Good day, and thank you for standing by. Welcome to Q4 20 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Katie Keita, IR Lead. Please go ahead. Thank you, operator. Welcome everyone to Kneat's Earnings Conference Call for the fourth quarter of 2025 and the full year. Today's call will be hosted by Eddie Ryan, Kneat's CEO, and Dave O'Reilly, Kneat's CFO. Note that the Safe Harbor statement on slide 2 and the forward-looking statements disclosure at the end of the earnings release inform you that some comments made on today's call may contain forward-looking information. This information, by its nature, is subject to risks and uncertainties. Actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our relevant filings, which can be found on SEDAR and on our website. During the call, we may refer to certain supplementary financial measures as key performance indicators. We use both IFRS and supplementary financial measures as key performance indicators when planning, monitoring, and evaluating our performance. Management believes that these non-IFRS measures provide additional insight into the company's financial results, and certain investors may use this information to evaluate our performance from period to period. With that, I will now pass the call to Eddie Ryan, CEO of Kneat.com. Good morning, everyone, and thank you for joining the call today. In order to leave more time for your questions, we will keep our prepared remarks brief. As I laid out in my letter to shareholders, 2025 was a year that proved the strength of Kneat's resilience. In a period of macro uncertainty, elongated buying cycles, and new considerations presented by AI, we continued to gain share with software revenue up 33% for the full year, and we welcomed a record number of new customers. These new customers were added to an exceptionally stable base of existing large customers. Our net revenue retention was 115%, reflecting continued expansion with that base. Customers come to Kneat today because we are a trusted domain expert in a field where confidence in the product is paramount. Theirs are highly regulated, mission-critical environments where validation data needs to be attributable, traceable, and auditable, all things for which Kneat has been purpose-built. With this in mind, Kneat's advantage in leveraging AI to deliver business value for companies is clear. Over the last while, we've been building AI into our platform to accelerate the advantages Kneat already brings to validation. We introduced AI-powered features designed specifically for environments adhering to Good Manufacturing Practices. These include content review agents, a natural language processing analysis expert, a user support expert, and an instant language translation function. Building in AI to improve the platform extends our competitive advantage, which was already considerable. With these tailwinds, we are excited about where we are heading in 2026. Our platform is second to none, our pipeline is strong, and our land and expand model, which contains significant expansion potential and brings more with each new customer we add, is proving to scale, putting cash flow profitability within line of sight. This is a necessary milestone as we plan for the long game in pursuit of our mission, that any regulated company can be confident they are developing, manufacturing, and delivering their products to the highest safety standard. I will now turn it over to Dave, who will take you through the numbers. Good morning. As you have the numbers and commentary in our materials that went out last night, I won't go through them in detail again. Before we turn it over to you for your questions, I do want to first highlight a few numbers and what drove them. First, ARR growth in the quarter year-over-year was 24%. Solid, not as high as we were expecting. While changes to FX rates since Q3 added a $1.1 million headwind, some of the delta came from expansions being pushed to a future period. This means we expect these same deals to materialize in 2026, if not in Q1, then in a subsequent quarter. Incrementally, ARR is historically back-end loaded, we also expect 2026 to be no different. Second, operating expenses in the fourth quarter came down from Q3, and for the full year, we're up 33%. After 2024, in which we held headcount steady, we invest in key talent in 2025 to drive the platform forward, expand our presence within our growing number of customers, and amplify our voice in the life sciences space. Finally, on our financial position and outlook, we ended the year with CAD 48.7 million of cash on the balance sheet. This, together with a fortified team, sets us up for a pivotal year. As Eddie mentioned, we are targeting for 2026 to be cash flow breakeven. Meeting this target is contingent upon meeting our own top-line growth expectations for the year. With that, I'll turn it over to you for your questions. ... Seems like we're having a little bit of a difficulty getting the questions, lined up and asked. If you just sit tight, we will get this sorted, and take your questions. Just sit tight for a minute. Okay. Thank you. Thank you. I do show we have a first question in queue coming from the line of Doug Taylor from Canaccord Genuity. Please go ahead. Hi. Thank you. Hopefully, you can hear me. Can do. Can do, Doug. Okay. Thanks, Eddie and Dave. I'll start with, you know, an AI question, seems unavoidable these days. I appreciate all the commentary you provided on AI in your letter overnight, in