Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $10,000, down from $24,000 in Q4 2024, reflecting modest revenue fluctuations typical in early commercial stages [20] - Total revenue for 2025 was $81,000, slightly up from $77,000 in 2024, indicating a gradual revenue expansion [21] - Operating expenses for Q4 2025 were $9 million, down from $9.4 million in the prior year, showcasing disciplined expense management [20] - Net loss for Q4 2025 was $7.9 million compared to a net loss of $8.6 million in Q4 2024, demonstrating improved financial control [21] Business Line Data and Key Metrics Changes - Research and development expenses for 2025 were $13.2 million, down from $14.7 million in 2024, driven by lower clinical study costs following the completion of the PRIME study [21] - Selling, general, and administrative expenses were $23.3 million compared to $21.9 million in the previous year, reflecting targeted commercial readiness investments [21] Market Data and Key Metrics Changes - The company engaged with 13 states for partner programs, exceeding its initial goal of six states, and aims to expand to 15-17 states by year-end 2026 [9] - In Europe, the company is working towards CE marking approval for its preterm global test, with submissions expected in the coming months [10] Company Strategy and Development Direction - The company aims to build evidence, access, and commercial infrastructure to drive preterm birth adoption at scale, with a focus on Medicaid and high preterm birth burden states [5][8] - A disciplined approach to market access and commercial infrastructure investments is being maintained, with a focus on expanding partner programs and generating real-world evidence [11][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum gained from the PRIME publication and the growing engagement with payers and state-level stakeholders [45] - The company anticipates gradual adoption of its technology, supported by compelling clinical evidence and increasing payer engagement [45] Other Important Information - The company ended 2025 with $95.8 million in cash equivalents, which is expected to fund operations through significant adoption and commercial milestones until 2028 [22][25] - A new Head of Sales and Strategic Accounts has been appointed to enhance commercial execution and market access [15] Q&A Session Summary Question: Can you expand on converting payer discussions and partner programs using outcomes and economic data? - The company highlighted the importance of clinical outcomes and economic benefits in discussions with partners, particularly for state Medicaid agencies [29] - The reduction in NICU admissions is a significant cost driver that partners are interested in [30] Question: What feedback was received at the SMFM conference regarding PRIME? - Engagement with providers and leadership at SMFM was strong, focusing on making the test more accessible [33] - The publication has improved credibility and engagement across various stakeholders [35] Question: How will the company balance investments in successful U.S. states versus global EU launch capital requirements? - The company plans to reallocate spending from clinical and R&D activities towards commercial activities, including EU opportunities [38] Question: Can you elaborate on the profile of the new partner? - The company is negotiating with large health systems, provider payers, and group practices, aiming to implement the PreTRM test as standard care [40] - The new partner is an employer collaborative with multi-state opportunities [42]

Financial Data and Key Metrics Changes - Adjusted pre-tax earnings reached BRL 241 million for Q4 2025, 12.1% above guidance, and BRL 592 million for the full year, 11.5% above guidance [4] - Adjusted net income was BRL 180 million for Q4, 31.5% above guidance, and BRL 502 million for the full year, 14.1% above guidance [5] - Net revenues grew to BRL 3 billion in Q4, up 69% year-over-year, and BRL 10.3 billion for the full year, an 85% increase [9] Business Line Data and Key Metrics Changes - Total payment volume reached BRL 157.5 billion in Q4, up 28%, and BRL 550 billion for the full year, a 31% increase [6] - Cash-in grew to BRL 139.4 billion in Q4, up 27%, and BRL 483.4 billion for the year, up 29% [7] - Deposits increased by 44%, reaching BRL 28.7 billion, indicating growing client trust [7] Market Data and Key Metrics Changes - The credit portfolio reached BRL 24.1 billion, up 128% year-over-year, driven by secured and unsecured products [8] - Personal loans origination more than doubled in Q4, reaching BRL 4.4 billion, up 116% [8] - The average revenue per active client (ARPAC) rose to BRL 71 in Q4, up 52% [9] Company Strategy and Development Direction - The company is focusing on expanding its affluent consumer segment with the launch of Epic, targeting high-income