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Operator: Thank you for joining us for the V2X, Inc. First Quarter 2026 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Gary, and I will be the operator for today's call. At this time, all participants have been placed in a listen-only mode. Following management's presentation, we will open the call for a Q&A session. To withdraw your question, please press star then 2 on your telephone keypad. I will now pass the call over to your host, Michael J. Smith, Vice President of Treasury, Investor Relations, and Corporate Development at V2X, Inc. Please go ahead. Michael J. Smith: Thank you. Good afternoon, everyone. Welcome to the V2X, Inc. First Quarter 2026 Earnings Conference Call. Joining us today are Jeremy C. Wensinger, President and Chief Executive Officer, and Shawn M. Mural, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on the Investor Relations section of our website at gov2x.com. Please turn to slide two. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The company assumes no obligation to update its forward-looking statements. In addition, in today's remarks, we will refer to certain non-GAAP financial measures because management believes such measures are useful to investors. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP on our slide presentation and in our earnings release filed with the SEC, both of which are available on the Investor Relations section of our website. At this time, I would like to turn the call over to Jeremy. Jeremy C. Wensinger: Thank you, Mike, and good afternoon, everyone. We appreciate you all joining us today. Please turn to slide three. Today, we will be providing a recap of our first quarter 2026 results and sharing more on our outlook for the year. First, I want to acknowledge the talent of our team at V2X, Inc. for their continued hard work and dedication to our company and our customers' mission success. With double-digit growth in revenue and earnings, we demonstrated how consistent strategic execution paired with close alignment with national security priorities results in enhanced financial performance. The strength of our awards is further proof of the momentum underway and the continued demand for the capabilities we provide. With robust bookings of $4.1 billion in the quarter across all business areas, we achieved a record backlog of $13.8 billion. We continue to make progress on our Go Towards Tomorrow strategy, innovating across the enterprise. This strengthens our global operations and delivers differentiated outcomes for customers operating in increasingly complex environments. As we advance this innovation-forward strategy, we do so with the benefit of a healthy balance sheet and the flexibility to invest for growth. Looking forward, we are confident in our position in the market and are increasing our guidance for 2026. We now expect revenue and adjusted EBITDA to increase 9% year over year at the midpoint, and adjusted diluted EPS to increase approximately 14% at the midpoint. This is a testament to our ability to deliver enhanced value for both customers and shareholders in the year ahead. With that, let us move to slide four, which summarizes the quarter's financial and operational highlights. In the first quarter, we achieved robust top-line growth and delivered strong operational results across the organization. Revenue increased 23% year over year to $1.25 billion, marking a record year-over-year organic growth rate for V2X, Inc. Adjusted net income for the quarter was $48.1 million, representing an increase of 53% year over year. Adjusted EBITDA was $85.6 million, with margins of 6.8%. Adjusted diluted EPS was $1.53, representing a significant increase of 55% compared to the same period last year. We believe our financial performance underscores our position as a leading provider of mission capabilities. I also want to recognize some of the key contract wins and highlights we delivered in the first quarter. We secured approximately 50 contract awards representing approximately $4.1 billion in total awards, spread across all business areas. We were awarded work to modernize critical components of the F-18, as well as integrate advanced infrared countermeasures for the KC-130J. These programs showcase our role in supporting long-term platform readiness. In global training, we captured multiple awards supporting customers across North America and Europe, reflecting both the reach of our training footprint and the demand for our capabilities. In aerospace, we achieved full operational execution for T-6, which highlights our ability to transition large national priority programs. Additionally, we supported the Artemis II mission, providing training, simulation, and recovery operations—another example of how technical expertise supports complex, high-visibility national initiatives. In mission readiness, we continue to support essential logistical requirements for national security customers across multiple geographic locations. These awards demonstrate the breadth and diversity of our opportunities and our ability to execute across capabilities to support our customers' most critical missions. Moving to slide five, our recent contract success is yielding record backlog, strengthening the foundation from which we are executing. We delivered bookings in the quarter of approximately $4.1 billion, reflecting the strength of our portfolio and the demand for our diversified solutions. This drove a quarterly book-to-bill ratio of 3.2x and a trailing twelve months book-to-bill ratio of 1.5x. As a result of increased awards, total backlog for the quarter was $13.8 billion, up from $11.1 billion at the end of the fourth quarter, providing strong visibility into future revenue. With a healthy pipeline, we remain on track to achieve a 30% year-over-year increase in bid velocity in 2026. Overall, the expansion in backlog, robust pipeline, and opportunities underscore the demand for our capabilities and reinforce our confidence in the long-term growth outlook for the business. Turning now to slide six, last quarter we introduced our efforts to invest in advanced capabilities and pursue best-in-class partnerships to drive innovation across the enterprise. In the first quarter, we made solid progress executing this strategy. In the last six months, we have introduced three artificial intelligence platforms operating on our enterprise IT infrastructure, and we are seeing a promising pace of adoption across our employee base. We are also seeing significant expansion in AI-enabled productivity, which is enhancing operational efficiency in our support functions across the organization and will drive lower costs over time. At the customer level, the targeted investments we are making in innovation are creating new offerings that expand how we execute customer missions and enhance our customer value proposition. One example is aviation operations. With our early prototype AI-enabled aerospace sustainment platform, we are building this platform with Google, Tactile, and NVIDIA products. Our goal is to capture unstructured data and turn it into predictive insights and automated decision support. We expect this to improve aircraft availability, reduce delays, and streamline sustainment operations. I look forward to keeping you updated as we continue to invest in innovation to meet customers' evolving and complex requirements. With that, I will turn the call over to Shawn for a more detailed review of the financials. Shawn M. Mural: Thank you, Jeremy. Good afternoon, everyone. Please turn to slide seven. As you heard, we reported strong first quarter financial performance across all major metrics. Revenue in the first quarter increased 23% to $1.254 billion. As Jeremy mentioned, this was a record organic growth rate for the company, driven primarily by the ramp-up of training, foreign military sales, rapid prototyping, and engineering programs, as well as some discrete activities to support a national security customer. This growth also reflects continued diversification of capabilities across our business, which is visible in our customer mix, with approximately 21% of revenue in the first quarter coming from customers outside of the U.S. Army, Navy, and Air Force. This percentage is up from approximately 13% in the prior year period, reflecting expansion with national security customers. Adjusted EBITDA in the quarter was $85.6 million, increasing 28% from the same period in the prior year. Adjusted EBITDA margin was 6.8%, improving approximately 20 basis points year over year. The increase was driven by volume and mix changes. Interest expense in the first quarter was $18.1 million. Cash interest expense was $16.5 million. Net income for the quarter was $18.9 million. Adjusted net income was $48.1 million, up 53% year over year. First quarter diluted EPS was $0.60 based on 31.5 million weighted average shares. Adjusted diluted EPS in the quarter increased approximately 55% year over year to $1.53. Adjusted operating cash flow improved significantly year over year and was a $22.1 million use in the quarter, reflecting solid cash collections and our focus on enhancing quarterly cadence. Based on our progress to date, we expect our cash flow performance in 2026 to track more favorably relative to our historical profile. Please turn to slide eight. From a liquidity perspective, we are operating from a position of strength, with approximately $200 million of cash on the balance sheet and a $500 million revolver that had a zero balance at the end of the quarter. Additionally, we expect another year of solid operating cash flow generation, which we anticipate will drive our net leverage ratio to less than 2x by the end of 2026. Our ongoing progress is providing substantial flexibility and optionality to deploy capital for value creation. We have established clear criteria as we actively evaluate deploying capital to invest for growth, whether organically or through M&A. This includes investments that accelerate our innovation strategy, expand our capabilities, provide access to incremental growth, and enhance our overall margin profile. We will continue to be disciplined, focusing on growth opportunities that drive enhanced value for our customers and shareholders. Please turn to slide nine. Overall, our strategy is yielding positive results as demonstrated by our strong financial performance this quarter. We believe the combination of our global reach, proximity to mission and national security priorities, and diverse capabilities positions us well for the future. Given our momentum in the first quarter and current trends, we are increasing our guidance ranges for 2026. Revenue is now expected to be between $4.825 billion and $4.975 billion. Adjusted EBITDA is expected to be between $345 million and $360 million. Adjusted diluted earnings per share are expected to be between $5.75 and $6.15. Adjusted net cash from operations is expected to be between $160 million and $180 million. Overall, we are pleased with our performance across the business this quarter, as our team continues to bring the best of V2X, Inc. to meet our customers' critical mission requirements. Looking ahead, we believe this sets us up well for the rest of 2026. With that, I would like to turn the call back to Jeremy for some closing remarks. Jeremy C. Wensinger: Thanks, Shawn. As summarized on slide ten, our fiscal year 2026 is off to a really strong start. We continue to accelerate our position as a leading mission capability provider. Before we begin the Q&A, I would like to recognize our more than 16 thousand employees around the globe for their unwavering commitment to our company, each other, and the customers we serve. They come to work day in and day out focused on the success of our customers, and it does not go unnoticed. It is because of them that we are prepared for today and to take on the missions of tomorrow. We will now open the call for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question today is from Andre Madrid with BTIG. Please go ahead. Andre Madrid: Jeremy, Shawn, Mike, thanks for taking my question. Looking across the scope of your business, the recent announcement of troops out of Germany—5 thousand troops there—and I saw something in the queue about potential work scope change in Kuwait. What are the puts and takes that we should be looking out for across the regions right now? Jeremy C. Wensinger: It is a really good question. In Europe, the missions we support are not necessarily at risk because of the programs we operate. When I look at Europe, I look at COBRA DANE, Ascension Island, and Thule, Greenland. We are well positioned with the missions we support. Regarding Kuwait, that is going to be TBD, but I do not see us changing our posture in the Middle East—at least that is not what we are hearing. I see us in a very good position in the Middle East. When I look at the macro side, it looks like we are well positioned because of the contracts we have, the work we do, and the support we provide. Overall, we are in a really good position both in Europe and in the Middle East to support our customer long term. Shawn M. Mural: Andre, I will amplify because you mentioned we had a disclosure subsequent to the quarter relative to our Kuwait task order. On Kuwait, we have about $500 million in backlog. Our guide assumes that we continue at the levels that we performed at in the first quarter. We are continuing to see demand signals. We are working with our customer consistently on what that looks like, but we expect to be in the region and executing. Our guide and everything we are hearing assumes that we will be continuing to support our customers' missions. Andre Madrid: That is really helpful. Is the guide increase all on the back of the new work, or is that a mix of some programs that had previously been awarded and are just accelerating ahead of expectations? Jeremy C. Wensinger: It is a little bit of both. We are getting T-6 stood up, and that will contribute, and we had some announcements around jobs in the Middle East that will accelerate as well. I am proud of the team's ability to capture wins and support our customer. The back half of the year will accelerate based on those contract wins. Andre Madrid: If I could double click on T-6, is the $140 million to $160 million range still appropriate, or should we be closer to $160 million now given the raised guide? Jeremy C. Wensinger: Think a little bit higher than $160 million. The team did a wonderful job transitioning that in the first quarter, and we are assuming a slightly higher ops tempo as we work through everything. We said there would be an inherent lag to get to a full run rate. That is going. The team went IOC in Q1. We are closer to the $175 million to $180 million type of number for the year on that program. I could not be prouder of the team. Andre Madrid: That is great to hear. I appreciate all the context. Operator: The next question is from Analyst with Noble Capital. Please go ahead. Analyst: Good afternoon. Congrats on the quarter. From the Middle East to INDOPACOM—Asia revenues were pretty flat year over year. What are you expecting there for the rest of the year? Are you seeing any interest, maybe exercises—normally they are odd year—but a little more color on what is going on in the INDOPACOM region? Jeremy C. Wensinger: With the budget we are seeing, the work our team has done in INDOPACOM to help our customer understand where they might want help is paying off. Presence is everything. The fact that we have presence, understand the mission requirements, and are working shoulder to shoulder with the customer to align with their priorities is paying off. I am excited about the INDOPACOM region. Our team being there means everything. Analyst: On the back half, you said it should accelerate. Last quarter you said this year should be more of a 50/50 first half versus second half. Are you changing that, or was that something different? Shawn M. Mural: You are exactly right. We are going to be about 50/50 first half/second half from a revenue standpoint. You saw some of that play out with the strength in Q1. We are standing by what we said previously—same type of profile this year—which, as you point out, is a little different than what we have seen historically. Analyst: SG&A expenses were a little higher than expected. Is there anything unusual in there? Shawn M. Mural: We had some nonrecurring costs related to potential growth opportunities that the business undertook in the first quarter. That is why you saw a spike in SG&A. Operator: The next question is from Peter J. Arment with Baird. Please go ahead. Peter J. Arment: Good afternoon, Jeremy, Shawn, Mike. Nice results. When we see an operational tempo increase by the U.S. military, how quickly does that impact your operations? Is there much of a historical lag effect? Jeremy C. Wensinger: It is a good question. Our mission support team does a really good job reacting and responding in near real time. There is a bit of a lag, but not as much as you might think. For example, supporting the Air Force in Israel was days, not weeks or months. In INDOPACOM, the ability to get assets on the ground and deliver capability was weeks. We are very responsive and scrappy, capable of responding quickly to requirements. Peter J. Arment: A quick one for Shawn: time and materials as the contract mix was up quite a bit this quarter—is this a one-off, or will we see more of this going forward? Shawn M. Mural: In the prepared remarks, I mentioned a discrete national security customer we are supporting. That activity set is time and materials. That is what drove the change. Peter J. Arment: Will it repeat? Shawn M. Mural: Yes. As part of the increase in our guide, this activity set will continue throughout the year. Of the $150 million raise at the midpoint, about $70 million to $80 million is associated with this activity. Important to note, some of it was contemplated in our prior guide, and there has been an extension and continuation. What we have reflected in the guide is what we are under contract to perform. Jeremy C. Wensinger: Being on the right contract vehicles and having proximity is everything. You are seeing execution of the strategy we put in place. Operator: The next question is from Tobey O'Brien Sommer with Truist. Please go ahead. Tobey O'Brien Sommer: From a broad perspective, what is the duration of your book-to-bill in terms of number of years? Shawn M. Mural: Typically, our backlog converts over five to seven years. In the quarter, we booked a large award in T-6 that will run for ten years, which is longer than average, but generally it is five to seven years. Tobey O'Brien Sommer: The uptick in the quarter—how would you describe the sources of the remaining portion beyond the national security customer? Shawn M. Mural: Bridging from the prior midpoint: there is between $40 million and $50 million for additional support in the Middle East, about $80 million associated with the national security activities, and T-6 contributes another $20 million to $25 million. Those three activities bridge you to the midpoint of the new guide. Tobey O'Brien Sommer: How big were the professional fees in Q1, and do those continue into Q2? Shawn M. Mural: About $12 million in the first quarter. There will be a little bit in Q2. Tobey O'Brien Sommer: Are those growth opportunities still out there? Shawn M. Mural: We continue to evaluate both organic and inorganic investments. We are focused on growth and delivering returns and value for shareholders. We will update everyone as things progress. Tobey O'Brien Sommer: The “other” customer category was up 105% year over year. Is that primarily driven by the national security customer? Shawn M. Mural: It is mostly that national security customer. Operator: The next question is from Analyst with RBC Capital. Please go ahead. Analyst: Really nice growth in the quarter. Can you discuss how much of an award the T-6 contributed to bookings, and what the book-to-bill would have been without that award? Shawn M. Mural: T-6 contributed $3.3 billion in the quarter. Analyst: In terms of revenue visibility for the full year, you previously talked about 85% for 2026. With the strong bookings, is there upside? Shawn M. Mural: Revenue under contract we have visibility into is about 94% for 2026, reflecting the notable uptick from where we began the year. Jeremy C. Wensinger: Bookings in a quarter are interesting, but TTM is where you earn your calories. Given the episodic nature of awards, we look to sustain a 1.4x to 1.5x TTM book-to-bill for the year, which is outstanding. Analyst: On margins, with many contract startups, how should we think about long-term margin opportunity as we get out to, say, 2027? Shawn M. Mural: It is early in 2026. We will talk more in the back half of the year. Many contracts are in early startup stages; margins tend to mature over time, particularly in our aero and modernization sustainment businesses. We feel very good about being positioned to deliver margin expansion in the future. Operator: The next question is from Trevor Walsh with Citizens. Please go ahead. Trevor Walsh: Jeremy, you talked about AI opportunities with an aviation operations use case and great partnerships. Do you have line of sight on specific opportunities with customers for these AI-related efforts, and can they be duplicated? How does the pipeline look? Jeremy C. Wensinger: We partner with some of the best in the industry, and those partners are core to bids we have on the street and to what we are doing internally. Adoption of AI tools internally is delivering outstanding efficiencies. I was in Orlando for almost two months bidding a job, and the team put our relationships with Google, Amazon, and NVIDIA into that bid to create a differentiated solution for our customer. The customer will benefit. These are enduring relationships, and this is not beta work. We are delivering capability, and I believe this will be the new norm for V2X, Inc. Trevor Walsh: You called out COBRA DANE earlier. There was commentary from Space Force about including that into an RFI for modernization of ground-based radar. Does that create any risk, or will you be in that party regardless? Jeremy C. Wensinger: We are part of the Golden Dome. Being on location and supporting the customer positions us to help the government modernize. I see it as an opportunity, not a risk. Operator: The next question is from Analyst with Citi. Please go ahead. Analyst: We recently got a request for a $1.5 trillion budget. What opportunities do you see from this, and what are you most excited for? Does this outlook change with a possible blue wave? Jeremy C. Wensinger: I cannot comment on the political scenario. On the budget, we have looked at it carefully and are helping the customer understand where we can support modernization and mission needs. We are on the ground with them every day. If we modernize systems like COBRA DANE or COBRA KING, we have provided insights on where we can help. We are well positioned because modernization and sustainment are exactly what we do. Analyst: Outlook on possible M&A activity, considering your clear line of sight on leverage? Jeremy C. Wensinger: We are very disciplined in how we deploy capital, with a focus on shareholder value. We have optionality, and creating shareholder value is top of mind. We will be very disciplined going forward. Operator: The next question is from Analyst with Morgan Stanley. Please go ahead. Analyst: The administration put out an executive order on maximizing fixed-price contracts. Can you talk about the puts and takes for you? Do you see contracts being converted? Jeremy C. Wensinger: We welcome the opportunity to do fixed-price work. This market should welcome it. We can create a lot of value for our customer and save them money. We have been discussing this with the government for several years. The executive order is a great fit for the sustainment and modernization market. We will see how it manifests. Analyst: The U.S. business was up 40% year over year to over $800 million in revenue. How much of that was work on Operation Epic Fury? Shawn M. Mural: I would be guessing on the Epic Fury slice. The strength you saw was U.S.-based and largely supporting our national security customer. Year over year, we also had ramp in F-16 avionics lifecycle (ALOT) work and in Warfighter Training Readiness Support, which contributed to the strength—pretty much consistent with what we expected when we started the year. Operator: The next question is from Sebastian Rivera on for Stifel. Please go ahead. Sebastian Rivera: Congrats on the strong quarter. Can you flag some of your rapid prototyping capabilities you are most excited about, and how you envision your recent tech partnerships augmenting those capabilities on the ATSP-5? Jeremy C. Wensinger: We take concept to delivery in a very short time frame. These are programs of need, not programs of record. Our engineers turn concepts into fielded systems quickly, delivering outcomes daily. We are a very scrappy company, and I am proud of what the team delivers. If you ever want to visit Indy, it is remarkable to watch. Sebastian Rivera: On the budget request, specifically around CUAS—early days, but can you speak to your outlook for Tempest over the next one to three years? Shawn M. Mural: It would be speculation to quantify, but we think of this as a family of systems delivering unique capability, moving from concept to fielded systems very quickly. We have seen excellent growth in that part of the portfolio. We think these are franchise-type programs and capabilities we will deliver to multiple customers across theaters. We will take it one step at a time. Operator: This concludes our question and answer session. I would like to turn the conference back over to Jeremy C. Wensinger for any closing remarks. Jeremy C. Wensinger: Thank you so much for joining us. Great first quarter. We appreciate your interest in V2X, Inc. Thank you for the questions, and more importantly, thank you to all of our 16 thousand employees who care for each other every day. Operator, back to you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the GeneDx Holdings Corp. First Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question at that time, you need to press star 11 on your telephone keypad. Please be reminded that this conference call is being recorded. At this time, I would like to introduce your host for today's presentation, Sabrina Dunbar of Investor Relations. Ma'am, please begin. Sabrina Dunbar: Thank you, operator, and thank you to everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx Holdings Corp. released financial results for the first quarter ended March 31, 2026. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance, and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, May 4, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures that exclude certain items from reported results. Please refer to our first quarter 2026 earnings release and slides available at ir.gendx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. With that, I will now turn the call over to Katherine. Katherine Stueland: Thanks, Sabrina, and good afternoon, everyone. In the first quarter, GeneDx Holdings Corp. continued our mission of enabling everyone to live their healthiest life through genomics, leading the shift from diagnosing genetic conditions using multi-gene panels to the most comprehensive genetic tests available: exome and genome. In Q1, test result volume grew 34% year-over-year, demonstrating robust demand in our foundational markets and indicating positive early momentum in our expansion markets. Our competitive advantage continues to set us apart from others in the market. The combined strength of our large, diverse data set, GeneDx Infinity, our team of genetics experts, and our advanced technology underpins products that cement our leadership position, as evidenced by a loyal and growing customer base that drove the 34% volume growth in Q1. While volume growth outpaced our expectations, total revenue was $12 million lower than expected. We conducted a thorough, channel-by-channel business review to diagnose what happened, and we learned it was driven by two factors. First, approximately $5.5 million was due to a lower-than-expected blended average reimbursement rate for exome and genome. Second, approximately $6.5 million was due to softer-than-expected performance from our non-core business lines. As a result, we are updating our outlook for the year and now expect total revenues to be in the range of $475 million to $490 million, with strong continued exome and genome volume growth of at least 30% and gross margins of approximately 70%. We are also committed to returning to profitability on an adjusted basis for the full year and expect profitability to grow significantly into 2027 and beyond as we continue to lead and shape this large and ever-expanding market. Now I want to walk you through the Q1 revenue dynamics in more detail. Starting with the blended average reimbursement rate, ARR was primarily impacted by product mix with no structural changes in pricing. Through our business review, we identified clear opportunities to improve reimbursement dynamics spanning commercial execution and revenue cycle management, and our team has already taken action. Moving to our non-core business lines, which include Fabric and our biopharma business, it has been one year since we closed the Fabric Genomics acquisition, and it has become increasingly clear that the interpretation-as-a-service product is best suited for international markets. We are fully integrating the Fabric team, technology, and services into the GeneDx Holdings Corp. brand, and we are focusing our resources to support international growth and key domestic drivers. We are lowering our expectations for revenue contribution in 2026 accordingly. On the biopharma and data business, we saw positive underlying momentum but fell short of delivering Q1 revenue due to a longer-than-anticipated sales cycle. As we continue to build demand for our data asset and engage with biopharma companies large and small, our conviction around this business continues to strengthen. These partnerships can offer meaningful long-term value creation for patients and for GeneDx Holdings Corp., and the value proposition will grow alongside our clinical testing business. With more than 2.5 million patients, more than 1 million exomes and genomes, and more than 8 million matched phenotypic profiles, our contactable database stands apart. We have right-sized revenue contribution to the 2026 guide based on high-probability deals in our pipeline, positioning this business as upside as it continues to ramp. With our guidance now reflecting these shifts, and with the strong performance thus far in Q2, we are confident in the path forward with a massive focus on our core diagnostic business as the primary driver. Let us walk through each of the customer segments to give you more color. Starting with geneticists, as we continue to lead the market transition from multi-gene panels to exome and genome, geneticists are leaning into genome. This is an exciting development. We chose the ticker symbol WGS because we have always believed that the market would move to genome over time, but the speed of this transition in Q1 outpaced our expectations. We made the strategic decision to begin capturing share. Importantly, the experts are the clinicians who are interested in genomes. Most patients in the outpatient setting remain best served by exome testing, given that it covers approximately 85% of known disease-causing mutations. GeneDx Holdings Corp. is best positioned to lead the genome future by leveraging our scale, brand, clinician relationships, first-mover advantage, and vast dataset, GeneDx Infinity. Infinity enables us to interpret both coding and noncoding regions of the genome with speed and precision. As genome coverage matures, access improves, and volumes scale, the flywheel effect of this additional data will compound our competitive advantage across our portfolio. Informed by early data, we launched a Reflex offering in February to balance clinical demand with a relatively higher gross margin product. Customer feedback has been positive, and early adoption has reinforced that we can actively manage this market transition. Looking at pediatric specialists, we continue to deliver steady growth supported by exome utilization, high clinician retention, and robust same-store sales in the quarter. However, the blended exome ARR came in lower than expected based on the mix of tests submitted with parental comparator samples, a shift that we have already mobilized to correct with customer experience features, sales messaging, and incentives. We expect a return to longstanding exome reimbursement norms in the near future. In the NICU, we are seeing good progress driven by rapid and ultra-rapid genomes. It has been just over a year since the first study data was published demonstrating how a programmatic approach to testing can ensure that every NICU baby who needs a genome receives one. Genome ARR and gross margins are desirable in the inpatient setting, and with a robust set of institutions already ordering from us, our focus remains on increasing utilization as accounts mature. We have expanded the sales team to accelerate this ramp and plan to leverage our dominant market position to fuel continued growth. General pediatrics is our largest long-term opportunity and our earliest-stage market. We are beginning to see encouraging signals with early exome orders coming in as our sales reps get accounts up and running. It typically takes several touchpoints and meetings before the first order is placed, and we are seeing that progression play out. While volumes are still modest, our experience is reinforcing that education, awareness, and service are all critical in this market. Our tailored customer experience for non-expert clinicians remains on track, and upcoming workflow enhancements, including streamlined bundled ordering and improved post-test guidance, are all designed to reduce friction and accelerate uptake in the second half of the year. And finally, prenatal. Demand has been building steadily in the new market, and we are seeing good traction with maternal-fetal medicine physicians. Importantly, genome adoption appears additive to our small but existing exome volume in this channel. Stepping back, our core testing business is well positioned to translate demand momentum into profitable growth. We have line of sight to at least 30% volume growth at approximately 70% gross margins on the exome and genome portfolio, and we are committed to a return to profitability on the balance of the year. We have taken the decisive step of cutting $25 million of OpEx for the year, and we are putting our capital and team to work on the three biggest levers for the business: number one, growing utilization of exome and genome; number two, optimizing unit economics through both ARR and COGS; and number three, delivering the leading products at unmatched scale. Aligned around these three goals, we are moving forward with more clarity and operating rigor than ever before. With that, I will pass it over to Kevin. Thanks. Kevin Feeley: In the first quarter, we delivered $102.3 million of total revenue, including $90.6 million of exome and genome revenue, up 27%, and test result volume of 27,488 tests, up 34%. The blended average reimbursement rate was approximately $3,300. Adjusted gross margin was 69%, and we reported an adjusted net loss of $8.2 million. As Katherine outlined, two factors drove the quarter: mix dynamics resulting in a lower-than-expected blended average reimbursement rate and softer non-core business line performance. First, the blended ARR came in approximately $200 below expectations. I want to be very clear: on a like-for-like basis, ARR by product is relatively unchanged. There have been no meaningful contracted price changes, nor any material variation in coverage or collection rates across each respective channel. Instead, the lower ARR is primarily a result of product mix shifts within the exome and genome portfolio. The impact of mix is important, so let me walk you through it. Starting with payers, roughly 85% of volume is insurance-based outpatient services, and 15% is institutional pay. Specific to outpatient, genome was approximately 40% of volume in the first quarter, which is roughly double from a year ago. We expect that mix shift to continue, but at a far more moderate pace as we manage the transition. Both exome and genome are good for patients and our business, but in terms of ARR in outpatient, exome is closer to a blended average of $4,000 per test after all denials, and we are reimbursed more for cases with parental comparators than cases without them. In contrast, an outpatient genome blended ARR today is about half that of exome due to the relative maturity of payer coverage. Each has a very wide array of medical necessity criteria across payers. Policies are not all created equal, and policy coverage does not always equal broad access nor guarantee payment. Over time, a strengthening coverage landscape will help close the gap between products. Continued investment in automation and AI creates meaningful opportunity to improve collection rates across both as we scale. Our team continues to make the case for expanded coverage with payers, leveraging clinical and health economic evidence like the recent SAVE Kids study to open access for both exome and genome testing, which found that GeneDx Holdings Corp. exome and genome leads to cost savings of up to $80,000 in the first year after testing for children with neurodevelopmental disorders. That tells us testing should be covered much more broadly than it is today to deliver cost efficiencies to the U.S. healthcare system. We are in the early days of making the case, and across state Medicaid programs, there are now 38 states covering either test. Go back just a few years, there were none. Additions have been coming almost quarterly; it would be reasonable to expect momentum to continue. But it will take time. In the meantime, we will continue to accept samples in states without coverage, which is an intentional margin investment in market share and the evidence necessary to influence policymakers. If more states adopt coverage, orders that are zeros today in our blended ARR will become something more. Our strategy remains intentionally driving each market first from lower-margin panels to exome, and eventually towards genome for all. While genome reimbursement is currently constrained by coverage, we expect rates to strengthen over time as clinician demand grows, clinical and economic evidence builds, advocacy efforts advance, and the need for biopharma to identify patients drives payer modernization. Genome COGS are also higher than exome’s, specifically due to higher reagent input costs. Unprecedented? We can assume the cost curve here will continue to come down as utilization and scale grow. Not to be overlooked, approximately half of all tests we resulted in the first quarter were single-gene and multi-gene panels. Conversion has always been a cornerstone of our strategy. It remains both a big growth opportunity ahead and evidence that our market-leading exome will be durable for years to come. We have also taken steps to more actively manage the longer-term transition to genome, in particular with our Reflex product enabling more patient access to this innovative testing while maintaining higher unit economics. Parental sample mix also impacted the blended ARR this quarter by 200 basis points across the combined portfolio. We view this as a function of an opportunity for stronger field force training and execution, as well as new clinician education rather than any structural shift, and we are addressing it directly. Moving forward, we expect the blended ARR to stabilize and improve modestly over the balance of the year. To reiterate, there have been no changes to pricing, and a balanced payer coverage policy has expanded and is expected to continue to expand over the coming quarters. The lower realized rate in the first quarter was driven by product mix shifts within the portfolio, many of which are transitory and should have been better anticipated. We have invested significantly over the past several weeks to enhance forecasting precision, including bringing in external perspective to rigorously stress test our updated market assumptions and bottoms-up plan. This work reinforced our conviction in the long-term opportunity while sharpening our near-term expectations. With that added rigor and better visibility into each channel, the business is more predictable today than it was at the start of the year. Moving to non-core business lines where revenue fell $6.5 million short: in Fabric, the $2.5 million miss reflected legacy positioning in its go-to-market approach. The GAAP financials include a non-cash impairment charge of approximately $31.3 million to write down goodwill and certain intangible assets. In biopharma and data, a $2 million miss was timing-related, reflecting longer sales cycles. We are treating this business as line of sight for the purposes of guidance rather than relying on it. In multi-gene panels, a $2 million miss was caused by overestimating the timing of organic CMA uptake in the pediatric market prior to our sales force efforts ramping. This reflects a forecasting correction and should not be read as a demand signal. So we are taking four actions to get the year back on track. First, improving blended ARR through tighter channel management. Second, accelerating market access and revenue cycle investments. Third, optimizing cost per test for genome as we scale. And fourth, enhancing forecasting precision. Finally, we have already reduced and reallocated approximately $25 million in planned spend to align investments with current performance and remain committed to full-year 2026 adjusted profitability. This is not a cut out of our current run-rate spend, but rather a reduction in future planned increases to match our updated revenue timing. The reductions are primarily a recalibration of our hiring and marketing timing, essentially slowing out-year non-direct expenses while protecting investments in our proven channels and more line-of-sight expansion markets. Now on to guidance. We are reducing full-year revenue guidance by 12%, or $65 million, at the midpoint. The bridge on that is $36 million from the effects of blended ARR, $11 million from lower volume contribution across new expansion markets, and $18 million from non-core business lines split evenly between Fabric, biopharma, and other testing. With that, we expect full-year 2026 total revenues of $475 million to $490 million, exome and genome volume growth of at least 30%, translating to approximately 126,400 tests, exome and genome revenue growth of at least 20%, adjusted gross margin of approximately 70%, and profitability on an adjusted basis. In the second quarter of 2026, we expect total revenues of $110 million to $112 million, exome and genome volume of approximately 30,000 tests, exome and genome revenue of approximately $100 million, adjusted gross margin of approximately 70%, and an adjusted net loss of approximately $5 million in the second quarter as we move back to profitable in the third quarter. This is a framework we can execute with confidence. Katherine? Back to you. Katherine Stueland: Thank you, Kevin. Just twenty years ago, it cost millions of dollars and multiple weeks to sequence and interpret a genome. Today, GeneDx Holdings Corp. has scaled the promise of this technology like no one else in our space, with turnarounds in as little as 48 hours. And we continue to innovate. Three hundred million people are living with a rare disease globally, and we have never been more confident about our ability to drive profitable growth in service of these patients and shareholders. I recognize that resetting expectations is difficult, but it also gives us all great clarity and conviction in our ability to deliver on our commitment. We are grateful to our shareholders for the support and patience as we continue to deliver on a bold mission. Leading a generational shift in medicine is no small undertaking. It requires taking some big swings, learning quickly, and moving forward with urgency to satisfy the growing number of patients who need our services. You have my assurance that we have recalibrated our assumptions, taken decisive action, and positioned the company for long-term sustainable and profitable growth. Thank you. We will now open the call for questions. Operator: Thank you. Ladies and gentlemen, if you have a question or comment at this time, please press 11 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press 11 again. In an effort to facilitate as many participants as possible, we ask that you please limit yourself to two questions. If you have additional questions, you may reenter the queue again by pressing 11. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Mark Massaro from BTIG. Your line is open. Mark Massaro: Hey, guys. Thank you. There is a lot to digest here. I guess the first question I want to ask is on the Q2 guidance, because clearly, when I look at it, it does not look like that is fully de-risked either. Can you give me a sense for why you are guiding to approximately 30,000 in Q2? And can you give us a sense for what type of traction you are picking up in the NICU? Because I know that is an area where I think you noted that you missed in 2025, and I just wanted to get a sense for how you are doing here in 2026. Katherine Stueland: Yes, I will start. First of all, what we are seeing in the business today is strong momentum. As we arrived at a Q2 guide, it is coming from a knowing place reflective of the momentum that we are seeing in terms of volumes coming in for the quarter and overall the business behaving in line with the way that we want it to. I would say we are operating from a place of strength and clarity for that Q2 guide. On NICU, we have continued to see, with our expanded sales force, really good continued traction there. We had a lot of ambition last year, and I would say we right-sized that in the guide. We are feeling really good about line of sight in terms of momentum in the NICU. Mark Massaro: Okay. Can you give us a sense for if any part of your guidance has been a function of the end markets being, in any of the submarkets, a little different than you had expected? I also wanted to ask about competitive dynamics. Are you seeing any changes in the field? You did a good job, I think, on volumes in Q1, but you are lowering your volume uptake. I am wondering to what extent that might have an impact from competition. Katherine Stueland: Sure. First, as we look at the channels that we are in, this is the first time that we have four sales teams going after different clinicians, and there is a different product for each of those. So we are learning a lot. I think, reassuringly, we learned we are in the right channels. We have a good business model. As we really dug into our business review, we are not pivoting out of any of those channels because we have the right overall strategy. The tweaks that we need to make—we talked a bit about the genome dynamic for the expert geneticist; we talked about the pediatric neurologist and how we get them ordering more parental comparators—are areas that we have already actioned through sales messaging and incentives. We have great confidence that is something within our control. Similar goes for the general pediatrics segment. We are pleased to be in that channel. We are learning that it takes multiple touchpoints and meetings to get an account activated and to start seeing orders come through, but we are seeing early signs of exome. I would say this is more reassuring in terms of being in the right market with the right products. We are tweaking our sales strategy and commercial strategy to make sure we are really optimizing the way that we are showing up in the markets. I believe that we have in hand the right course correction to make sure that we can realize the guide and continue to execute on a really clear and achievable plan—we want to go out there and crush it as the leader. Operator: Our next question or comment comes from the line of David Westenberg from Piper Sandler. Your line is now open. David Westenberg: I just wanted to talk about some of the commercial footprint here and maybe some of the potential productivity per rep that we would expect to see in the back half of the year. Can you talk about adding those additional reps, how we should think about productivity, and then whether doubling or tripling the sales force had any issues impacting other parts of the business, like small panels or Fabric? Katherine Stueland: As we look at the sales force, a couple of things. There are four sales teams, so we have 75 people selling to specialists—about 25 of them new and added—and we are just starting to see them move out of their early stage and starting to get into greater productivity. In general pediatrics, there are 50 reps; they are still in their early days. That is a new channel where we do not yet have a sense of exactly what full productivity is going to look like—whether it will mirror what we see in the specialist sector or be a little bit different. We are seeing that it takes several meetings to get accounts activated, so more to come as we spend more time in the field with new reps there. There are 10 reps in the NICU and 10 reps in the prenatal space, and they are all still in the early days. One of the important factors that we are going to keep an eye on is sales force productivity and how that is changing week to week, month to month, quarter to quarter. We are in the early stages with a lot of these reps, and that should give us a lot of confidence in terms of our ability to continue to generate more volume and more healthy volume across these different sales channels. Kevin Feeley: And, Dave, that was the grounding philosophy of the guide, which is to build it from the core business with tighter assumptions and less reliance on areas where visibility is limited, including what those new reps in new channels might translate to in the back half of the year. It is a more disciplined framework than the one with which we started the year. At this point, it comes down to execution, and we will learn and iterate as we move forward. David Westenberg: Got it. And I will just ask one follow-up on the genome mix. I appreciate the color around 40% and the ASP being around $2,000. Is there any possibility of seeing a big coverage decision in that area? Is there blocking and tackling that you can do in the near term to get that ASP up? As we look out a couple years from now, can that ASP become around the same ASP as exome? Kevin Feeley: Yes, we think it can get towards parity with exome. There are a number of factors there, including improving commercial coverage, which today is far more expansive for exome than genome. There is also, as you alluded to, a lot of blocking and tackling with respect to ensuring that as we submit claims, they adhere to what is a wide array of medical necessity and documentation requirements. We can use better process, technology, and automation to tighten up the revenue cycle, reduce denials, and improve collection rates, all while expanding policy coverage for genome. We have run this playbook before; we are just years behind exome in driving commercial payers and Medicaid towards improving coverage similar to exome. We have seen it be done; we are confident we can get it done. But there is a lot of work to do to march genome ARR up towards parity with exome. It is going to take a number of quarters, and we have built that level of expectation into the blended ARR and the guide. Katherine Stueland: I would just add: control what you can control, and the COGS side of the house is an area where we think AI and automation give us an important ability to continue to reduce our cost of goods on the genome product. That will be a huge factor for us internally, because we have done that masterfully on the exome side of things, and we will rinse and repeat that on the genome side. Operator: Our next question or comment comes from the line of Daniel Brennan from TD Cowen. Mr. Brennan, your line is open. Daniel Brennan: Great, thank you. Maybe just the first one on the $11 million cut on the growth expansion market and the cut to volumes on exome/genome to 30%. Walk through the thinking there. Is that just de-risking versus your original expectations? Kevin Feeley: Yes, Dan. We have gone through an extensive exercise through the core business—really channel by channel, bottoms-up by assumptions—and tightened a number of product mix assumptions, not just exome versus genome, but how much to expect with respect to parent comparators. We recently introduced a Reflex product, which will play an important part in the geneticist channel. The outlook is representative of a lot of work to tear down and rebuild assumptions at a more granular level by channel. In doing so, the overarching philosophy was to rely on things that are far more line of sight rather than having to pull out any heroics in improving any of those metrics or over-reliance in the expansion markets. For those new markets, namely prenatal and general pediatricians, I have taken those down some, with the balance coming from the core foundational markets, to ensure we get back to an old habit of setting expectations that we can deliver upon. Daniel Brennan: Thank you for that. And then one more back to price. As this transition occurs, is the goal just to get the genome price back to parity with the exome—taking a fully reimbursed exome and now swapping in this lower-priced genome trying to get back up there? Or is there a future benefit long term for the genome? And then, Kevin, any way you can give us color as we think about the back half of the year pricing—what is baked in and any high-level math on the genome/exome split we can think about? Katherine Stueland: I will kick it off, Dan. We have good gross margins on the genome product, and the transition and the demand for genome are really good things. We are excited about the opportunity to continue to improve the unit economics on the genome product. We have introduced this Reflex test that enables us to satisfy the need of a geneticist for more content while also having the benefit of better unit economics for us. On top of that, the whole-genome opportunity continues to help us generate more and more data, which continues to build our competitive moat, which is proving to be effective. The demand is part of the way that we are measuring our effectiveness in terms of the competitive lead. We do want to see a future where we are running genomes for everyone. But the reality is, for a lot of clinicians like general pediatricians and many pediatric neurologists, exome is going to do the job because it will satisfy information for about 85% of the diseases that we can diagnose off of the genome. So it is a yes-and: we want to usher in this era we have been thinking about for a long time, we have to continue to improve the unit economics, and we have a portfolio of products that help ensure we can provide the right clinical information and insight for the right patient and the right customer channel at the right time. Operator: Thank you. Our next question or comment comes from the line of William Bonello from Craig-Hallum. Mr. Bonello, your line is now open. William Bonello: Thanks a lot. I want to push a little bit more on some of these pricing or ASP dynamics. On the geneticist side, I want to confirm that geneticists were just ordering a straight-up genome, not the Reflex product. I think maybe you just introduced that. Going forward, are you going to offer standalone genome, or do you have to order the Reflex? If Reflex is ordered, can you bill for an exome with payers where you are not reimbursed for a genome? That would be helpful to know. And then explain more about this shift in the parental mix and why you would be seeing suddenly fewer trios and how that is happening. Katherine Stueland: On the parental comparator side of things, which is mainly in the pediatric neurology space, the good news is it is not a structural problem. It is an execution problem, and we have already implemented changes in the sales force, messaging, and incentives to address it. When you go from one sales force to four sales forces, you are going to get some things right and some wrong. We were thrilled to diagnose this quickly and implement course correction immediately. On what we are selling to geneticists: if a geneticist wants a genome, we are selling them a genome, full stop. We are also offering them the additional Reflex product. Because our turnaround times are so fast on exome and genome, we can turn around both tests quickly. To the super-savvy geneticist who knows for most patients an exome will do it, if they want to Reflex to a genome, then they can. Kevin Feeley: Think of the Reflex as a tool to manage the transition in the geneticist office only. From a margin perspective, do not get confused: genome is still a good margin test for our business, and it is a great test for patients. Exome has a higher gross margin than genome, and the Reflex product slots in between in terms of its gross margin profile. William Bonello: Sure. Okay. But if I understand your answer, while there is less coverage for genome than for exome, you are going to have to live through a phase as the market continues to shift to genome where you are getting more zero pays. Is that basically what I am hearing? Kevin Feeley: There is more coverage for exome today than genome. Exome has a higher average reimbursement rate today. Now we have to work on ensuring that access for genome expands in commercial policy and that we tighten the revenue cycle to get the reimbursement rate between the two closer to parity. The Reflex test will have a reimbursement rate closer to exome. Operator: Our next question or comment comes from the line of Tycho Peterson from Jefferies. Mr. Peterson, your line is now open. Tycho Peterson: Thanks. Kevin, I wanted to understand the linearity here. There is a bit of déjà vu from a year ago—different issues—but you guided in late February, you were out in March on the conference circuit. When did you see the impact from the genome mix shift in the quarter? Maybe start with that. And then get us more comfortable that you have better visibility going forward. Kevin Feeley: We were glad to see volume come in above expectations. It came in slightly ahead of expectations this first quarter; a quarter ago it was 100 tests less versus the consensus number. The demand and volume number ended up exactly where we expected. That demand strength informed most of the quarter. As the quarter wrapped up, trends and mix in particular began to crystallize at the end of March. That triggered extensive work to go back into each and every channel and reset assumptions. Those reset assumptions are baked into the Q2 guide and full-year guide we just put out. The volume flows for incoming orders were strong and continued strong through the end of April. But the mix dynamic, we were slow to pick up on in our models, and forecasting did not anticipate those as well as it should have. Tycho Peterson: And the 30% volume guide—can you clarify specific assumptions now for foundational growth versus new market growth? What is the key driver behind the lower foundational guide? Kevin Feeley: Effectively, the core foundational markets plus the NICU make up the overwhelming portion of the guide, leaving very little with respect to the expansion markets beyond that. We want to see those markets begin to develop before we bake them into forward-looking projections. Tycho Peterson: And the $25 million on OpEx—get us comfortable that does not have a revenue impact. And why are you no longer breaking out SG&A versus R&D? We are getting a little bit less visibility here as you are leaning into OpEx. Kevin Feeley: SG&A is broken out from R&D. What we did was combine the G&A and Sales & Marketing lines into SG&A—we think that is in line with our peers. The $25 million in cuts, as we said on the call, are more a calibration of longer-term investments we were making—slowing some anticipated hiring plans and longer-term R&D initiatives, indirect marketing spend, and some G&A build in anticipation of future growth. We are confident that the core areas of investment remain untouched and we are recalibrating some dollars to ensure that we are opening up more access, improving reimbursement rates, and driving volume and growth. Investing in commercial expansion, AI, and automation to reduce COGS—we are confident that despite the trimmed outlook in future expenditures, there is enough OpEx and capex to fund the growth plan we have outlined. Katherine Stueland: I would just add, we have tracked every dollar and every effort to one of three areas of focus: one, utilization of exome and genome; two, improving unit economics; and three, making sure we have the industry’s leading products and services. Everything we continue to invest in is tied to one of those three levers. We are confident we are not cutting into our growth strategy; we are trimming where we can to get the team fully focused on the biggest levers for the business. Operator: Our next question or comment comes from the line of Keith Hinton from Freedom Capital Markets. Mr. Hinton, your line is now open. Keith Hinton: Thank you. I want to push on the volume side of things a little bit, since ASP has been pretty well covered. Volume came in a little bit above expectations for the first quarter, and yet you took the volume guide down. Help us better understand the drivers there. And related to this, there was a large genomics player that recently announced they are launching into non-oncology rare diseases with a long-read option. Any comment on the competitive dynamics there—was that a driver of the downgraded guidance at all? And where are you in getting a long-read or medium-read option into the marketplace? Katherine Stueland: Thanks, Keith. On the competitive dynamics, we have not seen any change from our point of view—nothing new happening out there. As we think about continuing to lead the way with whole-genome sequencing, long-read for WGS is without a doubt an important element we are working on. It will enable us to continue to drive our dataset to be even more enriched on the genome side. We have been able to offer it to clients in a research setting, and we will have it available at some point in a commercially available product as well. Kevin Feeley: We set the initial guide and it proved to be too aggressive, primarily with respect to mix shift, and we want to make sure we do not get that wrong moving forward, in particular with contribution from the new markets. We believe we corrected that. We understand we need to rebuild credibility, and the way we expect to do that is by setting a guide we believe we can execute on and deliver against. This guide today is underwritten with more line of sight, relying only on those more mature foundational markets, leaving volume contribution from the new channels as upside as they come. Keith Hinton: Great. And a quick clarification on the ASP side. The reason why the average genome is lower is purely because of higher denial rates, right? There is not a situation where genome, when paid, is meaningfully lower than exome. Correct? Kevin Feeley: I would refer back to the clinical lab fee schedule, which is usually the basis for every contract negotiation. Without sharing proprietary contracted rates, exome has a higher contracted rate today than genome, and exome is in more commercial policy coverage than genome today. So it is both price and coverage, and then the overall denial rate also plays in. We have room to improve both the contracted status as well as overall collections and denial rates to get those two ARRs over time, we think, towards parity. Operator: Our next question or comment comes from the line of Kyle Mikson from Canaccord Genuity. Your line is now open. Kyle Mikson: Hey, guys. Thanks for the questions. I want to go to the non-core revenue—it was a $4.5 million headwind on the non-core excluding other tests, so Fabric and biopharma. On the Fabric side, I think the deal milestone was $12 million in revenue for this year. You are clearly going to be well below that. You have the impairment too, which is disappointing. What does the refocus on international really mean for that business, as well as powering some of these domestic competitive tests that we know about? Then on biopharma, there is momentum but longer-than-anticipated sales cycles—that would imply you will get that revenue back one day. How should we think about the health of that segment? Katherine Stueland: Starting with Fabric, the technology is valuable. What changed for us was the durability of the domestic commercial opportunity. As we have been building out—and as we always intended—Fabric’s interpretation-as-a-service is a really attractive way for us to cost-effectively drive international volumes. We have been integrating the team and the technology to support that. We wanted to right-size our expectations for this year and make sure we get it right. On the biopharma side, it remains an important opportunity, not just from a patient perspective, but it fundamentally brings us more testing and gives us the requisite next steps that every diagnosed patient needs to figure out the healthiest course of action. The selling cycle is longer. We are also taking a deeper look—the data is even more robust than what we originally thought. We talked about the Komodo deal earlier this year; that is giving us really good insight into the longitudinal nature of the view that is interesting to biopharma. With new products like that out there, we are learning a lot about the selling cycle. Yes, it takes longer, but some of the deals that we were counting on at the end of Q1 we hope we will realize later this year; if not, we are really ramping up the pipeline with a sales team that we continue to expand. Kyle Mikson: Thanks, Katherine. On pricing, it seems in the guidance we can get to maybe mid-$3,000 ARR by the end of this year. Could you get to maybe the high $3,000 by 2027? And I also want to confirm that the 2026 guidance now includes Medi-Cal. Kevin Feeley: The guide is at 20% exome/genome revenue growth and 30% volume growth; you can back into what that ARR is, and it is just a very slight step up above Q1’s approximately $3,300. We want to make sure we do not get too far ahead of our skis there, so I am not going to go above the guide. For 2027, that is theoretical. We certainly believe there is room to improve blocking and tackling on the revenue cycle to get paid more often. It will become harder and harder for payers to ignore the clinical and economic evidence in support of opening up policy for genome. Those things, along with greater clinician demand, should lead to an improved ARR structure for whole genome in 2027 and beyond. Operator: Next question or comment comes from the line of Subhalaxmi Nambi from Guggenheim. Your line is now open. Subhalaxmi Nambi: Hey, guys. Thank you for taking my question. Given the granular details, what are you assuming whole-genome versus whole-exome mix is going to be this year in the current guide? It used to be 70/30, right? Kevin Feeley: In the prepared remarks, we said genome is 40% of the outpatient volume. When you load in the NICU, genome is about 45% of all exome/genome volume in the first quarter. We do not anticipate giving that split for the guide, but I would point you to the volume and inferred ARR in that guide. What underpins that is different assumptions channel by channel. Subhalaxmi Nambi: Thank you for that, Kevin. Regarding your current market penetration, you include a slide where you have penetration by market. There is a bit of investor confusion about this analysis. For example, if a patient sees a pediatric specialist and a geneticist after being referred, that is still one patient and only one test. Does your analysis count this as one test in each specialty area, meaning in both pediatrics and geneticist market, or only once based on the clinician that actually orders the one test? Katherine Stueland: As we zoom out, remember, the diagnostic odyssey typically entails a patient seeing several different clinicians over a five-year period. They start with the general pediatrician, move to a specialist, and then get to a geneticist. As we think about penetration, we are zeroing in on where the patients are landing and getting diagnosed. We are focusing on the diagnosis day as the anchoring factor. Operator: Next question or comment comes from the line of Brandon Couillard from Wells Fargo. Mr. Couillard, your line is open. Brandon Couillard: Thanks. Kevin, a few clarifications. Did you say that the spike in the genome/exome mix was not evident until late in the quarter? And are you assuming that mix is stable in future periods or comes down? I want to understand directionally what is embedded in the guide. Kevin Feeley: The bottom line is the signals we had internally were not showing in real time the extent of those shifts and the economic impact. Those did not really become clear until late in the quarter, and then more so after we dug in channel by channel through a fairly extensive review. The go-forward expectation is now reset clinician by clinician and channel by channel, informed by experience at the end of the quarter as well as through April. We think we have proper expectations now at that granular level by channel and enough of a trend on which to make a call. Brandon Couillard: I believe you said the $25 million of OpEx savings was not in the current run rate, so we should not necessarily expect it to decline sequentially in Q2 or Q3. Is that correct? Kevin Feeley: Yes, that is correct. I think Q1 is fairly representative, on an annualized basis, of where we might end up. There will be some puts and takes and some refocusing to ensure we are spending every dollar on those with a shorter payback and the most impactful ROI. The $25 million effectively came out of what was planned expenditures for the full year. Operator: Showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day. Speakers, standby.
