Solesence, Inc.

Good day. Thank you for standing by. Welcome to the SolarSense fourth quarter and full year 2025 conference call. Today's call is being recorded. During this call, management will make statements that include forward-looking statements within the meeting of the federal security laws, which are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. This conference call may contain statements that reflect the company's current beliefs, and a number of important factors could cause actual results for future periods to differ materially from those stated on this call. These important factors include, without limitation, a discussion of a customer to cancel a purchase order or supply agreements, demand for acceptance of the company's personal care ingredients, advanced materials, and formulator products, changes in development and distribution relationships, the impact of the competitive products and technology, possible disruption in commercial activities occasioned by public health issues, terrorist activities, and armed conflicts and other risks indicated in the company's filings with the Securities and Exchange Commission. Except as required by federal securities laws, the company undertakes no obligation to update or revise these forward-looking statements to reflect new events, uncertainties, or other contingencies. I'll now hand the conference call over to Kevin Keraton, President and Chief Executive Officer. Please go ahead, sir.

Thank you, Operator, and thank you to our investors, brand partners, and teammates who are joining us today. Today, we will provide more guidance on our 2026 plan and the strategy we initiated at the end of 2025, which aims to take our company forward to enhance consumer health and well-being while delivering outstanding results to our investors. This initiative is called Transform and Transcend. Before we delve into our plans, we will review our 2025 results. To walk you through how we wrapped up 2025, I'll turn the call over to our CFO, Laura Riffner. Laura?

Thank you, Kevin. I will begin with a review of our fourth quarter 2025 results before moving to full-year performance in our 2026 outlook. For the fourth quarter, revenue was $12.5 million, roughly even compared to the previous year. Fourth quarter 2025 gross profit was $3.4 million compared to 2.8 million for the same period in 2024. Gross margin was 27% in the fourth quarter of 2025 compared to 22% in the same period in 2024. Our results were affected by transition costs and operational inefficiencies in manufacturing resulting from our facility consolidation. operating expenses in the fourth quarter of 2025 were $3.2 million compared to 2.8 million in the same period in 2024. This figure included relocation charges as we transitioned from three facilities to two. So lessons reported net income for the quarter of $163,000 compared to a net loss of $558,000 the previous year. Turning to the full year 2025, revenue reached a record $62.1 million, up 18.6% from $51.9 million in 2024. This was primarily driven by a large scale launch in the first half of 2025, as well as 20 new brand partners who launched products in 2025. While revenue growth was substantial, full year growth profit was $16.1 million compared to $16.2 million in 2024. As Kevin noted in our third quarter call last November, our margins were compressed by three key areas. The first is labor costs. Elevated labor costs this period were primarily driven by extended process changeovers and related downtime as we scaled our production volume. The second is product design, which relates to startup and quality costs associated with a complex launch in the first half of 2025. Third, inventory control, which represented the most substantial headwind to margins this period. Driven by our efforts to grow while scaling production, we experienced yield volatility and associated losses, which impacted our bottom line. We are now prioritizing cycle counting and pre-production staging to improve production flow as we continue to expand. With the above results, we delivered adjusted EBITDA of $4.2 million, less than 7% of revenue. As we look ahead, our 2026 guidance focuses on operational health. As a result, we are establishing a 30% gross margin floor as our target for the year. We expect EBITDA improvement in 2026, returning to double digits as we realize six-figure annual savings from our facility consolidation and the elimination of 2025's operational inefficiencies. A critical goal in 2026 is to increase our free cash flow by reducing safety stock and improving procurement operations. We began 2026 with momentum from 2025, driven by organizational changes and the launch of the Transform and Transcend initiative. Still, our first quarter results will be impacted by investments in training and restructuring associated with Transform and Transcend, as well as by changes in customer order patterns largely due to retail dynamics and weak sell-through from one of our large mass market customers. Our current shifts in open orders stand at just under $33 million as compared to a year ago when they were at $38 million. While we anticipate a period of revenue normalization, we plan to improve EBITDA relative to 2025 and remain confident in our ability to achieve our full year guidance. I'll turn it back over to Kevin to provide more details about our Transform and Transcend initiative. Kevin?