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Operator: Welcome to the Hertz Global Holdings First Quarter 2026 Earnings Call. Currently, [Operator Instructions] I would like to remind you that this morning's call is being recorded by the company. I would now like to turn the call over to Bill Cook. Senior Vice President, Finance. Please go ahead. Unknown Executive: Good morning, everyone, and thank you for joining us. By now, you should have our earnings press release and associated financial information. We've also provided slides to accompany our conference call, and these can be accessed through the Investor Relations section of our website. I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not a guarantee of performance and by their nature, are subject to inherent risks and uncertainties. Actual results may differ materially. Any forward-looking information relayed on this call speaks only as of today's date, and the company undertakes no obligation to update that information to reflect changed circumstances. Additional information concerning these statements include factors that could cause our actual results to differ. This is contained in our earnings press release and in the Risk Factors and Forward-Looking Statements section in the SEC filings. We make with the Securities and Exchange Commission. Our filings are available on the SEC's website and the Investor Relations section of the Hertz website. Today, we'll use certain non-GAAP financial measures, which are reconciled with GAAP numbers in our earnings press release and earnings presentation available on our website. We believe that these non-GAAP measures provide additional useful information about our operations allowing better evaluation of our profitability and performance. Unless otherwise noted, our discussion today focuses on our global business. On the call this morning, we have Gil West, our Chief Executive Officer, who will discuss strategy, operational highlights and our fleet. Our Chief Commercial Officer, Sandeep Dube, will share insights into our commercial strategy. followed by Scott Haralson, our Chief Financial Officer, who will discuss our financial performance. I'll now turn the call over to Gil. Wayne West: Good morning, everyone, and thank you for joining us. I want to start by recognizing the Hertz team. The hard work, discipline and resilience they bring quarter after quarter is what makes results like Q1 possible. When we laid out our transformation strategy, we framed it around three financial North Star metrics. Fleet Management measured by DPU below $300 a revenue optimization measured by RPU over $1,500 and rigorous cost control measured by DOE per day in the low $30. These are our guidepost on a path to $1 billion EBITDA in 2027. Over the last 2 years, we fundamentally turned fleet from a headwind to a tailwind through our Buy right, hold right sell right strategy with tangible sequential improvements that have compounded over time. We hit our DPU North Star target last year and are tracking to hit it again this year. Over the last few quarters, we have also been building steady momentum on revenue. and we're tracking to hit our North Star RPU target for full year 2026. This quarter, the results show that our strategy is working we set aggressive targets and we hit them. Adjusted corporate EBITDA was up $141 million year-over-year, a nearly 50% improvement. Revenue was up 11% year-over-year and both beat consensus. It was, in fact, our strongest year-over-year revenue growth in 3 years. We delivered our strongest year-over-year Q1 RPD improvement since the travel recovery in Microchip driven spike in 2022, we saw sequential improvements in both RPU and RPD throughout the quarter. A clear sign that the Hertz unique commercial strategies are paying off, along with broader market stream. These results are especially meaningful given the environment we were operating in. The quarter brought headwinds, including elevated recalls, a partial government shutdown, higher TSA wait times and storm disruptions across key markets. Amidst this environment, our performance underscores that this transformation is driving structural improvements. On fleet, while DPU is an annual North Star target, this quarter's gross DPU beat that metric while net DPU, which fluctuates based on net car sales gains and losses was in line with our expectations. And supported by continued disciplined fleet rotation. With our youngest fleet in nearly a decade, we are seeing our strategy translate directly into better economics. After a slow start to the year, the residual values improved significantly through the quarter. With all this, we expect full year net DPU to remain below our North Star target of $300 per month, even with an enriched fleet mix. Adjusted DOE per transaction day increased approximately 2% year-over-year, driven primarily by revenue-related costs, which are EBITDA accretive and real estate sale-leaseback transactions executed last year. Normalizing for these impacts, core DOE per day continued to improve year-over-year. We still have work to do, and we need to continue to build scale to achieve our North Star target in the low 30s. The progress is there, and we have a variety of initiatives in flight. This quarter, recalls we're up nearly 300% temporarily shrinking our rentable fleet, that required us to carry more fleet than planned, impacting utilization by about 200 basis points year-over-year. Our team is strategically managing through this, making progress by working proactively upstream we're undertaking numerous initiatives to mitigate the impact, including working with OEMs and government officials for both tactical and structural improvements. While normalizing for the higher recalls, utilization was 140 basis points higher for the same period, showcasing our team's achievements and asset efficiency. Even with hiring calls, reported utilization was 90 basis points above where we were in Q1 of '23 and 2024. On the customer front, we're raising the bar to build on last year's 50% improvement in Net Promoter Score to deliver a truly gold standard. That work recently earned us a spot as the only rental car company on USA today's list of most trusted brands of 2026. We also saw the highest year-over-year improvement of any a car rental company on Business Travel News satisfaction survey. As we discussed last quarter, [ rent-a-car ] remains the foundation of our business today. But our transformation is about building more than 1 single value stream. We're running today's business with discipline while deliberately investing in the capabilities that will define Hertz future. That work is creating a more diversified platform, spanning rent-a-car, service, fleet and mobility. I'm pleased to share that we made progress across our highest priority areas this quarter. In rent-a-car, we launched an advanced fleet planning engine, which leverages Navidea's decision optimization engine in Palantir's foundry data operating system. This system will enable us to deliver the right car to the right place at the right time more efficiently than ever before, delivering positive impacts across the business from utilization to customer experience. By continuing to improve our operations and strengthen our customer trust and loyalty in our brands, we're delivering greater value to our franchise partners. At the same time, we're sharpening our focus on franchise with new leadership and a fresh look at how to unlock additional value by expanding and optimizing our franchise footprint. In fleet, Hertz car sales continues its evolution into a truly omnichannel business, building on our strengthened physical and digital channels, we're establishing a scalable sales model that expands the top of the funnel and drives volume through partnerships like Amazon Autos. This week, we also announced the new partnership with eBay, putting our near new certified inventory in front of more customers than ever before. And as more leads come down the funnel, our partnerships with Cox Automotive is helping drive conversion through AI-generated pricing, revamp digital tools and better upstream lead generation tools like Autotrader. In addition, we've continued to make great progress on finance and insurance. As car sales volumes grow, F&I scales efficiently and enhances overall unit economics. This was our best quarter in 3.5 years for F&I revenue, and we're building on this progress with more favorable financing partner arrangements. And finally, the breakthrough this quarter was in mobility, where our platform really came to life. We said that for some time that Hertz has a role in the future of mobility. And over the last few quarters, we've been building the skills and capabilities to make it real. Now we're coming out of stealth mode. Last week, we announced Oro, our mobility business with an expanded Uber partnership. But here is the bigger picture. AV technology has the potential to unlock a multitrillion dollar market. But as the industry transitions from personally owned vehicles to commercially operated fleet whether driver-led or autonomous, a critical layer has been missing. Tech providers are focused on autonomous software and hardware. OEMs are focused on vehicles. App-based platforms are focused on aggregating demand. What is missing is the operations and orchestration layer. That's where Oro comes in. Oro is purpose-built to fill the gap between autonomous technology, vehicles and demand platforms, managing and servicing fleets reliably, efficiently, safely and at scale. Backed by Hertz century of expertise and complex fleet management, Oro brings a distinct advantage to the market. Hertz operates one of the world's largest rideshare rental fleets with over 40,000 vehicles and has deep experience with EVs and a management team with the direct AV operational experience. Once more, the company has a network of over 2,700 chargers over 11,000 service locations in car washes and thousands of maintenance technicians. Oro harnesses that scale with agility of an independent entity to deliver flexible, vertically integrated rideshare solutions for fleets of all sizes. Oro is partnering with Uber to provide rideshare fleet services across both driver and AV fleet delivering capabilities directly relevant for the transition to scaled autonomy. Today, Oro owns, maintains and operates a fleet of vehicles, employing and managing over 1,000 drivers under a high-quality turnkey operating structure. Oro creates value by optimizing preplanned supply to meet growing rider demand on Uber's platform with an elevated customer experience and additional safety protocols. Oro is currently active on the Uber platform in Atlanta, Los Angeles and San Francisco and Northern New Jersey just launched this week. Our drivers have logged over 4 million miles to date. And with Uber's nearly 200 million monthly active platform consumers, there's plenty of room to scale. Oro has joined -- Oro has also joined Uber's autonomous robo taxi program. supporting lucid vehicles equipped with neuro AV technology. Starting later this year, Oro will provide the program's orchestration and operation by leading charging maintenance, repairs, cleaning and depot staffing. By managing both driver led and driverless vehicles we're widening our scope and deepening our experience with more complex and dynamic fleets. Testing and refining economics, asset utilization and workforce models, so we'll be ready for the transition to scale autonomy at whatever pace that occurs. While it's still early innings, Oro represents or presents meaningful upside and reinforces the progress we've made thus far on our transformation. Marking the beginning of a new chapter for Hertz. We're strengthening our core business and innovating for the future, all while furthering our mission to advance the way the world moves. With that, I'll turn it over to Sandeep. Sandeep Dube: Thanks, Gil, and good morning, everyone. Last quarter, we saw tangible progress that underscore the positive momentum our commercial strategy was driving. And in our last earnings call, we said that revenue was off to a positive start in 2026. Q1 2026 full quarter results tell an even better story. We achieved Hertz's strongest year-over-year revenue growth in 3 years with revenue totaling $2 billion, an 11% increase from the year before. This was primarily driven by the structural improvements we have made to our commercial strategies, which resulted in meaningful gains in year-over-year RPU, RBD and days. Our view was up 4.5%. We hit our North Star ARPU target in March, and we have line of sight to achieving our North Star RPU metric for full year 2026. Our Q1 RPU results showed positive momentum despite headwinds from elevated recalls and were primarily driven by our focus on delivering positive year-over-year RPD which was up 5%. This RPD performance marked our most significant year-over-year improvement since Q2 2022. U.S. Airport showed particular strong improvement with RPD up about 8%. These revenue headlines are the product of strength across the entire quarter. During this typical seasonal trough period for the industry and amidst headwinds, we delivered sequential improvement in year-over-year revenue and RPD through our January February and March. This steady progress reflects Hertz's increasing commercial maturity as our playbook continues to yield results, we are executing with creative sophistication, leveraging the same drivers outlined in our Q3 and Q4 2025 earnings calls. Let me dive into the details. First, enhancing our customer experience. We are making systemic improvements across every customer touch point, leveraging deep research and insights to create a more consistent convenient and caring experience. We have redesigned our customer service training framework, and the results from our pilot were immediate. NPS scores grows. We have now rolled this out across our top 50 U.S. airports. Importantly, the changes we are making are being delivered consistently across the business, with our European team achieving a record Net Promoter Score for the quarter. Second, generating greater durable demand from higher-margin channels. Direct website demand is showing strong growth. Our corporate business is gaining ground. We are continuing to strengthen our partnership segment with last week's launch of a new Hertz iStar status benefit for American Express Gold Card members, and yesterday's launch of a new strategic partnership with Air Canada's leading travel loyalty program, Aeroplan. We are now driving consistent growth in our off-airport business, and our rideshare rental business is growing strong. Third, improving our pricing tactics and strategies, our multiphase approach continues to bring more precision to the way we price demand. And we remain focused on continuing to drive positive RPD for comparable asset classes. The new pricing metrics we spoke about in Q4 continues to contribute to RPD gains. We are seeing exciting results from an even newer version of our pricing metrics. Which we executed towards the end of Q1. Early signs indicate its ability to deliver improved revenue production. The positive effects of which will show up in revenue results for mid-Q2 and beyond. Fourth, improved monetization of our higher RPU assets. Our new fleet management tools are helping advance our ability to get the right vehicle in the right location at the right time, enabling a more precise pricing approach. Fifth, better value-added product sales. We continue to drive sales of our value-added products with higher conversion and improved pricing sophistication. Q1 showed particular strength in year-over-year gains in RPD due to value-added product strategies. Finally, local level profitability and optimization. We continue to improve our ability to manage our business at a more granular level of profitability. Quarter-by-quarter, these initiatives are demonstrating their improved capability to enhance our revenue engine. Throughout April, our playbook drove strong performance for the month. particularly in total fleet utilization gains and mid-single-digit RPD gains. In particular, Easter we can provide provided a clear example of our engine in action. Utilization reached its highest level for any Easter since 2017. And RPD increased 10% compared to last Easter, which occurred later in the month. Together these results drove a 16% year-over-year increase in RPU on our rentable fleet. Importantly, we generated more revenue over Easter weekend than we did last year with approximately 20,000 fewer rental bull vehicles. This marks the seventh consecutive major holiday where we have grown both utilization and RPD year-over-year, highlighting the consistency of our execution. In summary, the revenue momentum, which has been building for the past few quarters through build-to-last structural improvements has now improved to a level where it is translating to positive year-over-year revenue RPD and days. Fleet mix, which was a headwind for RPD in 2025 will be a tailwind through the remainder of the year. Demand from our customers continues to look strong for the rest of Q2 and beyond. And we have line of sight to achieve our North Star RPU target in 2026. Primarily through a plan that delivers positive RPD. This quarter reinforces our commercial strategy is delivering. With that, I'll hand it over to Scott to walk through our financial performance. Scott Haralson: Thanks, Sandeep. Good morning, everyone, and thanks for joining. The first quarter demonstrated continued progress across the business. Revenue momentum continues to build. Our unit economics are improving. And we are managing the business with discipline. While Q1 is seasonally our most challenging quarter, the better-than-expected results reinforced that the structural improvements we continue to make are translating into tangible financial outcomes. Before I get into the quarter, I want to briefly touch on the platform. You heard Gil talk about Oro, which we are excited to unveil, we obviously view this business as an important piece of the platform has the potential for high growth and good margins, and therefore, could have a sizable value accretion to the enterprise. As we have said before, Oro has the potential to be the most valuable asset in our platform, especially when we unlock additional value streams within Oro that are not being discussed today. Plus there's more to the platform than Oro. We are diligently working on similar strategic unlocks for both the fleet and services side of the business that will be rolled out over time. In short, there is a lot more this business is capable of than just renting cars. Now let me walk you through the quarter in more detail. I'll also cover liquidity and our updated views on Q2 and the full year. For Q1, we generated revenue of $2.0 billion, up 11% year-over-year, driven by continued strength in pricing with RPD up approximately 5.5% and transaction days up around 3%. GAAP net loss for the quarter was negative $333 million with an adjusted net loss of negative $224 million, an improvement of approximately $105 million year-over-year. GAAP diluted EPS was negative $1.06 and adjusted EPS was negative $0.72, which was an adjusted EPS improvement of $0.35 versus the first quarter of last year. Adjusted EBITDA was negative $161 million, representing a $141 million year-over-year improvement. EBITDA margin improved by 860 basis points to negative 8% from negative 17% in the first quarter of last year and coming in better than our guidance expectations. Recall activity was a headwind in Q1, up almost 300% higher than a year ago, taking an average of over 16,000 vehicles out of service each month. While we expected an elevated number of recalls, the lack of fixes to prior recalled vehicles and additional new recalled models, drove a larger-than-expected number of sideline vehicles in the quarter. Partially offset to the impact, we carried more fleet than originally planned. This drove higher depreciation expense and pressured utilization and transaction days. In total, elevated recalls reduced utilization by roughly 200 basis points, impacted transaction days by approximately $930,000 and resulted in a revenue impact of about $50 million. The total impact to adjusted EBITDA was more than $25 million. Despite that, we still produced EBITDA results that meet our expectations. Turning to cost. Adjusted DOE per transaction day was $38.43, representing a 1.7% increase year-over-year. DOE per day was impacted by higher RPD related variable costs that are EBITDA accretive and EBITDA-neutral damages costs that are recovered through revenue. The reported increase was also partially driven by higher real estate expense tied to sale-leaseback transactions executed after Q1 of last year. When normalizing for these costs, DOE per day improved approximately 1.6% year-over-year, in line with what we would expect with an almost 3% increase in days. More importantly, our RPD to DOE per day spread an important indicator of profitability improved by approximately 12% year-over-year. SG&A increased modestly year-over-year, primarily driven by higher advertising spend as part of our strategy to invest during seasonal trough periods. Importantly, as a percentage of revenue, SG&A declined from 12% to 11.6%, reflecting improved operating leverage. Gross depreciation per unit per month for the quarter was $296. Losses on the sale of vehicles drove an additional DPU per month amount of $16, resulting in net DPU of $312. We typically experience losses on sale of vehicles in Q1 with expected gains on sale in the second and third quarters. This puts our expectations for net DPU for the full year below our North Star target of $300 per unit per month. Turning to liquidity. We ended the quarter with $837 million, which includes cash and cash equivalents and the available capacity under our revolving credit facility. In April, we completed an additional ABS financing that added $200 million of liquidity in the second quarter. With other liquidity enhancements planned, we expect to end the second quarter with just under $1 billion and look to end the year at north of $1.5 billion. Now before I talk about guidance for Q2 and the full year, let me talk about how our views on capacity growth for Q2 and the full year have migrated, particularly in relation to what our expectations were as we entered the year. We exited Q4 with positive pricing momentum and a desire to grow the different parts of our business. And new liquidity was going to be necessary to grow given the normal -- abnormal drains on liquidity that are occurring this year. Like the Wells Fargo litigation settlement and the reduction in our revolver size that occurs in June. Early in the year, the plan was to add liquidity to fuel our growth for the year. We have since decided to limit capacity growth in the first half of the year and reevaluate it later for the second half of the year. One of the benefits of this business is that we can be nimble with supply. Unlike in other businesses that can't efficiently pivot capacity that quickly. While we believe the majority of the RPD improvements Hertz has seen to date are from our commercial strategies and tactics we do know that industry supply has been limited, and that obviously has played a role in pushing RPD to healthier levels across the industry. As with other businesses that have significant fixed costs like ours, there is constant tension between pricing, supply and unit cost. We appreciate that there is a balance between limiting supply for pricing power and the pressure that it puts on unit cost. And we are constantly assessing the impact of all of these on profitability and the return on invested capital. We have North Star metrics that help guide broader, longer-term company initiatives that are particularly helpful in the transformation. But these are many times moving numerical targets, but they are grounded in the solid tactical strategies around revenue optimization, fleet efficiency and disciplined cost management. Those don't change, but as we have mentioned before, there are many ways to win in this business. We still have our eyes set on growth in the right places at the right time, but also look to optimize the balance between capital deployment supply, unit revenues and unit costs that produce the desired EBITDA and return on invested capital outcomes in the short run. So with that preamble, let's talk guidance. For capacity, given the backdrop I just discussed, we're going to slightly reduce our outlook on days and fleet for the full year versus our original guidance expectations. Days are now likely up in the mid-single-digit range versus the mid- to high single-digit range we originally expected. Fleet is expected to be up low single digits year-over-year versus our original expectations of up mid-single digits. Obviously, this puts some pressure on DOE per day, but we hope to keep that roughly flat year-over-year even with sizable pressure on revenue and related expenses. RPD showed, however, continue to improve for the year to the point that we think we can produce a level of total revenue for this year that gives us a similar expected EBITDA outcome. Just with higher RPD and lower days than originally expected. So in total, we are maintaining our EBITDA margin guidance in the 3% to 6% range for the full year. As for Q2, we expect days to be down 2 to 3 percentage points year-over-year and fleet down about 1 to 2 percentage points as recalls continue to weigh on days production. With April RPD production strong, we expect the Q2 year-over-year improvement in RPD to be higher than Q1. We also expect net DPU will be well below $300 per month as we expect to take sizable gains on the sale of vehicles in the quarter. Altogether, we expect an EBITDA margin in the low to mid-single-digit range for the quarter. As for 2027, we still continue to target $1 billion of EBITDA for the year. With that, I'll turn it back to Gil for closing remarks. Wayne West: Thank you, Scott. A big story this quarter, of course, is our progress on the commercial side, especially in our revenue growth. But the even bigger story is cementing our position in the future of mobility with Oro. We haven't just been executing a turnaround, though make no