clients [12] - A new Global Account was introduced, allowing multi-currency balances and a global debit card [13] - The strategy includes deepening integration with small and medium businesses and enhancing the B2B ecosystem [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining strong growth while managing asset quality, particularly with the shift towards secured products [47] - The company anticipates continued revenue growth and margin expansion in 2026, focusing on credit product penetration and customer engagement [41][42] - Management acknowledged the competitive landscape but remains optimistic about sustaining growth despite new entrants [66][70] Other Important Information - The company reported a significant shift in revenue mix, with float fees and commissions now representing 48% of revenues [10] - The efficiency ratio fell below 50% for the first time, reflecting improved operational leverage [28] - The company is actively seeking additional funding sources to support rapid credit portfolio growth [36][37] Q&A Session Summary Question: Asset quality and credit growth sustainability - Management expects to maintain a strong growth pace with improving asset quality, particularly due to the focus on secured products [47] Question: Evolution of third-party card transactions - Revenues from third-party credit cards represent low teens percentage of total net revenues, with a significant shift towards PicPay's own credit capabilities [49] Question: AI efforts and efficiency - The company has integrated AI into customer service, avoiding the need for thousands of customer service representatives, and is leveraging AI for cross-selling [59] Question: Seasonality in first-quarter guidance - Management acknowledged that Q1 is typically weaker but expects strong performance, with credit card TPV and loan origination remaining robust [64][65] Question: Competition in the private payroll product market - While competition is increasing, management believes they can maintain growth due to strong product offerings and customer relationships [66][70]

Financial Data and Key Metrics Changes - Adjusted pre-tax earnings reached BRL 241 million for Q4 2025, 12.1% above guidance, and BRL 592 million for the full year, 11.5% above guidance [3] - Adjusted net income was BRL 180 million for Q4 2025, 31.5% above guidance, and BRL 502 million for the full year, 14.1% above guidance [4] - Net revenues grew to BRL 3 billion in Q4, up 69% year-over-year, and BRL 10.3 billion for the full year, an 85% increase [8] - Gross profit for the year was BRL 3.6 billion, up 28%, with earnings before taxes reaching BRL 241 million in Q4, nearly four times the prior year [9] Business Line Data and Key Metrics Changes - Total payment volume reached BRL 157.5 billion in Q4, up 28%, and BRL 550 billion for the full year, a 31% increase [5] - Cash-in accelerated to BRL 139.4 billion in Q4, up 27%, and BRL 483.4 billion for the year, up 29% [6] - Deposits grew 44% to BRL 28.7 billion, indicating increased client trust [6] - Personal loans origination more than doubled in Q4 to BRL 4.4 billion, up 116%, totaling BRL 11.4 billion for the year, a 67% increase [7] Market Data and Key Metrics Changes - The credit share of wallet for existing customers stands at around 6%, indicating significant growth potential [18] - Market share for private payroll loans increased from 0% to 3.7% in one year, while personal loans market share nearly doubled from 0.9% to 1.78% [19] Company Strategy and Development Direction - The company is focusing on expanding its affluent consumer segment with the launch of Epic, targeting high-income clients [11] - A Global Account was introduced to extend services beyond Brazilian reais, offering multicurrency balances and a global debit card [12] - The strategy includes deepening integration between consumer banking and business platforms to enhance service offerings for small and medium businesses [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining growth while maintaining asset quality, particularly with the shift towards secured products [45] - The company anticipates continued revenue growth and margin expansion, driven by increased credit product penetration and enhanced customer engagement [40] Other Important Information - The company reported a significant shift in revenue mix, with float fees and commissions now representing 48% of revenues, indicating a more balanced revenue base [10] - The average revenue per active client (ARPAC) rose to BRL 71 in Q4, up 52% year-over-year [8] Q&A Session Summary Question: Asset quality and credit growth sustainability - Management expects to maintain a strong growth pace with improved asset quality, projecting a cost of risk between 3.5%-3.7% for 2026 [44][46] Question: Evolution of third-party card transactions - Revenues from third-party