Financial Data and Key Metrics Changes - In 2025, the company achieved full-year profitability in airline operations, defined as positive Adjusted EBITDA, marking a significant operational improvement [17][23] - Full-year revenue for 2025 was $106.6 million, an 11% decrease compared to 2024, driven by a 15% decrease in scheduled service revenue, partially offset by a 3% increase in on-demand charter revenue [21][23] - The Adjusted EBITDA loss for 2025 was $41.7 million, a 5% improvement over the previous year's loss of $44.1 million [23] Business Line Data and Key Metrics Changes - The airline operations achieved profitability with positive Adjusted EBITDA for the full year of 2025, reflecting operational improvements and cost efficiency [17][23] - The on-demand charter business saw revenue increase and improved flight margins year-over-year, driven by better sourcing discipline and a shift to longer-haul trips with larger aircraft [8][21] - In the fourth quarter of 2025, on-demand charter revenue increased by 36% year-over-year, while scheduled service revenue decreased by 19% [21][22] Market Data and Key Metrics Changes - The company is focusing on the Hawaii market as a strategic anchor for demonstrating electric aircraft technologies, committing over $22 million to enhance infrastructure and operations [11][12] - The partnership with BETA Technologies aims to introduce electric aircraft into service, with plans for cargo operations in 2026 and passenger services to follow [12][36] Company Strategy and Development Direction - The company is transitioning from an airline-first model to a platform-centric business, emphasizing the integration of electric aircraft and AI-enabled software [28][29] - The strategic partnership with BETA Technologies is expected to enhance operational efficiencies and profitability through the introduction of electric aircraft [12][14] - The company plans to commercialize its SurfOS technology in 2026, aiming to improve efficiency and transparency in the aviation ecosystem [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, increasing 2026 revenue guidance by 20%-30% compared to the previous year [3][25] - The company anticipates that the introduction of electric aircraft will significantly improve operating costs and profitability [37][66] - Management highlighted the importance of partnerships and technology integration as key drivers for future growth [16][29] Other Important Information - The company raised over $100 million in equity in 2025 to reduce overall cost of capital and lower net debt, which decreased by 47% from $139 million to $74 million [4][20] - The company is actively pursuing partnerships and collaborations to enhance its platform and expand its market presence [16][68] Q&A Session Summary Question: Clarification on SurfOS spending and commercial rollout - Management detailed that SurfOS remains a significant investment priority, focusing on product development and building a sales pipeline through initiatives like BrokerOS [31][34] Question: Timeline for BETA aircraft integration - Management explained that the BETA aircraft order allows for deliveries across various product types, with plans to start with cargo operations in 2026 [35][36] Question: Improvement in economics from BETA aircraft - Management anticipates a 30% reduction in operating costs due to lower fuel and maintenance requirements of electric aircraft compared to legacy models [37][38] Question: Future geographic expansion plans - Management refrained from disclosing specific geographic targets but indicated that existing networks would facilitate quicker adoption of electric aircraft [46][48] Question: Early signs of adoption for Powered by Surf On Demand program - Management reported a positive uptick in interest and applications from independent brokers for the Powered by Surf On Demand program [50][51] Question: Revenue generation timeline for SurfOS - Management expects revenue from SurfOS to begin in the first half of 2026, with significant contributions anticipated in the second half [54][56] Question: Long-term economic ownership in electrification strategy - Management clarified that the partnership with BETA enhances operating efficiencies while SurfOS will continue to provide software services [63] Question: Expected timeline for first commercial flight of electrified aircraft - Management noted that certification speed is the largest hurdle, with participation in the FAA's eIPP program expected to expedite the process [65][66] Question: Expected timeline for sustainable profitability - Management indicated that regional airline operations are currently profitable and will continue to improve with the introduction of electric aircraft [66][67]

