Financial Data and Key Metrics Changes - For Q4 2025, net revenue decreased by $2.7 million or 9.3% to $26.5 million compared to $29.2 million last year, primarily due to reduced political revenue [3] - For the full year 2025, net revenue decreased by $5.8 million or 5.1% to $107.1 million compared to $112.9 million last year, with almost half of the decrease attributed to reduced political revenue [4] - The company recorded a non-cash impairment charge of $20.4 million in Q4 2025, leading to an operating loss of $9.5 million compared to operating income of $1 million for the same period last year [5] - The net loss for Q4 2025 was $6.9 million compared to net income of $1.3 million last year [5] - For the year ended December 31, 2025, the company reported a net loss of $7.9 million compared to net income of $3.5 million last year [6] Business Line Data and Key Metrics Changes - Gross political revenue for Q4 2025 was $254,000 compared to $2 million for the same quarter last year [3] - For the year 2025, gross political revenue was $650,000 compared to $3.3 million for 2024 [4] - Total interactive revenue increased by 25.8% for the quarter and 19.1% for the year [12] - E-commerce platform revenue grew by 16% year-over-year, contributing $2.5 million in local direct revenue [18] - Revenue from hyperlocal online news sites grew by 18% year-over-year, contributing over $2.5 million in revenue [18] Market Data and Key Metrics Changes - The company anticipates a return to revenue growth, including political revenue, in the second half of 2026, with expected increases in the range of mid-single digits [12] - The second quarter of 2026 is currently pacing down mid-single digits, including political revenue [12] Company Strategy and Development Direction - The company is focusing on building digital infrastructure to support interactive orders and enhance local management teams [13] - A digital initiative is expected to increase marketing expenses by $1.5 million for 2026, with the goal of improving profitability through digital transformation [14] - The company plans to maintain a strong balance sheet while returning value to shareholders through regular dividends and potential stock buybacks [11] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges in transitioning from traditional broadcast revenue to digital revenue but remains optimistic about future growth [12][14] - The company is committed to an advertiser-first approach that integrates digital strategies with its core radio business [22] - Management emphasizes the importance of education and training for leadership and media advisors to adapt to changing consumer behaviors and advertising strategies [26] Other Important Information - The company recognized a gain of $11.6 million from the sale of telecommunications towers and related property [8] - The company paid a quarterly dividend of $0.25 per share on December 12, 2025, and plans to continue regular dividends in the future [10] - The company has $31.8 million in cash and short-term investments as of December 31, 2025 [11] Q&A Session Summary - There were no questions during the Q&A session [28]

Financial Data and Key Metrics Changes - Oil-Dri generated EBITDA of $22 million in Q2 fiscal 2026, consistent with the same quarter a year ago [14] - Cash flows from operating activities for the first six months of fiscal 2026 exceeded $28 million, with cash and cash equivalents at $47 million at the end of Q2 [15] - Outstanding debt was $40 million, indicating a strong cash position with more cash than debt [16] Business Line Data and Key Metrics Changes - The agriculture and horticulture products segment showed strong performance, driven by increased planted acres and new customer opportunities for Verge granules [29][30] - The consumer products division launched several new products, including an antibacterial litter and health monitoring litter, which are expected to enhance market presence [35][36] Market Data and Key Metrics Changes - The broad acre market for agriculture products is experiencing growth due to increased planted acres, while the turf and ornamental market is also seeing strong demand for engineered granules [29][30] - Renewable diesel sales faced challenges due to changes in tax incentives and feedstock sourcing, but there is potential for recovery as producers adjust [39][40] Company Strategy and Development Direction - The company is focused on long-term capital allocation to sustain high uptime and optimize capacity, rather than viewing capital spending as a discrete project [22] - Continued investment in growth and infrastructure projects is planned, with new product launches expected in the second half of the fiscal year [16] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the team's response to Winter Storm Fern, highlighting the commitment to safety and customer service [12][14] - The company anticipates continued strong performance in agriculture and horticulture, with optimism about new product introductions and market expansion [31][35] Other Important Information - The company is integrating artificial intelligence into R&D to enhance product development and operational efficiency [61] - The management team emphasized the importance of maintaining a strong cash position to support strategic initiatives [16] Q&A Session Summary Question: Progress