Greetings. Welcome to the AirJoule Technologies' Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. It is now my pleasure to turn the conference over to your host, Tom Divine, Vice President of Investor Relations and Finance. Thank you, you may now begin.

Thank you, and good morning. With me today for our full year earnings call are Matt Jore, Chief Executive Officer; Pat Eilers, Executive Chairman; Bryan Barton, Chief Commercialization Officer; and Stephen Pang, Chief Financial Officer. During this call, we'll be referring to a presentation, which is available on the webcast platform and on the Investors section of our website. I would like to point out that many of the comments made during the prepared remarks and during the Q&A section are forward-looking statements that involve risks and uncertainties that could affect our actual results and plans. Many of these risks are beyond our control and are discussed in more detail in the risk factors in the forward-looking statements sections of our filings with the SEC. Although we believe the expectations expressed are based on reasonable assumptions, they are not guarantees of future performance, and actual results or developments may differ materially. And now I'll turn it over to Matt Jore.

Thanks, Tom. Good morning, everyone, and thank you for joining us for our full year 2025 earnings call. This is an important call for AirJoule. 2025 was the year we built the foundation for commercialization and 2026 is the year we intend to convert that foundation into a commercial pipeline to revenue. Before I review our accomplishments and outline our plan for the year ahead, I want to take a moment to talk about something that has become impossible to ignore, the growing urgency of water resilience. In Corpus Christi, Texas, home to one of the nation's largest petroleum ports, the main water reservoir has dropped below 10% capacity, its lowest level on record. The city's own projections indicate it could reach a water emergency within months, meaning supply will be unable to meet demand. The Governor of Texas has publicly warned that the state may need to intervene. Industrial operations that produce jet fuel for Texas airports and supports billions of dollars in economic activity, faced the prospect of curtailment due to lack of water. The city's proposed long-term solution is a desalination plant that will cost over $1 billion and is years away from producing any water. Meanwhile, in the Middle East, the unfortunate ongoing conflict has caused immense human suffering. Our thoughts are with the people and the communities affected there. It has also exposed the critical vulnerability for the more than 100 million people who depend on desalination for their water supply. Desalination plants in Bahrain have been damaged by military strikes, facilities in the UAE and Kuwait have been hit by missile debris. As Bloomberg columnist, Javier Blas, recently observed, water is now more strategically important than oil. These desal plants are centralized facilities that represent single points of failure for entire populations. These risks…

Yes. Thanks, Matt. I have spent a considerable time in the Middle East region over the past 2 years with AirJoule and the last decade since my BlackRock days and I want to share some perspective on why it is an important region for AirJoule. The Middle East is one of the most water-stressed regions on earth. Gulf nations depend on desalination for 70% to 90% of their drinking water. At the same time, the region is experiencing massive growth in data center development, advanced manufacturing and infrastructure investment. Each of these sectors require substantial quantities of water. Governments and enterprises across the Gulf are actively seeking technologies that can strengthen water security while reducing energy intensity. Matt described the recent attacks on desalination infrastructure in Bahrain and elsewhere in the Gulf. Those events have exposed the vulnerability that has concerned regional leaders for years, with the concentration of critical mineral supply in small number of centralized coastal facilities. Communities have already lost access to drinking water when individual plants have gone off-line. The fragility of this infrastructure is now visible to the entire world. This is exactly why distributed water generation matters. AirJoule systems operate independently of desalination infrastructure and can be located where water is needed rather than relying on pipelines or trucks. It can be deployed on site at industrial facilities, military installations and community water systems to produce pure distilled water from the atmosphere. This capability has significant value in a region where water resilience is now a national security priority. We recognize that the current conflict in the region creates uncertainty around the near-term timeline for deployments. We are monitoring the situation closely and working with TenX, our partner, to ensure we are positioned to move forward when conditions are favorable. At the same time, these events are reinforcing the strategic urgency of water resilience across the Gulf and the conversations we are having with prospective customers reflect that urgency. We are confident that the long-term opportunity in the Middle East is substantial, and we intend to support the increased need for water resiliency. Now I will turn it over to Bryan Barton, our Chief Commercialization Officer, to discuss our product road map and commercialization plans for 2026. Over to you, Bryan.

