.3 million of cash and accounts receivable and approximately $1.7 million of inventory on our balance sheet. In March 2026, we secured a subscriptions for a $7.5 million senior convertible note financing. The proceeds were used to pay off the existing mortgage on our manufacturing facility in Defiance, Ohio, as well as other obligations and will accelerate construction completion, which will position the company to control its manufacturing destiny with significantly expanded production capacity. In addition, as previously announced, we were recently approved for a $2.4 million government grant to purchase and install specialized equipment necessary for full-scale production operations. The financing structure gives us significant financial flexibility. The ability to pay in either cash or registered stock preserves cash for operational needs during the construction phase and owning the facility free and clear, positions us to access additional capital through mortgage and equipment financing as may be required for any remaining investments. Now I will turn the call back to Riccardo for closing remarks. Riccardo Delle Coste: Thank you, Lisa. As I reflect on 2025, this year represents an inflection point for Barfresh. We delivered record revenue of $14.2 million and fundamentally repositioned this company for unprecedented growth. The strategic decision we made this year acquiring Arps Dairy and securing the financing to facilitate the completion of construction on our new state-of-the-art facility mean we are no longer constrained by third-party manufacturers or limited production capabilities. We now control our own destiny. Looking ahead, we have multiple powerful drivers of growth working in our favor. First, our own manufacturing capabilities through Arps Dairy give us direct control over production, enhanced operational efficiency and the flexibility to innovate and scale new products more rapidly. Second, once our facility expansion is complete, we will have capacity to support over $200 million in annual revenues, a significant leap in our production capabilities. The new equipment and optimized facility layout will create greater operational efficiencies, increase profit margins and provide the scalability to support aggressive growth plans. Third, we're still in the early innings of penetrating our core education channel with massive runway ahead of us. Our recent school district wins demonstrate that we're gaining traction and rebuilding momentum. Fourth, Beyond our core product lines, the expanded facility opens significant opportunities for manufacturing, both for new products owned by Barfresh and co-manufacturing for third parties, creating additional revenue streams that leverage our state-of-the-art capabilities. Now turning to our fiscal 2026 outlook. As we advance our initiatives for the year, we are making thoughtful progress on the integration and optimization of our 44,000 square foot facility. While the implementation is taking slightly longer than initially anticipated, the new equipment and optimized facility layout will create greater operational efficiencies, increase profit margins and provide the scalability to support our growth plans once fully operational. Given our updated facility and equipment time line, we are adjusting our fiscal 2026 revenue guidance to a range of $28 million to $32 million, and our adjusted EBITDA guidance to a range of $3.2 million to $3.8 million. While this represents a more conservative ramp-up schedule than our initial projections, it still reflects substantial year-over-year growth of 97% to 125% on revenue from both the full year inclusion of Arps Dairy's revenue and growth of legacy Barfresh products. We remain confident in the transformational nature of the platform we are building and believe fiscal 2026 will represent a pivotal year that demonstrates the power and scalability of our integrated model. For the first quarter of fiscal 2026, we expect revenue in the range of $5 million to $5.2 million and to be adjusted EBITDA breakeven, which is also impacted by our updated equipment time line. As we progress through the year and complete our facility enhancements, we expect year-over-year quarterly improvement in both revenue and profitability. We are building a scalable, profitable business model that positions us to capitalize on significant market opportunities while delivering sustainable long-term value creation for our shareholders. The integrated manufacturing model we're building will enable us to pursue opportunities with improved economics and operational control that simply weren't possible before. The operational momentum we demonstrated in 2025, combined with owning our own manufacturing facility and dramatically expanding our capacity positions Barfresh for what we expect to be exceptional growth beyond fiscal year 2026. We look forward to updating you on our progress as we move through 2026 and demonstrate the full potential of what we've built. And with that, I would like to open up the line for questions. Operator? Operator: [Operator Instructions] And our first question comes from the line of Thomas McGovern with Maxim Group. Thomas McGovern: First one, just as we're gaining additional clarity on the supply chain ramp here and the initiatives that are underway to kind of stabilize everything after some of the shakiness we've seen in the past. I'm just curious how the conversations have gone with -- in terms of reengaging the school districts that you might have lost due to some supply chain disruptions in the past. Just maybe unpack that for me. And then my second question relates specifically to your guidance, right? If we look at that, we're clearly expecting some growth in the back half of the year. Maybe walk me through what you're expecting in terms of timing? And then kind of what some of the underlying assumptions for that full year guidance is, is that based on essentially just your base business, including conversations that have kind of come to fruition? Or does that assume that certain relationships or contracts that are up in the air will be signed as we're entering maybe the new school year for '26, '27? Riccardo Delle Coste: Yes, sure. Thomas, so the customers that we're talking with and have been constantly engaged with love the product. we're really just now focused on keeping that communication up. We're reaching out to customers that have taken off the product due to no supply. We're going through the bidding process again. A lot of the customers are just waiting for us to have product come back into distribution in certain markets or their bid to come back around with their distribution partners. The fortunate part is that we're in the bidding cycle again now. So