your prepared remarks. You frame this as additive versus competitive to your platform. I guess I'd like to ask, you know, if you could provide anything you've heard, like, what your customers are saying on the subject. Are they building things with AI that sit on top of your data and your infrastructure? Is there evidence of that? I'm just looking for some anecdotes to, you know, wrap around the subject. Yeah, good question, Doug. Yeah, we're not seeing anybody sitting on top, right, doing anything like that. Look, we're dealing with the biggest pharmaceutical companies in the world, as you know, and we've been dealing with them for over 10 years, 15 years. One of the things that is really critical to them is data integrity and compliance. Kneat is a system of record for that data integrity and compliance. When I talk about data integrity in the compliance world, I'm not talking about data in a database being managed and protected there and secure. I'm talking about the interaction with that data and the audit trail on that data, and who put that data there, when did they put it there, when did they change this, no matter how small that data is. Everything's attributable, it's auditable, and it's traceable. This is the kind of data integrity that this industry requires, right? You know, we see that as a real moat from our perspective. We accept, yes, that there has to be, you know, additional AI to support that, and we would see AI from our perspective as, you know, doing the heavy lifting as part of the workflow processes and that type of thing for the customer and bringing value to them that way. Over time, where it may go to the next level. Just back to your point, Doug, on customers today, we have very intimate relations with these customers, and we would be sharing our roadmap, and we'd be sharing what we have in AI or AI already with them. They're aligned with us, very much aligned with us in what use cases they want AI to support them in and what parts of the workflow they want it to be present in, and how they don't want it to be... You know, it's a human aid, at this point in time. Does that answer your question there, Doug? Yeah, I mean, it does. You know, taking the AI as, you know, being additive and not, you know, in any way competitive with your solution, as you know, if we set that aside, you know, the ARR growth in this last year was slower than in prior years, partly because you're lapping some larger numbers, but also you've referred to these deferred expansion plans for a few quarters now. I think some of that was, you know, attributed to the uncertainty as it relates to, you know, global trade and things like that. That's no less confusing today than it was maybe in the last quarter. I guess I'd like to refresh our understanding of, you know, the duration of those deferrals. When do you know, do you see those start picking up again and perhaps, you know, returning your NRR to some of the levels, or we've seen Kneat enjoy earlier in, you know, 2026 and beyond? Yeah, we definitely expect it to go up. What I would say is, you know, it's only when you look back on the year, you can see how the year panned out fully, right? We are back end of the year type, where we do a lot of our ARR addition, in traditionally. What I would say is quarter two began to see the macro environment, Doug, as you know, and the uncertainty and what we will see that follow through to the year, the full year. Our budgets were deprioritized in certain areas where they were cut and frozen temporarily. That's what we've seen. All of those, what we call deferred expansions, they're all still in our pipeline, as Dave said in his earlier note. They're all being worked on, and the engagement is ongoing on all of those. I expect them to come through for us as well through 2026. Do I know exactly what the year ahead of that is like from a macro perspective? You know, there's still uncertainty from last year, but I think it's beginning to get stabilized more from that perspective. Other things are coming into play, like AI and stuff like that. The message there being you'd expect ARR to rebound from the 2025 level, sorry, NRR, I should say, based on what you said? Absolutely. Okay. You know, I guess, a similar comment or question about, you know, what was definitely clear last year was a very strong pace of new customer additions, new logo wins. Is the setup in the pipeline this year for you to extend that streak? Yeah. We added, I think net new, there was a bit of churn in there as well, but net new, we added 20 odd percent new customers in 25. As you know, in recent years, we focused more on strategic and enterprise. Very happy with that delivery from our sales team. You know, we're seeing these deals being more matured, and for that reason, going through more diligence and, you know, more competitors involved and more RFPs, and we're winning all, you know, the majority of these RFPs. Very excited about that, and that puts in a great platform for the future, as you know. I would say the marketing team has done a great job of building the pipeline, and we see a similar and better pipeline for the year ahead and beyond, you know? Okay, one last question for me, and perhaps this one is for Dave. You've stuck to the cash break-even bogey for this year, and we're in this year now, so I wanna give that a little more attention. You know, to start with, you know, just to confirm once again, you're talking about free cash flow or operating cash flow break