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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.
Operator: Good day, and welcome to the American Shared Hospital Services Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Kirin Smith. Please go ahead. Kirin Smith: Thank you, Chuck, and thank you, everyone, for joining us today. AMS' fourth quarter and full year 2025 earnings press release was issued today before the market opened. If you need a copy, it can be accessed on the company's website at www.ashs.com at Press Releases under the Investors tab. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. Please note that various remarks that may be made on this conference call about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may vary materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the company's filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2025. The company assumes no obligation to update the information contained in this conference call. Before I turn the call over to management, I'd like to remind everyone about our Q&A policy where we provide each participant the time to ask one question and one follow-up. As always, we'll be happy to take additional questions offline at any time. With that, I'd now like to turn the call over to Ray Stachowiak, Executive Chairman. Ray, please go ahead. Raymond Stachowiak: Thank you, Kirin, and good afternoon, everyone. As I reflect on 2025, I'm reminded of the strength and importance of our health system partnerships, which continue to be our foundation to our business and a key driver of our long-term strategy. Over the past year, we've worked closely with both long-standing and new partners to position our company for success in 2026 and beyond. These alliances have allowed us to expand our clinical capabilities, strengthen our operational foundation and enhance patient access to advanced cancer care. 2025 was a year of transition and investment. While our total revenue remained relatively stable at $28.1 million, the underlying transformation of our business was significant. We continued our shift toward a direct patient care model, which now represents the majority of our revenue and provides a more stable and scalable platform for long-term growth. At the same time, we encountered challenges across certain areas of our business, including physician turnover, reimbursement dynamics and expected headwinds in our Leasing segment. Importantly, we took decisive actions to address all these issues. A key highlight of the year was the strengthening of our partnerships, including our new collaboration with Brown University Health in Rhode Island, which has helped us rebuild our physician base and improve treatment volumes. We're also very pleased to have -- to announce our long-standing relationship with Orlando Health has been extended by a 7-year lease extension for our proton beam radiation therapy system. I would like to highlight our long-standing partnership of over 2 decades with Orlando Health, which clearly exemplifies the long-term nature of our relationships and reflects the ongoing collaboration in delivering advanced cancer treatment services. In addition, as part of our broader focus on strengthening our financial position, we're actively engaged with our lending partners as we evaluate opportunities to enhance our capital structure and support our long-term growth initiatives. We have a long-standing relationship with our lenders and these discussions are constructive and ongoing. Looking ahead, we believe we've laid a strong foundation for future growth, supported by new and old partnerships, expanded clinical capacity and a clear development pipeline. With that, I'll turn the call over to Gary. Gary? Gary Delanois: Thanks, Ray, and good afternoon, everyone. 2025 was a foundational year for American Shared Hospital Services as we expanded our direct patient care services platform and strengthened the operational infrastructure needed to support long-term growth. Our strategy is centered on building and leveraging strong partnerships with leading health systems, and we made meaningful progress on that front throughout the year. In Rhode Island, we worked closely with Brown University Health, Care New England and CharterCARE Health to stabilize and rebuild our radiation oncology physician team. Through these efforts, physician staffing has now been stabilized, and we're beginning to see improvements in treatment volumes, which we expect to continue into 2026. We also took important steps to enhance our operational capabilities, including improving our revenue cycle management infrastructure. This gives us greater control over billing and collections and positions us to improve financial performance over time. From a growth standpoint, our Direct Patient Care Services segment expanded significantly, driven by a full year of operations at our Rhode Island centers and our center in Puebla, Mexico. These centers are increasing patient access to advanced radiation therapy treatment options and are central to our long-term growth strategy. Additionally, we saw strong growth in LINAC treatments with volumes increasing significantly year-over-year, reflecting the contribution from our Rhode Island and Puebla centers. At the same time, Gamma Knife volumes improved on a same-center basis following technology upgrades, while proton therapy treatment volumes reflected variability. Our international business continues to be a strong contributor and meaningful source of future opportunity. In 2025, we successfully relocated our Lima, Peru center and upgraded our Gamma Knife to a state-of-the-art Esprit platform. We continue to deliver strong performance in Puebla, which has exceeded our expectations, and we maintain leadership positions in Ecuador and Peru with the only Gamma Knife centers in those countries. Looking ahead, we see significant opportunity in international markets, including the development of our Guadalajara, Mexico center, which we expect to begin operations in 2026. In Rhode Island, we have also created a clear runway for expansion through our certificate of need approvals for both a new radiation therapy treatment center in Bristol and a proton beam radiation therapy center in Johnston. These projects represent major long-term growth drivers and further strengthen our partnerships with leading health systems in the region. From an operational and financial perspective, we are also focused on strengthening the overall foundation of the business, including improving cash flow generation and aligning our cost structure with the scale of our operations. As Ray mentioned, we're working closely with our lending partners as we continue to invest in the business and position the company for long-term growth. We believe the steps we are taking operationally will support these efforts and enhance our financial flexibility over time. While 2025 included operational challenges, we addressed them directly and made the necessary investments to position the company for improved performance. Our priorities going forward are clear. increase treatment volumes across our existing centers, drive operational efficiencies and margin improvement, expand our footprint through disciplined development and continue to leverage our partnerships to scale our platform. With the foundation we've built, we are optimistic about 2026 and confident in our long-term growth trajectory. With that, I'll turn the call over to Scott. Frech Scott: Thank you, Gary, and good afternoon, everyone. I'll begin with our fourth quarter results, followed by a review of our full year 2025 performance and key financial drivers. For the fourth quarter, total revenue decreased 14.8% to $7.7 million compared to $9.1 million in the prior period. This decline was primarily driven by the expiration of 3 Gamma Knife contracts and lower proton beam radiation therapy volumes. Revenue from our Direct Patient Care Service segment represented 63% of total revenue, increasing 2.6% year-over-year to $4.8 million, driven primarily by increased procedures at our Puebla, Mexico facility and in Rhode Island. Revenue from our Medical Equipment Leasing segment declined 33.9% to $2.9 million, reflecting lower PBRT volumes and contract expirations. Gross margin for the quarter was approximately $906,000 or 12% compared to 35% in Q4 2024, reflecting both lower treatment volumes and the continued shift in revenue mix towards direct patient services. Net loss attributable to the company improved to $631,000 or $0.09 per diluted share compared to a net loss of $1.6 million or $0.23 per diluted share in the prior year period. Adjusted EBITDA was $868,000 for the quarter compared to $3.8 million in Q4 2024. For the full year, total revenue was $28.1 million compared to $28.3 million in 2024. Direct patient care services revenue increased 23.7% to $15.5 million, while leasing revenue declined to $12.6 million, reflecting the company's ongoing strategic transition. For additional perspective, LINAC revenue increased 35.4% to $11.5 million, while Gamma Knife revenue decreased 5.5% to $9.2 million and proton beam radiation therapy revenue declined 26% to $7.4 million. LINAC treatment sessions more than doubled to 28,147 in 2025, the first full year of operation for both Puebla and Rhode Island. Gross margin for the year was $5.1 million or 18% of revenue compared to $9.2 million in 2024, reflecting increased operating costs and lower leasing segment contributions. The net loss attributable to the company was $1.6 million or $0.23 per diluted share compared to net income of $2.2 million in 2024, which included a $3.8 million bargain purchase gain related to the Rhode Island acquisition. Adjusted EBITDA for the full year was $5.5 million compared to $8.9 million in 2024. Turning to the balance sheet. We ended the year with approximately $3.7 million in cash compared to $11.3 million at the end of 2024. The decrease was primarily driven by $7.5 million in capital expenditures related to our Rhode Island expansion and international investments. Total debt at year-end was approximately $17.3 million, primarily associated with our credit facilities. As previously disclosed, certain financial covenants were not met at year-end due to lower profitability during our transition, higher operating costs and reduced leasing contributions. We are in active and constructive discussions with our lender regarding amendments and potential restructuring of our credit facility. Based on these discussions, we believe we will reach an agreement that provides the flexibility needed to support our business plan. While these conditions raise substantial doubt about our ability to continue as a going concern if unresolved, we are confident in our path forward based on our ongoing lender engagement and improved operational performance. Finally, I would like to point out that as of December 31, 2025, our shareholders' equity, including noncontrolling interests, was $24 million or $3.66 per outstanding share compared to $25.2 million or $3.92 per outstanding share at December 31, 2024. And when comparing this to our current market valuation, we'd like to highlight the steep discount in our market value. This concludes the financial review. I'll now turn the call back for Q&A. Operator: [Operator Instructions] And our first question for today will come from Mim Marin with Zacks. Marla Marin: So it seems clear from your remarks and from what we've seen that when you upgrade equipment, which is obviously a positive over the long run. But in the short term, there's a temporary distortion because the absence of that equipment sort of distorts the year-over-year comparability. So first of all, thank you for providing some same-center volumes. I think that's helpful. But long-winded way of getting to the question, which is, as you deepen your footprint in Rhode Island, will you be able to help offset some of that noise by referring patients from one center to another? Or is that just not something that's easily done? Gary Delanois: Well, thank you for your question. That is certainly part of the strategy in Rhode Island. Once we establish the infrastructure that we have in place, we are able to leverage that infrastructure over a bigger footprint, and there are the economies of scale, and that certainly is part of our strategy in building out our regional development in Rhode Island. Marla Marin: Okay. Great. And then one follow-up. So if you could just remind us of the time line for constructing the first new facility in Rhode Island, but also importantly, how early before the center actually opens do you begin initiatives to staff the facility? Gary Delanois: We anticipate that the Bristol facility will come online in late '27 and followed by the proton facility in '28. In terms of staffing, we normally start staffing up several months in advance. Again, that's one of the advantages that we have. We have a team, for instance, of radiation therapists or physicists or dosimetrist, physicians that we can spread over that certainly in the -- at the start or at the initial ramp-up period, so we can very closely manage our expenses. And then as we need to add additional headcount, we'll do that over time as the volumes increase. Marla Marin: So could I sneak one follow-up in very brief follow-up. So should I -- should we interpret that as there really won't be that much downtime for some of the professional staffing because of the time line between hiring and then actually opening the facility and the possibility of utilizing some of those resources at other sites? Gary Delanois: That is correct. Operator: The next question will come from Anthony Marchese with Investor. Anthony Marchese: Question for you regarding the 3 expired contracts. Did you know about these contracts in the last conference call? So I'm trying to figure out why we can't -- why we're constantly surprised with, oh, revenue was lower this quarter because contracts expired. Isn't that something that ordinarily you should give out to investors if you know that these contracts are expiring? Gary Delanois: Ray, I'm just going to ask you just by way of history of other calls, our disclosures on expiring contracts, but we did have 3. And in all 3 of those cases, they were centers, health systems that -- basically decided to do the update themselves rather than utilize us as part of that financing of their capital expenditure. Raymond Stachowiak: Yes. Tony, I think there's nothing new really being disclosed here. We've mentioned it in past calls and disclosures. But when you do a fourth quarter -- well, 2025 comparison to 2024, if those agreements expired in the third quarter '24, you're going to see negative variances when you compare the full year. If they expired in first quarter '25, you're going to see negative variances when you compare fourth quarter '24 against fourth quarter '25. So I think we've been pretty consistent. There's no really new contracts expiring. We have one, but it's low technology, and we're kind of just keeping it extended with low volumes. There's little or no cost to that situation. Anthony Marchese: Right. Right. Okay. And my follow-up question is, do you anticipate being profitable for 2025 -- I'm sorry, 2026 overall? Gary Delanois: Yes, go ahead and please take it. Raymond Stachowiak: Yes, Tony, we really can't speculate on that. We really have not ever been in the habit of giving forward-looking statements. So we really can't comment on that. And those foundational issues have been addressed. We've addressed them. Anthony Marchese: Got it. I assume that your credit agreement or even one that you're -- that you would be entering into at some point, hopefully in the near future. Would that prevent you guys from buying back stock? Gary Delanois: Tony, could you restate the question? I'm not sure. Anthony Marchese: I'm just asking your ability to buy back stock, is that constrained by a credit agreement or you guys have just decided that you don't want to buy back stock? I mean my point is you guys are go out of your way to say that you're trading at half of book, but there's no stock buyback and your directors basically own 0 stock. I mean 2 directors own 2,000 shares, 1 director owns 0. So I don't see a lot of -- and I'm sorry, I have to be so harsh, but as an investor, I like to see the Board aligned with investors. And frankly, 3 of your Board members own virtually 0 stock. And so I'm asking if they're not going to buy stock and show some confidence in the company, then perhaps the company might want to demonstrate some confidence to investors by buying back stock. And so I'm just asking, is that a possibility? Or are you constrained from buying back stock because of other factors? Gary Delanois: Yes. I know Ray's addressed this on prior calls, and I'll turn it over to him. Raymond Stachowiak: Yes. So thanks for the question. In the past, the company has not really been interested in a buyback -- stock buyback program. So under this situation with our lenders, it's unlikely to change that stance. And I have continued to align -- I remain very bullish on the company. I know our stock has not performed. And it's disheartening to report a loss for a year. But I'm still very bullish on the future of our company. Anthony Marchese: I know you are, right? 100%. I know you are. And we've had calls and private calls. I know you -- I guess it would be helpful, and I'll just leave it at this. I'm not trying to "die on the hill" so to speak, on this comment. But my point is it would be really helpful and a show of confidence if the 3 directors who own basically 0 stock would step up and buy something. I mean you got -- you pay them $50,000 a year in compensation. Maybe as a way to preserve cash or extend your cash runway, you might want to consider having them take their compensation in the form of stock as opposed to cash, thereby, I think, helping to align their interests along with mine. And I'll leave it at that. Raymond Stachowiak: Yes. I think it's duly noted. We'll take that under consideration, Tony. Operator: [Operator Instructions] And this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Gary Delanois for any closing remarks. Please go ahead. Gary Delanois: Thank you, Chuck, and thank you all for joining us today. 2025 was a year where we laid the foundation for future growth. Through strong partnerships, expanded clinical capacity and targeted operational improvements, we position the company for the next phase of its evolution. While we encountered challenges during the year, we took decisive actions to address them, and we're already seeing the benefits of those efforts. With a strengthened management team, a growing direct patient care services platform and a robust development pipeline, we're optimistic about '26 and beyond. We remain focused on delivering high-quality cancer care, expanding patient access through the advanced treatment technologies and creating long-term value for our shareholders. Thank you again for your continued support and interest in American Shared Hospital Services. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Bitgo Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions]. I will now hand the call over to Baylor Myers, VP of Corporate Development. Please go ahead. J. Baylor Myers: Good afternoon. Thank you for joining us. Our remarks today will include forward-looking statements, including those regarding our future operating results and financial condition, such as our outlook for the next year, our business strategy and plans, market growth and our objectives for future operations. Actual results may vary materially from today's statements. Information concerning risks, uncertainties and other factors that could cause these results to differ will be included in our SEC filings, including those that are stated in the Risk Factors section of our annual report on Form 10-K for the year ended December 31, 2025, and in our other filings with the SEC. These forward-looking statements represent our outlook only as of the date of this call. We undertake no obligation to revise or update any forward-looking statements. Additionally, the matters we'll discuss today will include both GAAP and non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. Joining me today on the call are Mike Belshe, Founder and CEO; as well as Ed Reginelli, our CFO. With that, I will now turn the call over to Mike. Michael Belshe: Thank you, everyone, for joining Bitgo's first earnings call as a public company. Since this is our first earnings call, I'm going to give a little more background on Bitgo than we will going forward. Some of you may have heard this before during the IPO process. So thank you for your patience as we go through it, but I want to make sure we're all starting from the same place. All right. So when we founded Bitgo over a decade ago, we wanted to create a company that could meaningfully contribute to accelerating the transition to a digital economy. At Bitgo, we believe that digital assets are already fundamentally reshaping the financial system and are going to continue to do so. The ongoing announcements and news from all major traditional firms from Fidelity to Morgan Stanley to SoFi demonstrate that this is true. Since Bitgo's inception, we've been building for a future where all assets will be digital. Early in my own crypto journey, it became clear that the infrastructure to support the shift to digital assets was nonexistent and the ecosystem was incredibly immature. Established financial institutions didn't have a compliant framework, secure custody or even institutional-grade security solutions to rely on. So we set out to build the technology to provide this institutional-grade infrastructure, which could elevate digital assets to a higher level. The product we created is now the industry standard, multi-signature threshold MPC wallets that protect against both theft and loss, and this is what Bitgo was founded on. While other early participants built retail products, we established our track record for building institutional-grade infrastructure. In 2014, we introduced enterprise policy controls to digital asset wallets. In 2018, we launched the first U.S. trust company purpose-built for digital assets. We expanded into prime services and liquidity in 2020 and became the first to support qualified custody under New York DFS framework in 2021. We built a globally regulated platform spanning the U.S., Europe, Asia and the Middle East. As you're probably aware, we recently received our National Bank Charter under the Office of Control of the Currency, OCC. That made Bitgo the first public federally chartered digital asset infrastructure company. And we scaled our business model support over 1,700 assets across thousands of institutions and over 1 million users. Through these accomplishments, we've continued to differentiate Bitgo in the broader digital asset industry. To start, we operate purely as infrastructure. We do not manage exchanges. We do not compete with our clients nor do we have the same kind of exposure to digital assets that retail platforms do. We exist to provide security and compliance that empower institutions to participate in the digital asset economy. Our institutional client base is investing in crypto for the long term and has proven itself much stickier and less impacted by short-term market cycles than retail users. It's also important to note that we didn't enter this industry during or because of a hype cycle. We were built and battle tested through many market cycles, fulfilling a growing and enduring need for our clients. Bottom line, Bitgo today is the digital asset infrastructure company, powering institutions, platforms and nations redefining the global economy, and we stand apart as the premier infrastructure provider. So you can think of us a bit like a hyperscaler for digital assets. We're a one-stop shop, multiproduct platform with institutional-grade infrastructure and mission-critical reliability that our partners can build and scale on regardless of where that takes us globally. We believe that no other company can provide the streamlined and comprehensive suite of solutions that we do. Institutions have been forced many times to piece together providers, opening themselves up to operational risk and increased inefficiency. Our vertical platform was built with security as the foundation and provides wallets, qualified custody, trading, staking, lending, settlement and compliance tools, all within one unified scalable infrastructure. Starting with wallets. These are developed in-house and integrated across our platform, driving client stickiness. We operate regulated trust entities globally and provide qualified custody under the most stringent and rigorous regulatory frameworks in the world. Our Go network allows clients to settle assets 24 hours a day, 7 days a week directly from cold storage, which is a significant differentiator. The liquidity services we offer enable institutions to trade, stake, borrow and lend without commingling assets. We're proud to have one of the largest institutional staking platforms in the world. Finally, we also provide Infrastructure as a Service capabilities. This includes token management, stablecoin issuance and crypto as a service. To briefly recap our most recent results, I'm proud of the impressive revenue growth of 424% we achieved for the full year, driven primarily by digital asset sales and gains in subscriptions and services, partially offset by a decline in staking revenue due to digital asset prices. Obviously, Bitgo is a long-term believer in digital assets, and we evaluate our business performance independent of short-term price volatility. So rather than solely citing the USD value of assets on platform, which fluctuates with market prices independent of our business activity, we'd like to also share coin unit growth and price normalized growth that more directly reflect Bitgo's performance rather than the market's pricing. On a unit basis, BTC on platform grew 8% year-over-year and our top 5 assets by volume grew 3% year-over-year, growth driven entirely by client inflows, not market price movement. On that normalized price basis, assets on platform grew 16% year-over-year. Asset states declined 7% on the same basis. This is a trend we continue to monitor as certain tokens unlock over time. We believe these normalized figures represent Bitgo's strong performance in an otherwise very volatile market. Moving on to our growth strategy. Our platform operates at the center of the digital asset ecosystem with each new integration, new asset and new user making Bitgo more useful, more defensible and more essential. When protocols, fintechs and issuers build on Bitgo, they bring assets and transaction volume onto the platform. That, in turn, increases demand for liquidity, staking services, financing solutions and compliance infrastructure. Growth in assets and flows naturally gives greater engagement across our product suite. And as we expand functionality, whether through new asset support, prime capabilities or infrastructure services, we increase cross-sell opportunities and deepen our client relationships. The result is a scalable platform model that underpins our growth strategy, driving market expansion, client growth and product expansion that reinforce one another, contributing to revenue growth over time. Now starting with market expansion. We are actively replicating our product in markets globally to ensure that we can serve clients wherever they operate. In 2025, we made more regulatory progress in international markets, notably expanding our license in Germany and becoming custody broker in Dubai. At the domestic level, our OCC license supports our expansion in the U.S. and allows us to provide digital asset services to clients across all 50 states under a single national regulatory framework. In 2026, we are actively expanding into additional regions with several new licenses and registrations already in progress in India, South Korea, the U.K. and the Cayman Islands. We see the biggest opportunity for expansion this year in the APAC region, which represents a significant share of global crypto liquidity and has already established regulatory frameworks for digital asset custody and infrastructure. These markets are seeing increased engagement from banks, asset managers and family offices exploring digital assets, stablecoins and tokenized financial products. Because Bitgo already has a strong presence across several of these hubs, we're well positioned to support institutional clients and adoption as it accelerates demand for regulated client custody, settlement and prime services. On to client growth. We've seen tremendous growth in our client base over time due to a number of factors. In 2025, we saw benefits from expanding internationally, which has helped us win more global clients. In 2026, we are focused on expanding Bitgo's role in institutional market infrastructure by increasing our market share in OTC and derivatives while continuing to build next-generation wallet capabilities. At the same time, we're also investing in agentic wallet infrastructure that enables programmable, automated interactions with digital assets, supporting more sophisticated trading, settlement and treasury use cases for institutional clients. Finally, product expansion. During the first half of 2025, we launched our Stablecoin as a Service and our crypto as a Service. We started as the issuer for USD1, which has grown to over $5 billion in market cap since its launch, making one of the fastest-growing stablecoins of all time. We also announced recently that SoFi selected Bitgo's Stablecoin as a Service platform for their SoFi USD stablecoin. Further, we started off 2026 with the launch of our derivatives business, which we believe substantially improves our trade offerings for 2026. So far, we've seen roughly $3 billion in notional trading volume and over $3 million in revenue. We also see opportunities to expand our lending and trading offerings as well as enter tokenized equities as real-world asset tokenization has surpassed $25 billion as of July 2025. Looking ahead, we believe growing regulation of the digital asset industry in the U.S. as evidenced by the passage of the GENIUS Act and ongoing discussions on the CLARITY Act positions us well to increase our total addressable market. As more regulation is in place, we expect to see more traditional firms come to us looking to get involved in the digital asset industry with solutions that are secure and safe. We're seeing this now with our ecosystem team in support of the Canton network, a blockchain designed for traditional finance, where Bitgo has been the sole qualified custodian for some time. All these efforts will help power our product expansion strategy. We also secured exciting partnerships in 2025 that meaningfully raised our profile, including with Fidelity and Bitcoin. We started 2026 off strong. We're supporting Investify with nationwide digital asset investing for banks and credit unions. We're selected for custody and staking with Fidelity's Solana ETF as well as being named for the Bitcoin ETF, and we are accelerating our global ETF partnership with 21 shares. This is a particularly exciting opportunity as we've seen ETF client count grow over 200% year-over-year. Finally, we can't ignore what's coming with tokenized equities. We see several models emerging to tokenize traditional U.S. equities and all of them require the infrastructure that Bitgo has been building. We're proud to be the custodian on the Figure platform, which launched earlier this year to directly issue equities on blockchain through Figures open network. To conclude, I'm proud of our achievements in the fourth quarter and full year 2025, and I'm incredibly excited about the start of our journey as a public company. Being public adds another layer of rigor to our business as we continue to operate with transparency and security. We also believe that access to public markets reinforces Bitgo as the steady-state infrastructure player for institutions. I'm confident Bitgo is uniquely positioned within the crypto industry as the digital asset infrastructure company, and we have the right strategy in place to drive growth and deliver significant value for our shareholders. Finally, I want to thank the Bitgo team for their continued hard work and dedication to our company and mission that's made executing our IPO and achieving our strong financial results possible. I now turn it over to Ed. Edward Reginelli: Thank you, Mike, and thank you all for joining us today. Before reviewing our financial performance, I'd like to build on Mike's discussion of Bitgo's growth drivers and connected to how we generate revenue. Bitgo makes money through 5 revenue drivers: digital asset sales, staking, subscriptions and services, Stablecoin as a Service and interest income. Starting with digital asset sales. We offer a secure, seamless liquidity solution that simplifies the complexities of digital asset trading. Our revenue reflects the total trading volume generated when the company acts as Principal, executing trades on behalf of clients through relationships that Bitgo has with various third-party liquidity providers and exchanges. Second, we earn staking revenue by participating in proof-of-stake blockchain networks where we validate blocks using either our proprietary staking technology or by partnering with our network of 25-plus leading third-party validators. In exchange for providing clients the ability to stake their assets, the company earns blockchain rewards in the form of the network's native tokens. Third, subscriptions and services revenue encompasses our core technologies. Wallet services, cold storage, development fees, lending services and crypto as a service. This service is very sticky and provides stability and predictability in our financials because our technology is highly integrated into our clients' operations. This relationship provides the opportunity to upsell additional products and services. Fourth, Stablecoin as a Service revenue, which is our newest product offering, launched in fiscal year 2025. This service allows institutional clients to issue U.S. dollar-backed stablecoins using our regulated trust infrastructure. We earn implementation and ongoing service fees for the issuance, reserve management and transaction processing of white label stablecoins. Lastly, interest income, which represents interest earned from the company's fiat treasury earned from deposits in various money market products. While we are not entirely immune to market volatility, our diversified revenue model helps insulate us from fluctuations in digital asset prices relative to others in the industry. In addition, a meaningful portion of our revenue is recurring and subscription-based and our performance is driven by a broader set of factors beyond asset prices, including interest rates, industry sentiment and continued investment in emerging ecosystem and products. Finally, our focus on institutional clients results in a stickier customer base, especially through periods of market volatility. Moving on to our results. Fourth quarter total revenue of $6.2 billion increased 440% year-over-year. For the full year, total revenue of $16.2 billion increased 424% year-over-year. Growth in both periods was driven by higher digital asset trading activity, increased subscription and service revenue and the launch of our Stablecoin as-a-Service offering, alongside deeper engagement from existing clients and continued expansion of our client base. This growth was partially offset by a decline in staking revenue due to lower digital asset prices. On our key operational metrics, as of the end of the year, number of clients grew 104% year-over-year to 5,322 and number of users expanded 14% year-over-year to 1.2 million users. Assets on platform of $81.6 billion decreased 9% year-over-year, while assets staked of $15.6 billion decreased 51% year-over-year. These declines were driven by lower digital asset prices. To reiterate what Mike noted earlier, excluding the impact of price by applying consistent pricing across periods, assets on platform increased 16% year-over-year, while assets staked decreased only 7%. On a product level, in the fourth quarter, digital asset sales of $6.0 billion increased 531% year-over-year. For the full year, digital asset sales were $15.6 billion, increasing 513% year-over-year. Growth during both periods was driven by higher digital asset trading activity resulting from the continued growth of our OTC services, the expansion of trading pairs on the platform, increased activity from existing clients and an expanding client base. With digital asset sales, there are corresponding transaction costs. In the fourth quarter, digital asset sales costs were $6.0 billion, resulting in a take rate of roughly 24 basis points. For the full year 2025, digital asset sales costs were $15.5 billion with a take rate of approximately 21 basis points. Staking revenue in the fourth quarter of $58.3 million declined roughly 64% year-over-year. Full year staking revenue of $385.0 million decreased 16% year-over-year. Decreases across both periods were primarily driven by volatility in digital asset prices. Similar to digital asset sales, staking revenue includes corresponding fees. In the fourth quarter, staking fees were $55.4 million, resulting in a take rate of roughly 7%. For the full year 2025, staking fees were $346 million with a take rate of approximately 11%. Subscriptions and services revenue in the fourth quarter of $39.3 million increased 75% year-over-year. Full year subscriptions and services revenue of $121.5 million grew 57% year-over-year, primarily driven by an increase in the number of clients, growth in development fees and higher lending activity. Custody and wallet solution clients increased to 1,534 with an average quarterly spend of [indiscernible] per invoice client. In addition, we exited the year with a lending book of approximately $207.4 million, representing an increase of 114% year-over-year. Stablecoin as a Service revenue was approximately $26.6 million in the fourth quarter with a take rate of approximately 20 basis points on assets under management. For the full year, revenue totaled $66.7 million with a take rate of approximately 16 basis points on assets under management. As a reminder, this service was launched in fiscal year 2025. Finally, interest income was $0.5 million in the fourth quarter, up 34% year-over-year. For the full year, interest income totaled $1.5 million, up 63% year-over-year, primarily driven by increased fiat treasury investments. Total expenses were $6.2 billion for the fourth quarter and $16.1 billion for the full year, principally driven by digital asset sales costs, staking fees and stablecoin sponsor fees as referenced earlier. Fourth quarter compensation and benefits were $27.9 million, up roughly 19% year-over-year and $104.2 million for the full year, up 30%, driven largely by continued investment in our engineering and commercial teams. Fourth quarter general and administrative expenses were $24 million, up 29% year-over-year and $76 million for the full year, up 44% year-over-year, primarily reflecting increased third-party costs associated with our IPO initiative, higher legal expenses and variable costs tied to customers and revenue growth. Net loss in the fourth quarter was $50 million compared to a net income of $129.4 million in the prior year. Net loss for the full year was $14.8 million compared to net income of $156.5 million in the prior year. Losses in both periods were primarily driven by unrealized losses on the company's digital asset treasury due to falling digital asset prices. Fourth quarter adjusted EBITDA of $12.1 million increased 188% year-over-year, while full year adjusted EBITDA of $32.4 million grew 904% year-over-year. We believe we are in the early stages of growth, and our priority is to accelerate revenue while expanding our product capabilities and global footprint. We will continue to make disciplined long-term investments to support these objectives, even if they temper near-term profitability. Fourth quarter diluted loss per share was $1.03 compared to prior year earnings per share of $1.07. Full year diluted loss per share was $0.38 versus earnings per share of $0.90 in the prior year. Moving on to our balance sheet. Our balance sheet remains strong as we ended the year with $318.5 million in total equity. Our balance sheet includes a Bitcoin treasury strategy under which we retain Bitcoin received or acquired in the ordinary course of business and at times, allocate cash flows to purchase additional Bitcoin. We remain confident in this strategy and our long-term approach remains unchanged. Looking ahead, we are committed to a balanced capital allocation strategy over the long term. As we invest to grow the business, we will remain disciplined in the way we allocate capital and operate as a business in order to minimize risk and maintain liquidity. As of December 31, 2025, total diluted shares outstanding were 119.9 million shares. As a reminder, we issued an additional 11 million shares in our January 2026 IPO. We hold no long or short-term debt on our balance sheet since any borrowings are primarily used to fund our lending business and are on a demand basis. Now turning to expectations for the first quarter of 2026. We've been operating as a publicly listed company for about 10 weeks. And while the quarter is not complete yet, we want to be transparent and share insights into the current market conditions. The macro environment in the fourth quarter was challenging, and those conditions have carried into the first quarter. Digital asset prices have remained under pressure and geopolitical tensions in the Middle East have added additional volatility. These macro conditions, along with the decline in digital asset prices have a direct impact on our revenue streams. We are not immune to these dynamics. With that said, our underlying unit-based metrics remain healthy. Our client pipeline is strong and the structural demand for our platform remains intact. As Mike noted, we are executing on our 2026 growth strategy and continue to see strong growth in our client base and pipeline. In our trading business, we expect strong year-over-year growth in the first quarter compared to Q1 2025, supported by the momentum built during fiscal year 2025. We launched our derivatives business in the first quarter of 2026. As spot trading volumes have declined from the fourth quarter of 2025 amid lower digital asset prices and market volatility, client interest in derivatives has increased as a way to generate yield and provide market downside protection. Please note that a portion of our existing spot trading activity is transitioning to derivatives. While spot trading volumes are reported on a gross basis, derivative trading is reported on a net basis. Other areas to highlight include continued growth in our Stablecoin as a Service business, where assets under management exceeded $5 billion during the first quarter, alongside the addition of new notable clients utilizing the service. We expect solid year-over-year growth in subscriptions and services in the first quarter compared to Q1 2025. However, revenue is expected to be lower than the fourth quarter of 2025, primarily due to a decline in development fees, partially offset by strong recurring revenue base from custody and wallet services and increased lending business. Staking fees, which are most directly impacted by digital asset prices are expected to be significantly lower in the first quarter compared to Q1 2025 and down sequentially from Q4 2025. However, we anticipate a meaningful improvement in take rate relative to Q4 2025, driven by the onboarding of a significant token. Bitgo has been around since 2013, and we have experienced many different market environments over the years. I remain confident in our ability to weather the current dynamic macro environment as our near-term opportunities are strong, underpinned by a deep client pipeline and several active projects. With a constructive and evolving regulatory backdrop, we continue to see strong momentum and remain positive on the digital asset industry as a whole. To close, we are pleased with our strong fourth quarter and full year 2025 results, which position us well to continue executing on our long-term growth strategy. We remain confident in our ability to drive client growth, asset growth and product expansion and to deliver long-term value for our shareholders. Thank you for joining us today. I'll now turn it over to the operator for our Q&A session. Operator: [Operator Instructions]. Your first question comes from George Sutton with Craig-Hallum. George Sutton: Congrats on your first quarter. So I wanted to ask on the CLARITY Act, Mike, in terms of -- obviously, we're starting to get some sense of what that might look like. I'm just curious if we could use your informed thought process on what you'd like to see or what you're expecting to see relative to how it will impact your business. Michael Belshe: George, thank you for the question. Let's see. We're excited to see CLARITY pass. We hope that it comes about. I know there's been a lot of debate in the industry about, in particular, some of the relitigation of stablecoin points. From my view, most of the work with CLARITY actually comes in the next 18 months after CLARITY is passed because what it sets up is okay, CFTCs can do most of the work in the regulation. And that's going to really determine the bulk of what matters. So we hope that it passes soon. I would take it in almost any form. I don't think we should be worrying about the interest that's being returned or not returned. I think we need to get to the next stage, which is getting this fully enacted and legislated so that we don't have to worry about whether we have a full path forward from Congress. So we're very much in favor of getting CLARITY passed, and I think we're at the finish line. George Sutton: There was a lot of reference to a very strong client pipeline. I wondered if you could just give us any more sense of what you're seeing from a pipeline perspective. And how much of that is TradFi focused? Michael Belshe: Great question. Glad you asked. So look, I mean, you're reading announcements almost every week, Morgan Stanley, Citibank, et cetera. All of these large major players were not participating in digital assets just a short 18 months ago. And with infrastructure, I think you also know that it goes through a pretty significant amount of process. It goes through an RFI, then it goes through some iterations to an RFP and then finally to a close. So we can't announce everything that's done until the client wants to announce it. But the pipeline has been super strong. And in fact, if anything, I just want to make sure that we have enough sales team out there to make sure that we're connecting with everybody that we need to. So we've been growing the sales team over the last 3 to 4 months, just there's a lot of work out there. Operator: Your next question comes from Brett Knoblauch with Cantor Fitzgerald. Brett Knoblauch: As we look at maybe the broader crypto space, obviously, there's some weakness here. In your prepared remarks, you guys said you guys are a bit different of a platform and business isn't entirely correlated to where digital asset prices are going, but then also alluded to the fact that lower digital asset prices will weigh on some of the segments. Can you maybe frame it a bit better, like which segments are you expecting to kind of be pressured with, call it, broader crypto down 20% year-to-date versus which segments do you think can grow strongly irrespective of, call it, the macro market for crypto? Michael Belshe: Yes. Thanks, Brett. Good to hear from you again. Let's see. I mean, in general, I don't want to sugarcoat it, right? Like the asset prices being down, it affects everybody in the sector. And I think we said during the IPO roadshow, I will say it again, like Bitgo has some amount of correlation to digital asset prices, and you kind of see it in many aspects of our business. We've got a few that are less correlated. One of them is stablecoins, of course. Those are not directly correlated to the crypto prices. The other one is trade volume, which we sell a lot of trade volume in up and down markets, those volumes will increase. So it's not a direct correlation to just the asset prices. But of course, it is a direct correlation to what's going on in the space broadly. Lastly, we do have subscription service -- subscriptions as part of our services. So sometimes people are buying a subscription, which caps a monthly minimum, which includes some amount of custody, some amount of trade volume, et cetera, transaction volume, all under a constant price. So it's a little bit less volatile than the digital asset prices. Brett Knoblauch: Awesome. And then maybe just as a follow-up, you mentioned like agentic wallets, which I think is a really interesting area and kind of a hot topic right now. How do you -- or how are you guys kind of positioned for that with respect to your subscription services product? Is it a different bundle? Is it included in maybe the same package? Just broadly, how should we think about maybe just agentic wallets and Bitgo together? Michael Belshe: Yes. Great. Well, actually, we think the product offering that we have is really well suited actually for all of the Agentic needs and capabilities. So we got our MCP server up by the way we've seen it, like where AI picks up on that and is able to help put together products and code on it. We're watching that carefully to make sure that we fully understand exactly what clients are looking for, and we react to that as quick as we can. Then in terms of why our products are kind of designed for this. I mean when we started doing our institutional-grade wallets back in the beginning, I mean, first, you've got the basic security components, which is how do you have no single point of failure, how do you have protection against loss. But then the next thing you're doing is you're making it work for an institution, a business, a group of people, right? And so there's multiple people on the wallet. There's a policy that you can set. You can say, hey, these types of accesses need these permissions, the other types need these other permissions, you can do it risk-based. This turns out to work really well with agents, right? So the agents are effectively like other participants on the wallet. And you can actually do it in both directions. You can both have the agents spending money on your behalf and then going through your controls to approve. And also, you can do the reverse where you're doing the spending of money and then the agent is kind of watching that. So if you have a large organization and maybe you've federated out different parts of your digital assets to multiple parties, that agent can put other controls on it that you can watch and then they'll decide whether or not to improve. So anyway, I think everything we've built is like perfectly in line for agents. And if you are looking for an agentic wallet, like please try out Bitgo, give us feedback. We are always iterating and improving. Operator: Your next question comes from Joseph Vafi with Canaccord. Joseph Vafi: Congrats to you and to Bitgo on getting to this stage of the journey in the company's evolution. Maybe just staying on the agentic for a second. I've been kind of noodling what's going to move the industry forward other than just spot prices. And I think everyone's been thinking that clarity could be a big driver, but agentic AI combined with programmable money and assets and blockchain are kind of all coming into view here. Do you think that agentic could move the industry forward faster than CLARITY? I'm just trying to get a view from your point of view and then a quick follow-up. Michael Belshe: Well, thanks, Joseph. I think it's a little bit apples and oranges. I think they'll move in different speeds. So first off, on CLARITY, I didn't quite say this in my previous answer. Having done the roadshow, having spoken to all kinds of potential investors, many of whom have not been in the digital asset space very much kind of prior to the unlock of 2025, all of those guys are looking for CLARITY to kind of be the permission that this is not just something where like under the Biden administration, you have one set of regulators and then under the Trump administration, you have a different set of regulators. And under the next administration, we're going to have yet a third set of regulators, each with their own agenda. CLARITY puts a pathway forward where Congress has said, yes, they support this, and they've asked the regulators to officially take on that thing. So I believe there's a significant amount of traditional finance that is very much waiting on CLARITY. And if CLARITY doesn't come through, those folks may be kind of in and out as the market goes up and down. So that's a risk. Let's see, on the agentic side, I think we're going through an early phase where people are learning how to use agents. You see some of the almost [indiscernible] that happens where we're all learning it. We're so excited about it, and yet we're not quite as productive as we hope that we will ultimately be. So I think the innovation and this kind of exploration wave is just starting. Clearly, there are going to be very -- a lot more robots than there are humans, a lot more AI brains than there are human brains. And so I think it's only natural that you will see agents operating on our behalf in all kinds of ways. But we're in the early days of figuring out how those get deployed. So both CLARITY will help us and agents are going to help us grow, but I think they're almost as different paths. Joseph Vafi: All right. And then any other thoughts Ed here? It sounds like take rate may go higher on staking due to adding a new token. Any other color that you may be able to provide there? Edward Reginelli: Yes. So -- on the staking side, we did add a significant token. Canton was the asset we added, and that has brought a tremendous amount of margin to the product line. Also on other product lines, including our trading business, we referenced earlier in the conversation about the introduction of derivatives, and that has been really successful in Q1. So that's also going to help improve margins. And then as we continue to grow our overall customer base, we'll get incremental revenues from subscriptions and services. The difficult part of the business right now from a revenue perspective because it's so tied to digital asset prices is our staking product line. But we still are very confident in that overall product line and expect that to continue to grow. We'll grow adding new assets to the platform, more units. And hopefully, we see a recovery in prices. Operator: Your next question comes from Brian Dobson with Clear Street. Brian Dobson: Congrats on your first quarter. So maybe we can take a step back and a longer view. As you're contemplating, say, the next year or 2 for the business, which global catalyst do you expect to be most meaningful for the company and call it, the sector at large? Michael Belshe: Sure. There's a lot of questions about like digital asset prices. One thing that we're trying to help describe and always open to feedback on this as well is how do you differentiate how the market performed versus how Bitgo performed. And so the reason we were citing earlier, if you take a look at assets under custody from a normalized price perspective, you can either do it normalized at the beginning of the period at the end of the period, it doesn't really matter. Our assets under custody grew 16% during this year, irrespective of the asset price on the market. So hopefully, that indicates we're doing something right. It's not easy to add billions of dollars of new asset into custody. And then where is that next thing going to come from? Look, I think mostly, it's that the TAM is growing. So the regulatory unlock of 2025 started with just what was now legal in the U.S. to do. The second unlock is the increase of participants in the space. And so kind of back to that comment earlier about pretty much every traditional financial firm has a significant investment in digital assets going right now. You've heard me say this before. Larry Fink of BlackRock says every asset, every bond, every token is going to be digitized. I think there's an increasing number of people that believe that. We just had Paul Atkins this week also saying that within 2 years, everything is going to be digital. So this is just a huge growth in the total addressable market for us. And we think as an infrastructure provider, we will be able to serve those clients, whether you're talking about self-custody, whether you're talking about custody, whether you're talking about financial services on top. Operator: Your next question comes from Pete Christiansen with Citibank. Peter Christiansen: Congrats Mike, Ed, Baylor on the successful IPO. I wanted to ask about attach rates. You've had some really impressive client growth over the last couple of quarters. I'm assuming a lot of that is custody led. Can you just give us a sense of how you're seeing the attach rates to some other services, in particular, maybe like prime brokerage, how you're seeing that trend? And then I guess as a follow-up, I want to double tap on TV a little bit. How should we think about Bitgo's competitive moat there? Is it, hey, we've got best-in-class capabilities and it also stretches on to our custody capabilities, what have you? -- but there's other players out there that may have bigger balance sheet. Just help us understand what is the competitive strategy there to grow some of these other ancillary services. Michael Belshe: Sure. Thanks, Pete. I'll take part of this, and I'll hand it to Ed for the attach rates afterwards. So look, I mentioned custody, and I always kind of hate mentioning custody because I don't want people to think of us as just a custodian by any means. We've had significant attach rates across the product lines. I think Ed's got the official stats, but we're really trying to move all of the revenue up the stack. And so that's why we care a lot about the trade volumes increasing significantly on Bitgo. So increasingly, we hope to move as many participants up there. I think when you're helping people make money, whether it's by trading, whether it's by staking or by using their assets, it's a much stronger position to be in. So as it relates to prime brokerage, look, the lending book is larger than it's been in the past. The trading volumes are up. The culmination of these 2 things is where you start to put together and build leverage for your clients. Right now, I'd say that we're still increasing kind of these individual services and then ultimately, we get to prime brokerage. As the competitive moat, I think the difference is a couple of things. A, we have the foundation at the bottom of the stack, which you can actually build on and understand the risk. A lot of prime brokerage is understanding what are the risks that you're taking and too much of the early prime variance that came a few years ago from various players was not adequately taking into account what the risk that's being taken is. Obviously, if you don't have custody -- if you don't have a solid risk around how you're holding it, it's difficult to even talk about like the market risk and counterparty risks that happen on top of it. So we have that strong foundation at the bottom. The fact that our trading volume grew so well in the last year as we finally have turned that on, partially just unlocked by the new regulatory environment here in the United States. We think all of this grows. So we are differentiated in that we do cold storage for that. We've got a solid foundation for that. We support more coins than anybody. I think we have some stats coming out probably in some press releases soon around just how broad the asset support is. I think when you look at other players, they're probably going to start with Bitcoin, they're going to start with Ethereum. And look, Bitgo supports just a much broader spectrum of products today. Ed, do you have the specific numbers on the attach rates on the various services? Edward Reginelli: Yes. So I believe as of end of last year, about 70% of our revenue-generating clients use 2 or more of our products and about 50% use 3 or more. As Mike pointed out, the clients are really focused now on yield-generating activities, and they would much rather be sharing some of those profits compared to just paying for stand-alone services. So we'll continue to keep driving customers of our products stack. And we also appreciate that, too, from the standpoint of increasing our margins. Instead of talking basis points, we're talking percentage points. So we're actively trying to move more and more clients to trading staking, lending and other value-added products that we currently offer. Operator: Your next question comes from Edward Engel with Compass Point. Edward Engel: Could you please talk about the launch of derivatives trading in the first quarter? It looks like it's been a strong start so far, but just wanted to get a better idea of when exactly that was launched and then, I guess, how you see that ramping throughout the year? Michael Belshe: Yes, sure. Yes, we're very pleased with how it's been going so far. Actually, let's see to [indiscernible] say here. Okay. I don't think so. All right. We launched on January 1. And one of the things that, by the way, I want to note you've got this terrible way of like aggregating gross revenue, which includes gross trading of spot then derivatives, of course, is not quite equivalent to trading volume. It's equivalent to the derivatives component. So it makes it hard to tease out. But we've seen substantial clients moving from pure spot trading over to derivatives. We've seen multibillions of trade volume already in 2026, and we just launched it, I guess, 3 months ago. So we think this is where the bulk of our trading volume