mistake, that alone has taken a tremendous effort. We've been building quietly deliberately and with real conviction about where this industry is going. Driving innovation at a century old company isn't easy, but we're proving it can be done. Oro is not a bad. It's the result of doing the hard work, finding the gap, selecting the right partners and putting our capabilities to work in new ways. We're strengthening our core and building what comes next. That's the Hertz story right now, and I couldn't be more confident in where it's heading. With that, let's open it up for questions. Back to you, operator. Operator: [Operator Instructions] Your first question comes from the line of Chris Woronka of Deutsche Bank. Please go ahead. Chris Woronka: So thinking through all this news Oro and some of your platform in and I guess just trying to kind of assess how much hurt is really worth today? I mean, it seems like given all the changes, maybe some of the traditional valuation framework or metrics that we typically look at are potentially becoming a little bit less relevant and maybe you can lead to a different approach in how we look at your company. I mean, how are you guys kind of internally thinking about valuation in light of some of these transformations and other business changes that you're making? Wayne West: Yes. Thanks, Chris. Great question. I'll start, and then I imagine Scott, want to chime in, too. So it kind of sounds like you've been sitting in our meeting rooms and boardrooms. But I think, candidly, the valuation of our business today is tough. The problem with our current valuation is that it's almost entirely based on traditional rental car business, which is understandable. So that's a paradigm that's hard to overcome. It's hard for us just to say, hey, we are and we will be more than a traditional rental car business and expect people to immediately assign different valuations to our business. And then I'd just point out, historically, the company's subordinated all parts of the Hertz platform to optimize the rental car business, which ironically might be the least valuable part of our platform. So we're shifting that paradigm to really look at all parts of our platform as interrelated stand-alone business is to manage and create value around. So to change the way Hertz is valued, I know we're going to have to provide evidence. And this we unveiled Oro in that business, if valued as a stand-alone could have a sizable valuation. And then our fleet business as it continues to develop, should also have a sizable valuation. So as we think about it after the rental car transformation is largely complete. All these businesses together could have a real sum of the parts impact that could be material to the overall valuation of the company. In fact, I think one of the issues we got to deal with will be each of the pieces of the platform, as we talked about it, have different growth rates, right? So also different margin profiles, different capital requirements, and we'll probably attract different investor types and different valuation methodologies and probably even different multiples to the business. So that's how we're starting to look at. Scott Haralson: Yes. Chris, this is Scott. Thanks for the question. I think Gil's last point. I think that's likely part of the disconnect between how the equity markets are beginning to view our stock versus maybe some of the price targets that the analysts on the call set that traditional view of rental car company valuations and multiples, we'll probably need to be reevaluated to take into account the different aspects of the platform Gill is talking about and the sum of the parts attributes. . I might even urge each of you to potentially even take a different approach to how you think about it, appreciating the nuances between the transformational rental car and valuing what is really a top five used car dealership and really that has a competitive supply advantage. And then you have the mobility platform that provides what will be critical nuts and bolts infrastructure to ride share delivery, autonomous transportation. So I would just be curious how you guys view it after you take that sum of the parts of you. But I will say in fairness, Chris, that I'll have to acknowledge that haven't made it easy for you guys to really value us correctly yet given the limited information we give you. So that's on us, we'll figure that out. Along with figuring out the strategy around how to create the value, we also got to figure out the best way to report it, honestly. I think in the end, we'll need to figure out things like how to structure the company, the businesses that unlocks the greatest shareholder value and even out of structure of the P&L and to report the businesses differently. We'll have to adapt the messaging into this changing landscape. But I think more of these alterations over time, different viewpoints, I think, will definitely help people correctly value the business as we go forward. Chris Woronka: Yes. Super helpful. I really appreciate the thoughts, guys. If I could get a quick follow-up. You kind of hit on this in the prepared remarks. the DPU -- or sorry, the DOE per day, understanding your North Star targets and I think DPU is pretty well understood at this point. But , do you envision a situation beyond '26, maybe it's '27 where you're not quite in that low 30s on BOE per transaction per day, but you're maybe higher RPE or RPU, whichever you like to look at. Is that -- could that be kind of a as you mentioned, the same way to get to a different way to get to the same outcome of $1 billion next year. I wasn't sure if your comments about the being higher on RPD or RPU and higher on DOE exclusive to '26? Or could that be kind of a go-forward thing, too? Scott Haralson: Yes. Yes, certainly, Chris, this is Scott. I'll start. I think you kind of hit on it. Obviously, the spread between RPD and DOE per day is the sort of critical one. There's different ways to move the business that would change RPD and DOE per day. And that spread is critical. Obviously, we have targets around unit cost and everything. And so there's components of this that will have a bit of a longer tail I would argue our cost management discipline is as much around long-term cost efficiency as it is just short-term cost cutting which is complex in a transformational rental car business setup. And look, we got to return some scale back to the business that's been reduced over the last years. And we'll also look to grow other parts of the platform. I'll argue a bit that today, our DOE expenses are 70% driven by labor, facilities and maintenance and repair. We've done a good job on labor, workforce planning, collision repair has seen some increased volume, but we've done a good job with reducing rates the way we pay for repairs. But facilities is a sticker cost we probably have more footprint than we need, given the current size of the fleet, and these costs are not the easiest to reduce given the lease terms. But over time, we'll continue to manage that. But -- but at the end of the day, we're going to need some scale. We've talked about this. But the good news is we don't need a ton of scale, right? There's a lot of leverage here. And in fact, I'd argue probably 10% to 15% more scale we'd have a sub-35 DOE per day number. So it's in front of us. I think it's just going to take a little time, but it's just something we're going to have to deal with as we think through all the parts. Operator: Your next question comes from Chris Details of SIG. . Christopher Stathoulopoulos: Scott or on the inflection here in RPU, if you could -- you called out a few things on the quarter, the partial shutdown storms recall. If you could perhaps break those out, just wanted to get a sense of how core is looking. And then your confidence around maintaining that positive growth through the year. I know you're pulling in your fleet guide to low single digits. Just wanted to understand if there's other areas that give you confidence around that? I typically think about your booking window as the shortest within my coverage to $0.30, $0.40 just want to understand your confidence around maintaining that growth through the balance of the year. Sandeep Dube: 3 Yes, Chris, thanks for the question. This is Sandeep here. I'll talk about basically RPD and how we think about that, right? So the RPD improvement that we saw in Q1 and was primarily driven by Hertz's unique commercial strategies and supported by broader market strength. I'll touch upon both of those. First, let me briefly cover the broader market strength reference. You've seen more pricing discipline in the market, I'd say starting late Q4 and certainly more so all through Q1 and into Q2 so far, right? So the industry pricing has been positive, I'd say, and especially since mid-Feb and consistently so. So from an industry discipline context, it feels like we are now swimming downstream. And it's a contrast from what we felt before. So that's definitely encouraging and that provides a good platform. But here's the main kicker, right? It basically Hertz's unique commercial strategies, which we detailed a bit in the script. And I would characterize those strategies as the follows. First, unique in terms of the positive impact it creates for us. second, largely durable and persistent in their accretive impact to our business. And this is largely irrespective of broader market conditions. And third, I'd say, growing and strength quarter-over-quarter. We first articulated these commercial strategies in Q1 2025. And you can see the sequential improvement in year-over-year revenue in RPD since then. So 4 to 5 quarters of consistent year-over-year improvement -- and the positive impact of these has now cumulatively led to positive revenue RPD and days in Q1 2026. I think what excites us is the journey ahead. We have a clear commercial strategy an execution plan of initiatives over the next few quarters that will keep building momentum and a more motivated team. Chris, we are on a different and a more exciting trajectory commercially than what we have had in multiple years prior to that. So yes, this is fun now. Wayne West: Yes, I would just add too, I think a big part of it is it all starts with demand, right? I mean when we talk about the sustainability of this, sustainable demand underpins everything on the pricing side. So I think the team has done a really good job structurally over the last couple of years building that demand. So whether it's direct demand through our dot-com type Hertz.com loyalty channels, that's been big through partnerships, through commercial agreements, corporates, all of that really has helped us develop the demand side of the equation that then the RM type strategies and initiatives can really resonate on. So I think Sandeep said it well. I think if anything, we feel confident those -- all of that is going to help us sustain improvements and where we're at and build off that as we go forward in addition to whatever the broader market does on top of that as more of an amplifier. Christopher Stathoulopoulos: Okay. And then it sounds like at some point, you're going to give us a little bit more disclosure on oral and our sales. But in the meanwhile, as we look at your North Star RPU above or more than 1,500 and the DOE low 30s. As we think about I guess, the back half in '27 and these segments start to grow. Any color you can kind of give us as we think about things like revenue and margin contribution until these segments are ultimately broken out. Wayne West: Yes. I think a little bit on maybe Oro to talk about that 1 first. The -- I guess maybe in the materials you've seen it. But I'd just point out that we have -- within that construct, we have three different businesses there. all of them kind of a different maturity levels, different growth rates, et cetera. So we're not just starting from scratch. We have kind of a platform we're building on. So we should see growth really across all three of these, but at different rates. So the first 1 I would describe is what would be the more traditional rideshare rental car business where we're renting cars to ride share drivers through the partnerships we've got with Uber and Lyft. We've been at that a couple of years, and now we're among the largest in the world. As I mentioned, I think, in the script, we've got over 40,000 vehicles combination EV and ICE vehicles, right? So that's kind of the existing platform. We continue to lean in and build off that. But then the other two businesses, that really are new in a sense, at least to the broader market. We've been working both of these for at least the last couple of years. But the first one is where we've got Oro driven fleet where we've got this high-quality turnkey capacity we're providing to Uber. We've leaned in. We've leveraged technology to better manage the kind of driver life cycle productivity. We're also leveraging it to scale and then in our safety performance. So as we think about that, we're in a -- we're ramping through a measured market-by-market expansion, and we're scaling kind of proven programs now there's a clear line of sight to demand. This is a large addressable market. But as we move forward, we got to make sure the economics work at a market level. We've got to make sure we got the operational controls in place and ultimately, we're scaling with discipline. So -- and we're gated by things like operational readiness, safety thresholds, the economic returns. We're just not after top line here. I want to emphasize that. So -- but we do think this is going to be more and more a meaningful contributor to the overall company's results. And then the third piece of this is AV operations, right? And there, of course, with the partnerships that we've announced over the last week, -- we know we're -- we've got the ability to be a major player in this space. We've got unique capabilities that only a handful of companies can bring -- the pace of AV growth, I think, is going to be probably maybe a little longer tail, but potentially much higher ultimately. So we've got kind of a whole spectrum here of three businesses within mobility with different growth rates, all with good margins, it should be accretive to the company. But that windage, we'll have to give you more color as we move forward. Scott Haralson: Yes. Chris, this is Scott. I'll add a little bit to that. Oro is obviously an important piece of it. But as you think about the near-term P&L '27, '28 in I mentioned the spread. So RPD definitely moving in the right direction. I mean you heard Sandeep's commentary mean U.S. airports were up 9% alone on RPD. So definitely positive RPD stuff. Oro is going to be great Also, too, I mean, we have grown our fleet car sales F&I income, which sits in the revenue line. It's been the largest line we've had since in recent history, and there's a ton of room to grow that without corresponding DOE and expenses associated, plus the other piece is we've talked about growing franchise which has a direct revenue benefit with very little corresponding costs associated. So as we talk about growing revenue without cost, -- those are the things that are going to create that big spread going forward. So it's not just about rental car RPD and the costs associated. Those other pieces that will create that GAAP. Operator: Your next question comes from the line of John Healy of Northcoast Research. Please go ahead. John Healy: We'd love to spend a little bit more time on the Oro opportunity. I love how you name it Oro. I think that means gold in a different language or a couple of different language -- Very cool move. But I would just love to get your thoughts about -- and I think, Scott, you mentioned we need to figure out how to monetize or get value for some of these pieces of the development that we haven't gone to market with. Can you get more granular with us on that I think with Oro, you guys are actually hiring drivers in certain markets to kind of go with the fleet you're providing. So we just love to get your thoughts on just how some of these aspects of the operation might evolve from here? Wayne West: Yes. Maybe around kind of the oral driven fleet piece. I'll talk just a little bit more about that. Scott, you may want to add some additional broader color on the valuation side. But I guess the first point I'd make here is that oral is not entering into just a generic human capital business. I'll just say that upfront. But really, what we're trying to do here is provide Think of it as turnkey rideshare capacity to Uber, okay, turnkey. And we're really just -- we're putting the pieces we already have out there in place here. None of this is really new. So what we're doing really is operating fleets end-to-end under a contracted capacity supply. And we're employing drivers as part of that equation. Keep in mind, we've got thousands of people already driving our cars that are employees. And so we're well positioned. We have all the pieces. We're just putting together to fill a gap here And we already manage a really large distributed workforces across the operations. We own the fleet, we have the maintenance and logistics. And I'd just point out, I think the model is superior to the traditional gig structure since it provides really a more predictability and control along with higher quality in terms of the customer experience as well as safety performance. So there's value created around that. And again, we're really deliberately scaling this and we're gated as I mentioned -- just mentioned about kind of the operational performance, safety thresholds, the economics, all those things. So the real focus is getting it right. And the other thing I've got to point out here is that this is a real stepping stone to running AVs that at scale, right? This is an operational cadence that's not normal for a rental car company, even though we have all the pieces. So as we're kind of building that rhythm, it's directly applicable to the AVs, it's just without the drivers at that point. So kind of we're bridging really all the aspects of ride share, but it's got application and other businesses like delivery, other potential partners. So this is -- these are big markets. We've got all the pieces that we can play in it. Sandeep Dube: Yes. No, I think that's right on. John. Look, I think we're not going to be able to talk a lot about the economics of the deal here. But I think what Gil pointed out is exactly right, which is the -- this plays into the strengths of what hurts does well. We're a big human capital provider. We employ thousands even those that drive cars today for us. And this is an extension of that plays into the real estate footprint that we have today, the maintenance capabilities, the fleet management control. All of these things are most of things that we do today with a slight twist. But as Gil said, it's a massive bridge to tomorrow's AV world. So this is a very nice extension of what we do today that will provide near-term benefit to the P&L while also setting us up for longer-term AV infrastructure capabilities. John Healy: That's great. And Scott, just 1 follow-up question on the expectations for -- did I hear you right, you said that you're expecting global days to be down, but for the year, we're going to be up mid-single digits. I was just hoping you could just run that ask this again. Yes, that is right, John. We'll be down in Q2, which would imply up in Q3 and Q4. And obviously, there's some year-over-year nuances as days were probably a little smaller in Q4 last year. So there will be some year-over-year nuance of the math. But yes, we won't be as big in Q2 as we would have liked. -- given the macro demand economics, but that will recover a bit in Q3 and Q4. Operator: We have reached the end of the Q&A session. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Welcome to the ScanSource, Inc. quarterly earnings conference call. All lines have been placed in a listen-only mode until the question-and-answer session. Today’s call is being recorded. If anyone has any objection, you may disconnect at this time. I would now like to turn the call over to Mary M. Gentry, Senior Vice President, Finance, and Treasurer. Please go ahead. Mary M. Gentry: Good morning, and thank you for joining us. Our call will include prepared remarks from Michael L. Baur, our Chair and CEO, and Stephen T. Jones, our Chief Financial Officer. We will review our operating results for the quarter, then open the line for your questions. We posted an earnings infographic that accompanies our comments and webcast in the Investor Relations section of our website. As you know, certain statements in our press release, infographic, and on this call are forward-looking and subject to risks and uncertainties that could cause actual results to differ materially from expectations. These risks and uncertainties include the factors identified in our earnings release, and our Form 10-K for the year ended 06/30/2025, and in our subsequent reports on Form 10-Q. Forward-looking statements represent our views only as of today, and ScanSource, Inc. disclaims any duty to update these statements except as required by law. During our call, we will discuss both GAAP and non-GAAP results. We provide reconciliations on our webcast website and in the press release included in our Form 8-K filed earlier today. I will now turn the call over to Mike. Michael L. Baur: Thanks, Mary, and thanks to everyone for joining us today. Our team delivered strong third quarter results, with adjusted EBITDA, EPS, free cash flow, and ROIC all increasing versus the prior year. I am pleased to see improved hardware demand drove 9% growth in net sales with growth across most technologies, especially networking and security. We believe end users have more choices than ever, and solutions are getting more complex, but what they are really looking for are business outcomes—complete solutions, not point products. Research shows us that end users prefer to buy from trusted partners who can deliver across the full technology stack. That is why we are taking the next step to help our partners grow their business by launching a new Converged Communications business unit to deliver a unified OneScanSource partner experience. This new business unit will include the business development and sales resources, pre-sales engineering, marketing, and supplier management functions, bringing together the ScanSource, Inc. Specialty Communications team and the Intelisys CX cloud-based solutions team into one combined business unit. This team will support Specialty Communications VARs and Intelisys CX partners, helping VARs sell more cloud recurring revenue products and solutions and helping Intelisys partners attach more hardware. Importantly, each partner will have dedicated sales resources to sell across our OneScanSource portfolio. The Converged Communications business unit will be led by Katherine White, who brings five years of ScanSource, Inc. experience across both our Specialty business and Intelisys. Looking ahead, we are focused on helping our channel partners grow by delivering innovative converged solutions, including, of course, new opportunities in AI. Our partners are finding excellent opportunities for AI adoption in the CX solutions area. Let me share two examples of recent AI channel wins. First, with AI as automation, a financial institution adopted an AI-powered platform with AI agents to handle routine inquiries. That freed up approximately four to five hours per live agent each week so they could focus on more complex customer needs. Second, with AI as augmentation, AI helps drive revenue expansion, including cross-selling. In this deployment, AI supports inside sales agents during live interactions by providing real-time recommendations. We believe both examples highlight how ScanSource, Inc. helps our partners bring converged, AI-enabled CX solutions to market. Overall, our strong results this quarter reinforce our confidence in our business model as we look to the future. I will now turn the call over to Steve to take you through our financial results and our outlook for fiscal year 2026. Stephen T. Jones: Thanks, Mike. We are pleased with our Q3 results, with consolidated net sales and non-GAAP EPS growing 9% year over year. We also delivered strong free cash flow for the quarter and feel very well positioned to deliver our fiscal year 2026 outlook. Turning to our segments, I will start with Specialty Technology Solutions. Net sales increased 9% year over year, led by North America hardware sales growth across most of our technologies. Gross profit increased 10% year over year to $81 million. Approximately 15% of segment gross profit is coming from recurring revenue, led by managed connectivity growth from our Advantix and DataZoom acquisitions. Segment adjusted EBITDA grew 6% year over year to $24.7 million, with an adjusted EBITDA margin of 3.3%. In our Intelisys and Advisory segment, net sales declined 1% year over year. Intelisys annualized net billings increased to approximately $2.88 billion. Quarter over quarter, both segment net sales and gross profit increased 4%. Adjusted EBITDA for the segment was $11 million, a sequential quarter growth of 6%, with segment adjusted EBITDA margin of 42%. Going a bit deeper on balance sheet and cash flow, we ended Q3 with $120 million in cash and a net debt leverage ratio of approximately zero on a trailing twelve-month adjusted EBITDA basis. For the quarter, we generated $69 million in free cash flow, bringing our year-to-date free cash flow to $119 million. Share repurchases totaled $33 million in the quarter, and we had $146 million remaining as of 03/31/2026 under our share repurchase authorization. Adjusted ROIC was 14.3% for the quarter and 13.6% year to date. We continue to have a strong balance sheet, and we are well positioned to execute our strategic priorities and achieve our three-year goals. Our three-year goals focus on growing the company’s gross contributions from recurring revenue, expanding our profitability, delivering strong free cash flow, and maintaining disciplined capital deployment. You can find our goals in the infographic and our investor presentation in the Investor Relations section of our website. We continue to explore