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Operator: Welcome, ladies and gentlemen, and thank you for standing by. NN, Inc. First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now hand today's call over to Joseph Kameniti in Investor Relations. Please go ahead, sir. Thank you, Tamika. Joseph Kameniti: Good morning, everyone, and thank you for joining us. I am Joseph Kameniti with NN, Inc.’s Investor Relations team, and I would like to thank you for attending today's earnings call and business update. Last evening, we issued a press release announcing our financial results for the first quarter ended 03/31/2026. A supplemental presentation has been posted to the Investor Relations section of our website. If anyone needs a copy of the press release or supplemental presentation, you may contact Alpha IR Group at nner@alpha-ir.com. Joining us from NN, Inc. management today are Harold C. Bevis, President and Chief Executive Officer, and Christopher H. Bohnert, Senior Vice President and Chief Financial Officer, while Timothy M. French, our Senior Vice President and Chief Operating Officer, will be joining us for the question and answer session. Please turn to Slide 2, where you will find our forward-looking statements and disclosure information. I would like to note the cautionary language regarding forward-looking statements contained in today's press release, supplemental presentation, and the risk factors section of the company's quarterly report on Form 10-Q for the fiscal first quarter ended 03/31/2026. The same language applies to the comments made on today's conference call, including the Q&A session, as well as the live webcast. Our presentation today will contain forward-looking statements regarding sales, margins, inflation, supply chain constraints, foreign exchange rates, tax rates, acquisitions and divestitures, synergies, cash and cost savings, future operating results, performance of our worldwide markets, general economic conditions and economic conditions in the industrial sector, including the potential impact and ramifications of tariffs, the impacts of pandemics and other public health crises, and military conflicts on the company's financial condition, and other topics. These statements should be used with caution and are subject to various risks and uncertainties, many of which are outside the company's control, which may cause actual results to be materially different from such forward-looking statements. The presentation also includes certain non-GAAP measures as defined by SEC rules. A reconciliation of such non-GAAP measures is contained in the tables in the financial section—I'm sorry, in the final section—of the press release and the supplemental presentation. Please turn to Slide 4, and I will now turn the call over to our CEO, Harold C. Bevis. Harold? Harold C. Bevis: Thank you, Joe. Joe, I just received a text that there is just music on the call. Can we do a check to make sure the lines are open? Can you help us with that? Operator: Yes. The lines are open. Harold C. Bevis: Okay. I will proceed here. Thank you. Thank you, Joe. Good morning, everyone. We had a good quarter and we have a good outlook. We look forward to giving you an update today and answering questions. We had a strong Q1 and we are very thankful for it, across net sales, adjusted EBITDA, and a few other areas. We are going to highlight a few of those today. The performance in the quarter was led by a very good mix, which was a main driver of our improved results. Of note, we achieved the highest trailing twelve-month adjusted EBITDA that we have had in five years. Additionally, with regard to future performance, we captured noteworthy wins in key markets of electric grid and data center, and we are going to touch on those in a minute also. Second point: our growth programs are delivering results. We have three main diversification programs in play—electrical grid and data center, defense electronics, and the medical markets. We expect to see solid volume growth through 2026, and we are winning in data centers for AI cloud-computing hardware. We are focused on increasing our content per data center. Third, our growth program is meeting up with our cost blueprint and generating good profits. We have a lower-cost operating footprint today; it is delivering results reflected in stronger profitability. Our margins, therefore, are trending to the high side of historical results, and you are witnessing the earnings potential of this company. Fourth, we are forecasting this performance to continue, and we are raising our 2026 guidance in a few spots. Our strong Q1 and the outlook and the visibility we have to the remainder of the year are leading us to positively revise our full-year guide. We are revising our guidance ranges higher for net sales, adjusted EBITDA, and new business wins, which we previously announced on April 14. We are building momentum from new launches and program ramp-ups, and we are quite excited about it. Our improved 2026 outlook is pulling the timelines of attaining our long-term goals in as well, and specifically, we are accelerating our five-year model to be a four-year model. If we turn to Slide 5, I would like to make a few more comments about the outlook and the guidance improvement. We did have a strong first quarter—we are going to cover that—and Christopher is going to do a deep dive into some of the areas. We delivered on multiple company records, and we are building forward momentum that will carry us through the rest of the year and into 2027 as well. First, our sales growth is broad. It is not one big program with one customer or just a few customers. Instead, our sales are up with 22 of our top 30 customers, and improvements are widespread. We have 700 customers in total, and the group beneath the top 30 customers was up as well. Right now, we are launching over 100 small and medium-sized programs with many of those customers, and we are adding brand new customers also, specifically in the data center arena. So our outlook for the rest of 2026 is strong and multifaceted. Second, based on our full-year outlooks, forecasts, and actual momentum, we are going to deliver record annual performance this year. We expect that strength to be across many of our key metrics. We expect strong sales mix growth, growth in adjusted EBITDA, growth in adjusted EBITDA margins, growth in adjusted EPS, and growth in new business wins. We are expanding our participation in the data center build-out that is underway, and we are actively prospecting and winning additional business. It is a nice turning point for our company, and we expect it to continue. Additionally, as a result of a strong 2026, we are moving the long-term goal timeline in from 2030 to 2029. The results that we are delivering are overcoming global automotive weakness and global commercial vehicle weakness and tariff turmoil. We are more than offsetting those dynamics and successfully replacing these soft areas with new sales in electric grid, data center, defense electronics, medical, and our industrial business. Turning to Slide 6, we want to review the high-level metrics in the first quarter, and then Christopher H. Bohnert, our CFO, will drill down further into the numbers. First, our sales were up both year-over-year and sequentially by about $12 million to $13 million, or about 12%. The growth was a solid mix, and it was in grid and data center, defense, and electronics—delivering strong growth as I mentioned. The sequential sales growth also led to a commensurate increase in working capital, which occurs seasonally in our business, and that did happen in the first quarter. Second, our adjusted operating income was up year-over-year and sequentially, and the results of our operational actions are shining through. We have a leaner operating model today, and the large one-time costs that we incurred are washing behind us. Our adjusted EBITDA was also up year-over-year and sequentially, driven by a good sales mix, which we expect to continue, heavily concentrated in the power side of our business, and strong operating performance. Most of our plants are delivering results for us. We have just a few left that are at breakeven or slightly negative, but it is very widespread across many customers and all of our plants, and we are very thankful that we are seeing the results of our hard work. On the new business front, we were up significantly year-over-year and sequentially. We had a big quarter in Q1, concentrated in electrical grid and the data center markets. On adjusted gross margin, we were up sequentially and year-over-year, for the same reasons—good sales mix and good operating performance. It was a solid quarter, reflective of the progress we have made across the portfolio, with a good sales mix and strong operating performance. As a result of this performance and our outlook, we are raising our outlook for both the full year and for the next two years. We will get into a few more details after Christopher reviews our first quarter more fully. Chris? Christopher H. Bohnert: Thank you, Harold. Good morning, everyone. If you are following along in the presentation, I will start on Slide 7, which highlights our first quarter financial results. Net sales for the quarter were $118.5 million, an increase of $12.8 million, or 12.1%, versus the prior-year quarter. Revenue growth was driven by the impact of a positive shift in our sales mix, as Harold mentioned, higher precious metals pass-through in the quarter, along with favorable foreign exchange impacts. These positive impacts were partially offset by softness in our China automotive business. Outside of China, our global automotive business was up slightly. Adjusted operating income for the first quarter was $5.8 million, marking a strong increase of $3.8 million compared to $2.0 million—up 184% versus the prior-year period. Adjusted EBITDA results for the quarter were $14.1 million, increasing $3.5 million compared to the $10.6 million reported in the prior-year period, an improvement of 33.7%. Our strong first quarter adjusted EBITDA results were driven by an improvement to our sales mix, the capture of operating efficiencies across our operations, and our successful cost-out programs implemented over the past couple of years. As a result, adjusted EBITDA margins were 11.9%, an increase of 33% compared to the 10% in the prior-year quarter. I will turn to our segment results starting on Slide 8. In our Power Solutions segment, where our business consists largely of stamped products, net sales for the quarter were $55.4 million, up $11.9 million, or 27%, compared to the $43.5 million reported in the prior-year period. The growth was driven by an improved sales mix from higher volumes in targeted growth areas, higher precious metals pass-through pricing, and favorable foreign exchange impacts. This top-line growth was partially offset by sales volume softness in certain stamped product lines. Power Solutions adjusted EBITDA was $10.4 million, an increase of $4.1 million, or 65.1%, versus the prior-year quarter of $6.3 million, driven by improved sales mix and strengthening profitability through ongoing cost-out initiatives. We do see a short lag as we pass through the impact of inflation to precious metals pricing, tariff impacts, and other surcharges, which temporarily pinch profitability. As a function of this improved adjusted EBITDA, we have seen stronger margin pull-through, with quarterly adjusted EBITDA margins of 18.7% of net sales, up from 14.5% in the prior-year period. Looking ahead, our new business momentum in this segment remains strong, with wins totaling $29.3 million in the first quarter, concentrated in the key markets that Harold mentioned—electrical grid, data center, and defense and electronics products. During the quarter, we announced that we had acquired additional plating equipment to advance our growth in electrical grid and data center markets. Consistent with our strategic growth efforts, we continue to invest our CapEx to support these growth opportunities. Now turning to Slide 9, our Mobile Solutions segment, which covers our machined products business: net sales for the first quarter were $63.1 million compared to $62.2 million in last year's first quarter, an increase of $0.9 million, or about 1.4%. Notably, this segment has now returned to year-over-year sales growth. While modest, our sales growth reflected solid volumes from new program launches and broader strength across North America, South America, Europe, and automotive markets, along with favorable foreign exchange impacts. This was partially offset by softer automotive volumes in China. Our first quarter adjusted EBITDA in the Mobile Solutions segment was $8.2 million, up slightly versus last year's first quarter, with adjusted EBITDA margins holding at 13%. The flat margin reflects the offset of profitability improvements in most regions against the impact of China automotive softness. On the new business front, we secured wins totaling $13.6 million, notably including liquid cooling connector components. We are now in production and pursuing additional opportunities. With that, I will turn the call back over to Harold. Harold C. Bevis: Thank you, Chris. Let us turn to Slide 10. Our portfolio transformation is working. We are executing on our strategy to intentionally reshape our portfolio toward higher growth and higher margin end markets. Our top three growth markets are electric grid and data center, defense electronics, and medical. Those specific end markets are collectively up 28% versus Q1 2025. On a consolidated basis, our growth markets accounted for 35% in 2023 and now constitute 44%, so the 56% in automotive has shrunk to 44%. We are deliberately changing that mix, and we have four goals to continue that progression. Our growth is broad-based and spread across multiple customers, products, and programs. It is not concentrated in any single program or with any single customer or platform. There are no big bets in what we are doing—intentionally. Our auto strategy remains disciplined. Our goal in automotive markets is to maintain good volumes, not chase share or large volumes. Because of this, we are better able to absorb the automotive market weakness that is happening without disrupting our overall growth trajectory or our reported numbers. This mix shift is an important structural driver of our margin expansion. The growth markets carry more accretive margins than our legacy mix, helping us achieve our margin rates. As these scale up, we expect to see continued pull-through to gross margin and EBITDA. This will be a primary lever closing the gap to our long-term targets. Turning to Slide 11, I want to point out a little bit more about each of the three areas we are pursuing for diversification and forward growth, and each has the potential to become a material business for our company. All three are internally funded, and we have been allocating people and capital resources to each one. Each has dedicated assets, certifications, and pipelines well in excess of current revenue. Starting with electric grid and data center: we are building on a large, profitable NN, Inc. business. It is already over $70 million on an LTM basis, and our near-term goal is to target this to be a $100 million business. We have added assets, products, and people, and as we previously reported, we added liquid cooling connectors in the first quarter with a new product line and new customers. The data center part of this endeavor for us is fast-paced and collaborative. As you know from following the public markets, there is a big backlog of equipment and infrastructure build-out underway globally, and the supply industry, of which we are a part, is working to get caught up. Bottom line: growth from new and existing customers is higher and faster than we expected, and it is continuing. We are attempting to increase our content per rack and content per data center with multiple endeavors underway. Margins are quite good. Next is Defense Electronics. We are also adding to a large, profitable business already over $50 million on a trailing twelve-month basis. We are adding assets and certifications here as well and internally funding this. We have been working with a marquee OEM in the United States to expand into a new product area as a tier-one manufacturer of weapons components. It has been going quite well. We have had to add new specialized equipment because the parts are quite large compared to parts we have made in the past. Bottom line: growth has been faster and bigger than we expected, and momentum continues to build. The third area is medical. We restarted that in 2023. It was a small, unprofitable business, and we implemented both an operational turnaround plan as well as a forward growth plan. Similar to Defense Electronics, we have been working for two years with a marquee OEM, a global maker of robotic surgical equipment, and that program is beginning to show results for us with products going into production. Bottom line: it has been slower than we expected relative to the other two diversification endeavors, but momentum is now increasing. We are carrying forward with each of these, with prospecting lists, new products envisioned, new equipment, and new certifications. The biggest and fastest one obviously is data center. If you turn the page to Slide 12, we are getting a lot of questions about what we are doing and the size of the market. It is our number two overall market right now. Our internal plan is for it to become our number one market; currently, the global automotive business is larger. We sell multiple components into this arena—transformer components, electrical disconnects, circuit breaker components, smart meter components, and liquid cooling components. It is already a big, accretive business for us, and our near-term goal is to get it to $100 million. The liquid cooling connector business that we launched in the first quarter is a meaningful product for us. The market calls them quick-disconnect couplings or fluid connectors—the stainless steel connectors through which the coolant flows to the cold plates and cooling system inside the data center racks so chips do not overheat and can perform to spec. Market size estimates for what we are participating in range from $1.5 billion to $6 billion and are growing quickly—some growth rates are at 40% per annum. The bellwether reporter here is NVIDIA; they say they have a five-year backlog. We are seeing big backlogs as well, going out through the rest of this decade, and we are participating. We are leveraging our fluid management trade secrets. For a long time, we have understood how to control fuels—atomized fuels inside engines. It is a no-leak situation as well. While we had over 100 machines that could make these products already, we added another 17, have ordered them, and received about half. We are coupling them with our in-house trade secrets around turning, treating, electroplating, abrasive flow machining, and manufacturing and testing. You cannot have burrs; there is a lot of deburring required, and they must be aesthetically pleasing with a mirror-like finish, which leads to electroplating. We believe there is a lot of upside in this area. We have a multiproduct view and a goal to add content per rack; we are working that on a go-forward basis. Turning to our end market outlooks, we participate in several end markets. We have two main types of production platforms—one turning and machining, and one stamping, welding, and plating—and we serve multiple end markets with those common engineering and manufacturing platforms. Grid is strong, growing, and backlogged several years; generally, we are getting into situations that are immediate ramp-ups, and we expect that to continue through the rest of this year. In defense electronics, we mainly serve North America, specifically the United States. Spending is at record levels under the current administration and on a forward basis, and we expect that to continue through the rest of this year. In medical, we are focused on equipment versus implants. It is a steady and growing market, and we expect to achieve more new wins as the year progresses. It is still a small business for us, but Timothy M. French and team have corrected the profit problem, and we are making money in the medical business already. Automotive in China has been growing quickly for us over the last couple of years. If you follow that market year-to-date in 2026, the China market is down and is predicted to be down for the rest of the year. We expect to stay at a similar rate through the rest of 2026. Indigenous market is down more than export market, but we are in the suburbs of Shanghai serving Chinese carmakers, and the business is soft. We have been able to overcome that softness with our mix. Commercial vehicle covers trucks, agricultural equipment, and construction equipment. Each of those markets has a different outlook by geography. We are mainly attached to large diesel engines. The market has been down slightly globally—a combination of down in North America but up in China. The bellwether there is Cummins—big diesel engines and now generators for data centers—and we are expecting growth in the second half. Industrial—mainly tied to the U.S.—with GDP up about 2% year-to-date; we expect modest growth through the rest of the year. Global Auto is slightly down due to affordability, ICE/EV transition reset rates, and China exports; global data out yesterday predicts the global market will be down about 2% this year. Due to the programs we are on, we will do a little better than that, but we are definitely flat to slightly flat the rest of 2026. Overall, our markets are better than last year. If we turn to Slide 14, I would like Chris to take us through a little bit on our long-term goals. Christopher H. Bohnert: Thank you, Harold. Please turn to Slide 14. Given our expected market growth rates and the pace at which our targeted growth programs and cost initiatives have been delivering results, we are pulling in the timing of our long-term financial goals by one year. We have previously communicated these goals to you. With these changes in our markets and business, we are pulling them forward from 2030 to 2029. The net sales and EBITDA targets are not changing. Net sales of approximately $600 million at a 20% adjusted gross margin rate and adjusted EBITDA of about $80 million at a 13% margin are consistent with what we have previously reported. Relative to our full year 2025 results, this reflects more than 40% growth in net sales and more than 60% growth in adjusted EBITDA, with adjusted gross margins expanding from around 18.5% in 2025 to our target of 20%. As previously communicated, we are targeting about 13% to 14% adjusted EBITDA margins, demonstrating meaningful growth from where we were at about 11.6% through 2025. Slide 15 provides additional context on our business performance through our transformation actions and the trajectory underpinning our targets. This chart represents our adjusted EBITDA performance from 2020 through the midpoint of our 2026 updated guidance, excluding the contribution from the divested Lubbock business for comparability. Notably, ahead of the launch of our transformation, our results reached a trough in mid-2023—approximately $35 million on an LTM basis—with adjusted EBITDA margins having fallen to 7.4%. From the launch of our transformation plan, adjusted EBITDA has increased approximately 61% to the midpoint of our 2026 guidance of $57 million, with margins expanding significantly to 12.4%. This success in the first years of our transformation has been led by operational performance as we simultaneously reestablished our sales pipeline and reshaped our portfolio mix. Our growth programs in electric grid and data center, defense electronics, and medical are now contributing and we expect to drive further improved results. Lastly, on Slide 16, which shows our end market outlook for 2026 as it stands today: given our first quarter results and the expected forecast we have for the remainder of the year, we are revising our guidance ranges slightly higher. For the full year 2026, we are now guiding net sales in the range of $450 million to $470 million, reflecting approximately 9% growth at the midpoint compared to the prior year, and adjusted EBITDA in the range of $52 million to $62 million, reflecting approximately 16% growth at the midpoint. Importantly, this revised guidance is supported by our current market outlooks, the expected contributions from our new business from prior wins, and the operating leverage we expect to capture as our volumes grow across the year. With that, I will now turn the call back over to the operator for questions from our analysts. Operator? Operator: And if you do have further questions, you may reenter the queue. First question is from the line of Rob Brown with Lake Street Capital Markets. Rob Brown: Congratulations on the progress. Thank you. Good morning. Just following up on your data center activity and wins there. To get to the $100 million goal, what are the steps you need to take? It seems like you are well on the way there. Is it expanding penetration in the liquid cooling market, or are there other products that you can go after to get there? Harold C. Bevis: Yep. We have multiple items there, Rob. We have two new products we are coming out with for busbar and power whips. We are also growing with the current content that we have there, which is tied into transformer components as well as these connector components. So we are not overly counting on one product line. We are hitting the market more broadly now and have organized to do that. We are not making any predictions yet, but we have a great product line going into these data centers, and we are trying to get our content up. We are not falling in love with any particular product. We are selling a product basket. Rob Brown: Okay. Great. And then on the capacity to expand there, I know you have mentioned additional machines that you are deploying, but how much capacity do you have in the Power Solutions segment that you can grow into before you really need to add much capacity? Harold C. Bevis: Yeah. Tim, do you want to take that? Timothy M. French: Sure. In Power Solutions specifically, we have significant capacity available. We are not running 24/7 in the primary facilities, so we are able to adapt and assimilate new business fairly quickly. It requires basically just the creation of the tool, and then we are good to go from there. So lots of available capacity. Ramp-ups can be extremely quick on the power side. Rob Brown: Okay. Excellent. Thank you. I will turn it over. Harold C. Bevis: Thank you, Rob. Operator: Your next question is from the line of Analyst with Noble Capital Markets. Analyst: Good morning. Thanks for taking my questions. You mentioned a couple of factors that were behind the sales growth for the quarter, including precious metals pass-through, some favorable FX, and product mix. Could you break those out as to what each contributed to that 12% sales growth? Harold C. Bevis: It is harder to answer than that because we are up with 22 of our 30 top customers, and they cover basically all the markets we are in. We are flat with three others and down in a couple areas. It has been a consequence of the new programs that we have won and are launching. Chris touched on that—we have all these new programs that we have won with new and existing customers, and that is helping propel us. Precious metals were flat sequentially but up year-over-year. We are expecting precious metal pricing for the rest of the year to be flat to where it is now, so it will not contribute anything further beyond the second quarter because current levels are flat to the second half. If you look at the second half of last year, when things began to come up, we are getting a temporary boost for sure from precious metals and volume growth with customers in most of the markets we are in. Analyst: Okay. Thanks for that. And then just a follow-up on the data centers. When you talk about increasing content per rack, what are we talking about here? I do not know if you can give a dollar figure or percentage type of increase. Whatever the number is that you are selling into the rack today, could you double the amount of content you are selling into that rack, triple it? Just a little more color to see the potential growth by increasing wallet share per rack? Harold C. Bevis: That is similar to what Rob asked. Roughly speaking, our trailing twelve months is a little over $70 million, and we are trying to get to $100 million, and our pipeline is multiples of that number. It is hard to tell which new programs you will get a hit on, but we are planning on our same hit rate, and I believe that we have the pipeline that we need to get to $100 million. The TAM is so big here, Joe—we are talking billions of dollars of TAM—and we have a $70 million business. We cannot blame anything on the market; it is based on our own actions. We are coordinating our efforts to grow. When we get specific numbers, it is hard to tell how many racks are in development right now with the amount of announcements underway. We cannot answer that with accuracy right now, but we will get smarter and report more in the future on per-rack content. When we say per rack, when we are calling on a customer that is building out racks, we are trying to get more content during that sales call, and we have multiple products we can bring. We are coordinating between what we call Power and Mobile to call on these customers to sell a bigger portfolio of products. Analyst: Okay. Great. Thanks for that, Harold. I will get back in queue. Harold C. Bevis: Thank you. Operator: Your next question is from the line of John Edward Franzreb with Sidoti & Company. John Edward Franzreb: Good morning, everyone, and thanks for taking the questions. I would like to drill down a little bit on some of your newer growth initiatives. Can you talk a little bit about what is going on in medical? You suggested that it is a little bit behind plan. Also, the new program—I am interested in the wire harness program initiated last year. How is that standing? Harold C. Bevis: Medical pipeline is fine. The development is fine. We have had to conquer more plant certifications than we expected at the beginning of our endeavors, but we have now done that, and we expect to report positively in the medical arena this year. Coming into today’s call, it was not a source of our sales increase, so it has not showed up yet in terms of actual revenue. We are not backing off it. We have a dedicated team, we hired people, we added equipment, we completed certifications, and we are calling on customers and adding to the portfolio. In terms of the three initiatives, it is behind, but overall what we expected from the three in total is ahead by a lot. It is hard to tell where you are going to get the hit. It is playing out nicely overall. Timothy M. French: On wire harness, we put together the team and hired a team. Harold and I are in the final stages of equipment selection. There is a wire harness show—today, actually—and we have a team there. We are making specific equipment selections and expect to report during this year that we have launched that program. John Edward Franzreb: Got it. And on precious metals cost escalation, how are you dealing with regular metals—steel, aluminum, copper? All of them have risen sizably in the first quarter. Do you have surcharges, escalators? How are you working with that with your customers? Harold C. Bevis: Yes, you are correct. We are experiencing metal escalation, and we have the right to pass it through. We have to show POs that we actually incurred the inflation before we can increase our prices for the pass-through. We still have metal tariffs—copper from Germany and that sort of thing—so we also have tariff charges to pass through. We get a slight lag, but we do not have to wait until the end of a month or quarter. Once it happens, we present proof. We have been able to keep up with it because, generally speaking, we have raw material on hand at the old price. The game plan is: procurement has a lead time, you have a time period for an adjustment negotiation that you go through and prove it. We have had to adjust our prices, and it has taken active work by customer service teams. But, knock on wood, we have not had any material margin compression from that. John Edward Franzreb: Good to hear. I will get back in queue. Thank you. Harold C. Bevis: Thank you. Operator: Your next question is from the line of Analyst with B. Riley. Analyst: Hey, this is Remy Johnson on for Mike. I wanted to zero in on the new business wins guidance for 2026. It was nice to see the $42.9 million in new business for the quarter. How should we think about the cadence of wins as the year goes on, and what does that split look like between Power Solutions and Mobile Solutions? Thanks. Harold C. Bevis: Thank you. Our pipeline overall covers each of the areas we have pretty uniformly. The hit rates are similar. We set goals for our sales team and business development team that obviously exceed our guidance—we are aiming higher than what we are committing to here. The goal is skewed toward our growth areas of medical, defense and electronics, and grid and data center, so the pipeline reflects what we are trying to do. In automotive, the outlook is interesting. Unit volumes are supposed to be down a couple percent, but the industry is not necessarily stressed because affordability is so high that wealthy people are the ones buying new cars, and they are still wealthy. The industry is viewed as healthy even though unit volume is down somewhat. We are not getting the normal pressure like in a recession to reduce prices on new business. We are on the watch for that because it sometimes happens. We will let quotes go if they get below our margin bottom lines—this happens most in automotive—and that will continue. It is going to be driven by margins and our opportunity set. Right now, we see a good cadence to get to the new guidance we have given. Analyst: Nice. Thanks for the color on that. And then looking at 2029 where the new long-term goal settles, could you share how the split might look between the growth end markets and the auto end market? Where could we see auto fall out in 2028–2029? Harold C. Bevis: We are trying to get automotive to be 30% or less over time. We could do it abruptly and harm ourselves financially because it takes active work to be flat in automotive. You have end-of-life that comes upon you, and then you need to either be aggressive about the next-generation win for that same platform or pursue a different type of business. To stay flat in automotive is hard work. If we get to the point where we are outperforming in the other areas, we can start to price-clear ourselves on next-generation programs. Then it goes EOP and the sales are gone. For the moment, it is sizable for the company, and we are working hard to keep the business we want. In the last two years, we have gotten rid of a bunch of dilutive business—that is largely behind us. On a go-forward basis, it is about competing in areas that are profitable for us. If we could dial it in perfectly, it would be around 30%. Analyst: Thank you. I will get back in the queue. Harold C. Bevis: Thank you. Operator: We have a follow-up from the line of Analyst with Noble Capital Markets. Analyst: Hey, Harold. Did you talk this morning about the strategic options program? Maybe give us an update on what has been going on there and when we might hear more? Harold C. Bevis: We do have an ongoing process, still evaluating our alternatives for financing or otherwise. There is nothing material to report or meaningful, so we do not really have an update. I do have an update on the CARES Act proceeds—we received that money. We have that in-house. That has helped with our liquidity and was also a driver of looking at our options because we were having a tough time with liquidity given the growth vector we are on. That is helping us a lot. The pressure is less, and we are being calculated. The Board is being calculated with its actions, and we have nothing major to report at this time. Analyst: Okay. Great. Thanks, Harold. Operator: You have a follow-up from John Edward Franzreb with Sidoti & Company. John Edward Franzreb: I was looking at the slide on Power, and it seems like you were looking for new wins in certain markets that may not have materialized. Can you talk about that? What are the new program wins that you referenced? Harold C. Bevis: In Power, we are prospecting to get more straight-up grid business. We have outperformed on the data center side of that. On the grid side, residential starts are down in the U.S., the EV craze has subsided, and the residential stream that was driving a lot of grid thinking has lessened. On the other side, the industrial side of the grid—tied to large equipment and large infrastructure investments—is outperforming. Historically, our grid portfolio was tethered to residential grid, and we are pursuing new wins in those areas. In terms of product category, busbars are an area we have been focusing on growing in, tied into the plating equipment acquisition we previously announced. We could not plate the big parts—most of them were silver plated. The acquisition of that equipment from a customer who is also a very large electrical grid customer headquartered out of Europe is a big advancement for us. Instead of no-quoting business, we will be able to quote the full bill of material and be a more holistic supplier. We have fixes underway, and we are always looking at our hit rates and for pattern recognition to improve them. These are areas we know about and are focused on fixing. John Edward Franzreb: And on the refinancing of the preferred—retirement or otherwise—it has been a multiyear process. Can you give us some color as to why it has taken so long, besides turnover at the investment bank? Harold C. Bevis: We are actively looking at our alternatives. It is on the front burner. It is helpful to have better operating performance because you have better credit statistics when you look at the secured debt part of that. We are in possession of our outlook for the year, and you are too now. You see that we are planning on having a nice year, and the cash value of the EBITDA is going to be a lot higher because we are not doing plant closures and layoffs. In the last few years, we closed four plants and laid off 800 people, and that had a cost to it. The cash value of our performance was lower. Going forward, that is behind us. Our adjusted EBITDA has a cash value and is leverageable. We will have better cash flow to do a refinancing than we have had in the past. It is becoming a better situation in terms of a refinance story. John Edward Franzreb: Got it. Thank you, Harold. I appreciate the color. Harold C. Bevis: Thank you, John. Operator: Your next question is from the line of Analyst with Bentley Capital Management. Analyst: Thank you. Two questions. Number one, in your outlook for margins, your goal is to go from 18.5% to 20%. However, everything you said indicates you are pruning low-margin businesses—maybe another plant or two to close—and the new business is theoretically at a much higher margin. Why is your goal only a 1.5% improvement from 2025 to 2029? Harold C. Bevis: It is a good question and a good catch. We are being conservative. We are not ready to change our guidance yet on that topic. The same comment also applies if you compare the EBITDA margin, Robert. We are looking at both for revising external commitments. We are closing in on them. You are correct—they look conservative going forward. We are aware of that. As we thought through how to improve our multiyear guidance, instead of changing the margin percent goals, we decided to change the time period to achieve them. That would be what is next, and it is top of mind for us. Analyst: Are there still plans or businesses to exit that are marginally profitable or not making an adequate return for you? Timothy M. French: At this point, we have nothing scheduled for closure. We have mitigated the impact of what we formerly referred to as the “group of seven,” and they are all performing in a decent fashion now. So at this point, there is nothing scheduled for closure. Harold C. Bevis: I will add that we obviously have some plants at the bottom of a forced rank, but when you look at consolidation, the one-time cost to do it, the IRR of the project, and the disruption, we do not have any that check those boxes right now. We have better uses of capital than closing plants. Analyst: Okay. Last question for me. How are you paying for the plating acquisition, and is it going to be a meaningful add to your revenues, or is it relatively small? Harold C. Bevis: It is medium-sized, and it is in our thinking and guidance for the year. The equipment is expensive; installation is expensive. It has a lot of chemicals and requires proper chemical handling. It was in our base plan this year to do a product expansion in that area so we could more fully participate in busbar prospecting. It will come online towards the end of the year. Timothy M. French: Yes, the end of the year. Analyst: Okay. Keep up the great work. Thank you very much. Harold C. Bevis: Thank you. Operator: I will now hand today's call back over to Harold C. Bevis for any closing remarks. Harold C. Bevis: Thank you, everyone, for staying on the call with us and for the good questions. We are very happy about this quarter, and we expect it to continue, as reflected in our guidance improvement. We look forward to reporting out on our initiatives on the next call. Operator, Tamika, we will end the call today. Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
Operator: Greetings, and welcome to the Maximus, Inc. Fiscal 2026 Second Quarter 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, James Francis, Vice President of Investor Relations. Thank you. You may begin. James Francis: Good morning, and thanks for joining us. With me today are Bruce L. Caswell, President and CEO, and David W. Mutryn, CFO. I would like to remind everyone that a number of statements being made today will be forward-looking in nature. Please remember that such statements are only predictions. Actual events and results may differ materially as a result of risks we face, including those discussed in Item 1A of our most recent Forms 10-K. We encourage you to review the information contained in our recent filings with the SEC and our earnings release. Maximus, Inc. does not assume any obligation to revise or update these forward-looking statements to reflect subsequent events or circumstances, except as required by law. Today’s presentation also contains non-GAAP financial information. For a reconciliation of the non-GAAP measures presented, please see the company’s most recent Forms 10-Q and 10-K. I will now turn the call over to David W. Mutryn for the financial results. David W. Mutryn: Thanks, James, and good morning. I would characterize our completed second quarter in three ways. First, strong execution with the sequential step-up to profitability we anticipated. Second, clear evidence that our technology investments are contributing to bottom-line returns as reflected in our improved full-year earnings outlook. And third, increased capital deployment toward share repurchases, given our view that our shares have been trading at an attractive valuation. Turning to second quarter results, Maximus, Inc. reported revenue of $1.31 billion, consistent with our expectations and on track with our full-year guidance. As I indicated on previous calls, as we progress across this fiscal year, we are facing tough comparative quarters to last year, which benefited from natural disaster work in the U.S. Federal Services segment and temporary clinical volume surges in both domestic segments. On the bottom line, adjusted EBITDA margin was 14.4%, and adjusted EPS was $2.07 for the quarter, which compares to 13.7% and $2.01, respectively, for the prior-year period. The improvement highlights our ability to drive margin enhancement through efficiency enabled by automation, including AI tools. One example is a dispute resolution program for a government customer where automation has helped create meaningful operating leverage. The second quarter results included two unusual items, with one reducing earnings and the other increasing earnings by approximately the same amount—meaning they effectively net out of adjusted EPS. First, we recorded an asset impairment related to a subset of capitalized assets attributable to the U.S. Services segment. This impairment was tied to an unusual circumstance dating back to fiscal 2024 where a software asset was built and capitalized under a prior contract for a specific customer. A recent decision by this customer led us to writing off the balance of the asset, which was $6.9 million, or a $0.09 per share impact to the U.S. Services segment operating income. The second item is the discrete research and development tax benefit totaling $4.2 million, or approximately $0.08 per share. As we have become a more tech-forward company with higher levels of R&D activity, we undertook an initiative to identify and document all eligible R&D tax credits. These credits became recognizable at the completion of the exercise during the second quarter. As I mentioned, the impact of these roughly nets in adjusted EPS, and both items have no impact on our adjusted EBITDA. Let us go to the segment results. Second quarter revenue for the U.S. Federal Services segment was $753 million and in the range that we expected for this period. The prior-year period revenue was $778 million and benefited primarily from elevated natural disaster support that has not recurred at the same levels. I mentioned on the February call that this dynamic is expected to recur for this segment in fiscal year 2026 when comparing to the prior year. Excluding the natural disaster work, U.S. Federal Services grew 1.5% organically year-over-year. The operating income margin for this segment in the second quarter was 17.6% as compared to 15.3% in the prior-year period. Another item I mentioned on the February call when we increased the full-year segment margin guide is the anticipated durability of this segment’s margins. This quarter’s segment margin is delivering on that commitment thanks to technology initiatives embedded in our programs that decouple labor costs from our ability to process more volumes. In fact, we are raising the margin guide for this segment again this quarter, which I will touch on shortly. Moving to the U.S. Services segment, second quarter revenue was $416 million as compared to the prior-year period revenue of $442 million. I noted on the February call that our first quarter segment results had the greatest anticipated divergence and that by the back half of 2026 we anticipate positive organic growth, which we continue to forecast. These second quarter results are evidence of that progression. Bruce will provide a positive update on current state customer priorities that are anticipated to make contributions in fiscal year 2027. The segment’s operating income margin for the second quarter was 9.3% and was impacted by the $6.9 million non-cash item I mentioned earlier. Excluding the charge, the margin would have been 10.9% for this period, and demonstrates substantial uplift from the lower segment margin in the first quarter that we anticipated. Turning to the Outside the U.S. segment, second quarter revenue was $137 million and the segment realized an operating loss of $3.1 million. As I mentioned on the February call, we are tracking a number of opportunities in the geographies that remain after our reshaping effort. The majority of segment revenue stems from programs in the United Kingdom, with Canada and the Gulf Region comprising the balance of the segment. Our goal remains driving growth and further margin improvement in this segment by building scale in those limited geographies, all of which have a corresponding set of pipeline opportunities. Moving to cash flow items, cash provided by operating activities was $190 million and free cash flow was $179 million for the second quarter. We continue to expect improving cash flow across the year and are reiterating our free cash flow guidance for the full year of between $450 million and $500 million. As we anticipated and communicated last quarter, DSO remained elevated at 78 days driven by ongoing administrative delays at a major federal customer. We are working diligently with this customer to process the outstanding invoices and we expect collections to accelerate and thus DSO to trend downward and finish fiscal year 2026 below 70 days, driving strong second half free cash flow. We currently believe that DSO may remain elevated as of June 30, then improve in our fourth fiscal quarter. Of note, we also expanded our receivables purchase agreement from a ceiling of $250 million to a ceiling of $350 million. We view this as a helpful and low-cost tool to help manage short-term liquidity needs. We ended the second quarter with total debt of $1.55 billion, representing a slight reduction from the first quarter balance. Our consolidated net total leverage ratio per our credit agreement was 1.8x and unchanged from the ratio at December 31. We remain below our stated target leverage ratio range of 2x to 3x. During the second quarter, we repurchased approximately 1.4 million shares totaling $111 million, and subsequent to quarter end through May 1, we repurchased an additional 600 thousand shares totaling $40 million. We were pleased to announce this morning a Board-authorized refresh of our share repurchase program for further share repurchases up to an aggregate of $400 million, effective May 11. Let me expand on our thinking and provide some context for capital deployment in the near term. This fiscal year, we have been carefully managing our cash through the DSO dynamics I mentioned. In the second quarter, we deployed the majority of our free cash flow to share repurchases. We have long said that we are opportunistic in our share repurchasing. To be more direct, we prioritize repurchasing when we believe our share price does not reflect the intrinsic value of the business based on a disciplined and conservative assessment. Going forward, we will continue to execute on our capital deployment priorities while considering near-term liquidity, the potential M&A opportunity set, and all within the constraint of our stated target net debt ratio of 2x to 3x. Even amidst market conditions that are favorable to share repurchases, we continue to seek acquisition targets to accelerate longer-term organic growth. We remain focused on targets that add capabilities, add and expand customer relationships, and create revenue synergy opportunities. We also remain disciplined in our evaluation of targets and require that valuations must be reasonable in the context of current market conditions, and the expected return must exceed our cost of capital. Moving to guidance, we are raising our fiscal year 2026 earnings outlook for the second consecutive quarter, and we are reiterating both revenue and free cash flow guidance. Starting from the top, we expect that fiscal year 2026 revenue will range between $5.2 billion and $5.35 billion. Our full-year adjusted EBITDA margin guidance for fiscal year 2026 is now approximately 14.2%, which is a 20 basis point improvement from prior guidance. Our adjusted EPS guidance increases by $0.20 and is now expected to range between $8.05 and $8.55 per share. It is notable that this represents 14% year-over-year growth at the midpoint of the new adjusted earnings guidance. Finally, free cash flow is expected to range between $450 million and $500 million. While the timing of specific receivable collections always has the potential to cause significant cash flow variation at the end of a given period, the guidance reflects our expectation that DSO will finish the fiscal year below 70 days as we catch up on collections from the major federal customer. I will provide some color on full-year operating margin assumptions for the segments. We expect the U.S. Federal Services full-year segment operating margin to be 17.5%. For U.S. Services, we expect approximately 10%, with the update reflecting the $6.9 million non-cash charge this quarter. And for Outside the U.S., we are expecting the segment to be roughly breakeven on a full-year basis. Other updated assumptions include expected interest expense of roughly $84 million, and we anticipate our full-year tax rate to range between 24% and 25%. I will conclude with updated thinking around our near-term margins. Approximately 18 months ago, we laid out a near-term adjusted EBITDA margin target range of 10% to 13%. At that time, our margin was around 11.6%, and we are now guiding to approximately 14.2% for fiscal 2026. Much of the improvement has come from technology enhancements and cost actions that we believe have staying power. Given that progress, we are raising our near-term adjusted EBITDA margin target range to 12% to 15%. We expect to operate toward the upper end of that range in periods with stable volumes and continued technology leverage, while recognizing that new program ramps and mix can affect margins in any given year. Meanwhile, revenue is holding within the range we set out for fiscal 2026 despite difficult comparable periods that we anticipated and communicated. Looking forward, we believe that our robust near-term pipeline is of high quality and capable of driving awards and revenue contribution in the coming quarters. With that, I will turn the call over to Bruce. Bruce L. Caswell: Thanks, David, and good morning. At roughly this point last year, I shared progress on our multiyear transformation initiative where we streamlined certain areas of the business, driving cost out and funding investments in technology, primarily in the area of AI-enabled automation. Those investments are improving our operations and enabling us to scale a business that already supports roughly one in three Americans who rely on the programs we deliver for government. At the halfway point of fiscal year 2026, our results provide further evidence that the investments we have made in technology, automation, and AI-enabled tools are improving execution across the enterprise. Our second consecutive earnings guidance increase reflects that progress and suggests that we are slightly ahead of the technology leverage goals we set at the beginning of the year. We also believe that we remain well positioned to execute against our capital deployment priorities, including selective investments in capabilities that strengthen our differentiation, potential acquisition targets that could accelerate longer-term organic growth by augmenting capabilities and customer access, and share repurchases supported by the Board-authorized $400 million program refresh. As a reminder, we remain focused on the federal, defense, and national security domains for our inorganic priorities. I will focus my remarks today on three areas. First, the growing emphasis across government on fraud prevention and program integrity. Second, how we are accelerating AI and automation in our solutions and across Maximus, Inc. And third, the progress we are seeing with state customers around Medicaid community engagement (also called work requirements), SNAP, and unemployment insurance administration. Our government customers want programs that work—programs with integrity that are effective, efficient, and trusted—delivered by partners free from conflicts of interest, often under performance-based contracts structured to provide transparency and accountability to outcomes. Increasingly, better technology and data quality is helping customers flip the model to combat fraud upfront rather than relying solely on after-the-fact detection, often referred to as pay-and-chase. The technology-enabled services that Maximus, Inc. provides to government are designed to embed integrity directly into program operations, using analytics, automation, data matching, and increasingly AI-supported workflows to drive execution and support oversight without slowing service delivery. It is important to emphasize our role in this ecosystem. As I have commented in the past, Maximus, Inc. does not make policy, but we do help operationalize it. Our focus is on translating policy intent into practical technology-enabled solutions that strengthen program integrity and reinforce public trust. We are seeing growing bipartisan alignment around this approach. A number of customers are using advanced data matching and analytics to address issues like concurrent enrollment, where Medicaid beneficiaries may be enrolled in multiple states concurrently, connecting data sets across programs to ensure enrollment integrity. Technology allows these checks to happen faster, more accurately, and at scale, increasingly preventing enrollment errors before they occur. As a trusted partner to government, we develop data-driven insights through tens of millions of interactions with citizens each year. That data matters not just because it provides our teams and our customers real insight on the user experience—how people engage, where they struggle, and how they make choices—but moreover, this data is increasingly informing models that are designed to improve program delivery, eliminate friction, prevent fraud, and improve outcomes for our customers. Fiscal 2026 has seen a planned acceleration of AI across Maximus, Inc. through a company-wide initiative, and I am pleased to provide an update on our enterprise activation. AI is already enabling Maximus, Inc. to deliver even greater value for our customers. Our solutions are accelerating service delivery, providing deeper insights on program effectiveness, enabling rapid adaptation to changing policy and mission priorities, and increasing operating leverage and scale. Let me begin with two customer-focused proof points. First, our Total Experience Management, or TXM, solution that I briefly mentioned on the last call is capturing the attention of government customers and winning in the marketplace. In fact, one representative of a federal agency acknowledged TXM as the most sophisticated deployment of AI in a contact center environment that they had seen to date. We continue to invest in TXM as we address this multibillion-dollar government market. Second, our AI accelerator team rapidly implemented an innovative solution developed in-house using a combination of generative and probabilistic AI to streamline high-volume claim processing on a core program where we serve as an independent dispute resolution entity. Nearly half of the effort required in processing claims is now handled through automation, enabling staff to focus on outcome accuracy and more complex cases. Our AI focus has been straightforward: we are deploying it where we believe it helps our customers run programs with greater integrity, speed, and consistency, and where it is designed to measurably reduce friction for the people those programs serve. Doing that responsibly requires more than a model. It requires a methodology that leverages domain knowledge, brings the workforce along, embeds controls into workflows, and integrates securely into legacy environments. We are intentionally acting as customer zero for many of these initiatives. In the government context, where trust and proven execution are critical, we believe that this matters. Through internal use, we gain firsthand insight into what drives adoption, the governance and controls required, how to integrate with real-world workflows, and what it takes to move from a successful pilot to scalable, sustainable operations. We are already seeing the impact of our AI investments applied at scale on certain programs. I only expect this to grow as we move from pilots to scale with high-value contact center use cases—from call deflection to summarization, from training to quality assurance, from intelligent document processing to real-time fraud detection. Our toolkit is broad, and includes proprietary techniques developed through our R&D investments, venture investments and partnerships with early-stage companies, and preferred relationships with industry leaders. That said, I am optimistic about the ultimate potential for AI for our customers as we are in the early innings with regard to deploying some of our most sophisticated AI solutions. These solutions have the greatest potential to transform delivery models with speed and cost-effective delivery of high-quality, complex services. As an example, through our Corporate Venture Capital function, we invested in the health AI domain to create new intellectual property that we plan to deploy in the near term. This IP uses knowledge graphs and a complex clinical ontology to provide decision support traceability for clinical assessments that government programs require. While we are advancing with the rapid pace of AI developments, we also acknowledge the still-evolving federal and state government regulatory environment, as well as the limitations of legacy systems which we often must integrate. An equal, if not more important, consideration of course is the environment of public trust that is foundational to the programs we administer on behalf of government. Finally, as you would expect, no area of the business has been exempted from our AI enablement. From back office operations such as AP invoice processing, to our business support functions like legal and human resources, to enterprise technology development, we are examining every aspect of how we work and create value. For employees, our generative AI tools delivered through familiar channels like Microsoft Teams are designed to streamline common tasks and are poised to evolve as agentic orchestration matures in the enterprise. So to summarize, we are executing as planned, moving with speed and urgency but also respecting the pace of our customers. We are demonstrating the art of the possible, backing it up with proof points, and differentiating Maximus, Inc. in winning new work and our rebids. We view our combination of domain knowledge, ability to gain insights from large operational datasets, and our industry-leading tech talent as a powerful competitive differentiator. Next, I will share how the procurement environment looks for us today. On the federal side, particularly in civilian agencies, the shortage of acquisition professionals continues to make forecasting procurement timelines difficult. In an environment where awards have shifted right, protests have increased, further delaying outcomes. Moreover, certain technology modernization initiatives—again, particularly in civilian agencies—have been slow to manifest in formal procurements, although the underlying demand signal is strong. That said, we believe momentum is starting to build, and we will be in a good position heading into next year. On the state side, we are seeing solid traction in a number of areas related to H.R. 1, or the Working Families Tax Cut Act. Presently, there are two states working with us toward arrangements that could utilize our existing contracts to support Medicaid community engagement, or MCE, compliance. Depending on the contracting mechanism, these opportunities may either show up as higher volumes under existing contracts or be reported as new awards. One of these examples we estimate could drive a more than 30% increase in current program revenue, subject to final scope and implementation timing. More broadly, states remain actively engaged in both planning and delivery to address Medicaid needs, and the momentum we are seeing is consistent. The timing of final MCE regulations has necessitated that states leave placeholders in their operating plans until regulations solidify, which is expected next quarter. Following that, we believe action by customers to put in place solutions where we play a role could accelerate. We are also making good progress on positioning Maximus, Inc. to assist states in lowering SNAP payment error rates through our Accuracy Assistant offering. After multiple rounds of demos being well received with certain customers, our conversations are increasingly focused on integration, technical detail, and indicative pricing, which tells us that we have moved beyond concept and into serious implementation planning. Senior state officials have commented on the comprehensiveness of our SNAP solution, noting that Accuracy Assistant is the only truly end-to-end complete vendor solution they have seen. Finally, we are seeing renewed traction in unemployment insurance administration, representing a small but important pipeline. We view this as both reflecting current economic conditions and also the greater flexibility granted to states to use private partners for this work—a development championed by Maximus, Inc., of which I have spoken previously. Moving now to our award metrics and pipeline, our year-to-date signed contract awards as of the end of the second quarter were $913 million of total contract value. In addition, at March 31, we had a balance of $322 million worth of contracts that had been awarded but not yet signed. These awards translate into a book-to-bill ratio of approximately 0.5x using our standard reporting for the trailing twelve-month period. The second quarter had a quarterly book-to-bill ratio of 0.5x, reflecting sequential improvement from the prior quarter’s figure of 0.2x. Turning to our total pipeline of sales opportunities, we had $56.8 billion at March 31, comprised of approximately $4.6 billion in proposals pending, $1.5 billion in proposals in preparation, and $50.7 billion in opportunities we are tracking. The share of new work in the total pipeline is 59%, and the U.S. Federal Services segment share of the total pipeline is 58%. Finally, even as states await final work requirement regulations expected this summer, I am pleased that the second quarter pipeline includes an H.R. 1-related opportunity set that increased 75% compared to our tracking of this set last quarter. The other positive sign of H.R. 1 progression is that our forecast for U.S. Services includes mid-single-digit organic growth in Q4, providing early momentum as we enter FY 2027, with improvement possible as the H.R. 1 pipeline matures and converts. In all, I am proud of the team for their continued focused execution this quarter, for the momentum we are building to capitalize on market opportunities, and for the enterprise-wide focus on our continued evolution as a leading provider of technology-enabled solutions to government. We will now open the call for questions. Operator? Operator: Thank you. We will now open the call for questions. Our first question is from Will Gilday with CJS Securities. Analyst: Good morning. Thanks for taking our question today. Hope you are well. I guess for David, any more color on the higher DSOs in the quarter? And you refreshed the buyback authorization, but how are you thinking about capacity for share buybacks considering the cash flow lumpiness? David W. Mutryn: Yes, thanks. A little more color on the higher DSO. It stems from a major federal customer, as I said, and it is the same customer that contributed to the temporarily higher DSO in our fiscal year 2025. We did anticipate a buildup of accounts receivable in our November guidance and then again in February when we said we expected DSO to remain elevated in Q2. A little more detail: this is a large program with extremely complex and data-intensive invoicing requirements. The slowdown in collections has occurred since November as we have worked with our customer on incorporating new and evolving requirements, many of which are retroactive, so may require rework of prior period invoices. This is a federal agency. We are operating under a funded contract, so we have full confidence that the outstanding invoices will be collected. We continue to regularly collect, but this customer’s AR increased in Q2, and our current view is that it may remain flat in Q3 before declining in Q4 as we expect to catch up and collect more than our revenue. That matches with my prepared remarks that we believe DSO may remain elevated as of June 30, then improve in Q4. Near-term cash flow plays into our thinking, as I said, among other factors with the share repurchase, including the valuation as well as any near-term M&A opportunities. We factor all that into our repurchase calculations. Analyst: That is super helpful. Thank you. And then thinking about H.R. 1 opportunities in SNAP, you talked about that error prevention solution and the good response from potential customers. Are you currently marketing or planning to bring to market other solutions for SNAP? Bruce L. Caswell: The heart of the solution is the Accuracy Assistant tool, which has been very well received in the marketplace. As I mentioned in my prepared remarks, we have had customers say that it is the most comprehensive end-to-end tool out there. Those very same customers have now come to us and said, “How do we get this implemented? What would the indicative pricing be?” At the heart, it is really that tool and then the services we can wrap around it to help states identify instances where there could be inconsistencies. The tool surfaces inconsistencies in the data, and then the BPO services are used to contact beneficiaries, obtain corrections, and ensure an accurate eligibility determination. On the Medicaid side, we have a community engagement tool designed to allow beneficiaries first to navigate whether they actually need to comply with the work requirements, because they may have conditions that meet the qualifications for exemption. There is an entire upfront process where individuals can apply for an exemption; that has to be determined, and they have appeal rights if they do not agree with the outcome. If they pass through that process and need to demonstrate compliance with the 80-hours-a-month work requirement, the tool—mobile app–style—allows them to upload a timesheet or other evidence that they may have, whether volunteering or working. We use our intelligent document processing solution, which is AI-enabled, to ensure that those documents appropriately reflect the hours worked from a federal compliance standpoint in the core legacy system. There is a lot of tech we are building as part of this. As I mentioned, our view about implementing AI for our customers is that it is not about having a shiny tool. It is about understanding workflows, establishing governance and guardrails, bringing along the staff who will be using these tools because it requires retraining, and most importantly, working with customers to ensure that the public trust they have created with these programs is maintained, and if anything, enhanced through the use. We feel like we are in a great position to help our customers navigate H.R. 1. Analyst: That is great color. Thank you. And then just asking for some more color on the state side. What are the dynamics that have driven revenue declines in the first two quarters of the year, and why are you confident in a return to growth by Q4? David W. Mutryn: Yes, sure. We had expected the year-over-year comparisons to improve over the remaining quarters—we said that last quarter—and Q2 is sequentially up from Q1, so we are seeing that play out. I mentioned in the prepared remarks that there was an element of higher clinical work in the prior-year period in U.S. Services as well as U.S. Federal. On the U.S. Services side, a few of our larger clinical contracts in the segment had some state-specific dynamics that drove a reduction in volume year-over-year, not indicative of any broader trend. Our confidence in Q4 is really driven by the H.R. 1-related activities, which we expect to see coming in Q4. That sequential growth in U.S. Services actually drives our expectation that for the whole company, revenue and earnings should be a little higher sequentially in Q4 versus Q3. So that is a little quarterly color while I am at it. Analyst: Thank you. And then you keep raising the margin outlook on U.S. Federal based on tech initiatives and efficiency gains. Maybe add some more color on exactly what those efficiency gains are and why we have not yet seen a similar dynamic in the U.S. Services segment? Bruce L. Caswell: First, our federal contracts are generally larger, meaning that when you implement technology initiatives, they get applied in that segment to programs that are larger from a scale and volume standpoint, so they are by definition going to be more impactful on the margins of the business. Second, many of our U.S. Services contracts, particularly in Medicaid and the health benefit exchange area, involve us delivering services directly to consumers, and that issue of public trust is front and center for our state customers. As a consequence, they have expressed decidedly more caution in the adoption of AI and other automation tools without first really understanding how guardrails can be put in place to ensure compliance with program regulations, which is super important to them. It is also worth noting that there is a patchwork quilt of regulations at the state level that our clients must individually navigate, whereas that is less the case at the federal level presently. Third, U.S. Services contracts certainly have great incremental technology opportunities in them, but they also operate in a fairly sophisticated environment that incorporates a lot of state systems. Therefore, there are multiple points of integration with state legacy systems required in executing our program delivery model. To give you an example, in one state our employees are trained across five different state systems in order to do their work. Environments like this are much more challenging to apply automation to, particularly when this has to be done across multiple vendor contracts that must be coordinated. Finally, to overlay all of this, our state customers already have a lot on their plates, particularly with the requirements for implementing H.R. 1. In many cases, they have limited bandwidth and do not have the budget resources to do a lot more than that. Performing the “system surgery” needed to really drive significant automation and change an already very stable and positive end user experience has become less of an immediate priority for them. David W. Mutryn: No. That is great. Thanks. Analyst: Switching back to federal, do you have any updates on the VBA contract? Is a recompete still expected in the summer, or do you think there will most likely be an extension? And you have an industry day later this month—what are you looking to accomplish or learn there? Bruce L. Caswell: The current contract, as a reminder, goes through December 31, 2026 for all vendors. The VA has not yet released a formal timeline for the rebid, and we expect to learn at the upcoming industry day what that timeline is intended to be. Generally speaking, agencies across government have the ability, if needed, to extend existing contracts as they complete their recompete process. We do not know yet if the VA will need or intend to do that; we may learn that at the industry day as well. We would expect to be able to share more information on subsequent calls as it becomes available from the customer. In the meantime, we are remaining completely focused on providing first-class service to veterans and to the VBA. We think we have earned the reputation for delivering a high-quality veteran experience. This is very much made possible by the many employees in our Veterans Evaluation Services subsidiary who themselves have served and are veterans. They understand the experience and how to navigate these programs, and they do so with a great deal of empathy and compassion. We feel like we are delivering great value to the VBA under the current contract and therefore we are optimistic about the future outcome of the rebid. We have a strong track record with the VBA, demonstrated delivery capabilities at scale and capacity, and we have made significant technology investments—continuing to invest—in further improving the veteran experience, with a specific focus on reducing the time that veterans spend in our portion of the MDE claims process. That is the update I am able to provide at this time. Analyst: Thank you. And outside of the VBA, are there any notable recompetes over the next 12 to 24 months? Bruce L. Caswell: Nothing that I would call out in particular. As you have noted, the veterans exams recompete is the largest. Everything else is kind of normal recompete cadence within our contract portfolio. As I noted in my prepared remarks, we are seeing bid determinations—including rebid determinations—moving to the right, both on the federal and the state side. That is not necessarily a bad thing, because often our work can be extended while we are awaiting the outcome of rebids, and our rebid win rate remains very high. So it is not a bad environment necessarily. Analyst: That sounds great. And just one more, more of a guidance question for David. On the federal side, are there any other tough comps to lap in these last two quarters? I know the emergency stuff was a tough comp for this quarter. David W. Mutryn: Yes. If you look back at fiscal year 2025, Q3 (June) was also very strong on the surge in clinical volumes, so that will remain a tough comp, as will Q4 to a lesser extent. James Francis: Thanks, Will. Operator, back to you. Operator: Thank you. This concludes our Q&A session and our call. Thank you for your participation. You may disconnect your lines at this time, and have a great day.
