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Operator: Good afternoon, and welcome to Sunrun's First Quarter 2026 Earnings Conference Call. Please note that this call is being recorded and that 1 hour has been allocated for the call, including the Q&A session.? [Operator Instructions]? I will now turn the call over to Patrick Jobin, Sunrun's Investor Relations. Thank you. Please go ahead. Patrick Jobin: Thank you, Julian. Before we begin, please note that certain remarks we will make on this call constitute forward-looking statements related to the expected future results of our company, including our Q2 and full year 2026 financial outlook and other statements that are not historical in nature, are predictive in nature or depend upon or refer to future events or conditions, such as our expectations, estimates, predictions, strategies, beliefs or other statements that may be considered forward-looking. Although we believe these statements reflect our best judgment based on factors currently known to us, actual results may differ materially and adversely.? Please refer to the company's filings with the SEC for a more inclusive discussion of risks and other factors that may cause our actual results to differ from projections made in any forward-looking statements. Please also note that these statements are being made as of today, and we disclaim any obligation to update or revise them. Please note that during this conference call, we may refer to certain non-GAAP measures, including cash generation and aggregate creation costs, which are not measures prepared in accordance with U.S. GAAP.? These non-GAAP measures are being presented because we believe they provide investors with a means of evaluating and understanding how the company's management evaluates the company's operating performance. Reconciliation of these measures can be found in our earnings press release and other investor materials available on the company's Investor Relations website. 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.? On the call today are Mary Powell, Sunrun's CEO; Danny Abajian, Sunrun's CFO; and Paul Dickson, Sunrun's President and Chief Revenue Officer. A presentation is available on Sunrun's Investor Relations website along with supplemental materials. An audio replay of today's call, along with a copy of today's prepared remarks and transcript, including Q&A, will be posted to Sunrun's Investor Relations website shortly after the call. And now let me turn the call over to Mary. Mary Powell: Thank you, Patrick, and thank you all for joining us today. At Sunrun, we are busy rapidly ramping sales and operations to fulfill the surging customer demand we have generated for our offering. Sunrun is solidifying and expanding its leadership position as the nation's largest residential distributed power plant developer and operator. Our addressable market is no longer solar-driven savings. It is America's need for power to fuel our economy. Our strategy is working.? In Q4, we told you we had reached an inflection point.?Today, we're here to tell you that the momentum we built is holding and accelerating. In a market environment that continues to test many participants, our scale, our vertically integrated model, our product strategy, and our relentless focus on execution and customer experience are proving to be genuine, durable competitive advantages. Put simply, we believe the market dislocations occurring around us present opportunities for us to extend our lead and accelerate profitable, high-quality growth.? Let me start with our Q1 results. We added approximately 19,000 customers in Q1, and our storage attachment rate increased again to 73%, reflecting our continued commitment to a storage-first strategy as we build the nation's largest distributed power plant. Aggregate subscriber value for Q1 was $1.1 billion, above our guidance range of $850 million to $950 million. Contracted net value creation was $108 million, near the high end of our guided range of $25 million to $125 million. Cash generation came in at negative $31 million when excluding equipment safe harbor investments.? We chose to shift certain project finance transaction activity from Q1 into Q2, negatively impacting our cash generation for Q1. We remain on track for our full-year guidance of $250 million to $450 million.? Danny will walk you through the details of the financials in a moment, but I want to give you the strategic picture first.? When we closed 2025, we had installed more than 237,000 solar plus storage systems and approximately 4 gigawatt-hours of network storage capacity. In Q1, that number grew to 4.3 gigawatt-hours. Our fleet of dispatchable storage has grown by over 50% compared to the prior year. That is not just a metric. It is infrastructure. It is really distributed dispatchable power woven into American homes and the energy system, and it is something no one else in this industry has at our scale.? This is the business we have been building, not a company that sells solar panels, but a company that operates critical energy infrastructure that stabilizes the grid and provides customers with price certainty and backup power. In a moment of unprecedented electricity demand driven by AI data centers and electrification, coupled with an aging grid, that distinction has never mattered more.? I want to spend a moment on the dynamic industry environment we are operating in. Sunrun is incredibly well-positioned to capitalize on and extend our lead in the industry. The changes happening in the industry are difficult for many companies to navigate, but we believe that they play directly to Sunrun's strengths.? Let me hit the big changes in the industry and our position.?First, the consumer ITC under Section 25D of the tax code associated with cash purchases or loan financing sunsets at the end of December. Many smaller dealers and some of our affiliate partners that have significant volume dependent on the 25D tax credit have suffered significant volume declines this year. Sunrun's origination volume is almost entirely subscriptions, and thus, we are not seeing similar impacts from changes to the 25D tax credit.? Second, utility rate structures have become increasingly complex, and customer value propositions hinge on and can be expanded by storage that is properly designed and actively managed to ensure consumer value. We believe that our vertically integrated model has allowed us to provide the best customer experience and offerings. We train our sales force and operations teams and ensure end-to-end alignment. This is one of the reasons we have very deliberately shifted our growth mix towards our direct business.? Third, the regulatory complexity of navigating domestic content and Fiat rules is increasing. We believe that our experience and scale give us tremendous advantages to navigate these items from equipment, procurement, logistics, and compliance.? Fourth, we have focused on margins and cash generation, well ahead of others in the industry. This allows us to operate with a strong balance sheet that has low parent recourse leverage, enabling us to strategically invest in profitable growth and make the right long-term business decisions from a position of strength.? Our balance sheet strength, along with our large-scale operations, has also afforded us the ability to prudently invest in safe harboring, enabling maximum ITC levels through 2030.? Sunrun's end-to-end visibility, our vertical integration, and our sophisticated capital markets experience are precisely what allow us to drive competitive advantages and thrive.? We are leaning in during this moment of industry change. We are seeing strong momentum in direct sales force recruiting. We are matching direct sales momentum with ramping up our direct installation capacity, enabling us to approach year-over-year growth in overall installations later this year. We hired more than 1,000 people in sales year-to-date who are excited to be part of our growth trajectory. We are onboarding hundreds more, representing some of the best talent in the industry, from sales dealers who have recognized Sunrun's sustainable approach and appreciate our customer experience focus.? These talented sales representatives understand that the shifts in industry have made the dealer model unstable and unattractive. We are driving strong, profitable growth with expanding margins for new customers. We are also deep into our strategy of building capital-light sources of recurring cash flows that are independent of new customer origination. We will be monetizing our base of customers and providing at-scale resources to the grid. We plan to also offer these services to orphaned customers across the industry. We expect these recurring cash flows to scale and augment our cash generation growth in the coming years. Our full-year 2026 guidance remains intact, and we are excited about our long-term growth trajectory. I want to close by returning to what I believe most deeply about this company and this moment. America needs more power, and Americans want more independence and control. The proliferation of AI data centers, the electrification of transportation and homes, and the decarbonization of the grid all of these demand new solutions. The answer is not going to come from a single large plant that takes years and years to build. Instead, we believe distributed, intelligent, flexible resources deployed into homes and communities today will be a meaningful part of the solution. That is Sunrun. We have over 1.1 million customers across the country. We have the largest residential battery fleet in the country. We are dispatching energy to the grid. We are protecting families from outages, and we are doing all of this while generating meaningful cash, paying down debt, and building a balance sheet that gives us flexibility to invest in the future. Before handing it over to Danny, I also want to take a moment to celebrate some of our people who truly embrace our customer-first and service-focused mentality. This quarter, I specifically want to call out our team members in Hawaii. As we all saw, Hawaii experienced severe and catastrophic flooding this past March, affecting thousands of residents, including many Sunrun customers. Over a dozen of our team members in Hawaii, ranging from electricians to installers to sales leaders, spent many hours assisting in recovery efforts on the island of O'ahu. I'm so thankful for their contributions. Darius, Kelton, Chad, and all our Hawaii team members, Mahalo, we are incredibly proud to have you representing Sunrun. Danny, over to you. Danny Abajian: Thank you, Mary. Our Q1 volume performance exceeded our expectations as we expanded our sales force and increased productivity at a robust clip. We added nearly 19,000 customers this quarter, with average system sizes up 5% from Q4 and a 73% storage attachment rate, up two points from Q4. While customer additions are down year-over-year given the effects of reduced lead generation and sales activities in mid-2025 around the budget bill and our decision to reduce affiliate partner volume, early funnel sales activities this year have seen an inflection point toward growth. Based on the strong sales in our direct business, we are on track to resume overall year-over-year growth in installations later this year. To provide some more color on early-stage activities in our direct business, our active sales force has grown over 20% since the start of the year, and March saw over 30% growth in sales bookings month-on-month. These trends are outpacing the typical ramps we have seen at this point in prior years. Importantly, this growth is occurring in higher-value geographies and with our desired product mix. Aggregate contracted subscriber value was $980 million in Q1. On a unit basis, contracted subscriber value was up 14% year-over-year, driven by higher system sizes, a higher storage attachment rate, a higher average ITC level, and lower capital costs. Aggregate creation costs were $872 million in Q1. On a unit basis, creation costs were 18% higher year-over-year, driven by higher system sizes, higher storage attachment rate, and adverse fixed cost absorption from lower volumes. Upfront net value creation was $91 million in Q1, or approximately 9% of aggregate contracted subscriber value. This represents the cash margin we expect to obtain on systems, and their tax attributes are monetized before working capital and recourse debt interest costs. On a unit basis, upfront net subscriber value was $5,136, up over $4,000 per subscriber compared to the prior year. Cash generation was negative $59 million in Q1, or negative $31 million, excluding the $28 million net investment in equipment safe harboring. Cash generation was lower than our guidance due to our decision to shift certain project finance transaction activity from Q1 into Q2. We repaid $92 million of recourse debt in Q1, ending the quarter with $680 million of unrestricted cash and $626 million of parent recourse debt. Turning now to our activity in the capital markets. Investor demand for Sunrun's assets remains strong. We have executed and closed several traditional and hybrid tax equity funds and tax credit transfer agreements so far this year and have developed a pipeline of several transactions we expect will close during Q2. Corporate ITC buyers and traditional tax equity investors are actively engaging in their 2026 tax planning, and we are capturing a broadening base of investors. According to industry data, approximately 27% of Fortune 1000 companies purchased tax credits in 2025 in a market that grew nearly 50% from 2024. Tax credit investment has become a common practice for hundreds of corporate treasurers and CFOs who are generating savings and reducing their corporate tax rates, and we expect more of them to catch on this year. Market activity has picked up considerably since the second half of 2025, when tax law changes created temporary tax planning uncertainty. The pickup in activity has also driven modest recovery in market pricing for ITCs. Certain multinational tax equity investors have paused 2026 activity as they await Treasury guidance on Fiat ownership restrictions to confirm that their capital structure does not present any complications. The broader universe of tax credit investors is not impacted by ownership restrictions and remains active. We have built a supply chain and operating process for full FIC compliance. Through today, we have raised $774 million in nonrecourse asset-level debt financing year-to-date. The publicly placed tranche of our recent $584 million securitization priced at a spread of 220 basis points, a 20-basis point improvement from our most recent transactions in Q3 of last year. As of today, closed transactions and executed term sheets, inclusive of agreements related to non-retained or partially retained subscribers, provide us with expected tax equity capacity or equivalent to fund approximately 1,000 megawatts of projects for subscribers beyond what was deployed through the first quarter. We also have over $675 million in unused commitments available in our nonrecourse senior revolving warehouse loan to fund over 250 megawatts of projects for retained subscribers as of the end of Q1, pro forma to reflect the announced securitization. Approximately 23% of our subscriber additions in Q1 were monetized through the non-retained or partially retained model. As a reminder, proceeds from these transactions are equal to or better than our on-balance-sheet retained monetization while also providing simpler GAAP treatment and further diversification of capital sources. Under the joint venture structure, we retain a share of long-term cash flows along with grid services and the ability to cross-sell customers. Turning to our outlook on Slide 23. We are reiterating all of our 2026 full-year guidance. We expect strong volume growth in our direct business and to produce cash generation of $250 million to $450 million for the year, excluding the use of approximately $50 million to $100 million related to equipment safe harbor investments. We expect to continue to allocate cash generation to reduce parent leverage and make final equipment safe harbor investments. In the coming quarters, we will evaluate additional value-accretive capital allocation strategies depending on the market environment and our outlook. Operator, you can now open the line for questions. Operator: [Operator Instructions] And our first question comes from the line of Philip Shen with ROTH Capital Partners. Philip Shen: First one is on that tax equity pause, Danny, that you mentioned earlier. I just wanted to understand what the impacts on your business is or are. My guess is you guys have been able to pivot away to other sources of capital or funding. But ultimately, this can drive the cost of funding higher. And as a result, do you see any impacts on your volumes? I know you maintained your full-year guide, but the reality is, I guess it is impacting the wider market. You guys did cut affiliate volumes down 40% year-over-year a quarter ago. So, is the bigger impact more with the affiliates business, and you guys have everything buttoned up for the direct business? Danny Abajian: Yes. I would say maybe there are two different questions in there. I don't know that they're necessarily related if you're tying them together. I think I would say, starting with the go-to-market approach, there's a strategy decision to lean into the direct business for all the reasons we articulated. I'd say that's pretty much independent of our observations of conditions in the capital markets. So, those two aren't necessarily linked, perhaps in the way you did in your question. So, I would say, pull those apart. We've talked a lot about the go-to-market approach. On the capital market side, I'd say I wouldn't categorically refer to it as a pause in the market. Certainly, there have been a few who have paused their activity in doing transactions in the market. We did see, as we noted on the last call, a slowdown in activity in the market in late '25 second half of '25. We noted that there were a few cents per credit in terms of pricing impact that we had been seeing. So we've noted in the past that low-90s-area dollar-per-credit pricing has moved into the high 80s. And we also noted here in the remarks that we've seen a modest recovery, I would say a partial recovery, as the market activity has picked up early this year. I think people on the corporate buyer side worked sequentially to resume their buying activity. Now, once they have clarity on what they need for '25, the appetite has been there. It's now clear to them what that appetite is, and they've been procuring the credits. And as they've completed their exercise for '25, they have swiftly moved into filling their needs for 2026. It's been noted widely that there are a few players in the market who have paused over FERC restrictions. And I would say that's not related to our supply chain. That's related to the ownership side of FERC restrictions, and frankly, they want to be certain of their qualification in terms of the purchaser of the credits before they resume their activity. But that characterizes a rather small portion of the market. That does feed into the supply-demand fundamentals in the market that have led to modestly lower pricing, and again, we're seeing a nice recovery building. And that does have us feeling quite confident about matching that with the volume trajectory and the demand we're seeing. We feel nicely balanced there overall. Philip Shen: Shifting over to the Freedom Forever bankruptcy. Historically, I think you guys did work with them. So, I was wondering if you guys can talk about the exposure that you guys have there, if any? And then ultimately, when did you guys cut off Freedom from your affiliate network? Was it back during the Q4 call? Or was it done perhaps earlier? Paul Dickson: Yes, great question. So our partnership with Freedom has declined in volume programmatically over the last three years and gotten to a place where we have relatively little exposure or ongoing new sales generation with them. So, from a run-rate perspective, quite small. I think just to emphasize on your first point, to be amply clear, the dislocation between our strategy on deemphasizing affiliate partner business and ramping up our internal business is not driven by capital. We're raising capital, and we're growing that internal business swiftly, as Mary highlighted, and we're seeing robust growth in that area. So, it really is a focus on becoming an organization that has control over more aspects of the business that we think is paramount as we transition to be a distributed power player and build and own those assets. I'll let Danny talk specifically about any of the financial exposure. Danny Abajian: Yes. I'd say well-managed, as we have participated in the affiliate partner space for nearly two decades. So, we've had lots of safeguards to manage our financial exposure regardless of the partner. I'd say the nature of the exposure is related to projects that are in flight. They may have been installed but not fully interconnected. And so there is an exercise of working through the in-flight pipeline for us, and that's how we think about the exposure. I think a lot of that is operational in nature. And because we are vertically integrated, should we need to step in and complete the installation, we could also do that. So we have more direct control over the outcome. But apart from that, I'm not going to disclose specific figures here on the call. Operator: Our next question comes from the line of Colin Rusch with Oppenheimer & Co. Colin Rusch: I just want to get into some of the assumptions on the net subscriber value. Obviously, a little fewer megawatts get amortized over the OpEx, which gets amortized over that pretty clearly. But having a little bit higher percentage of noncontracted value, I just want to understand the underlying assumptions around that and what's driving some of that value capture? Danny Abajian: Are you doing the comparison sequentially, just so I follow which numbers you're looking at, so I can address that? Colin Rusch: I'm just looking at the almost $6,000 of noncontracted net subscriber value, which is substantially more than what we've seen historically. I'm just trying to understand. Danny Abajian: Yes. So we've noticed there are a few factors at play. Some of it is system characteristics. Some of it is mixed. So system sizes are larger. You'll note that in the metrics. The storage attachment rate is higher. Less impactful on the renewal, but the overall average ITC level is higher. So, we had more domestic content qualification in the period. That will range a little bit here for the balance of the year. I'd say most notably, you'll see some fluctuation across the last several quarters related to the retained and non-retained mix. And I think that would be the biggest driver of the noncontracted value, but it's a big driver overall. And of course, the discount rate will fluctuate. I'd say those are the key drivers to the top-line subscriber value numbers and specifically to the noncontracted value. You'll also see some sequential impacts or year-over-year impacts on the creation cost side, where I would say it's most heavily driven by lower fixed-cost absorption in the period, which is related to the volume decline we've seen sequentially over the last few quarters, which, as we noted, we expect to inflect, and we'll gain a lot of that back. There are also some mixed effects on the cost side as we mix shift towards our direct business away from the affiliate business, there are some lagging costs that are blending up the creation cost figure that's weighing us in period, and that drag should alleviate over the coming few quarters. Colin Rusch: Then, looking at the market, we're obviously going through a pretty substantial shift in terms of end market dynamics with competition as well as where some of these crews are. I'm just curious what the most prominent gating factors are for you guys right now in terms of megawatt growth? Is it sourcing deals? Is it construction availability? Or is it tax equity availability? I just want to understand how you're managing some of those limitations. Mary Powell: Yes. Great question. This is Mary. Yes, again, we are ramping meaningful profitable growth. Our access to capital to support it is strong. Our whole approach is an extension of what we've been doing now for years, which is very sharply focused on where we can do that in a way that has the best customer experience with the highest profitable margins in the business and also, at the same time, do it in a way where we are positioned really strongly from a distributed power plant perspective. Paul Dickson: I think just adding to that, I would say, as Mary articulated formerly on calls, we've been appropriately, I think, selective around hiring and onboarding sales talent to generate more volume in profitable markets at returns that are attractive and trying to be thoughtful around attracting the best talent that we can. And I think some of that talent swirled around with the 25D expiration and looked at different homes, some with us, some with other players. The market turmoil that's taken place over the last several months with different finance shops pulling back, changing pay, adjusting, exiting the space, and then several installation shops struggling, going out of business, closing up their shops. More and more of the sales talent that's thoughtful and analyzing the market is realizing the unsustainable and unattractive nature of the dynamics of that business, and we're starting to see more and more of that business flow to us. So, where previously we've been a bit cautious around the internal growth and said it will be steady, we're starting to see pretty steep upticks in that and are growing increasingly bullish on approaching later in this year's year-over-year growth overall, absorbing all of the dealer decline and seeing attractive growth in the internal direct business. Operator: And our next question comes from the line of Brian Lee with Goldman Sachs. Brian Lee: Danny, going back to some of your comments around tax equity, I know that's been a key focus for the market and investors since your commentary from last quarter. So curious, it does sound like on the margin, you're seeing some improvement in trends. You quantified it in terms of pricing and how it's a systematic pause here. It's maybe just a few lenders that are holding off. But is that a fair assessment of your view of the market today versus where it was at the end of last year and maybe early this year? And then how much does tax equity availability and/or cost play into your view of the low and high end of the range for cash generation this year? Danny Abajian: Yes. So, your recap and how you characterized it, I think I agree with that, was spot on. I think we're seeing more and more buyer activity pick up. I would say that there's a bit of a narrow focus here on the tax credit transfer market. And if we stay there for a second, that market was $28 billion in 2024, $42 billion in 2025, and it grew that much despite there being a wide noting of there being a slowdown in that market. So it still overcame all of that and had a 50% year-over-year growth rate. And it's still only 27% penetrated in the Fortune 1000. And to add a little bit more color, when you look at who bought in '23 and '24, there was an 80% repeat rate for them being buyers in 2025 again. So, what's been proven out in the data so far is that once you start doing this, your tendency to repeat it is very high. The entry cost is also a little bit high as a corporate Treasurer, CFO in a non-related industry, just learning how to do this. Once you overcome that hurdle, it's something that becomes part of your planning and is in the process of going mainstream. I think that is visible to us as we observe this now with 3 years of data. The amount of last year's unsold credits exiting '25 was half as much as it was for exiting '24. So, all the trends there are positive. And that's why we see research and market forecasts indicating that we might see full price recovery, where the second half of this year might have pricing that's as high as the first half of last year. So just to add all of that color there. Then I would say, in addition, we've built a pretty broad base of investors going back to a narrow focus on tax credit transfers. That's a big piece. We have the non-retained asset sale monetization transactions, and that's been a pretty significant part of our mix. And on the tax equity side, we're still doing traditional structures, even traditional structures with new investors entirely and using pref equity structures. So, we built a pretty broad base of capital. So we further diversified it through the period of market slowdown. We saw through enough transactions, obviously, to get '25 done. And now our focus is looking forward to '26. Brian Lee: And then any thoughts just on low-to-high-end ranges of cash outlook for this year, what's embedded in the tax equity availability and cost side? Danny Abajian: It's still $25 million per penny of, on a dollar per credit basis, $25 million per penny, plus or minus. Operator: And our next question comes from the line of Praneeth Satish with Wells Fargo. Praneeth Satish: So, just maybe, just so I understand it correctly. So Q1 cash generation was impacted by a shift of financing into Q2, I guess, due to the disruptions in the tax equity market. Can you help frame, I guess, how much volume got shifted and maybe what Q1 cash generation would have looked like absent that shift in timing? Then, when you look at Q2, now that we're here in May, can you give us a sense of how far along you are in terms of proceeding with those transactions that you've shifted from Q1 into Q2? Danny Abajian: Yes. So the negative $31 million is the number that excludes the Safe Harbor investment of $2. So, on a pro forma basis, starting from negative $31 million, you would have to believe that $31 million or more of a draw from a fund that closed earlier would have taken us to break-even into positive territory. So that would be the gap. I would say, just to clarify a part of your question there, the delay is not related to a slowdown in the market. I think we've always noted it's inherent to transactions that some close before the quarter, some close after, and deals need to be right, all deals need to be right to close it all. And I think that's the nature by which I'd characterize that. I think again, we could see lumpiness in the result over the quarters. Obviously, our job is to keep transactions tightly on the calendar. Sometimes we do. Sometimes we might see it straddle quarter ends. And I think we're generally fine with that when we zoom out, look over a rolling 4-quarter period, we want to have a high magnitude of cash generation. I think that's what we're looking for the whole year. Praneeth Satish: And maybe just switching gears. So if I look at fleet servicing costs, they've been trending down quite a bit over the last few years, including this quarter. Can you talk about what's been driving those reductions? And then, whether you expect those costs to continue to decline or if you're kind of nearing more of a natural floor there? Mary Powell: Yes. Thanks for that observation. Yes, it's the result of having a team that has been relentlessly focused on how to improve the experience and service for customers while doing it in a way where we, frankly, leverage our scale, our capabilities as the largest installer in the country, and continue to have a focus on driving down costs. And also, we've done a lot, as I know we've highlighted before, in terms of having a team that can really help us leverage AI to get to next-click improvements that again drive down the cost. So we're really pleased with what we've seen, and we expect to still see more improvements in the coming months and years. Operator: And our next question comes from [Technical Difficulty]. Unknown Analyst: Danny, I think you gave a number of the 1,000 megawatts of closed transactions and executed term sheets. Can you just speak to the mix within that tax equity pipeline between the different buckets that you're speaking of? So corporate buyers, like big multinational financial institutions, that kind of thing? Danny Abajian: In terms of the investor mix, very large global institutions through to more specialized domestic players. Like on the ITC buyer side, that spans across all industries at this point. So I could give you lots of examples of companies that are not traditionally even tied into the solar space at this point. Unknown Analyst: So would you say those corporate buyers are a bigger part of the mix today? And if so, could you just give us a sense of how much that could be? Danny Abajian: Yes. So we noted 23% of the systems were sold into the non-retained model. So that's quantified, and that's a single investor acquiring assets in a JV structure. And apart from that, there's a mix of traditional and hybrid tax equity funds where sometimes the tax credit purchase is stapled with the same investor who is participating in the fund. Sometimes it's a hybrid where we are selling out tax credits to the ITC transfer market. And then there's an emerging set of pref equity type JV structures, such as what we announced in a press release with Cannon Armstrong last quarter. I think that's another transaction mode that gives you a flavor of the type of investor. I think there'd be more of that. And in those transaction types, there's also the ITC transfer activity going out to the same market that spans all industries at this point. Operator: And our next question comes from the line of [Technical Difficulty]. Unknown Analyst: A couple of different things here. First, can you talk about the nature of the change in the partnership a little bit more? Does that impact anything around your cash flow and cash? Obviously, you reiterate guidance, et cetera. Just can you talk a little bit about that and the strategic decision on why to do it now? Can you elaborate on that? And then I'll throw in the second one. Mary, you talked about the success you're having in the direct business. Is there any change in your strategy and how you're going to market here? You've got the new sales talent in the door. It's ramping up nicely, as you say earlier in the Q&A. How are you doing it differently this time, if at all? I'm just curious about how you're shaping the sales tactics at all versus the affiliate channel. Paul Dickson: Can you just clarify on the first part of your question, which partnership are you referencing? Unknown Analyst: Yes, apologies. On the financing side, you all's JV structure here. When you think about retaining the cash flows here and any changes, how does that impact your cash guide? Danny Abajian: So I'll go on that, and Paul will handle the growth piece. So we have the same things that we've disclosed in the past. So there's the non-retained model that's with an energy infrastructure investor. And then there's the Hannan joint venture transaction that we also talked about. I think more diversification into those transactions could occur as well. So I think structurally, we like the efficiencies of those transactions. The economics of those transactions are all in a very similar range. I would say we've noted very specifically that upfront proceeds look very similar in the non-retained model as they do in the retained model. We said that and maintain that. And all of that is assumed in the $250 million to $450 million guide. Paul Dickson: And then on the market dynamics, I think the major thing I think that's important is understanding the market itself. And I think people have tried to categorize consumer demand. I think, generally, I would summarize consumer demand as being unaware. And so consumers are sitting there, generally unaware that this solution exists. As we ramp up and deliver salespeople to educate Americans about this alternative option, we continue to see the same take rates, the same adoption, the same excitement, and have seen nothing but that continue to accelerate. The real change in that has come from us selling a solar savings product years ago to being critical infrastructure and going to a customer, saying, we can insulate you against price uncertainty caused by these energy shortages, and we can give you resiliency with a battery, insulating them against power outages, and combining that with it actually being a grid infrastructure resource. The market for this is, I would question back, does America need more power, and is dispatchable power useful? And that is the market that we're really serving. And so, approaching it that way, and kind of candidly, changing the way we train our salespeople and the value proposition, how it's delivered, has been an evolution over the last 24 months. And we're seeing better success now, higher take rates, and more of those consumers that we go and approach accepting and adopting the product. So we're seeing a lot of efficiency pickups as a result of that. But that dynamic change has taken place slowly over the last several quarters. I think, just generally looking at the growth, I would say Sunrun has been focused on being stable, being sustainable, and underwriting assets correctly. As the market outside us continues to see more turmoil, the stability of Sunrun becomes more attractive, and more people are flowing into that program. Mary Powell: It's Mary. I would just say, layering on that, like simply put, it has become what we sell has become more sophisticated. Policy changes have gotten more sophisticated. And meeting customer needs requires a company like Sunrun that's very, very focused on the customer and has sophisticated capabilities around training the sales force and ensuring that we provide the best fit for customers. So again, as we said on the last call, we continue to make strategic changes to make sure that we're delivering world-class NPS to customers. We're delivering the right product in the right way, program the right way for them, both for the consumer and for the grid. And what we're finding is that we can scale that really significantly and effectively in the direct business, and that's why you've seen us focus on it. Operator: And our next question comes from the line of Maheep Mandloi with Mizuho. Maheep Mandloi: I think just mostly on the tax equity side. Maybe separately, just on the products going forward, is there a possibility you could see just selling a battery storage product somewhat similar to what we've seen in Texas with 25, 50-kilowatt-hour batteries with utilities over there? Any opportunities on that end you're seeing in the market? Paul Dickson: Yes. So we've launched our stand-alone battery offering, and it's being received extremely well. We sold thousands of units, and as that continues to grow in size and scale, we'll probably start providing more reporting on it in the future. Maheep Mandloi: I look forward to that. And maybe just like one housekeeping just on the recourse debt. So, the plan is still to get to 2x below the cash generation, or are there any plans to pay down even further than that? Danny Abajian: Yes. I think we'll get to that number, if not a little bit through it, by the end of the year. And so we're on track for that. That goal hasn't changed. Obviously, we had a big payment down in this year's Q1. So we've started the year pretty well on that dimension, and we expect to see more pay down before the end of the year, but I think we're trending towards that less than 2x total parent debt to trailing four-quarter cash generation multiple. Operator: And our next question comes from the line of Robert Zalper with Raymond James. Robert Zolper: I think on your last call, you said across the portfolio, you've experienced roughly 75 basis points of annual net defaults. How has that been trending since the last call? Danny Abajian: Yes. I think we've been seeing across the board, I would say, starting with the macro piece. We've been seeing a little bit of a credit cycle, just consumer performance degradation. I think we've been looking at -- I would say nothing different as far as the ranges we've been seeing. There's a pretty there's a range based on different markets, different average FICO profiles or FICO bands, and some of our affiliate and non-affiliate mix is also changing. I think we see an elevation, frankly, of default rates with a greater affiliate mix and some of the market mix implications. So we've been looking at an initial period of a couple of years where default rates look elevated. And then the annual default rates start to fall as we get through early-on issues on the customer-facing service delivery side. I think that's had an impact. As it was noted, our service costs are down more than 30% year-over-year, but that's also with greatly improved SLAs. That's certainly related to some degree. Now we're all in the less than 1% per year territory, so very small, but we've seen elevation recently, and we have lots of reasons to believe that those will also be coming down and are generally contained. Robert Zolper: And then, as it relates to your renewal rate assumptions, if you have 75 basis points of net defaults annually, so roughly 20% over a 25-year life. Like, how could you have renewal rates in excess of 80% if that is the case? Danny Abajian: Yes. On Slide 30, I'll point you there. We have given you the -- just at the very top, what the default rate affected, I guess that's uncontracted. On the renewal piece, I'd say it's not linear. So, just go back for a second. We have that on the contracted piece. We do not have it on the non-contracted piece on the sensitivity table, just to be clear. So then you're assuming a renewal rate. I'll remind you that the contract says we can renew at a 10% discount to the then-current utility rate. That's generally across our contracts. Whereas our renewal rate assumption in these tables assumes that we are renewing at x-percent of our year '25, for example, our year '25 Sunrun solar rate. And if we had initial savings and utility rate inflation was far outpacing our annual rate of increase, we would be pretty well discounted to the expected utility rate out in the future. So I think that mathematically, you should be able to get to these rates even assuming a lot of customer attrition. But I'd also note that even where we see an annual default rate, that's really the amount we bill and the amount we collect. And for many customers where we don't collect for some period of time, there's a high correlation with them being in the process of, for a subset of them, going through a foreclosure or a short sale. Ultimately, somebody buys that home, and they're a creditworthy obligor, and they resume payments. So it's not a full attrition rate either. Operator: And our next question comes from the line of Vikram Bagri with Citi. Vikram Bagri: I apologize for that. Just one quick question, but a difficult question. You're certainly more sophisticated in raising and recycling capital than the average TPO. You've seen a lot of stress in the market with a few blowups. There was a discussion about another one this morning by one of the suppliers. Where do you see your market share next year or at the end of this year? I guess I'm asking if the TPO market as a whole in the U.S. grows or shrinks after the dust settles on safe harbor, the tax equity, and your guidance. Fully understanding that you manage your business for profitable growth. I'm just curious how you see the state of the market today and how it evolves. And based on that view, would you layer on more safe harbors? If you see an opportunity to gain more market share given the hiring you've done, would you layer on more safe harbors because there's an opportunity to gain market share? Paul Dickson: Yes. So today, Sunrun represents 1/3 of the subscription volumes in the United States for solar products. We are more than 50% of the storage market across the country as well. And so, on those two metrics, just a short answer, we anticipate them going up and continuing to grow as we execute our strategy. I think we will continue to see consolidation in the space and be the recipient of that consolidation. Danny Abajian: You mentioned safe harbor, so let me hit on that as well. So with our $50 million to $100 million of use of cash for safe harbor activity this year, where we have a July 4 deadline. That's one year from the date of bill passage. As we complete that exercise, we will have safely harbored the use of the solar ITC out through 2030 with a combination of vendors. We note that in the deck, numerous vendors with different strategies, with redundancy built in and with some buffer for growth, which I think gives us a window of opportunity to play the market opportunity. And as Paul noted, that should lead to the enablement of market share capture over time, especially as you look at the 25D credit no longer being there, a lot of the demand that's still there for solar will access it via our product. And then, just the operational fulfillment, there were some questions throughout the call here. There's lots of very good coordination across, like at a very, very geographically specific level. We get to see how many retail stores are staffed, generating leads. We get to see how many new reps are selling at the door. We have the exact signal we need to know how much to go hire on an existing platform that is already at scale and can grow in a very cost-efficient manner. So the pull-through on the fulfillment is more of a coordination task. We don't see bottlenecks to that. Operator: And with that, ladies and gentlemen, this does conclude our question-and-answer session as well as today's conference call. We thank you for your participation, and you may disconnect your lines at this time and have a wonderful rest of your day.
Operator: Good afternoon, everyone, and welcome to the First Quarter 2026 Earnings Conference Call and Webcast for Hamilton Beach Brands. Earlier today, after the stock market closed, we issued our first quarter 2026 earnings release, which is available on our corporate website. Our speakers today are Scott Tidey, President and CEO; and Sally Cunningham, Senior Vice President, Chief Financial Officer and Treasurer. Our presentation today includes forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in either our prepared remarks or during the Q&A. Additional information regarding these risks and uncertainties is available in our 10-Q, our earnings release and our annual report on Form 10-K for the year ended December 31, 2025. The company disclaims any obligation to update these forward-looking statements, which may not be updated until our quarterly conference call, our next quarterly conference call, if at all. The company will also discuss certain non-GAAP measures. Reconciliation for Regulation G purposes can be found in our earnings release. And I'll now turn the call over to Scott. Scott? R. Tidey: Thank you, Brendan, and good afternoon, everyone. Thank you for joining us today. We are pleased to report first quarter profitability that exceeded our expectations. First quarter revenue was expected to be down year-over-year as we are up against a challenging comparison. And while it declined slightly more than planned, we delivered exceptional gross margin expansion of 510 basis points, which drove operating profit growth of 115% to $5 million. Sales were modestly below our expectations, primarily because March was softer than planned. Consumers remained under pressure and discretionary spending weakened in parts of our business. The impact was most pronounced in our U.S. consumer business, where shoppers in our price segments appear to be especially affected by elevated fuel costs. At the same time, our gross margin performance was slightly -- was significantly stronger than planned. Thanks to the implementation of foreign trade zone last year in our distribution center, we were able to quickly capitalize on the Supreme Court's ruling on IEEPA tariffs in late February, shipping certain products in March that had no additional tariff charges. First quarter gross margins also benefited from other tariff mitigation actions, including diversifying our sourcing strategy and selectively raising prices, the latter of which will continue to be a tailwind in the second quarter due to the delta in the timing between the price increases and higher costs hitting our P&L. This margin expansion more than offset modest sales shortfalls and resulted in profitability that exceeded our expectations. Besides the recent global uncertainties, we continue to make meaningful progress on our five strategic initiatives, and I wanted to update you on each of these. Starting with driving growth of our core business. We are executing well on our product innovation pipeline. Our three new innovative blender kitchen systems are gaining traction in the market, bringing fresh innovation to one of our strongest categories. The redesigned Durathon iron platform launched during the quarter with exceptional reception, building success on an established Durathon technology. We are particularly excited about our expansion into the garment steamers with new models and believe we are well positioned to capture share in this large and growing segment. Looking ahead, our two new single-serve coffee platforms launching in the second half of the year will bring needed innovation to another important category. Additionally, we recently picked up placements for multiple product categories. This includes expanding several programs with a leading department store in the fall, adding shelf space at two top wholesale membership clubs and increasing penetration with a leading mass market retailer. These wins are being supported by our significantly increased investment in digital, social media and influencer marketing, which is helping us connect with consumers in new and more efficient ways. Moving to accelerating our digital transformation. The consumer shopping journey continues to evolve rapidly, and we're adapting our approach to meet them where they are. We're leveraging our strong foundation of e-commerce capabilities and our consistently higher consumer reviews and ratings, which average above four stars across our brands to drive discoverability and conversion. Our increased advertising investment is focused on ensuring we are present and relevant when consumers are making purchase decisions. We've added resources specifically focused on improving our discoverability across platforms and sharpening our AI shopping tactics to stay ahead of the curve as generative AI increasingly influences shopping behavior. And we are excited to announce that we recently selected a new advertising agency that will help oversee and drive our digital marketing strategy starting in the second half of the year. Gaining a larger share in the premium market is our next strategic initiative. The premium market represents approximately half of the $9 billion U.S. appliance market, and we currently hold only about a 1% share in this segment, providing us with tremendous runway for growth. Our Lotus brand expansion continues to exceed expectations. Following the strong double-digit sell-through results we achieved with the Lotus Professional launch in 2025, we're preparing for the fall launch of Lotus Signature. Our key retail partner has committed to expanding shelf space based on the brand's performance, which validates our strategy and provides a platform for accelerated growth. Turning to leading in the global commercial market. Our commercial business continues to gain traction and represents a significant growth opportunity. The Summit Edge high-performance blender remains a cornerstone of our commercial strategy. We're deepening our relationships with large food service and hospitality chains with particular emphasis on regional and global penetration. To that end, another of our commercial blenders, the Eclipse, will soon be added to a leading national coffee chain. Meanwhile, we recently picked up a spindle maker placement for a leading U.S.-based fast foods chain for their Central America locations. Lastly, our Sunkist commercial juicers and sectionizers, which we launched in the second quarter of last year, continue to exceed expectations with accelerating demand from leading restaurants, hospitality chains and schools. Finally, accelerating growth of Hamilton Beach Health. The first quarter marked the third consecutive quarter of profitable growth for this business, and we are on track to increase sales by 50% this year. We're making excellent progress expanding our injectable reach by adding more specialty pharmacy and pharmaceutical company partnerships. We recently signed on a new injectable drug that will be available on our Smart Sharps Bin platform starting this quarter. At the same time, we are broadening our connected medical device platform beyond our core injectable medication management. In the third quarter, we will launch the pilot of our pill management platform, which is designed to improve medication adherence and provide valuable patient feedback. We are initially targeting oncology and mental health treatments with plans to expand other therapeutic areas as we validate the platform's effectiveness. This expansion represents a significant opportunity to address additional patient pain points and grow our distribution network with large specialty pharmacies. As Sally will discuss shortly, we remain confident in delivering our 2026 financial goals despite the recent downturn in consumer sentiment. In addition to comparisons beginning to ease starting in April, which has helped our recent trend line, we plan to reinvest the margin upside from the first quarter into additional promotional programs to help drive demand in the current environment. Looking past the current headwinds, we believe our diversified business model across consumer, commercial and health, combined with our strong brand portfolio and the strategic initiatives we're executing provides multiple avenues for growth and positions us well to capitalize on opportunities as market conditions continue to stabilize. I want to thank our teams for their continued dedication and execution. Their agility in navigating the March consumer headwinds while delivering exceptional margin performance exemplifies the resilience and commitment that defines our organization. With that, I'll turn it over to Sally. Sally Cunningham: Good afternoon, everyone. Echoing Scott's comments, we are pleased with our start to the year, especially our gross margin and operating profit performances. For the first quarter, revenue was $122 million compared to $103.4 million a year ago, a decline of 8.6%. The revenue decline was primarily driven by lower volumes in our U.S. consumer business as we lapped our highest growth rate from last year. The lower volumes in our U.S. consumer business were partially offset by higher prices, and our overall results include another quarter of robust sales growth from our healthcare division. Turning to gross profit and margin. Gross profit was $36.2 million in the first quarter, up 10.4% compared to $32.8 million in the year ago period. Gross profit margin was 29.7% compared to 24.6% of total revenue in last year's first quarter. The 510-basis point improvement in gross profit margin was due to favorable pricing and customer mix, partially offset by higher product costs. I want to highlight that the margin improvement included a one-time benefit of 190 basis points related to the sell-through of inventory that was priced in anticipation of IEEPA tariffs that were eliminated following the Supreme Court ruling. This benefit is nonrecurring and will not persist beyond the sell-through of affected inventory. The other 320 basis points of improvement was driven by the timing of our price increases that Scott touched on earlier that will normalize as we get into the second half of the year and increased penetration of our higher-margin commercial and health care business. Selling, general and administrative expenses increased $31.2 million compared to $30.5 million in the first quarter of 2025. The increase was primarily driven by $1.4 million in accelerated depreciation of our legacy ERP system, which we are in the process of replacing, partially offset by the benefit of restructuring actions we took during the second quarter of last year. Our strong gross margin gain allowed us to more than double our operating profit to $5 million compared to $2.3 million in the first quarter of 2025. Income tax expense was $1.4 million in the first quarter compared to $700,000 a year ago. And net income in the first quarter was $3.5 million or $0.26 per diluted share compared to net income of $1.8 million or $0.13 per diluted share a year ago. Now turning to our balance sheet and cash flows. For the three months ended March 31, 2026, net cash provided by operating activities was $3.3 million compared to $6.6 million for the three months ended March 31, 2025. The decrease was primarily driven by higher net working capital, including a planned increase in accounts receivable following our decision to exit the arrangement with a financial institution to sell certain U.S. trade receivables of a single customer, which shifted the timing of cash receipts. This was partially offset by lower incentive payout compared to 2025. During the first quarter of 2026, we allocated our cash flow to repurchase approximately 55,000 shares totaling $900,000 and paid $1.6 million in dividends. At the end of the first quarter, net debt was $2.6 million compared to net debt of $1.7 million on March 31, 2025. Turning now to our outlook for 2026. We are reiterating our previously issued guidance. We continue to expect revenue growth to approach the mid-single-digit range. Gross margins are still projected to be similar to slightly better than 2025 level as we reinvest the upside from Q1 into additional promotional programs to drive demand, while operating profit on a reported basis is expected to decline low teens on a percentage basis, inclusive of an incremental $6 million in planned advertising spend in 2026 to support our strategic growth initiatives and approximately $6 million in accelerated depreciation associated with our legacy ERP system. Cash flow from operating activities less cash used for investing activities for 2026 is expected to be in the $35 million to $45 million range. Our current earnings and cash flow outlook excludes any potential impact from IEEPA-related refunds, which total approximately $41 million of tariffs paid in 2025 and early 2026 that the company is actively pursuing. However, the timing and ultimate recovery remain uncertain. In closing, we entered 2026 with building momentum and renewed confidence in our ability to deliver sustainable growth and shareholder value. Our diversified business model, strong brand portfolio, and the work we've done strengthening our foundation position the company to capitalize on improving market conditions this year and create a platform for long-term growth. This concludes our prepared remarks. We will now turn the line back to the operator for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Adam Bradley from AJB Capital. Adam Bradley: Question about Lotus. The investment behind them, and just how things are going, and if we should expect additional investment behind Lotus beyond 2026. R. Tidey: Adam, this is Scott. So yes, as we indicated, we had a great launch with our initial exclusive national chain in the back half of 2025. That exclusivity with that chain ended in the first quarter of 2026. So we are now rolling that out, Lotus Professional, out to other retail customers as we speak. And as mentioned, we're super excited about launching Lotus Signature later in the year, which will be closer to the holiday time period. And we did support the business of several million dollars last year, and we expect to do so with more this year. And that would continue through into 2027 as well and beyond. Adam Bradley: All right. So is there -- will there be a time -- given the level of investment, what are your kind of long-term expectations for Lotus? R. Tidey: I don't think we have a dollar revenue amount that we're going to put out there and project. I think that we believe that we can go in and grab multiple share points in this very large segment of the small kitchen appliances. And we've got what we believe is very targeted retailers to be able to do that. Those are both brick-and-mortar and online customers that we feel like are more in the premium position. And the revenue will come. Again, we're willing to commit. We know this is building our own brands, so we're willing to commit to the advertising investment behind it to build that brand awareness. Operator: [Operator Instructions] There are no further questions in the queue. That concludes our question-and-answer session. That also concludes our call for today. Thank you all for joining, and you may now disconnect.
Operator: Welcome to the Mineralys Therapeutics First Quarter 2026 Conference Call. It is now my pleasure to introduce your host, Dan Ferry of Life Science Advisors. Please go ahead, sir. Daniel Ferry: Thank you. I would like to welcome everyone joining us today for our first quarter 2026 conference call. This afternoon, after the close of market trading, we issued a press release providing our first quarter 2026 financial results and business updates. A replay of today's call will be available on the Investors section of our website approximately 1 hour after its completion. After our prepared remarks, we will open up the call for Q&A. Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings, including our annual report on Form 10-K and subsequent filings. Please note that these forward-looking statements reflect our opinions only as of today, May 6, 2026. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. I would now like to turn the call over to Jon Congleton, Chief Executive Officer of Mineralys Therapeutics. Jon Congleton: Thank you, Dan. Good afternoon, everyone, and welcome to our first quarter 2026 financial results and corporate update conference call. I'm joined today by Adam Levy, our Chief Financial Officer; Dr. David Rodman, our Chief Medical Officer; and Eric Warren, our Chief Commercial Officer. I'll begin with an overview of the business, our clinical programs and recent milestones, followed by Adam to review our first quarter financial results before we open up the call for your questions. Our NDA acceptance in the first quarter has been the culmination of a massive effort by our team and our mission to provide more healthy days to patients with cardiovascular disease. From an operational perspective, we're focused on preparing lorundrostat for a successful launch in the United States, while we continue to evaluate partnering opportunities and consider the next steps in the clinical development of lorundrostat. During the first quarter, the FDA accepted the NDA for lorundrostat for the treatment of adult patients with hypertension in combination with other antihypertensive drugs and assigned a PDUFA target date of December 22, 2026. This represents a significant regulatory milestone for lorundrostat that moves us meaningfully closer to our goal of delivering a potentially best-in-class therapy to patients with uncontrolled or resistant hypertension. The NDA is supported by a comprehensive clinical data package, including positive results from the Launch-HTN and Advance-HTN pivotal trials, Transform-HTN, our open-label extension trial and the proof-of-concept trials, Target-HTN and Explore-CKD. Collectively, these 5 trials demonstrated that lorundrostat delivers clinically meaningful reductions in blood pressure, is well tolerated and maintains a durable response across diverse patient populations. We believe this data package supports the potential for lorundrostat to be included in prescribing guidelines, the economic value of lorundrostat to the health care system and lorundrostat as a differentiated novel therapy. Uncontrolled and resistant hypertension continue to represent areas of significant unmet medical need, affecting over 20 million people in the United States and contributing significantly to cardiorenal complications. Aldosterone dysregulation often plays an important role in resistant hypertension, where patients on 3 or more antihypertensive medications fail to achieve their blood pressure goal. The launch of lorundrostat, if approved, will be initially focused on this population with the highest need. Our ongoing market research highlights the following 3 key factors: one, prescribers prioritize magnitude and consistency of blood pressure reduction and have stated a consistent willingness to prescribe lorundrostat in the fourth line. Two, payers recognize the high-risk nature of patients whose hypertension is uncontrolled on 3 or more medications and have expressed a willingness to provide coverage for lorundrostat. Three, patients are seeking meaningful and sustained blood pressure reductions that are tolerable and simple to integrate into their daily lives. They're very receptive to novel agents like lorundrostat that may help them achieve their goal. As we move towards our PDUFA target date, our operational focus will continue to be on preparing lorundrostat for commercial success. Our teams are working on early market access planning and payer engagement to ensure the value proposition of lorundrostat is clearly understood. In parallel, we continue to invest in physician advocacy with our medical communications capabilities, including broader education of the unmet need in uncontrolled or resistant hypertension through peer-reviewed publications, increased participation in scientific meetings and the continued build-out of our field-based medical science liaison team. We are also expanding our sales and marketing capabilities to ready lorundrostat for success. Together, these activities are intended to support awareness of the clinical profile and position lorundrostat for a potential commercial launch. We continue to evaluate partnering opportunities and engage in strategic discussions. The right partner could provide enhanced value and enable us to reach more patients who could benefit from lorundrostat. Our focus on preparing for a strong commercial launch is invaluable to potential business development partners. I will now turn the call over to Adam to review our financial results for the first quarter 2026. Adam Levy: Thank you, Jon. Good afternoon, everyone. Today, I will discuss select portions of our first quarter 2026 financial results. Additional details can be found in our Form 10-Q, which will be filed with the SEC today. We ended the quarter with cash, cash equivalents and investments of $646.1 million as of March 31, 2026, compared to $656.6 million as of December 31, 2025. We believe that our current cash, cash equivalents and investments will be sufficient to fund our planned clinical trials and regulatory activities as well as support corporate operations into 2028. R&D expenses for the quarter ended March 31, 2026, were $24.4 million compared to $37.9 million for the quarter ended March 31, 2025. The decrease in R&D expenses was primarily driven by a $15.5 million reduction in preclinical and clinical costs following the conclusion of our lorundrostat pivotal program in the second quarter of 2025. This decrease was partially offset by $1.1 million of increased clinical supply, manufacturing and regulatory costs and $0.8 million of increased personnel-related expenses resulting from headcount growth and increased compensation. G&A expenses were $21 million for the quarter ended March 31, 2026, compared to $6.6 million for the quarter ended March 31, 2025. The increase in G&A expenses was primarily driven by $7.9 million of higher professional fees, $6.1 million of increased personnel-related expenses resulting from headcount growth and increased compensation and $0.4 million from other general and administrative expenses. Total other income net was $6 million for the quarter ended March 31, 2026, compared to $2.2 million for the quarter ended March 31, 2025. The increase reflects higher interest earned on investments in our money market funds and U.S. treasuries due to higher average cash balances invested during the quarter. Net loss was $39.3 million for the quarter ended March 31, 2026, compared to $42.2 million for the quarter ended March 31, 2025. The decrease was primarily attributable to the factors impacting our expenses that I just described. With that, I will ask the operator to open the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from Michael DiFiore with Evercore. Michael DiFiore: Two for me. Number one, in a scenario where Mineralys launches lorundrostat itself without a partner, will you conduct any more significant R&D activity or business development? Or will you preserve funds just to support the launch and focus on the launch? And separately, as you near the day 120 safety update, it may have already passed, I'm not sure, can you comment on whether safety remains consistent with the past and whether there's updated plans to publish data from the OLE? Jon Congleton: Yes, Mike, thanks for the questions. To the first one, in the event that we launch, we, from the beginning, have been focused on how do we build value with lorundrostat, how do we do that by extension for Mineralys. We have built this organization from the beginning. I think about our clinical development program with an eye towards how do we generate the greatest value from a commercial standpoint launching, whether it's on our own with a partner or through someone else. And so I think it's fair to say we're going to continue to look at ways that we increase value for lorundrostat and Mineralys. If you think about the development program to date, we've done that. Launch-HTN, obviously, spoke to the real-world population. Advance-HTN stands out on its own because it's a very distinct complicated population that no one else has studied with an ASI. Explore-CKD provides information for prescribers looking at the complexity of resistant hypertension in nephropathy or CKD. So we've always had an eye towards meeting the physicians where they are, what they need with lorundrostat and building the appropriate data around that. So we'll continue to look at opportunities to build value from a clinical development perspective. And we'll continue to look at opportunities to expand the value of lorundrostat through business development. To your second question around the 120-day safety mark, we continue to be very confident in the safety profile of lorundrostat. The Transform-HTN trial or open-label extension continues to collect that data. We think lorundrostat is well characterized from a durable effect and safety and tolerability profile perspective. And as we've noted in the past, we'll be looking to get that long-term data published in due course. Operator: Our next question comes from Richard Law with Goldman Sachs. Jin Law: A couple of questions from me. Do you get a sense that you need to compete with AZ on preferred or exclusive access with payers based on some of the discussions that you're having? And also, what is your confidence level on getting access to that 3L setting compared to fourth and the fifth L setting? Is your 3L strategy based on a broader use? Or is it more on the smaller niche population? And then I have a follow-up question. Jon Congleton: Yes, Rich, thanks for the questions. As we've talked about in the past, our clinical development program looked at that third line or later opportunity, both Advance and Launch looked at that population failing to get to go on 2 or more because I think that's where significant need exists. I think that's where an ASI can add significant value. From a market standpoint, in at launch, we think the focus will be fourth line. I'll have Eric opine on some of the feedback we've gotten from payers to date. But clearly, the -- it's our feeling that, that fourth-line setting resistant hypertension, payers appreciate the risk that these patients are under and the lack of satisfactory alternatives that are currently available relative to what lorundrostat has shown in our clinical program. Eric Warren: But Eric, do you want to add some? Yes, Richard. So it's all about sequencing, Richard, so that fourth line as the entry point. But obviously, there is a need for those comorbid patients that are third-line patients. So the opportunity will be to gain that experience, gain that confidence and then make that transition to the third line using that comorbid condition as a bridge. And this has been well vetted with payers in research and advisory boards and as our team is now out there engaging payers with our account executives. You also asked about whether we're going to try to position ourselves in a different way than baxdrostat. Obviously, there's an opportunity for both ASIs and having parity access is something that's a focus for us. Jin Law: I see. Got it. And then a follow-up. So we heard that AZ been saying that bax can potentially achieve like $10 billion peak if we can succeed in other indications beyond hypertension and CKD that they're developing. And I also remember, Jon, I think you mentioned that when you think of a partner, an ideal partner would be the one who would recognize lorundrostat's potential. So when I hear that, I think you meant that the potential beyond hypertension. So in your discussion with potential partners, how many of them like recognize the value of lorundrostat outside hypertension? And what are these like indications that you believe that partners are bullish on and or the ones that they're not bullish on and based on the unmet need of the drug mechanism? Jon Congleton: Yes. Thanks, Rich. As we noted before and made in the comments, our prepared remarks, there are 20 million patients that are struggling to get to goal on 2 or more meds right now. We know the clear linkage of uncontrolled or resistant hypertension to poor outcomes, whether they're cardiovascular or renal. I think at this stage that we can clearly say that what lorundrostat has demonstrated in reducing blood pressure that, that blood pressure reduction is a clear surrogate for what we could expect as far as a reduction in cardiovascular risk. So I'm not surprised by AstraZeneca's bullish position on baxdrostat. I would say we've shared that given the fact that just in the United States alone, there are 20 million patients at risk. We talked in the past about having a partner that is more global in nature and has a holistic view of this asset. I don't think that view has changed. I can't really opine on how some of those discussions have looked at different indications. But clearly, we know that aldosterone is going to be a key target for the next several years into the 2030s as it relates to not only hypertension but the related comorbidities. Operator: Our next question comes from Seamus Fernandez with Guggenheim Partners. Seamus Fernandez: So I guess I'll address the -- I'm going to ask you to address the elephant in the room, which is you guys have been talking about potential partnering for quite some time. You've had the data and now you've had the NDA sort of firmly established in terms of the PDUFA date for some time. What is it that you're looking for at this point in a potential partner that perhaps you're seeking but hasn't quite matched up? Or should we anticipate that you are in active discussions along those lines? I think we're all just trying to kind of metric what is the timing for either selection of a partner or that go-it-alone -- a potential go-it-alone strategy in the U.S. Jon Congleton: Yes, Seamus, I appreciate the question. And as we've said in the past, we're interested in finding the right partner. In response to Rich's question, I talked about the global nature of that. We're routinely evaluating those partnering opportunities. As you can imagine, and I think appreciate we're not in a position to really provide color or specifics around the level of dialogue, the timing, the structure, but it's something that we're mindful of. We have, as noted, continue to focus on how do we build value going forward. And that's why operationally, we're focused on commercial readiness for this asset. I think it's an important part of those partnering dialogues. But clearly, looking for a partner to build on that value continues to be something we're focused on. Seamus Fernandez: Great. And maybe if I can just ask one follow-up question. As you kind of look at the sort of opportunities to partner your asset with other mechanisms specifically, what would you say are kind of the core mechanisms that you're particularly excited? We've got a whole host of new cardiovascular mechanisms that are advancing and potentially looking to emerge outside of hypertension. So just -- which would you say would be particularly exciting from your perspective to partner with lorundrostat? Jon Congleton: Yes, Seamus, it's a great question. I think what's key as an opportunity for Mineralys is we have the core foundational molecule, and that's being lorundrostat as an ASI, given the nature of aldosterone to be a driver of not only hypertension, which is the beginning point of all of these other cardiorenal metabolic disorders, but also just the role that aldosterone plays in CKD and heart failure and other disorders. So I think it begins with the fact that we've got really the core foundational molecule there. There are other mechanisms. Certainly, the SGLT2s are what our competitors are looking at. I think the fact that dapagliflozin is going generic or is generic at this point, given the data that we've generated to date within our pivotal studies, but specifically Explore-CKD, I think gives us an entree to put lorundrostat forward in a hypertensive nephropathy or CKD population. But there are other mechanisms that we're looking at from a cardiorenal standpoint. We're not in a position right now to opine on those. But I would come back to the fact that we've got the core product that really addresses the key driver of pathology, and that's lorundrostat. Operator: Our next question comes from Jason Gerberry with Bank of America. Jason Gerberry: As you guys are doing a lot of your prelaunch activities, how are you thinking about like the physician segments that you think are going to be the most likely to drive early adoption, especially in that fourth-line setting, where it sounds like maybe you won't be focusing on doctors that maybe focus on comorbidities like CKD, but maybe more cardiology-driven hypertension? So just wondering if you can kind of discuss maybe some of the learnings from the prelaunch activities and how you're thinking about sort of the early adopter. Jon Congleton: Yes, Jason, thanks for the call. I would say that we've been thinking about this going back 3, 4 years when we framed the pivotal program for lorundrostat. Clearly, there's a primary care portion of the audience that is key prescribers in fourth line. They would be part of a launch target, but cardiologists as well, and that's why Advance-HTN is such a critical differentiating piece of our data story. Now these are the patients that a cardiologist is truly seeing. They're maximized with treatment. They've tried various alternatives and still cannot get to goal. That was the test that Advance-HTN put lorundrostat through and lorundrostat came through with flying colors. And that is a key and distinct data set that AstraZeneca, frankly, does not have. And so the cardiologist will certainly be a part of that target-based nephrology as well. We know that nephrologists deal with uncontrolled and resistant hypertension with comorbid CKD. And as we speak to those nephrologists, the #1 goal for them to try to arrest the progression of their kidney disease is to get their blood pressure to goal. And so I think we've been thinking about the target population, thinking about the prescribers and the use cases they have -- and I think that's why we've built out a very distinct and diverse data set that's going to provide information about how to use lorundrostat, where to use lorundrostat and the expected benefits they can see in the blood pressure control and beyond such as proteinuria. Jason Gerberry: And as a follow-up, is there any 1 or 2 things you'll be looking at in the first 3 to 6 months of your competitors' launch that may alter your go-to-market strategy? Jon Congleton: I don't know if I would say it will alter it. Certainly, it will be informative, but we've got a view of the data package we have. Eric and his team have done a really nice job of identifying where the unmet need is, who the key prescribers are, where that beachhead indication is for fourth line and what's important to them in prescribing. And so we'll obviously be looking at AstraZeneca's launch, and we anticipate it's going to be a successful launch given the significant unmet need here and the lack of innovation in the last 20-plus years. But given the data that we've generated and specifically speaking to the different prescribers that you -- the first part of your question alluded to, I think we're very confident in our ability to tap into that, assuming approval and launch very quickly after that. Operator: Our next question comes from Annabel Samimy with Stifel. Annabel Samimy: So I'd love for you to just talk about who you might think might be driving a process of guideline changes that would position the new ASI class as the next drug to try after third-line agents have failed. You have just a tremendous amount of data across the spectrum of uncontrolled and resistant patients as well as safety in CKD and OSA. Like how important is it to have that wealth of data to drive those conversations? Or do you think that it's the first to market that drives the conversations? Just want to understand the mechanics behind that. Jon Congleton: Yes, Annabel, thanks for the question. I think it's safe to say that we've been interacting with those physicians that are part of the guideline committees, appropriately sharing the information that we have. To your point, and again, it's -- it's something we contemplated 3 years ago, and that's why we work with the Cleveland Clinic and Steve Nissen and Luke Laffin with Advance-HTN because we knew there had been a lack of innovation in this space. This is a heavily genericized space and the guidelines would be a critical component. Advance-HTN becomes that study that addresses all of the questions the guideline committees are going to have about, is it apparent or is it truly confirmed hypertension. That data set, I think it's going to be an instrumental component of our argumentation for inclusion in the guidelines. Launch-HTN is an important part as well. I don't want to dismiss Launch-HTN because it speaks to the primary care physicians. Explore-CKD, Explore-OSA, as you alluded to, each of those provides additional data that's informative that speaks to the unique complexities, particularly of the resistant hypertension population. So from that standpoint, we're in front of the right physicians who are part of those guideline committees, and we have the right data and data set with lorundrostat to make a compelling argument. Annabel Samimy: And if I could just follow on, on the physician segmentation that you're thinking about. Given the launch trial and the fact that primary care is a big prescriber of hypertensive agents, do you expect the focus to be cardiologists, nephrologists and hope for trickle down into primary care? Or do you expect to, I guess, include high prescribing primary care physicians within that first set of physician targeting? Jon Congleton: Yes. I'll have Eric add some additional color here. I don't know that our view has changed. We're continuing to narrow in on those prescribers that control approximately 50% of that third and fourth line, predominantly fourth line. And within that, there are primary care as well as specialists. But Eric, you can add some more to that. Eric Warren: Yes. No. Well said, Jon. So cardiologists, nephrologists, but there are primary care physicians that function very well within this fourth-line state. So they're actively prescribing. We've looked at the segmentation. We looked at the [ deciling ], and there will be primary care that's included in that initial go-to-market strategy. Operator: Our next question comes from Mohit Bansal with Wells Fargo. Mohit Bansal: So one question I have is regarding differentiation. So do you expect to see any kind of differentiation when it comes to labeling between lorundrostat and the competitor here based on market -- your market research, like what feedback are you getting from physicians that they see any differentiation between these molecules? Jon Congleton: Yes. Mohit, thanks for the question. To the first part on the label, I think there'll be a level of uniformity, certainly within the indication. But I'll step back to a point that I've been making here. There's a distinct difference between the data sets that we generated with lorundrostat and baxdrostat. Certainly, Launch-HTN is speaking to the real-world audience. But again, Advance-HTN, I don't want to be redundant here, but it's a very distinct and differentiated data set that really provides information to cardiologists specifically who are dealing with these very difficult confirmed hypertension case patients. And then Explore-CKD. We know that proteinuria and having a benefit on proteinuria is a key attribute in physicians' minds when they think about an antihypertensive and how they view its utilization. Certainly, for nephrologists, having a benefit on proteinuria, it's a key signal or surrogate, if you will, for slowing renal progression. Launch HTN, Advance-HTN and Explore-CKD as well as our long-term open-label extension Transform-HTN were all part of our submission in the NDA. Now what language, what portions of those studies get into the actual label, that will be part of negotiations with the FDA. But certainly, having that data, whether within label for promotion or through medical information, I think it's going to be very instructive and informative for those distinct physician population prescribers. Mohit Bansal: Got it. And the physician feedback I mean the second part? Jon Congleton: The physician feedback has been very robust. Eric, do you want to. Eric Warren: Yes. So the 2 things I'll highlight, Mohit, is, number one, the absolute systolic blood pressure reduction. That is really what shines from a physician perspective, that 19-millimeter that we demonstrated in launch, but also the diversity and the well representation of our trial populations, and I'll call out the black African-American populations between 28% and over 50% of our patients depending upon the trial. Physicians really appreciate the inclusivity of our populations. Operator: Our next question comes from Matthew Caufield with H.C. Wainwright. Matthew Caufield: So we covered a couple of my questions. But I think overall, the sense is that baxdrostat's possible approval midyear helps the overall ASI receptivity and awareness just at a high level. Do you anticipate there being any headwinds with that approval? Or do you see it only as a positive as we get closer to the December PDUFA? Jon Congleton: I think there's certainly a significant opportunity within this space. As I noted previously, Matt, the lack of innovation, I think, speaks to the high interest from physicians to have a novel agent or a novel class of agents. So I do think there is an opportunity to see this market opportunity grow as AstraZeneca launches 6 to 7 months in advance of a potential approval for lorundrostat. I think it's important to highlight that we will have voice in the market during that 6- to 7-month period. We've had national account executives in front of payers going back to quarter 1. We have our MSL team in place going out building advocacy within those top tier and regional tier KOLs. And so I think it's really both companies out there progressively talking about the role of aldosterone and the importance of addressing it within ASI that grows this market opportunity. And I think it's important to realize this is -- whether you look at it from a revenue projection that AZ guided to, whether you look at it from the 20 million patients that we target, this is a massive market opportunity that is sitting on significant interest in the novelty of this class of drugs. And so I think it's a net positive. Operator: Our next question comes from Rami Katkhuda with LifeSci Capital. Rami Katkhuda: I guess given that ASTRO will likely set the initial pricing benchmark for the ASI class with baxdrostat, I guess, are there any other market access levers that you can pull to differentiate lorundrostat? And then maybe secondly, I know there's not many recent cardiovascular launches, but what do you view as the most relevant commercial analog for lorundrostat at this point? Jon Congleton: Yes, Rami, thanks for the questions. Relative to AZ, certainly, presuming approval, they'll be setting the initial price point. I've been asked, is that an anchor point. I think it's a guiding point. I have no idea where they're going to price it at this stage. Clearly, they're bullish on the revenue opportunity, but it will be informative for us. I think going back to the differentiation and the payer discussions, we're seeing that right now as we have dialogues with payers, the distinction of the data set, whether it's Advance-HTN, which I've commented on previously in a very distinct population that AstraZeneca can't speak to, whether it's the Black African-American population that Eric just alluded to, we know that's a critical high-risk population. We believe we have the data set that's going to be very informative for those payers from an access standpoint. And I think the feedback that we've gotten from payers to date is they're open and willing to create access in this fourth-line setting and potentially in due course, third line. And they're also interested in having 2 assets to evaluate. So it's not as if from our perspective, baxdrostat is going to launch and secure all access from a payer standpoint. Rami, can you comment -- the second question was commercial analogs. Is that right? Rami Katkhuda: Exactly, yes. Jon Congleton: Yes. I think it's a fair question. It's hard to answer because there just hasn't been a lot of innovation within the cardiovascular space for quite some time. I think an interesting analog for me, it's a gen med category. It's not cardiovascular, probably migraine with the gepants, the orals. And so I think when you come out with something that's truly novel from a clinical profile standpoint, match that to a market with significant unmet need, you can see significant commercial opportunity. And so I think that's an informative analog that we think about as we prepare the commercialization of lorundrostat. Operator: Our next question is from Tara Bancroft with TD Cowen. Tara Bancroft: So I just have a follow-up from Mohit's question before that was helpful to hear about label differentiation. But maybe can you tell us more about how you'll react to WACC pricing, especially when it comes to your pricing strategy? And I know how important access is to physicians, as you've been saying, but we're curious about the strategy that you're thinking there? Like could you launch with a lower WACC price? Or should we assume rebates will be the primary mechanism to drive access or something else? Just more thoughts there would be really helpful. Jon Congleton: Yes. Tara, I appreciate the question. And I hope you appreciate that it's really early to opine too much on that. We'll see where AstraZeneca comes in with pricing. We've guided in the past that thinking about Farxiga, Jardiance WACC or list price is probably a good barometer to work from. We'll see where they go from a pricing standpoint. We'll evaluate what makes sense for lorundrostat. The key for us at the end of the day is to ensure that patients that physicians believe could benefit from lorundrostat get access to that. And there are a lot of different levers we could pull from contracting to what we do with our patient assistance program. But I would say it's too early to give you maybe the level of color that your question would require. Tara Bancroft: Okay. Great. That makes sense. I guess maybe then I can ask a different question. So as we are looking at this launch as a proxy to lorundrostat, can you maybe talk about how you would think about cadence of that launch? It's hard without recent hypertension proxies to look at, but do you expect that there would be initial bolus of patients within the hypertension population or anything like that, that could help us understand what a good first couple of quarters could potentially look like? Jon Congleton: Yes. I appreciate the question again. I think the best proxy, and we have this in our non-con deck that's on our website. The best proxy is if you look at the turnover within this space right now. So what we have in our slide deck is 2024 IQVIA data that shows third line or later, there are about 8.8 million patients that are turning over trying new medications. And that's in the absence of any innovation, right? That's with existing treatments that have been available for 20-plus years. And so as an old marketer to me, what that tells me is that there's a market that has a great deal of dissatisfaction. Physicians that haven't given up, they continue to trial their existing medications, helping patients get to goal. So there's, I think, significant pent-up demand. There's significant focus and appreciation of the risk these patients are under if they don't get to goal. And so fundamentally, that to me is a bit of a proxy. Now how that translates to baxdrostat's launch quarter-over-quarter, I don't know that I can opine on that. I just know looking at fairly recent data from 2024, there's a lot of movement within this marketplace, and I think that creates opportunities for novel agents like lorundrostat. Operator: We have reached the end of the question-and-answer session. I'd now like to turn the call back to Jon Congleton for closing comments. Jon Congleton: Thank you, Rob. In closing, we remain encouraged by the FDA acceptance of our NDA based on a strong clinical data package that I've just spoken about through the question and answers. From an operational perspective, we're focused on executing on our pre-commercial readiness strategy, while in parallel evaluating partnering opportunities and considering the next steps in the clinical development of lorundrostat. We believe Mineralys is entering an important next phase in its evolution. This reflects the dedication of our entire team, the physicians and researchers who have supported the lorundrostat program and, most critically, the patients whose needs continue to guide our daily work. Thank you to everyone for joining us today. We appreciate the continued interest and support, and we look forward to providing further updates in the quarters ahead. With that, we will close the call. Have a nice day, everyone. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, ladies and gentlemen, and thank you all for joining us for this Energy Fuels Inc. Q1 2026 Conference Call. As a reminder, all participants will have an opportunity to ask questions. As a reminder, today's session is being recorded. It is now my pleasure to turn the floor over to President and CEO, Ross R. Bhappu. Welcome, sir. Ross R. Bhappu: Thank you, Jim. I appreciate the intro. And thank you, everybody, for participating today. I want to start by thanking Mark S. Chalmers. Mark recently retired from Energy Fuels Inc. after almost ten years with the firm. Mark has done a fabulous job putting together a great group of assets and a great team, and as I look forward to my new tenure here as the CEO of the company, I am thrilled to be taking the helm and moving the company into the next generation. We have a lot of work ahead of us, and as I start my tenure in the company, I am focused on a few things. One is executing on our business strategy. It is ensuring that we have the right team in place and it is ensuring that we all operate safely within this organization. That is a key area of responsibility. The other heavy focus of mine is being a good neighbor in the communities where we operate. We want to operate at very high environmental standards and be a truly good partner wherever we go. My focus as I look forward is to position the company for long-term growth and build stability and shareholder value. With that, I would like to turn our attention to the next slide, which is our forward-looking notice and forward-looking statements. We will be making—I will be making—forward-looking statements today. These statements reflect our current expectations and assumptions and certainly involve some uncertainties. I would refer you to our 10-Q filing, our latest 10-K, and other SEC and SEDAR+ filings for the risk factors. Looking at our next page, the first-quarter highlights: we had a fantastic first quarter by every measure, and I am excited to tell you about some of these accomplishments. First, from an operational perspective, we mined 425 thousand pounds of uranium and we produced nearly 800 thousand pounds in our mill. We ended the quarter with 2.25 million pounds in our inventory, and we released a very positive Varamata feasibility study with a $1.8 billion NPV, and that includes over $500 million per year of expected EBITDA. When you think about that and put that into perspective, that takes Energy Fuels Inc. to a whole new level. We also completed our White Mesa Mill Phase 2 bankable feasibility study, and that came in with a fantastic, lower-than-expected capital cost at $410 million. We expect $311 million of annual EBITDA when that facility is up and running on a standalone basis. We also announced the ASM (Australian Strategic Materials) acquisition, which I am going to talk about later. It really moves us into a new league and gives us the ability to produce metals and alloys, and we will talk about that later. Also during the quarter, we produced our first terbium. Terbium is one of those exotic heavy rare earth minerals that everybody is seeking in their magnets, and it really puts us into a different league. We have gained, as a result of those announcements, substantial interest from off-takers. From a financial perspective, we have a robust balance sheet of over $950 million of liquidity. We generated $8 million of EBITDA, and we had sales and revenue from both a combination of contract and spot sales in the uranium business. In addition, we are continuing to work on expanding our Phase 1 facilities. Recall Phase 1 is our uranium processing line that we recently converted to process rare earth minerals. We are expanding our current capabilities in Phase 1—what we are calling Phase 1B—which will allow us to produce commercial quantities of terbium and dysprosium. And then we are adding Phase 1C, which will allow us to process MREC material. MREC is mixed rare earth carbonates, and that puts us into a different league. The fantastic aspect of that is we will be able to process rare earth minerals and uranium simultaneously with Phase 1C. Finally, in the quarter, right at the very end of the— Operator: Ladies and gentlemen, this is the operator. Please remain connected. Ladies and gentlemen, we appreciate your patience. Please remain online. We are attempting to reestablish connection with our speakers. Ladies and gentlemen, this is the operator once again. We thank you for your patience. Please remain online as we try to reestablish connection with our presenters. Ladies and gentlemen, this is Jim, your operator, once again thanking you for your patience as we reconnect with our speakers. Thank you all. Ladies and gentlemen, this is your operator. I thank you for your— Ross R. Bhappu: Patience. Operator: I believe we have Mr. Bhappu reconnected. Thank you all. Ross R. Bhappu: Thank you, Jim. And ladies and gentlemen, I apologize for that mishap. I am not exactly sure what happened, but I hope you can hear me now. I would like to go back and start—I do not know where we cut off—so I am going to start back on our first-quarter highlights. By any measure, Q1 2026 was a very good quarter for Energy Fuels Inc., and I am excited to tell you about it. From an operational perspective, we mined 425 thousand pounds of uranium and produced nearly 800 thousand pounds through the mill. At the end of the quarter, we ended with 2.25 million pounds in inventory, and we released a very positive Varamata feasibility study. That study showed an NPV of $1.8 billion, and we are anticipating over $500 million per year of expected annual EBITDA. This takes Energy Fuels Inc. to a new level by any measure and is a game changer for us. We also released the White Mesa Mill Phase 2 feasibility study. We were pleasantly surprised that our CapEx came in lower than anticipated at $410 million. Economics of that project are robust and provide for a $1.9 billion NPV. The IRR on that project is about a 33% rate of return. We expect EBITDA from Phase 2 to be about $311 million, and that is on a standalone basis, not including taking into account our Varamata feed as well as other feed. We produced our first terbium this quarter, which again is a game changer. It is being done at a pilot-plant scale. We are producing about a kilogram per week, and we have gained incredible interest from all those announcements across the board. The other announcement, of course, was the announcement of the ASM acquisition, Australian Strategic Materials. ASM is a rare earth metal and alloy producer, and that is a game changer. It helps open a choke point that exists in our sector for rare earths. From a financial perspective, we have a robust balance sheet. We have $950 million of liquidity. We generated $8 million of operating cash flows last quarter—in Q1. We have sales revenue from a combination of both contract and spot sales, and we would like to keep a balance of both contract and spot sales, and that has worked well for us in the past. In addition, we are working on a number of exciting opportunities—at least we started working on them in Q1. The first one is Phase 1B. Recall that Phase 1 of our mill is our uranium facility that we converted to process rare earths. Today, we can only process either uranium or rare earths. We cannot do them simultaneously. But we are trying to fix that, and we are adding Phase 1B, which will allow us to produce heavies, both dysprosium and terbium. We will also be able to produce other heavies like samarium, europium, gadolinium, and possibly yttrium depending on market conditions. Phase 1C will allow us to process MREC material. MREC is a product coming from ionic clays, and that will allow us to process both uranium ores as well as rare earth ores simultaneously, which we cannot do today. Also, I would like to highlight that at the end of the quarter, we published our sustainability report. It is a strong demonstration of what we are doing in sustainability, and I encourage you to take the time to have a look at that report. It is on our website. For those of you who are new to Energy Fuels Inc., I would like to give a bit of background on our capabilities. Energy Fuels Inc. started its life as a uranium company. We have been in the uranium business for over 45 years in various forms, and we built that uranium capability through mining and processing at our White Mesa Mill. Given that expertise, we carried that over to rare earth minerals. Recall that all rare earth minerals contain some level of either uranium or thorium—they are all radioactive to some extent. Our knowledge and expertise in the uranium business has allowed us to be a leader in the processing of those rare earth minerals. The mineral of choice for us is monazite. Monazite is a byproduct from heavy mineral sands, and that has allowed us to get into the heavy mineral sands business and we now own three heavy mineral sands operations plus another mining operation called Dubbo with the ASM acquisition. I will talk about monazite and why it is our mineral of choice here in a few minutes. While the three areas—those three sectors—look quite disparate, they actually flow quite well together. The thing they have in common is that they all contain radioactive components, and that really defines Energy Fuels Inc. today. Looking at a global footprint of where we are, on the far left side the dark blue dots and highlights represent our uranium business. In the middle on the left side, the yellow box is our White Mesa Mill that really brings everything together and allows us to do everything else that we are doing. Across the bottom of the page, the red boxes represent our heavy mineral sands opportunities and projects. Those will not only produce titanium and zirconium products, but they will also provide us the monazite that we will feed into the facility at White Mesa, our mill in Utah. With the addition of ASM, we now have an operating metallization facility located in Korea. We are planning to replicate that facility with an American metals plant here in the United States. So it is very much a global footprint, very much a growth story, and very much an exciting story for critical minerals here in the U.S. Carrying this over now to our uranium highlights: recall that Energy Fuels Inc. is the largest producer of uranium in the U.S. We mined 425 thousand pounds from both La Sal and Pinyon Plain last quarter. Last year, we produced 1.7 million pounds from those two mines. The White Mesa Mill produced about 800 thousand pounds in Q1, and to date we are about 1.2 million pounds of uranium from the White Mesa Mill. We continue to build a strategic base of uranium, and we sell opportunistically into the spot market, but we also have a set of long-term contracts. The U.S. is heavily reliant on imports of uranium, and we are trying to help solve that problem. It still amazes me that we are taking uranium material from Russia. I know that is going to end soon, but we would like to be a part of solving that. When we look at the market trend for uranium, you cannot help but be excited about what is happening in the nuclear energy space and the need for more uranium. We will continue to offer uranium on both the balance of contract and spot sales. The older contracts are set to expire over the next few years. Recall those are lower-priced contracts, but those allowed us to restart our uranium operations a few years ago. The new contracts will continue to have price floors and ceilings. We are excited about the opportunities there. Moving to the White Mesa Mill in Blanding, Utah: the White Mesa Mill really makes everything possible for us at Energy Fuels Inc. It is truly a national treasure by any measure. It is 45 years old and is using state-of-the-art technology and equipment for processing not only uranium but rare earth minerals. We are often asked what it would take to replicate that facility. It is hard to put a price tag on it because it is not easily replicable, mainly due to permitting challenges, and the time to replicate that facility would be very extensive. The dual-commodity processing of both rare earths and uranium is unmatched in the Western world. Our history of uranium processing provides us with an incredible track record for processing not only uranium but also rare earth feedstock. We are the only facility in the United States that can commercially process monazite at that mill. On our rare earth highlights: we are building a fully integrated mine-to-alloy chain for critical minerals. Through the acquisition of ASM, we plan to capture value across the supply chain, and we are not beholden to any other part of the chain by having this self-reliance of vertical integration. We have a fabulous team at the White Mesa Mill. We are actively producing heavy rare earths at the pilot plant that we have been sending out for validation. As mentioned previously, we are preparing to expand Phase 1, and that includes Phase 1B, which will allow us to process terbium and dysprosium. Phase 1C will allow us to produce and process MREC. MREC, as I mentioned, comes from ionic clays, and it is a valuable source of rare earth minerals that will enable us to produce both uranium and rare earths simultaneously. Then we have Phase 2. For Phase 2, we are in the permitting process, and we hope to have those permits by the end of next year. When fully commissioned, we will be able to produce over 6 thousand tons per year of NdPr. We will truly be a substantial supplier of rare earths. The question we often get is: why monazite? Monazite offers a number of benefits. First, it is a very high-grade source of rare earth minerals. It typically contains 50% to 60% total rare earths, and it is high in neodymium and praseodymium, and equally high in dysprosium and terbium—very attractive. In addition, it also contains uranium, which we recover and sell as a byproduct of the rare earth processing. Monazite has a lot of benefits. Another benefit is, as a byproduct of heavy mineral sands, the production cost can be shared across a number of different commodities. Again, the White Mesa Mill is the only facility in the U.S. that can process monazite commercially. We announced the acquisition on January 20 of Australian Strategic Materials (ASM). ASM really provides a unique opportunity for Energy Fuels Inc. Outside of China, there are very few rare earth metallization factories, and ASM has a commercial operating facility in Korea. The vertical integration from mine to alloys provides a tremendous competitive advantage, including expanded margins and greater market share, and it has resulted in very positive feedback from our off-takers. The acquisition is progressing very well. We recently obtained our FIRB approval—FIRB is the Foreign Investment Review Board, equivalent to CFIUS in the U.S.—and that approval was an important part of the process. We are targeting closing that transaction in early July, and it is progressing quite well. On the heavy mineral sands side of the business, heavy mineral sands are very important. They allow us to obtain the monazite as a byproduct, and they also contain titanium and zirconium minerals used across a wide range of industrial applications, including pigments, metals, ceramics, chemicals, refractories, foundries, and nuclear applications. Energy Fuels Inc. has three heavy mineral sands projects, and with the ASM acquisition, we will hold an important polymetallic operation as well. The Varamata project is our project in Madagascar. We are advancing that. We are working towards obtaining a government stability agreement, also called an investment agreement. That work has been underway for some time, but with the change in government recently, we have had a bit of a delay getting that investment agreement signed. We continue to have very good engagement with the government of Madagascar, and we are looking forward to progressing that through the balance of this year. The Donald project, in Australia, is where we are earning a 49% joint-venture ownership. Donald is shovel-ready. It has obtained all of its permits. We are looking to make a final investment decision in the next few months. The one thing holding us back is finalizing our financing and offtake agreements. We are making very good progress and hope to be able to announce that FID fairly soon. The Bahia project is a 100%-owned project in the state of Bahia in Brazil. We are conducting drilling there, and we hope to have a scoping study or a PFS done later this year. Finally, we have the Dubbo project, which comes from the ASM acquisition. Dubbo is not a heavy mineral sands project—it is a polymetallic project—but it has very high critical minerals grades, and we hope for that to provide further feedstock to the White Mesa Mill in the future. The next slide is interesting because it shows just how global we are, especially in delivering rare earth minerals to the White Mesa Mill. Our three heavy mineral sands projects supply monazite—one in Australia, one in Brazil, and one in Madagascar. Those supply the monazite feedstock to the White Mesa Mill. White Mesa Mill will process those rare earth minerals and produce oxides. The oxides will then go either to Korea or, once we build our facility in the U.S. for metallization, to the U.S. for processing. From there, it gets sold to magnet manufacturers and end producers. We truly are a global company and excited about our opportunities. With that, I would like to hand this off to Nathan Bennett, our CFO. He is going to talk about the financials for the quarter. Nathan Bennett: Yes. Thank you, Ross, and good morning, everyone. As we look at the financial updates for Q1 2026, we continue to maintain a strong financial position as we prepare to develop our long-term projects. We finished with $957 million in working capital and $1.4 billion in total assets. This working capital continues to reflect the $621 million in net proceeds received from our convertible note offering that we completed last year in the fourth quarter that we have yet to draw down on. The working capital also includes 2.2 million pounds of uranium, about half in finished inventories and the other half in process or in ore pile. This liquidity gives us the financial flexibility to advance our strategic projects, be opportunistic as the market evolves, and deliver on our guidance. Looking at the P&L, we continue to see improvement in our net loss, with a net loss of $11 million in Q1 2026. This compares to a net loss of $26 million in Q1 2025 and a net loss of $21 million in Q4 2025. This improvement is due to the increase in our uranium revenue and sales, and also an increase in income from our marketable securities from invested cash. This is partially offset by higher operating costs and transaction costs, as you see in the P&L, as we progress our global strategy. Now, noting our guidance, we do anticipate uranium sales to continue throughout the year to help offset our burn rate as we progress our projects and our strategy. Looking at our segment footnote—footnote 19 of the 10-Q—we noted that our uranium segment has shown promising results as we begin to be profitable, and we expect this trend towards profitability to continue in our uranium segment. As we look at our revenue and our sales, we took advantage of spot price increases during the quarter. We sold 100 thousand pounds at an average price of $95.88. Looking at our long-term utility contracts, as forecasted, we sold 110 thousand pounds at just under $64 per pound. We expected these sales at this price as it relates to some of our initial long-term agreements entered into back in 2022 and 2023. We entered into these agreements when uranium prices were beginning to increase, and these contracts really supported the decision to go forward with mining at Pinyon Plain and our La Sal Complex. Now looking at our uranium production and moving forward throughout the year, for Pinyon Plain, we mined 375 thousand pounds with an average grade of 1.12%, which was from a lower-ore-grade area as our mining moves between high-grade zones. These ore grade fluctuations are expected as we mine different segments of the ore deposit, and we expect these ore grades to increase throughout 2026. These fluctuations were contemplated in our mining production guidance. At the mill, in accordance with our guidance, we continued processing Pinyon Plain and La Sal ore through Q1. We processed over 800 thousand pounds through March, as Ross noted, and we reached the 1 million-pound milestone for the year during April. These are exciting results, as the last two quarters have shown the mill’s capabilities above expectations, having not run at these levels in many years. Our all-in cost for mining, transportation, and processing continues to be within our expected range of $23 to $30 per pound, and we expect this to continue throughout the rest of the year. We also expect processing at the mill to continue throughout 2026, but we note that we will pause processing for planned maintenance downtime scheduled at the end of Q2 and the beginning of Q3. As the mill processes ore at a faster rate than we can mine, the downtime will allow mine production to catch up and replenish our ore piles at the mill. We expect our mill processing to continue to be within our guidance of 1.5 million to 2.5 million pounds for the year. Looking at our inventory and cost, we continue to see a decline in our inventory costs as we produce low-cost Pinyon Plain pounds, decreasing to $36 per pound at the end of the quarter. This decrease is expected, and we expect it to continue as we mine throughout the rest of the year at Pinyon Plain. We note our cost of goods sold is expected to decrease closer to $30 per pound throughout 2026 as we sell through inventory and add low-cost Pinyon Plain production. This will help improve our gross margins and our profitability in our uranium segment. We finished with 1.1 million pounds at $36 per pound, with another 1.1 million pounds in process and ready to be processed. This gives us sufficient inventory to meet our processing and sales guidance and to meet our long-term utility contract commitments for the remainder of 2026 and 2027. Updating guidance: we continue to anticipate being within our guidance ranges. Starting with mining, we mined 425 thousand pounds between our Pinyon Plain and La Sal Complex. We will continue to mine during the downtime at the mill to replenish the ore piles. We expect ore grades and pounds at Pinyon Plain to increase as we move into higher-grade zones. At the mill, as noted, we hit our processing milestone of over 1 million pounds during April, and we are starting to near the bottom end of the range by the end of Q2. We expect to be within the range anticipated even with the planned maintenance downtime. For sales, we sold 510 thousand pounds during Q1. We expect sales to continue and to be in line with our guidance, with both sales under our long-term contracts and spot sales depending on market conditions. With that, I will turn it back over to Ross for some final thoughts on our 2026 activity. Ross R. Bhappu: Thank you, Nathan. I would like to finish our presentation by talking about some of our objectives for the balance of 2026. For me, it is all about execution. We have an incredible asset base, incredible mines to develop, and an incredible facility at White Mesa. Now it is all about execution. We are going to focus on Phase 2 permitting. We are going to focus on Phase 1B and 1C—get that construction going and finalized. We hope to be operational on Phase 1B and 1C late in 2027. We hope to make our Donald FID very soon; we are very focused on that. We are going to continue to advance our Varamata project both on the engineering side and on the investment agreement and government relations side. We have a big social outreach program and a big focus on the communities there that will continue. We are going to continue advancing our drilling and engineering work at the Bahia project. Finally, a big focus of mine is for our company to operate safely and in a sustainable way. I encourage you to have a look at our sustainability report that we just released. I think you will find it very impressive. I am really proud of what this team has accomplished in the first quarter. I am excited to be taking the helm of the company and moving it forward through the rest of 2026 and beyond, and I am very excited for what we have going forward. With that, I would like to end our formal presentation and turn it back over to Jim for questions and answers. Operator: We will now open the call for questions. Thank you. To our audience joining today over the phones, at this time, if you would like to ask a question, simply press star and one on your telephone keypad. Pressing star and one will place your line into a queue, and I will open your lines one at a time. We will hear first from Anthony Taglieri at Canaccord Genuity. Anthony Taglieri: Thanks, and good morning. Maybe just starting with the uranium side of things. How much finished inventory are you maintaining? We saw you sell 100 thousand pounds in Q1 on the spot market, close to $100 per pound. Should we expect you to sell up to the high end of the sales guidance range if prices came back to around those levels? Ross R. Bhappu: First, we have to maintain sufficient inventory to meet our contractual obligations. That is a driver. We also want to maintain optionality where we can switch the mill over from uranium to processing rare earths depending on market conditions. It is a bit of a balance. When you look at our guidance, we have relatively wide ranges of uranium sales largely because of that—maintaining enough inventory to meet contractual obligations, having some available for the spot market, and preserving flexibility to transfer the mill operations from uranium to rare earths at any point in time. We will continue to process uranium as heavily as we can. When we see prices going over $100, as they did earlier this year, we will certainly take advantage of that. Longer term, we see uranium prices escalating, and we want to maintain optionality around that. It is a bit of a balance, and I would say it is a bit of an art, but that is why we are going the direction we are. Anthony Taglieri: Great, thanks. As a follow-up: in the first quarter, you sold about half of your long-term sales commitments for the year, it seems. Should we expect the remaining portion of that to come in the second quarter, or will it be staged differently throughout the year? Ross R. Bhappu: I think it will be staged throughout the year. We have big contractual obligations in the first quarter, and we will be meeting those through the balance of the year. There were some pretty big sales that came as a result of one of our big contracts, but I anticipate we will smooth that out through the balance of the year. Operator: Thanks. Our next question will come from B. Riley Securities. Analyst: Thank you, team, and congratulations on the quarter. My first question: rare earth companies that are standalone are trading meaningfully at higher multiples than diversified miners. As the rare earth business scales—when Donald, ASM, Varamata all come together—do you think about spinning the business out and operating as two distinct businesses, rare earths and uranium? Ross R. Bhappu: It is an interesting issue. Rare earth companies trade at higher multiples; uranium companies a bit lower; heavy mineral sands companies even lower. Our view is that we want to be integrated across those three sectors. It is vitally important technically and commercially that we control our own feedstocks. If we are going to be a monazite processing company and an MREC processing company, we want to control our own molecules. Spinning out the heavy mineral sands side is something we might consider in the future, but right now it is so important as a source of feedstock for us, and we want to be in control of it. I will leave it to you and other analysts to figure out how to value us, but I believe the bulk of our revenue, as I look forward, will come from rare earths. We will have continuing revenue from uranium and will be ramping up revenue from heavy mineral sands. We will live with how you weight those, but I would be hesitant to give up control over the feedstock going into our mill. Analyst: That is very clear, Ross. On another line, how are you reading the uranium market right now? Prices have been strong and holding above the $80 per pound threshold. Are you seeing any utility customers signaling urgency to lock in domestic supply, or is the contracting still moving slowly? Ross R. Bhappu: You see headlines from companies in the SMR business with amazing future projections. The only way they are going to feed those SMRs is with uranium. We have not seen the utilities ramping up their buying schedules yet. I fully expect we will see that. I am confident there will be more focus on ensuring supplies of uranium going forward. To the best of my knowledge, we have not seen a huge increase in demand or discussions from the utilities to date, but I expect that will change. Every research group that studies uranium and the nuclear industry shows the supply and demand balance is going to come out of alignment in the next few years. You are just going to need more uranium. I remain very bullish on uranium personally, and we talk about it internally quite a lot. Operator: Our next question will come from Brian Lee at Goldman Sachs. Brian Lee: Hey, thanks for taking the questions. On Varamata, a little bit of a delay there. Can you elaborate on how much of a delay, what needs to happen to get that back on track, and any milestones through the year that might improve visibility? Ross R. Bhappu: The change in government that happened in September/October really slowed the process down. We were very close to signing an investment agreement around that time, but the change in government slowed things. We have been spending considerable time in-country in Madagascar. I am joined here by Nathan Longenecker, our General Counsel, who has been spending a lot of time in Madagascar. Let me let him add to that. Nathan Longenecker: We continue to push it forward. The government is relatively new, but we have been meeting fairly regularly with the highest levels, and our discussions have been met with a fair bit of support. The government has been supportive of the project. There are a number of things we need to get in place. The document itself has many aspects and takes time to finalize. That is generally where we are—working with the government. Brian Lee: Fair enough. Related to that, any updated thoughts around sourcing monazite in the open market as you are waiting for upstream assets to reach FID and move to production? Monazite pricing has come down a decent amount recently. Any thoughts around using that more as a bridge? Ross R. Bhappu: We will need to source monazite. We have three sources internally of monazite. We also have an agreement with Chemours to source monazite from them. To keep Phase 2 at White Mesa full, we will need additional sources—a small amount, but additional nonetheless. We have a very active business development and partnerships group in discussions with a host of suppliers. Groups in production today are selling their monazite almost exclusively into China, and Western companies doing that are looking for alternative outlets. We have many discussions ongoing, and we will have additional sources of monazite to feed our mill. Operator: Next, we will hear from Justin Chan at SCP Resource Finance. Justin Chan: Hi, Ross and team. Thanks for hosting the call. On uranium processing, you could run a longer processing campaign, etc. What is your current thinking in terms of how long you intend to process uranium for? Ross R. Bhappu: The mill operates at a higher rate than our mines produce ore, so the mill will outrun the mines, at least for now. We will be able to process ore for probably another four to six weeks, then we are going to shut down for maintenance and do some modifications to the mill. That will allow us to build our uranium stockpiles. Then we will have to choose whether we restart with uranium or with rare earths, and a lot depends on market conditions. We are over 1 million pounds processed so far this year. We will get through the next month to month and a half, shut down for probably a couple of months for maintenance, and then decide whether to start back up with rare earths or uranium depending on market conditions. Justin Chan: If nothing changes from now, how would that influence your thinking? Ross R. Bhappu: If nothing changes, we would probably start back up with uranium processing and continue uranium processing through the balance of the year. Justin Chan: Thanks, that is clear. You mentioned Phase 1C will give you optionality to process rare earth minerals alongside uranium. Will you be receiving MREC from third parties, or could you make your own MREC stockpiles? Ross R. Bhappu: It would be primarily sourced from ionic clays via third parties. Early on, when we ran the mill, we produced an MREC material at our own facility from monazite, but we do not anticipate doing that going forward. There are a number of third parties looking for a home for their MREC, and we think we can help fill that void. Justin Chan: When you have your own dedicated rare earth processing lines and are processing monazite, would you still retain capacity to receive additional MREC or does that create a blending issue? Ross R. Bhappu: No blending issue. The separate facility we are building—Phase 1C—will allow us to continue to process MREC in addition to processing monazite through Phase 2. We will maintain the capability to process MREC along with monazite. Justin Chan: With that capacity, does that change your strategic thinking about having your own potential upstream ionic clay feed? Ross R. Bhappu: We are always going to be opportunistic. If there is an opportunity to acquire an ionic clay and an MREC producer, we would certainly consider that if it made sense. Operator: Next, we will hear from Noel Parks at Tuohy Brothers. Noel Augustus Parks: Good morning. On Donald, could you give a sense of what remains on finalizing the offtake agreements, which in turn will help get to the FID? Ross R. Bhappu: Good to talk to you, Noel. Donald will produce a heavy mineral concentrate as well as monazite. There are two separate offtake agreements we need to finalize—one on heavy mineral concentrate and another on various rare earth products. Coordinating offtake agreements across different commodities is time-consuming, and it has taken longer than anticipated. Once you get those locked in, that impacts your financing, so they go hand in hand. We are having discussions with various financing parties as well as offtake parties, and they are different groups you must coordinate between, which creates complexity. That is also compounded by having a joint-venture partner—Astron—so financing and offtake agreements must also be agreeable to our JV partner. What from the outside looks straightforward is actually complex and time-consuming, and it has delayed us making the FID more quickly. We are very focused on getting the FID as quickly as possible and getting that mine up and running. Noel Augustus Parks: Thanks. On rare earths, in the past you mentioned how what the market wants has been evolving and that has informed your decisions about which products you pursue and in what order at the mill. Could you update us on how you see demand shifting for particular elements going forward? Ross R. Bhappu: Demand signals often reflect what producers can actually make. We continue to see very strong demand for dysprosium and terbium. Not everybody can produce those heavies. Magnet manufacturers are trying to design magnets that reduce reliance on dysprosium and terbium, but they have not solved that yet. There remains big demand for Dy and Tb in magnets, and I think that continues for the foreseeable future. At the mill, we want the ability to produce the full suite of heavies—not just dysprosium and terbium, but also samarium, gadolinium, europium, and yttrium—because there is demand for those. Yttrium demand in the aerospace industry, for example, is very strong. The heavies allow motors to operate at very high temperatures, and alternatives without heavy rare earths have not been proven at scale. There is some wishful thinking out there, and perhaps that will happen in the future, but we are seeing a lot of requests from potential off-takers for Dy and Tb. Operator: Next, we will hear from Matthew Key at Texas Capital. Matthew Key: Good morning, and thanks for taking my questions. What market indications would you need to see to move ahead with some of the medium-term uranium projects? As you mentioned, mined ore is the main bottleneck. Would it be economic at current spot pricing to bring a couple of those online? Ross R. Bhappu: Timely question—we just had a meeting on prioritizing our pipeline. At current prices, you start to consider bringing some of those online. One question is where pricing will go. If we see prices well over $100 per pound, which we anticipate at some point, that brings a lot of the pipeline into a real opportunity. At these prices, we are happy with what we have operating—La Sal and Pinyon Plain—and we have Nichols Ranch on standby. We will continue to permit and advance development projects and be ready to put them into production as soon as we feel there is a long-term sustainable price above a project-specific threshold. Thresholds vary by project. We think about this every day, even if I cannot give you a hard number. Matthew Key: Got it. Would you ever consider selling Nichols Ranch as an ISR project, given it is different than the conventional portfolio? Could that generate incremental liquidity, or is the plan to eventually develop it? Ross R. Bhappu: If you are making an offer, we will certainly think about it. We are excited about Nichols Ranch. We like that it is ready and on standby. We could get it up and running in probably four to six months if we pull the trigger. We like that optionality. That does not mean we would not consider a great offer, but we like the optionality today. Matthew Key: Understood. One more on the Dubbo project. If the ASM transaction closes, could Dubbo be used as feedstock for White Mesa, or would it operate more as a standalone project? Ross R. Bhappu: Great question. It is not a heavy mineral sands project—it is polymetallic with high critical mineral credits like niobium, as well as rare earths. The current plan from ASM is to use heap leach and semi-processing to produce a rare earth hydroxide that would then come to the White Mesa Mill for treatment—much like an MREC material. That approach was driven largely by capital cost considerations versus building a mill and producing more of a concentrate on-site. After we close, we want to review the engineering to make sure we agree with ASM’s path or consider alternatives to extract the best value, including for products like niobium. Right now, the plan is to produce a hydroxide that we would then process at White Mesa. Operator: We have no further questions from our audience this morning. Mr. Bhappu, I am happy to turn the floor back over to you for any closing remarks. Ross R. Bhappu: Thank you to everybody for participating. This is my first earnings call as the new CEO, and I am excited to be in this role and to take the company forward. Please keep a watch on our company because we have a lot of exciting things happening. Thank you. Operator: Ladies and gentlemen, this does conclude today’s Energy Fuels Inc. Q1 2026 conference call. We thank you all for your participation. You may now disconnect your lines. Have a great day.
Operator: Greetings, and welcome to the ProFrac Holding Corp. first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael Messina, Senior Vice President of Finance. Thank you, sir. You may begin. Michael Messina: Good morning, everyone. We appreciate you joining us for ProFrac Holding Corp's conference call and webcast to review our results for the first quarter ended 03/31/2026. With me today are Matt Wilkes, Executive Chairman; Ladd Wilkes, Chief Executive Officer; and Austin Harbour, Chief Financial Officer. Following my remarks, management will provide high-level commentary on the operational and financial highlights of the first quarter 2026 before opening up the call to your questions. A replay of today's call will be available by webcast on the company's website at pfholdingscorp.com. More information on how to access the replay is included in the company's earnings release. Please note that the information reported on this call speaks only as of today, 05/07/2026. You are advised that any time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, comments on this call may contain forward-looking statements within the meaning of the United States federal securities laws, including management's expectations of future financial and business performance. These forward-looking statements reflect the current views of ProFrac management and are not guarantees of future performance. Various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in management's forward-looking statements. The listener or reader is encouraged to read ProFrac's Form 10-Ks and other filings with the Securities and Exchange Commission, which can be found at sec.gov or on the company's investor relations website section under the SEC Filings tab, to better understand those risks, uncertainties, and contingencies. The comments today also include certain non-GAAP financial measures, as well as other adjusted figures to exclude the contribution of Flotek. Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the earnings press release, which can be found on the company's website. Now over to Mr. Matt Wilkes, Executive Chairman. Matt Wilkes: Thanks, Michael, and good morning, everyone. I'll begin with some brief remarks on our overall performance, the broader market environment, and the progress of our strategic priorities. Ladd will then take you through our business results in more detail, followed by Austin, who will walk through the financials. We're pleased to report that our first quarter results exceeded our expectations that we discussed in March. Our exceptional operational performance as we progressed through the final month of the period drove outperformance for Q1 relative to some weather-driven challenges we faced to start the year. Specifically, as we discussed on our Q4 call, harsh winter conditions across much of our operating areas created some operational disruptions that resulted in approximately 9 million of adjusted EBITDA impact. More importantly, market dynamics shifted meaningfully beginning in late February and early March with the onset of the '1, characterized by calendar tightening and a reduction in white space. More recently, we've begun to see work added to the calendar that was not scheduled prior to the Iranian conflict. Further, we're proud to note that our stimulation services team delivered record efficiency levels in March with operational momentum carrying into the second quarter. As a near-term solution to oil supplies remaining elusive, exacerbating a material increase in oil prices, operator sentiment has continued to improve. Against the positive market trajectory, we're witnessing an open window for more favorable pricing dynamics. We are aware that pricing discussions are happening across the energy value chain, and our customers are highly engaged. We have taken a measured, deliberate approach focused on partnering with operators that will collaborate with us to generate appropriate returns through the cycle. We have successfully implemented price increases for the majority of our active fleets. These increases layer in throughout the latter half of the second quarter and into the back half of the year. Based on these factors, we expect Q2 to trend higher sequentially. Ladd will provide more color in a few minutes. Stepping back to the broader market environment, what we're experiencing at the company level reflects a larger set of dynamics we believe are still in the early innings of North American energy services. We believe the geopolitical developments that emerged in late February fundamentally altered the global energy security-of-supply calculus. Beyond the immediate disruption to tanker traffic via the closure of the Strait of Hormuz, what's becoming increasingly apparent is the scale of damage to critical Persian Gulf infrastructure. The processing facilities, export terminals, and distribution networks that were impacted represent decades of engineering and capital investment. Reconstruction timelines are becoming clearer, and they could be measured in years, not quarters. This isn't a transient supply shock. We believe it is a shift in available global capacity that will take considerable time to resolve. Further, this supply constraint is coinciding with a policy environment that increasingly appears to be pivoting decisively toward domestic energy security and infrastructure development. While it's early to predict specific legislative outcomes, the direction is clear, and it reinforces the case for a sustained call on North American production activity. Energy security has also become a more prevalent factor globally. As importers revise their strategies regarding consistent, reliable access to hydrocarbons at scale, we believe these dynamics provide increased structural tailwinds to the North American energy industry as the lowest-risk producer of crude oil and LNG. Overlaying these macro developments is a North American demand picture that was already tightening. The production gap we flagged for several quarters has only widened, with operators running behind the activity curve required to offset natural decline. Meanwhile, on the gas side, the convergence of expanding LNG export capacity with accelerating power demand from data centers and industrial electrification is creating increased medium- and long-term demand. On the service side, the available capacity supply response has been notably restrained. Years of capital discipline have limited new equipment from entering the market, while the natural attrition of aging fleets continues to reduce available capacity. The result is a tightening supply-demand balance for high-specification, high-efficiency service capacity coinciding with an inflection in operator activity. Our record efficiency performance in March reflects this evolution as we delivered a company record measured by pump hours per fleet. Our vertical integration model, dual fuel and electric fleet capabilities, and asset management platform position us to continue to enhance service quality and efficiency. We're focused on delivering value where operator demand is strongest, maintaining our disciplined approach to fleet deployment, and leveraging the technology differentiation that Ladd will discuss in more detail. I'd like to spend some time discussing our approach to asset deployment. Of note, irrespective of market cycles, we execute a routine program upgrading diesel to dual fuel or natural gas-capable configurations. In the current market environment, as the call on equipment continues to increase, we have fielded a number of inbounds from operators seeking incremental assets and crews. In order to employ additional assets, we would need to accelerate our upgrade program and to do so, we have certain requirements that must be met. We will remain disciplined in our approach to capital allocation and fleet deployment. Importantly, our vertically integrated model and asset management capabilities uniquely enable us to respond rapidly to evolving market conditions. As we discuss future activity with customers, the dialogue remains constructive. Suffice to say, there are numerous factors in play that bode well not only for an improved Q2, but an improved second half of the year and potentially beyond. While we're encouraged by the macro backdrop and the tightening we're seeing in the market, what ultimately positions us to capitalize on these dynamics is the work we've been doing internally to strengthen our cost structure and improve our operational efficiency. On our last call in March, we outlined our business optimization program, and I am pleased to report significant progress toward our goal. On a year-over-year basis, and including our capital expenditure reduction in 2025, we have achieved the majority of our 100 million annualized savings target. Our labor-related cost reductions have been fully implemented and are running at an annualized savings rate at or above the midpoint of our 35 million to 45 million target range. On non-labor operating expenses, SG&A reductions have been implemented. Additionally, we continue to make progress on repair and maintenance and asset-level operating expense reductions. While some of our projects remain in earlier stages of implementation, they should accelerate as we move through the year. We continue to expect to achieve the full 30 million to 40 million range as these initiatives mature through the year. On capital expenditure efficiency, we have already achieved, at a minimum and including the reduction in 2025, the high end of our targeted range of 20 million to 30 million. One element worth highlighting is our transition to internally designed, developed, commercialized e-blenders. Ladd will elaborate on this in his remarks. Taken together, these actions meaningfully improve our cost structure and position ProFrac to generate stronger returns through the cycle. Our internal execution on costs and capital efficiency is what keeps us competitive through the cycle, but competing effectively over the long term also requires technology that creates value that our customers cannot find elsewhere. And that brings me to Makena. On our last call, we introduced Makena in considerable detail as a unified completion optimization platform combining ProPilot 2.0 surface automation with Seismos subsurface intelligence. In summary, Makena is ProFrac's integrated well optimization suite that brings pre-stage design, field execution, post-stage diagnostics, and historical analysis into a cutting-edge real-time unified feedback control framework that actively intervenes to increase perforation performance by up to 33%. What I want to share is where things stand and the dimension with opportunity that has come into sharper focus as we have been in front of customers. The headline is that we are in active price discovery on the commercial model. Customer feedback from testing-stage deployments has been encouraging, and that feedback is informing us of how we think about structuring the value share. We will have more to say as this process matures. What has become increasingly clear through those customer conversations is that Makena's most compelling application may be in unlocking acreage that operators have effectively set aside. A portion of stranded inventory may be uneconomic due to complications in frac design impacted by existing adjacent infrastructure. Offset wells, wastewater infrastructure, and legacy downhole completions can collectively create constraints that may force operators to conclude that fewer locations are economic to produce. Makena may address this issue directly. Ladd will explain what that looks like on location, but the strategic point is this: we believe this platform has the potential to bring previously stranded inventory back into play for our customers. To conclude my opening comments, we delivered a strong Q1, exceeding our expectations. Despite a weather-impacted start, the business performed well with increased completions momentum through the end of the quarter. Our cost optimization program continues to advance. We have achieved the majority of our 100 million run-rate target. The macro backdrop is working in our favor. Energy security has moved to the front of the conversation, and that has direct and tangible implications for domestic completions activity and the operators we serve. Makena, our complete well optimization suite, is gaining traction in the market with more customers inquiring about closed-loop well optimization capabilities. As a continuous improvement engine, Makena may potentially offer operators the ability to economically complete stranded locations. And finally, Q2 is shaping up to be a meaningful step forward. Some operators are pulling work forward, helping to eliminate white space in frac calendars. The market has tightened, and we see it tightening more as the year unfolds. With natural gas-burning equipment nearly sold out, we are in active discussions with customers and have achieved price increases on the majority of our fleets. Discussions with operators remain active, and we will remain disciplined on fleet deployments. Let me now turn it over to Ladd, who will get into the operational details. Ladd Wilkes: Thank you, and good morning, everyone. Picking up from Matt, I'll begin with a deeper look at our Stimulation Services results. We maintained our fleet count in the low 20s during the first quarter, consistent with the disciplined approach we've held throughout this market cycle. Pricing was generally stable sequentially. In March, we delivered record efficiency performance with average pumping hours per active fleet exceeding 600 hours. I'd like to commend one fleet in particular that recorded an exceptional 682 pumping hours in the Eagle Ford in March, working for a supermajor on a dedicated contract. We have sustained efficiency levels through April and into May. On the activity front, we're seeing operators add to their previously scheduled work while also securing availability on the calendar later in the year. These dynamics reflect the tighter equipment market as Matt alluded to earlier. We expect the tightening completions landscape to drive a more balanced pricing structure that will flow through to the bottom line. However, it is worth noting that we are also monitoring some emerging cost pressures—pricing creep in chemicals, diesel, and diesel surcharges on product delivery, and certain specialty materials where feedstock is exposed to the current macro environment is starting to materialize. Steel costs are something we're watching as well. Importantly, our customers and vendors see the same dynamics and understand them. That shared awareness is part of what is making our pricing conversations constructive. Cost pressures are not a surprise to anyone at the table. We are applying the same discipline to fleet deployment that we've spoken about for some time now and are not chasing spot work. Our strategy of maintaining an active fleet count in the mid to lower 20s positions us well to capitalize on improving market conditions. Although we are in active dialogue to potentially increase fleet deployments, as Matt previously noted, we will remain disciplined in our approach. Before I continue on to proppant, I want to expand on Matt's point about the benefits we're seeing from our electric, or e-blenders. First and foremost, our internally designed and manufactured electric blenders are completely modular, enabling faster repairs and reducing the need for redundancy. While some parts and lead-time delays may push full deployment of the remaining e-blenders into early 2027, capital efficiency benefits are already materializing on the units we deployed in late 2025. And we expect meaningful second-order savings from reduced repair and maintenance expenses as the full fleet is deployed and legacy units are retired. Moving to proppant production, the first quarter presented some challenges for this segment, as we noted on the March call. Beyond the winter storm experienced in the quarter, we experienced some operational issues that affected production levels. While completion activity increased, particularly in March, these headwinds resulted in lower sequential Q1 volumes versus the strong performance we delivered in the fourth quarter. Operational challenges and unplanned downtime have negatively impacted utilization and sales into the second quarter. As a result, we expect volumes to be down from the first quarter. We're focused on returning to the execution levels that drove our strong fourth quarter results—namely, we are optimizing mine investments in both South and East Texas to increase utilization and throughput. The operational leverage in this business remains the key driver. When we can maximize production efficiency and maintain high uptime, profitability follows. Beyond the segment results, I want to pick up on Makena where Matt left off and touch on the acreage opportunity he described. When an operator looks at completing a well in a complex subsurface environment, that is, one with nearby offset wells, wastewater disposal infrastructure, legacy completions in close proximity, they face a practical dilemma. The frac design that could optimize production from that wellbore may carry increased execution risk. In some cases, the well sits as a DUC, or is deferred. Our platform potentially enables the ability to pursue a more optimized design in these environments, with real-time subsurface intelligence guiding the execution and closed-loop control reducing the exposure to unintended downhole consequences. Ultimately, Makena may shift the economic calculus on certain uneconomic locations and open up a broader swath of developable inventory. From a competitive standpoint, I will simply note that the ability to deliver this capability without requiring upfront infrastructure investment in adjacent or offset wellbores is a meaningful practical differentiator. Approaches that depend on fiber installation in offset wells could cost up to $1 to $2 million. We are working through price discovery with customers on how to appropriately capture the value Makena creates. That process is ongoing, and we look forward to providing more color as it develops. With that, let me hand it over to Austin to walk through the numbers. Austin Harbour: Thank you, Ladd. In the first quarter, revenues were 450 million, up slightly from 437 million in 2025. We generated 54 million of adjusted EBITDA with an adjusted EBITDA margin of 11.9% compared with 61 million in the fourth quarter, or 14% of revenue. The impact of the winter weather storm resulted in an estimated 9.3 million reduction to consolidated adjusted EBITDA. Pro forma adjusted EBITDA margin would have been approximately 13.6%, in line with Q4 2025 and an improvement of approximately 350 basis points versus Q3 2025. Free cash flow was negative 25 million in the first quarter versus 14 million in 2025. Turning to our segments, Stimulation Services revenues were 407 million in the first quarter, improved from 384 million in 2025. Adjusted EBITDA in Q1 was 32 million, in line with the 33 million we reported in Q4, with margins of 7.8% compared to 8.7% in Q4. As noted earlier, harsh weather conditions impacted us in the first several weeks of the year and were an estimated 7.8 million headwind to Stimulation Services adjusted EBITDA. Pro forma for the weather impact, segment margins were slightly improved from the fourth quarter, as well as an increase of approximately 370 basis points versus Q3 2025. Our Proppant Production segment generated 120 million of revenue in the first quarter, a touch above the 115 million of revenue we reported in 2025. Approximately 28% of volumes were sold to third-party customers during the first quarter versus 39% in Q4. Adjusted EBITDA for the Proppant Production segment was 7 million for the first quarter versus 16 million in Q4. On a margin basis, adjusted EBITDA margins were 5.4% in the quarter versus 13.9% in Q4 2025. Winter weather had an approximately 1.5 million impact on adjusted EBITDA. In addition to weather, lower throughput and sales volumes and an increase in tons per share and sold-through third-party mines impacted results. Our Manufacturing segment generated first-quarter revenues of 48 million versus 43 million in the fourth quarter. Approximately 14% of segment revenues were generated from third-party sales compared to approximately 18% in Q4. Adjusted EBITDA for the Manufacturing segment was 7 million, up from 4 million in Q4. Flotek generated first-quarter revenues of 72 million versus 43 million in the fourth quarter. Approximately 25% of segment revenues were generated from third-party sales compared to approximately 26% in Q4. Adjusted EBITDA for Flotek was 11 million, up from 10 million in Q4. Selling, general, and administrative expenses were 44 million in the quarter compared to 43 million in the fourth quarter. We are reaping the early benefits of our savings initiatives. As Matt alluded to, we have achieved the majority of the savings on a year-over-year basis and including the reduction in capital expenditures in 2025. We anticipate realizing the remainder of the savings as we progress through the year. Turning to the cash flow statement, cash capital expenditures of 41 million in the first quarter were up from 37 million in 2025. Consistent with the outlook we issued on our March call, we expect total capital expenditures in 2026, including Flotek spend, to be in the range of 155 million to 185 million. Excluding Flotek, we expect our CapEx to be in the range of 145 million to 175 million. As Matt highlighted, we have strict criteria that must be met first before we will take action or commit ourselves to accelerating our fleet upgrade program. In addition to meaningful price increases, sufficient contract duration is also necessary. We are quite pleased with how constructive our customers have approached our ongoing and dynamic dialogue on these fronts. Turning to cash, total cash and cash equivalents as of 03/31/2026 were approximately 34 million, including approximately 6 million attributable to Flotek. Total liquidity at quarter end was approximately 108 million, including 80 million available under the ABL. Borrowings under the ABL credit facility ended the quarter at 116 million, an increase from 69 million at year end. At quarter end, we had approximately 1.09 billion of debt outstanding, with the majority not due until 2029. Our approach to the balance sheet remains the same—disciplined, opportunistic, and focused on maintaining the flexibility to act as market conditions evolve. As we noted on our last call, we completed two financing transactions in the weeks following year end: a 25 million additional issuance of 2029 senior notes to Beal Bank in January and a six-month extension on our senior secured revolving credit facility extending it to September 2027. We will continue to evaluate opportunities to further strengthen our liquidity and capital structure. That concludes our prepared remarks. Operator, please open up the line for Q&A. Operator: Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of Dan Kootz with Morgan Stanley. Please proceed with your question. Analyst: Hey, thanks. Good morning. So, just wanted to square a couple of comments on pricing. In the press release and in the prepared remarks, there were a few times that kind of “balanced pricing” was mentioned or operator dialogue indicating balanced pricing, which I kind of interpret as, you know, you guys had flagged that you'd seen pricing headwinds and interpret down pricing as kind of more flattish. But then there were a few points where you mentioned increasing pricing across part or majority of the fleet. So I was hoping you could help us square those two comments. Maybe it has to do with different timelines or different types of assets in the fleet, but yeah, if you could clarify that, that'd be really helpful. Ladd Wilkes: Yes, that's different timelines. As you look at Q4 to Q1 sequentially, pricing was stable. But as we transition into Q2 and into the rest of the year, we've got active dialogue with customers on pricing improvement. Much of this we've already secured, and you'll see some of the pricing show up in Q2 and then completely show up in the back half of the year. These are material price increases, and it's not just the commodity environment and the Iran war, but mostly because of how tight the market is on available horsepower. Analyst: Great. Yep, that all makes sense. That's helpful. And then maybe just looking at the second quarter, appreciate that there's a lot of puts and takes, but it seems like there's a lot more that's a tailwind sequentially. So you flagged cost headwinds, but you have the consolidated, I think it was 9 million weather impact, you have price improvements, you flagged the frac calendar tightening—and that's even versus, I think you said, March was kind of a record efficiency period. And then I guess lastly, you have the full run-rate cost savings. So, anything you could help us with a bit more specifically about how you're thinking about the second quarter on the top line or on the profitability EBITDA line? Ladd Wilkes: Yeah. I'll let Austin jump in on some of this. But essentially in Q3, we launched our cost savings initiatives, which have been extremely successful—most of which we've fully realized to this point—but we think there's more to gain there, especially on the R&M side and on the maintenance CapEx side, just from optimizing our procedures, our control of assets through asset management, and then by implementing automated resources for the automated controls on our equipment. We're finding incredible benefits across our entire fleet in how our fleet operates. And many things that we thought were ordinary-course failures we're finding are now preventable failures from just doing the software update. So we're pretty excited about what our frac automation is doing for our cost structure and what it's teaching us about our equipment and what we can control. We expect to see further savings from there. And then we had a slow start to the year—some of it was schedule from customers, but a lot was weather delays. That compressed our schedule in the back half of Q1 and into Q2. As well as the Iranian war bringing the spot work forward, bringing DUCs forward, really tightened up and eliminated white space in our calendar, combined with a real move from operators on planning activity going into the second half. That increase in activity has tightened the market to a point where there's limited availability of horsepower and has put us in a good spot to have conversations with our customers about pricing. And not just from a supply and demand standpoint, but also from a fuel standpoint—diesel prices have gone up tremendously, and the demand for fuel-efficient fleets has increased. With that, we've been able to have very constructive, collaborative conversations with our customers where we talk about fuel savings, and we can deliver them a friendlier cost structure for their budget while also getting an increase for ProFrac. So it's been a really constructive dialogue that has allowed us to focus on our partnership and preserve and reinforce the strong relationships that we have with each customer. Austin Harbour: And I think, Dan, when we look at the cost and cash savings initiatives, if you think about the 100 million, we're about 65% to 70% of that already showing up going back to Q4 and then Q1 this year, and that's without a full-year impact of those initiatives being implemented. In addition to that—and both Matt and Ladd touched on this—we're investing more so in the back half of the year in our e-blender fleet and program, and there was a little bit of a delay to that program given some supply chain issues and long-lead items. But once those start to feather in, we anticipate more savings both on the CapEx side and ultimately on the R&M side as well. So when you take those together, we haven't updated guidance beyond the 100 million at the midpoint, but I do think as we move through the year and get those fully implemented, we'll see some upside to that total number. With respect to Q2, echoing Matt's comments: the increases feather in throughout the quarter and then become more pronounced as we move into the back half of the year. In addition to that, where we're seeing a lot of demand and activity on the completion side unfold in real time, we've still got some work to do on Alpine just given some of the operational issues and some of the unplanned downtime that we faced not just in Q1, but in early Q2 as well. So you've got a little bit of offset there, but net-net we will be up in Q2 versus Q1. Ladd Wilkes: One thing I'd say about the e-blenders as well is not only are they better for our cost structure and save us money on CapEx, but when you look at the efficiencies that they gain, we've seen about a 98% reduction in MPT associated with blenders when utilizing these e-blenders. So they're incredibly reliable. When they do have issues, you can address them immediately on location, and you don't have to send them back to a shop to get rebuilt. It's far superior to what's been available historically on the market. Analyst: Got it. Do you think you'd be up more than the 9 million weather impact in Q2 versus Q1 sequentially on the EBITDA line? Austin Harbour: Yeah, I think that's safe to say. Analyst: Great. Alright. Thank you both. Really appreciate it. I'll turn it back. Ladd Wilkes: Thanks, Dan. Thank you. Operator: Our next question comes from the line of Patrick O'Leary with Stifel. Please proceed with your question. Analyst: Hey, it's Pat on for Steven Juguera. Thanks for taking the questions. I know you touched on pricing in the opening remarks and from Dan's question, but I was wondering if you can give any color about where current pricing sits versus maybe the last few years, and any way to quantify what to expect over the next few quarters? Ladd Wilkes: I'd say from the peak in 2022 compared to where we are now, we're probably at 55% to 60% of where pricing was in 2022, and you would need essentially an 80% or 90% increase to get back to that level. I don't know if we'll ever get back to that point, but you also have a much more efficient industry as well. The number of pump hours you get per fleet and the number of hours you can put up on a daily basis is substantially higher than what it was in 2022. So we can do a lot more with a lot less. But with that being said, we've got a long way to go for price improvement. Our number one goal is to generate positive net income and to get there as quickly as possible, without stressing our partnerships that we've worked so hard to establish. I think that's a reasonable goal that can be accomplished within the next couple of quarters. Analyst: And then just a quick one. Could you talk about frac sand pricing and any way to think about pricing through year end? Ladd Wilkes: The sand market has been tightening up. In South Texas, it's extremely tight. East Texas is improving as well. West Texas has started climbing also. All the way across the board, sand has become a really tight commodity, and there's without a doubt pricing improvement. I won't get into specifics because each one of these regions is unique and has its own drivers, but I'd say with no exception, every market is quickly improving, not just on price but in volume. Analyst: Right. Thanks. Appreciate the uniqueness of the regions, and that's all for me. I'll turn it back. Ladd Wilkes: Thank you. Operator: Our next question comes from the line of Bill Austin with Daniel Energy. Please proceed with your question. Analyst: Hey, guys. Thanks for taking my question. Good morning. So, just thinking about this, as you guys evaluate inquiries for incremental frac spreads, can you help us frame the mix between public and private operators? Has that composition shifted meaningfully? Ladd Wilkes: We've seen a lot of new activity coming on from private operators. Without a doubt, there's a lot of spot work out there that's come out of the woodwork. We're even seeing some private operators bring on full dedicated programs, which is what we focus our commercial efforts on. We talk to everybody and work with everybody regardless of the size of their program, but our ability to cover spot work is really associated with the core of our business and whether or not we have white space. We're not going to activate a fleet so that we can string together a lot of spot pads. We focus on our core—committed, dedicated, reliable, and consistent schedules. What we run into from our high efficiencies is that sometimes we outrun people's programs and we end up with a few gaps in the calendar. That's where the spot work is so valuable for us. It allows us to squeeze those jobs in whenever we outrun our steady customers' schedules. You need a healthy mix of the two. What we're seeing right now is a disproportionate amount of spot work that has come to market all at the same time, and it's quickly transitioning into committed programs and rig activation. We like the way the market's framing up. We're still in the early innings, but for us to get out and start activating fleets and committing capital to tailoring this equipment for the customer's unique needs, we need to see a stronger signal and some commitment from the customer to help in those efforts. We don't want to deploy capital on spec. We're not going to. We're remaining disciplined. Our core focus is to make sure that we maintain control of our cost and our disciplined approach to operations. With that, I think we end up with plenty of opportunities to address every one of our customers' needs. When you look at pricing and where it's going and how quickly it's readjusting, I think this is a win-win scenario for our customers as well as our bottom line and our ability to address those needs quickly. Pricing is coming up, but we're not going to chase and we're not speculating on where it's going. We are ready. We've got high-quality assets that are ready to go, and with direct signal, we'll respond accordingly. But that signal isn't coming from our own macro analysis; it's coming direct from our customers who are committed to their programs, and there should be no ambiguity related to how active they want to be. This “drill baby drill,” we think it's pretty close. That doesn't factor into any of the guidance that we've provided. I think in very short order this year, we'll see positive net income. I think everything's there for us to deliver that. It's just working with our customers to make sure that they're getting what they need and that our relationships are strong. I think this is the perfect environment to see the service industry and the economic outlay for the service industry restored—and to do it at a time when our customers are in a good spot as well. Analyst: Great. Thanks. Operator: We have no further questions at this time. I would now like to turn the floor back over to Mr. Matt Wilkes for closing comments. Matt Wilkes: Thanks, everybody, for joining our call. We look forward to the next one and are very excited about the positive results that we're seeing in ProFrac, and especially excited about the coming quarters. Thank you. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Hello, and welcome to Vir Biotechnology First Quarter 2026 Financial Results and Corporate Update Conference Call. As a reminder, this call is being recorded. [Operator Instructions] I will now turn the call over to Kiki Patel, Head of Investor Relations. You may begin, Kiki. Kiki Patel: Thank you, operator, and welcome, everyone. Earlier today, we issued a press release reporting our first quarter 2026 financial results and corporate update. Before we begin, I would like to remind everyone that some of the statements we are making today are forward-looking statements under applicable securities laws. These forward-looking statements involve substantial risks and uncertainties that could cause our clinical development programs, collaboration outcomes, future results, performance or achievements to differ significantly from those expressed or implied by such forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the potential benefits of our collaboration with Astellas, the therapeutic potential of VIR-5500 and our PRO XM platform, our development plans and time lines, financial terms and milestone payments and our cash runway and capital allocation priorities. These risks and uncertainties and risks associated with our business are described in the company's reports filed with the Securities and Exchange Commission, including Forms 10-K, 10-Q and 8-K. Joining me on today's call from Vir Biotechnology are Dr. Marianne De Backer, our Chief Executive Officer; and Jason O’Byrne, our Chief Financial Officer. During the first quarter of 2026, the Vir Bio team delivered meaningful advances across our T-cell engager and Hepatitis Delta programs, underscoring our ability to execute towards key clinical and corporate priorities. The agenda for our call today is as follows: First, Marianne will share an update on our recent landmark global strategic collaboration with Astellas and our prostate cancer program. Next, she will provide an update on our Hepatitis Delta program evaluating tobevibart, an investigational neutralizing monoclonal antibody and elebsirin, an investigational small interfering RNA. Then Jason will provide an overview of our first quarter 2026 financial results. And finally, Marianne will close the call, and we'll open the line for Q&A. With that, I'll now turn the call over to Mary Anne. Marianne De Backer: Thank you, Kiki. Good afternoon, everyone, and thank you for joining us for Vir Biotechnology First Quarter 2026 Earnings Call. Since our last earnings call in February, we have remained highly focused on execution as we advance both our oncology and hepatitis delta programs with speed and focus. I will begin by providing a brief update on the current status of our recent collaboration with Astellas, a deal valued at up to $1.7 billion. In addition, in the U.S., commercial profits will be split 50-50 between the parties with Vir Bio having the option to co-promote alongside Astellas. As a reminder, on February 23, we announced that we entered into a collaboration with Astellas to co-develop and co-commercialize VIR-5500, our PRO-XTEN dual-masked PSMA-targeted T-cell engager. Since then, the transaction successfully closed on April 15, marking an important transition from deal announcement to deal execution. With the deal closed, our joint teams are operational and partnering closely on a shared clinical development plan to enable rapid expansion and accelerate delivery to patients. This collaboration brings together Astellas' global leadership in prostate cancer with our differentiated PRO-XTEN -enabled T-cell engager. We chose to partner with Astellas because of their decade-long track record of successfully co-developing category-defining therapies, including XTANDI, the world's #1 prostate cancer drug. Metastatic castration-resistant prostate cancer, or MCRPC, remains a significant unmet need with a 5-year survival rate of only 30%, underscoring the urgency for new treatment options that can deliver even deeper, more durable disease control and improved quality of life. VIR-5500 is the most advanced dual mask T-cell engager currently under evaluation in prostate cancer. The foundational driver of the Astellas collaboration shaping our development strategy going forward is our Phase I data for VIR-5500. Dr. Johan De Bono shared an update from this study evaluating patients with advanced MCRPC as an oral presentation at ASCO GU in February. Today, I'll highlight key takeaways from the data. For a more comprehensive update from the trial, please refer to our fourth quarter earnings call from February 23. Overall, the VIR-5500 data showed a favorable safety and tolerability profile with no observed dose-limiting toxicities. At the dose levels of 3,000 micrograms per kilogram and above, we saw mostly Grade 1 cytokine release syndrome or CRS, defined as fever only. We did not observe any Grade 3 CRS at this dose, reinforcing the potential of the PRO-XTEN dual masking platform to widen the therapeutic index of our T-cell engagers. We view the absence of high-grade CRS at our go-forward monotherapy dose, together with a lack of mandatory steroid premedication in our protocol as a meaningful differentiator for VIR-5500. We believe that sparing steroids may help preserve T-cell function and reduce treatment complexity for both patients and physicians. Collectively, these attributes support the potential for outpatient administration and could translate into significant clinical and commercial advantages over time. Importantly, this profile may support positioning VIR-5500 in both the pre- as well as post-radioligand therapy or RLT settings, offering flexibility across the treatment continuum and potential use in routine care settings relative to the specialized infrastructure required for RLT administration. Furthermore, the depth of PFA and RECIST responses we observed were particularly encouraging with several patients sustaining responses for up to 27 weeks. Additionally, we saw emerging signs of durability up to 8 and 12 months, respectively, in patient cases with extended follow-up. One of the most compelling aspects of our data is that these deep responses were observed in heavily pretreated patients with advanced poor prognosis disease, including liver metastasis. This is historically the most difficult population to treat and resistant to immunotherapies, underscoring the clinical significance of the activity we are seeing. Additionally, we observed a complete response for a patient who previously relapsed on an actinium-based PSMA directed radioligand. We view these findings as especially meaningful given the historically poor outcomes and limited responsiveness of this patient population to subsequent therapies. Building on these encouraging Phase I dose escalation monotherapy results, we have dosed the first patient in our Phase I dose expansion cohort for VIR-5500 in late-line patients. This milestone represents an important step in further evaluating VIR-5500's best-in-class potential for people living with prostate cancer. In the monotherapy expansion cohorts, we are evaluating Q3 week 800, 2,000, and 3,500 microgram per kilogram step-up dosing. This study will measure safety and efficacy, including PSA responses and objective response rate or ORR of VIR-5500 in patients with MCRPC who are refractory following treatment. These patients will have had exposure to multiple prior lines of therapy, including at least one second-generation androgen receptor pathway inhibitor and taxane regimen. The expansion includes 2 distinct cohorts: patients who are naive to prior RLT and patients who have previously received RLT in any treatment setting. Dose escalation of VIR-5500 in combination with enzalutamide continues in early-line MCRPC patients. We anticipate dosing the first patient in the combination dose expansion cohorts in both early-line MCRPC and metastatic hormone-sensitive prostate cancer over the coming months. Together, these cohorts highlight the potential of VIR-5500 across the prostate cancer continuum, including in the frontline setting. Without the challenges associated with RLTs, such as radioactivity and restricted settings of care, we believe masked T-cell engagers represent the long-term future in this space and that VIR-5500 has the potential to be a best-in-class T-cell engager. We anticipate initiating our registrational Phase III program for VIR-5500 in 2027. These results provide validation of our broader PRO-XTEN platform, unlocking significant opportunities to develop next-generation masked T-cell engagers in other solid tumor types. Turning now to the rest of our clinical stage T-cell engager programs. VIR-5818 is our PRO-XTEN masked HER2-targeted T-cell engager. We view this as a signal finding study given the early stage of development and the basket design where multiple tumor types are evaluated in parallel. We expect to report preliminary response data evaluating VIR-5818 monotherapy and combination therapy with pembrolizumab in the second half of 2026. This update is intended to inform our understanding of dose and help identify which HER2-expressing populations may warrant further study, particularly in areas of high unmet medical need. For VIR-5525, our PRO-XTEN dual-masked EGFR targeted T-cell engager, Phase I study enrollment is progressing as expected. The study design incorporates learnings from VIR-5818 and VIR-5500 to enable efficient dose escalation. We are evaluating both monotherapy and combination with pembrolizumab across multiple EGFR-expressing tumor types, including non-small cell lung cancer, colorectal cancer, head and neck squamous cell carcinoma, and cutaneous squamous cell carcinoma. We believe this program has the potential to address significant unmet medical needs in these indications where existing EGFR-targeted approaches have limitations. Turning now to our Hepatitis Delta program. The hepatitis delta community is severely underserved, with approximately 180,000 actively viremic patients across the United States, the U.K., and the EU, based on a composite of high-quality epidemiology sources. In the U.S., the patient population is highly concentrated in major urban centers and can be supported by an efficient commercial approach with a targeted specialty sales organization focused on hepatologists, gastroenterologists and infectious disease specialists. Overall, we expect our tobevibart plus elebsiran combination to have 2 clear advantages in chronic hepatitis delta versus our competitors. The first is that we are seeing potential best-in-class efficacy with a strong safety profile. The second that our regimen is designed with once monthly subcutaneous dosing and the potential for both at-home and in-office administration. For viral infectious diseases, clearing the virus is the key to improving long-term outcomes. KOLs in the chronic hepatitis delta space highlight undetectable virus as measured by target not detected or TND, as the gold standard measure of viral clearance. Achieving undetectable HDV by this measure is the most stringent threshold available and means that the delta virus is completely cleared from the bloodstream. As the delta virus replicates so aggressively, patients need HDV to be completely undetectable for positive clinical outcomes and to avoid rebounds. Peer-reviewed evidence suggests that patients with hepatitis delta who achieve undetectable virus have significantly improved long-term clinical outcomes, including reduced progression to cirrhosis, hepatocellular carcinoma, liver transplantation, and death compared with patients in whom the virus remains detectable. These data support an undetectable virus as a key clinically meaningful goal of antiviral therapy for patients with hepatitis delta. In January, we reported potential best-in-class efficacy in our Phase II SOLSTICE trial in patients with chronic hepatitis delta for a subset of patients at 96 weeks. Evaluated participants receiving the combination therapy of tobevibart and elebsiran showed increased and sustained viral suppression of HDV RNA versus treatment with the antibody alone. The data showed 88% of evaluable participants achieved undetectable virus compared to 46% on tobevibart monotherapy alone. Additionally, we saw a rapid onset of viral suppression, achieving already 41% undetectable virus within 24 weeks. These results underscore the limited efficacy of hepatitis delta treatment with antibody monotherapy alone. In contrast, combining complementary mechanisms of action with tobevibart plus elebsiran raises the rate of undetectable virus to approximately 90%. Importantly, we see similar efficacy in cirrhotic patients, which will be a significant patient cohort at launch due to the delayed diagnosis of most hepatitis delta patients to date. The combination was well tolerated with no grade 3 or higher treatment-related adverse events and discontinuations. The second key differentiator is that tobevibart plus elebsiran will only be administered monthly, consisting of 2 subcutaneous injections to be administered at the same time. As a reminder, competitors' sleep regimens require either daily or weekly injections. For the hepatitis delta patient population, this frequency will be a significant challenge. So, we see monthly dosing as an additional meaningful differentiator for our regimen. Additionally, due to the need for a higher dosing frequency of competitive regimens, tobevibart plus elebsiran may have the potential to be the only product conveniently enabling both self-administration at home and physician administration in the office. This is important because physicians have indicated that up to 20% of hepatitis delta patients might not be able to self-administer. So tobevibart plus elebsiran may be the only treatment available for this group of patients. Our hepatitis delta regimen has already been recognized by multiple global regulators with FDA breakthrough therapy and Fast Track designations as well as EMA Prime and orphan drug designation, underscoring both the unmet need and the strength of the data package. These designations provide ongoing engagement with both agencies and support a high level of confidence in our ability to achieve broad labels for our regimen. We are pleased to share that we will be presenting the complete 96-week SOLSTICE Phase II data in an oral presentation at the upcoming EASL 2026 Annual Meeting in Barcelona on May 29th. We will also be presenting a poster of a 48-week subgroup analysis evaluating the impact of VMI on ALT normalization after successful viral control. As we look ahead to our ongoing registrational program, all 3 of our ECLIPSE studies are on track. ECLIPSE-1 enrollment is complete with approximately 120 participants randomized 2:1 to our combination therapy versus deferred treatment. The primary endpoint is a composite of undetectable virus as measured by HDV RNA target not detected plus ALT normalization at week 48. We expect to report top line data from ECLIPSE-1 in the fourth quarter of this year. ECLIPSE-2 enrollment continues on track across multiple European sites. This study will enroll approximately 150 patients who are being randomized 2:1, evaluating the switch to our combination therapy in patients who have not adequately responded to bulevirtide. The primary endpoint for the trial is undetectable virus as measured by HDV RNA target not detected at week 24. The strong enrollment momentum we are seeing in Europe reflects an important unmet need in patients previously treated with bulevirtide. For ECLIPSE-3, our Phase IIb head-to-head comparison, enrollment is complete with approximately 100 patients randomized 2:1 to our combination therapy versus bulevirtide. The primary endpoint for the trial is undetectable virus as measured by HDV RNA target not detected at week 48. In general, we view Gilead's expected U.S. launch of bulevirtide as a positive for the hepatitis delta market overall and one that helps pave the way for next-generation therapies like ours. Hepatitis delta remains significantly underdiagnosed and undertreated and the introduction of the first approved therapy in the U.S. should meaningfully raise disease awareness, expand screening and establish treatment properties among treating physicians. Complementing this, we have an experienced commercialization partner through our collaboration with Norgine, who holds an exclusive license across Europe, Australia and New Zealand. Norgine's established infrastructure and expertise in specialty pharma and hepatology positions us to maximize the commercial opportunity of our HDV regimen across these geographies. In summary, we have made exceptional progress across our entire clinical portfolio, and we believe these advancements leave us well positioned to deliver on our clinical and corporate objectives. With that, I'll now hand the call over to Jason for our financial update. Jason O’Byrne: Thank you, Marianne. Before discussing the first quarter financials, I will share the latest news about our Astellas collaboration. We are pleased to report that the VIR-5500 global collaboration and licensing agreement closed on April 15, 2026, following expiration of the HSR waiting period. Upon closing, Vir Biotechnology received a $75 million cash payment, representing Astellas' equity investment. And within 30 days of closing, we will receive a $240 million upfront payment. As a reminder, we are eligible to receive a $20 million manufacturing tech transfer milestone payment in 2027. We will share global development costs, 40% by Vir Bio and 60% by Astellas. We will split U.S. commercial profit loss equally with Astellas, and we are eligible to receive up to an additional $1.37 billion in development, regulatory and ex-U.S. sales milestones, along with tiered double-digit royalties on ex-U.S. net sales. A portion of certain collaboration proceeds will be shared with Sanofi according to the terms of that licensing agreement. Overall, this deal provides immediate capital and significantly reduces our near-term development spend while preserving substantial long-term economic upside. The collaboration with Astellas can maximize the value of VIR-5500 through accelerated clinical development and global reach, potentially benefiting more patients and creating greater value for our shareholders. Shortly after announcing our global collaboration with Astellas and sharing updated Phase I data from the VIR-5500 program, we completed a follow-on equity offering. On February 27, 2026, the offering closed, and we received gross proceeds of approximately $172.5 million before deducting underwriting discounts and commissions and estimated offering expenses. We intend to use the proceeds from the offering to fund our share of the development costs for VIR-5500 to advance the broader T cell engager platform and for working capital and other corporate purposes. Turning now to our balance sheet. We ended the first quarter with approximately $809.3 million in cash, cash equivalents and investments, which includes the aforementioned proceeds from the follow-on offering. Subsequent to quarter end, we closed the Astellas collaboration, and therefore, the $315 million in proceeds from that transaction are not reflected in our March 31, 2026 cash position. Based on our current operating plan and including the net effects of the recent Astellas agreement and capital raise, we expect our cash runway to extend into the second half of 2028, enabling multiple value-creating milestones across our pipeline. Now I will review our first quarter 2026 financial performance and overall financial position. R&D expense for the first quarter of 2026 was $108.9 million, which included $6 million of stock-based compensation expense. This compares to $118.6 million for the same period in 2025, which included $7 million of stock-based compensation expense. The year-over-year decrease was primarily driven by a $30 million payment to Alnylam in the first quarter of 2025, partially offset by hepatitis delta qualification batch manufacturing costs and to a lesser extent, higher clinical expenses in the first quarter of 2026. SG&A expense for the first quarter of 2026 was $23.3 million, which included $6.1 million of stock-based compensation expense compared to $23.9 million for the same period in 2025, which included $7.1 million of stock-based compensation expense. Our first quarter 2026 operating expenses totaled $132.3 million, representing a $10.3 million decrease compared to the same period in 2025. Net loss for the first quarter of 2026 was $125.7 million compared to a net loss of $121 million for the same period last year. Looking ahead, we will continue disciplined allocation of capital, prioritizing investments in those programs with the greatest potential for meaningful patient benefit and value creation. With that, I will now turn it back over to Marianne to close the call. Marianne De Backer: To close, we are exceptionally well positioned for long-term value creation at this inflection point. Since December 2025, the combination of our collaborations with Norgine and Astellas, together with a successful financing has generated over $0.5 billion in capital, significantly strengthening our balance sheet. With the closing of our global collaboration with Astellas this quarter, we now have an established partner to advance VIR-5500 aggressively across the prostate cancer landscape while maintaining disciplined capital allocation. Overall, the combination of potent antitumor activity and a favorable safety profile underscores VIR-5500's potential as the best-in-class T cells engager for the treatment of prostate cancer. Beyond our clinical programs, we are steadily advancing 7 preclinical T-cell engager assets that utilize the PRO-XTEN platform and broaden our pipeline's optionality, positioning us well to generate the next wave of value creation. At the same time, our hepatitis delta program continues to generate compelling and increasingly differentiated clinical data with multiple near- and mid-term catalysts ahead across our ECLIPSE studies. Taking together with our progress in oncology, this momentum underscores the breadth of our scientific platforms and our ability to execute with focus, urgency and discipline. Looking ahead, our priorities are clear: to deliver rapid, high-quality clinical execution, advance multiple expansion and registrational-enabling studies and deploy capital thoughtfully in ways that maximize long-term value while keeping patients at the center of everything we do. With that, I'll turn the call over to Kiki to begin the Q&A session. Kiki Patel: Thank you, Marianne. This concludes our prepared remarks, and we will now start the Q&A session. Joining me for the Q&A are Marianne and Jason. Please limit questions to two per person so that we can get to all of our covering analysts. I'll turn it over to you, operator. Operator: [Operator Instructions] Our first question comes from Paul Choi with Goldman Sachs. Kyuwon Choi: My first question is on 5818 in the HER2 setting. Can you comment on your level of interest in future development, particularly in HER2-positive breast cancer. It's not listed among the tumor types in your quarterly deck here. And so, I'm just curious, given the number of available therapies for that particular tumor type, sort of what is the criteria from your upcoming data set for potential development in that tumor type? And then I had a follow-up question. Marianne De Backer: Thank you, Paul, for that question. Yes. So, we will be sharing data on our 5818 programs in the second half of this year, and this will be both for our monotherapy dose escalation and the dose escalation in combination with pembrolizumab. As to future development, we will, at that time, be able to provide a better picture as to what future expansion cohorts could be. Specifically, to your question on breast, I would say that, obviously, the bar is high, but do keep in mind that this drug, for example, like in HER2 has a 1% mortality rate. So, there's certainly still a prospect to come up with better treatments. But again, we will be sharing data second half of the year, and we'll then give further guidance. Kyuwon Choi: Okay. Great. And with regard to 5500 and your comment on potential development earlier treatment settings, I guess, what would sort of, I guess, the framework for that be and potential timelines? Would you file an IND for that particular population this year or possibly in 2027? Marianne De Backer: Yes. So just to recall that we already have a dose escalation ongoing for early line 5500 combined with an ARPI. What we are planning to do now together with Astellas, our collaboration partner, is start expansion cohort in the same setting, combination of VIR-5500 with enzalutamide. So that is something that is coming in expected coming months. Operator: Your next question comes from Roanna Ruiz with Leerink Partners. Unknown Analyst: This is Michael on for Roanna Ruiz at Leerink Partners. Regarding 5500 late-line MCRPC monotherapy expansion cohort, what would constitute a clear signal as a green light to initiate Phase III in 2027? Are you anchoring on like, PSA50, 90 or RECIST or PFS, something like that? Marianne De Backer: Yes. So, we started first -- we dosed the first patient in the late-line expansion cohort for VIR-5500 monotherapy. We are going to, in that expansion cohort, explore a little bit more in-depth both pre- and post-radioligand therapy. So that will be additional data that we will be gathering. We only have a limited set of such patients in our initial cohort on which we reported data on February 23. And I would say it's going to really be the totality of the data. Obviously, PSA, RECIST, RPFS, we will have a more full data set to then decide on the next steps. But our goal is pending data, obviously, to start pivotal trials in 2027. Unknown Analyst: Great. Just one more question. I also had a question about the underlying biology for PRO-XTEN cleavage. How tumor-specific is the protease activation profile across different tumor types? For example, are you seeing differential cleavage kinetic in like prostate versus colorectal or CLC that might affect that therapeutic index? Marianne De Backer: Yes. One of the founders of the company that was acquired by Sanofi and from which we licensed the technology has been working in this field for over 20 years. And it's fair to say that the protease cleavable linker is really promiscuous linker. There's different families of proteases there to really ensure that you are going to be successful across a broad set of tumor types. Operator: Your next question comes from Cory Kasimov with Evercore. Mario Joshua Chazaro Cortes: This is Josh Chazaro on for Cory. Maybe one on hep B. As you approach the pivotal hep B data, wonder what your latest thoughts are on pricing there. Marianne De Backer: Sure. Thank you, Josh. So, if you look -- first of all, hepatitis delta is an orphan disease. There's a number of anchor points for price that we can point to. The first one, I would say, is to look at the price of bulevirtide in Europe, which varies somewhere between $60,000 and 165,000 gross price. You can also look at the price of bulevirtide in Canada, which was set at, I believe, USD 115,000. And then if you look across your fellow analysts, I see that estimated prices vary somewhere between $150,000 and $250,000. We think that is very adequate for, again, a disease that is very severe, an orphan disease where we would be delivering substantial benefit for patients. Mario Joshua Chazaro Cortes: And then just one -- another quick one on 5500 here, maybe following up on one of the previous questions, especially in the late-line castrate-resistant setting, is there a minimum durability you're looking for with you and Astellas before you move into a Phase III? Is there a number you guys have in mind or a certain competitive threshold you're looking at? Marianne De Backer: Yes, not specifically. Again, we will be looking at, obviously, the totality of the data. I didn't hear it very well, but what your question on durability? Mario Joshua Chazaro Cortes: Correct. Marianne De Backer: Yes. Yes, I can only point to -- so what we know thus far is that several T-cell engagers have been showing durable responses. Our data set was still a little bit early, but also in our data set, you could already see that we had a number of resisted patients with data post 27 weeks confirmed partial responses. And also, we had a couple of patient cases, one patient that had been on treatment for 8 months. We had another patient that had been on treatment for a year and continuing. So we have sort of case examples of durability. And obviously, we will be looking in our broader data set for durability more consistently across the entire expansion cohort. Operator: Your next question comes from Alec Stranahan with Bank of America. Unknown Analyst: This is Matthew on for Alec. Congrats on the progress. I guess 2 for us on competitive landscapes. First for HDV. Just curious your thoughts on this year data that came out recently and whether that sort of changes your thoughts on commercial opportunity or competitive landscape? And then secondly, for EGFR T-cell engagers, competitor of yours recently discontinued development of theirs dual mask. I guess just what gives you confidence that your strategy will pan out where others have failed? Marianne De Backer: Thanks, Matthew. Yes, on your first question, so as I laid out in the introduction, we -- and generally the key opinion leaders in the field very strongly believe that what really matters in a viral disease is to get rid of the virus. And the way that we measure that is through HDV RNA target multi-tectin. So, if you look at our levels of TMD for our monthly regimen of tobevibart and elebsiran, also 48 weeks, which is our primary endpoint, we achieved about 66%. And we have also shown that it really increases. It's actually increasing from 41% at 24 weeks to 66% at 48 weeks and then to 88% at 96 weeks. So, we saw that significant increase in target multitasking over time for our dual mechanism regimen. We did not see that actually for our monotherapy antibody. We saw it at about 30% TMD at 24 weeks and then sort of plateaued around 50%. It seems that what Mirum is sharing for their monthly therapy, which would be most comparable to our monthly therapy is only 5% target not detected. So that might not be very viable. And then for their weekly regimen, at 300 milligrams, they are showing at 24 weeks, 30% target not detected. So, we believe that from an efficacy perspective, we have a potential superior drug here and potential best-in-class regimen. Also from an ALT perspective, you can now see sort of across the different regimens that are in development that everyone is sort of landing around the 50%. We had 47% at 24 weeks. I think Mirum reported between 40% and 45%. So, ALT normalization seems to be sort of evening out across different regimens. But again, we do believe that it's really the viral efficacy measured by viral elimination and getting to undetectable that really matters. And there, we clearly have superior data. As to your question on EGFR, yes, Janux discontinued their EGFR T-cell engager. I would say the only sort of surprising thing there from our perspective is that they saw muscular skeletal issues that were mentioned as dose-limiting toxicity. That was unexpected and something, of course, that we will watch. But the reason why we strongly believe in the differentiation of our mask T-cell engagers is first, the masking technology is fundamentally different. So, we use steric hindrance. It's the same mask across all of our clinical programs. So, we don't need to redesign a new mask every time for every program. So, we really take learnings from one program to the next. And what we have seen with VIR-5500 is that, that masking technology allows you to dose much higher. And if you can dose higher, obviously, you can get potentially to a better therapeutic index. So, I would say that our masking technology is fundamentally different. Operator: Your next question comes from the line of Phil Nadeau with TD Cowen. Philip Nadeau: Two from us. First on 5818, you referenced the dose escalation data in the second half of the year. Can you give us some sense of what will be disclosed at that time, things like number of patients, duration of follow-up measures that you'll talk about, what tumor types will be in the update? That's the first question. And then second, on HDV, your presentation cites about 174,000 patients with HDV in the U.S. and Europe. We're curious how many of those you estimate are diagnosed and under the care of a physician, so could be amenable for therapy shortly after launch. Marianne De Backer: Thank you, Phil. Yes, on 5818, so we will be sharing data both from our monotherapy dose escalation and also from the dose escalation in combination with pembrolizumab. A number of patients, we will share at a later date. I want to maybe point out that the 5818 trial is very different actually from our 5500 trial in the sense that it's a basket trial. So, we actually have a wide variety of tumor types in that trial. And we have already shown you some initial results, for example, in metastatic colorectal cancer, where we had a 33% confirmed partial response. So, we will be where possible and where we have enough patients in one given tumor type, be sharing you, of course, information on where we use CA to look at responses, tumor shrinkage, et cetera. So, we see it importantly as a signal-seeking trial that will give us information around what indications to potentially go into expansion cohort. And then your question on hepatitis delta. So, from those patients, we estimate that there are about 61,000 actively viremic patients here in the United States. And it's a hugely underdiagnosed disease, as I mentioned earlier. We believe that actually only about 10% to 15% of those patients are diagnosed at this moment in time. We do believe that once a regimen can become available that, that could really change. And the diagnostic testing is also getting better. For example, diagnostic tests for Delta are also relatively affordable. The Medicare reimbursement rate for an antibody test is $17 and for a quantitative RNA test about $43. The only difficulty at this moment in time is that patients often need to go 2 or 3 times to see their physician before all testing is done. The first time for hepatitis B test, the next time for the antibody test and the next time for the RNA test. So, there's a lot of streamlining that can happen. And in Europe, they have already shown that if you do reflex testing, so really when a patient tests positive for hepatitis B immediately proceed to testing for hepatitis delta on the same sample that, that could really increase diagnosis rates substantially. So that is something that if the guidelines get adopted here in the United States, that could drive a lot of difference. Operator: Your next question comes from Etzer Darout with Barclays. Unknown Analyst: This is Luke on for Etzer. For HCV, with the ECLIPSE-1 trial reading out in 4Q and then you have ECLIPSE 2 and 3 reading out in 1Q next year, how are you guys thinking about assuming a positive ECLIPSE-1 trial, is that going to be enough to support a BLA filing? Or do you need to wait for 2 and 3 to do that? And then on 5500 with the partnership with Astellas, and the announcement said that they will be responsible for all development activities after Phase I. Just wondering what kind of visibility you'll have into those trials as they enroll. Marianne De Backer: Sure. I'll start with your last question on collaboration with Astellas. So, it is a global co-development and co-commercialization agreement, and we have quite significant joint governance in the deal. So, we have a joint development committee, of course, the joint steering committee, joint manufacturing committee, joint IP committee, joint finance committee and so on, with equal representation and joint decision-making with some level of escalation to executives, et cetera, pretty standard, I would say, for a 50-50 type of partnership. So, we will remain very intricately involved. We are, of course, running the Phase I trials now. And of course, Astellas are very involved in that as well. So, it doesn't really matter who operationally runs the trial. It's really important that we have pre-aligned on the clinical development plan and the associated budget, and we try to make decision-making, of course, jointly, but also very swiftly. And then your first question on what is required for filing. So, our guidance is that we would need a combination of ECLIPSE and ECLIPSE for filing. So we will have the ECLIPSE -1 data, as you mentioned, the fourth quarter of this year and then the ECLIPSE -2 is coming in the first quarter of next year. Operator: Your next question comes from Sean McCutcheon with Raymond James. Sean McCutcheon: Just one quick question from us. So, you've talked a bit to the competitor data in HDV. But maybe could you speak to the specific component of the competitor running an all-comer study with a meaningful proportion of patients with elevated ALT above the 5x the upper limit of normal? And any potential read-through to kind of how you guys are seeing the patient population here? Marianne De Backer: Yes. So, the estimation is that maybe about 5% of delta patients have an ALT that is above 5x the upper limit of normal. And these kind of very high levels of ALT can have a lot of different reasons. We and KOL strongly believe that the real measure of looking at whether there is damage to the liver is looking at cirrhosis. And that's why we have enrolled more than 50% of patients in our trial that are CPTA-cirrhotic and have shown actually really good results, similar to slightly better in those type of patients. Operator: Your next question comes from Joseph Stringer with Needham. Joseph Stringer: For the Phase III ECLIPSE-1 trial in HDV, what's your current thinking on the bar for success, on the response rates on the 48-week primary composite endpoint? Would replicating the 38% or so response rates that you saw in Phase II set you up for success here? Marianne De Backer: Yes. Thank you for that question. So, ECLIPSE-1, just to remind everyone, is a trial where we compare treatments with our regimen of tobevibart and elebsiran within the first treatment. So, it is almost like placebo-controlled trial, which makes it, of course, very, very likely that we will be successful in that trial. The bar for success is really low. I mean, again, target not effective, for example, for tobevibart, which is in Phase III development, 10 milligram is about 20%. So irrespective of the ALT levels with an endpoint of TND plus ALT, you cannot get more than 20%. And it was 12% for the 2-milligram tobevibart dose. So, the bar for success is not that high. But again, I think we have a combination of best-in-class variable efficacy and then again, ALT normalization that seems to be pretty similar across all regimens. Operator: Your next question comes from Patrick Trucchio with H.C. Wainwright. Luis Santos: This is Luis Santos in for Patrick. A follow-up question on the strategy for hep B has to do with where does the at-home self-administration strategy stand from a regulatory and device standpoint. Would you expect to launch to begin with the clinical administration before transitioning to that self-administration? And how -- and the follow-up question would be, by then, bulevirtide is expected to already be accepted in the U.S. How much do you think the at-home administration benefits versus hepcludex or bulevirtide? Marianne De Backer: Yes. Thank you, Luis. So maybe answering your second question first. So, patients who will be on bulevirtide will have to inject themselves daily, and it's a chronic treatment, right? So really chronically every single day, they will need to inject themselves. And as I just mentioned, for bulevirtide 10 milligrams, the expected level of target effect that you can reach is about 20%. In contrast, what we have is a regimen of a combination of tobevibart and elebsiran, which is a monthly administration also subcutaneously, but with a level of targeted at 48 weeks of 66%. So, the chances of success for patients are much higher and the convenience is also much better. So, I think there will be a real potential desire for patients and physicians to look at such a regimen. In addition, we are running ECLIPSE-2 and ECLIPSE -2 is really looking at bulevirtide failures. So, patients that haven't been achieving adequate control of their virus on bulevirtide and then can switch to our regimen. So, we will also have data to show that, obviously, that makes sense for patients to do. As to your question for at home and at clinic, so the good news is that with our monthly administration subcutaneously, we have a very convenient offering, both for patients who want to do the administration at home. And of course, there's a lot of different ways we can achieve that and also actually for patients who might not be capable to inject themselves at home and where physicians and patients might think they prefer administration in office by physician, this level of once-month administration is really convenient to allow that to happen. So, we will be preparing at launch to have both available, both options at home and in office. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Greetings, and welcome to The ONE Group First Quarter 2026 Earnings Conference Call. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Nicole Thaung.?Please go ahead. Nicole Thaung: Thank you, operator, and hello, everyone. Before we begin our formal remarks, let me remind you that part of our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance, and you should not place undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Please also note that these forward-looking statements reflect our opinion only as of the date of this call. We undertake no obligation to revise or publicly release any revisions of these forward-looking statements, considering new information or future events. We refer you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During today's call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating our performance. However, the presentation of these matters or other information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. For reconciliations of these measures, such as adjusted EBITDA, restaurant operating profit, comparable sales, annual adjusted operating income and total food and beverage sales of company-owned, managed, licensed and franchise units to GAAP measures, along with a discussion of why we consider these measures useful, please see our earnings release issued today. With that, I would like to turn the call over to Emanuel P. Hilario. Emanuel Hilario: Thank you, Nicole, and good afternoon, everyone. I appreciate you joining us today. I want to start where I always do by thanking our teammates. Every day, our teams across every brand and market show up focused on creating memorable experiences for our guests. These days, consistency is more important than ever, and I appreciate all that they do in executing with excellence and upholding the Vibe Dining experience that defines our brands. Today, I will begin with an overview of our first quarter performance, and then I will walk you through our progress with respect to our strategic priorities before turning it over to Nicole for the financial details. We are excited about our continued momentum. Our operational performance is resulting in strong financial results. Total GAAP revenues grew year-over-year, and comparable sales are sequentially better than the previous quarter. The restaurant's cost of sales improved to 19.4% from 20.8% in the prior year quarter. Operating income increased 30%. Adjusted EBITDA increased 12.1%. And capital expenditures, net of tenant improvement allowances, reduced 23% year-over-year as we prioritize capital-efficient growth and free cash flow generation. Total GAAP revenues for the first quarter were $213 million, an increase from $211 million in the same quarter last year. First quarter consolidated comparable sales were relatively flat at a negative 0.3%, representing a continuation of the positive momentum we experienced exiting the fourth quarter. For clarity, consolidated comparable sales are reported on the same number of days year-over-year. Looking at each brand, U.S. STK total comparable sales reported another positive quarter at 1.4%. Benihana's comparable sales were flat, reflecting stable demand for the brand. And our Grill Concepts comparable sales, while down 4.9%, represented the strongest quarterly performance since early 2023, and Grill transactions was positive for the quarter. Each segment continues to improve from the previous quarter. What is most notable, particularly in a period of elevated inflation, is the strength of our margin performance, a direct result of the hard work we have been doing across our supply chain, including, most importantly, beef sourcing. Restaurant operating profit increased 11% to $40 million, while restaurant operating profit margins expanded 100 basis points to 19%. The margin improvement was driven by a 140 basis point reduction in food and beverage costs, reflecting menu optimization, integration synergies, and supply chain efficiencies.?We also achieved a 40 basis point improvement in restaurant operating expenses as a percentage of restaurant revenues. STK delivered particularly strong results with restaurant operating profit margins expanding 280 basis points to 21%, while Benihana margins improved 130 basis points to 21%. Adjusted EBITDA grew 12% to $29 million. The improvement was driven by cost management discipline, our contracted beef pricing, continued Benihana integration synergies, and the benefit of portfolio optimization actions. The key point I want to make is that these results are execution-driven. We are not dependent on macroeconomic recovery or shifts in consumer sentiment, but would certainly welcome them. Over the past 18 months, we have implemented a series of strategic initiatives, operational improvements at Benihana, the Barbell Strategy at STK, portfolio optimization across the growth concepts, and rigorous cost management. It is those initiatives that are driving our successful performance. Now, let me update you on our four strategic priorities. Priority One: accelerating comparable sales through execution. Our first strategic priority is accelerating comparable sales through disciplined execution. I want to highlight that Valentine's Day 2026 was a record-breaking day for our portfolio. Easter was also strong across our brands, while sales were up in the high single digits compared to last year. These results are a testament to both the operational capabilities we have built and the strength of our brands as a celebration destination. As we look ahead, we are gearing up for what we expect to be a strong Mother's Day and graduation season. Both occasions are critically important to us, and our teams are focused on delivering exceptional guest experiences during these high-volume periods. Through the first 5 weeks of the second quarter, the company has positive comparable sales and transactions. Momentum has continued through all of our brands with STK and Benihana so far, delivering positive comparable sales, and the growth is sequentially improving.?We have made operational improvements to position the brands for a strong spring and summer and are seeing encouraging trends as Happy Hour has been a real driver and is working well, while lunch traffic is also returning. Our Friends with Benefits Loyalty Program continue to gain momentum. Since launching last year, we have added over 8,000 new organic members to the program per week. Newly enrolled guests continue to show strong repeat participation, and we are seeing loyalty members spend more per visit compared to non-loyalty guests. We will be actively targeting our Friends with Benefits members for Mother's Day and graduation celebrations, leveraging personalized outreach to drive traffic during these occasions.?We continue to focus on growing membership, driving organic sign-ups, and increasing engagement within the program to strengthen brand connection and repeat visits. We are driving growth through seasonal innovation, launching new food and beverage menus 4 times a year across our brands. This keeps our offerings fresh, differentiates us from competitors, and generates strong engagement on social media. We are expanding our off-premises business with a focus on curbside operations. Highlights include burgers and sides, which continue to drive strong takeout and delivery volume across all brands and Benihana and RA Sushi, fried rice burritos for takeout and delivery, which have performed well. Priority Two: capital-efficient growth with disciplined expansion. Next, our second priority is capital-efficient growth. We currently have two company-owned STK restaurants and one company-owned Benihana restaurant under construction, an STK in Phoenix, Arizona, a relocation of STK downtown in New York City and a Benihana in Seattle, Washington. We intend to open 6 to 10 new venues in 2026 as we prioritize locations requiring $1.5 million or less in net capital investment to open. Capital expenditures, net of TI allowances was 23% lower at $10 million in the first quarter compared to the year ago period. Of this amount, $6.5 million was related to new restaurant construction with the remainder supporting existing restaurants. This reduction reflects our disciplined approach to capital allocation as we focus on high-return capital-efficient growth. On the franchise side, our 10-unit California Benihana and Benihana Express development agreement continues to progress and our commitment for franchise Benihana and a licensed Benihana Express in the Florida Keys remains on track. The Benihana Express format continues to generate strong franchise interest as it delivers the Benihana food experience without teppanyaki tables, making it more labor efficient and more appealing from a cost of entry perspective for potential franchisees. In January, we completed the relocation of our Kona Grill in San Antonio, Texas to a smaller footprint location. And in February, we converted a franchise Benihana Monterrey, California to a company-owned restaurant to accommodate a long-term franchise partner who wish to retire. Both are tracking in line with our expectations. Priority Three: portfolio optimization to improve returns. Our third priority is the portfolio optimization to improve returns, and we have made significant progress improving the quality and returns of our portfolio. As we discussed last quarter, we are converting Grill locations to higher-performing STKs and Benihanas. In 2025, we exited 6 RA Sushi and Kona Grill locations. And in January 2026, we exited one additional RA Sushi location that did not fit our conversion criteria. The remaining Grill locations are healthy, profitable restaurants in quality real estate, and we expect them to generate approximately $10 million in restaurant level EBITDA and over $100 million in revenue. 5 Grill locations closed on January 5, 2026, for conversion to either Benihana or STK. Construction is in progress with all 5 expected to reopen by the end of 2026. Each conversion is expected to cost between $1 million and $1.5 million and to be EBITDA accretive. As a reminder, our first conversion, the RA Sushi to STK in Scottsdale, Arizona is currently operating at a run rate of approximately $7 million in annual sales, delivering an increase of over $4 million in sales and a return on investment of approximately 4x. This validates our conversion strategy and gives us confidence in the pipeline. As we have said before, we will continue to evaluate the portfolio as leases expire. We have approximately one to two Grill leases that come up each year as part of the natural end of cycle process, and we'll make decisions on a case-by-case basis. Priority Four: maintaining balance sheet strength and flexibility. Our fourth priority for 2026 is conserving cash and optimizing the balance sheet. We are significantly reducing discretionary capital expenditures, targeting company-owned development to projects requiring on average, $1.5 million or less in build-out costs. We are also working through our existing lease pipeline rather than adding new commitments. This discipline gives us flexibility in an uncertain environment and position us to invest selectively in the highest return opportunities. We finished the quarter with $6.6 million in cash and cash equivalents and restricted cash. We have $33.7 million available under our revolving credit facility. Under current conditions, our term loan does not have a financial covenant. Cash flow from operations was a strong $22 million compared to $9 million in the prior year quarter. This improvement was primarily attributable to increased net income and collections on holiday credit card receivables. We also reduced our debt with $2 million in repayments under the credit agreement and $7 million in repayments on the revolving facility, bringing our revolving facility balance to 0. As we discussed on our previous call, we expect to generate free cash flow in 2026. Debt reduction and creating shareholder value remain a top priority. Before I turn it over to Nicole for the financial details, I want to reiterate, the items that I have outlined today are fundamentally execution-driven and within our direct control. We are focused on strategic initiatives that position us to deliver results regardless of broader economic trends. With that, I will turn the call over to Nicole. Nicole Thaung: Thank you, Manny. As a reminder, beginning this year, we are reporting financial information on a fiscal quarter basis using four 13-week quarters with the addition of a 53rd week when necessary. For 2026, our fiscal calendar began on December 29, 2025, and our first quarter contained 91 days. Consolidated comparable sales are reported on the same number of days year-over-year. Let me start by discussing our first quarter financials in greater detail before introducing our outlook for the second quarter of 2026 and reiterating our fiscal '26 guidance with the exception of an update to our expected effective tax rate. Total consolidated GAAP revenues were $212.8 million, increasing 0.8% from $211.1 million for the same quarter last year. Growth was driven by two primary factors: the fiscal calendar shift that moved New Year's Eve into fiscal '26, which added approximately $8.3 million to our top line as well as contributions from new openings and conversions completed in the second half of 2025. These gains were partially offset by the closure of underperforming Grill locations as part of our portfolio optimization strategy, which reduced revenues by approximately $1.8 million. Included in total revenues were our company-owned restaurants net revenues of $209.3 million, which increased 0.9% from $207.4 million for the prior year quarter. The increase was primarily due to the change in the fiscal year calendar, which resulted in a shift in New Year's Eve into fiscal year '26 and the sales generated by 8 new restaurants. These gains were partially offset by a decrease in revenue from the Grill restaurants closed, and a 0.3% decrease in comparable restaurant sales. Management license franchise and incentive fee revenues decreased slightly to $3.5 million from $3.7 million in the prior year quarter. The decrease is primarily attributable to the exit of a management agreement in Scottsdale, Arizona in the second quarter of 2025. As Manny noted, we converted a former RA Sushi to a company-owned STK in that market. Now turning to expenses. We continue to implement targeted cost management initiatives. Last year, we made strategic adjustments to our beef tenderloin sourcing and have contracted pricing through September 2026, eliminating our exposure to significant U.S. beef price fluctuations and providing significant cost certainty. We also optimized our labor structure across the business last year by improving scheduling management, and we are still realizing synergies from the Benihana acquisition. Company-owned restaurant cost of sales as a percentage of company-owned restaurant net revenue improved 140 basis points to 19.4% from 20.8%. This improvement was primarily due to menu optimization, integration synergies, supply chain initiatives, increased menu pricing and more efficient cost of sales associated with New Year's Eve and our record-breaking Valentine's Day. Company-owned restaurant operating expenses as a percentage of company-owned restaurant net revenue improved 40 basis points to 61.7% from 62.1%. This reflects improvement in labor costs. Restaurant operating profit, excluding Grill Concepts restaurants closed, was $39.9 million or 19.1% of owned restaurant net revenue, improving by 100 basis points from 18.1% in the prior year quarter. On a total reported basis, General & Administrative costs increased $1.9 million to $15 million from $13.1 million in the same quarter prior year, driven by inflation on salaries and bonus, higher audit-related fees, investments in information technology, specifically AI-related technologies and increased marketing expenses. When adjusting for stock-based compensation of $1.1 million, adjusted General & Administrative expenses were $13.9 million compared to $11.5 million in the first quarter of 2025. As a percentage of revenues, when adjusting for stock-based compensation, adjusted General & Administrative costs were 6.5% compared to 5.4% in the prior year. Depreciation and amortization expense was $10.4 million compared to $9.8 million in the prior year quarter. The increase is attributed to new restaurants opened during fiscal year '25. Lease termination and restaurant closure expenses were $2 million for this quarter, primarily as a result of the Grill portfolio optimization, which included $500,000 in noncash expenses related to closed restaurants. Preopening expenses were approximately $1.5 million, primarily related to preopening rent for restaurants under development, including $500,000 in noncash rent and payroll costs for Kona Grill Landmark, which opened in January 2026. Preopening expenses decreased by $200,000 compared to the prior year period. Transition and integration expenses were $500,000, down significantly from $3.7 million in the prior year quarter as we're nearing completion of the integration of the Benihana and RA Sushi acquisition. Operating income was $13.9 million compared to operating income of $10.7 million in the first quarter of '25, an increase of $3.2 million, primarily due to improved restaurant operating profit and the reduction in transition and integration costs. For a reconciliation, please refer to our press release issued earlier today. Interest expense was $9.7 million compared to $9.8 million in the prior year quarter. Our weighted average interest rate was 10.2% compared to 10.9% in the prior year quarter. Provision for income taxes was $1.2 million compared to $300,000 in the prior year quarter as a result of an increase in pretax book income. Net income attributable to The ONE Group Hospitality, Inc. was $3.2 million compared to net income of $1 million in the first quarter of 2025. Net loss available to common stockholders was $6.2 million or $0.20 net loss per share compared to $6.6 million in the first quarter of 2025 or $0.21 net loss per share. Adjusted EBITDA attributable to The ONE Group Hospitality, Inc. was $28.8 million compared to $25.7 million in the prior year quarter, an increase of 12.1%. We finished the quarter with $6.6 million in cash and cash equivalents and restricted cash and cash equivalents. We have $33.7 million available under our revolving credit facility, subject to certain conditions. And as Manny said, as of quarter end, we had no borrowings outstanding on our revolving credit facility nor does our term loan currently require a financial covenant. Now I would like to provide some forward-looking commentary regarding our business. This commentary is subject to risks and uncertainties associated with forward-looking statements as discussed in our SEC filings. We remind our investors that the actual number and timing of new restaurants for any given period is subject to factors outside of the company's control, including macroeconomic conditions, weather and factors under the control of landlords, contractors, licensees and regulatory and licensing authorities. Based on the information available now and the expectations as of today, we are issuing the following financial targets for the second quarter of 2026. Beginning with the top line, we project total GAAP revenues of between $202 million and $206 million, which reflects our anticipation of consolidated comparable sales of 1% to 2%. Management license franchise and incentive fee revenue are expected to be approximately $3 million to $4. Total company-owned operating expenses as a percentage of company-owned restaurant net revenue between 81% and 82%. Total G&A, excluding stock-based compensation, between $13 million and $14 million; adjusted EBITDA of between $24 million and $26 million; and finally, restaurant preopening expenses of between $1 million and $2 million. Based on the information available to us now and our expectations as of today, we are reiterating the following financial targets for fiscal year '26 with the exception of increasing the range of the effective tax rate. We project total GAAP revenues of between $840 million and $855 million, which reflects our anticipation of consolidated comparable sales of 1% to 3%. Management license franchise and incentive fee revenues are expected to be between $14 million and $15 million; total company-owned operating expenses as a percentage of company-owned restaurant net revenue of approximately 82% to 83%; total G&A, excluding stock-based compensation of approximately $53 million; adjusted EBITDA of between $100 million and $110 million; restaurant preopening expense of between $5 million and $6 million; an effective income tax rate of approximately 10% to 20%; total capital expenditures, net of allowances received from landlords of between $38 million and $42 million. And finally, we plan to open 6 to 10 new venues. With that, I will now turn the call back to Manny. Emanuel Hilario: Thank you, Nicole. Before we open up for questions, I want to emphasize how excited we are about our business. Although the current environment remains challenging, our future looks bright. With our proven ability to execute, strengthened portfolio and expanded franchise capabilities, we are well positioned to capture the significant opportunities ahead of us. We thank you for your continued support and look forward to sharing our progress in the quarters ahead. And as always, a special thanks to all teammates all over the globe that live our mission every day, creating great guest memories by operating the best restaurants in every market by delivering exceptional and unforgettable guest experiences to every guest every time. Nicole and I look forward to your questions. Operator? Operator: [Operator Instructions] The first question we have is from Joe Gomes of NOBLE Capital Markets. Joseph Gomes: I just want to start. The revenues were a little below what the guide was for the first quarter and the comps were a little off from where the guide was. And just maybe give us a little more color there, Manny, on what transpired during the quarter to cause that slight miss. Emanuel Hilario: Yes. I mean I think the only thing that was less than we expected in the quarter was the, our volume at our STKs in malls, really the first year where we've had two restaurants fully operating in the first quarter in the mall. I think that the first quarter is a little different from the other quarters for those restaurants. So, I would say just the seasonality of our mall STKs was a little bit different than what we expected. But other than that, I think that the quarter was solid. I think the only other noise in the quarter was just spring break this year seemed to have a lot of different changes in terms of how people took their holidays. And then I think just Easter being much earlier, it just is a little bit of a different cadence of sales, if you will, in the year. But overall, I thought that the business was very strong in our brands. Joseph Gomes: And then I think also last quarter, you talked about the conversions you were hoping to have them all done by mid-July, and now it sounds like at the end of the year. Anything there? Is it just extended construction cycles or you just being a little more conservative in the conversion opportunity? Emanuel Hilario: No, I just think it's just the pacing of resources to reopen them out properly. I mean there are reloads and if you will, conversion sites, but you still have to go through the full training cycle. So, I think the timing of all these restaurants is really based on how we feel about the right pace of opening the units without being negatively impactful to operations. So, it's really just a timing pace, making sure that you're moving your opening teams to the right places at the right time. So, it's just an internal judgment relative to when we want to open the restaurants. Joseph Gomes: And then last one for me, and I'll jump back in queue. Anything new on the franchising front or some more of the nontraditional venues that you had some success that we reported on the past couple of quarters, but just wondering if anything new in the in the pipeline there? Emanuel Hilario: Yes. I mean I think franchising still lots of interest. We're actively talking to people all the time. We have amped up our resources behind getting new deals. So, I think it's progressing really well and interest is very high. So, I'm very pleased with the progress, and I feel very positive about the outlook relative to franchising, particularly for Benihana. Operator: The next question we have is from Anthony Lebiedzinski of Sidoti & Co. Anthony Lebiedzinski: So Emanuel, just wondering if you guys saw any notable regional differences in terms of your same-store sales performance in the quarter? Emanuel Hilario: Yes. I mean I think for us, if there was one market that stood out a little bit differently, was Texas. We did see a little bit of different trends in Texas. But other than that, everything was relatively very similar. So that's probably the only market. And if I have to drill down a little bit more, I think Dallas per se was one of the markets where we saw a little bit more softness in the business. But other than that, as our results show coming into the second quarter, we have a lot of momentum and sales are positive for the company and transactions. So, in this environment, I believe that to be a really strong testament to the initiatives and all the activities that we're doing in building traffic and sales. Anthony Lebiedzinski: So as it relates to Texas, was there any change in the competitive landscape? Or was it something else that drove some of the softness there, you think? Emanuel Hilario: I think in Dallas specifically, I think it's just a very competitive market, and there's always a lot of competition coming into that market. So, I just think it's the, at least from my perspective and our perspective in that market is that there's just a lot of people playing in that market. And so, there's, from time to time, you will have a little bit of up and down in the business there just because there's just a lot of people, it's an attractive market. It's a large market, and everybody wants to have a restaurant in Dallas. So, I think it's just a matter of what the competitors are doing in the marketplace. Anthony Lebiedzinski: Understood. Okay. And then in terms of the commentary about the second quarter same-store sales, which are tracking positive, can you give us a sense as to traffic versus ticket? What's the kind of breakdown approximately? Emanuel Hilario: Well, we're up in traffic. So, it's a good lead in. And I think that, to me, that's the most important part of that mix of sales is that our initiatives, particularly around value and our continuous messaging around happy hour and some of the great price points we have at lunch and at dinner are starting to really resonate. And our marketing is starting to really make lots of progress in communicating those value points. So, I feel very good about that. And then Benihana, we also launched our Power Lunch offering, which is starting at $15 $15.95, 45-minute guarantee. Lunch is starting to also gain traction. So, I feel really good about all the initiatives, and we're starting to see progress made on building traffic. Anthony Lebiedzinski: Got it. Okay. And last question for me. Nicole, you mentioned that there were some Benihana cost synergies realized in the quarter. Can you expand on that? And are there any other synergies that you think may be realized this year as it relates to the Benihana acquisition? Nicole Thaung: Yes. I think one of the biggest synergies we're still realizing is the beef contracts, combining the different brands that are both very heavily reliant on beef products, we were able to secure a pretty decent contract. So that's something that we'll continue to see through the coming months. We're also seeing some of our other contracts that were placed over the last year or so in terms of linens and other operating supplies that we're still realizing synergies on as well. Operator: The next question we have is from Mark Smith of Lake Street Capital. Unknown Analyst: Alex on the line for Mark Smith today. Just first one for me. Looking at capital allocation priorities, you made good progress on the balance sheet with the revolver now paid down to zero free cash flow generation improving as leverage comes down further, how are you guys thinking about balancing debt reduction and conversion investments and potentially becoming more active on share repurchases? Emanuel Hilario: I mean I think as you saw in the quarter, our focus has been debt, right, because we did pay the revolver as well as term loan. And so that will be, continue to be a priority is really focusing on debt and really balancing that with a growth portfolio of restaurants that is really cost effective. So that's really kind of on the short-term is our primary objectives. Of course, capital allocation and shareholder value creation is always a priority of our Board. So, we always are actively looking at anything and everything that makes sense in terms of creating value for the shareholders. Unknown Analyst: Okay. And last one for me, just switching over to the restaurants. Benihana Express seems to be getting a lot of traction from a franchise interest standpoint. Maybe just talk about how you view that long-term opportunity for that format relative to the traditional Benihana concept and what you think franchisees are finding most attractive about the model today? Emanuel Hilario: Yes. I mean, good question. What the franchise interest is around the product itself, the fact that we have fantastic fried rice products and protein offerings going with it. So, there's excitement about the product offering. There's also excitement about the price point positioning of that product because, being a Benihana product, it's a premium in market. So, they do like that. Then, of course, franchising economics are paramount. So, I think within the Benihana Express, we get the best of Benihana in great COGS, Cost of Goods. And then we also get a very beneficial labor equation, meaning that we don't have service at the table, a teppanyaki table. So there's a really relatively predictable and strong labor model on that. And then obviously, it goes without saying, the fact that these footprints are small, occupancy is also very effective. And then also the fact that the footprint is smaller allows for a lot more flexibility in terms of what real estate is available for that brand. So again, you start adding all those things. And of course, the cost of development is also very affordable relative to building other full-sized stores. So I think once you add all those up, the franchisees are very interested in pursuing that. Operator: The next question we have is from James Sanderson of Northcoast Research. James Sanderson: I wanted to go back to your update on same-store sales and traffic and build on that. Any feedback on what your bookings are looking like from Mother's Day and graduation events relative to where you were, say, one year ago? Emanuel Hilario: I mean, without getting to precise numbers, I would say that traffic is positive coming into the quarter. And I think just in line with that, I think in general, our bookings, because we do manage that very closely, our books in general are very solid. So I would say that I feel very good about the forward look on the books. James Sanderson: Excellent. Shifting over to your store margin guidance, I noticed that relative to the first half of the year, you're probably expecting some modest margin compression. Can you walk through how margin is going to progress over the year? Emanuel Hilario: I mean for us, it's always the third quarter, right? So, we always have first quarter, second quarter and fourth quarter are always very good margins. And of course, our third quarter is our lowest-volume quarter. And so we do always get that shift in margin in the third quarter just because of seasonality. So, other than that, everything in the margin, as Nicole reported during her update, is strong, and we have great momentum in COGS. As a matter of fact, our Cost of Goods is the lowest we've ever reported as a company. And I think the margin overall outlook for the year is very solid. James Sanderson: And then speaking to margin a little bit more, you mentioned you've got beef visibility until September. Any thoughts on what you're looking at for locking in those prices as we get to the holiday quarter? Emanuel Hilario: I mean, always an active dialogue about what we do with beef. I think the thing that we spend a lot, and of course, I don't have a crystal ball, so I wish I could give you an exact fourth quarter look on beef. But again, our view on beef is still a tough market right now. And so there's a lot to manage there. But our focus really with beef right now is just looking at alternative cuts and promotional windows to try to take advantage of other cuts that might be lower cost than maybe a filet or something else. So, it's really more about P-mix management and starting to really plan out for Q4 promotional windows that are not so reliant on filets because that takes pressure off the cost line. James Sanderson: Very good. And then I think you also reported your weighted average interest rate was down. Could you walk us through what's driving that and what your outlook for the rest of the year is? Emanuel Hilario: I think that the Fed rates came down a bit, which impacts overall rates. So I think that's the big part of it. And again, our focus on that right now is to as much as we have free cash flow is to bring it down. And that's our number one objective as we go forward, is to really balance that growth and be effective on growth and still have free cash flow to service debt so we keep bringing that principal down. James Sanderson: All right. Last question for me. Any feedback on what your off-premises mix was in the first quarter and how that was broken up between delivery and pickup, third-party delivery and pickup? Emanuel Hilario: As I reported in previous quarters, very low double digits as a percentage of mix in delivery. And I think that the majority of our mix right now is still reliant on delivery. It's more delivery than pickup at the restaurants. And as you might imagine, our focus right now is building up that pickup at the store because that's more P&L effective. And we think that there's also big opportunities on that. Operator: The next question we have is from Roger Lipton of Lipton Financial Services. Roger Lipton: A great number of my potential questions have been answered. I did want to just explore a little bit more the store-level margin, which it looks like you could have been in a position to bring down the operating expenses, bring up your margin a little bit for the full-year guidance, beating the first quarter by, I guess, 150 basis points, 160 basis points over the mid 80%, the 19.1% instead of 17.5% at the midpoint of your previous guidance. And in the second quarter, you're 81% to 82% to 83% in terms of expense totals. So, it looks like maybe you've got a little room for the full year to improve upon that 82% to 83%. Emanuel Hilario: I mean, again, thanks Roger, and good to hear from you. I think our view on this, and as I answered the previous question, is our fourth quarter is really a big quarter, and I just want to make sure that we have numbers that we're super comfortable with. And again, I'm very happy with our first quarter results, and I think that we're making tremendous progress in the second quarter and forward. But I always want to make sure that we're realistic about the environment. It's still a challenging environment. Lots of noise with gas prices. And as you know, gas prices over time can impact your supply chain. So again, I'm not saying that we believe that that's ultimately going to happen, but we're just being cautious about how we go about guiding for the rest of the year on the margin. Roger Lipton: Okay. That's fair. And just, you went over so quickly, the new economics on that Scottsdale conversion. You're saying the ROI, increasing the ROI by 4x. Could you just run by those numbers one more time quickly? Emanuel Hilario: That's a good question. So just for clarity, that restaurant was doing about $3 million to $4 million in revenues. It's now north of $7 million. So we grew revenues there by about $4 million, we think, year-over-year on an annual basis, and we spent about $1 million getting that $4 million in sales. So it's really a 4x return on sales on the investment we put in the site. Sales, I'm sorry. The ROI will also be very good because that $4 million increase in revenues will drive a significant amount of incremental EBITDA. So our ROI on that conversion will be very, very high. Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the conference call back to Manny Hilario for closing remarks. Emanuel Hilario: Thank you, everyone. I appreciate everyone taking time to be with us here today. As I said earlier, we're very excited about the future for the company. And as I always tell everyone, none of this would be possible without the incredible contributions from all our teammates who live our mission every day. So I want to thank them all once again. And then I look forward to running into all of you in our restaurants. So everybody have a great summer. Back to you, operator. Operator: Thank you. This concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good afternoon, and welcome to Castle Biosciences First Quarter 2026 Conference Call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session. I would like to turn the call over to Camilla Zuckero, Vice President, Investor Relations and Corporate Affairs. Please go ahead. Camilla Zuckero: Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences First Quarter 2026 Results Conference Call. Joining me today are Castle's Founder, President and Chief Executive Officer, Derek Maetzold; and Chief Financial Officer, Frank Stokes. Information recorded on this call speaks only as of today, May 6, 2026. Therefore, if you're listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the Investor Relations page of the company's website for approximately 3 weeks following the conclusion of the call. Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements, including statements about expected addressable markets, statements containing projections regarding future events or our future financial or operational results and performance, including our anticipated 2026 total revenue and the impact of our investments and growth initiatives, including our ability to achieve long-term growth and drive stockholder value. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties. There can be no assurances that the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. Please refer to the risk factors in our most recent SEC filings for more information. These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, adjusted gross margin and adjusted EBITDA that have not been calculated in accordance with U.S. GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website. I will now turn the call over to Derek. Derek Maetzold: Thank you, Camilla, and good afternoon, everyone. We delivered strong first quarter results, building on our momentum from 2025. Thanks to the strong execution by the entire Castle team, we delivered revenue of $83.7 million. Test report volumes for our core revenue drivers grew 36% compared to the first quarter of 2025. Excluding DecisionDx-SCC and IDgenetix revenue, our revenue growth for the first quarter of 2026 is approximately 42% compared to the first quarter of 2025, highlighted by double-digit year-over-year test report volume growth for both DecisionDx-Melanoma and TissueCypher. Throughout the first quarter of 2026, our teams remain focused on executing our growth priorities and our strong performance gives us confidence to raise our 2026 revenue outlook to between $345 million to $355 million compared to our previous provided guidance of $340 million to $350 million. Now I will walk you through business highlights from the first quarter, and then Frank will provide additional financial highlights before we turn to your questions. Let's start with our core revenue drivers and what we see as the bulk of our 2026 top line growth story, DecisionDx-Melanoma and TissueCypher. For DecisionDx-Melanoma, we delivered 10,021 test reports in the first quarter, representing 16% year-over-year growth. Further, March of 2026 saw an all-time high record month for test reports delivered. We believe DecisionDx-Melanoma remains a durable growth driver and continue to expect mid- to high single-digit volume growth for the full year 2026. Driving test adoption and sustaining our competitive advantage through robust clinical evidence remains a key priority. We recently presented new data at the 2026 American Academy of Dermatology Annual Meeting, demonstrating that our DecisionDx-Melanoma test can significantly improve risk prediction within the American Joint Committee on Cancer, or AJCC, stages for patients with cutaneous melanoma. These data from 1,868 CE-linked patients showed that DecisionDx-Melanoma significantly stratifies 5-year melanoma-specific survival within AJCC stages and T categories, identifying patients whose mortality risk is substantially higher or lower than staging alone would predict. What this means is that in this study, DecisionDx-Melanoma provided clinically meaningful differences in risk within the same stage, enabling more personalized risk-aligned management decisions by helping clinicians identify patients who may warrant closer monitoring or early intervention while also recognizing those who may safely be managed less intensively. These great results are in addition to our recently published data from the prospective multicenter study evaluating DecisionDx-Melanoma's i-31 SLNB test result. Data from this prospective U.S.-based study confirmed again that our test identified patients with a less than 5% predicted risk, consistent with the National Comprehensive Cancer Network guideline thresholds while maintaining favorable outcomes and outperforming traditional staging criteria. Now let's turn to our gastroenterology franchise. During the first quarter of 2026, we delivered 11,745 TissueCypher test reports compared to 7,432 in the first quarter of 2025, which is 58% growth. Consistent with our DecisionDx-Melanoma test in March, March also represented an all-time record month for TissueCypher. Two studies were recently presented at the Digestive Disease Week by researchers at the Mayo Clinic. The findings demonstrated how molecular risk stratification with the TissueCypher test refined risk assessment and directly informed real-world management decisions for patients with Barrett's esophagus with one study showing changes in surveillance intervals in more than half of patients compared to recommendations guided by traditional histopathology alone, supporting more personalized, risk-aligned patient management. Look to our news release from earlier this month for more information on these studies. Looking to the full year, we expect to add a similar number of tests in 2026 as we did in 2025, indicating year-over-year growth approaching 50%. Let's move on to what we believe are our midterm, which we view as 2027 and 2028 revenue drivers, which includes our AdvanceAD-Tx test in addition to our core revenue drivers. As a reminder, AdvanceAD-Tx is our first-in-class test designed to guide systemic treatment selection for patients 12 years of age and older with moderate-to-severe atopic dermatitis, or AD. You may recall that we released this test under a limited access program mid-fourth quarter of 2025. Continuing on our limited access during the first quarter, we received approximately 650 orders. Initial responses indicate that clinicians appreciate that AdvanceAD-Tx integrates into their existing AD care pathway, helping them make more informed systemic therapy choices early in the patient treatment journey. Supporting this claim, during the quarter, we published data from a prospective multicenter clinical validation study in the Journal of the American Academy of Dermatology, demonstrating that AdvanceAD-Tx can identify patients with moderate-to-severe atopic dermatitis who are significantly more likely to achieve greater and faster responses when treated with a JAK inhibitor compared to a Th2 biological therapy. The data showed that AdvanceAD-Tx can stratify patients by molecular profile, identifying those more likely to achieve near-clear skin or EASI-90, faster time to response and meaningful patient-reported benefits when taking a JAK inhibitor, supporting improved outcomes and more biologically informed systemic treatment decisions early in the treatment journey with JAK inhibitor therapy as compared to Th2 targeted biologic therapy. Based on revenue cycle time lines, we expect to be in a position to provide more detail on reimbursement by the end of the third quarter 2026. And with that, I will now turn the call over to Frank. Frank Stokes: Thank you, Derek, and good afternoon, everyone. As Derek noted, our first quarter financial performance marks a strong start to 2026. Revenue was $83.7 million for the first quarter of 2026, driven by continued strength in our core revenue drivers. For total revenue for 2026, we are raising our revenue guidance to $345 million to $355 million, up from the previously provided range of $340 million to $350 million. This is growth of high-teens to low 20s in 2026 over 2025, excluding revenue from DecisionDx-SCC and IDgenetix from the 2025 and '26 totals. Our gross margin during the first quarter of 2026 was 72.8% compared to 49.2% in the first quarter of 2025. As a reminder, first quarter of 2025 gross margin reflects the onetime adjustment of an acceleration of amortization expense of approximately $20.1 million. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 75.6% for the quarter compared to 81.2% for the same quarter in 2025. Turning to expenses. Our total operating expenses, including cost of sales for the first quarter of 2026, were $102.1 million compared to $115.9 million for the first quarter of 2025. Sales and marketing expenses for the quarter were $41 million compared to $36.8 million for the same period in 2025, primarily driven by higher personnel costs and higher sales-related travel expenses. Increases in personnel costs reflect a higher headcount driven by sales force expansion as well as merit and annual inflationary wage adjustment for existing employees. Higher sales-related travel expenses reflect increased field activity to support growing test report volumes. General and administrative expenses were $23.9 million for the quarter compared to $21.8 million for the same period in 2025, primarily attributable to higher personnel costs, higher information technology-related costs and higher travel costs, partially offset by a decrease in professional fees. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustments for existing employees. Cost of sales expenses were $20.5 million in the first quarter of 2026 compared to $16.4 million in the first quarter of 2025, primarily due to higher expenses for lab supplies, higher lab services costs, higher personnel costs and higher depreciation expense. The increase in expenses for lab supplies and lab services expense was driven by higher test report volumes. Increases in personnel costs reflect a higher headcount due to additions made to support business growth in response to growing test report volumes as well as merit and annual inflationary wage adjustments for existing employees. The higher depreciation expense reflects continued investment in and expansion of our laboratory facilities. R&D expenses were $14.4 million for the quarter compared to $12.6 million for the same period in 2025, primarily due to higher personnel costs and higher clinical studies costs. The increases in personnel costs reflect a higher headcount to support continued business growth and increases in clinical studies costs reflect investment in our pipeline products. Total noncash stock-based compensation expense, which is allocated among cost of sales, R&D and SG&A expense, was $9.8 million for the first quarter of 2026 compared to $11.2 million in the first quarter of 2025. Interest income was $2.5 million for the first quarter of 2026 compared to $3.1 million in the first quarter of 2025. Our net loss for the first quarter of 2026 was $14.5 million compared to a net loss of $25.8 million for the first quarter of 2025. Diluted loss per share for the first quarter was $0.49 compared to a diluted loss per share of $0.90 for the same period in 2025. Adjusted EBITDA for the first quarter was negative $5.1 million compared to $13 million for the comparable period in 2025. The year-over-year change primarily reflects a onetime noncash amortization expense recognized in 2025 related to the accelerated amortization of our IDgenetix test. Net cash used in operating activities was $22.1 million for the first quarter of 2026 due in part to annual cash bonus payments and certain health care benefit payments that do not recur through the remaining 3 quarters of the year. Net cash used in investing activities was $25.8 million for the first quarter and consisted primarily of purchases of marketable investment securities of $55.1 million, purchases of property and equipment, partially offset by the maturities of marketable investment securities and the sale of equity securities. As of March 31, 2026, we had cash, cash equivalents and marketable securities of $261.7 million. As we've discussed, we expect M&A to play a role in our growth story, and we intend to continue to evaluate candidates that fit within our strategic opportunities criteria. In closing, I'm pleased with our strong first quarter results and increased guidance, which reflect the consistent execution and momentum we are building across the entire business. I'll now turn the call back over to Derek. Derek Maetzold: Thank you, Frank. In summary, I am pleased with our strong start to 2026. We remain confident in our ability to execute our growth strategy and drive long-term value to our stockholders. Finally, I want to thank the entire Castle team for their dedication to advancing patient care and improving patients' lives. We're proud of our accomplishments and excited about the path ahead, and we look forward to sharing our continued progress in the coming quarters. Thank you for your continued interest in Castle Biosciences. Now we will be happy to take your questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Mason Carrico with Stephens. Mason Carrico: I want to start out with TissueCypher volume, 58% growth year-over-year. Obviously, that's great growth. But volumes did decline very modestly quarter-over-quarter. That just hasn't happened since early 2024, I think. So any unique dynamics to call out in the quarter that may have contributed to that weather, seasonality, anything capacity related? Just I guess, any color there would be great. Frank Stokes: Yes. Sure, Mason. Thanks. As you noted, we continue to see really strong growth there with 58% year-over-year growth. On the sequential or quarter-to-quarter trend there, I think we finally have hit the penetration level where we are seeing seasonality and seeing and feeling the sense of that. Based on looking at IQVIA third-party data, historically, the first quarter of the year has fewer GI procedures than the other quarters. But having said that, importantly, March was a record month for TC and that trend continued in April. So I think we're going to add -- we would expect to add a similar number of test reports in '26 as we did in '25, and that gets us something close to a 50% year-over-year growth for the year. And so good performance on the test, and we continue to be pleased with what we're seeing. Mason Carrico: Got it. And you guys update -- or would you give us an update on the reimbursement initiatives for your AD-Tx test or the progress you've made on that front? And then I guess as kind of a follow-up to that, on the potential for revenue to become material there in 2027 or 2028, where does that -- where do you expect that revenue to come from? Is it all from appeals? Or could there be some other revenue model contributing next year by 2028? Derek Maetzold: So we don't -- Mason, Derek here. We think based upon the long revenue cycles from an RCM perspective, we could be in a position probably by the end of the third quarter to provide some good evidence-based clarity in terms of what we're seeing, what we can assume for 2027, 2028 under a traditional reimbursement approach. There are, of course, other avenues as well in terms of interested parties who may be interested in controlling the cost of having patients keep cycling around medications. And of course, there's always an opportunity to potentially partner with some of the pharmaceutical companies who might have interest in having their share shifted. But for -- right now, I would say if we rely primarily on traditional governmental or private payer reimbursement, probably in the third quarter so we can give some strong clarity based on evidence. Operator: Your next question comes from the line of Thomas Flaten with Lake Street. Thomas Flaten: Any -- I think you guys were relocating to a new Phoenix lab at some point this year. Any update on what impact that might have on gross margins going forward? Frank Stokes: I don't think we'll see much impact on gross margins, Thomas. We haven't made that change yet. We're moving into an expanded facility in the Phoenix area. And that's really towards -- an eye towards -- as you recall from working with us for a while, we try to stay a couple of years ahead of demand in terms of capacity. And so as we look at the expanding derm franchise and the growth in those test volumes, in particular, we're trying to stay ahead of it. So I don't have guidance for you on when we'll make that move, but I don't think you'll see much impact on gross margin at all as we shift from one facility to the other. Thomas Flaten: Got it. And then on to AdvanceAD, any thoughts on broadening this initial rollout? I think you had 150 accounts targeted as the first group. Will that stay at those 150 for the foreseeable future, at least until you have more visibility into reimbursement? Derek Maetzold: We opened up access a bit more in this first quarter of this -- late in the first quarter. And we'll kind of look at our volume, look at our early RCM assumptions here, make sure we're on track and then kind of continue to go and release it over time. But that being said, having 650 orders come in the door in the first quarter is very, very nice reinforcement of the opportunity that we have here when the field force is 100% focused on melanoma, and we have such limited access to our customer base. So we are quite pleased with the continued early response of the dermatologic clinicians out there in the field. Operator: Your next question comes from the line of Catherine Schulte with Baird. Catherine Ramsey: Maybe first for the mid- to high single-digit melanoma volume growth for the year after a really strong start there with mid-teens growth in 1Q, should that double-digit growth continue in the second quarter with some conservatism baked into the back half? Or how should we think about the phasing there? Frank Stokes: Yes. We did reiterate, Catherine, our 2026 mid- to high single-digit growth expectations. Q1 was a bit of an easier comp than we expect for the rest of the year. So we're pleased with that. I think that's where we see the business trending. Catherine Ramsey: Okay. And then I guess, have you guys been getting any feedback from clinicians regarding some of the moving pieces on NCCN guidelines? And any feedback you've received on the future oncology publication or any other data that you've put out recently? Derek Maetzold: So we continue to get good feedback on -- I don't quite understand what NCCN sees here. This is a failed study, failed to meet the 5% cut point here. So what's trying to be said, which is good for us. I think, unfortunately, from an NCCN standpoint, there's a belief that this is really more political than we even thought, I guess you would say. We're hearing that from most of our customers. The recent DeCIDE study, which came out in Future Oncology earlier this year was another strong reinforcement that if you use our test to look at accuracy. Once again, we have one more study showing that we comfortably get way below 5% predicted risk in people who actually underwent an SLNB. And as important in that same publication is that people who used our test to move away from SLNB, meaning you didn't know if you were going to be positive or negative, had extremely strong outcomes. It was 97.8% recurrence-free survival over the time period of the publication. That is a really safe melanoma patient, if you can, I guess, use those 2 words together, right? So that continues to be strong reinforcement that we've got data that they can rely upon that's consistent over time, which is excellent. And I think that's what also led to having our greatest month ever in March of this year. Operator: Your next question comes from the line of Subbu Nambi with Guggenheim. Unknown Analyst: This is [ Thomas ] on for Subbu. Frank, you mentioned M&A. Is that something you're looking at near term? Can you just walk us through those factors you're considering when evaluating targets that meet your criteria there? Derek Maetzold: I mean I think we always are open eye to what may be a possibility. We own things as we become aware of them. We don't feel compelled to chase anything. I think we've got a great opportunity with what we own and control today. But we do look at things as they come around or come across us. And as you know, the goldilocks approach is pretty tough. I mean things have to look pretty good, but we do think that could be part of the future. Unknown Analyst: Great. And then separately on -- maybe on sales force. Can you just give an update today on derm and GI? And then maybe how headcount expansion is expected to look for this year? And how does that translate to selling and marketing spend? Frank Stokes: Yes. We -- what we said is we think we can cover for the time being in the near term, both of those verticals with fewer than 100 reps, and that's where we are today. Operator: Your next question comes from the line of Matthew Parisi with KeyBanc Capital Markets. Matthew Parisi: This is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. Congrats on the quarter. You previously mentioned in 2025 that melanoma received FDA breakthrough designation. And I was wondering if Castle is still preparing for like an FDA submission in '26 that you mentioned? Derek Maetzold: We are moving forward with a submission along that same time line sometime in 2026 here, yes. Matthew Parisi: And then just one other follow-up. Just wondering if there's been an update on SEC. I know you guys had received acceptance of the reconsideration request for both Novitas and MolDx. And if there's just any update or an idea on timing? Derek Maetzold: No official update, I guess, from either one of the Medicare contractors, Palmetto or Novitas since, I guess, our year-end earnings call a few weeks ago. We still continue to believe that there -- that kind of a year plus review cycle should be plenty of time for a reconsideration request that was accepted in, I guess, July and September accordingly between Novitas and MolDx. So we aren't, at this point in time, thinking that there is a later posting of a draft LCD than sort of the second half of this year. That would be surprising. Operator: Your next question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: This has been covered, I apologize. But on the 650 orders for the atopic dermatitis test, could you just talk about recent trends and how you expect that to accelerate going forward? And when you think about that number getting into the thousands, I guess, in the relative near term here, how does that affect the cost structure of the company? I guess I know it's obviously not super material. But as we see gross margin decline sequentially and things like that, I'm just curious how we should be thinking about P&L impact. Frank Stokes: Yes. So Kyle, I think that what we see right now the primary hurdle for our AD test is just our -- candidly, our willingness to -- how available do we want to make it. In terms of impacting the overall COGS profile, that's a pretty efficient test. It's PCR-based test. And so even with some growth in volumes from where we were in Q1, we wouldn't expect a material impact on the blended adjusted COGS structure of the company, certainly in the next several quarters anyway. Kyle Mikson: Okay. Now on that note, I guess the -- how do you guys kind of anticipate expenses, the cadence of expenses throughout this year because it was a little bit surprising to see the net loss and the lower-than-expected EBITDA in the quarter. And as we think about cash flow positivity and that's been this goal for '26, '27 for a while with the SEC, how should we -- what's the updated thoughts on that metric? Frank Stokes: Yes. So as you know, we continue to focus growth on sort of 3 windows, Kyle, near, medium and long term. And as we support that, we do expect some growth in operating expenses. I think as we get through Q1 here and we lap the more meaningful change in FCC revenue, we'll get to a more meaningful comparability period going forward. But I think that we continue to grow into the P&L and leverage the cost structure and our intent there is to generate meaningful returns on those operating expenses driving value going forward. Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: So first one, maybe on the guide itself, you beat by $4 million, raised by $5 million, largely banking the beat. Just wanted to understand how much of the beat was from FCC? And then I have a follow-up on the TissueCypher. Frank Stokes: Yes. Most of that beat was driven by TissueCypher. Puneet Souda: Okay. Got it. And then can you maybe provide a little bit more color on the TissueCypher ramp throughout the year? I think you called out you had the 2 best quarter -- I didn't mean March and April, 2 best months, March and April, but maybe that was sequentially down. I didn't exactly catch that. Maybe if you can provide some more color there. So how should we think about the ramp from 1Q to 2Q? I mean it seems it could be larger than what you saw last year, especially given another 18,000 up year-over-year. So maybe just talk to me in terms of the TissueCypher ramp. Frank Stokes: Yes. So as we said, Puneet, we continue to think we'll add a similar number of tests reports for '26 as '25. I think we're big enough or penetrated enough now that probably some seasonality is probably to the point where we feel it. And as I referenced, the number of procedures tends to be lower in Q1. So I think we'll see that growth come ratably through the year. I don't see amount of things quarter-to-quarter that should shift that from more of a ratable ramp. Operator: There are no further questions at this time. I will now turn the call back to Derek for closing remarks. Derek Maetzold: This concludes our first quarter 2026 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to Red Violet's First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your first host for today's conference, Camilo Ramirez, Senior Vice President, Finance and Investor Relations. Please go ahead. Camilo Ramirez: Good afternoon, and welcome. Thank you for joining us today to discuss our first quarter 2026 financial results. With me today is Derek Dubner, our Chairman and Chief Executive Officer; and Dan McLachlan, our Chief Financial Officer. Our call today will begin with comments from Derek and Dan, followed by a question-and-answer session. I would like to remind you that this call is being webcast live and recorded. A replay of the event will be available following the call on our website. To access the webcast, please visit our Investors page on our website, www.redviolet.com. Before we begin, I would like to advise listeners that certain information discussed by management during this conference call are forward-looking statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company's business. The company undertakes no obligation to update the information provided on this call. For a discussion of the risks and uncertainties associated with Red Violet's business, I encourage you to review the company's filings with the Securities and Exchange Commission, including the most recent annual report on Form 10-K and subsequent 10-Qs. During the call, we may present certain non-GAAP financial information relating to adjusted gross profit, adjusted gross margin, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share and free cash flow. Reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measure are provided in the earnings press release issued earlier today. In addition, certain supplemental metrics that are not necessarily derived from any underlying financial statement amounts may be discussed, and these metrics and their definitions can also be found in the earnings press release issued earlier today. With that, I am pleased to introduce Red Violet's Chairman and Chief Executive Officer, Derek Dubner. Derek Dubner: Good afternoon, everyone, and thank you for joining us. Before I walk through the quarter, I want to recognize our team. The results we're reporting today, record revenue, record margins, record EBITDA and one of the strongest quarters for new customer onboarding in our company's history are a direct outcome of disciplined execution. This is a team that consistently delivers and that consistency is what drives the results you're seeing today. Now to the quarter. Revenue for the first quarter was a record $25.8 million, up 17% year-over-year. It's important to note that the prior year period included $1.2 million of one-time transactional revenue. So the underlying growth this quarter is stronger than the headline suggests. Adjusted gross profit increased 20% to $22 million, resulting in a record adjusted gross margin of 85%. Adjusted EBITDA increased 27% to $10.7 million with a record margin of 41%. Adjusted net income was $6.6 million, producing record earnings of $0.46 per diluted share, and operating cash flow increased 32% to $6.6 million. This marked yet another quarter of consistent execution with high-teen growth and continued expansion in margins and cash flow. On the customer front, IDI added 400 new billable customers, one of the highest quarterly additions in our history, bringing total customers to 10,422. FOREWARN grew to more than 417,000 users with over 640 REALTOR associations under contract. These metrics reflect increasing adoption, deeper integration and the growing reliance our customers place on our platform in their daily operations. At the same time, we continue to see a significant and expanding opportunity set in front of us, particularly as AI continues to unlock new capabilities across analytics, data aggregation and customer interaction. Given the strength of our model and the level of cash flow we are generating, we are well positioned to invest proactively into that opportunity. Importantly, our opportunity in AI is not just about access to tools. It is about the foundation that we have built that those tools operate on. Our longitudinal identity graph built and refined over time through real-world usage is what enables us to generate actionable signals, not just data outputs. AI enhances our ability to analyze the foundational graph, identify patterns and surface risk and insight with greater speed and precision. Similarly, our ability to aggregate and fuse new data is directly tied to our ability to resolve that data to unique individuals within our identity graph. Aggregating data is one thing but correctly attributing it to the right individual over time is something entirely different. Whether it is distinguishing between thousands of individuals with the same name, resolving generational differences or identifying underbanked consumers with limited public data, our platform is architected to unify fragmented data into a persistent, accurate identity, a continuously maintained and correctly attributed view of an individual over time, all powered by our proprietary engine. As we bring in additional data inputs, AI further enhances our ability to validate that data against our graph, then link and extract meaningful insight, reinforcing and extending the advantage we have built over the past decade. Across customer workflows, AI is also enhancing how our solutions are experienced, improving responsiveness, deepening integration and increasing the utility of our platform in day-to-day decisioning. Internally, we are seeing accelerating adoption of AI across the organization from engineering and security to operations and customer support, driving significant gains in productivity and development velocity. Within our technology organization, in particular, development velocity has accelerated materially with teams leveraging AI and agentic tools to code, test and deploy at rates we have not previously experienced. What historically required multiple resources can now often be accomplished by a single engineer operating with AI augmentation, significantly increasing our pace of product development and innovation. What we are observing is a compounding effect. As adoption deepens across the organization, the pace of improvement is accelerating, driving efficiency gains internally while simultaneously strengthening the value we deliver to customers. We are just scratching the surface. The net effect is that AI is acting as a force multiplier, increasing the value of our data, accelerating our pace of innovation, strengthening our position within the markets we serve, and further enhancing our AI embedded layered architecture, which is fundamentally differentiated from the legacy technology stacks of our competition. Switching topics for a moment. I also want to revisit something we said several years ago, and Dan will go into it in more detail. At that time, we outlined what this business would look like at a $100 million annual revenue run rate, specifically, adjusted gross margins exceeding 80% and adjusted EBITDA margins in the range of 35% to 40%. We had our skeptics, but that was guided by this team's knowledge and experience building similar businesses over the past three decades. Today, at our current scale, we already are delivering 85% adjusted gross margins and 41% adjusted EBITDA margins. This level of performance reflects the durability of our business and the operating leverage inherent in the model as we grow. We ended the quarter with $43.5 million in cash. We currently have $15.6 million remaining under our stock repurchase program after repurchasing 73,250 shares at an average price of $41.90 per share during the first quarter and through April 30, 2026. We will continue to allocate capital with discipline, balancing share repurchases with continued investment in our platform, data assets and go-to-market capabilities. This was a strong start to 2026 and the continuation of the consistent, disciplined execution that defines who we are. With that, I'll turn it over to Dan. Daniel MacLachlan: Thanks, Derek, and good afternoon, everyone. We are off to an excellent start in 2026, delivering the highest revenue, adjusted gross profit and adjusted EBITDA in our history, results that reflect the strength of our platform, the expanding reach of our solutions and the consistency with which we are executing. I want to take a moment to put these results in context because I think it speaks to something important about this team and this business model. As Derek mentioned, in March of 2022, we laid out a framework on our earnings call of what this business looks like at $100 million in annual revenue. At the time, our run rate was approximately $45 million, our adjusted gross margin was 75%, and our adjusted EBITDA margin was 25%. We told you that at $100 million in annualized revenue, you could expect adjusted gross margin to exceed 80% and adjusted EBITDA margin to be in the range of 35% to 40%. We meant it and we built toward it. This quarter, we crossed that revenue threshold for the first time on $25.8 million in quarterly revenue, a $100 million-plus annual run rate, we delivered adjusted gross margin of 85% and adjusted EBITDA margin of 41%. Disciplined execution against a multiyear road map at the margins we said we would deliver is not something every management team can point to, but we can. And we're just getting started. At maturity, this business model is capable of adjusted gross margins in excess of 90% and adjusted EBITDA margins approaching 65%. The first quarter of 2026 is evidence we are on the right path to get there. But we take a long-term view of this business, and we are not managing to a near-term margin target. We are managing towards the full potential of what we have built. Over the past decade, we have constructed a differentiated data and analytics platform, one that ingests, normalizes and delivers intelligence at scale across a broad and growing set of use cases and end markets. The foundation we have built is what makes our AI opportunity actionable. AI is accelerating how we develop and deploy new capabilities, compressing development cycles and broadening the solutions we can bring to market. It is enhancing our customers interact with our products, improving the speed and precision with which identity intelligence is surfaced and acted upon and it is reshaping how we think about operational efficiency and scale, enabling us to accelerate productivity across the entire business. We are already seeing these benefits, and we expect their impact to compound. As we continue investing in AI, product development and go-to-market capabilities, we expect adjusted EBITDA margins in the near term to trend in the mid- to high 30% range. We view that as a reflection of deliberate investment in the long-term growth of the business. The path to 65% adjusted EBITDA margins runs directly through the investments we are making today. Turning now to our first quarter results. For clarity, all the comparisons I will discuss today will be against the first quarter of 2025, unless noted otherwise. Total revenue was a record $25.8 million, up 17% over the prior year. As Derek noted earlier, Q1 '25 included $1.2 million in one-time transactional revenue from two significant customer wins. Normalizing for that, our underlying growth rate this quarter would have been greater than 20%. We generated $22 million in adjusted gross profit, the highest to date, delivering a record adjusted gross margin of 85%, up 2 percentage points. Adjusted EBITDA came in at a record $10.7 million, up 27% over the prior year. Adjusted EBITDA margin expanded 3 percentage points to 41%, a new high. Adjusted net income increased 29% to $6.6 million, resulting in adjusted earnings of $0.46 per diluted share, both new highs. Turning to the details of our P&L, as mentioned, revenue for the first quarter was $25.8 million with solid performance across the business. Within IDI, we saw broad-based growth across our verticals with particular strength in financial and corporate risk and investigative. We added 400 billable customers sequentially to end the quarter with 10,422 customers. Financial and corporate risk was our fastest-growing vertical, with background screening leading the way with exceptional growth, continuing to benefit from the targeted product development and go-to-market investments we have made over the past year. Financial services delivered strong growth driven by deeper customer integration and volume expansion. In addition, both corporate risk and insurance contributed meaningful growth, rounding out a solid showing across the vertical. Investigative posted robust double-digit gains across every industry, including law enforcement, private investigators, bail bonds, and process servers. Law enforcement, in particular, continues its impressive trajectory, and we remain focused on deepening our penetration of the public sector. This vertical is expanding as a share of our total revenue, and we see significant runway ahead. Collections delivered steady gains this quarter. The recovery dynamic we have discussed in prior quarters remains intact, and we continue to see volume expansion from our existing customer base as the industry works through elevated delinquency levels. The vertical is maintaining its steady recovery, and we view it as a meaningful tailwind to our growth outlook. Emerging markets delivered healthy underlying expansion this quarter. The $1.2 million in one-time transactional revenue in Q1 '25 we noted earlier was concentrated in this vertical, which creates a tough year-over-year comparison. Normalizing for that, the underlying growth rate was robust and in line with the demand momentum we continue to see across these industries. Retail, government, legal, repossession, and marketing all contributed to meaningful growth. We remain encouraged by the breadth of activity throughout emerging markets as a significant long-term growth driver for the business. Lastly, IDI's real estate vertical, which excludes FOREWARN, delivered modest growth year-over-year, but is starting to show signs of stabilization following the prolonged pressure that elevated rates and affordability constraints have placed on housing activity. While the macro environment remains a headwind, we are encouraged by the trajectory and believe we are well-positioned as conditions gradually improve. As to FOREWARN, the platform continued its impressive performance, delivering strong double-digit revenue expansion this quarter. We exited the quarter with over 417,000 users, up from 325,000 users a year ago. FOREWARN continues to gain traction with real estate professionals who rely on it as an essential part of their daily workflow. We now have over 640 REALTOR associations contracted to use FOREWARN. Overall, contractual revenue accounted for 75% of total revenue in the quarter, up 1 percentage point from the prior year. Gross revenue retention remained strong at 95%, down 1 percentage point. Moving back to the P&L, our cost of revenue, exclusive of depreciation and amortization, increased $0.1 million or 4% to $3.8 million. Adjusted gross profit increased 20% to a record $22 million, resulting in a record adjusted gross margin of 85%, up 2 percentage points from the prior year. Our sales and marketing expenses increased $0.5 million or 8% to $5.9 million for the quarter, driven primarily by higher personnel-related expenses. General and administrative expenses increased $1.7 million or 28% to $7.9 million, driven primarily by higher personnel costs and acquisition-related activity. Depreciation and amortization increased $0.2 million or 10% to $2.8 million for the quarter. Net income increased $1 million or 28% to $4.4 million for the quarter. Adjusted net income increased $1.5 million or 29% to $6.6 million, the highest to date, resulting in record adjusted earnings of $0.46 per diluted share. Moving on to the balance sheet. Cash and cash equivalents were $43.5 million at March 31, 2026, compared to $43.6 million at December 31, 2025. Current assets totaled $57.3 million compared to $56.5 million at year-end, while current liabilities were $5.1 million, down from $7.9 million. We generated $6.6 million in cash from operating activities in the first quarter compared to $5 million in the same period last year. Free cash flow for the quarter was $3.1 million, a 24% increase from $2.5 million a year ago. In the first quarter and through April 30, 2026, we purchased 73,250 shares of company stock at an average price of $41.90 per share under our stock repurchase program. As of April 30, 2026, we had $15.6 million remaining under the repurchase program. In closing, crossing the $100 million revenue run rate threshold this quarter is a milestone worth acknowledging, but it is not a finish line. The same discipline and focus that got us here is what will take us to the next level. We have a clear line of sight to continued margin expansion, a platform that is scaling efficiently, and a team that is constantly and consistently delivering on what it said it would do. We are confident in our ability to build on this momentum, and we look forward to updating you on the progress throughout the year. With that, our operator will now open the line for Q&A. Operator: [Operator Instructions] Our first question today is from Eric Martinuzzi with Lake Street Capital Markets. Eric Martinuzzi: Congrats on the $100 million run rate. That's a very significant milestone that I know you guys have been working a long time to achieve. So it's great to see that. I had a question regarding, we're always looking for kind of what's next. And given the achievement of those targets that you laid out back in March of 2022, do we have, you talked a little bit in your prepared remarks, Dan, about the at maturity type model having in excess of 90% gross margins and then approaching the 65% on the adjusted EBITDA. Obviously, that's the goal. Is there a time line you're willing to communicate? Daniel MacLachlan: Thanks, Eric. I appreciate the question. Yes, look, I mean, we're really excited, obviously, about crossing that revenue threshold. And I think that's a milestone that obviously is a good marker for us. But as I said earlier, it's just the beginning. It's not a finish line, so to speak. And so when we talk about some of the timelines to kind of get to that maturity, right, we're not really going to put a timeline on that today because we don't issue formal guidance and, kind of pinning a year of maturity state outlook would be inconsistent with how we manage the business. What it comes down to is kind of the structure of the business model. We operate a data and analytics platform with a largely fixed cost base. Once the platform is built and the data is in place, the marginal cost of an incremental transaction is very small. That means as revenue scales, an outsized share, as you know, of every dollar flows to the bottom line. Our cost structure is built to support a meaningfully larger business than where we are today, and we are continuing to invest in that cost structure to enable future growth. So 65% at maturity isn't a forecast and it isn't a target. It's the model output when you take a high fixed cost, low marginal cost platform and you let it scale to its natural operating leverage. So for timelines, it's really about continuing what we're doing, building a good foundational business and moving quickly as we can towards those underlying metrics. Eric Martinuzzi: Okay. And then the other notable achievement here was the new customer onboarding, as you went through the different verticals you serve, I didn't really pick up on anything that was a substantial change, versus your commentary last quarter, and maybe I'm incorrect there. But what do you attribute the Q1, typically a time when you do onboard a significant number of new customers? Or is there something going on in the macro or with the brand that's allowing you to achieve those numbers? Derek Dubner: Thanks, Eric. It's Derek. Q1 is generally strong. Industries tend to enter the new year with a little bit of wind in their sales. Maybe they're ready to deploy those budgets and get going. But I think what we would say about that is we have produced near record onboarding or at least at the very highs of our average, 12-month average for quite a while now. And we've always said that those are a great leading indicator of the revenue generation and success of the business in the out months. And obviously, that's bearing true, and that's why we use it as exactly that, a leading indicator. It's a confluence of many things that are ongoing within the organization. I think we're doing a very nice job of marketing ourselves, being present at conferences, engaging with our customers and, delivering what they want in products and solutions. We have always said we're very customer-centric, and we will never change. And so when we think about the next series of developments, whether it be functionality, for example, within an application for a certain industry, we're talking to our customers. We're finding out what they want, what they don't see in the competitive environment, and we execute upon that. And so I'm very proud of the organization, and that's why I started out with a thank you to the team. It is really brilliant execution over the last 18 months. And we've got an extraordinarily strong road map. And because of the AI implementations across the organization, we're seeing acceleration there. And so it's got us very enthusiastic that we're very well positioned for the future. Eric Martinuzzi: Got it. Last question for me. You talked about the growth in the quarter was up 17%, but really would have been even stronger when you back out the $1.2 million from the year ago quarter. My math has the kind of apples-to-apples growth at around 24%. I know you're not in the business of giving guidance here, but seasonal trends in the business historically would have Q2 up from Q1. Is there any reason that, that trend would be different this year? Daniel MacLachlan: Thanks, Eric. This is Dan again. Look, I mean, historically and traditionally, first quarter has always been a really strong quarter for us. Obviously, we talked Q1 of '25 had a little additional in there and kind of one-time transactional. But going back historically, we always had a good first quarter out of the gate. We try to replicate and grow that in Q2. Last year, I think if you look, I mean, we were probably down sequentially by about $200,000. But of course, we were going against that kind of transactional comp. So for us, yes, we're not providing any formal guidance. And for us, when we think about the business and going back to 2024, 2025, we talked about early on reaccelerating the growth rate. Obviously, in 2024, 2025, we were able to do that. And so for us, it's one foot in front of the other and continuing to execute. But I think from a sequential basis, we have a great foundation coming out of the gate at $25.8 million. And the expectation is we can leverage that and over the next couple of quarters, obviously grow from there. And first quarter, we talked about April, for the most part, is closed. And what we saw in April was just an extremely strong month. And so we're excited about what's happening in the business and looking forward to continuing to perform for the near, medium and long term. Operator: Our next question comes from Josh Nichols with B. Riley Securities. Josh Nichols: Great to see the company taking back some stock this quarter. I wanted to ask a little bit -- two questions for me. One, about scaling up the go-to-market strategy historically, you've been a little bit more narrowly focused. But when we think about broadening out, inside sales, strategic sales and distribution, what are your plans to grow those channels this year? And how are you investing in that? Daniel MacLachlan: Yes. Thanks, Josh, this is Dan. I'll take that. And look, I mean, if you look historically, especially kind of in that go-to-market line, which we do provide some supplemental metrics around kind of our sales and marketing personnel. And we've invested there. We've invested in the marketing front a number of years ago, bringing in a highly skilled leader to build out that team. And as Derek talked about earlier, we're at the conferences we need to be at. We're at the trade shows we need to be at. We're continuing to engage with the customers. And that starts with a solid marketing foundation and building out from there. When you think about our sales go-to-market type strategy, we've built out an extremely efficient and productive inside sales team. I think of that as kind of the engine of the organization, highly skilled, verticalized subject matter experts across a broad group of industries and verticals. And tactically, over the last several years, we've built out more of our strategic side, right, in a number of areas where we've made investments, and we've built out the strategic team. So for us, when we look at growth, yes, it's not only in some of those pockets where we've been investing in, it's also across the broad and diverse industries and verticals we serve. We kind of call out five main verticals in which we operate and kind of break down revenue. But when you look at the amount of industries that roll up into the verticals, it's around 25, 26 different industries. So, the great thing about the growth that we've seen this quarter and we've seen consistently, it is broad-based. It is in a number of areas, and it's not concentrated in one use case or one customer. And so, that's what obviously gives us a lot of confidence today to talk about how the business has been performing and how we expect it to perform in the future. Derek Dubner: Yes, Josh, it's Derek. I know you're aware, but I'll state it very unequivocally that we are an early-stage company, and we're sitting in front of an enormous market opportunity, and we're very fortunate that we're generating very healthy cash flow. So with that opportunity in front of us, that's really the summary of our call today is that we're going to invest. The opportunity is that large. And our goal isn't to set necessarily a record EBITDA margin tomorrow. For us, you know this, Josh, we're building a very healthy foundational business with a view of 10 years out. And so the answer across the board is we expect to grow our team. You know this team, it's going to be methodical. It's going to be deliberate, and it's going to be directly in line with where the opportunity demands it. And that includes go-to-market, your question, but product, data and definitely on the AI-driven capabilities. And so what that will create over time is an inflection point, right? We will get where the revenue scales meaningfully without a commensurate increase in the headcount because of what we're doing today and tomorrow. And that's the model. We're not one of those companies that has bloated through the pandemic or using AI as an excuse to eliminate personnel or a missed quarter or anything else. Net-net, today, more employees, but a team that's going to operate at fundamentally a much higher level of productivity. And then that will flatten out, and you'll see those margins just drive, drive, drive. Josh Nichols: Thanks, Derek, you touched on it -- always good to hear you talk a little bit about your thoughts on technology and the impact and tailwinds that you think that's going to bring to the business. Clearly, it's a rapidly evolving environment. Agentic capabilities with AI or something, right, that has gotten a lot of focus recently. I'm curious maybe if you want to opine for a minute, just how you're thinking about investing in that, enhancing the company's agentic capabilities and what that could do for the business as it scales up over the next few years? Daniel MacLachlan: Yes. Sure, Josh. Thank you for the question. I appreciate it. We've spent some time on this in the fourth quarter in our earnings and full year and -- but I'm very happy to revisit it. AI, we don't perceive that as a threat to our business. It's a tailwind for us. And I'll restate it again, AI alone cannot replicate our data. We've built this longitudinal identity graph. It's billions of unified records. And it's tested and modeled and refined over years of actual usage. And that's the foundation that AI needs to run on. So for us, -- we've got this healthy foundation built, and we can layer it with AI on top of it and better serve our customers in all different ways in the risk signals we're generating so that through an API connection, our customers see it when they come into the office in the morning versus the competition's solutions. Our competition is working on trying to complete migrations from the cloud -- to the cloud, from other architectures. We are optimized. This is cloud-native, AI embedded from day one. And so for us, we are using AI to, as we said, compress the development cycles, implement more AI across the organization. It's pulsating through the products in what we're doing every day, vibe coding, agentic. And we're very excited because as the customers especially small and medium sized, become more adept at using it, developing it and getting agents, for example, into their workflow. We're completely usage-based. We're volume-based. So that means they will access our products in much faster fashion, less manual activity and more demand for the identities that we can clear every single day. And it's necessary to come back to us, right? We've talked about this. One person's identity on a given day to open a new bank account is only good for that moment in time. The next day, that person's identity and profile has changed. They might have been arrested the night before. They might be now divorced. They might have financial stress that occurred, a bankruptcy filing, a very large judgment. So the next time commercial or public sector see that consumer, they need to then again clear that identity and make a critical decision about that individual. So we've been building for this for the last 11 years. We've built this identity graph to be extraordinarily high confidence. AI can only be directionally correct. We need to be accurate. Law enforcement is making critical decisions every day using our products, financial services, all of our industries. So we're really well positioned. We're very excited about the innovation that's going on and the product road map and very excited about introducing new products and updating you on that. Operator: I'm showing no further questions at this time. So, I would like to turn it back to Derek Dubner for final remarks. Derek Dubner: Thank you. As we close, I want to reiterate that our performance this quarter reflects the strength of our strategy, the resilience of our business model and the continued trust of our clients and partners. We remain focused on disciplined execution, responsible growth and delivering long-term value to our shareholders. While the macro environment continues to evolve, we are confident in our positioning, our technology and our team. We appreciate your continued support, and we look forward to updating you on our progress next quarter. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Good afternoon, and welcome to Ibotta's Q1 2026 Earnings Conference Call. With us today are Bryan Leach, Founder and CEO; and Matt Puckett, CFO. Today's press release and this call may contain forward-looking statements. Forward-looking statements include statements about our future operating results, our guidance for Q2 2026, our ability to grow our revenue, factors contributing to our potential revenue growth, our key initiatives, our partnerships and the capabilities of our offerings and technology, all of which are subject to inherent risks, uncertainties and changes. These statements reflect our current expectations and are based on the information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures and should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, our 10-Q and our Q1 2026 earnings presentation, which are all available on our Investor Relations website at investors.ibotta.com. Unless otherwise noted, revenue and adjusted EBITDA comparisons to prior periods are provided on a year-over-year basis. With that, I'll turn it over to Bryan. Bryan Leach: Good afternoon, everyone. Thank you for joining our discussion of first quarter results. We're pleased to report first quarter revenue and adjusted EBITDA that are both above the top end of the guidance range we provided on our fourth quarter earnings call. We continue to anticipate that our year-over-year revenue trends will improve sequentially, returning us to overall revenue growth in the third quarter of 2026, which is consistent with the outlook we provided in February. The improved trajectory of our business is mostly the result of our sales team's success in deepening and broadening the supply of offers available to us. Our core promotions product is demonstrating strong market fit, while our more recent offering, LiveLift, continues to receive positive early feedback. On the publisher front, we've added 2 new partners in quick succession, both of which have entered into multiyear exclusive partnerships with us. In late March, we announced the addition of Uber, meaning that later this year, Ibotta's digital promotions will appear within the Uber, Uber Eats and Postmates apps. And today, we announced that Giant Eagle is also joining the Ibotta Performance Network. I'll say more about the significance of these new publisher wins later on. But first, I'd like to provide a bit more context on our recent financial performance and share additional details about the from-to pathway we see ourselves on. On a year-over-year basis, our redemption revenue performance has almost fully recovered. In the first quarter, it was down 1% year-over-year compared to being down 15% in the third quarter of last year and down 5% in the fourth quarter. This gradual recovery has been partly driven by redeemer growth with 15% more redeemers in Q1 than in the same quarter last year. That said, increased demand for offers alone doesn't move the needle unless we also source enough offers to take advantage of it. This is all about having the right team in place, spending more time in market, multi-threading our outreach to stakeholders at different levels within an organization and being more immediately responsive to our clients' needs. Building trust in these ways, is allowing our team to continue moving forward further upstream in our client strategic planning processes. We're also doing a better job of supporting our sellers and account managers with B2B marketing, training and enablement and client-specific insights. Our product team is working hard to deliver new tools that make each step in the quote-to-cash process easier, faster and more efficient. Encouragingly, our success has been broad-based, which continues to increase our conviction in the path we're on. Our sales team is adding new clients, securing new, often larger commitments from existing clients and retaining the overwhelming majority of our clients. Our strategic partnership with measurement leader Circana continues to generate sales and marketing momentum. We recently published a case study available on our website that independently validates Ibotta's ability to deliver successful results for our clients. Chomps, the fastest-growing meat snack brand in the United States, ran a campaign earlier this year to drive trial and household penetration. The results were outstanding and were independently verified through a sales Llift study conducted by Circana. Households exposed to the Ibotta campaign spent an average of 15% more on Chomps than their unexposed counterparts. Even more impressively, the campaign outperformed Circana's snack category benchmarks for sales lift by more than 4.5x and surpassed household penetration benchmarks by a staggering 9x. Stacey Hartnett, the SVP of Marketing at Chomps, summarized the impact well. She noted that achieving strong on-shelf presence was only their first milestone. The strategy has now shifted toward winning new buyers through smarter promotional strategies. She stated that our partnership has become a key lever in that effort and that the study reinforces that the IPN delivers impact well beyond a discount, helping them reach the incremental shoppers critical to their long-term growth. Turning to LiveLift. We continue to see positive signs of product market fit, even though it's still early days. We continue to limit access to those clients willing to spend a certain amount and run their campaigns for a certain duration. For this reason, the revenue contribution from LiveLift remains modest for now, and we aren't forecasting a significant ramp in revenue until we loosen those eligibility requirements. I'll have more to say on what that will require in a moment. Actual re-up rates among clients that have completed a LiveLift campaign remain consistent with the approximately 80% level we've discussed in prior quarters. Those clients who have not yet re-upped are primarily smaller CPGs, which we believe reflects our eligibility criteria rather than any dissatisfaction with the product, consistent with what we've said previously. Repeat users represented approximately 60% of LiveLift campaigns in the quarter, with the remainder being first-time users running pilots. The average campaign size for LiveLift campaigns remains meaningfully larger than for our core product. The most common question I received after our last earnings call was, 'can you help me better understand what the pathway to greater adoption of LiveLift will look like? So let me try to shed some light on what that entails and why I believe we're making solid progress. Of course, as with any innovative product development process, it's impossible to know in advance everything we will learn along the way or exactly how long that will take. Our goal is to make it as easy as possible for our CPG clients to buy campaigns on the Ibotta Performance Network. Some will prefer to stick with managed service, while others may take advantage of our self-service tools, which we will continue to refine and improve. In the future, our clients may also rely on agents to make more autonomous media buying decisions. Whichever interface they choose, clients will start by identifying the goals of their campaign. Our LiveLift platform then takes this information and evaluates a wide range of possible campaigns and chooses the best fit for their goals, projects the amount of redemptions, incremental sales and cost per incremental dollar we think they will achieve, tracks these metrics on an ongoing basis, providing profitability readouts at various points during the campaign and optimizes the campaign as necessary along the way. Scaling LiveLift to our wider client base will require greater automation of these processes. With that in mind, we are focused on a few key initiatives. First, we're building a more sophisticated programmatic API layer so that our software as well as any agents we create, can interface with the various models and systems that power LiveLift, allowing our system to fully harness the power of AI and programmatically design, build, launch, optimize and report on a campaign. This includes considering different scenarios and making the best possible projections and recommendations more quickly and at lower cost. Second, we are refining the underlying models that power LiveLift. These models become more robust as we train them on the data generated by running these early LiveLift campaigns as we receive additional data from existing publishers and as we expand the publisher network, gaining access to new sources of data. Widening the availability of LiveLift requires continued model training through repeated experiments and those take time. We are building a novel capability in this industry, and that necessitates a disciplined phased approach to scaling. Third, we are working on what I would broadly call AI enablement. That means documenting processes to create additional context for AI, defining standard operating procedures and simplifying our product catalog to reduce complexity. Creating this scaffolding takes time. But once we have a simpler set of products with the appropriate context, more reliable agentic AI flows become possible.?We believe that the progress we are making along all these fronts will ultimately allow us to more meaningfully inflect the level of CPG offer supply. Switching to the demand side of the equation. We continue to see strong results this quarter with healthy redeemer growth driven by organic growth at our existing publishers and the 2025 launch of DoorDash. One of our top priorities has been diversifying our publisher base, and we have begun doing that with the recent additions of Uber and Giant Eagle, both of which entered into multiyear exclusive partnerships with Ibotta. Adding Uber to the IPN allows us to intercept consumers in high-intent commerce moments and solidifies our leadership position in the fast-growing and important e-commerce delivery space. Our partnership with Giant Eagle further validates the strength of our model and enhances our presence in the traditional grocery channel. As one of the nation's largest multi-format food and pharmacy retailers and a recognized industry thought leader, Giant Eagle chose to transition to Ibotta in order to access a more robust and relevant offer gallery that moves the needle for their customers. We're pleased with the terms and the economic profile of both of these new partnerships. These partnerships demonstrate the extensive work of our business development and technology teams behind the scenes to enable these milestones. I'll now turn the floor over to our Chief Financial Officer, Matthew Puckett, to walk through our financial results and guidance in more detail. Matthew Puckett: Thank you, Bryan, and good afternoon, everyone. Right off the top, I'll repeat Bryan's comments. We're pleased to have delivered another quarter that was ahead of our initial outlook, further validating that we are very much on the right track. With that, let me jump into the Q1 results. We delivered revenue and adjusted EBITDA that were respectively, 3% and 25% above the midpoint of the guidance range that we provided on our fourth quarter earnings call. Now to unpack our top line results for the quarter. Revenue was $82.5 million, a decline of 2% versus last year. Within that, redemption revenue was $73 million, down approximately $400,000 or 1% year-over-year. Both redemption revenue and ad and other revenue trends improved on a year-over-year basis as compared to the fourth quarter. We continue to be pleased with the results our sales organization is driving and how both our core product offerings and LiveLift are resonating with our clients.?As Bryan noted, the LiveLift re-up rate remains healthy, underscoring that clients are realizing the measurable benefits that these next-generation capabilities deliver. Third-party publisher redemption revenue was $54 million, up 12% versus last year and accelerating sequentially versus the prior quarter's increase of 8%. Direct-to-consumer redemption revenue was $19 million, down 25% year-over-year and similar to Q4's result, where, as anticipated, we've continued to see redemption activity shift to our third-party publishers. Ad and other revenues, which represented 11% of our revenue in the quarter, were $9.5 million, down 15% versus last year due primarily to continued pressure on ad revenue as a result of lower direct-to-consumer redeemers.?This reduction was partially offset by growth in data revenue. Turning now to the key performance metrics supporting redemption revenue. Total redeemers were $19.7 million in the quarter, up 15% year-over-year. We saw another quarter of significant growth in third-party redeemers across the IPN, including strong growth with our largest publisher partner, highlighting the continued health of the demand side of our network. In addition to organic growth with existing publishers, the quarter also benefited from the launch of DoorDash in the second quarter of 2025. Redemptions per redeemer were 4.5, down 6% versus last year, a meaningful improvement in trend versus the second half of last year when redemptions per redeemer were down 22%, but where the decline continues to be driven by both the quantity and quality of offers available to each redeemer as well as the growth in third-party redeemers, which have a lower redemption frequency as compared to our direct-to-consumer redeemers. Redemption revenue per redemption was $0.83, which was flat versus Q4 and down 7% versus last year, driven primarily by the mix of redemption activity. Summing it all up, total redemptions were $88 million, up 6% versus last year, driven by 15% redemption growth on our third-party publishers. This represents a more measurable return to year-over-year growth in redemptions for the first time since the first quarter of 2025 after being flattish in the fourth quarter. Now switching to the cost side of our business. As anticipated, non-GAAP cost of revenue was up $2 million versus a year ago, largely driven by an increase in technology-related costs, along with a more modest increase in publisher costs. This resulted in a Q1 non-GAAP gross margin of 78%, down approximately 300 basis points versus last year. As we discussed last quarter, much of the increase in technology-related costs is a function of increased investment in product development, as well as a higher allocation of certain costs from R&D expense to cost of revenue. Before I review non-GAAP operating expenses, let me point out that we've made a change in how non-GAAP operating expenses are defined and shown on Page 12 of the presentation that accompanies our earnings materials. You'll notice we are now including depreciation and amortization in non-GAAP operating expenses. Now turning back to the results. Non-GAAP operating expenses were up 5% versus last year and were 71% of revenue, an increase of approximately 470 basis points year-over-year. Within that, non-GAAP sales and marketing expenses were up 17%, driven by higher sales labor, the cost of third-party Lift studies and B2B marketing expenses. Non-GAAP Research & Development expenses decreased by 21%, primarily a result of higher capitalization of software development costs and a higher allocation of labor expense to cost of revenue. This is due to more of our investment in R&D being directly focused on product development. Lastly, non-GAAP General & Administrative expenses increased by 5%, while depreciation and amortization increased by approximately $600,000 or 60%. Similar to the last couple of quarters, while overall non-GAAP operating expenses grew modestly year-over-year, our investments in areas related to our transformation, inclusive of both the P&L and what is being capitalized to the balance sheet increased at a faster pace. This increase was approximately 12% and again was highlighted by higher labor costs in the sales organization and other technology-related costs. We delivered Q1 adjusted EBITDA of $8.7 million, representing an adjusted EBITDA margin of 11%, non-GAAP net income of $6 million and non-GAAP diluted net income per share of $0.24. Our non-GAAP net income excludes $16.7 million in stock-based compensation, and it includes a $0.3 million adjustment for income taxes. We ended the quarter with $164.6 million of cash and cash equivalents. And in Q1, we spent approximately $45 million repurchasing approximately 1.9 million shares of our stock at an average price of $22.92. We had 25.6 million fully diluted shares outstanding as of 3/31. And as of the end of the quarter, we had $90.3 million remaining under our current share repurchase authorization, which, as previously disclosed, was increased by $100 million upon authorization from the Board of Directors on March 11. And finally, we generated $23.3 million in free cash flow, an increase of 56% versus last year, largely driven by higher cash flow from operations as a result of decreases in working capital compared to the first quarter of 2025. Now shifting to Q2 guidance. We currently expect revenue in the range of $82 million to $86 million, representing a 2% year-over-year decline at the midpoint and at the same time, a 2% sequential increase versus Q1 at the midpoint. And we expect Q2 adjusted EBITDA in the range of $9 million to $12 million, representing about a 12.5% adjusted EBITDA margin at the midpoint. With that, let me provide a little more color on our outlook. First off, as both Bryan and I have mentioned, we continue to be pleased with the consistency of our execution with our clients and publisher partners, both with core product offerings and with LiveLift pilots. This has been the driver of improving revenue trends during the last couple of quarters, and we expect that to continue. One other point to make on Q2 revenue. At the midpoint of our revenue outlook, we would expect redemption revenue to return to growth for the first time since Q1 of 2025. Beyond our specific Q2 revenue guidance, we are confirming our expectation of a return to year-over-year growth in total revenue in Q3 in the low single-digit range. It's probably on your mind, so let me highlight the assumptions implied in our outlook specific to the 2 new publishers we are adding to the network. We've assumed an immaterial impact on Q2 during the testing and piloting phase and expect a small benefit to revenue in the second half of the year as we ramp up with these partners. I'll note that offer supply will be the governor on the near-term revenue impact of this expansion on the demand side of our network. As it relates to costs, our expectations are broadly unchanged from last quarter. We continue to expect to see a modest sequential increase in quarterly non-GAAP cost of revenue and operating expenses throughout the balance of the year. That continues to be a function of investing in areas that are critical to our transformation. Specifically within cost of revenue, as we said last quarter, we expect to have substantially less growth in publisher-related costs as compared to what we saw in 2025. And we do expect similar to the first quarter that the biggest factor driving an increase in cost of revenue will be higher technology costs, which is partially a function of where these costs are allocated in the P&L relative to last year. Lastly, with a healthy balance sheet and positive free cash flow, we'll continue to prioritize investing in organic growth and the strategic priorities of the business while also returning cash to shareholders. We remain excited and energized by the opportunities ahead and look forward to returning to year-over-year revenue growth in the second half of this year. With that, operator, let's please open up the line for Q&A. Operator: [Operator Instructions]. Our first question will come from Ken Gawrelski with Wells Fargo. Kenneth Gawrelski: Can you hear me okay? Bryan Leach: Yes. Kenneth Gawrelski: Could you maybe, Bryan, could you talk about how you, as move more to LiveLift over time and you get the sales process really humming, when you look into '27 and '28, how do you think the financial picture may change? Like what does it mean for the margin structure of the business relative to kind of post IPO? What fundamental differences do you see there? Maybe the first one. Bryan Leach: Sure. And then go ahead, please. I'll follow up. Kenneth Gawrelski: The second one is this is like if, as you think about the progress you can make in the back half of this year and into early next year, how much of it is like a change in the calendar year provides another opportunity to kind of another bite at the apple with some of those big CPG brands versus just getting your go-to-market strategy and process working? Bryan Leach: Thanks, Ken. So, I'll take those in turn. So, the first one, I'll answer at a high level and then let Matt provide additional detail, and then I'll have him pass it back to me for the second question. So, for the first one, I would say, broadly speaking, we feel like we're in a good place with our expenses to be able to build the products we need to drive the increase in office supply over the next few years, you asked about '26, '27, '28. And so that should, in other words, we don't expect to have to continue to ramp expenses at the same rate that we're ramping revenue. And so that should be positive in terms of the margins and the contribution to adjusted EBITDA over the next 3 years. We have ongoing innovation that's baked into the R&D that's part of our current effort. I think more time will allow us to get in front of our customers with the Liveliest message. It is an evolution in the industry that is moving from annual planning and annual allocation and annual measurement to more ongoing measurement and optimization using rule-based or outcome-based systems. And that go-to-market takes some time to build the necessary trust and conviction and then have the cultural changes that need to happen on the client side. But I feel like the developments that I described in my remarks will put us in a position where there'll be, more a variety of different ways that people can buy on our network. And those ways will be much more sophisticated and allow us to meet the needs of our clients more often and allow us to earn the way into larger and larger budgets, which is what's really going to move the needle and drive revenue in this business. I'll let Matt add any additional thoughts on that before turning to your second question. Matthew Puckett: Yes, Ken, just a couple of things I would add. Without being precise, which obviously we're not going to do about regarding our financial algorithm, a couple of things I'll say. One is kind of more medium term and then longer term, which is really kind of reiterating Bryan's points. We've been talking for a couple of quarters now about the investments that we were making, right, in first in the sales organization, which is restructuring, reorganizing and really just leveling up the capabilities in the sales organization as well as the investments we've been making in our technology as it relates to the transformation of the business and the capabilities that we've been building. We're kind of nearing lapping most of those investments. We're not fully there. But over the course of this year, we will lap all of those investments. That's factored into everything we've said about what the forward picture looks like. Once we've done that, then as we sit here today with what we see that needs to get done, we don't expect to have to add. There's not another step change in the investment profile from here. So, as we see the top line stabilize and then we start to drive consistent, sustainable growth, we're going to see the opportunity to expand both gross margins and EBITDA margins over time. So hopefully, that helps answer. Bryan Leach: The second question, Ken, about the back half and the change in the calendar year. I would say that different clients have different fiscal years. Some of our clients reset in July, some of them reset in the fall, some of them reset on the calendar year. And while that is definitely a factor in situations where we have kind of gotten through the budget that was allocated to us in the previous cycle, we get a chance to kind of demonstrate the effectiveness of that, the level of performance earns us into a larger budget. That's true. However, I think it is more a function just of being able to get in front of clients with our core product, demonstrate the scale that we have that we are along the breadth of purchase in all these different places now, the addition of these new publishers that allows us even in between even intra-year to go back and make the case that this is where they should be spending more money at a time when they're aware that this is how they gain market shares by intelligently thinking about where they're pricing their products and how they're promoting their products. So I don't want to lean too much on that as sort of some major driver. We are always selling both in the annual planning process and then within that year. And then I would say also our whole goal here is to move the industry away from that mentality of annual planning into a mindset of 'I always want to buy this as long as these rules and constraints are being met. So I want every dollar of top and bottom line revenue and profit that I can get through this platform, and I'll spend until I'm no longer seeing that level of efficiency. And so that's ongoing. But I think it's safe to say that for now, we are still living in a world where we do participate in those annual re-up conversations. There are just thousands of brands happening all the time at different parts of the year. And Matt was going to add one more thing. Matthew Puckett: Yes, Ken, just one more thing to make sure we got to the essence of part of your question there on the kind of the margin profile. As we grow LiveLift over time as a bigger penetration of the business, that doesn't materially change the margin profile, whether it's the core product offering or LiveLift, you wouldn't see a really different outcome. It's really about the investments we've made to enable the growth that will flow through our business model. Operator: Our next question will come from Tim Mitchell with Raymond James. Unknown Analyst: So first, a couple. So first, if you can just kind of talk about some of the early progress with the Uber partnership and how that is tracking. And then within that commentary, you gave on some of the initiatives surrounding LiveLift in terms of what it's going to take to ramp that a little further. Just any thoughts on like, what inning you're in, any progress made on those initiatives so far? And then secondly, just on the macro, curious if you're seeing any impacts from energy prices, whether it be on CPG spend or on the health of the lower end consumer. Bryan Leach: Great. Thanks, Tim. So first, on the Uber partnership, pleased to have announced that a little while ago. That's, like all of our publishers, they don't just turn that on overnight to 100% of all of their customers across thousands of stores that they support. They do that in a stepwise function, and we are in, the early part of the process of that rollout. And we will then begin working with them on other aspects of that partnership to make sure that we're able to do the most sophisticated forms of measurement and personalization, et cetera, marketing, reactivation, activation, those best practices. I would say we're, but we are in a position where the technology to support this, has been built. And we're, like I said, in the early days in the process of introducing that to different customers at Uber. And we're excited about that. As you know, we have a strong presence in that area, and that's something where we hope that it will also have the same level of uptake and high redemption rates that we've seen in that category more broadly. Second question, or I guess the second part of your first question, was to do with the progress we've made on the ramp of LiveLift. I think we've made significant progress from the last time we had a conversation in late February. That is along all the different dimensions that I mentioned. AI itself is evolving very rapidly. And so, we are investing heavily in AI enablement to take advantage of the efficiencies that are available to us through using things like Claude Code, but also our ability to create this programmatic API layer. We're absolutely working on that around the clock, getting that to a place where we'll be able to automate more of these processes, which will benefit our entire business, not just LiveLift but also LiveRamp, but also all of our core offers, and benefit from having it be easier to design, set up, revise, and so forth from beginning to end a campaign. And then the models underlying, I think I mentioned that those get better with the more data, with the more refinement of the model, and the more publishers you add. The addition of Uber and Giant Eagle will help us refine those models. That itself represents progress. But we are also seeing that as we get a second and a third LiveLift campaign from some of these repeat customers. I mentioned 60% of LiveLift is from a repeat customer. They're able to test out different strategies, and we're able to learn something about the way the consumer responds to different structured promotions based on their goals. That then helps project the next campaign that much better. So those clients that are participating or gaining an advantage, they are all aware that doing that in this environment is important, which is a good segue to your last question about the macro. The news you're reading is the same thing we're hearing from our clients. The American consumer is looking for value. We're excited that we're an integral part of that. Whether that is driven by the war in Iran, gas prices, tariffs, or some other exogenous factor, there's a lot of focus on this topic. Even earlier today, the CEO of Kraft Heinz put out a message, Steve Cahillane, saying the new mantra is value. Consumers are literally running out of money. Those are the kinds of things that cause people to take a closer look at the product that we sell. And I think that we're making the case that there are smarter and less smart ways to do that to deliver that value, and we think the Ibotta Performance Network is a really good way to do that in a way that's also capitalizing on the latest technologies that are available. So I think that will continue to be true. But I also want to stress that this is nondiscretionary spending. So no matter what the macro environment is, people are looking for value in the things they have to buy week in, week out. If you look at the press release we put out today from Giant Eagle, they commented on why they switched to Ibotta. They switched to Ibotta because they wanted to see an 8x increase in value delivery for their customers. And they're hearing consistently that that is what makes the difference in why people shop at Giant Eagle versus somewhere else. And so both on the CPG side, for example, Kraft, or on the publisher side, for example, Giant Eagle, being in this field right now is particularly important. Operator: Our next question will come from Stefanos Crist with Needham & Company. Unknown Analyst: Can you hear me? Bryan Leach: Yes, we got you. Unknown Analyst: I just wanted to ask about the third quarter revenue inflecting positively. What are the assumptions in there? Are you baking in a certain ramp in LiveLift? Are you including Uber and Giant Eagle? I would just love to go through the assumptions there and where there could be upside. Bryan Leach: Great. I'm going to hand that one to Matt. Matthew Puckett: Yes. So it's really kind of what we're doing today, continuing, right? We've seen sequentially improving results in our business, particularly driven by redemption revenue, and that's really the driver. We expect to see that get better in Q2 versus Q1, and the same to be true for Q3 versus Q2, and that's all going to translate into growth. There's no step change assumed in terms of LiveLift adoption or us further opening the aperture to that. It's kind of where we are today, the expectation. We've assumed a very modest impact from the 2 new publishers in the back half of the year. That'd be a little bit less in Q3 and a little bit more in Q4. That's probably the way to think about that. But it's really an ongoing kind of performance that we've seen to date, driven by consistent execution and the fact that our products, both core products and obviously, LiveLift as well, are resonating with our clients. Unknown Analyst: Got it. If I could squeeze one more. Just on the monetization of Uber and Giant Eagle. I assume Uber is similar to DoorDash, but how about Giant Eagle? Is that similar to Dollar General, or are there any differences between these 2 partnerships? Bryan Leach: Yes. I think without going into the specifics of the economics of individual partnerships, broadly speaking, those are similar to how we've approached these in the past, and we're happy with the economics of those partnerships. And I think, as we get greater scale and more momentum, greater access to supply, we continue to see publishers that much more interested and motivated to deliver the best possible value for their customers, and that we think will continue to contribute to favorable economics going forward. Operator: Our next question will come from Nitin Bansal with Bank of America. Nitin Bansal: Bryan, can you provide some more details on your progress with the go-to-market transformation, specifically, like how the new sales motion impacted your 1Q results? And what additional changes are you making to the sales team that could impact your performance for the rest of the year? Bryan Leach: Thanks, Nitin. Absolutely. There are a number of different things that have been going on since the arrival of Chris Reidy on our team. And that started with taking a look at the team itself and making sure we have the right people in the right roles to help ourselves with the kind of sales that we're going to need to do, which is much more of a kind of consultative sale where we have to be fluent in the businesses of our clients. We reorganized the sales organization to be no longer geographic but focused on the actual industry-based approach. So, we have experts in beverages, for example, or in household products or what you have. We separated into enterprise clients versus emerging clients with each having its own industry subvertical. We focused on a variety of support structures that weren't in place that needed to be such as bringing in an SVP of Enterprise Sales, SVP of Business Marketing to help us with sort of the B2B marketing expertise, beef up the sales finance, sales operations, training and enablement of our sellers. And I think that was very important. We filled all those senior leadership roles by early October of 2025, as I've said on previous calls. And we brought in the right people. We have brought in excellent talent, and that has helped us in a lot of different fronts. So, we mentioned on the last call, the thought leadership, the ability to be proactive, get in front of our clients. I think the example I gave was the SNAP program. We had a kind of a playbook that was designed. We reached out that led to incremental dollars being committed to Ibotta that weren't in their previous annual plan that were kind of opportunistic, which is really valuable. We've talked a little bit about other things that we've done like multi-threading is a term we've used, meaning teaching our sellers to go in at multiple different levels of an organization at the same time to speak to different needs and pain points of the people in those organizations using the language of their business. The simple fact of being on the ground more often, being in the room more often, the hustle factor, continuity, so not handing people over between rep to rep. That is really about trust. Most of the structural changes were made last year, but we're continuing to build that trust. And as we're doing that, we're getting invited into more and more important strategic conversations. We're getting clients that are wanting to say, 'let's come out and spend a day with you', and we're going to bring significant senior members of our team to discuss where you think this industry is heading and how it's impacted by things like technology, AI, et cetera. So I think we're being embraced more as a thought leader and invited more into upstream strategic planning conversations. I think the introduction of Circana and ABCS has allowed our sales team to provide this third-party independent analysis. That's given them another important platform. We've done a better job with event marketing. So Chris Reidy has been on stage all over the place. He's on the stage at ADWEEK in places like this is possible, NACDS, lots of different conferences where we're getting in front of all different parts of the CPG organization. So I think it's not one thing, Nitin. It's a variety of different upgrades to how our team sells. And I think that, of course, having something like LiveLift to discuss, having the ability to focus on incremental sales and really lead the conversation around rigorous measurement, that's given them a lot to talk about, and I'm really proud of the work they're doing. Operator: Our next question will come from Tim Huang with Citizens JMP. Unknown Analyst: I wanted to follow up about the pricing changes that were talked about in last quarter's call with regard to pricing being more linked to AOV. Just like could you give any color on how that's been received or just like further progress during the quarter on pricing and what's been flowing through? Bryan Leach: Thanks, Tim. Sure. You're right. And your memory is spot on. It's a question of moving from a flat fee that is applied based on the price band that a product falls within. So, the old system is if your product was $3 to $4, you paid this cost per unit sold or per redemption rather. If your product was $4 to $5, $5 to $6, $10-plus, you might pay a different cost per redemption under the old model. And of course, the problem with that is that as you get to either side of that range, you get kind of discontinuities. So, you get the ratio that your fee represents as a percentage of the overall product price, and that's the kind of total economics available to the brand varies. And that can create inadvertent inefficiencies. So, it might make it unnecessarily expensive, for example, to use Ibotta with lower-cost products where our fee per redemption constitutes a high enough percentage that it's hard to deliver a cost per incremental dollar that's attractive, meaning lower than the contribution margin of that product, consistent with a goal of profitability. So, the solve for that is to shift toward a system where it's continuous. So, it is a fixed percentage of the price itself. And that way, whether you're at $1.01 or $1.99, you're equally able to take advantage of that structure. What we've been doing is introducing this transition in our pricing as part of a broader reset of some terms that we have in our preferred partnerships and our agreements. That was very well received. I think people view that as simplifying the system, dispensing with discrete fees for things like setup costs and things, makes it simpler. Everything is wrapped into this one percentage of the price fee. As I said, it's encouraging clients to promote lower-priced items. We're still very much in the middle of that transition because we didn't want to just mandate that. Everybody turn on a dime. You have to now institute this new pricing. But as we come back through these conversations on our annual preferred partnerships, for example, that, along with other conversations around things like payment terms are a natural part of our conversation. And that's been, broadly speaking, I think, going well. We're seeing success in that transition, although we're still very much in the midst of it. And Matt is going to add one more thing. Matthew Puckett: Yes. I would just say, and you'll see this, obviously, in our results, our redemption fee, those numbers are going down a little bit, right, in terms of kind of the way to think about price. We pay attention to that. We understand it, but it honestly doesn't scare us. In order to maximize revenue, in many cases, it makes sense to lower fees. It allows our clients to hit profitability objectives. And think about our business model, our financial model as it sits here today, incremental revenue flows to the bottom line at a really high rate. So it's actually not a bad thing. We do understand it and pay attention to it. But seeing revenue coming down as a result of fees but then offset by higher volume is actually a good answer for us in most cases. Bryan Leach: Yes. I think broadly speaking, Tim, it's fair to say we've been, we've had a greater level of analytical rigor. And I think looking at that has caused us to, is one of the reasons why we arrived at this transition in our pricing. And I think we did a lot of, had a lot of conversations with our clients before we settled on this. And so fortunately, I think we had properly prepared for the transition, and I'm happy with how it's going. Operator: [Operator Instructions] This now concludes the Q&A section. I would now like to turn the call back to management for closing remarks. Bryan Leach: Thanks very much, everyone, for your time today. We are pleased with the results that we reported and the momentum in our business, and we look forward to speaking with you again soon. Operator: Thank you for joining today's session. This call has concluded. You may now disconnect.