Financial Data and Key Metrics Changes - For the full year 2025, the company facilitated 97,348 certified loans and recorded total revenue of $93.2 million, resulting in adjusted EBITDA of $15.6 million [9] - In Q4 2025, the company facilitated 19,308 loans, generating revenue of $19.3 million and adjusted EBITDA of $2.8 million [9][34] - Operating expenses decreased by 9.3% year-over-year to $13.9 million in Q4 2025 compared to $15.4 million in Q4 2024 [36] - Net income for Q4 2025 was $1.7 million, a significant improvement from a net loss of $144 million in Q4 2024 [36] Business Line Data and Key Metrics Changes - The ApexOne Auto platform was launched in Q4 2025, with two customers in the prime credit auto segment, contributing to a more than doubled pipeline since launch [18] - The profit tier unit economics for the 2025 vintage continue to be booked at a constrained 72.5% loss ratio, with expectations to perform closer to a mid-60% loss ratio [17] Market Data and Key Metrics Changes - The loan-to-share ratio for credit unions improved to 83.2% in Q4 2025, indicating a healthier lending environment [20] - The company observed a 20% year-over-year increase in application flow through February 2026 [12] Company Strategy and Development Direction - The company aims to maintain tighter underwriting standards and appropriate pricing to ensure disciplined, profitable growth across multiple credit cycles [6][11] - The introduction of the ApexOne Auto platform allows the company to serve the entire spectrum of credit scores, enhancing its market position [18] - The company plans to continue innovating and deepening relationships with credit unions, focusing on responsible growth and maintaining a disciplined approach to underwriting and pricing [20][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capture incremental certification and partner expansion within the credit union market, especially if interest rates decline further in 2026 [22] - The company anticipates certified loan guidance of 100,000-110,000 for 2026, reflecting an 8% increase over 2025 results [27] Other Important Information - The company paid down approximately $50 million of its senior secured term loan in Q4 2025, which is expected to save approximately $575,000 in quarterly interest expenses [28][39] - The company repurchased approximately 564,000 shares at an average price of $66 per share during the quarter [28] Q&A Session Summary Question: Concerns about AI disruption - Management acknowledged the use of AI in their tools and models, emphasizing that their proprietary data and machine learning capabilities are superior to standard AI tools [44][46] Question: Cert outlook for Q1 and 2026 - Management explained that the first quarter's lower certs are influenced by the elimination of super thins and tighter credit standards, but they expect growth to resume incrementally throughout 2026 [48][50] Question: Health of the credit union channel - Management reported that credit unions are looking to grow in a disciplined manner, with improved loan-to-share ratios and a focus on responsible growth [60][62] Question: Current outlook for delinquencies - Management indicated that delinquencies for the most recent vintage are running about 200 basis points better than previous years, reflecting improved credit quality [70][72]

Financial Data and Key Metrics Changes - Revenue for 2025 increased by 20% to approximately $2.2 million, compared to $1.86 million in 2024. Excluding a temporary revenue impact from transitioning to direct management of Amazon sales, full-year revenue growth would have been closer to 30% [6][10] - Gross margin improved to 62.5% from 54.1% in 2024, reflecting an improved product mix and a growing contribution from e-commerce channels [10] - The company reported a net loss of $6.4 million for 2025, compared to a net loss of $6.2 million in 2024. Adjusted net loss for the year would have been approximately $5.6 million when excluding one-time legal expenses [10][11] - Adjusted EBITDA loss improved to $5.3 million compared to $5.8 million in 2024 [11] - The company ended the year with $8.6 million in cash and short-term investments, providing a solid operating runway [11] Business Line Data and Key Metrics Changes - E-commerce revenue increased by 88%, driven by strong growth on Amazon and the direct-to-consumer website, now representing more than half of total revenue [7][8] - Municipal markets are seeing increased interest in fertility control approaches, with ongoing programs in cities like New York and Chicago [8][9] Market Data and Key Metrics Changes - Internationally, the company expanded its footprint with regulatory approvals in New Zealand and new distribution relationships in Belize [9] - The company is in discussions with potential deployment partners in New York City as the trial of Evolve concludes [9] Company Strategy and Development Direction - The company's core strategy remains focused on delivering current initiatives, scaling areas with traction, and maintaining resource allocation discipline [5] - The board is engaged in finding a new CEO to help scale the business and build on progress made [4][5] - The company aims to maintain financial discipline while investing in areas with traction, including e-commerce expansion and municipal adoption [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about accelerating growth in 2026, aiming for higher growth rates than 2025 [13] - The company is focused on a mixture of revenue contributors, including e-commerce, municipal orders, and international expansion [15][17] - Management is confident in the potential for improvement in profitability and revenue growth [45] Other Important Information - The legal dispute with Liphatech has been resolved satisfactorily, with all litigation dismissed [10][22] - The company is preparing for a significant year ahead, with expectations for growth