we're having added again to customers, and we're getting new ones as well. So we're in a very fortunate position that we've got some great customers that love our product, and they want to keep using it and the kids love the product. And as we're now getting product back out into the market in different parts of the country, we're just staying in close contact with them and working towards whatever obstacles they may have from a timing perspective in their own establishments. Does that make sense? Thomas McGovern: Yes, absolutely. And then just kind of maybe walk me through some of the underlying assumptions for the revenue -- the implied revenue growth in the back half or quarters 2 through 4? Riccardo Delle Coste: Yes. So the implied revenue obviously includes both the Barfresh business and the Arps business going forward. We would typically have a more severe drop off with Barfresh products in the second quarter, for example. With the Arps business, we actually have the addition of the ice cream mix, which is quiet in the winter months. So it's actually quite counter seasonal to the rest of our business. And then in the -- so in the second quarter, we'll have a higher than expected for our products revenue. And then in Q3, you'll have the addition of still of the ice cream mix-type products together with the Barfresh products as well, which is our biggest -- typically our biggest quarter. So the growth is coming by the combination of the 2 businesses, based on the base business that we have as well as some foresight with some of the new accounts and bids that we're winning. Thomas McGovern: Understood. And then just one more question for me. I mean, especially as you guys are kind of diversifying your seasonality, if you will, or with your product portfolio, you should expect some counterweight there, which is great. Just also curious, I know it's not as large of a component of revenue now, but as we look at channels outside of education, in the past, we've talked about foodservice and military as potential growth channels for you guys. Is there any updates on that front? And can you talk maybe a little bit about strategy and how innovation or new product launches might play a role in expanding your presence in those channels? Riccardo Delle Coste: Yes. I mean there are so many opportunities in terms of different channels for us to focus on. I mean, we've got a huge market that we're only in a 4% to 5% market penetration of in the education channel. And we haven't even been able to keep up with supply up until now in that channel alone. So we do feel that there's an enormous amount of opportunities in other channels, whether it's food service, whether it's even retail, petrol and convenience, we just haven't had the supply to get there. So we have been in this -- protect our base business mode for the last couple of years. Now that we have the manufacturing capacity, and we're in control of that we're now going to be getting back into aggressive sales mode. And that aggressive sales mode is going to be exploring the various channels out there and how we can best exploit these opportunities. Operator: [Operator Instructions] And our next question comes from [indiscernible]. Unknown Analyst: Congratulations, Riccardo and Lisa, on the record Q4 and this acquisition. I think, it has definitely changed the story where last year, the company was supply constrained. But I think at this juncture, the company -- the business just controls its own destiny. So it's really a great move. I have 2 questions. One is in terms of the production capacity, I think it was mentioned on the press release that with this new enhancements to the facility done, where it will -- basically, you'll have a capacity to support about $200 million in revenue at some point. Can you share on what's the production capacity that you have at the moment? And how does it scale? When do you get to that point? That's number one. And then number 2 is in terms of the guidance, 28% to 32%, very strong guidance. And as you mentioned, that includes the base business and the Arps business. From the base business side, does the guidance include the business that you already have signed up? And is there an upside to as you go in the school season and sign more school districts? Riccardo Delle Coste: Yes. So let me start with the first question on the capacity, and we'll circle back to the second one. The existing facility is an older facility. We're operating in there, and we're able to service to get what we need, and that will see us through up until we get to the new facility. It's not ideal, but it's working, and we're able to get product out that had we not done the acquisition, we would not have been able to supply customers. That's how important this acquisition actually was for us. When we get into the new facility, which will be later this year, the infrastructure will all be there. The base infrastructure for the processing will also be there. So it's really going to be a matter of as we ramp up and want to do more things, whether it's more products, we'll have additional capacity on our existing lines, plus room to install new lines. So we're going to have a lot more flexibility in how we grow the business, and where those revenues come from. That's why this is such an important acquisition for us because not only is it going to be instrumental in growing our base business and our base product portfolio, but it's also going to give us an enormous amount of opportunities in the future. As we look at the revenue in the base business, we're looking at 2026 as a stabilizing year for the business. And that includes the customers that we have both in the Barfresh business and the Arps business, a little bit of growth in terms of being able to acquire and get back to some of these customers that we've lost and really setting us up for a very exciting 2027, especially once the new facility is done, and we get a really significant jump in efficiencies to the bottom line. Unknown Analyst: Got it. Got it. And then one more on the recent signing of this Nevada large school district. I mean, for a 7-year deal, I mean, that's also I think it's -- from an outside, I mean, it just looks like -- I mean, the business, and you have so much confidence to supply the product to sign such a long-term deal. And in the past, I mean, Barfresh has been able to sign similar kind of deals like with Los Angeles School District at some point, but I think you guys were supply constrained. Anything you can share on what the pipeline really looks like? I mean, does this just changes where you are not really just going after like smaller school districts, is not where you just intend to go after larger school districts and you have the confidence to be able to? Riccardo Delle Coste: We will. We will. We really are focused on just making sure that we get out of the old facility into the new facility. So that we start talking to those larger accounts and really starting to build that pipeline and being able to go after the business aggressively. And that's just something that we couldn't do before because we couldn't supply. Unknown Analyst: Okay. And on that facility upgrade, what is the time line? I think you said end of 2026. Riccardo Delle Coste: It will be before the end of the year. Operator: [Operator Instructions] All right. And it looks like there are no further questions at this time. So with that, I would like to thank everyone for their participation, and this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful rest of your day.
