加载中...
共找到 25,101 条相关资讯
Operator: Good day, and welcome to the Designer Brands Inc. 4Q 2025 Earnings Conference Call. All participants will be in listen-only mode. By pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Matthew Crumme, SVP of Strategy and FP&A. Please go ahead. Matthew Crumme: Good morning. Earlier today, the company issued a press release comparing results of operations for the 13-week and 52-week periods ended January 31, 2026, to the 13-week and 52-week period ended February 1, 2025. Please note that the financial results that we will be referencing during the remainder of today's call exclude certain adjustments recorded under GAAP unless specified otherwise. For a complete reconciliation of GAAP to adjusted earnings, please reference our press release. Additionally, please note that remarks made about the future expectations, plans, and prospects of the company constitute forward-looking statements. Results may differ materially due to the factors listed in today's press release and the company's public filings with the SEC. Except as may be required by applicable law, the company assumes no obligation to update any forward-looking statements. Joining us today are Doug Howe, Chief Executive Officer, and Seamus Toll, Chief Financial Officer. I will now turn the call over to Doug. Doug Howe: Good morning, and thank you, everyone, for joining us today. I'm very proud that our fourth quarter and full fiscal 2025 results reflect disciplined execution and the meaningful progress we have made in strengthening our business. I want to recognize the commitment of our Designer Brands Inc. associates, who have remained focused on serving our customers and advancing our strategy. Before discussing our results, I want to give a warm welcome to Seamus Toll, our new executive vice president and chief financial officer, who joined us last month. Seamus brings decades of financial and operational leadership experience across complex organizations, and his expertise will be critical as we advance our strategic priorities and drive long-term shareholder value. I am pleased to have him with us today. Building on the momentum we established throughout the year, we were pleased to deliver another consecutive quarter of sequential improvement. Net sales were flat year over year in the fourth quarter, and consolidated comparable sales improved sequentially by 50 basis points. For the full year, total company sales declined 3.9% compared to last year, coming in towards the high end of our guidance range, and comp sales were down 4.3%. Notably, we delivered full-year adjusted operating income of $65,000,000, significantly above our guidance range of $50,000,000 to $55,000,000, driven by an improvement in fourth quarter sales trends, continued gross profit expansion, and disciplined expense management that resulted in a $26,000,000 reduction in adjusted operating expenses compared to last year. As I reflect on 2025, I want to acknowledge that the year began with a level of macroeconomic volatility and pressured consumer sentiment that few could have anticipated. I am proud of how our team responded. We executed disciplined pivots to meet the needs of our business while remaining committed to our strategy, ultimately closing the year on a strong note. Over the last year, we continue to enhance our retail product strategy by elevating our assortment, improving inventory productivity, and cultivating our relationships with strategic national brand partners. We launched a new DSW brand positioning campaign this past fall, and are highly encouraged that it is resonating meaningfully with customers, strengthening brand perception, and driving engagement. In 2025, the DSW brand generated 79,000,000,000 total impressions, up 10% year over year, signaling strong sustained interest. Our new brand positioning is beginning to come to licensed stores as well, with several remodels and new store openings completed this past fall that incorporate updated creative and visual elements. Customer feedback and financial performance in these locations have been encouraging. In our Brand Portfolio segment, we are pleased with the progress we have made to refine our go-to-market strategies and improve the profitability of the business, driving an $8,000,000 increase in segment operating income for the year as we navigated an incredibly complex tariff environment. Before turning to review of our financial performance, I would like to share an update on a recent organizational change we implemented in the business designed to accelerate execution across key priorities while maintaining a focus on reducing operating expenses. We recently brought our U.S. and Canada retail business under a streamlined reporting structure, which will enable better collaboration and integration of operations across our businesses. As part of these changes, we have right-sized our shared services organization to appropriately support the business moving forward. Now let's review the financial highlights from the fourth quarter and full year. Starting with our Retail segment, which reflects the aggregation of our U.S. Retail and Canada Retail operating segments, our total sales for the fourth quarter were flat year over year, with comparable sales down 1.7%, an improvement from down 2.1% in the third quarter. This improvement was driven by strength in the Boost category, affordable luxury, and accessories. For the full year, total sales declined 3.4%, with comparable sales declining 3.9%. Comp sales improved throughout the year, driven by positive in-store sales trends. In addition to the momentum we saw in existing stores, we were encouraged by the early learnings from our new stores that opened in 2025. Over the course of the year, we opened 13 stores and remodeled 4 stores in total. While not all of these projects included the full suite of experimental features, each incorporated enhancements to improve merchandise, customer flow, and overall store experience. The initial customer reaction has been strong with notably higher conversion and traffic. We will continue refining these concepts as we move forward by leveraging data and customer feedback to scale what works to further elevate the DSW in-store experience across our footprint. In the fourth quarter, we delivered retail operating profit expansion driven by a gross margin improvement of 140 basis points compared to 2024. For the full year, gross margin improved 30 basis points. Turning to our Brand Portfolio segment. In the early phases, our focus was on margin enhancement and cost discipline, and in 2024, we achieved profitability in the segment for the first time. 2025 was centered on foundational work to refine go-to-market strategies, and despite significant tariff-related disruption, we drove an $8,000,000 increase in segment operating income. On the top line, fourth quarter sales were up over 5%, driven by Topo, which was up 42%, and Jessica Simpson, which grew 17% versus last year. We remain encouraged by the underlying growth trajectory inherent in each of these brands. For the full year, total sales were down 9%, reflecting headwinds in the first half of the year with performance improving as the year progressed. A clear standout was Topo, continued to drive impressive growth, up 46% on the year, and more than doubling the size of the business compared to two years ago. We further strengthened and diversified our supply chain this year, which enabled us to proactively mitigate the impact of tariff, external cost pressures, and deliver an 80 basis point expansion in brand gross margin for the year. Now I would like to spend a few minutes discussing our strategic priorities for 2026. As we move forward, we are laser-focused on the following. First, winning with the merchandise that matters most to our customers; second, amplifying and expanding our DSW brand positioning; third, elevating our in-store customer experience; and finally, building and scaling our brand portfolio. Let's start with our product strategy and winning with the merchandise that matters most. Our refreshed merchant leadership team has made incredible progress in shaping our 2026 assortment. We are doubling down in areas of strength and leaning into encouraging trends in fashion across dress, boots, and affordable luxury. These categories are resonating with our customers. This will be supplemented by our efforts to build and scale our brand portfolio. We are also planning strong growth in categories adjacent to footwear, such as beauty, wellness, hydration, socks, and sunglasses. To further support our to add newness to our product offerings, we are excited to be working closely with a consumer-focused investment bank focused on emerging consumer brands called Consensus, which runs the Great Brands Program, the preeminent platform for emerging consumer brands in North America. This partnership enables us to thoughtfully identify and introduce new relevant brands within our leading categories while also expanding into adjacent non-footwear categories that encourage customer discovery and exploration. Through this relationship, we gain early access to emerging brands that align closely with our customer and our brand vision. By infusing our assortment with this targeted newness, we reinforce our Let Us Surprise You brand positioning, strengthen differentiation, and ensure our assortment remains dynamic and aligned with evolving customer preferences. These product strategies are enabled by heightened focus on end-to-end inventory optimization across planning, allocations, and digital order fulfillment. These efforts are designed to drive healthier margins, improve in-stock rates, support store conversion, and lower supply chain costs. In 2020, we made great strides in amplifying and expanding our DSW brand positioning, energized by the success of last fall's DSW brand campaign. To open 2026, we launched our Let Us Surprise You campaign for spring, designed to broaden our reach, strengthen customer connections, and ignite meaningful brand engagement, anchored by new, fresh creative that debuted on March 1. At the same time, we continue to invest in strengthening relationships with our most loyal customers. This fall, we are relaunching our loyalty program, which continues to represent roughly 90% of our transactions. With this revamp, we are poised to deliver an even more compelling, differentiated experience that drives long-term engagement and growth. Our stores remain the foundation and an important point of differentiation in our strategy, and we are continuously working to elevate the in-store experience. In 2026, we are bringing our brand positioning and product strategies to life in new and exciting ways across our store base. We are also planning new store openings as well as several remodels. Early indications from last year's work are encouraging, demonstrating how we can deepen engagement through a more immersive, differentiated shopping experience. Finally, turning to our Brand Portfolio, we are now entering the third year of the transformation journey that we outlined in 2024. In 2026, we will continue to build and scale our portfolio, a strategy which will in turn supplement our strategic priority of focusing on merchandise that matters. We are very excited about the renewed focus on our exclusive brands, which are only sold at DSW. These brands serve as a strategic tool for us to increase profitability via vertical integration and strengthen the DSW brand. We believe we are well positioned to deliver meaningful sales growth in 2026, highlighted by opportunities to amplify trends in the dress and boot categories. Topo's sales trajectory continues to be strong as the brand executes against ambitious growth plans. We are confident this momentum will continue in 2026. Growth will be driven by core franchises as well as new product launches that further elevate Topo's brand positioning. We expect to continue expansion of the brand footprint within existing partners as well as opening additional points of distribution with new customers, with a particular focus on specialty running. With Keds, 2025 was a year where we sharpened our product design to improve comfort and fit across the assortment, while also focusing on building the profitability of the brand. We are now looking forward to accelerated growth in 2026. We plan to drive this through expanded wholesale distribution, with a focus on value, as well as from our direct-to-consumer digital business where we are seeing positive signs so far this year. Jessica Simpson has capitalized on the recent resurgence of trends in the dress category. Additionally, we have diversified into the boot category and lowered heel heights in key dress styles in an effort to strategically appeal to a larger audience. We are confident that this evolved product strategy will continue to drive momentum with this brand in 2026. Throughout the Brand Portfolio, we are pleased with the progress we have made in building a profitable foundation and are looking forward to advancing our efforts to drive sustainable growth in 2026 and beyond. Before I conclude, I want to share a few thoughts on our 2026 guidance. We are currently operating in a volatile macro environment that includes evolving tariffs dynamics and conflict in the Middle East, the latter of which may introduce increased inflationary pressure moving forward. We will continue to monitor these situations closely and remain nimble and adaptable as the year progresses. While there is some uncertainty in the current external environment, in 2026, we do expect to build on the improving trends we generated in 2025. We anticipate that total sales will be between negative 1% and positive 1% driven by strength in our Brand Portfolio sales, which are anticipated to grow double digits. We also expect to deliver meaningful operating income and EPS growth on the year. Seamus will take you through our 2026 outlook in more detail. Before I close, I want to reiterate how proud I am of our team's disciplined execution and unwavering commitment, which drove sustained sequential improvement throughout the year. Despite a dynamic operating environment, we stayed focused on what we can control and executed against our priorities, and I am excited to see this momentum continue in 2026. With that, I will turn it over to Seamus. Seamus Toll: Thank you, Doug, and good morning, everyone. I would like to begin by expressing my excitement about joining the team as Chief Financial Officer and thanking the Designer Brands Inc. Board and the leadership team for their trust and warm welcome. My first month has been exciting, and I look forward to supporting our strategy to drive long-term growth and value creation. I am eager to engage with our investor community and hear your perspectives as we continue to execute our strategy. I am pleased to share Designer Brands Inc. fourth quarter and full-year results. The team successfully executed against its strategic priorities and delivered significantly improved performance as the year progressed. Let me provide a little bit more detail on the financial results. We were pleased to see another quarter of continued sequential improvement with net sales of $713,600,000, flat to last year, and comps down 1.9%. Full-year net sales decreased 3.9% to $2,900,000,000, and comps were down 4.3%. In our Retail segment, sales were roughly flat to last year, and comps were down 1.7% in the fourth quarter. From a category perspective, boots, affordable luxury, and accessories were our top performers. In our Brand Portfolio segment, sales were up 5.3% in the fourth quarter driven by strong performance in both Topo and Jessica Simpson. Consolidated gross margin in the fourth quarter was 42.4%, a 280 basis point improvement year over year driven by stronger IMU, fewer markdowns, and lower shipping costs. This resulted in a $20,100,000 gross margin dollar improvement compared to last year. Full-year consolidated gross margin was 43.6%, a 90 basis point improvement year over year driven by favorable merchandise margin and increased efficiency in our digital order fulfillment operations. For the fourth quarter, adjusted operating expenses were up $6,400,000 compared to last year, representing 44.4% of sales. This reflects a deleverage of 90 basis points over last year on lower sales. It is also worth noting that the fourth quarter operating expenses were impacted by $9,000,000 of incentive compensation in the quarter compared to none in the fourth quarter of last year, and absent the impact of incentive compensation, fourth quarter operating expenses would have leveraged 40 basis points versus last year. For the full year, adjusted operating expenses represented 41.7% of sales, an 80 basis point deleverage from last year. Amid a challenging macro backdrop, we remain focused on disciplined cost management across operating expenses, inventory, and capital allocation throughout the year. Our total adjusted operating expenses declined by approximately $26,000,000 for fiscal 2025 compared to 2024. We also ended the fourth quarter with total inventories down mid-single digits from prior year and decreased our debt by nearly $60,000,000 compared to last year. For the fourth quarter, adjusted operating loss was $11,000,000 compared to a loss of $23,500,000 last year. The improvement was mainly driven by gross margin expansion of 280 basis points. For the full year, adjusted operating profit was $65,200,000 compared to $67,300,000 last year. While full-year adjusted operating income declined slightly year over year, we were encouraged by the progress we made in 2025, delivering an increase in adjusted operating income of over $15,000,000 versus 2024 across Q3 and Q4 collectively, to come in at above the high end of our guidance range for the full year. In 2025, we had $10,400,000 of net interest expense, compared to $11,100,000 last year. For the full year, net interest expense was $45,300,000, flat to last year. Our effective tax rate in the fourth quarter on our adjusted results was 31.3% compared to 38.6% last year. For the year, our effective tax rate was 54.3% versus 31.6% last year. Fourth quarter adjusted net loss was $15,600,000, or $0.31 per diluted share, compared to a loss of $21,300,000, or $0.44 per diluted share in the prior year. Our full-year adjusted net income was $8,300,000, or $0.16 per diluted share, compared to $15,000,000, or $0.27 per diluted share in fiscal 2024. The full-year decrease was largely driven by higher taxes as 2024 included one-time reversals of tax reserves. Turning to our inventory. We ended the fourth quarter with total inventories down 6% versus the prior year. We are planning to tightly manage inventory throughout the year as we focus on the brands, styles, and choices that matter most to our customers. We ended fiscal 2025 with $50,900,000 in cash. Our total liquidity, which includes cash and availability under our ABL revolver, was $152,000,000 at the end of the year. We continue to prioritize balance sheet strength in the quarter, applying excess cash towards debt repayments, and closing the year with total debt outstanding of $435,000,000, a decrease of nearly $60,000,000 compared to the prior year. Turning to our guidance for the full year. As Doug mentioned, the macro environment remains dynamic, with the conflict in the Middle East introducing uncertainty that could drive inflationary pressures and impact consumer sentiment. Conversely, while there may be some net upside for our business performance as a result of tariff policy evolution, this is not currently contemplated in our guidance. We currently anticipate net sales to be in the range of down 1% to up 1% for the year, with sales in the Retail segment flat to declining slightly, offset by double-digit growth in the Brand Portfolio segment. In 2026, we expect to drive operating income growth through gross profit expansion and a continued focus on increasing efficiency in the business. Our guidance contemplates actions taken to rightsize our workforce in 2025 partially offset by a return to a normalized level of incentive-based compensation in 2026. This guidance assumes an effective tax rate of approximately 40% for the year. We plan to deliver EPS between $0.28 and $0.38 per diluted share on an average diluted share count of 58,000,000 shares, compared to an adjusted EPS of $0.16 in 2025. I would also like to provide some commentary on intra-year performance. Aside from some unfavorable weather impacts early in the quarter, we have seen a continuation of the positive momentum in Q1. We anticipate sales to be flat to up low single digits and EPS to be breakeven to slightly positive in the quarter. As we look across the year, we are anticipating sales and earnings growth to be stronger in the first half of the year. As we shift into the back half of the year, and anniversary actions implemented during 2025 that drove margin expansion and cost reductions last year, comparisons become more difficult. To conclude, I am proud of the progress we delivered in the fourth quarter and across the full year. I am confident in the foundation that has been built, and our ability to continue building momentum throughout 2026, and I am excited to be working alongside such a disciplined and strong team. We will now open for questions. Operator: Thank you. We will now begin the question-and-answer session. If your question has already been addressed, you'd like to remove yourself from queue, please press star then 2. Once again, that's star then 1 if you have a question. Today's first question comes from Mauricio Serna with UBS. Please go ahead. Mauricio Serna: Great. Good morning. Thanks for taking my question. A couple of things. First, could you comment on what you saw in performance in the top eight national brands? I believe that has been a focus for the company in the previous quarters. And then maybe just to understand the shape of the revenue guide. You mentioned first quarter revenue should be flat to up slightly, or up low single digits, but then the guidance for the year actually calls for flat at the midpoint. So I'm just trying to understand what drives the implied slowdown as you move on through after Q1? And is the increase in wholesale just driven by the strength in some of the exclusive brands that you sell? Topo, Jessica, is that the right way to think about it? And one last housekeeping item. In the guidance, you included share count being 58,000,000. I think that is 58,000,000 shares outstanding for fiscal 2025. That is 8,000,000 higher, 16%, versus last year. I just want to understand what drove that increase and how should we think about the interest expenses for the year? Thank you. Doug Howe: Yeah, Mauricio. Let me take the first question on the top eight brands. We are going to actually be evolving that to top 10 brands for 2026. It would be those brands plus our three exclusive brands which we sell only at DSW, and we are really excited about the growth those brands represent given they are only sold in our channels of distribution. The top eight brands for 2025 drove a comp increase. We were very happy with that, roughly 40% of the total business. So the team's continued focus on deepening those relationships with the merchandise that matters most and deepening our planning with those strategic brand partners has definitely paid off, and we see that continuing to pay dividends into 2026 as well. To your second question on guidance, you know, I am the internal optimist. There could be some upside in there. We just want to acknowledge that given the uncertainty of the macro environment, we want to be mindful of that, particularly as it relates to the back half, which, as Seamus said in his prepared remarks, we come up against stronger comp. Very encouraged by quarter-to-date trends that we are seeing in Q1. That momentum that we experienced in Q4 has continued, particularly in the store channel, which has been a big focus for the teams, and we feel like that is our biggest point of differentiation. You know, we had a little bit of challenging weather impacts as we started this quarter, but kind of come around that and, you know, coming up against the shift of Easter, we feel really encouraged by that. So in large part, just a little bit of a conservatism probably in back half when we come up against those higher comp. On the overall side, obviously, we are going to see a double-digit increase on the wholesale business throughout the year. So that is kind of how it balances out for total. Yeah. The whole portfolio is going to drive significant growth. Obviously, Topo is a significant driver of that growth. Jessica Simpson is a big growth driver. Keds will have an increase in 2026 as well. And again, those are largely the largest clients are either not DSW at all or their largest customers are outside DSW. And then the exclusive brands piece will be driving growth in our channels and distribution. So pretty well-rounded growth, internal and external. Seamus Toll: Mauricio, it is Seamus. I will take those questions. So first, in terms of the share count, I think if you look back at the history, the lower share counts were in periods in which we had a loss. And in those periods, from a GAAP accounting standpoint, we do not include the full impact of potential dilutive shares. As we move into the future, we are anticipating, and based upon our guidance, anticipating that we will shift back into profitability. And as such, we need to include the full impact of potentially dilutive shares in our diluted share calculation. So that is what is driving the increase. It is not really incremental shares; it is just that now they are included in periods of income. In terms of the interest for the year, I think as we disclosed on the call, we are expecting to see significant reductions in debt levels as we have completed this year. We completed this year with debt levels down approximately $60,000,000 to last year. So that is helping us from an interest perspective in controlling interest costs as we move into the fiscal year this year. So those are built into those expectations, are built into our numbers for the year. You know, in terms of the total dollar value, we are anticipating about $40,000,000 of interest for the full fiscal year, which takes into account that lower level of debt. Also, would point out in terms of our interest calc, you might have noticed that we have tremendous partnership with our banking partners. We negotiated an extension of our ABL revolver. So we are really pleased with those partnerships, and that will continue for us into the future. Mauricio Serna: Got it. Very helpful. Thanks so much. Operator: Thank you. And as a reminder, if you would like to ask a question, our next question today comes from Dana Telsey at Telsey Group. Please go ahead. Dana Telsey: Hi, good morning everyone. Can you talk a little bit about on the inventory side and tariffs? As you are bringing in inventory now, what rate are the tariffs being brought in by, and how are you thinking about the tariff impact flowing through with rates where they are and how they were, how is that changing and the impact on margins. And then just lastly, Doug, category wise, what are you seeing category wise? How is it shifting? And promotional landscape of how you are seeing the environment. Thank you. Doug Howe: Thanks, Dana. Appreciate your questions. First of all, to address your tariff questions, it is still an evolving tariff environment. We thought we had kind of gotten through all of that in 2025, but there is still, you know, quite a bit of evolution that is happening there. Our guidance is built on the assumption that the new tariffs are largely going to be inactive. We will replace the IEPA tariffs. So there is definitely favorability that we are seeing right now with regard to year-over-year comparisons. But there potentially could be some upside if, you know, if the inactive tariffs do not replace those. So that could prove to be conservative, but we want to just be, you know, clear about the fact that there are ever-changing dynamics there, so we want to stay close to it. So, again, could be some net upside in there. But, again, just continues to be so much volatility. On the category perspective, I would say it is pretty broad-based. We feel really good about the dress category. We have always had leading market share penetration in that category. We are seeing nice increases there. For fall, you know, we planned boots down significantly. We actually had an increase, so that was a big rebound. Sandals for spring are off to a really good start. So it is pretty broad-based. We talked about affordable luxury. It is a business that is providing incredible growth for us and fits into that, you know, Let Us Surprise You component of our product assortment. And then the accessory business in adjacent categories has given us very significant growth as well. And we feel really good about all those continuing momentum through 2026. From a promotional perspective, I am really proud of the team, the evolution that the new refresh merchandising team has made on the product assortment. You heard about our margin expansion of 280 basis points for last year's performance. We are being much more surgical with regards to promotions. We have focused a lot on channel profitability, specifically on digital, pulling back on some of those promotions. And as a result, we have reduced our markdown rate tied to the fact that we are very conservatively managing our inventory. We ended with inventories down 6%. So all that has led to a pretty nice expansion in margin that we feel really good about. Thank you. Operator: That concludes our question-and-answer session. I would like to turn the conference back over to Doug Howe for any closing remarks. Doug Howe: Thank you all for your continued interest in Designer Brands Inc. Before we close, I just want to again recognize the dedication and the commitment of our teams. Really proud of the determination and the resilience that they showed this past year. I would also share that we continue to be encouraged by the momentum we are building in the business, driven by the strategic priorities that we shared, and we are looking forward to continuing to update you on our progression throughout the year. Thank you. Operator: Thank you. That concludes today's conference call. We thank you for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Operator: Good morning, and welcome to Worthington Steel, Inc.'s third quarter fiscal year 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. I will now hand the call over to Melissa Dykstra, vice president of corporate communications and investor relations. Please go ahead. Melissa Dykstra: Thank you, Operator. Good morning, and welcome to Worthington Steel, Inc.'s third quarter fiscal year 2026 earnings call. On our call today, we have Jeff Gilmore, Worthington Steel, Inc.'s president and chief executive officer, and Timothy Adams, vice president and chief financial officer. Before we begin, I would like to remind everyone that certain statements made today are forward-looking within the meaning of the 1995 Private Securities Litigation Reform Act. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested. We issued our earnings release yesterday after the market closed. Please refer to it for more detail on factors that could cause actual results to differ materially. Unless noted as reported, today's discussion will reference non-GAAP financial measures which adjust for certain items included in our GAAP results and are presented on a standalone basis. You can find definitions of each non-GAAP measure and GAAP-to-non-GAAP reconciliations within our earnings release. Today's call is being recorded, and a replay will be made available later today on worthingtonsteel.com. I will now turn the call over to Jeff Gilmore. Jeff Gilmore: Good morning, and thanks for being with us today. It has been a memorable few months for us to say the least. As most of you know, in January, we announced our proposed acquisition of Kloeckner, which will be the largest in our history and a meaningful strategic step for the company. I appreciate that even with an announcement of this size, and the work that goes with it, our team stayed anchored in what matters: safety, serving customers, and improving the business every day. Thank you to the entire Worthington Steel, Inc. team. This quarter, I will start with an update on the Kloeckner acquisition. The combination of our two organizations will create a larger, more diversified metals processing platform with meaningful opportunities to generate value and capture synergies through Worthington Steel, Inc.’s proprietary base business improvement program that we call the transformation. This transaction is being executed through a voluntary public tender offer in Germany and remains subject to the tender process and required regulatory approvals. Since our investor call in January, the voluntary tender offer has been launched. We have submitted requests for regulatory approval in the required jurisdictions, and we are beginning to see approvals come through. Overall, the process is progressing well. Today is the final day of the initial acceptance period of the tender offer process, and we are confident we will secure enough shares to meet the 57.5% minimum threshold. We continue to expect the transaction to close in the second half of the calendar year. In preparation for closing, we have begun and focused on integration, governance, and day-one readiness. We are doing that responsibly and deliberately with an eye toward maintaining our high-performing cultures, unlocking value, and accelerating growth. Most importantly, this deal is about combining two great companies that share the same values. I have had the opportunity to spend time with several of our future Kloeckner teammates, and it reinforced our view that Worthington Steel, Inc. and Kloeckner are culturally aligned and fit together very well. Furthermore, since our announcement, the response from customers, suppliers, and investors has been overwhelmingly positive. As a reminder, the German public company takeover process is highly structured, and we will continue to provide updates as we reach key milestones. With that, let us turn to our results for the third quarter. Net sales were $769.8 million, adjusted EBITDA was $41.6 million, and adjusted earnings per share were $0.27. On a macro level, the third quarter of our fiscal year was volatile and uneven, with galvanized spreads remaining compressed and the effects of the holidays and winter weather dampening and delaying industrial activity. While direct volumes were up over the prior year, overall conditions were stable to soft, keeping customers’ inventory disciplined and highly sensitive to interest rates and uncertainty. Even with those headwinds, our execution remains strong where it matters most: safety, customer service, and transformation. Commercially, the team continued to win the right work and capture high-value opportunities, including building on our momentum in the automotive market. Our direct shipments in Q3 to the Detroit Three increased by approximately 13%, significantly outpacing the reported 3% growth in Detroit Three production for the quarter. As discussed last quarter, the outlook for the automotive market heading into calendar year 2026 remains cautiously optimistic. Conditions appear to be moving toward a more robust market later in the year. That view is supported by growing confidence that a USMCA agreement will be completed in 2026, removing a significant amount of market uncertainty. Turning to agriculture, we believe we are nearing the trough of the market cycle, and that a slow rebound will begin in late calendar year 2026. On a positive note, our team has been able to secure new business with a key customer in this market, which will continue to ramp up over the next few quarters. In construction, conditions remained flat in most segments. We expect to see data center growth continue, and as lower interest rates take hold, we believe we will see some expansion in 2026 due to pent-up demand. In heavy truck and trailer, as we expected, the market started off slowly in calendar year 2026. We are more confident about the back half of this year, where we expect to see a pickup in both the Class 8 truck sector as well as the trailer market. Looking ahead, we are still cautiously optimistic about the second half of calendar year 2026. Overall, the backdrop looks modestly encouraging as key economic indicators show a return to expansion. With that market context, let me turn to our strategic priorities. We continue to make progress in the areas that matter most: investments in electrical steel growth, innovation, and transformation. In electrical steel, we advanced the projects that underpin our longer-term growth strategy. In Canada, we have shifted some production to our new facility and are shipping from both locations. We will finish moving the existing equipment and production to the new facility over the next few months. We have more than 60% of the increased capacity sold for the facility. We are sequencing the startup to protect performance and service levels, and we expect to fill the balance relatively quickly as the facility ramps up. Our traction motor lamination facility expansion in Mexico is also on track and will begin shipping production parts this quarter. Almost all the OEMs tied to the expansion are experiencing some type of OEM delays. Previously, we expected to reach full production levels in fiscal 2028. However, the OEMs have pushed out a number of the programs for a variety of reasons. While timing is shifting on production starts for some of our new programs, when these platforms reach full production volumes in fiscal 2029, we will be at 75% capacity, based upon current contracts. These delays are not surprising as many automotive OEMs are rethinking their electrification strategy. With the elimination of the fuel economy mandate and the elimination of the $7,500 federal tax credit, the market is clearly pivoting away from a government-driven BEV mandate to a consumer-led demand for hybrids. The data is quite clear. Year-over-year, hybrid sales in the U.S. increased 18% in 2025, and the same trend is happening in early 2026. Sales and production of hybrids are both up more than 10%, and the shift to hybrids is expected to continue. We are also seeing reports of increased consumer interest in hybrid and full electric vehicles due to rising oil prices and geopolitical tensions. While it is too soon to see if this will translate into sales, we will be watching closely and are well positioned to capitalize on this renewed interest. From a commercial standpoint, we have seen a slowdown in quotes for pure BEV opportunities, but the quote activity related to hybrids is picking up. We are excited by the growth in hybrids, as we have the opportunity to produce the electrical steel laminations for a hybrid traction motor as well as the specialty cold-rolled steel used in the powertrain for the hybrid’s internal combustion engine. We continue to improve our business using the Worthington Business System and artificial intelligence. In one notable project, we used our transformation process to implement a lean flow operating model at our Delta, Ohio, facility that aligns material release, production, purchasing directly to customer demand, replacing a forecast-driven push process with a more disciplined pull approach. This allows us to tighten our purchasing windows and drive down inventory. The work has led to 60% fewer coils held in our work-in-process bay and an overall reduction of six days of inventory over the past 26 months. As the next step in the process, we will be adding predictive AI tools to ensure our flow is not only disciplined, but also predictable. That means spotting problems earlier and moving more quickly to remedy them. Predictive flow helps us stabilize performance as we run leaner, enabling faster, more consistent decisions at lower working capital levels. Further, we will use what we learn at Delta, package what works, and build scalable solutions we can use across our footprint. We also continue to make progress transforming our administrative functions. When we stepped back and looked at where we started about a year ago, a few themes stood out. There was a significant amount of manual repetitive work, a fair amount of variation in how processes were executed across functions and facilities, and much of the work was being managed through email, spreadsheets, and manual follow-ups. We are addressing that in a couple of ways. First, we see discrete opportunities to remove manual effort; we move quickly using automation and AI. For example, we are developing an AI agent for daily cash posting in our finance group that is expected to eliminate a significant amount of manual data entry and free up about 30 hours per month of analyst time. We have also deployed automation in accounts payable that is reducing manual invoice interventions and should remove roughly 150 hours of work per month as the models continue to improve. In our order-to-cash process, robotic automation that reconciles shipping notices with customer portal data has helped accelerate cash collection and reduce past-due balances. Second, for workflows that are more interconnected, we are using AI to assist us in mapping processes, establishing standard work, and removing waste. For instance, in indirect purchasing, we redesigned the sourcing workflow and then layered in analytics and AI tools that allow the team to focus more on strategic sourcing rather than repetitive tasks. We are still early in this part of the transformation journey, but what we are building is a repeatable capability that allows us to apply automation and AI across more functions over time, structurally improving efficiency and scalability across the organization. To close, while this was a challenging quarter from a macroeconomic standpoint, our team remained focused on executing the business, advancing our electrical steel strategy, and moving the Kloeckner process forward in a disciplined way. At the center of that is a culture that puts safety first and reflects the dedication of our people across the organization. To our employees, thank you. The discipline, care, and commitment you bring every day are what turn our strategy into action. I will now turn the call over to Timothy Adams for more detail on the financials for the quarter. Timothy Adams: Thank you, Jeff. Good morning, everyone. Our third quarter was a disciplined quarter in a more challenging environment. While we saw softer demand in certain markets and continued pressure in Europe, we executed well, generating strong free cash flow, gaining share in key markets, and maintaining a strong balance sheet. That consistency and execution, particularly in more challenging environments, is a hallmark of how we run the business. We also took an important strategic step forward with the proposed Kloeckner transaction, which we believe will strengthen our long-term positioning. For the third quarter, we reported earnings of $10.4 million, or $0.20 per share, as compared with earnings of $13.8 million, or $0.27 per share, in the prior-year quarter. There were several nonrecurring items that impacted comparability in the quarter, including a number of Kloeckner-related items which are primarily transactional and timing-related, and not indicative of our ongoing operating performance. First, the current-quarter results include $15.4 million of pretax SG&A expense, or $0.24 per share, for advisory, legal, and regulatory fees incurred in connection with the previously announced acquisition of Kloeckner. Additionally, we recognized $9.1 million of pretax miscellaneous income, or $0.14 per share, related to a foreign currency forward contract designed to hedge a portion of the Kloeckner purchase price. Unrelated to the Kloeckner transaction, we recognized a $6.0 million pretax restructuring gain, or $0.06 per share, on the sale of real estate and equipment associated with our previously announced Worthington Samuel coil processing plant closure in Cleveland, Ohio. Finally, in the quarter, we recognized a $1.5 million pretax impairment of certain internal-use software, or $0.03 per share. The prior-year quarterly results included several nonrecurring items, including a $7.4 million pretax impairment of assets, or $0.07 per share, primarily related to the operational consolidation of our Worthington Samuel coil processing facility in Cleveland into WSCP’s remaining facility in Twinsburg, Ohio. Additionally, we recognized pretax restructuring expenses of $0.9 million, or $0.01 per share, related to a voluntary retirement plan and our Taylor-Worthington Blanking joint venture. Excluding these items, we generated adjusted earnings of $0.27 per share in the current-year quarter compared with $0.35 per share in the prior-year quarter. In the third quarter, we reported adjusted EBIT of $20.0 million, which was down $5.3 million from the prior-year quarter adjusted EBIT of $25.3 million. The year-over-year decrease was driven primarily by lower toll processing volumes, higher SG&A largely related to compensation, and unfavorable results in Europe, partially offset by higher direct volumes and higher equity earnings from Serviacero. Total shipments were approximately 818,000 tons, down 64,000 tons, or 7% year over year, as lower toll volumes more than offset volume growth in direct sales. Direct sale volume made up 63% of our mix in the current-year quarter compared with 57% in the prior-year quarter. Direct volume increased 4% compared with the prior-year quarter. The year-over-year increase was split evenly between the legacy business and the addition of CEDIM compared to the prior-year quarter. Our increased shipments to the automotive market remained a bright spot. Direct shipments to automotive increased 10% year over year. Similar to last quarter, the increase in automotive volume reflects share gains from new programs plus the impact of a key automotive OEM customer returning to a more normal build schedule after curtailing production last fiscal year. This growth in the automotive market reflects the strength of our longstanding customer relationships and our collaborative, proactive approach to assisting customers to meet their needs. Outside of automotive, agriculture volume was up 9%, primarily due to improved OEM equipment demand, and container volume was up 11%. As Jeff mentioned earlier, we won additional business with a key OEM customer in the ag sector. These gains were partially offset by lower shipments to a number of other markets, including energy, which was down 22% year over year, largely driven by project-based solar programs; construction, which was down 7%; service center, where we saw some increased competition, which was down 21%; and heavy truck, which was down 12% due to ongoing market weakness. Toll processing volumes declined 22% year over year, due to a combination of closing our Cleveland-area Worthington Samuel coil processing facility in fiscal 2025 and near-term demand headwinds. We view the softer market conditions in toll processing as cyclical, not structural, and expect toll volumes to improve as end market demand recovers, excluding the impact of the Cleveland facility consolidation last May. Direct spreads were relatively flat year over year, excluding the impact of the CEDIM acquisition, which closed in June. Direct spreads were impacted by a $3.3 million favorable swing in pretax inventory holding gains. In the current-year quarter, we had estimated pretax inventory holding gains of $2.1 million compared to estimated pretax inventory holding losses of $1.2 million in the prior-year quarter. After stabilizing around $800 per ton in the fall, the price for hot-rolled coil increased $175 per ton in our third quarter to approximately $975 per ton. We expect the market price for steel to remain volatile in the near term, with expected mill outages, extending lead times, and a tightening market. Given that many of our contracts use lagging index-based pricing mechanisms, we estimate in our 2026 pretax inventory holding gains will fall within a range of $15 million to $20 million. Turning to the other drivers for adjusted EBIT this quarter, SG&A expense, excluding the $15.4 million impact of the Kloeckner-related acquisition expenses, was up $7.5 million primarily due to increased compensation expense in the legacy business and $4.8 million of incremental SG&A with the addition of CEDIM. It is worth noting that our Q3 results include increased headwinds in Europe. As expected, CEDIM EBIT prior to minority interest decreased $8.4 million during the quarter. This performance reflects challenging economic conditions in Europe, particularly in the electrical steel and automotive end markets, where demand remains weak and competition, especially from China, has intensified. While expected, we are actively addressing these headwinds through cost actions and operational adjustments, and our team in Europe is moving with urgency to improve performance. Although near-term conditions remain challenging, we are focused on positioning the business to return to profitability and to capture share as the market recovers. Finally, equity earnings from Serviacero, our Mexico-based joint venture, increased $3.5 million due to higher direct spreads, inventory holding gains, as well as the favorable impact of exchange rate movements. Turning to cash flows and the balance sheet, for the quarter, cash flow from operations was $63.0 million and free cash flow was $33.0 million, with both metrics benefiting from a reduction in working capital. Capital expenditures were $30.0 million in the quarter, related to several projects, including the previously announced electrical steel investments. We expect CapEx for fiscal 2026 to finish in the range of $110 million to $115 million as several of our large capital growth projects transition from the build phase into startup production. In addition, we are pursuing maintenance projects that keep our key assets market ready. We take a disciplined approach to capital allocation, balancing investment in growth with maintaining balance sheet strength. On a trailing twelve-month basis, we generated $81.0 million of free cash flow. We increased borrowings during the current quarter on our ABL to purchase approximately 8.3 million, or 8%, of Kloeckner shares for $101.0 million. We ended the quarter with $90.0 million of cash and net debt of $161.0 million, up sequentially driven primarily by the purchase of Kloeckner shares. Earlier this week, we announced a quarterly dividend of $0.16 per share, payable on June 26, 2026. In summary, this was a disciplined quarter in a more challenging environment. We are gaining share in key markets, generating consistent cash flow, and maintaining a strong balance sheet. At the same time, we are taking actions to address underperformance in Europe while continuing to advance our strategic priorities, including the proposed Kloeckner transaction. This reflects how we manage the business: staying focused on execution and positioning the company to perform through cycles. We believe these actions position Worthington Steel, Inc. to navigate the current environment and continue creating value over the long term. I want to thank our entire Worthington Steel, Inc. team for their continued focus on safety, customer service, and execution this quarter. We will now be happy to take your questions. Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Samuel McKinney with KeyBanc Capital Markets. Your line is open. Please go ahead. Samuel McKinney: Good morning. With direct volumes for the third quarter only up 3% year over year, surprised to hear you say the direct auto shipments increased by 10%. Assuming much of this was owed to the market share wins you have outlined, can you talk through some of those wins and the impact they are having? Okay. Thanks. That is helpful. And then on to Kloeckner, how should we think about the over $100 million of short-term debt you used to purchase their securities? Just any other color you could give on that equity investment in the context of meeting the threshold would be helpful. Like Tim said, that is about 8% of Kloeckner shares. Okay. Thanks. And then last one for me. Steel pricing has remained hot in recent weeks. Can you give us a sense of the net working capital expectation for the fourth quarter in the context of the $15 million to $20 million of inventory holding gains? Jeff Gilmore: Yes, Sam, this is Jeff. I will take that. Clearly, positive impact. If you look at automotive as a whole, it was down maybe 1% or 2% year over year. If you look specifically at the Detroit Three, their production was up 3%, and ours were up 13%. If you look at the difference in the gap, that really is that market share gain that we have been speaking about the last several quarters. Fortunately for us, we have continued to win market share with those customers mentioned as well as several others, so that is something that you will continue to see layered in. The beginning of your question was being up 13% there, but only 3% as a whole. As you are aware, weather in the Midwest was quite challenging in late January, specifically for a week, and that disrupted the entire supply chain, whether it was the mills trying to ship out to us, receiving in, and then us trying to ship to our customers. The impact there was probably 10,000 to 15,000 tons. The mills are extremely busy right now. They have extended lead times. Their on-time delivery performance has been challenging. We just were not able to make up for that backlog during the month of February. We did some, but probably could have shipped closer to 15,000 additional tons. Fortunately, those are not orders lost. We will make up that backlog and are starting to do so already this month. Timothy Adams: Yes, Sam, this is Tim. We had the ability through antitrust—right, we had to look at the regulations of antitrust as far as how much we could buy. We could buy in the open market 10%, and we used that opportunity when the tender offer was announced to buy in the open market. So we increased our ABL by $126.0 million, and we used $101.0 million of it to buy shares in the open market. As long as the price stays below the tender offer of $11, we can buy shares. You have seen the price of Kloeckner rise a little bit. That shut us out of the market. We bought shares early in the quarter, and we have not bought much since. On working capital, we are definitely going to see some upward pressure. You can look at the percentage price increase and translate that into how much working capital should go up, but you will see some upward pressure on working capital in Q4 for sure. Operator: Your next question comes from the line of John Tumazos with John Tumazos Very Independent Research. Your line is open. Please go ahead. John Tumazos: Thank you. The German stock market is down 8% year to date, and their economy is more vulnerable to the energy escalation, as they are almost entirely an energy importer. Is your view of the amount of debt level that you want to hold post-acquisition or the degree of exposure to Europe changed given our incursion into Iran and the subsequent events in the last four weeks? Following up on what you just said, would you then want to have more equity in your financial structure and less debt? Jeff Gilmore: John, good question. Thanks for calling in. We went into this acquisition with eyes wide open and a clear understanding on Europe and the current challenges. A few things: first, their economy—I think they are doing their own things to increase, I will call it, protectionism, which certainly will help their economy. Specifically, I think aimed at China. I think they have increased spend on defense pretty significantly over the last six to twelve months, which should benefit the business environment, specifically manufacturing. What we did not predict was a war with Iran and the impact on oil prices. Right now, it is not having a major impact on the business here or in Europe. But if this is prolonged, then we certainly are concerned about their economy, and we are equally concerned about the economy here. Obviously, higher energy prices, higher gas prices are not going to be good for either economy. So that is really our position on it right now. No, we are comfortable with the capital structure where we are moving forward right now. We are quite comfortable with the debt level that we will be carrying forward. To be more transparent, it is because we are very confident in our plan and how we will go about paying that debt down over time. We have not had any serious discussions about reducing the debt and increasing equity as part of capital structure, and I think we are going to be in very good shape. Operator: There are no further questions at this time. I will now turn the call back to Jeff Gilmore, president and CEO, for closing remarks. Jeff Gilmore: From a macroeconomic standpoint, there were some challenges with the business. During last call, I addressed the overall market as well as some of the challenges in spreads, specifically hot rolled and coated, and hot rolled and cold rolled, but at that time, I mentioned I felt like the quarter would be the trough, and I feel strongly that is the case, and that is what we have seen. I think the tightness in the market in the U.S. and where we are seeing prices headed, along with being cautiously optimistic now on all markets, that we are starting to see recovery, and that is the sentiment across the market. We are no different. We can start to see signs of growth, not just with market share gains in automotive, but other key markets as well. Certainly, those markets will increase demand for galvanized as well as cold rolled, and we start to see some of that spread pressure alleviate gradually over time. More importantly, we could not be more well positioned to continue to grow as a company. We have a great deal of confidence in us achieving the threshold goal for Kloeckner, and that puts us in a position to accelerate growth moving forward. The business is in great shape. I look forward to what is to come. Thank you again for listening in today. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
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 the H.B. Fuller Company Q1 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Scott Jensen, Investor Relations. Please go ahead. Scott Jensen: Thank you, operator. Welcome to H.B. Fuller Company's first quarter 2026 Investor Conference Call. Presenting today are Celeste Mastin, President and Chief Executive Officer, and John Corkrean, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will have a question and answer session. Before we begin, let me remind everyone that our comments today will include references to certain non-GAAP financial measures. These measures are supplemental to the results determined in accordance with GAAP. We believe that these measures are useful to investors in understanding our operational performance and to compare our performance with other companies. Reconciliations of non-GAAP measures to the nearest GAAP measure are included in our earnings release. Unless otherwise noted, comments about revenue refer to organic revenue, and comments about EPS, EBITDA, and profit margins refer to adjusted non-GAAP measures. We will also be making forward-looking statements during this call. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations due to factors covered in our earnings release, comments made during this call, and the risk factors detailed in our filings with the SEC, all of which are available on our website at investors.hbfuller.com. I will now turn the call over to Celeste Mastin. Celeste? Celeste Mastin: Thank you, Scott, and welcome to today's call. In the first quarter, we delivered on our profit commitment and executed with discipline in a challenging operating environment. We continued to expand margins by leveraging our global sourcing strengths and maintaining a focused approach to cost and portfolio management. To start today's call, we will cover our consolidated results in the first quarter. We will also spend significant time discussing the impact on supply chains resulting from the recent events in the Middle East and the actions we are taking to successfully navigate this new operating environment. In the first quarter, organic revenue decreased 6.6% year on year as positive pricing was offset by lower volume. From a profitability perspective, EBITDA of $119,000,000, which was at the higher end of our guidance range, increased 4% year on year, and EBITDA margin expanded 90 basis points to 15.4%. This was primarily driven by continued restructuring savings from Quantum Leap and the positive impact from price and raw material cost actions that more than offset the impact from lower volumes. Now let me move on to review the performance in each of our segments in the first quarter. EA organic revenue increased approximately 3% in the first quarter, excluding the impact of exiting the lower margin solar business, driven by continued strength in electronics and aerospace. Organic revenue declined 2% in the first quarter, including solar. EBITDA increased 9% in EA, and EBITDA margin increased 120 basis points year on year to 19.9%. Favorable net pricing and raw material cost actions and the benefit from restructuring drove the year on year margin expansion. In HHC, organic revenue declined 10% year over year, reflecting a challenging environment and a tough comparison to 2025 when the business delivered 4% organic growth. We saw customers maintain tighter inventory levels, and consumers continue to shift away from premium products to lower-cost alternatives and smaller package sizes as they manage ongoing affordability pressures. Through disciplined cost management, EBITDA margins were 13.9%, up 120 basis points versus last year, reflecting pricing and raw material cost actions as well as strong expense control. In BAS, organic sales decreased 5.1% year on year, consistent with our expectations. The team executed well even under challenging weather conditions. EBITDA for BAS decreased 1% year on year, and EBITDA margins were flat as positive price and raw material actions as well as restructuring savings were offset by volume declines. Geographically, Americas organic revenue was down 4% year on year. Declines in HHC were partially offset by 8% year on year growth driven by continued strength in the aerospace and general industries market segments. In EIMEA, organic revenue declined 11% year on year, primarily driven by tighter customer inventory management in HHC, a weak construction market in BAS, and a tough comparison to 2025 when HHC revenue grew over 10%. Asia Pacific organic revenue was up 2%, excluding solar, lower than trend due to the timing of Chinese New Year. Total organic revenue decreased 6% year on year including solar. Now let's turn to the developing supply chain impact resulting from the conflict in the Middle East and its implication for our business. This is a critical development for our industry. This conflict is already creating significant constraints on raw material availability with impacts that extend across feedstocks, intermediates, logistics lanes, and energy inputs. We have received over 40 force majeure letters from suppliers in recent weeks, clear evidence that this is a major disruption. Chemical production capacity has decreased significantly and tanker routes have been disrupted and repositioned. Even if this conflict were resolved tomorrow, we would expect supply chain aftershocks to persist throughout the year as inventories rebalance, transportation and logistics normalize, and plants work through restart cycles. As a result, there will likely be significant broad-based inflationary pressure and raw material shortages. While the magnitude will vary by region and technology, it is clear the system is under stress and volatility will remain elevated. We are taking swift and decisive action by deploying the full scope of our global sourcing and supply assurance infrastructure. Our global sourcing organization was an industry first mover, leveraging our long-established strong relationships with suppliers and strategic category management. Since the conflict began, they have taken mitigating actions in securing raw materials ahead of the broader market, reallocating volumes across regions, and pursuing qualified substitutes where available. These are the same capabilities that differentiated H.B. Fuller Company in 2021 and 2022 when we navigated unprecedented volatility and successfully supported our customers. We have already taken swift pricing action to reflect the increase in raw material prices, announcing a minimum 10% price increase across all product lines globally effective April 1, with significantly higher price adjustments for certain technologies and regions where cost escalation is more acute. These steps are designed to offset supply shock inflation and protect customer service levels. Importantly, the adhesive industry is traditionally one where gaining market share is a function of bringing solutions for new applications. It is more difficult to take share from established business allocation given the high performance requirements of products and the natural aversion to change. In current conditions, many competitors are now confronting real supply uncertainty, creating an opening for H.B. Fuller Company. In summary, this disruption creates a unique opportunity to support existing customers and gain market share, positioning us for improved volume growth in the future. Now let me turn the call over to John Corkrean to review our first quarter results in more detail and our updated outlook for 2026. John Corkrean: Thank you, Celeste. I will begin with some additional financial details on the first quarter. For the quarter, organic revenue was down 6.6% year on year, with pricing up 0.6% and volume down 7.2%. Currency had a positive impact of 3.6%, and acquisitions increased revenue by 0.7%. Adjusted gross profit margin was 31.3%, up 170 basis points versus last year as positive pricing and raw material actions as well as restructuring savings more than offset volume declines. Adjusted selling, general, and administrative expense was up 4% year over year. Excluding the impact of acquisitions and foreign exchange, SG&A was down slightly year on year, reflecting diligent expense management. Adjusted EBITDA for the quarter was $119,000,000, up 4% versus last year, as favorable pricing and raw material actions and restructuring savings more than offset the impact of lower volume. Adjusted earnings per share of $0.57 was up 6% versus the same quarter in 2025, driven by higher operating income and lower shares outstanding. Cash flow from operations improved $49,000,000 year on year. As previously communicated, operating cash flow for 2026 is expected to be weighted to the second half of the year. Net debt to adjusted EBITDA was 3.1 times, consistent with fiscal year-end 2025 and down from 3.5 times at the end of the first quarter of last year. With that, let me now turn to our guidance for the 2026 fiscal year. As a result of our year-to-date performance and our response to the supply chain disruptions Celeste outlined earlier, we are updating our previously communicated financial guidance for fiscal 2026. Net revenue is now expected to be up mid-single digits and organic revenue is now expected to be up low single digits versus fiscal 2025, reflecting updated pricing actions and anticipated market share gains. We now expect foreign currency translation to positively impact revenue by 1% to 2%. Adjusted EBITDA for fiscal 2026 is now expected to be in the range of $645,000,000 to $675,000,000. And adjusted EPS is now expected to be in the range of $4.55 to $4.90. Net revenue for the second quarter is expected to be up low single digits and adjusted EBITDA is expected to be in the range of $175,000,000 to $185,000,000. We have updated our short-term capital allocation priorities given the current petrochemical market disruption and uncertainty. While M&A remains a cornerstone of our growth strategy and we continue to evaluate strategic acquisitions, we will pause on closing deals in the near term, focusing more cash deployment on share repurchases while we deliver on our commitment to achieve our target of 2.5 times to 3.0 times net debt to EBITDA. Let me turn the call back over to Celeste to wrap us up. Celeste Mastin: Thank you, John. Our operational focus is on controlling what we can, leveraging our global sourcing advantage, maintaining commercial discipline, and executing our strategy with consistency. The current disruption further reinforces the importance of a resilient supply chain and manufacturing network. Against this backdrop, Project Quantum Leap is progressing well and remains on track. Our redesigned plant and supply chain network will strengthen our long-term competitiveness and deliver improved profitability. We have provided context today on what we expect from the developments in the Middle East. Most importantly, our primary focus remains on our employees, our customers, and those affected by the ongoing conflict. I particularly want to thank and recognize our leaders in the region who have stepped up to ensure the continued safety and well-being of our employees. Our agility, decisiveness, and collaborative approach ensure we will continue to serve customers reliably and differentiate ourselves from our competition while generating sustainable value for shareholders. That concludes our prepared remarks for today. Operator, please open the line for questions. Operator: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. Your first question comes from the line of Patrick Cunningham with Citigroup. Your line is open. Patrick Cunningham: Hi. Good morning, Celeste and John. Thanks for taking my question. Celeste Mastin: Good morning, Patrick. Patrick Cunningham: Good morning. I just wanted to start off on the 10% price hike and the guidance raise. I guess, given this announcement and pretty sudden raw material constraints and pricing, does your price-cost assumption still hold? Are you baking in additional benefits from price here? Just wondering how the cadence of net price translates to raising the full-year guide here. Celeste Mastin: Yeah. So, Patrick, we are baking in additional price and raw material benefit, but also negative volume benefit. But I think it is important to take that question in the broader backdrop of what is happening in the industry. So there are a couple of things going on here that I think are really important. I tried to reference them in the script. But the first thing is that as we look at the landscape that we are now in, this is a very different adhesive market environment, and one where our ability to gain share is enhanced. I say that because when you think about how we usually win business, it is by winning new applications with customers that are introducing a new product or upgrading a product, or maybe working with a customer that has a problem on their line or a performance problem in their existing adhesive. But those latter things do not happen very often. So normally, our share gains happen through the winning innovation that we bring to solutions for new products. Now what has happened today is that as it relates to the current adhesive allocation, everything has changed. We have competitors that are unable to get raw materials. We have customers that are seeking those raw materials. We are out aggressively doing everything we can to increase allocations, to go after raw material provisions with other suppliers. So that pricing comes in the context of an environment where the market is really squeezed. But on top of that, the opportunity to bring solutions to customers directly relates to share increase. On top of that, we believe this market reset is a very sustainable place for us to be. I say that because today, if you look at the overall raw material supply base, what you see is that our suppliers have really thin margins. They are below their reinvestment economics. There is capacity coming out of the system because their profitability is so low. So what we expect to see is those raw material suppliers also use this as a market reset to raise the underlying, underpinning cost structure within our raw material environment. And thus, we felt the need to get out quickly with price, not only because we do not think that underpinning raw material cost structure is going to go away, we do not think that is going to decline over time, but also we knew we had to be out paying suppliers to get more raw material share than anyone else. Because on this journey to greater market share, the most important part of that journey today is making sure we have raw materials to satisfy our customers with. The second part of that journey that is also really important is that not only do we have those raw materials, which are going to remain scarce, but that we are choosing those customers that want to work with us and innovate with us as partners to use those scarce raw materials with. So we are being very selective about where to gain share and how to use those precious resources. John Corkrean: Understood. I mean, if it takes a little more context as it relates to how we thought about the rest of this year. Perfect. You are right. The impact of pricing, raws, and volume is driving probably two-thirds of the change we are making to our guidance. Just to put it in context, we are now expecting organic growth to be up low single digits, which is roughly sub high-single-digit pricing because we will be probably averaging roughly 10% or more pricing in for the rest of this year. But we have taken our volume assumption down. We were assuming volume would be sort of flat to down 1%. Now we are assuming it will be down 5%. But I would say the way we expect to manage pricing and raws and the expectation that we will get some market share gains, that is probably delivering maybe $10,000,000 of additional favorable EBITDA impact this year. The rest of the increase is a number of things. We are making more progress more quickly on our restructuring actions. FX is a little favorable. But hopefully, that gives you some context as to how we are thinking about the impact of pricing, raws, and volume. Patrick Cunningham: No. That is very helpful. And maybe just topical with the lower volume outlook. I think HHC previous quarter, you called out some inventory in December, some tighter inventory management. Did that get worse in January and February? Did it start to trend better? I am just wondering, I think the organic growth was maybe a bit sharper decline than we expected. So any additional color on what is going on in HHC? And maybe within that? Celeste Mastin: Yeah. In the HHC business, we are seeing a lot of pressure on the consumer. So a few things are happening there. To your point, the inventory management is real. It is occurring at big customers, but also we really see it in distributors as well. And when you think about it, they are serving the smaller customers. Those smaller customers are really being impacted by tariffs and other inflationary measures. So we are seeing that inventory control for sure. The other thing we are seeing is that the consumer is switching away from what I will call more premium products, and with a premium product, you usually have more adhesive usage. There are more features and benefits on those products. So when the consumer switches down, then we are selling less adhesive for the end good that they are buying. And they are buying smaller package sizes. Again, smaller packages mean less glue, and you see all of that in the HHC space. Patrick Cunningham: Thank you so much. Operator: Your next question comes from the line of Mike Harrison with Seaport Research Partners. Your line is open. Celeste Mastin: Good morning, Mike. Good morning, Andre. Mike Harrison: Congrats on a nice start to the year. I was hoping that you could talk a little bit. I feel like on the fourth quarter call and when you initially gave guidance, there was an expectation that the timing of Lunar New Year was going to be a headwind in Q1 and a tailwind in Q2. And so I was wondering if you can help us quantify how much that Lunar New Year timing played into the 7% year on year volume decline. And then maybe also just talk about how you have seen activity in China and other parts of Asia coming out of the Lunar New Year and curious how they responded to kind of the initial impacts of the Middle East conflict. Celeste Mastin: Yeah. So we experienced about a $15,000,000 to $20,000,000 revenue impact from Chinese New Year in Q1. You will see that that is already in our guide for Q2. So that ended up just getting pushed out into the second quarter. And as we looked at overall Asia’s performance, we had seen China bounce back to double-digit growth. If we extract that impact of Chinese New Year, we would have had another double-digit quarter in Asia in Q1. I was just there in January for a couple of weeks, so to answer your question about what I saw while I was there and in the region, I see a very motivated population base. In fact, I think the tariff impact in Q2 and Q3 of last year really caused a pause, but the country was able to quickly renew export markets for their goods, and in fact, in Q1, our HHC business did very well in Asia Pacific. It was the best performing region. And part of that was because there has been such an increase in the exportation of a lot of these hygiene products out of China. So we have focused business in China in HHC away from the lower-cost baby diapers, as I have mentioned before. But we have also, at the same time, redirected that capacity to more higher-end femcare and adult incontinence products, and that is where we saw a lot of growth in China in Q1. John Corkrean: Mike, I can just give, and just to maybe build on that because you had, I think, asked kind of are we seeing this flow through in Q2 as expected? I would say, yes, the impact to Q1 and I think the impact to Q2 will be as expected, which is roughly $20,000,000 of revenue. So as we look at the first few weeks of our, what is our period for Q2, we certainly see an increase in activity and volume in China. We actually see a little bit of a step in all regions. I think this is in part customers trying to get out ahead of some of these supply challenges. And I do think we are also getting some additional share because we have been able to secure material. So I would say Q2 in China is certainly playing out as we expected. And we saw a little bit of a step up here that is probably related to concerns over supply availability. Mike Harrison: Alright. Very helpful. And then just in terms of the raw material slate, I know that your slate skews towards specialty chemicals, and a lot of those are several steps removed from oil and gas. But just curious if you can talk about any specific materials or buckets or regions where you are starting to see some concerns about supply availability. And maybe help us understand a little bit better the timing of some of this inflationary impact on the P&L. Celeste Mastin: Sure. So as I mentioned in the script, we have already received over 40 force majeure notices. Now a lot of those, Mike, are coming from the Asia Pacific region. Reason for that is because so much of the crude in use in Asia Pacific and in China comes from the Middle Eastern region. So the materials that are impacted, when I mentioned that we were quick to raise price to try to get on top of these material increases, I will tell you, it is because we are already experiencing higher raw material costs. And in some cases, those price increases that I mentioned, they extend from the base level of 10% on up to 40% to 50% on some of our finished goods. There are examples that abound on different material categories and increases. VAM is a good example. The spot market in Europe for VAM was up 300% just recently. We have relationships in that particular material class where we have negotiated caps, negotiated extended availability, etc. And it goes like that in all materials. We do buy specialty chemicals mostly. Eighty-seven percent of what we buy is a specialty chemical. Normally, prices are influenced by the supply-demand balance within any one of those material classes. But this is a case where everything is impacted, and it is because so much of the crude feedstocks and even LNG availability has been impacted by this event. Mike Harrison: Very helpful. Thanks very much. Operator: Your next question comes from the line of Lucas Beaumont with UBS. Your line is open. Celeste Mastin: Good morning, Lucas. Lucas Beaumont: Thanks for taking my question. So I was, yeah, I just wanted to follow up on the raw materials to start. So, I mean, kind of the way we have been looking at this at a high level is we sort of see oil up 25% to 50% on an annualized basis. Now, eventually, that is going to flow back down to kind of those tech chem intermediates. And for you guys, raws are 50% of your sales. So directionally, that would sort of seem to point to needing to get kind of 10% to 20% of pricing over time to kind of fully offset that. So, I mean, it is great you guys have gone out proactively with the first sort of 10%. So I was just wondering, is the right way to frame this that that is kind of a first step in the process, and then as we get further into this year, you will look to kind of go again as you need to. Celeste Mastin: Yeah. That is absolutely right, Lucas. So we knew we needed to get out early to get raw materials. Our team has been working on material acquisition for the last three weeks very aggressively. They saw everything was inflating, and it is not just raw material. It is also energy. It is also freight costs. And so what we knew was that 10% was a minimum that we needed to do across all materials. The team is also, as we speak, negotiating supplements for various raw material classes on top of that today. Now again, we want to be responsible in our pricing. We want to make sure we can acquire material for our customers. That is what it is all about right now: their supply security. And so we will likely have other instances throughout the year when we need to reconsider our pricing and look at these underlying material categories and see where we need to do more. But we are right now just at the first step. Lucas Beaumont: Great. Thanks. And then, I guess, just as we look at the updated outlook for the year, it sort of seems like it is kind of implying pricing up seven to eight and sort of volumes down sort of five to six as you guys talked about. Could you give us a bit more kind of detail on what you are expecting across the segments on that front? Any areas where you are seeing more or less pressure on the volume side and more or less benefit on the pricing side? Thanks. Celeste Mastin: Yeah. So let me just talk about volume really quickly because I think that is going to be the most difficult part of this equation. So when we think about volume, on the plus side, we know we are going to be taking share. In fact, we have already, just last week, had three large global customers, existing customers, come to us and ask us if we could supply another application in their end product because they were unable to get their other supplier to supply them. So that share gain is real, and it is, like I said, an unusual time for us because we get to have a chance to see the existing market reallocated. That is on the plus side, but certainly the challenging thing on the volume side on the negative side will be what is going to happen as it relates to overall demand as this inflationary environment persists. And secondly, what we are considering is how much impact will there be from customers that cannot get other substrates or other raw material that go into their end product. They may have the adhesive from us, but they are going to have to get films and other components. And so that is the uncertain part of the equation. John Corkrean: Yeah. And I think, Lucas, just to build on that a little bit, I think the impact is going to be relatively similar across the GBUs in terms of the impact on volume. And certainly, if we look at our pricing actions, they are very consistent. Celeste mentioned in her remarks at the beginning the similarities to 2021 and 2022. And I think it would be really helpful for people to go back and look at that period. If you look at the results during that period, we were delivering mid-teens organic growth, about two-thirds from pricing and a third from volume, and it was very consistent across all three GBUs in terms of seeing improved volume and improved pricing. We are, in this environment, not counting on that improvement in volume. We know we will pick up some market share, but we are assuming that will be offset by overall demand destruction. But definitely the pricing actions being taken by all three GBUs sort of support a similar outcome. Lucas Beaumont: Thanks very much. Operator: Your next question comes from the line of Kevin McCarthy with Vertical Partners. Your line is open. Kevin McCarthy: Yes. Thank you, and good morning. Celeste, can you elaborate on where you see the greatest opportunities to gain share either by product line, SBU, or region of the world, I guess, would be one question. And maybe related to that, as you suggested a lot of these FM declarations are coming out of Asia, which tends to be more of a spot market. And so I was wondering if you could talk through how you can achieve these share gains on a more durable basis rather than a transitory basis? Thanks. Celeste Mastin: Absolutely. So let us start with that last part. The way our sourcing organization works is, at the beginning of every year, we more heavily contract our raw materials and leave a lower portion of our raw material sourcing to spot buying. So we have very durable relationships, long-term relationships with the supply base, including and especially the supply base in China. And in fact, interestingly enough, while the U.S. and Europe have very strict rules on how materials are allocated in force majeure situations, that is not the case in other countries like China. And so as we have gone forward, we are committing long term to these suppliers that are able to supplement our needs today. And these are suppliers that over the long haul, whether we are talking about the U.S. or Europe or Asia, that we work closely with, and we have very strong relationships with. And so I see this as an opportunity to continue to partner with those suppliers, to continue to partner with our customers, and we will experience an environment where we are going to have a more healthy industry going forward. So if you look at the different business units and where the opportunities are, again, we buy specialty chemicals, but this impact has occurred across the board. And so I do see quite a number of opportunities to gain share in HHC, certainly, particularly because a lot of the raw material base for HHC comes out of China and is being highly and directly impacted. But we have also been very selective and thoughtful about how we use this opportunity to increase our position in those faster-growing higher-margin spaces, the opportunity where we have a greater opportunity to differentiate ourselves, like in EA or in BAS. And so the team does have targets as it relates to how they are thinking about this as an opportunity to grow their business, and they are doing it quite intentionally. John Corkrean: Kevin, I will just add one thing because your question around how do you make the share gains more durable. So we have, as Celeste said, situations where new customers and a lot of times previous customers have come to us and asked us to help out during this period of supply shortage, and we are happy to have old customers back. We are asking them to sign longer-term agreements. I think that is only fair that if we are helping them out in the situation that they are signing up. The other thing that it really does change, as Celeste alluded, it really does change the playing field. Because with this supply shortage, it is hard to be the low-cost supplier in this market because you cannot get the materials, and so it kind of collapses the playing field a little bit, which helps out those companies like us that compete based on quality and innovation and premium service. So those are the two things that I think are keys around making these share gains more durable. Celeste Mastin: I would think of it, Kevin, like a window of opportunity. A window in time. Because right now, while there are unmet needs, unfilled capacity, customers need material. All the barriers are down to getting share in the existing market. Now what will happen over time is the Middle East conflict will end. Material will be more available again. And, however, at the same time, that barrier wall goes back up because once a customer chooses an adhesive, it works online, they are likely not to change it unless there is a performance problem or a manufacturing problem because it is just not worth the risk. Kevin McCarthy: That is very helpful. As the second question, John, I was wondering if you could provide some updated thoughts on your cash flow prospects for 2026 given everything that we have talked about. You have got some upward tension from earnings, but possibly some downward tension from working capital. So maybe you could just kind of talk through how you see the basket shaping up. John Corkrean: Sure. Yeah. So we did have a good start to the year from a cash flow standpoint in terms of performance relative to last year. Obviously, higher income. We are seeing better working capital performance in the first quarter than we did last year. So that is positive, and we are taking some very intentional actions. So we are confident. We are comfortable with our guidance. It is something we will watch. I think managing inventory will be a little trickier in this environment, and I think we are willing to live with a little higher inventory if it means helping secure supply assurance. But right now, I feel comfortable with it, but it is something we are monitoring. I would say that the biggest question will probably be around inventory management. We are doing a good job. I think we will continue to do a good job, but we will need to be a little flexible. Kevin McCarthy: Great. Thank you. Operator: Your next question comes from the line of Jeff Zekauskas with JPMorgan. Your line is open. Jeff Zekauskas: Thanks very much. Celeste Mastin: Morning, Jeff. Hi. Good morning. Jeff Zekauskas: It sounds like you are doing very well with your price initiatives. You did change your volume expectations for the year, I think, from something like negative one to negative five. Can you expand on the meaning of that change? That is, is it global economies slowing down? Is it something specific to the Health and Hygiene and Consumables segment? Why has your volume outlook changed so much? Celeste Mastin: Yeah. It is a balance, Jeff, of three things. So one is the positive impact of gaining share, the second is the negative impact of our customers potentially not being able to get other materials, other substrates to produce their product with, and then the third is some erosion in global demand in this inflationary environment. And so we believe the three of those things are likely more net negative than what we felt like coming into the year and also given this uncertainty. I think we need to be cautious as it relates to volume. Jeff Zekauskas: So, obviously, Europe has been the geography where natural gas prices have really risen, and fuel prices have lifted. Is Europe the area of particular concern, or is it more broad based? Celeste Mastin: No. It is broad based. I would say it is broad based. I do think that given the strides that the U.S. has made in becoming more energy independent, it may not be as bad here as it will be in certainly Europe. And Asia is still a question. Again, getting feedstocks in Asia is the most difficult right now. So, Jeff, one other thing to keep in mind when I say this, again, on average, we produce 97% of what we sell in a region for the region. And in the U.S., that is 99%. So, again, I feel like the U.S. is going to be a little more self-sufficient than some other parts of the world. But I would not say that any part of the world looks very good right now. Jeff Zekauskas: And then lastly, can you comment on two more issues? Celeste Mastin: Sure. Jeff Zekauskas: Which are your overall cost reduction aspirations, both what you had achieved in the first quarter and what you expect for the end of the year, and then secondly, can you comment on your solar-related revenues and what the decrements are there, if that is the right way to describe it? Celeste Mastin: I will take the cost reduction question. John, maybe you can address solar. So on the cost reduction question, we came into the year with $10,000,000 of benefit from Quantum Leap. We are increasing that to $15,000,000 this year given this reduction in volume and our decisions that are underway right now to continue to reduce costs to offset that. John Corkrean: Yeah. And, Jeff, you had asked about the impact of solar, which was about $12,500,000 of revenue in the quarter, and that is probably down 40%. So I think the impact from an overall company standpoint is about 1%. And for Engineering Adhesives, it was about a 4% impact. And then I apologize. I forgot what the other item was you asked about. Oh, I answered it. No. You got it. Okay. Okay. Good. Jeff Zekauskas: Thank you. John Corkrean: Thank you so much. Sure. Operator: Your next question comes from the line of David Begleiter with Deutsche Bank. Your line is open. Emily Fusco: Hi. This is Emily Fusco on for David Begleiter. Could you maybe just give some more color on order trends exiting FQ1 into March and kind of what you are seeing in terms of visibility given the uncertainty? I know you mentioned some uptick in China, but have you observed any pull-forward in demand or prebuying in other regions or anything to call out by segment? Thanks. Celeste Mastin: Sure, Emily. So in March, what we are seeing is higher revenue. So we have a good start on March. And we are also seeing improved margins in March. Now, of course, some of that is related to Chinese New Year and the bounce back that happens afterwards. I would say we are seeing customers that are anxious to get their orders in. We are avoiding filling orders far in excess of prior year’s demand. So the team has been really judicious about ensuring that we are not facilitating any hoarding. So I do not think we are seeing that yet, but it has been a robust month. Operator: Your next question comes from the line of Ghansham Panjabi with Baird. Your line is open. Josh Vesley: This is actually Josh Vesley on for Ghansham. Maybe if I could just ask one quick one here. I think in response to Jeff’s question, you talked about some of your customers not being able to procure raws to build some of their products. Can you just give some color on what specific GBU might be seeing an impact there more so relative to others? And yes, just any color there would be great. Thank you. Celeste Mastin: So, Josh, we are not seeing it yet. We are anticipating it. And I say that because when you think about polyethylene, polypropylene, they are in such a variety of goods. And so we have not heard yet of an instance where we have a customer that is unable to get their substrates, but we are anticipating that there will be some impact of that. And, again, that is an environment where we work very closely with our customers because the likelihood when they change their substrate is that they are going to need a different adhesive because adhesives are really so substrate-specific. So we are anticipating that we will see that and that we will be working closely with customers to reformulate our products or support them by introducing new products to be able to enable them to get a finished good to market. Josh Vesley: Okay. Great. That is perfect. Thank you very much. Operator: Your next question comes from the line of Rosemarie Morbelli with Gabelli Funds. Your line is open. Rosemarie Morbelli: Thank you. Good morning, everyone. Celeste Mastin: Good morning, Rosemarie. Rosemarie Morbelli: So one area we have not touched on is your latest acquisitions. So if we look, could you give us an update on the medical grade and the performance of the last acquisitions? And then this is a category that you are adding to previous acquisitions. So could we also have a ballpark number for the size of this entire entity? Celeste Mastin: So I will speak just to the medical business, Rosemarie, in Europe in particular this quarter. It was another good strong quarter. Our medical business in Europe was up almost 20%, again, organically. So we continue to see performance out of that business. We do not identify the size of any one of our market segments. And admittedly, the medical business is still small. But you can see it is growing rapidly with performance like that. Rosemarie Morbelli: I expected that particular category to be affected by the price of oil. Or it is so specific that it will not make a difference. Celeste Mastin: You know, the amount of material used in those goods is really small. So it is a lot of cyanoacrylate. The raw material base is significantly comprised of cyanoacetates. And compared to the industrial use of those products, the medical use is much smaller. So that is one area where we are going to see less of an impact. Rosemarie Morbelli: Okay. And then if I may follow up on a couple of questions, the solar comparison. When are you going to be at the level where it does not make any difference, so you have reached the bottom of that particular business. Celeste Mastin: Yeah. We will be wrapping that around by third quarter. Rosemarie Morbelli: Okay. And should we expect similar impact in the next two quarters then? Celeste Mastin: Yeah. We are already at the trough revenue we expect there. So it will run rate at about this level. Rosemarie Morbelli: Okay. And if I may, that 20% EBITDA margin that you are targeting, in this environment, can you still get to it by 2029? Or maybe it has been pushed out another year? Celeste Mastin: We can still get there. Rosemarie Morbelli: But no timing. Okay. Thank you. Celeste Mastin: No. We are still really right on track, Rosemarie. And our objective for this year is to maintain margin. So we got out really early to make sure we were not going to see a big raw material margin lag impact. So we are really working hard to deliver on that 20% commitment over time. John Corkrean: I think we said by 2028, and I think that is still our target. Celeste Mastin: It was 2028, Rosemarie, not 2029. Rosemarie Morbelli: See, I was already giving you a year. Celeste Mastin: I know. I should have run with that, but no. Rosemarie Morbelli: Alright. Thank you very much. Celeste Mastin: Thank you. Operator: I will now turn the call back to Celeste Mastin, the President and CEO, for closing remarks. Celeste Mastin: Thank you all for joining us this morning. We look forward to speaking with you again next quarter. Operator: Ladies and gentlemen, that concludes today’s call. Thank you for joining. You may now disconnect.