in various markets [74] Q&A Session Summary Question: Should we expect similar growth rates in 2026 as in 2025? - Management indicated that growth could be higher, aiming to accelerate growth in profitable areas [13] Question: What will contribute to 2026 revenues? - A mixture of e-commerce, municipal orders, and international expansion is expected to drive revenue [15] Question: What is the status of the court case with Liphatech? - The case has been settled satisfactorily, and the company considers it a past issue [22] Question: What is the status of product registration in Australia? - Regulatory authorities are expected to provide a response in the spring [25] Question: Will the new CEO have incentives based on stock performance? - Yes, a meaningful portion of the CEO's compensation is expected to be equity-based [56] Question: How is the agricultural sector performing? - The agricultural sector is performing well, with expansions in various areas including almond groves and poultry [33] Question: What municipalities besides New York City are evaluating Evolve? - Baltimore and Chicago are mentioned, with ongoing assessments in various neighborhoods [32] Question: Will the sales team be expanded? - Yes, the company plans to expand the sales team to maximize B2B sales efforts [61]

Financial Data and Key Metrics Changes - Revenue from continuing operations increased by 3.1% in Q4 2025 compared to Q4 2024, reaching $15.2 million, while consolidated adjusted EBITDA rose by 7.8% to $3.6 million [9][20] - For the full year 2025, revenue was $54.9 million, up from $52.2 million in 2024, and consolidated net income improved to $2.9 million from a loss of $5.8 million in 2024 [21][22] - Unrestricted cash and cash equivalents at the end of Q4 2025 stood at $23.6 million, down from $25.1 million in the prior year [22] Business Line Data and Key Metrics Changes - System-wide sales decreased by 3.9% to $130 million in Q4 2025, while comp sales were down 3.8% [18] - For the full year, system-wide sales were flat at $532 million, with comp sales declining by 0.4% [18] Market Data and Key Metrics Changes - The total clinic count at year-end 2025 was 960, down from 967 clinics in the prior year, with 885 franchise clinics and 75 company-owned clinics [19] - The company refranchised 41 clinics and closed 36 clinics during 2025 [19] Company Strategy and Development Direction - The company is on track to complete the first phase of its transformation journey, Joint 2.0, by the end of 2026, transitioning to a pure-play franchisor model [5][28] - Future growth strategies include expanding operations into new channels and markets, focusing on health trends and integrated treatments [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in improving operating leverage and financial position through refranchising and cost-saving initiatives [28] - The company anticipates that 2026 will be more profitable than 2025 due to refranchising efforts and realignment of corporate costs [24] Other Important Information - The company repurchased 1.1 million shares for $9 million in Q4 2025 and a total of 1.3 million shares for $11.3 million in 2025 [9][22] - The company expects system-wide sales in 2026 to range from $519 million to $552 million, with comp sales projected between -3% to 3% [22] Q&A Session Summary Question: Can you share the attrition and new patient add metrics? - Management noted that new patient flow has been the weakest component of active member growth, but early signs from new marketing efforts are positive [33][34] Question: How are you evolving marketing initiatives for 2026? - The focus remains on shifting investment from local to national marketing to amplify brand awareness, with ongoing adjustments to creative messaging and addressing shifts in search behaviors due to AI [36][37] Question: How did the three-tiered pricing pilot go? - The $10 pricing increase showed more benefit compared to the $2 increase, and further testing is ongoing before broader rollout [39][40] Question: How did comp sales progress throughout the quarter? - Comp sales were down the most in November but improved in December, with expectations for better performance in the second half of the year [46][47] Question: What specific leading indicators give confidence that comps will improve in 2026? - Management highlighted early signs of improvement in leads and new patient acquisition, with expectations for better performance in the second half of the year due to easier comparisons [52][55] Question: Can you elaborate on growth initiatives and capital allocation? - Investments will focus on technology improvements and user interface enhancements for Wellness Coordinators, with ongoing negotiations for RD territory buybacks [70][73]