Thanks, Pat. Let's start with the AirJoule A250, which we're now referring to as AirJoule Core. As Matt mentioned, we made a deliberate decision in 2025 to focus our initial system builds on the Core platform. The Core is a 2-chamber system that shares the same sorbent chamber architecture as our larger AirJoule Prime water generator. By building, deploying and iterating on the Core systems throughout the year, we accomplished two things simultaneously. First, we gained important engineering learnings that helped us improve the overall design of the system. Second and equally important, we used the Core system as a proof-of-value surrogate for the Prime system. Every Core deployment demonstrates to customers the performance, water quality and economics of the AirJoule platform, directly derisking the pathway to Prime commercial deployment. We are finalizing the Core product design and preparing for UL and NSF certification, which are required steps before commercial launch. We expect the Core product to be commercially available in late Q4 2026. For industrial dehumidification applications, there will be an additional Core product that will be optimized for maintaining low humidity environment in a range of approximately 30% to 40% relative humidity with significant energy savings compared to incumbent desiccant wheel technology. For this product, we are targeting commercialization in 2027. On cost reduction, we have made substantial progress. We have sourced lower cost components across multiple subsystems and are evaluating their reliability in our current builds. We are also simplifying the overall system design which reduces both manufacturing complexity and cost. The sorbent chamber remains the only custom manufactured component. The balance of the bill of materials consists of commercially available parts. Turning to the Prime. This is our larger water generator designed for industrial scale water production using waste heat. Prime is the product that the…

Thank you, Bryan. I will now walk through our financial results for the fourth quarter and full year 2025 and also provide some color on our 2026 outlook and liquidity position for the year. We can turn to the financial results slide in the presentation. As a reminder, AirJoule Technologies accounts for its 50% ownership in the JV with GE Vernova using the equity method. The numbers I will discuss are for AirJoule Technologies and the results from the joint venture are reflected in the loss from investment in AirJoule JV line. For the fourth quarter, AirJoule Technologies reported net operating expenses of $3.2 million. This is inclusive of approximately $0.7 million in administrative and engineering expenses reimbursed to us by the joint venture under a statement of work. For the full year, net operating expenses at AirJoule Technologies were $13.6 million, which compares to $11.2 million in 2024. The year-over-year increase was driven primarily by a $4.2 million increase in noncash stock-based compensation expense and is offset by lower professional fees and a shift in the R&D line from AirJoule to the joint venture. Our net loss for the full year is $9 million. The primary components below the operating line were a loss in investment AirJoule JV of $39.3 million offset by a noncash gain of approximately $25 million from changes in the fair value of earn-out liabilities and subject vesting shares. The $39.3 million JV loss compares to $5.3 million for the full year 2024. The primary driver of the variance is the noncash impairment of in-process R&D that reduced net income at the joint venture. This is a noncash accounting adjustment related to a change of valuation of intellectual property contributed to JV at formation. It has no impact on our joint venture's operations cash position…

[Operator Instructions] And the first question we have comes from the line of Michael Legg with Ladenburg Thalmann.

Congrats on the quarter. Nice progress here. Wanted to ask a little bit about, you talked about the customer engagement. Can you talk about how you're going about engaging the customer from a feet-on-the-street perspective, from a distributor perspective? And what -- how is the outreach going and talk about that a little bit, please?

Thanks, Mike. This is Bryan. I think if I understand your question correctly, it's really around our process of engaging customers. Is that accurate?

Yes, yes.