Operator: Welcome to the Lee Enterprises, Incorporated 2026 Second Quarter Webcast and Conference Call. The call is being recorded and will be available for replay at lee.net. At the close of the planned remarks, there will be an opportunity for questions. Participants accessing this call via webcast may submit written questions through the platform and they will be answered during the call as time permits. Any remaining questions will be followed up on after the call. A link to the live webcast can be found at investors.lee.net. I will now turn the call over to your host, Jared Marks. Jared Marks: Thank you, and good morning, everyone. We appreciate you joining us today. With me on this morning's call are Nathan Bekke, president and chief executive officer; Josh Rinehults, vice president, chief financial officer, and treasurer; Joe Battistoni, chief revenue officer; and David Hoffman, Chairman of our Board of Directors. Earlier today, we issued a news release announcing preliminary results for our 2026 second quarter. The release and accompanying presentation are available at investors.lee.net. As a reminder, this morning's discussion will include forward-looking statements based on current expectations. These statements are subject to certain risks, trends, and uncertainties that could cause actual results to differ. Such factors are described in this morning's news release and in our SEC filings. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are included in the tables accompanying the release. With that, I will turn the call over to our Chairman, David Hoffman. David Hoffman: Thank you, Jared, and good morning, and thank you for joining us. As I open this call, I would like to say that it is a privilege to step into this role at a company with more than a century of service to its communities, its shareholders, and the enduring importance of local journalism. Lee Enterprises, Incorporated's legacy is strong, but as important is the decisive transformation that is now underway at our company. I would like to spend a few moments to frame the vision for Lee Enterprises, Incorporated's next chapter. We are a different company than we were even a year ago—more focused, more accountable, and more closely connected to the communities we serve. We are thinking more expansively about our role in local media and our path to long-term growth. That has required meaningful change—deliberate, and at times difficult—but meaningful to position Lee Enterprises, Incorporated for a stronger and more sustainable future. Delivering on that vision requires strong leadership and clear alignment at the top. I am very happy to share that, following a comprehensive nationwide search, the board and I concluded that the right leadership for Lee Enterprises, Incorporated’s future was already in place. Nathan and Josh have demonstrated strong execution, deep industry knowledge, and a clear vision of where the company is headed. Just as importantly, they built alignment across the organization and are already translating that into action across the business. Coming back to the vision for Lee Enterprises, Incorporated’s next chapter, let me start with one of our most important priorities: reconnecting with our communities. Over the past several months, I have been on the road with our leadership team conducting town hall meetings across our markets. These were not symbolic visits; they were working sessions. We listened carefully to readers, advertisers, and community stakeholders and leaders. What we heard were gaps in local news coverage—areas where communities felt underserved. We have already begun to address those gaps by reinvesting in local journalism, including adding reporters in key markets to fill those holes. That work, we believe, is foundational to who we are, and it is where our turnaround begins. At the same time, we have taken a disciplined approach to our cost structure. We are committed to being strong stewards of capital, and that starts at the top of the organization. Just recently, the board has shifted its compensation structure to be 100% equity-based, aligning more directly with long-term shareholder value. A similar structure was put in place for our top 120 executives. We have also reduced corporate overhead and simplified our operating model, ensuring that more resources are directed to the front lines of the business, prioritizing our content and our customers. We are also producing more local content that is important to our readers. We recently launched Community Center, which is a free collection of publicly available content covering everything from municipal news releases to local real estate listings. Another area where we see real opportunity for differentiation is local sports. Through our partnership with Hudl, we are expanding and enhancing our coverage of high school and local sports. This is deeply relevant, highly engaging content for our communities. It is just yet another example of how we are investing where it matters most to our audience. And finally, I will occasionally contribute a column sharing my perspective on opportunities to build stronger communities. Looking further ahead, we are actively developing a disciplined acquisition strategy. We believe there are opportunities to expand Lee Enterprises, Incorporated’s footprint in ways that make both strategic and financial sense. Our focus will be on markets and assets that strengthen our commitment to local journalism while enhancing our overall scale and efficiency. We will be thoughtful and selective but insistent in our efforts to grow the business. Underlying all this is a clear financial priority: conserving cash and strengthening our balance sheet. We are managing liquidity carefully, improving operational efficiency daily, and ensuring we have the financial flexibility to execute our strategy. That provides stability today and optionality for the future. I am very confident in the direction we are headed—grounded in local journalism, disciplined in operations, and ambitious about our future. With that, I will pass it over to Nathan, our chief executive officer. Nathan Bekke: Good morning, everyone, and thank you for joining the call today. I would like to start by thanking David for his investment in Lee Enterprises, Incorporated and, more importantly, for his commitment to local journalism and the communities we serve. As David mentioned, we are entering this next phase of the business from a position of strength and optimism. Our strategy is clear, execution is gaining momentum, and our results are beginning to reflect the progress we have made. We are a leading provider of high-quality local news, information, and advertising with 114 daily and weekly publications. Our strength is rooted in trusted local journalism, delivered through a digital-first model that continues to deepen audience engagement and provide value to advertisers. Over the past 12 months, digital-only subscription revenue grew 7%, further strengthening our mix of sustainable and recurring revenue. At the same time, we have maintained disciplined cost management across the organization, particularly in legacy costs and corporate overhead. The combination of those efforts has driven adjusted EBITDA to $57 million over the last 12 months, reflecting both improved efficiency and structural improvement in the business. Second quarter adjusted EBITDA grew 95% year over year. That level of growth reflects extremely strong execution and the accelerating progress of our digital transformation. We also recognized $4 million in business interruption insurance proceeds related to last year’s cyber event. The magnitude of these reimbursements underscores the significant impact the cyber event had on prior year results and its continued effect on our operations, while also reflecting the diligent efforts of our team to secure these recoveries. While those proceeds contributed to the quarter, it is important to note that even excluding them, second quarter adjusted EBITDA grew 45% year over year, reflecting underlying operational strength. The strong second quarter growth builds off our solid first quarter and now, year to date through March, we have delivered a 78% increase in adjusted EBITDA—an improvement of $12 million year over year—driven by diligent cost management while continuing to advance our digital strategy. Absent business interruption insurance proceeds, our adjusted EBITDA growth was 40%, or $6 million year over year, in the first half. These results highlight our ability to expand profitability while navigating industry change, particularly demonstrated over the last four quarters of adjusted EBITDA growth on a comparable basis. Our standout performance in the second quarter was highlighted by adjusted EBITDA nearly doubling year over year to $15 million, with margin expanding 670 basis points. This improvement was driven primarily by decisive cost actions. Cash costs declined 15%, or $19 million, with meaningful reductions across SG&A and print-related expenses. From a revenue perspective, digital revenue now represents 56% of total company revenue, up 270 basis points year over year, and now accounts for 74% of total advertising revenue, underscoring the growing importance of our digital offerings. On the digital subscription side, we ended the quarter with 591 thousand digital-only subscribers and $22 million in revenue. Year-over-year comparisons were impacted by a couple of factors tied to last year’s cyber event. Units continue to be challenged compared to the prior year, particularly due to lost starts during the impact period from last year’s cyber event in addition to other processing limitations. All things considered, lapping the cyber event had a negative impact on our second quarter revenue. As we move beyond those impacts, we view this quarter as a clean baseline moving forward. We remain focused on building and growing high-quality recurring subscription revenue. In digital advertising revenue, we saw sequential improvement for the second consecutive quarter. The second quarter saw a 2 percentage point improvement in same-store revenue trends compared to the prior quarter. While revenue declined modestly year over year, trends are stabilizing. Importantly, we continue to prioritize profitability over volume, which included the intentional exit of certain lower-margin advertisers and products that impacted top-line revenue but had minimal impact to adjusted EBITDA. Our team is focused on profitable growth, which Joe will expand on momentarily. Before turning it over to Joe, I will briefly touch on the balance sheet and our improved capital structure. Following the close of the strategic investment mid-second quarter, our cash balance surged to $53 million as of March. This strong baseline of cash provides us the opportunity to make targeted investments in high-ROI areas that will drive improved content and subscriber engagement, acquisition, and monetization. Additionally, interest expense decreased $2.4 million year over year as a direct result of the interest rate reduction from 9% to 5%, with further benefits expected in the coming quarters. With that, I will hand it over to Joe to add some additional context on our subscription and advertising revenue performance. Joe Battistoni: Thanks, Nathan, and glad to join the call this morning. From a revenue strategy standpoint, I will start on the subscription side. Our digital growth strategy is centered on building the audience funnel with a focus on higher-intent, more engaged users. This reflects a move away from relying on algorithm-driven traffic toward focusing on our own platforms, with repeatable channels that generate stronger, more consistent engagement. We are driving higher conversion and retention by applying data-driven insights and targeted product enhancements that grow customer lifetime value. At the same time, we are scaling efficiently using AI and streamlined workflows to reduce acquisition costs while accelerating growth in our digital subscription base. Today, we reach millions of users across our markets. Our opportunity is to deepen those relationships, converting and retaining more of that audience as long-term subscribers. As Nathan mentioned earlier, this quarter was hindered a bit by some of the fallout of the cyber incident last year. We know there is growth potential over the long term, and our primary focus is the consumer—serving our local communities with high-quality local news with the best experience in the ways that matter most to them. Our advantage is being intensely local. There is a lot in store for Lee Enterprises, Incorporated on the subscription side of the house. We are executing several exciting initiatives in the second half of fiscal year 2026, all focused on expanding content offerings, driving new users, and improving the consumer experience. On the advertising side, the landscape continues to evolve, and our approach is grounded in profitability and long-term value. We are seeing early signs of stabilization with sequential improvement in revenue trends. At the same time, we are not chasing commoditized ad dollars. We are being disciplined, prioritizing higher-margin, more sustainable revenue, and reviewing and exiting lower-quality opportunities. Through Amplified Digital Agency, we deliver full-funnel, AI-enabled marketing services that help advertisers increase customer lifetime value and grow their business. This year, we are sharply focused on delivering a more complete, integrated solution for advertisers, especially across multiple products. Our full product suite remains a key differentiator, enabling us to meet a broader range of advertiser needs in one place. In last quarter’s call, Nathan introduced our partnership with Hudl, a leader in sports technology, video analysis, and data. David also mentioned it earlier in today’s call. I would like to echo their excitement regarding this partnership, which represents one of the largest collaborations in local sports media and aligns with our mission to serve our communities, with high school sports coverage at the core. Our partnership with Hudl will enable us to serve our communities better by adding video and free access to remarkable local sports content. Hudl also strengthens our ability to connect advertisers with a highly engaged, local audience at scale. By aligning with a platform that sits at the center of community sports, we give our clients direct access to passionate fans, families, and athletes, creating more relevant, impactful advertising opportunities. Also, briefly on initiatives like America’s February, Community Center, and Vidmax, these are fantastic examples that further support how we are expanding higher-value, differentiated advertising opportunities. We are leveraging our own audience and our local market strength to deliver premium, brand-safe environments that drive stronger engagement for our advertisers. They also enable more integrated, multi-platform campaigns, increasing client retention and deepening relationships through multichannel solutions. Collectively, these offerings support our shift toward higher-margin, recurring digital revenue built on unique content and first-party data. Ultimately, these efforts support our broader goal to build a more predictable, higher-margin digital advertising business. With that, I will pass it back to Nathan. Nathan Bekke: Thanks, Joe. Stepping back, it is worth highlighting the strength and stability of our digital growth, especially considering the challenging landscape within the industry. Over the past several years, we have delivered consistent expansion in digital revenue supported by both subscription and agency growth. Over the last three years, our digital subscription revenue has grown 25% annually, while our digital agency business has shown tremendous resiliency in a tough operating climate, growing 5% annually. Together, this has yielded a strong foundation of $290 million in total digital revenue over the last 12 months, representing 4% annualized growth over the past three years. While the broader industry remains under pressure, our focus on local markets, owned audiences, and recurring revenue streams has positioned us to perform competitively. Our focus is not just on top-line growth, but on improving the quality and margin of our revenue. As we continue to execute, we believe this differentiated approach will drive sustainable performance over the long term. This further illustrates the longstanding progress we have made in building a more sustainable and higher quality digital revenue base. Over the past six years, we have gone from print-dependent to digital-dominant. Digital revenue has grown from a minority of the business—21% back in 2020—to 56% as of our second quarter. A clear and measurable shift. Digital is no longer a growth initiative, but the core engine of our business, and it will continue to drive both revenue expansion and margin improvement. Over time, this transition positions us to operate as a predominantly digital business with significantly reduced reliance on print. Our focus remains on strengthening our digital products, enhancing audience engagement, and building scalable capabilities that position the company for sustained performance in the digital media landscape. We are focused on scaling these core drivers while continuing to optimize price, product mix, and customer lifetime value. As we execute, digital will continue to expand as the primary engine of our growth and profitability. And with that, I will hand it over to Josh to provide some additional financial performance details. Josh Rinehults: Thanks, Nathan. As Nathan said, we have made significant progress in our digital transformation. We are not only transforming our business, we are also strengthening our financial foundation. From a long-term execution standpoint, our digital business continues to scale toward a key milestone where digital gross margins fully cover our SG&A costs. We have made meaningful progress since the start of our digital transformation, and our current trajectory gives us a clear, achievable path forward. Year to date through March, core digital revenue has grown at a 9% annual rate from fiscal 2021 to fiscal 2026, with digital gross margins expanding at a similar pace. This continued shift from print to higher-margin digital revenue is strengthening the underlying economics of our business. At our current pace, we expect digital revenue and margins to fully support our entire business within three years. Our confidence in reaching that milestone continues to build as we realize the benefits of our transformational initiatives and maintain disciplined execution across both revenue growth and cost management. Turning to costs, we continue to pair strong cost discipline with targeted investments that support long-term growth. Our focus on reducing legacy costs and simplifying operations is strengthening our financial profile while preserving the quality of our journalism. By enhancing operational rigor this year, without compromising quality, we have improved our long-term positioning and are poised to drive sustainable shareholder value over the long term. In 2026, cash costs declined $37 million, or 14%, compared to the prior year. The majority of that reduction came from SG&A costs, which decreased approximately $23 million, largely driven by lower corporate overhead. Legacy print costs declined by $13 million year over year, primarily reflecting efficiencies aligned with our evolving revenue mix and ongoing print optimization efforts. Through 2026, we have remained disciplined from a cost perspective. We continue to manage our print business for efficiency, scale our digital operations, and reduce SG&A costs. Lastly, before I pass it back to Nathan, I would like to highlight the significant progress we have made on the balance sheet. Since refinancing in March 2020, we have reduced debt by $121 million. Following our recent strategic investment and resulting lower interest rate, we expect to generate approximately $18 million in annual interest savings, or up to $90 million over five years. We are also actively monetizing noncore assets to further accelerate deleveraging, with assets estimated at $20 million in value currently identified. With a stronger balance sheet and reduced interest costs, we are in a significantly improved financial position compared to just a quarter ago. This enables us to invest in the business, reduce debt, and drive long-term shareholder value. I will now turn the call back to Nathan for final remarks. Nathan Bekke: Thanks, Josh. We are reaffirming our full-year outlook of adjusted EBITDA growth in the mid-single digits, and based on our first-half performance, we are confident that we will deliver. Our disciplined approach to cost and focus on profitability were key drivers of our strong first-half results, and we will maintain our operational rigor going forward. Our strategy is clear: accelerate digital growth, strengthen the balance sheet, and continue delivering sustainable value for shareholders. We have moved beyond stabilization and are now executing with real momentum. As a result, Lee Enterprises, Incorporated is better positioned than ever to accelerate into its next phase of sustained growth. We will now open the call for questions. Operator: Thank you. At this time, we will be conducting a question-and-answer session. As a reminder, if you are accessing this call by webcast, you may submit typed questions on your screen. Those questions will be answered during the call as time permits. One moment while we poll for questions. Jared Marks: We will now take our first question from the web. Were there any debt principal payments made in the second quarter? Josh Rinehults: Great. Thank you for the question. In the second quarter, we did not make any debt payments. However, we did have two real estate sales of noncore assets, and we made a $1 million debt payment just into the third quarter. But that would not be reflected in our second quarter debt. Jared Marks: Alright. We have no more questions from our web participants. I will now turn the call back to Nathan for closing remarks. Nathan Bekke: Great. Thank you. Midway through fiscal 2026, I am pleased with our results. As an organization, we are fundamentally stronger than ever before, and our first-half results meaningfully demonstrated our ability to execute across the board with improved operating efficiency. With a clear strategy, strong foundation, and significant momentum, we are well positioned for our next stage of evolution as a digital media company. I want to thank our employees for their dedication and our shareholders for their continued support. Thank you again for joining today’s call. Operator: Thank you, ladies and gentlemen. That does conclude our call for today. Thank you all for joining, and you may now disconnect. Have a great day.
Operator: My name is Karen, and I will be your conference operator today. At this time, I would like to welcome everyone to the US Foods Holding Corp. Q1 2026 Earnings Call. All lines have been placed on mute to prevent background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star once again. Thank you. I would now like to turn the call over to Michael D. Neese, Senior Vice President of Investor Relations. Please go ahead. Michael D. Neese: Good morning, everyone, and welcome to the US Foods Holding Corp. first quarter fiscal 2026 earnings call. On today’s call, we have David E. Flitman, our CEO, and Dirk J. Locascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up. Our earnings release issued earlier this morning and today’s presentation can be found on the Investor Relations page of our website at ir.usgoods.com. During today’s call, unless otherwise stated, we are comparing our first quarter fiscal year 2026 results to the same period in fiscal year 2025. In addition to historical information, certain statements made during today’s call are considered forward-looking statements. Please review the risk factors in our Form 10-Ks for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in forward-looking statements. Lastly, during today’s call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules to our earnings press release, as well as in the presentation slides posted on our website. We are not providing reconciliations to forward-looking non-GAAP financial measures. Thank you, and I will turn the call over to David E. Flitman. David E. Flitman: Thanks, Michael D. Neese. Good morning, everyone, and thank you for joining us. Before we begin, I want to thank our dedicated team of 30,000 associates for their unwavering commitment to serving our customers, which was clearly evident in the first quarter. Through their hard work, despite significant weather-related challenges and increased macro uncertainty related to the war in the Middle East, we again accelerated our case growth and made further progress on our self-help initiatives. Perhaps more than any other quarter during my tenure, this performance reflects our ability to win in any environment. I will move now to highlights from the first quarter followed by an overview of our performance and the progress we have made in executing our strategy, all of which position us for further growth in 2026. Dirk J. Locascio will then review our first quarter financial results in more detail and provide an update on our 2026 guidance. Starting on Slide 3, during the first quarter we delivered strong results amid headwinds from severe weather, the conflict in the Middle East, and rising fuel costs, with consumer sentiment declining to an all-time low in March, all of which impacted our industry. Importantly, we accelerated year-over-year and sequential organic independent restaurant case growth by more than 300 basis points and 70 basis points, respectively. We posted 15% adjusted diluted EPS growth despite a deteriorating macro environment that persisted well beyond early February, when we provided our first quarter guidance. We delivered strong case growth with our target customer types. The first quarter marks our 20th consecutive quarter of market share gains with independent restaurants, and 22nd consecutive quarter with health care. We achieved our strongest organic independent case growth in more than two years at 4.4%. This achievement reflects the continued momentum we are building by winning new business and bringing increased value to our customers. Case growth started out strong before storms hit a significant portion of the country beginning in late January and persisted for much of the quarter. Despite these challenges, we again posted profitable growth by focusing on what we can control. We grew adjusted gross profit 50 basis points faster than adjusted operating expenses, increased adjusted EBITDA 6%, and delivered 15% adjusted EPS growth. The winter storms and higher fuel costs impacted our P&L with nearly twice as many distribution center closure days this year compared to the first quarter of last year. Adjusting for these external impacts, we believe our adjusted EBITDA growth would have been approximately 10%. Importantly, our April independent case growth remained strong and was in line with our first quarter. We are focused on executing our strategy with discipline and underscoring the strength of our business model, the significant momentum we have built over the past several years, and our ability to win in any environment. Let us now take a look at our progress within each of our strategic pillars. Starting with Slide 4, our first pillar is culture. Keeping our people safe is paramount. During the first quarter, we improved injury and accident rates by 12% compared to the prior year and 45% over the past three years. While we are making steady progress, our ultimate goal is zero injuries. As part of our commitment to safety, we continue to replace our EnRide powered industrial equipment with safer center-ride models to greatly reduce the risk of one of our most serious injury types. We have completed 80% of that rollout and remain on track to finish by year-end. Beyond improving safety, we continue to invest in the business, focusing on developing our people and strengthening our capabilities. During the first quarter, we brought together more than 500 leaders for our Sales Leadership Academy, a multi-day workshop focused on strengthening critical leadership skills, building high-performing sales teams, and preparing them for the rollout of our new seller compensation plan. Feedback was very positive and reinforced the value of this continued investment in the development of our associates. Moving to Slide 5, our service pillar. To enhance our customer experience and the value we provide, we continue to advance our digital capabilities and drive operational excellence across the business. We have embedded new AI capabilities into our MOXY platform that empower our customers and help them run their business more efficiently. We recently launched MenuIQ, an AI-powered tool that helps restaurant operators better manage food costs and gives them real-time visibility into menu profitability. MenuIQ is built the way operators work, bringing together essential capabilities that make menu management intuitive and actionable. Operators can upload recipes and automatically calculate food costs, monitor which menu items drive margins, and identify underperforming dishes. Recently, a chef at one of our independent restaurant customers shared their experience. He said MenuIQ is easy to use and super fast. He can cost out new menu items and try ingredient swaps in a few minutes on his phone—something that used to take hours juggling spreadsheets. Customer adoption has been strong. In just two months since launch, 15% of our independent customers are using MenuIQ, which is double our early expectations. AI remains an important opportunity for us, and we continue to expand the use of our proprietary and third-party tools. We are building momentum as we apply these capabilities to enhance the customer experience while driving productivity and more effective execution across the business. We are also thrilled to introduce Signature, our new differentiated solution for hospitality customers, which provides similar value that our highly successful Vitals program does for our health care customers. Importantly, Signature goes deeper than just our customers’ ordering relationship with us. It is a comprehensive suite of industry-leading products, smart technology, and support, designed to help our hospitality customers solve some of their biggest challenges: managing labor and staffing, identifying cost savings opportunities, and improving menu profitability for high-volume events such as catering and banquets. In addition to providing the right tools and resources to help our customers “Make It,” we are building a best-in-class supply chain to ensure customers get the products they ordered on time and in full. A key driver of service level improvement is our focus on Operations Quality Composite, or Ops QC, which measures how well we deliver accurate, error-free orders to customers, enhancing the quality of service that our customers experience. We made strong progress with Ops QC in the first quarter, improving by 21% and building upon the 20% improvement we achieved last year. In fact, Q1 represented our best performance since 2019. In summary, we continue to enhance our value proposition to help our customers Make It while executing our self-help initiatives to drive sustainable improvement in our operations and generate annual productivity gains. Now let us turn to our growth pillar on Slide 6. Pronto, our small truck delivery service, is a powerful competitive differentiator and strong contributor to our growth strategy. Through Pronto, we offer our customers more convenience and flexibility including smaller order sizes, more frequent deliveries, and fill-in orders, which enables us to more effectively compete with local specialty distributors. We continue to expand the reach of Pronto and have recently gone live in our 47th market, and Pronto Next Day—which extends the Pronto service to existing independent customers—is now live in 26 markets with plans to add approximately 10 more this year. The overall Pronto program is growing at strong double-digit rates and remains on track to generate $1.5 billion in sales in 2027, demonstrating this model’s success and Pronto’s role as a key long-term growth driver. Another expected driver of our long-term growth is our new seller compensation plan, which will go live across the company next month. As a reminder, our local sales force will transition from their current 50/50 fixed and variable compensation plan to a fully variable plan. We are committed to ensuring a smooth transition for our sellers and our business. As we have previously discussed, it may take two to three years for the majority of our local sales force to fully transition to 100% variable compensation. Doing this well, rather than adhering to a strict timeline, is the right approach to fully support our sellers through this important change that we believe will unlock future growth. The new compensation structure will create better alignment to our business strategy, enhance the earning potential of our sellers, and fuel future case growth. I am pleased with the progress we are making toward our launch, and our sellers and sales leaders remain excited about the opportunity ahead. Let us now move to our profit pillar on Slide 7. Our team effectively managed this challenging quarter through the disciplined execution of our self-help initiatives, resulting in consistent profitable growth and margin expansion. Adjusted gross profit was $1.7 billion, up 4.4% from the prior year and driven by volume growth and improved cost of goods sold. We continue to make progress with our strategic vendor management work aimed at generating additional cost of goods savings. As we realize these benefits, we are reinvesting a portion of those savings to help accelerate growth. We continue to expect to deliver at least $300 million in cost of goods savings over our three-year long-range plan ending in 2027, which is up from our original $260 million commitment. We also remain focused on growing our private label brands. Our penetration remains strong and stood at 54% with our core independent restaurant customers. Private label remains a meaningful growth opportunity as it benefits both our customers and US Foods Holding Corp. by offering more cost-effective products and supporting stronger margins. In addition to improving gross profit, we are offsetting operating expense inflation by accelerating productivity, simplifying administrative processes, and capturing savings on indirect spend procurement. In the first quarter, we delivered a 3% improvement in year-over-year warehouse and selector productivity driven in part through our US Foods Market operating system, or UMOS for short. UMOS is our supply chain process standardization and continuous improvement platform to operate more effectively. It is a key enabler of our annual productivity improvement goal of 3% to 5%. UMOS is now live in 70 markets, and we expect to finish deployment by the middle of this year. Indirect spend remains an important lever in our expense management efforts, and we continue to generate strong results. This year, we expect to deliver more than $75 million in savings, up from $45 million last year, and we remain on track for more than $100 million of savings in 2027. Before I hand it over to Dirk J. Locascio, I will take a moment to acknowledge our exceptional associates who consistently deliver excellence. May holds special significance for us. It marks the tenth anniversary of the US Foods Holding Corp. IPO and it is also National Military Appreciation Month. On May 26, 2016, US Foods Holding Corp. debuted on the New York Stock Exchange with an initial public offering at $23 per share. We have come a long way over the last ten years, transforming into the strong and resilient company we are today. I extend my sincere gratitude to our 30,000 associates for their dedication and hard work. I will also highlight an associate who achieved an extraordinary milestone. Jaden Falkumbang, a night selector in our Sacramento distribution center, is taking the “every case matters” mentality to the next level, selecting more than 1 million cases without a single error since June 2023. Each and every case he selects reflects his commitment to accuracy and his pride in ensuring our customers receive exactly what they ordered, every time. Thank you, Jaden, for your commitment to delivering excellence to our customers. With this being National Military Appreciation Month, I am incredibly grateful for our 1,500 veteran associates and the unique expertise they bring to our company. At US Foods Holding Corp., we highly value the skills gained through military experience, and I am proud that we are on track with our Mission 2030 commitment to hire 3,000 military veterans by the end of the decade. As Memorial Day soon approaches, we remember all the courageous men and women who have made the ultimate sacrifice to defend our freedom. To all our active military and veteran associates, customers, partners, and investors: thank you for your unwavering dedication and steadfast commitment to our great nation. Now let me turn the call over to Dirk J. Locascio to discuss our first quarter results and our 2026 guidance. Dirk J. Locascio: Thank you, David E. Flitman, and good morning, everyone. Our first quarter performance reflects our continued focus on controlling the controllables, driving profitable volume growth, and delivering on our self-help initiatives. We again grew adjusted EBITDA, expanded margins, and grew adjusted diluted EPS meaningfully faster than adjusted EBITDA. We also generated significant operating cash flow and remained disciplined with our capital allocation priorities—investing in the business to support growth and repurchasing shares while maintaining a strong balance sheet. Starting on Slide 9 and our financial results, first quarter net sales increased 2.8% to $9.6 billion, driven by total case volume growth of 1.4% and food cost inflation and mix of 1.4%. Excluding the Freshway divestiture, which we completed in the first quarter of last year, total case growth was 1.6%. Our independent restaurant volume accelerated again and grew 4.6%, including 20 basis points from acquisitions. Health care grew 3.7%, and hospitality grew 5%. Our chain restaurant volume was down 2.3%, largely in line with industry foot traffic trends as reported by Black Box. Turning to our financial results, first quarter adjusted EBITDA grew 6.2% to $413 million, driven by volume growth with our target customer types and ongoing progress on our self-help initiatives to improve gross profit and enhance operational efficiency. We estimate that the combined net impact from weather and higher fuel costs reduced our adjusted EBITDA growth by approximately four percentage points. Finally, adjusted diluted EPS increased by 14.7% to $0.78. We again grew adjusted EPS meaningfully faster than adjusted EBITDA, and expect this trend to continue, supported by earnings growth and deploying our strong cash flow towards share repurchases. Turning to Slide 10, we drove operating leverage gains as we again grew gross profit per case faster than adjusted operating expenses per case, resulting in healthy adjusted EBITDA per case growth. Adjusted gross profit per case maintained its strong and steady growth trajectory and increased $0.23, or 2.9%, compared to the prior year. This was primarily driven by our self-help initiatives, including our cost of goods sold work. Adjusted operating expenses per case increased $0.14, or 2.3%, with $0.04 related to incremental expenses from weather and higher fuel. We remain focused on offsetting a portion of operating cost inflation by driving efficiencies through supply chain productivity gains, indirect spend procurement savings, and administrative process streamlining. First quarter adjusted EBITDA per case increased by $0.08 to $1.98 as we grew adjusted gross profit per case 60 basis points faster than adjusted OpEx per case. Moving to Slide 11, we continue to generate strong cash flow and deploy capital with our capital allocation priorities—namely funding strong capital investment to maintain our business, support growth, and drive attractive returns; returning capital to shareholders through share repurchases; maintaining a strong balance sheet, with net leverage remaining well within our long-term target range; and pursuing accretive tuck-in M&A. Operating cash flow in the first quarter was $294 million. Cash flow was below prior year due to less working capital benefit in the current year. Excluding the working capital impact, operating cash flow was above prior year. We expect our full-year operating cash flow to grow this year versus 2025. During the first quarter, we invested $98 million in cash CapEx to support our business, enable organic growth, enhance our capacity, and further strengthen our technology leadership. We also repurchased 1.4 million shares for $125 million and have $1 billion remaining on our share repurchase authorizations. We ended the quarter at 2.6x net leverage. Our debt structure is strong, and our leverage is the lowest among our large public peers. In addition, we have no long-term debt maturities until 2028. Now turning to guidance on Slide 12, we are reaffirming our 2026 guidance based on the strength of our business and outlook for the balance of the year. We continue to expect adjusted EBITDA growth to be in the range of 9% to 13% and adjusted diluted EPS growth to be between 18% and 24%, which includes the impact of a 53rd week. Given the macro uncertainty, OpEx timing shifts, and higher fuel costs—which we believe will remain elevated in the near term—we expect second quarter adjusted EBITDA growth will be mid- to upper-single digits. If fuel remains at these elevated levels and macro uncertainty persists into the second half of the year, we believe we will be at the lower end of our full-year guidance range. Absent those pressures, we expect growth to be in line with our long-term algorithm. As a reminder and specific to fuel, we typically recover 30% to 40% of fuel cost increases through surcharges, although this recovery process tends to lag fuel price changes by about a month. Additionally, we have approximately one-third of our expected 2026 fuel gallons locked into fixed-price contracts at lower-than-current market prices. Fuel costs do impact our business and industry; however, I am confident we can effectively manage through this likely transitory period of higher costs with our self-help initiatives. We are executing our plan. We are accelerating independent case volume, driving profitable growth, and prudently allocating capital to drive shareholder returns. I remain encouraged by our first quarter progress and confident in our ability to deliver results within our guidance range this year while continuing to position the business for double-digit EPS growth over time and advance our long-range plan. Now let me turn the call back to David E. Flitman. David E. Flitman: Thanks, Dirk J. Locascio. As we look ahead, I remain highly confident in our ability to deliver our long-term growth algorithm. Even in a quarter shaped by external headwinds, we accelerated independent case growth, continued to gain share with our target customer types, expanded EBITDA margin, and delivered double-digit adjusted EPS growth. This performance speaks to the strength and resiliency of our team and our business model, the quality of our execution, and the value we continue to bring to our customers. We operate in a large, fragmented, and resilient industry, and we remain focused on the most attractive and profitable customer types within independent restaurants, health care, and hospitality. We will continue to run our proven playbook—investing in the business to improve our customers’ experience and accelerate growth, driving productivity and operational excellence, and deploying capital with discipline. I am confident we will continue to win in the marketplace and drive shareholder value for many years to come. We will now open the call for questions. Operator: Your first question comes from the line of Jeffrey Andrew Bernstein of Barclays. Please go ahead. Jeffrey Andrew Bernstein: Great. Good morning. Thanks. This is Pratek on for Jeff. David E. Flitman, a question about the elevated gas prices. You talked about how you expect it to potentially impact your profitability, but I just wanted to ask about how you are thinking about it from the top-line perspective. Perhaps restaurant customers may pull back on orders as their foot traffic declines further. Anything you can help us understand there? David E. Flitman: Thanks for the question, and please pass along our best to Jeff on his pending retirement. It has been a pleasure working with him. Twenty-five years is a long time in any industry, and we appreciate his dedication and support over that long period. I think the headwinds related to fuel are just another pressure point on the consumer. As we mentioned, consumer sentiment dipped in March to record lows. But really, that is nothing new for this industry, and that is why I finished my comments with resiliency. People want to go out and have a good time and enjoy their families and have a meal out every once in a while. I think that speaks to the resiliency of the industry. I point back to the Great Recession where volumes were down mid-single digits. We would love to see the tailwinds come back—that will happen—but again, we are two and a half years into a declining foot traffic environment. The macro uncertainty right now is just another pressure point. I would point you back to our results here. Even given the macro and the weather, we delivered very strong results, expanded margins, and accelerated growth—importantly across our three targeted customer types. Given all those headwinds, I feel really good about our ability to control the outcomes going forward, just as I always have. As I said in my opening, this quarter speaks to that resiliency in our business model and our commitment to deliver in any environment. So we are feeling good about our momentum. We would love to have foot traffic bounce back in a stronger macro—it is going to happen—but we are not concerned about the timing of it. Jeffrey Andrew Bernstein: Got it. I appreciate that color. And, Dirk J. Locascio, just a quick one on the inflation outlook. Obviously moderation in the first quarter to about 1%, easing from the fourth quarter. How are you thinking about the cadence of the rest of the year? Are there any particular drivers that we should be aware of that could change things materially? Dirk J. Locascio: Good morning. Our outlook for the year of roughly 1.5% inflation and mix is still our best estimate. As you pointed out, things moderated as they ended last year and then further into the first quarter. The movement from quarter to quarter tends to still be primarily protein and commodity related. The underlying grocery is pretty stable. So that has not really changed from what we were looking at a quarter ago. Operator: Your next question comes from the line of Edward Joseph Kelly with Wells Fargo. Please go ahead. Edward Joseph Kelly: Okay, great. Thanks. Could we first dig in on the guidance a little bit more? As you think about Q2, how are you thinking about some of the headwinds persisting around the way that you guided the second quarter, specifically related to fuel? And then for the full year, what could get you to the low end or to the high end? Could you speak to what that means from a traffic standpoint and a fuel standpoint? Dirk J. Locascio: Good morning, Ed. For the second quarter, we assume that fuel remains elevated. We saw it really spike earlier in April, and then it moderated a bit, but it is still elevated. We assume it stays around where it is now. If we see it spike further, that would put an additional headwind on the business for the quarter, but we do not assume it gets significantly better for the quarter. As we go through the year, that is why I gave the comments about how we think about the range. If we see fuel moderate back to where it was more quickly and we see the macro strengthen a bit, that would propel us to the higher end. If fuel remains quite elevated for the year and the macro is weak, then that would be the lower end of the range. Outside of those factors, which can influence the outcomes, we still feel very good about our core performance and the self-help initiatives that we have talked about and ultimately achieving the algorithm in a normalized environment. Edward Joseph Kelly: Thanks. And taking a step back, David E. Flitman, could you talk a little bit about M&A and the pipeline? You have a large competitor doing a big cash-and-carry deal. Does that change the way you think about anything strategically? And could you talk about the pipeline generally? We have not seen much from the company in the last year or so. How is that shaping up? David E. Flitman: I appreciate the question, Ed. Our strategy around M&A has not changed. To answer your question directly about the JETRO transaction, that does not change at all the way we think about it. We are aimed at driving tuck-in acquisitions. As a reminder, we did Chitakis in the fourth quarter in Las Vegas. We have done five tuck-ins of scale in the past two and a half years or so, and that remains the opportunity for us. I love our footprint. We have scale in all the major MSAs. This is really about driving further productivity within our markets, taking miles out of our distribution network, and finding the right companies that fit our culture—with very strong management teams and good brand recognition locally, with a high mix of independent restaurants. Those are the key elements that we look for. That is really driving our pipeline activity, and the pipeline remains extremely strong right now. We are active in several conversations, and as we always like to say, you never know when something is going to pop out of that. You cannot really control the timing, but we are very active as we have been. Operator: Your next question comes from the line of Lauren Danielle Silberman of Deutsche Bank. Please go ahead. Lauren Danielle Silberman: Hi. Thank you very much. I want to start with a follow-up on the expense side. In Q1, how much did weather impact expenses versus fuel? And can you help us understand what percentage of the business you implement surcharges for? I think you mentioned 30% to 40% of fuel costs are covered, but I believe you have a higher mix of contract business. I would have thought that number was higher. Help us understand the dynamics. Dirk J. Locascio: Good morning. Out of the $0.04 in the first quarter we called out, it was about half and half between fuel and weather impacts—so about $0.02 each. Overall, for fuel surcharges, we recover about 30% to 40%. We have them in place for the majority of our customers, contract and non-contract. Those are essentially a grid that is tied to actual fuel costs, and the recovery rate is the math of what is charged versus what the expenditures are for fuel. That process runs every single month. In the first quarter, as one of our peers talked about as well, fuel really spiked in the last month of the quarter, and because of the one-month delay that is typically in place for surcharges, there was not any offset to it. Going forward, that recovery rate would be at a more normalized level. And, as I mentioned during the call, we also have almost a third of our gallons for this year locked in at a contractual rate below market. Lauren Danielle Silberman: And is it fair to assume that the Q2 guide embeds a low-single-digit headwind from fuel? Dirk J. Locascio: Yes, it does. Fuel is roughly a couple of points of headwind within the period. Lauren Danielle Silberman: On the independent case growth side, really good during the quarter—even a little surprising given the weather headwinds you called out. Can you help us understand why expenses were seemingly more pressured than what the case growth would suggest? And April sounds like it is off to a good start too. David E. Flitman: Appreciate the question. We are really excited about our continued acceleration of independent case growth. That has not been a flash in the pan; it has been several quarters in a row. We have very good momentum. As you know, net new account generation is the lifeblood of that activity, but I am also pleased— and I have alluded to this in prior calls—that our penetration continues to improve. It was actually the best in Q1 since 2023. With the focus we have had on both net new account generation and penetrating our customers, we also saw lines per customer be the best that it has been in quite some time. To your question around the expenses opposite the case growth, I would point to the weather. When we gave our guidance in February, we assumed about the same weather impact that we had in Q1 of the prior year. That continued throughout February and even expanded into March with spring storms and tornadoes in the Midwest. As it turns out, we had almost twice as many closure days as we did in the first quarter of last year. On those days, it is pure demand destruction because those cases do not come back, but you still have a lot of costs because you are paying people and operating without the volume coming in. That is really the productivity headwind. And then even coming out of the storm—particularly in the Southeast, where the cold persisted—you would show up at a customer’s door and they were not open the next day, so you are round-tripping multiple times. It added a significant cost burden to the quarter, completely isolated to those events. Structurally, nothing has changed. We still feel very good about our self-help. Our selector and driver turnover is the lowest it has been since 2019. All those productivity initiatives are still in place—UMOS, as I talked about. We feel really good about the structural things and the things that we can control. We just got hit with some challenges in the quarter. Operator: Your next question comes from the line of John Edward Heinbockel with Guggenheim. Please go ahead. John Edward Heinbockel: Hey, David E. Flitman. I want to start on drop size. It looks like that got back to flat. Maybe dig into wallet penetration—where that opportunity is. Are you making headway in COP particularly? And can lines per account improve a lot more in the next six to twelve months to offset the macro? David E. Flitman: Good morning, John. We feel good about the penetration momentum. It has been a point of focus despite foot traffic challenges, which tend to show up most in penetration. COP is a strength for us and has been for quite some time, and we have seen penetration there, among other categories like produce. We are also excited about the sell acceleration we have had. We have a strong focus on our Stock Yards brand, and we will have a ribbon cutting for our new opening just outside of Charlotte in Lexington, North Carolina next month—a large comprehensive facility that will do all center-of-the-plate, including seafood, beef, and chicken. We are very excited about it; it will be a great shot in the arm for our team in the Southeast. There is a lot of good momentum, and there is more to come. John Edward Heinbockel: And secondly, on the compensation changes—while you want to go slow—how are you incentivizing wallet penetration versus net new local case growth? What do you want to initially get out of that transition? David E. Flitman: I feel really good about all the work Randy Taylor and the team have done across the company preparing for this. We started on this in 2025, so we have been at it for a year. Change management is important. I referenced the training of our sales leaders we held this past quarter. Everyone remains excited. These are individualized conversations as we roll them out, hence the timeline. We are going to look back on this as a meaningful transition point for growth. Stability is important in the sales force. In the first quarter, turnover for our territory managers with five or more years of experience was better than a year ago, which underpins the excitement the sales force has. Many of our sellers who have been with us more than twenty years experienced a 100% commission plan previously. They are great advocates for the change. We are watching all the key metrics as you would expect. We are launching next month. A key enabler is independent case growth. Operator: Your next question comes from the line of Mark David Carden of UBS. Please go ahead. Mark David Carden: To start, are you seeing any shifts on the competitive front? You called out consumer sentiment continuing to fall as the quarter went on. Were upfronts pushed more in the industry as fuel prices climbed to close out the period? Historically in these environments, what have you seen, especially as fuel crosses thresholds? David E. Flitman: Competitive intensity is always high in this industry. The challenged foot traffic we have had for so long has kept it intense the past couple of years. It ebbs and flows in a given market at any given time. I would not point to any significant pressure directly as a result of fuel, but it is still early. Because it is so competitively intense all the time, it is hard to tease those things out. Dirk J. Locascio: On upfronts, as David E. Flitman said, nothing really changed as we went through the quarter. Upfronts have increased a bit over the last few years across the industry, but they are still the minority of rebates. As a business, we do not lead with that; we address it more reactively if competitors come in with it. No meaningful changes. Mark David Carden: As a follow-up, your hospitality business put together some of the strongest organic case growth we have seen recently. What is driving the incremental strength there, and would fuel prices impact it any more than the rest of the business? David E. Flitman: We have great teams in both health care and hospitality. We are excited about Signature, the analogous capability to Vitals that I mentioned. We are bringing new technology to hospitality, bringing together existing tools and capabilities, and leaning in heavily to our brands. The pipeline for both health care and hospitality remains strong. We expect continued momentum that will carry into the back half of this year and even into 2027. Operator: Your next question comes from the line of Kelly Ann Bania with BMO Capital. Please go ahead. Kelly Ann Bania: Good morning. Thanks for taking our questions. David E. Flitman, on the outlook for total case growth this year, is it reasonable to expect the low end of that 2.5% to 4.5% target, or is the mid-3% still on the table for the full year? Can you walk us through expectations by channel to get to that? David E. Flitman: We remain confident in our case growth guidance for the year. We saw acceleration from Q4 to Q1 despite macro and weather challenges. Underpinning that are our three targeted customer types, where we remain very focused. We feel good about our momentum with independents and have strong pipelines in hospitality and health care. Coming off the first quarter performance, you can expect continued improvement as the year progresses, particularly in the back half. Kelly Ann Bania: And any color from the sales force and managers during the pilot for the new sales comp plan? Any significant tweaks? David E. Flitman: We received really good feedback. That is why we ran pilots for quite some time. The sales force was very engaged—seeking to understand the impact on their customers, how they can lean in more, and how they will be compensated. Any changes we made were truly tweaks. There was nothing structural we felt we missed. In the pre-launch work, we are sharing detailed information with markets, sales leaders, and now individuals—what they earn today and what it looks like in the new structure without behavior changes—and giving guidance on what they may need to do differently. The beauty of 100% commission is the simplicity. It is less complicated than our prior plan. They have clear line of sight to their activities and how they will be rewarded. We feel very good about that. Operator: Your next question comes from the line of Alexander Russell Slagle with Jefferies. Please go ahead. Alexander Russell Slagle: Thanks for the question. On the Signature program launch to help hospitality operators, it seems like a big step. Would love to hear the magnitude of this and where it takes you. It seems like a meaningful catalyst to accelerate new customer growth. David E. Flitman: That is how we are thinking about it, Alex. In many ways, it is a simple launch because it brings together the best of the company and what we have offered to other segments in a way that directly supports hospitality customers. It brings together technology capabilities, links our exclusive brands, and provides training and offerings to customers that impact profitability. From a process standpoint, we are aligning our team behind it. As I mentioned, similar to what Vitals does, Signature will help with labor planning and staffing, cost optimization, and improved satisfaction for hospitality end-customers. It ties together solutions that help customers think about their business holistically. We would expect similar levels of success for hospitality that Vitals has provided for health care. Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Please go ahead. Jacob Aiken-Phillips: Hey, this is Sam Barton on for Jacob. Inflation has moderated meaningfully, and you reiterated roughly a point and a half as inflation for the year. How does US Foods Holding Corp. perform across different inflation environments? Is there a level of inflation that is most constructive for the model, and how do the drivers of EBITDA growth change in a low-inflation environment like today versus a higher, more volatile backdrop? Dirk J. Locascio: Typically, as a business and as an industry, 2% to 3% cost inflation is what we like over time. It provides a small positive to distributors and is manageable for operators to pass through. Being a little above or below that range provides a small positive or negative to the sales line more so than earnings. We are encouraged that the grocery part of the business stays pretty stable with very modest inflation. A lot of the movement from quarter to quarter tends to be around a few commodity categories. Operators have flexibility in menu engineering—focusing on a particular COP category, for example, if that is deflationary or less inflationary than others. In the current environment, we have effectively passed through costs. Even in periods of high inflation coming out of COVID, a distributor has to have good processes around inflation and deflation, and our expectation is we will continue to operate very well here. Operator: Your next question comes from the line of Peter Mokhlis Saleh of BTIG. Please go ahead. Peter Mokhlis Saleh: Thanks for taking the question. Given the noise in the quarter with weather, higher gas prices, and tax refunds, can you give more detail by cuisine or region—any strengths or pockets of weakness that stand out? David E. Flitman: Starting geographically, I would highlight the obvious where the storms were—we saw challenges there. By cuisine types, our strength in bar and grill remains. Hispanic is doing well. Mid-scale family dining is doing well for us. White tablecloth has held up pretty well through these challenges. Those are areas where our share gains in the quarter outpaced the company average, which is not surprising since they have been focus areas for a while. Operator: Your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead. Brian Harbour: Thanks. Good morning. On the compensation changes, are all markets going to go next month? I know it could take a couple of years, but can you give a sense of the timing—will some folks transition over a longer time frame? David E. Flitman: To answer your first question, yes—everyone will go live across the company next month. We have been building this for a long time, starting with the pilots in the fall and the communications we discussed. The timing is driven by the individualized nature of these conversations and any tweaks in roles. We will lean in with pace, but to be clear, everyone will be paid on the new compensation structure beginning next month. We expect it to ramp through time—some limited impact in the back half of this year and then more meaningful impacts into 2027 and 2028. This is a long-term play, and we are going to do it right. Brian Harbour: With some of the AI-enabled tools, how do you measure success? Are you seeing better penetration with customers that use those? Are salespeople more effective? David E. Flitman: It is both. For each tool, we have measures in place. At the heart of it are two objectives: deepen relationships and provide more meaningful capability for customers—making it easier to do business with us—and improve our sales force productivity. The MenuIQ example: what used to take hours in spreadsheets is now seamless and quick with AI. Customers can understand menu costs, where profitability comes from or not, and where they may need to make changes. It is powerful, and our salespeople partner with customers on it. It moves quickly, helps customers, and frees up salespeople to drive future growth. It is hard to point to any single thing behind the acceleration in independent case growth, but it is all working together. The traction you see—importantly in penetration—is part of it. Operator: Your next question comes from the line of Karen Ann Holthouse with Citi. Please go ahead. Karen Ann Holthouse: Thanks for taking the question. How are you thinking about the hospitality business as we head into the peak summer travel season? There are moving pieces: last year’s soft inbound international tourism, potential benefit around World Cup games played in the US, and macro factors—gas prices could be a headwind or keep people domestic with a staycation positive for restaurants. How do you think about that for 2Q guidance and the year? David E. Flitman: At the highest level, hospitality trends tend to follow restaurant traffic. We do not need the macro to improve to control outcomes. Our pipeline in both health care and hospitality remains strong—that is fueling our growth despite macro challenges. We expect to continue to lean into growth and accelerate going forward, driven by share gains. The World Cup could be a nice shot in the arm over the summer, but it will come and go. What structurally changes performance is our ability to continue to win and take market share, and that is what our team is focused on. Operator: Your next question comes from the line of Danilo Gargiulo of Bernstein. Please go ahead. Danilo Gargiulo: Thank you. I want to go back to resilient performance through the cycle. Traffic has been elusive for multiple quarters now. Do you think we are entering a phase of permanently low or declining volumes? If that were the case, what would be a reasonable top-line algorithm for US Foods Holding Corp.? Dirk J. Locascio: Ultimately, our expectation is that we continue to outperform the macro. If you look at how we have grown versus the industry the last few years when traffic has been slower—using Black Box as the proxy—in our three target customer types, especially health care and hospitality, we have outgrown the market. That would be our expectation going forward. Chain and other would perform more like the overall market. Since we do not know exactly what the macro looks like, we continue to focus on share gains and what we can control. We are pleased with the progress and continue to work pipelines hard in each of those. Danilo Gargiulo: A few quarters ago, you were looking for strategic options for CHEF’STORE and ultimately decided to retain the business. Do you see more revenue synergies from integrating a cash-and-carry business with your delivery business? What are your expectations for the business going forward? David E. Flitman: I appreciate the question. The way we left it remains my view: fundamentally, we are not the right long-term owner for that business. At the heart of our desire to sell originally was that the synergies from the acquisition have not played out. Most of those assets were purchased west of the Mississippi River and are not in the heart of our broadline markets. If you think about existing customers going into those stores, it becomes more challenging when they are 20 to 30 miles away from core customers and markets. That said, we remain focused and will retain the business as long as we need to. The business has improved dramatically. One comment: a large competitor announced an acquisition in the space. That does not change how I think about our CHEF’STORE business at all. It will be interesting with the number one broadliner buying the largest cash-and-carry—getting industry attention. The Independent Restaurant Coalition is potentially intervening in the case. It will be interesting to see how that progresses, including the regulatory process over the next while. We are watching that, of course. Operator: Your next question comes from the line of Analyst with Wolfe Research. Please go ahead. Analyst: Hi, thanks for taking my question. On Pronto—you just went live in your 47th market. As you make investments in Pronto this year, where do you see the biggest opportunities to accelerate: more trucks in existing markets, new markets, or deepening Next Day penetration with existing customers? David E. Flitman: Appreciate the question. It is all of the above. Originally, we launched Pronto in markets aimed at identifying and obtaining new customers. We are excited about Pronto Next Day, a fairly new launch for us—now live in 26 markets, with more to come. We also have the opportunity to penetrate existing markets with new trucks, which we continue to do. We are excited about Pronto and fully committed to that $1.5 billion revenue target in 2027. Operator: Your final question comes from the line of John Ivankoe of JPMorgan. Please go ahead. John Ivankoe: This is Crystal on for John. On private label, you kept it at 54% with core independents and mentioned it as a growth opportunity. What actions are being taken to grow this mix, and are you happy with the selection, or are there gaps? David E. Flitman: I am pleased with the progress we have made over the last couple of years with our exclusive brands. We have a great portfolio—more than 22 brands and 10,000 products. Our sales force is leaning into those brands. It saves our customers money and is more profitable for US Foods Holding Corp. The new sales compensation structure will heavily incent our sales force to sell our brands. Structurally, we are lined up to continue that momentum. What excites me most is that we do not have a ceiling on our ability to penetrate with exclusives. Twenty-five percent of our existing independent restaurants are already penetrated at 70% or higher, and 45% are above 60%. We have a long track record of success and a long runway of further penetration and growth with our brands. You will continue to hear us talk about that momentum. Operator: I will now turn the call back over to David E. Flitman, CEO, for closing remarks. David E. Flitman: We appreciate everyone joining us today. We are excited about our momentum. The structural improvement that we are driving in the business will continue, and we are fully committed to achieving our long-term growth algorithm. Have a great day and a great week. Thanks. Operator: Thank you all for joining. That concludes today’s call. You may now disconnect. Have a great rest of the day.