Operator: Good morning, everyone. Welcome to BGSF, Inc. First Quarter Fiscal 2026 Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To withdraw your question, please press star and then two. As a reminder, this conference call is being recorded. Now, I will turn the call over to Sandy Martin, Three Part Advisors. Please go ahead. Sandy Martin: Good morning. Thank you for joining us today for the company's first quarter 2026 conference call to discuss our results. On the call with me are Kelly Brown, President and Co-CEO, and Keith R. Schroeder, Co-CEO and CFO. After our prepared remarks, there will be a question and answer session. As noted, today's call is being webcast live. A replay will be available later today and archived on the company's Investor Relations page at investor.bgf.com. Today's discussion will include forward-looking statements, which are based on certain assumptions made by the company under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including those listed in the company's filings with the Securities and Exchange Commission. Management statements are made as of today, and the company assumes no obligation to update these statements publicly, even if new information becomes available in the future. Management will refer to non-GAAP measures, including adjusted EPS and adjusted EBITDA. Reconciliations to the nearest GAAP measures are available at the end of our earnings release. I will now turn the call over to Keith R. Schroeder. Keith R. Schroeder: Thank you, Sandy, and thank you all for joining us on today's call. As expected, BGSF, Inc.'s transition services agreement with Inspire successfully concluded on March 31, thus beginning in the quarter we are now operating as a standalone company. This represents a meaningful inflection point for the business, enabling our leadership team and employees to dedicate their full attention to managing a best-in-class property staffing company and executing our 2026 strategic growth initiatives. Operating independently simplifies the organization's support structure and strengthens our ability to drive operational discipline, efficiency, and accountability. During the quarter, we made solid progress through three key directives that remain central to our strategy. First, we are leveraging insights from an independent consulting firm to support incremental top-line revenue. Kelly will provide an update on several encouraging developments following my remarks. Second, we have resized our general and administrative cost structure to align with our standalone property staffing business and we will continue to look for opportunities to optimize our cost structure. We continue to estimate ongoing G&A costs at approximately $12 million annually, including roughly $2 million in public company costs, reflecting a more appropriate and sustainable cost base. Third, informed by an external organizational and incentive compensation study, we took targeted actions late in the first quarter to reduce selling costs. While the timing limited the near-term impact, we expect the full benefit of these actions to be realized beginning in the third quarter of this year. On an annualized basis, these initiatives are anticipated to generate approximately $1 million in cash cost savings. These actions reinforce our focus on execution, margin improvement, and progress towards sustained profitability. With that, I will turn it over to Kelly to walk through the strategic initiatives currently underway. Kelly Brown: Thank you, Keith, and good morning, everyone. We are proud to share that BGSF, Inc. was recognized as one of the 2026 Best Places for Working Parents by the Staffing Industry Analysts organization, or SIA. This recognition reflects our ongoing commitment to supporting working families through flexible, people-first policies that strengthen engagement and retention across the communities that we serve. We were also recognized by SIA as one of the top 100 largest staffing firms in the U.S. Operationally, we completed the BGSF, Inc. rebrand in the first quarter, a pivotal step in sharpening our market positioning and building a more scalable, technology-enabled, digital lead generation platform. By clarifying our brand positioning and strengthening our digital marketing foundation, we are seeing improved SEO performance, a larger and more efficient funnel, and deeper client engagement. We are also encouraged by the early results of our technology investments. Today, we are operating both recruiting and sales AI capabilities, and we believe we have established a balanced model that combines advanced technology with human expertise as the market continues to evolve. These capabilities are improving efficiency and accelerating speed to fill for our clients, while enhancing the candidate experience as well. Our AI-enabled recruiting tools have already streamlined interviews for more than 7,500 candidates, strengthening compliance and security while expediting critical steps such as identity verification. The result is a materially faster time to fill with higher-qualified candidates. On the sales side, our AI sales assistant platform has successfully converted inquiries into new clients, and our relationship teams then step in to arrange and schedule delivery. Taken together, these initiatives reinforce our focus on delivering better outcomes for clients and candidates. We believe this continued focus on the end user will continue to position BGSF, Inc. as a differentiated workforce solutions partner. As a part of our organic growth strategy, we launched our PropTech consulting services through our strategic partnership with Yardi. While still early, the ramp has been encouraging. We have begun building a consulting pipeline for PropTech services, secured initial engagements, and expanded our Yardi consultant network. This opportunity is being driven by increasing complexity in implementation and integrations, the demand for our expertise in evaluation and simplification of existing tech stacks, and continued consolidation of management portfolios within the property management industry. PropTech presents a complementary adjacent market to our core staffing business and further strengthens our differentiated position across multifamily and commercial property management. If execution continues as planned, we believe PropTech could represent approximately 1% to 2% of our total revenue this year. Overall, we are making steady progress advancing our operating model and strengthening our competitive differentiation. As our AI capabilities continue to evolve, we expect further efficiency gains across recruiting, sales, and service delivery. Our initiatives are beginning to gain momentum, positioning the business for top-line growth and improved financial performance, which Keith will discuss shortly. As previously mentioned last quarter, we also look forward to participating in the two leading rental housing and commercial real estate industry events in June, hosted by the National Apartment Association, as well as BOMA International, which will be valuable platforms for in-person customer engagement and lead generation. With that, I will turn the call back to Keith to cover our first quarter financial results. Keith R. Schroeder: Thank you, Kelly. As a reminder, our comments today refer to continuing operations unless otherwise noted. First quarter revenue was $20.9 million. While revenue was flat year over year, this was a positive change compared to the prior two fiscal years. Further, we believe severe nationwide weather and widespread power outages in late January and February affected results during the quarter. Our gross profit for the first quarter was $7.4 million, slightly down from the $7.6 million achieved in the prior-year period. Our gross margin was 35.5%, down from 36.2% last year. We believe our gross margin for the full year will trend closer to 36%. SG&A expenses were $8.8 million for the quarter compared to $9.0 million a year ago. This quarter includes $483,000 of strategic review costs compared to $21,000 in the prior-year period. In addition, income from discontinued operations included a $918,000 gain from the final settlement of net working capital from the sale of the Professional Division, which is a cash inflow to our financial results. Adjusted EBITDA for the first quarter was a loss of $541,000, an improvement compared to the $1.0 million loss in the prior-year period. As our revenue strengthens during seasonally stronger Q2 and Q3 time periods, the additional gross profit will positively affect our EBITDA, as will the previously discussed cost-reduction actions we implemented during the quarter. On a GAAP basis, we reported a net loss from continuing operations of $0.13 per diluted share compared to an adjusted EPS loss from continuing operations of $0.70 per share. Consolidated adjusted EPS for the quarter was a positive $0.10 per share. We exited the quarter with a strong, debt-free balance sheet and remain committed to disciplined capital management and cost control. Our cash flows from operations in the first quarter were essentially flat in a seasonally low revenue quarter. We also repurchased 170,862 shares of common stock at an average price of $5.11 per share, which totaled approximately $873,000 for the quarter. We continue to expect full-year 2026 revenue to grow in the low- to mid-single-digit range compared to 2025. As Kelly outlined, our teams are focused on executing our property management staffing strategy, advancing our growth initiatives, and building momentum across the business. Completing the divestiture required a significant effort across the organization, and Kelly and I want to thank our employees for their commitment and perseverance throughout the process. From an investor engagement perspective, we will present at the East Coast IDEAS Conference on June 11, participating in a live presentation and one-on-one meetings. We look forward to updating investors on our progress each quarter. Please reach out after this call if you would like to schedule a follow-up meeting. We will now open the call for questions. Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble the roster. The first question will come from Michael Taglich with Taglich Brothers. Please go ahead. Michael Taglich: Hi, guys. Thanks for taking the call. Just a quick question on stock buyback. Have you been able to buy any blocks of stock, especially recently, or no? Keith R. Schroeder: We are in a 10b5-1 plan, so we really do not know that. The broker is in charge of that, but I do not think so. Michael Taglich: Okay. All right. Thank you. Keith R. Schroeder: Thank you, Mike. Operator: Please standby as we poll for questions. The next question will come from George Melas-Kyriazi with MK Edge Management. Please go ahead. George Melas-Kyriazi: Thank you. Thanks for taking my question. Could you give us a sense of how you see the market? It seems like the market was a bit tight and in a downturn for a couple of years. How do you see that evolving? What did you see so far in 2026, and what are your expectations for the rest of the year from a market perspective? And as a second question, from a tech perspective, the company has invested quite a bit in tech in the last three to five years. It is an evolving, never-ending process, but how comfortable are you right now with your current tech, in particular to recruit your staff and meet the needs of your customers? Kelly Brown: Certainly. Good morning. It has been an interesting couple of years. We have had to really work with our clients as they navigated heightened insurance costs and stubborn interest rates. That does impact how they operate for various reasons, and I think some of that pressure continues. However, we have also seen a lot of adjustment to knowing what these costs are and the impact they can have. While we have seen some loosening in certain pockets, we expect conditions to remain relatively static for a little bit longer. That said, there has been significant adjustment in operational strategies and where staffing fits into that, which positively affects our customers' ability to leverage services such as ours on an ongoing basis. On your technology question, we are very comfortable with the technology we have for recruiting. We are able to leverage AI in various ways to improve response times to our candidates. Now that we are past the TSA, we continue to review every piece of technology we use: is it the right technology for our business as a standalone company, and where can we optimize costs? We are comfortable with our recruiting technology today, and we will continue to evaluate as we operate as a standalone company. Absolutely. Thank you, George. Operator: This concludes our question and answer session. I would like to turn the conference back over to Kelly Brown for any closing remarks. Kelly Brown: Thank you for your time today. We appreciate your interest in BGSF, Inc. and look forward to providing an update on our second quarter in a few months. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to Watts Water Technologies, Inc. First Quarter 2026 Earnings Call. At the end of the presentation, we will open the line for questions. I will now turn the call over to Diane M. McClintock, Chief Financial Officer. Please go ahead. Diane M. McClintock: Thank you, and good morning, everyone. Welcome to our first quarter earnings conference call. Before we begin, I would like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts Water Technologies, Inc.'s publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Today’s webcast is accompanied by a presentation which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non‑GAAP financial information is reconciled in the appendix to the presentation. With that, I will turn the call over to Robert J. Pagano. Robert J. Pagano: Thank you, Diane, and good morning, everyone. Please turn to Slide 3, and I will provide an overview of the first quarter. We began 2026 with better-than-expected results, including record sales, operating income, operating margin, and earnings per share. I would like to thank the entire Watts team for their impactful contributions to our results. Organic sales rose 12% in the quarter, as we benefited from price and incremental volume. Adjusted operating margin of 20.1% increased 110 basis points due to better-than-expected price, volume, and productivity, which more than offset tariff costs, inflation, and acquisition dilution of 80 basis points. Our balance sheet remains strong and provides ample capacity to support our disciplined capital allocation strategy. This includes evaluating strategic M&A opportunities while continuing to invest in product innovation and advancing our digital strategy. As a result of our solid start to 2026 and expected cash flows for the remainder of the year, we announced a 21% increase to our dividend beginning in June. We continue to see strong momentum in data center cooling applications, with sales more than doubling in the quarter as we deepen customer relationships and leverage our broad portfolio. To support this growth and meet our customers’ needs, we are investing in our team and accelerating innovation across our product portfolio. Additionally, we are expanding capacity, including adding inventory to meet shorter lead-time expectations. We are also gaining traction with our digital solutions, including the Nexa platform, our intelligent water management solution. Together, these strategic initiatives are driving growth and helping to offset softer end markets. In 2025, we completed five acquisitions enhancing our technology capabilities and expanding our product range, geographic reach, and exposure to high-growth nonresidential end markets. These businesses are performing well, and we are successfully integrating them through our One Watts performance system. We are on track to achieve or exceed the targeted synergies. We are proactively working to mitigate the impact of the Middle East conflict. Our direct sales exposure to the Middle East is limited to approximately 2% of global sales, with the majority being in our APMEA region. We are implementing targeted pricing strategies as well as sourcing and productivity initiatives to mitigate both the direct and indirect impacts, including freight and energy cost increases. Our direct Middle East exposure includes our recent acquisition, Saudi Cast, and I would like to highlight that the Saudi Cast business is largely an in‑country business model, which should help insulate it from the full impact of the conflict. The tariff environment also remains fluid, with IEPA tariffs being eliminated but generally being offset by new tariffs under Section 122 and changes in the Section 232 rules. Additionally, the administration is considering new tariffs under Section 301. Based on the tariff structure in place as of today, we believe we are well positioned from a price-cost perspective. Our strong first quarter performance and outlook for the second quarter give us a solid start toward achieving our outlook for the full year. We continue to face an uncertain macroeconomic and geopolitical environment, including the Middle East conflict, downward revisions of global GDP forecasts, and elevated interest rates. In light of these factors, we believe it is prudent to maintain our full-year outlook, and we will revisit it on our next earnings call. With that, let me turn the call over to Diane, who will address our first quarter results and our second quarter and full-year outlook. Diane? Diane M. McClintock: Thank you, Bob, and good morning, everyone. Please turn to Slide 4, which highlights our first quarter results. Sales reached $677 million, reflecting a 21% increase on a reported basis and a 12% increase organically. This performance was supported by favorable price and volume, including the benefit of growth in data center sales. The Americas region delivered strong organic growth of 16% and reported growth of 23%, exceeding our expectations. Acquisitions accounted for an additional $31 million in sales, contributing seven points to the Americas reported growth. In Europe, organic sales rose 1%, while reported sales increased 12%. Organic growth stemmed from favorable pricing, while reported sales also benefited from positive foreign exchange. In APMEA, organic sales grew 3%, with acquisitions adding 19% and favorable foreign exchange contributing 7% for a total reported sales growth of 29%. Adjusted EBITDA totaled $151 million, an increase of 27%, with an adjusted EBITDA margin of 22.3%, up 90 basis points year over year. Adjusted operating income of $136 million increased 28%, and adjusted operating margin improved 110 basis points to 20.1%. These improvements were primarily driven by favorable pricing, volume leverage, and productivity gains, more than offsetting inflationary pressure, tariffs, and acquisition dilution of 80 basis points. Segment margins were as follows: Americas increased 80 basis points to 24.2%, APMEA increased 120 basis points to 18.7%, while Europe decreased 20 basis points to 13.7%. Adjusted earnings per share equaled $3.04, representing a 28% year-over-year increase, with operational performance, acquisitions, tax, and foreign exchange gains outweighing higher net interest expense. The adjusted effective tax rate in the quarter was 24.2%, down 30 basis points compared to 2025, primarily due to a higher tax benefit from the vesting of stock compensation awards that occur in the first quarter of each year. Our free cash flow for the quarter was $7 million compared to $46 million in the first quarter of last year. The cash flow decrease was primarily due to the increase in accounts receivable due to higher sales volume, increases in and timing of our annual customer rebate payments, and an increase in inventory related to incremental tariffs and our strategic investment in inventory. We expect sequential improvement in our free cash flow and are on track to achieve our full-year goal of free cash flow conversion greater than or equal to 90% of net income, as previously communicated. We have a strong balance sheet and solid cash flow, giving us flexibility in executing our capital allocation strategy, including the announced 21% increase in our dividends that will begin in June. On Slide 5, we will review our outlook for the second quarter and full year 2026. We are reaffirming the full year 2026 outlook we presented in February, which reflects the market factors Bob discussed. It assumes the Middle East conflict is short term in nature, the current tariff structure remains in place for the remainder of the year, and there are no IEPA tariff refunds. For the full year 2026, we are maintaining both our consolidated and regional sales outlooks. Consolidated organic sales growth is expected to be between +2% and +6% and our reported sales growth is expected to be between +8% and +12%. We are also maintaining our full-year adjusted EBITDA and adjusted operating margin outlook. Next, a few items to consider for the second quarter. Reported sales are expected to increase by 10% to 14% with organic sales up 4% to 8%. We anticipate mid- to high-single-digit growth in the Americas, despite the tough compare to the second quarter last year, which included an estimated $20 million of pull-forward sales into the second quarter from the third quarter due to the timing of price increases. We expect a low-single-digit decline in Europe and low- to mid-single-digit growth in APMEA, with our expected data center sales offsetting the direct impact of the Middle East conflict. These estimates incorporate the negative impact from product rationalization under our 80/20 initiative of approximately $2 million in Europe and $6 million in the Americas. Incremental sales from acquisitions are projected at $25 million to $30 million for the Americas and around $5 million for APMEA. We also estimate a foreign exchange benefit of approximately $5 million. Second quarter EBITDA margin is expected to be between 22.3% and 22.9%. Operating margin is expected to be between 20.0% and 20.6%. Price and volume leverage in the Americas and APMEA are anticipated to be offset by acquisition dilution of 70 basis points. In addition, last year we had a nonrecurring price-cost benefit of approximately $6 million in the second quarter, in addition to the volume leverage on the estimated $20 million of sales pull-forward, that together are a 120 basis point headwind to margins in the second quarter. Additional key assumptions for the second quarter and full year are available in the appendix of the earnings presentation. With that, I will turn the call back over to Bob before moving to Q&A. Bob? Robert J. Pagano: Thanks, Diane. To wrap up, we had a strong start to the year with record first quarter sales and earnings. Our portfolio spans diverse end markets, and we are actively reallocating towards areas of strong demand, including institutional and data center applications. Importantly, approximately 60% of our sales are driven by repair and replacement activity, which provides a consistent foundation for revenue and cash flow generation over time. We remain nimble and are confident in our ability to execute through dynamic market conditions. We are maintaining our full-year outlook despite the macro and geopolitical uncertainty. Our balance sheet remains strong and provides ample flexibility to support our capital allocation priorities. We believe we are well positioned to deliver on our financial commitments, create value, and drive profitable growth over the long term. With that, operator, please open the lines for questions. Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad to raise your hand and join the queue. We will go to our first question from Nathan Jones at Stifel. Nathan Hardie Jones: Good morning, everyone. I know you said, Bob, it is only one quarter in and there is a lot going on, but you did beat the first quarter by a long way, and the second quarter guidance is a fair way ahead of consensus as well. Is there any kind of assumption in here that you are making that the MRO business slows down a little bit with global GDP? You have always said it is pretty well correlated with that. Or is there any reason to think that the second half is likely to be any weaker than you thought it was going to be three months ago, or is this just purely being conservative given the macro environment? Robert J. Pagano: Thanks, Nathan, for the question. I think it is prudent right now. We have dialed in Q2 and we feel really confident about that. It depends on how long the war goes on at this point in time and whether it impacts future demand. If it is over quickly, I think we have opportunities in the second half. Let us talk about that in three months, and we will have a better answer for you at that point in time. Nathan Hardie Jones: Fair enough. My second question is on data centers. You said it doubled in the first quarter. Can you talk about how big this is, the contribution to overall growth, how big the addressable market is, and how much you think you can grow it over the next few years? Is it accretive to margins? Robert J. Pagano: Regarding data centers, it is an over $1 billion addressable market for us. We ramped up last year, so the first half of this year will have easier comps, as last year’s second half was stronger than the first half. Our goal is to deliver high double-digit increases in data center for the year, and we believe we are well on our way. The teams are doing a great job, we are innovating new products, and customers are happy with our performance. We are excited about this opportunity and doubling down on it. It is accretive to company margins at the operating income level. There are some movements on the gross margin with lower SG&A, but overall it is accretive for Watts Water Technologies, Inc. Operator: We will move next to Mike Halloran at Baird. Michael Halloran: Hey, good morning, everyone. On the conservatism in the back half of the year, maybe help us understand how you are talking about margin cadence and price-cost. Guidance for the back half implies lower margins than the front half, but if this trajectory continues, there feels like there is room. How are you thinking about price-cost, particularly in the context of recent inflation, and what you are doing on pricing? And then an update on the 80/20 side of things: progress with the initiatives, expectations for drag on sales through the year, and where you are starting to see benefits so far. Robert J. Pagano: We always stay in front of price-cost, and we believe with all the movements in tariffs and everything else, we are still ahead. Regarding the cost inflation impact from the war, our international units have put in additional price increases because they are more impacted than we are in the U.S. In the U.S., we are evaluating closely. We are watching fuel costs and are prepared to put in an additional price increase if required. Regarding margins, with second-half volume assumptions that are flattish, if there are opportunities to increase our outlook in the second half, that should provide margin opportunities. As we said earlier, about 2% of overall Watts sales is in the Middle East. We have addressed that in the second quarter with about an $8 million sales headwind, and we are watching to see any bigger impact in the second half if the war continues. Diane M. McClintock: From an 80/20 perspective, we expect to see that ramp up in the back half of the year, which is another piece of the decline in the second half. We had about $15 million of that total in the first half, and you will see that significantly increase in the back half. Things are going well. We started with price increases, which is always the first piece, and we are getting a good response. We expect the initiative to ramp up in the second half and then clearly wrap into the front half of 2027. Michael Halloran: Thank you. Appreciate it. Operator: We will go to our next question from Jeff Hammond at KeyBanc Capital Markets. Jeffrey David Hammond: Hi. Good morning, guys. Diane M. McClintock: Good morning. Jeffrey David Hammond: Can you give us price/mix versus volume in the quarter for North America and how you think that is going to pace through? And then on price, you mentioned you are pushing some increases internationally. What do you need to see in North America to move forward with any incremental pricing, whether it be tariffs, copper inflation, or fuel and transportation inflation? Robert J. Pagano: You hit all the categories we are looking at. We are watching closely. Our international units are more impacted and are seeing higher charges, so we immediately went out with increases there. The impact likely will not be seen until the third quarter by the time it flows through. Overall, price realization was just a little shy of 8% in the first quarter, which was strong and covered our costs. We stay in front of it and are preparing, if needed over the next few weeks, to implement additional price increases if this continues. Diane M. McClintock: On your question of sequentials, we will see price realization come down sequentially across the year as we start to lap the 2025 price increases. Jeffrey David Hammond: Okay. Great. And then on the uncertainty, if you look at the order book through the quarter and into April and May, are you seeing any pockets of slowing, or are you assuming things continue and could become more disruptive? Robert J. Pagano: Right now, we are not seeing it. We have seen some drain business that has been lumpy and was waiting for some BABA funding, but it is not material. We are up against very difficult compares on order rates in Q2 last year because of the pull-in with price increases. Overall, the order book is in line with our Q2 forecast. Data centers are offsetting softness, particularly in the residential market. Jeffrey David Hammond: And then last one: this inventory investment. Can you quantify what it was and how you think working capital use looks for the year? It does not seem like you are changing free cash flow guidance, but it seems like a change in tone on inventory. Robert J. Pagano: It is really around the strategic investment for data centers. Our customers are asking for quicker lead times and adjustments, and we want to ensure inventory is on hand to support that. Net-net, by the end of the year, we believe it works its way through. Operator: We will take our next question from Andrew Creel at Deutsche Bank. Andrew Creel: Wanted to see if there was any meaningful impact from weather this quarter. One of your public peers called this out as a point benefit for the first quarter, and I think that continues into Q2. Historically, I think Watts has even over-indexed on this versus them. Anything you can provide? Robert J. Pagano: It was not a huge impact—just a little under 1% in the first quarter. We are not expecting it to be meaningful in the second quarter. The freeze in the first quarter created some incremental demand, but we do not expect that to carry over into the second quarter. Andrew Creel: Makes sense. Following up on the 2Q margin guide, it implies just a little bit of sequential expansion. You went through some of the year-over-year headwinds, but any reason we are not seeing a bigger sequential expansion? You mentioned $8 million related to the Middle East—was that a cost number or sales? Any help on why it is not a bigger jump into Q2? Diane M. McClintock: Sequentially, first quarter to second quarter on the margin side, we will have a decline in price realization, which is a margin headwind. Also remember we had a pull-forward last year in Q2, which is a headwind for us as well. And the Middle East conflict will be about $5 million to $6 million on the margin side, which is also a headwind. It is a challenging compare. Robert J. Pagano: The $8 million I referred to was the negative sales impact in the Middle East. We are keeping our team fully aligned there, so we will have some net negative absorption costs as a result. We believe it is timing, and we are going to ride it out because we have a great team and a growing opportunity in the Middle East. Andrew Creel: Great. And one last quick one: you see $5 million to $6 million cost dollars and $8 million of sales. Was there anything meaningful in the first quarter on both of those metrics? Robert J. Pagano: Not on the cost side. On the sales side, a small number—just a few million dollars. Most of the conflict’s impact did not really happen until March, so we were able to get most of our expected shipments out. Andrew Creel: Thank you. Robert J. Pagano: Thank you. Operator: We will take our next question from James Ku at Jefferies. James Ku: Good morning. On guidance, are you assuming the Middle East conflict continues for the remainder of the year and potentially impacts other regions like Europe, or are you assuming it ends by the first half? Robert J. Pagano: We are not assuming a long impact in Q2. We have not made a firm assumption for the rest of the year given we do not know the duration. If the conflict ends and supply lanes open up, there are opportunities in the second half. There are too many geopolitical uncertainties to raise the outlook now. We will reassess in the next three months when we expect to have greater clarity. James Ku: Thanks. On Europe margin, it was down a bit in the first quarter, but last quarter you had nearly 500 basis points of improvement. Why are we not seeing strong expansion like last quarter? Diane M. McClintock: There is typical seasonality in Europe—Q4 tends to be a higher-margin quarter. Volume was down in Q1, which impacts leverage. The 80/20 initiative is also a factor. Those are contributing to the margin decline. Robert J. Pagano: There was also a small mix issue in the first quarter. Nothing to read into. The team is doing a good job. Europe is relatively stabilized—two decent quarters in a row where it is more flat. We are not seeing the decrease we saw before. The duration of the war and knock-on effects inside Europe are the variables. James Ku: Got it. Thanks for taking the questions. Operator: We will move next to Jeff Reeve at RBC Capital Markets. Jeff Reeve: Last quarter, you characterized North American and European residential construction markets as remaining soft in 2026. As you sit here today, are you seeing any meaningful change in demand trends or customer behavior relative to those expectations? Robert J. Pagano: I would say it is a little softer than we anticipated, given uncertainty and fuel costs. People are holding back, and you can see it in starts on the residential side. Residential is a little softer, but other markets are in line with expectations. Jeff Reeve: Within residential, is it single-family, multifamily, or repair and remodel that is tracking worse? Robert J. Pagano: All of the above to some degree. Repair and replacement is holding up. Big remodeling is a little softer as people defer. New construction markets are still soft, and we are watching carefully. We are more than offsetting that with our data center growth. Jeff Reeve: Thank you. Robert J. Pagano: Thank you. Operator: We will go next to Joseph Giordano at TD Cowen. Analyst: Hi. Good morning. This is Chris on for Joe. You mentioned institutional alongside data centers as showing growth. Can you elaborate on which areas within institutional are growing? And can you discuss Nexa attach rates broadly in both data center and institutional? Robert J. Pagano: Schools and hospitals are the primary drivers within institutional and they have been holding up, along with data centers which are very strong. On Nexa, it continues to be a favorable story for us and we continue to grow it steadily. Nexa will be enabled across our main products, which helps protect our core business and allows customers to connect when they are ready. It supports higher pricing based on the value it delivers. Analyst: Have you seen any evolution in the M&A environment over the last 90 days—any change in the attractiveness of targets or overall activity? Robert J. Pagano: The pipeline remains strong. We are disciplined; opportunities must make strategic and financial sense based on our criteria. You can never predict timing, but we will continue to cultivate opportunities and keep you posted as we make progress. Operator: As a reminder, if you would like to ask a question, please press 1. We will pause just a moment. And that concludes our Q&A session. I will now turn the conference back over to Robert J. Pagano for closing remarks. Robert J. Pagano: Thank you for joining us today. We appreciate your continued interest in Watts Water Technologies, Inc., and we look forward to speaking with you again during our second quarter earnings call in early August. Have a great day and stay safe. Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the F&G Annuities & Life, Inc.'s First Quarter Earnings Call. During today's presentation, all callers will be placed in listen-only mode. Following management's prepared remarks, the conference will be opened for questions with instructions to follow at that time. I would now like to turn the call over to Lisa Foxworthy-Parker, SVP, Investor and External Relations. Please go ahead. Lisa Foxworthy-Parker: Thanks, Operator, and welcome, everyone. I am joined today by Christopher Owsley Blunt, Chief Executive Officer, and Conor Ernan Murphy, President and Chief Financial Officer. Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP measures which management believes are relevant in assessing the financial performance of the business. Non-GAAP measures have been reconciled to GAAP where required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay. With that, I will hand the call over to Christopher Owsley Blunt. Good morning, and thanks for joining today's call. Christopher Owsley Blunt: The first quarter was a solid start to the year and in line with our expectations. Today, I will share some highlights of the business as well as details of our investment portfolio and capital allocation. Then I will turn it over to Conor to cover results in more detail. Starting with business highlights, from a top line perspective, F&G Annuities & Life, Inc. has consistently grown AUM in recent years. We have generated strong free cash flow and reinvested it back into the business, driving our diversification and accelerating our growth that has brought AUM before reinsurance to nearly $75 billion at the end of the first quarter, an 18% compound annual growth rate since 2019. Today, F&G Annuities & Life, Inc. is a recognized market leader across multiple products and distribution channels with a strong strategic foothold in large and growing markets. The retirement landscape is creating a powerful and lasting demand for our business. The peak '65 retirement wave is driving unprecedented demand for guaranteed income and growth solutions, with more than 4 million Americans turning age 65 every year through 2027, at a rate of 11 thousand people per day. This structural tailwind is fueling industry sales in the U.S. across retail indexed annuities, indexed universal life, and pension risk transfer, which are our core product lines. Industry results are more mixed for our opportunistic products. Funding agreement-backed notes reached record industry issuance last year, while the multiyear guaranteed annuity market began to normalize in the fourth quarter as consumers felt less urgency to lock in rates following the interest rate movements earlier last year. As F&G Annuities & Life, Inc. navigates the competitive landscape, we are focused on disciplined sales growth and capital allocation priorities between core and opportunistic sales to power our AUM growth. We view AUM as our primary metric to track the top line growth of our business as sales volumes may fluctuate year to year depending on opportunities and returns. Having reached a meaningful level of scale, our focus has shifted to continuing to improve margins and expand ROE. We are intentionally shaping our product mix, managing our sales volumes, and utilizing flow reinsurance to capture the highest return opportunities and deliver sustainable long-term value while growing AUM. From a bottom line perspective, we have intentionally diversified our business over the last five years across our spread and fee-based strategies. This diversification further reinforces the durability of our business model and it supports more predictable and higher quality earnings as well as expanded returns over time. For our spread-based business, we have a long and proven track record across varying interest rate environments, including the current landscape where credit spreads remain near historical lows despite recent volatility. Our approach is straightforward and disciplined. We source attractive, stable, and surrender charge-protected liabilities. We source high-quality assets with a deep understanding of our liabilities to achieve well-matched asset and liability cash flows, and we have a clear line of sight to investment returns, actively managing our new business pricing and in-force renewals to maintain spreads. The result is a stable cost of crediting aligned to our expanding in-force book that generates steady long-term growth in spread-based earnings over time. This is complemented by the increased earnings contribution from our fee-based strategies, including flow reinsurance, owned distribution, and middle market life insurance. These strategies are higher margin, less capital intensive, and positioned to generate higher returns and valuation over time. In 2025, fee-based strategies represented approximately 15% of our adjusted net earnings, excluding significant items, and we expect that mix to grow to approximately 25% by year-end 2028. As the mix shifts, we believe ROE will become the most important return measure for our business reflecting the higher quality and capital efficiency of our growing earnings base. Next, shifting to our investment portfolio, our $53 billion retained investment portfolio is well diversified and performing very well. The retained portfolio is high quality with 97% of fixed maturities being investment grade. I will walk through some highlights of our five primary asset classes as shown on slide 26 in our spring investor presentation, including fixed income, public structured, private origination, mortgage loans, and alternative investments. First, our traditional liquid fixed income portfolio is $18 billion, or 34% of the total retained portfolio. This portfolio is anchored in high-grade public bonds and traditional Rule 144A private placement securities. Next, our public structured portfolio is $11 billion, or 21% of the total retained portfolio, and provides access to well-diversified and high-quality assets across three categories, including $5 billion in CMBS and non-agency RMBS focused on stable property types with built-in structural protections, $5 billion in CLOs that are well diversified across industries, issuers, and managers, with a focus on investment grade tranches and ample par subordination, and $1 billion in high-quality ABS that is well diversified by collateral type. As an aside, we view the NAIC's proposal for higher capital charges on CLOs invested in broadly syndicated loans as very manageable. After properly adjusting for funds-withheld reinsurance assets, the effect of the proposal for our CLO portfolio would translate to a decrease in RBC of five points or less as a conservative estimate. Next, our private origination portfolio is $11 billion, 21% of the total retained portfolio. Private origination is a key component of our investment strategy. It provides enhanced yield while limiting additional credit risk, as well as diversification and strong covenant protection. Our private origination portfolio is well diversified and includes corporate and commercial lending, consumer loans, real estate, and other real asset exposures. From a ratings perspective, approximately 90% of the private origination debt portfolio is investment grade and included within the 97% investment grade for our total fixed income portfolio. We primarily use the top five nationally recognized statistical rating organizations. Nearly 90% of the private origination debt portfolio and 94% of the rated assets in our total fixed income portfolio are rated by at least one of the top five rating agencies. Further, 64% of our total fixed income portfolio is dual rated by two rating agencies, with at least one being one of the big three. Egan-Jones ratings are de minimis at less than 1% of our total retained portfolio, and private letter ratings account for approximately 8% of our total retained portfolio and undergo the same analytical rigor as public ratings. When it comes to private asset origination, most of these are directly originated asset classes that have historically been underwritten by commercial banks and have a long performance history over multiple market cycles, providing observable data for thorough underwriting. Here, we utilize Blackstone's best-in-class origination, underwriting, and structuring teams to source high-quality pools of physical and financial assets. The combination of Blackstone's structuring talent, our ability to complement Blackstone's ability with other asset managers, the track record of these assets, and our thorough due diligence has helped generate attractive risk-adjusted returns for F&G Annuities & Life, Inc. that have performed very well to date and through stress environments like the COVID pandemic. Recent headlines have been focused on middle market lending to midsized corporations. I would like to provide further details on this subset of our private origination portfolio. Middle market corporate lending is nearly $5 billion, or 9% of the total retained portfolio. Eighty-nine percent of our middle market lending positions are investment grade. We have low loan-to-value ratios and strong structural subordination. We are lending to sizable, high-quality companies with average annual EBITDA over $200 million. We have a track record of near-zero credit losses, and the upgrade-to-downgrade ratio is positive for our private origination corporate exposure. Next, our mortgage loan portfolio is $7 billion, 13% of the total retained portfolio. It is weighted toward defensive sectors with two-thirds in residential loans and the remainder in commercial loans concentrated in multifamily and industrial properties, two segments that have demonstrated resilience across varying economic conditions. Finally, our alternatives portfolio is $4 billion, or approximately 7% of the total retained portfolio. This includes approximately $3 billion of limited partnerships and $1 billion of other equity interests. Under our updated definition of alternative assets discussed last quarter, we have reclassified approximately $6 billion of lower-yielding, debt-like assets into our fixed income portfolio. As a result of this updated definition, we have revised our long-term expected return assumption from 10% to a range of 12% to 14% for the remaining LP and equities portfolio. Many of these alternative investments are still in the earlier phases of their value creation cycle, so we are not yet fully realizing the long-term expected returns. During the first quarter, we saw improvement in our annualized return at 8.3%, up from 7.8% in the sequential quarter. Next, with regard to our overall portfolio, our fixed income yield was 4.77% in the first quarter, in line with 2025. Relative to 2025, our yield decreased 16 basis points as a result of four items in the first quarter: the removal of the assets associated with our sale of FG Life Re, lower yields on floating-rate assets, lower preferred stock dividends due to seasonality, and an investment expense true-up adjustment. These were largely one-time items or due to timing. Excluding these items, we maintained our core spread in line with the fourth quarter. As a reminder, our fixed income yield excludes alternative investment income as well as variable investment income, which we define as prepayment fees. Software exposure across the total retained portfolio is below 5% and relatively short duration. The vast majority of our software positions are protected by high switching costs, large competitive moats, regulatory barriers, and/or embedded in workflows that are difficult to disrupt. We believe this exposure is very manageable. Credit-related impairments have remained low and stable, averaging six basis points over the past five years. Through the first quarter, credit-related impairments were a modest three basis points. Portfolio credit quality has improved over time through implementation of de-risking programs. Since 2020, we have selectively repositioned over $2 billion of assets to optimize, de-risk, and position the portfolio to perform in varying market conditions while also improving credit quality. We believe our portfolio is performing exceptionally well, as expected, and conservatively positioned to withstand economic downturns. Now turning to the liability side of our balance sheet and how we think about the intrinsic value of our business, F&G Annuities & Life, Inc. reported GAAP equity excluding AOCI of $6.2 billion at quarter end and has grown its book value per share excluding AOCI to $46.51, up 70% since the 2020 FNF acquisition. We think about our business as three distinct and complementary value-creating components: our new business platform, our profitable in-force block, and our capital-light fee-based strategies. Each contributes meaningfully to earnings, and together, they support a compelling sum-of-the-parts valuation. At the core of our business is a high-quality and profitable in-force book that delivers steady spread income on a growing AUM base. We do not have any problematic legacy blocks of business. Our GAAP net reserves of $55 billion are diversified across $37 billion of retail fixed annuities, $8 billion of pension risk transfer liabilities, and $7 billion of funding agreements. In addition, our $3 billion index universal life in-force book is less capital intensive than our annuity business and generates significant recurring product fee income annually. This is a top-10 IUL franchise with strong positioning in the cultural middle market that has demonstrated above-average growth rates. F&G Annuities & Life, Inc. is also uniquely positioned to provide flow reinsurance to third parties and through our sidecar, a capital-efficient strategy that generates fee-based returns. Demand for reinsurance capacity has greatly increased in recent years, and we have reinsured over $15 billion of cumulative annuity new business. Our own distribution franchise, Peak Altitude, rounds out the picture. With approximately $700 million deployed into this business and approximately $80 million in annual EBITDA, we believe the value of Peak is not fully appreciated by the market or reflected in our current share price. As a result, we have initiated a formal process to explore strategic alternatives for Peak to capture its significant growth opportunities and unlock that value for our shareholders. Importantly, each of these components—our new business platform, our profitable in-force block, and our capital-light fee-based strategies—represent a distinct and measurable source of value. Taken together, we believe the sum-of-the-parts framework reveals meaningful value that is not yet fully reflected in F&G Annuities & Life, Inc.'s current market valuation, and we remain focused on closing that gap. Next, turning to capital allocation, during the first quarter, F&G Annuities & Life, Inc. returned $67 million of capital to shareholders through $38 million of common and preferred dividends, and $29 million to repurchase approximately 1.2 million shares of common stock at an average price of $24.14. The company's existing stock repurchase authorization permits aggregate repurchases of up to $50 million, of which approximately $3 million remained available as of 03/31/2026. Effective 03/13/2026, our Board of Directors authorized an additional new three-year share repurchase program under which F&G Annuities & Life, Inc. may repurchase up to $100 million of common stock. Our Board views repurchasing shares at current levels as a compelling use of capital. Despite the progress we have made to increase our outstanding float through stock distribution at year end, buying back shares at current prices reflects our confidence in the results we have delivered and our conviction in the significant long-term opportunities ahead. I will now turn the call over to Conor Ernan Murphy to provide further details on F&G Annuities & Life, Inc.'s first quarter highlights. Conor Ernan Murphy: Thank you, Chris. This morning, I will provide some additional details of our earnings, asset growth, and other performance drivers, as well as our strong capital position. Starting with earnings, on a reported basis, adjusted net earnings were $110 million, or $0.82 per share in the first quarter. Alternative investment income was $44 million, or $0.32 per share, below management's long-term expected return for the quarter. Adjusted net earnings included an unfavorable significant item totaling $5 million, or $0.03 per share, from investment and other income true-up adjustments. As Chris mentioned, effective 01/01/2026, our presentation of investment income for alternative investments does not include fixed income assets. Prior periods are presented on a comparable basis to reflect the new definition. We believe this updated definition more appropriately delineates between the fixed income portfolio and alternative investments, while also improving comparability to others in the industry. Importantly, this updated definition does not have any impact to adjusted net earnings on an as-reported basis. Please see page 42 in our spring investor presentation for further details. Overall, as compared to the prior year, adjusted net earnings reflect retained asset growth, growing fees from accretive flow reinsurance, steady owned distribution margin, and operating expense discipline driving scale benefit. First quarter results were in line with our expectation, and our core spread remained consistent with 2025. With regard to asset growth, we achieved record gross AUM of nearly $75 billion, up 11% over $67 billion for 2025. Retained AUM was $56 billion for the first quarter, up 3% over $55 billion for the prior year quarter. The current period excludes a $1.8 billion in-force block reinsured with the sale of the FG Life Re legal entity effective 03/01/2026. F&G Annuities & Life, Inc. reported gross sales of $3.2 billion for the first quarter, up 10% over $2.9 billion for 2025. This includes core sales of $2 billion for the first quarter, up 11% over 2025. This reflects higher core retail indexed annuity and indexed universal life sales and pension risk transfer sales. This also includes $1.2 billion of opportunistic sales for the first quarter, up 9% over 2025. This reflects $1 billion of funding agreements, in line with the prior year, and $200 million of multiyear guaranteed annuities which we intentionally moderated to allocate capital to the highest return opportunities. F&G Annuities & Life, Inc.'s net sales were $2.2 billion in the first quarter. This reflects flow reinsurance, in line with capital targets for multiyear guaranteed annuities and fixed indexed annuities. The first quarter showcased the diversity of our new business engine, allowing us to flex across our products and channels to source the most attractive liabilities in the current environment to grow AUM. Next, turning to fee-based earnings, our fee income from accretive flow reinsurance was $16 million for the first quarter, as compared with $13 million in 2025. Our fee income from owned distribution margin contributed $9 million for the first quarter as compared with $7 million in 2025. Next, turning to scale benefit, as F&G Annuities & Life, Inc. grows, we are benefiting from increased scale, as our ratio of operating expense to AUM before reinsurance decreased to 48 basis points at quarter end, benefiting from higher AUM and due in part to favorable timing of expenses. This compares with 50 basis points at year-end 2025, and 60 basis points at the end of 2024. As AUM grows and we continue to manage expenses, we expect the operating expense ratio to improve to approximately 45 basis points by year-end 2027, for a cumulative 15 basis point, or 25%, improvement over the three-year period. From a return perspective, our reported results include short-term fluctuations from alternative investment income. As reported, adjusted ROE excluding AOCI was 8.4% for the first quarter. As reported, adjusted ROA was 76 basis points for the quarter and 87 basis points on a last twelve month basis, which was in line with full year 2025. Taking into consideration management's long-term expected return for alternative investments, and the unfavorable significant item, would have resulted in 3.4% of additional ROE and 34 basis points of additional ROA for the quarter. Turning to our strong capital position, we remain committed to our long-term target of approximately 25% debt to capitalization, excluding AOCI, and expect that our balance sheet will naturally delever over time. We continue to target holding company cash and invested assets at two times interest coverage. Our annualized interest expense is approximately $165 million, or roughly a 7% blended yield on the $2.3 billion of total debt outstanding. We expect to maintain our estimated Company Action Level risk-based capital, or RBC, ratio above our 400% target. Importantly, F&G Annuities & Life, Inc. maintains strong capitalization and financial flexibility. We conservatively manage to the most stringent capital requirements of our regulators and four rating agencies. As a reminder, F&G Annuities & Life, Inc. remains a U.S.-domiciled company. We are a full U.S. taxpayer and all new business is originated in our U.S. subsidiaries. Our majority shareholder is FNF, a U.S.-domiciled business regulated by Florida, and is also a full U.S. taxpayer. To build on Chris's earlier comments, I would like to provide some added perspective on capital allocation. Our business is built around a diversified and self-funding capital model designed to support growth and reward shareholders without relying on any single source. This is an important part of our story. I want to take a moment to walk through both where our capital comes from and how we put it to work. We have multiple reliable sources of capital supporting our business. Our in-force generates approximately $1 billion from the existing book of business. We expect even stronger capital generation in the future as we rapidly move toward a more fee-based, higher margin, and less capital intensive business model. Our reinsurance sidecar provides $1 billion of on-demand third-party capital that we can access without diluting shareholders. Our strategic flow reinsurance partnerships add another layer of flexibility, allowing us to adjust retained sales levels and support cash from operations as we grow. Our statutory excess capital provides additional capital strength, in line with our ratings. And as the balance sheet continues to delever, our available debt capacity will only grow over time. We deploy capital across top priorities, starting with interest and dividends. We fund our $165 million of annual interest expense and are committed to our $135 million of annual common stock dividend that we have consistently increased over time, as well as our $17 million of annual preferred stock dividend. We also invest for strategic growth. That means reinvesting in our core business to drive continued AUM expansion and selectively pursuing acquisitions to strengthen our owned distribution strategy. And finally, as Chris discussed earlier, we launched opportunistic share repurchases during the first quarter and have over $100 million of authorization remaining at March 31. Taken together, our capital allocation reflects the financial strength and flexibility we have built and our confidence in the future. To bring it all together, as I look ahead to the remainder of the year, our focus is clear: grow our core revenues and earnings, expand ROE, and create long-term shareholder value. On the top line, we are focused on growing assets under management with an optimized sales mix that maximizes return on capital. For our core retail products, we expect indexed annuity and indexed universal life sales growth to track in line with the strong industry trend Chris outlined earlier. In pension risk transfer, the pipeline remains strong, and we expect annual sales between $1.5 billion to $2 billion. For our opportunistic products, we are pleased to have completed a $750 million funding agreement-backed note issuance in early January; market conditions were particularly attractive and we will continue to monitor that market closely. We expect multiyear guaranteed annuity sales to continue moderating given the current rate environment. Beyond AUM growth, we remain focused on three additional priorities. First, generating additional scale benefits as our business continues to grow. Second, expanding returns on equity excluding significant items while maintaining our return on assets, excluding significant items, in a corridor around our current level. And third, continuing our evolution toward a more fee-based, higher margin, and less capital intensive business model, a natural advantage of our position as one of the largest sellers of annuities and life insurance in the industry. This concludes our prepared remarks. I will now turn the call back to our Operator for questions. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. If you would like to ask a question, please press star then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Analyst with Raymond James. Please state your question. Analyst: Hey, good morning. Excited to be covering you. This is a bit of a housekeeping item, but do you consider 1Q26 EPS a good intermediate-term run rate off which you can continue to grow, and should we largely expect EPS to grow along with AUM over time given share repurchases are a relatively small part of the equation? Thanks. Conor Ernan Murphy: Yes, thank you for your coverage and your interest. I would say probably, if I think about near term, just talking about the next few quarters here, but broadly speaking, that is true. I break it down: if we get into maybe the core fixed income yield, it is probably down a few basis points from things that are actual rate-related and so on in the market, and we will manage that core spread maintenance. There will be maybe a tiny bit of a lag effect there. But we also saw some green shoots on the outside. My view on the mixed income core spread is timing aside, it will be pretty close. Maybe it will tick down a little bit. We will see how surrenders will be in the industry. They are staying relatively close to where they have been, so that should probably be there. Their alts could be a little bit lighter. We will see. The core reinsurance and owned distribution should continue to move along nicely and grow up a little bit. The expense number, we are very focused on getting that full 25% reduction from where we started a little over a year ago. I would argue that is maybe a little too good this quarter; some of that is timing. All in all, I think, broadly speaking, this is around the range with the big unknown being how will the alts portfolio do. Right now, we have been assuming longer-term return in this new definition with the LP and equity portfolio of 12% to 14%. We have been planning a number below that for capital purposes, just so that if that does not happen quite so soon, we are not in a hole with that. Hopefully that answers your question. I am happy to clarify any component you would like me to. Christopher Owsley Blunt: And, this is Chris. The only thing I would add to what Conor said is I do think what you said is broadly true. Obviously we see opportunity to expand ROE over time due to owned distribution. As we continue to move down this capital-light path and reinsure more assets, that obviously has a very positive and accretive impact on ROE. Historically, it would track AUM very tightly. It will diverge, I would think positively, as we go forward because of those other two sources of fee-based income. Analyst: Do you see opportunities to take advantage on the asset side? Spreads have widened in some asset classes, but are you still kind of remaining conservative given spreads are still overall tight? Thanks. Christopher Owsley Blunt: Yes, we have been. There are pockets. Mortgages, a good example, particularly on the residential side, are still attractive on a return-on-capital basis. So that is an area. You have seen opportunities in some of the asset-backed lending area, but those are much more opportunistic and idiosyncratic as opposed to something that you have a steady flow pipeline into. But I think as a general rule, this feels like a good environment to keep a little dry powder and stay a bit conservative. Conor Ernan Murphy: And I would add, we remain thoughtful and active on the portfolio. We will take advantages, again, of something that will lead to a higher yield, but it takes a little time before you get the full benefit of that through the portfolio. The other thing I would say we are constantly monitoring is how the capital charges might be changing on the margin for different asset classes, and because that is just a constant marginally, we will do some capital pressure weighing. So we do some rotating here and there to help balance that factor as well. Analyst: If I can sneak one more in, it seems surrender charge income remains similar to last quarter's or recent quarters. Has the environment remained similar? And what are you seeing from policyholders in terms of surrender behavior? Christopher Owsley Blunt: Yes, I think there is a little bit of seasonality that we have seen. This is maybe the third year in a row where first quarter is a little weak. Just keep in mind, the policies that get processed in the first quarter are activity from the fourth quarter. As you get into the holidays, it is not most clients' preference to spend their holidays with their insurance agent talking about moving policies. So, so far it has followed as a fairly similar pattern. Then you get into the nuances of which policies are being surrendered early, what is surrender charge income, but I would say pretty consistent. Conor Ernan Murphy: Mathematically, from a modeling perspective, it is remarkably consistent when you compare this quarter with both last quarter and the first quarter of last year. I do not expect it to necessarily go up from here. I think it is possible that it could move down, fewer surrenders in the industry, for what it is worth. April, I would say, has been a consistent month as well. So it has not shifted. I might be mildly surprised by that, but not much. Analyst: Okay. Thank you. Operator: Our next question comes from Mark Douglas Hughes with Truist Securities. Please state your question. Mark Douglas Hughes: Thank you. Good morning. Conor Ernan Murphy: Morning, Mark. Mark Douglas Hughes: Just following up on the prior question, when we look at adjusted ROA, the 80 bps in the quarter, obviously substantially impacted by the return on the alts. Was your suggestion there that the run-rate starting point on a go-forward basis ought to be the 80 bps and then, over time, perhaps the alt performance, as it matures, you would see improvement, but for the near term, kind of stick with the 80 basis points? Is that fair? Conor Ernan Murphy: Yes. If I look at the yield in the quarter, and it ticked down about 16 basis points, we had about probably four of that roughly being market-related changes—SOFRs and floating assets, etc. A couple of it is because of assets that were tied to the Bermuda entity that we do not have anymore, so I would call that a permanent difference as well. But about 10 of it is largely timing-related. It was a combination of fewer preferred stock elements coming in the quarter—just fewer days, if you will, in the quarter. We had a little bit of investment expense clean-up in the quarter as well. So maybe a third, roughly, of the decline we saw in the quarter will likely be permanent, and the other two-thirds likely one-time. Mark Douglas Hughes: And there you are talking about sequentially, the 87 to 76? Conor Ernan Murphy: Yes. Mark Douglas Hughes: And then, when we think about the return on the alt portfolio that is dampening your adjusted ROE—kind of the 8% to 9% here lately—is that something that needs to be factored into the product pricing if the alt portfolio is uncertain? I know you are going to be shifting to more fee income in more of a capital-light model, and that will help returns. But is there anything in terms of the pricing that is relevant? And maybe I will ask in the context because I think investment in alts is a competitive dynamic. Do you think others are maybe too dependent on better alt performance? Just trying to think through how it interacts with ROE and ROA. Christopher Owsley Blunt: I would say the pricing dynamic is a lot more complicated because it depends on duration of the liability. We are not repricing daily, but we are repricing frequently, and we are going through the calculations of exactly where we are on a real-time basis. In terms of the long-term assumption that we guided to, the purpose of it is literally to help you all think about how to forecast our earnings going forward, and the reason we give a range is we are in an environment where you could make a compelling argument for the lower end of the range and a compelling argument for the higher end of the range. As Conor said, most importantly, from a capital perspective, we take a very pessimistic view because you do not want to get that one wrong. So there is probably more upside than downside from a capital perspective. And then on a pricing basis, we are modeling all real-time inputs, and it is done not just on a deterministic basis but on a stochastic basis—various environments, what is the range of returns, is the lower end of that band acceptable to us. In terms of us versus competition, I do not know that we are an outlier in either direction. I think most of the folks in our space are in and around the 5% or 6% alts allocation within their portfolios. I think everybody tries to look at it long term. Now there could be big mix differences—if you are skewed towards credit; we tend to be skewed towards PE and real estate. And within real estate, you have the classic Blackstone themes of infrastructure and multifamily housing, as opposed to office. Mark Douglas Hughes: You are going through a process to look at your alternatives. Was that for the owned distribution that you are talking about—the $80 million in EBITDA? Could you talk a little bit more about that, what you might be looking to do, how that would, to the extent that you have some alternatives, impact the go-forward business model? Christopher Owsley Blunt: Absolutely. Thanks for bringing that up. I would say the good news is this is driven by realizing we are onto something really substantial here. What started as trying to help a handful of long-term distribution clients who were looking for growth capital and wanting an alternative to the PE model has become a real business, and a real business that is growing nicely. We really like the platforms that we own. We see opportunities to acquire more platforms. The exercise we are going through now is where is the optimal place to hold this business—is it underneath the carrier, would it be beneficial to deconsolidate it from F&G Annuities & Life, Inc., what is the best way to fund it. So that is the exercise that we are going through. Everything is technically on the table. I would say it is pretty unlikely that we would sell the whole business at this juncture just given where we are on the inflection curve for the business, but it is something that we are super excited about. Mark Douglas Hughes: And so, presumably, you would keep the same distribution relationships—your owned distribution, your own sales—on a go-forward basis and that would not be influenced by any type of transaction? Conor Ernan Murphy: Correct. Because keep in mind, this was never about forcing market share because it is independent distribution. That label has meaning. You cannot force; you have to earn it, and they are separate teams. So we do not see that impacting the deep relationships that we have today. Operator: Our next question comes from Alex Scott with Barclays. Please state your question. Alex Scott: Hey, good morning. Follow-up on the conversation you were just having on the IMO and potential. Would you expect that would raise some amount of capital that the Holdco has available for deployment—whether it is putting it down into the operating companies or selling it to a third party or deconsolidating? Will that generate cash for the Holdco if you pursue one of those avenues? And if so, what would you look to do in terms of deployment? Conor Ernan Murphy: Hey, Alex. The simple answer is yes. Obviously, it depends a little bit on how exactly we do it, but in the scenario where someone joins us in ownership of Peak and brings some capital in, one thing I would highlight is that right now all of our debt is at the Holdco, not at the Peak level. So I would expect some element of the proceeds we would likely use to pay down some debt. Right now, the dividends that we earn from the Peak entities obviously come up through the Holdco. So we would run a balance of that. But outside of that, yes, we would have capital available for general business purposes or to continue to grow AUM, etc. Alex Scott: Are you thinking of it from the standpoint of this would help you fund growth down in the OpCo, or is this—because you mentioned sum of the parts, and that sort of suggests that you are frustrated with the sum-of-the-parts discount, and that would cause me to believe maybe you would take proceeds and buy back stock. Which would you favor? Christopher Owsley Blunt: Alex, I would say it is a little premature—not that we have not thought about this question—but I do not think it would be to convert that capital into additional spread earnings since our goal is to grow the fee portion of the earnings. Once it is there, it is like any other Holdco cash. All the various options are on the table—dividends, share buybacks, other things that we could do with that capital. Alex Scott: That is helpful. Christopher Owsley Blunt: The only other thing I would squeeze in is there is a very tangible benefit of deconsolidating. You would pick up some leverage capacity on the business itself that we cannot do today, so you would pick up a pretty attractive funding source to do more deals if in fact you deconsolidated from F&G Annuities & Life, Inc. Conor Ernan Murphy: And I might add, our expectation would be having someone alongside us to continue. There is, as Chris is saying, great opportunity for continued momentum and growth in the entities as well. We would very much expect to continue to participate in that going forward, perhaps accelerating the growth of the Peak entities alongside a partner. Alex Scott: Got it. Okay. Next one I had for you is on the investment portfolio. I appreciate the enhanced disclosure. One thing I realized, though, you shifted some AUM out of what we were calling alternative investments. The private origination fixed income that you disclosed more on in the presentation this quarter looked like it was still around the same level at $11 billion from the last time you talked about it. So where is this AUM that is no longer considered alternatives, more fixed income-like—does that have private credit-like features? I would have guessed that would have been considered private credit and did not see anything specifically on that. Could you dimension that for us a bit so we could understand that alongside the private origination that you have in the deck here? Christopher Owsley Blunt: Maybe do it in reverse order. If you say what is in what we actually consider alternatives—part of what we found is peers were defining it differently, and so we looked like an outlier when we knew that we were not in terms of the size of “alts.” Of the $4 billion sitting in alts, I think it is about $3 billion in traditional LPs. That is overwhelmingly private equity and private equity real estate with the themes—the classic Blackstone themes—that we have talked about. There is $1 billion that says other equity interests. It is not exclusively, but the bulk of that is what we would say credit residuals, so equity tranches on the credit side. What people think of as the longer-term higher returning, but therefore more volatile, that is why that sits there. The reason we moved the credit over is those properties are going to look very, very similar to a high-quality CLO tranche or any other investment grade piece of paper. It was really a bucketing thing. We were defining it for a while based on where it sat on the schedule as opposed to what the underlying characteristics look like. On the disclosure side, we have been through all of our peers. We feel like we are giving as much, if not more, disclosure than anybody. We feel good about the portfolio, and you can see that in the credit losses, upgrades versus downgrades, percentage of first lien, LTVs, just across the board. So I am not sure what more we can do at this point to allay some concerns. Alex Scott: Just to be clear, so the CLO-like assets that you moved out of the definition of a non-fixed income alternative, that is or is not in the $11 billion that you gave more disclosure on? And if it is not, could you help us think through that piece a little more—what is the size of it even? Christopher Owsley Blunt: Sure. Again, if you go back to what used to be $11 billion that we now define as four, the remaining seven is largely that. It is investment grade tranches of fixed income coupon-clipping securities. So it would look a lot like CLO or CMBS-type structure. Alex Scott: And that is in the $11 billion that you have in your slides? Conor Ernan Murphy: It is. Alex Scott: Got it. That is clear now. Thank you. Sticking with this, of that $11 billion, can you talk about software? I know you mentioned 5% for the broad portfolio. Can you tell us about just the private origination because I think that is the area of software people are a little more concerned about. Do you know what that number is as a percentage of private origination? Christopher Owsley Blunt: I have to confirm this, but I want to say it is about 20%. Within that, the reason we have given the piece that is at risk—you know software comes in so many different flavors. I would say the vast, vast majority of this we do not think is at high risk of AI disruption, particularly in the near term, because a lot of these loans are pretty short duration—two to three-year loans. These are not twenty-year loans to these companies. Based on what we have seen from some of our competitors, I do not know that we are necessarily an outlier in terms of software exposure. Alex Scott: That is helpful. Maybe one last one. On investments others define in different ways—some peers include 144A private placements, and I am looking at it both ways. How much 144A private placement do you have? Christopher Owsley Blunt: I do not have that number handy, but we can certainly dig that out and follow up for you. Alex Scott: Alright. That is it for me. Thanks. Conor Ernan Murphy: Great. Thank you. Operator: This will conclude our question-and-answer session. I will now turn the conference back over to the CEO, Christopher Owsley Blunt, for closing remarks. Christopher Owsley Blunt: Thanks again, everyone, for joining us this morning. We delivered a solid start to 2026 with record gross AUM, disciplined capital allocation with an increased capital return to shareholders, and a high-quality investment portfolio that continues to perform well. We continue to execute on our strategy toward a more fee-based, higher margin, and less capital intensive business model. Underpinned by our diversified new business engine and the structural tailwind of the peak '65 retirement wave, we remain confident in our ability to grow AUM and expand return on equity. We appreciate your continued interest in F&G Annuities & Life, Inc., as we remain focused on delivering long-term shareholder value. We look forward to updating you on our second quarter earnings call. Operator: Thank you for attending today's presentation. The conference call has concluded. You may now disconnect.