Operator: Good day, everyone, and welcome to the CXApp Fourth Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Khurram Sheikh. Sir, the floor is yours. Khurram Sheikh: Thank you, Matthew. Good afternoon, everyone, and thank you for joining CXApp Fiscal Year 2025 Earnings Call. I'm joined today by our Chief Financial Officer, Joy Mbanugo. I am Khurram Sheikh, Chairman and CEO of CXApp. Before we begin, I want to frame today's discussion. 2025 was a year of deliberate transformation. 2026 is a year of AI-driven acceleration. Today, we will walk you through what we accomplished, where the market is heading and why we believe 2026 represents a true inflection point for CXAI, as we know, you pronounce as sky. With CXAI, we are moving beyond simple workplace apps to an autonomous agentic platform where we define the employee experience. Let me start by directing your attention to our safe harbor statement over the next few slides. Please read at your leisure once you have the slide deck. All right. For those newer to the CXAI story, let me give you a quick snapshot of who we are. CXApp trades on NASDAQ under the ticker CXAI. We're headquartered in the San Francisco Bay Area with offices in Toronto and Manila, giving us a global engineering and delivery footprint. CXAI is a global AI-native workplace experience platform deployed across 200-plus cities, 50-plus countries with over 1 million plus users. We built this with a lean and highly technical team with over 70% focus on R&D, which is critical given our pivot into Agentic AI. Importantly, we now have 39 patents filed, including a new provisional filed on Agentic AI just recently, and we're really proud of that filing because it is a landmark in our space. And then we also have -- already have 18 granted patents. This patent portfolio is not -- is a meaningful competitive moat. This is not just a product company. This is becoming a defensible AI platform company. We maintain enterprise-grade compliance with ISO 2701, SOC 2 and GDPR certification. This is a global enterprise-ready platform with the security credentials that Fortune 500 procurement teams aspire to. So very proud of that. We're proud of the accomplishment of the team over the last year, and we're going to share with you what this strategic transformation has been about and why this is a really great point for our investors to understand what is really happening in the market. So I want to start with the market. Why is this timing right for CXAI, right? We are seeing a fundamental market shift in enterprise workplace technology. Three forces are converging simultaneously. First, hybrid workplace orchestration. Fortune 500 enterprises are actively procuring unified platforms that consolidate desk booking, room booking, parking, dining and attendance into a single workflow. They want calendar and HR system integration with AI-driven smart bookings. The days of coming together 5 or 6-point solutions are ending. Secondly, AI and specifically Agentic AI have moved from nice-to-have to require or must-have. Enterprise buyers are now mandating AI agents with 3-year road map. They want conversational assistance, proactive suggestions, auto routing and AI-enhanced incident reporting. This is not a future requirement. This is the current RFP today. And this is why we're seeing this good momentum because we've seen a lot of RFPs from large enterprise that are exactly what we've been working on. And thirdly, we have started our journey with indoor intelligence and IoT, the Internet of Things. Enterprise want interactive map with real-time occupancy data from IoT sensors, wayfinding, colleague finders and visitor management with multimodal physical and access control. That kind of gives us a new advantage in terms of the AI world. It gives us that localization and edge experience. So CXAI, CXAI sits at the intersection of all these 3 trends. We're not chasing the market, the market is coming to us now. And that's why we see as way, way different from 2025. Now what is happening with Agentic AI and the defining trend there? Let me put some numbers behind the AI opportunity. By the end of 2026, Gartner estimates that 40% of enterprise apps will feature task-specific AI agents, up from less than 5% in 2025. This is an 8x increase in a single year, and workplace is identified as a primary deployment domain booking, service request, contextual suggestions. This is exactly what we built. The AI agent market currently sits at $7.8 billion and is projected to reach $52 billion by 2030. Gen AI model spending alone is growing at north of 80% in 2026. On the adoption side, 88% of organizations now report regular AI use in at least 1 business function. Enterprise software spending is up to around 15% year-over-year, driven primarily by AI investment. The validation from Fortune 500 buyers is clear. They now require AI agents, conversation systems and AI road maps in their procurement decisions. They are specifying exactly what CXAI does. And as you all know, we didn't pivot to AI. We've been building towards this for years. The market has now validated our thesis. So what I see is this is really a platform shift, Agentic AI becoming the control layer of enterprise software and CXAI is positioned directly in that layer as the interception on workflows, data and physical environment. You heard at GTC, Jensen talked about physical AI. We are the physical AI for that workplace environment. So I'm super excited about the direction the market is heading and what we've been accomplishing over the last 2 years with our Agentic AI platform. It's interesting when I have been working with our sales team on all the different opportunities that come in. It is super interesting to watch that our competition is actually no longer there because with our Agentic platform, our clients are coming to us saying, this is what we actually want. We want you to be successful and