acquisition opportunities that could expand our technology stack, our capabilities, and accelerate our recurring revenue growth. Our capital allocation priorities also include continued share repurchases. We are confident in our business model, and our Q3 results support our expectations for our annual outlook. We are maintaining our full-year projections for both revenue and adjusted EBITDA, and for FY 2026 free cash flow, we are raising our expectations to at least $90 million. We will now open the call for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. Please stand by while we compile. Our first question comes from the line of Keith Michael Housum of Northcoast Research. Your line is open. Keith Michael Housum: Great. Thanks, guys. Appreciate the opportunity. Hey, Steve, in terms of the revenue guide for the full year, based on the strong quarter you have, if my math is right, that would suggest at the top side revenue growth of only 2% in the quarter, and on the downside, it would be a decline of 10%. Was that intentional in terms of what you are thinking about for the next quarter? Stephen T. Jones: Well, Keith, thanks for the question. When we look at our full-year outlook that we gave last quarter, we said that we would need some large deals coming in, and we had growth projected for the second half. Q3 delivered on that, and we are confident that we can deliver our full-year guidance, but we do not want to get over our skis as we look at Q4. Keith Michael Housum: Okay. Is there a sense that business was pulled forward from fourth quarter into third quarter based on, you know, the world that is in chaos when it comes to memory pricing right now? Stephen T. Jones: What I would say on that, Keith, is visibility is always hard on pull-forwards and that kind of detail, but we do not believe that we saw material pull-forwards in our Q3 results. Keith Michael Housum: Okay. Appreciate it. You guys called out Resourcive sales being down in the quarter. I would assume those would sequentially grow every quarter. Was there anything unique that happened in the quarter that would cause that to be down? Stephen T. Jones: Well, on Resourcive, remember that is our end-customer-facing business, and what you will see in that is there is recurring revenue and there is services revenue in that business, and some of those services revenues can be up and down quarter over quarter. Keith Michael Housum: Okay. Gotcha. How were Intelisys’ orders for the quarter? I know you guys mentioned billings were $2.88 billion. How did the orders do? Michael L. Baur: Hey, Keith. It is Mike. Good morning. One of the things that we are focused on is how do we accelerate new order growth, and that is one reason we really are focusing on establishing this new group, this new team. We believe that we need to put additional focus on new orders, especially through the VAR community. So this Converged Communications team is going to have as a primary goal how do we get more partners selling Intelisys and getting the new order growth to accelerate. We would like to see that grow faster. Keith Michael Housum: So do I assume that order growth did not grow for the quarter year over year? Michael L. Baur: No, I did not say that. Our belief is that we are doing everything we said we are going to do, but we want to go faster, and we do not believe it is growing at the rate we would like to see. Keith Michael Housum: Gotcha. Hey, last question for me, and I will turn it back over. In terms of the STS segment, revenue is almost identical to the third quarter, but gross margins were about 50 basis points higher. I know last quarter you guys called out freight costs due to more small and medium-sized businesses. Anything else that drove the improved gross profits for the quarter? Stephen T. Jones: I would say it is more mix driving that benefit. We have seen the freight costs normalize for us. We thought that was going to be more of a one-time impact in the quarter, so I would say it is more of a mix story in terms of the improved margins. Operator: Thank you. Our next question comes from the line of Gregory John Burns of Sidoti. Please go ahead. Gregory John Burns: Good morning. Just to follow up on the investments you are making on the Intelisys side of the business to drive faster growth. I know you announced this new Converged business unit, but you have done a number of things over the last 12 to 18 months to stimulate that growth. Are you finding the impact of those investments and changes that you previously made are not what you expected them to be, or has there been increased competitive response? Why have you not been able to get the growth on Intelisys where you think it should be? Michael L. Baur: Hey, Greg. It is Mike. Good morning. From my perspective, we have been very clear that we need to see acceleration of our new orders growth. We have been able to talk consistently over time about end-user billings being also the indicator of how our revenue is going to come in. New order growth, if you remember, has a lag between a new order and revenue for us. So we clearly have to not only continue doing what we were doing for new orders, but everything that I am talking about today that is new, we will not see the results of that for anywhere from six to 18 months. Really, what I am saying today is we are going to do more so that we can, a year from now, see even more of those results. I would say the challenge with our Intelisys business is we are seeing in new order growth now the actions we took a year ago, and we are saying we would like to see better results. We want to accelerate that, and we believe now is the time. One more point, Greg: we felt like we needed to get to this point in the year. Our strategy and our outlook for the year required a strong second half, and some of our decisions for more investments would not be made until we got through the first half. We are there, and we saw what happened in Q3, so we have the confidence that we should do that now. That is why now—it is a timing question for us. Operator: Thank you. Once again, to ask a question, please press 11 on your telephone. Our next question comes from the line of Logan Katzman of Raymond James. Please go ahead. Logan Katzman: Yeah, hi. Thanks for taking my question. This is Logan on for Adam. Maybe back to one of the first questions that was asked earlier. When we are looking into 2027, since we have to start to model that, first, any guidelines or parameters you want to give us as we look into modeling that? And then secondly, what do customer conversations look like around the first half of 2027? I know it is a little early, but kind of back to the pull-in question. Are you seeing a big potential drop-off in demand as we move into that first half of 2027, second half calendar 2026? Just wanted to see what you are hearing on that front. Thank you. Stephen T. Jones: Yeah, Logan, thanks for the question. I would start by saying we have not given 2027 guidance yet. We typically do that when we deliver our fourth quarter results, so we are a little bit early in talking about FY 2027 for us. But we are happy with where Q3 came in, and we are confident in our Q4 forecast that builds to our full-year guidance—the guidance range. There are some things in our business right now that have a lot of momentum. Mike talked about security and networking having a lot of momentum from a sales perspective, and what we saw this quarter that we have not seen in previous quarters is most of our technologies showed growth, which is a great sign for us as we think about going into 2027 to have that momentum. Logan Katzman: Awesome. I appreciate the color. Thank you. Operator: I would now like to turn the conference back to Stephen T. Jones for closing remarks. Stephen T. Jones: Yes. Thank you for joining us today. We expect to hold our next conference call to discuss our June 30 quarterly and full fiscal year results on Thursday, August 20, approximately 10:30 AM. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, everyone and thank you for participating in today's conference call to discuss BBSI's financial results for the first quarter ended March 31, 2026. Joining us today are BBSI's President and CEO, Mr. Gary Kramer; and the company's CFO, Mr. Anthony Harris. Following their remarks, we will open the call for your questions. Before we go further, please take note of the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statement provides important cautions regarding forward-looking statements. The company's remarks during today's conference call will include forward-looking statements. These statements, along with the information presented that does not reflect historical fact are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements. Please refer to the company's recent earnings release and to the company's quarterly and annual reports filed with the Securities and Exchange Commission for more information about the risks and uncertainties that could cause actual results to differ from those expressed or implied by the forward-looking statements. I would like to remind everyone that this call will be available for replay through June 6, starting at 8:00 p.m. Eastern Time tonight. A webcast replay will also be available via the link provided in today's press release as well as available on the company's website at www.bbsi.com. Now I would like to turn the call over to the President and Chief Executive Officer of BBSI, Mr. Gary Kramer. Sir, please go ahead. Gary Kramer: Thank you, and good afternoon, everyone and thank you for joining the call. I am pleased to report that we had a solid start to the year and our Q1 results were in line with our expectations. We're a company that executes to a plan and we continue to grow our client base while delivering additional products across our tech stack. Moving to our financial results and worksite employees. During the quarter, our gross billings increased 3.5% over the prior year's quarter and was in line with our expectations. We continue to execute on our strategies to increase the top of the sales funnel and we continue to see positive results. While Q1 new client additions were strong, they trailed Q1 '25, which benefited from an inaugural selling season with Kaiser. Additionally, our client retention continues to trend better than our historical levels. I'd like to attribute that to the work we do with our clients and the value our teams provide. The result of all these efforts or what I refer to as controllable growth is that we added approximately 5,300 worksite employees year-over-year from net new clients. However, our overall growth was tempered by broader client workforce reductions. As a reminder, macroeconomic uncertainties led many of our clients to reduce headcount through the back half of 2025, a trend that impacts our year-over-year comparisons. While we saw further workforce reductions in Q1, the rate of decline has begun to moderate compared to the back half of 2025. To summarize, despite client workforce reductions, we achieved a 2% increase in total worksite employee growth for the quarter, driven by strong sales volume and strong client retention. Moving to our staffing operations. Our staffing business declined 21% over the prior year quarter, reflecting a broad reluctance among clients to place staffing orders amid macroeconomic uncertainty. In response, we continue to leverage our recruiting expertise for our PEO clients, successfully placing 90 applicants during the quarter. Moving to the field operational updates. We're very pleased with our entrance into new markets with our asset-light model. These folks continue to gain traction and consistency and added approximately 550 new WSEs in the quarter. As a reminder, we opened our newest branch in Nashville in January, following last year's openings in Dallas and Chicago. In each of these locations, we have formed business teams with local professionals to support our clients and have moved into traditional brick-and-mortar BBSI branches. We anticipate converting 3 additional locations to traditional branches this year as we continue to invest in the development of our asset-light markets. Regarding product updates, we continue to execute on the sale and service of BBSI Benefits, our health insurance offering. We're off to a great start to the year. As a reminder, we had a successful 1/1/26 season, renewing 93% of our book despite rising health insurance rates. On an adjusted basis, we retained 97% of these clients, proving that our value proposition holds firm even when clients choose to transition off of our benefits platform while remaining with BBSI. We have achieved operational consistency and added nearly 140 clients and 3,500 participants to our various health plans during the quarter. We continue to invest and improve the sale and servicing of BBSI benefits. Our value proposition resonates well. We're having success with small and large clients in white and blue collar industries in every state we operate and with a diverse distribution channel. Next, I'd like to shift to our 2026 IT product objectives. I previously mentioned that we've been investing in our tech stack on the product side to service and support our clients better. Over the last couple of years, we made additional investments in myBBSI to support our BBSI Benefits offering, added a learning management system and added numerous integrations with third parties. We've also been investing in our technology to better support the employee life cycle experience, which is from when an employee is hired to when the employee retires and everywhere in between. We previously launched BBSI applicant tracking system, which addresses the front end of the employee life cycle and allows for job postings, interviews and seamless onboarding into our payroll and timekeeping systems. In January, we launched the employee file cabinet, which provides a secure, centralized and fully integrated digital repository. This allows our clients and their employees to confidently manage sensitive employee data and allows for manuscript or individualized curated forms with e-signature capability, which improves compliance and efficiency. In April, we officially launched our performance management module. This module's intuitive design will allow organizations to better align employee objectives with company expectations while tracking performance with consistency and clarity. It empowers employers to formalize performance expectations and document performance conversations through standardized review cycles, ongoing feedback and development planning. Our beta clients were very complimentary of the overall offering as well as the ease of use of our system. We think that ultimately, these products will result in increased sales and better client retention and we are excited to offer these products to existing clients as well as new prospects. Next, I'd like to shift to our view of the remainder of the year. As we look to the remainder of the year, our outlook remains unchanged. We expect our clients to continue growing at a rate below historical norms. However, we expect that rate of impact from low client hiring to moderate in the second half of the year. We believe BBSI is well suited to navigate macroeconomic and geopolitical uncertainties. In challenging times, small businesses are better off in a PEO relationship and can benefit from our scale and our expertise. We have consistently achieved strong controllable growth by focusing on the needs of our clients and by adding new clients, a focus that we will maintain. We have more products to sell and more folks selling. Consistent execution, differentiated service model and strong relationships position us to continue driving sustainable growth through 2026 and beyond. Now I'm going to turn the call over to Anthony for his prepared remarks. Anthony Harris: Thanks, Gary. Hello, everyone. I'm pleased to report that we finished the quarter with results in line with our plan and are reaffirming our outlook for the remainder of the year. Gross billings increased 3.5% to $2.16 billion in Q1 '26 versus $2.09 billion in Q1 '25. PEO gross billings increased 3.7% in the quarter to $2.15 billion, while staffing revenues declined 21% to $14 million in the quarter. Our PEO worksite employees grew by 2% in the quarter, which, as Gary noted, was driven by strong controllable growth tempered by year-over-year client workforce reductions. Average billing per WSE per day increased 1.7% in the quarter, which was driven by increasing wages, partially offset by lower overtime and hours worked. Looking at year-over-year PEO gross billings growth by region for Q1. Southern California grew by 2%, Northern California declined by 2%, Mountain grew by 6%, East Coast grew by 17%, Pacific Northwest grew by 1% and our asset-light markets grew by 85%. A few comments on our regional performance. Southern and Northern California, our 2 largest markets, both experienced slower growth in the quarter, primarily due to year-over-year client workforce reductions. New client adds in both regions were in line with expectations. However, Northern California also had slightly elevated runoff in the quarter and was more impacted by the negative client hiring trends. The East Coast continued to stand out, delivering its 20th consecutive quarter of double-digit growth, supported by strong controllable growth and positive client hiring. The Pacific Northwest region returned to growth as solid net client adds more than offset softer client hiring activity. Turning to margin and profitability. Our workers' compensation program continues to perform well, resulting in favorable adjustments for prior year claims. In Q1 '26, we recognized favorable prior year liability and premium adjustments of $1.1 million compared to favorable adjustments of $3.8 million in the first quarter of 2025. We've previously discussed the market inflection in workers' compensation pricing and the positive momentum that followed the California insurance commissioner's approval of an average 8.7% premium rate increase in 2025. In the first quarter of 2026, we were able to increase our pricing each month and have now established a 5-month trend of increased pricing. Reinforcing this broader market trend, the WCIRB has recommended an additional 10% increase in California advisory rates for 2026. As a reminder, the previous period of declining workers' compensation pricing has resulted in margin compression in recent years. And while we expect cost trends to continue to increase as well, we expect the improved pricing environment to stabilize margins and support margin expansion over time. We continue to prioritize thoughtful risk management. And to that end, our workers' compensation claims are primarily fully insured and our health insurance product is [Audio Gap] looking at our payroll tax costs. Payroll taxes are typically highest in Q1 as taxable wage caps reset, which results in lower margins in the first quarter of the year and a typical net operating loss. Payroll tax rates were in line with expectations for the quarter. You will also see that we have separated benefits costs into a discrete financial statement line item, representing the direct costs of our client benefits offering. As a fully insured product, these costs primarily represent the pass-through premiums for our client health plans and are directly correlated to the related client billings included in PEO revenue. We expect benefits volumes to continue growing with first quarter benefits costs up 56% year-over-year, broadly consistent with BBSI Benefits billings growth. Overall, our gross margin rate was in line with our expectations and reflected stronger pricing trends and increased benefit sales with some headwind from lower staffing revenues. Moving to our operating costs and overall profitability. In Q1, SG&A increased approximately 6% due primarily to the timing of certain employee-related expenses. We continue to expect full year SG&A trends lower than gross billings growth and more in line with prior year SG&A growth. Moving to investment income. Our investment portfolios earned $2 million in the first quarter, down approximately $600,000 from the prior year due to interest rates and lower average investment balances as we continue to use excess cash in our stock buyback program. Our investment portfolio continues to be managed conservatively with an average quality of investment at AA. Looking at our net results for the quarter. As a reminder, on March 31, we announced the company had recorded a onetime tax charge related to credits from tax years 2017 through 2022, which were disallowed by the IRS and the related tax court decision. The amount of this charge was $11.6 million or $0.46 per share. We continue to evaluate our available legal options, including our right to appeal. As a result of this charge, our GAAP net loss per diluted share was $0.59 for the quarter. Excluding the onetime charge, our adjusted net loss per diluted share was $0.13 compared to a net loss of $0.04 per diluted share in the year ago quarter. Turning to our balance sheet. We are in a strong position with $92 million of unrestricted cash and investments at March 31 and no debt. We continued our consistent approach to capital allocation, making investments back into the company through product enhancement and geographic expansion and distributing excess capital to our shareholders through our dividend and stock buyback plan. Under our $100 million August 2025 repurchase program, BBSI repurchased $20 million of shares in the first quarter at an average price of $28.68 per share, with $55 million remaining available under the program at quarter end. The company also paid $2 million in dividends in the quarter and reaffirmed its dividend for the following quarter. This brings total capital returned to shareholders in the last 6 months to over $40 million. Now turning to our outlook for the full year. Our Q1 operating results aligned with our expectations, reflecting continued strong execution of our fundamentals across the company. Accordingly, we are reiterating our full year outlook. We expect gross billings growth between 3% and 5% for the year, WSE growth between 2% and 4% for the year, gross margin as a percentage of gross billings between 2.7% and 2.85% and an effective annual tax rate normalized for the onetime tax charge between 26% and 27% I will now turn the call back to the operator for questions. Operator: [Operator Instructions] And we have our first question from Chris Moore with CJS Securities. Christopher Moore: Maybe we'll start on the workers' comp pricing. Obviously, encouraging 5 months straight increased pricing. I assume pricing is still -- hasn't caught up to the state of California increase at this point in time. That's fair, still lots of room there. Gary Kramer: Yes. I mean the rates went up last year by about 9%. The market was a little slow to start to go out and reflect that immediately. We started to see rates going up as far as charge rates for what we're able to get in the market. We started to see that it was choppy at the back half of the year. So we have 2 good months, 1 bad month kind of thing. But from December until April, we had positive rate increases on all of our renewals and our new business. So we're seeing it in the market as far as rates going up. It varies by market as far as -- this is predominantly California but it varies by location but just in the aggregate, the tide is coming in. Christopher Moore: Got it. And what would it take to raise the upper end? I guess is that more of a '27 really kind of situation? I know that there's a lag between the time you raise pricing, you've got different contracts that are renewing at different periods. Just trying to understand if you had another 3 or 4 months, would that have a meaningful impact on the -- on that 2.7 to 2.85% range? Anthony Harris: Yes, Chris, I'll jump in on that. So it's obviously early in the year now and we're encouraged by the trend we've seen in pricing. But remember, we finished 2025 lower than we started 2025. So really, as we kind of build that back, we're going to kind of work back towards where we were and see sequential improvement but we also only renew about 1/12th of our book each month. And so really, that will continue to build and build profitability towards the second half of the year. And to your point, really where you'll see that on a year-over-year basis on a gross margin rate is going to be in 2027. Christopher Moore: Got it. That makes sense. And maybe just last one for me. In terms of the technology that -- features that Gary was talking about, how does that work from a pricing standpoint? Or is it more just about retention really? Gary Kramer: We're -- good question. We're not going to get rich on these products. What it's going to do is, it's going to get us to the table with every competitor out there, right? So there's not going to be something that knocks us out because our tech can do what everybody else tech does. And anything, it gets you in the door, #1. Then #2, these products, we're not charging a lot. If we have variable costs on them, we try to push the variable cost through. We're not doing this to -- we're not doing this to get rich. We're doing this to -- really the more SKUs you sell someone or the more products you have, the longer they're going to stay with you. And the more product you have, the more it appeals to the white collar business and the more appeals to the larger clients. So we think of this as it gets us to the table, it gets us to the table with white collar, it gets us to the table with larger clients. So we're optimistic. The tech is good. We're optimistic that it's going to be received well by our clients and new prospects. Operator: We have our next question from Jeff Martin with ROTH Capital Partners. Jeff Martin: Wanted to start by diving in on the health care benefits side. How are you feeling about the take rate and the renewal rate on that? And are you seeing a relatively material size amount of your new clients coming on as a result of the benefits offering? Gary Kramer: So we -- when we launched benefits, we did more upsell than new sell. Now we're at the point that we do more new sell than upsell. So