Operator: Good day, and thank you for standing by. Welcome to StoneX Group Inc. Q2. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, William Dunaway, Chief Financial Officer. Please go ahead. William Dunaway: Good morning, and welcome to our earnings conference call for our quarter ended 03/31/2026. Philip Smith: Good morning, everyone, and thank you for joining our second quarter earnings call for fiscal year 2026. I am very pleased to report a consecutive record quarter, including record net operating revenues, net income, and EPS. This was driven by strong performance across all four operating segments, highlighting our depth and breadth of product offering and capabilities within the unique StoneX Group Inc. ecosystem. It also reflects the continued progress of integrating RJ O’Brien, which remains on track to be substantially completed later this fiscal year with no change to expected synergies and efficiencies, making StoneX Group Inc. the largest non-bank FCM in the United States. Despite the geopolitical uncertainty, nearly all of our products reported double-digit growth driven by higher volatility and increased demand for our services. This has included delivering another record quarter for listed derivatives, with volumes approaching 100 million contracts, and average client equity approaching $14 billion, reflecting the expanded scale of the platform following the RJ O’Brien acquisition. Record OTC derivatives volume, transacting over 1.5 million contracts, a 68% increase year-over-year. As a reminder, we offer customizable OTC contracts to customers, giving them the benefit of a look-alike option or swap or structured product to more closely address their risk management needs, whilst we benefit from typically higher rate capture when compared to traditional listed derivatives. We reported record securities average daily volume of over $12 billion driven by strong performance across both our equities and fixed income franchises. We will touch on our equities business later today, but we believe we have one of the most diverse equity market ecosystems covering execution, market making, custody and clearing, prime brokerage, as well as equity capital markets and research offerings, which we acquired through the Benchmark acquisition last year. Alongside our securities and derivatives records, we also reported record operating revenues derived from physical contracts, which underscores our continuing global relevance in the physical space within the commodities market over consecutive quarters. Turning to payments, we recorded our second highest ADV of $92 million following the record set last quarter, with year-on-year growth of 19%. This performance reflects continued engagement from institutional counterparties using our cross-border payment solution. Lastly, we saw FX/CFD volumes grow by 3% year-over-year, and the revenue capture of $103 per million, up by 6%, reflecting the higher market volatility seen in this quarter. We continue to set records across our key metrics but are mindful that the geopolitical landscape remains complex, and disciplined risk management will remain at the heart of our business as we continue to service our clients' business needs and activities. As our company scales, processing ever higher volumes, growing our client base, and improving our offering to clients, I wanted to spend a couple of moments touching on one of our strategic initiatives regarding the use of AI. We are seeing the deployment of AI evolving from isolated experimental use to now serving as an enterprise force multiplier that enhances operational efficiency across our organization. What started out as a useful development tool for our programmers has now grown into utilizing AI agents across client support, internal operations, and platform development. Within payments, we mentioned our Xpay system in previous calls, which was a proprietary-built platform, and within this, we have developed AI-assisted automation to help with settlement instruction repair, validation, and reconciliation designed to reduce manual intervention and improve our straight-through processing rates. Alongside this, we are developing an AI chatbot to aid client services with client queries, document translation, and compliance-related tasks. We are also applying AI to further improve the productivity of our software developers through the design of support agents for AgenTeq development. This should culminate in: one, accelerated development, shortening the time from a proof of concept to a functioning prototype; two, enhanced agility and innovation, automating testing and delivery of iterative improvements, which should lead to innovation; and three, business solutions, ultimately leading to the delivery of working solutions for our commercial teams that are responsive to our clients' needs. Such an example of this was the development of a feature which we estimated would have taken the team without AI approximately two to four times longer to design, test, and launch. This is the sizable step change we hope to replicate across the organization, whilst ensuring we operate within a standardized framework and remain cognizant of local regulations, controls, and governance. It is a promising start, and we see opportunities to leverage technology further to develop products and services faster, meet our clients' needs, and optimize our resources to continue to deliver strong financial performance. With that, I will now turn it over to William, who will go through this quarter's financial results. William Dunaway: Thank you, Philip. I will begin with a financial overview for the quarter, and we will be starting with slide number five in the slide deck. Just as a reminder, our Board of Directors approved a three-for-two split of our common stock, and our shares began to trade on a split-adjusted basis at the market open on 03/23/2026. All per-share metrics on this call will be on a split-adjusted basis. Second quarter net income came in at a record $1.743 billion with diluted earnings per share of $2.07. This represented 143% growth in net income; however, earnings per share grew at a 120% rate due to additional shares outstanding as compared to the prior year, primarily related to the issuance of approximately 3.1 million shares related to the acquisition of RJ O’Brien during the [inaudible]. Net income and diluted earnings per share were up 25–24%, respectively, versus our immediately preceding [inaudible]. This represented a 26.5% return on equity despite a 75% increase in book value over the last two years. On a tangible book basis, this equates to a 37% return on tangible equity for the quarter. We had operating revenues of approximately $1.6 billion, up 64% versus the prior year and up 9% versus the immediately preceding quarter. As a reminder, our operating revenues include not only interest and fees earned on our client balances, but also carried interest that is related to our fixed income trading activities. Net operating revenues, which net off interest expense, including that which is associated with our fixed income trading activities, as well as introducing broker commissions and clearing fees, were up 70% versus a year ago and 14% versus the immediately preceding quarter. Total fixed compensation and other expenses were up 44% versus the prior year quarter, with $56.9 million of this attributable to acquisitions made over the last twelve months, most notably RJ O’Brien and Benchmark. Also contributing to this increase as compared to the prior year, bad debt expense increased $12.3 million, primarily within our commercial segment, which, despite this, had a second consecutive record quarter. Total fixed compensation and other expenses, excluding bad debt expense, were up 5% or $16.4 million versus the immediately preceding quarter. Fixed compensation and benefits were up 32% versus a year ago and up 13%, or $18.7 million, versus the immediately preceding quarter. The increase versus the immediately preceding quarter included a $10 million increase in employee benefits, most notably payroll taxes, paid time off benefit costs, and retirement costs, which is typical as we start a new calendar year, as well as $8.5 million in higher severance and retention costs, including costs associated with a formal collective redundancy consolidation process for UK-based employees following the integration of certain RJ O’Brien entities, as well as severance and retention costs for certain US-based positions relating to ongoing integration activities. These increases were partially offset by higher purchase participation on our employee-elected deferred compensation plan, which is part of our restricted stock plan. Professional fees increased $1.9 million versus the prior year, primarily as a result of higher legal fees related to our defense in various legal matters, net of recoveries. They were down $14.4 million versus the immediately preceding quarter, which included significant legal costs incurred related to the BTIG arbitration matter. During the second quarter, we received the final arbitration award from the FINRA arbitration panel adjudicating the claims between us and BTIG. The panel awarded us $1 million in compensatory damages and awarded BTIG $2.9 million in damages. These amounts were offset, and we made a net payment of $1.9 million during March 2026. On 05/04/2026, we made an immaterial payment to fully and finally resolve all differences with BTIG, and no additional claims between the parties remain. The conclusion of the BTIG litigation, along with the resolution of the option sellers arbitrations and settlement of the patent case inherited through the acquisition of GAIN Capital, marked the end of the large-scale litigation matters that have resulted in heightened legal expenditures over the last five years, most notably the last twenty-four months. Moving on, I had mentioned the acquisitions over the last twelve months and wanted to touch on the contribution of the most notable one, RJ O’Brien. Excluding amortization of acquired intangibles and a $7.7 million negative mark-to-market adjustment on their investment portfolio, RJ O’Brien contributed $35 million in pre-tax net income for the quarter, a nice improvement over the immediately preceding first quarter. Looking at our results from a longer standpoint, our trailing twelve months results show operating revenues up 40%. Net income was a record $462.4 million, up 57%, with diluted earnings per share of $5.60 and a return on equity of 19.8% for the trailing twelve-month period, above our target of 15%. For the second quarter, our average client equity and FDIC sweep balances were $15.2 billion, up 91% versus the prior year and up 4% versus the immediately preceding quarter. Finally, we ended the [inaudible] with a book value per share of $34.16. Turning to slide number six in the earnings deck, which compares quarterly operating revenues by product as well as key operating metrics versus a year ago, we experienced operating revenue growth across all products versus the prior year. Transactional volumes were up across all of our product offerings, and spread and rate capture increased in all products with the exception of securities, down 3%, and payments, down 7%. Just touching on a few highlights for the fourth quarter, we saw operating revenues derived from listed derivatives increase $189.4 million, or 148%, versus the prior year, primarily due to the acquisition of RJ O’Brien, which contributed $151.7 million, as well as strong growth in base metals activities in LME markets, which increased $20.2 million versus the prior year. Listed derivative operating revenues increased 18% versus the immediately preceding quarter. Operating revenues derived from OTC derivatives increased 98% versus the prior year, driven by increased client activity and a widening of spreads, most prevalent in agricultural and energy markets, including renewable fuels, driven by heightened volatility as a result of the onset and continuation of the US–Iran conflict. This also represented an 89% increase versus the immediately preceding quarter. We had strong performance in our physical business, with operating revenues derived from physical contracts increasing 162% versus the prior year, primarily driven by a $116.1 million increase in precious metals operating revenues. Operating revenues derived from physical contracts were up 21% versus a record immediately preceding quarter. Securities operating revenues were up 38% as volumes were up 35%, partially offset by a 3% decline in the rate per million captured versus the prior year, the improvement driven by growth in US equity volumes as well as an increase in overall client activity driven by the onset and continuation of the US–Iran conflict. Payment revenues increased 14% versus the prior year quarter due to a strong 19% increase in average daily volume, partially offset by a lower rate per million. Payment revenues were down 2% versus the immediately preceding quarter. FX/CFD revenues were up 9% versus the prior year quarter, resulting from a 3% increase in average daily volume and a 6% increase in rate per million, each of which were primarily driven by improved performance in our self-directed business. FX and CFD revenues were up 13% versus the immediately preceding quarter. Our interest and fee income earned on our aggregate client float, including both listed derivatives client equity and money market FDIC sweep balances, increased $54.8 million, or 54%, versus the prior year, with the acquisition of RJ O’Brien contributing $53.9 million. Average client equity increased 110% as RJ O’Brien contributed $6.4 billion in average client equity for the current quarter, while the average money market FDIC sweep client balances declined 7%. Turning to slide number seven, this depicts a waterfall by product of net operating revenues from both the prior year quarter to the current one, as well as the same for the trailing twelve-month periods. Just a reminder, net operating revenues represent operating revenues less introducing broker commissions, transaction-based clearing expenses, and interest expense. For the quarter, net operating revenues increased 70%, principally coming from listed derivatives and physical contracts, up $84.6 million and $116 million, respectively. In addition, we had a very strong quarter in OTC derivatives, which nearly doubled, adding $58.8 million versus the prior year. Net operating revenues from securities also added $36.9 million. On a net basis, interest and fee income on client balances increased $33.2 million, with RJ O’Brien contributing $30.3 million. Looking at the bottom graph for the trailing twelve-month period, listed derivatives had the largest increase, up $187.7 million, primarily as a result of the acquisition of RJ O’Brien as well as strong growth in LME base metal markets. Securities was up $180.6 million versus the prior year, driven by a 27% increase in average daily volume and a 17% increase in rate per million. Physical contracts net operating revenues added $162.1 million versus the prior fiscal year, primarily driven by strong performance in precious metals. OTC derivatives added $90.4 million off of strong performance in agricultural and energy markets, including renewable fuels. Interest and fee income increased $87.6 million, primarily as a result of the acquisition of RJ O’Brien. Moving on to slide number eight, I will do a quick review of our segment performance. Our Commercial segment saw record net operating revenues, an increase of 111%, primarily resulting from 529–8% increases in listed and OTC derivatives, respectively. In addition, physical contracts increased 239%, while net interest income and fee income increased 55%. The growth in listed derivatives and interest income were primarily driven by the acquisition of RJ O’Brien, as well as in base metal markets on the LME. Segment income was another record, increasing 101% versus the prior year. On a sequential basis, net operating revenues were up 30%, and segment income was up 36%. Our Institutional segment also saw strong growth in net operating revenues and segment income, up 65–40%, respectively. The growth in net operating revenues was principally driven by a $33.3 million increase in securities revenues. In addition, listed derivatives and interest and fee income increased $60.4 million and $14 million, respectively, primarily driven by the acquisition of RJ O’Brien. On a sequential basis, net operating revenues and segment income declined 3–13%, respectively. In our Self-Directed Retail segment, net operating revenues increased 15%, and segment income was up 40%, which demonstrates the strong operating leverage in this segment. This growth was driven by a 9% increase in rate per million captured in FX/CFD contracts along with a 3% increase in average daily volumes. On a sequential basis, net operating revenues were up 18%, and segment income increased 65%. Our Payments segment net operating revenues were up 10% and segment income increased 30%. Average daily volume was up 19% versus the prior year, while rate per million was down 7%. Versus the immediately preceding quarter, Payments net operating revenues decreased 3%, while segment income decreased 6%. Moving on to slide number nine, looking at segment performance for the trailing twelve months, we saw strong growth in the Institutional segment with net operating revenues up 62% and segment income increasing 58%. Our Commercial and Payments segments added 48% and 11% in segment income, respectively. Our Self-Directed Retail segment income decreased 23%. Finally, moving on to slide number ten, which depicts our interest and fees earned on client balances by quarter as well as a table which shows the annualized interest rate sensitivity for a change in short-term interest rates, interest and fee income net of interest paid to clients, and the effect of interest rate swaps increased $29.1 million to $103.6 million in the current period, and as noted, the acquisition of RJ O’Brien contributed $30.3 million in net interest in the current quarter. On a sequential basis, interest and fee income net of interest paid to clients and the effect of interest rate swaps declined $7.8 million, primarily related to an $11.7 million mark-to-market adjustment on our investment portfolio. During 2026, we entered into an additional $600 million in fixed-rate SOFR swaps to hedge our aggregate interest rate exposure, which brings our aggregate swap position to $1.8 billion with an average duration of approximately two years and an average rate of 3.38%. These swaps are reflected in the interest rate sensitivity table on this slide. As shown, we now estimate a 100-basis-point change in short-term interest rates, either up or down, would result in a change to net income by $47.6 million, or $0.58 per share, on an annualized basis. With that, I will hand you back to Philip for our product spotlight on our global equities business. Philip Smith: Thank you. Now turning to slide 12, I wanted to highlight another facet of our ecosystem and speak about our principal market-making business within our global equities business line. Our equities business operates as a global market intermediary built around agency execution, custody and clearing, market making, prime, as well as capital market services. We serve institutional clients, offering access to exchanges, liquidity, and clearing and custody infrastructure. We monetize client activity through commissions, spreads, and financing. Through the Benchmark acquisition, we further enhanced our relevance to customers with deep equity research and the ability to connect users through corporate and capital market services. We have built an ecosystem that is designed to service clients across the full equities life cycle. On our next slide, slide 13, turning to equity market making specifically, it is important to recognize the scale and relevance of this business. We are a principal equities market maker providing liquidity and execution across a wide range of global securities. In 2025, StoneX Group Inc. ranked number one in over-the-counter American depositary receipts and foreign securities, a position we have held consistently since 2015, according to FINRA ORF data. We make markets in approximately 18,000 equities globally, and we ranked number one in over 1,500 individual securities. This is supported by more than twenty years of experience, twenty-four-hour market coverage, and access to 120 global markets. For institutional clients, this matters because it translates into reliable liquidity, pricing, and execution, particularly in less liquid, international, or complex stocks. While this part of the business may be less visible than traditional listed securities, it plays a meaningful role in how institutional investors, asset managers, and retail broker-dealers access global equity markets with StoneX Group Inc. Moving on to the next slide, slide 14, what makes our market-making franchise different and succeed? Our entry into the highly competitive Reg NMS stock was built upon our leading OTC ADR franchise, market experience, and deep institutional relationships developed over decades. This foundation has allowed us to scale into the listed space in a disciplined way. Second, market making at StoneX Group Inc. operates within a vertically integrated equities ecosystem. As already shown, it exists alongside clearing, custody, prime brokerage, research, and capital markets. It is all connected. This integration improves capital efficiency and allows us to serve clients more comprehensively. Third, we benefit from the aggregation of trading flow across a globally diversified client base that is institutional as well as self-directed retail. This aggregated, diverse flow allows us to provide deeper liquidity and more consistent pricing, supporting high-quality execution for our clients while managing risk and hedging more efficiently. Finally, technology is the real enabler. Our proprietary electronic platforms are designed to support best execution and allow us to deliver tools focused on execution quality. The result of these factors are reflected in the growth you see here, with our Reg NMS market-making volumes growing at a compound annual rate of over 130% since 2022. We believe we are a fraction of the total addressable market, which is likely measured in trillions of dollars of notional volume. Lastly, turning to the priorities on slide 15 required to scale the market-making platform. First, we continue to streamline our operations by consolidating platforms, automating middle-office processes, and simplifying reporting and post-trade workflows. This improves operating efficiency and supports our operating margins as volume grows. Second, we are deliberately deepening our market share, expanding our NMS wholesale market-making capabilities, growing outsourced trading relationships, and increasing our presence in ETFs and global options where client demand is rising. Third, we are strengthening our global reach and technology platform. This includes building a footprint in Asia Pacific, expanding sales coverage in the EMEA region, and continuing to invest in the core architecture that underpins our market-making platform. Overall, we expect to process higher volumes, expand our global reach, and continue to invest in a platform that is efficient and scalable, and supportive of high operating leverage. Importantly, all of this is being done in a way that strengthens our broader equities ecosystem, making StoneX Group Inc. increasingly relevant to our clients across execution, liquidity, clearing and custody, prime services, research, and capital markets. Now to close out this presentation, this was a hugely pleasing quarter all around, highlighting record net income of $174.3 million, which is up 143% versus prior year, and diluted EPS of $2.07, up 120% versus prior year, and achieving an ROE for the quarter of 26.5%, 19.8% for the trailing twelve months ending 03/31/2026, and an ROE on tangible book value for the quarter of 37%, 25.9% for the trailing twelve months. Book value per share of $34.16, up $8.43, or 33%, versus prior year. And results over the last two years have grown trailing twelve-month net operating revenues by 56%, or a 25% CAGR, and trailing twelve-month earnings by 91%, or nearly 38% CAGR. A more volatile economic backdrop has emerged, potentially surpassing levels of the past two years, but this environment plays into our strengths, as volatility continues to be a key driver of our business. We have seen significant growth in our client assets, average client funds, securities clearing, prime brokerage, and metals, which provide stable recurring income. We believe our unique ecosystem, which offers extensive depth and breadth of product and a widespread geographical reach, combined with a significant total addressable market, will continue to power growth in the years to come. We naturally remain very excited about our future growth and continued expansion of our ecosystem. We will now open the call for questions. Operator: Thank you. At this time, we will conduct a question and answer session. Please limit to one question and one follow-up. To ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Daniel Thomas Fannon from Jefferies. Daniel, your line is now open. Daniel Thomas Fannon: Thanks. Good morning. The environment continues to be quite constructive, as you highlighted, and I was hoping to get a bit more context around the health of that. One of your peers highlighted a customer loss in, I think, January on the natural gas side. Hoping you could talk about just the good and bad volatility that you saw in the quarter, and then also give us an update here, given we are now in May, on what has happened as the quarter has ended. We have seen some of the exchange volumes also start to moderate—how that is translating across your business as well? Philip Smith: Sure. So as we said in the Q1 Q&A, there was, surprisingly, very little in terms of credit losses. And we did remind the market that continued heightened levels of volatility, while positive from a revenue perspective, obviously do increase the chance of some credit losses. We work very closely with our clients each and every day to help mitigate that, because communication with our clients through these extremely volatile periods is, whilst unusual, important. We maintain that level of communication and ensure that we help our clients to minimize their own exposure and their own liquidity risks. In light of the levels of volatility in the last two quarters, I think the level of credit losses we have provided for has been somewhat minimal. I would not say it was particularly unusual. It highlights the quality of our clients, and more relevantly, it highlights the interaction and engagement that we have with our clients. But as we have said very openly many times, with this level of increased volatility there should be an expected increased risk in credit losses that come with that heightened revenue generation. Daniel Thomas Fannon: And then, just to follow up, on the current environment we are seeing in April, particularly in certain markets where volumes have moderated—whether that is metals or precious metals or other areas—can you give us an update in terms of how that business looks thus far to start fiscal third quarter? William Dunaway: Certainly. We have had tremendous activity in the first couple of quarters, and last year, in the precious metals space. Listed derivatives, OTC—everything was really doing well with the volatility we saw here in the second quarter of the fiscal year. But we do see some moderation coming into April as we start the third quarter, just off where you saw it in Q2 from the standpoint of activity. That still said, overall it is a very good environment from the standpoint of interest rates and still an elevated volatility market in bonds. Daniel Thomas Fannon: Got it. That makes sense. I am not used to being restricted by my number of questions on this call, but—feel free? Philip Smith: Feel free. Go ahead, Dan. You are fine. Daniel Thomas Fannon: I guess, William, you mentioned some of the costs associated with RJ O’Brien and severance and what we saw in the quarter. Can you update us on the synergies and, broadly at the highest level, how the integration is going? Clearly, the environment is good, but can you give a little bit more detail around what you are doing under the hood and how that is going? Philip Smith: If I maybe start, Dan, by just giving you an update in terms of what we set out from a timeline from an integration program perspective: we are on track. On the last call, we highlighted that targeting our non-US businesses and the integration that goes with those businesses was the priority and also a testing ground to ensure that the larger program of integration in the US is able to run more smoothly, based upon any issues that arose during the non-US integration process. Those have begun. This quarter we are currently in is an important quarter for us, and we have begun the process of the integration of our US FCMs. It is on a much more gradual basis whereby we begin testing with some small groups of clients; we then have a second group, which has already occurred; and then we have a gradual buildup to the entirety of the FCM consolidation at the end of this month. It is an ongoing process. The timeline has not changed from where we set it out almost two quarters ago. In terms of the costs and the efficiencies, those are also on track, but I will let William highlight those in detail. William Dunaway: Thanks, Philip. We touched on this a little bit last quarter, Dan. Within the quarter, coming out of last quarter, we talked about what the run-rate is. For the second quarter, we had just shy of $76.9 million worth of synergies that we saw in the numbers in Q2, and the exit run-rate coming out of Q2 at those same synergies is a little over $8 million per month. So we are at about a $32 million run-rate on an annualized basis. To reaffirm where our target is: our expectation is that we will be $50 million by the end of the process. We think that coming out of Q2 we are probably around $32 million on an annualized basis, and we expect by the end of fiscal year to be closer to $45 million, and then we will have that remaining piece dribble in in 2027. Daniel Thomas Fannon: That is super helpful. Lastly, in the context of the hedge that you quantified, do you expect to do more as the year goes on, or is this the right amount in terms of interest-rate exposure you are looking to manage to? William Dunaway: We talked about this when we first did the RJ O’Brien integration in that first quarter, and Sean had touched on it at the time. At that time, we had about $13 billion of the two combined portfolios, and roughly half of that is balances where we keep virtually most of the yield on those assets. That is the key one that we are trying to protect. This puts us at around $1.8 billion of swap coverage, and we have about $1.5 billion of duration that is going out twenty–twenty-four months of physical purchases of investments. We feel like we have a good start. We will probably continue to look, where applicable, to still put in some floors there just to protect the downside on that where it is not shared on those balances, so we want to make sure that we are comfortable with the levels we are set at. It is still an active management program that we have in place. Hopefully, that gives you some guidelines of what we are looking to protect. Daniel Thomas Fannon: That is helpful. I will get back in the queue. Thank you. Philip Smith: Okay. William Dunaway: And feel free, Jeffrey, if you have multiple questions as well. Operator: Thank you. Your next question comes from the line of Jeffrey Paul Schmitt from William Blair. Jeffrey, your line is now open. Jeffrey Paul Schmitt: Hi. Good morning, everyone. In the Commercial hedging business, could you give us a sense of the mix of that business? Obviously, strength was widespread, but how much is agricultural versus energy or renewables? And RJ O’Brien’s interest-rate business as well? William Dunaway: The majority of the RJ O’Brien interest-rate business is actually in the Institutional segment because it is more institutional customers—looking to the big group and others—looking to manage their exposure. If we are looking on the Commercial side of listed derivatives, it is probably going to be more heavily weighted toward the energy and renewable fuels side. A lot of it was soybean oil and other inputs into renewable fuels. You can call that agriculture; you can call that renewable fuel. It is a little bit of both—it is inputs on the agricultural side, outputs on the energy side—but it is more so that. I think we still saw a bit of a slow start to Q2 in the US row crops—corn, soybeans, wheat—but then we saw nice activity in the back half of the quarter. Really, the OTC market was the real standout with the best volume and best revenues we have seen historically in the OTC space, and with that volatility, I think those customized solutions that we can provide customers to really help capture margin and mitigate their risk showed their benefit in that quarter to clients, and we saw a lot of uptake in activity. Philip Smith: I would only add that in Q1 we were slightly overshadowed by the success of the metals business in relation to everything else. But in Q2 there was a consistent level of increased activity and increased revenue across the board, which we do not always expect and should not expect, but it was pleasing to see that was evident. As William said, energy was very much the story of the quarter, but there was consistent growth in other areas as a result of increased volatility and also just increased activity from our clients across the board. That was good to see—very pleasing. Jeffrey Paul Schmitt: That is helpful. Maybe do the same in the physical trading business. Is that mainly precious metals and gold in particular? What portion of mix is that? And where are you in terms of cross-selling with RJ O’Brien clients? I do not think they have that physical trading capability. Philip Smith: No, they do not, and that was raised last quarter. There was a level of confusion whether a lot of that came from RJ O’Brien integration and cross-selling. The physical aspect is very much driven by our very successful precious metals business, but also our very successful non-metals business, which in areas of cocoa and coffee saw continued expansion and continued growth across the board. Unfortunately, within the physical space, there is still an overshadowing by the physical metals business. We saw Q1 showing record levels of transaction volume and net income attached to that physical metals business. Q2 overshadowed Q1—so continued growth and client activity. As I said before, across multiple sub-products within our Commercial business, there was a broad level of increased activity and increased revenue. With regards to our OTC business, we highlighted a record level of OTC contracts. That is something where we look forward to greater participation from the RJ O’Brien integration post full integration in the US, where we are able to more easily offer OTC contracts, OTC products, and capabilities to the legacy RJ O’Brien client base. Until the integration happens, it is just slightly more cumbersome in terms of papering in different legal entities, and full integration will make that easier. William Dunaway: And, Jeffrey, to your numerical question there: for a total of $190 million worth of physical contract operating revenues in Q2, about $150 million of that was precious. The rest was what we called physical agriculture and energy before—we are now calling it StoneX supply and trading—but that is more the agriculture and energy side of the business. Jeffrey Paul Schmitt: Okay. Very helpful. Could you provide an update on the M&A environment and what inning you think we are in for industry consolidation? Are opportunities up versus a year ago? How are valuation expectations trending? Philip Smith: Generally, we will always continue to see a certain level of small- to mid-size interest and M&A activity. We are known in the market as a consolidator. We are known as an expander of our ecosystem. That drives interest in people wanting to bring their business—either those who want an exit strategy or those who want to take their business to the next level and be part of a broader, more capable, expansive ecosystem that they can operate within at StoneX Group Inc. We have mentioned previously that, on the whole, most of the acquisitions we have done end up, within a relatively short period of time, growing in multiples of where they were prior to becoming part of StoneX Group Inc. A lot of that is the heavy cost of business, heavy cost of regulation, and heavy cost of having a monoline business in certain areas where you do not have that diversity of revenue and the ability to utilize and access clients across multiple products. That is our benefit. As a result, we get a near-constant level of interest in that small- to mid-size $10–$30 million range of businesses that we are very easily able to acquire, incorporate, and tack onto the ecosystem, and then start leveraging either the client capability, the geography expansion, or the product that those acquisitions provide us. It is important that we talk about our ecosystem all the time, and that is a huge driver of much of the M&A activity. It is something we probably do not talk enough about, because the way we operate our verticals and our products, we do not want any silos within our businesses. Over the last ten to fifteen years, we have done a very good job of integrating multiple new products, new entities, and new capabilities that were previously on a standalone basis. Everything is becoming much more integrated, and that allows us to truly leverage those capabilities and have multiple-product initiatives, like we have seen with our FIG initiative, where we are bringing together all aspects of the company and heading in the same direction. That drives interest in us from an M&A perspective, and it drives interest that we have in other areas where we would like to continue that level of ecosystem expansion. I do not think the market has changed drastically. We continue to have a lot of interest, and we do almost make small acquisitions on a very regular basis, which we probably do not promote as much because we are so used to that level of expansion. But we are always looking at transactions—always looking at potential expansion opportunities. Jeffrey Paul Schmitt: Okay. Great. Thank you, everyone. William Dunaway: Thank you, Jeffrey. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. Please hold while we compile the Q&A roster. This now concludes the question and answer session. I would now like to turn it back to Philip Smith for closing remarks. Philip Smith: Thank you. In closing, I would just like to say a huge thank you to all the employees of StoneX Group Inc. for their vital contribution in achieving this record quarter. Working tirelessly every day with our clients through such heightened volatility market conditions is what we do, and StoneX Group Inc. employees do this incredibly well—a service for which I am hugely proud. This quarter, I feel, is a testament to that dedication and that service to our clients. So a huge thank you to all of our employees, and I look forward to seeing what Q3 brings. Thank you very much. Operator: This does conclude the program, and you may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Sight Sciences First Quarter 2026 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Hannah Jeffrey, Investor Relations. Please go ahead. Hannah Jeffrey: Thank you for participating in today's call. Presenting today are Sight Sciences Co-Founder and Chief Executive Officer, Paul Badawi; and Chief Financial Officer, Jim Rodberg. Also in attendance is Sight Sciences' Chief Operating Officer, Ali Bauerlein. Earlier today, Sight Sciences released financial results for the first quarter ended March 31, 2026, and raised its revenue guidance and maintained its adjusted operating expense guidance for full year 2026. A copy of the press release is available on our website at investors.sightsciences.com. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements, including statements about materials business considerations, 2026 outlook and financial guidance. These statements are based on plans and expectations as of today, which may change over time. In addition, actual results could differ materially from projected results due to a number of risks and uncertainties. For a discussion of factors that may affect the company's future financial results and business, please refer to the earnings release issued prior to this call and the company's most recent SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. Also on this call, management refers to certain financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including adjusted operating expenses. We believe these non-GAAP financial measures are important indicators of the company's operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. See our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures as well as additional information about our reliance on non-GAAP financial measures. I will now turn the call over to Paul. Paul Badawi: Thanks, Hannah. Good afternoon, and thank you for joining us. We delivered a strong start to 2026 with first quarter results that demonstrated a return to double-digit revenue growth, continued strength in gross margin and disciplined operating expense and cash management. We drove solid execution across both segments, Interventional Glaucoma and Interventional Dry Eye. This included a third quarter in a row of revenue growth in Interventional Glaucoma and continued positive commercial traction in Interventional Dry Eye, where revenue nearly doubled from the fourth quarter, representing early validation of our procedural in-office recurring revenue business model. Based on our performance and outlook, we are raising our full year 2026 revenue guidance while maintaining our adjusted operating expense guidance. We are continuing to build an interventional eye care company focused on 2 significant anterior segment diseases, glaucoma and dry eye disease, where we believe procedural options can play a larger role in the treatment paradigm. Our 2 flagship technologies, OMNI and TearCare are designed to address the root underlying causes of disease and can efficiently integrate into established practice workflows. They each support our focus on earlier procedure-based care while helping providers deliver consistent clinical outcomes for patients. We believe there is meaningful customer and patient overlap in our 2 business units, particularly in high-volume cataract and MIGS practices, where ocular surface disease is common and where physicians are increasingly incorporating procedural options in their treatment algorithm. Glaucoma and dry eye disease are often present in the same patient and eye care providers often want to address both as part of the patient's treatment plan. We're already seeing this overlap where we are driving new TearCare adopters from our existing glaucoma customer base. As we continue to drive earlier procedure-based care across these 2 significant market opportunities, OMNI and TearCare can fit naturally along the same patient journey, supporting consistent clinical outcomes for patients as well as practice efficiency for providers. Over time, that broader portfolio participation can help deepen account penetration and support our efforts to scale both of these businesses and drive sustainable growth long-term. Our strategy is to help advance interventional care earlier in the treatment paradigm of both glaucoma and dry eye disease and to accelerate these efforts by leveraging the overlap of our 2 interventional business segments that we call the intersection of intervention. We began to drive momentum from this unique intersection in the first quarter. As we build on this progress, we remain focused on delivering sustainable growth and creating long-term value for our stakeholders. Now turning to our segments. I'll begin with Interventional Dry Eye. In our first full quarter following initial market access, we drove expanded traction in our reimbursed dry eye business and increased customer adoption of our TearCare technology. We are increasing our Interventional Dry Eye revenue guidance by $1 million at the midpoint based on our strong results ahead of expectations and our confidence moving forward. We are very pleased by the commercial traction we generated with our dry eye customers in the first quarter, where we delivered revenue of $1.4 million, nearly doubling our fourth quarter revenue. The majority of this revenue was from our disposable SmartLids, and we sold approximately 1,500 in the first quarter, up from approximately 700 in the fourth quarter of 2025, more than doubling the volume. This includes sales to 96 accounts made up of a balanced mix of new accounts and reordering accounts. Average SmartLids utilization increased from approximately 9 per active account in the fourth quarter to approximately 16 per active account in the first quarter. Our strong dry eye performance is primarily in the First Coast and Novitas regions, where fee schedules were recently established. We are pleased with the early validation of our reimbursed business model and solid customer engagement with TearCare. In addition, we are driving encouraging cross-selling dynamics with approximately half of all active accounts coming from our existing glaucoma customer base and with higher utilization in those accounts versus the Interventional Dry Eye-only customers. These early indicators demonstrate the depth and value of our established relationships and the synergies that exist between our 2 business segments. Importantly, early utilization trends are improving with a growing number of accounts reordering and increasing procedure volumes. For accounts that reordered in the first quarter, utilization more than doubled from fourth quarter volumes. In addition, new accounts onboarded in the first quarter are ramping at higher initial levels than those in the prior quarter. Together, these dynamics point to improved customer targeting and enhanced office workflow training, strengthening adoption and early momentum for scaling this business. We are also focused on supporting practices as they incorporate TearCare into their workflow. A growing number of accounts have successfully completed reimbursed procedures and reordered SmartLids, which we view as a positive early indicator of repeat utilization. This adoption reflects the effectiveness of our targeted commercial approach, prioritizing high-volume dry eye practices with significant Medicare patient volumes. These efforts are translating into meaningful traction with increasing interest from both new and existing accounts, supporting the broader shift towards Interventional Dry Eye care. To build on this foundation, we have continued to expand our commercial team in the first quarter, adding resources in both our sales rep and clinic support functions to enhance execution and deepen provider engagement. Our focus remains on scaling efficiently within established reimbursed markets while positioning the organization to drive meaningful growth as we move through 2026. In parallel, we are also focused on expanding market access through engagement with additional MACs as well as commercial payers. We are actively engaged in discussions with multiple MACs, including detailed reviews of our clinical and economic data and submitted TearCare claims reviews. Based on these activities and discussions, we expect additional payers to establish fee schedules this year. We are encouraged by our continued progress and view expanding TearCare market access as an important catalyst to support long-term growth. Building on a foundation of clinically differentiated technology, initial reimbursement in select markets, ongoing reimbursement discussions and strong commercial traction, we are excited about our opportunity to drive the development of this large and underpenetrated reimbursed interventional dry eye market. Turning to Interventional Glaucoma. Our OMNI technology continues to demonstrate its clinical value within the evolving glaucoma treatment paradigm and its increasing importance as a differentiated technology and durable growth driver in the expanding field of Interventional Glaucoma. In the first quarter, we delivered strong performance and generated the third consecutive quarter of year-over-year growth. Revenue was $18.3 million, up 7% versus the prior year period. Ordering accounts increased 6% compared to the prior year period, driven primarily by reactivating dormant accounts and adding new accounts. The revenue growth was primarily driven by increased volume and price and partially offset by slightly lower utilization per account. We finished the first quarter with a strong March with procedure volumes increasing from a slower than typical start in January and February. Additionally, we drove continued strong adoption of OMNI Edge, which helped in reactivating accounts and adding new accounts. OMNI Edge includes a higher capacity viscoelastic delivery feature while maintaining the trusted safety, efficacy and usability of the OMNI technology platform. For 2026, our Interventional Glaucoma strategy is anchored in consistent execution as we work to expand the combo cataract market and capture additional share as well as further unlock the stand-alone market opportunity. In the combo cataract market, we are focused on adding accounts through training new surgeons, capturing share in existing accounts, expanding adoption and penetration with MIGS-naive surgeons and increasing combo cataract volumes through Interventional Glaucoma activations. In stand-alone, we have hired a dedicated market development team and are encouraged by the early progress they are making in activating stand-alone glaucoma interventions. Together with our differentiated technology and experienced commercial organization, we are in a strong position to deliver our growth targets in 2026 in Interventional Glaucoma. Looking closer at the stand-alone opportunity, as the shift toward earlier interventional treatment continues to shape the glaucoma treatment landscape, our effective market development team has been instrumental in partnering with surgeons and their staff to help them introduce a streamlined and actionable Interventional Glaucoma patient workflow that is modeled after the well-known and proven cataract patient workflow. This differentiated approach is helping practices identify patients and support increased procedural interventions in those practices adopting this workflow. We believe this new Interventional Glaucoma patient workflow partnership with our customers represents an important driver of market development and a growing contributor to long-term revenue growth. Before turning the call over to Jim, I want to briefly touch on the latest regarding our patent infringement case against Alcon. In April, the court issued its final judgment, which upheld the jury's finding of willful infringement by Alcon and confirmed past damages and interest totaling approximately $55 million as well as ongoing royalties of 10% of Hydrus revenue through patent expiration. This ruling is subject to appeal, and no cash has been received to date. To close, we delivered a strong start to 2026 in both our Interventional Glaucoma and Interventional Dry Eye business segments and the progress we made in the first quarter reinforces our confidence in the year ahead, including our decision to raise revenue guidance while maintaining our adjusted operating expense guidance. In Interventional Glaucoma, we generated our third consecutive quarter of year-over-year growth and remain focused on expanding our leadership position in the combo cataract segment while continuing to activate stand-alone intervention. In Interventional Dry Eye, we are encouraged by increasing customer adoption and utilization, and we remain focused on scaling efficiently in markets where reimbursement is in place while working to expand market access over time. We are also excited about the increasing recognition within the eye care community that there is strong patient overlap between Interventional Glaucoma and Interventional Dry Eye. We are uniquely positioned to leverage this synergy with 2 leading interventions for these 2 large and overlapping disease categories as we build something bigger, a leading interventional eye care company. Across the company, we are investing to support growth while maintaining the operating and financial discipline needed to improve cash usage and advance our path toward cash flow breakeven. With that, I'll turn the call over to Jim to walk through the financials. Jim Rodberg: Thanks, Paul. Before discussing the first quarter results, I want to underscore that we are executing against our strategic goals from a position of strength with the operating discipline and cost structure we need to support growth, and we believe this positions us to achieve cash flow breakeven without the need to raise additional equity capital. Unless otherwise noted, my comments reflect results for the first quarter of 2026 and comparisons are to the same period in the prior year. In the first quarter, total revenue was $19.7 million, a 13% increase, driven by growth in each of our 2 Interventional segments. Interventional Glaucoma revenue was $18.3 million, an increase of 7%, driven by increases in ordering accounts and average selling prices and partially offset by lower utilization per account. Ordering accounts grew 6% from the prior year as well as 1% sequentially from the fourth quarter. Interventional Dry Eye revenue was $1.4 million, up from $0.4 million and nearly doubling from the fourth quarter of 2025. Dry eye results were driven by increases in average selling prices, utilization and ordering accounts, reflecting strong momentum in our reimbursed Interventional Dry Eye business model. Gross margin was 86%, flat compared to the prior year. Interventional Glaucoma gross margin remained strong at 87%, in line with the prior year period on higher average selling prices and product mix, slightly offset by tariff costs. Interventional Dry Eye gross margin was 72%, up from 71% in the same period in the prior year, primarily due to higher average selling prices and increased SmartLids sold, mostly offset by a onetime inventory overhead adjustment in the prior year. Over time, we expect our dry eye margins to continue to improve as we scale our reimbursed business model and offset absorption and overhead costs. Total operating expenses were $29.4 million, an increase of 2% compared to $29 million. primarily due to a $5.4 million one-time fee earned upon a successful final judgment in the Alcon litigation case described above. Excluding this fee, operating expenses were down 17%, driven primarily by lower personnel-related expenses and stock-based compensation. As a reminder, we conducted a reduction in force in the third quarter of 2025, and this past quarter was the second full quarter of our lower cost structure. Adjusted operating expenses were $21.2 million, down 14% compared to $24.7 million. Net loss was $13 million or $0.24 per share compared to a net loss of $14.2 million or $0.28 per share. We ended the quarter with $85 million of cash and cash equivalents compared to $92 million at the end of 2025. Cash used was $7 million in the quarter, which was down significantly from $11.6 million in the first quarter of 2025. We ended the quarter with $40 million of debt, excluding unamortized discount and debt issuance costs. Moving to our revenue outlook for full year 2026. We are raising revenue guidance to $83 million to $89 million, which reflects growth of 7% to 15% compared to 2025 versus the prior guidance of $82 million to $88 million. This includes revenue for our Interventional Glaucoma segment of $77 million to $81 million, representing growth of 2% to 7% and our Interventional Dry Eye segment of $6 million to $8 million compared to $1.6 million in the prior year. This guidance reflects our philosophy of setting achievable targets and our focus on disciplined execution and the growth we believe we can deliver. Looking closer at the second quarter, we expect total revenue to grow low-double digits compared to the second quarter of 2025. We expect Interventional Glaucoma to grow mid-single digits compared to the second quarter of 2025. Interventional Dry Eye revenue is expected to be in the range of $1.5 million to $2 million in the second quarter, and we expect that revenue to continue to scale throughout the year. We are reaffirming our full year 2026 adjusted operating expense guidance of $93 million to $96 million, representing an increase of 6% to 9% compared to 2025. The increased spend compared to the prior year is driven by targeted commercial investments to capture growth opportunities in both Interventional Dry Eye and Interventional Glaucoma, while we continue to manage the business with operating discipline. We are pleased with our return to double-digit revenue growth in the first quarter. Looking ahead, we are excited to continue pioneering the Interventional Glaucoma and Interventional Dry Eye markets, and we are laying a strong foundation for sustainable growth and continued success. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Frank Takkinen of Lake Street Capital Markets. Nelson Cox: This is Nelson on for Frank. Congrats on the solid progress. Maybe just to start, I want to start on the SmartLids utilization stepping from 9 to 16 in the quarter per active account. So, a strong read there. For your most mature kind of fully reimbursed accounts, can you talk about that steady state utilization and how we should think about that trajectory for the broader kind of installed base moving forward? Alison Bauerlein: Yes. Thanks, Nelson. And it's a great question. And the good news is I don't think we're anywhere close to a steady state yet. All of our accounts are still relatively early in their usage of TearCare across their Medicare -- traditional Medicare fee-for-service population. And so, I think even our largest accounts are not yet fully activating this across their patient population. And then, of course, once we can also get additional coverage, that will also allow our customers to treat more and more patients across their patient pool. I will say when we look at our customer mix, there are a handful of accounts, probably 10% of the accounts that are driving a larger portion of the total volume here. And that's -- those are accounts that have really figured out the workflow, how to put this into their overall practice. And frankly, we're really proud of the progress that we had in the first quarter, almost 100 active accounts. These accounts are really like the true early adopters of TearCare, the true believers in the future of procedural dry eye interventions. And we really see all of our customers are still very early in their utilization curves, which is really just a testament to how large this market is and how many patients could benefit from a procedural dry eye intervention. Nelson Cox: That's very helpful. And then just quickly, you called out adding sales reps and clinical support resources during the quarter. Can you maybe size the Interventional Dry Eye team today and where we should see that going just throughout the year? Alison Bauerlein: Yes. So, we're not going to provide a detailed sales force headcount every quarter, but we did incrementally add in the quarter. I know we reported at the end of 2025, we had about 10 between our direct sales force as well as clinical specialists. So that team is still very small and growing. So, we are investing in the team, really focused on those First Coast and Novitas areas where we have Medicare fee schedules established, and we would expect to continue to grow that team throughout the year. Operator: Our next question comes from the line of Adam Maeder of Piper Sandler. Adam Maeder: Congrats on a good start to the year. Two for me. And I guess the first one, I wanted to start on Interventional Glaucoma. And I really was hoping you could kind of double-click and contextualize the good result there, the plus 7% year-over-year. Curious to get your view on kind of underlying market trends, competitive dynamics. I think one competitor may have had a little bit of a supply issue, pricing. And then you obviously talked about some increment weather. So did you recapture those patients in the quarter. So just maybe kind of bring that all together for us? And then I have a follow-up. Paul Badawi: Yes. Hi, Adam. We're excited to be back in growth mode in IG, in Interventional Glaucoma. The glaucoma community recognizes now that intervening earlier is better long-term for patients. So, there's this real tailwind in the ophthalmic community. You can feel it. We were just at ASCRS, A-S-C-R-S, American Society of Cataract and Refractive Surgery meeting last month, and there's just so much talk around earlier intervention, both IG, Interventional Glaucoma as well as IDE, Interventional Dry Eye. On the glaucoma side, we all know there's millions of glaucoma patients that are currently on medications and could benefit from an earlier intervention. That market is growing. We're excited to be a leader. We're the leading implant-free microinvasive glaucoma surgical option in the market. And over time, as this category grows, we expect to continue to innovate and lead the category we've created. We've got new technology coming out. We're trying to stay ahead of the market with OMNI Ultra later this year. It's our third straight quarter of year-over-year growth. So, we're excited about that, excited about the tailwind of Interventional Glaucoma and continuing to lead as the implant-free market leader in IG. Jim Rodberg: Adam, this is Jim. On the Q1 dynamics, we closed the quarter very strongly. As you can imagine, March tends to be a pretty significant part of the first quarter and team executed really well. And we leave the first quarter feeling really good about where we're at. We had strength in March. We expect that strength and momentum to continue into Q2 and the balance of the year. And overall, confident about our path forward. Adam Maeder: Okay. Fantastic. Very helpful color and great to hear the comments on the market. And then maybe switching over to dry eye. Congratulations, Ali, on the progress there. I wanted to push a little bit in terms of market access and try and better understand the expectations for new payer adds, whether it's on the commercial or the MAC side. I'm not sure if you can be any more specific in terms of potential timing there. And I guess, really, the -- one of the questions I have is, can you hit the updated $6 million to $8 million without any additional payer wins? Alison Bauerlein: Yes. Thanks for the follow-up here. And of course, we are also very focused on increasing reimbursed access to TearCare with both Medicare payers as well as commercial payers. We're having continued good conversations across the payer mix really focused on the SAHARA data, the health economic data and also showing claims utilization and interest in the procedure. And so we are, of course, building a category here. It does take time. We still expect to have additional payer wins in 2026. It is hard to predict exact timing there, but we fundamentally don't feel any different about our ability to get payer wins over time here to get access to this technology for our patients and our ECP provider partners. I will say that we do have some incremental positive movement with -- there are some commercial payers that are paying regularly, while they haven't established coverage policies. There are payers that are moving towards those types of activities, and we feel good about it. In terms of guidance, yes, we still feel extremely confident -- the guidance is put in place that only takes into account First Coast and Novitas fee schedules in place for 2026. And really, that market potential alone is still very large for us. We're still a very small fraction of the patients that have moderate to severe dry eye disease with MGD even within that traditional Medicare fee-for-service population. So very much early stages, and it's a large market, and we feel very good that we set appropriate guidance, taking into account all those factors for the areas where we currently have fee schedules established. Operator: Our next question comes from the line of Steve Lichtman of William Blair. Steven Lichtman: Congratulations on the progress. Wondering if you could talk about customer accounts for dry eye in the regions that you are approved with reimbursement. What's your latest view on sort of the denominator, the number of viable centers that you think are target sets for you within the regions that you're currently in? Alison Bauerlein: Yes. I'm going to shift that question a little bit and talk about ECPs, eye care providers because that's an easier way of thinking about this opportunity. When we talk about across the U.S., really the targeted payers -- targeted providers that do a lot of prescription eye drops, do procedural interventions for dry eye, have strong populations of patients here. We've talked about historically about 6,500 ECPs fall into that bucket as kind of that initial target population. Within First Coast and Novitas, there's 2,000 ECPs that would meet that same criteria. So, we are still very small. Obviously, active accounts is a little different than eye care provider counts. But even with there being a couple of ECPs per active account, we're still very much in the early penetration days of the opportunity within First Cost and Novitas. Steven Lichtman: Great. And then just a follow-up on the patent suit. Obviously, a decent amount of cash pending here for you guys. Either Paul or Jim, can you talk about the next steps here? I think Alcon has an opportunity to potentially appeal, but within the next couple of weeks, if that -- or there could be a settlement. What's the next steps and remind us of the interest accrual if it does go to appeal? Jim Rodberg: Yes. So, I can give an update on at least the amount. So, in April of this year, final judgment was issued and that preserved the jury verdict from 2024. That awarded us updated damages, interest and royalties of approximately $55 million as well as ongoing royalties of 10% of future Hydrus sales through the patent expiration. We have not received any cash to date, and we will not book anything, obviously, until such time when appeals would be exhausted and cash would change hands, for example. The final judgment is subject to appeal. And beyond that, we won't comment further on pending litigation, but we feel we are in a very strong position in this case. Operator: Our next question comes from the line of Tom Stephan of Stifel. Thomas Stephan: First one on dry eye. Nice to see the guidance raise already really strong sequential growth in utilization. Maybe I'll just ask sort of a big picture question. Like what have been, call it, the top one or two upside surprises or learnings amidst kind of this relaunch, if you will? And part two to that, how do you feel about the playbook you're developing for when different markets and patient populations hopefully unlock and sort of your ability to deploy that quickly? I'll leave it there. Alison Bauerlein: Yes. So, one to two areas, we've had a lot of learnings since launch, and most of them have been very positive, both about how large of an opportunity this is, how many patients really are looking for a better treatment, but also the synergies with our IG business. That's probably the largest benefit that we've seen is that those accounts are a large part of the accounts that have activated in these early stages. They have larger traditional Medicare fee-for-service populations, and they are looking for ways to help their patients who also experience a significant amount of dry eye. And so that is a very large part of our initial launch here, initial success. And we also see that those accounts are having higher utilization than the non-IG synergistic accounts. So really positive momentum there and good synergies across the team. In terms of the playbook and what we see as we move forward here, there is still a lot of workflow activation that needs to occur when account decides that they want to implement procedural dry eye. So, we do think that this is involved with people, people really being in accounts and helping the clinics set up their workflow, identify the patients and identify how best to put them into a dry eye treatment workflow. And so, because of that, we do think that as we have additional market access wins, particularly in new geographies, that will involve additional commercial investments as we grow the team and, of course, work with the accounts that we already have in those areas as well. And then as we have additional density happening with additional payers coming on in already markets where we have Medicare fee schedules, those are easier to activate because those accounts is just adding new payers that can process and add those patients into that same workflow. Over time, that may also shift the accounts that we're targeting. As you know, we are targeting right now a lot of those higher-volume ophthalmology practices that do have a lot of Medicare patients, which is where we're seeing the synergies with IG. Over time, that population may shift where we know that there is -- when we look at the dry eye disease market, 70% of patients are covered by commercial plans and 30% are being covered by Medicare or Medicare Advantage plans. And so right now, we're targeting a subset of a subset there. As we get the commercial plans, that can really shift our strategy in terms of account targeting and where we look to really partner with people. But we're really happy with the progress we've seen in terms of creating workflow within accounts, and it is being replicated very efficiently across accounts so they can work TearCare into their procedure flow, whether that's I'm going to have a TearCare day or I'm going to have multiple TearCare afternoons or TearCare morning. They tend to stack them up in the day to be efficient. But all of that is being worked through and then we're having the assessment upfront to identify those patients that may benefit from a procedural dry eye intervention and working that into the workflow. So, a lot of different things coming together right now, but we do think we're in a good spot to continue to execute across this new area. Paul Badawi: And Tom, I just want to add a few thoughts to Ali's comments around the intersection. Sight Sciences started -- we were born interventional. We started with OMNI and then we developed TearCare. These are 2 very strong interventions for 2 of the leading diseases in eye care. So, while that's been our philosophy, I think what we've seen and we've been pleasantly surprised by is the rate at which our customers and specifically surgeons, as Ali mentioned, have recognized the overlap of these 2 disease categories and the possibilities of offering these same patients multiple interventions. So, the alignment between the ophthalmic community and our philosophy of building an interventional eye care company has come faster, I'd say, than even we expected. When we go out in the field and we meet with our happy OMNI surgeons and we're working with our dedicated commercial team, it's amazing how many of our glaucoma surgeons talk about how many of their glaucoma patients have dry eye disease, and they're complaining about their dry eye disease because you can feel that. They're not complaining about their glaucoma because it's a silent disease, unfortunately. And so, the -- us being able to show up as their interventional partner having an intervention for their glaucoma patients, having an intervention for their glaucoma patient who also has dry eye disease. It's a very powerful partnership. And I think we're just -- we're surprised and very happy about how fast the community is acknowledging that. We're calling it again internally IX. It's the intersection of intervention. It's this proprietary angle we have, and we're looking forward to like driving the benefits and the synergies of these interventional platforms to reach more patients with better interventions, offering better care more quickly. Operator: Our next question comes from the line of Joanne Wuensch of Citi. Joanne Wuensch: You seem to be making a fair amount of progress on expense management, cash management and everything else that goes along with it. Can you sort of give us a view on your philosophy of how do you balance everything that you're doing in terms of penetrating the MAC and educating the physicians and ramping them with the other metrics that we come to view and love on the side of Wall Street. Jim Rodberg: Joanne, thanks for the question. I'll take that one, and Paul and Ali can add as needed here. But we're in a really good spot with a really healthy balance sheet and a strong pathway to cash flow breakeven, while at the same time, having the ability to go invest in these 2 significant opportunities. As we look at 2026, the most important investments for us this year are in -- on the dry eye side, both in market access resources as well as commercial resources to scale up that business in markets where we already have reimbursement. And then on the glaucoma side, continuing to invest in the stand-alone opportunity there. So, the balance for us is we want to make disciplined, high-return investments. And we're fortunate, I think, to have the flexibility to go faster on some of those investments where there's outsized opportunity for growth. Paul Badawi: And the only thing I would add to that, Joanne, on the R&D front, look, we have a history of developing -- cost effectively developing clinically differentiated interventions that can elevate the standard of care. I think we've done that well with OMNI. We've done that well with TearCare. We're making very selective -- we've got a number of selective R&D programs that we're investing in that we're going to be very excited about, all within this interventional category as we build a focused interventional eye care company. But we've got very interesting pipeline that we're developing cost effectively. And in due course, we're looking forward to sharing more about that, hopefully later this year. Operator: Our next question comes from the line of David Saxon of Needham & Company. David Saxon: So, I wanted to ask a similar question to Adams, but from a slightly different angle. So, I think you're only in 4 of the 13 states in First Coast and Novitas, those 2 regions or jurisdictions, I should say. So, does the guide assume you get into any more of those states? Or is the 6% to 8% really just reflective of presence in like a fraction of the total immediate opportunity? Alison Bauerlein: Yes. So, to your point, we have sales really across -- first of all, most of the 13 states, we have some level of sales. So, we do have some sales support across them. But you are right, we do have density within 4 or 5 main states that have the majority of the sales resources in them. We do expect to continue to expand the resources there, whether we expand them within those specific 4 to 5 states as there are still opportunities, as you can imagine. One rep in Florida would not be sufficient to cover the entire state of Florida, for example. So, we are looking at where we invest those resources. The plan does take into account that we do have incremental investments in commercial resources in those areas. We aren't going to get into specific territories or how we're going to break that out. But all of that is accounted for in our operating expense guidance. So, we have already adjusted for that appropriately. David Saxon: Okay. And then on the IG side, Paul or Ali, would love to get an update on Omni Ultra timing of that clearance. And is that embedded in the IG revenue guidance? Or would that be upside when that comes out? Paul Badawi: Yes, David, this is Paul. We are in discussions with the FDA on OMNI Ultra. While nothing is definitive, as everybody knows, with 510(k) clearance pathways, we feel confident that we should have a clearance, hopefully, within the coming months, certainly by the end of the year. So, we're very excited to launch Ultra, again, hopefully, by the end of the year it will be out in the market. It's got a number of great features, surgeon informed. We obviously partner very closely all the time with our surgeons and take their feedback to continue to innovate in IG and move the OMNI platform forward and stay ahead. It's got single pass, single incision, single pass 360. It's got viscoelastic delivery on both advancement and retraction, which is a really nice feature. It's got markings on the catheter to tell the surgeon how far they've advanced. It's got better ergonomics. The handle has better ergonomics. It's got a number of features that we think will help elevate this category even further. Hopefully, it's getting released by the end of the year. We don't know when, ultimately, we can't predict with specificity when the clearance will come. I can say this. We've put out guidance that we are very confident we can deliver regardless of when Ultra arrives. Hopefully, it arrives sooner rather than later, and we can do even better. Operator: This concludes the question-and-answer session. I would now like to turn it back to Paul Badawi for closing remarks. Paul Badawi: Thank you all for attending today's call. We appreciate your interest in Sight Sciences, and we look forward to updating you on our progress in the future. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Greetings, and welcome to the ElectroCore First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. Earlier today, ElectroCore published results for the first quarter ended March 31, 2026, and the press release is available on the company's website. Before we begin, I would like to remind everyone that members on the call will make forward-looking statements within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements that are not historical facts should be deemed to be forward-looking, including, without limitation, any guidance, the company's outlook on second quarter and full year performance, and its path to profitability. These statements involve material risks and uncertainties that could cause actual results to differ materially from those anticipated. For a list of risk factors, please see the company's filings with the Securities and Exchange Commission. ElectroCore disclaims any obligation to update these statements, except as required by law. This call contains time-sensitive information accurate only as of today, May 6, 2026. Joining us on today's call from ElectroCore are Dr. Thomas Errico, one of the company's founders, Investor and Independent Chairman of the Board of Directors; Joshua Lev, Interim President and Chief Financial Officer; and Mike Fox, recently appointed Chief Operating Officer. It is now my pleasure to turn the call over to Dr. Thomas Errico, ElectroCore's Founder and Independent Chairman, for opening remarks. Dr. Errico? Joseph Errico: Thank you, Amanda. Good afternoon, everyone, and thank you for joining ElectroCore's First Quarter 2026 Earnings Call. This is the first earnings call since we announced our leadership transition, and I want to take a moment to share how encouraged I am by the progress we have made executing that transition and by the momentum we continue to see across the organization. Since stepping into the role of Interim President, Josh has provided steady, disciplined leadership while maintaining his focus on financial rigor. The alignment between our operational priorities and our financial strategy has been evident, and the organization has responded with focus and urgency. The strategy has not changed. The execution has not slowed. If anything, the focus across the organization has sharpened. At the same time, Michael Fox joined us as Chief Operating Officer on April 13, bringing more than 35 years of commercial leadership experience across complex health care markets, including extensive work within the federal systems and the U.S. Department of Veterans Affairs. In just 3 weeks, his depth of experience has already provided valuable insights to strengthen our execution, particularly as we continue to expand our presence within complex government channels.?He will introduce himself shortly. Importantly, this transition has not slowed us down. It has reinforced our foundations. We remain firmly committed to our strategy, driving growth within our covered entities, advancing our clinical and scientific leadership in noninvasive vagus nerve stimulation, and expanding our reach into the consumer wellness market. And we are doing so with discipline, managing the cost base, expanding the margin, and protecting our path to profitability. In our clinical work, we continue to invest in the evidence base that underpins our portfolio. That evidence remains a key differentiator as we engage with providers, payers, and partners globally as well as domestically, and it positions us to expand into new indications over time. In the VA, where we have built a credible commercial presence over many years, we believe we have a meaningful long-term opportunity. Our commercial leadership is leveraging Mike's experience to identify new ways to be more targeted and more effective, particularly within a system where we still have substantial room to penetrate. On the consumer side, we are building a scalable direct-to-consumer channel with increasing brand visibility, improving unit economics, and a growing network of influencer and affiliate partners that resonate with audiences seeking non-pharmacologic, science-backed wellness solutions. The early traction we are seeing reinforces our belief in the broader applicability of our technology and its relevance to everyday wellness. What gives me the greatest confidence is not just the program itself, but how it is being achieved with discipline, alignment, and a clear sense of purpose across the organization. We are building a strong foundation, and we are doing so in a way that positions the company for durable long-term growth. While our search for a permanent CEO continues, I am confident that the team we have in place today, Josh, Mike, and the broader leadership group, is the right team to execute against our priorities and carry our strategy forward. I look forward to updating you on our continued progress in the quarters ahead. With that, I would like to introduce our new Chief Operating Officer, Mike Fox. Mike? Unknown Executive: Thank you, Tom. Good afternoon, everyone. I joined ElectroCore for one reason. I saw a science-based platform technology with proven published clinical outcomes data that support a credible commercial foundation and significant room for growth, particularly within the federal channels where I spent most of my career. Three weeks in, that conviction has only strengthened due to my greater exposure to the existing and future data sets being gathered. I?also had the opportunity to meet a vast number of talented colleagues within the company who are dedicated to the mission and the patients we serve. So, rather than walk through my background, let me tell you what I've been focused on and where the opportunity exists. A major priority is the VA and Department of Defense markets. We have just scratched the surface of penetrating the addressable VA headache market. So we have patients being treated with our products in VA medical centers across the country, but we're not attaining the utilization level that meets the needs of our veterans and the dedicated providers caring for these military heroes. The majority of new patients identified and prescribed our products in Q1 are not spread across the country as expected or needed. That tells me 2 things. One, we have built real distribution; and two, we are nowhere near saturation. My focus is moving from facility breadth to facility depth, more prescribers per site, more patients per prescriber, and a more consistent customer experience across the system. My second priority is the broader federal channel. The VA is our largest entry point, but it is not the only one. The Department of Defense across all service branches represents an underdeveloped opportunity for both our prescription products and for TAC-STIM. Given the heightened tempo of U.S. military operations abroad, the demand environment for noninvasive, drug-free performance-supporting solutions has only intensified. I spent the last 3.5 decades building relationships in these channels, and I intend to put them to work for this company. My third priority is operating discipline. Josh and the team have built a high-margin business, 87% gross margin in Q1, and you're starting to see operating leverage show up in the numbers. My job is to make sure that as we scale, incremental revenue translates to incremental bottom line, not incremental costs. We intend to grow this business efficiently while we establish ElectroCore as a partner of choice to ensure market stability in the years ahead. I'm 3 weeks in, but trust that my experience in developing company growth and success is from decades of learning and proven execution strategies. I'm truly excited about the opportunity presented to me here at electroCore. There will be much more for me to share over the coming quarters, but I'm convinced that what is in front of us is real, and I'm truly grateful to be a part of it. With that, I will turn the call back over to Josh to walk through the quarter. Josh? Joshua Lev: Thank you, Mike. Before I get into the details, let me tell you what this quarter represents for electroCore. We just delivered our highest revenue quarter ever, $9.6 million, up 43% year-over-year. Gross margin expanded to 87%. GAAP net loss was $5.3 million, and adjusted EBITDA loss improved by 24% to $2.3 million. That combination, accelerating top line, expanding margin, and improving adjusted EBITDA loss in the same quarter, is demonstrating operating leverage, and it is the clearest signal yet that we are executing on our strategy. We are reaffirming our full-year 2026 revenue guidance of approximately 30% growth. As I'll discuss in a moment, the catalysts in front of us for 2026 give us conviction in that outlook. Now to the details. The VA hospital system remains our largest customer, and growth there continues to accelerate. Prescription device revenue increased 48% year-over-year to $7.9 million. Within that, prescription gammaCore grew 26%, and Quell sales surpassed their first $1 million quarter. Since we acquired the Quell assets from NeuroMetrix in May 2025, Quell fibromyalgia has generated $2.5 million in cumulative revenue, and we are still in the early stages of placing that product across the VA system. As of March 31, approximately 15,000 VA patients have received the gammaCore device, which we estimate represents roughly 2.5% penetration of the addressable VA headache market. The underlying patient population continues to expand. A 2024 study published in JAMA Network Open of nearly 500,000 U.S. veterans found that 8.2% of male and 30.1% of female veterans report a history of migraine, roughly 3x the rate observed in the civilian population, and that approximately half of veterans with migraine also meet criteria for PTSD. The U.S. Department of Defense has reported more than 485,000 service members' traumatic brain injury diagnoses since 2000. Combining with the Veterans Health Administration's emphasis on non-opioid first-line treatment for chronic pain, we believe the runway for prescription gammaCore adoption inside the VA is long, and we are still early. Turning to our consumer wellness channel. Revenue reached $1.6 million in the quarter, up 44% year-over-year, with Truvaga contributing $1.5 million, up 38% from Q1 of last year. This quarter, we deliberately tempered top-line growth in favor of efficiency, and the results are showing up in the unit economics. Our return on advertising spend, or ROAS, was approximately 2.37 in the period, a 14% improvement over the prior quarter. In plain English, every dollar we spent on Truvaga-related media generated nearly $2.37 of revenue. That improvement was driven by a concentrated shift toward affiliate and influencer partnerships that reach consumers already interested in wellness and in vagus nerve stimulation specifically. Return rates remain in the 12% to 15% range, consistent with prior periods. We believe the macro environment for our consumer wellness offering is meaningful. The Centers for Disease Control reports that approximately 24.3% of U.S. adults experienced chronic pain in 2023, up from 20.4% in 2019. Independent industry research projects the global noninvasive vagus nerve stimulation segment will expand at a low double-digit CAGR through 2030, supported by aging demographics, the regulatory and clinical pivot towards non-opioid pain management, and rising consumer awareness of the vagus nerve. We believe Truvaga is well-positioned to capture a meaningful share of that growth. On to TAC-STIM, our human performance product. While quarterly TAC-STIM revenue has historically been variable, the underlying demand environment for cognitive performance and fatigue mitigation in the active duty military and federal channels is robust and getting more robust. Given the heightened tempo of U.S. military operations abroad, particularly around remotely piloted aircraft, drone defense, and other extended duration mission profiles, the need for noninvasive, drug-free solutions to support war fighter alertness, focus, and resilience has only grown. TAC-STIM is the subject of ongoing research and evaluation across the U.S. Air Force Special Operations Command, the U.S. Army Special Operations Command, and the Air Force Research Laboratory, and was previously selected by AFRL for inclusion in the real-time assessing and augmenting cognitive performance in extreme environments program, a program designed in part to support multi-day transoceanic operations and long-duration remotely piloted aircraft missions. With Mike now leading our commercial operation, we see a meaningful opportunity in 2026 and beyond to deepen our engagement and to pull TAC-STIM through as a more consistent revenue contributor. Now to the financials. Net sales of $9.6 million represented 43% growth over the prior year, driven by gammaCore and Quell within the VA and continued growth in Truvaga. Gross profit was $8.4 million with gross margin expanding to 87%, a 200 basis point improvement year-over-year. Research and development expense was $740,000, up modestly from the prior year, primarily reflecting work on the ACACIA PTSD study. Selling, general, and administrative expenses were $12.9 million. That number includes approximately $1.9 million of nonrecurring leadership transition costs and $300,000 of legal expense related to the ongoing IP litigation. Excluding those items, the year-over-year increase was driven by approximately $1.6 million of variable expense, supporting our $2.9 million revenue increase, a clean illustration of how the cost base scales with the top line. Other expense of $276,000 includes interest associated with the convertible term debt financing we put in place with Avenue Venture Opportunities Fund. GAAP net loss in the first quarter was $5.3 million compared to $3.9 million in the prior year period. This increase was driven primarily by the $1.9 million in nonrecurring leadership transition costs. Net loss per share was $0.59 compared to $0.47 per share in the same period last year. Excluding the leadership transition expenses, net loss per share was $0.37. And now I want to draw your attention to the 24% improvement in our adjusted EBITDA loss, which I believe is an important indicator of the operating leverage we are building. Adjusted EBITDA loss for Q1 was $2.3 million compared to $3.1 million a year ago. That improvement happened in a quarter where we absorbed $1.9 million of nonrecurring leadership transition expenses. Strip those out, and the operating leverage in this business is even more evident. Revenue grew 43%, and adjusted EBITDA loss narrowed 24%. As we scale further, that gap is what gets us to profitability. A reconciliation of GAAP net loss to non-GAAP adjusted EBITDA net loss is provided in the financial tables in today's press release. Turning to the balance sheet. Cash, cash equivalents, and marketable securities were approximately $8.8 million at March 31, 2026, compared to $11.6 million at December 31, 2025. One important note on cash. Q1 is historically our highest cash burn quarter of the year. This year, certain working capital items, primarily the timing of inventory and capital improvements to our Rockaway facility, may extend a portion of that burn into the second quarter. We are managing the balance sheet with discipline and remain focused on the operating efficiencies that support our path to profitability while also evaluating available capital resources, including our existing shelf registration statement and at-the-market facility. Before we open the call for questions, I want to spend a minute on the catalysts ahead of us in 2026 because the runway from here is significant. First, R&D and nVNS as a platform technology. We continue to work towards a platform of products that can be sold through our established sales channels. This comes in the form of indications, products, and features. The body of evidence supporting the therapeutic potential of nVNS continues to expand. A new publication in Frontiers in Neuroscience entitled ‘Adjunctive non-invasive vagus nerve stimulation for chronic mild traumatic brain injury with comorbid post-traumatic stress disorder, a post-hoc analysis highlighted findings on the potential benefits of adjunctive noninvasive vagus nerve stimulation in patients with mild traumatic brain injury and PTSD. Additionally, approximately 20 participants have enrolled in the clinical study conducted by Acacia Clinics in collaboration with the Vagus Nerve Society, designed to evaluate the safety and effectiveness of electroCore's gammaCore nVNS device as an adjunctive treatment for symptoms associated with PTSD. PTSD is a breakthrough device designation for us. And as the data matures, we expect it to become an increasingly important part of the platform story. Work on our next-generation Truvaga and Quell mobile platform is underway. We are developing a mobile application designed to complement our consumer products, deliver more personalized features and user experiences, and, if done right, open the doors to recurring revenue, deeper engagement, and richer real-world data. Second, we remain focused on opening additional commercial channels for our products. Beyond continued VA penetration, Mike's mandate includes expanding our commercial and federal channel presence. This includes areas such as Kaiser, federal workers' compensation programs, TRICARE, and broader adoption within active duty military and the Department of Defense. With TAC-STIM already engaged across Air Force Special Operations Command, Army Special Operations Command, and the Air Force Research Laboratory, we see meaningful opportunity for additional federal contract activity. Quell continues gaining adoption through our current sales channel and primarily within the VA. Sales of the Quell product line surpassed $1 million in quarterly revenue for the first time in Q1 2026, bringing cumulative Quell revenue to approximately $2.7 million since the acquisition from NeuroMetrix in May 2025, including $2.5 million of Quell fibromyalgia sales in the VA. We have a small cohort of legacy Quell over-the-counter users and expect to relaunch the over-the-counter Quell relief for lower extremity pain later this year. Earlier this year, in January 2026, we launched Truvaga in the United Kingdom. And as that business scales, we expect to evaluate additional markets. Third, perhaps the most important catalyst of all, is our path to profitability. The math is straightforward: mid-80s gross margin, accelerating top line, increasingly disciplined cost base. We are not yet ready to provide a specific quarter for breakeven, but that trajectory is clear, and Q1 is the strongest evidence yet that we are on. Taken together, these catalysts underpin our reaffirmed full-year 2026 revenue guidance of approximately 30% growth, which translates to roughly $9 million to $10 million of incremental revenue versus our $32 million in 2025. We expect the majority of that growth to come from continued VA prescription growth, where Q1 alone delivered prescription device revenue of 48% year-over-year. Truvaga growing in the high 30% range and improving in efficiency is our next meaningful contributor. Quell Relief and our international launch represent newer contributions that we hope to scale through the back half of the year. TAC-STIM, while historically variable, represents potential upside as Mike deepens our federal engagement. And our next-generation mobile platform is a 2027 contributor that opens the doors to recurring revenue over time. In short, 3 catalysts, a clear 30% growth bridge from 2026 and a longer runway into 2027 and beyond. With that, I would like to open the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from Jeff Cohen at Ladenburg. Destiny Buch: This is Destiny on for Jeff. I just wanted to touch on the VA channel a little bit, and this is going to be a multipart question. But I'm wondering, as you move away from breadth and more towards depth in this channel, does that change the structure of your sales force in terms of W-2 versus 1099? And then how are you balancing expanding into new sites versus additional patient treatment or additional patients treated, I should say? Joshua Lev: Hi Destiny, thanks so much for the question. Really appreciate it, and I appreciate you being on the call today. I think the best person to answer that question will be Mike. Mike, why don't you jump in and let everyone know what your strategy is? Unknown Executive: Yes. Thanks, Josh. I think the question is a really good one because I don't believe it's an either/or in my experience, we definitely want to expand breadth. We do have VA utilization across the country, but the depth in various specialties and within various patient segment groups is not where it needs to be. I'm a fan of the 1099 model. I'm a fan of the W-2 model. In my history, as long as we have strong performers that are aligned with the strong mission to help our veterans, we can build a really strong opportunity around that. So, I don't see this being a big change as much as just an internal alignment focus and opportunity for us to ensure that we're setting appropriate expectations and really hold people accountable to exceeding those expectations for both our gammaCore line and the Q. Destiny, does that answer your question? Destiny Buch: It does. I think I would also just be curious what your target is for the number of clinics for the end of 2026, perhaps a range from that 200 number? Unknown Executive: That depends on right now when we say clinics. I really like. Clinic centers. Yes, the VA medical centers depend on what number you want to utilize. I've always been in the belief that we're not helping at least 75% of the facilities across the country help the vets. We're not doing our job. I don't know about an exact number, but we need to get really active and have consistent utilization of our products and treat veterans in at least 75% of those accounts on a monthly basis. Destiny Buch: And then, as you go into these other DoD channels, how does that process compare to the VA centers? Is it similar in terms of timing? Unknown Executive: It probably will be a different story altogether because, as you know, they're both under FSS, but the Department of Defense accounts, like the military health centers, also include the TRICARE component. So there are different segments. But from a timeline perspective, the VA usually takes a long time to get things established due to FSS and working with our customers, like global government services for some things. On the Department of Defense side, I would expect by sometime Q3 or Q4, with our plan in place, that we'll start seeing additional revenue. Destiny Buch: And then I guess transitioning over to wellness and Truvaga, you have really strong ROAs this quarter, which I think is fantastic. I'm just wondering if there were any changes to the marketing channels that played into that stronger ROAS. Unknown Executive: Yes. I'd say that's a great question. It's not so much a change in the marketing channels. It's more a function of where we are deploying and investing our resources. We made a more concerted effort to work on affiliate programs and influencers. You may have seen that Miranda Kerr posted about us earlier. That's a co-marketing opportunity that we have. Those are opportunities where what we could do is utilize and leverage the marketing budgets of other people so that they're actually the ones that are putting out there the marketing messaging. And really, what we're doing is using that halo effect to help lift our efficiency. So it's not so much a change per se. I wouldn't say that we cut out any of the other channels or media that we've done before. We're just reallocating the resources and looking at it slightly differently. Destiny Buch: And have you noticed any differences in repeat purchase behavior or anything of that nature compared to last year? Unknown Executive: Not yet, but we also haven't given any formal guidance on that either. But I would say not yet for the time being. Everything seems to be business as usual. Operator: Our next question comes from Fozia Ahmed from Brookline. Fozia Ahmed: First, Mike, thank you for joining the call and coming on board. We look forward to engaging with you. My question is on the FRONTIER study on PTSD patients, which was very compelling. I was wondering if you could just remind us how this study is aligned with the ongoing ACACIA trial. Is it set up the same, whether the outcomes are actually designed to capture the same outcomes that were published in FRONTIER or something different? Unknown Executive: It's something slightly different. Both of them are there to capture patients with PTSD and the effects of utilizing noninvasive vagus nerve stimulation on patients with PTSD. The actual protocols themselves are slightly different. And you can look those up on the IRBs if you'd like. But in essence, the idea here is how to aggregate different data points that have PTSD as being tested in a patient population, but the populations themselves may be slightly different. Fozia Ahmed: And then I have a follow-up question. There's a breakthrough designation attached to PTSD. Are there any ongoing discussions with the FDA at this point? Unknown Executive: So in previous quarters, we've given information and spoken about how we've gone back and forth with the FDA in terms of the best way to approach expanding the breakthrough designation to what would be a formal PTSD label. What we're doing with a lot of the work now, primarily with the ACACIA study and what you just referenced a moment ago, is really aggregating more data points and information that we can bring to the FDA to have a full rollout of what would be a PTSD indication and a full label. And we're doing that sort of in conjunction with them in that they've identified or articulated to us what they're looking for. And based on that information, we're looking to take that and aggregate the data set to provide to them to ultimately apply for the full form PTSD. Operator: Our next question comes from RK Ramakanth at H.C. Wainwright. Swayampakula Ramakanth: Good afternoon, Joshua, and welcome aboard, Michael Fox. Hopefully, you guys are able to hear me. I have two or three questions. So Josh, just starting off, thanks for reiterating the 30% growth for 2026. But during the first quarter, there was a gain of 43%. So what is it that's keeping you from being more careful than needed? Do you see something that makes you -- I'm not going to use the word concern, but makes you think that I need to wait for at least one more quarter to change that guidance? Joshua Lev: That's a great question, RK, and very astute. The answer is no. More than anything, we have internal projections, as you know, and the guidance that we provided to the Street is really based on what we believe organic growth could look like based on, I would say, an outdated model, if you will. And what I mean by outdated is that Mike, with all of his experience of coming to the organization, has utilized strategy and tactics, which have helped grow its former businesses 3x to 4x in terms of top-line revenue. Mike's only been here since April 13th. So it's not really necessarily "fair" hard to expect any more sort of direction or tactics as it relates to how it's going to be able to expand or accelerate that growth, what the timing of that growth is going to look like and the resources required, which is the reason why we keep on going back to -- we are going to provide more detailed guidance when it becomes available and more appropriate. It just hasn't been enough time for Mike to get his feet wet fully to be able to map out and say, Okay, I think that we can grow by x, but it's going to take this amount of time. Swayampakula Ramakanth: And Michael Fox, as I said, welcome aboard. I have a quick question for you. As you were doing your due diligence and trying to get on board, gammaCore has been marketed to the VA facilities for quite a while now. We have about 200 centers, actually not only acquiring but also stocking the product. From your experience and from what you have done in the past, what are the easy pickings in the VA market to move to a larger number of centers? And also outside of the VA, can you name one or two additional federal centers where you think this can be an easy sell? Unknown Executive: RK, that's a really good question. And I would say, from what I've seen in my experience in the VA, the best way to adjust within the VA is to work with them. The VA has a lot of standardizations. They've got a lot of requests for algorithms and treatment protocols, medical necessity. I find a lot of companies do a lot of great things, one account at a time, but they're not working with the leadership at the business level or national level to really place where this product fits and get support from top down. I believe this company has done a phenomenal job of generating support from the bottom up. What I can do is continue to work with that information, that data, the patient-provided outcomes, and the information gathered by our providers in the VA to generate more opportunities for us to standardize treatment and put a really strong position for gammaCore within the federal space. On the second part of your question, outside of the VA, I know there's a large federal workers' comp opportunity with the number of headaches and migraines within that space. Within the Department of Defense, whenever you say Department of Defense, you've got to think of places like Walter Reed, SAMMC, Portsmouth, Naval, and Balboa. There are so many medical facilities that treat patients post-deployment who come back with various things that we can definitely assist them with. So it's early in my evaluation of where we will be able to start, but I promise, for the Department of Defense, it will be with key opinion leaders within the headache space on those active military bases with a focus on the larger centers first, probably closer to the East Coast where we're based. Does that answer your question, RK? Swayampakula Ramakanth: Yes, yes. So, if I can, one more question for you, Mike. In terms of Kaiser Permanente, this is one of those entities where you really need to generate internal KOLs that can drive the growth of the product. I'm not sure. In terms of your experience, do you see that as a real way to do it? Or are there any other levers that need to be pulled? Because I believe once you can get that going, it can be a good draw for the product. Unknown Executive: RK, that's a phenomenal question. And I think a lot of companies ask the same thing about Kaiser because everyone knows the importance of a place like that for business. I can't say all the details of our propositions to date with Kaiser. I have been on numerous calls. I'm very excited about what we have going on in the key opinion leader support within Kaiser. It is a phenomenally well-organized and standardized group. So within the foundation, I know there's a lot of support. So the work is definitely being done in the California market, and we're going to address some other outside-of-market opportunities. But I don't want to get too deep into the Kaiser description of what's going to happen, but we have a very favorable position now that we need to really just understand what's holding us back so we can generate that necessity from the customers. But you are right, we need internal providers requesting it. And I can tell you from my early meetings, we have national headache and migraine experts already doing that. So we're in a good spot. We've got to, I would say, tie a bow a little bit and figure out what's missing, but we're getting a lot of momentum there. Swayampakula Ramakanth: On the Quell Fibromyalgia, you have $2.5 million cumulative in the VA market. How big is the opportunity within the VA for Quell? And is there any opportunity outside of the VA, because it looks like it was not sold much as an over-the-counter sort of product, because you have quite a bit of experience now with Truvaga? And I'm just trying to understand how that can be translated into Quell OTC, if I can call it that? Unknown Executive: Well, that's a great question, okay, because within the VA, obviously, we're treating some of the multidisciplinary types of patients with multifactorial disorders. And fibromyalgia as a percentage is a large population in the VA. I think there are some recent statistics just on even active military. It's very low before they go on deployment. But upon return from deployment, it's about 11% just on active duty. So the veterans as a whole are always exposed to greater and bigger issues. So it is a market by itself, which is very, very scalable as a product like Quell.? Outside of the VA, I think we all have family members and friends who have been dealing with fibromyalgia. It is a big opportunity outside there. But I would say we talked about Kaiser a little bit earlier. I think those are the markets that would be the first ones to address as we continue to explore, maybe some opportunities to talk with Triwest and Optum for some of the active military. That's the plan for at least the immediate future, but we still have to verify what the best spot is. Joshua Lev: And look, RK, it's also definitely worth noting as we look at the number of facilities that are out there prescribing our products, the fibromyalgia product as well is being prescribed in roughly 1/3 of the number of facilities that gammaCore-S is being prescribed. So if you think about that in the context of the overall runway, we acquired the company a year ago. We've been able to grow that to about $2.5 million within the VA system. But of that VA system, it's concentrated in one area of the region. We just need to spend more time being out there and selling. So there's a lot of opportunity, I think. Swayampakula Ramakanth: So I don't mean to hog the call, but one last question on Truvaga. What learnings can you take from the U.S. to the U.K. part of it? Joshua Lev: That's a great question. Right now, we've only launched in the U.K. with our Truvaga 350. We've had a lot of inbound interest that is coming from the U.K., and people who are expressing the need or the desire to get more access to vagus nerve, noninvasive vagal nerve stimulation for the wellness space. So it's early days there. We really just launched it in January. It's a soft launch.? What I mean by that is we're not actively putting any media dollars behind it right now. Really, what we're trying to get a better understanding of is what the uptake for that Truvaga 350 unit is? And does it make sense, and what is the business opportunity more broadly, not just in the U.K., but also in other areas outside of the U.S., but also outside of the U.K., to go ahead and launch a next-generation product like the Truvaga? Operator: Okay. Josh, our next question comes from Jeremy Perlman from Maxim.? His first question is actually for Mike. He says, " Where does Mike see the easiest wins, the lowest hanging fruit? And what are his longer-term plans to drive increased utilization? Unknown Executive: Thanks for the question, Jeremy. In my vast 4 weeks of experience, the low-hanging fruit opportunity is, as we discussed, the federal space. I think the VA and the unmet needs of our veterans are a key focus for us. We know we have a really strong opportunity there and other federal channels, as we discussed, with the Department of Defense. I think long-term plans are a good starting spot, but we all know that it's a good place to help our veterans, but we have to go beyond. That's where I think the longer-term plan will continue to work on the commercial segments and figure that system out as a way for us to expand beyond the FSS and DSA opportunity. So that's still in development, still being identified, but that's the long-term plan, so we can develop the revenue for the long term. Operator: Jeremy's next question is what the Quell release commercialization rollout looks like in target markets and users. Joshua Lev: Yes. So great question. So first and foremost, Jeremy, there is a small cohort of users of the Quell over-the-counter product that we inherited when we acquired the NeuroMetrix business. You may recall that when NeuroMetrix was at its peak, it was doing somewhere in the tune of $12 million to $15 million of Quell over-the-counter related business. And a lot of that went away after the company decided to do a strategic pivot, had the FTC issue, and move to a medical device Quell fibromyalgia product. So from our point of view, what we're really focused on is making sure, number one, that we can still go ahead and service those legacy consumers that have been using the product or that may want to continue using the product, but it's no longer available. That's number one. And then number two is we need to do it in a way that makes sure that we have addressed all of the concerns that NeuroMetrix had addressed regarding the FTC. So, in terms of overall rollout and commercial strategy, the answer is going to be that it's going to be slow. and it's going to be well defined, but it's going to be deliberate in that we're purposely going to make sure that we've addressed the concerns that NeuroMetrix had earlier in their iteration as an over-the-counter product so that we can go ahead and do it in a way that's balanced between offering a Quell fibromyalgia FDA-cleared product or FDA-approved product and then also a consumer product as well. Operator: Okay. And our last question from Jeremy. What are your leading indicators, pipeline, reorder rates, and device utilization that give confidence in continued acceleration in guidance? Joshua Lev: So again, Jeremy, great question. I tried to really focus on it at the end of my remarks, but there's really, we look at this in terms of 3 main categories of catalysts. The first is R&D related, so that could be additional indications. PTSD is putting out additional information about how the studies are going. If you look and you follow our IR page, you'll note that we put out recent press releases, noting the ACACIA study, noting some other publications where data is coming out to help support what could be the makings of a PTSD label. That would be an R&D effort. Products or features that we had mentioned as it relates to Truvaga and Quell, we are investing in our second generation or our next-generation mobile application. Those features will allow us to hopefully get to a point where, if done correctly, we'll be in a situation where we can have a recurring revenue model. So that would be the first catalyst. The second catalyst will be commercial, being able to go ahead and announce items such as launching Truvaga outside the United States, as we recently did in January, the opportunity or the probability of ultimately launching the Quell Relief or the Quell over-the-counter product as its own stand-alone consumer product. Hopefully, Mike is coming to the table and being able to announce either further traction within places like Kaiser, new orders within the federal marketplace like federal workers' comp, perhaps TRICARE. So opening up different commercial avenues. Lastly, which is the third catalyst will ultimately be the operating results. We believe that we can be in a situation where these other catalysts will help drive increased total addressable market and adoption of noninvasive nerve stimulation products or devices. And we believe that acceleration will yield higher revenue growth. and be able to do it in a way that we're managing our costs and expenses. So ultimately speaking, can we accelerate our revenue while also reducing our overall cost to do that, whether that's a percentage of sales and marketing as a percentage of revenue as an indicator, so on and so forth. So those are really the 3 main catalysts that we're here focused on, and we're going to be very mindful about them as we go into the remainder of 2026 and beyond, so that we can give very specific milestone updates as to these different areas that we are strategically focused on. Mike, I don't know if you've got anything else you want add on. Unknown Executive: Jeremy, I'd just like to add in my opening comments, I talked about what I knew about the company before I got here as far as how clinically in-depth this location is and what they're doing to continue to enhance the strength of the clinical platform since joining the company and seeing Dr. Stats and his team and all the investigator-initiated research and the resources the company is putting behind the products to prove more and to do more is one of the reasons I'm extremely excited about the future.? So when you talk about acceleration, it's not just always using the same product as the same, and just trying to get momentum. It's building the platform that Josh has talked about. And that's what I believe is a really exciting factor of this company: what you will see in the future that we really can't discuss today, but the economics and the efforts are being placed here at electroCore to make it happen. Operator: Okay. We have now concluded the live Q&A portion of the call. With that, I will turn the call back over to Josh for closing remarks. Joshua Lev: Thank you, Amanda. I wanted to take the opportunity to thank our shareholders for your patience and your continued support. To our patients, our providers, and our partners, thank you for trusting us with your care and your time. And most importantly, to our team, thank you for showing up every day with the discipline and the ambition this opportunity demands. I really appreciate everyone's participation in today's call. We look forward to speaking with you again next quarter, and I wish you all a happy afternoon. Operator: That concludes today's call. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Patria Investments Limited First Quarter 2026 Earnings. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today’s conference is being recorded. I would like to hand over the conference to our first speaker today, Andre Medina, Investor Relations Director. Please go ahead. Andre Medina: Good morning, everyone. Welcome to Patria Investments Limited’s First Quarter 2026 Earnings Call. Speaking today are Chief Executive Officer, Alex Saigh, and our Chief Financial Officer, [inaudible], who joins us for his first earnings call in this role. This morning, we issued a press release and earnings presentation available on our Investor Relations website and on Form 6-Ks filed with the SEC. A replay will be available on our IR website. As a reminder, today’s call contains forward-looking statements, is subject to risks and uncertainties, does not guarantee future performance, and undue reliance should not be placed on them. Please refer to the forward-looking statement disclaimer and risk factors in our most recent Form 20-F. Patria Investments Limited reports under IFRS and will reference non-IFRS measures. Reconciliations are in the earnings presentation. With that, I will now turn the call over to Alex. Alex Saigh: Thank you, Andre. Good morning, everyone. We started 2026 with solid operating performance as we continue to make progress expanding the breadth and reach of our platform. Our results this quarter reflect three consistent drivers: continued organic fundraising momentum, growth in fee-earning AUM, and differentiated investment performance across our investment strategies. Before I turn to the quarter, I want to formally welcome our new CFO for his first earnings call in the role. He has been a partner of this firm since 2024 and has been closely involved in our financial operations. He knows our business well, and I am confident he will bring a fresh perspective to the role. Now turning to the quarter. Fundraising totaled $2.1 billion, keeping us firmly on track to achieve our full-year guidance of $7 billion. We see upside potential as we work to beat our 2025 record fundraising of $7.7 billion, given the strength of investor demand we are seeing across the platform. Fee-earning AUM reached $45.8 billion, up approximately 12% from fourth quarter 2025 and 31% year-over-year, reflecting year-over-year organic growth and the closing of Solis, our Brazilian CLO platform, and three Brazilian REIT acquisitions, including RBR, Vectis, and Genial, which together added approximately $4.9 billion of fee-earning AUM. Pro forma for WP Global Partners, our co-investment platform in the United States, which closed on April 1, fee-earning AUM stands at approximately $47.5 billion. The growth in fee-earning AUM drove fee-related earnings of approximately $51 million for the quarter, up 19% year-over-year, and we remain on a solid path to achieve our full-year FRE guidance of $225 million to $245 million. To put this progress into context, annualizing our first quarter FRE and adding the $10 million to $15 million of seasonal incentive fees that typically crystallize in the fourth quarter gets us to roughly $215 million to $220 million, even before considering the additional revenue growth and margin expansion versus first quarter 2026 that we expect to see over the balance of the year. Finally, distributable earnings per share of $0.27 rose 14% year-over-year. Our CFO will take you through the financials in detail. I also want to highlight that subsequent to the quarter, Patria Investments Limited reached an important milestone as we completed our first issuance of $350 million of fixed-rate long-term debt. The notes were placed with a diversified group of institutional investors primarily in the United States, and the offering was approximately three times oversubscribed. This transaction extends our maturity profile, reduces our reliance on short-term credit facilities, and provides additional balance sheet flexibility. The notes include a mix of five-, seven-, and ten-year maturities with fixed coupons ranging from 6% to 6.6%, resulting in an average duration of 8.5 years and an average cost of 6.4% per year. Proceeds are being used to retire our existing revolving credit facilities, with the balance available to fund future growth initiatives. Pro forma for the offering, our net debt to FRE ratio stands at approximately 0.8x, consistent with our long-term target of 1x or less. Our CFO will provide more detail on our capital management outlook in his remarks. Of course, the bedrock of our ability to grow the business is investment performance, and we continue to generate attractive returns across our platform. As shown in our earnings presentation, the vast majority of our funds have historically outperformed their relevant benchmarks, with over 80% of our current fee-earning AUM, excluding SMAs and third-party managed funds, invested in funds that have exceeded their benchmarks since inception. This reflects the consistency of our investment process across cycles and strategies and remains the foundation of our LP relationships and our capacity to raise capital. I invite you to take a look at the return pages of our earnings presentation. For example, our largest strategy, Credit LATAM High Yield, with over $5 billion in fee-earning AUM, has generated 11% annualized net returns in U.S. dollars since inception 26 years ago, outperforming its benchmark by over 360 basis points, and it is outperforming its benchmark for all periods analyzed—year-to-date, one, three, and five years. Investment performance, of course, directly translates into revenue growth, as over 70% of our fee-earning AUM—mainly in credit, real estate, GPMS, and public equities—grows as our funds deliver positive performance according to their underlying market value. As a reminder, our drawdown vehicles charge fees on a cost basis, so marks in underlying portfolios do not affect management fees. Moving on, we are very pleased with our fundraising in the quarter, which reflected our continued momentum across multiple verticals. Our credit vertical continues to stand out, as we raised over $925 million across various strategies that keep attracting strong demand from local investors and, depending on the strategy, global investors as well. Of note, Solis contributed over $265 million in the quarter, quickly highlighting how this business is additive to our overall platform. The integration of Solis is progressing well and is expanding our capabilities in private structured credit, particularly in the Brazilian CLO market. This positions us to benefit from the continued development of non-bank financing in Brazil, which we view as a structural multiyear growth opportunity. We are also seeing strong interest in our dollar-denominated Private Credit LATAM Fund II from international investors and expect this to be a meaningful contributor to fundraising throughout the year. Infrastructure continues to attract sustained demand from global institutional investors and raised over $545 million in the quarter, particularly notable as we are not currently raising a flagship fund. We are seeing growing interest in large-scale SMA and co-investment mandates. Many of these mandates are targeted to specific initiatives, such as the data center project we announced in partnership with ByteDance that is now advancing through its construction phase, and we are in active conversations on additional transactions of comparable scale. This represents the kind of fee-generating structured mandate we expect to see with greater regularity as our product offering continues to develop. In addition, we continue to expand the breadth of our infrastructure platform into new strategies such as infrastructure core. In private equity, we raised $275 million through a co-investment opportunity and continue to develop a pipeline of additional co-investment and SMA transactions. We are also seeing growing traction in our local buyout Colombian fund and our high-growth reforest fund. Our ability to raise capital for co-investments reflects continued LP confidence in our origination capabilities, even considering the DPI challenge facing the more mature vintages of our flagship private equity buyout funds, Fund V and especially Fund IV. The DPI profile of our buyout funds reflects a slower realization environment as well as company-specific challenges. While lower interest rates would support improved exit activity, the new interest rate environment has not yet materialized. To address the challenges of that part of our business, we have recently appointed the leader of our value creation team to focus primarily on divestments, while the existing leader of our private active vertical will focus on investing our Buyout Fund VII and various SMAs and co-investment opportunities. Meanwhile, Buyout Fund VI and Buyout Fund VII portfolio companies are performing well, having generated an average EBITDA growth of 17% last year. Performance has also been strong for our growth equity and venture capital strategies, with flagship funds generating a net IRR in U.S. dollars of 13% and 17%, respectively. Now with respect to GPMS, first-quarter fundraising totaled around $265 million, and we anticipate that 2026 should be a good year for several reasons. First, this quarter’s fundraising includes a $139 million first close for our inaugural commingled co-investment vehicle, the Patria Co-Investment Partnership Fund. This highlights our ability to develop new products on top of acquired platforms. Second, we expect to complete the fundraise for our Secondaries Opportunity Fund V, or SOF V, in the coming months. We can share that SOF V has already received commitments in excess of its initial target of $500 million, and we believe the fund could reach close to $600 million by its final close, which would make it approximately 50% larger than its predecessor. This highlights our ability to enhance the commercial performance of existing products within acquired platforms. Finally, we are particularly pleased to see that our European program is seeing increased interest from a broad range of institutional investors, including local institutional clients in Latin America, as well as North American and Asian investors who are already part of Patria Investments Limited’s global client base. This is an important development I want to highlight: the incremental demand from existing investors who have partnered with us in Latin America and are now expanding their engagement with us into new strategies and, most notably, into new regions. Furthermore, the WP Global Partners acquisition, which closed on April 1, further strengthens our position in the U.S. lower middle market, adding a local institutional presence and origination network in a segment where track record and relationships are the primary competitive differentiators. Real estate fundraising outlook remains strong. Take two of our largest Brazilian REITs in logistics and urban retail, for example. They have over $100 million of capital already contracted, which should flow into fee-earning AUM in the coming quarters, highlighting what we believe to be one of our structural competitive advantages. The scale of our listed vehicles allows us to operate our asset exchange model, through which property owners transfer illiquid assets in exchange for shares of our large, liquid listed funds as a way to monetize their portfolios. This asset exchange program is generating an attractive fundraising pipeline that we believe is not only less dependent on the interest-rate environment than traditional fundraising, but also potentially less costly to originate as well. The RBR acquisition further enhances our scale and structural advantage, as we expect real estate—which is currently over 90% in permanent capital vehicles—to be a strong contributor to fundraising over the balance of the year. Reflecting on the growth and fundraising that we are experiencing across our platform, it is clear to us that we have significantly diversified our firm’s investment and distribution capabilities both organically and inorganically. We believe we now have at least 10 investment strategies with flagship funds with the potential to raise more than $1 billion each per fund, up from just two flagship funds at the time of our IPO. All of our fundraising initiatives reinforce and support the high quality of our asset base, as over 85% of our fee-earning AUM is in vehicles with no or limited redemptions, and our permanent capital base now stands at $10.7 billion, or roughly 23% of total fee-earning AUM. In addition, pending fee-earning AUM—capital committed that would earn fees as deployed—increased about 17% to approximately $3.3 billion in the quarter, providing additional visibility into future management fee revenues. At our December 2024 Investor Day, we set a three-year cumulative performance-related earnings, or PRE, target of $120 million to $140 million for the period from fourth quarter 2024 through year-end 2027. Having generated approximately $62 million through 1Q26, Infrastructure Fund III continues to support this progress, with about $19 million of net accrued carry well positioned for monetization this year. As we approach the midterm of our guidance period, and gain greater visibility into Private Active Fund VI, which has $237 million of net accrued carry, we now expect PRE realization to take longer, making contributions more likely beyond 2027 rather than within our original time frame. Importantly, this is a timing issue, not a value one, and Private Equity Buyout Fund VI is well positioned to be a significant PRE contributor in 2028 and beyond. Meanwhile, we are encouraged by the expansion of our PRE sources across growth, venture, real estate, and credit, which together have about $13 million of growing net accrued carry, some of which could generate PRE in 2027. Taking it all together, we believe cumulative PRE for the 4Q24 through 4Q27 period can reach $80 million to $100 million, with upside potential if markets improve and divestment activity accelerates. Now let me share a brief perspective on the operating macro environment. Having invested across Latin America through multiple cycles for nearly 40 years, we bring long-term perspective, deep local knowledge, and resilience that few can match. We continue to believe the region’s exposure to commodities, its evolving renewable energy mix, and its significant infrastructure needs make it an area of sustained structural interest for global capital well beyond short-term market dynamics. Given the recent geopolitical developments you are well aware of, we are seeing growing engagement from global investors, with institutional allocators across Asia and Europe increasingly turning their attention to Latin America and engaging with us across a broader and more diversified set of strategies than has historically been the case. This reflects not just interest in the region, but confidence in our integrated platform, scale, and execution capabilities. We are continuing to invest in our ability to meet this demand, and we believe we are uniquely positioned to capture these opportunities. In summary, we are executing consistently across the business. Fundraising is on track. Our asset base is predominantly long-duration and non-redeemable. Our investment performance is solid, and we remain confident in our ability to achieve our full-year objectives. With that, I will hand the call to our CFO. Thank you. Unknown Speaker: Thank you, Alex. Good morning, everyone. I am pleased to be here for my first earnings call as CFO. I have been deeply involved with Patria Investments Limited since 2023, and I aim to bring continued transparency, a focus on the quality of our earnings, and, over time, improvements in the clarity of our financial disclosures. Now let me take you through the first quarter results. Total fee revenues for the first quarter were approximately $92.6 million, up 20% year-over-year from $77.3 million in first quarter 2025 and up 3% sequentially from fourth quarter 2025 excluding the incentive fees that typically crystallize in the fourth quarter. The year-over-year growth reflects the full-quarter contribution of Solis and the Brazilian REITs acquired through 2025, two months of RBR, organic fee AUM growth, and the net FX and performance effect. Our last-twelve-months management fee rate was approximately 87 basis points in the quarter, reflecting the full-quarter impact of Solis in first quarter as well as stronger growth in credit, real estate, GPMS, and various co-investments and SMAs over recent quarters. Independently of fluctuations in average fee rates—and as evidenced by our margin outlook to be discussed in a few moments—the economics of these products remain very attractive given their open, high incremental margin and the sticky and long-duration structure of the mandates, which can include permanent capital vehicles. Regarding expenses, total compensation and operating expenses for the quarter were $42 million, up 14% sequentially from fourth quarter 2025. The increase reflects integration of recent acquisitions, planned investments in distribution and investment capabilities, and the seasonal reset of compensation programs at the start of the year. Fee-related earnings for the quarter were approximately $50.5 million, up 19% year-over-year, showing an FRE margin of 54.6%. The margin reflects the contribution of the acquisitions closed in the quarter, platform investments, and seasonal compensation timing, all consistent with our prior guidance on quarterly phasing. We expect the margin to improve progressively through the year as management fee growth continues, integration work evolves, and expense growth moderates. We remain comfortable with our long-term FRE margin of 58% to 60%. Overall, we are reaffirming full-year 2026 FRE guidance of $225 million to $245 million, or $1.42 to $1.54 per share, approximately 15% to 16% growth from last year’s $202.5 million. We are also maintaining our 2027 FRE target of $260 million to $290 million. Total distributable earnings for the quarter were $42.4 million, or $0.27 per share, up 14% year-over-year on a per-share basis. Growth was driven primarily by FRE. Alex has updated you on our PRE expectations, so let me turn to stock-based compensation. Stock-based compensation in the quarter was $10.1 million. Based on current programs, we expect full-year 2026 and 2027 stock-based compensation to represent between 10% to 11% of total fee revenues, respectively. The expected nominal increase reflects an intentional expansion of equity ownership deeper into the organization and a higher proportion of total compensation delivered in equity for key employees. When benchmarked against listed alternative manager peers, we believe our stock-based compensation profile is consistent with the group. Finally, we believe that over the long term, our stock-based compensation will moderate as a percent of net revenues as our business scales. Now a brief note on taxes. The first-quarter effective rate was approximately 10% to 13%, reflecting our evolving business mix and consistent with our guidance. This is driven by country mix as we engage in acquisitions with higher tax burden, which increase the total tax expense. Regarding the balance sheet, I want to take the opportunity to help you understand Patria Investments Limited’s updated liquidity profile following the completion of our debt private placement, which, as Alex noted, extends our maturity profile, eliminates reliance on revolving credit facilities, and provides fixed-rate capital for future business development. To facilitate this, we have added a specific slide to the reconciliation and disclosures sections of our earnings presentation available on our website. Between proceeds from the debt offering and cash generation, we expect to have ample capacity to meet all of our obligations, pay out dividends, reinvest in the business, and buy back shares while maintaining a conservatively structured balance sheet. In this context, share count for the quarter was 159.1 million shares, inclusive of 893 thousand shares repurchased directly in the market for $12.7 million and the initial implementation of a new total return swap, or TRS, of an additional 840 thousand shares. It remains our goal to maintain the share count in the 158 million to 160 million range. To summarize, our financial picture is straightforward. We have a business generating growing, sticky cash flows from a highly diversified and predominantly long-duration and non-redeemable asset base. Our fundraising momentum continues and fee-related earnings are growing, giving us confidence that we are on track to meet our objectives. In addition, the balance sheet remains strong and positioned to support future growth initiatives. We look forward to your questions. Thank you. Operator: At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Siegenthaler from Bank of America. Your line is now open. Craig Siegenthaler: Good morning, Alessandra. Hope everyone is doing well. Hi, Alex. Thanks for taking my questions. You have a big election coming up in Brazil. I was wondering if you could talk about what the outcomes could mean for the asset management industry in Brazil and Patria Investments Limited, even though I know Brazil has been a shrinking part of your overall business given your diversification? Alex Saigh: Yes, of course. As you know, it is pretty tight between the two runner-ups, the current president, Lula, and the son of Mr. Bolsonaro, the ex-president, under the name of Flavio. It is very hard to say which way it is going to go. A scenario of having a fourth mandate of Mr. Lula is more of the same, and in our view we would see an environment with higher inflation and therefore higher interest rates driven by fiscal indiscipline that is currently the trademark of Mr. Lula’s government. The main difference for the asset management industry, Craig, is a higher inflation, higher interest rate environment under Mr. Lula’s government, and a lower inflation, lower interest rate environment under Mr. Bolsonaro’s. Even though in the first moment it would be hard for Mr. Bolsonaro to reduce the deficits immediately, projections would show that he would work on that deficit, and the yield curve would start showing a decline in interest rates during his four-year mandate. Under Lula, we think the environment will be more likely higher rates. Where does Patria Investments Limited stand in that? Our credit business will continue to perform extremely well, as it is right now, as you saw in fundraising over the last years and the last quarter—record fundraising for our credit products. We are expanding our credit portfolio mainly in Brazil. The acquisition of Solis positions us well. Non-bank financing in Brazil is a huge, multiyear opportunity. We want to place Patria Investments Limited in credit the same way we placed the firm in the REITs business in Brazil. Today, we are the number one leader of a R$250 billion-plus industry that is growing at double digits. In 2025, it was the first year that capital markets’ non-bank financing surpassed bank financing for corporations in Brazil. Due to regulation and Basel restrictions, banks are lending less, and capital markets surpassed banks in lending for the first time. For individuals, the same dynamic will happen. The right structures are through Solis and our FIIs focused on real estate credit. The opportunity is immense. We are positioning ourselves to continue expanding our credit business and our real estate business that does not relate to credit. On the other side, equities might continue to suffer given a high-rate environment under Lula. Under Bolsonaro, credit would continue to be a major source of income for us, and while it would take some time to reduce inflation and rates, the yield curve would project a decrease; brick-and-mortar real estate and equities would fare better. Given our 40-year experience in Brazil, we are maintaining a broad spectrum of products, with a strong bet on private credit and non-bank financing as an engine of growth, followed by real estate. GPMS is growing a lot outside LatAm for us. Infrastructure is inflation-hedged; with a higher inflation environment under Lula, that also should benefit. During his prior three terms, Lula promoted one of the largest concession programs in the world—toll roads, water and sanitation, etc.—and we are benefiting a lot through our infrastructure vertical, which has contracted revenues indexed to inflation. That should favor infrastructure under Lula as well. I hope that answers your question, Craig. Craig Siegenthaler: Great, very comprehensive. For my follow-up, Brazilian public equities have been very strong over the last 12-plus months. How has this impacted your realization outlook, which should make IPO exits easier? I am especially looking at some of your older vintage private equity funds like Fund IV and V. Alex Saigh: Yes, all true. Listed securities benefited first from flows to the region, even with Lula’s fiscal imbalance concerns, and we saw strong appreciation. Last year, our public equities funds returned from 40% to 60% in reais and even more in U.S. dollars. Our credit funds with listed securities also saw market value gains. We are now seeing some of that flow into private markets—it takes a bit longer to ripple down. We are using this momentum to exit most of our companies in our Private Equity Fund IV, Private Equity Fund V, Infrastructure Fund II, and Infrastructure Fund III, and using this momentum to clean our portfolio and send money back to investors. Even with exits under execution, we do not expect performance fees for Private Active Fund IV. Private Active Fund V might generate performance fees, but Private Active Fund IV will not. Infrastructure Fund II will not generate performance fees, but Infrastructure Fund III will, and it has been paying performance over the last years; we see it continuing to pay performance fees in 2026. Thank you. Craig Siegenthaler: Thank you, Alex. Operator: Our next question comes from the line of Lindsey Marie Shema from Goldman Sachs. Your line is now open. Lindsey Marie Shema: Hi. Good morning, Alex and Andre, and welcome to the new CFO—looking forward to working with you. Maybe following up on the private equity outlook and performance fees. On the last call you mentioned that the not-official accrued but Private Equity Fund V performance fees were running around $40 million. Is that still the case? What has changed since then to take it out of carry? I know it is volatile, but please update us on the outlook there. And then more broadly, what do you really need to see? I know rates are a factor and you mentioned momentum from inflows into Brazil. You now have a person entirely focused on divestments—so is the upside really just on rates, or is there more momentum? Please help us understand the factors that led to revising down guidance and what could be upside there. Alex Saigh: Thank you, Lindsey. As mentioned, we do not expect performance fees coming from Private Active Fund IV. We are selling companies from Fund IV and generating DPI for investors, but not enough for carry—not even close. For Private Active Fund V, we are conservatively valuing companies across the portfolio. The upside is that if we can sell companies above our current marks, then it would generate performance fees, but today I prefer to be conservative and not have expectations of performance fees from Private Active Fund V either. Fund IV—pretty sure no carry. Fund V—we are being conservative. Private Active Fund VI has over $230 million of net accrued carry, and Fund VII is too early, but companies are performing very well. Our growth equity funds are performing very well. We have a large asset in Growth I—PetLove, the online pet business and market leader in Brazil—that is now a sizable investment and can generate sizable performance fees. We do not see it within the 2027 range; upside could be 2027, which is why we reduced expectations for the 2027 period. Venture also is shaping extremely well with high DPI. Plus, performance fees can come from other asset classes like real estate and credit. Lastly, even if we generate $80 million to $100 million of performance fees versus the prior $120 million to $140 million, the difference of $40 million to $60 million over three years is roughly $13 million to $20 million per year added to DE. Given our FRE projection of $225 million to $245 million this year and $260 million to $290 million next year, an additional $13 million to $20 million is relatively small in percentage terms. Performance fees are becoming less relevant to our business and results by strategy: we have moved more to NAV- and market-valued funds—REITs, public equities, credit, GPMS—where about 70% of our fee-earning AUM charges fees on market value, and 30% are drawdown funds with performance fees. Looking to 2030, our 2030 vision will continue that path—expanding permanent capital and listed funds charging on market value—making performance fees even less relevant and our results more predictable and visible. That predictability is what bond investors and rating agencies appreciated in our recent notes offering. I hope that answers your question. Lindsey Marie Shema: That was great—heard you on the strategy moving more towards market-valued assets. One more question, more specific to this year: On expense growth in the quarter, could you break down by magnitude—how much was acquisition related, how much was investment, how much was comp resetting, how much was FX? How much can margin expand throughout the year? Could you reach your longer-term FRE margin target this year, or is that more of a 2027 topic? Alex Saigh: Short answer—yes, we can reach the 58% to 60% FRE margin this year. I will pass to our CFO for the breakdown. Unknown Speaker: Hello, Lindsey, and thank you for the question. We have three temporary factors that explain the first-quarter margin. First, integration costs from the Solis and RBR closings. Second, the seasonal compensation reset at the start of the year. Third, platform investments that were front-loaded. The path to the 58% to 60% margin is supported by simple math. Moving the margin from 54.6% to 58% on our $45.8 billion fee-earning AUM base generates approximately $50 million of additional FRE before any new fundraising contribution. On top of that, our $3.3 billion of pending fee AUM converts to fee-paying status through the year, and we expect $10 million to $15 million of seasonal incentive fees in the fourth quarter. Annualizing first-quarter FRE plus those incentive fees gets us to roughly $250 million, and the margin expansion plus organic growth reaches the rest. Regarding FX, we did have an impact on expenses in the first quarter, but remember we also have a positive impact on revenues; when viewed together, it nets through the bridge I just mentioned. Lindsey Marie Shema: Perfect. And just confirming, the $3.3 billion of pending fee AUM—is that all to be deployed this year, or only part? Alex Saigh: The plan is to deploy within a year, and at roughly 90 basis points average fee rate you can see around $25 million coming from there. Our expectation—and investors’ expectation—is to see the money on the ground being deployed in the next quarters. Lindsey Marie Shema: Okay. Perfect. Thank you so much. Alex Saigh: Thank you. Operator: Thank you. Our next question comes from the line of Guilherme F. Grespan from JPMorgan. Your line is now open. Guilherme F. Grespan: Thank you so much. Good morning, Alex and team. First question was answered regarding the pending AUM. Second question is on the average management fee rate. On the consolidated view there was a step down, mostly related to mix. On a per-segment basis for private equity and infrastructure—where there was no M&A—we saw a small step down. Can you confirm there was no step down or change to fee schedules for PE and Infra? Alex Saigh: Thanks, Guilherme—great question. Short answer: no fee pressure in private equity or infrastructure. What happens is mix. When we raise a flagship fund—which we are not doing this year—those post higher fee rates: private equity at 1.75% and 20%, infrastructure at roughly 1.5% to 1.6% and 15%. When we raise SMAs—like the data center SMA with ByteDance, or the toll road SMA we did with PIF and GIC—those are more in the 1% and 10% range. This year we are seeing SMAs, not flagship funds, so you see some lower average fee-rate movement. Private equity also raised an SMA for a large healthcare deal in Colombia and Chile related to assets formerly owned by UnitedHealthcare. We raised over $500 million there—about $200 million in first quarter, with another $200 million expected in second quarter. That SMA is 1% and 15% in private equity. So during years without flagship fundraising, you will see some mix-driven movements—no fee pressure. Large LPs that pay full fees in the flagship often co-invest at 1% and 10% as a way to get a blended discount, which is standard industry practice for the last 20 years. We do not reduce fees for flagship funds; we provide co-invest opportunities with lower fees. I hope that answers your question. Guilherme F. Grespan: Yes, super clear. Thank you, Alex. Operator: Our next question comes from the line of Nicolas Vaysselier from BNP Paribas. Your line is now open. Nicolas Vaysselier: Hello, hope you can hear me. Two questions. First, on co-invest in infrastructure and private equity—do you charge anything at all in terms of fees, or is it purely at zero? I understand it is necessary in the industry, but wondering if there is any revenue impact. Second, regarding your last acquisition in mid-market secondaries—would future M&A be focused on developed market capacities? You have talked about the United States quite a bit recently—will that be a focus near term? Alex Saigh: Nicolas, thank you. We do charge fees on co-investment vehicles, but there is typically a dollar-for-dollar match for very large investors. Example: if a large investor commits $300 million to a flagship fund, they often require that the first $300 million of co-invests be no fee, no carry. After that one-to-one threshold, we charge the standard co-invest fees—typically 1% and 10% in infrastructure, and 1% and 15% in private equity. If an investor is not in the main fund, they go straight to 1% and 10% (infra) or 1% and 15% (PE). I am generalizing, but that gives you the right picture; this is standard industry practice. On the United States and the WP acquisition: short answer, we do not intend to expand in the U.S. in a big way beyond GPMS. The WP acquisition was targeted to enhance our GPMS capabilities—primaries, secondaries, and co-invests—where two-thirds of our portfolio is European focused and our investors asked for a more global approach that includes a stronger U.S. presence in the lower middle market. Beyond strengthening GPMS, our focus is not expansion in the U.S. Our focus is LATAM and the U.K./Europe. The U.K. is effectively our second-largest alternative market opportunity (China is technically second globally, but harder for us to access). The U.K. market is very fragmented compared to the U.S., which has consolidated. We can see ourselves—through organic growth and acquisitions—becoming one of the top three to five alternative managers in the U.K., and therefore in Europe, across credit, GPMS, and real estate. So we will continue expanding where we already are: the U.K./Europe and LATAM—not the U.S., besides the GPMS enhancement. I hope that answers your question. Nicolas Vaysselier: Very clear, and thank you for the clarification. That was very useful. Alex Saigh: Thank you. Operator: I am showing no further questions at this time. This concludes our Q&A. I would like to turn it back to Alex Saigh for closing remarks. Alex Saigh: Thank you very much for your participation. It was a great quarter for us—strong performance starting with our funds, flowing through to fundraising of $2.1 billion for the quarter. We see upside on our $7 billion guidance and even the potential to beat the $7.7 billion record fundraising we had in 2025. Very strong FRE growth for us, confirming the $225 million to $245 million FRE for 2026 and a 58% to 60% FRE margin. Thank you for your participation. We hope to see you in person soon, and have a very good day. Operator: Thank you all for your participation in today’s conference. This does conclude the program. You may now disconnect.
Operator: Good day, and welcome to the Cushman & Wakefield plc 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. If anyone should require operator assistance, please press 0 on your telephone keypad. Please note this event is being recorded. I would now like to turn the conference over to Megan McGrath, Head of Investor Relations. Please go ahead. Megan McGrath: Thank you, and welcome to Cushman & Wakefield plc's First Quarter 2026 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our Investor Relations website at ir.cushmanwakefield.com. Please turn to the page in our presentation labeled Cautionary Note on Forward-Looking Statements. Today's presentation contains forward-looking statements based on our current forecast of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definitions of non-GAAP financial measures, and other related information are found within the financial tables of our earnings release and the appendix of today's presentation. Before I pass the call over to Michelle, a quick reminder that on April 8, 2026, we filed an 8-K with the SEC outlining several changes to our reporting presentation effective January 1. To better align our reporting with industry peers, we will no longer report service line fee revenue, along with the following non-GAAP measures: Adjusted EBITDA margin, segment operating expenses, and fee-based operating expenses. As a result, our discussion of revenue and associated growth rates will now be inclusive of growth contract costs. Further detail on these changes, as well as two years of recast historical financials, can be found in the 8-Ks filed with the SEC, which are also available on our IR website. Lastly, comparisons discussed on today's call are against the first quarter of the prior year in local currency. And with that, I'd like to turn the call over to our CEO, Michelle MacKay. Michelle MacKay: Thank you, Megan. And thank you, everyone, for joining us today. We delivered strong first quarter results demonstrating consistent execution of our strategy and measurable progress toward our long-term financial targets. We delivered 9% revenue growth, exceeding our long-term guidance range. We generated mid-teens adjusted EBITDA growth as operating leverage continued to build. And we delivered 67% adjusted EPS growth, reflecting both strong business performance and the structural improvements that we have steadily made to our balance sheet. These outcomes are deliberate—the product of a strategy designed for durability and growth. Supported by our solid first quarter performance and continued strength in our pipelines, we remain confident in our full-year guidance of 15% to 20% adjusted EPS growth. I want to focus on the breadth of our growth, which is a key driver of the consistency of our performance. In high-growth asset classes, clients are shifting capital and demand towards specialized sectors, including logistics, life sciences, and AI-related industries. AI is a structural tailwind for the business, supporting leasing activity across geographies and fueling growth in our data center-related services, with 50 technical advisory data center projects underway in APAC now, and expanding global mandates. This is a long-duration opportunity that continues to scale. In Capital Markets, we delivered our sixth consecutive quarter of double-digit revenue growth, including 22% growth in The Americas, with institutional client revenues up 32%. This reflects the compounding returns from our talent and platform investments and the increasing connectivity within our institutional franchise. In Leasing, we achieved the highest first quarter revenue in company history, growing 17%. Performance was broad-based across industries, deal sizes, and geographies, with growth in 15 of our top 20 cities in The Americas. That breadth matters. It reinforces both the sustainability of the growth and our ability to consistently capture share. In Services, revenue grew 7%, reflecting steady progress as clients increasingly consolidate toward providers that can deliver integrated, multi-service capabilities at scale. Project Management growth of 15%, driven by international performance, underscores our ability to manage increasingly technical workstreams for a growing global client base. And taken together, this is what consistency looks like: diversified growth, scalable margins, and disciplined capital allocation. With that, I'll turn the call over to Neil to discuss the quarter in more detail. Neil O. Johnston: Thank you, Michelle, and good morning, everyone. As a reminder, all comparisons are against the first quarter of the prior year and in local currency. First quarter revenue was $2.5 billion, up 9%, fueled by broad strength across our service lines and continued positive momentum from our growth initiatives. Adjusted EBITDA grew 15% to $111 million as we drove operating leverage across our platform. Adjusted EPS of 15¢ was up 67% as we benefited from the strength of our core business and the capital structure improvements we have made. Continuing our balance sheet transformation, earlier this week, we announced our decision to redeem $100 million of the $650 million outstanding on our 2028 notes. Once completed, this will mark approximately $100 million in total debt repayments since the start of 2024, and further progress towards our target of reaching 2x net leverage in 2028. Taking a look at our revenue performance by service line for the quarter, Leasing grew 17% in the quarter, with Americas Leasing up 19%. Our Leasing growth in The Americas was broad-based, with double-digit growth in core, mid-sized, and large leasing deal sizes. By asset class, office demand remained solid, and we saw particular strength in industrial, including data centers. EMEA and APAC Leasing increased 109% respectively, with particular strength in Germany, The Netherlands, and Greater China. Turning to Capital Markets, we reported 14% global growth in the quarter. Our continued strong performance in Capital Markets reflects the work we have done to add top talent and strengthen our platform. Office is up 11% globally, performing especially well in The Americas, with gains across all deal sizes, and particular strength in New York City, Northern California, and Phoenix. Industrial grew 25%, with double-digit growth in each of our regions. Our Services business expanded 7% globally, with continued strength in Project Management in both EMEA and APAC, while The Americas benefited primarily from new business wins and expanded client mandates in our Facilities Management business. To reiterate what we said at our recent Investor Day, we are focused on driving steady, profitable growth in our Services business as we continue to move up the value chain with our clients. Turning to cash flow, our first quarter use of cash was in line with historical working capital trends, including the annual payments of our U.S. bonuses, and reflects typical seasonal patterns in our business. Our trailing twelve months free cash flow was approximately 70% of adjusted net income, in line with our target range of a 60% to 80% free cash flow conversion rate. We closed the quarter with approximately $600 million in cash and cash equivalents, and $1.6 billion in total liquidity. Our net leverage ratio at the end of the quarter was 3.1x, a near full-turn improvement from the same time last year. Moving now to our 2026 outlook, which remains unchanged, we continue to anticipate revenue growth of 6% to 8% and adjusted EPS growth of 15% to 20%. Finally, I would like to give an update on our three-year targets we provided at our 2025 Investor Day, given the recent changes in our reporting as disclosed in our April 8 8-Ks. The previous three-year fee revenue growth target of 6% to 8% has been transitioned to a GAAP revenue growth target and remains at 6% to 8% growth. While we will no longer provide specific EBITDA margin targets, we continue to expect to achieve roughly 150 basis points of margin expansion over the three-year period. Our targets of annual adjusted EPS growth of 15% to 20%, free cash flow conversion of 60% to 80%, and net debt leverage of 2x by 2028 remain unchanged. With that, I will turn the call back to Michelle. Michelle MacKay: Thanks, Neil. Over the last three years, we have intentionally reshaped this company into one that is more focused, more agile, and better positioned to lead through market transformations, allowing us to compound profitable growth. Quarter after quarter, we are converting strategy into performance, delivering predictable results, resilient growth across our business lines, and durable earnings through changing market conditions. Our consistency of execution is not by chance; it is by design. And it is a defining characteristic and a key differentiator of this company. Importantly, consistency for us is not only reflected in our financial performance, but also in how we lead our clients with clarity and tailored strategies during periods of transformation. The work that our think tank, including the continued expansion of our AI impact research, reflects that mindset. Today, we are proud to launch part two of our AI series. The first part, which focused on introducing our AI dashboard, engaged over 15,000 clients and stakeholders, cementing our position as a true thought leader in this space. Today's release goes even deeper, examining how AI is likely to reshape economic growth, employment patterns, and space demand by sectors, roles, and geographies. By translating complex macro and technological shifts such as AI into clear, actionable insights, we continue to support better decision-making for occupiers and investors. I will close today with this: We are confident in our outlook, grounded in the visibility we see across our businesses and the durability of our model. Thank you to our teams for delivering another strong quarter and to our shareholders for their continued confidence. And with that, I will turn the call over to the operator for questions. Operator: Thank you. We will now open the call for questions. We ask that all callers limit themselves to one question and one follow-up. If you have additional questions, you may requeue, and those questions will be addressed time permitting. If you would like to ask a question, please press 1 on your telephone keypad. One moment while we poll for questions. Thank you. Our first question comes from the line of Julien Blouin with Goldman Sachs. Please proceed with your question. Julien Blouin: Yes, thank you for taking my question. Just wondering on the Leasing results—were pretty impressive in the quarter. Can you remind us how much of that was driven by some of the recruitment initiatives over the last year? And from a recruitment standpoint more generally, how do you feel you stand today across your different segments? Michelle MacKay: Thanks, Julien. Good morning. In terms of recruiting in general, we are doing extraordinarily well. We are building out the Capital Markets platform still, but we have had a significant number of hires there. First quarter, we had a significant number of Leasing recruits land as well. In industrial leasing, that has been a consistent bright spot for us over the past two years, so we expect to continue to do some really strong leasing there. We have recently landed some teams in Boston, and our expectation is that fundamentals will continue to be strong in U.S. industrial as minimal supply is out there. Let me give you just a couple of data points around Leasing, and industrial in particular. Demand is accelerating in Q1. Absorption in the U.S. was up 52% year-over-year, so this is a great place to recruit. New and modern facilities are winning. Larger users are seeking modern logistics facilities to support automation. Higher power requirements are becoming the primary driver of demand, and construction is down 60% from peak levels in 2022, which is going to help vacancy drift lower. But also importantly, the industrial leasing market is now 80% larger by dollar volume than it was pre-pandemic, and so as those leases roll over, transaction values are going to be significantly higher—so net-net, a tightening market there. Very similar dynamics in U.S. office leasing for us as well, where demand on the fourth-quarter rolling net absorption exceeded 5.2 million in Q1, which is the strongest level since the pandemic. Leasing, obviously, unfortunately gets overlooked sometimes relative to Capital Markets, but it is doing extraordinarily well. Julien Blouin: Thank you, that is very helpful. And then I think you noted in the slides that the strong Services growth in EMEA was driven by improved Facilities Management in the U.K. and Ireland and then strong Project Management in France. Just wondering how sustainable those improvements are going forward. Should that higher growth carry for the rest of the year? And is this evidence that the restructuring that you did last year—or actually the year before—is really taking hold? Neil O. Johnston: Yeah, Julien. As we look at Services, certainly very pleased with what we are seeing internationally. Project Management—that was an area of particular strength, both in APAC and in EMEA. We certainly are seeing very nice improvement in margins in EMEA. It is our fifth quarter of margin expansion, and some of that is as a result of the structural work we did around our Services businesses. So in general, we are very good about where Services is going and the growth we are seeing. Operator: Our next question comes from the line of Seth Eugene Bergey with Citi. Please proceed with your question. Seth Eugene Bergey: Hi, thanks for taking my question. One of the topics at Investor Day was the ability to cross-sell and drive that by 200% by 2028. Within the 1Q results, can we start to see evidence of that and how you are tracking that? Can you share any color on that initiative? And then just a quick question on guidance with tracking: 9% kind of ahead of the revenue target. I know 1Q is a bit seasonally weak, but thoughts on leaving the guidance unchanged, tracking ahead with a strong first quarter? Michelle MacKay: Certainly. Part of this is motivating teams in a cross-sell capacity. We have recently brought together the GOC, which is our next top-50 group of leaders, and aligned them on our compensation structure, which involves KPIs associated with the cross-sell. So we are starting to make good movement there. We are tracking a series of KPIs to ensure that is happening as we hit our targets over the course of the next three years. Neil O. Johnston: Yes, sure, I can address the guidance. Look, certainly very pleased with the first quarter we had—solid Leasing, certainly Services was right in line with expectations. We do continue to see strong momentum in April, and pipelines look good. But we started the year with fairly ambitious targets, and we remain very confident in achieving those targets. At this point, everything is pointing towards a solid year. Operator: Our next question comes from the line of Anthony Paolone with JPMorgan. Please proceed with your question. Anthony Paolone: Thanks. Good morning. Maybe I will start with the last item you mentioned, Neil—and maybe, Michelle, as you look into April, May, June, whatever visibility looks like right now—can you talk about whether there have been any changes or particular places of strength, property type or business segment-wise, especially since a lot of the first quarter, which was very good, was locked up before the war and some of the geopolitical matters? And then my follow-up: you mentioned 50 data center projects in APAC. Were you calling that out just as you were going around the globe, or is that where the bulk of your data center business is? Any big geographic differences in your capabilities on the data center front—APAC versus the U.S. or EMEA? Michelle MacKay: We are still seeing significant strength in April, and that really is across every business line and segment type. On data centers, we pulled that out because that is a pretty substantial number. It involves project planning, project development, construction and delivery, cost consulting, and technical due diligence. We recently won a five-year Project Management mandate with a blue-chip tech firm focused on higher-value, more technical services in the form of project controls. We have won several Leasing deals in The Americas since the beginning of the year. In EMEA, we have recently won five mandates in The Nordics for preconstruction advisory services. It is across the globe that we are seeing business and execution in data centers. Operator: Our next question comes from the line of Brendan Lynch with Barclays. Please proceed with your question. Brendan Lynch: Great, thanks for taking my questions. One on office leasing. It has been really strong to start the year, as you suggested. Do you get the sense that companies are still catching up from not leasing sufficient space over the past couple of years? And if so, how far are we through this process? Are you getting the sense that companies are leasing space in anticipation of future growth as well, given the lack of space on the market? Are they getting more assertive in trying to lock up space for a longer term? Michelle MacKay: There is a bit of that. Sublease space is trending lower and down about 25% from the peak, so businesses are taking their space back. We also have an interesting supply dynamic, similar to industrial, where the U.S. construction pipeline is 85% below its Q1 2020 peak. That dynamic is driving demand into the best-located Class A space, so there is a bit of a scarcity play going on here as well. Lease terms are holding, and this is not a single-quarter event. The fundamentals are aligning to really support sustained activity in the office leasing sector. And yes, companies are getting more confident. If you were not sure whether you were going to take the extra 20,000 square feet and you find an asset that you really like to take space in, you are going to go forward with that. Operator: Our next question comes from the line of Stephen Hardy Sheldon with William Blair. Please proceed with your question. Stephen Hardy Sheldon: Hey, good morning. Great to see the continued acceleration in Services. Commentary has been that pipelines are good. What are you seeing in the pipelines there, and how does that look between the different businesses within Services, especially with the push you are making into more tech areas? And then as we look at APAC profitability trends, it looks like APAC took a step back this quarter and was down quite a bit year-over-year. I am assuming that was a tough comp, especially with Capital Markets being lower year-over-year. Anything to call out there on APAC profitability and how you are thinking about that over the rest of the year? Neil O. Johnston: Sure, Stephen. Overall, global Services businesses are performing exactly where we want them to perform—overall up 7%. Great to see the tremendous work that our teams are doing in APAC and EMEA, particularly around Project Management, and also Property Management in EMEA. The one area where we have seen slightly slower growth in The Americas over the last couple of quarters is in Facility Services—our janitorial business—where we have seen some contract transitions. But we feel very good about the work we are doing there. We are strengthening the platform, and we like the pipeline that we are seeing. Another key area of strength for us, particularly in the U.S. and globally, is our Global Occupier Services business—that is the outsourcing of large enterprise clients. We have had some very big notable wins recently. That is a real bright spot for us and lends itself really well to cross-selling and growing the business. So pretty excited about what we are seeing on the Services side. On APAC profitability, fundamentally APAC has not slowed down. We like what we saw there and what we are seeing. There were really two primary drivers for the drop in profitability. First, Capital Markets in Japan—we had a couple of very large upside transactions there a year ago. If you adjust those out, Japan was up almost 100%, so we like the underlying fundamentals, but those tough comps certainly contributed to what we saw in the quarter in that market and in APAC overall. Second, we recognized $3.5 million lower earnings from our OneWow joint venture in China as a result of a one-time provision for credit losses. China itself actually started to see a bit of a recovery, so China itself is very strong, but we had that one-time impact. Overall, we feel good about APAC, but you saw the impact of those two things in the quarter in our results. Operator: Our next question comes from the line of Ronald Kamdem with Morgan Stanley. Please proceed with your question. Ronald Kamdem: Hey, great. Going back to the margin expansion target that you still expect to achieve—maybe can you talk through what that 150 basis points entails? Is that mix? Services? Other business lines? Where will that margin uplift come from, and could we start seeing some of that this year? And then on AI and data centers, beyond Leasing exposure, can you talk about tailwinds in other segments from that trend and what the company is doing to position itself? Neil O. Johnston: Sure, Ron. As we look at margins, we are very focused on profitable growth. Growth is clearly the headline, but at the same time, as we grow, we want to make sure we are doing that profitably. Where are we seeing margin improvement? As our transactional businesses grow—Leasing and Capital Markets—that mix will result in higher margins. On the Services side, we have done a lot of work restructuring around contracts and looking at the back office to make it more efficient. It will really be a combination of both that drives the margin. We are very mindful of the investments we are making, ensuring they have a strong IRR and are driving both growth and profitability. You saw the 30 basis points of margin expansion in the first quarter, and we intend to keep that going as we look out over the next three years. Michelle MacKay: At Cushman & Wakefield plc, we view AI through two lenses: as an efficiency enabler and as a growth tool. We consider efficiency gains table stakes—operating with rigor—and we are continuing to evaluate ways we can optimize workflows and outcomes across the entire platform. On growth, leveraging our proprietary data to capture net new revenue is what excites us most. We have entered into a strategic relationship with one of the leading AI companies. This provides us with external thought leadership and domain expertise to ensure we are considering every opportunity to drive growth across the platform. At the macro level, our view—which you will see in the report released today—is that AI expands the size of the economy, translating long term into more demand for space. Based on our research, we expect AI to drive a net increase of 330 million square feet of additional demand over the next decade, and we are already seeing early signs across office and industrial. A few points of information: U.S. office demand in Q1 had its highest post-pandemic reading. In the Bay Area, we are currently tracking an AI footprint of 7 million square feet, up from 4.5 million square feet in 2025. Manhattan and San Francisco, with strong tech ecosystems, were among the leaders in office absorption in Q1. Industrial demand, as mentioned earlier, was up 52% year-over-year in Q1 according to our internal research, with a focus on modern facilities designed for AI and automation accounting for most of that net absorption. AI will be a net positive for demand, with nuances: office will continue to shift toward high-quality Class A space—flexible and tech-centric; industrial toward modern, more power-intensive facilities; multifamily performance increasingly concentrated in high-growth, talent-dense markets; and in retail, we expect a K-shaped economy to persist, driving outperformance at the high and low ends with pressure on mid-tier retail. Operator: Our next question comes from the line of Mitchell Bradley Germain with Citizens J.M. Please proceed with your question. Mitchell Bradley Germain: Michelle, I think you mentioned clients shifting capital to specialized sectors. How are you positioning to capture some of that activity? And then on the hiring environment—this trend seems consistent across most of your peers—are you seeing shifts in the ask or economics around that, particularly for advisory or brokerage talent? Michelle MacKay: Thanks for the question, Mitch. For several years now, we have been allocating dollars into those specialties—both in terms of bringing valuable talent to the platform, increasing our cross-sell, and building out those platforms globally. So whether it is data centers, specialized logistics, or life sciences, it is not just that we have the talent for transactions; we also have it in servicing, and we support some of the biggest names in the world with respect to the assets that they either own or occupy in those spaces. On hiring economics for advisory or brokerage talent, we are not really seeing a shift from our perspective in the way that we are structuring our contracts. We have a very specific way of analyzing and structuring those contracts, and we have not seen a material shift in those structures. Operator: We have reached the end of the question and answer session. Ms. MacKay, I would like to turn the floor back over to you for closing comments. Michelle MacKay: Thank you, everyone, for your time today, and we look forward to speaking to you again on our second quarter earnings call. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.
