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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.
Operator: Good day, and welcome to the Elauwit Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Matt Kreps with Darrow Associates. Please go ahead. Matthew Kreps: Good morning, and thank you all for joining us today to discuss Elauwit's Fourth Quarter and Full year 2025 financial results and business update. The earnings release covering our 2025 results is now available on the Investors page of our website at investors.elauwit.com. We plan to file our Form 10-K for the full year today as well. I would encourage you to review the full text of the release and accompanying financial tables in conjunction with today's discussion. This conference call is being webcast live and will be available for replay on our Investors page. Speaking today on the call are Executive Chairman, Dan McDonough; Chief Executive Officer, Barry Rubens; Chief Financial Officer, Sean Arnette; and Sebastian Shahvandi, our Chief Growth Officer. We will cover our prepared remarks on the business and financial results, then open the call for questions from our analysts and institutional investors. Please note that during this call, management will make projections and other forward-looking statements regarding our future performance. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the earnings release as well as other risks that are more fully described in Elauwit's filings with the SEC. Our actual results may differ materially from those projected in the forward-looking statements. We encourage you to review our filings with the SEC for additional information on factors that could cause actual results to differ from our current expectations. Elauwit specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. We will also reference adjusted EBITDA, which is a non-GAAP financial measure. A description of adjusted EBITDA, along with a reconciliation of adjusted EBITDA to the most comparable GAAP financial measure can be found in our earnings release. And with that, I will now turn the call over to Dan. Please go ahead. Daniel McDonough: Thank you, Matt, and thank you to everyone who has joined today's call. I'll begin today's call with an overview of the business, then pass to Sebastian for an update on our rapidly expanding sales program. Barry will have a discussion around our operations, and then Sean will provide a few highlights from the financial results. Since we are still a newer company to Nasdaq, let me give a quick summary of our business. Elauwit is a technology-driven broadband infrastructure provider focused on delivering high-speed Internet to multifamily and student housing communities. We install and activate carrier-grade gigabit service via fiber and WiFi 6 access throughout the entire property. We then generate long-lived recurring revenue from these properties under 2 financial models: managed service and Network as a Service, which we refer to as NaaS. Uniquely, we integrate the property owner into the revenue chain, driving new revenue and value creation for them. Ultimately, we expect to create a win-win-win scenario, where we generate high-margin revenue streams for Elauwit, elevate the resident experience and unlock value for property owners. In addition to a growing number of units already under contract, we have a robust and quickly expanding pipeline of new installations, giving us visibility into our growth ahead. To deliver on this, we have built a scalable operating model that we believe can grow to handle almost any number of units and in any location as we take share in a large and fragmented addressable market. At its core, the Elauwit model represents simplicity, service and profit. When a resident moves into an apartment or other multifamily housing unit, they sign a lease, then begin the arduous process of securing Internet access. This usually means a lengthy sign-up process, waiting several days for a technician to be available and then taking a day off work for an open-ended install appointment. Typically, the property owner isn't even participating in this revenue stream. Elauwit simplifies and improves every facet of this experience. The property is prewired with enterprise-grade networking equipment, offering the resident better service and faster speeds. When the resident signs their lease, the Internet fee is included on their rent invoice as a standard cost, but usually at a 10% to 15% less expense than the conventional products I just described. Instead of waiting days for an install, they get their log on credentials when they get their keys, providing immediate Internet access, not just in their unit, but property-wide in all of the amenities. That alone is a compelling case, but we take it one step further by integrating the property owner into the monthly recurring revenue from the service, which provides a source of profit and the increased recurring cash flow that can increase the value of their property. We offer 2 approaches to this incredible service in what we estimate is more than a $25 billion market opportunity. For both approaches, the entire property is turned on and serviced and the monthly fee is included in the resident's cost by default, ensuring full subscription to the services. Option 1 is a managed network approach, whereby the property owner pays us an upfront fee to construct and install the network throughout the property. The property owner then collects a monthly fee from the resident that goes in part to them for their installation cost and profit and partly to us for our services under a 5- to 7-year contract. This model works well in new construction or with large and financially sophisticated properties seeking retrofit upgrades. Option 2 is Network-as-a-Service, or NaaS, a deal for retrofits for smaller property owners. Under this model, we can use our public company balance sheet to install and own the network, then collect a higher recurring monthly fee from the property owner to operate under an 8- to 10-year contract. Both models mirror the data center or alarm company model where customers stay for years, generating what we expect will be high-margin service revenue. We are now moving ahead quickly to expand our pipeline of targeted managed services and Network-as-a-Service opportunities with a major marketing and sales campaign. Sebastian will speak more to this point in a moment, but I'm very pleased with the initial results of our newly unleashed revenue engine, and I look forward to what the year ahead can bring. And that brings me full circle to my opening comment that Elauwit represents a compelling growth case of high-value recurring and long-lived revenue. And with that, I'll turn it over to Sebastian to talk through our new sales and marketing program to deliver on that opportunity. Sebastian Shahvandi: Thanks, Dan. We've built a fully integrated go-to-market engine that brings together inbound and outbound strategies into a single coordinated system. At the center of this model is a clear, consistent focus on customer experience, ensuring that every interaction from the first touch to long-term partnership is intentional, seamless and value-driven. Our approach is powered by a modern AI-enabled marketing and sales stack, custom designed not just for speed and scale, but for relevance and personalization. We're leveraging a broad set of AI tools to enhance data quality, improve targeting precision and deliver a more meaningful engagement at every stage of the journey. Our programs span multiple ICT and persona-driven channels, including our website, targeted account-based outreach, organic and paid social media and structured outbound campaigns. Let me give some additional detail to illustrate just some of the diverse channels we're using to identify and engage property owners. A central pillar of our 2026 strategy is an aggressive industry event calendar, 22 regional events and conventions. However, our approach is not focused on booths and exhibiting. Instead, we invest in pre-event outreach to identify and schedule one-on-one meetings with decision-makers before we ever arrive. And early results are encouraging. With just 3 of the 22 events completed, event source deals currently represent approximately 1,800 units in our active pipeline. Adding to this, paid media efforts are gaining attraction with about 6,000 units in active bidding sourced via paid ads and 127,000 impressions across Google, LinkedIn and Meta ads. Our channel partner program is also demonstrating significant forward motion with almost 7,000 units of new business pipeline attributed to the partner activity. All in, we're actively targeting approximately 2,000 new business accounts right now, representing an addressable base of roughly 12 million units through these and other strategies. And I want to remind everyone, the results reflect only a couple of months of initial work given our RevOps organization was only formally launched at the beginning of Q1. Even so, business attributed to the new RevOps organization now represents 63 opportunities, 13,000 units in discussion and an addressable base of roughly 315,000 units in total across the property owner portfolios. New business sales currently represents 254 opportunities. The continued momentum in new logo growth reflects both increased marketing activity and deeper alignment with customer needs driven by stronger engagement over the last 90 days. But it isn't just about new properties. We can also mine our existing customer base for more properties. Our current customer base represents approximately 387,000 addressable units for expansion, and our focus remains on deepening relationships and continuously improving the customer experience. From a solution mix perspective, approximately 88% of our pipeline is comprised of managed services, 9% on managed services finance and 5% as Network-as-a-Service. While many early-stage opportunities are currently positioned as managed services, we see a strong opportunity to expand NaaS adoption as deals progress, particularly with smaller portfolio customers where flexibility and ease of deployment are critical components of the customer experience. As we continue to scale this engine, we're already seeing improvement in both deal creation and pipeline velocity. Just as importantly, we're creating a more efficient and customer-centric sales process. This includes a soft quote process built for our Network-as-a-Service offering, enabling us to reach consideration in the funnel weeks faster than before. Our goal is to reduce the sales cycle, while improving the overall buying experience. We're already seeing a strong indicator of traction, pipeline growth and increased alignment between our go-to-market efforts and the needs of our customers. With that, I'll turn the call over to Barry. Barry Rubens: Thank you, Sebastian, and good morning, everyone. We're excited to be here and to deploy our expanded balance sheet for growth. Elauwit built a strong base as a private company, but being a listed company provides the access to capital to expand our market reach and drive growth. With our enhanced balance sheet, we are now funded to pursue the 70% of the market opportunity that was available, but not accessible to us before by virtue of the Network-as-a-Service model. While Sebastian described our rapidly growing sales opportunity set, once signed, we track our revenue-generating business across 3 nested metrics. Those are contracted units or those waiting to be built or in the process of installation, activated units, units that are fully installed and turned on for service, but may not be fully billing yet due to onboarding and billed units, units that are fully generating monthly recurring revenue under our managed service or NaaS contracts. As a reminder, Activated units represent the rollover period throughout the 12 months following installation, and we onboard their costs pro rata to align with property lease renewals. In short, when we complete an installation, we know that we have 12 months of growth ahead, then long-term sticky recurring revenue for years to follow. Giving some numbers to the categories based on December 31, 2025 counts, contracted units, those waiting to be built or in the process of installation, along with units we currently serve increased 34% to 34,067 from the 25,375 at the end of the prior year period. Activated units, units that are fully installed and on but may not be fully billing yet due to onboarding increased 92% to 22,255 from 11,588 at the end of the prior year period. Build units, units that are fully generating revenue under our managed services or Network-as-a-Service contracts increased 77% to 16,445 from 9,279 at the end of the prior year period. And our pipeline continues to grow, taking a slightly different filter on the numbers Sebastian presented, -- of the 121,000 units in our pipeline, we now have 9,221 units in the contracting process. Those have been verbally awarded to us by the property owner. And we have 32,968 in the proposal phase. I should remind everyone that the majority of new contracted units remain as managed services, since we only began selling NaaS proactively as a model following our IPO in the fourth quarter last year and added our sales team in the first quarter of this year. I should also note, and Sean will elaborate more, that our revenue includes the recurring services sales as well as installation sales. While we have largely been focused on managed services to date, we expect recurring revenue to increase as a percentage of total revenue over the coming years due to: 1, the rising number of billed units on long-term multiyear contracts; and 2, the rising contribution of network installation -- Network as-a-Service installations that bill typically at a higher monthly rate. We anticipate that recurring revenue will grow steadily because of the sticky nature of these contracts and may be enhanced further by the shift in favor of Network-as-a-Service throughout 2026 and well into 2027. I'd also like to take a moment to note that our sales universe is vast. We're currently in about half the states and our business model uses a highly scalable call center for service to residents, plus contracted installation teams that we can easily flex and scale as needed with minimal cost to us. This approach means that rather than targeting specific markets, we can readily go anywhere our property owner clients want us to provide service. We believe we have good growth visibility just from the business we have already contracted and exciting upside from the new sales team to expand our growth prospects, providing a compelling business built on a growing percentage of recurring revenue under long-term profitable contracts. And with that, I'll hand it over to Sean to briefly cap some of our business highlights from the quarter and year-to-date. Sean Arnette: Thank you, Barry. Today, I'll walk through financial highlights of our fourth quarter and full year 2025 that continue to show robust growth. Revenue for the fourth quarter increased 85% to $6.1 million compared to the $3.3 million for the prior year period. Cost of revenue increased to $5.5 million for the fourth quarter compared to $3 million for the prior year period. As noted in our previous call, network construction activity, both in terms of cost and margin can be lumpy and incur substantial costs upfront, but leads to long-lived recurring revenue. Gross profit increased to $0.5 million for the fourth quarter compared to $0.3 million for the prior year period. Our gross margin for the fourth quarter period remained at 8.6% compared to the prior year period. Management is currently implementing cost reduction actions intended to bring our network construction gross margin back into our expected range of approximately 15%. Operating expenses were $2.8 million for the fourth quarter compared to $1.3 million for the prior year period. As planned, we are investing in sales and marketing expansion coming into 2026 to drive additional growth in top line sales and recurring revenue. We reported an operating loss of $2.2 million for the fourth quarter compared to an operating loss of $1 million for the prior year period. Net loss was $2.3 million compared to $1.1 million for the fourth quarter last year, driven by our investment in our sales and marketing teams as well as public company-related expenses. Adjusted EBITDA in the fourth quarter was a loss of $2.2 million compared to a loss of $1 million for the prior year period. On a full year basis, revenue increased 154% to $21.6 million compared to $8.5 million for the prior year period, demonstrating increased network construction and activation activities driving the ramp in our recurring service revenues. Cost of revenue increased to $17.6 million for the year compared to $7.3 million for the prior year period. Gross profit increased 244% to $4.0 million for the year compared to $1.2 million for the prior year period. Our gross margin for the full year increased to 18.5% compared to 13.7% for the prior year period, primarily due to increased network activations and greater recurring services revenue in which we realized higher gross margin levels than with our network construction activities. Operating expenses were $7.7 million for 2025 compared to $4.4 million for the prior year period. Growth in our network construction and operations teams, investment in sales and marketing and expenses associated with the preparation for an existence as a publicly traded company drove the increase. With our NASDAQ IPO and related capital raise, we now have a balance sheet capable of funding increased Network-as-a-Service activity and other initiatives designed to drive growth and increase the contribution from long-term recurring revenue sources. With that, I'll turn the call back over to Dan. Daniel McDonough: Thanks, Sean. I'd like to remind everyone that we are available to meet with institutional investors. If you would like to arrange a meeting, please do so through one of the investor events, if attending or via Matt Kreps, our Investor Relations contact, whose contact information on our results release and on the IR website. And with that, I'd like to ask the operator to open the call for questions. Operator: [Operator Instructions] The first question today comes from George Sutton with Craig-Hallum. Unknown Analyst: This is Logan on for George. I want to start with the -- I believe it was 9,000 units in the contracting phase and 32,000 units in the proposal phase, if I got those numbers right. Barry Rubens: You are correct. Unknown Analyst: Okay. Great. How fast would we expect those to potentially move to being contracted units? And I would extend that question to the 8,000 units of incremental bidding opportunities that you called out in the press release. Just how long would it take to potentially win those? Barry Rubens: The majority of the 9,200 units in the contracting process will be complete in -- by the end of April. And the majority of those units are to be completed by the end of 2026. If I look at the 33,000 units in the proposal process, -- and I simply apply the success rate we indicated we had last -- in earlier periods of 25% to that, which I think is going to be low. That would represent another 8,000 units that we'd expect to have contracted before the end of the year. Unknown Analyst: Got it. Helpful. I'm curious if you could talk about what you're seeing or hearing with some of the really large property managers out there who have shown a desire to potentially move portfolios over to a managed WiFi structure. Just is it an area that you feel like you're making some progress? And how material are some of those opportunities right now? Barry Rubens: I'll take that question. The process of larger companies moving their portfolios over to typically managed services because they are larger companies with established balance sheets is accelerating throughout the marketplace. We are actively involved with conversations with several parties that have a desire to move their portfolios rapidly over to managed services over the course of the next several years. And we believe it could have a material impact on our results looking at 2026 and 2027. So -- in addition to that, as we're seeing larger companies very rapidly make this move over to managed services, it's not lost on me that midsize and smaller companies are paying attention. I literally was in a meeting this past week where someone indicated they felt like they would be at a disadvantage, if they did not move forward with this and capture the 200 basis points of NOI that's available to them. So what we're seeing is an accelerating movement to managed services, led by larger companies. We think that's going to be followed by medium and small-sized companies. Unknown Analyst: Got it. So it certainly sounds like there's a lot of early success with kind of the new sales and marketing efforts. I'm curious, as we sit here today with, I think you said 5% of the pipeline being Network-as-a-Service, how do you go about trying to increase that share over the next year from a sales and marketing perspective? And just any color on kind of the strategy to expand that part of the business would be helpful. Barry Rubens: Sebastian, would you like to handle that? Sebastian Shahvandi: Yes, absolutely. Great question. Look, as we have a focused approach to where we're targeting and how we're going about it, our -- some of our focus is going towards the smaller customer base or the smaller prospects that have moved to lighter portfolios and capital is not readily available for them. In order to get to the kind of NOI increase that they want, the Network-as-a-Service offering is the best offering for them that they can start quicker with real capital out of their pockets. And so by targeting those specific size portfolios, we're able to have more penetration into that growth side of that business as well. Operator: The next question comes from Derek Greenberg with Maxim Group. Derek Greenberg: Just continuing off the last one. I was wondering maybe how you view the potential time line in terms of beginning to generate revenue from the Network as a Service offering. Sebastian Shahvandi: Well, Barry, I can take this as well. Sure. Look, Network-as-a-Service offering is a conversion, right? It's not like new builds that we have to wait after the contract is signed for the property to be built up and so on. Network-as-a-Service, typically, if you look at from contracting being done inside, you can look at 3 to 6 months for it to get started depending on the size of the property and the kind of the work that needs to go into it. We're also seeing on a lot of these conversations that we're having with the Network-as-a-Service offering with the current prospects is the conversation moves a little bit faster than new builds as well. So all in all, as I mentioned, post contract signing, you can think about 3 to 6 months to starting the revenue side. Derek Greenberg: Okay. Great. And then in terms of just your expenses. I was curious looking at the fourth quarter this year, how much of G&A was like onetime expenses related to the IPO? And what do you expect expenses to kind of revert to or hover around going forward? Barry Rubens: Sean, I'm going to let you handle that question, if that's okay. Sean Arnette: Sure, absolutely. Derek, we certainly did have an increase in our SG&A in the fourth quarter due to the offering. I think, it was in between 15% and 20% of that was onetime in nature that we don't anticipate continuing. Fully expecting SG&A to come down a bit as we move into 2026 here with a slow ramp through the year in line with the growth of the business. Derek Greenberg: Got it. That's helpful. And then in terms of sales and marketing and specific with the new team investments in that area, I was wondering maybe at scale, what you project it could represent as maybe a percent of sales or percent of total expenses? What do you expect the investments in that to get to over time? Barry Rubens: Sebastian, you and I have gone through that before. Why don't you talk about kind of what the target run rate is for new sales and marketing expenses. And then, Sean, we can put it into a perspective with respect to overall cost of the organization. Sebastian Shahvandi: Sure. I mean for 2026, I think it's around $1.5 million for sales and marketing combined. Sean Arnette: And in terms of overall SG&A, we're looking for that to be about 20% of the expense of the business. Derek Greenberg: Okay. Great. That's super helpful. My last question is just on gross margins. I was wondering if you could maybe talk a little bit about the potential for the business overall as recurring revenue scale. Barry Rubens: Sean, I'm going to let you handle that question. I think it's still in line with what we discussed during the IPO. Sean Arnette: Yes, absolutely, Barry. Derek, the long-term forecast hasn't changed from the discussions at the end of last year during the IPO process. Ultimately, we expect around 15% gross margin on our network construction activities, whereas the recurring service revenue is really where we're going to generate the gross margin for the business with managed service projects realizing in the neighborhood of 60% gross margin over time and Network-as-a-Service projects closer to 75% over time. Operator: The next question comes from [ Deane Pernis ] with Pernis Research. Unknown Analyst: Congrats on the quarter. Had a couple of questions. Number one was in regards to Network as a Service with your sales and marketing. So when you first, I guess, start conversations with these customers, do they -- are they aware of your services? Does it kind of start from a level of 0? Or are they already kind of familiar with services you provide? I'd love to just know more about that. And secondly, on kind of future financing, I would love to know how you're planning on financing future growth through equity versus debt and if you're in talk with any capital partners or facilities that you're in talks with? And just how you feel about the balance sheet as of right now? Barry Rubens: Dean. Thanks for joining the call. Good to hear from you. Sebastian's team has been engaged most recently with folks. So I think on that first part of the question in terms of the familiarity that our customers have, maybe Sebastian, you can add some color to that. And then I thought Sean could handle the balance of that. Sebastian Shahvandi: Happy to. So as far as your first question, do they know us as far as what offerings we have? The way we approach it is this. When we are going after prospects, as I mentioned earlier on our earnings kind of report, the approach is very strategic. It's very well targeted. So we have a really good idea of the portfolio size of customer base we're going after. And in that way, as we approach them, we know which ones to position first and second. That being said, we don't exclude any of the offerings that we have. But if we're going after someone who has a smaller portfolio, we let them know that the NaaS offering with 0 capital expenditures from their side could be more attractive to them. And then if they have funding available or capital available for themselves, we provide them the managed service offering as well. So it's not a one or the other. It's more of here's everything that we have available, starting with the size of the customer, the persona we're going after and who we're talking to at that point. Sean Arnette: Sorry, Dan, I'll address the rest of the question in terms of the balance sheet, which for Elauwit is stronger than it's ever been right after the IPO. We feel great about the position we're in and the ability to leverage that balance sheet for project financing. So when we look out, we certainly expect to be able to fund Network-as-a-Service projects predominantly from debt with a small bit of equity capital off the balance sheet. We are talking with a variety of different type of capital partners working to tease out the most efficient way of delivering financing for these type of projects. But we do have one existing relationship as disclosed in our filings with Endurance Financial, a debt partner that has supported us from the early days and ability to move very quickly should Network-as-a-Service opportunities come about quickly, but certainly looking to find a bit of efficiency in terms of how we fund projects moving forward. Operator: This concludes our question-and-answer session and concludes the conference call today. Thank you for attending today's presentation. You may now disconnect.
Operator: Good evening. Thank you for attending today's Super Hi International 2025 Q4 and Full Year Earnings Conference. The company leaders are present to the conference are Ms. Yang Lijuan Executive Director and CEO; and Ms. Qu Cong, CFO and the Secretary of the Board. The content of today's meeting may contain forward-looking statements, including, but not limited to, the company's statements on its strategies and business plans as well as the outlook for its performance. The content released by this conference at the earnings conference as well as the comments and responses to your questions only represent the views of the management as of today. Please refer to the latest safe harbor statement in earnings press release, which applies to all the conference calls. The meeting is conducted in Chinese with an external institution providing simultaneous English translation. In case of any discrepancies, the Chinese content shall prevent. The meeting presentation materials have been uploaded to the company's Investor Relations page for your reference. Now we remind Ms. Yang Lijuan, Executive Director and CEO of Super Hi International to review the company's performance in fourth quarter 2025. Lijuan Yang: Thank you. Host. Dear investors and analysts, good evening. I am Yang Lijuan, Executive Director and CEO of Super Hi International. I'm here to brief you on the company's performance in the fourth quarter and the full year of 2025. In 2025, under the strategy of focusing on both employees and customers, the company took the initiative to offer benefits to these core groups. We have witnessed a sustained growth in revenue and customer traffic with the quality of growth improving in the fourth quarter of 2025, that the company's overall operation continued the recovery trend of the first 3 quarters, the customer traffic of Haidilao restaurant reached 8.31 million persons times in this quarter, driving the overall average table turnover rate of Haidilao restaurant to 4x per day, an increase of 0.1x per day year-on-year. At the same time, the company's delivery business and other businesses continue to contribute to revenue in this quarter. Company's total revenue reached the U.S. dollar 230 million, an increase of 10.2% compared with USD 208.8 million in the same period last year. And month-on-month increase of about 7.5% from the third quarter, indicating that our investment in optimizing product cost performance ratio and reaching consumption scenarios and improving service experience that have gradually been recognized by customers. Looking back to the full year of 2025, for Haidilao restaurants operated by the company received a total of 32 million diners. The overall average table turnover rate of the restaurants reached 3.9 turns per day, and the same-store average table turnover rate reached 4 turns per day both an increase of 0.01 turn per day compared with the same period last year. Total revenue in 2025 was USD 841 million, an increase of 8% year-on-year. Now I shared with you some of our continuous efforts in business improvement. First, adhere to offering benefits to customers and employees and consolidated the foundation of store management in 2025 on the basis of focusing on both employees and the customers. We further clarified and implemented the proactive strategy of offering benefits to customers and employees throughout the year. In terms of the employee development, we have continuously optimized from multiple dimensions, such as salary and welfare, daily care and training and development, enhancing the sense of belonging of the diversified team. Up to now, we have about 90 reserve backbones and nearly half of whom are foreign key staff laying a talented foundation for diversifying management. In the frontline management, on the basis of a formulating corporate line principles, we have turned the focus of work to frontline stores in the regional divisions, allowing them to focus more on the market customers and employees themselves. This transformation has released very obviously, frontline vitality in the second half of the year in many excellent service cases and the management practices have been spontaneously created by regional divisions in stores. At the same time, we also encourage management, the team in various regions to conduct cross-departmental and cross-city store inspections that conducts a comparison learning and reflection in on-site work, in conjunction with the dual store management and multi-store management policies, we extend excellent management capabilities to more stores and to further expand the talent training action. Second, to create a unique Haidilao and continue to invest in customer experience this year in our work of focusing on customers that we have formulated the differentiated service plans for different scenarios such as birthdays, parent-child activities, the diners and late-night snacks and implemented the scenario-based services in [ holdings ] such as dishes, peripheral products and decorations with a more substantial investment. In terms of our products, we have continued to promote localized new product launches in various countries with a total of more than 1,000 optimized new launches throughout the year. This year, we focused on the implementation of fresh-cut food scenario. Fresh-cut meat is quite novel for overseas consumers. We have simultaneously equipped with the declaration of open kitchen, fresh-cut workshop, which can bring a better consumption upgrade experience. At present there are a total of 57 SKUs over fresh-cut beef and pork series covering 13 countries. As of December 31, the average click-through rate of the fresh-cut meat series products in overseas countries reached 12.21%. This year, we have continued to innovate in the takeout scenario, launching faster food categories such as spicy boiled food cups, fried snacks and wraps and noodles. At the same time, we launched and promoted on multiple platforms and expanded delivery coverage at the annual takeout revenue increased 68.1% year-on-year, effectively reaching customer groups beyond the dine-in meals, in terms of space and service, we selected some pilot stores to carry out the transformation of nightclub scenarios, upgrading lighting, sound effects and the interactive experience. The improvement of table turnover rate during late night snack hours in pilot stores is more obvious than not similar stores around us. In addition, we have actively explored the innovative marketing models in many countries and driven a certain degree of talk-of-town popularity and customer traffic support of the through the dual track strategies of celebrity co-branding and IP authorization. In terms of cost performance ratio, we have authorized the teams in various countries to make a reasonable adjustment in pricing, portion size and plating allowing customers to better feel the cost performance ratio. This is also one of the important reasons why our table turnover rate remained stable in the traditional off season in the first half of the year. Thirdly, enhance the capability of the headquarters and promoted the upgrading of organizational efficiency and digitalization. We have made several important progress in the capacity building of the headquarter this year. In terms of supply chain, we have continuously increased the production capacity of our own central kitchens strengthened the hierarchical management and the bargaining power of global suppliers. The continuous efficiency improvement of the supply chain since this year has offset the gross profit pressure brought by the customer benefit strategy to a certain extent, proportion of the employee cost that has also gradually approached this level of the same period last year. In terms of digitalization and organizational efficiency we have actively explored the application of AI technology in management to improve the operational efficiency of the headquarters and stores. We have also further integrated the coordination mechanisms of products and marketing guided menu optimization and the data evaluation informed in normalized product management cycle of new launch evaluation and iteration. Up to now, the scale of our overseas members has continued to expand and the application of digital tools in the members activation and scenarios reach has gradually deepened. As of the end of 2025 with the number of overseas and members of Haidilao has exceeded 8.5 million. Fourthly, the expansion of store network and the wood picker plant are promoted in parallel. In terms of expansion, we still adhere to the bottom-off strategy where country managers are responsible for site selection and implementation. The headquarters control the quality and pace. In 2025, we opened a total of 13 Haidilao stores throughout the year, covering 9 countries, including Malaysia, South Korea, Indonesia, Japan, United States, Australia, Canada, UAE and the Philippines. In the meantime, we continue to optimize the store network layout in hand and make adjustments at the right time. In 2025, we closed a total of 9 stores in Singapore, Thailand, Malaysia and Japan, some due to lease expiration, others due to active adjustments among the 3 locations that have completed the format transformation from Haidilao to the second brand and been incorporated into the Pomegranate Plan for unified operation. As of the end of 2025, we operated a total of 126 Haidilao stores overseas. In terms of store opening quality, the number of stores we have signed contracts for and should be opened it still remains in double digits with a steady overall expansion pace, we have not relaxed that -- the requirements of our profitability and implementation of a quality of new stores, 50 in terms of Pomegranate Plan, we have implemented at a steady pace of advancing gradually and verifying was a polishing the plan. As we go along this year, we continue to incubate prototype stores in the second brand, projects in different countries around multiple catering trucks, such as the hotpot, BBQ, smart spicy cups and in terms of the implantation mechanism, we adhere to bottom-up approach in the terms. The teams in various countries identify trust and promote the site selections and implantation based on the local market whilst the headquarters focuses on the construction of the middle office capabilities, such as product R&D, brand marketing, informization and business analysis forming front-end and back-end coordination. We can also show you some of the results this year. In terms of progress, we have some specific achievements that we will report to you this year, projects such as [ spa power barbecue and HiboMalatanian ] the Japanese Izakaya are progressing as an the some of which have achieved a single store probability proving that our exploration of new formats overseas is feasible. In addition, 3 original Haidilao locations were transformed into second brand operations throughout 2025, and the Pomegranate Plan has begun to link with the optimization of the existing store network rather than being an isolated new thing from the perspective of operating data, the revenue contribution of related business has also continued to increase. Other business revenue increased by 61.4% year-on-year and the substansive contributions have begun to be seen in reaching the revenue structure and expanding the customer base. And next, we'll still adhere to a prudent pace of advancement to continue to polish the proven project, buildup information, digitalization and the mid-of the support capabilities and on this basis, gradually improve replication efficiencies and enrich the company's format layout and growth sources. Looking forward into the future, we take becoming a leading global comprehensive catering group as our long-term development goal and continue to improve in 5 aspects, the customer experience, the restaurant network, operational improvement in new business and headquarter capabilities. The above is my introduction to the business development in situation. So now please welcome Ms. Qu Cong to introduce the financial situation to you all. Cong Qu: Thank you. Ms. Lijuan and next, I will report to you on the financials of the company. Our total revenue for the full year 2025 was USD 840.8 million, an increase of 8% compared with the same period last year. Operating revenue of Haidilao restaurants was USD 790 million, accounting for about 94% of the company's total revenue, an increase of 5.7% compared with last year, take out revenue USD 19 million, increase of 68.1% year-on-year. Other business revenue was USD 31.8 million, increase of 61.4% year-on-year mainly due to the continued expansion of the revenue contribution from restaurants incubated under the Pomegranate Plan and the continuous penetration of peripheral products such as hot pot condiments among local consumers and in retail channels. Full year table turnover rate of Haidilao restaurant was 3.9 turns per day and the same-store turnover rate was 4 turns per day, both an increase of 0.1 turn compared with 2021 in achieving steady improvement in operating quantities against the background of a continuous expansion of the store network -- from the perspective of the annual rhythm, the year-on-year revenue growth rate of each quarter was 5.4%, 8.5% to 7.8% and 10.2%, respectively, with the growth momentum and strengthening quarter-by-quarter and reaching the annual highs in the fourth quarter, reflecting that our continued investment in optimizing product cost performance ratio reaching consumption scenarios and improving service experience. In terms of the raw material costs accounted for 33.6% revenue increase of 0.5% over last year due to our active optimization restaurant dish quality and increase in the proportion of fresh products, which brought certain fluctuations in raw material cost in the short term, employee costs accounted for 33.9%, an increase of 0.6 percentage over last year in 2025. We systematically reached the salary and welfare for the frontline employees and increased the investment in employees daily care. Rental accounted for 2.9% of revenue increase of 0.3 percentage points compared with the same period last year. Quarter and electricity expenses of 3.4% for revenue, a decrease of 0.2 percentage points compared with last year. Depreciation and amortization accounted for 9.8% of the revenue decrease of 0.6 percentage points compared with last year. Above changes are mainly due to dilution of a promotion proportion of relevant expenses by the increase in revenue, other operation-related expenses accounted for 11.3% of revenue increase of 1.4 percentage points over last year, mainly due to the increase in our outsourcing services piece for restaurants as well as the company's increased investments in continuous promotion of the Pomegranate Plan and the brand building regional expansion in 2025. Our full year operating profit was USD 37.4 million, operating profit margin, 4.4% decrease compared with 2024, from a perspective of quarterly trends against the background we actively increased the investment in the first half of the year. Operating profit margin had a low of 1.9% in the second quarter recovered significantly from the third quarter and rebounded from 5.9% to 5.7% in the third and fourth quarters, respectively, with a clear recovery trend in the second half of this year. This resulted in line with our forecast at the beginning of the year, and this has laid a solid foundation for the company's long-term healthy development under the comprehensive influence of above factors after tax net profit to 2025 was USD 36.3 million in any substantial increases compared with 2024, significant improvement in net profit and is mainly due to the favorable impact of 2025, the global exchange trend on the company's multicurrency asset and liabilities. So now looking at Q4, achieved a total revenue of USD 230 million, an increase of 10.2% compared to the same period last year, month-on-month to 7.5% from third quarter, mainly due to expansion of the store network compared with last year, continuous improvement of table turnover rate the peak season, in fact, driving double growth of customer traffic and average customer spending among the operating revenue of a Haidilao restaurant with USD 211.9 million accounting for 92.1% of company's total revenue increase of 6% compared with the same period last year. Takeout revenue was USD 6.8 million substantial increase of 94.3% compared with the same period last year continued high-speed growth and other business revenue was USD 11.3 million, increase of $109.3 million compared with same year last year. We can continue to see the success of Pomegranate Plan with further evidence in our fourth quarter. Fourth quarter of 2025 raw material cost is USD 76 million. The gross margin, 66.6%, a decrease about 1 percentage point compared with same period of last year, mainly due to the short-term cost increase brought by optimization of further materials employee cost was USD 74 million, accounting for 32.2% of revenue, basically same as same period last year, improvement compared with the third quarter mainly benefiting from the increase in revenue scale in fourth quarter rental expenses is USD 6 million, accounting for 2.8% of the revenue basically same as the same period of last year. Quarterly, electricity expenses at USD 7 million, accounting for 3.1% of revenue, a decrease of 0.3 percentage points compared with the same period last year. Depreciation and amortization was USD 21.5 million, accounting for 9.4% of the revenue, a decrease of about 0.9 percentage points compared with the same period last year. Total revenue and other operating expenses of USD 29 million, accounting for 11.7% of revenue increased about 1.1 percentage points and mainly due to the promotion of Pomegranate Plan, brand building and the store expansion. Q4 company's operating profit was h-h. $12.98 million operating profit margin, 5.7%, decreased about 2.7 percentage points and basically, the same as third quarter, the decline in the profit margin is mainly due to active investment on the cost side, which is in line with our overall rhythm of continuously offering benefits to customers and the employees and net exchange losses in the fourth quarter was USD 3.8 million, mainly due to the revaluation impact of exchange rate fluctuation. Under this impact, in Q4, our after-tax net profit was USD 4.47 million achieving profitability by end of 2025 on and our capital reserve is USD 270 million compared with USD 250 million at the end of 2024, mainly due to the net cash inflow generated from annual operating activities. In terms of performance of the restaurants in Q4, we have served a total of 8.31 million customers, an increase of 3.89% compared with the same period in 2024. Company's average table turnover rate was 4 turns per day, increase of 0.1 turn compared with the same period of last year. Our average customer spending was USD 25.4 increase of U.S. dollar at 0.4% compared with the same period last year, mainly because we continue to optimize the this structure and marketing measures to providing consumers with a more differentiated choices. Average daily revenue per restaurant was $18,800, slight increase from the same period last year. And we can see that if the Asia performance is the most outstanding. It has increased about 0.3 turns compared to the same period of last year, reaching 5.1 turns and hence this is mainly thanks to the operating efficiency in Japan and South Korean markets as well as the incremental contribution of the newly opened stores, the average customer spending remaining at USD 28. North America, roughly the same as last year at 4.1 turns per day. In terms of average daily revenue per restaurant is USD 24,100 in the same period, roughly the same as -- same period of last year, and the average customer spending in North American market was the USD 41.4. It rebounded from USD 41 in the same period net increase of 2 Haidilao restaurants in North America in this quarter supported revenue growth. Other regions, the table turnover rate in the fourth quarter were 3.9% affected by ramping up period of newly opened restaurants during the same period. Average daily revenue per restaurant is a USD 24,300 slight adjustment from USD 26,100. Average customer spending for the USD in Southeast Asia total of 5.3 million customers and in terms of the average customer spending USD 19.3 slightly the same as last year maintaining stable operation overall. In the fourth quarter, same period revenue was $195.4 million, an increase of 2.3% for the same-store growth, achieving positive growth for Southeast Asia, we can see 12.8% year-on-year growth and for other regions, they are at 1%, 0.2%, 0.5% year-on-year. For North America, Southeast Asia and for regional same-store performance is pretty much consistent with the overall trend, and I'm not going to go into further details. So this concludes our presentation. We now go into the Q&A session. Operator: [Operator Instructions] The first question comes from [ Jong Yezhang ] from [ Yezhang ] Securities. Unknown Analyst: Ms. Yang and Ms. Qu, This is [ Jong Yezhang ] from [ Yezhang ] Security. I have two questions. The first one is on store opening. May I please ask for the next 3 years and what your store opening plan and looking at the different regions, what the approximate quantity given that there are certain global geopolitical changes and will this affect your current store opening plans? My second question is on the brand equity? And what indicators do you use to judge the strength of your brand in terms of Haidilao branding in various countries? And what is the strength and for the countries that you're not doing so well? And how would you further strengthen your brand equity in those countries. Cong Qu: Thank you. Mr. [ Yezhang ]. I will answer your first question in terms of store opening. For store opening, we continue to focus on bottom to up and we're not going to have a specific target. And in terms of our selection of the stores and in terms of the business district maturity preparation for the local team, those are more important. The present most of these plants, they will be opened up in 2026. In terms of regions, the East Asia is where we have the most confidence, we can see that single store model in Japan and South Korea have been very fine. We have also noticed that North America achieved a net increase in the fourth quarter. And for Southeast Asia, we have a large base. Hence, the focus is on optimizing the existing stock and improving quality of single stores, Middle East, Europe, Australia, and we'll be following and watching the market closely. You also talked about the geopolitical frictions and the work going on at the moment. So for our Middle East deployment, of course, for the short term, that will come as a headwind. But in terms of geopolitics and our approach is that. So we will not be making unified decisions on contractions or accelerations, but it is really country managers to make their judgments call because they are the ones who know the best about the local situation. And again, it is still bottom to upper hand, so we will maintain very prudent. In terms of your second question, how do we evaluate our brand power? and I'll have Ms. Yang to answer this question. Lijuan Yang: So you can see that these would be reflected in our internal indicators, and we mainly look at the following areas, for instance, and number one is the quality of natural growth of the members, the customer registered. Voluntarily and repurchase without relying on promotions or discounts. And second, steady growth of table turnover rate in peak season again, which reflects our customers' willingness to visit certainly continues to increase in the proportion of local customers. If the market mainly relies on the Chinese customers and then the brand barrier is fragile. Number four is the spread of word of mouth that we continue to follow the natural discussion volume and the emotional tendency in a local social media in each market by market. By markets, in the mature markets such as South Korea and Southeast Asia, the brand awareness is high and the local customer base is solid. Japan is growing rapidly with a remarkable progress in the past year. In addition, in some markets where we have entered a short-term -- short time and the brand awareness is still in the early stage, and Asian customers are still the main support. For markets with a relatively weaker brand power, our strategy has several levels. So first, the localized products and the services to make local consumers to feel that a Haidilao dishes are made for them. Secondly scenario-based marketing strategies such as Star co-branding and IP authorization have a higher leverage effect in the market with a weak brand awareness; and number three, be patient, we will not easily abandon a market because of a poor short-term data, but we will carefully evaluate which stores need adjustments based on performance. Thank You. Operator: So the next question comes from CITIC Securities [ Wei Jaba ]. Please go ahead. Unknown Analyst: Thank you. I have two questions for the management team. And the number one is with respect to the Pomegranate Plan. Ms. Yang has mentioned this in detail. Could you please share with us about some of the single store models and the profit levels of the representative of brands in this area? And what are the subsequent development plan? And my second question is about 2026 to 2027. How do you look at this in terms of customer experience and the employee benefits? How do you look at this? And how will this be reflected in operating indicators such as the expense ratio? Cong Qu: Okay. Thank you, Mr. [ Wei ] for your question. The first question, will ask Ms. Yang to answer your question. Lijuan Yang: Thank you, Mr. [ Wei ]. The Pomegranate Plan has achieved some specific results this year. Sparkora BBQ and the Canada Hi Bowl Spicy Hot Pot and the Japanese Izakaya are all progressing as planned and some of them have already achieved a single store profitability. This is a very important signal for us, proving that it is feasible to build a second brand overseas. For single store models, there are great differences among different brands in the markets. At moment, it's difficult to give a unified figure because we're now basically are literally crossing the river by touching the stones and it is not yet the time for large-scale replication and we consider there are mainly 3 factors, whether brand is worth promoting first whether a single store can make a profit without headquarter subsidies. Second, whether the model can be replicated to opened a second store in the same market. And thirdly whether the local team has the ability to operate independently. Only when all 3 conditions are met, will we consider accelerating the expansion. The other business revenues increased by 61.4% year-on-year in 2025, with the substantive contributions starting to emerge behind this growth in this follow-up, we will adhere to a prudent pace of first polish in the successful projects and build the middle platform to support capacity and gradually improve the replication efficiency. At this stage, we still focus on independent research and in incubation and selection, no clear acquisition plans at the moment. Operator: And let's wait for the next question. Cong Qu: I'll take your second question. 2025, this is a year of our active investment concentrated in the first half of the year, operating profit margin hit a bottom of 1.9% in the second quarter, but rebounded to 5.9% and 5.7% in third and fourth quarters of the second half of the year, showing a clear recovery trend. Entering into 2026, our investment strategy has shifted from increasing to optimizing the established the employee benefits of standards and customer service quality will not be reduced, and we'll continue to pay attention to any unreasonable aspects in dish and pricing. However, the strategy running in period has passed, the corporate correction has been briefly improved. The investment direction will be more precise and the more attention will be paid to the input/output ratio reflected in the expense ratio, the ratio of the employee cost of revenues is expected to gradually spin out with the revenue growth, the continuous efficiency improvement of supply chain will support the proportion of the raw materials, the fee of food delivery platforms will rise with the business growth. But the investment in brand building and the consulting will be more focused. Overall speaking, the expense ratio structure in 2024 will be optimized to a certain extent compared with the 2025, but we will not set a specific profit margin target and then reverse deduced business behavior. We will not shrink investment in customers and employees for the sake of short-term good profit margins, but they will be more precise. Thank you. Operator: And we now go into the next question, is Mr. Lai Shengwei coming from CICC. Shengwei Lai: Can I please ask about the raw material cost, and we can see that the price of the beef in [indiscernible] has recent shop team recently, and there are external environmental disturbances and how do you look at the future gross profit margin trends? How would the company hedge against the pressure of rising raw material costs? My second question is about the different store level operating profit and margin across different regions, which regions may perform relatively poorly in 2026 further? And improvement measures that the management might take? Lijuan Yang: Thank you, Mr. Lai for your questions. So first question on raw material, this is our key focus. 2025 raw material accounted for 33.6% of our revenue for the whole year, an increase of 0.5 percentage points compared with 2024, mainly due to the increase in food material costs driven by business expansion. For instance, we have introduced fresh fruit cutting. Our response measures are mainly in threefold: first centralized procurement and hierarchical supplier management to continue to strengthen the bargaining power with the global suppliers. And none of the scale effect has already been partially reflected in 2025. Secondly, continuously to improve the production capacity of our central kitchens, reduce the dependence on external processing. Number three, menu structure optimization, we have established an evaluation system of click rate, coverage rate, gross profit margin and continuously iterate the items with no gross profit contribution to avoid inefficient SKUs occupying procurement resources. Overall, we expect the ratio of raw materials to revenue will remain basically stable in 2026. Your second question, in terms of store level profit margin by region separately. We do not disclose those, but we can give you some directional judgments. East Asia is the region with the healthiest single store model at present with a table turnover rate of 5.1x in Q4, average revenue of USD 20,800 per single store. Profit contribution at the restaurant level has improved significantly. North America remains above USD 24,000 with a high absolute value, but the rent and labor costs are correspondingly be higher. Southeast Asia has a large base of stores with a great individual differences. Some mature stores performed very well and a few individual stores are still in the adjustment stage. If we look at the future improvement potential, the table turnover rate of some stores in Southeast Asia has not reached the expected level in 2026. So we'll focus on promoting the operational improvement of these stores, including deepening of product localization and upgrading of the services scenarios. The newly opened stores in North America need time to ramp up their performance and we have expectations and patience for this. The improvement direction over each region in 2026 is a clear and will not change our long-term judgment call on any of the regions due to short-term fluctuation. Operator: Next question. We have Ms. [indiscernible] from [indiscernible] securities. Unknown Analyst: Thank you for this opportunity. I have three questions. here to ask the management team. The first one is short term, we can see that right now -- Japanese relations are being affected. And so I don't know whether this would affect your table turnover rate performance. And second, about average customer spending -- we can see that 2025 average [indiscernible] trending downwards has helped with the increase in the customer traffic in 2026, what about your pricing? Would you continue to reduce your price. In terms of the mid and long term, how do you balance this short-term profit concessions? And as well as profit margin balance, how do you strike a balance between those two? And my next question is on the stores because in 2025, you have closed certain stores, underperforming stores. Right now, what is the proportion of the current store network that are still in loss or have a low operating profit margin? Going forward, how would the company evaluate those companies when you consider whether those should be close or -- what are the key indicators? Lijuan Yang: Thank you, Ms. [ Li ] for your questions. So your first question, the performance of the Japanese region in terms of what we can see right now, our operation has not been affected and our turnover -- table turnover rate is maintaining stable in terms of proportions of local customers that continue to rise, the consumption scenarios are also relatively rich, impact over short-term certain fluctuations on the overall operation is limited. This is the result of our persistent localization operation and in-depth cultivation of local customers. We have not yet been impacted, but we will continue to follow up on the external environment closely. In terms of the adjustment or reduction in average customer spending in 2025. And this is not simply about a price reduction. This is about making customers feel better in terms of cost performance, such as pricing rationality, portion science, plating and the service experience. So some of those are our active adjustments and some of these are superimposed with the structural changes on the other hand, such as the number of stores in different countries, the increase in local customers, the changes in average number of people per table and so on. Our direction in 2026 will remain to ensure Haidilao's position as the mid- to high-end restaurants whilst subordinating to the improvement of customer perceived value, healthier and fresher tissues, better new product launch experience and more dimensional consumption choices in the mid- and long-term profit concession and profit margins are not an opposing relationships. The customer flow growth and the customer stickiness brought by profit concessions are the foundation for the long-term improvement of profit margin for every 0.1% increase in the table turnover rate and the positive impact on the store level profit margin is quite considerable and the profit concessions and the profitability for a positive cycle with a time lag. In 2025, and we have closed down 9 shops and 3 of those have actually changed to a second brand. And for us, it's not giving up on those companies. And out of these 126 companies that we are running overall speaking, and overall quality is improving. We're not really able to disclose to you about the specific number of the ones that are not doing so well, were underperforming stores, but I can give you some guidance and when we look at a store whether any adjustments need to be made, mainly three aspects. Number one is to see the operating -- number one is to see whether there is any visible improvement in the pathways. Second, the trend of the table turnover rate and not only just at a single time point, but also in the past 6 to 12 months, rather, for instance, a store with a continuously declining table turn rate and even if it's not in loss at the current stage, we will also intervene. And in terms of the ones that we're seeing a positive turnaround, and we'll encourage the local managers and the division head to further improve. Number three, we look at whether the problems are management related, which we will change and update the management. And if it is about the market related and then we'll review our overall market strategy and to make adjustments accordingly. That's my answer. We also hope that the company can achieve better results in the future. [Audio Gap] Hildy Ling: My first question is about your strategy, focusing on both customers and the employees. And we can see that in Q4, the table turnover rate has improved. So if I look at this strategy itself, it in terms of the strategy itself and how will this drive the table turnover rate? And secondly, how do you look at the customer satisfaction? And because in 2026 in terms of this strategy, how would you continue on with the customer satisfaction strategy? And my next question is still asking about the Middle East impact on your business. For the Middle East, of course, that market will be affected and for European, how do you look at the European market expansion and deployment? Those are my 2 questions. Cong Qu: Thank you, Hildy, for your question. The first one with respect to focusing on both customers and the employees, hence, giving profit concessions to customers and our employees, and we not only look at the numbers, but also customer behavior. Last year, our overseas members has exceeded 8.5 million with a continuous natural growth. The second overall overseas table turnover rate has been rising continuously. Customers' willingness to visit actively is increasing. Whether it is repeat purchase or new customers that they're both increasing. And number three, same-store sales growth rate has maintained positive growth throughout the year, reaching 2.2% in the fourth quarter. Among them, the same-store growth in Eastern Asia was 12.8%, indicating that our stores have closer connections with the surrounding customers and our overall grasp of the business district customer group is improving. In terms of the local customers, we have seen that there is an increase in the number and the proportion of the customers who place the orders in local languages. So for instance, in South Korean market, the proportion of the bills placed in Korea exceeds 90%, which is the most direct signal of brand localization and the performance of a repurchase rate varies across the regions, in the regions with a strong growth momentum, both customer acquisition and the repurchase performance and are improving simultaneously in relatively mature regions. So the contribution of our regular customers is more prominent, and we have not disclosed the specific figures of the repeat purchase, but the repeated behavior of members is a core indicator that our system continuously to track. For 2026 is that the customer base construction brought by profit concession strategy will continue to take effect. This -- we have believed that last year, this is a long-term investment and not simply a short-term move. For your next question, Middle East and Europe, yes, indeed, geopolitics is indeed an unavoidable external variable for our overseas restaurant operations. We have a business and the deployment in Middle East and Europe, we have 2 stores in the Middle East at the moment for the short term in terms of some of the projects that we are working on. It has been affected negatively, but we also have authorized to the country manager. They are the ones who know the market very well and to ask them to determine the pace and the timing. In Europe, we also focus on different stores, and we are constantly visiting those stores, but whether we would sign the contract or not, depending on the location such as customer footfalls and looking at the country's macroeconomy as well as the number of population, et cetera. So there are quite a lot that we need to consider. So it's all about the bottom to up and we are very prudent, but we're very, very positive as well for the market. Operator: Thank you, Ms. Qu, for your answer. Hildy Ling: We also hope that next year, we'll see better results from your strategies. Operator: Next question comes from Jun Zeng from Huatai Securities. Jun Zeng: So how do you look at the customers' satisfaction? And at the moment, do you think that the table turnover rate is already quite satisfied? And can you please also share with us in terms of the same-store improvement for the future, how to consider the price dimension? Lijuan Yang: Thank you Mr. Zeng. And stability of table turnover rate is a result of our continuous investment in the past 2 years. There are several directions. We can continue to tap into the potential. Number one is optimization of a time period structure to present our potential for improving table turnover is mainly in off-peak hours, especially the late-night snack scenarios we have carried out a nightclub style, seeing transformation in some pilot stores. And going forward, we'll be looking at some other different investment methods and different types of sales to help us better promote the transformation. And the second is on the customer stickiness. And we already have done quite well, but we do believe that there is a lot of improvement. For instance, using digital tools to reactivate the members and to be able to reach them precisely. And we will want to make the customers change from knowing Haidilao being used to comeing to Haidilao. And number three is the enrichment of the scenarios, not only the birthdays, the parent child activities, the dinners, the late-line snacks and each have an independent customer group. This is the most direct way to improve the table turnover rate and based on different customers at different time periods in terms of the pricing, we are not going to actively raise the average customer spending nor are we going to offer disorderly profit concessions in pursuit of customer flow. And I think that the headquarters that does not have a one-size-fits-all approach, and we'll continue to monitor the market and which is more sustainable than simply our price adjustment. Jun Zeng: That's all very clear, and I also wish the company a bright future going forward. Operator: Thank you, analysts and investors online. We will see you next time. That concludes our conference result announcement today. And thank you, everyone, for joining us on the call. Thank you. Goodbye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and welcome to the BRC Group Holdings Fourth Quarter and Full Year 2025 Financial Results Conference Call. My name is Isabelle and I will be your Evercall moderator. The format of the call includes prepared remarks from the company, followed by a question-and-answer session. [Operator Instructions] And I will turn the call over to Bryant Riley from BRC Group Holdings. You may now begin. Bryant Riley: Thank you, and good afternoon. We appreciate everyone joining us. To start, we are pleased to report that our 10-K was filed on time. It's an important milestone for our counterparties, shareholders and the organization as a whole. With that, for nearly 30 years, BRC Group Holdings has been defined by a key principle, our willingness to be opportunistic. In the deals we took on, the capital we deployed, the companies we backed and the businesses we built. Over the years, our team has grown adept at rising to the challenges associated with capitalizing on those opportunities. The last 2 years required the firm to apply those same skills to itself, rebuilding our balance sheet, shifting operations, refocusing parts of the platform and positioning BRC GH for what comes next. We made some hard decisions along the way, but we made them deliberately and we made them so that we could get back to doing what we do best. The bedrock of success of BRC GH's platform is our ability to bring together diverse companies, aligning them to partner creatively for our clients and building a collaborative ecosystem, advisory, capital markets, wealth management, principal investments and businesses that generate recurring steady cash flow. That combination creates real value for clients and shareholders alike. Over the past 2 years, we made the difficult decision to sell some of those businesses to strengthen our balance sheet. As we sit here today, the model is intact as exemplified by our recent results. Our Communications Business Group continues to generate consistent predictable cash flow. Our broker-dealer executes complex transactions, raise significant capital for our clients and continues to grow and add talent. In our investment portfolio, anchored by our position in Babcock & Wilcox delivered results that reflect the hands-on work our team put into our portfolio over many years. In 2025, we reported net income available to common shareholders of $299.4 million and earnings per share of $9.80. We reduced net debt significantly and continue to invest in the businesses and people that drive the platform. We welcomed the new CFO, Scott Yessner, enhanced our finance staff and transitioned to BDO as our auditing partner. Looking at the opportunity in the market for BRC GH, the small and mid-cap market we've always served is at an inflection point. Traditional lenders have pulled back, generalist firms can't cover the complexity, companies in the space need experienced partners will understand the capital structure, know the equity story and can move with speed uncertainty. That's our lane, and it's been our lane for 30 years, and the demand for what we do is growing. To that end, yesterday, we announced BRC Specialty Finance, a dedicated platform that addresses this exact issue, which is very exciting for us. Also yesterday, the Delaware Court of Chancery dismissed, in full, the Marstons versus Riley derivative action, finding that the planet failed to adequately plead demand futility. BRC GH believes this outcome reflects the integrity of its Board and the governance processes. We will not be commenting further on pending litigation. We're proud of what we accomplished in 2025, and we're committed to building upon these results. We are laser focused on continued growth and maximizing profitable outcomes. The world is changing fast, AI included, and we will continue to make the shifts necessary to stay relevant and competitive. Finally, we need to take a moment to acknowledge our team. These past few years have been a demanding period for the firm. Our people leaned in, stayed focused on clients and kept us moving forward, showing exactly what the platform is built on. There are a competitive advantage, the continuity, experience, institutional knowledge, we cannot be more proud of what this team has accomplished. I will now turn the call over to Co-CEO, Tom Kelleher, for a few additional comments. Thomas Kelleher: Thanks, Bryant. As mentioned in our earnings release, we completed a number of strategic and operational objectives throughout the year. In March 2025, we closed the sale of Atlantic Coast recycling for a purchase price of approximately $102 million with net cash proceeds to BRC GH of approximately $69 million after adjustments. In April 2025, we sold a portion of our W2 Wealth Management business representing 36 financial advisers and approximately $4 billion in assets under management for a net consideration of $26 million. In June 2025, we completed the sale of GlassRatner Advisory and Capital Group and B. Riley Farber advisory, generating cash consideration of approximately $118 million. While every one of these divestitures was a challenging decision to make, they fit with our strategy to deleverage the platform and focus the business going forward. With the GlassRatner sale, we executed a Transition Services Agreement, or TSA, whereby we operationally supported that business through the end of 2025. Similarly, we also executed a TSA with our 2024 partial sale of Great American and that TSA was also completed at the end of 2025. In 2025, we also completed a multiyear project to consolidate the clearing arrangement for our Wealth Management business, which streamlines back-office operations and will materially lower costs. Effective January 1, 2026, we rebranded as BRC Group Holdings, reflecting our evolution from a financial services platform into a diversified portfolio of distinct businesses, spanning financial services, communications, retail and investments across equity, debt and venture capital. Like many other firms, BRC GH has begun deploying artificial intelligence tools. We standardized around Claude a year ago and are well positioned to capitalize on the opportunities presented by this emerging technology. More than half our corporate staff is using AI tools. Across our operating companies, AI adoption has accelerated guided by a centralized team focused on developing and expanding these capabilities throughout the enterprise. The story heading into 2026 is straightforward, a stronger balance sheet, a growing business and a market that needs exactly what we offer. Our CFO, Scott Yessner, will now walk through the financials in detail. Scott, Over to you. Scott Yessner: Thank you. I'm pleased to share an update on our 2025 financial performance, investment holdings and liquidity. To start, I'd like to walk through our financial performance for the fourth quarter and full year 2025. Year-over-year, fourth quarter revenues were $279 million compared to $179 million and full year revenues were $968 million compared to $746 million. The increase in fourth quarter year-over-year revenue was driven by $68 million on higher trading gains on investments, primarily in Babcock & Wilcox common stock and by a loss of $72 million in fair value adjustments on loans receivable in 2024, which were offset by lower service and fee income of $33 million, which was comprised of $15 million in lower investment banking revenue and $20 million in revenues related to exited businesses. These fee declines were partially offset by higher net investment advisory fees related to a fund that holds SpaceX. The full year 2025 revenue increase was driven by $183 million in higher trading gains due to $126 million in investment appreciation, primarily in Babcock & Wilcox and a loss of $325 million on fair value adjustments on loans in 2024. The year-over-year revenue increase was offset by $150 million of lower service and fee revenues and $64 million in lower interest income from securities lending. The components of lower service and fee revenue decline were $66 million lower revenue from exited businesses of Revel, Noggin and the Stifel Wealth sale, partially offset by higher net investment advisory fees related to a fund that holds SpaceX. Further, $44 million lower Communication Business Group subscription revenue, driven by subscriber attrition and a divestiture of a Lingo wholesale business, and finally, $22 million of lower investment banking revenue. Fourth quarter operating expenses were $218 million compared to $345 million in 2024 and full year operating expenses in 2025 were $892 million compared to $1.24 billion in 2024. The $128 million fourth quarter year-over-year reduction of operating expenses was primarily due to costs from exited businesses and a $78 million goodwill impairment in 2024. The $352 million full year reduction of operating expenses was due to $186 million from exited businesses and lower cost of sales linked to revenue declines. $61 million lower interest expense from securities lending and a $104 million goodwill impairment in 2024. Our administrative costs have been elevated in the past 2 years, particularly on professional fees. As we return to a normalized operating cadence, we expect to reduce these costs and will update in the future calls. Continuing down the income statement. Fourth quarter other income, excluding interest expense, was $38 million compared to a loss of $59 million in 2024. And full year other income excluding interest expense was $247 million compared to a loss of $270 million. The $98 million fourth quarter year-over-year increase was primarily driven by fair value total markups of $66 million on Babcock & Wilcox stock and double down Interactive Holdings. The $516 million full year year-over-year increase was due to gains of $86 million on gain on sale of deconsolidation businesses, $76 million in Babcock & Wilcox stock value increase $67 million on senior note exchanges, $34 million in equity gains on the JOANN's GA Group liquidation deal and $273 million in investment markdowns in 2024. Fourth quarter interest expense was $20 million compared to $31 million in 2024 and interest expense for the full year of 2025 was $93 million compared to $133 million in 2024, which was driven by debt reduction of $347 million during 2025. These details culminate with fourth quarter net income attributable to common shareholders in 2025 of $85 million compared to $900,000 in 2024 and full year net income attributable to common shareholders in 2025 of $299 million compared to a net loss of $772 million in 2024. Fourth quarter adjusted EBITDA in 2025 was $104 million compared to a loss of $114 million in 2024 and full year adjusted EBITDA in 2025 was $231 million compared to a loss of $568 million in 2024. Please refer to the reconciliation tables in our earnings press release for the adjusted EBITDA calculations. Next, I'll review our segment operating performance. Our segment presentation has been revised with the following changes. Our former Communications segment has been separated into 4 reportable segments, which we aggregate and described as the Communications Business Group. The Capital Markets segment had a few investment entities reclassified as nonreportable segments. These NAs are now captured in Corporate and Other. The Capital Markets segment, which is comprised solely of B. Riley Securities, had fourth quarter and full year revenues of $93 million and $265 million and segment income of $53 million and $89 million. The revenue and segment income increases are primarily due to a fair value increase in Babcock & Wilcox in trading gains. Core Investment Banking revenues were lower by approximately $222 million in 2025, which was a result of lower banker headcount, reduced client engagement from among things, late SEC filings at the corporate parent. The Wealth segment had fourth quarter and full year revenues of $47 million and $176 million and operating segment income of $8 million and $15 million. After completing the sale of $4 billion in assets under management in April 2025, the wealth segment completed a back-office integration and cost reduction program. Wealth ended 2025 with $13 billion in assets under management and 197 registered representatives. The Communications Business Group is the aggregate results of Lingo, MagicJack, Marconi and United Online Reportable segments. The Communications Business Group had fourth quarter and full year aggregate revenues of $63 million and $250 million and aggregate income for the fourth quarter and full year of $13 million and $47 million. The results exceeded our expectations in 2025. While the Communication Services have a declining customer base, we have a strong team who does a very good job of servicing our customers and offering a very profitable and strong cash flow business. We will continue to evaluate opportunities to leverage this business model. The Targus business, which comprises the Consumer Products segment had fourth quarter and full year revenues of $49 million and $182 million and operating segment loss of $4 million and $16 million. Lower revenues, inventory write-downs, goodwill impairments and tariff costs led to the 2025 operating loss. Tariff costs were approximately $4 million, which have been submitted for reimbursement. We'll update if the reimbursement is realized. Tariffs, complex, chip shortages remain risk to the business in 2026. After several years of declining sales from the consumer product surge around the time of COVID, sales revenues have stabilized year-over-year in the fourth quarter of 2025 and into the first quarter of 2026. We are evaluating options to refine our pricing model and cost structure as key opportunities in 2026. Next, I would like to provide an update on the company's Investment Holdings portfolio. which are reported in our balance sheet in Securities and Other investments, Loans Receivable at fair value and Equity Investments. Investments are held across the consolidated entities where valuation changes are booked as revenue and either trading gains or realized and unrealized gains, depending on the entity. Securities and other investments increased by $165 million to $447 million at year-end 2025. The increase was primarily driven by a $129 million value increase in Babcock & Wilcox and a $28 million increase in partnership interest and other related to our carried interest in funds that own SpaceX. At 12/31 2025, the Babcock & Wilcox stock price used in the valuation was $6.34. The company owned approximately 27.5 million shares at December 31, 2025, and at March 31, 2026. The SpaceX carried value was marked at $421 per share at 12/31 2025. Securities and other investments are reported in the 10-K table with subtotals, including public equities, private equities, corporate bonds and other fixed income securities, along with partnership interest and other. In the public equities in addition to the Babcock & Wilcox valuation change, DoubleDown Interactive and Synchronoss were lower primarily from selling a portion of the holdings with small changes in price. The private equities subtotal amount, which has over 60 investments, including the Venture Capital portfolio, had $34 million in new investments, $10 million in liquidations and the balance of the year-over-year change due to valuation updates. The venture capital portfolio has a few maturing investments that may be realized in the next 12 to 24 months. Corporate bonds increased $2.7 million, primarily due to an increase in value, partnerships and other investments increased primarily due to the SpaceX security interest value increase identified earlier. We operate the securities and investment portfolio to maximize shareholder returns and to support operational funding and liquidity requirements. Continuing with investment holdings loans receivable at fair value declined $64 million in 2025 to an ending balance of $26 million at 12/31 2025. Loan lending activity included approximately $110 million of fundings and $170 million of repayments, primarily driving the balance decline. Exela Technologies represents $21 million of the remaining balance, of which approximately $15 million