Operator: Good morning, and welcome to the REX American Resources Corporation Fourth Quarter and Full Fiscal Year 2025 Conference Call. As a reminder, today's call is being recorded, and at this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. I would now like to turn the call over to Doug Bruggeman, Chief Financial Officer of REX American Resources Corporation. Please go ahead. Doug Bruggeman: Good morning, and thank you for joining this morning's call. I have joining me on the call today Stuart Rose, REX Executive Chairman, and Zafar Rizvi, our Chief Executive Officer. We will get to our presentation and comments momentarily, as well as your questions. But first, I will review the safe harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the company's filings with the Securities and Exchange Commission, including the company's reports on Forms 10-K and 10-Q. REX American Resources Corporation assumes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Stuart Rose, our Executive Chairman. Stuart Rose: Good morning, and thank you to everyone for joining us today. Fiscal 2025 was an exceptional year for REX American Resources Corporation, highlighted by outstanding operational performance and meaningful progress on our strategic growth initiatives. We demonstrated not only the resilience and scalability of our business model, but also the strength and capability of our team. Our ethanol sales volume reached record levels in 2025, driven by strong export demand and favorable industry conditions. In a dynamic commodity pricing environment, our team's operational excellence and market expertise enabled us to deliver strong financial results while maintaining our leadership position in the industry. While we expect these conditions to persist in the near term, our long-term success is rooted in discipline, execution, efficiency, and, most importantly, teamwork—qualities that allow us to perform consistently even in more challenging environments. On the strategic front, 2025 was a transformative year. We are encouraged by the initial implementation of the 45Z tax credit with its impact on fiscal 2025 and expect it to positively impact our results going forward. We also made significant progress on our capacity expansion at the One Earth Energy facility, which is nearing completion and will allow for increased annual production capacity to 200,000,000 gallons. In addition, we continue to work diligently on our carbon capture and storage initiative at the One Earth facility, reinforcing our commitment to sustainability and long-term value creation. Our financial position remains exceptionally strong after reporting record EPS for fiscal 2025. We concluded the year with a solid balance sheet, substantial cash reserves, and no bank debt. This financial flexibility, combined with our operational strength, positions us well to pursue continued growth and deliver enhanced shareholder value. Looking ahead to the remainder of 2026 and beyond, we are confident in our ability to build on this momentum. Our expanded capacity, tax credit eligibility, and strong financial foundation provide multiple avenues for sustained growth. As always, our success is driven by our people. The dedication, market insight, and attention to detail demonstrated by the REX team truly set us apart. Whether operating our facilities at peak efficiency or strategically managing our commodity positions, our employees continue to perform at the highest level. With that, I will turn the call over to CEO Zafar Rizvi, who will provide additional details of our operations, achievements, and strategic initiatives. Zafar Rizvi: Thank you, Stuart. Fiscal 2025 was a landmark year for REX American Resources Corporation, highlighted by exceptional execution across all aspects of our business and meaningful progress against our growth strategy. I am pleased to report that we are making strong progress toward completing the capacity expansion project at our One Earth Energy ethanol production facility, which will increase capacity to 200,000,000 gallons per year. We expect testing and commissioning to begin upon completion, with the facility becoming fully operational in fiscal 2026. In addition to increasing potential sales volume, this expanded capacity positions us to capture greater market share and benefit from the strong export demand environment that characterized 2025 and continues into 2026. This additional production also enhances our ability to maximize benefits under the 45B tax credit program. Turning to the 45Z program, as Stuart mentioned, we successfully positioned REX to capitalize on near-term opportunities under the 45Z tax credit program during 2025. We completed assessments with multiple independent experts to establish carbon intensity scores across our facilities. As anticipated, our score came in below the required threshold with the purchase of energy credits, enabling us to qualify for and begin recognizing 45Z tax credit benefits. Looking ahead, our carbon capture facility would further reduce our CI scores. This would allow us to qualify for higher credits, potentially increasing the financial benefits from the program. Our carbon capture and sequestration projects continue to await permitting for the Class VI well and associated carbon dioxide connector pipeline. We remain actively engaged with the EPA and the Illinois Commerce Commission throughout this process. As of fiscal year-end 2025, we have invested approximately $166,000,000 in our carbon capture and ethanol expansion projects combined, and currently remain within our previously stated total budget range of $220,000,000 to $230,000,000. I will now turn the call over to our CFO, Doug Bruggeman, to discuss our operational and financial results. Doug Bruggeman: Thank you, Zafar. I will begin with our operational results. REX ethanol sales volumes during fiscal year 2025 were 290,000,000 gallons, a slight increase over fiscal year 2024 sales volumes of 289,700,000 gallons, and represented an all-time high for REX. Volumes in 2025 were 70,100,000 gallons versus 74,600,000 gallons in 2024. Average selling price for our consolidated ethanol volumes was approximately $1.74 per gallon for the full fiscal year 2025 and $1.72 for the fourth quarter. Dry distillers grain sales volumes during fiscal 2025 totaled 612,000 tons, a 3% decrease over fiscal 2024 volumes of 632,000 tons. Volumes during the fourth quarter were approximately 151,000 tons, a decrease of approximately 9% over 2024. Average selling price for dry distillers grains was approximately $144.06 per ton for the full year and $147.25 per ton for the fourth quarter. Modified distillers grain sales volumes were 81,900 tons in fiscal 2025 compared with approximately 70,000 tons in fiscal year 2024. For the fourth quarter, modified distillers grain volumes totaled approximately 19,700 tons, an increase of approximately 1% over the same period in 2024. The average selling price for modified distillers grain was approximately $65.82 per ton for the full year and $67.92 per ton for the fourth quarter. Corn oil sales volumes in fiscal year 2025 were particularly strong, coming in at approximately 97,000,000 pounds compared to 88,100,000 pounds sold in fiscal year 2024, an increase of approximately 10%. For the fourth quarter, corn oil sales volumes totaled approximately 25,200,000 pounds, an increase of 7% over fourth quarter 2024. Average selling price for REX’s corn oil product was approximately $0.54 per pound for the full year 2025. Gross profit for fiscal year 2025 was $93,700,000 versus gross profit of approximately $91,500,000 for fiscal year 2024. Gross profit in Q4 2025 was $28,900,000 compared to $17,600,000 in Q4 2024. The fourth quarter benefited from both improved ethanol pricing and reduced corn cost, the two largest drivers of gross profit. Our SG&A expense increased to $32,600,000 for fiscal year 2025 versus $27,100,000 in 2024. SG&A in the fourth quarter increased to approximately $12,300,000 versus $6,200,000 in 2024. The fourth quarter increase was primarily due to increased incentive bonus based on company profitability levels. Interest and other income was $15,000,000 in 2025, down from $19,200,000 in fiscal year 2024. We reported interest and other income for the fourth quarter of approximately $4,500,000 versus $4,200,000 for the same period in 2024. Income before taxes and noncontrolling interest for 2025 was approximately $88,600,000, a 5% decrease from $92,900,000 in 2024. During the fourth quarter, we reported approximately $27,400,000 in this metric versus $17,900,000 during the same period in the previous year. Net income attributable to REX shareholders for the year was $83,000,000 compared to $58,200,000 in fiscal year 2024. For the fourth quarter 2025, this equaled $43,700,000 compared with $11,100,000 for the fourth quarter 2024. The fourth quarter benefited from the recognition of approximately $28,000,000 in 45Z tax credits as the regulations became more clear. On a per share diluted basis for the full year, this amounts to an all-time high of $2.50 per share of net income in 2025 compared to $1.65 per share in 2024. And for the fourth quarter 2025, diluted net income per share was $1.32 compared to $0.31 per share for the same period the previous year. We ended the fiscal year with total cash, cash equivalents, and short-term investments of $375,800,000 compared with $359,100,000 for fiscal year-end 2024. This net build in cash was primarily due to cash from operations offset by capital expenditures primarily related to the plant expansion project at the One Earth Energy facility. REX American Resources Corporation ended the year without any bank debt. I would now like to turn things back to Zafar. Thank you. Zafar Rizvi: Thank you, Doug. I would now like to provide additional context around our priorities for 2026 and the key factors expected to influence our business throughout the year. We are well positioned as we enter fiscal 2026 with expanded production capacity expected to come online this year, contribution from the 45G tax credit expected to benefit our bottom line, and favorable market tailwinds so far. We anticipate another year of strong performance and continued growth. Our strategy and execution remain guided by our three P’s: profit, position, and policy. Profit: We have now delivered 22 consecutive quarters of profitability, a testament to our team's discipline, operational excellence, and market expertise. We expect a profitable first quarter. Earnings of 2026 are expected to benefit from expanded capacity, a continued laser focus on our core business, and expected contribution from the 45Z tax credit. Position: We expect to complete the Monarch Energy expansion this year while continuing to advance our carbon capture initiative. These projects will enable us to increase production at lower carbon intensity and enhance our comparative position, allowing us to capture additional value from both the 45Z tax credit and our core business. Policy: The policy environment remains favorable. The 45G tax credit program provides meaningful near-term benefits, which would further increase with our carbon capture facility at One Earth. We also continue to monitor developments related to year-round E15 blending, which could drive incremental ethanol demand while reducing gasoline prices and emissions. Ethanol export demand remained exceptionally strong throughout 2025, with U.S. exports reaching record levels once again. We expect this strength to continue into 2026, bolstered by growing global demand for lower-carbon fuel, increased fuel blending, and the cost competitiveness of U.S. production. On the input side, corn supplies remain favorable, which should support manageable input cost and expected healthy gross margin. Looking ahead, as we progress through 2026, we remain focused on maximizing the performance of our core business, capturing the benefits of expanded production capacity, and continued efforts on our carbon capture facility. At the same time, we will continue to drive operational excellence across all aspects of our business. Our strong balance sheet, zero bank debt, and multiple growth drivers position us well for another year of value creation for our shareholders. In closing, I would like to thank our dedicated team for their hard work, innovation, and commitment to excellence, which continue to drive our success. We are excited about the opportunities ahead and confident in our ability to deliver sustained strong performance. Thank you to all of our stakeholders for your continued support. With that, I will turn it over for questions. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Thank you. Our first question comes from the line of Peter Dastreich with Water Tower Research. Please proceed with your question. Peter Dastreich: Thank you. So, good morning, gentlemen, and congratulations on yet another quarter of better-than-expected results at REX. It is also great to see the One Earth expansion fully on track, and you have continued with the strong share buybacks. But my first questions are regarding 45Z. For that $28,000,000, is that just for Q4, or does that represent a catch-up on previous periods? And also, how should we think about 45Z in terms of the future run rate? Doug Bruggeman: That is for the full fiscal year of 2025. You know, going forward, this is good through 2029. So we remain optimistic that we will continue to be able to claim these 45Z tax credits in the future years. Stuart Rose: Also, if we get the carbon capture project completed, that will significantly increase the amount of 45Z credits that we will receive over and above this. Peter Dastreich: Okay. Great. And just to follow up on that, are you able to disclose by how much that would improve your CI score with the CCS? Zafar Rizvi: I think at this time we have not disclosed that publicly. Maybe in the future, if it is required, we will. It will be significant. Let us just leave it that it will be significant if we can get it. That is why we are working so hard on it. Peter Dastreich: Okay. Great. Very good. And regarding the CCS permitting, so the Illinois pipeline moratorium, I believe, was set to expire July 1. Just wanted to confirm where we are on the Class VI injection permit. I recall it was expected to be finalized in June. Is that still the case? Zafar Rizvi: Yes. We have several— Doug Bruggeman: It has been moved to September on the EPA website at this point. Zafar Rizvi: It has moved on the website, but we have had several different conversations with the EPA over the last few months and even the last few weeks, and we are at the final stage of technical review at this time. We have all the documents which they requested; we have provided them. But, as you know, government agencies move a little bit slower than expected, and that is what they posted on their website, but that does not mean that will be the latest we will get. We are having regular meetings with them. Peter Dastreich: Okay. Great. Thank you. Just a couple of questions before I get back in the queue. Just regarding tariffs and the geopolitical situation. So, the first one on tariffs: How would you characterize the impact that tariffs are having on your operations for both ethanol and corn oil in the fourth quarter and looking into this year? Zafar Rizvi: As far as tariff impact, we are pleased to see that there is no impact on our exports of ethanol. As you know, last year, 2025 export was the best export ever, and even though we have a great relationship with Canada at this time, Canada imported approximately 792,000,000 gallons, and so there seems to be no impact whatsoever at this time. Actually, the tariffs may help us to really export because we can see that Brazil is back in the business now. Last year, they only exported 49,600,000 gallons, and this year, first month of the year—it is January 2026—they imported about 36,400,000. Also, the export for January was the best five months since a long time. So we certainly see the export is increasing, and there is no other impact whatsoever on our business at this time. Stuart Rose: Adding on to that, the high oil prices that we are currently experiencing should only be good for our business, both export and domestically. We are much greater value than we ever were, as far as I can recall anyway. The differential between the price of ethanol and the price of gasoline made from oil is significant. So, assuming that oil prices stay high, that should be very, very good for the ethanol business. Peter Dastreich: Okay. That is great. Actually, that was exactly what my fourth question was going to be about. Thank you very much, and I will get back in the queue. Stuart Rose: Thank you. Thanks for the question. Operator: As a reminder, if you would like to ask a question, please press 1. Our next question comes from the line of Mason Born with AWH Capital. Please proceed with your question. Mason Born: Good morning. A couple of questions from me. I guess to start on 45Z, a nice surprise there. Could you talk about, on a per-gallon basis, what you are recognizing now? It seems like it is roughly $0.10 per gallon if you think about it in terms of your total gallons. But is there mix within that where some are more, some are less than what you are currently working? Doug Bruggeman: Your estimate is correct at this time. Mason Born: Okay. So it is $0.10 on all of your gallons. Doug Bruggeman: Correct. Mason Born: Okay. And then are there other things within 45Z outside of carbon capture that you view as opportunities for increased credits, or is it mainly just carbon capture? Zafar Rizvi: I think, as you can see, and as Stuart mentioned, once the carbon capture facility is completed, that will reduce further our CI score at least 30 to 35 points more, so that will really make a significant effect on our— Mason Born: Do you still view the full $1 as achievable on any of your plants, or is that more aspirational? Zafar Rizvi: I think it is possible, once we have the carbon sequestration facilities completed and our construction is completed at the One Earth Energy level, that we may be able to achieve $1 a gallon at that location. Mason Born: It seems like your language and your commentary around carbon capture being operational in 2026 is maybe different than last time. So are you more optimistic now? Is that fair to say as you have gotten further into discussions with EPA? Zafar Rizvi: No. I think my conversation is about the completing of the construction of our facility at One Earth Energy. You know, carbon capture facility is already complete. It all depends on the permits when we receive them from EPA and IEPA and ICC, Illinois Commerce Commission. So it depends on the permits. But as far as the facility for the carbon capture, it is complete. But to be clear, we do not— Doug Bruggeman: —expect to capture 45Z credits due to carbon capture in 2026. If that was construed that way, that would not be correct. Mason Born: Okay. I guess just the last thing for me. On the E15, there has been a lot of commentary there or speculation that maybe you could see some progress. I know there is a waiver just, I think, this week on a temporary basis. But what are your thoughts higher level on the likelihood of a nationwide E15 in a more sustainable manner? Stuart Rose: Nationwide E15 would be great, but I do not expect that to happen. The oil companies are too powerful. But I do expect more and more independents to put in E15 pumps, and the E15, at least in our areas—I think in the whole country—significantly lessens the price to the consumer, significantly less than E10. Also, the retailers have a chance to make more money. So I expect that to happen. It should happen, and with more pumps of E15, I believe more consumers will use them, and it will benefit us in that way. I do not expect nationwide E15. That would be great, but I do not think that is going to happen. Mason Born: Great. Thank you. Operator: Thank you. It appears we have no further questions at this time. Mr. Rose, I would like to turn the floor back over to you for closing comments. Stuart Rose: I would like to thank everyone for listening. As always, I would like to attribute our record year—and it is a record year in both earnings per share and after-tax earnings—to having the very, very best people, starting with our CEOs of our REX team and all the way down to the plant level. We just have excellent people, and our results speak to that. I think we are among the top, if not the top, in the industry, and it is truly due to having the best people. We feel we have the best people in the industry. Again, I would like to thank everyone for listening, and we will talk to you next quarter. Bye. Operator: 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 morning, and welcome to Rockwell Medical, Inc.'s Fourth Quarter and Full Year 2025 Results Conference Call and Webcast. Please note, this event is being recorded. At this time, I would like to turn the conference call over to Heather Hunter, Chief Operating Officer at Rockwell Medical, Inc. Heather, please go ahead. Heather Hunter: Good morning, and thank you for joining us for this update on Rockwell Medical, Inc. Joining me on today's conference call are Rockwell Medical, Inc.'s President and Chief Executive Officer, Doctor Mark Strobeck, and Rockwell Medical, Inc.'s Chief Financial Officer, Jesse Neri. Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical, Inc. within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our Annual Report on Form 10-K and our subsequent periodic reports filed with the SEC. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC. Rockwell Medical, Inc.'s Annual Report on Form 10-K for the year ended 12/31/2025 was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's full year 2025 results. The reconciliation of non-GAAP measures we discuss on today's call can also be found in today's press release. Our Form 10-Ks and other reports filed with the SEC, along with today's press release, our updated investor presentation, and a webcast replay of today's call can be found on our website under the Investors section. I will now turn the call over to Rockwell Medical, Inc.'s President and CEO, Doctor Mark Strobeck. Mark Strobeck: Thank you, Heather. Good morning, everyone. Thank you for joining us today on Rockwell Medical, Inc.'s fourth quarter and full year 2025 earnings conference call and webcast. 2025 represented a defining year for Rockwell Medical, Inc. We successfully navigated changes in our customer base, changes in our customer purchasing volumes, and changes in our distribution footprint, all while maintaining profitability on an adjusted EBITDA basis for the second consecutive year. We made significant operational changes to further align our infrastructure to match demand, the benefits of which began to be realized in the fourth quarter and delivered one of the highest quarterly gross margins in the company's history. Additionally, in the fourth quarter 2025, we generated positive cash flow from operations, resulting in a higher cash position at year end. We exited 2025 with a business that we expect to remain stable and well positioned to deliver sustainable profitability for years to come. Now let me delve into the details of our operational results. A central focus of our strategy over the past several years and especially throughout 2025 has been building a more durable business to reduce volatility, support more consistent margin performance, and enable us to plan our operations with greater confidence. Reducing customer concentration risk and improving revenue stability have been essential priorities for Rockwell Medical, Inc. and we believe we have made significant progress on both fronts. Today, our customer mix is diverse. We serve approximately 300 customers throughout the United States including all five of the leading dialysis providers in the U.S., along with university medical centers, community hospital systems, and other renal care organizations. In addition, we supply hemodialysis concentrates to more than 30 countries outside the United States. Let's start with Fresenius, the largest provider of renal care solutions in the world. Based on the agreement we signed back in 2024, we consistently and reliably supplied them with our concentrate products throughout 2025, and based on their projections for 2026, we expect that business to grow. As for DaVita, the second largest provider of kidney care services in the world, while they originally intended to completely transition away from Rockwell Medical, Inc. by 2025, they did not. Instead, for a variety of reasons, including our reliability, consistency, and quality, DaVita ended up extending our agreement to 2026, during which product pricing will be increased. We are excited to continue to supply and support DaVita and look forward to finding ways to reestablish a larger supply agreement with them. We expanded our relationship with Innovative Renal Care, the fourth largest dialysis service provider in the United States. We signed a multi-year agreement with IRC to support their goals to invest in high-quality hemodialysis products, streamline workflows, and help avoid potential supply chain disruptions. This multimillion-dollar purchase agreement has utilization commitments and will remain in effect for three years with the option to extend for an additional one-year period. Since announcing this transition in July, our partnership with IRC continues to grow stronger, and we now reliably supply 70% of their clinics with our hemodialysis concentrates. Efficient processes, high-quality products, business continuity, and supply chain reliability were key drivers for IRC to expand their relationship with us. We are excited to be a part of their mission. Another customer to highlight is DCI, which is one of the top five dialysis providers in the U.S. and the nation's largest not-for-profit dialysis provider. Rockwell Medical, Inc. is currently under a long-term agreement with DCI through which we supply and deliver to over 80% of their clinics. In 2025, we also signed a product purchase agreement with Concerto Renal Services, the largest provider of dialysis in skilled nursing facilities in the United States. This three-year agreement has an option to renew for one additional year and includes supply and purchasing minimums for our liquid and dry acid bicarbonate concentrates, including our bicarbonate cartridges. We currently supply 100% of their facilities where Concerto provides dialysis services. Last year, there was a major hemodialysis concentrate supply chain disruption due to another concentrate supplier in the Western part of the U.S. winding down operations due to regulatory and compliance-related concerns. To stabilize the market, we moved quickly to ensure product availability by rapidly scaling production and expanding our logistics infrastructure to address vital customer demand created by this disruption. As a result, we added 30 new customers in the West, increasing the clinics we serve and opening the possibility for further expansion. We also further diversified our concentrate product portfolio by adding a single-use bicarbonate cartridge that is 510(k) approved by the FDA and comes in two sizes: 720 and 900 grams. Interest in this disposable, which is compatible with a range of dialysis machines, continues to increase with our existing customer base as well as with prospective customers. In 2026, we expect to generate approximately $1,000,000 in net sales from our bicarbonate cartridges. As we look ahead, our pipeline remains active and diversified across customer segments and geographies. We continue to see strong interest from customers who increasingly recognize the importance of quality and supply chain reliability for our hemodialysis products. While we remain disciplined, we believe our diverse customer mix positions us well for sustainable growth and expansion. As our customer mix evolved in 2025, we took a hard look at our operations, not just to reduce cost, but to strengthen the foundation of our business. Throughout the year, we executed a series of targeted actions across manufacturing, supply chain, logistics, and overhead. The objective was straightforward: operate more efficiently while continuing to meet the high expectations of our customers to ensure quality, safety, reliability, and top-tier customer service. As our business evolved, we took the opportunity to further standardize processes and optimize how we deploy resources across the organization. By reducing complexity, improving planning, and better aligning capacity with demand, we are able to operate more predictably and with greater discipline. These changes support our ability to respond more efficiently as volumes and customer needs shift, the impact of which is clearly being reflected in our gross margin. It is important to emphasize that our margin expansion, especially in 2025, is not the result of temporary actions or one-time benefits. Instead, these changes reflect structural improvements in how we run our business, from how we manage production to how we align resources with demand. Our margin improvement is being driven by several factors. First, we are improving our pricing discipline across a more diversified customer base, which is allowing us to better align contract economics with the value we provide. Second, operational efficiencies of reducing costs and improving throughput. Third, a more stable production and logistics environment is enabling better planning and execution. As volumes shift and customer needs evolve, this disciplined operating model gives us flexibility to respond efficiently while maintaining high service levels. In the fourth quarter, we appointed a new head of manufacturing and operations, Rashad Brown, as Vice President of Manufacturing and Supply Chain. Rashad brings deep operational expertise and a strong track record in regulated manufacturing environments, specifically hemodialysis concentrates, having previously worked with Fresenius and other leading medical device manufacturers. His leadership is already having a significant impact on our operations through improved execution, consistency, and discipline. We expect further improvements in our manufacturing efficiencies in 2026 and beyond. Our financial performance in 2025 reflected an organization that was in transition but also laser-focused on maintaining profitability and stabilizing its business to ensure future growth. Revenue changes throughout the year reflected the combination of a change in our customer base and product mix along with additional organic growth. Similarly, we made adjustments to our organizational and manufacturing infrastructure to match the changes in our customer base, which produced consistent improvements quarter over quarter. Gross margin expanded meaningfully, making the fourth quarter 2025 one of the strongest quarters of gross margin in Rockwell Medical, Inc.'s history. Operating loss narrowed. The overall financial profile of our organization improved, and we delivered positive adjusted EBITDA for the full year 2025. We also generated cash in the fourth quarter supported by margin expansion and better working capital management. That progress further reinforces the strength of our underlying business. In short, we are doing more with less and doing it better. The business is becoming more focused and more predictable, and we believe it is increasingly well positioned to generate sustainable returns over time. We initiated a strategic shift nearly four years ago to fundamentally revitalize Rockwell Medical, Inc. Our main objective at the time was to reestablish credibility with all stakeholders, especially with the investment community. This is and remains incredibly important to our success. We are pleased to report for the third year in a row our annual performance was aligned with our annual guidance. We have strengthened the core fundamentals of this business and clarified the key drivers for its success, positioning it to become increasingly consistent, reliable, and repeatable over time. For our 2026 guidance, we believe we are well positioned to advance our strategy to drive sustainable revenue growth, expand our profitability, and further diversify our portfolio. As a result, we project our business operations in 2026 will generate adjusted EBITDA between $1,000,000 and $2,000,000 and operating cash flow to be positive. Because we are currently in negotiations with several large customers, the outcome of which has the potential to positively impact both net sales and gross margin in 2026, we expect to provide guidance on those financial metrics in the near future. Bottom line, in 2026, we believe that our business is projected to be profitable and generate cash. As new opportunities arise, we anticipate that these projections have the potential to strengthen, reflecting our business' ongoing adaptability and growth prospects. Looking ahead, we continue to focus on long-term value creation for our shareholders. Our strategy over the next three years is centered on three core elements. First, we are focused on growing our profitable, leading hemodialysis concentrates business, serving dialysis centers in the United States and around the world. This remains our core foundation. Our ability to deliver reliable supply, consistent quality, and strong service supported by a more efficient operating model enables us to be a dependable partner to our customers while sustaining margin performance and supporting shareholder returns. Second, we are focused on building a broader portfolio of renal care products that integrate seamlessly into our existing commercial, manufacturing, and distribution infrastructure. We see meaningful opportunity to leverage the platform we have built, including our customer relationships, operational capabilities, and logistics network, to support additional products that align with our expertise and enhance the overall offering we provide to customers. Third, and longer term, we continue to seek the next advancement in renal care—innovations that can drive improved treatment options and outcomes for patients. While inherently deliberate and disciplined, this work reflects our commitment to remaining forward-looking and strategically positioned within an evolving healthcare landscape. Beyond these core areas of focus, and based on what we see today, we believe that over the next three years, we have a path to meaningfully grow our business. By 2029, we believe that we will be well positioned to generate annual net sales above $100,000,000 while continuing to broaden and diversify our portfolio so that a smaller share of revenue comes from our concentrates business as it exists today. Over that same period, we expect gross margins to trend upward, potentially approaching the 30% range, and our business to move toward annual profitability in the range of $5,000,000 to $10,000,000. These are our goals, and we see a path to achieve these goals. Of course, I would emphasize that these are longer-term directional views based on our current expectations, and they are subject to a range of risks and uncertainties so actual results could differ. Now I will turn the call over to Jesse to review in further detail our fourth quarter and full year 2025 financial results. Jesse Neri: Thank you, Mark. Good morning, everyone. As you can see from this morning's press release, we presented our financial highlights as a quarterly trend, from Q4 2024 through Q4 2025. We believe the most meaningful comparisons are quarter-to-quarter progression given the changes to our business over the past year. As Mark mentioned, we remain focused on continuing to optimize our cost structure to match the changes in our customer base. We measure our progress against this objective by focusing on three metrics: cash, gross margin, and adjusted EBITDA. We have shown consistent improvement throughout the year in each of these areas. First, we increased our cash position from $173,000,000 at March 2025 to $25,000,000 by the end of the year. Gross margin grew from 16% in Q1 to 21% in Q4. And adjusted EBITDA improved each quarter, starting at negative $400,000 in 2025, and ended with a positive $1,000,000 in Q4. We believe adjusted EBITDA is the best indicator of profitability because we remove noncash items, nonoperating items, restructuring costs, and other items that are not part of our core concentrates business. Now let me walk through our financial results for the fourth quarter and full year 2025. Net sales for Q4 2025 were $18,300,000, which was 15% higher than net sales for Q3 2025 and represents a 26% decrease over net sales of $24,700,000 for Q4 2024. Net sales for the full year 2025 were $69,300,000, which represents a 32% decrease over net sales of $101,500,000 for the same period in 2024. The decrease in net sales was driven by the expected reduction in purchase volumes by one of our customers. Gross profit for Q4 2025 was $3,900,000, which was 70% greater than gross profit for Q3 2025 and in line with gross profit for Q4 2024. Gross profit for the full year 2025 was $11,700,000, down from $17,500,000 for the same period in 2024. The decrease in gross profit was driven by the reduction in purchase volumes by the customer mentioned earlier. Gross margin for the fourth quarter 2025 was 21%, representing one of the strongest quarters of gross margin in Rockwell Medical, Inc.'s history and a meaningful increase over 14% gross margin in Q3 and 15% gross margin in Q4 2024. Gross margin for the full year 2025 was 17%, which was in line with our 2025 annual guidance and in line with our gross margin in 2024. As Mark mentioned earlier, we made adjustments to our infrastructure and operations last year to better match demand, and the results of these activities began to be reflected in our fourth quarter numbers. Net loss for Q4 2025 was $600,000, which represents a threefold improvement over our net loss of $8,180,000 in Q3 2025 and a slight improvement over a net loss of $800,000 for Q4 2024. Net loss for the full year 2025 was $5,300,000 compared to a net loss of $500,000 in 2024. Loss for 2025 includes $4,000,000 of noncash depreciation, amortization, and stock compensation expense, as well as $1,200,000 of severance and other restructuring costs associated with facility transitions. Rockwell Medical, Inc. was profitable on an adjusted EBITDA basis for the fourth quarter and full year 2025. Adjusted EBITDA for Q4 2025 was a positive $1,000,000, which represents a $900,000 increase over Q3 2025 and was generally in line with Q4 2024. Adjusted EBITDA for the full year 2025 was a positive $300,000 compared to a positive $5,000,000 for the full year 2024. Cash, cash equivalents, and investments available for sale at year-end 2025 were $25,000,000, an increase of $1,300,000 from the end of Q3. During the fourth quarter, we generated positive cash flow from operations of $2,300,000, which was partially offset by cash paid in connection with our Vopra asset acquisition. Since Q4 2024, we increased our cash position by $3,400,000. Our $25,000,000 cash balance not only provides a stable foundation for the business, but also provides the growth capital necessary to pursue the strategic activities Mark outlined earlier. Now I will turn the call back over to Mark. Mark Strobeck: Thank you, Jesse. Operator, please open the phone lines for any questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad now. Press star one again to withdraw your question. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Now please stand by while we compile the Q&A roster. Your first question comes from the line of Anthony Vendetti with Maxim Group. Your line is open. Please go ahead. Anthony Vendetti: Thank you. Mark, I was wondering if, based on the current relationship with DaVita since they continued to purchase in 2025, have they given you any indication of what volume levels or commitments for 2026 they are considering, or do you have expectations for 2026 from DaVita, or is that still up in the air, negotiation phase? Any color on that would be really helpful. Thanks. Mark Strobeck: Thanks, Anthony. Yes. As part of our agreement with DaVita, they are obligated to provide us a forecast for the year, which they have. At this point, they are purchasing at volumes that are consistent with and slightly above what they have projected for us. So I think that is a positive sign. I think, as we continue to work with them and create better ways in which to service them, we are hopeful that there is an opportunity here not only in establishing a much longer-term relationship, but also the possibility of securing additional business with them. Anthony Vendetti: Okay. Great. And then two other quick follow-ups. On the West Coast expansion as well as at-home dialysis: you have 30 new accounts on the West Coast. Is there a particular goal for 2026 in terms of expansion there, or is that on a case-by-case basis? And then maybe talk about the progression of the at-home dialysis market. Where is that right now in terms of approximate percentage of revenue, and what do you see as the growth trajectory in 2026? Mark Strobeck: Yeah. So on the first question, we took over those customers. We are now in the process of putting those under long-term agreements with Rockwell Medical, Inc. Given the customer base that we already have in the West, with the addition of this group, it really puts us in a position to begin to start to expand further within the West. We are right now designing a commercial strategy to bring forward in part to do that. We will also be looking to our work with B. Braun. If you recall the partnership that we had put in place two years ago, they are heavily focused in the West. So I think collectively that is going to position us well to target dialysis centers that we otherwise have not supported in the past. As it relates to the at-home market, that market continues to establish itself. As an overall percentage of the dialysis hemodialysis market, it is probably trending towards what will be about 10%. We work with some of the largest players in that space, and so we are continuing to support those. As that market grows, I think we are well positioned to take advantage of that, in part because we have configurations now of our products that work incredibly well at home. Anthony Vendetti: Okay. Great. Thanks very much. Appreciate it. I will hop back in, too. Operator: Again, if you would like to ask a question, please press star one on your telephone keypad now. To withdraw your question, press star one again. Remember to pick up your handset when asking a question. If you are muted locally, remember to unmute your device. Please stand by while I compile the Q&A roster. Your next question comes from the line of Ram Selvaraju with H.C. Wainwright. Your line is open. Please go ahead. Ram Selvaraju: Thank you very much for taking my questions, and congrats on all the recent progress. I wanted to drill down a little bit more on the likely evolution of the relationship with DaVita, and ask three questions on that front. Firstly, I was wondering if contribution from DaVita factors into your longer-term projections. If it does, to what extent? And if it does not, could you confirm that? Secondly, I was wondering, in the context of 2026, are there any factors that you see potentially driving DaVita to extend the relationship with Rockwell Medical, Inc. after 2026? In other words, is that even an option, or do you think that is definitively off the table and we should not be assuming it in any way, shape, or form? And then lastly, I was wondering if you could talk a little bit about the broader markets and competitors with you for DaVita's business, and how they might be looking to prise DaVita away. Is it primarily on price, or are they able to compete on something else? And then I have a few others. Thank you. Mark Strobeck: Great. Thanks, Ram. Maybe the first one I will let Jesse answer. Jesse Neri: Yeah. So, Ram, in terms of our longer-term projections, we are assuming consistent volumes purchased from DaVita over the next few years, so consistent with what they purchased the last three quarters of last year, going forward into this year. So no gigantic growth assumption there for DaVita. Mark Strobeck: And then on your next question, we continue to have a very strong relationship with DaVita. I think it is their intent, and it was their desire to want to put in place a long-term relationship with us. So it is our anticipation that if we continue to supply them consistently over the course of the year with products that are of the highest quality, that there is a high probability that they will continue to work with us going forward. And depending on how the performance of others continues, I think it may open the possibility for us to expand further and regain many of the clinics that transitioned away in the middle of next year. As to the third part of your question around competitors, this is really a three-party market, and it is us, Fresenius, and Nipro. We believe that Nipro continues to struggle to bring products to the market, given some of their recent historical issues around the quality of their products. We do not have much visibility into that, but all indications are that that still continues to present a challenge to them. And we continue to not only work with Fresenius, but also recognize that there are customers that continue to leave Fresenius in preference of Rockwell Medical, Inc. Not just our ability to provide products that are incredibly high quality, but our ability to distribute those through our Rockwell Medical, Inc. transportation system helps reduce the third-party cost that other customers would see if they were to purchase products from Fresenius. Our competitive advantage continues to be high-quality products—that means products that are manufactured in facilities that do not and have not had significant issues related to FDA inspections. And then secondly, because we transport our products largely on Rockwell Medical, Inc. transport, which is a more cost-effective way to get products to clinics, those are the two areas that put us at a competitive advantage. And the third is our customer service group. We have a dedicated customer service group that works exclusively with dialysis centers. As you can imagine, many of these are not set up as businesses per se. They are set up as treatment facilities really focused on delivering high-quality therapy to patients with end-stage renal disease. They are not sophisticated in procurement; they are not sophisticated in logistics. And we provide all of that through our customer service, and it continues to be an advantage for us. So those are the areas that I think differentiate us and continue to generate very positive customer feedback. Ram Selvaraju: Thank you. That is very helpful. I wanted to ask two other quick ones, if I may. Firstly, can you give us any additional granularity on how the Western expansion is going, what the prospects are for additional customer acquisition in 2026, and how you see that aspect of the business contributing to your longer-term forecast? And then I was wondering if, in the, let us call it, late 2020s timeframe—the outer years of your longer-term forecast—you can give us any further commentary on where you expect gross margin to be trending at that point. Mark Strobeck: Yep. So, as we mentioned, we stepped in and took over the business of about 30 customers in the West. That is a multimillion-dollar revenue base that we have now acquired and are beginning to support. That, as I mentioned, gives us an even stronger foothold in a region of the country that has largely been supplied by one manufacturer. So once we made that announcement and made it clear to folks that we are now able to provide products to dialysis centers in the West, we received a number of calls from customers that are looking to transition away from their current supplier. So we are in the process of prosecuting those. Those can be smaller opportunities all the way to multimillion-dollar opportunities, and we are just going to continue to prosecute those throughout the year. But we certainly think that there is a large opportunity to secure more business out there. As it relates to our projections through 2029, two things I would say in an effort to answer that question. The first is we continue to be actively engaged in a number of business development discussions around acquiring renal care products that fit very squarely into what we are doing, whether that is additional concentrates or whether that is products that are used by dialysis centers—blood tubing sets, dialyzers, et cetera. So we are now working with a couple of organizations to evaluate those and determine the prospects of bringing them to the United States for us to sell alongside our concentrates. All of those product opportunities that we are looking at are going to be higher-margin opportunities than our current business today, which is going to help pull up our overall gross margin. And then, in addition, we are also looking at one or two very innovative therapies in the space that may require additional investment to get to the market. But all of that is what we believe we can successfully accomplish to get to the revenue projections that we provided. Ram Selvaraju: Thank you so much. Mark Strobeck: Thanks, Ram. Operator: There are no further questions. I would now like to turn the call back over to Doctor Strobeck. Mark Strobeck: Thank you for joining us today for an update on Rockwell Medical, Inc. We are proud of our achievements in 2025 to navigate changes in our customer base, purchase volumes, and distribution footprint, all while maintaining profitability. Our team has done a tremendous job aligning our infrastructure to match demand. In 2026, we remain focused on making Rockwell Medical, Inc. profitable for what would be the third year in a row and continuing to ensure that we are set up for long-term stability and success. Strengthening our top-line revenue, expanding our profitability profile, and further diversifying our portfolio through product acquisitions and business development opportunities requires significant ongoing effort. We believe we are getting close, and we will have more to share with you as we reach key milestones in the coming months. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Heinrich Richter: Good morning, and welcome to Gemfields 2025 Full Year Results Shareholder and Investor Webcast. Sean Gilbertson, CEO; and David Lovett, CFO, will present Gemfields financial results. At the end of the presentation, we will go into Q&A. [Operator Instructions] Before we start, please take a note of the important information in our disclaimer on Slide 2, with a full disclaimer in the appendix. And with that, I'll now pass you on to Sean. Sean Gilbertson: Thank you very much, Heinrich. Good morning, and welcome. Thank you for your time and interest in what was an extremely difficult year for Gemfields, Ignoring the COVID year of 2020, 2025 saw us deliver our weakest annual auction revenues since 2013, more than a decade and only 41% of the peak auction revenues, which we achieved in 2022, which was the height of the post-COVID so-called revenge spending boom for us. I think it's worth recapping on what transpired in getting us to this situation. First, buoyed by the post-COVID boom, we paid out $80 million in dividends to shareholders between May '22 and May '24, and we also did a $10 million share buyback. We then went on to initiate a growth strategy, which included the largest CapEx project Gemfields has ever undertaken, being our second processing plant at MRM in Mozambique at a cost of $70 million. Then in the second half of 2024, we saw the deterioration of the Chinese economy and a marked decline in China's share of luxury goods consumption. That was followed by the contested general election in Mozambique in October '24, giving rise to civil unrest in many parts of the country and a direct attack on MRM on the 24th of December 2024, leading in turn to significant illegal mining incursions during the first quarter of 2025 and multiple disruptions. We also experienced decreased premium ruby production from our Mugloto area at MRM. In the third quarter of '24, One of our emerald competitors started selling considerable quantities of emeralds at low prices, damaging the emerald market. And in January 2025, of course, we saw the Zambian government's surprise introduction of a 15% export duty on gemstones and resulting in our suspending Kagem's exports entirely until the issue was nimbly remedied by the government just a couple of months later in March '25. All of those prevailing circumstances led us to suspend mining at Kagem altogether from January through May of 2025. And at the same time, we were experiencing significant logistics and work permit delays in Mozambique, affecting particularly the specialist electrical installations that were required for MRM's second processing plant. April of 2025 infamously saw President Trump's tariff shocks and their considerable jolts to the luxury and jewelry sectors. And we suffered in '25 from being unable to recover meaningful proportions of the VAT owed to us by the governments of Zambia and Mozambique and which reached circa $45 million at peak. And finally, we had the impact of widespread geopolitical instability arising from Israel, Gaza, Syria, Ukraine and now, of course, Iran. Despite that long list of excuses and save, of course, for the potential impact of the latest round of Trump-induced turbulence, our overall position as Gemfields is, of course, markedly better than where we were just 12 months ago. In addition, MRM, our ruby mine, has so far in the first quarter of this year already exceeded by a modest $3 million, the whole of 2025's mega $50 million of ruby revenue. With that scene now set, I'll pass you on to David to lay out the VFX. David Lovett: Thank you, Sean, and good morning, everybody. I won't repeat the overview of 2025 that Sean has just given, but the financial results you'll see over the next few slides certainly show how tricky a period it has been for Gemfields. Both revenue and cash generation came in significantly below expectations, largely due to the delayed year-end ruby auction, but the actions taken in 2025, both operationally and strategically have materially strengthened the group's footing heading into 2026. I will now take each of the key financial metrics in turn on the next slide. Starting at the top left, we have revenues. Group revenue came in at $135 million, which is down sharply from the strong levels seen in '22 and '23 and from the $199 million we achieved in 2024. This was driven primarily by weaker ruby production throughout the year and the postponement of the planned December ruby auction. On the cost side, operating expenses were down by approximately 17% to $129 million, reflecting cost discipline and the pause in operations at Kagem in the first half of the year. This then resulted in an EBITDA of $6.25 million, a significant reduction year-on-year, and adjusted earnings per share of negative $0.013 and a free cash outflow of $29 million, driven primarily by the reduction in revenue and the CapEx spending at MRM. Finally, on this slide, we had net debt, which closed the year at $39 million. If you include the auction receivables, this falls to $19 million. There's no doubt that this is a weaker position than we would have liked, but the heavy investment in PP2 is now behind us. And as PP2 stabilizes, we should see our cash position improve. Looking at revenues in more detail. Here, we have our rolling 12-month auction profile. This highlights the decline since the post-COVID peak we saw in 2022 and the core challenge we're facing at MRM. On the next slide, we split out Kagem and MRM separately. On the left, you see Kagem's auction track record. We generated $78 million in 2025, which is in line with 2024 despite the pause in mining activity in the first half of 2025. Our next Kagem auction is expected in May this year. On the right-hand side, MRM tells quite a different story. Revenues were significantly lower than the previous year at $50 million. The reduced recovery of premium quality rubies had a clear impact through the postponement of the year-end auction and the reduced revenues seen earlier in the year. This graph is a clear example of why PP2 and general improvements in operational stability at MRM are key for both MRM and Gemfields. It's worth noting that the MRM's auction in February generated $53 million, and we expect the next ruby auction to take place in Q3 of this year. Moving on to CapEx. This slide shows rolling 12-month CapEx at both Kagem and MRM on an actual cash cost basis. At Kagem, on the left-hand side, CapEx remained controlled, reflecting the focus on disciplined capital allocation at that operation. On the right-hand side, MRM CapEx has been elevated because of the new plant. As we move into 2026, CapEx spending is tapering as the project moves towards completion, but it should be noted that there is still some mining fleet purchases to come in 2026. Looking at operating costs. Here, we have the cash cost operating for Kagem, MRM, the U.K. Corporate and the development assets. At Kagem, we made material reductions in the year, but that is largely due to the pause in mining operations in the first half. The bars will start to move back up as mining activity starts to normalize. At MRM, operating costs have reduced somewhat, but security concerns and increased operations to feed the new plant will see these costs tick up in 2026. Corporate costs, again, made some progress, but it should be noted that they were impacted by one-off costs relating to the capital raise in the year. And finally, on development project costs, they continue to fall as we wind down activity in almost all of those projects. Cost control remains a key focus as we move through 2026. Finally, from my side, we'll have a look at the net debt position. At the year-end, we reported gross cash of $64 million and gross debt of $103 million, which gives us a net debt position of $39 million. As we said earlier, if you include the auction receivables of $20 million, that net debt reduces to $18.7 million. Still plenty of work to do here, but we're certainly in a stronger position than we were at the end of 2024. I'll hand back to you now, Sean. Sean Gilbertson: Thank you very much, David. On Slide 12, while competitor behavior, the 15% export tax and the ensuing suspension of mining at Kagem from January through April of 2025 were serious issues, the mine actually had a pretty solid year with auction revenues of nearly $80 million at $78 million. Kagem yielded almost $40 million after deducting operating costs and CapEx. Of course, that's due to the great team we have at Kagem, but it was also greatly aided by good production and an improved market for emeralds in the second half of '25. MRM's woes are well documented. And combined with everything else we were facing, the group completed a $30 million rights issue in June of '25, and we sold Fabergé for $50 million in August of '25. Keen observers and those with eagle eyes will note that the amount from the rights issue, together with the proceeds from the sale of Fabergé equal precisely the amount of cash that we paid out as dividends to shareholders between May '22 and May '24. Turning to Slide 13. Gemstones in the premium category are what matter in our business. And with only its processing plant running from January through April of '25, it's clear to see that Kagem got off to a slow start. But as shown on the left-hand graph, the second half of the year was super. Across the way at MRM, shown on the right-hand side, headline premium ruby production actually looked pretty good from a headline perspective. However, these included fewer rubies from our long-standing Mugloto area, which underproduced and more rubies from the newer Maninge Nice area. While there are some really super gems from Maninge Nice, including the third most expensive ruby we've ever sold, the overall value per gram or per carat of Maninge Nice's rubies is lower than what we have achieved historically from Mugloto. Ruby prices do vary enormously based on slight variations in color, saturation, tone and, of course, internal imperfections. On Slide 14, in the next broad quality category down, simply called Emerald at Kagem and Tumble at MRM, both mines produced in line with recent years. Slide 15 shows a very interesting comparison of rubies from the older Mugloto area on the left and rubies from the newer Maninge Nice area on the right-hand side. This image is taken on a blue backlight and shows the same effect as one would see under ultraviolet light. While all rubies fluoresce, some do fluoresce a great deal more than others, as can clearly be seen in the photograph. And while Mugloto produces a tiny proportion of more fluorescent material, Maninge Nice produces a very considerable amount of fluorescent material. For interest, the famed Burmese rubies are very well regarded and renowned for exhibiting high fluorescence. While we are still garnering price information given the material from the newer Maninge Nice area, and it's only been offered at 2 of our regular mixed quality auctions, we have seen this fluorescent material command a premium in some size fractions and a discount in others. Our customers are very familiar with the long-standing Mugloto material, which we have auctioned for more than a decade, but are very much like us, still learning about how Maninge Nice material cuts and sells. On Slide 16, the final commissioning of our second processing plant at MRM, or PP2 as we call it, is significantly behind schedule. When the project was first announced, we expected final commissioning by the end of June of '25. Encouragingly, PP2 has demonstrated its ability to attain and even exceed the 400 tonne per hour design throughput rate in the wet circuit. And that can be seen in the graph on the left-hand side, which charts the weekly data since PP2 started operating. However, and while I want to stress that there are no known fatal flaws, we have experienced a number of teething and commissioning issues, which mean that the second processing plant is not yet attaining the target number of operating hours each day, which is 20 hours. As a result, ore processing and ruby production is materially constrained. Those issues exacerbated by the wet season include, but aren't limited to choking and blinding, which require shoot, liner and screen reconfigurations and also the presence of organic and inorganic material reaching downstream pumps and screens. PP2 was built on a fixed price contract by Consulmet, South Africa, and who are still very much on site, working very closely with our own team in remedying these issues. While we anticipate considerable improvements with the arrival of the dry season from May of this year, we now expect final commissioning of PP2 only in Q3 of 2026. On Slide 18, our priorities are to stabilize the business after all the turbulence we've been through, particularly, of course, ironing out the final commissioning issues with PP2, and then to rebuild our auction revenues, particularly in rubies, followed by our profitability and then, of course, deleveraging our balance sheet. On Slide 19, and touching on auctions, we presently have a higher quality emerald auction scheduled for May of this year in Bangkok. And as David indicated, probably in the third quarter for rubies. And while the emerald market looks satisfactory, it's too early to tell what the fallout from the war in the Middle East will be. Our ruby demand has been a little bit more muted, especially in the lower quality segments, but the best gems consistently do well. And so as we assess what's happening in Iran, we'll balance production with market considerations and maintain a flexible approach to the number and size of the auctions that we run during the course of the second half of this year. We will obviously work hard to keep a lid on costs. But clearly, the Iran war may have a significant impact, including on fuel, where we are already seeing prices of diesel increase in our operations. And from past experience, that clearly then has a knock-on impact on to everything delivered at mining operations, including, for example, food and beverage. And with that, I'll pass back to Heinrich to run the question-and-answer session. Heinrich Richter: Thank you, Sean. [Operator Instructions]. First question received is as follows. In terms of Nairoto and Sedibelo, what are your optionalities in terms of commercializing those assets? Sean Gilbertson: Thanks for the question, Heinrich. We took the decision during the course of late '24 and '25 issues and cash constraints to shut down Nairoto. And so we have removed all personnel and equipment. And the reality is Nairoto, therefore, is not a project that we're going to bring back into business. It is, of course, a gold project and doesn't fit with our core business of emeralds and rubies. And insofar as Sedibelo is concerned, that clearly has seen a shot of life in the form of the increases in precious metals prices. We have obviously historically written that down to 0. And if there are any interesting inquiries, we will obviously progress them. But the reality is that's also been written down to 0. Heinrich Richter: Thank you, Sean. That's very clear. [Operator Instructions] On to the next question. Please advise what the fuel supply is looking like in the countries which you operate? How dependent is Gemfields' business continuity on stable fuel supply? And what contingency measures are you pursuing? Sean Gilbertson: Very topical question. We are obviously critically dependent on the ongoing supply of fuel, particularly diesel. We have circa 300,000 liters of storage capacity at MRM and approximately twice that across the way in Zambia at Kagem. The reality is we are already seeing some increases in the price of fuel. And there have been a couple of warning signs in Zambia as to a lack of the ability to guarantee ongoing fuel supplies post April. We are particularly dependent on diesel generators in Mozambique, where the second processing plant eats up a huge amount of power. And we do have a pretty good relationship with our supplier there after something of a reset about 18 months ago. But the reality is, it's very difficult to ascertain precisely what's going to happen with supply at this stage. Our team is obviously working on some mitigations, and that might go so far as to literally have additional tanks set up and source fuel. But it's a tricky pinch point if this market gets worse. Heinrich Richter: And with that, we have no further questions. We'd like to thank you all for joining us this morning. If you have any further questions or would like to speak one-on-one, please reach out to us at ir@gemfields.com. Enjoy the rest of your day. We will close the call. Thank you very much.