on capital expenditure for plant upgrades - The capital spending program is progressing as intended, focusing on foundational areas and ongoing improvements rather than a defined endpoint [22][23] Question: Sales increase in agriculture and horticulture products - Strong performance in both broad acre and turf markets, with expectations for continued growth driven by new customer opportunities [29][30] Question: New product introductions in the second half - Several new products are set to launch, including expansions in the Cat's Pride litter portfolio, aimed at enhancing consumer experience and e-commerce fulfillment [35][36] Question: Weakness in renewable diesel sales - Sales were impacted by changes in tax incentives and feedstock sourcing, but recovery is expected as producers adapt to new conditions [39][40] Question: Trends in manufacturing and transportation costs - Manufacturing costs have seen volatility due to operational disruptions, while transportation costs have stabilized, aided by effective logistics management [49][50] Question: Progress with Amlan and long-term sales growth - Amlan faced challenges due to a key account loss but is working to recover and broaden its customer base in high-margin markets [54][55] Question: Headwinds and tailwinds in the oil and gas situation - Increased fuel costs are providing margin support for end users, while the company has strategies in place to manage cost fluctuations effectively [56][58] Question: Use of artificial intelligence in product development - The company is thoughtfully integrating AI into R&D to drive efficiency and innovation in product offerings [61]

Financial Data and Key Metrics Changes - The fourth quarter results included an Adjusted EBITDA loss of CAD 95.2 million, reflecting an Adjusted EBITDA margin of -20.9% and cash used in operating activities of CAD 3 million [14][15] - For the full year 2025, Adjusted EBITDA was a loss of CAD 261.4 million, representing an adjusted EBITDA margin of -12.5%, compared to a gain of CAD 22.4 million and a margin of 0.9% in 2024 [19] - The company finished the quarter with CAD 77 million in cash, CAD 195 million available under the revolving credit facility, and CAD 417 million under the Large Enterprise Tariff Loan facility [15] Business Line Data and Key Metrics Changes - Shipments in the fourth quarter were 378,000 net tons, down 31% year-over-year, largely due to the impact of U.S. tariffs [15] - For the full year 2025, total shipments were 1.7 million net tons, compared to 2 million net tons in 2024 [18] - Net sales realizations averaged CAD 1,080 per ton for the full year, down from CAD 1,107 per ton in the prior year, reflecting softer market conditions [19] Market Data and Key Metrics Changes - Shipments to the U.S. were approximately 30% lower than the average U.S. sales over the previous three quarters as the company began its exit from the U.S. market [9] - Plate pricing continued to enjoy a significant premium relative to hot-rolled coil, driven by resilient demand, while sheet pricing was reported to be 40% lower than the index [16][37] - The Canadian dollar strengthened approximately 5% over the course of 2025, impacting financial results [14] Company Strategy and Development Direction - The company is pivoting its commercial strategy towards the Canadian market, exiting blast furnace and coke oven operations, and focusing on high-value products [7][12] - A binding MoU with Hanwha Ocean Co., Ltd. was announced, with a potential value of CAD 250 million, indicating a strategic repositioning towards defense and industrial supply chains [11] - The company aims to evolve from a cross-border commodity producer to a Canadian-focused steel supplier, optimizing for margin quality rather than volume [12] Management's Comments on Operating Environment and Future Outlook - The management acknowledged that 2025 was the most challenging year for Canadian steel producers due to the 50% U.S. Section 232 tariff, which dismantled the cross-border business model [21] - The company is committed to exploring product diversification initiatives to support Canadian industrial policy and has implemented mitigation programs for affected employees [22] - The foundation for long-term value creation is in place, with confidence in the company's direction moving forward [24] Other Important Information - The company absorbed CAD 225 million in direct tariff costs for the full year, which are considered a structural shift rather than cyclical headwinds [9] - Accelerated depreciation of blast furnace and basic oxygen steelmaking assets was captured in the cost of sales during the quarter [17] Q&A Session Summary Question: What are the expectations for full year shipments and their split between plate and sheet? - The company expects total shipments between 1 and 1.2 million tons for the year, with a mix of roughly 50/50 between plate and sheet [27][28] Question: How exposed are energy costs to the current spot market? - The company generates power from its own natural gas-fired power plant and consumes power from the grid, which is subject to Ontario's spot rate pricing [29] Question: What is the current status of plate pricing in Canada? - Plate pricing is holding up better than sheet pricing, with government measures helping to stabilize the market [36][37] Question: What are the expected milestones for the beam mill project? - The company is working on engineering, cost estimates, and timelines for the beam mill project, with a focus on supporting the Canadian market [39][40] Question: What is the expected CapEx for the full year? - The company does not expect any change in the total project budget for the EAF, with sustaining CapEx expected to be around CAD 80 million a year [42] Question: How is the scrap supply situation? - The scrap availability and supply are progressing well, with the joint venture working effectively [43]

