Core Viewpoint - Forum Energy Technologies (FET) has demonstrated significant financial growth and aims for continued expansion, targeting $1 billion in revenue by 2030 under a baseline scenario and up to $1.6 billion in a market-growth scenario, supported by strategic initiatives and market share gains [6][10]. Financial Performance - The company has achieved a revenue growth of approximately 10% compound annual growth rate (CAGR) over the last five years and has increased adjusted EBITDA roughly fourfold since 2020, alongside notable margin improvements [1]. - Management has guided for about $840 million in revenue and roughly $100 million in adjusted EBITDA for 2026, representing a 16% increase in EBITDA compared to 2025 [6][7]. Business Segments - FET operates primarily in two segments: Artificial Lift and Downhole, and Drilling and Completion, serving both exploration and production operators and oilfield service companies [3][4]. - The revenue mix consists of approximately 75% activity-driven consumables, with the remainder from capital equipment and upgrades [2]. Capital Management - The company has prioritized capital returns and balance-sheet repair, reducing debt by 69% and lowering net leverage from 3.9x to 1.2x [5][8]. - FET has generated about $65 million in free cash flow, equating to a roughly 10% free cash flow yield, which is allocated towards share repurchases and potential acquisitions [5][9]. Growth Strategy - FET's strategy focuses on targeted markets with limited competition and continuous innovation, aiming to double its market share in growth markets from 8% to 16% over the next five years [10][16]. - The company believes its served markets could grow about 9% per year, driven by global GDP expansion and increasing electricity demand [10]. Market Exposure - The Middle East accounted for about 11% of FET's revenue last year, with management noting that a ceasefire in the region could reduce potential disruptions and increase demand for FET products due to drained oil inventory [12]. - The company has a significant backlog entering 2026, which is expected to support its growth despite a flat market outlook [13]. Acquisition Strategy - FET is looking for targeted-market businesses with differentiated technology for future acquisitions, comparing potential deals to its own stock buybacks [15]. - The acquisition of Variperm Energy Services in early 2024 is highlighted as a successful deal that doubled EBITDA and free cash flow, demonstrating the company's effective acquisition strategy [14].

Financial Data and Key Metrics Changes - Organic revenue decreased by 6.6% year-on-year, with pricing up 0.6% and volume down 7.2% [14] - Adjusted EBITDA for the quarter was $119 million, up 4% year-on-year, with an EBITDA margin of 15.4%, an increase of 90 basis points [5][15] - Adjusted gross profit margin was 31.3%, up 170 basis points year-on-year [14] Business Segment Performance - Engineering Adhesives (EA) organic revenue increased approximately 3% year-on-year, with EBITDA margin rising to 19.9% [6] - Health and Hygiene (HHC) organic revenue declined 10% year-on-year, with EBITDA margins at 13.9%, up 120 basis points [7] - Building and Construction (BAS) organic sales decreased 5.1% year-on-year, with EBITDA margins remaining flat [8] Market Performance - Americas organic revenue was down 4% year-on-year, with EA achieving 8% organic revenue growth [8] - EIMEA organic revenue decreased 11% year-on-year, primarily due to tighter customer inventory management [8] - Asia Pacific organic revenue was up 2% excluding solar, lower than trend due to the timing of Chinese New Year [8] Company Strategy and Industry Competition - The company is leveraging global sourcing strength and maintaining a focused approach to cost and portfolio management [4] - A minimum 10% price increase across all product lines globally was announced to offset supply shock inflation [11] - The current supply chain disruption presents a unique opportunity for the company to gain market share [11] Management's Comments on Operating Environment and Future Outlook - Management highlighted significant constraints on raw material availability due to the conflict in the Middle East, leading to inflationary pressures [9] - The company expects organic revenue growth to be up low single digits for fiscal 2026, reflecting updated pricing actions and anticipated market share gains [16] - Management remains focused on controlling operational aspects and ensuring supply chain resilience [18] Other Important Information - The company has received over 40 force majeure letters from suppliers, indicating major disruptions in the supply chain [9] - Cash flow from operations improved by $49 million year-on-year, with expectations for operating cash flow to be weighted to the second half of the year [15] Q&A Session Summary Question: Impact of the 10% price hike on guidance - Management indicated that additional price and raw