credit cards represent low teens percentage of total net revenues, with PicPay Card becoming the primary funding source for transactions [47][48] Question: AI efforts and efficiency - The company has integrated AI into customer service, significantly reducing the need for customer service representatives and enhancing revenue through AI-driven recommendations [53][56] Question: Seasonality in first quarter guidance - The first quarter is traditionally the weakest, but the company expects strong performance, with credit card TPV and loan origination remaining robust [60][63] Question: Competition in private payroll product market - While competition is increasing, the company believes it can maintain growth due to operational improvements and a strong market position [64][66]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $10,000, down from $24,000 in Q4 2024, reflecting modest revenue fluctuations typical in early commercial stages [19] - Total revenue for 2025 was $81,000, a slight increase from $77,000 in 2024, indicating gradual revenue growth [21] - Operating expenses for Q4 2025 were $9 million, down from $9.4 million in the prior year, showcasing disciplined expense management [19] - Net loss for Q4 2025 was $7.9 million compared to a net loss of $8.6 million in Q4 2024, demonstrating improved financial performance [21] Business Line Data and Key Metrics Changes - Research and development expenses for 2025 were $13.2 million, down from $14.7 million in 2024, as resources shifted towards commercialization [21] - Selling, general, and administrative expenses were $23.3 million in 2025, up from $21.9 million in 2024, due to targeted commercial readiness investments [21] Market Data and Key Metrics Changes - The company engaged with 13 states for partner programs, exceeding its initial goal of six states, and aims to expand to 15-17 states by year-end 2026 [8] - In Europe, the company is advancing its regulatory pathway for the preterm global test and is on track to submit European dossiers in the coming months [9] Company Strategy and Development Direction - The company aims to build evidence, access, and commercial infrastructure to drive preterm birth adoption at scale, with a focus on Medicaid and high preterm birth burden states [5] - The strategy includes launching targeted programs to generate outcomes data that support clinical adoption and reimbursement expansion [7] - The company plans to maintain disciplined investments in market access and commercial infrastructure while expanding geographically [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum gained from the PRIME publication and the growing engagement with payers and states [45] - The focus for 2026 will be on disciplined execution, advancing partner programs, and supporting clinicians in integrating PreTRM into workflows [45] - The company believes that compelling clinical evidence and increasing payer engagement will unlock significant value in an underserved market [45] Other Important Information - The company ended 2025 with $95.8 million in cash equivalents, providing a runway through 2028 for significant adoption and commercial milestones [22] - The capital allocation philosophy emphasizes disciplined deployment towards milestones that de-risk the commercial model while maintaining balance sheet strength [23] Q&A Session Summary Question: Can you expand on converting payer discussions and partner programs using outcomes and economic data? - The company highlighted the importance of clinical outcomes and economic benefits to engage partners, particularly state Medicaid agencies [29] - The reduction in NICU admissions is a significant cost driver for payers, making the economic model compelling [30] Question: What feedback was received at the SMFM conference regarding PRIME? - The conference led to increased engagement with providers and state legislators, with a focus on making the test more accessible [33] - The publication has improved credibility and engagement across various stakeholders [35] Question: How will the company balance investments in successful U.S. states versus global EU launch capital requirements? - The company plans to maintain a similar cash operating expense budget while reallocating spending towards commercial activities, including EU opportunities [39] Question: Can you elaborate on the profile of the new partner in the second partnership program? - The company is negotiating with various partners, including large health systems and provider payers, to implement the PreTRM test as standard care [41] - The second partner is an employer collaborative with multi-state opportunities, showcasing the diverse nature of partnerships [43]