Financial Data and Key Metrics Changes - For the fourth quarter, the company generated $0.29 per share of GAAP net investment income, with Core Net Investment Income also at $0.29 per share, excluding excise taxes [5] - Total realized income for the quarter was $0.48 per share, which included realized gains of $5.5 million on five equity positions [5] - Net asset value per share decreased by $0.23 during the quarter, attributed to $0.11 per share in dividend payments exceeding earnings and net realized losses of $0.12 per share primarily from two debt investments [5] Business Line Data and Key Metrics Changes - The investment portfolio at fair value remained stable at $1.01 billion across 115 portfolio companies [6] - During the fourth quarter, the company invested $34.1 million in four new portfolio companies and received repayments totaling $37.9 million [6] - 99% of loans were secured, with 92% priced at floating rates, and the average loan per company was $8.8 million [7] Market Data and Key Metrics Changes - The company has investments in 24 separate industry sectors, with approximately 10% in high-tech industries [8] - The portfolio includes a small number of loans to software companies related to the SaaS space, comprising 6.8% of the loan portfolio [9] Company Strategy and Development Direction - The company announced a $20 million share buyback program, reflecting the current trading level of shares at approximately a 30% discount to net asset value [16] - The external manager, Stellus Capital Management, is set to join Ridgepost Capital, which is expected to open up new investment opportunities for the company [14][15] - The company focuses on direct, originated, senior secured loans to lower middle market private equity-backed companies, differentiating itself from larger private credit managers [18] Management's Comments on Operating Environment and Future Outlook - The company expects to maintain its portfolio size at approximately $996 million, with continued equity realizations of about $2 million in Q1 2026 [12] - Management expressed confidence in the private credit sector, highlighting the significant amount of dry powder available in lower middle market private equity firms [21] - The company anticipates a gradual resolution of non-accrual assets over the next 12-18 months, with a focus on restructuring and monetizing positions [60] Other Important Information - The company has paid $333 million in dividends since its IPO, representing $18.27 per share to investors [4] - The weighted average risk rate across the portfolio is approximately 2, indicating investments performing on plan [18] Q&A Session Summary Question: Will there be any change in the leverage targets for SCM? - Management confirmed that there will not be a change in the targeted leverage for SCM, which is approximately 1:1 on the regulatory test [27] Question: What is the remaining capacity in the SBA? - Management indicated that there is significant new capacity in the SBA, with $65 million of new debentures available for growth [29] Question: Can you provide details on the non-accrual investments? - Management stated that the non-accrual companies are working with others to secure additional capital during challenging periods [30] Question: What is the exposure to higher energy prices? - Management confirmed no direct exposure to the oil and gas industry and emphasized a focus on avoiding commodity price risk [52] Question: What is the expected timeline for resolution of non-accrual assets? - Management anticipates a gradual resolution over the next 12-18 months, with some assets being restructured [60] Question: Will spreads widen sustainably in the next year or two? - Management noted that public loan indices have widened, and while private markets have not yet reflected this, the conditions for widening spreads are present [62]

Financial Data and Key Metrics Changes - In 2025, the company achieved record engine shipments approaching 800 engines and over 75 megawatts of power, representing a 38% growth in megawatts shipped compared to 2024 [3] - Full-year revenue exceeded $99 million, up 43% year-over-year, with Q4 revenue approximately $34 million, reflecting a 37% increase year-over-year [3][18] - Gross margin improved to 17% in Q4, a 30-point increase year-over-year, while full-year gross margin was positive 5%, up 37 points from 2024 [18] - Total operating expenses for the full year were approximately $109 million, 32% lower than the previous year, with expectations for 2026 operating expenses to range between $65 million and $75 million [19] Business Line Data and Key Metrics Changes - The company secured its largest marine order to date, a 6.4-MW award from eCap Marine and Samskip, and announced a significant commercial agreement with New