material benefits are factored in, but negative volume impacts are also expected [24][30] Question: Inventory management in HHC - Management noted that inventory control is real, with consumers shifting away from premium products, impacting adhesive usage [33] Question: Lunar New Year impact on volume - The company experienced a $15 million-$20 million revenue impact from Chinese New Year, with expectations for a bounce back in Q2 [40] Question: Raw material supply concerns - Management anticipates potential impacts on customers' ability to procure substrates, which may affect adhesive demand [95] Question: Medical grade adhesive performance - The medical business in Europe saw nearly 20% organic growth, indicating strong performance despite overall market challenges [102]

Financial Data and Key Metrics Changes - In Q4 2025, net sales were $63.487 million, a decrease of 1.4% compared to Q4 2024 [2] - The net loss for Q4 2025 was $3 million, improved from a net loss of $7.198 million in Q4 2024 [2][6] - For the fiscal year 2025, net sales totaled $257.429 million, down 2.9% from fiscal year 2024 [2] - The net loss from continuing operations for 2025 was $7.275 million, or $0.50 per diluted share, compared to a net loss of $12.210 million, or $0.83 per diluted share in 2024 [3] Business Line Data and Key Metrics Changes - Soft surface sales for the quarter and year were down less than 1%, while the industry was down approximately 4% in Q4 and 5% for the year [3] - The company gained market share in the carpet market despite the overall industry decline [3][10] Market Data and Key Metrics Changes - Existing home sales in 2025 were at a 30-year low, with only three houses sold for every 100 households, the lowest ratio since 1982 [9] - The housing industry has been in recession for four years, with production down about 30% from four years ago [9] Company Strategy and Development Direction - The company has implemented a profit improvement plan for 2026, expected to improve profitability by over $13 million [10] - Cost reductions of over $12 million were achieved in 2025, with a total of $60 million in cost reductions over the last three years [10] - The company is focusing on enhancing its product offerings and market position, particularly in the high-end market [12] Management's Comments on Operating Environment and Future Outlook - The management expressed concerns about the potential impact of rising interest rates and ongoing geopolitical issues, particularly related to Iran [21][23] - There is optimism about pent-up demand in the housing market, contingent on further reductions in mortgage rates [9] - The company is navigating a challenging environment but continues to gain market share [10] Other Important Information - The company reduced its workforce by 30% due to the decline in business [10] - The total payment of IEEPA tariffs was approximately $3.3 million, with ongoing efforts to seek refunds [12][41] Q&A Session Summary Question: Impact of potential interest rate rises - Management acknowledged that rising interest rates could hinder sales volumes, which have remained steady despite previous higher rates [21] Question: Material sourcing concerns due to geopolitical issues - Management indicated that while material availability is not a major concern, rising raw material costs could be problematic [23] Question: Stock performance and potential dividends - Management agreed to consider suggestions regarding stock dividends and insider purchases to boost investor confidence [27] Question: Clarification on cost savings for 2026 - Management confirmed that the $14.2 million in cost savings for 2026 is incremental compared to 2025 [30] Question: Tariff impact breakdown - Management noted that the bulk of the $1.4 million net tariff impact occurred in the third and fourth quarters [39] Question: CapEx for 2026 - Management projected a CapEx of $2.5 million for 2026 [44]

Financial Data and Key Metrics Changes - For the fourth quarter, sales were $695.1 million, up 8.7% year-over-year, while organic sales decreased 0.1% excluding Stuart Weitzman [19] - Consolidated gross margin was 42.9%, down 10 basis points from the previous year, reflecting lower margins in the brand portfolio [20] - SG&A expenses increased by $48.3 million or 18.3% to $310 million, primarily due to expenses related to Stuart Weitzman [21] - Fourth quarter earnings per diluted share were a loss of $0.36, while excluding Stuart Weitzman, the loss was $0.06 [23] Business Line Data and Key Metrics Changes - Brand portfolio sales increased 1.5% on an organic basis and 20.3% including Stuart Weitzman, with lead brands growing about 2% [5][19] - Famous Footwear sales decreased 1.2%, with comparable sales up 0.1% [20] - Sam Edelman and Allen Edmonds showed strong performance, with Sam Edelman exceeding expectations and Allen Edmonds experiencing broad-based growth across all channels [9][10] Market Data and Key Metrics