Operator: Hello, ladies and gentlemen. Thank you for standing by, and welcome to Pony AI Inc. American Depositary Shares Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. As a reminder, today’s conference call is being recorded, and a webcast replay will be available on the company’s Investor Relations website at ir.pony.ai under the News and Events section. I will now turn the call over to your host, George Shao, Head of Capital Markets and Investor Relations at Pony AI Inc. American Depositary Shares. Please go ahead, George. George Shao: Thank you, operator, and hello, everyone. We appreciate you joining us today for Pony AI Inc. American Depositary Shares’ fourth quarter and full year 2025 earnings call. Earlier today, we issued a press release with our financial and operating results, which is available on our Investor Relations website, and an earnings presentation, which we will refer to during the conference call, can also be accessed and downloaded on our IR website. Joining me today on the call are Dr. James Peng, Chairman of the Board and CEO; Dr. Tiancheng Lou, CTO; and Dr. Liu Wang, CFO of the company. They will provide the prepared remarks followed by the Q&A session. Before we begin, please refer to the safe harbor statement in our earnings release, which applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under GAAP in our earnings release available on our Investor Relations website and filings with the SEC and Hong Kong Stock Exchange. I will now hand over to our Chairman and CEO, Dr. James Peng. Please go ahead. James Peng: Thank you, George. Hello, everyone. Thank you for joining our earnings call. 2025 is an amazing year for us. This was defined by multiple remarkable milestones. First, our top-line growth significantly accelerated. Looking at Q4 last year, our robotaxi revenues surged 160% year-over-year and fare-charging revenues skyrocketed by over 500%. Second, since our Gen-7 robotaxis’ debut last April, we moved straight into mass production and commercial deployment. Our fleet has now surpassed 1,400 units. Third, we are expanding our footprint, launching services in new cities, in both China and globally. This has massively broadened our reach. In fact, we have now crossed the 1,000,000 user mark in China alone. Fourth, we have proven our business model actually works. We achieved UE breakeven in both Guangzhou and Shenzhen, and we will replicate this success in more markets. Looking ahead at 2026, it will be a year of hypergrowth for Pony AI Inc. American Depositary Shares. We are riding a perfect wave of industry momentum built on five pillars: fully driverless technology, policy support, mass production, large-scale operation, and ecosystem maturity. Last year, we used China’s tier-one cities as a strategic blueprint to deploy Gen-7 robotaxis. From official debut to mass production, regulatory validation, and rigorous testing, we achieved commercially fully driverless operations within just six months. Last quarter, we set our robotaxis fleet target to over 3,000 units for this year. Bolstered by the financial firepower from our successful Hong Kong IPO, and also with Toyota bZ4X Gen-7 model already in SOP, we now have greater visibility and are confident in even exceeding this target. Our excellent virtual driver is the key to support this confidence. Proven mastery of highly complex urban scenarios and a superior safety record have earned deep trust from policymakers and partners, driving rapid user adoption. This directly translates into positive UE. Since we hit UE breakeven in Shenzhen last month, growth momentum continues. This March, we are seeing peak daily revenues of RMB 394 per vehicle and daily orders at 25 per vehicle. We will certainly replicate this success globally. By year-end, we plan to deploy robotaxis in over 20 global cities. As the go-to partner, we have forged strategic alliances with industry leaders like Tencent and Uber. Together, we will propel global expansion, powering accelerated top-line growth and more than tripling our robotaxi revenues for 2026. Let me elaborate on how we will drive this hypergrowth. We are executing a dual-engine strategy. That means we are all in on both China and global markets. Our proven business model in China gives us a solid foundation to replicate success internationally, and we are already seeing great results that position us for our next growth phase. In China, we have earned clear leadership across tier-one cities, scaling further and pushing deeper into busy downtown areas. Take Shenzhen, for example. Our robotaxis satisfied surging demand in traffic hubs such as Nanshan and Baoan during Chinese New Year. The paid orders in the first two months this year alone have already surpassed that of the whole year 2025 in Shenzhen. We also entered University Town in Guangzhou, the business campus zone in Southern China. This sets the stage for more launches in multiple cities across the Greater Bay Area. In March, we also entered Hangzhou and Changsha, top tier-two cities. This is just the start, and we will have more cities to follow soon. Now turning to overseas markets. Our presence in Europe, the Middle East, East Asia, and Southeast Asia now covers a population of 100,000,000. We are aiming for nearly half of our 20-city target to come from overseas by the end of this year. Recently, we teamed up with Uber and Verne, which is a Rimac Group company, to enter Croatia, working together to launch Europe’s first commercial fare-charging robotaxi service. In the Middle East, we rolled out our first fare-charging service with Karwa in Doha, and we are gearing up for fully driverless operations after approval later this month in Dubai, UAE. In Singapore, we have launched the public debut of autonomous driving services with ComfortDelGro. We are confident overseas revenues will grow rapidly in 2026. Ecosystem maturity is a critical pillar in executing our dual-engine strategy. Our successful business model makes us a go-to partner. Partners are now lining up to join our joint deployment model. Essentially, it is a model where they will fund the vehicles and we can share success together. This will empower us to achieve fleet acceleration, reduce cost, and improve capital efficiency. We have a robust pipeline of new partners ready to jump on board. Toyota is the first to adopt our joint deployment model. Their bZ4X Gen-7 robotaxis will account for a significant portion of our 3,000-vehicle target in 2026, and we have already secured 1,000 units. As a long-standing strategic partner, our collaboration with Toyota extends far beyond just manufacturing. Together, we will commercially deploy robotaxis to drive market penetration by leveraging our OEM partners’ mature supply chain and extensive after-sales service networks. Our enhanced partnership with both Beijing Auto and Guangzhou Auto further reduces our vehicle cost. In addition, we will jointly deploy robotaxi vehicles into more overseas markets. To reach a broader user base, we also partnered with Tencent by integrating with WeChat Mobility, unlocking access to hundreds of millions of users to call our local taxi services. We are also deepening strategic partnerships with OnTime Mobility in Guangzhou and ATB in Beijing to accelerate adoption of our joint deployment model. Overseas, our global partnership with Uber enables us to access users across multiple continents starting from Europe. Our regional alliances strengthen our market penetration with partnerships established with ride-hailing platform Bolt and also automaker Stellantis. Now let me turn to robotruck. Over the past few years, we made huge technological leaps by using our proven L4 tech stack. It has been translating into commercial breakthroughs. We are now covering major logistic routes connecting industrial hubs, ports, and consumption centers across China. To seize the opportunity, we introduced our Gen-4 robotruck in 2025, reducing the ADK BOM cost by 70%. We target mass production of Gen-4 robotrucks and deployment this year. In 2025, we have deployed fully driverless robotrucks at the Jiangmen Port in Guangdong Province and tested the 1+N driverless platooning in extreme weather conditions in Northwest China. With this proven stack, we will deploy robotrucks in more ports and mine-haulage scenarios. Lastly, our licensing and applications business delivered robust growth. Last year, autonomous domain controllers (ADC) sales actually reached sixfold the level of 2024. We have also expanded our application scenarios to low-speed deliveries, robust sweepers, logistics, and humanoid robotics. Strong customer demand and growing market recognition of our technology will continue to drive growth. In summary, we have hit a major inflection point, as we validated our business model through 2025 achievements such as fleet expansion, new city launches, and UE breakeven. 2026 is poised as a year of hypergrowth. We are confident we will triple our robotaxi revenues, grow our fleet to over 3,000 vehicles, and deploy robotaxis in more than 20 global cities. Powered by our dual-engine strategy, we are speeding towards autonomous mobility everywhere. I firmly believe every effort we make today will not only reshape the future of human mobility but also drive a revolution in transportation. This will be a revolution where safety, efficiency, and accessibility redefine how the world connects, commutes, and thrives. I will now turn the call over to our CTO, Dr. Tiancheng Lou, who will go over our technology strategies. Tiancheng, please go ahead. Tiancheng Lou: Hello, everyone. Looking back at our journey in 2025, it was a landmark year. We proved the commercial viability of our robo-taxi, achieving positive unit economics in Guangzhou and Shenzhen. Today, our sites have surpassed 1,400, with large growth throughout the year. Robotaxi is the first commercial application of physical AI validated by real-world operations and user adoption. Overall, our amazing tech architecture, built on years of R&D, has earned the trust of policymakers and established first-mover advantage to capture multiyear growth. As highlighted in the previous quarter, world models are now the widely recognized tech path, a domain where we hold a firm leading position with the Pony world model. But technology is only the foundation. The key to success is who can deliver reliable driverless robotic service at scale. I will walk you through how our technology drove commercial results in 2025 across three dimensions: scale, efficiency, and user experience. First, scale. Through strong execution on mass production, we surpassed our 2025 fleet target, and this momentum positions us to reach over 3,000 units by 2026. Since mid-2025, we began mass production of two Gen-7 models with Guangzhou Auto and Beijing Auto, both now ramping up to full capacity. In February, the bZ4X Gen-7 robotaxi co-developed with Toyota rolled off the production line. This strong generalization of our overall car-driving stack enables us to efficiently adapt across different vehicle platforms. This multi-OEM network enables rapid scaling while strengthening local partnerships and broadening our robotics vehicle offerings. This scale is backed by a comprehensive ODD that validates our technology’s stability to generalize across diverse urban environments. Today, our fully driverless fleet operates 24/7 in many cities across the globe, serving the public during peak rush hours and severe weather conditions. Achieving this required rigorous engineering validation, and the breadth of our fleet and ODD reflects the maturity and robustness of our autonomous driving stack. Our overseas expansion further validates its generalization capability. In Zagreb, we are operating across a large area in the city’s urban core, handling complex urban traffic rather than limited low-complexity routes. Such ability to deploy in demanding environments from day one demonstrates both the relevance of our technology and the commercial potential of our global expansion. This gives us strong confidence in reaching our target of more than 20 cities worldwide. Second, efficiency. We have established a clear cost advantage, driving a twofold improvement. On hardware, we optimized the design in Gen-7 robotaxis, effectively lowering BOM costs through adopting more cost-effective components. Our operations and safety record create significant leverage, dramatically reducing insurance fees and improving remote efficiency. Altogether this enables us to scale positive unit economics. Beyond that, our tech is building a powerful operation model. We have developed a highly generalized AI driving capability to build comprehensive and scalable operational workflows. This deep know-how makes us the go-to partner across the mobility ecosystem. It perfectly positions us to execute our joint deployment model, allowing us to scale fleet much faster with better capital efficiency. Third, user experience. Our technology enables robotaxis to serve consistently in high-value, high-difficulty scenarios, exactly in high-frequency ride-sharing hotspots where demand peaks and users are willing to pay a premium. This differentiates our service, supports our pricing strategy, and directly drives UE improvement. For example, in Shenzhen, our 24/7 driverless robotaxi covers high-traffic urban zones such as the Nanshan high-tech area to fulfill daily commuting needs. During rush hours, our AI virtual driver navigates not only major main roads, but also narrow streets where commuters actually need to pick up and drop off, providing convenient portal coverage that truly addresses real-world commuting needs. In Beijing, during a heavy snowstorm in early March, getting a ride became a major pain point for users, with long waiting times and limited availability. Despite the extreme conditions—snow-covered sensors, reduced visibility, and unpredictable road conditions all demanding significantly high driving capabilities—our robotaxis continued operations throughout the snowstorm, capturing substantial order volume growth during that period. Beyond handling extreme conditions, we have significantly improved ride comfort. Our Gen-7 robotaxi delivers smoother acceleration, braking, and signaling, significantly reducing motion sickness—a pain point that users care about most. This underscores the fundamental point: technology leadership is not just an engineering milestone; it is the core engine of our commercial success. Outstanding user experience earns user preference and repeat usage organically without relying on discounts. Beyond the robotaxi business, our proven L4 technology enables us to capture commercial opportunities across the broader autonomous driving industry. Our platform’s generalization enables 80% of the tech stack to be shared between robotruck and robotaxi. We have achieved true full-scenario, all-weather, 24/7 operational capability. Our operations now span from complex highway segments to unique scenarios like port logistics, with cumulative mileage exceeding 60,000,000 kilometers. We also unlock synergy in the licensed application segment through leveraging our advanced autonomous driving domain controller design, capitalizing on the rapid growth trend in low-speed delivery, robust sweepers, logistics, and robotics. We effectively fulfill our customers’ demand in robotics. Looking ahead to 2026, we will increase our investment in R&D and AI talent to strengthen our competitive position. Specifically, we are focused on advancing our Pony world model to further strengthen our top driving capabilities, reducing cost through continued hardware and software optimization, and improving operational efficiency to lower per-vehicle operating cost. These improvements are designed to fuel faster commercialization, expanding our robotaxi operations to more than 20 cities globally by year-end and delivering faster revenue growth. We will more than triple the robotaxi revenue versus 2025. As we have demonstrated already, technology leadership directly drives commercial performance, and this investment will further widen our advantage. This concludes my prepared remarks. I will now pass the call over to our CFO, Dr. Liu Wang, for a closer look at our financial results. Liu, please go ahead. Liu Wang: Thank you, Tiancheng. And hello, everyone. This is Liu. I will focus on year-over-year comparison for the fourth quarter unless otherwise noted. For full year 2025 and fourth quarter detailed financials, please refer to our earnings release. 2025 marked an inaugural year of large-scale commercialization for our robotaxi operations. The robotaxi segment continues to act as the core growth engine for the group, delivering exceptional top-line growth. In the fourth quarter, robotaxi revenues surged 160% to $6.7 million. For full year 2025, robotaxi revenues reached $16.6 million, growing 129%. This remarkable acceleration was primarily driven by our fare-charging service, where we saw Q4 fare-charging revenues skyrocket by 501% with a full-year growth rate of nearly 400%. More importantly, within just four months of Gen-7 robotaxi launch, we are thrilled to see consecutive UE turn positive in both Guangzhou and Shenzhen, the two most valuable cities in China. This milestone was built on two unique pillars that are exceptionally difficult to replicate by others. First, our clear cost advantages in both vehicle and robotaxi operations. Second, our exceptional AI driving capabilities. Being capable of navigating highly complex urban environments 24/7, we deliver a consistent, reliable, and high-quality service which helped us capture robust user demand. With the foundation of positive UE, and as vehicle density improves, we are seeing a clear network effect. Improving fleet density shortens wait time, boosts utilization rates, and drives the number of orders per vehicle. This in turn enhances overall passenger experience and further stimulates ride-hailing demand. Specifically, year-to-date of 2026, our users have nearly tripled year-over-year and reached 1,000,000. In February, we successfully delivered unit economics positive in Shenzhen, with an impressive average daily orders of 23 and RMB 338 average daily net revenue on a per-vehicle basis. As a matter of fact, this strong upward trend is continuing right now. In March, we hit a new daily peak of RMB 394 net revenue and 25 orders per vehicle. More excitingly, our paid orders in the first two months of 2026 in Shenzhen have already surpassed the entire order volume for the full year of 2025. Looking ahead, we remain highly confident in the growth trajectory of our robotaxi business. As James mentioned, our dual-engine strategy will drive rapid expansion into more than 20 cities in China and overseas. We are confident that our robotaxi revenues will at least triple this year. Simultaneously, we are enhancing our revenue quality by adding high-margin recurring revenue streams through robotaxi joint deployment with our partners such as OnTime Mobility. This model will lower the CapEx requirement on initial fleet deployment from our end and also gives us leverage to expand faster and more efficiently into new regions. From a technology perspective, as Tiancheng mentioned, our advanced AI driver capability directly empowers a premium user experience, providing safe, reliable, smooth, and efficient rides for passengers. This superior experience strengthens our pricing power and deepens user mind share, which can further boost top-line growth. On the cost side, we have proactively secured procurements for critical vehicle components and hardware, including high-demand memory modules. Therefore, we expect minimal impact from supply chain pricing fluctuation. Meanwhile, with greater fleet scale, continuous tech reiteration, and deepening OEM collaboration, we have high confidence in continuously reducing our vehicle BOM and further improving operating efficiency. Together, the high gross margin profile of the robotaxi segment is fundamentally elevating our revenue quality and actively contributing to the group’s future profitability. Now let us move on to robotruck. By leveraging our proven robotaxi stack, our next-gen robotruck achieves a 70% cost reduction. Furthermore, our transition to EV trucks will continue to drive down per-kilometer operating cost. Looking ahead to 2026, our shared expertise in robotaxi will accelerate our robotruck mass production, enabling us to begin deployment within 2026, as we aggressively deepen our route coverage across major logistic corridors and expand into more scenarios such as dedicated lines and port operations. We expect to see accelerated growth in revenues beginning in 2025. We are seeing strong client demand for our autonomous domain controller (ADC) product, with the ADC volume growing to six times the level of 2024. Looking ahead, we are seeing a solid order pipeline from existing customers and are actively expanding into new use cases. On the overall profitability front, we achieved a historical financial milestone in the fourth quarter by achieving our first-ever quarterly GAAP-level net profit. This historical pivot to profitability was primarily driven by gains from our strategic equity investments, which strengthen our broader ecosystem positioning and unlock business synergies. In 2025, our expenses were slightly widened. This was a deliberate front-loaded investment to accelerate Gen-7 mass production, expand into new cities, and strengthen our tech stack. Such investments are already starting to drive strong top-line growth. In the era of AI, we anticipate continuous investments into AI technology and talent to help us secure a long-term competitive edge. Beyond the technology benefits, our joint deployment model will also be a powerful lever for CapEx efficiency. By collaborating with partners to share the initial investment, we are able to scale our fleet rapidly while maintaining a lean balance sheet. Looking ahead, we expect revenue growth to outpace the growth of operating expenses as we capitalize on our fleet scale and capture the virtuous cycle of positive UE. Finally, we closed the year with a highly robust balance sheet with substantial cash reserves of over $1.5 billion following our successful Hong Kong IPO. This solid capital position gives us the firepower to invest decisively into R&D, SG&A, and go-to-market capabilities. We are confident that the stepped-up investment will accelerate our pace on large-scale commercialization and deliver faster revenue growth in 2026. Looking ahead, we are crystal clear on our strategic priorities: tripling our robotaxi revenue, expanding our fleet target to over 3,000 vehicles, and deploying robotaxis to more than 20 cities globally by 2026. We have ample dry powder to support these initiatives, and we will drive progress through our dual-engine growth strategy combined with our joint fleet deployment model that optimizes capital efficiency. We are well positioned to accelerate these targets and turn our operational momentum into sustained, profitable, and long-term growth for our shareholders. I will now turn the call over to the operator to begin our Q&A session. Thank you. Operator: We will now begin the question-and-answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, for the benefit of all participants on today’s call, if you have more questions, please reenter the question queue. If you ask questions in Chinese, please repeat them in English. The first question today comes from Ming-Hsun Lee with Bank of America. Please go ahead. Ming-Hsun Lee: Hi. This is Ming from Bank of America, and thank you for giving me the opportunity to ask a question. My only question is that since you already have a target of over 3,000 robotaxi fleet by 2026, can you share your production ramp-up and deployment plan? Now that you have achieved the UE breakeven in Shenzhen and Guangzhou, how do you think about the future UE trajectory? Thank you. James Peng: This is James. I will take this one. In my opinion, hitting the UE breakeven is a huge win for the whole industry, not just for us. It proves that our technology actually works in the real world. It also shows that robotaxi is not just feasible, but profitable at scale. Right after the UE breakeven in Guangzhou, we did it again in Shenzhen. This shows that our model is replicable, and we achieved this breakeven by focusing on service value, not discounting. What we have seen is that on the regulatory front, we see a policy tailwind to support the whole industry. In China, there are coordinated efforts between the central and local governments to bring robotaxi services to many cities. In our existing markets of the tier-one cities, we have seen more licenses issued to facilitate a larger fleet. Globally, many countries learn from the progress in China and the U.S. to clear the policy hurdles and come up with regulations to support accelerated deployment. So the regulatory momentum gives us confidence to replicate our current success in many more markets both globally and in China. Therefore, to capture the market, two things we are focusing on this year: one is ramping up production, and the other is launching robotaxis in many more markets. On the fleet ramp-up, over the last two months, we have been focusing on producing the Toyota bZ4X, and we are also continuously producing more vehicles with Beijing Auto and Guangzhou Auto. With all three vehicles, we are confident we will hit over 3,000 units by year-end. Then on the ODD extension, we are pushing deeper into downtown hubs, and we are also expanding into new cities such as Hangzhou, Changsha, and many cities across the Greater Bay Area. In terms of UE, since fares in China are relatively low compared with many global markets, and in China we already deliver positive UE and are continuing to improve UE, we expect better earnings in our existing markets and definitely a lot better margins overseas. We plan to expand this year into 20 cities, which will give us a very strong first-mover advantage. Our joint deployment model will also lower our CapEx expenditures, which can help us accelerate fleet growth and at least triple our robotaxi revenues this year. With this, I will get back to the operator. Operator: The next question comes from Tim Tsao with Morgan Stanley. Please go ahead. Tim Tsao: Hi. This is Tim from Morgan Stanley. Thanks for taking my questions. I just have a follow-up question about Pony AI Inc. American Depositary Shares’ latest operation. Based on the dual-engine strategy management just mentioned, regarding expansion strategy to enter over 20 cities this year, could you share details about which cities you plan to enter and what is the split between China and the overseas market? Separately, with geopolitical tensions escalating in the Middle East, are you seeing any challenges or headwinds to your operation? That is my question. Thank you. James Peng: This is James again. I will take this one. Strategically, we are using our success in China as a blueprint for our global expansion. Because our technology and business model are proven, we can replicate quickly and broadly in global markets. In fact, we expect nearly half of the 20 cities we are targeting this year to be overseas, spanning Asia, Europe, and the Middle East. In terms of go-to-market strategy, we are teaming up with industry leaders to improve our joint deployment model, which can greatly reduce our CapEx expenditure. This helps us scale efficiently while at the same time building strong local networks. We are already launched in Zagreb, Doha, Dubai, and Singapore, partnering with global giants like Uber, Bolt, and Stellantis. One example is that together with Uber and Verne, we have launched the first commercial robotaxi services in Europe. Looking ahead, we are exploring more European cities and also doubling down in Asia, such as South Korea and Singapore. Regarding the last part of your question, our efforts in the Middle East—first and foremost, risk mitigation remains our high priority. So far, we have not seen any material impact to our business from the current geopolitical tensions. We are still charging along with our efforts in the GCC region. We expect to roll out fare-charging services with Mowasalat in Doha, Qatar, and we are getting ready for fully driverless operations in Dubai after approval later this month. Back to the operator. Operator: The next question comes from Liu Yu with CLSA. Please go ahead. Liu Yu: Hi. Good evening, management. My question is on technology. So the world model and autonomous driving stack are now operating in multiple cities across different countries. Could you please tell us more about how the technology generalizes to new environments where the conditions could be very different from China? And what role does the world model play in accelerating your expansion plan? Thank you. Tiancheng Lou: This is Tiancheng. I will take this one. First and foremost, the key insight is that driving is about interaction and negotiation with the agents around it. There is no difference whether you are in Guangzhou, Shenzhen, or Zagreb. Different cities and countries are essentially different combinations of similar scenarios. What varies is the probability distribution, not the fundamental nature of the challenges. Some example corner cases are reckless lane changes without checking mirrors or a fallen bicycle in the road. These corner cases occur everywhere. Our technology has already been validated in the most demanding conditions, operating at scale across all peak hours and all weather in dense urban cores in China’s major cities. This means that when we enter a city like Zagreb, we are not starting from scratch. We are deploying our system that has already mastered a superset of the scenarios it will encounter. This is why we can operate directly in Zagreb’s urban core, which carries significant commercial value. Regarding the second part of your question, our world model plays an important role in accelerating this process. It enables us to model the interaction and negotiation dynamics between our vehicle and the surrounding agents, and to generate large-scale simulated scenarios that reflect the specific traffic patterns of our new markets. By reinforcement learning within this simulated environment, our system continuously improves its driving policy, allowing us to validate and fine-tune efficiently without needing to collect massive amounts of data in a new city. The enablers for reaching 20 cities are clear. Our multi-OEM network provides locally suitable vehicle platforms. Our operational playbook—from remote assistance to fleet management—is highly standardized and repeatable. Our technology’s broad ODD coverage means we can operate in complex urban environments, not just limited to low-difficulty routes. Together, this gives us strong confidence in achieving our target of deploying robotaxi services in more than 20 cities worldwide by year-end 2026. With that, back to the operator. Operator: The next question comes from Xinyu Feng with UBS. Please go ahead. Xinyu, your line is open. You may now ask your question. Xinyu Feng: Hi. Can you hear me? Hi. Yes. Hi. Thank you for taking my question and congrats to the solid results. My question is about the joint deployment model. For vehicles Pony AI Inc. American Depositary Shares plans to add this year, can you elaborate a bit more on how you will apply the joint deployment model? And how should we think about the benefit of this model for the company and our value chain partners? Thank you. Liu Wang: This is Liu. I will take this question. As you can see, we have hit the critical milestone of UE breakeven in Guangzhou and Shenzhen. After that, we have seen a lineup of partners in the whole ecosystem that want to join the robotaxi market, and we are their go-to choice. In this joint deployment model, our partner funds the vehicle CapEx and starts to tap into the whole robotaxi value chain—for example, ground operations, vehicle maintenance, and charging. We consider this a win-win situation for both of us. Our partner gets growing revenue from deployed vehicles, and we essentially are in an asset-light model to expand our fleet rapidly. In this year, we expect nearly half of our new vehicles to come through this model, led by Toyota. Not only do we improve our capital efficiency in our expansion through this model, but it also creates an additional revenue stream through recurring direct income in the form of revenue sharing or AI driver license fees. This revenue stream, combined with our self-owned fleet fare-charging revenues, will help us to achieve more than triple robotaxi revenue in 2026. Beyond that, with the current lineup of our partners such as Toyota, OnTime Mobility, and ATB, we expect even more partners will jump on board this year. I will get back to the operator. Operator: The next question comes from Purdy Ho with Fubon Securities. Please go ahead. Purdy Ho: Thank you for taking my questions and congratulations on your results. Regarding the 1,000 robotaxis already contracted with Toyota, how are you planning to deploy these vehicles? And do you expect any future scaling up or strategic initiatives with Toyota down the road? Thank you. James Peng: This is James. I will take this one. In terms of Toyota, I consider them not just a partner; they have been with us since 2019 as our largest strategic shareholder. The relationship between us goes way beyond just an auto supplier. It is a deep, strategic, long-term collaboration. In terms of the mass production of robotaxi vehicles, we have jointly launched several robotaxi models on Toyota platforms since 2019. In 2026, we are adding 2,000-plus new vehicles, and nearly half will be the new Toyota bZ4X Gen-7 vehicles. This model is jointly developed with Toyota Motor Company and GAC Toyota. The mass production is already live on Toyota’s assembly lines. There is great synergy between us. Their manufacturing capability and top-line platforms blend perfectly with our L4 technology and operational know-how. Besides jointly developing vehicles, Toyota is also the first partner to adopt our joint deployment model, funding the fleet to help us scale capital-efficiently. This shows their incredible confidence in Pony AI Inc. American Depositary Shares, and together we are rolling out commercially starting from China’s top-tier cities. With this, I will get back to the operator. Operator: The next question comes from Yuchian Ding with HSBC. Please go ahead. Yuchian Ding: Thank you. This is Yuchian from HSBC. I have two. The first question is about the competition dynamics. How do you see the automakers getting into the robotaxi segment? And the second question is about the competitive edges. The market narrative is shifting more into scaling with more entrants getting in. What is Pony AI Inc. American Depositary Shares’ most unique leading advantage? Thank you. James Peng: I will take the first one, and I will hand over to Tiancheng for the second part. Certainly, we have seen that especially lately there are many announcements about new players already entered or planning to enter the robotaxi business. Those new entrants include automakers, ride-hailing companies, tech giants, and startups. In general, I think this new entrance to the robotaxi space validates the long-term potential for our industry, and I very much welcome the new players. Essentially, they can make the whole ecosystem even larger. But in reality, L4, especially robotaxi, is such a complex system that it requires an integrated solution. As I mentioned in my prepared remarks, there are five pillars for the robotaxi industry—technology, policy, mass production, operation, and partnerships. These five pillars are intertwined; simply throwing resources at them will not accelerate the development process. Over the years, we have developed a unique advantage across all aspects of the robotaxi industry. Regarding some of our competitive moats, I will hand over to Tiancheng to elaborate. Tiancheng Lou: Thank you. Technically, I do not think automakers have an advantage in L4 robotaxi just because they are strong in manufacturing or in L2 systems. The key point is that L2 and L4 are fundamentally different. They are not just two points on the same path. In L2, as the mild system intervention increases, the accident rate can increase. Partial automation can create a false sense that the system is almost good enough until it fails in a situation where the human is no longer ready to take over. That is why the L2 path does not naturally lead to L4, especially when we are talking about a driverless fleet at scale. One unique advantage we have at Pony AI Inc. American Depositary Shares is our long-term investment in our world model and our L4-native virtual driver training approach. The reason this matters is that L4 robotaxis need to be significantly safer than human drivers, and that cannot be achieved by simply imitating human driving behavior. To reach that level of safety, the system has to keep improving through large-scale trial and error in a virtual environment, which is why our world model is essential. In other words, the key to training an L4 virtual driver is building a virtual environment with strong enough sim-to-real capability, especially when it comes to interaction between vehicles. That is also why the L4 approach requires many years of investment in AI, and it does not improve mainly by collecting more real-world data. The second unique advantage is that we have a real robotaxi fleet in operation, and those fleets continuously help us see where the world model is still different from the real world. The hardest part of L4 is not the first 99%. It is the last 1%: the long tail of rare, critical corner cases. We handle those cases safely, but it is not enough to look at the well-recorded trajectory. What really matters is understanding how the other vehicles may behave across many different intentions with the AI driver. This is exactly why the world model is so important. Only a world model can give you enough coverage of the full combination space of different intentions in the corner cases, and that kind of coverage is what L4 safety ultimately requires. At the same time, only fully deployed robotaxis can keep narrowing the gap between the world model and the real world. Real-world robotaxi operations let us observe and understand the actual behavior patterns of vehicles and pedestrians in those scenarios, where human driving data cannot observe interaction with robotaxis. This is also aligned with the fact that new players typically can only start with a very small fleet. Regulators understand this logic as well, so they are naturally very cautious about granting permits at early stage. To summarize, automated entrants confirm the size of the opportunity. But L4 robotaxi is not something you get by extending L2. Pony AI Inc. American Depositary Shares’ unique advantage comes from two things: a world model built for L4 and a real robotaxi fleet that continuously helps to improve it. Together, they create a closed loop that keeps both the model and the product moving forward. With this, back to the operator. Operator: The next question comes from Joel Ying with Nomura. Please go ahead. Joel Ying: Thanks for taking my question. This is Joel from Nomura. I would just like to understand how management views the impact of NVIDIA launching their open-source model for smart driving as Level 4, which we just saw at GTC this year. Thank you. Tiancheng Lou: For this question, I think the key is to distinguish between a model and the real product. An open-source autonomous driving model can be a good starting point but not the end product. There is still a very big gap between a model and a robotaxi fleet that is commercially deployed, safety-proven, government-approved, and operating at scale. Closing that gap is exactly where our core advantage lies. At Pony AI Inc. American Depositary Shares, our strength comes from years of full-stack in-house development and real L4 deployment at scale. That includes not just the software or the model, but also the vehicle architecture, sensor redundancy design, domain controller, operating system, validation, and the commercialization capability needed to run actual robotaxi services. For example, sensor customization, redundant design, direct functional safety, manufacturability, and BOM cost. Our OEM partnerships are also very different from a plug-and-play approach; they give us better system integration, higher reliability, and lower overall system cost. We view progress from NVIDIA as moving the ecosystem forward. At the same time, we believe the real barrier to entry remains very high. And, of course, NVIDIA is an important partner of ours on domain controllers. We maintain a strong collaborative relationship. With this, back to the operator. Operator: The next question comes from Tianyu Liu with CITIC Securities. Please go ahead. Tianyu Liu: Hi, this is Tianyu from CITIC Securities. Thanks for taking the question and congratulations on rapid growth in your robotaxi service. I have one question. How do you plan to allocate your Hong Kong IPO proceeds? And given your accelerated development targets, do you expect any upward revisions to the 2026 cost and expenditures? Liu Wang: This is Liu. I will take this question. As I mentioned earlier, we have ample cash reserves, about $1.5 billion as of December 2025, which was driven by our Hong Kong IPO proceeds. We received proceeds of more than $800 million. This definitely secures long-term capital to fuel multiyear growth. For us, the 2025 achievements in terms of Gen-7 deployment and UE breakeven made us a clear industry leader. Looking forward, we look for accelerated top-line growth to widen our leading position and push the whole industry towards the next stage. Hence, we need to strategically increase our investments. We have significantly scaled up the number of robotaxis operating across China’s tier-one cities, especially in Shenzhen and Guangzhou. We also recently entered new cities in China such as Hangzhou and Changsha, and internationally in Croatia, and plan to deploy in more than 20 cities by this year. In order to support the multiple market expansion, we will invest in business development, operations, and marketing. As we scale our robotaxi deployment, we are expanding our robotaxi fleet through joint deployment models as well as investing in self-owned vehicles. We would also recruit AI talent and invest in AI infrastructure to further improve our virtual driver capability. We think this will allow us to consistently meet the public’s high expectations for safety, reliability, and quality to offer a trusted robotaxi service. James already mentioned that this is a critical period to expand market share, which we think requires necessary investment to solidify our technological and operational moats. We believe the strategic increase in investment is a value-driven trade-off to secure long-term market leadership. With disciplined capital allocation and the benefits from the joint deployment model, we believe this will pay off with much faster growth, city expansion, and fleet size, and will also lead the whole industry into a much advanced phase. Thank you. I will now get back to the operator. Operator: The next question comes from Kai Shao with CICC. Please go ahead. Kai Shao: Thank you. This is Kai from CICC. I have one question regarding raw materials information such as memory. Could you share your view on how inflation impacts your production plan and cost items? Thank you. Liu Wang: This is Liu again. I will take this question. Thank you for asking this important question. As I mentioned earlier, the impact on both vehicle and ADK BOM cost is very limited. We think this resilience is driven by our proactive supply chain strategy and inventory management with our ADC domain controller business. Through this approach, we secured our memory even before the market went into price inflation and shortages. We are very confident that we can fully support this year’s robot production target of over 3,000. Thanks to the supply chain measures and our continuous scaling, we remain on track to achieve a 20% reduction in ADK BOM cost for 2026 compared to Q2 2025 levels. We will carry out ongoing hardware and software optimization, and this will further reduce our overall cost down the road. Thank you, and I will get back to the operator. Operator: There are no further questions at this time. I would like to now turn the call back over to the company for closing remarks. George Shao: Thank you once again for joining the earnings call today. If you have any further questions, please feel free to contact our IR team. We look forward to speaking with you in the next quarter. Operator: This concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your line.