Financial Data and Key Metrics Changes - In Q4 2025, the company delivered $18.3 million in bookings, near the high end of the guided range, with strong contributions from IP products and TCAD solutions [14] - Revenue reached $18.3 million in Q4, above the high end of the guidance, with TCAD and IP revenue growing 34% and almost 3x respectively [14] - GAAP gross margin in Q4 was 83.3%, and non-GAAP gross margin was 85.6%, reflecting a sequential increase of roughly five full points [15][16] - GAAP operating loss improved to $6.8 million, while non-GAAP operating loss was just over $1 million, ahead of expectations [18][19] - Cash and marketable securities at quarter end was $18.3 million, with expectations to approach operating cash flow breakeven in Q2 and positive operating cash flow in Q3 [19][20] Business Line Data and Key Metrics Changes - TCAD business saw a 70% sequential increase in bookings to $9.2 million and a 34% sequential increase in revenue to $8.7 million, driven by the adoption of the AI-driven FTCO solution [6][14] - The semiconductor IP business delivered record revenue and bookings of over $5 million in Q4, significantly driven by the Mixel acquisition [7][14] - EDA bookings and revenue declined significantly in Q4, with bookings just under $4 million and revenue of $4.4 million, following record performance in Q3 [10][15] Market Data and Key Metrics Changes - The APAC region contributed significantly to growth in Q4, accounting for 57% of total revenue, driven by the FTCO solution [15] - The MIPI PHY market is valued at over $300 million per year, with the company holding a relatively modest share, indicating potential for growth [8] Company Strategy and Development Direction - The company is focused on executing a turnaround plan, with an emphasis on AI-driven solutions and enhancing the TCAD business [4][5] - There is a commitment to reducing annualized non-GAAP operating expenses by at least $20 million, aiming for profitability at flat revenue [18] - The company is prioritizing core products in EDA and leveraging AI tools to improve software development and operational efficiency [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to recover faster than expected, with strong guidance for Q1 2026 [4][20] - The transition to AI-enabled sales is expected to be a long-term tailwind for the business, with significant opportunities identified in the semiconductor manufacturing process [5][13] - Management acknowledged the need for continued focus on execution and the importance of customer support while enhancing product development [11][12] Other Important Information - The company has seen a meaningful inflection in the semiconductor IP business, with expectations for steady growth in this area as they ramp MIPI PRO products [9] - The restructuring efforts have led to improved gross margins and increased R&D capacity, positioning the company for future growth [11][16] Q&A Session Summary Question: Growth priorities and execution - Management highlighted the need for financial flexibility and the successful execution of cost reduction programs, leading to improved morale and focus on new opportunities [22][25] Question: Revenue recognition for FTCO deal - A significant portion of the FTCO revenue was recognized in Q4, with the remainder to be recognized over the contract term [28][29] Question: Adoption process for FTCO - The efficiency in closing and ramping FTCO customers is expected to improve, with a growing pipeline of potential customers [35][36] Question: Segment bookings expectations for Q1 - Continued strength in TCAD is anticipated, with IP expected to remain stable and EDA to be flat sequentially [36] Question: Growth expectations from Mixel acquisition - The Mixel acquisition is expected to contribute to double-digit revenue growth, particularly in the second half of the year [46][51] Question: Performance expectations for business segments in 2026 - The fastest growth is expected in the IP segment, followed by TCAD, while EDA is anticipated to remain stable [55]

Financial Data and Key Metrics Changes - For Q4 2025, diluted earnings per share increased by 23% year-over-year, while for the full year, it grew by 25% year-over-year [6][15] - Total operating revenue and other income rose by 107% year-over-year to $734 million in Q4, driven by the acquisition of Mercury and increased managed receivables [12] - Managed receivables increased by 37% year-over-year, with new account originations up 73% for the year [8] Business Line Data and Key Metrics Changes - The acquisition of Mercury Financial effectively doubled the size of the company's balance sheet to approximately $7 billion, adding over 1.3 million customers [4] - Purchase volume increased by 54% for Q4 year-over-year and by 32% for the full year [8] - The company acquired a $165 million retail credit portfolio from a competitor, enhancing its position in the point-of-sale market [6] Market Data and Key Metrics Changes - The competitive landscape remains robust, with record solicitations leading to some softening in response rates and marketing efficiency [9] - The company has seen stable consumer behavior, with consistent payment performance and stable delinquency trends [8] Company Strategy and Development Direction - The acquisition of Mercury is expected to enhance long-term earnings power through disciplined portfolio management and cost savings [4] - The company aims for long-term earnings growth of 20% or more annually while maintaining a return on average equity of 20% or greater [11] - The integration of Mercury is expected to be completed by early 2027, with ongoing realization of synergies and efficiencies [21] Management's Comments on Operating Environment and Future Outlook - Management anticipates a robust tax season, which may lead to a temporary slowdown in growth but will ultimately reduce delinquencies [29] - The