Changes - The brand portfolio gained significant market share in both women's fashion footwear and total footwear during the quarter [5] - Famous Footwear saw market share gains driven by strong performance from brands like Skechers and Jordan during the holiday season [45] Company Strategy and Development Direction - The company aims to build back earnings power in 2026, focusing on strategic growth vectors and initiatives already in place [5] - Plans to expand the FLAIR format at Famous Footwear, with expectations to increase locations from 57 to a range of 65-75 by year-end 2026 [13] - The company is committed to elevating and editing brand and product assortments to enhance consumer experience [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026 as a build-back year, with expectations of modest organic sales growth and meaningful earnings recovery [16] - The company is monitoring geopolitical risks and tariff changes, which could impact future performance [27] - Management noted that the integration of Stuart Weitzman is on track and is expected to contribute positively to profitability [60] Other Important Information - The company ended the fourth quarter with $282.9 million in cash and $296.5 million in borrowings, with inventory at $610.5 million [26] - The company is maintaining a flexible approach to sourcing amid evolving tariff environments [27] Q&A Session Summary Question: Concerns about sales volatility and tax impacts - Management acknowledged that expected sales volatility did not materialize, with strong performance in other business areas offsetting minor impacts [34] Question: Wholesale planning and market share gains - Management indicated that the order book is in line with guidance, and they are seeing positive trends in e-commerce and international sales [43] Question: Category performance and sandal sales - Management reported strong sales in sandals, particularly from brands like Birkenstock and Crocs, and noted good performance in the thong category [57] Question: Stuart Weitzman break-even expectations - Management confirmed that significant cost-saving measures have been implemented, positioning Stuart Weitzman to return to break-even in 2026 [60]

Financial Data and Key Metrics Changes - Total sales for the second quarter grew by 8.1% year-over-year, reaching $4.3 billion, while earnings per share (EPS) decreased by 2.3% [9][25] - Excluding a non-cash $59 million LIFO charge, EPS would have increased by 7.1% compared to the previous year's Q2 [9][25] - Gross margin was reported at 52.5%, down 137 basis points from the previous year, primarily due to the LIFO charge [31][32] Business Line Data and Key Metrics Changes - Domestic same-store sales increased by 3.4%, with DIY same-store sales growing by 1.5% and commercial sales up by 9.8% [9][25] - International same-store sales rose by 2.5% on a constant currency basis, with an unadjusted comp of 17.1% due to favorable exchange rates [10][21] - The company opened 64 new stores globally, bringing the total to 6,709 U.S. stores, 913 in Mexico, and 152 in Brazil [11][30] Market Data and Key Metrics Changes - The domestic commercial sales growth was impacted by severe winter weather, with commercial sales up only 1% during the two weeks affected by storms, while the remaining weeks saw over 12% growth [10][18] - Inflation for same SKU items was reported at over 6%, contributing to a 5.2% increase in average ticket size [16][19] Company Strategy and Development Direction - The company plans to invest approximately $1.6 billion in capital expenditures (CapEx) to support growth initiatives, including store openings and supply chain improvements [22][40] - The focus remains on gaining market share in both domestic DIY and commercial segments, as well as accelerating international growth [41][45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth initiatives and market share gains, despite challenges from weather and inflation [13][20] - The company anticipates that tax refunds and improved weather conditions will positively impact sales in the upcoming quarters [56][57] Other Important Information - Free cash flow for the quarter was $15 million, down from $291 million in the same quarter last year, attributed to timing of CapEx and payables [37][38] - The company repurchased $311 million of its stock during the quarter, with $1.4 billion remaining under its buyback authorization [40] Q&A Session Summary Question: Can you elaborate on same SKU inflation expectations? - Management expects same SKU inflation to remain in the mid-single digits for the remainder of the fiscal year, with potential increases due to tariffs and vendor negotiations [51][54] Question: What is the outlook on demand creation from tax refunds and weather? - Management is optimistic that tax refunds will be slightly larger this year, which could drive demand, especially in regions affected by winter weather [56][57] Question: What is the underlying run rate of the domestic business? - Management indicated that the domestic business was running at a better than double-digit growth rate before being impacted by severe weather [62][63] Question: How does the company view pricing elasticity as it reaches peak pricing? - Management believes that maintenance-related sales will remain strong, while discretionary items may see more elasticity [70][72] Question: What is the expected return on investments in new stores and Hubs? - Management anticipates that new stores will mature and contribute to faster top-line growth and EBIT growth, with returns on invested capital expected to be healthy [81][82]