even as being the target you expect to eclipse this year, given the capitalized R&D. You know, and if so, you know, I mean, in any event, it's a big lift from where you were over this past year. I just wanna maybe walk through some of the assumptions, not necessarily the revenue, but you know, the margin assumptions and spending, and budget for OpEx, you know, that would get us to that objective. Thanks, Doug. Yes, it's still very much our objective for 2026 is to be cash flow break even. To your point, we can get into some of that detail, but what I would say is that the messaging that we've given before, certainly in Q3, about the Adjusted EBITDA margins, I still expect that to hold true for the next 12 months. I expect our capitalized R&D, I would expect that to be relatively static year over year. I still expect a little bit of growth on our OpEx, and I expect improvement on our gross margin lines. just to be clear then, to be cash flow break, you would have Adjusted EBITDA that would surpass your capitalized R&D. I mean, that would be necessary for free cash flow break even. just maybe sharpen my understanding there? To an extent, yes, Doug. It should cover the vast majority. There's a couple of other levers on the balance sheet that will help us hit that number in 2026, such as our R&D tax credits. It's not just the Adjusted EBITDA that will get us there. As I mentioned, there's another couple of levers on our balance sheet that will help us in the pursuit of cash flow break even. All right, I appreciate the answers to my questions. I'll pass the line. Thank you. I show our next question in the queue comes from the line of Gavin Fairweather from ATB Cormark. Please go ahead. Hey, thanks for taking my questions. Eddie, in your letter, you called for an expansion of incremental ARR in 2026 versus 2025. I think that's the first time you've kind of provided that type of guidance. Maybe you could just flush out what you're seeing in the macro and the pipeline that kind of gives you that confidence to hang that out there in your letter. You know, I'm trying to remember that statement, but yeah. For, as I said, we put in a lot of strong customers over the last couple of years into the pipe, into our customer portfolio. As you know, Gavin, we focused on enterprise and strategic, you know, a couple of years ago, and they are beginning to show fruit now, the ability for them to expand into the future. You know, they take a year, maybe two years to get going, and we're seeing that playing in as well. We're also having these great conversations with our customers around new potential areas that we will bring value for them. You know, outside of validation, adjacencies areas, and we expect to be delivering to some of these areas as well in 2026. Yeah, that kind of flows into my next question. I mean, I was looking for a bit more detail on how conversations are going in the base around, you know, CSA and adjacencies and how you're thinking about, you know, potential adoption in 2026. Like, how many customers would be, you know, speaking to you about moving into some of these new areas? Yeah. We would say that we are already deploying in some of these areas with some of our customers. We have some really, engaging, you know, opportunities, you know, under discussion with some customers. We see us being able to capitalize on that further. These are, you know, couple of the biggest customers in the world, right? Who are talking about looking at these new adjacencies. We're really upbeat about that, we will, you know, we will hope to announce them in due course, Gavin. I would say, just to give you a flavor, there are more, you know, deeper in the manufacturing space, you know, adjacent to validation, where we've already earned the right to be there. You know, we've proven our ability to be great at data integrity in a validation environment. Now we can take that same capability to adjacent areas. The one thing I would say is that, you know, I think our ability to be great at data is going to enable more processes in the future, because of the... You know, if you've got this great data integrity underpinning your AI, then you'd be more inclined to put processes in there that can give you that quality. I think great AI is gonna need great data integrity. As I said, it's not just data and databases, data is managed and policed, and that's what I think will be great as well. Appreciate that. Maybe a couple for Dave. You know, the gross margins seem to be increasing faster than your mix would kind of imply. Maybe you can just discuss where you're getting some leverage on the COGS line, whether it's, you know, still coming through in SaaS or also, or if you're starting to make a bit of money on the services line. In Q4, there's a couple of credits that we booked to our P&L in Q4 related to year-end accrual releases. There's probably a half percent on our gross margin because of that in Q4. To your point, sales mix is still beneficial to us. We are eking out a little bit more margin basis points. You know, I think historically, that's been running at around 15%. I expect that to increase over the next 12 months. SaaS is continuing to be in, you know, an 80% kind of level, and that will flow into 2026. Great. Just lastly, on debt, if I remember correctly, I think some of that debt on the balance sheet, the penalties for prepayment start to roll off, you know, over the course of 2026. Just on capital allocation, maybe you can discuss your plans. Obviously, you have more cash on the balance sheet than you have debt. Should we be thinking about some of that debt starting to move off the balance sheet there? You're exactly right. 