build it for us. So all the new clients coming in are asking for Agentic AI as critical, as part of the road map. Without it, they will never deploy a solution and the existing customers are naturally evolving to this very rapidly. So let me summarize also what has been the strategic transformation in 2025 and what do we actually do? We executed a comprehensive strategic transformation built on 4 pillars. First, we focused on high-quality recurring revenue. We mean a deliberate decision to prioritize subscription revenue over onetime services and implementation fees. That shows up clearly in the numbers, which our CFO, Joy, will walk through shortly. Secondly, we implemented an AI-driven cost structure. As you know, we have a partnership with Google where we are implementing a lot of the GCB-based solutions. We're a big AI user. We're using Gemini. We're using all the different tools out there with different providers. I won't name all of them because some of them maybe have said that we're not using them, but we're using a number of those guys. But it's all driven towards productivity and to drive operational efficiency, reduced cloud cost in automating the process that previously required manual effort, that AI-driven cost structures across all our functions, be it engineering, be it sales, be it marketing, and that has resulted in, as you've seen the numbers, a much reduced cost structure for us. Thirdly and most importantly, we built our platform from the ground up as an AI-native CXAI platform. This wasn't a bolt-on. We will talk about BOND and CORTEX. They were our key orchestration and intelligence layer solutions. We had designed from day 1 as core platform components, not afterthought. And fourth, we balance short-term impact with long-term scalability. Yes, revenue declined in 2025, and we're transferring above that, but the revenue we have today is dramatically higher quality and the platform we built positions us for a sustainable, scalable growth in 2026 and beyond. I'm going to talk a little bit more about the impact of all of that to our clients and to the end market. This slide illustrates the fundamental transformation we made and how our product delivers value. Because a lot of the customers ask a question, so what? Why is this so important to me, what's the ROI? What's the value? And given all the information out there on AI and Agentic AI, all the promising we made, why is our solution relevant? And this is where we want to show you what the legacy systems are and what our system. We're going to describe those systems in detail later, but I want to show the value and outcome, right? If you look at the legacy world, workplace tools required multiple clicks, manual configuration, fragmenting analytics across different tools. That's what most of our competitors still offer, right? With our AI platform, we replaced those pain points with 4 core capabilities. BOND + CORTEX replaces multi-click workflows with instant actions and autonomous workflows. CXAI VU replaces static analytics with real-time insights that produce actionable outcomes. Our One-Map engine and experience engine replaces fragmented tools with a single source for all workplace data and actions. And finally, our Zero-Touch deployment replaces months of manual configuration with site deployments measured in days now versus months. This is an incremental improvement. This is a category shift from SaaS to intelligent AI platform. And it's the reason enterprises are choosing CXAI over legacy alternatives. And that's being delivered from us in terms of our design, our capability and how we thought about making this system frictionless for our clients. So I'm going to pause now and turn it over to the CFO, Joy Mbanugo to go through the financial results, and I'll be back with the strategic implications for 2026. Joy, over to you. Joy Mbanugo: Thank you, Khurram. Let me walk you through the financial results for fiscal year 2025. I want to start by framing how we think about the past year. As Khurram mentioned, fiscal year 2025 was a year of intentional and strategic reset. We made very deliberate decisions to exit lower quality revenue, transition the platform from SaaS to AI and build a more durable foundation. Those decisions had a short-term cost, and you'll see that impact on the top line. But the underlying health of the business has improved meaningfully, and I want to walk you through exactly why. Starting with the headline numbers on Slide 10. Total revenue came in at $4.6 million compared to $7.2 million in the prior year. I'll address the decline directly in a moment, but first, let me highlight what moved in the right direction. Subscription revenue now represents 98% of total revenue up from 87% a year ago. That shift matters because subscription revenue is recurring, predictable and very high margin. It's a foundation that every AI -- before it was SaaS, and it's the foundation that every AI company wants to be built on, and we're essentially there. Gross margin expanded to 87% in up 5 points from 82% in 2024. That improvement came from disciplined cloud cost management and platform efficiency gain. It demonstrates the operating leverage in our model. We ended the year with a really healthy cash balance of $11.1 million as of December 31, strengthened by various capital raises throughout the year. And that gives us a real runway to execute for the rest of this year. So we have enough cash to cover our expenses for the next 6 quarters. On a per share non-GAAP basis, our diluted earnings per share was negative 58%, improving from last year, which was negative $1.2. So yes, revenue decline, but the business that remains is fundamentally stronger than what we started the year with. Can we go to the next slide? So now I go line by line on the P&L, so you have a more robust picture of what happened over the last year. Revenue was $4.6 million, down 36% year-over-year. This reflects 3 things: the exit of noncore and low -- noncore contracts and professional services, customer churn during our platform transition and reduced bookings during the positioning period. We expect that some of this decline, and it's the cost of doing the reset correctly. Cost of revenues dropped 55% from $1.3 million to $578,000. That declined significantly outpaced the revenue decline, which is exactly what drove the margin expansion. We became materially more efficient at delivering the product. Gross profit was $4 million at 87% gross margin, up 5% -- up 5 points year-over-year. For context, that puts us in best-in-class with other companies in this area. This is a structural improvement, not a onetime event. Now on to operating expenses. Total OpEx was $21.6 million, up 10% from $19.6 million. I