is due in 2026. We expect to continue to fund loan and credit structures for our clients in 2026. For the last balance sheet line item in our investment holdings, equity method investments were $90 million at 12/31 2025, increasing $5 million from December 31, 2024, increase was primarily due to $4 million of investments transferred from partnerships. The GA Group investment formerly Great American, comprises $83 million of the 12/31/25 balance. In 2025, the GA Group had good financial performance and hired new executives to support their expansion, including a new CEO. Due to the GA Group capital structure, we've recorded the investment using the hypothetical liquidation at book value method. Well, we don't anticipate this booking method will result in a significant movement in our balance sheet valuation periodically, we believe the value will grow over the next few years. Having grown GA Group since 2014, we know this business well. We'll continue to update business performance periodically and seek to participate in equity and debt deals as partners to GA Group, as we did in 2025 with a $34 million equity gain in the JOANN's liquidation equity earnings and the lending we provided to GA Group in 2025. Next, I'll provide an update and remarks on our liquidity and capital. At year-end December 31, 2025, cash, restricted cash and cash equivalents balance was $229 million compared to $247 million at December 31, 2024. In 2025, BRC Group produced total debt by $347 million, which included a $147 million RILYN bond redemption on February 28, 2025, $127 million in bond exchanges and $98 million in pay downs of term loans offset by $23 million of other increases in debt borrowings. Net debt declined $437 million in 2025 to $627 million at December 31, 2025. As we enter 2026, we have 3 senior note series maturing in 2026 for a total principal amount of $457 million with an additional $16 million in scheduled paydowns on a subsidiary lending facility. On March 30, 2026. The Riley K senior notes were fully redeemed for approximately $96 million, inclusive of accrued interest. Remaining in 2026 and based on the balances at 12/31 2025 we have $178 million in principal amount of RILYN in senior notes due September 30 and $177 million in principal amount of Riley G notes due December 31, maturing. On March 12, we announced $30 million in senior note reductions through Section 39 exchanges and buybacks, which are across the senior note series, including all 3 series in 2026. We will continue to use capital actions and also use cash generated from operations and investment liquidations to fund the scheduled senior note paydowns and support our operations. Continuing interest expense in 2025 totaled $93 million. In 2026, interest expense based on scheduled paydowns is estimated to be approximately $81 million expected to be lower due to the debt exchanges already announced in our anticipation of continuing these capital actions. To conclude, our capital and liquidity plan in 2026 is to fund our emerging credit market opportunities, support our clients with capital and advisory services, support holding investments to their optimal assets, while funding the remaining senior note redemptions in 2026. Thank you for the opportunity to share this update today. We look forward to answering your questions. I'll turn the call back to the operator for a Q&A session. Operator: [Operator Instructions] Our first question comes from Amer with Imperial Capital. Amer Tiwana: Guys, first of all, congratulations on filing the 10-K. Am I reading this correctly that the remaining $350 million you'll potentially use the investment portfolio as the primary source and some cash flow from operations? Or there are other levers that you intend to pull as well? Bryant Riley: So thanks for the questions. And Scott, feel free to join in. I think the way that we've looked over the last 2 years, if you try to put in a playbook you would have changed directions 15x. So our portfolio is opportunistic. You don't know it's going to pop up in different ways. I think the year ago, it wasn't known that we had -- and we hadn't counted as much of a SpaceX partnership, ownership that we had. And -- and so there's just -- it's a pretty big book. And we've got a fair amount of assets, and we're going to be opportunistic. So I wouldn't point to one thing or another. I would point to a combination of opportunities, whether it's SPAN Swaps, which we've done a lot of, whether it's buying bonds in the market or selling some investments, all of those things will be considered. Scott or Tom, do you want to add anything to that? Thomas Kelleher: Yes. Thanks, Bryant. Really appreciate the question. And I think Bryant had summarized it very well. The way we look at it is we have investments and assets to the company that we want to maximize the value to. And we also have opportunities to supply capital to our clients. And so we balance all those different factors against our liquidity requirements for those bond redemptions. And so we have some high cash flow generating businesses and other opportunities, and then the capital actions that Bryant had levered on. So we'll be opportunistic and make the best decision for the shareholder, but we have many different levers in which to pay down the redemptions this year. And I'd also just note that the redemptions because we have had these capital actions so far this year. The principal balance on the RILYN's due in September 30 is $167 million. And then the Riley G's are -- which are due on December 31, 2026, they're down to $170 million. So those have already reduced from our reported in our 10-K. Amer Tiwana: My next question is, when you guys look at BRF, I know you guys have talked about a SPAC transaction. Is there any sense of the timing for that? Bryant Riley: Well, if anyone talked about a SPAC transaction, maybe it was -- yes, we have not talked about a stock transaction. We have carved it out so that it is an entity that you can -- there is some equity ownership by the management team, some of the partners there, and it's an asset of BRC and we're always evaluating our assets to maximize value. But it's very much an integrated part of our business as well and it does feed off -- we still do feed off of each other in terms of creating opportunities, whether it's myself being involved on the BRF side or some of the BRF helping on the wealth management side. And so we're really -- when we did have a carve-out to identify that asset a little more clearly. I would view those as still pretty integrated. Amer Tiwana: Congratulations you guys have accomplished an incredible amount over the last year or so. So it's been pretty frenetic in terms of things that have happened. But seems like you guys have found yourself in a very good spot at this point in time. So congratulations. Operator: Our next question comes from Sean Haydon of Charles Lane Capital. Sean Haydon: Thanks for all the information and congrats on the recent developments. Bryant, in your prepared remarks, you spoke of a, I believe, the word Specialty Finance Platform within the boundaries, could you kind of expand on that? And is that going to be something that's going to be on balance sheet or shared with investors? How should we kind of think about that going forward? Bryant Riley: Sure. So Thanks, Sean. This is not incredibly different from what we've done for a long time, helping facilitate transactions. And as we mentioned in our in our press release, there is a gap in the market for more short-term loans, especially around public companies when you're willing to also underwrite not only the business, but the equity and all the assets of the estate. And so we will -- we did a loan -- we completed a loan. I think it's done maybe was done today, but it was for a public company, a $10 million loan against receivables and those receivables go directly a lot, so we take a fee off of those and they'll pay us back in 4 months, but they had a direct use for that. There's not a lot of places you can go for that type of transaction. We certainly have a lot of relationships, just like anyone does that has a loan business like that, where we will consider syndicating. We have a dedicated family office that is -- partnership is a wrong word. It's not formalized, but we have a high degree of confidence that, that family office will be a participant to the extent we want to do some things bigger. So on balance sheet, depending on timing, depending on size, syndicated depending on timing, depending on size. I think the most proprietary thing and the reason that we wanted to make sure that we were in this business is, one, it's serving clients that are long-term clients, and we think we can put that in perspective. Two, we don't think it's a hugely competitive market because most lenders need a duration of their capital and a defined MOIC and have very kind of strict mandates within the lending portfolio. So we think we can be opportunistic and also be really good partners. And so we're really excited about formalizing it. And we think we're already seeing just from that press release, we're seeing opportunities. So that's how that will work. Does that answer your question? Sean Haydon: Yes. Yes. No, that was helpful. And then kind of piggybacking on the first question from the previous person where are you guys comfortable bringing the balance sheet in terms of net debt? I mean should we expect it to be lower? And how should we kind of think about it getting there? Bryant Riley: So that's -- it's a question every day based on your cash flows and realize this year, our expenses -- our cash flows were hit quite a bit because of these expenses associated with the financials and changing orders and all the legal things. And so we expect to get some tailwinds there. We think that from operations, obviously, there's going to be meaningful cash flows. And we look at it all the time. If you were to take to market our portfolio now, the debt-to-EBITDA on a trailing basis would not be hugely uncomfortable, but that's net debt, right? So we have to constantly hit these things. I don't think there's -- I don't think there's a number of mine. We just want to make sure that we can, one way or another, be on the offense and helping our clients and being able to utilize capital to do that. And so that will always be mindful of that, and we'll balance that against whether we need to utilize other methods, selling an asset or doing bond swaps. So I can give you a target. I could tell you that we feel pretty good about where we are right now, obviously, relative to where we were 18 months ago, and we're just going to keep grinding away. Sean Haydon: Yes. I guess obviously, we don't have to get any specifics here, but directionally, when those maturities come up in the latter half of the year, should we expect replenishment from that? Or is that going to be the level we should expect going forward once they've matured. Thomas Kelleher: I kind of answered the same way I answered the prior call or if -- in this business, 6 months and 9 months is like equivalent to 5 years in a legit business, if things changed 18 different ways. And I just -- I would I couldn't tell you exactly what the next steps are going to be other than we feel really comfortable about our -- about 2026 and going forward. So I would love to give you an exact linear description on the next steps, but we're just going to continue to think through what is best for the overall business and where we are in markets and how markets are. And if we're seeing a ton of opportunities, as Scott said, to put money to work at really good rates are really good opportunities that we'll be thoughtful of that. But it's similar to how we got to March. I mean, by the time we got to March, there was $96 million of maturities, and we had tipped away at them from a couple of different ways. And that's how I would think about September and December. Sean Haydon: Congrats. It's been a ride. Bryant Riley: Well, I know you've been on the ride, and we appreciate it, going forward and accomplished a lot and just are charging forward. Operator: [Operator Instructions] Our next question is a follow-up from Amer of Imperial Capital. Amer Tiwana: I just wanted to dig into the Great American business. Can we talk a little bit about what -- how do you guys value the business on your balance sheet? And secondly, you guys had invested some additional capital for the JOANN liquidation. Can you talk about what kind of returns you got are expecting on those investments? Scott Yessner: Yes. I was going to just touch on the accounting and the booking and that part of it, and then turn to you, Bryant. Yes. So there's -- the nature of the capital structure at GA Group after we did sold a portion and now have roughly 43% to 45% of that business. Because of that structure, we had to use an accounting treatment hypothetical liquidation and book value method. And it just sort of gives you a book value of that company. And when you think about the value of a firm like the GA Group, the balance sheet is not primarily the element to it. It's a fantastic business, which you know, we've honed for well over a decade. And so the part of the reason for my remarks on the call was just to identify that the -- well, we will communicate its performance as we are required to the 10-K of the actual business, the valuation on the balance sheet won't move much, and we think that's helpful to communicate to our shareholders and analysts to understand that the performance of the business may not necessarily be reflective of a hypothetical liquidation, but value, which I know everyone is very good at understanding book value versus market value. And so that's how -- sort of how to think about it is that we want to communicate the performance in its P&L sense and earnings sense, but may not be able to reflect the actual valuation change in the balance sheet. And with respect to the equity. The equity returns that we earned on the JOANN's deal, that was -- those are very, very high. We -- that was a very, very successful deal for us, something that we were very comfortable in being with as part of our means of organizing that partnership with Oaktree, the majority owner now. And those are equity participations in transactions or something that we want to supply capital for and continue to. And we also provided some lending last year to that business operation. And so we want to outside of our ownership through that equity investment, provide additional capital to support the business. So Bryant, I'd like to pick it up from there. Bryant Riley: No, that was perfect. Yes, I wouldn't add anything more. Operator: Our next question comes from Jonathan of JH Lane Partners. Unknown Analyst: I had a couple of quick ones for you guys. Number one is -- what is your ability to sell any of your shares in Babcock for liquidity purposes? Are there any restrictions associated with that given your significant ownership stake of the company. I have 2 other follow-ups. Maybe if you just want to answer that one first, and then I'm happy to get to the other questions. Bryant Riley: We are -- we've been very involved in BW in a number of ways and advisory roles, et cetera. But in terms of restrictions outside of being restricted because we would have information. Our shares are subject to 144A requirements, which means that because we own a fair amount of shares, we would have to measure the volume per month of those shares, but the volume of that company is far more than the shares that we own. So we do have a requirement to follow some volume restrictions based on our ownership, but they are not -- they don't come into play with volumes here. Thomas Kelleher: Okay. Great. And then just on the -- I've been following the story for a little bit. You guys have made obviously, a lot of progress. Is there any general comment you could comment you could provide to the broader market about changes maybe at the governance level given, obviously, it's obviously great that you got the positive litigation rule today or yesterday. But for someone new to the story and perhaps for people to just understand, there's a lot that went on here in the last couple of years. Have you had changes to the Board, other than changing your auditor is the law firm that you had worked with closely over the last couple of years, still kind of involved in your company at all? Like how can we understand kind of OldCo and NewCo, just understanding that is this kind of a new company, a new stage, obviously, some of the management have been the same, but is there any kind of fresh moves on the board and just a sense how we're going into the... Bryant Riley: There hasn't been any new member to the board. I think you can tell by -- as you may know we had a lot of governance around investigations and things like that. I think that center newer to the story, and I certainly appreciate the dynamics around FRG. But BW which you spoke of was not a dissimilar situation. That's a 20-year relationship with the management team and that company, obviously, with our help and with the number that the management team has really ended up having great returns for us. And so you're balancing things that you've done in the past and things -- and the way you're going to look in the future and what is best for the business. And I think that certainly, we have -- Scott Yessner is here, and we've implemented I think the proper amount of procedures, and I think our Board is incredibly additive and we have a new auditor, which we're very thankful for. And so I wouldn't -- I think that's how I'd answer it. I think I feel good about the procedures we have in place and balancing the opportunities with creating the right environment for everyone. And I think the disclosures we're providing, that Scott is providing is more and more, and we're trying to walk the right line between thinking about the dynamic of an FRG, but also realizing that a lot of the opportunities we have in front of us are going to be -- we need to take advantage of. So Tom or Scott... Thomas Kelleher: Yes, that's very helpful. And I appreciate it. I just would note that obviously, like a situation like Babcock is just now such a meaningful part of the situation where in the past, like obviously, FRG ended up being a very significant part of the story, obviously, not comparing the 2, but just in terms of like as a percentage of your value and assets is something cognizant from the ex markets in terms of people that invest with you, obviously, that's the more diversified you could be, I think, the better. And then the last question I had would be, is there any update on liquidity or maybe your cash position or something you could provide to us as of 3/31 or post those transactions we did in post the bond pay down that was -- that took place at the end March, I guess now. Bryant Riley: Yes. So I mean, we're going to be back on the phone, hopefully, in 5 weeks, right? I think maybe my [ otters ] are listening. So that's absolutely a hope or 4 or 5 weeks. So we'll get back to -- we're not providing guidance right now. So hopefully, we... Operator: [Operator Instructions] Bryant Riley: I think, operator, I think we're good. Thank You. Just before we go, I'll just speak personally as we've gone through this last couple of years and where we are and the momentum we have, and I'm just humbled by the team that we work with every day, and the new team members, it's been just an amazing experience to be able to be in a situation where you watch arms and you go and you battle and and we're seeing the rewards of that. And I think that the people that have been fighting through it are seeing the rewards of that. So very thankful for this team, very thankful for for TK and Scott and everybody else from our team on the call, and we're excited to be able to have a quarterly earnings call that will be normal and normalized and have a regular cadence. So thank you very much, and we really appreciate everyone for joining. Operator: This concludes today's Evercall. A replay will be made available shortly after today's call. Thank you, and have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the GEN Restaurant Group, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Tuesday, March 31, 2026. And now I would like to turn the conference over to Tom Croal, the company's Chief Financial Officer. Please go ahead. Thomas Croal: Thank you, operator, and good afternoon. By now, everyone should have access to our fourth quarter 2025 earnings release. If not, it can be found at www.genkoreanbbq.com in the Investor Relations section. Before we begin our formal remarks, I need to remind everyone that our discussions today will include forward-looking statements within the meaning of federal securities laws, including, but not limited to, statements regarding growth plans and potential new store openings as well as those types of statements identified in our annual report on Form 10-K for the year ended December 31, 2025, and our subsequent reports filed with the SEC. These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements represent our views only as of the date of this call and are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we currently expect. We refer you to our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q for a more detailed discussion of the risks that could impact on our future operating results and financial condition. Except as required by law, we undertake no obligation to update or revise these forward-looking statements in light of new information or future events. During today's call, we will discuss some non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and our SEC filings, which are available in the Investor Relations section of our website. Now I'd like to turn it over to our Chairman and CEO, David Kim. Wook Kim: Thank you, Tom, and good afternoon, everyone. The fourth quarter continued to be a very challenging environment for all restaurants in the business. Since the majority of our customer base is Hispanic in many of our markets, and they have been put under extreme pressure through the immigration enforcement, our customers have retracted and are very afraid to come out. This significantly reduces our customer traffic. Additionally, just as we felt we were turning the corner, the increase in the fuel prices because of the war has reduced customer discretionary spending. All of this has led to a decrease in our same-store sales. In spite of this, we completed our business plan for the year, including opening new stores, continuing to deliver an exceptional service and build our brand recognition. We opened 15 restaurants in 2025, including six located in South Korea for a total of 57 restaurants in operation. In the first quarter of 2026, we opened two additional restaurants in Tucson, Arizona and Denton, Texas. As a result of the changing economic environment, we have made several directional changes through initiatives designed to improve the company's value proposition. First, we're managing our portfolio of restaurants that have recently entered into a joint venture with Chubby Cattle International to partner on five of our non-performing restaurants. We will own 49% and Chubby Cattle will own 51% of these restaurants, which will be operated under the Chubby Cattle brand. This transaction creates a $4.5 million write-down, but will create five profitable restaurants that will generate strong EBITDA in the future for which we are entitled to 49% of the profits, which will enhance our overall profitability as a company. Second, we also have several operational initiatives to improve the financial results of our restaurants. We have adjusted our menu to streamline options in response to stubborn increase in our food cost. We have enhanced our incentive program with restaurant managers, focusing them on short-term financial results. We have tested new boba drinks as well as soju drinks, which have shown promising sales during the launch. After two quarters of research and preparation, we started to explore our new digital platform to enhance our customers' experience online. Additionally, we recently launched our GEN loyalty program and are accepting cryptocurrency for payments. Lastly, we're launching our new enhanced e-commerce website, which will be selling much more of our GEN branded products. Finally, as we slow down our restaurant development, we have initiated an AI program to create efficiencies and reduce corporate overhead. As a further update, our Costco gift card program continues to sell exceptionally well. During 2025, we sold approximately $29 million in gift card to Costco, which is 150% increase over last year as this program has greatly exceeded expectations due to our strong brand recognition. As CEO of GEN, I've contemplated for some time how we can expand a GEN Korean products and experience around the country without the heavy capital outlay to build restaurants everywhere. This is why we decided to enter into the consumer packaged goods called CPG business. We began by offering fresh frozen ready-to-cook Korean branded meats. These products feature the exact same meats and recipes used in our restaurants, ensuring an authentic experience. The CPG business has done very well in recent years. Many smaller companies have entered this business and are doing very well as current customer profile tends to seek smaller brand names. Companies like Kevin's, Marie Callender's, California Pizza Kitchen, P.F. Chang's and Bonchon Japanese Sauces have created large businesses with valuations reaching over $400 million to $800 million in a relatively short period of time. We previously announced the creation of a new division within the company to develop and sell CPG products to grocery stores. We started with four SKUs by testing our products at over 30 locations in Southern California in October of 2025. The customer response was incredible and the business blew up. Early this month, we announced that we had expanded our CPG business to over 800 locations in various supermarkets. With the strength of our restaurant labor force, GEN has deployed trained team members to local grocery stores to demo our products. This has been very successful in the early stages of moving products to consumers. Most grocery store demos done by other companies are done by employees with no product knowledge. The expertise our restaurant staff has to present these demos creates a dynamic sales presentation that exponentially increased the sale of our products. Additionally, because of our well-known GEN brand and the great taste in Korean food, it is easy for our staff to introduce our products. Our concept is simple. We bring our restaurant experience into your homes just as in our restaurants, where guests cooked their own meal using fresh frozen meats. Our grocery products allow customers to create that same hands-on dining experience and exact same case in their own kitchen. Unlike most restaurant brands in the frozen food aisle, GEN is able to deliver the exact same quality you would expect in dining in our restaurants. These are not typical TV dinners, where food is different from the restaurant level. Our products represent thoughtfully crafted meals made with same high-quality ingredients we serve at our restaurants. Introducing our products to grocery store chains takes time to set up in their IT systems, organized shelf space and complete the delivery and distribution chain. Once this initial setup is completed, the growth of this segment significantly speeds up, allowing us to achieve significant sales. By the end of 2026, we are projected to have our CPG products in 1,500 to 2,000 locations across the United States. We estimate that our CPG products could be carried to 7,000 to 8,000 locations by the end of 2027. With this expanded growth, we believe we can achieve a run rate of over $100 million in annual revenue as soon as 3 years. After accounting for slotting fees and promotional market investments, the company projects an EBITDA margin in the high teens. GEN's strong brand recognition is a key driver behind our retail momentum and a testament to the connection we've built with our consumers through our restaurants, gift cards at Costco and social media. Korean food is under penetrated, but the most sought out food in the ethnic food category. As we grow this business, GEN will offer many Korean food SKUs under the GENK food ecosystem. Due to early retail reception from both buyers and consumers. GEN is accelerating its CPG expansion trajectory and expect CPG to be a meaningful growth driver with strong margins. As a result, GEN will be working with investment bankers in the CPG space to explore possible investments, logistics and supply line partners to help grow this business and increase shareholders' value. With a solid operating model, meaningful expansion across both core and new concepts, we're executing with focus and discipline. Now I'd like to hand over the call to Tom for a detailed look at our fourth quarter and year of 2025 financial performance. Thomas Croal: Thank you, David. During the fourth quarter, we generated total revenue of $49.7 million compared to $54.6 million for the fourth quarter of 2024, a decrease of $4.9 million. As we previously reported, due to the global tariffs early in the year and extreme pressure through immigration enforcement, we experienced a downturn in our restaurant customer traffic during the remainder of 2025, which resulted in same-store sales dropping by 11.6% for the fourth quarter and some of our peers are experiencing the same downturn. For the year ended December 31, 2025, revenues totaled $212.5 million compared to $208.4 million in 2024, an increase of $4 million or 2%. Revenues increased by approximately $14 million from our new restaurant openings, offset by a same-store sales decrease of approximately $10 million. Consistent with our previous messaging, same-store sales are not the metric that defines our success, I can't stress that enough. Our AUV revenue is still over $5 million per restaurant in the casual dining space. This is a very elite level. Cost of goods sold as a percentage of company restaurant sales increased by 285 basis points to 36.9% in the fourth quarter of 2025 compared to the fourth quarter of 2024. The increase reflects inflationary cost increases, more new restaurant in operation and a minor impact from our premium menu. For the full year of 2025, cost of goods sold as a percentage of revenue increased from 33% in 2024 to 34.7% in 2025. As a result of the inflationary impact on our meat prices, we implemented a $1 price increase at the majority of our restaurants in the first quarter of 2026, which equates to about a 2.5% price increase overall. Payroll and benefits as a percentage of company restaurant sales increased by 97 basis points in the fourth quarter of 2025 to 31.8% compared to the fourth quarter of last year. For the full year, payroll and benefits as a percentage of company restaurant sales remained relatively flat from 2024 to 2025. Occupancy expenses as a percentage of company restaurant sales increased by 253 basis points to 11.2% compared to the fourth quarter of last year. For the full year, occupancy costs as a percentage of restaurant sales increased from 8.4% in 2024 to 10% in 2025. This is primarily due to higher rent at some of our new locations, along with the decrease in same-store sales for 2024 to 2025. Other operating expenses as a percentage of company restaurant sales increased 261 basis points to 12.4% compared to the fourth quarter of 2024. For the full year, other operating expenses as a percentage of restaurant sales increased from 10.3% in 2024 to 11.4% in 2025, primarily due to the decrease in same-store sales. G&A, excluding stock-based compensation during the fourth quarter was $6 million compared to $5.7 million in the year ago period. For the full year, G&A, excluding stock-based compensation was $23 million in 2025 compared to $18.4 million in 2024. This increase is primarily due to increased personnel required for new restaurant development and additional advertising, marketing and legal expenditures. G&A expenses in the fourth quarter remained flat with G&A expenses in the third quarter of 2025. Additionally, due to our decreased new restaurant openings in 2026, we expect there to be a reduction in G&A as we move forward. In the fourth quarter, we had a net loss before income taxes of $12.5 million, which equated to $0.36 per diluted share of Class A common stock compared to a net loss before income taxes of $1.2 million, which equated to $0.04 per diluted share of Class A common stock in the fourth quarter of 2024. The fourth quarter 2025 reflects higher costs associated with new restaurant development in addition to a $5.5 million provision for asset impairment and $1.3 million in preopening costs for new restaurants. For the full year of 2025, the company had a net loss before income taxes of $20.3 million, which equated to $0.59 per diluted share of Class A common stock. If you look at adjusted net income, a non-GAAP measure, we had a net loss of $5 million or $0.09 per diluted share of Class A common stock in the fourth quarter of 2025 compared to adjusted net income of $1.4 million or $0.04 per share in the fourth quarter of last year. For the full year, we had an adjusted net loss of $3 million or $0.09 per diluted share of Class A common stock compared to adjusted net income of $11.6 or $0.33 per share last year. As a result of the decrease in sales and the inflationary-driven increase in costs, our restaurant level adjusted EBITDA for the fourth quarter of 2025 was $3.9 million or 7.9% of total revenue compared to $9.3 million or 17% in the fourth quarter of 2024. The restaurant level adjusted EBITDA was $29.4 million or 13.8% for the year of 2025 compared to $36.9 million or 17.7% in 2024. Total adjusted EBITDA for the fourth quarter of 2025 was negative $2.7 million as compared to $2.1 million in the fourth quarter of 2024. After removing preopening costs from both periods, adjusted EBITDA for the fourth quarter of 2025 was negative $2.1 million compared to $3.7 million for the fourth quarter of 2024. For the full year, total adjusted EBITDA for 2025 was $0.7 million compared to $13.3 million for 2024. After removing preopening costs from both periods, adjusted EBITDA for the year of 2025 was $6.3 million compared to $18.6 million in 2024. Turning to our liquidity position. As of December 31, 2025, we had approximately $2.8 million in cash and cash equivalents. We have the majority of our $20 million revolving credit facility available. We anticipate using a portion of our revolving credit facility as we continue to open limited new restaurants in the future and grow our grocery store initiatives. In 2026, we have significantly slowed our new restaurant growth plans and focus our efforts on improving operations and margins at our existing restaurants as well as growth through our grocery store initiatives. Before concluding, I want to reiterate what we said on previous calls. Our balance sheet reflects $173 million in lease liabilities as required under GAAP through the new ASC 842 lease accounting standards. These are not financial obligations in the form of long-term debt, but rather the accounting recognition of our future lease commitments. Importantly, they are offset by $146 million in operating lease assets. To wrap up, we're targeting full year revenues of $215 million to $225 million in 2026 and achieving restaurant-level adjusted EBITDA margins in the 15% to 15.5% range. By the end of 2026, we anticipate being at an annual run rate approaching $250 million in revenue. This concludes our prepared remarks. We'd like to thank you again for joining us on the call today. We are now happy to answer any questions that you may have. Operator, please open the line for questions. Operator: [Operator Instructions] And your first question comes from the line of George Kelly from ROTH Capital Partners. George Kelly: I wanted to start just with -- Tom, you ended with your expectations for 2026. And I was hoping that we could drill into your revenue guide a little more. I think you said $215 million to $225 million. If you could give the retail contribution that's baked into that as well as -- on the core restaurant business, your comp expectations and net openings, anything that you're comfortable giving just to -- that's baked into that guide? Thomas Croal: Yes, George, we are -- on the retail side, we're working towards getting to a $20 million run rate by the end of this year. And so we should be in the $10 million range in the retail for this year, which would then put the restaurants in $205 million range looking at the low end. George Kelly: Okay. So $205 million. And what kind of -- the net openings that you talked about slowing down your opening pace. What is that? What are your expectations with respect to openings and closures? Wook Kim: So there will be no -- we haven't really contemplated on the closures. We did do a deal with the Chubby Cattle Group, which we're very optimistic and excited about. In terms of the new store openings, we opened two, we have one -- five under construction, and that will be completed this year. Maybe we'll squeeze in 1 or 2 more towards the end of the year or the beginning of '27. George Kelly: Okay. So 2 to 5 under construction, 1 or 2 more and then closures are not baked in outside of the Chubby Cattle partial divestiture. Okay. Understood. Wook Kim: Okay. As of this time, yes. George Kelly: Okay. And then last question for me, back to the retail business. You said, I think, high teens contribution margins somewhere in that range. What should we think about the kind of getting to scale there? Do you anticipate making a lot of upfront investments in 2026 as you scale the business, maybe behind promotion or just G&A infrastructure. How should we think about near-term profitability in the retail business? Wook Kim: Sure. The infrastructure costs, we're leveraging the current infrastructure we have at the restaurant side. So we don't anticipate a lot at all in terms of infrastructure cost. We will be reducing the construction infrastructure in the GEN side considerably because we're going to cut down on that side of the business. In terms of the capital, it's purely inventory now because there's a lag time between the order that's ordered and some products come from South Korea and some products are made in the U.S. So it depends on how the orders come in. Why we have such a larger number from a run rate versus actual is when you start having an interest in the larger markets order, once the order is in, you have to go through their channels of how to get -- to be on their system, i.e., their SKUs, their accounting. There's a lot of insurance. There's a lot of setups. Once the setup is done then the cash flow of money coming in and what's sold and the repeated business it's very seamless. So it works very well. The margins that we've talked about all account for the various discounts, the various slotting fees, et cetera. So when we said it will be in the high teens, that accounts for all that. And after taking all that out, we will be -- we're looking at the high teens. George Kelly: Okay, okay. And maybe if I could just squeeze in one more. The numbers you gave, your longer-term expectations around the retail business are big as far as store count and revenue productivity, et cetera. And the business is still early stage. So the question is, what is it that you've seen so far that gives you confidence in that longer-term expectation? Maybe it's the velocities you're doing or the performance outside of Southern California looks good. Like can you just give us a sense of what makes you confident? Wook Kim: Yes, several things. The -- after signing up with larger brokerage firms, and I'm actually personally making these travels and talking to the senior buyers. The numbers of supermarkets around the country is significantly higher than I expected. This is not just the Walmarts of the world. These are small regional players in the hundreds per their own sections of their markets. We, as of today, can tell you that all the meetings we've had, we have not had a single turndown of the buyers turning down our products and the continuation of interest especially we are in the Korean barbecue business and Korean-related products because of the tailwind that we're getting from the cultural changes and the customer pattern behavior on the ethnic food side. There's continuation of data is coming out saying, it's the highest demanded, but the lowest penetrated food in the United States. So that helps a lot, and it's backed by the cultural changes of movies, getting recognized, Netflix' on the K-drama, the bands, the BTSs, et cetera, et cetera, that's all fueling this. So it's a huge benefit of all the cultural younger generation knowing this food -- Korean food is actually getting the buyers from these larger institutional supermarkets, not just having interest in buying our products. Now the ones that we already in now that have placed products on the shelves. They don't keep products on the shelves if they don't have velocity. So our velocity is above their -- every retailer has their own lines of what velocity that each ones have to hit, and we are actually above their velocities, especially for a new line like this, they're very, very excited. We're very excited too. It's unusual, they say from this industry to have a hit rate of 100%. I'm sure the more we see, we will start to have challenges of certain areas, not buying our products. But it's unusual where products are presented and they bought it. So even if we introduce all the products, the lease that we've had so far is one group buying 2 out of the 4. And then we have other products growing, too. So I'm a believer that just selling into the markets is not a business model, is the continuation of -- yes, consumers coming back to buy it is actually a better measurement. So as of today, it's a small sample, but the amount of bookings that we have from supermarkets to ordering from us, and what we have in the system, that's why we are able to comfortably project those numbers. Operator: [Operator Instructions] At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Mr. Kim for any closing remarks. Wook Kim: Thank you very much for your time and listening to our quarterly call. Thank you. Thomas Croal: Thank you very much. Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Tony Dammicci: Welcome, everyone, to the MDB Capital Holdings Fourth Quarter and Full Year 2025 Update Conference Call. Thanks very much for joining us today. [Operator Instructions] Before we begin the formal presentation, I'd like to remind everyone of several important things. Today's conference call is being recorded. A question-and-answer session will follow the formal presentation. [Operator Instructions] Remember, questions can only be seen by the moderator. Please remember that statements made on this call and webcast may contain provisions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You're cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Also, please be aware that we are not obligating ourselves to revise or publicly release results or any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we'll attempt to present some important factors relating to our business that may affect our predictions. You should also review our most current Form 10-K for a complete discussion of these factors and other risks, particularly those under the heading of Risk Factors. A press release detailing these results, which crossed the wire this afternoon is available in the Investor Relations section of our website, mdb.com. A replay of this call will also be provided later on mdb.com. Your host today is Chris Marlett, Chief Executive Officer and Co-Founder of MDB Capital Holdings. He'll be joined later by George Brandon, MDB Capital President and Head of Community Development. Chris will lead an update on the fourth quarter ending December 31, 2025. At this time, I'll turn the call over to Chris Marlett. Chris? Christopher Marlett: Thanks, Tony. Well, thanks, everyone, for joining today. I'm excited to be here and talk to you about what's been happening. It's been a while since our last call, and the year has gotten off to a really interesting start. And so I thought I'd first kind of just talk about our agenda, which I know most of you are very, very interested in where our assets are, what we think about our current investments and what we see for the future. But I wanted to take some time to give you sort of a view from the way we're looking at building this business and why we're so optimistic for the future of MDB. We just published, which you should all have as shareholders, a year-end shareholder letter, which will talk to a lot of what we're going to talk to today, but in a bit more detail. If you can get through it, it's about 9 or 10 pages. But I think it does a pretty good job of giving you a real good view of where we see the business, where we're headed and why we're excited about the future. So with that, I'll start off with just reminding everybody our story, really, we've taken this proven model of launching companies about 1 every 18 months where we helped to conceive of a big idea, bring it and position it for being public and having value in the public markets and then taking them public. And we did that before we were public, and it was a very nice business. And of course, the reason we decided to go public was that we believe we could scale that to 3 to 5 launches a year, maybe not overnight, but we really believe that we could do that, have a lot more impact and build a real organization to build public venture really kind of into an asset class where we could actually build portfolios for our investors as opposed to just most of our investors historically had 1 or 2 of our companies in their portfolio. So we did that for 29 years. We just did our 18th IPO. Never a failure means we never failed to get an IPO done. And every one of them, except for the last one, which is very new. It's only a couple of months old, have traded at a very significant premium to the IPO price. And that really, I think, speaks to what we've done from an asymmetric value positioning perspective, bring companies public at a reasonable valuation and the promise of them caused them to trade at values much higher than what we took them public at. All those companies had the opportunity to raise additional follow-on capital, and we create a lot of equity value, not just fees. And so the scaling is really what we're talking about. So talking about where we came from, and I've been in the business now for 40 years. And my mission has always been before we even started MDB was how do we get to the truth quickly? How do we understand the companies that we're getting behind or the opportunities we're getting behind and creating -- or in many times, creating these companies in conjunction with inventors or universities or entrepreneurs. And so in the old days, we would look at 10-Ks and 10-Qs. We literally have to call Washington and get these filings. And it was a very haphazard approach to trying to learn about companies. These were all public companies. If we had a private company, we were going to take public. The information challenge was really crazy. As a result of the Internet, we launched PatentVest in 2003, which enabled us to really understand deep tech very much in a clear way because we could get our minds around what somebody owned and how it was differentiated from somebody else out there in the technology landscape. And that gave us, in our mind, a real ability to really understand the critical elements to building leadership. And this leadership we saw was the critical element for these companies being able to trade at $1 billion valuations or have the potential to trade at $1 billion valuations. And as we refined it, we -- in our screening criteria and our processes and trained our analysts, we could start to filter companies where instead of going from a handful in the old days or maybe 100 a year after PatentVest, we got into the point where we could review thousands per year really because we could get through an idea in an hour or 2 by understanding did they have the ability to be a leader in a technology vertical pretty quickly with the development of PatentVest. But we still had really a bottleneck, and we've really experienced that bottleneck over the last couple of years since going public at MDB, which is we can find a big idea, we can pull it together. But really, that process of getting a position to create real value in the public marketplace is a very, very labor and time-intensive process. So the deep diligence and all the market insertion risks and competitive mapping and the business IP strategy and then getting the -- really getting the company positioned to be able to communicate its value add is very tough. And it's still tough. It's always tough with a big idea. And that would consume hundreds, if not thousands of hours. And it would take many months to get these companies ready to go public. And so this has really been our reality and quite frankly, our biggest challenge in scaling that we've had. But I have to say, and I referenced in my letter that AI really is a game changer for us, and we are committed as an organization to using it at every level. I would tell you that even the last 90 days has just been kind of earth-shattering for us in the ability for us and our teams to really solve that information challenge that almost every company faces, and we certainly face in getting these companies ready for being public. And so when you think about the Internet, it really did a great job of catalyzing and organizing that information, but it really created sort of overload in inertia. You had almost too much information. Even when we were looking at patent data, when we first started, you would look at -- you would do a screen and you would look at thousands of patents. Well, getting to those thousands of patents was virtually impossible. It would take really unbelievable amount of man hours to make that happen and really understand how a company could differentiate itself from the other companies in that field. And so what AI has really done and really done in a very, very tangible way, literally in the last 90 to 120 days is it eliminates that inertia. It really connects the dots at an unprecedented speed. And when you couple that with our expert analysts that have created the SOPs, if you will, to actually screen through these companies like we did very manually before, those SOPs applied through agentic models in AI has really become almost unbelievable. And what we're seeing, whether it's with patents or whether it's with new business opportunities, we're able to get to the truth super-fast. We're able to connect dots we could never connect before. And this is going to have an unbelievably profound impact on our business. And I know AI is sort of the catchword of today and every AI company that comes in to look for funding, I'm always very skeptical of. But I can tell you that as far as using really off-the-shelf AI, things like Claude day-to-day within our operation and now building SOPs and agents to effectively execute what we can do doesn't mean we're going to actually lay off anyone or fire anybody like has been put in the press. What it enables us to do now is really scale in an unbelievable way. So the transformative impact in a real tangible setting is becoming real. And we really believe that our ability to effectively boil the ocean of opportunities is achievable. And we're in the process of continuing to develop these agents where we can literally look not only for new companies through our patent data, but from grant databases, from conferences, anywhere we go where we see opportunities where we can feed it in with our specific criteria, these agents can now do the work of hundreds of analysts and then start to boil the ocean and get these things narrowed down to where now our analyst team who are experts in understanding whether or not these are real genuine opportunities can be boiled down very, very fast to a very small stack of companies. But even if, let's say, 5% of the opportunities made it through our screen, whether it was companies that were brought to us by friends or colleagues, the real hard work was the deep due diligence. And that deep due diligence was very -- that took -- that's what took the hundreds, if not thousands of hours to do. And in fact, every one of these companies were facing the same thing. They're trying to get to the answers quickly. The Boards are trying to figure out what strategy to employ. And the information divide is just really, really difficult, especially when you're talking about deep tech or disruptive technology. And so we really estimate that we can compress that time by 2/3. It's really astounding. And you're going to see it, obviously, as investors, right? So you can put in every one of our deals. You can put the prospectus in, you can query it. And you guys are getting the questions quicker. And we're seeing it already in the last 90 days the questions we're getting from investors and the insights we're getting from investors is really astonishing. I mean it's really -- it's fun for us because our mission is to get to the truth as fast as possible. And so we're experiencing this real time. It's like something I've never seen before. But then when you actually want to prepare that company and take it public, it would take from 6 to 18 months. And I think we're going to be able to get this done in weeks. Like we -- to give you an example, we just started on the S-1 for Paulex to take it public. Our team could actually put together a pretty good draft for the S-1 pretty darn quickly. And I think -- and again, we're still in the early stages of really implementing all these processes within our organization. But whether it's the financial models, the business strategy, the IP positioning, we see this being done in weeks, not months, which has -- when you talk about the scale issue that we're -- that we faced, we're seeing this as a total game changer for our ability to scale. And so -- but throughout our business, whether it's through PatentVest, through all of our investor diligence, I mean this whole thing is going to change. It's going to change how our community reacts to deals. It's going to change how deals get distributed. It's going to change it at every level, and we're seeing it real time right now. So over the -- since we've gone public, one of the things that I don't think has been very apparent to everybody that has really just been focused on figuring out what one of our deals is worth or whether they should buy it or what eXoZymes might be worth is that we've been investing in MDB Direct in our clearing operations and patent vest to really build those as separate discrete assets. Yes, they're very obviously critical and important in our daily operating business, but they really are distinct assets in their own right. And we've been investing about $4 million annually since the IPO on these assets. And that is super apparent because we've been able to take and stand up these 2 enterprises to where they now, in our mind, have significant independent value and in effect, big ideas that are going to be launched off into their own entities very soon. So in MDB Direct, what we did was super unique. And we knew that scaling IPOs, especially public venture IPOs was going to -- was not a thing that is done with traditional institutional investors. Traditional institutional investors are looking for ideas that are much more highly developed. And so a lot of these companies that are sort of in the development phase or going public, a lot of them were starting to get funded by crowd funding and other platforms like this, Reg A+, things like that. And now we're seeing things -- companies like Robinhood now being key distributors for these kind of offerings for big companies like the big major underwriters. And distribution is changing in a very, very dynamic way. But the key differentiator is clearing. So folks like Robinhood had to become -- had to go self-clearing. They used to clear it through other people. Most of the broker-dealers that operate in the microcap marketplace, none of them are -- or virtually none of them are self-clearing. But they're recognizing to be able to operate and access these investors, clearing could be a clear differentiator. And clearing is also the ability to be profitable. In many cases, stock loan margin lending, et cetera, these things are key cash generators for any company in our space that has any kind of assets that are built on their platform. And so we know that what we've built here is a very, very valuable asset. And so it took 5 years of work with our vendors and our software developers and what have you to get this up and running. And it's a super valuable asset. And I think that we're looking forward to being able to scale that asset and at the same time, create value and monetize the asset. So really, the big opportunity for MDB Direct is a strategic partnership to monetize the asset and also help solve our distribution challenges at scale. I talked about in the letter a bit, but when you go from one company every 18 months with a very small community and effectively a few relationship managers that work within our organization to go to 3 to 5 companies a year and really start to scale this, we have to basically solve the distribution challenge. And so again, I spoke about public venture as sort of being a very much of an individual investor-oriented asset class, where you can look back to the IPOs of even companies like Amazon and Tesla that went public through larger underwriters, but the institutional investors were not major players that drove valuation in those companies. And even today, SpaceX is talking about going public and raising a lot of money. Elon Musk is smart enough to know that he needs to have retail distribution, and he's figuring out ways to do that in the offering because he knows they're going to end up being the people that really want to own the stock. And the institutional investors many times came a lot later. And so we see an opportunity with these firms that don't have self-clearing that are recognizing that distribution is going to change that this is a real opportunity to partner with other -- either other firms to spin this off as its own entity, to sell it outright and then clear through those -- clear through whoever we sell it to. But we see this as a very valuable asset. To our knowledge, there's no other clearing firms for sale or partnering capability right now. When we were looking to do this, we were looking at -- there was only one clearing firm that was set up for sale or for partnership. And that firm, even with a lot of challenges and really not a huge platform, sold for tens of millions of dollars. And so we see this as really exciting. It's now operational. It's working, and we're now just starting active discussions with various folks, and we're seeing this as really a force multiplier, not only generate some value for the shareholders, but also partner on distribution, which I think could be a really great thing for what we're doing as we have the ability to curate more big ideas. And PatentVest, just the other big idea, just as big as clearing was, was to become a law firm. So we had built a patent research company before and sold it before we had gone public. And that company was very limited by the fact that we weren't a law firm because we really -- we could do research, but we couldn't really render opinions. We had to be careful with attorney client privilege. A lot of our analysts were in Latin America, which made a lot of people nervous. But with that, we were able to sell to a U.K.-based law firm because in the U.K., they were able to go public. And then as we went forward and the ABS program became a possibility, we became one of the first ABS IP law firms, and it's been really phenomenal. And Javier Chamorro, who runs the operation has done a great job of getting this up and going to where we have all the core operations of a law firm from patent prosecution to foreign prosecution management to docketing to maintenance fees, all the various things you need to do to do that in addition to all the front-end research that enables us to start to provide a lot more value and create higher quality patents and higher -- a better experience for small companies and large companies that are looking to be more efficient and create higher quality. So what we see is by being the first potential ABS law firm to go public, which makes a lot of sense and take this from being a real legal process to a business process, we can now partner with these big law firms like we used to before we sold the patent research business. And we think that big law is facing an existential crisis with regard to what's happening in patent prosecution. A lot of the big law firms see that prosecution is a process business and that their high-level legal talent really can be best focused on strategy and litigation. And we're having some great discussions with these law firms, and we're looking forward to seeing this develop. It turns out it's a huge business. So if you look at patent prosecution in the U.S., I think $10 billion to $15 billion is a conservative figure for how big that business is in the U.S. And we really think that we can garner a really meaningful share of that business by partnering with big law firms. And we're really excited about this. And I think that the AI legal tech market is boomed. Obviously, there's been tons of money going into that market. We don't want to call ourselves an AI legal tech company because really what we are as a law firm that is going to embrace AI. And I think that a lot of these platforms that have been funded, there's probably -- I wouldn't be surprised if there's 100 AI legal tech law firms out there currently. And I think we're in this really great position to be able to participate in this area, create a lot of value, and we're looking to spin this out as an independent entity and finance it before year-end, as we touched on last year. And so our portfolio assets, we have 2 portfolio assets outside of MDB Direct and PatentVest that I think can create a lot of value. And obviously, eXoZymes which is, is public in Paulex, which we recently funded and are planning to take public later this year are, again, $1 billion market cap potential just like everything else we've done historically. And so talking about eXoZymes, eXoZymes is at a really critical point in its development. And I think that what had happened with eXoZymes is that initially, the strategy was let's go out and partner with pharmaceutical companies to go help them make stuff they can't make. We recognized at eXoZymes as I'm on the board there that, in fact, we could make things that nobody else could make. And if we could do that, why wouldn't we just make them and sell those products. And so that's where it's going. And I think that the promise of synbio is about ready is upon us because companies like Ginkgo Bioworks, everybody thought that they had cracked the code for being able to scale manufacturing in synbio when, in fact, they hadn't. And they created a lot of partnerships and they had a lot of sort of irons in the fire. What we realized is focusing in on a couple of really big ones was really super critical and making sure that we could scale manufacturing. And so as you've seen -- hopefully, you've seen is that some of the press releases is that, that technology is now being turned over to contract manufacturers and being demonstrated that it scales. -- which is something that's never really been done in our experience in synbio. So it's -- again, this is a company that -- I don't know that anyone is going to want to value synbio at $20 billion again, but I think that the headroom on this, when you look at the current market value of the company is pretty immense, and we're pretty excited that we're at this critical point now. And Paulex, I won't spend a lot of time on. We're going to have an update for those of you that participated in Paulex. But quite frankly, we're hoping to initiate the clinical trial in September at the same time the IPO goes. Again, another game-changing potential drug that would touch both type 1 and type 2 diabetes by producing insulin, by helping the body to produce insulin again or produce more of it. We started the company with some of the same folks that we started prevention with that know diabetes and that we've had a lot of success with. So we're very excited. And I think that I look forward to this IPO later this year. And we're super excited that the clinical trial results could start to emerge at the end of this year or early next year that could be really groundbreaking. So when you look at our 4 principal assets as it stands right now, eXoZymes as a current sort of market valuation. At year-end, it was about $45 million. The stock has come down a little bit. It's about $30 million in market value currently of what we own. Paulex, we own 7.1 million shares of that, and it's yet to be seen what we'll price the IPO at, but it could be a very substantial asset. And MDB Direct, again, not making promises on the value, but clearing firms of this type have sold for tens of millions of dollars or -- and I think we're in an environment where the value of this could be much greater with where the world is going from a distribution perspective of new offerings. And of course, PatentVest, we've been investing in for a long time, has, in our mind, a lot of value. We've invested many millions of dollars in the development of PatentVest since 2003 and even more so since we've been public to get it ready as a law firm and ready for launch. And then a combination of our cash, current assets through marketable securities, less all the current liabilities at year-end was about $22.3 million. And one of the sort of footnotes was we thought we were going to get Buda Juice done before year-end, but it ended up trickling into January. So it will give us some benefit in the first quarter. So when you look at the financial overview, I'm trying to simplify it as much as possible. Obviously, you can read the 10-K for yourself, but we have about $10 million in fixed operating expenses, and we burned about $5.7 million if you look at the cash flow statement for the year. And -- but if you look at the investment we've made in the clearing ops and PatentVest, it was about $4 million, which was $4 million as part of the $10 million. So if you effectively took the $4 million off of the $5.7 million, we would have -- in effect, burned $1.7 million. So I think that a lot of people, when they're looking at our operating statements, I don't know that, that's super clear to everybody. So if post the spinout of our clearing platform and PatentVest, our OpEx will go down to about $6 million a year, which when you now look at the number of companies we can launch and how much equity we earn in those companies, we have huge financial leverage. Even if you look at the equity position that we earned from co-founding Paulex this year, that equity is certainly worth -- in our minds, a lot -- worth a lot more than what we burned from a cash perspective this year. And so we think we generated significant equity value that's really not apparent in fiscal year 2025. But going forward, we've seen this leverage as being really unbelievable. And so I think that all of our things have $1 billion capabilities. And if we can launch 3 or 5 a year on a $6 million in OpEx base, I think we're going to have really, really -- we could drive a lot of really important shareholder value. So what can go wrong? Well, we are -- this is not public, sure thing. It's public venture, right? And so what I would say is that there's a lot of interesting things going on that we face since we've started. There's obviously a lot of macro and global risk. I have no idea how it's going to turn out nor do I want to venture a guess. The microcap market conditions have been very difficult. A lot of these companies because of the venture markets and small public markets were having such a difficult time. So many of these companies face such horrible dilution. There were lots of institutional investors investing in the space, but the dilution of these small companies was just horrific. And so we're hoping to see that change hopefully soon. Obviously, execution risk, not only our execution risk, but obviously, our portfolio companies have to execute. And this distribution gap that we're looking to solve is probably the biggest worry I have. And I'm not too worried about AI execution risk. We're already seeing those tools work for us. And with regard to clinical and regulatory risk, those are always something to be faced with all the life science companies we're involved with. So the path forward is pretty straightforward. We're now positioned to launch 3 to 5 high-quality companies a year. Again, that's going to depend a lot on our distribution and how we can build that. We've got a lot of -- we've talked about it in the past. We're doing a lot of things in partnering with other distribution partners. And so we're hoping to make that happen in addition to what we're doing with spinning out the clearing platform. And we're obviously going to spin out PatentVest as well and monetize that. And this cost scale efficiency improvement, I think, is only getting better as we get better at what we're doing. And as always, shareholders retain preferred access to MDB deals. And so I want to thank you all for having faith in what we're doing here at MDB. And it's been a really tough couple of years for us, watching our stock go down for the last couple of years since we took this company public. And so I'm going to use that for a second here to editorialize for 1 second. I know I've ran a bit over on this presentation. We're up to 37 minutes, but I'm going to try and make this as quick as possible. So we've had a lot of people that have stuck in there, but a lot of people have sold our stock or the stock wouldn't have gone down. And I think a lot of people have been disheartened. And I think part of what I will take credit for is this was a lot harder than we originally thought to get up and going. I could use the market backdrop as an excuse, but the reality was is that we thought we had it in the bag. And when you looked at the -- let's call it, the batch of companies we did right before we -- let's call it, the grouping of companies we launched right before we went public, all of them went to $1 billion valuations. And if that had happened after we were public with our current batch, we would not be having this conversation right now. And I think that a lot of our investors were like, well, yes, you got lucky with prevention, one of the drugs worked and it's sold and -- but -- or how much are you really involved? Well, the reality was we started that company, those assets wouldn't have been licensed. There wouldn't have been, in my mind, that opportunity and certainly not in a public realm, hadn't we been able to help make that happen. If you look at POS Biosciences, investors have had -- it still trades, I think, for $1.5 billion valuation or so, maybe close to $2 billion. I don't know where it's at right now. But investors have had multiple opportunities to make many multiples of their investment for where we took that public. And even when you look at the most challenging one, which was Cue Biopharma, this company achieved $1 billion valuation on the promise. The technology worked, but it also highlights the difficult parts of what we do, which is the company has got to execute. And that technology, we haven't given up on it. We still think the technology is brilliant, and it should be broadly available to patients, but it's had some challenges. But when I look at the current batch of companies that we have here today, when you look at all 4 of the principal assets we have, I really believe all those have $1 billion capability. And obviously, if all of them hit $1 billion, it would be a crazy return to shareholders. I'm not saying that's going to happen, and I don't expect it to happen. But it would not surprise me if any one of them hit $1 billion valuation. And I think that when you couple that with the pipeline of things that we see that we have coming, it seems inconceivable to me that we're not going to find one of these companies to hit $1 billion valuation again and reward shareholders. So again, it's not a promise. It's with all the caveats, but that's the way we're seeing things and why we're excited. So with that, I'm going to open it up to questions. I think, George, why don't you come back... George Brandon: Let's just jump into it. [Operator Instructions] I'm going to start right off. Chris, I know you hit the positions we have the biggest stake in, but I just got a question on, can you talk a little bit about Cue, ClearSign and Beam and then also a question on Buda. That was unusual for us to do Buda. So can you just give a little bit of a view on those positions that many of our shareholders still hold? Christopher Marlett: Yes, yes. So ClearSign has certainly been on that long commercialization journey. And that's a company that Anthony knows much better than me. But from the -- and it's a very small position within our firm. But it -- they have been on this commercialization journey and their unique burner technology is more relevant than ever. We're going to be burning a lot more natural gas. And so I think that, that company is scaling. And I still think the prospects for that company are quite good. With regard to HeartBeam, HeartBeam did something that most people thought was impossible to get an FDA approval for a pocket 12-liter ECG, what's not told in that story is that, that ECG is even better than a 12-liter in many ways. And as they've signaled, could be the first device to be able to detect a heart attack, which is a game changer would save millions of lives. The commercialization journey is not easy for any of these small companies. And so -- but HeartBeam, we're still super -- we think everybody in the ECG space or health monitoring space, AI space should want to partner with HeartBeam because they have the most sensitive ambulatory ECG in the planet. Period. End of story. So we're very hopeful that the team is going to execute on making sure one of those partnerships happen, which will bring scale to a really unbelievable technology that could save millions of lives. Buda, I addressed it in the shareholder letter. You can look at it, but Buda, everyone said, well, geez, why are you going away from deep tech or what have you? Well, it was a bit serendipitous because a friend of mine really was the CEO of the company, and he was visiting me in Nicaragua, we were sitting around and he said, well, here's what I'm doing. And I said, my God, you're building a whole new category in a category that's going to be everything. So when you look at Buda, they have the opportunity to be not only the fresh juice leader, which is not widely known that is you can't really buy fresh juice at scale in most markets like Walmart and Kroger across the country. And -- but this fresh movement is going big. And now ever since we started the thing, man, every one of these markets need a fresh element because all the shelf-stable processed foods are all going to get shipped by Amazon. And quite frankly, everything is going against processed foods. So it was the opportunity to basically participate in what could be one of the biggest global shifts we've seen. Anybody that's shopped at markets in Europe knows that you're not -- people go shopping a couple of times a week because they want fresh. They don't want they don't -- they're not eating preservative foods for the most part in Europe. So this is a massive, huge opportunity, and we saw an opportunity to bring that to our community. It's a unique company that could be the leader in the space, and it happens to be profitable. And so we're super excited about it. And what else did I miss? George Brandon: And Cue Bio. Christopher Marlett: And Cue Bio. So Cue is struggling. I think they've struggled putting together a cohesive management and Board and getting that technology to commercialization. But that being said, they partnered with Boehringer Ingelheim and also partnered with ImmunoScape on 101. And now they're about ready to put 401 in the clinic. All of these are massive game-changer type opportunities. The stock doesn't reflect it. You'd never guess by looking at the stock that it has any value. But in fact, we believe that all 3 of those opportunities, those shots on goal are super valuable. And we're really -- we're still just as bullish about the technology as possible as we've ever been, but they've had their challenges in getting the execution side of it done. George Brandon: So a question on -- moving on to eXoZymes in that conference call. We're going to jump right off this call and go right into Exosymes's year-end call here that starts in 15 minutes. So we'll wrap up before that. But what are you looking at for, obviously, they're going to have to raise money. What's the dilution going to look like in your mind? I'm getting a question on what do you -- how do you think the dilution works? And how does that work when you're looking at an asymmetrical opportunity? Christopher Marlett: Yes. So the great thing about Eosymes is that, again, much like if you think about mDBVat a $10 million OpEx level to create big opportunities, eXoZymes is the same way. Exosymes has about $10 million in OpEx to create huge opportunities. Now they've created now 2 gargantuan opportunities in NCT and cannabinoids. And they're going to talk all about that, so I won't go into it too deeply. But the combination of government grants and now that those opportunities being on the doorstep of commercialization. These aren't science projects anymore. These are -- so dilution is in our mind, is going to be relatively minimal because this is not like putting drugs in clinical trials. This is not -- they can outsource manufacturing. So it is super capital efficient. And we've worked really hard and they've worked really hard to create a high-impact organization to focus on big, huge platforms, where they can be -- where they can generate -- we're talking about TAMs in the hundreds of billions with the 2 platforms they're in. And they have the ability to be a major player in those platforms with a relatively small operating budget, which really speaks to how impactful their technology is. The reality is nobody believed they could do it. Nobody believed it would scale. I would just tell you, throw all your best scientists at it, go visit the company, go see where they're at, and you're going to see that this could be the biomanufacturing. This could really be the start of a huge biomanufacturing revolution. And in fact, the U.S. government, we can't continue to outsource manufacturing, especially pharma and nutritional supplement manufacturing overseas. And so -- this is a huge initiative. I think you're going to see continued government grants coming to them. And so I just think that it's in the right place at the right time. And now we just got to go out and tell the story. George Brandon: A question on PatentVest. How systematically or structurally, how do you see that spin out? If I'm a shareholder of MDB, how is that going to impact me? Do you have an idea of what that path is on valuation and spin out? I know you said, hey, you weren't really sure about what the valuation is going to be. But how -- if I own a share of stock, what am I going to see as a shareholder? Christopher Marlett: Well, the good news about both the clearing -- MDB Direct, the clearing ops and PatentVest is we own 100% of both of them. So we're starting with a much larger share of those than we do with the other companies we have ownership in. And -- and so our objective is to do a round of financing to bring in partners. So we want to bring in folks, I can't mention names, whether it be law firms, big corporate strategics or other strategics, and we're talking to various strategics right now. Our goal is to get that funded and out of MDB as a company. Then we look -- we're going to look forward to taking it public in 2027 and the method in which we do that and how we do it, it's not really completely formulated yet. But that's going to be largely dictated by what we do on the partnering front here in the short run and funding it as its own independent division here shortly. George Brandon: Can you talk a little bit about what your deal pipeline looks going forward in the next 12 to 24 months? Christopher Marlett: It's really interesting because the deal pipeline is great, and it's -- I can only see it getting better. So the biggest point is really our ability to get them sold, right? We have to get them packaged and sold. And so right now, with where we're at, the biggest constraint isn't the number of companies we're seeing. It's really going to be to work out the distribution side of the equation and get those and get that done. So I think once we do that, who knows how many we can do a year. So like I said, we -- the biggest issue is solving the distribution thing. Obviously, our stocks, some have done okay, some haven't done as good as we hoped. And obviously, if a couple of them work out pretty good, then that puts wind in the sails of everybody. But we really need to add incremental distribution. Our community is still relatively small. We have -- while we have a couple of thousand shareholders, we only have 675 active accounts. So it's still very small. And we're trying to broaden distribution so that we don't have a couple of really large investors in our deals. We're trying to broaden that a bit. And so as we do that, then our ability to get more of them done is going to increase. So I'm not worried about the number of companies that we can launch. I'm worried about just making sure that we can find investors for them all. George Brandon: Okay. So I got a question here that -- it's a good question, but I'm just going to read it. I normally paraphrase, but would or have you considered a SaaS model for PatentVest that in turn for its analysis? This would serve not only to generate revenue but attract IP contribution to increase IP content to evaluate the combination of IP to uncover unexplored opportunities. Christopher Marlett: Yes. So I think to be 100% blunt, I think SaaS is going to be crushed by AI. George Brandon: Go into that a little bit. How, why, and why do you think that? Christopher Marlett: Yes. So just to give you an idea. We -- just to give you one segment that's a really, really big core thing of what we do. So -- let's take patentability, which is what is largely called prior art search, right? So any new vendor that comes up with a new idea wants to do a patentability or should do a patentability analysis. So heretofore, you would -- maybe if you were -- you would subscribe to a patent database, you would go out, you would do your own patentability analysis and search, you would maybe pay PatSnap $10,000 or $12,000 a year or $15,000 a year to go do that. And it would kind of get you part of the way there, maybe, right? And you kind of -- you get a lot of data and you'd say, well, maybe this works. An expert user would use PatSnap in maybe 5 or 6 other databases and then get to a really, really good patentability, but very few people did it because it was too expensive and too time consuming. We've now -- just to give you an idea, what we were doing is we had expert trained analysts in Latin America with PhDs and master's degrees in science. They would do a patentability analysis in 45 hours. Now even though the cost was lower by doing it in Latin America, 45 hours is still a huge amount of inertia to actually go through and actually do that work. We took the same SOPs for doing a patentability analysis, now run by that same expert analyst that we have in Latin America, with AI, where we basically programmed the agent. We programmed the agent ourselves with a popular AI vendor where the software needed to run that analysis was completely done in-house without a software developer, mind you, okay? We can now do that patentability analysis with our expert, patent searcher in 1.5 hours, and it's better. And that's today. We're doing that right now. I'm telling you it's going to completely change the SaaS business. So these folks that are out there building AI solutions, curated AI solutions, I think they're going to -- I'm very skeptical of the value of them because we're building them with off-the-shelf AI solutions today with our own people. They're not even software developers. And so the curated data that we have that we've invested in for all these years is super valuable now because it's got to be done behind a wall, right? And we don't think that people should be putting their investments or their inventions into ChatGPT and doing this. So that gives you a reason why I think SaaS is going to be -- I think human in-the-loop IP development is the future. and we have a shot to be a leader in it because we're an ABS firm, because we have attorney client privilege, because we have the ability to basically turn this into a unified business process, I don't see it as a SaaS business going forward. George Brandon: Okay. Well, we're at the end here, and I'm going to go ahead and turn it back to you and let you go ahead and close it out. Christopher Marlett: All I can say is thanks. It's been a very tough road the last couple of years since we've been public. But I hope that by listening to where we see things going that you have a bit more enthusiasm and you have the ability to kind of keep the faith and hang in there. We're super excited about the future for the firm. We're getting better and better every day. We're not -- the entire team here is working their ass off to make things happen. It's been a rough thing. We haven't given people raises. We've taken back RSUs. We've really backtracked a lot and a lot of the expectations that we had for ourselves were not met. But you just don't give up. You never say die, you just keep going. And we -- I appreciate everybody at the firm that's done it. It's not been easy. It's been a lot of really difficult discussions. But that being said, when I look at what's bubbling up from what we have, I'm super excited. So I'll leave it at that. Tony Dammicci: George? George Brandon: You want me made the ending? Well thank you, everybody, for coming. Tony, that was your job. You're supposed to jump on there, close it out, start it, close it out. Tony Dammicci: That's all right. I'm ready to do it. So we'll say thank you very much for attending today's presentation. This will conclude our conference call. George Brandon: All right. Thank you, guys. Appreciate it. Tony Dammicci: Bye.