Yes. So it's worth noting that there's really, I think, three ways of one in which these conversations are initiated, right? One is through direct engagement from the customer themselves. That's when they reach out to us. And then, of course, there's warm introductions that happen across our network and to the tops of these organizations. And then there's really kind of meeting folks through direct conferences or trade shows or suppliers and that kind of thing. And so there's really a lot of activity in all three kind of categories of how we reach our customers. There's a lot of them that come to us, frankly, because this is an urgent topic for a lot of data center builds in particular, in that market. One thing to note on the data center market is there's a lot of builds that are happening and a lot of builds that end up getting canceled, canceled projects due to permitting on the water side, where everything seems to be moving ahead, but then you can't secure the water permit. And so that's one thing that's really driven a lot of engagement for us in the data center market. And there's other verticals as well where that outreach has been predominantly customer-driven in the industrial sector as well as in the residential sector, which we believe is a significant value for AirJoule to unlock different kind of frozen residential developments. Does that address the question, Mike?

Yes. Great. And then on the supply chain, you mentioned most of the -- almost everything except one is commercially available. As we scale over the coming years, will -- is there anything that's a scarce supply chain or that you don't have redundancy on that we should be thinking about?

I don't think so, Mike. Most of these components that are in the box, so to speak, are kind of already at scale, pumps and motors and valves. The custom part of our sorbent chamber is an aluminum vacuum chamber that is produced at scale through cast aluminum manufacturing, and this is a very commodity industrial process. It's just our form factor is a bit unique, but it's totally available at scale. The thing inside the vacuum chamber is our sorbent coated contactor. The contactor is already at scale commodity, many vendors, millions of parts globally already produced. So that's a standard offering that we then coat with the metal organic framework sorbent material. We do that in-house really to define the process of coating, but coating parts is also a commoditized process. There are many vendors that can do this at scale. AirJoule has taken -- like this is kind of a core aspect of our intellectual property and we need to define and own kind of the optimization of that process and lock it down before we engage with the select partner to take that to scale.

Okay. Great. And then just one last question. You mentioned $10 million cap call on the AirJoule joint venture at year-end. Can you explain that and then also talk if there are any other major CapEx needs for '26?

Yes, Stephen, do you want to take that?

Yes, Mike, you're asking about the 2026 capital call, correct?

Yes.

Yes. So that capital call -- those two capital calls are kind of the normal course funding plan for this year, as we laid out in our prepared remarks, what our anticipated total spend for the joint venture will be and these two capital calls are part of the funding contribution to fund the JV for those prospective expenses. And I'm sorry, the second part of your question?

Any other major CapEx for '26?

No, nothing other than, again, the forecast that we provided in our prepared remarks around our cash needs. CapEx for the joint venture has largely been funded through last year to help support the build-out that Bryan described.

Great. We've got some progress.

Our next question is from the line of Alex Fuhrman with Lucid Capital.

Congratulations on all the milestones you've achieved in 2025. Wanted to ask about gross margins. What kind of gross margins are you expecting initially for your first couple units of sales? And then as you think about longer-term contracting -- transitioning to contract manufacturing, what kind of gross margin do you think you'll be able to achieve at scale?

Yes, maybe I can take that. I think for this year, we're really just focused on the deployments at hand. And so I think the gross margin is less of an emphasis for us in terms of what our long-term objectives are, which are around 30%, 35% at scale as we move into contract manufacturing. So this year, as we're focused on really the customer pipeline build-out and the validation of our technologies, the focus is more on top line and customer engagement execution and as we move into 2027, as I alluded to, as we contract manufacturing that margin is what we're targeting. And so our conversations around both our design and our build materials will ultimately help unlock the gross margin profile that we're pursuing long term.

Okay. That's really helpful. And then nice to see the first obviously, small revenue here for the JV in Q4. Should we expect to see similar small revenue throughout 2026 as we get closer to the full-scale commercial launch at the end of the year?

Yes, we do. We envision these deployments while some of them will be passed in nature will be paid deployments. So we expect some modest revenue that will continue to [indiscernible] at the joint venture level. And given some of the accounting treatment of the JV that will flow through the equity income or loss from the JV line.