Operator: Hello, and welcome everyone to the fiscal 2026 second quarter earnings call for Commercial Metals Company. Joining me on today's call are Peter Matt, Commercial Metals Company's President and Chief Executive Officer, and Paul Lawrence, Senior Vice President and Chief Financial Officer. Today's materials, including the press release and supplemental slides that accompany this call can be found on Commercial Metals Company's investor relations website. Today's call is being recorded. After the company's remarks, we will have a question-and-answer session, and I will have a few instructions at that time. I would like to remind all participants that today's discussion contains forward-looking statements, including with respect to economic conditions, effects of legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products and precast concrete products, the expected capabilities, benefits, costs, and timeline for construction of new facilities, the expected performance of our recently acquired precast platform, the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures, and capital spending. These statements reflect the company's beliefs based on current conditions, but are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K, and other filings with the U.S. Securities and Exchange Commission contains additional information concerning factors that could cause actual results to differ materially from those projected in those forward-looking statements. Except as required by law, Commercial Metals Company does not assume any obligation to update, amend, or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release, supplemental slide presentation, or on the company's website. Unless stated otherwise, all references made to year or quarter end are references to the company's fiscal year or fiscal quarter. Now for opening remarks and introductions, I will turn the call over to Peter. Peter Matt: Good morning, everyone, and thank you for joining Commercial Metals Company's second quarter earnings conference call. The Commercial Metals Company team delivered another excellent financial performance this quarter, propelled by solid operational and commercial execution, a favorable market backdrop in most regions, and the addition of our newly acquired precast platform. For the quarter, Commercial Metals Company reported net earnings of $93 million or $0.83 per diluted share. Excluding certain charges, which Paul will take you through in more detail, adjusted earnings were $130.1 million or $1.16 per diluted share. Commercial Metals Company's consolidated core EBITDA of $297.5 million grew by 114% from a year ago, while our core EBITDA margin of 14% increased by 610 basis points. Cash flow from operating activities likewise improved significantly over the same period. While the domestic market environment remains supportive and we are pleased with our results, I would note that profitability was impacted by abnormally disruptive weather conditions that temporarily reduced production and increased energy costs. Absent these factors, we believe performance would have been even stronger. Overall, our impressive second quarter results were built on the strategic foundation we laid over the last 24 months, including the launch of our TAG program, organizational realignment in critical areas, the addition of key talent and resources to support growth, and of course, the establishment of our new precast platform, which is a regional leader and one of the largest in the United States. These self-directed actions are driving bottom-line improvement and generating value for our shareholders, and we are confident that there is much more to come as we continue to transform our company into an even stronger organization with higher, more stable margins, earnings, cash flows, and returns on capital. The second quarter marked Commercial Metals Company's entry into the precast concrete business following the closing of both the CP&P and Foley acquisitions in December, and the first 100 days have been a success by any measure. I would like to take a moment to provide an update on our integration efforts to date. Paul will share some financial highlights from the second quarter later in this call. We developed our integration plan with the goal of maximizing value creation potential for Commercial Metals Company's new growth platform. Our aim is to provide our new businesses with the support they need while standardizing key practices, delivering synergies, and developing an optimized operating model that positions the business for future growth. Overall, progress against our plan is on schedule, and we have already achieved critical near-term goals. The strong cultural fit and the quality of the teams charged with completing key tasks has helped our integration efforts tremendously. We have found that employees across CP and Foley are excited to join forces and build a clear industry leader as part of Commercial Metals Company. They also share our view of significant commercial, operational, and logistical upside created by combining two geographically contiguous leaders. Turning to our on-the-ground efforts, we have retained a strong management group of proven industry veterans who are fully engaged in operating the business and executing on our performance and synergy targets. We are centralizing several support functions, a move that will assist future coordination and free up resources at the acquired assets. We have also made good progress on several critical elements of our plan to realize synergies from the transactions, including the insourcing of rebar supply, benchmarking of key performance metrics, centralizing procurement of certain common items, and aligning on a plan to execute a number of small capital, high return operational excellence projects. I am also pleased with our progress on the commercial front. Thanks to the work of our teams, we have scored several early wins with immediate financial benefits. A few of these are highlighted on slide 7 of the supplemental earnings presentation. One worth noting is the development of a unified go-to-market strategy in overlapping geographies, which will ensure an improved customer experience, enhanced service capabilities through coordination, and a consistent pricing approach. We are also capitalizing on opportunities to strategically expand product lines to better address market demand. Dry utility structures used heavily in data center construction is one example of this. Zooming out a bit, we have already engaged in a handful of initial commercial opportunities between Commercial Metals Company's legacy solutions and our new precast offerings, an effort which has been met by very positive customer reception. Though we are only just beginning conversations with customers, we view the delivery of a more complete early-stage construction solution as a significant potential source of value creation and one that will set Commercial Metals Company apart in the marketplace. While it has only been a few months, we are very encouraged by what we have seen within our new precast platform. A good workforce culture, strong leadership, a solid customer value proposition, and attractive industry fundamentals, all of which support our investment thesis. Now I will touch briefly on our progress in executing TAG. This is our enterprise-wide operational and commercial excellence program aiming to drive a durable step change improvement to our margins, earnings, cash flows, and ROIC. Fiscal 2026 is a pivotal year in the delivery of TAG as execution broadens throughout the organization and the expected level of EBITDA benefit increases meaningfully from fiscal 2025. After focusing primarily on domestic mill operations and logistics during 2025, TAG is now being executed in every line of business across each segment. These efforts include an increasing emphasis on commercial opportunities and targeted efficiencies in our SG&A spend. I am pleased to report that through the first half of fiscal 2026, we are seeing solid and broad-based momentum in delivering the benefits to the bottom line. What is particularly exciting is the TAG continuous improvement mindset is in several instances, driving initiative outcomes that far exceed our initial expectations. A good example of this is the success our logistics team has had in improving fleet utilization and volumes per load, helping to ensure that we are using capital invested in Commercial Metals Company's logistics assets more efficiently. Another success story is the margin improvement being achieved across much of our recycling network through better commercial coordination and targeted efforts to address low-margin accounts. Based on the progress we are making, I am confident we should reach or exceed our ambitious goal of exiting the fiscal year at an annualized run rate EBITDA benefit of $150 million. Turning now to the early-stage construction market environment in North America. We continued to experience healthy, solid underlying demand for our major products. Finished steel shipments were virtually unchanged on a year-over-year basis, despite challenging weather conditions that temporarily slowed shipments. Good demand in combination with a well-balanced supply landscape supported volumes and margins in the quarter. Consistent with our guidance, metal margins on steel products were stable sequentially, ticking up by $2 per ton and reaching the highest level in three years. We were able to capitalize on the November and January price announcements to offset the impact of rising scrap costs. Downstream bid volumes, our best gauge of the construction pipeline, remained at levels consistent with recent quarters. Strength continued in several key market segments, including public works, institutional buildings, energy projects, and data centers. Needless to say, data center construction has been red hot, and we believe we are positioned both geographically and commercially to capitalize on this growth. New data center sites have been concentrated in the Mid-Atlantic and the South Central U.S., which are regions where we have leading market positions and can leverage our broad suite of early-stage construction solutions. Slide 10 of the earnings presentation highlights how our products are utilized on a data center construction site and includes estimated consumption intensities of several core offerings. In addition to direct data center expenditures, Commercial Metals Company is well situated to capitalize on the build-out of energy infrastructure to support forecasted growth levels, which is expected to require significant investment. More broadly, we continue to have encouraging conversations with many of our largest customers who see a robust project pipeline based on inquiries related to energy generation, LNG infrastructure, and reshoring opportunities. Our own downstream bidding and contract award activity supports this view. Bookings during the second quarter were the highest since late fiscal 2022, helped by several energy projects and a large advanced manufacturing facility. We are encouraged by the preliminary outcomes of the rebar trade case filed with the International Trade Commission, or ITC, back in June, alleging exporters located in Algeria, Bulgaria, Egypt, and Vietnam have violated trade rules and damaged the U.S. market. The Department of Commerce has made its preliminary ruling on each nation named in the case and set both antidumping and countervailing duties to be applied on all subject material. As you can see on slide 11 of the earnings presentation, the combined impact of the duties range from around 50% in the case of Bulgaria to up to 200% for Algeria. Remember, these levies are in addition to the Section 232 tariff assessment. This finding, if confirmed, is important for the domestic rebar industry for several reasons. One, it establishes durable protection with an initial term of five years and a mandatory sunset review that could add another five-year term. Two, it directly addresses predatory behavior by four leading exporters that have the ability to negatively influence the U.S. market. For example, at its peak, Algeria shipped nearly 500,000 tons into our domestic market. Three, it acts as a deterrent to other bad actors that oversize their industries for purposes of dumping material here. Though we are very encouraged by the preliminary findings, we would note that they may change in the final determinations scheduled for this summer. I would like to commend the Department of Commerce for its defense of fair trade, and more importantly, for protecting the hardworking men and women of Commercial Metals Company and the broader steel industry from disruptive and unfair trading practices. Our Construction Solutions Group is exposed to similar market trends as our North America Steel Group. Therefore, current conditions are consistent with those I just described. Activity is steady across most construction segments, punctuated by a few hotspots like data centers and large energy projects. Our commercial teams continue to see encouraging signals regarding future activity, including healthy quoting levels and positive customer commentary. We remain confident that the positive structural drivers, including investment in U.S. infrastructure, reshoring industrial capacity, growth in energy generation and transmission, the build-out of AI infrastructure, as well as addressing a U.S. housing shortage, will support construction activity over the short, medium, and long term. As noted on slide 9 of the earnings presentation, nearly $3 trillion of corporate investments were announced across related areas in calendar 2025. Commencement of even a handful of these mega projects could provide a meaningful demand catalyst for Commercial Metals Company in the quarters ahead. Market conditions for the Europe Steel Group were mixed during the quarter. Demand for merchant bar remained resilient. However, the large quantity of rebar imported ahead of the January first implementation of the European Carbon Border Adjustment Mechanism, or CBAM, temporarily disrupted the supply-demand balance. The underlying consumption of rebar in the Polish market was seasonally affected by cold weather conditions, but continues to be healthy based on robust economic growth and solid investment levels for infrastructure and residential construction. Despite the overhang of imported rebar, the average selling price for Commercial Metals Company's rebar increased during the quarter in anticipation of the supportive impact of CBAM and reduced availability of new import offers. Encouragingly, the average price on new orders for each of our major products trended upward throughout the quarter and exited well above the period average. We are monitoring the market environment for potential effects of the war in Iran. To date, our primary markets have not been meaningfully impacted, though this could change in the case of a prolonged conflict. There has been a general increase in the cost of natural gas and natural gas-derived electricity across Europe. As a reminder, the electrical grid in Poland is heavily coal dependent, which compared to other EU countries, minimizes the disruption we experience from the volatility in the price of gas. We do consume natural gas in our reheat furnaces, and based on current spot pricing levels, we estimate a potential increase to our cost of production in the coming months of approximately $15-$20 per ton. Despite this increase, we believe we are among the least exposed steelmakers in our Central European market, potentially offering an energy cost advantage while gas prices remain elevated. The green shoots that we have noted in recent earnings calls continue to mature. Recent market developments include signals of an emerging recovery in residential construction activity driven by declining mortgage interest rates and the need for new housing stock. We are also optimistic about the prospect of CBAM benefiting long steel pricing once current inventories of imported material are consumed. We also believe the steel action plan that will come into effect in the middle of the calendar year 2026 has the potential to meaningfully restrict import levels of Commercial Metals Company's core products. Quotas are expected to be significantly reduced while the volumes over the quota will be subjected to a 50% tariff. The policy, as currently written, is the most supportive measure taken by the European community in years and has the potential to meaningfully benefit steel pricing. It is worth mentioning that our team in Poland has continued to do an excellent job managing costs in a dynamic environment. This experience is adding value in Poland and in North America as we define and execute our TAG initiatives. Before turning the call over to Paul, I would like to recognize the efforts of our world-class employees. We have asked a lot of the team as we execute our ambitious vision and strategy, and I am truly inspired by all that they have accomplished so far. Their efforts have been instrumental in laying the groundwork for years of success ahead, and I look forward to maintaining that momentum. With that, I'll turn the call over to Paul. Paul Lawrence: Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal second quarter 2026 net earnings of $93 million or $0.83 per diluted share, compared to net earnings of $25.5 million or $0.22 per diluted share in the prior period, prior year period. During the quarter, we called out $47.2 million in pre-tax expenses, $45.1 million of which was associated with our recent acquisitions of CP&P and Foley. Of that amount, $20.6 million was incurred as transaction fees and costs supporting the integration efforts, while $24.5 million reflects non-cash adjustments related to purchase accounting treatment of inventory and order backlogs. During the quarter, we also recorded $4.1 million for interest on the judgment amount associated with the previously disclosed PSG litigation, as well as $2 million related to an unrealized gain on undesignated commodity hedges. Excluding these expenses, which amounted to $37.1 million on an after-tax basis, adjusted earnings for the quarter totaled $130.1 million or $1.16 per diluted share, compared to $35.8 million or $0.31 per diluted share, respectively, in the prior year period. Purchase price accounting adjustments for our acquisitions of CP&P and Foley are reflected in Commercial Metals Company's second quarter financial statements. These adjustments relate to the allocation of the estimated fair values of the assets and liabilities acquired and placed into Commercial Metals Company's balance sheet. On-hand inventory was adjusted to fair value, resulting in a write-up of $6.7 million. This entire amount was recognized in the quarter in adjusted EBITDA, but removed in our core EBITDA adjustments. Several of the balance sheet adjustments will be depreciated or amortized over time, which will not influence core EBITDA, but will impact net income and EPS. These include property, plant, and equipment, which will be depreciated on a straight-line basis, as well as customer intangibles in the acquired margin in the backlog, which will be amortized over their respective useful lives. During the second quarter, depreciation of acquired property, plant, and equipment amounted to $6 million and is estimated to be approximately $25 million annually for the next several years. Amortization of customer intangibles was $5 million in the quarter and will be annualized to a roughly $23 million level. Majority of the acquired intangible assets will amortize over a 10-year period. I also mentioned the amortization of the acquired margin in backlog. This has a more finite life and will result in amortization expense of approximately $60 million in 2026, with $18 million recorded in the second quarter. Remainder of the $79 million asset will be amortized in 2027. For financial modeling purposes, the impact of the purchase price accounting adjustments in combination with higher interest expense related to the debt raised to help fund the precast transactions broadens the gap between core EBITDA and pre-tax income by approximately $60-$65 million on a quarterly basis for the next three quarters. This amount includes about $20 million quarterly related to the amortization of backlog, which, as I just mentioned, will terminate in fiscal 2027. During the second quarter of fiscal 2026, Commercial Metals Company generated consolidated core EBITDA of $297.5 million, equating to a 14% core EBITDA margin. Commercial Metals Company's North American Steel Group generated adjusted EBITDA of $269.7 million for the quarter, equal to $257 per ton of finished steel shipped. The EBITDA margin of the segment was 16.8%, supported by our TAG efforts, which contributed meaningfully to the financial results as key commercial and operational initiatives continued to gain momentum. In addition, higher margin over scrap costs on steel products in comparison to the prior year supported the business. However, as Peter mentioned, challenging weather negatively impacted profitability during the quarter. We estimate that reduced production and higher energy costs associated with grid stress linked to the winter storms reduced second quarter segment adjusted EBITDA by between $5 million-$10 million. The Construction Solutions Group second quarter net sales of $314.4 million grew by 98% on a year-over-year basis. Adjusted EBITDA of $53.4 million increased by 127% on a year-over-year basis, driven by the addition of the precast businesses. This new growth platform exceeded our expectations in the seasonally weak period by contributing $33.6 million to our Construction Solutions Group segment adjusted EBITDA. Excluding the inventory purchase accounting adjustment mentioned earlier, precast generated EBITDA of $40.3 million on revenue of $145 million. Shipments were solid across the core Mid-Atlantic and Southeastern regions and increased on a year-over-year basis despite suffering temporary disruptions due to the inclement weather. Average selling prices for pipe and precast products also ticked up from a year ago and demonstrated the attractive stability we have discussed previously on our conference calls. Value in the backlog at the end of the quarter was up by high single-digit % compared to February of 2025, which allowed for opportunistic price increase on new bookings in certain geographies and positions the business well ahead of the upcoming construction season. Hence, our financial performance remains stable on a year-over-year basis in its seasonally weak second quarter, with positive contributors from targeted commercial initiatives and continued INTERAX product adoption offset by weather delays from the winter. Profitability of our performing reinforcing steel division remains historically strong, but declined compared to a year ago due to project timing delays. Adjusted EBITDA margin of 17% for our Construction Solutions Group segment improved by 2.2% compared to the prior year period. The inclusion of Commercial Metals Company's precast business was 5.3 percentage points accretive to segment adjusted EBITDA margin during the quarter. Our Europe Steel Group reported an adjusted EBITDA loss of $1.4 million for the second quarter of 2026, which was little change from a prior year period. Looking at the primary drivers of performance compared to a year ago, lower shipments and associated reduction of fixed cost leverage roughly offset the positive impact of the higher margins over scrap. As Peter mentioned, the elevated level of import flows prior to the implementation of CBAM acted to depress rebar volumes during the quarter. We saw this factor, along with harsh winter conditions experienced as temporary and expect shipments to rebound in the quarter ahead. Turning to our balance sheet and liquidity position, as outlined on slide 13 of the supplemental presentation, our cash and cash equivalents at February 28th totaled $504 million. In addition, we had approximately $1.2 billion of availability under our credit and accounts receivable facilities, bringing total liquidity to just over $1.7 billion. As illustrated within the table on the left-hand side of the slide, Commercial Metals Company made meaningful progress against our goal to rapidly delever following the acquisition of CP&P and Foley. Adjusted net leverage now stands at approximately 2.3 times based on using adjusted EBITDA for legacy Commercial Metals Company and the estimated run rate annualized EBITDA of our newly acquired precast business. This is lower than the 2.7 times illustrative figure shared at the time of the Foley acquisition with the reduction resulting from increased Commercial Metals Company profitability. We continue to be confident in our ability to return to our net leverage target of 2x or below within the time commitment we made at the time of the acquisition. This effort will be aided by strong free cash flow generation from the precast platform itself, the wind down of capital expenditures for the construction of Steel West Virginia, and significant cash tax savings related to the 48C tax credit associated with Steel West Virginia and One Big Beautiful Bill Act. Additionally, during the period of leverage reduction, we have reduced our share repurchase activity to a level aimed at offsetting the dilutive impact of our annual share issuances under our compensation programs. We anticipate returning share buybacks to levels similar to recent quarters once we are below our net leverage target levels. Our board of directors demonstrated its confidence in Commercial Metals Company's strong free cash flow outlook and ability to rapidly delever by its decision yesterday to increase the company's quarterly dividend by $0.02 per share. This will bring our quarterly payout to $0.20 per share, representing an 11% increase over the company's prior quarterly dividend. Commercial Metals Company's effective tax rate was 15.2% in the second quarter. This is higher than our first quarter effective tax rate due to the fixed dollar impact of the 48C tax credit on Commercial Metals Company Steel West Virginia in comparison to our earnings level. Looking ahead, we anticipate the full-year effective tax rate of between 7% and 9% for fiscal 2026, in line with the guidance we provided in the first quarter. As a reminder, we do not anticipate paying any significant U.S. federal cash taxes in fiscal 2026 and for much of fiscal 2027 due to the factors mentioned earlier. Turning to Commercial Metals Company's fiscal 2026 capital spending outlook, we expect to invest approximately $600 million in total, a slightly lower guide than provided in January, given the impact of the harsh winter slowing construction of Steel West Virginia. Of the $600 million, approximately $300 million is associated with completing the construction of our West Virginia micromill, as well as a handful of high-return growth investments within our Construction Solutions Group segment. We anticipate capital expenditures of approximately $25 million in our new precast business, which will be split between maintenance spend and high-return growth opportunities. This concludes my remarks, and I'll now turn it back to Peter for additional comments on Commercial Metals Company's financial outlook. Peter Matt: Thank you, Paul. Turning to our outlook, we expect consolidated core EBITDA in the third quarter of fiscal 2026 to increase meaningfully from the second quarter levels due to normal seasonal improvement within our key markets and the continued margin strength across our North American footprint. North America Steel Group adjusted EBITDA is anticipated to rise modestly on a sequential basis on higher seasonal volumes, the impact of which will be partially offset by annual maintenance outages across the mill network that are expected to add approximately $15 million-$20 million in costs during the quarter. Financial results for the Construction Solutions Group are expected to nearly double compared to the second quarter of fiscal 2026. Europe Steel Group adjusted EBITDA should substantially improve on higher seasonal volumes, modestly improved metal margins, and the anticipated receipt of an approximately $20 million CO2 credit. I am confident that Commercial Metals Company is well-positioned to drive further growth during the second half of fiscal 2026. Solid market dynamics, additional benefits from our TAG program, and effective operational execution are generating momentum in Commercial Metals Company's existing businesses, which will be supplemented by contributions from our newly established precast platform. For the full fiscal year, we continue to anticipate the precast business will generate between $165 million and $175 million in EBITDA. Longer term, we remain focused on creating significant value for our shareholders by continuing to execute against our strategic plan, delivering meaningful and sustained enhancements to our margins, earnings, cash flow generation, and return on capital. I would like to conclude by thanking our customers for their trust and confidence in Commercial Metals Company and all of our employees for delivering yet another quarter of very solid safety and operational performance. Operator: Thank you. At this time, we will now open the call to questions. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble the roster. The first question will come from Alexander Hacking with Jefferies. Please go ahead. Alexander Hacking: Hey, morning, guys. Thank you for taking my question. Peter Matt: Morning. Paul Lawrence: Hey, Alexander. Alexander Hacking: I want to just touch on the 3Q guidance for the North American segment to have some offsetting negative impacts from some annual maintenance outages. Maybe if we could just get some more detail there. I don't believe in previous years, maintenance activity was called out during 3Q. I just wanted to see if that was related to maybe some of the scheduled activity during 2Q being deferred given some of the more extreme weather we have seen. Or is maybe some of this on the voluntary side given the anticipated supply coming out of the market? Thank you. Peter Matt: No, I think, thank you, Alexander, for the question. There are a couple things going on there. Some of the maintenance outages are normal maintenance outages that we would put into that quarter. Some of them were deferred from Q2 just given some of the weather challenges and also some of the challenges in getting contractors to support those maintenance outages. It's it wouldn't be our preference to have quite as much as we have in this quarter, but that's the way it fell this year. Obviously we will work in the future to spread them out more evenly. Alexander Hacking: Yep. Helpful. Thank you. Peter Matt: Yep. Thank you. Operator: The next question will come from Bill Peterson with J.P. Morgan. Please go ahead. Bill Peterson: Hi, good morning, and thanks for taking the question. I appreciate the color on the AD/CVD. However, you know, year-to-date annualized, we've heard reports are tracking in line with sort of 2022, 2024 levels, and given some countries like South Korea have been stepping into the market. Trying to get a sense in your view on non-duty impacted countries still in the import flow, and whether this may be a persistent trend. Maybe more broadly, how would you characterize the sort of supply ramps from your North American competitors and are you still seeing some discipline in the market? Peter Matt: Let me start with the second question you asked. We are seeing supply and demand in a, I'd say, a relatively balanced place at this juncture. The North American capacity increases are entering the market. We can see them. They're manageable at the current levels given the demand profile. In terms of imports, it is true that you have seen some elevated imports, but we don't think that those are likely durable. As a consequence, we expect that number one, just given the fact that we haven't learned anything about South Korean imports coming in that make us believe that they're gonna be more than the 150,000 tons that people have spoken about, we think that's manageable. Turkey, given the war, I think is going to be facing higher energy costs and higher transportation costs that I think for Turkey and for other importers are gonna make it more challenging. I'd say we have quite a sanguine view of where imports are gonna be this year, despite the 2 months that I think you're referring to. Bill Peterson: I appreciate that. Appreciate that comment. You characterized the sort of cost impact, I think, for your Polish operations, if I caught it correctly, maybe potentially $15-$20 a ton. Is there a way to characterize any potential risk for North America, whether it be energy prices or perhaps on, you know, on concrete, which is a kind of an energy-intensive part of the market? Are there other pass-through mechanisms here? Is there any sort of key risks we should be thinking about if the conflict is prolonged? Peter Matt: Yeah. At this juncture, we are not seeing material cost challenges to our operations. Things like fuel surcharges, we are working to pass those through, so that we expect to recoup that. And we'll have to take any other inflationary impacts as they emerge and adjust accordingly. So far, we haven't felt that at all. Paul Lawrence: Bill, I would just add, you know, with respect to Europe, we are confident that because of the situation that Peter outlined on the call, that it's competitively better positioned, that we will be able to pass along price increases to offset the costs. We've seen that. We've announced price increases. I think, you know, overall, while we're seeing the cost increase from an overall performance perspective, we're confident that it won't impact the margins. Bill Peterson: Great. Thanks for that, those insights. Peter Matt: Thanks, Bill. Operator: The next question will come from Sathish Kasinathan with Bank of America. Please go ahead. Sathish Kasinathan: Hi, good morning, and thanks for taking my questions. My first question is on the outlook for shipments in the North American segment. You mentioned that the backlogs are up year-over-year and are at the highest level since 2023. You also had some weather issues in Q2 and have scheduled some maintenance outages in Q3. At the same time, you have Arizona 2 ramping up and potentially West Virginia Mill, which will start up soon. Given all the moving parts, can you maybe give a sense of a potential volume or uplift that you will see in Q3 and into Q4? Peter Matt: Yeah, I think so. For Q3, I think we should expect a normal change in shipments. If we look at what we saw in Q2, we did have the weather impacts, but they actually impacted the production from a cost perspective more than they did the shipments. So we expect kind of a normal move moving from Q2 to Q3. Into Q4, we will be just starting up West Virginia. We would expect, I would say again, kind of a normal transition between Q3 and Q4, given the fact that it's the, you know, early days of the startup, and so I wouldn't expect those volumes to really heavily impact the market. Sathish Kasinathan: Okay. Thank you. Maybe one question on the pricing side. The downstream product pricing saw the first uptake in nearly like three years. Based on some of the more recent project awards and the current bidding activity, can you maybe talk about how the pricing for new fabrication orders today compare to what it is in the backlog? In other words, I mean, like, does it, I mean, is the pricing covering the recent $150-$200 increase in rebar price that we have seen? Peter Matt: Yeah. Let me start on that, and then maybe Paul can jump in. First of all, the current pricing of the backlog is already reflecting the business that we're putting into the backlog. In fact, I would say today that the booking price is higher than the backlog price in our backlog. We see strong level of bookings. As we kind of look forward here, I think over the next couple of quarters, you should see the pricing impact turn into a tailwind. Remember that the pricing that you are seeing in our data sheets is the backlog that we're executing that we booked, say, nine months ago. I think over the next couple quarters, you should see kind of the pricing translate into a tailwind in margins and margins improve in that downstream business. Paul Lawrence: The only thing I would add, Sathish, is, you know, I think we've talked recently about the discipline on the commercial side in the fabrication of ensuring we get value for the service that we bring and ensure that we're getting the necessary margin on the downstream business that we think is warranted. That has certainly had a positive contribution to how the backlog is, you know, up at this time of the year. Recall that it was, you know, May, June, July last year that rebar pricing really started to increase. For us to already realize it here in the second quarter is accelerated versus historical time frames. Sathish Kasinathan: Okay, thank you for the color. Peter Matt: Thank you. Operator: Again, if you have a question, please press star and then one. The next question will come from Katja Jancic with BMO Capital Markets. Please go ahead. Katja Jancic: Hi. Thank you for taking my question. Maybe going back to the cost, especially on the power side, can you remind us what is the percent of your total production cost that is accounted by power or driven by power? Paul Lawrence: Yeah. Katja Jancic, if we exclude scrap from that calculation, electricity is in the 15%-20%. Natural gas is generally a pretty small number. I will also from a Polish perspective share that, you know, we've talked certainly in the energy crisis at the beginning of the Ukraine war, how we were better positioned. We are around 50% hedged with long-term power purchase agreements in place in Poland. While the cost of electricity has the potential for increasing dramatically, we're well protected. Again, back to what Peter Matt said during the call, Poland, because it's self-sufficient with a lot of coal, it's not as susceptible as other European nations are to the electricity price increases. Katja Jancic: Is the percentage similar in the North American operations, I would assume? Paul Lawrence: Yes. Yes. That's fair. Katja Jancic: Maybe just quickly on the TAG. What is the current run rate EBITDA benefits that you have achieved so far? Peter Matt: What we've said, Katja, on that is that by the end of the year, we expect to exceed $150 million, and we are on track for that. In fact, I'm highly confident we're gonna end up being ahead of that number. We have not given any further updates to that, but the project is very successful in the company and not just for the initiatives, but as we said in the past, it's really creating a new mindset in the company about improving ourselves from both an operational and a commercial perspectives. We feel very good about where we are with TAG. Katja Jancic: Okay. Thank you. Peter Matt: Yep. Thank you. Operator: The next question will come from Andrew Jones with UBS. Please go ahead. Andrew Jones: Hi, gents. I just want to dig into the recent index price decrease on rebar and what you're seeing there. I mean, I'm curious to what extent that's, you know, Hybar linked or, you know, I mean, basically, how much of an effect are you seeing from those volumes ramping up in the market and potentially undercutting on price? Just curious to your thoughts on what's happening in the market there. Peter Matt: Yeah. Thanks, Andy. I would say, again, as I said before, supply and demand today in our view is pretty balanced. We feel that the new capacity coming into the market is pretty manageable. In terms of a price impact, I would say that, again, pretty manageable. It's fair to say there are a few pockets of weakness, but I think a lot of those are attributable to some of the winter conditions that we've had and the slowing business in that harsh winter that we've had. We expect as the demand comes into the construction season, that we are gonna see prices firm up, and we feel comfortable about where they are. Andrew Jones: Okay. Thanks very much. Peter Matt: Thank you. Operator: The next question will come from Tristan Gresser with BNP Paribas. Please go ahead. Tristan Gresser: Yes. Hi. Thank you for taking my questions. The first one is how should we think about the profitability of steel products versus downstream into Q3 and Q4? I think you mentioned steady margins for North America. Is that fair to say that we should see the downstream profitability increase and offset those lower margins for steel products? Paul Lawrence: Tristan, thanks for the call. Yeah, there's a number of moving pieces that will impact the North America Steel Group in the third quarter. First and foremost, we'll see the volume rebound. That's what one would expect, as Peter said earlier, from a seasonal backdrop. One key aspect to recall is, you know, what we saw in the second quarter were successive increases in scrap costs. While we saw the selling price increase, what we will see flow through our earnings will be that higher cost scrap. Our metal margin statistic is likely to be very stable. That's our outlook. The earnings will be slightly impacted by that lag effect of the scrap in Q3 versus Q2. In addition, we have the maintenance outages. As you mentioned, for the downstream business, which you know is roughly a third of our volumes in North America, we'll see a margin pick up from the continued rise in the selling prices or the realized selling prices. Tristan Gresser: All right. That's clear. My second question, if you could give us an update on the rebar micromill, Arizona to West Virginia. More specifically, I was looking at the U.S. rebar volumes. On fiscal 2026, would you expect some growth for rebar? Peter Matt: In terms of the West Virginia mill, we're on track for a startup beginning in June of 2026. That's pretty much right on time. We have been in prior calls, we've talked about the fact that we've had over 100 days of weather delays in the construction of that project. Really proud of the team for kind of getting us to a place where we are today and with in sight of the startup. In terms of the market growth, we expect modest market growth this year on rebar from probably in the range of, say, 1%-3%, I think is a good number. Tristan Gresser: All right. Thank you. Operator: At this time, there appears to be no further questions. Mr. Matt, I'll now turn the call back over to you. Peter Matt: Thank you. At Commercial Metals Company, we remain confident that our best days are ahead. The combination of structural demand trends, operational and commercial excellence initiatives to strengthen our through the cycle performance and value accretive growth opportunities create an exciting future for our company. Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls in the coming days and weeks. Have a good day. Operator: This concludes today's Commercial Metals Company conference call. You may now disconnect.
Operator: Good afternoon, and welcome to VirTra, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. My name is Diego, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Givens, and CFO, Alanna Boudreau. Following their remarks, we will open the call for questions. Before we begin the call, I would like to provide VirTra, Inc.'s Safe Harbor statement that includes cautions regarding forward-looking statements made during this call. During this presentation, management may discuss financial projections information or expectations about the company's products and services or markets, or otherwise make statements about the future, which are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I would like to remind everyone that this call will be made available for replay via a link in the Investor Relations section on the company's website at www.virtra.com. I will now turn the call over to VirTra, Inc.'s CEO, John Givens. You may proceed, sir. John Givens: Thank you, Diego, and thank you, everyone, for joining us this afternoon. After the market closed today, we issued a press release that provided our financial results for the fourth quarter and the full year ending December 31, 2025, along with an update of our business and operating environment. 2025 was defined by an extended and highly atypical disruption in federal funding. These delays affected the timing of awards, procurement activities, and ultimately, system deliveries across our core markets. As a result, our reported revenue does not fully reflect the level of underlying demand or activity across the business. What I want to do this afternoon is walk you through what drove the disconnect, what we are seeing change in the funding environment, and how we are positioned as these conditions begin to normalize. Let me start with the funding environment because that has been the primary driver for our results. The federal funding freeze that began in 2024 was unlike anything that we have seen. Budget approvals that were expected to flow in fiscal year 2025 were held, and agencies were limited in their ability to move forward with procurement. That dynamic persisted through the fourth quarter. What has changed more recently, in the last several days, is that we are now seeing those programs begin to reopen. Specifically, just in the past week, the Justice Assistance Grant, or JAG, and the COPS Fund have both reopened for applications. Importantly, this includes fiscal year 2025 funding that was approved in the federal budget back in October 2024 and has been frozen since. It is only now being made available, but that gives you an indication of the extent of the delays we have been operating through. Behind that, additional funding cycles are progressing, as fiscal year 2026 and expected fiscal year 2027 allocations are moving through the system at the exact same time. As a result, we are seeing a meaningful increase in customer engagement and applications across our base. We are actively working alongside those customers as they move through the grant application and approval process. As we have noted before, this remains a multistep process: customers must apply, awards must be determined, and purchase orders must be issued, and then the systems must be delivered and accepted. We are staying closely engaged throughout the process to help conversions wherever we can. Based on what we are seeing today, that process is likely to play out over the coming quarters rather than all at once. So while the environment is clearly improving, the timing of revenue conversions will continue to be driven by those external funding timelines. One point I want to be clear on is that demand has remained strong throughout the period. We closed 2025 with $25,600,000 in backlog and generated $26,700,000 in bookings during the year. In many cases, orders have already been placed, but customers are not yet in a position to take delivery, either due to funding timing or readiness on their end, with buildings and space. We are also seeing this dynamic internationally, where contracts are in place across markets in EMEA and Latin America, but deliveries are tied to customer-side funding or operational readiness to accept. So the core dynamic we have been operating in is not a lack of demand, but the delay in conversion. We are ready for that conversion. We have used this period to align our operations, inventory, and production capacity so that we can fulfill orders quickly as they come through. Our inventory levels are where they need to be. Our production processes are optimized, and our team is positioned to execute. As funding is secured and purchase orders are issued, we expect to be able to move quickly from order to delivery. At the same time, we have made targeted investments in our sales organization in recent quarters. We are adding a second dedicated federal sales resource to increase coverage in that channel, which has a longer and more relationship-driven sales cycle. This allows the rest of our team to stay focused on law enforcement, where we already are seeing reengagement as the grant programs open. We have also recently added an experienced director of marketing with deep simulation and defense industry roots. Marketing cadence has increased meaningfully at the start of 2026, building on the website redesign we completed last fall. We are seeing early signs of improved engagement, including higher volumes of inbound activity and demo requests, increased time spent on our website, and more qualified leads. We are also planning to expand our presence at key industry events to further strengthen visibility and pipeline development in 2026. Additionally, we continue to progress through the GSA reentry process, which we believe should be completed by Q3 and will shorten the path for agencies from interest to order once completed. We are continuing to engage with federal training stakeholders, including agencies within DHS, where we believe our solutions align well with evolving use cases around immersive judgment, de-escalation, and scenario-based readiness training. On the product side, our focus has been on increasing the value of our platform and delivering the best possible training outcomes in the industry. I want to highlight several developments that I believe are meaningful for our competitive position and long-term growth. First, our Apex Analytics platform is now integrated across our system, enabling customers to capture and analyze performance data in real time and generate actionable insight around accuracy, reaction time, and decision-making. Apex is a meaningful step forward from traditional training environments and has already been a strong differentiator in recent customer wins. Apex also created the opportunity for ongoing engagement through customization and servicing, which could support a meaningful additional revenue model over time. We have also continued to advance our integration with VBS4, allowing for more flexibility and customized training environments tailored to specific customer requirements. We have demonstrated these capabilities with multiple U.S. military groups in real-world training settings where feedback has been encouraging and highlights the relevance of our platform in a more advanced training use case. Over time, this integration should further expand our role within the military training ecosystem and support additional services and development opportunities. In addition, we have introduced a drone defense training solution recently, which is designed for corrections professionals, helping agencies prepare for the growing threat of unauthorized drones in secure environments. This represents an expansion of our addressable market into a new and evolving use case, where we are beginning to see early interest and engagement. Adoption of the VXR platform continues to grow as well, with multiple systems sold in recent months and additional demand building in the pipeline. Across our product initiatives, the common theme is improving the value of our platform and deepening integration into agencies' training workflow. Our military pipeline continues to develop with active programs and evaluations underway across the Army, Navy, and Marine Corps. We currently have multiple opportunities in process, including demonstrations of our capability in real-world training environments. These opportunities are supported by our enhanced reporting, analytics, and customizable training environments. And in this period of lower revenue conversions, we have been focused on ensuring our solutions remain aligned with evolving military programs and requirements. To summarize, 2025 was a challenging year driven by external funding disruptions that impacted timing. We are now seeing clear signs that funding is moving again with multiple cycles making progress. We have maintained strong customer engagement, built backlog, strengthened our commercial organization, and prepared our operations to execute. As those funding cycles translate into awards and purchase orders, our focus is on converting that activity into revenue in a disciplined but efficient way. I will now turn the call over to Alanna for the detailed financial review. Alanna? Alanna Boudreau: Thank you, John, and good afternoon, everyone. Now let us review our audited financial results for the fourth quarter and full year ended December 31, 2025. Our total revenue for the fourth quarter was $2,900,000 compared to $4,700,000 in the prior year period. The decrease was driven by those continued delays in government funding, the timing of customer procurement cycles, and deferred deliveries across both domestic and international customers. For the full year, our total revenue was $22,400,000 compared to $26,400,000 in 2024. The decline was primarily due to extended funding delays throughout the year. Breaking our full revenue down by market, our government revenue for the year was $17,800,000 compared to $22,900,000 in 2024. International revenue for the year was $4,200,000 compared to $3,100,000 in 2024, and commercial revenue was approximately $400,000, consistent year over year. Our gross profit for the fourth quarter was $1,700,000, or 58% of total revenue, compared to $2,900,000, or 62%, in the prior year period. The decline was primarily due to that lower revenue volume. For the full year, gross profit totaled $152,000,000, or 68% of revenue, compared to $19,400,000, or 74%, in 2024. Our net operating expense for the fourth quarter was $3,300,000, a 23% decrease from $4,200,000 in the prior year period. For the full year, net operating expense was $14,800,000 compared to $17,400,000 in 2024, representing a 15% reduction as we actively managed costs while continuing to invest in key areas of the business to help reaccelerate our growth. Operating loss for the fourth quarter was $1,600,000 compared to $1,300,000 in the prior year period, and for the full year, operating income was $400,000 compared to $2,000,000 in 2024. Net loss for the fourth quarter was $1,000,000, or $0.09 per diluted share, consistent with the prior year period, and for the full year, net income was $3,000,000, or $0.02 per diluted share, compared to $1,400,000, or $0.12 per diluted share, in 2024. Our adjusted EBITDA for the full year was $1,600,000 compared to $2,900,000 in the prior year period. As we turn to the balance sheet, we ended the year with $18,600,000 in cash, and $30,800,000 in working capital. This provides flexibility to navigate the current timing dynamics in the business. VirTra, Inc. defines our bookings as the total of newly signed contracts, awarded RFPs, and purchase orders received in a given period, and our bookings for the fourth quarter totaled $7,300,000, contributing to the full year bookings of $26,700,000. VirTra, Inc. defines our backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or incomplete in their performance obligations and, therefore, cannot be recognized as revenue until delivery in a future period. We segment that backlog into three primary categories: Capital, which includes our simulators, accessories, installation, training, custom content, and design work; Service, which is primarily extended warranty and support contracts; and STEP, which is our long-term subscription-based program. Our backlog at December 31, 2025 stood at $25,600,000. That included $13,800,000 in Capital, $5,100,000 in Service, and $6,700,000 in STEP contracts. That concludes my prepared remarks, and I will turn the call back over to John for his closing comments. John? John Givens: Thank you, Alanna. At the start of 2026, we are beginning to see the macro conditions shift, with funding moving back into the system and customers actively increasing activity. We have used this period to strengthen our sales and marketing execution and enhance our product capabilities. With a robust backlog, continued support engagement, and the operational infrastructure and processes in place to scale, our focus is on converting that activity into revenue in a disciplined and efficient manner. That concludes my prepared remarks. Operator? Thank you. Operator: At this time, we will conduct the question-and-answer session. If you would like to ask a question at this time, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We will pause for a moment while we poll for questions. Your first question comes from Jaeson Schmidt with Lake Street Capital Markets. Please state your question. Jaeson Schmidt: Hey, guys. Thanks for taking my questions. John, just hoping you can expand a little bit about your commentary on the expansion of engagements with the military market. Just curious if that is expanding into different programs. Is it additional systems being trialed? Or how should we think about that? John Givens: Yes, all of those are accurate. We have multiple engagements across Army—several—and Navy and the Marine Corps. We have engaged with them to find out exactly what they are looking for on the systems. My commentary previously about how we are focusing on the systems and making them military-ready—it hardens them for LE as well—but there is a different dynamic in which the military requires a very dynamic, adaptive way that they think and learn on a system. So that is where VBS came into play. The programs that are out there—there is no secret—are out there as the SVT, the virtual trainer. There are several others that are out there as well, and some of the ones that we currently have with ADMIRE and with Special Operations. We also have Navy contracts coming up, and our engagements at I/ITSEC, the large show in Orlando, were quite a hit. We have one box called our V-100 Next Generation, which puts everything in one box. It is portable, and it is a hit. They are looking to replace some aging systems and ones that have lack of technology and are not nearly as mobile out there in the field. We have really honed our training and also our system to meet those needs, and they are all benefiting. So there are programs out there that you can look up that I have mentioned on these calls before. We also have several other military groups that are taking our systems, and they are doing evaluations with their staff, like gunnery sergeants and those sorts of things, and looking at it as a replacement. So the activity is quite robust right now. Much longer sales cycles, but we have been at it for a bit, so we are looking forward to those coming to fruition. Jaeson Schmidt: Okay. Great. That is good to hear. And then understanding that the funding environment remains challenging, just curious what you are seeing from a quoting activity standpoint so far this year and overall sales touch points even against this more challenging backdrop. John Givens: As I stated, demand has remained high, and I would say it is even higher. Our focus has been that a lot of these agencies had relied on multiple different grants that came from multiple places. As I stated, it has been unfortunate because none of the money that was allocated in these grants for fiscal year 2025, which was awarded in October 2024, and then subsequently 2026's in October 2025, have just been released. We already expect that. I have been on Capitol Hill, and we have been going through why it is important, and we have been in front of legislators and said they need to release the money. We do expect a pretty regimented release of funding. The only caveat to that that I would say is the quoting has increased. We have the quotes out there, and they are just sitting. Unfortunately, it is up to the agencies, because we cannot legally submit these grants. We help them in any way that we can and stay side by side with them. We have people in-house that are giving them the information that they need about the system and helping where we can. They still have to submit it, and then they still have to be down-selected. There still is a process, but we have not even had that process moving the last two years, so that is a great sign. As far as other activity, we are also starting to see, on the same time frame, our international market starting to see those monies flow as well. The only monies that are not flowing are DHS. As you know, we have DHS with Customs and Border Patrol as our customer, and we have Secret Service as our customer, and we have Coast Guard. As we talk about their upcoming upgrades and purchasing new systems, all that has come to a grinding halt. That is the only one that we are down that path, and it just came to a halt. There are other agencies as well that are also engaged with us wanting systems. The orders, the interest, the demand—it is all there. It is going to free up the funding. We are doing everything we can to help move that forward. Jaeson Schmidt: Got it. That is really helpful. I will jump back into the queue. Thank you. John Givens: Thank you, Jaeson. Great questions. Operator: Thank you. To ask a question, press 1 on your phone. To withdraw your question, press 2 on your phone. The next question comes from Richard Baldry with ROTH Capital Partners. Please state your question. Richard Baldry: Sort of following on that and building on what you talked about during the call, could you look in more detail at the process it will take to get the money to move? While it has been held, have people been building grant documentation so that it could move across the table very quickly? Did they, for some reason, not start that so that process still has to fully take place? Are there any timelines around, from submission to approvals—things that you have seen in the past under normal circumstances—to give us a feel for how slowly or quickly it could take to start to see some of these things move? John Givens: That is the crystal ball. The problem is there really has not been any consistency. We will get a consistency of April—several of these grants are due. Two and a half months, almost three months ago, we created what we call a grant stage in our CRM in Salesforce. All the sales folks have been working with them on a regular basis in constant contact. They already have quotes. They already like the system. They want the system. They have the training need. They just do not have the funds. As soon as we knew that there was something coming out, all the sales folks started that process. That process is demographics or geographics or certain types of training—there are specifications. We have grouped each of those and helped them identify which grant they would most likely be a good candidate for, with a higher success rate. We have done that. That grant stage consists of a number of police departments across the country. Then there are things like, what does the system do? We have a lot of that information that is just block information that we can give them. Then they have to fill out an application, and they have other items and things that they have to do that we have no visibility on. Once that is complete, then they submit it by the timeline. Once it goes there, unfortunately, Rich, I cannot tell you what the timeline is. We have seen it three months, we have seen it a year, and we have seen it eighteen months. It does vary, and it also varies based on the number of submissions they get and the level of staffing that they have of the administrators of those particular grants. Not all grants are created equal because they are coming out of different departments, but sometimes for the same thing. Then there is a level of priority for what they are looking for. If it is immigration and those sorts of things—if they have scenarios and things that they need to in their certain geographic area—they may have a priority or a precedence. It is uncertain who the source selection committee is and how they determine that. The best thing I can tell you is at least we have a deadline right now of submission. We have our team working directly with all those customers that have had active quotes for a while, and we are working them through and helping them—telling them what they have to do and reading all the documentation and walking them through as much as we can. Then it is up to them. After that, when it is all collected, they have a source selection committee that reviews all of them, and I do not always know how they choose the different groups. Then what we do is we collect all that data and start normalizing it. If anybody else is in the queue and someone with a certain geographic or demographic or size agency or training-specific need, we look for folks in our grant stage and start pushing them towards those grants. We do have a methodology that we are using with as much as we can, but there are a lot of variables. That is a great question. I wish I knew all the answers, Rich. Richard Baldry: If I looked at your backlog, if I put the Services and STEP together, is it fair to view that as those two combined and then divide by four or whatever? Is that an annual sort of baseline, or can even the Service and STEP be multiyear, so we cannot really think of it that way? John Givens: Your latter. You cannot really think about it that way. I am going to let Alanna do some commentary. Backlog, as you said, has three components, and you can have Services and warranty. On a capital system, you also have the maintenance and warranty, so it could be multiple years as well. We may have a larger concentration in year two and three, or one and two. One might be coming off, another one going on. It is very hard to break that down to say, look, you have $25,000,000 in backlog. Clearly, not all of it—even if we were incredibly efficient and everything cleared up—you are not going to get $25,000,000. I think the capital was—what did you say—$12,000,000? So it is hard to say that. Alanna, did you want to make commentary on that? Alanna Boudreau: I was just going to say the problem is the bookings and backlog, especially for the STEP. We have STEP contracts that we have signed this year that are three years long. Then we have STEPs that we signed the year before that are five years long. Some of those were not guaranteed, so those are in our future STEP revenue as opposed to what we just talked about on the call. If you look in the K, we think that on top of that backlog, we have an additional $2,500,000 that has not been resigned or committed to that can also be part of that, but that is another year or two. STEP can be anywhere from one year from now to all the way up to four years from now for revenue conversion. The same goes for the warranty service plan. Some people sign one-year agreements. Some people sign three-year agreements. Occasionally, somebody will allow a five-year agreement. It is not quite as easy as just divide by four because there is a mix in those numbers. The Capital extends out a little as well because some of that Capital is for what we talked about—our international customers or development work that is not going to convert until later in 2026 through early 2027, depending on when they can accept those items. John Givens: I think, Rich—and Alanna, you can correct me—but if you did want to do a quick number and you want to be on the conservative side, taking the STEP and dividing it by four would give you a very conservative number. Richard Baldry: We were sort of backing into the fourth quarter numbers using your full year. I do not know if I heard this or not. Can you tell me what the fourth quarter adjusted EBITDA number was as a stand-alone? John Givens: Yes, I— Alanna Boudreau: I do not have that reported in the K or the prepared remarks. Give me a minute to get that for you. Feel free to move on if you want to another question for John. Richard Baldry: The last for me would be, are there any upcoming important milestones on the military side that we would see on our side of the table, or is it in a status where we are going to have to wait until something larger is announced by one of the other contractors, maybe? John Givens: It is a mix of both. There are larger contracts where we are a smaller component, where we are partnering with others to go after. Then there are larger contracts that are coming out that are more specific to us, where we will be the prime contractor on the bids. You can see quite a few of them—different branches of the service have several that are out there. One thing that we do see—I will mention this—is because of what happened with those, the military—at least the Army—has done, in their acquisition corps, a massive restructuring and taken one entity down and created a new one, and moved them around on who is responsible. There is speculation that some of these marksmanship training simulators and some of these programs may be combined—may be a much larger one. We are well-positioned for those, but the large ones may require that we actually take on a sub that may have staffing and those sorts of things because it is across the world, not just the U.S. Richard Baldry: Maybe one more last one for me. A big topic across any of my software-driven companies is AI these days. Can you talk about to what extent you think AI is a threat, to what extent you think it is perhaps able to be monetized in incremental offerings, and to what extent you could use it internally to streamline processes and make things more efficient? Thanks. John Givens: That is a fantastic question, Rich, and I do not see it as a threat. I see it as an igniter. We will be able to do a lot more with less. What is happening in the AI world right now is they are coming out with AI skill sets and AI models, and we are taking advantage of the models and skill sets. A skill set might be programming facial recognition in a gaming environment with textured characters. We are taking advantage of those. One example: we do video shoots—they are like Hollywood movies—to be able to get our scenarios. That is why they are so good. The team took one of these AI models and they took all of the scenes and scenarios that they had recorded, and then they had this AI model, and they actually made an opening trailer for the scene with assets that they could not record on. It was quite amazing. Even the team was amazed. They have been at this, some of them, for thirty years in this industry. We are also using it, as far as comparative analysis as you start writing software and code—what it was kind of made for. As you find bugs and you find things inside your software, doing a comparative analysis sometimes took a long time to thread through millions of lines of code. The AI model with this programming skill set would be able to identify a potential area of this code. You still need that very strong skill set to identify, but it narrowed it down. We were able to fix a few things and identify performance-related issues in a matter of days rather than a matter of months or maybe even through two or three different releases of software. That is significant. The other one that is really coming around is the AI tutor. If you go to a weapons range and you shoot at a target, and you shoot a grouping of five shots in one area, but you have one or two that are out on the side, unless an instructor is there watching you, they would normally say, you did not breathe right, you pulled the trigger, you blinked your eyes, whatever that is. Now what we are able to do is take standard operating procedures, instructors' notes, cognitive performance studies—whatever it is—throw it into that AI model, and then once the shot is taken, we can have AI look at all the information that we put into that model, analyze the results, and give suggestions of what may have happened. So there is that AI tutor as well. It is not a replacement, but at least it gets you there, because what our systems have always done is present a target just like you are on the range. It shows you your results of what you have done, but then there is no one there to give an analysis. This section of AI that we are using now is able to do the analysis as well. There are a multitude of other areas that we are taking AI and looking at in performance enhancement. Monetizing is a different story in our case. We are looking at ways to monetize AI in that regard. That is a little tougher question and a harder look. What we are seeing is our bottom line showing cost savings across the board because of our implementation of these AI models and skill sets. Richard Baldry: Got it. Thanks. Alanna, did you get that number? Alanna Boudreau: It is negative $0.9 million. John Givens: Thank you. Operator: Ladies and gentlemen, at this time, this concludes our question-and-answer session. Thank you for joining us today for VirTra, Inc.'s Fourth Quarter and Full Year 2025 Conference Call. You may now disconnect.