Operator: Good day, and thank you for standing by. Welcome to the nCino Fourth Quarter and Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Harrison Masters, Vice President, Investor Relations. Harrison Masters: Good afternoon, and welcome to nCino's Fourth Quarter and Fiscal Year 2026 Earnings Call. With me on today's call are Sean Desmond, nCino's Chief Executive Officer and Greg Orenstein, nCino's Chief Financial Officer. During the course of this conference call, we will make forward-looking statements regarding trends, strategies and the anticipated performance of our business. These forward-looking statements are based on management's current views and expectations, entail certain assumptions made as of today's date and are subject to various risks and uncertainties described in our SEC filings and other publicly available documents, the financial services industry and global economic conditions. nCino disclaims any obligation to update or revise any forward-looking statements. Further, on today's call, we will also discuss certain non-GAAP metrics that we believe aid in the understanding of our financial results. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call as well as the earnings presentation on our Investor Relations website at investor.ncino.com. With that, I will turn the call over to Sean. Sean Desmond: Thank you, Harrison, and thank you all for joining us today. I want to start by saying how proud I am of the entire nCino team for the results we achieved in fiscal '26 and especially in the fourth quarter. We exceeded our financial guidance across every key metric and delivered an exceptional ACV result, up 17% year-over-year, which we believe was largely driven by customers embracing our AI strategy and product innovation. The team executed incredibly well, and we're seeing the momentum in the market as more prospects are engaging with and choosing nCino and existing customers are expanding and deepening their commitments with us, in large part because of how we are embedding AI throughout the nCino platform. I'll get into the details shortly, but with over 170 customers of all sizes, including global, enterprise, regional and community banks and credit unions having already purchased AI intelligence units as of the end of fiscal '26, we believe nCino is rapidly becoming the de facto AI platform for financial institutions across the globe. For those of you just getting familiar with our story, nCino plays a mission-critical role for our customers and the global financial services market. Financial institutions will continue to struggle with legacy fragmented systems that limit growth, hinder financial performance, restrict their ability to leverage data as a competitive advantage and create poor user experiences. nCino solves these problems with AI-powered intelligent automation on a unified, scalable platform. We are the only platform for managing lending, onboarding, account opening and portfolio management across all major lines of business for financial institutions across the globe. This is why the nCino platform serves as a system of record for the most critical operations of banks, credit unions and IMBs of all sizes in now over 25 countries. Throughout fiscal '26, I talked about the confidence I had in our team, our technology and strategy and our market-leading position. I also said the foundation was in place and that our fiscal '26 performance would come down to execution, including against our AI strategy. This past year's results only strengthen my conviction about what's ahead for nCino as we walk hand-in-hand with our customers into a new era of AI where data, context, guardrails, security, trust and a deep understanding of how financial institutions operate matter more than ever. As banks further embrace automation and think about using AI as an accelerant to do this, they're choosing nCino because nCino is their process. We connect their data, operate as their system of record and enable them to comply with numerous rules and regulations. nCino is an essential Tier 1 mission-critical platform that amplifies their ability to more profitably generate revenues in a regulatory compliant manner. At the start of fiscal '26, I laid out a few strategic initiatives where I believed we had an opportunity to excel with focused execution. I'm very proud of what the team delivered in these areas, and the fourth quarter put an exclamation point on what was a tremendous year for the company. First, in the U.S. enterprise market, we delivered our best sales quarter in over 4 years, which included a mortgage expansion with a top 40 bank and cross-selling commercial to our largest consumer lending customer. Second, in EMEA, we leaned in with new leadership, a new go-to-market strategy and a clear execution plan. We delivered our largest deal of the year with a marquee net new customer win in Austria, and I'm thrilled with the momentum the EMEA team is seeing. I'm also thrilled with the momentum we continue to see in Japan, as highlighted by the fourth quarter signing of one of the largest banks in the world for a commercial lending transformation. I want to congratulate the Japanese team for tripling their total ACV in fiscal '26 from fiscal '25. Third, it's gratifying to see our existing customers continue to validate our AI strategy as they move to our new platform pricing framework to access our growing AI capabilities. We saw expanded commitments from some of our largest accounts, and our ACV net retention rate improved to 112% or 109% organically and in constant currency, up from 106% in fiscal '25. Consistent with what we saw throughout fiscal '26, we closed a number of early renewals in the fourth quarter, including a fresh 5-year commitment from our largest customer by ACV. And those customer commitments go beyond dollars. Critically, they come with trust. More and more customers are choosing to share data with us because they want the insights and benchmarking that only nCino can deliver. Today, almost 500 financial institution customers representing over $11 trillion in assets have granted nCino the right to process their data into a proprietary and anonymized data set, one that powers the development of our products, fuels best-in-class industry insights and sharpens the accuracy of our intelligent services. This proprietary data set that nCino has carefully aggregated and curated for the better part of a decade gives nCino a unique unmatched global perspective on how to more profitably and efficiently operate a financial institution, how work moves seamlessly through the bank, where bottlenecks form, where exceptions happen and what great looks like at scale. We have already put this data set to work through our product called nCino Operations Analytics, which helps customers pinpoint inefficiencies, track cycle times and win rates and benchmark performance against anonymized peers. That benchmarking provides valuable and actionable insights as customers get a true baseline, a clear path to ongoing operational and process improvements and real-time demonstrable ROI as they adopt our AI capabilities. It also informs how we build AI and deploy agents that are practical, relevant, reliable and trustworthy in real bank environments. And it goes a step further. Because of our API foundation and integration gateway, we can seamlessly connect data across a bank's technology stack as well as the key third parties. That broad 360-degree view of a financial institution's customers has been nCino's calling card in the market since we started the company. Before I turn things over to Greg to talk through our financials in more detail, I want to spend a few minutes addressing the elephant in the room as we have all heard the narrative that AI will replace SaaS. For some categories of software, that may very well be true. But the highly regulated business of banking is different and nCino's position and value proposition in banking is different from what you're seeing across the broader SaaS landscape. Bottom line is we believe AI will be a tremendous tailwind for nCino as it becomes central to how financial institutions operate and compete and how we're scaling and operating the company. Here's how we see the world evolving and how nCino fits in. AI is moving quickly from help me write and help me search to help me complete meaningful productive tasks so I can focus on other work to grow my business more efficiently and profitably. And in a financial institution, the work is not generic. It's onboarding, it's underwriting, it's credit reviews. It's monitoring, assessing and managing risk. It's opening accounts. It's work where the data is sensitive, strictly adhering to the rules is essential. Regulatory compliance is nonnegotiable and the cost of being wrong can be extremely high, not only financially but reputationally. To make all this work, AI needs a foundation to run on. In banking, that foundation is the data and regulatory infrastructure nCino provides. That's why we feel extremely confident about our position. We are the system of record and user experience for many of the most important processes in a financial institution. And every capability has been built with regulatory compliance in mind. As AI becomes more capable, that makes our platform even more relevant because AI needs a place where it can safely understand context and then take action in an efficient, controlled, secure, trusted and regulatory compliant way. You'll hear a lot of discussion in the market about AI commoditizing the application layer. We understand why people raise that point because it's undeniable that AI-driven software makes writing code easier and cheaper. But in the highly regulated mission-critical world of banking, deploying that code in a safe and compliant way is harder. Because of this, we believe AI agents actually increase the value of our underlying platform and system of record. An agent can't operate in a vacuum. It needs trusted data, industry context and guardrails, and it needs to be traceable and auditable. And the platform that connects the user to the data and records the actions taken becomes the natural home for these AI-driven experiences. nCino is that platform. All this leads to how we're approaching AI agents. Our role-based agents, what we call digital partners, were designed to work alongside banking professionals inside the nCino platform, guided by what we've learned from almost a 1.5 decades of usage patterns across our lending customer base and what those patterns mean for speed, consistency and results. Now let me connect that strategy to what we're seeing in the business today. First, adoption is real and usage is growing. While much of the SaaS industry continues to debate how best to respond to the agent economy, community, regional enterprise and global banks, credit unions and IMBs are already using nCino's AI capabilities in production today, not just as a pilot or beta, but as part of how they do lending and banking work. Customers are not just buying AI access, they're using it, and we can see that directly in the increasing consumption of intelligence units on our platform, with banking adviser usage up over 25x in March compared to usage in October. For years, we have said that nCino is not only in the software business, we are in the change management business and moving every customer from contract signing to implementation to pilot to using nCino's AI and production as an integral part of the day job is the sole focus of our forward deployed engineering team. We also continue to see the halo effect we talked about before. nCino's AI innovation and product strategy is showing up as a clear differentiator in competitive conversations. I have mentioned over the past couple of quarters that it's helping drive earlier renewals, and it's becoming another reason new customers are engaging with and choosing nCino and current customers are expanding their relationship with nCino. Second, when we talk about AI, we try to keep it simple. We care about outcomes. The question isn't how many features or how many agents exist. The question is, how much time and money did the financial institution save? How much risk was serviced earlier and mitigated and how much did consistency, efficiency and profitability improve, all while helping to ensure the financial institution operates in accordance with various rules and regulations and provides an enjoyable and compelling user experience for its customers. That's why when we look at banking adviser and our digital partners, we focus on practical wins. In the past, a single relationship review meant painstakingly pulling documentation from systems, manually identifying the relevant data points, followed by hours and hours of analysis. With agentic credit reviews, released as part of the analyst digital partner family last quarter, nCino summarizes in seconds what changed, highlights the drivers, cites the underlying data and helps draft the follow-ups. And the work stays inside nCino with the right permissions, the right documentation and the right audit trail. The bank gets faster answers, more consistent reviews and more capacity for higher-value work, like being in front of customers and growing relationships. This focus on outcomes is exactly why we transitioned our pricing model, and I'm pleased to report that as of the end of fiscal '26, we have already moved approximately 38% of our ACV away from seat-based pricing to platform pricing. Third, our data is not just a competitive moat. It is the foundation for a new category of proprietary intelligence capabilities, benchmarking, predictive risk, operations analytics and other capabilities and products you will hear about as the year progresses that we believe will create entirely new value for our customers and new revenue streams for nCino. We strongly believe that proprietary domain-specific real-world data is the most valuable asset in an AI economy and no other company has the data nCino has. And that data moat compounds with every customer we add in every line of business we expand into. Finally, I want to emphasize something that is especially important in banking. Trust. In a regulated environment, close enough isn't good enough. AI has to be deployed in a way that respects policies and data privacy, aligns with the bank's risk tolerance, which varies from institution to institution and produces results both the institution and regulators can confidently rely on. One of our stockholders recently conveyed, they were reminded how embedded nCino is within a bank's internal and external controls, risk management and governance processes when a top 5 U.S. bank explained to them that they have over 500 exemption workflows configured in nCino that guide every deterministic step of the lending process and that they rely on that process to manage risk, regulatory compliance and audit trials. That's why we're building AI into the nCino platform, where our customers already have the industry context, the controls and the ability to measure outcomes over time. As the Agentic operating system for financial institutions, nCino will be the backbone delivering AI with the same compliance guardrails, the same regulatory audit trails, the same institutional policy logic and the same lending decision framework they have grown to trust and rely on. And that's also why we believe our approach will uniquely scale, not by asking banks to bolt generic AI onto complex processes, but by delivering banking-specific AI that reflects how banks actually operate on a platform that has demonstrated time after time the ability to scale to support some of the largest financial institutions in the world. So stepping back, we feel really good about where we are. While still early, we're seeing strong excitement and increasing momentum in AI adoption and growth in usage as measured by intelligence unit consumption. Our sales pipeline looks great, and we believe our AI agents make nCino even more valuable and sticky to our customers because we connect the user, the process and the data in a trusted, controlled, regulatory compliant environment. In summary, we believe the agent economy expands our addressable market. The outperformance against our financial guidance, the acceleration of ACV bookings, the reacceleration of subscription revenue growth and the improvement and strength of our retention KPIs are all reflections of the impact AI is already having on the business, and we're just getting started. As I wrap up my prepared remarks, I want to welcome a new member to the nCino leadership team. I cannot be prouder of how our sales and marketing teams performed in fiscal '26. And to build on that momentum, we are further investing in our go-to-market organization. Today, we are excited to announce that nCino has hired Keith Kettell as our new Chief Revenue Officer. Keith is a seasoned operator who brings deep financial services, enterprise sales, large global company and scaling expertise to the company. We believe Keith's experience and vision are a great addition to the company to help us further accelerate our subscription revenues growth and take nCino to the next level. With that, I'll hand the call over to Greg to walk through our financial results. Gregory D. Orenstein: Thank you, Sean, and thanks, everyone, for joining us this afternoon to review our fourth quarter and fiscal year 2026 financial results. Please note that all numbers referenced in my remarks are on a non-GAAP basis, unless otherwise stated. A reconciliation to comparable GAAP metrics can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8-K furnished with the SEC just before this call. Turning to our fourth quarter results. Total revenues were $149.7 million an increase of 6% year-over-year and $594.8 million for fiscal '26, an increase of 10% over fiscal '25. Subscription revenues were $133.4 million in the fourth quarter, an increase of 7% year-over-year and $523.1 million for the full year an increase of 12% over fiscal '25. Organic subscription revenues were $132.2 million in the fourth quarter, up 6% year-over-year and $505.9 million for fiscal '26, an increase of 8% year-over-year. As a reminder, our fourth quarter organic subscription revenues comparison is negatively impacted by an approximately 3% headwind resulting from onetime subscription revenues that occurred in our international business in the fourth quarter of fiscal '25 as the result of a contract buyout. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our subscription revenues over performance. International total revenues were $32.9 million in the fourth quarter, down 1% year-over-year or down 6% in constant currency. International total revenues were $131.5 million in fiscal '26, up 13% year-over-year or 11% in constant currency. International subscription revenues were $28.4 million in the fourth quarter, up 1% year-over-year or down 4% in constant currency in light of the difficult comparison from the onetime contract buyout last year previously noted. International subscription revenues were $109.5 million in fiscal '26, up 19% year-over-year or 16% in constant currency and 5% organically. We had our largest international gross bookings year in company history and with ACV as a leading indicator of future subscription revenues growth, we look forward to our international subscription revenues growth rate once again being accretive. Professional services revenues were $16.3 million in the fourth quarter, a decrease of 1% year-over-year. Full year professional services revenues were $71.6 million, flat year-over-year. As we have previously highlighted, we are emphasizing professional services gross profit growth over professional services revenues growth and expect to see this reflected within our financial results by the second half of fiscal '27 due in large part to our ongoing initiatives, leveraging AI to accelerate our implementations. Non-GAAP operating income for the fourth quarter of fiscal '26 was $34.7 million or 23% of total revenues compared with $24.4 million or 17% of total revenues in the fourth quarter of fiscal '25. Please see Slide 14 of our fourth quarter earnings presentation for additional details on the components of our non-GAAP operating income over performance. Non-GAAP operating income for the full year was $129.4 million or 22% of total revenues compared with $96.2 million or 18% of total revenues in fiscal '25. Non-GAAP net income attributable to nCino for the fourth quarter of fiscal '26 was $42.8 million or $0.37 per diluted share compared to $22 million or $0.19 per diluted share in the fourth quarter of fiscal '25. Non-GAAP net income attributable to nCino for fiscal '26 was $122.7 million or $1.07 per diluted share compared to $84.5 million or $0.72 per diluted share in fiscal '25. As expected, churn year-over-year continue to trend down towards historic norms and settled to a 3-year low in fiscal '26 of $18.2 million or 4% of prior year subscription revenues. We ended the quarter with cash and cash equivalents of $88.7 million, including restricted cash. Free cash flow was $12.5 million in the fourth quarter of fiscal '26, up from negative $10.4 million in the fourth quarter of fiscal '25. Free cash flow for fiscal '26 was $82.6 million up 55% compared to $53.4 million in fiscal '25. We repurchased approximately 1 million shares of our common stock in the fourth quarter at an average price of $25.84 per share for total consideration of $25 million under the $100 million repurchase authorization announced on December 8, 2025. When added to the stock repurchases made through the third quarter last year, we repurchased a total of approximately 5 million shares of our common stock in fiscal '26 at an average price of $25.18 per share for total consideration of $125 million. In addition to the $75 million that remains available under the December 2025 share repurchase authorization, today we announced a $100 million accelerated share repurchase program. We expect to fund this repurchase program with available free cash flow and with a portion of the $200 million term loan expansion of our existing credit facility, which we also announced today and which was funded by some of our largest customers. A portion of the proceeds from this term loan will also be used to reduce the outstanding balance under our revolving credit facility. We ended the year with 620 customers that contributed greater than $100,000 to fiscal '26 subscription revenues, an increase of 13% from fiscal '25. Of these, 114 contributed more than $1 million to fiscal '26, an increase of 9% from fiscal '25 and 14 contributed more than $5 million to fiscal '26 subscription revenues flat with fiscal '25. ACV as of January 31, 2026, was $602.4 million, an increase of 17% year-over-year. On an organic constant currency basis, ACV grew 13% year-over-year in fiscal '26. ACV net retention rate in fiscal '26 increased to 112% or 109% on an organic constant currency basis, up from an ACV net retention rate of 106% in fiscal '25 and reflecting growing demand for our AI-powered platform and solutions among our customer base and success implementing our new asset-based pricing framework. Subscription revenue retention rate in fiscal '26 was 110% or 106% on an organic constant currency basis compared with a subscription revenue retention rate of 110% in fiscal 2025. Note that the subscription revenue retention rate was negatively impacted by the difficult compares in the third and fourth quarters this past year. Additionally, a significant amount of the existing customer expansion that drove the ACV net retention rate improvement occurred in the fourth quarter, so the subscription revenues from those deals are not yet reflected in the subscription revenue retention rate. Turning to guidance. For the first quarter of fiscal '27, we expect total revenues of $154.5 million to $156.5 million, with subscription revenues of $137 million to $139 million, an increase of 8% and 10%, respectively, at the midpoint of the ranges. Non-GAAP operating income in the first quarter is expected to be approximately $38 million to $40 million. Please note that effective for fiscal '27, we will be providing annual guidance for free cash flow in lieu of quarterly and annual guidance for non-GAAP net income attributable to nCino per share as we believe annual free cash flow is a more meaningful measure of our financial performance. For fiscal year '27, we expect free cash flow of $132 million to $137 million, up 63% year-over-year at the midpoint of the range, which reflects our guidance range for non-GAAP operating income less certain assumptions, including approximately $15 million of interest expense, $6 million in cash taxes and $1.5 million of fixed asset purchases. Please recall that our cash collections from customers is highest in the first quarter, which does introduce seasonality to free cash flow. Turning to ACV. For fiscal year '27, we expect net additions of $60 million to $65 million on a constant currency and organic basis, which would bring our fiscal '27 ending ACV to $662.5 million to $667.5 million, representing 10% ACV growth at the midpoint of the range. After a few difficult years for the banking industry, large deals have again become a healthy part of our business, and our sales performance during the fourth quarter included several multi 7-figure net new and upsell wins. While we are confident in our go-to-market organization and the repeatability of the sales activity that drove these multi 7-figure wins in fiscal '26, these large deals can be inherently difficult to predict in both their timing and eventual sizing. In order to continue to prudently manage expectations on the booking side of the equation, our ACV guidance framework reflects win percentages that are higher than the approach we took for ACV guidance in fiscal '26, but lower than the win percentages we actually achieved last year. Also, recognizing that the fourth quarter has historically been, and we expect it to continue to be the largest gross bookings quarter for us each year, similar to this past year, you should not anticipate quantitative revisions to our ACV guidance throughout the year. For fiscal '27, we expect total revenues of $639 million to $643 million, with subscription revenues of $569 million to $573 million, representing growth of 8% and 9%, respectively, at the midpoint of the ranges. Excluding U.S. mortgage, our guidance assumes 10% to 11% year-over-year subscription revenues growth. Please reference Slide 15 in our earnings presentation for assumptions around our subscription revenues guidance. As you will note, consistent with the guidance philosophy we instituted last year, our guidance assumes approximately 1% growth in U.S. mortgage subscription revenues. While we recognize mortgage industry volume forecasts are currently indexed higher than what this growth rate reflects, for guidance and internal business planning purposes, our intention is to continue to be prudent around expectations for U.S. mortgage. To help you reconcile our subscription revenues guidance with our fiscal '26 ACV result, please consider the following: one, a portion of the ACV booked in fiscal '26 contributed to subscription revenues last year. Two, recall that we define ACV as the highest annualized subscription fee under a customer contract and when subscription fees increase during a contract term, the revenue recognition rules require that they are straight line, which leads to subscription revenues being less than ACV for such contracts. Three, churn experienced in fiscal '26 would have generally been from legacy contracts under our old seat-based activation model, where ACV more closely approximated subscription revenues. And four, subscription revenues from mortgage overages are not included in ACV. We expect non-GAAP operating income for fiscal '27 to be $165 million to $170 million. Finally, I'll leave you with a few additional comments to assist with your modeling that should be construed as supplemental to our formal guidance. First, international subscription revenues are expected to be accretive to overall subscription revenues growth in fiscal '27, beginning with the first quarter. Second, we expect to reduce stock-based compensation expense in fiscal '27 as a percentage of total revenues by approximately 100 basis points year-over-year from the 12% reported in fiscal '26. As a reminder, during our initial Investor Day in September 2023, we referenced a long-term stock-based compensation expense target of 6% to 8% of revenues. Third, effective January 2026, nCino is self-insuring for medical benefits, which may introduce some volatility to health care expenses in fiscal '27 as we make our way through the first year of the program. But ultimately, we expect this approach to be a more cost-effective alternative to traditional third-party insurance. And finally, our subscription revenues outlook includes revenues from both contracted and planned ACV bookings that we attribute to our AI products. Our customers are validating our AI strategy, reinforcing that it is innovative and compelling and the month-over-month increase in the consumption of intelligence units is trending quite well. At the same time, our experience has taught us that overall, financial institutions are going to adopt AI at a very deliberate pace. Accordingly, and consistent with our guidance philosophy, while we expect to sell incremental bundles of intelligence units this year, our fiscal '27 subscription revenues guidance does not yet contemplate this. In closing, I want to thank my nCino colleagues for all of their hard work and efforts successfully executing on our fiscal '26 operating plan. We entered fiscal 2027 with a ton of sales momentum and our sales pipeline, which Sean noted looks great, is up meaningfully from this time last year even after achieving the best gross bookings fourth quarter in company history. The intelligence unit usage trends we are seeing are very exciting and reinforce that our AI capabilities and AI strategy are resonating incredibly well with the market. We have the data, the products, capabilities and global reach, a unique and unmatched AI strategy, a reputation for innovation and for taking care of our customers and a phenomenal customer base that trusts nCino to successfully guide them on this AI journey. It is an incredibly exciting time to be part of nCino, the company leading the financial services industry into the world of AI-powered banking, just as we led the financial services industry into the world of cloud banking. As evidenced by our financial guidance, we feel really good about our headcount and expense plan and our ability to continue generating increasing non-GAAP operating income and free cash flow. Our financial guidance also reflects reaccelerating subscription revenues growth, and we believe the pieces are in place for that upward subscription revenues growth trend to continue. We remain confident that we are on track to achieving Rule of 40 around the fourth quarter of this fiscal year. And while the high end of our financial guidance for fiscal 2027 suggests a Rule of 40 mix of around 10% subscription revenues growth and 30% non-GAAP operating income margin in the fourth quarter, we are keenly focused on driving that mix more towards subscription revenues growth. With that, I will open the line for questions. Operator: [Operator Instructions] Our first question comes from Alex Sklar with Raymond James. Alexander Sklar: Sean or Greg, on the positive sales pipeline commentary and the ACV outlook, can you just frame what you saw in terms of the change in close rates or win rates in the back half of the year versus prior years? You referenced coming in above? And then how you approach the ACV outlook from a pipeline coverage perspective versus last year? Sean Desmond: Yes. Thanks, Alex. First of all, we did highlight early in the year our renewed focus on the execution discipline of pipeline growth and our emphasis and prioritization around demand generation in the marketing machine, right? So I think some of that played out in the back half of the year as our pipeline increased, conversion rates were healthy, but we just had a larger pipeline, and we're seeing that continue into this year over last year as well, and that's why we're so excited about the outlook. Overall, by solution, by geography, it's pretty balanced. And obviously, we're seeing nice momentum in our international business that we highlighted on the call. But I think a lot of it is around the discipline of just pipeline management overall. And when you have a larger pipeline, conversion rates can stay pretty steady and you'll have a larger ACV outcome. Alexander Sklar: Okay. Great. And then, Sean, you gave a lot of great color on the Banking Advisor adoption, 170 customers now on the platform. I think you have over 100 skills now versus 2 a year ago. Can you just frame where you're actually seeing the greatest usage across that portfolio of capabilities and skills? And then in terms of the magnitude of a 25x growth in credit usage versus October, maybe help frame how many of those customers are approaching kind of the upper end of their purchase credit allotment? Sean Desmond: Yes. Listen, first and foremost, our executive leadership team as well as the entire company is maniacally focused on adoption of Banking Advisor and our Agentic solutions. And I think we've been very thoughtful about selling our customers large enough blocks of intelligence units upfront to give them the runway that will enable them to navigate the adoption curve and see the benefits and kind of settle into the new experience, which is really important as you're managing the change. The last thing a customer wants is to feel nickel and dimed when they're adopting something new, right? So we didn't want to put them in a position where we sell blocks in small portions where immediately they have to re-up. And I think we can draw some parallels and analogies to the personal experiences that we have, right, with whatever chat interface you might use. The last thing you want is in the first month to be asked for an increase in your monthly subscription, right? So what we're focused on, first and foremost, is that adoption. And we're pivoting a lot of the energy of the field towards sitting side-by-side with customers and getting them comfortable with that. And then I would expect over time, as this settles in, we'll look into the next block of intelligence units. But in particular, your question around what are we seeing traction in, listen, our agenda credit reviews are really exciting, which falls under our analyst digital partner umbrella. Locate and file has been a mainstay since day 1 that we launched banking advisor, and we're seeing a lot of traction with credit monitoring as well as auto spreading. Operator: Our next question comes from Joe Vruwink with Baird. Joseph Vruwink: Great. Just to stay on some of the AI debates. Lending is a very complicated process. And part of that complexity, I'm sure we can appreciate ties to all the different systems and data and decisions that go into it. I guess the risk is that AI models can be good at orchestration. Are you seeing that type of capability and it starts to eat into nCino's differentiation? Or does it cause you to think about how the platform is currently architected and maybe doing some things differently to match up against what AI makes possible? Sean Desmond: Yes. Thanks, Joe. I appreciate the question and certainly understand a lot of the narrative that's going on in the market today. And some of the realities have changed with the AI capabilities, no doubt. For instance, we all know the coding has never been easier, right? And what we need to focus on is the reality that there's a difference between standing up an overnight user experience and deploying that code and maintaining that code in a highly regulated industry. That's still hard if you weren't built from day 1 in a compliant way for the regulators, if you don't own the workflow, if you don't own the data and you don't have the trust relationship, then these AI tools aren't going to stand you up overnight. All that being said, we've acknowledged that workflow is relative old news. And what we're focused on is an Agentic operating system future where we can instrument the platform with agents that tap into our own embedded intelligent workflows and mine that data and provide a differentiated experience. And we believe that is very unique. And the right question right now is not necessarily who's best positioned to deliver overnight because I've yet to see somebody to take a customer live even in the past year that was threatening that posture this time last year. What I think the right question is who's best and most uniquely positioned to capitalize on AI and banking, and we think that's nCino. Joseph Vruwink: That's helpful. On the Intelligent credits, do you have any metrics you can share maybe around efficiency gains or P&L impact that customers using the credits have seen so far? Or maybe is there a spectrum of outcomes you're seeing between heavy and light users? Can you kind of present to your customer base that here are examples where greater consumption is actually translating into greater benefits and you start to build referenceability in kind of that way. Sean Desmond: Yes. And thanks for highlighting the focus on outcomes that we have here at nCino. Listen, I don't really wake up in the morning excited about people adopting AI. I get excited about them getting real outcomes. And when I talk to bank CEOs, around the world, they care about what impact we can have on their top line and what impact we can have on their bottom line, right? It's all about revenue efficiency and cost savings. And so I think we're seeing really good gains and traction, specifically around credit monitoring, which is why I highlighted that credit analyst. And in some cases, we're seeing months to days and days to minutes in terms of getting [indiscernible]. We plan on highlighting at site some direct outcomes sharing their experiences on leveraging those units. But safe to say that as I wake up every morning with the CEO agent stack of my own that highlights intelligent units consumption, there's a direct correlation between the outcomes our customers are getting and the intelligence units they're drawing down on across the spectrum of banking advisers. Operator: Our next question comes from Michael Infante with Morgan Stanley. Michael Infante: On pricing, obviously, it sounded like a really strong result with 38% of revenue now on the new pricing model. Any incremental commentary you can share just in terms of price realization for the fiscal 4Q renewal cohort versus your plan? And in the instances where customers did push back. Can you sort of speak to some of the instances or initiatives you have in place to retain those customers, either in terms of ancillary product of attach of things like banking adviser and/or lower price realization? Sean Desmond: Yes. On the pricing front, first and foremost, I want to highlight that we started on the pricing journey nearly 3 years ago. And I really point that out because we're not reacting to anything here. We had a vision for how outcomes would be the end game for software companies like nCino. And so we prepared for this. The pricing has now been out there for a little over a year. And what I would tell you is that we are exceeding our internal plans and targets, and that momentum even picked up in Q4 versus the prior quarters. And while nobody likes a price increase and nobody likes change, I think that we're very prepared for that. And by and large, those customers are going very well. I'm proud of our account teams in the field. Those aren't necessarily easy conversations. But what I would say is they're more focused on education and enablement and drawing direct lines to the outcomes that our customers are going to get over time versus the old per user per seat model. So the value exchange is becoming apparent to our customers. And because of that, we're seeing early renewals. We're exceeding our targets, and we're leaning in heavily. It's been really accretive to our business. Michael Infante: Helpful, Sean. And then maybe just a quick follow-up on gross margins. I know it's fairly early in terms of thinking about banking advisory monetization. But do you expect the consumption of those incremental credits to be gross margin accretive? Should we be focusing on incremental gross profit dollars? How are you sort of thinking about the inference cost and customer usage intensity when usage exceeds expectations? Sean Desmond: Yes. Listen, I would absolutely expect these to contribute toward gross margins and really both, right? I mean what we're doing in terms of instrumenting our customers with the ability to come to decisions faster over time. we expect the value exchange to play out, right? And I think they're going to be in a position where they can exchange some of the labor cost and add their labor force to more high-value activities and put their employees in front of the customer, right? And that's where they want to be. And we're going to automate the things that happen in the middle and back office, and that's going to drive margin efficiency for our customers. Ultimately, that will flow through to nCino as well. Gregory D. Orenstein: And Michael, just to add, I mean, one of the benefits of seeing the usage tick up quite well is that it gives us the opportunity to stress test our gross margin model as we ramp up, and so we've been able to see that over the last few months is again 25x from October to March. And again, so far, we feel good about it. Operator: Our next question comes from Chris Kennedy with William Blair. Cristopher Kennedy: Can you provide an update on the credit union initiative? Sean Desmond: Yes, something we're very excited about. We mobilized the team, as you know, early last year that wakes up and sleeps, eats and breathes as well, just that credit union market. I'm proud of the way they've run toward the opportunity, have established relationships and credibility in that space and understands the problems we're solving for those customers. I think that's a matter of really being able to tell the same nCino value proposition story in a way that resonates more deeply with the credit union space, and that's given us the opportunity to even envision how we can think about road map in a different way and how we kind of augment the platform and the experiences that we deliver and think beyond some of the traditional experiences we serve up. So we've got good momentum there. The team is fully activated. The pipeline is growing as we head into this year, and we plan on selling the entire platform to our Credit Union customer base. Cristopher Kennedy: Great. And then just as a follow-up, historically, you've given ACV by category. Can get an update between mortgage, commercial and consumer? Gregory D. Orenstein: Yes, Chris, we don't have that for this call, maybe at another public forum, we'll be able to provide that breakdown for you. Operator: Next question comes from Ryan Tomasello with KBW. Ryan Tomasello: I guess starting with the organic subs guide. You're talking about 10% to 11% growth ex mortgage for the year. I appreciate the commentary on international being accretive this year, but I was hoping you can just put a finer point on the drivers there. Ex mortgage, particularly with respect to the U.S. business ex mortgage in terms of subs growth outlook. Gregory D. Orenstein: Yes. Thanks, Ryan. I mean, overall, I think business perspective, whether it's by product or geo, I think we feel really good about the sales momentum that we're seeing in the market. Our customer base generally is quite healthy. Balance sheets are healthy, lending activity has been up. And I think that is driving, again, demand for nCino -- for our products. And I would also go back to AI is a big driver for that as well. You can't leverage AI. You can't leverage this revolutionary technology unless your house is in order. And that's the business that we're in. We're in coming in and transforming your bank so that you can operate on a platform and to be able to leverage not just your data, but the data that nCino has across our whole customer base that's given us the rights to leverage that data as part of our product offering. I would point you to the appendix in the back of the earnings call presentation that we put up, you'll see a nice walk in terms of our year. And the other thing I'd highlight again is the continued downward trend in churn, which, as we know over the last couple of years, has been unusual for us, right, heightened churn, but that coming back more towards historic norms has been a big positive to getting our growth trajectory back towards an upward motion and one that we can build on. Ryan Tomasello: I appreciate that, Greg. And then just following up, just kind of on the subs cadence for the year. The 1Q guide round numbers looks like 9% to 11% organic subs growth versus 9% to 10% for the full year. Just trying to reconcile that with your comments earlier, Greg, about being confident in being able to continue to drive this acceleration in subs growth and just how we should think about this cadence throughout the year with respect to that Rule of 40 target. Gregory D. Orenstein: Yes. Thanks, Ryan. I think you should assume that mortgage comps in the second and third quarter are a little bit tougher. And so that from a trajectory standpoint is something that you should take into account in your modeling. Operator: Our next question comes from Aaron Kimson with Citizens. Aaron Kimson: Sean, can you talk about why now is the right time to bring Keith in to run sales? And what is type 2 priorities will be in fiscal '27? It seems like the sales team is executing well. Sean Desmond: Sales team is executing phenomenally well. And we are -- we have been marching towards a point in time where we were going to appoint a Global Chief Revenue Officer. That's going to help us scale to $1 billion and beyond in terms of where we're going on the revenue growth side. And that has been in the works for some time. What I would share with you is that we had a model in place where Paul Clarkson, who ran our North America sales operation is stepping aside for personal reasons, and Keith is coming in to consolidate the global org and we'll have a tight partnership not only in North America, but in EMEA and Asia PAC and with our partner organization, and Keith has a lot of experience in these areas. He's been somebody we've known for a long time in our network, not only his days at Salesforce, but also at Alloy. And we're super excited about his leadership. He's not only a great experienced leader who's operated in this vertical and has deep relationships with our customer base, but also is a great culture fit for nCino. So yes, the sales organization is operating fantastically well in large part due to Paul Clarkson's leadership. And Paul is stepping aside for personal reasons and Keith is the perfect guy to step in at this point in time and take us to the next level. Aaron Kimson: Understood. And then as a follow-up, it's good to see the mortgage win with a top 40 bank where they also use your commercial lending, small business lending and treasury products. Are you getting to a point in mortgage sales cycles now where you have a better idea of how the move up market with nCino mortgage is going now that you're 3 quarters in there from when you really rolled it out after the Investor Day last year at nSight and at the larger FIs, you finding that existing relationships and other parts of the bank are helping you get a foot in the door on the mortgage side of the house or that the buyers are just generally separate in those big organizations? Sean Desmond: The answer is yes. We are learning from experiences there. As you know, we made the jump from our mortgage solution in the IMB space full on towards some of the largest banks in the world. And we're excited that we have a top 30 bank in the U.S. on the platform, and that naturally gets the attention of the peer group and the cohorts to the point where we start getting some inbound calls for nCino to participate in forums at that level. We're also getting traction in the community and regional bank space as well as the credit union space with the mortgage solution. And I think our teams now have some of the experience and quite frankly, some of the attitude and confidence that it takes to go aggressively sell that across lines of business. It's not uncommon that I would be meeting with our customer base, whether it's a CEO or Chief Lending Officer, or somebody in the C-suite that would proactively bring up on their side and recommend that we talk to the mortgage leader in their business. So that is happening and it's happening pretty organically. Operator: Our next question comes from Saket Kalia with Barclays. Saket Kalia: A nice finish to the year. Greg, maybe for you. I think we said we've got about 38% of ACV on platform pricing now, which is great to hear. I'm curious, have any of your top 20 banks made that transition yet. And were there any learnings from those customers in particular that you feel you could build upon? Gregory D. Orenstein: Yes. Thanks, Saket. The answer is yes. I mean, I think with every deal, you learn something new. We certainly try to. But to Sean's point, this is something that we started in terms of this pricing transition going back about 3 years. First off, internally and testing with our customers. Again, one of the great things about the wonderful customer base we have as we work very closely with them to get their thoughts and input. And so the rollout has frankly exceeded my expectations, not just from the uplift that we've talked about, but as well just in terms of the execution and you would have heard Sean's prepared remarks, our largest customer by ACV renewed for a 5-year deal, and that would have been on the new platform pricing model. So we do have some of our larger customers already on it. And again, I think it's gone quite well, quite pleased -- we're quite pleased with the execution there. Saket Kalia: That's great to hear. Maybe for my follow-up. It was great to hear you reconfirm the Rule of 40 expectation. Is it may be fair to say that, that rule of 40 is achievable based on the ACV that you've already booked here in fiscal '26? Or is it dependent on some of the new bookings that you anticipate this year as well? Gregory D. Orenstein: It would include some new bookings. Again, the slide I referenced earlier, Saket, in the appendix, I think it's Slide 15, you'll see a nice walk that we tried to lay out, so you could see the contribution from bookings last year and what we came into the year with, which is quite a bit of visibility. But we do have -- we do have some work to do this year. And again, I think as we look at our pipelines, as we look at the activity in the market, and frankly, as we look at the excitement that we see in here and feel around AI, we come into this year feeling good about the plan that we have. And it's actually Slide 16, if you look in that deck. Operator: Our next question comes from Charles Nabhan with Stephens. Charles Nabhan: Just 1 quick one for me. Looking back over the past couple of years, you've done several acquisitions. Wondering if you could provide us an update on the progress you've made on Sandbox and DocFox, any positives or negatives? And just an update on the traction you're getting on those solutions in the market. Sean Desmond: Of course, taking those each on its own from a Sandbox standpoint, that has actually become the foundation and the backbone of our integration gateway and the MCP layer that we expect to control how agents access data in the nCino moat, right? So that's very strategic. We're not necessarily selling -- looking to that as a stand-alone revenue engine, but as a strategic foundational platform that sets us up to be the agentic operating system of the future for banks. So we're really excited about that. And from a DocFox standpoint, we remain very compelled by the opportunity with complex commercial onboarding that continues to come up in nearly every conversation as an adjacent problem our customers are solving to the one that we solve so well around commercial loan origination. And so those opportunities in the pipeline are growing. We have acknowledged in past calls that it was going to take us the better part of the prior fiscal year to complete the technology integration work. And now we're looking to convert some of that pipeline here in the first half of this fiscal year. So we're really excited about onboarding coming into full focus as it's kind of been mainly in the background and the R&D room. Now it's coming into the sales machine. Operator: Our next question comes from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Sean, where are bank CIOs leaning in most to AI from your perspective, whether that's nCino or otherwise? And how does that differ across financial institution side? I'm just curious if smaller to midsized banks or maybe more likely to lean into packaged AI use cases. And are you seeing any appetite for some of the larger banks, in particular, to try to do anything? And how is the -- I'm just trying to understand ultimately what banks are out there trying versus not trying from an experimentation perspective and then how nCino fits into that? Sean Desmond: Sure. And in our landscape and as you've acknowledged, I appreciate the tee up there and market segmentation. Undoubtedly, the further down market you go, the bigger the appetite those customers have for prepackaged solutions that we would serve up the agents, right? And we would actually build and deploy the agents. And what's so powerful about our platform as we render those in the existing workflow, right? At nCino, AI lives in the workflow, so the context is already there. The user doesn't have to change their behavior and the trust and compliance are inherited and the data moat is leveraged. So those banks absolutely get that. As you go upmarket, the same value proposition applies but you absolutely have, what I would say, more curious in experimental groups within the organization who are being chartered with, hey, if we build our own agents, what would that experience look like, right? And those customers, just the same need context, they want trust and compliance and they want to tap into nCino data. So we have thoughtfully architected a platform as we evolve in our journey that would enable customers to do both. And we're seeing enterprise banks that are asking us to actually sit side-by-side and co-develop some of these agents and look at those experiences. So it's all exciting. I do think that what comes up most for me when I'm talking to customers about the outcomes they want to go back to that credit monitoring experience is very powerful. The ability to reduce the time spent analyzing the scores and reams of documentation and data to get to a proactive monitoring position over time, and that's not only upfront to do a deal, but that's maintenance. That's pretty common. And then, of course, you know that we have banking adviser skills embedded across the experiences. So that's one that stands out. They are looking for low-hanging fruit. They are looking for quick wins, and we can serve those up, and that's exactly how we've architected our digital partners. Adam Hotchkiss: Okay. That's really helpful, Sean. And then Greg, just on the Slide 16 that fiscal '27 growth algorithm, I really appreciate the detail there. Any way to think about how that contribution mix between contracted in the prior year and forward bookings compares to ultimately what you did in fiscal '26 just from a mix perspective would be helpful to understand. Gregory D. Orenstein: Yes, Adam, I think you can assume it's comparable. Operator: Next question comes from Terry Tillman with Truist Securities. Terrell Tillman: I'll keep it to 1 question, but as typical, there's probably multi parts to it. On the early renewals, it seems like that's a good sign of the interest in the new innovation. But could you all quantify how much early renewals impacted or benefited the strong 4Q ACV? Or the in-year ACV target? And the kind of the second part of this is with the early renewals, I think you did say that one did a contractual renewal at 5 years. But what is the duration looking like on early renewals versus the original contract? And then just do they tend to consume or sign up for more banking adviser or skills versus the non early renewals? Just double-clicking more on early renewal activity would be great. Gregory D. Orenstein: Yes. So in terms of the renewal trajectory and momentum, I'd point you to the ACV you mentioned that we disclosed going from -- it was 102%, I think back in fiscal '24 up to 106% and then up to 112% or 119% at constant currency organic basis, Terry. So again, really like that trend. And I think that's reflective of, again, the customer relationships that we have and also, again, just the breadth of our product that we can go back to our customers and sell them more. And again, a lot of those discussions actually AI, whether it ends up being an AI discussion or not, being able to go talk about AI provides an opportunity for us to explore where else we may be able to add value to our customer base. And so all that's exciting, and I think all that's helping to drive the momentum that we saw last year and that we came into this year with. Operator: Our next question comes from Koji Ikeda with Bank of America. Unknown Analyst: This is [ George McGrehan ] on for Koji Ikeda. And I know that you guys already talked about the relationship between sub revs and ACV. But I kind of wanted to ask this simplistic question, and apologies if it's a bit redundant, but if you could humor me. So fiscal year '26 sub revenue came in higher than ending fiscal year '25 ACV. But the initial guidance for fiscal year '27 sub revenue doesn't quite get us to ending fiscal year '26 ACV. What's kind of the relationship there? And how would you kind of describe the level of conservatism in this fiscal year '27 sub revenue guide? Gregory D. Orenstein: Yes. Thanks for the question. Just going back to some of the earlier comments, there's a few things to keep in mind when you're trying to reconcile the ACV performance in our sub-rev guide. One is, again, a portion of the ACV that we got actually contributed to subs revs last year. So you need to take that into account. Again, the way that we've always defined ACV is the high point of a contract. And when there's increased pricing during a contract, right, the rev rec rules require you to straight line that. And so your actual revenue is going to be short or fall short of what your ACV is and what that exit contracted amount is would be another thing to take into account. The third thing is churn that we experienced last year would generally have been from our older seat-based pricing model. And the ACV and subscription revenue would have been more aligned under that historic model that we had. And then finally, again, as you think about subs revs, keep in mind that our mortgage overages don't fall into ACV. And so those are some of the deltas to take into account when you're trying to reconcile the ACV performance we had in fiscal '26 and the initial guide that we've given for sub revs for fiscal '27. Operator: Our next question comes from Eleanor Smith with JPMorgan. Eleanor Smith: I think I'll keep it to 1 as well. I know many products can be implemented in a matter of weeks or months. But when you land a large new customer as you did in Japan this quarter, how long does it take to implement a large customer like that? And when do you begin recognizing revenue? Sean Desmond: Sure. And listen, I think on average, it's a reality with the efforts we've put into rotating a lot of our energy in our field, PSO organizations toward our forward deploy engineer as well as applied intelligence groups to reducing overall implementation times. And that's showing up and they're compressing nicely, and we're getting customers live in time frames that are actually exceeding my expectations. Specific to the large Japanese deal, that's a multinational deployment that is probably unique in its own regard with respect to some of the coordination that needs to happen upfront before we even start thinking about deploying nCino. So there's some of that that's happening right now. once we get hands on keyboards with nCino, I expect that we'll hammer through that project in months. But there's a lot of upfront prep work when you're bringing a global organization together across 26 countries that needs to happen, that will probably elongate the time that we can announce something very exciting with respect to a go-live on that particular bank. Gregory D. Orenstein: Yes. Ella, with respect to the rev rec, just recall with platform pricing, it's going to be straight lined over the term. And it would generally start a month or two after contract signing, when we would start billing just based on the terms of the contract. Operator: Our next question comes from Nick Altmann with BTIG. Nicholas Altmann: Just on the renewal base. I know you guys mentioned 38% of the ACV base is renewed to the new pricing. But can you just talk about where you expect that mix to trend as it relates to the 2027 ACV guide and whether that contemplates some continuation in the early renewal activity that you guys have been seeing? Gregory D. Orenstein: Yes. Thanks, Nick. Yes. As it relates to fiscal '27. I mean, we would expect a similar performance as we had in fiscal '26 in terms of the renewal cohort that comes up. Recall historically, the average contract length of our bank operating customers is upwards of 4 years. And so break that down generally a quarter over that 4-year period. We are seeing accelerated renewals. And so I think we're ahead of plan for that. So again, we would expect a similar performance. Keep in mind in terms of the comp because it's a similar performance, you won't see that onetime kind of step-up that we had this past year, which was the first year really of the step-up. And so just keep that in mind from a compare standpoint as move into fiscal '27. Operator: Our next question comes from Ken Suchoski with Autonomous Research. Kenneth Suchoski: I'll keep it to 1 as well. I wanted to dig into the long-term moat of the business a little bit because it seems like people are -- investors are questioning the terminal value of these -- of software companies more broadly. You mentioned how banking is a highly regulated business and how that's different. Could you just talk a little bit about how nCino works -- if and how nCino works with regulators and how that might impact the ability to remain entrenched and prevent new companies from coming into the space? And then secondly, it sounds like data is going to be one of the key sort of aspects to the moat longer term. So are we at the point where the network effects of the data are strong enough to keep nCino in the lead? Or is there this sense of urgency across the business to try to build up that aspect of the moat? Sean Desmond: Thank you. And yes, we do believe that the future long-lasting durable software companies that are going to be the generational companies that can survive inflection points like these are going to be able to deliver AI embedded within existing business processes and in particular, in this banking vertical to lend context and within the guardrails of regulation. And beyond regulation, you have to consider things like security, there's trust and there's that data moat that you talked about. And we believe that what's unique about nCino is we started accumulating this data 14 years ago, right? So we are absolutely not sitting here reacting and aggressively trying to build up our data moat overnight because that was the original vision of nCino. When I joined this company in 2013, I had a conversation with our founding CEO on the power of sitting at the intersection of the things that we do and where we do them. And if we could serve that data up with meaningful insights that would be very compelling. And we just happen to now be in the era of AI. So while other companies are scrambling to deliver user experiences overnight with no foundation of data, we're actually continue to build on 14 years of buildup. And we just -- we're not arrogant about it, but we believe our data moat is unparalleled and unique, and nobody else has the type of contextual view on how capital flows through workflows in financial institutions. So we're excited about that, and we believe that's going to propel us we'd lean into it. As far as the regulation, I would first point you to the fact that we have hundreds of bankers that work at nCino, they come from that world, right? In many cases, sitting in those chairs side-by-side with the chairs of the regulators for careers before software. And that's very unique in terms of how you think about product management. And now in the world of prompt engineering and imagining experiences very quickly, doing that without that human riding shotgun with you is where I'd be nervous, right? That's where you start getting into hallucinating on public cloud data that you think regulation lives in the public cloud. It does not and the bankers understand that. And that's why we're excited about that, and we maintain the relationships with these types of people in the space. Operator: Thank you. I would now like to turn the call back over to Sean Desmond for any closing remarks. Sean Desmond: Thank you all for joining us today. We do look forward to seeing many of you at nSight, which is our annual user conference in May, where we will be showcasing many of these agentic experiences we're talking about with customers on stage delivering outcomes. Hope to see you there. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the everplay group plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, we would 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 everplay group plc. Mikkel, good afternoon, sir. Mikkel Weider: Good afternoon, and thank you very much. And welcome, everyone, to this 2025 results presentation. I am, as mentioned, Mikkel Weider, I'm the CEO of everplay; and with me is, Rashid Varachia, our CFO. We'll take you through the year of 2025 and look a little ahead. But since most of you probably haven't met me before, I should probably say just a few words about myself. So I have started several gaming companies during my life, including Nordisk Games, which grew to 1,300 employees via M&A and organic growth. I was the founder and CEO for 7 years. So we invested in or acquired 9 different game studios, including Avalanche, Supermassive, Raw Fury and MercurySteam. I have been at something like 15 different boards, mostly game companies and worked with games of all sizes from indie games and UGC to AAA. So when they called last year from everplay, I was engaged with a handful of different game companies, but I thought the opportunity sounded a little too exciting. So I really like the strategy and the people I met during the process. So I said, yes. And I started on January 5, just a couple of months ago, and I will talk a little about my early findings and thoughts later in the presentation. But first, let's look at 2025. So 2025 saw solid revenues of GBP 166 million, which is up 5% when excluding physical distribution and the performance of our new releases were really good. We saw an 11% growth in adjusted EBITDA for the year, reaching GBP 48.5 million, of course, which represents a 29% margin, which is up 3.1% from the previous year. We will pay a total dividend for the year of 2.9p per share, representing a payout of GBP 4.2 million in total. We ended the year with almost GBP 52 million in cash despite active M&A activities and dividend payouts. Overall, we are set to grow. We have a very nice pipeline of games coming out, many new partnerships and a strong back catalog. So our strategy remains on track. So what happened more in 2025? Well, we launched 11 new titles. They overall performed very well. They actually generated 80% more revenues than all the new titles in the past year. We signed several new large partnerships. We took a minority stake in Super Media Group connected to a strategic partnership with Bulkhead. We acquired the rights of the popular Hammerwatch franchise, including a range of long-term publishing rights. Now if we look a little at the specific companies, Team17, our largest company, had a very nice year, reached more than GBP 100 million in revenue and 20 million units sold. I would also say the quality of our new releases in 2025 were a lot higher than the previous year, reaching an average user score of 87% compared to only 61% the year before. So a big shout out from me to everyone who worked on these games. Date Everything! was the breakaway hit of the new releases with more than 750,000 copies sold. Yet our back catalog still accounted for 75%, which I think is really good and very high compared to most game studios out there. And I would say it's fair to say that 2026 looks even better with more than 10 new games coming out, which is more than twice the releases of last year and also including some really big ones, Hell Let Loose, Golf With Your Friends 2 and Wardogs. It's worth mentioning that the brunt of releases will come out in the latter part of the year. Now astragon, on the other hand, had a less good year than Team17. We terminated the physical distribution business, which hurt the top line, but streamlined our business. But we also saw underwhelming launches of the 2 main new titles during the year. Seafarer had a rocky launch in early access with several box and issues and Firefighting Simulator: Ignite was a better launch, but still saw less traffic and sales than we hoped for. So we are currently improving and adding content to both games. Seafarer will come out of early access and into full launch at the end of the year and should be in a much better shape at that point. We also lacked important large update for our main titles, which we are changing now onwards. In 2026, we look forward to several new releases, whereas not all have been announced yet. We are cautiously optimistic for the year. Lessons have been learned and more content is coming out. As for Team17, the larger launches will also fall in the second half of the year. So of course, when one company is under delivering, it's, of course, nice to have a portfolio of companies. So we are not too dependent on a few launches. And StoryToys had a really, really great year. Revenues rose an impressive 25% to GBP 30 million. And StoryToys did 740 updates during the year, which is about 3 launches per workday and 40% more than the previous year. And we ended the year with 376,000 active subscribers. Growth came from several places. StoryToys had a highly successful launch of the LEGO DUPLO app, LEGO Bluey app, which had more than 1 million downloads in the first month and also reached #1 in the app stores. StoryToys also secured several new partnerships and license agreements, including some large partnership with both Netflix and Apple. If we look ahead, 2026 has started well. We crossed 300 million downloads in the beginning of the year, and we have a lot of content coming out mostly on existing apps, but also a couple of new and unannounced apps. And now over to Rashid for a more financial review. Rashid Varachia: Lovely. Thank you, Mikkel. Hi, everyone. So group revenues were broadly flat year-on-year at GBP 166 million, but excluding the physical distribution, which we exited during the year, they were 5% up year-on-year. And the growth drivers coming from the success of our new title releases such as Date Everything!, Bluey, Worms Across The Worlds and Apple Arcade and then the new strategic partnership deals with Netflix Games. Team17, as mentioned by Mikkel, was 8% up year-on-year, reaching a record GBP 106 million with 20 million units sold. Six new games drove a 700% increase in new release revenues and outstanding performance from titles such as Date Everything!. Other titles included SWORN and Worms Across The Worlds and Apple Arcade. Back catalog contracted by 13%, mainly due to strong performance from Dredge in 2024 and revenue generated from fewer new title releases in the prior year. astragon was the only division which contracted with a decline of 33%, in part driven by a strategic decision to exit low-margin direct physical distribution. Excluding physical distribution, astragon revenues decreased by 18%. Two new titles were released during the year, Firefighting Simulator: Ignite and Seafarer: The Ship Sim, both performing unfortunately below expectations. But we're expecting the business to bounce back in 2026. And then finally, on StoryToys, outstanding performance where revenues were up 25% to GBP 30.4 million. They released 740 app updates. Subscriber numbers increased to 376,000 with peak monthly active users of 12.9 million, reaching 286 million lifetime downloads. Performance driven by a major new Netflix and Apple game partnerships, including LEGO DUPLO World and Barbie Color Creations, along with 3 launches on Apple Arcade Greats. Next slide, please. Thank you. New release revenue increased 80% to GBP 41 million versus GBP 23 million in FY '24 due to an increased number of titles and stellar performance of Team17 titles and LEGO Bluey from StoryToys. Our back catalog contributed 75% of group revenues, which was in line with its 5-year average. The total back catalog revenue were GBP 125 million, which was a 13% decline versus prior year. This was on the back of an exceptionally strong FY '24, which grew by 27%. First-party IP revenue declined 9% to GBP 56 million, reflecting a softer performance at astragon. Team17 was up 2%, supported by Hell Let Loose and Golf With Your Friends. And finally, on this slide, third-party revenue grew 4% to GBP 110 million with strong contributions from the overcooked franchise, Date Everything!, Dredge and LEGO DUPLO World. Gross profit increased significantly by 10% to GBP 76.3 million, where gross margins increasing by 4.4% to 46%, mainly due to exit from physical distribution business and no material impairment. And just as a reminder, during FY '24, a GBP 4.6 million charge was booked for title impairment. Overall, royalty payments were lower year-on-year due to a favorable sales mix at Team17 and a higher weighting of StoryToys revenue, which carry lower royalty levels. And then finally, expense development costs increased modestly to support expansion onto new subscription services, for example, Worms Across The Worlds on Apple Arcade and LEGO DUPLO World. Significant improvements on adjusted EBITDA, which grew just over 11% to GBP 48.5 million. Adjusted EBITDA margin also increased 3.1%, reflecting higher gross margin and flat admin costs. Acquisition-related adjustments declined from 13.8% to GBP 12.1 million due to the end of acquisition-related incentive payments. And net finance income increased to over GBP 1.2 million, and the effective tax rate increased from 24% to 25.5%. And then finally, adjusted EPS increased 7% to 25.7p. There was an GBP 8.2 million increase to GBP 33.3 million on capitalized development costs. This was due to Team17 and the new titles such as Golf With Your Friends 2, Hell Let Loose: Vietnam and astragon, both Police Sim and Ranger's Path. The current year for cap dev in terms of FY '26 is forecasted to be GBP 45 million. Again, this is mainly due to the investments in first-party IP such as Wardogs, the Hell Let Loose franchise, which we have much better visibility over. However, this has led to an increase in terms of cap dev. And then finally, on cash, our cash position was GBP 51.9 million versus last year and increases were driven by our dividend payment during the year, increased tax and then also increase in acquisition-related payments. But overall, our variances included working capital and capital development. And as mentioned earlier by Mikkel, I'm pleased to announce a 2.9p per share dividend. Mikkel Weider: Yes. And now I wanted to say a couple of words about my first 3 months. It's, of course, always interesting to start in a new business and coming into a company with fresh eyes, so -- and see a little from the outside. So I wanted to take this opportunity to give my view on the company after close to 3 months in. So yes, it's always a little exciting to start a new job. Is everything as good as they told you in the hiring process? Or do you uncover larger problems once you're on the inside? Well, fortunately, I can say that the company is in better shape than I had hoped for. Yes, there is stuff to work on for sure. But overall, I'm very impressed with the company and the organization despite the stock being pretty weak in the recent weeks. There is a good energy, I think, in the company and the culture is strong. While there has been several changes in the management in the last years, especially in Team17, I feel we have a range of great people now to take the company to the next level, and we are well positioned for growth. The back catalog is also as strong as I could have hoped for, which creates stable cash flows and predictability, which is really nice, of course. I already like the vertical strategy of the company with focus divisions before I joined. But getting on the inside, I can really appreciate the focus of each division. If you like an astragon or StoryToys game, you'll most likely like the new games coming out from them as well, and Team17 can also do a lot of cross-promotion between titles. Some of the stuff I would like to focus more on in the coming years are to have a stronger tech focus, including AI. I also like to look more at processes and reutilization. So we want to add more service elements and upsells for evergreen titles, for example, having more paid DLCs attached to our bigger games. And I'm also looking at how we can work more together and create synergies across the group. And of course, we want to do more M&A. So over the last 18 months, my predecessors have worked with different strategic pillars. And I think there overall has been good progress on these pillars in 2025, and these are pillars that I support as well. So there was an ambition to strengthen our first-party IPs that is IPs and games we fully own ourselves, something I definitely think is a good idea. And in 2025, we launched 2 new titles with first-party IPs. And we have 10 projects in the pipeline for our owned IP. So I think there has been good progress there. Another focus has been to find and grow new innovative third-party games that is games made by other companies with their IPs. There has been solid progress here as well. Date Everything! was a breakaway hit, and we have more than 10 new third-party games coming out already in 2026. A third focus has been to be very mindful of costs and to improve margins. Gross margins, they are up 4.4% and adjusted EBITDA was up 3.1%, which makes the company a very profitable one compared to a lot of our peers. And finally, we wanted to drive more growth. Well, adjusting for the removal of physical distribution, the company did see growth after all, and we also managed to acquire IPs and games for the future back catalog. On the organization side, there has been several changes. Aside from having a new CEO, me, if you're in doubt, Team17 promoted Harley Homewood to be the General Manager in November, and he's really doing a good job so far. In Team17, we have recently regrouped our games in 3 overall pillars with a franchise director for each, so we more easily can reutilize knowledge, technology and do cross-promotion within the clusters. In astragon, we have exited the distribution business, but also slimmed the organization overall to focus on the core titles, and we now have a more simplified organization, making it easier to get higher margins again. In general, we want to scale without adding proportionally more people. I think it's important to stay nimble and agile and use technology and processes in smarter ways. An example of that, Team17 has more than twice the amount of launches in 2026 compared to last year, while not adding to the total headcount. I think that is quite impressive. Finally, we have hired a few additional central resources to assist all divisions. And overall, we are creating a stronger foundation for organic growth and acquisitions. As mentioned, I want us to become stronger in tech and AI. And as many of you know, AI has evolved a lot the last months, really empowering developers in tech. New tools and AI will allow us in everplay to, a, create more and larger and richer games while not adding costs; and b, also help us optimize our internal processes and logistics. In general, I actually think AI will result in a greater demand for publishers like us, someone who can help developers games to stand out in the crowd. With more games being launched, discoverability will definitely be key onwards. So in many ways, AI strengthens our reasons to be. In the meantime, it's, of course, very important we follow the evolution closely to reap the fruits, we need to be at least early adopters. We need to be stellar in marketing and publishing, and we need to be very agile and adapt to changing technologies while still doing it in an ethically correct way. We've been working with AI for a while. We have an AI council and AI tools for all our people. And we have various cases across the group, cases we want to expand on and distribute across the group. Some examples, StoryToys are actively using AI in engineering, doing 40,000 lines of code per month. We're also using AI in QA several places, for example, for performance testing and [ automatization ]. But as mentioned overall, we can go further, and I want to empower our employees even more. And now a short break from talking. Let's watch a show reel of some of the games coming out this year. [Presentation] Mikkel Weider: A lot of nice games, if you ask me. So some of the bigger titles this year are Hell Let Loose: Vietnam, Golf With Your Friends 2, Bus Simulator, Silver Pines, Wardogs and some pretty interesting unannounced titles we look forward to presenting later in the year. And now for the last slide of the presentation. Overall, I believe we are well positioned to continue the growth with a strong pipeline and back catalog. As mentioned earlier on, some of the larger games are scheduled for the second part of the year, which gives some additional weight to H2 results. But overall, we are confident we can deliver the adjusted EBITDA for 2026 in line with the current market expectations. Looking to the midterm, we are investing in several of our larger first-party franchises with games coming out over the next couple of years. We are very happy about these investments, and we think they will bring great returns and strengthen our portfolio considerably. And with these words, I think we can conclude the presentation. We will now take questions hosted by James Targett, our Head of Investor Relations. So James, come on board and tell us if you have some questions already. James Targett: Yes. Thank you, Mikkel. I do have some questions, which have come in from shareholders. First of all, your thoughts on capital allocation, particularly how you think about M&A versus share buybacks currently? Mikkel Weider: Do you want to say some words on that, Rashid? Rashid Varachia: Yes. Obviously, capital allocation, very important to us. We're hugely cash generative, and we're always very conscious in terms of how that cash has been deployed. But we also -- it's also important to note last year was the first year whereby we actually reported a dividend payment. And so we will continue in terms of our journey in terms of capital allocation. We want to do M&A, and it's great that we have the funds to do M&A. But in terms of share buyback, it's very unfortunate where we find ourselves with our share position and share price position this week. And it's something that the Board will continue to review and discuss, but no immediate plans for any action on that at the moment. James Targett: Thanks, Rashid. Mikkel, one for you on AI. There's been a lot of narrative over the last few months that AI will disintermediate software businesses, make them less relevant. Could you address that directly for everplay and outline why developers won't be able to go straight to players and bypass Team17 or everplay? Mikkel Weider: Yes. No, no, I think it's a very interesting topic. So first of all, we don't see clear indications that there will be like one person in a basement ticking a button and suddenly having a wonderful game. There will certainly be a lot of low-quality games out there, but games of a certain quality will need like a team around them. However, that -- those teams, they can really be empowered by AI. And we are very used to working with small and agile teams of like 3, 4, 5, 7 people. And I think that's really what you need to make a quite powerful games -- game these days. I would be a little more worried if we had like 300 people working on a AAA game, and we've been working on it for 3 years on a very old engine, and it's coming out in 2 years or something like that. But I actually think we are really well positioned to work with smaller agile teams using powerful tools. Now of course, yes, there will be -- I'm sure there will be a lot more content coming out, but then it will be super important to have someone help kind of like connect the gamers with this content. And here, I think we are, again, really well positioned, helping teams out there where they can focus on making cool games, and we can get them in front of a much bigger audience. So maybe a little like today where everyone of us on this call, we can easily upload a video to YouTube, but is it going to be watched very much? Well, most likely not. And whereas there are some really big content creators out there who are very professional in their output. And that's where we want to be, like either the professional YouTubers or the -- or like closer to the Netflix. And it's not like Netflix has not been able to grow while YouTube was there. So I think we're going to live pretty well actually in that intersection, you can say. But again, we have to be on the top of our game here, like we can't just sit and wait for this to happen, like we're going to actively embrace it. And hopefully, we'll be a disruptor instead of getting disrupted ourselves. I think we have a good chance of that. James Targett: Thanks, Mikkel. Rashid, one for you. Are you concerned about the rise in development costs compared to the previous years? And how does this support the midterm growth? Rashid Varachia: Yes. So not concerned, James, because there's reasons for the increase. We came off the back of '24, whereby it was an all-time low in terms of cap dev. We had impairments back in '23, early part of '24. But this is a growth for our future. So I'm hugely excited. We've got some fantastic new games coming. We've already said this year, there's going to be at least 15 games, 15 new games. And it's investment, as I said earlier, into our first-party titles. And towards the end of last year, we invested in the Super Media Group, the Bulkhead team who are responsible for Wardogs, a fantastic game, massively excited. The games coming out later this year, but that does require capital investment. So a combination of Wardogs, our own IP and the team at StoryToys are also growing significantly. Unfortunately, we can't announce everything on this call, but there's some really great games coming from the StoryToys team as well. So that has led to an increase in cap dev, and the way we like to -- well, how I like to forecast is I'm fairly conservative. That's reflected in the numbers, and we should see growth in future years. Last year, we had 3 upgrades. So all being well, we'll beat the current expectations. James Targett: Thanks, Rashid. A question on how we decide about acquiring IP versus building IP internally. Maybe that's more for you, Mikkel. Mikkel Weider: We'll do both, you could say. Our core business is to build our own like to grow organically and invest in games that we -- as we do today. And then, as Rashid also mentioned, sometimes when we know something is working, we can take -- we can do a bigger investment in that title based on like, let's say, Hell Let Loose. It's such -- there's such a huge fan base. So it feels much more safe to kind of like do more within that IP than trying something completely new. On the M&A side, we are interested in looking around, and we're going to be super structured about it. And we're going to be highly picky with what we potentially buy. We're going to say no and no and no and no, and then maybe we're going to say yes to something because it has to sit really well with us for us to buy something. We are -- would potentially like to buy IPs and games, so assets because we can actually handle assets in our company, which is much better than in my previous company, for example, where we always had to buy like a full team that can handle everything themselves. This time around, we can buy assets and then take care of them for the next 5, 10 years. We can also buy a studio or a company, but then it has to be really fitting with our values and it has to -- that our due diligence has to be very thorough whether we want to take them in or not. And you could say that we -- on our wish list are titles that can bolster our existing divisions and to make a new kind of like forest division would require that it's like really like a standout opportunity. So we'll be active, but very cautious on what we potentially would be buying. And now I'm going to -- I saw a question on the list here as well. And we can, of course, evaluate whether we should buy shares in our own company if we think we are more attractive than anything out there. That's, of course, something to -- we'll be considering along the way as well to get most bang for the buck. James Targett: Rashid, what is the amortization policy for capitalized development costs on larger first-party titles such as Hell Let Loose: Vietnam and Golf With Your Friends 2? Rashid Varachia: Yes, it's very conservative, James. It's 2 years with month 1 being 30% and that hasn't really changed. And it's something which I reviewed when I first came on board. We've taken feedback from PwC as well. And the expectation was we would increase that. But again, with the very nature of how I tend to do things, I'd like to leave it conservative. The Board agrees, we should leave it how it is. But the tail for our titles is much longer than it's ever been. And I think it's a good point -- good place to mention our back catalog because as we said earlier, our back catalog represents nearly 75% of our total revenue. And when we look at our back catalog and we look at the aging of our back catalog, there's still over 50% of our back catalog, which is coming from titles, which is 4 years plus. So a, demonstrating the longevity of our titles, but also the number of titles that we have actually, what I call in the hopper, which is 150-plus titles that we have. So there's no concerns there in terms of our amortization policy. James Targett: Thanks, Rashid. A question from Mikkel. How does everplay, specifically Team17 and astragon focusing on the PC and console business aim to stand out among the growing number of indie and AA releases every year? Mikkel Weider: Well, several answers to that one. One is that we can -- as opposed to most other, we can actually do cross-promotion. So hey, if you like Construction Simulator, you might really like Bus Simulator, for example, like where we stick within our verticals. If you like Hell Let Loose, maybe you're going to love Wardogs. So I think cross-promotion is something that we can do and which is harder for the other. We are great in kind of like getting to a bunch of different platforms, which is quite hard for smaller entities like you don't just immediately get on Xbox or PlayStation or new consoles coming up. So I think the distribution is we have more direct consumer access than a developer typically would have. We know how to operate social media and marketing and outreach and where it gives the most bang for the bucks. Honestly, most developers, they are not very interested in a lot of these things that we are doing, and they are not -- therefore, not very good at it. And we just need to keep being at the forefront of marketing and getting games in front of eyes of other people. So we are also strengthening actually our marketing department, for example, in Team17 because this will be core for us in the future. And then maybe we'll have technology handle some of the -- be more active in other parts of the organization, where -- which is not our core focus. So yes, it's -- we need to keep improving, of course, and being at the forefront. James Targett: Okay. And actually, our last question, maybe one you could both answer to finish with. Is there any particular game this year that you're most excited about? Mikkel Weider: What do you say, Rashid? What are you excited about? Rashid Varachia: I say one, James. I'm going to say 2. I'm going to go Wardogs because it looks fantastic, and it's a bit of me, love a bit of shooting. And then I'm going to go Golf With Your Friends because I'm rubbish playing it. I need to practice a little bit more. Mikkel Weider: You mean you are obviously playing it in real life. Okay. Yes. Okay, then Golf With Your Friends 2 is a little more. Yes, those are good titles. I'm also personally excited about, of course, the Hell Let Loose that we mentioned. I think that like a classical franchise like Bus Simulator has been with us for so many years. And sometimes instead of killing dragons and shooting some, it is actually very, very relaxing and soothing to drive a bus instead. So I think that's going to be good fun. And then, of course, some of the more like indie titles like Silver Pipes, for example, I think looks really exciting. James Targett: Okay. Well, yes, plenty to look forward to. Well, that's all the questions. So yes, Mikkel, over to you. Mikkel Weider: Well, thank you very much, everyone, for joining this call. It's been a pleasure, and thank you so much for banking everplay. Operator: Perfect, guys, if I may just jump back in at this point, and thank you very much indeed for updating investors this afternoon. 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 everplay group plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.
Operator: Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Buzzi S.p.A Full Year 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Pietro Buzzi, CEO of Buzzi S.p.A. Mr. Buzzi, you have the floor. Pietro Buzzi: Thank you, and good afternoon, everyone. Welcome to our conference call. And again, thanks for participating. We do publish a presentation, which I will follow at least in part, if not in full, that is available on our website. So I will mainly refer to that and to the page. So starting from the first page, we have a brief summary of what has been 2025 for Buzzi. Overall, a good year, although not as good as the 2 last one, so with some decline in profitability, but still showing, let's say, very strong results and very significant cash flow generation. So as you can see from here, we had a slight improvement in our revenues, in our net sales. This was already disclosed at the beginning of February with an impact -- positive favorable impact coming from the changes in scope. EBITDA is falling somewhat short of last year, minus 3% approximately, which would be actually minus 6% like-for-like. So the overall impact again of the Forex and the Scope changes was favorable. EBITDA margin, we are losing some profitability, which is mainly due to the fact that the additions, let's say, to the perimeter to the scope at least initially for the first year, they are coming in with an average profitability, which is below the one of the, let's call it, traditional scope perimeter and to the fact that one of the -- or the strongest country for us, U.S. declined somewhat. CapEx are, let's say, similar to last year in terms of industrial CapEx, a little bit lower than last year, considering also the equity investment, and we can let's say, enter into that later in the presentation. Net financial position also with the help of some lower CapEx improved significantly and cash flow generation was very close to last year regardless of the slight decline in profitability. We have -- we propose to the next AGM to keep the dividend unchanged versus last year. But -- and we will comment later the shareholders' remuneration in 2026 is anyway going up significantly, thanks to the buyback program, which is underway. As you can see on the following page, let's say, Page 2, one of the key feature, let's say, of 2025 was the Scope changes, which included an Asset Swap, if you wish, which occurred in Italy and Italy and its bordering country, in particularly Austria, where we sold, let's say, the Fanna plant in the Northwest, is in the Pordenone province for those that are a little more acquainted with the Italian geography. And Alpacem is the owner, is part of the Wietersdorfer group. This group, which acquired the Fanna plant is composed basically of 3 parts. It includes 1.5, let's say, plant in Austria, which is quite strong, let's say, locally. The Slovenian plant where we have already -- we used to have already a presence since some year, which is a very stronger plant just on the other side of the Italian border. And some Italian assets that now includes also the Fanna plant. So quite a strong and integrated group in the Northeast of Italy. And then we expanded our presence internationally between starting from March, April until December, it's an ongoing process, if you wish, by acquiring initially over, let's say, a 30% stake in a listed company in the Emirates name Gulf Cement Company, which is a single plant, let's say, entity, but with a quite significant capacity, very powerful in terms of machinery, let's say, and equipment. Then through the OPA, the ownership was increased. And later on, December and also something more will follow during this year. We achieved a gradual improvement in our ownership, which at the end of the year is around 66% indirectly is a little less because we participate to this investment together with a partner in a specific entity called TC Mena Holdings, where we see as 90% and the partner as 10%. So the, let's say, economic ownership is a little less than the 66% at the year-end. On the following page, you'll see the bridge, let's call it, of the turnover -- 2025 turnover by regions, so by main regions where we operate. And Italy had a fairly good year, I would say. If we do not consider -- so excluding the scope impact, actually, our volume and pricing will remain basically the same, prices slightly better. So this was quite a strong support in Italy coming from the infrastructure project of the so-called resilience plan of the European funds, let's say, allocated to Italy. Central Europe was kind of mixed. So there was a recovery in volume, but prices suffered mainly in Germany. And this translated into, let's say, an offset of the progress that we achieved in the volume in our cement, let's say, shipments. Eastern Europe, I would say, good results overall. There was a negative impact -- unfavorable impact coming from the deconsolidation from the sale of the of the Ukrainian assets. So this was the first year without Ukraine included in the scope of consolidation. But the remaining countries overall performed well, in particularly Poland and Czech Republic. And we did have also some benefits from the strengthening of the local currencies, both zloty, Czech koruna and also the ruble in Russia. U.S. was, in a sense, the worst performer also due to the size. So every time that something, let's say, negative happens to U.S. in our case, impact on our figures on our numbers is inevitably more significant. What happened in U.S., we had a minor, let's say, decline in volumes more in ready-mix actually than in cement. Pricing fairly stable, but no improvement if you look at the average or there were some improvements in specific geographic areas, but some declines in other ready-mix prices were a bit under pressure, particularly in Texas and the overall result was a little negative. And the dollar lost us some of its value affecting the translation. So around EUR 70 million or EUR 70 milliojn negative on our net sales figure. Brazil is coming in for the full year for the first time. So the comparison of the first 2 bars refers to the last quarter of 2024. But the impact is, I would say, overall positive with the exception of some unfavorable variances coming from the Forex. -- and is bringing in additionally, let's say, EUR 2,065 million of turnover. Same reasoning more or less for the UAE, which is smaller in terms of turnover and is also including -- included -- it's been included starting from May, so about 6, 7 months. And this brings us to the EUR 4.5 billion approximately level up to EUR 4.3 billion of last year that you see in the bar at the right. Not top, right side of the slide. And then if we move to the main, let's call it, operating figure for the results, which is the EBITDA. What you can see from here is, again, fairly simple, if you wish. So volumes good trend. A favorable variance of about EUR 44 million, but a number of, let's call it, negative items or unfavorable items associated, first of all, with the price environment, which was overall slightly negative besides what happened in the U.S., particularly, I would say, in Germany. So Germany and the U.S. were the 2 countries where we suffer actually Germany, more than U.S., we suffered the most in terms of pricing trend. Variable cost not so much coming from energy and fuel or electrical power. It was more related to raw material and other variable costs, for example, logistic ones. And fixed cost, typically labor, maintenance were also going up, difficult to fully, let's say, control versus the volume and price trend. Other mixed cost also showing a favorable figure. CO2, basically not an issue last year because we still remain -- this refers, of course, to the countries under the ETS scheme. And in those countries, we basically remain in line with the free allowances received with a few exceptions and a minor, let's call it, negative variance versus the previous year. FX overall negative, mainly in the U.S. And then Scope changes that refer to, okay, on the positive side, Brazil and Emirates on the negative to Ukraine, rebalancing somehow the negative impact that you see on the center of the slide by EUR 61 million. So overall, the decline is what we mentioned at the beginning, and this is the -- in brief, let's say, the explanation and more explanation can be given, of course, country by country or region by region where things did not behave, let's say, or happen in a consistent way. We had, of course, some regions more affected by costs, some regions more affected by prices, et cetera. In the following pages, the cash generation and capital allocation. You can see that operating cash flow, as I was mentioning at the beginning, remained very, very close to last year besides the EBITDA decline. CapEx industrial slightly lower than last year, not really because of our decision to decrease them was actually somehow related to the execution phase, which on more complex projects usually takes than you might budget or when you, let's say, translating the design in the engineering phase into implementation and execution usually takes longer. And remuneration of the shareholder was quite good, I would say. You can see the split between, let's say, dividend and buyback. We have an ongoing program, which started at the end of February, which has been more or less so far 50% completed and we should get to the end. We will see, of course, it depends on the liquidity of the shares on the daily trading. But normally, with this kind of trend, we should be able to complete it by the end of May or maybe even earlier. We will see. It's well advanced and likely to be completed in maybe 2 more months. There is also a proposed resolution taken today by the Board of Directors to cancel the shares that will be in portfolio, let's say, in treasury at the time of the AGM. So we don't know exactly the number. But anyway, both the shares that were already in treasury at year-end and the ones that are being bought currently will be canceled, which is also, I think, overall a positive news for the shareholders. Just to give you a little more color on the different geographic areas, we move to Page 7. The U.S. always, let's say, a very strong contributor to our results. But last year, they were not able to keep up with the same level of profitability that we enjoyed in 2024. Basically, in terms of EBITDA margin, as you can see, we went back to the level of 2023, which is anyway a very good one, both in absolute terms and also in relative terms when you compare to other peers operating in the U.S. But the trend was slightly negative. We faced difficult volume part of the year. Then in the second part, there was a recovery, but not full. So we were unable, let's say, to close with a favorable volume trend, minus 2.2%, I think, very similar to the overall market trend. And ready-mix volumes suffer like we were a little bit more in terms of shipment deliveries and also pricing ready-mix, as you know, as you recall, in our case, they are mainly in the Texas area, which was one of the -- yes, I would say, more difficult in terms of market environment also due to the presence of the significant presence of both incumbent and new importers into the -- along the coast from Houston to Corpus Christi, et cetera. So we have a structure in the U.S., a cost structure which is compared to our countries, skewed in a sense of more significant weight of the fixed cost. So when you lose also slightly volumes, this has an immediate impact on our profitability, which was the main case. So cost not really going down, volumes going down a bit, pricing not moving or more, let's say, moving unfavorable than the opposite. And this was the result. On top, we had the negative foreign exchange impact following the devaluation of the dollar, which on the EBITDA -- on the EBITDA means around EUR 26 million, not a small amount. Moving to Italy, which is the following page, more favorable situation, support, as I was mentioned before, mainly from the PNRR programs. So public building and infrastructure projects, which also are typically enjoying a greater cement intensity versus either new residential or residential renovation. So there is a decline in cement volume, but this is a direct consequence of the Scope changes that we were commenting at the beginning. Meanwhile, for example, our ready-mix concrete subsidiary has been able to increase volume by around 6%. Pricing performance was okay, some improvements. And our cost, both fuel and power were definitely under control. So we did not suffer any significant, let's call it, inflation -- energy inflation during 2025. The changes in scope on EBITDA means 13 million -- EUR 14 million let's say, about EUR 14 million of impact, which is not very different from what you see in the EBITDA variance actually. We are showing plus 3.5% like-for-like. So it was fully offset by the good trend or the stable trend in volume and favorable trend in pricing. In Central Europe, which means for us, basically mostly Germany plus Luxembourg and ready-mix operation in the Netherlands, quite a different trend if we look at Germany versus Benelux. Unfortunately, Germany has a much greater weight on the area because the performance of Luxembourg was -- and in the Netherlands was growing, was okay, was improving. Meanwhile, Germany did improve some. So there was a rebound in the volumes, but there was no rebound. Actually, there was a decline in prices, which started already on the previous year. Actually, we entered 2025, the exit price, let's say, of 2024 was already lower, and we were unable to recover or to change it significantly or just slightly to 2023 and '25. And this was the major impact on the -- I mean, the major reason for the EBITDA decline together with a cost situation, cost environment, which was not favorable or quite different from what we experienced in Italy, mainly on the -- we suffer mainly on the energy cost, on the power cost, not so much on the fuel. But yes, on power, this is also somehow related to the -- to an hedging, which was made in advance so to cover the purchases for 2025, which at the end was not, if you wish, successful in a sense that maybe it was a bad timing. But of course, I mean, the reasoning behind hedging is not to pick the right timing. Just in this year, I mean, in 2026, we will see a totally different trend because the market condition has changed in the meantime. So the change -- the favorable change in Benelux was able to help somehow the region. But Germany, clearly is waiting significantly on this specific portion of the business. And the performance in terms of EBITDA certainly was not was poor overall. I mean there are reasons behind it, which explains it, but was overall quite poor. In Eastern Europe, on the following page, we are, I think, continue to be on a steady, let's say, profitability outcome. Of course, these businesses are not as big and as significant. So their contribution, let's say, to the overall profitability of the company is not as significant as Germany or U.S. But the good news is that there is a positive momentum, both in Poland and in Czech Republic, which should also continue in the coming year. So strong cement volume dynamics in Poland was clearly -- I mean, it was quite meaningful. Czechia, it's smaller, but also stable. Our ready-mix business in Czechia performed very well. We lost cement volumes in Russia. That's the only area where I think also after some years of war, let's say, the impression is that the economy is starting to feel more, let's say, the pain than in the previous year. And also probably in Russia, the prospects for the next year are also quite difficult or more difficult than in other Eastern European countries. Ukraine is not part of the region anymore. So -- but its contribution was not very significant anyway. So if we exclude Russia, there is a margin expansion. And driven by higher production and also, in this case, lower energy cost, which did not as opposed to Germany that we commented before. Exchange rates also favorable, if you wish, not a minor, let's say, contribution, but anyway, a favorable contribution. And the impact of the deconsolidation of Ukraine was, I would say, totally absorbed and also the negative contribution from Russia was totally absorbed by the strong performance of Poland and Czech Republic. Brazil, which is a newcomer, let's say, first year in the group. So let's say that we are on a pro forma comparison here because last year, actually, only the last quarter was included in our figures. We had a volume trend, which was favorable, 2%, 3% up again compared to the full year 2024. Price trend in local currency also favorable. This translated into, I would say, significant margin expansion. Our cost also were particularly the energy costs are lower than the previous year. So -- as a first, let's say, year of full operation in the group, I think we can be fairly happy with the overall performance. There is room to do better in the coming year if the external condition and also the industry trend will go in a certain direction, which is possible. And the only negative factor, the only negative is the exchange rate trend, but not so impact. I mean, not so dramatic on our -- on the overall figure with minus EUR 5 million on net sales and minus EUR 1.5 million on EBITDA. And currently, actually, if we look at the -- of course, it's not necessarily a trend that will continue for the entire year 2026. But what we are seeing lately is actually a more stable real versus the euro since the beginning of 2026. So if the local currency -- if the trend in local currency will perform better, which is what we expect also in euro, we should have -- it should be reflected, I mean, also in euro terms in likely absence of negative FX impact in the coming -- in the current year. Mexico is not part, as you know, of the group is not line by line consolidated, but it remains a very important part in terms of, let's call it, also management involvement, but in particular, in terms of results -- net result contributed to the other company. The Mexican performance was mixed, but overall, still very good. We [ suf ] a bit on the turnover on the EBITDA in euro terms. But when we clean up, let's say, from the foreign exchange impact, actually, both figures were better than last year. And this is one of the few countries together with the Eastern European country, Poland and Czechia, that is -- was able to achieve an improvement in the EBITDA margin, which is already very, very high, as you can see. So I would say that we cannot complain about the Mexican performance. The only complaint is that it cannot be included in the line-by-line consolidation. But for the rest, very strong performance coming from this country. Some comments on how we see [ 2020 ] also on the light of what has happened so far and also recent change in the macroeconomic environment. I mean, we are -- we were, let's say, but we still are pretty confident that we can continue to perform fairly well during the year. There are uncertainties. There are certainly geopolitical tension, potential inflation pressure for how long this difficult, let's say, situation in the Middle East will last and will affect particularly the energy cost, but not only because there are anyway also impacts on the demand in part directly like in the Emirates or indirectly like in Europe or probably less in the U.S. and Brazil. But anyway. So by major, let's say, regions like we showed before, U.S., the expectation are for -- the association is, let's say, forecasting some additional decline in demand. probably in the range of 2%, 3%, something similar to what happened in the previous year. But of course, if this happens, it would be already the 3, 4, 5, 6, 4, at least fourth year in a row of decline versus the previous peak which was not historical peak, but anyway, the previous peak of the cycle in 2022. And this is something that clearly is not, let's say, helping the overall price environment because there's most of the regions of the state, some capacity available. And as I said before, due to our cost structure to lose some volumes almost immediately translates into a margin construction because the fixed costs are quite high in the area. On the other hand, we have seen also at the beginning of the year, particularly during the month of February, demand quite resilient. So it's true that on one side, you have residential weakening, but there are definitely in the nonresidential portion of the demand or yes, some kind of projects that are going well that require cement and concrete. Typically, just to mention one, which is, of course, very much on the fashionable the data center construction, but this is actually happening. It's happening and it's relatively intense in terms of cement consumption. So again, a mixed environment with the nonresidential segment and also the infrastructure probably supportive and maybe even better than what the association has been forecasting for the full year. So we will see. There are, of course, other factors to be considered in the U.S., which we mentioned in the comments of the press release that are a bit disturbing or potentially disturbing, let's say, the price environment. But okay, a situation or a scenario which is, I would say, moderately optimistic. I would be optimistic about the outcome for the U.S. in the current year. Italy should be a year very similar to the previous one as long as we continue to have demand coming from the infrastructure plan, let's say, or the European funds, there are good chances that we can more or less repeat last year results and also Italy is more likely probably than the U.S. to be able to improve somewhat the prices. There are underlying reason related to the introduction of the CBAM, the scarcity or the less availability of CO2 allowances, which also translate into a higher cost. So there are -- there's probably more room than in the U.S. on the pricing side to be a favorable variance. Central Europe, we should see some rebound. We are forecasting some rebound in Germany. The federal infrastructure plan should start -- will start to have some impact also on cement demand. We are coming from a year where the prices, as we were commenting before, remain fairly weak. So there is -- there should be a possibility also couple being within, let's say, the ETS system similarly to the -- to Italy, there should be a possibility to recover something on the pricing side. Clearly, this means also additional cost for CO2, but more chances, let's say, to gain something on the price level. Eastern Europe, with the exception of Russia, which is probably entering a much more difficult phase than what we faced in the last 2, 3 years. We don't see a reason why Poland and Czechia should be worse than the previous year. These are also countries where as opposed to Germany, Italy, we are operating at a very high capacity utilization level. And so we are definitely optimizing, I would say, our profitability, thanks to the capacity utilization, which is -- we think they have to stay. In Brazil, we mentioned it already, we see a positive trend overall, particularly in the Northeast, which has been growing in terms of volume and prices more than the Southeast. But if there is an easing of the monetary policy, which today represents significant constraints for the construction investment with interest rates at 15% or 16% the number of projects that are -- that have been on hold so far should start. And clearly, this has even more impact in the Southeast where most of the consumption and the population actually are because this is where the bulk, let's say, the cement consumption of the country is located. In the Emirates, we will certainly suffer from lower cement consumption until at least -- we will see until something different happens. But that's the country with more direct impact coming from the local, let's say, turmoil or conflicts going on. But on the other hand, we are -- we have a number of initiatives of projects that are -- that have been put in place last year and will continue this year to improve the profitability. So even with the lower cement volume, we may be able to do something better in terms of EBITDA. Mexico craze not affecting directly our numbers. But we are seeing -- we're, let's say, more positive versus last year in terms of volume trend and profitability should remain at a very, very high level. This is for the, let's say, the top line and the volume prices scenario. The risk or the, let's call it, the uncertainties are definitely more related to the cost side, where it is true that many components or many items are -- have been contracted for a certain number of months. So we have certainly some stability for a good part of the year. But it is clear that on the energy cost, in particular, the current situation is creating an environment of rising cost driven by renewed inflation like we mentioned here. So there is volatility, but volatility mainly on the high side in a sense of more expensive side. This is difficult to, let's say, assess completely right now. We ran some number, taking, of course, kind of sensitivity analysis. And there is certainly an impact that we don't know if we will be able to offset with the price improvement or not. It will mainly depend on the specific situation, demand, pricing demand, let's say, competitive environment, what is the attitude of the competitors, et cetera. So the idea is, of course, to try our best to preserve the margins. But how much we will be able to do that and how much actually the cost environment will be unfavorable is difficult to assess. In general, we do see a significant risk of rising cost, in particular, the energy component in the coming months. The FX foreign exchange is very difficult to somehow forecast. Initially, in our budget, we introduced an exchange rate for the dollar, which was definitely weaker than the 2025 average. Is this going to be true? It's not going to be true. We don't know. So far, again, not as much as we forecasted, but this could change in the coming months and can certainly move, let's say, the variance from positive to negative if the dollar will weaken more than what we expected or more than what is showing up to now. So overall, again, reviewing our numbers, reviewing our budget in a quick way, we think that it will be quite difficult or actually as of now impossible to achieve an EBITDA greater than in 2025. So our view right now is to as we wrote, let's say, marginally decline by how much is difficult to tell right now. But I think the message, which is important to give today is that looking at all the variables, looking at all the available information as of now, it is -- this is the best, let's say, forecast that we can make, and we think that is a correct one, which means that, okay, there our profitability will not improve in 2025. But if it is a marginal decline like we expect, will remain anyway at a very good level. And we would be happy, of course, to change this view as soon as possible. And -- but this, realistically speaking, is likely to occur if it does occur only after more months of actual results available. So with, say, 1 quarter or maybe let's call it, 6 months behind us, we will have definitely a clearer view on the full outlook. But I think it's important to give this message today, which has been, I mean, analyzed in a very deep and serious way with, again, running several sensitivity analysis that are giving us this kind of outcome at least at the current stage. So I think I spoke for almost 1 hour. So probably -- in order not to be tedious and to make the conference a little more interactive, I would let you read the following pages by yourself and open now, let's say, the Q&A session. Thank you for listening. Operator: [Operator Instructions] First question is from Ben Rada Martin, Goldman Sachs. Benjamin Rada Martin: I've had 3, please. My first one was on CapEx. I know in the release, you spoke to an increase planned in 2026 versus '25 and some of the buckets in terms of decarbonization and production. Would you be able to talk to what kind of quantum you expect for 2026 CapEx and then in terms of the medium-term CapEx expectations as well? And then the second would just be on the guidance assumptions and very much understand how uncertain the backdrop is currently and very helpful to kind of talk through some of those impacts. But if we look at that moderate decline or slight decline in EBITDA expected, is it right to assume that there's limited energy impacts so far in that number? Or I guess, what kind of pressure do you see embedded within that forecast? And then finally, would just be another quick one on energy. When would you expect to see, I guess, pressure come through the cost base? Is it more of a second half story at the moment? Pietro Buzzi: Yes. I mean the last 2 questions are, I think, related. And the answer, yes, is that definitely, we have -- as usual, I mean, we have in front of us about I mean, starting from January more than today because already 3 months past, but usually 5, 6 months of fairly stable energy cost or at least as we budgeted because of, let's call it, hedging policies, which is different from one country to another. So -- but if you look at the mix or the weighted average, in general, we have 40%, 50% more or less of our cost already hedged for electrical power or fuel. So yes, the trend if it changes, which I think it will change, unfortunately, will be more evident in the second half. By how much, it depends because we have, for example, also countries in Europe, typically Germany and in Europe, the debate about power cost is really significant. I mean there's a lot of political pressure on power cost being too high to reduce even talking about how to amend the ETS. Tomorrow [indiscernible] will speak about that. Let's see what he say. But -- so specifically in Europe, the big countries like Italy and Germany, we don't see a big risk on power cost. The [ famous ] also energy release has been approved. So there, we should be okay. On fuel cost is different, of course, also even if our share of so-called waste-derived fuel is increasing gradually, we are still strongly dependent on pet coke. So let's say, a price which is somehow linked or index to the -- to some extent, certainly to the oil price. So there, easily, you could see an increase of, I don't know, 20% or so. And unfortunately, this is well possible. It will impact only partially, as I said before, the full year results, let's say, 6 months, but it's well possible. On the CapEx, our trend, I think -- I mean, we are always very kind of ambitious. We are approving the budget. And then as I was explaining before, some of the biggest projects are actually taking longer to be executed to come to the execution phase. Engineering is more complex versus the initial -- I mean, at the time of the initial approval. So if you want to take an average of the next 2, 3 years, I would move it to between -- I mean, to be -- except for -- I mean, just the industrial CapEx, then there will be other kind of equity investments or M&A transaction is different. But I would move it to between 500 and 550 is probably a number that considering the major projects that we have underway, including some expansion projects is likely to be the right one. Operator: The next question is from Elodie Rall, JPMorgan. Elodie Rall: So maybe you could talk to us a bit on the price action that you're taking in Europe to start with to offset indeed the increasing inflationary environment. You talked about your hedging strategy. Are you pushing prices a bit more? Are you seeing the industry pushing prices and where are we at, at the moment in terms of price increases in Europe? And same question for the U.S. You talked about better demand year-to-date. So how do you see scope for price increases? I guess April will be the big start in the U.S. And then I had a clarification on your buyback plan. You did EUR 200 million very recently, I think. And now you announced another EUR 300 million plan. Is that the correct way to understand it? You can do another EUR 300 million from here? Okay. I'll stop here. Pietro Buzzi: Yes. On the buyback, in theory, well, first of all, we have to complete the -- undergo, let's say, EUR 200 million. And then the idea is to renew, let's say, the authority to ask for a renewal, to ask the AGM a renewal for the authorization to authorize an additional EUR 300 million. This EUR 300 million still will -- I mean it doesn't mean that we will necessarily, let's say. exercise the authorization. This is a preliminary authorization, which is given by the AGM, and then the Board will have to decide whether to actually start the program or not. What I think is likely to -- I mean this is unless, again, the market changes completely, but I think we will complete the undergoing EUR 200 million. And then we will have an opportunity or a possibility for another, let's say, EUR 300 million in the 18 months, -- is lasting, let's say, 18 months after the AGM resolution or authorization. On the price section, well, there are some countries, I would say, in Europe, mainly which are also -- the biggest one Italy and Germany. The winter has been difficult in Europe. In general, what we saw and what you also will see when we release our, let's say quarterly summary. There's been cold rain. So particularly January and February was not a good time, let's say, to go for a price increase and March is better. And also the weather has been improving. And of course, January and February are not big shipment months anyway. So the attempt in Europe to increase prices is driven yes, mainly by the cost trend, which includes an additional cost for CO2 like we mentioned in the beginning, probably an additional cost associated with the CBAM, let's call it, also a decline of allowances because you have the 2 components. And yes, more, let's say, today than yesterday, of cost pressure on the energy side, mainly fuel, as I said before, than power. The magnitude, I think, it's moderate. We have to make sure, let's say that we will not be, let's say, losing volume or market share, either against the import or local competitors. But I think there is at least in these 2 important countries in Europe, there is a chance to a price improvement and being able to offset the additional costs like we were commenting before, let's say, on the -- on our policies to at least keep the margins. In the U.S., very differentiated from area to area. There are -- okay, we don't have the ETS, but we have other issues that are associated with the, first of all, okay, the imports where they are strong. That continue to be, let's say, have a very competitive approach in terms of pricing. Second, the industry structure has changed quite significantly. As you know, in particular, I think, the growth, the presence of QUIKRETE as a cement player has changed the picture quite a bit. Also QUIKRETE being major customer of cement from us but also from other competitors. And the fact that the declining, let's say, capacity utilization is clearly for them, let's say, an opportunity to self-supply cement to their, let's say, mixing operation as much as possible. It has to be obviously, economically feasible. So if they are too far away from one of their plants, they will continue to buy from another competitor. But if they can, they will obviously buy from themselves. And this is something that is putting pressure because if you lose volume, you have to look for volumes somewhere else, to look for volume somewhere else maybe -- I mean, pricing is a tool. And this is one of the changes we have to -- which again is very regional, but can have a significant impact. Another point which we also briefly mentioned in the press release is the product mix. There was an effort 2, 3 years ago, particularly by the European player in the U.S. to move as quickly as possible to the so-called 1L product. So with a lower clinker content for limestone, which is actually a very good product, but more capacity available and again, players in the market that don't have maybe European parent, like, again, QUIKRETE, their interest in developing or in pushing 1L is much less. And this is also translating into a competitive pressure, which is different from the past where you compete not only on pricing, et cetera, but you compete also on the kind of product that you're selling. So again, a mixed environment. Anyway, if the demand stays, I think that maybe not everywhere, but some price improvement we can get also in the U.S. And then we will see how much the cost pressure -- how much cost pressure there will be on the margins. But it's a complex -- it's a more complex landscape than 2, 3 years ago certainly. Operator: Next question is from Emanuele Gallazzi, Equita. Emanuele Gallazzi: I have 3 questions. Well, the first one is on Germany. Can you just discuss a little bit more on your expectation for the German market in 2026. You mentioned a gradual recovery supported also by the infra spending plan. When do you expect the first contribution from it to kick in? The second one is on the capital allocation, very clear on the buyback. I was looking at, let's say, the M&A, can you just update us on your M&A strategy at this stage and the opportunities that you see in the current environment? And the last one is a clarification on the guidance. I probably missed it. But on which euro-dollar exchange rate is based your current guidance? Pietro Buzzi: Okay. We are at [ 120 ] right now as an average for 2026 versus [ 114 ] -- was [ 113 ] approximately in '25. So this of course, can be -- as I said before, can be better. If we look at the trend so far is better. Will it last? I don't know, anyway. M&A, yes, is the focus. I mean it is a focus in a sense that our idea is to be, of course, continue with a stronger financial discipline and consider only, let's say, targets that are -- can represent a real opportunity, not only on a strategic view, but also on the financial, let's call it soundness of the overall proposal. I think that today, but also before, it really hasn't changed much. The focus remains countries where we already are. So the opportunities -- if there are opportunities where we already have a presence, certainly they are -- we give them much more investigation, but much more, let's call it, focus than versus opening totally new country or venture with someone else. I say something that is publicly known publicly available, certainly in Brazil recently there have been movement announcement, CSN is announcing -- more than announcing, I think, it started actually a sales process of its cement division. And is it -- is this a real opportunity or not for us? Difficult to tell. I mean, we have to -- but certainly, again, looking at the main strategy, which is reinforced in a disciplined way. The presence where we already are, it could represent, let's say, an opportunity. It has to be investigated. I mean the process is at the beginning. So we need to understand a little better. But generally speaking, this kind of, let's call it, opportunities are more interesting than others. And basically, that's it. In Germany, it's not totally clear how much of the, let's call it, public infrastructure plan will translate into a greater consumption already this year. We think that something will show -- is starting to show, will start to be available. In terms of quantities, let's say, of cement coming from these kind of projects. It's difficult to tell, but maybe I don't know. I don't have -- I don't want to spend a clear number without support. But what we are seeing that, yes, there is a rebound due to the normal, let's call it, cyclicality. The fact that after 2, 3 years of declining consumption, it is rebounding. There is more, I think, also optimism let's call it, confidence within the country after the change of government. And there is a potential, but more than potential consumption coming from the infrastructure plan. So what we can do maybe is to look at -- again come back with some figure with you looking at -- because last year, the association was giving some information of some -- was somehow trying to assess the overall impact, but was more on a longer time horizon. So in the next, let's say, 5, 6 years. Maybe there are more recent, let's say, population assessment of what could be or what will be -- what can be, let's say, the impact already in 2026. But I think certainly, there is some. Operator: Next question is from Arnaud Lehmann, Bank of America. Arnaud Lehmann: So I have 3 questions, please. Firstly, on CO2. Do you have an idea how much reduction in free CO2 allowance you will get for '26 relative to '25, that's my first question. The second -- yes, go for it. Pietro Buzzi: No, no. Let's take... Arnaud Lehmann: So the other one is, I think you're announcing a stable dividend for 2025, even though your net cash position is above EUR 1 billion, it seems very comfortable. So maybe we could have hoped for a little bit of growth in the dividend. And lastly, on your assets in Russia, we've seen some competitors in different sectors are seeing their assets being seized. Do you think that's a risk for Buzzi as well? Pietro Buzzi: Well, it is a risk. It's probably the largest or the greatest or the biggest risk that we have also in our, if you call, enterprise risk management tool. The probability, extremely difficult to tell. I think -- because this thing really depends on one person now. He wakes up on a certain morning, and if you ask me, I don't see it very likely. I believe that we can continue this way, which is not great because, unfortunately, we are not able to manage the way we would like. But to see really political attack of this kind, in my opinion is unlikely. Anyway, the risk is certainly there. And it's, I think, yes, the biggest risk we have currently in our system, in our -- the second question, tell me again was... Arnaud Lehmann: So the other 2 were how much reduction in free CO2 allowances and why a stable dividend? Pietro Buzzi: Okay. Reduction is about 1 million less for the group, 1 million tons less. And I think we estimate to be in deficit, certainly in Poland and, I think, in Czechia too. And in Germany, I don't recall if we will be in a deficit also, yes. Yes. In Italy, probably slightly deficit, but not as important. And I think we will continue with our internal let's call it, guideline, which is to use the bank or the inventory of free CO2 allowances in the countries where they were coming from. So meaning in Italy, we will continue to use them and in the other country, also the way of somehow hedging the cost by CO2 rights to the extent needed. But we are also able to secure some already at the beginning of this year when the prices went down. So I think we should have a yes, of course, a cost -- additional cost versus last year, but probably a per ton cost, which is still, let's say, favorable. On the stable -- the idea behind a stable dividend was quite simple. Our net income is the same of last year. It is true that our payout is not that great, and there would be room for improvement. I think there is room also in the coming year is basically -- is basically -- and overall, to let's say, examine and to consider the overall shareholder remuneration. So it is true that on one side, we did not increase the dividend. But we do have the undergoing buyback, which makes the overall -- okay, maybe not for everyone because it depends if you're selling your shares or you're keeping your shares. But in general, I think the buyback is beneficial to everyone. And also the decision to cancel the share will adjust at least in -- finally, in a definite way the EPS with an improvement there, which should translate sooner or later, providing, let's say, that the markets are also becoming a little less volatile and improvement in the share price. So we thought that this would be a balanced decision. And also looking at the coming year, where our outlook is not for an improvement. It seems to us that to keep the dividend, which is, yes, same as last year was a balanced decision. Operator: Next question is from Yassine Touahri, On Field Investment Research. Yassine Touahri: I would have 3 questions. First, a question on pricing. I think in Germany and Italy, some of your competitors have announced price increase of 5% to 10% as soon as April. Have you seen price increase later -- in the U.S., I think it was outside of Texas. You had also price increase of like, I think, between $8 and $12 per ton sent by many of the largest players to ready-mixed concrete producer. Again, have you announced similar price increase? Then I would have a second question beyond the price development. On your vertical integration strategy in the U.S. I think that a lot of your competitors are vertically integrated. And you can see -- I understand from your comment that the lack of vertical integration, for example, versus QUIKRETE has been an issue. Is it something that you could consider addressing in the next 5 to 10 years with potentially more acquisition in aggregate of ready mix? And the last question would be on Russia. Could you give us the amount of cash which is currently in Russia when we're looking at your net debt position? Pietro Buzzi: Okay. Russia, I will check it and let you know quickly. In the U.S. as well, we are not totally, let's call -- let's say, without it, in some area, actually, our vertical integration in Texas and San Antonio, Houston, Austin, et cetera is quite significant. We don't have a presence in the aggregates. I mean, this is true. We have some aggregate production, but not -- never, never considered a business in itself and always somehow related to our ready mix activity. So as a way to supply our own ready mix activity. This will become more significant in the coming years. I would say yes. I think initially, at least more oriented towards ready-mix than aggregates because is the most important in terms of keeping your production levels steady, again, not losing customers or avoid losing customers. So it can be seen more, I would say, as a defensive move than strategy, devoted to additional vertical integration in a market which is -- has been shrinking, let's say, in a way or another in a market that's changed like we mentioned before and also changed in terms of big ready-mix producers that are importing cement for their own supply. The number -- I mean, the risk of losing customers and not being able to replace it with another customer, particularly in the ready-mix environment is great. So it can certainly make sense to add the vertical integration, as I said, more as a defensive move than something else. But it is a defensive move that will allow you to keep your volumes and also to keep your -- again, to keep your margins. On the pricing environment, I think, we moved that, but not by the same percentages there. Yassine Touahri: I think the percentages are mentioned, where the price increase announced. Not the price increase that are expected to be realized. I suspect that the message, I think, of the larger -- of some of the large cement players in the U.S. would be that a low single-digit price increase being expected which I suspect means like maybe half for the price increase... Pietro Buzzi: Yes, probably this is, again, not everywhere, but probably this is the most likely outcome, usually. You have protection, you have anyway, as I said, many players that are behaving maybe not exactly as the big ones that are particularly in this moment where the output is not going up. So clearly, looking very much to their capacity utilization than versus just even if economically speaking, it could make more sense sometimes to lower your production and increase prices in the long run. This is not necessarily a good move because if you lose a customer and you're not able to recover it in the long run, this will translate into lower profitability, too. So yes. Yassine Touahri: And another question was, have you sent a price increase letter for April in the U.S., Germany and Italy? Pietro Buzzi: In the -- so-called price increase letter is more a technique of -- more common in the U.S. than in Italy or Germany. In Italy and also in Germany is more case-by-case, customer-by- customer, let's call it, discussion or any way proposition. So... Yassine Touahri: If we look at -- if you look at your own vertical integration into concrete in Germany and Italy, are you increasing prices in April substantially to offset the higher fuel costs that you're expecting and the CO2 alone? Pietro Buzzi: Is not yet the higher fuel cost. It was more, let's call it, decision taken already at the beginning of the year. And yes, we have price improvement in place, which I don't think will be the magnitude that you were mentioning, right. Like I mean, for the reason that you were mentioning. But yes, we think it's likely to stick also because again, more recently, people are feeling pressure also on other cost factors. So it's more -- it's easier, let's say, to accept also an increase of the cement price if there is a general inflation rebound. Yassine Touahri: And maybe following on this situation. I think like the importer in Europe, especially in Italy, they will probably have to pay a CBAM cost, but it's a bit unclear they don't know. I think what kind of cost they will have to pay because the benchmark is not public. What do you feel? Do you feel that the independent importer are being a little bit careful because they might have EUR 10, EUR 15 extra cost, but they are not yet increasing prices? Pietro Buzzi: No, I think they've been already increasing in general. It is like you're saying, it's not totally clear what will be the -- it depends actually on their CO2 content. And yes, each importer can have a different impact according to the kind of product that is bringing in. But yes, I think everyone is considering just maybe as a conservative move to make sure that they are not losing, let's say, versus the previous price. So that they will be able somehow to offset the additional CO2 cost associated with the CBAM scheme. Yassine Touahri: And on the pricing as well, I think, on one side, you've got the imports that are making it difficult to increase prices. But at the same time, I guess, the cost of importing is probably increasing a lot with the oil price making shipping more expensive? Is it something that could be helpful for you to either increase prices or get back the market share that you lost versus especially the big bag imports? Pietro Buzzi: Yes, yes. It is a chance. The -- anything that makes the import more expensive will allow, let's say, or will help, let's say, domestic supply to be more and more competitive, certainly. Yes, it is a chance. Yassine Touahri: On the other side, on Texas, you've got a new cement plant. I think it's the first time there is a cement plant in Texas for many, many years in West Texas. It looks like it's 10% of the Texas capacity, so it's a lot. And the -- it looks like they're going to -- it looks like the cement plant could be -- I guess, do you see a risk for your market share in West Texas? I think where there is a lot of oil well cement. Do you see a risk as well in your market share in the Dallas Fort Worth area where I guess that if they want to ramp up, they will have to sell to Dallas and Fort Worth. Is there a risk for sure? Pietro Buzzi: Of course, there will be more competition, particularly on the oil well. On the other hand, it is true that GCC was already preparing, let's say, the commissioning of the plant by importing cement from Mexico in the area. So it's not totally new. I mean, of course, they have more capacity locally, so they are more competitive, and they can be more aggressive, but they were anyway preparing the commissioning already before. And on the oil well, yes, at the end, the oil well is really a matter of what is the oil price. So if the oil price stays or goes up, I think, yes, okay. There can be more comments. I think this kind of customer is a little different. I mean, being really special products with a very strong significant quality requirements, consistency must be difficult -- it's much more difficult for a customer of oil well to change supplier versus the normal ready-mix customers. So there must be -- okay, there is a huge pricing difference they will consider it, but then they have to test it. I mean they have to go through their quality department is quite complex. So -- and again, the demand is driven purely from the cost -- from the price -- oil price. Yassine Touahri: Okay. Is it fair to assume that in the U.S. in your forecast, you've assumed maybe a bit of a price increase in land, but no price increase in Texas at this stage? Pietro Buzzi: Correct. Yassine Touahri: Maybe on Russia, on Russia, you don't have the number on even approximately the amount of cash that you have in Russia? Pietro Buzzi: EUR 150 million. Operator: Next question is from Alessandro Tortora, Mediobanca. Alessandro Tortora: A few questions, if I may, as -- so the first one is on you made a comment on a very significant margin expansion. Clearly, volume were up, let's say, low single-digit prices, let's say, not slightly up. So the game changer not to stay in this, let's call it, new level, very good level. So you -- it was the work you did on the cost side. And the real mission of the market is I don't know, to be structurally above 30%. So just to understand that clearly, I understood your comment on we need, let's say, more, how can I say, disciplined competitive landscape and for the CSN deal could help on this. So just your thoughts on this because clearly, the margin expansion, especially in the second half was very, very good operationally. Pietro Buzzi: Yes, yes. It was driven, yes, by -- well volumes were good, let's say. So capacity utilization is some plant is really pro capacity, which is giving the best operating leverage. So this is always -- the energy -- power cost, in particular, we save some. We are also becoming in a sense, indirectly, but let's say, producer of renewable energy. We have now an investment into a renewable energy company, which is allowing us to enjoy, let's say, better -- lower, let's say, power cost. And pricing, not a great change. I mean you don't see such a significant improvement. But there are some improvements in prices. Also again, because the market is quite brilliant, let's say. And yes, CSN could be an opportunity besides -- I mean, whoever buys it, will buy anyway, we'll have to invest a significant amount of money because -- okay, relatively speaking can be cheap or expensive. It depends on how much we want to take. But in absolute term, is any way sizable company. So -- and yes, CSN has been certainly more aggressive, let's say, than other competitors on prices, particularly in the Southeast region. So we hope that this could translate into a more disciplined competitive environment that is certainly a chance, let's say. Alessandro Tortora: Comment on pricing strategy discussion client by client in some countries. So is there at least with some clients in some countries, some kind of indexing with, let's say, CO2 price and so on? Because we saw the decline in CO2 price recently. So just to understand if there is or not. Pietro Buzzi: No, there's not. It would be too dangerous in our -- I mean someone definitely did it in the past, but it's very dangerous. I think in our opinion, will not be the right commercial marketing strategy. Alessandro Tortora: Okay. Because there are different opinions on that. And on the CapEx side, the question is, first of all, you mentioned this run rate for the next 2, 3 years with EUR 500 million, EUR 550 million per year CapEx. Does this include the, let's say, U.S. expansion project you had in mind? Pietro Buzzi: Yes. Yes. Correct. Alessandro Tortora: And which is... Pietro Buzzi: I mean, which will start, but we'll start at a slow pace, let's say. But it will start, yes. Alessandro Tortora: Okay. Okay. And secondly, in theory, we should have, let's say, a second round of grants, let's say, in Europe also for, let's say, some innovative carbon capture projects. Is it something that you're still monitoring? Do you believe that maybe you can take, I don't know, a decision on developing at least one single project for this technology? Or let's say, the approach is to be extremely, let's say, conservative and maybe waiting a little bit for technology getting more mature? Pietro Buzzi: Monitoring, yes. Lorenzo, you want to add something? Lorenzo Coaloa: No, I mean, again, monitoring for sure and -- but let's say, at the same time, we need probably more clarity on the regulation and also on the criteria that will be, let's say, considered by the commission when it comes to the evaluation of the project. Pietro Buzzi: Let's see if there is -- what happens on the ETS side, I say tomorrow, but not tomorrow, I mean the so-called revised ETS by June, I know it's, if I recall correctly, let's see what happens there. Because still, we believe that the cost benefit of a carbon capture project is unjustifiable, let's say, today. So what you are focused much -- is -- and also to -- okay, if you build a totally new plant, but again, cost benefit very difficult to justify, it can make sense. I mean you build a totally new plant. You introduce also the carbon capture installation. But to add the carbon capture installation to an existing plant, which dates to maybe the 70s or the 80s, they are not bad, but let's say there's plenty of room for improvement in energy consumption and also fuel consumption before carbon capture installation. So we are a little bit shifting our focus on projects in countries like Poland or Deuna. Deuna, where we put on all the carbon capture projects to something that will reduce, let's say, maybe CO2 emission by 20%, 25% and modernize the plant. So being ready to possibly at a later time, which I think it will be inevitable because the deadline that are set today are realistic at a later time to introduce a carbon capture on a plant, which has already been optimized, instead of doing it on a plant, which is again 30 -- 40 years old. Lorenzo Coaloa: And maybe if I may add, with a return -- I mean, return on investment definitely much more interesting than a single installation, carbon capture installation with, let's say, a business plan, which is at the moment and with the current situation is not really flying. Pietro Buzzi: It's a better way to lower CO2 emissions for sure. Alessandro Tortora: Okay. Okay. Just if I may, sorry, you mentioned that the financial, let's say, income was not pretty high this year. Can you help us to quantify, sorry, the FX gain component in that number? Pietro Buzzi: Yes. Well, one item, which is included into that figure is also the bad will of the UAE acquisition, which is EUR 44 million positive. If you look at the fewer net interest expense and net interest income in this case, we have EUR 60 million and last year, it was EUR 55 million -- EUR 60 million, yes. Last year it was EUR 55 million. So it is EUR 5 million up. This is the cash portion. The noncash portion, the 2 big items are [ 75 ] of ForEx, so nonmonetary. And -- well, I don't know if it nonmonetary, the bad will because we paid anyway. So -- but we paid less than the equity -- book equity. And so we have [ 44 ] positive that we are also inside the same line item. Operator: [Operator Instructions] Mr. Buzzi, there are no more questions registered at this time. Pietro Buzzi: Okay. Good. Thanks, everyone, for listening. I don't know how many are still listening. But anyway, I hope it was somehow helpful. And we stay in touch, of course, with our Investor Relations team and looking forward to meet you personally in the coming months. Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.