Operator: Good day, and thank you for standing by. Welcome to the Evergy, Inc.'s First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. 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 be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Peter Francis Flynn. Please go ahead. Peter Francis Flynn: Thank you, Dana, and good morning, everyone. Welcome to Evergy, Inc.'s First Quarter 2026 Earnings Conference Call. Our webcast slides and supplemental financial information are available on our investor website at investors.evergy.com. Today's discussion will include forward-looking information. Slide two and the disclosures in our SEC filings contain a list of some of the factors that could cause future results to differ materially from our expectations. They also include additional information on our non-GAAP financial measures. Joining us on today's call are David A. Campbell, Chairman and Chief Executive Officer, and W. Bryan Buckler, Executive Vice President and Chief Financial Officer. David will cover first quarter highlights, provide an economic development update, and discuss our regulatory agenda and integrated resource plan. Bryan will cover our first quarter results, retail sales trends, and our financial outlook. Other members of management are with us and will be available during the Q&A portion of the call. I will now turn the call over to David. David A. Campbell: Thanks, Pete, and good morning, everyone. I will begin on slide five. This morning, we are pleased to announce the signing of a fifth large customer electric service agreement and the favorable amendment of two previously signed contracts. As I will discuss in a moment, Evergy, Inc.'s large customer team continues to excel in bringing economic development to Kansas and Missouri. We also are reporting solid first quarter results as we delivered adjusted earnings of $0.69 per share, compared to $0.55 per share a year ago. The increase was primarily driven by recovery of regulated investments, growth in weather-normalized demand, and revenues from our large load customers. Other factors impacting results were the effect of mild weather, higher operations and maintenance expense, and higher depreciation expense. Bryan will cover these results in more detail. During the quarter, we worked closely with two of our large customers to refine their anticipated load profiles and amend their electric service agreements, or ESAs. As a result, we will receive a boost to 2026 margins, helping to offset the impact of the mild winter weather earlier this year. The first quarter demonstrated ongoing momentum in our large customer strategy. During our year-end earnings call in February, we signaled our expectation to execute at least one more ESA in 2026 that was not yet incorporated into our financial plan. Today, I am excited to announce a new ESA with a premier developer for a new data center project in our Kansas Central service territory that will drive affordability benefits for our customers. This new customer will take service under our Large Load Power Service tariff, the framework under which new large customers pay a premium rate that covers their fair share of existing and new system costs. This ESA will bolster our adjusted EPS growth, demand growth, and credit metrics throughout our five-year plan. Bryan will also cover this in more detail. With this solid start, we are reaffirming our 2026 adjusted EPS guidance range of $4.14 to $4.34 per share. We are also reaffirming our long-term adjusted EPS growth target of 6% to 8%+ through 2030 off of the 2026 midpoint of $4.24. We expect adjusted EPS growth to exceed 8% annually beginning in 2028 through 2030. Slide six summarizes our recent data center announcements. As I mentioned, the fifth ESA is for a data center in Kansas Central. While customer specifics are confidential, we can confirm that the customer is a large, well-known developer with strong investment-grade credit ratings, and is working with the hyperscaler off-taker. We anticipate further disclosure in the coming months. In aggregate, we have executed ESAs for five data center projects under our LLPS tariffs, securing the strong protections that the tariff requires for our existing customers. These five ESAs include steady-state peak load of approximately 2.5 gigawatts. Including the 450 megawatts of steady-state peak load from non-LLPS customers such as the Panasonic electric vehicle battery manufacturing plant, the total reaches 3 gigawatts. We continue to make progress with other large customers, and we expect at least one additional ESA in 2026. As a reminder, any additional ESAs would represent upside to the financial plan that we are sharing with you today. These economic development wins solidify Kansas and Missouri as premier destinations for data center customers and will empower investments in growth, helping to drive prosperity for our region. Slide seven summarizes the progress we have made in converting our large customer pipeline into signed agreements and provides an update on activity further down the queue. Starting in the top row, the 3 gigawatts include the five announced ESAs and large customers that have already commenced operations. This tier one demand enables a transformative growth opportunity supporting our revised estimate of 7% to 8% annual retail load growth through 2030. This total consists of projects already in operation progressing toward a steady state of 1.2 gigawatts. The remaining 1.7 gigawatts represent additional projects that have executed ESAs contractually requiring minimum monthly bill payments, whether or not the capacity is fully utilized. Regionally, these will deliver significant benefits—billions of investment that will create jobs, support a leading-edge digital economy, and expand the tax base—while enabling us to spread system costs over a broader base to maintain affordability for all customers. In the next category, we highlight approximately 1 to 1.5 gigawatts of expansion opportunities with existing customers who have signed ESAs. These expansions would require amending load ramps that are already in existing contracts, and we are working on the transmission and generation solutions to enable them. To be clear, our five-year financial plan does not incorporate any upside from the potential expansion projects, which could materialize both before or after 2030 depending on individual project timing. We remain in advanced discussions with multiple new customers in our tier two category representing approximately 1.5 to 3 gigawatts. These customers have acquired land or land rights, signed letters of agreement, and are actively reviewing transmission and generation capacity solutions. The opportunity from these customers is primarily beyond 2030. Taken collectively, the opportunity set with tier one expansion and tier two category customers gives us confidence that our exceptional earnings and load growth will continue into the 2030s. The remaining pipeline, totaling well over 10 additional gigawatts, highlights the robust activity and sustained interest in our region. Serving this load will require working in tandem to identify creative solutions with our customers who stand ready to move forward as capacity opens, allowing us to prioritize the best-fit projects as the queue evolves. Moving to slide eight, I will provide a brief update on our regulatory priorities in both Kansas and Missouri. In Kansas, we expect to file our 2026 integrated resource plan in the second quarter. This year's update will reflect several key developments including higher long-term demand growth driven by new electric service agreements, active Southwest Power Pool capacity reserve requirements, changes to federal tax credit policies, new construction cost estimates reflecting the results of RFPs, and coal plant retirement schedules. Together with other key inputs, these factors will inform the selection of future generation projects and shape the recommended resource mix in our preferred plan. Once the IRP is filed, we anticipate related generation predetermination filings over the balance of the year. Additionally, the Kansas Corporation Commission approved a unanimous stipulation agreement to return all deferred nuclear production tax credits to customers over a three-year period, which is a constructive outcome for our Kansas customers. In total, we are expecting to monetize in excess of $100 million of nuclear production tax credits per year that will be flowed back to our customers over time, further enhancing affordability. Pivoting to Missouri, we filed our Missouri Metro rate case on February 6. The procedural schedule calls for staff and intervenor testimony by June 30, settlement conferences in September, and hearings beginning October 5, with new rates effective around 01/01/2027. We look forward to working collaboratively with Missouri Public Service Commission staff and our stakeholders to achieve a constructive outcome for our metro customers. Later today, we will file our 2026 integrated resource plan in Missouri. Similar to Kansas, we anticipate multiple CCN filings for the balance of the year as we advance the next phase of our all-of-the-above generation strategy. I will conclude my remarks with slide nine, which highlights the core tenets of our strategy. We will continue to prioritize customer affordability in our long-term plan. While capital investments are higher than historical levels, so too is load growth. Serving new large customers has a dual advantage. The premium rates help cover not only the cost to serve them but also any new investment needed, and in addition, the higher energy sales allow us to spread system costs over far more kilowatt-hours. We expect to see customer rate increases over the next several years to be in line with or below inflation for the significant majority of our residential customers. Missouri West is our smallest utility with the lowest rates in our system, some of the lowest rates in the nation, partly because the utility is in need of infrastructure investment, in particular, dispatchable baseload generation. As a result, as new generation plants come online to serve that jurisdiction, these customers may see rate increases above inflation over the next five years. We still anticipate their rates will remain regionally competitive, and these investments will reduce the reliance on market-provided energy, making rates more stable for our Missouri West customers. Longer term, as the full benefits from large load customers are realized, we are confident that we can manage residential rates to a level consistent with inflation, and all Evergy, Inc. customers will benefit from these infrastructure investments for decades to come. Affordability has been at the forefront of our strategy since the merger that created Evergy, Inc. back in 2018. Evergy, Inc.'s prices in Kansas and Missouri have been stable in recent years, with our overall rates today about 5.1% cumulatively higher than in 2017—an increase of well under 1% per year, far below inflation during that time. By prioritizing affordability, we also contribute to the robust economic development pipeline ahead of us and support the substantial economic potential within our states. Ensuring reliability is also a core element of our strategy. We are targeting top-tier performance in reliability, customer service, and generation, as measured by key metrics such as SAIDI, safety, grid resiliency, and generation fleet availability. Our teams delivered strong results in these areas in 2025, and we are pleased to report a strong start to these metrics in 2026. With respect to sustainability, we continue to advance the evolution of our sustainable generation fleet, as will be outlined in our 2026 IRP updates. Our primary objective is to implement a cost-effective all-of-the-above generation strategy. Informed by the analysis from the IRP process, we will advance this objective through targeted investments in natural gas, energy storage, and solar resources to serve our customers. We remain focused on maintaining a balanced portfolio of resource additions to support long-term growth and prosperity across our states. And with that, I will now turn the call over to Bryan. W. Bryan Buckler: Thank you, David. Thank you, Pete and Kyle, and good morning, everyone. Let us begin on slide 11 with a review of our results for the quarter. For the first quarter 2026, Evergy, Inc. delivered adjusted earnings of $162 million, or $0.69 per share, compared to $128 million, or $0.55 per share, in 2025. As shown on the slide from left to right, the year-over-year drivers are as follows. First, load impacts were essentially flat versus the prior-year quarter. Reflecting our exceptional business fundamentals, weather-normalized demand was strong in the quarter, growing 4.7%, while mild winter weather resulted in fewer heating degree days compared to prior year and versus normal, impacting EPS by approximately $0.06 compared to budget. These drivers effectively offset each other in the quarter. The strong start to the year in weather-normalized load growth is consistent with the overall 3% to 4% full-year load growth expectations we shared with you in February and is reflective of the positive economic development outlook in our service areas. In fact, in the first quarter, we saw strong results from Panasonic and from the start-up of operations of a large data center in March, which was a couple of months ahead of plan. In tandem, these two large customers drove a $0.02 EPS benefit in the quarter compared to prior year. As we look to the full-year 2026 outlook, other revenues and incremental large-load margin from the amended ESAs David mentioned are projected to fully offset Q1 mild weather and place us in a solid position to meet the midpoint of our 2026 EPS guidance of $4.24. The next driver of Q1 results to mention is recovery of and return on regulated investments, driven primarily by new retail rates and FERC-regulated infrastructure investments, which in total contributed $0.15 of EPS. Next, a combination of higher O&M and increased depreciation and net interest expense related to our capital infrastructure investments drove a $0.10 decrease in EPS. And finally, other items contributed a positive $0.09 variance in the quarter. To assist investors and analysts with their modeling, we are providing second quarter adjusted EPS guidance of 17% to 19% as measured against the $4.24 midpoint of our 2026 adjusted EPS guidance range. Turning to slide 12, I will provide more detail on sales trends. As I mentioned earlier, weather-normalized retail demand grew 4.7% in the first quarter, with strong growth across customer classes. Residential demand grew 3.3%, reflecting solid underlying customer growth as our Kansas and Missouri service areas continue to see migration into our communities. Commercial demand grew 3.8%, driven primarily by the initial ramp-up of data centers. Industrial demand grew 10.1%, driven primarily by Panasonic's continued ramp as well as higher usage from a large customer that experienced an unplanned outage last year in Q1. We anticipate robust growth in the commercial and industrial classes throughout 2026 given continued ramps of large customers, including the data center project that energized in March. At a macro level, the robust customer demand in our service areas is supported by a solid labor market. On slide 13, we highlight our updated large-load demand growth profile. This table reflects the results to date from years of dedicated efforts to advance a competitive framework for capital investment in Kansas and Missouri that is enabling our ability to invest for growth in a way that promotes economic prosperity for our customers and communities, while solidifying our region as a premier destination for advanced manufacturing and data center customers. As indicated on the chart, the large-load customer ramps are already underway, and we will continue building in aggregate through 2030 and beyond, supporting our retail load growth CAGR of 7% to 8% through 2030. This reflects the impact of the fifth ESA we announced today, as well as the amendments of two ESAs previously signed. And as a reminder, the new ESA and the amended ESAs are all subject to the minimum bill protections previously described. To put in perspective the great progress the team has made in the last couple of months, on this slide we highlight the significance of the increase in megawatts served in the five-year plan, compared to what we showed you during our February investor call. For example, while not shown on the slide, 2026 large-load capacity revenues are starting earlier within that year, leading to EPS benefits in 2026. And as we look to future years, 2027 large-load capacity revenue will now be tied to megawatts in ESAs that are 100 megawatts greater than previously disclosed, trending up further in 2028 and 2029, and with 2030 projections now approximately 500 megawatts greater than our previous projection of capacity served by the end of that year. In fact, by 2030, we expect to be serving up to 2.25 gigawatts of capacity for this set of new customers. This tells a powerful story of growth anchored by long-term contracts and clear parameters on monthly billings, providing significant visibility into our earnings growth and cash flow streams for ESA LLPS contracts that generally span 16 to 17 years. As a reminder, this plan reflects the contributions from customers under signed ESAs for five large projects. Furthermore, we continue to make strong progress with several additional large customers and expect to execute at least one more ESA in 2026, whose load and capacity served could represent upside to this five-year forecast and, importantly, well into the next decade. As David described, we will continue working in a measured fashion through our massive pipeline of prospective customers to build on the success we have achieved thus far. Let us briefly touch on slide 14. This slide highlights our strong load growth profile, which has been further strengthened by today's large customer announcements. As indicated on the chart, the large-load customer ramps are already underway and will continue building in aggregate through 2030 and beyond, supporting our retail load growth CAGR of approximately 7% to 8% through 2030, up from our previous forecast of 6%. This exceptional growth trajectory, anchored by long-term contracts and clear parameters on monthly billings, provides significant visibility into our earnings growth and cash flow streams. Importantly, we now expect load growth ranging from 6% to 11% in each of our three utilities over the next five years, paving the way for affordability benefits for customers across our service areas. Let us conclude on slide 15 by summarizing the key updates to the plan we shared with you in February. As previously mentioned, we now anticipate higher load growth and higher revenues for our entire 2026 through 2030 forecast as a result of the fifth ESA we announced today and amendments to two previously signed ESAs. Our forecasted 2025 through 2030 retail load growth CAGR is now approximately 7% to 8%, up from our prior forecast of 6%. The amended ESAs accelerate revenue earlier than our previous plan, and the fifth ESA will begin contributing in early 2027. Regarding our potential upside to the five-year capital plan, we will soon file our integrated resource plans in Missouri and Kansas, which will outline the generation capacity projects needed to serve our projected peak load profile for customers that have been signed to date. This current view of generation needs is referred to as the preferred plan in those IRPs. The preferred plan will represent modest upside to our $21.6 billion capital investment plan, taking our projected rate base CAGR to approximately 12% compared to our previous disclosure of 11.5%. These IRPs will also articulate the dynamic nature of our customer pipeline and load growth projections, which could require additional capital projects beyond what will be shown in the preferred plan as our business evolves in the months and years ahead. As it relates to our EPS outlook, we are reaffirming our 2026 adjusted EPS guidance midpoint of $4.24. For 2027 through 2030, all years are now strengthened, and we expect annual earnings growth to exceed 8% beginning in 2028, with an upward bias from the ESA additions announced today. As David discussed on our fourth quarter call, for the later years in our forecast period we continue to estimate a 250 basis points delta between rate base growth and EPS growth, which is now compared against the approximately 12% rate base CAGR that I have described earlier. The benefits of the recently signed and amended ESAs also strengthen our credit metrics. In comparison to an estimated 14% FFO-to-debt forecast we disclosed on our February call, we now anticipate higher FFO-to-debt across the entire five-year forecast. From 2026 to 2028, we expect to be in the range of 14% to 15%, further strengthening thereafter as our large customers ramp towards their peak load. This target range also reflects the impact of a three-year flowback period for nuclear production tax credits in Kansas. We understand the importance of a strong balance sheet to our equity and credit investors and many other stakeholders. In short, our strong financial outlook has been bolstered by further execution on the large customer front, which will in turn drive greater affordability benefits for our customers. We believe Evergy, Inc. has one of the most compelling growth opportunities in the industry, with robust growth into the next decade, resulting in sustainable growth and affordability benefits for our customers and communities over the long term. I speak for the entire leadership team in saying that we are excited about the future at Evergy, Inc. and are deeply committed to successfully executing our business plan and delivering consistent results for our customers, communities, employees, and shareholders. And with that, we will open up the call for questions. Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Nicholas Campanella of Barclays. Your line is now open. Analyst: Hey, good morning. Thanks for all the updates. David A. Campbell: Morning, Nick. W. Bryan Buckler: Morning, Nick. You can hear me. Analyst: Yeah. So, hey, I know I just—I just, Bryan, thanks for the clarity on, you know, it looks like this 500 megawatts is worth about 50 basis points of growth to the rate base CAGR. So you are pointing people more towards 12. I know you kind of talked about 250 basis points of lag. So, you know, it just seems like you could be well above 9 here. Is there anything that you would flag that is an offset to that basic walk? W. Bryan Buckler: Yeah, Nick, thanks for the question. And no, I think you interpreted exactly what we were trying to communicate. There is a lot of great momentum. These are signed ESAs with great counterparties with minimum bills that just give us tremendous line of sight. And it sounds like you are hearing what we want you to hear, which is confidence that not only can we exceed 8% in those out years, but trending towards the math you just described. Analyst: Okay. Yeah. Sorry to be naive there. Then I know you have talked about executing one more ESA in 2026, and you have this bucket of 1 to 1.5 gigawatts into the 2030 window of, you know, higher probability. Could you just expand on how many customers that is made up of? David A. Campbell: So, Nick, we do not break out the piece, but you can have a sense for how large these customers typically are by the load—you can analyze the load impacts of the five ESAs that we have signed. There is a range of sizes. Some folks are even larger, but there is a range there that is reflected. If you look at our five, they are generating a peak in the 2.4 gigawatt range. I will describe the opportunity set as pretty robust across, especially, the tier one and tier two categories. There are some natural advantages that come with expansion opportunities because you already have a signed ESA and know where the site is. W. Bryan Buckler: We are working with some known parameters, but we also have some very interesting discussions in the tier two category. And, of course, we are not going to lose sight of the tier three as well. David A. Campbell: A little more creative solutions are required for tier three, and that is likely to be primarily beyond 2030, but we are excited about each bucket. The most promising is always, of course, the expansion opportunities where you have already got that relationship, and you have already got an ESA in place. Analyst: Okay, great. And then just one last confirmation on this new kind of outlook. You are going to roll in some additional capital, it looks like, and you have an increase in the FFO-to-debt. Just on the new roll, how are you thinking about that communication around equity in 2030? W. Bryan Buckler: Oh, hey, Nick. It is Bryan again. Yes. So for capital updates, it is still where we have described it before. When we updated our capital investment plan back in February, we funded that with about 37% equity. So the incremental capital was around 37%. We generally have given a range of 40% to 50% assumption on that going forward. So I think that still applies here. David A. Campbell: And, Nick, as Bryan mentioned in his remarks, as a result of the additional ESA, the ESA amendments, and the settlement reached around the affordability benefits we can provide by flowing back nuclear PTCs over three years, our FFO-to-debt metrics are strengthened over the plan. We are in that 14% to 15% range and trending up in that range, particularly as new customers come online in the back half of the plan. Analyst: Thank you. Operator: Our next question comes from the line of Julien Dumoulin-Smith of Jefferies. Your line is now open. Analyst: Hey, good morning, team. How are you guys all doing? So, unfortunately, I am going to follow the same direction as Nick here. Hopefully that is okay. If you can, obviously, you have got these five ESAs in hand. How do you think about latitude for six and onwards? And what I am getting at here is how do you think about spare capacity versus transposing incremental ESAs into further generation and supply resources of various flavors? I just want to understand the alignment—when you see these next announcements, how much more capital intensity there might be with that, and then also how you think about the cadence if you have used up the bulk of your capacity, how you would set expectations on this front. Again, obviously, I am very cognizant of how you just described things a moment ago. David A. Campbell: Yep. I appreciate that, Julian, and it is an insightful question because not every additional ESA is going to have the exact formulaic impact on capital. Even if you do some good math and see, given the amount of megawatts we added to our peak load, we have robust improvement in the amount of capital we are describing—rate base growth that goes from 11.5% to approximately 12%. In some cases, as you add ESAs, there may be a little more or less capital impact, but it will be in that range. What I would emphasize is that on our last call, we signaled our confidence that we would sign one more ESA, and we have announced that ESA here on this call. On this call, we are also announcing our confidence that we will sign at least one additional ESA this year. We have tried to be thoughtful about the long lead-time equipment—from turbine capacity to the things you need on the T&D side—to have the equipment available so that we can meet the demand that we see. We are not going to meet everything in our pipeline, but we are confident in the expression that we made today that we will sign at least one additional ESA. We have turbine reservations beyond what is needed in the ESAs we have announced. We continue to work with customers to be responsive to their needs, and it is typically around the transmission and generation capacity side. So we have been purposeful in thinking about our queue and being positioned to continue to grow. If we have additional ESAs, as we expect to have at least one, that will have an impact on the capital plan. It will create some more upward bias across the board. It will be under the ESA framework, so it will have the premium rates that come along with the LLPS tariff. We have high confidence that we are not done. The team has done tremendous work. We are pleased with how attractive our region is to these large customers, and we will continue to work with them to find the right locations for those opportunities. We have execution, of course, as we bring the large customers online, but we are excited about the momentum and really expect to continue. Analyst: Excellent. And maybe just, Bryan, a follow-up with that. How do you think about ATM or block? I mean, just as the cumulative capital accelerates here, how do you think about funding it or pre-funding it? We have seen some companies talk about this in recent days. So curious on your latest. W. Bryan Buckler: Thanks, Julian. Our equity issuance plan for now is unchanged. It is $700 million to $900 million per year from 2026 through 2029, and still no needs in 2030, as our credit metrics just become stronger and stronger throughout the forecast period. So that is $3.3 billion in the aggregate. For 2026, we have already done $125 million. As for our remaining need in 2026, we have no plans currently for a block issuance, as our needs are easily addressable through our ATM program. So we plan to dribble it out as we go through 2026. Analyst: Excellent. Thanks for the details, guys. All the best. See you soon. W. Bryan Buckler: Thanks, Julian. See you soon. Operator: Thank you. Our next question comes from the line of Shar Pourreza of Wells Fargo. Your line is now open. Analyst: Hi, team. Thanks. This is Andrew Kadavy on for Shar. Good morning. On the amended ESAs, was there a step-up in the amount of final load you will be serving, or is this just a change in the ramp profile? And then can you offer any insight into what spurred that step-up? David A. Campbell: Sure, Andrew. If you look at our material, we try to provide a sense—we give you a really good view of how the total load has changed in slide 13. It is in Bryan's section, where we detail the megawatts served each year for our total of our LLPS and our non-LLPS customers. You will see that the peak demand from these customers relative to last quarter has gone up to 3 thousand megawatts, and it was 2,400 last quarter. So it is a cumulative increase of 600 megawatts. That is the impact of both the amended ESAs and the new ESA. It is fair to say that the new ESA is the main driver of the cumulative increase. Some of the amendments are higher levels over the interim period. So a lot of the predominant impact of the higher peak is from the new ESA. The logic for the amended ESAs is that these customers had a high appetite for capacity—essentially as much as we could provide within reason. We identified an ability to serve them at higher levels. Those customers were interested in doing that under the framework of the existing ESAs, so we made those amendments. It was a mutual solution to help serve our customer need that we were happy to be able to serve. Analyst: Great. Thank you. And then can you give us a little detail on what is included in and what drove the $0.09 tailwind in the “other” bucket on slide 11? W. Bryan Buckler: Yep. Hey, Andrew. There are a few items in there. Our COLI—company-owned life insurance—proceeds added about $0.03 year over year. We had some incremental power marketing revenues that were also a bit higher than prior year, and lastly, our ETR is lower than prior year. Altogether, a modest portion of this $0.09 is favorable to our original plan, but a lot of it is just budgeted activity. Analyst: Great. Thanks. I will leave it there. David A. Campbell: We reaffirmed—there was real mild weather at the start to the winter—but we are pleased with the start to the year, delivered solid results, and reaffirmed our guidance for the year. Operator: Our next question comes from the line of Michael Sullivan of Wolfe. Your line is now open. Analyst: Hey, good morning. W. Bryan Buckler: Good morning, Mike. David A. Campbell: Hey, Michael. Analyst: On the regulatory side, maybe if you could just give us a sense of potential to settle the Missouri case this year, and then you seem to be kind of setting the stage for where rates could be going at Missouri West. When do you plan to file there next, and what is the rate trajectory going to look like after it has been kind of so depressed in recent history? David A. Campbell: A lot there, Michael—good questions. On the Metro case, the last few cases we filed in both states, we have been able to reach settlements. So we are certainly going to be working towards getting a constructive solution with Staff, OPC, and other stakeholders in Missouri. Staff will not file their testimony until June. The settlement conference comes later, towards the fall timeline, so more to come on that. Those settlement discussions actually follow a schedule in Missouri. I noted in the script when the actual dates are for the settlement conference. More to come, and the schedule is after even our next quarterly call. In our Metro jurisdiction, base rates went down in our last rate case, which was after a four-year stay-out in Missouri. So the trajectory in Metro has been terrific in terms of overall rates being much lower than the impacts of inflation, and that affordability focus is one we are going to continue to have. For Missouri West, the cadence that we have had there is typically every other year or so. That would put us on a timeline to file a case in the back part of this year or early next year. I will reiterate the remarks I made regarding affordability in Missouri West. Overall, for the significant majority of our residential customers, we expect to be in line with or below inflation. Missouri West, we do expect, is going to be a little higher than inflation over the next five years, but manageable over the long term to that inflationary level. That is really a result of Missouri West having a level of infrastructure investment that is lower than our other jurisdictions. It is more exposed to market power trends, so when there have been price spikes, for example during Winter Storm Uri, or when there were spikes in natural gas prices in 2022 and in January, that jurisdiction is a little more susceptible, so it needs that infrastructure investment. It has by far the lowest rates in our system as well, so that jurisdiction has benefited from the lower investment, but eventually, we need to make sure they have adequate capacity. There will be a level over inflation over the next five years, but over the long term we expect to be in that range of inflation, and we really know that Missouri West will benefit from these needed investments for decades to come. It is currently our smallest utility. It has very robust load growth. The good news about the LLPS tariff is that it has a premium rate. So Missouri West, we expect to grow 10% to 11% per year in sales growth. That gives a lot more kilowatt-hours over which to spread the investments. That is helping to moderate that rate increase trajectory. It is a really great situation in Missouri West—if we did not have large load growth, we would be needing to make this investment, but we would not have the same kind of incremental sales or premium customer to spread it over. Analyst: Okay. That is very helpful, David. Thank you. And then just in terms of when you are signing these ESAs with maybe some of the non–AA rated counterparties, how important is visibility into ultimately having a hyperscaler off-taker? I think you mentioned this most recent one—we should know more in the next couple of months. And then I go back to the one from last quarter. Where does that stand? If you could give us a feel for how important the visibility to a hyperscaler is. David A. Campbell: It is an important consideration, Michael, no doubt about it. Sophistication of the counterparty, their knowledge of how to bring it together, their ability to line up those end-use customers—all matter. The LLPS tariff has a set of collateral and credit requirements that every customer has to meet in addition to having confidence as to who their off-taker is. We are not announcing the counterparty today, though we did note that it is a premier developer. It actually does have a strong corporate rating—BBB+. But all of our customers have to meet the credit and collateral requirements that are in the LLPS. If there is not a parent with an investment-grade rating, there have to be letters of credit that follow the terms of the LLPS. In our ESA discussions, the counterparty situation—making sure we have the right setup in terms of counterparty credit—is a key part of every discussion. Of course, we have Google as our counterparty for two data centers and Meta for another. Those are companies with capitalization levels that are enormous. Developers that have strong off-take with hyperscalers are also great counterparties, and they all have to meet the credit and collateral requirements in the LLPS. W. Bryan Buckler: Thank you, Michael. Operator: Our next question comes from the line of Paul Fremont. Your line is now open. Analyst: Thanks, and yes, good morning. Great quarter. I was curious if we could get a sense of, on slide 13, what would be the end date in terms of the 3,000 megawatts for peak demand? David A. Campbell: We have not laid that out precisely, but I would describe it as going well into the 2030s—not quite out to the mid-2030s—but well into the 2030s. You will see that we have an additional 800 megawatts where it will continue to expand. So it is a robust growth rate well into the 2030s. Of course, the pipeline that we have—many of those discussions are focused on the 2030 and beyond time frame. We feel very confident about the growth rate being sustained in that timeline, not only from the signed ESAs, but also from the customer discussions that are underway. Analyst: And then I guess I am assuming that most or all of that increase is based on the new contracts. Has the end year changed significantly from the fourth quarter to the first quarter disclosure? David A. Campbell: When you say end year, you are talking about the general timeline when folks reach peak load—has that changed materially? For the existing ESAs, no. And the new ESA is generally in line in terms of the overall timeline when they are ramping up. It is a historic opportunity, so folks are generally on a timeline that moves pretty fast. It is still well into the 2030s, but that timeline has not changed significantly. Analyst: And I think we are using, like, a five-year assumption. Is that reasonable to ramp to full load? W. Bryan Buckler: That is right, Paul. These five ESAs start in years from 2026 through 2028. Some of the 2028 ESAs go into 2032, for example. Hopefully that helps. David A. Campbell: Generally, the LLPS has a five-year ramp-rate provision and a 10- to 12-year peak provision. So that is embedded in the structure of the tariff. Analyst: Okay. Thank you very much. Operator: I am showing no further questions at this time. I would now like to turn it back to David Campbell for closing remarks. David A. Campbell: Thank you, Dana, and I want to thank everyone for joining our call today. This concludes the call. Have a great day. Operator: Thank you. This does conclude the program. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Cooper-Standard Holdings Inc. first quarter 2026 earnings conference call. During the presentation, all participants will be in a listen-only mode. Following the prepared comments, we will conduct a question-and-answer session. At that time, if you have a question, please press star then 1 on your telephone keypad. To withdraw your question, press star then 2. As a reminder, this conference call is being recorded, and the webcast will be available on the Cooper-Standard Holdings Inc. website for replay later today. I would now like to turn the call over to Roger Hendriksen. Roger Hendriksen: Thank you, Sergio, and good morning, everyone. We appreciate you spending some time with us today. The members of our leadership team who will be speaking with you on the call this morning are Jeffrey S. Edwards, chairman and chief executive officer, and Jonathan P. Banas, executive vice president and chief financial officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to slide 3 of this presentation and the company's statements included in periodic filings with the Securities and Exchange Commission. This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I will turn the call over to Jeffrey S. Edwards. Jeffrey S. Edwards: Thanks, Roger. Good morning, everyone. We appreciate the opportunity to review our first quarter results and provide an update on our business and the outlook going forward. To begin on slide 5, I would like to highlight some of the key first quarter data points that we believe are reflective of our continuing outstanding operational performance and our ongoing commitment to our core company values. In terms of operations and customer service, we started 2026 with the same strong level of performance that we had in 2025, ending the first quarter with 99% green customer scorecards for quality and service. For new program launches, we also continue to deliver strong performance, with 97% of our customer scorecards being green. Our plant managers and our plant employees continue to deliver outstanding performance and value for our customers through their dedication and commitment to excellence. And, as always, our most important operating metric, safety performance, continues to be excellent. In fact, in the first quarter, we had a total incident rate of just 0.18 reportable incidents per 200,000 hours worked, well below the world-class benchmark of 0.35. Importantly, 48 of our plants maintained a perfect safety record, with a total incident rate of zero for the first three months of the year. That is 84% of all of our production facilities achieving a perfect safety score, demonstrating that our ultimate goal of zero safety incidents is achievable. We are certainly proud of our entire global team for their focus and achievement in this important operating measure. In terms of cost optimization, we had another solid quarter, with our manufacturing and purchasing teams delivering $17 million of savings through lean initiatives and other cost-saving programs. These cost reductions and operating efficiencies, combined with revenue growth in the quarter, allowed us to achieve a solid 40 basis point improvement in gross margin versus the first quarter of last year. As a result, despite some of the market headwinds we have been seeing, we continue to drive profitable growth and margin expansion through the execution of our plans and strategies. Finally, we are continuing to leverage world-class service, technical capabilities, and our award-winning innovations to win significant new business. During 2026, we received $128 million in net new business awards, which are expected to drive profitable growth as they launch over the next few years. I will talk more about the significance of our new business awards in a few minutes. Turning to slide 6, as we have made terrific improvements in our operating metrics and profitability over the past few years, we certainly have not lost sight of the importance of being a good corporate citizen. We continue to work on developing and delivering product and material solutions for our customers that help them achieve their environmental goals. And, of course, we have set and are working to achieve aggressive internal goals for reducing energy consumption, emissions, and scrap. Our achievements in corporate responsibility continue to garner recognition from numerous entities, as well as our customers. One of our recent innovations, our FlexiCore thermoplastic body seal technology, was recently recognized as a winner in the 2026 Environment + Energy Leaders Award. This new technology replaces the metal carrier that is used in a traditional dynamic body seal with a patented thermoplastic carrier. The result is a lightweight body seal that maintains the same high-quality performance of traditional materials but is 100% recyclable, increasing vehicle efficiency and reducing materials that end up in landfills. Recently, a FlexiCore front and rear closure seal application was successfully launched into production with a global automaker, further demonstrating the real-world impact of this technology. We are also pleased to have recently been included among USA Today's list of America's Climate Leaders for the third consecutive year, in recognition of our continuing advancements in environmental stewardship. Corporate responsibility is and will continue to be an area of focus for our entire organization, from the production floor to the boardroom, because it is the right thing to do. You can learn more about our goals and our progress in sustainability in our 2025 corporate responsibility report, which will be published within the next few days. We encourage everyone to take a few minutes to look through it when it posts on our website. Now let me turn the call over to Jonathan P. Banas to discuss the financial results for the quarter. Jonathan P. Banas: Thanks, Jeff, and good morning, everyone. In the next few slides, I will provide some details on our financial results for the quarter, and discuss our cash flows, liquidity, and aspects of our balance sheet and capital structure. On slide 8, we show a summary of our results for 2026, with comparisons to the same period last year. First quarter 2026 sales were $686.4 million, an increase of 2.9% compared to 2025. The increase was driven primarily by favorable foreign exchange, partially offset by unfavorable volume and mix, net of customer recoveries. As Jeff mentioned, our first quarter 2026 gross margin improved 40 basis points compared to the prior year, up to 12% of sales. This was a strong result in view of the production volume headwinds we continue to face on certain key platforms in North America during the quarter. Adjusted EBITDA in the quarter was $51 million, compared to the $58.7 million we reported in the first quarter 2025. The year-over-year change was primarily due to the non-recurrence of approximately $10 million of royalty payments that we received in 2025. Otherwise, EBITDA and margin would have improved over last year. On a U.S. GAAP basis, we reported a net loss of $33.3 million in 2026, compared to net income of $1.6 million in 2025. Adjusting for the loss incurred on the successful refinancing of our debt in the first quarter this year, restructuring, and other items from both periods, as well as their related tax impacts, adjusted net loss for 2026 was $5.2 million, or $0.29 per share, compared to adjusted net income of $3.5 million, or $0.19 per share, in 2025. Our capital expenditures in 2026 totaled $24 million, or 3.5% of sales, slightly higher than the prior-year period due to increased launch-related investments. We continue to exercise discipline around capital investments, as we focus on maximizing our returns on invested capital. Moving to slide 9, the charts provide additional insights and quantification of key factors impacting our results for the first quarter. For sales, favorable foreign exchange was a tailwind of approximately $24 million in the quarter versus 2025. Unfavorable volume and mix, net of customer price adjustments, had a negative impact on sales of approximately $5 million compared to the same period a year ago. For adjusted EBITDA, lean initiatives in purchasing and manufacturing positively contributed $17 million year over year, delivered by continued strong performance from our global teams. In addition, we continue to realize benefits from our restructuring initiatives implemented in prior periods, amounting to $2 million in incremental savings, as well as lower SG&A of $1 million in the first quarter compared to last year. Offsetting these improvements were $7 million of unfavorable volume/mix including customer price adjustments and the impact of certain short-term production disruptions, $7 million in increased costs in the form of higher wages and general inflation, $2 million from unfavorable foreign exchange, and $12 million of other unfavorable items, primarily the non-recurrence of certain royalty payments we received in the first quarter of last year. Moving to slide 10, we ended the first quarter with a cash balance of approximately $118 million, owing primarily to typical seasonal changes in working capital, which we expect will unwind over the next couple of quarters, as well as $24 million of out-of-period accrued interest that we paid in conjunction with our refinancing. Cash on hand, coupled with $167 million of availability on our ABL facility, which remains unutilized, resulted in total liquidity of approximately $286 million as of 03/31/2026. We believe that this provides us with more than sufficient liquidity to support the continuing execution of our business plans and profitable growth objectives in today's economic and industry environment. The successful refinancing that we completed on March 4 gives us an overall lower interest rate and reduces expected annual cash interest by approximately $6 million. In addition to the lower interest rate, the refinancing also provides us with increased financial flexibility through more favorable terms, and significantly extends the maturity on the newly issued notes out to 2031. We believe this enhanced capital structure positions us extremely well to continue to execute on our strategic plans, deliver profitable growth, lower our net leverage, and maximize our returns on invested capital. This concludes my prepared comments. I will turn it back over to Jeff. Jeffrey S. Edwards: Thanks, John. In the last portion of our call, I would like to again comment on our high-level strategic imperatives and how these are positioning us for continuing profitable growth over the next several years. I will wrap up with a few comments on our outlook for our business and our industry in general in 2026. Please turn to slide 12. Our strategies and operating plans, as you know, are built around the four key strategic imperatives that you see outlined on slide 12. By aligning the company around these common objectives, we continue to drive significant improvements in virtually every aspect of our business. And by the continuing execution of our plans and strategies, we are positioning the company to deliver continued profitable growth, further improvements in margins, and significantly improved returns on invested capital, as we discussed in last quarter's call. Moving to slide 13, the charts provide a concise summary of the progress we have made in restoring the financial strength of the company. Through our successful strategic execution, we have been able to increase our gross profit margins by 160 basis points over the past two years, despite reduced or flat production volumes in our two largest operating regions. This includes the impact from the significant decline in production on one of our key platforms in North America that resulted from a customer supply chain disruption beginning in the fourth quarter of last year. Because of our success in driving sustainable efficiencies and cost reductions, we believe we will continue this trend of expanding margins in 2026 and beyond, even if production volumes remain flat. And we would expect to leverage any increase in production volume to drive further profitability and returns. In addition, in our cost optimizations we are benefiting from continuing launches of new programs and products with enhanced variable contribution margins. As these new programs ramp up, they are replacing older programs that have lower margins on average. Our booked-business launch cadence and the delivery of run-out business give us a high degree of confidence in our expanding margin outlook. Turning to slide 14, both of our business segments are executing sound strategies to drive profitable growth and improved returns on invested capital. In our Sealing segment, where we are already the global leader in the industry, we are leveraging our leading technologies, expertise, and innovation to capture additional share and profitability. We have also deployed sophisticated digital tools within our manufacturing facilities to drive further efficiencies and improved asset utilization. Finally, as we continue to deliver exciting innovations that provide incremental value to our customers, we are winning more than our fair share of new business. Turning to slide 15, in our Fluid Handling segment, we have an unmatched portfolio of products and innovations that position us well to take advantage of increases in ICE and hybrid powertrains in the U.S., the continuing adoption of EVs in China, and the evolving mix of hybrids and EVs in Europe. This flexibility around powertrains, combined with our ability to design and deliver engineered solutions to optimize vehicle efficiency, is creating opportunities for increased content per vehicle and profitable new growth. As we have said in the past, our longer-term strategic target is to double the fluids business within the next five to seven years. With recent new business wins and a long list of target business opportunities coming up, we believe we are on track to achieve this goal. Turning to slide 16, in terms of winning new business, as I mentioned at the beginning of the call, we have received $128 million in net awards in the first three months of the year. This was ahead of our plans for the quarter, putting us in a strong position to achieve the full-year goal of over $400 million in net new business awards. As you can see in the chart, as our overall operating performance and financial strength continue to improve, the new business awards are accelerating. And the good news is that we have available capacity to launch much of this new business over the coming years with minimal incremental capital investment. We are proud to be the supplier that our customers are increasingly turning to for quality components, consistency of delivery, and collaboration on critical design and development of new technologies. With these awards in hand for Q1 and a bright outlook for the new business wins ahead, we are increasingly confident that we will be able to execute our plans to achieve our longer-term strategic financial targets for growth, margins, and return on capital. Turning to slide 17, to conclude our prepared remarks this morning, let me shift focus to the near term and our outlook for the rest of 2026. The key takeaway this morning is that, despite continued disruptions within our industry and ongoing uncertainty in the global economy, we were able to deliver results that exceeded our original operating plan. We are optimistic that certain headwinds we have faced for the past two quarters could turn into tailwinds in the back half of the year. And if we could get some resolution to the military conflict in the Middle East, we would expect a strong positive effect on consumer sentiment and consumer demand globally. Meanwhile, we are maintaining our focus on delivering value for our customers, optimizing our operations around the world, and successfully executing our strategic plans to drive profitable growth, further expand our margins, and maximize return on invested capital. We believe we are on track to achieve or exceed the full-year targets that we set out for you back in February. We expect to provide a more formal update on guidance, as we typically do, in conjunction with our second quarter results. We also believe we are solidly on track to achieve our longer-term strategic financial targets for adjusted EBITDA margins and return on invested capital. This concludes our prepared remarks. Operator: We will now open the call for questions. Operator: Ladies and gentlemen, if you would like to ask a question, please press star followed by 1 on your telephone. If you are using a speakerphone, please pick up the handset before entering your request. To withdraw from the queue, press star then the number 2. One moment, please, as we assemble the queue for questions. The first question comes from Nathan Jones from Stifel. Please go ahead. Analyst: Good morning, everyone. This is Andre Sourette Molla on for Nathan Jones. Thanks for taking my questions. There was a nice step up in new business from 2024 to 2025, and now $128 million in January. I think you released that about $32 million of net new bids were coming from BEV and full hybrid. Can you give us a split between how much of that is within Sealing or Fluid for Q1 2026 as well? Just so we have an indication—obviously, more content on the Fluid business on those powertrains—so curious to hear about that. Jeffrey S. Edwards: Yes, sure. Good morning. The $128 million that we have booked so far in Q1 is about 60% Fluid and 40% Sealing. Not a surprise. Around 50% of it is North America-based, and a large percentage is China-based—again, not a surprise. I think as we go forward and there are continued hybrid products introduced into the market, you will continue to see the content per vehicle for Fluid continuing to rise. Last year, to your point about the nearly $300 million of net new business, I think Sealing actually had more of that than Fluid, so it does not surprise me this year that Fluid is outpacing the Sealing net new business. It tends to fluctuate like that. But I do think Fluid, going forward, is going to benefit significantly from the additional hybrid coming into the market. And, as we have said in the past, that can result in more than double the content per vehicle than what we have seen from the traditional ICE programs that were booked within our Fluid business. So, really a positive story. We are on our way to exceeding the $400+ million of net new business for 2026. Analyst: Thank you. And then just one more, switching gears to margins. Can you discuss the impact higher input costs are expected to have on margins this year? How should we think about that and maybe the escalators and de-escalators you have in place? Jonathan P. Banas: Good morning, Andres. When you think about the significant oil price increases that the industry is bearing, as well as higher aluminum prices for some discrete reasons that suppliers are raising globally, we are fairly well protected. As we have discussed in the past, we are in excess of about 70% covered on contractual indexes with our customers or otherwise negotiate on a regular cadence—every quarter or every six months—with customers to claw that back. So we think any increases will be adequately addressed with those historical mechanisms we have in place overall. There is a lag when you think about our spend versus the timing of recovery. The indexes will traditionally reset every quarter and therefore you then go back in and recover the previous quarter's inflationary impact, or in a good-news situation, you would give some of that back. That is the typical cadence. In Q1, just given the timing of the oil price ramp-up, there was not a significant inflationary impact. But we certainly expect to see that headwind come in Q2, and then the recoveries would come online in that sequential recovery cadence. Analyst: Thank you. Thanks for taking my questions. Operator: Thank you. Your next question comes from Kirk Ludtke from Imperial Capital. Please go ahead. Kirk Ludtke: Hello, Jeff, John, Roger. Thank you for the call. On slide 16, another impressive quarter for new business, and one of the bullets says 74% related to innovation products. If I remember correctly, those are materially higher margin than your existing average margins. I am just curious if you would be willing to quantify how much more profitable they are? Jeffrey S. Edwards: Yes, Kirk, this is Jeff. As we have said, going forward—whether it is innovative net new business or traditional products—we have been very consistent with targeting hurdle rates and achieving those hurdle rates as we book net new business. It is why we are able to put out the type of strategic targets we have related to VCM increase, overall margins, and the significant increase of return on invested capital that is forecast over the next several years. That is actually happening. You can see the 160 basis point increase over the last two years. You can see the VCM well over 30% this particular quarter. As all this business launches—from what we booked in 2024, 2025, and what we are booking here in 2026—those numbers will continue to go up. We expect our return on invested capital to be well over 20% at the end of our 2028 business year, tracking to the same strategic targets that we put out last June. Your point is well taken related to innovation. We are seeing further expansion as we launch products that provide customers with cost-down opportunities, light-weighting opportunities, and recycling opportunities. I would expect those numbers to be even better as we present our five-year plan. We have a meeting coming up with our board in June where we will roll out the next five years, and I would expect to see continued margin expansion beyond what we have even said. Kirk Ludtke: Got it. I appreciate it. Thank you. And then maybe a follow-up on the higher gasoline prices. Have you seen any change in schedules since prices went up? Jeffrey S. Edwards: The volumes that we have in our business plan had some pluses and minuses as we usually do each quarter. As we start into the second quarter, we are seeing the volumes basically on our plan. As I said on the call, I think that as long as the Middle East conflict gets resolved here in short order, I expect it to end up being a tailwind in the second half. If that does not happen, then your guess is as good as mine. But so far, I think we are well positioned for the first half of the year. We will manage through the increase in oil prices versus our plan for the second quarter, and then hopefully be well positioned for the second half of the year to be stronger than planned. That is what I am hoping for. Operator: Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star followed by 1 on your telephone. If you are using a speakerphone, please pick up the handset before entering the request. Your next question comes from Doug Carson from Bank of America. Please go ahead. Analyst: Great, team. Thanks for hosting the call and for taking my question. As I look at the bridge from 2025 to 2026, I know you will be out with more detail in Q2, so I do not want to get ahead of it. But there was a goal that was set—investors thought it was optimistic—but it looks like you are going to hit it or potentially exceed it. A large part of that bridge was lean manufacturing, improvements in purchasing, and in this tough market, to be able to beat that number—could we get a sense if this is going to be coming more from business wins, or you feel like the lean could get even higher, or maybe more pricing, because volume is going to be challenging? Just a little sneak peek on what to be thinking about as far as the guidance. And then separately, during the deal you talked about 51% of your awards coming from high-growth Chinese OEMs. How has that cadence been with the Chinese? Jeffrey S. Edwards: Thanks for the questions. Related to how we continue to expand margins, it is all of the above. We have teams in both our Sealing and Fluid businesses across 20-plus countries, and each month and quarter they have detailed plans they are executing—plans that are developed well in advance of a particular business year. As Jonathan and I said on the last call, we had a high level of confidence that execution of cost reductions to help offset inflation was well on its way to being a record performance. We had not seen a year where they came in with 90%+ of these ideas already identified and being worked on before we even started 2026. That is why you see the execution and the ability to deliver on what we told you we would. I would expect that to continue for the rest of this year and next year. It has been our approach for well over a decade—the process is the process, the team is the team—and they continue to exceed expectations. Related to net new business, when we talk about 2027 and 2028, 85% to 95% of that is already booked. We know what those prices are, we know what our costs are, and we know what the investment is going to be to launch it all. Hence the confidence we have in more than doubling our return on invested capital over the next couple of years. The only thing I cannot forecast is volume and mix. Despite that being a challenge for the last number of years, we continue to expand profitability and returns because of how we are running the business, the decisions we are making, and—most importantly—the people we have in our plants executing. Oil prices have shot up versus what we had in the business plan, but contractually we are largely covered for recovery. There will be some timing issues in the second quarter, but for the full year I am still bullish. I believe the overall macroeconomic environment is positive, and I think the geopolitical environment has to become more positive. That is why I believe the second half could have some tailwinds. We will talk more about that in August. On the China question, the cadence with high-growth Chinese OEMs remains strong and aligned with what we outlined—consistent opportunities and awards as they expand globally, which supports our growth in Asia and beyond. Operator: It appears that there are no more questions. I would now like to turn the call back over to Roger Hendriksen. Roger Hendriksen: Thanks, everybody. We appreciate your continued engagement with our calls. If you have questions that did not come to mind and you would like to get in touch with us, we would certainly be open to further conversation—just feel free to reach out to me directly. Again, we appreciate your participation this morning, and thanks for your continued trust and confidence. This will conclude our call. Thank you. Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Kinetik Holdings Inc. First Quarter 2026 Results. 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 Alex Durkee, Head of Investor Relations. Please go ahead. Alex Durkee: Good morning, and welcome to the Kinetik Holdings Inc. first quarter 2026 earnings conference call. Our speakers today are Jamie W. Welch, President and Chief Executive Officer, and Trevor Howard, Senior Vice President and Chief Financial Officer. Other members of our senior management team are also in attendance for this morning's call. As a reminder, today's discussion will include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of these factors, please refer to our SEC filings. We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP measures can be found in our earnings materials and on our website. With that, I will turn the call over to Jamie. Jamie W. Welch: Thank you, Alex. Good morning, everyone. Kinetik Holdings Inc. delivered record earnings in the first quarter. This reflects key execution across our three core pillars: commercial, operations, and financial. Before walking through each in more detail, I wanted to briefly touch on recent geopolitical developments. The global macroeconomic landscape has shifted meaningfully since reporting fourth quarter 2025 results. While Trevor will cover the implications that we see today in more detail, we believe that Kinetik Holdings Inc. is incredibly well positioned as these dynamics continue to play out. Commercially, our team has been highly productive. We have seen strong conversion of opportunities into new and amended agreements across both Texas and New Mexico. Over the past few months, we have added new customers across our gas, crude, and water service offerings, while continuing to advance our strategy of revising commercial terms and extending legacy Durango contracts. During the quarter, we completed a significant contract amendment with a large existing customer in New Mexico that expands the original dedicated acreage by roughly 25%. It consolidates multiple agreements into a single contract and extends terms through 2039. As a result, approximately 75% of legacy Durango gas processing volumes have now been amended over the past four months. Collectively, these new and amended contracts extend terms into the mid and late 2030s, increase margin, expand dedicated acreage, broaden services rendered, provide downstream control of plant products, and reinforce long-term visibility across our New Mexico system. As we have said before, the message from customers has been clear. Incremental sour gas treating and processing capacity is a necessity to support their development plans in New Mexico. Our strong runtime performance at King’s Landing and continued progress on the sour conversion project, combined with the recent contract amendments and new agreements, have created strong commercial momentum in support of potentially advancing a processing capacity expansion at the King’s Landing Complex. We also continue to pursue highly capital-efficient power generation-related opportunities. We signed a zero CapEx interconnection with Pecos Power, connecting our Delaware Link residue gas pipeline to the Pecos Power Plant in Reeves County. Combined with the CPV Basin Ranch interconnection, announced late last year, we have again demonstrated a fee-based template for monetizing our existing footprint as Permian power generation demand grows. On the operations front, field operations executed at a high level this quarter, delivering reliable performance across the system, while maintaining a strong focus on safety. We have also made solid progress across our capital projects in the quarter. We are nearing completion now of the ECCC pipeline, with in-service later this quarter. At King’s Landing, we received all required approvals from the BLM and the NMOCD, allowing us to proceed with the AGI and sour gas conversion project for the full 20 million cubic feet per day of Total Acid Gas, or TAG, capacity. All long-lead materials have been ordered, construction is underway, and we plan to spud the first acid gas injection well this summer. Once complete, the project will enable us to handle elevated H2S and CO2 levels across all three Delaware North processing complexes, providing total operational TAG capacity of 26.5 million cubic feet per day and permitted capacity in excess of 31 million cubic feet per day. Phase one of the sour conversion to King’s Landing remains on track for in-service by year-end 2026 and meaningfully enhances the long-term value of our New Mexico business. In Delaware South, we advanced our 40 megawatt behind-the-meter power generation solution at Diamond Cryer. Turbine equipment has started to arrive on site, and engineering, procurement, and permitting work is well underway. Financially, we remain highly focused on executing on our priorities, including leveraging data and technology to drive efficiency across our business. In February, we began our pilot program with Palantir and have been encouraged by early results which are reinforcing more data-driven execution across the organization. At the same time, our finance and operations teams are progressing on our operating cost reduction initiatives. Importantly, operating and G&A expenses are tracking in line with our budget estimates, and through our efforts so far, the teams have identified efficiencies that optimize our cost structure for 2027 and thereafter. At the end of last year, we secured more residue gas transport capacity to the Gulf Coast, which provided financial insulation to the pronounced price-related production shut-ins we had seen and expect for much of 2026. As new Gulf Coast takeaway capacity comes online, and hub differentials tighten into 2027, Kinetik Holdings Inc. remains well positioned as curtailed volumes return and gross margin normalizes, reducing the contribution from this spread-driven financial offset. We remain extremely vigilant about managing our medium- and long-term Gulf Coast transportation capacity portfolio. Not only is it important for our customers to receive Gulf Coast hub pricing, but also critical for growing with new customers. We recently secured additional Gulf Coast pricing exposure starting in 2028. We also have our European LNG price contract with INEOS starting in early 2027. Since 2018, we have shown that we think outside the box, and believe it is one of our corporate core strengths to creatively find premium pricing solutions for our customers’ natural gas. Stepping back, the contracts we have signed, the commercial opportunities we are pursuing, and the takeaway we have secured all extend Kinetik Holdings Inc.’s earnings durability well into the next decade. The near-term gas price environment is a cycle to manage through, not a thesis to revisit. We are managing through it from a position of strength, and our confidence in the multi-year plan has only increased over the passage of the last 90 days. And with that, I will turn it over to Trevor. Trevor Howard: Thank you, Jamie. First quarter adjusted EBITDA of $251 million was a quarterly—record and came in above the high end of the range that I outlined during our fourth quarter earnings conference call. Distributable cash flow totaled $181 million and free cash flow was $101 million. The Midstream Logistics segment delivered a record $179 million of adjusted EBITDA, up 12% year-over-year, essentially on flat volumes. The result is the direct payoff from the Gulf Coast takeaway capacity that we contracted late last year. Spread-based marketing gains have more than offset approximately 170 million cubic feet per day of Waha price-related production shut-ins in the quarter, converting what would have been a volume headwind into a margin tailwind. In addition to the wider basis spread, outperformance relative to our internal expectations was also driven by stronger-than-expected system operating performance that yielded more condensate and NGL recoveries, higher fee-based margins, stronger commodity prices, and slightly lower unit operating costs than budgeted. Our Pipeline Transportation segment generated $78 million of adjusted EBITDA, down year-over-year, reflecting the EPIC Crude divestiture that closed on October 31 and lower throughput volumes on Chinook. Turning to our updated outlook, as Jamie noted earlier, the macroeconomic environment has shifted meaningfully. Higher commodity prices in response to the conflict in the Middle East have driven improvements in the forward pricing curve, implying stronger commodity margins relative to the underlying assumptions in our guidance. While we have seen activity pull-forwards with certain customers, primarily pertaining to 2027 activity, overall producer behavior remains disciplined. In stark contrast, we have experienced a significantly more challenged price environment at the Waha Hub. In March and April, the gas daily average price at Waha was negative $4.81. Given the push and pull dynamic of higher crude prices and a highly oversupplied local natural gas market, a few of the assumptions underpinning our guidance have changed. First, processed natural gas volumes expectations. In February, we called for high single-digit volume growth year-over-year in 2026, inclusive of 100 million cubic feet per day of curtailments from gas price-sensitive customers. Actual production shut-ins to date have been materially higher than that expectation. We now forecast low- to mid-single-digit percentage growth in processed gas volumes year-over-year, which reflects approximately 220 million cubic feet per day of curtailments on average for 2026. At current processed gas volumes of approximately 1.8 Bcf per day, the incremental 120 million cubic feet per day of curtailments represents a decline of more than six percentage points relative to our original growth expectations. In conclusion, the reduction in volume growth expectations is driven by our assumptions on price-related shut-ins which are temporary in nature. Second, financially offsetting the impact from the Waha price-related production shut-ins are the wider natural gas hub price differentials. To date, the Waha-to-Houston Ship Channel spread has been wider than assumed in guidance, enabling stronger-than-expected marketing gains. We have approximately 50% of our transport spread exposure hedged in 2026. As a reminder, our spread hedging tends to be lower during the spring and fall pipeline maintenance seasons and higher during the summer and winter months. Third, commodity prices have moved higher since the onset of the conflict in the Middle East. While ethane has remained relatively flat, the NGL composite and propane have increased over 20% since the February 13 strip used in our guidance assumptions, and WTI is up over 30%. We have capitalized on higher prices with incremental hedges. Specifically, we estimate our equity volume exposures are approximately 75% hedged for propane and butane volumes and approximately 85% hedged for crude and C5+ volumes. Marking to market our commodity price exposure, we estimate an uplift of approximately $20 million to full-year 2026 adjusted EBITDA at current forward pricing, excluding our Gulf Coast marketing spread. We are affirming our 2026 adjusted EBITDA guidance range of $950 million to $1.05 billion. Relative to our underlying assumptions in our February guidance, we expect to benefit from improved commodity margin and Gulf Coast marketing opportunities, partially offset by lower volume expectations associated with the temporary price-related shut-ins. With respect to earnings growth cadence for the remainder of 2026, I would reiterate my comments from our fourth quarter call. We expected the first and second quarter results to be in the $230 million to $240 million range and the third and fourth quarter results to be in the $260 million to $270 million range. Given our first quarter results exceeded that expectation, we are tracking ahead of plan. We continue to expect quarterly performance to generally align with the cadence originally outlined for the balance of the year. We continue to expect 2026 capital expenditures guidance in the range of $450 million to $510 million. CapEx, including growth and maintenance, was $91 million in the first quarter. As we look to the balance of the year, we currently anticipate the remaining spend to be pretty evenly weighted across quarters. Now turning to the balance sheet, we ended the quarter with ample revolver capacity and leverage of 3.9x, which was within our targeted range. Our healthy balance sheet combined with our cash flow profile provides the flexibility to fund our growth program without compromising our return of capital to our shareholders. Looking ahead, the pace and scale of incremental residue gas takeaway capacity continues to reshape the long-term outlook for the Permian. More than 5 Bcf per day of new capacity is expected to be in service by early 2027, with an additional 6 Bcf per day anticipated across 2028 and 2029. This structural shift has reinforced the constructive view on long-term Permian gas growth. Combined with the direct feedback from our customers, our confidence in the durability of our multiyear plan continues to strengthen. Execution in the near term remains critical to sustaining that trajectory, and we remain focused on consistently delivering across our three priorities: disciplined commercial conversion, reliable operational execution, and conservative financial stewardship. We will now open the call for questions. 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 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 to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A list. Your first question comes from Michael Blum with Wells Fargo. Please go ahead. Michael Blum: Thanks. Good morning, everyone. I wanted to ask about the Durango agreements that you amended and extended here. How do we think about the incremental EBITDA contribution for 2026 and beyond? And with these new agreements, does this change at all the mix of your contract portfolio between fee versus POP and keep-whole, or just your overall commodity exposure? Trevor Howard: Michael, thanks for the question. In terms of 2026, I would call it, as we have characterized in the past, a modest uplift—so 1% to 2% of the overall base business. It is a nice uplift, but it really sets the stage for reinvesting in the field and also investing in King’s Landing further with the sour conversion and then the potential processing expansion, by pushing out the duration and term of those agreements. It also has removed a portion of commodity within the business. When we acquired Durango, the system was about 60% fee and 40% commodity. Through these restructurings and amended and restated agreements, we have taken that fee-based percentage up. Not quite like our business down south, where that is an 85% to 90% fee margin business, but we are closing the gap there. Michael Blum: Got it. Thanks for that. And then I wanted to ask on this Pecos Power deal. How do we think about returns for a project like this? And do you see other opportunities in the basin to replicate this? Because that is another way to deal with Waha—finding more in-basin demand for gas. Jamie W. Welch: Thanks, Michael. As far as the returns, there is no capital, so it is infinite in that context. We are seeing a lot of new gas-fired power generation located in and around West Texas. The footprint of our system is such that we have a lot of connectivity. We have the ability to provide residue natural gas to these new power generation plants, and we have a very active dialogue with a number of them. You are correct. We look at it much the same way you pointed out, which is a little bit of self-help for Waha on the basis of creating incremental demand. We will continue to capitalize on it and, from our vantage point, it is a nice incremental base of fee revenue. Kris Kindrick: Hey, Michael. As Jamie alluded to, it is an earnings opportunity not only to sell residue gas transportation, but a lot of these power companies want hourly services too. To the extent we can provide that flexibility, that is additional margin. We are in conversations with these parties right now, and it is future upside that we are working on. Operator: Thank you. Your next question comes from Spiro Michael Dounis with Citi. Please go ahead. Spiro Michael Dounis: Thank you, operator. Good morning, team. I want to start with King’s Landing 2. You announced these new dedications. You talked about growth accelerating into early 2027. Trevor, you just mentioned a lot of this sets the stage for an expansion. How close are you? I think, originally, the potential FID was a 2026 line item. Where does that stand? Is there maybe even a capital-light option you could pursue first? Jamie W. Welch: Spiro, good morning. As far as King’s Landing 2 is concerned, we have been actively engaged in commercializing that project opportunity for some time. We have knocked down incremental steps along the way which bring us closer and closer to the endpoint of finally being able to FID that particular plant. I think we are getting close, and the overall level of activity we continue to see reinforces our belief in the prospects and opportunity that we find in New Mexico. In the interim, as you know, ECCC will come into service in a month from now. We will be able to start taking incremental, what we would say, sweet New Mexico volumes down south for processing capacity. We will continue to look at the level of activity more broadly in New Mexico, which remains very robust. Trevor Howard: And on your last comment about the capital-light option, really, ECCC was that option. Because Delaware North was on an island and not connected to our Delaware South system, King’s Landing 1 is going to get filled this year, and we would have needed King’s Landing 2 in service by the end of this year to take incremental gas. We took that measure with ECCC, allowing us to utilize processing capacity in other parts of our system. There are also more markets and more optionality down in Texas. Spiro Michael Dounis: Got it. Understood. Going back to the 2026 EBITDA cadence, could you give a bit more detail on the drivers for the back-half ramp? Waha likely is not improving until maybe mid-summer. There are indications Hugh Brinson could come online by that time frame and help provide some relief. How are you thinking about when the marketing gains flip to curtailments coming back online and volumes being the bigger driver? It sounds like that is what you are counting on for the back half of the year. Jamie W. Welch: I think Trevor will answer this, but what we announced with the incremental expectation for curtailment is that we foresee a continuing period of challenge for Waha. For the sake of being conservative, we wanted to communicate that the overall level of curtailments was higher than we anticipated in our original guidance. More importantly, it is deferred revenue. That volume will show up, and in the meantime, we have found a bunch of value in the form of these marketing revenues that have ensured we met our financial guidance and created a net windfall for our stakeholders—because you have money from marketing, and you are going to have deferred revenue coming from the return of production. Trevor Howard: Also, piggybacking off Jamie’s comments, it makes it easier to grow in 2027 because the PDP base starting off in January 2027 will be higher. Again, Jamie’s comments are right: it is deferred revenue. PDP will be higher entering 2027, so it really sets up 2027 well. We have talked at length about the strategy we have employed with the Gulf Coast marketing hedge as an offset to curtailments. It has been effective. With respect to the ramp in the back half of the year, I would reiterate my prepared remarks: no changes to our second-through-fourth-quarter earnings cadence—$230 million to $240 million in the second quarter and $260 million to $270 million each quarter in the second half of this year. What is driving that is not a return of shut-in volume. We are expecting shut-ins to persist through the balance of the year and really resume in December. When you look at the forward spreads, Waha is negative up until October. We have taken a little bit of conservatism, given that is a maintenance period, and we wanted to ensure we are out of the maintenance season before expecting volumes to return. The drivers: we have a very summer-heavy development program and a handful of big packages of gas coming online across the system, particularly in New Mexico in the third quarter. In the fourth quarter, we have some Texas packages that are real needle movers for gas volume growth. Then come December, that is when you have the resumption of curtailed volumes and then Gulf Coast marketing margins declining. Jamie W. Welch: Spiro, it is interesting that we sit here in May and we have only had Waha being in positive territory—greater than zero—for 13 days; six days were attributed to Winter Storm Fern. Excluding Winter Storm Fern, seven days, and we are now in the fifth month of the year. We are dealing with unprecedented volatility. Even at the beginning of this year, we thought 2026 would be the tale of two halves, but seeing negative pricing for Waha going into October is truly hard to fathom. Trevor Howard: One more comment on the volume revision lower in our year-over-year volume guidance. As you saw, we increased our curtailments by 120 million cubic feet per day on average for the full year. That is about six percentage points to our overall gas processed volumes. We went from high single-digits year-over-year to low- to mid-single-digits year-over-year, solely attributable to the increasing curtailments. Spiro Michael Dounis: Understood. Helpful color as always. Thank you, gentlemen. Jamie W. Welch: Thank you. Operator: Your next question comes from Brandon B. Bingham from Scotiabank. Please go ahead. Brandon B. Bingham: Good morning. Thanks for taking the questions. I wanted to go back to the setup into next year. With all the egress capacity coming online at the end of the year into next year, what is your sense in discussions with producer customers that have higher in-basin pricing sensitivity about the appetite to maybe accelerate development? Is there a potential slug of pent-up supply beyond the expected curtailments as prices normalize? Jamie W. Welch: Brandon, as prices normalize, do you mean gas prices or normalized in the context of Waha pricing? Brandon B. Bingham: Yes. Trevor Howard: Okay. It is interesting because what we have tried to communicate in both the press release and the prepared remarks is that we have this push-pull impact right now for 2026 in activity. We are seeing some of the smaller independents pull forward packages in a matter of weeks or months, but we are seeing a building momentum in 2027. We had estimated second half of the year or middle of the year, and people are pulling forward packages into the very beginning of the year. The longer we have this elevated commodity price environment, the more we are going to see, particularly from our larger public customers, a lot more activity in the beginning of 2027 that capitalizes on that continued tailwind. That sets you up for an even better 2027. Not only will we have the return and a higher PDP base because of the shut-ins effect, but we also have a real pull-forward of a lot of activity. Brandon B. Bingham: Great. Thank you. And then, quickly, you mentioned some incremental cost optimization opportunities for 2027-plus. Could you expand on those to the extent you can? Trevor Howard: Sure. We have a fair amount of general equipment that is under lease—either where we are operating it or where it is a true lease. We are looking at all of our cost structure. The biggest opportunity for us is to integrate a few things that historically we have had others operate for us or have under some kind of capital lease. That is the majority of what we are seeing, and they are very capital-efficient, quick payback projects for us. As Jamie commented, we are in the early stages of transforming, from a data perspective, how we look at our cost structure and optimize there. That is more about building the framework and foundation in 2026 and starting to see benefits in 2027. In 2026, the immediate focus is buying equipment and insourcing services that we have outsourced. Brandon B. Bingham: Awesome. Thank you very much. Operator: Your next question comes from Truist. Please go ahead. Analyst: Thanks, operator. Good morning, everyone. Thanks for all the color thus far. Jamie, I was hoping to get some thoughts around adding more Gulf Coast exposure in the 2028 to 2030 period. Looking at the strip, with all the egress coming on, Waha should improve and experience better days ahead. What is the rationale for longer-term exposure there? Jamie W. Welch: Thanks for the question. It is interesting because we have gone from a situation where Waha was a heavily discounted price relative to Ship Channel or South Texas and was disadvantaged, to now where it is outright negative. It is in such a bad place. We think about 2028 to 2030 as follows: this too shall pass—we will get out of the purgatory of negative absolute pricing—but it is our estimation that Waha will remain a discounted price point relative to every other nodal market price in and around Texas. Therefore, the need for premium pricing will remain Gulf Coast or export. Those are your two options. Securing incremental Gulf Coast supply will remain critically important. Likewise, contracting for incremental export and LNG opportunities is something we are focused on. We start our INEOS contract at the beginning of next year, which we are looking forward to. We will get out of this negative price paradigm, but it will still remain a heavily discounted price point relative to other options. We will continue focusing on the premium options and how we can secure more of it for our customers going forward, because there seems to be an endless demand for that from our customers. Kris Kindrick: The important point Jamie said was “for our customers.” Our customers want to get out of Waha. The period of 2028 to 2030 is important. We have renewal options on our Gulf Coast capacity in 2031, so it syncs up well with that. The forward says Waha gets better, but the last five years, the forwards have been wrong. We are seeing gas growth out of the basin, and it has been an important differentiator for us. We are going to continue to get exposure in basins other than Waha. Analyst: That makes sense. As a quick follow-up, can you remind us what your fee floors are on the G&P side, given these curtailments you have highlighted? Trevor Howard: I am happy to jump in here. We do not have fee floors in our business. Operator: Okay. Analyst: Got it. Thanks. Operator: The next question comes from Jeremy Bryan Tonet with JPMorgan Securities LLC. Please go ahead. Jeremy Bryan Tonet: Hi. Good morning. Jamie W. Welch: Good morning, Jeremy. Jeremy Bryan Tonet: I wanted to build on some of the commentary before. It seems like 2026 you are tracking ahead of expectations at this point, but you do not want to lift the guide—you want to see how more unfolds—but you still have 4Q intact, gradually increasing over the course of the year. What does that mean for 2027? Is there any way you can frame how you see the momentum—what type of growth this could generate or a normalized growth for the business at this point? Jamie W. Welch: Jeremy, you are right to start with caution. You are talking to Trevor, myself, and the management team. This was our second consecutive beat. It followed a series of misses, which we took personally and felt we needed to do better. We are being very cautious and conservative. It is not lost on us that we had a very strong first quarter, and we are hopeful that will shape up for the balance of this year. We will sit with the guide we have until such time as we conclude that changes make sense. Importantly, on transparency, the incremental PDP base—on average, 120 million cubic feet a day—is 60% of one of our existing cryos on average, and it peaks and declines depending upon the period. There was already a heightened expectation for 2027, which we agree with. We have a lot of benefits flowing through into 2027: NGL contract resets, incremental benefits, the first full year of our sour gas conversion project at King’s Landing. With a higher PDP base and accelerated activity earlier in the year, it sets us up well. It is premature to quantify dollars or percentages of growth, but the sun, the moon, and the stars are aligning for a very strong and positive year post-2026. Trevor Howard: The other thing I would point you to is that historically we have guided to projects across our entire portfolio being mid-single-digit multiples. If you strip out maintenance, you are looking at $400 million to $425 million of growth capital last year and this year. Looking at 2025 actuals and then adjusting out for the EPIC Crude sale, this year you are looking at double-digit growth. That ties to a reinvestment multiple on the growth capital that we had spent in 2025. Just to provide additional color based on prior comments we have made. Jeremy Bryan Tonet: That is helpful. One more: some of your peers have talked about a cadence for processing capacity expansions—x plants per year. Any high-level thoughts on what it might look like for Kinetik Holdings Inc. in similar terms? Jamie W. Welch: We take note of those statements from our competitors. We are probably on the cusp of being big enough to think about what that cadence may look like, but I do not think we are at that point quite yet. We would like to get King’s Landing 2 sorted, done, and behind us, and then we can think about it. We are still exploring the full benefits and breadth of the opportunity set in New Mexico. That will reinforce the perspective on processing cadence and growth needs for the company going forward. Jeremy Bryan Tonet: Got it. That is helpful. Thank you. Jamie W. Welch: Thank you. Operator: Your next question comes from John Mackay with Goldman Sachs. Please go ahead. John Mackay: Hey, team. Thank you for the time. Back in October, you had talked about shut-ins from some oil-directed wells. I just wanted to check in. The shut-ins you are talking about either for first quarter or balance of the year—is that all effectively on the Alpine High side, or are you expecting some more regular oil-directed activity to be impacted as well? Jamie W. Welch: You have it right in the context of the impact—Alpine High and more gas-sensitive customers. We have not seen oil-directed customers shutting in. To the contrary, some of the smaller guys, given the current commodity price environment, are looking to accelerate their level of activity. It is a tale of two cities: crude-focused folks are doing cartwheels and backflips, and those that are localized Waha gas-centric sellers are struggling. John Mackay: Appreciate that. Second one: you keep noting we will see a lot more gas growth—GORs in the basin are going up. Would you be able to give us a bit of a mark-to-market on your NGL T&F recontracting expectations? Alongside this, we would expect NGL volumes to go up. Maybe recontracting gains might not be as high as we could have thought at the end of last year. Could you mark to market that? Jamie W. Welch: No problem. I think we said on the call in February that the market was even more aggressive than we were anticipating. It is still early days, and we are in this discovery phase as we have communicated. We said we would clearly communicate to the market at the appropriate time. The expectation is you will have even better net realized margins on our part than we previously communicated because of the environment we find ourselves in. It is the antithesis of what you just described. John Mackay: Fair enough. That is interesting. We will stay tuned. Thanks for the time. Operator: Your next question comes from Keith T. Stanley with Wolfe Research. Please go ahead. Keith T. Stanley: Good morning. For the new packages of gas coming on in the summer that boost the second-half outlook, I want to confirm those producers that are bringing on those new volumes have gas takeaway capacity, so they are not sensitive to what is going on with Waha. Jamie W. Welch: Yes, correct. They have Gulf Coast transport. Keith T. Stanley: Great. Second question: you have had a good couple of quarters dealing with the Waha issue. How confident are you that marketing gains can continue to offset curtailment losses this year, and what is the risk around that? I assume it is if pipes you have FTE on experience unexpected downtime. Can you frame how you are thinking about risks to continuing to manage this this year? Jamie W. Welch: From an overall dynamic, we have multiple FTE arrangements on multiple pipelines. The overall reliability we have seen remains high, and it would have far-reaching consequences if there were unexpected issues. We are not anticipating any. There is a very regular cadence of maintenance in the fall and spring, communicated clearly to shippers. As far as managing is concerned, we have been looking at the spread differential between Waha and Houston Ship Channel. We have some hedges in place that mirror the expected capacity profile. We see more dislocation in Waha in the spring and fall during maintenance seasons when there is curtailment of capacity when pipes come down for days or maybe a week. We have been able to manage it. We feel confident we will be able to manage it. We have managed it through the first quarter, through April, and May as well. We are finding our sea legs as far as managing this exposure, even though it is very volatile. Trevor and the team have done a really good job. Trevor Howard: I would also say part of the risk is testing new lows. This company has done a very nice job managing which customers are more sensitive as you move from positive territory to minus $1 to $2 Waha, then the next tranche being $2 to $6 negative Waha, and then, like we saw for a few days in April and March and also in October, where you start to see $8, $9, almost $10 negative Waha. Being totally candid, the risk is whether you go and touch new lows we have not seen, like minus $15 per MMBtu. Given the setup of Hugh Brinson starting to have some deliveries in the third quarter, Blackcomb coming online in the fourth quarter, Hugh Brinson reaching full in-service, and GCS coming online this summer, I think the risk of us touching new lows is quite low. The commercial team has done a nice job of playing offense, learning from customer feedback, and migrating the portfolio to primarily Gulf Coast sales, which is important and a long-term strategy to help insulate us from the shut-ins we have seen. There is a lot of wood to chop, but the team’s initial work has been strong, demonstrated over the last two quarters of performance. Keith T. Stanley: Thank you. That is helpful detail. Operator: Your next question comes from Jefferies. Please go ahead. Analyst: Good morning, everyone. It is Rob on for Julien. Just one for me. I think you alluded in your prepared remarks to being a bit less hedged during the spring. Waha has been even more discounted in April and May. Any reason you would not expect to perform as you did in 1Q, if not better, in the second quarter? Jamie W. Welch: Rob, thanks for the question. Let us not get ahead of ourselves. We feel confident and good about where we are. Your statement is correct that April and May have been fairly negative from a Waha pricing standpoint. We will take each day and each month as we find it, and we will continue to build upon our financial base and aim to outperform. Analyst: Understood. Thanks for the time, everyone. Jamie W. Welch: Thank you. Operator: Your next question comes from Saumya Jain with UBS. Please go ahead. Saumya Jain: Hi. Good morning. Thanks for taking my question. As you keep your 2026 CapEx guide, what sorts of growth opportunities are you looking at in New Mexico? Would that be more on the AGI facilities on the sour gas side, or infrastructure investments to capture more gas residue? Could you detail what sorts of infrastructure investments are also needed on the gas residue side to expand that opportunity? Jamie W. Welch: This is Jamie Welch. As far as infrastructure and capital in New Mexico, 70% of our budget is allocated to New Mexico versus Texas. A lot of it is related to the AGI sour conversion project being one of the larger ones, and the completion of the ECCC pipeline. You have some long-lead items in relation to King’s Landing 2. On the residue side, we have connectivity to the existing pipeline operators up there—Transwestern, El Paso—and we will have other connections going forward. That is not huge dollars from our vantage point. It is all encapsulated within the CapEx we gave and have listed in our prepared materials. If I were to think about dollars, it is roughly $320 million versus the overall $480 million midpoint for our guidance. Saumya Jain: Thank you. Could you comment on any discussions with customers on technologies increasing recovery in the Permian, and if you have seen any notable differences from that already in the Delaware Basin? Kris Kindrick: We have seen efficiencies. It shows in production data, and from at least our public customers discussing on their calls. A lot of them are reticent to share any competitive advantage because that is part of how they optimize their costs. We are seeing a decrease in days drilled and similar metrics. There has been a trend of improved technologies over time, but nothing specific to a certain customer that we can share. Saumya Jain: Great. Thank you. Operator: We have reached the end of the Q&A session. I will now turn the call back to Jamie W. Welch for closing remarks. Jamie W. Welch: Thank you, everyone, for your time this morning. We look forward to seeing you in a few weeks at EIC. We wish everyone a great day. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.