Operator: Good day, and welcome to the Xos, Inc. Fourth Quarter and Full Year 2025 Earnings Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the call over to David M. Zlotchew, General Counsel. Please go ahead. David M. Zlotchew: Thank you, everyone, for joining us today. Hosting the call with me are Xos, Inc.'s Chief Executive Officer, Dakota Semler, Xos, Inc.'s Chief Operating Officer, Giordano Sordoni, and Xos, Inc.'s Chief Financial Officer, Liana Pogosyan. Today, after the close of regular trading, Xos, Inc. issued its fourth quarter and full year 2025 earnings press release. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as commentary on the quarter and year ended 12/31/2025. Management's statements today reflect management's views as of today, 03/26/2026 only, and will include forward-looking statements, including statements regarding our fiscal year 2026, management's expectations for future financial and operational performance, and other statements regarding our plans, prospects, and goals. These statements are not promises or guarantees, and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Additional information about important factors that could cause actual results to differ materially, including, but not limited to, Xos, Inc.'s ability to access capital when needed, continue as a going concern, Xos, Inc.'s ability to implement business plans and identify and realize opportunities, potential supply chain disruptions and/or economic downturns as a result of trade policies and tariffs or war in Iran and shortages of access to oil, energy, and other key industrial inputs, is included in today's press release and in our filings with the SEC, including our most recently filed Annual Report on Form 10-K, and subsequent filings. We undertake no obligation to update forward-looking statements except as required by law. You should not put undue reliance on forward-looking statements. Further, today's presentation includes references to non-GAAP financial measures and performance metrics. Additional information about these non-GAAP measures, including reconciliations of historical non-GAAP measures to the comparable GAAP measures, is included in the press release we issued today. Our press release and SEC filings are available on the Investor Relations section of our website at www.xostrucks.com/investor-overview. With that, I now turn it over to our CEO, Dakota Semler. Dakota Semler: Good afternoon, everyone. 2025 was the year Xos, Inc. proved something that many doubted was possible: that a young electric vehicle company operating with discipline, under real constraints, and without the luxury of unlimited capital could deliver a full year of positive free cash flow, grow its customer base, diversify its product portfolio, and emerge stronger on the other side. That is exactly what happened, and it did not happen by accident. For the full year, Xos, Inc. generated $46 million in revenue on 328 units delivered, more units than any year in our history. Our GAAP gross margin was 5.9%, marking our second consecutive full year of positive GAAP and non-GAAP gross margins. Full year operating loss narrowed 28% to $33.1 million, the lowest since we went public, and our adjusted EBITDA loss improved 33% to $23.5 million. But the number that I am most proud of is this: we generated $5.4 million of positive free cash flow for the year, compared to negative $49.1 million in 2024. That is a $54 million swing. And in Q4, we delivered our third consecutive quarter of positive free cash flow, the fourth time we have achieved that milestone since going public. Those are not just numbers; they are proof that our model works. In Q4 specifically, we shipped strip chassis already on their way to upfitters for a major customer program. Revenue recognized in the quarter was $5.2 million on 34 units, with the balance to be recognized in coming quarters as vehicles are completed and delivered. The signal is clear: demand is real, customers are returning, and scale is growing. Let me step back and put this year in context, because I think the arc of 2025 tells the real story of where this company is headed. We entered 2025 with a clear mandate: grow the business, protect margins, and manage liquidity with discipline. Every quarter, we executed on that mandate, and every quarter, the results compounded. Even amidst a tumultuous environment with frequent tariff changes and complex macroeconomic factors, we prevailed. In Q1, we set the foundation. We continued growing hub production at our Tennessee plant. At the same time, we strengthened our balance sheet and sharpened our cost structure. Q2 was a breakthrough. Revenue hit $18.4 million, the highest quarterly revenue in our history. We delivered 135 units, secured the orders for the largest production program in company history at over 200 units, and proved that national fleets are not experimenting with Xos, Inc. anymore. They are committing to us at scale. Q3 sustained that momentum. Revenue held strong at $16.5 million on 130 units. Our operating loss dropped to $7 million, the lowest since the company went public, and we achieved our second consecutive quarter of positive free cash flow, demonstrating that this was not a one-time event but a structural shift in how the business operates. And Q4 capped the year with continued execution. While Q4 is seasonally our lightest quarter, the team kept delivering, fulfilling our 200+ unit program, scaling Blue Bird powertrain production, and preparing the hub platform for its next chapter. Each quarter built on the last. That is what momentum looks like when it is earned, not inherited. Much of our 2025 volume went to organizations like UPS and FedEx ISPs, fleets that do not forgive unreliability, that do not tolerate downtime, and that do not adopt new technology unless they have deep confidence in the engineering and provider's ability to deliver at scale. Their confidence in Xos, Inc. is earned. It is validated by millions of miles on the road, with several customers now exceeding 1,000,000 miles across their Xos, Inc. vehicles, and evidenced by repeat orders that have grown in size. Our 200+ unit program represents the shape of the future for Xos, Inc.: deeper relationships, larger programs, repeatable volume. These large fleet agreements may compress margins in the near term, but they are the foundation of a durable industrial business. They create the volume and the credibility needed to expand margins over time. I want to personally acknowledge the Aldermay Automotive Company, whose support of Xos, Inc. has been unwavering. Together, we amended the repayment structure of the convertible note, moving from a single August 2025 maturity to quarterly installments through February 2028. This is not just a restructuring; it is a change that allows us to operate from a position of focus rather than constraint. Aldermay is now our largest shareholder, a strong signal of their conviction in our long-term trajectory. Our collections execution was exceptional this year. Accounts receivable came down from $26.9 million to $6 million, driven by $14 million in Q4 collections alone, including the $9.9 million from UPS. Liana will walk you through the full liquidity picture, but the takeaway is this: we ended the year with $14 million in cash, up from $11 million, while simultaneously paying down obligations and investing in growth. Even as the step van continues to drive substantial revenue, our strategy has never been limited to a single product. In 2025, we deliberately expanded into higher margin, less competitive categories, and that strategy is now delivering real results. Our powertrain business had a breakout year. We delivered 15 powertrain systems to Blue Bird Corporation in Q4 alone, and since Q2, we have received nearly 100 additional orders. School districts are electrifying, and our technology—modular, reliable, and highly serviceable—is becoming the backbone they trust. Gio and I attended the Blue Bird Dealer Meeting last year, and the engagement from dealers and districts is exciting, and we believe it will translate to a robust pipeline that we expect to convert over the next one to three years. And finally, 2025 saw the emergence of our flagship Xos, Inc. Hub product line, which we are expanding in 2026. Grid constraints are not a theory. They are the single largest friction point in North American fleet electrification. The hub addresses this head-on. It is not a prototype. It is deployed. It is working, and its impact is expanding far beyond transportation. In 2025, we deployed hubs to utilities, fleet operators, and industrial users. We showcased the hub at RE+, the largest renewable energy conference in North America, where it drew significant attention from energy developers and utilities looking for mobile power, resilience, and peak-shaving solutions. The response confirmed what we already knew: the hub addresses a problem almost no one else in the market is addressing effectively. We are now preparing the 2026 hub update, offered in three size configurations ranging from 210 to 630 kilowatt-hours, delivering greater power resilience, energy cost optimization, and advanced load balancing capabilities. This is not just a charging product. It is a mobile energy platform capable of serving industrial users who require temporary power, peak shaving, and resilience where grid infrastructure is delayed or nonexistent. That dramatically widens our total addressable market and positions Xos, Inc. as an energy company, not just an electric vehicle company. As we look to 2026, the opportunities in front of us are expanding. Order sizes are increasing as customers experience the real-world cost advantages of our trucks and our charging solutions. Our product pipeline—the upgraded hub, our powertrain expansion with Blue Bird, and the continued growth of our step van business—align with secular markets that will grow regardless of political cycles, incentives, or noise. I believe 2025 was the year Xos, Inc. proved it could build a durable industrial business. 2026 will be the year we scale it. And while some may perceive a pullback in the U.S. EV market, Xos, Inc. keeps pulling forward. We are not just enabling cleaner delivery vans carrying packages. Xos, Inc. also provides cleaner and more efficient transportation of school children through Blue Bird’s powertrains, enables unloading of cargo vessels in ports with Wiggins, and charges fleets of autonomous rideshare vehicles. There is even a Xos, Inc. ice cream truck in Sacramento. The breadth and variety of our deployments underscore the foundational strength of our technology and the enormous opportunity that lies ahead. With that, I will turn it over to Gio to walk through the operational highlights of the quarter and the full year. Giordano Sordoni: Thanks, Dakota. 2025 was a year defined by focused execution, operational discipline, and continued progress towards scalable production. I will walk through our fourth quarter performance and then zoom out to highlight our full year operational achievements across manufacturing, engineering, and the supply chain. In the fourth quarter, we continued to demonstrate consistent production execution across our core product lines at the factory in Tennessee, while also executing on the launch of new powertrain kit variants for Blue Bird and preparing for the launch of new mobile charging hub variants. At our Birdstown, Tennessee facility, the team continued building and delivering against our over 200-unit UPS program, maintaining a steady production cadence and reinforcing our ability to execute on large fleet commitments. We expanded our manufacturing capabilities by adding a dedicated production line within our facility for Blue Bird kit development, which began producing kits in the second quarter of last year. This expansion of our kit production line marks an important step in scaling our powertrain systems business and supporting external OEM partners like Blue Bird. We also initiated the development of a more robust production line for the next generation of our mobile charging hub. We are now offering it in three size configurations, ranging from 210 kilowatt-hours all the way up to 630 kilowatt-hours. This new line layout allows for scaled production at higher volumes in 2026, while producing several variants on the same production line. From an engineering perspective, our team was focused on developing new powertrain variants for Blue Bird, as well as improved versions of our charging hubs and improvements on our chassis. At the same time, our supply chain organization remained focused on navigating tariff dynamics while continuing to drive direct material cost impacts where possible. We resourced some components, localized others, and negotiated with our supply base to share in the cost of the new tariff impacts that we saw in 2025. Stepping back to the full year, 2025 marked a meaningful step in building a more efficient, scalable, and margin-focused operating platform. Our engineering, supply chain, and manufacturing groups worked together to build and deliver over 328 units while reducing operational and direct material costs throughout the year. We also engineered and launched new product variants while improving on existing products, all the while contributing to reductions in overall operating expenses of 28% that Dakota mentioned. In 2025, the engineering team enhanced our vehicle product offering and introduced improvements like galvanized frame rails, which improve long-term corrosion resistance and durability for our fleet customers. These types of targeted upgrades reflect our focus on delivering higher quality, longer life vehicles. The engineering and supply chain groups collaborated to reduce the bill of materials cost of the strip chassis by making changes to our design and sourcing strategy. We expanded our engineering and product capabilities, including the development of five distinct powertrain kits to support Blue Bird’s school buses. This work further establishes Xos, Inc. as a flexible electrification partner for OEMs looking to benefit from battle-tested powertrains that have driven millions of real-world miles by our fleet customers. At the plant in Tennessee, our manufacturing team established a production line for powertrain kits and expanded our hub production line. The team built vehicles more efficiently than ever before, reducing the labor hours per vehicle, while building at a rate of three units per day at certain points throughout the year. Building at these volumes for UPS is evidence of Xos, Inc.'s ability to ramp up our supply chain and manufacturing capability to meet high volumes for large national fleet customers. We were also able to negotiate the termination of the Mesa, Arizona lease that we inherited from our merger with LeXoR Mechanica, which resulted in a total cash savings of $20.7 million. From a supply chain perspective, 2025 was defined by disciplined execution in a volatile environment. The team successfully navigated tariff uncertainty through a combination of strategic stockpiling, cost restructuring, and proactive planning, while also implementing shared-risk supplier agreements to help absorb tariff impacts and protect margins. At the same time, we strengthened our battery sourcing strategy by onboarding a top-tier global supplier for our hub programs and locking in pre-tariff pricing through 2026. This approach gives us both cost stability and supply continuity as we scale production. We also made meaningful progress in how we manage working capital and inventory. The team introduced a more robust annual procurement and inventory planning process, improving forecast accuracy and better aligning spend with our production needs without compromising supply reliability. In parallel, we advanced our supplier strategy by expanding dual sourcing and geographic diversification across critical components, reducing dependency risks while increasing supplier competitiveness and flexibility across the supply base. Importantly, these initiatives translated directly into financial performance. The supply chain team delivered meaningful direct material cost reductions across key components, contributing to the company achieving positive gross margins. During the year, we were able to maintain or reduce direct material costs despite headwinds from tariffs, and at the same time, we maintained strong supply continuity despite variability in schedules and ongoing supplier constraints, proactively managing lead times, inventory levels, and delivery commitments to keep production running smoothly. Overall, 2025 was a year where we improved our product, strengthened our cost structure, and laid the foundation for scalable growth across trucks, powertrains, and our hub platform. We maintained positive gross margins despite changes in product mix and reserves and write-downs in 2025. We achieved a 28% cost reduction in operating expenses. We improved our cash position with faster inventory turns. As we look ahead, our focus remains on continuing to drive cost discipline and seek margin expansion, scaling efficient production across our core multiple product lines, and preparing our operations to support increased demand in 2026 and beyond. With that, I will turn it over to Liana to walk through the financial results. Liana Pogosyan: Thanks, Gio. Before getting into the details, I want to take a moment to highlight the meaningful progress we made in 2025. This was a year of execution and important milestones across the business, from achieving positive free cash flow for the full year and improving liquidity to driving substantial reductions in operating losses and expenses. At the same time, we took decisive actions to strengthen our balance sheet, optimize working capital, and position the company for more sustainable, long-term growth. For the full year of 2025, revenue totaled $46 million on 328 units, compared to $56 million on 297 units last year. We delivered more units year over year, reflecting strong demand, though the shift in product mix—driven largely by our strip chassis product and powertrains—resulted in a lower average selling price and a decline in total revenues. For the fourth quarter 2025, revenue was $5.2 million on 34 units, down from $16.5 million on 130 units last quarter and $11.5 million on 51 units a year ago. Revenue is down as a result of our reduced deliveries during a slower time of the year as the company began shifting focus and allocating resources to powertrain and hub production. This quarter's deliveries were mainly driven by our hub and powertrain product lines, including 100 units between 2025 and 2026. Turning to gross margin, we continue to make meaningful progress in building a more sustainable and scalable business. For the full year, GAAP gross margin was $2.7 million, or 5.9%, compared to $4 million, or 7.1%, in 2024. Performance for the year reflects product mix, including a higher volume of low-margin strip chassis units under the UPS order, as well as certain inventory write-downs associated with our commercialization strategy. Tariffs reflected in cost of goods sold were a meaningful headwind to margins this year. Non-GAAP gross margin for the year was $4.1 million, or 8.8%, compared to $10 million, or 18%, in the prior year, driven by the same mix dynamics and normalization of inventory-related adjustments. Importantly, this marks our second consecutive full year of positive GAAP and non-GAAP gross margins, underscoring the structural progress we have made and our clear path towards margin expansion over time. For the fourth quarter, GAAP gross margin was a loss of $2.6 million, primarily driven by discrete items, including additional inventory reserves and write-offs due to a shift in the commercialization strategy and warranty reserve updates. Excluding these items, non-GAAP gross margin was a profit of $300,000, or 5.2%. While down sequentially, this marks our tenth consecutive quarter of positive non-GAAP gross margin, reinforcing the consistency of our underlying performance and the strength of our margin foundation as we continue to scale. Turning to expenses, our full year 2025 operating expenses were $35.8 million, down $14 million, or 28%, from $49.8 million last year. These sustained reductions reflect the structural impact of actions we have taken and underscore our disciplined approach to managing the business. Fourth quarter operating expenses were $7.1 million, representing a $2.4 million, or 25%, reduction from prior quarter and a $3.8 million, or 35%, decrease from the fourth quarter of last year. Fourth quarter operating expenses benefited from $1.7 million of nonrecurring favorable adjustments related to a settlement of finance equipment leases and certain vendor payables. Excluding these items, operating expenses would have been $8.8 million, reflecting continued sequential improvement from the third quarter and a more normalized run rate. We made strong progress on operating performance in 2025, with operating loss narrowing by approximately 28% to $33.1 million from $45.9 million last year. Non-GAAP operating loss improved by approximately 24% to $24.3 million, reflecting continued momentum towards profitability. Operating loss for the quarter was $9.7 million, higher than the third quarter mainly due to the discrete items mentioned, but significantly improved from $14.6 million in 2024. Non-GAAP operating loss improved to $4.6 million, compared to $4.8 million in the third quarter and $6.4 million in the fourth quarter of last year. Our full year EBITDA loss was cut by more than half, improving to a loss of $21 million from $42.2 million in 2024. Adjusted EBITDA improved to a loss of $23.5 million from $34.8 million, a 33% improvement, reflecting the compounding benefits of cost discipline and operational efficiency. As we have said, our focus this year has been on execution, financial discipline, and strengthening the foundation for sustained growth, and in 2025, we made meaningful progress across each of these areas. We took a series of strategic actions to strengthen our balance sheet and extend our financial runway, ending the year with $14 million in cash and cash equivalents, up from $11 million at the end of last year. This improvement in liquidity was driven by several key factors. First, accounts receivable declined significantly to $6 million at year end from $26.9 million last year. This was driven by another year of very strong collections—approximately $66 million of collections from customers and state grant program administrators. Second, we successfully launched our ATM program during 2025, generating $2.4 million in net cash proceeds during the year. Third, we continued to execute on strategic inventory management, with inventory declining to $25 million from $36.6 million last year. This reflects strong unit sales outpacing production, as we moved more units from existing inventory while positioning ourselves to support upcoming deliveries. Fourth, we amended our $20 million convertible loan note, extending principal payments to begin quarterly in Q4 2025 through Q1 2028, enhancing liquidity and providing greater financial flexibility. Lastly, in Q3 2025, we reached an agreement to terminate our Mesa facility lease we had assumed as part of the EMV acquisition. This action is expected to generate approximately $21 million in cash savings through 2026. While the agreement requires 18 monthly payments through March 2027 totaling about $2.8 million, it significantly reduces our long-term obligation. As part of the termination, we also recognized a $9.9 million gain in nonoperating income along with related GAAP adjustments, including the removal of the associated operating lease liabilities. We continue to actively manage our liquidity position throughout the fourth quarter while advancing additional opportunities to further strengthen it. Together, these actions reflect our disciplined approach to capital management and reinforce our commitment to enhancing financial flexibility and positioning Xos, Inc. for long-term stability and growth. Beyond the balance sheet, we continue to execute well. We generated positive free cash flow of $5.4 million for the year, a significant improvement from negative $49.1 million last year. Fourth quarter free cash flow was $2.4 million, compared to $3.1 million last quarter and $3.3 million in the same period last year. This marks our third consecutive quarter of positive free cash flow and the fourth time we have achieved positive free cash flow since going public. This consistent performance highlights the strength of our execution and the durability of our operating model. We are building a business that is increasingly self-sustaining, with disciplined capital deployment and a clear path to continued improvement in cash generation. Finally, turning to the guidance for 2026, we anticipate revenue to fall within the range of $40 to $50 million, unit deliveries to be within the range of 350 to 500, and non-GAAP operating loss to be in the range of $11.9 to $13.3 million. With that, I will turn the call back over to Dakota. Dakota Semler: Thank you, Liana. To close, I want to step back to what 2025 really represented for Xos, Inc. A year ago, the question many had was whether a company like ours could sustain itself—whether we could grow, manage costs, and generate cash in a market that was still sorting itself out. The answer is in the results: positive free cash flow for the year, our lowest full year operating loss since going public, our second consecutive year of positive gross margins, a product portfolio that is broader, stronger, and more relevant than at any point in our history. None of this happened by accident. It happened because this team questioned assumptions, executed with discipline, and refused to accept that building an industrial company from scratch required cutting corners on quality, on service, or on the ambition of what Xos, Inc. can become. Stepping into 2026, our priorities remain clear: accelerate growth, reinforce liquidity, and continue expanding margins. The foundation is built. Now it is the time to scale. With that, I will hand it back over to the operator for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. Please press star then 2. Our first question comes from Craig Irwin with ROTH Capital. Please go ahead. Andrew (for Craig Irwin): Hey, guys. It is Andrew on for Craig. Congrats on the progress, and thanks for taking my questions. The first one for me is on the new hub products you guys announced you are starting to develop in 2026. Can you kind of talk about the opportunities, especially these larger products have with customers outside of the typical EV charging opportunity? Dakota Semler: Yeah, thanks for the question, Andrew, and I appreciate you joining. I think there is a little bit of background noise coming from your line, so if it is possible, maybe just to mute, that would be helpful. But in regards to the question on the hub, we really have been focusing on listening to customers over the last year and a half to two years since we rolled out our first units. What we learned is that there are a variety of different use cases that people have been using them as. Some have been using them as a direct replacement for large DC charging infrastructure sites. Like our autonomous car fleet, they charge sometimes up to 80 vehicles a day with a single hub unit—so very high-throughput power discharge and charge application. Some folks have been using them for remote power. One of our utility customers, a big water utility in Southern California, utilizes it for when they do pipeline shutdowns. They will roll out a hub, and all of their EV equipment can charge out in the field when they have a few-day kind of pipeline shutdown. Then we have got other utilities using them for disaster preparedness. When hurricanes or storms come, they will roll one out into the field for customers, and it dramatically expands their existing DC charging infrastructure when people are looking to evacuate a specific zone within their territory. So a ton of different use cases, different sizes of vehicles being charged, and different kinds of applications. Some are remaining plugged into the grid, some are completely off-grid, some are using mobile gensets to power them. The next iteration was really designed to address those different use cases. The first element that we have incorporated is these new energy storage capacities. We started with a slightly smaller energy storage capacity for really light-duty Class 1, Class 2 pickup trucks—fleets that are not going to see a ton of throughput on a hub—to be able to offer a more competitive price point, and that product can really be used in lieu of traditional DC fast chargers. We have a lot of customers that are deploying them in fixed applications because it is much more cost effective than deploying conventional DC fast chargers with their energy storage systems. We have our new kind of mid-tier, what we are going to be calling our flagship variant, which is our 420 kilowatt-hour version, and that is going to replace the last version, which was 280 kilowatt-hours. Competitively priced in the same territory as our previous unit, but you are getting basically another 30–40% additional energy storage capacity on that unit, and you are still able to keep that unit sub-10,000 pounds, so you do not need a CDL to drive it around. It can be rapidly deployed with a pickup truck, just basically building better capabilities—more energy capacity for our customers—but doing it at the same price point. And then that third largest variant, the 630 kilowatt-hour configuration, is really designed for our larger battery capacity operators—customers that are running medium-duty or heavy-duty trucks that need rapid power deployment. That is really going to be for your medium-duty trucks—Class 5–6 trucks like ours—as well as getting into Class 7 and 8 electric zero-emission vehicles and off-highway products. We actually have a customer now building a large data center in Indiana, and they have inquired about some of their zero-emissions construction products utilizing this larger capacity unit. So it is a perfect application for both on-highway traditional applications that we have been serving for the last year and a half or so, but also a lot of new off-highway construction, agricultural-type applications too. That is just the first variant and first kind of product launch that we announced earlier this year. We have got several more announcements and several more upgrades to the hub product that are really exciting about the capabilities and configuration that we are going to be talking about probably in Q2 and Q3, the end user markets that these new versions will address, which are going to be potentially even larger than the markets that we are serving today. Andrew (for Craig Irwin): Great. I appreciate the detail. I am looking forward to those announcements later in the year. Second one from me, kind of a similar question—you were talking about exploring new designs for your powertrain product. Can you kind of just talk about how that may expand the opportunity set as you ramp that business unit? Dakota Semler: Yeah, and specifically in regards to the powertrain products? Talking about looking at new designs for the powertrain products. Yeah. One of the things we have been able to do over the years is take all the learnings from deploying thousands of our own vehicles on the road and apply that to our other segments, including the hub product and the powertrain product. We are not starting from scratch; we are building upon a foundation of engineering that we have invested in over the last ten years. Now those variations that we are selling are being sold into a wider variety of products. We talked a lot about our school bus partnership and relationship. We are developing several configurations there, addressing the traditional Type C school buses, which is the largest part of the market and represents anywhere from 70% to 85% of the market on an annual basis. But we are also developing a rear-engine configuration that we are in production with now for traditional Type D buses, which is in use in places like California and some other markets. We have really done a lot to focus on commonizing our platforms to drive reliability and service performance in the aftermarket. These buses and trucks are expected to run ten to fifteen years in most cases, but also driving cost competitiveness, and that is a key attribute that our customers are interested in. They do not want another premium product that is entirely dependent upon incentives. Everybody wants to be able to scale without being reliant on incentives, and so the focus is driving cost competitiveness to eventually achieve parity with diesel. By commonizing components, commonizing parts, and building supply chain synergies across our product portfolios, we are able to achieve scale even in segments that might be considered niche. A lot of work has been done by our engineering team to achieve that and particularly our supply chain team to realize those synergies. That work is continuing this year. We have got a couple new variants that we are working on that will hopefully ship into production by probably Q4. Operator: Our next question comes from Ted Jackson with Northland Securities. Please go ahead. Ted Jackson: Hey, thanks for taking my questions. First, just out of curiosity, are you going to file your K? Liana Pogosyan: We are. Okay—good. Oh, sorry, not the K. We filed the 8-K. The 10-K is going to be filed likely on Monday. Ted Jackson: Okay, so I will not have a cash flow statement from you until Monday, basically? Liana Pogosyan: No—you will be able to reconcile it on Monday. Ted Jackson: Okay. Then there is a bunch of data in there that typically is not available, but I want to maybe dance around it unless you want to tell me, because I wanted to bring it forth into 2026. So, you know, typically, you break out the revenue within, or units within, kind of step vans and powertrain and other. Can you talk with regards to what that mix was in the fourth quarter? And then when we think about that mix in 2026, how would we think about it? I would assume that there is going to be a shift to a greater number of units coming from powertrains and hubs, given what is going on with Blue Bird and all the effort you are making with hubs, but maybe a little discussion about how you see your unit mix evolving from what we have seen in the fourth quarter—really, I guess, 2025. That is my first question. Thanks. Liana Pogosyan: Thanks for the question. The details of the unit mix will be disclosed in our 10-K that we are planning to file on Monday. But I would say directionally for 2025, the majority of the units were predominantly step vans, and hubs and powertrains made up the remainder of the mix for the full year. For the fourth quarter, powertrain and hubs drove the significant volume, with step vans being less significant. Ted Jackson: And then when we think about 2026, whether it is the—given the focus of the company—we should expect to see a pronounced shift to more powertrains and hubs relative to that? Dakota Semler: Appreciate the question, Ted. When we are talking about 2026, we do not guide to the ranges. However, the rate of growth that we are seeing in both the hub business and the powertrain business is high double digits and could easily exceed triple digits this year. The relative rate of growth is increasing significantly as compared to step vans. We still anticipate step vans will grow and sustain a lot of our core customers, but overall, we expect the other two to grow increasingly. We do not want to put too rough of a number on it, but there is a general consensus that we are seeing a lot of demand, particularly with the new variants of the hub that we have released, and then also a lot of demand with the school bus powertrains that we are building today. Ted Jackson: And those are your higher margin products, and you did kind of a lead in terms of your discussion of that last quarter that you are making strides. You will—just to share some of the tariff costs with your customers—you know what I mean? On those higher margin products, it will not show up per se 100% through to you. But can you talk a little bit about how you would see—you know what I mean? Because if you look at gross margin this quarter, and I am going to talk GAAP because it is what I have in front of me—but your gross margin for the year was down. Would we see a pronounced improvement with regards to gross margin because of the mix? I mean, could you get yourself north of what you did in 2024, or is that too much? Dakota Semler: Yeah, that is a great question. We did have some one-time impacts to gross margins that hit last year that we do not anticipate will be recurring. In regards to gross margins across the portfolio, I would say the hub is probably the strongest margin one. The powertrains are comparable to what we see in the step van realm. The reason for that is there is a lot of engineering effort and investment that goes into development for those new platforms. A lot of that gets amortized over the overall revenue that we generate from that segment. Comparable to step vans, for hubs, and powertrains and step vans, we do an annual pricing exercise where we try to realign pricing with all of the factors from the previous year taken into consideration. I do not want to communicate what is going to happen with tariff strategy or tariff policy in the next twelve months, but I think things have slowed down and have become a bit more stable in terms of tariff volatility and tariff changes. So we anticipate that our 2026 pricing, which factored in a lot of the tariff impacts that we were aware of from last year, will allow us to achieve those target margin ranges without having to go back to the customer and have them make concessions or share in any additional tariff exposure. The way we see it, we are very transparent with these customers around the tariff exposure and the tariff cost structure. It is not benefiting either of us. It is increasing your cost basis for the products that we are both building together. A high degree of transparency is shared with those customers, and I think that level of transparency creates appreciation for them in order to be able to share in some of that exposure and cost. But our 2026 pricing does have it factored in. Ted Jackson: Shifting over to the UPS program. So the 200-unit program—you have been putting units out to it. Can you give us some kind of sense in terms of that program? How many units have you shipped and how many are left, and the time frame? Dakota Semler: Yeah, the vast majority of them have shipped. There are only a few units that will hit this quarter that we will be recognizing revenue for, which have actually already been delivered, but we still need to meet all of the other revenue recognition criteria. Most of those units are on the road and operating every day delivering packages. You probably cannot tell that they are a Xos, Inc. truck. There are no markings or logos on them, but if it says “electric vehicle” on the side, there is a very high likelihood that it is a Xos, Inc. truck. They are running in California, Texas, Pennsylvania, New York, New Jersey—all over the place. It is very likely that if you are in one of those major states or cities, you will see them on the roads. Ted Jackson: Well, that is exciting. I will not see them up here in Minnesota, but maybe someday. How about on powertrain? You shipped 15 to Blue Bird this quarter; I think it was 10 last quarter. You had orders of 100 since the second quarter. Is it fair to assume that three-quarters of the volume that you have gotten from Blue Bird is on the come, if you will? Dakota Semler: Yeah, it is a good question. We do a lot of close work with their production planning team and coordinating and organizing to ensure that we are meeting their demand forecast. But they are also selling a number of other buses and their other fuel powertrains, so it does vary and fluctuate quarter to quarter, and it really comes down to their build schedule. We do anticipate that business will grow, as I was saying before, probably double digits, if not triple digits in terms of percentage this year. We have already started to see that demand come in with that order of 100 units since our last quarter. The great thing about that business is there is still very, very strong interest in that market. School buses are an ideal application to go electric. They do very short routes, generally driving twice a day. Even for some of the longer-range vehicles, they are doing field trips and other activities. They are not long-range vehicles. We also announced in Q1 an accomplishment that the newer vehicles will actually have V2G capability on them, which is becoming critical for obtaining funding and public incentive funding for procuring or acquiring these vehicles for school districts. Really, for us, we see that application continuing to grow over time. We have been very fortunate to have such an incredible partner like Blue Bird that has invested in us, continued to grow with us, and continues to share in several of these opportunities, because I think they see the reliability and durability that our platform has brought to them, and they see the cost competitiveness versus some of the other solutions that are out there in the market. Ted Jackson: So you provided a good segue into my next question, which is on the two-way charging capabilities that you announced in the quarter. Given that a battery system has so many cycles of charge and discharge, when you put something like that in place, does it change the lifespan of that infrastructure? Is there much of an impact for that? And is there any kind of resistance because of it? Dakota Semler: Yeah, that is a great question. Any use of the battery or any component in the powertrain is going to have an impact on the overall lifespan. In the context of V2G, the discharge rate for most V2G chargers and V2G vehicles is not nearly the most intense use of the battery pack. The most intense use is often fast charging. If you are doing 1C charging on the vehicle—that is 1C or 2C charging depending upon the battery system. When you are doing V2G charging, for instance, a typical bus battery for us might be around 200 kilowatt-hours. A typical V2G power connection is usually only about 60 kilowatts, so it is equivalent to like a 0.3C charge rate. Without getting too much into the technical specifics, it is a much lower charge demand. It still does create some degradation and it is utilizing the pack, but it is not a very intense use case like you have with fast charging. All of that is factored into our long-term warranty. We warrant on usage as well as on duration of when the vehicle is deployed. So we have warranty programs depending upon what the customer wants and what our suppliers want, that will extend that. We have done a ton of work in qualifying the batteries and characterizing them to make sure that we can hit those warranty periods. That is largely in part due to the newer battery chemistry that we have been using for the past four years or so, which is our lithium iron phosphate battery pack that enables us to achieve those higher extended life cycles. Ted Jackson: Is there an ability for you to retrofit any of your installed base with that capability? I would imagine you would be interested if you could. Dakota Semler: Yeah, for some of our later-generation vehicles that we have recently delivered, we have explored the potential to install the V2G capability. It is a pretty simple hardware change and a software change. We have not determined whether it is enough opportunity to pursue and commercialize and offer it to customers, but from a technical feasibility standpoint, it is something that we have evaluated and feel that we could do. Ted Jackson: Let me ask one more, and then I will get out of line. I am going to cycle back in if there is time. Going back to Blue Bird and the hub—you have a really strategic opportunity there. Are they interested in the hub? Is there any chance that you have them as a distribution partner for you for the hub? Or do they bring you in for sales and such? It seems like a logical place for the hub to go. Dakota Semler: Yeah, it is a great question. Blue Bird itself has obviously been very interested in the product, but they have an incredibly robust dealer network that they partner with, which is crucial in their distribution of their products. We have actually already started building relationships with several of their dealers who have been delivering the buses with Xos, Inc. powertrains in them. Those folks have been a great touch point to socialize the product for the end school district fleets, so we have already had several of those conversations. We do think there is a tremendous opportunity in those school bus fleets. Oftentimes, they do not have the adequate power in their yards because they have not had EVs in their fleet before, just like most of our customers. The hub is a perfect application. Generally, a lot of these sales—the average sale of a school bus transaction—is very low volume; it can be single-digit units. The hub really is a perfect product to be able to support those smaller deployments that do not currently have infrastructure in place. We are looking to expand that distribution segment with our existing hubs commercial team. Ted Jackson: And so you would be going into that distribution network with the blessing of Blue Bird. Blue Bird would not be, like, OEM reselling your product into it themselves? Dakota Semler: That is correct. Ted Jackson: I have a couple more questions. On the new hubs, you said they would start becoming available in April, which is next month. Is that still on track? Dakota Semler: Yeah, actually the first 420 kilowatt-hour variant shipped this quarter. We have a couple units that are going out, and everything after this will be all of the new options. Ted Jackson: Well, that is exciting. Thanks. This is a working capital question. The improvement in working capital that you guys have done in 2025 is unbelievable—amazing. But if I look at the balance sheet in the fourth quarter and I see your receivables and everything, I am hard-pressed to see that there is much more improvement that you can get. When you think about 2026 and your ability to generate cash, is there more cash you think you can get off the balance sheet, or is it going to be more based on access of the ATM and revenue growth and margin improvement? Dakota Semler: It is a great question. The first thing I would start with is on the working capital utilization standpoint. We still have about $25 million in inventory, and not all of that—only a very small portion of that—is finished goods, but that usable inventory is the primary means of generating more cash for working capital in the year. We are continuing to focus on the longest segments of our inventory conversion process to optimize and cut those down to make sure that we can turn that inventory. We want to be really, really lean. We want to get to multiple inventory cycles per year, which we still have yet to do. The first thing we are working on is optimizing that inventory, turning it over quicker, building to order, delivering products faster, delivering more strip chassis as opposed to step vans, and delivering more hubs, which is a complete assembly that we build. Same with powertrains—it is a completed assembly, so we recognize revenue as soon as it is delivered. So the product mix will favor that and help that, as well as just our improved processes internally to order, spec, and get vehicles delivered. We do hope to be able to utilize the ATM in the year ahead. We are going to figure out when there is an optimal time to be able to do that. That is why we have that facility outstanding. We are going to be selective about it, and we do not want to overly dilute the cap table and impact investors, particularly where the stock is today. I think there are other things that we can continue to do and improve. We have taken a pretty hard look at OpEx, and we do not believe OpEx is going to be restructured that heavily in 2026, but there are some expenses that will continue to reduce and burn down through the year, which will be favorable for working capital. Lastly, growth in new segments—having products such as the hub and the powertrains that we do not ever have to deliver as a partially assembled vehicle, where it is sitting in somebody else's hands, which could be for months on end—will dramatically enable us to reduce that inventory count and value over time and speed up our inventory turns. Ted Jackson: That is a good point. Then jumping back over to the hub, last quarter you talked about going into some new avenues with the hub—power and resiliency—and you mentioned that you would be able to provide some more color. Can you maybe give a little update on what is going on with regards to your efforts to position the hub for that and penetrate? Dakota Semler: Yeah, it is actually a big area of focus for the engineering team as well as our sales and business development team right now. We think that there is a niche that is not being serviced right now in the power reliability and power resiliency markets, not just for mobile applications but also for fixed applications. I can talk about it at a high level, but with the influx of data center demand creating huge demands on the grid for power, every industrial power user is now competing with the likes of those customers, which are willing to pay premiums for power delivery and they are willing to pay premiums for power reliability and resiliency. Now folks that operate a 3PL warehouse or a cold storage facility or any other kind of industrial power consumer are going to be competing with the likes of Google and Facebook and many of these other larger companies that are incredibly well capitalized, looking to buy power or even establish behind-the-meter infrastructure. Our focus is on solving the niche segment, which is going to be power reliability, power resiliency, and being able to provide those industrial power users that are focused on keeping their operations going and continuing to grow. Data centers are one application, but we believe that is one segment of many that will need power reliability in this current industrial grid environment that we are in today. Ted Jackson: Okay. And then my last one, just more for clarity. When we talk about powertrains, it is kind of almost interchangeable—powertrain business and Blue Bird. You talked last quarter about 10 of shipments to Blue Bird, this quarter 15. Is there other customers other than Blue Bird that are taking powertrains, or is Blue Bird right now kind of the only thing and something you want to build off of? Dakota Semler: There are a few other customers. The customer diversity is not nearly what it is in the vehicles business, but it is something that we are working on—diversifying and building up new customers there. I think with our latest powertrain platforms that we have been developing, we should have a lot more interest coming from some other off-highway customers and other segments that we have not really gotten the best penetration in previous years. Ted Jackson: Okay. Alright. That is it for me. Thanks for all the time. I appreciate it. Dakota Semler: Thanks, Ted. I appreciate all the questions. Operator: This concludes our question and answer session. Thank you for attending today's presentation. You may now disconnect.