Operator: Good day, and welcome to the Vertex Pharmaceuticals Incorporated first quarter 2026 earnings call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Susie Lisa. Please go ahead. Susie Lisa: Good evening, all. My name is Susie Lisa, and as the senior vice president of investor relations, it is my pleasure to welcome you to our first quarter 2026 financial results conference call. On tonight's call, making prepared remarks, are Reshma Kewalramani, Vertex's CEO and president, Charles Wagner, chief operating officer and chief financial officer, and Duncan J. McKechnie, chief commercial officer. We recommend that you access the webcast slides as you listen to this call. The call is being recorded, and a replay will be available on our website. We will make forward-looking statements on this call that are subject to the risks and uncertainties discussed in detail in today's press release and in our filings with the Securities and Exchange Commission. These statements, including, without limitation, those regarding Vertex Pharmaceuticals Incorporated's marketed medicines for cystic fibrosis, sickle cell disease, beta thalassemia, and moderate to severe acute pain, our pipeline, and Vertex Pharmaceuticals Incorporated's future financial performance, are based on management's current assumptions; actual outcomes and events could differ materially. I would also note that select financial results and guidance that we will review on the call this evening are presented on a non-GAAP basis. I will now turn the call over to Reshma. Reshma Kewalramani: Thanks, Susie. Good evening all, and thank you for joining us on the call today. Vertex Pharmaceuticals Incorporated is off to a terrific start in 2026, which we see as a year defined by execution. Q1 revenue growth was strong across the portfolio as we reach more patients with more products and delivered total product revenue of $2.99 billion, reflecting 8% growth year over year. Importantly, we achieved key commercial milestones for each of the newer products since launch through end of Q1. AlifTrack exceeded $1 billion in cumulative revenue. More than 500 people have initiated their Kasjevi treatment journey. And over 1 million prescriptions have been written for Jernabix. Another highlight in Q1 was that products from the new disease areas, namely KASJEVY and GERNAVICS, drove approximately 25% of total product revenue growth. Execution in R&D was equally strong with multiple regulatory submissions recently completed and more anticipated, combined with rapid progress across clinical trials and important advancement in research. Let me spotlight a few accomplishments. First, on POBI, the interim analysis results from the Phase III RAINIER study in IgAN on efficacy and safety from top to bottom were sparkling and further fueled our enthusiasm for Povi as a potentially best-in-class BAFF/APRIL inhibitor. I was exceptionally pleased with the rapidity and quality of the recently submitted BLA filing for POBI in IgAN. Indeed, at 27 days from database lock to regulatory submission, this was the fastest submission in Vertex history. Equally notable is the urgency with which the Povi primary membranous nephropathy and the Povi myasthenia gravis programs are advancing. In membranous, the Phase II study has been fully enrolled and the Phase III program has already initiated. In addition, the Phase II proof-of-concept myasthenia gravis trial is underway. Second, on KASJEVY, I am also very pleased with the rapidity and quality of this sBLA submission for KASJEVY in 5–11-year-olds with sickle cell disease or beta thalassemia. The KASJEVY filing has been granted a Commissioner's National Priority Voucher, reflecting the importance of treating this younger age group before some of the most serious complications of the disease can begin. Overall, Vertex Pharmaceuticals Incorporated continues to extend its leadership in CF, drive growth with new product launches, while building out our disease area franchise in nephrology, accelerate programs in mid and late stage development, and advance the earlier-stage R&D pipeline. Tonight, I will limit my R&D comments to CF as well as the pipeline programs with the most significant new information to share, certain renal programs, Povi, myasthenia gravis, and zamylosel in type 1 diabetes. Starting with CF, four quick R&D updates for this quarter. We recently reached a significant milestone in the U.S. with label expansions for both AlifTrack and TRIKAFTA. With this expansion, patients with a clinical diagnosis of CF who have at least one variant in the CFTR gene that is responsive based on clinical and/or in vitro data are now covered by the AlifTrack and TRIKAFTA labels, reinforcing the impact of these medicines regardless of the location of the variant in the CFTR protein. This is a significant expansion of eligibility that reflects decades of investment, effort, and a relentless pursuit of the science. It is also a great example of innovation, using results from clinical trials complemented by in vitro data to expand the benefit of Vertex CFTR modulators to about 95% of people with CF, including those with rare and even N-of-1 genotypes. As we expand the AlifTrack and TRIKAFTA labels to additional mutations, we are also expanding the labels to younger patients. We will soon submit for approval for AlifTrack in patients 2–5 years of age, where you may recall our pivotal trial demonstrated a remarkable 65% of children reaching normal levels of CFTR function. We also plan to submit for TRIKAFTA in children 1–2 years of age in the near term. In addition, we continue to advance our next-generation 3.0 CFTR including VX-828, which is currently in a study of patients with CF. We are on track to complete the study and share results in the second half of this year. Following closely behind VX-828 in the family of next-gen 3.0 are VX-581 and VX-2272, both of which are currently in the clinic in Phase I healthy volunteer studies. As we have consistently said, if it is possible to do better in CF, we are committed to being the ones who do so. And finally, on VX-522, the mRNA therapy we have been developing for people who produce no CFTR protein and therefore cannot benefit from our modulators. We previously disclosed tolerability issues in this program. Despite actions we have taken in the trial to overcome these issues, we have not been able to do so, and as such, we have chosen to discontinue the program. Given this early termination, we will not be able to assess the efficacy or full safety of VX-522. We will be working with sites to close out the study in the coming weeks. Moving on to our renal franchise, which continues to make quick progress and is rapidly establishing itself as Vertex Pharmaceuticals Incorporated's fourth franchise along CF, heme, and pain. In total, we have four programs in mid and late-stage development in renal: Povi in IgAN, Povi in primary membranous nephropathy, enaxaplin in AMKD, and VX407 in ADPKD. Tonight, I will cover the first three programs, starting with Povi in IgAN. Recall Povi's differentiated, potentially best-in-class profile stems from its specific design as an engineered TACI fusion protein with binding affinity, potency, and PK properties that deliver optimal dual BAFF/APRIL inhibition. The dual inhibition and engineering advantage is evident in both the interim analysis data of the RAINIER study, where we saw rapid, deep, and sustained improvement in proteinuria, a favorable safety profile, and consistency across all subgroups, as well as in three key patient dosing benefits: once-monthly dosing, small volume, and subcutaneous administration via an auto-injector. Overall, the Phase III interim analysis data represent a home run in terms of study design, execution, and results, with Povi achieving statistically significant and clinically meaningful results across all primary and secondary endpoints. Patients in this trial received excellent standard of care, with high rates of background medicines including the highest rates of SGLT2s seen in any IgAN study. Baseline characteristics were well matched to real-world IgAN patients in terms of age, renal function, and degree of proteinuria. In addition, as a measure of study quality, it is important to look at discontinuations. In this study, treatment discontinuations were low, and trial discontinuations were even lower at a rate of 1.5% in the placebo group and 0.8% in the Povi group. To replay the top-line primary and secondary efficacy results: for the primary endpoint, Povi achieved a 52% reduction from baseline in proteinuria as measured by 24-hour UPCR. That is a 49.8% reduction versus placebo. For the first secondary endpoint, Povi treatment led to a 77.4% reduction from baseline in serum GdIgA1 levels. That is a 79.3% reduction versus placebo. For the second secondary endpoint, of those patients with hematuria at baseline, 85.1% of Povi-treated patients achieved hematuria resolution, which is a 61.7% reduction versus placebo. In addition, 42.2% of patients reached the exploratory endpoint of 24-hour UPCR of less than 0.5 g/g, an important clinical threshold. These are remarkable results, and particularly noteworthy considering that at the time of the interim analysis, patients had received just 36 weeks of Povi treatment. On safety, Povi was generally safe and well tolerated. The majority of adverse events were mild to moderate, and there were no serious adverse events related to Povi. Importantly, in terms of infections, most were mild to moderate. The rate of SAEs of infection was low at 0.5%, observed in both the placebo and Povi groups. There were no opportunistic infections and no discontinuations related to Povi overall, including no discontinuations due to infections. Lastly, on anti-drug antibodies or ADAs, ADAs were observed as expected with biologics but had no impact on Povi's efficacy or risk profile. We look forward to sharing more details of the interim analysis results and anticipate doing so at upcoming medical meetings this fall. Shifting to Povi in primary membranous nephropathy, I am pleased to share we have completed enrollment of the Phase II portion of the OLYMPUS Phase II/III study and have already initiated the Phase III portion, ahead of our previously announced mid-2026 goal. And finally, on Povi as part of its pipeline and product potential for B cell–mediated diseases beyond renal, I am also pleased to share that the Phase II proof-of-concept study of Povi in generalized myasthenia gravis is underway. This is a 30-patient study of people with gMG, evaluating both the 80 mg and 240 mg dose for 12 weeks with the primary endpoints of safety and the percent change from baseline in IgG at week 12. The rationale for studying Povi in myasthenia is compelling. It is a serious B cell–mediated disease with high morbidity affecting approximately 175 thousand people in the U.S. and Europe. There is high unmet need as current therapies have meaningful limitations, which means there is room for improved efficacy, a better benefit-risk profile, and more patient-friendly dosing and administration, which we have discussed in the context of IgAN as being critically important when considering a chronic biologics market. We believe Povi's mechanism of action, striking at the heart of autoantibody production with an engineered protein format, provides best-in-class promise in myasthenia; we are excited to develop this opportunity. Shifting back to renal to finish up with enaxaplin in APOL1-mediated kidney disease or AMKD. First, on AMPLITUDE, the pivotal Phase III study of primary AMKD, that is to say patients with two APOL1 variants, PND, and no other renal-related comorbidities, we are on track to conduct the interim analysis, which occurs after 48 weeks of treatment, and to share data from this cohort in early 2027. If positive, we will be poised to file for potential accelerated approval in the U.S. thereafter. Second, on AMPLIFIED, our Phase 2b study of enaxaplin in separate populations—patients with two APOL1 variants, modest proteinuria, and no other kidney disease, and patients with two APOL1 variants, moderate to severe proteinuria, and a second disease, type 2 diabetes, that could impact the kidney—these two populations are not being studied in AMPLITUDE. We recently completed enrollment in the AMPLIFIED study, which is a study of 13 weeks in duration. Given the clear differences in these populations, we made the decision early on to study them in separate trials. Emerging data in the field confirmed the wisdom of this decision. We are excited to learn from the AMPLIFIED study and look forward to sharing results in the second half of this year. Finally, on type 1 diabetes, a reminder that zamylosel has very strong clinical results to date, as detailed in last year's New England Journal of Medicine. Among patients who received a full dose and had at least one year of follow-up, 10 out of 12 patients were insulin free. These results are unprecedented and are particularly noteworthy given that these patients are those with 20-plus years of type 1 diabetes, undetectable endogenous insulin production at baseline, taking 40-plus units of exogenous insulin per day, and with two or more severe hypoglycemic events per year despite best available care. You may recall that in the second half of last year we paused dosing of the Phase I/II/III study in order to conduct a manufacturing analysis, which we have now completed. I am pleased to report that dosing in the study has resumed and multiple patients have been dosed. With dosing now restarted, we will update you in the coming months on the revised timelines, study completion, and regulatory filings. With that, I will turn the call over to Duncan for a commercial update. Duncan J. McKechnie: Thanks very much, Reshma. I will start with 6% globally, balanced nicely between U.S. growth of 5% and international growth of 8% in Q1. Global growth reflects continued AlifTrack uptake as its once-daily dosing and improved sweat chloride profile continue to resonate with the clinical and patient communities. As mentioned, AlifTrack has now surpassed $1 billion in cumulative global revenue since its approval in the U.S. in late December 2024 and Europe in July 2025. Outside the U.S., we have signed reimbursement agreements in 11 countries for AlifTrack in Q1 alone, building on the access generated in the second half of last year. The tremendous scientific and regulatory achievements represented by the label expansions for AlifTrack and TRIKAFTA also represent a meaningful incremental commercial opportunity of 800 people in CF who are newly eligible in the U.S. This broad labeling is one of several key CF growth drivers for the remainder of 2026, along with the global rollout of AlifTrack, treating younger patients, and expanding into additional geographies. We have worked closely with the CF population for two decades and remain focused on continuing to serve the CF community and expand our leadership across all genotypes, age groups, and geographies. Shifting to heme, the rollout of Kasjevi continues to gather momentum across all three regions, and I am pleased to highlight another significant commercial milestone since launch. Over 500 patients have now initiated the KASJEVY treatment journey. Hundreds have had their first cell collection, and many patients have had their cells edited and are ready for infusion. During the first quarter, we delivered $43 million in KASJEVY revenue. Importantly, we worked on securing a pricing agreement for KASJEVY in Germany in Q1 and are currently working through the implementation steps. This is a historic moment, and we are excited that German patients with sickle cell disease and TDT may soon be benefiting from long-term access to KASJEVY at a sustainable price. Overall, we are very encouraged by the robust flow of patients in the U.S., in Europe, and the Middle East moving from referral to cell collection and infusion. First-quarter revenue reflects expected variability quarter to quarter as patients choose the timing for their infusion that suits them best. For the full year 2026, the Kasjevi outlook is very promising, as we have built our ATC network, secured reimbursements, and now have many patients at all stages of the treatment journey. We therefore have very strong visibility to revenue for the rest of 2026, for KASJEVY to contribute meaningfully to our $500 million-plus revenue goal for non-CF products this year and towards KASJEVY's ultimate multibillion-dollar potential. For Gernavix in moderate to severe acute pain, prescriptions, prescribers, and awareness all continue to build. More than 350 thousand prescriptions were filled in the quarter, compared to approximately 550 thousand in all of 2025, which was in line with our expectations. We also surpassed the milestone of over 1 million Gernavix prescriptions written since launch. Prescriptions this quarter were once again split roughly 50/50 between the hospital and retail channels and generated $29 million in revenue, also in line with our expectations. Overall, prescription growth remains strong, although Q1 revenue reflects some normal inventory destocking. We remain on track to more than triple the 550 thousand prescriptions from 2025, and for revenue growth to significantly exceed prescription growth. I will now outline some of the key drivers of our continued growth and expected success for Gernavix in 2026. Firstly, physician and patient clinical experiences on Gernavix continue to be excellent, which provides a great foundation for continued growth. We also continue to see outstanding breadth of physician uptake, as well as Gernavix additions to hospital and IDN formularies, protocols, and order sets. Secondly, we continue to make good progress in the payer space: 240 million lives now covered. In addition to the big three commercial PBMs, I am delighted to announce that we have reached an agreement with the first of the big four Medicare Part D plans to start covering Gernavix effective as of May 1. Given the multiple and well-documented challenges that opioids present seniors, this is welcome news, and we are in discussions with the remaining Medicare Part D plans as well as the smaller regional plans. Thirdly, we have completed doubling the size of our field force to 300 representatives, slightly ahead of plan. As we have communicated before, Gernavix is highly promotionally responsive, and we are excited about the impact of this new field team on Gernavix growth. Lastly, we also continue to execute multiple initiatives to drive awareness, growth, and provide new mechanisms for patient access, including the launch of Vertex Pharmaceuticals Incorporated's first direct-to-patient telehealth-informed pain care. This platform is accessible from genavix.com and provides appropriate and independent telehealth evaluations for nonsurgical acute pain patients, if eligible. We are also pleased that Gernavix was recently added to the list of non-opioid medicines eligible for separate payments under the NO PAIN Act, effective retroactively to January 2023. In summary, with the increased size of our field organization, our continued progress in securing payer and hospital coverage, as well as strong gains in formulary status, we remain confident we will triple prescriptions for Gernavix in 2026. In addition, our strong reimbursement progress continues to position us to taper our patient support program over the course of 2026 and enter 2027 with a normalized gross-to-net. We continue to expect Gernavix to contribute meaningfully to the $500 million-plus we expect in revenue outside CF this year. I will conclude with an update on the commercial initiatives for our emerging renal business. We are investing in the nephrology community for the long term, and povitacicept is the first in a series of potentially transformative medicines that tackle the underlying cause of four serious renal diseases—namely IgA, PMN, AMKD, and ADPKD. We were thrilled with the interim analysis results of the RAINIER Phase III study, with excellent results across the board in efficacy, safety across all subgroups, and in the areas of greatest interest to nephrologists and patients. The results create a superb foundation for the commercial launch of a potentially best-in-class medicine. Our goal for povitacicept is to be physicians' first choice for their IgAN patients, given Povi's compelling trifecta of differentiated efficacy results, well-tolerated profile, and patient-centric administration characteristics due to its low volume, monthly dosing via subcutaneous auto-injector. Based on our market research and discussions with nephrologists, plus feedback from our field team engagements, we know nephrologists are looking for treatments in IgAN that meaningfully and rapidly reduce proteinuria in the patients they treat, as they see proteinuria as the key indicator of where the patient is headed. Nephrologists also seek a favorable tolerability profile, and both physicians and patients communicate to us the need for a seamless treatment experience, which includes everything from access to patient support to monthly dosing, size of dose, and administration in an auto-injector. We believe that, uniquely, Povi has the clinical profile, and that Vertex Pharmaceuticals Incorporated has the capabilities to meet all of these needs. Our renal field force will be specialty-sized and large enough to cover nephrologists who see approximately 80% of U.S. IgAN patients. We will target key facilities that represent a combination of renal centers, glomerular disease clinics, and key high-volume private practices. Our payer conversations are proceeding well. In a U.S. market, approximately 70% of patients have commercial coverage. We have a proven track record in securing broad and rapid access for our medicines and plan to establish the same for Povi in IgAN. And lastly, we know that the quality of the patient support provided is critical in the biologics space. With that in mind, Vertex Pharmaceuticals Incorporated programs to support Povi patients will enable speed to therapy and personalized support through the treatment journey, delivering a seamless experience of onboarding for patients and physicians alike. Povi in IgAN is the first component of our emerging renal franchise. We are excited to bring it to nephrologists and their patients. Based upon our work with them, we know they are excited to try it as well. We believe Povi delivers exactly what nephrologists are looking for in IgAN, and just as we have done for over a decade in CF, Povi's success will be driven by a field force delivering a high-science sell, fueled by a potentially best-in-class product, broad reimbursement, and robust and high-quality patient programs. We are very excited to begin building our fourth commercial pillar and creating another multibillion-dollar franchise at Vertex Pharmaceuticals Incorporated. I will now turn the call over to Charlie to review the financials. Charles Wagner: Thanks, Duncan. As Reshma noted, Vertex Pharmaceuticals Incorporated's Q1 2026 results demonstrate our consistent strong performance and attractive growth profile. First-quarter 2026 total revenue increased 8% year over year to $2.99 billion. CF revenue grew 6% year over year, and new disease areas also contributed, with KASJEVY delivering $43 million and GERNAVICS $29 million in Q1 sales, representing about 25% of total year-over-year growth for the quarter. By region, U.S. revenue growth of 7% year over year was driven by continued steady performance in CF and growing contributions from KASJEVY and GERNAVICS. International revenue grew 9% year over year, driven by continued CF expansion and increasing contribution from KASJEVY and, as anticipated, a benefit from year-over-year changes in foreign exchange. First-quarter 2026 combined non-GAAP R&D, acquired IPR&D, and SG&A expenses were $1.29 billion, an increase of 5% compared to $1.23 billion in 2025. Within total OpEx, non-GAAP R&D expenses were down 2% year over year, partly driven by the timing and mix of certain clinical trial expenses. In addition, certain Povi manufacturing expenses were included in R&D in 2025 and are now recorded in cost of sales following the positive interim analysis data. Non-GAAP SG&A expenses increased 30% year over year, driven primarily by commercial investments—roughly 40% attributable to GERNAVICS in pain and approximately one third to renal launch programs. We also recorded $1 million in IPR&D expense in the quarter, compared to $20 million in 2025. First-quarter 2026 non-GAAP operating income was $1.31 billion compared to $1.18 billion in non-GAAP operating income in 2025. First-quarter 2026 non-GAAP effective tax rate was 19.6%. First-quarter 2026 non-GAAP net income was $1.1 billion, an increase of $93 million compared to 2025, primarily due to increased product revenue, partially offset by increased operating and income tax expenses in 2026. First-quarter 2026 non-GAAP earnings per share were $4.47 compared to $4.06 in 2025, reflecting our strong revenue growth and disciplined expense management. We ended the quarter with $13 billion in cash and investments after deploying approximately $344 million to repurchase more than 741 thousand shares in the first quarter. This activity reflects our ongoing commitment to returning value to shareholders while maintaining the flexibility to act on strategic growth opportunities. Overall, our priorities for cash deployment remain unchanged, with a primary focus on investing in innovation. Now switching to guidance. We are reiterating our 2026 total revenue guidance of $12.95 billion to $13.10 billion, representing growth of 8% to 9%. This outlook reflects continued solid performance from the CF franchise driven by the AlifTrack launch, expansion into younger patient groups, incremental patients from the label expansion, and geographic expansion. We continue to have high confidence in our outlook for revenue of $500 million or more from non-CF products, driven by growing KASJEVY infusions—we have good line of sight given the length of the patient journey—and a meaningful ramp in GERNAVICS prescriptions and revenue as gross-to-net normalizes through the second half of the year. Lastly, our revenue outlook continues to include an expected impact from foreign exchange, net of our hedging program. Our outlook for full-year gross margin remains at just under 86%, reflecting the growing non-CF product mix impact and ongoing investments in manufacturing network and process development for various products. We are also reiterating our combined non-GAAP operating expense guidance of $5.65 billion to $5.75 billion, reflecting continued investment in our late-stage clinical pipeline, commercial infrastructure, and activities for new launches and revenue diversification. We also continue to expect our non-GAAP effective tax rate to be in the range of 19.5%–20.5% for the full year 2026. On the subject of tariffs, we do not expect any material impact to the income statement in 2026. We continue to evaluate the details of recent announcements and the potential applicability to Vertex Pharmaceuticals Incorporated. In summary, Q1 2026 was a very strong start to the year. Financial results are on track, commercial launches and diversification are gaining momentum, and we continue with targeted investment both in innovation and commercialization as the pipeline is advancing across our multiple disease areas. Our increasingly diversified commercial portfolio, now spanning three disease areas and soon to be four—the establishment of the renal franchise—is driving new revenue streams and adding to our near- and long-term growth profile. Vertex Pharmaceuticals Incorporated is well positioned to continue expanding its impact for patients, investors, and all stakeholders. These and other anticipated milestones of continued progress in multiple disease areas are detailed on slide 17. We look forward to updating you on our progress on future calls. I will now ask Susie to begin the Q&A period. Susie Lisa: We will now open the call for questions. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Our first question for today will come from Jessica Fye with JPMorgan. Please go ahead. Jessica Fye: Hey, guys. Good afternoon. Thanks for taking my question. So you have talked about renal one day rivaling the cystic fibrosis business in size. Can you speak to what needs to play out from here to realize that vision? And among your renal assets, which you see having the greatest long-term revenue potential? Thank you. Reshma Kewalramani: Jess, this is Reshma. I guess, as the nephrologist at the company, maybe I can take this, and, Duncan, please feel free to add. So, Jess, what we are talking about in our emerging renal franchise is four assets—Povi for four diseases—three assets: Povi for IgAN, Povi for membranous, enaxaplin for AMKD, and what we call VXS-407 in ADPKD. The reason I think that this has the potential to be as big if not larger than CF is that the diseases that these medicines treat are rare diseases, but they are common rare diseases. And when you add them all up together, they are well into the hundreds of thousands of patients. For example, we talk about 150 thousand or so patients with IgAN in North America and Europe, 100 thousand patients with membranous in the same geographies. For AMKD, that is another 150 thousand or so patients with the AMPLITUDE population, not including the AMPLIFIED population, which adds another 100 thousand, and ADPKD is about 300 thousand patients. Of course, the first medicine that we are studying, VX-407, can treat about 10% of that 300 thousand. So, one, while each one is a rare disease, they are common rare diseases, and when you add it together, we are hundreds of thousands of patients in just the Western world. The second is that in renal medicine, unfortunately, the natural history of these diseases is a relentless decline in renal function, and a movement then to death, dialysis, and transplantation. Obviously, those are enormous burdens for society. I do not need to say much more about death, but dialysis in particular is exceptionally expensive. And while it allows you to live, it is a very, very difficult life, and life expectancy is like very serious cancers like pancreatic cancer. And then last of that block, when we look at the emerging results for Povi, for example, in IgAN and membranous, you can look at the Phase II, and for IgAN, you can certainly look at the Phase III interim analysis results. As I said in the call, they are sparkling. From top to bottom, safety, efficacy—these are the kind of medicines that can bring transformative value. When I think about AMKD, same thing. You look at the Phase II results that we published in the New England Journal—47.6% reduction in proteinuria is a very big deal. And when we think about ADPKD, no human results yet, but when you look at the mechanism of action—this is to say to properly fold the misfolded PC1—and what we see preclinically, another one where we think transformative effect. That is why we believe this is another vertical that can rival, if not crest, CF. Best renal asset—that is a tough one, Jess. I am going to focus my attention for the here and now on Povi. It just looks sparkling. You can call it near-term bias because we just looked at the Phase III results. Jessica Fye: Thank you. Operator: The next question will come from Salveen Richter with Goldman Sachs. Please go ahead. Salveen Richter: Good afternoon. Could you discuss the read-through from MACE's recent data to the enaxaplin program? And also, could you just speak for that program, whether there were enrollment considerations to enrich for patients with larger APOL1 contribution to CKD, especially in the non-FSGS patients? Thank you. Reshma Kewalramani: Yes. Hey, good afternoon, Salveen. On the MACE data, you know we do not like commenting on other companies' assets and results, but I will simply say the top line: the Vertex results were 47.6% reduction in proteinuria, as published in the New England. And my recollection is the MACE data is 35.6% at the top line. Going below that is difficult because we are talking about groups of two and three patients with or without diabetes and such, and I just do not think you can make very much when you are down to two or three patients. What I will say is I am very happy about the decision we made early on to not mix a heterogeneous group, and to focus our program on those with heavy proteinuria, two APOL1 alleles, and reduced kidney function, and not study those who have a comorbid condition like diabetes. Instead, what we did is study those people in a separate trial called AMPLIFIED along with a group of patients with lower proteinuria. That trial is done enrollment; I do expect to have results in the second half of this year. Operator: The next question will come from Brian Abrahams with RBC Capital Markets. Please go ahead. Brian Abrahams: Hey, guys. Thanks so much for taking my question. With the Povi launch not too far off, what do you think you will need to convey to KOLs and community physicians to convince them of povitacicept differentiation and overcome first mover advantage by competitors? Thanks. Reshma Kewalramani: You bet, Brian. Let me ask Duncan to take that. He has been spending a lot of time with nephrologists both in academic institutions and centers of excellence, as well as in the community. Duncan? Duncan J. McKechnie: Brian, good afternoon. So, one comment before we dive into your answer. I just made the point that, obviously, this is a huge market opportunity with about 160 thousand patients in the U.S. It is five times bigger than CF, for example. And the vast majority—about 75%—of those patients are nowhere near the KDIGO guideline goal in terms of proteinuria. So the opportunity is significant. We have been engaging through market research and other mechanisms with many nephrologists, and essentially they tell us they are looking for a product that significantly impacts proteinuria—we will come back to that—is well tolerated, and is easy for patients to use. And we believe that povitacicept uniquely meets those needs. We think it has the sort of winning trifecta of incredible clinical effects—as you heard in the prepared remarks, things like the rapid, deep, and sustained reduction in proteinuria, as well as GdIgA1 and hematuria—it has a supremely favorable tolerability profile and very attractive dosing and administration. So, as you know, it is once a month, it is a small-volume dose, it is delivered by an auto-injector. So we think we have an incredible product, as we saw in the clinical data. We also know from our market research that those nephrologists that distinguish between BAFF/APRIL and APRIL alone, the vast majority of them preferred dual inhibition with BAFF and APRIL. And in our patient market research, the vast majority of patients prefer monthly dosing over weekly dosing. In fact, eight times more patients prefer monthly dosing to weekly dosing. So, in terms of the profile of the product matched against the need of the physicians and patients, we think we have a best-in-class asset on our hands. And I would also add on the commercial capability side, we know how to execute a high-science sell, we know how to secure rapid, deep, and broad reimbursement, and we know how to build patient support programs, which are incredibly important in the biologic space as we have done for the last 12–13 years or so in cystic fibrosis. So we are feeling really good about the profile of povitacicept. We are getting ready for launch, and we are going to be ready to go the day the FDA gives us regulatory approval. Operator: The next question will come from Geoffrey Meacham with Citi. Please go ahead. Geoffrey Meacham: Afternoon, guys. Thanks so much for the question. I have two quick ones. So on pain and on 993 in particular, as you guys have got commercial experience with Gernavix, are there settings where an IV modality is perhaps a better fit in the clinical practice? I imagine that is maybe the hospital setting in the acute. I wanted to get your perspective. And then on Povi, congrats on the quick filing in IgAN, but looking beyond PMN and gMG, is it worth it to do a basket study? Are there other autoimmune indications where you could have the most differentiation for Povi and then maybe have the highest probability of success? Reshma Kewalramani: Hey, Geoff. This is Reshma. On the pain portfolio and whether or not an IV medicine would be helpful: I think it would be helpful to have an IV medicine, and what we are really looking to do here—and the reason we have not only suzetragene or Gernavix, but 993 and additional Nav1.8, but, very importantly, Nav1.7—is to make sure that we have the best medicine, whether it is PO or IV, and that formulatability into IV is one of the features that we are looking at and are interested in. Switching then to Povi and where we see things go, IgAN is already done in terms of the interim analysis and filing. Membranous Phase III is already underway. Myasthenia Phase II is underway. There are some additional B cell–mediated diseases that we are thinking about, and I do think a basket study is a very efficient way of evaluating those conditions through Phase II development. I will not say much more about exactly which conditions, but suffice it to say, there are some B cell–mediated conditions where autoantibodies are important, where we think Povi would fit nicely. And I do think that going about this by way of basket studies and efficient Phase II/IIIs are the right way to go. You will be hearing us talk more about Povi, our immunology portfolio, in the coming months and in the coming times. But I like your idea. Operator: The next question will come from Cory Kasimov with Evercore ISI. Please go ahead. Cory Kasimov: Hey. Good afternoon, guys. Thanks for taking my question. I wanted to follow up on Salveen's question on enaxaplin. When you think about the pending data from AMPLIFIED looking at AMKD patients with moderate proteinuria or diabetes, what is needed in this population for a clinically meaningful benefit to justify advancement in this patient segment? Thank you. Reshma Kewalramani: I would say that, generally speaking, in renal, we have been thinking about double-digit improvements as being valuable. By that, I do not mean 10% or 11%. I would say if we can show a 30% improvement—some number between 20% and 40%, 25% and 50%—some solid double-digit improvement in proteinuria on top of standard of care, of course—so, on top of ACEs, ARBs, SGLT2s, etc.—that would be meaningful. And we will be able to see how we fare shortly. The enrollment is done. It is a 12-week study. We will be able to tell you the results in the near term. Cory Kasimov: That is very helpful. Thank you, Reshma. Reshma Kewalramani: You bet. Operator: The next question will come from Michael Yee with UBS. Please go ahead. Michael Yee: Hey. This is Mike Yee from UBS. On Povi, do you believe that on the efficacy standpoint your differentiation on eGFR will be able to come through over 9 or 12 or 24 months versus, say, Otsuka, which I think is presenting their eGFR 9-month data next month and then their 2-year data coming up? And then I just wanted to think about where you would start to see differentiation for yours and a read-through to their data that they are going to present. And then on the safety component for Povi, Reshma, can you talk a little bit about the hypogammaglobulinemia? I think there are some questions around whether 150 or 300 matters, and then noise within the assay and the timing of the measurement, and why you do not think that would be any issue here for Povi? Thanks. Reshma Kewalramani: Yes. I will start with safety on hypogammaglobulinemia, and then we will go to efficacy. On safety, the results are really terrific because Povi—and any medicine that works on APRIL or BAFF/APRIL, in essence, is modulating B cells—you do need to think about the safety profile, and in the safety profile, the domain to think about is infection. So specifically, what we focused on and what I was very pleased to see is we can get this level of efficacy on proteinuria, on hematuria, on GdIgA1, on getting down to these very low levels—less than 0.5 g/g, which is the important clinical threshold—we can get down to those levels with a very favorable safety profile. So, on infection: most of the infections are mild to moderate—think upper respiratory infection. There are no opportunistic infections, no uncommon infections. The SAEs of infection are low and balanced; it is exactly 0.5% in the placebo group and the same exact number in the Povi-treated group. So that looks really nice. With regard to the actual immunoglobulin levels—and let us focus on IgG—the IgG thresholds of less than 300 or 200; some people use 400. These thresholds are important because that is how people set up their trials, and that is how the trials may have certain actions taken. You are correct: each trial defines a different threshold; you measure it a different number of times. Some people measure it monthly like us; other people measure it quarterly. Some people require multiple measurements to call it less than that threshold; others require a simple one level. So it is not very easy at all to cross-compare. The important thing, though, Michael, is if you are asking me, “Hey, is there anything there that gives you concern?” None at all. The important thing to look at is the infections, and the infections look very balanced between these groups. On efficacy, you ask about eGFR, which is the regulatory-enabling endpoint, right? So the regulators have said proteinuria is acceptable at nine months for accelerated approval, but they are looking for two-year eGFR for full approval. Note, however, eGFR is actually not the hard endpoint in renal medicine. The hard endpoint is death, dialysis, or transplantation. That is what we are really trying to avoid. It is just that that endpoint takes a long time, and so the acceptable regulatory-enabling endpoint for full approval is eGFR. The reason I think that the proteinuria is so important is when you think about that hard endpoint of death, dialysis, and transplantation, which takes years to develop, the thing that most proximally reflects that is proteinuria. And what I would do is think about proteinuria—okay, if I got one point of proteinuria improvement more than any other medicine, two points, five points, 10 points—compound that over years, and you start to see why proteinuria is so very important. The agency has said very clearly that we are not allowed to share eGFR, but they have equally said that they need to see eGFR to provide accelerated approval. So what I would say is any medicine in IgAN that gets accelerated approval has the proteinuria that we have already shared and has an eGFR that the agency finds comforting. Michael Yee: Yep. Thank you. Operator: The next question will come from Tazeen Ahmad with Bank of America. Please go ahead. Tazeen Ahmad: Hi, good afternoon. I wanted to ask what your thoughts are on the read-through from this positive IgAN study that you provided top line for recently onto the PMN study that you are currently running for Povi? And then secondly, on the CF pipeline, I just wanted to get a sense of what data you plan on showing in the second half of the year for 828, and what would be considered good data there? Thanks. Reshma Kewalramani: Let us do IgAN first. Tazeen, I see some data from the IgAN as very important and positive for membranous because now we have studied hundreds of patients over a nine-month period, which is additive information to the Phase II results. So things like PK, PD, the reduction in proteinuria—I see all of that in terms of efficacy as important. Clearly, the autoantibody of interest is different. One is PLA2R—that is what we are looking for in membranous—versus GdIgA1. So that has to play itself out. But in terms of those other parameters, I see that as really positive. The other variable that I see as very positive is on safety. The fact that there is such a favorable safety profile, I see as a positive. Of course, the IgAN study was at 80 mg, and in the membranous study, we are studying both 80 mg and 240 mg to pick one. Last, I feel very good about the way the study is being conducted. That is to say, low discontinuations in terms of study discontinuations and treatment discontinuations. I also feel really good about the background therapy. It is very important to look at as you think about doing these studies in contemporary practice. On CF, the 828 results are a CF cohort after we have completed the healthy volunteer study, and so what you should see is data from the single dose that has gone into the patient cohort, and you should expect to see sweat chloride results and safety results as well. It is a small cohort, so you should not expect anything on ppFEV1. But the readout—the efficacy readout—that we are looking for is sweat chloride. So you should expect us to share that. Operator: The next question will come from Evan Seigerman with BMO. Please go ahead. Evan Seigerman: Hi, thank you so much for taking my question. I want to expand a little bit on the discontinuation of VX-522. Anything else you can share on the tolerability issues? And then, looking ahead, do you plan to utilize another technology to help these patients that are not currently treatable with your current portfolio? Thank you. Reshma Kewalramani: Good afternoon, Evan. On VX-522, what I can tell you is that the tolerability issue that we have been monitoring and sharing with you, now that the study is being discontinued, has to do with lung inflammation—an inflammatory response, probably in response to the LNP that is being used to deliver it. And I say that because this is not unusual in that regard. So, with regard to what are we going to do for our patients, I want to be clear about the fact that our commitment to CF is absolute and steadfast. If there is any more that we can do for our patients in the 95% group, we are going to be the ones who do it. And for our last 5,000 or so patients, we are going to work on that as well. I expect that the challenge is going to continue to be delivery. And in terms of modalities, we are going to have to go back to the drawing board on modalities. These last 5,000 are going to require some nucleic acid therapy, right? Because they simply do not make any protein. And so the big question is not necessarily what the nucleic acid therapy is—I have some big ideas, and they are, I think, obvious—but how do you deliver it without having this lung irritation? And that is what we are going to be working on. Evan Seigerman: Great. Thank you. Operator: The next question will come from David Risinger with Leerink Partners. Please go ahead. David Risinger: Thanks very much and thanks for all the updates. So my questions are on GERNAVICS. Could you maybe help reconcile the $29 million in revenue in the first quarter with the volume of either prescriptions or pills? And then, given that GERNAVICS has PBM coverage for 240 million lives now, which is over two thirds of the population, does GERNAVICS need to achieve more employer opt-ins and more Tier 2 formulary positions for the gross-to-net to normalize? Thanks so much. Reshma Kewalramani: Duncan, do you want to take that one? Duncan J. McKechnie: Sure. Good afternoon, David. So in terms of the first part of your question, I would say overall, by the way, we are extremely pleased with the progress on GERNAVICS. We are fully on track in terms of our prescription numbers and our revenue numbers. In terms of reconciling Q1 and volume, as I mentioned in the prepared remarks, we did see a small but relatively normal channel inventory destocking in Q1 between Q4 2025 and Q1 2026. It is also true that in that quarter, of course, Medicare Part D plans are resetting, which can lead to higher co-pays and more abandonment. And then also, we saw the traditional reduction in the number of elective surgeries in January, which were a little bit harder impacted this year because of the fairly strong flu season. So overall, I would say that the Q1 performance was in line with our expectations. We are absolutely on track to more than triple the number of prescriptions that we delivered in 2025. And to answer the second part of your question, we have just achieved our 240 million lives covered. As you know, we are very happy with that. And actually, in an update since we finalized the script—you know that we have been working on four Part D plans, and in the script, we communicated that we had secured coverage at one of those four plans—we have actually secured coverage at two of those four plans and are very close to securing coverage at a third of those plans. That coverage starts from between May 1 to July 1. So I do not think we need to be focused on downstream plans and employer plans. As we have said all along, as we secure the final pillars of access, the patient support program will taper down, our gross-to-net will normalize by the end of the year, and you will see revenue significantly accelerate and accelerate faster than prescription growth as we go through the balance of the year. David Risinger: Thank you. Operator: The next question will come from Terence Flynn with Morgan Stanley. Please go ahead. Terence Flynn: Great. Just two questions for me. I was just wondering if you can tell us if there is a defined percentage of FSGS patients in the AMPLITUDE Phase III trial for enaxaplin—if there is a cutoff, or if you are just pretty much all comers and that mix will be dictated by who is enrolled. And then for AlifTrack, just curious to know if you are seeing anything different in terms of patient mix this quarter versus prior quarters in terms of the three different buckets that you guys have focused on? Thank you. Reshma Kewalramani: Terence, I will take your FSGS question for Phase III enaxaplin, and I will turn it over to Duncan. I will not be able to share what the baseline characteristics look like because we have not looked at those data, and we do not know those data. But what I will tell you is that what is common in AMKD is because they tend to be heavily proteinuric—so we are talking about people who are coming in with proteinuria 0.7 g or more—they often tend to have a biopsy because a lot of proteinuria and people are trying to figure out whether there is an underlying identified cause. So it would not surprise me at all if many—maybe even the majority—of patients in the AMKD Phase III AMPLITUDE trial actually were known FSGS patients because a lot of these patients do get a biopsy. Not all of them, but it is not an uncommon act. So that would be my guess, but I do not have a formal answer for you. Fortunately, the IA enrollment is complete, the full study enrollment will complete this year, and we fully expect to have results from the IA in early 2027. So we will know the answer real soon. Duncan? AlifTrack characteristics—transition? Duncan J. McKechnie: Yep. Terence, thank you for the question. So I am assuming the three categories you are talking to are the naïve patients, the discontinued patients, and the transition patients. I would say that we see continued strong progress in all of those. Once we have both regulatory approval and reimbursement, we see the naïve patients coming on first, then we see discontinuation patients coming on, and then finally the transition patients moving on to AlifTrack, indeed exactly as we desire. So at this point, essentially, I would tell you that all new patients are going on to AlifTrack—no one is going on to TRIKAFTA—all going on to AlifTrack. We see the discontinued patients largely moving on to AlifTrack, and the vast majority, of course, of our patients now are transitions from TRIKAFTA to AlifTrack, exactly as we would expect. So the three drivers really of AlifTrack growth this year are continued uptake in the U.S., more European countries securing reimbursements, and the expanded labels—for example, the additional 800 patients that were recently included in the most recent labeling updates. So hopefully that answers your question, but we are seeing essentially similar profile to that which we saw before, and super happy that we are well over $1 billion on AlifTrack at this point. Jessica Fye: One more question, please, Chuck. Operator: The next question will come from Analyst with Barclays. Please go ahead. Analyst: Just on 828, just to follow up on the earlier question. I guess, what are you seeing as a bar for what you would want to see to bring this forward from an efficacy or safety perspective? And then, just as you think about the cystic fibrosis landscape overall, how are you thinking about the bar set by AlifTrack versus where you see room for incremental improvement? Thanks. Reshma Kewalramani: When we had TRIKAFTA and were working to see what the unmet need was, honestly, AlifTrack was a little bit easier to see. As amazing as TRIKAFTA is, we could see that a once-daily medicine would be better for patients. And we could see that getting more CFTR protein function—that is to say more sweat chloride improvement, more patients below the diagnostic threshold of 60 and the normal level of 30—would be advantageous. Now, fast forward to where we are today with AlifTrack, and, genuinely, there is very little unmet need. And so it is going to take something special for us to advance, and that is why we are looking at VX-828, VX-581, and VX-2272, because we want to really interrogate to see if there is more that we can bring to the table. And what I am really saying, if the event is unclear, is this: today, 90% of people—if you start at a young age, which AlifTrack is now approved down to 6 years old, and we are filing for 2–5 years old—90% are less than 60. Two thirds of our patients are in sweat chloride that is below normal. And this is with a once-a-day medicine. And now, when you think about it, everyone—as Duncan described—all our new patients, all our young patients, are coming onto AlifTrack. There is very little room for improvement here. So if it is possible, we are going to be the ones who do it, but it is getting really, really tough because we are already down to once a day, good-looking DDIs, excellent sweat chloride function with two thirds normal. It is tough. So if we see it, we will certainly let you know, but that is why we are being so particular in bringing these number of medicines forward to see if anything can be better than AlifTrack. Susie Lisa: This will conclude our question and answer session, as well as our conference call for today. A replay of today's event will be available shortly after the call concludes by dialing +1 (877) 344-7529 or +1 (412) 317-0088 using replay access code 10208180. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, greetings, and welcome to the Medifast, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference call, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Medifast, Inc. VP, Investor Relations, Steven Zenker. Please go ahead. Steven Zenker: Good afternoon, and welcome to Medifast, Inc.'s First Quarter 2026 Earnings Conference Call. On the call with me today are Daniel R. Chard, chairman and chief executive officer; Nicholas M. Johnson, president; and James P. Maloney, chief financial officer. By now, everyone should have access to the earnings release for the first quarter ended 03/31/2026 that went out this afternoon at approximately 4:05 PM Eastern Time. If you have not received the release, it is available on the Investor Relations portion of the Medifast, Inc. website at medifastinc.com. This call is being webcast, and a replay will also be available on the company's website. Before we begin, we would like to remind everyone that today's prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. The words believe, expect, anticipate, and other similar expressions generally identify forward-looking statements. These statements do not guarantee future performance and therefore undue reliance should not be placed on them. Actual results could differ materially from those projected in any forward-looking statements. All of the forward-looking statements contained herein speak only as of the date of this call. Medifast, Inc. assumes no obligation to update any forward-looking statements that may be made in today's release or call. Now I would like to turn the call over to Medifast, Inc. Chairman and Chief Executive Officer, Daniel R. Chard. Daniel R. Chard: Thanks, Steve, and good afternoon, everyone. We appreciate you joining us today as we share an update on the continued execution of our strategy to transition to serving the metabolic health market. When we spoke to you last quarter, we described the growing focus on metabolic health as a defining shift in our industry and the significant opportunity it presents for Medifast, Inc. We saw early signs that our strategy was beginning to translate into measurable progress and the potential to build on that as we moved into 2026. As we speak today, I am pleased to report that those early indicators have continued to strengthen. We are seeing further evidence that our business is at the beginning of a period of stabilization and that we are making meaningful progress in delivering tangible traction in the market. We will go into the numbers in more detail in a moment, but as you will have no doubt read in the release, although the number of active earning coaches continues to decline, the first quarter saw our first sequential quarterly revenue growth in three years, a second consecutive quarter of year-over-year coach productivity gains, strong coach leadership advancement, and improved performance in the percentage of coaches acquiring new clients. All of this is indicative of high field engagement and provides encouraging signs that have historically been signals of future growth. Our sector, including Medifast, Inc., has undergone a significant change due to the continuing high rate of adoption of GLP-1 medications, which has disrupted the traditional weight loss market. We have responded by fundamentally repositioning the company, not by abandoning weight loss, but by reframing it to address the metabolic health crisis that is impacting the vast majority of Americans today. That work is now largely complete, and our focus has shifted decisively from transformation to execution. Nicholas M. Johnson is going to walk you through the substance of what we are seeing across the business, the science that is driving our differentiation, the evidence from the field that our strategy is working, the tools and programs that are supporting our coach community, and the continued work we are doing to position the company for sustainable growth ahead. Over to you, Nick. Nicholas M. Johnson: Thank you, Dan, and good afternoon, everyone. As Dan mentioned, we are seeing exciting progress right now, and that is indicative of the focused work of both our coaches and our corporate team members. At the core of this work is our foundational 3.0 strategy, which represents the biggest shift in this company's approach since the introduction of OPTAVIA in 2017. We have strengthened our clinical and scientific foundation and enhanced our ability to link our underlying science to measurable health outcomes over time, and we have meaningfully realigned our cost structure to the realities of the market, which is anticipated to generate more than $30 million in future savings, helping us work towards reattaining profitability even as we tactically invest in long-term growth. We believe the market opportunity is massive. More than 90% of U.S. adults are metabolically unhealthy, or in other words, are affected by metabolic dysfunction. Our online survey conducted with KRC Research found that nearly 94% of Americans are concerned about at least one aspect of their metabolic health, 85% believe metabolic dysfunction can be reversed, and 84% view metabolic health as central to overall well-being. Yet despite that concern, 80% of Americans report limited understanding of what it truly means to be metabolically healthy. The combination of concern, belief in reversibility, and low understanding of how to achieve change represents a huge opportunity that our science-backed, coach-guided approach is designed to address. At the center of our approach is metabolic synchronization, our breakthrough science that reverses metabolic dysfunction. Our clinically proven plans create an important shift in the body's metabolism and activate strong and targeted fat burn, leading to improved body composition. Our most popular plan does this through three critical pillars: burning bad visceral fat, with a 14% reduction in visceral fat demonstrated in just 16 weeks; preserving lean mass, with 98% of lean mass retained over that same period; and protecting healthy muscle to help restore the body's natural metabolic function. These are not just weight loss outcomes. They represent body composition changes that support broader metabolic health benefits, helping differentiate us in a crowded market. Importantly, our clinical research demonstrates that these outcomes are materially enhanced by working with a coach, thanks to our highly personalized and customized approach. Clients on our most popular plan who work with a coach achieve better outcomes, including up to 10 times greater weight loss and 17 times greater fat loss than those who attempt to do it on their own. We are continuing to build on this scientific foundation and are planning to launch a new comprehensive metabolic system at our next coach convention in July, featuring products that incorporate clinically studied ingredients designed to further advance metabolic health. This represents our first effort to fully leverage our metabolic synchronization science. We have developed a proprietary ingredient technology for the new product line, which will build on the success of previous products while reinforcing our commitment to improving metabolic health. We recently initiated a pilot with a small group of clients and coaches utilizing the new product line, and I am pleased to say early feedback has been highly encouraging. As a result, we plan to roll out the new system to all our clients and coaches later in the year. Simplifying how we support clients across every phase of their metabolic health journey is an essential component of our efforts, and we will be making a number of key announcements in this space at our upcoming Coach Convention in July. Our new metabolic system is built around three phases—reset, refine, and renew—giving coaches a clear roadmap to guide clients from a targeted metabolic reset toward optimal metabolic health. Our highly personalized system gives clients the ability to jumpstart their progress with both foundational and targeted nutrition, a coach, and the introduction of new habits, which are then reinforced and mastered in subsequent phases to support long-term health span and vitality. Our program is eligible for HSA and FSA reimbursement on select insurance plans, reflects the importance of metabolic health in today's healthcare landscape, and makes our solution more accessible and affordable for a wider range of clients. For many, weight loss is the fundamental starting point for improving metabolic health, which in turn contributes to meaningful health outcomes in areas such as cardiovascular health, joint health, sleep quality, energy levels, liver health, and mental well-being. These metabolic improvements can also support better outcomes in type 2 diabetes and insulin sensitivity. Empowering our coaches to tell their own stories and those of their clients who have had success losing weight on our program is a key aspect of our value proposition. As clients experience improvements in metabolic functions, these stories become powerful proof points for our metabolic synchronization science. They give coaches a sharper, more compelling story to tell, and we are beginning to see the impact of that in the core metrics that we closely measure. Historically, coach productivity has been a leading indicator of future growth. The first quarter marked our second consecutive quarter of year-over-year coach productivity gains, with an increase of 19% year over year and up 16% on a sequential basis. This is markedly higher than last quarter's 6% gain, with coach productivity at its highest level in many years. We expect the positive trend to continue throughout the year, and a sustained positive trajectory gives us confidence in the direction of the business. Our EDGE program continues to strengthen the coach leadership foundation of our field. We are seeing consistent year-over-year improvements in the percentage of active earning coaches reaching the executive director rank, a historically significant indicator of success. This metric has recently hit levels previously linked to periods of robust growth. Retention at this level remains encouraging. Moving forward, we aim to maintain and build upon this momentum, as the duplication of this core leadership rank is the primary driver of coach business growth. Field engagement continues to build across the board, with a focused effort on establishing a repeatable cadence of coach-led product and business opportunity meetings targeting prospective clients and coaches. We have seen significant acceleration in these field meetings, with activity levels remaining well above the year-ago period. We also recently completed our coach incentive trip and Go Global event, both of which were well attended and reinforced the energy and excitement around our immediate opportunity. Coaches are leaning in right now with confidence and conviction. We are also seeing our referral engine gain strength. March closed with a record-high percentage of new clients coming from referrals, outperforming expectations. Coaches who participate in our referral program are achieving two times higher client acquisition rates compared to nonparticipating coaches, which tells us that when coaches lean into referral activity, the initiative works. Combined with improving sponsoring activity and a younger tenured coach mix, these dynamics can create a flywheel of momentum that we have seen in prior growth cycles. With that, I will turn it back to Dan. Daniel R. Chard: Thanks, Nick. It is exciting to see this energy in the field and the delivery against the progress we previously said that we expected to see in 2026. Before I hand it over to Jim, I want to reinforce a few points. We remain focused on executing against a clearly defined long-term strategic plan centered on offering our clients optimal metabolic health. That plan is backed by breakthrough science and delivered through a coach-led model that provides a genuine structural advantage in the market. We are seeing progress already, and that is ahead of a number of key market launch initiatives that we will kick off later in the year. We are encouraged by the metrics showing increased coach productivity and by the energy and enthusiasm we see from the coach base, which is showing up in the percent of coaches reaching executive director and above. We believe these are early indicators of an expected turn in the business, and we expect these and other metrics to improve as we move through the year and into next year. And we are managing this business with financial discipline. Our balance sheet remains strong, with substantial cash and investments of approximately $169 million, marginally higher than in Q4, and no debt. This positions us well as the business stabilizes and we reestablish revenue growth. We continue to review our cost base for further opportunities that do not compromise our ability to drive growth. We are reconfirming our full-year 2026 guidance today. As we communicated last quarter, we believe improvements toward reattaining profitability will begin in 2026, and we are targeting those improvements to continue into 2027 and beyond. Now I will turn it over to Jim to review the financials and our outlook. James P. Maloney: Thank you, Dan. Good afternoon, everyone. First quarter 2026 results for both revenue and EPS were within our guidance ranges, supported by a second consecutive quarter of year-over-year coach productivity growth. Revenue for the first quarter was $76 million, a decrease of 34.3% versus the year-earlier period, primarily due to a decrease in the number of active earning coaches. We ended the quarter with approximately 14,000 active earning coaches, a decrease of 44.9% from 2025. This decline was driven in part by the rapid adoption of GLP-1 medications, which continues to impact the traditional weight loss category. It is also reflective of our continued work to build a new coach leadership structure comprised of the most productive executive director organizations. This work resulted in average revenue per active earning coach for the first quarter of $5,432, a year-over-year increase of 19.2%. This growth reaffirms the green shoot we saw during Q4 2025, with coach productivity continuing to increase both year over year and sequentially. The 19% year-over-year gain is the largest increase for any quarter in five years, and the sequential quarterly increase of 16% is the highest in eight years. We continue to believe that increases in revenue per active earning coach are an early indicator for future coach growth, which we believe will in turn lead to revenue growth. As a reminder, revenue growth has historically lagged coach productivity by several quarters, and productivity gains need to continue in order for revenue growth to occur. Gross profit for Q1 2026 decreased 38.6% year over year to $51.8 million, driven by lower sales volumes. Gross profit margin for the current quarter was 68.1%, compared to 72.8% for 2025, primarily driven by the loss of leverage on fixed costs. SG&A expense was down 35.6% year over year to $55.1 million, primarily due to a $16.2 million decrease in coach compensation on lower volume, a $5.6 million decrease in company-led marketing-related expenses, a one-time $2.2 million gain on the sale of our Maryland distribution center, and a $2.0 million decrease in employee compensation resulting from the realignment of the employee base to lower revenue. SG&A as a percentage of revenue decreased 150 basis points, primarily due to approximately 470 basis points of decreased company-led marketing-related expenses and 240 basis points of one-time gain on the sale of our Maryland distribution center building and land, partially offset by 620 basis points of loss of leverage on fixed costs due to lower sales volume. Loss from operations was $3.3 million in 2026, an increase in losses of $2.0 million versus the year-earlier period as the decline in gross profit was largely offset by lower SG&A. As a percentage of revenue, loss from operations was 4.3% in the first quarter, 320 basis points below the year-earlier level. Other income decreased 24.3% year over year to $1.4 million, primarily due to unrealized gains on our investment in LifeMD common stock in the year-earlier period. As a reminder, we sold our common stock investment in LifeMD during 2025. Income tax expense for the period was $200,000, an effective rate of negative 9.3%, as compared to $1.3 million for 2025, an effective rate of 246.8%. Due to the existence of a full valuation allowance against its deferred tax assets recorded as of 12/31/2025, the company calculated income tax expense for the current period based on actual results for the quarter. As a result, the company's income tax provision for the quarter reflects discrete items, primarily state income taxes. The decrease in the effective tax rate was primarily driven by the increased loss incurred in the 03/31/2026 period and the valuation allowance on the net deferred tax assets. Net loss in 2026 was $2.1 million, or $0.19 per share, compared to a net loss of $800,000, or $0.07 per diluted share, in the year-earlier period. With respect to our balance sheet, we ended the quarter with $168.9 million in cash, cash equivalents, and investments, and no debt as of 03/31/2026. Additionally, our working capital, defined as current assets less current liabilities, was $160.4 million as of 03/31/2026. Now I will turn to guidance. We are expecting second quarter revenue to range from $60 million to $80 million and loss per share for the quarter to range from $0.50 to $1.00. We expect to see continued coach productivity growth during the quarter, up both year over year and sequentially. For the full year 2026, we expect revenue to range from $270 million to $300 million and loss per share between $1.05 and $2.75. Also included in our guidance is that we believe improvements to get back to profitability will start in Q4 2026 following the launch of our new product line, and we will be targeting improvements in earnings to continue into 2027 and beyond. Finally, we believe that our working capital will be more than $140 million at 12/31/2026. With that, let me turn the call back to the operator for questions. Operator: Thank you. We will now open the call for questions. Please press star and 1. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to lift your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of James Ronald Salera from Stephens Inc. Please go ahead. James Ronald Salera: Wanted to start off with the $30 million in cost savings. I know you have made a lot of progress over the last several years as the business has changed in both the structure of the company and some of the product lineups. Can you just give us a sense for where that is going to come from, COGS and SG&A? And then maybe a steady state—how we should think about gross margin once we start to pivot back towards earnings growth in 4Q and moving forward? Daniel R. Chard: Jim, this is Dan. I am going to have Jim answer that question. But as we move into the more technical aspect of the financial questions that come in, I just wanted to highlight that what you have heard in our prepared remarks is reflective not only of our progress in the financial cost structure, but also we are very encouraged by the trajectory of some of these key underlying metrics, and not just the metrics, but the consistency, particularly around coach productivity—second consecutive quarter—and now that is actually the seventh month where we have seen that improvement. We see that also translating into top-line improvement. This is the first time in quite some time that we have seen sequential revenue growth, and that is being driven by improved coach effectiveness in acquiring new clients. That has been one of the key challenges we have had in a GLP-1 environment. We are starting to see our coaches break through. The other thing we want everyone to understand from an investment standpoint is the transition to a model where weight management was the primary benefit to one where optimal metabolic health is the primary benefit, with weight management as a key component, is beginning to take hold. We certainly have more work to do, but our focus remains on execution, particularly around the critical initiatives in the back half of the year as we continue to move in that direction. One of them is what you are referencing, which is the changes in the cost structure to help us get back on that path to profitability. I will let Jim comment specifically on that question around the cost improvement. James P. Maloney: Thanks for the question. When you think about our prepared remarks regarding the path to profitability—and that starting in Q4—we believe we are going to start seeing improvement in the second half of the year, but more towards the last quarter, in gross margin, and then you will start seeing the same thing within SG&A. We took action last year in December, so it is starting to come through in certain budget line items as we look at our full P&L to make certain that we can get back to profitability starting in Q4 2026 and then go into 2027. That is what we are focusing on. When you think of our margins—you mentioned gross margin or the breakout of it—I cannot really give you specific guidance on that, but I would say that we are expecting in the back half of this year for our gross margin to get better, and within the SG&A line items, we are expecting to start overcoming some of the loss of leverage as we go into Q4. James Ronald Salera: That is great. Maybe shifting more to Dan's point on the coach productivity improvement, are you able to share any details with some of the new or newest members that have come into the program given this greater focus on metabolic health? Do you see their tenure with the program being more consistent or longer while they are on the program relative to people in the past who may have been on and off? Any early results that you could share on that? Daniel R. Chard: Nick is here, and he has the closest connection with coaches, and I think he will be able to give you the answer you need. Go ahead, Nick. Nicholas M. Johnson: Thanks, Jim, for the question. The good thing about the new coach draft classes is that there is no pre–GLP-1 world for them. They are very steeped in what is going on in the marketplace, so they only know this GLP-1 world that we live in. The reason why that tenure mix is important is because newer coaches tend to drive a lot of productivity. With respect to the client metrics, we did mention this in the prepared remarks—a note around the referral program—and we do see a lot of encouraging activity coming out of that program. Coaches who are engaged in that program are experiencing higher acquisition rates, and I can say that the other metrics that support a client's journey are seeing improvement. We are encouraged by what we are seeing so far in the client referral program. James Ronald Salera: Historically, you have talked about that coach productivity improvement as being the first step to indicate a new growth cycle, and then subsequent to that, you will start to see the actual number of coaches return to growth. As we size up the back half of the year, do you have any sense for if it is possible that maybe in conjunction with some of the improving profitability in 4Q, we would see the absolute number of coaches start to improve? Nicholas M. Johnson: I will start off with that one, Jim, and then I will pass it over to Jim to talk about the back half of the year. Productivity tends to be that leading indicator in our business. The growth of the business comes predominantly through two metrics: one is growing productivity or volume per coach, and then expanding the channel—number of coaches who are active and participating in the business. We do tend to see that sequence of events: coach productivity first, leading to the expansion of the channel. While we said in the prepared remarks that the continuation of growing coach productivity is essential for revenue growth, it is because we tend to create those future draft classes of higher-producing coaches coming from those client draft classes. We are anticipating good things coming from the productivity numbers. It tends to be a leading indicator, and then we can expect the channel to extend—at least that is what historically has happened. Jim, if you want to make any comments on the back half. James P. Maloney: We are not going to give exact guidance on when we anticipate coach growth to come back. What we can tell you, Jim, is when you think about our financials, Q4 2025 we were basically at $75 million of revenue. Q1 2026 we were at $76 million in revenue—so sequential growth, even though small. We have not seen that in three years. Any sequential growth—and if you look at our guidance, the midpoint is at $70 million of revenue—means three quarters of relative flatness, so stabilization. With the coach productivity increase of 19% and sequentially growing at 16% for the quarter, that gives us comfort that coach growth will be coming. We are not going to predict exactly which quarter, but based on history, we believe that is going to happen in a short period of time. James Ronald Salera: I appreciate the thoughts. I will hop back in the queue. Operator: Thank you. We will take the next question from the line of Doug Lane from Water Tower Research. Please go ahead. Doug Lane: Hi. Good afternoon, everybody, and thanks for taking the questions. The 19% growth in coach productivity is impressive, and I just wanted to drill down on what is really driving that. Are there coaches selling more products per customer, or do they have more customers per coach? What is really driving the increase in productivity of that magnitude? Nicholas M. Johnson: Great question. To answer specifically, it is not being driven by spikes in average order sizes. We are seeing average order sizes remain more or less consistent with historical averages. Coach productivity then comes down to an increasing number of clients per coach. That is driving that productivity—and also their length of stay. Doug Lane: That is an important inflection point. Hopefully, if that momentum keeps building, that is what you are looking for to drive the return to coach growth, and then, of course, the timing of that is unpredictable, which I guess is what your message has been on this call. One thing I wanted to ask you about on this transition to metabolic health is messaging. Weight loss is easy—the scale goes down, the clothes fit better. How do you message metabolic health in a GLP-1 environment? Nicholas M. Johnson: I think it is critical that we call out that distinction because, to your point, generic weight loss is pretty much commoditized at this point with GLP-1s, and even before that. It is the quality of the weight that is being lost that is a differentiation for our offer. Our value proposition is that we are not focused just on the number on the scale. There are many other numbers and indicators that are important. When we talk about the science of metabolic synchronization, we specifically address the quality of the weight loss that one is experiencing: a 14% reduction in bad visceral fat in 16 weeks—that is bad fat in the wrong places. We are being specific about the type of weight that we are losing—we want to lose the bad fat in the wrong places. We also want to preserve lean mass—98% preservation of lean mass in 16 weeks is critical in protecting lean muscle. We believe that the focus on metabolic health and the focus on the quality of the weight being lost will be a defining point in the future because, to your point, losing weight is easy. Once you get specific in terms of the quality of the weight that you are losing, you really want to focus on that, because if you are losing too much lean muscle in particular, you would say that the quality of that weight loss was not there, and it leads to other problems down the road metabolically. Doug Lane: We have read a lot about GLP-1 weight loss being unhealthy. It is such a new phenomenon, and it is so widespread. Has there been any additional science towards that end? I just wondered if that science is still evolving on the unhealthiness of the rapid weight loss with the antagonists. Nicholas M. Johnson: I think that the GLP-1-only solution—a pharmacological approach that suppresses appetite—is one-dimensional in terms of a problem that is very complex to resolve. We believe that what we see going forward is a need for a comprehensive solution to installing a healthy lifestyle. That comprehensive approach is what we are talking about with the evolution of our program. We view our program as a comprehensive metabolic health system that is comprised of three distinct phases: reset, refine, and renew. The goal of the reset phase, which we are going to be talking more about at our convention in October, comes down to resetting one's metabolic set point, reduction of bad visceral fat, improving body composition, focusing on lean mass preservation, and protecting healthy muscle. That sets someone up for the refine stage, which is all about improving your body composition. There is a lot of room, and it is a big, big market. Doug Lane: Thanks, Nick. That is very helpful. Thank you. Operator: Ladies and gentlemen, as there are no further questions from the participants, I would now hand the conference over to Daniel R. Chard for any closing comments. Daniel R. Chard: Thanks. Before we close, I want to take a few minutes to share a few final thoughts. As I mentioned on last quarter's call, I informed the board earlier this year that I plan to step down as chief executive officer effective June 1. I have led this company now for close to ten years, and it has been one of the great privileges of my career. This is not the end of my relationship with Medifast, Inc. I am engaged as CEO through May and will continue to serve as chairman of the board following the transition. I am looking forward to continuing to help this great company as we drive this exciting new path forward in metabolic health. I want to extend my thanks and my best wishes to all of the Medifast, Inc. team, but especially to Nicholas M. Johnson. Nick has been instrumental in shaping and executing the strategy that we talked about today, and I have every confidence in his ability to lead this company into the next chapter. All of the team at Medifast, Inc., past, present, and at all levels, have been incredible to work with over the years. I am grateful for their partnership and expertise. Finally, thank you to everyone on this call for your time today and for your interest in Medifast, Inc. during my tenure here. This is a company that is building something meaningful, and I am excited to see that continue over the months and the years to come. Thanks, and have a good evening. Operator: Thank you. Ladies and gentlemen, the conference of Medifast, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the OSI Systems, Inc. Third Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the conference over to Alan Edrick, Chief Financial Officer. You may begin. Thank you. Alan Edrick: Good afternoon, and thank you for joining us. I am Alan Edrick, Executive Vice President and CFO of OSI Systems, Inc. And I am here today with Ajay Mehra, OSI Systems, Inc.'s President and CEO. Welcome to the OSI Systems, Inc. fiscal 2026 Third Quarter Conference Call. We are pleased that you can join us as we review our financial and operational results. Before we discuss these results, I would like to remind everyone that today's discussion will include forward-looking statements and the company wishes to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to such forward-looking statements. All forward-looking statements made in this call are based on currently available information, and the company undertakes no obligation to update any forward-looking statement based upon subsequent events, new information, or otherwise. We will also reference both GAAP and non-GAAP financial measures. Applicable reconciliations are available in today's earnings release. We delivered solid third quarter financial results, setting fiscal Q3 records across multiple metrics, despite facing the most challenging year-over-year comparison of fiscal 2026, primarily driven by our Mexico contracts. The company's revenues reached a fiscal Q3 record of $453 million, and non-GAAP earnings per diluted share set a fiscal Q3 record of $2.60. Importantly, excluding revenues generated by the large security contracts in both periods, Security revenues grew 25% year over year. Our Optoelectronics and Manufacturing division also performed well, posting 10% growth and a Q3 record for that division. Bookings were strong, with a 1.3 book-to-bill ratio driven by both Security and Opto, resulting in a record backlog, highlighted by the previously announced Homeland Defense award, about which Ajay will provide more information shortly. On the cash side, we generated $14 million in fiscal Q3 operating cash flow despite limited collections in the quarter on the receivables in Mexico. Shortly after quarter end, we collected approximately $74 million of the largest Mexico receivable, a strong start to Q4 cash flow. Before diving more deeply into our financial results and discussing our outlook for fiscal 2026, I will now turn the call over to Ajay for our business and operational discussion. Ajay Mehra: Thanks, Alan, and thank you everyone for joining us today. I am pleased to be here to discuss our third quarter results for fiscal 2026. We delivered another quarter of solid execution and ended the quarter with a backlog of approximately $1.9 billion, the highest in the company's history. We remain focused on execution, leveraging our strengths in key markets and utilizing our global operating model as we finish Q4 and head into fiscal 2027. Let us turn to our businesses to discuss Q3 performance in more detail, starting with Security. As expected, Q3 performance was up against difficult year-over-year comparisons, primarily due to our Mexico programs transitioning from significant product sales to long-term related service and support revenues. Despite that, Security performed well with solid bookings, top-line growth, and operating margin expansion. Furthermore, we continue to be very active with customers across aviation, ports and borders, and defense-related applications. Bookings were highlighted by a sizable award from Homeland Defense of an undefinitized contract action, or UCA, with a not-to-exceed value of approximately $235 million for the production and integration of Homeland Defense over-the-horizon radar transmit subsystems. We continue to build strong traction with our RF engineered solutions, and are hopeful that there may be additional opportunities in this area of future business. In addition, these capabilities position us well to further support Golden Dome, the U.S. initiative to create an integrated missile defense system. As you know, we are a participant in the $151 billion Shield IDIQ, which we announced last quarter, and we look forward to the opportunities that may arise from this initiative. During Q3, we also received several international awards for cargo and vehicle inspection systems and airport screening solutions. In addition, we were an integral part of the security at the Milan Winter Olympic Games, providing our products to screen participants, officials, fans, as well as their baggage and cargo. Towards the latter half of Q3, we began to see initial impacts from conflict in the Middle East. Certain programs and activities have been delayed by factors such as logistics constraints, travel restrictions, and heightened security protocols. Certain customers in the region are facing pressure from disruptions tied to the conflict. If the situation persists, we could see further impact on the timing of order intake and project completion timelines. That said, once the region stabilizes, we could potentially see even stronger demand for our security solutions. In the U.S., the order activity for security products was impacted during the quarter by the shutdown at DHS, which delayed the procurement of our products and services to support U.S. border initiatives. Now that the shutdown has ended, we are hopeful for order patterns to normalize over the coming weeks and months, and I want to emphasize here that these are timing-related dynamics rather than changes in the underlying demand. In the U.S., we are also excited about the potential of our security solutions for high-profile upcoming events, such as the FIFA World Cup 2026 soccer tournament and the 2028 Olympics. Furthermore, in the U.S., the roughly $1 billion outlined in the One Big Beautiful Bill for NII equipment remains a significant growth opportunity, and of course, during the shutdown, the spending resulting from this bill was delayed in Q3. Turning to Opto—our Optoelectronics and Manufacturing division—Q3 performance was again strong as revenues increased 10% year over year, with the book-to-bill ratio well exceeding one. In March, Opto received a $40 million award for electronic subassemblies from a medical OEM, a significant award in a division where most orders are under $5 million. Customers continue to value our vertically integrated model and global manufacturing footprint as they diversify supply chains and launch new products. Our global manufacturing footprint across Malaysia, Indonesia, India, Canada, Mexico, the UK, and the U.S. allows us to offer customers attractive combinations of value and scalability. Opto's backlog remains at record levels, providing great long-term visibility across aerospace, defense, medical, industrial, and other end markets. And finally, our Healthcare division continues its path of improving operations and focusing on new product development. In Q3, Healthcare was adversely impacted by order timing, most notably in the U.S., resulting in lower sales and profitability. On the flip side, we did see growth in the EMEA region during the quarter. As you may know, Healthcare's products generally carry the highest contribution margins at OSI Systems, Inc., so even modest revenue growth has an outsized impact on profitability. Looking at OSI Systems, Inc. overall, our financial position remains strong. The robust and growing backlog, year-to-date cash flow generation, and a healthy balance sheet give us continued confidence in the company's prospects. In addition to large program opportunities highlighted earlier, we remain focused on increasing our mix of recurring revenues through expanded service and support agreements. As always, I would like to thank our employees, customers, and stockholders for their continued support and dedication. With that, I will turn the call over to Alan to discuss our financial results in more detail before we open the call for questions. Alan Edrick: Thank you, Ajay. Now let us review in greater detail the financial results for Q3. Let us begin with a look into our revenues by division. Security division revenues in Q3 came in at $319 million, driven by higher service revenues and increased contribution from the RF business, which has been effectively integrated into our overall operations, and increased aviation product revenues. As expected, revenues from our large Mexico Security contracts decreased to $11 million in Q3 fiscal 2026 from $69 million in Q3 of the prior year. Excluding the Mexico contracts, Security revenues surged 25% year over year, reflecting healthy growth across the broader Security portfolio. Fiscal Q4 is expected to experience a reduced revenue impact from Mexico in comparison to Q3, with the magnitude of this headwind expected to largely roll off as the company enters fiscal 2027. Our Optoelectronics and Manufacturing division had another excellent quarter. Opto sales, including intercompany, increased 10% year over year to $111 million, a new Q3 record for this division. This was driven by sales growth across our diversified product and customer portfolios. And as described earlier, Healthcare division sales were soft. Our Q3 fiscal 2026 gross margin was 33%, slightly down from the same quarter in the prior year, as a less favorable revenue mix on product sales outweighed an increase in gross margin from higher service revenues. Our margins can fluctuate based on product and service mix and volume, supply chain cost, FX, tariffs, among other factors. Moving on to operating expenses, SG&A expenses in the 2026 third fiscal quarter were $71.5 million, down 2% from the prior year fiscal Q3 and representing 15.8% of sales compared to 16.5% of sales in Q3 last fiscal year. We continue to work diligently across all divisions to manage our SG&A cost structure efficiently. R&D expenses in Q3 were $19.5 million, or 4.3% of revenues, up from $18.6 million, or 4.2% of revenues, in the same quarter last year. This increase stems from our commitment to investing in innovation, resulting in market-leading offerings in Security and positioning OSI Systems, Inc. well for the future. We expect to continue our heightened R&D efforts to advance key initiatives. Even with these R&D investments, our combined SG&A and R&D expenses as a percentage of sales have decreased annually for each of the past eight years, underscoring our ability to drive operating efficiencies while still funding growth initiatives. Now moving below the operating line, interest and other expenses, net, in fiscal Q3 was $4 million, down from $8.2 million in the same quarter in the prior year, primarily due to reduced borrowing costs. Our effective tax rate under GAAP was 18.3% in this Q3 versus 14.3% in Q3 last year. Excluding discrete tax items, our normalized effective tax rate, which is the rate used in calculating non-GAAP EPS, was 23.6% in Q3 this year compared to 23.7% in the same prior-year quarter. On a non-GAAP basis, our Q3 2026 adjusted operating margin of 14% was comparable on a sequential basis from Q2 and slightly below the prior-year third fiscal quarter. The Security division's adjusted operating margin expanded from 18.1% in Q3 last year to 18.3% in 2026, driven by growth in higher-margin Security service revenues combined with reduced operating expenses. This, though, was offset by the other two divisions. The Opto adjusted operating margin decreased to 13.5% in Q3 this fiscal year from 14% in last year's fiscal Q3 on a less favorable mix of revenues. The adjusted operating margin of our Healthcare division was negligible due to the sales level. As Ajay mentioned, we expect margin recovery as Healthcare performance improves. Moving to cash flow and the balance sheet, we generated $14 million in Q3 operating cash flow despite limited collections in the quarter on our largest receivable in Mexico. However, as mentioned earlier, not long after quarter end, we received a payment of approximately $74 million from our largest Mexico customer, providing a strong start to our Q4 cash flow. Operating cash flow for the first nine months of fiscal 2026 was just shy of the amount for all of fiscal 2025. DSO increased 7% from fiscal Q2. Current expectations are that DSO will decrease by fiscal year end. We expect substantial cash inflows in Q4 and into fiscal 2027 as we continue to collect on the Mexico receivables, which should lead to sizable operating cash flow and strong free cash flow conversion. CapEx in Q3 was $8 million, while depreciation and amortization expense was $9.5 million. Our balance sheet remains solid. We ended the quarter with $345 million in cash. Our net leverage at the end of Q3 fiscal 2026 was approximately 2.2, as calculated under our credit agreement. Now turning to our guidance, we are maintaining our fiscal 2026 guidance for revenues and non-GAAP earnings per share. The recent shutdown of the Department of Homeland Security and the conflicts in the Middle East have impacted short-term bookings and could impact near-term Q4 revenues, but looking out further, resolution of each of these matters—one of which has just been done—could potentially represent future opportunities for the company. We note that our fiscal 2026 non-GAAP diluted EPS guidance excludes any impact of potential impairment, restructuring and other costs, amortization of acquired intangible assets and their associated tax effects, and discrete tax and other non-recurring items. We currently believe this guidance reflects reasonable estimates. The actual impact on the company's financial results of timing changes on the expected conversion of backlog to revenues, new bookings, timing of cash collections, tariffs, the recent DHS shutdown, the conflicts in the Middle East, and supply chain disruptions, among other factors, is difficult to predict and could vary significantly from the anticipated impact currently reflected in our guidance. Actual revenues and non-GAAP EPS per diluted share could also vary from the guidance indicated above due to other risks and uncertainties discussed in our SEC filings. In summary, we delivered a record fiscal Q3 driven by our two largest divisions, a record backlog providing multi-period visibility, and we also made a meaningful cash collection in the beginning of Q4 that further enhances our balance sheet. We remain committed to operational excellence as we grow our businesses and deliver innovative products and solutions to our customers. We aim to invest in key strategic areas with the goal of driving long-term value for our shareholders. Once again, we thank the entire global OSI team for their dedication to supporting our customers and partners. Their efforts are what make our results possible. We will now open the call for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press star then the number one on your telephone keypad. And if you would like to withdraw your question, press star one again. Your first question comes from the line of Larry Solow with CJS Securities. Your line is open. Lawrence Scott Solow: Good afternoon. I guess first question, we know Mexico is going to be pretty slow, so the 25% growth you have seen outside Mexico—where is that coming from, and just on the product mix? Is most of that still ports and borders, vehicle inspection, or where? I am just trying to figure out if you could parse out, give us a little color on the origin of the growth. Alan Edrick: Larry, this is Alan. Good question. We are seeing growth in a bunch of different areas. First off, geographically, we are seeing most of the growth internationally. As we look forward, with the ending of the DHS shutdown, we foresee the U.S. picking up steam significantly as we enter fiscal 2027. But to date, most of the growth has been driven internationally. And we are seeing it across a wide variety of our areas. We are seeing our service revenues increase nicely. We are seeing our aviation revenues increase nicely. We are seeing our RF revenues increase nicely. And that is predominantly what has driven most of the growth that we are seeing outside of Mexico, as you mentioned. Lawrence Scott Solow: And the RF contract that you got, the Golden Dome contract that you announced—you announced it in April—but was it actually obtained before the end of the quarter? Because that sounds like that order is clearly in the backlog and the book-to-bill for the quarter, correct? Ajay Mehra: Yes. It came in at March. Lawrence Scott Solow: Got it. And I guess you were just delayed because of the government shutdown, or any reason why that release was not put out? Ajay Mehra: Larry, it just takes a little bit of time to go through the various sequences in order to get a press release out and get the appropriate approvals to do so. Lawrence Scott Solow: And just on the government shutdown or delays and whatnot, it sounds like it certainly has impacted your bookings a little bit to date, maybe a little bit more Q4. Has it impacted revenue at all to date? It sounds like maybe no, but there is potential in Q4. Is that what I hear? Ajay Mehra: What I pointed out earlier was yes, it has impacted some bookings, but really it is a timing issue. We think that those bookings—and, like I said, the $1 billion big, beautiful bill—is still sitting there. In Q4, we are hoping things start loosening up over the next few weeks to a few months, and it may have a slight impact, but we will wait and see. Operator: Your next question comes from the line of Christopher Glynn with Oppenheimer. Your line is open. Christopher Glynn: Hey, thanks. Good afternoon. Just wanted to ask about the services revenue. I know it was not going to be totally linear, but it was above 5% growth after having been consistently strong double digits. My understanding, following significant sustained backlog growth for a few years, was that this would probably be a double-digit grower compounding pretty consistently. Is that still an appropriate view, or should we view it as maybe stepping down to a single-digit profile for services going forward? Alan Edrick: Good question. What we saw throughout calendar 2025 for four straight quarters was very strong double-digit growth in service revenues as our installed base increased significantly. In this particular quarter, we had mid-single-digit growth in our service revenue coming off of a more difficult comp, and it also has to do with some of the timing of installations that were done in prior quarters versus this quarter. As we look forward, we continue to expect to see very strong service revenues. There will be certain periods where we will see good double-digit growth; there will be other periods where it is single digit. But overall, we expect to see nice growth in service revenues, which is nice because it inherently carries a higher margin associated with it. Christopher Glynn: Okay. So, Alan, it sounds like you expect, generally over the next year or two, to be outgrowing equipment. Is that right? Alan Edrick: It can be; it all depends. It will vary with the mix and with the strong product revenues we are expected to have as well. Christopher Glynn: On Security margins, you have effectively run down the Mexico revenues you described as very efficient production runs. Should Security be on a pretty consistent margin expansion trajectory from here? Alan Edrick: Our goal in Security is always to couple top-line growth with operating margin expansion, and that is what we look to do over the long term. There will be certain quarters or periods where, based upon the mix of the revenues—particularly the mix of the product revenues—it may not necessarily lead to that end result. But over a longer-term basis, that is absolutely the goal and the intent of the company. Operator: Your next question comes from the line of Josh Nichols with B. Riley. Your line is open. Michael Joshua Nichols: Thanks for taking my question. Great to see the record backlog and book-to-bill yet again. Despite the DHS shutdown, now that that is back open again, are there any specific mechanisms by which the CBP procurement resumes post-shutdown, or do you expect there would be a relatively quick uptick in order activity between now and your fiscal year end in June? Ajay Mehra: I think it is going to be relatively quick—over the next few weeks, maybe some months. But there is really no restriction that we can see that they cannot resume. It is just people coming back in; it takes some time to get everybody working and concentrating on letting out orders instead of where the funding is going to come from. We feel good about it. Over the next few weeks, time will tell, but we are very encouraged that the shutdown is over. Michael Joshua Nichols: I just wanted to touch on two things for my last two-part question. One, this $235 million Homeland Defense contract—I think that is much larger than anyone was anticipating. You touched on Shield. Do you see any other large opportunities within that piece of potential business that you think the company is in a good position to secure? And lastly, Alan, on the $74 million Mexico accounts receivable that you got—how would you characterize the related AR levels today? Ajay Mehra: I will take the first part. We are very happy and proud of this contract we got. It demonstrates our technical expertise. Some of the products we have were well considered by the government and other customers. There are opportunities out there. I am not going to try to quantify them. It is a very new market; we are all looking at it. But by the size of the order and what the future holds, we will wait and see over the next few quarters. It is a great start, and we feel very good about it. Alan Edrick: And on the Mexico receivable, with the recent receipt of the $74 million, it certainly reduces the Mexico receivable balance. That being said, there are ample opportunities for significant cash flow as we collect on this receivable over the coming months and quarters. We would expect the free cash flow conversion to be quite outstanding over the foreseeable future. Michael Joshua Nichols: Appreciate the detail. Thanks, guys. Operator: Your next question comes from the line of Citi. Analyst: Hi. This is Bradley Eister for John. Thanks for taking my question. I just want to take a step back and look bigger picture on the opportunities we are seeing, particularly around airport security demand. I appreciate that you touched upon the potential supply chain challenges given the dynamic macro environment. But in that same school of thought, with reduction of flight capacity to various degrees and concerns over jet fuel cost and availability, I know it is still early days, but have you seen any impact to the demand for these services, or any timing impacts creeping up from this? Ajay Mehra: It is a great question. Overall, after a conflict ends—unfortunately, being in the security business—things tend to pick up. There are some temporary disruptions in the Middle East because of aviation, yes. But we have to look at it from an overall standpoint. As and when this gets put behind us, we think we will see—not just in aviation, but overall—an uptick potential in our business. Analyst: Got it. Appreciate the color. I just want to touch upon the opportunities on Golden Dome and Shield that you are pursuing, more medium to longer term. How would you measure out the competitive landscape here for the RF protection side specifically? Any update you can provide on traction or customer interest would be helpful. Ajay Mehra: We have been talking about it for several quarters. This initial contract has been very good for us. We announced smaller contracts last quarter. We think there is a lot of momentum going forward. There is a limited amount we can talk about because of the type of contracts these are, but we think the future looks good. The timing—we will just have to wait and see. Operator: Your next question comes from the line of Seth Seifman with JPMorgan. Your line is open. Analyst: Hi. Good afternoon. This is Rocco on for Seth. Should we think about the Homeland award and possible similar awards in the future as supporting the longer-term growth in the Opto segment? Should we be thinking about the top-line growth in 2027, following the low double-digit pace this year? Could it be one of the faster growers next year? Ajay Mehra: First of all, this is in the Security segment—the Golden Dome—that is where it falls. On the Opto side, we think that yes, there is room for potential growth as we go forward. There is definitely a movement away from China, and with our capabilities all over the world—not just in Asia, but in Europe and the U.S.—from a manufacturing basis, we provide a lot of flexibility to our customers. We feel good as we move forward. There are always a little bit of ups and downs, but overall, I think Opto is in a good position. Seth Seifman: Great. Thank you. Operator: Once again, everyone, if you would like to ask a question, press star one. Your next question comes from the line of Jeff Martin with ROTH Capital. Your line is open. Jeffrey Michael Martin: Thanks. Good afternoon, Ajay and Alan. Wanted to dive into the RF business a bit more. Are you able to give us the revenue number from that business for the quarter? And then I believe you were ramping up additional production facilities there. Curious where you are today in production capacity relative to the Homeland Defense contract? Ajay Mehra: I will not go through the actual numbers, but we started ramping up the production capabilities and moved into new facilities over the last several months—we made that decision a while ago—and frankly, it looks like a very good decision. We have ramped up that capacity. We keep on ramping it up. We are in a new facility, and we feel good about what we can do and offer the government in terms of being able to turn around product a lot faster than we were able to maybe a year or two ago. Alan Edrick: We were pleased with the revenues in the RF business. I believe it was a new record for us. We did about $38 million in the quarter. So the run rate of that business has significantly increased since the time of acquisition, about eighteen months or so ago. We are very pleased with the trajectory. Jeffrey Michael Martin: That is helpful. Thank you. I know you are not in a position to give any guidance beyond this year, but just curious, qualitatively, how you are thinking about growth and your growth prospects in fiscal 2027 and 2028. Alan Edrick: Good question, and you are right—we will be giving our guidance for fiscal 2027 on our next call in August. That being said, we are optimistic for growth as we move into our new fiscal year just two months from now. We are excited to close out Q4 and fiscal 2026. With the strong backlog and robust opportunity pipeline that we have out there, fiscal 2027 could be a very, very exciting year for us. Jeffrey Michael Martin: Last one for me: you have been a very value-oriented buyer on the M&A front. A lot of those have produced very good returns—the RF business is case in point. Are you seeing other opportunities out there that are similarly interesting? And are there areas from either a market expansion standpoint or a technology expansion standpoint that you are looking at that could move the needle the next couple of years? Ajay Mehra: We are always looking at opportunities. As Alan has pointed out before, we have a lot of dry powder available to us. From a technology standpoint, we want to make sure that one plus one is greater than two—maybe more. There are opportunities, but I do not want to get into specifics. We are always actively looking, but we are not going to do anything unless we feel it really makes a difference from a strategic as well as from a business perspective as we move forward. Jeffrey Michael Martin: Thank you. Operator: There are no further questions at this time. That concludes the Q&A session. Ajay Mehra: Once again, thank you all for attending our conference call. We look forward to speaking with you during our next earnings call following the completion of our fiscal year. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Thank you for standing by. Welcome to Matson, Inc.’s First Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode with a question-and-answer session to follow. To ask a question during this session, you will need to press 1 1 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press 1 1 again. As a reminder, today’s program is being recorded. I would now like to introduce your host for today’s program, Justin Schoenberg, Director of Investor Relations and Corporate Development. Please go ahead, sir. Justin Schoenberg: Thank you. Joining me on the call today are Matthew J. Cox, Chairman and Chief Executive Officer, and Joel M. Wine, Executive Vice President and Chief Financial Officer. Slides from this presentation are available for download at matson.com under the Investors tab. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements within the meaning of the federal securities laws regarding expectations, predictions, projections, or future events. We believe that our expectations and assumptions are reasonable. We caution you to consider the risk factors that could cause actual results to differ materially from those in the forward-looking statements in the press release, presentation slides, and this conference call. These risk factors are described in our press release and presentation and are more fully detailed under the caption “Risk Factors” on pages 12 to 23 of Form 10-Ks filed on 02/27/2026, and in our subsequent filings with the SEC. Please also note that the date of this conference call is 05/04/2026, and any forward-looking statements that we make today are based on assumptions as of this date. We undertake no obligation to update these forward-looking statements. I will now turn the call over to Matthew J. Cox. Matthew J. Cox: Thanks, Justin, and thanks to those on the call. Starting on slide three, in the first quarter 2026, Ocean Transportation operating income exceeded our expectations primarily due to higher freight demand post-Lunar New Year in our China service. In our domestic trade lanes, we saw lower year-over-year volume in Hawaii and Alaska. In Logistics, operating income was lower year over year primarily due to a lower contribution from supply chain management. To date, the Iran conflict has not impacted our operating performance or service levels; however, it has impacted fuel prices in all our markets. While we have effective mechanisms to recover the cost of fuel by the end of the year, for the second quarter, we expect a negative impact from the lag in the recovery of fuel costs. I will go into more detail later in the presentation on the effects of fuel prices and our recovery mechanisms. Lastly, we are raising our full-year outlook for consolidated operating income and now expect to modestly exceed the level achieved in 2025. The primary driver behind raising outlook for consolidated operating income is the strengthening of freight demand in our China service post-Lunar New Year that we expect now to continue through peak season. Joel will go into more detail on the outlook later in the presentation. I will now go through the first quarter performance in our trade lanes, SSAT, and Logistics, so please turn to the next slide. In our Hawaii service, container volume for the first quarter decreased 5.6% year over year primarily due to lower general demand and the drydocking of a competitor’s vessel in the year-ago period. For the full year 2026, we expect volume to be comparable to the level achieved in 2025 reflecting similar economic conditions in Hawaii and stable market share. Please turn to slide five. According to UHERO’s February economic report, Hawaii’s economy is expected to experience modest growth supported by construction activity, while tourism remains soft and inflationary pressures persist. Construction continues to be a bright spot for the labor market with a high level of public and private building activity, including the rebuilding of Maui. Regarding tourism, the outlook for international visitors remains weak, offsetting modest growth in domestic tourist arrivals. Lastly, inflation remains elevated and may continue to weigh on discretionary spending and overall demand. Moving on to our China service on slide six. Matson, Inc.’s volume in the first quarter 2026 was 9.5% lower year over year primarily due to lower general demand. As we noted on the fourth quarter earnings call, we expected volume in the first quarter to be lower than the prior year as we return to a more traditional Lunar New Year freight cycle. Please turn to slide seven for additional commentary on current business trends. In the first quarter, we did not see a traditional bump in demand prior to Lunar New Year. Post-holiday, the freight demand exceeded our expectation and was driven by higher demand across several of our key market segments such as e-commerce, e-goods, and garments. We saw continued air-to-ocean freight conversions, and further growth and penetration into Southeast Asia ports. E-commerce from South China continues to be a solid recurring contributor to volume demand. E-goods volume picked up post-holiday due to strong demand for data center servers and racks and has continued into the second quarter. With respect to air-to-ocean freight conversions, we have benefited from elevated freight costs and reduced air cargo capacity in select markets. In the first quarter 2026, we saw strong volume from our feeder network in North and South Vietnam and Thailand. Our Thailand feeder service, commenced operations in late December 2025, has received positive feedback and has exceeded our expectations to date on volume. Overall, the uptick in freight demand we saw post-Lunar New Year has continued to build in the second quarter as demand strengthens and volumes return to a more traditional seasonal pattern. With increasing demand, we remain focused on maximizing the yield on every sailing out of Shanghai and our freight rates remain at healthy levels. As a result, we expect second quarter 2026 container volume to be higher compared to the prior-year period, which included a market decline in transpacific demand due to the tariffs imposed in April 2025. As a reminder, our container volume declined 30% last April before recovering in May and June. Encouragingly, conditions are more stable today. For the full year 2026, we expect container volume to be moderately higher than the level achieved in 2025 as we expect the demand strength in the second quarter to continue through peak season. Please turn to the next slide. In our Guam service, Matson, Inc.’s container volume in the first quarter 2026 was flat year over year. In the near term, we expect Guam’s economy to remain stable. As such, for the full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to the next slide. In our Alaska service, Matson, Inc.’s container volume in the first quarter 2026 decreased 2% year over year. The decrease was primarily due to lower general demand partially offset by an additional northbound sailing and an additional AAX sailing compared to the year-ago period. In the near term, we expect continued economic growth in Alaska, supported by a low unemployment rate, job growth, and continued oil and gas exploration and production activity. As such, for full year 2026, we expect container volume to be comparable to the level achieved last year. Please turn to slide 10. In the first quarter, our SSAT terminal joint venture contributed $5 million, representing a year-over-year decrease of $1.6 million. The decrease was primarily due to lower lift volume. For the full year 2026, we expect the contribution from SSAT to be lower than the $32.5 million achieved in full year 2025. Turning now to Logistics on slide 11. Operating income in the first quarter came in at $6.8 million, or $1.7 million lower than the result in the year-ago period. The decrease was primarily due to lower contribution from supply chain management. For full year 2026, we expect operating income to approach the level achieved in full year 2025. Please turn to the next slide. Before I turn the call over to Joel for a review of our financial performance, I would like to share a few thoughts on the recent volatility in fuel attributed to the Iran conflict. We expect fuel price volatility to impact our near-term earnings due to a timing lag between when we incur fuel costs and when we can fully recover these costs through our fuel surcharge. These mechanisms are very effective at recovering the cost of fuel over time. Historically, in our maritime business, we have been successful in recouping the cost of fuel within any calendar year, although fluctuations can occur between quarters. In the first quarter of this year, the impact was not material as we experienced escalating fuel prices only during the last few weeks of the quarter. For the second quarter, we expect a lag in the recovery of fuel costs, but we expect to fully recover our fuel costs by the end of the year with most of that occurring in the third quarter. These expectations regarding the impact of fuel costs and the recoverability of these costs have been factored into our outlook. And with that, I will now turn the call over to my partner, Joel. Joel M. Wine: Okay. Thanks, Matt. Please turn to slide 13 for a review of our financial results. For the first quarter, consolidated operating income decreased $20.7 million year over year to $61.4 million, with Ocean Transportation decreasing $19 million and Logistics declining $1.7 million. The decrease in Ocean Transportation operating income in the first quarter was primarily due to a lower contribution from our China service. The decrease in Logistics operating income was primarily due to a lower contribution from supply chain management. We had interest income of $6.1 million in the quarter compared to $9.4 million in the same period last year. The effective tax rate in the quarter was 16.6% compared to 21.6% in the year-ago period. Our tax rate was lower year over year due to a discrete tax item that reduced taxable income. Given the lower income level in the quarter relative to the other quarterly periods in the year, discrete tax items can have a more pronounced impact on our effective tax rate in the quarter. In the first quarter 2026, net income and diluted earnings per share were $56.6 million and $[inaudible], respectively. Diluted weighted shares outstanding decreased 7.8% year over year. Please turn to the next slide. We continue to generate strong cash flows. For the trailing twelve months, we generated cash flow from operations of $552.1 million. We returned capital in the form of dividends and share repurchases of $333.8 million, and we had maintenance CapEx of $150.9 million. Our cash flow from operations exceeded the aggregate spend on maintenance CapEx, dividends, and share repurchases by $61.4 million. Please turn to slide 15 for a summary of our share repurchase program and balance sheet. During the first quarter, we repurchased approximately 400 thousand shares for a total of $54.4 million. Since we initiated our share repurchase program in August 2021, through March, we have repurchased approximately 14.2 million shares, or 32.7% of our stock, for a total cost of approximately $1.3 billion. On 04/23/2026, we announced the addition of 3 million shares to our existing share repurchase authorization. As we have said before, share repurchases are an important component of our capital allocation strategy, and this increase allows us to continue to be steady buyers of our shares in the absence of any large organic or inorganic growth investment opportunities. Turning to our debt levels, our total debt at the end of the first quarter was $351.1 million, a reduction of $10.1 million from the end of 2025. With that, let me now turn to slide 16 and walk through our outlook for 2026 at the top of the page. Based on the outlook trends Matt mentioned earlier, we expect Ocean Transportation operating income to be approximately $20 million higher than the $98.6 million achieved in 2025. We also expect Logistics operating income to approach the $14.4 million achieved in 2025. As such, we expect consolidated operating income in the second quarter to be approximately $20 million higher than the prior year, which includes the negative impact we expect from the lag in the recovery of fuel costs that Matt mentioned earlier. On the bottom half of the slide, we have our expectations for full year 2026. Starting with Ocean Transportation, we now expect year-over-year operating income to modestly exceed the level achieved in the prior year. The strengthening of freight demand in our China service post-Lunar New Year and our expectation that this demand strength continues through peak season is the primary driver behind our raise in outlook. For Logistics, we expect operating income to approach the level achieved in the prior year. As a result, we now expect consolidated operating income to modestly exceed the level achieved in the prior year. Our full-year outlook includes the expectation that we are able to recover fuel costs by the end of the year with most of the recovery occurring in the third quarter. We also expect a more normal operating seasonality pattern with consolidated operating income in the second and third quarters being the strongest relative to the first and fourth quarters. In addition to this full-year operating income outlook, we expect the following for the full year: depreciation and amortization to approximate $210 million inclusive of approximately $35 million for drydocking amortization; interest income to be approximately $16 million; interest expense to be approximately $6 million; other income to be approximately $7 million; an effective tax rate of approximately 21%; and drydocking payments of approximately $45 million. Moving to slide 17, the table on the slide shows our CapEx projections for the full year 2026. Our range for maintenance and other capital expenditures is unchanged at $150 million to $170 million for full year 2026. Our estimate for expected new vessel construction milestone payments and related costs for full year 2026 is $400 million. As of March 31, we had cash and cash equivalents of approximately $100 million and had approximately $522 million in our capital construction fund. Our CCF covers approximately 93% of our remaining milestone payment obligations, and when combined with our balance sheet cash, exceeds our remaining financial obligations. We continue to be in a great funding position on the new build program. Lastly, our targeted build schedule remains unchanged. In the first quarter, we made a milestone payment of approximately $16 million from the CCF. Looking ahead, we expect to make approximately $213 million of milestone payments in the second quarter. And then in the third and fourth quarters, we expect to make milestone payments of approximately $34 million and $110 million, respectively. With that, let me turn the call back over to Matt for closing remarks. Matthew J. Cox: Thanks, Joel. Please turn to slide 18 where I will go through some closing thoughts. We continue to navigate a period of geopolitical tension and uncertainty. While we have experienced higher fuel prices, we are confident in our ability to fully recover our increased fuel costs. Our focus remains on what we can control, which is to put our customers first, maintain operational excellence, and uphold our high standard of service. We remain confident in the demand consistency of our businesses because of our focus on serving niche markets where we are an integral part of the supply chain. In our domestic trade lanes, we provide a vital lifeline to the communities we serve. And in our China service, our value proposition is differentiated based on speed, reliability, and schedule integrity. Building on these strengths, we have successfully moved with our customers into Southeast Asia markets to extend our geographic reach and diversify our origination ports. Our China service has also become an important means for our e-commerce customers to meet the increasing consumer demand in the U.S., and we continue to expect e-commerce to be a long-term driver of growth for our CLX and MAX services. Lastly, we remain disciplined in our return of capital to shareholders. In the absence of sizable growth projects or acquisitions, we expect to continue to return excess cash to shareholders. As Joel mentioned and we recently announced, we added 3 million shares to our authorization to repurchase stock. We will now open the call for questions. I will turn the call back to the operator. Operator: Certainly. Our first question for today comes from the line of Jacob Gregory Lacks from Wolfe Research. Your question, please. Jacob Gregory Lacks: Hey, Matt. Hey, Joel. Thanks for your time. You mentioned that you expect demand strength to continue through peak season. Last year was a little bit unique with the MAX service below 100% utilization during peak. Do you think you can get back toward more full ships this year as we move into the third quarter? And as I look at air freight versus ocean freight, air tends to be a lot more fuel intensive. Are you seeing more shippers look to convert freight to your service the longer this high fuel price environment persists? To the extent we start seeing some jet fuel shortages in Asia, could that accelerate volume growth from some of the non-China geographies? And lastly, can you give us a sense of how much the fuel lag headwind you are expecting in the second quarter is? I know it is volatile, but any quantitative color would be helpful. As you get into the third quarter, could you even over-recover given the investments you have made in scrubbers and LNG, or is this really a true pass-through? Matthew J. Cox: Yes, I do, Jake. I think we said at the beginning of the year, and we continue to see it as it is unfolding in front of us, a more traditional cycle in the China trades—meaning a post-Lunar New Year slow build to the second and third quarter with full or nearly full ships as we have traditionally seen. We have vessels that are slightly different sizes, but we expect to be full or nearly full in the second and third quarters as we build into the traditional peak season. We expect it to remain busy until the traditional October pattern into the Lunar New Year. Overall, we expect to end up above where we did last year, and we are at a point where we feel like we are going to exceed last year’s marks. On the air-to-ocean conversion, you are right. Although we have been mentioning air freight conversion for the last couple of years given this expedited space that we created, there has been a long-term trend with periods where that growth would go up or go down. We think we are entering a period where we are going to see more air freight conversions, some of which will be temporary and some of which will continue to convert. The longer that energy prices and availability are issues, the more the air freight markets are dislocated, especially in places where they primarily import their jet fuel. While we have not seen significant impacts yet, we are seeing, both from a price standpoint and a potential availability standpoint, a lot of passenger airlines cancel flights or cancel marginally profitable flights. That is happening all over the world, including in the U.S., although that is not our core market. Just a reminder that 50% of air freight flies in the bellies of passenger planes. So we see it as a tailwind rather than a huge catalyst. Our ships are likely to be in a more traditional peak cycle—nearly full—so I think it will be helpful as a tailwind. Regarding the near-term fuel lag, we are not exactly sure where we will end up given the volatility, and it is not central to our story. We remain highly confident in our ability to recover fuel for the year. The first quarter had very little impact because prices escalated late in the quarter and we consume fuel over longer voyages. We think the impact will primarily be felt in the second quarter, and we are highly confident that we will be able to recover that in the second half of the year. There is not a margin erosion story. Our second quarter guide is inclusive of the amounts we are contemplating, but we would rather stay away from point-specific items. I will let Joel address the recovery mechanics. Joel M. Wine: If it is fuel-related items, we will put them in the recovery basket, Jake. For instance, for a scrubber—which we have not done recently, but we did many years ago—that is a fuel-related item that allows us to purchase fuel at lower cost. It is part of the overall equation. So if something is very specific to fuel, then yes, that goes into our overall recovery basket. Operator: Thank you. Our next question comes from the line of Analyst from Stephens Inc. Your question, please. Analyst: Hey, thanks for taking the question. You previously disclosed transshipment mix around 20% of CLX and MAX. Was there any change in that figure in the first quarter? And then any regions in particular that made you more optimistic on near-term growth? As a follow-up, on the China service, last year was really volatile with a lot of changes in trade. How would you describe overall hesitancy on China trade as we move through the year among customers? And then on the competitive backdrop within expedited ocean, have you seen any increase in blank sailings or capacity losses as competitors had less confidence on the trade backdrop with China? Matthew J. Cox: I think the 20% we previously cited—we are in the 20% to 25% range—and we expect to continue to be in that range as we grow both our China origins and our Southeast Asia origins as we look toward filling our ships into the more traditional peak season. We do expect our customers to continue to move some of their manufacturing base out of China, although we continue to believe that China will remain an important element of our story and remain an important part of the world’s productive capability for manufacturing products. Could we go up from the 20% to 25%? Sure, it is possible. Importantly, it allows us to move with our customers as they relocate their plants. We are a trusted supply chain partner, and they have confidence in us, so we will continue to move as our customers move. On hesitancy, customers are looking at producing their products from an all-in standpoint—including tariffs and transportation charges—to meet their retailing needs. There are a lot of factors, but our view, embedded in our commentary, is that while there will be moments where tariff issues pop up, in our world we think that tariff uncertainties are largely behind us. President Xi and President Trump will be meeting in a few weeks. We are optimistic that we are past the period like last fall where there was significant uncertainty. Regarding the expedited ocean competitive backdrop, on the broader generic ocean side we are seeing relatively good utilization. There are small roll pools. The ocean carriers are trying to get ocean freight rates up. Many of them have significant increases in fuel and other costs and are seeking to raise rates in part to recover those costs. I would call the broader generic ocean market orderly. For the second-tier expedited carriers, we have not seen dramatic changes in capabilities. We have not seen significant cancellations of sailings. The market for that secondary carrier set—there are three or four of them that vie for that space—has been relatively similar. Our belief was and continues to be that if we remain the fastest and second fastest—CLX and MAX—we will get the lion’s share of the expedited market, and that continues to be true now. Operator: Thank you. Our next question comes from the line of Analyst from JPMorgan. Your question, please. Analyst: Hello everyone. Your second quarter Ocean Transportation operating income guidance is $20 million up year over year. Which services or customer segments are driving this growth, and what are the key risks to achieving it? And if you could share some more color on Hawaii and Alaska demand and economic conditions, especially regarding tourism and construction and energy—and again, what risks do you see for 2026? Lastly, the Logistics segment operating income declined in the first quarter. What specific actions are you taking to drive recovery in the second quarter and beyond, and what is your outlook for the rest of the year? Joel M. Wine: Thanks. The primary driver to that increase is the continued strength in our China trade post-Lunar New Year that we talked about. Our domestic businesses we expect to hang in there on a relatively similar basis year over year. So the primary uptick is really the China trade and the demand drivers in some of our core segments that Matt talked about earlier—e-commerce, e-goods, garments—returning to a more normal traditional demand in the second quarter compared to last year’s second quarter, which had a lot of tariff impacts on it. The risks would be a dislocation—tariffs reenacted or other shocks to the system. Absent a shock that would impact consumer demand or direct trade relationships, we expect it to be a relatively orderly, demand-driven second quarter, which is how we expect it to be up year over year. On Hawaii, the bright spot is construction. There has been more construction activity, fairly consistent for a year to a year and a half, and we see that driving some demand in 2026. It has not been enough to really buoy the economy in a meaningful way because tourism has been sluggish. U.S. tourism to Hawaii has been okay, although dollar spend has not dramatically grown. International tourism remains quite a bit off where it was four to five years ago, which has been the biggest overhang on GDP growth in Hawaii. Overall, it is a sluggish environment. In Alaska, there continues to be significant oil and gas and infrastructure investment around energy. That has been very positive. Our volumes have hung in well. We sometimes have year-over-year differentiation based on competitors’ drydocking and timing of voyages, but overall Alaska continues to be steady with an upward trajectory due to energy investment and more disposable income for residents as a result. On Guam, which is a really important domestic market for us, conditions continue to be steady as well. Tourism is hanging in okay, but again, international is not fully back; government spending in Guam and the Western Pacific region is helping volumes. For Logistics, our outlook for the rest of the year is that we will be approaching last year’s results. The actions we are taking focus on two pieces. Our Span Alaska business is a little over half of Logistics, and there we are focusing on disciplined pricing and delivery for our customers, providing the best transit times and customer service in that market. On the brokerage business—where margins have been compressed and under pressure in highway truckload and intermodal—we are focusing on stickier customer relationships, small and medium customers, pricing discipline, and good execution in what is still a generally soft freight environment. On the buy side for truck procurement, we continue to work with our trucking partners to buy capacity at the right price, while maintaining our pricing and margin discipline. We expect to approach last year’s results for the full year. Operator: Thank you. This does conclude the question-and-answer session of today’s program. I would like to hand the program back to Matthew J. Cox for any further remarks. Matthew J. Cox: Thanks for listening in today. We look forward to catching up with everyone on our second quarter call. Thanks very much. Unknown Speaker: Aloha. Operator: Thank you, ladies and gentlemen, for your participation in today’s conference. This does conclude the program. You may now disconnect. Good day.