for Q1, it was about 60% of the clients that we put on to the benefits were new to BBSI. So we're getting better at our craft. We're getting better at positioning. We're getting better at selling it. So that's one. As far as the volume and the conversions, we have a really good conversion rate on benefits, better than just PEO. So when we actually present a benefits quote, we have a higher close rate. So math just says do more of it, right? So that's what we're trying to do. The interesting part for 1/1 was everybody's rates went up double digits, some went up more. So you had a lot of shopping. And when you had the shopping, you had somebody come in and they were getting a, call it, a 40% or 50% rate increase on the renewal. And then they came to us and we looked at it and there was a reason why they were getting that 40% to 50% rate increase. So we did see more business flowing, more opportunities came across our desk in end of Q4, Q1. But some of these, we got to protect -- we don't take the risk on the underwriting but we got to protect the pool and there was a lot of business that we had to decline to quote. Jeff Martin: Makes sense. Okay. And then just curious what else you can tell us about the Northern and Southern California markets, your 2 biggest markets in terms of maybe what you're seeing or hearing from that client base with respect to their reluctance to hire or even cutting back on their headcount? Gary Kramer: Yes. Just in general, Southern Cal, on a WSE basis, Southern Cal had more reductions. But on a proportion basis, Northern Cal had a bigger proportion, if that makes sense. So that was broad-based for Northern Cal and for Southern Cal and it was broad-based pretty much for all industries. We saw it from the cookie stores to the construction companies and we saw them pull back. I get out and visit clients and some of the themes that I heard in Northern Cal where the Bay Area construction has slown down. So the contractors are pushing out of the Bay, right, because they got to work, they got to find business and they got to go out as far as Fresno and places like that. So it's interesting that they shrunk. They've got their base but you're not seeing the robust housing starts, you're not seeing any of those things yet. I don't think interest rates are helping [Audio Gap] at this point. Jeff Martin: Right, right. Okay. And then with respect to the asset-light markets, you've got 3 at critical mass. It sounds like you're rolling out 3 additional branches this year. Any -- can you refresh our memory on how many new markets you're starting greenfield on the asset-light this year? Gary Kramer: The reason we didn't give that is because it gets complicated, right? Do I call Chicago or Dallas a new market anymore? But in total, if you include Chicago, Dallas, Nashville, we're at like -- I think it's 22. And we started to go into states that we haven't been in. So we started to hire some folks and they're selling in Florida and some other places that we're... Operator: We have our next question from Vince Colicchio with Barrington Research. Vincent Colicchio: Yes. Curious, the new client pipeline, how does it look in comparison to recent quarters? Gary Kramer: Pipeline is strong. Pipeline continues to be strong. We've got a lot of focus and attention on our direct efforts. We've got a lot of focus on attention on active acquiring new referral partners. We've got more referral partners referring to us now than we've ever had. And that piece is working very well as far as the top of the funnel. The conversion could be a little higher. You're seeing a reluctance right now unless there's a cost savings. I think it's got to do with the macroeconomic. But unless you can show a cost savings or explain the value, that's how you're going to get the conversion rates up. Vincent Colicchio: And how are the health care brokers performing in terms of providing the lead of referrals? Anthony Harris: That's a new channel for us. Typically, because of our workers' comp product, we aligned with the P&C brokers but now that we have the employee benefits, we align better with the health insurance brokers. With those, we're doing well. We have some national partners, some big brokers that we work with. We're doing well with them on the benefit side. I would like to do better with the smaller health agencies. We have some that are referring to us but I'd like to have more of those. Operator: [Operator Instructions] We have our next question from Marc Riddick with Sidoti. Marc Riddick: I wanted to touch a little bit on -- a lot of my questions have been covered but I did want to touch a little bit on cash usage during the quarter and maybe just hear some thoughts around the share repurchase activity in the quarter and if that sort of continued into April there? And then I have a quick follow-up after that. Anthony Harris: Yes, absolutely. So we generate a lot of cash. As you know, we're not a capital-intensive business. So when we talk about our capital allocation strategy opportunities to invest in our business, the most clear way is through our IT investments we've been talking about there and obviously investing in our sales teams and asset-light expansion. But we are going to have excess cash generated through operations. And we have consistently shown that we want to deploy that back to shareholders. In particular, right now, there's a lot of, we believe, intrinsic value in our stock. And so we look at where we can invest. That's something we've increased our share purchasing both in Q4 2025 and through Q1. Marc Riddick: Okay. Great. And then I wanted to circle back on -- you touched on the client vertical behaviors that you're seeing out there. I was just sort of wondering if there was much in the way of change or differentiation in certain areas, particularly whether it's retail or construction, residential construction or the like? And whether you've seen any impact or change that was more directly tied to the geopolitical and the war and the like or if that was just sort of consistent across the board through the quarter? Gary Kramer: Good question. If you think of how the last, call it, 4 quarters or how '25 progressed, right, we -- in Q1 of '25, our customers grew, which makes this a harder compare, right, for Q1 of '26, right? We're going against growth. Q1, our clients grew, Q2, they moderated back to flat. Q3, they reduced. Q4, they reduced more. So a lot of the negative effects we're feeling are from reductions that happened in the. [Audio Gap] Our clients reduced further in Q1 but at a much lower rate than they did in Q3 and Q4. So we're not seeing bad numbers. We're not seeing as bad numbers in Q1 as we saw in Q3 and Q4. But in general, it's -- East Coast, there's a couple of regions that have growth. The East Coast is one. But just if you think of these industries, in California, it was pretty much down in every industry with construction being the most. And then when you look at it by region, it kind of -- you have some puts and takes. Some regions are growing, some regions are shrinking. But for the aggregation of our clients in California, just in general, all industries reduced their workforce. Operator: At this time, this concludes our question-and-answer session. I will now turn the call back over to Mr. Kramer for closing remarks. Gary Kramer: I just want to thank everybody for dialing in and thank all of our BBSI employees for another great quarter. Thank you, everybody. Operator: And thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to the Biote First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Szymon Serowiecki, Investor Relations. Please go ahead. Szymon Serowiecki: Thank you for joining us today. This afternoon, Biote published financial results for the first quarter ended March 31, 2026. This news release is available in the Investor Relations section of the company's website. Hosting today's call are Bret Christensen, Chief Executive Officer; and Bob Peterson, Chief Financial Officer. Before we get started, I'd like to remind everyone that management will make statements during this call that include forward-looking statements regarding, among other things, the company's financial results, future performance growth opportunities, business outlook, strategic plans and anticipated benefits, goals, future and development, manufacturing and commercialization activities, competitive position, regulatory operations, benefits of its solutions, anticipated impact of macroeconomic Biote's business, results of operations, financial conditions and other matters that do not relate to historical facts. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties, some of which are beyond the company's control. Actual results could differ materially from expectations reflected in any forward-looking statements. These statements are subject to risks, uncertainties and assumptions that are based on management's current expectations as of today. Biote undertakes no obligation to update them in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. Discussion of risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and the Investor Relations section of our website as well as risks and other important factors discussed in the earnings release. Management will also refer to adjusted EBITDA and EBITDA margin are non-GAAP financial measures to provide additional information to investors. Reconciliation of the non-GAAP to GAAP measures is provided in the earnings release with the primary differences being stock-based compensation, fair value adjustment to liabilities and other non-operating expenses. Please refer to our first quarter 2026 earnings release for reconciliation of these non-GAAP measures to the closest comparable GAAP measures. I'll now turn the call over to Bret Christensen. Bret Christensen: Thank you, Szymon, and thank you all for joining us. After my remarks, Bob will review our first quarter financial results. We'll then open the call for your questions. Over the past 12 months, we have made important progress to advance our strategic priorities. We have strengthened our commercial organization, expanded our sales team and enhanced our capabilities to better support practitioners and their patients. We have also sharpened our focus on maximizing value from our existing top-tier clinics, which remain important contributors to our long-term financial performance. Through these strategic and operational initiatives, we built a solid foundation that we believe supports sustainable long-term profitable growth. As previously communicated, in January, Biote voluntarily withdrew certain bio-identical hormone pellet inventory from the market. We initiated this recall out of an abundance of caution. This temporary supply disruption created a headwind to our first quarter performance, resulting in an estimated $1.7 million revenue impact and approximately $1.5 million of incremental costs incurred due to the voluntary recall. We are addressing the supply challenge as efficiently as possible. To mitigate the impact on our practitioners and their patients, we are increasing inventory levels to ensure continuity of care throughout our network. The recall affected our first quarter results and was a significant distraction to our sales force and their growth objectives as they were forced to service accounts versus focusing on growth. While the impacts are expected to continue into the second quarter, we believe this is a temporary issue, and it does not affect our long-term strategy or alter the overall demand environment. We continue to see a sizable market opportunity across hormone therapy and therapeutic wellness, and we remain focused on building sustainable revenue growth. In our last call, I noted that one of our top priorities in 2026 was to expand our sales personnel from over 90 at the end of 2025 to approximately 120 this year. I'm pleased to report that we are substantially complete with this effort with over 25 new sales personnel hired in the first quarter. We've expanded and strengthened our commercial capabilities and are ready for the future. Despite the distraction caused by the voluntary recall, our commercial team is already beginning to deliver a higher level of service to existing accounts while utilizing our increased sales capacity to grow and scale our practitioner network. In the first quarter, we trained more than 200 new practitioners, representing a 16.5% increase from the first quarter of 2025. For our top clinics, we have introduced a series of measures aimed at improving retention and supporting stronger lifetime revenue outcomes. We are enhancing our commercial framework to reinforce the value proposition Biote can offer to our leading practitioners. New practitioner training sessions remain at near full capacity, underscoring continued practitioner interest in our bio-identical hormone optimization and healthy aging solution offerings. Because the number of newly trained practitioners is a leading indicator of future procedures and dietary supplement sales, this high level of engagement further strengthens our belief that we are on the right path to restore revenue growth. As a reminder, once a practitioner is fully trained, it typically takes about six months for that new practitioner to begin to contribute meaningfully to our financial performance. As we continue to invest in our commercial team, one of our key objectives is to elevate the quality of our sales pipeline. Over the past several months, we have seen clear evidence of progress with higher-value OB/GYN and general practitioners representing a growing share of our pipeline. This reflects a more disciplined qualification process as well as our focus on recruiting practitioners with greater long-term revenue contribution potential. We believe our efforts to enhance our sales pipeline should translate into more predictable performance as we increasingly support practitioners whose clinical specialties more closely aligned with our suite of product offerings. In summary, while our first quarter performance fell short of our expectations due to the voluntary product recall, we continued to move forward on key initiatives that support our long-term strategy. I'm confident that our strategic investments and actions are expected to strengthen our capabilities and lay the groundwork for what we anticipate will be a return to growth in the second half of the year. I'll now turn the call over to Bob to review the first quarter results. Robert Peterson: Thank you, Bret, and good afternoon, everyone. Unless otherwise noted, all quarterly financial comparisons in my prepared remarks are made against the first quarter of 2025. Revenue decreased 8.3% to $44.9 million, with procedure revenue declining 13.2% to $31.3 million, which included a $1.7 million impact related to the voluntary recall of certain hormone pellets shipped by Asteria Health. Procedure revenue was primarily impacted by the following factors, one, lower procedure volume in existing clinics, which includes the impact of hormone pellet supply constraints related to the recall; and two, slower productivity from new clinics as our sales reps focused on supporting recall impacted clinics. Dietary supplement revenue grew 19.1% to $11.0 million. The increase was primarily driven by the continued growth of our e-commerce channel. Overall, we continue to forecast our dietary supplement revenue will grow at mid- to high single-digit rate for the 2026 year. Gross profit margin was 68.9% compared to 74.3%. The decrease was primarily due to $1.1 million of incremental cost related to the recall. In the first quarter, Asteria Health produced approximately 30% of our shipped pellets as compared to over 50% in the fourth quarter of 2025. As Bret noted, we anticipate fully restoring Asteria Health supply continuity by the end of the second quarter. As a result, we expect our second quarter product mix will continue to include an elevated level of third-party supply, which will impact second quarter gross margin. Our goal remains to meet customer needs through the vertical integration of Asteria Health. Selling, general and administrative expenses increased 4.1% to $27.8 million. The increase reflected higher legal expense and $0.4 million of SG&A costs associated with the product recall. Net income was $2.7 million and diluted earnings per share attributed to Biote Corp. shareholders was $0.06. This compares to net income of $15.8 million and diluted earnings per share attributed to Biote Corp. stockholders of $0.37. Net income for the first quarter of 2026 included a gain of $2.1 million due to changes in the fair value of the earn-out liabilities. By comparison, net income for the first quarter of 2025 included a gain of $10.7 million due to changes in the fair value of the earn-out liabilities. Adjusted EBITDA decreased to $8.7 million with an adjusted EBITDA margin of 19.4% due to lower sales, reduced gross profit and higher operating expenses. Cash flow from operations in the first quarter was $3.9 million. As of March 31, 2026, cash and cash equivalents were $5.3 million as Biote fully repaid the remaining amount due under its share repurchase liabilities in January 2026. Now turning to our financial outlook for 2026. We maintain our guidance, forecasting 2026 revenue above $190 million and 2026 adjusted EBITDA of greater than $38 million. With respect to our 2026 revenue outlook, procedure revenue is expected to return to growth in the second half of 2026, unchanged from our prior guidance. Based on current trends, we now expect first half procedure revenue growth to be moderately lower than previously forecast due to the temporary impact of the voluntary product recall and related supply constraints. Dietary supplement revenue is expected to grow at a mid- to high single-digit rate from 2025. I'll now turn the call back to Bret for his closing comments. Bret Christensen: Thanks, Bob. While we continue to address temporary impacts from the recall, we remain focused on the priorities that will strengthen our business for the long term. Our continued investments in commercial talent, technology and practitioner support are creating a stronger platform for future execution. With this foundation in place, I believe Biote is well positioned to better serve our practitioners, improve our financial performance and create value for our shareholders. Operator, let's now open the call for questions. Operator: [Operator Instructions] The first question today comes from Les Sulewski with Truist Securities. Jeevan Larson: This is Jeevan on for Les. How did the clinic attrition trend in the first quarter as the recent hires ramp up? And are you seeing some stabilization here if you normalize for the voluntary recall? Bret Christensen: Jeevan, this is Bret. Thanks for the question. Attrition for us has stabilized and been stable now for several quarters. It's still a little bit higher than we'd like to see it. And with the disruption that we had in Q1 due to supply constraints from the recall, it's hard to draw any conclusions of really any improvement there yet. We did see, however, some positive signs in daily volumes prior to the recall, which is where we get the $1.7 million impact of the recall, which we quoted in the earlier comments. So, there was some things to be encouraged by and supply constraints really sort of put a damper on that. And then as far as the sales force, the sales force expansion, that expansion is new in Q1 going to 120 reps. They were fairly distracted in Q1 with supply constraints, but we have every belief that they're going to start growing the business now as we are just weeks away from completely normalizing inventory levels and getting that team back to growth. So, we should see the impact of that team starting in Q2. Operator: The next question comes from Jeff Van Sinderen with B. Riley Securities. Jeff Van Sinderen: Just wanted to understand a little bit more about the supply constraints. I guess I'm confused by the recall still having an impact in Q2 and why we would still have supply constraints at this point. I would think that Asteria would recover a little more quickly. Maybe you can just talk a little bit about that. Bret Christensen: Yes, Jeff, I'll start with that, and then Bob can add some color to everything that's going on here. So, if you remember, we announced the recall at the end of January and then began notifying our customers that was done out of an abundance of caution for product that was compounded and manufactured prior to October of 2025. That was just a lot of product that needed to come back and be replaced by Asteria and by some of our third-party customers who are helping with the fulfillment of that product. It just put a lot of strain on Asteria. We've done a tremendous amount to scale production at Asteria, including adding a second shift and asking that team to work very hard to catch up on supply, but it's been an ongoing struggle. The disruption really comes from two things, having to allocate inventory to our customers, meaning to give them probably less than what they ordered in some cases, that meant rescheduling of patients and just some uncertainty in the field as to what they can do for scheduling patients and making sure they have enough product to perform those procedures. The distraction in the field was we asked them to manage that message and in some cases, manage those orders to help us prioritize who should get inventory and when. All of that aid to our safety stock at Asteria, and we're in the process of building that back up now. But it's been a process that's been longer than we'd like it to be, and we've had to ask for help from our third-party pharmacy partners to help fulfill those orders. But again, we are probably just weeks away from a more normalized situation. It's better today than it was in February and March as well. I'll say that. Today, a much better situation than it was in the early days of a recall. Bob, do you have anything to add there? Robert Peterson: Yes. Look, I think the -- Jeff, the biggest thing that I would add would be, look, we're maximizing our production to build safety stock. We intentionally slowed some of the pellets that went out from Asteria so that Asteria could potentially build inventory. And as Bret said, one of the biggest steps that we took to potentially build inventory even quicker is the establishment of a second production shift. So this will enable us to maximize our production and really prepare for the future growth in the future, but at the same time, increase our stock levels. So I think those are probably the two biggest pieces. We intend and will return to expanding four vertical penetration in the remainder of the year once we see a line of sight into that, as Bret said, in the next several weeks once we see that safety stock at a solid level. Jeff Van Sinderen: Okay. And so I'm just kind of, I guess, thinking this through out loud, but you had a shortfall in Q1. You sort of guided down for Q2 in your language as I took it, but you kept the year guidance unchanged. So I guess I'm wondering what gives you confidence that the second half will be even better than what was previously implied in guidance? Bret Christensen: Yes, Jeff. Thanks for the question. So like I said in my comments earlier, we just believe this is a temporary headwind to demand because we had these inventory constraints. What makes us optimistic and confident in the guide that we're still going to return to growth in the second half of this year are a couple of things. We saw some positive signs, as I said, going into the recall in daily volumes. That's where -- that's how we extrapolated this impact of $1.7 million in revenue on the top line. We believe that's temporary. There's also some -- surely some pent-up demand from these supply shortages that we'll recapture in the coming weeks and months. And then this team of 120 territory reps that's new really didn't even have a chance to contribute to some of those positive signs that we saw going into the recall. So we're optimistic that, that team is going to do just what we hired them to do. We just go out and grow the business once they're not distracted from these inventory issues. If you remember, too, I'll say one more thing, we've had full training classes now for going on six months. That's the earliest indication of supply -- I'm sorry, of production in the field returning to growth. So we're optimistic that those 200-plus practitioners that we trained in Q1 are going to start adding meaningfully to growth after they've been onboarded here in the next six months. So there's a lot to be optimistic about once we get through these supply issues. It's why we still are confident in a second half return to growth. Jeff Van Sinderen: Okay. That's helpful. And then just thinking about some of the doctors who couldn't get the supply that they needed. They were on allocation. In the moment during Q1 and maybe a little bit in Q2, was there anything preventing them from maybe sourcing the pellets elsewhere? Bret Christensen: Well, not really, Jeff, but I'll say this, that the entire industry has been stretched for pellet production. And the best partners out there are partners of ours. And so we very quickly reached out to them, ask for their help in supplying product to our customers, which is why you saw the Asteria mix go down in Q1. That's a temporary drag on gross margin. But those are the most readily available pellets out there. We frankly have strained some of our third-party suppliers because of the demand that we've given them. So there's not a ton of places that physicians can go. It's a very difficult thing to do. If you remember, 80-plus percent of our patients are women since we're so strong in the OB/GYN space. And the hardest pellets to produce are the estrogen estradiol pellets. They're very manual and can't be produced at scale in the way testosterone pellets can. And so that, for the most part, was the drag on supply and the challenge, but that challenge is shared by a lot of the pharmacies out there. So, we're in a good spot today, thanks to the help of our third-party pharmacies and the quick work by Asteria to scale production as a second shift, and we think we're in good shape going forward. Operator: [Operator Instructions] The next question comes from George Kelly with ROTH Capital Partners. George Kelly: First one is just back to the recall. I was curious if you saw much clinic attrition as a result. Bret Christensen: George, this is Bret. Thanks for the question. Not really. So, at this point, it would be anecdotal anyway, but we did -- we haven't seen too much clinic attrition. We clearly saw a reduction in volumes of procedures in the field. And so, it remains to be seen if there was any patient attrition, meaning the patient switch modalities, things like that. We think there's pent-up demand that we'll capture in the coming weeks and months. But not meaningfully. We didn't see any uptick in attrition that we could not. George Kelly: Okay. And then with your current status and your sort of inventory build that your catch-up that you're doing right now, where are you in that process? You mentioned that you feel like you're in a good spot now as there's still a lot of sort of catch-up that needs to happen? And part two of the question is, what have you seen in April? Can you comment on -- the press release commented that there's continued pressure. So, any kind of detail you can give about procedure volume in April would be helpful. Bret Christensen: Yes. Thanks, George. So, we said it would persist into Q2, which where we're at today. But at the same time, we're saying we're weeks away from probably a fully normal situation. So that is tremendous progress. And we intentionally are kind of taking an easy on Asteria to allow them to build through safety stock because we do want to eventually get to another two months or so of safety stock on top of everything they are currently supplying to our customers. So, we're going to continue to use our third-party partners as much as we can to allow that to happen. And we use them going forward as well. They've just been fantastic in this whole process. So, we had the management team into the corporate office today. And like I can tell you, just anecdotally, if it's not going well, we hear it. And the consensus was things are much, much better today than they were weeks and months ago. So I think that the team is feeling it. Our customers are certainly feeling it. We're not completely out of the woods only because we're still allocating inventory, meaning we're holding some of our customers to two or three weeks of inventory when they're used to having two-plus months sometimes. That just gives them the confidence to schedule a lot of cases in the future. So that's the only thing I would say is there's inventory in the field. It's not to the level that some of our customers would like to see it to feel confident, but we'll get there shortly. Robert Peterson: And George, to your first part of the question about Asteria, I would just tell you that it does take some time in a regulated environment to make sure that we can get a second shift up and running. So those steps started about one month, 1.5 months ago. I can tell you, as far as where we are in the second shift, we just recently started that second shift. And as you can imagine, the shop at Asteria is working even before the second shift around the clock to maximize production. But the second shift now would eliminate a lot of the constraints, if you will, that exist with vialing and packaging some of these smaller items. So I would tell you, in the next -- Bret mentioned in a couple of weeks -- in the next couple of weeks, we should be in a solid position. I believe that, that would be the case primarily because of the advent of the second shift. And probably in a month's time -- in a month, maybe a little bit longer, we should be ahead of our safety stock levels so that we can start looking forward to regaining traction from a vertical integration perspective at Asteria, so we can really start ramping back up to where we once were. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Bret Christensen for any closing remarks. Bret Christensen: I want to thank everyone for joining us today. We appreciate your interest in Biote and look forward to speaking with you on our next conference call. Thanks, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Biote First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Szymon Serowiecki, Investor Relations. Please go ahead. Szymon Serowiecki: Thank you for joining us today. This afternoon, Biote published financial results for the first quarter ended March 31, 2026. This news release is available in the Investor Relations section of the company's website. Hosting today's call are Bret Christensen, Chief Executive Officer; and Bob Peterson, Chief Financial Officer. Before we get started, I'd like to remind everyone that management will make statements during this call that include forward-looking statements regarding, among other things, the company's financial results, future performance growth opportunities, business outlook, strategic plans and anticipated benefits, goals, future and development, manufacturing and commercialization activities, competitive position, regulatory operations, benefits of its solutions, anticipated impact of macroeconomic Biote's business, results of operations, financial conditions and other matters that do not relate to historical facts. These statements are not guarantees of future performance. They are subject to a variety of risks and uncertainties, some of which are beyond the company's control. Actual results could differ materially from expectations reflected in any forward-looking statements. These statements are subject to risks, uncertainties and assumptions that are based on management's current expectations as of today. Biote undertakes no obligation to update them in the future. Therefore, these statements should not be relied upon as representing the company's views as of any subsequent date. Discussion of risks and other important factors that could affect our actual results, please refer to our SEC filings available on the SEC's website and the Investor Relations section of our website as well as risks and other important factors discussed in the earnings release. Management will also refer to adjusted EBITDA and EBITDA margin are non-GAAP financial measures to provide additional information to investors. Reconciliation of the non-GAAP to GAAP measures is provided in the earnings release with the primary differences being stock-based compensation, fair value adjustment to liabilities and other non-operating expenses. Please refer to our first quarter 2026 earnings release for reconciliation of these non-GAAP measures to the closest comparable GAAP measures. I'll now turn the call over to Bret Christensen. Bret Christensen: Thank you, Szymon, and thank you all for joining us. After my remarks, Bob will review our first quarter financial results. We'll then open the call for your questions. Over the past 12 months, we have made important progress to advance our strategic priorities. We have strengthened our commercial organization, expanded our sales team and enhanced our capabilities to better support practitioners and their patients. We have also sharpened our focus on maximizing value from our existing top-tier clinics, which remain important contributors to our long-term financial performance. Through these strategic and operational initiatives, we built a solid foundation that we believe supports sustainable long-term profitable growth. As previously communicated, in January, Biote voluntarily withdrew certain bio-identical hormone pellet inventory from the market. We initiated this recall out of an abundance of caution. This temporary supply disruption created a headwind to our first quarter performance, resulting in an estimated $1.7 million revenue impact and approximately $1.5 million of incremental costs incurred due to the voluntary recall. We are addressing the supply challenge as efficiently as possible. To mitigate the impact on our practitioners and their patients, we are increasing inventory levels to ensure continuity of care throughout our network. The recall affected our first quarter results and was a significant distraction to our sales force and their growth objectives as they were forced to service accounts versus focusing on growth. While the impacts are expected to continue into the second quarter, we believe this is a temporary issue, and it does not affect our long-term strategy or alter the overall demand environment. We continue to see a sizable market opportunity across hormone therapy and therapeutic wellness, and we remain focused on building sustainable revenue growth. In our last call, I noted that one of our top priorities in 2026 was to expand our sales personnel from over 90 at the end of 2025 to approximately 120 this year. I'm pleased to report that we are substantially complete with this effort with over 25 new sales personnel hired in the first quarter. We've expanded and strengthened our commercial capabilities and are ready for the future. Despite the distraction caused by the voluntary recall, our commercial team is already beginning to deliver a higher level of service to existing accounts while utilizing our increased sales capacity to grow and scale our practitioner network. In the first quarter, we trained more than 200 new practitioners, representing a 16.5% increase from the first quarter of 2025. For our top clinics, we have introduced a series of measures aimed at improving retention and supporting stronger lifetime revenue outcomes. We are enhancing our commercial framework to reinforce the value proposition Biote can offer to our leading practitioners. New practitioner training sessions remain at near full capacity, underscoring continued practitioner interest in our bio-identical hormone optimization and healthy aging solution offerings. Because the number of newly trained practitioners is a leading indicator of future procedures and dietary supplement sales, this high level of engagement further strengthens our belief that we are on the right path to restore revenue growth. As a reminder, once a practitioner is fully trained, it typically takes about six months for that new practitioner to begin to contribute meaningfully to our financial performance. As we continue to invest in our commercial team, one of our key objectives is to elevate the quality of our sales pipeline. Over the past several months, we have seen clear evidence of progress with higher-value OB/GYN and general practitioners representing a growing share of our pipeline. This reflects a more disciplined qualification process as well as our focus on recruiting practitioners with greater long-term revenue contribution potential. We believe our efforts to enhance our sales pipeline should translate into more predictable performance as we increasingly support practitioners whose clinical specialties more closely aligned with our suite of product offerings. In summary, while our first quarter performance fell short of our expectations due to the voluntary product recall, we continued to move forward on key initiatives that support our long-term strategy. I'm confident that our strategic investments and actions are expected to strengthen our capabilities and lay the groundwork for what we anticipate will be a return to growth in the second half of the year. I'll now turn the call over to Bob to review the first quarter results. Robert Peterson: Thank you, Bret, and good afternoon, everyone. Unless otherwise noted, all quarterly financial comparisons in my prepared remarks are made against the first quarter of 2025. Revenue decreased 8.3% to $44.9 million, with procedure revenue declining 13.2% to $31.3 million, which included a $1.7 million impact related to the voluntary recall of certain hormone pellets shipped by Asteria Health. Procedure revenue was primarily impacted by the following factors, one, lower procedure volume in existing clinics, which includes the impact of hormone pellet supply constraints related to the recall; and two, slower productivity from new clinics as our sales reps focused on supporting recall impacted clinics. Dietary supplement revenue grew 19.1% to $11.0 million. The increase was primarily driven by the continued growth of our e-commerce channel. Overall, we continue to forecast our dietary supplement revenue will grow at mid- to high single-digit rate for the 2026 year. Gross profit margin was 68.9% compared to 74.3%. The decrease was primarily due to $1.1 million of incremental cost related to the recall. In the first quarter, Asteria Health produced approximately 30% of our shipped pellets as compared to over 50% in the fourth quarter of 2025. As Bret noted, we anticipate fully restoring Asteria Health supply continuity by the end of the second quarter. As a result, we expect our second quarter product mix will continue to include an elevated level of third-party supply, which will impact second quarter gross margin. Our goal remains to meet customer needs through the vertical integration of Asteria Health. Selling, general and administrative expenses increased 4.1% to $27.8 million. The increase reflected higher legal expense and $0.4 million of SG&A costs associated with the product recall. Net income was $2.7 million and diluted earnings per share attributed to Biote Corp. shareholders was $0.06. This compares to net income of $15.8 million and diluted earnings per share attributed to Biote Corp. stockholders of $0.37. Net income for the first quarter of 2026 included a gain of $2.1 million due to changes in the fair value of the earn-out liabilities. By comparison, net income for the first quarter of 2025 included a gain of $10.7 million due to changes in the fair value of the earn-out liabilities. Adjusted EBITDA decreased to $8.7 million with an adjusted EBITDA margin of 19.4% due to lower sales, reduced gross profit and higher operating expenses. Cash flow from operations in the first quarter was $3.9 million. As of March 31, 2026, cash and cash equivalents were $5.3 million as Biote fully repaid the remaining amount due under its share repurchase liabilities in January 2026. Now turning to our financial outlook for 2026. We maintain our guidance, forecasting 2026 revenue above $190 million and 2026 adjusted EBITDA of greater than $38 million. With respect to our 2026 revenue outlook, procedure revenue is expected to return to growth in the second half of 2026, unchanged from our prior guidance. Based on current trends, we now expect first half procedure revenue growth to be moderately lower than previously forecast due to the temporary impact of the voluntary product recall and related supply constraints. Dietary supplement revenue is expected to grow at a mid- to high single-digit rate from 2025. I'll now turn the call back to Bret for his closing comments. Bret Christensen: Thanks, Bob. While we continue to address temporary impacts from the recall, we remain focused on the priorities that will strengthen our business for the long term. Our continued investments in commercial talent, technology and practitioner support are creating a stronger platform for future execution. With this foundation in place, I believe Biote is well positioned to better serve our practitioners, improve our financial performance and create value for our shareholders. Operator, let's now open the call for questions. Operator: [Operator Instructions] The first question today comes from Les Sulewski with Truist Securities. Jeevan Larson: This is Jeevan on for Les. How did the clinic attrition trend in the first quarter as the recent hires ramp up? And are you seeing some stabilization here if you normalize for the voluntary recall? Bret Christensen: Jeevan, this is Bret. Thanks for the question. Attrition for us has stabilized and been stable now for several quarters. It's still a little bit higher than we'd like to see it. And with the disruption that we had in Q1 due to supply constraints from the recall, it's hard to draw any conclusions of really any improvement there yet. We did see, however, some positive signs in daily volumes prior to the recall, which is where we get the $1.7 million impact of the recall, which we quoted in the earlier comments. So, there was some things to be encouraged by and supply constraints really sort of put a damper on that. And then as far as the sales force, the sales force expansion, that expansion is new in Q1 going to 120 reps. They were fairly distracted in Q1 with supply constraints, but we have every belief that they're going to start growing the business now as we are just weeks away from completely normalizing inventory levels and getting that team back to growth. So, we should see the impact of that team starting in Q2. Operator: The next question comes from Jeff Van Sinderen with B. Riley Securities. Jeff Van Sinderen: Just wanted to understand a little bit more about the supply constraints. I guess I'm confused by the recall still having an impact in Q2 and why we would still have supply constraints at this point. I would think that Asteria would recover a little more quickly. Maybe you can just talk a little bit about that. Bret Christensen: Yes, Jeff, I'll start with that, and then Bob can add some color to everything that's going on here. So, if you remember, we announced the recall at the end of January and then began notifying our customers that was done out of an abundance of caution for product that was compounded and manufactured prior to October of 2025. That was just a lot of product that needed to come back and be replaced by Asteria and by some of our third-party customers who are helping with the fulfillment of that product. It just put a lot of strain on Asteria. We've done a tremendous amount to scale production at Asteria, including adding a second shift and asking that team to work very hard to catch up on supply, but it's been an ongoing struggle. The disruption really comes from two things, having to allocate inventory to our customers, meaning to give them probably less than what they ordered in some cases, that meant rescheduling of patients and just some uncertainty in the field as to what they can do for scheduling patients and making sure they have enough product to perform those procedures. The distraction in the field was we asked them to manage that message and in some cases, manage those orders to help us prioritize who should get inventory and when. All of that aid to our safety stock at Asteria, and we're in the process of building that back up now. But it's been a process that's been longer than we'd like it to be, and we've had to ask for help from our third-party pharmacy partners to help fulfill those orders. But again, we are probably just weeks away from a more normalized situation. It's better today than it was in February and March as well. I'll say that. Today, a much better situation than it was in the early days of a recall. Bob, do you have anything to add there? Robert Peterson: Yes. Look, I think the -- Jeff, the biggest thing that I would add would be, look, we're maximizing our production to build safety stock. We intentionally slowed some of the pellets that went out from Asteria so that Asteria could potentially build inventory. And as Bret said, one of the biggest steps that we took to potentially build inventory even quicker is the establishment of a second production shift. So this will enable us to maximize our production and really prepare for the future growth in the future, but at the same time, increase our stock levels. So I think those are probably the two biggest pieces. We intend and will return to expanding four vertical penetration in the remainder of the year once we see a line of sight into that, as Bret said, in the next several weeks once we see that safety stock at a solid level. Jeff Van Sinderen: Okay. And so I'm just kind of, I guess, thinking this through out loud, but you had a shortfall in Q1. You sort of guided down for Q2 in your language as I took it, but you kept the year guidance unchanged. So I guess I'm wondering what gives you confidence that the second half will be even better than what was previously implied in guidance? Bret Christensen: Yes, Jeff. Thanks for the question. So like I said in my comments earlier, we just believe this is a temporary headwind to demand because we had these inventory constraints. What makes us optimistic and confident in the guide that we're still going to return to growth in the second half of this year are a couple of things. We saw some positive signs, as I said, going into the recall in daily volumes. That's where -- that's how we extrapolated this impact of $1.7 million in revenue on the top line. We believe that's temporary. There's also some -- surely some pent-up demand from these supply shortages that we'll recapture in the coming weeks and months. And then this team of 120 territory reps that's new really didn't even have a chance to contribute to some of those positive signs that we saw going into the recall. So we're optimistic that, that team is going to do just what we hired them to do. We just go out and grow the business once they're not distracted from these inventory issues. If you remember, too, I'll say one more thing, we've had full training classes now for going on six months. That's the earliest indication of supply -- I'm sorry, of production in the field returning to growth. So we're optimistic that those 200-plus practitioners that we trained in Q1 are going to start adding meaningfully to growth after they've been onboarded here in the next six months. So there's a lot to be optimistic about once we get through these supply issues. It's why we still are confident in a second half return to growth. Jeff Van Sinderen: Okay. That's helpful. And then just thinking about some of the doctors who couldn't get the supply that they needed. They were on allocation. In the moment during Q1 and maybe a little bit in Q2, was there anything preventing them from maybe sourcing the pellets elsewhere? Bret Christensen: Well, not really, Jeff, but I'll say this, that the entire industry has been stretched for pellet production. And the best partners out there are partners of ours. And so we very quickly reached out to them, ask for their help in supplying product to our customers, which is why you saw the Asteria mix go down in Q1. That's a temporary drag on gross margin. But those are the most readily available pellets out there. We frankly have strained some of our third-party suppliers because of the demand that we've given them. So there's not a ton of places that physicians can go. It's a very difficult thing to do. If you remember, 80-plus percent of our patients are women since we're so strong in the OB/GYN space. And the hardest pellets to produce are the estrogen estradiol pellets. They're very manual and can't be produced at scale in the way testosterone pellets can. And so that, for the most part, was the drag on supply and the challenge, but that challenge is shared by a lot of the pharmacies out there. So, we're in a good spot today, thanks to the help of our third-party pharmacies and the quick work by Asteria to scale production as a second shift, and we think we're in good shape going forward. Operator: [Operator Instructions] The next question comes from George Kelly with ROTH Capital Partners. George Kelly: First one is just back to the recall. I was curious if you saw much clinic attrition as a result. Bret Christensen: George, this is Bret. Thanks for the question. Not really. So, at this point, it would be anecdotal anyway, but we did -- we haven't seen too much clinic attrition. We clearly saw a reduction in volumes of procedures in the field. And so, it remains to be seen if there was any patient attrition, meaning the patient switch modalities, things like that. We think there's pent-up demand that we'll capture in the coming weeks and months. But not meaningfully. We didn't see any uptick in attrition that we could not. George Kelly: Okay. And then with your current status and your sort of inventory build that your catch-up that you're doing right now, where are you in that process? You mentioned that you feel like you're in a good spot now as there's still a lot of sort of catch-up that needs to happen? And part two of the question is, what have you seen in April? Can you comment on -- the press release commented that there's continued pressure. So, any kind of detail you can give about procedure volume in April would be helpful. Bret Christensen: Yes. Thanks, George. So, we said it would persist into Q2, which where we're at today. But at the same time, we're saying we're weeks away from probably a fully normal situation. So that is tremendous progress. And we intentionally are kind of taking an easy on Asteria to allow them to build through safety stock because we do want to eventually get to another two months or so of safety stock on top of everything they are currently supplying to our customers. So, we're going to continue to use our third-party partners as much as we can to allow that to happen. And we use them going forward as well. They've just been fantastic in this whole process. So, we had the management team into the corporate office today. And like I can tell you, just anecdotally, if it's not going well, we hear it. And the consensus was things are much, much better today than they were weeks and months ago. So I think that the team is feeling it. Our customers are certainly feeling it. We're not completely out of the woods only because we're still allocating inventory, meaning we're holding some of our customers to two or three weeks of inventory when they're used to having two-plus months sometimes. That just gives them the confidence to schedule a lot of cases in the future. So that's the only thing I would say is there's inventory in the field. It's not to the level that some of our customers would like to see it to feel confident, but we'll get there shortly. Robert Peterson: And George, to your first part of the question about Asteria, I would just tell you that it does take some time in a regulated environment to make sure that we can get a second shift up and running. So those steps started about one month, 1.5 months ago. I can tell you, as far as where we are in the second shift, we just recently started that second shift. And as you can imagine, the shop at Asteria is working even before the second shift around the clock to maximize production. But the second shift now would eliminate a lot of the constraints, if you will, that exist with vialing and packaging some of these smaller items. So I would tell you, in the next -- Bret mentioned in a couple of weeks -- in the next couple of weeks, we should be in a solid position. I believe that, that would be the case primarily because of the advent of the second shift. And probably in a month's time -- in a month, maybe a little bit longer, we should be ahead of our safety stock levels so that we can start looking forward to regaining traction from a vertical integration perspective at Asteria, so we can really start ramping back up to where we once were. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Bret Christensen for any closing remarks. Bret Christensen: I want to thank everyone for joining us today. We appreciate your interest in Biote and look forward to speaking with you on our next conference call. Thanks, everyone. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Velocity Financial First Quarter of 2026 Results Conference Call. Please note that today's event is being recorded. [Operator Instructions] I would now like to turn the call over to the Treasurer, Chris Oltmann. Please go ahead. Christopher Oltmann: Thanks, Joe. Hello, everyone, and thank you for joining us today for the discussion of Velocity's first quarter 2026 results. Joining me today are Chris Farrar, Velocity's President and Chief Executive Officer; and Mark Szczepaniak, Velocity's Chief Financial Officer. Earlier this afternoon, we released a press release with our first quarter results, and you can find the press release and accompanying presentation that we will refer to during this call on our Investor Relations website at www.velfinance.com. I'd like to remind everybody that today's call may include forward-looking statements, which are uncertain and outside of the company's control, and actual results may differ materially. For a discussion of some of the risks and other factors that could affect results, please see the risk factors and other cautionary statements made in our communications with shareholders, including the risk factors disclosed in our filings with the Securities and Exchange Commission. Please also note that the content of this conference call contains time-sensitive information that is accurate only as of today, and we do not undertake any duty to update forward-looking statements. We may also refer to certain non-GAAP measures on this call. For reconciliations of these non-GAAP measures, you should refer to the earnings materials on our Investor Relations website. And finally, today's call is being recorded and will be available on the company's website later today. And with that, I will now turn the call over to Chris Farrar. Christopher Farrar: Thank you, Chris, and good evening, everyone. We appreciate you taking the time to join us today. First off, I want to apologize to everyone on our last call. We had technical difficulties, and we've been assured that by our vendor that won't happen again. So hopefully, things go well here for us. I'll start off with a few words on the environment then walk through our Q1 performance. Mark will take you and through the rest of the financials in detail before we open up for questions. The first quarter of 2026 was obviously volatile from a macro perspective, but quite steady in our corner of the world. Our end real estate markets are functioning well, our pipeline is growing and our fixed income markets are well bid. In our view, making low LTV loans secured by real estate is a smart way to generate healthy risk-adjusted returns and our Q1 results speak to the durability of what we've built at Velocity. In the first quarter, we delivered results that were in line with our expectations and importantly, consistent with the trajectory we laid out at the start of the year. Portfolio growth was measured and deliberate, NPL recoveries remained strong, and we continue to generate reliable net interest income from a well-seasoned book. Our story is about consistently compounding our capital. And in this environment, I believe consistency is exactly what our investors, our borrowers and our originator partners need to see from us. Credit is always a top priority, and this quarter reinforced that discipline. Our nonperforming loan resolutions were very consistent with positive gains and significant interest income recognition. Our dedicated special servicing team continues to resolve assets efficiently while maximizing recovery rates. I said before that we optimize for asset valuation and that disciplined approach to valuation has served us well through several cycles now. And Q1 was no exception as evidenced by the weighted average LTV on new loan originations of 64.9%. On the origination side, we were intentional. We did not chase volume for its own sake. We originated loans that met our return threshold in markets where we have depth of knowledge through originator relationships we trust. The result was a portfolio that grew nicely quarter-over-quarter with yields that remain attractive relative to our cost of funds. The most significant activity in the quarter was our first ever issuance of $500 million of unsecured corporate debt rated by Moody's and Fitch. The investor demand was broad and the deal was oversubscribed and comprised of high-quality, sophisticated investors that we are proud to call partners. This capital positions us well for future growth and strengthens our financial flexibility as we dramatically reduced our reliance on shorter term warehouse debt. As we look to the rest of 2026, we feel well positioned. Our balance sheet is clean, our funding is stable and we see a pipeline of origination opportunity that should translate into meaningful volume growth in the second half of the year. We remain confident in our ability to deliver on the objectives that we set at the beginning of the year. With that, I'll turn to the earnings presentation materials, starting on Page 3. As I mentioned in my remarks, a pretty stable, straightforward quarter, very simple. Core net income, up 30% over the prior year's quarter. NIM was very healthy and on target at just over 3.5%. Mentioned that the portfolio grew nicely, up 25% year-over-year. Continue to see positive gains on the NPL resolutions, again 102.3% and expanded our disclosures here to show the other recovered revenue on those NPLs of $4.6 million. In financing and capital, as I mentioned, the securitization markets are very healthy, and we've got another deal on the market that will price this week. Those markets are very supportive. In terms of capital and liquidity, we've never been in a stronger position. For us, it's a much larger amount of liquidity coming off that unsecured corporate debt issuance and really gives us, as I mentioned, the strength and the flexibility to navigate whatever market comes our way. So with that, I'll turn it over to Mark. Mark Szczepaniak: Thanks, Chris, and good evening, everyone. As Chris mentioned, the first quarter of '26 can kind of continue the consistent production that we saw during 2025. On Page 4 of the presentation, our Q1 loan production was just a little over $639 million in UPB. That's consistent with just under $635 million for Q4 of '25. In Q1 of '26, there were over 1,600 loans funded. The production during Q1 included the weighted average coupon on new held for investment originations continuing to come in strong at 10.1%, and the weighted average coupon on our held-for-investment originations for the last 5 quarter average trend has been at 10.3%. This growth in originations in Q1 also continued at tight credit levels with the weighted average loan-to-value for the quarter at 62.5% and on a 5-quarter average trend basis at 62.7%, so consistently tight credit levels. So strong Q1 production growth, the healthy WAC and the low LTV demonstrates a consistent trend, as Chris mentioned, of borrower demand for our product even through these recent challenging economic markets. If we go to Page 5. As a result of the strong Q1 production, Page 5 shows the growth in our overall loan portfolio at the end of Q1. The total loan portfolio as of March 31 was $6.8 billion in UPB, and that's a 5.3% increase from Q4 and a 25.6% increase in the portfolio year-over-year compared to Q1 of '25. The weighted average coupon on our loan portfolio as of March 31 was 9.75%, which is almost flat to Q4 '25 and a 16 basis point year-over-year increase compared to Q1 of '25. The total portfolio weighted average loan-to-value decreased to just under 65% as of March 31, and the loan portfolio continues to provide a healthy yield at these tight credit levels. Moving to Page 6. Our first quarter net interest margin was 3.56%. That's consistent with Q4's net interest margin of 3.59%. Kind of looking at the individual components over to the right of our net interest margin, our portfolio yield increased by 12 basis points year-over-year due to continued loan production at those healthy WACs. The higher portfolio yield in Q4 '25 was due to more cash being received during that period on our nonperforming loans. As we said, some of that cash in nonperforming loans kind of comes in lumpy time over time. So it was a little bit elevated in Q4. Our portfolio cost of funds decreased by 14 basis points, both quarter-over-quarter and year-over-year compared to Q1 '26. And that's mainly due to paying down the portfolio warehouse lines in Q1 with proceeds from the unsecured corporate debt issuance that Chris had mentioned. On Page 7, our nonperforming loan rate at the end of Q1 -- it's in the left table -- was 10.1%. That's a 70 basis point year-over-year decrease compared to Q1 of '25. We continue to see strong collection efforts by our special servicing department that have resulted in favorable gain resolutions of our nonperforming assets, which are comprised of both the nonperforming loans as well as the REOs. The table to the right shows our loans held for investment portfolio, including both our amortized cost loans and our fair value loans, and it shows the total year-over-year nonperforming loan valuation allowance we have for our nonperforming loans. As of March 31, '26, the amortized cost loan portfolio had a $4.9 million CECL loss reserve and the fair value loan portfolio had a $52.2 million valuation adjustment loss allowance for a combined valuation loss allowance of 83 basis points on the entire HFI portfolio. Both these valuation adjustments are required under U.S. GAAP. The unrealized loss valuation adjustment on our nonperforming fair value loans represents what could be achieved for those loans transacted between a willing buyer and a willing seller in the secondary market. However, we do not plan on selling these NPL loans since our in-house special servicing department has a history of producing net gains on the resolutions of these nonperforming assets. And again, that 83 basis points of total loss allowance on our entire HFI portfolio, our actual historical trends on losses has been nowhere near that 83 basis points. It's been fractions of that. On Page 8. Page 8 just shows the CECL loan loss reserve activity. The CECL reserve, remember, is only applicable on the amortized cost loan portfolio, which is continuing to pay down as all our new loans are fair value. So it does not include the fair value portfolio. And again, that CECL reserve at the end of the quarter was $4.9 million or 25 basis points of our outstanding amortized cost portfolio. So it's been very consistent. Moving to Page 10 on the real estate owned, it's -- I'm sorry, Page 9, we go to Page 9. Get my pages straight here. Page 9 shows the real estate owned activity. And the left-hand side just shows the percentage of our real estate assets to the total HFI portfolio. And you can see year-over-year, it's been very, very consistent. You're talking about basis point movement from 1.5% to 1.9%. On the right-hand side, it's an expanded disclosure that we have on total gain or loss on REO activity. And what we've done on this page is we've actually broken out the gain or loss activity on new REOs compared to the gain or loss on existing REOs. So the top half of the table shows the gain or loss from recording new REOs in that period, and it segregates that REO activity between being sourced from either the amortized cost or the fair value loan portfolios. As you can see in Q1 of '26, there was a total $6.8 million gain on transfers of nonperforming loans to new REOs in the quarter compared to $4.4 million gain year-over-year in Q1 '25. The second half of that table shows the gain or loss on activities on existing REOs subsequent to the initial recording of the REO in future periods or subsequent periods, reflecting our lower of cost or market accounting. For Q1 of '26, it was a $3.3 million loss on REO activities compared to $1.8 million in Q1. And if you take those 2 sections combined, that presents a holistic picture of our overall REO P&L activity for the period, which for Q1 of '26 was a net gain of $3.5 million compared to a net gain of $2.7 million for Q1 of '25. I think to keep in mind there is the REOs in that bottom half are not the same REOs. The REOs in the top half are new REOs that have come on. The bottom half is the activities of REOs that we've had on the books for a while are now making adjustments to based on requirements of GAAP under lower of cost or market accounting. That kind of gives you the full picture of all the REO activity. On Page 10. Page 10 shows our nonperforming loan resolutions. Chris mentioned, continued very, very strong resolutions of our nonperforming assets. In Q1 of '26, we resolved a little over $70 million in UPB of nonperforming loans and had total resolution dollars recovered, including the past due net contractual interest of $4.6 million or 6.5% over the UPB principal of the loans. And that's compared to $68 million in UPB of loans resolved in Q1 of '25 with $5.2 million in total recovered revenue or 7.6% over. And if you want to know just the gain based on the default interest and prepayment fees, that's still there, and that would be in the column that just says gains. So for the first quarter of '26, the total gains on just on default interest and prepayment would be $1.6 million of that $4.6 million, with the difference being all the collection of that past due accrued interest. Turning to Page 11 on the durable funding and liquidity. Our position at the end of the first quarter, total liquidity as of March 31 was $329 million. That's comprised of $87 million in cash and cash equivalents, and almost another $242 million in available liquidity on unfinanced collateral. The available warehouse line capacity at the end of the quarter was $835.6 million with a maximum line capacity of $935 million. During Q1, as Chris mentioned, we issued our first publicly rated unsecured debt deal, a $500 million deal. We used the proceeds to pay off our 2022 corporate secured note of $215 million. So we paid off the secured note of $215 million that was issued in '22. And then we also paid down a number of our warehouse lines with those proceeds. Also in Q1, we issued the first regular securitization of the year, 2026-1. That had a little over $335 million in securities issued. And we issued another private security 2026-P1 and that had about $178 million in securities issued. And then looking at the bottom table, our recourse debt-to-equity ratio at the end of Q1 remained very low at 1.0x. And our total debt-to-equity ratio, which includes all the nonrecourse securitizations that we do, was at 9.6x as of the end of the quarter. That kind of wraps up my Q1 '26 financial recap. And with that, I'll turn the presentation back over to Chris for an overview of Velocity's outlook on key business drivers this year. Chris? Christopher Farrar: Thanks, Mark. On Page 12, we think the markets are healthy and continue to see strong demand. Credit remains very stable for us and where we expect it to be. In terms of capital, I mentioned that all capital markets are healthy and functioning well. So we're in really good shape there. And from an earnings perspective, we continue to expect a 3.5% NIM and the portfolio to continue to grow this year as we see origination volumes pick up in the latter half of the year. That concludes our prepared remarks, and we can open it up for questions. Operator: [Operator Instructions] And our first question here will come from Chris Muller with Citizens. Christopher Muller: So originations feel like they've been on a pretty steady pace here for, I guess, the last year, 1.5 years or so. Do you guys expect origination volumes in 2026 to continue on a similar path to what we saw last year with a pickup later in the year? Christopher Farrar: Yes. Yes, we do. I think we felt like -- we felt a little bit of a slowdown kind of the end of the year and the beginning of this year. I think that was more seasonal in nature. Maybe it was the market, I'm not sure, but we've already seen kind of new origination volumes starting to pick up a little bit. And we think similar to last year, kind of Q2, Q3, those volumes will accelerate. Christopher Muller: Got it. And then you guys are generating some really impressive ROEs. Do you think that that can hold in the high teens? It seems like a bunch of the inputs are suggesting that it can hold there, at least in the near term. So how are you guys thinking about ROEs going forward? Christopher Farrar: Yes, we expect them to hold in there. As I mentioned, we're very disciplined on margin. The margin is probably the most important thing to us. We treat our capital as precious and we need to make sure we earn those returns. So we don't have to chase volume because we have this in-place portfolio. We're far more focused on maintaining margin, which obviously translates into ROE. So yes is the short answer. Operator: This concludes our question-and-answer session. I'd like to turn the conference back over to Chris Farrar for any closing remarks. Christopher Farrar: Great. Thanks, everyone, who joined us today. We appreciate your continued interest in Velocity. As always, the Investor Relations team is available for follow-up conversations, and we look forward to speaking with many of you over the coming weeks. Have a great evening. Mark Szczepaniak: Thank you, everybody. Have a nice evening. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Q1 2026 Black Hills Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. I would now like to hand the conference over to your speaker today, Salvador Diaz, Director of Investor Relations. Salvador Diaz: Thank you, Operator. Good morning, and welcome to Black Hills Corporation's first quarter 2026 earnings conference call. You can find our earnings release and materials for our call this morning on our website at blackhillscorp.com. Leading our earnings call are Linden R. Evans, president and chief executive officer, Kimberly F. Nooney, senior vice president and chief financial officer, and Marne M. Jones, senior vice president and chief utility officer. During our earnings discussion today, comments we make may contain forward-looking statements as defined by the Securities and Exchange Commission, and there are a number of uncertainties inherent in such comments. Although we believe that our expectations are based on reasonable assumptions, actual results may differ materially. We direct you to our earnings release, Slide 2 of the investor presentation on our website, and our most recent Form 10-Ks and Form 10-Q filed with the Securities and Exchange Commission for a list of some of the factors that could cause future results to differ materially from our expectations. With that, I will now turn the call over to Linden R. Evans. Linden? Linden R. Evans: Thank you, Sal. Good morning, and thank you all for joining us today. I will provide a summary of our Q1 2026 results, our strategic progress, and our progress with our pending merger with Northwestern Energy. Kimberly will provide our financial update and Marne will provide our business update, including key projects, our progress with large load opportunities, and our solid regulatory execution. In April, our industry recognized Line Mechanic Appreciation Month. Let me start by pausing to recognize our remarkable team of men and women, many of whom are tuning in today. You are often the face of our company and industry, which our customers and communities respect, admire, and rely on, ensuring our system is operating reliably and restoring interrupted service as safely and efficiently as possible. When most seek shelter during a weather event, you are the team that heads out into the storm. Thank you for all you do and the sacrifices you make, and often your families make, to keep the lights on and for what you do every day to keep our customers safe. Our first quarter strategic achievements are outlined on Slide 3. Following an excellent year of results for our stakeholders in 2025, I am very proud of our team's continued success carrying our positive momentum into 2026. We continue to deliver safe, reliable, and affordable energy to our customers and communities while executing on our strategic growth opportunities. We are off to a solid start with reaffirming our earnings guidance range and maintaining our solid financial position and credit ratings. We made regulatory progress advancing our Arkansas rate review and requesting our first rate review in more than a decade for South Dakota Electric. We also continued construction of our 99-megawatt Lange II generation project, which is on schedule to be placed in service later this year, and the ongoing construction of our 50-megawatt battery storage project as part of our clean energy plan in Colorado that we commenced in Q4 2025. Large load customers, including hyperscale data centers, continue to offer significant growth opportunities representing more than 3 gigawatts of potential demand, including 600 megawatts by 2030 within our current five-year financial plan. We are also negotiating with high-quality partners to reach agreements to serve this pipeline. This includes a 1.8-gigawatt data center being developed in Cheyenne, where we have executed an agreement that supports our reservations for generation equipment as part of the mix of resources to serve this potential customer as we continue to advance negotiations toward reaching definitive agreements. Additionally, we are optimistic about the future upside potential of our current pipeline stemming from Microsoft's recent announcement to acquire 3,200 acres of land in Cheyenne, Wyoming, for future data center expansion. As a reminder, we approach our growth pipeline with caution, restricting it to demand that is covered by nondisclosure agreements and being actively negotiated. The opportunities we are executing on today, along with this future potential for upside, provide depth and durability to our long-term growth profile. Slide 4 outlines our $4.7 billion five-year capital plan. We invest in our natural gas and electric customers' core needs for safety, reliability, and growth. Our current capital plan includes minimal investments to support the 600 megawatts of data center demand already in our financial plan, which we expect to serve mostly through market energy procurement. We are also developing opportunities for investment that are not currently in our plan. This would include generation and transmission builds as part of a mix of resources to serve growing, large load customer demand. Moving to Slide 5 for an update on our merger with Northwestern Energy. We made solid progress alongside Northwestern in advancing our planned merger. Both companies received favorable shareholder votes on April 2. The Hart-Scott-Rodino Act antitrust waiting period expired on April 20, satisfying an antitrust condition to closing. And we made state regulatory progress with settlements with certain key intervenors in all three states, Montana, Nebraska, and South Dakota. We anticipate securing all state regulatory approvals and FERC approval to finalize the merger within the second half of this year. As I wrap up my prepared remarks, we continue to deliver solid results for our stakeholders as we execute on our customer-focused capital plan, continue our regulatory progress through multiple rate reviews, meet the growing demand of our customers, and maintain positive momentum through our large load pipeline while maintaining protections for our customers, and complete our planned merger with Northwestern. With that, I will turn the call over to Kimberly for our financial update. Kimberly F. Nooney: Thank you, Linden, and good morning, everyone. We had a successful first quarter executing our strategy and delivering results within our expectations even with the impact of very warm weather. We are on track to achieve our earnings guidance as we maintained our solid investment-grade credit rating and strong liquidity. On Slide 7, we provide a bridge for Q1 2026 EPS compared to Q1 2025. We delivered GAAP EPS of $1.73, which included 5¢ of merger-related transaction costs. Adjusting for these costs, we reported $1.79 of adjusted EPS compared to $1.87 in Q1 2025. One of our warmest winters in history, including record warm temperatures in Wyoming and Colorado, weighed on demand by 18¢ per share compared to Q1 2025. For the quarter, this reflected 13¢ of unfavorability compared to normal weather, which is our base assumption in setting our earnings guidance range. With this backdrop, I am proud of our team's strong execution as we maintain confidence in our ability to deliver on our full-year earnings guidance. We delivered 24¢ per share of new rates and rider recovery margin and 10¢ of lower O&M excluding merger costs. These positive drivers offset 16¢ of higher financing and depreciation costs and a large portion of the impacts of weather and lower retail usage. We delivered favorable O&M for Q1 and, excluding 5¢ per share of merger-related costs, we reduced our O&M expenses by 10¢ year-over-year. This reduction was primarily driven by 4¢ of lower employee costs and other O&M reductions of 6¢ per share. Excluding merger-related costs, we are on track to deliver