will be probably in about another year or so, but very happy to be having this offer to our clients. Edward Engel: Great. That's helpful. And then just to try to sneak one in here. Just given that successful launch and then maybe just some of the recent volatility -- is there a world where we could see net trading revenue maybe kind of flat Q-on-Q? I know you said higher year-on-year, just that 1Q is a pretty low base. Michael Belshe: Ed, do you want to take this? Edward Reginelli: Yes. We are projecting that our overall gross trading volume will be down. On a net basis, we will also be down quarter-on-quarter, but will be up substantially versus Q1 of 2025. Q4, we appreciated the benefit of a lot of digital asset trading companies, treasury companies that came to the platform, and we had a tremendous amount of volume through them. What we've seen there is behavior changing. Those same clients are now using our derivative products, looking for yield, looking for market protection. So overall, we are very positive on our trading and derivative business and expect that to be a huge driver of our future growth. Edward Engel: That's great color. Congrats on being a public company. Operator: Your next question comes from Brian Bedell with Deutsche Bank. Brian Bedell: And also congrats on your first quarter here. Very exciting. First question, just on the -- going back to some of your comments, Mike, on CLARITY Act and the pipeline. How do you see that progressing during the year? Obviously, you mentioned that the CLARITY Act can be an unlock for traditional finance firms. And the pipeline is strong coming into 1Q. But do you see this being actioned upon relatively quickly if just the Act passes? Or do you expect more of a lagged response as we go throughout the year? From a revenue perspective, I'm thinking about the custody wallet component of subscription and services. Michael Belshe: We have not seen any slowdown in terms of readiness to adopt digital assets from traditional financial firms. If anything, I'd say it's been just as strong. So I think most people had been expecting CLARITY would get passed kind of over the last 3, 4 months. Maybe the -- probably market would probably tell you exactly what the predicted odds are, maybe that's come down a little bit, but it doesn't seem to have slowed anything down. And I'm not entirely sure that just because we don't -- that even if we didn't get CLARITY, I'm hopeful that it will, but even if we didn't, that it would cause a slowdown. It could. But I guess I just don't know exactly. So far, there's been no slowdown. So I think it's all positive. Remember, these build-outs take a long time, like the decision process for large firms moving into digital assets, the decision alone is 6 to 12 months. After that, there's the build-out and then there's finally the deployment. And usually, when they deploy, they do it kind of on a risk-adjusted basis where they do a small amount first and then grow it slowly. So because they've already started the process, I think it takes a while before they drop out. But I guess we're going to see exactly how they go. So far, it's been no problem. Brian Bedell: Yes. That's great. And then maybe an interesting press release on the Prediction markets venture. And it certainly seems like a differentiated way to go about the market. Can you talk a little bit more about that in terms of the OTC platform and how that -- you expect that to work? Is that going to sit at Bitgo? And then just talk about what types of contracts you're creating? It sounds like it's mostly in the crypto asset class right now. And how you're seeing that institutional demand play out? Michael Belshe: Sure. I think you're referring to our partnership we just announced with Susquehanna, right? Brian Bedell: Yes. Yes, that's absolutely, yes. Michael Belshe: Yes. For those that may not have seen it, we did announce a partnership with Susquehanna that -- you can have your assets at Bitgo and then we can -- through our OTC capabilities, we can help you place investments over at Polymarket and Kalshi, and we do that in partnership with Susquehanna. Look, that's just started. So I don't have any positive data that -- positive or negative to share with you just yet. We did have a lot of reach out and excitement about it. I think it creates a differentiated way to access these markets that wasn't there before. So look, we're excited to see what happens. Why don't you refresh that one for maybe the next quarterly report. Operator: Your next question comes from Dan Dolev with Mizuho. Dan Dolev: And also congrats from our end at Mizuho. Really quick question for you. It sounds like Stablecoin as a Service has been a huge success. I think you -- you recently launched it in the first half of '25, and it's already grown to like a very significant AUM. I think you mentioned $5 billion. So how big could this become? And what are maybe potential new ways to monetize beyond what you're doing today? -- congrats again. Michael Belshe: Great. Thank you for the question, Dan. Yes. So we started with USD1 last year. We helped them get from 0 to fully launched in about 6 weeks on top of the Bitgo Stablecoin as a Service product. It's a modular service. So you can kind of pick and choose some of the components that go into that. We announced just earlier this year that SoFi USD is going to be built on top of the Bitgo Stablecoin as a Service platform as well. I think that will be -- the first Stablecoin as a Service platform, I'll probably get to $1 billion each. SoFi is not there yet, but I think it will be the next one. We think there's tremendous opportunity. Like stablecoins are super easy for pretty much everybody in finance to understand. And in terms of payments, it's just better. I know there's some debate that's going on at the CLARITY Act, whether or not interest gets passed or not, there's a tremendous amount to be done here. So as the payment rails change, that changes how people are moving money locally and internationally, especially if you ever try to wire money internationally, it's very hard. People are opting to use stablecoins. You're going to start hearing like regular people outside of the business talking about, hey, I want to use some tether to send some money to a supplier across the globe. These are real things that are going to happen. At Bitgo, we've got increasing improvements around what we call our mint and burn dashboard, our ability to convert between these stablecoins, so we're going to have kind of an explosion of different stablecoins available and people might have some USDC, but they want to move to USD1. They got some USDT, but they want to move that to SoFi USD. And on the banking side, we haven't even seen the tokenized deposits quite come live yet. If you read up on the SoFi dollar, you can see how they're addressing the combination of both tokenized deposits and stablecoins. So I think we're in the early innings here. I think it's going to completely revolutionize how we're doing payments. I think you're going to see a use for settlements kind of everywhere. And then that will carry over, hopefully, into our Go network in the coming quarters. Operator: Your next question comes from Chris Brendler with Rosenblatt Securities. Christopher Brendler: I also add my congratulations on your first quarter out of the gate. I wanted to ask about the OCC approval process. I think it's now complete, but what does that mean for your business? And sort of which areas can you leverage that new charter? And it seems like it's somewhat unique as well. So it could be a competitive advantage, at least in the near term. I'd love to get a little color there. Michael Belshe: Yes. Thanks, Chris. Yes, for those that didn't notice, we did get converted over to the OCC National charter. So it's Bitgo Bank and Trust at this point. And it's been huge for our business actually. Now interestingly, from an operational point of view, we've been ready for this for quite some time. You probably know we operate multiple regulated custodians around the planet. We've had a couple in the U.S. We have in Switzerland. We have in Germany, we have in Dubai. We have in Singapore, coming hopefully in 2026 in South Korea. So we've built a playbook for how you run these that incorporates, of course, all of the U.S. things that you would expect, but also all of the things from other regulatory regions, et cetera. And I think we've got the most robust custodial platform of anybody in terms of being on top of all the regulatory components. Just being able to call yourself Bitgo Bank and Trust, actually, you're speaking the language of traditional finance. You say the word Bitgo it doesn't say bank in it and people don't quite know exactly what that is. Believe it or not, that does matter. But overall, you can't get a more respected regulatory framework. So it's been great. And of course, it cuts out any ambiguity. I see a few different states are looking to potentially try to regulate stablecoins in their own way, and we could end up with kind of the money transmission licenses of the states, but now it played out for crypto or played out for stablecoins. And by having that national charter, we are immune from that. So it's very good for our business. It's very good for our clients. And I'm proud that it shows that the Bitgo team has met the highest standards that are required. And one last thing that's interesting, we are a fiduciary for our clients' funds that are held at Bitgo Bank & Trust. And when you take a custodial duty over 100% reserve accounts, like what we do, that's fiduciary. Interestingly, when you go to roll up to your bank, he's not a fiduciary to you. It's a depository, it's a different relationship. So we think this is the right relationship for holding on to billions and billions of dollars of assets. Our clients do seem to value it, and it's been really good. One last thing, our crypto-as-a-service product has really taken off in 2026 already. We signed more new clients on crypto as a Service this year than we did all of last year. And we're only 3 months in, I think the OCC charter had a lot to do that. Christopher Brendler: That's fantastic and really looking forward to seeing how that progresses throughout the year. A separate question sort of related to the last question, which is on the Stablecoin as a Service, really great to see the SoFi news. I would love to hear just that pipeline because it feels like stablecoins is an area where it's not as impacted by crypto asset prices volatility. It's not as impacted by the regulatory environment since GENIUS Act is already done, although the interest exemption that fight might have a little bit impact. But I'd love to see more and more stablecoins being issued through Bitgo. And how does that pipeline look as you enter 2026? Michael Belshe: Yes, there's been a number of others. We haven't mentioned them as much because they're not as big of brands, but FY USD launched on top of Bitgo Stablecoin as a Service as well as a few others. There's a healthy pipeline more. Also the conversion component between all these different stablecoins is an area that we've been growing partnerships with some of the existing players everywhere from PayPal to Fidelity. Then in terms of how this grows, there's an interesting point that goes with CLARITY. If you're not allowed to get interest on stablecoins, then it kind of encourages everybody to want to be an issuer. Imagine your role as a bank or a business, you've got some distribution channel of parties and you want to use stablecoins, you've got 2 choices, either use an existing stablecoin, in which case somebody else gets all the interest or you build your own. And then you get to participate and figure out how you're going to use the interest that you get off of the reserves. And a lot of parties that have an existing distribution channel, of course, they want to tap into that. Eventually, I believe I don't know what arc of time it's going to take to get there. Eventually, we will have interest on stablecoins. And when that happens, the calculus changes. Now being an issuer is no longer so much about keeping the interest from your own distribution channel. Instead, you'll pay somebody much like an ETF, you'll pay them an administrative fee, probably 40 to 80 basis points and then you'll be able to get the interest from them. So suddenly, the need to be an issuer will be less. So it's an interesting place where I think, on one hand, we here at Bitgo are very much in favor of, yes, you should be able to provide interest on stablecoins, and that should be the way it works. I don't think that, that's going to happen. I think whether CLARITY Act passes or not, it's going to remain kind of constrained, and that's going to lead to more people wanting to be their own issuers, and that leads to more people wanting Bitgo stablecoin as a service product. Christopher Brendler: I was thinking as well. Operator: Thank you for your participation. That is all the time we have today for the question-and-answer session. I will now turn the call back to Mike Belshe, Founder and CEO, for closing remarks. Michael Belshe: Thank you, everybody, for joining us today. I appreciate your interest and support of Bitgo. Thanks, everybody, for saying congratulations. I think it's not entirely necessary, but it is appreciated. The entire team here at Bitgo works super hard. We've been doing it for 12 years. The people feel we're on a mission to really change the way the financial system works, and we're really proud to be a part of it. So thank you and look forward to keeping in touch with all of you on this journey. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Jiayin Group's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. I will now turn the call over to Mr. [ Sam Lee ] from Investor Relations of Jiayin Group. Please proceed. Unknown Executive: Thank you, operator. Hello, everyone. Thank you all for joining us on today's conference call to discuss Jiayin Group's financial results for the fourth quarter of 2025. We released our earnings results earlier today. The press release is available on the company's website as well as from Newswire services. On the call with me today are Mr. Yan Dinggui, Chief Executive Officer; Mr. Fan Chunlin, Chief Financial Officer; and Ms. Xu Yifang, Chief Risk Officer. Before we continue, please note that today's discussion will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's actual results may be materially different from the expectations expressed today. Further information regarding these and other risks and uncertainties is included in the company's public filings with the SEC. The company does not assume any obligation to update any forward-looking statements, except as required under applicable law. Also, this call includes discussion of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP financial measures to GAAP financial measures. Please note that unless otherwise stated, all figures mentioned during the conference call are in Chinese renminbi. With that, let me now turn the call over to our CEO, Mr. Yan Dinggui. Mr. Yan will deliver his remarks in Chinese, and I will follow up with corresponding English translation. Please go ahead, Mr. Yan. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] Hello, everyone. Thank you for joining our fourth quarter and full year 2025 earnings conference call. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] 2025 was a pivotal year for the industry, marked by deepening regulation and standardized development. Despite the continuously tightening in external environment, we maintained steady progress with -- for the full year, our loan facilitation volume reached RMB 129 billion, representing a year-on-year increase of approximately 28%. We achieved revenue of RMB 6.22 billion, up approximately 7.3% year-on-year and net income of RMB 1.54 billion, a year-on-year increase of approximately 45.4%, demonstrating our operational resilience amidst a complex environment. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] In the fourth quarter, following the implementation of the new regulation, we observed a continuous decline in comprehensive financing costs alongside higher entry barriers and stricter compliance requirements. In response to this new regulatory landscape, we have proactively collaborated with our funding partners to facilitate necessary adjustments. As of now, we maintain partnerships with 79 financial institutions with an additional 53 currently in negotiations. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] We have consistently adhered to the operating philosophy of compliance as the foundation, quality and efficiency as priority. We proactively adjusted our borrowing acquisition pace this quarter, adding approximately 407,000 new borrowers, reflecting a year-on-year decline. To further enhance the precision of channel management and the efficiency of marketing spend, we implemented cross-functional collaboration to revamp our channel evaluation framework and to continue to optimize onboarding standards, ongoing monitoring and off-boarding processes. Additionally, by establishing a more flexible credit limit management system, implementing targeted reactivation strategies for existing borrowers, we effectively unlocked the repeat borrowing potential among quality borrowers. Repeat borrowing contribution accounted for 79.4% of loan facilitation volume, an increase of 6.7 percentage points compared to the same period last year. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] Since the fourth quarter, risk indicators have remained under pressure. We have been advancing a phased deep restructuring of our risk control strategy, which include multiple rounds of tightening entry criteria, optimizing credit limits and iterating on product offerings. This has allowed us to proactively manage risk exposure and refine borrower segment structures, mitigating the impact of certain external fluctuations on asset quality. As of the end of the fourth quarter, the 90-plus day delinquency ratio was 2.03%. Entering 2026, thanks to precise identification and isolation of tail risk, along with structural optimization of existing asset portfolio, forward-looking risk indicators are showing positive trends. We will continue to build a risk control system that balances long-term stability with short-term dynamics serving as the balance for steady operations. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] On the artificial intelligence front, we made solid progress in 2025 in multimodal, antifraud, AI-powered agents and data intelligence. In 2026, our 4+2 strategy will undergo a key upgrade. We have reorganized our 4 core pillars into 2 main tracks: production and non-production. The production track focuses on core business value creation, covering 3 directions: borrower acquisition, risk management and marketing. We are exploring AI-driven identification and acquisition of high-quality borrower groups, deepening the application of multimodal technologies such as voice print, knowledge graph and anti-fraud and enabling AI-powered content generation and review and marketing. The non-production track aims to improve efficiency and quality in daily operations, covering engineering intelligence, agent assistance and office intelligence. Key initiatives include advancing AI programming from coding completion to autonomous coding, adopting a human-machine collaborative agent model to enhance service quality and efficiency and further upgrading our internal intelligent workplace systems. Meanwhile, our intelligent agent platform and machine learning platform as the 2 foundational infrastructures will continue to provide underlying tooling support for upper layer applications. This strategic upgrade marks a shift in our AI strategy from capability building to value creation, embedding AI more deeply into our business value chain and providing stronger, more sustainable drivers for development. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] In terms of new business expansion, we have continued to focus on 3 dimensions: financial product innovation, partnership model innovation and overseas market. On the product side, we actively expanded into auto-backed loans and digital intelligent micro loans, enriching our credit product portfolio. In partnership models, we connected with leading traffic ecosystem through joint operations, establishing deep strategic partnerships with multiple institutions. Throughout the year, we launched 21 projects with business scale growing month by month. As an early mover in global markets, its strategic value has become increasingly prominent. In 2025, facilitation volume in Indonesia increased by approximately 187% year-on-year, while registered users grew by approximately 119% year-on-year, demonstrating gradual scale effect. Mexico business accelerated significantly in the fourth quarter. For the full year, the total loan facilitation volume grew approximately 105% year-on-year, while registered users up approximately 110% year-on-year, marking a key milestone in validating our business model. We plan to use several countries where we have investment and operational experience as anchors to explore opportunities in other markets. Through cross geography and cross-cycle deployment, we will steadily expand our global footprint. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] The essence of financial inclusion lies not only in the depth of service reach, but also in conveying social value. Over the past year, our philanthropic initiatives reached multiple areas, including youth mental health and support for special needs groups. We directly trained over 30,000 teachers, students and parents covering more than 1,300 schools and conducted mental health assessments for over 60,000 students and teachers, protecting the healthy growth of children through concrete actions. In terms of volunteering services, since the establishment of the Jiayin volunteer service team, we have grown to 120 members, completed 28 activities and accumulated nearly 3,800 hours of service. Our philanthropic practices and social responsibility efforts have received multiple recognition from government departments, authoritative media outlets and social organization. This is not only an affirmation of our commitment to long-termism, but also a core competitive advantage in building trust in our brand. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] Regarding shareholder returns, in 2025, we continue to deliver on our commitment to sharing benefit of our development with our shareholders. During the year, we completed cash dividend distributions totaling USD 41.1 million, representing an increase of over 50% year-on-year. In August, we increased the total quota of the current share repurchase program to no less than USD 80 million. To date, we have repurchased nearly 4.6 million ADS with total value of approximately USD 30.4 million. We will maintain our existing dividend policy and make disciplined use of the remaining repurchase capacity to deliver sustainable returns to shareholders. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] Given the ongoing uncertainty in the macro environment, we maintain a prudent stance and expect loan facilitation volume for the first quarter of 2026 to be between RMB 18.5 billion and RMB 19.5 billion. We will continue to use compliance as our foundation and innovation as our engine to continuously solidify the technological foundation and build resilience against cyclical fluctuations. Dinggui Yan: [Foreign Language] Unknown Executive: [Interpreted] With that, I will now turn the call over to our CFO, Mr. Fan Chunlin. Please go ahead. Chunlin Fan: Thank you, Mr. Yan, and hello, everyone, for joining our call today. I will now review our financial highlights for the quarter. Please note that all numbers will be in RMB and all percentage changes refer to year-over-year comparisons, unless otherwise noted. As Mr. Yan noted, amid the liquidity tightening and heightened risk volatility following the new regulatory implementation, we have proactively pivoted to prioritize asset quality over expansion to safeguard our long-term stability. Loan facilitation volume in Q4 was RMB 24.2 billion, representing a decrease of 12.6% from the same period of 2024. Our net revenue was RMB 1,090.2 million, representing a decrease of 22.4% from the same period of 2024. Moving on to costs. Facilitation and servicing expense was RMB 328.2 million, representing a decrease of 3.3% from the same period of 2024. Reversal of credit losses of uncollectible assets, loans receivable and others was RMB 20.1 million compared with RMB 1.2 million allowance for credit losses of uncollectible assets, loans receivable and others in the same period of 2024, primarily due to write-back of allowance for oversea contingent guarantees arising from lower expected loss rates. Sales and marketing expense was RMB 498.7 million, representing a decrease of 3.6% from the same period of 2024, primarily driven by the improvement in operational efficiency. General and administrative expense was RMB 66.8 million, representing an increase of 24.4% from the same period of 2024, primarily due to an increase in employee costs. R&D expense was RMB 121.9 million, representing an increase of 21.4% from the same period of 2024, primarily due to an increase in professional service fees and employee costs. Non-GAAP income from operations was RMB 120.4 million compared with RMB 402.4 million in the same period of 2024. Consequently, our net income for the fourth quarter was RMB 100.6 million compared with RMB 275.5 million in the same period of 2024. Our basic and diluted net income per share were both RMB 0.49 compared with RMB 1.30 in the fourth quarter of 2024. Basic and diluted net income per ADS were both RMB 1.96 compared with RMB 5.20 in the fourth quarter of 2024. Each ADS represents 4 Class A ordinary shares of the company. We ended this quarter with RMB 61.8 million in cash and cash equivalents compared with RMB 124.2 million as of September 30, 2025. With that, we can open the call for questions. Ms. Xu, our Chief Risk Officer, and I will answer questions. Operator, please proceed. Operator: [Operator Instructions] Our first question comes from Yuxuan Chen with Huatai Securities. Yuxuan Chen: [Foreign Language] I got 2 questions here. The first one is about the risk. Could management share how your risk metrics have been trending in the fourth quarter of 2025 and year-to-date in 2026? Given the recent volatility in the industry, how have you adjusted your customer acquisition strategy? The second one is about the regulation. With the regulatory environment in China continuing to tighten, what are your expectations for growth this year? In particular, how do you see the key metrics like loan facilitation volume and profitability trending? Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] Mr. Chen, I will answer your first question, and Mr. Fan will answer your second question. So as you know, risk for this year is highly related to the regulation. So I won't go into too much detail on the interpretation of the new policy and new regulation because I believe most of the investors in the sector are already quite familiar with the dynamics. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So from Jiayin perspective, compared with the previous cycle, the increase in risk last year was more pronounced and more prolonged. And particularly in the first 4 to 6 weeks leading up to the peak at the new borrower level, we observed the market reached its peak around late September and to early October. So the exact timing is a little bit different across different channels of different quality, but risk levels remain elevated through November before starting to decline in December. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So during this period, we proactively adjusted our channel mix. We tightened our standards in the new borrower models and strategies and control the absolute volume of new borrower acquisition. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So from the repeat borrower side, for the incremental assets from the repeat borrowers, risk peaked in November and then gradually declined starting in December. So in response, we adopted a more selective and disciplined approach to risk management, focusing on higher quality and more resilient borrowers for approval. So we also applied more stringent underwriting and credit limit management for customers who are higher risk with multiple outstanding debt, weaker asset profiles and limited financing capacity, particularly among the near prime or marginal borrowers. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So overall, our structured risk management approach has delivered tangible results. And based on our internal analysis, amid the broad industry-wide risk cycle, our measures contributed to an improvement in risk metrics by approximately 25% to 30%. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] Since January, we have been closely monitoring the overall industry volume trends. Both the platforms and our financial institutional partners are really still digesting the impact of last year's risk volatility. With that said, we're still seeing continued improvement in our new risk vintages. Since your question is on the customer acquisition front, we remain cautious in ramping up volumes. In terms of channel strategy, we're really prioritizing the leading traffic platforms and lower cost acquisition channels so that we can optimize our customer mix for the long term. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So for the second question, I'll hand it over to our CFO, Mr. Charlie Fan. Chunlin Fan: [Foreign Language] Unknown Executive: [Interpreted] So Mr. Chen, your second question is on the effects of the regulation and metrics. So for the full year of 2025, we achieved total facilitation volume of RMB 129 billion, with revenue and net profit reaching RMB 6.2 billion and RMB 1.54 billion, respectively, representing a net margin of 24.7%. Chunlin Fan: [Foreign Language] Unknown Executive: [Interpreted] So we see since the second quarter of 2025, particularly following the formal implementation of the new regulation, industry liquidity has gradually tightened and risk levels have shown a clear upward trend. So against this backdrop, we proactively tightened our standards and restructured our risk management strategies. So after reaching a historical quarterly peak of RMB 37.1 billion in facilitation volume in Q2, we continue to scale back in Q3 and Q4 with Q4 volume declining to RMB 24.2 billion. Revenue and net profit for the quarter were RMB 1.09 billion and RMB 100 million, respectively, with net margin declining to 9.2%. Chunlin Fan: [Foreign Language] Unknown Executive: [Interpreted] Similar to other leading players in the industry, we have faced short-term pressure on profitability due to declining pricing, volatility in risk metrics and diseconomies of scale resulting from rapid volume contraction. Chunlin Fan: [Foreign Language] Unknown Executive: [Interpreted] So with that said, as we've iterated in previous earnings calls, the implementation of the new regulation is expected to raise industry entry barriers and increase market concentration. As a leading platform, we believe that Jiayin technology can navigate through this period of short-term risk volatility and scale adjustment. We are well positioned to enter a new phase of high-quality moderate growth over the medium to long term. And encouragingly, after several quarters of rising risk across the industry, we are beginning to observe the early signs of stabilization and improvement in asset quality. Chunlin Fan: [Foreign Language] Unknown Executive: [Interpreted] So looking ahead, we'll continue to operate with the compliance as our foundation, closely monitoring changes in risk trends and market liquidity and dynamically adjusting our strategy in line with the evolving industry fundamentals. Given that the industry is still undergoing a transition period following the new regulations, we will maintain a high degree of flexibility and review our target on a quarterly basis. As Mr. Yan mentioned, for the first quarter of 2026, we expect the facilitation volume to be in the range of RMB 18.5 billion to RMB 19.5 billion. Operator: Our next question comes from [ Roxy Liu with Kaiyu Capital ]. Unknown Analyst: [Foreign Language] Given the rapid growth of the company's overseas business in 2025, could the management elaborate on Jiayin's strategy road map and the future outlook in the overseas market? Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] Roxy, I'll answer your question on the overseas part. So in today's fintech landscape, the international business has really become a key growth pillar that we're actively cultivating. As Mr. Yan mentioned earlier, our operations in Indonesia and Mexico have both been growing at a strong pace with volumes roughly doubling year-over-year in 2025. So we expect this momentum to continue. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So from the scale perspective, we look to do the same in 2026. So another year of doubling in scale. At the same time, on the quality front, both markets are expected to reach important strategic milestones and moving towards profitability. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] So from a business model perspective, we will continue to deepen our localization strategy, expanding partnerships with local financial institutions and enhancing our ability to serve and empower the local financial ecosystem. At the same time, we'll continue to broaden our collaboration with international financial institutions to capture synergies from our global strategy. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] For the new countries and markets, we've been actively laying the groundwork for expansion into new markets. So we look forward to sharing more progress with you later in 2026. Yifang Xu: [Foreign Language] Unknown Executive: [Interpreted] Thank you. That's my answer on the international part. Operator: Seeing no more questions, I will return the call back to Sam for closing remarks. Please go ahead. Unknown Executive: Thank you, operator, and thank you all for participating on today's call. We appreciate your interest and look forward to reporting to you again next quarter on our progress. Operator: Thank you all again. This concludes the call. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
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: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Purple Innovation Fourth Quarter Full Year 2025 Earnings. [Operator Instructions] I would now like to turn the call over to Stacy Turnof, Investor Relations. Please go ahead. Stacy Turnof: Thank you for joining Purple Innovation's Fourth Quarter and Full Year 2025 Earnings Call. A copy of our earnings press release is available on the Investor Relations section of Purple's website at www.purple.com. Before we begin, I'd like to remind you that certain statements made in this presentation are forward-looking statements. These statements reflect Purple Innovation's judgment and analysis as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our filings with the SEC. Additionally, today's presentation will reference non-GAAP financial measures such as adjusted gross margin, adjusted operating expenses, adjusted EBITDA, adjusted net loss and adjusted net loss per share. A reconciliation of these measures to the most comparable GAAP measures can be found in the earnings release available on our website. With that, I'll turn the call over to Rob DeMartini, Purple Innovation's Chief Executive Officer. Robert DeMartini: As we close out 2025, I'm proud of how far the business has come over the past year. While the broader market remains challenging, the progress we're making at Purple is increasingly evident in our results. The fourth quarter marked an important inflection point for the company. Revenue increased approximately 9% year-over-year. We delivered gross profit expansion and profitability improved meaningfully across the business. In the quarter, we generated adjusted EBITDA of approximately $8.8 million and finished the year profitable. This performance was driven by the benefits of the strategic actions we've taken. Those actions include our cost initiatives that are now fully embedded in the business, including consolidating our manufacturing footprint as well as a full quarter of expanded Mattress Firm distribution and a significant expansion of our Costco program. Looking at the full year, 2025 was a period where the business became meaningfully stronger. We continue to build on our path to premium sleep strategy and delivered positive adjusted EBITDA for the year, finishing within the guidance range we established at the beginning of 2025. Importantly, we achieved profitability levels that we haven't seen since 2021. That progress was driven by the execution and by the changes we put in place, not by a recovery in the broader market, which speaks to the durability of the model we've been building. Our focus throughout the year was not on short-term fixes, but on creating a business that can perform more consistently. Taken together, this represents more than a strong finish to the year. It marks a clear shift from defense to offense. Growth, margin expansion and profitability are showing up in the numbers and that's in a market which is down low single digits. The direction is clear, the momentum is real, and we're entering 2026 with a playbook designed to scale profitably as demand continues to improve. We've made meaningful progress across each of our sales channels in 2025. And in the fourth quarter, 2 of our 3 channels delivered positive growth for the second consecutive quarter. Comparable sales in our showrooms increased 8.8% in the quarter and showrooms continued to grow in profitability for the full year. Sales execution improved, the updated selling model gained traction and Rejuvenate 2.0 represented over 50% of showroom mattress revenue during the quarter with more than 80% of showroom's 4-wall profitable for the full year. Wholesale was a key driver in 2025 with a robust 39.8% growth in the fourth quarter. E-commerce performance was mixed during the year and declined in the fourth quarter, though we did see pockets of strength around Black Friday and Cyber Monday. At the same time, we saw solid marketplace performance, particularly on Amazon and meaningful improvements to the website experience tied to our less pain, better sleep positioning. Stepping back, the way we're thinking about the business today is fundamentally different than a year ago. Last year was about reshaping the business for a tougher market, rightsizing our cost structure, strengthening the foundation and restoring profitability. Today, we're focused on growth. Going forward, our focus is centered on 3 priorities: deepening our understanding of the consumer, delivering better sleep through product experience and expanded distribution and executing with financial discipline across the business. This approach builds on what's already working and reflects how we're running our business. With that framing, let me walk you through our progress against these priorities and what they mean for the business going forward. Number one, knowing our consumer. Over the past year, we've sharpened our focus on understanding who our consumers are, what matters most to them and how they make their purchase decisions across the channels. Our work is shaping how we communicate, shifting us away from promotionally led messaging towards clear benefit-driven storytelling, focusing on GelFlex Grid technology that helps consumers understand how Purple delivers better sleep. Our less pain, better sleep positioning continues to resonate, providing a consistent consumer-led message that translates across e-commerce, retail and wholesale channels. Importantly, we're focused on reaching our consumers with the right message in the right place at the right point in their decision journey. We're seeing early signs of improved brand momentum with increased awareness, beginning to translate into brand consideration. As a result, we're improving our clarity across touch points, strengthening engagement and supporting higher quality conversion as consumers better understand the value of our product. In e-commerce, we're encouraged by the progress we're making. As part of better meeting consumers where they're shopping, our expanded presence on Amazon is gaining traction. Improvements in availability, delivery speed and conversion are strengthening the consumer experience and broadening our reach particularly among new-to-brand consumers. This expanded assortment is driving a healthy lift in Amazon sales, especially in pillow and seat cushions and introduces new consumers to our technology. We're also seeing this consumer-focused approach resonate through our partnerships. Our participation in Mattress Firm's Sleep Easy marketing campaign drove sales conversion and improved aided awareness scores. At the heart of better sleep is better product. From there, we focus on how we bring innovation to life through the consumer experience and expanded distribution. Innovation remains at the core of Purple's differentiation and our Rejuvenate 2.0 collection continues to validate that approach. Performance exceeded our expectations in 2025 with strong traction across both showrooms and wholesale as retail partners expanded Rejuvenate 2.0 placement on their floors. Through our direct channels, Rejuvenate 2.0 is performing well at an average selling price of almost $5,800, demonstrating our ability to drive demand at meaningfully higher price points and reinforcing the value consumers place on better sleep. We also completed development work on Purple Royale, a new premium offering developed in close partnership with Mattress Firm. This is an important product for us and a meaningful step forward in our premium strategy. Purple Royale is complementary to our Rejuvenate 2.0 collection, with similar price points across the curated floor model lineup. The launch is on track with initial floor models arriving now. The Purple Royale collection was originally planned for over 2,800 slots bringing us to a total of 12,000 slots across Mattress Firm's 2,200 stores. Encouragingly, the quality and design of the final product has exceeded expectations, and as a result, Mattress Firm is adding incremental slots as the product launches. Beyond the product itself, we continue to focus on delivering a differentiated end-to-end consumer experience, anchored by compelling in-store presentations across our own stores and wholesale partners. This includes elevating how we educate our consumers around pain relief and the role of GelFlex Grid technology, which we are seeing drive strong engagement when brought to life through in-store demonstrations and digital content. We're also continuing to strengthen white-glove delivery services to ensure that Purple shows up consistently incredibly whenever the consumer chooses to engage. This focus is strengthening the brand and improving conversion by reinforcing the value of our technology across channels. Part of delivering better sleep is expanding our distribution presence, meeting more consumers where they shop. The premium innovation is translating directly into expanded distribution. With Purple Royale now launching across Mattress Firm, we've expanded our footprint and deepened our presence across their network. Additionally, we're seeing strong performance with Costco, where our program continues to resonate with members and provide an important opportunity to introduce Purple to new customers at scale. With both Mattress Firm and Costco, our initial launches significantly exceeded expectations, driving immediate demand for expanded placement. In Costco's case, early performance was exceptional, supported by the introduction of unrolled beds on floor displays, which allowed members to see and feel our differentiated product. The strength of those results led Costco to quickly expand the program in the fourth quarter to approximately 450 clubs bringing us to nearly nationwide distribution. We're also making progress in new channels, including Walmart and Sam's Club, which are helping us reach new consumers, diversify demand and drive incremental volume. Importantly, expanding into these large far-reaching retail platforms strengthens distribution for our pillow portfolio and positions us to drive meaningful incremental pillow sales through highly scaled high-traffic partners. And in owned retail, we continue to focus on showroom profitability. In 2025, we closed 4 underperforming stores as part of optimizing the sleep. And looking forward to 2026, we plan to open 7 new stores. Our showrooms continue to be an important part of the model that showcases our GelFlex Grid technology and premium positioning. Our showrooms drive traffic to wholesale locations, helping convert interest into purchases. Finally, let me talk about how we're executing with financial discipline across the business. Last year, our focus was on rightsizing the business, so we could operate profitably at current scale. That work is now behind us. And importantly, the actions we took were structural, not temporary. We're increasingly focused on driving growth from a much stronger foundation. Gross margin improvement remains a key focus, and we continue to see the benefits of the actions we've taken to simplify the business and improve efficiency across sourcing, operations, fulfillment and product quality. Mix has become an increasingly important tailwind led by the growth of Rejuvenate 2.0. The shift towards higher ticket products, combined with strong attachment rates for adjustable smart bases and pillows, is driving higher average transaction values and incremental profit dollars. As a result, the operating discipline we put in place over the past year is now clearly showing up in our margins and profitability. We continue to view 40% gross margins at a sustainable level, and we expect further improvement as we move into 2026 as efficiencies continue to flow through the business. Todd will provide more detail on specific margin drivers and cost actions in his remarks. Turning to our guidance. As we look ahead to 2026, we're entering the year with improved stability and a structurally stronger operating model. For the full year, we expect revenue in the range of $500 million to $520 million and adjusted EBITDA of $20 million to $30 million. This outlook reflects continued momentum in our premium product portfolio, expanded wholesale distribution and the operating leverage in the business as volume grows. Importantly, this guidance is driven by execution, not by a recovery in the broader market. It reflects the progress we've made across product, distribution and operations, with gross margin sustainably above 40% and disciplined expense management we believe we're well positioned to deliver meaningful earnings growth in 2026. Before I close, I'd like to briefly readdress the Board's ongoing review of strategic alternatives. The process remains ongoing, and we've engaged with multiple parties across a broad range of opportunities to maximize shareholder value, including a potential merger, sale or other strategic or financial transaction. We'll continue to evaluate all options and will provide updates as appropriate. As a reminder, we will not be commenting further or taking questions on this topic during today's Q&A. With that, I'll turn the call over to Todd. Todd Vogensen: Thank you, Rob. I'll begin by walking through our fourth quarter financial performance and then the year ended December 31, 2025. Net revenue for the fourth quarter was $140.7 million, representing growth of 9.1% year-over-year. The increase was driven primarily by wholesale, reflecting a full quarter of expanded Mattress Firm placements and continued momentum with Costco, partially offset by a decline in e-commerce. By channel, direct-to-consumer net revenue for the quarter was $71.9 million, down 9.9% compared to last year. Within DTC, showroom revenue increased approximately 4.5%, up for the second consecutive quarter and comparable sales were up 8.8%, reflecting continued strength in Rejuvenate 2.0. E-commerce revenue continued to be down with a decline of 15.3%. Wholesale revenue increased approximately 39.8%, driven by our expansion with Mattress Firm and Costco. Gross margin for the quarter was approximately 41.9%, remaining well above our 40% quarterly margin target and down 100 basis points from last year. We're pleased with the durability of our gross margin, particularly given the strength of last year's results when gross margin rose 970 basis points driven by sourcing initiatives and the profitable liquidation of inventories. Viewed over a 2-year period, gross margin increased by nearly 870 basis points, reflecting durable improvements to the business. The margin continues to be driven by direct material savings, plant efficiencies, restructuring benefits and volume leverage. On an adjusted reported basis, gross margins for the quarter, excluding restructuring costs, was 41.9%, down 300 basis points from last year. Operating expenses for the quarter were $61.2 million, down 2.9% versus $63 million last year. The decrease reflects the benefits from restructuring activities and other cost-savings initiatives. Our fourth quarter adjusted loss per share was $0.02 compared to an adjusted loss per share of $0.11 last year. Adjusted EBITDA in the fourth quarter was $8.8 million, a notable improvement over the $2.9 million EBITDA last year. Turning now to full year results. Net revenue for the full year 2025 was $468.7 million, reflecting a 3.9% decline versus the prior year. By channel, direct-to-consumer net revenue for the year was $261.3 million, down 7.9% compared to last year. For the full year, showrooms generated strength with sales up 1.5% versus last year to $78.5 million and comparable revenue was up 6.6%. We delivered net revenue of up 4% or more in 3 of the past 4 quarters with only the second quarter being impacted by the timing related to the Rejuvenate 2.0 launch. Wholesale has been sequentially improving over the last 4 quarters, up 1.6% versus last year to $207.4 million, benefiting from expanded partnerships and nontraditional revenue streams, while e-commerce remained soft throughout the year. Full year gross margin increased 310 basis points to 40.2% versus last year, reflecting the impact of restructuring, sourcing initiatives and manufacturing efficiencies. On an adjusted basis, full year gross margin, excluding restructuring costs, improved slightly to approximately 40.4%, up approximately 10 basis points year-over-year. Our cost initiatives delivered $25 million in annual savings in 2025, with $25 million to $30 million of sustainable savings expected going forward, giving us greater flexibility to reinvest in marketing and innovation while continuing to expand margins. Just as importantly, it reflects a business that is operating with greater discipline and a structurally stronger cost base. Full year operating expenses declined by 15.3% to $231.6 million, driven by restructuring savings and productivity initiatives. Adjusted net loss was $34.3 million versus an adjusted net loss of $55.1 million in the prior year. Adjusted EBITDA for the full year was $1.9 million, representing a significant improvement versus the adjusted EBITDA loss of $20.8 million last year and adjusted net loss per share in 2025 was $0.32 compared to an adjusted net loss per share of $0.51 in the full year of 2024. Now turning to the balance sheet. We ended the quarter with cash and cash equivalents of $24.3 million versus $29 million on December 31, 2024. Net inventories on December 31, 2025, were $59.7 million, up 5% compared to December 31, 2024. We're pleased to exit the quarter with cash over $24 million, and we believe we are well positioned from a liquidity standpoint. We also extended our debt maturities from December 31, 2026 to April 30, 2027, enhancing our financial flexibility and reflecting continued strong support and confidence from our lending partners. Now let's turn to the outlook. Given that we are through most of the quarter, we will be providing guidance for the first quarter. We plan total revenue to be in the range of $100 million to $105 million and adjusted EBITDA to be in the range of a loss of $7 million to a loss of $4 million. As Rob walked you through earlier, for the year, we expect revenue in the range of $500 million to $520 million and adjusted EBITDA of $20 million to $30 million. We plan for revenue to continue to be driven by strength in Rejuvenate 2.0 as well as our expanded distribution with Mattress Firm and Costco. We also anticipate continued improvement in EBITDA, driven by further operational efficiencies and ongoing restructuring actions benefiting both gross margin and operating expenses. These initiatives are expected to support improved profitability and cash generation, reflecting the full impact of our cost actions, product innovation and expanded distribution. Robert DeMartini: Thank you, Todd. This morning, we filed our annual report on Form 10-K for the fiscal year ended 2025. As disclosed in the filing, our independent auditor has included a going concern qualification. While this notification is not necessarily a surprise, given the liquidity challenges of the past year and our historical cash burn, we want to provide clear context why the decisive, transformative actions we've already taken are expected to continue stabilizing our financial position and driving the business forward. The fruits of our labors are already evident in our recently improved operating and financial performance. Following a rigorous period of restructuring, we achieved profitability levels in the second half of 2025 that we haven't seen since 2021. This momentum is driven by 3 core strategic pillars: supply chain reorganization. We've optimized our footprint to ensure a more agile, cost effective flow of goods. Disciplined cost management. Structural savings initiatives implemented in 2025 have led to significant margin expansion and profitability at revenue targets meaningfully lower than past years. Channel momentum. We're seeing robust volume growth across both our wholesale and showroom channels as our path to premium sleep strategy takes hold. We entered 2026 on much firmer footing. We expect to conclude Q1 '26, historically our seasonally weakest quarter with neutral cash burn. Furthermore, we're grateful for the strong continued support of our lenders. Our recent agreement to extend debt maturities to April 2027 provides us with the runway and the financial flexibility to execute our long-term vision. We believe these factors, combined with our improved liquidity profile, directly address the concerns raised in our 10-K and position us for a year of consistent growth and profitability, as evidenced by our 2026 guidance. We appreciate the patience and the confidence of our shareholders. Like you, we are disappointed by the current stock price. Our team remains focused on executing our clear plan to build on recent business momentum and deliver sustainable shareholder value on your behalf. With that, operator, we can turn it over for questions. Operator: [Operator Instructions] Your first question comes from the line of Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Rob, I wanted to start off asking about recent trends. There's no question that the fourth quarter showed some nice momentum and your outlook for this full year is very encouraging. It does look like maybe the first quarter had maybe a step back in the pace of the business. Can you just talk a little bit more about what you've been seeing here? Robert DeMartini: Yes, Brad, thank you for the question. And I think there's a couple of things going on. We had a very strong fourth quarter. And the way the fourth quarter shipped, it did impact demand in January as that sell-through and consumption happened. Particularly, we've got the club customer that had a significant buy-in in December that was part of loading the floor, and so there wasn't much follow-up in that. As Todd said, we think we'll be between $100 million and $105 million. And I think the momentum also includes all those floor samples at Mattress Firm going out, and that obviously has a short-term push down on revenue as they sell in at floor sample prices. So we're encouraged. Q1 has always been our weakest quarter. It's not a strong quarter, but we think the momentum in the business dictates the strong rest of the year that we've predicted. Bradley Thomas: And just to be clear, Rob, it sounds like aside from the January, you've seen an improvement in trends of late. Is that fair to assume? Robert DeMartini: Yes. I mean Q1 is not robust by any means, but we've seen us kind of lapping last year right at about equal to comp levels. And obviously, we're close to ending March, and we expect kind of the same performance in March. Bradley Thomas: Great. And then just following up about the outlook for the year, we can obviously back into it a bit through your guidance. But the question is really how to think about the flow-through margin? You've done a great job of improving the cost structure of the business. As you start to drive this volume, how do we think about it flowing through to the bottom line? Todd Vogensen: Yes, flow-through actually should be quite good for us. If you look at the guidance, we're guiding to revenue that's $30 million to $50 million better than last year and looking at EBITDA that's going to be around $20 million to $30 million better. That's a pretty healthy flow-through. I think on a normal basis, our sales should be generating about a 30% flow-through. This year will be a little bit more because we're also seeing margin expansion and a lot of cost control that is helping us along the way. Bradley Thomas: Great. And if I could squeeze in just one more regarding the macro environment as it relates to raw materials. Can you just remind us the degree that you have exposure to petrochemicals or other inputs that may be at risk of some price pressure here? And what are you hearing from suppliers? Todd Vogensen: Yes. So mixed bag, we obviously are not importing oil or anything like that directly, but we do have products that have a petroleum base to it. You can think foam, some of our -- to a lesser degree, the mineral oil that's going into the gel. Overall, we've looked at it. And if the price of oil stays around that $100 a barrel range, effectively, the savings we're going to get this year off of tariffs from being able to get -- well, lower rates on tariffs, but also tariff mitigation would roughly offset the exposure from any oil. We continue to monitor it. We're hearing noises about price increases, but it's just very, very early on at this point. Operator: Your next question comes from the line of Matt Koranda with ROTH Capital. Matt Koranda: I wanted to hear a little bit more about how you're thinking about the seasonality of the year, just given the visibility you have into the product launches with your wholesale partners. So maybe just a little bit more around the ramp that's implied in guidance for the remainder of '26. Todd Vogensen: Yes. So you should see revenue growing -- sorry, Rob. You should see revenue growing pretty consistently across the course of the year. In Q2 -- typically, Q2 would be relatively flat to Q1. But this year, we have the Purple Royale launch at Mattress Firm that literally just got out on floors last week officially. So that will help out the Q2 pace. And then we have a natural build that we see virtually every year going into Q3 and Q4. So it really should build pretty consistently as we go across the course of the year. Matt Koranda: Okay. And then maybe just wanted to hear you unpack the drivers of the flow-through. You mentioned there's likely some more restructuring actions. Does that benefit operating expenses? Or are there gross margin benefits embedded in the actions that you're taking? Are the actions already taken? Or is this incremental stuff that still needs to happen during the second quarter to hit the flow-through sort of that's implied in the '26 EBITDA guide? Todd Vogensen: Yes. So the actions that I kind of referenced were actions that have already been taken at this point. We don't have plans for additional actions that are needed right now. We feel like we're positioned very well for the full year. But we did take a little bit of an action in January that will continue to benefit the operating expense line. And then from a gross margin perspective, we actually just have a very strong team on the operations side of the world that is always looking for room for improvement from an efficiency perspective, overall scrap and yield, looking at sourcing opportunities. There's a number of opportunities that should play out across the course of the year to help that flow through. Operator: Your next question comes from the line of Dan Silverstein with UBS. Daniel Silverstein: Maybe just to start, looking at the sales guidance, up $30 million to $50 million this year. I think the Mattress Firm expansion was supposed to drive around $70 million of additional sales and it sounds like it's doing really well right off the gate. If this is the case, what other areas might be driving a bit of a drag to kind of net out below $70 million? Robert DeMartini: Yes. First of all, I think that the $70 million, we've got to grow into that number. It's probably somewhere between $50 million and $70 million. And obviously, it's just hitting the floor right now. But we've got -- we expect growth from Costco as well. We expect growth from showrooms, modest. And then we have assumed a flat e-commerce business in the roll-up. We want to do better than that. But given the performance of the last few years, we tried to show some conservatism there. Daniel Silverstein: Super helpful. And that was kind of my second question. Why is the Amazon business doing well relative to your own e-com channel? How can you capitalize on this? And how can you reinvigorate your own e-com channel looking ahead? Robert DeMartini: Yes, Dan, I'll separate the 2 questions because they really are different drivers. I mean our own e-commerce business, we've got to figure out a way as we've expanded our availability across both our own showrooms and partner showrooms. The specialness of reaching our product online has been challenged and the product assortment while proving to be a benefit in a physical environment is either a neutral or a negative in a digital environment, and we're still trying to figure that out. So that's what's going on with e-com. On Amazon, it's quite a different situation where because of the cube of mattresses, we have a very underdeveloped shape of business at Amazon. So the progress you're seeing is kind of getting our fair share relative to the pillow business that we have there. And so it is a bit of a development opportunity, and that has to do with availability and prime badging that we're starting to figure out. So it really is 2 different drivers across those otherwise seemingly consistent channels. Operator: [Operator Instructions] Your next question comes from the line of Bobby Griffin with Raymond James. Alessandra Jimenez: This is Alessandra Jimenez on for Bobby Griffin. First, I wanted to follow up on current demand trends. What are you seeing from growth in your retail partners outside of Mattress Firm and the incremental Costco program? Robert DeMartini: Alessandra, on our own business, you're asking not the overall market? Alessandra Jimenez: Yes. Robert DeMartini: Yes. It's a mixed bag. We've got some customers where we're seeing nice growth, and we've got others where we've got to figure out why we're not seeing that. So it is a bit mixed across total sale. I think if you backed out the 2 customers that we spoke about in our script, we're probably seeing a net down about 5%. And I think that's about consistent with the market, but it is definitely mixed in the performance. Alessandra Jimenez: Okay. That's helpful. And then what are you expecting from a cash flow perspective for 2026 on the improved EBITDA profitability? Do you anticipate positive free cash flow for the year? Todd Vogensen: Yes, we would expect positive free cash flow for the year. Apologies, I was getting an echo. Positive free cash flow for the year. And as we look at it, we'll have CapEx that we'll be reinvesting in and $20 million to $30 million of adjusted EBITDA that would get us modestly positive. And coming off of a Q1 where we're ending Q1 with our cash actually equal to where we ended Q4. That's the first time that we've been in that range in over 7 years. So we're off to a good start for the year for sure. Alessandra Jimenez: That's really helpful. And if I can just sneak one more in. I wanted to revisit the showroom channel. It's encouraging to see that strong comp growth. Can you speak to what you're seeing from a demand perspective and what's kind of accelerating there? And then how do you think about the roughly 20% of locations that are not yet 4-wall profitable? Robert DeMartini: Yes, Alessandra, let me try to tackle that. So Scott Kerby, who runs that channel, has been doing an excellent job in establishing a selling system. And what's driving the results is positive mix. As I mentioned in the script, our mattress percent to total of the premium line is now over 50% of dollar revenue. And so that obviously helps the stores be much more profitable. Of the 20% of stores, that's about 9 stores that are not 4-wall profitable, we think at least 5 of those can get there with continued development and maybe 3 to 4 of them we really have to look at and figure out if we have -- are we in the right location with the right rent structure. But it's been mix, tight labor discipline and really looking at the cost structure of those stores that have led to the significant improvement over the last 2 years. Operator: Your next question comes from the line of Brian Nagel with Oppenheimer. Brian Nagel: So I have a couple of questions. First off, just with regard to the newer products, the more innovative products, is that rollout now complete? Or should we expect further rollout here, I guess, through '26? And then my follow-up question, I guess, mostly for Todd. I mean maybe just outline kind of the capital needs from an operational standpoint, the capital needs of the business. Robert DeMartini: All right, Brian, let me take the first one, and then I'll let Todd answer the second one. Yes, that rollout is physically completed. We completed our Rejuvenate rollout probably in the middle of fourth quarter and then started the Royale, which is a curated version of similar price points. The official launch at Mattress Firm was March 20. It's on all the slots that it was aimed for at this point. But we still have significant opportunity to develop that line. I spoke about the percent to total in showrooms. It's much, much lower in wholesale and in e-commerce. And that's a business development opportunity. So we think we can continue to grow that as a percent to total, but the physical expansion is completed, and we're now looking to a very full innovation pipeline for other products starting in early '27. Todd Vogensen: And from a capital needs perspective, I should have said before, our target for the year is $10 million to $12 million in capital. That's just up modestly from the $8 million that we had in 2025. So the base CapEx is going to always be kind of the normal maintenance CapEx that we've had for the past several years, particularly in our operations. We do have a little bit of innovations CapEx this year as we innovate for new products going forward. And then the -- probably the big chunks that are incremental versus last year, with the new products going out this year, we are looking to expand some of the fixtures that go into stores. So you can think about that being the headboards. We have some branded walls that go in and a number of things that just help with the overall environment around the Purple products that we think help sell the products through. And then Rob mentioned, we have 5 new stores that we're planning for this coming year. There's a modest amount of CapEx that goes for those as well. Operator: I will turn the call back over to Robert DeMartini for closing remarks. Robert DeMartini: I just want to thank all of our shareholders and investors and lenders for the support we've gotten and I want to thank the Purple associates for the hard work they've put in on the business. I believe from the Q3 and Q4 results, you can see our turnaround is taking hold, and I want to say thank you to everybody for that. Todd Vogensen: Thank you, operator. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to the SPAR Group Fourth Quarter and Year-End 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sandy Martin, Three Part Advisors. Please go ahead. Sandra Martin: Thank you, operator, and good morning, everyone. We appreciate you joining us for SPAR Group, Inc.'s conference call to review the fourth quarter and full year 2025 results. Joining me on the call today are SPAR's Chief Executive Officer, William Linnane; and the company's Chief Financial Officer, Steven Hennen. This call is being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section at investors.sparinc.com. The information recorded on this call speaks only as of today, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay or transcript reading. I would also like to remind you that the statements made in today's discussion that are not historical facts including statements, expectations, future events or future financial performance, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, by their nature, are uncertain and outside of the company's control. Actual results may differ materially from those expressed or implied. Please refer to today's earnings press release for our disclosures on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management may also refer to non-GAAP financial measures and reconciliation to the nearest GAAP measures can be found at the end of our earnings release. SPAR Group assumes no obligation to update or revise any forward-looking statements publicly. Finally, the earnings press release we issued today is posted on the Investor Relations section of our website at sparinc.com. Now I would like to turn the call over to the company's CEO, William Linnane. William Linnane: Thank you, Sandy, and good morning. I'm pleased to share our fiscal 2025 results. After our prepared remarks, we will open the line for questions. Fiscal 2025 was a transformational year for SPAR. We finalized the work connected to the divestiture of our international joint ventures, a deliberate decision that allowed us to concentrate fully on growing our business in the U.S. and Canada. Last week, we announced a strategic partnership with ReposiTrak, which I'll speak to in a moment. Today, SPAR is a nationwide retail service solutions company with deep expertise in merchandising, both traditional and our new on-demand model. We are North America-centric, people-powered and tech-enabled, and we are aligned around a clear vision of where this business is going. Before we get to the numbers, I want to walk you through how we fundamentally changed this organization. Last 2 years, we simplified the business, exiting international operations that added complexity without serving our core strategy and sharpened our focus on the U.S. and Canada markets, where we have long-standing relationships with retailers and CPG companies. In 2025, we rebuilt the leadership team from the ground up, eliminating management layers, bringing in proven operators with direct and varied industry experience, strengthening our data foundations and upweighting our advanced analytical capabilities. The result is a leaner organization that can scale profitably, leveraging a rightsized cost base and automating manual tasks to turn complex execution and related data into faster decisions and ultimately, better client outcomes. We are focused on delivering continued revenue growth, deliberately targeting higher-margin core merchandising business while building on new service offerings. These 2 streams are complementary. Together, they open a large and underpenetrated addressable market with a flexible, innovative approach. And each new contract improves the economics of our fixed cost base we've already built. Our partnership with ReposiTrak is a direct expression of this. It demonstrates how AI, data, people and in-store action can work together seamlessly to solve a problem retailers and the vendors cannot solve with technology alone. This brings me to our strategic thesis. We believe the future of retail execution lies in the intersection of human action and AI-enabled intelligence. Technology is transforming how retailers detect out of stocks, pricing errors, compliance gaps and execution failures. But detection alone doesn't fix shelves. Retailers and brands are flooded with signals. What they lack is reliable, fast, verified actions in store. That gap is where SPAR operates and where we are building something defensible. Our industry is long run on a dedicated and flexible time-based labor, pay for hours, assigned tasks has hope for outcomes. We are moving past that. SPAR is redefining retail execution around intelligent outcome-based action, a model where data, technology and in-store execution converge in real time on demand. The retailers and brands that will win over the next decade need a partner that can move at their speed, hold themselves accountable to outcomes, scale without breaking. That is what we are building, and we are just getting started. After Steve covers our detailed financial results, I will share additional thoughts and insights about the business. Steve? Steven Hennen: Thank you, William, and good morning, everybody. Fiscal 2025 net revenues totaled $136.1 million. During 2025, the company changed its reportable segments from Americas, Asia Pacific, APAC, and Europe, Middle East and Africa, following our strategic exits from several global joint venture arrangements. Today, we present geographic reportable segments that include the United States and Canada. All prior year segment information has been recast to the year-end presentation, which means that Mexico and all other international operation revenues are included as all other for the year ended December 31, 2024. On a comparable basis, full year revenues of $136.1 million for the United States and Canada increased by 3.3% over 2024. Drilling down, U.S. net revenues increased 3.9% to $122.1 million, while Canadian sales were essentially flat at $14.1 million. Our gross profit for the year was $21.7 million or 15.9% of revenue compared with $33.6 million or 20.5% of revenue in 2024. Gross margin compression in 2025 was primarily due to shift towards the remodeling business, which inherently carries higher labor and travel costs, market-driven wage pressure and shifts in workforce alignment. Full year selling, general and administrative expenses were $32.2 million or 23.7% of revenues compared to $33.9 million or 20.7% of revenues in the prior year. SG&A costs included approximately $7 million of onetime costs and out-of-period write-offs in 2025. We expect our annual run rate SG&A costs to be approximately $25.5 million to $26.5 million, excluding any unusual and nonrecurring costs. In addition, we recorded restructuring costs and severance of $4.8 million for the 2025 fiscal year-end. As a result, we reported operating loss of $16.9 million for the fiscal year 2025 compared to $700,000 of operating income in the prior fiscal period. Net loss attributable to SPAR Group, Inc. for 2025 was $24.6 million or $1.04 per diluted share compared to a net loss of $3.2 million or $0.13 per share in 2024. Adjusted net loss attributable to SPAR Group, Inc. was $10.7 million or $0.45 per diluted share compared to $707,000 or $0.03 per diluted share in the prior period. Consolidated EBITDA for the fiscal 2025 year was a negative $16.5 million compared to $3.5 million in the prior year. 2024 includes $2.5 million gain from the sale of the businesses. Consolidated adjusted EBITDA was a negative $8.6 million compared to a positive $6.7 million in the prior year. Fiscal 2025 adjusted EBITDA attributed to the SPAR Group, Inc. was the same as consolidated with a negative $8.6 million compared to a positive $5.6 million in the prior year. Turning to the company's financial position. As of December 31, 2025, our balance sheet remains solid with positive working capital of $14.7 million, excluding the balance owed on the line of credit and the current portion of the long-term debt. This includes $3.3 million in cash and cash equivalents, for the 12 months ending December 31, 2025, net cash used by operating activities was $18.4 million. With that, I would like to turn it back to William. William Linnane: Thank you, Steve. On March 26, we announced our strategic partnership with ReposiTrak. And I want to give you a sense of what that looks like in practice. When a truck arrives with promotional items, seasonal goods or high-velocity SKUs, a retailer and as importantly, the vendor needs those products on shelf immediately. They can't wait for scheduled labor. This is relevant to all vendors, but can be especially challenging for scan-based trading with direct-to-store vendors. SPAR teams are dispatched in real time to any store anywhere in the country. We call this surge or on-demand merchandising. It's a cost-effective, flexible labor buffer that activates exactly when and where it's needed without adding to the store's teams workload, providing a high return on investment. The ReposiTrak partnership adds the intelligence layer, out-of-stock detection, perpetual inventory accuracy and route optimization so that our dispatch decisions are data-driven, not reactive. The result is a seamless loop. Technology identifies the need and SPAR executes to fix. This model is applicable to grocery, mass, club, dollar convenience and specialty retail across the United States and Canada, depending on the data source. The addressable market is large and the need is immediate. We are bullish about what this partnership and other similar partnerships unlock for SPAR in 2026 and beyond. Turning to our fiscal year 2026 financial guidance issued today. We expect top line revenue to be in the range of $143 million to $151 million and gross margins to improve to 20.5% to 22.5%, primarily driven by our service mix with a growing percent of merchandising work relative to remodel work. We are encouraged by the growing strength of our business pipeline, driven by wallet expansion from existing clients and market share gains this year. We believe that SPAR will win because we are uniquely positioned to serve as a critical operating layer for leading retailers and brands with national scale, deep execution DNA and a large, highly flexible labor model. We've also invested in modern cloud and ERP infrastructure to enable fast, efficient recruiting and client services. And as we discussed earlier, we are successfully pursuing a partner-led technology strategy. With our strategic retail partners, we can move faster and more credibly than anyone else. In addition, our proprietary SPARview platform is a mobile-first tool that collects data as we perform projects and allows us to communicate with our people on outcomes. We are increasingly utilizing AI platforms to detect issues, help us prioritize what matters most. A trigger is signaled with ROI-driven tasks and SPAR deploys trained field teams dynamically soon after the execution is verified and outcomes are measured and reported. This creates closed-loop retail execution from signal to fix to ROI. SPAR is the execution engine that turns retail intelligence into revenue recovery. Turning to our strategic transformation. Our road map over the past year has been disciplined and deliberate. And now we are laser-focused on building a profitable business that generates free cash flow. Growth underpins everything we do. Our plans include growth in each of our core areas. We are deepening existing relationships and building new ones with mass retailers, grocery partners in the dollar channel and with leading CPG partners. We are expanding our services for existing clients and increasing wallet share. At the same time, we are investing in data integration, AI and technology partnerships, workforce intelligence, dynamic scheduling, automation and margin expansion. None of this works without the right people. That's why we've strengthened our leadership bench, simplified the organization, stabilized Workday, our ERP, invested in workforce management and focused on training, deployment and retention. Our ambition is not just to lead in technology but to genuinely lead in how people are managed, developed and valued because the future of this company is tech and people powered. We are developing SPAR's reliable and repeatable human operating layer for the retail and CPG industries, and we believe this will deliver sustainable shareholder value. The work ahead is significant, but the direction is clear. If we execute consistently, decisively and with discipline, SPAR will not just participate but will lead in the future of retail execution. With that, operator, I would like to open the line for questions. Operator: [Operator Instructions] The first question comes from [ Ross Davidson ] with Benetton Capital. Unknown Analyst: I know 2025 is a big transformational year. I think you guys have done a good job of laying that out. Just on Q4, though, can you give us any -- just a little bit of color around both the revenue decline and, I guess, the resulting negative gross margin? Just help us understand how we are inflecting from that Q4 into what you've described for 2026? William Linnane: Yes. Thanks, Ross, for your question. In terms of the shape of 2025, obviously, Q3 was significant growth rate, and we had some timing of projects in terms of how they land in 2025 and how they land in 2024. So that's part of the answer to 2025, Q4. I think you'll see a more stable growth rate as we go into 2026, and that's partly related to the focus back on to really growing merchandising as opposed to remodel business. So does that answer the question? Unknown Analyst: I think. So almost like a little bit of an air pocket as you kind of wrapped up some projects and then as we get into 2026, sort of work through that and on to the sort of the numbers you described, I guess. William Linnane: Yes, that's correct. And we've purposely pivoted the business development and sales team to really focus on the merchandising going forward given the margin difference between the 2 businesses. So obviously, we'll take the remodel work if it's profitable, but we want to focus this on where we see the headroom for growth and where we think we can add technology with partners to improve margin over the long term. So yes, that's correct. Unknown Analyst: Okay. Great. And that makes sense. And I think that you described that well. And then just in terms of expectations for the year, in no way am I trying to get to quarterly guidance, I don't think you should do that. But just as we think about the ramp and the transformation, should we expect a build up towards the gross margin you described? Or any seasonality, I guess, anything we should expect with respect to what we'll see in Q1, Q2 versus Q3, Q4? Steven Hennen: Yes. So this is Steve. When we provided the guidance that we released today, that is on an annual basis. Now the only quarter that we see kind of below that, potentially at the bottom end of that range is the fourth quarter, which is typically our slowest quarter of the year. William Linnane: And Ross, that's partly because within our gross margins, we have our field management costs, which is somewhat semi fixed. But we've intentionally pivoted strongly to focus back office merchandising. So I think we'll post Q1 here in the next 4 to 6 weeks. And as Steve said, they're full year numbers, but you'll see the story laid out as we post that and then refine the guidance. Unknown Analyst: Okay. So it's a pretty quick sort of -- well, it's a pretty quick turnaround for Q1, as you noted. And then the business, we should expect pretty clean numbers with respect to kind of all the transformation work we've done in 2025, even early in 2026, we'll see kind of the profile of -- or the result of that work, I guess, is kind of what I'm hearing. Steven Hennen: That is correct. Yes. Unknown Analyst: Okay. That's great. And then the ReposiTrak partnership, just to confirm, so is that -- that's "live" and that's something you're out now marketing and offering to potential customers? William Linnane: That's correct. Meetings are actually in progress in terms of conversations. So yes, it's live. And we're excited about it. It's the first of potentially some other announcements we'll make into the future, but it's -- it aligns to our strategy of where we can really add the most value, but also create a defensible model at a higher margin rate by having partners who can be data about different parts of the market. ReposiTrak specifically have a strong out-of-stock management tool, and they've got access to data across certain parts of the market that they're strong in. So yes, we're excited about the partnership. Operator: As there are no further questions from investors, I would like to turn the conference back over to William Linnane for any closing remarks. William Linnane: Thank you, and thank you for continuing to follow our company. I look forward to providing our first quarter results and updating our strategic initiatives in a couple of months. Have a great day, everyone, and thank you again. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to the AirJoule Technologies' Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Tom Divine, Vice President of Investor Relations and Finance. Thank you, you may now begin. Tom Divine: Thank you, and good morning. With me today for our full year earnings call are Matt Jore, Chief Executive Officer; Pat Eilers, Executive Chairman; Bryan Barton, Chief Commercialization Officer; and Stephen Pang, Chief Financial Officer. During this call, we'll be referring to a presentation, which is available on the webcast platform and on the Investors section of our website. I would like to point out that many of the comments made during the prepared remarks and during the Q&A section are forward-looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors in the forward-looking statements sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. And now I'll turn it over to Matt Jore. Matthew Jore: Thanks, Tom. Good morning, everyone, and thank you for joining us for our full year 2025 earnings call. This is an important call for AirJoule. 2025 was the year we built the foundation for commercialization and 2026 is the year we intend to convert that foundation into a commercial pipeline to revenue. Before I review our accomplishments and outline our plan for the year ahead, I want to take a moment to talk about something that has become impossible to ignore, the growing urgency of water resilience. In Corpus Christi, Texas, home to one of the nation's largest petroleum ports, the main water reservoir has dropped below 10% capacity, its lowest level on record. The city's own projections indicate it could reach a water emergency within months, meaning supply will be unable to meet demand. The Governor of Texas has publicly warned that the state may need to intervene. Industrial operations that produce jet fuel for Texas airports and supports billions of dollars in economic activity, faced the prospect of curtailment due to lack of water. The city's proposed long-term solution is a desalination plant that will cost over $1 billion and is years away from producing any water. Meanwhile, in the Middle East, the unfortunate ongoing conflict has caused immense human suffering. Our thoughts are with the people and the communities affected there. It has also exposed the critical vulnerability for the more than 100 million people who depend on desalination for their water supply. Desalination plants in Bahrain have been damaged by military strikes, facilities in the UAE and Kuwait have been hit by missile debris. As Bloomberg columnist, Javier Blas, recently observed, water is now more strategically important than oil. These desal plants are centralized facilities that represent single points of failure for entire populations. These risks are real, and they are often underappreciated until they become urgent. They stem from the same structural problem, the world's water infrastructure is concentrated, brittle and increasingly vulnerable to disruption. Whether the stress comes from drought, Industrial and population growth or geopolitical conflict, the result is the same. Communities and industries are exposed to water supply risks with very limited alternatives. AirJoule offers a fundamentally different approach. Distributed water generation from the atmosphere that operates independently of pipelines, reservoirs and centralized desalination. AirJoule systems generate water on site behind the meter and at the point of need. They require no municipal water connection. These systems produce pure distilled and potable water from ambient air using waste heat. We've proven this in the field. Over the past year, AirJoule systems have operated in Texas, Arizona, California and Dubai. The macro tailwinds that we discussed on prior calls remain in full force and have been exacerbated and exposed by the current war. Data center expansion and the onshoring of advanced manufacturing is exponentially driving an increase in industrial water and power demand. But the events of recent weeks have elevated the conversation from efficiency and sustainability to resilience and security and even survival. That shift is accelerating interest in exactly what AirJoule can deliver. In our year-end call in March of last year, we laid out a clear set of objectives for 2025, validate our technology in the field, develop products for commercial launch, strengthen our partnerships towards building a commercial pipeline and ensure sufficient capitalization to support commercialization. We delivered on these commitments. On technology validation, we said we would move from laboratory demonstrations to real-world field deployments. In Dubai, we operated an AirJoule system at a government advanced technology facility showcasing our technology to public and private sector customers across the Middle East. In Hubbard, Texas, we deployed the first U.S. field demonstration of AirJoule, showing our ability to produce pure water from air and generating months of operational data across diverse environmental conditions. At Arizona State University, an independent academic evaluation is ongoing in one of the most demanding air environments in the United States. On product development, we said we would advance our products toward commercial readiness. Last year, we made a deliberate engineering decision to focus our initial builds on our so-called A250 platform, which we'll now be referring to as our AirJoule Core product. This is our core 2-chamber system optimized for industrial dehumidification and water generation. This allowed us to build, deploy and learn from multiple systems in the field, and those learnings have directly informed the design of our A1000 which we'll now be referring to as AirJoule Prime. This is our larger water generator for industrial scale applications that we're currently building. Both products share a common sorbent chamber architecture and produce distilled and potable water that meets FDA bottled water standards. On partnerships, we said we would leverage our strategic relationships to accelerate commercialization. GE Vernova invested additional capital and commenced a strategic waste heat integration project with us. We'll also be deploying an AirJoule system at GE Vernova's New York facility to support our waste heat strategic project with them and to be used as a demonstration system for GE Vernova's customers. Additionally, we were selected for the Net Zero Innovation Hub to showcase our AirJoule system for Google, Microsoft, Data4 and other leading data center infrastructure companies. We established defense sector credibility through ACRADA with the U.S. Army and an agreement with a defense contractor for anti-corrosion applications. And we announced an exclusive Middle East distribution agreement with TenX Investment, an Emirati owned company with well-established relationships across government, commercial and industrial sectors throughout the Gulf. On commercial pipeline, we said we would develop strong customer engagements with a path to commercial sales. We are now actively engaged with customers across several industry verticals. We introduced the water purchase agreement business model, and we developed a defined, repeatable customer engagement process that is advancing prospects toward commercial deployment. Bryan will take you through that process in detail shortly. On the balance sheet, we said we would ensure sufficient capitalization to support commercialization. We completed a $15 million private placement anchored by GE Vernova, filed an S-3 shelf registration and completed a $23 million equity offering in January 2026, ensuring that we have the runway to execute on our plans with 0 debt. Let me highlight the key milestones from the fourth quarter and the first several weeks of 2026. Some of these were discussed on our third quarter call in November, but I want to place them in the context of the full year and the momentum we're carrying into 2026. During the fourth quarter, we continued to advance our defense sector relationships. ACRADA with the U.S. Army, which we announced in October, is focused on integrating AirJoule with tactical waste heat recovery systems to deliver resilient water supply for forward-deployed troops. In December, we announced a collaboration with Red Dot Ranch to bring off-grid water solutions to rural residential communities in Pescadero, California, demonstrating AirJoule's value proposition for distributed residential water generation. We deployed an AirJoule Core system in January and completed the first stage pilot in February. In December, we also commissioned an AirJoule Core system at Arizona State University for independent academic evaluation by Dr. Paul Westerhoff and his team of globally recognized experts in atmospheric water harvesting. In January, we announced an exclusive distribution agreement with TenX, providing AirJoule with market access across six Gulf countries, and we commenced our partnership in the Net Zero Innovation Hub program in Denmark that I mentioned earlier. Looking ahead, 2026 is the year when AirJoule transitions to commercial pipeline building. We expect to secure multiple long-term customer commitments across data center, industrial, defense and international markets. Importantly, the customer relationships we build in 2026 are laying the foundation for scaled commercial business in 2027 and beyond. As I mentioned earlier, one of our recent announcements was our exclusive distribution agreement with TenX across the Middle East, a region where water demand has far exceeded natural supply and where recent conflict has further exposed its fragility. I'd like to turn it over to Pat Eilers to discuss the significance of this part of the world in terms of energy, water and the opportunity it represents for an AirJoule solution in that region. Pat? Patrick C. Eilers: Yes. Thanks, Matt. I have spent a considerable time in the Middle East region over the past 2 years with AirJoule and the last decade since my BlackRock days and I want to share some perspective on why it is an important region for AirJoule. The Middle East is one of the most water-stressed regions on earth. Gulf nations depend on desalination for 70% to 90% of their drinking water. At the same time, the region is experiencing massive growth in data center development, advanced manufacturing and infrastructure investment. Each of these sectors require substantial quantities of water. Governments and enterprises across the Gulf are actively seeking technologies that can strengthen water security while reducing energy intensity. Matt described the recent attacks on desalination infrastructure in Bahrain and elsewhere in the Gulf. Those events have exposed the vulnerability that has concerned regional leaders for years, with the concentration of critical mineral supply in small number of centralized coastal facilities. Communities have already lost access to drinking water when individual plants have gone off-line. The fragility of this infrastructure is now visible to the entire world. This is exactly why distributed water generation matters. AirJoule systems operate independently of desalination infrastructure and can be located where water is needed rather than relying on pipelines or trucks. It can be deployed on site at industrial facilities, military installations and community water systems to produce pure distilled water from the atmosphere. This capability has significant value in a region where water resilience is now a national security priority. We recognize that the current conflict in the region creates uncertainty around the near-term timeline for deployments. We are monitoring the situation closely and working with TenX, our partner, to ensure we are positioned to move forward when conditions are favorable. At the same time, these events are reinforcing the strategic urgency of water resilience across the Gulf and the conversations we are having with prospective customers reflect that urgency. We are confident that the long-term opportunity in the Middle East is substantial, and we intend to support the increased need for water resiliency. Now I will turn it over to Bryan Barton, our Chief Commercialization Officer, to discuss our product road map and commercialization plans for 2026. Over to you, Bryan. Bryan Barton: Thanks, Pat. Let's start with the AirJoule A250, which we're now referring to as AirJoule Core. As Matt mentioned, we made a deliberate decision in 2025 to focus our initial system builds on the Core platform. The Core is a 2-chamber system that shares the same sorbent chamber architecture as our larger AirJoule Prime water generator. By building, deploying and iterating on the Core systems throughout the year, we accomplished two things simultaneously. First, we gained important engineering learnings that helped us improve the overall design of the system. Second and equally important, we used the Core system as a proof-of-value surrogate for the Prime system. Every Core deployment demonstrates to customers the performance, water quality and economics of the AirJoule platform, directly derisking the pathway to Prime commercial deployment. We are finalizing the Core product design and preparing for UL and NSF certification, which are required steps before commercial launch. We expect the Core product to be commercially available in late Q4 2026. For industrial dehumidification applications, there will be an additional Core product that will be optimized for maintaining low humidity environment in a range of approximately 30% to 40% relative humidity with significant energy savings compared to incumbent desiccant wheel technology. For this product, we are targeting commercialization in 2027. On cost reduction, we have made substantial progress. We have sourced lower cost components across multiple subsystems and are evaluating their reliability in our current builds. We are also simplifying the overall system design which reduces both manufacturing complexity and cost. The sorbent chamber remains the only custom manufactured component. The balance of the bill of materials consists of commercially available parts. Turning to the Prime. This is our larger water generator designed for industrial scale water production using waste heat. Prime is the product that the majority of our data center and industrial water customers are ultimately looking for. The learnings from our Core systems have directly informed the Prime design, and we are building our first Prime system now in Newark, Delaware. Once operational, it will serve as a critical outdoor showcase unit, enabling customers to see the full scale system operating in real-world conditions. We will provide updates on Prime deployment timing as the build progresses and we gain operational experience with the full-scale system. Water productivity per chamber continues to improve through ongoing optimization of our sorbent performance and cycle tuning across a range of temperature and humidity conditions. These improvements directly translate to better economics for our customers, and we expect to continue to make gains as we move into commercial production. We are also initiating a direct -- a dedicated optimization of the Core platform for the stand-alone dehumidifier market, focused on system performance optimization for dry storage and anticorrosion applications. This targets a large installed base of approximately 1.3 million industrial dehumidification systems globally and our longer-term HVAC integration work with Carrier continues to benefit from the engineering and productization work underway on both the Core and Prime systems. On manufacturing, our coating line is operational in Newark, producing the sorbent coated contactors central to AirJoule's operation. We are advancing process development to establish a scalable, repeatable manufacturing process. Our Newark facility has sufficient production capacity to address expected sales volume through 2027. As demand increases beyond that, we expect to transition to contract manufacturing for both contactor production and full system assembly. We're initiating those conversations now and preparing for assembly documentation required to support that transition. On Slide 9, I want to walk us through our process for converting strong customer interest that Matt and Pat described into commercial deployments. We have developed a defined repeatable customer engagement process with four stages. Stage 1 is discovery and evaluation, where we assess product market set for a specific customer, benchmark AirJoule's performance against the customers' alternatives and complete a technoeconomic analysis. This stage typically takes 1 to 3 months, and we are actively engaged with customers across several industry verticals. Stage 2 is a proof of value. In some cases, the technoeconomic analysis from Stage 1 or prior deployments are sufficient for customers to move to commercial structuring. In other cases, we deploy a demonstration unit on site and validate performance in the customers' operating environment. The customer validates water quality, observes waste heat integration, economics, and confirms real-world performance and reliability. Our deployments in Hubbard, at ASU, in Dubai and in Pescadero have all served as proof-of-value demonstrations. Today, the Core system is our primary proof-of-value platform because it operates on the same architecture as the Prime and demonstrates the same sorbent performance, water quality and energy economics. As Prime becomes operational, it will serve as an additional proof-of-value asset at full scale. This stage typically takes 6 to 12 months. Stage 3 is commercial structuring. Once performance is validated, we define the commercial model, which could be a water purchase agreement, direct unit sale or a lease. We also align on product configuration, site engineering, deployment scope and pricing. This stage typically takes 3 to 6 months. Stage 4 is deployment and scale. Multiunit commercial deployment, expansion within the customer's portfolio and across geographies and recurring revenue through service, maintenance and WPA contracts. This is the long-term value creation engine. I should note that these stages are not strictly sequential. For customers with strong strategic urgency or established familiarity with our technology, commercial structuring discussions often begin while proof-of-value work is still underway. This parallel progression can compress the overall timeline from initial engagement to commercial deployment. Putting it all together, here's what to expect from us in 2026. The Core system for both industrial dehumidification and smaller scale water production applications will be our first commercial products to launch late Q4 this year following completion of certifications. Our first Prime system is being built now, and once operational, it will serve as our showcase for industrial scale water generation customers. Through our partnerships with the Net Zero Innovation Hub for Data Centers, we expect to deploy an AirJoule system later this year. This deployment will directly demonstrate AirJoule's performance for Google, Microsoft, Data4, Danfoss and other leading data center customer -- companies. Through TenX, initial commercial deployments in the Middle East are planned for late 2026, subject to regional conditions. And across our defense partnerships, we anticipate deployments in 2026 in both water resiliency and anticorrosion applications. And in the residential market, we're planning for additional partnerships and deployments that can unlock new developments in water-scarce regions. Through these various deployments and partnerships, our focus in 2026 is on building the deployed reference base in contracted customer relationships that support scaled commercial activity in 2027 and beyond. Every deployment we execute this year validates AirJoule for an entire category of customers and advances our pipeline toward commercial conversion. The customer engagement cycle we are outlining is the engine that converts interest into commercial deployments. We're advancing customers through this process with the discipline and the pipeline is growing across multiple verticals and geographies. Now I will turn it over to Stephen for the financial update. Sze-Yin Pang: Thank you, Bryan. I will now walk through our financial results for the fourth quarter and full year 2025 and also provide some color on our 2026 outlook and liquidity position for the year. We can turn to the financial results slide in the presentation. As a reminder, AirJoule Technologies accounts for its 50% ownership in the JV with GE Vernova using the equity method. The numbers I will discuss are for AirJoule Technologies and the results from the joint venture are reflected in the loss from investment in AirJoule JV line. For the fourth quarter, AirJoule Technologies reported net operating expenses of $3.2 million. This is inclusive of approximately $0.7 million in administrative and engineering expenses reimbursed to us by the joint venture under a statement of work. For the full year, net operating expenses at AirJoule Technologies were $13.6 million, which compares to $11.2 million in 2024. The year-over-year increase was driven primarily by a $4.2 million increase in noncash stock-based compensation expense and is offset by lower professional fees and a shift in the R&D line from AirJoule to the joint venture. Our net loss for the full year is $9 million. The primary components below the operating line were a loss in investment AirJoule JV of $39.3 million offset by a noncash gain of approximately $25 million from changes in the fair value of earn-out liabilities and subject vesting shares. The $39.3 million JV loss compares to $5.3 million for the full year 2024. The primary driver of the variance is the noncash impairment of in-process R&D that reduced net income at the joint venture. This is a noncash accounting adjustment related to a change of valuation of intellectual property contributed to JV at formation. It has no impact on our joint venture's operations cash position or our ability to execute on the commercialization plan. Now let's turn to the joint venture. The total JV cash outflows for the year was approximately $18 million, which is consistent with the guidance provided on our third quarter call. The JV received capital contributions totaling $17.8 million from AirJoule Technologies during the year. $5 million of that came from GE Vernova through the April 2025 equity investment in AirJoule Technologies. The joint venture remains in the development of [indiscernible] as there is nominal revenue of approximately $110,000 during the fourth quarter from the sale of AirJoule Core systems to Arizona State University. AirJoule Technologies ended 2025 with approximately $22 million of cash on the balance sheet. Subsequent to year-end, we completed an equity offering in January 2026 that raised approximately $22 million in net proceeds. Following that offer, our combined pro forma cash position across AirJoule Technologies with the JV was approximately $44 million with no debt. With respect to liquidity, we have sufficient cash to fund our operations, the JV and our planned commercial deployments through 2027. We expect our combined cash spend across the corporate entity and the JV in 2026 to be approximately $25 million. The January offering, combined with our existing cash and liquidity, provides a clear runway to execute on the commercialization plan that Matt and Bryan have both outlined. Looking ahead to 2026 at the joint venture level, we are budgeting approximately $17 million to $19 million in operating expenses to support the productization, manufacturing and commercial deployment activities that Bryan described. This is in line with our 2025 spend level. At AirJoule Technologies, our corporate operating expenses are expected to be approximately $15 million for the full year, of which approximately $8 million is noncash stock-based compensation. With the successful execution of our registered offering in January, along with our effective S-3 registration status, we continue to maintain strong flexibility in managing our capital position and balance sheet. Going forward, we will remain opportunistic in evaluating any financing and strategic opportunities that enhance our balance sheet and support long-term value creation. With that, I will pass it back to Tom for the Q&A portion of the call. Operator: [Operator Instructions] And the first question we have comes from the line of Michael Legg with Ladenburg Thalmann. Michael Legg: Congrats on the quarter. Nice progress here. Wanted to ask a little bit about, you talked about the customer engagement. Can you talk about how you're going about engaging the customer from a feet-on-the-street perspective, from a distributor perspective? And what -- how is the outreach going and talk about that a little bit, please? Bryan Barton: Thanks, Mike. This is Bryan. I think if I understand your question correctly, it's really around our process of engaging customers. Is that accurate? Michael Legg: Yes, yes. Bryan Barton: Yes. So it's worth noting that there's really, I think, three ways of one in which these conversations are initiated, right? One is through direct engagement from the customer themselves. That's when they reach out to us. And then, of course, there's warm introductions that happen across our network and to the tops of these organizations. And then there's really kind of meeting folks through direct conferences or trade shows or suppliers and that kind of thing. And so there's really a lot of activity in all three kind of categories of how we reach our customers. There's a lot of them that come to us, frankly, because this is an urgent topic for a lot of data center builds in particular, in that market. One thing to note on the data center market is there's a lot of builds that are happening and a lot of builds that end up getting canceled, canceled projects due to permitting on the water side, where everything seems to be moving ahead, but then you can't secure the water permit. And so that's one thing that's really driven a lot of engagement for us in the data center market. And there's other verticals as well where that outreach has been predominantly customer-driven in the industrial sector as well as in the residential sector, which we believe is a significant value for AirJoule to unlock different kind of frozen residential developments. Does that address the question, Mike? Michael Legg: Yes. Great. And then on the supply chain, you mentioned most of the -- almost everything except one is commercially available. As we scale over the coming years, will -- is there anything that's a scarce supply chain or that you don't have redundancy on that we should be thinking about? Bryan Barton: I don't think so, Mike. Most of these components that are in the box, so to speak, are kind of already at scale, pumps and motors and valves. The custom part of our sorbent chamber is an aluminum vacuum chamber that is produced at scale through cast aluminum manufacturing, and this is a very commodity industrial process. It's just our form factor is a bit unique, but it's totally available at scale. The thing inside the vacuum chamber is our sorbent coated contactor. The contactor is already at scale commodity, many vendors, millions of parts globally already produced. So that's a standard offering that we then coat with the metal organic framework sorbent material. We do that in-house really to define the process of coating, but coating parts is also a commoditized process. There are many vendors that can do this at scale. AirJoule has taken -- like this is kind of a core aspect of our intellectual property and we need to define and own kind of the optimization of that process and lock it down before we engage with the select partner to take that to scale. Michael Legg: Okay. Great. And then just one last question. You mentioned $10 million cap call on the AirJoule joint venture at year-end. Can you explain that and then also talk if there are any other major CapEx needs for '26? Tom Divine: Yes, Stephen, do you want to take that? Sze-Yin Pang: Yes, Mike, you're asking about the 2026 capital call, correct? Michael Legg: Yes. Sze-Yin Pang: Yes. So that capital call -- those two capital calls are kind of the normal course funding plan for this year, as we laid out in our prepared remarks, what our anticipated total spend for the joint venture will be and these two capital calls are part of the funding contribution to fund the JV for those prospective expenses. And I'm sorry, the second part of your question? Michael Legg: Any other major CapEx for '26? Sze-Yin Pang: No, nothing other than, again, the forecast that we provided in our prepared remarks around our cash needs. CapEx for the joint venture has largely been funded through last year to help support the build-out that Bryan described. Michael Legg: Great. We've got some progress. Operator: Our next question is from the line of Alex Fuhrman with Lucid Capital. Alex Fuhrman: Congratulations on all the milestones you've achieved in 2025. Wanted to ask about gross margins. What kind of gross margins are you expecting initially for your first couple units of sales? And then as you think about longer-term contracting -- transitioning to contract manufacturing, what kind of gross margin do you think you'll be able to achieve at scale? Sze-Yin Pang: Yes, maybe I can take that. I think for this year, we're really just focused on the deployments at hand. And so I think the gross margin is less of an emphasis for us in terms of what our long-term objectives are, which are around 30%, 35% at scale as we move into contract manufacturing. So this year, as we're focused on really the customer pipeline build-out and the validation of our technologies, the focus is more on top line and customer engagement execution and as we move into 2027, as I alluded to, as we contract manufacturing that margin is what we're targeting. And so our conversations around both our design and our build materials will ultimately help unlock the gross margin profile that we're pursuing long term. Alex Fuhrman: Okay. That's really helpful. And then nice to see the first obviously, small revenue here for the JV in Q4. Should we expect to see similar small revenue throughout 2026 as we get closer to the full-scale commercial launch at the end of the year? Sze-Yin Pang: Yes, we do. We envision these deployments while some of them will be passed in nature will be paid deployments. So we expect some modest revenue that will continue to [indiscernible] at the joint venture level. And given some of the accounting treatment of the JV that will flow through the equity income or loss from the JV line. Alex Fuhrman: That's really helpful. And then you guys mentioned the water crisis in Corpus Christi and kind of the trade-off between AirJoule and desalination. Just curious how close your economics are getting to competing with large-scale desalination progress -- project? And how much of a selling point is the lack of a massive upfront CapEx for these types of projects as you start engaging with communities like that? Bryan Barton: Yes. Thanks, Alex. I think it's important to think about how a desalination actually gets built. It's a multiyear permitting and planning process. And typically, desal plants are billions of dollars of infrastructure that goes into the ground, then they clean up the salt water, of course, and then they have to dispose brine, and brine disposal back into the source is a point of concern often. Economically, the comparison desal is definitely cheaper than AirJoule Technologies for water creation. It's about 5 to 10x cheaper in terms of operating costs. The difference is like really the value of when you would deploy AirJoule is when the time to those permits and capital are constraining economic development. We're in a period of time right now where there's immense build-out. And we talk about Corpus Christi, who is right on the gaff as you point out, but the timeline to unlocking those development projects is really constrained. And another thing I'd like to point out in terms of the water that's produced from AirJoule is distilled, very plain, 0 TDS. And this is actually difficult for RO water or desal water infrastructure where there's residual TDS or things that come along. And so water quality is a main value driver. So for the kind of like bucket at large, like where is the value for AirJoule Technologies, it's in terms of speed to market, distributed water, resiliency water where that water is yours, right? And it is your asset that you own. And then it's around water quality. Matthew Jore: And Alex, this is Matt. I'll add two things here that Stephen and Bryan said. Regarding your gross margin question, you might recall we've established a water purchase agreement business model, and that has been well received by customers. And to Bryan's point about distributed water. If you envision these AirJoule water plants at the site, wherever there's waste heat and every data center there is waste heat, every industrial operation has waste heat, you can envision an AirJoule water plant. And so the gross margin question, when you take that model is easier to maintain, as long as you're focused on where that water has value, and that distilled water that Bryan brought up has tremendous value. So we're pretty confident because you get this -- we place these AirJoule water plants and sell the water for a 15-, 20-year period. So that gross margin question on sale of equipment also applies to water being sold. So just wanted to add that to your question. Operator: Our next question is from the line of Julian Mitchell with Barclays. Unknown Analyst: This is Drew on for Julian Mitchell. So I just wanted to get a sense of what commercial opportunities you're expecting to turn into firm orders, I guess, more broadly like on a global scale and then more specifically in the Middle East, I know you guys touched on that a bit during the call, but if there's any additional color you could provide there, that would be great? Bryan Barton: Sorry, I'm not exactly -- yes. So the question is around commercial deployments that lead to -- sorry, deployments to lead to commercial activity? Unknown Analyst: Deployments like leading into orders throughout the year, if there's any color on that? Bryan Barton: Yes, sure. So thanks for the question, Drew. As kind of discussed on the call, there's a number of different market verticals that we're engaging into, be it on the residential side of unlocking whole residential build communities that are currently frozen and the development pipeline due to water permitting as well as a number of data center engagements as well as the U.S. military in terms of water resiliency as well as on dehumidification. So there's a number of verticals and customer conversations that are ongoing that are really kind of poised for these deployments and that proof of value conversation with each one of those customers. We will announce these as they happen throughout the year and kind of give updates as to the success of those deployments and proof of values with those customers in different verticals. And then those will cascade into commercial commitments from those customers is our expectation on the overall process. Does that address the question, Drew? Unknown Analyst: Yes, absolutely. Operator: At this time, there are no more questions in the queue, so I'll turn it back to Matt Jore for some closing comments. Matthew Jore: Thanks, everyone, for joining us this morning. 