Operator: Good afternoon, everyone, and thank you for standing by. Welcome to Evolus, Inc. for First Quarter Earnings Conference Call. As a reminder, today's conference is being recorded and webcast live. All participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. I would now like to turn the conference over to Nareg Sagherian, Vice President, Head of Investor Relations and Corporate Communications. Please go ahead. Thank you, operator. Nareg Sagherian: And welcome to everyone joining us on today's call to review Evolus, Inc.'s first quarter financial results. Our first quarter press release is now on our website at evolus.com. With me today are David Moatazedi, President and Chief Executive Officer; Tatjana Mitchell, Chief Financial Officer; and Rui Avelar, Chief Medical Officer and Head of R&D, who is also with us for the Q&A portion of the call. Today's call will include forward-looking statements. Actual results may differ materially due to risks and uncertainties outlined in our earnings press release and SEC filings. These forward-looking statements are based on current assumptions and we undertake no obligation to update them. Additionally, we will discuss certain non-GAAP financial measures. These measures should be considered in addition to, and not as a substitute for, our GAAP results. A reconciliation of GAAP to non-GAAP measures is included in today's earnings release. As a reminder, our earnings release and SEC filings are available on the SEC's website and on our Investor Relations website. Following the conclusion of today's call, a replay will be available on our website at investors.evolus.com. With that, I will turn the call over to our CEO, David Moatazedi. David Moatazedi: Thank you, Nareg, and good afternoon, everyone. We started 2026 with strong momentum that carried over from the fourth quarter, resulting in our second consecutive quarter of positive adjusted EBITDA. Importantly, we achieved this in what is seasonally our lowest revenue quarter of the year, and against our strongest prior-year comparison. We view this as a clear validation of both the strength of the business and the benefits from the structural improvements we implemented in 2025. At a market level, we are encouraged by what we are seeing across the category, with industry data and commentary signaling a global aesthetics market that remains healthy, with continued growth and strong consumer engagement. We estimate that in the first quarter, the U.S. toxin market grew in the low- to mid-single digits, while the filler market demonstrated continued improvement and was flat to slightly down. Against that backdrop, we maintained our Jeuveau U.S. market share at 14% and delivered share gains with Evolisse, reflecting continued strong performance driven by execution and a differentiated commercial model. This is an important inflection point for Evolus, Inc. Over the past year, we took deliberate actions to align our cost structure with the scale of the business and position the company for sustained profitability. The results we are delivering today reflect that work. We are now demonstrating that we can drive profitable growth while continuing to invest in expanding our portfolio. To start the year, we are tracking ahead of our operating profit assumptions, giving us the optionality to invest in growth-driving initiatives in the back half of the year. As we look ahead, our strategy is consistent and focused on building a scaled, multi-product aesthetics company, supported by a differentiated and increasingly durable business model. Our long-term outlook through 2028 is grounded in executing our playbook each quarter: expanding account coverage, improving field productivity, deepening relationships with practices, and consistently converting demand into repeat purchasing across the portfolio. A key element of our differentiation, which has enabled us to achieve mid-teens market share for Jeuveau, is a competitive moat we have established through our Performance Beauty platform. At the foundation is our cash-pay model and ability to deliver a fully integrated experience for both customers and consumers. Unlike traditional models, our leading digital ecosystem connects the entire platform, from practice engagement and product ordering to consumer acquisition, loyalty, and repeat utilization, creating a level of connectivity and efficiency that is difficult to replicate and that continues to drive repeat usage and momentum across the business. This platform is now powered to drive portfolio bundle benefits, and with international growth on a steady rise, the upcoming launch of Esteem in Europe this quarter, and additional pipeline milestones ahead, we believe this differentiated commercial structure positions us to scale efficiently and execute with greater precision. At the same time, we are increasingly leveraging our digital ecosystem to drive efficiency and scale across the organization. Over the past year, we have embedded AI into core areas of the business, and we are now seeing those actions translate into tangible results. Our unified data platform allows us to connect insights across the commercial organization, enabling more targeted engagement, improved field productivity, and faster decision-making. What makes this particularly powerful is how tightly integrated these capabilities are within our operating model. Our commercial platform, including Evolus, Inc. Rewards, practice engagement tools, and ordering systems, creates a continuous data loop that feeds directly into our AI capabilities. This allows our field organization to operate with greater precision and effectiveness, with real-time insights at their fingertips that support everything from customer targeting to conversion. Turning to the business, underlying demand remains healthy and consistent with the momentum with which we exited 2025. In addition to customer expansion and strong reorder rates, we are seeing increasing traction from our portfolio bundling strategy. We are encouraged by the progress and momentum we are seeing across our accounts as customers adopt a more integrated approach to our portfolio. Given this is a structured six-month program, we look forward to providing a more comprehensive update following the second quarter. Importantly, this is a key driver of both growth and profitability. As a more streamlined organization, these capabilities allow us to scale the business more efficiently, which is a meaningful contributor to the operating leverage and profitability we are now delivering. This is not a trade-off between growth and efficiency; it is a reflection of a more intelligent and scalable model and a clear point of differentiation versus traditional approaches in the category. Looking at our key performance indicators, they reinforce both the quality and demand scalability of our commercial model. We are continuing to broaden our reach across practices. Total purchasing accounts increased by nearly 500 in the first quarter, and since launch, more than 18,000 customers have purchased from Evolus, Inc., including approximately 3,500 for Evolisse. U.S. account penetration is now above 60%, and reorder rates remain approximately 71%. And Evolus, Inc. Rewards continues to expand, approaching 1.5 million members, up 27% year-over-year, with redemptions exceeding 255,000 in the quarter. These metrics reflect strong engagement and support our ability to translate demand into increasingly consistent financial performance. On Jeuveau, we continue to see a brand that is building. In the first quarter, Jeuveau delivered $66.4 million in global revenue, with positive unit growth and pricing stability across both U.S. and international markets. While reported revenue reflects normal seasonality and prior-year timing dynamics, underlying demand remains intact. As we move through 2026, we expect to wrap around those dynamics from early 2025, resulting in high single-digit growth for Jeuveau over that period. Beyond Jeuveau, our next phase of growth is being driven by portfolio expansion and increasing share of wallet within our accounts. In the U.S., Evolisse is increasing our relevance with customers and contributing to an evolving revenue mix as we apply the same playbook that drove Jeuveau's success: education, training, and disciplined scale. Just this past weekend, we hosted 50 customers per training program on our injectable products, and the feedback on Evolisse was incredibly positive. We are seeing accounts repurchasing at higher volumes as they gain confidence in the uniqueness of the product benefits. The excitement is also building around the upcoming FDA milestone for Sculp, which further completes our HA portfolio and puts us in a strengthened competitive position against the market-leading companies. As previously stated, we expect to gain FDA approval for Sculp in the fourth quarter of this year. Internationally, we are extending that strategy with the mid-May launch of Esteem in Europe, expanding our addressable market and building on the commercial foundation we have established with Nuceiva. In Europe, we have the opportunity to introduce a full line of Esteem products, including the flagship Sculp mid-face product, along with the U.S.-approved Smooth and Form product, and the Esteem Lips product, which is currently in U.S. FDA trials. The market learnings from these products in Europe will further support our launch strategy in the U.S. We also continue to take a disciplined approach to expanding our innovation pipeline. We are continuing to actively evaluate and pursue targeted, capital-efficient opportunities that complement our portfolio and leverage our existing commercial infrastructure. This is a natural extension of our strategy and an important component of our long-term growth, and positions us well to continue building a differentiated multi-product platform. Stepping back, our priorities are clear. We are focused on executing our plan, maintaining discipline across our cost structure, and investing in catalysts that will drive our next phase of growth. We are well-capitalized to support existing business growth and invest in pipeline opportunities. Based on our performance in the first quarter, we are reiterating our full-year outlook and remain confident in our ability to deliver double-digit revenue growth and achieve full-year adjusted EBITDA profitability in 2026. With that, I will turn the call over to Tatjana to walk through the first quarter financial results and our outlook. Tatjana Mitchell: Thank you, David. Our first quarter results reflect meaningful progress toward full-year adjusted EBITDA profitability. We are executing against our revenue plan while maintaining the expense discipline we established in 2025, and we are seeing the benefits of that structure flow through and expand our operating leverage over the course of 2026. For Q1, global net revenue was $73.1 million, representing a 7% increase over the prior year. This included $66.4 million of global Jeuveau revenue and $6.7 million from Evolisse. On Jeuveau, units increased in both the U.S. and international markets, reflecting healthy underlying demand. In the U.S., there were one-time revenue deferral dynamics that benefited 2025 and created a headwind in 2026. We expect second quarter U.S. Jeuveau net revenue growth to more than offset the first quarter decline. For 2026, our guidance implies high single-digit year-over-year growth for global Jeuveau revenue, supporting our expectation for total company revenue growth of 10% to 13% for the full year. Turning to gross margin, reported gross margin in the first quarter was 67%, and adjusted gross margin was 68%, which excludes the amortization of intangibles. Regarding tariffs, a recent executive proclamation set a 15% tariff on certain pharmaceutical products in South Korea, including Jeuveau, with an effective date of 09/29/2026. We believe there is a pathway to mitigate or eliminate the impact of this tariff, and we are actively evaluating multiple options. In the near term, we have a plan to secure significant U.S. inventory, supported by the product's three-year shelf life, which provides flexibility as we bridge to longer-term solutions. We plan to provide an update by year end as we gain greater clarity. Importantly, the announced tariffs do not impact or change our confidence in our 2026 outlook or long-term guidance. Moving to operating expenses, GAAP operating expenses for the first quarter were $55.7 million compared to $55.1 million in the fourth quarter. As a reminder, 2025 included a $4.5 million benefit related to the revaluation of the contingent royalty obligation. In Q1 2026, the revaluation impact was immaterial. Non-GAAP operating expenses for the first quarter were $49.1 million compared to $53.0 million in the fourth quarter, reflecting continued discipline and the impact of structural cost actions we implemented last year. As a reminder, non-GAAP operating expenses exclude stock-based compensation, revaluation of the contingent royalty obligation, and depreciation and amortization. Within operating expenses, selling, general and administrative expenses for the first quarter were $52.0 million compared to $54.7 million in the fourth quarter. This included $4.8 million of non-cash stock-based compensation, similar to the prior quarter. From a profitability standpoint, we generated positive adjusted EBITDA of $0.6 million in the first quarter, compared to a loss of $5.5 million in the prior-year period. This improvement reflects both revenue growth and improved cost efficiency as we continue to scale the business while maintaining disciplined expense management. Turning to the balance sheet, we ended the first quarter with $49.8 million in cash and cash equivalents, compared to $53.8 million at the end of the fourth quarter. The primary uses of cash were interest and bonus payments, which were offset by the net proceeds from the line of credit. As a reminder, in addition to the approximately $50 million in cash, we have access to an additional $120 million in capital—$100 million on our long-term debt facility with Pharmakon, and $20 million on the revolving credit facility. Our existing term loan does not mature until mid-2030. Over the past two quarters, cash usage was modest at approximately $3 million in aggregate. Our current cash trajectory supports ongoing operating expenses, while the incremental facilities provide optionality for potential pipeline development opportunities. Overall, we believe this provides sufficient liquidity and flexibility to execute our strategy, invest in growth, and progress toward meaningful free cash flow generation over time. Finally, we have recently terminated our at-the-market equity facility, which was never utilized, reinforcing our confidence in our current capital position. Turning now to guidance, our full-year 2026 outlook remains unchanged. We continue to expect total net revenue of $327 million to $337 million, adjusted gross margin of 65.5% to 67%, non-GAAP operating expenses of $210 million to $216 million, and low- to mid-single-digit adjusted EBITDA margin for the full year. The first quarter results strengthen our confidence in delivering full-year profitability. Importantly, our long-term outlook through 2028 is unchanged, including our expectations for continued double-digit revenue growth, significant margin expansion, and increasing operating leverage as we scale the business. With that, I will turn it back to David for closing remarks. David Moatazedi: Thank you, Tatjana. We are very pleased with our start to 2026. The first quarter reflects exactly where we want to be as a company: delivering revenue growth while generating profitability. Importantly, this performance validates the operating model we have been building. We are scaling the business through performance above market, making investments to further expand our portfolio, while driving improved profitability within a disciplined framework. We are also in a strong financial position. We have the liquidity to execute our strategy and invest in growth. As it relates to tariffs, we are taking a proactive approach. Our goal is to eliminate any long-term impact, and our strategy is straightforward: create flexibility in the near term while we evaluate structural solutions. We will provide updates as we gain greater clarity. Finally, we are reiterating both our 2026 and long-term financial guidance. We look forward to updating you on our progress throughout the year. Operator, you may now begin the Q&A. Operator: Thank you. We will now open the call for questions. Our first question comes from the line of Annabel Samimy with Stifel. Please proceed with your question. Annabel Samimy: Thanks for the details here. I just had some questions on the Evolisse launch. How do you find the headwinds of the filler market impacting the launch? And is bundling helping with increasing volumes? Is any of the bundling taking away from net sales? Can you help us understand the dynamics there a little bit? You have talked about how sentiment seems to be turning, but the market does not seem to be turning positive. So I am just trying to sort of reconcile those two points. Thanks. David Moatazedi: Annabel, this is David. I will take the questions around the category for fillers. I would say, especially coming off this weekend where we had 50 clinicians here, the sentiment is turning more positive. And when I am speaking with clinicians now, I am consistently hearing that the interest in HAs is rising again, that they are seeing their utilization rising. So although we may still be in a market that, on a year-over-year basis, could be down slightly, it is a marked improvement from the category that we were operating in one or two years ago, and that puts Evolisse in a really favorable position. That being said, keep in mind the competitive set has been in the market well established for a number of years—not just in the U.S. Most of these products were launched in Europe over a decade prior to entering this market, so they are well-established brands with a lot of history in terms of how to use the products, and a full line of products that they are supporting clinics with. And so that has been the opportunity for Evolisse. As we are getting in and exposing clinicians to the product, and they are gaining more experience, trialing it, and then getting additional trainings on the product, we are seeing that their confidence is rising and the reorder rates are increasing in terms of the amount that they are purchasing once they get that experience and education. So we feel very good about the trajectory that Evolisse is on. We also recognize that we are not operating in the mid-face segment of the market, which is a sizable part of the category. Sculp will be an important product there, and we have mentioned many times before that we view the Sculp product to be the flagship product in this line that will play an important role. The other part that will play an important role, of course, is the bundling. We piloted in the fourth quarter of last year a growth rebate that performed very well in a small subset of clinics. We rolled that out in January, and it is a six-month program, very similar in timeline to the competitive set. That is an important part of the conversation because clinics that move more of their business over to our portfolio are making trade-offs against the portfolio bundles of the competitive set. We will be in a position to give you more color from a quantitative standpoint coming out of our Q2 earnings call. But I can tell you that we are tracking those customers that have expressed an interest in participating in our portfolio growth rebate, and we are seeing very good uptake around that group of customers. And so we do feel that we are on the right track with the product, and Evolisse is a very important part of that conversation overall. Annabel Samimy: Just a follow-up on the rebate. Is the function of your rebate different from your competitors? And is it more of a direct cash savings than a rebate that goes towards forward sales? Is it an easier rebate for them to wrap their economics around? David Moatazedi: I think the rebate itself operates in a similar fashion in terms of earning that amount back on their account, just like they would with the competitive set. Probably the part that makes it easier to execute is it is purely a function of their growth with Evolus, Inc. We designed it as a partnership rebate for clinics that want to partner more closely with us. That growth rebate gives them an additional incentive to cover the cost of making that conversion—bringing their portfolio business over to us—and in those increments of $75,000 and $150,000 incremental purchasing over what they purchased during that same period the year prior. As it relates to the accounting for it, I will let Tatjana add some color. Tatjana Mitchell: To your question around whether the portfolio rebate is a drag on net sales, it is not. We have designed both the pricing tiers and the portfolio rebate to maintain a healthy margin rate. In terms of net sales, that really is driven by the dynamic of last year. We defer revenue for the consumer rewards program, and then we also recognize revenue upon delivery. In any given quarter, this pretty much washes out and does not impact year-over-year growth rates. It just so happened that last year in Q1 there was a pretty good pickup, and we did not see that this Q1. That is really what you see in the net sales impact this quarter. Annabel Samimy: Got it. Thank you for the clarity. Appreciate it. Operator: Thank you. Our next question comes from the line of Marc Goodman with Leerink. Please proceed with your question. Marc Goodman: David, you gave us a sense that in the U.S. the market seems to be improving a little bit. Can you give us a sense of what is going on OUS, both toxins and fillers—what the dynamic is there, maybe just a country by country? And then secondly, Hugel came into the U.S. market last year as a competitor. Anything that they are doing differently today than they were doing six months ago? Just curious how well they are kind of breaking in. Thanks. David Moatazedi: Great. Marc, I will start with the OUS business. As we talked about in our full-year earnings call from last year, our OUS business continues to perform incredibly well. If you double-click into any of those markets, the revenue is nearly doubling, and our most mature market, being the U.K., was also on a very fast growth clip. We feel that we have a lot of momentum across the markets in Europe. Especially considering the U.K. is the first market to be approaching double digits, those other markets are several years behind the U.K. in terms of the timing that we entered them directly, so we see a lot of growth potential going forward. With that greater scale, we have an increasing presence now in Europe as well, and that infrastructure we are able to leverage to launch Esteem. In two weeks, I will be back in Europe for the launch of Esteem with over 100 of our top customers across Europe who will be coming in to learn about the entire line. We think that is a significant advantage because, one, we will be one of just a handful of companies that have both a neurotoxin and a hyaluronic acid in Europe; and two, they will benefit from having our flagship Sculp product as part of the line. We have been engaged with about 30 or so clinicians throughout Europe in an experience program for the last year, and it is very clear that the Sculp product is highly differentiated from even the mature products that are available in Europe, and that is a far more competitive market. As we go across all the markets, we are seeing really great uptake. There is not a single market where we are not seeing healthy growth. The team in international is very focused, and we have in-market country heads that are seeing a lot of success. We are excited to see what Esteem will do overall for that business over the next several years as we aspire to continue to build that business to approach roughly 15% of our overall revenue. As we look to the U.S., I would say that overall we continue to gain market share in the category. We talked about shares being steady in the first quarter, but even through last year with the entry of a new competitor, we saw a lot of heavy sampling initially and then purchasing that follows from that competitor. Despite that, we continue to gain momentum in the market. We believe that this year will be much of the same. We expect another competitive entrant to enter in the back half of the year—once again, rinse and repeat, meaning heavy sampling and then the need to drive that pull-through into revenue from sample. I do not have a whole lot to add in terms of anything different that I am seeing in the field. I would just say that the shares appear to be relatively stable sequentially from the fourth quarter into the first quarter; we are not seeing any major share-shift dynamics. Operator: Thank you. Our next question comes from the line of Uy Ear with Mizuho Securities. Please proceed with your question. Uy Ear: Hey, guys. Thanks for taking our questions. Maybe just help us understand—you guided to high single digit for the first half of the year for Jeuveau. Is it fair then to think about a rebound or reacceleration sequentially going into Q2? And secondly, if my math is correct, does the high single-digit first-half growth for Jeuveau mean you are kind of blessing the consensus, which is roughly $71 million for the second quarter? Thanks. Tatjana Mitchell: Thank you for the question. Yes, as you probably realize, what we are seeing this year in quarter-over-quarter revenue—Q1 versus Q4 and what you can expect for Q2 versus Q1—is really normal seasonality. What we saw last year was unusual. In Q1, we had the pickup from the revenue deferral; in Q2, we really took a hit for the market slowing down. We were also launching Evolisse. All of these things were happening last year that make for an interesting comparison. But when you take the first half of the year together, what you will see is what we guided to, which is that global Jeuveau will show high single-digit revenue growth year-over-year. Operator: Our next question comes from the line of Navann Ty with BNB Paribas. Please proceed with your question. Navann Ty: Hi, thanks for taking my question. Maybe a follow-up on fillers. Have you seen some further signs of recovery in Europe and in the U.S., and how are fillers doing versus biostimulators? And then on competition, what are your assumptions on competitive launches, maybe after the etranibotulinum FDA CRL? Thank you. David Moatazedi: Thanks for the questions, Navann. The filler market in Europe has been a bit more resilient than what we have seen in the U.S., and that has more to do with the economic backdrop in Europe, which has been a bit stronger. That is reflected in the growth rates—not just for fillers, but the toxin market as well. In our year-end call, we noted that we estimated the market in Europe may have turned positive by year end. It is too early for us to give visibility to how the first quarter played out specifically in Europe, but we believe it is in line with where it ended in Q4, if not potentially improved. Despite the war and potential energy concerns, we have not seen any meaningful change in demand in Europe associated with economic risks there. As it relates to our assumptions, we did open the year saying we expected two new competitive entrants. We all saw the news from AbbVie about the delay to the short-acting BoNT. In fairness, we had not estimated any impact to the existing market from a short-acting product entering the category, so it does not change our assumptions for full-year revenue. And we do continue to expect that Galderma will introduce their new liquid toxin in the back half of the year and, as you know, has a final FDA response date expected sometime in the summer. Thank you. Operator: Thank you. Our next question comes from the line of Douglas Tsao with H.C. Wainwright. Please proceed with your question. Douglas Tsao: Hi, good afternoon. Thanks for taking the time and the questions. David, it sounds like you feel pretty good about the environment in the U.S. market, and obviously, both from your results as well as competitors, things seem strong. When you step back and think about the environment—gas prices are higher and seem unlikely to come down anytime soon—I am curious how we should think about stress testing the macro environment in terms of the broader aesthetics market. David Moatazedi: I think the consumer was really tested last year with all the shifts that took place in the overall environment. What you are seeing now as we wrap around what was a really challenging base in the front half of last year is that, even though there are some puts and takes in the news and consumer sentiment, in the end you are left with a value-conscious consumer who is continuing to come in and seek treatment. I am spending a lot of time both in the market and talking to clinicians, and what I continue to hear is that business continues to be stable and strong on a year-over-year basis, despite what we are reading in the backdrop. We also have visibility into the start of the second quarter, and we feel really good about the trends that we have started out with. They continue to be strong, and we are not seeing any signs that reflect slowing. Perhaps the last part that is important is we have visibility to transactional data through our Evolus, Inc. Rewards program, and that is to the day. We get a daily view of utilization of product at the clinic level. We continue to see strength in overall redemptions in the Evolus, Inc. Rewards program. We feel confident that the market continues to be on a strong road to recovery, as we saw in the fourth quarter and again in the first quarter, and we are seeing it now as we start the second quarter, more than a month into it. Douglas Tsao: That is really helpful, David. As a follow-up on the filler market, one of your lead competitors reported numbers in the first quarter that were down just a little bit. I am trying to understand—there have been a few things going on in fillers: some macro related because it is a higher price point product, and also some product-specific issues in terms of adverse events. Within that, do you have a sense of whether what we are seeing from some of the other players is related to their particular product portfolios versus filler fatigue? How does that inform your own strategy as the Evolisse launches gain momentum? Thank you. David Moatazedi: We have a lot of data points—competitor reporting, third-party data, and conversations with clinics—and they all point to the same thing: the market is in some stage of recovery and rebound. It is not clear yet whether we have turned to positive market growth, but we are getting very close, which is consistent with our views coming into the year. Keep in mind, we are benefiting from a significant tailwind of GLP-1 patients who, once they achieve their desired weight, have an interest in entering aesthetics. There are a few areas in particular they are interested in, and one of those is replacing lost facial volume from weight loss—people call it Ozempic face—and that is a tailwind for the category. We know we are seeing some of those patients starting to come in. It has not yet led to the tailwind that drives the category back to growth, but it is not a question of if, it is a question of when. That gives clinicians optimism—these are new consumers coming into the category, and they will help fuel the market back to positive growth. We feel very good about where this category is going over time. Ultimately, it comes down to continuing to strengthen our position within that category, and that will happen through continued focus on differentiation of Evolisse with training, the launch of the Sculp product, and our focus on bringing these products together through a competitive bundle that is effective against the competitive set. Operator: Thank you. Our next question comes from the line of Sam Eiber with BTIG. Please proceed with your question. Sam Eiber: Hey, good afternoon. Thanks for taking the questions. Maybe I can start on Esteem with the launch coming up in May. Should we expect any initial stocking order similar to what we saw with Evolisse in the U.S. in Q2 of last year? Tatjana Mitchell: Hi, Sam. Good question. We do expect some, but consider the size of that market and Esteem launching in the middle of the quarter. We will see some stocking, but it is not going to be a meaningful impact to our Q2 growth. Sam Eiber: That is helpful. And as a follow-up, any feedback or conversations you are having with the FDA on Sculp? I know you have reiterated timelines for Q4 approval, but curious about your communications with them and what you have been hearing. David Moatazedi: Rui is sitting right next to me, so I will turn it over to him. Rui Avelar: It is a PMA going through the regular PMA process where we get questions along the way and it can also be interactive. We continue to say Q4—we are hoping to have approval by the end of the year. Sometimes it will go faster; hopefully it goes on timelines. As a reminder, for Form and Smooth we were conservative on timelines, but we got lucky there and received approval earlier. Operator: Thank you. Our next question comes from the line of Serge Belanger with Needham and Company. Please proceed with your question. Serge Belanger: Hi, good afternoon. Thanks for taking my questions. David, you talked a little bit about what sounds like an increasing appetite for BD and making additions to your product portfolio. Can you talk about what kind of products you are interested in and maybe how large of a transaction we could see here? Thanks. David Moatazedi: We are very active on the pipeline side. Rui has likely more experience than anyone in the aesthetics space in getting drugs and devices through the FDA. Although we are still an earlier-stage company commercially, we have the luxury of a fully staffed organization in clinical development and regulatory. That capability is well recognized within the industry, which is why we often get a first look at assets, especially those that are more complex to develop. I will let Rui talk a bit about where we spend a lot of our time looking at assets today. Rui Avelar: Biostimulators remain of high interest to us, and there are a number of assets out there. We look at the various ones and assess strengths and weaknesses, just like what we did with our current programs. Skin quality remains something of high interest. In Europe, it is quite popular with a number of offerings. Bringing it into the United States has a higher bar of entry and, as far as we know, there is only one that has been approved thus far. And then areas like hair continue to represent an unmet need. There are a lot of opportunities, and we have seen very successful stories out there right now. Operator: Thank you. This concludes our question-and-answer session as well as today’s teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great rest of your day.
Operator: Hello and welcome to Nuvation Bio Inc.'s first quarter 2026 financial results and corporate update call. Today's call is being recorded and will be available on the company's website. All participants are currently in a listen-only mode. A brief question-and-answer session will follow the prepared remarks. Now I would like to turn the call over to J.R. DeVita, Vice President of Corporate Development and Investor Relations at Nuvation Bio Inc. Please go ahead. J.R. DeVita: Thank you, and good afternoon, everyone. Earlier today, we issued a press release summarizing our financial results for the quarter ending 03/31/2026, and provided a business update. The press release is available on the Investors section of our website at nuvationbio.com. Today's call includes forward-looking statements, including statements about the therapeutic and commercial potential of our plans for safusitinib development and future data presentations, the components of our anticipated product revenue, expected milestone payments, and our cash runway. Because such statements deal with future events and are subject to many risks and uncertainties, actual results may differ materially from those in the forward-looking statements. For a full discussion of these risks and uncertainties, please review our quarterly report on Form 10-Q, which we filed with the U.S. Securities and Exchange Commission today. Joining me on today's call are our Founder, President and Chief Executive Officer, David Hung, our Chief Commercial Officer, Colleen Sjogren, and our Chief Financial Officer, Philippe Sauvage. I will now turn the call over to David Hung. David, please go ahead. David Hung: Thanks, J.R. Good afternoon, everyone, and thank you all for joining us. Today, I am excited to discuss the progress we have made across our business in the first quarter. Following the line-agnostic FDA approval of Iptrozy in June 2025, we entered 2026 focused on continuing to build a successful commercial launch in ROS1-positive non-small cell lung cancer, with specific focus on educating physicians, supporting patients, and generating new clinical evidence that reinforces Iptrozy’s differentiated profile. Overall, we are very pleased with our continued execution, highlighted by strong demand for Iptrozy and our ability to significantly increase the percentage of new patients treated in the first-line setting. We successfully treated approximately 200 new patients with Iptrozy in the first quarter, which makes three consecutive quarters of about 200 new patient starts, bringing our total to over 600 since launch. We see a growing trend of more new patients coming from the first-line setting and, in turn, a lower percentage of patients coming from the third-line setting or later. In fact, for the first time since launch, more than half of the new patients who started Iptrozy in the quarter were TKI-naive. Given the changing dynamics of patient mix and moving from later-line to the first-line setting, and considering the significantly increased durability of Iptrozy in earlier versus later-line settings, we are just beginning to see revenue stack in this quarter, as Philippe will shortly discuss. This revenue dynamic is the most important metric for the launch going forward. Therefore, at some point in the future, we will focus on revenue and no longer report new patient starts. This has meaningful implications for the long-term opportunity for our brand, especially now given that based on a recent new analysis presented at AACR, Iptrozy has now extended its median duration of response to 50 months in TKI-naive patients in the pooled results from the pivotal TRUST studies. When patients are treated earlier in their disease course, they are often in a better position to realize increased benefit from a therapy with durable efficacy and generally favorable tolerability. Over time, we believe this can build a larger, longer-duration base of active patients on Iptrozy and support more substantial revenue growth. Since launch, our discontinuations have been driven primarily by disease progression in later-line patients. This is expected in any oncology launch as these patients have already progressed through other approved therapies. From the data that we see, discontinuations in earlier-line patients or for adverse events are consistent with clinical trial results and remain relatively low. As a reminder, and as detailed in Iptrozy’s prescribing information, 6.5% of 337 patients with advanced ROS1-positive NSCLC in our pivotal TRUST studies discontinued therapy due to any adverse reaction. And as we have previously presented, only one of these patients, or 0.3%, discontinued treatment due to any of the six most common adverse events, including liver enzyme elevations, diarrhea, nausea, vomiting, or dizziness. The feedback we continue to receive from both key opinion leaders and our sales organization has been highly consistent. Physicians are impressed with Iptrozy’s clinical profile, citing the durability and tolerability, and the real-world experience is giving physicians increased confidence to both keep patients on therapy longer and to choose Iptrozy when considering a preferred first-line treatment option. This response further supports our belief in both consensus net revenue estimates for Iptrozy in 2026 and its long-term potential. We are also encouraged by the addition of Iptrozy to the latest NCCN CNS guidelines as a systemic therapy option for ROS1-positive NSCLC patients with brain metastases. We believe this is an important recognition of Iptrozy’s demonstrated intracranial activity and further supports its differentiated position in the ROS1 treatment landscape. Turning to our recent abstracts and publications, we were thrilled to present updated pooled results from the August 2025 data cutoff of the TRUST-1 and TRUST-2 studies at the American Association of Cancer Research congress, or AACR. These updated data continue to reinforce the strength of Iptrozy’s profile. In TKI-naive patients in TRUST-1, as recently published in the Journal of Clinical Oncology, median duration of response and median progression-free survival have both now increased to approximately 50 months, or more than four years. As presented at AACR in TKI-pretreated patients, the median duration of response was nearly 20 months in TRUST-2, and the overall survival in the pooled TKI-pretreated population showed a median of nearly 30 months, which is unprecedented in this space. And with this longer follow-up, Iptrozy continued to demonstrate a manageable and consistent safety profile, including lower rates of neurologic adverse events and no new safety signals. We believe these durability data matter not only clinically but commercially. Drugs that combine deep and durable efficacy with a favorable tolerability profile are well positioned to become the therapy of choice for TKI-naive patients, and that is exactly the trend we are seeing in our launch. With approximately three years of follow-up in the pooled analysis, and more than four years of follow-up in TRUST-1, we believe these data further support Iptrozy as an effective, durable, and tolerable treatment option for patients living with advanced ROS1-positive NSCLC. At AACR, we also presented preclinical work which continues to build on our broader scientific understanding of Iptrozy’s differentiated profile. As I discussed on our last earnings call, Iptrozy is designed to achieve deep and durable inhibition of ROS1 while maintaining measured activity against TRK-B. Our presentation showed two important points. First, talotrectinib has nearly complete coverage of ROS1 fusions at clinically relevant concentrations and is effective against ROS1 resistance mutations. Second, talotrectinib has partial, yet biologically meaningful, inhibition of TRK-B, while being sufficiently balanced to avoid significant CNS-related adverse events as seen in our clinical trials and real-world experience. Of note, in the same experiment, a TRK-sparing agent failed to control tumor migration and markers of invasion and metastases, which were well controlled by talotrectinib. These data support the concept that some degree of TRK-B inhibition may be required to inhibit systemic progression, prevent the migration of lung cancer cells, and protect against metastases to the brain. This analysis showed that our medicine may have a mechanistic profile which we believe leads to a potential impact on tumor invasiveness and metastatic behavior in patients, while limiting neurologic adverse events. This balanced approach and ability to prevent resistance could ultimately play an important role in the long-term durable control of ROS1-positive lung cancer, as demonstrated in Iptrozy’s median progression-free survival of over four years. At ASCO in June, we will be presenting additional data from our TRUST program on patient-reported outcomes and our ongoing TRUST-4 study in the adjuvant setting. Turning to safusitinib, we remain very excited about the potential of this program and the opportunity it represents for patients with IDH1-mutant glioma. Beyond its potential clinical importance, we believe safusitinib could address a broad segment of the glioma market and therefore represent a meaningful long-term value opportunity for the company. Safusitinib is currently being evaluated in the ongoing Phase 3 SIGMA study for the maintenance treatment of patients with IDH1-mutant astrocytoma who have high-risk features following standard of care, and in a non-pivotal cohort with grade 3 oligodendroglioma following surgery. In Phase 1 and Phase 2 single-arm studies, safusitinib has shown very encouraging efficacy signals, including durable responses and prolonged progression-free survival across both low- and high-grade IDH1-mutant gliomas. We think about the glioma market as a pie with four parts: low-grade low-risk, low-grade high-risk, high-grade low-risk, and high-grade high-risk tumors. Today, the only approved glioma drug, vorasidenib, is approved in the low-grade, low-risk glioma setting, and prior data have shown limited activity in enhancing or high-risk, high-grade tumors. In contrast, safusitinib has shown significant activity in clinical studies across all four subgroups of IDH1-mutant glioma. The safusitinib SIGMA pivotal trial will target three of the four pieces of the glioma pie, enrolling high-grade high-risk, high-grade low-risk, and low-grade high-risk IDH1-mutant glioma patients. We are also exploring potential studies to further develop safusitinib in the final piece of the pie, low-grade low-risk glioma, and we will provide an update on our plans later this year. I would also like to highlight that a November 2025 publication in Neuro-Oncology summarized the Phase 2 study of safusitinib in patients with chemotherapy- and radiotherapy-naive grade 2 IDH1-mutant gliomas as of a 03/10/2023 data cutoff. Strikingly, as of February 2026, 12 of the 27 patients evaluated in this study remained on treatment with a median follow-up of more than five years. We believe these data continue to support the potential of safusitinib in patient populations with significant unmet need and limited or no FDA-approved targeted treatment options. Importantly, in April, we acquired exclusive rights to safusitinib in Japan from our partner Daiichi Sankyo. With that agreement now complete, we plan to expand the pivotal Phase 3 SIGMA study into Japan, continue to advance the global development program, and pursue presentation and publication of longer-term Phase 2 data so the scientific community remains current on these findings. Finally, we remain on track to provide an update on our drug-drug conjugate platform by the end of the year. Overall, the first quarter confirmed important points in our 2026 outlook. We are seeing solid new patient demand, improving mix toward first-line use, and continued confirmation of Iptrozy’s encouraging efficacy and tolerability profile in the real world. We believe these trends position Iptrozy well for long-term success while we continue to advance a broader pipeline designed to address significant patient needs and create additional future value. With that, I will turn the call over to Colleen. Colleen Sjogren: Thank you, David, and hello, everyone. We continue to see strong momentum in the launch of Iptrozy, and we are particularly encouraged by what we have accomplished in just three quarters, especially when viewed against relevant targeted therapy launch analogs. Based on our internal data, we have generated more new patient starts than the prior ROS1 launches combined over the same time period. We believe this early success reflects the compelling clinical profile of Iptrozy and the focused execution of our commercial team. In addition, it represents a strong foundation for long-term value creation. As David mentioned, new patient starts remained robust at approximately 200 for the third quarter in a row, and this included a greater proportion of patients initiating treatment in the first-line setting. Importantly, our internal data sources indicate that for the first time, over half of new patient starts in the quarter were TKI-naive, compared to approximately 30% in the first full quarter following launch. This continued shift from later-line to frontline use is one of the clearest indicators of the strength of the launch and is in line with what we would expect based on typical uptake trends with new oncology agents. This gives us confidence in Iptrozy’s long term because these patients respond at a higher rate, have the potential to remain on therapy for years, and contribute to a more durable active patient base over time. This dynamic is also important in understanding the discontinuation patterns we have observed, as we are encouraged by how Iptrozy’s clinical profile has translated to the commercial setting. Discontinuations continue to be concentrated among later-line patients, which is expected given the more advanced disease in this population and exposure to multiple prior therapies. As we discussed last quarter, most discontinuations are driven by disease progression in later-line patients rather than tolerability, and this dynamic can introduce some variability in near-term revenue even when new patient demand is steady. Importantly, adverse event-related discontinuations remain low and in line with what we observed in clinical trials, reinforcing the strong overall clinical profile of Iptrozy, including its favorable tolerability. Taken together, these observations, along with feedback from both patients and physicians, reinforce our view that Iptrozy is well positioned to serve patients across the ROS1 lung cancer treatment landscape and has not changed our view of the potential for Iptrozy in this setting. This increasing strength in patient mix and positive real-world feedback on Iptrozy’s treatment profile is matched by expanding adoption across both academic and community settings. We are especially encouraged by the pace of uptake we are seeing, particularly given that ROS1 is a rare disease and the prescriber base is relatively broad. Our commercial efforts continue to translate into strong physician awareness, which we believe is a meaningful indicator of successful launch execution. Based on our most recent market research, aided awareness of Iptrozy among target physicians has reached 97%, underscoring the breadth of our commercial reach and the growing visibility of Iptrozy in the market. We understand that academic and community customers have different needs, and we have been deliberate in aligning our commercial strategy with the distinct value drivers for each setting. As a result, 100% of the top 50 historical TKI accounts in the country have prescribed Iptrozy. Our broad account adoption is another important indicator of launch strength, and when paired with favorable placement on pathways and formularies, it reinforces our belief that institutions recognize the differentiated clinical profile of Iptrozy. We believe the launch progress we have seen to date also reflects the strength of a team that knows how to win in targeted oncology. We are seeing our efforts translate into meaningful account and physician traction, the result is an appreciation for the durability that Iptrozy has to offer and the openness to partnering with Nuvation Bio Inc. Taken together, we believe this positions us well to continue building momentum in the full ROS1 market over time. Lastly, we believe there is meaningful opportunity to increase the number of ROS1-positive patients who are diagnosed and treated with a ROS1 TKI today. Publications and data from the field suggest there should be approximately 3 thousand patients with advanced ROS1-positive non-small cell lung cancer diagnosed annually in the U.S. based on DNA testing. As the field shifts to using RNA- and DNA-based testing together, which may detect an additional 30% of fusions, the annual addressable population could expand to approximately 4 thousand patients. Unfortunately, although effective testing is better in most academic centers, it is currently significantly lower in parts of the community, including below 50% in some centers. To combat this, we have implemented several initiatives to partner with and educate the community on the importance of testing for oncogenic drivers. We strongly believe all patients should have the opportunity to benefit from the prolonged durability and high response rates Iptrozy has shown in the first-line setting, consistent with the NCCN guidelines issued last year. Improving patient identification is the right thing to do for patients and will be a key driver of long-term value for Nuvation Bio Inc. Overall, we are encouraged by the level of demand we are seeing, the shift towards earlier-line use, and the strength of the launch execution to date. The medical community recognizes that Iptrozy’s long durability gives physicians an important tool and offers patients the potential for long-lasting benefit with a generally favorable safety profile so they can stay on therapy for years. With an experienced commercial team, a clear strategy, and disciplined execution across the launch, we believe we are well positioned to continue building momentum and the long-term success of Iptrozy. Now I will turn it over to Philippe. Philippe Sauvage: For detailed first quarter 2026 financials, please refer to our earnings press release which is available on our website. I will highlight a few key points from the quarter. In the first quarter, we generated $83.2 million in total revenue, including $18.5 million in Iptrozy net U.S. product revenue. This represents 18% growth in net product revenue from the prior quarter, which was not only driven by yet another quarter of about 200 new patient starts, but importantly, from a growing population of active patients remaining on Iptrozy due to increasing frontline use. As you can see on this slide, the number of patients starting Iptrozy in the last three quarters has been consistent; however, due to the percentage of first-line patients increasing from approximately 30% in the third quarter last year to approximately 40% in the fourth quarter last year to now more than 50%, net product revenue has grown from $7.7 million to $15.7 million to now $18.5 million, in spite of an expected uptick in gross-to-net. We expect this trend to continue and also expect the number of new patient starts to increase as more U.S. physicians become aware of Iptrozy and testing rates in the community continue to improve. As previously mentioned, our long-term success will be driven by the exceptional duration of response with Iptrozy in the first-line setting. We are pleased that the growing number of TKI-naive patients have started our medicine since the early months of our launch. This trend, combined with our ability to grow revenue despite later-line patients dropping off Iptrozy, demonstrates the potential impact of revenue stacking going forward. Lastly, as noted, we did see an expected uptick in gross-to-net discount at the start of the year; we still expect our gross-to-net expansion to gradually stabilize from here. In addition to product revenue, we recognized $64.7 million in collaboration and license revenue in the quarter, including an upfront payment of nearly $60 million from Eisai pursuant to our partnership, which was announced in January. We also received approximately $1.7 million in royalty payments from our partnerships in Japan and China, both of which are exceeding initial expectations on a new patient starts and net revenue basis. As a reminder, talotrectinib was listed in China’s National Reimbursement Drug List, or NRDL, in January and, since then, sales from Innovent’s launch have increased rapidly. We believe this significant commercial uptake is due to a greater appreciation for effective testing in China, and we also believe this rate of adoption will translate to the U.S. market as patient identification improves over time. We continue to invest in our business and in our programs, resulting in total operating expenses of $73.5 million for the quarter. R&D expenses were $35.0 million, driven by increased investment in the SIGMA and TRUST clinical studies, and SG&A expenses were $38.3 million, primarily driven by commercialization activities. Turning to the balance sheet, we ended the quarter with $533.7 million in cash, cash equivalents, and marketable securities. In addition, $50 million remains available under our existing term loan agreement with Sagard Healthcare Partners through June 30. We also expect to receive a milestone payment of approximately $30 million from Eisai upon the approval of Iptrozy in Europe in 2027. Lastly, on the business development front, we announced our partnership with LSI in January to commercialize Iptrozy in Europe and other territories outside of China and Japan, which we discussed on our previous earnings calls. In April, we also announced the agreement with Daiichi Sankyo to acquire rights to safusitinib in Japan. This transaction made sense to us from a strategic and financial perspective, as it allowed us to fully secure global rights to safusitinib, including ownership of all clinical data and rights to future publications and data generation, without changing our expected cash runway. Acquiring full global rights will reinforce our speed of execution and now allow us to expand our commercial reach to Japan. I would like to thank Daiichi Sankyo for their efforts in developing safusitinib and for their confidence in us to take the program forward to potential global regulatory approvals. Overall, our capital position continues to provide us with the flexibility to support the Iptrozy launch, advance our pipeline, evaluate additional strategic opportunities, all while maintaining a disciplined approach to spending. We continue to believe we are well positioned to execute on our priorities without the need for additional external financing, even on our current trajectory and operating plan. I will now turn it back to David for closing remarks. David Hung: Thanks, Philippe. As we move through 2026, we remain focused on disciplined execution, continuing to build on the momentum of the launch, advancing our clinical and scientific understanding of Iptrozy, and progressing our broader pipeline. I want to thank our team for their continued commitment, our investigators, partners, shareholders, and, most importantly, patients and their families for their ongoing support. We will now open the call for questions. I will now ask the operator to open the line. Operator: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of an analyst with Jefferies. Your line is now open. Please go ahead. Analyst: Thank you. Congrats on the progress, and thank you for taking my question. Can you comment on whether the growing first-line patients are coming from the academic or the community settings? And then what specific educational field force initiatives have been implemented to accelerate adoption in the high-volume community setting? Right, adoption and basically use over the chemo-IO agent. Colleen Sjogren: Hey, Farzin, it is Colleen. I will take that one. First, we are very encouraged. We have about 97% awareness right now, and this is uniform adoption of Iptrozy across both academic and community. Most importantly, when we look at historically the top ROS1 accounts—which we have a historical list of about 50 of those accounts—100% of them have prescribed Iptrozy. So we are seeing broad adoption across all channels: academic, IDN, and community. We believe that speaks directly to oncologists being driven by the clinical evidence and TRUST data. It is so compelling that, in each channel, we are seeing really good uptake and adoption. On your question about specific initiatives to accelerate adoption over chemo-IO, one of the things we are really focused on is testing rates. This is a real challenge, and we are not dismissive of it, but we are also not passive about it. The gap between academic and community testing is very well documented, and, frankly, in some community centers, we are seeing testing rates that still remain below 50%. In our opinion, that is unacceptable from a patient care standpoint and represents a really meaningful community opportunity. What gives us confidence is that we have a targeted strategy in place. We are partnering directly with community oncology practices, investing in educational initiatives, and directly working with testing platforms to make sure comprehensive molecular testing is the standard of care and not the exception. We believe in the size of this market, we acknowledge the testing issue, and we are addressing it directly. David Hung: Hi, Farzin. This is David. To add a little more precision, the ability to get first-line patients really depends on them being diagnosed. While we have great awareness in both community and academic centers, testing rates are currently higher in academic centers than community centers. Therefore, the diagnosis of new patients is right now higher in academic centers because that is where more testing is being done. But we have already seen significant improvement in multiple community centers, and we are very heartened by that improvement in testing rates and the awareness that there is a drug that is highly efficacious, durable, and well tolerated to use when those diagnoses are made. We are excited about the change we have seen in first-line percentage—from about 30% in the first quarter after launch to about 40% and now to over 50%. That is a pretty exciting growth trajectory for us because we think it will allow us to meet our consensus expectations for the year if that were to continue. Analyst: Thank you so much. Congrats. Operator: Your next question comes from the line of an analyst with RBC Capital Markets. Your line is now open. Please go ahead. Analyst: Thanks for taking my question. I wanted to follow up on that a little bit, trying to better understand the dynamics of the new patient starts. It seems like it has been 200 for the past three quarters, and you have laid out a lot of reasons why there should be growing awareness and better testing. I am trying to understand why that has not pulled through into more new patient starts yet. For example, why the proportion is changing towards first-line, but you are not necessarily also seeing more of the later-line patients coming on as well. Is there a bottleneck somewhere? If this is something that can be helped by expanding the salesforce and hitting more prescribers, please talk about that dynamic. Thank you. David Hung: It is a great question. The main reason is that, in our early quarters of launch, we were getting mainly late-line patients—third-, fourth-, and fifth-line. Those patients can discontinue therapy in literally a month or two. Very late-line patients drop out very quickly, unfortunately, to pursue other therapies or they pass away. The reason it appears to be a plateau is not that demand is plateauing; it is that the late-line patients are dropping out very quickly. We are getting first-line patients, but those are incident cases. The prevalence pool has already been diagnosed—those are easier to find because they have already had a ROS1 diagnosis and have been on therapy—but they do not stay on very long and drop off quickly. The first-line patients have to be newly diagnosed, and that incidence pool obviously takes longer time to build. The fact that we have gone from 30% to 40% to now over 50% first-line shows we are finding those first-line patients, while the third-, fourth-, and fifth-line patients are dropping off rapidly. That should stabilize because eventually we will deplete that pool. We think we have already captured a significant amount of the late-line patients. That is why we are really focused on first-line. That is what really matters given that we now have a PFS or DOR of more than four years—50 months—which no drug is even within a year of. We think that is going to lead to revenue stacking that will really start to kick in, and we are just seeing that this year. So even with roughly the same number of new patient starts, and in spite of an increase in gross-to-net, revenue still went up 18%. If we keep the same growth rate in first-line patients that we have seen from Q3 to Q4 and Q4 to Q1, we think we should make our consensus for the year comfortably. Operator: Your next question comes from the line of an analyst with Clear Street. Your line is now open. Please go ahead. Analyst: Good evening. Thanks for taking my questions. Maybe a question on repeat prescriptions and distribution. Previously you mentioned a 70% versus 30% academic versus community split, but today you also mentioned that 100% of top 50 accounts have prescribed Iptrozy, which I assume are mostly community-based. Any insight you can provide there? Also, how does the NCCN CNS guideline inclusion help you get more first-line adoption? And on the lower testing rates in the community, are these rates lower because of lack of awareness, or are there other hurdles that could take longer to change? Colleen Sjogren: A couple of things to keep in mind. Across the top historical accounts—100% of those 50 accounts have now written Iptrozy—we see much greater usage now across community, IDN, and academic. You are right: when we first launched, we saw very fast uptake in academics. Now we are seeing just as much strength in uptake across other channels, especially in the community. Academic oncologists are driven by clinical evidence, and the TRUST data speaks directly to that. Community oncologists need practical support—reimbursement pathways, patient support programs, and confidence that their patients can tolerate therapy over time. They are now seeing all of that: the surround sound of Nuvation Connect, reimbursement pathways in effect, and our patient support programs. We believe that is directly linked to increasing uptake in the community. On testing, our accounts are increasingly prioritizing flagging mutation status. As RNA-based testing gains ground alongside DNA, more ROS1-positive patients are starting to be identified each month and year. We are laying the groundwork in education, positioning Iptrozy to benefit as identification rates improve. We are also educating on effective testing—making sure oncologists wait until they get all oncogenic driver testing back before making a treatment decision. David Hung: On the NCCN CNS guidelines, that is important because one of the most widely used previous TKIs in ROS1 was crizotinib, and crizotinib does not get into the brain. The new NCCN CNS guidelines specifically call out the CNS profile of Iptrozy, which contrasts starkly against crizotinib’s complete absence of brain penetration. About 36% of ROS1 cases have brain metastases at first diagnosis, and another 50% will progress in the brain upon first progression. It would be inappropriate to give a drug that is not CNS-penetrant. Not only is Iptrozy highly CNS-penetrant, but even in the second-line setting—often the most difficult-to-treat patients—our intracranial response rate is 66%, the highest recorded so far of any TKI in the pretreated space. That is independent of our unmatched first-line durability. We think the new NCCN CNS guidelines make it even more imperative that doctors select the right therapy. Colleen Sjogren: And, Kaveri, to add to David’s point, we have already received early feedback from HCPs that this will enhance Iptrozy’s profile and impact treatment decisions. Analyst: Very helpful. This has a lot of exclamation points. Thank you so much. Operator: Your next question comes from the line of an analyst with Truist Securities. Your line is now open. Please go ahead. Analyst: Good afternoon, David and team. Congrats on the progress and results, and thanks for taking my question. A competitor recently presented data suggesting activity in patients previously treated with talotrectinib. How would you expect treating physicians to interpret such results? Would you see this influencing sequencing decisions or Iptrozy’s positioning compared to competing or potential agents in the market? David Hung: It does have implications. First, we are delighted that new treatment options are becoming available for patients as they fail therapy. But if you look at Iptrozy’s efficacy—with a response rate of 90% and now a PFS of about 50 months—there is nothing close to it in the first-line space. Repotrectinib’s PFS is about 36 months, so you are still talking about almost a year-and-a-half difference. In the second-line setting, with our DOR approaching 20 months and a response rate of 56% without excluding any oncogenic drivers—and an intracranial response rate of 66% without excluding any oncogenic drivers—there are no agents today that can claim numbers that match those. When a competitor has data in the third-line setting showing response after Iptrozy fails in the second-line setting, we are delighted that patients have another option in the third line. The competitor you are referring to received Breakthrough Therapy designation in the third-line setting, while Iptrozy received Breakthrough Therapy designation in the first- and second-line settings. We think things are playing out as the FDA initially saw them: Iptrozy will be used in the first- and second-line settings; other agents are needed in the third line, and we welcome that because that is what patients need. Operator: Your next question comes from the line of an analyst with B. Riley. Your line is now open. Please go ahead. Analyst: Good afternoon, team. Thanks for taking our questions. Building on the prior point of how Iptrozy is now considered relative to crizotinib and how entrenched positions could shift with additional market education—how relevant is the development of new CNS meds to the clinicians you talk to? And could you comment on dose interruptions or reductions tracking in frontline patients versus later lines? And on a go-forward basis, since new patient adds may not be a very relevant metric, what should we focus on—updates on first-line proportion, durability, gross-to-net—to think about modeling beyond 2026? David Hung: CNS is highly relevant. ROS1 NSCLC is aggressive not only in tumor growth but also in where tumors go. More than a third of patients have brain metastases at diagnosis, and in 50% of cases, upon progression, the brain is the first site of metastasis. That makes it imperative to have CNS coverage as early as possible with an agent that has proven long-term efficacy. Our intracranial response rate in the second-line setting is 66%, our duration of response in second line is about 20 months, and overall survival approaches three years—no other agents have published data close to that. In first line, the difference is even more pronounced: there is no agent remotely within Iptrozy’s 90% response rate and 50-month PFS. Regarding dose reductions and interruptions, the drug is well tolerated. We are not seeing anything new in the real world that we did not see in clinical trials. Dose reduction and interruption rates in practice are essentially what we saw in clinical trials. On efficacy, it is early to quantify real-world durability, but we expect similar performance to trials—about 50 months in first line and roughly 20 months in second line—based on what we see so far and physician feedback. Philippe Sauvage: On the forward-looking metrics, the key driver is the build-up of first-line patients and the resulting revenue stacking. We grew first-line patients by roughly 35% from Q3 to Q4 and again by about 35% from Q4 to Q1. If we keep increasing at that rate from Q1 to Q4, we will hit consensus; if we do better, we can beat consensus. The apparent stability in total new starts reflects two opposing dynamics: first-line patients increasing quarter after quarter, while the finite pool of late-line patients drops off faster. Looking ahead, we will keep talking about first-line build, given the incredible tolerability and durability that help patients stay on therapy a long time and help us progress quarter after quarter. On gross-to-net, Q1 typically sees an uptick due to price changes and mix effects such as 340B and Medicaid. Our gross-to-net increased a few percentage points this quarter as expected. We continue to expect stabilization around the high-20s to roughly 30% over time. There are no surprises here—no surprises on GTN, patients, or operating expenses—everything is tracking as we anticipated. Operator: Your next question comes from the line of an analyst with TD Cowen. Your line is now open. Please go ahead. Analyst: Thank you so much, and thanks for all the detail. As the proportion of first-line, treatment-naive patients rises from 30% to 40% to now over 50% of new starts, can you give us a sense of what percentage of total on-therapy patients are treatment naive at this point? And on gross-to-net, should we assume you will be in the high-20s and stabilize there this year, given it was around 25% last quarter? Philippe Sauvage: On your first question, yes, the proportion of first-line patients among new starts is increasing quarter after quarter, and we expect that to continue. We have limitations on exact real-time data for the full on-therapy base, but you can estimate based on first-line growth rates and the drug’s favorable tolerability profile, plus the late-line versus first-line discontinuation dynamics we described. On gross-to-net, it is fairly mechanical. Increased 340B and Medicaid exposure and the inflation-linked price dynamics drive gross-to-net higher by roughly the amount of the price increase for those segments. We expect to stabilize around ~30% as the mix normalizes and inflation dynamics flow through. This is aligned with what we said previously. Operator: Your next question comes from the line of an analyst with JonesTrading. Your line is now open. Please go ahead. Analyst: Thanks for taking my questions. How is the duration of therapy in first-line patients comparing to your expectations based on clinical trials? And with the recent NCCN additions, do you expect a noticeable inflection, or is that more of a background tailwind? David Hung: It is still early, but first-line patients are clearly staying on longer, which is reflected in revenue growth and the growing active patient base. We expect an average of over four years, consistent with trials, and so far discontinuations are predominantly in late-line patients, as expected. Philippe Sauvage: Side-effect profiles are aligned with clinical trials, so there is no reason for adverse events to drive early discontinuations. David Hung: On the NCCN updates, there is usually some lag. The first NCCN change a year ago—clarifying that IO is contraindicated—took time to shift practice. The CNS guideline may be appreciated sooner given high awareness that ROS1 is brain-tropic. In any case, it is a positive tailwind consistent with Iptrozy’s profile. On issuing annual sales guidance, now that we have hundreds of patients and a clearer growth trajectory, we would be willing to consider providing guidance at some point in the future. Operator: Your final question comes from the line of an analyst with Citizens Bank. Your line is now open. Please go ahead. Analyst: Thanks for taking the question, and congrats on the results. We have gotten a lot of color on CNS efficacy. Could we get the team’s perspective on comparing talotrectinib’s CNS profile to emerging clinical candidates rather than already approved ones? And does the NCCN CNS guideline reinforce the benefit here? David Hung: The nearest not-yet-approved competitor has reported an intracranial response rate of about 45% in the second-line setting, with exclusions. Our intracranial response rate is 66% without excluding oncogenic drivers. Against approved TKIs, Iptrozy’s intracranial activity is also higher. So, based on available data today, Iptrozy’s CNS activity compares favorably, and the NCCN CNS guideline does reinforce that benefit. Operator: Your next question comes from the line of an analyst with UBS. Your line is now open. Please go ahead. Analyst: Hey, thanks for squeezing us in. A quick one on the IDH1 program. Could you remind us of the standard of care in the high-grade glioma setting? And what PFS or ORR would be clinically meaningful in the broader population and in the subset that could read out next year? What would a good result look like, and what could the next steps be? David Hung: The SIGMA trial is a placebo-controlled study. There is absolutely nothing approved for the management of high-grade IDH1-mutant glioma. Management today is surgery for tumor debulking, radiation, and chemotherapy, with limited effectiveness. For response rate, anything north of 20% would be clinically meaningful in an indication with no approved therapies, and we would go to the FDA to discuss an approval pathway. For grade 3 oligodendroglioma—less aggressive than grade 4 astrocytoma/GBM—we would expect higher response rates, and again anything north of 20% we believe would be of strong interest to the FDA given the lack of options. We feel good about this based on data presented so far. Operator: There are no further questions at this time. I will now turn the call back to David for closing remarks. David Hung: Thank you all for your support. We are really excited about what we are seeing with the Iptrozy launch—it has gone pretty much as we had hoped—and we cannot wait to report our next quarter’s results. Thank you very much. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by. My name is Jordan, and I will be the conference operator today. At this time, I would like to welcome everyone to the Q1 2026 Ameresco, Inc. Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Leila Dillon, Chief Marketing Officer. Please go ahead. Thank you, and good afternoon, everyone. Leila Dillon: We appreciate you joining us for today’s call. Our speakers on the call today will be George P. Sakellaris, Ameresco, Inc.’s Chairman and Chief Executive Officer; Mike Backus, who will become the CEO of Neogenix Fuel; Nicole Bulgarino and Lou Maltezos, newly appointed co-presidents of Ameresco, Inc.; and Mark A. Chiplock, Chief Financial Officer. In addition, Josh Barabow, our Chief Investment Officer, will also be available during Q&A to help answer questions. Before I turn the call over to George, I would like to make a brief statement regarding forward-looking remarks. Today’s earnings materials contain forward-looking statements, including statements regarding our expectations. All forward-looking statements are subject to risks and uncertainties. In particular, some of the commentary is predicated on the expected closing of the Neogenix Fuels transaction. Please refer to today’s earnings materials, the safe harbor language on Slide two of our supplemental information, and our SEC filings for a discussion of the major risk factors that could cause our actual results to differ from those in our forward-looking statements. In addition, we use several non-GAAP measures when presenting our results. We have included the reconciliations of these measures and additional information in our supplemental slides that were posted to our website. Please note that all comparisons that we will be discussing today are on a year-over-year basis unless otherwise noted. I will now turn the call over to George. George? Thank you, Leila. George P. Sakellaris: And good afternoon, everyone. I am pleased to report that we had a solid start to the year, with the Ameresco, Inc. team delivering 14% revenue growth, despite experiencing adverse weather conditions affecting several of our RNG facilities. New business also remained quite strong, with 20% growth in awarded backlog, against a backdrop of significant activity, especially with the federal government. We also announced several important corporate actions which we have taken to better position ourselves for substantial future growth opportunities while also maximizing shareholder value. Today, after the market closed, we announced the signing of a transformational agreement with HASI for a $400 million strategic investment in our biofuels business. This agreement will create a newly formed joint venture named Neogenix Fuels. Ameresco, Inc. has been a leader in the biofuels industry for the last 25 years. When completed, this transaction will enable us to monetize a portion of the $1.8 billion enterprise value that we have created in our biogas business. Of the $400 million commitment from HASI, $300 million will be directly invested in Neogenix Fuels to drive business growth, and $100 million will be direct compensation to Ameresco, Inc. for the existing business, which would be used for strategic opportunities, working capital, and deleveraging throughout the year. I would like to turn the call over to Mike Backus, a member of my management team for nearly 30 years and who will become Chief Executive Officer of Neogenix Fuels, to comment on this exciting introduction. Mike? Thank you, George. Good afternoon, everyone. First and foremost, I very much appreciate the confidence and trust that George and HASI leadership have bestowed on me to take the helm of what we see as a transformative business. As many of you are aware, I have been leading Ameresco, Inc.’s biogas business since the founding of the company, helping to create one of the country’s largest greenfield developers of biogas projects. We are thrilled to be taking the next step in this evolution along with our long-term partner, HASI, with the creation of Neogenix Fuels, which will be 70% owned by Ameresco, Inc., and 30% by HASI. As part of the transaction, Ameresco, Inc. will contribute its operating biogas assets along with one of the most robust development pipelines in the industry. The organization will be staffed by Ameresco, Inc.’s seasoned team of biogas veterans. Both Ameresco, Inc. and HASI recognize the tremendous opportunities to deliver resilient energy and biofuel solutions while building the foundation for renewable molecules and next-generation drop-in fuels of the future. This transaction represents a combination of Ameresco, Inc.’s proven history and expertise in successful biogas development with HASI’s deep sector financial knowledge and scalable capital platform. We see this partnership as positioning Neogenix to become a global industry leader in the next generation of fuels as our addressable market continues to expand. As noted, we have a signed agreement and expect the timely close to the transaction. George, I will turn the call back to you. George P. Sakellaris: Thank you, Mike. We are very excited about this transaction, which I believe not only recognizes the tremendous tangible value of our energy assets, but also positions Ameresco, Inc. to better drive long-term profitable growth. And also during the quarter, we strengthened our corporate structure to position us to fully execute on our great growth opportunities. We recently promoted proven leaders, Nicole Bulgarino and Lou Maltezos, to co-presidents of Ameresco, Inc., and Peter Grisakas to Chief Operating Officer. Lou and Nicole both came to Ameresco, Inc. 22 years ago with our successful Duke Solutions acquisition. As co-presidents, Nicole and Lou will work closely with me on Ameresco, Inc.’s continued growth strategy while at the same time maintaining clear and distinct areas of operational focus. The easiest way to understand the operational alignment is to look at our current project business, which is split evenly between energy infrastructure and building efficiency. Nicole is responsible for the energy infrastructure half of the business while continuing to guide the company’s federal solutions business. Lou focuses on the building efficiency side, overseeing the core non-federal projects. Now I will ask each of them to comment on some of the market dynamics in their respective area. Nicole? Nicole Allen Bulgarino: Thank you, George, and good afternoon, everyone. Ameresco, Inc.’s federal business continues to be a core strength of the company. We see strong demand across our traditional federal programs, including energy efficiency and infrastructure modernization with long-term ESPC and design-build work. Ameresco, Inc.’s military and civilian federal government customers remain focused on upgrading buildings, improving reliability, reducing life-cycle costs, and hardening critical facilities, and I am pleased to note a nice uptick in federal government proposal activity over the last year. Ameresco, Inc.’s longstanding relationships, technical expertise, and proven execution track record position us well to continue delivering strong results in this important market. In parallel, we are seeing great demand for our energy infrastructure solutions. We have built a strong pipeline of large and complex projects, including transformational data center opportunities. This activity is being driven by growing demand for on-site reliable power solutions where access to utility power is constrained or delayed. We are approaching this market with discipline, focusing on larger, experienced developers and projects where Ameresco, Inc.’s behind-the-meter capabilities can provide clear value. While still disciplined in what we advance, we are encouraged by the quality and the scope of opportunities we are pursuing and how they are progressing. I will now turn the call over to Lou. Thank you, Nicole. Lou Maltezos: It has been a very exciting time for our project business, with our long history and expertise in providing building efficiency solutions. For many of our customers, energy represents one of their single largest operating expenditures. More and more, our customers are experiencing spiking electricity prices, leading to heightened interest in energy efficiency solutions. In addition to these challenges, many customers have older, often outdated buildings with limited capital budgets to pursue new construction. So upgrading their existing facility is not only the best economic option, but it is often their only option. The cost savings generated from our energy efficiency upgrades can then be reinvested in a laundry list of facility improvements, all done by Ameresco, Inc. As electricity prices rise, energy efficiency investments drive much faster returns, allowing our customers to tackle more and more improvement. This enables Ameresco, Inc. to execute larger, more comprehensive projects. As one of the largest energy services companies in North America, Ameresco, Inc. should be a main beneficiary of increasing energy costs for years to come. I will now turn the call back over to George for a few brief comments before Mark covers our financials. Thank you, Lou. George P. Sakellaris: Before we turn to the financials, I want to step back and connect the themes you have heard over the last few minutes. We see the creation of Neogenix Fuels with HASI as a clear validation of the scale and value we have created in our biofuels platform, while also bringing in a strong long-term partner and incremental capital to accelerate the next phase of growth. At the same time, the leadership updates we announced reflect the depth of our bench and our focus on continuity and execution as we scale, positioning Mike to lead Neogenix Fuels and elevating Nicole and Lou as co-presidents to sharpen execution across our energy infrastructure and building efficiencies business. Together, we see these actions strengthening our operating model, enhancing our ability to deploy capital and talent where returns are most attractive, and keeping Ameresco, Inc. firmly on the same strategic path: delivering durable growth while creating long-term shareholder value. With that, I will turn it over to Mark to walk through the core financial results and guidance reflective of the Neogenix Fuels transaction. Mark? Mark A. Chiplock: Thank you, George. We had a solid start to the year, with total revenue of $[inaudible] million, up 14% year-over-year, reflecting broad-based growth across our core businesses, and led by continued strength in Projects and O&M. Project revenue increased 16% to $291 million, driven by solid execution across federal and key geographies as well as continued demand for both building efficiency and energy infrastructure solutions. Importantly, business development activity remained very strong. Awarded project backlog grew 20% to $2.8 billion, with over $500 million of new awards during the quarter, bringing our total project backlog to $5.3 billion. We continue to see a healthy pipeline of opportunities and strong proposal activity, particularly in the federal market. Energy Asset revenue grew 7% to $61 million, supported by the continued expansion of our operating portfolio. We did see some weather-related impacts at certain RNG facilities during the quarter, but the underlying performance of the portfolio remains strong. Our operating energy asset base now stands at 838 megawatts, with 568 megawatts in development and construction, positioning us well for continued long-term growth. As we continue to scale this platform, we are increasingly focused on both the operational performance and the capital efficiency of our asset strategy. In line with that strategy, and as George highlighted, we entered into an agreement to sell a 30% equity interest in our biofuels business. Of the $400 million commitment from HASI, $300 million will be directly invested in Neogenix Fuels to drive business growth, and $100 million will be direct compensation to Ameresco, Inc. for the existing business, which will be used for strategic opportunities, working capital, and deleveraging throughout the year. This transaction implies a post-money enterprise value of approximately $1.8 billion and recognizes the tremendous value embedded within our energy asset portfolio. In addition, it will allow us to retain control of the platform and bring in a trusted partner to help fund future growth, which will allow us to continue scaling the business in a capital-efficient manner. Turning back to the financials, O&M had another strong quarter, with revenue up 22%, driven by the continued additions of new long-term contracts. Our long-term O&M backlog now exceeds $1.5 billion, reinforcing the visibility and durability of this revenue stream. Gross margin of 14.1% reflects project mix along with the impact from adverse weather conditions at certain RNG sites. We continue to make targeted investments in people, project development, and execution to support future growth. These investments drove operating expenses to $46 million during the quarter. Net interest and other expenses were slightly higher than expected, driven primarily by $1.8 million of non-cash mark-to-market impact and approximately $1 million in foreign exchange losses. Net loss attributable to common shareholders was $18.3 million, with a GAAP EPS loss of $0.35 per diluted share and non-GAAP loss per share of $0.33. Adjusted EBITDA of $40.5 million was in line with the company’s expectations. Turning to our balance sheet, we ended the quarter with $104 million of unrestricted cash. Total corporate debt was $417 million, reflecting our investment in working capital to support continued growth across both our project and energy asset businesses. In the quarter, our senior secured lenders reaffirmed their confidence and commitment to Ameresco, Inc. by increasing our term loan by $45 million. Our corporate leverage was 3.2 times, which remains below our 3.5x covenant. Our cash generation remains solid this quarter, with adjusted cash flows from operations of approximately $62 million. On a longer-term basis, our eight-quarter rolling average adjusted cash from operations was approximately $57 million. Now turning to guidance. Given our solid start to the year and strong visibility, we would have been reaffirming our 2026 guidance, but in anticipation of the closing of the Neogenix Fuels transaction, we are updating our full-year guidance to reflect the expected impact on our reported results. Given the structure of the transaction, we plan to consolidate Neogenix Fuels, and therefore our revenue guidance remains unchanged. Thirty percent of adjusted EBITDA and net income from the biofuels business will be attributable to HASI and reflected as noncontrolling interest. Consistent with this, our operating assets and assets-in-development metrics will reflect our 70% ownership, and the 100% of Neogenix Fuels’ assets and liabilities including all related project-level debt. HASI’s 30% ownership will be reflected as a noncontrolling interest within shareholders’ equity, representing their share of the JV’s net assets. We continue to anticipate placing approximately 100 to 120 megawatts of total energy assets in service, including two RNG plants. Expected CapEx is $300 million to $350 million, the majority of which is expected to be funded with a combination of energy asset debt, HASI’s investment, tax equity, and tax credit sales. The revenue cadence for the remainder of the year is expected to follow our historical seasonal pattern, with results weighted towards the second half. We expect the second half to contribute approximately 60% of total 2026 revenue, consistent with recent year performance. And finally, for the second quarter, with the expectation that the Neogenix Fuels transaction will close in the quarter, we expect adjusted EBITDA of $58 million to $62 million and non-GAAP EPS of $0.18 to $0.23. Now I would like to turn the call back to George for closing comments. George P. Sakellaris: We are not only off to a solid start in 2026, but we are also taking decisive steps to position the company to thrive long term and build shareholder value. We look forward to seeing many of you at upcoming meetings and conferences. In closing, I would like to once again thank our employees, customers, and stockholders for their continued support. Operator, we would like to open the call to questions now. Operator: We will now open the call for questions. In order to ask a question, press star followed by one on your telephone keypad. Please limit yourself to one question and one follow-up question. Your first question comes from the line of Craig Aaron from ROTH Capital Partners. Your line is live. Analyst: Good evening, George. Congratulations on another really foundational move for the company with the investment in Neogenix here. We have advocated for this for years, and it is really just a fantastic thing that I think will generate a lot of value for your company. So congratulations. George P. Sakellaris: Thank you. Thank you, Craig. Analyst: As we look at the value of Neogenix, you know, a lot of people know that Mike has been incredibly loyal to your company, having built your asset portfolio from his early days, I guess, at Duke Solutions. Right? And it seems that the multiple that you are using for the enterprise value might be kind of at the low end of the range versus what some of the other public competitors are trading at. If you were to use a public mark for the valuation of this business, what are the features of this business that you would point people to that would have you compare this to some of your peers that seem to trade at a better than 15x multiple? George P. Sakellaris: Well, we went out and we spent over a year evaluating the company and looking at various proposals and so on, and we think we got a very fair valuation for the company. And the fact that we are only selling 30% is because with the additional investment that we will make in the company, the $300 million coming into it, we will accelerate development. We have almost 10 projects under development right now, and it will help us accelerate the development. At the end of the day, we will substantially increase the value and become much more significant. And Josh did lots of the analysis. I think you might want to add some color to that. Joshua Riggi Baribeau: Sure. Yeah. So one of the reasons we did this transaction and, of course, got board approval and we had a lot of brainpower behind the advisers we used is because we actually believe this is in line, if not above, market multiples. We are at over 20 times post-money valuation on the $1.8 billion. So again, we believe that is significantly greater than Ameresco, Inc. was trading prior to this, as well as what a lot of the prior transactions in the market—either public comps or transaction multiples in the past three, four years in the space—have been. So we are very comfortable that we created a lot of value here and unlocked a lot of value. Analyst: Congratulations on that. The next question is also not really about the quarter. For the last many years—how long it has been, I guess, 10, 15 years—investors have had a hard time separating out the debt related to your ESPC receivables financing. There has been constant debate about do we take it out, do we leave it in. We have been squarely in the camp that you take it out because it is nonrecourse debt. It is debt where the federal government is the agency recourse there. You have never had a project not accepted by the federal government. You handled one of the biggest issues today with Neogenix that I think will drive value for the company over the long run. This is another key thing that I know that you have been bringing some creative ideas to over the last many years. Is it possible that we see this other point of structural confusion in the market—similar changes that might allow a cleaner valuation on Ameresco, Inc. versus its peers so people can see how clearly your company is undervalued? George P. Sakellaris: Yeah. We will go back and convince the SEC to change the way we were doing it before. You know? And you have a good point, Craig. No question about it. It is nonrecourse debt, and it should not show up as people combine it, and they indicate that the company will be over-leveraged when indeed it is not. So Mark, I might want to ask you to add color. We will not geek out on the accounting with our GAAP account, Mark A. Chiplock: But the federal ESPC—I mean, the contract structure, I think, that the federal government likes to use—certainly, Nicole can speak more to that. So yeah, I think we are constrained a little bit, and I think some of the complexity is just really how we need to report this, not only on the balance sheet but coming through the cash flows. But we do not consider this to be debt, and so we do not include it in our reported debt in our metrics. But I do not know, at this point—I guess you will be able to tell us—you know, we see that changing of the contract structure. I do not see any. You know, it might not be a bad idea to start George P. Sakellaris: Think about it and see if maybe we can do something. Yeah. Analyst: Excellent. Excellent. If I could squeeze in one last question. Your EBITDA dollars are $1 million ahead of consensus, $2 million ahead of us in this quarter. You mentioned some weather headwinds that impacted things a little bit in the first quarter. Clearly, the federal business is not facing some of the potential issues from the shutdown. Everything is tracking in line. Were there any particular closeouts or big wins or big pieces of book-and-burn business that maybe contributed to the strength in the quarter, or is this just indicative of a strong start to the year? George P. Sakellaris: It was a strong start for the year, and probably, I would say, $20 million to $30 million of next quarter revenue that we pulled into this quarter. But the weather, though, did have a major impact. We had the freeze-up on three of our RNG plants, and that was for at least a couple of weeks, Mike, or more. So we would have had an excellent quarter if that had not happened. And then, of course, the snow cover—we had more snow this season than we did the last couple of seasons. And that did not help some of the solar farms that we had. Even on the construction side, some of the solar farms, we could not get in. We had to demobilize, remobilize. But anyway, not a one-time pickup. Mark A. Chiplock: I think it was purely mix that in a way helped to some of the impacts, but nothing unusual or one-time from a closeout perspective. Yep. Analyst: Great. Well, thanks for taking my questions and congratulations on these big changes. Operator: Next question comes from the line of George Gianarikas from Canaccord Genuity. Your line is live. George Gianarikas: Hi, everyone. Good afternoon, and thank you for taking my questions. Again, maybe to focus on Neogenix. What are the plans that you have in place to accelerate growth? And are there any additional plans to maybe go public with this asset as well? Thank you. George P. Sakellaris: You know, we always look at opportunities to maximize value. And if Craig is right, we grow it, get it to a large enough size, and then we will look at opportunities, no question about it. And as far as the money that we will invest, the $300 million, no question about it, we will accelerate the growth. Right now, we are building a couple of plants a year. I think it will take us probably a couple of years at least to get to about four plants a year, and maybe we could do a little bit better than that as we go down the road. But as you know, to permit some of these plants, it takes a couple of years. So you are not going to see anything till late 2028 and beyond. But the plan is to accelerate the growth, double up. And then Mike might want to add some more color—some other opportunities that we are looking at—that will help us accelerate the growth. Mike Backus: Yeah. And, George, just from me again. Look. There is a tremendous amount of opportunity, I think, in our space to see some consolidation. And so there is a fair bit of, I think, platform—small—that might do M&A and help us grow the business in addition to our organic growth. As you know, to date, our portfolio has been 100% greenfield. We have not acquired anything yet. I also think that the market has really started to transition to more of a global opportunity, and I think the capital will allow us to expand our resources to potentially export some of our product that we produce today. George Gianarikas: Thank you. And maybe as a follow-up on the cash. So you are expecting $100 million of cash from the transaction internally to Ameresco, Inc. And if I may bring this up, at some point, you are going to get, if our math is correct, about another $100 million from the SEC deal. So you will be, I would argue, at a corporate level at least, relatively underlevered. What are your plans for that about $200 million of cash infusion? George P. Sakellaris: I can start. Look. One of our business plans is to have sufficient cash in order to be able to accelerate the growth of this company. We have been growing in the high single digits, and we want to add a few percentage points to that to get over the 10% threshold that we have established as a goal internally. And then we know—we added a substantial amount of resources in expanding our, what I call, the large energy infrastructure projects, like data centers and so on and so forth. And that is why the OpEx picked up for the first quarter, because so many of these people charge into OpEx now rather than capitalizing the cost. And then, of course, we have Europe. We have quite a few opportunities where we can expand our market and our reach. And then, of course, if there are some strategic acquisitions, we will always be looking at them, and that, of course—rather than hiring one person at a time—when you buy a particular company, especially if they have the human resources that we will need, it will help us accelerate the business. And then to point out— Mark A. Chiplock: I will not add too much, except what George said. I think we will take a balanced approach, George, if you look at this. I mean, this is going to be a great place for us to be when we start talking about that cash and the flexibility it will give us. So, certainly, we will focus on supporting working capital, but we will selectively delever throughout the year. We are going to want to give ourselves plenty of dry powder to stay flexible for opportunities. So yeah, this is going to be a good place for us to be. We are looking forward to all of this coming in. George P. Sakellaris: Thanks. Operator: Your next question comes from the line of Dhrushant Alani from Jefferies. Your line is live. Analyst: Hi, team. Thanks for taking my question. Maybe just to follow up on the prior comment there. Maybe could you share the timeline that would take for you guys to cross over that 10% hurdle or threshold that you have set for top line, and then maybe specifically—you touched on some of the key drivers—but what would be more imminent if you had to discuss that? Mark A. Chiplock: Yeah. So maybe just some clarity on the question. You are talking about the top line 10% growth? Analyst: Yep. Mark A. Chiplock: Yeah. I mean, I think that is just going to come down to execution. We feel really comfortable in the plan we put in place for the year and the visibility we have coming out of our backlog, especially with the Projects business. So yeah. I mean, that is why we said in our remarks we would have reaffirmed guidance, and revenue does not change in any of this with the transaction. So I think our plan this year probably puts us right around that 10% growth year, and we feel pretty confident about that. Analyst: Got it. And then maybe just another question on—I know you guys talked about tax equity earlier in your comments. Have you seen any slowdown in tax equity in terms of if there have been any FIAC concerns on tax equity that have been impacting your projects? I know that we have heard some comments around FIAC for tax equity, but I do not know if that has been impacting you or not. Joshua Riggi Baribeau: The compliance around FIAC—this is Josh—the compliance around FIAC has been more of the concern, more so than a pullback in availability. We are probably not large enough to source those mega tax equity funds or syndications that some of those sort of tier-one utility-scale developers are, or that we have also been hearing have been pulling back. We use a mix of transferability, which we are tapping into bank markets as well as corporate, and we use smaller regional banks as well as large life co’s. So we have a pretty diversified pool of tax investors or tax equity, and so far, given the strength of our pipeline, our reputation, and probably even the fact that our appetite is not huge, we have not seen any meaningful pullback because of that. Analyst: Got it. Thank you. Operator: Your next question comes from the line of Ben Kallo from Baird. Your line is live. Ben, your line is live. Benjamin Joseph Kallo: Hi. Sorry about that, guys. So a couple quick ones for me. Congrats on the JV. First, if pricing is impacted, could you just maybe talk to it—just from the amount of natural gas that is being demanded to power data centers. Maybe it is a completely different market. Maybe talk to that, and then I have a follow-up. Analyst: Second question, Peter. Peter? Joshua Riggi Baribeau: Well, Ben, this is Josh. Let me see if I can reiterate the question. You are wondering if the price of natural gas impacts the end market for renewable natural gas, based on either data center demand or other— Analyst: You know, will demand any RNG, or if that changes the market at all. Well, or if the data center— Mike Backus: Yeah. I mean, I will say if you are tracking some of the stats, I think there was a whole host of projects—I think almost 200 data center projects—that have been in jeopardy because of community groups. And so a lot of data centers are looking to green their power supply to get through the concerns of some of the local community groups. So we have seen an uptick in interest in fuel, and I think part of it is it is a baseload security supply. The RNG, it is all local. So that has a lot of interest versus intermittent resources. Analyst: Okay. A follow-on just on data centers. You guys talked about being targeted and selective. Maybe could you just talk more about where you would play in data centers, and then also if you could just mention any kind of more work you are doing with military bases as well and data centers related to the U.S. government. Thank you. Nicole Allen Bulgarino: Yeah. So this is Nicole. To answer your second question first, we are continuing our strategy of working on military land because we feel like it is a great position for data centers to be located on. It has fewer land permitting requirements than commercial properties do. It is also usually away from communities and on secure military bases, which is another plus in the field. And certainly the ultimate tenant there serves nicely for the government IT. So that is top of our strategy, but also we are working with a lot of commercial developers who need to bring power and land solutions to the market. And we are seeing that across lots of states right now because of the constraints from the grid. And that is our specialty—doing these behind-the-meter microgrid, eventually-to-connect-to-the-grid future solutions as well. Operator: Great. Thank you, guys. Analyst: Uh-huh. Thanks, Ben. Operator: Next question comes from the line of Eric Stine from Craig-Hallum. Your line is live. Eric Stine: Hi, everyone. This is—so, obviously, I know it would be in a different form, but any thoughts about something like the joint venture that you are forming for RNG and doing that in the data center space? I know that your first award, I believe, you are counting 10% or so of the megawatts in your backlog with the expectation that you would have a partner in some ways. So just curious. I mean, is there a path to having—rather than each project maybe a separate—do you have a defined partnership where you can accelerate that? George P. Sakellaris: Yeah. Definitely, Eric. We are looking into it. We are talking to several people, but we do not have anything concrete to announce yet. When we are ready, we will do it. But the data centers, as you know, require a rather substantial amount of capital, and even on the development stage. And so it will be good to have somebody with deep pockets that will help us accelerate the development of those data centers. Yep. Eric Stine: Okay. And the larger infrastructure projects that you are developing and building, like we are doing the hydro plant up in Alaska, the wind farm up there, and so on—that is the infrastructure business. We are getting pretty good traction into it, in addition to the data centers. It is a good question, and we are looking into it. I will definitely stay tuned. I guess maybe my follow-up—just curious. You touched on this a little bit last quarter. But after the award that you made back in—I believe it was September—you know, I come and get the question, you know, when is the next order? So I know these projects take time. I know often that these are greenfield situations where you need to wait for the data center to even be built out before you start your work. So could you maybe just touch on the typical project you are going after and why maybe that timeline is a little longer than other parts of your business? Nicole Allen Bulgarino: Yeah. I mean, I think you have already kind of highlighted it very well. These are complex projects, and it is not just the power side, but it is also the data center side itself and getting the right specs for the tenants that they are serving, and then matching that with the power that we can put there, matching that with the permitting, the air permitting that is required, the gas supply, the future interconnection. There is a lot of complexity there. So our pipeline consists of a lot of projects that are in various stages—some very far in development that we have been brought into for the power specifically, others we are developing together on the land side to bring solution there. When you are talking with a large amount of capital required that George mentioned, these are complex projects and just require a lot more—I mean, our normal assets require a lot of development in there, but again, having a diverse pipeline will help us hedge against when these start coming online. Eric Stine: Got it. That is very helpful. Thank you. George P. Sakellaris: Thank you. Operator: Next question comes from the line of Manish Somaiya from Cantor. Your line is live. Manish Somaiya: Thank you. Thank you for taking my question. Mark, you mentioned 60% of the earnings are in the second half. Maybe if you can just talk about the biggest execution milestones embedded in the second half outlook? Mark A. Chiplock: I mean, we have great visibility coming out of contracted backlog, which just becomes our ability to execute conversion of that. And then there is a portion of that coming out of our awarded backlog that will require us to convert that to sales, get to a contract, and then start executing on that revenue. We drive that forward-looking view based on the best visibility we have coming out of the backlog. We feel pretty confident not only based on the mix of what is coming out of the backlog but with our ability to execute. Manish Somaiya: Okay. And then the $522 million of new awards that you had in the quarter, maybe you can just talk about where you see the biggest opportunities going forward? Nicole Allen Bulgarino: Certainly a lot of it is on the federal side. We have seen an uptick in activity for infrastructure modernization with GSA, with VA, even with the Department of War. So we are seeing new activity and modifications in the federal government. We also, again, on the power infrastructure side of this, are providing new projects for electrical distribution and for other generation-type projects as well. Lou Maltezos: Yeah. Alright. I think in the rest of the projects business, we are also seeing a lot of increased demand. I mentioned in the comments that electricity prices are increasing pretty dramatically for some of our customers. That is creating a real motivation for them to get to the table and look at projects that might have been borderline in the past. Manish Somaiya: Super helpful. Thank you so much. Congrats again on the JV. George P. Sakellaris: Thank you, Manish. Operator: As a reminder, if you would like to ask a question, press 1 on your telephone to ask a question or rejoin the queue. Next question comes from the line of Ryan Pfingst from B. Riley Securities. Your line is live. Ryan James Pfingst: Hey, guys. Thanks for taking my questions. Mark A. Chiplock: Hey, Ryan. Ryan James Pfingst: Hey there. Mike, it would be great to hear your view on the recently finalized RVO and any expectations you might have for D3 pricing. Mike Backus: Yeah. I think the EPA was focused on trying to get an RVO set that meets market conditions, and that is why I think we have seen the rates have been pretty steady—between $2.40 and currently, I think today was around $2.51. And I think what you are going to see if you think about where the market expansion and what is going on in the industry—we are starting to see more gas go to Canada. California is going to start seeing more gas go through their program, which is a non-RFS, SB 1440. You are going to start seeing more go to Europe. So you have some of the gas leaving the RFS program, which will just create more demand to fulfill the RVO. So I think we were happy with where it ended up on the volume. Ryan James Pfingst: Appreciate that. And then turning to the data center opportunity, are there any updates or milestones that we should look for around the CyrusOne project as that one moves forward? Nicole Allen Bulgarino: I mean, we are continuing to develop that, work with the timing of when the data center can be built and constructed as well, because that needs to match up with the energy build as well. We are continuing to refine those dates and when they can come online together. But in the meantime, we are continuing to work with Cyrus on other opportunities as well. Ryan James Pfingst: Great. Thanks, Nicole. I will turn it back. Operator: Your final question comes from the line of Noah Kaye from Oppenheimer. Your line is live. Noah Duke Kaye: Alright. Great. Thanks for taking the questions. I want to start by congratulating Nicole and Lou and Mike on your new roles and responsibilities. Just great to see how you all and how the company has kind of continued to grow over the years. So I wish you all a lot of success. Let me ask a question, or two questions, on the JV. I just want to make sure I got this right. I guess the comments imply something like a $90 million EBITDA profile for the platform—that is where it is running for 2026. First of all, is that right? And then I guess with 74 megawatt-equivalent in the development pipeline, where does that kind of grow to, do you think, over the next three years? Because that pipeline is usually what you expect to bring online in the next three years. Joshua Riggi Baribeau: This is Josh. I will start with the valuation. If you just look at what we have to back out for noncontrolling interest at 30%—so $22.5 million at midpoint divided by 0.3—it is more like a $75 million type of number at the midpoint for this year. Mike, in terms of growth and pipeline? Mike Backus: Yeah. I mean, you are pretty spot on. Typically, we have visibility three years out on our pipeline, which is what we have now with the 11 projects in development, and we continue to add to that pipeline. So right now, we have good visibility through 2029, and we are working on some new awards right now that we would expect to build into that 2030 time frame and beyond. Noah Duke Kaye: Okay. Thanks. And then I guess the follow-up is as the platform continues to grow in size, just how should we think about the ability to further recycle capital or monetize? Is this going to stay a 70/30 split? Is there any kind of an option to adjust ownership percentages going forward? Just curious about the mechanics. Joshua Riggi Baribeau: This is Josh. I will start again. What is important to note is that Ameresco, Inc. does not have to put another dollar into this business until HASI’s $300 million commitment is exhausted. We think that will last us a few years, unless something really material and exciting comes along from an acquisition standpoint. But pure CapEx, this is multiple years’ worth of cash that Ameresco, Inc. does not have to put in. And just to be absolutely clear, those dollars will not dilute us further at 70/30 for this $400 million commitment. The natural other side of that is that all the dollars we would have normally had to put into that business ourselves are now back at Ameresco, Inc., where we can invest in Lou’s business, Nicole’s business, and the rest of what we are doing at a corporate level, including potential acquisitions if they are accretive. I want to make sure that is clear for everyone listening, as well as yourself. I think that is our key message. After that $300 million is exhausted, then the partnership—if there are further capital calls—could be pro rata, or depending on how the partners choose to fund, that is kind of when you will get maybe a change in ownership. But as of right now, we do not have to put a dollar into this business for the foreseeable future. Noah Duke Kaye: Yeah. I mean, you marry up the pipeline visibility with now the funding visibility. Just great to hear. Congratulations to all. Joshua Riggi Baribeau: Thanks. And actually, I will add a comment just to be also clear. This does not change any of the strategy around nonrecourse debt and tax equity, and that is how we are able to stretch these dollars so far. We will still be levering the assets probably somewhere between 60% to 70% if we can get it on a loan-to-value on a nonrecourse basis, and monetize a majority of the tax credits themselves through partnerships or tax transfer. That is why we are able to stretch this $300 million very far and really pull in the build and potential acquisitions. Operator: There are no further questions in the question-and-answer session. That concludes today’s meeting. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to Pinterest, Inc. first quarter 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Andrew Somberg, Vice President of Investor Relations and Treasury. Please go ahead. Andrew Somberg: Good afternoon, and thank you for joining us. Welcome to Pinterest, Inc. earnings call for the first quarter ended 03/31/2026. Joining me on today's call are William J. Ready, Pinterest, Inc. CEO, and Julia Brau Donnelly, our CFO. The statements we make on this call reflect management's view as of today, and will include forward-looking statements. Such statements involve a number of assumptions, risks, and uncertainties, and actual results may differ materially. We disclaim any obligation to update these statements. For information about assumptions, risks, uncertainties, and other factors that could affect our results, please refer to our earnings press releases and the periodic reports we file with the SEC and available on our Investor Relations website at investor.pinterest.com. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today's earnings press release and presentation, which are distributed and available to the public through our Investor Relations website. Lastly, all growth rates discussed today are on a year-over-year basis unless otherwise specified. I will now turn the call over to William. Thanks, Andrew. Good afternoon, and thank you for joining our first quarter 2026 earnings call. William J. Ready: We entered 2026 focused on delivering the next phase of growth at Pinterest, Inc., and our stronger than expected first quarter results reflect our early progress. We delivered more than $1 billion in revenue, up 18% year over year, and grew adjusted EBITDA to more than $207 million. Pinterest, Inc. is a destination where our 631 million monthly active users, all of whom are logged in, come to discover what they want and go do it in the real world. That experience is powered by one of the largest image corpuses in the Western world and a powerful proprietary dataset. Together, they allow us to solve a problem that text-based general purpose search was never built for. It is the classic “I will know it when I see it” problem. When a user knows what they want but cannot quite describe it, an image can do what text cannot. That is where our AI and proprietary taste graph come in. By understanding not just what a user is searching for today, but who they are and how their interests are evolving, we have made Pinterest, Inc. a highly personalized AI-powered shopping assistant. The result is more than 80 billion monthly searches on our platform, approximately half of which are commercial in nature, and a platform that continues to distinguish itself as both a destination for users and a vital partner for advertisers. That said, we remain clear-eyed about where we are in this journey. Users are growing, and engagement continues to deepen globally and in UCAN, our highest engagement region. Improvements to shopping and actionability are at the heart of those trends. We have also built an ads platform that is delivering performance for advertisers, but we still have more work to do to ensure monetization more fully reflects the strength of that user activity. Our priorities remain clear. First, continue building a differentiated visual search, discovery, and shopping experience to drive sustained momentum with users. Second, keep AI at the core of everything we do, from powering our user experiences and ad platform to optimizing our internal operations. And third, accelerate monetization through improved go-to-market and measurement capabilities, so our revenue more fully reflects the strength of our engagement. With that context, let me turn to how AI is driving user growth and engagement. Ten straight quarters of double-digit user growth are the direct result of multiyear investments in AI improving personalization and curation within visual search and discovery. At the center of this is our taste graph, which captures visual intent and curation signal built on hundreds of billions of user actions over a decade. Every search, click, and save gives our AI more signal about who a user is and what they care about, which allows us to deliver more relevant and personalized experiences across the platform. Higher relevance drives deeper engagement. Deeper engagement increases retention. And stronger retention brings users back with higher intent. Powering this flywheel is our deliberate approach to AI at Pinterest, Inc. We pair a world-class engineering team with the unique signal from our taste graph to build the models that deliver the best results for our specific use cases. In some cases, that means fit-for-purpose proprietary models that outperform leading third-party alternatives. In others, it means post-training suitable open-source models in our own environment within our cloud infrastructure that deliver comparable outcomes to third-party models, but at a fraction of the cost. Deploying these and other models across our platform has led to meaningful gains in user experience and advertiser performance over the last several quarters, and with ongoing model improvements, we see significant opportunity ahead to extend these models to more surfaces over time. An example of this is PinRack, our proprietary generative retrieval system, which is trained on user activity and our taste graph. Rather than building separate models optimized for each surface, PinRack is now a single model that generates personalized results for each user across all surfaces simultaneously, informed by the full depth of what we know about their taste and interests. We initially launched this model on search and related surfaces in 2025, and subsequently extended it in Q1 to serve content globally site-wide. This launch improved search fulfillment by approximately 180 basis points. It also drove a roughly 180 basis point reduction in CPA and CPC for advertisers. On our search surfaces, where over 72% of our impressions occur today, across both visual and text-based searches, we continue to see searches grow as we improve the experience. In Q1, we updated our proprietary search ranking model, extending user context windows within search by 30-fold, similar to the expansion we previously made to our home feed ranking model. We now use up to 16 thousand user actions over a two-year period to inform the search results shown to each user. This launch improved search fulfillment by approximately 70 basis points and saves by approximately 390 basis points. Our AI capabilities also extend into creative generation with Canvas, our in-house AI image generation model trained exclusively on Pinterest, Inc. data. Canvas allows us to build experiences that reflect the high bar for visual quality and aesthetics that users and advertisers expect from Pinterest, Inc., while operating at an order of magnitude lower cost than leading third-party models. It already supports Pinterest, Inc. Performance Plus creative optimization, enabling advertisers to dynamically edit backgrounds and transform basic catalog images into high-performing lifestyle images. With the newest version of the model now supporting real-time, high-fidelity image editing, particularly in key verticals, we expect to expand Canvas to enable more creative experiences for users and advertisers in the months ahead. Our AI investments are also translating into better advertiser performance, as Pinterest, Inc. Performance Plus, our AI-powered performance ad suite, continues to drive strong results for advertisers. In particular, we are focused on driving adoption of Pinterest, Inc. Performance campaigns, our automated bundle of bidding, budgeting, targeting, and creative features that reduces CPAs and CPCs while requiring half as many inputs to set up as a standard campaign. As we have said in the past, Pinterest, Inc. Performance Plus will be a multiyear customer adoption and product cycle. Just over a year in, approximately 30% of lower-funnel revenue is now running through Pinterest, Inc. Performance Plus campaigns, but we are still early in capturing the full opportunity, as adoption continues to expand and we continue to build out functionality of the suite. Advertisers using Pinterest, Inc. Performance Plus campaigns continue to see higher ROAS and improvements in CPA and CPC compared with business-as-usual campaigns. And importantly, in Q1, adopters of Pinterest, Inc. Performance Plus campaigns grew their lower-funnel spend nearly twice the rate of non-adopters. We are now making it easier for advertisers to validate that performance using the metrics they value most. In Q1, we launched a native A/B testing tool in beta directly in Ads Manager, allowing advertisers to run structured, KPI-driven tests comparing Pinterest, Inc. Performance Plus campaigns to their existing ones. And we are starting to see strong early results. For example, Mejuri, a leading fine jewelry brand, ran a four-week A/B test comparing a dedicated Pinterest, Inc. Performance Plus campaign to its business-as-usual approach. The Pinterest, Inc. Performance Plus campaign delivered a 46% increase in ROAS and a 62% increase in conversions, which led Mejuri to adopt Pinterest, Inc. Performance Plus campaigns more broadly. We are also continuously upgrading our core ads models. In Q1, we unified and retrained our Shopping ROAS models to better predict and optimize for advertiser return on ad spend across multiple stages of our ad stack. In experimentation, these improvements drove ROAS gains of up to 11% and are an indication of what continued investment in our ads platform can unlock. As our ads platform gets better at driving outcomes, the next priority is ensuring advertisers can fully see and attribute the value we are generating for them. That means capturing more of the actions Pinterest, Inc. drives and connecting that data more directly to the measurement tools and bidding systems advertisers use to evaluate and optimize their spend. For our largest and most sophisticated advertisers, we are continuing to pilot integrations with their proprietary in-house measurement systems, which enables our bidding systems to respond dynamically to their specific definition of a successful outcome, whether that is customer lifetime value, profit per order, or something else entirely. In early testing with one advertiser that prioritizes lifetime value, the advertiser cited a 15% to 20% improvement in lifetime value ROAS. These and other bidding optimizations helped drive stronger performance in Q1, and we were encouraged to see some advertisers lean in further over the course of the quarter. We plan to expand this pilot to additional large, sophisticated advertisers later this year. We also expect to deepen integrations with key third-party measurement partners later this year, giving a broader set of advertisers both the attribution clarity to see what Pinterest, Inc. is driving and the bidding tools to act on those insights at scale. Whether an advertiser uses a first-party measurement system or a third-party partner, our goal is the same: help them better understand the full value Pinterest, Inc. is driving, while also helping us optimize our AI bidding systems toward the outcomes that matter most to them. And as we deepen our performance and measurement capabilities on Pinterest, Inc., we are also extending that performance to the biggest screen in the home through our acquisition of TV Scientific, which closed in Q1. With TV Scientific, we are unlocking the ability to extend Pinterest, Inc.’s unique consumer intent signal and audiences beyond our owned and operated properties to power high-performing CTV campaigns. We have already begun integrating Pinterest, Inc. audiences and signals with TV Scientific’s algorithms via TV Scientific’s buying platform. The early results are encouraging. One early partner, a leading home furnishings omnichannel retailer, saw a nearly 190% increase in incremental audience reach and a 159% increase in incremental sales after leveraging Pinterest, Inc. audience data in its CTV campaigns. These are early days, but they demonstrate what becomes possible when Pinterest, Inc.’s deep understanding of consumer intent meets the scale and reach of connected TV. Over time, we expect to integrate TV Scientific capabilities directly into Pinterest, Inc. Performance Plus, turning Pinterest, Inc. into a full-funnel search, social, and CTV performance solution that should open larger and incremental budget pools. As part of our efforts to accelerate the monetization of our platform, I will now turn to how we are strengthening our global sales and go-to-market organization. Since joining as our Chief Business Officer earlier this year, Lee Brown has been focused on making our monetization motion more durable and scalable so we are better positioned to capture the opportunity ahead. He is moving with urgency and has already begun making key changes, particularly in leadership across parts of our international and go-to-market organizations, and how we drive accountability across the sales force and in accelerating adoption of internal AI tooling. For example, we have sharpened our coverage model to position sellers closer to the clients they serve, with higher expectations for how they engage, and we are evolving our sales incentive structures to drive more accountability and give a sharper insight into execution across the organization. We are also incorporating internal AI adoption and advertiser conversion signal quality into how we measure performance. Our performance and measurement sales specialists, the technical sales teams supporting performance and measurement solutions, will soon have product activation and customer engagement targets. And we have rolled out a globally consistent merchant playbook, giving our teams a standardized, scalable way to bring Pinterest, Inc. best practices to market across every region. Looking forward, our ongoing go-to-market work is organized around three broader themes. First, broadening our revenue base. During our last earnings call, I noted that we were seeing pressure from our largest retail advertisers. While it was encouraging to see that dynamic improve in Q1 relative to our expectations, as Julia will describe a bit later, our conviction around broadening our revenue base has not changed. We continue to see meaningful upside over time by expanding our footprint across mid-market, enterprise, managed SMB, and international advertisers. Second, increasing the consistency of our global go-to-market execution. We have evolved from a primarily upper-funnel sales force into a more full-funnel and performance organization. The changes I just described are designed to translate that more reliably into advertiser outcomes and revenue at scale. Third, strengthening our measurement foundation. As measurement becomes an increasingly important part of performance selling, we are leveling up our technical expertise to ensure advertisers adopt our measurement solution and can better understand the full value we are driving. As we said last quarter, some of these changes will take a couple of quarters to fully play through, and progress may not be perfectly linear. But we believe these changes are critical to broaden our revenue base and position us to execute more consistently against the large opportunity ahead. Ultimately, the reason we have conviction in this work is because Pinterest, Inc. is doing something different, and that difference matters. What sets Pinterest, Inc. apart is not just that we help people discover ideas; we help them act on those ideas in the real world. Consider a homeowner renovating their garage who knows they want their space to feel more functional but may not know where to start. On Pinterest, Inc., they can start with garage organization ideas, visually explore different layouts and styles, identify solutions like pegboards or modular storage, and ultimately find and shop the products that bring that vision to life. The same is true for a parent planning a child's first birthday party or a Gen Z user designing a manifestation board. In each case, Pinterest, Inc. helps turn inspiration into action. That reflects the kind of experience we have been building for years. We have long focused on creating a more positive platform—one centered on time well spent, not just time spent. That foundation is becoming even more relevant as the broader online ecosystem faces increasing scrutiny around youth mental health, well-being, and online safety. We were the first major online platform to make accounts for users under 16 private only. We have also supported efforts like phone-free schools and App Store age verification while applying AI in ways to prioritize positivity. Our new brand campaign brings that differentiation to life for consumers. Launched earlier this month in the US and UK, the campaign marks a meaningful step up in how we are showing up in the market. It reaches Gen Z and millennial audiences across television, streaming, cinema, out-of-home, and digital channels through the end of the year. The message is simple and true to Pinterest, Inc.: the best thing you can find online is a reason to live your life offline. In closing, as AI reshapes how people discover, plan, and shop, Pinterest, Inc. is in a differentiated position. Our taste graph and rich curation signal give us a data foundation that is hard to replicate. We are pairing that foundation with product, measurement, and go-to-market improvements to better translate that deep engagement into more durable growth over time. And importantly, we are doing that in a way that stays true to what makes Pinterest, Inc. distinct: helping people discover what they want and then go do it in the real world. I am proud of our team's execution this quarter and excited about the work ahead. With that, I will turn the call over to Julia to share more details about our financial performance. Julia Brau Donnelly: Thanks, William, and good afternoon, everyone. Today, I will be discussing our first quarter 2026 financial results and provide an update on our second quarter 2026 outlook. All financial metrics, except for revenue, will be discussed in non-GAAP terms unless otherwise specified, and all comparisons will be discussed on a year-over-year basis unless otherwise noted. Q1 was a strong quarter. We delivered over $1 billion in revenue for the third consecutive quarter, growing 18% year over year and above the high end of our guidance range. Stepping back, we remain in the early stages of fully monetizing the engagement and commercial intent on our platform. As William discussed, improving the consistency of our go-to-market execution and strengthening our measurement foundation are central to that opportunity. While these changes will take time to fully play out, we believe the progress we are making across the business and the outcomes from our AI investments will lead to durable growth over time. Year to date through today, we repurchased roughly $2 billion of stock, or 109 million shares at a weighted average price of approximately $18, reflecting our confidence in the long-term value of the business. Funded with a $1 billion convertible note and cash on hand, this $2 billion stock repurchase has resulted in an approximately 16% reduction in our shares outstanding versus a quarter ago. We now have $2 billion remaining on our new board-authorized $3.5 billion share repurchase program. We believe these actions reflect both the strength of our business as well as our significant opportunity ahead. Now I will turn to more specifics about our first quarter results. We ended the quarter with 631 million global monthly active users, or MAUs, growing 11% and reaching another record high. We continue to demonstrate user growth across all of our geographic regions. In Q1, our US and Canada region had 106 million MAUs, growing 4%. Our Europe region had 159 million MAUs, growing 7%. And in the Rest of World markets, we had 367 million MAUs, growing 15%. Shifting to revenue, in Q1 our global revenue was $1.08 billion, up 18%, or 15% on a constant currency basis. We saw strength from our conversion and, to a lesser extent, our consideration objective. Across verticals, growth was driven by retail—though with puts and takes—as well as smaller but faster growing categories on our platform, including financial services. As we previewed on the last earnings call, we saw a continued headwind from our largest retailers in Q1. However, AI-driven ad platform improvements, including bidding optimizations for this group, partially offset some of this headwind later in the quarter. Revenue growth excluding these large retailers accelerated in Q1 relative to Q4, underscoring the progress we are making to diversify our revenue base. Turning to our geographical breakouts for Q1: in the US and Canada, we generated $750 million in revenue, growing 13%. Strength came from retail and emerging verticals, including financial services. In Europe, revenue was $186 million, growing 27% on a reported basis or 16% on a constant currency basis. Growth in Europe was driven by retail. Revenue from Rest of World was $72 million, growing 59% on a reported basis or 50% on a constant currency basis. In Q1, overall ad impressions grew 24% while ad pricing declined 5% year over year. The deceleration in ad impression growth versus recent quarters was primarily driven by lapping the initial ramp of monetization in previously under-monetized markets, including from resellers in Rest of World, which had contributed to outsized impression growth the prior year. On pricing, the sequential improvement versus recent quarters was driven primarily by a higher relative mix of UCAN ad impressions, which carry higher average pricing overall, due to the lower growth of international ad impressions I just mentioned, as well as stronger UCAN ad demand. Moving to expenses, in Q1 cost of revenue was $232 million, up 20% year over year and up 5% versus Q4, driven by increased infrastructure spend related to our user and engagement growth. Our non-GAAP operating expense was $574 million, up 16%. The increase was primarily driven by Sales and Marketing due to headcount investments and marketing expenses, as well as R&D to support our AI and product initiatives. In Q1, we delivered $207 million in adjusted EBITDA, above our guidance range, with an adjusted EBITDA margin of 20%, up 40 basis points versus Q1 last year. The higher-than-expected adjusted EBITDA was driven by flow-through from higher revenue as well as a reversal from Canada Digital Services Tax following its repeal. We also delivered Q1 free cash flow of $312 million. Consistent with prior years, Q1 is seasonally our strongest quarter of free cash flow conversion due to higher Q1 collections following Q4 peak revenue. We ended the quarter with cash, cash equivalents, and marketable securities of $1.3 billion. Now I will discuss our guidance for the second quarter. We expect Q2 revenue to be in the range of $1.133 billion to $1.153 billion, representing 14% to 16% growth year over year. Based on current spot rates, our guidance assumes the impact of foreign exchange will be approximately one point of tailwind. For Q2, we expect adjusted EBITDA to be in the range of $256 million to $276 million. We anticipate Q2 2026 non-GAAP cost of revenue to grow sequentially from Q1 2026 by mid-single digits percent, partially driven by the full quarter impact from TV Scientific and our investment in GPU capacity. In Q2, our primary area of year-over-year investment within non-GAAP operating expense will continue to be Sales and Marketing, including in our brand campaign, as well as sales headcount. As a reminder, Sales and Marketing trends tend to be seasonally higher in Q2 than in Q1 due to the timing of certain marketing expenses within the year. Within R&D, we are continuing to invest in headcount to support our AI and product initiatives. As we are still early in the year, our full-year margin outlook is largely unchanged from what we shared last quarter, so I will keep these reminders brief. Starting with cost of revenue, as with Q2, we continue to expect modest headwinds from cost of revenue as a percentage of revenue in 2026 as a result of the investments in areas such as additional GPU capacity, as well as the impact from the inclusion of TV Scientific. Importantly, we are already starting to see strong yield from our GPU capacity investments, including the engagement and performance improvements that William mentioned earlier. For adjusted EBITDA, we continue to expect full-year 2026 margins to come in around 29%, including the approximately 100 basis point drag from TV Scientific that we called out previously. We expect adjusted EBITDA margin pressure to moderate in the second half compared to the Q2 adjusted EBITDA margin implied by our guidance range. In closing, our Q1 results reflect a strong start to the year and the underlying health and relevance of our platform. Our user base is growing, our AI investments are producing measurable results for users and advertisers, and the changes we are making to our go-to-market organization are the right ones for the business long term. Progress may not always be linear, but our direction is clear, and our conviction in our ability to return to our long-term targets and capture the large and growing opportunity ahead remains unchanged. With that, I will hand it over to William for some final words. William J. Ready: Thanks, Julia. I want to thank our teams at Pinterest, Inc., our advertising partners, and all the people that come to Pinterest, Inc. to find inspiration and take action. And with that, we can open up the call for questions. Operator: We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question. And if you are muted locally, please remember to unmute your device. Your first question comes from the line of Douglas Till Anmuth from JPMorgan Chase. Please go ahead. Douglas Till Anmuth: Thanks so much for taking the question. Can you talk more about the drivers of upside in Q1 across the core business, TV Scientific, and FX? And also how you are thinking about Q2, and do you expect to maintain revenue growth in the mid-teens on an FX-neutral basis in the back half? Thank you. Julia Brau Donnelly: Sure. Thanks, Doug. So on Q1, the story of the strong quarter is really two things. First is the continued broadening of our revenue base, and second, better-than-expected performance from our largest retail advertisers as we continue to drive improvements to the ad platform. In Q1, revenue growth excluding these large advertisers accelerated relative to Q4 as we continue to make progress diversifying our business across mid-market, enterprise, managed SMB, and international. Overall, large retailers remained a headwind to growth, but AI-driven platform improvements, including bidding optimizations we delivered for these advertisers, began to offset some of this headwind later in the quarter. We are seeing strong early results there, including our efforts to link our AI bidding systems directly to advertisers' measurement sources of truth, and we plan to scale that pilot to additional large advertisers later this year. We do not intend to break out TV Scientific's revenue contribution specifically going forward, but I will say for Q1, the TV Scientific contribution was broadly in line with the updated guidance we gave in mid-February. Looking ahead to Q2, given the change in FX impacts in Q2, our guidance for Q2 revenue growth is consistent with Q1 on a constant currency basis. Maybe just to dive in a little bit into some of the color by region, starting with UCAN, which is roughly 75% of our revenue. We achieved double-digit growth in Q1 in UCAN, and we expect to repeat that in Q2. We are really encouraged by the stability we are seeing in that core market. We believe we are on the right trajectory there. International revenue is a smaller portion of our business, but there are a few factors which we expect to moderate international growth in Q2. We are making deliberate leadership and structural changes in our international go-to-market organization to best position for the long-term opportunity, including a new Head of International joining soon. As we said last quarter, progress as we rebuild and retool the organization will not always be linear, and that modest disruption is playing out here in our international regions in Q2. And then, as a reminder, in Q2 we are also lapping more difficult comparisons in Rest of World and Europe due to the ramping of resellers last year and elevated cross-border spend following the introduction of US tariffs. We are still significantly under-monetized internationally relative to the strength of engagement and commercial intent we see on the platform, so our long-term conviction in international is unchanged. We think the changes that we are making now best position us to fully capture that opportunity over time. To your last question on the outlook for the rest of the year, we do not guide beyond one quarter, of course. But stepping back, the plans that we laid out last quarter to return to our mid- to high-teens long-term growth targets are proceeding well, and we are encouraged by the early progress here in the first half of the year. The work that we are doing across the business is focused on returning us to consistent delivery of those targets over time. Operator: Your next question comes from the line of Eric James Sheridan from Goldman Sachs. Please go ahead. Eric James Sheridan: Thanks so much for taking the question. Maybe coming back, William, to some of your comments about the hiring of Lee into the role in the organization. I just want to go a little bit deeper in terms of his areas of focus, what signal investors should be taking in terms of what that means for your go-to-market strategy not only in 2026 but longer term, and how should we be monitoring that in terms of what we will see showing up in the business in the years ahead? Thanks so much. William J. Ready: Thanks for the question, Eric. First of all, at the platform level, it is really important to remember that today our user engagement and commercial activity continues to outpace our monetization. While we have made real progress building a full-funnel performance ads platform, the significant opportunity to broaden our revenue base across performance, mid-market, SMB, and international is still largely in front of us. Over the last three years, we have gone from primarily selling upper-funnel ads to large US CPG and retailers to selling full-funnel performance solutions across more verticals, more advertiser segments, and more geographies than ever before. As those channels have expanded, they have also introduced a higher level of scale and complexity, and that is exactly what Lee is laser-focused on addressing. That scale and complexity is a great thing for our business, but clearly it requires a different operating approach for us to fully pursue the opportunity. What he is focused on first is bringing more accountability, more consistency, more operational rigor, and AI tooling to how we go to market. The through-line across everything he is doing is making performance more visible and measurable and making sure we are executing with greater consistency across regions and teams. Some of the near-term changes I mentioned in my prepared remarks are already underway, including leadership changes across parts of the international and go-to-market organization, accelerating adoption of internal AI tools, and sharpening accountability across the sales force. We are also restructuring and reallocating resources so we can move faster in the parts of the market where we see the biggest opportunity, including mid-market, enterprise SMB, and international. At the same time, we are doubling down on measurement and technical selling capabilities across the organization, and that includes increasing accountability for technical sales teams by adding product activation and customer engagement targets to how we measure performance. As industry has advanced on attribution, we know that we need to move faster, and that is an area we are very focused on improving. Stepping back, I have high confidence in Lee and in the team, and we are already seeing good early progress. The focus now is on building a go-to-market organization that matches the strength of the product foundation that we have spent the last several years putting in place. Operator: Your next question comes from the line of Ross Adam Sandler from Barclays. Please go ahead. Ross Adam Sandler: Great. Julia, you mentioned that the small and midsized accounts accelerated in March. Just curious what you are seeing both in that area and with the large accounts since the conflict started and what the early read is on Q2. In particular, when do we expect the larger accounts to start maybe pick up the pace a bit? Any thoughts there? Thank you. Julia Brau Donnelly: Yes, happy to take that one. As we said, in Q1 the large retailers remained a headwind, but we did see some strength there later in the quarter, largely driven by ad platform and product improvements. And then outside of those large retailers, the rest of the business—the areas we have been talking about in terms of driving growth—accelerated in Q1 relative to Q4. To your question on macro and the Middle East, broadly the environment we are seeing in the ad market is relatively consistent with last quarter. Those large retailers do continue to navigate some tariff-related margin pressure, though we are seeing some stability there. We are continuing to focus on how we grow outside of that business, driven by a lot of the product and go-to-market changes that William was just talking about and that Lee is really focused on driving. We are tracking the conflict in the Middle East, but I would say the impact we are seeing so far from that conflict is small on a dollar basis based on what we now know. We see it most directly in our Rest of World region and to a lesser extent in Europe as well, where it is really isolated to certain verticals impacted by higher oil prices. This has all been factored into our Q2 guidance range. Operator: Your next question comes from the line of Rich Greenfield from LightShed Partners. Please go ahead. Rich Greenfield, if you could double check that your line is unmuted. While we troubleshoot, let us move on to our next question, which comes from the line of Colin Alan Sebastian from Baird. Please go ahead. Colin Alan Sebastian: Great. Thanks. Good afternoon, and thanks for taking the question. Maybe as a follow-up to Ross' question regarding the efforts to diversify the advertiser base, Performance Plus now running at approximately 30% of lower-funnel revenue. What adoption trends are you seeing within the mid-market and SMB segments? And related to that, given that Performance Plus adopters are growing their spend at, I think, twice the rate of non-adopters, how are you leveraging tools like Canvas and PinRack to lower those barriers for smaller advertisers? Thank you. William J. Ready: Thanks for the question, Colin. As I noted, we are really encouraged by the progress in Q1. Our business accelerated in the quarter, and that acceleration was driven by growth outside of our largest retailers. So the diversification we have talked about—we feel really good about the progress we are making there. On SMB, to be very clear, we are referring to advertisers with tens of millions to $100 million of GMV—not really the long tail of mom-and-pop advertisers. It is also important to remember that Pinterest, Inc. Performance Plus only reached general availability approximately a year ago. For the first time, we have a product built to serve smaller advertisers that do not have the time, resources, or expertise to manage campaigns across multiple platforms, and we are only about a year into that journey, which we expect to be a multiyear cycle just as it was for the larger platforms when they deployed their AI-driven automation suites. Early adoption is encouraging. The 30% of our lower-funnel revenue that is now running through Performance Plus campaigns—we feel good about that, but obviously that is still early in the journey of capturing the full opportunity, both in terms of driving continued adoption—because there is significant room to grow adoption—and also because we continue to roll out meaningful performance improvements, a few of which I noted on the call, and we see much more opportunity for that to continue. We are adding more functionality across bidding, targeting, creative, and measurement over time, and a lot of that leverages our in-house capabilities and taste graph—things that we think we are really uniquely positioned to do and are demonstrating. I would also mention that mid-market, enterprise, and international are also still relatively early opportunities for us. We made a good start in both areas last year, and now we are focused on building the teams, processes, and go-to-market motions required to serve a much broader set of advertisers at scale. As I commented earlier, that takes a different level of operational rigor than serving a smaller group of large retailers, and that is exactly what Lee is focused on building. We feel good about the early progress, but we still have a lot more to go—much more of that opportunity is in front of us. We still very much believe that SMB, along with mid-market and international, can become a meaningfully larger part of our business over time, and we have the product and tooling to do that. We are building out the go-to-market to do it as well, but much more build is still in front of us to fully capture that opportunity. We are encouraged by the progress. Operator: Your next question comes from the line of Jason Helfstein from Oppenheimer. Your line is open. Please go ahead. Jason Helfstein: Thank you. I will ask a high-level question and then a quick margin question. How are you viewing the impact from chatbots with respect to the competitive landscape and emerging visual discovery? And second, I know you are not guiding for next year, but is there any way to think about how we should be thinking about expenses for next year relative to what might be a higher level of investment this year after the headcount reduction? Thanks. William J. Ready: Thanks for the question. Obviously nobody can perfectly predict the future, but we are actually several years into a massive AI adoption cycle, and that means we can really learn a lot from what people are already doing. I would start with what we can see and what our users are telling us through their actions already. It is important to note that at the same time chatbots have grown in popularity over the last few years, we have put up ten straight quarters of double-digit user growth and deepening engagement per user. Users, including Gen Z, are engaging with chatbots and Pinterest, Inc. at the same time for very different things. Of Pinterest, Inc.’s more than 80 billion monthly searches, half are commercial in nature, whereas ChatGPT’s own data says that only 2% of their prompts are commercial. You are seeing specialization versus generalization play out among the AI models on enterprise versus consumer, but consumer search has historically had a significant generalization-versus-specialization split as well, and we believe we have clearly carved out a unique and specialized use case on visual search and shopping—again, as evidenced by the fact that many, if not most, of our users have interacted with AI chatbots but are deepening their engagement with Pinterest, Inc. Users come to Pinterest, Inc. leaned in with intent, and Pinterest, Inc. offers something that other platforms are not built to solve, which is visual search and discovery. We surface relevant, personalized recommendations before the user even knows how to ask for what they want, and we connect that to real products that they can act on. We are solving the “I will know it when I see it” problem, which is such a significant component of so many consumer shopping journeys. We are seeing this dynamic play out right now even amongst the largest players, where it is clear that focus has been more successful than trying to be all things to all people all at once. Pinterest, Inc. is a specialized platform, and that is a position of strength. It is very hard to be a text-based general-purpose search platform and simultaneously deliver the depth of visual discovery and taste-based personalization that Pinterest, Inc. offers, and specialization is where we believe we can win. In comparison, general-purpose chatbot platforms start with a blank screen and a command-line interface, and the user has to know what to type, which is a meaningful barrier for discovery and planning use cases because often the user does not yet have the words for what they are looking for. When these platforms generate an image, there is often no path to a real product, brand, or purchase, versus on Pinterest, Inc., where that same journey centers on shoppable content, product comparisons, and real purchase paths, particularly in a primarily visual nature. On agentic commerce more broadly, you have also seen meaningful strategic pivots from some of the platforms that were most aggressively pursuing that space. That validates our view that the barriers to progress in agentic were likely not technical, but around user behavior and ecosystem incentives. We have been clear about partnering with advertisers and not disintermediating their relationship with customers. Hope that helps to give a little more color, and I will give it to Julia on the second part of your question. Julia Brau Donnelly: It is obviously too early to talk about 2027 margins specifically. However, I will reiterate what we said on the last call about the long-term targets of 30% to 34% adjusted EBITDA margin still being the right ones and still being the ones we are shooting for in the medium term. We laid out those targets at the very end of 2023 and made very rapid progress toward those targets. This year we are aiming for 29%, partially because we are including TV Scientific, but if you exclude that, we are basically flat year over year. I still think the 30% to 34% targets are the right ones to be focused on, and we will have more to say specifically on the exact trajectory for 2027 as we get later into this year. Operator: Your next question comes from the line of Justin Patterson from KeyBanc. Please go ahead. Justin Patterson: Great. Thank you. William, I wanted to touch on your deepening engagement point a little bit more. What do you see as the core levers to continue doing that? Given UCAN is a more established market, how much more runway do you have to drive further engagement growth here? Thank you. William J. Ready: Thanks, Justin. While we do not comment on or validate third-party data, our user and engagement strength continues to be one of the real highlights of the transformation we have driven over the last few years. It is eleven straight quarters of record-high users, and it is important to note that 100% of our reported users are logged in and 85% come directly to our mobile app, making Pinterest, Inc. a clear destination app. We have also had ten straight quarters of double-digit user growth. We see ourselves as having effectively turned Pinterest, Inc. into an AI-powered shopping assistant that operates in a primarily visual manner, which is consistent with large portions of how people actually shop. In terms of how we are deepening engagement, we are doing so in the areas that matter most, globally and in UCAN: 80 billion monthly searches, half commercial in nature, which is a much more significant skew toward commerciality than you would see in general search elsewhere or in chatbots. We have also talked about how we are winning with Gen Z—over 50% of our platform and our fastest growing cohort. Not only are they coming to Pinterest, Inc. to shop, but they also value our platform as a more private, positive space committed to their well-being. Our intentional choices to prioritize safety and positivity are really resonating with Gen Z specifically, as well as other generations that we track, and we continue to see growth across generations, including with millennials. Longer term, at the heart of our engagement strength is how we continue to leverage AI to drive better personalization and relevance. Our ongoing improvements to the platform, including the launches we highlighted this quarter across search ranking, content recommendations, and creative generation, are all pointing in the same direction, which is a more relevant and personalized experience that gives users more reasons to come back and anticipates what they are looking for next—all built off of our proprietary signals and unique curation behavior. I have talked about this consistently since joining Pinterest, Inc.: that curation behavior that occurs on Pinterest, Inc., which we see as completely unique in the Western world, gives us a highly differentiated signal that we can use to train AI in ways that others without that signal cannot. That is why Gen Z—who are obviously very familiar with chatbots—are coming to Pinterest, Inc. in larger and larger numbers and with increasing depth of engagement per user, as they clearly get something very different from Pinterest, Inc. than they get from chatbots. Julia Brau Donnelly: One other thing I would add on user and engagement trends: it is worth a quick reminder that Q2 is typically our seasonally softer period for quarter-to-quarter sequential user growth, particularly in Europe. We measure monthly active users on a thirty-day lookback from the last day of the quarter. As we get into the summer months, users tend to travel and spend more time outside, so we often see a seasonal pattern there in Q2. Overall, we feel really great about where the user and engagement trends for the business are heading right now. Operator: Your next question comes from the line of Rich Greenfield from LightShed Partners. Please go ahead. Apologies for the technical difficulties. Your next question comes from the line of Ronald Victor Josey from Citibank. Please go ahead. Ronald Victor Josey: Great. Thanks for taking the question. Two, please. William, as part of the sales reorg that we talked about, I believe you talked about having ad sales closer to clients. Can you talk a little bit more about how the sales force is now structured going forward? Are we talking more regional versus vertical? Any insights about go-to-market would be helpful. And then teeing off on your latest comments around personal assistant and shopping assistant getting greater adoption—we are seeing consumers do that—but talk to us about how retailers are preparing for this going forward. As you look out maybe one to three years and we hear about the personal assistant on Pins, how do you envision that future going forward? Thank you. William J. Ready: Thanks for the questions, Ron. On the sales reorg, we have had regional focus previously—really around segments that report as UCAN, Europe, and Rest of World. The most notable thing over the last few years, as I mentioned in my prepared remarks, is that a few years ago we were primarily an upper-funnel ads platform that really went to market with a smaller number of large CPG and retailers in the US and internationally. As we have built a broader set of user engagement, that allows us now to engage with a much broader set of advertisers. There are different things required for a very large enterprise versus a mid-market advertiser versus an SMB. We really just got the ad product that would let us start to go beyond those largest retailers into mid-market and SMB—that went GA approximately a year or so ago. Over 2025, we saw good early progress there, but we also saw that we need more specific efforts around those different segments, and we need to target our sales and go-to-market approaches differently for a mid-market or SMB than for the largest retailers, which is where more of the approach had been focused in the past. As you do more and more performance selling, you have more to do around measurement and technical selling. We talked about measurement and the things we are doing around getting more technical sales capabilities and the right measurement implementation. As I mentioned, we have more than 5x’d the number of clicks we send to advertisers over roughly the last three years, but our monetization has not increased nearly at that rate, which means there is a lot more shopping activity that we are driving than what our monetization currently reflects. Part of that is driving deeper measurement integrations to get credit for that. So that is part of the go-to-market motion—the technical selling capability is a really important addition. Those are some of the things in terms of going a little bit deeper on the go-to-market there. On the second part of your question—shopping assistance and AI—a few things. We launched Pinterest, Inc. Assistant in beta in Q4 of last year. As we continue to have strong user engagement trends, we are being intentional and taking our time on getting the product-market fit right with Pinterest, Inc. Assistant and incorporating important learnings into our core user experience. I think you have seen some false starts from others in the space that they then had to pare back. We have such strong commerciality and great traffic that we are driving to advertisers that we want to make sure we are doing this in a way that deepens the relationship between the user and the advertiser. Over the past couple of months, we have materially advanced capabilities of the underlying model powering the Pinterest, Inc. Assistant, due to both advancements in the underlying open-source model as well as our ability to post-train that model with our unique data and integrate it into our suite of in-house models. As we bring that to market, we are growing our excitement about being able to solve more of the shopping journey, but in a way that more deeply connects the user to the advertiser. For our brands and retailers, we want them to gain a customer, not just a transaction. We have been really successful in doing that over the past few years, and we want to make sure we continue to do that with our assistant. We are seeing good ability to do that, with more to come in terms of how we will continue to ramp that over the coming months and quarters. Last, on models across the industry, the industry is converging on a view that we reached at Pinterest, Inc. relatively early on: the unit economics of relying on large proprietary third-party LLMs do not make sense for many use cases, as companies end up paying a significant premium for what might be an overengineered generalized capability that is not necessarily optimized for company-specific problems. It is increasingly clear that the narrative that you have to rely on only one of the largest proprietary models to get significant benefits from AI is not holding up. Our approach has been deliberate from the start. We build compact, fit-for-purpose models trained on our proprietary data for our most unique and core use cases such as visual understanding, and we have seen these consistently produce better results at far lower cost for the majority of what our product does. For the more generalized LLM capabilities, we use suitable open-source models running in our own cloud environment within our infrastructure when they are the right tool, and then we post-train them on our own proprietary data. That has multiple advantages: since it runs in our environment, it is more secure; it has much lower latency; and since it has been trained on our unique data, it delivers better performance than off-the-shelf proprietary models at a fraction of the cost. That is all enabled by the unique feedback loop that we get from the curation on our platform. Pinterest, Inc.’s dataset is fundamentally different from what third-party models have been trained on. As we think about advancing our assistant, pairing our fit-for-purpose in-house models that are great at understanding and driving commerciality and recommendations with some basic LLM capabilities—and then post-training that in the places that can be helpful to the user—we think that unique combination can really help a lot and we can do differentiated things. Lastly, in terms of the incredibly valuable assets that we have with our data and our taste graph and how much that lets us do unique things with AI, I would point you to what we are doing with TV Scientific. It is a very tangible example of what we can do with that data beyond our Pinterest, Inc. app, where we have been able to achieve a 27% increase in outcomes and a 65% increase in purchases by leveraging our taste graph on top of TV Scientific’s algorithms. That is one tangible example we talked about on the call of how we can use our data on top of algorithms to get even better outcomes and is part of what we are doing with AI models generally—both what we build in-house and where we retrain open-source models. Hopefully that gives you a sense of how we are thinking about the assistant and the advancement of the AI landscape overall. Operator: Your next question comes from the line of Shweta Khajuria from Wolfe Research. Please go ahead. Shweta Khajuria: Thank you for taking my question. Could you please talk to your view on the evolving regulatory environment and the focus on online safety for younger folks, and perhaps the opportunities or risks from the pending and/or proposed regulations? Thanks, William. Thanks, Andrew. William J. Ready: Thanks, Shweta, for the question. We are seeing a clear trend where parents, policymakers, and governments are raising the bar on online safety for young people, and this is a conversation we have long pushed for. We believe social media companies should compete on their safety record the same way car manufacturers compete on their safety ratings. We have proven that prioritizing safety and well-being can lead to better business outcomes. As a specific example, when we made accounts private by default for under-16s in 2023, many people thought it would hurt our relationship with Gen Z. Instead, Gen Z is now our largest and fastest growing demographic, representing more than 50% of our user base. Beyond what is happening from a regulatory perspective, we see that young users are becoming much more keenly aware of the negative effects of traditional social media and are looking to create a healthier social media diet and spend time in places that they know are positive for their well-being. In addition to making accounts private by default for users under 16, we have supported phone-free schools and App Store age verification, and we apply AI in ways that prioritize and tune for positivity. The response from users reflects that there is genuine consumer demand for a more positive and safer space online, and Pinterest, Inc. has earned that trust by making the right choices over many years. While neither we nor anybody else can perfectly predict what happens in the regulatory environment, we welcome that conversation. We have been an active voice in those discussions, and we have seen policymakers recognize and appreciate the proactive stance that we have taken on these issues. For the sake of all our young people, we are hoping to see more advancement of that dialogue. Operator: Your final question comes from the line of Brian Thomas Nowak from Morgan Stanley. Please go ahead. Brian Thomas Nowak: Great. Thanks for taking my questions. Maybe just two. One, on the upside in the first quarter—it sounds like it was driven by some of the attribution improvements from the large advertisers toward the end of the quarter. As you look into Q2, are you assuming you see further benefits from that attribution modeling across even more advertisers, or would that be a source of upside to your base case expectation? And then secondly, William, you have quite a few innovation irons in the fire. Are there any one or two that you would point to and say this could be a driver of substantially faster growth in revenue even this year, like the attribution modeling was? William J. Ready: On the first part of your question on attribution—this is not a guidance commentary, to be very clear—but as I mentioned in the prepared remarks, linking our AI bidding systems to the measurement sources of truth of the advertiser allows the AI to deliver more and more outcomes that are aligned with the way the advertiser sees value. As we rolled it out in Q1—and we were in beta with that in Q4—we are seeing that work well. We have more deployment to go, and we are excited about that. We also think that, as I mentioned a few times, continuing to deepen our measurement integrations with our partners should allow us to capture much more of the value that we are creating. Again, we have more than 5x’d the number of clicks to advertisers over the last three years, but revenue has not increased nearly as much as that. As you look at what is happening with other platforms, you hear them talking about model conversions, you see them growing revenue faster than the rate of their supply growth. Those model conversions and similar dynamics mean that some platforms are doing a better job of taking credit for clicks and conversions that they may not have driven directly or where they were a more tangential part of the path. We think as we get more deeply integrated into measurement platforms, that gives us opportunities to get more of our rightful credit for those things. Simultaneously, another positive trend is that as advertisers start to really give more credit to actions beyond just the last click, we have a lot of upper- and mid-funnel activity as well. As we see that playing out, we think that is generally, in the long term, a good thing for our platform, but there is a lot of work to do in terms of getting the measurement and integrations adopted—both from a product standpoint and via the sales and go-to-market efforts—which is why we have had the meaningful retooling of our sales and go-to-market. In terms of innovation, one of the things I would point you to—we see and are driving much more commerciality than what we believe we are getting credit for today, and we also think that commerciality can let us take that very unique, highly commercial audience that we have and drive outcomes well beyond just our owned-and-operated property. TV Scientific can be thought of as the first move in that direction, and we shared some of the stats we are really excited about: the 27% increase in outcomes and 65% increase in purchases when you brought the Pinterest, Inc. audience on top of the TV Scientific algorithms. We have a lot more to do in CTV, and we are very excited about that. We also think there is more we can do in terms of leveraging our audience beyond surfaces—beyond just the Pinterest, Inc. app—which we think is a really interesting area of opportunity. Connected TV is off to a good start; lots more to do, but we think there is more that we can do in terms of the value of that audience more broadly. Julia Brau Donnelly: To wrap up, our plans here all factor into our Q2 guidance numbers. It is way too early to talk about what is happening in the second half of the year, but we are feeling really good about the first-half progress against the plans, and our goal is to continue hitting consistently our mid- to high-teens revenue growth targets, which are our long-term targets. Operator: This concludes our question and answer session. We will now turn the call back to William J. Ready for closing remarks. William J. Ready: Thank you again to all of you for joining the call and for your questions. We look forward to keeping this dialogue going, and we hope you enjoy the rest of your day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the ThredUp Inc. First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during that time, please press star then the number one on your telephone keypad. I would now like to turn the call over to Lauren Frasch, Investor Relations. Lauren, please go ahead. Lauren Frasch: Good afternoon, and thank you for joining us on today’s conference call to discuss ThredUp Inc.’s financial results. With me are James Reinhart, ThredUp Inc.’s CEO and Co-Founder, and Sean Sobers, CFO. We posted our press release and supplemental financial information on our Investor Relations website at ir.thredup.com. This call is being webcast on our IR website, and a replay of this call will be available on the site shortly. Before we begin, I would like to remind you that we will make forward-looking statements during the course of this call. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially. Please refer to our earnings release, the supplemental financial information, and our Forms 10-K and 10-Q for more information on these expectations, assumptions, and related risk factors. We undertake no obligation to update any forward-looking statements. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in today’s earnings press release and the supplemental financial information distributed and available to the public through our Investor Relations site at ir.thredup.com. I will now turn the call over to James. James? James Reinhart: Good afternoon, everyone. Thank you for joining our first quarter 2026 earnings call. Today, I will review our Q1 results, discuss what drove performance in the quarter, and share how we are focused for the balance of the year. I will then hand it over to Sean Sobers, our Chief Financial Officer, to walk through the financials in more detail and provide our outlook for Q2 and the full year. As always, we will close with a question-and-answer session. First to the results: In the first quarter, revenue grew 14.6% year over year to $81.7 million, while gross margin was 79.2%, and adjusted EBITDA was 3.4% of revenue. We grew our cash balance by $1.3 million. Active buyers on a trailing twelve-month basis grew 25% year over year, and new buyer acquisition remained strong. March was the best month in our history. All of these metrics exceeded our expectations. However, as we move through Q2, we think it is worth acknowledging that the macro environment remains uncertain. Relative to prior quarters, we do see an incrementally discerning consumer as gas prices remain high and inflation proves to be sticky. We have observed this mainly through average selling prices and conversion rates being slightly lower since early March. Prices are off roughly 3%, and conversion rates for existing customers are lower by about 5%. Nevertheless, overall demand has remained resilient year to date, with continued growth in new buyers and strong sell-through driven by existing buyers. That demand, combined with improved marketing efficiency, supported strong unit economics. It has given us confidence in our growth plan for 2026 and how our business leverages and expands margins over time. As we move through 2026, our priorities are focused in three areas: continuing to grow and retain high-value buyers; developing AI technology that helps customers discover and shop across our vast marketplace; and scaling high-quality supply from a diverse group of sellers. In Q1, we continued to improve how customers discover, shop, and sell across ThredUp Inc. With millions of unique items, helping customers find the right item quickly is critical to conversion and retention. On that note, we are excited to share that we now have our first agentic product experience live for a segment of customers. We start by assigning an agent or a team of agents to each customer. The agents consume event feeds across all platforms—web, mobile web, native—and channels—email, push, SMS—and use reinforcement learning to enable personalized browsing at the individual customer level. No two customer journeys are the same. Ultimately, we are working towards a customer experience that will dynamically change everything you see on ThredUp Inc. based on your clickstream data in real time. This is the true promise of agentic commerce. Second, we are now aggregating exact match items into an improved customer experience, starting with our highest-volume category, dresses. Let me explain. This means the customer who is shopping for a dress might now see options on that product page to buy this dress in a different color, a different size, or a different quality standard—all without having to navigate to another product page. While this is standard in ecommerce, no scaled resale company has been able to replicate this experience across thousands of brands and category SKUs. We think this is a foundational improvement in the resale shopping journey, and ThredUp Inc. is uniquely able to do this given our data and vast catalog of photography. This experience is particularly relevant for newer customers and amplifies our broader acquisition strategy as we bring more and more first-time secondhand shoppers to our site. We plan to slowly roll this out to more customers and more categories in the coming quarters. Third, with the ongoing success of our AI product development cycles and elevated conversion rates, we are unlocking scale in new channels. Our spend on Meta is up 100% year over year in Q1, delivering some of the highest LTV-to-CAC ratios we have seen. Pinterest is similarly up 94%. This has reduced spend on Google, where we tend to see acquisition costs be lower and returns higher. This evolution is consistent with our goal of increasing early customer retention and expanding LTVs over time and exemplifies how ThredUp Inc. benefits from generative AI technology. Turning to supply. Each year, our annual Resale Report has become the industry’s go-to resource for understanding where the secondhand market is headed, and this year’s edition, which we published last month, identified supply as the defining constraint for the next phase of growth. With U.S. online resale already growing more than three times faster than the broader retail environment, we believe the key to unlocking the next phase of market value is not demand—it is aggregating more high-quality supply online. Let me anchor that in what we are actually seeing on the supply side of our own marketplace. Our seven-day sell-through rate, which we view as the best proxy for overall demand, is up more than 15% year over year alongside continued strong growth in listings. The net of these performance indicators is that we need more sellers and more supply to satisfy the growing awareness and demand from buyers on our marketplace. Listings are up 17% year over year in Q1. We are moving swiftly to do so. In Q1, we made a deliberate investment in new seller acquisition. Of our total kit requests in the quarter, 48% came from sellers who were new to ThredUp Inc. New seller kit requests grew 90% year over year. Overall, this was one of the largest surges in new sellers in ThredUp Inc.’s history, driven by TikTok Shop activation, on-site promotion, and targeted seller campaigns. With so many new supplier initiatives in motion, we have renewed our focus on onboarding, seller education, and segmentation, with particular attention to TikTok Shop, where we just recently launched premium bags. In addition, we are increasing inbound processing faster than planned to capitalize on this influx of new sellers and build on the momentum we saw in Q1. The long-term picture is clear: a larger seller base, improved supply quality, and more aggressive processing should create a faster-growing, more liquid, more profitable marketplace. Now let me turn to other areas of opportunity in our business. Our direct listings data remains promising, as we maintain our goal of growing 10% week over week while continuing to launch new features that deliver the highest-quality buyer and seller experience. First, using our vast dataset, we are launching a suite of improved seller pricing tools to help items sell more quickly. Second, leveraging the customer data we have accumulated over the years, we are finalizing the rollout of a relisting tool that allows our core marketplace buyer to resell their previously purchased items with one click or make their entire purchase closet shoppable. This relisting feature is a powerful and unique asset given we have sold over 100 million items that ostensibly could be made available to others with one click. We think about this as “lean-back selling.” It is more consistent with our approach to serving casual sellers first, not professionals looking to run a small business. Finally, we are improving seller verification and training that will reduce potential for fraud, eliminate subpar listings, and build more trust in our marketplace over time. On the Resale-as-a-Service, or RAAS, front, we have landed several new apparel brand partners that will be launching resale experiences with us in the coming quarters. We have also deepened engagement with existing clients. A standout example was Reformation’s in-store trade-in event in New York City, which went viral on TikTok—a playbook we are now replicating across the entire partner base. Earth Month was a particularly strong activation period, with Lands’ End, Madewell, and Abercrombie all running RAAS campaigns that drove meaningful engagement. As we look ahead, we remain focused on executing our growth plan amidst an ever-changing consumer environment. Our priority is building a marketplace that delivers clear value to buyers and compelling monetization and convenience for sellers. We are confident our focus on conversion, retention, and supply quality on top of our strong unit economics will position us to deliver durable, compounding performance over time. With that, I will turn it over to Sean to walk through the financials in more detail and provide our outlook for Q2 and the full year. Sean Sobers: Thanks, James. I will begin with an overview of our results and follow up with guidance for the second quarter and full year of 2026. I will discuss non-GAAP results throughout my remarks. We are extremely proud of our Q1 results, in which we exceeded our internal expectations for revenue, gross margins, and adjusted EBITDA. For Q1 2026, revenue totaled $81.7 million, an increase of 14.6% year over year. Our performance was driven by investments into new buyer acquisition, continued LTV-to-CAC efficiencies, and inbound processing that drove our marketplace flywheel. These drivers resulted in another strong quarter for new buyer acquisition, including a record month in March. We finished the quarter with a record 1.7 million active buyers on a trailing twelve-month basis, up 25% over last year, while we had 1.6 million orders in the first quarter, up 19.3%. For Q1 2026, gross margin was 79.2%, a 10 basis point increase versus the same quarter last year, as a result of higher ASPs. For Q1 2026, GAAP net loss was $6.5 million compared to GAAP net loss of $5.2 million in the same quarter last year. Adjusted EBITDA was $2.7 million, or 3.4% of revenue for Q1 2026, outperforming our internal expectations. Our Q1 result represented a 190 basis point decline over last year. This year, with more confidence in our growth trajectory, we invested in our drivers earlier in the quarter, resulting in better top-line results and more moderate EBITDA this year. From here, we expect to methodically expand EBITDA year over year in 2026. Turning to the balance sheet. We began the quarter with $53.1 million in cash and securities and ended the quarter with $54.4 million. We invested $4.1 million in CapEx and generated $1.3 million in cash in Q1. We continue to expect similar levels of CapEx in 2026 as last year. Now I would like to turn to guidance. As James mentioned earlier, we are seeing indications of a more selective consumer. As a result, we are maintaining our revenue and EBITDA margin expectations for the balance of the year while flowing through our Q1 outperformance. Nevertheless, we remain confident in driving strong performance in the things within our control. In the second quarter, we expect revenue in the range of $89 million to $91 million, representing 16% year-over-year growth at the midpoint; gross margin in the range of 78.5% to 79.5%; adjusted EBITDA of approximately 5.2% of revenue; and basic weighted average shares outstanding of approximately 130 million shares. For the full year 2026, we expect revenue in the range of $351.2 million to $356.2 million, reflecting 14% year-over-year growth at the midpoint; raising our gross margin expectation to the range of 78.5% to 79.5%; adjusted EBITDA of approximately 6.1% of revenue, representing approximately 170 basis points of expansion versus last year; and basic weighted average shares outstanding of approximately 131 million shares. As we emphasized on our last call, we continue to plan to flow any incremental dollars above our guide back into growth-driving opportunities in processing and marketing. This year, we remain confident in the fundamentals of our marketplace flywheel, our operational consistency, and our strategy as we pursue predictable growth, expanding profits, and accelerating cash flow. James and I are now ready for your questions. Operator, please open the line. Operator: At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. We kindly ask that you limit your questions to one and one follow-up for today’s call. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ike Boruchow with Wells Fargo. Please go ahead. Irwin Bernard Boruchow: Hey, good afternoon, guys. The first one is, Q1 was very strong—I understand maintaining expectations for Q2 to Q4—but can you elaborate on the consumer being more selective and the demand remaining resilient? There have been a lot of things in the macro—gas prices, inflation. How do you square those two dynamics? How are you thinking about the rest of the year? Maybe when did you start to see the consumer behavior start to change? Did it coincide with geopolitical events or gas prices going up? Just elaborate more on that. James Reinhart: Yeah, sure. Hey, Ike. The business has remained strong. Q1 was a good quarter and exceeded expectations on the top and bottom line. Gross margins expanded. We are feeling very good about the business. April has been good quarter to date, so I think everything generally is going in the right direction. We wanted to give folks the building blocks of what we saw on ASPs and conversion rates, because it does track, in our view, with the war in Iran and elevated oil and gas prices, which we think on the margin is making the consumer a little bit more picky and discerning. We are seeing it in ASPs and conversion rate. Having said that, we have flowed those dynamics through the P&L for the rest of the year, and the business remains strong even with those dynamics at play in April. But there is just enough out there that we want to be thoughtful about what the rest of the year guide looks like. Sean? Sean Sobers: I think it is key to understand that we did flow through the ASP and conversion items that we saw in April through the full guidance outlook. Irwin Bernard Boruchow: And then just to follow up on ASP, you said it is down low single digits. Is that the expectation for the rest of the year—that your ASP or AOV should remain under pressure—or are you expecting a bounce back in the back half? James Reinhart: Right now, it is off about 3%, consistent with March, when we started to see this. That is in the guide for the rest of the year, but depending on how things materialize with oil prices and inflation, I could see a scenario where it bounces back. Timing is a little unclear. I still think the unit margins, contribution margins, top line, and EBITDA are all strong even with ASPs being off a little bit, and our assumption is there is not a recovery in the guidance numbers. Operator: Your next question comes from the line of Matt Koranda with ROTH Capital. Please go ahead. Matt Koranda: Hey, guys. Following up on that line of questioning—can you unpack the trend you are seeing in the business in April and how you built the guide for the second quarter? You said reduced conversion and ASP pressure in April, but the guide for second quarter sales is an acceleration relative to the first quarter. Can you square those for us? James Reinhart: Yeah, Matt. April has been strong, and the guide reflects 16% growth in Q2. We flowed through the Q1 beat, with the full year at 14%. The business remains strong and resilient, but we have to acknowledge that ASPs are a little lower than we anticipated. Had ASPs not come down a bit and conversion not come down a bit—again, we attribute this to the macro—my guess is numbers would be coming up for both the quarter and the year. At this point, it is better to be a little more cautious and see how the quarter unfolds. Both dynamics are at play: a slightly more discerning consumer and us really operating and executing the business at a high level. Both things can be true. Matt Koranda: On the supply front, it sounds like the macro disruption might even be driving more supply to your marketplace. Can you talk about the incremental supply that you are seeing turn on, and maybe in the context of the third-party initiative you have going on? James Reinhart: We saw a huge surge in new sellers coming onto the platform in Q1—almost a 1 thousand basis point improvement year over year on new sellers. It was a conscious effort to invest in getting the supply engine going, and we are seeing success. Any time you are onboarding that many new people, it adds more work for the team around messaging, education, and onboarding. We are spending more time on that than ninety days ago. It speaks to the strength of the marketplace model in any economic climate, and we feel very good about how these suppliers, from a cohort basis, become repeat suppliers over time and really fuel the business back in 2026 and into 2027. Operator: Your next question comes from the line of Dylan Carden with William Blair. Please go ahead. Dylan Douglas Carden: Appreciate it. Is this the first time that you spent to acquire sellers? James Reinhart: Yeah, Dylan. We are spending some dollars testing the methods and the way that we acquire sellers. The work we did on TikTok, as an example—we are working with some creators and influencers on an affiliate basis. Yes, we are kicking off a real, methodical approach there. What we have learned is that there is room to really grow sellers through some basic paid marketing, and we are embarking on that journey now. The effects are not only expanding the seller base, but those sellers you acquire convert at pretty good rates into buyers, and the quality of the sellers’ goods helps drive improvements in buyer conversion rates and buyer LTVs. There is a nice recipe to spend money acquiring sellers that makes both sides of the marketplace spin faster. For the last couple of years, I have said when we start turning attention to acquiring sellers, we have effective ways to do that—evolving messaging across platforms and changing the incentive mix. Everything I have said over the last few years around how we would do this is exactly what we are doing today. It is playing out as we thought—there are compelling ways to acquire sellers beyond our organic reach, and those methods can be very accretive to the business by expanding the overall seller base and converting those sellers into buyers. We see it as an acceleration of the flywheel. Operator: Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead. Dana Lauren Telsey: Hi. Good afternoon, everyone. As you think about prices being lower and conversion a bit lower, was it consistent throughout the quarter, or was that just the end of the quarter in March? And with the uptick in new customers, what are their demographics—is there any regional, age, or income trend you are seeing? James Reinhart: Hey, Dana. The pricing piece and some conversion headwind started in March, which is consistent with the war in Iran. It is hard to say it is perfectly correlated, but we did start to see it then. It has since normalized; we have been operating in that environment for the past sixty days. We have been able to adjust where necessary around the types of goods we put on promotion, how we think about sell-through, marketing, and curation. We have digested pricing and conversion changes and changed how we are operating the business to meet the customer where they are. It does point to some correlation with elevated oil prices and consumer sentiment. On the buyer mix, we are spending more on Meta and Pinterest and fewer dollars on Google, primarily because of the mix of customers we acquire. The Meta and Pinterest customers have better LTVs—their CACs are slightly elevated, but the LTVs more than offset them. As more new-customer flow comes from those channels, we see predictive LTVs be higher, which speaks to compounding cohorts over time. We feel good about the acquisition mix and strategy, and we feel good about digesting the pricing and conversion we have seen since March. Dana Lauren Telsey: Got it. And just one last thing. You talked about inbound processing being faster than planned. How much faster was it and where do you go from here? James Reinhart: With all of the growth in buyers—active buyers up, new buyer acquisition strong—our data suggests that buyers could buy more and absorb more supply. Our approach now is to turn on the afterburners to process as much as possible. Given the cohort sizes and purchase behavior, it is a wonderful moment where if we process more goods, the business flywheel should go faster, given the pent-up demand from this large buyer cohort. We are able to acquire customers efficiently, LTVs are good, and we just need more supply online—and that is what we are doing. Operator: Thank you. Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Please go ahead. Robert Brooks: Hey. You started to see headwinds in pricing and conversion in March, but at the same time had the best month in your history of buyer acquisition. That seems really impressive. I would love to hear more on that dynamic and what you did to drive that great performance. James Reinhart: Hey, Bobby. Both things can be true. It shows the underlying strength of the business: even where conversion rates might be a little softer, the fundamental conversion rate remains strong. Go back to last year—we spent multiple quarters driving conversion rates up. Right now, we are seeing a little pullback because of the macro, but they are still very strong. That conversion is translating into new buyer growth. For example, new buyers in Q1 were up 27% year over year, and CACs were down more than a double-digit percentage. We are executing at a high level, and had we not had the ASP and conversion headwinds, I am guessing numbers would be going up. We just wanted to acknowledge the headwinds are real, but we are navigating through them. Robert Brooks: Thanks. And an update on the supply channel through TikTok Shop—you mentioned 100 thousand bags in one month previously. Was that high-quality supply, and is this a channel you will tap more going forward? James Reinhart: On TikTok, the TikTok Shop bags we have processed so far look similar to other new suppliers—that is, new suppliers are always a little worse than existing suppliers because they need to get up the learning curve on ThredUp Inc. It is a huge opportunity to lean into TikTok to scale. We need to improve onboarding and education to get these sellers to perform like our large cohort of existing sellers. We feel great about the channel. We just launched our premium kits for sale on TikTok in the last couple of weeks, which is a new opportunity to scale premium bags further. We feel great about the channel, and we will keep educating new sellers as they come on the platform. This cohort looks promising. Robert Brooks: Lastly, on buyer acquisition—what incentives or levers are driving that really good acquisition? Is it the better marketing channels—leaning into Meta and Pinterest and away from Google—or tailwinds from last year’s rebrand? James Reinhart: The channel mix is a big piece. We kicked off work to improve how we advertise on Pinterest in a material way about a year ago and have been methodically growing those channels. We are seeing historically low CACs on Meta, so we can put more dollars to work there. The combination of a better product experience on the site and better targeting and efficiency has created a good recipe. We are leaning more into Pinterest and Meta going forward. If we can continue to scale spend and move dollars away from Google PMAX, you will see those cohorts get even better than they are today. Operator: Next question comes from the line of Oliver Chen with TD Cowen. Please go ahead. Oliver Chen: Hi, James and Sean. As we look ahead, what should we know about order frequency relative to the momentum in active buyers? Second, regarding ASP and conversion rates, do you expect those to be noisy or get worse, and what is incorporated in your guidance? Third, on reinforcement learning, many models are based on action-reward—what is happening in terms of the agent versus the reward, how does that optimize to be adaptive, and what should we pay attention to as you continue to invest there? James Reinhart: On reinforcement learning, this is an exciting time for us to have our first product experience in market with an agentic engine. Every time the agent—or team of agents—engages, we get better data on how the customer is browsing, what they are adding to cart, removing from cart, what they are clicking, and time spent on items. The model takes that data and predicts the path most likely to lead to conversion, changing what the customer sees as they navigate the site in real time. Traditionally, models have a lag—you push learnings into email or push marketing. Here, it is changing the on-site experience live. For a traditional retailer, this is easier with limited catalog depth. In secondhand, with hundreds of thousands of new items coming online each week, you need a more robust, dynamic engine. The team has built something special. We are seeing strong conversion rates and will roll it out to more customers and categories over time. We started with dresses, our biggest category, but there is lots more to do. Sean Sobers: On ASPs and conversion from a planning or guidance perspective, we looked at what we were seeing starting in March through April, as James mentioned, and baked that into the guidance as we go forward. You see that in the Q2 and full-year 2026 outlook. On frequency, we are seeing incremental frequency. On the last call, we discussed product decisions around the free shipping threshold and focusing on frequency over average order value. On a trailing twelve-month basis, you can see revenue per order being slightly lower, but orders per buyer are going up. You will continue to see that trend through the rest of 2026. If you roll that forward into 2027, order frequency is a much bigger driver of revenue growth than revenue per order, given how much customers are shopping on ThredUp Inc. These dynamics are positive, and the team has done a great job calibrating revenue per order and frequency. Oliver Chen: Supply has always been important, but it feels like your machinery has heightened that importance given your success with buyers. What is different now? And on mix, premiumization has been a factor—how does that interplay with reinforcement learning and customer experience? James Reinhart: On supply, historically we believed the supply we were getting could satisfy demand on the marketplace. Over the last fifteen months—through the launch of our premium service and recently direct selling—we are seeing that incremental innovation in supply channels can drive outsized growth among both sellers and buyers. There are pockets of sellers and the market we were not addressing. Premium and above-premium were areas ThredUp Inc. was not really known for, but we are becoming more relevant to customers with that premium mix. Similarly, with direct selling, customers who wanted to sell their own items and recover more did not have an option—now that is changing. Our point of view is that seller innovation can expand the addressable market and make the business grow faster, which is why we are innovating. As for reinforcement learning with respect to supply, it is TBD. We are not using agents yet to do much on the supply side, so there is no RL to comment on there right now. Oliver Chen: On the virtuous circle and TAM expansion, do you anticipate needing different capabilities or supply chain, or will you test as you go? Does it change how you handle or authenticate longer term? James Reinhart: I do not see any material change in how we handle supply. What we have done so far is build real defensibility and unique assets to process and price at scale—items that are $25, $26, $27—and we are leveraging that entire supply chain and innovation to do more. Our thesis all along was that we could build competitive advantage in supply chain, data, and our marketplace, and then incrementally expand how we serve buyers and sellers. We are showing we can do that—drive growth among our core everyday sellers and attract different segments, whether through premium or direct selling. It speaks to the power of the business model to compound year after year. Operator: Next question comes from the line of Bernie McTernan with Needham and Company. Please go ahead. Bernard Jerome McTernan: Great, thanks for taking the question. On supplier KPIs—James, what metrics do you track internally to make sure you have enough supply, and where are those metrics now versus where you want them to be? And I have a follow-up. James Reinhart: We track a few things. One is items per buyer—broad selection and availability as we look at the distribution of buyers and items. That metric flipped in Q1 and said we have so much incremental buyer demand that we do not have quite as many items per buyer as needed. That speaks to improvements in and the amount of buyer growth—our “warning light” went on that we could benefit from more supply to meet demand. Second, we look at the quality of items—we think about it internally as a HangerScore, the quality score of items per buyer. We saw that we could still drive more high-quality HangerScore items, primarily through the mix of premium, to delight that segment of buyers. That led to launching premium bags on TikTok, as an example. Both indicators suggest the relationship between supply and buyers is healthy, but the marketplace today is slightly underserved relative to six months ago. That is why we are more aggressively investing and ramping supply. Bernard Jerome McTernan: And on the ASP headwind, is this consumers trading down or any specific action you are taking on pricing that is causing this headwind? James Reinhart: That is the question. From what we see, the consumer is being a bit more discerning. Over the next sixty to ninety days, we will evaluate if there is something we can do to have that flip back more quickly—how we promote, curate, or merchandise. Today, we think it is mostly the consumer being a bit more discerning, which is why we flowed it through the rest of the year. If ASPs were back up 3% to 3.5%, my guess is numbers would be higher for Q2 and for the year. We will digest this and keep operating at a high level, and I think we will be in great shape. Operator: That concludes our question-and-answer session. I will now turn the call back over to James Reinhart for closing remarks. James Reinhart: Thank you all for joining us today. I am especially grateful to the ThredUp Inc. team for your continued hard work and relentless pursuit of solutions to make the lives of all of our buyers and all of our sellers better. Thank you all. We look forward to seeing you on our next call. Cheers. Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Hello, and welcome to Travere Therapeutics, Inc.’s first quarter 2026 financial results conference call. Today’s call is being recorded. At this time, I would like to turn the conference call over to Nivi Nehra, Vice President, Corporate Communications and Investor Relations. Please go ahead, Nivi. Nivi Nehra: Thank you, Operator. Good afternoon, and welcome to Travere Therapeutics, Inc.’s first quarter 2026 financial results and corporate update call. Thank you all for joining. Today’s call will be led by Eric M. Dube, our President and Chief Executive Officer. Eric will be joined in the prepared remarks by Jula Inrig, our Chief Medical Officer, Peter Heerma, our Chief Commercial Officer, and Christopher Cline, our Chief Financial Officer. William E. Rote, our Chief Research Officer, will join us for the Q&A. Before we begin, I would like to remind everyone that statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statements. Please see the forward-looking statement disclaimer on the company’s press release issued earlier today, as well as the Risk Factors section in our Forms 10-Q and 10-K filed with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made, May 4, 2026, and Travere Therapeutics, Inc. specifically disclaims any obligation to update such statements to reflect future information, events, or circumstances. With that, let me now turn the call over to Eric. Eric? Eric M. Dube: Thank you, Nivi. Good afternoon, and thank you for joining us. This has been a tremendous start to the year for Travere Therapeutics, Inc. We have made significant progress across our three strategic priorities. We achieved the first FDA approval in FSGS, we reported a new high in demand for FILSPARI in IgA nephropathy, and we dosed the first new patient in the Phase III HARMONY study of pegtibatinase following restart of enrollment. April 13 marked a pivotal point for the FSGS community and Travere Therapeutics, Inc. Achieving the first full FDA approval for FILSPARI in FSGS established it as the first and only approved medicine for this rare and devastating kidney condition. With the potential to help more than 30,000 people living with FSGS without nephrotic syndrome, this approval is a significant indication expansion for FILSPARI and meaningfully increases the opportunity ahead for us. The first quarter also marked another period of exceptional commercial performance in IgA nephropathy. We delivered another quarter of record new patient start forms. As we look ahead, we are already building upon our experience gained from the successful launch of FILSPARI in IgA nephropathy and are executing a strong launch in FSGS. Across IgA nephropathy and FSGS, we are now estimating that more than 100,000 patients in the U.S. could be eligible for FILSPARI. Together, we believe this represents a $3 billion potential peak sales opportunity for FILSPARI, reinforcing a compelling long-term growth trajectory for the company. We are also advancing our pipeline to support further sustainable growth. We recently dosed the first new patient in our pivotal Phase III HARMONY study evaluating pegtibatinase in classical homocystinuria following the restart of enrollment. Importantly, achieving this milestone puts us on track to deliver top-line results in 2027. Based on the data we have generated to date, we believe this program has the potential to become the first disease-modifying therapy for the HCU community. We expect there are approximately 7,000 to 10,000 people living with HCU globally who would be addressable for pegtibatinase. I am incredibly proud of our team’s accomplishments and look forward to accelerating Travere Therapeutics, Inc.’s growth as we expand our reach and serve more patients across the rare disease community. With that, I will turn it over to Jula for a medical update. Jula? Jula Inrig: Thank you, Eric. I am very excited to have the first ever approved medicine for the FSGS community now available for patients. As a reminder, FILSPARI was approved to reduce proteinuria in adults and children eight years and older with FSGS without nephrotic syndrome. I would like to take a moment to highlight how nephrotic syndrome is defined in clinical practice and what it means in the context of which patients may be eligible for FILSPARI. Nephrotic syndrome is a clinical diagnosis and is typically defined by the presence of all three of the following criteria: high levels of proteinuria greater than 3.5 grams per day, low serum albumin levels of less than 3.0 grams per deciliter, and the presence of edema. If a patient is missing any one of these criteria, they are not considered to have active nephrotic syndrome. This is different than nephrotic-range proteinuria, which is typically greater than 3.5 grams per day. For example, a patient with 4 grams of proteinuria and low serum albumin, but no edema, will be eligible for FILSPARI. Importantly, nephrotic syndrome is not a chronic state. If a patient with FSGS presents without nephrotic syndrome, which represents the majority of the FSGS population spanning all types of FSGS, they are immediately eligible for FILSPARI. For those who initially present with nephrotic syndrome, physicians will typically use immunosuppression induction to try to control the patient’s proteinuria and stabilize them, after which these patients may also become eligible for FILSPARI. In addition, based on the data from DUPLEX, patients treated with FILSPARI demonstrated sustained reductions in proteinuria over time, with proteinuria levels reaching approximately 1.5 grams per gram or less on average at study end. At these proteinuria levels, patients would be expected to have a much lower risk of relapsing to nephrotic syndrome. Based on our discussions with key opinion leaders following the approval, there is wide enthusiasm for using FILSPARI across the types of FSGS, including among secondary and genetic FSGS. This is supported by our recent publication in CJASN demonstrating consistent efficacy and safety in patients with genetic FSGS, a population often considered the most difficult to treat. Physicians consistently highlight the need for effective, non-immunosuppressive options for long-term disease management. Now let me talk about IgA nephropathy. We recently published data in CJASN from the PROTECT study showing that patients with IgA nephropathy who achieved complete remission of proteinuria to less than 0.3 grams per gram experienced a rate of eGFR decline of less than 1 milliliter per minute per year, a rate which is similar to healthy aging. The KDIGO guidelines recommend a treatment approach for IgA nephropathy that addresses both kidney injury and upstream immune drivers, and include FILSPARI as a first-line option for patients at risk of progression. The data published this month reinforced FILSPARI’s role as a foundational medicine in IgA nephropathy, demonstrating that it helps more patients reach complete remission, which is associated with improved preservation of kidney function over time. Turning briefly to our pipeline, we are pleased to have reinitiated enrollment in our Phase III HARMONY study of pegtibatinase, with the first new patient now dosed. HARMONY is a randomized, double-blind study designed to evaluate the efficacy and safety of pegtibatinase compared to placebo, with a primary endpoint focused on reduction in plasma total homocysteine, a key driver of disease in classical HCU. The primary endpoint for HARMONY is assessed at 12 weeks, consistent with the primary endpoint timing from our Phase I/II COMPOSE study. Patients who complete the HARMONY study are eligible to enroll in the ENCOMPOSE extension study. This open-label extension will allow us to evaluate long-term outcomes, including sustained homocysteine control, as well as meaningful aspects for patients such as the potential for greater dietary flexibility and self-administration. This program is supported by data from our Phase I/II COMPOSE study, where pegtibatinase demonstrated rapid, sustained, and dose-dependent reductions in total homocysteine levels. At the 2.5 mg/kg dose twice a week, pegtibatinase delivered a 67.1% mean relative reduction in total homocysteine from baseline to 12 weeks, as well as maintenance of mean total homocysteine below the clinically meaningful threshold of 100 micromoles, and was generally well tolerated. Pegtibatinase has the potential to become the first disease-modifying therapy for patients living with classical HCU, and as Eric mentioned earlier, we expect top-line data from the HARMONY study in 2027. Finally, we continue to generate and share new data across IgA nephropathy, FSGS, and HCU, and we look forward to upcoming medical meetings. At NKF this week and ERA next month, we will present additional analyses in both IgA nephropathy and FSGS. I will now turn it over to Peter for a commercial update. Peter? Peter Heerma: Thank you, Jula. I am pleased to share that we started the year strongly and set new records with our FILSPARI performance. The first quarter marked the highest demand to date as we received 993 new patient start forms, reflecting continued expansion among new prescribers and deepening utilization across established accounts. Importantly, we continue to see an increasing number of practices treating multiple IgA nephropathy patients with FILSPARI, with PPU as a meaningful indicator of physicians’ confidence with the medicine’s foundational and nephroprotective positioning. As new treatment options become available for this indication, FILSPARI remains the most commonly prescribed medicine approved for IgA nephropathy in the U.S. This broad utilization supports our confidence in FILSPARI’s continued growth potential in IgA nephropathy, and we are seeing strong demand at the start of the second quarter. For the first quarter of 2026, we reported approximately $105 million in FILSPARI sales, despite the typical beginning-of-year insurance resets and gross-to-net dynamics, as well as recognizing fewer revenue shipping weeks. The strength of our performance in IgA nephropathy and the momentum we have with FILSPARI is directly relevant as we enter the FSGS launch. There is significant overlap in the prescriber base between these two indications, and many nephrologists already have experience with FILSPARI in their IgA nephropathy patients. This will support early adoption in FSGS patients, and we anticipate a faster uptake compared to the initial IgA nephropathy launch. In fact, early feedback from the FSGS community has been overwhelmingly positive. We received our first patient start forms on the first day following approval. We are encouraged by the enthusiasm and engagement we are experiencing. Having spent time in the field over the past two weeks, I have seen that enthusiasm firsthand in discussions with nephrologists in their offices. It reinforces our belief that the FSGS opportunity is expected to be even bigger than IgA nephropathy. Established payer access in IgA nephropathy is helping to position FILSPARI for a supportive access environment in FSGS. In fact, we saw our first FSGS reimbursement approvals in the first week. Payers often manage access at the product and indication level, and our team is focused on expanding payer plans and formularies to include FILSPARI for FSGS. While education on the FSGS indication will be important, we are starting from a position of strength with an experienced commercial team and established infrastructure. We believe there are more than 30,000 patients in the U.S. with FSGS who are currently eligible for FILSPARI, and we expect that number to grow. In summary, the start of 2026 reflects exceptional commercial execution with record demand and revenue growth. With our continuing performance in IgA nephropathy and FILSPARI’s recent FSGS approval, I am confident in our ability to continue delivering strong, sustained growth and long-term leadership across these rare kidney disease indications. I am incredibly proud of our team and the impact they continue to have on patients and physicians. I am excited for what lies ahead for us in 2026. I will now turn the call over to Chris for the financial update. Chris? Christopher Cline: Thank you, Peter. As you have heard from the team, we delivered another strong quarter of execution across the business, and recently we achieved an important milestone with FILSPARI’s approval in FSGS that further strengthens our outlook for continued growth. In the first quarter, we generated $124.5 million in total U.S. net product sales, reflecting strong year-over-year growth. Importantly, U.S. net product sales of FILSPARI grew approximately 88% year over year to $105.2 million, despite typical beginning-of-year gross-to-net impact and fewer revenue recognition days. As Peter noted, for FILSPARI, we recognize revenue when product is delivered to our specialty pharmacies, which typically occurs a couple of days after shipment from our logistics partner. Due to the quarter-end timing and typical early-week ordering patterns, the first quarter had one fewer shipping week than usual. As a result, some FILSPARI shipments made in the first quarter will be recognized in the second quarter. Adjusting for this dynamic, and supported by record demand during the first quarter, we believe FILSPARI is on a strong trajectory in IgA nephropathy for the balance of the year. Elsewhere, Thiola and Thiola EC contributed $19.3 million in U.S. net product sales during the first quarter, and we recognized $2.7 million in licensing and collaboration revenue, resulting in $127.2 million in total revenue for the first quarter. Moving to operating expenses, our research and development expenses for the first quarter of 2026 were $57.1 million, compared to $46.9 million for the same period in 2025. On a non-GAAP adjusted basis, R&D expenses were $51.5 million compared to $42.2 million for the same period in 2025. The increase is primarily driven by the restart of enrollment in the Phase III HARMONY study of pegtibatinase during the quarter. Selling, general, and administrative expenses for the first quarter of 2026 were $80.3 million, compared to $60.4 million for the same period in 2025. On a non-GAAP adjusted basis, SG&A expenses were $69.3 million compared to $53.3 million for the same period in 2025. The increase is primarily attributable to investments in preparation for FILSPARI’s launch in FSGS, including an expanded field team, as well as investments in IgA nephropathy. Beginning in the first quarter, we revised the presentation of our amortization expense associated with royalty and milestone payments to a separate royalty expense line item in order to provide greater transparency to underlying operating expenses. In the quarter, we recognized $24.8 million in royalty expense compared to $12.4 million for the same period in 2025. The increase is primarily a result of the Thiola intangible asset reaching the end of its accounting useful life, resulting in amortization of the full amount of the royalty payments accrued this quarter, as well as an increase in capitalized FILSPARI royalties. Under accounting policy, Thiola royalties will now be expensed to royalty expense in the same quarter as the corresponding net sales. Contractual milestones and royalty payments related to FILSPARI will continue to be capitalized to intangible assets and amortized on a straight-line basis over its useful life, with only amortized expense recognized within royalty expense. Total other income, net, for the first quarter of 2026 was less than $1 million, compared to $1.5 million for the same period in 2025. Net loss for the first quarter of 2026 was $37.1 million, or $0.40 per basic share, compared to a net loss of $41.2 million, or $0.47 per basic share, for the same period in 2025. On a non-GAAP adjusted basis, net income for the first quarter was $4.1 million, or $0.05 per basic share, compared to a net loss of $16.9 million, or $0.19 per basic share, for the same period of 2025. As of March 31, 2026, we had cash, cash equivalents, marketable securities, and receivables of approximately $352 million. Receivables include the $25 million sales-based milestone payment from Mirum Pharmaceuticals, which was recognized in 2025 and received in April. This is not yet reflected in our cash balance of approximately $264.7 million as of March 31. Looking ahead, we are well positioned to fund our operations with existing resources, investing with discipline across our key priorities, including the commercialization of FILSPARI in IgA nephropathy and FSGS, ongoing evidence generation, advancement of the pivotal HARMONY study of pegtibatinase in HCU, alongside building further pegtibatinase supply. We expect continued strong demand in IgA nephropathy to drive sustained revenue growth, with FSGS further contributing to our top-line trajectory. Overall, we believe our balance sheet, expected top-line expansion, and disciplined approach to investing in our priorities position us to execute with confidence and deliver durable long-term growth. I will now turn the call over to Eric for his closing remarks. Eric? Eric M. Dube: Thank you, Chris. As we look ahead, our priorities are clear: continue to drive growth by reaching more patients with IgA nephropathy, execute a strong launch in FSGS, and enroll our HARMONY study of pegtibatinase. With FILSPARI now approved in IgA nephropathy and FSGS, and a pipeline progressing into late-stage development, we believe we are well positioned to deliver meaningful value for patients and shareholders over the near and long term. With that, I will turn the call back over to Nivi for Q&A. Nivi? Nivi Nehra: Thank you, Eric. We will now open the call for questions. Operator? Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your keypad to raise your hand. To withdraw your question, please press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. As a reminder, we ask that you limit yourself to one question. If you have another question, please rejoin the queue. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joseph Schwartz with Leerink Partners. Joseph, your line is open. Please go ahead. Joseph Schwartz: Hey, guys. Will Soghikian: This is Will Soghikian on for Joe. Thanks for taking our question, and congrats on all the progress this quarter. One for us on FSGS. You have messaged several times that the launch is expected to progress at a faster rate than IgA nephropathy. Could you please characterize what you are seeing at this early stage and how it compares to the original IgA nephropathy rollout a few years ago? It seems like the full approval here could also make a difference, especially since we know nephrologists are sometimes slower to adopt innovative medicines. Is what you are seeing in these early days supportive of a more rapid FSGS launch? Thanks so much. Eric M. Dube: Will, thank you so much for the question, and I am very pleased with the early performance and particularly the execution from our field teams. Peter, why do you not give some color to what you are seeing in the early part of the launch? Peter Heerma: Absolutely, Eric, and Will, thank you for that question. Indeed, we are confident in a faster uptake in FSGS relative to the IgA nephropathy launch for multiple reasons. First, this is a very high unmet need and this is the fastest progressive glomerular disease as well, where for IgA nephropathy we really had to establish the urgency to intervene earlier. In addition to that, we built upon very strong brand awareness and many of the physicians already have experience with FILSPARI, given this is basically the same core point for IgA nephropathy. From a payer perspective, we already are in most of the formularies and payer plans. We currently have over 97% pathway to access for patients. We built upon a very strong foundation, and that gives me confidence that we will have a more rapid uptake in FSGS relative to our initial IgA nephropathy launch, and we believe it is an even bigger opportunity with FSGS than IgA nephropathy. Thank you so much. Operator: Next question comes from the line of Tyler Van Buren with TD Cowen. Tyler, your line is open. Please go ahead. Gregory Allen Harrison: Hi. This is Greg on for Tyler. Thanks for taking my question. You noted that the first FSGS PSF arrived the day after approval, and reimbursed treatment started within one week. How many FSGS PSFs have you recorded thus far in the launch, and what proportion of early starts are coming through payer authorizations versus exceptions or appeals? What are you seeing on initial behavior in general? Thanks. Eric M. Dube: Greg, thanks so much for the question. While it is too early for us to be able to quantify some of that, Peter certainly can provide some qualitative and directional views on the demand and the payer dynamics. Peter? Peter Heerma: Yes. Great. I would love to answer that question with specifics, but this is a Q1 call, so I am looking forward to sharing more with you in the second quarter call. Following my answer to your earlier question on the faster uptake than IgA nephropathy, I would say everything we are seeing so far is confirming what I have said, with regard to a faster uptake than our initial IgA nephropathy launch. That counts both for demand as well as for the early approval rates that we are seeing with payers. We are seeing actually a higher first-pass approval at the payer level than what we saw initially for IgA nephropathy. Operator: Your next question comes from the line of Anupam Rama with JPMorgan. Anupam, your line is open. Please go ahead. Anupam Rama: Hey, guys. Thanks so much for taking the question. On the FSGS launch, if you could build upon some of your prior comments, I know you mentioned that there is a need to further educate physicians. I know that it is only three weeks post approval, but I was wondering if you could speak to what is resonating with physicians in terms of the product label and the product profile. And within that, where do you think the education is required? Thanks so much. Eric M. Dube: Anupam, thanks so much for the questions. Peter, why do you not take that? And, Jula, I know your team has extensive engagements with thought leaders, you can add anything that you might want to. Peter? Peter Heerma: Happy to take that question, Anupam. Overwhelmingly positive responses from physicians, but you still have to educate them. I was in the field a few days, and many of the community nephrologists in particular may not know yet that FILSPARI was approved. That awareness you have to build. You have to educate physicians also on the label, in particular on patients not being in active nephrotic syndrome. That requires some education. Once you explain that, it resonates with physicians because it is very similar to how patients are being treated today. It is very consistent with the guidelines. Jula, maybe you can provide some context on that. Jula Inrig: Yes, thanks. Our team, as Eric mentioned, has been out at conferences, advisory boards, and seminars. The approval is getting resoundingly positive feedback from physicians. This patient community has been waiting a long time, and they are excited to have a non-immunosuppressive treatment option to control these patients and get their proteinuria down. You asked about education. Part of it is a reminder that active nephrotic syndrome is not the same as nephrotic-range proteinuria, so we are educating around that. But as Peter mentioned, very positive and excitement to have this option to treat their patients. Anupam Rama: Thanks so much for taking my question. Eric M. Dube: Thanks, Anupam. Operator: Your next question comes from the line of Prakhar Agrawal with Cantor Fitzgerald. Prakhar, your line is open. Please go ahead. Prakhar Agrawal: Hi. Thank you for taking my questions, and congrats on the quarter. Going back to your comments on faster uptake than IgA nephropathy, when I go back to the IgA nephropathy launch in the first few full quarters, you had 400 to 450 patient start forms. Is that how we should think about the uptake for FSGS as well? And secondly, on access, do you expect payers to cover the secondary FSGS patients broadly as well despite the segment not being tested in Phase III? Are you hearing any pushbacks from the payers? Thank you so much. Eric M. Dube: Prakhar, thanks for the questions. With regard to the uptake, we are not going to be providing guidance, and we will not be breaking out the PSFs by indication as we move forward. I will reinforce what Peter shared, that everything we are seeing so far in the first three weeks of launch has confirmed what we have been saying around a faster uptake, an eagerness to prescribe, and payer dynamics helping to get patients from PSF onto therapy. Peter, why do you not take the question around payer access and the different types of FSGS, secondary, etc., and any pushback. Peter Heerma: Absolutely. I am most encouraged by the early approval rates that we are seeing for FSGS, which are higher than what we saw initially for IgA nephropathy. For context, payers understand that FSGS is a rarer disease compared to IgA nephropathy with a more progressive nature. This is what we have been educating payers on over the last six to seven months. In that context, payers are not focused on types or subtypes of FSGS. They understand the common injury pathway and how FILSPARI is the first approved medicine for this patient population that is rapidly progressing. That is what we are hearing and seeing so far in the context of the conversations we have had with payers over the last six to seven months. Prakhar Agrawal: Thank you. Eric M. Dube: Thank you. Operator: Your next question comes from the line of Vamil Divan with Guggenheim Securities. Vamil, your line is open. Please go ahead. Vamil Divan: Great, thanks for taking my questions. I wanted to get back to the topic around the history and nephrotic syndrome. We have spoken to some physicians since the approval, and there seems to be some confusion about this and whether they can prescribe FILSPARI in these patients or not. Could you elaborate in terms of whether physicians should focus on a history of nephrotic syndrome? It sounds like maybe you mentioned that some education is still needed on that topic. Can you elaborate on what you are doing to make sure it is clear, because it certainly sounds like your perspective is that this should not be a limiting factor? Eric M. Dube: Thank you, Vamil, for the question. We firmly believe this is not going to be a challenge. It is certainly an opportunity to educate. Jula, why do you not talk about the efforts that you are doing and the reaction from nephrologists? Peter, you can talk about how payers may be thinking about this topic. Jula Inrig: This has not been an area of focus from physicians, and we have had a fair bit of engagement, as has Peter’s team. We do not believe that a history of nephrotic syndrome should preclude a physician from prescribing FILSPARI. The reason for that is our labeled indication: it is for patients without active nephrotic syndrome. This is very much aligned with KDIGO, which recommends patients with active nephrotic syndrome be treated with immunosuppression, while those without it receive optimized supportive foundational care, and that is where FILSPARI provides the best treatment option for these patients. Peter Heerma: To build upon that from a payer perspective, the most important point is to educate payers that nephrotic syndrome is a dynamic state, not a chronic state, and payers understand that. These conversations have not really come up as issues, given this is a rapidly progressing disease and payers understand that as well. Vamil Divan: Okay. Thank you. Eric M. Dube: Thanks, Vamil. Operator: Your next question comes from the line of Gavin Clark-Gartner with Evercore. Gavin, your line is open. Please go ahead. Gavin Clark-Gartner: Hey, guys. Thanks for taking the question. I wanted to pivot over to IgA nephropathy quickly. What are you seeing as discontinuation rates over time here, maybe at the one-year mark and the two-year mark since patients start therapy? How does that compare to what you saw in the IgA nephropathy Phase III? Eric M. Dube: Peter, why do you not take that question? Peter Heerma: The compliance and persistence rates for FILSPARI in IgA nephropathy have been very high. We have not given specifics on the numbers, but we have not seen any change or disruption in those rates. We have high confidence both from patients, who are being helped, and from physicians, who are seeing that this product works for a patient population that historically did not have a treatment option. Jula, maybe you can provide context on what we are seeing versus what we saw in the PROTECT trial. Jula Inrig: I would say consistent. We saw high persistence of patients staying on treatment during the two-year double-blind trial, and I think it is very aligned with what we are seeing commercially. Part of the reason for that is patients have that positive reinforcement: their proteinuria goes down; they see it; and they feel like they are getting better. With a side effect profile very consistent with irbesartan, patients tend to stay on therapy, and they understand this should be truly lifelong—as long as they keep their kidneys, they should stay on FILSPARI. Gavin Clark-Gartner: Great. Thanks. Operator: Your next question comes from the line of Mohit Bansal with Wells Fargo. Mohit, your line is open. Go ahead. Sadia Rahman: This is Sadia Rahman on for Mohit. Thanks for taking our question. The patient start form number this quarter again looks very impressive. Can you provide some color on the conversion rate for these forms to patients ultimately starting treatment, and any reasons for any drop-off along the way? Thank you. Eric M. Dube: Thanks, Sadia. Peter, why do you not take that? Peter Heerma: I am glad you reflect on the 993 patient start forms as impressive because I am really impressed with my team that is continuing to show growth in IgA nephropathy in a rapidly changing environment. With regards to conversion, we continue to convert those patients quite rapidly over time. We continue to make improvements, though where we are right now is not as dramatic as what you saw in the beginning. We do not see any drop-offs or changes. With regards to translation of patient start forms into revenue, that may be part of your question. I think Chris provided some context on fewer ordering and shipment weeks in Q1 relative to the typical gross-to-net dynamics you usually see in Q1. I hope that answered your question. Sadia Rahman: Yes. Thank you. Eric M. Dube: Thank you. Operator: Your next question comes from the line of Laura Chico with Wedbush Securities. Laura, your line is open. Please go ahead. Laura Kathryn Chico: Thank you very much for taking the questions. I apologize if this has been asked already, but one question I had was on IgA nephropathy dynamics for FILSPARI. It is great to see the PSF number considering the increase, and I am presuming that is predominantly from IgA nephropathy patients. But we also had a competitive update: Novartis indicated the ALIGN confirmatory study for atrasentan did not reach its statistical significance, and while they will pursue an FDA full approval, I am wondering how that changes your views on the competitive landscape dynamics for IgA nephropathy with FILSPARI. How are you thinking about pushes and pulls on demand drivers in 2026? And then I have a quick follow-up, if that is okay. Eric M. Dube: Thanks, Laura. Peter, why do you not take that, and Jula can add any further perspective on the evolution or consistency of the treatment landscape. Peter Heerma: Happy to answer that question. Most important, this is a market in development. Most growth in this marketplace is not coming from competitive share, but mainly from continuing to grow the market, and that is exactly what we see and anticipated. I think FILSPARI is very well positioned to grow in this marketplace because it is really replacing RAS inhibition. There is no other product that has that ability. Most competition is in the other sector—more immunosuppressive agents—where B cells are now playing together with complement inhibitors and histories of steroids. Physicians understand the positioning of FILSPARI very well as the foundational nephroprotective treatment option, and understand FILSPARI’s positioning relative to atrasentan and others. Eric M. Dube: And just one thing, Laura, before your next question. You asked about the PSF increase. That is all based in Q1, so that would be IgA nephropathy before the approval of FSGS. We do expect to see an acceleration of demand over time as we look at both indications, but that very solid number of 993 patient start forms in Q1 reflects our performance in an increasingly competitive landscape of multiple treatment options. I think it is a really impressive number that Peter’s team has been able to deliver. Laura Kathryn Chico: Just real quick, we have got a few weeks in April since the FSGS approval. It does seem like a couple PSFs are coming through here. Just out of curiosity, are these originating from existing FILSPARI IgA nephropathy prescribers versus newly activated FSGS prescribers? Should we presume these are already established prescribers in these early days and quarters of launch? Thanks very much. Eric M. Dube: Laura, thanks so much for the question. It is early. Peter, why do you not comment on what you are seeing thus far? Peter Heerma: It is indeed early. We see both, to be honest, and more color will come in the Q2 call. In this context, it is good to talk about the halo effect. I have spoken about the halo effect in the past: experienced prescribers for IgA nephropathy who now also adopt FILSPARI for FSGS. Vice versa, we are starting to hear anecdotes as well from physicians that have been on the fence who are excited about starting in FSGS, and based on that, are now also excited to start prescribing in IgA nephropathy. I think a halo effect will benefit both indications. Operator: Your next question comes from the line of Maury Raycroft with Jefferies. Maury, your line is open. Please go ahead. Maury Raycroft: Hi. Thanks for taking my question, and congrats on the quarter. Maybe following up on Laura’s question, focusing on PSFs, I am trying to think about how to estimate that going forward for IgA nephropathy. You talked about atrasentan as a competitor, but Otsuka also had a good quarter for PSF growth in IgA nephropathy. Do you have any perspective on how Otsuka is launching their drug and how you are factoring that into your estimates, and any more perspective you can offer on switching to biologics and how you are thinking about that in your total estimate for $3 billion in peak sales? Eric M. Dube: Let me take a couple of those, and Peter can comment on what he is seeing from a competitive standpoint and switching. First, PSFs moving forward will be provided in aggregate, so I recognize you are likely trying to figure out IgA nephropathy alone. There is no reason to believe we cannot continue this level of performance because of the number of patients and the very unique positioning that non-immunosuppressive kidney-targeted therapies have, which Peter can speak to. With regard to the $3 billion peak sales, that really is based on continued growth in both indications, and we have talked about FSGS being a larger opportunity than IgA nephropathy. We fully expect growth in both, but a much faster uptake in FSGS is going to allow us to reach more patients over time and contribute more meaningfully to peak growth. We really do not see market dynamics taking away from our opportunity or performance. Peter, why do you not talk about that in the context of new patients as well as switches. Peter Heerma: The most important point is that we do not see B-cell therapies as direct competitors for FILSPARI. Conceptually, the way patients are being treated for IgA nephropathy is similar to the past with RAS inhibition, and on top of that you use steroids when needed. That concept is not changing, while for RAS inhibition, you now have FILSPARI as a superior option for those patients. For patients needing additional treatments, you have B-cell therapies potentially replacing steroids. The growth in this market is not so much competitive growth; it is developing the market. This is a highly underdeveloped market historically. There are still many patients treated with generic RAS inhibitors and generic steroids. You have better options available now. The KDIGO guideline is reinforcing that. You have more ambitious treatment targets nowadays, which will often mean more combination therapy as well. There is space for multiple products to grow, and FILSPARI is very well positioned in that nephroprotective foundational treatment category. Eric M. Dube: Thank you, Peter. Maury, if we just take a step back, we have talked over the last couple of years about new entrants helping to accelerate growth within the IgA nephropathy market. That is not going to take away from our performance and outlook—that is exactly what we are seeing with the entrants that have come to the IgA nephropathy foundation. The performance we posted this quarter really reflects the opportunity we have, but perhaps more importantly, the opportunity for patients who have been undertreated with off-label therapies to really have innovation moving forward, both with FILSPARI as well as other therapies. That is going to be the foundation for continued performance of FILSPARI. Maury Raycroft: Got it. That is really helpful. Thank you very much. Eric M. Dube: Thanks, Maury. Operator: Your next question comes from the line of Jason Zemansky with Bank of America. Jason, your line is open. Please go ahead. Jason Eron Zemansky: Good afternoon. Congrats on the progress, and thanks so much for taking our question. Maybe, Jula, one for you. Where are you seeing FILSPARI used or sequenced in FSGS? Is it in lieu of ACE/ARBs? Are these patients usually already on SGLT2s? We have gotten some mixed feedback regarding whether this drug is going to be used first line or in those uncontrolled while already on an ARB or an ACE and an SGLT2. Jula Inrig: Thanks for the question. Just like IgA nephropathy, the vast majority of patients are already on some form of a RAS inhibitor, an ACE or an ARB, even by the time they get sent to the nephrologist, so predating their diagnosis. It is slightly lower than IgA nephropathy because kids may or may not always be on an ACE inhibitor, but you are still talking at least 70% to 80% of patients on some form of foundational treatment. As far as SGLT2 inhibitors, I would say they are used, but potentially not quite as prevalent because we do not have as great data around SGLT2s. But as Peter has mentioned multiple times, these patients are at very high risk for rapid progression to kidney failure, so physicians will be pulling at as many things as they can in their tool belt to try and stabilize these patients. Now they have FILSPARI, which is better in a head-to-head versus a RAS inhibitor, so they are going to take patients off their RAS inhibitor and initiate FILSPARI, ideally at their next clinic visit when they see these patients. Eric M. Dube: And, Jula, maybe I can add something else for Jason’s question. Particularly for those patients with primary FSGS and particularly those with active nephrotic syndrome, they are, based on the guidelines, going to be treated with an immunosuppressant. Once they are not in active nephrotic syndrome, they would be eligible and likely placed on FILSPARI. In terms of not being first-line use, it is a slight nuance, but that is also an opportunity moving forward. Jula Inrig: No, that is accurate. Eric M. Dube: Thanks, Jason. Jason Eron Zemansky: Thanks. Operator: Your next question comes from the line of Alex Thompson with Stifel. Alex, your line is open. Please go ahead. Alexander Thompson: Thanks so much. Just a quick follow-up question on IgA nephropathy, and then I would like to ask about pegtibatinase as well. Maybe, Chris, are you able to quantify the shipping week impact at all? That would be helpful for the quarter. And then for pegtibatinase, the Phase III—congrats on restarting that—have you met with the FDA review division recently, and how confident are you that total homocysteine is still going to be an approvable endpoint here? Thank you. Eric M. Dube: Alright, Chris, and then we can turn that over to Bill for the pegtibatinase question. Christopher Cline: Thanks for the question, Alex. We do not typically break down individual weeks of revenue. The best proxy is to take the average for the quarter. We had about 12 weeks of revenue recognition within the quarter, and that will get you to the best proxy there. William E. Rote: I will take the pegtibatinase question. We have breakthrough therapy designation for pegtibatinase, so that allows us to have a lot of interaction with the FDA. Through that process, we reached alignment on the endpoint for the HARMONY study, and it mirrors the timing of what we saw in the COMPOSE study. It was in collaborative discussion with the agency where we settled on that 12-week endpoint. Alexander Thompson: Has that happened since the original alignment this year or since you redosed, or was that the original alignment? William E. Rote: That was the original discussion. We have not had reason to discuss the endpoints of the trial once it was agreed and aligned upon. Alexander Thompson: Okay. Thank you. Operator: Ladies and gentlemen, this concludes the question and answer session of today’s conference call. I will hand the call back over to Nivi. Nivi Nehra: Great. Thank you everyone for joining today’s call. Have a great rest of your day. Operator: Thank you for attending. You may now disconnect.