Operator: Good afternoon, and welcome to the Dave & Buster's Fourth Quarter 2025 (sic) [ 2026 ] Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Cory Hatton, Head of Entertainment Finance, Investor Relations and Treasurer. Please go ahead. Cory Hatton: Thank you, Gary, and welcome to everyone on the line. Joining me in the room on today's call are Tarun Lal, our Chief Executive Officer; and Darin Harper, our Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. This call is being recorded on behalf of Dave & Buster's Entertainment, Inc. and is copyrighted. Before we begin the discussion on our company's fourth quarter and full year 2025 results, I'd like to call your attention to the fact that in our prepared remarks and responses to questions certain items may be discussed, which are not entirely based on historical fact. Any of these items should be considered forward-looking statements relating to future events within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Information on these risks and uncertainties have been published in our filings with the SEC, which are available on our website. In addition, our remarks today will include references to financial measures that are not defined under generally accepted accounting principles. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP measure contained in our earnings release this afternoon. And with that, let me turn the call over to Tarun. Tarun Lal: Thank you, Cory. Good evening, everyone, and thank you for joining our call today. I'm pleased to report that our back to back -- back to basics strategy continues to gain meaningful traction. As we discussed on our Q3 call, we saw improvement in same-store sales throughout last quarter. I'm encouraged to share that excluding the 3 days of impact from Winter Storm Fern in January, we also saw improvement throughout the fourth quarter. We have now had 6 consecutive fiscal months of improving same-store sales for the Dave & Buster's brand, when adjusting for the 3-day storm impact and ended February roughly flat in same-store sales. We're also pleased to report that during the first fiscal month of 2026, we have experienced continued momentum with roughly flat total company same-store sales as well as growth in revenue and adjusted EBITDA. Since joining the company about 9 months ago and fully immersing myself in every facet of the business, I'm even more confident in our ability to dramatically improve operating results. During financial year 2026, we will continue to make meaningful improvements to the business. Sharpening our marketing and promotions to drive brand consideration, traffic and repeat visitation, refining our food and beverage pricing and menu architecture, launching a powerful lineup of culturally relevant new games, implementing our improved remodel program and opening up several new stores at attractive returns on investment. We've also significantly strengthened our leadership team and are prioritizing our field operations and culture, because we know that exceptional execution and guest experience will lead to improved traffic and sales. We believe we have the right strategy, the right team and the right momentum to create meaningful value for our guests and our shareholders. Our priorities for financial year 2026 are clear. One, grow same-store sales; and two, generate meaningful free cash flow. To that end, during financial year 2026, this management team is highly confident in its ability to deliver an increase in same-store sales, revenue and adjusted EBITDA and to generate more than $100 million in free cash flow. Let me now provide an update on each pillar of our back to basics strategy. First, on marketing. As we discussed last quarter, we have reconstructed our marketing strategy with a clearer, more disciplined approach to planning and execution. We created a simplified marketing and promotional calendar which effectively communicates the attractiveness of our offerings. We continue to believe that improving and optimizing our marketing message as well as our media mix are one of the biggest opportunities we have to improve traffic, sales and adjusted EBITDA. We've been laser-focused on leveraging data to balance our investment between television and digital channels, and to make sure we get the right message to the right people at the right time. Looking ahead to 2026, our marketing reset will go even further. Our focus is to rebuild brand consideration while promoting culturally relevant promotions at attractive price points. We're also focused on building brand buzz, leveraging our exciting Instagram-worthy entertainments on the arcade. One recent example of this was our Valentine's Day promotion where we gave away diamond engagement rings to 5 lucky customers using our Human Crane. The campaign generated over 6 billion impressions and a tremendous amount of earned media value. We're also activating our loyalty program to drive personalized messaging and increase guest traffic through frequency. We are building a scalable special events business engine that turns even into culturally relevant moments and converts our event guests into repeat walk-in customers. For example, Super Bowl, which used to be one of the worst Sundays of the year for us, ended up being a highly productive day for us this year with ticketed advanced purchase programming where guests would enjoy our massive 40-foot screens, unlimited wings and games for $24.99. Looking ahead, and as already highlighted, the FIFA World Cup represents another significant opportunity to establish Dave & Buster's as a destination of choice for major watch occasions and drive incremental traffic this summer. Second, during the last several quarters, our food and beverage offering has been one of the earliest success stories of our back to basics strategy. As we've discussed, the percentage of guests who came into our stores to play games and then also ate food had declined significantly versus historical levels. Our menu had changed quite materially in the years following COVID. Over the course of 2025, we reversed that trend decisively. Our new menu, which is largely a return to our successful pre-COVID menu was launched in October and delivered strong results. In late 2025, traffic in our dining rooms was up meaningfully year-over-year which helped us grow our comparable food and beverage sales approximately 7% during the fourth quarter. Our F&B same-store sales have now been positive for the last 6 fiscal months through February 2026. In addition to our new menu, our improved execution around our Eat & Play Combo offering has also been a powerful driver. Guest opt-in to EPC has improved significantly to a double-digit percentage of our guests since the beginning of 2025, growing from roughly 10% in Q1 2025 to approximately 16% in Q4 2025, demonstrating the attractiveness of the offering and seamless accessibility via kiosk. All told, the percentage of people who came into the stores -- excuse me, all told, the percentage of people who came into our stores to play games and then also ate food also improved by roughly 700 basis points year-over-year in Q4. Third, regarding our games offering. As we have previously discussed, we moved away from introducing new games to the system over the last 6 years. This current management team strongly believes that was a mistake and that delivering new and relevant games and attractions as the company had done consistently before COVID is a key element to attracting new and repeat guests and drive traffic and same-store sales. To that end, we've been hard at work and are excited to be introducing at least 10 new games and attractions across our store portfolio in year 2026. This is the most new games we have introduced in a year since 2017, demonstrating that a renewed focus on our entertainment offering is a core and obvious pillar of the back to basics strategy. Many of the new games we will introduce this year will be associated with highly relevant cultural IPs, which will maximize awareness, engagement and traffic. This is one of the strongest lineups we have ever assembled as a company, and it reflects our commitment to delivering experiences that are bigger, bolder and more immersive than anything our guests have seen before. Our new lineup of innovation includes games featuring John Wick, Stranger Things, Mandalorian and Grogu. Additionally, given the exceptional demand, we have now rolled out Human Crane across the entire system. We're equally excited about our big push to leverage our highly differentiated watch offering, which includes massive 40-foot screens, promote visitation to our stores during World Cup soccer games this summer. We devised a comprehensive 360 activation around soccer this summer, which will experience new games, win items and new F&B innovation all linked to soccer. This revitalized product offering represents a significant step forward in the quality, variety and cultural relevance of our entertainment offerings. We are combining world-class IP partnerships and innovative original concepts, and we are doing it in a way that drives both per capita spend and repeat visitation. I could not be more enthusiastic about what this means for our guest experience and our business. For year 2026, our ambition is to continue to evolve our play experience and position Dave & Buster's as the fun capital of America. Fourth, regarding operations. We are reinvesting in our field operations with comprehensive training programs designed to empower our teams to deliver exceptional guest experiences and drive higher customer satisfaction. By fostering a collaborative culture that receives strong support from our shared services center, we're reducing turnover, enhancing engagement and creating an environment where our people and our brand can truly thrive. For year 2026, we are establishing what we call an obsession metric around speed of service with clear standards at critical guest moments such as 1-minute greet and 4-minute drinks time, supported by coaching and performance management. We are also revamping our labor model to optimize staffing and simplify operational processes. To bring all this together and further accelerate our momentum, we are elevating our culture and people capabilities across the organization. From launching industry-leading GM incentives to investing in training programs and simplifying task for our team members, we are sending a message to the field that our success is closely tied to our execution and to our guest experience. For year '26, we're implementing leadership development programs and tools across both the shared services center and the field to strengthen our bench, improve retention and increase internal mobility. We're also establishing our employee value proposition and unifying our culture by defining and activating a shared mission across Dave & Buster's and Main Event. We want our teams to know that we are walking the talk on the fundamental truth that our guest experience can never exceed our team member experience. Finally, we have made continued progress on our revamped remodel program. As mentioned last quarter, we have high confidence. We have found the right layout to increase traffic and overall productivity and generate highly attractive ROIs at a reasonable cost. We recently opened 3 new remodels and we have 3 new remodels under construction and plan to open an additional 4 remodels in the next 9 months. As a reminder, remodeled stores consistently outperform non-remodeled stores by approximately 700 basis points. As we have discussed before, after COVID, this company moved away from many of the very clear and obvious elements that made it successful. Marketing and promotions changed significantly. The F&B menu and offerings changed significantly. The commitment to annual games and entertainment investment changed significantly. The focus on operations excellence changed significantly and a commitment to refresh stores while maintaining the core ethos of what customers love about D&B changed significantly. We are now going back to basics piece by piece to restore those elements that made this brand and this company is successful and it's working. We have made meaningful progress over the past 9-plus months and expect that progress to now even more quickly convert to financial results. We cannot have more confidence in our back to basic plan and our ability to grow this business meaningfully in the near term and over the long term. Before I pass the call over to Darin, I'd like to spend a minute addressing a topic we have gotten from many shareholders, our plans around capital expenditures, including our investment in new stores. I want to be clear that we are highly focused on strict capital expenditure discipline, minimum ROI thresholds and generating significant free cash flow. We are consistently evaluating our capital investment plans, including our new store plans and will make adjustments as we weigh the best returns for each dollar of capital. If and as we make material adjustments, we will communicate them to you. We currently plan to spend no more than $200 million in CapEx during year '26 and to deliver over $100 million in free cash flow this year. To talk about this more and review our financial results, let me hand the call over to Darin Harper, our Chief Financial Officer. Darin Harper: Thank you, Tarun, and good afternoon, everyone. As Tarun touched on in his comments, there are several areas where we have made very solid progress over the past several months. While our comparable store sales decreased 3.3% versus the prior year in the fourth quarter of fiscal 2025. Excluding the impact from the extreme winter weather, we estimate our comparable store sales would have decreased 1.5%. Excluding the impact of the winter storm, we saw sequential improvements in our comps during Q4 with period 12, the month of January, up 90 basis points at the Dave & Buster's brand year-over-year. Also during the quarter, F&B same-store sales increased approximately 7%, special events grew nearly 7% and as Tarun mentioned, our remodel locations continue to outperform the balance of the system by approximately 700 basis points. Additionally, we drove sales improvement throughout our half-price games test on Sunday through Thursday. As Tarun mentioned, we experienced roughly flat comp sales performance to start the first period of FY '26. And while early days, we also saw year-over-year total revenue and EBITDA growth in the first period of FY '26 versus the corresponding period in the prior year. This year, we also have seen a spring break calendar shift from March into the month of April. So we need a few more weeks before we have a good read on performance during our spring break period. During the fourth quarter, we generated total revenue of $530 million, a net loss of $40 million or $1.15 per diluted share, adjusted net loss of $12 million or $0.35 per diluted share and adjusted EBITDA of $111 million, resulting in an adjusted EBITDA margin of 21%. We estimate that the negative impact of the winter storm in January was approximately $1 million in adjusted EBITDA, and there was further EBITDA headwind of $9 million related to higher deferred revenue from the prior year. We expect this deferred revenue headwind to decrease in magnitude for the next couple of quarters and to be approximately $10 million in total for FY '26. Our fourth quarter EBITDA margin decline year-over-year was impacted by 110 basis points related to this deferred revenue headwind, 100 basis points of higher marketing costs and the balance of the margin impact due to net deleverage coming from the 3.3% same-store sales decline, which, as previously noted, was impacted 180 basis points by the winter storm in January. As Tarun mentioned, we expect positive comps in FY '26, leading to EBITDA growth and steady improvement of our margin profile over the course of FY '26. Our adjusted net loss of $12 million for the quarter was impacted by $24 million of incremental depreciation expense year-over-year. We anticipate a more normalized depreciation and amortization expense in FY '26 of approximately $75 million per quarter. As a reminder, reconciliations of all non-GAAP financial measures can be found in today's press release. On the expense side, we believe that we have an opportunity to drive even more cost optimization. Over recent weeks, we have put together -- we have put significant effort into further improving our internal processes and controls and costs and have in parallel kicked off a comprehensive initiative to identify material cost savings across all aspects of our business, including bringing on a new senior resource who spends 100% of his time focused on cost savings initiatives. As a result, we believe we can meaningfully improve our margins over time. Our new store development continues to deliver strong returns, and we have had a solid pipeline of upcoming store openings. In the fourth quarter, we opened 2 new domestic Dave & Buster's stores which, as expected, took our new domestic store openings for the year to 11 plus 1 relocation. We anticipate opening 11 new stores in FY '26 comprised of 8 new Dave & Buster's and 3 main events, and we expect them to contribute approximately 280 incremental operating weeks in FY '26. On the international front, with the opening of our fourth international franchise location in the Dominican Republic, we expect 3 more international openings in the next few months in Delhi, India; Perth, Australia and Mexico City, Mexico. As a reminder, we have secured agreements for over 35 additional international franchise stores in the coming years, and we see international franchising as a driver of highly efficient incremental growth, monetizing our brand around the world with minimal investment and risk. We have a massive opportunity internationally. We generated $103 million in operating cash flow during the fourth quarter, ending the quarter with $17 million in cash and $483 million in total liquidity, combined with the availability under our $650 million revolving credit facility, net of $14 million in outstanding letters of credit. In 2025, we invested approximately $270 million of CapEx on a net basis when factoring in payments from our landlords. We are making increasing progress converting our strong operating cash flow to free cash flow through more strict management on capital spending by eliminating inefficient capital spend. As a reminder, we are committed to generating meaningful free cash flow while continuing to invest in double-digit new store growth, new games, other high ROI initiatives and a more diligent remodel program. As Tarun mentioned, in FY '26, we fully expect the net CapEx figure to be no greater than $200 million. We are constantly evaluating our capital investment program. And if we identify better uses of our capital that makes sense for the business, we will be sure to provide an update. We completed 3 remodels of our latest remodel prototype at 3 Dave & Buster's already this year in FY '26 and are under construction at an additional 3 D&B stores. We believe this new prototype will maximize the impact elements of our successful store remodels, while eliminating previously ineffective spend for a high return outcome, and we look forward to updating you on the progress in this area. As Tarun also mentioned, given our plans, management is highly confident in its ability to grow comparable store sales, total revenue and adjusted EBITDA during FY '26. Additionally, given our improved discipline around capital expenditures, we expect to generate more than $100 million in free cash flow during FY '26, which we believe positions us well to continue investing in the business, reduce leverage and return capital to shareholders at ours and the Board's discretion. Our financial foundation remains strong, supported by a business model that consistently generates high returns, healthy unit level performance, disciplined cost management and very straightforward potential to generate meaningful free cash flow. Both leadership and the Board remain sharply focused on executing our priorities to drive same-store sales growth and generate significant free cash flow. And with that, operator, please open the line for questions. Operator: [Operator Instructions] The first question comes from Andy Barish with Jefferies. Andrew Barish: I was just making sure on the opening comments, you were just referring to February because of the March spring break shift, but anything else just obviously, the world's changed a lot in March. Anything else you care to comment on just in terms of consumer behavior, just too tough to read with if everything is shifting around in the business. Darin Harper: Andy, it's Darin. Yes, look, it's -- obviously, there's a lot going on from a macro perspective from gas prices, from consumer sentiment and the like. It's just -- it's hard for us to parse through what's impacted to the macro versus some of these holiday shifts with spring break and Easter. So as typical for our business, we kind of like to get through this spring break period of time and try to get a better read on things. But it's mindful. We certainly know it's out there, but it's too early for us to really parse through what impact that's having. Andrew Barish: Okay. Helpful. I guess kind of philosophically Tarun, more value seems to be helping to stabilize the business, whether that's half price gains now more than just Wednesday or kind of eat and play and the season pass and things like that. Are we -- I guess, are we seeing the impact of that on margins sort of as we came through the back half of last year? Or do you think like the promotional stuff can be offset by more traffic? Just trying to get a sense of kind of like what the trade-off is to kind of continue to improve margins as you guys have talked about for 2026? Tarun Lal: Andy, that's a great question. And I must say kudos to our product design and our marketing teams. They've designed the product in such a way that actually there is minimal margin erosion on either half of games or on the seasons pass. In fact, what we are seeing is that our consumers are spending the same amount of money on the games, but because they're spending more time on the games floor, they're actually consuming more food and beverage. So it's working really well. And we don't see any risk of margin dilution as a result of these value promotions. Darin Harper: Yes, I'll add too, Andy, with -- because we've driven more attached on the F&B side. We're seeing more sales mix sort of weighting to F&B. And again, that's not a product of less entertainment or anything happening on the entertainment side, it's us driving more revenue on the F&B side. So that inherently -- every percentage point of sales mix into F&B will have about 16 basis points of sort of inherent pressure on gross margins. But that's something that obviously we'll live with. It's incremental penny profit. But yes, as Tarun said, we've really done a nice job designing these to be very margin neutral. Andrew Barish: Got you. And then just finally, Darin, on the net CapEx kind of finished up about $50 million more than you kind of originally had targeted. Could you give us a little sense of the variance? Was it real estate proceeds or TIs or just kind of spending a little bit more as we look at the weighting or the timing of '26 openings? Darin Harper: Yes. Most of it, Andy, is coming from there was $33 million of FY '24 CapEx that bled into FY '25 that was a cash outflow this year. So that was a big factor. If you net that out, it's about a $233 million number versus the $220 million guide and that $13 million incremental increase, some of that came from rolling out human cranes faster than we wanted and a few other areas that we anticipated. So really, most of it is just due to timing really from the prior year. FY '24, that bled into FY '25. Operator: The next question is from Andrew Strelzik with BMO. Andrew Strelzik: I wanted to ask about the amusement business. With the momentum you're seeing in F&B, obviously, that means with the overall comp amusement was down pretty solidly. And so I guess, to me, that kind of feels like a truer sense of incremental traffic. Correct me if you think I'm wrong on that. But I guess I just want to ask then in your confidence that the initiatives that you have in store for '26 can change the trajectory of that business, which still seems like it's under a decent amount of pressure. Tarun Lal: Yes, Andrew, thanks for the question. As we have acknowledged that I think one of the mistakes we've made as a business is that over the past 6 years, we've not invested in amusements at all. And the number of new games in our arcade or in general, the total number of games in the arcade or partnerships with relevant IPs, that's been missing for a long time. And consumers have told us that when we've spoken to them. And so as we've done our research and as we've heard from our customers and responded to what they have said, we actually feel extremely confident that our strategy of bringing new games and bringing not only new games, but different kind of games with immersive experiences with culturally relevant IPs will attract a lot more foot traffic. And that's what we're looking for. We're looking for same-store sales growth driven by traffic. So it's early days to share all the plans for 2026. But we are in -- I mean, in addition to the -- what we have already shared with you about these 10 games that are being launched shortly, we're actually in discussions with big brands and partnerships, again, that are very, very exciting and gives us tremendous confidence that this is going to drive consumer interest. It will lead to brand consideration, and that will drive traffic and same-store sales growth. Andrew Strelzik: Okay. That's helpful. And maybe just following up on that, as you think about communicating that to guests. I mean the first point you brought up was the marketing. And so I guess from -- for 2026, I wanted to better understand exactly kind of how to think about what's changing from a marketing perspective. Is it mostly visibility or messaging and that type of thing? Or is the spend or media mix shifting in '26 versus kind of since you came in? How should we think about that? Tarun Lal: So Andrew, I think it's a combination of several things. I think -- my very strong view is one, that you need to have the right product. If you have the right product, it just gives marketing that ammunition to fire effectively. So we believe that by investing in products, in new games, in culturally relevant IPs, we're giving marketing the right ammunition and so that's kind of one piece. The second piece really is that we've now driven every execution on the back of compelling customer insights. So these are not just kind of marketing activations that are happening because of our gut or something that someone likes. It's actually based on the foundation of what consumers are telling us. So that gives us confidence. And then finally, to your point, that I think that we had really kind of leaned on two extreme ends on media mixes. And now because we are using data and we're using MMM, we feel a lot more confident that we are reaching the right target audience through our campaigns, both using television as well as social and digital. Operator: The next question is from Dennis Geiger with UBS. Dennis Geiger: First question, I wanted to ask a little bit more on the free cash flow guide for the year. Anything else that you could share sort of on thinking about margins as we go through the year or for the year or sort of the EBITDA at a high level? And then within the context of the CapEx, the net CapEx guide, I forget if you've given gross or anything on kind of sale-leaseback assumptions for '26 that you could share maybe? Darin Harper: Yes. So on the first part of your question, yes, we're not providing any incremental EBITDA guidance for FY '26. Yes, I think one thing that might be helpful is to point you to the sort of mini deck that we had back in September that there's a slide in there with a cash flow waterfall. I think that may give you some perspective on sort of how to think about modeling this free cash flow guide a bit. When it comes to the margins for the year, overall, we feel like obviously, growing comps is what's going to drive the margin growth. We feel like we are managing the rest of our lines pretty well between what we're doing from a cost optimization standpoint. We talked about how we're designing these promos to be as margin neutral as possible. And so we feel like how we're designing these, any inflationary pressures that we're able to manage through our cost initiatives. And then again, as we've communicated, getting it to positive comp territory, all that is going to lead and drive to margin accretion. So hopefully, that's a little bit helpful. And remind me, Dennis, the second part of your question, what was your question? Dennis Geiger: That's great, Darin. I think just a part and maybe you touched on it with the slide, I have to double check that. But just on the growth CapEx and the sale-leaseback assumption... Darin Harper: Yes, yes, as far as -- yes, the gross Yes. Look, we haven't sort of historically broken that out too much. However, look, I think you could look even in our K that was filed as well. There's a table in MD&A, which breaks out the gross versus net in terms of some of the sale-leaseback proceeds. Look, I'd say that's a pretty good proxy. If you take our sale-leaseback proceeds there, divided by the number of new units. Yes, I think that will kind of give you a sense for sort of how to think about gross CapEx and sort of how we're thinking about it in FY '26 as well with -- because we're opening about the same number of units. Dennis Geiger: Got it. Very helpful. And then just a follow-up question. Just as it relates to the positive comps target for the year, really helpful to get a good sense of the key initiatives and sort of where progress is there. Anything else as you guys look into your crystal ball and you think about benefits from tax rebates over the coming couple of months, you think about maybe where gas prices might be, World Cup. Just kind of factors beyond the strategic plans, how you're thinking about some of those factors and how important they may or may not be within the context of full year comp expectations? Tarun Lal: Yes. Dennis, as far as the external environment is concerned, we cannot really predict what's going to happen tomorrow. So our focus is really on internal plans. And as we've shared before today that we are very confident that by just going back to our back to basics strategy of things that we used to do really well until COVID hit and we kind of stopped doing it. We feel very confident that, that's going to drive same-store sales growth, and we're already seeing that. We're already seeing in the last 4 periods that we've stemmed the decline. We're getting increased traffic. The business has stabilized now. Now the big investment we are making is in new games, which, again, is like not something that is just a mere hope. We have spoken to our customers. We have spoken to our teams to understand what our guests are saying, and one of the things that they've been craving for is more games, more experiences and more immersive experiences. So we're going to give it to them, not only through like the typical arcade game, but through culturally relevant IPs. So that's kind of the second piece of the puzzle. The third piece of the puzzle that gives us confidence is that as we shared earlier that a micro event like a Super Bowl became like a big day for us in our business. And we are now latching on to several such micro events, including the World Cup soccer, which is like honestly, in our mind, is going to be a catalyst for us to truly show our guests how compelling our watch program is. Like there's nobody in this country who has 40-foot televisions across the entire estate. Like this is -- and again, we are guilty of not promoting this enough, but now we have a really strong catalyst that gives us this opportunity. And then finally, as I said to you that we are in conversations with big IP holders on partnerships that we should be in a position to share when we kind of come back in 3 months' time to speak to you guys. And all that in combination gives us confidence that the trend we are seeing will continue and in fact, improve. Operator: The next question is from Mike Hickey with StoneX. Michael Hickey: Tarun, Darin, Cory, just curious, double-clicking here again on 1Q. February, flat same-store sales. It seems like we should be very excited, but March, I'm just not getting a good feel for it. Obviously, we're last day of March here, you are 2/3 through your 1Q period. You guided to inflection in same-store sales. Is this a 1Q possibility? Or should we set expectations here, which obviously are important to maybe 2Q. 2Q I'm guessing you get some new games in. You've got the World Cup, you kick in marketing. You got tax refunds, you got no tax on tips. Is it really Q2 that we should be looking for your business to inflect? Or the February that we saw being flat, should that be a signpost for us here that your business has turned. Darin Harper: Mike yes, certainly, we're not prepared to sort of say what we think Q1 is going to print out and where that ultimate inflection point is. As mentioned, I mean, the spring break period of time is honestly our -- it's our high watermark during the year in terms of sales volumes. And so when you have these shifts, it's pretty meaningful to our business, and we always like to get through this 4- to 5-week period of time and have a good sort of postmortem view of kind of where we were heading into it? What did it look like blended and kind of what's our exit velocity coming out of there. So look, we'll be very excited to share results in Q1. But at the moment, it's just too early for us to say. But as Tarun mentioned, I mean, all the areas that we're focused on, we have a lot of confidence in. I mean, I guess kind of drafting a bit off of even Dennis' questions of the income tax refunds and things like that. None of that, we sort of factored into, hey, these are going to be tailwinds that we're anticipating. But the other thing I'll say is, look, if there is some consumer pullback and consumers aren't traveling as much, having been in this space for a long time, sort of that staycation concept. D&B and Main Events are well placed to sort of take advantage of that as we get into the out of school and into the summer months as well. And that, combined with what we're doing with our 10 new games, we're really optimistic about. But I'll stop shy of sort of predicting when we think sort of that trend inflection point is going to occur? Michael Hickey: All right. I get it. You did say very excited. So hopefully, you'll be excited when you do report. It's nice to see the attach on the F&B. I think you highlighted a lot of that was the promo activity, the Sunday through Thursday half-price games. That seemed like it was a real driver for you. You pulled back on that. I'm guessing you're going to maybe start it again when you get some new games. So that's sort of a question -- a lead-in question to the question. Ten games is great. Is there anything -- your Human Crane was phenomenal. Putting IP on to boring games is not great. I mean, when you think about the -- not to say that they are, we just don't know -- when you look at the 10 games, is there anything to get excited about? Or are you just sort of installing and sort of hope and pray here? I mean besides the IP, like the games themselves, like is there anything compelling, and I didn't hear a World Cup game, I would have to imagine that you'd have the World Cup game. So any more color, please, on the games. If there's anything, innovation -- and if you're going to reengage that promo activity that Sunday through Thursday, we're all excited. It seemed like it was really moving traffic and you mentioned traffic was maybe what you need. That incremental traffic to split positive same-store sales. So it seems like the combination of those two will lead us to the inflection. Tarun Lal: I'll take that. So first of all, I think, we are far more excited than you highlighted on the new games. I think that the quality -- so as you know that in the last call, we mentioned that we brought in our Chief Games and Entertainment Officer, Putnam Shin. He's had experience with several entertainment companies in the past, including Disney, and he's worked on our games innovation calendar. And it is true that in the past, we have kind of almost kind of brought in games that are more reskin than anything truly innovative. We feel actually strongly that some of the games that we are launching now are different experiences and provide a far more social experience than the regular games that arcades have. So whether you talk about Stranger Things or John Wick these are games that will be exciting and exciting to our guests. We've actually tested these out, by the way. These are tested with guests, and we've got a lot of good feedback. We have a -- we have a game called the Perfect Pump actually, which is on the face of it, it may sound not exciting, but it's the most popular game in the lineup, and it could be because of the gas prices. But you can -- it's funny how much time our guests are spending on some of these games. Now as far as World Cup is concerned, we have 2 games that we're bringing in that's associated with soccer. We also have the arena that we are reskinning and we are bringing in 5 games within the arena that's associated with the World Cup. And that's not included in the list of 10 games that we're talking about. So honestly, once again, I want to reiterate that these are very exciting games. These are very exciting IPs. And as we move into the rest of the year, the quality of IPs, the quality of the games will only improve from here. Operator: The next question is from Jeff Farmer with Gordon Haskett. Jeffrey Farmer: Just a few follow-up questions to some of the stuff that's already been discussed. But from a same-store sales perspective in 2026, can you offer anything as it relates to what type of comp you might need to hold store level margins flat in 2026? Darin Harper: Yes. I -- in terms of holding flat comps, it's flat margins. I think you're looking at 1%, 1.5% sales lift, and that could keep us at flat margins. Jeffrey Farmer: Okay. And then -- as it relates to the Sunday, I think Sunday to Thursday LTO in terms of the half-price games, when that ran, what was the consumer response? Did you get the traffic sort of bump you wanted to in those sort of early week day parts or week parts rather? Darin Harper: Yes. So it was a really good learning for us because it was the first time that we've done it for an extended period of time. We had tested half-price Sundays for a while as well in sort of the latter half of Q4 last year. But yes, we saw traffic lift. We saw spend lift and there was some really good learnings for us to really understand the experience from some of our more loyal consumers versus the consumers that don't have as high a frequency level, how it impacted their spend, how it impacted their dwell time and how was their win experience impacted as well. So some really good learnings, and I would anticipate that you'll see more of that in the days ahead. Jeffrey Farmer: Yes. Okay. And then final question. You've been asked this in prior quarters over the last year or so. But what is the strategic upside pursuing another year of double-digit store growth on the heels of a multiyear run of same-store sales declines. Do you feel like that's what the investor community is sort of expecting of you? Or do you think that's the best way to run the model? What is the strategy in terms of maintaining that high level of unit growth as opposed to slowing down a little bit until you get the comps up? Darin Harper: Yes. Yes. Great question. And it's certainly the right question to ask. The overall historically, and here as of late, it's really been pinned on, hey, we continue to get good returns on these locations. The competition has not been slowing down, so it helps us continue to fill out markets and take a competitive advantage along the way. But I will say -- and one more comment. Obviously, the timetable for these is very lengthy in terms of turning the spigot slower or faster on it. And when we look at FY '26, we're under construction to some degree for every one of those locations, but FY '27 and beyond, there's obviously more flexibility. We are -- as we always have been hyper diligent on just making sure that we're investing these dollars correctly. But I think we are even more focused on absolutely making sure that we're going to get the right return. And that deploying capital there does not keep us from investing in something that can drive comps. Up to this point, we've been able to do both. But we are very mindful of whether separate capital allocation approach in terms of new stores can be accretive to us from a same-store sales perspective. But -- but it's very mindful. This is a very, very, very important consideration as we move forward on that end. Tarun Lal: Jeff, I just want to add to what Darin said. First of all, let me assure you that we've heard your feedback and the investment community feedback. Two, again, internally, we are committed to making sure that our core business delivers and anything that distracts us from the core business, we will not do. So it brings me to the fact that I don't believe that opening new stores that deliver very high cash and cash returns is a distraction. Now if somebody asked me "Hey Tarun, is there a growth target, are you going to open 15 stores, 18 stores, 20 stores?" My answer is going to be no, because that could become distracting. But I think that if we had sites that were very carefully chosen for their ability to deliver access to our guests to provide D&B in a way that's more convenient to our customers to ensure that the competition doesn't take the right side we are still very, very excited and committed about these opportunities. But if we feel that, that opportunity is not going to deliver, if there's a risk associated with that, we will rather conserve the CapEx and invest that into the core business. So once again, our assurance that we hear you guys and we are committed to really focusing and prioritizing our core business and making sure that it delivers positive same-store sales growth. Operator: The next question is from Brian Vaccaro with Raymond James. Brian Vaccaro: My question was just on the fourth quarter comps and the monthly cadence. I just want to make sure my notes were right. I think you had previously said that your November comps were down -- and today, I believe you said January was up 90 bps, which would imply December was down pretty significantly. Is that correct? And if so, maybe just some color on what might have driven that in December? Darin Harper: Yes, Brian, our same-store sales cadence sequentially actually improved throughout the quarter. And so P10 was the softer of the 3 as we -- and again, this is adjusting for the weather impact. So yes, there is actually a sequential improvement throughout the quarter. And keep in mind, too, the 90 basis points was the Dave & Buster's brand, specifically as well. I guess I do want to highlight that just we felt like that was worth calling out. Brian Vaccaro: Okay. Okay. That's good to note as well. And just so we're on the same page in terms of cadence of new unit openings there in 280 weeks implies pretty back-end weighted. Just -- is there any way to just high-level expectations kind of on the pace of openings, but if I heard the 280 weeks correctly? Darin Harper: Yes, that's right. Yes. You heard the 280 weeks correctly. Yes. I guess as some high level for you, we've got 3 locations expected to open in May, location in June, location in July, a couple in August, 1 in September and then 3 in November, if that's sort of helpful from a top line sort of cadence. Brian Vaccaro: Yes, that's great. And then just last one, I wanted to just ask about the marketing spend. I believe that was about $93 million in fiscal '25. Can you elaborate a little bit on your marketing plans for '26, either as it relates to the spend level or the mix you might deploy between sort of traditional TV versus digital? Darin Harper: Yes, sure. So from a spend level, overall, we anticipate sort of traditional media spend to be very similar year-over-year. Some nontraditional type of spend may go down a little bit, some nonworking, we expect it to go and add a little bit as well. But overall, sort of that core media, we expect to be similar-ish currently. As -- in terms of mix, like we're going to continue to optimize this. I think what you'll will find as in FY '25, as we leaned more into TV, linear, CTV, et cetera, that mix may wait a little bit more into digital as we've gotten better with our modeling and targeting our consumers, but certainly not where it was 2, 3 years ago. So I think a good blend as we work through our right mix analysis and just continue to iterate with the consumer on the right message and the right channel. So I hope that's helpful. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tarun Lal for any closing remarks. Tarun Lal: Thank you, operator, and thank you to everyone for your time this evening. Let me leave you with this. Dave & Buster's is at an inflection point. We are executing against a clear differentiated strategy rooted in innovation, operational rigor and an unwavering commitment to the guest experience across every dimension of the business, brand marketing, culinary quality, in-store execution and next-generation game content, we are raising the bar, and the early returns are validating the thesis. Our strategic framework is straightforward and disciplined, building enduring brand equity over time, drive top line performance with urgency, deliver a world-class guest experience at every touch point, protect and expand industry-leading unit economics and underpin all of it with the right talent, the right culture and the right technology infrastructure. At the end of the day, the financial model is elegantly simple. Same-store sales growth-driven EBITDA expansion and EBITDA expansion drives long-term shareholder value creation. We are operating from a position of growing momentum. And frankly, we are still in the very early innings of unlocking the full potential of this platform. Nonetheless, in these early innings, we have made significant and tangible progress, including; one, 6 months of sequentially improving Dave & Buster's brand same-store sales; two, roughly flat total company same-store sales and positive revenue and adjusted EBITDA growth in February; three, securing an exciting lineup of 10 new exciting games. Four, successfully turning F&B same-store sales consistently positive; five, returning to and executing on the EPC, the Eat & Play Combo, a highly successful promotion with continually increasing opt-in rates. Six, other successful promotions, including half off games, seven, successful remodels, which outperformed the system consistently by 700 basis points and lastly, eight, continued international expansion, reaching 4 total international locations with an additional 3 more to open in the next 60 days. We see a clear path to sustain same-store sales growth, expanding free cash flow and durable value creation for our shareholders. I want to thank our teams across the globe for their extraordinary effort and dedication. They are the ones making this happen. I look forward to updating you on our continued progress. Have a wonderful evening. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, everyone. Thank you for standing by, and welcome to BIO-key International's 2025 Year-End Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded today, Tuesday, March 31, 2026. I will now turn the call over to Bill Jones, Investor Relations. You may proceed. William Jones: Thank you, Jerry. Hosting today are BIO-key's Chairman and CEO, Mike DePasquale, and its CFO, Ceci Welch. As a reminder, today's call and webcast as well as answers to investor questions include forward-looking statements that are subject to risks and uncertainties, which may cause actual results to differ materially from current expectations. Words like anticipate, believe, expect and project or similar words identify and express forward-looking statements. These statements are made based on beliefs, assumptions and information currently available to management as of today and pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act. For a more complete description of the risks and uncertainties that affect future performance, please see Risk Factors in the company's annual report, Form 10-K with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements made as of today. The company makes no obligation to revise or disclose revisions to forward-looking statements to reflect circumstances or events occurring after this call. Now I will turn the call over to Mike to begin. Mike? Michael DePasquale: Thanks, Bill, and thank you all for joining us today. After my remarks and Ceci's financial overview, we will open the call to investor questions. As highlighted in today's press release, we had a broad base of achievements in 2025 that position BIO-key for improved top line and bottom line performance in 2026 and future periods. Kicking off the year, we now anticipate Q1 '26 revenue of approximately $2.2 million, representing a 37% increase over Q1 and 2025 and a larger sequential improvement over Q4 '25 as well. We also expect a substantial improvement in our Q1 '26 bottom line performance exceeding each of our fiscal '25 quarters, and although we were disappointed by our 2025 revenue performance, we are now seeing much more urgency and focus from our customers and prospects, to take action in better securing access to mission-critical systems, particularly in the military and defense, financial services and regulated industries. Our 2025 revenue comparison versus 2024 was also impacted by two significant factors totaling roughly $2 million. The first related to a $1.5 million 2-year license renewal with a foreign national bank, the bulk of which was recorded in 2024. This caused roughly an $800,000 decrease in recognized revenue related to this customer in 2025 versus 2024. Despite revenue recognition timing related to this customer, the relationship continues to grow nicely, and earlier this month, they executed an expanded 1-year license renewal of over $1 million for 2026, which represents an approximately 30% increase in revenue over the previous contract. Our year-over-year revenue comparison also reflected the completion in 2025 of our strategic transition to selling only BIO-key-branded solutions in the EMEA region. As anticipated, this transition is beginning to benefit our gross margin and growth prospects as we rebuild our EMEA pipeline with BIO-key-only solutions and sales opportunities that carry substantially higher net margins. While these factors led to lower year-over-year software license, both Hardware and Services revenues grew in 2025 due to the expansion of our customer base and licensed endpoints. Turning to our outlook. Let me review key trends in the enterprise authentication market that support our optimism for 2026. First is the increasing need for secure access to digital platforms and protection against growing cybersecurity threats, which is driving rapid growth in the authentication solutions market. Global sales are estimated to be $23 billion in 2025 and projected to reach almost $100 billion by 2035, representing a compound annual growth of almost 16%. As cybercrime becomes more sophisticated, we expect businesses and governments to increasingly embrace advanced authentication technologies such as those that BIO-key provides to safeguard sensitive information and maintain customer trust. This surge in demand for enhanced authentication solutions is being driven by the widespread adoption of digital services, e-commerce, online banking and the growing use of mobile devices. Authentication solutions, including biometrics, MFA, digital certificates are all crucial to ensure that only authorized individuals gain access to private information or systems. A key gap we fill is that mainstream MFA solutions offer only device-assisted authentication, whereas our PortalGuard platform is a complete MFA offering with phoneless and tokenless authentication that leverages biometrics. Our Passkey:YOU Solution provides web key secured hosted FIDO2 passkey authentication for tokenless, phoneless and passwordless authentication with biometric efficiency. By the year-end 2026, passwordless authentication will be the default for workforce access across almost every enterprise. The shift is being driven by the increased vulnerability of passwords to phishing, credential reuse and account takeover attacks. More than 70% are already moving towards passwordless adoption and about 3/4 of enterprises expect to invest in passkeys or passwordless tools this year. Biometric authentication adoption is expected to continue to grow, particularly in the most sensitive and high-value use cases in the regulated spaces such as military and defense, financial services and health care, where we have already seen growing adoption. The traction we see is also aided by more supportive regulatory frameworks in many foreign jurisdictions as well as by escalating geopolitical risks, which we're all aware of. AI-driven threats are forcing security leaders to rethink how access decisions are made, emphasizing the need for much more resilient identity strategies, where biometrics can play a pivotal role as opposed to conventional methods that are most vulnerable to AI-powered attacks. Authentication technologies are converging towards unified access for workforce, partner and privileged access under single strategic foundations. Our PortalGuard Passkey and Biometric Solutions provide infinite flexibility in deploying to any component of a company's employee population despite infrastructure and job function. Phones and tokens are no longer necessary and with 16 types of auth-factors, one size no longer fits all. These significant shifts in how enterprises approach authentication with a focus on security, convenience, compliance and evolving regulations, play directly to our strengths. In 2025, we launched our Defense & Intelligence Cybersecurity Initiative, which is discussed in today's press release. We also highlight several recent contract wins and momentum we are seeing in the defense and financial sectors, as well as significant new partnerships, both domestically and internationally. Since that's in the press release, I won't repeat it here, but we can certainly address any questions regarding any of those areas in the Q&A session. In terms of our continuing investment in R&D and new product development, in Q4, BIO-key formally introduced the new FBI FAP 20 Certified EcoID III fingerprint scanner. EcoID III is our most advanced reader, which pairs encrypted device-to-host communication with liveness detection for faster, more secure authentication. EcoID III is primarily for highly regulated industries and the most sensitive zero-trust environments such as defense and banking. We're also finishing up work on our most significant update ever for our PortalGuard Identity platform, Version 7.0. This includes a major platform monetization, significant new configurability and flexibility and improved lower-cost deployment capabilities. It is currently undergoing comprehensive third-party security testing for an expected release during the second quarter. Our updated product offerings and unique biometric capabilities give us a sustainable competitive advantage, particularly as I discussed in the regulated industries due to those strict compliance standards. Our defense and banking niches, in particular, have significant global upside in 2026 and beyond. Today, our business is predominantly subscription-based, and we continue to utilize a partner-centric model, in which roughly 50% of our new U.S. business and nearly 100% of our international business is sold through a network of sales channel partners, including Amazon and TD Synnex, which we have built relationships with over the last few years. Turning to overhead and cost. In 2025, we were able to reduce our total SG&A expense by almost $800,000 or 11% and total operating expenses by 7%. This mission continues, and we are optimistic about the potential benefits of AI adoption in our processes to drive even further operational efficiency, productivity and lower cost. These initiatives play an important role, along with our growth efforts to progress the company toward our goal of reaching breakeven and profitability in 2026. Finally, we also made great strides in strengthening our financial position in 2025, ending the year with $2.7 million in cash, up more than $2 million from 2024 and increasing our book value to $7.6 million versus $3.8 million at the end of 2024. Our current cash position and expected cash receipts provide a solid working capital base to support our growth plans for 2026. We're off to a strong start this year with building momentum in several key verticals. We expect top line expansion, combined with expense management to meaningfully advance our goal of reaching our target again of breakeven and profitability this year, and we are well positioned in terms of financial liquidity to fund our growth plans. Given the growing adoption of BIO-key's flexible passwordless, tokenless and phoneless authentication solutions that we are seeing, we expect 2026 to be a very exciting and productive year for our company and for our shareholders. We're entering the most exciting chapter in our company's history, one defined by innovation, strategic expansion and relentless focus on delivering value to our customers and our shareholders. Significant growth and profitability are in sight and with the right team, technology and partnerships in place, we are poised to deliver long-term shareholder value. Now let me turn the call over to Ceci for a review of the financials. Cecilia Welch: Thank you, Mike. We released our results this morning, so let me provide a quick review. Reflecting the factors Mike addressed earlier, the total 2025 revenues decreased 12% to $6.1 million versus $6.9 million in 2024. 2025 revenue did benefit from over 100% increase in Hardware revenues to $1.3 million in 2025, largely due to increased purchases of our Biometric Solutions, and Service revenue increased 6% to $1.2 million due to BIO-key's growing customer base and new customer deployment. In Q4 of '25, License Fee revenue decreased 26%, Hardware revenue increased 85% and Service revenues decreased 10% as reflecting the factors Mike discussed as well as the timing of deployment. Our 2025 gross margin was 77.5% as compared to 81.4% in 2024, primarily due to the mix of software fee -- License Fee revenue and Hardware revenue as a percent of total revenues. Gross margins on license fee improved 91% in 2025 from 88% in 2024, reflecting the benefit of selling branded products versus third-party products in the EMEA region. In 2025, we reduced our SG&A costs by 11% due to proactive cost management, including reorganization of sales personnel, reducing marketing show expenses and lower audit fees, partially offset by higher professional fees related to BIO-key financing activities. We will continue to focus on cost reduction opportunities as we move forward in 2026. Research and development engineering costs increased 4% in 2025 due to support the new product development, as Mike discussed. As a result, operating expenses decreased 7% overall in 2025. Lower operating costs helped to offset the impact of lower revenue in 2025 as BIO-key's net loss increased to $4.6 million or $0.69 per share from $4.3 million or $2.09 per share in 2024. BIO-key's Q4 '25 net loss increased to $1.7 million or $0.19 per share as compared to the $1.4 million in 2024 or $0.46 per share. Weighted average common shares outstanding, which reflect warrant exercises and other financial activities are provided in today's press release. As of December 31, 2025, BIO-key had current assets of $4.6 million, including cash of $2.7 million as compared to the prior year-end of $1.9 million, which included $438,000 of cash. Accounts receivable increased 73% to $1.2 million at December 31, 2025, from $718,000 at the end of 2024, and our book value increased to $7.6 million at year-end 2025 from $3.8 million at the close of 2024. We plan to file the 10-K within the next week. With that, operator, let's please proceed to the question-and-answer session. Operator: [Operator Instructions] Our first question today is from Jack Vander Aarde with Maxim Group. Jack Vander Aarde: So Mike, I think just -- you already addressed it pretty well. I just want to also just kind of get a little more clarity on the 2025 revenue was a little softer than you initially expected. But obviously, great to see you're targeting a strong first quarter '26 with $2.2 million of revenue. That's fantastic. Just trying to better understand the 2025 result. So one of the reasons mentioned was due largely to a significant contract renewal with a foreign retail bank in 2024 that didn't benefit 2025. Can you just maybe speak to this a little bit further? Is this an active customer? Are they due for an expansion or renewal in 2026? Just help me better understand that particular customer. Michael DePasquale: Yes. So -- and in my comments, Jack, by the way in my comments, I mentioned that they did renew for 1 year at over $1 million. So about a 30% increase in value of that contract. So it was a 2-year contract that we closed in 2024. We took the revenue all in 2024 for that 2-years. So that's why, again, in 2025, obviously, it wasn't repeatable. So that's what I was trying to say. But you're looking for a little more color on 2025. And I would sum it up this way outside of the comments that I made in the prepared session. We went through a significant transition in our EMEA division. That took a little bit longer than we expected, but quite frankly, is going to have a huge benefit for us here too in 2026 and going forward because of two things. Number one, we're selling BIO-key-only solutions with and including our Biometrics, which are getting very, very good visibility, especially within the regulated industries, and that's banking, defense, health care, that kind of thing. The second piece is the reason this again took a little bit longer, the deal size in EMEA is -- some of the deals are 7-figure, but most of them are in the high hundreds of thousands of dollars. So they are larger deals. They're all through channel partners. They're typically with larger customers, and the benefits are incredible when they close. But that took us a little bit longer to get over the chasm in 2025. And I think that's why we underperformed our expectations there. Most of it was timing, but we are very bullish and very encouraged about 2026, and we will take advantage of that benefit. And that should get us to our goal and objective of breakeven profitability and obviously being cash flow positive this year. Jack Vander Aarde: Okay. Great. No, I really appreciate that extra color, Mike. That actually makes a lot of sense. And then just to be extra crystal clear, is this -- in the press release, you did -- you referenced all these various specific deals in highlights. Is this the customer that I'm looking at? Or is this a different one under the financial sector, you secured a $1.04 million 1-year license renewal with the foreign bank. Was this -- is this that customer from 2024? Or is this a separate entity? Michael DePasquale: No, that's that customer. Jack Vander Aarde: Okay. Great. And then Mike, let's talk about the first quarter because this is definitely a point of emphasis that I just -- it popped out to me. Here we are, we're basically the last day of the first quarter as of today. So it sounds like you have a pretty good read-through on that $2.2 million target. Is this any of the -- I guess, one, any of the slippage from the fourth quarter that slipped into the first quarter? And then two, do you have a good sense of the mix of that revenue? Is it mostly license revenue? How do I think about that? And is it growth across all three segments? Michael DePasquale: Well, the majority will likely be License revenue, but there's also some strong Hardware revenue as well, but very good margins. As you know, our blended gross margins are always never lower than the high 70s all the way up through the low 80s. So depending upon that mix, you're going to be looking at an 80-plus percent, if not more, gross margin across the board, whether it's hardware or software combined, that's what you can expect. Jack Vander Aarde: Excellent. That's helpful. And then -- just maybe if we could just touch on some of these large deals you're seeing in some -- it sounds like you're seeing more urgency, as you mentioned, from customers across -- you started listing a segment here and there, and then you started basically covering all your segments, it seems that -- where would you say -- if you could just highlight like maybe a handful of potential -- maybe deals that aren't in stone yet, but things that are kind of in the background that you're working on that could really move the needle. Would you say that these opportunities are in Europe and they're in your defense, your military and defense sector primarily, the financial banking financial services primarily? Or is it really all over the board? Where are you seeing the largest needle mover opportunities that maybe you haven't talked about explicitly yet? Michael DePasquale: Well, for sure, and we've discussed this before, we've developed quite a niche in defense and in government right now that, including and incorporating our Biometrics is getting significant uptake. So I don't have to remind you of the geopolitical scenario we're dealing with and certainly the sense of urgency around security. Within our niche, we have a sub-niche, which is focused on intelligence and information, and so that's top, top priority. And our solutions not only provide the level of security that's required, but convenience and availability and scalability, and that is critical and important in those segments. We're seeing the business on a global basis and the expansion will be on a global basis. It will be in EMEA, in Europe and in the Middle East. We have a couple of very large opportunities in South America right now that we're working with some very large partners, notorious partners. And the relationship that we announced just a couple of weeks ago with TD Synnex, as you know, they're one of the largest resellers and VARs in -- they're global, but certainly here in the U.S. and they're very focused on the state, local and federal business, and they are going to help us as a force multiplier, grow our business there as well. So it's across the board. I mean we have opportunities, for example, in the gambling space, right, to secure access to information, in banking in both large national banks as well as some regional banks as well, in health care, some national ministries all the way down to hospitals. As you know, we've been in that business for a long time. So we cut across every sector of the economy. But certainly in the regulated space, that's where I see continued growth. And it's not -- let's put it this way, if you're a defense or a government contractor right now, your business is going to blossom and grow. And each of those contractors, forget about the government themselves, has to secure at the NIST level, right? They have to secure and meet the compliance hurdles that are required to do business with the government, and that's a huge opportunity for us. And that's why our relationship with TD Synnex, I think, is going to blossom and be significant here domestically. Operator: [Operator Instructions] The next question is from [ Dan Camis ], a private investor. Unknown Attendee: Were your expenses in the first quarter about the same as fourth quarter? Michael DePasquale: Well, we haven't reported the quarter. So I can't comment on the exact numbers for expense and so forth. We did and do believe our revenue is going to be in the range that we predicted. But certainly, the first quarter should be similar to all of the other quarters. Sometimes events like, for example, when we attend a large event and we spend money perhaps there, it could be a little bit higher. We are relaunching our website right now and planning to do so early in the second quarter. So there might be some expense associated with that. But other than that, we're pretty stable. Unknown Attendee: Okay. So we should see pretty significant improvement in cash flow in the first quarter, it sounds like. Should we expect -- or can you give us any clue as to what to expect for expenses in R&D in 2026? Michael DePasquale: We're -- I think I mentioned in my prepared remarks that we're about to launch one of the most significant upgrades and enhancements for our PortalGuard platform Version 7. So a lot of that money has already been spent. We've been working on this for nearly 1.5 years, 2 years. And so I would think our R&D expenses are going to be relatively stable. I don't expect them to grow significantly. And we're really hoping, and we have a very intensive initiative going on within the company to assess AI-related tools, and we have contracts with a number of them -- and we're assessing where and how we can use those not only within all facets of the business, but within development to do two things: Number one, become more efficient and more productive; but ultimately reduce cost and increase our time to market. Unknown Attendee: I see. Anything revolutionary about this version? Or is it a marginal improvement and upgrade in your offerings that you can talk about... Michael DePasquale: It's significant, and we'll be announcing that shortly, especially for partners, Dan, where some of our larger partners want to be able to control, to mix and match and to deploy because everything is subscription now, to be able to deploy licenses, pull them back if, for example, the customer decides to cancel and to utilize those licenses in other accounts and so forth. So the ability to have multi-tenant management for those partners is a really big deal, and that's part and parcel of what we're doing here amongst many other enhancements for security, the incorporation of mobile technologies, a whole host of different options and availability. But a lot of this is focused on making our partners more involved in the dashboard and management of the solution set. Unknown Attendee: I see. Is there anything, I guess, in that 30% increase you mentioned in the $1 million foreign bank renewal that you're particularly excited about? Or was it just more licenses or... Michael DePasquale: Excited about a couple of items. Number one, obviously, the growth and the increase in the user population, but also the assessment of our more advanced technologies like one-to-many, that could dramatically change the way they operate and increase the size of this contract as we continue through this year and into next. So I'm very excited about that opportunity. And I think it's revolutionary because it could be one of the largest deploys of this type and this nature in the world. So we're enthused about that. There's a lot of growth potential ahead for that as well. Unknown Attendee: Are you saying that you're going to be scrubbing their database on a one-to-many basis? Michael DePasquale: No, no, no, they already do that. I mean that's [indiscernible]. I'm talking about some more advanced use of the technology. Unknown Attendee: Okay. I guess we'll be hearing about that then. Michael DePasquale: Hopefully. Unknown Attendee: You said it's a good start toward our goal of achieving breakeven results in early 2026. Are you saying there's a -- I'm just trying to clarify that statement in your release. Are you saying that, that's -- there's a potential for breakeven in the second quarter? Or were you just saying that you basically reduced your cash burn in the first quarter? Michael DePasquale: I think we're saying that our goal this year, right, is to be breakeven or profitable and to be cash flow positive, and that's our objective. And when we get there, I can't specifically say, but it's -- we should be there in the early part of 2026. That's our goal and objective. Unknown Attendee: I mean... Michael DePasquale: Again, it's not that sophisticated, right? You can look at our expenses in the -- I'm saying $2 million range, right, give or take, right? It could be higher, it could be a little bit lower. You can look at our revenue in the $2 million to $3 million range. You can look at our gross margins in the 80% range and you can figure it out. So that -- again, that's our goal and objective, right, to get there, to be there. And I believe we have as I mentioned and closed in my prepared comments, I believe we have the team, we have the partners, we have the product. And now we have, I'll call it, a very captive market, especially, again, in our niche on the regulated side to be able to get there. Unknown Attendee: Got it. Any evidence in the first quarter? I mean, I think one bug has always been U.S. businesses adopting passwordless adoption. You're indicating there's a significant move in that direction. I'm just wondering if there's any evidence in the first quarter that U.S. businesses are willing to purchase from BIO-key rather than their usual large competitors? Michael DePasquale: Yes. No doubt. New business, no question, yes. And again, that partnership, look, Synnex is a large company. They're a large public company. You can look them up. They're very enthused about offering our solutions and technology, especially in their public sector business. So I mean, that's a very strong proof-point that we can expand and them as a force multiplier, right, with the customer base they have, nevertheless, the partner network they have, we should see significant growth in that business. Unknown Attendee: Well, along that line, I think recently, when you've mentioned the partner announcement, there's usually been some underlying deal that supports it. Is that what's going on with TD Synnex? Michael DePasquale: We have a whole series of deals going with them. And you'll hear more about it as we're able to announce them. Unknown Attendee: All right. That sounds good. Can you say anything about your ARR, where is that running in the first quarter? Or are we still between $6 million and $7 million? Michael DePasquale: Yes, we're in that range. Again, we've transitioned -- other than our legacy customers, we have a handful of legacy customers. For the most part, our business is a subscription business. And even those legacy customers, we're migrating them, especially now that we have new and enhanced features and products, we have a good reason to be able to migrate them. So that sector of our business is definitely substantial, and multiyear deals are our total focus. And so even when we're on-prem, we can be subscription and we can be multiyear and still fit within the confines of their requirements. So that's another really big advantage that we bring to the table. And that's why I believe in the regulated industries, we're doing so well, where many -- especially international clients do not want hosted solutions. So everything here is kind of moving to the web, right, to AWS or Oracle or Azure, no question, here domestically. However, internationally, there's still a pension for storing and housing customer data on-prem, and we can go both ways. So we can offer our customers the opportunity to do it either way. And more importantly, and this is a new feature in Version 7, to be able to do both at the same time and to be able to transition seamlessly. So that's a powerful, powerful differentiator for us. Unknown Attendee: Got it. A couple more, I think. Any changes in the Boumarang asset or any news on that? Michael DePasquale: No. I know they have an S-1 filed now, which I think is public information and are looking at -- they've done a couple of acquisitions of like product, and that's really all I have at this point. I have no other information. Unknown Attendee: So no change in that asset value at all? Michael DePasquale: No. Unknown Attendee: Last question is, I think probably you have about 10 business days to get the stock above $1 before to stall a reverse split. At this point, is there anything you think that could still forestall such a split? Michael DePasquale: Yes. That's a great question. I didn't even think about quite honestly, the proxy that's out there. Obviously, belt and suspenders, right? We're not going to risk the potential to lose our NASDAQ listing, right? That's not going to happen. So obviously, the Board, it was prudent for us to file the proxy. We have until early May, I think the first week of May to have the stock trade for 10 consecutive days over $1, if that happened, we certainly would not do the reverse split. But if we need to, we certainly will. And so our shareholder meeting is scheduled late April. I'm hoping that in the next month that we're going to be able to find our way clear to seeing the stock trade up. But as you know, this geopolitical scenario hasn't been kind to anyone, and it doesn't matter who you are, what space, what industry, has been broad-based, and it's a difficult market. So who knows? But we certainly are in a position to do whatever we need to do to protect ourselves, especially now, as the wind is at our back, and we're feeling much more optimistic about significant scale of our business going forward. So I hope we don't have to do it, Dan, but if we do, we will. Operator: Showing no further questions. This concludes the question-and-answer session. I'll ask Mike DePasquale to provide any closing remarks. Michael DePasquale: Thank you again for joining today's call. We genuinely appreciate your interest in BIO-key, and I look forward to updating investors on our progress on our Q1 call in May. In the interim, we will update investors via press release of significant developments. If you have any questions, please reach out to our IR team whose contact information is in today's press release. With that, operator, please conclude the conference. Thank you, everyone, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. 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.