Financial Data and Key Metrics Changes - Revenue for Q4 2025 was $5.3 million, up 128% from $2.3 million in Q4 2024 [21] - Full year 2025 revenue was $13.6 million, a 5% increase from $12.9 million in 2024 [22] - Gross profit for Q4 2025 was $2.7 million, up 226% compared to Q4 2024 [22] - Gross margin for Q4 2025 was 50.9%, representing a 1,530 basis points increase from Q4 2024 [23] - Net loss for Q4 2025 was $5.9 million, compared to a net loss of $10.4 million in Q4 2024 [25] - Full year net loss was $35.6 million, down from $40.7 million in 2024 [26] Business Line Data and Key Metrics Changes - Sold 16 units in Q4 2025 compared to 9 units in Q4 2024, indicating increased demand across all business lines [21] - Significant revenue growth in the second half of 2025, generating $8.7 million compared to $4.8 million in the first half [22] - R&D expenses decreased by 25% in Q4 2025 compared to Q4 2024, reflecting a transition to a commercial growth stage [24] Market Data and Key Metrics Changes - FDA clearance for the updated Swoop system in December 2025, enhancing its clinical utility in stroke workflows [6] - Approval of the first-generation Swoop system in India opens a new market opportunity [7] - Positive market feedback on the Swoop system with Optive AI software, indicating readiness for broad adoption [17] Company Strategy and Development Direction - Focus on continuous innovation and market development, with plans for one to two software releases per year [9] - Expansion into neurology offices and international markets as key growth vectors [14][17] - Emphasis on generating clinical and economic evidence to support sales and adoption [6][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of the Swoop system and its unique position in the ultra-low field MRI market [5] - Anticipated revenue growth for 2026 between $20-$22 million, representing a 55% increase at the midpoint [28] - Expected gross margin for 2026 to be in the range of 50%-55% [29] Other Important Information - The company raised over $20 million in equity and $15 million in long-term debt to strengthen its capital position [19][20] - Cash burn for Q4 2025 was $5.7 million, down 30% from Q4 2024 [26] - Cash runway extended into 2028 due to recent financing [30] Q&A Session Summary Question: Key assumptions surrounding 2026 guidance - Management indicated that guidance is tied to growth catalysts across three business verticals, with multi-unit systems and IDNs playing a significant role [35][37] Question: Pipeline status and strength - Management confirmed that the pipeline remains strong and diversified, with multiple IDN deals in progress [41][42] Question: Service revenue trends - Management acknowledged that service revenue was lower in Q4 due to accounting adjustments but expects long-term growth in this area [55]

Financial Data and Key Metrics Changes - Revenues increased by 8% in Q4 2025, leading to a 3% increase for the year, with product and service revenues up 4% excluding interest [3][4] - Total dollars processed set a record, up 19% for the year, and transactions processed increased by 30% [3] - Operating cash flow for the year was $1.5 million, with nearly $7.5 million in cash on hand for future investments [5][6] Business Line Data and Key Metrics Changes - ACH revenue grew over 30% for both Q4 and the full year, with dollars processed up 22% and transactions up 29% [4][20] - Card revenue increased by 7% in Q4 and finished the year up 3%, driven by PayFac growth [4][8] - Output Solutions saw a 6% revenue increase in Q4, with pieces mailed up 11% and electronic documents processed up 18% [4][19] Market Data and Key Metrics Changes - The company reported a diversified customer base, with no single client accounting for more than 10% of total revenue [5] - The pipeline remains strong across all business lines, indicating potential for continued growth [21] Company Strategy and Development Direction - The company aims to increase its share of customers' wallets and build a portfolio of recurring revenues through new product introductions [7][15] - The acquisition of PostCredit is seen as a strategic move to enhance business banking solutions and improve customer risk management [16] - The Usio One initiative focuses on cross-selling opportunities and improving sales team accountability [9][15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026, expecting 10%-12% revenue growth and continued positive adjusted EBITDA [22] - The company is focused on completing tasks that offer immediate returns on investment while being cautious with guidance [21][22] - Management highlighted the importance of new customer implementations and the potential for significant revenue contributions in the latter half of 2026 [31][32] Other Important Information - The company has reported positive adjusted EBITDA for three consecutive years and anticipates maintaining this trend in fiscal 2026 [6][22] - The company is actively engaged with large commercial and