Flyer for 50 MW [4] - The focus on product cost reduction through negotiations, execution, and innovation is expected to enhance competitiveness and improve gross margins [8][9] Market Data and Key Metrics Changes - The majority of engine shipments were directed towards Europe and North America, with particularly strong activity in Canada [3] - The company is increasingly focused on stationary power applications, aiming to replace diesel generators and power data centers, with products generating over 100,000 hours of power [12][13] Company Strategy and Development Direction - The company aims to achieve sustainable positive cash flow within the next two years by aligning its cost structure with market realities and expanding revenue and gross margins [4][16] - Five near-term focus areas include improving commercial terms, product cost reductions, enhancing fleet service offerings, expanding product reach, and innovating business models [5][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the path ahead, emphasizing the importance of disciplined spending, growing top-line revenue, and maintaining financial health [22] - The company is committed to delivering fuel cell power for a sustainable planet and is focused on leveraging its installed base for enhanced fleet services [11][16] Other Important Information - The company ended the year with nearly $530 million in cash, no bank debt, and no near or mid-term financing requirements, indicating improved financial stability [21] - The company has made decisive changes to its cost structure, reducing cash operating costs in Q4 by 41% compared to the same period last year [4] Q&A Session Summary Question: On the restructuring side, what are the key drivers of the incremental cost contraction? - Management indicated that large items have been harvested, and the focus is now on driving costs out of products through innovation initiatives and manufacturing efficiencies [24][26] Question: Has the restructuring materially altered the R&D roadmap? - Management stated that R&D is focused on extracting value from existing innovations, with longer-term innovations expected to be in the three to five-year range [28][30] Question: What is the duration of the New Flyer contract? - The contract is for 500 units, with a focus on megawatts and unit volumes rather than duration [33] Question: How does the FCmove-XD and FCveloCity-HD compare with competing offerings? - Management highlighted that the products can address the stationary market with configurations that meet customer needs for power now, emphasizing speed and cost as key factors [40][46]

Financial Performance - Oil-Dri generated EBITDA of $22 million in Q2 fiscal 2026, consistent with the same quarter a year ago [14] - Cash flows from operating activities for the first six months of fiscal year 2026 exceeded $28 million, with cash and cash equivalents at $47 million and outstanding debt at $40 million, indicating a strong cash position [16][14] - The company reported a one-year stock price growth rate of 36%, two-year growth of 88%, and five-year growth of 258% [18] Business Lines Performance - The agriculture and horticulture products segment has seen strong sales growth, driven by increased planted acres and new customer opportunities for Verge granules [28][31] - The renewable diesel segment experienced a slowdown due to changes in tax incentives and feedstock oil sourcing, but there is potential for growth as the market adjusts [38][39] Market Insights - The broad acre market for grains and oilseeds is expected to continue growing, while the turf and ornamental market is also showing strong performance with new application opportunities [29][31] - The company is optimistic about the long-term growth of the animal nutrition and feed additive markets, despite recent account losses in the Amlan segment [60] Company Strategy and Industry Competition - Oil-Dri is focused on ongoing capital investments to modernize and optimize its manufacturing capabilities, viewing this as a continuous process rather than a project with a defined endpoint [22][23] - The company is committed to innovation, with several new product launches planned for the second half of the fiscal year, including expansions in the Cat's Pride litter portfolio [36][37] Management Commentary on Operating Environment - Management highlighted the team's resilience during Winter Storm Fern, emphasizing safety and customer service as core values [12][10] - The company is well-positioned to navigate cost pressures and market fluctuations due to its strategic approach to natural gas purchasing and operational execution [65][66] Other Important Information - The company is integrating artificial intelligence into its R&D processes to enhance product development and operational efficiency [68][69] Q&A Session Summary Question: Progress on capital expenditure for plant upgrades - The capital spending program is progressing as intended, focusing on foundational areas and maintaining high uptime [22][23] Question: Sales increase in agriculture and horticulture products - Strong performance in both broad acre and turf markets, with expectations for continued growth [28][31] Question: New product introductions in the second half - Several new products are set to launch, including health monitoring litter and new Cat's Pride items [36][37] Question: Weakness in renewable diesel sales - Sales slowed due to tax changes and feedstock sourcing issues, but growth is expected as the market stabilizes [38][39] Question: Trends in manufacturing and transportation costs - Manufacturing costs are influenced by operational disruptions and labor-related pressures, while transportation costs have stabilized [47][53] Question: Amlan's long-term sales growth outlook - Despite recent account losses, the long-term outlook for Amlan remains positive due to the size and value of targeted markets [60] Question: Headwinds and tailwinds in the oil and gas situation - Increased fuel costs are impacting margins, but there is potential for order upticks if prices remain high [62] Question: Use of artificial intelligence in product development - The company is thoughtfully integrating AI into R&D to improve efficiency and product innovation [68][69]

Financial Data and Key Metrics Changes - For the fourth quarter, the company generated $0.29 per share of GAAP net investment income, with Core Net Investment Income also at $0.29 per share, excluding excise taxes [5] - The net asset value per share decreased by $0.23 during the quarter, attributed to $0.11 per share in dividend payments exceeding earnings and net realized losses of $0.12 per share primarily from two debt investments [5][6] - The company has invested approximately $2.8 billion in over 220 companies since its IPO, with $1.8 billion in repayments and $333 million in dividends paid to investors [4] Business Line Data and Key Metrics Changes - The investment portfolio at fair value remained stable at $1.01 billion across 115 portfolio companies [6] - During the fourth quarter, the company invested $34.1 million in four new portfolio companies and received repayments totaling $37.9 million [6][8] - 99% of loans were secured, with 92% priced at floating rates, and the average loan per company was $8.8 million [7] Market Data and Key Metrics Changes - The company has approximately 10% of its investments in high-tech industries, with a focus on industry-specific tech-enabled solutions rather than large-scale SaaS software [8][9] - The company has loans to five portfolio companies on non-accrual, comprising 7.5% of the total cost and 4.1% of the fair value of the total investment portfolio [8] Company Strategy and Development Direction - The company announced a $20 million share buyback program, reflecting its current trading level at approximately a 30% discount to net asset value [16] - The external manager, Stellus Capital Management, is set to join Ridgepost Capital, which is expected to enhance investment opportunities for the company [14][15] - The company focuses on direct, originated, senior secured loans to lower middle-market private equity-backed companies, differentiating itself from larger private credit managers [18][19] Management's Comments on Operating Environment and Future Outlook - The company expects to maintain its portfolio size at approximately $996 million, with continued equity realizations of about $2 million in Q1 2026 [12] - Management expressed confidence in the stability of asset quality and the potential for improved pricing in the private credit sector [39][62] - The company anticipates a gradual resolution of non-accrual assets over the next 12-18 months [60] Other Important Information - The company has a weighted average risk rate of approximately two, indicating investments performing on plan [18] - The company has a long history of equity co-investments alongside debt investments, generating approximately $98 million of net realized gains to date [20] Q&A Session Summary Question: Will there be any change in the leverage targets for SCM? - Management confirmed that there will not be a change in the targeted leverage for SCM, which is approximately 1:1 on the regulatory test and approximately 2:1 including SBIC debentures [27] Question: What is the remaining capacity in the SBA? - Management indicated that there is significant new capacity in the SBA, with $65 million of new debentures available for future growth [29] Question: Can you provide details on the non-accrual investments? - Management stated that the non-accrual companies are working with others to secure additional capital during challenging periods [30] Question: What is the exposure to higher energy prices? - Management confirmed no direct exposure to the oil and gas industry and emphasized a focus on avoiding commodity price risk [52] Question: What is the expected timeline for resolution of non-accrual assets? - Management anticipates a gradual resolution over the next 12-18 months, with some assets potentially coming off non-accrual [60]