Financial Data and Key Metrics Changes - Total sales for Q2 2026 were $4.3 billion, an increase of 8.1% compared to Q2 2025. Earnings per share (EPS) decreased by 2.3% [22][6] - Excluding a non-cash $59 million LIFO charge, EBIT would have grown by 7.2% and EPS would have increased by 7.1% [22][6] - Gross margin was 52.5%, down 137 basis points year-over-year, primarily due to the LIFO charge [28][29] Business Line Data and Key Metrics Changes - Domestic same-store sales grew by 3.4%, with DIY same-store sales up 1.5% and commercial sales up 9.8% [22][6] - International same-store sales increased by 2.5% on a constant currency basis, with an unadjusted comp of 17.1% [22][8] - The company opened 64 new stores globally, finishing with 6,709 U.S. stores, 913 in Mexico, and 152 in Brazil [9][10] Market Data and Key Metrics Changes - The peso strengthened by over 12% against the US dollar, providing a $74 million tailwind to sales and a $0.95 benefit to EPS [23][22] - Domestic commercial sales represented over 32% of domestic auto parts sales and 27% of total company sales [24][22] Company Strategy and Development Direction - The company plans to invest nearly $1.6 billion in capital expenditures (CapEx) to drive strategic growth priorities, including accelerated store growth and supply chain improvements [20][21] - The focus for FY 2026 includes growing market share in domestic DIY and commercial businesses while accelerating international sales growth [40][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth initiatives and market share gains, despite challenges from winter weather impacting sales [11][12] - The company expects a strong summer selling season driven by increased maintenance and failure events due to winter weather [11][52] - Management anticipates that tax refunds will be slightly larger this year, which could positively impact sales in the early spring and summer [52][51] Other Important Information - Free cash flow for Q2 was $15 million, down from $291 million in Q2 last year, attributed to CapEx and payables timing [33][34] - The company repurchased $311 million of its stock during the quarter, with $1.4 billion remaining under its buyback authorization [35][34] Q&A Session Summary Question: Can you elaborate on same SKU inflation expectations? - Management expects same SKU inflation to remain in the mid-single digits through the third quarter and into the fourth quarter, with a potential increase in ticket prices due to tariffs [46][49] Question: What is the outlook on demand creation from tax refunds and weather? - Management noted that winter weather typically leads to strong sales in the spring and summer, and they expect tax refunds to be slightly larger this year, which could boost sales [51][52] Question: What is the underlying run rate of the domestic business? - Management indicated that the domestic business was running at a better than double-digit growth rate before being impacted by severe weather at the end of the quarter [56][59] Question: How do you assess the elasticity of transactions as pricing peaks? - Management believes that maintenance-related transactions will remain strong, while discretionary spending may be more elastic [66][67] Question: What is the current status of investments in Hubs and SG&A spending? - Management stated they are in the middle innings of their investment cycle, with expectations for continued growth in store count and disciplined SG&A management [70][71]

Financial Data and Key Metrics Changes - Fourth quarter sales increased by 17% to $211 million, resulting in a full-year sales growth of 4% to $839 million, marking the first annual growth in three years [8][9][15] - On a pro forma basis, excluding the Custom Fluidpower (CFP) divestiture, fourth quarter sales were up 29% and full-year sales were up 6% [9][15] - Gross profit for the fourth quarter rose by 31% to $71 million, with gross margin expanding by 350 basis points to 33.6% [16] - Adjusted EBITDA margin for the fourth quarter was 20.1%, up 270 basis points year-over-year [19] - Diluted EPS for the fourth quarter was $0.58, a fourfold increase compared to the prior year [18] Business Line Data and Key Metrics Changes - Hydraulics sales increased by 10% in the fourth quarter, with pro forma growth of 27% [15][20] - Electronics