Operator: Please stand by. Your program is about to begin. Welcome to the Stabilis Solutions, Inc. first quarter 2026 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If at any point your question has been answered, you may remove yourself from the queue so that others can hear their questions clearly. We ask that you pick up your handset for best sound quality. Lastly, if you require operator assistance, we would now like to turn our call over to Andrew Lewis Puhala, Chief Financial Officer. Mr. Puhala, please go ahead. Andrew Lewis Puhala: Good morning, and welcome to the Stabilis Solutions, Inc. first quarter 2026 results conference call. I am Andrew Lewis Puhala, Senior Vice President and CFO of Stabilis Solutions, Inc., and joining me today is our Executive Chairman, and Interim President and CEO, J. Casey Crenshaw. We issued a press release after the market closed yesterday detailing our first quarter operational and financial results. This release is publicly available in the Investor Relations section of our corporate website at stabilissolutions.com. Before we begin, I would like to remind everyone that today’s call will contain forward-looking statements within the meaning of the Private Securities Reform Act of 1995 and other securities laws. These forward-looking statements are based on the company’s expectations and beliefs as of today, 05/07/2026. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. The company undertakes no obligation to provide updates or revisions to the forward-looking statements made in today’s call. Additional information concerning factors that could cause those differences is contained in our filings with the SEC and in the press release announcing our results. Investors are cautioned not to place undue reliance on any forward-looking statements. Further, please note that we may refer to certain non-GAAP financial information on today’s call. You can find reconciliations of the non-GAAP financial measures to the most comparable GAAP measures in our earnings press release. Today’s call is being recorded and will be available for replay. With that, I will hand the call over to J. Casey Crenshaw for his remarks. J. Casey Crenshaw: Thank you, Andy, and good morning to everyone joining us today. Our first quarter results reflect the expected transition following the completion of two large multiyear contracts at the end of 2025 that were in our marine and behind-the-meter power generation markets. As anticipated, that created a near-term revenue and earnings headwind in the quarter. At the same time, we continue to see strong demand in the quarter for aerospace and emerging power generation opportunities for additional data center work. While our financial results were soft during the transition period, our commercial activity remains very encouraging. Demand for small-scale LNG and integrated last-mile delivery solutions continued to grow, and our commercial teams are actively engaged with both existing and prospective customers across multiple end markets. Importantly, the contracts already awarded to us combined with our active pipeline of opportunities provide us with increasing visibility into improved performance as we move through the balance of 2026. Based on expected contract startups later this year and advanced commercial discussions underway, we expect results to improve meaningfully in the second half of 2026, even before the expected 2027 startup of the large data center contract we announced earlier this year. As a reminder, the data center award is an estimated $200 million minimum two-year contract to support behind-the-meter power generation for a U.S. data center. While delivery is expected to begin in 2027 and continue through 2029, we view this award as a strong validation of Stabilis Solutions, Inc.’s platform and a meaningful step forward in our participation in the rapidly growing distributed power market. The accelerating demand for behind-the-meter power, bridge power, commissioning support, and durable energy infrastructure is creating a clear need for flexible, reliable LNG solutions. This is where Stabilis Solutions, Inc. is especially well-positioned. Our value proposition is not simply LNG supply; it is the ability to deliver a complete solution, including sourcing, logistics, storage, regasification, and last-mile reliability in environments where customers need dependable energy infrastructure quickly. A key advantage of our model is that we are not limited solely by the capacity of our own liquefaction facilities. Our multi-source LNG supply model allows us to serve customers across regions of the United States by combining our own production assets with third-party supply arrangements, logistics capabilities, and mobile infrastructure. This scalability is critical as we pursue larger opportunities in data center, aerospace, marine markets, and industrial applications. Within the aerospace market, demand remained strong. Activity among commercial space customers continues to grow, and we are seeing increased engagement with current customers as launch activity and LNG requirements expand. We continue to believe aerospace represents a long-term growth opportunity for Stabilis Solutions, Inc., supported by our ability to provide high-purity LNG, reliable delivery, and fit-for-purpose solutions for customers with demanding technical requirements. Turning to our Galveston LNG project, as we announced last month, we elected to terminate an offtake agreement for our proposed Galveston LNG facility. During negotiations with prospective financing partners, we were asked to amend the offtake agreement to facilitate the financing. The customer did not agree to the requested modification and we elected to terminate the agreement. While this development has delayed the project timeline, I want to be clear that we remain committed to pursuing the Galveston LNG project. We are in active discussions with other potential customers to sell the available capacity. We also continue to express support for the project. Galveston LNG remains an important component of our long-term value creation strategy, particularly as we look to serve durable multiyear demand in the Port of Galveston and the broader Gulf Coast marine market. At the same time, it is important to emphasize that the Galveston project is only one part of our growth strategy. We continue to see significant organic growth opportunities across our existing platform, including distributed power for data centers, fuel for aerospace, and LNG for industrial applications. As we look ahead, we believe that 2026 is a temporary low for the business as we move through this transition period and prepare for the ramp-up of new contracts and opportunities beginning in 2026. The demand environment remains strong, our customer engagement is active, and our awarded contracts provide a foundation for recovery in 2026 and substantial growth in 2027. We remain focused on converting current and future demand into sustainable, profitable growth while maintaining financial discipline and creating long-term value for our shareholders. We believe Stabilis Solutions, Inc. is well-positioned across multiple high-growth end markets, and we look forward to updating you on our progress in the quarters ahead. With that, I will turn the call over to Andy for a detailed review of our financial performance. Andrew Lewis Puhala: Thank you, Casey. I will begin with a discussion of our first quarter performance, followed by an update on our balance sheet, cash flow, liquidity, and capital spending. First quarter revenue was $10.4 million, a decrease of approximately 40% compared to 2025. The year-over-year decline was driven primarily by a 41% decrease in LNG gallons sold and lower rental and service revenue, partially offset by a slight increase in the underlying commodity price. At an end-market level, there were no revenues from marine customers during the quarter, and revenues from behind-the-meter power generation were not material due to the completion of the large multiyear contracts late last year. This was partially offset by continued growth in our aerospace and other legacy markets, where revenues increased [inaudible], respectively, compared to 2025. Adjusted EBITDA was negative $700 thousand in the first quarter compared to a positive $2.1 million in the prior-year period. The decrease was primarily attributable to the completion of the two large multiyear contracts. I would also note that our adjusted EBITDA for the first quarter excludes approximately $1.5 million of vessel charter costs incurred during the period. These costs relate to the lease of a non-Jones Act vessel that we entered into in 2025 in anticipation of supporting logistics requirements of our previously completed marine bunkering contract. We are currently working to fully subcharter this vessel. In the interim, we are leasing it back to the lessor at a reduced cost. Until a subcharter agreement is finalized, which we expect during the second quarter, our cost of revenue will continue to reflect these lease expenses, which we expect to exclude from adjusted EBITDA as an extraordinary item. Turning to cash flow and liquidity, cash flow from operations was $12.4 million for the quarter. This included $15 million of advance payments from a customer associated with our behind-the-meter data center contract scheduled to begin in 2027. These payments are restricted to support equipment and other preparations for that project. At quarter end, total liquidity was $17.2 million, consisting of total cash of $13.7 million, of which $10.6 million is restricted, and $3.5 million of availability under our credit agreements. Capital expenditures totaled $5.3 million during the quarter. These expenditures were primarily related to equipment purchases associated with our upcoming large data center project. Looking ahead, we expect to invest an additional $10 million to $12 million in capital for equipment and securing guaranteed supply for this project. We expect these investments to be funded through the advance payments received during the first quarter as well as additional advance payments we expect to receive over the course of the year. That concludes our prepared remarks. We will now open the call for questions. Operator: We will take our first question from an Analyst with Johnson Rice. Analyst: Good morning. The first question I had, I wanted to talk a little bit about the contracts that you are finalizing here that could start up in 2Q, but it sounds like they will definitely impact the second half of this year from behind-the-meter power. Could you talk about the size of those, for the two contracts that were canceled in the fourth quarter last year? And also, with behind-the-meter power, is this going to be a bridge-type arrangement until pipeline is hooked up to these facilities, and then is there the opportunity for backup-related contracts later on? J. Casey Crenshaw: Good morning, and thank you for joining today. Let me try to take on what are really two questions. First, on the type of contract for distributed power, we really talk about that being either commissioning power, bridge power, or more permanent backup related to behind-the-meter applications and distributed power. This is more of a commissioning project, which is normally a six- to twelve-month effort that we anticipate starting up at the end of the second quarter of this year and running through the end of the year. We do anticipate, with the work we have commitments around, being able to replace the contracts that ended at the end of last year during the back half of the year. Without giving too much in the way of forward-looking statements, we anticipate being able to replace that on the P&L, and that is before we get into the contracted demand starting in Q1 of next year, which is meaningful in size as well. Analyst: Great. Thank you. And then just on the Galveston LNG project, it sounds like you are active with discussions with offtakers to replace the canceled contract. Is there the possibility that the previous offtaker would return to sign up for offtake, and also are you satisfied with the provisions of the other offtake agreement contracts you have that they will not need to be modified for project financing purposes? J. Casey Crenshaw: Yes, that is a great question. I will take the last one first. The current offtake agreement we have works well with the project construction timeline and does not create risk on when construction would finish and when startup would happen, so that contract is in good position. Going back to the first question, we highly anticipate this customer that we were required to cancel that contract with coming back and doing business with us in Galveston once we get further down the road or complete the plant. Whether or not they will be part of the offtake that helps create the financing, or they become a spot market client post construction, we do not know yet, but we are actively working with that client. Timelines and the Iran war and different things happening caused delays and issues around dates and how that would affect financing, which created the need to exit that contract. Thank you. Operator: Our next question comes from William Dezellem with Tieton Capital. J. Casey Crenshaw: Good morning, Bill. William Dezellem: Good morning. I would like to talk a little bit more about the new data center contract. If we understood correctly, you said that was a commissioning contract that will begin in Q2 and basically last through Q4. Did we hear that correctly? And if so, was this a contract that you went direct to the data center, or did you have an intermediary that is taking care of all the power and they have hired you? J. Casey Crenshaw: Yes. This particular project you are asking about is more of a construction commissioning project. On all of these projects, we work with both the end user and the provider, and we are normally engaged with both. There are numerous projects like this that I would call construction commissioning, and those are normally, the way we view it, six- to twelve-month contracts depending on whether you are just going to commission Phase One or which systems you are going to work on commissioning. That is what this project is anticipated to be. It is different than the one that is starting up next year, which is more of a bridge power solution, longer in duration. All of these have minimum periods of time with potential extensions related to what is happening on their time schedule, etc. William Dezellem: Is the magnitude of the original commissioning contract’s monthly revenue similar to what you will have for the monthly revenue from the bridge, and it is simply a shorter period of time? Or is there a difference in the size of these two data centers that makes this very different? J. Casey Crenshaw: I would say, when you think about the bridge, it is defined by how many megawatts we are providing, and it is consistently provided in a consistent flow. The commissioning project that is starting this quarter and going into the back half of this year is smaller in total megawatt terms and is lower in gallons related to that, but still meaningful in size. What we wanted to present is the expectation of the recovery: kind of the trough in the first and second quarters and then how the recovery of the business goes into 2026. That is what we are trying to highlight for our shareholders and stakeholders. William Dezellem: That is appreciated, Casey. You mentioned there are many other contracts like this. We all hear of data centers ramping; there is lots of commissioning taking place. Talk to us about the pipeline of opportunities in the data center arena, because over the last few months you have announced two. J. Casey Crenshaw: Yes, Bill. We are certainly excited about it, and we are optimistic. If you look back about eighteen months, the expectation was that all the power was going to come in on time or early, pipelines would be put in on time or early; and then what has happened are natural delays—construction delays and other factors—creeping into this giant infrastructure buildout that you all know about. As that rolls downhill, first you have the power generation and backup power solutions, and now we are getting to how you provide the natural gas needed to do either commissioning, startup, or bridges. We are really excited about this commissioning activity because this is where we go in and support the data center commissioning their project—testing all their cooling and other systems—while they are waiting on either the final gas pipeline or the connection to the grid. In a perfect world it is connection to the grid with cheap power that never stops; secondly, behind-the-meter with pipeline. Stabilis Solutions, Inc. can participate in providing either commissioning, backup, or bridge, and that is what we are working around. We are seeing more commissioning activity in the first quarter of this year. That is where the activity is with our customers, with some people talking about the longer-term bridge. But the longer-term bridge is not the perfect solution for the client, so there is less activity there relative to six- to twelve-month commissioning activity. We have a number of those we are working on. William Dezellem: Essentially, we have come to this point because of delays. One way to think about these commissioning opportunities is that they may be ready to go live after testing, say in the fourth quarter, but if the grid or the pipeline is not ready, then your commissioning contract converts to a bridge contract. Is that likely? J. Casey Crenshaw: That is a good way to think about it. Another way to think about it is that their commissioning may be in modular formats; they may get power connected to one of the modular concepts and then move into the next phase of commissioning the next center nearby, because it is normally in groups or hubs. We do not expect it to be just a short-term situation. Secondly, you are going to have outages and other backup needs to continue with the reliability that they are committing to, and that will provide additional work for LNG long beyond the construction and bridge phases. Think of them as modular—80 megawatts, 50 megawatts, 100 megawatts—building modular, stacked up around each other, and we are providing unit work for units in the system. William Dezellem: One question relative to the subchartering of the vessel. What is the timeline you expect that to happen? J. Casey Crenshaw: Good question. We initially chartered that to support our client in Galveston. We ended up, for a number of reasons, with them going to a different solution. We anticipated a very quick subcharter capability with that vessel, but the Iran war disrupted rechartering activity and put a delay on it. We anticipate it happening in the second quarter for an effective date in the third quarter. We do not expect the subcharter to be at a big profit, so we expect it to be net neutral. Operator: We will go next to an Unknown Speaker, a private investor. Unknown Speaker: Good morning, guys. J. Casey Crenshaw: Good morning. How are you doing? Unknown Speaker: Pretty good. Just a couple of questions, if I may. First, with oil and LNG getting backed up, there is a lot of talk about some of these countries coming into the Gulf of America and picking up their oil and LNG. Are you currently in a position to capitalize on that development? J. Casey Crenshaw: Yes. We appreciate the question. We have never seen a macro for our Galveston LNG bunkering—reliable, consistent supply there for marine bunkering activity—being better than it is today. Though the conflict has caused some disruption in the timing of our subcharter of the vessel and potential short delays for construction, the macro around it is amazingly strong. It validates why we need more LNG, fit-for-purpose bunkering capacity on the water in the Gulf Coast. Our customers know that, and our commercial team is working hard on it. The duration of contract, credit quality, and how that matches with project financing are the things we are working on right now. Validation of the need for the project with a Jones Act vessel in the Houston Ship Channel is not in question. The conflict and the price of LNG also further our fit-for-purpose supply for aerospace and the value of what these aerospace customers are doing with telecommunications and other technologies. This further reinforces the need for U.S. presence to be successful in aerospace. Lastly, it reiterates that the price of U.S. natural gas and LNG for behind-the-meter power for AI data center activity is advantaged versus globally priced data centers. We have an advantage now, and given oil and LNG prices globally on a TTF or JKM basis, it further makes U.S. data centers more competitive when they are either on-grid power, pipeline, or LNG. It reiterates the thesis of all three of our growth legs. We are not reporting a great quarter—we do not want to gloss over that—but we are excited about the back half of the year and next year, and about marine, aerospace, and behind-the-meter power. We are working very hard on our Galveston LNG bunkering project, and we are equally excited about aerospace and behind-the-meter power. Unknown Speaker: That segues into my second question. Andy, I think you are still in charge of IR. With all that is happening now—and the data center stuff was all over Fox Business this morning—it is such a hot item. Is this a time to get on the radar a little bit with your story? Any plans for it? You are really becoming an AI company—without overhyping it—any plans to get the story out? J. Casey Crenshaw: We are starting this morning by talking about what is contracted and what we are doing on commissioning and bridge—different versions of the behind-the-meter power story. We have three growth stories: marine, which is really exciting; aerospace; and behind-the-meter. It is important, as you bring up, that these are three exciting growth platforms where we are delivering advantaged U.S. LNG into the market. We are communicating what we are doing, and we are hopeful that over time, as we see the growth we are anticipating for next year, and we see the Galveston project come online—moving it to FID, then through construction—we believe people will be able to do the math around what that means and understand the value like we see it. We cannot force people to believe in it to the same level that we do; we can only communicate what we are up to. I will now turn it over to Andy for additional comments on investor relations. Andrew Lewis Puhala: Thanks for the question. Philosophically, our number one priority is to demonstrate this in the results of the business—grow the top line, grow profitability—and then the stock price takes care of itself. That is number one. Number two, we do intend to get out there and do more in terms of telling the story as we get more exciting things to talk about. We think it is important both to deliver the results and to make sure we are communicating them. From a corporate governance perspective, we continue to file and keep the company positioned appropriately around that. Operator: We will take our next question from an Analyst with ID Capital. Analyst: I would like to follow up on the data center commissioning. Is this the same data center as the one where you are doing the bridge? J. Casey Crenshaw: No. It is a completely different project, different region, and different customer. Analyst: Will this commissioning use George West capacity or third parties? J. Casey Crenshaw: We can always do both. It is the benefit of having your own supply for backup and reliability to make sure you can deliver. This project is not an offtake as the primary source. Neither of these are. A lot of our own offtake is being drawn into both industrial projects and aerospace. That is how we think about the mix right now. Andrew Lewis Puhala: The great thing about both of these data center projects is that they are not using George West molecules, so it does not absorb all our capacity. It allows us to grow the top line and continue to grow the business without having to wait on expansion of internal production capacity. It is great for that reason as well. Analyst: Will the same third-party power provider be the one that contracted you for the bridge power with the other data center? J. Casey Crenshaw: We work with numerous power providers and numerous data center end users. Due to confidentiality and competitive information, we would prefer not to share that level of detail. Analyst: You mentioned aerospace activity and strength there. What is your current estimate on when George West volumes will be completely used again? J. Casey Crenshaw: We will have some room at George West. We are anticipating getting closer to a consistent offtake—we are not expecting 100% utilization—but moving toward reasonable utilization in the third and fourth quarters of this year. We were significantly off as those two projects ended; they were heavy offtakers of both of our production facilities. We are seeing a steady increase in pull-through and usage and expect that to happen in the third and fourth quarters—not fully utilized, but at levels consistent with what we have seen in the past. Analyst: When we look at the revenue and earnings profile of current operations, and that is prior to the addition of the new contract for next year, will that contract use George West molecules? J. Casey Crenshaw: Right now, it does not need to. It will be additional. Analyst: Thank you both again for taking the extra questions. J. Casey Crenshaw: We are delighted to do it. Thanks for joining the call. Operator: This concludes the Q&A portion of today’s call. I would now like to turn the floor over to Andrew Lewis Puhala for closing remarks. Andrew Lewis Puhala: Thank you, everyone, for joining the call today. We appreciate the interest in the company and the continued support, and we look forward to updating you on our developments as we have them and talking to you again next quarter. Thank you all very much. Operator: Thank you. This concludes today’s Stabilis Solutions, Inc. first quarter 2026 earnings conference call. Please disconnect your line at this time, and have a wonderful day.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the GATX Corporation 2026 First Quarter Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star, then the number one on your telephone keypad. I would now like to turn the call over to Shari Hellerman, Head of Investor Relations. Shari, please go ahead. Shari Hellerman: Thank you, Tiffany. Good morning, and thank you for joining GATX Corporation's 2026 First Quarter Earnings Conference Call. I am joined today by Robert C. Lyons, President and Chief Executive Officer; Thomas A. Ellman, Executive Vice President and Chief Financial Officer; and Paul F. Titterton, Executive Vice President and President of Rail North America. As a reminder, some of the information you will hear during our discussion today will consist of forward-looking statements. Actual results or trends could differ materially from those statements or forecasts. For more information, please refer to the risk factors included in our earnings release and those discussed in GATX Corporation's Form 10-Ks for 2025 and our other filings with the SEC. GATX Corporation assumes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. Earlier today, GATX Corporation reported 2026 first quarter diluted earnings per share of $2.35. This compares to 2025 first quarter diluted earnings per share of $2.15. I will briefly address each of our business segments. After that, we will open the call up for questions. Despite heightened macroeconomic uncertainty, our businesses delivered results in line with expectations in the first quarter. At Rail North America, demand for railcars in the existing fleet remained steady. As noted in the earnings release, starting this quarter, Rail North America metrics and statistics reflect the combined legacy fleet and the Wells Fargo fleet. At the end of the first quarter, Rail North America's fleet utilization was 98.1%. This was consistent with our expectations given the inclusion of the Wells Fargo fleet, which was at 96.5% utilization entering 2026. Renewal activity remains strong. The renewal success rate was 79.1%, and we continue to achieve lease rate increases while extending term. The renewal rate change of GATX Corporation's Lease Price Index was 22.3%, and the average renewal term was 56 months. With a little over two-thirds of the combined fleet repriced in the current favorable lease rate environment, we see meaningful runway to enhance financial performance across the remaining fleet. We continue to successfully place new railcars from our committed supply agreement with a diverse customer base. Through the first quarter, we have placed over 8.4 thousand railcars from our 2022 Trinity supply agreement. Our earliest available scheduled delivery under the supply agreement is in 2026. Additionally, supported by a robust secondary market, we generated about $50 million in gains on asset dispositions in the quarter. At Rail International, railcar demand in Europe remained steady despite ongoing macroeconomic pressure in the region. Fleet utilization at the end of the first quarter was 94.7%, unchanged from the prior quarter. In India, policy support and economic growth continue to drive strong demand for railcars. GATX Rail India's fleet utilization remained at 100% at quarter end. Within engine leasing, our joint venture with Rolls-Royce and our wholly owned engine portfolio produced excellent operating results in the quarter. Lower earnings at RRPF compared to the prior-year quarter were driven by the timing of remarketing activity, which, as we have discussed, can be lumpy from quarter to quarter. Demand for aircraft spare engines remains strong, supported by resilient global passenger air travel, though we continue to closely monitor the evolving geopolitical environment and its potential impact on air travel trends. With that quick overview, we will now open the call for questions. Operator: We will now open the call for questions. Your first question comes from the line of Andrzej Zenon Tomczyk with Goldman Sachs. Please go ahead. Andrzej Zenon Tomczyk: Awesome. Thanks, operator, and good morning, everyone. Thanks for taking my questions. I was just curious, starting off with the integration of the Wells Fargo fleet and the recent deal, I wanted to dig a little deeper on how integration is going there, if you are able to share any milestones or updates there. And then just a reminder on how we should think about synergies in 2026 and 2027? Robert C. Lyons: Sure, Andrzej. I will take that one to begin with. First of all, the integration is going very well, probably ahead of where we anticipated we would be today. As we noted back in January, we did the cutover of all of the fleet data in one step on January 1, and that was a major undertaking and it was very successful. We have onboarded a number of new employees, many from Wells Fargo. We are thrilled to have them here with us, and the original headcount numbers that we laid out and the expectations for that incremental SG&A are all in line. From a customer perspective, the reaction has been very positive. Anytime there is a change of this magnitude, there are always things to work through, like contract structures and billing and cash distributions, etcetera, and we are addressing issues as they come up, but there have been zero surprises. On top of that, we have added about 300 new accounts through the acquisition—new customers—bringing our total customer base well over 1 thousand, and many of those are companies we have done business with before in the past. We know who they are, and they are all in industries that we know really well, so the learning curve was not very steep. By and large, the largest customers in the portfolio are names that we know very well. As I laid out back in January, the full-year impact of the joint venture would be somewhere in the $0.20 to $0.30 range, and we are certainly on target for that. Andrzej Zenon Tomczyk: Great. Thanks. And as a follow-up, do you believe there will be more consolidation in the leasing space over the medium term? Or is it the case that most of the major players are set in a good place at this point? And maybe just broadly, how you are assessing competition in the space and how that shows up in bidding activity of late, whether that is on the buy or sell side. Robert C. Lyons: I would not want to speculate on other potential transactions or consolidation in the marketplace. That is difficult for us to predict, and given the size and scale we are at today, we are really focused on making sure we maximize the returns on our portfolio. It is a competitive market—that is not going to change. There are a number of big full-scale lessors that we compete with on a regular basis, and then there is a far lengthier list of institutions that have fleets in the sub-100 thousand, sub-50 thousand railcar range that are extremely active in the marketplace. We see them often when we compete for transactions in the secondary market—other portfolios that get offered—and they are very active buyers of GATX Corporation's assets. We saw that in this quarter, and we expect to see it through the full year where that secondary market is incredibly robust. Capital continues to flow into this market. A lot of people recognize the value proposition that owning railcars presents, and so we are seeing a lot of interest in our secondary market offering. Andrzej Zenon Tomczyk: Understood. And in terms of the overall GATX Corporation North America consolidated fleet now, where do you see that overall fleet in three to five years from now? If you could share how you are thinking about adds versus selling or scrapping of the fleet over the near to medium term. Historically, you have balanced out your fleet between what you add and sell over a given period. Should we think the same way going forward—that it is largely flattish for the foreseeable future? Paul F. Titterton: Just from normal fleet activity, I would say that is a fair assumption. Robert C. Lyons: Right now, obviously, if we see opportunities to buy additional railcars in the secondary market or direct new cars, we will do that, and same on the sell side. We are always looking for the best way to generate the most attractive return for our shareholders and optimize our portfolio. So we are always going to look at buy and sell opportunities, but from a forecasting and budgeting standpoint, I would start in the same place we do, which is keeping the fleet generally in the same car count where we are at today. Andrzej Zenon Tomczyk: Got it. And then just one more for me on leasing. One of your peers recently indicated that they believe the market value of their fleet is 35% to 45% above its book value. I was just curious if GATX Corporation has assessed that same metric in terms of market value versus the book value of your lease fleet. And I know you have the engine leasing as well—maybe possibly break those out. However you think about it—just curious if you had any thoughts there. Thomas A. Ellman: Andrzej, this is Tom. We are very active in the secondary market in both the North American rail market and the aircraft engine leasing market. You can see from the consistent returns that we deliver—if you look over the last decade, we have averaged over $70 million a year in gain on sale of assets—so clearly, there is a lot of value there. A theoretical quantification probably does not provide a ton of value since we see it in a very practical way when we receive actual cash for the assets we sell. Robert C. Lyons: I would just add to that, too. As I mentioned previously, a lot of capital over the last 10 or 15 years has come into the railcar leasing space. We continue to see it, and while we have to deal with that from a competitive standpoint from time to time, we understand the logic. These assets are tremendous stores of value. They generate outstanding, very high-quality cash flow over very long periods of time, and they are attractive assets to own for a lot of different types of institutions. So yes, we do think about that, and we try to optimize that when we are both buying—in the most disciplined manner we can—and also optimizing the fleet and taking opportunities to sell assets to others. Andrzej Zenon Tomczyk: Understood. And then just last for me, shifting to engine leasing. Are there any incremental thoughts related to the airline industry capacity impacts into your engine leasing business with Spirit now going away? And also, broadly, in the geopolitical and elevated commodity price environment, is that impacting lease rates at all? And then I think the engine leasing affiliates were down year over year. As you mentioned, I am curious what drove that and if you expect engine leasing affiliates to be back to year-over-year growth in the near term? Thomas A. Ellman: Yes, Andrzej, I will start with the back half of your question first and then come back to the front half. Income from operations in the engine leasing business was actually up year over year, and that was due to more engines on lease at higher lease rates. As those of you who have followed us for a while know, remarketing income in the engine leasing business can be very lumpy, and indeed, it was very lumpy in the first quarter. The remarketing income as a percent of earnings from the joint venture was less than 10% in the first quarter. Over the last couple of years, it has been about a third of our total earnings, and indeed, last year it was around a third. But if you looked at quarter-to-quarter variations last time, it was between about 15% on the low end and almost 70% on the high end. So it can move quite a bit quarter to quarter. We expect when the year is over, it will be generally consistent with what we have seen historically. So the first quarter driver of what was a little bit lower quarter than we have seen the last couple was less remarketing income, but I want to be very clear that that is unrelated to what is going on in the world right now. It is still a very strong market for remarketing of that asset class, and we just expect that first quarter is normal variation in what is historically very lumpy. As far as the first part of your question, as I mentioned, through the first quarter the business performed very well. There continue to be strong supply-demand dynamics in the industry. There is a lot of demand for our engines, and we expect that to continue going forward. Having said that, obviously there is a lot going on in the world right now, and we will continue to watch and monitor the situation. Robert C. Lyons: If you look at the income contribution from RRPF—the joint venture—over the course of the last many years and try to identify a pattern quarter to quarter in earnings, you would find there is no pattern. It can move pretty dramatically each quarter. At the beginning of the year, I said we expected segment profit in engine leasing to be in the $180 million to $185 million range, which was up from 2025, and we still expect that. Andrzej Zenon Tomczyk: Thanks, Bob and Tom. Appreciate the time and thoughts this morning. Operator: Your next question comes from the line of Ben Moore with Citigroup. Please go ahead. Ben Moore: Hi. Good morning. Thanks for taking my questions. Congrats on the beat. I wanted to ask for some clarification on your NCI line. It looks like it has added to net income versus subtracting a net loss. Presumably, this is the amount left out going to Brookfield. I wanted to see whether that should reverse to be a subtraction from net income in future quarters. Thomas A. Ellman: Ben, there are two parts to that question that I want to hit. First, if you go back to the guidance that Bob provided, it was the total impact of the Wells Fargo Rail transaction. So in addition to what is going on in the joint venture itself, you need to look at the management fees that are earned and the incremental SG&A that GATX Corporation takes on. When you take those items into consideration, the first quarter was a net positive, all of those combined. Importantly, that was with very low asset disposition gains from the joint venture. Bob mentioned at the beginning of the year that we expected those gains to be about $70 million over the course of the year. In the first quarter, it was about $2 million, and that was expected. We expected that we would not do a lot of asset sales in the very first quarter as we focused on integration, but we continue to expect to do that over the course of the year. So, again, reiterating, total impact in the quarter was positive, and it should be more positive going forward as we do some of those asset sales. Ben Moore: Appreciate that. And very good print on the LPI, in my opinion—the 22.3% relative to your full-year guide of high teens to 20%. We were coming in around 20% for the quarter, so a nice beat. Would you say this is indicative of more sustained strength and catch-up renewal rate gains to be expected over the next couple of years, or is this somewhat high based on lumpiness just for this quarter? Paul F. Titterton: Ben, this is Paul. The North American rail market continues to be supportive of solid performance in our business. The same supply-demand dynamics that we have talked about for a number of quarters now continue to persist, which is to say that we are not seeing a lot of new cars enter the market, and high scrap prices are causing a lot of older cars to exit the market. That is causing net fleet shrinkage across the North American rail fleet, and that is very favorable for us in terms of maintaining utilization and maintaining pricing. Overall, we have said for a while the environment is supportive. We continue to see that supportive environment. We do not talk about specific guidance beyond the current year. We feel very comfortable with the LPI guidance we provided for the full year. Ben Moore: Great. Thank you for that, Paul. Next, I would like to ask about your renewal success rate. That is now in the high 70s from the mid-80s average from last year. You had noted 4Q was a step up based on intra-quarter lumpiness. Would this high 70s indicate some impact from the Iran conflict, or is it just a step down in the quarter and we should expect it to come back to the mid-80s average going forward? Robert C. Lyons: Ben, I will start, and then Paul will add to that. Coming into the year, back in January, when we gave guidance on the LPI and a host of other metrics, we also provided one for the renewal success rate. At that point, I said it would, in all likelihood, be in the high 70s to low 80s. That was our expectation coming into the year. The roughly 91% that we achieved in the fourth quarter—and in my 30 years at GATX Corporation, I have never seen one with a nine in front of it—around 80% is pretty typical if you took a very long-term average. That is what we guided to, and that is where we came in for the quarter. Paul F. Titterton: You asked about any impact of the Iran conflict, and while we all express concern, overall we are not seeing any significant deterioration in market conditions for leased railcars across North America. If you look at the first quarter, I would not say we have seen significant impacts in the business so far, broadly speaking. Ben Moore: Okay, great. Next, I would like to ask about the higher-than-expected step down in your ending balance of combined North America rail railcars. It looks like the 98 thousand added would be the Wells, which is a somewhat dramatic step down from the 100 thousand that they started with, and also higher scrapping and higher sold in this quarter. What were the puts and takes there? Why was the add 98 thousand versus 100 thousand? Paul F. Titterton: Thanks, Ben. You have to also include the boxcar fleet, which we report on separately from the overall fleet, which is just under 10 thousand cars at the end of the quarter. That is part of it. Broadly speaking, additions and subtractions from the fleet in the first quarter were more or less as expected. The answer to most of the questions on this call is that things have gone more or less as expected since the acquisition of the Wells Fargo fleet. Robert C. Lyons: If you took the 98 thousand on the non-boxcar fleet and then roughly another 3 thousand-plus on the boxcar side, that gets you to the 101 thousand that we talked about back in January when the transaction closed. Ben Moore: Great. Appreciate that. One last one from me. A pretty remarkable step down in North America maintenance expense—it looks like 27.6% of revenue. We were at 31%, assuming the qualification test would keep it more elevated. How should we think about that going forward—should maintenance expense as a percentage of revenue revert back up to around 30% from last quarter, or have you taken steps, and we are seeing more cost synergy realization? Paul F. Titterton: In any given quarter, there can be noise in maintenance. We are standing by the full-year guidance we gave for maintenance. I would not read too much into the performance specifically in the first quarter, so we are sticking to the overall full-year guide on maintenance. Robert C. Lyons: That guide was in the range of $500 million. If you annualized the first quarter, you would come out a little less than that—more in the $485 million range—but as Paul mentioned, things can move around a little bit from quarter to quarter. For the full year, we still expect to be right in the range we previously guided to. Ben Moore: Great. Thanks so much for the time and for taking my questions. Operator: Your next question comes from the line of Harrison Bauer with Susquehanna. Please go ahead. Harrison Bauer: Great. Thanks for taking my questions. To follow up on the LPI, I want to confirm that it is on the entire North American fleet and not just the legacy fleet. And then building off of that, could you walk through any differences that you are seeing in repricing on your legacy versus the Wells fleet as it relates to bringing up the profitability of a lot of that newer fleet that you have brought on? Thank you. Paul F. Titterton: The LPI for Q1 does not include any material impact from the acquired Wells Fargo fleet. Going forward, over time, more and more of the Wells Fargo fleet will be included in the LPI. Even with that in consideration, the full-year guidance we provided of high teens to low 20s remains the guidance we are providing. Harrison Bauer: Okay. That is helpful. Taking a step back longer term, at the recent RAF conference you outlined a fairly credible case of railcar production potentially being lower for longer for at least the medium-plus term. As you already have an avenue to growing your fleet through owning more of the Wells portion of this JV going forward, can you update your views on your long-term supply agreement with some of the railcar manufacturers? Do you expect a difference in buying new versus used? And general updates on how you expect to replenish your fleet over time. Paul F. Titterton: Broadly speaking, nothing about the Wells Fargo acquisition has changed our long-term view of supply, which is we are going to continue to buy railcars in a variety of different ways. We will have our programmatic multiyear supply agreements, we will buy in the spot market, and we will buy in the secondary market. That broad, diverse approach to procurement will continue to be the case. We will not comment on any specific procurement efforts, but we would expect that going forward those same three prongs will apply. We are aware that we are in the midst of a current long-term supply agreement, which we will continue to perform on, and then eventually we will replace that with a subsequent agreement when that runs out. Nothing has changed in terms of our overall fleet procurement strategy. Harrison Bauer: Understood. Building off the secondary market discussion, gains came in fairly strong in the quarter, in line with expectations. You mentioned that the Wells fleet was not a large contributor. Can you give any sense of your assessment of the secondary market—quantity versus pricing or gains per railcar—how we should be expecting that going forward? Do you think that a lot of the secondary market has been traded through at elevated asset prices and therefore might be a bit of a headwind to gains as you look out to 2027? Robert C. Lyons: I will start by reiterating what the guidance was coming into the year on gains on dispositions, which was in the range of $200 million, and we still expect that to be the case. As we said at the beginning of the year, we expected that to be split about $130 million on the GATX Corporation wholly owned side and about $70 million from the joint venture. As Tom mentioned, we really have not started that sale process for assets out of the joint venture. That will come in the latter three quarters of the year, and we still believe we will be right in that $70 million range. Paul F. Titterton: The overall activity remains very robust. There is a lot of capital that wants to invest in railcars—that continues to be the case. Because we are in such a muted new railcar environment, really the only place that capital can flow is into the secondary market. For us as a seller, that is a very nice position to be in, and we see a very eager universe of buyers we are transacting with. You asked about gain per car and that sort of thing. We are opportunistic sellers in the sense that we are going to go where the relative value is most attractive to us, and that could be older cars or newer cars; it could be more expensive cars or less expensive cars. There is no particular metric I could give you in terms of specifics. We will seek the highest economic value as we sell, and we have been very good at that, but that means what we sell and to whom we sell will be eclectic, depending on where the opportunities are. Robert C. Lyons: As we talked about back in January, now with 2x the fleet that we had previously, we have a lot more options—a lot more ways to go to market to meet that demand from those secondary market buyers—so we are in a very good spot. Harrison Bauer: That is it for me today. Thank you for the time, guys. Operator: Your next question comes from the line of Brendan Michael McCarthy with Sidoti. Please go ahead. Brendan Michael McCarthy: Great. Good morning. Thanks for taking my questions. Just two quick questions from me. You mentioned the lease economics continue to support a nice positive LPI for you, right in line with expectations. I noticed the average renewal term has stepped down sequentially a little bit, quarter over quarter. Can you discuss general lease renewal conversations and how those have evolved in the past quarter? Are you making any concessions on lease term or price? Paul F. Titterton: That is largely noise at this point. Every renewal conversation is different. We are not seeing any significantly negative trend in terms of achievable lease term. Some of it may be related to the fact we have a different fleet mix now after adding the Wells Fargo fleet, and in different car type markets, the market term may differ. Some of this may just be mix. If I sound like I am speculating, I am, because we are just in the beginning of digesting this fleet. Broadly speaking, I feel pretty confident that, for the most part, what you are looking at is noise. Brendan Michael McCarthy: Got it. That makes sense. Looking at guidance—your 2026 full-year EPS—now that we are one quarter through the year, what at this point would cause your EPS to come in at the lower end of that range versus the higher end? Thomas A. Ellman: Purely in terms of what drives near-term variability, the biggest one is remarketing—either in Rail North America or at the Rolls-Royce joint venture. Having said that, as we have noted several times, both those markets are very strong. The variability is almost always timing—you cannot always predict exactly what quarter things will close. We also mentioned last quarter that Rail North America has a big maintenance spend, and Bob reiterated today that we think it will be close to $500 million. Even a relatively small change there can be impactful and can show up. Importantly, we are assuming no material disruption to the global economy in general or the global aviation market in particular—and in particular there to the wide-body, long-haul routes. To date, we have not seen material impacts, but we will continue to closely monitor the situation in the world and in the Middle East. Brendan Michael McCarthy: Understood. I appreciate the detail. That is all for me. Operator: Your next question comes from the line of Justin Laurence Bergner with Gabelli Funds. Please go ahead. Justin Laurence Bergner: Good morning, Bob, Tom, Paul, and Shari. It is a pity that Bloomberg misstated or perhaps overstated consensus expectations for the quarter, but it looks like a strong start to the year regardless. I wanted to kick off my questions regarding guidance and the components therein. Has anything changed? Was Rail International stronger than you expected, or was that just a function of a light first quarter comp in 2025? Robert C. Lyons: Justin, thank you for the question, and thank you for the opening comment. As far as the overall mix of the elements that drive full-year guidance, the first quarter was very much in line with what we expected as we clicked through every single key element that drives that guidance. We look through where we were at in the first quarter—whether it is lease revenue, gains on disposition, gross maintenance, segment profit at Rail International—everything fell very close to in line. At this point, not a lot of variance from what we expected, and the quarter played out very much the way we expected. I will turn it to Tom if he has anything he wants to add. Thomas A. Ellman: Bob did a great job. As Paul said earlier, the recurring theme is that things are laying out according to our expectations. If you went back and pulled up Bob's opening comments from last quarter and ticked through things, you would see that it is very much in line. Justin Laurence Bergner: Great. That is helpful. You mentioned maintenance moves can change financial performance. Are you seeing any pressures on maintenance beyond what you may have thought coming into the year from inflationary forces? Paul F. Titterton: The short answer is no. By and large, there is noise in the first quarter as there often is, but from a maintenance standpoint, the year is playing out about as expected. We continue to be able to support our existing guidance for that reason. Justin Laurence Bergner: That is helpful. Lastly, if I focus on the Wells JV—excluding the management agreement—and I look at that noncontrolling interest line, what will cause that to become not a source of income but a source of expected cost as the year progresses, besides higher gains on sale? What else would cause that negative $6.4 million to become closer to breakeven and potentially positive? Thomas A. Ellman: Justin, the NCI number indicated a loss for the first quarter, and the key reason for that, as noted earlier, was relatively de minimis amounts of asset disposition gains. That really is the key item. If you look at what revenue was for the JV compared to what we expected it to be—very similar. The expense line—very similar. That is not surprising because, just like the GATX Corporation legacy fleet, most of the railcars in the fleet in a given quarter—nothing happens to them. They do not renew; they do not expire. Similarly, the maintenance expectation for a large number of cars is fairly straightforward. Those are the items you could look for to change, but much like the general question on what could drive overall change, the biggest one would be if that $70 million did not happen. As you look for other potential sources, there is a big gap between the impact of what those might be and that very first one of asset disposition gains. Justin Laurence Bergner: Thank you. That is it for me. Appreciate it. Operator: That concludes our question and answer session. I will now turn the call back over to Shari Hellerman for closing remarks. Shari Hellerman: I would like to thank everyone for their participation on the call this morning. Please contact me with any follow-up questions. Have a great day. Operator: Thank you. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Thank you for standing by. Good day, and welcome to the First Quarter 2026 Cheniere Energy, Inc. Earnings Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Randy Bhatia, Vice President of Investor Relations and Communications. Please go ahead. Randy Bhatia: Thank you, operator. Good morning, everyone, and welcome to Cheniere Energy, Inc.’s First Quarter 2026 Earnings Conference Call. The slide presentation and access for the webcast for today's call are available at cheniere.com. Before we begin, I would like to remind all listeners that our remarks, including answers to your questions, may contain forward-looking statements and actual results could differ materially from what is described in these statements. Slide 2 of our presentation contains a summary of those forward-looking statements and associated risks. In addition, a reconciliation of non-GAAP measures to the most comparable GAAP measure can be found in the presentation appendix. The call agenda is shown on slide 3. After prepared remarks from Jack, Anatol, and Zach, we will open the call for Q&A. I will now turn the call over to Jack A. Fusco, Cheniere Energy, Inc.’s President and CEO. Jack A. Fusco: Thank you, Randy, and good morning, everyone. Thank you for joining us today as we review our results from the first quarter of 2026 and our improved outlook for the full year. Certainly, a lot has changed since our last earnings call, which took place just before the start of the war in Iran. What has unfolded in the wake of that operation is another major shock in the global energy system—the second such shock in just over four years. The closure of the Strait of Hormuz and the weaponization of energy, including the damage to a portion of QatarEnergy’s LNG facility at Ras Laffan, are tragic consequences, the effects of which are being felt all over the world. The sudden cessation of reliable supply of Middle Eastern oil and natural gas, and the many other products that normally transit the Strait every day on their way to dependent markets around the globe, shines a bright light on the criticality of supply security and a diversified portfolio. What we sell at Cheniere Energy, Inc. is access to a secure, reliable, and affordable product that provides the energy to power homes, businesses, and economies. Prior to the war, the LNG market already demanded more production than the market could supply, as evidenced by the elevated spot market margin we had in the first two months of the year. The disruption of Middle Eastern volumes only exacerbates that supply shortage, increasing prices and restricting availability of supply to the wealthiest buyers at the expense of fast-growing energy-hungry emerging markets. At Cheniere Energy, Inc., we look forward to the resolution of this conflict that will enable the renormalization of commerce to one of the world's most important trade gateways so that prosperity through energy affordability and availability can benefit all. Please turn to slide 5, where I will highlight our key results and accomplishments for the first quarter of 2026 and introduce our upwardly revised guidance for the year. Our performance in the first quarter has gotten off to an excellent start. We generated consolidated adjusted EBITDA of over $2.3 billion and distributable cash flow of approximately $1.7 billion. On the production side, we picked up where we left off at the end of 2025 and produced and exported a record amount of LNG in the first quarter. The 187 cargoes we exported through March topped the previous record set in the fourth quarter of last year. I am extremely proud of our operations team, whose tireless efforts to engineer and deploy solutions to address the feed gas composition-related challenges we experienced last year continue to bear fruit and drove enhanced operational reliability during the quarter. Today, we are increasing our full-year 2026 financial guidance to $7.25 to $7.75 billion of consolidated adjusted EBITDA and $4.75 to $5.25 billion of DCF. This significantly improved outlook—the previous high end of the EBITDA guidance is the new low end—is driven primarily by an improvement in our production forecast of approximately 1 million tonnes, higher marketing margins, as well as higher contributions from optimization activities achieved year to date, both upstream and downstream of our facilities. Zach will cover guidance in more detail in a few minutes, but we look forward to delivering financial results within these upwardly revised ranges for the year. During the first quarter, we continued to execute on our comprehensive capital allocation plan. We repurchased approximately 2.7 million shares for approximately $535 million, funded approximately $1 billion of growth capex with equity and debt, paid down over $250 million in debt, and declared a dividend of $0.555 per share. Moving to our growth projects, we continue to make excellent and safe progress on our growth and expansion during the first quarter. Our CCL Stage 3 project now stands at approximately 97% complete. Substantial completion was achieved on Train 5 in March, and Trains 6 and 7 remain on track for substantial completion in the summer and fall, respectively, with each now tracking a few weeks ahead of schedule that had informed our initial 2026 production forecast in October. First LNG at Train 6 is expected within a few days. On our midscale Trains 8 and 9 and debottlenecking project, we have safely progressed to approximately 37% complete and, while it is still early, are tracking ahead of schedule on a number of execution fronts. Piling is nearly complete with approximately 8 thousand piles having been driven. The first structural steel has been erected, and the next major construction milestone is the first above-ground piping, which is scheduled to be installed this month. With regard to our future growth, our line of sight on the Phase 1 expansions at both Sabine Pass and Corpus Christi continues to improve. As we disclosed on our last earnings call, we are budgeting for limited notices to proceed this year on the first phase of the Sabine Pass expansion, Train 7. We are working closely with Bechtel to finalize the EPC contract and would expect to begin issuing LNTPs shortly thereafter, which should be seen by the market as a clear signal that we are on track to reach FID. At Corpus Christi, we are making excellent progress in our development of the CCL expansion project. We were pleased to receive our scheduling notice from FERC last week, supporting our expectation of FERC approval on that project in the first half of this year. We are extremely excited about these Phase 1 projects, which we believe represent the most compelling risk-adjusted infrastructure investment opportunities on the Gulf Coast—or maybe all of North America—and are expected to accretively grow the Cheniere Energy, Inc. production platform by approximately 10% each. Turn now to slide 6 where I will discuss my key strategic priorities for 2026. My priorities for 2026 are simple: execution, growth, and capital allocation. First, on execution, my priority is to maintain our track record of delivering top-tier safety metrics while furthering our operational excellence program and being a trusted and reliable supplier to our customers. In dealing with some operational challenges last year, the team has responded with determination and resolve, and its efforts are paying significant dividends. The team has increased utilization across both sites by identifying root causes and innovating solutions to address the issues impacting reliability, not just the symptoms. In addition, the team has increased production through identifying and executing on debottlenecking opportunities while seamlessly executing on our planned maintenance activities. And we are focused on managing our platform in a market with elevated volatility. Despite the volatility, our coordinated teams across the globe have done an excellent job managing our positions and assets, ensuring we deliver on our obligations to our customers while optimizing the portfolio through volatile domestic gas markets like we saw during Winter Storm Fern, as well as very volatile international gas and shipping markets that have prevailed since early March. Next, on growth, with Trains 1 through 5 of Stage 3 substantially complete, our immediate priority is a safe completion of Trains 6 and 7. As I just mentioned, these trains have accelerated since last year, benefiting from lessons learned on the first trains as our partnership with Bechtel has not only resulted in early operations of the trains, but also shorter timelines on both commissioning and ramp-up to full production. I expect those learnings to continue in order to benefit midscale Trains 8 and 9 as those trains move deeper into construction later this year. On our SPL expansion and CCL expansion, we are aggressively executing project development workstreams across regulatory, financing, commercial, and EPC contracting as FIDs on those projects come into focus. Last week, we received our scheduling notice from FERC on the CCL expansion project—a critical step in the FERC process—and it is aligned with our expected timeline of FERC approval in 2026–2027. And finally, on capital allocation, we had a major update on the last call with the achievement of the original 2020 vision plan, the new $9 billion authorization the Board approved during the quarter for share buyback, and our new share count and run-rate DCF targets. We are in an enviable capital allocation position, enabled by our incredible long-term contract portfolio that provides decades of cash flow visibility, our brownfield growth opportunities, investment-grade balance sheet, and opportunistic repurchase plan. In February, we celebrated the tenth anniversary of first cargo, and next week will mark my tenth anniversary at Cheniere Energy, Inc. I am extremely proud of the many incredible milestones we have accomplished together in that time. While these anniversaries offer the opportunity to look back, I prefer to look forward. And what we have in front of us are incredible opportunities: an opportunity to grow Cheniere Energy, Inc. in the near term and secure the next phase of growth beyond that; an opportunity to grow our platform by another 20%, benefiting Cheniere Energy, Inc.’s stakeholders while providing the world with more of the secure and reliable energy it needs to improve lives, grow businesses, and help emerging markets emerge. I am incredibly excited about these opportunities, and we are laser-focused on turning them into achievements in the coming years. With that, I will now hand it over to Anatol to discuss the LNG market. Thank you again for your continued support of Cheniere Energy, Inc. Anatol Feygin: Thanks, Jack, and good morning, everyone. Please turn to slide 8. The past quarter has been defined by geopolitical disruption, most notably the escalation in the Middle East and the resulting closure of the Strait of Hormuz, which has put significant strain on global energy markets, including LNG. While the situation remains fluid, our commercial focus is twofold: first, supporting our customers through near-term volatility, and second, understanding what these disruptions mean for longer-term LNG market structure and contracts. We continue to hope for a safe and timely resolution, including the return of Qatari and Emirati LNG volumes to global markets. Coming into the year, the industry was expecting roughly 40 million tonnes of LNG supply growth. This expected supply growth continues to be offset by the halt of Middle East LNG flows through the Strait, which removes approximately 7 million tonnes of supply each month. Additionally, U.S. exports were temporarily reduced during Winter Storm Fern to help balance the domestic gas market, and in late March, Australia’s approximately 9 mtpa Wheatstone facility and other gas processing plants experienced a multi-week outage following Cyclone Norelle. In aggregate, these disruptions displaced nearly 8 million tonnes of supply in the first quarter alone. With tanker and LNG vessel traffic through the Strait remaining constrained with limited visibility on timing of normalization, approximately 7 million tonnes of LNG supply per month—or approximately 100 cargoes—continues to be disrupted. The immediate effect of the crisis was a sharp repricing across regional gas markets, and given most Qatari volume is sold into Asia, we saw the JKM–TTF spread flip in a way not seen since 2023, creating a strong pull for LNG into Asia. Destination-flexible U.S. cargoes responded as expected, with flows re-optimizing toward Asia to capture higher netbacks. This is exactly the flexibility the market relies on in periods of imbalances or distress, underscoring a key advantage of U.S. LNG in the global gas market. While today our customers are squarely focused on replacing near-term lost volumes, the flexibility and security of U.S. LNG through long-term contracts is being highlighted in our commercial conversations and negotiations today. On the demand side, impacts have been more gradual. Middle East cargoes that were already on the water continued to arrive through March, which delayed the full physical effect of the supply disruption. Asia’s LNG imports were 5% higher year over year for January and February but started decreasing in March, dropping by 1.5 million tonnes, or 7% year over year, with import declines in price-sensitive markets expected to continue in April. Now several months into the disruption, we are seeing clear differentiation across markets in Asia to cope with the supply shock. China has again demonstrated system flexibility, halting spot purchases and redirecting cargoes to markets of higher need. Price-sensitive Qatari-dependent markets such as Pakistan, India, and Bangladesh have taken measures to reduce demand and seek alternate fuel sources, while higher-affordability markets including Taiwan, Singapore, and Thailand have stepped in to procure replacement cargoes, and we have been actively supporting our customers navigating this volatility. In Europe, the situation is increasingly tight as storage levels exiting the winter are near five-year lows, with a deficit of 13.2 bcm—about 10 million tonnes, or approximately 150 cargoes of LNG equivalent—versus the five-year average. While the region is relatively less exposed to disrupted Middle East LNG flows compared to Asia, the absence of Russian pipeline flows and the impending ban on Russian gas and LNG add further pressure. To reach adequate storage levels ahead of next winter, Europe will require almost 10 million tonnes more LNG than last year to reach minimum storage levels of 80% and approximately 15 million tonnes more year over year to reach historical levels of 90%. This highlights Europe’s dependence on LNG and intensifies the competition for marginal LNG supplies with other basins, especially as we look ahead to winter. Europe’s imports grew 12% to approximately 40 million tonnes in the first quarter, despite a month-on-month drop in March, which remained flat year over year as more cargoes started heading east. Across global markets, pricing dynamics evolved in two distinct phases in the first quarter. At the start of the year, benchmark gas prices were moderating, reflecting expectations of that forecast 40 million tonnes of incremental supply to enter the market. First-quarter JKM averaged $10.40/MMBtu and TTF $11.60/MMBtu, down by roughly 30% and 20% year over year, respectively. Following the disruption in the Middle East, we have seen a clear repricing, with prompt pricing and forward curves moving higher by $3 to $4/MMBtu. However, despite the disruption of comparable magnitude, these prices still reflect much lower levels than in 2022 following the onset of the Russia–Ukraine war, which we believe stems from the market’s expectation that the disruption will prove temporary and potentially quick to resolve. The Henry Hub curve, by contrast, has remained relatively flat, reinforcing its position as a stable pricing anchor. Let us turn to the next page to expand on what this means longer term. Uncertainty around the disruption in the Middle East remains high, and we continue to hope for a swift resolution with limited lasting structural impact. However, even under that assumption, the supply outlook over the next few years has shifted. The industry has effectively lost two liquefaction trains in Qatar, representing approximately 12.8 mtpa of capacity, which could be offline for up to five years. We are also likely to see delays to major expansion projects in the region in both North Field in Qatar and Ruwais in the Emirates. As shown in the chart on the left, even if flows normalize into the summer, most, if not all, of the previously expected growth in 2026 will be absorbed. Directionally, 2026 is much tighter than previously forecasted, and now 2027 has become more structurally constrained, especially considering the record-low storage position and supply dynamics across Europe heading into the 2026 winter I just discussed, likely creating a similar scenario ahead of winter 2027—before eventually net supply growth resumes as new projects in the U.S. and smaller ones elsewhere commence operations and ramp up production the rest of this decade. We expect the market to return to a more well-supplied position as new supplies start fully offsetting volume losses and Qatari projects get back on track after that. So timing matters. But in most scenarios, the near-term buffer has been greatly reduced, while the broader trajectory after the next year or two remains relatively unchanged. The LNG market is still expected to grow to approximately 600 million tonnes by around 2030. As new supply comes online, we would expect that growth to help moderate prices. This would be particularly welcomed by price-sensitive markets that have been constrained in recent years by sustained higher prices. Importantly, demand growth continues to be driven by a diverse set of markets from established importers in Asia to emerging consumers in South and Southeast Asia who need to supplement rapidly depleting domestic fields, to continued demand support in Europe as the complete ban on Russian molecules has and continues to create a structural demand anchor for the LNG market. At Cheniere Energy, Inc., our focus remains consistent: providing reliable, flexible, long-term LNG supply to a broad and growing set of global markets and doing so through a mix of direct relationships that expand access while maintaining the credit profile in our customer portfolio required to support long-term investment. It is these strategic relationships that underpin not only our current business and infrastructure investments, but also our expansions. With over 35 long-term creditworthy counterparties, we remain resolute in our commitment to them and our differentiated track record of performance, which is recognized and appreciated by our customers, particularly in volatile market conditions like these. That differentiation on reliability is a significant commercial asset, and we are leveraging this as we engage with customers today, with a focus on commercializing the balance of CCL Train 4 now that SPL Train 7 is sufficiently commercialized. So while the disruption we are seeing today is significant and it is difficult to fully assess in real time, over the long term events like these tend to become relatively small inflections in a much broader, longer-term growth trajectory. From that perspective, the underlying need for reliable, long-term LNG supply and the agreements that enable it is only being reinforced. With that, I will turn the call over to Zach to review our financial results and guidance. Zach Davis: Thanks, Anatol, and good morning, everyone. I am pleased to be here today to discuss our financial results and improved outlook for the full year. Turn to slide 11. For the first quarter of 2026, we generated consolidated adjusted EBITDA of over $2.3 billion and distributable cash flow of approximately $1.7 billion. Compared to the first quarter of 2025, our 2026 results reflect higher volumes of LNG delivered thanks to the substantial completion of Trains 1 through 4 last year of Stage 3, higher contributions from optimization upstream and downstream of our facilities, and the one-time alternative fuel tax credit during the quarter. We recognized in income 6.46 TBtu of LNG produced from our facilities in the first quarter. While meaningfully higher than 2025, 2026 volumes were impacted by in-transit timing dynamics that favored the fourth quarter of 2025 and February 2026. Looking to the balance of 2026, it is likely the first quarter will be our lowest quarter of volume recognized this year. As asset production ramps, the remainder of the year is expected to benefit from the rest of Stage 3 coming online, including midscale Train 5 at the end of January and Train 6 expected to produce first LNG imminently. In addition, there are no major turnarounds planned this summer, and lower ambient temperature should benefit the fourth quarter, making the last quarter of the year likely our highest quarter of LNG produced and recognized in income. Additionally, for the first quarter, we generated a net loss of approximately $3.5 billion, which is primarily the result of the unrealized non-cash derivative impact predominantly related to our long-term IPM agreements and the mismatch of accounting methodology for the purchase of natural gas and the corresponding sale of LNG. The derivative accounting treatment, coupled with the long-term duration and international price basis of our IPM agreements, results in fluctuations in fair market value from period to period as LNG curves move, which you may remember similarly impacted our GAAP net income results in 2021 and 2022. The surge in international gas prices and increased volatility during the quarter drove the unrealized non-cash losses and our overall net loss for the quarter. Adjusting for these non-cash unrealized derivative losses and the associated impacts to income tax and noncontrolling interests, we generated positive adjusted net income of approximately $1 billion for the quarter. This adjusted net income figure is aligned with our EBITDA and DCF and more representative of our financial performance in the quarter. To be clear, as we deliver on our IPM agreements that are accounted for as derivatives or economic hedges that mitigate future cash flow volatility, we expect these non-cash unrealized mark-to-market losses to unwind over time and generate mark-to-market gains as we realize the intended and corresponding fixed liquefaction fees from these contracts that pass through the LNG market price exposure to our IPM counterparties. While IPM agreements may contribute to variability in our reported GAAP net income, those agreements most importantly provide stable long-term cash flows, similar to our SPAs, that help support our contracted infrastructure platform and cash flow visibility for decades to come. As Jack and Anatol noted, our business model is built to thrive regardless of market environment, and the same goes for our capital allocation plan. During the quarter, we deployed approximately $1.2 billion towards our capital allocation pillars of accretive growth funded with equity and cash flow, shareholder returns in the form of buybacks and dividends, and balance sheet management. In the first quarter, we repurchased approximately 2.7 million shares for over $500 million, highlighting the opportunistic nature of the program considering the movement of our share price over the quarter. Given the volatility in the shares year to date, our disciplined value-based repurchase plan is working as designed, and we continue to opportunistically deploy the remaining over $9 billion under our current authorization according to the framework which guides repurchase activity, working towards our current target of approximately 175 million shares outstanding around the end of the decade. For the first quarter, we declared a dividend of $0.555 per common share, representing a payout of over $116 million for common shareholders. We remain committed to growing our dividend by approximately 10% annually through the end of this decade. Shareholder returns achieved through the combination of our dividend and opportunistic share repurchase plan are a key value proposition for our investors, providing them with a stable and growing dividend and increased ownership in Sabine Pass and Corpus Christi over time, while maintaining the financial flexibility essential to our long-term capital allocation plan. Moving to the balance sheet, we repaid over $250 million of our indebtedness with cash on hand during the quarter, fully redeeming the remaining SPL 2026 notes and amortizing a portion of the SPL 2037 notes. Additionally, in March, we issued $1 billion of 2030 notes and $750 million of 2056 notes at CEI, making our inaugural 30-year issuance and extending our maturity stack into the second half of this century alongside a growing list of our long-term LNG contracts. With a portion of the proceeds, we prepaid the $550 million drawn on our Corpus Christi term loan while also canceling an additional $600 million of unused commitments. We continue to maintain substantial liquidity with approximately $1.8 billion in consolidated cash and billions of dollars of undrawn revolver and term loan capacity throughout the Cheniere Energy, Inc. complex. Also in the quarter, we continued to receive recognition from the credit rating agencies, as Moody’s upgraded its ratings of our unsecured notes at CEI and CCH to Baa2 and Baa1, respectively, each with a stable outlook. We are now high-BBB at both projects and mid-BBB or better at the unsecured corporate levels by all three credit rating agencies. During the quarter, we funded approximately $1 billion of growth capital across our business as we continue to progress the construction of Stage 3 and midscale 8 and 9, development of the SPL and CCL expansion projects, as well as our Gregory Power Plant to support incremental power needs at Corpus over time as the midscale trains are completed. Of the $1 billion of growth capex in the quarter, approximately $300 million was equity-funded and approximately $700 million was efficiently debt-funded as planned via our delayed-draw Corpus Christi term loan as well as from a portion of the proceeds from the recent CEI bond raise. We do expect to increase our spending on Train 7 at Sabine Pass later this year as we have budgeted for potential limited notices to proceed to Bechtel ahead of our expected FID early next year, which is why we are retaining cash at CQP by flexing the variable component of the CQP distribution this quarter. Looking ahead, we remain well positioned to fund our disciplined growth objectives comfortably within our cash flow forecast while retaining our strong investment-grade credit metrics and our significant financial flexibility for shareholder returns through cycles. Turn now to slide 12, where I will discuss our upwardly revised 2026 financial guidance and outlook for the year. Today, we are increasing the midpoint of our guidance ranges for full-year 2026 consolidated adjusted EBITDA and distributable cash flow by $500 million and $400 million, respectively, bringing expected consolidated adjusted EBITDA to $7.25 to $7.75 billion and distributable cash flow to $4.75 to $5.25 billion. We are maintaining our CQP distribution guidance for the year of $3.10 to $3.40 per common unit. These increases are attributed to a few key drivers, including an increased production forecast for the year, an improved margin outlook, and contributions from optimization activities already locked in year to date, both upstream and downstream of our facilities. As Jack mentioned, thanks to increased utilization of our existing trains as a result of continued debottlenecking and resiliency efforts related to feed gas composition variability, as well as accelerated timelines on the remaining trains at Stage 3, we are increasing our 2026 production forecast by approximately 1 million tonnes—to approximately 52 to 54 million tonnes for the year—unlocking incremental volumes available for CMI this year. With this increase and continued forward selling by our team over the quarter, we still forecast less than 1 million tonnes—or less than 50 TBtu—of unsold open volumes remaining in 2026. Therefore, we currently forecast that a $1 change in market margins would impact EBITDA by, again, less than $50 million for the full year. Despite having very little open exposure for the balance of the year, we are maintaining the $500 million guidance range, as results could still be impacted by a number of factors, particularly given the sustained volatility in the global energy markets, but also variability in our production forecast, the ramp-up and specific timing of substantial completion of Trains 6 and 7 at Stage 3, the timing of certain cargoes around the year-end, contributions from further optimization activities during the balance of the year, and the impact Henry Hub volatility can have on lifting margin. As we progress through the year and lock in some of these variables, we will look to tighten these ranges as we have done in years past. Our first-quarter results, coupled with our revised guidance ranges, once again underscore Cheniere Energy, Inc.’s ability to leverage our platform, respond to market signals, and unlock optimization opportunities throughout our business while still maintaining our highly contracted business model built upon a foundation of long-duration fixed-fee cash flows from creditworthy counterparties—our conviction in which has only been reinforced as we look forward to funding additional accretive brownfield growth at both Sabine and Corpus, while concurrently growing shareholder returns in the form of buybacks and dividends that can be relied on year after year. These dependable cash flows are essential to the over $50 billion natural gas infrastructure platform we have developed over the last decade plus, as well as our disciplined, all-of-the-above capital allocation framework, and the durable through-cycle value of this approach has only been enhanced in the wake of the current market environment. Looking ahead, we remain focused on maintaining safe and reliable operations to ensure we can continue reliably delivering flexible, secure LNG as well as meaningful long-term value to our stakeholders around the world for decades to come. That concludes our prepared remarks. Thank you for your time and your interest in Cheniere Energy, Inc. Operator, we are ready to open the line for questions. Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow-up before rejoining the queue. Again, you may press star 1 to ask a question. We will take our first from Jeremy Bryan Tonet with JPMorgan. Jeremy Bryan Tonet: Hi, good morning. Thanks for all the color today. I just wanted to expand a bit on some of the remarks. Anatol, I was just wondering, in the customer conversations at this point, given the disruptions in the Middle East, how you would describe the tone or appetite for U.S. LNG given the reliability and Cheniere Energy, Inc.’s track record there. And then at the same time, contrasting that to somewhat higher prices and how that impacts demand for LNG overall—how have those two factors flowed through conversations? Anatol Feygin: Thanks, Jeremy, good morning. We are in a very enviable position. As the plants run better and, as you see, we have some additional volume, and we only have these three dozen critical long-term counterparties, we are able to really focus on supporting these key relationships, and that is what we have been doing over the last couple of months. As you can imagine, the initial reaction by a number of these players is to ensure there is ample supply as this 7 million tonnes a month is replaced to keep the lights on in the short run. Our ability to support them is helping to broaden and deepen the relationships and is certainly a tailwind to a number of those engagements. In terms of the longer term, we think, just like COVID in 2020, when you look in the rearview mirror, that disruption is a small blip. It changed the dynamic by delaying what we were expecting by somewhere between 12 and 18 months, but the overall trajectory remained the same. We expect this issue—and hope that this issue—is similar. We are in a great position. We need to support our growth ambitions with relatively modest incremental commercial agreements, and clearly we have proven that this is a very affordable, reliable offering, and Cheniere Energy, Inc. is a great counterparty to help support those long-term ambitions by our customers. Jeremy Bryan Tonet: Got it. That makes sense. And then just want to turn to operations and execution. Could you expand a bit more on the Corpus expansion—seems to be tracking a bit ahead of expectations for timeline there—and at the same time being able to eke out a bit more capacity. What bottlenecks were you able to address, and what more could be possible? Jack A. Fusco: Thank you, Jeremy. As I said in my prepared remarks, I am extremely pleased with what we have been able to do in operations and production engineering. At Corpus, not only have the trains been coming in significantly ahead of the guaranteed schedule from Bechtel, but our ramp-up has been higher and steadier. The team has really learned how to make those smaller midscale trains, and that is producing some very good quantities for us. I would expect those learnings to continue to work their way through 6, 7, 8, and 9 at a minimum. The other thing that has been helpful is we figured out a couple of different operational modes to handle variability of feed gas at both Sabine Pass and at Corpus Christi. We have worked with some good suppliers of solvents to come up with creative ways to use solvents to mitigate the need for defrost. There are a hundred different things in our toolkit right now that we use every single day, and they all seem to be adding up to meaningful amounts of additional production. That is what you are seeing from us in this raise of guidance. Zach Davis: And then, on the growth and the expansions, just to put into perspective, right now on the whiteboard is SPL Train 7. You can tell from the CQP distribution guidance and where we ended up with Q1, we are reserving cash as we are in good shape to start LNTPs later this year and be in a position, with a permit, to FID that project early next year. In terms of the Corpus expansion, that is a bit behind just because we did not file for the permit until after we officially announced FID and NTP on Trains 8 and 9. But that is in good shape and tracking to receive a permit, let us say, mid to late next year. In the context of the previous question to Anatol, we can be very disciplined on the SPAs considering we have approximately 10 million tonnes of SPAs today that have not been used yet to underpin an FID project. That is more than enough to cover the SPL Train 7 project plus debottlenecking, and we are in good shape on even the first train of the first phase of a Corpus expansion. So we can stay quite disciplined not just on how we grow and the parameters that we hold ourselves to—which are leaps and bounds beyond anyone else in the industry, especially in North America—and then we can be disciplined on the SPAs and eventually move forward and create value for the company long term. Operator: We will take our next question from Spiro Michael Dounis with Citi. Spiro Michael Dounis: Thanks, operator. Good morning, everybody. Picking up on contracting, there seems to be some expectation that we will see a wave of contracting for U.S.-sourced LNG. Understand your point that a lot of the focus so far has been filling near-term supply, but is the market wrong in expecting a contracting wave? And based on your discussions, would you be surprised if Corpus IV Phase 1 is not underwritten with SPAs by year-end? Anatol Feygin: Thanks, Spiro. I think your overall thesis is correct. There are not that many options, and we keep demonstrating that this is a great place to source volumes. Customers lifting from us FOB at today’s NYMEX economics are lifting roughly at $6/MMBtu with the reliability and flexibility that we have demonstrated over a decade. If not now, if not us, whom and when? That said, this is a very competitive market. There are some credible projects moving towards FID and a lot of projects that have FID that have spare capacity yet to be placed. We are fortunate in that we will continue to not participate in that commoditized race. We will pick and choose with whom we want to continue to partner. You will continue to see from us the same thing you have seen for the last four or five years, which is additional volumes with existing customers. We have made a significant dent into Corpus Train 4, and whether it is by year-end or by the time we are ready to FID, we think we will be in a very good commercial position to support that. Spiro Michael Dounis: Thanks. And on LNG prices, as you think about Europe needing to refill storage and the aggressive ramp in cargoes that needs to happen, perhaps extending into 2027, are you surprised prices have not been stronger? When would that play out in the curve? Beyond ’27/’28, do you think the curve appropriately reflects lingering supply issues? Anatol Feygin: We are astounded that prices are where they are—that prices in Europe and Asia are backwardated into the winter. U.S. is up 50% into the mid-$4s in the winter, but the world gas market is strangely backwardated. Europe is in a very difficult position with, adjusted for flows, record-low storage, banning Russian gas, and the Indian subcontinent—the price-sensitive market—has already been turned off. We think we will be in an environment in the third and fourth quarters where there is very aggressive competition for volumes globally. China has done an excellent job of using its storage and domestic production to be a relief valve again. The current situation is masked by the shoulder period, and the physical disruption of deliveries from the Strait being closed really only started to be felt a month ago. We are very constructive on where prices will go into the second half of the year, and that likely reverberates into 2027, which again will highlight how attractive the long-term SPA from Cheniere Energy, Inc. is to those that can meet Zach’s stringent credit requirements. Operator: Our next question comes from Jean Ann Salisbury with Bank of America. Jean Ann Salisbury: Hi, good morning. You have suggested in the past that after Sabine Pass 7 and Corpus 4, in the blue-sky growth case, future trains beyond 75 mtpa would be more likely to be at Corpus. Can you talk about the tradeoffs between your two sites for expansion, both for the potentially next two trains—Sabine Pass 7 and Corpus 4—and then beyond that? Jack A. Fusco: Hi, Jean Ann. Corpus has been blessed with another 500 acres of basically untouched land. We bought that land from the old Sherwin Alumina site. We have been working on that property to make sure that it is environmentally ready to go. It has great access to the water. It has a power plant that sits literally right next to it, which is our Gregory Power Plant that we own and control. It is close to the Permian—it is a 40-mile straw to our pipeline system and to Agua Dulce for gas supply. It just has a lot of benefits that make it a compelling place to continue to grow. At Sabine, while we still have property, a lot of it is wetlands that we would have to mitigate appropriately, which adds cost, and there are a few other nuances. On the positive side, we have three berths already at Sabine. So it is not out of the question, but I do think additional growth after the first phases will probably happen at Corpus prior to Sabine—just my gut—and that is way down the road from where we are today. Operator: We will take our next question from Jason Gabelman with TD Cowen. Jason Gabelman: Thanks for taking my questions. First, on the 2026 EBITDA guidance, you typically are a bit more conservative early in the year ahead of summer maintenance. Given that it seems you are guiding to lower maintenance this year, is there a bit less conservatism baked into the plan at this point? And then my follow-up is on what you are seeing across the world from governments in response to higher global gas prices—it is the second period of high and very volatile prices in the past five years—have you seen any reaction, especially from Asian countries, to pivot more toward long-term planning for coal and renewable power over gas? Zach Davis: I hear a lot of analysts say we are often conservative early in the year, but we do not overpromise. Our initial guidance is consistent with how we set budgets and targets. The reason we were able to raise this time is several things: production coming through—not just with midscale trains coming online quicker and ramping up quicker thanks to teamwork with Bechtel handing over—but also all the resiliency work since last year boosting production. That adds roughly $400 million at margins in the $9 to $10 range. Then margins are up since the last call on less than a million tonnes—that adds about $100 million. Optimization: we do not bake in optimization that has not been locked in yet; we were able to add another $100 million that is already locked. Henry Hub has come down since February a bit for the rest of the year, which offset some of that and is why we raised by $500 million. We feel good about the range, but there are moving parts: a $0.50 move in Henry Hub is about a $100 million swing; if Trains 6 and 7 timing moves by half a month, that is roughly a $50 million swing; about $50 million or less for every $1 move on CMI margins; overall LNG production variability adds plus or minus $100 million for 10 TBtu; and O&M is usually plus or minus $20 million. Add it up, and that is why we stick to a $500 million range. We prefer to overperform. Anatol Feygin: On your question about pivoting away from gas, we really have not seen that yet. It is fairly early in this disruption, and the market initially thought the resolution would be quick. We are skeptical it normalizes in weeks; we see months. After the Ukraine war, you did see a couple of governments shift, but we are not seeing that now. Entities that can transact on a long-term basis are seeing delivered gas prices from us that are well within, if not below, their planning ranges. Those that are creditworthy and capable to transact long-term and are not whipped around by spot prices have no reason to reconsider. In the grand scheme, LNG is only about 3% of primary energy. It is not a solution for the world; it is an elegant way to complement reliability, intermittency, and emissions. We are optimistic this will be in the rearview mirror soon, and the world will continue to grow to the 700+ million tonne market we expect in 2040. Operator: Our next question comes from Alexander Bidwell with Research and Advisory. Alexander Bidwell: Good morning. Appreciate the time. Looking at future expansions at Corpus and SPL, we have been seeing a ramp in labor competition across various projects in the U.S. Gulf. Do you expect that to have a knock-on impact in terms of EPC costs for the future Sabine and Corpus expansions? Jack A. Fusco: I think the timing of our FIDs will work very well with Bechtel’s current schedule and their growth projections, and we have not seen an issue with any of our midscale workforce—about 5 thousand workers there. So I do not see a problem. Zach Davis: There is a nice cadence with midscale—completing Stage 3 this year, then 8 and 9, and then the ramp-up starting next year and into 2028–2029 with Sabine 7, and then after that the ramp-up with CCL 4. The cycle is in our favor and slightly off from many projects that have FIDed recently or are desperate to FID right now. Alexander Bidwell: Thank you. And as a follow-up on midscale train performance, can you give a sense of the differences in OpEx and maintenance thus far versus your traditional large-scale trains? Jack A. Fusco: It is a little too soon. They have been roughly equal, maybe a little higher on the midscale as we continue to debottleneck. It is hard to segment sustainable O&M versus debottlenecking activities we are doing to get more output. Give us a bit more time with operations under our belt and we will try to provide more transparency. Zach Davis: One note: the midscale trains require more power, so you will see that incrementally in cost of goods sold. As we scale, it will be straightforward and consistent with the other 15 million tonnes at Corpus. With more scale beyond just five trains, they will get relatively close—it will just be in different buckets to an extent, as midscale requires more power. Operator: We will take our next question from Manav Gupta with UBS. Manav Gupta: Good morning. You are one of the few midstream companies that, besides dividends, also rewards shareholders with buybacks. Given the current environment and the amount of free cash you are generating, how are you thinking about stock buybacks here? Zach Davis: Today, we feel very good about buybacks. Our buyback is meant to be opportunistic and disciplined. Our stock basically varied from sub-$200 to $300 in Q1, and we bought over $500 million at about $202—showing discipline and opportunism. We bought back over $1 billion in Q3 and Q4 last year, but that is because we bought less than $700 million in the first half and rolled over allocations. Deployment may be bumpy quarter to quarter; the allocation and cash reserved for buybacks is not. That is very steady and why we committed to a $10 billion buyback through the rest of this decade. Also look at our payout ratio—dividend plus buyback versus DCF—basically around 50–60% a year, the high end of peers. We are basically the only one doing buybacks to this extent. As DCF grows, there is more cash for buybacks. We are budgeting to FID SPL 7 early next year and a first phase of Corpus by mid to late next year as well. With that cash flow reserved and still committing to $10 billion, you should expect buybacks to continue to compound quarter after quarter. If there is even a month delay in FIDs, that means more free cash flow for buybacks in the near term. Operator: We will take our last question from Burke Charles Sansiviero with Wolfe Research. Burke Charles Sansiviero: Thanks for the time. Understood you are not baking in any optimization that has not been locked in to the updated guide. Could you provide any additional color on what potential upside optimization could look like for the balance of the year, all else equal? Zach Davis: It can come from anything across the integrated platform. We have a different edge versus anyone else in LNG having the pipeline network we do, the two facilities, and then not just CMI handling open capacity but also our DES contracts and our IPM contracts. That scale gives us a different level of ability to optimize, and we do expect more optimization through the rest of the year. In the past quarter, including Winter Storm Fern, we were able to provide some of our gas back into the U.S. gas market as it was needed. There were also spikes in shipping and LNG prices after the war broke out in late February where we were able to provide ships and LNG to customers that needed them. Those are things we could not have forecasted even the same week they occurred. Having the scale and integrated platform gives us an edge. In the past three months, we bought cheaper gas upstream of our facilities as part of optimization upstream of Sabine and Corpus. We were able to source third-party cargoes—over 30 TBtu—freeing up shipping and optimizing certain cargoes as well. More likely to come. If there is one conservative aspect of guidance, it is that we do not bake in any more of that in the current roughly $7.5 billion EBITDA guidance. Anatol Feygin: As the platform continues to expand and these trains come on, additional DES and IPM contracts come with additional shipping that is paid for by those contracts. We have the highest number of vessels we have ever had in our portfolio today, and that will continue to grow—again paid for by long-term commitments—but giving us the opportunity to take advantage of volatility. Our crystal ball is not good enough to tell you what opportunity will be here next week, much less over the second half of this year. Burke Charles Sansiviero: Understood. Have you been able to opportunistically hedge some of your open exposure into 2027 a little earlier than normal as margins improved? Zach Davis: We do use our financial capacity for the prompt year and sometimes the year after. We usually try not to financially hedge too far out considering how much volatility there could be and considering we are in a shoulder season heading into Asia cooling and then European storage filling. Financially hedging is not the priority for 2027. Since the last call, however, we have sold over 1 million tonnes of open capacity in 2027. Margins were under $4 as of the call in February and now are closer to $6 to $7. When we see that and have willing buyers, we lock it in. We have already made a dent on the open capacity next year, which strengthens cash flow visibility and, obviously, cash in the coffers for things like buybacks. Operator: That concludes our question and answer session. I would like to turn the conference back over for any additional or closing remarks. Jack A. Fusco: Hi, this is Jack. I just want to thank you all again for your support of Cheniere Energy, Inc. Operator: This concludes today’s call. Thank you again for your participation. You may now disconnect, and have a great day.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Equinox Gold Corp. First Quarter 2026 Results and Corporate Update. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Ryan King, Executive Vice President, Capital Markets for Equinox Gold Corp. Please go ahead. Ryan King: Good morning, everyone, and thank you for taking the time to join the call this morning. Before we begin, I would like to direct everyone to our forward-looking statements on Slide 2. Our remarks and answers to your questions today may contain forward-looking information about the company’s future performance. Although management believes our forward-looking statements are based on fair and reasonable assumptions, actual results may turn out to be different from these forward-looking statements. For a complete discussion of the risks, uncertainties, and factors that may lead to actual operating and financial results being different from the estimates contained in our forward-looking statements, please refer to risks identified in the section titled “Risks related to the business” in Equinox Gold Corp.’s most recently filed Annual Information Form, which is available on SEDAR+ on EDGAR and on our website. Finally, all figures in today’s presentation are in U.S. dollars unless otherwise stated. With me on the call today are Darren Hall, Chief Executive Officer; Peter Hardie, Chief Financial Officer; David Chester Schummer, Chief Operating Officer; Daniela Dimitrov, Chief Strategy and Risk Officer; and Matt McPhail, SVP of Technical Services. Today, we will be discussing our first quarter 2026 financial and operating results, provide an update on Greenstone and Valentine ramp-up progress, and then we will take questions. The slide deck we are referencing is available for download on our website at equinoxgold.com. With that, I will turn the call over to Darren. Darren Hall: Turning to Slide 3, and thanks, Ryan. Good morning and thank you for joining us today on the call. Firstly, I would like to thank the entire Equinox Gold Corp. team, including all of our business partners across the Americas, for their commitment to safety, operational excellence, and disciplined execution, which delivered another strong quarter. There is no better demonstration of the team’s capability and commitment than responsibly delivering more than 197 thousand ounces of production with no material environmental events and a 25% reduction in our reportable injury frequency rate. Well done, thanks to the entire team for a great quarter. We continue building on the positive momentum established in 2025, which reset the foundation of the business, strengthened the balance sheet, and established a clear path to long-term value creation. Today, we are executing against that foundation with a focus on operational excellence, cost discipline, and delivering on our organic growth profile. We delivered a solid start to 2026, producing 197 thousand ounces of gold, with cash costs of 1.633 thousand dollars per ounce and AISC of 1.95 thousand dollars per ounce. Importantly, our Canadian platform continues to ramp up, contributing over 87 thousand ounces during the quarter. While the quarter reflected a level of variability not unusual with ramp-ups and winter conditions, based on performance to date and expected improvements for the year, we remain on track to achieve our full-year production and cost guidance. Turning to Slide 4, during the quarter, we sold more than 199 thousand ounces of gold at a realized price of just over 4.6 thousand dollars per ounce, generating 527 million dollars in adjusted EBITDA. We reported net income from all operations of 310 million dollars, or 0.39 dollars per share, and adjusted net income of 234 million dollars, or 0.30 dollars per share. We ended the quarter with 363 million dollars in cash and net debt of approximately 80 million dollars excluding our in-the-money convertible debentures. Additionally, we completed the sale of our Brazilian assets, repaid 990 million dollars of debt, initiated a share buyback, and paid our inaugural dividend. Subsequent to quarter end, following meaningful deleveraging and improved financial strength, we refinanced our revolving credit facility on improved terms, which enhances liquidity, flexibility, and our overall cost of capital. As of April 30, the company has nearly 1 billion dollars in available liquidity, providing significant financial flexibility. We also declared our second quarterly dividend of 0.01 dollars per share, reinforcing our commitment to disciplined capital returns. Turning to Slide 5. Let me take a moment to focus on our Canadian operations, which are central to our long-term value proposition. At Greenstone, we produced just over 60 thousand ounces in the quarter. Mining rates averaged 180 thousand tonnes per day, marginally lower than Q4, primarily due to heavier-than-normal snowfall, while mill throughput averaged 24.6 thousand tonnes per day, a 6% increase over Q4. Plant performance continues to improve quarter over quarter, with 51% of the days exceeding nameplate capacity in the quarter compared to 36% in Q4. With April mining rates increasing to approximately 200 thousand tonnes per day and the underlying productivity metrics continuing to improve, the mine is well positioned to deliver on 2026 material movement expectations, which will result in increasing grades through the balance of the year. At Valentine, we completed our first full quarter of operations, producing over 27 thousand ounces. The plant performed well and, despite significant weather challenges, the team delivered 90% of nameplate capacity for the full quarter and actually exceeded nameplate capacity over the combined period of February and March. Mining performance was impacted by a severe winter in Newfoundland, which hampered material movement and delayed access to planned ore zones. In addition, early-stage mining practices and sequences impacted mill feed grades. We have identified a number of opportunities to improve performance, including enhancements to blasting practices, better utilization of mine control systems, and tighter control around dig lines to positively impact dilution. We are seeing progress in April with improving grades supported by continued exceptional process plant performance. To highlight this progress, following a planned seven-day total shutdown in April, the mill has averaged 8.488 thousand tonnes per day, or 124% of nameplate, since coming out of the shutdown. Looking ahead, we expect steady quarter-over-quarter improvements through 2026 as mining productivity increases and our Canadian operations ramp up to steady-state performance, underpinning our robust outlook of over 500 thousand ounces of annual production for the next decade. Turning to Slide 6, beyond our current operations, we continue to advance a strong organic growth profile that underpins our long-term production profile. At Valentine, we announced details of our planned Phase 2 expansion as part of the updated technical report published at the end of the quarter. We are currently committing funds to long-lead-time items and progressing detailed engineering to secure schedule. We expect to initiate early site works in the second half of the year following full funds approval anticipated in the coming months. At Castle Mountain, we continue to advance engineering and permitting activities, with the project on track to receive a federal Record of Decision before year end. In anticipation, we have hired an experienced project director to lead all aspects of the project and have engaged Worley, an engineering professional services firm, to progress the detailed engineering. I anticipate committing risk funds to secure long-lead-time items in early Q3. At Los Filos, we have made important progress strengthening relationships with our host communities and government stakeholders. With fully ratified new long-term access agreements in place with two of the three communities and continued constructive dialogue with the third, I am convinced that all stakeholders are aligned on identifying a path forward to a restart of operations and realizing the full potential of the world-class mineral endowment that exists at Los Filos. Turning to Slide 7. I am confident that Equinox Gold Corp. is well positioned to deliver top-quartile valuation based on our portfolio of long-life assets in Tier 1 jurisdictions, a clear and executable organic growth pipeline, strong and growing free cash flow generation, a disciplined approach to capital allocation and shareholder returns, and, importantly, with the right team in place to deliver on those commitments. In closing, our priorities for 2026 are clear: ramp Greenstone and Valentine to nameplate capacity, maintain cost discipline and operational consistency, advance our growth pipeline, continue strengthening the balance sheet, and return capital to shareholders. With a stronger portfolio, improving operations, and a clear path forward, we are entering 2026 from a position of strength. Before passing to the operator, I would be remiss if I did not acknowledge the team’s efforts in Nicaragua, which delivered a record 81 thousand ounces of production for the quarter, which is a testament not only to the team but the prolific and enduring nature of those assets. We will now open the call for questions. Operator: If you are using a speakerphone, please pick up your handset before pressing any keys. If you have additional questions, the Equinox Gold Corp. team would be happy to offer a call to go into more details. Thank you. The first question is from Wayne Lam with TD Securities. Please go ahead. Wayne Lam: One question for tough. Let us go with Valentine. Grade in the early years of the mine plan is well above 2 grams a tonne, I guess, supported by the Berry pit. I am just wondering how the grades have reconciled to the plan to date, and should we be expecting a big step change in the grade profile into Q2, or is that more weighted to the back half of the year? Darren Hall: No, Wayne, and thanks for the support. Thanks for the question. If I sit back, I look at our reconciliation above an ore/waste cutoff and we are very comfortable with what we see out of Valentine, and we have articulated that over the last couple of years of infill drilling. Q1 was really our first quarter of how do we reconcile against the selectivity, and we saw some challenges, because we did not have that reconciliability with respect to the mill because it was the first quarter of taking that run-of-mine material in. We have seen some deficiencies that we need to focus on, and that is in and around mining control, utilizing the high precision, and again that was impacted further by the weather. We will see improvements in Q2 and we will see improvements as we work through the balance of the year. As we sit today, we are comfortable with how we have guided the year and we will continue to see improvements through the year. Medium and longer term, we are comfortable with where we have positioned ourselves. The importance of Phase 2 of the process to get us to 5 million tonnes is critical in that value proposition as well. We have a significant resource here with great opportunity to expand as we have highlighted with Frank drilling. This property will continue to deliver for a long, long time, and it will evolve as it goes, but I think it is going to evolve to the positive, which highlights the criticality of Phase 2 and why we are committing today to get those funds in place so we can ensure schedule to get us into a build as soon as we possibly can, which will take out the variances you see in trying to predict a grade in a quarter and take out some of the lumpiness. Long-winded answer, Wayne, but we are comfortable with the evolution, and there is nothing that concerns me at this point. Wayne Lam: Okay, great. I look forward to the ramp-up ahead. Darren Hall: Cheers, buddy. Operator: The next question is from Anita Soni with CIBC Markets. Please go ahead. Anita Soni: Hi, good morning. I just want to ask actually about grade reconciliation at Greenstone as well. So I think in the technical report the new MRE already includes the reduction as a result of the voids and all that. Darren Hall: Yes. Hi, Anita. Yes, and I guess two questions in that. From a technical report perspective— Anita Soni: Sorry, I was—go ahead. Darren Hall: Sorry. The technical report reflects the model update going forward, and the questions around voids and the experiences that we have had to date are reflected in that model revision. In terms of the quarter, we saw some turnover issues in and around the glory hole, which is that shrink stope in the center of the pit, and maintaining focus there. That is where Dave and the crew have brought in some additional resources so we can get bench turnover rate, which negatively impacts our performance of grade against plan. From a reconciliation perspective, if we take the last couple of quarters, the model is actually reconciling very well above a cutoff against the model that we have used to predict the longer term. Matt, is there anything you would add to that, bud? No. That is correct. Peter Hardie: I will just add one item if I might. We included all that information with respect to our guidance for the year as well. Darren Hall: Yep. Peter Hardie: Yep. Darren Hall: Does that cover the grade issue there, Anita? Anita Soni: Almost. The question was just in terms of the technical report, it does also talk about sort of negative ounces and tons and also on the grade a little bit, but combined a slight negative on the ounces. I am just wondering if the reserve estimate already includes that as well, or the commentary in the technical report says basically that it is typical for this early stage and it is not necessarily included in the reserve estimate yet. Darren Hall: No. Again, the technical report is congruent with the reserves and they all exactly tie together. Ryan King: That is right. Yes. Best available information was utilized in that technical report. The most up-to-date void model is included, so the reserve and resource are depleted for that void model. As Peter Hardie and Darren alluded to, in Q1 we are reconciling nicely to that model. Darren Hall: Yes. I think the underlying question there, Anita, is whether the reserve is reflective of what is in the forward-looking plan, and yes, the same model is used for the forward-looking plan as used in the reserve, so all those things are congruent. Anita Soni: Okay. Thank you. Darren Hall: Cool. Operator: The next question is from Mohamed Sidibe with National Bank. Please go ahead. Mohamed Sidibe: Maybe going back to Valentine, on your grade, tonnage, and recovery there, I know that production was probably impacted by inventory in circuit. Is there more inventory in circuit left that could potentially impact Q2, or how should we think about that going into the next quarters? Darren Hall: No. The inventory—we are not managing inventory. It is not like an AP sort of issue. There are pinches and swells in inventory depending on grades going through, but there was no drawdown of inventory at the end of the quarter. We play a straight bat at it. We actually saw a little bit of inventory build-up in the April period as grades improved, but there is no noise in there associated with inventory. Mohamed Sidibe: Sounds good. Just asking because I am trying to get back to your project results with the tonnage, grade, and recovery. I am slightly off, but maybe I can take that offline. On the costs at Valentine, I think the technical report highlighted lower processing costs and mining costs versus what you delivered in Q1. I understand that you were impacted by the severe weather, but what is the plan to get back to costs that were highlighted in the technical report, and what are some of the initiatives that you will be working on to get us back to that? Darren Hall: It is a good question. I will pass it over to Peter and we can talk specifically about some of the nuances in Valentine. I will take a step back and look at the business holistically. I know we do not guide quarter-on-quarter against budget, but I will use that as a basis, keeping in mind that all of our guidance is prefaced off the budget, and of course you take a budget, you lower it a little bit, and that becomes the guidance. If we look at Q1 spend, we were within 1% on non-capital costs. When I say capital, I am talking about the capital that was capitalized inventory and those sort of things are all in that total spend number. We were within 1% of spend. From an outgoings perspective, we are very consistent with where we see things. We were actually underspent on some of the capital during the quarter, which we will work on over the balance of the year, but that is typical—people being a little bit more aggressive about what they can get done at the outset of the year. Specifically at Valentine, Peter, do you want to give a bit of color? Peter Hardie: Thanks, Darren, and thanks, Mohamed, for the question. Yes, as Darren mentioned, across the board we are within 1%—very pleased with the control that the team and operators are showing over spend. At Valentine itself, we are a little above expectation, but not in a way that we are concerned about. Largely any spend that is above expectation is due to the severe winter and mitigations we put in place. Going forward, that is on the numerator side, so we are pretty happy with what is happening on the total spend side. It is the denominator, as Darren has already highlighted—bringing unit costs back into line with expectations. We have to focus on the denominator side, and that is the mining and the processing and grade management that Darren already alluded to. Mohamed Sidibe: Thank you. I will get back into the queue. Operator: The next question is from John Tumazos with John Tumazos Independent Research. Please go ahead. John Tumazos: Thank you very much and congratulations on net cash today, which every day that is going to be this week or last week or next week. Could you elaborate on your definition of gold production versus inventory versus in [inaudible]? We know you are generating cash and we know you are really selling gold, but it is kind of amazing that 20 thousand ounces fell out of circuit extra in Nicaragua this quarter. It is also equally amazing that Greenstone only had a 12 thousand-ounce drop from the December quarter when the grade fell by one third and the recovery fell by one fourth, and the recovery fell by 3%. It seems like the gold in solution is somewhat extraordinary. Darren Hall: Okay. Thanks for your question and thanks for the support. I will start with the definition of what we use as gold production. Gold production is bullion, as poured. Then we will have a recovered gold figure, which represents the in-circuit changes. There is not a lot of noise between gold poured and gold recovered for the better part. If we think about Nicaragua, the drawdown in inventory was not in process; it was stockpiles. We ended up at the end of the year with a significant inventory that we then got into that was built in Q4 because we ran out of capacity in the process plant in Q1. That was the inventory change in Nicaragua. It was just a build in inventory outside of the process plant; it was not an in-process inventory per se. In terms of inventories from Q4 to Q1 at Greenstone, I will ask Matt, but from my recollection I do not think there was a significant change in in-process inventories in circuit Q1 over Q4? Ryan King: There is a little bit of variation quarter on quarter, but it is nothing planned. It is just based upon timing of pour at month-end and it is a natural ebb and flow. As to what Darren said, I do not think there was a huge change of in-process inventory quarter on quarter. Darren Hall: You might have had an extra pour at Greenstone, like having an extra ship go off for a copper mine shipping concentrate or something? Typically, we will not pour on the last day of the month. We will pour on a specific day every week or two days a week, and wherever they happen to fall you might see some inventory ups and inventory downs. Happy to get on a chat and walk through the specifics at Greenstone as well to make sure you are comfortable. John Tumazos: Congratulations on all the cash. Darren Hall: Thank you. Appreciate it, and thanks for all your support. I know it has been a journey and you have been a supporter of the product for a long time, so thank you very much. John Tumazos: Thank you. Operator: The next question is from Jeremy Hoy with Canaccord Genuity. Please go ahead. Jeremy Hoy: Thanks, Darren and team. I appreciate you taking my question. I am going to talk about Los Filos. Could you give us any detail on what is pending or needs to be negotiated with the third community? And then any update on how you are thinking about that operation? I know you guys internally have been going through some iterations of what that operation could look like if it restarts. Just a refresh on your thinking there would be helpful. Darren Hall: Thanks, Jeremy, and thanks for your Canaccord support over the years. We are very optimistic about what we see at Los Filos, partly because of the 16 million ounces in all categories—it is clearly a world-class asset. It has demonstrated ability to produce. Our view of Los Filos is really looking to what the long term looks like. We are not in any hurry to restart operations in what was the previous form. It is really about the value proposition of birthing something that is potentially 300 thousand to 400 thousand ounces a year with a 20- to 30-year life within the current resource base. It is an outstanding asset. We are working very constructively with all of our stakeholders, including the third community, to get comfortable with a commercial arrangement that is going to ensure that the project is durable and resilient in all gold price environments and can maximize value for all stakeholders. The dialogue has been very constructive. It is clear in my mind that everyone is aligned behind wanting that to work, and we are going to make sure that what we put in place ensures that people can have a level of confidence about our ability—us and the stakeholders working together over the long term—to ensure that the investment we put into a CIL plant and reinvest back into that property is secure. That is our value proposition. The dialogue has definitely changed over the last year. We are very comfortable with the discussions we are having and the timing. Whether it is in two weeks, two months, or three months, I would anticipate something this year, but it is not important whether it happens this year; it is about making sure we get the right agreements. In the background, we are actually working with an EPC company to look at scale and scope around what this asset could look like and what that capital size relationship is. Our ability to be able to restart this asset is not impacted by the timing in which we have an agreement with the communities. They are all happening concurrently, and the community is aware of it. They are happy that we are doing that work and they see the value. I think this is a win-win and we will end up with a world-class asset that delivers for a long, long time. Jeremy Hoy: Great. Thanks for the color and looking forward to seeing the progress there. Darren Hall: Thank you. Operator: The next question is a follow-up from Anita Soni with CIBC World Markets. Please go ahead. Anita Soni: Hi. I just wanted to follow up on the tailings CapEx—the remediation that you are going to be doing there with the shear key. Can you give me an idea of the capital budget for that over the life of mine? Darren Hall: Sure. This is at Greenstone, right, Anita? Anita Soni: Yes, Greenstone. Darren Hall: Matt is probably best poised to talk about that. Matt? Ryan King: I do not know if I would classify it as remediation. It is initial construction of the shear key, and it is baked into our CapEx profile for 2026. Some may bleed into 2027 as well, but it is all baked into our estimates and our guidance figures. We can dive into more detail on a call if you want to go through dollars and cents. Peter Hardie: I was going to add, Anita, that, working off memory, we have 80 million dollars in there for 2026, but we will take offline maybe the life-of-mine costs. Ryan King: That is alright. Anita Soni: Okay. Thank you. Yes, definitely, I will connect with you offline. Thanks. Darren Hall: Thanks. Appreciate it. Thanks, Anita. Reach out and we will fill in any blanks that need to be filled in. Operator: This concludes the question and answer session. I would like to turn the conference back over to Darren Hall for any closing remarks. Darren Hall: I would just like to thank all our shareholders for their continued support and everyone for their participation and questions this morning. It is appreciated and valued. As always, Ryan and I and the entire executive team are available if you have any further questions. With that, take care, be well, and back to you, operator. Operator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Operator: Hello, everyone. Thank you for joining us and welcome to Essential Utilities, Inc. Q1 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 on your keypad to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Brian Dingerdissen. Brian, please go ahead. Brian Dingerdissen: Thank you. Good morning, everyone, and thank you for joining us for our first quarter 2026 earnings call. If you did not receive a copy of the press release, you can find it on our Investor Relations website. The slides can also be found on the website along with a webcast. As a reminder, some of the matters discussed today include forward-looking statements that involve risks, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-Ks, and other SEC filings for a description of such risks and uncertainties. References may be made to certain non-GAAP financial measures. Reconciliation of any non-GAAP to GAAP financial measures is posted in the Investor Relations section of our website. We will begin with Christopher H. Franklin, our Chairman and CEO, who will provide an update on the company. Then Daniel J. Schuller, our Chief Financial Officer, will provide an overview of the financial results. With that, I will turn it over to Christopher H. Franklin. Christopher H. Franklin: All right. Thanks, Brian, and good morning, everyone. Let's begin with a few updates on slide five. First, on the merger. As you likely saw in a press release we put out two weeks ago, we accomplished our first milestone regarding regulatory approval. The Kentucky Public Service Commission officially approved our merger request. This is our first regulatory green light and it is a big step toward bringing our two companies together. This momentum follows the clear “yes” we received from both sets of shareholders back in February, where the transaction was approved by an overwhelming margin of 95%. Now for the quarter, we reported GAAP earnings per share of $0.79, which includes about $0.04 of merger-related costs. While the quarter itself was up against a difficult comparison, with the previously discussed nonrecurring items from the first quarter of last year and merger-related costs this year, when we look at 2026 overall, we are very confident that we will meet our 5% to 7% annual growth in earnings per share compared to the non-GAAP 2024 earnings per share of $1.97. And Daniel is going to cover this in a lot more detail in a few moments. While the quarter was a bit challenging, largely due to the extreme weather we faced in some parts of our service territory, we are continuing to invest capital prudently and where it matters most. This quarter, we invested $269 million in our water, wastewater, and natural gas infrastructure. These investments help us to meet federal and state regulations—things like PFAS and lead—and boost reliability and safety for our employees and our communities. Our current trajectory indicates that we will meet our plan this year to make $1.7 billion in critical improvements by year’s end. Our customer rates remain affordable, and our planned investments and associated financing are built to meet our affordability goals. I have to tell you, I am really proud of the team in both gas and water for maintaining service for our customers during what were pretty challenging winter weather conditions this year, especially in January and February. Lastly, in March, we closed the Greenville Water acquisition. You may recall that we closed Greenville Wastewater in 2025. I will provide an update on our overall acquisition program in a few moments. If you turn to slide six, you will see a road map of what is ahead for completing our merger with American Water, which, by the way, is still on track to close by the end of 2027. Once we cross the finish line, the combined company will serve more than 4.7 million water and wastewater customers and more than 740 thousand natural gas customers. It really is an exciting path forward and we are moving full steam ahead. Slide seven shows the heavy lifting behind the scenes. Integration planning efforts are continuing with both Essential and American Water employees involved as part of the integration management office, the core integration teams, as well as subject matter experts. The focus is simple: ensuring we are ready to hit the ground running as a world-class organization the day after we close this transaction. These work streams and the partnership between leaders and subject matter experts from both companies are meant to ensure that the best practices of both companies are melded together in the combined company. We will have a lot more to say on this as we make progress. Now let us shift to the next slide—slide eight—to provide an update on our utility operations this year. Our continued mantra internally here to employees and everyone else is that we will conclude our time as an independent company with the same level of operational excellence we have enjoyed for nearly a century and a half. If you reviewed our proxy statement, you have seen the strength of our operating metrics—meeting and exceeding our targets and achieving many first- and second-quartile rankings versus our peers. I will mention that extreme cold causes challenges for both natural gas and water utilities. For gas utilities, it can cause increased leaks and more difficulty completing capital projects. And in the water business, it can cause treatment issues, especially in wastewater, increased main breaks, and, across the board, there is the added cost of things like snow removal. Despite all of these challenges, our year-to-date water quality, safety, gas leaks, among other metrics, are all on track for another strong year. Through 2026, five more PFAS projects have been completed and another 45 PFAS projects are under construction. We are on track for 106 PFAS project completions this year. Company-wide, in our water division, the 15 operational metrics we track include things like construction, safety, main breaks, leaks, and average time to address unplanned disruptions. Twelve have a green status, and only three are in yellow. The team is, of course, focused on moving the three that are yellow over to green. On the gas side, we are installing Intellis gas meters, which are advanced meters designed for enhanced safety. Last year, we installed 71 thousand Intellis meters and this year have a target to install at least 80 thousand more. Our gas division is focused on metrics associated with safety, construction, responsiveness, leaks, and damages. Of the 16 metrics we focus on, all but three are green, and we would expect them all to be green by year end. Despite winter weather and potential distractions associated with the merger with American Water, I remain very proud of our team’s continued focus on operational excellence. And with that, Daniel will now take us on a deeper dive into the results for the quarter. Daniel J. Schuller: Thanks, Chris, and good morning, everyone. Today, I am going to focus our conversation on our earnings performance and its drivers. There is some complexity due to nonrecurring items, both in Q1 last year and in Q1 this year, and I will discuss those items to provide clarity. Let us turn to slide 10 to walk through the bridge from last year. We are starting with our Q1 2025 earnings of $1.03 per share, which includes some positive one-time items. In terms of revenue drivers, earnings per share this quarter were positively impacted by $0.07 in regulatory recoveries and surcharges, $0.01 from higher water volume, and $0.01 due to a larger customer base thanks to both our recent acquisitions and organic growth. This was partially offset by a $0.01 impact from lower gas volumes, but overall, the top-line drivers remain solid. Now looking at the $0.10 decrease in earnings per share due to expenses, O&M increased by about $38 million, with the largest driver being $16.3 million in merger-related expenses. Also, last year we had $5.6 million of insurance proceeds that positively impacted earnings for the quarter, which did not recur this year. In terms of operational expenses, due to the extremely cold weather early in the year, we incurred about $2 million in incremental outside services costs and an additional $1 million in overtime related to water main breaks, snow removal, and callouts in our gas business. Cold weather also resulted in a slower start on our capital work, which resulted in less capitalization in Q1 of this year versus Q1 of last year. For the full year, though, we expect to achieve our capital targets for both water and gas totaling $1.7 billion. When adjusting for nonrecurring items and abnormal weather, we expect our year-over-year O&M expense increase to be in line with historic norms. Finally, we have the “other” bar with a $0.22 negative impact on earnings per share. This bar reflects the impact of a $22.6 million favorable tax reserve adjustment in the first quarter of last year due to the conclusion of the Aqua Pennsylvania rate case, as well as increases in depreciation and amortization due to additional rate base and some higher depreciation rates; increases in interest expense due to higher borrowings; and some weather normalization and tax impact. Together, this takes us to $0.79 for the quarter on a GAAP basis. If you back out the nonrecurring merger-related costs for financial advisory, legal, and other fees, our adjusted non-GAAP earnings come out to $0.83. You can find the full reconciliation on our website or in the appendix of this deck. As Chris mentioned earlier, the big picture has not changed. We are fully committed to our long-term goal of 5% to 7% EPS growth from our non-GAAP 2024 base of $1.97 through 2026 and 2027. I will wrap up on slide 11 touching on our regulatory activity. So far this year, we have completed regulatory recoveries totaling $15.1 million in annualized revenue, with about a third of that coming from water and wastewater and the rest from our gas business. Looking forward, the pipeline is active. Our water and wastewater segment has five cases pending for roughly $102 million in annualized increases. A few of these cases are nearing completion, and we will have updates on those in August if you are not watching the state regulatory dockets directly. Meanwhile, our gas subsidiary has a base rate case pending here in Pennsylvania for $163.2 million, which is critical for supporting our long-term infrastructure improvement plan, thereby enhancing the safety and reliability of our system and further reducing emissions. As always, our focus is on balance. We are maintaining these filings to ensure we are providing safe, reliable service and earning a fair return on our capital, all while keeping a very close eye on affordability for our customers. And with that, I will turn the call back over to Chris. Chris? Christopher H. Franklin: Hey. Thanks, Dan. Let us move to slide 13 to recap our growth-through-acquisition program. On March 4, we closed on our $18 million purchase of the Greenville Municipal Water Authority in Mercer County, Pennsylvania. The system serves 3 thousand customers in Greenville Borough, as well as Hempfield Township and West Salem Township, right here in Pennsylvania. We remain excited about our continued growth in Pennsylvania and welcome our new customers in Greenville. Now, aside from the selected opportunities on the slide, looking forward, we have signed purchase agreements for several small systems in Pennsylvania, Texas, North Carolina, and New Jersey, many of which we expect to close in 2026. Including these signed purchase agreements, in total we are adding about 201 thousand customers with a purchase price of approximately $285 million. This includes our DELCORA transaction. I will remind you again that the progress on our DELCORA transaction continues to be stalled by a stay put in place by a federal bankruptcy court judge related to the bankruptcy of the City of Chester. The pipeline of potential water and wastewater municipal acquisitions stands at approximately 400 thousand customers, and we remain very optimistic about the consolidation of water and wastewater systems in the United States and look forward to leveraging the combined resources of Essential and American Water to accelerate our business development work. I will wrap up our prepared remarks here on slide 14. As we have discussed before, we are reaffirming our 5% to 7% multiyear earnings per share guidance through 2027. Upon announcement of the transaction with American Water, we informed investors that we would continue growing EPS by 5% to 7% annually using our adjusted 2024 earnings per share of $1.97 as the base. As a reminder, this outlook includes the acquisitions we expect to close this year but does not include DELCORA. Beyond the numbers, our priorities have not changed. We are focused on keeping the balance sheet strong, improving our cash position, and growing the dividend while keeping our payout ratio between 60-65%. As part of our strong focus on customers, we are investing $1.7 billion in regulated infrastructure this year. With that, I will hand it back to the operator so we can take your questions. Operator: We will now open the call for questions. 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, please 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 roster. Your first question comes from the line of Paul Zimbardo with Jefferies. Paul, your line is open. Please go ahead. Paul Zimbardo: Hi. Good morning, team. Thank you for the time. First, I just wanted to check in. Pennsylvania has been very topical, and you all sit locally. I am curious if you have any thoughts on the latest affordability headlines and feedback on the Pennsylvania governor’s letter. Do you think that impacts your pending rate case, and just overall thoughts would be useful? Christopher H. Franklin: First of all, I think we would all agree we are aligned with the governor on the issue of affordability. Clearly, every utility is trying to accomplish pretty significant capital improvements while figuring out strategies to keep rates affordable for our customers. That is noble work, and we are aligned on that. In terms of the governor’s specific initiatives in his letter, I would say we are in ongoing conversations with the governor’s team. Daniel and I were on the phone with them as recently as yesterday. The conversation continues. We are trying to get real direction on how they are thinking about these issues. We know the issues; he outlines them pretty specifically in the letter. But how they will be applied and how they will actually materialize in terms of the Public Utility Commission, I think, is still being worked out. In terms of our filed case at Peoples, so far we are proceeding as though there is no change given we are already filed. We have a water case yet to file this year, and we are working through that case—preparation of that case—as we digest this new information from the governor. Paul Zimbardo: Thank you for that background. And then, with the adjusted EPS to exclude the merger charges, prospectively, should we think about adjusted EPS just adjusting out the merger items, or is there anything else that you think about adjusting at this point? Looking at the $0.79 going to $0.83, what is included there? Daniel J. Schuller: At this point, when we look at the $0.79 going to $0.83, the only adjustment in there is merger-related expenses. You will see that in the non-GAAP table—think bank fees, legal fees, filing fees, things of that nature. Prospectively, just those types of items adjusted out. Paul Zimbardo: Great. Thank you very much. Operator: Your next question comes from the line of Travis Miller with Morningstar Inc. Travis, your line is open. Please go ahead. Travis Miller: Hi, everyone. Just following up real quick on the Pennsylvania topic. I understand your comments in terms of your rate cases. What about the merger approval? Have you had conversations with the governor’s office on that, and how do you think that might impact the review of the merger? And then, more generally, how is the pending merger impacting discussions you are having with municipalities, and are you having discussions alongside your American Water colleagues? Christopher H. Franklin: I would say there is ongoing dialogue, but I cannot say we are in specifics on the merger. I would expect the governor would let the Commission adjudicate that case as they see fit. We just completed, as of today, the last of 14 public hearings throughout Pennsylvania, and I would position those as very positive. Very few people actually had anything to say, and several who did were positive. So I would say very successful hearings in Pennsylvania, and for that matter in North Carolina, where we have completed hearings as well. I would not expect the governor to give specific thoughts on the merger at this point, but generally people seem to think it makes sense, though I do not want to pigeonhole anyone into a position because nobody has actually staked out a position at this point. On municipalities, there are legal rules that would prohibit us from jointly marketing or coordinating with American Water pre-close. Interestingly, in at least two places we are still competing with American, which is a strange circumstance, but until the transaction is completed, we both have to do business as usual. Sellers—municipals in large part—understand that we will be one company within about a year, and they recognize that. It is part of their considerations, but we are business as usual out there, knocking on doors and trying to do as many transactions as possible. I cannot say that the transaction has inhibited our ability to pursue opportunities in any way, and I have not sensed any negativity at all from potential sellers. It is generally business as usual. Daniel J. Schuller: And, Travis, recall we are in some states that American is not in, and certainly in some states we are in different geographies. As Chris said, we are doing everything we can to continue to drive useful acquisition growth. Travis Miller: Okay. Great. I appreciate the thoughts. Operator: Your next question comes from the line of Davis B Sunderland with Baird. Davis, your line is open. Please go ahead. Davis B Sunderland: Good morning. Thanks very much for the time. Maybe a follow-up to the first question on the merger and the backdrop in Pennsylvania. I am sure, as far as states go, this will be the heaviest lift. Could you expand a bit more on what there is still to be done in the back half of this year and whether it is just time, or if there are any other potential road bumps we should consider as the process moves forward? And then, a two-parter for Dan: any thoughts on the shaping for Q2 and the rest of the year, and any considerations for equity issuance or other sources of capital through the year? Christopher H. Franklin: Regulatory process is generally one that we have to address as we go. We know who the parties to the case are at this point. We have seen filings already and will work through those through the summer. As we conclude the public hearings today and move to the more formal Commission process over the summer, we will get a good sense of where we can settle, and we are still optimistic that we will be able to settle with most of the parties. We will see how people come to the table. So far there has been nothing that we would put in the “unexpected” category. It seems to be proceeding as normal—plenty of interrogatories being asked and answered by the company and by the intervenors. I do not want to paint an overly rosy picture, but there has been nothing that has come up that we would say is unexpected. Daniel J. Schuller: For capital, you probably saw we did a $500 million debt offering earlier in the year. We will continue to raise equity when it is opportune using our ATM program. As we think about earnings for the year, as we said in the prepared remarks, we do expect to hit our target level of earnings per share based on the 2024 adjusted baseline of $1.97 with 5% to 7% growth off of that. In terms of quarterly shaping, it is difficult to give a precise breakdown, but I would point you to the same quarterly percentage ranges we have provided in the past—the chart showing the four quarters with a percentage of annual earnings, a range for each quarter—and use that as your guide here. Davis B Sunderland: That is very helpful. Thank you. Operator: We have reached the end of the Q&A session. I will now turn the call back to Christopher H. Franklin for closing remarks. Christopher H. Franklin: Thanks, everyone, for joining us today. As always, Daniel, Brian, and I are available for questions and follow-up afterwards. Thanks for joining us today. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to the first quarter 2026 Matador Resources Company Earnings Conference Call. My name is Stacy, and I will be serving as the operator today. We will facilitate a question-and-answer session at the end of the company's remarks. As a reminder, this conference is being recorded for replay purposes, and the replay will be available on the company's website for one year as discussed in the company's earnings press release issued yesterday. I will now turn the call over to Mac Schmitz, Senior Vice President, Investor Relations for Matador Resources Company. Mr. Schmitz, you may proceed. Mac Schmitz: Thank you, Stacy, and good morning, everyone, and thank you for joining us for Matador Resources Company’s first quarter 2026 earnings conference call. Some of the presenters today will reference certain non-GAAP financial measures regularly used by Matador Resources Company in measuring the company’s financial performance. Reconciliations of such non-GAAP financial measures with comparable financial measures calculated in accordance with GAAP are contained at the end of the company’s earnings press release. As a reminder, certain statements included in this morning’s presentation may be forward-looking and reflect the company’s current expectations or forecasts of future events based on the information that is now available. Actual results and future events could differ materially from those anticipated in such statements. Additional information concerning factors that could cause actual results to differ materially is contained in the company’s earnings release and its most recent annual report on Form 10-K and any subsequent quarterly reports on Form 10-Q. In addition to our earnings press release that we issued yesterday, I would like to remind everyone that you can find a slide presentation in connection with the first quarter 2026 earnings release under the Investor Relations tab on our corporate website. With that, I would now like to turn the call over to Joseph Wm. Foran, our founder, chairman, and CEO. Joe? Joseph Wm. Foran: Thank you, Mac, and good morning to everyone, and thank you for participating in today’s earnings conference call. We appreciate your time and your interest in Matador Resources Company very much. I have been coming to you for a long time. It is actually over 40 years, and I can unequivocally say that this is one of the more challenging times over that history, but I also feel very good that our team is experienced enough, our balance sheet is strong enough, and our lease position is strong enough that we can meet these challenges. I want to point out what I have heard over the years about keeping it simple: look at three things. Is production up? Yes, our production is up. Is our capital spending the same or down a little bit? It is. And finally, is your debt down? We have reduced debt. We have kept a lid on capital spending, and our production is up. Our balance sheet is in the best position that we have had during this entire time. We are ready to meet whatever challenges and opportunities may come along. I would like to emphasize the teamwork here. It has continually gotten better and better, and times like this get everybody working with extra effort. Over time, we have generally made our best gains in times like this. Everybody wants $100 oil or more, but these are often the times that help build the company. Thank you for your thoughtful analyst reports. We look forward to your questions. We want you all to know you are welcome to come visit us, where we will be able to spend more time and you can meet more of our people. Ask away, and I turn it back to you, Mac. Stacy, we are ready for Q&A. Thank you very much. Operator: Thank you. We will now open the call for questions. Due to time constraints, we ask that you please limit yourself to one question until all have had a chance to ask a question, after which we would welcome additional follow-ups from you. Our first question comes from Neal Dingmann with William Blair. Neal, please go ahead. Neal Dingmann: Good morning, and nice quarter. Joe, historically you have grown production a bit more than this year, and as you pointed out, there are certainly no balance sheet constraints. When you laid out the plan for this year and you think about the growth for the remainder of this year into next year, is it largely influenced by how you see the macro environment? Is it about potential incremental capital spend? What are the largest drivers behind your thinking about laying out the growth? Joseph Wm. Foran: Thank you, Neal. That is a great, multifaceted question. We are looking at it all different ways. As variable as this year has been, with the price of oil moving around, one thing has been somewhat chaotic. We have discussed different plans and what we do in each case. Management always tries to be nimble to be able to change plans as the business environment changes. We have been through COVID and came out better from that. We have been through various crises in the Mideast and came out better from that. That reflects a team with growing teamwork. We have people who have gotten to know each other very well over the years. It has been easy to go down one direction or another. Presently, we think the emphasis should be on getting production in, your debt paid down, and keeping a handle on capital spending. You want to spend some capital, of course, to keep growing, but you do not want to be reckless with it. Make each dollar count. That has been our approach, a collaborative effort with each of the department heads. If you or others come visit us and get around the table with us, I think you will see the interaction and teamwork, and you will leave feeling confident that this is a group that works together and has good ideas. In times like this, they can be trusted, and they have proven themselves in challenging environments and produced good results. That is how we have grown from $270,000 in 1983 to a present market cap somewhere around $8 billion. Christopher Calvert: Neal, this is Christopher Calvert, EVP and CFO. When we think about growth and the optionality that comes with it, you have to forward-think about potential restrictions or constraints to growth. For Matador Resources Company, we attack those in a unique way. Inventory scarcity is not really an issue for us—10 to 15 years of inventory with extremely good returns, 50% or better at different commodity prices. On takeaway constraints, we look at catalysts like our fully integrated midstream business with San Mateo and the Hubrinson catalyst that will alleviate negative Waha pricing in the back half of this year. Operational efficiencies drive capital efficiencies. As we think about growth, we want capital efficiencies to come with it. We are in a position where we do not have some of the potential constraints that affect certain peers. We have the optionality to grow if we want to, but we are focused on profitable growth at a measured pace. Operator: Stand by for our next question. Our next question comes from Scott Hanold with RBC Capital Markets. Scott, please go ahead. Scott Hanold: Good morning, all. Good quarter. You have historically seen better efficiencies in your operations and have pulled forward activities. As you look at the balance of this year, what is the opportunity to continue that trend of pulling things forward, and how much more could that add to your growth this year without impacting capital too much? Christopher Calvert: Hey, Scott. This is Christopher Calvert again. Looking at the first quarter, the outperformance was buoyed by wells that were turned online in the quarter and also by acceleration of activity—there were two additional net wells turned online in the quarter. The efficiency story that drives those results will play out through the remainder of the year. While we did not increase our full-year turn-in-line count, going back to the tail end of 2025, the operations team working hand in glove with the midstream team and the flow assurance it provides, we had the opportunity to accelerate activity at favorable oilfield service pricing, and we made the decision to do that. Historically, that is how we operate. As efficiencies continue to present themselves, there is likely to be the opportunity to potentially pull wells into the year. Right now, it is too early to make that judgment. We are focused on production growth from well outperformance and incremental growth on the back of efficiencies, which comes in leading wells faster into the quarters. Joseph Wm. Foran: One other thing is we are opportunistic about acquisitions. The lease-by-lease, brick-by-brick approach we have talked about remains our strategy. Where there are deals coming down the line, we try to be careful to ensure, as Christopher said, that it is profitable growth at a measured pace. Operator: Our next question comes from Gabe Daoud with Truist. Gabe, you have the floor. Gabe Daoud: Thanks, operator. Good morning, everyone. Joe, could we get an update on your thoughts around San Mateo? Another good quarter out of that entity, and I am curious how we should think about any type of strategic options for that asset this year. Joseph Wm. Foran: Gabe, that is a great question. We give that a lot of thought. Midstream has turned into a very valuable asset, not just in monetary terms, but also in providing us with efficiencies and flow assurance in the basin, where sometimes that can be difficult. It has been a great asset. One thought has been to take it public, although we are not trying to time the market. We do not want to go out unless it is a good time and we need the capital. It is an important catalyst for us because it has grown significantly—you can see the miles of pipeline that we have for flowing water, gas, and oil. It has provided great flexibility to our operating group to ensure we get our product to market. The Hubrinson deal that we have discussed is an excellent example. When Waha has had so much negative pricing, Hubrinson is coming online and moves us away from the Waha market over to Henry Hub. We think it may make as much as $0.50 an m difference, and multiplied by our gas production this year, it is an enormous difference. We are very excited about working with ET. They have been a top-notch operator, very innovative, and we see that as a great relationship that can continue to expand. We have other good partners that have given us other opportunities. Our production in the Delaware is not in one location or one field—it is now throughout the basin. We think we are set with the property set, takeaway capacity, experienced rigs, and experienced people. This is our time to continue to progress. Christopher Calvert: The one thing I would add, Gabe, is the strategic value of San Mateo and the Matador Resources Company wholly owned midstream assets to the upstream business—flow assurance and operational control. In the first quarter release, we talked at length about upstream efficiencies that come in partnership with San Mateo and the midstream business that resides here in Dallas with us. On water recycling, approximately 30% of Matador Resources Company’s water volumes used in the first quarter came from San Mateo and our wholly owned midstream assets. We are increasing investment—we began construction this quarter on a new water recycling facility that will assist and continue to grow both the upstream side from a CapEx savings perspective and revenue on the San Mateo side. From a gas use perspective, field-use gas has been utilized in Southeastern Lea with many Matador operations to mitigate diesel spend. Flow assurance and operational control are priorities as we analyze dropdowns or further strategic alternatives for San Mateo. We do not need the cash; we want the right deal that increases value to Matador Resources Company shareholders and pulls that value forward. Glenn Stetson: Gabe, I would add on field gas. By using field gas as opposed to compressed natural gas that is trucked to location for frac, we save an average of $100,000 per well. That advantage is in large part due to our unique relationship with San Mateo, Matador Resources Company’s midstream company. In Q1, with prices at negative Waha, in addition to those $100,000 capital savings, we are burning that gas in the field for hydraulic fracturing operations as opposed to selling it at negative Waha pricing. Operator: Our next question comes from an analyst with JPMorgan. Please go ahead. Analyst: Hi. Good morning, and thanks for taking my question. One thing you mentioned in the release is that you drilled your first Woodford well. Could you give us a little more detail there—what are your expectations on that well, and what could the inventory opportunity set look like for the Woodford if that well proves successful? Christopher Calvert: Hey, thanks. This is Christopher Calvert, and I will pass it to Andrew in a second. You can look at surrounding offset production. We have strong, encouraging expectations that this well will come on from a hydrocarbon perspective. Operationally, we are moving right along. This well has been successfully drilled and cased with completion operations ongoing. From a productivity standpoint, we expect to discuss this on the next call in July. Andrew? Andrew Parker: Thanks. This is Andrew Parker, EVP of Geoscience. We are really excited about the Woodford. This is a huge catalyst for us this year. The land team has done a tremendous job putting this position together, and the whole team has done a tremendous job executing on this first well. It is still early, but we like our position and our chances here. We look forward to reporting more later in the year—so far, so good. Tom Nelson: And I would just remind everyone that we have not currently counted any of the Woodford in our inventory today, either in reserves or in the lease position. That would be upside if we get success there. Operator: Our next question comes from an analyst with Capital One. Please go ahead. Analyst: Thanks for the time. I wanted to ask about your quarterly CapEx cadence for the year. Your second quarter guidance implies you will spend around 55% to 60% of the budget in the first half. How should we think about the shape for the second half—fairly ratable at a little over $300 million in both Q3 and Q4, or is one quarter significantly steeper than the other? Christopher Calvert: This is Christopher Calvert. The 55% to 60% range that we guided to in February is intact. The first quarter, where we came in at the April 28 release, was right in line with expectations. The second quarter midpoint, combined with Q1, puts us right in that 55% to 60% range. About 50% of our turns-in-line are occurring in the first half of this year, so you would expect a sizable drop in the back half. As efficiencies shift, it is too early to put a precise capital cadence on Q3 and Q4, other than that both will be down from the second quarter number. Operator: Our next question comes from Paul Diamond with Citi. Paul, please go ahead. Paul Diamond: Good morning, and thanks for taking the question. I wanted to touch on your D&C per lateral foot. Can you talk about the leverage you see available in the coming quarters and the trajectory to get down to that sub-$800 level? Christopher Calvert: This is Christopher Calvert. The range we put forward at the beginning of the year—$785 to $805—is about 6% down from 2025. The levers to maintain and finish toward the bottom end of that range are similar to what we have discussed in the past: multi-well completions; utilization of Simul and TrimalFrac; full utilization of electric fleets with about a 90% reduction in diesel usage; continued improvements in water recycling—we recycled over 70% of our water from recycled sources in 2026 and are pushing that further; and drilling/completing wells in shorter cycle times. Year over year, we are about 13% faster on average cycle times. The really impressive gains are in the deeper parts of the basin as we extend laterals. For three-mile laterals, our best this year was drilled in under 16 days, a 40% improvement versus 2025. Additional levers include vendor relationships, AI integration within operational processes, MaxComm integration—our MaxComm room is now in its eighth year—continuing to see records broken, including three-mile U-turns. The list of levers to keep improving that number is long. Operator: Our final question this morning comes from an analyst with BMO. Please go ahead. Analyst: Thanks. Good morning. Another Delaware operator this week talked a lot about AI. How is Matador Resources Company either implementing or looking at this in its operations to enhance efficiencies on the optimization side and also help on the drilling and completion side? Joseph Wm. Foran: Phil, we have team-tackled that here. Contributions to executing a competent AI program are coming from different people. It is a committee working together. Glenn Stetson is somewhat the leader, with Jordan Ellington, and the effort is to understand it, think about applications, and make sure there are not missteps. We are going in a controlled, organized fashion with the group working together. It builds confidence. We are learning it at a measured pace. We see uses for it, but like any tool, you have to be careful and be sure you understand its use. Glenn can give more specifics. Glenn Stetson: We are continuing to increase our integration of AI-driven analytics in almost every facet of our operation. On the production side, we bring in over 40 million data points a day, and our control room monitors those data points with our field staff in real time. The goal is to make them actionable to reduce downtime and identify inefficiencies quickly. On the completion side, we are monitoring in real time the hydraulic fracturing operations—the pressures and volumes on the water and sand sides—and even logistics. That is increasingly important as we expand the use of Simul and TrimalFrac. On the drilling side, with MaxComm, we set over 36 records just in this quarter across different hole sections and in the lateral. We are using AI to help target in the lateral, ensuring we are not just in the preferred target, but in the preferred portion of the preferred target, while drilling faster. Putting it all together, you get the results you saw in Q1 that we hope to continue to replicate and improve. Unknown Speaker: I think that is right, Joe. We are really proud of the methodical approach we are taking. We see clear benefits and real applications that deliver value. We will be fast followers here—we are not going to jump in and make a bunch of mistakes. We are taking the right measured approach. Operator: Thank you. This ends the Q&A portion of this morning’s call. I would now like to turn it over to management for any closing remarks. Joseph Wm. Foran: Thank you very much. I encourage those listening, if you have follow-up questions, to please call Mac Schmitz here at the office. Mac, give them your number. Mac Schmitz: You can reach me at the investor’s inbox, which is investors@matadorresources.com, and the phone number is (972) 371-5225. We are always available. Joseph Wm. Foran: Second, if you are in the area, come by. We are a public company, and we like meeting our shareholders. We began not through private equity, but through friends and family, and we try to perpetuate that feeling today. We like knowing our shareholders and all of our owners and want you to know that we are putting your interests first. I also want to invite you to our annual meeting this summer. We will have a display of equipment—you can see the drill bits we are actually using and meet the young engineers and geologists who have led this successful program, and the same on our completion activities. Cliff has done an excellent job of continuous improvement of our fracs, working closely with our vendors and their research. The industry has made great strides over the last 40 years and is still making progress. Our outlook is very good. We take a team approach on all of this. If you have other questions, call Mac and we will take care of you. Back to you, Stacy. Operator: Ladies and gentlemen, thank you for your participation today. This concludes today’s program.
Operator: Good morning, and welcome to the Service Properties Trust First Quarter 2026 Earnings Conference Call. There will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the call over to Kevin Barry, Senior Director of Investor Relations. Please go ahead. Kevin Barry: Good morning. Thank you for joining us today. With me on the call are Christopher J. Bilotto, President and Chief Executive Officer; Jesse Abair, Vice President; and Brian E. Donley, Treasurer and Chief Financial Officer. In just a moment, they will provide details about our business and our performance for the first quarter of 2026, followed by a question and answer session with sell side analysts. I would like to note that the recording and retransmission of today's conference call is prohibited without the prior written consent of the company. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Forward-looking statements are based on Service Properties Trust’s beliefs and expectations as of today, 05/07/2026, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission which can be accessed from our website at svcreit.com or the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO, adjusted EBITDAre, and hotel EBITDA. A reconciliation of these non-GAAP figures to net income is available in Service Properties Trust’s earnings release and presentation that we issued last night, which can be found on our website. Lastly, we will be providing guidance on this call, including estimated 2026 normalized FFO, hotel EBITDA, net operating income, or NOI, and adjusted EBITDAre. We are not providing a reconciliation of these non-GAAP measures as part of our guidance because certain information required for such reconciliation is not available without unreasonable efforts or at all. I will now turn the call over to Christopher J. Bilotto. Christopher J. Bilotto: Thank you, Kevin. Good morning, everyone, and thank you for joining the call today. Last night, we reported first quarter 2026 results which reflect measurable progress advancing Service Properties Trust’s strategic initiatives. We materially strengthened our financial position with roughly $1.5 billion in capital markets activity, enhancing our overall leverage profile and debt maturity schedule. We continue to advance our capital recycling program and remain focused on active asset management across both our hotel and net lease properties. These initiatives serve as a catalyst toward driving performance for the company and improving cash flow. I will begin today's call with an update on our strategic priorities, followed by highlights from our hotel portfolio performance during the first quarter. Jesse will then discuss our net lease business, and Brian will conclude with a review of our financial results, balance sheet, and financial outlook. Since the start of the year, we executed a capital plan that significantly strengthened our balance sheet and strategic positioning. In March, we closed $745 million of accretive ABS financing secured in part by 34 of our travel centers leased to TA, reinforcing the attractiveness of these assets. In April, we completed a $575 million underwritten equity offering that was intentionally sized to delever and improve our credit metrics. Importantly, RMR Group, our manager, invested $50 million alongside shareholders, underscoring strong alignment and confidence in our strategy. Taken together, along with cash on hand, we retired $1.6 billion of debt resulting in annualized cash interest savings of $59 million. We enter the remainder of 2026 with a stronger financial foundation and greater flexibility to execute our repositioning strategy and operational plans within our hotel portfolio, focused on driving EBITDA improvement and value creation. Turning to hotel performance. During the first quarter, RevPAR across our 93 hotels increased 6.7% year-over-year, primarily driven by broad-based occupancy gains across all service levels, with notable strength in the full service segment. Hotel EBITDA across the portfolio decreased 9.2% year-over-year to $18.4 million, though this reduction was partially impacted by a $2.4 million decrease tied to the 15 properties currently being marketed for sale. As a reminder, our full-year guidance contemplates the expected losses related to these marketed hotels. More importantly, the underlying performance of our 78-hotel retained portfolio was even stronger. Excluding the assets marketed for sale, RevPAR grew 7.5% year-over-year. Hotel EBITDA increased 2.1% to $26.2 million. This was achieved despite the known revenue displacement from our ongoing redevelopment of the Nautilus in South Beach. This outperformance is driven by our strategic concentration in higher STR chain scales, our footprint in premier resort destinations, including Kauai, San Juan, and Hilton Head, and the uplift we are seeing from completed renovations. Our focus remains squarely on capturing the margin flow we believe this portfolio is capable of generating as it ramps up over the next few years. Following several years of significant capital investment to reposition these assets, Service Properties Trust is well positioned to drive revenue uplift and outsized EBITDA growth. Over the last four years, approximately half of our retained hotels completed or are currently undergoing major renovations. To ensure we capture the performance improvement and margin flow-through anticipated over the coming years, our asset managers are actively engaging with our operators to refine operational synergies and streamline property-level execution. While we acknowledge the broader macro headwinds, including geopolitical uncertainty, elevated fuel costs, and lagging international and government travel, we remain confident that this active asset management approach will uncover varying opportunities to improve efficiencies and deliver stronger results. Turning to hotel dispositions. During the quarter, we advanced our capital recycling initiatives, selling a 133-key focused service hotel for $7.1 million, and progressed the marketing of 15 Sonesta-managed hotels totaling approximately 3 thousand keys. We removed one Sonesta Select property from the process to reassess its positioning; however, we retain an active and engaged roster of buyers for the remaining properties. Across the broader marketed hotels, pricing has come in softer than our initial outlook. This dynamic only reinforces our strategic commitment to exit these hotels and reallocate capital. Buyer demand for the eight focused service properties was strong, resulting in nearly 30 bids from more than a dozen unique buyers. Pricing was generally consistent with the average per-key valuation we achieved on open service hotels over the past year. Specific to these eight hotels, we have signed letters of intent with buyers for total proceeds of approximately $61.2 million, which we intend to use to repay debt. For the seven full service hotels, bids for this operationally challenged sub-portfolio have fallen below initial targets. Despite this, we are prioritizing the exit of these properties, with six of the seven hotels awarded to buyers for expected proceeds of $55.3 million. We anticipate an update on the final property in the coming quarter, which we expect will increase our total proceeds. From a strategic standpoint, holding these assets is not aligned with our long-term goals. Together, these marketed hotels represented $7.8 million of losses in the first quarter while carrying material future capital requirements. Exiting them now, regardless of the softer pricing environment, eliminates a significant drag on our earnings and preserves capital. More importantly, it allows us to pivot our full attention and resources toward our retained core portfolio, driving growth in markets and properties where we have the greatest opportunity for margin expansion. In summary, Service Properties Trust’s portfolio transformation is well underway, supported by our recently improved capital structure and the operational upside within our hotel assets. We are focused on our initiatives supporting Service Properties Trust’s continued shift to an increasingly net lease-oriented portfolio. Ultimately, we believe this combination of selling assets and operational improvement will drive durable cash flow and create attractive long-term value for our shareholders. I will now turn it over to Jesse. Jesse Abair: Thanks, Chris, and good morning. At quarter end, Service Properties Trust’s net lease portfolio contained 701 properties across 42 states with annual base rents of $392 million. The portfolio was approximately 97% leased with a weighted average lease term of 7.3 years. We have 185 tenants operating under 140 brands across 21 distinct industries. The aggregate coverage of our net lease portfolio’s minimum rents was 2.01x on a trailing twelve-month basis as of 03/31/2026, up slightly from last quarter. The improvement was driven in part by our [inaudible] 1.24x, up from 1.2x in Q4. During the quarter, our asset management team executed 20 leases totaling 219 thousand square feet, averaging over six years of term, with a cash rent roll-off of 8.5%. Looking ahead, portfolio lease expirations remain well laddered, with less than 5% of annualized rents expiring through 2027. NOI from our net lease portfolio declined $2.2 million year-over-year, primarily driven by credit loss reserves recorded for certain leases and related operational expenditures, which was partially offset by a $2 million positive impact from our acquisition activity. As we enter 2026, we shifted to a more measured pace of net lease acquisitions, targeting approximately $25 million of annual volume funded through capital recycling. Since the beginning of the year, we invested in four properties totaling $9 million, which were primarily funded with the proceeds from 13 net lease dispositions. Consistent with our investment focus on resilient necessity-based brands with limited e-commerce exposure, our acquisitions this quarter included quick service restaurants and an automotive services retailer. The transactions had a weighted average lease term of over fifteen years, average rent coverage of 3.8x, an average going-in cash cap rate of 7.9%, and an average GAAP cap rate of 8.8%. As we move through the year, we will continue to actively look for ways to recycle capital by leveraging our new and established brand relationships while pursuing growth opportunities in the form of sale-leasebacks and off-market deals. Our proactive asset management efforts and disciplined capital recycling strategy should allow the net lease portfolio to continue to function as a stable foundation for Service Properties Trust as it implements its broader transformation. And with that, I will turn the call over to Brian to discuss our financial results. Brian E. Donley: Thank you, Jesse, and good morning. Starting with our consolidated financial results for the first quarter of 2026, normalized FFO was $7.4 million, or $0.04 per share, down $0.03 per share compared to the prior-year quarter. Normalized FFO this quarter as compared to the prior-year quarter was primarily impacted by a $7.2 million, or $0.04 per share, decline in hotel results. Our hotel disposition activity accounted for $5.3 million of the decline, and $1.9 million was a result of the performance of the 15 hotels we are selling, partially offset by earnings growth in our 78 retained hotels as of quarter end. NOI from our net lease portfolio declined $2.2 million, or $0.01 per share, over the prior year on credit losses recorded during the quarter. Interest expense declined by $5 million, or $0.03 per share, in the period as a result of our capital markets activity. Turning to our hotel portfolio performance, for our 93 comparable hotels this quarter, RevPAR increased by 6.7%, and gross operating profit margin percentage declined by 70 basis points to 20.4%. Below the GOP line, costs at our comparable hotels increased by $5.4 million from the prior year, driven by higher insurance expenses. Our comparable hotel portfolio generated adjusted hotel EBITDA of $18.4 million during the quarter, a decline of $1.9 million, or 9%, from the prior year. The 15 Sonesta exit hotels we are currently marketing for sale generated RevPAR of $49, a decline of 3%, and produced losses of $7.8 million for the quarter, a decline of $2.4 million year-over-year. The 78 hotels in our retained portfolio generated RevPAR of $113, an increase of 7.5% year-over-year, and adjusted hotel EBITDA of $26.2 million during the quarter, an increase of 2% year-over-year. Hotel EBITDA declined $3.8 million for the seven hotels under renovation, including our South Beach hotel. The 86 hotels not under renovation increased EBITDA by $1.5 million, or 8%, over the prior year. Turning to the balance sheet. We have been active in the capital markets and took steps to further strengthen our balance sheet, improve our debt maturity ladder, and our cash flows. During the first quarter, we repaid $300 million of our February 2027 4.95% unsecured senior notes with cash raised from asset sales. We completed our second ABS offering for $745 million at a blended interest rate of 5.96%, with a maturity of March 2031. We securitized 158 net lease assets, including 34 travel centers, demonstrating the value of these assets and their attractiveness to investors. We used the proceeds from this offering to fully redeem all $700 million of our 8.38% senior unsecured guaranteed notes due June 2029, resulting in an annual cash interest savings of approximately $14 million. We also raised net proceeds of $542.3 million from our recent equity offering and redeemed all $450 million of our outstanding 5.5% senior guaranteed unsecured notes due 2027 and the remaining $100 million of outstanding 4.95% senior unsecured notes due in February 2027, resulting in additional annual cash savings of $29.7 million. Following these capital market transactions, we currently have $4.7 billion of debt outstanding with a weighted average interest rate of 5.65%. We have no unsecured debt maturities until 2028, and our 2027 and 2028 secured debt maturities have substantial refinance optionality supported by strong net lease collateral. Further, Service Properties Trust was recognized last week by Moody's, which upgraded its corporate family rating, underscoring clear progress we are making in strengthening our financial profile. Turning to our capital expenditure activity. During the first quarter, we invested $21.5 million in capital improvements. First-quarter activity was largely driven by the renovation of the Nautilus in Miami, as well as projects at the Royal Sonesta properties in Boston, Washington, D.C., and Austin, Texas. Turning to our annual guidance. We are reaffirming our full-year outlook for hotel EBITDA, net lease NOI, and consolidated adjusted EBITDAre. First-quarter normalized FFO results were in line with our expectations and reflect the anticipated seasonality of our hotel portfolio and the planned renovation displacement embedded in our initial guidance. We are increasing our normalized FFO range as a result of our debt repayments to $124 million to $144 million, or $0.24 to $0.27 per share. The per-share amounts assume a weighted average share count of 526 million shares. This full-year guidance assumes midpoint interest expense of $360 million and G&A expense of $40 million. This guidance does not reflect the impact of completing any of the 15 Sonesta hotel dispositions and continues to assume $25 million of capital recycling in our net lease portfolio. We continue to expect total CapEx for the year of $121.14 billion. To conclude, our first-quarter results demonstrate continued momentum repositioning Service Properties Trust and strengthening the company's cash flows, supported by our strategic capital market transactions. As we move forward, we remain focused on growing EBITDA and further optimizing Service Properties Trust’s portfolio to drive sustained value for our shareholders. That concludes our prepared remarks. We are ready to open the line for questions. Operator: We will now open the call for questions. The first question today comes from Jack Armstrong with Wells Fargo. Please go ahead. Jack Armstrong: Hey, good morning. Thanks for taking the question. First one for me on the net lease operating expenses, up roughly $2 million both sequentially and year-over-year, which by our math drove the majority of the miss versus our estimates. Can you talk a little bit about the moving pieces there and how we should be thinking about the run rate for the rest of the year? And then just on rent coverage in the rest of the portfolio, can you talk a little bit about what drove the expansion in coverage for the TA portfolio? How you expect that to develop over the remainder of the year? And then also walk us through any changes on your tenant watch list. We noticed you have got a couple that are well below 1x coverage, with both down significantly from Q4. And then jumping over to the hospitality side of things, pretty strong RevPAR in the quarter and even stronger in the retained portfolio, but margins are still down 10 basis points. Can you talk about what happened there on the expense side and any expectations you may have for improvement over the course of the year? And then kind of with that in mind, what is giving you confidence in the unchanged hotel EBITDA annual guidance there with booking trends into the rest of Q2? And last one for me, just at the corporate level. Could you maybe provide an update on the change you are planning to make to the board as well as the new leadership at Sonesta and how you expect both of those to impact your strategy as we go to the back half of the year? And then also, if you are considering waiving your bylaw limiting individual holders to 5%? Jesse Abair: Sure, Jack. This is Jesse. I will take the first part. As I mentioned, we booked about $2 million in credit losses. A portion of that was expenditures related to those assets, and the bulk of that was property taxes. We have two franchisees that filed for bankruptcy, so we are essentially covering the property taxes in the meantime. On a go-forward rate, in our opinion this is a one-time hit. With respect to these assets, they are all really good performers for us. The expectation would be that they would ultimately come out of bankruptcy and get transitioned either to new franchisees or back to corporate and get back to a rent and OpEx paying state. With respect to TA coverage, our perception of that is twofold. TA has historically benefited from pricing volatility, which we are seeing as a function of some of the geopolitical situation in the Middle East. Typically there is a lag between wholesale and retail pricing, and so TA has been able to take advantage of that. That, coupled with what we saw from freight operators nationally—which was an increase in freight demand as some regulatory changes removed excess capacity from the roads—helped freight pricing. Industrial demand was up, in part due to data center construction and related activities. Some of that is likely transitory, related to the Middle East situation. Some of that from the freight demand side is hopefully going to be more persistent. Either way, there is an opportunity there for that to provide something of a bridge as TA, with new leadership, advances its business improvement plan and, hopefully, implements more structural changes to drive EBITDA growth going forward. On the tenant watch list, we have a small exposure to drugstores and movie theaters; we are watching those. The bulk of the near-term issue relates to the two franchisees I mentioned earlier. Other than that, performance has been pretty consistent across the portfolio. Brian E. Donley: Good morning, Jack. This is Brian. On hotel margins, one of the big impacts we had this quarter was rising insurance costs. We had premium increases on the liability side that hurt margins, and there were some deductibles that were recorded for different incidents across the portfolio. Some of those recur here and there, but the premiums were the bigger driver. Labor was not an outsized impact; overall labor costs were up about 3% year-over-year. We are continuing to work closely with our operators on staffing models. As we move forward, Q1 is typically seasonally weaker. As we go into the stronger summer season, we should drive more margin through the portfolio. Expense management and labor modeling are at the forefront to improve flow-through. Regarding confidence in the unchanged hotel EBITDA annual guidance and booking trends, a lot of the things that impacted Q1 were already factored into our guidance range. There is still more to play out in the broader economy and from citywide events, including the World Cup and things of that nature, where nobody has perfect visibility on the total impact. We feel like trends are pretty good into the spring and early summer. Our RevPAR growth into April was comparable to what we saw in Q1, so those patterns have continued. We have not seen signs of slowdown, and there is still more to play out as the summer rolls through across our portfolio. We are going to continue to see uplift from hotels where renovations were completed last year; we are still building back group and contract business at those hotels that were displaced last year, and we see more opportunities there as the year progresses. Christopher J. Bilotto: On the corporate items, with respect to the board, as communicated in our public announcements, we are working toward bringing on a new board member with lodging experience, and that process continues to advance. Nothing to report today, but we believe this will be constructive for the company and governance. Regarding Sonesta’s new leadership, the new management team came on board effective in April. We are just over thirty days into that, and the team is off to a strong start identifying and unpacking changes at HoldCo and how those will inform hotel performance. We feel optimistic about the initiatives we are collectively discussing, including revenue mix—driving more group and contract business—and deploying new tools across operators, such as using AI for better lead generation and competitive set insights. On expenses and margins, we are reevaluating property-level offerings and how that impacts labor, including contract labor, which we anticipate will continue to decline. There is also an effort to expand the global sales team to better leverage our renovation program and stronger market positioning to drive group and contract business. Lastly, we are continuing to build out the loyalty program to increase direct business through brand.com and reduce more expensive OTA acquisition costs. On the 5% ownership limit, if you look at the April equity offering, we provided waivers to certain groups that own more than 5%. We are not changing the policy formally, as it is in place to protect certain tax attributes of the company as a REIT, but we evaluate waivers on a case-by-case basis. Operator: Your next question comes from Tyler Batory with Oppenheimer. Please go ahead. Tyler Batory: Hey, good morning. Thanks for taking my questions. A couple from me here. First, I wanted to follow up on the asset sales on the hotel side of things—the 15 you have in the market right now. Any help on the timeline for those? And then the seven full service hotels—could you give us some more guideposts on potential pricing for those assets? And I am also curious why performance at those properties has been so challenged. And then post-equity raise, where are you in terms of your covenants? And just talk about some of the additional flexibility that you have post doing that equity transaction. Lastly, on the 2027 senior secured notes—there is an extension option—just talk about the conditions that allow you to extend that, and should we assume that gets pushed to 2028? Christopher J. Bilotto: On timing, other than one hotel, we have identified or signed term sheets with buyers. There is a range of processes: more than half the portfolio deposits will go hard with no real diligence and a roughly 90-day period to close; the balance will follow a more traditional diligence period and then close. We have discussed these sales transacting in the back half of the year, and that remains the right bogey. We may take down incremental pieces over Q3 and Q4 rather than all at year-end. On performance, we are selling these hotels because of our conviction around reallocating capital and the markets where these assets sit, along with the capital they would need. The performance decrease reflects where they sit in certain markets and is not inconsistent with broader trends in those markets. There is also some disruption as you go through a sale process. All of this reinforces our conviction to exit and reduce cash drag for the company. On pricing, the seven full service hotels have received bids below initial targets; six of the seven are awarded for expected proceeds of $55.3 million, and we anticipate an update on the final property in the coming quarter. Brian E. Donley: As of Q1, post equity raise we paid down the $550 million of 2027 notes, which provided significant cushion on both our leverage and interest coverage covenants. Debt-to-assets on the 60% test improved from 59% to 53%, and interest coverage was at 1.75x. We were strategic in sizing the equity to navigate maturities and provide flexibility to refinance future debt within covenant limits. Regarding the zero-coupon notes, we have options: we can use asset sale proceeds to pay down some of the balance, and those notes are also backed by one of the travel center leases, which provides increased flexibility. For the 2027 senior secured notes, we do have a one-year extension option; it becomes a cash-pay instrument during the extension with a step-up scale over the extension period. It is more likely we will refinance those out rather than extend, but it is too early to be definitive given the September 2027 timing. Operator: Your next question comes from John Massocca with B. Riley Securities. Please go ahead. John Massocca: Good morning. Maybe sticking with Tyler’s line of questioning, as you think about the proceeds from upcoming hotel sales, would those have to be used towards paying down the zero coupon, or when you talk about using asset sale proceeds to pay down the zero coupon, would it be assets that are currently collateralizing that piece of debt? And then, of the pool of full service assets you are looking to sell this year, how much of the original estimate you put out is impacted by the one asset you pulled from the selling bucket versus a decline in market pricing? And on the select service assets you are selling, are those under contract right now, and what is timing? Is pricing going as expected? Switching over to the net lease portfolio, how should we think about the near-term impact of the tenant credit issues on the financials over the next couple of quarters as the bankruptcy process plays out? Was anything in 1Q particularly one-time in nature that could bounce back immediately, or is the normalization tied to retenanting? Given the nature of the bankruptcy declaration, would you expect some of the metrics to bounce back as soon as 2Q? Brian E. Donley: On the zero-coupon notes, it is not required that proceeds from hotel sales be used to pay them down. We will be thoughtful. Those notes were issued at a discount and effectively amortize; paying them off early would extinguish that discount. We also have a small variable funding note of $45 million that matures in early 2027 that we could pay down. We could sit on cash and address closer to maturity based on market conditions and strategy, so there is flexibility. Regarding full service sale proceeds, the combined awarded bids we discussed are about $116 million. The removal of the one asset was approximately $5 million. There is one large full service asset still in the market that is not in the $55.3 million number, and we expect pricing on that in the near term, which would increase total proceeds. Christopher J. Bilotto: On the select service assets, everything has been awarded or is under LOI. Most of those would close on an earliest path over roughly a 90-day period. A fair bogey is mid–Q3 on the early end, and we will see how each process plays out. Pricing on those also came in light, but generally consistent with the per-key valuations we saw last year. Jesse Abair: On the tenant credit items, these are two franchisees we had been engaged with for some time, so we knew it was likely to hit; it just happened to occur this quarter. We do not view this as thematic. We expect the bankruptcy processes to play out and result in outcomes such as transitions to new franchisees or back to corporate, which would improve the credit profile. We expect to get back to rent-paying status, and there is potential for some recovery of back rent and OpEx, though that remains to be seen. This is largely a timing function. The assets involved are solid and happen to be in our QSR space, which otherwise is performing well. The timing of a bounce-back will depend on the proceedings; it could be Q2 or Q3, but within that general timeframe. Brian E. Donley: On your final question regarding the apparent delta between about $17 million of interest expense savings implied by the equity raise and about $14 million of uplift on normalized FFO in guidance, the difference is really the net lease credit losses we just discussed. We are trending toward the lower end of net lease guidance, which offsets some of that interest benefit. Operator: This concludes our question and answer session. I would like to turn the conference back over to Christopher J. Bilotto, President and Chief Executive Officer, for any closing remarks. Christopher J. Bilotto: Thank you for joining our call today. We look forward to seeing many of you at upcoming industry conferences, including NAREIT in June. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the DLH Holdings Corp. Fiscal 2026 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Chris Witty, Investor Relations Advisor. Please go ahead, Chris. Chris Witty: Thank you, and good morning, everyone. On the call with me today is Zachary C. Parker, President and Chief Executive Officer, and Kathryn M. Johnbull, Chief Financial Officer. The company's earnings release and PowerPoint presentation are available on our website under the Investor page. I would now like to provide a brief Safe Harbor statement, which is also shown on Slide 3 of the presentation. This call may include forward-looking statements that relate to the company's outlook for fiscal 2026 and beyond. These statements are subject to various risks and uncertainties and could cause actual results and events to differ materially from such statements. Please refer to the risk factors contained in the company's Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. On today's call, we will be referencing both GAAP and non-GAAP financial measures. A reconciliation of our non-GAAP results to our reported GAAP results is included in our earnings release and in the investor presentation on DLH Holdings Corp.'s website. President and CEO, Zachary C. Parker, will speak next, followed by CFO, Kathryn M. Johnbull, after which we will open it up for questions. With that, I would now like to turn the call over to Zachary C. Parker. Please go ahead, Zachary C. Parker. Zachary C. Parker: Thank you, Chris Witty, and good morning, everyone. Welcome to our second quarter conference call. I am pleased for the opportunity to report our financial results and provide color regarding the current environment and our outlook. As I begin, I would like to recognize the performance of our highly skilled workforce. Our people are our number one asset as a company, and we lean on the passion, creativity, and expertise of our staff in order to succeed. This past quarter, you once again demonstrated the innovative thinking required to support our customers' critical missions and delivered excellence across the way. We continue to thank everyone at DLH Holdings Corp. for this execution. Now turning to Slide 4, I will provide an overview of the federal marketplace achievements and financial performance. The fiscal 2026 budget cycle is now complete, and the 2027 outlook is coming into full focus. We believe that the current federal funding environment is favorable to DLH Holdings Corp. Clients across our markets have increased funding capacity and improved budget visibility, allowing for a steadily improving procurement environment. Key federal health agencies received FY 2026 funding increases compared to FY 2025 levels, reversing in part the previously proposed funding reductions outlined by the President's request for fiscal 2026. Agencies in the defense and intelligence market have received significant budget increases that align particularly well with our capabilities. These are supported on both sides of the aisle, and we expect this to be a healthy profile for us in the years to come. We believe that the improved clarity and stability which has emerged in recent months meaningfully expands the company's addressable market and supports the company's strategic organic growth initiatives. Last year, and throughout the shutdown in our fiscal Q1, budget uncertainty and large reductions to federal agency contracting departments significantly slowed procurement activity across the government. As such, numerous key deals and strategic large procurements that we were expecting in 2025 are just now coming up for bid. We are encouraged by the increase in bidding activities and are experiencing a busy second half of the fiscal year responding to procurement requests. We expect certain award decisions over the coming months, subject to customer timelines and procurement processes. DLH Holdings Corp. continues to maintain a healthy pipeline of opportunities which will leverage our world-class workforce, our advanced capabilities, and our recently developed commercial technology differentiators to elevate our win probabilities in this pipeline. Notably, the President's recently released fiscal 2027 budget request calls for historic spending increases in the defense and intelligence sector. The administration proposes that this investment be partially offset by unspecified reductions in federal health spending. As always, the President's budget request is an initial step in the multi-phase federal budget cycle. We will remain engaged with the Hill, our customers, and influential industry groups as this process advances. Additionally, the current administration has taken several actions intended to simplify contracting and to accelerate the time required to complete transactions. We find this is very healthy for our industry. In addition to nontraditional contract arrangements that we discussed at our recent shareholder meeting, there have been executive orders to streamline the regulatory environment in contracting and to rebalance the risk-reward trade-off, moving away from some cost-reimbursement contracts to fixed-price arrangements with performance metrics. The changes align very well with DLH Holdings Corp.'s strategy and our heritage. We welcome this needed shift by our government. Our defense and intelligence customers continue to prioritize prototyping, rapid delivery, cost efficiency, digital modernization, and the integration of advanced technologies, particularly as they relate to C4ISR systems. These align very well with our DLH Holdings Corp. Cyclone and DLH Holdings Corp. Nexus Labs digital sandbox investments that are cloud-secure. In parallel, federal health agencies remain focused on interoperability, cybersecurity including zero trust architectures, cloud migration, and AI adoption. Collectively, these priorities position DLH Holdings Corp. very strongly to grow organically from these initiatives. It is always gratifying when DLH Holdings Corp. innovation and performance excellence are acknowledged by our industry. In recent months, DLH Holdings Corp.-supported projects in automation, artificial intelligence, scientific research, data science, and information technology were recognized by customer and industry organizations for outstanding program performance and significant technology achievements. We are proud of these accomplishments, as they illustrate the thought leadership, ingenuity, and passion of our employees in advancing the missions of our customers. While revenue was down year over year, largely due to the previously discussed program transitions to small business set-aside contracts—these include the VA CMOP and Head Start—we remain committed to maximizing shareholder value. Through strong project management, delivered margins, and implemented cost-scaling initiatives, we delivered adjusted EBITDA margin of 9%. As Kathryn M. Johnbull will discuss in more detail shortly, we continue to delever our commitment to the balance sheet. Total debt was reduced to $132.7 million, aligned with our debt reduction plans for fiscal 2026. In late-breaking news, we were awarded a two-year sole-source extension of one of our contracts to provide world-class clinical research support services to the National Institutes of Health. We truly appreciate the opportunity to continue this tremendous support in this critical public health mission that has been a primary focus area for DLH Holdings Corp. for decades. Overall, we remain well positioned to succeed over the coming years and are excited to vie for the high-value organic growth opportunities that our company was assembled to compete for. Our differentiated suite of data science and AI/ML technology applications, our outstanding capabilities, and our workforce alignment exceptionally well position us for work within our three strategic pillars: science, research and development; digital transformation and cybersecurity; and systems engineering and integration. As government acquisition strategies evolve, we remain prepared and proactive, leveraging speed, innovation, and agility to compete on multiple fronts in an accelerated acquisition landscape. With that, I would now like to turn the call over to our Chief Financial Officer, Kathryn M. Johnbull. Kathryn M. Johnbull? Kathryn M. Johnbull: Thank you, Zachary C. Parker, and good morning, everyone. Thanks for joining as we report on our second quarter results for fiscal 2026. Turning to Slide 6, I would like to first provide a high-level overview of some key financial metrics for the three months ended 03/31/2026. We reported revenue of $59.3 million in the second quarter, versus $89.2 million in the prior-year period, reflecting contributions from expansion on existing contracts offset by the impact of conversion of certain programs to small business set-aside contracts, as discussed in the past, and certain government efficiency initiatives. In total, the revenue contraction was mostly due to small business set-aside initiatives, primarily from CMOP and Head Start, with approximately a $24 million increase in the quarter-over-quarter results [inaudible]. The remaining change was due to year-over-year contract completions and government efficiency initiatives. We reported adjusted EBITDA of $5.3 million for the quarter, compared to $9.4 million in the prior-year period, with the decrease primarily driven by the change in revenue volumes. Adjusted EBITDA margin was 9% for the quarter, adjusting for the timing and incremental cost impact of our cost-scaling initiatives implemented in the second quarter. From a free cash flow standpoint, we generated approximately $3.8 million during the quarter. In comparison to the prior-year period, the prior year reflects the results of significant working capital build stemming from the transition of a CMOP location that restricted cash collections early in fiscal 2025. Now turning to Slide 7, I will wrap up with a summary of our debt reduction efforts, which remain a key focus area for DLH Holdings Corp. Debt reduced during the quarter to $132.7 million, a reduction from $136.6 million at the end of the previous quarter. This marks the resumption of our deleveraging trend after the typical seasonal uptick we experienced in the first quarter. We expect to convert approximately 50% to 55% of EBITDA generated during fiscal 2026 to reduce debt by year end. We remain well ahead of our mandatory repayment schedule and in full compliance with all financial covenants. With that, I would now like to turn the call over to our operator to open up for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, our first question comes from Joseph Gomes with NOBLE Capital. Joseph Gomes: Good morning. I just want to start out on the VA CMOP. Do we have anything left there? How much longer do you think that is going to run through? I know we were hoping it would end in this fiscal third quarter of this year, but maybe a little update on where we stand on that. Zachary C. Parker: Yes, I think we are still on plan with regard to that reduction. You know, the VA and our team have been working collaboratively towards standing down the final couple operations. Kathryn M. Johnbull, do you have any greater specificity for that? Kathryn M. Johnbull: Sure. Yes, our expectation is that we will wrap up the transition of those contracts just before Memorial Day. Joseph Gomes: Okay. Get that behind us. Kathryn M. Johnbull: Yes, sir. Zachary C. Parker: Yes, it obviously served us well. We remain committed, Joseph Gomes, to supporting our nation's veterans. We have still got irons in the fire for transitioning to different types of work for the VA. But once the VA changed that acquisition process, not only to small business set-aside, but changed it from being a solutions- and tech-derived execution to just butts-in-seats, we withdrew all of our joint venture bids and approached it accordingly. So it is bittersweet. As you know, we had a couple of decades of support in that arena. But we wish the small business community well. Joseph Gomes: Right, exactly. Agreed. And then, Zachary C. Parker, you talked about how there have been multiple delayed procurements. There are some going through the pipeline now, just now coming up for bids. You are hoping to hear something here in the next couple of months. I guess the concern is, obviously, every September 30th we go into a threatened government shutdown, a continuing resolution, all that, which then seems to always delay contracts. What is your comfort level of actually seeing some of these contracts be awarded in a timely manner versus getting caught back up in the whole continuing resolution issue? And then if you might be able to provide us a little more color on the nice late-breaking news of the new award that you received. Zachary C. Parker: You bet, Joseph Gomes. First of all, I will cover what we see in the market, and I will ask Kathryn M. Johnbull to address the extensions. We are always very mindful of what the headwinds could be, as we have come to know continuing resolutions and shutdown risk quite well over the recent years and certainly with this administration. We are also encouraged by some multiyear funding initiatives that have gone forward. They have already been approved, and we anticipate continuing to move forward in selected agencies. We particularly still find good strength and support on both sides for defense and intelligence budgets as well as critical health care programs, so we are pretty comfortable in that arena. More importantly, in the last quarter we have seen multiple RFPs that we have been signaling were coming, and fortunately, these have gotten under the wire before the usual September crisis. I think that was also attributed to some of the budget visibility once they got the budget passed. Customers have had pent-up demands for moving along on some of these procurements. We think that the fact that we have had three or four of the more material ones come through already, we have submitted bids, and we are hopeful that the decision process will also move forward in the coming quarter. Often for very material bids, you may see a protest or something of that nature that might delay the actual award and start of work. But we believe that we have some where we are very well positioned and that we should have decisions by this fiscal year. With regard to the contract extensions, Kathryn M. Johnbull, over to you. Kathryn M. Johnbull: Sure. Yes, as we mentioned, it is the continuation of a key contract we have been working in support of the NIH for a number of decades. It would have gone through a normal recompete cycle at the completion of its 10-year period of performance here shortly, but the NIH has decided to, or made the case to, extend it under a sole-source bridge for two years. So anytime an important part of your portfolio gets an extension and gives you additional revenue visibility, that is always very welcomed. And that is work that really reflects, as Zachary C. Parker mentioned earlier, just as we value a strong presence and continue to have interest in veterans’ health, public health is a key dimension of our portfolio and market-facing strategy for addressing every aspect of federal health care delivery. This part of our portfolio of contracts in that public health sector is very critical to us. So we are pleased and honored to be able to continue to provide that support and to get the additional revenue visibility in the short run. Joseph Gomes: Okay. Thank you for that color. And then on the cost scaling or the right-sizing, are we where we need to be for the current or the expected near-term revenue production, or do you think there might be more cost scaling that needs to occur here? Kathryn M. Johnbull: I think we have done the significant actions. We always have some strategies we are working through, and those would continue to be, as leases come due for example, continuing to evaluate our footprint in our real estate—those kinds of activities. So we continue to evaluate and assure that our cost structure remains competitive and allows our rates to stay competitive for bidding on new work. But we think that we have accomplished the material reductions that are necessary to right-size the business. Joseph Gomes: Okay, great. Thanks. I will get back in queue. Zachary C. Parker: You bet. Thank you, Joseph Gomes. Thanks, Joseph Gomes. Hearing none, do we want to reopen it for Joseph Gomes? Operator: He is not back in the queue. Joseph Gomes, if you need to requeue. Zachary C. Parker: Just give Joseph Gomes a second as he gets himself back in the queue. Operator: We will move forward. Alrighty. So with that— Zachary C. Parker: I would like to thank everyone for your participation throughout this call. Joseph Gomes, anything else? Joseph Gomes: Yes. Maybe a little more. Zachary C. Parker, you talked about some of the potential reprioritizing of federal health spending. Given what we have seen here in the past couple of years, it has been a challenging time for DLH Holdings Corp. with losing the CMOP business and Head Start, and to potentially see reprioritizing federal health spending just throws up additional challenges for the company. Maybe give us a little more of your thoughts and color on how you are going to go about addressing this. Zachary C. Parker: You bet. Great question again, Joseph Gomes. I think the best way we characterize it is, as you well know, we communicated and tried to be very transparent regarding what was largely fueled by the Biden administration's commitment to move not only the VA but a number of other agencies’ contracts to small business. We anticipated that erosion—it started in 2024 and certainly matured in 2025—and as you indicated earlier, we expect to have the final pieces of the headline set-aside for us, which was VA CMOP, running out this year. But we are also well positioned, and we are very optimistic that the RFPs and solicitations that had been earmarked for 2024, aligned with our establishment of our differentiators in data science and data analytics, were going to be fueled by RFPs in 2025. Unfortunately, as we indicated earlier, the overwhelming majority of those basically stalled. So we had a relatively flat bid cycle for the major new business deals that are just now coming around. A few of those have evolved from the government deciding to move toward some grants. The DOJ certainly impacted a lot of our clients where they did not have the acquisition officials to issue those RFPs. They have begun to stabilize that over the course of the last six months, and again we are starting to see both in the defense and intel side and in the public health arena those solicitations come back. So we have got a few we are anticipating in the next few months. We have a pretty healthy revenue potential for some that were recently submitted, so we are optimistic that the trend will continue. We are not expecting to have a series of major DOJ program budget cuts followed by historical shutdowns in the coming months. And the global challenges, including the war in the Gulf, are going to keep a strong commitment of funding and rapid development initiatives for the defense and defense health arena as well. So right now we do see good optimism that the flatness in terms of opportunities for us to compete in 2025 is starting to break, and that is good for us. What we thought was going to be a pretty quick V-curve turned out to become a little more of a bathtub, but we are starting to see the opportunities hit now and certainly feel that we will be able to compete favorably for our share. Joseph Gomes: Thanks for that color, Zachary C. Parker. Much appreciated, and I am looking forward to starting to see some wins be put up on the board here after, as you said, a challenging period—nothing to really do with you guys, it is the government itself—but it would be nice to start to see the engine start back up again and be moving strongly going forward. Zachary C. Parker: We absolutely cannot wait. Yes, 100%. Kathryn M. Johnbull: Yes. Operator: This concludes our question and answer session. I would like to turn the conference back over to Zachary C. Parker for any closing remarks. Zachary C. Parker: Well, again, I want to thank you all for your interest in DLH Holdings Corp. We remain committed to driving shareholder value. We are looking forward to chatting with you in the coming quarters, and we ask everyone to have a blessed day. Joseph Gomes: And we will talk again soon. Zachary C. Parker: Bye for now. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to the BGC Group, Inc First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Jason Chryssicas, head of investor relations. Thank you. You may begin. Jason Chryssicas: Hello, everyone. This morning, we issued BGC Group, Inc’s first quarter 2026 financial results, which can be found at ir.bgcg.com. Any historical results provided on today’s call compare only to 2026 with the prior year period unless otherwise specified. All references on today’s call to historic record and strongest results are to BGC Group, Inc stand-alone financial results, excluding Newmark prior to the spin-off in November 2018. We will be referring to our results on a non-GAAP basis, which include the terms adjusted earnings and adjusted EBITDA. Refer to today’s investor materials on our website for additional details on our financial results and for complete and updated definitions of any non-GAAP terms, reconciliations of these items to the corresponding GAAP results and how, when, and why management uses them, as well as relevant industry and economic statistics. The outlook discussed today assumes no material acquisitions or dispositions. Our expectations are subject to change based on various macroeconomic, social, political, and other factors. Information on this call contains forward-looking statements, including, without limitation, statements about our economic outlook and business. Statements are subject to risks and uncertainties, which could cause our actual results to differ from expectations. Except as required by law, we undertake no obligation to update any forward-looking statements. For information on factors that could cause actual results to differ from the forward-looking statements, and a complete discussion of the risks and other factors that may impact these forward-looking statements, see our SEC filings, including, but not limited to, the risk factors and disclosures within these SEC documents. With that, I am now happy to turn the call over to John Joseph Abularrage, Chief Executive Officer of BGC Group, Inc. John Joseph Abularrage: Thank you, Jason. Good morning, and welcome to our first quarter 2026 conference call. With me today are my fellow Co-Chief Executive Officers, Sean A. Windeatt and Jean-Pierre Aubin, along with our Chief Financial Officer, Jason Williams Hauf. BGC Group, Inc delivered another record quarter. Revenues increased 44% to $955 million, with growth across every asset class and geography. Excluding OTC, revenues grew 23% to $817 million, which was also a record. Pretax earnings hit an all-time high, up more than 44%. Our ECS revenues more than doubled to $330 million, reinforcing our position as the world’s largest energy broker. FMX posted its best ever quarter, setting ADV records for U.S. Treasuries, FX, and futures. FMX UST ADV grew 51% in the first quarter to a record $90 billion, representing 41% market share. We built on last year’s $25 million cost reduction program, which is now expected to result in $35 million of annualized cost savings. We will continue to identify and execute cost savings throughout 2026 to drive further margin expansion. A final point on the macro backdrop. The Iran conflict, which began on February 28, drove elevated volatility across energy, rates, and FX through the final month of the quarter. Through February 27, before the conflict began, revenues were tracking up 41%. Finishing the full quarter up 44% reinforces that our record results this quarter were driven primarily by our underlying business, with the conflict serving only as an incremental contributor. With that, I would like to turn the call over to Sean to go over the quarterly results of the business in more detail. Sean A. Windeatt: Thank you, John. We delivered record revenues of $955.5 million, a 43.8% increase versus last year. Our total brokerage revenues grew by 46.7% to $895.8 million, driven by growth across all asset classes. ECS revenues grew by 120.1% to $330 million, driven by the acquisition of OTC and strong organic growth across our broader energy complex and shipping businesses. Rates revenues increased 27.5% to $256.2 million, reflecting strong growth across listed futures and options, interest rate swaps, and government bonds, supported by continued FMX UST market share gains. Foreign exchange revenues were up 19.1% to $131 million, primarily due to strong volume growth in emerging market and G10 products. Credit revenues increased by 8.2% to $94.1 million, driven by higher emerging market credit, Portfolio Match, and structured credit volumes. Equities grew by 34.3% to $84.5 million, reflecting strong market share gains across all major geographies and global equity volatility. Data, network, and post-trade revenues grew by 23.2% to $34.5 million, excluding KACE, which we sold in 2025. This growth was driven by Lucera and Fenics market data, including KACE. Data, network, and post-trade revenues grew by 6.1%. Now turning to Fenics. Fenics revenues increased by 19.8% to a first-quarter record of $206.9 million. Fenics Markets generated revenues of $176.7 million, an increase of 20.3%. This growth was driven by higher electronic trading volumes across rates, credit, and foreign exchange, and increased Fenics market data revenues. On December 31, 2025, we completed the sale of our KACE Financial business for up to $119 million. Excluding KACE, Fenics Markets grew by 24.1%. Fenics Growth Platforms revenues grew to $30.2 million, a 17.4% increase, primarily driven by FMX, Portfolio Match, and Lucera. FMX UST generated record quarterly ADV of $89.7 billion, 51% higher compared to last year. FMX UST grew its first-quarter market share to 41%, up from 39% last quarter and 33% a year ago. In March, ADV reached $107 billion, the single highest month in the platform’s history. The FMX futures exchange delivered another quarter of significant growth. SOFR ADV climbed to more than 39 thousand contracts in 2026, up from 2.2 thousand contracts a year ago, while quarter-end open interest reached approximately 143 thousand contracts compared to 8 thousand in the prior-year period. FMX’s U.S. Treasury futures developed momentum in April, with volume building throughout the month to a new high of approximately 30 thousand contracts on April 29, 2026. FMX FX average daily volumes increased by 42% to a record $20.5 billion, driven by strong growth across spot FX and NDF volumes, resulting in continued market share gains. Portfolio Match ADV grew by 42% in the first quarter, setting a new all-time high. Growth was driven by higher client activity across U.S. and EMEA corporate credit, reflecting new and deepening customer relationships and broad-based adoption of recently launched trading functionalities. Average trade size grew to record levels, supported by an increase in the platform’s global maximum trade size. Portfolio Match continues to capture market share in this critically important part of the credit market. Lucera, Fenics’ network business providing critical real-time trading infrastructure to the capital markets, grew revenues by 22.8% in the first quarter. Growth was led by continued momentum in its FX offering and increasing client adoption across fixed income solutions, including U.S. Treasuries and futures. Looking ahead, a pipeline of new products across both FX and fixed income is set to come online, which is expected to provide meaningful sources of new incremental growth. And with that, I would now like to turn the call over to Jason. Jason Williams Hauf: Thank you, Sean. And hello, everyone. BGC Group, Inc generated record revenues of $955.5 million during the quarter, reflecting growth across all of our geographies. EMEA revenues increased by 56.7%, Americas revenues increased by 29.9%, and Asia Pacific revenues increased by 31.1%. Turning to expenses. Compensation and employee benefits under GAAP and for adjusted earnings increased by 57.3% and 51.5%, respectively. The increase in compensation and employee benefits under GAAP was related to the acquisition of OTC, higher commissionable revenues, charges incurred as part of the cost reduction program, and the weaker U.S. dollar. The increase in compensation and employee benefits for adjusted earnings was driven by OTC, higher commissionable revenues, and the weaker U.S. dollar. Non-compensation expenses under GAAP and for adjusted earnings increased by 33.4% and 27.4%, respectively, primarily driven by the acquisition of OTC. Excluding OTC, non-compensation expenses under GAAP and for adjusted earnings increased by 19% and 12.7%, respectively. During the quarter, we realized an additional $10 million of savings and now expect our cost reduction plan to result in $35 million of annualized savings. We remain committed to continuing our cost reduction initiatives throughout 2026 with the goal of achieving further margin expansion. Moving on to our record adjusted earnings. Our pretax adjusted earnings grew by 44.9% to $232.1 million, representing a pretax margin of 24.3%. Post-tax adjusted earnings increased by 40.6% to $201.1 million, resulting in post-tax adjusted earnings per share of $0.41, 41.4% higher versus last year. Our adjusted EBITDA increased by 26.7% to $253.2 million. Turning to share count. BGC Group, Inc’s fully diluted weighted average share count for adjusted earnings was 495.2 million shares during the period, a 1% increase compared to last quarter and a 1.3% decrease compared to last year. As of March 31, our liquidity was $878.4 million, compared with $979.1 million as of year-end 2025. The change in our liquidity reflects payments for year-end bonuses, tax payments, and timing differences between commissions earned in the seasonally busier first quarter and commissions collected from the seasonally slower fourth quarter. As cash uses are generally the greatest in the first quarter, we typically repurchase fewer shares during this period, and we expect share repurchases to increase throughout the remainder of the year. With that, I would like to turn the call back to John to go over our second quarter outlook. John Joseph Abularrage: Thank you, Jason. I am pleased to provide the following guidance for 2026. We expect to generate revenues of between $785 million and $845 million compared to $784 million in 2025, which, at the midpoint of our guidance, would represent 4% revenue growth for the second quarter and 22% revenue growth for the first half of the year, or 13% organically. We anticipate pretax adjusted earnings to be in the range of $178 million to $196 million versus $173.6 million last year, which, at the midpoint of guidance, would represent 8% earnings growth for the second quarter and 26% earnings growth for the first half of the year. We expect our adjusted earnings tax rate to be between 11% and 14% for full year 2026. We will now open the call for questions. Operator: Thank you. If you would like to ask a question, please press star-1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press star-2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Patrick Malcolm Moley with Piper Sandler. Please proceed with your question. Patrick Malcolm Moley: Yes. Good morning. Congrats on the record quarter. I wanted to ask about energy, commodity, and shipping revenues. They were very strong this quarter. In the release, you noted that total revenues were already tracking up 41% year-over-year before the Iran conflict broke out and finished at a 44% increase in the quarter year-over-year. So how much of that growth do you view as structural versus cyclical? Then I am just curious, how do you think investors should think about the ECS revenue run rate from here as you lap the OTC Global Holdings acquisition in April, and as we think about some of the geopolitical-driven volatility normalizing from here? Thanks. Sean A. Windeatt: Morning, Patrick. In terms of structural, as John said in his prepared remarks, we pointed out that the business was up 41% before the start of the conflict and ended up 44%. If you do the math on that, our opinion is that around $20 million of incremental revenue could be ascribed to the conflict. But most of the growth in Q1 was part of our normal business, which is incredibly positive. With ECS in particular, I do not think anything has changed between Q1 and Q2, and therefore, the rest of the year. We have now owned OTC for one year, and the integration of that business is virtually complete. Going forward, you will see growth across the ECS spectrum for our multi-brands, and we will not be breaking it out between OTC and our core business. Patrick Malcolm Moley: Okay. That is helpful. And then as a follow-up, you expanded the cost reduction program this quarter. In the press release, I think you said that you were going to continue to identify and execute cost savings throughout 2026 to drive further margin expansion. So could you walk us through what is driving that incremental $10 million, how much additional runway you see beyond the $35 million now, and how we should think about the pace of margin expansion flowing through the P&L over the remainder of the year? Sean A. Windeatt: I like that. You see, we increased our cost reduction program in Q1 by 40%, and you asked what we are going to do next after that. I like that. As you know, having covered us for a while, as a result of the OTC acquisition, we identified that we should be able to save $25 million in cost reductions. Once we started on that journey, we wanted to exceed that and found an additional $10 million, so now that is $35 million. The bulk of that is within the compensation lines; there are some infrastructure lines as well. For example, we closed one of the non–profit-making businesses that OTC had in its logistics business, which resulted in decreases in compensation and a small amount of non-comp as well. Once you do these exercises, we will continue to do that across the business. Do we expect to get more than the $35 million? Of course. That is why we said it in our prepared remarks. But having just done that incremental 40%, we will perhaps update you on what we think next quarter. Patrick Malcolm Moley: Okay. That is helpful. Looking forward to that. I have another question, but I am going to hop back in the queue. Thanks. Sean A. Windeatt: Thank you. Operator: Our next question comes from the line of Eli Abboud with Bank of America. Please proceed with your question. Eli Abboud: Good morning. Thanks for taking the question. You pointed out a moment ago to Patrick that revenues were tracking 41% higher year-on-year before the Iran war even began. So my question is, if the Iran war was not a major tailwind for you in 1Q 2026, how do I bridge the 31% organic revenue growth in Q1 2026 with the 4% revenue growth implied by the guide for 2Q 2026? Sean A. Windeatt: Thanks, Eli. I will take that one. It was interesting, actually. John, JP, and I, when doing guidance, would probably say it was one of the more challenging times to give you guidance, and that is for two reasons. Firstly, as we pointed out, in Q1 this year, around $20 million of incremental revenue was there as a result of the Iran conflict. And last year, you will remember that April 2025 was, I think, called Liberation Day, and there was the introduction of tariffs, which led to significant increases in volumes and trading in the month of April. So if you put the $20 million of Q1 this year and circa $20 million of Q2 last year together, that will help you bridge. Also, we did not mention it in our numbers in our prepared remarks—I apologize—but we did sell the KACE business, and we also closed down the logistics business. That is $10 million of quarterly revenue. If you add those three things together, that is a $50 million difference. That is also why John gave you the six-month numbers in his prepared remarks, which said that, assuming mid-guidance, we are growing organically at 12.7%. April was challenged by comparison to last year. But what we have seen—and, of course, today is May 7—is trading levels returning to what I would call normality, and we tried to reflect that in our guidance. Eli Abboud: Got it. And then in the deck, you gave some new data that show your listed revenues are outpacing exchange volumes. Conventional wisdom is that electronification is a one-way trend and that your business, which is primarily voice, should actually have slower growth than that of the exchanges. These numbers suggest that maybe that is not true. Could you help us understand why it makes sense for the high-touch flow that BGC Group, Inc does to be higher growth than the fully electronic, low-touch flow that comprises the majority of listed volume? Sean A. Windeatt: Two things. As my co-CEO, Jean-Pierre Aubin, pointed out last quarter, we are an exchange in how we operate, except we do it not just for electronic marketplaces but for voice, hybrid, and electronic. When there is volatility in the marketplace, it should not be surprising that when electronic volumes at, for example, CME and ICE are up, the trading that happens in voice, hybrid, and electronic with intermediaries like BGC Group, Inc is also positive. That is why there is a correlation between the two. You saw that in April where exchange volumes were lower, yet we still grew. Why are we outperforming them? For two reasons. Number one is our strategy that has led to market share gains in multiple asset classes, including acquisitions. Secondly, overall increased volume. That is why we continue to outperform the market. Eli Abboud: Got it. And I will squeeze one more in before I hand it back to Patrick. Could you help us understand the decline in FMX open interest quarter-to-date versus 1Q? What can be done to course-correct there? John Joseph Abularrage: Hey, it is John. The drop in OI on the futures is simply a reflection of a risk-off mentality in the market. OI, as you know, is standing orders. That is something we would expect to happen as the conflict starts, and it is something we are seeing now start to recover, in the same way you are seeing volumes start to recover. We saw this in the UST cash platform when that was the nascent exchange—and obviously now it is not. Our cash platform performed beautifully when the conflict started. If there was ever an opportunity where the climb back to the market share we had before—and we are virtually there now, and you will see that the next time we speak, we believe we will be there and above—it proves what participants in the market and partners have been telling us: you need a second player in this market. We are that second player, and that is why we believe our market share and volumes will climb back to where they were and higher. We are quite confident of that the next time we speak. The risk parameters in the market are changing, but our place in the market has only been reinforced by the recovery in our volumes and our OI that you are starting to see. Eli Abboud: Got it. Thanks, guys. Operator: Thank you. Our next question is a follow-up from the line of Patrick Malcolm Moley with Piper Sandler. Please proceed with your question. Patrick Malcolm Moley: Thanks for taking the follow-up. Just a quick one. I do not have the live transcript in front of me, but in your prepared remarks, you said something about new products that you were looking forward to launching. I think you might have said FX. Could you elaborate on what those are and any way to quantify, maybe from a revenue perspective, what sort of impact that could have and the timing of those launches? Thanks. Sean A. Windeatt: Yes. As you and I have discussed, Lucera is a gem within the BGC Group, Inc portfolio. In terms of quantifying that, you will continue to see it grow around the rates it has grown historically, despite the larger revenue size, so it grows at 20% plus. In terms of new product, the single thing that is most important in the Lucera world—and of growing importance in our world—is connectivity. Lucera is constantly rolling out other products within asset classes. The way to think about it is: yes, Lucera is dominant in FX and, to a slightly lesser extent but growing, in rates. But there are other parts of the rates complex where Lucera is growing and getting more buy-in from existing and new customers. As Lucera’s connectivity within big clients continues to grow, it continues to expand in other asset classes, and the trust and white-glove service that come along with Lucera are really taking hold. We are pleased to see that they are doing a great job. Patrick Malcolm Moley: Great. That is it for me. Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. Abularrage for final comments. John Joseph Abularrage: Thank you very much, everyone. As always, we appreciate your time and look forward to speaking to you next quarter. Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to Liberty Media Corporation's 2026 Q1 Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. As a reminder, this conference will be recorded today, May 7. I would now like to turn the call over to Hooper Stevens, SVP, Investor Relations. Please go ahead. Hooper Stevens: Thank you very much for joining us this morning for Liberty Media's first quarter 2026 earnings call. As we get started, I'd like to remind you that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-Ks and 10-Q filed by Liberty Media with the SEC. These forward-looking statements speak only as of the date of this call and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty Media's expectations with regard thereto or any change in events, conditions, or circumstances on which any statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Media, including adjusted OIBDA and constant currency for MotoGP. The required definitions and reconciliations for Liberty Media are on Schedule 1 and MotoGP Schedule 2 and can be found at the end of the earnings press release issued today and available on our IR website. Speaking on today's call, we have Liberty's President and CEO, Derek Chang; Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One's President and CEO, Stefano Domenicali; and MotoGP's CEO, Carmelo Ezpeleta. Other members of management will also be available for Q&A. With that, I will turn it over to Derek. Derek Chang: Thank you, Hooper, and good morning, everyone. When we spoke with you in February, we framed 2026 around three priorities: sustaining Formula One momentum, positioning MotoGP for long-term growth, and remaining disciplined and opportunistic with our capital. Our framework remains intact, and we are seeing good progress across the portfolio. We delivered strong financial results this quarter at both F1 and MotoGP. Starting with Formula One, the sport continues to demonstrate the strength and resilience of its global platform. We made the difficult but appropriate decision together with the FIA and local promoters not to proceed with the Bahrain and Saudi Arabian Grands Prix in April given the situation in the Middle East. The well-being of everyone in F1 comes first. We will always manage the calendar with that principle in mind. While that creates a near-term financial impact, it does not change our confidence in the long-term trajectory of the sport. We will be thoughtful in our approach, and we will continuously evaluate the calendar this year. As Stefano mentioned to Bloomberg News last week, it might be possible to reschedule one race toward the end of the season. Formula One remains supported by strong fan demand, deep commercial partner interest, attractive media rights dynamics, and a stable long-term foundation with the new Concorde Agreement. The early season has also reinforced the value of the investments being made around the fan experience and distribution. In the U.S., Apple's first season as our exclusive media rights partner is underway and the initial results have been promising. Our partnership with Apple and its tech-forward platform is already delivering early innovative enhancements to our F1 product, with multi-view, data feeds, and onboard features creating a more engaging viewing experience for our fans. Viewership increased through the first three races of the year. Fan engagement is up, we are attracting a younger and more female audience, and we are seeing expanded reach across the Apple ecosystem. Alongside Apple, we rolled out a series of dedicated marketing activations that significantly amplified the Miami race across both the city and the country, including nationwide Apple Store retail “pit stops,” Apple Maps integration, and the launch of new original F1 programming over race weekend. We are extremely pleased that the high energy from our U.S. fan base and the broader race week has become a meaningful cultural and commercial moment for the sport in the U.S. At MotoGP, the first full season under Liberty ownership is giving us even greater conviction in the opportunity. The sport is delivering compelling racing, with the calendar evolving to expand its global footprint, including the return to Brazil this year. We are also beginning to broaden the ecosystem around MotoGP through initiatives like the Harley-Davidson Bagger World Cup, which brings a distinctive new format and lifestyle brand into the MotoGP weekend experience. The broadcast of the U.S. Grand Prix on FOX delivered an average audience of 500 thousand, an increase over last year on cable and an increase from the last time it was on broadcast in 2023. We have also seen our social media followers in the U.S. increase 16% since January 2025, which is an encouraging indicator of growing engagement in the U.S. market. The strength of MotoGP is its compelling identity: fierce racing, extraordinary athletes, passionate fans, and a unique culture. Liberty's role is to help provide the commercial focus, operational support, and long-term investment discipline that can allow that identity to reach a broader global audience. That means building capabilities carefully, strengthening the event experience, improving fan engagement, expanding commercial partnerships, and sharing learnings across the portfolio where they are relevant. Following the Liberty Live spin-off, our portfolio is centered around two world-class sports with strong brands, valuable global rights, and multiple long-term growth levers. We will remain thoughtful in our capital allocation approach as we support our operating companies as they invest in growth, and we will evaluate additional opportunities to deploy our capital. Brian will cover the financial results in more detail. Stefano and Carmelo will provide a deeper dive on Formula One and MotoGP. We remain confident in the strategy we laid out earlier this year: Formula One has a proven global platform with significant momentum; MotoGP has meaningful long-term upside; and Liberty is well positioned as we build the next chapter of growth. Now I will turn it over to Brian. Brian Wendling: Thanks, Derek, and good morning, everyone. As a reminder, each quarter in 2026 for the Formula One business will reflect an incomparable race count and mix with the exception of the fourth quarter. Additionally, due to our decision to not hold the Saudi Arabian and Bahrain Grands Prix in April, results in the first quarter reflect a 22-race calendar this year. The second quarter will be the most impacted with only five races expected to be held this year versus nine races held during 2025. The change in the race calendar did affect pro rata recognition of revenue and team payments in the first quarter. We expect the largest impact from not holding the two races in April to be from the loss of race promotion revenue, followed by hospitality, and some minimal impacts to race-specific sponsorship revenue. We do expect relatively limited impact to sponsorship revenue as we anticipate the ability to offset some of that exposure with other races later in the season. On the expense side, we will not recognize most of the expenses related to the disrupted races, and the net impact to F1 will flow through the team prize fund calculation. Similar to revenue recognition, projected team payments in each quarter will be recognized pro rata over 22 races instead of 24. Now looking at the results for the first quarter, most of the strong growth in Q1 year-over-year results is due to one more race being held in the first quarter compared to the prior-year period, the change in the pro rata season-based revenue recognition, and underlying growth in the business. 2026 held three races compared to two in the first quarter of last year, with Japan included in the current-year period but not in the prior year. For the first quarter, revenue grew 53% and adjusted OIBDA grew 102%, driven by the extra race held and growth across all revenue streams from underlying contractual fee increases. Media rights and sponsorship revenue growth was driven by the calendar variance related to recognition of season-based revenue, with three out of 22 races recognized in the quarter (approximately 14% of season-based revenue) compared to two out of 24 races (approximately 8% of season-based revenue) recognized during the prior-year period. Sponsorship revenue also increased due to revenue growth from new sponsors, including Standard Chartered. Other revenue grew due to higher hospitality, freight, and travel revenue from one additional event held. Hospitality revenue growth was also driven by strong underlying Paddock Club performance and other premium product growth. Licensing revenue and revenue generated after the reopening of Grand Prix Plaza in Las Vegas in January also contributed. Adjusted OIBDA increased during the first quarter driven by strong revenue growth discussed above, outpacing expense growth. Increased operating expenses included higher team payments and expenses associated with hospitality, freight, and travel costs from the additional race held, as well as an increase in new premium product offerings and higher freight, travel, commission, and other partner servicing costs. The increase in SG&A expense was primarily due to unfavorable currency exchange rates and higher personnel and technology costs, offset by lower marketing expenses. Team payments as a percent of pre-team share adjusted OIBDA were 51.7% for 2026. For the full year, we continue to expect to see an average of roughly 200 basis points improvement in leverage, in line with the average we have seen over the past four years. After 2026, for the remainder of the term of the new Concorde Agreement, we expect the payout percentage to remain relatively stable. A reminder that team payments are best analyzed on a full-year basis due to the quarterly fluctuations in team payments as a percent of adjusted OIBDA. Now looking at MotoGP, we closed the acquisition on July 3 of last year. Our financial results prior to the date of acquisition are presented on a pro forma basis as though the transaction occurred on 01/01/2024, and the trending schedule will be posted to our website after the 10-Q is filed, including results in U.S. GAAP for historical periods. The majority of MotoGP's revenue and costs are euro-denominated and as such are subject to translational impacts from foreign exchange fluctuations. In the following discussion of results, I will focus on constant currency results. Year-over-year comparisons are impacted by the mix of races and MotoGP flyaway races generally carry higher costs including freight, travel, and ERDA fees. MotoGP held three races in the first quarter both this year and the prior year. Revenue increased at MotoGP during the first quarter due to the race mix and increased sponsorship revenue, slightly offset by a small reduction in media rights revenue. Adjusted OIBDA also grew during the first quarter as revenue growth outpaced expense growth. Cost of MotoGP motorsport revenue increased due to the impact of higher freight expenses from race mix and increased fuel costs. Looking briefly at Corporate and Other results for the quarter, revenue was $6 million, which relates to rental income generated by the Grand Prix Plaza in Las Vegas. Corporate and Other adjusted OIBDA was a loss of $7 million and includes Grand Prix Plaza rental income and corporate expenses. At quarter end, Liberty Media had cash and liquid investments of $1.3 billion, which includes $862 million of cash at F1 and $186 million of cash at MotoGP. Total principal amount of debt was approximately $5 billion at quarter end, which includes $3.3 billion of debt at F1 and $1.2 billion of debt at MotoGP, with just under $500 million at corporate. F1's $500 million revolver and MotoGP's €100 million revolver both remain undrawn. At quarter end, Liberty Media's net leverage was three times. As a result of not holding two races in the Middle East in April at F1, we expect a modest increase in trailing twelve-month leverage during the second quarter of this year. F1 and MotoGP are in compliance with their debt covenants at quarter end. And with that, I will turn it over to Stefano to discuss Formula One. Stefano Domenicali: Thanks, Brian. The 2026 season is off to a captivating start as we kick off this next chapter in F1's history with new regulations, new teams, and new winners on the podium. Congratulations to Kimi Antonelli who became the youngest driver in F1 history to lead the World Championship, taking three consecutive race wins after winning the Chinese, Japanese, and Miami Grands Prix. As you know, we made the decision not to go ahead with the Bahrain Grand Prix and the Saudi Arabian Grand Prix as planned in April to ensure the safety and security of everyone in the sport during a very fluid and uncertain time. Saudi Arabia and Bahrain have been fantastic long-term partners and we look forward to being back with our fans there as soon as we can. We were extremely excited to be back racing in Miami last weekend, and 2026 has represented the start of an incredible new era for our sport. The first four races of the season have all sold out, social media engagement is up year on year, and early TV data shows growing audiences worldwide. Fan research also indicates a very positive response to the on-track spectacle with particular appreciation for the level of action, racing battles, and overtakes. In Miami, we saw sellout crowds along with the exciting new activation with Apple, our new U.S. media rights partner. Engagement remains robust this season. We have welcomed 1.3 million attendees to date with all four races selling out and the Australian Grand Prix setting a new attendance record. The Paddock Club is already sold out for nearly all of our remaining races this season. With over 65 thousand tickets sold to date, this figure is already in line with our 2025 total Paddock Club attendance. To accommodate demand, we are increasing Paddock Club capacity this season at Silverstone, Austin, and Monza, and our promoters are working to increase capacity at other circuits. Our successful collaboration with Soho House and “House 4040” is also expanding and will feature at nine race locations this year, up from five after the launch last year. House 4040 is already sold out at eight races so far. In addition, our collaboration with Gordon Ramsay continues to grow with a new paddock-based premium offering operating in Shanghai, and we are looking into opportunities to roll out the experience at other locations, potentially starting with the United States Grand Prix in Austin. Live audiences across our top 40 markets are up year over year relative to 2025 across the first three races, driven by strength in key markets including Brazil, Italy, and China. This season, we returned to global TV free-to-air in Brazil. In China, we kicked off our new media rights deal with CCTV and have seen more extensive coverage. The live broadcast of the Chinese Grand Prix attracted 1.9 million viewers in China, a plus 60% decrease year over year in one of our key growth markets. Our YouTube content generated almost 600 million views through the Japanese Grand Prix, up 46% relative to last year. We grew our following nearly 20% year over year with over 120 million social media followers as of April. Commercially, we continue our momentum across renewals and new partnerships. We are delighted to welcome Apple TV as our new U.S. media rights partner this season. Through its extensive ecosystem, Apple TV has allowed Formula One to reach a large U.S. audience. The first three races delivered higher average viewership across track sessions relative to last season, and we are pleased that strong momentum carried into Miami. Our fans are collectively also tuning in for longer with total viewing hours increasing relative to linear last year. The average viewer of F1 content on Apple is both younger and more female. The sport is featured extensively within the Apple ecosystem and externally through innovative partnerships with Nex and Tubi, just to name a couple. Our broadcast of the Miami Grand Prix at IMAX theaters was extremely well received and continues to highlight the new ways we and Apple are bringing the sport to fans. We continue to see major brand alignment between our two iconic global brands as we take a more forward-looking approach to how fans discover and consume Formula One. Globally, our F1 TV product continues to perform well, with F1 TV revenue increasing 28% year over year. We were delighted to announce yesterday our five-year renewal with Sky in the UK through 2034 and Italy through 2032 inclusive. That will take us into the next decade with our incredible and long-term partner. The depth and quality of the programming and content Sky delivers has been impressive and helped to engage and grow our fan base in both the UK and Italy. In the UK, total viewing under Sky has increased by 90%, with female viewership more than doubling and under-35 viewership growing 120% since becoming the exclusive home of F1 in 2019. In Italy, we have seen a 25% increase in viewership this season, in part driven by the strong performance of Ferrari and Kimi Antonelli. Sky has been a trusted partner of F1 with world-class coverage and we are delighted to extend our partnership into the future. Internally, we remain active in our negotiations and renewals, recently renewing with beIN in Pan-Asia and with Foxtel in Australia. We are also thrilled to announce we will be returning to race at Turkey’s Istanbul Park next year for the first time since 2021, under a new five-year agreement. The return to the Turkish Grand Prix will be exciting for the F1 fans, drivers, and teams. Formula One continues to grow strongly in Turkey, where the sport now reaches more than 19 million fans, and almost half of the fan base is under 35. We are also seeing strong momentum on digital and social platforms, with Instagram followers growing by 30% year on year. We also officially began the 2026 public sales cycle for our fourth edition of the Las Vegas Grand Prix today. Following last year's sellout and ahead of our public on-sale, demand indicators were very strong with deposits for this year's race at record levels. We have maintained our sponsorship momentum with an active quarter of renewals and new partnerships. We entered into a new multiyear agreement with FanDuel as a best way to reinforce our desire to enter the betting space regionally. We have also signed Marsh as our official risk partner and official insurance broker partner. We have also extended our Salesforce partnership, all effective this season. Our momentum continued to accelerate across our other revenue streams, including licensing and hospitality. We have announced our multiyear extension with Fanatec, our sim racing hardware company, and relaunched our Esports Championship, hosting two live events to date and one in our new on-site facility, Abigail. We are fully leaning into our first full year of partnership with Disney, including the successful launch of the Disney and F1 “Fuel the Magic” campaign in the Asia-Pacific region. At the Chinese and Japanese Grands Prix, we launched specialty F1 Disney stores in the fan zone, driving overall retail sales during the quarter up 125%, with China retail sales growing nearly 80% year over year. We reopened our Grand Prix Plaza site in Las Vegas in January and the early performance has been encouraging. Average weekly attendance this year is nearly at peak levels from 2025, with private events occurring weekly. Demand for F1 Drive has also been particularly strong with multiple sold-out weekends. We remain focused this season on cultivating and fueling fandom with our always-on strategy, bringing the creativity, thrill, and excellence of our ever-evolving sport and entertainment platform to the fans. While we have grown so much in such a short amount of time, we believe we are just at the beginning of what is possible for Formula One. The momentum we see across all our business continues at a remarkable pace, and the foundation we are building today will create enduring value for our partners, shareholders, and our fans for the years to come. Avanti Tutta, full speed ahead as always. And now I will turn the call to Carmelo to discuss MotoGP. Carmelo Ezpeleta: Good morning, and thank you, Stefano. We have a strong start to the beginning of our season with compelling storylines on track and continued momentum across the business. With Liberty Media's continued support, we are confident in achieving the long-term strategic vision of our sport and are encouraged by the early progress to date. As you have seen, we have made a decision to postpone our Qatar Grand Prix to November given the ongoing situation in the Middle East. We look forward to returning to the region soon. On track, the racing remains as competitive as ever. While Marco Bezzecchi continues to lead the Riders’ Championship, we have already seen seven riders across five different teams on the podium this season, highlighting the unpredictability and excitement that define our sport. We welcomed more than 720 thousand fans across our first four races, including a record of 228 thousand fans in Jerez. We also returned to Brazil this season after a 20-year hiatus in the country, with the circuit seeing a swift integration and delivering an exciting race weekend. Brazil is one of our most engaged markets, with over 80% of fans consuming MotoGP content weekly. Across the Sprint and Grand Prix in Brazil, our broadcast audience surpassed 1.6 million viewers on average. We look forward to returning next year alongside our returns to Buenos Aires and Adelaide, both at new circuits in or near city centers, bringing the thrill of MotoGP racing closer to our fans. We continue to track brand awareness and engagement through our Fan Insights platform, which will support our commercial evolution and localized content initiatives in growth markets, including the UK and USA. We ended the quarter with nearly 62 million social media followers across our owned platforms. Video reels across our digital platforms, excluding VideoPass, increased almost 40% on the same period in 2025. We also continue to make progress with our commercial partners. We have extended our partnership with ServusTV in Austria to broadcast our rights through 2030. Starting with the Jerez Grand Prix this season, we also expanded our partnership with Quint through an exclusive multiyear agreement. With Quint's invaluable experience, our focus is on scaling our hospitality offering, enhancing the premium hospitality experience with the VIP Village, and driving further mix shift improvements toward high-end customers and partners. We are encouraged by the strong start to the year and the quality of demand we are seeing across our portfolio, with double-digit growth in ticketing volume and sustained momentum across all regions as we roll out new innovations across our hospitality product suite. We look forward to continuing to update the investor community on our progress. Now I will turn the call back over to Derek. Derek Chang: Thank you, everyone. We appreciate your continued interest in Liberty Media. And with that, we will open the call up for Q&A. Operator? Operator: Thank you. We will now be conducting a question and answer session. Our first question is from the line of Sean Diffely with Morgan Stanley. Please proceed with your questions. Sean Diffely: Great. Thanks very much, team. Two, if I may. First on sponsorships and second on capital allocation. Congrats on the success that you have seen on the sponsorship side. I think over the last few years, adding new sponsors has really driven a lot of this, and you continue to do that with Standard Chartered and Marsh. But it also seems like you are gaining traction on the renewal side with upgrades like Salesforce and others. I was hoping you could talk about the balance of new and existing partners going bigger and any categories or verticals that you think you are still under-penetrated in. And then second question, Derek, you had mentioned evaluating avenues for capital deployment to deliver long-term value to shareholders. I was hoping you could elaborate a bit on that. What is your framework for determining what those could be and how should we think about your approach to investing in the core businesses you have, potential M&A, or capital return? Thanks. Derek Chang: Sure. Thanks, Sean. Let me take the second one first, then I will hand it over to Stefano. On capital allocation, we have been pretty clear in recent history that the primary focus has been to de-lever, which we clearly are in the process of doing, as well as looking at strategic investments and, ultimately, the thought of capital return to shareholders. I do not think we are in a position right now to say we are pursuing one over the other. Our options are on the table and it is something that we are looking at on a regular, frankly daily, basis. We are very focused on the performance of our operating companies and leaning into those and continuing the strong performance we have seen there, which puts us in this position to be able to have the question that you have asked. In the very near term, we are very bullish on our businesses and where we see them going. We cannot control every macro factor out there, so to some extent, we are being a little bit conservative right now to make sure that we understand the implications of other events that are happening out there. On the sponsorship side, I will let Stefano talk about the mix of renewals and new sponsors and where he sees that going. Stefano Domenicali: Thanks, Derek, and thanks, Sean, for the question. If I go back a couple of years, we always said that our duty is to make sure that what we are offering is solid and genuine. Only solidity and genuineness have allowed us to be stronger in this momentum. No one would have thought that, for example, in the big category of programming, there would be someone who really wants to invest in our platform to develop their business. It is true that now we see potential to keep growing because we have done a lot of new steps in terms of creative activations that allow us to offer something new in the market to different partners. On the other side, we have moved from what was normally considered B2B partners also to B2C. We have seen that in the last couple of extensions, renewals, or new entries. It is clear that the category of high-tech is where we can find other opportunities in the future, even if the big partners we have now are very, very locked down in the future in order to prevent others to come in. It is a great situation. For us now, it is really a matter of keeping growing, keeping offering something new to partners, and keeping the momentum of what we can offer in a very genuine way. That has been a successful strategy that we will continue. As you said, we are also in the process of acting on renewals much more in advance before the expiry date. That means everyone believes in us, and we take that home as a great responsibility. Operator: Thank you. Our next question comes from the line of David Karnovsky with JPMorgan. Please proceed with your questions. David Karnovsky: Hi, thank you. Maybe just starting on the Sky agreement announced yesterday. You did have some time on this one in both Italy and the UK, so interested in why now is a good moment to execute on a deal with what I think is your largest media partner rather than waiting and testing the open market in a few years. And does this agreement have any current economic impact, or is this just about locking up future terms? Derek Chang: Sure. Hey, David, thank you for the question. There are no current implications as a result of the deal. One thing to think about is whether it is sponsors, media partners, or local promoters, what we are really asking a lot of these partners to do as they partner with us is to invest in the product. In order to do that, you want them confident with the relationship and where things are going to be on a longer-term basis. Sometimes we enter these discussions early to facilitate exactly that. You see that in a lot of the local promoter deals that Stefano and I have done in recent history, really to facilitate increased investment in infrastructure, hospitality, things like that. It is a similar concept here as these partners continue to work with us to build the next generation of what the viewing experience is like. I will let Stefano elaborate. Stefano Domenicali: Thanks, Derek. I would add, first of all, let me thank Dana Strong and all the team at Sky for the tremendous job they have done since the first day with us. This is an extension of an incredible deal that will cover very important areas where our plans are very solid: the UK, Ireland, and Italy. It will have an impact that is long term, because as Derek was saying, the financial implication up to the end of the 2028 expiry has not been touched. We are just looking ahead with a more and stronger financial and technical contribution. They are already very focused on delivering extra content, not only using the traditional broadcasting operation. They have a big voice in influencing a great demand that is growing in these markets, and we want to recognize that. We believe that, being a worldwide sport, we can really understand where the shifting between traditional broadcast and streaming is moving. In the markets where we have extended the agreement with Sky, the situation we are having will be the best even mid- and long-term. In other markets, the situation could be different because we are understanding other opportunities that we can take, for example in new markets that could be potentially very interesting in the future to bundle with other sports. We need to be creative. That has always been our approach to try to find the best solution with our partners that have contributed so much to the growth of our sport. David Karnovsky: Okay. And then I have one for Brian. Brian, your team payment figure this year always gets a lot of scrutiny. Can you shed any light on your budgeting approach, how you approach variable items like Vegas or potential sponsor deals, and would there be any contingencies in that number for the Middle East races you have on the calendar later this year given the ongoing conflict there? Brian Wendling: Yes. Thanks for the question, David. The budgeting approach is similar to past years, and the biggest variable we have had over the last few years since we launched the Vegas race is the Vegas race. There is certainly some conservatism in there around Vegas just to give ourselves room as it relates to the team payments. But the 200 basis point decrease that we gave you at the end of the year still holds true. Right now, we are focused on a 22-race calendar. As Derek said, we are still hopeful that we can move one of those races to the back part of the year. If so, that would be upside, but what is in the forecast at this point is the 22 races. Operator: Thank you. Our next question comes from the line of Steven Lasich with Goldman Sachs. Please proceed with your questions. Steven Lasich: Hey, great. Thanks for taking the questions. Derek, there has been some discussion in the press around Miami potentially adding some more Paddock capacity as well as maybe a MotoGP race at some point in the future. Could you talk a bit more about the opportunity in Miami to expand and, more broadly, how you are thinking about the opportunity to expand Paddock Club capacity across the calendar, as well as how many opportunities might be out there to add a MotoGP race alongside F1 at some of these tracks? Derek Chang: Let me take the second part first and then go back to Paddock Club and turn it over to Stefano. On MotoGP, our stated context is that the U.S. is an important market for MotoGP. We are looking at all avenues to grow our business here. It is going to take time, just like it did with Formula One, but we do see appetite and a market. We do have interest in adding races in the U.S. Miami would seem to be a logical spot because there is already a track there. There are a lot of things that have to get worked out, whether it is Miami or any other track, in terms of whether it works for MotoGP, safety concerns where requirements differ from Formula One, as well as what markets make sense from a commercial standpoint. Those are conversations we will have with Miami and with other folks, trying to scope out the right locations for U.S. expansion. As it relates to Miami itself, they did announce over the weekend that they are expanding Paddock capacity. Stefano has spoken about this on many occasions: the way we are structuring a lot of our promoter deals going forward emphasizes expansion of high-end hospitality. We saw that in Budapest, and we announced Austin recently—there is a whole new building going up there around Turn 1. I will turn it to Stefano for more detail. Stefano Domenicali: Thanks, Derek. Let me take the opportunity after an incredible Grand Prix in Miami to thank Tom Garfinkel and Kathy for their incredible organization. It was a phenomenal event with a lot of people and a lot of action on track. As mentioned, they are investing even more to make sure the quality and capacity of that event will be bigger in the future. There are certain events that we believe are fundamental for the growth of our sport, and by giving them the possibility to have long-term deals, we also push them to invest in the right way. On top of what Derek mentioned, remember that Monza will do that; Hungary will do that. Almost everyone will have plans to increase capacity with the right quality of the offer. Demand is very high. The profile of customers coming now, also with new partners, requires a different possibility of expanding that. In Monaco, for example, we have extra capacity with our partner MSC and a boat where our guests can enjoy a different kind of experience. The ecosystem is solid, strengthened together, working with the vision to keep growing the business. Otherwise, no businessman will invest. This is another signal, I believe, of the quality and performance of our sporting platform today. Steven Lasich: Great. And then maybe just one for Brian. On SG&A, it continues to trend higher on the F1 side. Could you help unpack what we are seeing in the first quarter and how that line should trend over the balance of the year? Brian Wendling: Yes. This quarter the three biggest drivers are: you do have an FX impact in the SG&A number that is negatively impacting growth, so we will see how that fluctuates as the year goes along; there are also some higher personnel costs and some SG&A costs around LVGP, which are more personnel-related and a bit more front-end loaded; and that is offset by reduced marketing costs because last year we had the 75th anniversary event. There is also some increased IT spend in there as the company is working on different types of projects. Operator: Thank you. Our next question comes from the line of David Carl Joyce with Seaport Research Partners. Please proceed with your question. David Carl Joyce: Thank you. In thinking about the Formula One calendar this year, if there is the possibility of adding Saudi Arabia back into December and shifting Abu Dhabi out a week, how does that reallocation-based accounting work for the various revenue lines? Would you restate the first quarter or would you reallocate going forward with a true-up? How should we think about that? And then secondly, kind of housekeeping, why was D&A up a lot sequentially? Thanks. Brian Wendling: On the first part of the question, any impact from adding an additional race would come through in the quarter in which you make that change in the calendar. On the second part of your question, D&A is up about $1 million. The company has been investing in the operations facility out in Biggin Hill, so you see increased depreciation associated with that building, which was largely completed early last year. That is probably driving the bulk of the difference. You also have GP Plaza CapEx that was in our results early in 2025, so you would see increased depreciation associated with that. David Carl Joyce: All right. Thank you. Operator: Thank you. Our next question comes from the line of Matt Condon with Citizens Bank. Please proceed with your questions. Matt Condon: Thank you so much for taking my questions. First, after the first couple of races with Apple in the U.S., any key learnings coming off of that, whether from the broadcast itself, but also from the distribution to the broader Apple ecosystem? And second, on the calendar opportunity in MotoGP, you have talked previously about optimizing race locations. How are those conversations coming, trying to move some of those into city centers and such? Derek Chang: Thanks, Matt. On the Apple question, I will let Stefano take most of that. What we have seen is that viewing across all segments of the race weekend has been very strong. Apple has done a great job of bringing people to the ecosystem. On the risk mitigation side, anytime you change broadcast partners, you risk fan backlash that they cannot find it or it is not as good. We have not had that. In fact, it has been positive in terms of how consumers have been interacting with the product and the viewing, and the commentary has been that it has been a good experience. I will let Stefano continue, and I will come back to the MotoGP calendar question. Stefano Domenicali: Matt, to add to what Derek said, we should not forget two things. Our fan base is younger and there are a lot of females—around 40% in the U.S.—and we believe Apple will guarantee to them a much more suitable way to live that experience. This journey has just started—we have done only four races—and it will be a long deal. Every weekend we learn and will improve. There is the possibility, as has happened with Apple, to use different platforms—IMAX, Tubi, Apple Stores, and other activations. They generate more interest and follow-up, a more dynamic way to live the sport. There is a tremendous effort by Apple to deliver some new technical content, and these are long-term journeys that so far have been very successful. We are just at the beginning of a new journey. The first three races were not time-friendly for the U.S. market, and as a global note, it has been a very positive start of the season. We believe this will create even more attention in the future. I can confirm because Eddy Cue was present in Miami—Apple is fully on board, confirmed by Eddy Cue, and also the future CEO of Apple is a racing fan. That is not bad. Derek Chang: On the MotoGP calendar, our stated objective is to get some of these races closer to cities where we can leverage infrastructure, whether it is airports and long-distance travel for both ourselves and international fans, or hotels and restaurants and ease of access. You are seeing this with the races we announced for next year, both in Buenos Aires and Adelaide, so we are already starting to make progress. That said, you also do not want to wholesale change out all the races. We have a long heritage of races in many compelling locations where it makes sense to keep them. They have been fixtures on the calendar and bring a lot to the sport and its identity. I have been this year already in Austin and Jerez, and I am headed to Mugello and Assen later this year. We want a good sense of what it feels like in different locations because we want to create a fan experience that is engaging, exciting, entertaining, and accessible wherever we do it. There is a lot to be learned even in locations where we may not move, about how to improve those. It is a mix of all of that as we think about the calendar moving forward. I think Carlos might be switched off, so we will come back to that later. Operator, we will take the next question. Operator: Thank you. Our next question comes from the line of Steven Lee Cahall with Wells Fargo. Please proceed with your questions. Steven Lee Cahall: Thank you. First, I wanted to ask about fuel prices. I think the structure allows for a pass-through from F1 to the teams on fuel prices, but I imagine in motorsport when fuel prices go up, that cost flows through somewhere. Can you help us understand how rising prices for gasoline will affect both F1 and MotoGP in the short to medium term, and where we might see some of that reflected longer term in the P&L? And then, Stefano, on competition: we have seen Cadillac and Audi come in this year, Ford is making a big push with Red Bull, and the racing has improved with the new technical changes. We have not yet seen any new teams get from the midfield to the top tier. What needs to happen for that to change? Is it a technical issue? A financial issue? Competition is always good for the value of the sport. Thank you. Derek Chang: I will let Brian start with the fuel question, then I will turn it over to Stefano for the racing question. Brian Wendling: Thanks, Steven. On fuel, it is a little bit different for the two businesses. At F1, if we have increasing fuel and freight costs, those are generally passed through to the teams. You will see a bit of a gross-up on the income statement throughout the year, but minimal impact to net margins. On MotoGP, it is a little different. There is more of a fixed structure there, so to the extent we experience rising fuel costs, you might see some pressure to our overall cost of revenue without that offset on the top line. Stefano Domenicali: Steven, what we see is what you would expect from an experience point of view. F1 is a big beast. When you come in, we are very pleased with the new entries, but the process is not related to money; it is related to experience and time. This has always been the case since the beginning of the sport. It is a big technological challenge. It is the work of team players who need to understand the level of the challenge. They are new, and with the budget cap they have less burden compared to the past. It is just a matter of being a little bit patient, even if in the racing world after only four races you feel like it is 400 races because the pressure is high. The advice—which they know very well—is not to fall into anxiety because anxiety will not help performance. The beauty of what we are seeing in a scenario of totally new regulations is that there is a lot of margin for improvement. The more you are behind, the bigger the potential improvement if you are able to take the right development path and work hard with your drivers and teams to improve performance. This year there are many new elements that could allow them to be faster if they understand where to focus to recover the gap they have now. Operator: Thank you. Our next question is from the line of Joseph Robert Stauff with Susquehanna. Please proceed with your questions. Joseph Robert Stauff: Thank you. Just trying to better understand the rescheduling scenarios. It seems to me a second race in Las Vegas might be, of all your scenarios, a relatively easier one given the city's flexibility and your vertical ownership of the Las Vegas Grand Prix. Is that a fair assumption? And with respect to whether or not you reschedule, how much lead time do you need to properly market that—two, three months? Derek Chang: We are evaluating all the various alternatives and trying to make decisions in a timely fashion that will give us as much lead time as possible to the extent we make changes and adjustments. I will let Stefano talk through some specifics, as he and his team are working overtime on this. Stefano Domenicali: Thanks, Joe. To be very direct and avoid speculation, the only thing I can say is that we have plans—hopefully not to be applied, because we hope the situation for the world, not only for racing, will go back to normal. We have plans, of course. The lead time or cutoff is different between what we can recover from what was not run in April versus what could happen in November or December. We are in line with the teams and the promoters because there is a big chain reaction. In due time, we will keep everyone informed. But I hope you understand, if we say something now it would be speculation, which we want to avoid. Our first hope is to be back in the places we should be. Operator: Thank you. Our final questions will come from the line of Ian Moore with Bernstein. Please proceed with your questions. Ian Moore: Hi, thanks. I know the announcements are relatively new and fresh, but given the broadcast agreement extensions like with Sky, the return of the Turkish Grand Prix next year, and the updates to the Miami regs, are you noticing any positive halo effects or incremental opportunities with respect to F1 sponsorship interest or broader demand that might have implications for the rest of the year and beyond? Derek Chang: I will let Stefano take that. My guess is that from a purely “what lands in this year,” it is probably limited at this point given how these deals are done, but Stefano can give more color on the broader halo effect. Stefano Domenicali: The halo effect, thanks, Ian, is what I said at the beginning: activations are getting bigger and better in terms of quality. We want to be as creative as possible without taking away the quality of what we offer to our customers and guests. Bigger audiences are pushing the ecosystem to find solutions, and this is good because everyone is on the same page. The F1 sponsorship package is very solid. If the question is about the effect this year, it is not related to having more numbers because we are already almost sold out everywhere. This is even better because it will allow us to grow in the future on numbers that are not yet indicated in today’s accounts. It goes back to the long-term strategy, and all partners and sponsors will be part of this incredible growth that we believe will happen in the next couple of years. Derek Chang: Great. Thanks, Stefano. And with that, we will conclude the call. Before we end, I want to say a special thank you to Carmelo and Stefano and their teams. Managing through some of the disruptions we have had—very directly to ours in terms of rescheduling, logistics, and contingency planning—has required a lot of work, and those teams have been working overtime. Thanks to everyone on the call for taking the time. We always appreciate your interest in Liberty Media and look forward to speaking with you again soon. Operator: Ladies and gentlemen, thank you so much. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good morning, ladies and gentlemen, and welcome to the Chatham Lodging Trust First Quarter 2026 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded on 05/07/2026. I would now like to turn the conference over to Chris Daly. Please go ahead. Thank you, Ernest. Chris Daly: Good morning, everyone. Welcome to the Chatham Lodging Trust first quarter 2026 results. Please refer to our 10-Ks and other SEC filings. All information in this call is as of 05/07/2026, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statements to conform these statements to actual results or changes in the company’s expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at chathamlodgingtrust.com. Now, to provide you some insight into Chatham Lodging Trust’s 2026 first quarter results, allow me to introduce Jeffrey H. Fisher, chairman, president, and chief executive officer; Dennis M. Craven, executive vice president and chief operating officer; and Jeremy Bruce Wegner, senior vice president and chief financial officer. Let me turn this session over to Jeffrey H. Fisher. Jeff? Jeffrey H. Fisher: Alright, Chris. Thank you very much, and I certainly appreciate everyone joining us here today. It was really a great quarter, obviously, for us on every front, delivering for our shareholders. Given our strong operating results, great acquisition and continued share repurchases, as well as improved outlook for the remainder of the year, we have increased our guidance by approximately 15% since February. On the corporate side, we increased our common dividend by 11% in the first quarter, following a 28% increase in 2025. With a common dividend to FFO payout ratio of only 32%, based on our updated guidance, our dividend is well covered with ample room to continue growing in the future. We will reevaluate the quarterly dividend later this year. Also, we continue to aggressively repurchase shares using free cash flow. Through the end of the first quarter, the company has repurchased 2.2 million shares, or approximately 4% of our common equity, at an average price of $7.04, which equates to a 10% cap rate based on the updated 2026 guidance. At current share price levels, we are trading over a turn lower than our select-service peers’ current EBITDA multiple, which is not reflective of our financial strength or our upward trajectory of our portfolio, especially given the continued strength and increasing strength of our Silicon Valley recovery. We will continue to repurchase shares given the market disconnect. Externally, we have been executing a massively successful recycling campaign over the last couple of years highlighted by the recently acquired portfolio of six high-quality Hilton-branded hotels comprising 589 rooms for $92 million that are immediately accretive to Chatham Lodging Trust’s operating margins, FFO, and FFO per share. The portfolio diversifies our geographic footprint into areas of the country that are benefiting from expanded investments in manufacturing and distribution. The hotels are generally the highest quality properties in their respective markets with an average age of only 10. Sixty-six percent of the portfolio’s rooms are extended stay. The hotels benefit from very favorable labor dynamics and will enhance Chatham Lodging Trust’s already industry-leading hotel EBITDA margins. Performance since closing has been great, with the portfolio producing RevPAR growth of 6% in the first quarter and an even stronger 7% in April. Obviously, we are very excited about this acquisition. Operationally, it was a great quarter for us with RevPAR, hotel EBITDA margins, and hotel EBITDA easily beating our expectations for the quarter. On a comparable basis, our hotel EBITDA grew 5%, and our hotel EBITDA margins gained 135 basis points. Facing difficult comps due to the significant amount of wildfire demand last year in our LA hotels, our RevPAR went from a decline of 5% in January to growth of 1% in February and up 5% in March, finishing the quarter up 1%, which was well above our expectations for the quarter. Silicon Valley led the way with RevPAR growth of 23% in the quarter when you exclude the Mountain View hotel, which was under significant renovation. We experienced broad demand growth across our portfolio, with over two-thirds of our hotels generating RevPAR growth and approximately 25% of our hotels earning double-digit RevPAR gains. I do want to spend a few minutes talking about our largest market, Silicon Valley, since these hotels had an incredible start to the year. Occupancy at our four Silicon Valley hotels was 72%, flat to last year despite our Mountain View hotel being under renovation for the entirety of the quarter, and ADR was up 10% to a post-pandemic quarterly high of $210. Not a first-quarter high, a high mark for all post-pandemic quarters, and our RevPAR of $152 would be the second best quarter over the last six years. These are great results and very encouraging, again, especially considering the renovation at Mountain View during the quarter. For the other three hotels, RevPAR was up double digits in each month of the quarter, finishing the quarter with a strong growth of 23%, as I said, and advancing another 12% in April. As Dennis quoted in the release, demand was up 9% in the first quarter and in April across the entire San Jose–Santa Cruz market. Our hotels did way better than that growth, as our extended-stay Residence Inn hotels, as we have said before, are best suited for the corporate traveler coming to the Valley. RevPAR was up 15% at our San Mateo hotel, and our two Sunnyvale hotels shined with RevPAR up 26% in the quarter. Of course, massive capital investment announcements continue into technology from all types of companies and, seemingly unending these days, major technology companies are engaged in a historic multi-hundred-billion-dollar investment arms race, as it has been called, in 2026, with big tech projected to spend over $650 billion on AI infrastructure alone. Capital is flowing aggressively into data centers, specialized semiconductors, and energy, with aggregate global AI investment projected to approach trillions. Of course, Silicon Valley is the heart of the tech world. We do not see that changing anytime soon, and having just been out there last month, I can tell you the energy and overall activity is the most positive I have felt since before the pandemic. In Sunnyvale, construction of the multibillion-dollar Applied Materials chip facility—our number one account, by the way—that is near both of our hotels in Sunnyvale is in full swing. Actually, they got a permit to build 24 hours a day. We tried to fly a drone over it to kind of share on one of our investor reports, but we kind of got knocked down on that idea by the people in charge there. Anyway, our two Sunnyvale hotels are seeing surging room-night production for our largest clients, many of whom are involved in these investments, as I said, such as Applied Materials, Palo Alto Networks, NVIDIA, of course, Google—particularly in Mountain View—Apple, Pure Storage, Plug and Play, and the list goes on and on. We certainly are encouraged about what finally seems to be happening for sure in the Valley. In the short term, of course, adverse repercussions stemming from the turmoil in the Middle East, especially with respect to gas prices and their impact on travel, so far have yet to make any meaningful impact. We have easier comps over the last three quarters of the year in our three DC hotels as a result of all the DoJ and shutdown events that occurred last year. And, of course, we do have US 250 celebrations, so as to that market, I think we have got some visible upside there. Additionally, we do, as others have mentioned, have the highest—some of the highest—exposure to the World Cup among lodging REITs, and in Dallas, our Courtyard Downtown is right next to the convention center, which will host up to 5 thousand media professionals as it is serving as the international broadcast center for the World Cup. In addition to Dallas, our hotels are quite close to stadiums in San Francisco and Los Angeles, and our Bellevue Residence Inn is positioned for easy commuter rail access to the stadium in Seattle, and our Residence Inn in Fort Lauderdale should also benefit. And, of course, importantly, business travel demand, especially in our tech markets, is surging. Recovery in our tech hotels, which accounts for over 20% of our EBITDA, represents a unique opportunity for us to outperform our peers. Longer term, of course, just looking forward, the supply-demand equation that we have talked about before should still continue to benefit existing hotel owners. Construction costs, of course, remain quite high, and development is only justified in a few markets. Demand growth is quite encouraging so far, as we have said, in 2026. Business demand should continue to rise even if a portion of the trillions of dollars of announced investments in technology and reshoring of manufacturing come to fruition in the United States, and, of course, that is where I think our Midwest portfolio that we acquired should also benefit, I think, on an outsized basis, being in the hub of the manufacturing belt in the US. Leisure travel, approximately 18% of our hotel EBITDA, will continue to benefit as well from changing consumer demand behavior as travelers want more experiences and nights away from home. Finally, on my end, we will continue to opportunistically sell some older, non-performing assets with the goal, of course, of capital recycling, reinvesting those proceeds into share repurchases or hotel investments. Also, we expect to commence our Portland, Maine hotel development during the quarter. So although we have been talking about it for quite some time, they are actually beginning to erect a fence around that portion of the property, so it is happening, with opening before the fall season of 2028. Dennis may say otherwise, but we will kind of hedge that bet a little bit. We will provide a detailed breakdown of total spend and timing in connection with our second quarter earnings call in August, but I will tell you the unlevered returns are projected to be quite strong, as we have mentioned. With that, I would like to turn it over to Dennis. Dennis M. Craven: Thanks, Jeff. Good morning, everyone. To supplement Jeff’s comment regarding using free cash flow to buy back shares, we implemented our $25 million repurchase plan in 2025, and our free cash flow was $15 million in 2025 and is projected to be approximately $20 million in 2026. So, therefore, we intend to finish the entire $25 million program this year and will be reevaluating a new plan in the coming months. After the end of the quarter in April, we did buy approximately 200 thousand shares at approximately $8.34 a share. Some additional quarterly information. Our top five RevPAR hotels in the quarter were our Residence Inn Fort Lauderdale with RevPAR of $262; our Home2 Phoenix Downtown with RevPAR of $191; followed by our Residence Inn Gaslamp; our HGI Marina Del Rey; and our Residence Inn by Marriott White Plains with RevPAR of $164. Our two Sunnyvale and San Mateo Residence Inns were three of our top 10 RevPAR hotels for the quarter. Our seven predominantly leisure hotels generated RevPAR growth of a little over 2% in the quarter. Six of our seven leisure-driven hotels produced RevPAR growth, with our Hyatt Place Pittsburgh leading the way with RevPAR growth of 23%, benefiting from a solid convention calendar—the convention center is right across the river from our hotel—and demand related to sporting events, especially Pittsburgh Penguins hockey. And, of course, in April, the NFL Draft activity contributed meaningfully, and we did really well there with RevPAR up over about 250% during the week. Our three predominantly government-oriented hotels, all in the greater DC area, are comping over the inauguration and last year’s disruptions. As a group, those hotels represent approximately 9% of our EBITDA. Our Springfield and Tysons Corner hotels are recovering. San Diego RevPAR grew 5% in the quarter, outperforming our expectation, which was a decline of 5%. We are obviously quite pleased with the quarter. As a reminder, though, the 2026 convention calendar is a bit softer than 2025, and we are forecasting a RevPAR decline of about 2% for the rest of the year. Hopefully, we have some upside there. In other large markets, our coastal Northeast hotels saw RevPAR decline 8% in the quarter. Our Portland and Exeter hotels benefited last year from renovations at hotels in the comp set. In Texas, our Dallas and Austin hotels have felt the impact of convention demand falloff with convention centers under renovation and ongoing expansions. RevPAR at our Courtyard Dallas was down 26% in the quarter, though the good news is that our comps get better in the second quarter as we start to lap over prior weaknesses from the closure. In Austin, our Residence Inn was under renovation for the bulk of the quarter, and that renovation is finished. Having said that, the entire Austin market has really been weak with overall RevPAR down 6% over the last twelve months. Like Dallas, comps start to get easier there towards the second half of the year. As an update—and this is really a great development—it was officially announced that the planned $3 billion MD Anderson Hospital and Research Center that was previously expected to be built downtown is now expected to be built at the JJ Pickle Research Campus, and groundbreaking is expected to start this year. That campus is approximately one mile from both of our hotels at the Domain, and because our two hotels are both extended stay, we should benefit greatly from this new facility that will be under construction shortly. Of course, we only owned the new six-pack of hotels for most of March, but as Jeff said, we are quite pleased with the performance of that group. RevPAR growth again for the quarter was up 6%, and then April was up 7%, slightly above our underwriting guidance. First-quarter occupancy is 74%, which was 200 basis points higher than our portfolio average for the quarter. And given that this is the first time we have spoken publicly since closing the acquisition, I do want to spend some time just sharing some color on the portfolio that we acquired. The markets further diversify our geographic footprint into areas of the country that are benefiting from expanded investments in manufacturing and distribution. Joplin, Missouri, is adjacent to the intersection of both Interstates 44 and 49 in Southwest Missouri and benefits from its location between Kansas City, St. Louis, Oklahoma City, and the ever-growing Northwest Arkansas area, which is home to, of course, Walmart, JB Hunt, and Tyson Foods. Key industries in the Joplin area include manufacturing, with major players there including General Mills, Frito-Lay, Coca-Cola, Cargill, and the headquarters of Leggett & Platt, and, obviously, distribution given its proximity is a major driver there. Additionally, the hotels will benefit from an almost $400 million development called Prospect Village, which will be home to a sports complex. It will include a 135 thousand square foot indoor athletic center as well as outdoor turf fields. The sports complex is expected to host 28 indoor tournaments and 22 outdoor tournaments over weekends each year that will generate $12 million of annual visitor spending and 27 thousand annual hotel room nights, and these will be mostly weekend nights, thus enhancing our full-week performance at the hotels. Paducah sits on Interstate 24 and is proximate to the many high-traffic commerce routes between St. Louis, Louisville, Nashville, and Memphis. Key industries include manufacturing, with large-scale facilities in the area operated by Darling Ingredients, Frito-Lay, HB Fuller, among many others, as well as the marine industry in Paducah, as it is a major hub for the inland marine industry due to its location at the confluence of the Ohio and Tennessee Rivers with proximity to the Mississippi and Cumberland Rivers. Like Joplin, Paducah is set to open, in the next month, an almost $100 million multi-sport outdoor sports complex, and it is expected to host 35 to 40 tournaments a year. In 2026, it is projected to at least host two full-weekend tournaments per month for the next six months. Additionally, on the longer-term horizon for Paducah, in March it was announced that Global Laser Enrichment is planning to build a new nuclear enrichment facility on a 665-acre site in Paducah. Plans are currently under review by the Nuclear Regulatory Commission, and once approved, construction will take approximately three years to open. The project is expected to generate approximately 1,000 jobs over the course of construction and hundreds of jobs upon completion, and just given the nature of the facility, it is going to be a constant source of demand from, obviously, ongoing visitations from authorities, interested parties, and everything of the like. So really good long-term project there. Effingham sits at the crossroads of Interstates 57 and 70, midway between Indianapolis and St. Louis, and brings into its area about 200 thousand workers from eight neighboring counties each week. Key industries include food and agriculture, with major players such as Archer Daniels Midland, Krusteaz, Pepsi, and Siemer Milling. Manufacturing is also a major player, with Flex-N-Gate, Hitachi Metals, Effingham Machine and Assembly, and Peerless of America, and then, of course, again, similar to the other two markets, distribution given its relation to many different modes of transportation is a big player. Shifting my comments back to our operating results, we did grow hotel EBITDA 5% at our 33 comparable hotels, as we were able to increase our GOP hotel margins on the back of a decline in labor and benefits per occupied room of over 1%. Additionally, we drove our other operating profit percent higher in the first quarter. Looking at guidance for the remainder of the year, our hotel EBITDA margins are up about 100 basis points from our previous guidance. And continuing the trend since last year, we have stayed laser-focused on our staffing levels and maximizing productivity and efficiencies. As a reminder, in 2025, our labor and benefits costs declined year over year slightly, and we are the only lodging REIT to accomplish that. And, like I said, in the first quarter, we were able to reduce our labor and benefits by over 1%, or $0.50 per occupied room. We also benefited from lower property insurance renewal rates and property taxes due to some refunds, and those items were able to absorb an approximate 12% increase in utility costs at our comparable hotels. We were particularly impacted by the massive snowstorm across the middle of the country and Northeast in the early part of the first quarter. For the quarter, our top five producers of GOP were led by our Residence Inn San Diego; our two Sunnyvale Residence Inns; then our Home2 Phoenix; and, lastly, our Residence Inn Fort Lauderdale. Outside of our top five but in our top 10 was also our Residence Inn San Mateo. So, again, all three of the Silicon Valley hotels that were not under renovation were in our top 10. Looking at these comparable Silicon Valley hotels, hotel EBITDA grew a remarkable 35% year over year on what was a 23% RevPAR increase for a 1.5 times flow-through—again going to show you the upside financial leverage we can get when these hotels start to grow. That 35% growth is pro forma for a property tax refund that we received on one of those three hotels during the quarter. If you include that, the actual growth was about 50% in hotel EBITDA. On the CapEx front, we spent approximately $6 million in the quarter. We completed the full renovation of our Residence Inn Austin and the rooms portion of the Mountain View renovation. We are completing major interior upgrades to the Mountain View gatehouse that will be complete here in the next month, and later this year, we will be completing a significant enhancement to our gatehouse outdoor amenities that will be fantastic for our guests to enjoy the great weather as well as to collaborate with other guests in a very nice setting. Our CapEx budget for 2026 is approximately $27 million. We have three hotels scheduled for renovation later this year: our Gaslamp Residence Inn, our Hyatt Place Pittsburgh, and our Farmington Homewood Suites, and those are all expected to start in the fourth quarter. Lastly, I will add that the six recently acquired hotels have very little CapEx required this year, and, in fact, only one hotel is scheduled for renovation over the next two years—the Hampton Inn & Suites Paducah. With that, I will turn it over to Jeremy. Jeremy Bruce Wegner: Thanks, Dennis. Good morning, everyone. Our Q1 2026 hotel EBITDA was $21.4 million. Adjusted EBITDA was $818.4 million and adjusted FFO was $0.20 per share. We were able to generate a GOP margin of 40.2% and hotel EBITDA margin of 31.8% in Q1. GOP margins for the quarter were up 60 basis points from Q1 2025 due to outstanding expense control. As Dennis mentioned, Q1 labor and benefits costs actually decreased 1% on a per occupied room basis. Q1 hotel EBITDA margins increased by 140 basis points due to both the strong expense control and $500,000 of property tax refunds in the quarter. In early March, Chatham Lodging Trust closed on the acquisition of a portfolio of six Hilton-branded hotels for $92 million. The acquisition was funded with borrowings on our revolving credit facility, which currently has a rate of approximately 5.1%. We are very excited about this acquisition given the hotels’ average age of only approximately 10 years, outstanding margins, strong RevPAR growth, and limited near-term capital needs. We expect this acquisition to be significantly accretive to Chatham Lodging Trust’s FFO and free cash flow. After this acquisition, Chatham Lodging Trust’s leverage ratio, as defined in our credit agreement, was only 32.5%. Chatham Lodging Trust’s strong balance sheet puts the company in an excellent position to continue actively repurchasing shares, pursue the planned development of a hotel in Portland, Maine, and to continue to grow opportunistically through accretive acquisitions. Turning to our 2026 guidance, we expect RevPAR growth of 0% to 2%, adjusted EBITDA of $95.3 million to $99.6 million, and adjusted FFO per share of $1.21 to $1.29 for the full year. Our guidance reflects the contribution from the $92 million acquisition from March 3 forward. Reflecting the pro forma impact of this acquisition, our 2025 RevPAR would have been $127 in Q1, $153 in Q2, $151 in Q3, $129 in Q4, and $140 for the full year. We generally expect Chatham Lodging Trust’s Q2 2026 RevPAR will increase approximately 1% to 2%. While our guidance does not reflect any share repurchases or acquisitions, our plan is to continue repurchasing shares and, over time, to continue to pursue accretive acquisitions. This concludes my portion of the call. Operator, please open the line for questions. Operator: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star followed by the number one on your telephone keypad. If your question has been answered and you would like to withdraw from the queue, please press star followed by the number two. And if you are using a speakerphone, please lift your handset before pressing any keys. One moment, please, while we compile the roster. Your first question comes from Gaurav Mehta with Alliance Global Partners. Please go ahead. Gaurav Mehta: Yeah, thank you. Good morning. I wanted to ask you on the portfolio acquisition, hoping to maybe get some more color. Was this an off-market deal or a fully marketed deal? What were the cap rates like? And it seems like the performance for the portfolio is coming in better than what you underwrote during the acquisition. What do you attribute that outperformance to? Dennis M. Craven: Hey, Gaurav. Yes. I mean, I think the transaction itself was a broker transaction sent out to, I guess, a group of parties. I think one of the things that we liked about the deal—and I think there are not a lot of buyers out there that have the ability to kind of take down a $100 million acquisition—it is kind of too big for a bunch of buyers that we might see on an individual deal. And we were certainly involved in the transaction and, in just kind of a lot of the deals that we have looked at over the last couple years, really excited about some of these other markets that might initially be off the radar for certain other people, but, you know, just doing a lot of work and seeing a lot of information, we liked the transaction. The performance of the portfolio is—I would not say meaningfully—above our underwriting, but both in terms of the first-quarter performance and the April performance, RevPAR growth I would say is a buck or two above where we thought it was going to be. So it is not significantly outperforming our underwriting, but it is outperforming. So just very pleased with the six hotels and how they have gotten out of the gate so far, and really like what it does for us in terms of diversifying into some other industries and a little bit into the Midwest of the country. Gaurav Mehta: Alright. Thanks for that color. Maybe on the acquisition market in general, are you guys seeing more activity now in the transaction market compared to maybe last quarter? Dennis M. Craven: I think it is similar to last quarter, Gaurav. I think it is still a challenged market, especially when you look at individual-type transactions. I think, thankfully, the public companies—their multiples—are, thankfully, starting to adjust a little bit here, so it is going to allow people to have a little bit of a lower cost of capital, which might generate some additional interest. But at the moment, I think it is pretty consistent in terms of deal flow, last quarter to this quarter, but that is certainly more than what we saw a year ago. Gaurav Mehta: Alright. Thanks for that color. And then maybe on, I guess, asset recycling, disposition side, are there any more assets that you guys may sell, or the asset that you guys sold in the last few quarters, is that about it for now? Dennis M. Craven: Yeah, we are still looking at that, Gaurav. And I think we will probably end up trying to sell one or two the balance of the year, with the whole purpose of, again, as we noted, reinvesting those dollars into either share repurchases or new acquisitions. But, certainly, that last program was a pretty high volume for us, and I think it will just be one or two for the foreseeable future. Gaurav Mehta: Alright. Thank you. That is all I had. Jeffrey H. Fisher: Thank you. Operator: Your next question comes from Ari Klein with BMO Capital Markets. Please go ahead. Ari Klein: Thanks and good morning. Maybe just a follow-up on the acquisitions. These are somewhat different markets than the rest of your portfolio. Just curious, any supply growth to speak of in these markets that we should be aware of? And you mentioned how some of your markets will benefit from the World Cup. What are your World Cup expectations and how is that factored into the guidance? And then, just on the guide in general, it seems like you are assuming somewhat slower growth in the second half of the year. You do have some easier comps. Is that just factoring some level of conservatism on your part? And in Silicon Valley, previously you used to get a decent amount of intern business. It kind of has faded maybe a little bit the last couple years. How are you seeing that play out over the course of this summer? Dennis M. Craven: Supply growth—very little. There is one hotel that just recently, I believe, opened in Paducah, but outside of that, really no new supply that is coming to the three markets. On the World Cup, I think we do have some conservatism in there in general. I think the World Cup—we are being pretty conservative, I think, in regards to that as well. There is a lot of publicity and media attention around international travelers coming in and the fact that tickets are really expensive, on top of just trying to get to the country. So we are taking a pretty measured approach in terms of our forecast for most of those markets. Obviously, we are projecting growth, but hopefully we see some upside, not only with the World Cup, but I think just in general. Like you said, we have some easier comps with a lot of the shutdown activity, but if you look at our guidance of kind of 1% to 2% for the rest of the year, hopefully we outperform. On Silicon Valley intern business, in general the intern business has come down significantly from pre-pandemic and especially, I think it was 2022, when we had a tremendous amount of business. There is some still out there. We do have one block of interns on the books at one of our hotels—not taking it to the bank yet—but we do have some intern business coming back this summer. That would be from the late May to mid-August time frame. Ari Klein: That is all for me. Thanks for all the color. Dennis M. Craven: Thank you. Operator: Thank you. Your next question comes from Tyler Batory with Oppenheimer. Go ahead, Tyler. Tyler Batory: Thanks. Good morning, everyone. A lot of good detail here, and congrats on the really strong results. Really nice to see the execution here. A couple of cleanup questions from me. On share repurchases and capital allocation first—it has been a while since your stock price was in the double digits. We are starting to approach that. Do share repurchases still make sense up here? You mentioned the stock still being undervalued in your mind. Any help in terms of what the portfolio might be worth? What do you think might be a fair multiple for your assets? And a follow-up on operations, and to hit on Silicon Valley a little bit more: the RevPAR growth there is tremendous, and I am trying to get a sense, in terms of your guide talking about the rest of the year, what is included in that outlook for Silicon Valley? And could you also just frame that you have one of the assets there under renovation—if that is a catalyst in terms of driving further upside to that portfolio in the years ahead? Dennis M. Craven: Well, that is a very interesting question. To talk about the share repurchases, if you look at where we are trading literally right this second, we are around a 9 cap on our corporate NOI and around a 10 cap on our hotel NOI. So, on a historical basis, even at $9.45, it is an attractive investment for what we determine a use of proceeds from our, obviously, free cash flow and our capital recycling. So I think we will continue to buy shares within our $25 million repurchase plan, and that probably takes us through the end of the third quarter, most likely, kind of at the rate that we have been buying shares at. As far as what we are worth, that is a loaded question, but we certainly feel our portfolio—and most, I think, our peers would say the same—our underlying value is much better from a cap rate perspective and EBITDA multiple than where we are trading. We are still all trading at multiples that are, in the history of lodging REITs, fairly low. So I think there is a lot of upside. On Silicon Valley, the Mountain View renovation—the gatehouse has been completely closed and check-in has been using, in essence, two guest rooms as our lobby, so it has been pretty disruptive there. But if you look at the balance of the year for the four hotels, obviously we talked about the three hotels being up 12% through April. When you look at coming out of the renovation, for the four hotels we are projecting kind of mid- to upper-single-digit RevPAR growth for the balance of the year from essentially May to December. That is a little bit, I think, conservative compared to what the first four months of the year have done, but hopefully we continue to see that demand growth. There potentially could be some upside there as well. Jeremy Bruce Wegner: Yeah. I think even outside of the question of valuation multiple or cap rate, we just see a ton of upside in the EBITDA and NOI in particular of our Silicon Valley portfolio. So even if the multiple were not to rerate at all, I think we still see a bunch of upside in the portfolio and the stock. Tyler Batory: Okay. Appreciate the detail. That is all for me. Thank you. Jeremy Bruce Wegner: Thank you. Operator: Thank you. There are no further questions on the phone line. I will turn the call back to Mr. Fisher for some closing remarks. Jeffrey H. Fisher: Well, again, I just want to thank everybody for being on the call. We are pretty pleased here with not only the top-line results, but, frankly, I am very pleased with how the operator has been able to flow those top-line results to the bottom line, and, as Dennis mentioned, actually experiencing some reduction in some labor cost and otherwise due to some really strict controls that have been enforced very well. So we look forward to continuing to put up some good results for the rest of the year. I think conservatism, obviously, as reflected in our peers as well, is probably the best bet for the time being given that there is a war going on in the Mideast, and I do not think we mentioned that yet, but it is certainly worth keeping in mind. But we, again, think the hotels themselves and the overall trends bode very well. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.