2025 was a year of building for us, building systems, building partnerships and building towards commercial pipeline. In 2026, we expect to see the early results of that work through our first product launches and additional customer deployments. Every deployment we execute this year and every customer relationship we advance is building the foundation for scaled commercial activity in 2027 and beyond. Thank you. Operator: Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Inventiva Full Year 2025 Financial Report Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, David Nikodem, Head of Investor Relationship. Please go ahead. David Nikodem: Good morning, good afternoon, everyone, and thank for joining Inventiva's Full Year 2025 Financial Results and Business Update. Our press release was issued yesterday evening, and this webcast and slides will be available in the Investors section on our website following the call. Joining us on the call today are Andrew Obenshain, Chief Executive Officer; Jean Volatier, Chief Financial Officer; and Dr. Jason Campagna, Chief Medical Officer and President of R&D. I would like to remind everyone that statements made during today's conference call and during the Q&A session may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Please refer to Slide 2 of the slides and our SEC and AMF filings for a discussion of associated risks. These statements reflect our views as of today and should not be relied upon as representing our views at any later date. With that, I will now turn it over to Andrew, starting on Slide 3. Andrew? Andrew Obenshain: Thank you, David. Good morning, good afternoon to everyone, and thank you for joining us. Since joining Inventiva 6 months ago, I've been struck by the depth of scientific conviction behind lanifibranor and the dedication of this team. Today, every resource, every decision and every member of this team is now aligned behind a single objective, advancing lanifibranor towards approval for patients with MASH. Let me start with our main focus, our global Phase III clinical trial NATiV3. Enrollment was completed in April 2025 and represented a landmark operational milestone for this company. Today, we are updating the expected timing of our top line readout to Q4 2026, reflecting the disciplined sequencing of our clinical and biostatistical milestones. We believe the data from the NATiV3 trial, if positive, has the potential to carry weight with regulators, physicians and most importantly, with patients. And we believe we are running this program with the rigor and precision all stakeholders deserve. On our pipeline and organizational focus, in the first half of 2025, we made the strategic decision to concentrate all of Inventiva's resources on lanifibranor and MASH. As part of this plan, in Q4 2025, we sold our global rights to odiparcil to Biossil and we may receive up to $90 million of potential regulatory and commercial milestone payments, as well as potential high single-digit royalties on future net sales if approved. While this transaction frees up our internal resources to fully focus on lanifibranor, we are pleased that odiparcil has found a new home where its development can continue, potentially in offering patients with MPS VI an opportunity for treatment. At the same time, we strengthened our leadership team to align with the level this opportunity demands. Jason Campagna joined as CMO and President of R&D. Martine Zimmermann joined as new EVP and Head of Quality and Regulatory Affairs; and Nazira Amra joined as our Chief Commercial Strategy Officer. We are building towards launch in a lean and targeted way, advancing our readout and NDA preparations while laying the early groundwork for commercialization in anticipation of potential approval of lanifibranor. And the opportunity is real. MASH has been underdiagnosed and undertreated for too long, but that is changing. More patients are being identified, more being diagnosed and entering care. Awareness is growing, screening is improving and metabolic disease is finally getting the attention it deserves. The numbers tell that story clearly. There are an estimated 18 million people in the U.S. living with MASH, but only around 10% have been diagnosed, and that number has grown by 25% compared to 2024 estimates. Among those diagnosed with clinically actionable F2 or F3 disease, only around 40% are currently under the care of a treating position. So while diagnosis rates are improving and the market is evolving, far too many patients with significant fibrosis remain without the care they need and face a real risk of progression to cirrhosis and liver failure. If our NATiV3 trial can replicate the 18% fibrosis improvement seen in Phase II, we believe lanifibranor could be well positioned as a potential best-in-disease oral therapy with significant commercial impact. Ultimately, our goal is to make a meaningful difference for patients and that is what drives everything we are doing. I will now turn the floor over to Jason, who will give a brief update on lanifibranor, our differentiated oral anti-fibrotic, and a potential new treatment option that we believe addresses the remaining unmet medical needs in MASH. Jason Campagna: Thank you, Andrew. Good morning and good afternoon, everyone. Let me start by reminding you of the mechanism of action and the development pathway of lanifibranor. Lanifibranor is a small molecule designed to induce anti-fibrotic, anti-inflammatory and beneficial vascular and metabolic changes by activating all 3 PPAR isoforms, alpha, delta and gamma in a balanced manner. This broad mechanism of action is designed to target the hepatic and extrahepatic drivers of MASH simultaneously and in one oral therapy. Lanifibranor was the first asset to achieve statistically significant improvement in the composite endpoint of both fibrosis improvement and MASH resolution in our Phase IIb NATIVE trial, after just 24 weeks of treatment with a favorable safety and tolerability profile. On the basis of these results from our Phase IIb the FDA granted lanifibranor breakthrough therapy and fast track designations. NATiV3, our pivotal Phase III clinical trial was designed to confirm and extend those findings in a larger, more diverse global population over 72 weeks and is intended to provide the data to enable successful marketing authorization in the United States and Europe. NATiV3 is a randomized, double-blind, placebo-controlled trial in patients with biopsy-confirmed MASH and stages F2 or F3 fibrosis, the core of the MASH treatment population. Those with significant disease burden and a high risk of progression to cirrhosis, liver failure and liver-related mortality. We specifically chose a clinically meaningful primary endpoint for NATiV3, fibrosis improvement and MASH resolution. And at 6 months in our Phase IIb the 1,200-milligram dose of lanifibranor showed a 24% treatment effect. NATiV3 was also deliberately designed to mirror the patient population of our positive Phase IIb and the real world as it exists today. A meaningful proportion of our patients have type 2 diabetes and other metabolic comorbidities, and a number are on background GLP-1 and/or SGLT2 inhibitor therapies, mirroring the patient's physicians actually see in their clinics, which we believe will ensure that we generate clinically meaningful data to support both NDA and MAA submission. In April of 2025, we completed enrollment, exceeding our original targets with over 1,000 patients in the main cohort and additional 410 patients with MASH and fibrosis stages F1 through F4 in an exploratory cohort. We anticipate sharing the top line results of our pivotal Phase III trial in Q4 of this calendar year, a moment, I believe, will be significant for the field and for the patients who need new treatment options. I will now turn the floor over to John for our financial review. Jean Volatier: Thank you, Jason. Good morning and good afternoon, everyone. So yesterday evening, we issued our press release with our full financial results for the year ended December 31, 2025. I will focus on the highlights. As of December 31, '25, we held EUR 230.9 million, close to EUR 231 million in combined cash, cash equivalents and short-term deposits. This position was built by 2 significant financing events in '25. First, the execution of the second tranche of our 2024 structured financing in May generating approximately EUR 108 million in net proceeds. And second, our U.S. registered public offering in November generating approximately EUR 139.4 million in net proceeds. We estimate that we are funded beyond our anticipated NATiV3 readout. Based on our current operating plan and cost structure, we estimate that our cash runway extends to the middle of Q1 2027 and to the middle of Q3 2027, assuming the full exercise of our tranche 3 warrants, which could generate up to an additional EUR 116 million. We confirm this way the cash guidance provided earlier. Our R&D expenses for the full year were EUR 87 million, primarily reflecting our pipeline prioritization and, to a lesser extent, the completion of NATiV3 enrollment in April 2025. Marketing and business development spend increased to EUR 5 million primarily due to expenses related to a planned pre-commercial investment as we prepare for a potential launch of lanifibranor if approved. G&A expenses of EUR 47.9 million include approximately EUR 20.3 million of noncash share-based compensation tied to the governance and organizational transition we implemented this past year. I will now turn the floor back to Andrew for closing remarks. Andrew Obenshain: Thank you, Jean. Inventiva enters 2026, well-funded, operationally focused and ready for a consequential chapter in this company's history. NATiV3 is fully enrolled. We've built a leadership team with deep medical, regulatory and commercial expertise, and our regulatory and commercial readiness work is progressing in parallel. Our anticipated top line readout in the fourth quarter of this year represents a genuine inflection point, not just for Inventiva, but for the millions of patients living with MASH, who still have no adequate treatment options. We are truly executing with the discipline and urgency this moment demands. Thank you for joining us today. We will now open the floor for questions. Operators, please go ahead and provide instructions for the Q&A session. Operator: [Operator Instructions] We will now take our first question. And our first question for today comes from the line of Seamus Fernandez from Guggenheim. Seamus Fernandez: Just a few quick questions. First, can you update us on how the performance of the trial has been in terms of dropouts? I know that there were some requirements from the tranches that were coming in that were successfully completed. But just wanted to get a sense of where the dropout rate was as you were kind of wrapping up enrollment. Second question is, can you help us understand how you're thinking about the performance of the 800 versus the 1,200-milligram dose in terms of both weight gain and then ultimately on fibrosis? Is the sort of change from a more typical 12-month endpoint to the 18-month endpoint geared to have the 800-milligram dose catch up to the 1,200 but also manage the potential tolerability or weight gain issues? And then to the last question is just what you're seeing in terms of the overall market interest. Madrigal continues to see very strong uptake in the U.S. How are you thinking about the opportunity to compete with Madrigal? What do you think is the threshold necessary? Andrew, you mentioned 18%. Just interested to know if you think 18% is the threshold where the impact is going to be substantial or is that more reference to the powering of the study? Andrew Obenshain: So, Morning, Seamus. Thanks for the questions. I'm actually going to take your third one first and then hand the first 2 over to Jason. So yes, just to be really direct, we think that if we replicate the Phase II trial and have an 18% effect on a fibrosis, we have an excellent drug. That is the clearing efficacy that we need for in order to have a very attractive market opportunity. We continue to see a lot of market growth, thanks to the entry of the 2 approvals and a lot of awareness around MASH. And there still continues to be unmet need, especially we see in that F3 diabetic patient population, where we think there'll be a very good entry point for lanifibranor. And then at 18% of fibrosis effect with our HbA1c lowering, we have a very good profile for that. Let me then turn the question over to Jason first on the drop-offs and what we've last discussed publicly there. And then the second question about the 800 catching up the 1,200 dose. Jason Campagna: Seamus. So let's take the first one. So you are correct. As part of the structured financing from 2024, there were covenants in there around the release of follow-on tranches that the early termination rate for the trial needed to be below 30%. That number was selected because the original powering analysis from the trial was built allowed for up to a 30% dropout rate. So that was the metric that was used, and we have disclosed publicly at the time of both the first and the second tranche release, which would have been in April of 2025, that we were below that threshold. I think now that we're tightening the guidance to Q4 of this calendar year, I think we were able to confirm we are well within that range and feeling quite good about where we've landed and are reaffirming that the trial is well powered to detect the primary endpoint with the size of the trial that we have and the early termination that we've seen. So the second question you asked about the 2 doses, I think you're landing sort of in the right mixture of elements that are important to us. So we agree with you that in theory, with additional time just because of the way PPARs work and the biology of the liver that that 800-milligram dose will have time to sort of catch up to the 1,200. It was already quite a good dose back in NATIVE, as you recall. But 6 months is relatively thin for a PPAR, which is a transcriptional modulator to sort of do its work. So the idea that you could see a deeper effect with that 800 dose at 18 months, it's very reasonable. But I think where you're landing around the potential dose responsiveness of the tolerability concerns, that is also very important to us. So take weight gain, which you mentioned. Weight gain is a traditional PPAR gamma mediated fluid retention event, and we know that, that fluid retention is highly likely to be dose dependent just from what's been shown with other PPAR agonists and our own data from NATIVE. So we think that potential to have really strong efficacy with both doses, which we were able to show in NATIVE, but may have a different tolerability profile at the lower dose could be meaningful for patients. So it's our hope that both will be positive, and we'll have that opportunity to discuss that with regulators. Operator: Our next question comes from the line of Yasmeen Rahimi from PSC. Unknown Analyst: This is Dominic on for Yas. The first one, we know that NATiV3 is a very large data set. As we're getting closer to top line data in 4Q, what are some of the quality control, I guess, protocols going on in the background to analyze the biopsy samples and what procedures are in place to ensure timely and thoughtful assessment of these biopsies? And then our second question is, can you just talk or help us understand, I guess, how you have how -- if you had any recent safety monitoring committed? And are you seeing anything on a blinded basis on the safety profile? Any color there would be helpful. Andrew Obenshain: Good morning, Dominic. So 2 questions. Let me take the second one first, and the first one over to Jason. Just on safety monitoring, there are periodic monitoring committee meetings every 6 months. You would know if they had said anything. Other than that, we really can't say anything about those meetings. Go ahead, Jason, on the biopsy. Jason Campagna: Yes. Thanks, Andrew. Dominic, so quality control and biopsy. Let me start by saying that the team we have here is outstanding. The clinical operation, the clinical development team have been immersed in the world of MASH clinical trials for the better part of a decade. So this is something that they know well and we carried that expertise forward. So you could think of quality control biopsy around 3 issues. Are we hurting the patient? Meaning at the bedside, are we doing the right things. Second, are we capturing the biopsy according to standard practice? So that's the length of the biopsy, the overall quality of the core, if you will. There's measurements and things that sort of go in and say check or not check. We have reviewed all of those and continue to do so right up until when we get to last patient, last visit later this year. And then lastly, finally, when the slides are sectioned prior to going off and being read, there's a quality control set there that looks at what actually gets made on to the slide. Afterwards, at that point, we are obviously blinded to all of that information. But there is a quality check in terms of are the reviewers, the readers staying on time and on track reading biopsies in the paired matter that's specified both in the protocol and the analysis plan. So I like the teams that we have in front of it and more importantly, I think that they are doing exactly the right work to keep us on track. Operator: Our next question for today comes from the line of Ritu Baral from TD Cowen. Ritu Baral: I want to drill down a little bit more upon final powering. You guys disclosed the over 1,000 final patient number. I think it's 1009 and the 90% powering. What's the effect size that, that powering is for on the primary combined endpoint? And what are your expectations for potential movement around placebo of that, I think it was 7% at the 6 month upon the final primary endpoint? And then I have a follow-up on market expectations around that F3 diabetic population that was mentioned. Andrew Obenshain: Thank you, Ritu. Jason, why don't you go ahead and answer that question? Jason Campagna: On the first one, we are not guiding to the actual effect size, but I can reiterate for you and for everyone what we have been saying. So first, we are with the sample size of over 1,000 patients. We are powered to over 90% on a primary endpoint of the composite fibrosis improvement 1 stage or more MASH resolution. That one has a higher placebo response than we showed in NATIVE, which as you know, was 7%; and two, a smaller treatment effect than we showed in NATIVE data about the 1,200 milligram dose. So that means the overall effect size that we are powered to is smaller. So a much more conservative view than the actual data that we showed in the Phase II program. We just talked earlier with Seamus that, that alongside our comfort with the early termination rates we have, we feel very good that the trial is structurally sound and that will give us an answer to the question one way or the other. Did lanifibranor work first at the 1,200-milligram dose? The testing is hierarchical. We can't get to the 800, unless you went on the 1,200. But that is the core question. We think the trial was well set up to deliver an answer to that question that is well powered and highly confident. I think to your second question around placebo response. The individual endpoints of fibrosis alone. I think everybody on the call knows this, fibrosis alone improvement or MASH resolution alone can be quite noisy. It's not clear after all these years of study why that is, but we do know that they're noisy. On the other hand, the composite endpoint, the primary endpoint of NATiV3, are with us and other sponsors have shown that, that endpoint is much less prone to placebo response. And that makes sense, Ritu, biologically, right? You have in 1 patient, they may on a placebo response move their fibrosis stage by 1 point or more, but the idea that they can also resolve their MASH spontaneously. What that 7% tells you was that in the wild, in the real world, that's incredibly uncommon and that makes total sense with the actual way that patients walk in. It's unusual if you leave them sort of sitting along without treatment, that both of those things will get better on their own. So the placebo response there actually reflects, we believe, the underlying biology, and it should remain very low. We've seen it by precedent, and it's our expectation for the trial that we're running. Ritu Baral: Very helpful. And then, Andrew, a question on how you guys and your own market research is viewing that F3 diabetic population. Do you have an approximate patient number? How is the diagnosis rate in that population changing versus the overall MASH population given the ADA focus on MASH and its messaging to diabetologists? Andrew Obenshain: Thanks for the question, Ritu. So in terms of size, there's about 375,000 patients total F2, F3, in under treatment of care right now. The largest segment is -- one of the largest segments is that F3 diabetic patient population, being 55% to 65% of the patients are diabetic, and about it splits roughly 50-50 in our market research between F2, F3. So that patient population is quite a large patient population overall. In terms of growth, we don't have the granularity down to that segment. However, I would just know anecdotally that F4 is one of the fastest-growing segments. And I think the diagnosis rates are increasing quite a bit overall for F2, F3, F4, just to the number of entrants into the market. So they are growing a minimally proportionate with the market in that segment. Ritu Baral: To that point, Andrew, can you tell us of the 410 expansion cohort patients, how many are F4. Do you know at this point? Andrew Obenshain: I'll pass that question. Jason Campagna: Yes. Confirming you're talking about the exploratory cohort, correct? Ritu Baral: The exploratory cohort, yes. Jason Campagna: We do have F4s in that cohort. They would have screen failed in that case, by histology, potentially other lab values for the actual main cohort in NATIVE. So they represent a sort of range of F4 from. They're all compensated by definition, meaning they have no clinical outcome events, decompensation events. But the range of severity with portal hypertension can be from none to evidence of clinically significant. And those -- that data is going to be quite interesting to us. We're not yet guiding on when we'll have an opportunity to get those data out. It's unclear right now if we have them at top line per se, or in the weeks that follow it in one way or another. But I think as we get closer to top line data, we should be guiding on that more tightly. Operator: Our next question today comes from the line of Thomas Smith from Leerink Partners. Thomas Smith: Just wanted to follow up on that F4 population. And I know you're capturing some of those patients in the exploratory cohort. Can you just expand a little bit on what you hope to learn from that exploratory cohort and how you're thinking about planning for the outcome study in F4s pending the NATiV3 data and perhaps how you're thinking about perhaps how some of those plans could change. We know we're going to get F4 outcomes data for Rezdiffra also in 2027. So some interesting timing around that data set relative to when you're planning on starting this F4 outcome study. Andrew Obenshain: Thanks for the question, Tom. Jason, go ahead. Jason Campagna: So there's a lot there. Let me make sure I get it all for you. So one, just in general, what are we expecting to learn from that cirrhotic population in the exploratory cohort. First, above all safety of lanifibranor in that population. Clearly, right, if you're going to bring in a new therapeutic into a more, let's say, sicker population, you want to obviously want to have safety headroom to do that. So approximately 75 patients we have in that cohort safety above all else. Second, it's not that, as you know, that cohort is not tracked systemically -- systematically, excuse me, for efficacy. That being said, we do anticipate having data of things on like LFTs, transaminases and other things that would point directionally towards whether the drug is biologically active. So really a pharmacology question, very important. We have done hepatic impairment studies with the drug, but looking at it in a real world and a clinical trial would be incredibly helpful. And I think lastly, it will give us a sense in our own hands of how those patients progress over time to later-stage disease. You could read about it, you can model it, you can look at other people's trial, but in your own trial we will see how many of those patients go on to actually have liver related or other events. And that will be incredibly helpful as we think about powering and sizing of an outcome-driven trial, which is what we're right now calling NATiV4, for lack of a better term. But make sure that, that gets to your question, Tom, on the value of that cohort to us? Thomas Smith: Yes, that's helpful. Jason Campagna: Great. So now look, you know the Madrigal data coming. I think yet we acknowledge that. We agree. I think our view is that positive data, if Madrigal were to show it, would only be helpful for the field period, full stop. The idea that we have now finally shown that the surrogate endpoint does correlate with clinical outcomes would be an enormous one for the field. Look no further than what happened in the cardio renal division with proteinuria in the last 6 years. Proteinuria was issued as a surrogate in 2019. I have 5 or coming 6 approved therapeutics for IgAN, that's an enormous win for patients. So we expect something like that would hope would happen here. But clearly, that would influence our thinking about how we think about populations and the ones that are most likely to develop liver-related outcomes because we want to get more of them since we know that the sort of door is open to show that the histology will map to clinical outcome. Operator: Our next question comes from the line of Michael Yee from UBS. Michael Yee: I have [ 32 ] myself. First question is on weight gain, can you remind or confirm the views that based on the phase II also, I think what you're sort of said in the ongoing Phase III that there is some initial weight gain, but that it plateaus and that you don't really see anything beyond a modest increase in some patients, at least in the phase II, and that plateaus and that was initially seen in the Phase III, and therefore, no concerns. The second question is, is there any view that either because of other drugs or because of longer time duration of 18 months versus 6 months here that, that could actually come down in some of those patients or at least come back down to baseline, is that possible? And then the third question is around getting the regulators comfortable with that, what I guess fluid retention effect in some patients and that there would be presumably no at least initial cardiac imbalance in any of the arms that you see and which you'll be able to talk about no imbalance in any cardiovascular events numerically or any SAEs of that nature when you disclose the data in the fourth quarter? Andrew Obenshain: Mike. You were a little soft, so I'm just going to repeat some of it. So there was a question about does weight gain indeed plateau and number one, if in the Phase II. Number two, does that weight gain -- is there a chance of that weight gain would actually go down in the Phase III, either due to concomitant medications or longer treatment? And then number three, some of the weight gain do -- if the weight gain is due to fluid is there any concerns about a cardiac imbalance in the trial. So for those 3 questions, I'll hand it over to Jason. Jason Campagna: Yes. Mike, good to talk to you again. So we have previously said and we'll reaffirm it here that the data that we have previously shown from the blinded look at NATiV3 back in September of 2024, and that we also disclosed at that time the FASST clinical trial in systemic scleroderma, which was a year trial with treatment of lanifibranor same doses in NATiV3, 800, 1200 milligrams, that the weight -- the fluid retention weight gain appear to plateau. I think we don't have any additional information to guide on that publicly, but I think that is what we've seen in both of the clinical trials so far. I think second, do we expect the weight to come down? It's well possible. I think there are a couple of factors at play. Take the LEGEND study, for example. We show that when patients are given SGLT2 inhibition in parallel with lanifibranor that there's almost no weight gain at all. There are many patients in the trial that are on SGLT2 inhibition and do not have the number for you off the top of my head. And we know that patients can be started on those therapeutics for management of diabetes or any other reason. So it is entirely possible and reasonable to believe that if patients are getting SGLT2 inhibitors or other diuretics to manage blood pressure, et cetera, that, that weight gain either the fluid retention, could be blunted or resolved so that the final landing spot, if you will, for any patient, might be lower than the peak weight gain that they had in the trial. But I think we'll see what the data show. Lastly, in terms of regulators, I think I can't speak for the FDA, but I can only speak to what I've read of everything they've put out. The fluid retention is a known phenomenon with PPAR gamma agonism, the thing about lanifibranor is it was designed to be different than other PPAR gammas, and we'll see what the data show. Our view is that it is a very different type of PPAR agonist. But that being said, the PPAR gammas is a known effect. It is on target. It is not idiosyncratic in any way. So FDA has shown with labeling and other work that they are comfortable with fluid retention, I think you're hitting on the right point, the cardiac. And as we've talked about and guided publicly over the years, we are not seeing congestive heart failure as a clinical issue in our program. It doesn't mean that we don't follow it. And it doesn't mean that you're thinking about how fluid retention may lead to that. That's certainly in the PPAR labels today, the gamma agonist, but it is just not something that we are generally seeing in our program, but we will be paying careful attention to it, and it's a dialogue we'll have with FDA. Operator: [Operator Instructions] Our next question comes from the line of Ellie Merle from Barclays. Unknown Analyst: This is Jasmine on for Elie. So as kind of a follow-up to Ritu's question. You talked about the overlap of MASH in type 2 diabetes as a segment where lanifibranor can be particularly attractive. But do you have a specific bar for what competitive data would look like in this population? And then specifically, how many type 2 diabetes patients do you think have undiagnosed MASH, and how do you plan to work to increase the diagnosis in this population and unlock that segment? Andrew Obenshain: So I'll take those 2 questions. First of all, just the diabetes and overlap with MASH, it is enormous, right? And there's -- I think there's about 18 million patients in the U.S. with undiagnosed MASH. At least half of those or more have diabetes at it's obviously way, way more than 375 under the treat or care. The way we see the market evolving is we've seen since about 2004 that market has grown about 20%. So it's clearly quite robust growth, and we do anticipate that to grow nicely. We, as a company, probably will not be pushing diagnosis, at least initially, there are enough patients coming in that we can focus on the patients being diagnosed -- the existing patients being diagnosed. That would obviously, maybe a later marketing strategy would be to actually increase diagnosis. And then your first question about -- I'm sorry, I forgot your first question already. Unknown Analyst: Just if you have like a specific bar in that population for what competitive data looks like? Andrew Obenshain: Yes. So the -- in terms of competitive data, the way we look at this is that the differentiated profile that we have is we work both on the liver and we're extrahepatic. We work on the body and we work on the liver. So we have direct anti-fibrotic effect. Again, as I said, that an 18% effect size, if we duplicated that in the Phase III trial, we feel it's a very competitive drug. And then the other thing we'll be looking at is HbA1c lowering, which was on average across the whole patient population, diabetic and nondiabetic in the Phase II, with just over 0.5 point, that would be an approvable diabetes medication years ago. So that combination of HbA1c lowering, combined with triglyceride lowering, HDL raising and the fibrosis effect, we think, has an extremely attractive profile for that diabetic F3 patient. Operator: Our next question comes from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Just one left, please. Regarding the confirmatory trial, just wanted to confirm, do you have an understanding with the FDA in terms of what underway means when it comes to granting accelerated approval? Is it enough just to have started that trial? And does this need to be by the time you file or by the time you get to approval? And then related to that, is starting that trial included in that mid 3Q cash runway with the third tranche of warrants? Andrew Obenshain: Yes. So yes, it is included. Starting that trial is included in the cash runway of that mid-Q3 runway. Jason, you want to talk about what's necessary for the trial? Jason Campagna: Yes. Lucy, I think you have the broad brushstrokes of it, right, but just something on the language. So accelerated approval is only at the time of the review. What we're looking to get is conditional approval under Subpart H, which is you've got marketing authorization and then the trial, as you note, confirms your surrogate and then you get full approval. Whether accelerated is only a question of how long it takes the FDA to actually review the file. With that, I'm just trying to make sure that we're all clear on that, that we -- you have the broad brushstrokes, right? But the individual rules are discussed with each sponsor at the time of the pre-NDA meeting and then during the mid-cycle review. But the general framework is you need to have most of the trials structurally in place, protocol approved at the time you were filing the drug and it needs to be moving on the definition of moving is going to be something FDA will define for us. We will be prepared. We have our CROs selected, the protocol is approved, may even have sites open. All of that is in the future. But at the time we file, we will meet the FDA position of trial meaningfully underway. And then at the mid-cycle review, you need to show continued progress on that. So they will check again that made a much more detailed look around enrollment nerves, site activation curves, et cetera. Again, each sponsor has their own detailed agreement with FDA on that, and it is our plan, of course, not only to have those conversations, but to make sure that we're meeting those requirements. So that when we are offered if we're fortunate enough to make it there, and we offered, the conditional approval, that trial will be well underway at that point. Lucy-Emma Codrington-Bartlett: Got it. Thank you, and thank you for clarifying on the terminology. Operator: Our next question for today comes from the line of Annabel Samimy from Stifel. Jayed Momin: This is Jayed on for Annabel. Congrats on the progress. Just 2 for me. The first one is around the use of background GLP-1 in the trial. What are your expectations on the potential impact of having that background GLP-1 use on [ lani ] effect size of those patients? And my second question is around the AIM-MASH tool that was nearly FDA qualified as a supportive tool to help with histological assessments. Do you have any plans to maybe leverage that to control or minimize variability? Andrew Obenshain: Yes. Thanks, and thanks for the question on the impact on the lani effect size based on background GLP-1 and the tools. So go ahead, Jason. Jason Campagna: Yes. So in confirming we do have, and we've previously shared that we have about 14% or so of the population in NATiV3, that's across both cohorts, that have background GLP-1 use at the time of randomization. That could be semaglutide, older drugs, liraglutide, dulaglutide, et cetera. So it's not only limited to the modern GLP-1. And I think its effect on treatment response should be minimal, and that should -- it will sound tongue in cheek, it's not intended to be. It's because that when you enter the clinical trial independent of what drugs you're on, whether you've lost weight by any other measure, independent of a GLP-1, you're entering the trial issue have that F2, F3 disease with active MASH. So whatever it is, one, those drugs are not doing it for you or your lifestyle modifications; and second, that the doses that we're using are really the diabetic doses. So they don't -- they are not anticipated to have much of an effect at all. We're simply seen that in the clinical trial data. I think to the second question about the tools, are you talking about PathAI specifically or just more general non-invasives? Jayed Momin: Yes, no, it's the PathAI tool. Jason Campagna: Yes. It's an interesting idea, right? But if you -- looking at it really simply, what PathAI lets you do is substitute one human pathologist for a digital pathologist and then you need a second pathologist to read. It's still the same idea of 2 plus 1 consensus. In this case, 1 of the 2 is PathAI. It's interesting. It's not something that in NATiV3, we anticipate taking much advantage of. But it is something we're thinking very closely about for NATiV4, potentially using that as the -- in the exploratory cohort presently from NATiV3 to see how we may be going to pull more data out of those patients that happen to have a biopsy. Operator: Our next question for today comes from the line of Rami Katkhuda from LifeSci Capital. Rami Katkhuda: I guess can you remind us of lanifibranor's FC and F2 versus F3 patients in the Phase II study and how those differences may impact expectations for NATiV3 just given the higher proportion of F3 patients enrolled? Andrew Obenshain: Go ahead, Jason. Jason Campagna: Rami, just to qualify, you want the proportion of patients in NATiV2 or the responses of the F2, F3? Rami Katkhuda: The responses, please, between the F2s and F3s. Jason Campagna: The sample sizes are simply too small to break out what we have done. We think the analysis that's more helpful, it's in our corporate materials, is that when you strip away the F1s in that trial. You get down to about 188 F2, F3 across all 3 arms. You can see that the effect size actually slightly goes up. What we guide to is that it remains unchanged. So the drug seems to work equally well in more advanced fibrosis in patients with earlier disease. So you're not getting much of a free glide on those F1s, if you will. I think second, when we look at NATiV3, as Andrew talked about earlier, this is a contemporary MASH market. The majority of patients showing up and clinics today that have F3 disease, will have diabetes. So we think that aligns pretty well with the outside world. And we're pretty comfortable with what we've seen from our Nature publication back in 2024, that the drug not only works equally well in earlier and late-stage disease, but the adiponectin levels actually go up equally well across all cohorts and it's that adiponectin that's really driving, we think, well correlated with the clinical response. So we like where we're landing with NATiV3 and the likelihood of efficacy in both those F2 and F3 patients. And as a reminder, we're stratified by fibrosis stage and diabetes and NATiV3, so we're going to cut those data in a number of different ways to sort of get where you're headed with your question. Operator: Our next question comes from the line of Srikripa Devarakonda from Truist Securities. Unknown Analyst: This is Anna on for Kripa. So 2 questions from us. First, looking ahead a little bit in terms of the MASH guidelines, would you expect an update on the MASH guidelines this year? And how are you thinking about getting [ lani ] into the MASH guidelines? And then second question, in terms of cash, what kind of needs to happen for you to have access to that third tranche? Is it based on kind of Phase III success only? And are you looking at any other non-dilutive sources of funding such as partnerships? Andrew Obenshain: Thanks for the questions. So on the MASH guidelines, I think we will wait -- we need to get data first before we have any conversations about putting lanifibranor into the MASH guidelines. On cash, the tranche 3 is a positive endpoint, and we hit a positive endpoint in our trial, and then when those 77 million shares of EUR 50 become exercisable, and the investors have 45 days to exercise them. So that's how that mechanically works. So positive trial equals cash coming in, so as long as the stock price is above the EUR 50. We are always looking for ways to increase our cash runway. And we've obviously in a very strong cash position right now. In terms of partnerships, right now, our plan is to commercialize lanifibranor ourselves. Going forward, we think that there's plenty of access to capital, either in the equity markets or other kind of capital sources that we don't necessarily need to partner lanifibranor. Operator: Our next question comes from the line of Sushila Hernandez from Van Lanschot Kempen. Sushila Hernandez: Could you elaborate on your regulatory and commercial infrastructure? What steps are you taking to act with speed once the data is here, also considering your cash runway? Andrew Obenshain: Yes, good question. So yes, so we are being very careful stewards of our capital right now before data. So a lot of -- the regulatory team is fully staffed, and I would include the quality team on that, too, because that's necessary, to make a really good filing with the FDA. So we have invested. We've increased the size of that team and the talent on the team in the course of this year. From a commercial standpoint, really focused on strategic commercial execution. So being led by Nazira Amra, really focused on market access, the market research. I'm going to include in the broad commercialization medical affairs there. So the strategic role that won't really set us up for success in the future. We will not staff up aggressively in commercial until we have positive data. Operator: This concludes today's question-and-answer session. I will now hand the call back to Andrew Obenshain, CEO of Inventiva for closing remarks. Andrew Obenshain: Thank you so much. Thank you, everyone, for joining the call this morning. We certainly have an exciting remainder of the year coming up for Inventiva, and we look forward to engaging with you all as we go forward. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Koil Energy's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Tuesday, March 31, 2026. A detailed disclaimer related to Koil Energy's forward-looking statements is included in the press release issued Monday morning and filed with the SEC. It is also available on the company's website, koilenergy.com or upon request. A reconciliation of non-GAAP financial measures used in the press release and on today's call is included in the press release and on the website. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Koil Energy also undertakes no obligation to revise any of its forward-looking statements to reflect events or circumstances after the date made. At this time, I'd like to turn the call over to CEO, Erik Wiik. Erik Wiik: Good morning, everyone. Thank you for joining us today. In this briefing, I'll be presenting an overview of our financial performance for the fourth quarter and the entire year of 2025. I'll also share an update on our strategic road map and discuss how Koil Energy is positioned for further growth. Finally, I'll be happy to answer any questions you may have. I'm incredibly proud of the Koil Energy team for delivering an outstanding quarter and achieving a new milestone in our growth journey. In the fourth quarter, we achieved a revenue of $7.3 million and EBITDA of $700,000, resulting in a 10% margin. This represents a 22% year-over-year increase in quarterly revenue and 14% sequential growth from the third quarter of 2025. Koil Energy is growing again. For the full year 2025, we achieved revenue of $24 million, marking a 6% year-over-year increase. Adjusted EBITDA was $1 million in 2025 compared to $3.5 million in 2024. The reduction was driven by investments tied to our growth initiatives. Koil remain focused on long-term growth by deploying free cash flow to acquire new rental equipment, fund growth-related expenses, including development of the intellectual property, the establishment of our Brazil operations and bidding activity that supports our international sales pipeline. These investments are already delivering positive growth results. And with that overview, I'll now turn the call over to our Chief Financial Officer, Kurt Keller. Kurt Keller: Thank you, Erik. Let me walk through our fourth quarter results in more detail. For the 3 months ended December 31, 2025, Koil Energy generated revenues of $7.3 million, a 22% increase compared to revenues of $5.9 million the same period last year. Gross profit for the quarter totaled $2.5 million or 35% of revenue, representing a 5% increase in gross profit compared to $2.4 million or 41% of revenues in the fourth quarter of 2024. The decline in margin reflects the shift in revenue mix and volume. Sequentially, quarter-over-quarter, gross margin improved from 32% of sales to 35%. Selling, general and administrative expenses during the quarter equaled $2.1 million. The increase was largely driven by increased sales efforts and legal assistance with patents, master service agreements and international contracts. Moving to net income. We reported a gain of $370,000 for the fourth quarter, which translates to a $0.03 earnings per diluted share. This compared to net income of $541,000 or $0.04 per diluted share recorded in the fourth quarter of 2024. This reduction in earnings reflected higher SG&A expenses. The full year's financials reflected a 6% increase in revenue, driven by a 45% increase in service revenue. The relatively modest overall growth was primarily due to a slump in fixed price contract revenues in the first half of the year. Gross margin increased steadily throughout the year from 32% to 35%. The gross margin for the full year was 33%, down from 39% in 2024. This was driven by increased direct overhead as a result of 15% higher head count levels and lower labor utilization during the first half of 2025. Selling, general and administrative expenses were $8.3 million for the year compared to $6.2 million incurred during the previous year. EBITDA for the year was $960,000, which was $2.6 million lower than in 2024. The reduction reflects $1.3 million in expenses related to our growth initiatives, with $680,000 resulting from higher head count levels, and lower utilization in the first half of 2025 and a $570,000 receivable write-down, which we are actively pursuing through legal action. This led to a breakeven earnings per share compared to $0.22 per share the previous year. Turning to our balance sheet. As of December 31, 2025, we reported $4.8 million in working capital, including $1.5 million in cash and $4.7 million in net receivables. This compares to $5.7 million in working capital at year-end 2024 with $3.4 million in cash and $2.8 million in net receivables. The shift is primarily due to the timing of billing and collections tied to fixed price contract milestones. Before I hand the call back over to Erik, I want to briefly acknowledge that while 2025 was not the year we had hoped for, the significant improvements throughout the year that led to a great fourth quarter, demonstrate the ability of the Koil team to carefully manage our growth journey. During 2025, we restructured and strengthened the finance team and successfully implemented NetSuite as our new ERP system. Our focus remains on profitable growth disciplined execution and scaling investments appropriately. Thank you. Erik Wiik: Thank you, Kurt. My congratulations to the men and women of Koil Energy. And particularly our sales team delivering a record order intake in 2025 and our service team who delivered a 45% annual growth in service revenue. The culture of Koil can be described as exceptional responsiveness and safe workmanship. This is our business DNA. Speed and collaboration are cornerstones of our work culture. Our clients continue to entrust us with critical project awards. For instance, during the year, we installed over 70 multi quick connector plates for Beacon Offshore Energy at its Shenandoah Deepwater field in the Gulf of America. We secured a significant contract to supply steel to flying leads and associated equipment for a project in the Gulf of America. We also announced the award of a significant contract for control equipment for a subsea isolation valve system. Earlier in the year, we won a significant contract to supply multi quick connector plates for a high-pressure system in the Gulf of America. Although we secured numerous smaller contracts on a weekly basis, it is a significant and major awards that drive our growth. We are very excited for our future. In 2026, our team will remain focused on growing the company and delivering on our growth strategy. The consensus among our customers is that global energy demand continues to rise. Deepwater fields naturally decline at an average rate of 7% per year underscoring the urgency for new development just to maintain current output. From our perspective, we're seeing global operators allocate more capital towards deepwater and ultra deepwater developments, particularly in Brazil, the U.S. and West Africa. Subsea tieback developments continues to gain momentum as a preferred approach among offshore operators. These projects allow operators to access nearby reservoirs, utilize available topside capacity and leverage existing subs infrastructure. A key advantage of subsea tieback development is the potential for shorter payback periods than traditional greenfield projects. Leveraging existing assets, these projects frequently have the potential to achieve first oil within 2 years of final investment decision. Proven practical design backed by a deep team experience in subsea development and commissioning plays a critical role in ensuring reliability and staying on schedule. Koil Energy, is in a uniquely strong position to win subsea tieback projects. Billing activity and order intake for subsea tieback projects continued to increase throughout the year. During 2025, we have continued to invest in new talent and additional assets to support our long-term growth strategy. We remain disciplined in balancing profitability with investment and are confident that our expanded capabilities position us well to execute on our growing backlog. We remain focused on our strategic objective to becoming the leading provider of integrated subsea distribution systems and services globally. One indication of subsea activity is the number of subsea trees awarded and later installed. For both greenfields and brownfields, industry analysts such as Westwood Global Energy Group on March 6, 2026, reported an expected increase from 247 subsea tree awards in 2025 to 296 awards in 2026, a 20% increase. Koil's product sales tend to correlate with subsea tree awards as we supply the controls infrastructure linking subsea trees to the topside production facility. Analysts also expect subsea tree installation activity closely correlated with Koil service activity to increase by approximately 8% even when compared against last year's elevated installation levels. We are 2 years into an ambitious 3-year strategy focused on achieving continued profitable revenue growth. While our growth strategy continues to push Koil's business performance domestically, we have also advanced our international activities. Our facility in Macae, Brazil is up and running. While we are waiting for a significant contract in that region, we are currently serving clients with rental equipment that we built in country. The bidding activity in South America is at its highest level and we are pleased to share that we are now qualified to bid for key customers in that region. While Brazil is our main focus, we continue to pursue opportunities in the North Sea, together with our alliance partner, SubseaDesign. We have also hired a channel partner, pipeline network, LLC to pursue service work in Africa and Southeast Asia. Before we conclude, I would like to share that we are currently refining our growth strategy and setting ambitious new goals through 2030. We look forward to presenting these plans at an in-person and online investor conference in Houston on May 7 and 8, 2026. The held in conjunction with the Offshore Technology Conference, OTC Formal invitations will be in shortly. That concludes our prepared remarks today. So I'll turn the call back to the operator to take investor questions. Operator? Operator: [Operator Instructions] The first question today comes from [ Mike Travels ], private investor. Unknown Shareholder: Question is the Iran war and increasing oil prices, what kind of a scenario assessment? Can you tell us when you get into the situation with oil prices increasing, increasing fast? Are your customers increasing their activity? Are they taking a wait and see? Is this more profitable for them? Is it better, worse or no change? What can you tell us? Erik Wiik: Well, that's a question for someone with a higher pay grid than me perhaps. But thank you, Mike, for the question. So I'll refer to our customers what they say. And last week, we had the CERAWeek in Houston. This is an excellent conference where you have not only executives from various international oil companies present, but you also have government officials from various countries that are engaged in oil and gas policies. So two things relate to this. First of all, as you said, the oil price going up. And for a while, we don't know how that will go and how long it will stay. But while it does, obviously, our customers are getting their cash flow improved. They always have and referring to a similar situation in the past, they always have projects sitting on the shelf that they would like to develop, but didn't get included in the budget. So when cash flow increase, what we often see is that we release more projects for that reason. Obviously, that has very little to do with the business case, the long-term business case because all these projects take years to develop. So who knows what the oil price is going to be 5 to 7 years from now. But the other part of this that again, referring to what I learned from my customers, is that the [ foremost ] trait as being something we always have talked about but not too often, perhaps in the recent years. We always knew it was a risk when so much of the resources come from that region. But now we know it's real. That risk is now on everybody's mind. And even if there is hopefully a piece coming shortly here, we will have this in mind. Too many resources are coming from one place. So officials from various countries have reflected that they obviously want to make sure that they have resources in their country or with a trusted neighbor. And for sure, the subsea developments is the best way to address that. There are so many subsea regions around the world and so many countries participate in developing subsea developments. And we hear now that they're more interest in going after that resource than perhaps before this conflict. Unknown Shareholder: That sounds like somewhat of a positive assessment long term, though. Erik Wiik: Well, I hate to connect our earnings to a conflict, but that's what I learned from these people, yes. Unknown Shareholder: Right. Can you give us more color on the longer-term growth plan that you mentioned going out to 2030? Erik Wiik: Yes. So we are preparing that now. We have been working so far on a 3-year strategy. The road map is now 2 years into the 3-year plan. So obviously, we need to hammer out some more details on what we're going to do in the next 3 years or actually 4 years, which gets us to 2030. So that is what we're working on right now. And then we plan to present that at an investor conference in the second week of May, the 7th and 8th of May. Unknown Shareholder: And is that -- is there going to be a link for us to watch that? Erik Wiik: Absolutely. So you can either be present here or we're going to have an online conference as well. Operator: [Operator Instructions] The next question comes from [ Peter Michelman ], private investor. Unknown Shareholder: I was wondering what is your exact head count today in Houston and Brazil, respectively. Erik Wiik: So the exact head count is 68 today. Is that correct? Kurt? Kurt Keller: If you don't include Brazil. And then if we include our people in Brazil, we have three people in that are dedicated to Brazil. Unknown Shareholder: Okay. And with respect to operations in Brazil, are you -- it doesn't sound like you're doing any fabricating with employees in the new facility. It's with subcontractors. Erik Wiik: So the initial work we did was with the subcontractors and -- but then we brought the equipment to the facility for inspection there and also had contractors working at the facility to do inspection and then we shipped it to the field. So all the -- is complete. Unknown Shareholder: And as time proceeds in Brazil and you -- let's say, you get a significant contract. What kind of margins do you see compared to Houston on fabrication and service work, respectively. I mean, the labor is a bit cheaper and the facility lease is cheaper, but then I imagine that -- when you facilitate a sale, it's going to be less revenue? Or how would that work? Erik Wiik: So our margin policy will be the same there as it is here. So we're trying to get the same margin on every project basically. And -- but as you indicated, winning the first project, perhaps we have to go lower, but not necessarily. We think that Brazil is a mature competitive region. You can manage risk well and the competition there is not necessarily you want to lose money either. So it doesn't mean that we necessarily need to give up margin. But as you indicated in the beginning, it might be a little less. Unknown Shareholder: So you're looking 40% target, 35% to 40% range roughly? Erik Wiik: So yes, the gross margin range, we want to be in the high 30s with that, then 40% would be a great target, absolutely. Unknown Shareholder: All right. What became of the receivable turned bad debt from last quarter or the engineering firm in Britain? Kurt Keller: We are still pursuing that, and we received a default judgment here in the States and now are going after them in U.K. legal system. Unknown Shareholder: And is that a long and winding road, so to speak? Kurt Keller: It's one that's maybe not as clear a path as the U.S., but it is in the U.K. And so... Unknown Shareholder: There is a path. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Erik Wiik for any closing remarks. Erik Wiik: All right. Thank you, operator, and our thanks to all of you who joined our call today. We appreciate your interest in Koil Energy and look forward to the next earnings call. This concludes our call. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day. Thank you for standing by. Welcome to the Solesence Fourth Quarter and Full Year 2025 Conference Call. Today's call is being recorded. During this call, management will make statements that include forward-looking statements within the meaning of the federal securities laws, which are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This conference call may contain statements that reflect the company's current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those stated on this call. These important factors include, without limitation, a discussion of a customer to cancel a purchase order or supply agreement, demand for acceptance of the company's personal care ingredients, advanced materials and formulated products, changes in development and distribution relationships, the impact of the competitive products and technology, possible disruption in commercial activities occasioned by public health issues, terrorist activities and armed conflicts and other risks indicated in the company's filings with the Securities and Exchange Commission. Except as required by federal securities laws, the company undertakes no obligation to update or revise these forward-looking statements to reflect new events, uncertainties or other contingencies. I'll now hand the conference call over to Kevin Cureton, President and Chief Executive Officer. Please go ahead, sir. Kevin Cureton: Thank you, operator, and thank you to our investors, brand partners and teammates who are joining us today. Today, we will provide more guidance on our 2026 plan and the strategy we initiated at the end of 2025, which aims to take our company forward to enhance consumer health and well-being while delivering outstanding results to our investors. This initiative is called Transform and Transcend. Before we delve into our plans, we will review our 2025 results. To walk you through how we wrapped up 2025, I'll turn the call over to our CFO, Laura Riffner. Laura? Laura Riffner: Thank you, Kevin. I will begin with a review of our fourth quarter 2025 results before moving to full year performance and our 2026 outlook. For the fourth quarter, revenue was $12.5 million, roughly even compared to the previous year. Fourth quarter 2025 gross profit was $3.4 million compared to $2.8 million for the same period in 2024. Gross margin was 27% in the fourth quarter of 2025 compared to 22% in the same period in 2024. Our results were affected by transition costs and operational inefficiencies in manufacturing resulting from our facility consolidation. Operating expenses in the fourth quarter of 2025 were $3.2 million compared to $2.8 million in the same period in 2024. This figure included relocation charges as we transitioned from 3 facilities to 2. Solesence reported net income for the quarter of $163,000 compared to a net loss of $558,000 the previous year. Turning to the full year 2025. Revenue reached a record $62.1 million, up 18.6% from $51.9 million in 2024. This was primarily driven by a large-scale launch in the first half of 2025 as well as 20 new brand partners who launched products in 2025. While revenue growth was substantial, full year gross profit was $16.1 million compared to $16.2 million in 2024. As Kevin noted in our third quarter call last November, our margins were compressed by 3 key areas. The first is labor costs. Elevated labor costs this period were primarily driven by extended process changeovers and related downtime as we scaled our production volume. The second is product design, which relates to start-up and quality costs associated with a complex launch in the first half of 2025. Third, inventory control, which represented the most substantial headwind to margins this period. Driven by our efforts to grow while scaling production, we experienced yield volatility and associated losses, which impacted our bottom line. We are now prioritizing cycle counting and preproduction staging to improve production flow as we continue to expand. With the above results, we delivered adjusted EBITDA of $4.2 million, less than 7% of revenue. As we look ahead, our 2026 guidance focuses on operational health. As a result, we are establishing a 30% gross margin floor as our target for the year. We expect EBITDA improvement in 2026, returning to double digits as we realize 6-figure annual savings from our facility consolidation and the elimination of 2025's operational inefficiencies. A critical goal in 2026 is to increase our free cash flow by reducing safety stock and improving procurement operations. We began 2026 with momentum from 2025, driven by organizational changes and the launch of the Transform and Transcend initiative. Still, our first quarter results will be impacted by investments in training and restructuring associated with Transform and Transcend as well as by changes in customer order patterns, largely due to retail dynamics and weak sell-through from one of our large mass market customers. Our current ship in open orders stand at just under $33 million as compared to a year ago when they were at $38 million. While we anticipate a period of revenue normalization, we plan to improve EBITDA relative to 2025 and remain confident in our ability to achieve our full year guidance. I'll turn it back over to Kevin to provide more details about our transform and Transcend initiative. Kevin? Kevin Cureton: Thank you, Laura. As we look back on 2025, it is important to reflect on our company's journey over the last 12 months, indeed, the past 2 years. During that period, our company nearly doubled its revenue. As I noted in our press release, this affirmed both the value we bring to the industry and our ability to establish ourselves as a leading innovator and manufacturer of SPF-infused beauty products. We increased our patent portfolio by 20%, which now numbers over 120 and through this expanded position, created a valuable picket fence that protects our market position and provides one-of-a-kind leverage for our brand partners as they grow. While we achieved these important business milestones, we invested in building our manufacturing infrastructure which both modernized our production capabilities and expanded capacity, which will enable us to generate over $200 million in revenue without further major investment. In October of 2025, we showcased a new product, Day Mode Hero Concealer. Day Mode is a hybrid product that combines skin care and color cosmetics with skin longevity claims, including UV protection and leverages 2 new technology platforms that we will bring to market in 2026. This prototype product was recently named a finalist across 4 categories of the Cosmetics & Toiletries Alle Awards. These categories are wellness, anti-aging and skin care, color cosmetics and UV protection. While the winners will not be announced until later in 2026, the cross-category recognition for this multifunctional concealer demonstrates the broad and enduring appeal of our innovations and affirms that our technology and product stories resonate with brands and industry experts alike. Through these developments, we have built a company on the cusp of changing the health and well-being of millions of people while dynamically growing our enterprise value, but there is still more work to be done. In our Q3 call, I spoke about 3 specific areas where our operating model needed changes that were revealed by our rapid growth. These areas are product design, labor efficiency and inventory control. While we achieved record-breaking revenue this year, our business processes were tested by the sheer volume and complexity of our success. As Laura highlighted, these challenges led to lower-than-planned income performance. As we face these challenges, we also saw that our opportunities to simultaneously increase profitability and growth were being limited by our execution. As a result, we launched the initiative that today we are formally introducing to our investors, Transform and Transcend. It is a framework we will use to ensure our financial performance aligns with our technological excellence in order to secure a path forward for sustainable profitability. This is a road map designed to fundamentally correct the operating challenges we have identified while amplifying the innovation platform we created, ultimately resulting in what we believe will be significantly increased enterprise value. The Transform and Transcend initiative is built on 4 core pillars. The first pillar is operational excellence through the implementation of lean management principles. We began work on this first and foundational pillar in November 2025. Through lean management principles, we are equipping our company with the processes and discipline to meet or exceed our brand partners' requirements while aggressively eliminating the inefficiencies we have identified across our business. A key tenet of this is a modernized sales inventory and operations planning process, or SIOP. These improvements will address the labor inefficiencies, inventory control issues and yield losses we saw in 2025. We plan to increase our gross profit margin by at least 5% by the end of this year compared to 2025. The second pillar is technology-driven expansion. Starting in late Q2 to early Q3 2026, we plan to expand our addressable market by introducing new product categories. These include bringing the technologies behind the prototype Day Mode Hero Concealer product to market. We are leveraging our 120 patents with new formulation innovations to move into adjacent prestige beauty segments like scalp care, where our technologies can provide an immediate competitive advantage. The third pillar is our shift toward a product development and supply model that enables us and our brand partners to capture more value and a greater share of wallet. This includes an emphasis on turnkey supply and collaborative marketing to drive sell-through and leverage increased consumer recognition of Solesence branded technologies. We kicked off our first major co-marketing activation 2 weeks ago with brand partners, Colorescience and Bloomeffects. The fourth and final pillar is collaborative globalization. Beginning in the first quarter of 2027, we plan to support select brand partners as they expand into international markets. Given the regulatory complexity of the global SPF market, this pillar represents an opportunity to modify our service model in those regions, increasing margins by 10% or more relative to our domestic benchmarks. The change in leadership, starting with my appointment as President and Chief Executive Officer, was made to achieve profitable growth for our company, including the development and implementation of the Transform and Transcend initiative. As you know, in support of our profitable growth objective, we also added a seasoned CFO, Laura Riffner, to our team in September of 2025. This represents the first time that we added a C-suite level of finance and accounting professionals to our team who has demonstrated success in our industry. We also recently added Yoolie Park as Vice President of Brand Partnerships. Yoolie brings over 20 years of experience in component supply and turnkey manufacturing. Her mandate is to institutionalize our new commercial strategy and help us further deepen and expand our relationships with existing and new brand partners. Looking ahead into 2026, beauty sectors remain resilient and consumers continue to view beauty as an affordable luxury with SPF-infused skin care at the intersection of essential and discretionary spending. Consumers are more critically examining how protecting their skin, their largest organ impacts their overall well-being. As a result, we believe SPF infused beauty will be a central aspect of the more than $500 billion global beauty and personal care market. We remain excited about how closely our products and technologies are aligned to consumer demand and the value our strategic brand partners see in our consumer products. Before we go to Q&A, please keep these thoughts in mind. Following 2 years of growth that significantly outpaced the industry average, 2026 will be a year focused on execution, which is at the heart of what the Transform and Transcend program will yield. It is this focus accompanied by the associated restructuring and investment that is a necessary step to transform our operational execution in order to transcend beyond the traditional CDMO model. Ultimately, this will turn Solesence into a strategic innovation partner that drives superior financial performance for both our brand partners and our company. Operator, we are now ready for the Q&A. Operator: [Operator Instructions] Our first question comes from Tony Rubin, who's an investor. Unknown Analyst: So I heard a lot of interesting words in the call, but I was hoping you could drill down to [ GrassTechs. ] In 2024, you had EPS of $0.07 per share. And Laura, you talked about increasing EBIT, but didn't really provide an EPS goal. So my question on that aspect is, will EPS in 2026 be at or above the 2024 levels? And kind of a related question is, Kevin, previously, you had suggested that gross margins would return to at least the mid-30s level. And on this call, Laura mentioned a floor of 30%. So I hope you would both agree that maximizing shareholder value is the purpose of a company. So with those goals in mind, could you address those 2 specific items? Kevin Cureton: Thank you, Tony, and thanks for joining. So what we'll do is have Laura address your first question and also can provide some color on the gross margin area, and then I may offer additional color to that. Laura? Laura Riffner: Thank you for joining us today. Regarding the EPS, we aren't prepared to provide guidance on that this morning. As I did mention, we are expecting and targeting an increase in EBITDA to return to double-digit numbers in 2026. Regarding the 30% gross margin floor. On that, Tony, our guidance is intentionally conservative. And while we are -- we have that as our guidepost, our intention is to leverage the Transform and Transcend initiative to improve that number. Kevin Cureton: I think Laura has answered both those questions very well. So there's nothing additional I can offer at this point other than, again, reaffirming our guidance is on an annual basis and that we are taking a conservative approach to that guidance, but expect to obviously focus on improving enterprise value, which ultimately will increase the value to our shareholders. Operator: Our next question comes from James Lieberman with American Trust Investment Services. James Lieberman: And I want to actually congratulate you for all the transitions that are going on. Most people don't fully appreciate what you've accomplished over the last couple of years. And in terms of consolidating manufacturing into your new facility, I'm sure that's a major step, and you have to be extremely careful about doing that transition so that you don't have real supply issues and manufacturing issues that could have been more difficult to meet your customers' goals. But can you address some of the questions of if you have an aspirational say that you could grow the company to be $200 million, is there sort of like a some sort of road map to get there in terms of the kind of new products you're coming out with, the relationships with your customers and how you see the market sort of, say, like a 2- to 3-year period? And also, can you give us an aspirational profit margin? So you're hitting on all cylinders. Could you reach as high as like a 40%? Can you address those areas? Kevin Cureton: Jim, thank you for your thoughts, and I appreciate your involvement in our company for as long as you have been. So thank you. There's a lot you offered there. We'll try and start by addressing, yes, the consolidation was successful. And in fact, through that consolidation, we did not have any impact or negative impact on OTIF. We actually continue to have a high performance on time and in full while we conducted that consolidation. So we're excited about that and excited about what contributions that consolidation will have in terms of improving our overall financial performance. When looking beyond the current state and being aspirational in a careful manner this morning, that is really at the heart of the Transform and Transcend plan. What we talked about in our prepared remarks was to really address some of our operational execution challenges so that we could amplify our innovation platform. We're really in a unique position based upon the type of IP that we've created, the type of protection that it builds around our brand partners and for us and uniquely addresses what's really the most important or really preferred area for consumers, which is mineral-based sunscreen is preferred by all consumers or at least at 70% of women as one of our resources say. So we're building a platform that really is targeting the areas that are growing the fastest. We're working with brands that are the fastest growing. We work with the middle market brands primarily, and those are the brands that are the fastest growing in the industry, and we're addressing a critical area that also is driving the change in the marketplace. So all of those things point to us resuming the type of growth that we've had in the past, which is growing at a multiple of the industry's growth rate. And so we anticipate that to happen. We also have talked in the past, Jim, about getting full value of the technology that we provide through the Transform and Transcend initiative, we also mentioned some of the changes that we're making relative to increasing our share of the value chain. And quite honestly, along with that, the share of the value chain that our brand partners have as well. Those initiatives or that specific initiative, along with the rest of what we've described in Transform and Transcend will help to significantly increase our gross profit margin performance and therefore, in the end, our EBITDA, so that we are targeting levels that you mentioned and maybe even greater. All of that takes time, as you know, and as you have appreciated over the many years you've been part of our investor community. And so we're excited about what's going to start, but we know that it will take some time for us to get to all of those objectives, but we're really excited about where we are and where it's headed. Operator: [Operator Instructions] Our next question comes from Stefano Bolis, an investor. Unknown Analyst: I have 2. The first is, are you still planning to have a dedicated investor call, as you mentioned last time? And the second is on the BASF volumes. In the last 3 years, they have been decreasing. So one would have expected after the lawsuit story that this is because they needed more, not because they needed less. So how do you see this trend moving forward on BASF? Kevin Cureton: Thank you, Stefano. I appreciate your call in today. So a couple of questions there. Let's take the last one first and just guide that as with many of our brand partners, even those that we are well known like BASF or publicly known, maybe a better way to state it, like BASF, we are very careful not to provide specific guidance on their performance. There -- we are permitted to acknowledge those brands, but not really provide specific guidance on their performance. So I'll not be able to provide more than that. We certainly continue to partner with them closely and have a good working relationship with BASF. Operator: Our next question comes from Wayne Rowan, who is an investor. Wayne Rowan: Yes. I'd like to thank you for your integrity and not trying to gloss over things. That's much appreciated. Nobody likes BS. Why have we struggled so much on production? Because it seems like we've been struggling with that for quite a while now. And then the other thing is, did we lose a brand partner, a place where we sold a lot of product? Or did I mishear that? I'm a little old and sometimes my hearing ain't so good. And then do you anticipate -- the other thing I'd like you to address is why it took so long to get this call this quarter. And then you anticipate an improvement in sales this year, and thank you for your hard work and tell Jeff hello too. Kevin Cureton: Thank you, Wayne, for continuing to be a committed investor in our company. We certainly are committed to providing as much transparency as we can. And I hope as you -- and Stefano, I did not address your first question, which was related to the investor call. It is our intent to provide improved communications to the investors. Now that we've communicated a little bit more relative to the Transform and Transcend program, we will be prepared to continue that process going forward. What we had talked about, again, I'll first finish up by addressing Stefano's question regarding the investor call. What we really talked about was an investor presentation. We do believe that is something that is important for us to present, and we will have further information and guidance that we'll provide in the months to come. So thank you again for that question, and we'll move on to some of Wayne's questions now. So Wayne, you had several questions, and thank you for our team helping me to track all of them. The first one is related to production. And I believe, as we mentioned in the script, one of our challenges has been that we've simultaneously grown at a multiple of the industry's growth rate and installed new capability. And what our emphasis has been over that time has been to make sure that we met the quality standards that are necessary for a cGMP production, which has its own unique challenges, but also to make sure that we're meeting the on-time and in full performance that's necessary to keep products on the shelves for our brand partners. So that simultaneous challenge certainly has been one that hasn't translated into the gross profit margins that we would like to see, but we've now reached a place through the plans that we have in front of us that we are confident in our ability to perform well in the future. I think the next question that you had, Wayne, was related to a brand partner. We did not mention in any of our guidance that there was any loss of any brand partner, just to be clear. What we guided was that there were some challenges that one of our brand partners was having in sell-through in the mass market. Laura Riffner: The next question, Wayne, I believe, was why it took so long to schedule the call. We prefer to schedule the call after our year-end audit is completed. And the scheduling of the audit gets done quite literally almost a year in advance. So by the time the audit was scheduled with our auditing firm and finalized, it's simply just how long it took to get it scheduled. Kevin Cureton: Yes. So the last question was related to the sales target. And again, thanks, Wayne, for all the questions. The sales targets, as we've guided, is that this year will be a period of normalization. And so that is on a full year basis, the guidance that we can provide at this point. We are excited about the future of our business. We continue to be excited about the addition of our new Vice President of Brand Partnerships, Yoolie Park, who brings over 20 years of experience in turnkey manufacturing. And that in and of itself has already helped us in terms of our ability to more effectively deepen the relationships that we have with some of our key brand partners and put new brand partners in front of us in a way that will materially improve and grow our company over the years to come. Operator: I'm not showing any further questions at this time. I'd like to turn the call back over to Kevin for any further remarks. Kevin Cureton: Thank you, Kevin. Before we sign off, I wanted to just give you a final thought on our future. Back in 2019, when our consumer products line was less than $2 million, we said the future of Sun Care is the future of beauty. Today, with over $50 million in revenue from our consumer products line and a global patent estate to support it, that vision has been validated. However, our 2025 results showed us that scale without operational excellence will not enable us to create a platform for our company to achieve our goal of dynamic growth in our enterprise value. That is why 2026 is our year of transformation. Through Transform and Transcend, we are removing inefficiencies from our operations, modernizing our supply chain and refining our partner base and ways of working with them to ensure mutual success at both the top and bottom lines. We are doing the hard work now to ensure that our proprietary technologies and consumer preferred products translate into the best-in-class financial returns our shareholders expect. We are confident by stabilizing our foundation this year, we are setting the stage for the next 5 years to be the most profitable in our company's history. Thank you for your continued support. Have a great day. Operator: Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.
Operator: Good morning, ladies and gentlemen, and welcome to the Charlotte's Web Holdings, Inc. 2025 Fourth Quarter Conference Call. [Operator Instructions] This call is being recorded on Tuesday, March 31, 2026. I would now like to turn the conference over to Cory Pala, Director of Investor Relations. Please go ahead. Cory Pala: Thank you, and good morning, everyone. Thank you for joining us today for Charlotte's Web Q4 2025 earnings conference call -- provide some color around the recent developments around BAT transaction, the Medicare opportunity, regulatory momentum and other progress. Afterwards, we will take questions from our analysts. As always, before we begin, please note that certain statements made during this call, including those regarding our future financial performance, business strategy and plans, constitute forward-looking information within the meaning of applicable security laws. These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause actual results to differ materially. We direct you to review the cautionary language in this morning's earnings release as well as the risk factors and other important considerations that are detailed in our regulatory filings, particularly in our most recent Form 10-K report. During the call, we will also refer to supplemental non-GAAP accounting measures, including adjusted EBITDA, which do not have standardized meanings prescribed by GAAP. Please refer to the earnings press release for descriptions of these measures and reconciliations to their most directly comparable GAAP financial measures. And with that, I'll now hand over the call to Charlotte's Web's CEO, Bill Morachnick. William Morachnick: Thanks, Cory. Good morning, and thank you for joining us today. I want to say right up front that this is not business as usual for Charlotte's Web. We've had several key announcements that have tremendous positive impact on our business that I'm excited to share with you. So let me also add that this includes another quarter of demonstrated progress for our push towards achieving scalable profitability. But first, let me start with the most recent development. Last night, we announced a financial transaction with British American Tobacco in relation to its existing convertible loan note. This transaction has 2 primary components. First is the conversion of BAT's outstanding $55 million convertible debenture, plus approximately $10 million in accrued interest in the common shares of Charlotte's Web at a conversion price of CAD 0.94 per share. This eliminates our largest balance sheet liability entirely and avoids approximately $3 million in future annual interest for the next 3.5 years. The second component is a new equity investment of $10 million through a private placement. This is fresh capital coming into the business to support the execution of our key strategic initiatives, including our upcoming participation as a leader in the CMMI Medicare pilot programs. So in total, BAT's combined equity commitment under this transaction is approximately $75 million. And following completion, BAT will hold approximately 40% of the company on a non-diluted basis. Among other things, this transaction provides clarity and stability around BAT's existing investment decision. Let me also provide some additional background on why we believe this is the right transaction at the right time and appropriate in the current circumstances. The original debenture was issued in November 2022 at a conversion price of CAD 2 per share. Due to several issues, including the ongoing federal regulatory delays around consumable hemp, it was extremely unlikely that BAT would voluntarily convert its debt anytime soon. If this debt burden were left unaddressed and continued to accrue interest at 5% per year, the company would have faced an additional $12 million or more in aggregate interest from now through the maturity date in November 2029. This transaction eliminates all of that. The net effect is a dramatically simplified equity-based capital structure. We go from carrying significant debt obligations to a clean balance sheet with a well-capitalized long-term investor. The additional $10 million in fresh capital strengthens our working capital position and provides flexibility to pursue multiple exciting growth opportunities. All right. So now let me turn to our most exciting recent growth opportunity the Center for Medicare & Medicaid Innovation pilot program, or CMMI. Under the CMMI pilot program, for the first time, seniors gained access to science-backed CBD products through a federally authorized Medicare pilot, and Charlotte's Web is positioned to be a participant within this program. Just 10 days ago, CMS, which is the Center for Medicare and Medicaid Services issued additional guidance that significantly clarifies and strengthens this opportunity. CMS established the Substance Access Beneficiary Engagement Incentive or Substance Access BEI, which will be the specific mechanism through which the pilot will operate. Notably, the guidance confirmed that the hemp-derived CBD products, including nonintoxicating full-spectrum products containing up to 3 milligrams per serving of naturally occurring THC are eligible under the program. This means our core portfolio of full-spectrum CBD wellness products qualifies under this federally authorized program. Under the Substance Access BEI, participating health care organizations primarily accountable care organizations, or ACOs, and oncology providers may purchase eligible hemp-derived CBD products for the Medicare patients with up to $500 per beneficiary annually available. To provide some clarity, it's important to note that Medicare does not directly reimburse these products. Rather, the ACO purchases hemp CBD products directly and furnishes them to its patients. The economic rationale is that if these products contribute to lower utilization of higher-cost services, the ACO may benefit through reduced total cost of care. As a result of that, the ACO may have an incentive to support adoption of the Substance Access BEI. Participants in the ACO REACH Model and the Enhancing Oncology Model are anticipated to begin offering the Substance Access BEI beginning April 1, which is tomorrow with the ACO LEAD Model expected to follow in January 2027. I want to be really clear about what this means. This represents an established health care integration pathway. It operates with CMS authorization, physician oversight, patient support through the program's partner Realm of Caring and structured outcomes data collection. To facilitate the pilot, Charlotte's Web will offer products intended to support eligible patients through a secure online health care portal. The initial phase is focused on senior patients receiving care through the ACO REACH provider. Over time, this type of model has the potential to be applied more broadly within the Medicare population, which currently includes approximately 67 million beneficiaries. And looking ahead, there is a second potentially much larger Medicare pathway development. In November, CMS proposed for the first time, allowing Medicare Advantage plans to be included -- to include hemp-derived CBD products in their benefit design. That is a separate program from the CMM pilot and it represents a potential expansion of CBD access into the broader Medicare Advantage system, which covers roughly half of all Medicare beneficiaries. The timing of additional details for this program are still being finalized, but we remain confident that our quality standards and compliance infrastructure position us well for this potential opportunity. All right. Let me take a moment now to talk about the federal regulatory status. Despite ongoing challenges, recent federal policy developments are showing progress for hemp-derived CBD. Congressman Morgan Griffith, who's the Chairman of the House Energy and Commerce Subcommittee on Health, which oversees the FDA, advanced the Hemp Enforcement, Modernization and Protection Act known as the Hemp Act. This proposed legislation would establish a science-based federal framework for hemp-derived products under the FDA oversight. We are actively working with our one hemp partners through the markup process. The Hemp Act is expected to proceed through regular order in the House Energy and Commerce Committee this year with potential pathways for advancements for broader legislative vehicles, including Congress' continuing resolution in September. At the same time, we recognize that multiple legislative approaches to hemp regulation are under active consideration in Congress. And we remain actively engaged with policymakers and stakeholders across these efforts and will support the most effective path forward to achieve a durable science-based federal framework. It's clear that a broader federal solution is critical. Recently issued Substance Access BEI guidance explicitly permits hemp-derived CBD products containing up to 3 milligrams of THC per serving under the CMS program. This would certainly seem to be a direct signal from the federal government that full spectrum products are considered safe and appropriate. Okay. Now let me turn to DeFloria, which is one of our most compelling long-term potential opportunities outside of our core consumer business. This is our collaboration with Aragen Bioscience and British American Tobacco. Last year, DeFloria received FDA clearance to proceed with Phase II clinical trials for its investigational new drug. This botanical IND is for the treatment of irritability associated with autism spectrum disorder. It represents a natural alternative to pharmaceuticals that are often poorly tolerated. It uses our proprietary full spectrum CBD extract derived from a patented hemp cultivars and we believe it represents the most advanced cannabinoid drug program utilizing the FDA's botanical drug pathway. Building on favorable results from Phase I, which established the dosing parameters for the Phase II program, DeFloria has been actively preparing for entry into Phase II clinical trials. Preparations are substantially advanced, and the program is expected to initiate midyear, subject to the customary development activities and resource alignment. Phase II consists of multiple studies across distinct patient populations. These studies will evaluate safety and tolerability and provide early signals of therapeutic effectiveness to inform a subsequent Phase III program. A reminder, as stated in this morning's press release, the potential strategic value to Charlotte's Web shareholders is significant. Clinical advancement through FDA regulated pathways validates the therapeutic potential of our proprietary genetics and strengthens the scientific foundation underlying our entire consumer business. We also hold exclusive commercial manufacturing rights to ultimately receive FDA approval which is clearly a significant long-term revenue opportunity. And we currently own approximately 1/3 of DeFloria, providing us with direct exposure to massive value creation as the program advances. With that high-level update, I'll now ask Erika to walk us through the Q4 and full year financials, and I'll return after her remarks to discuss our business execution and outlook. Erika Lind: Thank you, Bill, and good morning, everyone. As Bill noted, our 2025 financial results reflects 2 years of disciplined execution to stabilize the business return to growth and fundamentally restructure our cost base to drive to profitability. Let me walk through the key metrics, and I'll keep this concise so we can focus the balance of our time on the strategic discussion. Consolidated net revenue for Q4 2025 was $13.3 million. Q4 delivered a strong sequential rebound of 15.8% recovering from the Q3 dip driven by the planned B2B restructuring. Q4 also came in up 4.7% versus the prior year's $12.7 million in revenue. Growth was driven by continued direct-to-consumer momentum across our diversified botanical wellness portfolio, including expanded sleep and functional gummy mushroom offerings, the Brightside low-dose hemp THC gummy line and new minor cannabinoid formulations. Gross profit for Q4 was $5 million with a gross margin of 37.5%, and I want to provide important context around this number. The reported margin was significantly impacted by a nonrecurring $1.3 million inventory charge related to the disposal of legacy gummy products that did not meet our quality standards, which alone reduced gross margin by about 10 percentage points. Excluding this item, the underlying gross margin performance improved meaningfully. In-house manufacturing, net of onetime inventory charges contributed approximately 400 basis points of margin benefit in the quarter, validating our vertical integration strategy. We also saw improvements in the B2B channel mix following our Q3 restructuring driven by a reduction in trade spend. Our direct-to-consumer promotional efficiency improved as we shifted from broad discounting to targeted cohort-based campaigns. We expect gross margin to normalize toward our historical 50% range as we lap transitional items and as production efficiencies continue to scale. Total SG&A expenses were $10.6 million in Q4, consistent with the prior year and slightly higher than Q3. The quarter included several discrete nonrecurring items that impacted comparability, including a $600,000 state sales tax audit accruals and certain contract termination and timing adjustments. Excluding these items, our underlying operating expense base remained consistent with the structurally lower cost profile established throughout the year. Total net loss for the fourth quarter was $11.4 million or $0.07 per share compared to a net loss of $3.4 million or $0.02 per share in Q4 of 2024. Looking at full year results. Consolidated net revenue of $49.9 million increased 0.5% year-over-year, modest but significant as it was our first annual revenue increase since 2021. Full year SG&A expenses were $42 million, a 21.2% decrease from $53.3 million in 2024. This reflects the successful execution of our comprehensive cost optimization strategy, which has now reduced annualized SG&A by approximately $33.6 million or 44.5% over the past 2 years. We believe our cost restructuring is now largely complete. Going forward, we expect quarterly SG&A for the core business to remain in a normalized range of approximately $10 million to $11 million. Excluding anticipated launch spend for the previously mentioned Medicare coverage program. Net loss for the full year was $29.7 million or $0.19 per share compared to $29.8 million or $0.19 per share in 2024. This year, the full year net loss included a noncash change of $6.4 million in the fair value of the company's debt derivative and our investment in DeFloria. However, notably, our operating loss for 2025 improved by more than 36% to $20.3 million, a significant improvement from the $32 million operating loss in the prior year further demonstrating the impact of our cost restructuring. Turning to our cash flow and liquidity. Fourth quarter net cash used in operating activities decreased to $1.9 million compared with $5.5 million in the prior quarter and $1.8 million in Q4 of 2024. For context, quarterly cash change reflects the timing of cash outlays relative to accrual-based expense recognition so there is a natural variability quarter-to-quarter. In addition, our third quarter expenses always experienced a greater cash outlay than other quarters due to the timing of business insurance renewals. That said, the Q4 result demonstrates continued progress. Cash and working capital as of December 31, 2025, were $8 million and $21.7 million, respectively. It is important to note that this cash position does not reflect the BAT private placement, which adds $10 million in fresh capital, strengthening our liquidity and working capital position heading into this next critical phase. Before I hand it back to Bill, I do want to underscore the financial significance of the BAT transaction, which fundamentally changes our financial position. The transaction is transformational for our balance sheet eliminating material liabilities and adding fresh working capital. We are evolving from a company carrying significant debt obligations into one with a clean equity-based capital structure and a highly aligned strategic partner with a stable operating base, improving gross margins from in-house manufacturing and the capital to pursue the growth opportunities now emerging, we are well positioned for the next chapter. With that, I'll turn the call back to Bill to discuss our business execution and outlook. William Morachnick: Thanks, Erika. All right. So let's bring this all together. 2025 was a defining year for Charlotte's Web. We stabilized the business. We returned to annual revenue growth for the first time in 4 years, reduced our cost base by 44% over 2 years. Launched our boldest product innovations to date and laid the operational groundwork for what comes next. And I want to share one more data point that speaks directly to operational readiness. This month Charlotte's Web completed its annual NSF dietary supplement good manufacturing practices audit and received zero findings. For those unfamiliar, that's the gold standard of manufacturing compliance for dietary supplements. And achieving zero findings is an exceptional result. It reflects the discipline and the rigor of our quality team and validates the manufacturing infrastructure that underpins everything we do, from the products on our website to our qualification for federal health care programs. When we say Charlotte's Web is built to meet the standards that regulated health care requires, this is exactly what we mean. Let me share with you quickly what excites me about what's ahead. The CMMI Medicare pilot program, the presidential executive order, bipartisan legislative momentum for a rational federal framework, the advancement of DeFloria through FDA clinical trials and now a clean balance sheet with a well-capitalized strategic partner standing behind us. These are not speculative possibilities. They are real catalysts unfolding now that have the potential to fundamentally transform the scale and scope of our business. We built Charlotte's Web for moments exactly like this. Our brand, our science, our manufacturing capabilities and our regulatory engagement have positioned us to be at the forefront of the hemp industry's integration into mainstream health care. I want to take a minute to thank all of our shareholders for your continued confidence and patience. I know this has not been an easy ride, but the work of the past 2 years is now converging with the most favorable external environment our industry has ever seen, and we intend to capitalize it. Operator, we're now ready for questions from our analysts. Operator: [Operator Instructions] First question comes from Pablo Zuanic from Zuanic & Associates. Pablo Zuanic: Good morning, everyone. Look, I obviously have a lot of questions that I want to ask here given all the very positive news and of course, positive performance. Let me start with the CMS program. A few questions there. Precisely, when we talk about participating centers, what are these participating centers in the CMMI program? Which type of companies, are these established doctor offices or are these new setups, can Charlotte's Web own some of these participating centers. If you can give more color in terms of what are the participating centers in the CMMI program? Mindy Garrison: Well, good morning, Cory. This is Mindy Garrison here with Charlotte's Web, and thank you so much for your question. The participating centers are health care organizations that are already enrolled in specific CMS Innovation models. There are 3 actual models at play right now. The first 2 are ACO REACH and Enhanced Oncology Model or the EOM program, both of which can begin offering CBD, the Substance Access BEI hemp-derived products starting tomorrow, April 1. The third is an ACO LEAD Model, which is expected to launch in January of 2027. So these are not actually new facilities created for this program, they are established physician practices, health care systems, all combining together under an accountable care organization that are managed -- managing Medicare patient populations. The initial cohort under ACO REACH and the Enhanced Oncology Model, address approximately 2 million Medicare beneficiaries. Over time, as additional models come online, particularly the LEAD model and potentially the Medicare Advantage model, the addressable population will expand significantly towards a broader 67 million Medicare beneficiary base. And please excuse my mistake Pablo. Again, I really appreciate your question. Pablo Zuanic: And then just a follow-up on the same subject. Who is going to fund the $500 per patient per year under the BEI. Is that Medicare? Or is someone else funding that? And as part of that question, I'm assuming that the participating center will issue a prescription and the patient will go on your portal and order the product from you. So if you can just clarify in terms of who funds the $500 and then the logistics in terms of how the patients can access the product. Mindy Garrison: All right. Thank you, Pablo. Another really great question. And there's an important distinction here in that Medicare is not directly reimbursing these products. The participating ACOs and EOMs that I just talked about a few moments ago, will purchase the eligible hemp-derived CBD products using its own funds and furnishing them to its Medicare beneficiaries as part of their broader care strategy. The economic rationale for an ACO to participate in the Substance Access BEI and the hemp-derived products is that it will contribute to better patient outcomes, lower total cost of care, reduced hospitalizations, fewer high-cost interventions and lower pharmaceutical utilization. So they benefit through the savings under the CMS model. So the $500 per beneficiary annually represents a maximum of amount that the ACO can invest per patient, funded from the ACO's own program economics, not from a Medicare fee-for-service system is a value-based care incentive, not a traditional reimbursement. To get to your second question about logistically how will this work? Charlotte's Web has built a portal specifically for ACO and EOM programs to access the hemp-derived products that will be eligible under the Substance Access BEI program. They will order the products as if you were issuing a subscription to a pharmacy, except it would be through our portal. And those products would then be drop shipped to the patient's home. So it is a little bit different in that it's actually not a prescription. It's a recommendation from a health care provider to begin utilization of hemp in the service of helping their patients become healthier and live healthier lives. Pablo Zuanic: That's very helpful. And then on the same subject, what revenues does Charlotte's Web will expect from CMMI pilots in 2026 and 2027. I'm not sure if you can talk about guidance here. And as I ask that question, I wonder whether the participating centers will be able to buy from other companies or is Charlotte's Web were the only one pretty much in the pilot. But any guidance the company can give would be helpful. William Morachnick: Yes, sure. Pablo. So I think the way to think about it without giving you a ton of specificity around modeling is this is really early days in the pilot program. So I think I mentioned earlier, it literally starts tomorrow. For that TAM that Mindy just referenced that 1.7 million, 1.8 million folks in the ACO, the patients in there and then another couple of hundred thousand in EOM. I don't foresee massive revenue opportunity for, let's say, the balance of this year. We have to build out the education for the participants. I'm going to frame it as the channel participants, which are these medical and health care practitioners and networks. So they've got to understand the value proposition that CBD represents. They've got to get comfortable with it before they're going to make the recommendations that Mindy referred to. So it's going to be a gradual build over the next 12, 18 months. And we're really positioning ourselves for how this program scales out. So we'll see an uptick, say, in that 2 million TAM over coming quarters, not a whole lot initially. And then as the Medicare Advantage program progresses, then you're talking about a very large number, I think I referenced it in my earlier talk there, Medicare Advantage is about half of the 67 million participants in overall Medicare so that turns into a very large TAM. But we've got to see the specifics around that program and how it's going to flow and what the economics are. In terms of who else is participating, there is no exclusivity. But presumably, there are going to be continuing standards that have to be followed for anyone participating in the program around quality, around safety, around efficacy. So we really like the way we're positioned because we believe we're at the highest standard as that goes. And we've got a really fulsome robust go-to-market strategy immediately to do the kind of training that I was referring to earlier as well as establishing the portal for both the consumer and the health care practitioner. So we feel very confident about the way it's going to scale, but I think it's just -- it's too premature to start modeling around that for your purposes. Pablo Zuanic: No, that's great color, Bill. And one last question on the CMS program. How is the CMS program going to be reconciled with the potential hemp ban that's going to become effective November 12, 2026. William Morachnick: Yes. You always ask the hard question, Pablo. So here's where it stands at the moment, as you're aware, but for all the folks listening. At this current time, we've got the "Hemp ban" that could trigger in November of this year. That's the way that the language in the Ag [ Appropriations ] Bill that was inserted in the continuing resolution in the fourth quarter of last year [ reads ] such that if we're capped -- if the industry is capped at 0.4 milligrams of THC per container, it basically demolishes the CBD industry as we know it. At the same time, talk about cognitive dissidence that makes your head blow up. We are deploying a program for seniors that has a 3-milligram THC cap per serving. So dramatically different scenarios. We're working very closely through our resources in Washington, D.C. and beyond to come up with a very meaningful science-backed approach to where these things can get synchronized to where there is federal regulation that has a consistency that can operate across the country that can deliver the level of efficacy that's required. So at this moment in time, it exists in a way that you framed it, if I may, that we have a potential ban on the horizon. At the same time, we're deploying a program to address seniors that have dramatically different product components to it. So we have to see how the next several months play out but we're feeling good and confident that the Griffith's bill as well as the way the FDA is looking at things is going to land in a place that is much more like the Substance Access BEI is trending as opposed to the language that we saw at the end of last year. Pablo Zuanic: I guess, Bill, before I move on, maybe just a quick follow-up. I mean, would there be a concern that maybe the participating centers will wait to have clarity on the ban before they start getting involved or not necessarily? William Morachnick: It's a fair concern and I can only share with you in the conversations that we've had thus far because we've already done our outreach to potential participants. So ACOs and EOM practices, we're seeing -- I would categorize it as a reasonably high level of enthusiasm for what we have to offer. They're very intrigued by the power that CBD brings to their patients for those need states that we talked about, that their patients suffer to a large degree from. So lack of sleep, anxiety and pain, and they're looking at CBD with a very high level of curiosity and open mind in this of how this can be a phenomenal alternative, both from a cost perspective and an efficacy perspective. So again, I think it's too early to know if I was to say, I don't have a big enough sample set to say where that will go directionally. But early indicators are leaning much more towards we want to get on board with this now because we want to provide these solutions to our patients as soon as possible. Pablo Zuanic: That's good. Look, I'll just move on to some questions about the quarter. Obviously, congratulations on the 16% quarter-on-quarter sales growth. Give more color in terms of what drove that. I know you had something in the prepared remarks, but more color in terms of what drove that? And is that sustainable? Erika Lind: Pablo, this is Erika. Thanks for the good question there. So obviously, for the increase that we had, there were several factors. We have had continued D2C momentum because our portfolio continues to diversify, and we're doing much more targeted campaigns to broaden the top of the funnel. We also purposely restructured our B2B channel so that we removed a lot of the underperforming accounts. And we also think because of that, we've got some retail customers who transitioned to our D2C portal, which has been very positive for us. And then Q4 also benefits from a strong holiday season as with many companies. So it's really the combination of those things that produce really the strongest growth we've had in quite some time. Pablo Zuanic: And then just in terms of your balance sheet, obviously, I'm looking here at the year-end '25, right, $8 million cash, you still have negative -- I mean, negative operating losses. But you do have the BAT transaction now. Maybe just to address on a pro forma basis, the state of the balance sheet and your path forward on cash management and also cash flow generation, specifically I'm asking CapEx there. Erika Lind: Sure. And I appreciate the question, and I -- and the chance to really provide context because I know it's something that people are really sensitive about right now. So obviously, we had $8 million in cash to end the year, but it does not reflect that $10 million in fresh equity through the private placement. That placement clearly significantly strengthens our liquidity and cash position. So -- but I think it's really as important to note that this conversion eliminates our $55 million in the debt principle plus the $10 million in interest and prevents us from having to pay another $12 million for the balance of the note. So that really gives us a lot of optionality. On the operating side, as you know, we worked really hard to rightsize this business. Over the past few years, we've reduced OpEx by 44.5%. That's significant. And obviously, we're going to maintain that cost discipline because that's the norm for us now. We will have some launch costs related to the Medicare pilot program, but our leaner cost structure, improved margins, the steady consumer demand that we're seeing and the additional working capital for the BAT transaction, really strengthens everything for us. And I do want to stress to shareholders that the completion of this transaction requires approval from the majority of the shareholders. BAT obviously does not vote on it. So the decision rests entirely with the independent shareholders. And I strongly want to remind everyone that their vote matters. I encourage you to enter your vote as soon as you receive your proxy, it only takes a minute online. And that would make a huge difference for us and our consumers. Pablo Zuanic: Right. And on the same subject, in terms of the BAT transaction, why did management and the Board think this was the right time to do it at this point? Erika Lind: I'll expand a little bit on Bill's commentary on that. Obviously, we have some extraordinary opportunities ahead of us. And the Medicare pilot programs DeFloria FDA pathway require us to be properly capitalized. We have to be unencumbered by debt, and we have to be positioned to execute. In this case, the opportunity drives the transaction. I -- to talk numbers a little bit, I do recognize that the conversion price is lower than the original CAD 2. But the implied enterprise value per dollar of revenue is actually higher today than it was in '22 and I think it's important for people to understand that. The lower share price reflects the company's reduced revenue base and the industry headwinds. It does not give preferential treatment to BAT. The current transaction is struck at a higher implied EV to revenue multiple at about 3.5x compared to the original '22 deal, which was at about 2.1 to 2.5x. Even though the share price is lower, the enterprise value per dollar of revenue is actually higher today. BAT is paying more per dollar of revenue and not less. And I think that's a reflection of CMMI and the DeFloria catalyst that didn't exist back then. I also know that there are some dilution realities to this. The debenture reduces the debt but it's -- the conversion reduces the debt, but that's not new money. And in terms of enterprise value, that's approximately neutral. The market capitalization increase while debt decreases by the same amount. And what fundamentally changes is the company's risk profile. The debenture overhang, the interest burden and the refinancing risks are all eliminated. This clean balance sheet all else being equal, justifies a lower risk premium, which means the same enterprise value translate to a higher fair value for equity holders over time. And the private placement represents the incremental dilution from new capital, which is approximately 5% of post-conversion shares. We believe that is a modest cost for meaningful working capital at a critical time to capitalize on our growth opportunities. Pablo Zuanic: Yes. And the only comment I would make is that, obviously, I agree that this was a source of overhang, right? I mean the stock -- your stock is up 14% up today. So seems that it was an overhang. So the clarity is helping and investors are responding positively to that. The last question on the subject. BAT now is going to own around 40% of Charlotte's Web, right? We know that BAT also own stakes in Organigram. They own stake in Sanity Group, which was acquired by Organigram. Can BAT own more than 50% of Charlotte's Web at some point or are there restrictions given that they are U.K.-based. Erika Lind: So a couple of important points on that. There are no restrictions based on the fact that they're U.K.-based. The investment is made through BT DE investments or what we call BDI. And that's a Delaware incorporated subsidiary. They will be the direct holder of the shares. However, in the agreement, there is a part 49% cap of ownership and anything beyond that would have -- would be a subject to the applicable securities laws, TSX rules and also potentially shareholder approval depending on the circumstances. So we did build into the agreement of 49% cap that protects us from that. Anything else would have to go through some measures. BAT has been very supportive. They're a noncontrolling strategic partner. And there's a governance framework in the investment rights agreement that's designed to preserve the Board independence and the management autonomy regardless of BAT's ownership. Pablo Zuanic: Right. Understood. Look at the very last question. There were some headlines this week about the FDA submitting a CBD Compliance and Enforcement policy to the White House for review. What do you expect from this week's OIRA meetings? William Morachnick: It's -- I haven't been successful thus far, Pablo speculating where these things are going to land. I want to give this a little bit of time to see how it plays out. We're really head down focused on this transaction was just completed and how we ramp up our readiness for the CMMI program. There's just so much noise in the system right now between federal regulatory, state regulatory, CMMI versus the other things that you brought up. I want to give this a beat to play out a little bit. We've got contingency plans under any potential outcome. But I think it's just -- it's too early and too speculative right now. Pablo Zuanic: Right. And if I may just ask a quick follow-up, right? So I mean, given the way the headline reads, CBD compliance and enforcement policy, is this something to make it consistent with the CMS program? Or is this something to address this hemp ban in November because I guess, I'm confused in terms of the timing and what does it relate to specifically? Because it has repercussions for both, right, in theory, for the CMS program and for what the ban may be in November. And I know maybe it's too early to say, but thank you. William Morachnick: Yes. I mean you're raising the root of why I have an upset stomach most mornings trying... Cory Pala: Bill, your line is disconnected or muted. I'm in a different office, so I can't tell if they've completely disconnected. Pablo, are you still there? Pablo Zuanic: Yes, I am, but we can leave it for a separate follow-up call if you want, Cory. Yes. Cory Pala: Yes. At the end of the day, it's too soon to know exactly where these meetings are going to go in the next few days. We are encouraged that they're occurring but too soon to speculate on exactly where that's going to go. But at the end of the day, we are seeing a convergence of policy. So that's encouraging. Okay. Well, then with that, we seem to have technical difficulties on our end, but that was your final question, I think. So we'll close it off here. I would like to thank everybody for participating on the call today. Pablo, thanks as always for your in-depth questions. And we will look forward to speaking to you all again in the coming months. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.