sales surged by 31% year-over-year, driven by strong demand in recreational and industrial markets [21] - Hydraulics gross profit grew by 27% year-over-year, with gross margin expanding to 34.1% [20] - Electronics gross profit increased by 40%, with gross margin expanding by 220 basis points [21] Market Data and Key Metrics Changes - Demand in mobile applications was driven by construction markets across all regions, with early signs of recovery in agriculture [20] - The electronics segment saw persistent demand for construction equipment, particularly in the U.S. and Europe [21] - Channel inventory levels in the agriculture market improved, indicating potential for future growth [52] Company Strategy and Development Direction - The company aims to continue executing its go-to-market initiatives and product innovation to drive growth [7][10] - A focus on optimizing the portfolio and aligning go-to-market strategies with core competencies was emphasized [10][11] - The introduction of a new share repurchase program and continued cash dividends reflect a commitment to returning value to shareholders [11][23] Management's Comments on Operating Environment and Future Outlook - Management characterized 2025 as a turnaround year, with expectations for continued growth in 2026 despite macroeconomic uncertainties [8][30] - The company anticipates first quarter 2026 sales to be in the range of $218 million to $223 million, representing a 22% increase year-over-year [25] - Management expressed confidence in sustaining momentum from the previous year, despite potential challenges from global events and supply chain issues [39][40] Other Important Information - The company has successfully reduced net debt to adjusted EBITDA leverage ratio to 1.8 times, the lowest since Q2 2022 [23] - A new Core 2030 Strategy will be unveiled at the upcoming Investor Day, outlining the company's vision for future growth [32] Q&A Session Summary Question: Concerns about full-year outlook and go-to-market initiatives - Management acknowledged the cautious outlook for the second half of 2026 but emphasized strong order trends and existing backlog supporting first quarter guidance [39][40] Question: Capital allocation priorities - Management highlighted a systematic approach to capital allocation, focusing on debt reduction and increased CapEx for internal capabilities [41][42] Question: Insights on recent commercial wins - Management noted significant growth in the sales funnel and emphasized the importance of converting these opportunities into new business wins [48][49] Question: Clarification on agricultural market recovery - Management indicated that improvements in channel inventory levels are a positive sign, but end-market demand remains weak [52] Question: Tariff impacts and pricing strategies - Management discussed the ongoing tariff situation and the company's strategy to mitigate costs through pricing actions [67][68]

Financial Data and Key Metrics Changes - The company reported record revenues of $984 million for 2025, reflecting a 10.5% increase year-over-year [4][15] - Full year adjusted EBITDA reached $291.3 million, with a margin of 29.6%, down from 31% in the prior year [16] - Gross margin for the full year slightly increased to 42.8% compared to 42.7% in the prior year, despite macroeconomic challenges [16][18] Business Line Data and Key Metrics Changes - Single-family residential business achieved record revenues of $403 million, up from $372 million in 2024, driven by dealer growth and geographic expansion [7][11] - Multifamily and commercial businesses generated revenues of $580 million, supported by strong demand for high-performance products [5][15] - The company maintained a stable gross margin despite increased raw material costs and tariffs, reflecting effective pricing discipline [5][16] Market Data and Key Metrics Changes - The total U.S. construction spending is projected to grow approximately 1% in 2026, with residential spending expected to increase by about 2% [12] - Contractor sentiment has improved, with the National Remodeling Conditions Index at 54.5, indicating positive market conditions [12] - The company's backlog reached a record $1.3 billion, up 16% year-over-year, with a book-to-bill ratio of 1.1 times [10] Company Strategy and Development Direction - The company plans to expand its geographic footprint and product offerings, particularly in vinyl windows and high-end architectural glass [9][32] - A new state-of-the-art facility in the U.S. is under consideration, aimed at enhancing operational efficiency and meeting Buy American project requirements [63][64] - The board has approved an expansion of the share repurchase authorization to $250 million, reflecting confidence in cash flow generation and commitment to shareholder returns [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic challenges and maintain growth momentum into 2026 [32] - The outlook for 2026 