26, there's a couple of tranches that will roll out of, you know, penalty zones if we were to clear those tranches. It's certainly not in our short-term projection. We're talking about cash flow neutrality in the year. If we do make that call, we'll certainly announce it. Right now, we're just probably gonna let them continue to pay. If we see the opportunity to clear them down sooner, we absolutely will. Thanks so much. I'll pass the line. Thank you. Our next question comes from the line of Justin Keywood from Stifel. Please go ahead. Hi, thanks for taking my call. Just circling back on the outlook and the expectation for incremental ARR in 2026 over 2025. Doing the math, does that imply there's an expectation for CAD 15 million in additional ARR this year? Yeah, we don't put a number on it, Justin, but, you know, when we look at, you know, the add-ons and for this year, they will include the delayed expansions from 2025. You know, we see also outside of that cohort, we see expansions from, you know, the other cohort of customers we have. Today, we service over 130 customers. We also see that, you know, the new customers kicking in as they would be the ones outside that cohort of the deferred, the deferred expansion. Yes, we see those, definitely the number increase on 2025. Okay, good to hear. That's helpful. just circling back to the AI discussion, I'm wondering if there's an opportunity to deploy some of the AI tools that are out there, particularly around coding within Kneat's own business. The R&D expense continues to appear to be increasing at a decent rate, is there an opportunity to perhaps replace some of those functions with AI? Absolutely. Our team has been doing automated enhancements for quite a while. I would say, Justin, at the beginning, like in the last 6 months, they're really beginning to see tools that can really add value. I think we are all hearing about that in the news, and it's true. We're acknowledging it. Our team is acknowledging it quite well. We have, you know, dedicated AI teams in place now, looking to enhance everything. We're seeing some really good, really good improvements on, in productivity in certain areas, right? I mean, we're still building, you know, features into a big platform and, you know, coding is one part of it. You know, understanding what you're doing from your domain experience is a huge part of this. Articulating those requirements to any tool, whether it's an agent or whether it's a human that actually codes this, is a good part of the work. I would say there's tools helping us across the board, not just in the coding itself. There's value there. There's good stuff happening there. You know, there's ability to reverse engineer pieces of code and reengineer them again, and lot of good things happening. I expect we will be focused on that, Justin, and I expect we will over time, start bringing that, you know, down. The goal now is to get more out of the team we have. You know, any of those bits of hires that are going in this year are primarily related to that, you know, AI for the product, for our Kneat Gx platform, but also AI to improve our productivity in the organization. Very interesting. Would it be fair to assume, the R&D or additions to intangible assets to be leveling off at this level, and perhaps that's where... to Dave's outlook on breakeven free cash flow, is that where the operating leverage is gonna show up with that R&D level normalizing? You wanna take that there, David? Yeah. Just there will still be some growth in the R&D function. To Eddie's point, it's probably gonna be around the AI team and helping, you know, accelerate the development. We're also gonna see that shift, and I mentioned this one in the prior quarter, that we're gonna probably see a little bit more R&D expense to the income statement as we capitalize less. I would imagine that what we will see being capitalized year-over-year, being very static. Very helpful. Thanks for taking my questions. No problem. Thank you. I show our next question comes from the line of David Kwan from TD Cowen. Please go ahead. Hey, everyone. Dave, maybe I just want to clarify the comments on the gross margin. I think you said there was about 50 basis points of year-end accruals. Maybe the normalized gross margins were in the 77% range. Could 2026 gross margins be at this level or maybe even better than that? I would assume that they should be at a similar level, David. Yes. It does depend on the mix when we get there. Obviously, our PS revenue is running at, you know, historically, has been around 15%. I expect that to be 20% and above. And that depends on where we finish up from a PS revenue in 2026. I do expect the gross margin to be up around the 77% range. Sounds great. That's helpful. In just digging into the NRR, the decline there, obviously, you talked about some expansion projects getting pushed out there and some churn. Could you? You mentioned, I guess, that there weren't any customers that were switching to competitors, but I was just wondering if you had any color on what the churn was related to? Like, did those customers go bankrupt, or was there something else? Yeah, David, thanks for that. I would say that there's three aspects to the churn. There's the deferred expansions, there's the FX going against us, and then there's the