governmental entities for its Card Issuing services, which are expected to rebound [18] Q&A Session Summary Question: Impact of a lost customer on 2025 revenue - Management estimated a loss of around $3 million due to a customer loss, which impacted Card Issuing revenue [24][25][26] Question: Update on Usio One initiative and sales force reorganization - Management reported a good transition with positive adjustments in the sales team and successful outreach campaigns [27][28][29] Question: Details on new large customers and onboarding cadence - Management provided insights on three large Card Issuing projects, with significant revenue expected to start in Q3 2026 [30][31][32] Question: Visibility on 2026 growth guidance - Management indicated that there are numerous deals in implementation, providing confidence in meeting growth targets [33] Question: Future of ACH growth - Management expressed confidence in ACH continuing to outperform, with expectations for record performance in Q1 2026 [37][38] Question: SG&A expenses and investment outlook - Management aims to keep SG&A expenses flat for 2026, with a focus on efficiency and cost savings [39][40][46] Question: Success metrics for Usio One initiative - Management highlighted the importance of diverse contracts and successful cross-selling as indicators of success for the Usio One initiative [41][42]

Financial Data and Key Metrics Changes - Revenues increased by 8% in Q4 2025, leading to a 3% increase for the year, with product and service revenues up 4% excluding interest [3][4] - Total dollars processed set a record, up 19% for the year, and transactions processed increased by 30% [3] - Operating cash flow for the year was $1.5 million, with nearly $7.5 million in cash on hand for future investments [5][6] Business Line Data and Key Metrics Changes - ACH revenue grew over 30% in Q4 and 33% for the full year, with pinless debit dollars processed up 81% [4][20] - Card revenue increased by 7% in Q4 and finished the year up 3%, driven by PayFac growth [4][8] - Output Solutions saw a 6% revenue increase in Q4, with pieces mailed up 11% and electronic documents processed up 18% [4][19] Market Data and Key Metrics Changes - Card Issuing revenues were down in Q4 but improved relative to Q3, with expectations for recovery in 2026 due to easier comps from prior year transactions [5][18] - The company reported no single client accounting for more than 10% of total revenue, indicating a diversified customer base [5] Company Strategy and Development Direction - The company aims to increase its share of customers' wallets and build a portfolio of recurring revenues through new product introductions [7][15] - The acquisition of PostCredit is seen as a strategic move to enhance business banking solutions and improve customer risk management [16] - The Usio One initiative focuses on cross-selling opportunities across different business units [9][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2026, expecting 10%-12% revenue growth and continued positive adjusted EBITDA [22] - The company is focused on completing tasks that offer immediate returns on investment while being cautious with guidance [22] Other Important Information - The company has reported positive adjusted EBITDA for three consecutive years and anticipates maintaining this trend in fiscal 2026 [6] - The company is actively engaged with large commercial and governmental entities for its Card Issuing services [17] Q&A Session Summary Question: Impact of a lost customer on 2025 revenue - Management estimated a loss of around $3 million in revenue due to a customer loss, which would have significantly impacted growth [24][25][26] Question: Update on Usio One initiative and sales force reorganization - Management reported a good transition with successful sales outreach campaigns and positive responses from customers [27][28][29] Question: Details on new large customers and onboarding cadence - Management provided insights on three large projects, with significant revenue expected from a school voucher program and partnerships with a major bank and payment company, set to go live in Q3 2026 [30][31][32] Question: Visibility on 2026 growth guidance - Management indicated that there are numerous deals in implementation that could meet growth targets, but timing of go-lives is uncertain [33] Question: Future of ACH growth - Management confirmed that ACH is expected to continue its strong performance into Q1 2026, with ongoing momentum [38] Question: SG&A expenses outlook - Management aims to keep SG&A expenses flat compared to 2025, with a focus on efficiency [39][40][46] Question: Cross-selling targets for Usio One - Management noted that success will be measured by the diversity of contracts signed across business units, indicating positive early results [41][42]