Financial Data and Key Metrics Changes - In Q4 2025, the company generated $0.29 per share of GAAP net investment income, with Core Net Investment Income also at $0.29 per share, excluding excise taxes [5] - Total realized income for the quarter was $0.48 per share, which included gains of $5.5 million on 5 equity positions [5] - Net asset value per share decreased by $0.23 during the quarter, attributed to $0.11 per share in dividend payments exceeding earnings and net realized losses of $0.12 per share primarily from two debt investments [5][6] Business Line Data and Key Metrics Changes - The investment portfolio at fair value remained stable at $1.01 billion across 115 portfolio companies [6] - During Q4, the company invested $34.1 million in four new portfolio companies and received repayments totaling $37.9 million [6][8] - 99% of loans were secured, with 92% priced at floating rates, and the average loan per company was $8.8 million [7] Market Data and Key Metrics Changes - The company has investments in 24 separate industry sectors, with approximately 10% in high-tech industries [9] - The portfolio includes a small number of loans to software companies related to the SaaS space, comprising 6.8% of the loan portfolio [10] Company Strategy and Development Direction - The company announced a $20 million share buyback program, reflecting its shares trading at approximately a 30% discount to net asset value [18] - The external manager, Stellus Capital Management, is set to join Ridgepost Capital, which is expected to enhance investment opportunities for the company [15][17] - The company focuses on direct, originated, senior secured loans to lower middle market private equity-backed companies, differentiating itself from larger private credit managers [20] Management's Comments on Operating Environment and Future Outlook - The company expects to maintain its portfolio size at approximately $996 million, with continued equity realizations of about $2 million in Q1 2026 [13] - Management emphasized the importance of strong underwriting and being selective about opportunities in the current economic environment [38] - The company anticipates a gradual resolution of non-accrual loans over the next 12-18 months [59] Other Important Information - The company has paid $333 million in dividends since its IPO, representing $18.27 per share to initial investors [4] - The company has a weighted average risk rate of approximately 2, indicating investments performing on plan [20] Q&A Session Summary Question: Will there be any change in the leverage targets for SCM? - Management confirmed that there will not be a change in the targeted leverage for SCM, which is approximately 1:1 on the regulatory test and approximately 2:1 including SBIC debentures [28] Question: What is the remaining capacity in the SBA? - Management indicated that there is significant new capacity in the SBA, with $65 million of new debentures available for growth [29] Question: Can you provide details on the non-accrual investments? - Management stated that the companies in non-accrual are working with others to secure additional capital during challenging periods [30] Question: What is the exposure to higher energy prices? - Management confirmed no direct exposure to the oil and gas industry and stated that any impact would be more related to consumer spending rather than direct company exposure [52] Question: What is the expected timeline for resolution of non-accrual assets? - Management expects a gradual resolution over the next 12-18 months, with some companies coming off non-accrual [59]

Financial Data and Key Metrics Changes - Oil-Dri generated EBITDA of $22 million in Q2 2026, consistent with the same quarter a year ago [9] - Cash flows from operating activities for the first six months of fiscal year 2026 exceeded $28 million, with cash and cash equivalents at $47 million at the end of Q2 [10] - Outstanding debt was reported at $40 million, indicating a strong cash position with more cash than debt [11] Business Line Data and Key Metrics Changes - The agriculture and horticulture products segment showed strong performance, driven by increased planted acres and new customer opportunities for Verge granules [20][21] - The consumer products division launched several new products, including an antibacterial litter and health monitoring litter, which are expected to enhance market presence [24][25][26] Market Data and Key Metrics Changes - The broad acre market for agriculture products has seen growth due to increased planted acres, while the turf and ornamental market is benefiting from new applications of engineered granules [21][22] - Renewable diesel sales faced challenges due to changes in tax incentives and feedstock sourcing, but there is optimism for recovery as new rebates are implemented [27][28] Company Strategy and Development Direction - The company is focused on ongoing capital investments to modernize and upgrade plant and equipment, with a long-term view on sustaining high uptime and optimizing capacity [16] - Innovation remains a priority, with a commitment to enhancing consumer experience through R&D and new product development [24] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the team's response to Winter Storm Fern, highlighting the importance of safety and customer service during disruptions [5][9] - The company anticipates continued growth in the agriculture and horticulture segments, supported by expanding customer bases and product offerings [22][43] Other Important Information - The company has a strong cultural commitment to teamwork and customer focus, which has been crucial in navigating operational challenges [12] - The management team emphasized the importance of maintaining operational resilience and reliability in the face of cost fluctuations [39] Q&A Session Summary Question: Progress on capital expenditure for plant upgrades - The capital spending program is progressing as intended, focusing on foundational areas and