company is well-positioned to respond to macroeconomic changes, including fluctuations in oil prices, by adjusting underwriting and pricing strategies [43] - Management expressed confidence in the long-term positioning of the company despite a competitive landscape [9] Other Important Information - The company ended the year with over $600 million in unrestricted cash and maintained a diversified funding model [7][15] - The integration of Mercury is progressing well, with operational efficiencies already being realized [5] Q&A Session Summary Question: Integration progress of Mercury - Management confirmed that the integration is ahead of schedule, with significant changes in portfolio terms already implemented [19][20] Question: Funding structure and macro concerns - Management stated that funding partners remain supportive, and the company has not seen any deterioration in funding availability [24][25] Question: Tax refund season implications - Management expects a robust tax season, which will lead to paydowns that may slow growth temporarily but benefit delinquencies in the long term [29][30] Question: Customer concentration risk - Management indicated that relationships with larger partners have evolved positively, and concentration risk is managed through a diversified portfolio [33][34] Question: Fair value mark insights - Management explained that the fair value mark was conservative due to the nature of newly acquired receivables and expected improvements over time [46][47]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $69.3 million, exceeding the high end of guidance, driven by higher variable revenue [21] - Adjusted EBITDA for Q4 2025 was $10.8 million, also above the high end of guidance, attributed to improved cost structure and operational execution [21] - Recurring revenue was $52.9 million, representing 89% of total revenue, while professional services revenue was $8.3 million, down 36% year-over-year [21] - Average revenue per customer increased by 9% year-over-year to $680,000 [22] - Cash on the balance sheet at the end of Q4 was $95 million [22] Business Line Data and Key Metrics Changes - Revenue from hosted services was $51 million, down 15% year-over-year [21] - The company signed 40 deals in Q4, including 4 new logos and 36 expansions, indicating a slight sequential increase in total deal value [18] - Over 20% of all conversations in Q4 leveraged Generative AI tools, showing strong adoption of AI capabilities [8] Market Data and Key Metrics Changes - The company is seeing strong traction in regulated industries such as banking, telecommunications, and airlines, with significant renewals from major players in these sectors [18] - The partnership with Google Cloud is yielding early results, including a multi-million dollar renewal through the Google Cloud Marketplace [10] Company Strategy and Development Direction - The company is focused on three primary areas: customer growth and retention, innovation in the Conversational Cloud platform, and expanding technology partnerships [4] - The launch of Syntrix is a key strategic growth opportunity, aimed at addressing market gaps in AI deployment assurance [6][7] - The company plans to complete its multi-year platform modernization in the first half of 2026, which is foundational for long-term scalability [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving positive net new ARR in the second half of 2026, despite expected revenue declines throughout the year [16][23] - The company anticipates that the launch of Syntrix will drive future growth and improve customer retention [25] - Management emphasized the importance of disciplined execution and cost management to support long-term value creation [25] Other Important Information - The company expects full-year 2026 revenue to range from $195 million to $207 million, with approximately 92% expected to be recurring [23] - Adjusted EBITDA for 2026 is expected to range from a loss of $4 million to a gain of $7 million [24] Q&A Session Summary Question: Can you walk us through the decrease in total OpEx for Q4? - Management indicated that the decrease was primarily due to a large restructuring executed in the prior quarter, with some one-time items but mainly structural changes [28] Question: How does positive net new ARR relate to expected revenue declines? - Management clarified that while they expect positive net ARR in the second half, historical customer losses will continue to impact revenue negatively throughout 2026 [30] Question: Can you expand on the demand for Syntrix and its development? - Management noted that initial demand was for simulation capabilities, but it evolved into a broader solution addressing compliance and governance challenges in AI deployment [36] Question: What is the pricing model for Syntrix? - The pricing model for Syntrix is conversation-based, allowing for consumption-based pricing that aligns with customer needs [42] Question: How does Google Cloud Marketplace impact the sales strategy? - Management stated that the Google Cloud Marketplace serves as a retention lever, simplifying procurement and potentially driving new business opportunities [46]