Operator: Good morning. My name is Desiree, and I will be your operator today. At this time, I would like to welcome you to Imunon's Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the call over to Peter Vozzo of ICR Healthcare Investor Relations representative for Imunon. Please go ahead. Peter Vozzo: Thank you, Desiree. Good morning, everyone, and welcome to Imunon's Fourth Quarter and Full Year 2025 Financial Results and Business Update Conference Call. During today's call, management will be making forward-looking statements regarding Imunon's expectations and projections about future events. In general, forward-looking statements can be identified by the words such as expects, anticipates, believes or other similar expressions. These statements are based on current expectations and are subject to a number of risks and uncertainties, including those set forth in the company's periodic filings with the Securities and Exchange Commission. No forward-looking statements can be guaranteed, and actual results may differ materially from those such statements. I also caution that the content of this conference call is accurate only as of the date of the live broadcast, March 31, 2026. Imunon undertakes no obligation to revise or update comments made during this call, except as required by law. With that said, I would like to turn the call over to Dr. Stacy Lindborg, Imunon's President and Chief Executive Officer. Stacy? Stacy Lindborg: Thank you, Peter, and good morning, everyone. Joining me on the call this morning is Dr. Douglas Faller, our Chief Medical Officer; and Mr. Jeff Church, our Interim Chief Financial Officer, who likely needs no introduction given his tenure with Imunon. He'll be walking through and reviewing our financial results for the fourth quarter and full year of 2025. Mr. Michael Tardugno, the Executive Chairman of our Board, is also on the line and will be available for Q&A. We entered 2026 with strong momentum following a truly transformational year in 2025. Our proprietary IL-12 immunotherapy, IMNN-001, continues to demonstrate its potential to redefine frontline treatment for women with newly diagnosed advanced ovarian cancer based on all available data thus far, both translational and clinical. And IMNN-001 is rapidly advancing in the OVATION 3 pivotal Phase III study. The urgency of this program remains front and center for our efforts to create value for our shareholders and to address the unmet need in ovarian cancer, which continues to claim far too many lives as the standard of care traditional chemotherapy in the frontline setting has not advanced in over 30 years. In our OVATION 2 study, IMNN-001 demonstrated the first ever overall survival benefit in a randomized frontline clinical trial for this patient population with a final overall survival readout showing continued improvement in median overall survival across the trial through 3 different analyses that were conducted. Starting first with the original Phase II clinical trial data readout in July of 2024, which was across all endpoints. The median overall survival benefit was reported as 11.1 months. The median overall survival improvement observed in the subsequent clinical data readout in December 2024 was 13 months. And as we disclosed this week, has now expanded to 14.7 months in the final review of the trial results. Moreover, patients treated with PARP inhibitors as maintenance therapy in addition to IMNN-001 and standard of care chemotherapy demonstrated a median increase in overall survival of more than two years. The timing of this final analysis was defined in the protocol to occur when the last patient enrolled in the trial had reached three years post treatment, and these truly unprecedented Phase II results have given our laser-focused execution of the ongoing rigorous Phase III trial, which was as agreed to with the FDA, is designed to confirm the Phase II results and support full regulatory approval. Throughout 2025, we showcased the strength of these Phase II clinical data and the compelling translational insights at major scientific forums highlighted by the platform presentation at the 2025 ASCO Annual Meeting and the simultaneous publication of the OVATION 2 study results in the peer-reviewed journal, Gynecological Oncology. We capped off the year with a highly successful R&D Day we hosted in November in New York City, and the investment community and leading clinicians heard directly from key opinion leaders about Imunon's ability to turn immunologically cold tumors hot, to remodel the tumor microenvironment and deliver meaningful clinical survival benefits to women with newly diagnosed advanced ovarian cancer where none had existed before. This momentum carried into 2026 with OVATION 3 trial enrollment well ahead of plan. In a protocol that is virtually identical to the Phase II study, OVATION 3 is a 1:1 randomized trial to evaluate IMNN-001 plus standard of care neoadjuvant and adjuvant chemotherapy, which includes interval debulking surgery versus the standard of care alone in women with treatment-naive advanced ovarian cancer. The adaptive trial design with interim analyses for early efficacy stopping rules provides 95% power on the primary endpoint of overall survival while offering the potential for accelerated time lines of a BLA for full approval. Key updates since our Q3 2025 results conference call underscore the strength of our Phase II foundation and the accelerating progress in Phase III based on the strong response from patients, our clinical trial investigators and the broader medical community. And I'll just highlight a few areas, starting with site activation status. Phase III trial enrollment remains strong with 7 clinical sites actively enrolling patients and up to 43 additional high-quality centers under evaluation or in start-up mode. Returning investigators from the OVATION 2 study have been joined by new top-tier centers, many proactively reaching out following our data presentations and publications. We have contracted a global CRO to support rapid advancement of Phase III trial site activation and the study overall. Turning to enrollment velocity. Building on the strong progress we reported in late 2025, patient randomization and treatment in the Phase III trial have continued at an impressive pace and enrollment remains ahead of plan. The early sites have delivered higher than the assumed rate of 0.3 patients per month with some sites delivering as high as one patient per month. This early momentum driven by the compelling Phase II study overall survival benefit positions us well for continued acceleration of site activation and patient enrollment. Our goal is to have approximately 80 patients enrolled in the trial within the next 12 months and enrollment completed in 2029. Turning to regulatory and design validation. Based on the FDA's endorsement of overall survival as the primary endpoint of the Phase III trial combined with a robust statistical framework and precedent in oncology clinical drug development, OVATION 3 continues to derisk the path to a potential regulatory approval in both the U.S. and Europe. On translational data and the MRD trial data, we have data from the ongoing Phase II minimal residual disease or MRD study in collaboration with Breakthrough Cancer Foundation. This trial further reinforces IMNN-001 novel mechanism of action with demonstration of preferential uptake of peritoneal macrophages, profound tumor microenvironment remodeling, complete pathological responses and durable IL-12 and interferon gamma expression with excellent tolerability, even in combination with bevacizumab. We've successfully capped our enrollment in the MRD study at 30 patients, allowing the trial to meet all core objectives and upon completion, channel resources and highly productive sites fully into the Phase III OVATION 3 trial. Preliminary data from the Phase II MRD study continue to align with the overall survival benefit shown in the Phase II OVATION 2 study and support potential label expansions in the future. I'll now turn over the call to Dr. Douglas Faller for clinical commentary. Douglas? Douglas V. Faller: Thank you, Stacy. The enthusiasm within the gynecologic community that we saw at our R&D Day in November and throughout 2025 has only grown. The Phase II OVATION 2 clinical data showing a clinically meaningful 14.7 month median overall survival benefit and the ability of Imunon to activate both innate and adaptive immunity continue to resonate strongly with our investigators. Our multiple presentations at leading congresses in 2025 highlighted Imunon's unique profile, localized IL-12 delivery with negligible systemic exposure, favorable safety and clear signals of immune activation predictive of superior outcomes. Interestingly, after seeing our data presentations, many investigators have been approaching us asking us to join our Phase III OVATION study rather than vice versa. I find this kind of initiative to be most unusual in my long experience conducting clinical trials and also very gratifying. It further supports the consensus of the significant potential of IMNN-001 to address the unmet medical needs in newly diagnosed ovarian cancer. OVATION 3 has leveraged this interest from day 1. As Stacy said, study start-up was completed in record time and early sites have exceeded enrollment forecast. Safety data remains clean, mirroring the excellent tolerability seen across our IMNN-001 clinical programs. The Phase II MRD study has provided real-time confirmation of the favorable safety profile with no dose-limiting toxicities, no discontinuations due to IMNN-001 and very encouraging trends in progression-free survival and MRD negativity. These consistent findings across our studies give us high confidence as we scale the Phase III pivotal trial. Back to you, Stacy. Stacy Lindborg: Thank you, Douglas. Before turning to our financial update, I want to highlight that 2025 was defined by disciplined execution and strategic focus. We advanced the most important development program in our history while navigating a challenging capital markets environment with prudence and foresight. Our multipronged financing strategy, combining targeted equity raises, opportunistic ATM usage and ongoing partnership discussions has allowed us to extend our cash runway while minimizing dilution and advance IMNN-001 as quickly as possible. Shareholder equity remains paramount. Every decision is stress tested against our commitment to fully fund the OVATION 3 study with long-minded investors. We're making solid progress on this front and believe that once we secure a lead investor, we will be able to assemble a syndicate quickly. While the markets are improving and our ongoing calls with strong investors remain highly encouraging, we recognize that this time -- this process inherently takes time. We will continue to balance the ultimate goal of financing the trial with long-term oriented investors against the need to prudently extend our cash runway. We firmly believe that successfully completing this full financing is in the best interest of all of our constituents, including patients who are at the center of everything we do and all shareholders as we believe this will enable our investors to realize significant value. We are encouraged by continued interest in potential nondilutive partnerships for our TheraPlas technology platform and IMNN-001. On the financing side, prudence of our -- prudent use of our ATM facility and warrant exercises supplemented our cash position in 2025. Monthly cash usage has been further optimized, and we announced a strategic reorganization in February 2026 to reduce nonessential costs and to sharpen our operational focus exclusively on OVATION 3, streamlining operations and focusing scientific leadership while preserving all critical expertise in the interest of all Imunon stakeholders. These actions, combined with our continued manufacturing efficiencies, which are great, are designed to deliver on our milestone with maximum efficiency. Now over to Church for a review of our fourth quarter and full year 2025 financial results. Jeff? Jeffrey W. Church: Thank you, Stacy. Details of Imunon's fourth quarter and full year 2025 financial results were included in the press release we issued this morning and in our annual report on Form 10-K, which we filed before the market opened this morning. As of December 31, 2025, cash and cash equivalents were $8.8 million, reflecting disciplined cash management and net proceeds from warrant exercises and targeted ATM uses during the year. We project that this cash balance, together with our ongoing financial activities and cost-saving initiatives extends our operating runway into the second half of 2026. Research and development expenses for 2025 were $7.8 million, which was significantly lower than 2024, primarily due to the completion of the OVATION 2 study, optimization of the MRD study and focused spend on the OVATION 3 study manufacturing and start-up activities. General and administrative expenses were down 8% year-over-year through streamlined operations and renegotiated commitments. Net loss for 2025 was $14.5 million or $6.83 per share compared to $18.6 million or $16.94 per share, reflecting meaningful improvement driven by our cost discipline. I just would like to remind everyone that all share and per share amounts reflect the 15-for-1 reverse stock split effective in July 2025 and the 15% stock dividend declared in the third quarter of 2025. With that financial review, I'll turn the call back to Stacy. Stacy Lindborg: Thank you, Jeff. And Desiree, with that, we'll open the call for questions. Operator: [Operator Instructions] Our first question comes from the line of Emily Bodnar with H.C. Wainwright. Emily Bodnar: My first one, have you presented the final data from OVATION 2 to the FDA, particularly on the PARP inhibitor patient population? And have you received any feedback from the FDA on focusing on this patient population first in your OVATION 3 study? And then maybe if you could just kind of outline how you're thinking about upcoming milestones and catalysts for 2026 and any OVATION 3 updates that you're considering for this year? Stacy Lindborg: Thanks, Emily. A very well formulated and comprehensive question. So let me take it in steps. So first, we have not presented the OS data to the FDA. We are incredibly excited by the fact that it continued to improve. But really, this last analysis reinforces exactly the plans that we have in place. I think you specifically asked about the PARP-treated patients. And while this is even a larger effect than what we see in the intent-to-treat population, we know that this is a relatively small group in the trial, and it becomes important that we're replicating the findings. So we will be presenting the data to the investor community, and we'll also be presenting it to the clinical community. In fact, we got an abstract submitted over the weekend to a meeting that will really afford us to have some great discussions with potential new principal investigators. So our focus right now is really around the Phase III trial ensuring that we're continuing to build the amazing momentum and excitement in the medical community around this data and then ultimately delivering on the trial. So maybe I'll stop there really quickly and see if there's anything else, Douglas, you want to add to the latest data. Douglas V. Faller: Just that although we're very excited about the results in the patients treated with PARP inhibitors, we're equally excited about the results that we see in the entire population. And this greater than a year increase in survival is, as you know, Emily, unprecedented in ovarian cancer. No one has seen anything like this in the entire time I've been practicing medicine. So the ability as we replicate this in the Phase III, this will be incredibly meaningful for patients and the whole population of patients is what I'm getting at, not just the patients who received PARP inhibitors. If they continue to benefit as much as they did in the Phase II, that's wonderful. But we're focused on benefiting -- providing benefit to the entire population of newly diagnosed women with advanced ovarian cancer. Stacy Lindborg: Thank you. Emily, if I remember correctly, the other questions were focused around upcoming catalysts and our plan for this year and beyond. And I would say that we have catalysts that we're going to be very excited to report back, one of them being around the momentum of the trial. And so you heard in my prepared remarks, that we are -- our goal is to have 80 patients enrolled by this time next year. And reporting our momentum will be a very critical component of ultimately the overall time line that we've been committed to. So that will be one catalyst. We will continue to have presentations at medical and scientific congresses. We have samples -- tissue samples still from OVATION 2 that we intend to analyze and have in the near term, a comprehensive analysis and publication around translational data that we think will really be very compelling for the scientific and medical community that we'll be able to go beyond what we've presented to date. And I think that will be a very meaningful contribution. We have the potential for partnership progress that may provide opportunities to extend the runway further. And of course, we are continuing with our strategic goal of financing the trial with long-minded investors. And those are all things that we're very, very actively involved with. So our plans for 2026 really are going to be focused on our funding for the company, making sure we have the cash runway and that we are really increasing our institutional base in the -- in parallel. And then second, enrolling the trial and ensuring that we're spending a lot of time with our partners that are involved in this trial and the broader medical community as we're really helping translate the value for women newly diagnosed and bringing forward a product that really should revolutionize the standard of care. Operator: Our next question comes from the line of James Molloy with Alliance Global Partners. James Molloy: Could you walk us through -- I know you gave excellent guidance, very clear guidance on 80 patients by this time next year and 2029 to complete enrollment of the trial. Could you walk us through what potential cut points for interim looks we might be able to anticipate going forward over the next 12 months? Stacy Lindborg: Yes. Great question, James. Thank you. So the interim analyses, which have been laid out are all very carefully designed through comprehensive simulations, which are always looking at the time frame in which you might expect to be able to see a successful hit, if you will, so a p-value that would allow you to file your BLA. And as you know, we've described this in the past, and we've had reviews of our protocol. We've designed these steps for there to be 2. So the important component, given what we know very well from the literature and other Imunon agents, we need to observe patients long enough to be able to see events in the control arm for there to be really the ability to have success. So we've designed these interims to occur after the point that we would have fully enrolled trial. And we expect based on the simulations that we've done in the past that the first interim would occur about a year after that. So that is what we're actively working towards. And it's, as always, designed to allow for if we see a bigger effect than we have assumed in the protocol, this interim, in fact, the first interim may provide and would provide an opportunity for us to act more quickly than waiting. But it also is important that we're being very careful with these interims and of course, because you're using type 1 error rate as you're ultimately doing these formal analyses. So that's kind of a bit of an insight into how we balance the various dimensions and what we can expect going forward. James Molloy: And then maybe a follow-up question on the final data on the OVATION 2 showing the excellent survival data. How did that change the potential partnership environment, if at all, that you can share with us? Stacy Lindborg: So it's obviously very early. We just released the data last week. We are participating tomorrow in the MedInvest Biotech & Pharma Investor Conference, and we are getting new inquiries that are occurring even as of this week. But I expect that to continue to develop. These kinds of partnerships, whether they're geographic in nature or they're more fundamental with big pharma really ultimately has to fit with a strategy and an interest and an intent from a timing standpoint. So -- but we're very pleased to see renewed and new inquiries. Operator: Next question comes from the line of Jason McCarthy with Maxim Group. Jason Mccarthy: Going back to OVATION 2, is there going to be an opportunity when you continue to mine that data? Will you have anything related to minimal residual disease or any SLL, looks for MRD or any more immune data that might be suggestive of T cell memory or something that's keeping these patients' disease kind of in check and that could be driving these longer-term survivors? Stacy Lindborg: Yes. Maybe I'll start and then I'd like Douglas to pick up. So we won't have anything from OVATION 2 that relates to the minimal residual disease or second look laparoscopy because it's an additional procedure that is not part of standard of care, and therefore, it wasn't implemented in OVATION 2 nor will it be implemented in OVATION 3. So that is an exploratory and it's an endpoint that I think has gotten a lot of interest as a potential predictor of overall survival that was incorporated into what we call the MRD study. So the OVATION 2 won't give insights into that, but we will continue to contribute not only to our own learnings, but also the literature from the trial that we're doing in combination with breakthrough cancer. But we do have other data that we'll be able to get from OVATION 2, and I'll let Douglas go into some of that. Douglas V. Faller: Yes, we've been -- over the last 9 months or so, as you know and alluded to, we've been releasing more and more translational data, and we have additional translational data to present, and we will -- we're planning on publishing that also. This may include looking at peripheral responses in addition to the responses that we've shown so dramatically in the tumor and the tumor microenvironment. So we're very excited about the translational data. Just to expand on what Stacy said, even though we call one of our trials MRD, MRD is not really officially established for ovarian cancer. There's no -- there are no criteria that have been shown to be predictive of a patient's outcome. The MRD study is an approach to start working on that. But that data has yet to evolve. And we will try to determine over time what the best approach to MRD might be for it to be predictive in ovarian cancer. It's something of great interest. This is in part why breakthrough cancer got involved in the MRD study because they also would like to be able to generate a test like MRD, which could be predictive of patient outcomes. And in addition, in our Phase III, we will be looking at circulating tumor DNA. This may end up being a marker for MRD. It's not established yet in ovarian cancer, but our trial might be one of the ones that could establish circulating tumor DNA as a predictive marker. So that's yet to come. Jason Mccarthy: Great. Are there going to be updates from the MRD study in 2026 that we could look towards as potential catalysts? Stacy Lindborg: It's possible. I think that it will ultimately depend really on the -- our interactions with the study PI, [ Dr. Amir Jazaeri. ] We know that he presented data that was very exciting to see the analytical data, and he decided to really take a cohort of patients and analyze them together rather than continuing to analyze patients over time, individual patients over time. And the clinical data, of course, will be continuing to evolve. So we're in early discussions with him around where we may present that in the medical community, and we'll be thinking very much about bringing forward insight. It will be an exciting other arena for information. Jason Mccarthy: And I don't know -- last question. I don't know if I'm overlapping what James had asked previously about enrollment timing. But when you get to the 80, are you going to release any details on the HRD status of the patients just so people can get a sense of the percentages that are in the trial or maybe in the trial? Stacy Lindborg: It's an interesting question. I think right now -- and if I just step back and I look at what we've learned with this final analysis, our -- the overall effect that we've observed in the all-comers population has continued to grow so substantially that while the underlying genetics, which right now plays a critical role in the maintenance therapy and become central to how the treating community is taking care of patients. What's interesting is that our principal investigators are probably as excited about the effect in the HR-proficient patients as they are in the HRD positive. And so it will continue to be a very interesting and important part of our Phase III trial. But I think that we will really be looking holistically at the full trial and be very excited because we're able to influence and extend the life of an all-comers population. So it's -- that's my thinking of this. And I think that we'll have to think very carefully about the exposure that we give to an ongoing Phase III trial. It's an open-label trial, and we'll have the ability where we find it important from an investor standpoint to think about maybe secondary endpoints and provide updates, but those will be taken with great caution just to preserve the integrity of the trial. Douglas, anything more? Douglas V. Faller: Yes. The only thing I wanted to add is, although this is an open-label study because to preserve data integrity, we and the company are blinded in terms of efficacy, not safety, but efficacy. So we will not even ourselves be seeing the efficacy data as the trial progresses in terms of the primary endpoint. Jason Mccarthy: Okay. So just also -- sorry, one more, just a hypothetical. I'm not sure if you'd have the answer for this or not. There is a trial that's going to read out in the second half of this year for an oncolytic virus in the relapsed/refractory setting for PROC for ovarian cancer that the expectation is that it can resensitize to platinum. So for chemotherapy, it suggests that if they're successful that it could change the standard of care potentially even in the neoadjuvant setting. And I'm bringing it up because this trial is going to take a long time OVATION 3 and if you thought about how some potentially new therapies that could be on the market could influence how patients are managed by the time you get to the OVATION 3 full top line data. Douglas V. Faller: Thank you for that question. We're certainly very aware of the drugs that are being developed in the relapsed/refractory space, both platinum-sensitive and platinum-resistant. The most patients, interestingly, their tumors are sensitive to platinum. The idea that you'd have to sensitize patients in the neoadjuvant setting or the adjuvant setting really is not something that is at all mainstream. Most patients do respond to chemotherapy. Unfortunately, durable responses are rarer and then you get into second and third-line treatments. As you know, there have been at least one and soon two drugs approved in different settings in second, third, fourth line patients who are not being treated with platinum again. And that's wonderful. We're very happy that there are drugs that provide a bit of a survival benefit in second or third line. But as we all know on the phone and in this call, putting the best therapy upfront and making the biggest impact on the tumor is critical if you're going to treat ovarian cancer successfully. So we're very happy to be in frontline, very proud of the fact that we're in frontline, and we believe that we will be providing advantage over time in terms of increases in survival to the patients that we are treating. Operator: Next question comes from the line of Kemp Dolliver with Brookline Capital Markets. Brian Kemp Dolliver: First, are the savings from the restructuring of any significance that we would see them -- the impact of them in the first half of this year? Stacy Lindborg: So Kemp, really, what we reported as a strategic restructuring really is around ensuring that we are using all of our resources to the best of our ability and focused on Phase III. So we're ensuring that we have the ability to hire and bring in needed expertise for the future as we're thinking about the commercial setting, and we're looking to the upcoming year and beyond. So it really is not about a pure number, but it is about just an ongoing evolution of making sure that we're taking the talent we have in-house that we're focusing our attention for each person to ensure that we're bringing the most value possible and that we're really removing anything that is off target from the OVATION 3, which is our sole focus right now. Brian Kemp Dolliver: Okay. And with regard to your commentary regarding the pace of enrollment at the site level, I'm going to split a hair, if I can, because it may be informative. Is that pace increasing, say, month-to-month? Or is it just -- has it just been consistently above your forecast? Stacy Lindborg: So I'll give you -- we only have, of course, the time frame from the very first patient to now. But we see that for the entire trial, we are above the assumption of 0.3 patients per month per site. So the -- if you look across all the sites, the average is above that. And when we -- the numbers that I was reporting of these sites that actually are delivering one patient per month or even just slightly below, that is across the whole time period that they're delivering. So I do think you tend to see kind of episodic enrollment that can happen, but the numbers that we're reporting are not singular months. They're summarizing the entire time thus far. And I do think we're hearing phenomenal feedback. We're spending time in the site -- in our sites that are actively enrolling patients. We're having calls regularly as well. These conversations in terms of the data, we get to see a broader set of the community, for example, with the abstract we were putting in over the weekend, you have quite a few PIs that were part of OVATION 2. They all got to be on this abstract and to see the excitement and their responses. Gratitude for being included and really just pure excitement with the data. Douglas, why don't you comment more? Douglas V. Faller: No, that's exactly right. This is the first time that they had seen the final data in terms of survival, and there was a great deal of enthusiasm. As you might expect, they were very happy that their patients have seen this much benefit. Stacy Lindborg: So we really think this will be a difference maker for OVATION 3 compared to OVATION 2. Going into OVATION 2, we had a lot of promise. We had a mechanism of action that made a lot of sense, was very clearly established in the literature. Phase III now, we have evidence of a clinical effect that's never been seen. And we continue to really hear that, that becomes very critical. We can actually see the numbers that are entering prescreening, and we see a very high rate ultimately coming through to randomization with really the exceptions being things like inclusion criteria not met, that will always be the case or inability, perhaps somebody that's traveled a very long way and doesn't feel like they can make the schedule. But really, the rate of being exposed to this potential the way that our -- one of our PIs who's been involved with our program for a long time, talks about this with patients is you're going to get the standard of care, which you'll get in this trial. If you do not have interest in research and in this protocol, if you want to consider being in this protocol and if you're randomized to the experimental arm, then you have a chance at a product that may extend your survival. So it's been a very straightforward discussion as they're describing it to us, and we're getting, as we might expect, a positive response from patients and from the sites. Operator: And our last question comes from the line of David Bautz Bouts with [indiscernible] Research. Unknown Analyst: So I just have a couple of financial questions. So as resources become available, is the company going to look to open additional sites in the U.S.? Or will you be looking ex U.S. to get any international sites open? And then as far as payments for the Phase III trial, I guess I'm just trying to look at how is it being paid for? Did you have a bulk paid upfront? Is it pay as you go? Like how is it structured? Stacy Lindborg: So David, great questions. I was having a little trouble hearing you. So let me respond to your questions. And if I don't hit on them, we'll have you ask further. So we are actively enrolling and accelerating the enrollment of trials. And right now, those are focused in the U.S., although we have sites in Canada that we know are very interested, and we have had conversations as we're looking to consider the strategy of if we want to accelerate further adding a European country as well. So we've already had some discussions with leading sites in Central Europe. So that's a conversation that we expect to advance over the next year. But right now, we believe that we'll be able to meet our enrollment accelerations, and we have a lot of confidence with the sites that we're going after and we're starting with in the U.S. So we think that's actually the best way to start. In terms of payments for the trial, these trials are structured -- this trial is structured pretty traditionally. You have contracts with individual sites. There are start-up fees and then fees as patients are being treated as part of the protocol. We have an ability to take advantage of what is standard of care and to have that be paid through the traditional routes and some of the procedures not be due to be paid by Imunon and we've taken full advantage of that to really structure the contracts accordingly. Operator: This concludes the Q&A. I'll turn the call back to Dr. Lindborg for closing remarks. Stacy Lindborg: Thank you, Desiree, and thank you all for joining this call. With the Phase III study enrolling ahead of plan, as we've just been talking about, the enduring strength of our Phase II overall survival data and the compelling translational evidence that Douglas spoke about and our sharpened financial discipline, we really know that Imunon is well positioned for milestones that will create value inflection in 2026 and beyond. We remain steadfast stewards of the resources you have entrusted to us and are fully committed to delivering a potential paradigm shift for ovarian cancer treatment while creating lasting shareholder value. We thank you for your continued support and look forward to future calls. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Gary Friedman: There are pieces that furnish the home. And those who define it. There are places you visit. And those you remember. There are spaces you move through. And those have moved you. Welcome to the world of RH. Albert Einstein's Three Rules of Work: Out of clutter, find simplicity; from discord, find harmony; in the middle of difficulty lies opportunity. Seem especially relevant at this moment. We're compounding clutter from tariffs, global discord as a result of war, and the most dire housing market in decades can make it difficult to separate the signal from the noise. It's important to remember necessity is the mother of invention. And our most important innovations were birthed during the most uncertain times. Transforming a nearly bankrupt Restoration Hardware into RH, the leading luxury home brand in North America was not a feat for the faint of heart. While the external challenges are somewhat familiar, our internal opportunities are massively different. We're not closing stores and fighting to survive. We're building a never seen before brand that's positioned to thrive. Before we get into the details of our strategy, let's start with a few facts that should quiet some of the noise. In 2025, RH achieved revenue growth of 8% and 2-year growth of 15%, far outpacing our furniture industry peers by 8 to 30 points. Adjusted EBITDA reached $597 million, or 17.3% of revenues versus $539 million or 16.9% of revenues in 2024. Free cash flow of $252 million versus negative free cash flow of $214 million in 2024, an increase of $466 million year-over-year. Those results were despite 2025 being our peak investment year with $289 million of adjusted CapEx to support our global expansion plus an additional $37 million to purchase the Michael Taylor, Formations and Dennis & Leen brands to support the launch of our new concept, RH Estates, a strong performance considering the unusual circumstances. Let me shift your focus to our strategy and how we expect our growth to accelerate over the next several years. We believe there are those with taste and no scale, and those with scale and no taste. And the idea of scaling taste is large and far-reaching. We believe our goal to position RH as the arbiter of taste for the home will prove to be both disruptive and lucrative as we continue our quest at building one of the most admired brands in the world. We like to use a simple question to frame our significant opportunity. Who is the home brand for the luxury customer? The LVMH, Hermes, Cartier or Cucinelli customer. RH has curated the most compelling collection presented in the most inspiring spaces in the world. Our brand attracts the leading designers, artisans and manufacturers, scaling and rendering their work more valuable across our growing global platform. Our product is both categorically and stylistically dominant, enabling RH to address the largest market of any brand of its kind. We curate across the 7 major product categories: furniture, upholstery, outdoor, lighting, linens, rugs and decor, and we integrate across the 3 dominant product styles, traditional, contemporary and modern, which we refer to as RH Estates, RH Interiors, and RH Modern. RH Estates, our newest brand extension, launching this spring, will address the traditional market where the RH brand is currently underpenetrated. 60% of luxury homes feature classic or traditional architecture, which influences the majority of furniture purchasing behavior. RH Estates will feature the introduction of RH Bespoke Furniture, customizable collections from our recently acquired Michael Taylor, Joseph Jeup, Formations and Dennis & Leen to the trade brands. RH Estates will also include the introduction of RH Couture Upholstery by Dmitriy & Co., tailor-made sofas, sectionals and chairs of arguably the highest quality upholstery available anywhere in the world. Designers will be able to order custom made sizes and finishes plus specified COM fabrics. RH Bespoke Furniture and RH Couture Upholstery will enable interior design firms to now specify RH for their most discerning clients and custom projects. RH Estates will also include collections from many of the most talented designers and artisans in our industry. Let's take a look at some of their work. [Presentation] Gary Friedman: RH Estates will premiere at the opening of RH Milan, the gallery on the Corso Venezia, a 70,000 square foot former palace, during Salone, the largest design show in the world with an estimated 500,000 visitors descending on the city that week. The launch of RH Estates will include a dedicated source book, mainly mid-May, and international advertising campaign and freestanding Estates Galleries in Greenwich, Connecticut and the San Francisco Design District opening early summer. And the West Hollywood Design District opening in 2027. We believe RH Estates will become our largest and highest margin brand extension, driving significant growth over the next several years. Let me shift your attention to our multidimensional physical-first global ecosystem, the world of RH. That goes far beyond a typical multichannel approach, inspiring customers to dream, design, dine, travel, and live in a world thoughtfully curated by RH, creating an emotional connection unlike any other brand in our industry. The question we often are asked is why physical first in a digital world? Let me explain. Furniture remains the least digitized large retail category with an 80-20 store to online split, with luxury furniture estimated to be as high as 95.5%. Why do stores still dominate? Comfort, scale, finish and quality are hard to judge online. Even when customers purchase on a website, most experienced the product in a store, we believe the physical manifestation of a brand will continue to be significantly more valuable than an invisible online way. We also believe most retail stores are archaic windowless boxes that lack any sense of humanity. That's why we don't build retail stores. We create inspiring spaces. Spaces that are a reflection of human design, a study of balanced symmetry that creates harmony. Spaces that blur the lines between residential and retail, indoors and outdoors, home and hospitality, spaces with garden courtyard, rooftop restaurants, wine and barista bars. Spaces that activate all of the senses and spaces that cannot be replicated online. While most have been closing or shrinking the size of their stores, we've been building some of the largest and most immersive spaces in the history of our industry. Let's take a look at our most recent work. [Presentation] Gary Friedman: We believe our investments in building completely unique, immersive experiences in Paris, Milan and London, we'll set the stage for RH to become a truly global luxury brand. It's important to understand that there are several strategically significant businesses embedded in our galleries, including RH Interior Design, where we become the largest residential interior design firm in the world, with projects from San Francisco to Sydney, Los Angeles to London, Miami to Milan, and Dallas to Dubai. We offer design services, including interior architecture, landscape architecture, art and antique curation and turnkey installations. Another important business embedded in our galleries is RH to the trade, a specialized team that calls on services and supports interior design firms assisting in the design, curation, delivery and installation of many of their projects. RH Hospitality operates beautifully integrated restaurants, wine and barista bars in our galleries that generate significant traffic and brand awareness. While our galleries might see several hundred customers per week, our restaurants feed several thousand. With 26 restaurants in operation today and are scheduled to reach 40 by the end of 2027, RH is 1 of only 7 globally owned and operated luxury restaurant brands with 20 or more locations worldwide. We believe our galleries create a unique competitive advantage that will likely never be duplicated in our lifetime as the cost of construction at the luxury level has doubled post-COVID. To address that challenge, we've developed several immersive new gallery concepts that will enable us to scale in a faster and more capital-efficient manner. The first, the most revolutionary is what we call an RH design compound, currently in development in Naples, Miami and Walnut Creek, a compound is 6 to 8 independent buildings connected by beautifully landscaped garden courtyards with a sun-filled atrium restaurant anchoring the project. Due to the absence of multiple stories that require steel structures, grand staircases, elevators, complex mechanical systems and long development time lines, we believe we can build design compounds significantly faster and more capital efficient than our prior design galleries. Another new approach to deploying the RH brand in a faster and more capital-efficient manner is what we call a design ecosystem, currently under construction in Greenwich and Palm Desert and in the development process in West Hollywood Design District. An ecosystem is a multi-building brand presence on a street, in a neighborhood, design district or shopping center. Our first ecosystem will be in Greenwich, Connecticut, and includes our gallery at the Historic Post Office, our new outdoor gallery opened last year, and our new RH Estates Gallery with an integrated restaurant opening in the former Ralph Lauren building this summer. We've also developed a new single-story gallery, ranging from 15,000 to 20,000 square feet with a dramatic courtyard restaurant targeting secondary markets. We're currently under construction in Los Gatos, California and are in design development for galleries in Richmond and Milwaukee. We have been extremely pleased with our performance of our first freestanding RH Interior Design office in Palm Desert, California and have plans to open a second interior design office in Malibu this fall. In total, we have an opportunity to expand our presence in 27 existing markets, and open 1 of our new design concepts in 48 new markets across North America, representing a $2 billion opportunity. Let me shift your attention to our business model and balance sheet. While we believe it's prudent to plan conservatively this year due to uncertainties around interest rates and inflation, and have planned revenue growth in the 4% to 8% range in 2026. We do expect growth to accelerate to 10% to 12% in 2027, and reach $5.4 billion to $5.8 billion by 2030. Adjusted EBITDA in the 14% to 16% range for 2026, reaching 25% to 28% by 2030. We expect cash flow of $300 million to $400 million in 2026, and $500 million to $600 million in 2027, inclusive of $200 million to $250 million of asset sales each year. We expect cumulative cash flow of $3 billion by 2030, inclusive of the asset sales and expect to be debt-free by 2029. While one might look at the current market discord and argue that RH has been in the wrong place at the wrong time. I would argue we've used this period to position our brand to be in the perfect place at the perfect time. Let me explain why. There are two important factors that will meaningfully expand the size of our market over the next 10 years. One is the exponential spending of high and ultra-high net worth consumers on the home. Ultra-high net worth consumers with a net worth above $20 million, own on average 3.7 homes, billionaires own 10. Ultra-high net worth consumers spend 6.4x more on home furnishings than a consumer with a single primary residence. Two, is the estimated $30 trillion to $38 trillion wealth transfer projected to take place over the next 10 years, which is more than double the past 10 years. Not only does the absolute dollar amount more than double, it's estimated that the dollars transfer from one to an average of 7 people. It's possible over the next 10 years our market will be multiple times larger than the past 10 years. When you combine that with our efforts to elevate and expand our product, globally expand our platform, generate significant revenues and brand awareness with our immersive hospitality venues, I would argue that the RH brand is in the perfect place at the perfect time. And we will emerge from this period of clutter, discord and difficulty as one of the highest performing and most admired brands in the world. Allison Malkin: [Operator Instructions] Your first question comes from the line of Simeon Gutman with Morgan Stanley. Simeon Gutman: First question, I want to talk about demand signals from the consumer. This has been a transitional period for the company. I realize the demand is outpacing a lot of other home furnishing companies, but it's come at a pretty big cost to margin. So expectations around demand improving while we see the margin of the business begin to turn. That's my first question. Gary Friedman: Simeon, the margin pressures somewhat disconnected and unrelated from the demand. The margin pressures really from -- kind of the investment cadence we have as far as expanding the business throughout Europe and some of the margin pressure coming from the tariffs, from a transition and timing and resourcing. But you basically have kind of an inflection point of we're in kind of a peak investment period from a capital and an expense and cost perspective based on the investments we're making, both from a global expansion and North American expansion point of view and from a product point of view with the launch of RH Estates. I think you have to think about the launch of RH Estates in Q2, we'll have significant costs with sourcebook and advertising and launching costs, without having much revenue until we get into the third and fourth quarter. And Estates is, remember is basically running late. Our original plan was to have Estates in the third and fourth quarter last year. So we have some timing issues. I think when you think about the significant investments we're making, both from a capital and expense perspective, and we're going through kind of an unpredictable time. So I think that's why it's important as you're looking at the business, you're looking at the model, if you're thinking about being an investor here, you have to have a longer-term view than a shorter-term view in periods like these. And in many ways a lot of people are going less than we're going right as people are pulling back and trying to manage the margin side of their business, we're investing in the most significant way we have in our history, and that's just going to create some timing dislocations from an earnings perspective. Simeon Gutman: And then my follow-up, you made a couple of executive leadership changes, one, a new President and two, a second person. And in the release you talked about potentially helping monetize some of the real estate. So can you talk about both of those hires, what prompted them? And then what does it speak to about the direction of the business you are heading in? Gary Friedman: Well, I think it's explained in the press releases. I don't know if there's anything different than that. We mentioned -- we're extremely happy to have Dave Stanchak rejoined Team RH. He's -- has made a significant impact while he was here, both from a North American transformation point of view and a global transformation point of view and was involved in really setting up the structure of the real estate for European expansion. And so it's good to have Dave back. And I think, Dave, it's probably the most, I think experienced real estate executive on a retail point of view because he's -- both -- not someone who's just been involved with mall leasing and -- which is typical, when you think about most retailers, Dave's been involved in real estate investments. He is an investor. He's had his own shopping centers and controls real estate themselves. So he comes out from an investor perspective, a much bigger perspective and it's a kind of a transformational leader as you think about a unique business like ours and the platform we're building, which is unlike anything anybody else is doing or has done at a level of quality and locations and so on and so forth. So there's not anything that I didn't talk about, I think, in the press release. And then with Veronica's joining RH, we've known Veronica for a long time. We've been able to observe her and her leadership and her ability to build what we think is one of the leading manufacturing businesses in North America for an upholstery point of view. But mostly what we, I think, think about here is not just the upholstery part of our business. But if you think about the best luxury models in the world, whether you're looking at Vuitton or Hermes, or CHANEL or others, one of the things that's very unique with their business models as they have a very concentrated core business, 80% of their business is in the leather goods and accessories part of the business. It's very similar to our business from a penetration point of view, 80% of our business is furniture, that's typical if you look at the home furnishings business. So if you're in all categories, that's going to directionally be the mix depending on how you position those categories. And we think there's an opportunity when you look at our business from a global scale and building a unique platform that's synergistic and appropriate for the unique platform we're building from the selling side. I think we've built -- have built and are building the most unique physical selling platform in the world. And I think it deserves and will be positively impacted by building the most unique manufacturing and sourcing platform in the world. So eliminating, when you think about the inefficiencies of manufacturing, when you don't -- when you don't control your distribution, there's quite a bit. So long term we think we can build a unique manufacturing platform. And as I said in the press release, a combination of owned joint venture and outsourced that can be very unique and significantly accretive from a -- we think both a revenue and a cost perspective and a margin perspective. So yes, so we're excited. We think Veronica is the best person in the industry we've met. I think she's a unique talent leader. She's an engineer by education and experience, and has a big -- and very big and kind of strategic view of manufacturing and sourcing. So it's a new level of talent in the company. We've never had someone this kind of pedigree and experience and talent, and we think she's going to do some incredible things long term. Allison Malkin: Your next question comes from the line of Steven Forbes with Guggenheim Securities. Steven Forbes: Gary, with Milan and London slated to open here in short order, curious if you could give us an update on RH Paris and/or just comment on the anticipated revenue contribution from the broader RH International strategy behind the 2030 reference year you laid out in your prepared remarks. Obviously, just looking today, any color to help support or build conviction around those longer-term outlooks you laid out today? Gary Friedman: Not sure if I get that question correctly. Jack Preston: The impact of international as it relates to the 2030 targets, how we think about that growth of that. Gary Friedman: Yes. Well, I think what we've articulated most recently over the last few quarters and really since, I think, our start, really that the opening of Paris, Milan and London is kind of the brand foundation to build on when you think about European expansion. There are the three most important cities in Europe, we think they're important from a positioning of the brand and a brand awareness point of view. And all three of those are really the besides, again, RH England, which is out in the countryside, which was important from a brand impression and awareness perspective and how to kind of make an entry into the European market. But these really are where we have significant investments in the presentation of the product that hospitality experience, which we think is going to be critical long term to building brand awareness throughout Europe. And then one of the keys here is really not just these key stores because if you -- as we assess the business in Europe, and we have since day 1, I believe that the basic distribution and where the sales will come from will be long term, more important in suburbs and second home markets than cities that the cities are really going to be the key to brand awareness and driving the brand, positioning the brand, and we'll do significantly more revenues, we believe, in Paris and Milan and London than we will in other cities. And if we were ranking them, clearly lending, we believe, going to be the biggest market for us as it should be. But our distribution of business is significantly suburbs and second home markets in North America. 90%, 92% of our business is in suburbs and second home markets. And second home markets are kind of like a suburb, right? And about 8% of our business is in the cities. And we think that distribution is going to be similar throughout Europe. And if you looked at Apple's real estate strategy and you look at their distribution throughout Europe, which we believed was a good kind of model for us to look at as far as a higher-end consumer. And you looked at like Apple's North American kind of distribution versus our North American distribution, their penetration in suburbs, our penetration in suburbs. There are similarities there. We're more highly penetrated into second home markets than they are. Most people have their phone with them. But one of the keys for, I think, Dave is joining the company, too, is just to continue that leadership into Europe and building out into the suburbs and into the second home markets to cover the business. So strategically, we're setting up the business in the kind of key markets that you would from a brand and awareness perspective and not that we don't think that the business is going to have revenues there. We just think the biggest revenues are going to come long term when you think about the longer-term plan as we expand into the suburbs and [ certain end ] markets where people really buy much more furniture, both indoors and outdoors. Steven Forbes: Maybe just a quick follow-up. Obviously, great to hear Dave rejoining the company. You talked about -- you talked about $250 million of asset sales in each of the next 2 years. This is sort of a 2-part question. One, can you speak to sort of the value of the non-core assets or the assets that you don't plan to operate in the future versus the value of the assets RH is still planning to operate in the future. And then maybe any color on sort of timing for 2026 asset sales as we think through the potential interest expense savings. Gary Friedman: As far as that mix, I'd say the majority of the asset sales are assets that we will be operating that are in a sale leaseback kind of properties and then there's some investment properties that we had in Aspen. And a few other things that we've decided not to pursue for whatever reason, we own a building in Milan -- not Milan, excuse me, Madrid, and we're not going to pursue the development of that. We're fine with the location we have today. And so it's just looking at -- taking a look at our balance sheet and just turning the facets into cash, as we said we would be doing. So we've said we have about $0.5 billion of real estate assets that we could monetize. And we're going to begin to monetize those. Dave has got tremendous experience on that end of real estate. So -- and he feels very confident in what we're going to be able to do. And some of these are properties that we had purchased and had developed over the last 2 to 3 years, I guess. You got to think about a lot of our investment horizons are pretty long from a -- when you think about some of the galleries that we've built, you've got significant time to design and develop and get through the approval process and then you've got significant time building them. So you have a relatively long holding time. And I think post-COVID, all of the construction cost have went up, particularly at the luxury level. And those prompted us as we communicated in the video, to develop just other faster, more flexible ways to deploy the brand. And when you think about the design compounds and think about where the first couple are going in Naples, we're taking that what was formerly a Nordstrom's site in Walnut Creek, we're taking what was formerly a Neiman Marcus site. And then in Miami, we're developing kind of a parking lot size kind of a key visible area in Miami, that was kind of Bank of America. But we think about those opportunities to be significantly faster and more capital efficient. We've built most of our big, kind of, I'd say, the higher investment, higher capital side of the business, we've been transforming the real estate here now for 15 years. And so even on a European and global point of view, I would say that we have Sydney coming, but that's a different model that's really being built by the developer. It's not going to take much capital from RH. But yes, we have significant assets. We're going to now monetize, turn into cash, and then we've got some assets in Aspen and other things like that, that will monetize over time. So yes, so a lot of that will come off the balance sheet. I don't know, Jack, do you have anything to add on? Jack Preston: No. I think from a timing perspective, Steve, we'll just keep you posted. We're not ready to commit us to show the cadence to 2026, and we'll just update you as things as appropriate. Allison Malkin: Your next question comes from the line of Max Rakhlenko with TD Cowen. Maksim Rakhlenko: So first on Estates, can you provide color on how you're thinking about scaling the collection? We know when the books will hit, but how are you thinking about the cadence of the product rollout into the galleries? How are you looking by inventory, et cetera? Just if you could compare and contrast this collection versus the Modern and Interiors launches that you had a couple of years back. Gary Friedman: Sure. So the books will hit kind of mid-May, and we will -- we've got a handful of stores that will get the initial product that we'll be able to kind of test and then we and get some reads on, but we feel very confident in this selection. So we went out with a bigger inventory by -- and a lot of it based on just the data. You got 60% of luxury homes in America that have classic and traditional architecture. So -- and it is really the next big trend. As you think about how the trends cycle through, this trend is a lot of the product you're going to see cycle through, it's why we've made some of the acquisitions that we made, whether it's the Michael Taylor brand and the famous diamond table and so on and so forth to really be able to not only have authority, but be able to have intellectual property rights for a lot of the kind of key products that are going to come. And so we just think it's going to be a big building trend. But in the second half will be -- and how many galleries do we think? 