Financial Data and Key Metrics Changes - Fourth quarter revenue was over $5 million, representing a 128% increase compared to $2.3 million in Q4 2024 [23] - Full year revenue for 2025 was $13.6 million, up 5% from $12.9 million in 2024 [24] - Gross profit for Q4 2025 was $2.7 million, a 226% increase from Q4 2024 [24] - Gross margin for Q4 2025 was 50.9%, marking a 1,530 basis points expansion from Q4 2024 [25] - Net loss for Q4 2025 was $5.9 million, compared to a net loss of $10.4 million in the same period of the prior year [27] - Full year net loss was $35.6 million, down from $40.7 million in 2024 [28] - Cash burn for Q4 2025 was $5.7 million, a 30% reduction from $8.2 million in Q4 2024 [28] Business Line Data and Key Metrics Changes - Sold 16 units in Q4 2025 compared to 9 units in Q4 2024, indicating increased demand across all business lines [23] - The introduction of the next-generation Swoop system and Optive AI software has led to significant traction in hospitals and neurology offices [6][10] Market Data and Key Metrics Changes - FDA clearance for the updated Swoop system in December 2025 enhances its clinical utility, particularly in stroke workflows [7] - The approval of the first-generation Swoop system in India opens a new market opportunity [8] - Positive market feedback on the Swoop system with Optive AI software supports broader adoption [19] Company Strategy and Development Direction - The company aims to expand its market presence through continuous innovation and the introduction of new software releases [9] - Focus on leveraging clinical data to support adoption and drive sales in hospitals and neurology offices [10][15] - Plans to launch the next-generation Swoop scanner in international markets in the second half of 2026 [31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of the Swoop system and its unique position in the ultra-low field MRI market [6] - The company anticipates a progressive strengthening of revenue throughout 2026, driven by multi-unit hospital deals and international expansion [30] - Management highlighted the importance of maintaining spending discipline while investing in growth opportunities [32] Other Important Information - The company raised over $20 million in equity and $15 million in long-term debt to strengthen its capital position [21][22] - The device's MSRP was increased to $590,000, which is expected to enhance ROI for hospitals [41] Q&A Session Summary Question: Key assumptions surrounding 2026 guidance - Management indicated that guidance is based on growth catalysts across three business verticals, with expectations for progressive revenue strengthening throughout 2026 [38][39] Question: Pipeline status and strength - Management confirmed that the pipeline remains strong and diversified, with multiple IDN deals in progress, although larger deals may take longer due to budget cycles [43][44] Question: Service revenue trends - Management acknowledged that service revenue was lower in Q4 due to accounting adjustments related to technology upgrades, but expects long-term growth in this area [57]

Financial Data and Key Metrics Changes - For the fourth quarter, net sales increased 24% to $1.7 billion, with a comparable sales increase of just over 15% driven by an 8% increase in comparable ticket and a 7% increase in comparable transactions [15][19] - For the full year, net sales increased 23% to $4.8 billion, supported by a comparable sales increase of nearly 13% [19][20] - Adjusted net income for fiscal 2025 grew 33% to $370 million, and adjusted earnings per share increased 32% to $6.67 per share [21] Business Line Data and Key Metrics Changes - The company opened 150 net new stores in 2025, growing its store count by 8.5% to a total of 1,921 stores [6][16] - Adjusted gross profit for the year increased 25% to $1.7 billion, with a gross margin of 36.1%, an increase of approximately 50 basis points compared to last year [20] Market Data and Key Metrics Changes - The company experienced broad-based growth across all merchandising worlds, with strength in all 170 districts and across all income cohorts [7][10] - The fourth quarter saw the strongest holiday performance since becoming a public company, with sales growth of 24% [6][7] Company Strategy and Development Direction - The company has defined a new strategy focused on three pillars: a maniacal focus on the target customer, delivering a connected customer journey, and cross-functional collaboration [8][9] - The marketing strategy has shifted towards social media engagement, allowing the company to dynamically engage with customers and amplify viral trends [9][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business's positioning for consistent, durable growth, despite a challenging macro environment with geopolitical uncertainties [14][23] - The outlook for fiscal 2026 anticipates sales in