want to be direct about what drove that. R&D modestly increased by 4%, but that was intentional and we'll continue to invest in R&D while we continue to invest in AI and improve in the product. We believe that this investment is what's going to position us for double-digit growth in 2026. Sales and marketing was cut by a significant 36% as we use AI in our marketing efforts and made our go-to-market motion leaner, more targeted enterprise sales approach. G&A increased 10% and part of that is restructuring related, we're actively managing this down this year. The most important part in OpEx is the goodwill impairment of $2.1 million. This is a noncash accounting charge. It does not reflect cash outflow. It does not affect operations, and it's not recurring. It is the primary reason that OpEx increased year-over-year. Excluding that item, our operating cost base was essentially flat. Loss from operations was $17.6 million. Adjusted for the goodwill impairment of $2.1 million, the underlying operating loss was approximately $15.4 million, roughly in line with the prior year even as we continue building this platform. Now let's walk through the EBITDA bridge. If we can go to the next slide, please. Going through EBITDA and adjusted EBITDA, this is really important because this shows where some of the operational improvement comes from. Starting at a net loss of $13.5 million for the year, is already a meaningful improvement from $19.4 million of last year. And in back interest, taxes, depreciation, we arrive at negative EBITDA at $10 million compared to negative $15.6 million EBITDA in 2024. That is a 35% improvement year-over-year. This is a number I would point you to as the clearest measure of our operational progress in 2025, their trajectory is definitely trending in the right direction. Now adjusted EBITDA came in at negative $9.8 million compared to negative $8.3 million in 2024. I want to address this directly because on the surface, it could look like a step backwards. And I don't want that to go unexplained. The entire difference comes down to 1 line, our change in fair value of derivative liabilities. And if you remember from last year, this is related to our convertible notes. In fiscal year 2024, this line item was a positive $3.2 million and it flattened adjusted EBITDA. In 2025, it looked to a negative $4.5 million. That is a $7.7 million noncash swing driven entirely by mark-to-market accounting on derivative liabilities. This has 0 impact on our cash position, 0 impact on our operations. It is purely an accounting timing item. If you strip that 1 item out, adjusted EBITDA improved year-over-year. The other adjustments are pretty straightforward, stock-based comp, $2.8 million to $2.1 million of goodwill impairment, we already discussed in smaller items that net close to zero. The real punchline is that our $11.1 million cash balance more than covers our cash-based operating loss. We have the necessary runway to execute, and the hard part of this transition is behind us. If you remember last year, we ended with a significantly lower cash balance. And so we're starting off 2026 very, very strong. Now let's talk about pipeline and sales momentum, which is really exciting to discuss. As Khurram mentioned earlier, I think if we were at this time last year, we had momentum, but the momentum we see now as enterprises move towards Agentic genetic AI is really exciting. And even at CFO conferences and other tech conferences, you can see the excitement and the flurry of activity as people think about moving away from pure SaaS platforms and look into adopting Agentic AI. So where does that leave us as we head into 2026? The pipeline is growing. We are seeing expansion activity within existing enterprise customers. Accounts that have been on the platform are now asking for more. We are seeing new vertical opportunities that we're not pursuing 12 months ago, and we are seeing early signs of acceleration in bookings. In Q4 2025, we had really strong bookings and that has really continued into this year. On the market signal side, 3 things stand out. First, enterprises are consolidating, as you can see in the news, they're moving away from point solutions towards unified experience solutions that is exactly what CXAI is. The procurement conversations we are having today are fundamentally different from a year ago. Buyers are not comparing us to individual tools, they are evaluating us as a complete platform. Second, and very importantly, Agentic AI has become a buying requirement. Executive buyers like CFOs and real estate -- people that own real estate are now specifying AI agents, conversational agents and 3-year AI road map as a baseline requirement before they sign, before you even having a conversation, and we have built exactly that. The platform spent rebuilding is what enterprise procurement teams are now asking for by name. Third, and this is the 1 that gives us the most confidence, customers are telling us that they need our agentic capabilities to make their final buy decision. That is a closing signal, that is pipeline converting. 2025 was a strategic reset, 2026 is where that investment pays off. With that, I'll turn it back to Khurram, who will go through the rest of the presentation. Khurram Sheikh: Thank you, Joy. So let's talk about 2026 outlook. Looking ahead to 2026, we expect AI-driven acceleration to deliver double-digit growth. Let me outline the 4 pillars of our outlook. First, our Agentic AI platform, BOND + CORTEX is in market now and it's generating a lot of enterprise interest. As I said, all the RFPs we've responded to, all the wins that we're getting in this quarter and the coming quarter are all driven because customers have tested and evaluated and understood that what we have, is our road map, is the right thing. And this is our primary growth engine for 2026 is because of that differentiation. Secondly, we expect large enterprise wins and a strong power pipeline conversion as Joy mentioned, we've been involved with a lot of these RFPs for a while. I think it's very competitive. And the competition is not just smaller companies. They're also looking at much larger enterprises that are looking into solutions in our space. And the good news is we are winning. And we're winning big in terms of these client opportunities. So I'm very hopeful on that. These deals are in our funnel today are larger and more strategic than they were ever before. And the reason is because Agentic AI is so critical to an enterprise. It is not a senior manager level decision. This is a C-level decision. At the CIO, the CTO, the CHRO, the Head of Real Estate and even the CEO of the company. This is [ sacrosan ] for them. So that's why they're deliberately