Financial Data and Key Metrics Changes - Jefferson Capital reported record collections of $245 million for Q4 2025, representing a 41% increase year-over-year [3][4] - Revenue for the quarter reached $155 million, up 30% compared to the same period last year [4][18] - Adjusted pre-tax income was $51 million, reflecting a 15% year-over-year increase, with an adjusted pre-tax return on equity (ROE) of 44.8% [19] - The Cash Efficiency Ratio for the quarter was 71%, driven by strong collections from the Conn's portfolio purchase [4][17] Business Line Data and Key Metrics Changes - Collections from the Conn's portfolio contributed $36 million, while the Bluestem portfolio added $14 million to collections for the quarter [11] - The estimated remaining collections (ERC) reached $3.4 billion, a 23% increase year-over-year, with ERC related to Conn's and Bluestem comprising $140 million and $296 million respectively [13][14] Market Data and Key Metrics Changes - Delinquency trends remain elevated across non-mortgage consumer asset classes, creating favorable portfolio supply trends [5][8] - The current level of personal savings is $831 billion, significantly lower than the pre-pandemic average, indicating limited consumer ability to absorb financial hardships [6] - The insolvency market has seen an increase in the number of insolvencies in the U.S. and Canada, fueling a resurgence in supply of insolvency portfolios [6][8] Company Strategy and Development Direction - The company aims to solidify its leadership position as a strategic acquirer of consumer credit portfolios, with the Bluestem acquisition expected to contribute meaningfully to financial results in 2026 [4][10] - Jefferson Capital is focused on deploying capital to purchase portfolios at attractive risk-adjusted returns, with a robust funding structure and proven access to capital markets [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the investment opportunity, citing elevated levels of consumer delinquencies and charge-offs as a driver for robust portfolio supply [8][9] - The company has successfully navigated credit cycle fluctuations and is better positioned to take advantage of market opportunities compared to earlier periods [10][20] Other Important Information - The company completed a follow-on offering in January, improving liquidity and reducing J.C. Flowers' ownership to 53% [3] - A quarterly dividend of $0.24 per share was declared, representing a 4.7% annualized yield [24] - The company repurchased 3 million shares for $59 million as part of a tactical strategy to support the follow-on offering [24] Q&A Session Summary Question: Thoughts on macro uncertainties affecting purchasing environment - Management indicated that while energy costs and modest employment deterioration could impact delinquencies, they do not expect these factors to significantly affect liquidation rates [27][28] Question: Trends among sellers regarding forward flow deals - Management noted that they do not target a specific percentage for forward flows, but historically about half of deployments have been in forward flows [31][32] Question: Increase in supply of charged-off accounts - Management stated that the supply of charged-off accounts has been elevated, but the fourth quarter is typically the largest for originators to sell [46][48] Question: Stability of return profiles across the book - Management confirmed that return profiles have been stable, with predictable pricing in the market [49] Question: Tax rate expectations for 2026 - Management suggested a tax provision estimate of around 24.5% for 2026 [50] Question: Characteristics of deployments and market shifts - Management highlighted an increase in deployments in insolvencies and noted that their asset class specialization and geographic diversification continue to yield attractive returns [56][58] Question: Legal channel returns and scaling - Management indicated that the volume of legal accounts corresponds to underwritten expectations, and the growth in legal volume is consistent with their forecasts [91][92] Question: Areas of the market consciously avoided - Management confirmed that they have not consciously walked away from any parts of the market due to pricing or return thresholds [93][94]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $58.9 million, a 16% decrease year-over-year and a sequential decrease of 7% compared to Q3 2025, primarily due to challenges in the industrial end market and the divestiture of a mall-related business [14][15] - Gross profit for Q4 was $9.1 million, a decline of 15% year-over-year and a sequential decline of 21%, resulting in a gross margin of 15.5% [16] - SG&A expenses were $7.7 million, a 24% reduction year-over-year and a 17% reduction sequentially, attributed to headcount reductions and increased efficiencies [19] Business Line Data and Key Metrics Changes - The industrial end market faced significant volume declines, contributing to a $10.7 million reduction in quarterly revenue compared to the prior year [14][15] - Despite challenges in the industrial sector, the remaining two-thirds of the business saw modest growth of $7.4 million, or about 5% [15] - New business wins and wallet share initiatives launched in Q4 are expected to contribute positively in 2026 [15][18] Market Data and Key Metrics Changes - The overall pipeline remains healthy, but economic uncertainty has led to decision delays among potential clients [6] - The company has not