includes revenue guidance of $1.06 billion to $1.13 billion, representing approximately 11% growth at the midpoint [26] - The company anticipates continued market share gains and strong execution in new geographies, with expectations for double-digit growth in both residential and commercial segments [26][54] Other Important Information - The company repurchased $180 million in shares during 2025, including $88 million in the fourth quarter [6][24] - The Colombian peso appreciated approximately 12% during 2025, impacting cost structures and margins [20] - The company is evaluating pricing actions to mitigate the impact of raw material costs and tariffs [40][41] Q&A Session Summary Question: Expectations for first quarter performance - Management expects first quarter performance to be in line with fourth quarter results, accounting for scheduled maintenance shutdowns [38] Question: Pricing actions and expectations for gross margins - Management indicated that gross margins could range from the high thirties to low forties, depending on input costs and market conditions [40] Question: Acceleration of U.S. commercial revenue in 2026 - Management confirmed expectations for commercial revenue growth in 2026, driven by a strong backlog and expansion into new markets [51] Question: Contribution from showrooms and vinyl products - Management expects showroom revenues to significantly contribute to growth, with projections of $30 million-$35 million in 2026, separate from vinyl contributions [60] Question: Impact of aluminum costs on future margins - Management noted that aluminum prices remain elevated, but potential softening could benefit margins in the second half of the year [74]

Financial Data and Key Metrics Changes - Total revenue for Q4 2025 was $76.4 million, representing a 12% year-over-year growth [12] - U.S. revenue for the quarter was $66.6 million, reflecting a 10% growth compared to the prior year [12] - Gross margin for Q4 2025 was 60.6%, down from 64% in Q4 2024, primarily due to lower-than-expected U.S. consumable revenue and a one-time voluntary field action [15] - Net loss for Q4 2025 was $29.8 million, compared to a net loss of $18.9 million in Q4 2024 [16] - Adjusted EBITDA was a loss of $19 million in Q4 2025, compared to a loss of $10.3 million in the prior year [16] Business Line Data and Key Metrics Changes - Completed approximately 12,200 U.S. procedures in Q4 2025, representing approximately 69% year-over-year growth [12] - Handpieces sold totaled 9,400 units at an average selling price of approximately $3,340, reflecting a 5% price increase compared to Q3 2025 [12][10] - Total U.S. handpiece and other consumable revenue was $34 million in Q4 2025, representing 16% growth compared to Q4 2024 [12] - Sold 65 new HYDROS systems in Q4 2025, with an installed base of 718 systems, representing a 42% increase compared to year-end 2024 [14] Market Data and Key Metrics Changes - International revenue in Q4 2025 was $9.8 million, representing year-over-year growth of 25% [14] - The company expects 2026 total U.S. procedures to be in the range of 60,000-64,000, representing growth of approximately 39%-48% [17] Company Strategy and Development Direction - The company is shifting operational focus towards increasing procedure volume, expanding margins, and achieving profitability [6] - A new integrated regional structure for the commercial team has been established to ensure better coordination around customer success and procedure growth [7] - A dedicated launch team has been formed to drive consistent launches and improve downstream utilization [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q4 financial performance was lower than anticipated but emphasized that changes made are critical for sustainable high growth and a clear path to profitability [21] - The company is resetting 2026 guidance to $390 million-$410 million, representing annual growth of 27%-33% [10] - Management expressed confidence in the long-term growth and profitability trajectory despite short-term disruptions [18] Other Important Information - Cash, cash equivalents, and restricted cash totaled $285 million as of December 31, 2025, providing a strong balance sheet to support strategic priorities [16] - The company plans to provide a detailed multi-year look at financial guidance during the upcoming Investor Day [11] Q&A Session Summary Question: What unfolded in Q4 regarding handpiece sales? - Management indicated that the softness in handpiece sales was influenced by customer purchasing behavior and the elimination of bulk purchase discounts, leading to a more aligned sales model with procedure volumes [24][25] Question: Why is there confidence in the back half of 2026? - Management explained that as the sales force matures into the new alignment, they expect to see benefits in procedure growth, particularly in the second half of the year [29] Question: What is the confidence in achieving a 1-to-1 ratio