Operator: Good afternoon and welcome everyone to the BioMarin Pharmaceutical Inc. First Quarter 2026 Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Traci McCarty, Head of Investor Relations. Please go ahead. Traci McCarty: Thank you, operator. To remind you, this non-confidential presentation contains forward-looking statements about the business prospects of BioMarin Pharmaceutical Inc., including expectations regarding BioMarin Pharmaceutical Inc.'s financial performance, commercial products, and potential future products in different areas of therapeutic research and development. Results may differ materially depending on the progress of BioMarin Pharmaceutical Inc.'s product programs, actions of regulatory authorities, availability of capital, future actions in the pharmaceutical market, and developments by competitors, and those factors detailed in BioMarin Pharmaceutical Inc.'s filings with the Securities and Exchange Commission, such as 10-Q, 10-Ks, and 8-Ks reports. In addition, we will use non-GAAP financial measures as defined in Regulation G during the call today. These non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP. You can find the related reconciliations to U.S. GAAP in the earnings release and earnings presentation, both of which are now available in the Investor Relations section of our website. Please note that our commentary on today's call will focus on non-GAAP financial measures unless otherwise indicated. Beginning on slide three and introducing BioMarin Pharmaceutical Inc.'s management team, joining today's call are Alexander Hardy, chief executive officer; Brian Mueller, chief financial officer; Cristin Hubbard, chief commercial officer; and Gregory Friberg, chief R&D officer. I will now turn the call over to BioMarin Pharmaceutical Inc.'s President and CEO, Alexander Hardy. Alexander Hardy: Thank you, Traci, and thank you all for joining us today. I am so pleased that we completed the Amicus acquisition last week, starting a new and exciting chapter for BioMarin Pharmaceutical Inc. with the addition of two innovative therapies, Galafold for Fabry disease and Pombility and Opfolda for Pompe disease. The acquisition accelerates our anticipated year-over-year 2026 revenue growth to 20% at the midpoint of today's updated guidance. The strengthening trajectory is just the beginning of BioMarin Pharmaceutical Inc.'s enhanced longer-term financial outlook, supported by our larger, more diversified commercial portfolio. Since announcing our plans to acquire Amicus late last year, we have been preparing for rapid integration beginning on day one, with the goal of increasing the peak potential of these newly added products. Following the recent close of the transaction, we initiated our targeted integration plan focused on leveraging BioMarin Pharmaceutical Inc.'s operating scale and capabilities to drive diagnosis and treatment rates for patients with Fabry disease and late-onset Pompe disease. Next quarter, we plan to share this road map as well as more detail on BioMarin Pharmaceutical Inc.'s growth acceleration with the addition of Galafold and Pombility and Opfolda to our commercial portfolio, DMX-200 for FSGS in phase three to our late-stage pipeline. Turning briefly to first quarter results and outlook for the remainder of this year and starting with Enzyme Therapies, I am pleased with the strong interest we are seeing from the PKU community following the recent Palynziq adolescent label expansion in the United States. With Cristin, who will discuss in more detail, we expect Enzyme Therapies will deliver robust growth in 2026, further supported by the addition of Galafold and Pombility and Opfolda to the portfolio. Moving to our skeletal conditions business unit, we saw strong patient demand for Voxzogo, with new patient starts increasing across all regions in the first quarter. In the U.S., the majority of new patient starts were from the under age two cohort. These results reflect our focused investments in increasing adoption of Voxzogo, particularly among younger patients. Building on our leadership in achondroplasia, we are pleased to have submitted the sNDA for full approval of Voxzogo. We expect to hear the timing of our review in the coming months. I want to congratulate our regulatory team for the outstanding work that went into this comprehensive submission package. We also look forward to pivotal results for Voxzogo in hypochondroplasia and BMN-401 for ENPP1 deficiency, those later in Q2. In summary, we expect 2026 to be a momentous year for BioMarin Pharmaceutical Inc. Our immediate focus remains on the seamless and rapid integration of Amicus to accelerate our growth trajectory this year and beyond, and pursuing regulatory next steps following the two upcoming pivotal data readouts. The addition of Galafold and Pombility and Opfolda to BioMarin Pharmaceutical Inc.'s portfolio of innovative medicines provides an opportunity to reach more patients around the world, creating significant value for all of our stakeholders in the near and longer term. As we enter this next chapter, I would like to express my appreciation to the employees of both BioMarin Pharmaceutical Inc. and Amicus whose dedication forms the foundation of our shared mission to serve patients. Thank you for your attention, and I will now turn the call over to Brian to provide additional financial updates. Brian? Brian Mueller: Thank you, Alexander. Please refer to today's press release for detailed first quarter 2026 results, including reconciliations of GAAP to non-GAAP financial measures. All first quarter results will be available in our upcoming Form 10-Q, which we expect to file in the coming days. Now moving to slide seven. Total revenues in the first quarter were $766 million and increased year over year, supported by increased patient demand across both Enzyme Therapies and Voxzogo. As expected, those organic growth drivers were partly offset by order timing dynamics as well as lower revenue from Roctavian, Kuvan, and royalties. Enzyme Therapies revenue increased 6% year over year, led by growth in Vimizim, Naglazyme, and Brineura. Palynziq's first quarter revenues were impacted by U.S. order timing, which resulted in elevated stocking levels in 2025 as discussed last quarter. We expect this stocking dynamic to normalize and anticipate year-over-year revenue growth for Palynziq in full year 2026 as growth in new patient starts in the 12 to 18-year-old population gains momentum and patients continue to titrate to their maintenance dose. Voxzogo revenue was supported by new patient starts across all regions and in line with the expectations that we shared on our prior quarter earnings call. Looking ahead, due to anticipated order timing and consistent with 2025, we expect Voxzogo revenue to be higher in the second half of 2026 compared to the first half. Cristin will provide more color on commercial dynamics in a moment. Turning now to slide eight. Cost of sales increased year over year in the first quarter primarily due to a $31 million charge associated with an unsuccessful process qualification campaign to extend Naglazyme manufacturing capability. Importantly, this did not impact commercial supply. While this event decreased margins and earnings per share in the first quarter, we expect this charge to be offset in full year 2026 non-GAAP diluted earnings per share guidance. Q1 non-GAAP R&D expense increased year over year primarily due to spend to support BMN-401, our phase three clinical program acquired in the Enzyme Therapies transaction. The 2025 development activities for Voxzogo for hypochondroplasia, BMN-333 for achondroplasia, and BMN-351 for Duchenne muscular dystrophy also contributed to higher year-over-year R&D expense. Non-GAAP SG&A expense also increased, partially driven by investments to support commercial expansion across Enzyme Therapies and Voxzogo, and partially driven by pre-close costs associated with the Amicus acquisition. First quarter non-GAAP diluted earnings per share was $0.76 and was significantly impacted by the drivers of increased operating expense that I just mentioned, as well as the impact of Q1 revenue which we believe will be our lowest quarter of the year. The impact of the cost of sales charge and pre-close costs associated with the Amicus acquisition resulted in a $0.20 earnings per share impact to our non-GAAP earnings per share result. Looking past those elements helps to measure BioMarin Pharmaceutical Inc.'s underlying business performance as well as how this Q1 result fits into our full year earnings per share guidance, which remains unchanged for the historical BioMarin Pharmaceutical Inc. business before layering on the Amicus business. Now moving to slide nine, our updated full year 2026 guidance, which now includes the Amicus financial outlook starting last week. We are raising Enzyme Therapies revenue guidance to a range of $2.725 billion to $2.775 billion for the full year 2026 inclusive of meaningful contributions from Galafold and Pombility and Opfolda, resulting in approximately 30% growth at the midpoint. Adding these high-growth products to our Enzyme Therapies portfolio increases our full year total revenue guidance to a range of $3.825 billion to $3.925 billion, with the midpoint representing approximately 20% year-over-year growth in 2026. For Voxzogo, we are maintaining our revenue guidance of $975 million to $1.025 billion, which continues to reflect high single-digit growth at the midpoint. For non-GAAP diluted earnings per share guidance, we are updating the guidance range to $4.85 to $5.05. As previously communicated, the acquisition of Amicus will be slightly dilutive for the full year 2026. We continue to expect the acquisition to be accretive to non-GAAP diluted earnings per share in the first twelve months after close and substantially accretive beginning in 2027. The Amicus P&L will be incorporated into BioMarin Pharmaceutical Inc.'s financial results as of last week's closing of the transaction. In 2026, we expect to include the base Amicus operating expenses less initial cost synergies anticipated in 2026. As Alexander touched on, now that the transaction is closed, we have engaged more deeply with the Amicus business and plan to share our outlook on both commercial revenues and cost synergies on our next quarterly earnings call. To give some perspective on timing of the updated guidance, we expect order timing for the historical BioMarin Pharmaceutical Inc. products and two full quarters of Galafold and Pombility and Opfolda revenues in the second half of the year to drive significantly higher revenues as compared to the first half of 2026. To provide context, we expect more than 55% of total 2026 revenues to be recognized in the second half of the year. Likewise, on the expected timing of our profitability, we expect Q2 non-GAAP diluted earnings per share to be just modestly higher than Q1, partially due to pre-close Amicus costs incurred in April plus a higher amount of the 2026 Amicus dilution being weighted to the second quarter. Further, the revenue timing weighted to the second half of the year results in most of our expected profitability occurring in Q3 and Q4. These earnings timing dynamics drive approximately two-thirds of our 2026 earnings per share expected in the second half of the year. Briefly on evolving geopolitical uncertainties, we are watching the situation in the Middle East very closely and note that today's guidance reflects an allowance for a modest amount of disruption in that region in 2026. Looking ahead, we look forward to sharing with you our expanded financial outlook, enhanced by the addition of Galafold and Pombility and Opfolda, and setting the stage for accelerated near- and mid-term growth. Thank you for your attention. I will now turn it over to Cristin for a commercial update. Cristin? Cristin Hubbard: Thank you, Brian. We were encouraged by the commercial execution across our portfolio so far this year, with strong patient demand across Enzyme Therapies and Voxzogo. We look forward to providing a more detailed commercial update on our plans to maximize the potential of both Galafold and Pombility and Opfolda next quarter. Our initial priorities therein are focused on driving diagnosis in Fabry and switch in Pompe. This will support increased penetration in countries where Galafold and Pombility and Opfolda are marketed, while we concurrently work on geographic expansion plans for both products. We look forward to updating you on our Q2 call. Now moving to slide 11. I will begin with an update on first quarter 2026 performance starting with Enzyme Therapies. As Brian outlined, Enzyme Therapies delivered 6% year-over-year growth in Q1 led by Vimizim, Naglazyme, and Brineura. Across the Enzyme Therapies portfolio, we continue to see strong patient demand and adherence. Turning to Palynziq, in the first quarter we continued to expand the underlying patient base, and physician engagement remained strong. Importantly, following the FDA approval of Palynziq's age label expansion to those 12 years and older in February, we have successfully launched in this age group and are seeing encouraging early momentum. We have observed broad interest and engagement from caregivers and health care providers treating adolescents during this critical stage of their development. Since approval, we have observed meaningful enrollments and new patient starts in people under 18. From a prescribing standpoint, adolescent uptake is being driven by both physicians with significant experience prescribing Palynziq as well as by clinicians who are newer to the therapy. Recall that it can take a patient many months to titrate up to their maintenance dose of Palynziq, so we would expect to see the results of positive early prescribing over the coming quarters. Palynziq continues to stand alone in its ability to enable people with PKU to reach physiologic Phe levels while reducing dietary restrictions, regardless of severity. With the U.S. adolescent launch underway and European approval expected later this year, we are excited about the impact Palynziq can have for additional families over time. Turning now to Voxzogo on slide 12. As discussed, first quarter results reflected expected order timing dynamics following a strong Q4, particularly in international markets. Importantly, we have observed strong growth in patient additions globally, with the number of children being treated with Voxzogo increasing by more than 20% year over year. With a competitor having recently entered the U.S. market, our focus has remained on executing our strategy, and we continue to see strong momentum. During the first quarter, solid progress continued, supported by ongoing patient additions across all regions and ages, strong adherence and persistence globally, and continued expansion of the prescriber base. Our teams are focused on driving new patient starts across all ages, with an emphasis on children under two years of age, where international consensus guidelines for achondroplasia recommend early diagnosis and treatment with Voxzogo as soon as possible. In the United States, we are encouraged to see that our efforts educating and engaging with caregivers and HCPs are having an impact in the under two-year-old segment. In Q1, over half of new patient starts were from children under age two, a greater proportion compared to last quarter. Additionally, we have seen an approximate 10% decrease in the average age of children initiating Voxzogo treatment in the under two segment, narrowing the window between diagnosis and treatment starts. Internationally, building on our global expansion into 55 countries to date, our strategy remains focused on reaching more patients in regions that have further opportunity and treating infants in countries that already have high penetration rates. With our sNDA for full approval now submitted, we believe the depth and durability of Voxzogo's clinical evidence can be further reinforced, strengthening its role in treatment decisions for infants and children with achondroplasia. At the same time, we are making progress in preparations for potential expansion of Voxzogo into hypochondroplasia. As we get closer to the phase three data and potential launch, our pre-commercialization activities continue to accelerate. Our initiatives in the U.S. are making a difference. More people are being diagnosed at a younger age, diagnosis rates are rising, and more doctors are requesting diagnostic tests. We look forward to the phase three top-line results in the second quarter of 2026 and submitting to global health authorities in the second half of this year, with potential approval in 2027. In summary, we are pleased with the strong patient demand observed across the portfolio with continued momentum in our core business units and a compelling set of near-term opportunities to accelerate growth. With that, I will turn it over to Greg for an R&D update. Greg? Gregory Friberg: Thank you, Cristin. As expected, 2026 is shaping up to be an active year for R&D, and we are looking forward to delivering multiple meaningful milestones. Moving to slide 14, we have built a comprehensive Voxzogo evidence pack that goes well beyond describing annualized growth velocity, highlighting long-term durability and clinically meaningful health outcomes for children with achondroplasia. Recently, at the Pediatric Endocrine Society Annual Meeting, we shared data from three ongoing long-term extension studies that illustrate the sustained benefits of Voxzogo over time. Consistent and cumulative improvements in arm span Z-scores were observed across all age groups over the six to eight years of follow-up as depicted on the left of slide 14. On the right side, you again see consistent and cumulative gains in height and height Z-scores with durable results out to eight years of follow-up. In addition to anatomic measures of benefit, we also presented data demonstrating Voxzogo's favorable impacts on quality-of-life measures. Importantly, these sustained efficacy findings are supported by a robust safety database now comprising more than 10,000 patient-years of exposure, reinforcing Voxzogo's well-established long-term safety profile. Taken together, this extensive body of evidence reinforces Voxzogo's differentiated profile, with no other achondroplasia therapy supported by this level of long-term data with regard to safety, efficacy, and functional outcomes. Importantly, these data span the full pediatric age population, and Voxzogo remains the only therapy approved for use immediately from infancy. This allows for early treatment initiation and enables a long window to positively influence endochondral bone formation and all the potential downstream benefits to health outcomes. Together, these data formed a strong foundation for our full approval submission intended to fulfill our post-marketing requirements, which was submitted to the FDA in April and will afford us the opportunity to share direct evidence of Voxzogo's long-term value with the community via peer-reviewed publications and presentations later this year. Now moving to slide 15. The remainder of 2026 includes several anticipated pipeline updates, including two particularly important pivotal data readouts expected in the second quarter. Starting with hypochondroplasia, we believe the health care provider community is looking forward to a targeted therapy that addresses this skeletal condition, and we are confident in the scientific rationale for Voxzogo in this indication. That confidence is grounded in the strong proof of concept and durability demonstrated in Dr. Dauber's investigator-sponsored study and in the rapid enrollment we observed in our own phase three pivotal trial. We look forward to sharing these phase three top-line results in the second quarter. In parallel, enrollment is progressing very well in our phase two study in children under the age of three, highlighting early interest in Voxzogo as a potential option from infancy in hypochondroplasia. We also expect phase three top-line data for BMN-401 in the second quarter of this year. As a reminder, ENPP1 deficiency is a rare, serious, and progressive genetic condition affecting vascular, skeletal, and soft tissue systems. BMN-401 has the potential to be the first disease-targeted therapy for ENPP1 deficiency. The ENERGY-3 study in children aged one to 12 includes two co-primary endpoints. The first is change from baseline in plasma measured inorganic pyrophosphate through week 52. The second is change in the RGIC, or Rickets Global Impression of Change, after 52 weeks of treatment, assessing improvement in skeletal health. Clinical experience with BMN-401 in older patients has shown that normalization of pyrophosphate is accompanied by improvements in bone mineral biomarkers, functional performance, and patient- and physician-reported outcomes. In addition to these pivotal readouts, I would also like to highlight progress with BMN-333, our long-acting CNP therapy. We are pleased to share that enrollment is underway in our global registrational-enabling phase 2/3 study. We are rapidly progressing this program with the goal of establishing BMN-333 as a potential next-generation standard of care for achondroplasia and potentially for other skeletal conditions. Before closing, I would also like to touch on BMN-351 for Duchenne muscular dystrophy. At the Muscular Dystrophy Association Congress in March, we presented initial data demonstrating dose-dependent increases in dystrophin at week 25 in both the 6 and 9 mg/kg dose cohorts. These findings were accompanied by notable decreases in creatine kinase, a biomarker of muscle injury, and the prevention of functional decline as measured by the North Star assessment and the six-minute walk test when compared to historically matched controls. So far, we are encouraged by both the dystrophin expression levels and the functional improvements observed in our development program. Enrollment in the 12 mg/kg cohort is ongoing, and we look forward to providing an additional update by year end as the program continues to advance. Finally, we would like to thank the patients, families, and caregivers whose commitment continues to make this progress possible. Thank you for your attention today. We will now open the call to your questions. Operator? Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. We will go first to Sean Laaman at Morgan Stanley. Analyst: Hi. This is Mike on for Sean. Thank you for taking our questions. I guess I wanted to touch on two things. First, looking at the recent data at the Pediatric Endocrine Society, can you help to contextualize the benefits you saw on bone mineral content in hypochondroplasia? And how does that maybe inform or influence your expectations heading into the top line? And then just maybe circling back onto the intro comments regarding the integration of Amicus, you alluded to a road map for future growth acceleration. We were just wondering if you could help to comment, specifically for Pombility and Opfolda, what levers you see for driving increased switch rates in that market? Gregory Friberg: Yep. Thanks for the question, Mike. In addition to measuring growth velocity across both achondroplasia historically and hypochondroplasia, we are measuring a variety of factors of health and well-being, bone biology, and bone health. The DEXA scans that were presented in that cumulative data suggest that, in addition to growing bone length and stimulating endochondral bone formation, that bone shows the strength and health we would like to see and reiterates what we have seen in the other FGFR3-related mutation conditions of achondroplasia as well. Going into the card flip for the phase three study, we are certainly excited to see that data. The event is going to occur before the midway point of this year. As we mentioned, it is in the second quarter. We are eager to see those results. The data at PES highlights the fact that hypochondroplasia, while a unique and individual indication as compared to achondroplasia, has related biology that suggests the hypothesis is a strong one. We have seen in Dr. Dauber's data from Children's National that the kind of growth observed would meet the criteria for a statistically significant improvement that our study is developed to measure. With regard to the safety profile, we are not anticipating any unexpected events there as well. So fingers crossed, and we will be updating you all when that data is available. Cristin Hubbard: Thank you so much. This is Cristin Hubbard here. Just having closed last week, I can say we are really excited about the commercial potential of both of these products, both being high-growth products to add to our portfolio. As we have mentioned before, for Galafold specifically, we really think that the biggest growth lever is in and around diagnosis. We know that a large proportion of the amenable patient population remains undiagnosed, and driving diagnosis is exactly where Amicus has really started to build momentum. We feel that, using BioMarin Pharmaceutical Inc.'s capability in this regard, we can really continue to drive that forward. On the Pombility and Opfolda side, that is more about a switching opportunity, and we really think that there is going to be a sizable opportunity here to build over the next few years as patients on their existing therapies begin to progress. We are working on initiatives that Amicus has started, including starting new therapy, looking at patients who have identified their own progression and understanding what progression looks like. That is an area that we are really focused on, not to mention the continued generation of evidence to show the benefits of a switch. These are areas that we feel confident in our capability at BioMarin Pharmaceutical Inc. and are very excited about the future trajectory. We will share more on that on our Q2 call. Tommie Reerink: This is Tommie on for Salveen. Just a quick one on Voxzogo, wondering if you have seen any early signals of different behavior from competitor entry, whether it be switching or in new patients. Thank you. Cristin Hubbard: Thank you for the question. As you heard in our prepared comments, our demand in the first quarter remains strong. Our enrollments in Q1 exceeded the average of the second half last year, and that trend continued into April. We are very much focused on the zero to two population based on the consensus guidelines. We are seeing real momentum there. Not only were more than half of new patient starts in that zero to two population in the first quarter, but we are also seeing a reduction in the time from diagnosis to treatment in that population, reduced by 10% already. We know that focus is working. In addition, we are focused on the patients who are already on treatment and making sure that those patients who are doing well on treatment understand the totality of the evidence that exists for Voxzogo and continue to have a positive experience in terms of benefit. We are very pleased with how Q1 went and look forward to continuing on that trajectory. Paul Andrew Matteis: Great. Thanks so much for taking my question. Just kind of previewing your update next quarter as it relates to the Amicus integration. Was wondering if you could set the stage for us on what you might be providing as it relates to the duration of the revenue outlook. Would you talk about peak sales at all or update those views or anything else? And then secondarily, anything you can do on setting the stage on our expectations related to accretion, synergies, and again, the duration of profitability outlook as well? Thank you. Brian Mueller: Hi, Paul. Thanks. We wanted to highlight today, having just closed the transaction a week ago, a brief update on the integration to date, which is going well, and you saw the update of our revenue guidance today adding our expected range of the eight months of Amicus revenues resulting in a $500 million midpoint and the updated guidance, which is 20% year over year. We also wanted to set the stage for the Q2 update. At transaction announcement, we discussed how the strategic fit between these two businesses was very strong and that, because of the global commercial and medical capabilities BioMarin Pharmaceutical Inc. built over time in our existing portfolio, these two medicines should truly have more potential within BioMarin Pharmaceutical Inc. That was a key rationale underlying the transaction, and we have been making plans up to this point of closing. Now that we have closed, we are digging in and engaging more deeply with the Amicus business. That is why we are going to wait until Q2 to give this additional update, but it will include a number of details and metrics about the long-term potential, including our views on peak revenue. Just a reminder, based on our due diligence at the time of announcement of the transaction, we reiterated what Amicus had shared with respect to peak revenue potential of roughly $1 billion each for Galafold and Pombility and Opfolda. As we develop the long-term business plans and strategies to expand both of these medicines, we think that has some potential to be higher. We will share key metrics and tactics in terms of how we expect to achieve that potential. Stay tuned, and we will look forward to sharing more in Q2. That will include other financial elements as well, such as synergies, long-term profitability, and accretion. For today, we are reaffirming our previous expectation that, while as you saw in the EPS guide today, the Amicus acquisition is slightly dilutive to calendar 2026, it will be accretive for the first twelve months following closing and then substantially accretive beginning full year 2027. We are off to a strong start. Jasmine Fels: Hi. This is Jasmine on for Ellie. Thank you so much for taking our question. For Voxzogo in hypochondroplasia, what is the latest on what you are thinking will be good data and what you are looking to see on AGV? Also, how are you thinking about the contribution to Voxzogo revenues from hypochondroplasia next year? What do you think the cadence of uptake will be in this population? And can you talk a little bit about your commercial preparations? Gregory Friberg: Thanks, Jasmine. With regard to the VOX-HCH study, we will be looking at the data in the second quarter of this year and absolutely look forward to that. Success is a statistically significant improvement in growth as compared to the control arm. We are measuring a variety of other measures, including other anthropometric measures, as well as the safety profile. Any statistically positive improvement in growth is a win for these patients. We have seen pretty dramatic accelerations of recruitment both for the older children and, as mentioned in the prepared remarks, the infants on our hypochondroplasia study, suggesting that this is a market that is hungry for a disease-targeted therapy. The biology is significantly similar to that of achondroplasia with regard to the mutation that drives this condition, and built upon the data that Dr. Dauber has seen, we are excited to see the end results. I think there was a question also about the marketplace, and I will hand that one off to Cristin. Cristin Hubbard: Thank you. Overall, our goal is to continue the growth of Voxzogo, and hypochondroplasia provides an important component of that. Our pre-launch activities are focused on diagnosis. We have shared before that the total addressable patient population globally is at 14,000, and that assumes that we can continue to drive diagnosis and awareness of this condition. Our goal prior to launch is increasing the number of hypochondroplasia patients that have been identified, getting physicians to understand the genetic testing, and making sure they are ordering it, with the aim of diagnosing patients at a much earlier age so they are identified at the time of a potential launch. Gregory Friberg: From the medical affairs standpoint, we are actively working in the community, even prior to seeing our data, to accelerate the number of patients diagnosed with this condition. There are three prongs: getting patients referred sooner to be evaluated; enabling testing; and doing work on the genetic side to reclassify so-called VUSs, variants of uncertain significance. We anticipate there will be patients available and ready for this therapy should it become available. Cristin Hubbard: On the success we have had already with the diagnosis program and non–pre-launch activities, we are seeing a 90% increase in the number of hypochondroplasia patients identified, as well as a 70% reduction in the age at diagnosis. Those are precisely the types of numbers that we are driving for and want to continue throughout our launch period. Cory William Kasimov: This is Adi on for Cory. I had a question on the guidance increase. The $500 million midpoint increase in guidance—can you frame the contribution from Galafold and Opfolda? Is that conservative relative to the $600 million revenue they generated in fiscal year 2025? What are the key assumptions for adding these two assets into the guidance? Brian Mueller: Hi, Adi. Thanks for the question. The $500 million represents a midpoint of a range that fits within the range of our existing Enzyme Therapies guide for 2026, and, from a timing standpoint, represents mostly the eight months remaining from May to December for this year. On conservatism, I would say it is neither conservative nor aggressive—realistic. We analyzed the unreported period of Amicus product revenue from January through April, and when we looked at that versus consensus, January through April performance, while not reported, was ahead of consensus. Both Galafold and Pombility together are off to a strong start in 2026. We will come back next quarter with additional color, including the long-term potential. Since you commented on the $600 million reported for 2025, the range underlying today's update from an Amicus organic year-over-year growth rate standpoint ranges from the high teens to the low 20s. It is really healthy growth, and we are excited these assets are now part of our portfolio. You see the 30% increase year over year in Enzyme Therapies as a result of layering this onto BioMarin Pharmaceutical Inc., and total revenue growth of 20% at the midpoint. We will share more going forward. Analyst: This is Jose on for Jess. Thanks for taking our questions. How should we think about the adoption of Voxzogo in hypochondroplasia relative to achondroplasia? What do you see as the similarities and differences between these markets? And second, can you help us bridge the disconnect between the 20% year-over-year patient growth in Q1 versus a 3% revenue growth? Is it entirely explained by larger orders in the fourth quarter last year? Thank you. Cristin Hubbard: I think we can consider adoption to be similar to that of achondroplasia, but, as mentioned earlier, what is most important is ensuring disease awareness, urgency to treat, and diagnosis. We believe this is what accelerates the adoption curve. Our intention has been to drive as much of that so that we have patients identified at the time of a potential launch in the beginning of 2027 and importantly to continue that momentum, because that ultimately will drive the shape of the adoption curve. Gregory Friberg: From a medical standpoint, hypochondroplasia children are not born with the same growth deficit that achondroplasia patients may be born with. As a result, they often are referred and diagnosed a bit later. Shrinking the age at diagnosis is a real positive sign that the work we are doing to get these children in the hands of the right physicians is effective. We are looking forward to continuing to help shape that community and make these therapies, should they become available, actually in the hands of the physicians who treat the patients. Brian Mueller: Thanks for the revenue timing question. It is important to emphasize that the disconnect between the underlying patient demand growth and reported revenues is entirely order timing. There are a couple of layers to that, both of which we discussed last quarter. One was large international orders that were processed in Q4 that did not recur in Q1. The second was a modest amount of U.S. stocking impact from Q4 to Q1. This affected both Palynziq and Voxzogo. It was enough to show up as variance in the quarter-over-quarter revenue. This is why we emphasized the underlying patient demand growth. There are no significant price drivers—this is entirely an order timing dynamic. Philip Nadeau: Good afternoon. Thanks for taking our questions. Two from us. First, could you give an update on the ITC hearing and, in particular, your thoughts on the ITC pretrial brief that was recently posted online? Second, in the press release, there is a note that there will be some data from BMN-333's phase 2/3 trial in 2027. Could you provide a bit more detail around what data will be released at that time? Alexander Hardy: Thanks very much, Phil. Overall, we believe that seeking an exclusion order at the ITC and enforcing our IP is the most expeditious way to protect our IP in the United States. We recently completed the ITC evidentiary hearing, and post-hearing briefs are now being submitted to the presiding Chief Administrative Law Judge. We expect to receive a decision on whether Ascendis' product infringes our patent on or about August 21. If the full Commission decides to review the decision, then the final decision is expected on or about December 21. On completion of the ITC process, we would expect to also enforce our patent in the federal district court, where monetary damages are available. Gregory Friberg: Thanks for the question about BMN-333. As a reminder, this is our long-acting CNP analog to release continuous, potentially higher AUC exposures of CNP when administered on a weekly basis. In our phase one, we saw over 10x increases in the AUC levels achieved safely in healthy volunteers. We have recently initiated our phase 2/3 study in children with achondroplasia. This is a multiregional clinical trial currently open in a variety of countries around the world, and we are enrolling as we speak. Our goal is to run the phase two portion where one of three doses of BMN-333 will be administered to children, and there will be one arm that has Voxzogo as well. There is no placebo in this study. In 2027, we will report annualized growth velocity at the six-month time point and use that data, along with other anthropometric measures and safety and well-being, to make a decision—based on a Bayesian analysis—of which dose to bring forward into a phase three to run head-to-head against Voxzogo, looking for a superiority profile in AGV, with the presumption that more AGV will drive more improvements in the measurements of health and wellness that we all are familiar with. Christopher Raymond: Thanks. Just a question on the pivotal trial for BMN-333. I know this has come up before, but I want to ask in a more pointed way about the decision to go with a superiority trial versus noninferiority. I think I have heard what you have said around BMN-333 providing two to three times free CNP and that should translate into higher efficacy, but maybe just strategically, if a noninferiority trial could show that data, why take the risk and run a superiority study? Thanks. Gregory Friberg: Thanks for the question. Our goal with BMN-333 is to evolve this space, not just make a more convenient version of Voxzogo. That 3x target was an at least 3x. We are actually testing approximately 3x, 5x, and greater than 7x AUC exposure. We believe strongly that BMN-333 is the right reagent to test this hypothesis. From a noninferiority standpoint, it is a natural question to ask if it would be easier, but from a mathematical standpoint, it is actually much harder, and the study would be upwards of 10 times the size in order to show noninferiority versus a drug like Voxzogo. There is a practicality of designing the study. We will have an opportunity to look at the data after our phase two portion, and if there need to be adjustments, the Bayesian model gives us an update that could prompt reevaluation. That said, we are very clear with what we want out of this molecule: a superior CNP product that can be the cornerstone for future therapies for achondroplasia. Alexander Hardy: I would just add, as Greg said, we think the opportunity and the need here is around superiority in efficacy—AGV and benefits beyond linear growth. Also, by this study design, we have an active control with Voxzogo. So the size of the study is smaller than it would be if it were a noninferiority design, as Greg has covered. We also think the proposition to both caregivers and physicians makes this a study that is very attractive to potential patients to enroll in, which supports speed of recruitment—extremely important for achieving milestones. Gregory Friberg: Placebo-controlled studies, when there are active, safe, and effective therapies, are no longer really possible to run, nor is it the right thing to do. Analyst: Great. This is Chen Shui for Mohit. Thank you for taking our question. We just want to double-click on the competitive landscape a bit. Competitors are advancing their weekly CNP analog together with growth hormone, potentially reporting a higher AGV. How should we think about BioMarin Pharmaceutical Inc.'s view of the evolving treatment landscape and the role that BMN-333 could potentially play over time? Thank you. Gregory Friberg: Thanks for the question. The data in combination with growth hormone, of which we have seen about 12 months, does show in early studies that there is potentially additional growth by adding a second agent. But it is early days for the combination. Growth hormone has been around for quite a while, and in achondroplasia, it is only approved in one market that I am aware of—that is Japan. The reason is that growth stimulated with growth hormone ultimately has not historically resulted in increases in final adult height. It is growth that gets uncorked but at the expense of potentially closing the growth plates earlier, and that remains an open question. We need to see data at two to three years or more, not only to see safety—growth hormone, while it has a manageable safety profile, has its own set of challenges that need to be monitored by a physician—but also to see whether those gains are long-standing. We are watching this closely. If there are opportunities and levers that can help CNP do its job better, we will evaluate those at the right time and place. We do not feel that is the correct time right now, and we are interested in seeing additional data before the paradigm shifts. This is consistent with what we have heard from many of our stakeholders as well. Joseph Schwartz: Great. Thanks very much. I was wondering if we could get more perspective on your guidance raise for the Enzyme Therapies business. We see it increase by $500 million, and we estimate that Amicus generated around $450 million in revenue for Galafold and Pombility in the comparable eight months last year. That implies low double-digit growth around 11%, I think. But I heard you reference high double-digit percent growth, Brian. Can you help us reconcile that difference? Thanks. Brian Mueller: Thanks, Joe. I would attribute the reconciliation difference to two elements. One, by doing a pro rata eight months of 2025, there are missing variables and a lack of precision—you cannot do a strict apples-to-apples comparison. Secondly, on a full-year basis, I pointed to the strong performance for the first four months of the year for both Galafold and Pombility and Opfolda. While not reported—this is internal management data—we thought it was important to add color to the full year. It is more important to compare the full-year annual cycle year over year. When we piece together the range implied today over the full-year $634 million that Amicus reported for 2025, we have a range of high teens to low 20s. I encourage you to anchor to that rather than trying to calculate intra-quarter math. Jason Matthew Gerberry: Alex, just to follow up on the ITC question. Do you have any knowledge of Ascendis' ability to do a manufacturing workaround, and can you help us think through scenarios if you get a positive ruling? Could a decision be stayed pending any appeals? And then, as a follow-up on Pombility, I believe you have inherited the asset basically launched into 15 country markets, and the goal is to get it into 80 country markets. How should we think about the phasing of that now that you have the asset, either 2026 or 2027? Thanks. Alexander Hardy: Thanks very much for the questions. Unfortunately, I am not going to share any details of the ITC potential scenarios around it. I hope you can understand that we do not want to get into specifics, especially while the case is pending. I will hand it over now to Cristin for the second part. Cristin Hubbard: Thank you for the question around Pombility. You are correct that currently we are reimbursed in 15 countries. Before the transaction was closed, we were doing deep-dive discovery sessions, looking at the business in each market for both Galafold and Pombility, understanding the dynamics therein, and then looking at our 80-country footprint to identify where the potential and opportunity would be. We are identifying opportunities for both Galafold and Pombility. Given that Pombility is much earlier in its launch trajectory, you can imagine that there will be a larger number of countries to look at there. It is important to note that we are not necessarily going to put it into our entire 80-country footprint, but will look at where we believe the potential opportunities are and then have a cadence to that which we will share more of on the Q2 call. Operator: And that concludes the Q&A session. I will now turn the conference back over to BioMarin Pharmaceutical Inc.'s CEO, Alexander Hardy, for closing remarks. Alexander Hardy: Thank you, operator, and thank you all for joining us today. This quarter marks an important inflection point for BioMarin Pharmaceutical Inc., with the recent close of the Amicus acquisition expanding our commercial reach, strengthening our 2026 revenue growth outlook to 20%, and enhancing our ability to serve more patients globally. We are encouraged by the robust patient demand observed across our portfolio. In Enzyme Therapies, we anticipate that the momentum from the Palynziq launch in adolescents will continue to build. With Voxzogo, a consistent rise in new patient initiations—more than 20% year over year in Q1—especially among younger children, demonstrates confidence in its long-term safety and efficacy and highlights the importance of starting treatment as early as possible. With the integration of Amicus now well underway and several near-term catalysts ahead, including pipeline readouts, we are focused on translating this momentum into accelerated growth, broader patient impact, and meaningful value creation. We appreciate your continued support and look forward to updating you next quarter. Thank you. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Biodesix, Inc. First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To ask a question, simply press star 1 on your telephone keypad. It is now my pleasure to turn the call over to Christopher F. Brinzey, Investor Relations. You may begin. Christopher F. Brinzey: Thank you, operator, and good afternoon, everyone. Today, Biodesix, Inc. released results from the first quarter of 2026. Leading the call today will be Scott Hutton, Chief Executive Officer. He is joined by Robin Harper Cowie, Chief Financial Officer. An audio recording of today's call and the press release announcement with the quarterly results can be found in the Investor Relations section of the company's website at biodesix.com. As today's call includes forward-looking statements, we encourage you to review the statements contained in today's press release and the risks and uncertainties described in our SEC filings which identify certain factors that may cause the company's actual events, performance, and results to differ materially from those contained in the forward-looking statements made on today's webcast. In addition, we will discuss non-GAAP financial measures on this call. Descriptions of these non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial measures are included in today's press release. I would now like to turn the call over to Scott Hutton, Chief Executive Officer. Scott Hutton: Thank you, Christopher F. Brinzey, and thank you all for joining today. Biodesix, Inc. delivered an exceptional start to 2026 with first quarter results that demonstrate continued momentum across our commercial, operational, and strategic priorities. Revenue growth accelerated, margins expanded, and we continued to demonstrate operating leverage as we progress towards profitability. As a reminder, our focus in 2026 centers on three objectives: driving top-line growth, improving operational efficiency and leverage, and advancing our pipeline to support long-term expansion. In the first quarter, we made meaningful progress across all three objectives. Total revenue for the quarter was $25.6 million, representing 42% growth year over year, accompanied by strong operating discipline and execution. Starting with our diagnostic testing business, revenue grew 37%, driven by accelerating test volume growth and improved ASPs over 2025. Total test volumes grew 29% year over year due to increased adoption from both pulmonology and primary care, with test volumes from primary care now representing 15% of total tests delivered in the quarter. In support of both healthcare provider and payer adoption, we continue to present and publish clinical data for our on-market test. Specifically, Notify Lung testing is used by pulmonologists and primary care providers to triage patients by risk of lung cancer, helping determine who needs intervention versus surveillance, and allowing higher-risk patients to be prioritized for prompt follow-up. In February, we announced the publication of the largest lung nodule biomarker clinical validation study that included over 1.1 thousand patients leveraging our ongoing real-world evidence study, Clarify. The study demonstrated consistently strong NotifyCDT test performance with high specificity, or low false positive rates, regardless of nodule size or other patient risk factors. Recent data on patients without biomarker testing reported that 40% of malignant nodules had progressed in tumor size between the time of the first detection and the time of initiation of definitive treatment, underscoring the urgent clinical need for tests like Notify Lung to expedite diagnosis and enable earlier intervention when outcomes are most favorable for the patient. Turning to development services, revenue in the quarter nearly doubled year over year. This reflects execution on contracted programs, as well as continued success securing new agreements, reinforcing the strength and differentiation of our development platform. The depth and breadth of our offering was recently highlighted with several presentations at AACR in April. It is especially exciting to see our multi-omic technologies, combined with advanced data informatics, translating into meaningful clinical impact on our pipeline product concepts and fueling strong interest in our development services offering. Additional data on our pipeline products, including our genomic and proteomic MRD and ROR test, the Veriskrat test clinical utility in prostate cancer, and our new AI-based digital diagnostic test will be shared at upcoming conferences and events throughout the course of the year. Gross margin for the quarter was 84% on a GAAP basis and 82% excluding a one-time sales and use tax recovery, representing a 300 basis point improvement year over year. Margin expansion continues to be driven by scale in diagnostic testing, improved pricing realization, and ongoing workflow optimization in the laboratory resulting in decreasing cost per test. We are encouraged by the consistency of these trends and strong revenue growth and operating leverage, and believe they reinforce the scalability of our model. As a result of the performance across both diagnostic testing and development services in Q1, and our continued progress towards profitability, we are raising our full-year 2026 revenue outlook. With that, let me turn it over to Robin to review our financial performance. Robin? Robin Harper Cowie: Thanks, Scott, and good afternoon, everyone. Total revenue for the first quarter was $25.6 million, representing a 42% increase over the prior-year period. Diagnostic testing revenue was $22.3 million, an increase of 37% year over year. The increase in lung diagnostics revenue was driven by growth in volumes and higher average revenue per test. Test volumes were approximately 17.8 thousand, an increase of 29% year over year, supported by an average of 100 sales representatives in the field in the quarter, and we expect to continue our commercial expansion, as described in prior calls, at a cadence of about six representatives per quarter through 2026. Improvements in average revenue per test over the prior year are primarily driven by additional payer coverage and improvements to revenue cycle management, continuing a trend that began in 2025. We believe recent improvements in average revenue per test reflect durable changes in payer coverage and revenue cycle execution rather than discrete or one-time effects. Development services revenue for the first quarter was $3.3 million, an increase of 99% year over year, driven by delivery of our contracted program and the addition of new development services agreements. We finished the quarter with approximately $10.4 million in contracted business, following accelerated revenue conversion velocity in the quarter. We continue to see strong demand and visibility across our development services pipeline and do not expect the timing of these completions to impact our full-year expectations. Gross margin for the first quarter was 84%, which included a one-time recovery of 400 thousand related to previously paid sales and use taxes. Excluding the one-time recovery, gross margins were 82%, representing a 300 basis point improvement over the prior-year period. Year-over-year margin expansion was driven by growth in lung diagnostic testing, improvements in average revenue per test, and decreases in average cost per test. Gross margins continue to reflect Biodesix, Inc.’s strong operational efficiency and execution. Operating expenses, excluding direct costs and expenses, were $27.6 million, an increase of 18% year over year supporting the 42% revenue growth delivered during the quarter. The increase in operating expenses is driven by a 19% increase in sales, marketing, and general administrative expenses due to our planned commercial organization expansion. The company expects continued operating leverage as our expanded sales team advances along the productivity curve and converts growing experience into sustained performance. R&D expense for the quarter was $3.3 million, representing a 14% increase over the prior-year period. R&D investment reflects continued clinical studies supporting adoption of our lung diagnostic tests and progress across our pipeline. Net loss for the quarter was $7.8 million, a 30% improvement compared to the prior-year period. Adjusted EBITDA, which excludes non-cash and other one-time items, was a loss of $4.1 million, representing a 35% improvement over 2025. We also strengthened our balance sheet, ending the quarter with $25.6 million in unrestricted cash and cash equivalents, a 35% increase compared to the fourth quarter, providing solid runway to support our growth initiatives. The change in cash balance includes $16.8 million of at-the-market net proceeds raised during the quarter, partially offset by planned cash outflows that occur annually during the first quarter. Looking ahead to the remainder of 2026, and in addition to our planned headcount expansion, we expect sales productivity to continue to improve as our various sales cohorts gain experience and tenure, which remains a key driver of operating leverage through 2026. Following the strong first quarter performance and improved visibility into demand and execution, we are raising our full-year revenue guidance to $108 million to $114 million. The increased midpoint represents 25% growth over 2025, which reflects the strength of the first quarter while remaining consistent with our full-year planning assumptions. We also expect continued progress towards sustained adjusted EBITDA profitability, driven by increasing sales productivity, expanded clinical evidence supporting the Notify Lung test, growth in the development services pipeline, and demonstrated operating leverage. With that, I will turn it back to Scott for some closing thoughts before we begin the Q&A. Thank you, Scott. Scott Hutton: In April, Biodesix, Inc. was recognized as a top workplace for the third consecutive year. This recognition reflects who we are at our core: a team built on trust, collaboration, growth, and shared ownership of results. Our culture here at Biodesix, Inc. is not aspirational; it is operational. Our first quarter performance reflects that discipline and reinforces our confidence in the scalability and durability of our business model. We continue to see significant opportunities ahead as adoption expands, clinical evidence grows, and our commercial organization continues to mature. We remain focused on executing with discipline, improving capital efficiency, and delivering meaningful value to patients, providers, partners, and shareholders. In closing, I want to thank the entire Biodesix team for their continued focus, discipline, and commitment to our mission and culture. We will now open the call for questions. Operator, let us start the Q&A session. Operator: At this time, I would like to remind everyone, in order to ask a question, simply press star 1 on your telephone keypad. Our first question is from the line of Andrew Frederick Brackmann with William Blair. Please go ahead. Andrew Frederick Brackmann: Hi, Scott. Hi, Robin. Good afternoon. Thanks for taking the questions. I wanted to focus on the commercial team. I think you called out about 15% of volumes were coming from the primary care channel there, so clearly something is working. I guess as you think about some of the learnings, the successes, and some territories that are driving a lot of that volume growth, how transferable are those to other territories? And where are we in the process of amplifying these learnings across the entire salesforce? Scott Hutton: Thanks, Andrew. Great question. It has been about three quarters since we brought on that first sales cohort focused on primary care physicians, so you nailed it. We continue to learn, but we had some immediate learnings that we have been able to apply. We had our national sales meeting in February, which is a great opportunity for us to share best practices and to roll that out. What we have learned is that starting with the pulmonologist, building a really strong relationship, and allowing them to help us with introductions into their referral network really aids in a smooth transition. It allows the pulmonologist to track those patients through that referral process, and we are continuing to see that growth across the United States. We really started more in the Northeast when we first had our initial hires, and we are seeing that transition and progress more westward. So it has been transferable. We feel good about the progress we have made. I think we knew with a high level of confidence, based upon our early pilot experience, that this was the right decision, and this confirms that we have made the right decision. We still have a lot of opportunity to grow, and I will just remind everybody, what it really did was open up the addressable market that was serviceable to us. We knew that about 49% of those patients with incidentally found nodules are stuck in primary care, so we think that we have begun tapping into that, and we are really confident that over time it will start to show that we are getting to patients earlier. We know in this scenario earlier detection and diagnosis is going to lead to better outcomes. Andrew Frederick Brackmann: Perfect, appreciate all that color. And then just on the evidence front, you called out the publication of the validation study in February. Can you talk about what impact it has had on the field? In particular, you mentioned across that study there are low false positives regardless of the nodule size. Are you seeing an increase in the use of Notify in those smaller nodules? And how big of an opportunity is that for you in the grand scheme? Scott Hutton: Thanks. For us, it really is about data development. I think there is a continued opportunity for us to educate and empower pulmonologists and primary care physicians to utilize Notify testing. The more we can publish and present, it gives us opportunities to put new data out in front of healthcare professionals, and that is what this did. You nailed it. We know that not only do physicians want to get to these patients earlier, but they want to be bolder than they have been in the past. Something has to change because we have not seen a significant change in screen detection over the last 10 to 15 years. We are seeing an increase in addressing smaller nodules, but that goes hand in hand with the advent of robotic bronchoscopies, where interventional pulmonologists feel more confident that they can get to some of the smaller nodules that they would not have been able to get to easily and successfully in the past. The time was right, we are excited to get that data out, and I would add that whenever we see strong performance in a real-world environment, it really starts to show that these tests are durable, that our growth is sustainable, and that we are going to continue to have a significant impact with the healthcare professionals that we serve. Andrew Frederick Brackmann: Great. I will keep it at two. Thanks, guys. Scott Hutton: Thanks, Andrew. Operator: Our next question comes from the line of Thomas Flaten with Lake Street. Please go ahead. Thomas Flaten: Hey, Scott and Robin. Just a question to follow up on the PCPs. I am curious what you are hearing anecdotally from the PCPs about their level of comfort at retaining these patients with this test result in hand. Do they feel comfortable with the referral networks? I get that having it come from the pulmonologist is probably helpful, but anything you can share on their experience that they have had? I know it has only been three quarters, but I am just curious if there is anything you can share. Scott Hutton: Yeah, thanks, Thomas. It is a great question. Speaking on behalf of the healthcare professionals in the primary care setting, one of the things that we anticipated and we have confirmed is they have an abundance of patients that are eligible for Notify testing. They still have questions as to how to interpret those test results and defining who they refer on versus who they keep to monitor or surveil. What we have seen is that through our brochures and materials, and sharing of publications and data, they have become very comfortable with how those test results can better inform what they do with those patients, building that confidence. One of the things we have seen in primary care is they are very comfortable with diagnostic testing. It is what they do. They understand it. They have phlebotomy services on-site, and from a workflow implementation standpoint, we have actually found primary care to be really accessible and receptive to Notify testing. We are excited to continue to help educate them. One of the things that we really focus on is ensuring that when those patients are referred on, that they stay in contact with that pulmonologist. That primary care physician will always be that patient's primary care physician, so they, over time, will gain additional confidence as they see what ends up happening for those patients. Hopefully, we are able to see a stage shift, and we are starting to see patients live longer, which will build even more confidence within the primary care community. Thomas Flaten: Sticking with this theme, you called out what the PCPs are going to do with the incidentally identified nodules, but you did not mention the screening nodules. I am curious what you are hearing from the PCPs—not necessarily that having access to your test is going to help them get more patients into screening—but have they shared anything anecdotal about pushing the high-risk patients into the screening programs, by that I mean low-dose CT? And more broadly, have you seen any change in the trends in the number of patients getting pushed into that screening protocol? Scott Hutton: Yeah, it has been one of the challenges regardless of whether you talk to pulmonology or primary care physicians. Ten years ago, lung cancer screening compliance for those screen-eligible patients was low to mid-single digits. We have seen improvements in the last five to ten years, but most of the reports out there will still state that it is less than 15% to 20% of the screen-eligible patient population. We have come a long way, and we still have significant room to grow and improve. One of the beauties of Notify testing is our test works not only in incidentally found nodules but also in screen detection. As we see more support and compliance with screening programs, it will only increase this opportunity for us. We have seen that a little bit, but we are still not there. I do think the advent of blood-based screening tests in lung cancer will help, and we think this will benefit Notify testing and the Biodesix, Inc. team. Thomas Flaten: Got it. Appreciate that. Thanks, guys. Scott Hutton: Thanks, Thomas. Operator: Your next question comes from the line of John Wilkin with Craig-Hallum. Please go ahead. John Wilkin: Hi, guys. Thanks for taking the questions. Just a couple questions on the guide. Can you break out how much is baked into the guidance for development services versus testing revenue? I know Q1 came in really strong, and I am trying to get a sense of what you are expecting with that business for the remainder of the year. Robin Harper Cowie: Yeah, absolutely. We are anticipating that development services revenues for the full year remain consistent with where we had expected them to be. We had a little bit of a pull-forward in the quarter, so we were able to recognize more revenue earlier in the year. We expect the services business to remain consistent with those expectations, and the majority of the increase is included in the lung diagnostics revenues. John Wilkin: Perfect, that is super helpful. And then on the lung side, how much, if any, additional ASP expansion are you factoring in for the remainder of the year? Is that something we should expect to see continued progress on, or is growth embedded in the guide more skewed towards the volume side? Robin Harper Cowie: Growth in the guide is absolutely weighted towards volume. We do anticipate that we will see a little bit better ASP versus the first quarter. I anticipate somewhere like what we saw mid-year last year; fourth quarter was skewed higher due to the one-time collections that we had in that quarter. While we anticipate a little improvement in ASP, we are very pleased with where we are right now and the improvements made both through coverage contracting and revenue cycle management. Volumes should be the growth driver. John Wilkin: Perfect. That is all for me. Thanks so much. Scott Hutton: Thanks, John. Operator: Your next question comes from the line of Kyle Mikson with Canaccord Genuity. Please go ahead. Kyle Mikson: Thanks for the questions. Congrats on the quarter. It looks like you did better on the pharma front this quarter. Could you talk about the pipeline funnel there? What is most attractive within your portfolio relative to prior years that is helping you succeed on that front? Scott Hutton: Yeah, Kyle, great question. This was more of a cadence or timing scenario. We had a number of retro samples that came in earlier than we anticipated and forecasted. We were able to pull a couple of those contracts forward, so we do not see it changing our long-term performance. As a reminder, this has historically been about 8% to 10% of our total annual revenue. We continue to see great progress and momentum within the biopharma services and development services front, and you may have noticed that we exited the quarter with $10.4 million in contracted dollars to be recognized over the coming months and quarters. We have stayed above that $10 million mark for quite some time now, so that gives us a lot of confidence about what the future looks like. It really is not a shift or a change; this momentum has been building over the last few years. It is interest across our portfolio on the genomic side and the proteomic side—being a company that is focused on multi-omic solutions resonates with our biopharma services partners. Our team continues to do a great job on that front. We are excited about the rest of the year. We just finished AACR, and we have ASCO upcoming, and those two meetings usually set us up for a strong second half. Kyle Mikson: Perfect. You had a great top-line beat, and margin has been really solid the past few quarters. Could you specify how you are going to reinvest those dollars—sales force, new products, new markets? How do you think about that? And with respect to EBITDA positivity going forward, how does that affect that pathway? Robin Harper Cowie: We are obviously very pleased with the gross margins and the continued improvements that we have seen over the last several quarters. The team works very hard to not only improve our ASPs, but also gain real efficiencies and productivity improvements within our operations to drive down the average cost per test. The dollars that are coming in through those gross margins go to support the business, and our main focus is our commercial expansion, growing the top-line revenue, and then getting to sustained adjusted EBITDA positivity and cash flow positivity. So the dollars really are going towards commercial, and we are still on track. We are executing to plan and on the path to profitability. Kyle Mikson: On that note, anything additional to pipeline investment? Salesforce expansion is kind of an obvious one that you are going to be consistent with—several reps per quarter—but anything on the pipeline going forward, maybe partnerships that you can accelerate with this extra money? Scott Hutton: Yeah. We hope so. As we look toward the remainder of 2026, we think we have great opportunities to highlight progress being made, investments, and the return on those investments, and hopefully additional partnership and collaboration opportunities. We will look forward to sharing those when we get there. For us, it really is about controlling what we can control. We have worked long and hard to build what we believe is the strongest and best pulmonology-focused sales team in the market, and we want to continue to give them an opportunity to flex and demonstrate that we can continue to build this market. Last year, at the beginning of the fourth quarter, we had an R&D day. We will look forward to providing more on our R&D and development services front in the second half, but anything that happens between now and then, we are going to share that broadly and celebrate it. Operator: Our next question comes from the line of Dan Brennan with TD Cowen. Please go ahead. Analyst: Hi, Pradeep Ambrose on behalf of Dan Brennan. Can you quantify how much quarter one revenue was impacted by weather versus typical seasonality? Robin Harper Cowie: Yeah, it is a great question. Like everybody else, particularly those in the areas of the country that were impacted by the series of storms, we were as well. It was a pretty significant impact to us in the late January, early February timeframe as the FedEx hubs across the country were impacted. But we were very pleased with how the team responded and clearly finished the quarter strong to end with a nice strong beat for the quarter. Analyst: Awesome. Thank you. Operator: With no further questions in queue, this does conclude today's conference call. You may now disconnect.