30? Unknown Executive: I think -- yes. Gary Friedman: About 30, 40 galleries -- our top 30, 40 galleries in the large design galleries, we'll take over the first floor with RH Estates. So this is a significant launch and a significant bet. Maksim Rakhlenko: Got it. That's helpful. And then just a two-parter on margins. If you could just isolate how you're thinking about the impact of tariffs for 2026, both the cadence and magnitude as I don't think you discussed that in the letter this time around. And then separately, if we exclude tariffs and some of the timing shifts that you discussed earlier on the call, how healthy is sort of your -- or how healthy are your product margins as we think about the long-term targets you laid out? How much higher can the product margins go as you do continue to add these new collections that I think come with much higher margin. So if we just think about the core, where can the business go from a product margin perspective? Gary Friedman: Yes. I think -- I mean, we're not giving detailed margin forecast. But our margin -- our product margins are relatively healthy, except for some bumps we're going through from a tariff point of view. I think we've been able to perform reasonably well. If you exclude kind of the weight that we have from this investment cycle and the drag from Europe and you kind of take a look at the business. And I think one of the things we're doing, as we think about this business, a lot of times with brands as you go through the history of brands, you've got kind of the levels and the transformations you make to kind of get to where you want to go. And this next -- this cycle we're in now, it's a key investment cycle. Clearly, we've spent a lot of capital. We've made big investments to kind of position the brand not only in North America, but positioned in Europe for the long term. And once you get past those cycles, we're going to have great leverage. Opening galleries like we're opening and restaurants like we're opening or significant costs, especially when you're doing them in a different country. There's just more travel, more expense from hiring people and building new organizations and so on and so forth. So from a -- I just think, it's not just the product margins, it's really just the overall margin structure of the business once we go post peak here on this investment cycle, both from a capital and from an expense and cost point of view. I think the model of this business is going to look like one of the best models people have ever seen in our industry. So if not the best model, I think it's going to be the best model anyone seen. So we feel confident in that. I mean, we're also just -- from a global perspective, navigating through very uncertain times. And we do have a product mix that is going to be somewhat more cyclical and have more of a drag. So when you're really focused on the furniture business versus the home furnishing, the broader furnishings business, accessories business, tabletop business, kitchen businesses and so on and so forth. You're going to have more weight during times like these. So that's going to require you to fight for more business. But that's throughout our history. We've always fought through the business in times like these. We've always been more promotional than less promotional in times like these. And we think it's times like these that there's a lot of fallout. And there's going to be a lot of competition that's not going to make it through these times. There's been greater fallout in the furniture business. As most people know, over the last few years than in any time in history. And I think there's going to -- as long as the housing market remains difficult, there's just going to be a lot less competition, and we're going to be better positioned than we've ever been for the other side of the cycle. As we build out the assortment, especially in the Estates over the -- think about the Estates expansion over really a 5-year horizon from a product point of view, I'd say over the next 5 years as Estates assortment is going to grow, it's going to build, it's going to become more dominant. The trend is going to -- that wave is going to keep building over the next 5 to 10 years, right? So I think about the whole model of the business in this way, we're very confident in the long-term model. I think what confuses people is most public companies go public and they kind of manage the business, right? They have a simple rollout and they're going to do so many stores a year and the stores are all the same and everything is really predictable and most of them go through their rollout cycle of 5 to 7 to 10 years, however -- what amount of time they stay relevant for. And then usually, becomes kind of a dated concept over time. And that's why we like to say that most retail malls or graveyard for short-lived ideas. Most retail companies don't even concepts don't live out the first term or second term of their leases. So we're going through one of those investment cycles that will leapfrog this business forward and you're looking at kind of peak investment cycle and kind of trough kind of economic cycle, right? So and even with those two, you still get a business here with a kind of a mid-teens EBITDA margin to high teens EBITDA margin. And once you get past this cycle, there's a lot of leverage in this model. So... Jack Preston: Max, I'll add on tariffs. So in Q4, we talked about last year tariffs having an impact of 90 basis points in terms of a drag. And Q4, we had talked about $170 million. We ended up at $190 million in Q4. And the way we characterized that in the last call is that, that's ultimately by Q4, you're fully baked into the sort of prior tariff regime. Obviously, things have changed now with the Supreme Court decision. But tariffs come out in and out of turn, as you know. And so while in the -- let's say, in the first half, you might have some tailwinds from that relatively lower rate that exists under Section 122 today. Who knows what happens in the second half. There's obviously a sprint to replace all those tariffs and potentially more as Trump first said under Section 301 in the back half. So we're just -- we're playing by year being -- as you know, we're nimble and we're dynamic. But as far as last year's tariff impact was sort of fully baked in at Q4, the bit of an indicator as to how it plays out in the first half, but obviously, the math will tell you that there's going to be some relief there as far as that tariff drag is concerned. So we'll keep you updated if there's -- as things play out. Obviously, we're watching it like you guys are watching. Allison Malkin: Your next question comes from the line of Steven Zaccone with Citi. Steven Zaccone: I wanted to ask about the cadence of the year from a revenue growth perspective because the first quarter, obviously calling for revenue to be down, but in the full year, it looks like an acceleration in the back half. Can you just talk through the points of the acceleration? I assume Estates is a big piece? How much is International? Any details you could share would be helpful. Gary Friedman: Well, yes, clearly, International and Estates, the cycling of -- Estates across the entire platform, International from opening cadence and just what we think the growth in the first couple of years. We really -- RH England is kind of our best point of history and -- we know how that ramps. So we expect the International stores to have a ramp to them over the first several years. But when you think about the back half, sure, you've got openings in North America, you've got openings in Europe. You've got Estates, which will -- in Q3, Q4, you'll start seeing the revenues flow from demand in Q2. And you'll see a ramp in Estate. You'll have a second mailing of the book. You'll have newness in both Interiors and Modern. So all of those things combined, we believe is a big step up in the business in the second half. And we would have expected more in the back half of last year and the first half of this year because Estates would have been part of that cadence. Steven Zaccone: Okay. Understood. And then the second question I have is just on the margin recovery of the business, right, because we've been an investment period for the business for some time, and I think you've used the term leapfrog in terms of margins in the past. For the longer duration investor, when you look at the business, what do you think is the biggest factor holding back margins for improving? Is it just the fact that some of the investments have taken a little bit longer and have been a little bit higher than expected? Has it been the top line, the macro environment? How do we think about some of the unlocks to see that margin improvement on the other side come back stronger? Gary Friedman: I think you've just outlined it. Yes, I mean we've -- we're in peak investment cycle in trough -- economic cycle, especially from a home point of view. So the -- I mean, not just trough investment cycle, you've had the whole kind of chaotic tariff cycle, that has caused kind of significant disruption on the business. I mean we've resourced 40% of our assortment business of our size -- resourcing 40% of your core assortment, which is really -- 40% of the assortment is bigger -- it's a larger part of the business. So, yes, it's all of those things together, Steve. So this is a good time to buy our stock. This is when people create generational wealth, right? This is no different than trough times in a real estate market, trough times in any kind of a transitional time for an industry or business. And all businesses in our industry get hit in these times and all businesses that survive to the other side, get a lift in this time. I think what's different is we've historically been investors during times like this is when we've seen the biggest opportunities. But this time is, I think, different than previous times because we're in a kind of a real peak investment cycle. We're opening Europe, we're launching new businesses. And so the opportunity to have a leapfrog, if we're more right than wrong, and we don't have to be completely right, we just have to be directionally right here. And so we say don't let perfect be the enemy of great. And yes, we've got a lot of experience here in this company. We've been doing this a long time. And I think we've proven that we've been a lot more right than a lot more wrong. I mean if you think about the transformation from what was Restoration Hardware before, to what is RH today, if you think about the transformation of this brand, over a 20-plus year period and try to say, name other brands that have made transformations like that, name other brands that are positioned like we are. These are the times that businesses like ours separate ourselves even further from the pack. But you have to make those investments, you have to take that level of risk to be able to do that. So we are not kind of a management culture or leadership culture. And we're constantly innovating and investing, but this is one of those significant cycles. It just happens to be -- during a significant down cycle, especially focused on our industry. And so -- but we're in a better position than we've ever been from a historical point of view to weather the storm. And I think if you just think about what does the next 5 years look like from an investment point of view. I mean we're going to come off, if you take that -- the $37 million and the $289 million, you've got kind of a peak type of investment year historically. And then we come off that peak. And we come into the $250 million to $260 million, and then that's going to drop to $150 million to $170 million a year. So you think about the company growing, the capital investment period coming down, and it's not just the capital, right -- the investment, but it's also all the expense that's connected to that capital. All the expense that's connected to bringing up those stores, training the people, building the infrastructure, building the distribution capability in the business, all the marketing and advertising that supports a launch, all the time and energy to kind of build out the assortments, develop all the products at scale to create a leapfrog, not to kind of slightly outperform. But it's no different than taking a $300 million business that was losing $40 million a year. That was Restoration Hardware and creating RH, that's a $3.5 billion business. I mean that -- think about what the next cycle looks like. The next cycle is, I think, even more magnified that -- we -- our framework for the model. And the biggest pieces of the model are the pieces we're talking about. If I was on the outside, looking at this, I'd say, hey, what is the outlook for capital investments as they go forward and not just thinking about the capital, but what is the expense, the cost investments that are connected to that capital, how does that change over the next 5 years? And how does it change over the next couple of years, right? Just over the next couple of years, the investment cycle is post peak, and it's going to turn down and accelerate in a downward way just as revenues are going to accelerate in a positive way, right? And when you have those two things going in different directions, that's when you have inflection points in return on invested capital, on margins, earnings, et cetera, et cetera. So the framework for the math is pretty simple. I think the strategy because it's never been seen before is -- can be suspect and could be hard to understand. There can be less believers than more believers at certain times. So look, I don't blame anybody for kind of saying, "Hey, this is -- it looks like an uncertain time to invest," whether it's in our stock or any stock in our category. But especially, you've got to kind of believe in the longer-term debt here. And we think this is going to be the -- one of the best bets that people will make as referenced by my personal investment here. So that's how we think about it. Allison Malkin: Your next question comes from the line of Michael Lasser with UBS. Michael Lasser: Gary, you've laid out this ambitious and aspirational plan to take advantage of what seems like a very large and growing addressable market, and yet the market is not really willing to give you the amendment, sort of a doubt. And part of that is RH has been averse to and does not really look at its business on a same-store basis, which is understandable, and that's long how you've articulated it. But at this point, that has defaulted to the narrative where RH needs to grow concepts and its physical footprint in order to drive growth, and that comes with a significant cost. And as a result you may not be able to realize its aspiration, understanding that it's come a long way from its origin, but it's the market's relying heavily on the recent experience. So why based on the recent experience is the default of the market wrong? Gary Friedman: I think it's what I just said. You have to think about peak investment period and what hopefully is a low point in the trough from a market perspective. It's -- again, I think if you pull out the investments, just pull out the European drag of the investment -- think about -- we're investing in Europe. The European market is worse than the American market right now. It's -- we're investing at a time you likely would like to not invest, but you can't make long-term real estate investments and expect to get them all right, right? So the -- why is the simple model, Michael, of saying I'm cycling peak investments, and I'm cycling hopefully what is trough growth, right? And we've got significant growth opportunities as we've laid out. And the cost, they're going to kind of go away. So a lot of people thought Amazon wasn't going to make a lot of money until he did, right? That's -- I think it's that simple. Think about -- yes, I think the key is don't bake this cost structure into your model right now. You're looking at the -- a peak cost structure, both from capital and an expense perspective. These galleries that we're opening are the most expensive galleries that we've opened, both from a capital and a cost point of view. Michael Lasser: Got you. Very helpful. So put it in parlance that the investment community would think about it is, essentially this is, the peak of the disruption, there will be significant same-brand growth that will lead to sizable margin expansion, especially as the investments moderate. Now the counterpoint would be, hey, we're living in a world of high uncertainty between the geopolitical, technological and other factors. So what would be the sensitivity to your outlook for free cash flow in the event that sales in the back half just don't materialize like you would expect. And without asking you to show your hand, but it is important to the investment case, what options would you pursue in the event you needed more financial flexibility to execute on your strategy? Gary Friedman: Yes. I think it's a great question, Michael. Look, we've got the ability to pull back investments further, right? When I think about the major strategic investments that we had -- we had to decide to go international, invest into Europe, years ago, right? These weren't short-term decisions. These were 5, 6, 7, 8 years ago, right? We're making some of these decisions and investments. And those decisions are easy -- are not easy to pull back on, right? But we're cycling those. We've got a lot of flexibility. When you think about the next wave of investments, whether it's expanding in North America, whether it's expanding in Europe, you're looking at much smaller investments, you're looking at much more flexible real estate, many more choices, et cetera, et cetera. And you're just not going to have the same kind of cost. I mean we're going to -- the cost of building some of the new concepts that we've laid out, just the way we're thinking about deploying capital in North America through compounds and ecosystems and secondary market galleries that are in the 15,000 to 20,000 square foot range. Just the real estate risk, the investment risk of those, the financial participation of developers and landlords is much higher than when you're investing in major cities internationally. It's just a very different investment cadence. And we just have a lot -- and you don't have the same time horizon, right? So there's just a lot more flexibility. And -- so when I look at -- I would say, peak investment, peak risk right now. You're looking at peak investment, peak risk. And who knows from day-to-day or hour-to-hour about the geopolitical and economic environment. Of course, this is -- it's kind of different times. And there's major news headlines are made by tweaks and post today, right, and they happen all day long. So I just think that if you're just trying to say, okay, how do I think about the go forward? There's just a lot less risk. There's a lot more risk, I'd say, over the last couple of years than over the next couple of years. I mean there's -- is there further risk in the housing market? There always could be further risk. There always could be other things. I mean, could the war escalate? Could China try to take Taiwan? Could -- yes, there's a lot of things that can go the wrong way. We can all kind of imagine what those look like. But it's no different in calculating what the federal funds rate is going to be, right? Like everybody has been wrong on that. And unfortunately, that's been bad for our business, right? They're supposed to be 3 cuts to the federal funds rate this year. Now it looks like there's going to be no cuts, then there might be hikes. Does that create some short-term risk? It does. Can we navigate through that? We can. Do we have more upside to downside in the second half from a revenue -- demand and revenue point of view? We do. But I kind of say, look, if I was on the outside of this today and I had the information that the outside world has that we're giving you today. I'd say it's or you could -- I would -- look, I bought the stock at what, $2.16 a share, I bought $10 million of the stock. I was wrong, which is at the low point. But I don't see too much more downside risk in the model. Most of the work is behind us, building the galleries, getting the people trained, bringing up restaurants internationally. We -- the product side, I think, is a lot less risky. We're not going into some unknown aesthetic or trend we're betting on what is kind of the biggest market, the traditional classic market. And it just so happens, if you look at the trend that's going to come through, that is going to be the next trend. So -- but yes, your question is correct. We have toggles we can pull. We have assets that we can monetize. And we're pretty good at navigating 3 times like this. We've got it. Yes, this is my 26th year here. So I've seen cycles and the teams seem cycles, and we've navigated through. I would face somewhat similar times, not completely similar times. Allison Malkin: Your next question comes from the line of Brad Thomas with KeyBanc Capital Markets. Bradley Thomas: Gary, first, I wanted to follow up a bit more about the RH Estates line. And you, I believe, alluded to working more with designers and decorators in this. And so I was hoping you could talk a bit more if the selling process or how you go to market needs to be different on this line that seems to have so much potential for you? Gary Friedman: Well, we do a big business with design -- interior designers today. We have, I think, like I outlined in my comments that we have multiple businesses embedded in our galleries. We have a trade team that services interior designers and decorators, that's a meaningful part of our business. We think it will become a bigger part of our business, especially with the launch of RH Bespoke Furniture and RH Couture Upholstery because that's going to open up the ability to have kind of more customizable product from a size, fabric, finish, so on and so forth. And that will open up -- I think it should open up that market pretty significantly. We have some other strategies to address that market that you'll hear more about, that will kind of support what we're doing from a marketing point of view. So yes, Estates, I think, is when you think -- again, if you think about kind of the high-end part of the business that we're going to address with Estates, and that's just kind of the beginning. We'll also address that throughout the entire brand. But let's say, a stage represents the launch of RH Bespoke Furniture and the launch of RH Couture Upholstery kind of framing those. Think about those across the whole business long term. Bradley Thomas: That's helpful. If I could ask a follow-up on the 2030 margin targets. Just wondering if there's any high-level framework to think about perhaps how International fits into that, and how much mix or leverage of sale -- from sales factors into that? Gary Friedman: Yes, I mean, we have some data now. We kind of know as we've opened some of these, how they're evolving, how to think about, how they might evolve and grow. And so I think we have very reasonable targets internationally, mixed into this. I don't think there's anything that's a stretch perspective. So when you look at -- you just look at the total composition of kind of the top line accelerating in the out years to 12% growth. I think the way I'd think about that is you've got about 4 to 5 points from the platform expansion, you've got 3 to 4 points, maybe 5 points from the product expansion. And you've got -- at some point here, we think, there's a couple of points from the housing market coming back. I mean, I don't think we're going to be in a 9- or 10-year downturn of the housing market. Let's hope not. But if it doesn't come back, it's not like we've got a big number out there for the housing market. We've got kind of a 2- to 3-point hope in the out years of that plan that we'll see some lift in the housing market. If we see a lift in the housing market, you could see -- I mean, based on where it's been, I mean, you could argue there's a 10-point lift from the housing market in the out years. And if that happens, you don't have us growing at 10% to 12%, you have us growing at 18% to 22%. Allison Malkin: Your final question comes from the line of Marius Morar with Zelman. Marius Morar: Just a quick question on the growth outlook for next year. Gary, I think on -- in the video, you mentioned that it's a bit conservative. I was just wondering at the low end, do you sort of embed any sort of deterioration in the housing market or maybe an increase in interest rates? Gary Friedman: Yes. I think we're conservative throughout the second half. I mean, obviously, we have embedded the growth from our platform and the new galleries and the galleries that are cycling, and we've got growth from Estates and some of the newness and expansion of the assortment in Interiors and Modern. But do we have the housing market getting worse? I'd say we have embedded in this -- the current environment right now, which I believe is worse and mostly from a geopolitical point of view and a perception point of view, of more things can go wrong then maybe can go right. And I think that's how the market's generally risk times like these, when you've got uncertainty and you've got global tensions and war and oil issues and the endless amount of things that oil impacts, right? So, yes, I mean -- but did the housing market gets better when interest rates came down somewhat? Not really. Is the housing market going to get worse if they go back? If we get 25, 50, 75 basis points, you get three hikes. I don't think it gets much worse. I think you've got to think back in history and say, in 1978, we sold -- there's 4.06 million homes sold, and that was a low point. And in 2003, '04 and '05, you had 4.06 million homes sold on average, 4 million to 4.06 million of somewhere about 4.03 million. And that's -- and that's with 53 -- I think it's 53% more people, right? So it's hard to believe it gets worse than this to get worse in this for a small period. I mean, none of us have seen a world war in our lifetimes, right? Is there a risk of a world war? I don't think so. I mean I think, cooler heads will prevail. But this is uncertain times. So I think the -- whether the interest rates go up or down 25 to 75 basis points? I don't think it's going to change much in the housing market. If the interest rates go up 300 or 400 basis points, I think that's different. I think they go down 100 basis points with pricing coming down, which is pricing is coming down across the market, I think you're going to see a housing market acceleration. So I'd say short term, handicap it, as even. I think we're seeing pressure right now. Longer term, I think you have to kind of handicap it as a positive because we've never -- we've never seen -- we're now in the fourth year of the worst housing market in 40 to 50 years. That hasn't happened in my lifetime, I've never seen 2 down years -- seen 1.5 down years in my career. I've never seen 3 down years, and I surely never seen a fourth down year. I don't think anybody has. So how long does it stay here? I don't know. It's all today the new normal and build out from here. At some point, I think how the market comes back. And I think it's more likely to come back than go down. But if the interest rates are moving 50 to 75 basis points to 100 basis points, I don't know if that moves the needle plus or minus. On the minus side, you're getting closer to affordability, right? On the upside, you could have some moderate slowing. I think the bigger thing is if we have real inflation and interest rates have to rise 300, 400 basis points, that's a problem. Marius Morar: That's helpful. And maybe a quick follow-up. In the first quarter guidance, do you also embed any drag from the back order and special order similar to the drag you had in the fourth quarter? Gary Friedman: Jack, do you want to take that? Jack Preston: Yes. Yes, that's something that's going to take probably until the second half to fully resolve itself just because of the complexities of resourcing. So that is just -- yes, there's something that... Gary Friedman: We take that drag in, yes. Marius Morar: Is it getting worse in the first quarter? Jack Preston: There's some modest impact that that's over and above what we felt in Q4. And then so then we'll see the resolution of that in the second half. Gary Friedman: It's basically from the amount of resourcing and just the new factories being brought up in different countries, being able to ramp up fast enough. And so that's the biggest hit is coming from tariff-related resourcing of furniture, outdoor furniture, specifically metal outdoor furniture. Lighting is a big one. Rugs is a big one, and furniture is a big one. If you think about our business and you've got -- you take the furniture part of the business includes about 80%. And then you take lighting and rugs, which are the next biggest pieces, those are all being impacted. But you've got to -- by far biggest part of our business has been all impacted in a bigger way. Resourcing things like bedding, pillows, [ throws ], accessories, picture frames, things like that, which are not -- from a percentage point of view, not a very big part of our business, much easier to resource those things, much easier to move picture frames, pillow cases, [ throws ], tabletop, glassware, accessories, things like that much, much more easier. When you talk about ramping furniture factories, lighting factories, rug factories, moving those categories just more complex. And so those have been just slower to scale and transition. And when you think about just the -- being on the manufacturing side or manufacturing partners moving from one country to another, building factories, scaling them. And then all of a sudden, having tariffs change and going, "Oh, God, what do I do now? By doing the right thing, I mean, think about the rug business. And we -- for a while there, I mean, India was a big source of rugs, and you get hit with the 50% tariff and you're sourcing rugs to other countries. There's not that many places that have that kind of capacity to move those businesses. So same thing with lighting. Lighting is very different than any other kind of an item. Again, the more accessories, more seasonal parts of the business, you want to resource Christmas ornaments, things like that, very simple. When you're resourcing the core part of our business, much more complex. Allison Malkin: That concludes our question-and-answer session. I will now turn the call back over to Gary Friedman for closing remarks. Gary Friedman: Thank you. Well, thank you, everyone. We know this is an uncertain time in our business. Hopefully, we've shed some light to give you more certainty and more confidence in our outlook and our strategy. We believe this is the most important period in our history, and we've never been more excited about the outlook and what we believe will be the outcome. So we look forward to talking to you soon. Thank you for all the leadership and partnership from our teams and our partners all around the world. Everybody is working hard to kind of get to the next place. And so thank you. Allison Malkin: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to TON Strategy Company's Full Year 2025 Earnings Conference Call. Joining us today are Executive Chairman, Manuel Stotz; and Chief Financial Officer, Sarah Olsen. Earlier today, the company filed its annual report on Form 10-K for the year ended December 31, 2025, and issued a press release with its financial results. Both are available in the Investors section of the company's website. This call will also be available for webcast replay on the company's website. Before we begin, I would like to remind everyone that today's call includes forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Please refer to the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2025, for a discussion of these risks and uncertainties. The company undertakes no obligation to update any forward-looking statements, except as required by law. With that, I'd like to turn the call over to TON Strategy Company's Executive Chairman, Manuel Stotz. Manuel Stotz: Thank you, operator, and thank you, everyone, for joining us. For today's call, I'll start by framing why we believe TON matters and why we believe TON Strategy Company has a clear role to play in the ecosystem. Then Sarah will walk you through execution in the year's financial results, and I'll come back at the end with a few closing thoughts. Through my work at Kingsway, I've spent years investing in and working around digital assets. And in 2025, I also served as President of the TON Foundation during a very important period for that ecosystem. That experience informs my view of TON and why we believe TON Strategy Company has an important role to play in the market. TON Strategy Company is built to hold Toncoin to stake a substantial portion of the position and to increase TON held per share over time inside a public company structure. At the asset level, we believe TON is a differentiated network because it is designed for real economic utility and activity inside the Telegram ecosystem, where more than 1 billion users already communicate, transact and engage with digital services. The TON blockchain is designed to support payments, stablecoins, digital goods and application activity at scale. And we believe its combination of utility, distribution and still early adoption is what makes the asset compelling over the long term. We also think the network's growing developer and application ecosystem is an important part of that story. At the company level, we believe TON Strategy Company serves an important purpose. We've built TON Strategy to hold and stake Toncoin inside a public company structure designed to provide transparency, discipline and access to that exposure. We believe our structure is particularly relevant now while direct access to TON remains more limited in U.S. markets. We also think the staking component is a meaningful part of our business strategy. By staking a substantial portion of our holdings through institutional custodians and segregated validated structures, we have been able to make our treasury productive over time rather than leaving those assets idle. We took the first major steps in this strategy during the second half of 2025. In August, we raised capital, established our initial position and began staking. Over the balance of the year, we've also built out our operational and reporting foundation needed to support the strategy inside a public company. The fourth quarter was the first full fiscal period with staking in place, which is giving us a better view of how the model operates with the operating infrastructure fully established. I also want to provide a quick update on our CEO transition. As previously announced, the company continues to conduct an active search for a permanent CEO as part of a planned leadership transition. Veronika continues to serve as CEO during this transition, and our Board remains engaged in the search process. I'd personally like to thank Veronika for her integral role in launching TON's strategy and her continued commitment to the Toncoin ecosystem. With that, I'll turn it over to Sarah. Sarah? Sarah Olsen: Thank you, Manny. Thanks, everyone, for joining. I've had the privilege to work across capital markets and digital assets with a focus over the last decade on the intersection of crypto infrastructure and traditional markets. As we've gotten TON strategy up and running, my primary focus has been establishing the operating and reporting framework to support the business within a public company environment. As context for the financial results, our 2025 results reflect both the implementation of our TON treasury strategy beginning in August as well as the contribution of the company's legacy operating businesses. For the full year 2025, total revenue was $12.8 million compared to $0.9 million in 2024 and included approximately $4 million from staking activities following the implementation of the TON treasury strategy. Gross profit was $7.6 million compared to $0.7 million in 2024. Total costs and expenses were $49.2 million compared with $12.5 million in 2024. The increase was primarily due to noncash stock-based compensation expense, treasury implementation costs and costs associated with the infrastructure to support custody, staking, reporting and compliance. Loss from operations was $36.4 million compared with $11.6 million in 2024. Net loss before income taxes was $148.6 million compared with $10.5 million in 2024. Net loss included a $114.2 million net loss on crypto assets, which reflects realized and unrealized fair value changes in Toncoin Holdings during the year. At December 31, 2025, digital assets held a fair value of approximately $356.8 million and cash and restricted cash totaled approximately $39.7 million. From an operating standpoint, the important takeaway is that our treasury is active and productive. As of year-end, we had 219.7 million tons staked, and we earned 2.19 million tons since taking implementation. We expect to continue updating most company reported treasury metrics through our regular quarterly and annual public filings, consistent with our long-term treasury approach. We also recently launched an analytics dashboard on our website, tonstrack.com, to support transparency around the treasury and provide additional visibility into certain market-based and drive metrics alongside the company reported data. Going forward, operationally, our emphasis will remain on disciplined treasury management, which means taking a substantial portion of our position while preserving appropriate liquidity and financial flexibility. We intend to continue being deliberate in how staking rewards are used or retained over time, and we are applying that same discipline to our cost structure, including careful expense management and a continued focus on operating efficiently. I'll now turn it back to Manny for closing remarks. Manuel Stotz: Thank you, Sarah, and I very much appreciate the wonderful job you and the team have done on our first 10-K. To wrap up, I'd like to leave you with 3 key points. First, we entered 2026, having moved through the initial launch phase, and we are now operating the model with the core elements in place, a substantial Toncoin position, staking and the public company structure and processes needed to support the strategy. Second, we continue to believe TON is a very differentiated asset with growing utility and a network that is still very early in its development. Our view is that our public company structure offers a distinct way to access the TON ecosystem through the public markets. Third, our core focus remains on disciplined execution. We strive to manage the position carefully, operate transparently and continue increasing TON held per share over time through a measured approach. Thank you very much for joining us this morning, and thank you to our shareholders for your continued support. Operator, that concludes our prepared remarks. Operator: Thank you. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good evening, and welcome to the Sidus Space Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Adarsh Parekh, Chief Financial Officer. Please go ahead. Adarsh Parekh: Good evening, everyone, and thank you for joining us for Sidus Space's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining us today from the company is Carol Craig, Chairwoman and Chief Executive Officer; and myself, Adarsh Parekh, Chief Financial Officer. During today's call, we may make certain forward-looking statements. These statements are based on our current expectations with respect to the future of our business, the economy and other events and as a result, are subject to risks and uncertainties. Many factors could cause actual results to differ materially from the forward-looking statements made on this call. These factors include our ability to estimate operational expenses and liquidity needs, customer demand, supply chain delays, including launch providers and extended sales cycles. We also expect to discuss certain financial measures and information that are non-GAAP measures as defined in the applicable SEC rules and regulations. Reconciliations to the company's GAAP measures are included in the MD&A of Financial Conditions and Results of Operations within Sidus' full year 2025 10-K. For more information about these risks and uncertainties, please refer to the risk factors in the company's filings with the Securities and Exchange Commission, each of which can be found on our website, www.sidusspace.com. Listeners are cautioned not to put any undue reliance on forward-looking statements, and the company specifically disclaims any obligation to update the forward-looking statements that may be discussed during this call. At this time, I would like to turn the call over to Carol. Carol, please go ahead. Carol Craig: Thank you, Adarsh. Good evening, everyone, and thank you for joining us. I want to start by saying that 2025 was a productive year for Sidus, and I am proud of the progress our team has made as we translate several years of development into operational capabilities supporting both space and defense missions across multiple domains. For those who may be new to our story, Sidus was built with a clear mission to deliver end-to-end space and defense solutions, integrating satellite design, manufacturing and operations with advanced computing and data capabilities. Over the past several years, we've made deliberate investments in our technology, infrastructure and talent to support that mission, and we're now seeing those efforts materialize into tangible mission-ready capabilities. As a result, today, Sidus is a proven U.S.-based vertically integrated space and defense technology company, delivering end-to-end satellite infrastructure, space and defense-grade hardware and AI-enabled data platforms. Over the past 4 years since we became a public company through a traditional IPO rather than a SPAC, the landscape has evolved considerably. At that time, our objective was clear: to transition from a predominantly government-focused contract manufacturing business into a diversified space and defense technology company positioned to capitalize on the rapidly expanding commercial space ecosystem while developing capabilities that support both commercial and defense missions. Since then, the geopolitical environment has shifted meaningfully, underscoring the growing importance of space as a national security domain. At the same time, as a smaller company operating with disciplined resources, we have remained focused on advancing differentiated high-performance technologies and integrated capabilities that few others are able to deliver. Our vision is to be a leading innovator and provider of space and defense technologies, infrastructure and actionable insights, and our mission is to deliver cost-effective solutions that enable multi-domain operations through agility and vertically integrated capabilities. This strategy is not theoretical. The strongest validation of our technology is not what we say, but what our systems are doing operationally. With multiple satellites on orbit, Sidus is moving into a new phase where the focus shifts from proving technical capability to executing and operating mission-ready platforms for customers. We launched 3 LizzieSat satellites between March 2024 and March 2025, each building upon the last and demonstrating increasing capability across design, operations and mission performance. Together, these missions validate our platform, strengthen our credibility and support our transition into the next phase of commercialization. An important part of our strategy is that our satellites are company-owned and company-funded with multiple customers contributing revenue before and after launch. Unlike others that may depend primarily on government contracts to finance and build their satellites, we made a deliberate decision to create a Sidus-owned platform, including the underlying intellectual property that can support commercial, civil space and defense customers on a single satellite. This dual-use multi-mission model creates diversified revenue streams, broadens customer opportunities and supports a more resilient business model in an increasingly dynamic geopolitical environment. Another important differentiator is that we intentionally designed our satellites to serve as both development and production platforms. From the beginning, our goal was to build a robust, redundant satellite architecture capable of testing and maturing technologies while simultaneously supporting customer missions, beginning with the very first spacecraft. LizzieSat-1 successfully launched and established communications, enabling us to test our bus structure, radios and other internal payloads. We also successfully executed the requirements for a NASA mission, which led to a follow-on contract for additional support on LizzieSat-1. And equally important, LizzieSat-1 enabled full commissioning of our mission control center, marking a shift from development infrastructure to active mission operations. LizzieSat-1 completed its mission, and we are, therefore, beginning the process of dispositioning. However, we will continue to track our location for situational awareness and orbital monitoring. LizzieSat-2 was launched in equatorial inclination and remains in the commissioning phase. We continue to receive signals from the satellite while working toward establishing consistent and regular communication passes as part of the normal commissioning process. The equatorial inclination was intentional with the goal to test and strengthen our ability to operate satellites across very different orbital environments. Equatorial satellite commissioning is more challenging than polar due to the limited ground station access, resulting in fewer communication windows and longer time lines. The reason we chose an equatorial orbit was for its long-term advantages, enabling repeated coverage of high-value regions near the equator with fewer satellites. Lastly, LizzieSat-3 has completed full bus level commissioning, including successful validation of a new autonomous guidance navigation and control software, achieving pointing accuracy of less than 30 arc seconds. With commissioning complete, LizzieSat-3 is now supporting recurring customer payload operations, including near real-time maritime data through its AIS sensor and on-orbit imaging through HEO USA's non-earth imaging camera payload. Taken together, these capabilities reflect a deliberate evolution in Sidus' role. We are increasingly expanding from discrete mission delivery toward operating integrated platforms that support sustained multi-domain operations for customers. Building on this operational foundation, we continue to advance our onboard computing and AI capabilities through our Fortis VPX platform, including a SOSO-Aligned single-board computer and a PNT card designed for GPS-denied environments. Fortis is a ruggedized modular computing system developed to perform data processing in challenging and constrained environments from seafloor to space. By integrating Fortis with our software-defined satellite architecture and flight-proven AI capabilities, Sidus is enabling more data to be processed closer to where it's collected. This reduces reliance on centralized ground infrastructure, improves responsiveness and supports mission execution in environments where bandwidth, latency and connectivity may be limited. This effort reflects our broader focus on developing practical deployable technologies that align with both defense and commercial needs. In parallel, we're working with commercial customers and defense prime contractors, along with systems integrators to evaluate Fortis VPX for operational use cases, including satellite payload processing, unmanned systems and ground-based computing deployed at operational sites. Our focus is converting these evaluations into long-term programs and support agreements that can drive scalable and predictable revenue as mission needs expand. The continued growth in government spending across defense and space supports demand for our capabilities and a key focus area for us is our recent award under the MDA's 10-year SHIELD IDIQ contract. Our work over the past several years has positioned us to participate in programs of this scale and complexity. The SHIELD program is part of the broader Golden Dome missile defense strategy, which is focused on developing more resilient layer protection across air, missile, space, cyber and other operational domains. The contract vehicle is designed to enable faster delivery of capabilities by incorporating approaches such as digital engineering, open systems architectures and where appropriate, AI and machine learning. For Sidus, this award provides access to a flexible procurement pathway aligned with evolving defense requirements, and it reflects the increasing emphasis on collaboration across primes, emerging companies and research institutions. Our defense strategy is aligned with these types of large-scale programs. We're focused on areas where our capabilities in satellite platforms, onboard processing and modular compute systems can contribute to applications such as persistent sensing and real-time data processing. Our vertically integrated model allows us to move from design through deployment in a more streamlined manner, which is increasingly important as time lines continue to compress. Another strategic area of focus for us is Lunar. We view the lunar economy as an emerging ecosystem rather than a single program, requiring scalable technologies and partners capable of moving quickly. Our approach is to align our capabilities with that direction, supporting both government and commercial missions as activity beyond Low Earth Orbit continues to expand. Expanding beyond LEO, we made progress across our Lunar and GEO initiatives. We signed an agreement to integrate the Lonestar's Commercial Pathfinder mission onto LizzieSat-5, completed the systems requirement review of mission kickoff with an initial milestone payment received, introduced LunarLizzie, our next-generation Lunar spacecraft concept and executed an MOU with a partner to support development of a GEO platform. Our Lunar strategy is aligned with broader national space priorities that emphasize speed, commercial partnership and operational capability beyond LEO. Recent leadership perspectives, including those advanced by NASA administrator, Jared Isaacman, reflect a shift toward a more commercially enabled and execution-focused approach to Lunar and deep space missions. This direction closely aligns with our approach to building scalable, commercially driven space and defense capabilities. Our focus on vertically integrated satellite platforms, onboard computing and adaptable software-defined systems positions us to support elements of the broader cislunar architecture, including communications, data relay and mission-enabling infrastructure. This approach prioritizes leveraging commercial innovation, shortening development time lines and building sustainable infrastructure through public-private partnerships while maintaining a focus on operational readiness, repeatability and cost efficiency over time. As we move into 2026, our strategy and focus are on accelerating commercialization and expanding in defense markets through our technology platforms while reducing reliance on lower-margin contract manufacturing and prioritizing scalable, higher-margin products. Diversification remains central to our approach, and our company remains agile in a rapidly evolving industry. While we have been intentional and disciplined in how we deploy capital, we have built a full technology stack spanning hardware, software and data entirely through organic development, not acquisition. Unlike others that pursued multi-domain capability through large debt finance acquisitions, we built these capabilities from the ground up, leveraging a 1.5 decades of heritage experience while maintaining a clean balance sheet and retaining full control over our intellectual property. As defense priorities continue to shift toward integrated multi-domain operations, we intend to aggressively pursue programs aligned with these needs, including missile defense, space-based sensing and resilient communications architectures. By combining our satellite platforms, onboard AI and modular compute capabilities, Sidus is well positioned to support next-generation defense missions and capture a larger share of this evolving market. One of the key advantages of the LizzieSat architecture is that it is software-defined, meaning capabilities are not fixed at launch. This allows the satellite to be updated, reconfigured and enhanced through software while on orbit. Over the past year, we've demonstrated this by deploying autonomous navigation software and commissioning FatherEdge100i entirely on orbit, delivering capability upgrades to an operational asset without additional hardware or launch costs. This model allows us to extend mission utility and adapt to changing requirements over time while maintaining a more efficient approach to capability upgrades. As we look toward the next evolution of AI infrastructure, including orbital and distributed data architectures, we see a logical extension of capabilities that we've already demonstrated. Our on-orbit experience with software-defined satellites, combined with proven onboard AI processing and edge computing hardware provides a foundation for supporting data processing closer to where it's generated. Recent announcements from NVIDIA and others point to a broader shift toward deploying high-performance compute beyond traditional data centers, including in space. This direction is consistent with how we've designed our systems, integrating software-defined platforms, reconfigurable payloads and onboard processing to enable real-time data handling. This reduces reliance on ground infrastructure and increases operational flexibility. Our VPX-based computing systems, along with our flight proven AI hardware and software position us to support elements of this distributed model across both space and terrestrial environments. These systems are designed to operate in constrained and contested environments, which is increasingly relevant as data processing moves closer to the edge. From a broader perspective, our vertically integrated approach spanning satellite platforms, onboard compute and mission operations allows us to participate in multiple layers of this emerging ecosystem. As investment in the next-generation AI infrastructure continues to grow, particularly in defense and national security applications, we are aligning our technology road map with areas where that resilience, autonomy and real-time decision-making are required. We've strengthened and refocused our sales organization to prioritize high-value opportunities across both commercial and defense markets with an emphasis on programs that align with our core technology platforms and offer the potential for longer-term repeatable revenue. As a result, we're actively engaged with both commercial and Department of Defense customers to address growing demand for cost-efficient, rapidly deployable satellite platforms supporting communications, imagery and intelligence missions. In parallel, we continue to advance our next-generation satellite builds, including LizzieSat-4 and LizzieSat-5. LizzieSat-4 and LizzieSat-5 are being developed as a software-defined platform, incorporating capabilities such as laser comm and software-defined hyperspectral imaging. This architecture is designed to provide customers, including international partners such as the Netherlands Organization or TNO, with the ability to adapt mission requirements on orbit. This flexibility allows for adjustments to sensing, data collection and processing priorities over time, supporting both commercial and defense use cases as needs evolve. LizzieSat-4 also includes integration of the Lonestar payload, further expanding its mission profile. Our mission control center now in its third year of full 24/7 operations continues to support satellite operations, collection management and data distribution for both our own fleet and third-party customers, reinforcing our ability to deliver end-to-end mission support. We also entered into a strategic collaboration with Simera Sense to advance AI-enabled hyperspectral imaging focused on enabling near real-time intelligence-driven earth observation and situational awareness capabilities. To support these initiatives, we executed capital raises to fund key technology development, including our dual-use Fortis VPX product line, while also identifying operational efficiencies to reduce SG&A and maintain cost discipline as we scale. As we move forward, this operational transition informs how we think about scalability, margin durability and capital efficiency. Now Adarsh will walk through how this shift toward owned and operated platforms is reflected in our financial results and outlook. Adarsh Parekh: Thank you, Carol. At Sidus, we continue to build a scalable, vertically integrated company across space, technology and artificial intelligence. Our focus remains on operational excellence, rapid innovation and delivering cost-effective, high-impact solutions for our customers. Our investments to date have centered on expanding our satellite fleet, advancing innovation and implementing a robust ERP system to support scale and profitability. Momentum from 2024 carried through full year 2025, which reflects both our transition to commercialization of dual-use multi-domain products and the near-term financial impacts of scaling a deep tech space-based enterprise. During 2025, we continued our progress in establishing Sidus Space as an innovative space and defense technology company. Our rich space and defense heritage positions us to take advantage of opportunities across multiple sectors with a combined focus on commercial space innovation and national defense priorities. Let's review our results for the year ended December 31, 2025. Total revenue for the full year 2025 was approximately $3.4 million compared to $4.7 million in full year 2024. While this reflects a decrease of about $1.3 million or 28%, the change aligns with our strategic shift away from legacy contract work toward higher-value commercial space-based and AI-driven solutions. This repositioning is intentional and expected to generate more sustainable recurring revenue in future periods. The impact of milestone-based revenue recognition also influenced year-over-year performance and comparison. Cost of revenue was approximately $9.1 million, a 48% increase from $6.1 million in full year 2024. Key contributors included a $2.1 million increase in depreciation tied to satellite and software investments, reflecting the first full year of LizzieSat operations, a changing contract mix requiring greater material and labor inputs, ongoing global supply chain pressures impacting manufacturing operations. Gross loss for the year was approximately $5.7 million compared to a loss of about $1.5 million in full year 2024. This increased gross loss reflects increased depreciation, which is noncash and directly tied to recent investments that position us for future revenue generation, the transition away from legacy high-margin contracts as we focus on long-term value-added offerings, a shift in contract structure, which is expected to yield greater returns in future periods. When adding back depreciation, including in cost of revenue, gross loss for the year was approximately $1.7 million compared to a profit of approximately $453,000 in full year 2024. Selling, general and administrative expenses totaled $22.3 million compared to $14.2 million in the prior year. This $8.1 million increase supported key growth initiatives, including strategic headcount additions to support scale and expanded employee benefits to remain competitive, equity-based compensation and performance-based bonuses initiated during 2025, increased mission operations expenses to support our growing satellite fleet, infrastructure investments in software tools, and it was also -- it also included a $4.5 million impairment of LS-1 and related assets as well as depreciation expenses and severance costs as described further in the notes to the consolidated financial statements. To provide a broader view of our performance, we also report adjusted EBITDA, a non-GAAP measure we use internally to guide strategic decision-making. Adjusted EBITDA loss for the full year 2025 was $17.3 million compared to $12.9 million in full year 2024, reflecting ongoing investment in scaling our platform. The reconciliation table, including interest, depreciation, fundraising, severance, equity-related expenses and impairments is included in our annual report on Form 10-K. Net loss for the year was $29.5 million compared to $17.5 million in full year 2024. This increase is primarily tied to strategic investments in infrastructure, personnel and operational capacity, the $4.5 million LS-1 impairment charge and noncash depreciation related to our expanding satellite fleet. Turning to the balance sheet. As of December 31, 2025, Sidus had $43.2 million in cash compared to $15.7 million as of December 31, 2024. During 2025, we completed multiple capital raises totaling approximately $53.3 million in net proceeds from the issuance of approximately 47.1 million shares of Class A common stock. Notably, we entered 2026 with no outstanding term debt, a meaningful distinction in an industry where many peers continue to carry substantial debt obligations and the associated interest burden. As we move forward, we continue to manage cash conservatively while making strategic investments in our next-generation satellite builds and high-growth product lines. During 2025, we implemented meaningful cost reduction activities and operating efficiencies to support long-term profitability, and we remain focused on driving sustainable growth in the year ahead. With that financial context, I'll hand the call back to Carol for closing remarks. Carol Craig: Thank you, Adarsh. Before I close, I want to address a couple of questions we've received from investors and analysts, particularly related to our stock performance. We recognize the concern, and we view recent movement as the result of broader market conditions, volatility across small cap and space technology sectors and the timing of revenue as we transition the business. We've seen similar patterns across our peer group, particularly among companies moving from development into commercialization. From our perspective, the priority remains execution. We are focused on advancing a more scalable product and platform-driven model anchored by our LizzieSat satellite fleet, software-defined capabilities and Fortis VPX command and data handling systems. At the same time, we have strengthened our sales organization and are prioritizing opportunities that align with larger programs, including defense initiatives like MDA SHIELD as well as commercial applications. We're also maintaining a disciplined approach to capital allocation and cost structure as we move through this transition. Ultimately, our objective is to build a more durable business with higher-margin repeatable revenue streams. As we continue to execute, demonstrate capability in orbit and convert pipeline into contracted programs, we believe that progress will be reflected over time. As we move forward, we remain focused on execution, cost discipline, and innovation, and we are advancing with greater confidence than at any point in our history. Revenue in the period was impacted by the timing of legacy program completions and our transition toward product and platform-driven revenue streams while maintaining a disciplined focus on the programs that offer the greatest long-term value. Operating in a highly competitive industry while using significantly less capital than many peer companies presents both constraints and advantages. Remaining lean requires disciplined prioritization and difficult trade-offs, but it also drives technical focus, speed of execution and operational accountability. Sidus has intentionally avoided the excesses that characterize many space SPAC era entrants choosing instead a staged capital approach tied to milestone completion rather than speculative scaling. At the end of 2025, to ensure uninterrupted execution and reduce structural risk, we took proactive steps to strengthen our balance sheet. The approximately $41 million raised at the end of December was not intended to fund indefinite operating losses, but to improve liquidity, reduce financing friction, evaluate more favorable debt structures and lower our overall cost of capital as we enter the commercialization phase. This capital provides runway stability and optionality, allowing management to focus on execution rather than survival. We fully acknowledge that equity financing creates dilution. That impact is real, and it is not dismissed. However, dilution must be evaluated relative to what it enables. Our objective is not continued reliance on equity markets, but the conversion of validated technology into repeatable revenue streams, margin expansion and operating leverage. Per share value is ultimately restored through execution, not commentary. Sidus has raised material less capital than many public peers while achieving milestones that include satellite launches, on-orbit operations, vertically integrated manufacturing, proprietary computing and AI architectures and a growing patent portfolio. Importantly, we achieved these milestones through organic development alone, building, proving and retaining ownership of every capability in our portfolio. Looking ahead, management is focused on improving capital efficiency with each successive deployment and product cycle, reducing incremental capital required per platform and accelerating the transition from build to revenue as commercialization scales. These capabilities are now moving from demonstration into deployable products and services. So here are our key areas to watch over the next 12 to 18 months. LS-4 and LS-5 are in production as software-defined satellites with advanced onboard AI processing and Fortis VPX, enabling on-orbit data processing, autonomy and mission adaptability. The Fortis VPX platform is beginning customer deployment, marking a key step in commercializing ruggedized multi-domain compute solutions. We're increasing our focus on defense opportunities as demand grows and the convergence between commercial space and national security accelerates. And our collaboration with Simera Sense and other international agencies and partners is advancing AI-enabled software-defined hyperspectral imaging to support more responsive and intelligence-driven earth observation. Together, all these efforts reflect our continued focus on scaling advanced adaptable technologies across both commercial and defense markets. I want to personally thank our team, our partners and our investors for your continued support and confidence. We appreciate you taking the time to join us today. We remain laser-focused on execution, cost discipline and innovation and look forward to the next phase of growth for both Sidus and the broader space industry. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: At this time, participants are in listen-only mode. Following management’s prepared remarks, we will open the floor for Q&A. Before asking a question, please identify yourself and the organization you are working for. Please also note the call will be recorded. Simultaneous English translation will be available for this call. You can select your preferred language by clicking Interpretation in the Zoom toolbar. Our December quarter and full year 2025 results were released earlier today and are now available on our investor relations website at ir.miniso.com. Joining us here today are Guofu Ye, our Founder and CEO, and Eason Zhang, our CFO. Before we proceed, I would like to refer everyone to the Safe Harbor statements in our earnings press release, which also apply to this call, as management will be making forward-looking statements. Please also note, we will be discussing certain non-IFRS financial measures today. These measures are described and reconciled to their most directly comparable IFRS measures in our earnings release, and in our filings to the SEC and the Hong Kong Stock Exchange. Unless otherwise stated, all figures are in RMB. In addition, we have prepared a presentation featuring financial and operational highlights for today's call. If you are joining via Zoom, you will be able to see the slides. They will also be available on our IR website. I will now turn the floor over to Guofu Ye. Guofu Ye: Good day, everyone. Welcome to MINISO Group Holding Limited’s 2025 December quarter and full year earnings presentation. 2025 was a year of steady growth and continued breakthroughs for the group. Throughout the year, revenue growth followed a strong and constantly accelerating trajectory, rising from 80.9% year-over-year in Q1 to 32% in Q4, surpassing the upper end of our prior guidance and also reaching RMB 6.25 billion in quarterly revenue, marking the first time we have crossed the RMB 6 billion quarterly revenue milestone. Looking at our core brands in detail, MINISO brand recorded its fastest growth rate in nearly eight quarters in Q4 with revenue up by 28%, reaching RMB 5.65 billion. Meanwhile, TOPTOY delivered exceptional momentum, posting 112% year-over-year growth in Q4, with quarterly revenue approaching RMB 600 million, demonstrating the powerful dynamics of our multi-brand portfolio. This year, we achieved higher revenue growth with fewer net new store openings than 2025, with a greater share of the growth driven by same-store sales, reflecting a more efficient and higher-quality growth model, reaffirming the resilience and the long-term growth potential of our multi-IP plus multi-category and globalization business model. Today, against the backdrop of the group's full-year operating performance, I will share with you the significant progress that we made in the past year regarding meaningful strategy, particularly focused on the breakthrough in brand innovation and store experience enhancement. First, let us take a look at MINISO China. In the fourth quarter, the MINISO brand generated revenue of RMB 5,650,000,000. Mainland China contributed RMB 2,870,000,000, growing by 25%, representing 51% of the total. MINISO’s overseas revenue reached RMB 2,780,000,000, up by 31%, accounting for 50% of the total, reflecting robust, balanced growth driven by both domestic and international operations. Let us first talk about strategic initiatives in MINISO Mainland China business. In Q4, MINISO domestic same-store sales grew by mid-teens, a record high for the year, with average daily sales per store surpassing the level achieved in 2023. Given 2023 was largely driven by a surge in post-pandemic pent-up demand, MINISO’s ability to exceed those peak levels demonstrates structural improvement rather than cyclical tailwinds. We have every confidence that, assuming a more supportive macro environment and a gradual recovery in consumer sentiment in 2026, with our stronger brand equity, superior store positioning, more agile supply chain, and competitive standing, we will be able to outperform the industry by a wide margin, capturing more share in the market. By the end of Q4, our domestic franchisee count reached 1,157, a historical high. Franchisees vote with their support. That is the most authentic market signal, and they partnered with us because they have witnessed firsthand the traffic momentum and the financial patterns of our large-format stores. The trust has been earned store by store, IP activation by IP activation. It is something that we hold in the highest regard. At our 2024 Investor Day, we articulated our vision to make MINISO the go-to happy destination for international consumers worldwide. Today, the vision has been realized, one MINISO Land store at a time. By the end of 2025, we had already opened 26 MINISO Land format stores in Mainland China, securing prime locations in tier-one cities like Beijing, Shanghai, Guangzhou, and Shenzhen, and also distinctive retail destinations in Haikou and Guiyang. In January, the MINISO Land opening in Grandview Mall in Guangzhou attracted nearly 10,000 visitors on its opening day, generating RMB 450,000 in sales, a new record for the South China region. Equally impressive is the MINISO Land flagship opening in lower-tier cities in Urumqi and Nantong. The Nantong store soft opening drove 80% year-over-year growth in overall mall foot traffic. Urumqi’s store, featuring a three-story impressive space and a portfolio of 100 IP collaborations, quickly established itself as a regional premier destination. Such high-quality experience stores are, at their core, the engine for IP operations. Through authentic spatial design and curated product presentation, mature consumer and sensory, perceivable and tangible experiences bring IP value to life. They can also help us continue to improve our brand IP ecosystem. MINISO Land stores combined with robust IP activations have become the go-to platform for creating citywide mainstream brand momentum. Tens of thousands of consumers share their experiences on Xiaohongshu, Douyin, and WeChat Moments. That is the reason I always tell you our physical stores are MINISO’s most powerful brand billboards and our most enduring source of consumer traffic. MINISO is not the first brand to pursue a large-format store trajectory. But why can others not follow? The answer comes down to just one thing: a successful large-format store must be built on the conditions of owning proprietary product development capacity. Without in-house design and R&D capacity, a large-format store is nothing but an empty shell. Behind that, we have more than one decade of supply chain deployment, a network of more than 1,500 global suppliers, and a design team of over 1,000 professionals. In this process, no one will be able to copy the successful story unless they build the core capacities. MINISO moved even further ahead. In support of our MINISO Land strategy, we established a seven-tier store format mix in 2024 and continued to refine and evolve it through 2025. Our goal is to ensure every city, every trade area, and every consumption scenario will be served by the MINISO format precisely. In the past, I mentioned the intention to systematically upgrade our store portfolio. I also would like to share with you the reason behind such initiative: why every new store we open must be a large-format, high-quality MINISO Land format store. If we look at our journey, we navigated two distinctive strategic phases: first, rapid global store expansion to build scale; followed by strategic IP positioning, transitioning ourselves from a value-priced variety store into an interest-driven consumption destination. We achieved milestones in both phases. Now we move into the third phase, an immersive retail transformation centered on MINISO Land. It is not only about increasing store size; it is the integration of the store capacities built across the first two phases. Leveraging larger space, creating immersive environments, forging genuine emotional connections, and driving repeated visitors, we are transforming from selling products to selling experiences, from a traffic-driven business to a loyalty-driven, consumer-centered one. People never lack good products. They are truly seeking compelling destinations, memorable experiences, and moments. With our IP-driven formats and designs precisely meeting those needs, we can inspire consumers to share and continue to come back to generate purchase. Regarding international markets, our overseas revenue approached RMB 2,800,000,000 in Q4, an all-time high, representing 31% year-over-year growth. Our overseas store net adds were 159 stores, bringing a full-year net increase of 465 stores. Our largest overseas market, the United States, delivered a full-year growth of more than 60% and in Q4, same-store growth was more than 20%, ahead of our prior expectations. At our Q1 2024 earnings call, I stated improving store operating quality in North America was our corporate priority in 2025. A year on, MINISO U.S. business delivered comprehensive improvements in store quality, operational efficiency, and consumer engagement. For stores, new store quality was further improved. New stores in 2025 have all-time high growth by double-digit numbers; average transaction value and transaction volume are improving, driving meaningfully higher unit-level profitability and conversion rates. At the same time, our mature stores demonstrated strong operating rigor. Leveraging a refined same-store performance tracking model, we established stores to deliver revenue growth in both average daily sales and transactions, improving alongside gains in foot traffic and purchase frequency, especially for our Plaza store format. We opened 48 Plaza locations in 2025. They generate higher attachment rates and average transaction value. The average ASP outperformed most of our estate, establishing a more flexible and economically resilient new store expansion channel. Operationally speaking, we have crossed the base expansion strategy, improving logistics efficiencies and warehouse cost. Employee retention improved, revenue per headcount increased, and labor cost as a percentage of sales declined, achieving a dual optimization on cost and productivity. On the consumer side, membership in the U.S. market grew by 150% year-over-year. Member-driven sales exceeded 50% of total revenue for the first time. Together, those results mark the U.S. market’s transition from a new investment phase into a phase of high-quality, profitable growth, becoming our most resilient and dynamic engine for global expansion. This actually gives us greater confidence for our global rollout strategy. The operational challenges we encounter in other markets were also encountered and navigated in both China and the U.S. We are going to leverage our experience from China and the U.S. to continue unlocking profit potential for international operations. Thirdly, let me talk about TOPTOY. TOPTOY sustained its strong compound growth momentum in Q4 with revenue up 112%, reaching nearly RMB 600,000,000 in Q4. In terms of store footprint, by the end of 2025, TOPTOY operated a total of 334 stores, including 30 international stores in Thailand, Malaysia, Indonesia, and Japan. Brand global expansion continued to accelerate. Domestically speaking, TOPTOY’s growth strategy is centered on a high frequency of proprietary product launches to drive same-store sales. The proprietary IP, Youyou, rapidly gained momentum with sales of more than RMB 200,000,000 and is likely to double in 2026. By 2025, TOPTOY has built a proprietary IP portfolio of more than 20 brands. In 2020, I first introduced interest-driven consumption. The consumer’s core needs are rapidly shifting from pure functional value to emotional and experiential value, which has been fully validated by the market. MINISO stands as one of the most significant beneficiaries and pioneers of this consumption transformation. With our immersive experience and multi-category proprietary development capacity, those are our key and hardest-to-replace competitive moats in the IP-driven consumption era. Our strategic vision is to become the world’s leading IP-driven retail platform. My strategy has been ever clearer. Along the way, we have demonstrated the execution of our strategic development is right. We also witnessed firsthand the genuine and sustainable enthusiasm we have from consumers. For the past year, we delivered strong results in both China and the U.S. The road ahead is strong, but with each step forward, our conviction and confidence only deepen. That is all for my remarks. I will now turn the call over to Eason to walk you through the financial highlights for Q4 and full year. Thank you. Eason Zhang: Thank you. Thanks to Mr. Ye. Welcome, you all. Coming next, let me walk you through MINISO Group Holding Limited’s financial results for Q4 and full year 2025. I will also provide you the outlook. I should also say that all the units would be RMB unless otherwise stated. Let me start by reviewing financial performance for Q4 and full year. In Q4, revenue grew by 32.7%, surpassing the upper end of our prior guidance of 20% to 30%, driven by the outperformance across all business segments. MINISO Chinese Mainland Q4 revenue grew by 25%, exceeding our prior guidance of high-teens growth. MINISO’s overseas Q4 revenue grew by close to 31% year-over-year, ahead of our guidance of low- to high-20s percentage growth. TOPTOY Q4 revenue grew by 112%, above our guidance of 80% to 90% growth. Q4 momentum lifted full-year group revenue growth by 26.2%, exceeding our prior full-year guidance of approximately 25% in the interim result. In Q4, MINISO Chinese Mainland net and same-store sales growth reached mid-teens. U.S. same-store sales exceeded 20%, both surpassing our prior Q4 guidance of lower double-digit same-store growth. Both markets delivered high single-digit same-store sales growth for the full year, in line with our formal guidance but ahead of the internal expectations we had when we provided the guidance back in November. Adjusted operating profit rose by 12% in Q4, in line with our prior guidance of double-digit growth. Full-year adjusted operating profit reached RMB 670,000,000, aligned with our guidance. In Q4, our adjusted operating profit margin was 17%. Especially in 2025, we have already narrowed down the margin compression. Let us take a look at revenue. We have already created three revenue milestones in this quarter. First of all, single-quarter GMV exceeded RMB 10 billion for the first time. Quarterly revenue surpassed RMB 6,000,000,000 for the first time, and full-year revenue crossed RMB 20,000,000,000 for the first time, benefiting from outstanding performance across all of our business lines and over expectations. By brand, MINISO generated Q4 revenue of RMB 5,650,000,000, a 27.7% increase. MINISO China continued to demonstrate great growth. In Q4, its average growth is the highest for the past eight consecutive quarters. MINISO overseas revenue was RMB 2,780,000,000, up by 30.5%. TOPTOY revenue was RMB 600,000,000, up by 112%, also having a triple-digit year-over-year growth with very strong momentum that exceeded our expectations. Turning to the full year, group revenue reached RMB 21.44 billion in 2025. A few highlights I would like to share with you: MINISO Mainland China full-year revenue crossed the RMB 10,000,000,000 milestone for the first time. In such a consumption background, it grew by around 70%. Overseas full-year revenue was RMB 6.86 billion, up by close to 30%. TOPTOY full-year revenue was RMB 1.9 billion, maintaining very strong growth. In terms of geographic revenue mix, Mainland China revenue grew by 22%, accounting for 60% of total revenue. Overseas revenue grew by 33%, representing 40% of total revenue. Let us take a look at the same-store sales performance. MINISO Mainland China Q4 same-store sales continued sequential acceleration reaching mid-teens, beyond our expectation. Looking back to the full-year trajectory of MINISO China same-store sales: from a negative mid-single digit in Q1 to positive low single digit in Q2, to high single digit in Q3, and finally mid-teens in Q4. Sequential progression delivered mid-single-digit same-store growth for the full year, already exceeding our initial target in 2025. As I have already shared with you, delivering the improvement in domestic same-store sales required many hard efforts. In terms of internal management, same-store performance has been built into KPIs. We also have the digital infrastructure making the business flow more digital and intelligent to improve one-team empowerment. Operationally, we improved store SOPs with supply chain optimization, ensuring sustained contribution from top-selling SKUs and minimizing potential sales losses. The product development efficiency has been further improved. We actually have more contribution from new SKUs and speed-to-shelf of new product launches. Lastly, inventory was kept healthy. Regarding operations, we are also working on three fronts including consumer, product, and channel. For consumers, we improved in-store conversion. Our extensive store network serves as a large-scale testing ground and rich data pool. By deploying additional foot-traffic counters, we are able to capture high-frequency store-level data that help to further optimize our store and operations. We also have diversified marketing activations. For example, this year, we have the One-Day Store Manager program on RED, outdoor street pop-ups, as well as in-store meet-and-greet signing events and celebrity store visits, which became viral moments on social media, driving organic brand amplification through fan engagement. Regarding product, let me give you two points. We capitalize on seasonal and holiday product trends while at the same time managing IP and non-IP merchandise with profound understanding. We leverage the traffic-driving power of IP products to generate attachment purchases and lead the basket contribution of non-IP items. Regarding channel, we improved our existing store portfolio. We upgraded and improved 300 stores with tangible results. Regarding MINISO overseas, same-store sales performance differs from region to region. First of all, in Asia and in Latin America, same-store performance lagged behind other international markets. However, our strategic direct-operated markets, the United States and Europe, delivered very good results. Especially our key strategic direct-operated market, the U.S., delivered low-20s percentage same-store growth in Q4, supporting our previous guidance. We are driven by a strong end market and continued polish of our stores. You can also see healthy improvement of same-store profit margins. Through disciplined dollar-driven site selection and cost-based store opening approaches, U.S. back-end overhead costs declined by low single digits, providing further tailwinds to U.S. business profitability. It is also worth noting that in 2025, the U.S. business faced meaningful tariff headwinds. Against a backdrop of significant macroeconomic uncertainties, our team responded with exceptional foresight, sharp market insights, and agile execution, and still delivered standout results. Such results validate our robust business model. Such strength in and out is actually the foundation for our confidence to navigate economic cycles. Where the domestic market, as our strategic home base, delivered sequentially accelerating positive same-store sales growth in a highly competitive market, which demonstrates our strategic model and exceptional execution capacity of the team, creating a favorable spot for further growth. In 2026, successful stories and playbooks from China and the United States will be exported to Southeast Asia. With respect to the challenges in Southeast Asia, we believe the headwinds already met the bottom, and in 2026, through comprehensive upgrades of our channel strategy, product assortment, and organizational structure in Thailand and beyond, we will be able to continue to improve the business in Southeast Asia. Regarding stores, total store count approached 8,500 by the end of 2025. In Mainland China, the net adds were 182 stores compared with 460 in 2024. Recall, MINISO Mainland China revenue growth was around 10% in 2024; however, in 2025, it was close to 70%. In other words, with a clear indication that we have transitioned toward a higher-quality and more-productive growth model with fewer net new stores. MINISO overseas net adds were 465, bringing the year-end total to 3,583. TOPTOY net adds were 58 stores. TOPTOY started global expansion in 2024; within one year, we have 30 stores internationally, present in Malaysia, Indonesia, Thailand, Japan, and Macau. By the end of 2025, our domestic MINISO Land format store portfolio included 26 destinations across 90 cities nationwide. The large-format and flagship stores collectively accounted for 10% of our domestic store count, yet contributed nearly 20% of our domestic GMV. This number will continue to ramp up, which helps validate that big stores drive speed, results, and margin. In 2026, we will accelerate the release of this momentum. You will see locations including SDF in Sanya, David City in Zhengzhou, and Grand Gateway Plaza in Shanghai continue to come online. In 2025, we opened our first overseas MINISO Land at Samyan Mitrtown in Thailand with very strong market reception, which helps us understand the substantial potential of our overseas formats. In 2026, we will continue to bring the immersive brand experience to more retail destinations across the world. For our overseas directly operated markets led by the United States, we plan to have strategic new openings before Q4, so that Q4 will be fully concentrated on in-store operational excellence and experience optimization. When the peak shopping season arrives, we will be able to fully maximize the growth momentum. Regarding gross profit margin, it was 46.4% compared with 47% in the same period last year. For 2025, the GP margin was 45%, flat. For the past five years, our GP margin jumped from 28% to 45%, driven by our brand innovation, globalization, and IP strategy. During the year, we made selective gross margin adjustments across product categories, which enabled better sales performance and overall increases in GP margin. In the near future, we are going to continue to manage the balance between margin rate and sales volume, maintaining healthy, high-quality growth. Regarding operating expenses, operating expenses in Q4 grew by 45.3%. Sales expense grew by 47.4%, 3% higher than the same period last year. Administrative expense grew by 36.3%, accounting for 5% of revenue, flat with last year. The increase in sales expense was attributable to the growth in direct-operated store costs, licensing fees, and advertising and marketing expenses. First of all, our international expansion is still in the early stage. Direct-operated stores need rent and manpower, which was 1 percentage point higher than the previous year, accounting for 40% of total revenue, with the total cost growth at 40%. However, it is already a deceleration from the 54.5% growth rate in the first nine months of 2025. Secondly, license fees grew by 107% year-over-year, accounting for 3% of revenue, up by 1 percentage point compared with 2024. This also reflects our proactive upfront investment in IP strategy. Thirdly, advertising and marketing expense grew by 30%, slightly below the rate of revenue growth in Q4, with the ratio to revenue remaining flat compared with 2024. The increase in A&M then led to adjusted operating flow. Q4 adjusted operating profit grew by 7.7% and adjusted operating profit margin reached 17%. For the full year, adjusted operating profit, no matter on an M/M or Y/Y basis, continued to be well managed. From the P&L perspective in Q4, GP margin declined by 60 basis points because Q4 2024 was our highest GP margin quarter on record, and also direct-operated store cost ratio increased by 1 percentage point, licensing fee ratio increased by 1 percentage point, with a further contribution from miscellaneous items of a few tens of basis points, resulting in a total adjusted operating margin impact of 3 percentage points. For the full year, GP margin was flat versus 2024, mainly due to the direct-operated store ratio increasing by 2 percentage points, licensing and other fees increasing by 1 percentage point, resulting in a 3 percentage point impact. At the same time, you can also see that in Mainland China, from the business unit perspective, the China franchise business saw a margin decline by only basis points against a backdrop of approximately 70% revenue growth, reflecting our conservative approach for gross margin in exchange for healthy volume. At the same time, the growth was also contributed by our super warehouse and e-commerce operation, with a modest dilutive effect on margin. The group-level margin decline was primarily attributable to compression in overseas margin. For example, direct-operated store revenue as a proportion of total gross overseas revenue increased from one-third in 2024 to more than half in 2025. Outside of North America, other directly operated markets remain in the early investment phase and carry lower margins. By contrast, our overseas agent and franchise revenue, which carry higher margins, grew at a relatively slower pace. In our financial statements, we also have some non-IFRS adjustments. There are five points. First, share-based compensation (SBC) was RMB 150,000,000 in Q4 and RMB 370,000,000 for full year 2025, which used to be RMB 85,000,000 in 2024. The increase was mainly because of the equity incentive plan we made for the team. The second is the loss from the derivative fair value changes and the CB issuance cost. The third is the interest expense on CB and the YH investment-related loans. In Q4, convertible bonds interest expense was RMB 51,000,000, of which RMB 47,000,000 are non-cash. Interest expense on the acquisition loan related to YH was RMB 24,000,000. In 2025 full year, the convertible bonds interest expense was RMB 190,000,000, among which RMB 170,000,000 were non-cash interest; on the YH acquisition loan it was RMB 867,000,000. The fourth point is share of YH post-tax loss. In Q4, YH’s net loss was RMB 1,840,000,000. Fifth, we also had fair value changes of the redemption liability arising from preferred shares. The change was related to RMB 150,000,000 to RMB 160,000,000, related to the strategic financing completed last year. In aggregate, the adjustments impacted approximately RMB 900,000,000 in Q4 and RMB 1,690,000,000 for the full year to arrive at adjusted net profit. Excluding the items discussed above, the adjusted effective tax rate was 20.2% for Q4 and 20.1% for full year. Q4 adjusted net profit grew 7.6%, reaching RMB 850,000,000. However, as a result of our active share repurchase and consolidation program, our adjusted EPS grew slightly faster. The adjusted diluted EPS in Q4 grew by 9.4%; full-year reached 7.8%. Regarding working capital, by the end of 2025, inventory turnover was 100 days versus 91 days in the same period last year. In Mainland China, inventory turnover was 74 days. Internationally, inventory turnover was 228 days. The increase in overseas inventory days reflects strategic inventory built ahead of the anticipated tariff impact, booking the cost at favorable levels. We also established local direct sourcing that can help finance inventory pressure and ensure continued new product replenishment. In the near future, we will also adjust our overseas inventory and overall efficiency. By the end of 2025, our cash reserve was RMB 7.1 billion, remaining healthy. In 2025, full-year net cash generated from operating activities was RMB 2,580,000,000, accounting for 90% of full-year adjusted net profit, a reflection of our business’s high earnings quality and strong cash generation. On capital allocation, we will maintain our commitment to rapid business growth. In 2025, we obtained a waiver from the Hong Kong Stock Exchange to repurchase up to RMB 1,800,000,000. We continued repurchases to showcase our commitment and confidence. Looking at 2025 full year, returns to shareholders accounted for RMB 1,900,000,000, about 66% of full-year adjusted net profit, including RMB 540,000,000 in share repurchases and RMB 1.36 billion in dividends. The Board has announced a final dividend of RMB 810,000,000, representing 50% of second-half 2025 adjusted net profit, which is expected to be paid in April. Last but not least, closing remarks and outlook. Looking back at our financial performance over the past five years from 2021 to 2025, revenue CAGR reached 21% and adjusted net profit CAGR reached 44%. Looking to 2026, we expect group revenue will have a high-teens growth rate; three-year CAGR from 2023 to 2026 would be no less than 22%. We expect same-store sales to continue to ramp up. In 2026, same-store sales in key markets like China and North America will maintain healthy low single-digit growth. We plan to have net new store adds of 510 to 550 for the full year, sticking to quality rather than quantity. In 2026, we will balance growth and efficiency, pursuing profitable growth and profit backed by strong cash flow. We expect both adjusted operating profit and adjusted net profit will accelerate their growth rates in 2026. In terms of seasonality, the peak rate season for offline retail in North America and Europe is in the second half of the year. For many Western offline brands, 60% to 70% of annual revenue is generated in H2. Our direct-operated revenue from North America and Europe will continue to grow. Around 60% of the revenue is expected to come from H2, and H1 to account for 40% of total contribution. In 2026, revenue growth will be no less than 25%. China same-store sales will maintain high single-digit growth. North America same-store will deliver strong mid- to high-double-digit growth. It is worth noting Q1 profit will include a significant investment gain from specific investments. It was generated from a test investment we made a few years ago. The company is quite positive on AI. We invested in an AI company. That company has been IPO-ed. The company’s share price appreciated, generating a substantial fair value gain, bringing us an extra RMB 850,000,000 to RMB 900,000,000. It is worth noting that such gains will not showcase our primary business. We plan to exclude this item from adjusted operating profit and adjusted net profit. That is all for our prepared remarks. We will now open for questions. Operator: Ladies and gentlemen, please change your Zoom display name to include your institution name. In order to accommodate more analysts and investors, please raise no more than two questions each time. Thank you. First, let us welcome Michelle from Goldman Sachs, please. Michelle (Goldman Sachs): Hello? Mr. Ye and Eason, thanks for giving me the chance to raise a question. Congratulations on the company achieving such nice growth in a volatile market. I have two questions. First, regarding the domestic market: last year, we drove solid same-store sales growth through refined store operations, stronger faster sales execution, and store network upgrades. Looking ahead to 2026, as Eason has already provided guidance, is it possible for you to be more elaborate on the key levers to drive further same-store sales improvement? The second question is regarding the U.S. market. We do notice the sales were looking right in the United States market. However, localized sourcing would somewhat pressure your GP margin. What are your priorities for merchandise supply chain and store expansion this year? What is the expected impact on margin improvement? That is the two questions I have. Thank you. Guofu Ye: Thank you. Our core levers for driving domestic same-store sales in 2026 are clear. There are three: the right IP, for example the Jennie co-branded product, which can help to further consolidate our revenue and brand impact; the second one is the right product; the third one is the right experience. Regarding the right product, we attach equal importance to product quality and ASP, and we also open large stores to provide full customer experience. You can also see that the Jennie collaboration was first launched exclusively at MINISO Land and select pop-up locations, creating a fully immersive IP experience. The limited-time pop-up at Hong Kong Plaza in Shanghai generated RMB 2,200,000 in sales on the opening day, setting a new single-day record for any MINISO in 2025. This not only validates the extraordinary power of our Land format store as a primary destination for IP launches, it also demonstrates a fundamental truth: prime offline experience combined with top-tier IP content is the golden formula for unlocking global consumer demand and maximizing IP value. As many of you may know, Hong Kong Plaza is a top shopping mall, which is quite influential, and all these stores and brands are super luxury brands. We were able to move into such department stores to launch our IP product. This represents recognition from the top shopping malls and recognition from top, valuable consumers. At the same time, breakout IP products expand our customer reach beyond existing audiences, elevating average transaction value and strengthening repeat purchase behavior. Together with our store operations, they form a powerful virtuous circle. Enhanced store formats provide superior showcases and a vibrant environment for IP, while IP products, in turn, provide targeted and highly loyal customer bases, jointly driving sustained high-quality same-store sales growth. For us, IP business is never purely about selling product. We have sought to leverage MINISO’s global supply chain capacity, category development, equity, and omnichannel reach to give every great IP and every talented creator a bigger stage, and to build more enduring IPs that stand the test of time and earn long-term consumer affection. The Jennie collaboration is a new area we are tapping into, working with internationally well-known celebrities. In the past we had image IP and content co-IP; however, the collaboration with Jennie showcases a new co-branded IP with CDPR release, which provides ample room for future cooperation. You see that for one of our peers, they had a collaboration with Lisa which brought extraordinary global value. Working with celebrities, we will be able to continue to improve and maximize IP value. They are all world top artists and KOLs. At the same time, I would also like to share with you, based upon our latest operating data, we expect domestic same-store sales growth in Q1 will be quite aggressive. In 2026, we hope that we will deliver more surprises. We hope more investors will keep a look at that and our working with more celebrities in the near future. The second question you asked about is product and IP strategy. We will continue to deepen our dual-engine approach of top-tier IP collaboration plus local market adaptation. On one side, we will intensify our partnership with leading global IPs. On the other side, we will further expand our assortment in high-margin categories like home goods, plush, and blind box. Just now you mentioned the U.S. market. In terms of local direct sourcing, we will optimize our SKU architecture to focus on high-velocity and high-margin items, achieving a better balance between scale expansion and GP margin. I just traveled back from the United States. In 2026, we are going to have a more precise analysis on what products need to be sourced locally, and what need to be shipped from China. Sometimes sourcing from China represents higher margin. In 2025, due to volatile tariff policy, we actually already left some room for local sourcing. However, in 2026, we believe tariff turmoil has already gone. We will be more certain and clear on what will be exported from China to the U.S. and what will have localized sourcing. Regarding margin, let me be frank. At the procurement and headquarters sourcing level, we need to further improve our efficiency, optimize the merchandise mix, and then improve the GP margin structure as a whole. Our target is to further improve operating margin in 2026, with a more pronounced recovery expected in H2 of the year. We provide a six-month buffer in H1 of this year. We believe H2 of 2026 will be great, including our Land store format. Internally, we keep a look at increasing ASP and also the price per item. We are working very hard to further improve ASP as well as per-product GP margin. Thank you. Operator: Thanks to Mr. Ye. Coming next, let us welcome Samuel from UBS. The floor is yours, Samuel. Samuel (UBS): Thank you. Thanks for giving me the chance to raise a question. I am Samuel from UBS. I have a few small questions. First, Mr. Ye, in your prepared remarks, you mentioned something regarding IP. I would like to ask you regarding your proprietary IP. What is the progress on proprietary IP? What are the sales targets and the strategic plan for 2026? What are the key third-party IP priorities? Anything you can share with us? My second question is regarding overseas markets, specifically the Mexico market. In 2025, Mexico faced headwinds. What is the outlook for 2026? My final question, I would also like to ask Eason. You mentioned you invested in an AI company. Can you disclose the name of that company? Thank you. Guofu Ye: Three good questions. Let me respond to the first one. First of all, let me talk about our IP, starting with Youyou. With less than six months of its launch in 2025, Youyou has already surpassed revenue of more than RMB 100,000,000. From January to March 2026, Youyou-related sales were already RMB 165,000,000, around RMB 50,000,000 per month. According to this trend, in 2026, for Youyou only, our sales will be RMB 600,000,000. If we also combine the international market, it is going to be RMB 800,000,000 or even RMB 1,000,000,000, likely to hit the RMB 1,000,000,000 revenue milestone. The revenue was beyond our expectation. Youyou is actually a Chinese proprietary IP. If you take a look at our IP portfolio, Youyou is the first one to have revenue exceeding RMB 100,000,000; it took less than six months. There is no other Chinese proprietary IP that could ramp such revenue growth as fast as Youyou. It truly demonstrates our product and IP operation tactics and strategy and our robust confidence and operations of IP management. As we are working on that, we will be able to deliver faster growth. In terms of product approach, we will carry forward the successful logic. We will define the structure and landscape for the designer toy market, maintaining category innovation as a primary driver of IP growth. All three product generations of Youyou released outstanding commercial results. The first generation remains most popular; till now, the average transaction value is still about RMB 400, and the third-generation product demand goes beyond our supply. At the same time, we are also clear that product sales are not the only dimension of IP management. We place greater emphasis on healthy, sustainable development of our IP. We will not sacrifice IP longevity for the sake of short-term sales revenue. I believe 2026 will be a great year for Youyou. We are very likely to have more products working with internationally outstanding IPs. For example, IPs from the Disney family are going to have a co-branded wave with Youyou. That is how our proprietary IP works with international IP for co-branding. Up to now, we have completed a full pipeline of 30 to 40 proprietary IPs. Among them, we have IPs from South Korea, Japan, and Thailand, and from all parts of the world. Especially Kumado, Chiba, and Chuchu have completed the full proprietary process from creative design to product readiness, and they will be introduced to global consumers in the months ahead. Through those pipelines, we aim to fundamentally reshape market perceptions of the MINISO IP category and product potential, creating more robust IPs that deeply resonate with consumer needs. I also would like to tell you, on May 17, we are going to have the MINISO Photo Gallery put into operation in Shanghai. That is going to be another key artist we are going to work with. That artist’s one painting masterpiece can sell for tens of millions of RMB. When our MINISO art gallery is put into operation, we are going to engage more audiences to work with us. Reflecting on what led Youyou to break through successfully, I think we did three things right. First, we constantly held to our core conviction of category innovation to drive explosive IP growth. Product innovation is quite important. The first generation of Youyou is outstanding. The success of Youyou readily allows us to recalibrate our direction for product innovation and how category innovation will be for the IP business. MINISO has been deeply dialed into the industry for many years. We have built world-class capacity in multi-category product development and adapted to consumer insights that help us rapidly convert a creative IP concept into best-selling products. Secondly, we work on IP narrative first and product commercialization second, ensuring that IPs develop their own soul and emotional resonance with consumers before products are launched, to crystallize the value, not the other way around. Thirdly, we build a fully integrated, end-to-end closed loop from upstream creative ideation to back-end supply chain to all the omnichannel distribution, enabling rapid response to consumer demand and efficient product iteration and launch. The IP incubation model is also the way that underpins our future capacity for next-generation blockbuster IPs. This is also a meaningful three-part competitive moat: world-class category development capacity, early-stage IP potential detection capacity, and high-momentum multichannel global distribution capacity. Those are the three strengths that will continue to empower the growth of our OIPs. As you may already note, our flagship and new Land format stores have many Youyou installations. That is quite important for IP promotion. You know that we have a store in Causeway Bay, Hong Kong. When we did not have our proprietary IP, we could only showcase Disney IP. Next month, we are going to have the Youyou artist installations at that store. For any IP, you have to make sure you expose the IP, especially your proprietary IP, at the store. That is our unique advantage of over 8,000 stores worldwide. With installations and Youyou’s presence in the store, that will be the best way to promote the IP at our own stores and make it visible and touchable by the consumer. The third point regarding the third-party IP and proprietary IP portfolio, I have nine words: more IP, more portfolio, globalization. In other words, we need to have global licensed IP plus proprietary IP. International IPs have their advantages. Some already have movies, well-curated content, and strong fanbases. Proprietary IPs also have the attribute of scarcity. If it is only a MINISO proprietary IP, it will protect our business strengths. By having international IP plus proprietary IP, that would be the best business combination. As we are working together, we will be able to make sure we have a stable business and more work to be done. For example, recently, we have the Jennie collaboration and we saw the Instagram movement on WeChat and Xiaohongshu a lot. If it were linked only to proprietary IP, I do not think the popularity would be that good. That is the reason I believe multi-IP, multi-category works for sure. Improving consumer experience also contributes to business stability in the long run. We need to be forward-looking rather than short-sighted. We must fully validate that third-party IP plus proprietary IP is the golden formula. We hope you can see after two to three years whether my words will be validated by the market or not. Till now, we also contracted some incubation of independent original artists and we are also incubating IP projects. Starting from 2026, in 2027 or beyond 2028, our proprietary IP development is going better. From the financial performance standpoint, proprietary IP outperforms third-party IP on gross margin contribution, owing to stronger consumer loyalty, pricing power, and absence of licensing cost. Third-party IP, in turn, provides powerful complementary benefits in new customer acquisition, audience expansion beyond our existing base, and also provides us very good content marketing advantages. The two are highly synergetic, together driving sustained and high-quality growth of our IP-related business. You know that for MINISO, the brand impact continues to ramp up. Many international IPs proactively approach us to work together. Even Jennie, the international top artist, worked with us. Jennie has a nickname as Miss Chanel because Jennie is the brand ambassador for many luxury products. Jennie has been happy with MINISO because of our strong brand and customer experience. Let me now attend to the question regarding the Mexico market. I just came back from Mexico. I am fully confident in that market. I believe it is going to be better in the near future. Mexico is going to be top three in the global arena. I met face to face with the GM of Mexico. We need to do brand operations in Mexico and develop the Land store format. We need a mix of Land and franchise stores. The top 100 shopping malls in Mexico should have GFA more than 800 square meters. In that way, the Mexico market will see explosive growth. You know that I went to Mexico and they have 100 Zara stores. All those stores have been taken in good shopping malls. Mexico’s landscape is very much like China. Their GDP per capita and the consumption structure are very much like China, with lower manpower cost. Mexico is actually in the best time for offline business development. We hope Mexico could become a benchmark market we have in Latin America. When Mexico thrives, the Latin America market will be driven. We are fairly confident in the Mexico market, and we have high expectations. We now define Mexico as our benchmark market. We will spend more effort and resources to make this market right. We have a very clear strategy for Mexico; same-store sales growth and future growth will be quite promising. My first point: you can see in 2026, Mexico will also have fast high-single-digit growth. However, it is still before the explosive growth of the Mexico market. It is still taking the old business model, old format. If they follow my line of thinking, a few stores could be transformed into Land or flagship stores. There is one store with Hermès, Chanel, and Dior as the neighborhood, and these stores should satisfy something unique rather than value for money. So I asked them to please close down that store and reformat it to sell popular IP and premium products. Mexico is often taken as a backyard of the United States. People come to Mexico who really want to shop something unique. We find Mexico is a market with great opportunities. We found that Mexico has a great array of high-quality shopping malls with very strong traffic flow. So we are not going to sell daily necessities. We are going to translate them into flagship stores, sell IP and trendy toys along with immersive experience, and drive interest consumption to improve ASP. I believe after Q2, Q3, and Q4, performance in Mexico will meet expectations. We will retrofit our stores and upgrade top 100 shopping mall locations in Mexico. I believe the performance of that 100 in Mexico will be doubled. The first question was asking about our investment. We were quite lucky to invest in a company named MiniMax. That is an AI company. MiniMax is being applied at our company very well, and I also would like to continue to work with MiniMax. We invested in MiniMax when they still had a very low valuation. Now the return is looking pretty good. So the name of that company is MiniMax. That is all. Okay? Operator: Thank you, Samuel, for your question. Due to time, ladies and gentlemen, please make sure you raise just one question per time. Coming next, let us welcome Renbo from CICC. Yanran Bo (CICC): Hello, Mr. Ye and Eason. Thanks for giving me the chance to raise my question. My name is Yanran Bo from CICC. Just one question from me. In 2025, it seems YH is pressuring your margin and financial statement. What would be your plan for YH business? Thank you very much. Guofu Ye: First of all, I need to clarify to all MINISO investors: my primary focus has always been and will always be MINISO. It is our foundation and the core driver of our future growth going forward, and it is also the foundation to make MINISO great. So you can be reassured 90% of my energy and time will be on MINISO. MINISO will always be my highest priority. My investment in YH will not distract my attention from that. Regarding YH, we have completed a management team transition with Wang Shouchen appointed as YH CEO. Under his leadership, YH has its own complete management team that is now independently responsible for the day-to-day operation and strategic execution of the business. Regarding YH’s future, we still feel confident. For MINISO and me, myself, I still would like to say MINISO will still be my highest priority, and it is also the cornerstone for the company to further expand and make MINISO truly great. I always notice the market development and momentum of MINISO is quite unique worldwide. We will seize the opportunity, continue to ramp up our business, and make MINISO great. Thank you. Okay? Operator: Thanks to Mr. Ye. Coming next, let us welcome Shu Di from Huatai Securities. Shu Di (Huatai Securities): Okay. Thank you. I am Shu Di from Huatai Securities. Congratulations on the company delivering a satisfying scorecard to the market, which is truly in line with refined operations. Mr. Ye, you have already introduced a proprietary IP strategy. We have already noticed in 2026 you take it as an operating year for proprietary IP. For the dimensional elevation for proprietary IP, what is the organizational structure of the proprietary IP team now? What pipeline and marketing initiatives should we look forward to in 2026? Thank you. Guofu Ye: We define 2026 as the evolution year for our proprietary IP. The foundational first step is the comprehensive organizational restructuring and level design of our IP business. We established a dedicated IP business group with full accountabilities across the IP value chain from creative incubation to product development to omnichannel operation. Our leader of merchandise has been placed into the IP business group. We are putting very experienced people to take the lead of the IP business group—the best and most capable people to run the IP business—so you can already notice how important IP business will be for MINISO. You can see that, directly, in many companies people are just using new managers to run new businesses. It is quite risky. We remain confident in our new business. We are using the most capable individuals to run the new business. That is what we do at MINISO. The most capable individuals and the capable team are running the new business, IP business, and that business is fully independent as a new business group. Regarding team build-out, we have completed targeted headcount expansion in IP operation, product management, and creative design, and we also established two new back-end R&D departments including CMF (color, material, finish) and ink and powder development. We are among a few companies that started to enter into material study. So for our trendy toys, we not only do IP, we also do product design and material study and color study and finish study, stressing that IP product manufacturing from supply chain building to product quality continues to consolidate the foundation for long-term IP growth. That is what we did in 2025. We will have the fabrics and raw material aspects, and we have a CMF unit that is established in Dongguan, very close to our headquarters. Regarding marketing and communication, we are working to build global IP influence through a diversified range of activations. For example, attending international art fairs and fashion weeks. On May 17, we are going to have the MINISO Photo Gallery put into operation in one of the best art centers in Shanghai. That also helps to showcase our standing within the artist community. For continued updates, we are going to have our own photo gallery not only in Shanghai, but also a new one in Hong Kong, because Hong Kong is actually the hub for global artists. We are going to build such photo galleries in Hong Kong too. By leveraging those photo galleries, we are going to engage the best artists worldwide, continue to ramp up collaborations, and also leverage KOLs to amplify our brand reach. Last year, for Credit Katy Kitty as well as other international artists, we started to work with them for marketing events. Even some of the short videos and secondary creations have been quite popular. There are many secondary creation contents of Youyou, and even within secondary incubation or content creation, Douyin is actually ranking number one among all IPs. The fans are quite active. Certainly, at retail we actually have IP-specific zones, translating brand impact into actual sales. In Guangzhou, we also have the Artist Street that is about 50 square meters GFA. We are going to allow new artists and new products to be showcased in those Artist Streets, having interactions with consumers. I believe that by so doing, we will be able to continue to scale our investment in proprietary IP incubation, creating an ecosystem and back-end R&D capacity. Our investment is for long-term healthy development of IP, not short-term traffic speculation. We focus on building high-quality IP that accumulates enduring brand value and generates sustainable cash flow, cementing a robust second growth curve for the company’s long-term future. That is our strategy now. In the near future, as we continue to improve our business capacity, we will have new IPs and new strategies to truly unlock the value of IP. Operator: Coming next, let us welcome Anne from Jefferies, please. Anne (Jefferies): Thank you. Mister Ye, thank you very much. I have a question for your SSSG. What is the current same-store sales performance? What about store expansion or site selection? And also the operating margin level in different markets, especially in the directly operated stores overseas. In the past, you were still in the investment stage. When are we going to expect operating return improvement? Thank you. Eason Zhang: Thank you. I am Eason Zhang. Let me help respond to your question. I think for the past 12 months, our growth philosophy is getting more clear: same-store sales growth as a foundation and new store expansion, especially high-quality ones, as incremental upside. Those are working in tandem. For SSSG, our 2026 goal to deliver a positive SSSG globally is quite challenging; however, we have ways to make it happen. Because in international markets, we still have some agent stores. It is not easy to make their growth positive. However, with good assortment, we have every confidence we will be able to handicap them. Regarding store expansion, I have already mentioned a net increase of 510 to 515 high-quality stores globally, with China and international markets serving as a twin engine for growth. In China, we plan net new adds of 120 stores; the majority of them will be the Land format and large-format stores. We will also close our underperforming small stores and continue to optimize the existing portfolio. In 2026, besides same-store sales growth, the high-quality new stores opened in 2025 and 2026 will contribute meaningfully in subsequent years as they mature. In China, we will still harvest good growth, but net growth will be only 120. In international markets, net store growth will be 250 stores, covering North America, Europe, Southeast Asia, and Latin America, deploying a combination of Land format flagship stores plus high-quality standard stores in prime retail destinations. As Mr. Ye mentioned, we need to move into the world-class business streets to improve the brand potential. Regarding North America, same-store growth already exceeded 20% in January and February 2026. We expect OPM to have a low single-digit improvement. In Europe, since the start of 2026, we see SSSG grow by double digits. Store expansion is progressing steadily. For example, in Poland, we opened two stores which are quite efficient working on 20 toys only, making lucrative profits. In Europe, we have another four direct-operated markets. Those are still in the early-stage investment. We hope OPM could be improved further. In Mexico, since the start of 2026, we see SSSG growth being a positive number, and we believe Mexico with the agent model still provides a stable operating profit margin. In Southeast Asia, we see some challenges. However, for MINISO, our business model is globalization. No matter if some markets have been challenged, we can leverage our global expansion to diversify our investment portfolio. We have some challenges in Southeast Asia; however, we are going to return to positive SSSG, working on Indonesia, primary locations, to have new stores. Overall, SSSG and OPM trajectory across all key markets remain healthy, which also showcases that we are still in a fast expansion and growth period. The key drivers are four: optimizing stores, product operations, scale expansion, and, lastly, well maintaining cost and expenses. Thank you. Operator: Thank you, Eason. Next question, let us welcome Madam Xu from CCB International. Please. Madam Xu (CCB International): Thank you. Mr. Ye and the management team, I have a question regarding the Southeast Asia market. Southeast Asia was the first start for international expansion. In 2025 I made a visit in Southeast Asia. The performance of Southeast Asia has been a concern of investors. What is the inventory in the Southeast Asia market? Are you going to adjust operations and product strategy there in 2026? Thank you. Guofu Ye: Regarding the question for the Southeast Asia market, I think in 2026 there will be a huge adjustment. MINISO started our global expansion ten years ago. We made major investments in Mainland China. In 2026, we are going to adjust four key markets: Thailand, Malaysia, Philippines, and Indonesia. In Thailand, we were quite successful and the Land format stores delivered tangible results. Indonesia is going to copy the Chinese model. Southeast Asia is quite close to China, and the consumption pattern is very much impacted by China. The lessons and success we made in China can help guarantee success in Southeast Asia. Recently, we went to Malaysia to have a MINISO Land store with very nice performance. In 2026, we are going to continue to copy what we do in China to key markets in Southeast Asia. I believe after the 2026 adjustment in H1, then in H2, Southeast Asia is going to provide you a good turnaround. We have a very clear and transparent strategy. We are going to execute it right. Madam Xu (CCB International): Thank you, Mr. Ye. No further questions from me. Operator: Okay? We are going to accommodate the final question. Jingyi Yang from Yangtze River Securities, please. Tina Yang (Yangtze River Securities): Thank you. Thanks to the team. Mr. Ye and the management team, I am Tina Yang from Yangtze River Securities. I have a question for you. Regarding the store renovation and upgrade program, is it possible for you to tell us what the strategy for 2026 will be? How many stores do you expect to renovate in 2026? What are the results from the completed renovations so far? Thank you very much. Guofu Ye: In 2025, we completed renovation for 290 stores. The results were highly impressive. Renovated stores’ average sales uplifted by 40% to 50%. The improvement is not attributable to a single factor, rather a simultaneous improvement of foot traffic, conversion rate, and ASP. They are all being improved. At the same time, rent as a percentage of sales has declined meaningfully. Staff productivity and sales per square meter are rising significantly. Single-store profitability has improved too. More importantly, you can see that last year, major landlords have been getting more supportive, and we also got greater support from landlords who are happy to provide better and larger locations to allow us to have Land stores and larger formats. With prime locations, cheaper rent has been provided. In 2026, with our proprietary IP development, some shopping malls and department stores are happy to present the best locations for us to do aesthetic IP exposure and IP presence. That can really showcase how the resources we will be offered. In 2026, we are going to accelerate renovation and adjustment. Underperforming stores will be upgraded and moved to prime locations. 2026 is a year for accelerated renovation. I have already mentioned in the near future 80% of stores need to be renovated and upgraded. With our proprietary IP development, in the near future our stores are going to be quite unique, quite differentiated, and they are going to be more influential in the landlord’s mind and be able to get good leasing terms. That way, I believe assets will contribute to our business growth and profitability in China. Thank you. Operator: Thanks to all the investors and analysts for your time for this conference. If you have any further questions, please reach out to the IR team. Thanks for your attention to MINISO Group Holding Limited. See you next quarter. Thank you.
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Brandon Pizzurro believes there's more risk in a risk-off attitude. He offers his reasoning behind staying investing in equities during times of geopolitical stress.
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