taking the time to test it, to validate. They do the RFP and then they show up in our labs, CXAI labs here in the Bay Area and they're wowed by our engineers and our team, and they go back and tell their procurement guys, we need to get CXAI. And that's what's happening. And so I'm super excited about that. So we're confident we're going to achieve those large enterprise. They take a little longer, but they are for the long run. Certainly, strategic partnerships and particularly in vertical AI. And this is creating new distribution channels for us. We'll talk about our TouchSource partnership, that alone gives us access to over 11,000 digital directory deployments. Huge opportunity for us to partner with them and to scale our business through those distribution channels. And we'll talk about more in the coming weeks and months, but that is super exciting 1 for us right now. And fourth, we are committed to sustainable, high-quality revenue growth. We will not sacrifice the quality of our revenue base to chase top line numbers. Growth will come from subscription expansion, not onetime fees. So we stay with that philosophy. I think with the Agentic AI world, the monetization mechanism changing too from not just pure subscription, but also for outcome-based, and I think we're super excited about those opportunities, especially with the new clients who are coming in with a fresh perspective of the market. The 2025 reset is behind us. We entered 2026 with a stronger product, cleaner revenue, better margins and a validated market demand. That, to me, gives me confidence and hope that we're going to be super successful in 2026. So let me talk about some of these elements in more detail. And I'll start with the product road map. So this is a clear evolution and revolution from CXAI. CXAI 1.0 is our current platform. That's where all our current clients have. It's a single code base, delivering space booking, navigation, enterprise, SSO integrations and the full mobile app experience. This is what's in production with everybody, and this is still going to be around for a long time because it's the basis. And it gives us a strong leverage in terms of building CXAI 2.0, which is our major evolution, and it's going to be released in June 2026 with our new clients as well as the existing clients who are upgrading there. And this includes our behind the scenes or access control and [ Agentic ] system, plus our One Mapping engine, delivering a unified One Map experience. It has the Agentic AI interface powered by BOND and CORTEX. Achieves full web parity with our mobile experience and enables Zero-Touch campus deployment. CXAI 2.0 is the version that unlocks our next phase of enterprise open. So all the new clients I talk about are getting CXAI 2.0. They're already having their sandboxes, they're doing their first MVP deployments. And by June, they will be launching their campuses, their first deployments with that, and this is going to be the growth engine for all the new clients and then the existing clients are all wanting to upgrade to CXAI 2.0. So a huge opportunity for us, and this has been the making in the last 12 months. Looking further ahead, our future vision is CXAI Sky. What I mean by that is tongue-in-cheek, it's really the full Agentic AI-driven user experience with predictive intelligence. It includes reactive and generative UIs, zero-friction onboarding and also enables a new segment besides the large enterprise it enables mid-market expansion. This is where the platform really goes, and this is where the opportunities with the distribution partners, with what we mentioned TouchSource earlier in terms of certain vertical markets, a huge opportunity. This is now an MVP right now in our labs, in our CXAI labs. So if you're in the Bay Area and you want to play with CXAI Sky, come talk to us, we'll give you access. We're testing it in all labs. We're going to go to certain initial clients locally here, but this, we think, is a big opportunity for us in both 2026 and 2027. So building for the future already. And by the way, we're just not building features. We're building a platform that gets smarter and more autonomous with every single deployment. So this platform is solid. It's very exciting, and we just also filed our provisional patent, a broad patent on Agentic AI. I've got the number in there when we talk about it in the next slide about the Agentic AI platform, but it really is a landmark in our industry and we're very excited about it. We're going to have multiple filings beyond this. But I want to go under the hood since we filed the IP, the patent provision is there, I want to go under the hood and tell the world what we actually have done and what are our very strong technology team here in CXAI labs has accomplished. One of the things on the left you see is our Unified Data Fabric. This is the ingestion layer that connects IoT sensors for occupancy data, calendar systems for scheduling, enterprise systems like HRIS and IT and spatial data from maps and navigation. This is kind of combining all the integrations we do, and now we're going to connect them all together. That data flows into our Intelligence and Orchestration layer, which has 2 engines, CORTEX is our intelligence engine. It handles predictive analytics, natural language processing, context understanding and intelligence extraction. BOND is our Agentic partner. It provides autonomous orchestration, proactive recommendations, task execution and multisystem control. Think of BOND as a multi-agent solution that allows multiple agents to work together, orchestrate and then with CORTEX knowing the personal recommendations, the preferences the things that matter contextually and making the right decision. What we do is something super unique that nobody else does because we take in account what's really happening in the campus, in the site at Agentic AI, what is happening within the enterprise, and we stay within the enterprise. That is really the core of our IP and patents and what we believe is going to unlock a lot of shareholder value. On the right, you see the actual outcomes this produced. And this is what our clients want. This is what our users want, smart navigation and wayfinding, instant booking of rooms, desks and services, workforce analytics for real-time decision support, space optimization with automated utilization management and proactive context-aware alerts. This is where the world is headed. This is what they want, and we are going to be delivering this very soon to all our clients. The key insight here is that we are transforming passive data into proactive operational force multipliers. This is not a dashboard. It's a system that takes action on behalf of the enterprise, and