That's really helpful. And then you guys mentioned the water crisis in Corpus Christi and kind of the trade-off between AirJoule and desalination. Just curious how close your economics are getting to competing with large-scale desalination progress -- project? And how much of a selling point is the lack of a massive upfront CapEx for these types of projects as you start engaging with communities like that?

Yes. Thanks, Alex. I think it's important to think about how a desalination actually gets built. It's a multiyear permitting and planning process. And typically, desal plants are billions of dollars of infrastructure that goes into the ground, then they clean up the salt water, of course, and then they have to dispose brine, and brine disposal back into the source is a point of concern often. Economically, the comparison desal is definitely cheaper than AirJoule Technologies for water creation. It's about 5 to 10x cheaper in terms of operating costs. The difference is like really the value of when you would deploy AirJoule is when the time to those permits and capital are constraining economic development. We're in a period of time right now where there's immense build-out. And we talk about Corpus Christi, who is right on the gaff as you point out, but the timeline to unlocking those development projects is really constrained. And another thing I'd like to point out in terms of the water that's produced from AirJoule is distilled, very plain, 0 TDS. And this is actually difficult for RO water or desal water infrastructure where there's residual TDS or things that come along. And so water quality is a main value driver. So for the kind of like bucket at large, like where is the value for AirJoule Technologies, it's in terms of speed to market, distributed water, resiliency water where that water is yours, right? And it is your asset that you own. And then it's around water quality.

And Alex, this is Matt. I'll add two things here that Stephen and Bryan said. Regarding your gross margin question, you might recall we've established a water purchase agreement business model, and that has been well received by customers. And to Bryan's point about distributed water. If you envision these AirJoule water plants at the site, wherever there's waste heat and every data center there is waste heat, every industrial operation has waste heat, you can envision an AirJoule water plant. And so the gross margin question, when you take that model is easier to maintain, as long as you're focused on where that water has value, and that distilled water that Bryan brought up has tremendous value. So we're pretty confident because you get this -- we place these AirJoule water plants and sell the water for a 15-, 20-year period. So that gross margin question on sale of equipment also applies to water being sold. So just wanted to add that to your question.

Our next question is from the line of Julian Mitchell with Barclays.

This is Drew on for Julian Mitchell. So I just wanted to get a sense of what commercial opportunities you're expecting to turn into firm orders, I guess, more broadly like on a global scale and then more specifically in the Middle East, I know you guys touched on that a bit during the call, but if there's any additional color you could provide there, that would be great?

Sorry, I'm not exactly -- yes. So the question is around commercial deployments that lead to -- sorry, deployments to lead to commercial activity?

Deployments like leading into orders throughout the year, if there's any color on that?

Yes, sure. So thanks for the question, Drew. As kind of discussed on the call, there's a number of different market verticals that we're engaging into, be it on the residential side of unlocking whole residential build communities that are currently frozen and the development pipeline due to water permitting as well as a number of data center engagements as well as the U.S. military in terms of water resiliency as well as on dehumidification. So there's a number of verticals and customer conversations that are ongoing that are really kind of poised for these deployments and that proof of value conversation with each one of those customers. We will announce these as they happen throughout the year and kind of give updates as to the success of those deployments and proof of values with those customers in different verticals. And then those will cascade into commercial commitments from those customers is our expectation on the overall process. Does that address the question, Drew?

Yes, absolutely.

At this time, there are no more questions in the queue, so I'll turn it back to Matt Jore for some closing comments.

Thanks, everyone, for joining us this morning. 2025 was a year of building for us, building systems, building partnerships and building towards commercial pipeline. In 2026, we expect to see the early results of that work through our first product launches and additional customer deployments. Every deployment we execute this year and every customer relationship we advance is building the foundation for scaled commercial activity in 2027 and beyond. Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.