lost any customers in the industrial end market, indicating strong relationships that may benefit from future recovery [5] Company Strategy and Development Direction - The company is focused on operational excellence initiatives to drive efficiencies and improve financial performance as market conditions normalize [8][13] - There is an emphasis on expanding wallet share with existing customers and onboarding new clients to enhance revenue streams [10][13] - The company aims to reduce debt and improve cash generation while continuing to invest in growth opportunities [23][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that 2025 was a challenging year due to volume declines from the industrial end market, but expressed confidence in the company's ability to recover as macroeconomic conditions improve [12][26] - The company is well-positioned to accelerate financial performance and drive shareholder value as conditions improve [26] Other Important Information - The company generated over $1 million in cash from operations and $1.7 million of free cash flow in Q4 [21] - The company reduced its debt by approximately $2 million in Q4, bringing the full-year debt reduction to $13.2 million, a 16.4% reduction [23] Q&A Session Summary Question: Update on KPIs and operational efficiency initiatives - Management stated that all KPIs and operational efficiency initiatives are on track, with positive trending despite the difficult volume environment [30][31] Question: Health of the vendor network - Management reported improved relationships with vendors, with vendors now accepting payment to term and experiencing the lowest service disruptions in history [32][33] Question: Cross-sell opportunities with industrial customers - Management indicated that if industrial clients expand operations, the company stands to benefit due to strong relationships and service satisfaction [34][36]

Financial Data and Key Metrics Changes - The company ended 2025 with $245.8 million in cash and investments and no debt on its balance sheet [9][23] - Revenue for Q4 2025 was $21.8 million, and for the full year, it was $55.2 million [24] - R&D expenses for Q4 2025 were $29.7 million, totaling $117.3 million for the year [24] - G&A expenses for Q4 2025 were $11.2 million, with a full-year total of $68.7 million [24] - The net loss for Q4 2025 was $36.1 million, or $1.78 per share, while the full-year net loss was $164.1 million, or $9.73 per share [24][25] Business Line Data and Key Metrics Changes - The company focused on advancing its immunology and inflammation pipeline, particularly the Treg biologic, rezpegaldesleukin [3][4] - Positive results were achieved in phase 2b studies for atopic dermatitis and alopecia areata, validating the efficacy of the Treg mechanism [4][5] - The atopic dermatitis market is projected to grow to approximately $35 billion by the mid-2030s, with only 10%-15% of patients currently receiving biologic treatments [5][6] Market Data and Key Metrics Changes - In the U.S., over 15 million people suffer from moderate to severe atopic dermatitis, presenting a significant market opportunity [5] - The competitive landscape for late-stage novel mechanisms of action (MOAs) has narrowed, positioning REZPEG favorably [6][7] Company Strategy and Development Direction - The company plans to initiate phase 3 studies for rezpegaldesleukin in June 2026, with a BLA submission targeted for 2029 [9][10] - The strategy includes leveraging a differentiated efficacy and safety profile for REZPEG, aiming to provide a better dosing regimen compared to existing treatments [6][7] - The company is also exploring additional indications for REZPEG, including type 1 diabetes and other autoimmune diseases [20][21] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of the Treg mechanism in addressing various diseases and expressed optimism about the potential for REZPEG to achieve significant market penetration [20][21] - The company anticipates that the phase 3 program will provide robust data supporting the efficacy and safety of REZPEG, which could lead to a strong competitive position in the market [9][10] Other Important Information - The company raised approximately $476 million in additional net cash through a public offering and ATM exercises since year-end 2025 [9][23] - The phase 3 program for atopic dermatitis will include both biologic-naive and treatment-experienced patients, with a focus on achieving significant clinical endpoints [10][11] Q&A Session Summary Question: What type of new data can be expected from the AAD conference? - The upcoming presentation will showcase additional effects of treatment with REZPEG and the potential for more patients to achieve SALT 20 responses [29][30] Question: Will ACQ-5 data be included in the phase 3 program? - Yes, ACQ-5 will be included, and efforts will be made to incorporate it into the label [36][37] Question: What is the formulation or device for REZPEG being considered? - The plan is to launch REZPEG in an auto-injector device, with weight-banded dosing for ease of administration [41][47] Question: How does REZPEG differentiate from other treatments in type 1 diabetes? - REZPEG offers an outpatient dosing regimen without the need for routine monitoring, contrasting with the more complex administration of other treatments [78][79]