of handpiece sales to procedures in 2026? - Management stated that historical data showed handpiece sales were typically higher than procedure volumes, but they are now modeling a 1-to-1 ratio based on recent changes in business practices [34][35] Question: What was the impact of the field action on gross margin? - Management clarified that the field action was a one-time, non-recurring event that had no patient safety issues and was contained to Q4, impacting gross margin by approximately 240 basis points [37][38] Question: Is there any customer dissatisfaction due to the end-of-quarter bulk purchase deals being discontinued? - Management reported no anticipated customer dissatisfaction and noted that ordering patterns have remained stable despite the changes [42] Question: What is the stability of the sales force after the commercial restructuring? - Management confirmed that the sales team has remained stable with no higher attrition, and the restructuring is expected to enhance customer relationships over time [44][48]

Financial Data and Key Metrics Changes - Total revenue for Q4 2025 was $76.4 million, representing a 12% year-over-year growth [11] - U.S. revenue for the quarter was $66.6 million, reflecting a 10% growth compared to the prior year [11] - Gross margin for Q4 2025 was 60.6%, down from 64% in Q4 2024, primarily due to lower-than-expected U.S. consumable revenue and a one-time voluntary field action [13] - Net loss for Q4 2025 was $29.8 million, compared to a net loss of $18.9 million in Q4 2024 [14] - Adjusted EBITDA was a loss of $19 million in Q4 2025, compared to a loss of $10.3 million in the prior year [14] Business Line Data and Key Metrics Changes - Approximately 12,200 U.S. procedures were completed in Q4 2025, representing a 69% year-over-year growth [11] - Handpieces sold totaled 9,400 units at an average selling price of approximately $3,340, reflecting a 5% price increase compared to Q3 2025 [11] - Total U.S. handpiece and other consumable revenue was $34 million in Q4 2025, representing a 16% growth compared to Q4 2024 [12] - 65 new HYDROS systems were sold in Q4 2025, with an installed base of 718 systems, a 42% increase compared to year-end 2024 [12] Market Data and Key Metrics Changes - International revenue in Q4 2025 was $9.8 million, representing year-over-year growth of 25% [12] - The company expects 2026 total U.S. procedures to be in the range of 60,000-64,000, representing growth of approximately 39%-48% [15] Company Strategy and Development Direction - The company is focusing on increasing procedure volume, expanding margins, and achieving profitability while gaining market share [4] - A new integrated regional structure for the commercial team has been established to ensure better coordination around customer success and procedure growth [5] - A dedicated launch team has been formed to drive consistent launches and improve downstream utilization [5] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the financial performance in Q4 was lower than anticipated but emphasized that the changes made are critical for sustainable high growth and a clear path to profitability [19] - The company is confident in its long-term growth and profitability trajectory through 2026 and 2027 despite short-term disruptions [16] - Management expects to see benefits from the sales force realignment in the second half of the year [27] Other Important Information - The company has reset its 2026 guidance to $390 million-$410 million, representing annual growth of 27%-33% [9] - The average selling price for handpieces is expected to increase to $3,500 in 2026 [16] - The company plans to provide a detailed multi-year look at its financial guidance during the upcoming Investor Day [10] Q&A Session Summary Question: What unfolded in Q4 regarding handpiece sales? - Management indicated that the softness in handpiece sales was influenced by customer purchasing behavior and the elimination of bulk purchase discounts [21][22] Question: Why is there confidence in back-end loaded growth for 2026? - Management explained that the sales force's maturity and the new alignment would take time but are expected to yield benefits in the latter half of the year [27] Question: What gives confidence in a 1-to-1 ratio of handpiece sales to procedures in 2026? - Management noted that historical data showed handpiece sales were typically higher than procedure volumes, but recent changes are expected to align them more closely [31][32] Question: Are there concerns about customer dissatisfaction due to the end of bulk purchase deals? - Management does not anticipate dissatisfaction and believes that ordering patterns will stabilize without bulk discounts [39] Question: What is the health of underlying demand for procedures? - Management reported strong procedure growth of nearly 70% year-over-year, indicating healthy demand despite revenue shortfalls due to customer ordering behavior [52][53]