Operator: Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. conference call. My name is Kevin, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purposes. Before we start, I must remind you that statements made in this conference call concerning future revenues, results of operations, financial position, markets, economic conditions, product and product releases, partnerships and any other statements that may be construed as a prediction of future performance or events are forward-looking statements. Such statements can involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such statements. We ask that you refer to the full disclaimers in our earnings release. You should also review a description of the risk factors contained in our annual and quarterly filings with the SEC. Non-GAAP results will also be discussed on the call. The company believes the presentation of non-GAAP information provides useful supplementary data concerning the company's ongoing operations and is provided for informational purposes only. I will now turn the presentation over to Rekor's CFO, Mr. Joseph Nalepa. Joseph Nalepa: Good afternoon, everyone. I'd like to start by thanking all of our investors and stakeholders who have joined us on today's call. Today, I'll walk through our financial results for the year ended December 31, 2025. We've been focusing on execution and operational efficiency and are encouraged by the progress we continue to make. During 2025, we continued to deliver top line revenue growth while also finding efficiencies within our operations. For the year ended December 31, 2025, we recognized revenue of $48.5 million, an increase of 5% compared to revenue of $46 million in 2024. This increase represents continued growth across our public safety and urban mobility businesses. Throughout 2025, we continue to see growth in our sales pipeline and active deployments. As of December 31, 2025, our remaining performance obligations increased to $25.9 million, a nearly 80% increase from December 31, 2024, which highlights strong momentum, giving us confidence in our ability to drive growth into 2026. For the year ended December 31, 2025, recurring revenue was $23.9 million, up 6% year-over-year. This reflects our long-term strategy of expanding our recurring revenue base through software and Data-as-a-Service subscription contracts. Adjusted margin for 2025 was 56% versus 49% in 2024. This improvement was largely driven by a greater portion of high-margin software sales relative to our service and hardware-based contracts as well as operational efficiencies within our deployments. As we continue to grow, we expect margins to fluctuate over time, but to gradually stabilize as our Software and Data-as-a-Service businesses become a larger share of total revenue. As mentioned in our recent press release, we made the decision to onshore our engineering efforts to optimize our engineering operations and cost containment efforts. As a result of this decision, we recognized a noncash asset impairment charge of $3.8 million in 2025. A key highlight this year was our continued focus on optimizing our operations. Total operating expenses, excluding depreciation, amortization and asset impairment charges, declined 20% year-over-year, representing an $11.4 million reduction. These reductions were achieved across all major areas of the business and reflect continuing disciplined cost containment and a deliberate realignment of resources to support our strategy. The combination of revenue growth and improved operational efficiency resulted in significant profitability improvements. Adjusted EBITDA loss for 2025 was $18.1 million, an improvement of $11 million or 38% compared to 2024. A meaningful indicator of our progress in 2025 is the trajectory of our adjusted EBITDA loss throughout the year. Our adjusted EBITDA loss in the first half of 2025 was $13.1 million compared to a loss of $5 million in the second half of 2025, demonstrating that the operational improvements and cost discipline we've implemented throughout the year are taking hold and moving us in the right direction. We are encouraged by this trend and believe it reflects the early results of our strategic realignment. As we continue to evaluate our operations and identify further efficiencies heading into 2026, we do anticipate incurring onetime charges in the first and second quarters, primarily related to the cancellation and restructuring of existing agreements. While these charges are near term in nature, we view them as necessary steps in building a leaner, more scalable operating structure that positions the company for improved performance and long-term value creation. We entered 2026 with strong momentum and remain committed to driving sustainable growth and long-term shareholder value. I'm grateful for your continued support and partnership. Thank you for your attention. Robert, over to you. Robert Berman: Thank you, Joe, and good afternoon, everyone. 2025 was a defining year for the company. We made a deliberate shift away from building the company of the future and refocused the organization on executing a pragmatic, profitable business model. That shift is now clearly reflected in our results. We are a more disciplined, efficient and resilient company, having transitioned from a development-heavy R&D-driven organization to a customer-focused business with fully productized solutions. As our rightsizing actions conclude towards the end of Q2 and the bulk of our efficiency work moves behind us, we are entering a new phase of the company, one focused on scaling. In the back half of 2026, we expect to aggressively ramp sales execution and drive accelerated growth, supported by strong and expanding demand environment and a platform now built for scale. From a financial standpoint, we delivered solid progress. Revenue grew year-over-year despite a significant focus on efficiency. More importantly, our mix towards higher-value recurring revenue and tighter cost controls drove gross margins to 56%. We reduced net loss by 49% and importantly, achieved operating cash flow positivity in the fourth quarter of 2025. Combined with meaningful improvement in adjusted EBITDA, this makes a critical inflection point and demonstrates that our model is both viable and scalable. We have already captured substantial efficiencies through our rightsizing efforts and expect additional gains as we continue to align the cost structure with the current scale of the business. That said, we want to be clear, there may be some quarter-to-quarter variability as we complete this process. The long-term trajectory, however, remains firmly intact. We are also taking a disciplined approach to innovation spend. We are reducing and normalizing R&D to a run rate of 7% to 10% of gross revenue by the back half of 2026, aligning investment levels with a company of our size. At the same time, we are improving development efficiency through the use of modern tooling and focusing resources on near-term customer-driven priorities. Operationally, the decision to onshore our engineering team is already delivering results. We are seeing faster development cycles, improved responsiveness and stronger customer engagement. This is not only a cost and efficiency improvement, it enhances our competitive positioning. Between late '21 and late 2023, we completed 3 acquisitions, each with distinct technologies, teams and operating models, making integration a complex undertaking, after which we navigated a period of leadership transition across both the Board and executive teams, which added another layer of complexity. That work is now largely behind us. Integration is substantially complete, and we are operating on a unified platform and the organization is now aligned, stable and focused. Importantly, we continue to execute and make meaningful progress throughout this period, positioning us to fully leverage these assets as we enter a growth phase in 2026. We also launched Rekor Labs in 2025, focused on identifying synthetically created and modified media known as deep fakes. This initiative builds on technology we have been developing internally for years. Professor Sanjay Sarma has agreed to chair Rekor Labs and stepped down from the parent company Board to do so. In closing, we have materially strengthened the foundation of the business. We now have a more efficient cost structure, higher quality revenue base and a clear path to sustained profitability. With the heavy lifting behind us and a platform built to scale, we are entering our next phase focused on execution, growth and value creation. We believe we are well positioned to drive meaningful, scalable long-term value for our shareholders. Thank you for your continued support. And operator, we can now turn the call and open it up for questions. Operator: [Operator Instructions] Our first question is coming from Michael Latimore from Northland Capital Markets. Mike Latimore: Congrats on getting cash flow positive here in the fourth quarter. I guess as you look to '26 here, do you think -- do you expect the year to be cash flow positive, maybe excluding maybe onetime items? Robert Berman: Joe? Joseph Nalepa: Yes. So without -- I don't want to provide specific profitability guidance, but we are encouraged by the progress we made at the end of 2025, and we hope to continue to build on that momentum as we enter 2026. I think you'll see some additional cost savings related to the onshoring of engineering efforts as well as some other things that we're working on to kind of help reduce our expense base while also maintaining top line revenue growth. I do want to be conscious that there are going to be those onetime charges that come in as we look to restructure the business. But I think it all gets back to ensuring that we're running a lean operation and working towards that goal of becoming profitable. Mike Latimore: Yes. Great. Okay. Sounds good. And then maybe an update on the Georgia deployment. That was a big contract you guys won last year. Maybe talk a little bit about any deployments in the fourth quarter? How does that kind of play out through '26? Robert Berman: Yes. So Mike, typically, the state agencies or DOTs usually shut down between Thanksgiving and New Year's. It will let you do a lot of work. And then obviously, around the country, depending on the weather, it may be impossible. So we just started to crank things up there, probably towards the second half of the first quarter. And we're working down there right now at a pace that's more than we've ever done in Georgia before, and hopefully, it will continue. Mike Latimore: Right. Great. And you highlighted -- for '25, you highlighted the public safety sector growing. Can you just describe a few of the more important customers you had in '25 for public safety? [indiscernible] said in the press release. Robert Berman: Yes. We have a couple of large OEM customers. Unfortunately, that -- where we cannot use their name, but they've been using our engine and software for years. And the LPR business is growing. It's picking up, and we're seeing that. We still have probably one of the best engines there is given that it operates not only in the U.S. but in 90 other countries. So we're seeing more licensing of our software, which is where our focus is. And we're going to continue those efforts going into '26 because it's just a better business model, right? Less overhead, boots on the ground, sales churn and so forth. So we're focused more on the software side of it now, which is good. Mike Latimore: Great. And last one for me. There's been some talk about just political and, I guess, regulatory resistance to ALPR technologies. How do you view that? I mean is that elongating sales cycles? Is that creating obstacles? Or is it accelerating opportunities since you have some solutions there? Robert Berman: We -- the majority of our software license sales are not in the law enforcement arena. They are theme parks, parking companies and others. So we don't have that issue there. In law enforcement, it's always been an issue, Mike. It's not going away. But we don't operate like others. We don't have data lakes. We don't sell the data to third parties. That's where you see a lot of issues. So we kind of stay in the background and let others battle that out. Mike Latimore: I guess I'll sneak one more in, if that's all right. In Texas, there's a good kind of, I guess, master contract there and you have Austin and you're trying to sell other big cities. Maybe update on kind of the receptivity of other big cities to Command in Texas? Robert Berman: Only that it's moving forward. It's a very slow grind. These agencies do not move quickly, although we would like them to, and sometimes we're naive to think that, that was a much faster process. I do think the good news is that we're in front of them. I know we have a couple of meetings coming up later in April with a number of the districts. So there is interest. And we are in the process of working on a couple of new contracts and a couple of renewals of existing contracts. So I think onshoring command was a good thing for us to do because it brought us closer to the customer. And frankly, it fixed a lot of bugs that the system had that where attention wasn't being paid to it. So we'll be able to get that to scale a lot faster now and tweak it. Operator: Our next question is coming from Louie DiPalma from William Blair. Louie Dipalma: For Robert and Joe, for both of you, you referenced the Georgia DOT $50 million contract. In another geography during the summer of 2024, you won the 1,000-plus camera contract with the Florida DOT. What has been the progress of the Florida rollout? And do you expect that program to generate further growth in 2026? And what are the other prospects in Florida besides that particular contract? Robert Berman: Yes. So Florida, it wasn't 1,000. It was 150 systems and District 7. And it was a pilot as a state is looking to move to a Data-as-a-Service model for the entire state, and it's gone well, and we're in discussions with them now and the program is expanding. It's not public. I can't talk about it yet, but we're making good progress down there. The growth of the model and Data-as-a-Service is clearly starting to scale. So that's a good thing. And we're seeing that across a number of states, right? Louie Dipalma: Maybe the opportunity was 1,000 and your deployment was in the 100. Thank you for that clarification. Robert Berman: Yes. Yes, we deployed 150 systems in District 7. We have more cameras in Florida than 150. We deployed at least, I think, another 50, maybe a little bit more, and we're deploying now. But if you look at what the apparatus that we deploy does, okay, and you look at what it can replace, yes, there's thousands of systems that this technology can replace just in Florida alone, right? Louie Dipalma: And for the year that just concluded 2025, did you disclose what percentage of the $49 million in revenue came from recurring revenue versus equipment revenue? And what was the growth of your recurring revenue? Robert Berman: Yes, Joe, you want to take that? Joseph Nalepa: Yes. So it was about a 50-50 split, and we had about a 6% growth in our recurring revenue year-over-year. Louie Dipalma: Great. And should we think of that trend continuing in 2026? Joseph Nalepa: I think so. I think it is part of our strategy, we're working to push customers more to a recurring revenue model, and then that aligns well with Data-as-a-Service, Software-as-a-Service it's a little dependent on the buying power of the certain DOTs, but we do expect as part of our strategy to continue to push that into a recurring model. Robert Berman: One way to think about it is that the -- look, when we first went to the LPR business way back when law enforcement agencies, PDs, large and small, were not doing subscription-based procurement. They were buying hardware and software with maintenance packages. And that's traditionally how DOTs have operated. And we were the pioneers, the company we acquired SCS was the pioneer of the concept of Data-as-a-Service. So the idea that you get what you need to be able to have the data to manage your roadways, both for planning and public safety, but you don't have to buy anything. You just pay a company for the data, and they're responsible for the hardware, the software and the maintenance is a very appealing model. It's just that it takes government a little bit of time to catch on to that, but it is catching on. And we've got multiple states doing that now. So that's going to continue to expand because they get -- they can stretch the dollars that they spend much further, right? Operator: [Operator Instructions] And we reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments. Robert Berman: Look, everybody, thanks for your support. If you recall, back during the call, -- it was just a few years ago that we completed the acquisitions of these 3 disparate companies. And we've gone through a lot, and Rome isn't built in a night, right, or a day. And I think we've got the company stable. We're focused on profitability. I would encourage you to look at the back half of 2025 with regard to the EBITDA loss compared to the first half of 2025. And I would remind you that a lot of the rightsizing and cost savings and efficiencies that we're doing have taken place here in the first quarter of this year, which will probably be equal to, if not greater, than what we did last year. So you can look at the balance sheet and you can do the math, and you can see that the company is headed in the right direction. And the back half of '26, we're going to focus on scale, and then you'll see the company grow but grow profitably and smartly. So it's growing anyway, but growing a lot faster. So anyway, thanks, everyone. Appreciate it. Operator: Take care. Thank you. Thank you. That does conclude today's teleconference webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Birchtech Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, March 31, 2026, and the earnings press release accompanying this conference call was issued after market close today. On our call today is Birchtech President and CEO, Richard MacPherson; and CFO, Fiona Fitzmaurice. Before we get started, I'll read a disclaimer about forward-looking statements. This conference call may contain, in addition to historical information, forward-looking statements that are made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 or forward-looking information under applicable Canadian securities laws regarding Birchtech. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions or other statements relating to its future earnings, activities, events or conditions. These statements are based on current expectations, estimates and projections about the company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may and are likely to differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in Birchtech's periodic filings with the U.S. Securities and Exchange Commission or Canadian securities regulators. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control that may cause actual results to differ materially from those in forward-looking statements. During today's call, the company will discuss adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is presented as a supplemental measure of the company's performance and exclusive of certain items that the company believes do not reflect the core operations of the company. Such non-GAAP measures should not be considered in isolation or as a substitute for GAAP financial information. Additionally, the company's definition of these measures may differ from those used by other companies, making comparisons across organizations difficult. And finally, this conference call contains time-sensitive information that reflects management's best analysis only as of the date and time of this conference call. The company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this conference call. At this time, I'd like to turn the call over to President and CEO, Richard MacPherson. Richard, the floor is yours. Richard MacPherson: Thank you, operator, and good afternoon, everyone. Welcome to our fourth quarter and full year 2025 financial results conference call. I want to start with a few milestones that reshaped the company's trajectory over the past several months. In February of 2026, we completed our uplisting to the New York American Stock Exchange with a concurrent public offering raising the gross amount of proceeds of approximately $16.6 million, including the partial exercise of the underwriters' overallotment option. That capital raise, combined with a senior exchange listing, materially strengthened our balance sheet and broadened our investor base at a critical time in Birchtech's growth. Now on the legal front, the U.S. District Court for the District of Delaware entered our patent infringement judgment in December of 2025, which increased our judgment amount to approximately $78 million, up from the original $57 million unanimous jury verdict. Post-judgment interest will continue to accrue until this judgment is paid. Although defendants have filed an appeal, they have not posted a bond. Therefore, we have initiated collection proceedings, are pursuing enforcement of our judgment now. Since launching our IP enforcement strategy in 2019, approximately $37 million in license fees and settlements have been received, and we expect to convert other prior infringers into long-term commercial partners. Now turning to operations. Our business delivered fourth quarter revenues of $3.8 million with a 31% gross margin driven by our expanding base of licensed utilities and growing product supply relationships. U.S. coal market has stabilized and recent federal support for continued coal plant operation reinforces demand for proven emissions control solutions like our patented SEA platform. We believe this creates a longer operational runway for our core air quality business. And let me go deeper now into our air business. The SEA platform continues to anchor the company, and this quarter's results reflect the durability of that franchise. What has changed is the nature of the revenue as existing supply contracts expire for those utilities now under Birchtech's license agreements, we will actively work toward gaining their reoccurring product supply as utilities embed our sorbent formulations into their processes and directly benefit from our operational expertise and know-how. Fourth quarter air revenues totaled over $3 million, close to $4 million and mostly derived from product supply. Importantly, we expect to see a change in how utilities engage with us with our goal being that licenses that began as enforcement targets can transition to purchasing activated carbon directly, and we expect the pipeline of supply conversions to continue to grow as power demand increases in the coming years. That transition from legal resolution to commercial partnership was our core objective in our business-first approach patent enforcement efforts that began over 6 years ago. Now over the past year, we've signed several new license agreements, bringing us closer to a critical mass of licensed coal-fired utilities. Each agreement not only validates the uniqueness of our SEA process, but extends revenue visibility through multiyear procurement cycles. As licensees incorporate our sorbent formulations into their ongoing operations, we expect activated carbon sales to become an increasingly significant portion of our revenue, a shift that should drive meaningful year-over-year growth. As I noted earlier, our $78 million final judgment represents the culmination of years of patent enforcement. The defendants have appealed, but we are confident in the strength of our ruling and the thorough judicial review behind it. Collection efforts, as I mentioned, are actively underway. Now related to our air business, U.S. coal power generation is holding steady within a diversified energy mix that values grid reliability as well as domestic fuel supply. Federal policy continues to support the operational longevity of coal-fired plants, which in turn sustains demand for mercury emissions control. Our SEA technology remains the most effective solution globally recognized, and that positions us as an essential partner for utilities committed to running cleaner baseload power. With U.S. mercury emissions the lowest in the world relative to coal power generation, we're pleased to play a significant role in America's clean coal and will continue to do so as long as coal power is produced. For 2026, the Air division's road map centers on 3 objectives: continue converting unlicensed users to our technology into licensees and long-term supply customers while protecting our patents; second, grow reoccurring activated carbon sales to our expanding base of licensed utilities. And thirdly, channel the cash flow from this mature high-margin segment into our scaling of our water purification business. Now taken together, the Air division is a self-funded growth engine, generating the cash and credibility that allow us to invest aggressively in water while continuing to deliver for shareholders. So now let me turn to water, where the story shifted meaningfully since last year. We moved from laboratory validation to real commercial activity, booking our first revenues, signing our first strategic partnership and launching new products. The commercialization of our water treatment solutions began with approximately $0.9 million in purchase orders from a large Mid-Atlantic power utility for filtration system media replacement at 2 locations, removing contaminants from wastewater using our proprietary sorbent media. That engagement validated our technology in a real utility environment and gave us a reference account to build from. We then expanded our reach through a collaboration with Civil & Environmental Consultants, a national engineering firm with over 30 offices and 1,600 team members. Under this arrangement, we provide rapid small-scale column testing through our analytical design center in Grand Forks, North Dakota giving CEC's hundreds of water utility clients nationwide access to our testing and analysis capabilities. This effectively creates a pipeline of future system design and media supply opportunities without Birchtech having to build a direct sales force from scratch. For those less familiar, RSSCT replicates full-scale filter performance in a compressed time frame, enabling utilities to evaluate carbon media options and PFAS removal strategies quickly and cost effectively. Our center is one of the few independent RSSCT labs in the country with the capacity to serve the national market at this level. Beyond those 2 anchors, we hit several additional milestones. In January of 2026, we demonstrated that thermally rejuvenated granular activated carbon performs comparably to virgin carbon for PFAS removal. It was a breakthrough for our carbon rejuvenation program that could dramatically lower life cycle costs for utilities. This week, we just announced our SEA-IX nuclear-grade ion exchange resin product line targeted at an approximate $220 million addressable market, spanning nuclear power, coal-fired utilities and municipal water treatment. Birchtech's water platform covers a broad range of media supply, filtration services, our design centers RSSCT testing and analysis along with carbon rejuvenation and now ion exchange resins. So we have a comprehensive offering that didn't exist 12 months ago. Our approach to the market is completely different than our competitors. We work closely with and through engineering firms such as CEC and others alongside utilities to fully integrate the procurement of appropriate equipment, media and other ancillary services. This collaborative approach to the market will ensure water utilities with an affordable, high-effective clean water solution and will secure Birchtech's strong market position as we continue to build customers and strategic relationships. Now speaking of our design centers that launched our position into the water treatment market with our data-first approach. We are now generating a growing pipeline of lab-scale engagements with water utilities and engineering firms. We are currently participating in a grant-funded research project with a leading national engineering firm, evaluating strategy for managing PFAS contaminated drinking water waste, where Birchtech is leading advanced bench and pilot scale testing of thermal GAC reactivation using our proprietary rotary kiln system that we established in Pennsylvania. Other key projects include our role in the initial phase of a multiphase project where we are collaborating with another major national engineering firm and a large utility focused on carbon reactivation to identify the most appropriate media solutions for the removal of multiple contaminants. Our expertise in activated carbons provides our competitive edge and our ability to support both the engineering firm and the large water utility. And additionally, we're conducting water quality analysis, spent carbon evaluations and RSSCT testing for numerous other utilities to optimize media selection, reactivation protocols and overall treatment performance for PFAS and other contaminants. Each of these engagements is building relationships that have the potential to convert into long-term thermal reactivation partnerships or feed directly into our water treatment services pipeline. This data-first approach ensures that these utilities and engineering firms gain highly accurate and more effective media recommendations and receive full benefit from our unique industry expertise. We look forward to this area of our business becoming a key market differentiator and growth driver. The next chapter is about conversion and scale, turning these early engagements into reoccurring service and product revenue, progressing the development of our first GAC rejuvenation facility and expanding our water treatment solution offerings. Regulatory pressure around PFAS is only intensifying and utilities are actively seeking affordable solutions. Birchtech is now in position to meet that demand with a full suite of water purification technologies that complement our established air business and open a second significant revenue stream for the company. With that, I'd now like to turn the call over to Fiona Fitzmaurice, our Chief Financial Officer, to walk through some key financial details from the fourth quarter of 2025. Fiona? Fiona Fitzmaurice: Thank you, Rick. I will constrain my section to a concise review of the financial results for the fourth quarter. For a full breakdown of our financial results, please view our regulatory filings. Revenues totaled $3.8 million in the fourth quarter as compared to $5.6 million in the same year ago quarter. Product revenues increased 19.8% to $3.6 million as compared to $3 million in the same year ago quarter. The change in revenues was primarily due to a onetime $2.5 million licensing payment from a large Southwest utility in Q4 2024. Gross profit totaled $1.2 million, or 31% of total revenues, in the fourth quarter of 2025 as compared to $3.3 million, or 60% of total revenues, in the same year ago quarter. The change in gross profit was a result of the onetime license fee recognized in Q4 of 2024. This change was partially offset by an increase in product revenue during the fourth quarter of 2025 compared to the fourth quarter of 2024. The decrease in gross profit as a percentage of revenues was a result of the onetime license revenue generated in the fourth quarter of 2024 having higher margin. SG&A expenses decreased 42% to $2 million in the fourth quarter of 2025 as compared to $3.4 million in the same year ago quarter. The decrease in expenses was primarily due to lower legal fees in connection with patent litigation. R&D expenses totaled $0.5 million in the fourth quarter of 2025 compared to nil in the same year ago quarter. R&D expenses relate to research conducted to develop water treatment products utilizing new sorbent technologies. Net loss for the fourth quarter of 2025 totaled $0.6 million or $0.03 per basic and diluted share as compared to $1.3 million or $0.07 per basic and diluted share. Adjusted EBITDA, a non-GAAP measure, totaled negative $1.1 million in the fourth quarter of 2025 compared to negative $0.5 million in the fourth quarter of 2024. Cash as of December 31, 2025, totaled $2.2 million with no debt as compared to $3.5 million with no debt as of December 31, 2024. Subsequent to the quarter end, the company completed a $16.6 million capital raise concurrent with its uplisting to the New York Stock Exchange American in February 2026, significantly strengthening our balance sheet. I'd also like to briefly discuss the classification of our profit share liability in the amount of $7.9 million as a current liability on our balance sheet. This is a nonrecourse liability that will not be repaid from cash on hand and is only to be paid from litigation proceeds, including the proceeds of our $78 million final judgment in our patent infringement case. Interest on the judgment amount continues to accrue during this appeal period. Under GAAP accounting rules, the profit share liability is classified as a current liability as the company expects the proceeds from this judgment are likely to be received and the profit share from those proceeds repaid within the next 12 months. So ironically, the positive news of us believing receipt of these funds is likely within the next 12 months causes the profit share to be classified as a current liability, while at the same time not allowing us to reflect in our current financial statements, the expected revenue from the judgment. This completes my prepared comments. Now before we begin our question-and-answer session, I'd like to turn the call back to Rick for some closing remarks. Rick? Richard MacPherson: Thank you, Fiona. So folks to sum up, 2025 was the year Birchtech proved out its next chapter. We have since fortified our balance sheet with a $16.6 million raise in new capital, earned a senior exchange listing on the New York Stock Exchange, secured a $78 million judgment validating our IP and turned our water business from a development stage initiative into a revenue-generating platform with real customers and real orders. The execution plan for 2026 is focused. collect on our judgment, expand our roster of licensed utilities into reoccurring supply customers and obtain offtake agreements to support our first carbon rejuvenation facility. We entered the year from a position of strength, well capitalized, listed on a senior exchange and operating 2 complementary business lines that reinforce each other. The opportunity ahead is substantial, and I'm confident that this team that we have will deliver on it. I look forward to reporting on our continued progress throughout the year. With that, operator, please open the line for questions. Operator: [Operator Instructions] Our first question is from Rob Brown with Lake Street Capital. Rob Brown: Congratulations on all the progress. First question's on the air business product revenue, could you give us a sense of what the sort of run rate is on that business as you see it and maybe how it ramps throughout '26 with the customers that you've licensed to this point? Richard MacPherson: Sure. So on the product supply side, we had an increase, as you can see, in that in the last quarter of 2025. I expect to see increases as we go through 2026. The only unknown on that is when the actual contracts that are held by the companies that we just licensed will come up for renewal. As they come up for renewal, we're in a preferred position to vie for that business through RFPs. So I'll be advising the industry as we go along. But I do expect to see growth in that side of the business. I just -- at this point, don't -- I can't put a number on it, but I will expect to be able to do so in the coming month or 2. I do figure that we will be in excess of $20 million on the air side for 2026. Rob Brown: Okay. Great. And then on the remaining customers, I guess, that -- or utilities, I should say, that are potentially infringing or infringing, how many are left to settle that you haven't either got a trial on or settled with yet? What's sort of the remaining amount of potential there? Richard MacPherson: Sure. So there are -- Rob, there are a couple of very large defendants in the Iowa case that have significant product supply potential. And we are now, as you know, working through that case. I would expect that we can get to some decision with those in the first half of 2026. But they have a significant amount of opportunity should we be able to convert them to clients rather than have them remain as defendants. So as far as a specific number, I would expect that the outstanding infringers at this point hold somewhere in the $10 million a year range of supply side business should we secure it. Rob Brown: Okay. Great. Great. And then just maybe moving to the water side business, good progress there. Maybe just a sense of the pipeline of the rejuvenation customers? And maybe can you walk through how that pipeline develops and what are the sort of the steps that it goes through to turn into offtake agreements? Richard MacPherson: Yes. So where we are right now is working through the collaborations with engineering firms. We've been doing a lot of testing and analytical work with their clients. And also, we've been in discussions with a number of different end users, water utilities that would be interested in us either building a rejuvenation center for them on site or in a regional location nearby where we would be able to provide our rejuvenation services to them. We're still in the negotiation side of that. We have yet to sign any actual offtake agreements, but we're in some great discussions right now and continuing to move forward to present that option to a number of different new utilities as well. What's significant is we've basically become the tip of the spear for a lot of these engineering firms with regards to the analytical work that's necessary to be able to go back to their clients and provide some real tight assessment as to what their situation is and what can be done to get ahead of the PFAS problem. So we are a very firm part of the solution of the process. And we think that, that will lead to longer-term work for us, not just the analytical work. And what we're shooting for, of course, is to have the offtake agreements signed where we can do a collaborative effort of building out the regional facilities that we feel they're going to need. So the offtake agreements are the next step to answer your question, in the rejuvenation side of our business now that we've proved that we can do it, and we're doing the analytical work on a one-on-one basis. The next step will be to get the offtake agreements in place that will allow us to move forward with the construction of these facilities. Rob Brown: Okay. And the last question is on the new ion exchange product line. You gave some color on the market opportunity. Is that market sort of the similar customer base? Or would this be a utility customer base? Or just maybe help me understand the customer base that you're going after there? Richard MacPherson: Yes. Actually, it's a totally different market. We're very excited about it. We've had great results with this new product that we've helped to bring to market. And it is a multi-hundred millions of dollars opportunity. We're focused on the power plant side of it at this point, but we expect to be able to expand as well. And we've yet to talk about the water treatment services side of our business. And I think that will show substantial growth this year in real revenues adding to that first $1 million plus of business that we booked to date. So I really think that, that, and we're now looking to hire specialists to represent us in the field on that particular product line, but I've also been looking at and adding others to our team to move our general water treatment materials into the market. So I really think that that's one of our faster-growing aspects in 2026 in terms of adding real revenue to the company. Operator: Thank you. This does conclude our question-and-answer session. I will now hand the call back over to Chairman and CEO, Rick MacPherson, for his closing remarks. Richard MacPherson: Well, folks, thank you again to each of you for joining us on today's earnings conference call. Our IR firm, MZ Group, will be available to assist with any questions that you might have. We look forward to continuing to update you on our progress as we strive to deliver value to my fellow shareholders and execute upon our vision of becoming a leader in the specialty activated carbon space, delivering cleaner air and water to improve our environment. Operator: Ladies and gentlemen, this concludes today's conference. Thank you again for your participation. You may now disconnect your lines.