Operator: Good day, and welcome to the Magnera Corp. Second Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question, you will need to press 11 on your touchtone telephone. Please note this call is being recorded. I would now like to turn the call over to Robert Weilminster, Vice President of Investor Relations. Please go ahead. Robert Weilminster: Thank you, Operator, and thank you, everyone, for joining Magnera Corp.'s second fiscal quarter 2026 earnings call. Joining me, I have Magnera Corp.'s Chief Executive Officer, Curtis L. Begle, and Chief Financial Officer, James M. Till. Following our prepared remarks, we will have a question-and-answer session. To allow everyone the opportunity to participate, we ask that you limit yourself to one question with a brief follow-up, then fall back into the queue for any additional questions. A few things to note before handing over the call. On our website at magnera.com, you can find today's press release and earnings call presentation under Investor Relations. You can also go directly to ir.magnera.com to review the investor presentations from our recent conference attendance. Our annual report and proxy statements with the SEC can be found on our website under Investor Relations. As referenced on Slide 2 during the call, we will be discussing certain non-GAAP financial measures. These measures are reconciled to the most directly comparable GAAP financial measures in our earnings press release and in the appendix of the presentation available on our website. Additionally, a reminder that we will make certain forward-looking statements. These statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore are subject to risks and uncertainties. Actual results or outcomes may differ materially from those expressed or implied in our forward-looking statements. Some factors that could cause the results or outcomes to differ are in the company's latest SEC filings and our news releases. These statements speak only as of today, and we undertake no obligation to update them. I will now turn the call over to Magnera Corp.'s CEO, Curtis L. Begle. Curtis L. Begle: Thank you, Robert. Good morning, and thank you for joining our call. I am pleased to present our second quarter results and highlight our performance amid ongoing macroeconomic uncertainty. My remarks today will focus on four key themes. First, our earnings of $90 million of adjusted EBITDA were in line with expectations after adjusting for weather-related factors highlighted during our February earnings call. Our strong free cash flow enabled us to pay down $36 million of debt in the quarter. Second, I will discuss the winter storms that affected more than 50% of the United States, causing significant supply chain disruptions impacting both our customers' operations and our own. Third, the war in the Middle East has created global challenges on many fronts, including having a direct impact on our raw material and supply chain costs. Lastly, I will discuss how Magnera Corp. has responded to these challenges and continues to strategically invest in our business to position us for future success. The global economic environment remains strained, though there are signs of resilience within the Americas. Elsewhere, we continue to encounter tempered demand, particularly in Europe. Compounding these challenges, new geopolitical conflicts have contributed to higher operational costs and further supply chain disruptions. Magnera Corp.'s scale and global footprint are built for times like this. Through localized sourcing, disciplined cost management, and success in Project CORE initiatives, we have mitigated many of these impacts. We remain focused on managing our controllables. As mentioned, our largest region, North America, was impacted by back-to-back winter storms, Fern and Hernando. Fern required the temporary shutdown of 13 manufacturing sites, resulting in lost production and impacting shipping days depending on the location. The second storm, Hernando, affected seven plants, but as with Fern, there was no significant damage and shipping resumed. We anticipate recouping most weather-related setbacks in the second half of the fiscal year. Transportation lanes remained tight in the quarter and are expected to require additional time to stabilize. Our teams did an excellent job responding to the storms by working together to prioritize the safety of our employees and assets. As the weather improved, our teams quickly assessed impacts and initiated plans to restart production and supply to our customers. We had no major weather-related damage at our plants. Next, I want to talk about how the conflict in Iran impacted us in the quarter. Our strategic principles to procure, manufacture, and sell within our regions provide a competitive advantage given our extensive asset base and leading positions in specialty materials. The majority of our business is sourced and sold locally within the respective regions, providing us and our customers reliability of supply. The rising cost in raw materials, fuel, container shipping, and delivery times, notably affecting resin, pulp, and energy expenses, constitute approximately 70% of our cost of goods sold. Additionally, inbound and outbound transportation expenses have increased. To address these pressures, we are working closely with customers to transition pricing mechanisms to a monthly cadence, helping mitigate timing lags in cost recovery. While enhancements to our global energy program have helped offset some of the increased costs, prices remain above pre-pandemic levels. Further details on the financial impact and working capital implications will be provided by James in his update. Before transitioning to James, I want to reiterate the resilience demonstrated by our organization in a persistently challenging market. In the Americas, industrial activity remains subdued, despite signs of stability as the sector contends with tariffs, geopolitical uncertainty, and policy ambiguity. The U.S. economy persists in a stable yet cautious state, while South America shows early signs of improvement following proactive measures addressing deflationary pressures and elevated transport costs from Asia. We expect a stronger performance in the latter half of the year in this region, and excluding weather impacts, volumes in the Americas would have reflected a positive year-over-year increase. In Europe, the manufacturing index has seen modest improvements; however, business sentiment remains cautious, mirroring trends from recent years. In the rest of world, year-over-year volume change was down 4%. We achieved mid-single-digit volume increases globally in infrastructure product lines driven by seasonality and continued emphasis on consumer solutions. Adult personal care categories, especially incontinence and feminine hygiene, also experienced solid growth, supported by demographic shifts and higher consumer adoption. Initiatives from governments and NGOs to destigmatize incontinence products, combined with customers' preferences for innovative and premium features, have bolstered demand. We are investing in our business for growth and improving our competitive position. We initiated two critical projects at our Gernsbach and Lidney facilities that will reduce our energy consumption and help advance our sustainability agenda. Our Lidney project will reduce our electricity and water usage by installing modern vacuum blowers. We appreciate the support from the Industrial Energy Transformation Organization in our decarbonization efforts. Our team at Don Buell recently commissioned a new film asset that will modernize our product offering for elastic backsheets in hygiene, generate new volume, and provide energy, raw material, and plant efficiency improvements. Each of these investments is aligned with our capital allocation strategy and demonstrates our commitment to improving our business over the long term. Finally, I would like to highlight the ambitious commitments detailed in our latest corporate sustainability report. This document underscores our resolve to operate transparently and deliver measurable progress. We have set targets to reduce scope 1 and 2 emissions by 42% and scope 3 emissions by 25% by 2035. We are also aiming for a 10% reduction in water consumption and plan to achieve zero waste to landfill at 75% of our sites, or 34 locations, by 2035. These goals reflect our commitment to building a more resilient, sustainable enterprise and making meaningful contributions to a better world. I will now turn the call over to James for a comprehensive financial update. James M. Till: Thank you, Curtis. Good morning, everyone. Turning to our financial results on Slide 11, after adjusting for the impacts of the winter storms in North America, we delivered performance that was in line with our expectations. Volumes and earnings came in as anticipated while we continued our trend of strong free cash flow generation, which we have demonstrated since the closing of the merger. Our teams have done an exceptional job of advancing synergy realization and making substantial progress on Project CORE, which resulted in adjusted EBITDA remaining essentially flat for the quarter as gains from internal initiatives were offset by external headwinds. During the quarter, we generated a robust $73 million of free cash flow, reflecting our focus on operational excellence, a disciplined capital expenditure approach, and working capital improvement initiatives. Over the last twelve months, we generated $128 million of adjusted free cash flow, representing a free cash flow yield of over 40% relative to our quarter-end market capitalization. For the quarter, sales were $796 million, as solid performance across adult and infrastructure product categories was offset by weather-related disruptions in North America and continued broad-based market softness in Europe. Adjusted EBITDA for the quarter was $90 million, as contributions from synergies and Project CORE were offset by the headwinds from the winter storm shutdowns, as well as weaker demand in Europe and negative mix in South America. Turning to our segment performance, beginning with the Americas on Slide 12. Despite the winter storm impacts, we achieved volume growth in our adult and infrastructure categories and saw normalization toward the end of the quarter in South America as we lap the Asia import pressures discussed on prior calls. Reported revenues reflected the contractual pass-through of lower raw material costs during the quarter, which pressured pricing but did not have a material effect on underlying profitability. Adjusted EBITDA in the Americas declined by $6 million compared to the prior year. Although winter storms pressured reported volumes, the most pronounced impact was on our conversion cost and product mix. As constrained capacity areas did not fully recover during the quarter, we do anticipate recovery of these areas in 2026. Turning now to the Rest of World Division on Slide 13. We experienced a year-over-year decline in revenues in the quarter, as strength in the European wipes business was more than offset by ongoing general softness in Europe and the pass-through of lower raw material costs. Adjusted EBITDA for the Rest of World division increased by an impressive 19% to $32 million. The improvement reflects our progress on disciplined cost management and synergy realization, as the division's performance illustrates the positive impacts of our focus on operational efficiency and portfolio optimization. Turning to capital allocation on Slide 14. Aligned with our capital allocation priorities, we repaid $36 million of outstanding debt during the quarter, bringing our debt repurchases for 2026 to $63 million. These actions reflect our continued focus on strengthening the balance sheet while maintaining a disciplined and balanced approach to capital deployment. We closed the quarter with approximately $600 million of available liquidity, providing a strong financial foundation to navigate ongoing inflationary pressures, fund strategic investments, and pursue attractive growth opportunities while preserving flexibility in an increasingly dynamic geopolitical environment. From a guidance standpoint, after incorporating the March inflation, our target range remains unchanged. However, while we benefit from efficient pass-through mechanisms, we are operating in an environment of potentially unprecedented volatility, both in terms of the magnitude and timing of raw material inflation. As a result, we would expect some headwinds in the third quarter followed by recovery in quarter four. This concludes my financial review, and I will turn it back to Curtis. Curtis L. Begle: Thank you, James. This quarter's performance reflects the balance we have in our portfolio, our global scale, and our focus on improving our cost competitiveness. We have recovered from operational disruptions caused by the winter storms, worked closely with our customers to manage the negative impacts of the war in Iran, and maintained our long-term focus on business improvement. Our confidence in our business drove our debt repayment in the quarter. As we look ahead, there is uncertainty, but we remain steadfast in our commitment to delivering improved value for our stakeholders. Operator, please open the line for questions. Operator: Thank you. Please press 11. If your question has been answered and you would like to remove yourself from the queue, press 11 again. Our first question comes from Gabrial Shane Hajde with Wells Fargo. Your line is open. Gabrial Shane Hajde: Curtis, James, good morning. I know it was one month in March that you faced some of these higher costs, and the raw material suppliers tried to push in some price increases pretty quickly. I suspect that you had some level of raw material that sits on the books, and then by the time it filters through the income statement, maybe that mitigates some of the impact in the immediate short term. But you talked about having a lag impact on the third quarter. Can you give us a sense, with five months left for the second half, how you are thinking about the cadence and what you alluded to at the end of your remarks there, James, on EBITDA progression? Curtis L. Begle: I will cover the first part and then kick it over to James, Gabe. First, as we did see some of the inflationary measures coming through and anticipated them—historically, we have experienced some of these things, even if you go back to Katrina and Rita, where you had unprecedented lifts in a very short period of time—the most responsible and appropriate thing to do is to ensure continuity of supply for our customers. That is going to require whatever it takes to ensure that you are paying for the product to get it in. The immediate action and response from our commercial team I was extremely pleased with and proud of, getting with customers as soon as possible to start to address where we may have a quarterly price change versus monthly. In many cases, as we have talked about before, we are very efficient in our pass-through mechanisms for those inflationary costs. But whenever it goes up to the levels that it has, it is going to require shortening that window, and these are abnormal times. In terms of the collaboration with customers, it has been very positive. Ensuring that we get them supplied is paramount across the globe, and, more importantly, staying in regular communication. One thing we did not highlight as much on the script that I want to address is there are other increases you experience outside of just the raw material pass-throughs—freight, logistics, energy, etc. In addition to moving with the monthly price index moves, we work with customers on identifying surcharge opportunities and ensuring continuity of supply for them. James, I will let you cover how we are seeing the back half and the recovery. James M. Till: Thanks, Gabe, for the question. As Curtis highlighted, from an earnings standpoint the teams jumped in quickly to mitigate those gaps. The current environment is pretty fluid. My remarks in terms of headwinds are more in terms of cash. From a cash standpoint, the teams are working with customers and with vendors to offset any pressure that we would see in Q3 and offset that through the remainder of the year as we finish out the back half. Gabrial Shane Hajde: For posterity, you talked about reiterating the guidance—I think $3.8 to $4.1 of EBITDA and free cash of $90 to $110. Both of those elements are what you are talking about. And then, relatedly, cash flow generation was super strong in the first half—congratulations on that. Is there anything seasonally we should consider? There is not a lot of history to look to. It would seem to suggest, to your point, suppliers may give you a little bit of relief on the AP side, but with cost going up, it would consume cash. One of your prior parent companies gave a rule of thumb that for every penny it was roughly $7 million of cash consumption. Is there anything that you can help us with in that regard? Thank you. James M. Till: Sure. I remember that well. Unfortunately, it is not quite as mechanical for us. The straight math is $2 million a penny, but that is before offsetting actions. Then you think about working with customers, working with vendors, working on inventory levels. I would be remiss if I did not highlight that it is very fluid in terms of where we will be by the end of the year in terms of this inflation—it has even changed a lot in the last 24 hours. You are absolutely right that we had a very strong first half of the year. Q3 generally is a softer cash generation quarter for us due to timing of some payments and things like that. I am really proud of where the team started; it gave us a good head start as we get into the back half. There is a lot of uncertainty in terms of where it all plays out, but the teams are working diligently to offset the pressures that we see on cash, and on earnings we were very quick to try to address those gaps. Gabrial Shane Hajde: Last one for me. Order patterns or anything that you have observed, 60-some days into the conflict, that you would share with us? Orders—anything like that that is flagging? Curtis L. Begle: That is a good callout, Gabe. If you recall last year at this time, we had concerns related to order bookings with the announcement of the tariffs and some of the behaviors that we started to see from customers. In this case, as we headed into Q3, bookings are very normal for us. If anything, we are still fulfilling orders that were impacted by the storms in February, so there is still some catch-up there. There are customers that get low on inventories in a couple of areas, so we have looked to support them. From a year ago to now, I would say we feel good about where our bookings are. I do not want to declare victory or have a one-month trend declare what the next two months might look like, but coming out of March into April, we feel good about where the volume sits and the demand outlooks are. We are staying close to customers, both existing and potentially new customers, as they are identifying challenges within their own supply streams. We are being very responsible and looking to make sure that whatever we pick up from a customer order standpoint is above our expectations from a profit margin standpoint. Operator: Thank you. Our next question comes from Kevin William McCarthy with Vertical Research Partners. Your line is open. Kevin William McCarthy: Curtis, I think I heard you reference a shift to a monthly pricing paradigm. Would you elaborate on that in terms of the reception among your customers, what constraints, if any, you may have given existing contracts, and how we should think about lag effects as you shift to this new pricing strategy? Curtis L. Begle: Thanks, Kevin, and good to hear your voice. Historically, as we have communicated, we are very efficient in terms of the pass-through mechanisms in a normal environment. If polyolefins go up or down 3% to 6% in a quarter, it typically does not have a material impact, positively or negatively, on our financials. In this case, these are abnormal times. Contracts are meant to be established for normal environments. We acted quickly. Our customers told us we were the first ones to come to them with this, and that is what we would expect as the largest player. The entire market understands the negative impact this can have on businesses in our space. I am really proud of what the team has done in terms of collaborative discussions with customers—ensuring supply so they can run their lines and provide products on the shelf is of the utmost importance. As expected, after tense early negotiations, our customers as a whole have been very supportive. We are shifting in the near term from quarterly to monthly with some customers, understanding that will persist until things settle down. Then we would go back to our normal pass-through mechanisms. Kevin William McCarthy: Understood. I want to follow up on your comments regarding winter storms Fern and Hernando. What was the EBITDA impact on Magnera Corp.'s fiscal second quarter from those storms? Do you expect to recover the majority of it or all of it in the back half, and what is the cadence of that? Curtis L. Begle: If you recall during the earnings call in February, we highlighted $4 million to $6 million of pressure because of those shutdowns, and it came in at about $5 million total for the quarter. It is a matter of us catching up with those orders and getting the lines to run efficiently, and our expectation is to recover that through the balance of the year. Kevin William McCarthy: Last one for me, James, just to follow up on your reiteration of the free cash flow range. Can you provide an update on some of the moving parts? I would have thought that working capital today would require a larger use of cash than we might have thought pre-war. What are you doing to try to offset that and maintain the range? James M. Till: We were roughly $10 million positive through the first half, thanks to really good work by the team and all the efforts that delivered a strong quarter as well as first half and enabled us to pay down debt. As we think about the inflationary pressure we are going to have on working capital from a cash standpoint, the outlook is very fluid. The teams are doing a nice job of working with customers in terms of shortening terms—which they understand as we are having the conversations on shortening the lag as well. We are talking with our vendors in terms of temporary terms, as well as looking at our inventory levels. All the things we would normally do, but in this situation, everything gets heightened even more to offset those pressures. Operator: Thank you. Our next question comes from Roger Spitz with Bank of America. Your line is open. Roger Spitz: Hi, thanks very much. I think at one point you gave a split of your sales by the amount subject to contract with pass-through mechanisms, which we have been talking about going from quarterly to monthly resets; secondly, subject to general price change announcements; and third, spot sales. Do you have an update on that? Curtis L. Begle: Thanks, Roger. We have done a really good job—and we talked about it last year—as we started to put in new contracts, particularly around some of the legacy Glatfelter customers, which is a good portion of the fiber-based business. We were roughly 70% a year ago; that is closer to roughly 85% on any contract customers. If you think about the mix across the organization, I would say about 20% of the total portfolio is subject to general price increase mechanisms or spot business. Product lines like Typar, for instance, typically have annual adjustments, and we have recently gone out with an increase in that infrastructure space. Roger Spitz: Great. That is it for me. Thank you. Curtis L. Begle: Thanks, Roger. Operator: Thank you. Our next question comes from Edward Brucker with Barclays. Your line is open. Edward Brucker: Thanks for taking the question. Just to add on to that, the business that is not on contract pass-throughs—how does pricing work there? Is it through negotiated pricing or price increases? And secondly, the contract pass-throughs—are those just for raw materials, and then you have to do surcharges on top of that to offset freight, energy, and logistics? Curtis L. Begle: Yes, correct. To answer your second question first, historically and strategically our input raw material costs make up the majority of our cost of goods sold, and those are on indexes and baked into the contracts. In times like this—when it escalates so quickly—those are the discussions we have with customers to ensure we can keep them in supply. For other inflationary costs, we typically have openers in the contract language to have those discussions with customers, show them the benchmarks and the changes, and then put those through as a temporary or somewhat longer-term surcharge to recover some of those costs. If escalation continues, we have to address it with additional surcharges. At this point, we have worked really closely with customers on roughly 80% to 85% of our total portfolio. The other portion is balanced out by some of our branded business that we sell in the market, like our Typar brand in the building construction market and our Centerra and Chicopee wipes businesses. Those are price pass-throughs and updates throughout the year where needed and appropriate. Less than 10% of our business I would consider spot, and that is negotiated typically quarter to quarter or order to order, much like bidding on a campaign for a particular quarter if we have some line time that makes sense to go out and get some spot business. Edward Brucker: That is helpful. And on capital allocation, you have done an impressive job reducing debt the past two quarters. Do you expect to continue to chip away at debt? Maybe if you have a debt reduction goal, that would be helpful. And how have you been taking that debt out—has it been through open market purchases? James M. Till: Our capital allocation approach has been to delever and pay down debt, and we do that efficiently with our cash, including in the open market, as you would expect. That has been the case for the entirety of this current year. We gave a target at the beginning of the year of roughly a 100 of debt paydown this year based off our guided free cash flow range, and that has not changed. Edward Brucker: Got it. Thanks. Operator: Thank you. Our next question is a follow-up from Kevin William McCarthy with Vertical Research Partners. Your line is open. Kevin William McCarthy: Yes, thank you and good morning. Question for you on your sequential margin progression. As we think about this wave of cost inflation, particularly on resins, being unprecedented—if you were to recover that cost inflation dollar for dollar, maybe your top line would inflate rapidly and you would be EBITDA neutral because you recovered one for one. But one consequence is your percentage margin would decline sequentially. Is that the right way to think about it as you move from March into June? I think you are a FIFO accounting company—maybe that helps a bit. Can you talk through the moving parts and what we should expect in terms of your sequential margin trajectory? Curtis L. Begle: You are spot on. As you think about the pass-through mechanisms, it will increase the top line, which is why we cover both top line and volume—overall organic volume growth—in a particular quarter. You would anticipate stable and expected EBITDA dollars on a higher sales dollar number, which in essence would reduce your EBITDA percentage by some basis points. In general, for us, it is really focused on earnings, free cash flow generation, and—even in a deflationary environment—you may see your top line drop while bottom-line margin improves. We focus on the physical volume we sell and the EBITDA dollars that come along with that. Kevin William McCarthy: And just to follow up on the customer order patterns—are your customers, in any cases, trying to get ahead of what is likely to be meaningful inflation, or are they not doing that? If they are, how do you approach that? Do you try to control the pace of orders in some fashion? What are you seeing and hearing? Curtis L. Begle: We did not experience swings as much as we have historically. In some cases, there is only so much we can make in a given quarter, month, or week. As we take those orders, we ensure we keep customers in supply, understand where their inventory positions may be, and we may have certain inventory levels we keep as safety stock for them. We have not seen anything particularly abnormal. They typically operate on lower inventories and have limited warehouse space. We are FIFO, with roughly 60-day turns as a whole, and certain product lines at about 14 days. We are still catching up with some of the orders that were impacted by the February storms, and that is what we expect throughout the balance of the year. Kevin William McCarthy: Perfect. Thank you again. James M. Till: Sure. Operator: Thank you. There are no further questions at this time. I would like to turn the call back over to Curtis L. Begle for closing remarks. Curtis L. Begle: Thank you, Operator, and thank you again for joining us today and for your interest in Magnera Corp. We look forward to updating you on our progress in our next quarter and seeing many of you at the conferences scheduled in June. Have a great day, everybody. Operator: Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2026 Skyward Specialty Insurance Group, Inc. 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, please press star 11 on your telephone and 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 now to turn the conference over to Natalie Schoolcraft, Senior Vice President. Please go ahead. Natalie Schoolcraft: Thank you, Gina. Good morning, everyone, and welcome to our first quarter 2026 earnings conference call. Today, I am joined by our Chairman and Chief Executive Officer, Andrew Robinson, and Chief Financial Officer, Mark Hochul. We will begin the call with our prepared remarks, and then we will open the lines for questions. Our comments may include forward-looking statements, which by their nature involve a number of risk factors and uncertainties that may affect future financial performance. Such risk factors may cause actual results to differ materially from those contained in our projections or forward-looking statements. These factors are discussed in our press release, as well as in our 10-Ks that were previously filed with the Securities and Exchange Commission. Financial schedules containing reconciliations of certain non-GAAP measures, along with other supplemental financial schedules, are included as part of our press release and available on our website under the investors section. With that, I will turn the call over to Andrew. Andrew Robinson: Good morning, and thank you for joining us. This quarter marks our first reporting at Skyward Specialty Insurance Group, Inc. inclusive of both the Skyward Specialty Insurance Group, Inc. and Apollo segments. Our results reflect an excellent start as a combined company. Mark will cover the quarter in detail in a moment, but I will start with a few highlights. First quarter diluted operating EPS improved to $1.25 from $0.90 in the same quarter last year, an impressive increase of 39% reflecting both the strong embedded earnings growth of Skyward Specialty Insurance Group, Inc. and the realized accretion from the Apollo acquisition. Our annualized operating return on equity was an outstanding 20%. Our book value per share grew to $27.50, up 10% over the prior quarter. Altogether, these results reflect strong underlying earnings momentum and disciplined capital deployment, positioning us well to continue to deliver consistent top quartile returns for our shareholders. Our growth in gross written premiums on a pro forma basis was up 10% over the prior year. Managed premiums were up 20% on a pro forma basis to $968 million. As a reminder, managed premiums include a combination of group premiums and premiums supported by third-party capital providers. The underlying 49% growth in gross written premiums driving the fee aspect of Apollo's business will be an important and new earnings growth driver as we look out into the future. As is widely discussed, market conditions are increasingly challenging for significant parts of the P&C sector. Our portfolio construction is genuinely unique amongst the P&C universe in that over 50% of the Skyward Specialty Insurance Group, Inc. business, now inclusive of Syndicate 1971 or iBot, our digital economy syndicate, is in markets less exposed to the P&C cycles. Together with our niche-focused strategy and outstanding execution, Skyward Specialty Insurance Group, Inc. has never been better positioned to deliver sustained top quartile shareholder value and continued earnings growth. With that, I will turn the call over to Mark to provide the financial details for the quarter. Mark? Mark Hochul: Thank you, Andrew, and good morning, everyone. As Andrew outlined, our first quarter reflects a successful start as a combined company, reporting net income of $50 million and operating income of $57 million. Diluted operating earnings per share was $1.25, up 39% year over year. Underwriting income totaled $52 million, and the combined ratio was 89.5, inclusive of 1.8 points of catastrophe losses. Ex-cat, the combined ratio was 87.7, reflecting strong underlying loss performance and disciplined expense management. Annualized operating ROE was 20.3%, underscoring the earnings power of the combined group. Gross written premiums were $668 million, up approximately 10% on a pro forma basis driven by 9% growth in Skyward Specialty Insurance Group, Inc. and 9% growth in Apollo. Overall growth was driven by Skyward Specialty Insurance Group, Inc.'s accident and health, credit and surety, global agriculture, and specialty programs divisions, and Apollo Syndicate 1969, our multiclass specialty syndicate. As Andrew emphasized, managed premiums, which include gross written premiums from which we derive fees, are an important metric for our business going forward. Managed premiums totaled $968 million, up approximately 20% year over year on a pro forma basis, including fee-generating premiums of $300 million which increased 49%. In this quarter, we generated $10 million in underwriting fees. This income stream is capital-light, recurring, and incremental to underwriting profit, and it represents a structurally important earnings growth lever as managed premium volume scales over time. With the addition of Apollo, we now report through two operating segments, Skyward Specialty Insurance Group, Inc. and Apollo, and a discrete corporate unit. The corporate unit includes investment results, holding company costs, and enterprise-level functions that support both operating segments. This improves transparency and provides clear visibility into the true segment-level performance. Skyward Specialty Insurance Group, Inc. reported a combined ratio of 88.9, or 86.8 ex-cat, reflecting another period of solid underwriting performance and an improvement from the prior year quarter. The loss ratio of 62.7 includes 2.1 points of catastrophe losses from winter and convective storms. The non-cat loss ratio of 60.6 was in line with 2025 and reflects business mix shift as A&H and global agriculture make up a larger portion of our portfolio. Loss emergence was in line with expectations, and no development was recognized. The expense ratio was 26.2, improving by over half a point year over year, driven by continued operating efficiencies and business mix. Turning to Apollo. The segment produced a combined ratio of 85.3, a strong start to the first quarter as part of Skyward Specialty Insurance Group, Inc. As Apollo has not historically reported quarterly results on a comparable U.S. GAAP basis, we are not providing year-over-year comparisons. Apollo reported a non-cat loss ratio of 52.8, lower than full-year expectations as a result of Q1 business mix and seasonality. Loss emergence in the quarter was in line with expectations. Apollo did not incur any cat losses in the quarter, and our full-year cat expectations remain unchanged. The expense ratio of 32.5 is broadly in line with expectations. The $4 million of fee-based service expenses are excluded from the combined ratio but included in operating income and support the scalability of the fee-earning part of the business. Turning to investments. The portfolio now approximates $2.7 billion, of which 90% consists of fixed income and short-term investments. Net investment income was $27 million, an increase of $7.5 million year over year driven primarily by a larger invested asset base as a result of the Apollo acquisition. Alternative and strategic investments continued to experience volatility primarily due to marks on the underlying investments. These exposures represent a modest portion of total invested assets and the overall portfolio remains conservatively positioned. With the addition of Apollo, over $100 million of invested assets were added to the portfolio during the quarter, which contributed $5 million of net investment income primarily in fixed income securities and short-term investments. For the fixed income portfolio, we put $75 million to work at 5.5%. The embedded yield for the group portfolio was 5.3%. Turning to the balance sheet, stockholders' equity ended the quarter at $1.2 billion. Financial leverage was in line with expectations after the closing of the Apollo acquisition at 28%. As Andrew highlighted, book value per share was $27.50, representing a 31% increase over the prior twelve months. You will recall that on December 3, we provided guidance for 2026 and that guidance is unchanged. Now I will turn the call back over to Andrew. Andrew Robinson: Thank you, Mark. As Mark shared, our financial results for the quarter were again excellent. Our portfolio diversification, particularly in categories less exposed to the P&C cycle, again served as a catalyst for strong top line performance which in turn will continue to drive double-digit earnings growth. Notably, our increase in gross written premiums of 25% plus in A&H, credit and surety, and ag are all in areas that are removed from the pressures of the broader P&C market. Simultaneously, we are maintaining our disciplined bottom line focus in other areas of our business that are currently experiencing softening market conditions or a challenging loss inflation backdrop. Among small or mid-cap carriers in the public or private markets, there is no other company that has constructed such a well-diversified and cycle-resistant business portfolio. While only months into operating as a combined company, a number of important growth initiatives have been launched. This includes our proprietary insurance partnership for Uber's autonomous vehicle insurance program, the launch of our life sciences product using Lloyd's paper to serve U.S.-domiciled companies with international exposure, and the 1/1 launch of Syndicate 1972, which is Apollo's internal reinsurance syndicate. I will note that 1972 further provides strategic optionality for Skyward Specialty Insurance Group, Inc.'s outward reinsurance as we look to the future. John Burkhart and James Slaughter and several of our leaders are actively advancing a number of future shared growth initiatives, including opportunities in surety and the launch of iBot America. These highlight only a few of the exciting developments that we will discuss as we begin to scale these initiatives in the quarters ahead. Turning to our operational metrics. For Skyward Specialty Insurance Group, Inc., pure rate moved up a bit to high single digits ex global property and mid single digits including global property. Excluding our intentional actions in construction auto, retention was in the 70s driven by the effects of the competitive property market across our portfolio. We continue to see strong submission growth, which was solidly in the teens again this quarter. Apollo's risk-adjusted rate change ex property was in the low single digits. Apollo remains intently focused on rate adequacy to steer and maximize the returns at the account and portfolio level. And like Skyward Specialty Insurance Group, Inc., Apollo's diversified portfolio means that we are better positioned to capitalize on opportunities to defend our business in an evolving market. To wrap up, we had an outstanding quarter. It is clear that our niche strategy, our excellent execution, our portfolio construction, supplemented with a new fee engine, is and will be a continued source of strong earnings growth and top quartile financial performance into the future. The combination of Skyward Specialty Insurance Group, Inc. and Apollo brings together differentiated talent, technology, AI, and innovation capabilities, positioning us to build on the unique strengths of each company and to pursue attractive new opportunities together. With that, I would now like to turn the call back over to the operator to open it up for Q&A. Operator? Operator: Thank you. Please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We ask that you please limit to one question and one follow-up. For any additional questions, please return to the queue. The first question will come from Matthew John Carletti with Citizens. Your line is open. Matthew John Carletti: Hey, thanks. Good morning. Andrew Robinson: Hey, Matt. Matthew John Carletti: Hey, Andrew. I was hoping to dig a little deeper on your differentiated platform and really have two questions. First, as you think about how your business sits today, particularly with Apollo onboard now, and where we are in the cycle, can you give us your view of the impact on growth and the impact on margins, how that unfolds for Skyward Specialty Insurance Group, Inc. versus your select peer group or the industry? And second, appreciating that half of your business is not P&C—things like surety, A&H, agriculture—we hear those words at other carriers at times, usually not all three. Can you talk a little bit about how your approach to those businesses might be a bit different than the average approach? Andrew Robinson: Matt, good morning, and thank you for the questions. There is a lot there to unpack. On the first question about the market, our portfolio, and margin outlook: setting aside the uncorrelated parts that have seen the biggest growth—where we have great product-market fit and are not seeing cyclical factors—both Skyward Specialty Insurance Group, Inc. and Apollo share one important feature: the portfolios are quite niche-y. A simple example: in London, in the marine, energy, and transport division at Apollo, they have leadership positions in shipbuilders and in ports and terminals. While those subclasses are not necessarily immune from macro conditions, they are not feeling the full effects of the broader marine, energy, and transportation market. Similarly, in our management liability book in the U.S., which is made up of web3, smart contract exposures, cannabis, and distressed homeowners, we are away from the parts of the management liability market with the pressures of 50 carriers competing and little opportunity to create margin that separates from the rest of the industry. Across our portfolios, you would find example after example of that. These niches have a certain opportunity size. Writing web3 is hard; you must build a specialized insurance contract. We have done that, but it is a limited opportunity, which means that in soft market conditions, as long as you are disciplined and do not chase everything else, growth opportunities may be a bit more limited. I do not see an impact on our margin because of where and how we are competing. On the other side—the uncorrelated parts: iBot/1971, ag, and A&H—those are opportunities for us to drive outstanding growth and selectively expand margins. We will lean hard into those. Operator: Thank you. The next question will come from Analyst with Raymond James. Your line is open. Analyst: Good morning, everyone. I wanted to focus on the disclosure in your press release around gross written premium by underwriting division. You also included comments about managed premium growth. There are moving pieces with substantial growth in fee-generating GWP and shrinkage in other areas. How are you avoiding getting caught up in market sensitive businesses, and how are you able to focus on less cyclical areas? Andrew Robinson: Hey, and thanks for the question. Two things drive the premium that is driving fees. First, that is directly linked to 1969 and 1971 where we have approximately 25% of the capital deployed for those two syndicates. These are fees corresponding with business we are writing directly into our account. Second, as we have discussed, Apollo has a division focused on providing managing agency services to partner syndicates—there are nine in total. They are all away from the standard market, including parametric, a credit-related syndicate, and a captive for a global technology company. These are unique and fit with the innovation mindset of our company and Lloyd's ambition to bring new categories of risk into Lloyd's. If you asked Lloyd's management how they view Apollo as a partner, you would hear "innovation" and "ability to support new ideas with appropriate oversight." We feel good about the growth potential based on the backlog of opportunities. Regarding underwriting divisions: on the growth side, surety is the driver in credit and surety. Our team is incredible; books of business have followed new talent in a couple of geographies. Compare our results with SFAA data—our growth and loss performance are standout. Same in A&H—we are a top five performer in loss results, and our single-company medical stop loss plus group captive solutions—particularly the latter—have strong product-market fit. In ag, we are one of one, with a diversified global reinsurance program and a unique U.S. dairy livestock program risk transfer solution. On the flip side, our teams are doing an outstanding job defending our books and picking spots to win. In professional lines, soft market pressure in public D&O bled into other areas, though we see strong opportunity and growth in healthcare professional. On E&S, shrinkage is driven by property. Excess casualty still has opportunity, but you must be cautious given loss inflation. Very little auto exposure in our E&S excess book; we are writing smaller limits. GL is a mixed bag; be cautious of companies reporting big casualty growth—market opportunity is uneven. Example: we capitalized on migrant hotels, building a large New York City book with about a 20% loss ratio over three to four years; that business has gone away. The corresponding market shift to ICE detention centers is difficult risk; we write it only with comprehensive exclusions and at strong rates. Recently, we have seen respected companies enter without coverage restrictions, which likely triples or quadruples loss costs while competing nearly pari passu on pricing. The market has gotten very uneven—you have to be smart, pick and choose, be in the right place at the right time. We are not going to chase compromised terms and conditions. If you are an investor, rest assured we are bringing the discipline you would want. Operator: The next question comes from Meyer Shields with KBW. Your line is open. Meyer Shields: Thanks, and welcome back, Natalie. Mark, you mentioned both seasonality and mix when you were talking about Apollo. Can you talk about that? I am assuming the mix might be more persistent even if seasonality evolves over the year. Mark Hochul: Hey, Meyer. I agree with your comment. It is more mix than seasonality. It varies by class, and several businesses can impact the loss ratio quarter to quarter. Andrew Robinson: What I would point to is that you will see the fourth quarter heavily driven by 1971 and the third quarter by 1969. It is a lot lighter in the first half of the year. Unlike in the U.S. where most of our business earns more ratably over the year—or in surety over about a 14-month duration—some London business earns over a shorter period, which can affect how the loss ratio earns in. High level: Q1 was a great result, and we are proud of our Apollo colleagues. Over a full year, Apollo’s loss ratio will probably be a bit better than the U.S. at Skyward Specialty Insurance Group, Inc., with a somewhat higher expense ratio—resulting in relatively comparable combined ratios over a full year. Meyer Shields: Thanks. Second, can you talk about Middle Eastern exposure, both in terms of loss potential and where rates are evolving? Andrew Robinson: Great question. Apollo reduced aggregate exposure in the Middle East post-Crimea, having concluded rates did not support the potential political risk/political violence and adjacent exposures. Their exposure runs through marine, war, aviation, political risk, and political violence. As a percentage of Lloyd’s market share, their Middle East exposure is far less than their share in each of those markets. We have one reported loss of any size incorporated into our Q1 picks. If developments change in Q2 and beyond, we will reflect that. We are undersized in the Middle East by design. Post-event, we are being picky, writing a handful of accounts and sea-bearing risks where appropriate, but waiting to see a fulsome market movement before leaning in. Meyer Shields: Final question: is the margin on fee-based business for managing other capital providers’ premium pretty steady over the year? Andrew Robinson: It is generally steady and follows the writings of premium, so any seasonality there could influence it. We will follow up to ensure we provide precise detail. Operator: Our next question will come from Alex Scott with Barclays. Your line is open. Alex Scott: Hi. Good morning. Could you talk about the way Apollo participates in cyber? An overview of what they do in that market, and any risks from developments in AI and identifying vulnerabilities? Andrew Robinson: Thanks, Alex. One special purpose syndicate we manage participates in an entity called Envelop that has very unique IP in cyber, and much of that exposure is not traditional U.S. or even OECD exposure. That comes through as a reinsurance participation and is the most notable item; there may be other exposures. In the U.S., we have de minimis exposure to cyber. Alex Scott: As a follow-up, specialty markets have gotten pretty competitive. Any update on how you feel about growth and finding spots net of where you pull back, and any update to the 2026 plan? Andrew Robinson: The speed at which things have moved is extraordinary. Beyond MGAs and fronts, you now see third-party capital sidecars and even runoff carriers coming in, sometimes writing at better terms than ceding companies for sidecars, which is a bit frightening. It makes things hard to predict. On the flip side, our portfolio is incredibly durable. As things get tougher in selective places, our leadership is holding the line, writing the best accounts on terms and conditions that meet our return thresholds. Simultaneously, growth opportunities in A&H, surety, ag, and 1971—and niches elsewhere in the U.S. and in Apollo 1969—will continue to deliver growth well above peers. Against a cross-section of public peers, including the primary operations of Bermudians we compete against, our growth looks outstanding, and we feel as good or better about the margin content of that growth versus a year ago. We feel good about the year. Our guidance stands; we are not changing it. We have never missed consensus as a public company and have exceeded it every quarter. We give guidance we believe is achievable, and if we can beat it, we will. Operator: The next question comes from Jon Paul Newsome with Piper Sandler. Your line is open. Jon Paul Newsome: Good morning. How do you think about the proportion of your business today that is not part of the cyclical concerns we are talking about? Where is the business resistant? Andrew Robinson: On a full-year basis, well in excess of 50%. Categories include surety, A&H, credit, ag, captives, and 1971. There are also niches in management liability—e.g., web3—where few carriers participate because you need bespoke products (e.g., defining a smart contract). We do not include all of these in “cycle resistant” for disclosure simplicity, but practically they are. With iBot/1971 and autonomy, the potential is wide open given our leadership position. As we remain in a softening market that could persist for several quarters or years, we expect a larger portion of our portfolio to grow in these cycle-resistant areas. Jon Paul Newsome: Different question: the reinsurance market is changing, with some pockets pretty soft. You are a fair user of reinsurance. How should we think about the impact? Andrew Robinson: In both Skyward Specialty Insurance Group, Inc. and Apollo, we have had good success so far this year. We renewed our CAT program on 04/01; with property coming off, we right-sized our exposure and stayed with a range of roughly 1-in-10 to 1-in-250. Our risk-adjusted rate came down meaningfully. Our second-event cover dropped from about $7.5 million to $5 million. We saw many benefits in the U.S. and similarly in Apollo. We know there is still margin in our reinsurance purchases for reinsurers. We launched Syndicate 1972, a sidecar-like structure led by Apollo, taking 20% of outward reinsurance into 1972; we keep a quarter of that, and third-party capital supports the remainder, following the market. We recapture fees on that and will use it next year for Skyward Specialty Insurance Group, Inc. as well—allowing us to recapture a portion of the margin we believe exists in our reinsurance placement. Operator: The next question comes from Tracy Benguigui with Wolfe Research. Your line is open. Tracy Benguigui: Thank you. You are clearly pulling back in global property within the Skyward Specialty Insurance Group, Inc. segment. At the same time, we hear that the Lloyd's market has become more aggressive on property. Most of Apollo's growth shows up in fees, but you are still taking some of that risk. Within the Apollo segment, how would you characterize property growth in the quarter? If you are participating on a whole-account proportional basis, are you effectively assuming more property exposure at Apollo while reducing it at Skyward Specialty Insurance Group, Inc.? How should we think about aligning those underwriting appetites across the two platforms? Andrew Robinson: Thanks, Tracy, and good morning. Doug Davies leads global property in the U.S.; Kate Foster leads property at Apollo. They are in communication and comparing views. To be clear, we are not writing pro rata in London on the open market book; that is direct and facultative. There are no two people we feel better about to make a buck in a tough market than those two leaders. Apollo’s growth or lack thereof is following almost exactly what you see in our published U.S. global property numbers—both are being very disciplined. A standout Apollo capability led by James Slaughter is ensuring accounts are clearly understood in terms of risk quality. In a softening market, particularly in property, you want a quantitative view of the highest risk quality to defend your portfolio. We feel great. Even with negative growth in property, we are still putting up impressive overall growth as a company, reflecting thoughtful and responsible portfolio construction. Neither leader is under any pressure to write business that does not meet return thresholds. Tracy Benguigui: I like seeing the segment details, given Apollo has a different combined ratio profile—lower loss ratio, higher expense ratio. At the enterprise level, how should we think about the loss ratio and expense ratio outlook? Is the first quarter a good representation of what to expect? Andrew Robinson: Our guidance is a good representation of what you should expect, and we are sticking to it. It was a good quarter, and we are proud of the Apollo team. On a full-year basis, think about cats and mix earning in; we still expect outstanding returns and are confident we will hit—and hopefully meaningfully exceed—the guidance we provided late last year. Tracy Benguigui: My question was about the composition of the combined ratio—just the profile. Andrew Robinson: I think Mark can provide a bit more detail, but Apollo’s expense ratio in Q1 is within proximity of what we would expect on a full-year basis. Mark Hochul: In the aggregate, our watermark for the expense ratio remains sub-30%. For the quarter, it was 28.5%. That is in line with what we guided. On the loss ratio, ex-cat, we feel good. Business mix can move it a little quarter over quarter, but we feel pretty good about both the expense and loss ratios, acknowledging mix can move around a bit. Tracy Benguigui: Is corporate expense included in your view of the expense ratio? Mark Hochul: It is. Andrew Robinson: That 30% Mendoza line we talked about long ago—preceding Apollo—still holds after revisiting it with Apollo fully in mind. One additional point: AI requires real investment, often ahead of visible benefits. It is hard to do that without backing up on the expense ratio if you do not have growth to offset it. We are gaining efficiencies overall while also funding the next phases of technology development. Growth enables us to do that and remain comfortably within the 30% Mendoza line. For others, as AI investment ramps without growth, expense ratios may start to reveal that. We are funding our investments entirely within our expense ratio guidance. Operator: The next question will come from Mark Douglas Hughes with Truist. Your line is open. Mark Douglas Hughes: Thank you. Good morning. In the property market, you have talked about pressure, particularly in coastal national accounts. Looking across the public space, property premiums on average are up a little or down a little; you do not really see pressure in the published P&Ls of competitors. Is there really that much pressure, or is there a slower decline outside higher volatility areas? Andrew Robinson: Thanks, Mark, and good morning. In the U.S., our global property book is more general property with cat exposure and many technical risks; in London at Apollo, there is certainly more cat exposure. We are entering the point where volume is coming through, so we will be more precise next quarter. Broadly, we think the property market has lost its sense and sensibilities—and it has done so very fast. You might have looked three to five months ago and said it was coming off fast; it has not, in our view, slowed down. For those posting results and explanations that suggest otherwise, that does not correspond with our view. There are small pockets—true small-end property did not go up as much and does not come down as much—but those are small. It is hard to see companies say that represents their whole book. We are doing what we need to hold margin. If others do so without dropping volume, they are doing it in ways we do not understand. Mark Douglas Hughes: The accident and health growth has been fabulous. Talk about sustainability—how much is tied to initiatives you put in place versus lapping good experience? Does the opportunity feel durable? Andrew Robinson: Using a McKinsey horizon view: we feel really good about Horizon 1 (next year). For Horizon 2 (next couple of years), we have been pleasantly surprised by three things: disruption in parts of the market we do not touch but benefit from second-order effects; a great run on talent coming our way; and group captives growing share of the overall medical market, sometimes as a halfway house to fully self-insuring and sometimes as a great structure for homogeneous cohorts. The TAM keeps growing for us. Beyond that, it is harder to see, but we have a team that finds the next products—we have done that before. Operator: The next question will come from Michael David Zaremski with BMO. Your line is open. Michael David Zaremski: Hey. Thanks. Nice quarter. A couple numbers questions. On the $30–$35 million fee income guide, should we look at the underwriting fee income line of about $10 million and net some of it against the fee-based service expense of about $4–$5 million? Or is it just the $10 million number, and is it running better than expected early in the year? Mark Hochul: Good question. Fee income recognized for Apollo was circa $10 million, and there was about $5 million of related expense. Relative to the $30–$35 million guidance, I still believe the guidance holds, and when we guided to $30–$35 million, it was based on the $10 million run-rate you see here. Andrew Robinson: One other point: the roughly $4 million you see in service fee expense will not grow proportionally with our fees. Those are explicit investments to support the capability. That expense should be levered over time relative to fee growth. We are not yet at a place to quantify the levering, but it should become clearer quarter over quarter as you see separation between fee income and the service expense that supports it. Michael David Zaremski: Lastly, I do not see any disclosure on prior accident year development. Was there any? Mark Hochul: I did mention it briefly. There was no prior year development. Emergence in the quarter was in line with expectations and, quite frankly, favorable. We are in a great position on our reserves both in the U.S. and in London—the best point since we have been public. Operator: The next question will come from Andrew Scott Kligerman with TD Cowen. Your line is open. Andrew Scott Kligerman: Good morning. Following up on the A&H business—terrific growth. If I remember right, you focus more on employers with fewer than 2,500 employees. What is driving the growth? Is it mostly rate? Can you give detail on the rate you are seeing? Any expansion into larger employers? Andrew Robinson: Good morning, Andrew, and thank you. In A&H, our concentration tends to be 500 employees and under; the mix is not far from an 80/20. We have no interest in going up market; there are some dead bodies on the roadside there and for good reasons, and it does not fit our medical cost management model. On growth: we think about pure rate and effective rate (e.g., lasering coverages). Pure rate is contributing—call it not quite 10%—and is an important part. Growth is really two factors: we have really hit it with our group captives capability (growing both members and number of captives), which fits incredibly well with our medical cost management capabilities; and in single-employer stop loss, we have seen a market turn, in our view tied to stumbles at some MGAs and the larger-company market getting more realistic, with second-order effects into our space. We are seeing growth on the terms we want and fully utilizing our medical cost management IP to drive top-five industry loss ratios. Andrew Scott Kligerman: Shifting to the captives and risk specialty segment, it was down 13.5%. If I understand, you attach at $350,000 and write a broader mix, and stop loss could even be in there. Where are you seeing pressures and opportunities? Andrew Robinson: For clarity, all medical stop loss is reported in A&H. Captives in A&H and single-employer stop loss are both in that division. The captives and risk specialty division is pure P&C. Two parts to your question. First, the downward pressure: we had, in our view, an irresponsible party come in and write a captive in a way we believe will cause a lot of damage. We were not going to compete on terms that were not sensible. That happened at the end of last year—a unique instance that is running through the numbers. Second, opportunities: we have very interesting successes, e.g., a captive using Understory Weather for micro-weather analytics on dealer open lot—an unbelievably successful and unique solution, now in its fifth year. We are looking for more of those innovation-driven opportunities. Our partners in 1971, given autonomy developments, open interesting possibilities. Apollo also manages the only Lloyd’s captive with a large technology company. We will not do run-of-the-mill captives; it will be about innovation that can be highly additive to earnings and growth. Operator: The next question will come from Andrew E. Andersen with Jefferies. Your line is open. Andrew E. Andersen: Thanks for the extra time. I think I heard rate change on the Apollo business was low single digit ex-property, maybe lower than I expected considering about 45% of that business is shared economy or liability. Where do you see that rate change going? Was it an intentional decision to be more competitive, or is liability/shared economy pricing higher than that? Andrew Robinson: Good morning. It is neither. It is mix. On a written basis in the U.S., quarter-to-quarter property can influence reported rate; it is even more extreme with seasonality and mix in Apollo. Within 1971, there is very little autonomy exposure written in Q1, for example. That number will move based on which divisions inside 1969 and 1971 have seasonally higher GWP in a given quarter. I would not read too much into it. Andrew E. Andersen: Quick one: that is a gross rate number, I imagine? Andrew Robinson: It is. Everything we report is gross rate. For example, in global property, our net rate is negative mid single digits while gross rate is negative mid teens, influenced by FAC usage. Some of that is similar in Apollo relative to gross versus net, but we always report gross pure rate. Operator: I am showing no further questions at this time, and I will now turn the call back over to Natalie for closing remarks. Natalie Schoolcraft: Thanks, everyone, for your questions, for participating in our conference call, and for your continued interest in and support of Skyward Specialty Insurance Group, Inc. I am available after the call to answer any additional questions that you may have. We look forward to speaking with you again on our second quarter 2026 earnings call. Thank you, and have a wonderful day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, everyone, and welcome to the Blue Owl Capital Corporation's First Quarter 2026 Earnings Call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Mike, please go ahead. Mike Mosticchio: Thank you, Operator, and welcome to Blue Owl Capital Corporation's first quarter 2026 earnings conference call. Joining me today are Craig Packer, Chief Executive Officer, Logan Nicholson, President, and Jonathan Lamm, Chief Financial Officer. I would like to remind listeners that remarks made during today's call may contain forward-looking statements which are not guarantees of future performance or results and involve a number of risks and uncertainties that are outside of the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in OBDC's filings with the SEC. The company assumes no obligation to update any forward-looking statements. We would also like to remind everyone that we will refer to non-GAAP measures on the call which are reconciled to GAAP figures in our earnings presentation available on the Events and Presentations section of our website. Certain information discussed on this call and in the company's earnings materials, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information. Yesterday, OBDC issued its financial results for the quarter ended 03/31/2026, reporting adjusted net investment income of $0.31 per share and net asset value per share of $14.41. All materials referenced during today's call, including the earnings press release, earnings presentation and 10-Q, are available on the News and Events section of OBDC's website. With that, I will turn the call over to Craig. Craig Packer: Thanks, Mike, and good morning, everyone. Thanks for joining us. I would like to start by highlighting that our credit performance remains strong, with no new non-accruals, stable borrower performance, and underlying performance in line with recent quarters, and we continue to feel confident in the underlying credit quality of our portfolio. I would also like to acknowledge that the first quarter was a more challenging environment for OBDC from an earnings perspective. Lower base rates and tighter market spreads weighed on our results, reflecting headwinds that have been building over the last year and were fully realized this quarter. Given the market uncertainty this quarter, the deal environment was also slower, which led to minimal fee and repayment income, which was at a three-year low. In addition, we operated with lower leverage and preserved capital, which has positioned us well for the more attractive opportunity set we are starting to see. As we have highlighted on recent earnings calls, our dividend has been a key focus as we have watched these dynamics unfold, and we believe this is the right moment to address our dividend. As a reminder, when we went public in 2019, we set our dividend at $0.31 per share and maintained it there for more than three years while rates were low. When rates began to rise in 2022, we increased the dividend to reflect the higher earnings power of the portfolio and introduced the supplemental dividend framework in an effort to provide shareholders with a predictable base dividend while distributing excess income above that level. Similar to what a number of our peers have recently done, we are reducing the base dividend for the second quarter back to $0.31 per share, representing an approximate 8.6% yield on net asset value and an over 10% yield at the current share price. We believe this is the appropriate level given the forward earnings power of the portfolio, particularly with spreads now widening and the rate environment appearing more stable. At the same time, we are maintaining the supplemental dividend framework. As a reminder, under this framework, we pay out 50% of NII above our base dividend, allowing shareholders to benefit in a predictable manner when earnings exceed the base dividend. Separately, spread widening across the credit markets drove unrealized losses this quarter, resulting in a net asset value decline. Because our portfolio is marked quarterly, and spreads are a key valuation input, this drop in NAV was mostly driven by broader market moves across public and private credit, and not a deterioration in the underlying quality of our assets, which remains strong. Approximately 75% of the write-down was attributable to spread widening across our debt portfolio. Now, as a key point I want to emphasize, while this quarter reflected a more challenging earnings environment, the underlying portfolio continues to perform very well. Credit selection and portfolio construction are the parts of the business we can control most directly and that continue to be a source of OBDC's strength. Non-accruals remain low and declined again this quarter. Borrower revenue and EBITDA growth remained healthy. And repayment activity at par has been consistent. In the first quarter, we saw a market-wide reassessment of risk and a reduction in flows into private credit, which has resulted in a much better balance of supply and demand and a more favorable investing environment. We will come back to our outlook at the end of the call, but we believe we are very well positioned from here given our lower leverage, the strength of the portfolio, and the more attractive spread environment we see today. I will now turn the call over to Logan to provide more details on our investment activity and portfolio performance. Logan Nicholson: Thanks, Craig. Starting with investment activity, we approached the environment more conservatively this quarter, which contributed to lighter origination activity and lower leverage at OBDC. As market volatility increased and deal activity slowed, we remained disciplined in our pace of deployment, and now we are encouraged to see opportunities coming to market at wider spreads. In the first quarter, OBDC had fundings of $525 million against almost $1.5 billion of repayments and sales, resulting in an ending net leverage of 1.13 times, our lowest level in two years. The majority of our deployment was related to fourth quarter transactions that closed in the first quarter, which were committed at spreads lower than what we are seeing in the market today. As noted, we intentionally kept leverage low and, with ample dry powder, we are well positioned to deploy as the pipeline builds. Consistent with our approach of investing in diversified, accretive assets, we continued to deploy selectively into our joint ventures and specialty finance investments in the first quarter. For example, within our life sciences specialty finance vehicle, LSI, OBDC increased its allocation primarily to support an investment in TG Therapeutics, a company we have backed since 2024 that continues to perform well. Blue Owl served as sole lender in a $1 billion financing to support the company's continued growth. The LSI vehicle has generated returns of more than 14% to OBDC since inception, underscoring the attractiveness of our specialty finance and JV investments. Turning to the portfolio, credit performance remained stable and our borrowers continue to perform well. As a reminder, OBDC is a broadly diversified portfolio across 30 industries, with an average position size of approximately 40 basis points, and our focus remains on lending to large, non-cyclical, defensive businesses. Our borrowers delivered year-over-year revenue and EBITDA growth in the high single digits, consistent with last year and a reflection of the fundamental health of the businesses we finance. Zooming in, our software borrowers also demonstrated revenue and EBITDA growth consistent with the rest of the portfolio. As a reminder, these are primarily first lien senior secured loans with conservative LTVs even at today's valuations. As you will recall, we invest in mission-critical, scaled enterprise software providers with characteristics that we believe make them durable. While we remain appropriately cautious about the potential impact of AI on some areas of software, we are not yet seeing any material impact on our software borrowers' performance. Additionally, we saw meaningful repayments from software names during the quarter, including Intelerad, which was an over $400 million investment across the Blue Owl platform, including $169 million in OBDC. Intelerad is a provider of medical imaging software solutions which was sold to GE Healthcare at a $2.3 billion valuation, resulting in a full repayment. This is another example of the quality and strategic value of the software businesses in our portfolio. As a result of this and one additional large repayment, software exposure declined to approximately 16% of the portfolio, down from roughly 19% last quarter. Turning to our key credit KPIs, the picture is healthy and stable in all respects. Interest coverage ratios remain healthy at approximately 2.0x. Revolver draws remain at conservative low levels. Amendment activity is stable, and our 3-to-5 rated names remain in the same range as last year. PIK income was also stable compared to last quarter on a dollar basis but rose slightly to 11.7% as a percentage of total investment income due to a decrease in cash interest as a result of lower rates. PIK remains down from the peak of over 13% in 2024. Also, as we have highlighted in previous earnings calls, over 85% of our PIK names were underwritten that way at inception, and we have never taken a principal loss on those intentionally structured PIK positions. Finally, our non-accrual rate declined to 1% at fair value as we removed two names from non-accrual with no new additions. Over the last few quarters, our non-accruals have remained relatively stable, with a three-year average of approximately 1% at fair value, and this quarter's decline is a good reminder that our borrowers are performing well and fundamental performance is stable. We would note that LTVs moved modestly higher this quarter, which we attribute to the broader valuation environment rather than a deterioration in borrower fundamentals. Our average LTV across the portfolio sits at 47%, implying that over half of enterprise value would need to be impaired before we incur any losses. To close, the breadth and resilience of our portfolio remain intact. With lower leverage, more dry powder, and the sourcing advantages of the Blue Owl platform, we believe we are well positioned to take advantage of opportunities that this environment may bring. Now, I will turn it over to Jonathan to review our financial results. Jonathan Lamm: Thank you, Logan. In the first quarter, OBDC earned adjusted NII of $0.31 per share. As Craig outlined, results this quarter reflected several earnings headwinds that have been building over time and came through more fully in Q1. Most notably, three rate cuts between last September and December totaling 75 basis points are now fully reflected in our results, given the lagged impact that lower rates have on our mostly floating rate portfolio. Non-recurring income was also light this quarter, coming in at more than $0.01 below our historical average after running above that level last quarter. In addition, the earnings benefit from the low-cost unsecured notes we issued before rates moved higher over four years ago continues to roll off as those maturities come due. Since last July, $1 billion of those notes have matured, with another $1 billion set to mature this year. These factors together with lower leverage throughout the period drove the decline in adjusted NII this quarter and are now mostly reflected in our current run-rate earnings. The Board declared a second quarter base dividend of $0.31, which we believe aligns with the portfolio's forward earnings power in the current environment. The dividend will be paid on 07/15/2026 to shareholders of record as of 06/30/2026. Our spillover income remains healthy at approximately $0.28 per share, providing a meaningful cushion that further supports the base dividend going forward. Moving to the balance sheet, our first quarter NAV per share was $14.41, down from $14.81 last quarter, primarily reflecting the impact of mark-to-market adjustments. We would note that the realized losses reflected on the income statement were related to investments previously on non-accrual that had already been written down over the past several years and did not contribute to the NAV decline this quarter. We continued to execute on our share repurchase program in the first quarter, buying back $35 million of stock, which was accretive to NAV per share by $0.02, while balancing that activity with a focus on deleveraging and maintaining capacity to deploy into a more attractive market environment. Over the past two quarters, we have repurchased a total of $183 million, reflecting our conviction in OBDC's long-term value. The Board of Directors also authorized a new $300 million share repurchase program in February, replacing the previous $200 million plan, leaving approximately $265 million remaining following first quarter activity. We ended the quarter with net leverage at 1.13 times, within our target range of 0.90x to 1.25x, as we decreased leverage to preserve flexibility. Turning to our capital structure, we continue to be active in further strengthening our balance sheet and enhancing our liquidity profile. In January, Moody's upgraded our credit rating to Baa2. Beyond serving as meaningful recognition of the quality of our platform, the consistency of our performance and the strength of our balance sheet, we believe this is a validation of our efforts to build a best-in-class BDC credit profile. Subsequent to quarter-end, we accessed the unsecured debt markets with a $400 million note offering, demonstrating OBDC's continued ability to raise capital amid broader market volatility. The strong institutional investor demand we received is a meaningful vote of market confidence in OBDC's credit profile. With this offering, our liquidity has increased to over $4 billion in total cash and capacity on our facilities, which comfortably exceeds our unfunded commitments and provides ample capacity to invest in the current environment while addressing upcoming debt maturities. Overall, we are pleased with the proactive steps taken this quarter to strengthen our balance sheet, and we believe OBDC is well positioned from a capital and liquidity standpoint. Now I will turn it over to Craig for some closing remarks. Craig Packer: Thanks, Jonathan. I want to close by reflecting on where we are today and our outlook. Over the past few years, private credit has benefited from a very constructive backdrop, but it also became increasingly competitive as significant amounts of capital entered the space at a time of moderate private equity M&A. That drove spreads tighter and, together with lower base rates, put pressure on returns and earnings across the sector, including at OBDC. That environment has begun to shift. Volatility in the broadly syndicated loan market has driven a meaningful widening in spreads, while the rate backdrop appears to be stabilizing. On the deals we are seeing today, spreads are generally about 50 to 75 basis points wider and terms are more attractive than they were just a few quarters ago. At the same time, retail capital inflows have slowed into private credit and the supply-demand balance for new deals looks more favorable than it has been in years. Put simply, we believe this is a more attractive investment environment than the one we have been operating in over the last two years, and we believe OBDC is well positioned to take advantage of it. Our portfolio is in good shape. Our balance sheet is strong, and our leverage is at its lowest level in two years. Repayments over the past year have contributed meaningfully to that positioning, giving us additional flexibility at a time when spreads are widening and the opportunity set is improving. Combined with our scale, incumbencies, and deep sponsor and borrower relationships, we believe we are well positioned to deploy selectively into attractive risk-adjusted opportunities as they emerge. While overall deal activity has been more modest in recent months, periods like this have historically created a more favorable setup for direct lenders. As the broadly syndicated loan market becomes more volatile, borrowers increasingly turn to established direct lenders for certainty of execution, and Blue Owl is well positioned to capture that demand. As borrowers adjust to new market realities, refinancings will resume, driving spread widening and fee income. And even if new deal flow stays moderate, we will naturally have the opportunity to put capital to work through regular activity from our existing portfolio, including add-ons and upsizings with borrowers we know well and have backed through multiple cycles. Lastly, this quarter also marks an important milestone for OBDC, as the fund has reached its ten-year anniversary. Over that time, we have delivered a 9.6% annualized total return while managing the portfolio through multiple periods of volatility, maintaining strong credit performance and low loss rates that have averaged just 31 basis points annually. This recent volatility highlights the importance of risk management across the balance sheet. We remain focused on conservative asset selection with well-matched liabilities, sufficient liquidity, and the right protections in place. We have conviction in our strategy, remain focused on acting in the best interest of shareholders, and believe that our long-term track record is the clearest demonstration of the quality of this platform. Thank you for your time today. We will now open the call for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, you may press 1. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing 1. Our first question today is coming from Brian J. Mckenna from Citizens. Your line is now live. Brian J. Mckenna: Okay, great. Thanks. Good morning, everyone. So on the new $0.31 quarterly dividend, should we view that as a floor in NII over the next several quarters? And since you are keeping the supplemental dividend framework in place, is there the potential for some supplemental dividends to come through later this year depending on the trajectory of NII from here, as the environment begins to normalize with wider spreads, a recovery in transaction activity along with stable base rates? Craig Packer: Hey, Brian. Thanks. We thought very carefully about where to set the dividend. We think that this is the right level. In terms of it being a floor, I hope it is a floor. I expect that we will have a really good environment. I think spreads, as we talked about, will go wider from here. Obviously, it is very base-rate driven as well. Right now, rates are expected to stabilize here. We had very little prepayment income this quarter. That is not an easily predictable variable, but our history shows we typically have it. So I hope and expect it to be a floor. But, you know, in any quarter, things can happen, so I do not want to overstate the level of precision there. I appreciate you highlighting the supplemental dividend. I do think that there are going to be quarters where we overrun the $0.31, and again, at the risk of saying this multiple times, this is not a special dividend. We are really expressing a commitment to pay out 50% of everything over $0.31. So we hope investors appreciate that versus “special,” which is much more discretionary. I am quite optimistic over the next twelve months it is going to be a better investing environment, and we will have the ability to generate some really attractive earnings for the portfolio, hopefully in excess of the dividend. Brian J. Mckenna: Okay. That is helpful. Thanks, Craig. And then, Jonathan, it would be helpful to get a little more color around your framework and approach to marking the portfolio. I know your process is very thorough. I think it would be timely just to get a little bit more detail here. And then do you have any historical data around the average markup between final realized marks across the portfolio relative to the prior unrealized marks? Jonathan Lamm: Sure. Just in terms of our valuation approach, it has been consistent for the last ten years. We will remind you and remind everyone that here we do not mark our book at all. We go out to an external valuation agent every single quarter for every single name—a large, well-regarded valuation agent. They are not providing a range of values, but rather marking the book to the point value, and so we are not putting a number where it is at the top end of the range or the bottom end of the range, etc., but rather we are just a price taker ultimately for every single valuation. We do, as part of our overall requirements with our Board and obviously internally, a look-back analysis on, first of all, comparable valuations to peers. We have always been marked on a conservative basis, but not too much. We obviously do not want to be just taking marks down without thought, but we are always analyzing where we mark relative to the peers. And another thing that we do is always look at where we exit versus where we were previously marked in the prior quarter. So on a realization basis, we will look at where the unrealized values are and then ultimately where those realizations come in. And you are talking about generally a very, very small amount, unless obviously in the particular quarter there is some massive change relative to where we were. In the context of the unrealized or the realizations that we had in this quarter, all of those realizations—some of them were historical non-accruals where we effectively realized them exactly where they were because we had already taken the pain. And there were some realizations on the way up, like a name like SpaceX is obviously moving dramatically, so there was a realized gain associated with SpaceX in the quarter because the valuation changed between 12/31 and 03/31. Craig Packer: Yes. I would just add, we are a lender. Our loans are contractual and due at par. Loans, if they are performing and going to get taken out, should be getting taken out at par. It is very different than a private equity portfolio where a private equity firm is marking the value and then they have to exit at an indeterminate value up or down. So the vast, vast, vast majority of our loans in our history are exiting at their fair value because as we approach that refinancing or repayment or maturity, it gets closer and closer to par. And as we have highlighted, we have only had 35 basis points of loss in the history of the fund. So almost everything has gotten repaid at par. The average—just so you have it at your fingertips—the current spread in the book is 560 over, and the average loan is marked at 95.4. And we expect to get par on almost all of those loans. Brian J. Mckenna: Really helpful. Thank you, guys. Craig Packer: Thanks, Brian. Operator: Thank you. Our next question today is coming from Sean Paul Adams from B. Riley Securities. Your line is now live. Sean Paul Adams: Hey, guys. Good morning. It looks like your headline non-accruals declined, but it looks like you marked Walker Edison on non-accrual. But you kept the first lien at a 96 mark while effectively taking that delay draw to basically a zero. It looks like that was an opportunity to kind of draw down, or do you have estimates of a better recovery from that specific name? Jonathan Lamm: Walker Edison has been on non-accrual for a significant period of time and has been marked down to very, very low levels with a certain view of recovery. There was a realization this quarter, Sean Paul, so that is probably what is tripping you up. But in terms of non-accrual, it is not a new non-accrual and has been marked down drastically, not much more significantly this quarter, and no impact to NAV. This was just a realization of an already unrealized markdown that we had. So there was no change to NAV net at the end of the day. Sean Paul Adams: Correct, yes. It has been a longstanding non-accrual. I am just more questioning the marks of where it is—the fair value at 96%. On the new non-accruals for the quarter, Cornerstone OnDemand, you know, was a new addition, and that is kind of cross-held within the Ares portfolio as well. That is within the SaaS business. That mark has kind of deteriorated pretty rapidly. Do you have any extra color on that specific name? Craig Packer: Well, sure. Before I do, I just want to make sure it is clear: we did not have any additional non-accruals this quarter. We can talk about Cornerstone. Cornerstone has public loans that trade, and when we are in an investment that has public loans that trade, we certainly—and our valuation firm certainly—take the marks of those public loans heavily into account for obvious reasons. And so in that particular case, the mark that we have is heavily fact-weighted by the public marks. We believe it is a performing credit. It has had some volatility. Look, there is a lot of public market concern about software names, and sometimes that trading volatility may or may not line up with our view of credit fundamentals. But we feel good about having it on accrual, and we feel like we have marked it appropriately. Sean Paul Adams: Yes, my apologies to clarify. Your non-accruals were lower for the quarter, but your watch list—you know, with the aggregate marks below 85%—did increase. And so the Cornerstone callout was from the watch list increasing while the non-accruals are going down. So my question was more pointed towards whether, you know, headline non-accruals might be going down, but the aggregate watch list credits or the risk ratings within the portfolio—could those be going up? Or is that rather just a mark-to-market, like you said earlier in the call, when a number of these names are cross-held positions within other BDCs? Logan Nicholson: I would add our 3-to-5 rated names, which we would view as more expansive than just the names below 85, and the names that we spend a lot of time considering all of the factors around credit performance—that is stable. And it has not gone up. So the subset of names that you are looking at that have had volatile trading prices—there are a few. Most notably, Cornerstone that you highlighted had a relative value to a first lien that traded down significantly with the volatile public market, particularly around software names, in the first quarter. On that name in particular, earnings and revenues in that company are perfectly stable. It is a public market volatility point related to the first lien. So when we look at our more expansive proxy for a watch list—our 3s to 5s rated—the numbers are not going up. They are stable. Sean Paul Adams: Okay. Thank you for the color. Appreciate it. Operator: Thank you. Our next question is coming from Robert James Dodd from Raymond James. Your line is now live. Robert James Dodd: Hi, guys. A couple of questions if I can, kind of unrelated. On the first, kind of earnings trends going forward—three-year low in fee income, two-year low in leverage—so there are a lot of potential drivers. What do you think could be the primary drivers of earnings one way or the other through the remainder of the year? Do you think fee income—prepays, etc.—is actually likely to increase this year given how choppy the market is and spreads are wider, maybe people do not want to refi? Or do you think leverage is more likely to be the primary tool for the direction of NII through the course of this year? Craig Packer: Look, Robert, I think it is a mix. I do not think there is one primary driver. In any quarter, different things can happen. I think our fee income and prepayment income were unusually low this quarter. In almost all market environments, it is higher than we saw this quarter. It just wound up being an exceptionally low quarter. Without getting too far ahead of myself, I suspect it will be higher in the second quarter, but we will see. I do think that refinancings will take place throughout the year. That will allow us to add some spread to the book. I think that we are going to be cautious on leverage, just because I think it is an environment that deserves caution. But if we see attractive opportunities, which I think we will, taking the leverage up a bit is certainly something we have the flexibility to do. So I think it is all those things. We have our joint ventures—they pay dividends. They are very predictable dividends, but in any one quarter they can be a little bit higher or a little bit lower. And obviously credit performance needs to continue to be very strong. So it is all the factors. I guess what I would say is, as we said in the script, and I just want to be really clear: this quarter, you saw the culmination of a period of time where spreads were ground down in the industry and rates came down, and there is a lag effect to the rates as borrower elections turn over. And so you saw this in our results, but I think you are seeing it in our peers' results pretty consistently, and you are seeing it in the first quarter. For investors that do not follow the space very closely, what we are highlighting is that now that that has really washed its way through, I am optimistic because of the supply-demand in the industry that spreads are widening from here, and I think the expectation is base rates have stabilized from here. So if we get to some reasonable repayments, that is a cause for hope around earnings for the industry over the rest of the year. It is all those factors. Robert James Dodd: Got it. Thank you. And one more if I can. On the LTVs—there has been an area of focus for the space to talk about LTVs as a capital protection indicator. Can you give us any more color on how rapidly you update or where the V part of that comes from in your disclosure? Is it the underwriting value? Is it updated quarterly, which I presume? And also, what is the kind of range across the portfolio in terms of LTVs for the overall portfolio? I am also interested in the software side in terms of how that V is moving and what the range is in software as well as the overall portfolio. Craig Packer: I will start and anyone from the team can chime in. We update the LTVs every quarter. That is something we have disclosed consistently in our history. We called out in the script that the LTV for OBDC this quarter went from 41% to 47%. If you have followed us for a long time, you know that we have been in the low 40s, so this is a little bit higher. That move is very much driven by the drop in valuation in software, which is the largest sector in the book. To the spirit of your question, we look at this every quarter. The teams look at it. They look at a number of factors for when they are valuing a name. Certainly, entry valuation is a key factor in the early years because that is the most clear indicator. But as names season in the book, we update it for other comparable valuation—where assets are trading at M&A value, what has happened to the underlying credit. So this gets updated. I would say this quarter, we all recognize that there has been a real sea change in valuation for software assets. I think that is very clear to us and to the market. And so I think we took extra special care around valuing the software names, and that is reflected in the increase from 41% to 47%. In terms of your broader question around the range, I do not have it at my fingertips, but the vast majority of the names are going to be in that zip code and, if you were doing statistical analysis, they would cluster around 30% to 55%. We certainly have names—we always have and we always will—that are more challenged, and they are going to be higher loan-to-value. Just as any lending book has that, we have that. You can see that reflected in valuation levels. But we feel really good about our cushion even in today's environment, even in software. We highlighted it in a name like Intelerad—it is a software name—got sold to a strategic for 20 times cash flow. Our LTV on that loan was, at the end of the day, 25% or something. So we feel good about it. We update it. It is only one metric. I think it is an easy metric for people to wrap their head around. There are hundreds of other metrics that we look at to assess the quality of the portfolio. But I think the fact that the LTV went up this quarter should give investors some confidence that these are statistics that we put a lot of thinking into. Robert James Dodd: Got it. Thank you. Craig Packer: Alright. Thanks, Robert. Operator: Thank you. Our next question today is coming from Paul Conrad Johnson from KBW. Your line is now live. Paul Conrad Johnson: Thanks for taking my questions. I appreciate all the color that you have provided. I just had one—actually two—questions here, but realize this is a more recent development. You have seen relatively strong performance in the public equity markets for software companies over the last few weeks. I think they have bounced a little over 20% from the bottom that they hit at the end of last quarter. I was just curious—has that been reflected within conversations and engagement with the sponsor community, where maybe there is a little more of a narrowing of the bid-ask between these companies, or anything that is happening to allow these sponsors to get a little bit more comfortable transacting in that sector, just given the bounce we have seen in the public markets? Craig Packer: I do think it is nice to see some of that bounce, and I think the markets in general are being a little more thoughtful about software and the impact of AI. The initial reaction was so dramatic, and I think you are starting to see the market focus on the high-quality aspects of software and the stickiness and the durability even in an AI world. I think it is too soon—we are not seeing any significant different dialogue with sponsors based on a few weeks of trading activity. But I can tell you the sponsors are very focused on making sure that their companies are prepared for an AI world and investing considerable resources and doing what we would expect them to be doing to make sure their companies continue to prosper. That is the biggest part of our dialogue with them, but I do not have anything to add beyond that. Paul Conrad Johnson: Got it. Thanks. That is helpful. Last one—just higher level—but it feels like banks could certainly become more competitive here and lean into the BSL market a little more if they wanted to. In terms of the repayments of $1.5 billion this quarter and a little over $5 billion last year, how much of that is going to the BSL market? And whether or not you could actually use something like that to your advantage where you could potentially reduce software exposure or improve liquidity—that sort of thing—where perhaps getting some of these deals refinanced into the BSL market is not such a bad thing? Craig Packer: We compete with the broader syndicated market. That has been core to our business over ten years. There are times the market is really strong, there are times the market is weak. I think right now it is not especially strong. I do not think this is an environment where the banks are leaning in on underwriting, and I think if you follow that market closely, you will know that there have been some challenges in some syndications in the BSL market. It is part of the model. Sometimes names get refinanced; sometimes they do not. All of our names get refinanced—whether they get refinanced in the private market, public market, or the companies get sold. It is an expected part of our economic model. In those repayments, yes, I do think that this environment over the next twelve months is going to give us an opportunity when we get repayments to recycle those dollars into higher spread assets, and it could be just refinancing some of our own names and marking those to market. So I do think this is an environment where through refinancings and repayments—whether it comes from a BSL syndication or private refinancing—we will have a chance to add spread to the book. We reduced software exposure this quarter from 19% to 16%. That happened naturally due to some repayments. And I think that we are going to continue to be very cautious in software, and as we get repayments, probably look to continue to take that down. But we continue to have conviction on our software names. It is a wider sector, there is more uncertainty there, and I think you will see that reflected in a very high bar to add new names, and probably a disposition to reduce our software exposure. But they have performed very well, and this quarter was all just repayments. Paul Conrad Johnson: Got it. Appreciate it. That is all for me. Thank you. Operator: Thank you. Our next question is coming from Arren Saul Cyganovich from Truist Securities. Your line is now live. Arren Saul Cyganovich: Thanks. I was hoping you could discuss some of the conversations you are having with sponsors in terms of the pipeline that you are seeing right now. I know things have slowed down quite a bit, but is anything starting to show signs of opening up? And would we also expect the repayments to slow as well since new deal activity is slowing? Jonathan Lamm: Sure. Thanks, Arren. We are starting to see a little bit of an uptick in activity. The vast majority of the activity so far has been on our incumbent positions—so add-ons, bolt-ons, small acquisitions. But in the last couple of weeks, we have seen a couple of M&A processes underway, more in the healthcare, industrial, and distribution space. Software still remains relatively quiet. But we are starting to see some more activity, particularly with the bounce back in public markets and equity markets. For now, the activity still remains relatively light. Repayment activity really just depends. We have seen areas where, over the years, public market volatility slows repayments. It is a fair point, and those are oftentimes correlated. But in the past quarter, as an example, a number of our takeouts were strategic buyers taking out assets like Intelerad. Strategic buyers have certainly had strong equity market performance, strong valuations, and strong earnings in public investment-grade companies. So it really just depends, and this is not like the last few bouts of volatility. We will just have to see what happens. Arren Saul Cyganovich: Okay. Thank you. Operator: Thank you. Our next question today is coming from Kenneth Lee from RBC Capital Markets. Your line is now live. Kenneth Lee: Hey, good morning. Thanks for taking my question. Just another one on the new dividend level there. Would you talk a little bit more about some of the embedded assumptions behind there? Are you embedding potentially either further spread compression or, conversely, some benefit from spread widening? Anything else you would like to articulate around what drove the new dividend level there? Thanks. Jonathan Lamm: Sure. We are constantly analyzing our model and forward earnings. We are taking into account the forward curve and thinking through stresses to that. We are also looking at spreads and the compression that we have seen over the last couple of years and stressing the relative up/down of spread—further compressing relative to widening—and obviously we have a view on that. We are also looking at historical levels of fee income relative to where we are currently performing. All of those things—leverage, credit performance—go into that. We have set our dividend at a level that we think is a supportable level, and we took our time thinking through that process over the course of several quarters. Over the last few quarters, we have talked about it, and we think that this is the level that makes the most sense given all of those factors, Ken. Kenneth Lee: Got you. Very helpful there. And then one follow-up, if I may, just in terms of share repurchases. Given where valuations are and given some of the leverage considerations you have there, how active could you be in terms of share repurchase over the near term? Thanks. Jonathan Lamm: I think you have seen us over the last couple of quarters be active. We have upsized the total size of our repurchase plan. This quarter, we were a little less active. As you can see, notwithstanding the overall credit spread movements and therefore declines in NAV, we were able to bring leverage down and into a level that puts us in a very, very comfortable range. When we think about repurchases, we are thinking about it in the context of capital allocation, which is thinking about your leverage, thinking about future deal opportunities relative to current deal opportunities, and all of those elements. We want to be active, and we think that we are accretive in all of those things depending on where the best capital allocation is on the forward, and we think bringing down leverage this quarter is helpful to all of those potential allocations. Kenneth Lee: Got you. Very helpful there. Thanks again. Operator: Thank you. Our next question today is coming from Derek Hewitt from Bank of America. Your line is now live. Derek Hewitt: Good morning, everyone. I might have missed it because I was jumping between calls earlier. Could you discuss what is your net leverage on the total portfolio? And then also, what is the net leverage specifically on the software portfolio? Jonathan Lamm: You are talking about at the investment level, the BDC, not the company. Is that right? Derek Hewitt: Okay. Logan Nicholson: Yes. We have typically been running between 5.5x and 6.0x on our portfolio companies for net leverage, and that has not moved dramatically over the last few quarters. Similarly, interest coverage, as we have talked about, has picked up from 1.6x at a trough to around 2.0x. Software companies, given the strong cash flow dynamics, have typically run a little bit higher—so north of 6.0x for leverage. But that has not moved dramatically in the last few quarters either, given fundamental performance of our software borrowers has been strong. And as we mentioned, earnings growth for the software portfolio companies is still low double-digit EBITDA growth, in line with the rest of the portfolio. So the leverage statistics have not moved around dramatically. Derek Hewitt: Okay, great. And then just in terms of the software portfolio, what is the LTV for the software portfolio? You had mentioned the overall portfolio was 47%. Logan Nicholson: We mentioned 47% for the overall portfolio, and it is approximately 48% for the software portfolio. So it is not materially different. It is 48% for the software portfolio and 47% for the overall. Derek Hewitt: Okay. And does that include kind of mark-to-market in terms of what has happened with software values quarter-to-date? Craig Packer: Correct. That is our current view, marked to the quarter end. Derek Hewitt: Okay. Thank you. Operator: Thank you. Our next question today is coming from Patrick Davitt from Autonomous Research. Your line is now live. Patrick Davitt: Hey, good morning. Thanks for letting me join the party today. I just had a follow-up on the software EBITDA growth. I think you said it is low double digits versus last quarter’s 16%. Am I hearing that correctly? And if so, can you give more color on what is driving that decline? Thank you. Logan Nicholson: Great. Yes, sure. Thanks for the question. Last year, we saw software EBITDA growth for our borrowers in the low double digits. The fourth quarter, as you mentioned, was a little bit of an outlier higher. It is not a perfect measure in any one quarter given some of it includes M&A and the portfolio has puts and takes, given there are names exiting and names entering, and there is some seasonality. We will see what the trend is over time, but I would say that low double digits has been consistent for the last year, and you are right that the fourth quarter was a slight outlier higher. Patrick Davitt: So the 16% was not a full-year number—that was just the quarterly? Logan Nicholson: That was the year-over-year reference last quarter. Patrick Davitt: Got it. Cool. Okay. Thanks a lot. Operator: Thank you. Our next question today is coming from Christopher Nolan from Ladenburg Thalmann. Your line is now live. Christopher Nolan: Hi, thanks for taking my questions. Most of the questions have been asked. On loan sales, there were roughly $400 million in loan sales in February according to the Q. Are these the same loan sales that were discussed in the last quarterly call? Jonathan Lamm: Yes. Christopher Nolan: Okay. Just want to clarify. Thank you. Operator: Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over for any further or closing comments. Craig Packer: Terrific. Thank you all for joining. We appreciate your interest. As always, we are accessible if you have follow-up questions. We would be happy to engage with you—just reach out. And hope everyone has a great day. Operator: That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Q1 2026 Vanda Pharmaceuticals, Inc. Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Vanda's Chief Financial Officer, Kevin Moran. Kevin Moran: Thank you, Jordan. Good afternoon and thank you for joining us to discuss Vanda Pharmaceuticals First Quarter 2026 performance. Our first quarter 2026 results were released this afternoon and are available on the SEC's EDGAR system and on our website, www.vandapharma.com. In addition, we are providing live and archived versions of this conference call on our website. Joining me on today's call is Dr. Mihael Polymeropoulos, our President, Chief Executive Officer and Chairman of the Board. Following my introductory remarks, Mihael will update you on our ongoing activities. I will then comment on our financial results before we open the lines for your questions. Before we proceed, I would like to remind everyone that various statements that we make on this call will be forward-looking statements within the meaning of federal securities laws. Our forward-looking statements are based upon current expectations and assumptions that involve risks, changes in circumstances and uncertainties. These risks are described in the cautionary note regarding forward-looking statements, risk factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and other filings with the SEC, which are available on the SEC's EDGAR system and on our website. We encourage all investors to read these reports and our other filings. The information we provide on this call is provided only as of today, and we undertake no obligation to update or revise publicly any forward-looking statements we may make on this call on account of new information, future events or otherwise, except as required by law. With that said, I would now like to turn the call over to our CEO, Dr. Mihael Polymeropoulos. Mihael Polymeropoulos: Thank you very much, Kevin. Good afternoon, everyone. Thank you for joining us today for Vanda Pharmaceuticals First Quarter 2026 Earnings Conference Call. Vanda delivered strong commercial execution in the first quarter, highlighted by 26% year-over-year growth in Fanapt sales, the groundbreaking U.S. launch of NEREUS with its pioneering direct-to-consumer platform at nereus.us and the FDA approval of BYSANTI. We believe that these achievements, combined with meaningful pipeline progress and our raised 2026 revenue guidance position the company for continued growth and value creation. Financial highlights, the total net product sales reached $51.7 million in the first quarter of 2026, a 3% increase compared to $50 million in Q1 2025. Fanapt net product sales were $29.6 million, up 26% year-over-year. Full year 2026 revenue guidance was raised to $240 million to $290 million, including $10 million to $30 million from newly launched NEREUS. Key commercial highlights. Fanapt saw continued strong momentum with total prescriptions, TRx, up 32% and new-to-brand prescriptions NBRx, up 76% versus the first quarter of 2025. In April 2026, weekly TRx for Fanapt reached an 11-year high of over 2,600 prescriptions for the week ending April 24, 2026. NEREUS is now commercially available nationwide through nereus.us, Vanda's innovative direct-to-consumer platform. This pioneering patient-centric model enables convenient ordering online with rapid direct delivery, eliminating traditional pharmacy barriers and providing a seamless modern access experience. As the first new prescription therapy approved for the prevention of vomiting induced by motion in adults in more than 40 years, NEREUS represents a breakthrough in both science and patient access. Some key regulatory and clinical development highlights. BYSANTI, milsaperidone received FDA approval for the treatment of bipolar I disorder and schizophrenia. BYSANTI is protected by data exclusivity through February 20, 2031, and multiple patents, the latest of which expires on May 31st, 2044. Vanda's ongoing late-stage clinical studies are progressing rapidly and are expected to generate top line results in 2026 or early 2027, including the Phase III study of BYSANTI as a once-daily adjunctive treatment for major depressive disorder with results expected in Q1 2027. The HETLIOZ Phase III study of NEREUS for the prevention of vomiting in patients receiving GLP-1 receptor agonist therapies with results expected in 2026. The Phase III study of VQW-765 in the treatment of adults with social anxiety disorder with results expected by the end of 2026. The FDA accepted the biologic license application for imsidolimab in Generalized Pustular Psoriasis with a Prescription Drug User Fee Act target action date of December 12, 2026. The results of the pivotal clinical study were published in the April 28, 2026, issue of the New England Journal of Medicine Evidence. In summary, 2026 is developing into a transformational year for Vanda with an extensive and diversified portfolio of commercialized products that include Fanapt, HETLIOZ, HETLIOZ LQ, PONVORY, NEREUS, BYSANTI and potentially imsidolimab by year-end. Our recent innovative launch of NEREUS through the nereus.us platform revolutionizes customer experience through a convenient ordering system at a significantly discounted cash pay price. Finally, our late-stage pipeline with several late-stage Phase III studies are poised to further diversify our pipeline and strengthen Vanda's commercial presence for years to come. With that, I'll turn now to Kevin to discuss our financial results. Kevin? Kevin Moran: Thank you, Mihael. I will begin by summarizing our first quarter 2026 financial results. Total revenues for the first quarter of 2026 were $51.7 million, a 3% increase compared to $50 million for the first quarter of 2025 and a 10% decrease compared to $57.2 million for the fourth quarter of 2025. The increase as compared to the first quarter of 2025 was primarily due to growth in Fanapt revenue as a result of the continued commercialization efforts for Fanapt in bipolar disorder, partially offset by decreased HETLIOZ revenue as a result of generic competition. The decrease as compared to the fourth quarter of 2025 was primarily driven by the impact of insurance plan disruptions and deductible resets that are typical in the industry at the beginning of the year. Let me break this down now by product. Fanapt net product sales were $29.6 million for the first quarter of 2026, a 26% increase compared to $23.5 million in the first quarter of 2025 and an 11% decrease as compared to $33.2 million in the fourth quarter of 2025. The increase in net product sales relative to the first quarter of 2025 was attributable to an increase in volume, partially offset by a decrease in price net of deductions. Fanapt total prescriptions or TRx, for the first quarter of 2026 as reported by IQVIA Xponent, increased by 32% compared to the first quarter of 2025. Fanapt new patient starts as reflected by new-to-brand prescriptions, or NBRx, for the first quarter of 2026 as reported by IQVIA Xponent, increased by 76% compared to the first quarter of 2025. The decrease to net product sales relative to the fourth quarter of 2025 was attributable to a decrease in volume and price net of deductions. Fanapt TRx for the first quarter of 2026 decreased by 1% as compared to the fourth quarter of 2025. The decrease in volume was primarily driven by the impact of insurance plan disruptions and deductible resets that are typical in the industry at the beginning of the year and that we have observed with Fanapt and the broader atypical antipsychotic market in prior years. Historically, Fanapt inventory at wholesalers has ranged between three and four weeks on hand as calculated based off trailing demand. As of the end of the first quarter of 2026, Fanapt inventory at wholesalers was slightly above four weeks on hand, which was generally consistent with the level of inventory weeks on hand as of the fourth quarter of 2025, but slightly above the historic range. Turning now to HETLIOZ. HETLIOZ net product sales were $15.9 million for the first quarter of 2026, a 24% decrease compared to $20.9 million in the first quarter of 2025 and a 3% decrease compared to $16.4 million in the fourth quarter of 2025. The decrease in net product sales relative to the first quarter of 2025 and the fourth quarter of 2025 was attributable to a decrease in volume as a result of continued generic competition in the U.S., which has contributed to declines in dispenses for both comparative periods. Of note, for the first quarter of 2026, HETLIOZ continued to be the leading product from a market share perspective despite generic competition now for over three years. HETLIOZ net product sales continue to be impacted by changes in inventory stocking at specialty pharmacy customers from period to period. HETLIOZ net product sales have fluctuated and may continue to fluctuate from quarter-to-quarter depending on when specialty pharmacy customers need to purchase again. HETLIOZ net product sales may decline in future periods, potentially significantly, related to continued generic competition in the U.S. And finally, turning to PONVORY. PONVORY net product sales were $6.2 million for the first quarter of 2026, a 10% increase compared to $5.6 million for the first quarter of 2025 and an 18% decrease compared to $7.6 million in the fourth quarter of 2025. The increase in net product sales relative to the first quarter of 2025 was attributable to an increase in volume and price net of deductions. The decrease in net product sales relative to the fourth quarter of 2025 was primarily attributable to a decrease in price net of deductions, partially offset by an increase in volume. The specialty distributor and specialty pharmacy inventory on hand levels during these periods were in line with normal ranges. Of note, underlying patient demand was essentially flat between the fourth quarter of 2025 and the first quarter of 2026, even in light of the negative impact of insurance plan disruptions and deductible resets at the beginning of the year. Additionally, as we have previously discussed, an amount of variable consideration related to PONVORY net product sales is subject to dispute, of which approximately $3 million was recognized for the three months ended December 31, 2024. For the first quarter of 2026, Vanda recorded a net loss of $48.6 million compared to a net loss of $29.5 million for the first quarter of 2025. The net loss for the first quarter of 2026 included income tax expense of $0.1 million as compared to an income tax benefit of $7.9 million for the first quarter of 2025. As a reminder, the company recorded a onetime tax charge in the fourth quarter of 2025 to establish a valuation allowance against all of Vanda's deferred tax assets. Tax expense is expected to be nominal going forward until such time that a valuation allowance is no longer required. Operating expenses for the first quarter of 2026 were $101.9 million compared to $91.1 million for the first quarter of 2025. The $10.8 million increase was primarily driven by higher SG&A expenses related to spending on Vanda's commercial products as a result of the continued commercialization efforts for Fanapt in bipolar disorder and PONVORY multiple sclerosis, expenses associated with the preparation for NEREUS and BYSANTI commercial launches and higher legal expenses. These increases were partially offset by lower R&D expenses on our imsidolimab program, partially offset by an increase in expenses for our BYSANTI major depressive disorder program, VQW-765 social anxiety disorder program and other development programs. The first quarter of 2025 included an upfront payment to Anaptys for the exclusive global license agreement for the development and commercialization of imsidolimab. On the commercial side, during 2024 and 2025, we conducted a host of activities as a result of the commercial launches of Fanapt in bipolar disorder and PONVORY in multiple sclerosis, including an expansion of our sales force and the development of prescriber awareness and comprehensive marketing programs. Additionally, in the first quarter of 2025, we launched our direct-to-consumer campaign, which has driven meaningful gains in brand awareness for the company and our products, Fanapt and PONVORY. Throughout 2025 and the first quarter of 2026, we maintained strategic investments in our commercial infrastructure, including increased brand visibility through targeted sponsorships with the goal of supporting long-term market leadership and future commercial launches. Vanda's cash, cash equivalents and marketable securities referred to as cash as of March 31, 2026, was $202.3 million, representing a decrease of $61.5 million compared to December 31, 2025. The decrease to cash was driven by the net loss in the first quarter of 2026 as well as a onetime milestone payment of $10 million made to Eli Lilly in the first quarter of 2026 for the approval of NEREUS in the U.S. Seasonal compensation and benefit payments, which generally hit during the first quarter of the year of approximately $7 million and payments to third parties for manufacturing of commercial and clinical product of approximately $11 million, which is significantly higher than recent quarters. As a reminder, payments made in advance of production are capitalized as a prepaid expense. Commercial products are capitalized as inventory on our balance sheet after production, while pre-commercial products are generally expensed as research and development costs as incurred. The timing of manufacturing of pre-commercial products may result in future variability of our R&D expense depending upon the timing of production. When adjusting the decrease in cash for these items, the change in the first quarter of 2026 would have been closer to $40 million. With regard to the launches of Fanapt in bipolar disorder and PONVORY multiple sclerosis, as I mentioned, the launches were initiated in 2024, and we continue to enhance our commercial efforts through the first quarter of 2026 with the impact of these commercial efforts contributing to revenue growth in 2025 and expected to continue to contribute to our revenue growth in 2026 and beyond. We have already seen significant growth in our commercial activities. Several lead indicators suggest a strong market response to our commercial activities related to Fanapt for bipolar disorder, including total prescriptions or TRx increased by approximately 32% in the first quarter of 2026 as compared to the first quarter of 2025. In April of 2026, weekly TRx for Fanapt reached an 11-year high of over 2,600 prescriptions for the week ending April 24, 2026. New patient starts as reflected by NBRx increased by 76% in the first quarter of 2026 as compared to the first quarter of 2025. Of particular note, Fanapt was one of the fastest-growing atypical antipsychotics in the market throughout 2025 and in the first quarter of 2026 based on several prescription metrics. Our Fanapt sales force continues to expand. Our Fanapt sales force number approximately 160 representatives at the end of 2024 and increased to approximately 300 representatives at the end of 2025. These expansions have allowed us to significantly increase our reach and frequency with prescribers. To that end, the number of face-to-face calls in the first quarter of 2026 was more than 80% higher than the number of face-to-face calls in the first quarter of 2025. In addition to our Fanapt sales force, we have established a specialty sales force to market PONVORY to neurology prescribers around the country. We have grown this sales force to approximately 50 representatives. Fanapt performance remains the focus of Vanda's commercial initiatives and encourages us to continue to invest in this differentiated medicine and the franchise extending launch of BYSANTI. Before turning to our financial guidance, I would like to remind folks that with Fanapt, HETLIOZ, PONVORY and now NEREUS already commercially available and with BYSANTI recently approved for bipolar disorder and schizophrenia and a biologics license application for imsidolimab now under review by the FDA, Vanda has five products currently commercially approved and could have six products commercially approved by the end of 2026. Turning now to our financial guidance. Vanda is raising its full year 2026 total revenue guidance to reflect the potential contribution of newly launched NEREUS while maintaining prior ranges for Fanapt and other products. Vanda expects to achieve the following financial objectives in 2026. Total revenues from Fanapt, HETLIOZ, PONVORY and NEREUS of between $240 million and $290 million. The midpoint of this revenue range of $265 million would imply revenue growth in 2026 of approximately 23% as compared to full year 2025 revenue. This compares to the previous guidance of total revenues from Fanapt, HETLIOZ and PONVORY of between $230 million and $260 million. Fanapt net product sales of between $150 million and $170 million. The midpoint of this revenue range would imply Fanapt revenue growth in 2026 of approximately 36% as compared to full year 2025 Fanapt revenue. This guidance is consistent with the previously communicated revenue guidance. Assuming consistent gross to net dynamics between 2025 and 2026, the bottom end of the range assumes high single-digit to low double-digit sequential quarterly TRx growth for Fanapt in the remainder of 2026. The top end of the range assumes mid-teens to high-teens sequential quarterly TRx growth for Fanapt in the remainder of 2026. Other net product sales of between $80 million and $90 million. This range assumes a further decline of the HETLIOZ business due to generic competition and modest growth of the PONVORY business, where we are seeking to significantly improve market access to the product. Depending on our success in these efforts, we could see meaningful improvements in patients on therapy, prescriptions filled, and prescriptions written by prescribers. This guidance is also consistent with the previously communicated revenue guidance. Finally, NEREUS net product sales of between $10 million and $30 million. This guidance was not previously provided and is being introduced as part of the Q1 earnings update. Vanda is currently making conditional investments to facilitate future revenue growth, both in the form of R&D investments, commercial manufacturing, and potentially outsized commercial investments, which could vary moving forward depending on the success of these commercial strategies. As previously communicated, Vanda is not providing 2026 cash guidance at this time. However, it is likely that Vanda's 2026 cash burn will be greater than the cash burn in 2025. With that, I'll now turn the call back to Mihael. Mihael Polymeropoulos: Thank you very much, Kevin. At this point, we'll be happy to answer your questions. Operator: [Operator Instructions] Your first question comes from the line of Olivia Brayer from Cantor Fitzerald. Olivia Brayer: Can you run through what the pushes and pulls are that you're using for that $10 million to $30 million guidance range for NEREUS? It seems like somewhat of a big range, just given that it's so early in the launch. So, I'm curious what the higher end of the range assumes versus the lower end. And then on BYSANTI's launch, what's the progress on getting that to patients at this point? And should we assume that any contribution from BYSANTI this year is essentially embedded in your Fanapt guidance? Or is it just too early to start attributing revenues there? Mihael Polymeropoulos: Maybe, Olivia, I will start off by saying it is very early on the NEREUS launch. And you have seen that we're approaching it as a broadly available commercial product with a direct-to-consumer platform, which is in the early days. And of course, we're working through all the dynamics and logistics of that. We'll have a better idea on progress by our next call. And in terms of the $10 million to $30 million, we're excited about the opportunity. We know we are tapping a market of potentially 70 million people with motion sickness and a good percentage of them suffering from severe motion sickness that is not properly treated today. The $10 million to $30 million is a relatively wide range, but it is not informed by experience. It is more modeling from the total market opportunity and other treatments for motion sickness. But I'll turn it to Kevin. Kevin Moran: Yes. And that's right, Olivia. That's what's driving the range there. It's obviously not informed by actual data at this point. It's informed by modeling and what we've seen in some of our qualitative and quantitative research. And so, as we gather more information there, obviously, we'll be able to provide additional context as the year progresses. Maybe on the BYSANTI side, what we previously communicated there is that we were looking to have the product available in the back half of the year, and that's still on track. So, we're working to bring that product to market. And then as far as the revenue contribution goes, obviously, still pre-launch, so a little bit early on this. But I wouldn't necessarily think about it being as embedded in the Fanapt revenue item because we expect that we'll see demand for BYSANTI independent of Fanapt. And for any demand that we see for BYSANTI that replaces Fanapt demand, we're expecting to see meaningful net price favorability, which obviously would lead to a larger revenue contribution from a BYSANTI unit versus a Fanapt unit. Olivia Brayer: Okay. Got it. So, for BYSANTI specifically, is it just a matter of waiting until it's officially commercially available before providing any sort of revenue numbers around that? Or is 2026 maybe just a little bit too early to start modeling BYSANTI? Kevin Moran: I think it's going to be -- obviously, we haven't -- we're not committing to providing revenue guidance on BYSANTI at any point in time. But obviously, the launch is, I think, going to be critical to us having better visibility into providing revenue guidance. And then we'll be looking to provide additional updates on it. But I don't think it's necessarily too early depending on the timing at which we launch the product. Operator: Your next question comes from the line of Ram Selvaraju from H.C. Wainwright & Co. Raghuram Selvaraju: Firstly, I was wondering if you could provide us with some additional color regarding the timeline to reporting of top-line data for the tradipitant study assessing its ability to attenuate nausea and vomiting and other GI side effects associated with GLP-1 drugs. Kevin Moran: Yes. Thanks, Ram. So, what we've communicated there is that in the press release today, we said results by the end of 2026. And our timing obviously is consistent with that, and that's consistent with what we communicated in our most recent and our initial launch of the program. And obviously, we're actively enrolling patients at this point. So that's informed by actual activity. Raghuram Selvaraju: And can you talk a little bit about what your expectations are for that data set? What you would consider to be a clinically meaningful result? And if you are also going to have additional information regarding the impact of tradipitant use on adherence and efficacy outcomes on the GLP-1s for patients enrolled in the study? Mihael Polymeropoulos: Thank you, Ram. This is Mihael. First of all, the Phase III study is of a very similar design like the Phase II study for which we reported positive results in November. And that is a week of pre-treatment with tradipitant or placebo and then a single injection of Wegovy at 1 milligram and follow-on for another week. So, what we aim to do with this study is confirm the previous finding of the significant reduction in vomiting episodes that we saw. And certainly, that was highly clinically meaningful. On your question whether this will improve adherence, of course, with this short study, we will not have this information. But it is widely known that this GI decreased tolerability, especially around dose escalation to higher doses, is a significant contributor to decreased adherence. Raghuram Selvaraju: And just two other things on that front. Can you comment on the possibility or likelihood of any off-label use of tradipitant given the fact that it is now an approved drug for motion sickness among those folks taking GLP-1 drugs who may potentially have obtained them via some consumer health initiative, potentially to assist them in achieving long-term adherence? Mihael Polymeropoulos: So first of all, the key word here is off label. Of course, we don't have any approved use for that indication. We cannot promote off label, especially in the midst of clinical studies and certainly not before approval in that indication. So, we cannot have any insights for that. We certainly hope that upon approval there will be a significant interest in the use of the drug. Raghuram Selvaraju: And then last question for me is with respect to the long-acting injectable formulation of iloperidone. Can you provide us with an update on that? And how rapidly you expect to be able to advance the product candidate in this context at this juncture? Mihael Polymeropoulos: Yes. Thank you. For context, this is a long-acting injectable iloperidone being used in the study to measure relapse prevention in schizophrenia. The study is ongoing in the U.S. However, it is going slowly and slowly recruiting. We think that is a phenomenon of the field of these studies and the required design of a placebo controlled. And I know you're quite familiar with this type of designs, but we're highly concerned that this exact model that has worked extremely well for Fanapt oral and other antipsychotics is becoming less and less amenable to study new drugs. And what we are thinking and potentially discussing with the FDA soon is that not only recruitment has become slower in the U.S. for this type of placebo-controlled schizophrenia relapse prevention study, but the rate of relapse has historically been significantly reduced. We observed a significant rate of relapse on placebo in the study that was completed in 2015. We've seen since with other drugs that follow this design, a significant reduction on placebo. It is too early for us to say what the exact placebo rate will be in this study. But certainly, we already believe will be much lower rate of relapse than the oral REPRIEVE study of iloperidone. All these go together to say that we are concerned about the timing of -- and the progress of the study. But we do have several ideas. We plan to engage the FDA in a constructive discussion and perhaps even modify the development plan. Operator: Your next question comes from the line of Madison El-Saadi from B. Riley. Madison Wynne El-Saadi: Maybe I'll ask about the recent New England Journal publication on imsidolimab in GPP. So, we're looking at a potential Christmas time approval again. Are you taking steps now to kind of lay the groundwork for a potential year-end commercial launch? Will this likely be something where there's like a one quarter cushion before the launch? And then is the expectation that you would receive approval in both the acute and the maintenance settings out of the gate? Mihael Polymeropoulos: Yes. Thank you very much, Madison. And you're correct. We're very excited with the publication in such a high-caliber journal, the New England Journal of Medicine evidence on this result, a testament of peer reviewed scrutiny around this very impressive data. I will answer the question on indication first. We believe that the data that we've seen from the GEMINI-I, GEMINI-II studies do support both immediate treatment of acute flares with a single injection and maintenance of that relapse in responders with the once every four-week injections. So that is our proposed indication with the FDA. And we're also making progress with -- towards regulatory filings in Japan and in Europe, but they are much earlier than the FDA submission. In terms of launch timing, this is, of course, a complex project to manufacture being a monoclonal antibody. We do not expect that we will be commercially launching right after the PDUFA date. There would be some lag time. But hopefully, we can do that within the first half of 2027. Madison Wynne El-Saadi: Understood. And then if I may ask, so on the Fanapt prescription data, this kind of reacceleration in April, BYSANTI was approved late February. Just wondering if there was maybe some type of a halo effect that could have fed into that or if that was purely kind of the sales force that you described earlier? Kevin Moran: Yes, Madison, thanks for the question on that. So, the reminder there is that historically, including this year, we've seen the first quarter be -- have seasonality with both Fanapt and the broader atypical class. And this first quarter was no exception. And in line with our expectations, we saw a flattish first quarter on prescription demand, which is, again, consistent with what we saw last year and in years prior to that. What we saw last year was after the first quarter, we saw an acceleration and sequential quarterly growth in the double-digit range in the second, third and fourth quarter of last year. And that's our expectation of what we'll see this year, and that's supported by what we see on the April data, which includes our highest TRx prescription number in over 11 years, right, which was over 2,600. So, the pattern that we've seen in prior years and expected to see this year is what we've seen play out to date as the year has gotten started here. Mihael Polymeropoulos: Yes. I agree with all that. But also, I want to emphasize that the commercial infrastructure is mature. We have approximately 300 representative sales force, which is now well trained, mature, developing their relationships in the field and supported by both a significant awareness speakers' program, but also our brand awareness direct-to-consumer marketing. Operator: Your next question comes from Leszek Sulewski from Truist. Leszek Sulewski: So first on Fanapt, do you have a sense of what portion of the TRxs and NBRxs are coming from bipolar versus schizophrenia? And with inventory running above normal, should we expect any wholesaler destocking in 2Q? And then on BYSANTI, can you rank the launch priorities, new patient starts versus switches from Fanapt and targeting the Medicaid heavy patients? And then third, I see the MDD readout was moved to the first quarter of '27 from year-end '26. What drove the timing shift? And I have a follow-up. Kevin Moran: Thanks, Les. Maybe I'll start with the first two, and then Mihael can take the one on the MDD. So first on the split. So, while we don't analyze the data at an indication level, our expectation on the Fanapt growth is that the primary driver is going to be the bipolar label expansion that we got in 2024. And that's what we seen, and that's what's informed our targeting strategy and call points and call guidance. So, the expectation would be that the growth that we're seeing in the Fanapt business is driven by increased demand from the bipolar patient population. As far as the stocking question goes, so just to point you to what I said in my prepared remarks there, historically, we've seen the Fanapt inventory levels at three to four weeks. What we've seen in the -- at the end of the first quarter of 2026, fourth quarter of 2025 and as far back as the fourth quarter of 2024 is that the inventory levels were at or slightly above four weeks on hand. So actually, the inventory at the end of the first quarter is largely consistent with what we've seen over the recent period. And what we would expect to see for a product that's growing, right? Because as you're measuring this, it's based off a trailing demand figure. But if the demand is growing, then it's actually on a lag. So, I wouldn't expect that. I'd expect the inventory levels to maintain at this as long as Fanapt continues to grow. The second question you had there was around the prioritization of new patients versus switches from Fanapt to BYSANTI. And what I would tell you there is that we're going to be prioritizing both. And that's because with BYSANTI being launched as a newly approved atypical antipsychotic, we're certainly going to be detailing it in that light. And as part of that, we'll be deploying commercial strategies to have prescriptions moved from Fanapt to BYSANTI as appropriate. And the last kind of point I would make on that is that with the nearest -- or sorry, with the BYSANTI launch in the back half of this year and the Fanapt potential loss of exclusivity at the end of next year, we've got five quarters or so where both products will be in the market, and we can execute on a switch strategy while executing a launch strategy as well. With that, Mihael, I think, can address the question on the MDD timing. Mihael Polymeropoulos: Yes. Les, you're correct. we moved the timing of end of study and results for the MDD in the first quarter of 2027 from end of '26. We're still working hard to get the results as soon as possible and could be by year-end, but we have better data now on recruitment speed and especially bringing on new sites and those in Europe as well. So, it is a reflection of projections from the actual recruitment data. Leszek Sulewski: That is helpful. And then on your commercialization and motion sickness, can you provide some color around the patient access to the drug and how that pricing looks like outside of the website via the retail pharmacy channel? And then lastly, maybe just kind of curious on your pricing strategy given the competing NK-1s out there and how this would translate to the GLP-1 adjunct opportunity. Kevin Moran: Yes. Thanks, Les. So, as we look at the insurance reimbursement landscape, obviously, with the product relatively recently approved, that will be a process that plays out over coming quarters and years as the payers conduct their clinical assessments and then their periodic reviews. So, I expect to have more information to share on NEREUS access and progress on that front as we move further into the launch, but it's certainly something that would like to secure as well in addition to the cash pay model. But the cash pay model is our immediate focus for the actual NEREUS launch with the innovative platform that we've deployed. And I'm sorry, Les, what was the second question after that? Leszek Sulewski: The pricing strategy around and read-through for the GLP-1 opportunity. Kevin Moran: Yes. Sorry. Thanks, Les. Yes. So, as we kind of evaluate the space and we look at the competitive class for the NK-1s, they range anywhere per dose from the 200 range up to about the 600 range. So, with our pricing strategy there, we're kind of deployed in the middle on the lower end. And we think with an eye towards gastroparesis potentially, if we're able to be successful on the regulatory front there and with the GLP-1 that pricing would put that at a competitive market price to service those patients as well. So certainly, the considerations for us as we launched the pricing were having the appropriate price for the motion sickness market but having an eye towards the potential for a gastroparesis market and a GLP-1 market, hopefully, in the near future. Mihael Polymeropoulos: And what I would add is a couple of things. We chose this commercial model because we believe motion sickness is a prototypical consumer product. And as you can see on our website, we provide the product in increments of two capsules, which may be enough to supply somebody for their business or personal travel, where they may experience motion. So that's important to us, and we're receiving good comments on being very patient-centric. And while in recent, I would say, years or a year, we've seen a model of cash pay at discounted prices, coming on, especially for drugs like the GLP-1 analogues. This is the first instance we know that you can directly coordinate with manufacturer. And this is an innovative system that we have built at Vanda and works in conjunction with a mail order pharmacy that can get expeditiously the product to patients. We also are working to continue to add value-added measures, including a telemedicine platform so that patients can conveniently obtain the prescriptions. So, it's all focused on the customer experience, and we want this to be really an example for others to follow. You mentioned, I think, briefly other NK-1 antagonist. And yes, there are other approved drugs in the class. None of them have ever been studied or approved in motion sickness or as an adjunct to GLP-1. The lead product there has been precedent by Merck in chemotherapy-induced nausea and vomiting and postoperative nausea and vomiting. And there are some key things and key differences on the label that can make potentially NEREUS more attractive for our consumer base. And what I'm alluding to is the absence of interaction in the study imsidolimab study, which actually differentiates NEREUS from event on Emend contraindication or warning around contraceptive use. So that and other items on the prescribing information, we believe can make the product attractive, especially for this approved indication. Leszek Sulewski: That's very helpful. Just to clarify one thing, does it seem that you would weigh out the option of a dual model approach for GLP-1 adjunct opportunity, meaning you could roll it out with a DTC plan and also a traditional insurance channel as well? Mihael Polymeropoulos: Yes. First of all, our premise here is broad access. So, any way people want to acquire the product, we want to make it available for them. At the same time, we recognize the difficulties people are going through with all the, let's call it, middleman, the pharmacy benefits organizations, their own plans. Pharmacies and all the markups of prices that go along. And we know there's a national discussion around that. As Kevin said, the WACC price, the list price of $255 a capsule is within the range of other NK-1 antagonist. However, on the cash pay, we are offering it at about a more than 65% discount from $255 to $85 a capsule, making it affordable for folks who travel for business or pleasure engage in these motion sickness activities. At the same time, we are making the drug available to pharmacies, and we ensure that wholesalers would either stock the drug or will make it available upon demand. So, the premise here is access, but access is not just insurance negotiations is appreciating independence and convenience by individual patients in accessing this drug. And we think this dual model can achieve that. Operator: Your final question comes from the line of Andrew Tsai from Jefferies. Unknown Analyst: This is Faye on for Andrew. So, we have two questions. Number one is about milsaperidone. We want to gauge your views on its likelihood of success in the Phase III MDD trial. We know that not all antipsychotics work in MDD. So, do you want to talk about your confidence why milsaperidone should succeed? And is there any existing data to support any of its benefits as antidepressant? Mihael Polymeropoulos: Yes. We think actually we're quite confident. That's why we're running this study, and we're running it with the once-a-day BYSANTI. We think the study is properly powered to detect a clinical meaningful improvement in symptoms of depression. And generally, atypical antipsychotics are effective as an adjunctive treatment in major depression. Now there are individual receptor binding properties of BYSANTI that differentiated and may increase the ability of effectiveness. And that is not only the dual dopamine and serotonin receptor antagonism, but also the strong and unique in the class alpha-1 receptor antagonism. And whether this will be necessary to achieve the effects or not in major depression will remain to be seen. But we remain very confident on the ability of BYSANTI to achieve the effect. Unknown Analyst: Okay. And the second question we have is for NEREUS. So, it launched earlier this month, and you briefly touched on the pricing strategy, but can you talk about the sales cadence for this drug later this year moving into 2027? Kevin Moran: Yes. So obviously, with us launching mid-second quarter, we would expect the revenue to grow as the year progresses. And that's both with the passage of time, but also with the increase of our promotional activities associated with the product launch. So, one of the key elements to the commercial strategy here is a direct-to-consumer campaign, which we have worked on implementing over recent quarters, but will be continue to investing in as the year goes on. So certainly, we're optimistic about the prospects for NEREUS, and we expect the revenue cadence to increase and accelerate as the year goes on. Operator: There are no further questions. I'd now like to turn it over to Vanna Pharmaceutical management for closing remarks. Mihael Polymeropoulos: Thank you very much all for joining this call and for your questions. We look forward to talking to you soon. Operator: That concludes today's meeting. You may now disconnect.