the range of $5.2 billion to $5.3 billion, representing a 10% increase at the midpoint [24] Other Important Information - The company ended the year with approximately $932 million in cash equivalents and investments, with inventory increasing by 28% to approximately $847 million [21][22] - Capital expenditures for fiscal 2026 are expected to be between $230 million and $250 million, reflecting continued investments in new stores and technology [25] Q&A Session Summary Question: Drivers behind the magnitude of comps - Management highlighted the crew's execution and a focus on customer engagement through social media as key drivers of success [30][31] Question: Comp momentum and guidance - Management noted broad-based growth across all assortments and emphasized the importance of direct customer engagement through social media [36][37] Question: Investments to sustain momentum - Management confirmed a commitment to reinvest in marketing and labor to support growth while balancing profitability [50][51] Question: Traffic between new and existing customers - Management reported growth in both new and existing customers, attributing success to effective marketing strategies [67][68] Question: Pricing power beyond $5 - Management explained that changes in merchandising and customer engagement have allowed for greater pricing flexibility above $5 [72][73]

Financial Data and Key Metrics Changes - For Q4 2025, revenue was $26.2 million, an increase of $25.0 million year-over-year and $16.6 million sequentially, driven by strong defense and government demand [20] - Full year 2025 revenue reached $40.7 million, up $25.1 million year-over-year [21] - Gross margin for Q4 was 4.2%, up 85% year-over-year, while for the full year it was 3.1%, up 332 basis points year-over-year [20][21] - Operating expenses increased to $67.8 million in 2025 from $32.9 million in the prior year, reflecting planned investments for growth [22] Business Line Data and Key Metrics Changes - The company is scaling Black Widow drone output to 1,000 units per month in the first half of 2026, with USV boat manufacturing expected to have first deliveries in Q2 2026 [16] - The manufacturing expansion has increased facility square footage from 36,000 sq ft to 254,000 sq ft across various locations [17] Market Data and Key Metrics Changes - The company is experiencing increased demand for its products, particularly in the defense sector, with a focus on international expansion in the Middle East and Asia Pacific [26] - The company has received a letter of request from Ukrainian forces to replace Chinese ISR drones, indicating a significant market opportunity [13] Company Strategy and Development Direction - The company is focusing on expanding its USV division, with an estimated investment of $30-$40 million to fully operationalize it [24] - A joint development agreement with a Ukrainian state-owned partner aims to bring new battle-proven technology to USVs, enhancing the company's capabilities in the defense market [13] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about maintaining revenue momentum throughout 2026, supported by a diversified customer base and growing international presence [26] - The company is cautious about providing annual guidance until contracts are secured, but is confident in achieving strong performance [26] Other Important Information - The company has significantly improved its cash position, increasing from $9.2 million at the end of 2024 to $167.9 million at the end of 2025, providing financial flexibility for strategic initiatives [24][25] - The regulatory landscape shift following NDAA Section 1709 has created new opportunities while requiring enhanced focus on supply chain security [16] Q&A Session Summary Question: Can you provide scenarios for what 2026 could look like? - Management indicated a range of expectations between $100 million and $170 million for 2026, comfortable in the top half of that range but not ready to commit until contracts are secured [32] Question: How many ISR drones could potentially be replaced in Ukraine? - Management noted that Ukrainian forces are currently using 350,000 ISR drones per year, presenting a significant opportunity for replacement [34] Question: Is there an increase in RFPs due to heightened conflict in waterways? - Management confirmed an uptick in inquiries and potential RFPs from Gulf States, particularly related to counter-drone capabilities [35] Question: Will the full-rate production contract be a single order or multiple tranches? - Management expects to receive a full-rate production contract soon, with possibilities of immediate orders related to Epic Fury [48] Question: Will production ramp up to 1,000 drones per month before contracts are secured? - Management confirmed that production is already ramping up to meet anticipated demand [54]