Jordan: Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 2025 IRIDEX Corporation Earnings Conference Call. All lines have been placed on mute; there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Trip Taylor, Investor Relations. Please go ahead. Thank you, and thank you all for participating in today's call. Trip Taylor: Joining me from the company are Patrick Mercer, IRIDEX Corporation's Chief Executive Officer, and Romeo Dizon, the company's Chief Financial Officer. Earlier today, IRIDEX Corporation released financial results for the quarter ended 01/03/2026. A copy of the press release is available on the company's website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact, including, but not limited to, statements concerning our strategic goals and priorities, product development matters, sales trends, and the markets in which we operate. All forward-looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place reliance on these statements. For a discussion of the risks and uncertainties associated with our business, please see our most recent Form 10-Ks and Form 10-Q with the SEC. IRIDEX Corporation disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, March 26, 2026. I will now turn the call over to Patrick. Patrick Mercer: Thank you, Trip. Good afternoon, everyone, and thank you for joining us. Today, I am proud to share our fourth quarter and full-year results, which represent a successful year and a positive transformation for IRIDEX Corporation. In 2025, we achieved our goals to streamline our operations, reduce costs, and put IRIDEX Corporation on a path to sustainable profitability. For the full year 2025, we grew revenue by 8% and reduced operating expenses by 22% compared to the prior year. This leverage helped deliver positive adjusted EBITDA for the first time in the company's recent history. Further, we closed out the year by generating positive cash flow from operations in the fourth quarter. I believe it has been made clear that we have done the work to create a new financial profile capable of generating positive cash flow from operations in 2026 and beyond. For the full year, revenue was $52.7 million, representing 8% growth year over year versus 2024. Notably, we saw growth across every major product category—Cyclo G6, medical retina, surgical retina—as well as across both our U.S. and international businesses. Fourth-quarter growth was even stronger. The 16% increase marked the strongest quarterly growth rate of the year. I want to take a moment to highlight some of the important contributors to our strong Q4 performance. On the cost side, we are continuing to right-size the business to be more in line with revenues. We have continued to make meaningful progress with the relocation of certain general and administrative functions out of California. We expect this initiative alone to generate approximately $165,000 in quarterly savings beginning in Q1 2026. We also plan to relocate our headquarters later in 2026, which will further reduce our fixed cost base by approximately $600,000 on an annualized basis. Also, as part of our continuing efforts to reduce our cost structure, we are in active discussions with contract manufacturers as part of a multiyear initiative to transition production away from our Mountain View facilities and toward lower-cost third-party manufacturing. We expect to begin meaningful transfers in 2026, which will incrementally lower our cost of goods as the year progresses. Full implementation is expected to be completed in 2027, and will prove a further meaningful reduction to our cost of goods. This initiative is expected to be a significant driver of gross margin improvement over the coming years. Turning now to take a closer look at our commercial results. For the fourth quarter, beginning with our glaucoma business. In the United States, our strategy remains centered on leveraging our substantial installed base of Cyclo G6 systems and driving higher procedural utilization. Medicare LCDs introduced last year continue to create drivers for G6 adoption earlier in the continuum of care for mild- to moderate-stage patients. Our team is focused on educating our physician users on this opportunity, including highlighting our robust clinical data supporting the IOP-lowering efficacy of the procedure and updated sweep speed procedural technique. Using MedScout, our relatively new sales enablement software platform, we are identifying accounts in the mid-range of utilization to engage with clinicians and reiterate the benefits of our repeatable, incisionless procedure. In an extension of this effort, we are also now targeting high-volume MIGS surgeons who, based on their case volumes, have the potential to adopt the procedure at meaningful utilization levels. Pricing tailwinds based on the enhanced value of our procedure also contributed positively to Q4 glaucoma revenue. Physician relocations drove a number of system sales in the quarter as the new practice locations acquired their own dedicated G6 systems. With a growing installed base, higher ASPs, and increasingly effective commercial targeting through MedScout, we are well positioned to drive meaningful G6 growth throughout 2026. In total, in the fourth quarter, we sold 15,900 probes versus 13,300 in the prior-year period, and 44 G6 systems versus 47 in Q4 2024. For the full year 2025, we sold 57,800 Cyclo G6 probes compared to 55,400 in the prior year, and 133 G6 systems compared to 125 in 2024. International glaucoma was also strong across multiple geographies. In Europe, Middle East, and Africa, glaucoma probe sales grew for the third consecutive quarter, supported by fulfillment of several GPI orders, a meaningful milestone for the region. It is important to note that the conflict in Iran is impacting sales in the Middle East materially today. In GmbH, G6 probe sales remain stable with existing customers, and we believe our GmbH utilization is well positioned to absorb incremental volume as we work through distributor transitions in the region. In Asia, the region continued to experience volatile and operational challenges. Despite continued demand, shifting macroeconomic conditions continue to impact our commercial activity. The evolving tariff uncertainty with China continues to challenge sales and forecasting. In Japan, current headwinds continue to weigh on near-term results. Our partnership with Topcon remains, and we are monitoring the macro environment closely and expect conditions to improve over time. In Latin America and Canada, the region showed steady utilization in G6 probes, reflecting solid adoption of our technology in Canada and across key markets. Now turning to our retina portfolio, our top priorities continue to be capitalizing on the ongoing upgrade cycle, driving PASCAL adoption, both domestically and internationally, and securing additional regulatory approvals for our next-generation retina platforms to capitalize on our global distribution network. In the United States, PASCAL is firmly established as our flagship system, and we are seeing consistent trends of existing PASCAL customers upgrading to our newer platforms. Additionally, newly graduating ophthalmologists are choosing IRIDEX Corporation's PASCAL systems, in part due to our efforts to ensure PASCAL is the preferred system used in university and training programs. Medical and surgical retina revenue performed well. Surgical retina was a particular standout, exceeding the plan for the quarter. EndoProbe sales held steady throughout Q4, demonstrating consistent performance. Turning to international retina. In Europe, Middle East and Africa, the region continued to perform in line with expectations. PASCAL's performance in the Middle East and Africa was somewhat softer in Q4 following the fulfillment of several large orders in Q3. We are also making progress in expanding our E&C business in the U.K. with notable increases in ENT probes and IQ 532 XP systems. Italy remains stable and we continue to manage distributor quality and service in that market. Middle East sales of retina products are also being materially impacted by the conflict in Iran. In GmbH, capital equipment sales faced a slowdown in part due to purchase order delays. However, we completed our first IQ 532 XP sales in Germany. We believe this represents a promising new model for expanding our business. Our GmbH team has secured PASCAL Synthesis orders and continues to build a pipeline for placements with newer models pending MDR certification. In Asia, our retina business was affected by the same macro dynamics impacting glaucoma across the region, including the China tariff situation and currency pressures in Japan. Despite these headwinds, underlying demand for our retina products across Asia remains solid, and we believe the region represents meaningful upside as operational uncertainty is clarified. In Latin America and Canada, the region continues to stabilize, supported by consistent PASCAL sales driven by renewed distribution engagement in Chile and Colombia. Representative of our comprehensive commercial efforts, it is important to call out that clinician interest in our glaucoma and retinal laser platforms was very apparent at the American Academy of Ophthalmology annual meeting. Our booth location saw substantial foot traffic. We are pleased to see the growing attention to our industry-leading technology and have come out of the meeting with a large number of high-quality leads. More importantly, on the execution front, our sales team did an exceptional job converting those leads into orders, with close to $1,000,000 in business stemming directly from that meeting. We expect to continue to execute on our strategic initiatives and extend our commercial momentum with our glaucoma and retina platforms to drive revenue growth in 2026. For the year, revenue is expected to range from $51,000,000 to $53,000,000. This guidance contemplates no sales in the Middle East. When adjusted to exclude Middle East revenue in 2025, our guidance represents 2026 growth of 1% to 5%. I will now turn the call over to Romeo Dizon to discuss our financial results. Romeo Dizon: Thank you, Patrick. Good afternoon, everyone. Thank you for joining us today. Before I review the financial results for the quarter, please note that the fiscal year 2025 was a 53-week year, with the fourth quarter spanning 14 weeks compared to 13 weeks in the prior-year period. As we noted in our press release and in Patrick's comments, our total revenues for 2025 were $14,700,000, representing a 16% year-over-year increase compared to $12,700,000 in 2024. Growth was driven primarily by higher retina sales, including PASCAL sales, and glaucoma probe sales. Retina product revenue increased 22% in 2025 to $8,900,000 compared to 2024, driven primarily by the higher PASCAL system sales and medical and surgical retina system sales. Product revenue from the Cyclo G6 glaucoma product family was $3,800,000, representing growth of 15% year over year, driven primarily by higher probe sales. Other revenues decreased $100,000 to $2,000,000 in 2025, compared to $2,100,000 in 2024. Gross profit in 2025 was $5,500,000, or a gross margin of 37%, a decrease of $100,000 compared to $5,600,000, or a gross margin of 44%, in 2024. The decline was primarily due to an increase in overall manufacturing costs, including increased product costs associated with tariff developments throughout the year, and lower capitalization of manufacturing overhead as our inventory levels declined. Operating expenses were $5,500,000 in 2025, a decrease of $600,000, or 10%, compared to $6,100,000 in 2024, due to expense reduction measures taken in late 2024. Net loss for 2025 was $200,000, or $0.01 per share, compared to a net loss of $800,000, or $0.05 per share, in the same period of the prior year. Net loss for 2025 included a provision for income tax of $100,000 and interest expense of $100,000. Non-GAAP adjusted EBITDA for 2025 was $817,000, an improvement of $200,000 compared to non-GAAP adjusted EBITDA of $611,000 for 2024. The improvement is driven primarily by the expense reduction measures implemented in late 2024. Cash and cash equivalents totaled $6,000,000,000 at the end of the fourth quarter 2025, an increase of $400,000 compared to $5,600,000 at the end of 2025. In 2025, cash use was $2,100,000, an improvement of 71% compared to 2024. We are very pleased with our reduction in cash usage and expect cash use to continue or improve from these levels. While gross margin is a key driver to improving our financial profile, we experienced a decline in 2025 mainly due to an increase in overall manufacturing costs, including increased product costs associated with the tariff developments throughout the year, and lower capitalization of manufacturing overhead as our inventory levels declined. For the full year 2025, our gross margins also declined due to inventory write-downs, coupled with the reasons for the decline in the fourth quarter. We expect gross margins to improve as we progress through the manufacturing transition to third-party contract manufacturers in 2026 and 2027. Operating expenses continued their favorable trend in the fourth quarter, reflecting the sustained impact of the cost reduction initiatives implemented beginning in Q4 2024. For the full year 2025, operating expenses were reduced 22% year over year. The relocation of certain G&A functions out of California, commencing in 2026, is expected to generate approximately $165,000 in quarterly savings beginning in Q1 2026. We are very pleased to report that we achieved positive adjusted EBITDA for the full year 2025, consistent with the commitment we made at the outset of the year. In 2025, we achieved positive cash flow, another key milestone. Cash and cash equivalents at the end of the fourth quarter reflect our meaningfully reduced cash burn, and we expect to maintain this trajectory in 2026. As a reminder, in general, our cash usage is highest in the first quarter of the fiscal year, resulting from payments of accrued compensation and other accrued expenses and liabilities. For the remaining quarters of the year, we expect to generate cash, and for quarterly cash generation to improve sequentially as we sell through inventory and collect receivables on increased revenues. Cumulatively, this will result in positive cash flow for the fiscal year 2026. As Patrick mentioned, we are initiating our 2026 guidance. We expect to generate revenues of between $51,000,000 and $53,000,000. As a result of the market disruption from the ongoing conflict in the Middle East, this guidance does not include revenue from that region. On a pro forma basis, adjusted to exclude Middle East revenue in 2025, guidance represents 2026 growth of 1% to 5% compared to 2025. We also want to reiterate the seasonality we experience in our business. The first quarter on average represents 22% of our annual revenue and is the lowest quarterly total revenue for the year. From the total dollar perspective, the second and fourth quarters are seasonally stronger than the first quarter, with the fourth quarter being the strongest quarter of the year, and the third quarter is generally a sequential decline from the second quarter. We have provided the expectations for our adjusted operating expenses, which exclude depreciation and amortization and stock compensation, to be in the range of $19,000,000 to $19,500,000. And with that, I will turn the call back to Patrick. Patrick Mercer: Thank you, Romeo. As I reflect on the past year, I am proud of what the IRIDEX Corporation team has accomplished. When we began this transformation in Q4 2024, we set out to grow revenue, reduce operating expenses, improve our financial profile, and position the business for sustainable profitability. We are proud to say that we have delivered on all four. Looking to 2026, our priorities are clear. On the growth side, we are focused on expanding our G6 user base, targeting high-volume MIGS surgeons using MedScout intelligence, while continuing to drive utilization among our existing installed base. For retina, we are pursuing international regulatory approvals to unlock new geographies and accelerating our PASCAL installed base replacement cycle domestically. On the cost side, we will continue our transition to contract manufacturing, minimize production at our headquarters, and advance our facility relocation. We thank you for your continued support of IRIDEX Corporation and look forward to updating you on our progress next quarter. Thank you. Jordan: As a reminder, if you would like to ask a question, press star one on your telephone keypad. Your first question comes from the line of Scott Henry from Alliance Global. Your line is live. Scott Henry: Thank you, and good afternoon. Just a couple of questions. First, when thinking about your 2026 guidance, how large is the Middle East in terms of revenues? What percent of the revenue base? Patrick Mercer: Hi, Scott. It is 5% of our total revenue base and 10% of U.S. Scott Henry: Hi, Patrick. Thank you. So larger than typical for that geography. Looking at Q4 also, I noticed the other was down sequentially. Is that just typical variability, or any trends going on, kind of down from Q3, in the other segment? Romeo Dizon: Segment? Say that again, Scott. When you say other segment, what do you mean? Scott Henry: The other revenue line. It is about $2,000,000. It was, I think, $2.2 million last quarter, $2.2 million before—I mean, not big numbers—but Romeo Dizon: This is basically dependent on the service product lines, and not really—one month we will just get a bunch of service to provide. Others, there is just, you know, it is pretty flat. It is staying around within that same level, plus or minus $100,000. Scott Henry: Okay. Fair enough. And then when I was looking at G6, we do not have—I will get the specific breakouts, but just based on the general statement—it looks like pricing was down a little bit from the past couple quarters relative to the systems sold and the probe utilization. Is that fair, and is that a trend or just, you know, quarterly noise? Romeo Dizon: No. If anything, if you are looking to consolidated numbers, that must have been the OUS driving that down because in OUS and in the U.S., we have actually increased ASPs on the probes. And the volume as well has picked up and has continued to pick up as of this quarter. Patrick Mercer: Yes. We have increased ASPs last year and this year on both the probes and the system for global—in the U.S. Scott Henry: Okay. I guess I will just take a look at that when the K is filed as well. Final question. When you look at the retina segment, and, I guess, a little bit the G6 segment, how do you think of organic growth rates, particularly on the retina segment? How should we think of kind of a steady-state or organic growth rate for that segment? Romeo Dizon: Scott, I guess, you know, when we were talking back four, five years ago, we always expected the revenue to decrease, like, 1% to 2%. Well, after I left, the company has acquired or merged with the Topcon and we have acquired the PASCAL systems. So I think in my own mind, in terms of the size of this distribution model plus the product itself, PASCAL, which is really becoming our product flagship in the U.S., has just really contributed to either a small growth in the product business the last couple years. Scott Henry: Okay. So, I mean, it sounds like you are—if I think about the category growing at about 4%, do you still think you are gaining share in the retina segment? To put it differently? Patrick Mercer: Absolutely. We, you know, with our PASCAL, we have a lot of momentum moving forward with that product. It is faster than the competition. It is serviced in the field. And it is doing really well. And as we get more MDR approvals globally, we are going to see that pick up. It has already taken off in the U.S., and as we get more approvals, it will definitely pick up. We expect to see that increase. Scott Henry: Okay. Great. Thank you for taking the questions. Romeo Dizon: Thanks, Scott. Jordan: There are no further questions. I would like to turn the call over to Patrick Mercer for closing remarks. Patrick Mercer: Great. I appreciate everyone's time. We will continue to update you on our business and appreciate the questions. Thank you. Jordan: That concludes today's meeting. You may now disconnect.
Operator: Ladies and gentlemen, thank you for joining us and welcome to Laird Superfood, Inc. Fourth Quarter 2025 Financial Results. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Trevor Rousseau, Head of Investor Relations. Trevor, please go ahead. Trevor Rousseau: Thank you and good afternoon. Welcome to Laird Superfood, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. On today's call are Jason Vieth, Laird Superfood, Inc.'s President and Chief Executive Officer, and Anya Hamill, our Chief Financial Officer. By now, everyone should have access to the company's earnings release, which was filed today after market close. It is available on the Investor Relations section of Laird Superfood, Inc.'s website at investors.lairdsuperfood.com. Before we begin, please note that during this call, management may make forward-looking statements within the context of federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those described. Please refer to today's press release and other filings with the SEC for a detailed discussion of these risks and uncertainties. I will now turn the call over to Jason Vieth. Jason Vieth: Good afternoon, everyone, and thank you for joining us today. I am Jason Vieth, CEO of Laird Superfood, Inc. And I am joined by our CFO, Anya Hamill. We appreciate you taking the time as we review our fourth quarter and full year 2025 results, which we released earlier today. Fiscal 2025 was a pivotal and transformative year for Laird Superfood, Inc. We delivered record net sales of $49.9 million, up 15% versus the prior year and in line with our revised guidance. In the fourth quarter alone, net sales rose 15% to $13.3 million. This growth was broad-based and especially strong in our wholesale channel, which surged more than 40% in both Q4 and for the full year. That momentum came from meaningful distribution expansion paired with continued strong velocities in grocery and club outlets. Retail consumption data for the latest quad week ending 02/22/2026 confirms the health of that wholesale acceleration. Across measured natural and MULO channels, coffee posted the strongest full-year performance of any Laird Superfood, Inc. product group, +45% dollar growth on +18% unit growth over the last 52 weeks. Shelf-stable creamers delivered +15% dollar growth for the year, maintaining the largest share of our portfolio at 28%. I am also excited to report a very successful relaunch of our refrigerated creamers during late Q4 into early Q1, which included reformulation to what we believe is the cleanest, best-tasting liquid creamer product in the market. In addition, we repositioned our creamer to an extended shelf life refrigerated product packed in a post-consumer recycled plastic bottle. We believe that these changes to a cleaner formula and an already recycled bottle improve our positioning with both our retailers and our consumers. And after a challenging 2025 for this product, we are already seeing strong momentum in the latest four weeks, up 7% in the natural channel versus the same period last year. I want to be clear that these results are no accident. They are direct proof that our strategy to win in coffee solutions, which includes coffee, creamers, and lattes, is working. Consumers are responding to our complete ecosystem of functional, better-for-you coffee and coffee companions. And that is translating into outsized velocity and distribution gains in our core categories. E-commerce remained resilient at roughly half of total sales, and softness in our direct-to-consumer platform was partially offset by strong continued growth on Amazon.com, further reinforcing the power of our coffee solutions portfolio with the everyday convenience shopper. While we appreciate the core set of consumers that come to our DTC site to explore and purchase our Laird Superfood, Inc. products, we harbor no illusion that Amazon will not continue to win online volume in the future. For this reason, we will continue to leverage Amazon as the growth engine for our e-commerce sales. I also want to give a heartfelt acknowledgment to the entire Laird Superfood, Inc. team for the outstanding job they did of managing through the chaos of sharp commodity inflation, new tariff pressures, and ongoing supply chain volatility. Throughout 2025, they proactively secured strategic inventory ahead of tariff increases, built safety stock to protect service levels and avoid out-of-stocks, and maintained tight operational discipline across procurement, logistics, and cost control. That level of foresight and agility under pressure is exactly what allowed us to deliver top-line growth while keeping the business running smoothly, and I could not be more proud of how this team showed up every day. Now onto the other big news that we have shared over the last couple of months. Just two weeks ago, on March 12, we closed the acquisition of Navitas Organics, funded by the $50 million investment that we completed with Nexus Capital. This transaction is perfectly on strategy and represents a major step in our vision of building a scaled superfood platform. Navitas brings to Laird Superfood, Inc. a premium, purpose-driven brand with more than 20 years of history, $45.3 million in 2025 net sales, and a 31.8% gross margin. It adds complementary products, stronger reach in conventional grocery and club channels, new customers, and greater geographic diversity. Together, Laird Superfood, Inc. and Navitas instantly become a larger, more diversified platform with enhanced scale, cross-selling opportunities, and supply chain efficiencies we expect will drive both revenue growth and profit expansion in the years to come. The financing structure itself underscores our confidence in this path. Nexus invested $50 million upfront through the purchase of Series A preferred stock. Importantly, the investment agreement also gives us the option to call an additional $60 million from Nexus anytime within the next 270 days after closing, or up to 360 days if we are actively in discussions on another strategic transaction. These proceeds are earmarked for an acquisition or other growth initiative, with any remainder available for general corporate purposes. This financial structure gives us tremendous flexibility to move on additional opportunities should they arise. Of course, this investment did result in meaningful dilution to our common equity. On an as-converted basis, Nexus' stake represents approximately 56.2% of the company today. We are very transparent about that dilution because it is being exchanged for something that we believe is far more valuable: the immediate addition of a profit-accretive business that we expect will strengthen our overall earnings power and cash flow generation going forward. In short, we expect to be trading some ownership percentage today for a much larger, higher-quality earnings stream tomorrow. We are genuinely excited about the potential for additional acquisitions as we build out the leading superfood business in the country. With the capital access provided by Nexus, and the integration playbook we now have, we see a clear runway to continue consolidating within the superfood and functional food space. Our goal is to keep building scale, broaden our product portfolio, deepen our retailer partnerships, and ultimately create a category leader that delivers sustainable, profitable growth for years to come. Looking ahead, our priorities remain clear: drive continued wholesale momentum, protect and expand gross margins through synergies with Navitas, and execute a seamless integration while staying opportunistic on further M&A. With our strengthened balance sheet, expanded platform, and talented combined team, I have never been more optimistic about Laird Superfood, Inc.'s future. Before I turn it over to Anya for the detailed financial review, I want to thank every single Laird Superfood, Inc. teammate, our retail partners, our consumers, and now our new Navitas Organics colleagues. 2025 proved we can grow through turbulence, and 2026 is going to be the year that we show what a true scaled superfood platform can achieve. Anya, over to you. I will now turn the call over to Anya Hamill for the financial results. Anya Hamill: Thank you, Jason, and good afternoon, everyone. I will now provide additional detail on our fourth quarter and full fiscal year 2025 financial results. As Jason highlighted, we closed the year with record net sales of $49.9 million, which was up 15% year over year, and Q4 net sales of $13.3 million, also up 15% versus prior year. I will build on those headlines with the underlying financial details. Our wholesale channel was the primary growth driver, increasing 44% year over year to $7.0 million in the fourth quarter, representing 52% of total Q4 net sales. For the full year, wholesale grew 41% to $24.9 million, representing 50% of total net sales. This channel mix shift is a direct reflection of our strategy to transition Laird Superfood, Inc. to a wholesale-led business, and the numbers confirm we are executing against that plan. E-commerce contributed $6.4 million, or 48% of Q4 net sales, reflecting a 6% decline year over year; softness in our direct-to-consumer platform was partially offset by continued growth on Amazon.com. For the full year, e-commerce contributed $25.0 million, or 50% of net sales, down 3% versus 2024. As Jason noted, we are focused on Amazon as the growth engine within e-commerce, and our DTC channel continues to benefit from a highly loyal repeat customer base. Gross margin in the fourth quarter was 34.1%, compared to 38.6% in the corresponding prior-year period. This contraction was driven primarily by increased product cost from inflationary commodity prices and the residual impact of tariffs that have now largely been canceled for our raw materials, as well as the settlement recoveries recognized in fiscal year 2024 that did not reoccur in 2025. For the full fiscal year, gross margin was 37.9%, compared to 40.9% in 2024. This year-over-year decline was driven by the same dynamics as in Q4: commodity and tariff pressures alongside the non-recurrence of prior-year settlement benefits. Despite these headwinds, we delivered full-year gross margins in the upper 30% range, consistent with our stated expectations. Our supply chain team continues to drive efficiency through direct partnerships with key raw material suppliers and co-packing partners, and we remain confident in our ability to sustain gross margins at levels competitive with best-in-class CPG companies. Total operating expenses for fiscal year 2025 were $22.3 million, compared to $19.9 million in the prior year, reflecting planned investments in sales and marketing to support our top-line growth, partially offset by continued discipline in general and administrative costs. Net loss for the fourth quarter was $1.8 million, or $0.16 per diluted share, compared to net loss of $0.4 million, or $0.04 per diluted share, in the prior-year period. This year-over-year increase in loss was driven primarily by $0.9 million in professional fees incurred in connection with the Navitas acquisition, as well as higher commodity- and tariff-related procurement costs. For the full fiscal year 2025, net loss was $3.3 million, or $0.31 per diluted share, compared to $1.8 million, or $0.18 per diluted share, in 2024, a year-over-year increase of $1.5 million. Let me be clear about what drove that: the $0.9 million in Navitas acquisition-related fees and $0.7 million in Pikibar's intangible assets impairment charge. Together, those account for $1.6 million, essentially the entirety of the year-over-year change in net loss. Excluding these two discrete nonrecurring items, our core business net loss was essentially flat year over year, even as we absorbed significant commodity inflation and tariff headwinds. That is a result we are proud of, and it reflects the underlying earnings progress of our business. I also want to highlight our adjusted EBITDA performance, which I believe is an important measure of our underlying business progress. For the full fiscal year 2025, we delivered positive adjusted EBITDA of $0.3 million, which is a significant improvement from a $0.7 million loss in 2024 and consistent with our commitment to achieve at least a breakeven adjusted EBITDA for the full year. This represents a $1.0 million year-over-year positive swing and reflects the operating leverage that we are beginning to generate as our top line scales. Now turning to our balance sheet. We ended fiscal year 2025 with $5.3 million in cash and no debt. Accounts receivable increased to $3.9 million from $1.8 million at year-end 2024, reflecting the timing of large wholesale shipments at year-end 2025, which were subsequently collected in 2026. Inventory ended the year at $7.8 million, down from its peak of approximately $11.0 million in 2025, consistent with our strategy to draw down the forward purchases we made earlier in the year in order to mitigate the impact of tariff-related cost increases. Cash used in operating activities was $2.8 million for fiscal year 2025, compared to $0.9 million provided by operations in 2024. The year-over-year change was primarily driven by working capital dynamics, specifically the inventory build in the first half of the year and the timing of year-end wholesale receivables. As those receivables have since been converted to cash, and inventory levels continue to normalize, we expect operating cash flow to improve throughout 2026. Now on to 2026 outlook. While we are not providing detailed formal guidance for fiscal year 2026 at this time, I do want to share our directional expectations for the combined business. As a starting point and for context, Navitas generated net sales of $45.3 million and gross profit of $14.4 million, reflecting a gross margin of approximately 31.8% for fiscal year 2025, and reported net income of approximately $1.6 million for that period. These results are on a historical stand-alone basis and were not included in Laird Superfood, Inc.'s consolidated 2025 financial statements. Combined with Laird Superfood, Inc.'s $49.9 million in 2025 net sales, we are building from a meaningful combined revenue base. Looking ahead, we expect net sales for the combined business to grow by at least high single digits in 2026, and we expect adjusted EBITDA to increase, driven by top-line growth and the realization of integration synergies across procurement, supply chain, and operations. We will provide specific full-year 2026 guidance in connection with our first quarter 2026 earnings release, and we look forward to sharing more details at that time. I will now turn the discussion back over to Jason for any closing remarks. Jason Vieth: Thank you, Anya. In closing, fiscal 2025 was a year that tested our resilience and proved our conviction. We delivered record revenue, strengthened our wholesale momentum, successfully relaunched our refrigerated creamers, and, most importantly, took a transformative step forward with the acquisition of Navitas Organics and our partnership with Nexus Capital. We are no longer just a promising coffee and creamer brand. We are now a scaled, diversified superfood platform with greater reach, enhanced capabilities, and a clear runway for accelerated growth and margin expansion. The foundation we have built, combined with the talent and dedication of our combined teams, positions us exceptionally well for what is ahead. To our shareholders, thank you for your continued belief in our vision. To our retail partners, your support and partnership have been instrumental. To our consumers, your loyalty and enthusiasm for better-for-you functional products inspire us every day. And to every member of the Laird Superfood, Inc. and Navitas teams, thank you for your hard work, creativity, and unwavering commitment through a year of significant change. We enter 2026 with tremendous momentum and optimism. This is just the beginning of what we believe will be a multiyear journey to build the leading superfood company in North America. Thank you again for joining us today. We look forward to updating you on our progress when we report first quarter 2026 results. Operator, we will now open for questions. Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Nicholas Sherwood of Maxim Group LLC. Your line is open. Please go ahead. Nicholas Sherwood: My first question is how much crossover in retail locations exists between Laird Superfood, Inc. products and the Navitas products? And has there been a substantial improvement in average items carried? Jason Vieth: Hey, Nicholas. This is Jason. I thought the first part of your question is—who was the—or what was the last part? Nicholas Sherwood: The last part was, has there been an improvement in average items carried with the combined portfolio? Jason Vieth: Got it. I need to mention the portfolio a little bit so it is clear where it is. So, in the case of the biggest—think about this business as a pretty similarly sized business, Laird Superfood, Inc. They have more exposure to the wholesale channel than we do. They especially do not have as much of an online business as we do. There is a significant amount of crossover when you consider retailers similar to Laird Superfood, Inc. They are predominantly natural channel. They grew up through the natural channel, and the largest accounts being Whole Foods. So very similar to the Laird Superfood, Inc. portfolio that is now committed to this transaction. In terms of average assortment, we will be working on both of these brands. We are dividing both brands, so I want to be really, really clear on that. This is a planned deal forward where we will be managing multiple brands under the ticker symbol, but we will have something that is a house of brands. And Navitas is equally important, equally sized superfood, with a great portfolio of products that they compete in in different categories, but also in very similar temperature state in a shelf-stable bag or pouch products that very, very much like what you see with other superfoods. So there is not really a consolidation of items in these states. It is actually an expansion of items as you consider both brands, but there is quite a lot of overlap, and we are working through that now with the combined sales organization, which will really allow us to go to market in a more impactful way. All of those retailers that I mentioned, as well as just getting us additional help with—we are going to approach retailers. And then you are going to see where we belong. We indicated that as being the largest go-forward opportunity for us. Now we can go in with two exceptional brands and really play a much more important role to those retailers as well. So we are really excited about the assortment opportunities this creates, being able to leverage one brand for the next brand. Those relationships are super important in being able to utilize those across the two brands. Now we expect to see some really nice distribution years ahead. Nicholas Sherwood: Okay. Thank you for that detail. And then, switching gears, what have commodity prices looked like in the last month? Are oil prices higher? Are some of your suppliers having to raise their prices due to increased shipping costs and the like? Jason Vieth: It is a great question. We are not seeing a lot of impact from small cost increases on the margin thus far. We are largely in contracts that we entered the year with, where we have strong pricing buys that we have made. And as we look at those relative to what is going on, we have very little product that is impacted this route or not really impacting our products or anything more fuel- and distribution-related, and that has not shown up in our cost structure at this point. So we are cautiously optimistic that the routes that we run are in place, which are largely Asia and South America. We will be able to—in a bit of a—especially in the West Side of Africa, we will be able to kind of miss most of what is happening with regards to any inflation out of that. Nicholas Sherwood: Okay. And then my last question is, what sort of efficiencies can we see with the consolidation of Laird Superfood, Inc. and Navitas’ logistics? Is there going to be warehouse consolidation, more freight cost savings? Can you talk about that? Jason Vieth: It is a great question, and one that we obviously spent time on in diligence, so we will have a lot more to say as we go forward. We essentially have a structure here within both of the businesses that has the right model: using co-packers with third-party distributors for nearly all of our manufacturing and logistics. So there will be opportunities, certainly, to combine those. We are working our way through the supply chain to identify not only cost but capability opportunities. You have to optimize cost across the broad portfolio, leveraging the scale that we have. We become a $100 million business and, you know, doubling that obviously grows the opportunity for the various suppliers to our business as well. And so we have some great partners, and because we have some great partners, we are working our way through both sides of that ledger to try to do business in the future. And certainly, we expect to see some opportunity there for a program. Nicholas Sherwood: Awesome. Thank you for all that detail. I will return to the queue. Jason Vieth: My pleasure. Thank you. Operator: If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Your next question comes from the line of George Kelly of Roth Capital Partners. Your line is open. Please go ahead. George Kelly: Hey, everyone. Thanks for taking my questions. Maybe to start, I was hoping you could break down a little bit your gross—just the directional guidance you provided of high single-digit growth. I was hoping you could give us a little more just on expectations around each business, if possible. And are there certain product categories at each business that maybe you are going to deprioritize, and that is also factored into your guide? Just any context around that would be helpful. Did that go through? Operator: Please hold while we correct for technical difficulties. Ladies and gentlemen, thank you for holding. The call will begin again shortly. Jason Vieth: Hey, George. Are you still there? George Kelly: I am. Yeah. Jason, I can repeat the question if that would be helpful. Jason Vieth: Yeah, thanks, George. We had a technical issue over on our side. If you do not mind repeating that, that would be great. George Kelly: Not at all. Happy to. So I guess the question was if you could give a little more detail on your revenue guide for the year, the high single-digit growth. And I guess what I am trying to understand is does that account for the partial—it just looks like a decel from what both businesses have been doing, and so just trying to understand the dynamics. Maybe if you could give a business-level growth expectation, or does it not account for the kind of partial-year contribution of Navitas, or maybe there is a deprioritization of certain product categories at each business. Just any more context would be great around the high single-digit growth guide. Jason Vieth: That is right. Thanks, George, for asking on that. It is certainly something that we want to make sure we hit. So, look, you hit it on the head with the portfolio evaluation that needs to take place here to make sure that we are in all the right products. We certainly, across the business, have some opportunity as we put the two businesses together to put focus from a profitability perspective against the right SKUs and make those the SKUs and categories, frankly, that we look to grow as we go forward. So we are in the midst of that right now. I believe that there could be a little bit of deceleration for that reason as we go through this year. But the target list is still being identified. We still have some work to do as we consolidate the two portfolios, and so, as a result, we are calling out that high single-digit growth as a number that we feel confident that we should be able to do as we push the two businesses forward together as one portfolio. George Kelly: Okay. And then I guess a follow-up to that. Through that process, do you imagine that gross margin—gross margin was kind of fluid, I guess, with a lot of tariff complications in 2025 with the core business. What are kind of your gross margin expectations with tariffs going away and then the deprioritization? I would imagine those are lower-margin categories. Can you get the core business back in the high thirties? And should there be an uplift at Navitas as well, or how should we think about gross margin in 2026? Jason Vieth: I will kick that off, George, and then I will let Anya jump in as well. You are exactly right. The margins on the Navitas business are not as strong—have not historically been as strong—as they have been on Laird Superfood, Inc. over the last number of years. We see opportunity by virtue of combining these businesses and working our way through the portfolio to really highlight and grow those businesses and those SKUs that have higher margins. We see other opportunities as well to improve gross margin as we combine the two businesses, as I just mentioned: putting the footprints together, and on the sourcing side there is some opportunity as well. So our expectation is indeed to get back into the upper-30 percent range as we go forward. It just takes a couple of quarters to shake that out and also to get through some of the procurement contracts that we have been in as singular businesses so that we can start to get to better volumes and better pricing as a result on the combined business. So we will head back towards the upper thirties; it just needs a little bit of time to let the digestion process take place here. George Kelly: Okay. And that is on a consolidated basis, you think you can get back there? Anya Hamill: George, this is Anya. I think I would just add to what Jason said. I think once we complete and internalize the acquisition fully, then on a run-rate basis, by the end of 2026, with the help from synergies—which will partially come from supply chain—we can get back to the high thirties on the gross margins where Laird Superfood, Inc.’s core business has been. George Kelly: Okay. That is great. And then last one for me is just on some of Laird Superfood, Inc.’s innovation items. You mentioned the liquid creamer—you are pleased with the launch—and I know there was the coffee product, the instant coffee product. Curious if you could just talk high level about the performance of each and maybe the distribution plan or medium-term expectations. The liquid product—do you think you have the right product now to take it more broadly? That is all I had. Thank you. Jason Vieth: Of course. We are really excited about the liquid relaunch. As you know, you have been following us for quite some time, and we have been through a few stops and starts on that liquid product. We are now in, I would tell you, the best package that we have ever been in, and I would say most preferred by consumers and retailers. It is a beautiful plastic bottle, but it is post-recycled content. So it is a bottle that has already lived one life, which is really important not only with consumers but especially in the natural channel with the buyers there. So we are really excited about that packaging. And inside of that, we have now the cleanest formula we have ever had. In fact, I think it is safe to say it is the cleanest on the market. We have moved away from the long shelf-life processing, the aseptic processing, and gotten to a formula that really is incredibly clean with no more stabilizers in there and no fiber impact to hold it together. Every ingredient is one that you know. So this is a great product, George, that we have now, and we are putting it in front of retailers. We expect to see some significant distribution gains over the next years, and we have held on to that product. As you know, it is not a sizable part of the portfolio, but it is such an incredible addressable market, full of products that really are not very healthy. And so we see that this is an opportunity for us that we have to continue to grind against until we get it right, and I think we just did. So we are really excited about that. Beyond that, we did launch the protein coffee product that you were alluding to as well. That had a nice launch with one of the natural channel resellers that we gave exclusivity to. We are still working through the data on that and now starting to take that out to additional retailers, so you should see some expansion coming against that product over the next quarters as well. It is a great product, obviously hitting on the big protein trend with 10 grams per serving, and I think it tastes like nothing else in the market. So we see a lot of opportunity for that product, and that is just on the Laird Superfood, Inc. side. Over on the Navitas side, we have had some really great success recently with the Trail Mix product that went into club, and now we are starting to see some further expansion on that online, and we will look to take that more broad, as well as the Bites products, which is just a wonderful, great-tasting superfood bite across now a number of SKUs and a growing portfolio. It is starting to see nice uplift with retailers, and we see opportunity there and, frankly, across a lot of the Navitas portfolio. There is just so much white space for both of these brands, especially in that MULO world of conventional grocery. And so as we go forward, with now a sales team that is twice as large as it was previously, we think that there is just incredible opportunity for us to expand distribution on all those products. George Kelly: Thank you. Operator: There are no further questions at this time. I will now turn the call back to Jason Vieth for closing remarks. Jason Vieth: Thank you, Operator. Sorry we are having some technical difficulties over on our side today. Thanks for staying with us, and thanks to all of you for joining us again today. We are extremely proud of everything that our team has achieved in 2025. We delivered strong results through focused execution and through relentless innovation. And as we look ahead, we are genuinely excited about the transformative opportunities that lie in the combined future with Navitas. We appreciate your continued support and your interest in the journey, and we look forward to updating you all on the progress throughout the year ahead. Thank you, and wishing you all a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Steven F. Rossi: Good morning, and thank you for joining Worksport Ltd.'s fiscal year 2025 and Q4 2025 earnings call. I am Steven F. Rossi, Chief Executive Officer of Worksport Ltd. With me is our Chief Financial Officer, Michael D. Johnston. We will be reviewing the financial results for the quarterly period ending December 31, 2025, and our full fiscal 2025. These results were filed today at approximately 4:01 PM in our Form 10-K and can be downloaded from the link provided in the chat. On today's call, alongside our financial performance, we will review our operating execution across the flagship hard tonneau cover offerings, progress on the commercial launch of our SOLIS and CORE offerings, our capital position, and the key strategic priorities we are focused on as we move into 2026. Before we begin, I want to frame this call the right way. 2025 was a year of real top-line growth and significant margin improvement. Full-year net sales nearly doubled to $16,100,000. Gross margins improved 2,800 basis points to 28%, from 11% in 2024. Both are significant, as they were achieved through a combination of expanding our product offerings and increasing our presence in both direct-to-consumer and business-to-business sales channels. Our fiscal 2025 strategy is to expand our presence in multiple sales channels, introduce new products, and increase our market capture, resulting in a net operating loss and increased use of our cash otherwise generated from our growing operations. Our use of cash to support operations did not grow at the same rate as our net sales. To address our need for both operating and investing activities during fiscal 2025, we supplemented our cash flows with external capital. This strategy complements our intentions to capture more meaningful market share from our very large competitors. That is the right context for evaluating our results. That stated, we still have work ahead of us. We are evolving with additional product offerings and recently learned experience of navigating entry and growth in different sales channels. We have all the pieces in place to make the years ahead transformative, with a keen focus on lean operations and generating positive operating cash flows. Our time and investments through the end of fiscal 2025 have set the right foundation for fiscal 2026 and beyond. We successfully transformed the product capitalization to market delivery. We increased our brand and sales channel distribution presence with both direct-to-consumer and business-to-business customers. Most importantly, the lessons we learned along the way now create a clear pathway forward. Our prepared remarks will follow a slide presentation. After our prepared remarks, we will open the line for questions. At the end of today's call, our prepared remarks and presentation deck will be available for download, as always, at investors.worksport.com. And so with that, let's begin. Safe harbor statements. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year 2026, our expectations regarding financial and business trends, impact from the macroeconomic environment, our market positions, opportunities, go-to-market and growth strategies, and business aspirations, our product initiatives, and the expected benefit of such initiatives. These statements are only predictions that are based on current beliefs, expectations, and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other SEC filings. The forward-looking statements made in the earnings call are made only as of today's date. Worksport Ltd. assumes no obligation to update these statements. We will then address our risk profile, liquidity, and capital strategy to provide clear context on our financial profile. From there, we will walk through a detailed financial review, including full-year and sequential performance, margin expansion, net sales quality, and operating leverage. We will then cover our operational execution, including manufacturing scale-up, distribution expansion, and key product milestones across our tonneau cover product offerings. Next, we will review the commercial launch and positioning of SOLIS and CORE, followed by progress at our subsidiary, TerraVis Energy, and its AetherLux platform. We will also address multi-supply chain dynamics, tariff impacts, and our intellectual property strategy. Finally, we will conclude with our fiscal 2026 financials, including key milestones, our path to cash flow positivity, and the strategic priorities driving the next phase of growth. Let me start with four key takeaways. First, fiscal 2025 was a year of strong net sales expansion. Net sales increased 89.8% year over year to $16,100,000, following fiscal 2024 net sales of $8,500,000. The scale-up of our business over the last two years is clear. Last year's jump from $8,000,000 to $16,000,000 demonstrates a clear demand for our product offerings. Recent and forthcoming product launches provide fresh offerings to market participants. We are still growing and expanding our brand presence in the market across multiple sales channels. Second, our gross margin profile improved materially. Full-year gross margins moved to 28% in fiscal 2025 from 11% in fiscal 2024. On a derived basis, Q4 2025 gross margin was about 30% compared with roughly 11% in Q4 2024. Our margin expansion consistently grew as we enhanced our market presence in 2025. Third, we turned several long-running development programs into commercial activity. Our HD3 cover transitioned into production and began contributing to net sales in 2025. Our SOLIS and CORE product offerings launched commercially in December 2025. These are important developments, but investors should also understand that these launches came late in the year and did not significantly contribute to our fiscal 2025 financial results. Further, these efforts impacted our needs for operating cash flow without complementary liquidity conversion. We expect liquidity conversions from these efforts to otherwise enhance our financial production in 2026. Fourth, Worksport Ltd. has evolved from an emerging brand into a recognized player in the $4,000,000,000 tonneau cover market. Our product offering differentiation and focus on quality have allowed us to increase our market presence in the last two fiscal years. Our dealer network alone expanded sixfold in fiscal 2025, now encompassing over 550 locations across the United States and Canada. But with over 17,000 dealers nationwide, we have only just begun. We are targeting aggressive expansion in fiscal 2026, more on that later. Our brand identity matured. Our brand maturity is supported by our ISO 9001 certification, which we received in April 2025. This certification is not just a badge; it is the prerequisite for Tier 1 OEM relationships. We are actively pursuing those. As we enter fiscal 2026, Worksport Ltd. stands as the only company currently offering a fully integrated solar and energy storage ecosystem for the light-duty truck market. I will now address our risk profile directly. Our fiscal 2025 Form 10-K includes an explanatory paragraph along with management's assessment of the company's ability to continue as a going concern. This is a standard reporting requirement given our history of operating loss and as a growth-stage entity. Importantly, our growth has been outpacing our cost structure, reflecting improving operating leverage as we scale. With the foundational investments of 2025 now largely in place, our focus in 2026 shifts towards disciplined execution, monetization, and efficient capital deployment. Despite continued increases to one of our key raw components, aluminum, our margins continue to expand, and we expect our operating cash burn to normalize as production overhead is further absorbed by growing sales volumes in fiscal 2026. We are targeting and managing initial signals of operating cash flow positivity in 2026, more on that later. We remain transparent regarding our use of the at-the-market offering program, otherwise known as an ATM. In 2025, we raised approximately $500,000 in net proceeds via the ATM. In November 2025, we amended our agreement to permit sales of up to an additional $4,000,000 to ensure tactical flexibility. We recognize the impact of dilution on our shareholders. We all feel it the same. Our strategy is to use the ATM only as a secondary tool. We evaluate and select the capital tools that are most advantageous to operating while being mindful of our shareholder responsibilities. We have historically prioritized the use of certain capital events, such as the high-impact warrant inducement completed in December 2025, which brought in $6,400,000 at a fixed price. Every dollar of capital raised in fiscal 2025 has been tied directly to current and future operational return on investments, specifically doubling our overall production capacity and strategically controlled R&D investments. With that, I will hand it over to Mike. Michael D. Johnston: Thanks, Steve. Let's take a deeper look at the net sales growth. Net sales growth is driven by the rapid scale of our made-in-America hard tonneau covers. In fiscal 2025, our hard tonneau covers segment generated $15,700,000 in net sales, while our soft cover segment contributed net sales of $500,000. The shift toward our hardcover product offerings is intentional. It reinforces our commitment to quality production while supporting higher market price points and better margin profiles. On a sequential basis, Q4 2025 net sales were $4,700,000 compared to $5,000,000 in Q3 2025. In 2025, management responded to continued pricing pressure of our raw material components by implementing a product price increase for both direct-to-consumer and business-to-business customers. The 5.4% sequential decline is attributed to the product price increase and directly impacted our promotional marketing efforts, which in turn both increased our marketing spend and decreased our sales volume. The impact is further amplified by the large contribution of the direct-to-consumer sales channel to net sales. Despite the price increase, our sales channels are stable and are on track to continue growth in fiscal 2026, more on this later. In 2025, our operational KPIs remained strong. We maintained a gross margin of 30.1% in Q4, which is a significant improvement over the 26.4% we recorded earlier in 2025. This sequential stability proves that our manufacturing processes are mature and can handle product mix shifts without significant margin erosion. Gross margin expansion is the most critical metric for our fiscal 2026 outlook. Our fiscal 2025 gross margin was 28%. Our fiscal 2024 gross margin was 10.7%. The expansion to nearly 30% in the latter half of fiscal 2025 was driven by two factors: higher capacity utilization at our New York factory and becoming more efficient with our production efforts. We plan to continue our focus on margin expansion and have set a stable target of 35% gross margin in fiscal 2026. We will continue to employ lean manufacturing principles while adding to our product portfolio and maximizing our production capabilities. Passing it back to Steve to talk about net sales mix and unit economics. Steven F. Rossi: Thanks, Mike. The quality of net sales-generating products also improved in fiscal 2025. Online retailer net sales increased 142% to $11,900,000 from $5,000,000 in 2024. Online retailers represented 74% of total net sales in 2025 compared with just 58% in 2024. Distributor and jobber net sales increased to $4,200,000 from $400,000 the year before. Most notably, there were no private label sales in fiscal 2025, whereas private label represented $3,100,000, or 37% of net sales, in fiscal 2024. Every product that left our factory last year had a Worksport Ltd. label on it. We are proud of that. That strategic shift matters because our decision to focus on proprietary production efforts complemented our resulting margin expansion. We are no longer responding to the same sales channel mix demand that characterized fiscal 2024. The net sales mix in fiscal 2025 can be attributed to demand for our own branded products, especially through e-commerce and growing indirect distribution relationships. A mix within both channels complements our strategy to grow our brand without significant channel concentration or specific customers. We reduce customer concentration risk this way. Geographically, net sales remain overwhelmingly U.S.-based. U.S. net sales were $16,000,000, up 91% from fiscal 2024. That concentration is not surprising given our current sales channel footprint and market strategy. However, it does indicate meaningful room to broaden distribution over time, especially to international markets. Operator, am I still coming through clearly? Operator: Yes, you are. You can continue at geographically net sales. Steven F. Rossi: My apologies, everyone. Geographically, net sales remain overwhelmingly U.S.-based. U.S. net sales were $16,000,000, up 91% from fiscal 2024. That concentration is not surprising given our current sales channel footprint and market strategy. However, it does indicate meaningful room to broaden distribution over time, especially to international markets. Okay. Chime in if I do not. I apologize for the unstable internet connection at times. Let's discuss the hard metrics of our production. Our primary production facility is located in West Seneca, New York, and is currently capable of producing over 125 units within a single eight-hour shift. In August 2025, we announced our strongest four-week production run since domestic operations began. Our unit economics have improved dramatically. In early 2024, our overhead absorption was a headwind due to low volumes. Today, we approach phase one output levels, so fixed costs are being allocated across a much larger base. To reach company-wide cash flow breakeven, we calculate that we need to sustain a quarterly revenue level between $9,000,000 and $11,000,000 at about 35% gross margin. This quarterly revenue target is highly influenced by the underlying sales mix between direct-to-consumer and indirect distribution but is also influenced by our product mix. At our current growth rate, we are aggressively closing that gap and anticipate achieving net sales of $9,000,000 a quarter within the balance of this year. Mike will comment on our OpEx and cash position. Michael D. Johnston: Strategic focus as we enter fiscal 2026 includes diligent monitoring of our cash operating expenses. In fiscal 2025, our general and administrative expenses were $14,800,000. The $3,100,000, or 26%, increase was related to increased employment as we expanded our operations and further developed our product offerings. Excluding non-cash items, our growth in operational expenses is trending below our revenue growth. We have successfully insourced several business processes that were previously handled by high-cost third-party consultants, reducing our professional fees as a percentage of net sales. This is the definition of operating leverage. Our infrastructure is strong, and now every additional dollar of margin contribution has an even greater potential to impact our bottom line. Our net cash used in operating activities for fiscal 2025 is $17,200,000 compared to $10,100,000 in 2024. This increase reflects scaling our inventory resources as we began to offer additional products to the market in Q4 2025, while also supporting our continued growth in multiple sales channels for our legacy tonneau cover offerings. At 12/31/2025, we had approximately $9,500,000 of inventory, 56% of which were raw materials. We are well positioned as we begin fiscal 2026 with diversified product offerings for multiple sales channels and expect higher liquidity to reinvest in our production efforts: $5,950,000 in cash and $3,400,000 available on our revolving line of credit as of 12/31/2025, a total liquidity position of over $9,300,000. Given our projected margin expansion and the expected revenue contribution from SOLIS and CORE in 2026, we believe this provides sufficient runway to reach initial operational cash flow positivity within 2026. Our expectation is to monitor our results and use our existing liquidity resources in a manner that both supports operational goals and decreases the need to seek financing through ongoing capital. I will now turn the call back to Steven to discuss our operational execution and product commercialization. Steven F. Rossi: Thanks, Michael. The financial results Michael just detailed are the output; the input is our operational execution on the factory floor and throughout our distribution network. Fiscal 2025 was about proving that Worksport Ltd. can manufacture in the United States with rigorous quality control. Quality is top of mind for us as we continue to achieve manufacturing milestones. Our initial ISO 9001 certification evidences our commitment to a quality product and demonstrates our ability to scale reliably even with our abbreviated active product production history. Our business-to-business sales channel is still in its infancy. During fiscal 2025, we rapidly expanded our footprint. In the third quarter alone, we grew our national dealer network by 42%. By mid-2025, our partner dealer network exceeded 550 locations across the United States, a nearly sixfold increase from the start of the year. This includes our strategic partnership with Patriot Automotive Technologies, which will support our efforts to accelerate our national penetration. Our tonneau cover business is systematically becoming a moat. By manufacturing high-quality hardcovers in New York, enforcing strict minimum advertised price policies to protect our dealers' margin, and supporting them with aggressive marketing, we are becoming a vendor of choice in the business-to-business sales chain. In November 2025, we announced a major expansion at our R&D facility in Ozarks, Missouri. This facility serves two vital roles. First, it is the primary assembly, testing, and distribution hub for our SOLIS solar-integrated covers and CORE portable energy products. Second, it effectively doubles our R&D footprint. By separating our high-volume tonneau cover production in New York from our complex clean tech assembly in Missouri, we have de-risked the commercial launch of SOLIS and CORE. This geographical diversification also improves our logistics network, allowing us faster shipping to the critical Midwest and Southern markets. Our tonneau cover portfolio has never been stronger. By mid-2025, the premium AL4 achieved an 80% rollout, covering 20 of the 25 targeted vehicle models. In late October, we began production of the HD3 heavy-duty tonneau cover, which entered commercial sales in November. The HD3 is strategically priced for the business-to-business dealer network, protecting dealer margins while strengthening relationships within the jobber community. With a tiered lineup from entry-level SC3 soft-folding tonneau covers to premium AL4 and the professional HD3, we are now positioned to capture demand across the full $4,000,000,000 tonneau cover market. Importantly, with a now mature product lineup, ISO-certified manufacturing, strengthened branding, and the investments made throughout 2025, we believe Worksport Ltd. is entering a new phase. We are operationally ready to scale. As we move into 2026, our focus shifts towards monetization and expansion. Prioritizing the largest revenue opportunities through national distribution, deeper penetration of our dealer network, and initial expansion into international markets such as Europe and Australia. In parallel, we will seek to advance OEM-level relationships with leading automotive manufacturers including Ford, General Motors, and Ram, along with upcoming debutantes like Slate EV. A bonus note: in 2026, we plan to launch a next-generation cover that we believe will help shape the future of Worksport Ltd.'s hardcover product lineup, featuring patented capabilities not currently offered by competitors. Early feedback from select partners and prospective customers has been highly encouraging, with many labeling this new cover as a game changer. We expect this product to see strong adoption within our sales channels and contribute meaningfully to net sales as we scale. Additional details, including product specifications and preorder campaign outcomes, are expected in early 2026. In late Q4 2025, we marked the commercial launch of our SOLIS and CORE product offerings. This is an important milestone for us as it validates our successful development journey of a long-running R&D program. The product positioning is clear: SOLIS is a solar-integrated folding tonneau cover aimed at power generation on-vehicle. CORE is a portable energy storage system for mobile, off-grid, backup, and vocational use, and is designed for both function as a standalone or to integrate with SOLIS. We initially disclosed pricing direction during our Q3 2025 prepared remarks: the CORE starter kit at $949 and the SOLIS beginning at $1,999 and moving to $2,499 depending on fitment. We also described an initial rollout plan for 1,000 CORE units and 900 additional battery packs and a limited SOLIS release, representing about $2,500,000 of near-term initial revenue opportunity. The key 2026 question is not whether these products launched. It is how fast they scale with acceptable margins and working capital discipline. Let's touch on TerraVis Energy. TerraVis Energy continues to deliver breakthrough innovation. In February 2025, we announced that AetherLux can operate in temperatures as low as negative 57 degrees without energy-intensive defrost cycles, the only heat pump in the entire world that has been tested to achieve this feat. Importantly, AetherLux is not limited to extreme climates. Our proprietary ZeroFrost technology has been tested to eliminate frost cycling altogether, a common source of energy loss, system strain, and inconsistent performance in everyday winter conditions, including major markets like Toronto here in Canada or New York. This enables more consistent efficiency, improved comfort, and reduced mechanical wear across a broad range of environments. AetherLux Pro has undergone due diligence and some site visits from multibillion-dollar corporations and U.S. government entities, including the Department of Energy's NREL Alaska laboratory. While tonneau covers drive the current revenue, TerraVis Energy's intellectual property represents a compelling opportunity tied to the global shift towards clean energy products, including high-efficiency HVAC. In late Q1 2026, we selected an established manufacturing partner. The product is expected to achieve certification in 2026 and is currently being evaluated by multiple government entities. Management believes this intellectual property represents a compelling addition to our overall value proposition. Before closing, I want to address the macroeconomic environment, specifically tariffs and supply chain risk, which remain top of mind for many investors. Our soft tonneau covers, along with a small percentage of raw material used for our hard folding tonneau covers, are sourced from China. While we experienced overall increased input costs during fiscal 2025 as a result of tariffs on imported goods, these cost increases did not impact our soft tonneau covers as no additional components were sourced during that time period. Our hardcovers are made in the USA. In fiscal 2025, domestic aluminum prices increased by more than 35% and are up over 50% since the start of fiscal 2024, driven by supply constraints and primarily tariff-related pricing pressures. In response, we implemented a pricing adjustment across our tonneau cover portfolio. While this led to a temporary decline in sales volume in Q4 2025, demand has started to stabilize across each of our sales channels. While also offering higher-margin products, we are regaining momentum heading into 2026, into Q2 2026. Our portable energy products are currently manufactured using foreign lithium-ion supply chains. The current tariff environment has required adjustments to our price and go-to-market strategy. That said, we believe our unique SOLIS plus CORE system will be well received once proper commercialization of the product is achieved across all sales channels. We are also actively evaluating opportunities to transition towards a more domestic supply chain for the CORE over time. We continue to manage these risks proactively and strategically. As of 12/31/2025, we hold 24 issued utility patents and 50 issued design patents and registrations globally, with 95 utility and design applications currently pending. In addition, we have 43 trademark registrations and 15 pending trademark applications in various jurisdictions worldwide. We take a clinical approach to intellectual property enforcement and ensuring that our first-mover status in the solar tonneau space is defended against both domestic and international imitators. We are really excited about our recently submitted patent application for the AetherLux ZeroFrost system. Our intellectual property portfolio continues to serve as our defensible competitive advantage. Now to Mike. Michael D. Johnston: To reiterate the scalability of our product offerings, in fiscal 2025, our net sales grew by nearly 90%. During that same period, our core manufacturing and distribution matured and expanded to complement our customer demand across all sales channels. In fiscal 2026, we do not anticipate the need for major step-ups in each channel. We have the floor space, we have the machinery, and we have the ISO certification. Focus is now exclusively on increasing throughput and optimizing our sales funnel. This is the classic S-curve of growth. The heavy lifting of building the platform is done, and we are now entering the phase of accelerated market capture. Steven F. Rossi: Looking ahead to 2026, we have set clear, measurable milestones. One, initial SOLIS and CORE ramp-up and margin contribution. Two, full rollout of the HD3, AL4, and AL3 lines to all 550-plus dealer locations. Three, launch of the game-changer hard folding tonneau cover, expected to be a best seller. For the second half of the year, we target aggressive dealer network expansion to 1,500 locations through new distribution partnerships expected later this year, operational cash flow positivity, B2B and OEM partnership expansions for the SOLIS and CORE by getting our system to additional customers via synergistic partnerships with other businesses. Michael D. Johnston: Our path to net cash flow positivity is driven by three pillars. First is net sales volume. Reaching a $9,000,000 net sales quarterly threshold that meaningfully produces contributions in excess of operational needs depends on a combination of sales volume mix and product mix. It is also impacted by our production efficiency. We plan to monitor these components regularly and anticipate reaching this target outcome in fiscal 2026. Second is margin mix. Increasing overall production provides margin lift as we use our resources more efficiently to support our sales growth. We also have diversified our product offerings, some of which provide more meaningful margin lift. Both product mix and sales channel mix will directly impact our ability to maximize margin efficiencies. Third is capital efficiency. We plan to concentrate our efforts on performance marketing efforts that reinforce our brand rather than solely focusing on brand impression to drive sales volumes. We also plan to monitor our need to incur additional costs to increase our visibility and impression given our size and the stage of our operations. We enter fiscal 2026 with a stronger cash position and double the availability on our line of credit facility when compared with the start of fiscal 2025, providing us the stability to execute this plan. Steven F. Rossi: We are entering fiscal 2026 with a focused plan to continue our accelerated growth strategy, but with a focus on leveraging our previous investments in brand awareness as well as commercialization of additional product offerings. We believe this approach will continue to generate margin lift and provide additional operating cash flows. For 2026, we expect revenue of $35,000,000 to $42,000,000 with gross margins of approximately 35%. Some highlights. Our guidance includes a full year’s impact of three product offerings launched in late fiscal 2025. Our guidance includes the introduction of our game-changer product offering in early 2026. Our guidance reflects our commitment to driving efficiencies within operations as our company and our product offerings mature in the market. Our guidance assumes continued growth in our business-to-business sales channel, a market which grew during 2025 to be 26% of our sales mix. Some important notes. We remain focused on metrics such as EBITDA and positive operating cash flow within a strategy that includes responsible management of our liquidity. We plan to update investors as we continue to evaluate how the combination of sales mix and product mix impact key performance indicators. Our guidance excludes contributions from AetherLux, which is expected to reach commercial readiness in 2026. Our guidance also does not assume upside from a potentially faster-than-expected ramp-up of SOLIS and CORE. Our guidance excludes potential impacts that may arise from the current geopolitical environment. For example, our guidance assumes that aluminum prices stay stable at the current prices and do not decrease back to a more normal baseline. Why Worksport Ltd.? Why now? To our investors, I encourage you to consider the transformation we have achieved. Just two years ago, Worksport Ltd. was a pre-revenue development-stage company. Today, we have demonstrated our ability to scale and grow, growing net sales from approximately $1,500,000 in 2023 to $8,500,000 in 2024 to $16,100,000 in 2025. Over that same period, gross margins improved from 11% to 28%, exceeding 30% in late 2025. At the same time, we have significantly strengthened the foundation of our operations. We expanded our sales channel positioning, reduced our indebtedness, and brought multiple products to market including HD3, SOLIS, and CORE. We also continue to invest our efforts to develop our AetherLux product, which may serve as a long-term value driver. Our efforts with our intellectual property provide a comfortable competitive advantage. With these milestones achieved, we can now focus on execution, scaling throughput, and driving towards sustained profitability. Thank you. This marks the end of our presentation. Turning the call back to the Operator for Q&A. Operator: Worksport Ltd. is now opening for Q&A. We welcome live questions from analysts attending the call. Faran Ali: Investors attending the call can write their questions within the Q&A section of the Zoom call or email us at investors@worksport.com. We have Scott Buck here. Scott, you can go ahead with your question. Hi. Good afternoon, everyone. Thanks for the time. Scott Christian Buck: Steven, how should we think about the difference between the high end and the low end of the 2026 revenue guide? What needs to go right to end up closer to that high end? Steven F. Rossi: We have considered a lot of different things, bottom-up and top-down. Top-down faces the market and its demand. Fuel prices and purses get tighter, right? We are hoping that the economy stays strong. We are hoping that base fuels and energy stay affordable and do not pinch the pocket. We are hoping that the consumer stays active in the market. Tonneau covers are a must-have, but if people are more budget conscious, premium tonneau covers and CORE-type products might be something that is not purchased as actively. We might feel economic constraints. From the bottom-up, we are very cognizant. Domestic inflation as a result of global tariffs has been significant. A 50% increase on American aluminum because of foreign tariffs is definitely not what I think the intention was with foreign tariffs. If it goes to 55%, 60%, 70%, it erodes margin and leads to price increases that ultimately the average consumer pays, and that $1,000 product turns into an $1,100 product, which might have some dropouts in terms of conversions, if that makes sense. We are hoping that everything stays stable on the bottom-up cost side and supply chain, and that everything stays strong on the consumer side and the economy continues to show signs of strength. Scott Christian Buck: Great. That is very helpful. And then I wanted to ask about the heat pump business. How do you envision the monetization there? Are you going to manufacture and market and sell, or potentially license that technology, or could that even be a potential divestiture down the road? Steven F. Rossi: We have considered and had meaningful conversations about almost all options, from divestitures to licensing. When we released SOLIS, the quality of customer that reached out to us via LinkedIn and emails was huge—various OEMs—and we were so excited. I can say that it shadows the interest in terms of what came from AetherLux. The global billion- and trillion-dollar entities that reached out to Worksport Ltd. and TerraVis Energy—being interested in helping bring the product to market or M&A and these types of things—continues to be significant. We are going to explore all options, but what I think is important for you as an analyst and any investor shareholders to know is we know how to bring something from nothing to market. If nothing were to happen or we chose the path of bringing product to market and you were to say build it, stock it, and sell it, we know how to do that, and we have shown that from our ramp in sales. A product that is something for everybody, like the heat pump, has a much larger—it dwarfs the tonneau cover market. I think it is— Scott Christian Buck: On sales and marketing expense, a nice step up in 2025. Should we continue to see that move higher in 2026, or have you reached kind of a steady state there on the marketing budget? Steven F. Rossi: Steady state. We are going to tighten up. We front-loaded expenses for marketing and branding, and we are going to try to tighten that up for this year. Scott Christian Buck: Okay. Perfect. Well, congrats on all the progress, everyone. Looking forward to 2026. That is all I have. Faran Ali: Thank you, Scott. Steve, we have a question from the audience, Will L. His question is if there are any new relationships with truck lines. I am assuming he means OEM trucks, like a partnership and plan. Steven F. Rossi: OEM discussions are always active. We know all the major automakers, and we think that there is a right time for that. We are mature now, and that is what ISO is for. We do have relationships. As they become material, we will announce them, and I think OEM is definitely in the cards for us this year. Operator: Fantastic. Faran Ali: There is another question about the SOLIS and CORE and if we can comment on the current sales as well as sales forecast. Steven F. Rossi: We have 1,000 CORE products and almost 1,000 additional batteries because it is an unlimited energy system. Sales initially have been pretty strong, but you have to think that when we received the product from contract manufacturing is when we received assets to be able to make marketing. We did not have prototypes. If you are going to make one, you are going to make 1,000, if that makes sense. All the marketing assets have just been released. To that extent, interest and sales were okay for January, February, and March, but we only just released all the right marketing assets to get it to dealers, to get it online, to get it on our website—the videos and these types of things. We have always expected that there would be a 90- to 120-day delay to get the product really cooking. We will have more news in the second half of this year, or at least in Q2 and beyond. Faran Ali: Awesome, Steve. We are going to take one more question here. There are a lot of other questions that are left unanswered. I encourage investors to email me at fali@worksport.com. But we will take this question regarding the strength of intellectual property regarding AetherLux and if we anticipate any competitors in the shadow with the same technology. Steven F. Rossi: So far, we do freedom-to-operate reviews. We do patent checks. We do disclosure checks. We check the market. We are fairly thorough. We have on-staff legal expertise in patents. We think that we have a very strong IP asset in the making with the AetherLux patent. We think it is very defensible. We protect our intellectual property with vigor, and we do not think that anything like this exists that we have been able to find or hear about. There has been nothing close to it, and no other government entity or other business, including other manufacturers that we have spoken to—global manufacturers—none of them have said that they have anything close to this type of technology. We remain very enthusiastic about the opportunity for AetherLux. Faran Ali: Fantastic. Thank you again, Steve and Mike, for the presentation. I have put my email in the chat for any remaining questions, which is fali@worksport.com. If you would like to meet with management one-to-one, feel free to email us; we are happy to get that scheduled. Thank you for being an investor, and have a great day. Operator: Thank you, everyone.
Operator: Welcome to the Veritone Inc. Preliminary Unaudited Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. [Audio gap] I would now like to turn the conference over to Cate Goldsmith, Investor Relations. Please go ahead. Cate Goldsmith: Thank you, and good afternoon. After the market closed today, Veritone issued a press release announcing its preliminary unaudited financial results for the fourth quarter and full year ended December 31, 2025. The press release is available on the Investor Relations section of Veritone's website. Joining us for today's call are Veritone's President and Chief Executive Officer, Ryan Steelberg; and Chief Financial Officer, Mike Zemetra, who will provide prepared remarks. Please note that certain information discussed on the call today will include forward-looking statements. This includes, without limitation, statements about our business strategy and future of financial and operating performance. These forward-looking statements are subject to risks, uncertainties and assumptions that may cause the actual results to differ materially from those stated. Certain of the risks and assumptions are discussed in Veritone's SEC filings, including its annual report on Form 10-K. These forward-looking statements are based on assumptions as of today, March 26, 2026, and Veritone undertakes no obligation to revise or update them, except as may be set forth in a subsequent press release related to the company's audited Q4 and full year 2025 financial results. During this call, the actual and forecasted financial measures we will be discussing include non-GAAP measures. Reconciliations of these measures to the corresponding GAAP measures are included in the press release we issued today. Finally, I would like to remind everyone that the call today is being recorded and will be made available for replay via a link on the Investor Relations section of Veritone's website at www.veritone.com. Now I would like to turn the call over to our President and Chief Executive Officer, Ryan Steelberg. Ryan Steelberg: Good afternoon. I'm excited to provide an update on our preliminary Q4 financial results, discuss the strategic deal announced today with Oracle and provide more strategic insight into some of our newer and exciting business opportunities, including our material progress with certain hyperscalers. Because we are discussing preliminary results, we will not hold a question-and-answer session following our prepared remarks today. Our preliminary Q4 results, which we [ first ] today have a fairly wide revenue range of between $18.1 million to $30 million. The range is almost entirely driven by a single transaction, which we completed and signed in Q4 2025. The transaction was a complex multiparty nonmonetary transaction, which included an on-prem sale of our aiWARE [indiscernible] and application software at a price of $12.9 million. In exchange, we received certain intangible rights and direct and preferred access to a significant number of customers who control a variety of digital data sets for future use in VDR and AI model training at a fixed revenue share of 50% which is a significant improvement over our current margin on VDR today. While the contracted price of the software was $12.9 million, from a pure GAAP accounting perspective, it is very challenging to arrive at the appropriate fair value of the sale as the realization of the data rights is prospective, considering the relatively new, albeit fast-growing market of data sales and VDR. As a result, the stand-alone selling price of the software could be discounted substantially from a revenue perspective. It is important to note that the $12.9 million price was included in our previous range of Q4 revenue guide, but it could end up in the lower end of this range, it is very binary. That said, we are actively working with internal and external resources to ensure the value is fairly reflected in our Q4 2025 results, which we expect will be completed by the time we file our 10-K. Irrespective of the final GAAP accounting conclusion, I would like to explain why this deal is so strategic for Veritone, and why we are confident that we will ultimately turn this $12.9 million face value active deal into something far greater. Veritone currently holds exclusive and nonexclusive rights and relationships to monetize some of the most valuable and iconic sports, entertainment, public safety and news data sets from content and IP owners, such as the NCAA, CBS News and other franchise customers. However, the demand for VDR-specific content has increased substantially, and the content demands have varied widely. We do not have universal access to unlimited amount of data suppliers under contract with Veritone today. Case in point, in fiscal 2025, we were forced to turn down more than $10 million worth of bona fide data orders because we could not source the volume or specific type of content or data in the time frames our hyperscaler and motor developer partners required. Hence, why this strategic deal is part of the solution going forward in addition to our normal business development efforts. As a result of this deal, we now have preferred access to potential VDR customers, who control more than 50 million hours of monetizable data sets today. To put this into perspective, the entire marquee catalog of the NCAA video library is less than 1% of this size. And just to cite one example of these new customers from this transaction, which we recently signed an agreement with is a major fast food franchisee to provide Veritone with access to their catalog of multi-camera video surveillance footage, data that is in high demand by hyperscalers for frontier and world model development. Our forecasts have conservatively estimated the overall library of data sets from this transaction for potential VDR customers could generate over $100 million in VDR revenue over the next 3 years. In addition, we have a fixed margin on this data that is significantly better than our historical VDR margin. While the corresponding revenue may ultimately recognize over time from an accounting perspective, we now have access to a significant amount of valuable data sets that can be monetized through our VDR platform with no upfront cash expenditure to obtain them. We expect to begin monetizing this data set as early as Q2 2026. I know I have spent a lot of time discussing this transaction, but we want our investors to have a detailed understanding of the situation as well as the significant opportunity. Next, and I am so excited about this, I would like to introduce and discuss the groundbreaking agreement we just announced with Oracle, a deal that has been in the works for almost a year. The Oracle deal is a multiyear strategic partnership to accelerate the deployment of Veritone's aiWARE platform, application and data services via the Oracle Cloud Infrastructure, or OCI. With built-in and substantial financial cash incentives that allow Veritone to scale its cloud infrastructure at a more efficient cost for compute and storage. Under the terms of the agreement, Oracle Cloud Infrastructure will become the cornerstone of Veritone's next generation of AI solutions for commercial, public sector and high-growth Veritone data refinery markets. As the demand for scalable and secure AI infrastructure reaches unprecedented levels, Veritone will leverage OCI's high-performance AI super clusters to power its aiWARE platform and data solutions. This partnership ensures that Veritone's customer base can harness the transformative potential of AI with superior price performance, security and data sovereignty provided by Oracle's distributed cloud. Signing and collaborating with Oracle represents a pivotal milestone in Veritone's mission to help enterprises find their truth in their data, and Oracle's financial commitments in this partnership validate our leadership in managing unstructured data and our commitment to providing some of the most robust AI solutions in the market. By migrating critical workloads to OCI, we are unlocking new levels of scalability for Veritone data refinery and providing our public sector and commercial customers with the performance and security they require to stay ahead in an AI-driven world. Please check out the joint press release on our investor site to learn more. On to our core operating business. Over the past two years, we have been on a disciplined journey to realign Veritone around a singular clear vision, reestablishing aiWARE as the essential orchestration and intelligence layer for enterprise and public sector AI and unstructured data. Today, I am proud to announce that, that transformation of Veritone is complete. We have reshaped this organization into a focused platform-driven company, and we are now executing from a position of operational, financial and technical strength. In 2024, we started to reposition the company. In 2025, we validated that model, and today, we are no longer managing through a transition. We have exited non-core assets, we've simplified our operating structure and aligned our resources behind scalable, platform-driven revenue streams. We are now deploying capital, expanding our platform and driving the kind of operating leverage that defines the market leader. The most significant evidence of our progress is the Veritone data refinery or VDR and more importantly, those hyperscale leading customers that we are now serving. What began as a unique platform capability organically built has evolved into a scaled token production engine that is now powering the world's major hyperscalers and foundational model developers. Our strategy was to convert proprietary unstructured data sets into reoccurring revenue, and that strategy has been validated at the highest levels. We are now actively engaged with under contract to and generating revenue with all major players, including NVIDIA, Amazon, Google and Meta, among others. Now that we have increased our access and supply of rich data and have established contracts with all major hyperscalers, we see a clear opportunity to deepen and expand our engagement across each and every one of these partners. With hyperscalers expected to spend approximately $700 billion in combined CapEx in 2026 according to S&P, Veritone stands to capture an increasing share of that investment as a leading provider of clean, model-ready training data. On the supply side, we are effectively enabling enterprises to treat their unstructured audio video images and text as a renewable monetizable asset class to meet this AI demand. As previously discussed, it is imperative that we remain very focused and cost-efficient on data acquisition. On the VDR supply side, in addition to data sets now available to us as a result of the strategic transaction I detailed above, we continue to sign and expand our portfolio of available data sets through other channels as well as to improve our capabilities to refine, process and prepare those data sets for licensing, distribution and sales. Historically, the sales and representation process has been heavily dependent on business development and manual efforts, which, despite being effective, has limited our ability to significantly accelerate the acquisition and distribution of our data set offerings and portfolio. That changes I'm excited to follow on the announcement we did a couple of weeks ago about the launch of the Veritone data marketplace built on aiWARE. Veritone has officially taken the next step in evolution of the AI supply chain. Leaning into the data economy, we recently announced the launch of the Veritone data marketplace, a platform designed to improve and streamline the data ecosystem without compromising on control, transparency or quality. This marketplace is the essential partner to our Veritone data refinery. While VDR acts the tokenization engine that makes unstructured data AI-ready, VDM, the Veritone data marketplace serves as the trusted and accredited distribution hub, ensuring those assets are monetizable, transactional and governed. We are particularly excited about the value this brings to both sides of the data licensing market. Rights holders with valuable archives and data sets now has a clear path to monetization with complete asset control. Simultaneously, AI developers gain access to a deep catalog of proprietary data spanning industries from entertainment to human behavior to robotics. These data sets can even be evaluated for metadata density and model fit before acquisition, ensuring they are optimized for foundational architectures. Previously available only to a limited group of customers the Veritone data marketplace is now available for content owners and AI developers to accelerate responsible AI development. We are proud to lead the charge in sourcing high-quality data ethically and delivering it through a governed, transparent marketplace that meets the needs of the hyperscaler community. Our public sector division is starting to execute on all cylinders delivering a strong 68% year-over-year growth. This success is built on three clear strategic pillars: First, high-impact applications. Our Veritone iDERMS suite is revolutionizing productivity, enabling mission-critical workflows that simply aren't possible without Veritone. This has dramatically expanded our addressable market across SLED, higher education, Fed SIV and international agencies. Second, unmatched deployment flexibility. aiWARE and iDERMS are designed for the most sensitive environments. We meet the strictest security and sovereignty requirements, whether deployed in government cloud or completely network isolated airgap environments. And now with Oracle, we will take that to an even higher level of performance and security, both domestically and globally. And third, a true open architecture. Unlike many of our competitors, aiWARE is a completely open platform, our ability to ingest data at scale and connect with any application or data set without vendor walk-in makes us the infrastructure of choice for federal AI monetization and the Department of [indiscernible] AI First strategy. This foundation has led to deep integration within the Air Force OSI and the JPS Trust modernization program. With our pipeline at record levels, our Q4 wins, including a major U.S. University, a top 5 share of department and another major state highway patrol truly validates that we are a trusted AI partner for the public sector. In commercial enterprise, we have successfully operationalized our data to AI flywheel. By connecting proprietary supply or surging AI demand, we built a scalable architecture where volumes drive value. More data attracts more buyers, which directly fuels our margin expansion and relicensing efficiency. The results speak for themselves. In Q4, our licensing team executed 224 orders, growing nearly 10% over the prior year. Our reach is truly global, providing critical media assets to top-tier firms like Google and Goldman Sachs, major studios like NBCUniversal and premier sport entities, including ESPN, the NFL and Tom Brady's Religion of Sports. This momentum directly feeds our high-margin software business. Software deal volume grew 14% year-over-year to 33 deals in Q4. We are seeing a powerful combination of retention and expansion, renewing core partners like Sony Pictures and Summit Media, while simultaneously landing new accounts like Snap and deepening our relationships with prestigious events like the London Marathon and Augusta National Golf Club. I'm incredibly proud of our hire division, now rebranded as Broadbean by Veritone, which delivered yet another strong year. Despite macro hiring headwinds, Broadbean maintained and contributed robust profit margins critical to Veritone's overall growth and success. To appreciate the scale that our Broadbean division manages, in 2025, Broadbean distributed over 7.6 million unique jobs, powering more than 40 million unique job ads. The result, we drove an impressive 132 million engagements in application and clicks directly into our customers' ATS and recruitment systems. Every month, an average of 30,000 unique HR professionals rely on our software to manage their talent acquisition. Other highlights include our Global Media Services unit, achieving a record-breaking year with double-digit year-over-year net revenue growth. In fact, Q4 was our strongest on record, making the first time we crossed the $10 million threshold for media under management. We've carried that energy directly into 2026. I'm thrilled to announce a major SaaS win with the U.K.'s Department of Work and Pensions. This partnership establishes Veritone as a cornerstone of U.K. Government recruitment, as our software will now power job advertising for the Ministry of Justice, DEFRA and the home Office. Furthermore, our first year in the Workday Platinum Partner Program was a Triumph, securing 59 new deals, a 30% increase over the previous year. With an expanding pipeline of Fortune and Forbes Global 500 brands, we are just getting started. As we look ahead, we are preparing to unveil our next-generation job management modules and our groundbreaking angenticAI Broadbean framework. This isn't just an upgrade, we believe it's a productivity revolution, again, for our tens of thousands of monthly Broadbean users. Looking forward to 2026. As we enter the year, our focus is simple, disciplined scale. We are focused on converting our $50-plus million VDR pipeline into recognized reoccurring revenue and expanding our public sector deployments. We will continue to allocate capital towards platform expansion, and we'll continue to evaluate selective strategic opportunities and partnerships that strengthen our data and orchestration moat. Veritone has moved past the transition. We have the platform, the partners and the financial foundation to lead the AI-driven data economy. Thank you. Now I'd like to turn it over to our Chief Financial Officer, Mike Zemetra. Mike? Michael Zemetra: Thank you, Ryan. Given the preliminary nature of our financial results, I will only be discussing our guidance for fiscal 2026 today as well as a few balance sheet updates. Our software products and services revenue pipeline and long-term outlook continue to be at [indiscernible]. Specifically, we continue to see strong demand across commercial VDR and the public sector. In 2026, hyperscalers, including Google, Amazon, Meta, NVIDIA and others have individually forecast to spend hundreds of billions of dollars in fiscal 2026 to power their AI initiatives, including further investments into their large language models. According to Fortune Business Insight, the global AI training data set market size was valued around $3.6 billion in 2025 and is projected to grow from $4.4 billion in 2026 to $23.2 billion by 2034, a CAGR of 23%. From a model training perspective, we believe we are well positioned to exploit this potential revenue opportunity as more mature models are now investing heavily in rich video data, where we believe Veritone has a clear competitive advantage. As of today, our near-term sales pipeline in VDR alone is over 50 million and continues to grow. One of our most important learnings in 2025 was to expand the range of data set availability for our VDR customers and to improve the velocity to deploy these data sets. As Ryan mentioned, we have been able to secure millions of dollars of potential VDR revenue in fiscal 2025 simply due to the fact that we could not readily source the content requested by our VDR customers in a timely fashion. To address this in 2026, we will be focused on the most efficient and cost-effective ways to increase the supply of data, and we will also be investing in the engineering and product around VDR, including Veritone Marketplace, where our aim is to deepen our competitive moat with exclusive access to thousands of more data providers. As Ryan discussed, as a result of our Q4 strategic data set transaction, we now have access to customers who control more than 50 million hours of valuable video data sets, including with some of the largest retail, travel, entertainment and fast food providers in the world. We believe these near-term strategic decisions will enable us to continue to grow our VDR revenue in fiscal 2026 and beyond at or above the current 23% projected CAGR for spending on large language models through fiscal 2034. In the public sector, the TAM for digital evidence management solutions today exceeds $10 billion and is growing at double-digit rates. In fiscal 2026, we are targeting our public sector to grow between 60% to 70% year-over-year. This growth is forecasted to come from expanded offerings under existing federal contracts including those with the DLA and OSI and from new international deals across Western Europe. Collectively, our backlog and sales pipeline across our core AI platform is in excess of $200 million today. And as Veritone remains uniquely positioned to capture even more opportunity in the data as a currency market, we expect that pipeline and our potential to monetize our trove of tokenized audio and video content to increase further. On the OpEx side, we are forecasting relatively flat sales, marketing and G&A expenses in fiscal 2026 as compared to 2025 with forecasted spending across these areas as a percentage of total revenue expected to show improvements year-over-year. We are projecting research and development expenses to be slightly higher year-over-year on an absolute dollar basis, starting in Q1 and throughout fiscal 2026 as we continue to invest in our VDR and public sector revenue initiatives, including the Veritone marketplace and planned new software product features and enhancements in 2026. Note that consistent with 2025, we expect revenue to grow sequentially quarter-over-quarter in 2026 with Q1 2026 revenue approximating Q1 2025. This is partly driven by the public sector, where we see a higher revenue ramp starting late in the first half of 2026 from our existing larger federal deals, coupled with the timing of certain international contracts we expect to announce in the coming year. In addition and based upon the discussion and timing of certain VDR deals, including the signing of several large hyperscalers in late Q1 2026, we expect to see a more pronounced revenue ramp in VDR starting in Q2 and throughout the second half of 2026. The key risk to our revenue projections are the consumption-based nature of [ VDR ] coupled with the timing of government-based contracts and decision-making. In addition, the visibility into our VDR pipeline is typically 2 to 3 months in advance of delivery and decision-making on the nature and volume of content may change depending on the customers' need anticipated impact on its trading models. Given these factors, coupled with the complexity of government decision-making, especially during [ war ] time, we will only be providing financial guidance for the fiscal year 2026, which we plan to update on our next earnings call. More specifically, in fiscal 2026, we are expecting revenue to be at $130 million to $145 million, which at the midpoint represents a 47% increase year-over-year from the low end of our 2025 to eliminate financial range. We are expecting the public sector revenue to grow between 60% to 70% year-over-year and the remaining growth that comes from our commercial enterprise sector, predominantly from VDR. Our Veritone higher products and services are included in this growth, and we expect H1 to be flat to slightly down year-over-year given the current macroeconomic [ hire ] environment. Our managed services is expected to be up year-over-year by 10% to 15%, [indiscernible] due to the recent improvements we are seeing on the representation side of our business. We expect gross margins to fluctuate between 60% to 65%, driven by the forecasted mix of revenue in the period and non-GAAP net loss to be between $13.5 million to $22.5 million, which at the midpoint represents a 54% improvement year-over-year at the low end of our preliminary 2025 financial range. The change is reflective of the timing shifts in revenue, the previously discussed planned increase in research and development coupled with the compression in gross margins due to the mix of VDR in 2026. We believe we are still on the path to profitability, which is the earliest would be in Q4 2026 and is highly dependent on the planned compound growth of VDR in the public sector throughout fiscal 2026. Finally, I want to highlight several material improvements we have made to our balance sheet. In Q4, we retired 100% of our senior secured term debt and repurchased approximately 50% of our then outstanding convertible notes. This has resulted in a 90% reduction in our annual debt carry costs from roughly $14 million to just $800,000. We closed fiscal year 2025 with unencumbered cash and cash equivalents of $27.7 million, free of any restricted covenants. $45 million and 1.75% convertible debt and 92.6 million shares outstanding. We expect to provide a full financial release for Q4 and the full year 2025 once we finalize our fiscal 2025 results, which we expect to furnish when we file our 2025 annual report on Form 10-K. That concludes my prepared remarks. Ryan? Ryan Steelberg: Thank you, everyone, for your time today. Veritone has come a long way in just a very few short quarters. Over the past two years, we have focused the business around aiWARE, our core platform, which powers really our entire corporate and product offering strategy. We are very excited about the scale that we are beginning to experience. For example, VDR has evolved in a true production engine, and we are engaged with all of the major hyperscalers, which is a tremendous accomplishment. The strategic data set transaction and our partnership with Oracle are additional proof points of our success, and they're expanding our access to high-value data and giving us the infrastructure to scale more efficiently going forward. As we move into 2026, we are focused on disciplined scale by converting our pipeline into revenue, expanding our data supply and continuing to build on the operating leverage we have created. We have the platform, the partners and the foundation in place. Now it's about execution and scaling into what we believe is a very large opportunity. Demand remains strong. Our pipeline continues to grow, and our engagement with hyperscalers is as strong as it has ever been. I appreciate everyone's time today, and we look forward to speaking with you next quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Bullish sentiment increased 1.7 percentage points to 32.1%. Neutral sentiment increased 0.5 percentage points to 18.1%.
The board of governors voted 3-2 to cut the overnight interest-rate target by a quarter of a percentage point to 6.75%, resuming monetary easing.
Michael Saylor, Strategy co-founder, joins 'Power Lunch' to discuss the company's new product launch, the stated dividend and much more.
The chances of accelerating U.S. inflation are growing with each passing day as the war in the Middle East continues, with the average price of gasoline nationwide spiking to almost $4 a gallon as of Thursday. But there's another thing American consumers and investors should feel nervous about: the prospect of deflation.
A group of bipartisan Senators want to make sure lawmakers can't use insider information and benefit by betting on prediction markets. Democratic Senator Elissa Slotkin and and Republican Senator Todd Young spoke first with Bloomberg's David Gura and Christina Ruffini about the legislation they helped introduce.
Ed Yardeni, Yardeni Research president, joins 'The Exchange' to discuss what happens with equities if the Fed doesn't raise rates, how to invest in the current environment and much more.