churn element. I would say, yes, all of those customers actually, in fact, have had some degree of financial difficulty, one to some extent. Yes, there's, you know, one or two of those customers actually closed down. But for those customers that discontinued using Kneat, you know, we're not aware of any of them going to competitor at all. That's very clear to us. You know, when we look back at, again, talking about the how we focus on enterprise and strategic customers over the last couple of years. Prior to that, you know, we would have sold to a lot of different types of customers, and maybe the product market fit may not have been, or the product company fit may not have been 100%. We're seeing some of those bubbling up a little bit as well, over the, you know, over the last year. Well, thanks for the color, Eddie. Can you say, like, how much of ARR it represented? I'm guessing it's relatively small, but didn't know if you could quantify it. Yeah, it's a small issue. I would say that if you were looking at where we wanted to be on our, you know, overall growth versus where we were, it's probably divided into three, you know, three things, maybe, 40%, 50%, Dave, you might be able to correct me here, is related to the deals that were pushed out, and the other 50% to, is between churn and FX. Great. Just one last question. I suspect it's maybe a bit early here, but, just obviously with the Supreme Court's tariff ruling, do you expect that to probably lead to continued hesitation from your customers just, as it relates to uncertainties, as well, on their expansion plans? You know, I haven't consumed that fully, David, I would say, right? You know, what I am seeing is more stability in the customers, more clear on what they were doing. Maybe this adds another bit of volatility to the situation, but, you know, I had a feeling that things were improving, and, It's a bit early for me to comment on that. That's great. Thanks, guys. Thank you. I show our last question in the queue comes from the line of Erin Kyle from CIBC. Please go ahead. Hi. Good morning. Thanks for taking my questions. Apologize if any of this has been asked already. I got kicked off the call a little bit earlier here. I wanna go back to some of the comments in the shareholder letter around retention. You called out that you're not aware of any churn to competitors, which is good to hear, but I wanted to expand there and maybe ask if you're seeing any pricing pressure from increased competition in the space or anything to call out there. Yeah. I said earlier on, Erin, that, you know, of all the new deals last year, we are winning the majority of them by far. I would say that there's, you know, there's definitely more competition in the evaluations. That competition, you know, was entering through 2025 and having the ability to maybe slow down the sales process a little bit. Also, there's also the macros that were slowing down the sales process. I would say that, you know, definitely there's not a huge amount of pricing pressure. You know, we're not pushing our prices down in any way. We're winning the deals. We're holding our prices. I would say a little bit here and there, maybe we could be a bit innovative around the contracts and stuff like that, and the multiyears and that type of thing. No significant impact on our pricing. You know, that's, you know. We put a lot of effort into making sure our customers understand how great our product is before we get to the pricing stage, and I think that helps a lot. Okay, that's helpful. Thank you. Maybe can you just remind us, the percentage of your customer base that's on the enterprise-wide licenses, and maybe just discuss, whether you've been making a more dedicated push towards enterprise-wide? I believe you have. Can you let us know if customers have been receptive to this model or, yeah, what's the reaction to maybe moving to more enterprise-wide licenses? Yeah, that's an ongoing thing, Erin. As customers step up in volume, they go to more enterprise, and we have done quite a bit of that over the last, I'd say, 14 months or so, 16 months. We continue to do it. It's very, it's a very win-win situation, and we do very well from that. Percentage-wise, I find it hard to tell you exactly right now. Dave might have a number on it, but we don't track that number. I would say that if we were to take our strategic, maybe top 30 customers, I would say we have 30% on some form of strategic, longer-term deal. That's kind of an order of magnitude now, Ann, so I can't, I'd have to come back to you with that number if you wanted to follow up on this. Sure. Maybe I'll follow up offline. Thank you. Thanks. Thank you. That concludes our Q&A session for today. I'd now like to turn the conference back to Eddie Ryan, CEO, for closing remarks. Please go ahead. Thank you. We are excited about what we are setting out to accomplish in 2026. We are in a great spot to keep our momentum going as the go-to validation platform for the world's biggest life sciences companies. We continue to deploy AI to help our customers work faster and smarter by keeping their data 100% compliant in a way that they can see, understand, and trust. With an experienced and energized team, we're confident in our ability to sign up even more new business this year than last. Thank you for your support and for believing in what we are doing. Thank you. This concludes today's conference call. Thank you for participating. 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