Operator: Good afternoon, everyone, and welcome to the Nano Dimension Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded. At this time, I would like to turn the conference call over to Purva Sanariya, Director of Investor Relations. Please go ahead. Purva Sanariya: Thank you, and good afternoon, everyone. Welcome to Nano Dimension's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today is our CEO, Dave Stehlin; and our CFO, John Brenton. Before we begin, I will remind you that certain information provided on this call may contain forward-looking statements within the meaning of Federal Securities Law. Forward-looking statements are not guarantees and involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to be materially different from any future results performance or achievements expressed or implied by the forward-looking statements. The safe harbor statement outlined in today's earnings press release also pertains to statements made on this call. For a discussion of these risks and uncertainties, please refer to our filings with the U.S. Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements, except as required by law. In addition, I would like to point out that we will be discussing non-GAAP results, which exclude certain items and reflect the results of continuing operations. I encourage you to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP measures, which can be found in the press release available on the company's website. If you have not received a copy of the press release, please view it in the Investor Relations section of the company's website. A replay of today's call will also be available on the Investor Relations section of the company's website. With that, I will turn the call over to Dave. David Stehlin: Thank you, Purva, and good afternoon, everyone. We appreciate you joining us today. I'm pleased to update you on our performance for the Fourth Quarter and Full Year 2025. And more importantly, how we are positioning the company as we move through 2026. Before discussing our results in detail, I want to briefly highlight the progress we made during the second half of 2025, following the meaningful actions we implemented to sharpen the strategic focus of the business. During that period, we streamlined operations, reduced cash burn and aligned resources around forward leading industries and our technologies, where we see the strongest long-term opportunities. We also provided financial guidance for the first time in recent history and exceeded our fourth quarter expectations. In addition, we repurchased more than 14.4 million shares in the last 3.5 months of the year because we believe that our stock is undervalued. As we move into 2026, we're seeing the benefits of these actions reflected in improved execution, stronger engagement with strategic customers and increasing momentum across our priority industry segments while leveraging our partner network to help us drive growth. Additionally, we're continuing to reduce expenses, both by trimming as needed, and more significantly by eliminating costs in areas where we do not see long-term value. This allows us to continue growing in high-value industries while remaining disciplined and capital efficient. Turning to our fourth quarter results. As I mentioned, we delivered performance that exceeded the financial guidance we provided on the third quarter call. This marked our first time providing financial guidance in recent history reflecting improved execution and coordination across the Nano Dimension organization and the strengthening demand of our advanced digital manufacturing solutions, particularly in the key industry segments where we're focused. Momentum during the quarter was generally broad-based with strength in the advanced electronics, aerospace, automotive, defense, food and beverage and next-generation computing infrastructure industries. Customers in these industry segments continue to prioritize solutions that enable faster production cycles, improved supply chain resilience, improve cost efficiency and greater flexibility. These are industry segments that reward suppliers who provide superior solutions and great customer care, and we believe we're well positioned in each of them. For the full year 2025, our performance reflects meaningful progress in shaping Nano Dimension into a more focused advanced manufacturing platform serving these high-value industries. While the second quarter was challenging, including the subsequent bankruptcy of one of the two acquisitions completed during that period, we responded decisively in the second half of the year. We narrowed our focus, executed with greater discipline across the business and strengthened our position in production-oriented additive and digital manufacturing applications. From a market perspective, tariff uncertainty eased as the year progressed, though cautious capital spending continues to create variability in certain sectors. However, our fourth quarter results reflect the benefits of a more focused strategy, sales success and our disciplined execution. We focus on helping our customers accelerate towards scalable production. These are areas where our technologies deliver clear differentiation. Customers are adopting our solutions not only for design flexibility but also for measurable operational benefits, including faster production cycles, improved supply chain resilience, reduced downtime and more efficient use of materials and labor. Our ability to integrate advanced hardware, specialized materials and software enable secure, repeatable production environments that support manufacturing at scale. At the same time, we remain disciplined in how we scale our business. We align resources around the industry segments and product areas where we see the greatest opportunity for durable long-term growth, while continuing to execute cost reduction initiatives that are already delivering results. As we move through 2026, we expect continued progress as we further streamline operations reduce cash burn and invest strategically in these priority industry segments. One example is the automotive industry, where we're seeing large-scale deployments across multiple production sites, helping global organizations accelerate new product releases and lower tooling costs. In a rapidly growing advanced computing and data center space, Nano Solutions are enabling some of the world's largest electronics manufacturers to deliver the most advanced networking gear. These engagements underscore the strategic value of our platforms and differentiated advantages we bring in enabling production at scale. We believe our focused industry segment strategy, differentiated technologies and disciplined operating model position us well for sustained growth. Within our portfolio, our composite and metal manufacturing platform continues to gain momentum across high reliability end markets with especially strong engagements in the defense-related applications. In these defense applications, our customers require secure, repeatable and traceable production, not simply prototyping capability. Our Digital Forge platform integrates advanced hardware Engineered Materials and secure cloud-based software infrastructure to enable distributed manufacturing across facilities while maintaining strict control over data integrity and process consistency. As governments and prime contractors prioritize supply chain resiliency, domestic production capability and tactical edge manufacturing, our platform is increasingly aligned with these three mission-critical requirements. During the fourth quarter and throughout 2025, we expanded deployments of our X7, our FX10 and our FX20 systems with defense programs and research institutions that are supporting long-term advanced manufacturing initiatives. In some cases, FX20 platforms have been incorporated into field deployed manufacturing systems supporting U.S. and allied operations in Europe, enabling localized production of spare parts in supply constrained or operationally complex environments. Another important development during the year was the continued adoption of our FX10 platform. The FX10 is the world's first industrial system capable of producing both high-performance composite and metal parts within the same platform. This capability allows manufacturers to move seamlessly between materials while maintaining industrial-grade precision and repeatability. For customers, this translates to greater flexibility, simplified workflows and the ability to consolidate multiple manufacturing processes into a single system. We're seeing strong interest in the FX10 across aerospace, defense, and advanced industrial segments, where the ability to produce both composite and metal components on the same system is unlocking new production applications and expanding the range of customers able to adopt additive manufacturing. More broadly, defense customers are increasingly prioritizing manufacturing at the tactical edge. For example, with unmanned systems and drone operations. field deployable, additive manufacturing allows units to produce mission-specific components on demand, iterate designs based on operational feedback and maintained assets in disconnected or contested environments. Beyond defense, we continue to see adoption across aerospace and advanced industrial segments. High-performance composite and metal solutions are enabling tooling, fixtures and increasingly demanding structural components. These customers value reliability, material performance and accelerated production cycles, areas where our technology provides clear differentiation. To support this expansion, we've established industry-focused teams with deep domain expertise, complemented by a global network of channel and integration partners. This hybrid go-to-market model allows us to scale efficiently in regulated industries while maintaining operational discipline. More recently, we expanded our partnership with Phillips Corporation to strengthen customer support and accelerate adoption in our industrial additive manufacturing platform across the Southeast United States. This initiative enhances access to the full ecosystem, including hardware, materials in the [ IGRA ] software platform while providing manufacturers with deeper application engineering expertise and faster technical support. The goal is to help customers more effectively deploy our Digital Forge platform to optimize part design, improved material selection and scale additive manufacturing for production applications. Overall, we're encouraged by the continued integration of our composite and metal manufacturing platform into customer workflows and believe we're well positioned to deepen our presence in aerospace, defense, and advanced and high-value industry segments. I'd also like to highlight our SM Tech business, which was a meaningful and growing contributor to both the fourth quarter and the full year 2025 and continues to reinforce its position as a differentiated provider of advanced electronics manufacturing solutions. During the quarter, the business expanded relationships with Tier 1 customers across multiple regions, supporting both new production programs and scaling the existing ones. Demand was driven by applications tied to advanced communications, advanced electronics, automotive, and defense industry segments where high-speed, high-precision assembly and flexibility are critical. SM Tech's product innovation remains a key differentiator. For example, in jetting and dispensing technologies that address increasingly complex and high-volume production environments. Our platforms such as our FOX Ultra, All-in-One and our PUMA Ultra systems allow our customers to improve flexibility reduce changeover times and accelerate development in printed and hybrid electronics. In addition, our collaborations with Inventec Performance Chemicals and other fluidic developers have enhanced high-speed solder paste setting and dispensing capabilities, which strengthens our ability to address the increasing complexity of PC boards. These capabilities are critical as customers and forward-leaning industries seek higher performance, precision and flexibility in electronic manufacturing. Engagement at major industry events across Asia and Europe and the Americas continues to generate strong customer interest and pipeline development, highlighting SM Tech's global relevance technology leadership and ability to scale in dynamic high-valued industry segments. Together, these deployments reflect growing demand for integrated flexibility, software-driven manufacturing solutions, that improve throughput, traceability and material efficiency, areas where our technologies position us well as production requirements become even more dynamic and precision driven. Before I hand it off to John to speak about our financial results, I would like to provide a brief update on several key initiatives. First, regarding the strategic alternatives review process that we announced last September. We recognize that our communications has been limited. This has been intentional to allow the Board and management to conduct a thorough and disciplined evaluation, working with our financial advisors, Guggenheim Securities, and Houlihan Lokey. We've spent a tremendous amount of time working through a broad set of potential paths. We completed a comprehensive review of our product lines, core technologies, market dynamics, and competitive positioning. In a short period of time, we have significantly reduced our losses and improved our product lines and yet we also recognize that a gap remains to achieving sustained profitability. So we expect that in the second quarter, we will make a series of announcements that will make clear our path forward to maximizing shareholder value in a relatively short period of time. Second, as of January 1, 2026, Nano Dimension began reporting as a U.S. domestic issuer. This transition aligns our reporting and governance with U.S. market standards including SEC rules and U.S. GAAP, while maintaining compliance with local requirements for our global operations. By aligning our governance and reporting framework with U.S. standards, we aim to enhance transparency for shareholders, reduce our operational complexity and improve efficiency in managing our global business. We anticipate completing the redomestication process in the first half of 2026, subject to customary approvals. As part of this transition, our first Form 10-K filing time line were shortened from 119 days under SEC rules applicable to foreign private issuers to 75 days as a U.S. domestic issuer. In addition, our transition during 2025 from IFRS to U.S. GAAP added further complexity to our financial reporting process. 2025 was also a highly complex year from a financial reporting and disclosure perspective. We completed two significant acquisitions, Desktop Metal and Markforged, navigated the Chapter 11 process and deconsolidation of Desktop Metal, the continued integration of Markforged and executed a reduction in workforce as part of the post-merger integration. Together, these factors required additional time to ensure accurate, complete and transparent financial reporting and disclosure. We filed our Form 10-K today. As disclosed in our Form 12b-25, we identified a material weakness in internal control over financial reporting, primarily related to resource limitations impacting accounting for and disclosure of business combinations and related valuation analysis. Importantly, while a material weakness is never good news, we have not identified any errors in previously issued financial statements do not expect any restatements and believe that our 2025 reporting results are materially correct. Under the oversight of the Audit Committee, we have implemented a remediation plan to address the material weakness and strengthen our control environment. This includes enhancing our risk assessment processes, adding experienced technical accounting and financial reporting resources and providing targeted training to reinforce consistent execution of controls. We expect to continue executing this plan through 2026 and will validate its effectiveness through ongoing testing as these controls operate over time. We're confident these actions will strengthen our control environment going forward. Finally, on capital allocation. During the fourth quarter, we repurchased approximately 10.9 million shares for approximately $19.2 million and a total of over 14.4 million shares for approximately $24.9 million when factoring in earlier repurchases in late Q3 under our existing authorization of up to $150 million. Given the ongoing strategic process review, the Board is carefully evaluating capital deployment priorities, and we will not be providing forward-looking updates regarding repurchase activity at this time. Our strong balance sheet continues to provide meaningful flexibility as we evaluate opportunities to maximize shareholder value. As we sit here today, we're already at the end of the first quarter of 2026, and activity levels remain consistent with the momentum exiting the fourth quarter, taking into account typical seasonality. This is providing us with increased visibility into near-term demand. Given the nature of our business, which includes a mix of recurring activity and larger strategic orders, we believe annual financial guidance remains the most appropriate framework for setting expectations. John will walk through our outlook in more detail and discuss the underlying assumptions. Overall, our fourth quarter and full year results reflect the benefits of a more focused strategy, disciplined execution and continued investment in differentiating technologies that address real customer needs in high-value markets. With that, I'll turn the call over to John to review our financial results and provide financial guidance for 2026. John? John Brenton: Thank you, Dave. It's a pleasure to be here with you all today. Together with Dave and the global leadership team, we remain focused on executing our key priorities to improve the company's performance and enhance shareholder value. Unless stated otherwise, all numbers I will be discussing today are on a non-GAAP basis and reflect continuing operations. A reminder that the fourth quarter represents the second full quarter of Markforged being included in our consolidated financial results. Desktop Metal is excluded from our non-GAAP results as it is classified as discontinued operations following its Chapter 11 filing and deconsolidation during the third quarter of 2025. Turning to our fourth quarter performance. As Dave mentioned, we delivered results that exceeded the financial guidance we outlined on our third quarter call, reflecting improved execution, stronger demand across our priority industry segments and disciplined cost management. Revenue for the fourth quarter was $35.3 million, representing a year-over-year growth of approximately 142% compared to $14.6 million in the fourth quarter of 2024. This increase was driven primarily by the inclusion of Markforged, which contributed $20.7 million. Excluding Markforged, Nano Dimension's stand-alone revenue was approximately $14.6 million in line with the prior year as underlying growth offset the impact of divestments. On a sequential basis, revenue for the fourth quarter increased approximately 31% from $26.9 million in the third quarter of 2025, driven by improved customer engagement, stronger order activity and continued adoption of our advanced digital manufacturing solutions across key industry segments, including advanced electronics, aerospace, automotive, defense, food and beverage and next-generation computing infrastructure. Gross profit for the quarter was $17.6 million, with an adjusted gross margin of approximately 49.7% compared to $5.3 million and 36.3% in the prior year quarter. This increase was driven primarily by the prior year inclusion of a onetime unfavorable inventory adjustment. Sequentially, gross profit increased approximately 38% from $12.7 million in the third quarter with margin expansion of about 230 basis points from 47.4% reflecting improved product mix and operational efficiencies. Operating expenses for the quarter were $27.3 million, representing a year-over-year increase of approximately 13% from $24.2 million in the fourth quarter of 2024, primarily due to the inclusion of Markforged. However, on a stand-alone basis, Nano Dimension's operating expenses decreased approximately 42% year-over-year, reflecting the benefits of divestments and disciplined cost management. On a sequential basis, operating expenses for the fourth quarter declined over 6% from $29.2 million in the third quarter and more than 16% relative to the previously identified baseline of approximately $32.5 million which reflects second quarter operating expenses adjusted to include a full quarter of Markforged. This decrease reflects our continued cost discipline and efforts to streamline operations across the organization. Adjusted EBITDA for the quarter was a loss of $9.8 million, improving from a loss of $18.9 million in the fourth quarter of 2024 and $16.6 million in the third quarter of 2025, reflecting improved gross margins and disciplined expense management. Turning to our full year results. Revenue for 2025 was $102.4 million, representing approximately 77% year-over-year growth compared to $57.8 million in 2024. Growth was driven by the inclusion of Markforged, which contributed $54.3 million and continued adoption of our solutions across key industry segments partially offset by strategic divestitures and softer demand amid macroeconomic uncertainties, including tariffs. Gross profit for the year was $48.1 million with an adjusted gross margin of approximately 46.9% compared to $26.2 million and 45.4% in the prior year. This growth was primarily driven by the inclusion of Markforged. Operating expenses for the full year were $101 million, representing a year-over-year increase of approximately 12% from $89.8 million, mainly due to the inclusion of Markforged, offset by continued cost discipline across the organization. Adjusted EBITDA for the year was a loss of $53.2 million compared to a loss of $63.6 million in 2024, reflecting increased revenue, improved gross margins and disciplined cost management. Turning to the balance sheet. Our financial position remains exceptionally strong. As of December 31, 2025, total cash, cash equivalents, deposits and marketable equity securities were approximately $459.6 million, down from about $515.5 million at the end of the prior quarter. This change of approximately $55.9 million includes $19.8 million of cash used for share repurchases during the quarter and $24.4 million related to changes in the fair value of marketable equity securities. Looking ahead, I'd like to take a moment to outline our financial guidance. As a reminder, our business generates revenue from recurring book and ship activity and larger strategic orders, which can create some variability in quarterly results. Importantly, this variability reflects timing differences rather than lost revenue. With that in mind, we are taking a disciplined approach to providing guidance, and we'll continue to evaluate providing additional metrics over time. As such, we are implementing annual guidance for 2026. For 2026, we expect revenue in the range of $130 million to $140 million, representing over 30% growth at the midpoint compared to 2025, which included a partial year contribution from Markforged following its acquisition in the second quarter of 2025. This outlook reflects continued momentum across our forward-leaning industry segments, including advanced electronics, aerospace, automotive, defense, food and beverage and next-generation computing infrastructure. We expect, on a non-GAAP basis, gross margin between 46% and 48%, reflecting improvement at the midpoint compared to 2025, driven by operating leverage and continued efficiency across our cost structure. Operating expenses on a non-GAAP basis are expected to be between $106 million and $111 million, reflecting continued cost savings initiatives and disciplined resource management. At the midpoint, this represents modest growth relative to 2025, which included a partial year contribution from Markforged as we continue to balance cost control with targeted investments to support growth. We expect adjusted EBITDA loss between $40 million and $50 million, representing meaningful improvement at the midpoint compared to the $53.2 million loss in 2025, driven by operating leverage as revenue growth outpaces expense growth. In terms of cadence, revenue is expected to be modest in the first half, ramping in the second half, with the first quarter typically the lightest and the fourth quarter the strongest. While full run rate savings from operational improvements remain a 2026 target, we are encouraged by sequential improvement in expenses and expect continued efficiencies to support margin expansion and reduce cash burn throughout the year. I will now hand it back to Dave. David Stehlin: Thank you, John. In summary, our actions we implemented in the second half of 2025 are driving meaningful results today. We believe our momentum is positive and our potential is excellent. We have grown revenue, reduced expenses, one critical new and strategic customers. We've provided financial guidance, repurchased shares and implemented a comprehensive strategic alternatives review that is rapidly progressing toward key decisions. We fully expect that 2026 will bring an excellent opportunity to maximize shareholder value. We look forward to keeping you updated on our progress. With that, operator, please open the line for questions. Operator: At this time, we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from [ Moshe Sarsari ] from [indiscernible]. Unknown Analyst: Thank you for the very elaborate call. I want to ask -- I see that you closed the Markforged acquisition on April 25 of 2025. That means you had two months in Q2 with Markforged under the Nano Dimension umbrella, plus Q3 and Q4. If I compare total revenue of Markforged in the same time in 2024 to what you reported, revenue at Markforged is actually down compared to 2024. And I say that the rest of Nano Dimension revenue is also down. How does that reconcile with what I just heard about continued momentum? And also, how is that not misleading the first line in the press release is how revenue grew by more than 100%, implying that it's all organic. Well, it's clearly not organic, it's also not growing. David Stehlin: First off, thank you very much for the question. As we're stating about the revenue growth year-over-year, that's comparing the consolidated business now after the acquisition with the prior year, which did not include Markforged. So that's specific to the comparisons to the prior year. As it relates to MarkForged specifically in the fourth quarter, consolidated, the growth that we're talking about is the sequential growth in Q4 over Q3. And the continued improvement within the key areas and product lines that were specified. So that's the improvement that we're speaking of and what we're anticipating continuing into the 2026 year. Unknown Analyst: Right. Again, I'm sorry, it escapes me how writing that the revenue is up by 100% -- more than 100% is not an attempt to mislead the readers. David Stehlin: Moshe, it's definitely not an attempt to mislead. It's the requirements on how we have to compare our actual financials year-over-year before we had Markforged. And then if you read deeper into the press release and what we talked about on the call, we described the various comparisons, both year-over-year with and without Markforged. Unknown Analyst: I see. Okay. What about the share repurchases program? Why are you discontinuing it? . David Stehlin: Yes. As we described in the call, we think that there are better uses for our money at this point, which will become very clear in the second quarter, as we said during the call. That's number one. And there we have not taken it off the table. It's still an option. We're just not going to talk about it in advance. Unknown Analyst: I see. Okay. I just don't understand how buying $2 in something for $1.70. How can you have a better use for the cash than that? Is there anything at all that can be more immediately accretive than buying $1 for $0.85. David Stehlin: Understand the point. And as we said, in Q2, things should become a whole lot more clear. Unknown Analyst: That is very not encouraging, I have to say, it's very abstract, there is no explanation here. It's just a promise that just like the ones we heard from you often that in a few quarters, everything is going to turn around. David Stehlin: Appreciate the question. And as I said, you'll learn a whole lot more in this next quarter. Operator: [Operator Instructions]. And at this time, I'm showing there are no further questions. I'd like to turn the floor back over to Dave for closing remarks. David Stehlin: Thanks for joining us today and for your continued interest in Nano Dimension. Have a great day, and goodbye. Operator: And with that, ladies and gentlemen, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Good evening, and welcome to the Nuvve Holding Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. On today's call are Gregory Poilasne, Chief Executive Officer; and David Robson, Chief Financial Officer of Nuvve. Earlier today, Nuvve issued a press release announcing its Q4 '25 and FY '25. Following prepared remarks, we will open up the call for questions. Before we begin, I would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Nuvve's best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in Nuvve's filings with the SEC and in the earnings release issued today, which are available on our website. Nuvve undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances. With that, I would like to turn the call over to Gregory Poilasne, Chief Executive Officer of Nuvve. Gregory? Gregory Poilasne: Thank you, and good afternoon to everyone here today. Welcome to our Q4 '25 and Full Year '25 Results Call. 2025 has been a transition year where we have been pivoting from vehicle-to-grid deployments to stationary storage. Stationary battery were not new to Nuvve. We have been managing batteries for a few years in the U.S., for example, at the University of California, San Diego and in Japan with our partner at the time, Toyota Tsusho. Nuvve's platform has been designed to manage batteries from the ground up, either on wheels or stationary with the benefits of aggregation, second by second control and advanced stacking services, including behind-the-meter energy cost optimization, distribution grid support and ancillary services. We also started to integrate artificial intelligence-based functionalities 3 years ago with a focus on forecasting for battery usage and market values. Nuvve has now moved on into a full end-to-end AI-based product development cycle and is currently integrating AI-based project management, sales support and finance functionalities in order to scale our business while we are reducing our cost base. Though we are not stopping our current activities in school bus and fleets, all the market signals we are receiving are confirming that our pivot towards stationary battery deployments is the right path. In Europe, we have recently announced a partnership with OMNIA Global, a Zug Switzerland-based family office. The partnership with OMNIA is really a meeting of the minds as OMNIA has developed a 1 gigawatt plus battery pipeline across multiple countries in Europe that will be deployed over the next 24 months. The purpose of the partnership is to deploy batteries across Europe, batteries that will be owned by Nuvve. We have already announced 3 projects, a 50-megawatt 75-megawatt hour project in Sweden, a 40-megawatt 80-megawatt hour project in Austria, and a 60-megawatt 120-megawatt hour project in Romania. Different process are underway in order for Nuvve to ultimately own these batteries. The combination of these 3 battery projects represents 150 megawatts. Compensation for such battery projects can vary between $250,000 per megawatt per year to more than $500,000 per megawatt per year. This is an extremely exciting opportunity with tremendous upside for Nuvve and our shareholders. In Japan, following the termination of our partnership with Toyota Tsusho, we have then started our own entity, Nuvve Japan. The Japanese market is a less mature market, and therefore, we are pursuing different business models. We recently announced the sale of a 2-megawatt 8-megawatt hour battery for $3.35 million battery in Niigata Prefecture. We have already received a little less than $1 million as a down payment while we are targeting a battery delivery by November 2026. More recently, we have also announced that Nuvve Japan had been selected as the aggregator platform for another 2-megawatt battery projects. Outside of selling and managing batteries, other business models in Japan also include tolling, which is basically a rental agreement with a battery owner, receiving a fixed income on these assets while our advanced platform can generate high return with the battery. Our pipeline of opportunities in Japan has a similar size to our European project pipeline, but over a slightly longer period of time, about 36 to 48 months. Finally, we have similar battery opportunities in the United States, such as Kit Carson in New Mexico, driven by a New Mexico subsidiary. The U.S.-based battery projects don't seem to be moving as fast as projects in Europe and Japan. The exposure of these geographies to the conflict in Iran is making this project even more valuable. This effort to pivot the company started more than a year ago and is now on the verge of paying off. The future of Nuvve in the stationary battery space looks bright. Our partnership with OMNIA Global is absolutely transformative. Our team in Japan is doing an extraordinary job developing the business, and we are looking forward to sharing more with you on our progress very soon with a tight focus on battery deployment and reducing our operating costs. Now I will let David take you through the financial details of the quarter and the year. David? David Robson: Thanks, Gregory. I will start with a recap of fourth quarter 2025 results. In the fourth quarter, we generated total revenues of $1.93 million compared to $1.79 million in the fourth quarter of 2024. The increase was primarily driven by higher product sales and increased grant revenues, partially offset by lower service revenues due to the absence of management fees earned related to the Fresno EV infrastructure project versus the same period last year. Total revenues year-to-date through December 31, 2025, were $4.79 million, which compares to $5.29 million for the prior year period. The year-over-year decrease in revenues was driven by lower service revenues due to the absence of management fees earned related to the Fresno EV infrastructure project this year versus last year, partially offset by higher product revenues and grant revenues. Margins on products, services and grant revenues were 24.2% for the fourth quarter of 2025 compared to 15.8% for the year ago period. Year-to-date margins through December 31, 2025, were 39.1% compared with 33.1% for the year ago period. Margin was positively impacted quarter-over-quarter by a higher mix of grant revenues and improved pricing on product revenues this quarter compared with last year. Excluding grant revenues, margins on product and service revenues increased to 16% for the fourth quarter of 2025 compared to 11.5% in the year ago period. Year-to-date margins, excluding grant revenues through December 31, 2025, was 31% compared to 27.5% in the year ago period. As a reminder, margins can be lumpy from quarter-to-quarter depending on the mix. DC charger gross margins at standard pricing generally range from 15% to 25%, while AC charger gross margins are approximately 50%, but in dollar terms are a small fraction of the revenue of the DC charger. Grid service revenue margins are generally 30%, while software and engineering service margins are as high as 100%. During the fourth quarter of 2025, we determined that certain 125-kilowatt V2G DC Chargers held in inventory and purchased from our former third-party supplier were not conforming to our commercial product reliability standards, and they would no longer be offered for sale domestically. Given the commercial reliability issues of those DC chargers, we recognized a total inventory impairment charge of $3.47 million, reducing the carrying value of those inventories to zero. This inventory impairment loss is presented as a separate line item in the consolidated statements of operations due to its significance. Operating costs, excluding cost of sales and inventory impairment was $3.7 million for the fourth quarter of 2025 compared to $5.9 million for the third quarter of 2025 and $5.9 million for the fourth quarter of 2024. The decline in operating costs during the quarter was primarily driven by lower payroll expenses. Cash operating expenses, excluding cost of sales, inventory impairment, stock compensation and depreciation and amortization was $2 million in the fourth quarter of 2025 versus $5.4 million in the third quarter of 2025 versus $5.2 million in the fourth quarter of 2024. This represents a decrease of $3.4 million in expenses over the same quarter last year. Other income was $0.4 million in the fourth quarter of 2025 compared to $0.5 million in the fourth quarter of 2024. Both periods benefited from noncash gains from the change in the fair value of warrants and debt, offset by interest expense. Net loss attributable to Nuvve common stockholders increased in the fourth quarter of 2025 to $6.1 million from a net loss of $5.1 million in the fourth quarter of 2024. The increase in net loss was primarily a result of onetime inventory impairment charge, partially offset by lower operating expenses previously mentioned. Now turning to our balance sheet. We had approximately $5.5 million in cash as of December 31, 2025, excluding $0.3 million in restricted cash, which represents an increase of $5.1 million from December 2024. The increase during the fourth quarter was primarily the result of capital raised through the issuance of preferred stock and the exercise of warrants totaling $8.1 million, $0.9 million from the sale of its equity investment in DREEV, primarily offset by $4.5 million used in operating activities. Inventories were $0.8 million at December 31, 2025, compared to $4.3 million at the end of the third quarter of 2025. The decline of $3.5 million relates to the $3.47 million impairment charge for 125-kilowatt V2G DC Chargers held in inventory, reducing the carrying value of this inventory to zero. The impaired DC chargers were subsequently transferred to property, plant and equipment at zero carrying value and will be used to support our business development efforts in Taiwan. During the quarter, accounts receivable was flat at $1.1 million at December 31, 2025, compared to the third quarter of 2025. Accounts payable at the end of the fourth quarter of 2025 was $3.4 million, an increase of $0.5 million compared to the third quarter of 2025 of $2.9 million. Accrued expenses at the end of the fourth quarter of 2025 was $1.8 million, a decrease of $3.8 million compared to the third quarter of 2025 of $5.7 million. Now turning to our megawatts under management and estimated future grid service revenues. As a reminder, megawatts under management is a metric we use to quantify the aggregate amount of electrical capacity from the deployment of our V1G and V2G chargers, which are primarily deployed in the electric school bus market in the U.S. and in light-duty fleet deployments in Europe in addition to stationary batteries. Currently, these chargers and batteries are located throughout the United States and Europe. Megawatts under management in the fourth quarter increased 7.5% over the third quarter of 2025 to 28.3 megawatts from 26.4 megawatts and decreased 7.6% compared to the fourth quarter of 2024. In terms of its composition, 0.2 megawatts were from stationary batteries and 28.1 megawatts were from EV chargers. The quarter-over-quarter increase relates to the deployment of DC chargers, while the year-over-year decrease relates to the decommissioning of stationary batteries we managed in California and Japan, offset by the deployment of DC chargers. We continue to expect further growth in our megawatts under management in 2026 as we commission our backlog of customer orders we have earned in addition to new business we anticipate winning, which we have visibility to in our pipeline for both EV chargers and stationary batteries. Now turning to our backlog. At December 31, 2025, our hardware and service backlog decreased to $3.3 million, a decrease of $15.7 million from $18.3 million reported at December 31, 2024. The decrease primarily relates to the termination of the Fresno EV infrastructure project in early February 2026. As we look out to the next several quarters, we expect to see more developments from our Europe and Japan stationary battery projects. We also anticipate improvements in our cash burn resulting from the benefit of lower operating costs compared with last year. That concludes my portion of the prepared remarks. Gregory, back to you to conclude. Gregory Poilasne: Thank you, David. We are confident that our pivot towards stationary storage was the right choice. And we know that moving forward, our success is going through battery deployments, especially in Europe and Japan. Expect to hear more about our deployments soon. Thank you. Operator: [Operator Instructions] Showing no questions, this will conclude our question-and-answer session. I would like to turn the conference back over to Gregory Poilasne for any closing remarks. Gregory Poilasne: Thank you for listening to us today, and we're looking forward to sharing more with you in the near future. Bye-bye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to the Abra Group's Q4 FY 2025 Performance Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Maria Ricardo, Head of Investor Relations. You may begin. Maria Cristina Ricardo: Thanks, operator. Good morning, and thank you for joining us today. With me are Adrian Neuhauser, Chief Executive Officer of Abra; Manuel Irarrazaval, Chief Financial Officer of Abra; Gabriel Oliva, President of Avianca; Nicolas Alvear, Chief Financial Officer of Avianca; Celso Ferrer, Chief Executive Officer of GOL; and Julien Imbert, Chief Financial Officer of GOL. Our financial statements for the year ended December 31, 2025, as well as the presentation we will reference today are available on our investor website, abragroup.net. This call is being recorded, and a replay will be available shortly after the call concludes. Before we begin, I would like to remind you that on June 6, 2025, GOL successfully emerged from Chapter 11 reorganization, at which point, Abra became the controlling shareholder of GOL and began consolidating its financial results. Accordingly, GOL's results are included in Abra's consolidated financial results from that date forward. To facilitate comparability of financial and operational performance, our remarks today will reference pro forma results as if Avianca and GOL were combined for the full year periods presented for both 2025 and 2024. Today's discussion may include forward-looking statements, which are not a guarantee of future performance or results and involve a number of risks and uncertainties that are outside the company's control, including those related to the company's current plans, objectives and expectations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. The company assumes no obligation to revise or update any forward-looking statements. We'll begin with an overview of the business, followed by a review of our operational and financial performance for fourth quarter and full year 2025 and closing remarks before opening the call for questions. With that, I will turn the call over to Adrian. Adrian? Adrian Neuhauser: Thank you, Cristina. Everyone, thank you for joining us. If we can turn to Page 4, please. This is the first quarter where we are presenting our consolidated results as a group. We're really excited about this and proud of what we're going to show you. Slide 4, for those of you that have not joined us before, is just a summary of really what we are. We are today the second largest airline group in Latin America with the result of the consolidation of 3 main carriers: Avianca, which is the #1 airline in Colombia, Ecuador and in Central America; GOL, the second largest airline in domestic Brazil; and Wamos, a European ACMI provider. By putting together those groups over a few short years, we've created -- or those airlines over a few short years, we've created the second largest group in the region with over 300 aircraft, 375 routes, over 70 million passengers a year, 30,000 employees. Importantly, the strongest order book in the region, both on the narrow-body and wide-body side and also an agreement in principle to acquire SKY, which would add to our footprint domestic Peru and domestic Chile. Turning to Page 5. What did we achieve this year? First of all, we -- as Maria Cristina highlighted, we successfully completed GOL's restructuring, emerging as the -- with GOL emerging from its bankruptcy as a more sustainable and competitive airline and with Abra resulting as the controlling shareholder of GOL. We continue driving synergies. Today, we have over $180 million cumulative in value creation by increasing coordination across fleet, procurement network, commercial and loyalty. And we strengthened our leadership team as we drive more coordination through the group. We now have a Chief Procurement Officer, Chief Loyalty Officer and Chief Corporate Responsibility Officers at the group level. On the operational side, we announced a robust incremental fleet plan and the expansion of our wide-body strategies, adding 330s and 350s to enable the future growth and drive more efficient operations. We enhanced our value by coordinating our airlines more and beginning the process of aligning our products to drive an improved travel experience and operational excellence. And we continue progress in sustainability, delivering ongoing improvements in fuel efficiency while improving connectivity in the region. What does this mean financially? It means we achieved a pro forma adjusted EBITDAR growth of 26%, $2.7 billion for the year at a 27.4% margin. That's an over 300 basis point increase. We ended the year with liquidity at over $2.5 billion, about 25% of our LTM revenues and net debt to LTM EBITDAR decreasing sequentially to 3.3x. Both of our important additional business units, Cargo and Loyalty delivered strong performance. Cargo, in particular, delivering approximately $1.6 billion revenue generation on a pro forma basis. And importantly, and we'll talk about this later on, we aligned accounting policies across the airlines in line with market standards. Turning to Page 6. So what are we today? As we said, second largest group in the region, both of the key airlines in the region performing admirably, 98.3% schedule completion for Avianca and 99.2% for GOL. Both airlines with some of the strongest on-time performance in the world, continue to drive brand loyalty, one of the largest loyalty programs in the world combined with over 46 million members, a 34% increase in premium customers through our networks, 7% increase in gross billings and the program member share of our total passengers on average at about 50%. We drove an enhanced customer experience. We upgraded our premium offering through Avianca and VIP lounges and Insignia check-in in Bogota, and we enhanced our long-haul Insignia experience on the transatlantic routes. We've rolled out Business Class across the entire Avianca network, and we announced the fleet expansion, adding 7 A330-900s to support international growth for the group. Up to 5 of those will initially go to GOL and 2 to Avianca. Turning to Page 7, consolidated business indicators. ASKs growing nearly 12% on -- for the group with load factors holding at above 80%, passengers increasing by 5%, average fare in the network increasing, PRASK holding almost flat and PAX CASK holding about flat. Turning to Page 8. If you look at the 2 carriers to understand what's going on in the underlying, both carriers showing strong growth in their networks. GOL, if you'll remember, putting its fleet back in the air and recovering its operations as it worked through its bankruptcy, but also an important redesign in the network with GOL increasingly focused on strengthening its Rio hub. Avianca continuing to grow by extending stage length and expanding flights out from Bogota into the rest of the region. Passengers in Avianca decreasing slightly as we extended the stage length over 7%, average fare increasing at GOL, passengers increasing pretty much in line with the growth of the network. PRASK at both companies holding in spite of the very strong network expansion and CASK at both companies -- at Avianca continuing to decrease slightly and at GOL holding basically flat, passing through a little bit of inflation at about 4%. Turning to Page 9, handing it off to Manuel Irarrazaval, our CEO -- our CFO, sorry, to continue with the conversation. Manuel Irarrazaval: Thank you, Adrian, and good morning, everyone. I'll walk you through our financial performance for the full year. Maybe we start in Page 9 on the pro forma revenues. Pro forma revenue for this year has increased 11% to $9.7 billion. That is driven in about 8% by passenger revenue and as Adrian was explaining before, and a very strong increase in other revenues in cargo and others with that increase is about 31%, right? In terms of EBITDAR, we -- the company delivered a very strong pro forma adjusted EBITDAR growing almost 26% to almost $2.7 billion for the full year with a margin of 27%. If you look at that number as of the fourth quarter, in particular, it had a margin of 30.6%, which is a very strong margin and reflects the great performance of bringing in GOL and the improvement of GOL's margin over the fourth quarter and a very favorable seasonality in the fourth. I would like to highlight that we are not highlighting the metrics below EBITDAR as depreciation and interest are available under our current accounting policies and therefore, kind of the year-over-year comparison is not very meaningful. However, the numbers are in the back of this deck. If we go to Page 10 and we look at the balance sheet, we have ended the year with a strong liquidity, almost $2.5 billion of liquidity, which implies a 25% ratio of liquidity over revenues for the year, which we believe is a very strong point. In terms of net debt, we had a 16.6% reduction of net debt over the year, mainly coming from the restructuring of GOL, right? That has taken our net debt to EBITDAR, the net leverage metric down from 5x before in '24 to 3.3x. And this is an important driver for us, and we will continue kind of deleveraging as time goes on. If we go to the next slide, Slide 11, you can see the performance for the fourth quarter in particular. You can see ASKs at 31.2 with a load factor of 82.6%, which has helped us deliver an EBITDAR margin of 30.6%, as I said before, and again, highlight to you the level of leverage and liquidity that we are finishing the year. Going next to Page 12 exactly. I will also I will also touch on the point of the fuel volatility. As you all know, we have been monitoring very closely the events happening in Middle East and the impact that fuel has on our operations. In general terms, in these months, a $1 increase in jet fuel price has resulted in a $70 million impact on our monthly fuel expense, which means that to compensate that, we would need to increase prices in about 10% for every dollar that has increased. What have been we doing? On the right side, you can see that we have hedged 50% of our fuel needs for the months between March and May. putting in place a zero cost collar with a call strike at $2.45. That was a very good protective measure that we took right before the war started. And we have increased that hedging recently with another 14% of the fuel needs until the end of August at a strike price higher, of course, because the market has moved up significantly. In Brazil, in particular, the fuel pricing mechanism going through Petrobras allows the companies to feel the impact of fuel with a month of delay, and that has given the company time to try to pass through some of this into price. We continue to work with -- our commercial teams continue to work very disciplinedly on price management and being able to pass prices over to the tickets and to compensate for the increases of cost. With that, I finish this section on the financial results, and I will pass it over to Gabriel so that he can cover Avianca's full year performance. Gabriel, all yours. Gabriel Oliva: Thank you so much, Manuel, and welcome you all. If you turn to Page 14, I will give you highlights of Avianca's full year performance in 2025. More on the operational level, as Adrian commented, we're pretty proud of what we achieved. We continue expanding our network. We launched 13 new international routes with 4 new, completely new destinations, reaching more than 160 routes finishing the year, 83 destinations in 27 countries. As it was commented before, we finished that reallocation of capacity, moving -- expanding our stage length, moving capacity from Domestic Colombia into international markets, driving more than 7% our stage length and a much more healthier and balanced supply-demand dynamics. We continue -- and we continue investing. We invested and we continue investing in our product and brand loyalty. Right now, we have completed our rollout of Business Class in the entire network, including all our domestic markets. We opened new VIP lounges and dedicated Insignia, which is our transatlantic business class check-in space in Bogota and strengthening our premium customer and loyalty value proposition. And in the operational level, as it was touched upon before, we delivered a very robust performance, which we are proud of, while we navigated 3 industry-wide challenges with the engines that affected most of our family types of aircraft. On the financials, we achieved at Avianca an adjusted EBITDAR of $1.5 billion, which was more than 20% growth year-over-year at 26.5% margin, more than 200 basis points growth year-over-year. As Manuel was saying, on Avianca, we continue reducing our net leverage sequentially to 2.7x and liquidity reached $1.4 billion, which is close to 25% of last 12 months revenues. And that includes a $1,200 million undrawn revolving credit facility. And our business units were very proud of the performance they achieved. Cargo, a strong performance with market dynamics supporting that, and we completed our strategy of a network redesign, refleeting our cargo network right now having 9 A330 freighters across our cargo network. And in Lifemiles, we reached 16 million members and customers by year-end, which is more than 14% growth year-over-year. And at Wamos, we delivered its full year -- first full-year performance within the group, supported by very strong widebody demand. So turning to Nico to get more into the financials. Thank you very much. Nicolas Alvear: Thank you very much, Gabriel, and good morning, everyone. Turning to Slide 15, delving deeper into financial performance. You can see that Avianca generated EBITDAR of about $1.5 billion, up 21% year-over-year, with margins expanding by over 200 basis points to 26.5%. Importantly, fourth quarter EBITDAR, which you can see in the appendix, reached $463 million at a margin of almost 30%, which is about 60 basis points stronger versus last year. So overall, this reflects the combination of disciplined capacity growth, improved network efficiency, continued cost control and higher premium revenue generation driven by the rollout of Business Class across our network and the strengthening of our loyalty program. Also, as Gabriel mentioned, our Cargo business, Lifemiles and Wamos posted remarkable performance during the quarter and the year. You can appreciate that EBITDAR generation translated into continued balance sheet strength with liquidity increasing $110 million to roughly $1.4 billion, representing about 24% of last 12-month revenue. And notably, our net leverage declined to 2.7x, down sequentially from 2.8x in the prior quarter and from 3.3x in the prior year, driven by EBITDAR growth and relatively stable net debt. Between early 2025 and early 2026, we continue to strengthen our capital structure, refinancing approximately $1.75 billion of debt, mostly our bonds to 2028, pushing out maturities to 2030 and 2031 and optimizing the use of our collateral. So overall, our operating performance is giving us greater flexibility to manage through the cycles, continue investing in our business and our customers and contribute to the broader Abra platform. And with that said, I'll turn it over to Celso to discuss GOL's 2025 performance. Celso Ferrer: Thank you, Nico. And moving forward to Page 17. I want to share the GOL highlights for 2025, which was a really transformational year for GOL, as mentioned, marked by a successful completion of the Chapter 11 process in June and strengthening the capital structure of the company, which provides a solid foundation going forward. Operationally, the focus has been on increasing capacity with discipline. We saw a strong year-over-year capacity growth in international markets, reaching more than 13 countries. Domestic growth was supported by 11 aircraft returning to service and improved fleet availability. Importantly, that capacity has been deployed where the demand is strong and where returns justify it, consistent with the strategy that GOL has outlined over the course of the year. At the same time, GOL continues to benefit from its leading position in Brazil with a strong presence in key markets such as Sao Paulo, now more than ever, Rio de Janeiro and Brazil, including slot-constrained airports that support frequency and commercial relevance. The network is a high frequency with strong connectivity that drives both cost efficiently and customer preference, supporting health load factors as capacity increases. GOL is also beginning to selectively expand its long-haul operation in international markets, including the recently announced Rio JFK service. Operational quality remains a clear strength. GOL was the #1 airline in Brazil for on-time performance for the second consecutive year, which supports both customer loyalty and commercial performance. From a commercial perspective, Smiles continue to be the core driving of earnings quality with a large engagement from its base and diversified partnerships ecosystem that supports recurring high-margin cash flow generations. In Cargo, GOLLOG continues to perform very well, supported by the addition of 2 dedicated cargo aircraft, totaling 9 aircraft at the year-end, strengthening the Mercado Livre partnership and benefiting from a strong demand in e-commerce and express logistics. So overall, what you see in GOL is a disciplined recovery, increasing capacity, maintaining strong operational quality and strengthening the business commercial and earnings profile. Julien will speak about our financial results. Julien Imbert: Thank you, Celso. Moving to Slide 18. We are very happy to report that once again, we're outperforming on our plan since emergence. So it's the third quarter that GOL has been outperforming the [ 50 ] that we had published at emergence. If you look at EBITDAR, we reached an EBITDAR of $1.2 billion, which is an increase of 32% versus last year and a margin of above 30%. This is driven mainly by our growth on capacity growth plus price growth in local currency and our continued control on our cost. Liquidity also is ever stronger at $1 billion in liquidity, representing 25% of our last 12 months revenue and a significant increase versus the position of last year with 43% increase versus 2024. Regarding net leverage, we've been able to reduce our net debt over EBITDAR to 3 turns in 2025, accelerating the deleveraging of the company and pursuing our commitment to a healthy balance sheet. We are very happy with those results that underline our purpose of being the first airline for everyone, our clients, our investors and our teams. And we continue to deliver on our plan with consistency and discipline, building an ever stronger goal. With that, I will now turn the call back to Adrian for closing remarks. Adrian Neuhauser: Thanks so much, Julien. So to summarize, and as I said, really, really proud of the network of the results we're delivering this quarter. First of all, a continued focus on customer experience, boosted by differentiation and brand loyalty as we integrate the power of the 2 brands, but also take advantage of the increased connectivity and frankly, of the know-how that each of the 2 companies brings in creating a unified customer experience. Number two, revenue growth and disciplined cost management that drove higher margins; three, adjusted strong adjusted EBITDAR and liquidity and continued balance sheet deleveraging and very, very proud of the results our business units are delivering through the year. With that, I'd like to turn it over to I'd like to turn it over to Q&A. Operator: [Operator Instructions] Your first question for today is from Mike Linenberg with Deutsche Bank. Michael Linenberg: Great way to finish up 2025. And obviously, now as we look into 2026, the high energy prices are kind of the front and center of focus. I saw that you have these hedges, clearly opportunistic. What are you currently paying for jet fuel? I mean I saw that in the context of that $4 per gallon jet fuel hedge. What are we seeing today? And then can you kind of give us a view on how you're thinking about your capacity plan for this year? I mean I know we're starting to see other carriers sort of rethink near-term growth plans as they deal with higher fuel prices. Manuel Irarrazaval: Thanks, Mike, for the question. And yes, I mean, it's been an interesting start of the year with these movements. In terms of what are we paying for fuel today, there is a certain delay in kind of the cost of fuel as kind of our suppliers have some inventory. So we are today kind of spot price today where kind of outside of Brazil, I would say, is around $4, a little bit under that. In terms of the -- that is the fuel price that we're paying without kind of taking into account the hedging, right? In Brazil, it's going to be lower. I don't have the exact number here, but it's going to be lower than that. Then on top of that, you have the compensation that is coming from the hedges, right? From March, April and May, we have -- half of our volume is capped at the $2.45 that I referred to before. So that's what we're paying. And that is mostly -- that is the fuel that is being consumed outside of Brazil, right? And Brazil still hasn't seen -- we're just starting to see kind of the new price -- the price reset now on the 1st of April, right? So you're going to start to see an effect of the price increase going forward, right? Adrian Neuhauser: And so with regard to capacity, Mike, if you were to look at our sales curves today, what you'd see is the following, right? We've started pretty aggressively passing through the increased cost of fuel, right? So we're not relying on the hedges to boost margins. We're basically using them as a way to soften the transition to new pricing as we drive the pricing up. And obviously, there's a lag there, right? If you were to look at pricing in Brazil today, we're up, and I think the industry broadly is up about 30% from where we started a little over a month ago, which if that holds, right, that's pretty much a full pass-through of [ mid-4 ] fuel. Now obviously, because you've sold lots of bookings forward, there's a mix of bookings that you sold at lower prices, bookings that you sold at high prices, and it's going to take the better part of 3 months even with the new pricing levels for your average pricing to catch up. And then the second part of that is how much of that turns into reduced demand because that will ultimately answer your question, right? What we're seeing so far is that the short end of the booking curve is holding up pretty well. And -- but you're seeing the later bookings not come in, right? And the question is, do they show up later? Or do they -- which interestingly, if you think about what later means today, later sort of means the beginning of summer high season, right? And so it's not a crazy bet to assume that they will or do they fall off, right? We've started in Brazil, in particular, thinking about some tactical reductions sort of in the single -- low single-digit percentages of ASKs. But the reality is we don't know yet, right, how elastic is that going to prove and how much we need to react to that, right? So we're looking at it constantly. And as soon as we sort of start to see near-term bookings taper off, that will be a strong sign that we need to cut back on supply, right? On the Avianca side, the pass-through has been, I'd say, less effective. It's a more complex competitive set, right? You have over 20% of your ASKs deployed into Europe. The Europeans are largely hedged. You have 35% of your ASKs deployed into the U.S. The U.S. carriers, in spite of their big talk have actually been slower at sort of driving pricing up, at least in our region [indiscernible] and they've been slow followers as well. So we're slightly under 10% increase in pricing at Avianca. And again, we need to get to sort of the mid-20s, right? So call it 1/3 of the way there. And sort of the same dynamic, right, less to no impact on the near-term bookings, which is interesting because we've been in a low season. But a pretty strong drop-off in the long-term bookings, which is interestingly because -- which is interesting because those are high season bookings, right? So right now, I don't want to sound sanguine because this is obviously an unexpected sort of shock to the system, right? And it's not a positive shock. But between the hedges, between the effectiveness of our ability to pass through and between the near-term booking curve holding up even in low season, we're pretty optimistic about summer demand. You may see us pull back a little bit of capacity here and there, but we haven't yet decided to sort of make wholesale reductions, certainly not into the summer, right? If we see this dynamic holding up for a few more months and then sort of have to extend higher pricing into the much more elastic sort of post-summer shoulder season, that's a different discussion. Michael Linenberg: All right. Well, very encouraging that you guys are -- you appreciate the elasticity and are considering tactical moves if this fuel regime or environment continues, or it persists. So thanks for the thorough answer. Manuel Irarrazaval: Mike, to go back to your question around the fuel, in Brazil, in particular, the price announced by Petrobras for April is BRL 6.85 per liter, right? That translates into about $4.9 per gallon, which remember, that includes a non -- insignificant amount of taxes. And that -- so you have a reference is about a 55% increase against the price that was -- that we paid during March, right? Remember that in Brazil, the price kind of reflects the average of the previous month, right? So you're seeing -- you saw 55% increase when kind of world jet fuel prices increased kind of on spot is more, it's double, right? So it's a moderated increase by Petrobras for the month of April and then probably May, you're going to see the pull back, right? Adrian Neuhauser: And Mike, one more comment on your comment. We are cautious on elasticity. Again, like I said, we're monitoring it. The bigger concern, I think, for everybody should be less the price elasticity side, if you think. If you think about -- and this is an interesting data point, right? Because both GOL and Avianca have been pretty effective in keeping their costs in line and in driving higher loads, a 30% pass-through to fares would put 2026 fares on real terms at the same price we were charging in 2019, right? So you're actually interestingly not talking about sort of taking pricing to where it's never been, you're really sort of catching to inflation. So we are concerned about elasticity, but we're not panicked about it on the price elasticity side, right? If you have to think about what are we monitoring more long term, we're monitoring economic slowdowns and then income elasticity, right? Because that would have a much more significant impact, we believe, on demand than the fare pricing that we're passing through, in particular, when the entire market passes it through as well. Operator: Your next question for today is from Savi Syth with Raymond James. Savanthi Syth: I just -- maybe I appreciate the tactical capacity adjustments you might make. But I was wondering if you could talk a little bit about maybe the core capacity plan at Avianca and GOL this year and kind of where that kind of growth might be focused? Adrian Neuhauser: Sure. Celso, do you want to start with GOL and then we'll hand it to Gabriel for Avianca. Celso Ferrer: Yes, Adrian, I can. Savi, thanks for the question. And we have -- as I mentioned, 2025, we were like catching up the capacity that we lost during the pandemic. And basically, by creating connectivity, design the new network with the entire Abra team focused in regions where GOL used to be strong, but we see even higher potential for the company right now. I can give you two examples. One is Rio, the other one is Salvador that we are -- that both concentrates more than 86% of our growth in 2026. In Rio International, we have created a very strong position, high frequency where we believe if we need to do some tactical reductions, we will be able to recapture most of the demand as the whole industry continues to be and follow the rationalization. So we are monitoring very close. As Adrian mentioned, no decision, and we are not looking for restructuring of the network. We are confident. You saw our results, I mean, with ASK growth and unit revenue growth. So we are, I mean, monitoring close and doing these adjustments so far, okay? Gabriel Oliva: Sorry, Celso, go ahead. Celso Ferrer: No, no, please Gabriel. Please, go ahead. Gabriel Oliva: So on the Avianca side, as we commented and we were talking last year, we did this capacity shift to have a more healthy supply and demand balance, right? We extended the stage length more on the international side, and we did some adjustments in Domestic Colombia. As we think about 2026, our initial plan was a modest growth within the mid-single digits, right? And that comes on really not getting so much narrow-body fleet this year. So adjusting the network throughout the same pattern, but not a high growth. And on the wide-body side, it's really, as I said before, and we commented before, right, last year, we had this -- all these disruptions due to the wide-body engines that we commented on the last call. So it's more about putting our network on the wide-body side that getting all the [ 78s ] and all the 2 A330s that Adrian commented. So in a nutshell, we were not thinking on a high growth in the network this year, and it's basically keeping kind of the same pattern that we were having last year into this year. Operator: [Operator Instructions] Your next question for today is from Pablo Monsivais with Barclays. Pablo Monsivais: Just a quick question in terms of OpEx and CapEx. At this point, are you thinking of any measures to reduce the cash outlays, assuming the situation continues with a very high oil price? Manuel Irarrazaval: Pablo, thank you for the question. We are always looking at ways to optimize our OpEx and CapEx in particular, where kind of the amount of the CapEx around engines has turned to be more significant. We're also looking at ways, Pablo, of taking advantage of facilities or kind of using local facilities to be able to fix engines in Brazil, for example, which would give us also some kind of support in terms of being able to finance those. But yes, we are, of course, working on optimizing the CapEx and the OpEx plans. Operator: Your next question for today is from Guilherme Mendes with JPMorgan. Guilherme Mendes: I appreciate the comments on the first question about the demand outlook. Just following up into that, if you can break it down between different segments, think about leisure and corporate and domestic and international. When you say that you're increasing prices by 30% in Brazil and roughly 10% in Colombia, is this across the board for different segments? Or there's a difference between leisure and corporate and domestic and international? Adrian Neuhauser: No. What I'd say, we can dig into this more, right, offline. But what I'd say is, look, conceptually, it's across the board, right? We've tried to increase across the board. Obviously, there's some self-segmentation, right? If we're saying the shorter end of the booking curve is holding up very strong, the longer end of the booking curve is where we've seen some still TBD, if it's reduced demand or simply delayed demand. The shorter end of the booking curve tends to be more business focused, right? So we're passing through on everything. But what you're seeing is the leisure customer not book up as early as they would. And that's sort of natural, right? You'd expect the people that they thought the summer ticket was going to cost X, right now it's costing 1.3x. They look at it and they say, well, let's wait a bit before we book it and see if it drops, right? So I think there's some sort of self-selection there that's not us segmenting where we raise prices and where we don't, but sort of how people -- how different parts of the market react to changes in our pricing curves. In Colombia, as I said, it's a little different because even though we raise fares across the network and we intend and push for our pricing to go up and hope that our competitors will follow. The nature of the network means that you've got different competitive sets, right? So when you say international, again, our U.S. fares, we've been through -- don't quote me on this, but 3 or 4 price increases. I'd say 3 have stuck and we've had to pull back. And it has to do with whether competitors follow or not, right? And that has to do with sort of the competitive set you're playing against, right? In Europe, the European carriers have been much less willing to raise fares. I think that the position they're taking is they're more hedged and they're using that to try to capture market share. They're also driving some pretty extraordinary margins on their Far East routes, right, as connectivity sort of goes through Europe and avoids the Middle East, that's also giving them some incremental margins and allowing them to not pass through as quickly on the Americas route. So in those cases, we're probably 25% of the way passed through instead of 30%, right? So it depends more on who you're competing against than us segmenting international versus domestic versus what have you. Does that make sense? Guilherme Mendes: Very clear. Operator: Your next question for today is from Gavin McKeown with Amundi. Gavin McKeown: Just last question I have is in relation to the additional hedge that you mentioned. Can you give us any color as to whether or not that was at GOL or at Avianca? Manuel Irarrazaval: No. Look, the hedges themselves, we take them at Avianca, which is the company that has less -- has a more direct impact from changes in fuel prices, right? And of course, the company that has more ease to find with banks and other things, right? So -- but yes, they're being taken at Avianca today. Operator: Your next question for today is from Nicolas Fabiancic with Jefferies. Nicolas Fabiancic: Just had a few quick questions here. On GOL, if you could please expand a little bit about liquidity, especially when we look at liquidity without the credit card receivables, any thoughts there in terms of alternatives, things you could do with the intercompany loan or any contemplated reshuffling of the GOL capital structure at this stage? Regarding Abra, similar question. We have the '29s bond. I see that it's callable in October. So just any updated comments around liability management or refinancing for the Abra '29s or the term loan? And then at Avianca, you've made great progress with the refis there. There is the stub left over for the '28. If you could give us an update on liability management at Avianca. And also, I just wanted to ask about Avianca, the CapEx plan if you could give a little bit more detail on CapEx for 2026. Manuel Irarrazaval: Listen, let me -- thanks, Nicolas. Let me start by addressing Abra in general, and then we can go into the different points, right? The liquidity position that we have across each of the companies is very strong. In the case of Avianca, we have -- we finished the year with $1.4 billion of liquidity. That includes the revolving credit facility. At the level of GOL, we have about $1 billion, which includes the receivables, which, as you know, in Brazil, is a fairly liquid asset that you can get -- you can sell off. It's like having a revolving credit facility. Now in terms of kind of you're asking about the capital structure of GOL itself, there is no plans today to do anything around that. The company is in a strong position and has been deleveraging over time. Of course, we are looking at CapEx and OpEx and kind of how do we make sure that we keep our liquidity levels and our cash levels, in particular, at a reasonable amount going into this. But there is no plans or kind of things that I would comment on doing liability management at this point, right? And that's in general for the group. I think that given kind of the market environment today, I think liability management are not in discussions today. Same thing with Avianca, right? In Avianca, if you remember, we did a couple of refinancing at the beginning of the year. We brought down -- we repaid a big part of the '28 notes with a bond that we did at the beginning of the year and recap that we did in later in January. And there's about $400 million of the '28 notes outstanding. We have no plans on doing anything with those in the short term, right? And our financings at Abra, yes, we're approaching kind of the end of the non-call period, but that's a bigger question. In the market that we have today, I don't see that we're doing anything in the short term. And just to be clear, on the GOL liquidity that you see and the cash that you have there, that is real cash and liquid facilities, right? I mean, and liquid assets. So it's not -- we're just showing you there the cash and the factorable receivables. Anything -- any kind of receivables that is not factorable, we will not include there. Operator: [Operator Instructions] We have reached the end of the question-and-answer session, and I will now turn the call over to Adrian for closing remarks. Adrian Neuhauser: Thank you, everyone, for the time you spend looking at us. Again, really proud of the quarter we've delivered of the evolution of the company as we put it together in a very short time. The synergies we're driving, the growth that we've driven, the margins that we think are second to none in the region. We're really proud of what we've delivered. We're working through the fuel situation, as you can see, pretty effectively, the hedges have put us in a great position to work through it and pass through pricing as we head into summer high season. So all in all, even with the geopolitical backdrop that we're dealing with, very, very excited for what the year will bring. So again, thank you all for spending the time, and we'll be talking to you shortly. Manuel Irarrazaval: Thank you very much. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you very much, and good afternoon, ladies and gentlemen. Welcome, and thank you for joining our conference on the financial year 2025 results. My name is Jeroen Eijsink, and this is the first time I'm addressing you in my role as Chief Executive Officer of HHLA. I'm very pleased to be here today together with my fellow Executive Board member, Annette Geiss, to guide you through HHLA's performance in the 2025 financial year. Over the past 6 months since assuming the role on October 1, 2025, I've taken the time to get to know HHLA in depth. This has included spending a great deal of my time at our terminals in Hamburg as well as visiting our European subsidiaries such as Metrans and PLT Italy. Above all, I have met many of the people who ensure around the clock that supply chains continue to function. What I have seen during this time is a company with strong substance and committed teams. HHLA is operating in a challenging environment, but it is well positioned to address the challenges ahead. At the same time, I have also gained a clear understanding of where we need to improve and where we will focus our efforts going forward. Let me now briefly summarize the past year 2025. The year was shaped by a demanding market environment. Persistent geopolitical tensions and continued economic weakness in Germany weighed on supply chains and reduced planning certainty. At the same time, global trade flow shifted with declining volumes on North American routes and growth in Far East trades, particularly with China. Another factor during the year was the reorganization of liner services following the formation of new shipping alliances, most notably the launch of The Gemini Cooperation by Hapag-Lloyd and Maersk. In addition, MSC gradually shifted its Hamburg services to HHLA over the course of 2025. For the Port of Hamburg, this resulted in a noticeable reallocation of traffic flows, while all major alliances continue to be handled reliably by HHLA. In this dynamic environment, we focused on strengthening our operational base. We continued to modernize our Hamburg container terminals, building on our automation expertise at CTA and advancing our reorganization and expansion measures at CTB. At the same time, we strengthened our European Intermodal network by further expanding the activities of our Rail subsidiary, Metrans. For instance, we announced the modernization of our terminal in Slovakia and laid the foundation stone for a new site in Hungary in 2025. Most recently, we secured a 50% stake in a Romanian terminal to establish our first intermodal facility there. With investments like these, Metrans strengthened its position in Southeastern Europe. Even in a challenging geopolitical environment, we remain committed to our long-term strategic priorities. These include our continued engagement in Ukraine marked by the acquisition of a majority stake of 60% in the Intermodal Terminal Batiovo. Operationally, this all translated into solid growth. Container throughput increased by more than 5%, while Container transport rose by almost 11%. Supported by this volume growth, both revenue and EBIT made good progress. Revenue in the Port Logistics subgroup increased by about 10% and EBIT rose by more than 20%. At the same time, profit after tax and minority interests was burdened by a one-off and noncash tax effect. It was not cash-effective, but had a significant impact on net income for the year. Against this backdrop, the Executive Board, together with the Supervisory Board have decided to propose to the Annual General Meeting that no dividend will be distributed for the 2025 financial year. The focus remains on financing capabilities and a disciplined capital allocation to support the persistently high-level of strategic investments ahead. With that, I would now like to hand over to Annette, who will take you through the performance of our segments in more detail, starting with the Container segment. Annette Walter: Thank you, Jeroen, and good afternoon, everyone. Let's move directly to the performance of our Container segment. As Jeroen has already mentioned, we recorded overall growth in container throughput of 5.4%. Volumes at the Hamburg container terminals increased by 4.8% to almost 6 million TEU. The key drivers in overseas traffic were volumes to and from the Far East, especially China, as well as South America, Africa, Australia and the Middle East. By contrast, the North America shipping region declined strongly. Volumes in feeder traffic increased significantly year-on-year. This development was supported mainly by traffic with Finland, Poland and other German ports. However, cargo volumes from Estonia, Latvia and the U.K. declined. The proportion of seaborne handling by feeders was slightly above the previous year's level at 19.6%. At our international container terminals, throughput volume rose strongly by 19.2% to 339,000 TEU. Especially in Italy, we saw remarkable volume growth at the HHLA PLT Italy, which really makes us proud. At CTO, we resumed seaborne handling in the third quarter of 2024 and we were able to continue operations throughout 2025, also, still with certain limitations. This base effect leads to the significant year-on-year increase expected for 2025. Volumes at the multifunctional terminal at HHLA TK Estonia declined slightly on the other hand. Segment revenue climbed significantly by 9.0% year-on-year to EUR 843.2 million. This was supported by higher throughput volumes and beneficial shift in the modal split. On top of that, HHLA's international container terminals made a positive contribution to revenue growth with a strong performance of PLT Italy standing out once again. EBIT costs increased by 11.5% compared to the previous year. This was mainly driven by extensive automation efforts, the positive volume trend and correspondingly higher capacity utilization. Personnel expenses also increased, reflecting union negotiated wage settlement and the additional deployment of personnel from the general port operations pool. In addition, expenses for consultancy and related services as well for purchase services, rose strongly. As a result of necessary investments, depreciation expenses increased moderately. The earnings safeguard measures implemented at the Hamburg container terminal since March 2023 had an offsetting effect, but were not sufficient to fully compensate for the cost increases described. Against this backdrop, EBIT declined by 6.4% to EUR 73.6 million, while the EBIT margin decreased by 1.5 percentage points to 8.7%. So let's move on now to the Intermodal segment. Transport volumes in the Intermodal segment made particularly good progress over the year. As a result, container transport rose by 10.9% to 198,200 TEU compared to the previous year. Rail transport rose year-on-year by 11.2% to 171900 TOU. This strong volume growth was largely driven by traffic with the North German seaports as well as traffic in the German-speaking countries. Moreover, the transport volumes of Roland Spedition in the previous year were only included from June onwards. Road transport rose significantly by 8.7% to 263,000 TEU. This development was helped in particular by the recovery of transport volumes in the Hamburg region. With an increase of 12% to EUR 797 million, revenue outperformed the volume development. In addition to routine price adjustments, this was partly due to the further increase in Rail share of the total intermodal transport volume from 86.5% to 86.7%. EBIT increased by 23.9% to EUR 103.7 million. The main reason for this strong EBIT growth was the increase in transport volumes despite an opposing effect from ongoing operational difficulties caused by construction work on major transport roads and congestion at the North-German seaports. Let's turn briefly to the Logistics segment, where we have pooled for instant vehicle logistics consultancy as well as digital and leasing services. In the reporting period, the consolidated companies generated a revenue of EUR 92.8 million, representing an increase of 10.9% compared to the previous year. The rise is attributable to the leasing company for intermodal traffic and to vehicle logistics. After reporting a loss in the previous year, the segment returned to a positive operating result of EUR 6.5 million in 2025. The performance within the segment varied across the individual companies. Whereas the Leasing company and Vehicle Logistics made strong earning contributions, our Innovative business activities fell short of the prior year result. At-equity earnings also made encouraging progress, increasingly by 27.5% to EUR 5.7 million in the reporting period. Coming back to the Port Logistics subgroup as a whole, let's have a look now at our cash flow development. The reporting period, cash flow from operating activities of EUR 257 million mainly comprised earnings before interest and taxes as well as write-downs and write-ups on nonfinancial assets. The main items with an opposing effect were interest payments, trade receivables and other assets as well as income tax payments. Investing activities resulted in a net cash outflow of EUR 307 million, up almost EUR 26 million on the previous year. This development was largely due to payments for investments in large-scale equipment at the Hamburg container terminals as part of our efficiency program. As a result, free cash flow of the Port Logistics subgroup was a negative amount of EUR 50 million. Cash flow from financing activities totaled EUR 0.4 million. On the one hand, new financial loans of EUR 140 million, on the other hand, opposing effects from dividend payments and settlement obligations to shareholders of the parent company and to noncontrolling interest as well as from repayments on bank loans and payments for the redemption of lease liabilities. Overall, our available liquidity at the end of December 2025 remained at a robust level of EUR 180 million. Before I hand back to Jeroen, I would like to briefly address our dividend proposal. At this year's Annual General Meeting, the Executive Board and the Supervisory Board will propose, not to distribute a dividend for the 2025 financial year, neither for the Class A nor the Class S shares. As we already mentioned before, earnings per share are at a very low level. At the same time, we are currently investing at a high level in order to modernize our terminals and ensure that our infrastructure is fit for the years ahead. Against this backdrop, we have decided to retain the available funds within the company to safeguard our ability to invest and to finance our projects. This represents a responsible prioritization in favor of the long-term stability and future strength of HHLA. That concludes my remarks. For the review of our ESG performance, an update on the squeeze-out and an outlook for the 2026 financial year, let me now hand back to you, Jeroen. Jeroen Eijsink: Thank you, Annette. Let me start with the sustainability topic. Sustainability is not an image project for us. It's increasingly becoming a hard competitive factor. Our customers are paying much closer attention to low-carbon supply chains, and we are actively helping them achieve their targets. To do so, we are making investments in three key areas: energy-efficient systems, electrified equipment fleets and automated processes with significantly reduced emissions. There are already very concrete examples of this across our operations. At CTA, our tractor units are now fully electrified. At CTB, automated guided vehicles are helping us to significantly reduce diesel consumption, and at CTT, we are operating hybrid van carriers that are already designed to be converted to battery or hydrogen power. As a result, almost half of our total energy consumption is already covered by renewable sources today. This clearly demonstrates that technological innovation and sustainable solutions go hand-in-hand at HHLA. This is not only an ambitious aspiration, it's operational reality. Accordingly, this is also reflected in our EU taxonomy indicators, where we once again achieved very strong results. All of these measures are decisive steps towards our long-term objective to achieve climate-neutral production across the entire HHLA Group by 2040. Before we turn to the outlook for 2026, I would like to briefly address another topic that has been high on our agenda since the beginning of the year. In addition to our operational and financial performance, the squeeze-out request announced in early January by the Port of Hamburg Beteiligungsgesellschaft SE, HHLA's majority shareholder has required considerable attention. So where do we currently stand in the process? The amount of the cash settlement is currently being determined by an independent expert. Following this, the squeeze-out will require approval by the Annual General Meeting in June. Of course, the Executive Board will accompany this process in a responsible and constructive manner. Let me conclude by briefly addressing the current market situation and our outlook for the 2026 financial year. Recent developments in the Middle East once again pose significant challenges for international shipping. They continue to affect global trade routes, sailing schedules and supply chains and as a consequence, also have an impact on European ports and logistics corridors. At present, we are seeing a market rise in uncertainty. Shipping lines are adjusting schedules at short notice, opting for alternative routes and in some cases, accepting extensive detours. This results in longer transit times, higher operating costs and greater operational complexity along the supply chain. Against this backdrop, the outlook shown on this slide is subject to a degree -- a high degree of uncertainty. At the same time, the progress we've made in recent years in modernizing our infrastructure and expanding our European network provides a solid basis for our expectations for the current financial year. Overall, we expect a positive development for the current financial year. We anticipate a significant year-on-year increase in container throughput and a strong year-on-year increase in container transport. Moreover, strong revenue growth is expected from the Port Logistics subgroup compared to 2025. EBIT is likely to be between EUR 160 million and EUR 180 million. To further increase efficiency and expand capacity in the Container and Intermodal segments, capital expenditure in the Port Logistics subgroup will be in the range of EUR 400 million to EUR 450, around half of this amount will be invested in the Container segment with the majority going to the Hamburg container terminals. These investments will focus on the efficient use of existing terminal space in the Port of Hamburg and the expansion of our foreign terminals. The other half will be used primarily to further expand our own transport and handling capacities for our Intermodal activities. With this outlook for the current year, I would like to close my remarks on our 2025 financial results. Annette and I are both happy to take your questions now. Operator: [Operator Instructions] Ladies and gentlemen, there are no questions at this time. I would like to turn the conference back over to Jeroen Eijsink for any closing remarks. Jeroen Eijsink: Ladies and gentlemen, thank you very much for your interest in HHLA. Before we conclude, I would like to leave you with a closing thought. HHLA remains a central pillar of European logistics. Our international network strengthens our resilience, broadens our positioning, enhances our competitiveness. Our investments consistently focus on reliability, efficiency and sustainability, guided by our commitment to continuously improve customer satisfaction. We are determined to stay on this course. Thank you.