Operator: Greetings. Welcome to the Firefly Aerospace Inc. First Quarter 2026 Financial Results Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal remarks. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please note, this conference call is being recorded. I will now turn the conference over to Michael Sheetz, Firefly Aerospace Inc.'s Director of Investor Relations. Michael, you may begin. Thank you, Operator. Michael Sheetz: Hello there, and may the fourth be with you. I am Michael Sheetz, and welcome to Firefly Aerospace Inc.'s first quarter financial results call. I am pleased to be joined on the call by CEO, Jason Kim, and CFO, Darren Ma, as we report for the period ending 03/31/2026. Today’s call will include forward-looking statements, including, but not limited to, statements the company will make about future financial and operating performance, growth strategy, and market outlook. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause the actual results and trends to differ materially are set forth in our annual and quarterly reports filed with the SEC. Firefly Aerospace Inc. assumes no obligation to update any forward-looking statements, which speak only as of their respective dates. Also, on this call, we will discuss both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in the first quarter 2026 earnings release. Unless otherwise stated, financial information referenced in this call will be non-GAAP. Our earnings press release, SEC filings, and a replay of today’s call can be found on our investor website at investors.firefliespace.com. I will now turn the call over to Jason. Jason Kim: Thank you, Michael, and welcome to our first quarter 2026 earnings call. Firefly Aerospace Inc. opened the year with strong execution and increasing momentum driven by major government programs that align directly with our core capabilities. We delivered record quarterly revenue of $81 million. The acceleration of the ARTEMIS program combined with NASA’s Moon Base Initiative calls for monthly robotic lunar landings and reinforces the demand signals we have been building toward. Our early investments to scale Blue Ghost production and our milestone as the first commercial company to land on the Moon successfully position us to be a critical commercial partner as NASA expands lunar operations. With three additional missions ahead, we are already executing toward the goal. We also advanced our ocular lunar imaging service through a new partnership with NVIDIA, enabling on-orbit processing for faster, more actionable data in cislunar space. On the national security front, Firefly Aerospace Inc. subsidiary, SciTech, secured an agreement with the U.S. Space Force to support the space-based program under Golden Dome. We are concurrently delivering and proving the value of our AI-enabled data processing through the U.S. Space Force’s operational FORGE missile defense system. Within launch, the capacity-constrained market is driving increased demand for Alpha following its successful return to flight. We also completed the Victus DM responsive launch demonstration and made steady progress on our reusable Eclipse rocket in the first quarter. The pace of change in the space economy is accelerating, and Firefly Aerospace Inc. is scaling up our existing revenue-generating capabilities to meet the demand across every line of business. For those new to Firefly Aerospace Inc., we are a space and defense company delivering innovative hardware and software to perform the hardest missions in space for national security, exploration, and commercial technology. Our hardware is represented by four revenue-generating products: our Blue Ghost lunar landers, ELECTRA satellite orbiters, small-lift Alpha rockets, and medium-lift Eclipse rockets. Firefly Aerospace Inc.’s software portfolio falls under our SciTech AI-enabled defense systems, which are proven in national security operations. The industry tailwinds behind artificial intelligence and data centers are fueling operational realities for our company as we deliver crucial no-fail systems in support of the U.S. and our allies. We are meeting the U.S. government’s call for commercial investment, speed, and scale in defense and exploration. Our advanced technology products and funding of infrastructure include upgrades and expansion of Firefly Aerospace Inc.’s co-located spacecraft and rocket factories, clean rooms, and test stands, as well as our data centers and classified facilities. Now turning to our business updates. In the first quarter, we completed new milestones across each of our product lines and services. The lunar opportunity is here. Recent milestones, including the NASA Moon Base event, Artemis II successful lunar orbit, and our Blue Ghost Moon landing and surface operations, ignited the industry and the world. The Moon is now a permanent destination. NASA’s Moon Base plan represents a dramatic acceleration of the ARTEMIS program, with a detailed pathway to a regular cadence of missions to the surface and persistent support from satellites in lunar orbit. Our prior growth strategy was to extend from one Moon landing a year to multiple a year, and now we have an amplified demand signal from NASA. The agency’s objective is to provide multiple robotic landings on the Moon’s surface starting next year, as well as larger lander missions to support the required lunar infrastructure for a permanent presence. The first two phases of the NASA Moon Base architecture taking place over the next seven years represent a $20 billion program with multiple shots-on-goal opportunities for Firefly Aerospace Inc. When you combine Blue Ghost, the only commercial lander to operate successfully, with our ELECTRA spacecraft, we provide the ideal system to deliver and support many of the payloads and capabilities needed, such as navigation, orgo communications, surface observation, power infrastructure, exploration drones, rovers, cargo, and support systems for humans on the Moon. The Moon is a vastly untapped resource, and Firefly Aerospace Inc. is the tip of the spear in the routine deliveries and services that NASA needs to support a permanent presence on the Moon. Last week, we heard NASA Administrator Isaac Minh’s request at a congressional hearing to template Blue Ghost and launch with frequency. As stated earlier, we are already building towards this. In the first quarter, we made significant progress on our new clean room, which is four times the size of our existing clean room. This enables a production line of lunar landers for frequent missions. We are leveraging our vertical integration to scale up while also investing in our Blue Ghost supply chain. We are working closely with each major supplier to ensure they are ramping up with us through long-term agreements and strategic inventory in place to ensure quality, schedule, and quantities of delivery. Meanwhile, assembly of our Blue Ghost lander and ELECTRA orbiter is well underway for Blue Ghost Mission 2, and we are on track to complete assembly and payload integration this summer. We named Blue Ghost Mission 2 Riders to the Dark, as our team charges toward another historic milestone conducting the first American landing on the Moon’s far side carrying both NASA and commercial payloads. We are making progress on our additional lander contracts. With the Blue Ghost Mission 3 preliminary design review complete, which verifies the vehicle’s design to deliver payloads to the Moon’s Gruithuisen Domes, the team is now preparing to complete the critical design review for Mission 3 while also getting ready to complete the preliminary design review for Blue Ghost Mission 4 to the Moon’s South Pole. Moving to ELECTRA, we are pleased to add NVIDIA as another Firefly Aerospace Inc. partner, with our first collaboration included as part of our ocular lunar imaging service. NVIDIA’s Jetson module was embedded in the high-resolution Lawrence Livermore National Laboratory telescopes and delivered to Firefly Aerospace Inc.’s spacecraft facility for integration on our ELECTRA orbital vehicle. ELECTRA will first serve as a transfer vehicle and communications relay for Blue Ghost, and then begin our Oculus service to support advanced lunar surface mapping, mineral detection, and reconnaissance for five years in lunar orbit. Our ocular data will be rapidly processed onboard ELECTRA and autonomously transmitted back to Earth utilizing the NVIDIA Jetson module combined with Firefly Aerospace Inc.’s SciTech-enabled AI software. This allows Firefly Aerospace Inc. to mitigate downlink constraints from the Moon by processing data on orbit before it is transmitted to Earth as real-time actionable insights for government and commercial customers. Firefly Aerospace Inc.’s AI software will further enable advanced space domain awareness. Our AI algorithms and data fusion technologies are already proven in critical national security missions in Earth orbit. Our software will enable ELECTRA to leverage multiple data feeds onboard to more accurately track objects and provide timely situational awareness to space operations occurring in the cislunar domain. These capabilities are transferable to ELECTRA’s upcoming space domain awareness mission for the Defense Innovation Unit’s Sinaquon project. This mission also incorporates high-resolution Lawrence Livermore National Laboratory telescopes, just like the ones enabling our Oculus service. After completing the critical design review for the mission, the team has begun building and testing ELECTRA flight hardware. Additionally, in the first quarter, Firefly Aerospace Inc. completed critical ELECTRA test milestones for Blue Ghost Mission 2, including separation testing to demonstrate ELECTRA’s mechanisms that will deploy the European Space Agency’s Lunar Pathfinder satellite following separation from our Blue Ghost lander. This further highlights ELECTRA’s ability to operate and deploy critical high-mass payloads across cislunar space. The team also completed the initial interoperability test to ensure our ELECTRA orbiter communicates with Blue Ghost on the Moon’s far side and acts as a backup communications relay for NASA’s Lucy Knight payload. This enables NASA’s radio telescope to operate for up to two years on the surface even without direct line of sight to Earth. This relay service on ELECTRA is the pathway to our commercial offering, delivering alternative communications options that reduce blackout periods and strengthen connectivity for multiple future lunar missions for Firefly Aerospace Inc. and our customers. As we saw at the recent Space Symposium event, there is growing demand for ELECTRA’s robust capabilities combined with our AI-powered software to support dynamic space operations for national security, space exploration, and international missions. The demand includes space maneuverability to novel orbits, deorbit services for multiple spacecraft, and long-haul communications. At the symposium, U.S. Space Force Major General Purdy further emphasized the need for enhanced national security capabilities in cislunar space, including transportation, communications, and navigation systems beyond Earth orbit. Once deployed, those assets require protection and continuous monitoring, which is best done from the Moon as the ultimate high ground. Our ELECTRA vehicles are well positioned to enable these missions with high-thrust precision Spectra engines, ample fuel and payload capacity, and AI software. As General Salzman said in his April 30 congressional testimony, speed, scale, and clear demand signals are critical, and ELECTRA positions us to capture that with responsive on-orbit capability. We will continue to scale up our ELECTRA production line as demand steadily increases. Moving to our SciTech software offerings under our spacecraft business, we are pleased to be selected by the U.S. Space Force to support the space-based program under Golden Dome. In a Space Force press release just a week ago, this program was announced to develop a space-based missile defense interceptor system that will demonstrate capability integrated into the Golden Dome architecture by 2028. Space Force awarded a select group of companies, including Firefly Aerospace Inc.’s subsidiary, SciTech, with contracts totaling up to $3.2 billion. This critical program will enable next-generation space-based tracking and advanced interceptors integrated with artificial intelligence to counter the speed, maneuverability, and lethality of threats. As the prime contractor, we continue to execute on the operational U.S. Space Force FORGE system, providing a modernized AI-enabled missile warning and tracking architecture. We are rapidly processing vast amounts of data from satellites across all orbits, from LEO to MEO to GEO, to deliver high-quality mission-critical information to our warfighters to defend against threats. After the Space Force operationally accepted our FORGE system last year, in the first quarter we were awarded a $109 million engineering change proposal to accelerate and expand data center delivery. This critical system processed thousands of threats in the first 30 days of the Iran conflict to help protect the warfighters. The team further completed the interim ground readiness review for the Space Development Agency as part of our role in delivering the mission and data fusion ground components for the Proliferated Warfighter Space Architecture satellite constellation Tranche 1 Tracking Layer. More recently, the Air Force Research Laboratory awarded us a contract to support development of the advanced algorithm R&D and verification architecture by implementing deep learning and advanced AI algorithms on small size, weight, and power processors. This capability supports enhanced target detection, tracking, and custody and is conducive to future on-orbit processing missions. Last week, we also heard Chairman of the Joint Chiefs of Staff General Kane underscore in a congressional hearing the urgent need for critical investments in space-based command and control, artificial intelligence, advanced surveillance, and reconnaissance. This capability counters modern multi-domain threats, where operations are coordinated and synchronized across air, land, sea, space, and cyber domains. Our proven AI software and on-orbit processing capabilities are well positioned to support these multi-domain operations. Shifting to launch, in March Alpha Flight 7 successfully returned to flight and completed all mission objectives after deploying a Lockheed Martin demonstrator payload and validating key Block 2 subsystems. Additionally, in the first quarter, Firefly Aerospace Inc. supported Lockheed Martin on the U.S. Space Force’s Victus DM mission, performing two responsive space exercises to practice advanced emergency launch protocols required in a real threat scenario. Victus DM marks the second tactically responsive space effort that Firefly Aerospace Inc. completed to date after our record-setting Victus Nox mission, which launched with a 24-hour notice. The first Victus DM exercise included a rapid payload process demonstration where spacecraft arrival, operations checkouts, mating, and encapsulation were completed in under 12 hours. The second exercise included a 36-hour rapid launch simulation to practice and advance emergency launch protocols required to execute tactically responsive space missions in a real threat scenario. We are now focused on delivering our first Block 2 vehicle, which will debut on Flight 8 that is targeted to launch late this summer. Block 2 is designed to expand Alpha’s deployable launch capabilities for critical responsive space missions, such as hypersonic testing, national security missions, and commercial satellite launches for domestic and international customers. Firefly Aerospace Inc. completed qualification testing for the first- and second-stage tanks for Flight 8 and moved into the integration and test phase as we progress toward launch. The significant improvements across Alpha from Block 2 focus on enhancing reliability and production rate as part of our company culture of safety, quality, and reliability. And we are working ahead. We have structures and engines in build for Flights 9, 10, and beyond, rolling off our automated fiber placement machine and into assembly, as we continue to target three more Alpha launches in 2026. For our 2027 manifest and beyond, we talked to both new and repeat customers at Space Symposium this year and see strong interest in Alpha on the heels of our successful Flight 7 launch. As we look to the future, we are pleased to see the recent Swedish defense budget allocating tens of millions to invest in orbital launch infrastructure. Our international partners want to bring Alpha to market in Sweden, as well as other allied countries. To meet the growing demand for satellite launch capabilities around the globe, this approach allows us to not only increase our launch cadence, but also open new markets, add resiliency to our launch sites, and provide a national security advantage. Firefly Aerospace Inc. also recently signed an agreement with Seagate Space to collaborate on the development of an offshore launch platform that enables responsive sea-based Alpha launches. Together, we will work to mature the design of an integrated offshore launch system capable of supporting the unique requirements of liquid-fueled orbital rockets. These capabilities are in alignment with the Space Force demands for flexible infrastructure to accommodate responsive small launchers and eliminate single points of failure. In the Spaceport of the Future report, they have called for flexible manifesting, rapid integration, and launch-to-orbit timelines of 24 hours or less for designated payloads, which we have proven on Victus Nox. Everything we learned from building, testing, and launching our Alpha rockets allows us to improve and reduce risk for Eclipse. Our reusable medium-lift vehicle is marching towards its debut, while the need for more launch capacity from more providers is growing. All the major flight articles for our first Eclipse vehicles are in build and test, including our Miranda flight engines. In the first quarter, we completed qualification of the Eclipse interstage, a critical primary structure that connects the first stage to the second stage, as well as the liquid oxygen transfer line and the composite overwrap pressure vessels. More recently, we are progressing through the test campaign on Eclipse’s first-stage tanks, which tower nearly 100 feet tall. This risk-reduction testing allows us to push the tanks beyond their limits to verify flight margins. With that business summary, I will turn it over to Darren for a review of the first quarter financials. Darren Ma: Thank you, Jason, and good afternoon, everyone. We delivered record Q1 revenue driven by strong business fundamentals. As Jason highlighted, we have multiple growth drivers in place, which gives us confidence in achieving our long-term objectives. On today’s call, I am going to review the financial results of first quarter 2026 before handing the call back to Jason for closing remarks. For listeners new to Firefly Aerospace Inc., I want to reemphasize that key operational metrics drive our financial performance. In our spacecraft solutions business, we generally recognize revenue over time under each contract as we complete milestones. This adds a more predictable, recurring revenue component alongside the more event-driven launch business. For the launch business, we focus on the number of launches; for example, revenue for our operational Alpha vehicle is recognized at a point in time when the launch occurs. For Eclipse, while in development, we recognize revenue as a percentage of completion based on program milestones as part of the Northrop Grumman partnership. Once the Eclipse vehicle is operational, we will recognize revenue in the same manner as Alpha, when launches occur. Now turning to our first quarter results. We delivered the highest quarter of revenue in the company’s history, at $80.9 million. This compares with $57.7 million in the fourth quarter and $55.9 million in the same quarter a year ago. The sequential revenue growth was driven by the ramp of the FORGE and Golden Dome space-based interceptor programs, a full quarter of SciTech, and the successful Alpha launch. Within our total revenue, spacecraft solutions accounted for $67.6 million, and launch was $13.3 million. We ended the first quarter with a total backlog of approximately $1.3 billion, relatively flat from last quarter, reflecting the conversion of backlog to revenue and timing of new awards. As Jason mentioned earlier, we are excited about the industry tailwinds, including NASA opportunities for Blue Ghost, customer demand for Alpha, additional missions for ELECTRA, and increasing demand for our AI software solutions. Our position in the market and these sector catalysts provide Firefly Aerospace Inc. with confidence in our long-term revenue growth trajectory. First quarter GAAP gross margin was 21.6%, compared with 27.7% in the prior quarter. The change was primarily due to a higher mix of cost-plus program contracts driving revenue. GAAP operating expenses for the first quarter were $113.1 million, compared with $101.6 million in the fourth quarter. The increase was primarily from the inclusion of SciTech’s operating expenses for the full quarter and our continued R&D investments. For operating expenses, the primary differences between GAAP and non-GAAP measures are stock-based compensation expense, one-time transaction-related expenses, and the amortization of intangibles. Non-GAAP operating expenses for the first quarter were $93.7 million, compared with $80.5 million in the fourth quarter. The sequential increase was driven by our continued R&D investments to support Alpha Block 2 production ramp and Eclipse development. GAAP operating loss was $95.7 million, compared with a loss of $85.6 million in the fourth quarter. Non-GAAP operating loss was $76.2 million, compared with a loss of $64.5 million in the fourth quarter. GAAP net loss in the first quarter was $96.7 million, compared with a loss of $41.1 million in the fourth quarter. As a reminder, we recognized a one-time $37.1 million tax benefit related to the SciTech acquisition and a one-time $8.4 million gain on settlement of contingent liabilities in Q4. Our non-GAAP net loss in the first quarter was $74 million. This compares with a net loss of $58.5 million in the prior quarter. GAAP basic and diluted net loss per share was $0.61, compared with a loss of $0.26 last quarter. Non-GAAP basic and diluted net loss per share for the first quarter was $0.46, compared with a loss of $0.38 last quarter. We exited Q1 with a share count of 160.1 million shares. We expect our total share count to increase by about 1 million shares per quarter. Stock-based compensation expense was $12.5 million in the first quarter, compared to $12.6 million in the prior quarter. Adjusted EBITDA in the first quarter was a loss of $64.7 million, compared with a loss of $57.3 million in the fourth quarter. Turning to our balance sheet, we ended the quarter with total liquidity of $811.6 million, consisting of $551.6 million in cash, cash equivalents, and short-term investments and $260 million of available capacity from our revolving credit facility. After the close of the quarter, we upsized the capacity of our credit facility to $305 million, which remains undrawn. Capital expenditures in the first quarter were $16.3 million, compared with $12.1 million in the fourth quarter. The sequential increase was driven by test and upgrades to support Alpha Block 2 production and spacecraft manufacturing expansion that positions us to support NASA’s accelerated lunar opportunities. Free cash flow was an outflow of $78.9 million, compared with an outflow of $79.3 million in the fourth quarter. As a reminder, in the second quarter, we will have the final SciTech acquisition-related payment of approximately $24 million reflected in our cash flow. Now turning to our revenue outlook for 2026. With continued strength across our business, we remain confident in our trajectory to achieve significant annual revenue growth this year and are reiterating our outlook of $420 million to $450 million, consistent with what we gave on the March call. Thank you for your interest in Firefly Aerospace Inc. With that, I will turn the call back to Jason for his closing remarks. Jason Kim: Thank you, Darren. The first quarter proved what we have been building toward: Firefly Aerospace Inc. is not just participating in the space economy, we are shaping it. This is a defining moment in our industry. From our Moon landing to missile defense systems, from responsive launch to AI-powered space domain awareness, we are delivering the integrated capabilities that define the future of space exploration and defense operations. NASA is accelerating. The Space Force is investing. Our allies are mobilizing. Firefly Aerospace Inc. stands ready, with mission-proven hardware in production, battle-tested software in operation, and our team of Fireflies innovating and executing at pace. We stand at the threshold of a new era, where what was once impossible becomes inevitable. Firefly Aerospace Inc. has the end-to-end ecosystem to make it happen. Thank you for joining today’s call. Michael Sheetz: Thank you, Jason. Operator, we are ready to take questions. We will now open the call for questions. Operator: Thank you so much. Please press 11 and wait for your name to be announced. To remove yourself, press 11 again. One moment for our first question. It comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed. Sheila Kahyaoglu: Good afternoon, and thank you so much for the time. This morning, you announced SciTech won a key position among 12 total companies on Space Force’s space-based interceptor program. Can you maybe elaborate on that win a little bit more, your positioning there, and how SciTech accelerates the growth profile of Firefly Aerospace Inc.? Jason Kim: Thanks, Sheila. I will go back to what we have said before on previous earnings calls: Firefly Aerospace Inc. had multiple shots on goal for Golden Dome. We have referenced that a lot of the capabilities that SciTech has in battle-tested AI development on the FORGE program, which went operational last September, have seen a lot in real operations, particularly in Iran. A lot of the battle-tested algorithms are very transferable to other programs like Golden Dome. And if you remember what General Gulmein has said before, one of the hardest parts of such an architecture of this magnitude and complexity is the command and control and the fire control, the ground processing. Because SciTech is battle-tested and has exercised AI in no-fail missions in real-world operations, all those algorithms are transferable to Golden Dome as well. And then, as you know, our Alpha rocket is able to take 1 ton to orbit as well as 2 tons to suborbital, so it makes it really right-sized to launch hypersonic tests, potentially targets, for things like space-based interceptor. So there are multiple shots that we have on goal. Sheila Kahyaoglu: Great. Thank you for that. And maybe, Jason, you called out in the slides you expect a $20 billion opportunity for the initial phases of the Artemis Moon Base Program over the next seven years, based on monthly missions and large landers. What are you hearing from the customer on that, and can you talk about your operational readiness in support of that type of cadence? Jason Kim: Yes. The bold thinking that we heard from NASA Administrator Jared Isaacman recently since he released the Moon Base plans by NASA is the exact type of thinking that we embrace at Firefly Aerospace Inc. We were already thinking ahead and already building out our clean rooms and our production line capabilities to support not just one lunar lander a year, but multiple. This just further validates or amplifies the demand signal. When you look at having a permanent presence on the Moon, you have to validate a lot of technologies to understand the Moon better, to support human environmental control life support systems on the Moon, take cargo to the Moon, as well as have mobility such as rovers and light terrain vehicles. All those things are what we are working on with landers that can be templated into production-line landers so that we can address the frequency that is being demanded by NASA to take those types of technologies. One of the things that we are doing is we have quadrupled our clean room space compared to our existing clean room. That floor space and footprint help us with the rate. With our new Chief Operating Officer, Ramon Sanchez, who came in the fourth quarter of last year, he has brought a lot of best practices and expertise of production flow and labor and equipment utilization. That is helping us with ramping up production lines. We are vertically integrated as well, so one of the things that is important for rating up lunar landers is having the hardware put together and having the components. We build the avionics, we build the harnesses, carbon composites, and structures. We also are investing in some of our supply chain of our critical components. We are working closely with our supply chain in terms of having their dedicated support as well as strategic inventory and quality. Safety, quality, and reliability are really important to us. That is our focus as well. At the end of the day, it is about increasing the frequency of launch of these lunar landers, also building bigger lunar landers that we have designs for, and ensuring the probability of mission success just like we did on Blue Ghost Mission 1. Operator: Thank you. Our next question comes from the line of Seth Seifman with JPMorgan. Please proceed. Seth Seifman: Hey, thanks very much, and good afternoon. I wanted to follow up quickly on the space-based interceptor award for SciTech and just understand in terms of how they fit in, how you see the ground station role ramping up. What specifically does the infrastructure that SciTech has now— is that what would be used to support a space-based interceptor as part of Golden Dome? Is it something that would require the build-out of new infrastructure? If you can help us think in a little bit more detailed way what that involves, and where we saw there were several contracts that went out to different companies to work on it, are there other competitors who are potentially playing the same role here? Jason Kim: Hey, Seth. I think I mentioned in the fourth quarter of last year that SciTech, the acquisition of SciTech, was strategic, and it truly is. It really bolstered Firefly Aerospace Inc.’s entrance into national security, and in particular SciTech is the prime contractor on FORGE. That is a multi-hundred-million-dollar program of record. It is doing AI today in real-world operations. If you remember what General Gutlein said about Golden Dome, he is looking to defeat or stay ahead of the threats that have speed and maneuverability as well as lethality. One of the things that counters that is AI and the use of AI. Because SciTech has that capability as well as a rich history of 45 years of algorithms that also have been used to support the Space Force and the Air Force and the Missile Defense Agency, all of those battle-tested operational algorithms are also brought to bear for things like Golden Dome ground processing. With the AI processing, you can speed up the timelines because the threats are very advanced. In terms of the capabilities that SciTech has, they can mix and match a lot of those algorithms together to apply to this mission. Seth Seifman: And then just in terms of the overall contribution that they had in the quarter, is that something that you guys can disclose? Darren Ma: We have not broken it out separately, but FORGE and Golden Dome space-based have had revenue ramp up in Q1 this quarter. Seth Seifman: Very good. Thanks very much. Operator: Our next question comes from the line of Kristine Liwag with Morgan Stanley. Please proceed. Kristine Liwag: I wanted to follow up on your comments about Alpha after Flight 7’s success. You called out stronger customer demand, but backlog is relatively flat in the quarter. Does that mean that you anticipate orders that occurred after the quarter closed? And how should we think about the order trends for the year? Jason Kim: Hi, Kristine. Yes, we are seeing strong interest in Alpha on the heels of the successful Alpha Flight 7 Stairway to Seven mission. We completed all the post-data; everything was nominal. I was in the Mission Control Room with our team, and it was a flawless launch. It was with a Lockheed Martin demonstrator as well. We were able to insert that into the proper orbit. We even had our relight of the second stage. A lot of the transition to Block 2—a lot of the components and technologies that are going to help us with manufacturability and reliability on Block 2—were tested on Flight 7, to include the in-house avionics, the in-house batteries, and some temperature protection systems. We are very happy with those results. Because of that, at Space Symposium there was a lot of interest with existing customers as well as new customers. It is a matter of timing. A lot of our government customers, as you know, are going through some timing with their funding, as well as we had a lot of interactions with new customers as well. I will pass it on to Darren in terms of any additional color. Darren Ma: I think you covered it, Jason. Also keep in mind, we burned down the backlog this quarter with the record revenue quarter as well. Kristine Liwag: Great. Super helpful. And if I could pivot to the Moon opportunities. With NASA potentially skipping Artemis and going straight to the Moon, Blue Ghost’s capability set is really unique there with your successful landing as the first commercial company to have done so. But as you start seeing other companies accelerate their human landing systems capabilities and a much higher volume of potential payload that could reach the Moon, how do you think about where Blue Ghost lives in the construct when you have higher volume available too? Where does it live in that ecosystem, and how do we think about the longer-term opportunity for Blue Ghost? I think, Jason, you called out that you are also looking at a higher payload lander in the future. Jason Kim: Yes. In terms of our Blue Ghost line, we have designs for larger landers. A lot of the underlying technologies that made us successfully land and perform the 14 days of surface operations on Blue Ghost Mission 1 are transferable to our larger lander designs as well. If you go back to the NASA budgets, the CLPS 1.0 program, which is a highly successful program, has increased its budget from $2.6 billion to $4.2 billion. The anticipated CLPS 2.0 program is going to be around $6 billion. When you look at post-2030 landings, there are at least three 500-kilogram-to-lunar-surface CLPS missions, then there are twelve 3-ton mass-to-lunar-surface missions as well, and the remaining 15 are around 8 tons of mass to the lunar surface. Those are all in our roadmap. In fact, our larger lunar lander designs are scalable to meet that demand. It is not just the frequency of launch cadence of these lunar landers that NASA is asking for; it is also the magnitude, or the size, of these lunar landers that are increasing. Because we have a lot of capabilities that share common vertically integrated components such as carbon composites and engine technology as well as avionics—we build big things at this company. Our Alpha rocket is 100 feet tall, and our Eclipse rocket is 200 feet tall. So building a larger lander is right up our alley. Kristine Liwag: Great. Super helpful. And when do you think you could see these demand signals firm up into contracts? Jason Kim: We are seeing a lot of requests already, Kristine. There are things like CLPS 2, Moonfall, and CS-8, and CLPS 2.0. The majority of these are already solicitations that are out. If NASA stays on schedule, performers can get on contract as early as the third quarter of this year for some of these. Kristine Liwag: Great. Thank you for the color. Operator: Our next question comes from Edison Yu with Deutsche Bank. Please proceed. Edison Yu: Hey. This is Laura on for Edison. Thanks for taking our question. I want to ask about more broadly how we should think about the role of AI across your business today. Given your recently announced NVIDIA collaboration and also the R&D contract you were awarded, should we be thinking AI is primarily supporting SciTech’s software, or do you also see it becoming increasingly important for the spacecraft, autonomy, etc.? Jason Kim: You are exactly right, Laura, that we see AI as critically important to space. One of the visions that we have is we want to deploy on-orbit processing more and more. That is what makes the SciTech acquisition so strategic in the fourth quarter last year: we were thinking ahead, and SciTech’s software is operational on the ground today with big data centers to do no-fail Space Force missions and programs of record. They also have experience operationally performing on-orbit processing in space. That is one of the things that we envision at Firefly Aerospace Inc.—we have the whole ecosystem to launch satellites, build the satellites, operate the satellites with processing onboard with the SciTech algorithms to perform AI and processing with low latency, because a lot of these missions that we are going after, especially in national security, have very short timelines to be effective. Our recent partnership news with NVIDIA around the Moon on our Oculus service to do space domain awareness more quickly using AI and SciTech algorithms is a perfect example of taking things that work on the ground or in low Earth orbit and deploying them to the Moon because the Moon is the ultimate high ground. We see more and more deployment of AI on orbit. In addition, AI is being used across the company to increase productivity. We see it not only in the products that we provide but also in how we do work as well. Operator: As a reminder, to ask a question, simply press 11. Our next question comes from the line of Sujeeva De Silva with ROTH Capital. Please proceed. Sujeeva De Silva: Hi, Jason. Hi, Darren. Congratulations on the progress here. Following up on the Alpha discussions you have had at Space Symposium and others, given your strong government defense relationships, do we expect the launches in the future manifest to remain primarily government, or do you think you will diversify into civil or commercial? Obviously, there is strong demand from government, but wondering if it will be an effort on your part to diversify that or that should not be the expectation. Jason Kim: Hi, Sujeeva. Demand is not the problem with Alpha. We are steadily increasing rate year to year because there is so much demand from national security as well as commercial and civil. In terms of the benefits of the Alpha rocket—being a 1-ton-to-orbit capability and a 2-ton-to-suborbital capability, as well as having the responsive launch capability like we demonstrated on Victus Nox and recently with Victus DM—that really is very fit for national security purposes. If you think about national security, if there was a conflict, especially a near-peer conflict, one of the things that would be vulnerable are our launch sites. We have a deployable Alpha capability that we would like to field. With that capability, you could get resiliency through having a deployed capability in case any of the U.S. launch capabilities are inoperable. We are opening up a launch pad in Sweden, and that is the first time that we are going to take Alpha global. With our deployable launch system, we could take it to other places. Having the resiliency tied to the 1-ton capability that is right-sized to counter threats that U.S. adversaries might put into low Earth orbit, in addition to the 24-hour response timeline that we demonstrated on Victus Nox, is a combination that really supports national security very well. Sujeeva De Silva: Great. Thanks, Jason. And then my other question is on ELECTRA. With the first launch of the lunar satellite with the second Blue Ghost, can you remind us of the revenue model framework for ELECTRA—whether you can start revenue with that launch—and does the NVIDIA partnership enhance your pricing or revenue opportunity above and beyond what it was before? Darren Ma: Hey, Sujeeva. The ELECTRA that is on Blue Ghost Mission 2 is recognized as part of the entire contract. Blue Ghost Mission 2, we won it for $130 million. We have a number of commercial payloads on there, including a rover from the UAE and a couple of other commercial payloads that are add-ons on top of that. The Oculus imaging service is another add-on on top of that as well. That is all being recognized over time, as we discussed on the call. Sujeeva De Silva: Great. And, Darren, does the NVIDIA partnership enhance your ability to capture revenue in Oculus? Jason Kim: That is definitely part of the Oculus imaging service. The way to look at this is Oculus on Blue Ghost Mission 2—we are going to be able to experiment and try out different modes. Not only are we going to be able to send the raw data from doing lunar mapping and surveying, as well as sending space domain awareness data down to the ground to get processed even more, we are going to be able to demonstrate and experiment with AI on our NVIDIA module that is on the Oculus sensor using SciTech algorithms. There is going to be a lot of new discovery, and those are the kinds of things that the Department of Defense as well as NASA are looking for more of. There is more to come there. Operator: Our last question comes from Analyst with KeyBanc Capital Markets. Please proceed. Analyst: Hey, thanks for taking my question. It is Liam on for Mike today. I wanted to ask more broadly about NASA’s lunar plans and building a base on the Moon. What do you think would be the most feasible type of power generation to power the grid for lunar operations? What type of role could Firefly Aerospace Inc. play in powering the lunar grid? Jason Kim: I will go back to Blue Ghost Mission 1. When we successfully landed, we performed the 14 days of surface operations, which is the longest of any commercial mission on the surface of the Moon. We also had an engineering change proposal to look at operating slightly into the lunar night. Using our in-house batteries, we were able to operate five hours into the lunar night and still gather data from that. One of the things we can do in the future is add more batteries as we collect solar energy from our solar arrays. That will allow us to keep heating critical components like avionics and instruments on the lunar lander to last longer into the lunar night. We could also scale our solar energy as well. That is something that we have proven with Blue Ghost Mission 1. There are other opportunities like radioisotope heater units (RHUs). As you remember from the Mars missions, there are also other types of RTGs that can be used. Nuclear-powered plants can be used as well. Those are all things that NASA will want to explore more of because the essential things that you need to have a permanent presence on the Moon are things like power, communications, and navigation, and those are all things that Firefly Aerospace Inc. envisions continuing to support NASA with. Analyst: Thanks. And then lastly, on Blue Ghost, given NASA’s increased appetite for landers versus three months ago, how should we think about segment gross margins once mission cadence ramps up? Has there been any change to your view on Blue Ghost margins? Darren Ma: We have not— the only thing that has really changed there is in the program. Previously, we were planning to win multiple shots on goal each year, but now that has really accelerated. Our views on gross margin there have not really changed. We do not break out the spacecraft gross margin. Spacecraft solutions include Blue Ghost, ELECTRA, and also our software solutions business. Operator: Thank you. This will conclude our Q&A session. I will pass the call back to Michael for closing comments. Michael Sheetz: Thank you, everyone, for attending today’s call. We look forward to speaking with you again when we report our next quarter’s financial results. Thanks all. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Ana Soro: Good afternoon. I'm Ana Soro from Palantir Technologies Inc.'s finance team, and I would like to welcome you to our first quarter 2026 earnings call. We will be discussing the results announced in our press release issued after the market closed and posted on our Investor Relations website. During the call, we will make statements regarding our business that may be considered forward-looking within applicable securities laws, including statements regarding our second quarter and fiscal 2026 results, management's expectations for our future financial and operational performance, and other statements regarding our plans, prospects, and expectations. These statements are not promises or guarantees and are subject to risks and uncertainties, which could cause them to differ materially from actual results. Information concerning those risks is available in our earnings press release distributed after the market closed today and in our SEC filings. We undertake no obligation to update forward-looking statements except as required by law. Further, during the course of today's call, we will refer to certain adjusted financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute for, or in isolation from GAAP measures. Additional information about these non-GAAP measures, including reconciliation of non-GAAP to comparable GAAP measures, is included in our press release and investor presentation provided today. Our press release, investor presentation, and other earnings materials are available on our Investor Relations website at investors.palantir.com. Over the course of the call, we will refer to various growth rates when discussing our business. These rates reflect year-over-year comparisons unless otherwise stated. Joining me on today's call are Alexander C. Karp, chief executive officer; Shyam Sankar, chief technology officer; David A. Glazer, chief financial officer; and Ryan Taylor, chief revenue officer and chief legal. I will now turn it over to Ryan Taylor to start the call. Ryan Taylor: The last three months have been some of the most exciting in the history of Palantir Technologies Inc. as we have watched the whole world begin to see the incredible promise of operational AI as well as the risks and perils of being beholden to models alone. We achieved 85% year-over-year revenue growth, our highest overall revenue growth rate as a public company, and 16% sequential growth. Our U.S. business, now 79% of total revenue, surpassed 100% year-over-year growth for the first time since our DPO, growing 104% year-over-year and 19% sequentially. Our Rule of 40 score climbed to 145, up from 127 last quarter, on absolute AIP dominance. AIP is the only platform that establishes a true AI no-slop zone, a necessary requisite to converting potential AI leverage into compounding real-world value without risking enterprise disaster. As the AIG CEO noted in their recent earnings call, they are deploying AIP to implement a multi-agentic underwriting and claims solution comprised of purpose-built agents ingesting submissions, evaluating risk, benchmarking pricing, and detecting fraud, all coordinated through the ontology. When you want AI to work in production, in a real enterprise, at real scale, where there is no room for slop, there is only one platform. Unknown Speaker: AIP. Ryan Taylor: It is not just the playbook of cutting costs and streamlining processes. AIP is the battle-tested platform that allows the wholesale redefinition of how companies compete within their industries. The depth of our customer commitments reflects that ambition. Referencing our work with Motor and Freedom Mortgage, where we are revamping the end-to-end mortgage process with AIP, the Motor chairman stated, quote, this strategic partnership will reshape the future of our industry. Together, we are building technology that can help improve affordability, lower borrowing costs, and expand access to homeownership for millions of Americans. Our U.S. commercial business grew at a pace that speaks to the compounding real value created for our customers. For example, on the back of a 26% increase in engine performance with AIP, GE Aerospace deepened their partnership with Palantir Technologies Inc. last quarter to deploy agentic AI-powered solutions across their production system and military aviation supply chain, with a shared mission of ensuring that more aircraft remain available to train America's next generation of U.S. Air Force pilots. Ondas and World View expanded their work with Palantir Technologies Inc. to bring AIP to the stratosphere and build the operational backbone required to scale their missions. They noted, quote, Palantir-powered workflows do not just make one launch faster, they make dozens or 100 simultaneous launches possible with the same operational efficiency. Load-bearing institutions upon which the West depends know, or will soon know, that our AI platforms are the indispensable means of delivering their must-win outcomes. An upshot of our transformational work across every domain: the foundation remains our deployment of Maven Smart System to empower our troops. As the chief digital and AI officer at the Department of War noted, quote, I care about one thing and one thing only: that the 18-, 19-, 20-year-old kid who had no choice in where he went or what threat he was facing—I want him to win and come home. That is why we do it. Palantir Technologies Inc. is very helpful in delivering this. Beyond Maven, Ship OS, in partnership with the Department of the Navy, has produced remarkable impact at several manufacturing industrial base suppliers already, including dropping manufacturing bill of materials approval time from 200 hours to 15 seconds, increasing speed of contract review cycles by 57% to 73%, and reducing monthly material planning time by 94%. Just as commercial organizations are reshaping their industries, Ship OS is the reinvention of America's maritime industrial base. This is just the start of how our support of manufacturing processes will transform existential programs for the U.S. government. In fact, we have already seen the government step in to transition and scale a successful private sector manufacturing program we are supporting. On the civil side, the USDA awarded Palantir Technologies Inc. a contract of up to $300 million last month to provide USDA with capabilities to support American farmers, secure farmland, enhance supply chain resilience, and shield agricultural programs from fraud, abuse, and foreign adversary influence. In government and commercial, Palantir Technologies Inc. is transforming how load-bearing institutions operate and how they win. I will now turn it over to Shyam. Shyam Sankar: Thanks, Ryan. For over two years now, we have been saying that while LLMs are improving, models are converging, and the cost per token continues to drop precipitously. GPT-4–equivalent performance that cost $20 per million tokens in early 2023 is now approximately a thousand times cheaper three years later. Because of this increased efficiency, use case demand for tokens is exploding. Our AIP workflows today utilize vastly more tokens—agents orchestrating across the ontology, chaining reasoning, tool use, retrieval, and execution—and it is growing. This is Jevons' paradox. It is the single most important dynamic in enterprise software right now. When the Victorians built more efficient steam engines, everyone assumed coal consumption would fall. Instead, it skyrocketed. Cheaper transport meant more demand for transport. Tokens are the new coal; AIP is the train. As inference gets cheaper, the number of tasks that you can economically assign to AI grows exponentially. Precisely because tokens are so much cheaper, agent flows, tools self-correct. But in practice, the number of tasks that you can trust to a model without the right harness exponentially declines. More tokens means more slop. And the more commodity cognition you consume, the more you need a system that can prevent the economic harm so you can harness the economic value. That system is AIP. That intermediary representation is the ontology. This is also why we are seeing the death of legacy software. AIP replaces static workflows not by replicating the playbook, but by eliminating the need for one. Thomas Cavanagh Construction—97% of their employees use Foundry every day—and every other piece of software must now justify its existence. And so far, they have not been able to. We are seeing this internally too. This quarter, we replaced our old, expensive CRM with an AI-first solution built on AIP in a few months that users absolutely love. Our customers are seeing the real value is not automating what you already do—it is doing what was previously impossible. A major telco set out to automate 10 million customer calls a year. The real insight was that the most dissatisfied customers never call; they churn silently. The reframe was counterintuitive: Do not use AI to reduce calls. Use it to generate them. An AI advocate that proactively calls on every customer's behalf. The point is simple: Use AI to do more work—work that was never economically feasible before AIP. For every agent action, our customers need to answer three questions. Who authorized this? What did it cost? Can I trust what it did? These questions need exact answers with precision. There is no tolerance for slop. We are building a platform-native agent engine SDK, a single set of primitives for building, persisting, governing, and operating ontology-native agents. A common layer that lets you visualize every agent in your enterprise and control it, regardless of how it was built. A true agent operating system. On top of that, unified cost attribution per agent, per session, per workflow, with administrative caps. Full provenance, so every ontology mutation traces back to the agent and reasoning chain that produced it. Security marking propagation from input data through agent sessions onto all output, with approval gates for any workflow that could reclassify information. That is how you get a CISO, a CFO, and a combat commander to say yes. AIP is the no-slop zone—the platform where every agent action is governed, attributed, and auditable. Turning to U.S. government. On the foxhole side, Maven met its moment across real-world events in Q1. Usage has doubled in the past four months through March and is now 4x over the past twelve months—across the services, the combatant commands, the Joint Staff, and the intelligence community. When the stakes are highest—when failure is measured in lives and readiness—this is where we are uniquely positioned. On the factory floor side, the demand on the defense industrial base to ramp production and sustainment has been so acute that we have surged resources from our commercial business. This is exactly what Warp Speed was built for—modernized American manufacturing. And we are doing just that where it counts the most. AIP is the default builder platform in the Department of [inaudible], with thousands of developers using AIFD, migrating legacy systems, standing up new capabilities, solving problems that used to require contractor teams and months of lead time. Our software is becoming the most malleable and responsive weapon system for the joint force. Finally, what is now clear is that Mythos and SPUD and even other current-generation models with AIP are capable of finding novel vulnerabilities in complex cyber kill chains. They have discovered thousands of zero days across major operating systems and browsers. This is the Sputnik moment in the AI arms race. The rate of vulnerability identification is about to skyrocket. Finding the bugs is no longer the limiting factor. Rapid-fire remediation with exact precision, immediacy, and absolute certainty is the new hard problem—knowing exactly what versions of what software are running where, and closing the remediation chain autonomously. Apollo was built for exactly this. We are shipping the next generation of Apollo as we help our customers reposture for this world. And note the Jevons' paradox dynamic here too: More AI means more code. More code means more slop. More slop means more attack surface. More attack surface means more vulnerabilities, and more vulnerabilities means more Apollo. I will turn it over to Dave. David A. Glazer: Thanks, Shyam. We had an outstanding first quarter delivering our strongest ever Q1 sequential growth rate of 16% and our highest ever reported year-over-year growth rate of 85%. Our revenue growth rate accelerated for the eleventh consecutive quarter, highlighting the durability of the growth of our business at scale. We expanded our Rule of 40 score by 18 points quarter over quarter, from 127 in Q4 to 145 in Q1. Our U.S. business achieved triple-digit growth for the first time, driven by accelerating demand for our AI platform. Revenue in our U.S. business grew 104% year-over-year and 19% sequentially in the first quarter. Our U.S. commercial business grew 133% year-over-year and 18% sequentially, and our U.S. government business grew 84% year-over-year and 21% sequentially. On the back of this continued strength in the U.S., we are raising our full-year 2026 revenue guidance midpoint to $7.656 billion, representing 71% growth year-over-year, a 10% increase over our full-year 2026 revenue guidance from last quarter, and our largest ever full-year revenue guidance raise. Turning to our global top-line results. First quarter revenue grew 85% year-over-year and 16% sequentially to $1.633 billion. First quarter U.S. revenue grew 104% year-over-year and 19% sequentially to $1.282 billion. Customer count grew 31% year-over-year and 6% sequentially, to 1,007 customers. Revenue from our largest customers continues to expand. First quarter trailing twelve-month revenue from our top 20 customers increased 55% year-over-year to $108 million per customer. Now moving to our commercial segment. First quarter commercial revenue grew 95% year-over-year and 14% sequentially, to $774 million. We closed $1.3 billion in commercial TCV bookings in the first quarter, representing 42% growth year-over-year. Our AI platform dominates U.S. markets as the only real choice for deploying AI models operationally in a way that actually works. First quarter U.S. commercial revenue grew 133% year-over-year and 18% sequentially to $595 million. This exceptional growth even understates our U.S. commercial momentum. As Ryan noted, we had a successful U.S. commercial customer program transition to a U.S. government customer. Absent this transition, U.S. commercial growth would have been 143% year-over-year and 22% sequentially. In Q1, we closed our third consecutive quarter of over $1 billion in U.S. commercial TCV bookings at $1.2 billion, representing growth of 45% year-over-year. Over the past twelve months, we closed $4.7 billion of U.S. commercial TCV bookings, a 115% increase from the prior twelve months, highlighting the accelerating demand for AI that creates real operational value. Total remaining deal value in our U.S. commercial business grew 112% year-over-year and 12% sequentially. Our U.S. commercial customer count grew to 615 customers, reflecting growth of 42% year-over-year and 8% sequentially. First quarter international commercial revenue grew 26% year-over-year and 5% sequentially to $179 million. Revenue from strategic commercial contracts was $3 million for the quarter, representing 0.2% of overall revenue. We expect revenue from these contracts to be less than $0.5 million each remaining quarter of this year. Shifting to our Government segment. First quarter Government revenue grew 76% year-over-year and 18% sequentially to $858 million. First quarter U.S. Government revenue grew 84% year-over-year and 21% sequentially to $687 million. This growth was driven by continued execution in existing programs and new awards reflecting the growing demand for our AI platform in government. First quarter international government revenue grew 51% year-over-year and 7% sequentially to $172 million. We closed $2.4 billion of TCV bookings, up 61% year-over-year. On a dollar-weighted duration basis, TCV bookings grew 135% year-over-year. Net dollar retention was 150%, an increase of 1,100 basis points from last quarter. The increase was driven both by expansions at existing customers and new customers acquired in Q1 of last year as load-bearing institutions continue to turn to Palantir Technologies Inc.'s battle-tested AI platform. As net dollar retention does not include revenue from new customers that were acquired in the past twelve months, it has not yet fully captured the acceleration and velocity in our U.S. business over the past year. We ended the first quarter with $11.8 billion in total remaining deal value, an increase of 98% year-over-year and 6% sequentially, and $4.5 billion in remaining performance obligations, an increase of 134% year-over-year and 9% sequentially. As a reminder, RPO is primarily comprised of our commercial business, as it does not take into account contracts with an initial term less than twelve months and contractual obligations that fall beyond termination-for-convenience clauses, both of which are common in most of our government business. Turning to margin and expense. Adjusted gross margin, which excludes stock-based compensation expense, was 88% for the quarter. Adjusted income from operations, which excludes stock-based compensation expense and related employer payroll taxes, was $984 million in the quarter, representing adjusted operating margin of 60%. Q1 adjusted expense was $649 million, up 7% sequentially and 32% year-over-year, primarily driven by the continued investment in our AI platform and technical hiring. We continue to expect expenses to ramp in 2026; we remain committed to investing in the product pipeline and the most elite technical talent, all while delivering on our goals of sustained GAAP profitability. GAAP net income was $871 million, representing a 53% margin. First quarter stock-based compensation expense was $[inaudible] and equity-related employer payroll tax expense was $28 million. First quarter GAAP earnings per share was $0.34. First quarter adjusted earnings per share was $0.33. Additionally, our combined revenue growth and adjusted operating margin accelerated to 145% in the first quarter, an 18% increase to our Rule of 40 score from the prior quarter, and our eleventh consecutive quarter of an expanding Rule of 40 score. With our 2026 revenue and adjusted operating income guidance, we are guiding to a Rule of 40 score of 129% for the full year. Turning to our cash flow. In the first quarter, we generated $899 million in cash from operations and $925 million in adjusted free cash flow, representing margins of 55% and 57%, respectively. We ended the quarter with $8 billion in cash, cash equivalents, and short-term U.S. Treasury securities. Now turning to our outlook. For Q2 2026, we expect revenue of between $1.797 billion and $1.801 billion and adjusted income from operations of between $1.063 billion and $1.067 billion. For full year 2026, we are raising our revenue guidance to between $7.65 billion and $7.662 billion. We are raising our U.S. Commercial revenue guidance to in excess of $3.224 billion, representing a growth rate of at least 120%. We are raising our Adjusted Income from Operations guidance to between $4.44 billion and $4.452 billion. We are raising our adjusted free cash flow guidance to between $4.2 billion and $4.4 billion. And we continue to expect GAAP operating income and net income in each quarter of this year. With that, I will turn it over to Alex for a few remarks, and then Ana will kick off the Q&A. Alexander C. Karp: Well, welcome to yet another exciting earnings call. With these numbers, the ones that leap out to everyone are the over 100% growth in the U.S., the Rule of 145, the 85% growth in the U.S., and guiding to 71%, and just the underlying dynamics of that. You would think that the most interesting thing is just the truly n-of-one nature of these numbers. And in fact, it is pretty fascinating, especially to people who doubted that we would get this far. But I think the most important thing about our earnings is it establishes beyond a doubt that while over the history of Palantir Technologies Inc., we focused on things that actually transform the world, the current environment is actually being transformed by the Palantir Technologies Inc. platform. And although there is a wide view out there in the world that AI slop is going to take over the world, our clients, especially lasting primordial infrastructure industries, know this is not the case. They buy our product despite the fact we have 70 salespeople. A normal company of our size would have 7,000. Only seven of our salespeople actually even really sell. We are doing what a normal company would do with 7,000 salespeople with seven people. We are doubling the U.S. We are dominating on the battlefield. Shyam will talk about this later, but the way opposed and in contradistinction to both allies and friends and enemies is being done in our platform from beginning to end across the U.S. The reality that we will be able to drive 100% growth in the U.S. is being driven by the fact that our customers either know or will know that you need actual results. Those results require granularity, specificity, actual relationship to facts. The appearance of software working is not software working. And the slop that is getting a lot of attention is not only dangerous in terms of the hyperbolic rhetoric that it also—like, there will be no jobs because of the slop—nothing will work. We will have a godlike figure in the name of AI, when in fact, what actually does work is a platform built by a motley crew of highly technical people who over twenty years have been maligned for being right about the nature of having to build Foundry, the nature of having to build Apollo, the nature of an FDE, and the demand for this is once in a lifetime. And that demand is actually driving these financials, meaning growing 71% goal for the year. What did we miss? Okay. In any case, I hope you all got that. This is like being on stage. So with that, maybe we will go to questions. But the unique way in which this company is being run, the unique way in which we built the products, the unique way in which we are willing to be non-mimetic. When the whole world said software had to be worthless, we built platforms that worked. When the whole world said you could not extend it with FDEs, we went and built FDEs. When the whole world is saying AI slop without an ontology that allows you to put true statements and truths into the ontology and therefore produce actual results, we stuck to our guns. And what did we get? We got these results. And I think if you just look at the results—how can a company grow 100% in the U.S. with, functionally, a nonexistent sales force, with the same number of people? Our free cash flow this quarter is larger than our revenue a year ago in the same quarter. Think about that. Same company, same people, extended products—it is all being extended. And then look at the impact on the battlefield in the Middle East, on every government institution, on demand of our product, and in U.S. commercial. This is all the result of being right about product, right about execution, and standing in the headwinds of people who are certain they are right—now the new version is AI slop—and proving that they are wrong with our results. This is an incredible quarter, and I am very proud of this. Ana Soro: Aiden G. asks, how does Palantir Technologies Inc. expect to navigate an environment where AI is pressuring software companies' capabilities? Shyam Sankar: Well, thanks, Aiden, for the question. It is a massive tailwind for us. We have always been counter-positioned against this sort of legacy thin software that was built by and executes a playbook that is built around rent extraction and no outcome delivery. We, on the other hand, have been focused entirely on building software that is focused on alpha and not beta. We are not trying to make you the same as every other person. We are trying to figure out what makes you different, how we express your business strategy through the software platforms and products we build. So that part is probably obvious—that counter-positioning—but the other counter-positioning is against AI slop. We are focused on enterprise autonomy, not on dazzling demos. We have, in the ontology, the no-slop zone. The ontology is the body to the AI brains. You cannot actually interact with the enterprise or affect the world; your agents can go nowhere without ontology. And you are seeing that with our customers. In government, we are the platform that you build applications and agents on. In the commercial world, people are replacing legacy software at a lightning-fast pace, as I mentioned in my remarks, and we see that even internally at Palantir Technologies Inc., where we have gotten rid of legacy software like CRM and built it very quickly on top of our platform to a user experience that our users love. Alexander C. Karp: Can I just—almost every single highlighted example of AI that actually is producing results in the U.S. is actually Palantir Technologies Inc. by Palantir Technologies Inc. And one of the ways to pen test what we are saying is just dig into the examples of AI actually transforming an enterprise. Call the client. Talk to them. I am not saying every single one is, but almost every single one is. And it is because the theory of how you do AI and the practice in the enterprise are just radically different. And they look the same to nontechnical people, but they do not look the same to practitioners—whether you are on the battlefield, or whether you are an insurance company, or whether you are a hospital, or whether you are a manufacturer—what they discover is the reality of doing this requires a platform like ontology, and currently executed on top of Foundry with FDEs. And currently, that combination is available from one company, and that is us. Ana Soro: Thank you. Please, please, test. Our next question is from Dan with Wedbush. Dan, please turn on your camera, and then you will receive a prompt to unmute your line. Daniel Ives: Yeah. I mean, you said—yep, thank you. Well, great quarter yet again. My question is, how do we balance between going after government deals and then commercial deals? Because, obviously, you are in a unique position, just like we saw with that deal this quarter. Can you just talk about that balance? Because, obviously, there is more demand than supply in terms of relative in terms of Palantir Technologies Inc. Thanks. Alexander C. Karp: Yeah, and then I will give this to Ryan. The reality of how Palantir Technologies Inc. works is we always prioritize the U.S. warfighters over everything else. And when we believe or know—because of our proximity—that the U.S. warfighter is in danger, we put the whole company against it. And it is not always the way in which one should do this, but it is how we do it. And we have done this from the beginning and we are doing it now. And so in the current context, we take opportunities that look the same from a business perspective, and we 100% prioritize this nation's security over any other variable. Now, that also, interestingly, gives us leverage, because we go to the government and we will—and one thing people do not believe is—we are like, look, this does not work the way you think. Or this kind of execution will not lead to success, and you are actually asking us to take money out of our pocket to do it, which we will do. But we cannot sign up to do something that will not work, that will not advance the warfighter, that will not advance munitions, that will not help this country have better unit economics, while deprioritizing another client. By the way, we tell commercial clients this. I tell commercial clients this all the time. We are highly monogamous in the way we work. We are not trying to make you into a commodity. The only thing we will put above you is U.S. national security. And we are more than willing to do this when it is unpopular or when it is popular. And if you look at the retention and the full alignment inside Palantir Technologies Inc., the benefit of this is we attract and retain people that understand there is a higher value than just running the business as a business. That said, our biggest problem currently in the U.S.—and why I believe we have 100% growth in the U.S.—is that we just cannot meet demand. Again, the advantage here is we can go to commercial and government clients and say, look, this does not make sense. If you want slop, you can go here. If you want old-school software that actually does not work and probably will disappear, there are a lot of names. If you want us, we need to do it in a way that will make sense. And that gives us a lot of leverage. But we are very upfront with people, just like with our customers and just like we are internally. And we are also doing this abroad. One of the reasons why we are intolerant of software and AI or some kind of witchcraft dance you have in some parts of continental Europe is, we have no time for it. We literally have no time or energy for the waste-of-time machine. Probably, I should be on TV explaining to people why the models are actually only useful on a platform, why the use cases platform companies are talking about are actually in Palantir Technologies Inc., why the total cost and token reduction price is exactly what we predicted, why our clients actually are asking, can I have a cheaper model since they seem pretty similar? But we also do not have a lot of time for that. Ryan, would you like to add to this? Ryan Taylor: What we are seeing across our customers, and what is driving the U.S. generally, is those that understand the load-bearing context. In order to apply AI in that context, you need to be able to deploy it with precision, without slop. You see the AIG CEO talking about the agentic underwriting and claims process being coordinated through the ontology. These are all really massive undertakings. We are going deep with our customers, and we are having that level of impact. And that is what really is driving us. Ana Soro: Thank you. Next question is from Mariana with Bank of America. Mariana, please turn on your camera, and you will receive a prompt to unmute your line. Mariana Perez Mora: Afternoon, everyone. Hope you can hear me. I do not know if you are going to be able to see me, but I am going to start as a follow-up. I am going to do three questions today. Number one, when AI started, you had some customers that wanted to do it their way. What is happening right now with the AI labs getting into enterprise? How many customers understand that value, or how many are the niche customers that understand it and are actually advancing faster? But you also have some that are still trying with just Anthropic, Gemini, OpenAI; they all have enterprise solutions now. Alex, you mentioned talent. How easy or hard is it actually to get the right engineers to keep being able to incorporate all that to the outcomes that you are looking for? And the second one on defense, because it is where my heart is always: You got a good callout on Maven. In the presidential budget request, Maven is one of the two pillars for DoD C2, Titan is moving to production, and that is amazing news. But this is an election year. How much of that growth depends on that budget being appropriated, and how much can actually keep growing if we were to see an extended continuing resolution? Alexander C. Karp: The talent question—Palantir Technologies Inc. is famous for having the best talent over a very long period of time. Look, it is a super-competitive environment. The whole world wants to either work at Palantir Technologies Inc. or at a lab. The advantage that we have at Palantir Technologies Inc. is if you come here, you learn how to build something that is truly unique. And quite frankly, if you want to leave Palantir Technologies Inc., you can have any job in the world. And so I think that talent race is going to continue. Being at Palantir Technologies Inc. is a very high-pressure, very unique environment where we need people who are willing to do things that are different than anyone else. And where, although nine-tenths of the world loves us, one-tenth of the world professionally hates us. So someone on your social graph is definitely going to call you up and say, how can you do all this important work in or for the Department of War or other places—even though we have powered every administration basically since our existence, not at the scale, obviously. So that is an ongoing thing. I am pretty confident that we will continue to attract and retain some of the best talent in the world, and we are seeing a ramp-up in that. I am now personally sitting across recruiting. I am particularly interested in neurodivergent people of all kinds—people who are neurodivergent enough that they get up, come to this country, and do important, valuable work. We see a lot of allies who have chosen to come to America and chosen to come to Palantir Technologies Inc. We like that. But it is an ongoing battle. There really are a couple options in the world that make sense. Palantir Technologies Inc. is obviously one of them, and we are very, very unique. I would also say the more we produce these numbers and the more we have actual experience on the battlefield and in enterprise, one of the things we are going to do an increasingly frontal job of doing is: You can join this startup that probably is not going anywhere—everyone on the inside knows venture is kind of not doing well—or you could come to Palantir Technologies Inc. But it is an ongoing, everyday battle. Everybody wants a Palantirian. When we started this, a couple of years ago, I was saying Palantir Technologies Inc. is the most important degree in the world. The problem for us is it is the most important degree in the world—and everyone knows it now. Thanks also because we got fair coverage and because, you know, I mean, we probably are, because of our domination here, somewhat undervalued. But people know that we actually are changing the world, and we are probably somewhat undervalued. So it is a great place to go. On the defense side, I will leave it to Shyam to talk. Shyam Sankar: On the defense side, it has been a very active period. It is not just Maven and Titan. There is also the work that we are doing on production across major weapon systems for the department, and work around the Sputnik moment right now. So there is a lot going on that one should be pretty excited about. The department is pulling as much of that into 2026 as possible. History would suggest, of course, we are going to be in a continuing resolution, because for most of the time since Palantir Technologies Inc. has existed, there has always been a CR. So there are certain things that are outside of our control, but I feel very good that the role we are playing—the stakes are very high. What we are providing is existential to moving the department forward, and we will realize that value. On the AI lab side, the enterprise side here, I think one of the privileged positions we live in is at the limits of what the models can do. One of the challenges for the labs is that all they see are the limitless potential, as opposed to living at the edge of where it translates into economic value. You see that with attempts to build out deploy code—it is essentially, how do I take Palantir Technologies Inc. and try to replicate that. What we do is very unique based on how we have organized ourselves and the tension between FDE and product development. We have these out-of-body experiences: there are at least two labs we can think about where they were talking to different customers that they are working with and how it has transformed X or Y—yeah, it did, in AIP. We did that. Alexander C. Karp: I would just add to that point. The best thing that can happen to this company—and maybe this country—is, of course, they should go out and flirt with all this slop. Mostly they come home to Palantir Technologies Inc. They do not have to all come home to Palantir Technologies Inc. We have limits. But go test it out. Go see how easy it is to make these things work. Great. And then compare what you are delivering to what we have delivered. And you know what? We do not have to have all the market. We are at our limit doing 100% this year, which I am going to drive the company to. And maybe we can do 100% next year in the U.S. That is all we can do. And they can just expose the market to their beautiful, shiny appearances. And we will just expose the market to how we will transform your enterprise. That is how it is going to go down. And by the way, I am always telling people inside the company, everybody wants to be you. You just may not know it. They are all trying Duploico, Stoico, Disco. It is because, at the end of the day, they need to have growth with profit. But you cannot have profit if you are not changing the dynamics of the partner you work with—meaning your customer. It is downstream from the value you create. That is how Palantir Technologies Inc. is. We are very comfortable in that zone. Now, I do think we are going to end up with a different term for software. You cannot lump what we are doing into “software.” We are really providing infrastructure and installation of AI infrastructure. If your company is largely running around and offering steak dinners with something that someone can hack and rebuild in a week, yes, you are going to have a huge problem. Business models that do not make sense are under huge pressure. And that is one of the reasons we are at the forefront—can you believe we are at the forefront of almost every discussion in the world? And it is simply because we are powering almost everything that works. Not everything—there are some other great companies out there. Many of them are not well known, and we should help publicize them—but we are at the forefront. And that is what these numbers show. You do not have to believe us. Believe your non-lying eyes. Ana Soro: Thank you. Alex, as always, we have a lot of individual investors on the line. Is there anything you would like to say before we end the call? Alexander C. Karp: Well, to individual investors and Palantirians who are also individual investors, being on the front line of important things is painful. You get yelled at occasionally. Many of the people yelling at you have no clue what they are saying. Some of the people do have a clue what they are saying and just disagree with the West being strong and more efficient and more moral and having better unit economics. We value your support, and we value your defense of us. We are defending you every day, and that is in great part what drives these results. And we are having some fun doing it too, just so you know. And hopefully, you will have some fun. Thank you for your support. And we will see you next quarter. Ana Soro: Thank you. That concludes Q&A for today's call.
Operator: Good afternoon. My name is Krista and I will be your conference operator today. I would like to welcome everyone to Paramount Skydance Corporation Class B Common Stock's First Quarter 2026 Earnings Conference Call. At this time, all lines have been muted to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To ask a question, please press star followed by the number 1 on your telephone keypad. To withdraw your question, please press star 1 again. I would now like to turn the call over to Kevin Creighton, Paramount Skydance Corporation Class B Common Stock's EVP of Corporate Finance and Investor Relations. You may now begin your conference call. Kevin Creighton: Good afternoon and thank you for taking the time to join us for the Paramount Skydance Corporation Class B Common Stock Q1 2026 earnings call. I am Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer, David Ellison, our Chief Financial Officer, Dennis Cinelli, and our Chief Strategy and Operating Officer, Andrew Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainties. Our remarks will also include non-GAAP financial measures. Reconciliations of these measures can be found in our earnings letter or in our trending schedules which contain supplemental information. These can be found on our Investor Relations website. I will now turn it over to David for a few brief remarks before we take analyst questions. David Ellison: Good afternoon, everyone. As you have seen in our first quarter results and most recent shareholder letter, we are off to a strong start in our first full year at Paramount Skydance Corporation Class B Common Stock. The progress we have made in just nine months is a testament to the amazing team we have assembled that has worked tirelessly and with great conviction to deliver on all areas of our business. We are executing deliberately against our priorities and seeing tangible results: attracting top creative talent, nearly doubling our film slate, delivering shows audiences love, and greenlighting dozens of new and returning series while achieving our financial goals. At the same time, we are transforming how we operate, unifying platforms, data, and workflows, and embedding advanced technology to drive efficiency, better serve our partners, and elevate the overall consumer experience. Across the business, we are getting things done, and it is translating into real momentum. As a storytelling company, our top priority is and always will be delivering great films and television series from the world’s leading creators that resonate with broad global audiences. Recent highlights include Scream 7, which became the highest-grossing installment in the franchise’s 30-year history, Landman, now the most-watched series in Paramount Plus history, and the continued strength of CBS, which has 13 of the top 20 primetime series including all four of the top new series, an achievement no broadcast network has matched since the early 1990s. On streaming and sports, engagement remained strong, with more than 10 million households watching over 100 million hours of UFC programming on Paramount Plus, and CBS Sports delivering the most-watched final round of The Masters in over a decade. These are just a few examples of the progress and growth taking place companywide. We are also making meaningful strides improving our products to deliver more dynamic, personalized experiences and superior monetization. New features such as enhanced mobile experiences, short-form video, and more advanced recommendations are helping us better serve consumers. We are leveraging AI-powered capabilities across the businesses, including our agentic data warehouse and Precision Plus, our targeting and optimization platform, to move faster and operate with greater effectiveness in support of our advertising partners. While there is still significant work ahead, we remain confident in our strategy and the trajectory we are on. Finally, we continue to make steady progress towards completing the Warner Bros. Discovery transaction, which we believe will accelerate our transformation, strengthen our competitive position, and enhance our ability to help shape the next era of entertainment. To date, we have satisfied our U.S. HSR obligations and there are no statutory impediments remaining, and we continue to advance through European and other international regulatory approvals, several of which have already been secured. Earlier in April, we announced a broad syndication of the PIPE equity commitment to strategic investors, underscoring continued investor confidence, secured $10 billion in permanent financing, and syndicated the remaining $49 billion of our bridge to a group of leading banks and institutional lenders. Additionally, on April 23, WBD shareholders voted to approve the transaction. We are pleased with the momentum and will continue to take the necessary steps to bring this deal to completion. At every stage, we remain guided by our strong conviction that the combination of these two iconic companies and their extraordinary teams will create a leading global media and entertainment company, powered by storytelling and accelerated by technology, that strengthens competition, better serves the creative community, and delivers even more compelling stories to audiences worldwide. We are excited for all that is ahead and look forward to the opportunities it will create. And with that, I will turn it back over to Kevin for your questions. Kevin Creighton: Thanks, David. Just a quick note before we open the line: given the pending transaction for WBD, we will not be taking questions on the deal today beyond what we wrote in the shareholder letter. We will now open the call for questions. Krista, please open the line. Operator: Thank you. For any additional questions, please re-queue. Your first question comes from Sean Diffely with Morgan Stanley. Please go ahead. Sean Diffely: Great, thanks very much. I was hoping you could comment on business transformation early learnings as you converge your tech stacks between Paramount Plus and Pluto. Any things that you could apply to a larger asset base? And then broadly, how you see AI transforming the business? You mentioned on the ad tech front, but anything else that you think is notable to call out? David Ellison: Yes, absolutely. On early learnings, what I would highlight is our ability to execute and move quickly. We are on track, as discussed previously, to consolidate our three streaming services into one unified platform by the middle of this year. Those learnings will be crucial as we progress. We have had strong execution on cost saves and efficiencies and have been delivering against our plan. With respect to the pending transaction, as Kevin said, we are going to stay away from specifics while the process is ongoing. I will turn it over to Andrew to add more on the product side. Andrew Gordon: As we integrate BET Plus, Pluto, and Paramount Plus into one tech stack, it is going to accelerate our ability to do the same upon closing with WBD. When you see the consumer product that comes out this summer, we think you will be pleased with how they function together and create a better experience both for free consumers in the FAST channel business of Pluto and for the paid subscription tiers of Paramount Plus, both ad-supported and ad-free. We remain on track for convergence, which has significant benefits across personalization and recommendations. On the front end, we are modernizing the consumer-facing technology to create more dynamic, personalized experiences. As of April, you can see short-form video clips surfacing trailers, sports highlights, and library content in a curated, personalized feed. We are working on enhanced personalization across discovery, including AI-driven artwork, and building other mobile-optimized experiences like live stats for live sports, all designed to deepen engagement across the platform. This summer, Pluto is getting the most significant update since the inception of the platform. Across our tech and product org, approximately 80% of our engineering organization is using code-assisted technology, which is driving meaningful productivity gains and cutting approval times by more than half. These investments accelerate how we work across the business, support our long-term DTC growth, and are foundational to where we are taking the business. Dennis Cinelli: Around AI transformation, we are spinning up pods to pursue AI-based workflows in the back office—finance, HR, and operational functions. We are enabling these both on the Paramount Skydance Corporation Class B Common Stock side and, we believe, setting ourselves up for the combination, to drive meaningful efficiencies. That will benefit us today and in the future as well. One more point on Oracle Fusion, our ERP system: we achieved a major milestone in the first quarter, with the remainder of the transformation to the Oracle Fusion system for Paramount Skydance Corporation Class B Common Stock standalone targeted by early 2027. That puts us in a much better spot as part of closing with Warner Bros. Discovery as well. David Ellison: Great. Thanks, Sean. We appreciate the question. Kevin Creighton: Krista, next question, please. Operator: Your next question comes from the line of Jessica Reif Cohen with Bank of America Securities. Please go ahead. Jessica Reif Cohen: With WBD, you will undoubtedly have some of the best industry assets and libraries. But you really do need to integrate and execute. Are there any changes in how you are thinking about allocating capital or management attention as you integrate for the second time in two years? And then on films, you seem committed to having 30 films once you combine. Why that many, and how do you think about the marketing and distribution needs? What will it do to elevate Paramount Skydance Corporation Class B Common Stock and the combined company? Kevin Creighton: Thanks, Jessica. Before we jump in, we want to focus most of the call on our results for the quarter and the outlook for the business. With that, I will kick it over to David. David Ellison: Thanks, Jessica. Zooming out, we view our pending acquisition of Warner Bros. Discovery as a powerful accelerant to our strategy. It expands reach, enhances our ability to create the world’s most compelling stories and experiences, and positions us to build a next-generation media and technology company. Across three pillars: production, DTC, and linear. On production, we will be the premier destination for leading creative voices. We are firmly committed to 30 theatrical films per year. We have 15 films on the calendar to release this year, up from eight last year, nearly doubling Paramount’s output. WBD also has 15 films on its calendar this year, so together the companies are already making 30 films to date, supported by beloved franchises like Harry Potter, Top Gun, Star Trek, Looney Tunes, Game of Thrones, and Yellowstone. On DTC, the combination creates a scaled competitor, with over 200 million DTC subscribers across more than 100 countries, positioning us to compete with the leading streaming services. On linear, we would have a presence in over 200 countries and a portfolio of cable and free-to-air networks, such as CBS, CNN, TBS, TNT, and Food Network. Operationally, we are pleased with our execution at Paramount Skydance Corporation Class B Common Stock and believe we can deliver at WBD as well. Strategically, we could not be more excited. We remain on track to complete by September. With respect, we need to stay away from further WBD specifics and focus on the company we are operating today. Operator: Your next question comes from the line of Robert Fishman with MoffettNathanson. Please go ahead. Robert Fishman: Hi, good afternoon. Is the current plan to allocate more of your overall company programming budget toward higher-quality content like NFL, UFC, and blockbuster Paramount movies, or do you prefer to spread your budget out to a more volume-based approach going forward? And then on a related note, after launching short videos and clips in Paramount Plus, is the goal to compete for short-form ad dollars with YouTube and TikTok, or is it primarily to drive engagement and extend the premium ad dollars you already get from your networks? David Ellison: I will take the first half. A core theme for us is that quality is the best business plan—aim high and do not stop working until you get there. In today’s competitive landscape, that is essential creatively. CBS Sports has focused on big events that matter, delivering a record-setting NFL season, and one of the most successful Masters finals. We emphasize quality and aiming high across our film and television studios as well as streaming. At the same time, we have increased our content investment this year. We have roughly doubled the output of the film studio year-over-year and nearly doubled the output of original series greenlit in DTC. We believe we can maintain the quality bar while scaling, which is essential to our growth goals. Dennis Cinelli: Think about the content portfolio across our segments. In TV Media, the CBS team is managing linear declines by rightsizing programming while hitting creatively with a strong primetime lineup—13 of the top 20 shows in primetime. In DTC, this is a multiyear journey to build a portfolio that drives growth and engagement, and you are seeing that come through in Q1: Paramount Plus revenue was up 17% through a combination of delivering on the January price increase and healthy underlying subscriber growth. We added nearly 2 million underlying subscribers in the quarter. In the studio, overall studio revenue was up 11% in Q1, driven by films like Scream and continued progress building our third-party TV studio. We are spending a lot of time on content ROI analysis to ensure every investment is underwritten with rigor. On clips, we know audiences watch on multiple screens. A vertical short-form product deepens engagement, keeps people more involved, and increases time spent with our content. We view this as a beta test, but early engagement is high, with viewers moving from clips into news, sports, and entertainment. We are excited about what that means for the future, and there is incredible momentum as we take a test-and-learn, fast-iteration approach. Metrics are encouraging, but it is still early days. Operator: Your next question comes from the line of Richard Greenfield with LightShed Partners. Please go ahead. Richard Greenfield: Thanks for taking the question. David, you have very large D2C ambitions. As you think about your engagement goals for Paramount Plus in 2026 and 2027, given the size of investments since taking control, how fast can you move the goalposts on engagement, and how does the UI/tech stack rebuild this summer play into that step-change? And what is your view on channel stores, given Paramount Plus has used them aggressively historically—use them or not long term? David Ellison: Great questions. In summary, it is a combination of increased content investments and increased tech investments. To achieve our streaming goals, we need more content on platform. In 2026, we have new seasons of The Agency, Star Trek, Lioness, 1923: The Mob, and Tulsa King. Dutton Ranch is coming this summer from Taylor Sheridan. On sports, UFC is year-round; we have the NFL, March Madness, UEFA Champions League, and a new partnership with the WNBA. We have also greenlit significant new series from our studios, such as Discretion with Nicole Kidman and Elle Fanning, Nine Twelve with Jeremy Strong, and Fear Not with Anne Hathaway. On tech, we are on track to accomplish convergence by midyear. You will see significant improvements once we roll that out, but that gets us to the starting line of becoming best-in-class. We are hiring engineering and AI talent to compete with industry leaders; it is the combination of art and technology that drives growth, engagement, and scaled business metrics. The pending transaction serves as an accelerant toward that goal. On channel stores, it is case by case. We evaluate partnerships looking for win-wins across the board and will continue with that philosophy. Andrew Gordon: On engagement, we are focused on high-quality, high-calorie engagement. UFC viewers, for example, are averaging 15 years younger and staying on the platform longer. On Pluto, we are shifting to VOD, with VOD up 60% per user. These are higher-quality engagement metrics that help monetization. As we continue to invest in ads monetization, fill rates were up in Paramount Plus and Pluto. We are pursuing engagement that translates into better monetization. Operator: Next question comes from the line of Steven Cahall with Wells Fargo. Please go ahead. Steven Cahall: Thank you. A couple of questions on DTC. Paramount Plus grew around 17% in the quarter, strong for sure. I know it slowed a little the last couple of quarters even with the addition of UFC. Your guidance has revenue growth second-half weighted. How should we think about the underlying drivers of growth at Paramount Plus and the acceleration in the back half? And then on DTC EBITDA, I think there was a programming amortization benefit, maybe a change in accounting from Skydance. How does that impact adjusted EBITDA going forward, and is there any comparability we should be aware of? Dennis Cinelli: For context on the quarter, we came in at the high end on revenue and beat on adjusted EBITDA. Expenses were a bit lighter than planned, primarily around slower pacing of hiring and some timing shifts in content. We generally view overall expenses for the year, including DTC, as on track with expectations. On DTC EBITDA, you will see some margin pressure in the back half as the slate launches in Q3 and Q4. On Paramount Plus, we feel good about the trajectory: revenue up 17% year over year, driven by a 14% increase in ARPU from the January price increase and continued improvement in the subscriber mix. Headline net adds were approximately 700 thousand, but underneath that we added about 2 million underlying subscribers and exited a little over 1 million international hard-bundle subscribers; for context, those hard bundles have ARPU of less than $1, so they are uneconomic. Growth for the rest of the year will be driven by healthy underlying subscriber adds as the content slate fills in, as well as continued improvement in ad monetization. On the content amortization benefit, as noted, there was some timing in the quarter and we do have benefit from the Skydance transaction that flows through this year and steps down next year. We are not getting into specifics, but we recast the financials and you will see that in the recast. We will call out anything material each quarter. Operator: Your next question comes from the line of Peter Supino with Wolfe Research. Please go ahead. Peter Supino: Good afternoon. Can you talk about the programming cost environment generally? You and others seem focused on targeted but increasingly aggressive investing—are you seeing that in unit programming costs? And on ad sales, now that you have owned the assets for almost a year, any fresh ideas about how Paramount Skydance Corporation Class B Common Stock should be selling advertising, especially in DTC? Dennis Cinelli: On programming, we are competitive through our greenlight process. In TV Media, especially at CBS, the team is managing linear decline by rightsizing programming while delivering creatively with the slate. Across the studio, we are not seeing notable pressure on budgets or creative costs that we would call out as a trend. David Ellison: On advertising, particularly ad tech, this is a major focus and opportunity we identified early on. We are retooling go-to-market, consolidating national sales into a single client-centric structure under unified leadership, and have brought in new talent from leading digital platforms like Amazon, Google, Hulu, and Roku. We are making platform investments. On ad tech, Precision Plus—our AI-powered ad product combining first- and third-party data—is generating positive early feedback and driving performance above benchmarks. Our format innovation pod is creating new ad experiences, including streaming fixed units and sports DAI, and we are scaling for UFC. We are also using AI-driven QA. We just completed our first upfront under the new structure and feedback has been incredibly positive. Momentum is building, there is work to do, but we are pleased with the acceleration. Dennis Cinelli: In terms of results, Q1 overall ads declined 3%, but DTC ad revenue returned to growth and improved versus Q4. For the rest of the year, we expect total company ad revenue to return to growth in the back half, driven by DTC accelerating and more than offsetting declines in TV Media. Operator: We have time for one more question, and that question comes from Michael Morris with Guggenheim Securities. Please go ahead. Michael Morris: Thank you. First, can you share more detail on UFC and how it has performed in the first several months now that you have had about 10 events? How is it benefiting the broader business, and are there more things to come this year as you use that property? Second, in the letter, you noted several studio titles in production that will be released on Netflix and on Prime Video. Why is it important for the studio to sell content to services that are also competitors for engagement and subscriptions? David Ellison: We could not be more pleased with our seven-year UFC partnership; it has exceeded our early expectations across the board. More than 10 million households have watched UFC programming on Paramount Plus, with over 100 million hours viewed. Average UFC viewership across our platform is more than 15 times the average pay-per-view event over the past two years. New UFC subscribers are, on average, 15 years younger than the average Paramount Plus viewer and they come in for UFC and then engage with our broader offering, including series like South Park, spending more time overall. On CBS, main fight cards like UFC 326 and 327 averaged 2.8 million viewers, nearly 50% higher than ABC’s NBA primetime game on the same night. Advertising demand has exceeded expectations and meaningfully contributed to Q1 advertising. We are under a year into a seven-year journey and we are very excited about how UFC is driving the business. On selling to third parties, we do not believe in a one-size-fits-all approach. Content licensing is an important part of our business and will continue to be. Some series should remain exclusive to our owned-and-operated platforms; others make sense to sell to third parties, and often those series see increased viewership when they later return to our platforms. On originals, our goal is to be the number one home for top talent. Being able to place projects on our platforms or sell to third parties when appropriate makes us a more desirable home for creators. We own those shows and they generate revenue for us. We evaluate these decisions case by case and that approach has served us well. Operator: Thank you. I will now turn the call back over to Kevin for closing comments. Kevin Creighton: Thanks, Krista, and thank you to everyone for taking the time to join today. Andrew Gordon: We appreciate the questions, and please reach out if you have any follow-ups. Dennis Cinelli: Thanks all. Operator: This concludes today’s conference call. Thank you all for joining and you may now disconnect.