ongoing improvements rather than a defined endpoint [16] Question: Sales increase in agriculture and horticulture products - Strong performance in both broad acre and turf markets, with expectations for continued growth driven by new customer opportunities [20][21] Question: New product introductions in the second half - Several new products are expected, including expansions in the Crystal litter portfolio and new health monitoring formulations [24][25][26] Question: Weakness in renewable diesel sales - Sales were impacted by changes in tax incentives and feedstock sourcing, but growth is expected as new rebates are implemented [27][28] Question: Trends in manufacturing and transportation costs - Manufacturing costs have seen volatility due to operational disruptions, while transportation costs have stabilized due to effective logistics management [36][39] Question: Amlan's performance and future growth - Amlan faced challenges due to a key account loss but is working to recover and broaden its customer base for long-term growth [40][43] Question: Oil and gas market headwinds and tailwinds - Increased fuel costs are impacting margins, but there is potential for growth in renewable diesel production if prices remain high [44][46] Question: Use of artificial intelligence in product development - The company is integrating AI into R&D to enhance efficiency and effectiveness in new product development [48]

Financial Data and Key Metrics Changes - The company is focusing on protecting profitability, maximizing cash flow, and strengthening its balance sheet rather than pursuing growth for its own sake [5][6] - The annual capital budget has been right-sized to ensure the development program stays within cash flow, even in a softer price environment [6] - The company suspended its dividend, which is expected to increase annual liquidity by an estimated $20-$25 million [6][7] - Production is averaging more than 46,000 BOE per day, which is roughly 10% above the midpoint of the 2026 guidance range [8] Business Line Data and Key Metrics Changes - The capital budget for 2026 is nearly 50% lower than the previous year, while unit lease operating expenses per BOE are modestly higher due to targeted initiatives [7][8] - The development program is built for capital efficiency, highlighted by an estimated 65% increase in production per dollar invested [8] Market Data and Key Metrics Changes - Mid-cap E&Ps are currently rewarded for durable free cash flow, balance sheet strength, and meaningful high-quality inventory depth, rather than headline production growth [8][9] - The scarcity of Tier One shale inventory across the Permian Basin is increasing the strategic value of companies that hold significant high-return drilling inventory [18][19] Company Strategy and Development Direction - The company aims to build a resilient, valuable entity that delivers for shareholders over the long term, focusing on returns and resilience rather than headline growth [20][21] - The capital allocation philosophy prioritizes high-return investments, preserving premium inventory, and generating sustainable free cash flow [11][12] - The 2026 development plan is intentionally conservative, anchored around one drilling rig and one completion crew, with plans to drill about 30 wells and bring 36-38 wells online [6][7] Management's Comments on Operating Environment and Future Outlook - The management emphasizes the importance of financial discipline and operational excellence in navigating the current geopolitical and commodity landscape [5][6] - The company is positioned to thrive not just for the next couple of quarters but for years to come, with a focus on debt reduction and liquidity improvement [6][10] - The guiding principle is that return on capital employed matters more than production growth, allowing for the preservation and expansion of high-quality inventory [9][10] Other Important Information - The company has more than 2,600 total drilling locations across various formations, representing decades of high-return inventory [18][19] - The existing production base is a reliable source of cash flow, underpinning the business today [19][20] Q&A Session Summary Question: Can you provide more details on cost reduction and production optimization efforts? - The company has implemented various optimization strategies in drilling and completion processes, leading to faster drilling and completion times, as well as cost savings [25][26] Question: What is the split of wells across development areas for 2026? - Approximately 70% of capital will be spent in the Flat Top area, with 30% in Signal Peak, primarily focusing on Wolfcamp A and Lower Spraberry [30][31] Question: What is the expected corporate decline curve for 2026? - The corporate decline rate is expected to decrease from 38% at the beginning of 2026 to around 36% by the end of the year, which will reduce the CapEx needed for maintenance [38][39] Question: Will there be any structural changes regarding water handling in 2026? - The existing water system is efficient and paid for, which helps lower capital intensity while optimizing production [40][41] Question: Any updates on planned distributions in 2026 and 2027? - The company has extended the distribution timeline to allow for a healthier market environment, with flexibility in timing throughout 2026 [45][46]