that's the core of Agentic AI. So let me talk about this another pillar, which is really our strategic partnerships. And we believe this is going to be transformative for our distribution. Our partnership with TouchSource is a joint marketing, sales and product strategy that extends and also embeds CXAI's Agentic AI as the intelligence layer for TouchSource existing base of over 11,000 digital directory deployment. We signed an MOU. We've signed a marketing and co-selling agreement with them. We're super excited working with the team, and we've had -- we've already got some really key targets lined up. This partnership really extends our workplace AI capabilities from enterprise offices into physical commercial real estate, lobbies, common areas, health care facilities, retail spaces and mixed-use properties. The verticals we're tackling together include enterprise office, health care, retail and these mixed-use properties. Each of these represents a significant expansion of our addressable market. What makes this partner compelling is the math. TouchSource already has 11,000-plus deployed screens. We're providing the AI intelligence layer that makes those screens dramatically more valuable. This is a capital-efficient growth channel. And as you recall from me we also have a product, the CXAI Kiosk that we're selling into our enterprise clients, the large clients, and all of them are wanting to have the ability to scale that and knowing that we're the software layer, TouchSource already has those kiosk capabilities in different form factors with the hardware sizes and with the different media players. So it's a really great partnership, and we hope to sell both ways, meaning that we're enabling the Agentic AI Orchestration layer to those kiosks, and vice versa, we're also partnering with them to deploy their kiosks in our enterprise environment where every single floor needs a multiple of them. So there's a huge expansion opportunity. The teams are working very closely. We're going to start giving you updates from this partnership, but this is really a very interesting model for us and it allows us to go beyond the indoor campus environments that we've been in, but to get to a larger piece of the puzzle. And with the CORTEX BOND-based Agentic AI platform, this is going to be much, much simpler and easier for us to do than what we'll be doing for our enterprise clients. All right. So let me just bring it all together in terms of a summary of what we just shared with you. When you think of the bigger picture, the product market fit is confirmed now. Fortune 500 enterprises requirements now match CXAI's capabilities precisely. AI and Agentic AI moved from optional to mandatory in procurement. So no longer it is like, oh, maybe we'll check this out. It is becoming the right standard, and it is becoming critical. So anybody who doesn't have it is not going to be part of these discussions. And this is where, like I said at the start, we see ourselves really ahead of the competition in our space and even the big guys that are playing the space do not have the capability that we have. Secondly, our addressable market exceeds $100 billion, spanning digital workplace platforms is $77 billion with a 20% CAGR and AI assistance at $3.35 billion, going to $21 billion at a 45% plus CAGR. And the timing could not be better. 40% of enterprise after adding AI agents in 2026, that is from Gartner, they're really on top of it and they feel like this is where every app has to go. And the enterprise software spending is also increasing north of 15% year-over-year. And hybrid work is permanent now. It's no longer a transition. It is -- there is going to be there and the platform consolidation is accelerating. So in a nutshell, 2025 reset is complete. 2026 is about scaling the platform and capturing the opportunity. While we believe CXAI is positioned at the center of Agentic AI, enterprise workflows and physical space in thousands and we're excited about what's ahead. Our foundation is stronger than it has ever been. We have a differentiated AI platform, and we are entering the next phase of growth. This is the right company in the right market at the right time. Okay. Let me go to some Q&A. Joy, do you want to check if there are any questions from the audience? Joy Mbanugo: Yes. Absolutely. I think we have a good handful of questions. I think I'll start with questions around our stock because there seem to be quite a few. There's 1 on are you in danger of being delisted and the second 1 related to the stock is, what is your time line on becoming compliant and what is the action plan? And I'll take the first part of it, Khurram, if you want to take the second part. So first, we did receive a delisting notice from NASDAQ, but we received an extension and we have until September, and we do plan on being compliant before September and there are multiple ways we can get there, but we believe we'll get there through growth. Khurram, do you want to add anything? Khurram Sheikh: Absolutely. Look, we are very focused on that. When NASDAQ gave us extension, they understood that we have met all the requirements for listing, except the bid price, so all the other requirements are met in terms of shareholder equity, in terms of market cap, in terms of other requirements that NASDAQ has. The only requirement is the bid price. And we believe that given that we are severely undervalued and we believe that with the results we're going to be demonstrating to the market in the coming months and the momentum we have with our wins as well as our Agentic AI platform, we believe that we can meet that level. And then we also have mitigating factors. So we will be confined much before our September date. That is our goal, and our Board is fully committed to that. Joy Mbanugo: Okay. Next question. What can investors look forward to from the company in the near future? I'll take the first part of it again. And Khurram, if you want to take the second part. From a growth standpoint, like we mentioned, we're not giving specific guidance, but directionally, we expect to grow in the double digits, and we're already seeing great momentum with landing new customers and new logos for 2026. Khurram Sheikh: No, absolutely. And we made the press release, I think, in Q4, we had 5 large clients renew in the fourth quarter. All those clients are also expanding with the Agentic AI this year. And as Joy mentioned, we've got the 20 plus in the pipeline. We believe we're closing deals. There are things in contract right now. They're in contract with us right now, and there are other deals coming our way. So we're pretty excited about moving them from pilots and initial discussions to now contracts and hopefully scale deployments