Operator: Greetings, and welcome to the Faraday Future Intelligent Electric Full Year 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Schilling, Director of PR and Communications. Thank you, John. You may begin. John Schilling: Good afternoon, everyone, and thank you for joining Faraday Futures' Fourth Quarter and Full Year 2025 Earnings Call. My name is John Schilling, Global Director of Public Relations and Government Affairs here at Faraday Future. Joining me today are our Global Co-CEO, Matthias Aydt; our Global President, Jerry Wang; and our Chief Financial Officer, Koti Meka. Before we begin, please note that today's discussion will include forward-looking statements based on current expectations and assumptions. These statements involve risks and uncertainties that could cause actual results to differ materially. We encourage you to review our SEC filings for a detailed discussion of these risks. We undertake no obligation to update forward-looking statements, except as required by law. Following these prepared remarks, we will address a selection of stockholder questions submitted in advance. With that, I'll turn the call over to Matthias. Matthias Aydt: Thank you, John, and thank you to everyone who is joining us today. 2025 marked a fundamental transition for Faraday Future from strategy to execution. We are now entering early commercialization across both our EV and Robotics businesses, supported by growing demand signals and early validation of our gross margin profile. This is the first time in 12 years from company inception that we can expect to generate revenue with a positive margin. Most importantly, we are evolving beyond the traditional EV company into an embodied EAI ecosystem platform powered by a dual engine model of EAI EV plus EAI Robotics. The EAI strategy and the EAI industry Bridge Strategy are our core strategies. The EAI strategy is a 3-in-1 EAI ecosystem strategy driven by the EAI technology platform consisting of EAI devices, the EAI Brain and open-source, open platform and the EAI decentralized and centralized data factory, forming an open closed-loop EAI ecosystem. The EAI upgrade builds upon the IP and technology foundation of FF's original vehicle business. FF holds over 660 patents. The team is currently reviewing these existing patents to align with the EAI strategy. First, the devices under the EAI strategy, scalable embodied EAI devices for delivery include vehicles and robots. Second, the EAI Brain and open-source, open platform, this creates general purpose, Brain for multimodal embodied AI consisting of the EAI Brain, cerebellum and neural hub powered by EAI foundation models, EAI agents and skill technologies. Through an open-source, open platform we can unite the entire industry, empower each other and unlock massive value. Third, the EAI decentralized, centralized data factory. But on a multimodal all scenario common data infrastructure, this establishes a decentralized and centralized network ecosystem that integrates Web2 data monetization with Web3 data assetization, creating a new data business model. As the first U.S. listed company to achieve scale delivery of both humanoid and biomimetic EAI robot devices, FF not only has a unique first-mover advantage, but can potentially generate a series of chain reactions through this closed-loop ecosystem, internal ecosystem. The 3 businesses, devices, brain and data mutually fuel each other's growth. Mass delivery and adaptation of devices generate vast amounts of data, which enhance the EAI Brain's capabilities which in turn improves EAI terminal products and drives even larger sales, forming a close product technology loop. At the same time, this can reinforce the EAI business and accelerate the realization of fundamental value for the FFAI business. External ecosystem by open-sourcing FF's technology and platform and opening up protocol standards, FF can connect with industry partners and developers while organically linking shareholders, investors and users, creating synergies and co-creating shared value. Bridge strategy. With FF as the industry's bridge, the strategy can integrate global hardware strength with North American AI, R&D advantages, supports localized production and delivers affordable, high-performance intelligent products to target market users. Entering the U.S. Blue Motion market with a relatively asset-light fast iteration approach. The strength of this strategy lies in industrial efficiency and marginal cost benefits driven by deep synergies. Let me now walk through our business update. In the fourth quarter, we continued to move the reservation, production and delivery of EAI devices, highlights in the fourth quarter 2025, reached 2025's most significant milestone, the first FX Super One preproduction vehicle successfully rolled off the company's California AI factory, validating FF's ability to integrate resources across regions, industry and ecosystems, achieved a broad product competitiveness of Super One, a first-class MPV with 130 inches wheel-based flat floor, flexible zero gravity rear seats, FF EAI architecture and the world's first Super EAI F.A.C.E. System, emotional grill interface to be available in pure electric or AI hybrid extended range power options covering both urban and long-distance travel. Mass production preparation is on track as scheduled. A series of certification-related activities proceeded as planned. Additionally, purchase agreements for the first batch of FX Super One parts were signed in October. The final assembly line was completed in December. On the commercial front, we are building a 4-pillar sales architecture covering community, partner, B2B and third-party e-commerce channels. The B2B2C co-creation ecosystem expanded to 6 U.S. states. The cumulative non-binding, non-refundable pre-orders for the FX Super One reached over 11,000 units by the end of 2025. In the Middle East, the region transitioned from initial market entry to early commercial validation following the official launch of the FX Super One on October 28. Football legend, Andrés Iniesta became the world's first owner and co-creation officer in November, helping to strengthen regional influence. We are currently prioritizing deliveries to high-quality co-creation partners including local government entities while establishing operational foundation in Ras Al Khaimah. To support these global efforts, Faraday Finance, Inc. was established in October to provide diversified financing solutions. An application has been filed with the relevant order finance license with the California Department of Financial and Protection and Innovation. Meanwhile, the ultra-luxury FF 91 flagship continues its niche presence with a targeted delivery, and the company has released redesign sketches for our planned FX 4, which is positioned as the RAV 4 Disruptor in the AIEV Era. We also have amazing upgrades on the FFAI technology stack. The system now natively supports over 50 languages and includes real-time web searches with voice synthesis and RAG knowledge-based support. Technical improvements also include an AEC upgrade to support seamless conversation, interruption and the successful migration of end-to-end autonomous driving model. We have developed vision-based 3D object detection and a scalable automated labeling algorithm alongside the implementation of gesture-controlled door entry using the DinoV3 vision model. These are not isolated features. They form the foundation of a scalable cross-terminal intelligence system. Furthermore, FF has submitted a patent for a blockchain and Web3-based vehicle sharing system that allows for one-click sharing, automated credit verification and revenue distribution. Qualigen Therapeutics Inc., an independently operated company strategically invested in and controlled by FF was renamed AIxCrypto Holdings, Inc. NASDAQ AIXC. In November, FF expects to expand brand exposure and low-cost financing channels through potential cooperations with AIXC. Highlights of subsequent events, FF EAI Robotics was launched on February 4, and the deliveries officially commenced in late February. FF became the first listed company in the U.S. to deliver humanoid and bionic robots by March 2026, cumulative shipments of FF EAI Robotics, including predeliveries, reached 22 units, exceeding preset target, accompanied by the start of robot sales revenue and positive product gross margin in the first quarter. As of the launch event, total non-binding, non-refundable pre-orders of FF EAI Robotics reached over 1,200 units. FF EAI robots focus on education, home security and entertainment scenarios to drive product deployment and market awareness. By expanding the existing automotive sales system to include both EAI vehicles and EAI robots, we are maximizing our reach with limited incremental investment. Following the NADA Dealer Summit in January 2026, several memorandums of understanding have been signed with U.S. dealerships. By February 2026, the company upgraded cooperation with its bridge strategic partners, signing agreements for mass production component procurement and engineering services as it enters the final sprint towards full-scale production. In the U.S. market, 800-volt high-voltage drive systems are becoming a core label defining the product strength and technological leadership of high-end electric vehicles. We have already started work on product-related research and development. FFAI has achieved cross-platform sharing EAI vehicles and EAI robotics such as voice dialogue capabilities and multimodal interaction capabilities. Model training platforms and tool chains as well as multimodal environmental perception models have also been shared. Part 3, system building. Now let's discuss our recent progress on system building. Our update in the fourth quarter 2025 focuses on the reinforcement of our internal management systems, talent acquisition and regulatory framework, helping us transition toward AI-driven corporate management, effectively transforming our internal company processes through the integration of advanced AI technologies. We introduced the overall PPTIA governance methodology and implemented it across FFAI. To drive operational efficiency and strategic growth, Faraday Future continues to invest in world-class leadership and infrastructure. On the regulatory and governmental front, our leadership remains proactive in securing the company's position with the domestic policy landscape. FF and FX executives held a series of constructive meetings in Washington, D.C. with several U.S. members of Congress and government officials. These dialogues are essential as we continue to refine our corporate governance and ensure our strategic initiatives are well understood by key stakeholders. A major milestone was reached with the conclusion of the SEC investigation in March 2026, a result that we believe validates the significant reinforcement of our legal and compliance system. In March, our headquarters relocated to Silicon Beach, a strategic move that has significantly enhanced our ability to attract top-tier senior talent in the heart of major technology hub. By combining a validated compliance framework with a high-caliber talented pool and AI enhanced management tools, we have established a resilient organizational foundation to support the next phase of our global expansion. Now I will turn the call over to Koti Meka to discuss the fourth quarter and full year financial updates. Koti Meka: Thank you, Matthias. For the full year 2025, revenue was essentially flat year-over-year. This reflects early-stage commercialization with stable market engagement as we continue to refine our plan. Loss from operations was $32.3 million for the 3 months ending December 31, 2025, and $331 million for the full year 2025, primarily reflecting R&D investments, headcount growth and select asset-related adjustments. Excluding onetime impairments or losses, the operating loss was $185 million, reflecting the company's cost optimization efforts. The onetime asset impairment in 2025 resulted from the strategic shift from the FF 91 program to the planned FF 92 upgrade, along with reorganization and retooling for the FX Super One commercial production. The impaired assets are expected to be redeployed with limited additional investment in retrofitting and upgrades. Operating cash outflow was $107.5 million for the full year 2025, primarily driven by changes in working capital and the operational ramp-up of the FX platform. Financing cash inflow was $161.4 million for the full year 2025, a 100% increase from $80.7 million in 2024. Stockholders' equity was $7.7 million at the end of 2025, primarily impacted by manufacturing optimization expenses, fair value adjustments related to our convertible notes and impairment provisions for certain assets. As a reminder, our capital structure includes equity-linked instruments and as a result, reported figures may experience meaningful noncash volatility period-to-period. I will now turn the call over to Jerry Wang, our Global President, to discuss capital markets updates. Jerry Wang: Thanks, Koti. In 2025, we remain focused on aligning capital deployment with key milestones while maintaining flexibility to support execution and long-term growth. The company achieved a net financing inflow of $161.4 million, demonstrating an ability to raise capital despite a cooling electric vehicle financing environment. Throughout the fourth quarter, leadership maintained close communication with capital markets, participating in multiple conferences and roadshows to enhance visibility and active pursue analyst coverage. This momentum carried into February 2026 when the company successfully hosted an investor event in Hong Kong. During this event, we engaged with over 30 investment institutions to deeply record the result and future road map of the EAI Bridge Strategy, highlighting how the EAI EV plus EAI Robotics Dual Engine approach is driving a significant reevaluation of the company's market worth. We believe the market is beginning to recognize FF not as a traditional EV company, but as an EAI-driven ecosystem platform with a newly launched Robotic business. To optimize the capital structure, the company entered into agreements with several warrant holders in the fourth quarter 2025 to terminate and cancel a total of 44.5 million warrants previously issued under various of security purchase agreements. This decisive move aims to simplify the company's capital structure and reduce potential future share dilution. These structural improvements are being paired with aggressive measures to protect stockholders and investors. In March 2026, the company received a letter from U.S. SEC stating that the SEC has formally closed its investigation, which lasted more than 4 years and decides not to take any enforcement or legal action against the company, YT, Jerry or others. This removes the historical constraints and destabilizing factors that have hindered the company's development and stands as the most powerful and definitive response to illegal short sellers. The company will immediately launch an updated version of its [ term ] pronged transformation initiative to swiftly and cost effectively achieve 4 phased goals: short term, 180 days, mid- to short term, 1 year, midterm, 3 years and long term, 5 years. We will go all out to build sustainable and growing positive cash flow, rebuild market confidence and deliver returns to our shareholders and investors. In addition, on March 20, the company received a notice from NASDAQ regarding a 180-day compliance period to meet its share price listing requirement. We'll do our utmost to regain compliance without resorting to a reverse stock split. We have launched a collective share purchase plan by executives and employees and initiated steps towards legal action against potential illegal short selling as well as the dissemination of false and misleading information intended to manipulate the market and obtain improper gains. This collective action serves as a clear signal of our belief in the company's trajectory and our commitment to actively protecting the interest of the company and all stockholders. I will now hand the call over to Matthias to discuss our 2026 outlook. Matthias Aydt: Thank you, Jerry. Looking ahead to 2026, Faraday Future is focused on deepening strategic execution aimed at driving continuous growth of business and deliveries. In our Robotics division, we have set a clear trajectory for the year with cumulative shipment volume target of over 1,000 units by the end of 2026. Throughout this period, we will continue to ensure the positive product gross margin and ramp up production to prepare for high-volume delivery in the following years. For the FX Super One, our priority remains the enhancement of overall product competitiveness with stable cash flow as a prerequisite. With the initial deployment of the technology-driven ecosystem strategy and deeper open-sourcing of the EAI Brain and technology platform, we expect to generate software-related revenue within 2026. Considering EAI robotics to require considerably less investment than EAI vehicle, we expect the limited additional investment and the positive product gross margin of EAI robotics will improve our 2026 operating cash flow. On the capital and regulatory front, our objectives for 2026 are focused on restoring market confidence and ensuring long-term stability. This includes working towards regaining compliance with NASDAQ's minimum bid price requirement within the applicable 100-day compliance period and actively introducing strategic investments from top-tier global investment institutions. Our systems and corporate governance will undergo a major transformation to support the scale. We are establishing an advanced governance system aimed at maximizing the interest of stockholders and investors while embedding AI governance into our very core. By achieving the systemization and automation of AI governance, including risk identification, compliance control and token cost management, we will enable dynamic monitoring and intelligent optimization of our EV and robotics operations. This AI governance system is designed to achieve cross-regional compliance and optimal resource allocation, effectively transforming our operational capabilities into a core corporate competitiveness and strategic advantage. Simultaneously, we remain in continuous dialogue with government departments regarding the bridge strategy and tariffs to secure policy support and create value by bringing global supply chain capabilities back to the United States. Through these efforts, we are building an ecosystem supporting long-term valuation enhancement and our participation in the formulation of industry standards. In summary, Faraday Future has entered a new phase in 2026 from concept to execution, from single business to dual engine growth, from EV company to EAI ecosystem platform. We are approaching an inflection point toward a positive gross margin of robotics delivery and commercialization scale with continued creation of long-term value. We believe this transition positions us for long-term value creation and a potential re-rating of our market valuation. Thank you. To conclude, I will now hand the call over to John for the Q&A. John Schilling: Thank you to everyone who presented today. As we wrap up, I would like to briefly highlight the materials included in the appendix. In the appendix, you'll find our unaudited balance sheet and financial statements as of and for the 3 months and full year ended December 31, 2025, providing additional detail on our financial position. These materials offer helpful context to supporting everything we have shared today. John Schilling: With that, we would now like to open the floor for Q&A. Question one. Who is buying the robotic products today? And what are the primary use cases driving that demand? Matthias Aydt: Our Robotics business is structured across 3 core layers: robotic device deployment and decentralized data factory as well as the EAI Brain and open-source, open platform. In this context, robot sales represent only one component of our broader strategic architecture, albeit an important or complementary one. The robotic hardware deployment layer encompasses not only direct sales and rental, but also a full suite of user operation services, including aftersales support, spare parts, ecosystem products and financial services. Our goal is to become a U.S.-based leader in early-stage robotics deployment in North America, establishing a strong market presence and defensible moat. In terms of use case scenarios, our target customers span a wide range of industries, including high-end hospitality and vacation rentals, automotive dealership, showrooms, security and patrol, education, entertainment and life performance, agricultural harvesting and research laboratories. We have already achieved early deployment in several of these verticals. Our data factory business has completed its strategic planning and has now entered execution. Within the embodied AI industry, real-world robotic data collection and training serve as a critical complement to simulation-based data and are essential for validation. This creates a closed-loop system between sim to real and real to sim. Our data collection solution is already capable of seamless integration with the NVIDIA Isaac ecosystem. As our robot fleet continues to scale, it will become a key source of high-value data generation. In parallel, we are integrating this capability with AIXC's on-chain infrastructure, creating a differentiated and competitive advantage. On the EAI Brain and open developer platform, we have already made meaningful progress and plan to move into the implementation phase in the near term. John Schilling: Question two. How does your B2B2C model translate into actual revenue generation? Matthias Aydt: The so-called B2B2C model refers to FF working in collaboration with FF partners on the sales side to jointly engage and serve end consumers [ C-end ] users. FF's B2B2C model mainly relies on cooperation with various [ B-side ] commercial partners to convert high-end customers' resources into actual sales revenue. The company works with real estate agencies, high-end clubs, corporate clients, dealers and other partners to reach high net worth individuals through their channels, then completes vehicle sales and delivery to generate direct revenue from car sales. At the same time, the company incentivizes partners to acquire customers through reasonable commission and profit sharing arrangements, which not only lowers its own customer acquisition costs, but also quickly expands order volume. In addition to car sales, the company will also generate recurring revenue through value-added services such as aftersales maintenance, connected car services and automotive financing programs. This light asset model rapidly expands channels, targets high-volume customers and shortens the sales cycle, allowing orders to be converted into cash flow and revenue more quickly. As partner channels expand and delivery efficiency improves, valid orders driven by [ B-side ] referrals will keep growing, serving as an important pillar for the company to improve operating cash flow and restore market confidence. John Schilling: Question three. Following the approval to increase authorized shares, how are you balancing funding needs with dilution sensitivity? What principles are guiding capital allocation? Matthias Aydt: The increase in authorized shares provides us with additional flexibility, but it does not alter our disciplined approach to capital allocation. Our capital deployment remains milestone-driven and sequenced around clear value inflection points. We prioritize return potential, capital efficiency and importantly, the preservation of long-term shareholder value. Importantly, within our business mix, the EAI Robotics business represents a more capital-efficient growth engine compared to the EEI Vehicle business. It operates under a relatively light-asset model, requires less incremental capital and therefore, inherently carries lower dilution risk when funded. In addition, the Robotics business has already demonstrated revenue generation and positive product gross margin. This not only supports internal cash flow dynamics, but also contributes to expanding the company's valuation foundation, enabling the market to more appropriately reflect the intrinsic value of FFAI over time. John Schilling: Question four. What are the next steps for the EAI Brain and open-source, open platform and the data factory? Matthias Aydt: A good question. The FF EAI brain will evolve into a general purpose AI capability that can be migrated and reused across multiple scenarios, multiple tasks and multiple terminal devices, supporting the continuous evolution of vehicles and robots in different applications. Through open-source mechanism, open interfaces and ecosystem collaboration mechanisms, the open-source, open platform will potentially enable more developers, partners and various types of hardware to connect and co-build. By continuously accumulating high-quality scenario data and behavioral data, we will gradually build data commercialization capabilities for model training, capability optimization and industry applications. We plan to enter the AI infrastructure space, secure our first customer and generate revenue. In addition, we plan to actively establish broad partnership with data companies and AI enterprises to jointly promote data circulation, model coke construction and the deployment of scenario-specific capabilities. John Schilling: Question five. What measures will the company take to ensure compliance with share price requirements within 180 days? Matthias Aydt: One of the company's top priorities during the rectification period is to restore compliance with the minimum share price requirement to the greatest extent possible without conducting a reverse stock split. Firstly, the fundamental measure is to rebuild investor confidence through sustained improvement in the company's operating performance. FF Robotic has now commenced deliveries and started generating revenue with positive gross margins, making a positive signal for the company's fundamental operating performance and operating cash flow. We are focusing our strategy on business that enable rapid delivery and quick cash flow generation with a clear and progressively achievable path to profitability. Second, further optimize the company's cost structure and emphasize return on investment. Third, repurchase shares on the open market to signal internal confidence and better balance financing needs and equity dilution through strategic focus. Fourth, continue to strengthen information disclosure to stabilize market expectations and take legal actions against alleged rumor monitoring deformation and malicious stock price manipulation. Suffice it to say, our confidence is stronger today than it was a year ago. We look forward to restoring market confidence through consistent delivery positive margin products. John Schilling: Thank you for your time. This concludes our investor Q&A session. We appreciate all the questions submitted and apologize if we couldn't get to all of them today. We remain committed to maintaining open communication with our investors. That concludes today's conference call. Thank you for all of your participation. Operator: This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, everyone. Thank you for participating in today's conference call to discuss Jones Soda's financial results for the fourth quarter and full year ended December 31, 2025. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects or targets and negatives of these words and similar words or expressions. Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Factors that could affect our actual results include, among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC, including our annual report on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. In addition, this call includes discussions of certain non-GAAP financial measures, including adjusted EBITDA. The most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations. A telephone replay will be available after the call through April 14, 2026, and a webcast replay of today's webinar will also be available for 1 year via the link provided in today's press release as well as on the company's website. Now I'd like to turn the call over to Jones Soda's CEO, Scott Harvey. Scott Harvey: Thank you, Shamali. Good afternoon, everyone, and thank you for joining our fourth quarter and full year 2025 earnings call. 2025 was a transformational year for Jones Soda, culminating in a strong fourth quarter that underscores the progress we've made both operationally and strategically. For the full year, we generated more than $25.3 million in revenue, representing a significant growth over the prior year and reflecting the impact of our expanded distribution, product innovation and operational execution. Throughout the year, channel focus along with operational improvements reinforced the company's foundation. We centralized our warehousing, optimized logistics and implemented just-in-time inventory practices, making the organization leaner and more efficient organization. These actions also reduced costs, enabling us to reinvest in areas of the business that we have the highest impact potential. Strategic divestitures, including the sale of our cannabis business, enabled us to fully focus on scalable beverage operations and sale proceeds reinforce our balance sheet. Partnerships with Bethesda and/or Fallout, Crayola, Folds of Honor, alongside our expansion into the Club Channel, further enhanced the brand's visibility and drove record purchase orders, demonstrating the combined power of operational discipline and strategic growth initiatives. As we closed out the year, we began shipping Fallout the Vault-Tec packs to club stores nationwide, dramatically increasing the availability of our Fallout Inspired beverages. We completed the first of multiple shipments to select locations across Canada as well. Fourth quarter revenues reached $11.7 million, the highest gross sales Jones Soda has ever delivered in its history, underscoring the strong consumer demand and the effectiveness of our strategic initiatives. The operational and strategic foundation we built in 2025 positions Jones Soda to leverage growth opportunities, scale efficiently and drive sustained value across its key business areas in the year ahead. Core soda remains the backbone of our business. Over the course of 2025, we expanded our distribution network, adding new partners and extending our reach in both the U.S. and Canada. Direct store delivery partners serving major national retailers strengthened our presence in key markets. Culturally relevant and collectible product launches drove strong engagement and expanded the Jones brand to reach millions of consumers across North America. Crayola Inspired packs sold out within hours, generating approximately $275,000. Our D2C channel further accelerated momentum with the launch of the Fallout inspired rocket bottles, which sold out within days, creating a meaningful online excitement, reinforcing the value of our partnerships with iconic brands and gaming platforms. As a result of our success of these launches, retailer demand and interest continue to grow with each subsequent release. These results highlight the impact of culturally relevant collectible products while underscoring our focus on disciplined execution within core soda. Operational improvements, including enhanced forecasting, centralized logistics and multi-SKU shipping capabilities enabled us to meet strong demand efficiently, maintain product quality and support continued growth. Modern soda delivered limited growth in 2025 despite operating in an increasingly crowded and competitive category. Demand for better-for-you beverage remains strong, particularly among consumers seeking functional benefits without compromising on taste. Pop Jones a functional soda expanded into 1,500 retail doors, including national chains and consistently performed well in consumer taste evaluations versus comparable offerings. Our work in this category is far from complete. In 2026, we'll introduce new flavors anchored in high-demand core profiles such as Root Beer and Cream Soda while evolving our go-to-market approach. We'll increase localized support for retailers through a focused 4 walls, 4 blocks, 4 miles strategy designed to drive awareness, trial and sustain velocity at the store level. Overall, Modern Soda's performance reinforces that while the category is highly competitive, consumer demand for healthier functional beverage continues to support steady growth and long-term opportunity. In adult beverage, regulatory changes were a key consideration. Federal legislation enacted in 2025 alters the framework for hemp-derived products, including certain intoxicating cannabinoids. While the law is not expected to take effect until late 2026 and enforcement still remains uncertain, we are actively evaluating potential impacts and have developed contingent plans to address a range of outcomes. We are more cautiously moving forward with trusted partners while closely monitoring developments in Washington, D.C. and engaging with industry advocates to determine the appropriate path forward. At the same time, evolving state-by-state regulations continue to create complexity, requiring ongoing vigilance to ensure our products remain compliant. While we do not expect HD9 to be a material growth product line in 2026, we will continue to support our dedicated partners. We remain focused on staying nimble, adapting quickly to regulatory changes while maintaining and supporting our distribution network and ready to enact our contingency plans as regulatory deadlines approach. Spiked Jones also faced challenges in 2025 as distribution declined in certain accounts due to the product's high alcohol by volume and sugar content. In 2026, we plan to reposition the brand with a revised 4% to 5% alcohol by volume, new flavors, refreshed packaging. We also intend to support the brand through a more targeted regional strategy, as mentioned earlier, enable us to launch in a specific market, provide appropriate local marketing support and drive consumer engagement more effectively. Across all of our areas of business, core, modern and adult, we built an operational discipline, drove consumer engagement, creating meaningful momentum heading into 2026. With that performance as context, I'd like to turn the call over to Brian to review our fourth quarter and full year financial results. Brian? Brian Meadows: Thank you, Scott, and good afternoon, everyone. I will first go over our full year 2025 results, starting with revenue. Jones achieved revenues of $25.3 million for the 12 months ended December 31, 2025, compared to $17.8 million in the prior year or a 42% increase in revenue. Two categories stood out to drive the increase. sales of Fallout licensed products to the Club Channel and sale of Fallout products to the direct-to-consumer channels. We also saw some increases in the Pop Jones SKUs. However, this will be a focus in 2026, as Scott has previously stated, to make more material progress in the modern soda category. I'll further discuss the company's outlook for revenue '26 later in my comments. Focusing next on adjusted gross margin. Adjusted gross margin is a non-GAAP measure. It effectively takes GAAP gross profit and adds back onetime inventory provisions and divide that into net sales. Full year adjusted 2025 adjusted gross profit margin was 32% compared to 27% in the prior period. We incurred $1.2 million of onetime inventory write-downs associated with an HD9 business and inventory stranded with a co-man we had a legal dispute with as we previously disclosed. The majority of the write-down was due to the federal legislative changes to the HD9 business enacted in November 2025. Our outlook for the HD9 business as a result of these changes and its impact on the Jones HD9 business in general necessitated a further write-down of our year-end 2025 HD9 inventories to a level that reflects today's HD9 marketplace. The good news here is that we improved our adjusted gross profit margin by 5 percentage points comparing to the prior fiscal year. Gains were driven twofold. Firstly, the reduction in trade spend from 20% incurred in 2024 to 10% on average in 2025. The reduction was achieved through a mix of channels that have lower trade spend as a percentage of gross sales, for example, Club Channel and direct-to-consumer as well as we exited a DSD relationship in Canada that had a very high trade spend negotiated in 2024. This relationship was effectively exited in Q1 2025, and we saw the impact from Q2 onwards. Secondly, we made improvements in the freight and warehousing from 17% of gross sales to 16% of gross sales in 2025. We see continued opportunities to also reduce our product COGS in 2026 based on our increased volumes. And we also see further opportunities to reduce warehousing costs in 2026. However, freight out most likely will be negatively impacted by the higher oil prices we're seeing currently. SG&A. Scott and I took the reins in February 2025. We had quite a challenge in front of us to aggressively cut the burn rate and institute the necessary cash controls urgently. We shared the progress across the last 3 quarters, and I'm pleased to update our shareholders on the full year results from our efforts. Looking at SG&A in total for the year ended December 31, 2025, we reduced SG&A by 14% -- now to dig a little deeper into the truly amazing reductions we achieved as some of the SG&A numbers increased in line with the 42% increase in revenues. For example, the 42% increase in revenues also drove up our broker payments and licensing costs. These 2 items alone increased $0.7 million for the year. If you remove the impact of those 2 items, our SG&A decreased 20% for the full year. More specifically, we took out $2.4 million out of SG&A compared to 2024 in consulting, travel, marketing and promotions, rent and utilities and legal expenses, whilst at the same time, driving up our revenues by over 40%. These decreases were necessary to turn around the Jones business. Scott and I instituted a variety of common sense business controls, including centralized controls over legal contract approvals, purchase orders, marketing expenditures, travel and, of course, cash disbursements. That financial discipline is now entrenched in the Jones business. Further, we also implemented discipline in how we evaluate new business opportunities, product pricing and promotions, all of P&L statements developed for review and approval by Scott and myself. Moving to net loss. Net loss for the 12 months ended December 31, 2025, was $1.8 million compared to $9.9 million in the prior period or an $8.1 million improvement year-over-year or 82% improvement. This is driven primarily by 2 things: the gain on sale of our cannabis business of $3.9 million, but more importantly, the reduction in operating loss of $5 million. Adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure, reflects management's view of a more accurate reflection of ongoing cash flow generated or loss from its continuing operations. For the year ended December 31, 2025, adjusted EBITDA was a loss of $2 million compared to an adjusted EBITDA loss in the prior year of $7.2 million or an improvement of $5.2 million or a 72% reduction in adjusted EBITDA loss. Turning to the fourth quarter results. Revenue. Jones achieved revenues of $11.7 million for the quarter ended December 31, 2025, compared to $2.6 million in the prior period or a 450% increase in sales. Two channels stood out to drive the increase, sales of Fallout licensed products to the Club Channel as well as sale of Fallout licensed products in the DTC channels. I'll further discuss the company's outlook for revenue in 2026 later in my comments. Adjusted gross margin, again, non-GAAP measure, for the fourth quarter ended December 31, 2025, adjusted gross margin was 32% compared to 10% in the prior period. As previously discussed, we incurred a $1.2 million onetime inventory write-down associated with our HD9 business. These improvements were also driven by a reduction in trade spend as a percentage of gross revenues and a reduction in COGS and freight and warehousing costs. Trade spend as a percentage of gross sales reduced from 33% in the fourth quarter of 2024 to 10% in the fourth quarter of 2025. COGS as a percentage of gross sales reduced from 71% in Q4 '24 to 54% in the fourth quarter of 2025. We also made improvements in freight and warehousing from 20% of our gross sales to 18% in the quarter -- fourth quarter gross sales in 2025. We see continued opportunities to reduce our product COGS in 2026 based on our increased volumes. We also see some opportunities to further reduce warehousing costs in '26. However, freight out most likely will be negatively impacted by the higher oil prices we are now seeing. SG&A. Looking at SG&A for the fourth quarter, SG&A increased by $0.9 million or 28% up. This increase was primarily attributed to licensing fees on smaller revenues and increased broker payments on increased sales in the fourth quarter. Looking at the net loss for the quarter, it was $2.1 million compared to $4.5 million loss in the prior period or a $2.4 million improvement year-over-year or a 53% improvement. This is driven by the reduction in operating loss entirely of $2.4 million. Adjusted EBITDA for the quarter. For the quarter ended December 31, 2025, adjusted EBITDA was a positive $0.5 million compared to an adjusted EBITDA loss in the prior year of $2.7 million or an improvement of $3.2 million in adjusted EBITDA. Cash on hand, December 31, 2025, we ended the year with $3.6 million in cash on hand compared to $1.3 million at the end of '24. We also increased the size of the line of credit with our lending partner, Two Shores Capital from $5 million to $10 million. As of year-end '25, we had borrowed $3 million on this $10 million line. Subsequent to year-end, we also sold a promissory note owed to Jones from our cannabis business sale, which had a face value of $2 million or $1.4 million. We look at the payments that were associated with that $2 million that would have taken place from 2026 through to 2028 to collect the $2 million, and we determined that having cash in hand now would be the more prudent course of action to further give us the flexibility to finance the expected growth in '26 and help reduce some of the legacy payables. Looking at the outlook for '26, first quarter and 2026 revenue guidance. The following forward-looking statements reflect the company's expectations as of March 31, 2026. They are subject to substantial uncertainty and may be materially affected by many factors, many of which are outside the company's control. Based on the preliminary first quarter results of revenues recognized as of March 30, 2026, the company currently expects first quarter revenues to exceed $12 million or a 260% increase over the prior year first quarter revenues. Additionally, we expect the growth rate on our 2025 full year revenues to exceed 60% for fiscal 2026. Scott, back over to you for final remarks. Scott Harvey: Thanks, Brian. As we enter 2026, we expect our operating environment to remain dynamic, requiring continued laser focus on execution, innovation and discipline and strategic prioritization. Our strategy is clearly focused on our 3 core channels of growth: core soda, modern and adult beverages, where we are prioritized disciplined execution and targeted supported expansion. While our work is not done across these channels by any means, we are encouraged by the progress and remain optimistic given the strength of our innovation pipeline, increasing brand exposure and continued consumer demand. Innovation with each channel is well underway, and we're excited about the new offerings set to roll out across North America during this year, designed to strengthen our portfolio and drive incremental growth as well. Part of our direct-to-consumer and digital expansion strategy in 2026, we'll be reintroducing our D2C platform with a more focused and integrated approach aimed at strengthening consumer engagement and expanding higher-margin channels. Under this initiative, we're launching a new service-based offering and membership programs designed to deepen brand loyalty and increase lifetime customer value. These programs will provide consumers with exclusive access to reduce product pricing in exchange for participation, helping to establish more predictable and reoccurring revenue stream. A key component of our direct-to-consumer and digital expansion effort is the upgrade in our digital infrastructure. We are enhancing the website to deliver a more interactive brand experience, including improved navigation, richer brand storytelling and in addition to tools such as product locator to better connect consumer demand with the retail availability. Together, these initiatives reinforce our ability to capture direct-to-consumer insights, drive incremental revenue and further strengthen our brand ecosystem. Launching our technology enablement and operational integration strategy, we are investing in implementing systems that strengthen our ability to manage the business more effectively across all disciplines. These efforts include upgrading platforms that enhance customer engagement and response time, ensuring we are more connected and responsive to consumer needs across all touch points. In parallel, we're implementing an integrated transportation management solution to improve logistics visibility to optimize costs and drive greater efficiency across our supply chain. We're also advancing the adoption of project management tools and workflows to improve execution, accountability and cross-functional alignment. These systems provide real-time visibility into key initiatives, helping ensure that priorities are delivered on time and in line with our strategic objectives. Collectively, these technology investments are designed to improve operational discipline, enhance decision-making through better data visibility and support the scalable growth across our organization. In addition, we've also added and strengthened our key leadership roles across our sales group, marketing and supply chain, positioning the organization to execute more effectively against our 2026 and long-term objectives. At the same time, we continue to actively identify and attract high-impact talent across the organization to support our next phase of growth, enhance capabilities and elevate overall execution, all the while maintaining a sharp focus on controlling SG&A costs and driving operational leverage. Our focus remains unwavering, delivering channel execution, advancing innovation with each segment, maintaining cost discipline, deepening strategic partnerships and ultimately delivering shareholder value. Finally, and most importantly, I want to acknowledge the Jones teams. I refer to them as our village. Each individual has contributed meaningfully to our progress over the past 12 months. Our achievements would not have been possible without their focus on execution, adaptability and commitment to the brand. And for that, I thank each and every one of them. As we operate in 2026, our 30th anniversary, we expect our success to continue as the brand evolves and progresses. With that, we'll wrap up the call by addressing some of the questions submitted live by the shareholders through our webcast chat. Scott Harvey: That first question that we have relates to the Public Relations website section that we didn't have the correct information for a new IR firm on there. I can update you that, that was corrected this morning, and you will see over the next few weeks an actual transition from the existing company that's actually managing that site to another one. But if you go back and reference that site today, the new IR firm, which is Hayden IR, their information is listed on there. And again, you'll see further improvements as we start to transition that section over the next couple of weeks. Second question, given the global success of Fallout, is there any possibility to roll out products via licensing to countries abroad? Great question. As a matter of fact, we're already working down that path, not necessarily trying to secure a license, but actually exploring what it's going to take in order for us, one, to be able to ship it over water, what each one of these potential countries that we're interested in, what the regulations are, how do we get in there, what the restrictions, the timing and such. So it is a work in progress. It takes time because you want to make sure everything is aligned from paperwork to what kind of pallets you're shipping into these countries. So it's an exciting opportunity for us. We believe that the Fallout and Jones products will play in other countries around the world. But stay tuned, more to come on that, but we are actively pursuing that as we continue throughout the year. Question 3, and Brian, I'll turn this one -- throw this over to you. Can you provide an update on the S-1 process and potential uplisting time line? And how are you thinking about capital needs to support the next phase of growth? Brian Meadows: Thanks, Scott. So the Board and Scott and I are certainly committed to moving forward the S-1 process and uplisting to either NASDAQ or NYSE. We can't give a definitive time line today, but we are -- we do think it could happen in 2026. How we think about capital needs, we certainly have managed to not deploy equity last year despite a very difficult situation to manage through. So again, we thank our operating line partner with Two Shores Capital for their belief and support in us as a management team. And as a result of that, they did expand the line, successfully driven by the success in the Club Channel and DTC that they see. So Scott and I, as we evaluate other growth opportunities, there may be a role for additional equity at some point in the future. Certainly, if we do an uplift process, that would be part of it. But to date, you can see we have worked with our vendors and with our line of credit to support the 42% growth last year. And with the expansion of the line this year, we look like we're in a pretty good shape to manage growth this year. Back to you, Scott. Scott Harvey: Great. Thanks, Brian. Next question, can you comment on store count trends for Pop Jones and Fiesta Jones? Are those channels expanding or holding steady or being optimized? We're currently sitting around about 1,700 stores for the Pop Jones and Fiesta Jones combined product lineup. We have a relaunch plan that we're underway. And as I referenced within my comments, there's got to be a market strategy when we go into these markets. And what we've done in the past is that we were out selling the product. We didn't have the ability to support those. And I think people -- we sort of thought that people would just stumble upon us in the store, but that's not good enough. So when I think -- when I talked about earlier about the 4 walls, 4 blocks, 4 miles, we have to be able to tell consumers when we're into a store. So we're relaunching that strategy. We've got to test markets happening in 2 different states with 2 different markets to really put marketing efforts behind that, being able to communicate to consumers that Pop Jones is there, not only is Pop Jones there, but why you should come in and check out Pop Jones. So -- and the Fiesta segment of that as well. So we're taking a different approach to it. We expect it to accelerate. We're going to relaunch some more core flavors of Jones such as the Cream Soda and the Root Beer in the Pop Jones flavors. So I believe that we'll see some positive results, and it will give us some good trial. If we can go in and win a region, then it gives us something to go to the next region to be able to talk to. So I think strategically on how we go to market and how we reimpact in there is paramount on how we gain success on a go-forward basis. Next question. You demonstrated strong early success with Costco and licensed products. Can you help investors understand the road map to scaling success across national retailers and IP partnerships, including the benchmarks and operational investments required to support that expansion? I can tell you that, yes, we've had some really strong wins where we are currently with our club programs. We do have other club programs that are actually reaching out to us saying, how do we get on -- how do we help and how do we start to utilize some of those partnerships that we have. But it's just not the Fallout and the Fallout and through Bethesda. We also do the fold Honor, we've got Crayola, and we're actively speaking with other potential partnerships to be able to drive that. Currently, the way that we look at it now is that we've got Costco that we're rolling out through our club program and then subsequently, we roll that out through some of our other partners. What we're hoping to and working towards is being able to isolate some of those properties such as Fold of Honors and Crayola and create those experiences for either other clubs or other partnerships that are out there. What those terms look like and operational investments, quite honestly, it all depends. It depends on who you're partnering with, what the requirements are, how big they are. And those are active conversations that we're continuing to have day in and day out with a lot of these potential partnerships that we have. So yes, partnerships is a big thing. But what partnerships also does for us is it gives us the ability to be able to bring impressions of Jones, Jones, the name in front of people. reengaging consumers when they see that name. So yes, we're utilizing partnerships to gain share in some of the outlets that we're in, but we're also getting Jones in front of them. Perfect examples. We launched a Bethesda Fallout SKU. We did a very short stunt of doing a social media post. One social media post reflected on 19 million views of that just because of the partnership that we had. So I look at it as great for our partner, great for Jones because 19 million people got to see our name. So when you start to build impressions and people start to shop in stores, see our name, there's that connection. So super excited about that opportunity. We're going to maximize as much as we can on partnerships, but also using that as a springboard to continue to drive the Jones name into every household. Next question, how are you thinking about expanding core soda portfolio, particularly with respect to new flavors, formats, low-calorie multipack configurations that could drive higher velocity? Dan, great question. Yes, we have new formats. We have new flavors. So I approach the business is you introduce a new flavor, but it's got to replace something, right? And everything that we do, such as we've rolled out with a partnership with Fallout Sunset Sarsaparilla has done phenomenal for us. It's really moving. How does that get into our daily and our core products that we roll out in an everyday item? It will, but something has to fall off the chart because, again, we can't do SKU growth without being able to manage that. So yes, we are looking at different flavors. We've got a few new ones that I'll share with you on the upcoming calls that we'll be rolling out shortly. low calorie ready to go. So that's ready and on the shelf ready to go, and it will be -- you'll start to see some of that in our normal retailers. Multipack configuration, yes, we're looking at a couple of them. Right now, we've got the 12 packs to our club, but there may be a 6-pack coming to a store near you soon. But -- so there are, and we continue to look at that through our new sales leader and our operations leaders that we have and our supply chain is how do we optimize this. But more importantly, how do we get the name Jones in front of consumers when they come to the store. Next question, are there plans to bring successful limited or specialty formats like rocket bottles into a broader retail distribution? Yes, but it has to be the right mix. I can tell you rocket bottles are very unique. And they're not only unique in just the shape and form, but the weight, how they have to be manufactured, the glass itself, where they have to be manufactured, how are they decorated. But when you look at how do you get them into more mass retailers, it's really complicated because not every one of the manufacturers that we work with can run that product down the line. So it gets a little bit more tricky for that. But you'll see rocket bottles will be here for a while. But if there is something that comes up that we can do and we can duplicate to our manufacturers, absolutely take full advantage of everything that we can at the right time. Next question, does the company currently hold rights to expand into more mainstream licensed product like Nuka-Cola? And how should investors think about timing or scale of those opportunities? Well, you will see some more potential Fallout stuff coming out later on this year. We do have Folds of Honor stuff coming out. You'll see a lot of that this summer out there in the stores. Crayola will be making a reappearance again. And again, we have other partnerships that we're in active conversations with. So as soon as those come to life, we will bring those to you as well. Where will they go? I'm a big believer in spreading things out and not just focusing on one specific retailer because what we've learned through this is that other retailers are asking how do I play in this? How do I get involved with this? So it's advantageous for us to continue to build those partnerships and share that with other retailers out there that want that same kind of excitement that we see. Question -- the next question, with the addition of a new CMO, what strategic shifts should we expect to brand positioning, marketing investment and go-to-market execution? Should we expect a redesign or modernization of any of the product lines. Yes, all great questions, right? So I sort of alluded to this 4-wall, 4 blocks, 4 miles. It's really something I'm a firm big believer in that we've got to be able to communicate. We can't just assume we do a display in a store that people are going to come and buy us specifically if you don't go to that store. So the way that our CMO is looking at it in a more holistic thing is how do we get people in their use of social media today because it's so prevalent that's out there. It could be geofencing around stores. But I believe that we'll have more to report out after we complete these test markets that we're doing where we're actually deploying some of these strategies as to how do we reengage or engage consumers that are in this geographic circumference around stores and how do we get them in and one, not only to drive the new experience, but also drive velocities with inside those stores. Next question, how are you thinking about leveraging current trends like 90s nostalgic to accelerate brand awareness and the velocity? Well, Jones is -- that's where we play skateboarders and such, but also Fallout is coming from there. And I think, again, as we start to engage either through like the introduction of Zeroes, fans that may have loved the brand, but can't drink it because of sugar constraints, Zero is a great way. And let me tell you, they're absolutely phenomenal. So I believe by doing some of those things, we can reengage folks in there. We're still doing pictures. We're still doing that. myJones is bigger than life out there as well. So we continue and through our marketing efforts and looking at trends of how do we get involved, but it's got to be the right trend that matches Jones history of who we are. So it's got to be something that really succinct in what we think we are and how we want to be able to operate going forward. But definitely looking at those and to be able to drive brand awareness across all of our consumer bases. Next question, how are you approaching e-commerce fulfillment and channel control across platforms like Amazon, Walmart, Target to improve margin and customer experience? Well, the easy question is, one, we've got to fix what we have today, right? I'm not happy with the way that our D2C platform is operating today, and we've taken that challenge, and we've got -- we've brought in some new folks to help us bring the back of house and the front of house to life, be able to serve consumer needs. I talked about in the first section about subscription base, really signing up folks and signing up consumers so that they get the first look at what's coming out, potential discounts that are. We really got to work on our cost of shipping and such. And we've got a full robust plan in place to be able to start delivering on this here in the near term. And I'll be excited to get it all out in front of you when we're getting ready to launch. So you stay tuned to the website as you start to see things change, but super excited about what that brings to us. Once we get that in place, then that lets us springboard into the Walmarts, the Amazons, the Targets. Once we have a platform that's operating functionally, I don't believe in jumping ahead without making sure that we have the platform that's executing correctly to be able to do so. Next question. Can you provide any update on the regulatory landscape for hemp-derived products, particularly around the potential for a multiyear extension and how do those factors into your planning? I addressed that in the earlier comments. The multiyear extension, I haven't heard about it yet. So I'm always a firm believer on anything that we do. I don't want to be the first one in and I don't want to be the last one out. So we will stay in the game, and we will monitor and monitor what's happening within that environment. Should the extension go, we've got great partners that say, "Hey, if it continues to go, you're going to be our soda guide because you stood with us during these times." So we'll continue to monitor it, but closely monitored because, one, we don't want to be overexposed as well as it goes into effect, it's actually illegal for us to be able to do that. So we'll have to go back to a more of a state-by-state thing. So we've worked through a ton of contingency plans. We stay close to be able to monitor it. State complexity is ramping up because each one of them is starting to position themselves almost like the cannabis business did. As that does, it becomes a little bit more complicated to do scale of anything because each one of the states has their own set of criteria of how they want to, how the boxes are labeled, the cans are labeled, what the milligrams per can, not to bore you with all the details, but it's getting more and more complex as the states start to split apart from the national guidelines based upon what they perceive coming. Next question, can you provide an update on Spiked Jones reformulation and whether the broader or national retail rollout is still planned, including how you're thinking about positioning the segment with an overall portfolio? I talk about our channels. So adult is still a channel that we are not going to abandon. We're examining different ways of bringing Spiked Jones back to the market in its form of reduced alcohol by volume, lower sugar and some other avenues that we're currently exploring. But I still believe that we have a play in that piece. We are looking to get in front of consumers here later on this year as we reformulate the alcohol by volume, look at the flavor profiles as well as continue down some of the other paths that we're talking about internally as to how do we make it more robust. But our channels are our channels. We stay with our channels. I've always said, stay narrow, go deep, and we will continue to do that. and do whatever we can in order to get that to make sure that we're innovative and that we're addressing consumer needs. So stay tuned. More to come on that as we progress throughout the year. Next question. As demand increases, how are you ensuring consistency and customer experience across fulfillment, shipping and direct-to-consumer. I mentioned that earlier in there as well. So we're looking at, one, we've boosted some talent within our D2C on the back of the house and the front of the house. We've partnered with some customer service software to help us get back to consumers when it's needed. But really, it's just reworking the website to make it more friendly and more friendly for users to work as well as easier for us to be able to respond, whether it is a hey, here's your tracking number. Here's what your receipts are, really looking at shipping costs. So again, lots of initiatives going around there. I'm super excited about the 2 individuals that have joined us to help us bring this to life. So again, stay tuned in the works, but I think it's going to be a viable piece for us as we look to launch other innovative things like the rocket bottle. So we need to fix it because it has to work in order for us to be successful in there. Are there investments underway to further strengthen digital infrastructure and online presence? Again, I think that goes to the last question about our D2C piece. Again, in addition to that, when you look at marketing, it's about how do we utilize social media, how do we engage influencers to do the talking for us. And again, we've seen this through some of our club rollouts that, hey, we did one post or we engage with one influencer, and it just exploded across social media. So great learnings for us to be able to do that. And I think we have to be strategic and they have to be meaningful with what is it that we're trying to get out to. And more importantly, we have to be able to understand what's the return that we're getting for any investment that we do on here. So we will not just throw money at influencers, but we definitely have to understand what the return is and how is it impacting our business on a go-forward basis. Next question, are there plans to offer the 12 multipacks through grocery and retailers? 12 packs, really competitive. I think that you'll see some different packs going in there, but I'm not sure 12 packs today will be something that we could do specifically because we're glass and I have not seen any glass 12 pack. doesn't mean that's not a great idea. But it's probably not something that we're looking at in the short term. But I will say stay tuned because you will see some different packs coming through in some of the test markets that we've earmarked for the balance of the year. Next question, do you have any -- do you have a plan for more flavors for Fallout throughout the year? Yes, we do. So not going to peek under the hood at this moment. But yes, there are more flavors coming out. I don't want to ruin the excitement, but stay tuned. It's all exciting for us. I think it's going to be engaging for our consumers, for the Fallout fans, for our consumers with the different flavors that are coming out. But yes, stay tuned. There's more flavors and stuff coming out. Will the company consider canned products like 12-pack cans to reach more customers possibly using the Fallout IP? We've looked at it. We're not there yet. Again, the 12-pack, super competitive with Big Red and Big Blue that are out there. Again, it's a -- you have to have volume in order to drive margins with this. So we have to be very convinced that we have a great path to market to be able to do so. But we'll never say never. But currently, it's not on the docket today. When we've rolled out the -- some of these packs, the inserts in there has driven great success for the consumers. It's drawn great success for the fans that, hey, it's -- I can go out and find this, get something inside there as well as enjoy the phenomenal product that we put in those containers for them. But it's not something that, like I said today, but a great idea, but it will definitely something that we'll keep on the docket on a go-forward basis as well. Does the second quarter have things in the pipeline that will support continued quality revenue growth? Yes, we do. We put a forward-looking statement in there, and we take those things very seriously when we do that. The team has worked really hard with our partners, with our retailers to secure different promotions and such throughout the balance of the year. So yes, there's great stuff coming. And again, we'll be back here in a short 45 days reporting on the success of Q1, and we'll be well into Q2 by that time. And as a matter of fact. Brian Meadows: Can I just add something there, Scott. So I think when I read the questions about continued quarterly revenue growth, I think we have to root ourselves again. We guided for the year 60% revenue growth over 2025 revenues, right? There is seasonality that Jones has typically experienced in the business. So I think I would look at the overall year number. It may ebb and flow a little bit between quarters. And did you want me to go back over some of these other questions. Scott Harvey: Yes, if you could, Brian, that would be great. Brian Meadows: There's a multipart question here. I'm going to take it one piece at a time. Who is the note receivable with? I think it's the question. That is -- we sold our cannabis business in June and the private company called MJ Disrupters purchased it. Part of the sale for $3 million, we took a $2 million -- $2.5 million prom note. And so that was the receivables related to that. What inventory write-down was the impairment coming from, primarily our HD9 business based on the legislative change, we had to look at how our business was performing in the recent months, how much inventory we have on hand and what was the likelihood we were going to sell through that before, let's say, the November deadline happens in 2026. So we thought it was reasonable and prudent to write down the HD9 inventory at year-end. Next part of this was COGS seems incredibly high. Do you expect this to continue in Q1? I would go back to what I said earlier, we actually reduced our COGS to 54% from 71% in the prior year in the fourth quarter. We do see opportunities to further reduce our COGS because we are looking at higher volumes, right? There's a real volume and lower cost relationship in this business. Next part of the -- do we -- once -- there was a question about expected sales in Q1. Today, we guided a minimum of $12 million for Q1. And do we expect to see a GAAP profit? We haven't guided on GAAP profit or EBITDA for 2026. But what I could say is if you look at the fourth quarter, we did generate $0.5 million on $11.7 million in revenue. We see, Scott, I think that -- I think the last one is yours. Scott Harvey: Yes. With the engagement of your new investor relationship, how are you thinking about increasing investor visibility, investor demand? And are you setting a path towards uplisting to a real exchange? We've just transitioned over to Hayden IR. So the point will be is try to get out in front of more investors, have more calls, more visibility. They're a great team. We're super excited to partner with them as our IR firm going forward. So stay tuned. Again, I was going to close the call. Again, any type of questions or comments or one-off calls that you want to have, I'll give you their e-mail address. And again, it's been updated on the website as well. And again, setting -- is there a path that you're setting to uplisting to a real exchange? And I think Brian covered that before. It's always something on our radar. And again, we've done a couple of things that maybe kick that in the gear. But yes, there is that idea to get uplisted to either the NYSE or NASDAQ on a go-forward basis. So more to come on those pieces, but we're super excited about the partnership with the Hayden team and to be able to start to develop that and get us more out in front of the investors and new investors that are interested in the brand based upon the results that we've been able to deliver and we will continue to deliver through the balance of the year. So with that, those are all the questions that we're going to answer at this time. We'd like to thank everyone for taking the time to listen today. I would welcome further questions, and we'd be happy to take your one-on-one calls later this week or early in the next week. Please direct any inquiries to James@haydenir.com. I'd be happy to address accordingly. If I don't speak to you soon, I look forward to addressing you all when we report our first quarter results in May. Thanks again, and have a great day. And Shamali, back to you. Operator: Thank you. And this does conclude today's conference, and you may disconnect your lines at this time. Thank you, and have a great day.