Operator: Good afternoon. My name is Dylan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Inspire Medical Systems, Inc. First Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I will now hand the conference over to your first speaker, Ezgi Yagci, the Vice President of Investor Relations at Inspire Medical Systems, Inc. You may begin. Ezgi Yagci: Thank you, Dylan, and thank you all for participating in today’s call. Joining me are Timothy P. Herbert, Chairman and Chief Executive Officer, and Matthew Osberg, Chief Financial Officer. Earlier today, we released financial results for the three months ended 03/31/2026. A copy of the press release is available on our website. On this call, management will make forward-looking statements within the meaning of the federal securities laws. All forward-looking statements, without limitation, those relating to our operations, financial results and financial condition, investments in our business, full year 2026 financial and operational outlook, and changes in market access and different aspects of coding or reimbursement, are based upon our current estimates and various assumptions. Forward-looking statements involve material risks and uncertainties that could cause results or events to materially differ. Accordingly, you should not place undue reliance on these statements. For a discussion of these risks and uncertainties, please see our filings with the Securities and Exchange Commission including our periodic reports on Forms 10-K and 10-Q, as well as the Form 10-Q, which we filed this afternoon with the SEC for the quarter ended 03/31/2026. Inspire Medical Systems, Inc. disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and speaks only as of the live broadcast today, 05/04/2026. With that, it is my pleasure to turn the call over to Timothy P. Herbert. Tim? Timothy P. Herbert: Thank you, Ezgi, and thanks, everyone, for joining us today. On the call today, I will start by providing some key takeaways of our first quarter results, including an update on coding and reimbursement. I will also provide some insight into our revised outlook for the year and will then turn it over to Matthew, who will provide additional insights on our first quarter and full year financials. We will then open up the call for questions. First, I want to highlight how pleased we are with the team’s execution in the first quarter. Despite challenges related to coding and reimbursement uncertainty, as well as the WISER program, the organization delivered revenue growth and improved adjusted operating income and operating cash flow compared to the prior year period. In this environment, it is critical that we focus on the factors within our control. Our first quarter results demonstrate this as well as our focus on prioritizing revenue-generating activities and maintaining disciplined cost management while continuing to make targeted investments to support long-term growth. We believe these actions position the company well both in the near and long term. As we progressed through the first quarter, we saw many developments with respect to coding and reimbursement, and we are diligently working to establish a consistent methodology to coding of the Inspire V procedure in the short term. The long-term solution is to establish a new CPT code for a single-lead Inspire system. This is a long process, and if approved, we expect this new CPT code to become effective on January 1, 2028. Therefore, we are establishing short-term remedies for the various payers to bridge until the new CPT code is in place. For centers concerned with Inspire V reimbursement, we have inventory of Inspire IV, which has proven itself to be an extremely effective therapy with clear coding and reimbursement. As for coding for Inspire V systems, we are working with physicians, centers, and payers to establish clear and consistent coding and reimbursement guidelines, and there was progress in the first quarter. For Medicare patients, the Centers for Medicare & Medicaid Services, or CMS, announced the creation of a C-code to be used with Inspire V procedures, and the Medicare Administrative Contractors, or MACs, are beginning to incorporate the C-code into their local policies. This provides a reliable solution for hospitals and ambulatory surgical centers and, importantly, the facility payment is equal to the Inspire IV CPT code 64582. Staying with Medicare: for physicians, currently, the MACs list the Inspire IV CPT code 64582 without the use of a modifier. As such, the majority of Medicare cases this year have been billed without the use of a modifier, and we will continue to monitor this throughout the year. At this point, the commercial payers continue to list CPT code 64568 for Inspire V procedures. There is guidance provided by societies, including a nonbinding newsletter from the American Hospital Association recommending the use of an unlisted CPT code, specifically 64999. However, the use of an unlisted code requires manual reviews and additional support from centers. Because of this, many centers and payers may be reluctant to adopt the use of this unlisted code. The good news for commercial payers is each case is prior authorized, meaning the billing code is approved in the prior authorization before the procedure, significantly reducing payment uncertainty for the center. Medicare Advantage is managed by commercial payers; we recommend consistent coding practices as defined by the payer, and Medicare Advantage patients are also prior authorized. Although challenging, there has been progress in coding and reimbursement, and we have seen initial billing practices being established by physicians and centers in response to the changes in coding. However, we recognize that significant uncertainty remains, and we will continue to support our customers as they navigate the path forward. This coding uncertainty has adversely impacted the number of patients in the pipeline, including the number of prior authorizations submitted to commercial payers as we moved through the first quarter. We expect this trend to reverse and improve in the remainder of the year as we continue to support prior authorizations and build confidence in the coding processes and guidelines. To further support patient access to therapy, we are increasing our assistance to customers by providing additional proactive education relating to prior authorization and billing processes, and we are adding to our field reimbursement team. Our goal is to provide as much clarity to our customers as possible to mitigate disruptions to patient access to care. Switching to the WISER program, WISER is a government initiative requiring AI-reviewed prior authorization for Medicare cases in six pilot states, and the program kicked off in 2026. During the first quarter, the WISER program created prior authorization delays for traditional Medicare procedures in the six WISER states, resulting in a headwind to our first quarter revenue. As we continue to gain experience working with the new systems in these states, we anticipate the headwinds to abate in the remainder of the year. With the ongoing coding and reimbursement challenges and the WISER program impact, we are revising our full year revenue outlook. In light of our lower revenue outlook and as we demonstrated in the first quarter, we will continue to be disciplined with our spending, and focus on prioritizing revenue-generating activities while still making progress on long-term growth investments. In addition to enhancing our support to customers for proactive education and assistance with prior authorization and billing processes, we are also prioritizing projects to drive an improved patient care pathway, enhanced marketing effectiveness, improved digital product experience, continued R&D for new product development, and operational efficiencies. We believe that these projects can begin to deliver returns in 2026 and accelerate in 2027. We continue to remain focused on our commitment to put the patient first and deliver strong patient outcomes. We continue to believe that there is a large untreated population of people struggling with sleep apnea that can benefit from Inspire therapy, and we continue to be encouraged by the strong adoption of Inspire V and the positive data we continue to collect. At the upcoming SLEEP conference in Baltimore in June, we will be presenting the full results from the Inspire V trial conducted in Singapore. While we have previewed some of the early data points, including inspiratory overlap, this is the first time we will be showing the full trial results, including the ability of the new accelerometer-based sensing technology and the safety and efficacy of the Inspire V implant. Additionally, the Inspire ADHERE trial is now complete. The data from the 5 thousand-patient cohort will be presented at the SLEEP conference. This is a real-world cohort demonstrating the effectiveness of Inspire as it is delivered today and builds upon our previous safety and efficacy trials. We will further highlight the effects of Inspire therapy on cardiovascular outcomes utilizing a large claims database to retrospectively examine incident cases of cardiovascular disease after Inspire implantation as compared to a matched group of patients receiving CPAP therapy and those not receiving treatment. At the SLEEP conference, we will present this study on the cardiovascular outcomes along with two other independent studies using two different claims databases to compare the use of various claims databases in the demonstration of improved cardiovascular and respiratory outcomes associated with Inspire therapy. In addition, a third independent study from Virginia Commonwealth University was just published in a peer-reviewed journal. The data demonstrated that the Inspire patient cohort had significantly lower odds of stroke, myocardial infarction, atrial fibrillation, acute heart failure, acute respiratory failure, and hospitalization, to name a few, with at least two years of follow-up. These strong results suggest Inspire provides systemic cardiovascular and respiratory health benefits and reduces health care burden compared to CPAP. We expect further studies to support these findings. We are happy to report that the PREDICTOR manuscript has been accepted by a major medical journal, and we look forward to the publication in the coming weeks. As you are aware, PREDICTOR is the 600-patient study we conducted to demonstrate alternative screening options to replace the drug-induced sleep endoscopy, or DISE, procedure for a large subset of eligible patients, improving the patient experience and reducing the timeline to implant. Last but not least, last month, we published our 2025 patient experience report. Highlighted in the report is a continued improvement in our revision and explant rates, which were 1.7% and less than 1%, respectively, for full year 2024. In summary, we remain focused on providing the best therapy solution for patients and helping our customers navigate what we believe will be a temporary market disruption related to coding and reimbursement and the WISER program. We are actively addressing the challenges posed by this disruption, and we remain excited about our product and the market opportunity to improve the lives of our patients as we have already done for over 135 thousand patients since our inception. We will continue to take action to position the company for long-term profitable growth, and we believe that we have the right strategies in place to drive long-term stakeholder value. I will now turn the call over to Matthew for his review of our financial performance. Matthew Osberg: Thank you, Tim, and good afternoon, everyone. First, I will begin with a review of the first quarter results and then follow with commentary on our outlook for the remainder of 2026. Revenue increased 1.6% to $204.6 million, primarily driven by increased market penetration. As Tim mentioned, in the first quarter, we experienced disruption related to coding and reimbursement challenges and the WISER program, and we estimate that these items adversely impacted revenue by approximately $20 million. Operating margin and adjusted operating margin improved, primarily driven by gross profit expansion due to a higher sales mix of Inspire V systems. The effective tax rate increased to 571.2%, primarily driven by tax shortfalls related to our stock-based compensation, which were created by a decline in our stock price at award vesting date compared to the stock price at grant date. Additionally, in the prior year period, we maintained a full valuation allowance against federal and state deferred tax assets. The adjusted effective tax rate, which removes the impact of stock-based compensation, was 25.7%. As we mentioned on our fourth quarter call, as we are in a situation where our pretax income is a relatively small base, certain discrete tax charges can have a material impact on our tax rate. Due to the fact that we have a significant amount of stock-based compensation outstanding, and due to the volatility of our stock price, the tax impact of stock-based compensation on our effective tax rate can be material and could have significant variability from year to year. We expect the tax impact from stock-based compensation will be concentrated in the first quarter of the year, as that is when the majority of our vesting of our RSUs and PSUs occur. Diluted EPS was a loss of $0.39, and adjusted diluted EPS was $0.10 for the quarter. Our adjusted EBITDA margin, which excludes the impact of stock-based compensation, improved 100 basis points to 17.5%. Turning to cash flow and the balance sheet, operating cash flow was $12.8 million for the quarter, an improvement of $20 million compared to the first quarter of the prior year, primarily driven by improved working capital, partially offset by a higher net loss in the current period. Our balance sheet remains strong with no debt and $400 million in cash and investments at the end of the quarter. Our strong cash position allows us to remain focused on making investments to drive profitable growth. We ended the quarter with 284 U.S. territories and 288 U.S. field clinical representatives. We are being strategic in our approach to territory management and optimizing our model through targeted territory consolidation. We hired 13 field clinical reps in the quarter and are now at our goal of one territory manager to one field clinical rep. Turning now to our 2026 outlook, we are revising our full year revenue outlook to be in the range of $825 million to $875 million. This range incorporates updated assumptions of the expected impact on our full year results from continued coding and reimbursement uncertainty and the WISER program. As I mentioned, our first quarter revenue was adversely impacted by coding and reimbursement challenges and the WISER program by an estimated $20 million. We expect the adverse impact of these items to increase to approximately $40 million to $50 million in the second quarter as we see a more dramatic impact on our second quarter revenue. Changes in prior authorization rates typically impact revenue on a one-quarter lag. We expect the adverse revenue impact from these items to improve from the second quarter as we progress into the third and fourth quarters, as our customers receive more education and build experience with coding and billing processes, and as we continue to gain experience working with the WISER state systems. For the full year, we are currently estimating the total impact of these items to be in a range of $120 million to $150 million. Due to the nature of the items noted, the estimated impact of these factors on our first quarter results and full year outlook reflect high-level assumptions based on currently available data and incorporate inherent uncertainty related to quantifying how each of these items impacts customers, physicians, and patients. The ultimate impact of these items may differ materially from current expectations based on how quickly coding and reimbursement clarity evolves over the fiscal year. Although we believe there is a long-term benefit to our market from GLP-1s as prospective patients lose weight and become eligible for Inspire therapy, we also believe that in the short term, our revenue is being adversely impacted by their increasing prevalence and adoption. Our ability to estimate the potential impact of GLP-1 therapies on revenue is subject to meaningful uncertainty and relies on limited and evolving data regarding patient behavior, physician prescribing patterns, referral dynamics, and payer coverage decisions, and may not fully capture developments in longer-term treatment options for obstructive sleep apnea. In addition to revising our revenue outlook, we are also revising our outlook on profitability metrics for the year. We now expect adjusted operating margin in the range of 2% to 4%, diluted EPS in the range of $0.07 to $0.62, and adjusted diluted EPS in the range of $0.75 to $1.25. The changes to these metrics primarily represent the impact of the lower revenue outlook, partially offset by continued actions to reduce operating expenses. Our updated outlook assumes an effective tax rate of 65% to 70%, and an adjusted effective tax rate of 27% to 29%. The increase in the effective tax rates as compared to our previous outlook primarily relates to lower expected pretax income. Our outlook assumes estimated weighted average diluted shares outstanding of approximately 29.4 million and capital expenditures between $40 million and $45 million. Looking at the cadence of the year, we are forecasting a 9% to 11% year-over-year revenue decline in 2026 due to the expected ongoing impact of coding and reimbursement uncertainty, the impact of the WISER program, and lower expected commercial procedures driven by a reduction in prior authorizations in the first quarter. Additionally, we expect an adjusted operating loss in the second quarter of $10 million to $15 million, primarily due to our lower revenue expectation and sequentially higher operating expenses as compared to the first quarter, primarily due to higher stock-based compensation expense. We expect sequential improvement from Q2 in both our revenue and adjusted operating income in the back half of the year, with the fourth quarter having the highest levels of the year. As we demonstrated in the first quarter, we will continue to be disciplined with our spending and focus on prioritizing revenue-generating activities while still making investments in long-term growth. In closing, despite the dynamic reimbursement landscape, our team remains committed to providing strong patient outcomes and supporting our customers. As we look ahead to the remainder of 2026, we will continue to emphasize execution and remain focused on what we can control in order to drive long-term shareholder value. This concludes our prepared remarks. Tim, you may now open the line for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press 1-1 on your telephone. To withdraw your question, please press 1-1 again. Due to the essence of time, we ask that you please limit your questions to no more than one. Please stand by while we compile the Q&A roster. Our first question comes from the line of Robert Justin Marcus from J.P. Morgan. Please go ahead. Analyst: This is Lily on for Robbie. Maybe just starting with the guidance, I was hoping you could walk through your thinking behind the updated range. I think what we are all trying to figure out is how de-risked the guide is now. Can you walk through the assumptions that you are making around reimbursement and the confusion around the reimbursement and what that looks like the rest of the year? Why are you confident that this is now the right range and it is one that you can not just meet but hopefully exceed? Thanks so much. Timothy P. Herbert: Thank you very much, Lily, and thanks for the question. I would just highlight a little bit on the reimbursement, and each center looks at it a little bit differently. Our goal is to really focus with centers on providing education and a methodology that they are comfortable with to consistently start coding and billing for patients, both Medicare and commercial. Our assumption is that will improve as we progress through the year. But we know, as Matthew mentioned, there is a one-quarter lag in prior authorization. As the coding uncertainty unfolded in the beginning of the year, a lot of centers put on the brakes to make sure they understood it before they proceeded forward with prior authorization. Our core assumption is that we are going to be able to build that confidence as we move through the quarter and improve prior authorizations during the second quarter and beyond, and that will show a benefit in implants and revenue as we progress through the year. Matthew Osberg: Hey, Lily, maybe following up on what Tim said. As I pointed out, we saw a $20 million impact in Q1. We are estimating that accelerates and gets to $40 million to $50 million in Q2. If you look at the range for the year and back into what Q3 and Q4 might be, you can still see there are fairly significant impacts in the third and fourth quarters, although they are improving from the impact that we had in Q2. That risk is abating a bit from the second quarter. Operator: Thank you. Our next question comes from the line of Jonathan David Block from Stifel. Please go ahead. Jonathan David Block: I will keep it to one question. In terms of the $120 million to $150 million impact for the year from reimbursement headwinds, where do those revenues go? What can the company do to ensure they stay hot leads at some point and do not leave, whether that is coming back in 2027 or even beyond? And then, to push on the improvement into the back part of the year, if there is this one-quarter lag from prior authorization to getting through the funnel, are you starting to see anything thaw? It is early May. You are anticipating some sort of improvement 2Q to 3Q. Are there any green shoots starting to take place? Timothy P. Herbert: Absolutely, great point on the hot leads. We make sure we work with our centers to keep track of the patients. We work with them on their prior authorizations and help them get those submissions in, and we also help patients make that first appointment, trying to make sure we stay in contact with all these patients to give them the opportunity to receive Inspire therapy. We know they are there and still require treatment. As far as seeing some improvements, with Medicare and the changes we have there with the new C-code and that being incorporated into the MAC local coverage determinations, we are starting to see a little headway, and that is important, as well as surgeons having experience billing the Inspire IV code without modification. The more experience we get there, the more it will build on itself, and even if there is a modifier down the road, we would minimize any negative impact. Secondly, as we gain experience with the WISER cases in those six states, we are improving the prior authorization process, and that will continue to improve as we get to the second, third, and fourth quarters. Operator: Thank you. Our next question comes from the line of Adam Carl Maeder from Piper Sandler. Please go ahead. Adam Carl Maeder: Hi, good afternoon. Thank you for taking the question. On the revised outlook, I just wanted to confirm that the guidance cut is entirely related to the reimbursement coding uncertainty plus headwind from WISER. Is that the case? GLP-1s did come up toward the end of the prepared remarks. Are you baking in a little bit more conservatism for those, or are you seeing anything from a competitive standpoint? Would love to flesh out those different components. Matthew Osberg: Hey, Adam. If you do the math from where we started at the beginning of the year on our outlook and then what is implied now, and you say the $120 million to $150 million is due to some of the reimbursement headwinds, there is a gap. It is a smaller gap, but there is a gap. That is coming from a number of different things. Some of those are hard to put your finger on. We do think we are being impacted by GLP-1s, but it is harder to quantify what is driving some of that other impact. We definitely think the main part of the revenue takedown in our outlook is due to the reimbursement headwinds. Operator: Thank you. Our next question comes from the line of Christopher Thomas Pasquale from Nephron Research. Please go ahead. Christopher Thomas Pasquale: Thanks. Tim, can you talk a little bit more about the current state of the salesforce? Your U.S. territory count has contracted three quarters in a row, now down high-teens from where you were a year ago, which is a pretty big adjustment. How much of that has been an intentional rethinking of your commercial organization versus unplanned attrition? Are you simultaneously dealing with new reps or reps with expanded territories having to establish new relationships while you are going through this period where your customers need you even more? Timothy P. Herbert: Thanks, Chris. We do see adjustments in the field and, yes, it is a combination of both factors that you mentioned. We did our own adjustments with a realignment of our territories, and we increased the number of field clinical reps to get back to a one-to-one ratio. That started at the beginning of the year. I think we performed well in the first quarter by achieving the implants and revenue that we did, albeit impacted by the coding and reimbursement environment as well as WISER in those six states. It is purposeful for where we are, and we will continue to add territory managers as we deem appropriate. The field team is quite experienced right now, complemented by strong field clinical representatives. That allows us to address issues such as the current coding and reimbursement uncertainties. Operator: Thank you. Our next question comes from the line of Anthony Charles Petrone from Mizuho. Please go ahead. Anthony Charles Petrone: Thanks. Sticking with WISER, it is across six states and sounds like there is a higher prior authorization hurdle. Should we consider those procedures a backlog, or are they pushed out indefinitely as you navigate WISER? Then on CPT codes, some of the managed care policies still have the Inspire IV code and have introduced 64999. Why is it not just the case that they can bill to the code in the policy? Why is there ambiguity? Sorry for the two-part question. Timothy P. Herbert: That is great. On WISER, previously, in the non-WISER states, Medicare does not prior authorize. This is a new requirement placed on centers starting in January. We believe the majority of those patients exist, but as time goes on, they may get frustrated, which is why we want to act quickly. As we submit prior authorizations, we continue to learn, and centers are improving submissions as they understand WISER requirements. All six WISER states have different systems, with variability in each. We are working through that, and sites and our team are getting smarter to work with WISER more efficiently. As far as CPT coding, these are contracted rates with both facilities and payers. Payers want centers to work within their policies; that is what we are recommending as well. The good news is that these patients carry a prior authorization. When we submit the initial application, it includes the CPT code that will be used during the procedure, and once we receive approval, that prevents a lot of post-procedure challenges. Using a 64999 code is confusing because it requires additional work, manual reviews, and additional communication from the sites to the payers. We continue to work with centers and payers and use the codes that are in the existing policies. Operator: Thank you. Our next question comes from the line of Travis Lee Steed from Bank of America. Please go ahead. Travis Lee Steed: Thanks for taking the question. On the $20 million impact, can you go through some of the math behind that? There are a lot of factors you are calling out. How do you get confidence in that $20 million number? And when you look at prior auth, are they not just billing 64568 for commercial? Curious why procedures are dropping if they can just bill 64568 for commercial, especially given UnitedHealthcare moved April 1 to that code. Matthew Osberg: Travis, $20 million is an estimate. We have data, and we are triangulating different trends in the business to come up with that, looking at data quarter over quarter and versus last year and our expectations coming into the year. There is estimation involved, and we think we are triangulating it to $20 million in a reasonable range. As far as commercial payers, you are correct that when we support centers with prior authorizations, we use the code that is in the policy, and you are correct UnitedHealthcare adopted 64568 into their policy. Timothy P. Herbert: We do not expect many commercial policies to move away from that. Although the overall coding and reimbursement environment put challenges on centers to understand what code they want to use, it caused a slowdown that we see with the reduction of prior authorizations. Commercial implants in the first quarter tend to be the prior authorizations submitted in the fourth quarter that were not completed within that quarter, which drove a lot of the revenue. The impacts in the second quarter will reflect centers slowing down to make sure they understand the coding and coverage situation before they ramp up submission of commercial cases. We believe we will continue to gain confidence, and we expect improvement in the second quarter and beyond through the continuation of the year. Operator: Thank you. Our next question comes from the line of Lawrence H. Biegelsen from Wells Fargo. Please go ahead. Lawrence H. Biegelsen: Good afternoon. Thanks for taking the question. A technical coding and reimbursement question: the 10-Q states that the MACs identify CPT code 64582 as the appropriate code for Inspire V, but commercial payers continue to pay 64568. Why would there be a different code for Medicare and commercial payers? Is this common to have two different codes? And the 10-Q also states that you believe it is appropriate to bill 64582 without a modifier, but 64582 includes a respiratory sensor. Why would it not be appropriate to use a modifier, as you expected on the Q4 call? Timothy P. Herbert: Thank you, Larry. Your question really lays out the coding and reimbursement uncertainty in the quarter. In an ideal situation long term with the new CPT code, Medicare, Medicare Advantage, and commercial will all use the same CPT code. Where we are today, we do have that variance. The MACs currently identify 64582 for physicians to bill. The work related to Inspire IV and V for the pressure sensor is not that significant, and the Medicare difference in payment is only about $70 between the two procedures. The MACs have updated their local coverage determinations to not specify the use of a modifier and for surgeons to use 64582 for both Inspire IV and Inspire V cases. Overlapping with Travis’s question: commercial payers do not have to move away from 64568. That is what they have in their policies; it is the contracted rate with the centers, and we expect they will stay at 64568 as long as it is in the policies. We recommend centers follow the policies and submit prior authorizations consistent with those policies. It does cause confusion within the system, and it is not typical. It puts us in a unique situation, and every center approaches it a little differently. We are gaining experience, and that is why we believe we will see challenges in the second quarter but will build through that in the second half of the year and get back to growth in 2027. Operator: Thank you. Our next question comes from the line of Richard Samuel Newitter from Truist Securities. Please go ahead. Richard Samuel Newitter: Thank you for taking the questions. Tim, you said there were a few MACs where you are saying they updated to say 64582, but no modifier required. In most instances, they had 64582 and there was nothing about a modifier, but they never updated to 64568 to begin with. When they put out their updated policies, technically, there is no update. What gives you the confidence to say those policies are updated saying you do not need to use a modifier? Is there risk that they could change to use a modifier? And as a follow-up, what is your definition of growth for 2027? Timothy P. Herbert: Very good comment, Rich, and thank you. If I misspoke, I apologize. The LCDs identify 64582 as the only code, and they do not say “do not use a modifier.” They are silent on that and do not have language on a modifier. There are three MACs that have updated to include the new C-code but remain silent on any modifier. Several other MACs, you are correct, did not switch over to 64568. At this point, there is no MAC that identifies the use of a modifier with Inspire V cases; they remain silent. Is there risk that they could revisit this? We will monitor it, and we will monitor if there are surgeons who have used a modifier, what template they used, and any level of reduction in payment between the two. We know the difference in payment between 64582 and 64568 is only about $70. On 2027, we have to be careful. We have a lot of work to do to achieve consistency and confidence in the coding and reimbursement environment to allow centers to increase utilization again. We are committed to getting back to growth, but it is premature to put too much detail around that today. Operator: Thank you. Our next question comes from the line of Michael K. Polark from Wolfe Research. Please go ahead. Michael K. Polark: I am interested in an update on the Inspire IV versus V mix. Tim, I heard you say you still have inventory of IV for centers that have concerns about V billing. Where does that stand? Is the company thinking about maybe reinvesting in IV to navigate this period? Timothy P. Herbert: We did build up inventory, as you probably saw from the financials, and we have good inventory of IV to offer to centers in the U.S., as well as to continue to support ongoing implants in Europe and Asia. As we started the year and went through the first quarter, implants are predominantly Inspire V. When centers start doing Inspire V, they want to work through the coding and reimbursement and have a solution, but there are centers with different levels of Medicare reimbursement, geographically adjusted, that continue with Inspire IV. We will make it available to them. Once centers convert to V, they tend to want to stay there; they just want confidence in having a good coding solution and proper reimbursement. Matthew Osberg: I would add that the mix in Q1 was predominantly Vs, and that mix really did not change much from Q4. We will continue to monitor it. We have inventory of IVs should that mix tick up. Operator: Our next question comes from the line of Shagun Singh Chadha from RBC Capital Markets. Please go ahead. Shagun Singh Chadha: Thank you for taking the question. While providing guidance, you indicated it is based on high-level assumptions. You are talking about the WISER program a little more than you have in the past; some of our checks suggested potential overutilization. You also mentioned GLP-1s; some checks suggest it is driving a lag before patients come in for Inspire therapy, potentially over a year. Can you put a finer point on your comment around returning back to growth? Why should you return to growth anytime before 01/01/2028 when you have a new code? Timothy P. Herbert: Thank you. As Matthew went through in his comments, the impact on our revenue this year, reflected in our updated guide, is really based on coding and reimbursement uncertainty as well as negative impact from the WISER program delaying procedures due to prior authorization. We mention GLP-1s as a broader topic but not as a significant part of the revenue adjustment. If we focus our activities on gaining confidence with a solid methodology for coding and reimbursement, and continue to learn to work with the WISER systems to gain prior authorizations, we believe we can see improvements through the year to get back to a growth situation before 2028. Operator: Thank you. Our next question comes from the line of David Kenneth Rescott from Baird. Please go ahead. David Kenneth Rescott: Thanks for taking the questions. You mentioned prioritizing investing in revenue-generating activities. When I think about existing accounts versus adding new accounts, is the focus primarily on current accounts where you can capture untapped opportunities, or should we assume bringing on new accounts remains a growth driver into the back half and into 2027? Timothy P. Herbert: Thank you, David. The answer is both. The number one focus is to make sure our existing centers have a solid pathway in coding and reimbursement. Once that is in place, and they understand how to code Medicare, commercial, and Medicare Advantage, and have confidence in reimbursement, they can increase the use of Inspire therapy, seen in increased prior authorization submissions and ability to take on more patients. There were challenges opening new centers in the first quarter with this coding uncertainty, but we are going to continue to lean into that because we still do not have the capacity to treat the patient demand that we have. We will continue to open new centers and train additional surgeons at existing sites. That was a key benefit we talked about with Inspire V last year but have been unable to fully lean into until we get the coding taken care of. Priority one is increasing utilization at existing centers, but we will also continue opening new centers. Operator: Thank you. Our next question comes from the line of Analyst from Jefferies. Please go ahead. Analyst: You talked about getting accounts comfortable with billing and coding. What does it take for an account to get comfortable? Do they have to submit one, wait for reimbursement, then submit more? How long does it take for the average account to get comfortable? Timothy P. Herbert: It is experience. We proactively conduct business reviews with centers. We want them to understand the coding and billing, including the use of one code for Medicare and a different code for commercial. We make sure the facility’s coding personnel understand the right code to use, submit that code, and closely monitor the payment when it comes back, or if it is denied, whether it needs to go to appeal. As we worked through the first quarter, we started to pick up that experience, and we will continue to lean in as we go through the year. Once they have a methodology set and a good pathway with the bridge we are establishing to the new CPT code, and we have some consistency, we can really ramp up. It is simply having positive experience with their coding processes. Matthew Osberg: I would add that many challenges our customers face are unique to them. It is really understanding each customer’s challenge and how we can help. It is not a one-size-fits-all solution, so it is important we work closely with our customers. Operator: Thank you. Our next question comes from the line of Brett Adam Fishbin from KeyBanc Capital Markets. Please go ahead. Brett Adam Fishbin: Thanks for taking the question. On the competitive landscape, with a competitor now launched for a few quarters in the U.S., are you seeing any impact from centers trialing the new device or shifting their mix in any tangible way? How have you updated the guidance to account for any changes there? Timothy P. Herbert: When we issued initial guidance, we noted a competitive presence. With the coding and reimbursement uncertainty and the WISER situation in six states, we are really focused on addressing those two key challenges. That predominantly drives the actions of the centers right now, with less ability to introduce a new topic. Centers are really focused on coding and WISER, as is our team. We did not introduce anything new in the revised outlook specifically related to competition. Operator: Thank you. Our next question comes from the line of Daniel Markowitz from Evercore ISI. Please go ahead. Daniel Markowitz: Following up on what it will take for centers to feel like they have a handle on this, what gets you confident that we can get to the point where centers are comfortable before there is coding uniformity across payer types? Could we see some pent-up demand as we potentially return to growth in 2027, given that procedures have been put on hold? Timothy P. Herbert: On pent-up demand, centers understand the benefits when they are able to do Inspire V procedures, including the ability to take care of more patients as the procedure is more comfortable for an ENT surgeon compared to Inspire IV. We have not had the ability to fully lean into that and push the clinical evidence with Inspire V. That will come, and it should help with growth in 2027 and beyond. On confidence before uniformity, it comes from centers submitting cases and seeing positive acceptance of prior authorizations, positive acceptance of billing with the new coding methodology, and receiving expected reimbursement. That will continue to grow confidence and allow us to open the gates more and increase volume. Operator: Thank you. Our last question in the queue comes from the line of Michael Kratky from Leerink Partners. Please go ahead. Michael Kratky: Thanks for taking the question. On the rest-of-year cadence and growth implications, you provided helpful color on the second quarter and the dollar impact from reimbursement and WISER. What will be the key points of sensitivity that could get you to the high end versus low end of the range in 3Q and 4Q? Matthew Osberg: The main thing is how quickly we can move customers through their challenges with coding and reimbursement. If those challenges remain for longer, you are looking at the higher end of the impact range. If customers are able to move through more quickly, then you are looking at the lower end of the impact range. Timothy P. Herbert: Thanks all for joining the call today. As always, I am grateful to our team of dedicated employees for their enthusiasm, hard work, and continued motivation to achieve successful and consistent patient outcomes. The team’s commitment to patients remains unmatched and is the most important element to our success. We appreciate your continued interest and support and look forward to providing you with further updates in the months ahead. Operator: Thank you. This concludes today’s conference call. You may all disconnect.
Operator: Good day, everyone. Thank you for standing by. Welcome to Adeia Inc.’s first quarter 2026 earnings conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the call will be open for questions. I would now like to turn the call over to Chris Chaney, Vice President, Investor Relations for Adeia Inc. Chris, please go ahead. Chris Chaney: Good afternoon, everyone. Thank you for joining us as we share details of our quarterly financial results. With me on the call today are Paul Davis, our President and CEO, and Keith Jones, our CFO. Paul will share general observations regarding the quarter, then Keith will provide further details on our financial results and guidance. We will then conclude with a question-and-answer period. In addition to today’s earnings release, there is an earnings presentation which you can access along with the webcast on the Investor Relations portion of our website at adeia.com. Before turning the call over to Paul, I would like to provide a few reminders. First, today’s discussion contains forward-looking statements that are predictions, projections, or other statements about future events which are based on management’s current expectations and beliefs, and therefore are subject to risks, uncertainties, and changes in circumstances. For more information on the risks and uncertainties that could cause our actual results to differ materially from what we discuss today, please refer to the Risk Factors section in our SEC filings, including our Annual Report on Form 10-K and our Quarterly Report on Form 10-Q. Please note that the company does not intend to update or alter these forward-looking statements to reflect events or circumstances arising after this call. To enhance investors’ understanding of our ongoing economic performance, we will discuss non-GAAP information during this call. We use non-GAAP financial measures internally to evaluate and manage our operations. We have therefore chosen to provide this information to enable you to perform comparisons of our operating results as we do internally. We have provided reconciliations of these non-GAAP measures to the most directly comparable GAAP measures in the earnings release, the earnings presentation, and on the Investor Relations section of our website. A recording of this conference call will be made available on the Investor Relations website at adeia.com. Now I would like to turn the call over to our CEO, Paul Davis. Paul Davis: Thank you, Chris, and thank you, everyone, for joining us today. I am pleased to be here to share our results for 2026. After last year’s strong finish, including our license agreement with Disney, we entered 2026 with significant momentum which continued into the first quarter. We signed foundational agreements with both AMD and Microsoft, along with additional deal activity across multiple verticals. Our strong execution is demonstrated in our first quarter results. We delivered revenue of $105 million with an adjusted EBITDA margin of 60% and $58 million in operating cash flow. We also continue to execute on all four pillars of our balanced capital allocation strategy: paying down our debt, which is now less than $400 million; returning capital to shareholders through dividends and share repurchases; and investing in our portfolios through five strategic tuck-in acquisitions. The eight license agreements we closed during the first quarter were highlighted by AMD and Microsoft, which were among our three new customers. We closed five renewals with customers across a diverse set of verticals, including pay TV, consumer electronics, semiconductors, and OTT. I am very pleased that in early March, we resolved our dispute and signed a seminal multiyear license agreement with AMD for access to our semiconductor portfolio, which includes our hybrid bonding technology. The agreement was reached within four months of filing litigation, underscoring the strength of our semiconductor portfolio and the effectiveness of our approach. It also represents an important milestone for our semiconductor business and provides further momentum as we pursue additional semiconductor opportunities in both logic and memory that will be driven by continued adoption of hybrid bonding. The significance of our agreement with AMD cannot be overstated. AMD is a highly respected innovator and a leader in advanced semiconductor design. Their early adoption of chiplet architecture with hybrid bonding highlights the relevance of our technology in next-generation computing. While AMD was an early adopter, hybrid bonding is now becoming more broadly adopted across the semiconductor industry. We are seeing increased adoption in both logic and memory, supported by significant investment in next-generation architectures and increasing use in advanced semiconductors for high-volume consumer electronic devices. This adoption is being driven by AI and high-performance computing, which are fundamentally increasing power density and interconnect demands. As traditional Moore’s law scaling reaches its limits, our hybrid bonding and thermal management technologies have become essential to enabling continued performance gains. We believe our portfolio is well positioned to deliver value across both logic and memory markets as the industry pushes beyond the limits of traditional scaling. The AI-driven growth in semiconductors is remarkable, with the total semiconductor market anticipated to exceed $1 trillion annually by 2026. In addition to AMD, we also added Microsoft as a new customer in the first quarter with a multiyear license agreement for access to our media portfolio. Our media portfolio has broad applicability across Microsoft’s products and services, including its consumer electronics and social media businesses, such as Xbox and LinkedIn. In recent weeks, we also expanded our presence in e-commerce with a new license agreement with L’Oréal, adding another global brand to our expanding customer base in e-commerce. While e-commerce remains a relatively small portion of our revenue to date, our growing momentum and robust pipeline in this market give us confidence that it could be much more significant in the future. We continue to make steady progress toward reaching our long-term goal of $500 million in annual licensing revenue. Our strong start to 2026 reinforces our confidence in that trajectory. A key driver of this progress is our ability to add new high-value customers such as AMD and Microsoft—agreements that provide sustainable, recurring revenue streams. These new deals are contributing to the continued diversification of our business. In the first quarter, non–pay TV recurring revenue grew 28% year-over-year, reflecting further expansion into growth markets. Our most significant growth market is semiconductors. The rapid evolution of AI and high-performance computing is driving fundamental changes in chip design, including the broad adoption of chiplet architectures with hybrid bonding. Our agreement with AMD is an important validation of our position in this space. Other leading logic and memory companies are following similar paths, and we believe hybrid bonding will play an increasingly central role across both logic and memory applications for years to come. In addition, demand for high-performance memory continues to grow rapidly, particularly in NAND and high-bandwidth memory. We are already seeing contributions from earlier agreements with NAND manufacturers, and we expect further adoption as production volumes scale. We are also beginning to see early indications that these technologies are expanding beyond data centers into consumer devices, which represents an additional long-term, high-volume opportunity. Importantly, as AI and high-performance computing workloads continue to scale, thermal management becomes a critical constraint. Our RapidCool technology is designed to address these challenges, and we continue to make meaningful progress. Through further development, we have improved its cooling capability to approximately 5 watts per square millimeter, up from 3 watts less than a year ago, and interest from potential partners continues to grow. Our IP portfolio remains the foundation of our business. Since the beginning of 2023, we have grown our portfolio from approximately 10 thousand to over 13.75 thousand patent assets. While we have delivered strong double-digit growth in recent years, we expect portfolio growth to moderate over time. We believe our portfolio today is well positioned to support multiple licensing cycles in both our core and growth markets, and our innovation engine is primed to continue to refresh these licensing cycles well into the future. We continue to invest strategically in both organic R&D and targeted tuck-in acquisitions to ensure we maintain and enhance the value of our portfolio over time. In the first quarter, we increased our M&A activity, closing five tuck-in IP portfolio acquisitions across a wide spectrum of technologies focused on growth areas. We are very proud of these accomplishments. We continue to focus on expanding our customer base, which includes our history of developing long-term relationships. This has been a primary objective as we invest heavily in our portfolio development to support the ever-evolving technology solutions that help drive our customers’ products and services. Despite our tremendous track record of renewals, we occasionally find ourselves in customer disputes on the value of our portfolios. To that end, we are disappointed we could not reach acceptable terms for a renewal with DISH Network after their agreement expired at the end of March. DISH and their predecessor companies have been customers for decades, and throughout many renewals over the years, they have enjoyed the use of our IP. Since the last renewal, we have continued to innovate, add to our portfolio, and strengthen our relevance within the pay TV industry. In the past few years, we have successfully signed agreements with Hulu + Live TV, Optimum (formerly Altice), Verizon, and Frontier. Even through litigation, we keep the channels of communication open for the purpose of reaching terms on a license agreement, which is our ultimate goal. Leveraging our success with recent similar situations with Optimum, Disney, and AMD—each of which was resolved efficiently and relatively quickly—we are confident we will reach successful outcomes with DISH and DIRECTV. Our technologists remain at the forefront in their fields and are often panelists or speakers at industry conferences. We are recognized as market leaders and innovators and are actively engaged in the ecosystems in which we operate. I am proud we were named one of the Top 100 Global Innovators by LexisNexis Intellectual Property Solutions. We earned this recognition based on the quality and strength of our portfolios and the measurable improvements we have made in our innovation impact over the past two years. Unlike rankings based solely on patent volume, this award highlights companies driving meaningful advances in technology, and that is exactly what our teams do every day. We had a strong first quarter, and we have built meaningful momentum to start 2026. I am particularly pleased with the addition of AMD and Microsoft as new customers—both multiyear agreements that expand our presence in key growth markets and strengthen our recurring revenue base. Our strong financial performance supports continued investment in our portfolio and ongoing balance sheet improvement, and with a growing and diversified pipeline, we believe we have multiple paths to achieve our objectives for the year. Before I turn the call over to Keith, I would like to address the other news we announced today. As noted in the press release, after much consideration and consultation with my family, I have informed the Board of my intent to step down as CEO later this year to focus on my health and other personal pursuits. As I reflect on my last four years leading Adeia Inc., including through its separation from Xperi, I could not be more proud of what the company has accomplished. Our exceptional leadership team has transitioned the company from being primarily reliant on the pay TV market to one with robust and diversified revenue streams supported by our evolving and growing IP portfolios and technology leadership. Our balance sheet is strong, having cut our debt nearly in half since separation, and we are positioned well for continued growth. I have committed to the Board that I will continue in my current role until a successor has been identified and appointed, and through any necessary transition period. During this period, it will be business as usual, as I remain focused on driving the team toward achieving our goals for 2026 and setting us up for continued long-term success. Our goal is to find the next leader for Adeia Inc. by the fourth quarter. The Board has engaged a nationally recognized search firm, and I am confident we will find a leader that will continue the successes we have built and drive the next phase of growth for the company. I want to thank my family, the executive leadership team, and the Board for helping me through this difficult decision. I also want to thank the dedicated Adeia Inc. employees that are at the heart of all of our success. I will now turn the call over to my friend and our CFO, Keith, to cover our financial results. Keith Jones: Thank you, Paul. I am pleased to be speaking with you today to share details of our first quarter 2026 financial results. During the first quarter, we delivered strong financial results within our expectations. Revenue of $104.8 million was driven by the execution of eight deals across a diverse mix of customers, including semiconductors, consumer electronics, pay TV, and OTT. During the quarter, we signed three new license agreements, highlighted by AMD and Microsoft. Our recurring revenue during Q1 was $66.3 million as compared to $94.5 million in the prior quarter. The decrease in our recurring revenue was due to both subscriber declines and the timing of renewals with certain pay TV customers. Additionally, we were impacted by the timing of revenue as a result of the structure of our license agreements with both SanDisk and Kioxia, which contributed no revenue in Q1 but will contribute meaningful revenue in the following quarters. We expect our quarterly recurring revenue to grow over the course of the year, reaching approximately $90 million at the end of the year. Now I would like to discuss our operating expenses, for which I will be referring to non-GAAP numbers only. During the first quarter, operating expenses were $42.9 million, a decrease of $6.3 million, or 13%, from the prior quarter. The decrease was primarily due to lower variable compensation as a result of exceeding certain performance targets in last year’s fourth quarter. Research and development expenses decreased $1.2 million, or 7%, from the prior quarter. The decrease is primarily due to lower variable compensation and outside service costs, which was partially offset by seasonal personnel costs. Selling, general and administrative expenses decreased $4.6 million, or 18%, from the prior quarter, primarily due to lower variable compensation costs and lower spending on outside services, which was also partially offset by an increase in seasonal personnel costs. Litigation expense was $6 million, a decrease of $513 thousand, or 8%, compared to the prior quarter, primarily due to lower spending on Disney due to the resolution of the litigation in the prior quarter, partially offset by new litigation matters. Interest expense during the first quarter was $8.5 million, a decrease of $894 thousand, primarily attributable to our continued debt payments and to lower variable interest rates during the period. Our current effective interest rate, which includes amortization of debt issuance costs, is 7.3%. Other income was $1.7 million. It was primarily related to interest earned on our cash and investment portfolio and to interest income recognized on revenue agreements with long-term billing structures under ASC 606. Our adjusted EBITDA for the first quarter was $62.3 million, reflecting an adjusted EBITDA margin of 60%. Depreciation expense for the first quarter was $492 thousand. Our non-GAAP income tax rate was 21% for the quarter. Our income tax expense consists primarily of federal and state domestic taxes as well as Korean withholding taxes. Now for a few details on the balance sheet. We ended the first quarter with $115.8 million in cash, cash equivalents, and marketable securities, and we generated $58.5 million in cash from operations. As demonstrated by our results, the first quarter has historically been a very strong cash generation period for us. This strong financial performance allowed us to execute on all four pillars of our balanced capital allocation approach. This includes paying down our debt, repurchasing shares, paying our dividend, and making five tuck-in portfolio acquisitions. We made $28.1 million in principal payments on our debt in the first quarter and ended the quarter with a term loan balance of $398.6 million. I am also happy to announce that, based on our strong financial performance, Standard & Poor’s has upgraded our credit rating to BB from BB-. In the first quarter, we repurchased approximately 446 thousand shares of our common stock for $10 million, bringing the remaining amount available for future repurchases to $150 million under our current stock repurchase program. We paid a cash dividend of 5 cents per share of common stock. Our Board also approved a payment of another 5 cents per share dividend to be paid on June 15 to shareholders of record as of May 26. Now I will go over our guidance for the full year 2026. We are reiterating our prior guidance. Our 2026 revenue guidance range is $395 million to $435 million. As we mentioned in our previous call, our sales pipeline was, and continues to be, very strong. Overall, we continue to see the first half of the year and the second half of the year being relatively equal in terms of revenue contribution, with the second quarter being modestly lower than the first quarter. Operating expenses are expected to be in the range of $184 million to $192 million. We expect interest expense to be in the range of $34 million to $36 million. We expect other income to be in the range of $5.5 million to $6.5 million. We expect a resulting adjusted EBITDA margin of approximately 55%. We expect a non-GAAP tax rate to be 21% for the full year. We also expect capital expenditures to be approximately $2 million for the full year. As I conclude my remarks, I want to say this is obviously a challenging day full of emotions for me and the company. On a personal level, Paul is not only an incredible leader and boss, but also a dear friend that I cherish. Knowing Paul, this decision was very difficult for him and his family. Paul should take great pride in having helped to cultivate a legacy that will further propel Adeia Inc. to a great and promising future. As we look across the semiconductor and media landscapes, we continue to see broad adoption of our foundational technologies. We find ourselves at the right place at the right time. Speaking on behalf of all our employees, we take pride in this success. It is driven by the tireless and dedicated efforts of our entire team. The culture we have created will continue to thrive. Our future is bright, and I cannot be more excited about the opportunities that lie ahead of us in the coming years. We will now open the call for questions. Operator? Operator: We request that you limit yourself to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Kevin Cassidy with Rosenblatt Securities. Your line is open. Kevin Cassidy: Thank you. Congratulations on the great results, and congratulations, Paul, on making this decision. I hope it is a gradual departure, and thank you for leading the company. My question is around the AMD license: how much of it was retroactive royalties—things that we would not see reoccurring in future years? Can you give a percentage of what the upside was? Keith Jones: Hey, Kevin. In terms of AMD, we are not in a position to get into the granular breakout of the revenue in detail. But the AMD agreement is not only significant for us in terms of being one of our first licensees in the logic space, it will also be a meaningful revenue contributor going forward. For some color, they will be, in this quarter, a greater-than-10% customer, and that does include a retroactive amount that we recognized. More importantly, as we look ahead, they will most likely find themselves in a position where they would be greater than 10% for us going forward. It is very meaningful for us. Paul Davis: Kevin, just to be clear, they will not be a 10% customer going forward. And thank you for the kind remarks; I appreciate it. Kevin Cassidy: Thanks. And my follow-up is around the tuck-in technology acquisitions. Were any scientists or employees included with those, or were they only patents? Paul Davis: Hey, Kevin. We are focused primarily on portfolios that can be really helpful to our growth areas, and that is what these were. We do evaluate opportunities that are broader than that, but for the most part, what we have been acquiring has been primarily patent portfolios. In this case, it is very consistent with what we have done over the last couple of years. We did five relatively small tuck-in acquisitions individually, but they start to add up, and they are in growth areas. For instance, e-commerce and automotive were focus areas this past quarter. We look across all of our growth areas, including semiconductors and OTT, as we have done before with a number of acquisitions over the last couple of years. We do explore other types of acquisitions as well. Kevin Cassidy: Great. I will get back in the queue. Paul Davis: Thanks, Kevin. Operator: Your next question comes from the line of Hamed Khorsand with BWS Financial. Your line is open. Hamed Khorsand: Hey, thanks for taking the question. Could you talk about the IP licensing funnel that balances out Q2 through Q4, and how you are looking at that given the big announcements you had in Q1? Paul Davis: Thanks, Hamed. When we look at our pipeline, as Keith mentioned, it is quite robust, and we have multiple paths to get to our guidance range. It really comes from a number of areas, including core markets—pay TV, where we still have opportunities—and then e-commerce opportunities, as well as electronics, social media, and OTT. And then semiconductors, of course. It will be a mix of both renewals and new deals, but new deals are still important for us to hit our goals for the year, and we are entirely focused on that, as we were last year as well. Those new deals are important because they continue to diversify our revenue and add new streams that offset some of the known declines we have. If you look at our growth in non–pay TV recurring revenue, it continues to be very robust—28% year-over-year this quarter—which continues a trend over the last four or five quarters. We are really proud of that. Hamed Khorsand: Okay. Thank you. Paul Davis: Thanks, Hamed. Operator: Your next question comes from the line of Matthew Galinko with Maxim Group. Your line is open. Matthew Galinko: Thanks for taking my questions. You touched on moderating the rate of growth of the portfolio, although five tuck-in acquisitions would be on the high end of what you have done to date. Can you help us balance whether this reflects a shift in strategy to be more focused on external portfolios at this point, or is it just how things fell? And as a follow-up on capital structure, given the continued reduction in debt balance and the upgrade to your credit rating, does anything change in your plans for cash levels you want to keep on hand or your leverage ratios? Paul Davis: I would say it continues to be a mix, but one that is heavily weighted toward internal innovation. That is where we see the most value, and that is what our customers focus on as well. We have had an 85/15 split—85% internal and 15% external—for quite some time. It is a metric we like to maintain. We are not religious about it, and it can vary from time to time. On the strategic acquisition side, we look for things that can round out our portfolio, so activity can swing in a given quarter and lead to that number being a little higher at any given time. Over a longer period, that 85/15 split is something we would like to maintain. We are still doing a ton of internal innovation and have been since separation. You are seeing that on both the semiconductor and the media side of our business. Keith Jones: Hey, Matt. Thanks for the question on capital structure. We find ourselves in a great spot, and I could not be more proud of how we have operated. We have talked before about a certain amount of debt we are comfortable carrying as a company—historically between $300 million to $400 million. Through hard work and disciplined efforts, we find ourselves in that threshold right now. A nice tailwind is the upgrade from Standard & Poor’s to a BB rating, which will be advantageous to us. That said, the timing in the market to refinance right now is not optimal. Since the war broke out, interest rates have been more on the rise, and we would like to see things settle before we refinance our debt. Our timing is to be active and to have new debt in place at least 12 months before our debt matures in June 2028. We are actively looking and thinking about fixed structures that can increase cash flow back into the business to do more tuck-in acquisitions and return more capital to shareholders. We have a very defined plan, which comes on the heels of tremendous execution deleveraging our balance sheet. We are right where we want to be. Operator: I will now turn the call back over to Paul Davis for closing remarks. Paul Davis: Thank you, operator. Once again, I would like to thank our employees for their hard work and dedication, and also our shareholders, partners, and customers for their ongoing support. Thanks to everyone for being with us today. Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon. Welcome to Fabrinet's Financial Results Conference Call for the third quarter of fiscal 2026. Later, we will conduct a question-and-answer session, and instructions on how to participate will be provided at that time. As a reminder, today's call is being recorded. I would now like to turn the call over to Garo Toomajanian, Vice President of Investor Relations. You may begin. Garo Toomajanian: Thank you, Operator, and good afternoon, everyone. Thank you for joining us on today's conference call to discuss Fabrinet's financial and operating results for the third quarter of fiscal 2026, which ended March 27, 2026. With me on the call today are Seamus Grady, Chairman and Chief Executive Officer, and Csaba Sverha, Chief Financial Officer. This call is being webcast, and a replay will be available on the Investor section of our website located at investor.fabrinet.com. During this call, we will present both GAAP and non-GAAP financial measures. Please refer to the Investors section of our website for important information including our earnings press release and investor presentation, which include our GAAP to non-GAAP reconciliation as well as additional details of our revenue breakdown. In addition, today's discussion will contain forward-looking statements about the future financial performance of the company. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from management's current expectations. Statements reflect our opinions only as of the date of this presentation, and we undertake no obligation to revise them in light of new information or future events except as required by law. For a description of the risk factors that may affect our results, please refer to our recent SEC filings, in particular the section captioned Risk Factors in our Form 10-Q filed on 02/03/2026. We will begin the call with remarks from Seamus and Csaba, followed by time for questions. I would now like to turn the call over to Fabrinet's Chairman and CEO, Seamus Grady. Seamus Grady: Thank you, Garo. Good afternoon, everyone, and thanks for joining our call today. We delivered an outstanding financial performance in the third quarter, along with several notable achievements that we believe can extend our strong growth trends into the fourth quarter and fiscal year 2027. Revenue was above our guidance range at a record $1.214 billion, with year-over-year growth accelerating to an impressive 39%. Record non-GAAP EPS of $3.72 also exceeded our guidance range, reflecting continued excellent execution. Looking at our quarter by product area, Optical Communications revenue growth increased to 35% from a year ago. This was driven by 55% year-over-year growth in telecom revenue, which was fueled by strong growth in a wide range of products. Within telecom, data center interconnect revenue grew a robust 90% from a year ago and 38% from Q2, and we believe strong longer-term DCI growth trends remain firmly intact. This remarkable telecom performance more than offset softer-than-expected datacom revenue, which grew 4% year over year but declined 6% from Q2. Underlying datacom demand remains exceptionally strong. In fact, demand during the quarter far exceeded what we were able to ship, meaning our reported revenue does not fully reflect the true momentum of the business. Right now, demand is outpacing the broader supply of certain components, and we are actively working to narrow that gap. While we expect the supply-demand imbalance to persist into the fourth quarter, we remain optimistic that supply conditions will improve over time. The strong demand we are seeing today positions us well as that improvement unfolds. As we have outlined, our datacom strategy is to continue supporting the strong demand trends we are seeing with our largest customer, while actively expanding into new high-growth channels such as direct engagement with hyperscalers and partnerships with merchant vendors. With that in mind, we are happy to report that we have made meaningful, tangible progress on both fronts. First, we are excited to share that we have successfully completed and have already begun shipping two datacom transceiver programs directly to a hyperscale customer, with initial ramps starting in the fourth quarter. We expect volumes to ramp steadily throughout fiscal 2027, with these programs becoming a meaningful contributor to our datacom revenue over time. Second, building on the groundwork laid over the last several quarters, we are on track to qualify and ramp multiple merchant transceiver programs, including several for data center scale-out applications, with existing and new customers. We expect production to begin in the second half of the calendar year, aligning with the early part of fiscal 2027, with additional ramps progressing into the second half of the fiscal year. We expect this combination of hyperscale and merchant program wins to further diversify our datacom revenue and provide multiple new growth vectors in the new year and beyond. In non-Optical Communications, revenue jumped 52% year over year and 8% sequentially from Q2. This growth was driven primarily by high-performance compute revenue, which continues to ramp as we support our customers' transition to their latest product generation. At the same time, we are seeing encouraging traction beyond the current ramp, with new program wins and expanded scope across additional products that we will be manufacturing to support their accelerated computing infrastructure. We are also increasing capacity to align with the customers' ambitious growth plans, reflecting a deepening and increasingly strategic relationship. Automotive revenue moderated in the third quarter, as anticipated, with revenue decreasing modestly from Q2. This decline was more than offset by continued growth in industrial laser revenue, which was up 9% from a year ago and 7% from Q2. An important area of strategic focus for us over the past several years has been co-packaged optics, or CPO. In this space, we are deepening our engagement with customers across the CPO ecosystem including optical components, external laser source pluggables, as well as other integrated precision optical packaging solutions, building on our longstanding silicon photonics expertise. CPO relies heavily on advanced semiconductor packaging technologies, and we have been actively investing to expand our capabilities in this area with a focus on scalable, high-quality manufacturing processes and broader system-level integration. This includes leveraging and extending our in-house silicon photonics expertise, but also partnering with key technology providers to enhance our ability to deliver more integrated, end-to-end manufacturing solutions. With that backdrop, we have made a minority investment in Raytec Semiconductor, a Taiwan-based provider of advanced wafer-level packaging technologies, as an ecosystem partner. We already serve a number of common customers and expect this collaboration to further strengthen our capabilities and extend our offering. This investment supports our continued evolution from silicon photonics into more advanced packaging and integration solutions, reinforcing our role as a key manufacturing partner within the CPO ecosystem. Looking at our business as a whole, we are very excited by both the number and size of customer engagements for our advanced manufacturing services. The breadth and depth of these projects provide us with significant opportunities to demonstrate our differentiation and expertise that we have established as a key enabler for the success of our customers' most advanced products. As you know, we have been expanding our capacity to support our accelerating growth trends. We continue to make progress in the construction of Building 10, which will add 2 million square feet to our current 3.7 million square feet of space. With plans to be fully completed around the beginning of the new calendar year, we are on track to have a portion of Building 10 ready by next month, consistent with what we described last quarter. In addition to that, with our accelerated construction timeline, we now expect to commission an additional floor in this five-storey structure by September, with the rest of the building still scheduled to be completed by January. Beyond Building 10, we have sufficient land available at our campus in Chonburi for two additional buildings of more than 1 million square feet each. While this means we expect to have ample capacity available for the next several years, we continue to think ahead. In that context, we have recently acquired a building and land in the Navanakorn Industrial Estate in Thailand, not far from our Pinehurst campus. We have already begun renovations to make the existing 100,000 square foot building a world-class clean room factory, with sufficient space on the eight-acre site for additional expansion at a later time. In summary, our success in the third quarter extends well beyond our strong financial performance. We are particularly encouraged by the multiple new growth vectors we are adding across our datacom business, while our diversified telecom portfolio continues to show solid momentum and our non-Optical Communications segment expands further. This combination of execution and strategic progress reinforces our confidence in sustaining our growth trajectory, extending our leadership position in the fourth quarter, and carrying that momentum into fiscal year 2027. Now I would like to turn the call over to Csaba for more details on our third quarter results and our outlook for the fourth quarter. Csaba? Csaba Sverha: Thank you, Seamus, and good afternoon, everyone. We delivered another record-breaking performance in the third quarter of fiscal 2026. Revenue of $1.214 billion exceeded our guidance range, with revenue growth accelerating to a remarkable 39% from a year ago and 7% from the prior quarter. Strong execution and FX revaluation tailwinds led to non-GAAP EPS of $3.72 that also exceeded our guidance range. Turning to revenue by market in the third quarter, Optical Communications revenue was $889 million, with growth accelerating to 35% from a year ago and 7% from Q2. Within Optical Communications, telecom revenue was a record $628 million. Within telecom, revenue from data center interconnect modules, or DCI, jumped to $197 million, growing 90% from a year ago and 38% from the second quarter. Datacom revenue of $260 million increased 4% from a year ago, but moderated 6% from Q2 due to broadening component and material supply constraints in the quarter. Turning to Non-Optical Communications, revenue reached $326 million, growing 52% year over year and 8% sequentially from Q2. This strong performance was once again driven primarily by continued momentum in our HPC program, which delivered $107 million in revenue. Automotive revenue declined slightly as anticipated to $115 million, up 25% from Q2, while industrial laser revenue increased to $44 million. As I discuss the details of our P&L, all expense and profitability metrics will be presented on a non-GAAP basis unless otherwise noted. Gross margin in the third quarter was 12.1%, a 10 basis point improvement from a year ago and a 30 basis point decline from Q2, as anticipated, primarily due to foreign exchange headwinds. We continue to demonstrate operating leverage with operating expenses declining to 1.4% of revenue. This resulted in an operating margin of 10.7%, a 50 basis point improvement from a year ago and a 20 basis point decline from Q2. Interest income was $7 million, and we saw a foreign exchange revaluation gain of $7 million in the quarter. Our effective GAAP tax rate for the quarter was 6.7%. We expect our tax rate to moderate in Q4, resulting in a mid-single-digit effective GAAP tax rate for the year. Net income was a record $135 million, or $3.72 per diluted share. Turning to our balance sheet, we ended the third quarter with cash and short-term investments of $946 million. Operating cash flow for the quarter was $53 million, down $60 million from Q2. Capital expenditure spending of $64 million reflects continued accelerated construction of Building 10, as well as capacity expansions to support the rapid growth across the business. As a result, free cash flow was an outflow of $11 million in the quarter. Before getting into our guidance, I want to provide some additional color on our recent capital allocation decisions. As Seamus mentioned, we have made a minority investment in Raytec Semiconductor to support our efforts in advancing manufacturing solutions for CPO. In April, we completed a private placement of approximately $32 million for 20 million shares of Raytec, representing approximately a 14% position. This investment deepens our partnership and supports our joint efforts toward bringing CPO technology to market at scale. Early in the fourth quarter, we expect to complete the purchase of an eight-acre campus in the Navanakorn Industrial Estate, Thailand, located approximately fifteen minutes from our Pinehurst campus. The Navanakorn facility currently consists of a 200,000 square foot building, with additional space on the site for future expansion. We have already initiated minor renovations to support world-class clean-room manufacturing capabilities, and we expect to begin utilizing the space early next quarter. The total purchase price of $11 million will be reflected in our fourth quarter financials. With our very strong balance sheet, we are well positioned to deploy capital efficiently, support our growth initiatives, and continue to generate superior returns while remaining committed to returning surplus cash to shareholders through our share repurchase program. In the third quarter, we did not repurchase a meaningful number of shares. However, our share repurchase program remains active, and we ended the quarter with approximately $169 million available under our current authorization. Now, turning to the details of our guidance, we expect revenue in all major product categories to increase in the fourth quarter despite a broader supply-constrained environment, with datacom growth expected to be more measured as we continue to navigate component availability that is not keeping pace with strong demand. At the same time, we are excited by the number of new customer programs coming online that we expect will contribute more meaningfully to our performance in fiscal 2027 than in the fourth quarter. With that backdrop, we expect total revenue to be in the range of $1.25 billion to $1.29 billion, representing year-over-year growth of approximately 40% at the midpoint. We expect gross margin dynamics to be similar to Q3, with continued operating leverage as top-line growth continues. As a result, we expect non-GAAP EPS to be in the range of $3.72 to $3.87. In summary, our third-quarter results were exceptional, with record revenue and earnings that exceeded our guidance as growth continued to accelerate. We also made strong progress against our longer-term strategic priorities, establishing additional vectors of sustainable growth that we expect to begin contributing as early as the fourth quarter, positioning us to extend our strong track record into fiscal 2027 and beyond. Operator, we are now ready to open the call for questions. Operator: Thank you. Ladies and gentlemen, to ask a question, please press 11 on your telephone, then wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from George Notter from Wolfe Research. Your line is open. George Notter: Hi, guys. Thanks very much. I just wanted to click on the datacom business. I know that last quarter, you talked about having some new supply of 200-gig-per-lane EML coming online that would help support growth in the data business. It sounds like that did not happen. I am just wondering what is going on in terms of EML supply. Is that the gating item you are referencing, or are there other components that are problematic now? Anything more you can tell us there would be great. And then I just wanted to ask one also on CPO. I just want to be clear on where you guys see your opportunity in CPO. I assume that ELSFP that go into CPO switches are a real natural for you. Are you also going to manufacture other elements of CPO switches? Historically, you have not really been involved in manufacturing the switches themselves, but, obviously, this is a unique architecture. There is a large amount of fiber attached that goes into that CPO package. I just want to be clear on what you guys see yourselves doing in terms of that manufacturing exercise. Thanks a lot. Seamus Grady: Hi, this is Seamus. There are a number of commodities, you could say, that are causing us constraints. First of all, we are very excited at the breadth and depth of the opportunities in front of us, not just with our main customer but across a number of new products and new markets for us. Since we started to see the revenue accelerate from this AI-driven demand, our strategy has been to support the existing demand while pursuing additional hyperscale-direct and merchant relationships. We are excited with the progress we are making there. What we are managing right now is not demand risk; it is supply constraints. With respect to datacom supply, we saw a broadening of supply shortages for components and materials for datacom products, and as a result, shipments and revenue were well below demand levels. We could have shipped a lot more if we had those components. Without these supply constraints, datacom revenue would have been a new record by a wide margin. While we expect the constraints to get resolved over time, we do have to deal with them in the near term. We anticipate that supply volatility will continue, and it is in a number of areas. It is not any one component. It is a number of areas, mainly lasers, memory—which is no secret, there is a global shortage of memory—and also certain ASICs, so it is across a number of commodities. On CPO, for us, CPO is really an evolution from silicon photonics and precision photonics packaging capabilities that we have had for many years. It continues to be an area of investment for us to align our capabilities with our customers’ roadmaps. For many years, CPO has been just on the horizon, but it is a lot more real now than it has ever been, and we are in an excellent position to benefit. We feel we are well ahead of our competitors in making this technology a reality. We are already seeing some CPO revenue, but the amounts are relatively small at this point. We are working on a number of CPO programs with three different customers. The specific timing on each of them we do not want to speak to on their behalf, but we are working on three separate programs, and as with our customer programs, we expect to see the impact in line with or slightly ahead of our customers’ production schedules. The growth in CPO is in front of us. As you rightly point out, there are several opportunities for us in CPO, and we feel we can participate at a higher level up the food chain than we have historically. We are excited about CPO. Operator: Thank you. Our next question will come from Karl Ackerman from BNP Paribas. Your line is open. Karl Ackerman: Yes, thank you. I have two, if I may. Seamus, do you believe you will be at the full run rate of the current HPC program in June? I think the previous expectation was March and June time frame. How much visibility do you have with that follow-on program? And then maybe for Csaba: Building 10 was 2,000,000 square feet, adding a fifth floor. Is the 2,000,000 square feet still the case, or is it presumably maybe two and a half or so? And with respect to the two additional buildings of 1,000,000 square feet, given the high ROIC and relatively low upfront cost of building this new manufacturing fab, how quickly can you accelerate these manufacturing facility investments so you are not capacity constrained for these very large opportunities? Seamus Grady: Our current HPC program is ramping according to our customer’s expectations. It is not ramping in a perfect straight line—these things never do. We have been working closely with the customer to transition production to their latest-generation product, and that transition is making good progress. We have also been awarded some follow-on business for additional programs separate from the main programs with that customer, so we are helping to support their accelerated computing infrastructure in a broader way than we have in the past. We are installing additional capacity right now to support both the technology transition and also the additional products we will be manufacturing. Because of this technology transition, we now believe that the $150 million mark will be pushed out by maybe one quarter, but as a result, we expect our high-performance compute revenue to continue growing even after we reach the first $150 million quarterly revenue milestone. So, short term, this quarter we do not think we get to $150 million, but we think it is probably a quarter away. Longer term, because we are now making more than just one family of products, we think that opportunity is more than that. While timing has shifted slightly, the overall trajectory is stronger, and we expect continued growth beyond that $150 million level. We remain very optimistic about the long-term outlook for our high-performance compute business overall. On capacity, right now our current capacity supports about $4.8 billion in our current footprint. As we mentioned on the last call, we are converting about 120 thousand square feet at our Pinehurst campus into manufacturing space that will add an additional $200 million of capacity, taking capacity up to $5.0 billion before Building 10. Building 10 would add about $3.0 billion of capacity, and then the new factory we have purchased in Navanakorn, down the road from us, initially doubles that site’s capacity for about $250 million in the current factory that is on that land, with room to build another factory. Overall, that purchase will give us capacity for about another $500 million. So $4.8 billion in our current footprint plus the Pinehurst addition plus the Navanakorn factory plus Building 10 would take us to capacity of about $8.5 billion, if you add all that up. The timing on Building 10: the first floor will be coming on stream in June. We plan to have another floor ready, which will be mostly clean room space, by September or October, and the building would be finished by the end of the year, with the opening ceremony in January. Building 11, which we have not broken ground on yet, would give us capacity for about another $1.5 billion of revenue, and Building 12 the same. If we were to build out everything we have on the current land and space that we have, that would give us capacity of about $11.5 billion, there or thereabouts, probably a little bit more because as our growth accelerates, our revenue per square foot is also increasing. The timing of that is too early to talk about at this stage. We are focused on meeting our customers' needs and making sure we have capacity in place. We have ample capacity for the next few years, but we are seriously considering the timing for Building 11 and Building 12, and we are also looking for additional land in and around both the Pinehurst campus and Chonburi. High-quality problems. Operator: Thank you. Our next question comes from Samik Chatterjee from JPMorgan. Samik Chatterjee: Hi, thanks for taking my questions. Seamus, starting with the new datacom customer opportunities that you outlined with both the hyperscaler and some of the merchant opportunities, can you help us size that up in terms of what these customers are communicating to you in terms of their demand at full run rate? Just trying to compare it to your primary customer with whom you are doing about $250 million a quarter or so—how do these new opportunities size up relative to that? Is the supply chain different, where we should not expect some of the supply constraints you have with your primary customer to impact the ramp with the new customers? And then a follow-up on gross margins for Csaba. Seamus Grady: I think the supply chain is broadly similar across most of these primarily scale-out applications. Taking both of those in turn that you just mentioned, for the hyperscale relationship, we are excited about the new datacom opportunities we announced today. They are two separate products. We have already begun shipping, albeit in small, qualification-type quantities, but we have begun shipping those and expect that growth is already in front of us. We believe it will be significant. It is a significant piece of business for us. The demand we are seeing from the customer is very significant, and we are very focused on making sure we have the right capacity and capability in place to support the customer. In terms of merchant programs, for several quarters we have been working towards expanding our datacom business to encompass direct hyperscale and also deepening and broadening merchant relationships, and we have made sizable progress there. We have a couple of programs there as well that we are working on. Both hyperscale-direct and merchant are very significant and have the potential to be meaningful revenue contributors for us, but, as I said, all of these opportunities are essentially a very similar supply-chain ecosystem. Samik Chatterjee: Understood. Are you expecting that these programs, stand-alone, are like 10% of your revenue—are they that sizable? And then on gross margins, it sounds like you will be at the low 12% for the next quarter as well. How should we think about the recovery on the gross margin profile, particularly as ramp costs continue to feed through the P&L? Seamus Grady: We never predict which customer may or may not become a 10% customer. We only talk about that at the end of the year when we have to disclose which customers are 10% customers. We do not talk about it looking forward. They are significant opportunities; that is all I would say about that. On gross margin, I will let Csaba provide more color. Csaba Sverha: On gross margin, we are seeing a combination of external and internal factors. On the external side, exchange rates have been a headwind for a while, and that dynamic continues into this quarter. Margins from an exchange-rate perspective will be similar in Q4 as in Q3. We have some visibility with our hedging program in place, and Q3 panned out as anticipated in terms of headwinds, so Q4 we anticipate to be at that same level. At the same time, we are ramping a large number of new programs across multiple growth vectors, which sometimes creates short-term inefficiencies. This is a function of strong demand and the pace at which we are scaling the business. As these programs mature, we expect efficiencies to improve and to get back to our higher margin ranges. The good news is we are very disciplined on operating expenses. As you saw last quarter, we continue to generate operating leverage, and OpEx is trending down overall as a percentage of revenue; last quarter we were at 1.4%. While there are near-term pressures on gross margin—some of which we cannot control from an exchange-rate perspective—the overall model continues to deliver very strong, solid, and improving profitability as we scale. We feel very good about the underlying model and our ability to drive long-term profitability growth, and our ultimate focus is to drive strong return on capital and deliver consistent value to shareholders as we scale these programs. Operator: Thank you. Our next question comes from Christopher Rolland from Susquehanna. Your line is open. Christopher Rolland: Hi, this is Dylan Olivier on for Chris Rolland. Thanks for taking my question. For my first question, you spent some time talking about CPO and your role here. You mentioned that you are working with three customers or three programs and that you have begun getting revenue now. Are all these programs generating revenue today, and can you provide any color on whether these are all scale-out or if any of these engagements are related to scale-up? Seamus Grady: We are shipping to all three customers. They are both scale-up and scale-out. We are really putting the capacity in place and making sure we have the right technology in place. You can see with our investment in Raytec, it is to help us ensure we have the right capability. We are excited about CPO, but the revenue is largely in front of us at this point. Christopher Rolland: Thank you for that. For my second question, I wanted to ask about another opportunity that you did not discuss on this call, but OCS is seeing a nice explosion right now. Any color you can provide on how your engagements are going, when you think this could materialize, and if you can get a dominant share of the externally contracted OCS market? Seamus Grady: OCS remains a great opportunity for us as we look ahead. The technology is very similar to products that we already make for our customers, which gives us a head start versus our competition. There is no change in our optimism about OCS, but to be clear, the new merchant opportunities we talked about earlier are not OCS-related; they are separate. OCS opportunities are incremental to that and, similar to CPO, are largely in front of us. We are focused on one or two. It is too early to talk about them until we have something to talk about, but we are excited about OCS as a segment. Operator: Our next question will come from Ryan Koontz from Needham & Co. Your line is open. Ryan Koontz: Thanks for the question. Just wanted to ask more generically regarding your transceiver wins. Can you expand on where you would be in your milestone process before you would announce that you have a win? Is it when you have a contract, qualification, sampling? Not asking about a specific customer, but generically, at what point do you typically disclose, and might we consider these different programs somewhere between ramping to material revenue and maybe an MOU that is not contractually bound? Seamus Grady: Generally, we do not talk about wins until we have actually won the program. That means we have been awarded the business, we have contracts in place, we have purchase orders, and we have been qualified and approved. We are really at that milestone phase where we are getting ready to ramp at this point. We do not signal specifics on new programs until we have them won. Not all products that you think you have won early on turn into real products or real demand. In this case, we have a number of programs that we have won—contracts in place, product being shipped, subcontracts signed with customers—so we have actually won those. Ryan Koontz: That is helpful, Seamus. Thank you. As a follow-up on your strength in telecom—obviously DCI is a big star there—how would you characterize your customer mix within DCI? Is it changing? Can you share anything about the product mix there—400ZR to 800ZR? Are you seeing some industry shifts that are working in your favor within the telecom mix? Seamus Grady: Our position supplying the DCI market is very strong. We have all of the major players there as customers of ours. As we noted in the prepared remarks, our growth in DCI has been pretty staggering, and our telecom portfolio continues to go from strength to strength. We provide components, 400ZR and 800ZR modules, as well as telecom systems. We have evolved our business from being a niche optical component supplier several years ago into a diversified, strategic ecosystem partner for the leading OEMs for both optical components and systems across AI-driven growth in both datacom and telecom. The best example of that is our strength in DCI. Demand looks very strong. We continue to win business in that space and execute very well for our customers. There are a number of new programs that we are working on as well, in addition to ramping existing programs, with new products we are gearing up to ship. We feel very good about our momentum in DCI with the leading customers there. Ryan Koontz: Do you consider multihaul an opportunity in your wheelhouse within the telecom sector? Seamus Grady: Anything in the telecom space where we can have a high level of content is a good fit for us. Certainly, those types of products would be a good fit. Operator: Thank you. Our next question comes from Steven Fox from Fox Advisors LLC. Your line is open. Steven Fox: Hi, good afternoon, everyone. Seamus, on the supply constraints, it sounds like they got worse during the quarter, and at the same time, end markets are getting stronger. How do constraints not get worse going forward, and how do you manage through this and start catching up with demand? Is there any line of sight to improvements? And then I have a follow-up. Seamus Grady: We are not unduly concerned long term, but we do feel obliged to point it out in the short term because we guide one quarter at a time. It did impact our ability to ship last quarter—we could have shipped a lot more if we had those components—and the same this quarter. Overall, it is really a function of the growth we are seeing in the industries that we serve and in our business overall. We are proud of our track record of excellent execution built on dedication to customer service. That track record has allowed us to deliver the sales growth we have seen. Over a ten-year period up to FY 2025, we compounded revenue 16% annually and earnings 22%. In FY 2025, we grew 19% versus FY 2024, and for FY 2026, if you take the midpoint of our Q4 guidance, that would put us up 34% versus FY 2025. Growth is accelerating, and with that acceleration, it does expose certain supply constraints. The component supply ecosystem is doing everything it can to catch up with demand, but there is a lag right now. Our focus is on execution and ensuring we capitalize on this strong demand environment by having more than enough capacity in place to support the needs of our customers while we work on these challenges in the supply chain. It is nothing unusual; it is really a function of the explosive growth we are seeing. Steven Fox: Understood. On accelerating your own capacity additions, if we started today as another starting point, your ability to accelerate further—what else would you have to see? Would it be more new programs or loosening of the supply chain, and how long would that take? Seamus Grady: For us, these are quite straightforward capital allocation decisions because of the upside. We build a 2 million square foot factory that will give us capacity for an additional $3.0 billion of revenue. The CapEx is around $130–$132 million, depending on exchange rates. At full run rate in that factory, about six months’ worth of operating profit would pay for the entire 2 million square feet of manufacturing space. On the downside, if there is a downturn and we end up with no new business going into that factory—which we do not anticipate—the gross margin headwind would be about 50 basis points, a negligible headwind versus significant upside. The capacity is very fungible. Whether it is the 2 million square feet in Chonburi, the couple of hundred thousand square feet we just acquired in Navanakorn, or the 120 thousand–150 thousand square feet that we are converting in Pinehurst, customers are comfortable having their products built in either location. We have room to add two additional factories in Chonburi, and we can add another 200,000 square foot factory on the land we purchased in Navanakorn. We have ample land and capacity for the next several years and continue to look for more. As we see strong demand signals from our customers, making those capital investments is a relatively straightforward decision because we are not taking big risks; we are making sure we have capacity in place to support our customers’ needs. Operator: Thank you. Our next question comes from Mike Genovese from Rosenblatt Securities. Your line is open. Mike Genovese: Seamus, in talking about the direct hyperscale datacom business, I think you mentioned that there are two products. Does that imply an 800G and a 1.6T, or two 800G products? Can you comment on that? And then on DCI growth this quarter, did 800ZR in particular drive an outsized portion of the growth, or was it more broadly spread? I also noticed that you had some telecom growth above and beyond DCI. If you could call out those products that were not DCI that also grew in telecom, that would be helpful. Thank you. Seamus Grady: They are both 800G, but they are different applications, and they are both scale-out. On the mix between 800ZR and 400ZR, it is probably more appropriate for our customers to talk about that. 800ZR is ramping—it is getting going—and we have very big hopes for that. It looks to be a very strong product. A lot of those new programs are really in front of us and are just beginning to ramp, and I would put 800ZR in that category. On telecom growth outside of DCI, we continue to win business with our customers, both at the component level and at the system level, mostly share gain from some competitors. We are very fortunate to have what we believe are the best companies in the industry as customers, and demand for their products is very strong. Because of the very good job we do taking care of them and executing, they reward us by giving us more business. It is a self-reinforcing loop: the better we execute for customers, the more business they give us. It is a combination of growth in DCI and other telecom programs. Operator: Our next question will come from Timothy Savageaux from Northland Capital Markets. Timothy Savageaux: Seamus, I am going to take you back to OFC. You commented that you wished you could get farther out sometimes, and I am going to try to afford you that opportunity here with the following context. You mentioned maintaining momentum into ’27 and sustaining this growth trajectory. Looking at these datacom wins, it seems plausible that you could sustain, if not accelerate, this 34% growth rate that you are putting up in fiscal ’26. Any comments on that? And then, would you expect your two datacom direct wins to be at full run rate by ’27 or maybe even earlier? Lastly, on the merchant wins, how should we think about those opportunities, the rate they ramp, and whether that crosses over into the boundary of outsourcing from some of your historical one-time 10% customers? Seamus Grady: FY ’25 grew 19%. FY ’26, at the midpoint of our guidance, will grow 34% versus FY ’25. We have managed to do that with strong operating leverage. For example, in Q3, we grew revenue from $872 million to $1.214 billion—39% year-over-year growth—while operating expenses grew by 6.2% from $16 million to $16.99 million. Therefore, on revenue growth of 39%, our operating income grew 46% and our net income grew 48%. Growth without profits is not much fun for anyone, so we are focused on being cautious with the company’s resources while delivering operating leverage. The growth is accelerating. Demand signals we see from our customers look very promising for some time to come. We will continue to guide one quarter at a time, but that does not stop us from being optimistic about the future—certainly more optimistic than we have been in quite some time—with a very strong demand pipeline across telecom and datacom, and also industrial laser where we are seeing growth and new wins. On the two datacom direct wins, we would expect ramping throughout FY ’27, and likely earlier than late ’27—probably into the middle of ’27. On the merchant opportunities, some of these are very significant. The demand is very strong. We do not mind who we are making transceivers for, as long as we are making somebody else’s design. We are a services company. We will never have our own products, and we will never compete with our customers. That is very important for us and for our customers. Even a relatively modest percentage of any hyperscaler’s demand supplied directly would still be very significant. Any one of these could be a noteworthy opportunity, and the exciting part is we have several: two separate programs shipping to a hyperscaler, merchant business, and our main customer, plus strong telecom. Lots of growth vectors. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.