in 2026. So it's a pretty exciting time at the company, and our team is fully focused on executing those contracts and making sure they deliver. And I think if we deliver even a small percent of those, we're going to hit the double-digit number. So I think we believe that, that is very realistic. And we believe there will be more happening hopefully, in the coming weeks and months as these customers go from their pilots to their first appointment. Joy Mbanugo: Next question, and Khurram I'll have to punt this over to you. How do you plan on setting yourself apart from other AI companies? Khurram Sheikh: That's a great question. And in our space, if you look at our landscape, there's a lot of companies that have been around for a while in the new space management and other space. And that market is getting commoditized, and those companies are really at a very low margin. Secondly, you see people that have built apps. As you see, the SaaS model is on the threat. And so when you think about Agentic AI, there are only a handful of companies that actually can do it. I think the large AI companies are focused on horizontal solutions. We believe we are a vertically integrated solution that is really tied to campus environment, campus intelligence, intelligent AI system inside buildings. And that's where we have the big moat. And our BOND and CORTEX are designed to provide the same level of Agentic interface that you see in the horizontal apps, but in a more burdening integration -- integrated way with the security and privacy that are needed by our clients. And as a reminder, all our clients -- most of our clients are large financial guys, they are not going to -- they don't compromise on security and privacy. So I think that is a core part of our offering and core part our IP. And that sets us apart, right? So when I look at the competition, I think it's more about -- naturally competition is good, but I feel like we've got a significant advantage of others. And even when winning these RFPs, we have very large companies competing with us that don't have the depth of the capability that is required by the client. So I think that is my focus is really that differentiation. And you will see more and more filings on the patents as we move forward as we started implementing these solutions. But it's going to be a competitive space for sure, but it's going to be a much growing space because now these clients are looking at full transformation across the whole enterprise. They're not looking at just the space booking function or the desk booking function. They're looking at everything they do inside the enterprise and in a hybrid fashion. And we provide that solution today, and we're going to grow that capability over time. Joy Mbanugo: Okay. And the last 2 questions are sort of related on deal size and revenue growth. So I'll ask the longer one. Can you contextualize the double-digit growth target relative to 20-plus customer pipeline? How much conversion that would imply how much is new customers versus expected expansion? Was there a total of 5 major customer renewals in 2025, more or less. And for renewal contracts, how much do you see ARR increasing on average? I'll take some of this, Khurram, if you want to take the second half. So there are more than 5 renewals in 2025. How much is new versus expected expansions, I think we expect more growth on the new logo side just because we haven't seen it, but I think healthy on the expected expansion. And then renewal contracts, how much do you see ARR increasing? Hard to tell right now we have large renewals to happen in Q1 and then more throughout the year. So I don't have that exact figure at the moment. Khurram, if you want to take the double-digit growth relative to the 20-plus customer pipeline, do you want to take that? Khurram Sheikh: Yes, absolutely. So as Joy said, we don't just have -- 5 customers renewed in Q4. We've had many more renewals than that. I think on the deal size and the -- it depends on clients. A lot of our clients start with a couple of hundred thousand and then go to higher. And so think of that as the baseline. But a lot of our clients, as you know, are in this -- they're doing this a strategic move. This is through RFPs and a lot of diligence. So from their perspective, this is a multimillion dollar opportunity or multimillion dollar total value for contract, but it's over a number of years. So we believe the starting point is there, but they're making long-term decisions. They're doing -- these deals are 3-year deals. They are 3-year commitments, okay? So they're not just a single year. Let's see what happens. These folks are really wanting to do multiyear deals. So I think that's the exciting part. But on deal size, yes, it depends on the client. If a client has 100-plus campuses, you can imagine that's going to be much larger than somebody who has 10. But the interesting piece I would tell you is, and this goes back to our product capability and others, there's a client that has around 10,000 employees, not the 50,000, 100,000, but they also do around 10,000 events, and they're super excited about our Agentic AI event module because they want to now create events on demand and have all these different events. So from that customer, you would have -- you could -- potentially even have more revenue just from the events module than the employee engagement modules. So there's a lot of opportunity in the growth of these businesses because Agentic AI is going across all their different functions, whether it's space management, whether it's event management, whether it's food ordering. So we see this as even a bigger opportunity. But again, we're starting off on a good piece. And now we just need to make sure that we can execute and deliver and get these customers onboarded as soon as possible. But I see a very bright future for Agentic AI across different dimensions of our space. Joy Mbanugo: That was the last question. Khurram Sheikh: Okay. Great. Well, thank you, everybody, for joining our call. Joy and I are super excited to be hosting you today. We will look forward to future discussions. We are going to have our Q1 earnings call coming up, we're going to have our Annual Shareholder Meeting. We're going to be super proactive out there. We were a little bit under the cover because of the 10-K had to be filed and with the IP and patents. Now that we file those 10-Ks available, you can go read it. The patent has been issued. We're going to be super vocal in the market, and we look forward to sharing with you the positive news on our upcoming deployments, and we look forward to hosting the next earnings call in the next, I think, 30 to 45 days, but we'll keep you posted. Thank you, everybody.