O&M within the earnings guidance target provided. Financing costs increased 10¢ per share, including 9¢ per share from the impact of new shares and 1¢ of higher interest expense net of AFUDC. Depreciation expenses increased by 6¢ per share driven by new assets placed in service, including our $350 million Ready Wyoming transmission project placed in service at the end of 2025. Further details on year-over-year changes can be found in our earnings release and our 10-Q to be filed with the SEC later today. Slide 8 presents our solid financial position through the lens of credit quality, capital structure, and liquidity. We remain focused on maintaining a healthy balance sheet with our stated credit metric targets of 14% to 15% FFO to debt, which is 100 basis points above our downgrade threshold of 13%, and at or better than 55% net debt to total capitalization. Given stronger forecasted cash flows in 2026 driven by new capital projects placed in service, executing upon our regulatory initiatives, and increasing large load customer growth compared to last year, we expect a significantly lower total equity need of $50 million to $70 million in 2026. During the first quarter, we issued $41 million of equity under our ATM program, positioning us well with minimal equity needs for the remainder of the year. Our next debt maturity is in January 2027, with $400 million of 3.15% notes to be refinanced. We are evaluating refinancing options for later this year. We maintain strong liquidity with approximately $500 million of availability under our revolving credit facility at quarter-end. Financial outlook is listed on Slide 9. We reaffirmed our guidance range of $4.25 to $4.45 of adjusted EPS, which represents 6% growth at the midpoint over 2025. New rates and rider recovery from capital projects, large load demand growth and other organic customer growth, and our solid financial position drive strong confidence in our ability to deliver in the upper half of our 4% to 6% long-term growth target. Our plan includes large load demand contributing more than 10% of growing consolidated EPS beginning in 2028, reaching 600 megawatts by 2030. As Linden outlined, we are pursuing more than 2.5 gigawatts of large load opportunities which represent significant upside to our current financial plan. To serve these opportunities, each of our customers desires a unique mix of resources with varying ramp schedules. From a financial perspective, this complexity requires multiple negotiated agreements with earnings profiles designed to match the risks and considerations for each resource type under our Large Power Contract Service tariff in Wyoming. Slide 10 illustrates our industry-leading dividend track record. In January, we increased our dividend, extending our track record of increases to 56 consecutive years in 2026. Based on our current annualized dividend, we continue to target a 55% to 65% payout ratio. A dependable and increasing dividend is an important component of our strategy to deliver long-term value for our shareholders. I will now turn the call over to Marne for a business update. Marne M. Jones: Thank you, Kimberly, and good morning, everyone. I will provide an update on our current capital projects, discuss progress on our large load demand pipeline, and finish with a regulatory update. Moving to Slide 12, our 99-megawatt Lange II generation construction project, which will serve our customers in western South Dakota and northeastern Wyoming, continues on schedule and will be placed in service in the fourth quarter. The utility-owned natural gas-fired generation resource replaces aging generation facilities with modern Wärtsilä engines and supports updated reserve margin requirements. Recovery of this investment will be requested through the South Dakota generation rider, which we intend to file during the second quarter, and our Wyoming rate review request filed earlier this year. Slide 13 outlines our Colorado clean energy plan. During the first quarter, construction continued on our utility-owned 50-megawatt battery storage project in Colorado, to be completed and in service in late 2027. During the first quarter, we also signed a 200-megawatt PPA for solar resources to serve Colorado customers as previously approved by the Colorado PUC. Together, these resources support our progress towards the state's clean energy plan with an emissions reduction goal of 80% by 2030. Slide 14 outlines our flexible service model for large load customers and our data center demand pipeline of more than 3 gigawatts. Our unique tariff offers flexibility in how we serve large load customers, enables speed to market, and provides customer protections while benefiting our Wyoming customers. Our data center demand in the financial plan of 600 megawatts by 2030 is primarily driven by Microsoft and Meta's growth. We have successfully served growing demand from Microsoft hyperscale data centers for more than a decade through market energy procurement. Meta's new AI data center in Cheyenne is progressing, and we expect them to begin ramping later this year. We are prepared to serve these customers primarily through market energy and contracted resources requiring minimal capital investment. That said, we expect demand at or above 600 megawatts to drive the need for investments in generation and transmission infrastructure. We continue to make positive progress on additional opportunities and are advancing our negotiations with high-quality partners to serve more than 2.5 gigawatts of large load requests. Specific to a 1.8-gigawatt project in our pipeline, we are working through several agreements with counterparties that would ultimately support resources to serve this demand. We continue to focus on the reliability and resiliency of the overall system and customer protections as we design a portfolio of resources to meet the needs of our prospective large load customer. As Linden mentioned, and I am pleased to expand on, we have executed a short-term generation reservation agreement with this prospective customer for company-owned generation. The agreement provides for customer-funded milestone payments to support the long lead-time generation equipment as part of the broader resource mix needed to serve the 1.8-gigawatt project. To date, the customer has provided $201 million in refundable contributions in aid of construction to secure this generation equipment through the term of the agreement. In parallel, we continue to advance negotiations toward a long-term definitive agreement under which company-owned generation would be a component of the portfolio of resources serving the project, with the intent that this reservation agreement transitions the parties into a long-term definitive generation facilities agreement. As you would expect, a project of this size and complexity involves multiple parties and interrelated contractual components. We are carefully structuring these agreements to protect customers while appropriately managing operational and financial risk. Consistent with our normal practice, we will provide additional detail as definitive agreements are finalized. Now shifting to a regulatory update on Slide 15, we continue to effectively execute on our regulatory plan with a cadence of three to four rate reviews per year across our eight-state service territory. Our rate review filed last December for Arkansas Gas continues to progress with new rates requested in the second half of this year. During the first quarter, we filed a new rate review request for South Dakota Electric. We are seeking recovery of our customer-focused investments and increased cost to serve customers in western South Dakota and northeastern Wyoming after holding our base rates stable for more than a decade. In South Dakota, we requested $50.6 million of new annual revenue based on a 10.5% ROE and a capital structure of 47% debt and 53% equity. The request seeks interim rates within 180 days of filing. In Wyoming, we requested $5.1 million of annual revenue based on a similar ROE and capital structure as was filed in South Dakota. We also filed an abbreviated rate review in Kansas as allowed by the commission's prior order. The request seeks recovery of capital invested through 2025 at the previously agreed upon weighted average cost of capital, with rates requested early in the third quarter. And lastly, in South Dakota, wildfire liability legislation was enacted in March to be effective 07/01/2026. Utilities in compliance with their wildfire plan filed with and published by the commission will receive significant liability protections, similar to legislation in Wyoming and Montana. In Wyoming, we are awaiting approval of our mitigation plan, which is expected in the second quarter. We also continue to support the development of similar legislation in Colorado. In summary, our team is focused on executing with excellence on our customer-focused strategy. From day-to-day maintenance and outage response, to delaying a new line to serve a neighborhood or business, we are ready to serve. We are strategically managing and expanding our infrastructure to serve the needs of our customers and actively working with new large load customers to make their plans a reality as their energy partner of choice. With that, I will now turn the call back to Linden. Linden R. Evans: Thank you, Marne. To summarize what we talked about today, we continue to make meaningful progress on our regulatory plan, our growth initiatives, and our strategic goals. Black Hills Corporation offers a compelling long-term value proposition driven by our customer-focused growth, competitive yield, and significant upside opportunities. Additionally, our planned merger with Northwestern Energy will provide us with the advantages of increased scale and new opportunities as a larger, premier regional electric and natural gas utility company. Thank you for your interest and your trust in the Black Hills Corporation team, as we partner to grow long-term value for our customers and stakeholders. This concludes our prepared remarks, and we will now open the call for questions. Operator: As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. Our first question comes from Andrew Marc Weisel with Scotiabank. You may proceed. Andrew Marc Weisel: Hey, good morning, everyone. Congrats, a lot of exciting updates here. My first question is regarding the agreement to reserve generation equipment for the data center customer. Forgive me, Marne, you ran through some details pretty quickly. Apologies if I missed them. I want to make sure I got it all here. Did you say it was around $200 million of short-term deals for company-owned generation? So this should be utility-owned resources falling into rate base and earning the typical 9.8% ROE. Did I get that right? Marne M. Jones: Good morning, Andrew. I appreciate your question, and if I ran through a little fast, let us walk through a few of those details. Yes, it is a short-term agreement really meant to provide some financing, or a financing bridge, as we think about serving long-term generation needs. Ultimately, we intend to put this into a company-owned generation facility that would have a longer-term agreement. When we talk about company-owned generation and a generation facilities agreement, there is a bit of a difference from how you described it. It would be specific to this ultimate end-use customer. We think about the return of and on that investment based on that customer and the unique needs for that specific customer as we talk about risk-adjusted returns. This would not be part of overall rate base for retail customers in Wyoming. Andrew Marc Weisel: Okay. So this would still be that negotiated, risk-adjusted arrangement, not a standard formulaic return. This would still be negotiated then. Marne M. Jones: That is right. It would be a negotiated rate, but I would think about it more in the terms of a typical utility-like investment. This would not be the same as our microgrid management fee. Andrew Marc Weisel: Okay. That is helpful. And just to understand, the short term is about the financing. The equipment would be utility owned for the life of the asset. Is that what you are saying? Marne M. Jones: That is correct, yes. And just as a reminder, as we think about contracting these types of assets and we talk about customer protections, through these negotiations one thing we focus on is ensuring that we do not have stranded assets at the end of the contracts, etc. So this is not something that would ultimately be on the customers of Wyoming. This is all contracted through that long-term contract that we are negotiating. Linden R. Evans: And the $201 million that we received in the refundable CIAC is another way of protecting customers and helps us protect our balance sheet in the interim while we are working with these customers to serve their large load. Andrew Marc Weisel: Great, very helpful. So that $201 million, that is more about financing. Are you able to give an indication of the size of the asset or assets in terms of megawatts? I mean, this is not the full 1.8 gigawatts, is it? Linden R. Evans: No, it is not. And we are not yet ready to announce what kind of megawatts we would serve. We are still actively working with the customer on that. We have a direction with them, but there are a few balls in the air. As soon as we can let you know that, we will. But to date, we are still negotiating that with our counterparty. Andrew Marc Weisel: Okay. Can you say big, medium, or small? Linden R. Evans: Nice try, Andrew. Nice try. Andrew Marc Weisel: Okay, one last one before I pass it over. In terms of the merger, congrats on the three settlements you got there. Does that accelerate the timeline for closing? I know you are still pointing to the second half, but can you get a little more specific? And do these help speed things up? And then subsequent to closing, do you and your friends at Northwestern do some sort of Investor Day or something like that to present the outlook of the combined company later this year? Linden R. Evans: I would say it this way, Andrew. Settlements are always helpful. We have a hearing next week in Montana; we will see how that goes. We had our hearing on the full settlement in Nebraska. And we have hearings scheduled next month in South Dakota. Will it speed it up? No, but it certainly did not slow it down. I think it gives a nice solid foundation for the regulators to use as they consider this merger and ultimately approve it, we hope. With respect to a combined Investor Day, I am the exiting CEO, so I will be cautious to commit someone else. It may be a good idea. We shall see. Andrew Marc Weisel: Fair enough. Thank you so much. Linden R. Evans: Thank you, Andrew. Operator: Our next question comes from Christopher Ronald Ellinghaus with Siebert Williams Shank. You may proceed. Christopher Ronald Ellinghaus: Hey, good morning, everybody. So, Kimberly, this was a monumental weather impact but you did not adjust guidance at all. Can you give us any color on what you are thinking about for offsets? Kimberly F. Nooney: Maybe just to level set, looking back in any given year, we have had some pretty favorable and unfavorable weather swings. Specific to Black Hills Corporation's history, we have had more significant unfavorable impacts; when I look back, it was around Q4 2021. My point is that we are used to experiencing these types of impacts. As you noted, we are reaffirming guidance and will continue to manage the business to ensure that we are focused on mitigating risks while achieving our financial objectives. Just like any other utility, we will be focused on ensuring we are optimizing our O&M and the timing of our capital investments. That will be our strategy. Linden R. Evans: That is a good answer. I would suggest that during the fourth quarter of last year, we had pretty mild weather. You might remember that, Chris. As a team across the whole organization, we continued to lean into the challenge of warm weather into the first quarter, which helped us as well, and this is a chance for me to say thank you to our team. They have done a wonderful job of ensuring that we hit our targets. Christopher Ronald Ellinghaus: Along those lines, you have had some pretty unfavorable weather, particularly in the first and fourth quarters. Do you see a longer-term pattern of filling in the bowl that you guys have for an earnings shape, where you see more loads headed into the middle of the year and maybe out of the first and fourth quarter? Is that something that you are contemplating as a reality today? Kimberly F. Nooney: Based on the fact that we have a balanced mix of electric and gas resources, Q1 and Q4 have always been our most impactful, but this is not unique. One of the things that we have done over the past few years is look back on weather impacts and how we think about assessing those in the financials. I do not know that we are doing anything different. We are obviously very cognizant of it. We are paying attention to it, and we are ensuring that we are incorporating those types of impacts into our future strategies. But are we drastically changing our business model? No, we are not. Linden R. Evans: I would add we are also working closely with our regulators for weather normalization, as you might recall. We have a pilot we are doing in Nebraska this year that was helpful this quarter and the fourth quarter of last year. I would also say a benefit of the large load customers is that they are high power factor customers, and to that extent, that would be another benefit to our other customers to smooth out our earnings through the year. That is something we are working on too. Christopher Ronald Ellinghaus: Linden, you are the expert on data centers in Wyoming, so maybe you can shoo me off of this question too. There has been a lot of discussion about that data center. Can you give us some color on what is happening locally? I know there have been some efforts politically to try to move that along. Can you give us some sense of what some of the holdups are locally? Linden R. Evans: Chris, I guess my challenge is with the fact pattern. Yes, there are a few local entities that are asking that the commissions take caution about the data centers—are they doing it right? On the other hand, we are also seeing initiatives by local folks to actually accelerate permitting. So it is a balance. For us, and the data centers that we are working on, we are not seeing any slowdown due to decisions or permits or anything of that nature. All of ours are currently right on track. CPCNs, etc., are being granted. Local permits are being granted, etc. We are in nice shape with the customers that we are currently dealing with. Christopher Ronald Ellinghaus: Along the same lines, have you got a sense at all of when you might file a CPCN for generation? Marne M. Jones: As I mentioned, we have the short-term reservation agreement, which we would ultimately like to see transition into a long-term definitive agreement for generation. Once those agreements are in place—and it is not just the generation but really all the agreements that are needed—is when we would expect to see a CPCN for generation. Christopher Ronald Ellinghaus: I am not trying to figure out the size, but can you talk about what type of generation you are pursuing? Marne M. Jones: We are looking at long lead-time equipment items. We are looking at gas engines and transformers. Dispatchable generation will be really important. Christopher Ronald Ellinghaus: And one last thing. In Montana and South Dakota, have you got a sense of what to expect for the duration of those two hearings? Marne M. Jones: We are scheduled next week in Montana for a Tuesday-through-Friday hearing. South Dakota is scheduled for two or three days in June. Linden R. Evans: That is correct. Christopher Ronald Ellinghaus: I do not recall Montana ever accomplishing anything in four days, so that would be some kind of record. Marne M. Jones: As was mentioned earlier, we have reached a lot of settlements. We do not have a full settlement in Montana, but we have reached a lot of settlements. That really bodes for, hopefully, a much more efficient process given those settlements. Christopher Ronald Ellinghaus: You are a great optimist, Marne. Linden R. Evans: Yes, we are. Christopher Ronald Ellinghaus: Okay. Thank you for the color. Appreciate it. Linden R. Evans: Thank you, Chris. Operator: Thank you. Our next question comes from Paul Fremont with Ladenburg Thalmann. You may proceed. Paul Fremont: Thanks. My first question has to do with the short-term reservation agreement, which I guess is for $200 million. If the project were to move forward, is that the aggregate amount that you would contemplate spending, and if not, how large an investment would you contemplate? Kimberly F. Nooney: Hey, Paul. Good morning. I will start and then my team members can fill in. This is really, as noted, a reservation agreement, so these are milestone payments associated with procuring the actual investments that Marne mentioned. This is what we think about as a bridge agreement to ensure that we maintain balance sheet strength through this period until we get to definitive agreements and we are able to start constructing. We are not talking about the size yet because we are still in negotiations, but we will be contemplating the right financing strategy overall. We have not given the magnitude of the project beyond 1.8 gigawatts and the fact that it will be served with a variety of resources. Paul Fremont: Should we think of the $200 million as extending through some period in time? In other words, would this be the next three or four years of spend or the next two years of spend? Linden R. Evans: The reservation payments are the payments that we are actually making to these suppliers, and we are being reimbursed by the customer that we are negotiating with as part of that agreement, Paul. That is where this $201 million comes from. That is what we are paying to hold these resources in place so that we can put them in service for a customer. In the short term through June 30—and I encourage our stakeholders to think about June 30 as a milestone we are working toward as an organization—if we do not announce something by June 30, please do not assume that means we are not going to have an agreement with this customer. That is a milestone that we are working to achieve. Paul Fremont: And I guess, according to the AEP conference call, it sounded like if there is nothing in place by June 30, there is another six-month extension in terms of the Bloom equipment. Should we assume that December 31 is an absolute date by which the parties need to reach an agreement? Linden R. Evans: I do not know that it would be an absolute date, but we certainly work toward getting a contract in place by then. I would not see it as an absolute date. To date, the parties are working very well together and extending things by agreement. These are complex agreements with lots of parties. We want to get it right—especially us at Black Hills Corporation. We have to get it right on behalf of all of our customer base to ensure we have the best deal we can to serve these customers as appropriately as possible. So again, do not think we have hard, fast dates, although we all know the time value of money. We need to work efficiently, and we are. Paul Fremont: Is any of the CapEx related to this project significantly additive to the current compound annual growth rate? Also, if you need to build more resources for this, who should we assume will provide the funding, and is incremental CapEx going to be 50% equity funded? Marne M. Jones: I will kick this off and then turn it over to Kimberly. When we talk about CapEx, we have 600 megawatts of load in our current five-year plan that ties back into our CapEx, the $4.7 billion. Anything above that—which this project would be—is part of the pipeline that is not included in our current plan and would be additive to our overall capital investment opportunity. If we needed to build more resources, whether generation or transmission, both would be additive to what we currently have in the plan. Kimberly F. Nooney: On financing, we think about this under the overarching perspective that we want to maintain credit quality. We have set our credit quality targets of 14% to 15% FFO to debt and maintaining our debt to total cap at 55% or below. That is the guiding principle. To your point, we would think about this as a utility-like investment with a utility-like capital structure in the range that you are noting. Paul Fremont: Great. I think that is it in terms of questions. Linden R. Evans: Thank you, Paul. Appreciate your questions. Operator: Thank you. I would now like to turn the call back over to Linden R. Evans for any closing remarks. Linden R. Evans: Thank you very much for participating in our call today and for your interest in Black Hills Corporation. We have a compelling long-term value proposition, and I hope you are starting to see that develop through our comments today and the responses to your questions. Once again, I want to thank our team for leaning in so hard, doing it safely, and doing so well to serve our customers. We are grateful for that. I encourage you to have a Black Hills Corporation-safe day. Thanks for joining our call. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Horace Mann Educators Corporation First Quarter 2026 Results Conference Call. Participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Rachael Luber. Thank you, and over to you. Rachael Luber: Thank you. Welcome to Horace Mann Educators Corporation’s discussion of our first quarter 2026 results. Yesterday, we issued our earnings release, investor supplement, and investor presentation. Copies are available on the Investors page of our website. Our speakers today are Marita Zuraitis, President and Chief Executive Officer, and Ryan Greenier, Executive Vice President and Chief Financial Officer. Before turning it over to Marita Zuraitis, I want to note that our presentation today includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The company cautions investors that any forward-looking statements include risks and uncertainties and are not guarantees of future performance. These forward-looking statements are based on management's current expectations; we assume no obligation to update them. Actual results may differ materially due to a variety of factors, which are described in our news release and SEC filings. In our prepared remarks, we use some non-GAAP measures. Reconciliations of these measures to the most comparable GAAP measures are available in our investor supplement. Now I will turn the call over to Marita Zuraitis. Marita Zuraitis: Thanks, Rachael Luber, and good morning, everyone. Yesterday Horace Mann Educators Corporation reported record first quarter core earnings per share of $1.28, 20% above the record level of the first quarter earnings we reported last year. Insurance and fee-based revenue increased 6% year over year, reflecting growth across our businesses. Life sales were up 17%, individual supplemental increased 11%, and group benefits delivered a record quarter with sales more than tripling year over year. Core shareholder return on equity for the trailing twelve months was 12.7%. These results highlight the strength of our multiline business model and our ability to deliver consistent, profitable growth across a range of economic and industry conditions. We are maintaining our 2026 core EPS guidance of $4.20 to $4.50 and remain confident in achieving our three-year strategic goal of a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity. Today, I will discuss the highlights of the quarter and provide an update on our growth progress. Let us start with segment results. Property and Casualty profitability remained strong. The combined ratio of 83.3%, a five-point improvement over the prior year, reflects lower catastrophe costs and improved underlying performance. P&C written premiums increased 5%, and auto and property policyholder retention remained stable and consistently high relative to industry benchmarks. Segment sales reflect our disciplined focus on profitable growth in a competitive auto market. We are prioritizing growth in markets where we see the strongest returns. Excluding California, which remains a more complex and highly regulated market for the industry, auto sales increased at a high single-digit rate. Countrywide, property sales increased 11%. In Life and Retirement, core earnings increased 16% year over year, benefiting from lower mortality costs. Life sales increased 17%, and persistency across both life and retirement remains strong. The Individual Supplemental and Group Benefits segment continued to deliver strong growth this quarter. We continue to invest where we see meaningful long-term opportunity. Our approach is to build internally where we can deliver a differentiated, best-in-class experience and to partner with leading third parties where it enhances our capabilities and speed to market. In individual supplemental, we are investing in our distribution and product portfolio to support growth. Our enhanced cancer product continues to be a key driver of growth, with sales doubling year over year and building on record performance last year. Across all products, individual supplemental sales increased 11% year over year. This high-margin, high-persistency business also supports strong cross-sell opportunities. Life is a natural adjacency for benefits specialists selling individual supplemental products, and today, approximately 10% of our life sales are consistently generated through that channel. In Group Benefits, we are leveraging partnerships to expand our capabilities, including the recent implementation of a third-party technology platform that supports a fully integrated, end-to-end leave management experience for employers and educators. This investment underpins our paid family medical leave enhancement to our short-term disability offering introduced earlier this year in Minnesota. We will evaluate opportunities to expand these capabilities into additional markets over time as adoption continues to grow. Thirteen states have enacted paid leave mandates, with more proposals currently under consideration. Employers offering paid leave benefits report higher retention, a key priority for school administrators. Consistent with this, our research shows that one quarter of educators would be more likely to stay in their role with improved healthcare and protection benefits. Against this backdrop, Group Benefits sales more than tripled year over year to $11 million. While results can vary from quarter to quarter given the size and timing of our business, our first quarter sales nearly matched our total Group Benefits sales for all of 2025, highlighting the momentum we are building. Our corporate expense ratio is up slightly over the prior year but down sequentially. We manage our expenses closely and continue to expect a 25 basis point reduction over the course of 2026. Turning to how we are expanding our relationships across the educator market, we are reaching more educators than ever before and continuing to build meaningful relationships across our target market. As we have noted, unaided brand awareness among educators has increased to 35%, reflecting the impact of our investments over the past several years. We are building both awareness and affinity through partnerships with well-known, trusted national brands and educational institutions. In January, we sponsored Crayola Creativity Week, reaching more than 1 million educators through classroom and professional development activities. We are also excited about our new partnership with Disney. We recently launched a continuing education program, A Heart for Service and Education, developed in collaboration with Disney and delivered through the Disney Institute, with multiple sessions scheduled throughout the year. Each session brings together educators from across the country to participate in immersive, service-focused development experiences. We are seeing strong early engagement with the Horace Mann Educators Corporation Club, our centralized platform providing financial wellness tools, classroom resources, and educator benefits. Since launching earlier this year, thousands of educators across the country have already enrolled. We are also in the midst of Teacher Appreciation Month, where we continue to connect with educators through our Beyond Greet campaign. Last year, we engaged 55 thousand new educators during this event and expect another strong outcome this year. In addition, we have expanded our digital reach through targeted audio campaigns on platforms like Spotify and Apple Music, meeting educators where they are. Over the past year, we have grown our points of distribution by eight and continue to enhance the effectiveness of our marketing efforts as we scale these initiatives. Before I turn the call over to Ryan Greenier, I want to underscore our commitment to disciplined capital management and long-term shareholder value. In March, our Board of Directors approved a 3% increase to our quarterly shareholder dividend, marking the eighteenth consecutive year of dividend growth. In the quarter, we returned $33 million of capital to shareholders, including $18 million of share repurchases, a significant increase relative to recent periods. As we have said before, our highest priority remains investing in profitable growth, and we remain confident in our ability to continue creating long-term value for our shareholders. In closing, our strong start to the year reflects solid underlying performance and continued momentum across the business. We are investing where we see the most attractive returns and where it strengthens our ability to deliver a best-in-class experience for our customers, while maintaining expense discipline and executing against our strategy. We remain confident in achieving our three-year strategic goals of a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% shareholder return on equity. Thank you. And now I will turn the call over to Ryan Greenier. Thanks, Marita Zuraitis. I will focus on a few key takeaways from the quarter and provide some additional context on what is driving the results. Ryan Greenier: This was a very strong start to the year. We delivered record first quarter core earnings of $53 million, or $1.28 per share, up 20% year over year, with solid underlying performance across the business, continued margin improvement in P&C, and continued growth in our higher-return segments. Core shareholder return on equity for the trailing twelve months was 12.7%. Overall, results are tracking in line with our expectations for the year, and we are not making any changes to our outlook. Turning to results by segment. In Property and Casualty, core earnings were $39 million, up 46% year over year. The reported combined ratio of 83.3 points improved five points year over year, reflecting lower catastrophe costs and improved underlying results. The $5 million in prior-year development included $2 million in property and $3 million in auto, primarily driven by lower-than-expected claim severity, with claims settling below prior reserve expectations. From a premium standpoint, net written premiums increased 5% to $194 million, primarily reflecting higher average premium. In property, premiums were up 14%, while auto premiums were essentially flat, reflecting a shift in mix toward targeted growth markets. That is consistent with the approach Marita Zuraitis outlined: prioritizing profitability and focusing growth in markets where we see the strongest returns. Auto profitability improved, with the combined ratio at 89.2%, reflecting strong underlying performance, and retention remained strong. Property also performed well, with a combined ratio of 74.3%, supported by lower catastrophe costs. While catastrophe losses and prior-year development were favorable in the quarter, we also saw improvement in underlying margins. We continue to incorporate current loss trends into our pricing and underwriting and feel well positioned given the actions we have taken over the past several quarters. In Life and Retirement, results were stable and improving. Core earnings increased 16% to $9 million, primarily driven by favorable mortality. Life sales were up 17%, with persistency remaining strong near 96%. In Retirement, contract deposits were modestly lower year over year, primarily reflecting product mix and market conditions, while fee income and strong persistency continue to support stable earnings. In Supplemental and Group Benefits, the story is about growth and continued investment. The segment contributed $12.6 million of core earnings, and net written premiums rose to nearly $71 million. Individual supplemental delivered another strong quarter. Our enhanced cancer product introduced last year continues to be a key driver of growth, with sales up 11% year over year. The benefit ratio of 30.5% reflects favorable policyholder utilization trends, and persistency remains above 90%. In Group Benefits, results reflect the investments we have made, including the introduction of paid family medical leave in January within our short-term disability offering in Minnesota. Premiums increased 4% to $38 million, and the benefit ratio of 51.9% moved closer to our longer-term expectations. Sales more than tripled year over year to $11 million, although results can vary quarter to quarter given the size and timing of the business. Total net investment income on the managed portfolio was relatively stable year over year. Core fixed income performance remains consistent, with some offset from the commercial mortgage loan fund and runoff that we have discussed previously, as well as limited partnership returns that were slightly below our full-year expectation. Limited partnership returns can vary quarter to quarter, and we remain confident in our full-year outlook. We continue to make progress on expense optimization, with early benefits beginning to emerge. As expected, the majority of our targeted improvement will come in later years as scale builds, but we remain on track for approximately 25 basis points of improvement in 2026. Our balance sheet remains strong, and capital generation continues to support both strategic growth initiatives and consistent shareholder returns. In the first quarter, we repurchased approximately 420 thousand shares at a total cost of $18 million, representing a meaningful increase in activity relative to recent periods, and we also returned $15 million to shareholders through dividends. We continue to prioritize investing in profitable growth while returning excess capital to shareholders. Tangible book value per share increased 9% year over year, reflecting solid earnings and disciplined capital management. Stepping back, the quarter reflects strong underlying performance, improved profitability in Property and Casualty, and continued growth momentum across our businesses. Importantly, the drivers of performance this quarter—margin improvement in P&C, stable and improving results in Life and Retirement, and growth in higher-return businesses like individual supplemental and group benefits—are all consistent with the framework we laid out at Investor Day, supported by continued progress in customer engagement and brand awareness. We continue to execute against our strategy with a focus on disciplined underwriting, profitable growth, and thoughtful capital allocation. We remain confident in our ability to deliver our three-year financial targets, including a 10% compound annual growth rate in core earnings per share and a sustainable 12% to 13% return on equity. Thank you. Operator, we are ready for questions. Operator: Thank you. We will now begin the question and answer session. We have the first question on the line of Jack Maarten from BMO Capital Markets. Please go ahead. Jack Maarten: Hey, good morning. My first one is on the group business. I wonder if you could unpack further what is driving the strong sales growth, and I am curious over time how significant of a contributor you think the new paid family medical leave offering can be within that business. Marita Zuraitis: Yes, thanks for the question. When we think about our supplemental growth—both individual supplemental, quite frankly, and group—it really has been a very strategic product enhancement strategy. You heard in the script that we built out our cancer product. Not only is it the new paid family leave connection to our short-term disability offering, but we also have about a 30% increase in the number of benefit specialists out there and the work that we are doing on the supplemental side. For paid family leave, I think it is just a really good example of thinking about our customer segment and what our customer segment needs. Bundling it with short-term disability was the right answer for us. As you pointed out, it has been a meaningful contributor to the sales in the quarter. But our group business is still relatively small, so we are focused on building a sustainable pipeline. It is not necessarily going to be linear; this is going to be quarter over quarter for us as we think about growth. And we thought about PFML as both defense and offense. There are about 13 states out there that have included this in their mandate. We know our educators are looking for increased benefits. We see improvement in retention when we build out these products. So defensively, in a state like Minnesota, adding that to our short-term disability offering allowed us to keep the good groups—the good schools—that we have in Minnesota. But also on the offense side, it allowed us an edge for new customer engagement, and that is how we will think about it as we think about the remaining states out there in our footprint. It may be a really good way for us to think about how we enter some new geographies as well. So it is a good example of how we think about our customer segment—building what they need. And when you build it, they will come, and that clearly is what occurred this quarter. Ryan Greenier: And the only thing I would add is when I think about our ROE trajectory, growth in these capital-light, higher-margin products is a key component of our strategy to drive higher ROE in the future. Jack Maarten: That is helpful, thank you. And maybe just one on the Life and Retirement business, which has thrown off healthy and stable margins over time. I am wondering about the top-line growth outlook there. It is a little bit softer this quarter. I know part of that might be lower CML and LP returns, but any trends that you are seeing on the premium and contract deposit growth in that business that we should be thinking about? Marita Zuraitis: Yes. Ryan Greenier can cover some of the numbers, but what I would say in Life and Retirement is we are seeing a 17% increase in life sales. That is healthy. We are seeing more of our traditional agents in the game. That is also healthy. Ten percent of our life sales now, on a relatively consistent basis, is coming from benefit specialists who, at the beginning of this integration—when we brought on NTA and then later MNL—were predominantly in that individual supplemental space. Now they are selling Horace Mann Educators Corporation life products, and it is amounting to about 10% of our sales there. So it is working very well. And on the retirement side, we always talk about that as our ballast, and I would say retirement continues to be a very consistent, steady contributor to earnings. Ryan Greenier: Yes. And if you isolate for just sales, sales were up 7% in the first quarter for retirement. We are attracting a few thousand new customers in the first quarter, opening new retirement accounts with us. So like Marita Zuraitis said, it is an important product and an important entry point for many educators to begin their relationship with us. On the bottom line, you correctly pointed out the commercial mortgage loan allocation. As a reminder, our commercial mortgage loan funds are nearly entirely held within Life and Retirement, and Retirement has a larger allocation to them. So when there is some pressure there, you are going to see that in the fixed annuity spread number, and you can see that this quarter. But overall, the business is solid, it is steady, and it is an important earnings diversification tool for us. Jack Maarten: Thank you. And then if I could just sneak one more in on auto insurance. I think you referenced some challenges in California offset by strong sales growth in other states. Could you elaborate on what you are seeing in California and your outlook for growth there? Marita Zuraitis: Yes, thanks for asking. When we think about auto, obviously we think about all the states that we are in. But California specifically—when you take California out of our growth numbers, like we said in the script—we are seeing high single-digit growth in auto, which in this competitive environment for us, I think, is quite strong. But California is highly regulated; it is complex, and we took an intentional, conservative approach in the state. We remain active in the state. We have been working very closely with the department, and, as we have talked about before, we have reached target profitability in all of our states except California, and California is dangerously close, if you will, to targeted profitability. We feel very confident that we will get there. But as you can imagine, when you think thoughtfully about where you place agents, where you make marketing investments, and the things you do intentionally to drive auto new business, California would not necessarily be the state in which we were making those investments. So it takes a while to ramp them back up, and we will continue to take a conservative and appropriately cautious approach to California. But we feel really good about the momentum that we are seeing in auto in this environment outside of California. California was intentional. It is a state that you need to be thoughtful and conservative in, feel good about the work with the department, and feel like we are getting close to California being like the rest of the states, where we are wide open and ready to push. Operator: Thank you. Thank you. We have the next question from the line of Wilma Burdis from Raymond James. Please go ahead. Wilma Jackson Burdis: Good morning. Could you talk a little bit more about how much of the good combined ratio in P&C comes from favorable claims experience and some of the variability there in the quarter, and how much is just more diligent underwriting that is going to stick around a little bit longer, especially given some others seem to be leaning aggressively in pricing? Thanks. Ryan Greenier: Good morning, Wilma Jackson Burdis. Thanks for the question. The combined ratio improved 5.4 points this quarter and was 83.3%. Both auto and property contributed to that improvement. Stepping back, about half of that improvement was weather-related. We did not experience as severe weather activity in the first quarter, which benefited both property catastrophe and our non-catastrophe property results. But the other half reflects the disciplined rate and non-rate actions that we have deliberately taken to restore profitability and get the book back to our targets. We are seeing the benefits of the actions we have taken—whether it is terms and conditions, implementations of roof schedules, increases in deductibles, improved claims handling—that is all coming through our results. We believe that is durable and sustainable, and we are pleased with profitability in our P&C book. Marita Zuraitis: Yes, and I would add—thanks, Ryan Greenier, that was a good layout there. On the latter half of your question, as others are powering up for growth or lower pricing, it is important to talk about how we think about this. It is a competitive market out there; shopping activity is clearly up. When others talk about powering up for growth—and we have said this before—we really do not think about it that way. We are powering up, but we are powering up the value that we are bringing to our customers. Customer engagement is up, brand recognition is up. When I think about auto—and that seems to be the basis of your question—we talk about insulated but not immune. We are not immune to the environment, but we are insulated somewhat by our strategy. Growth is not one line or one state; we think about it more broadly than that. It is about us expanding the relationships that we have with educators and increasing that educator household count. We are seeing strong results there. We mentioned that excluding California, being up mid single digits in this environment actually feels very good. We are excited about bringing more of these things to California as well. More importantly, stepping back: with Group Benefits tripling, Individual Supplemental up 11%, Life up 17%, property countrywide up 11%, and the stable ballast from Retirement, the momentum is good. So we really do not think about ramping up or ramping down; we think about increasing educator households, and that is exactly what we are doing. When you add that to the customer retention that we are seeing and how healthy it is—low to mid-90s in Life and Retirement, and Supplemental near 90% for property, a decent 84% in auto—those are pretty strong numbers, and that adds up to momentum. Our story is a little bit different from a monoline auto writer or some of the P&C-only writers you cover, but it is playing out consistently with what we laid out, and against our internal plans, we are right where we wanted to be this quarter and feel strong about the result. Wilma Jackson Burdis: Thank you. I think you touched on this a little bit, but can you talk more about the strategy of reinvesting back into your teachers via programs and donations, and how that fits into your overall capital plans? There is a lot of pressure on classroom budgets, and it seems like you have leaned into some of these programs and donations given the good core results. Marita Zuraitis: Thank you for the question. It is at the heart and the core of what we have always done as a company, and I am excited about how modernized that has become and the work that we have done over the past few years—new marketing leadership, building out that team. We have done all the things necessary to make sure educators know who we are, and we are pleased with the increase in brand identity and the increase in the number of educators who are engaging with us, maybe not even customers yet. When you think about good old-fashioned top-of-the-funnel marketing, for the first time in our eighty-year history, we are doing that and doing it well. We are engaging with more customers. We are partnering with like-minded companies. Our Crayola creativity assessment that we are doing—bringing creativity assessments to the classroom—engaging educators in continuing education that is fun, not just the required continuing education in their profession, is resonating. We are meeting them where they are and bringing meaningful value to those educators, with the idea that if you are an educator, you should be with the educator company. We have many ways to start that relationship, but it starts with them knowing who we are, engaging with us, and bringing them a solutions orientation, not just product, so that when they have a product decision, they are going to place that product with the educator company unless we give them a reason not to. Our agent NPS scores and our customer surveys—all the indications—are up. We feel good that when you do really good top-of-the-funnel marketing and engage with these educators, the current momentum is good and the momentum to come is good. None of that changes that we are in a competitive auto environment—we get it. But we have lots of ways to engage with these educators other than auto, and we feel good that when we do engage in auto—other than intentional plans in California that are working as well—we get our fair share. We do not win business solely on price, so we do not lose business solely on price. Our proactive retention efforts are helping on the retention side, and we feel really good about where we are. Wilma Jackson Burdis: It makes a lot of sense. I know you touched on this a little earlier, but what are you seeing in the overall annuity spread environment, and do you think it will stabilize over the coming year? Ryan Greenier: Thanks for your question, Wilma Jackson Burdis. This quarter is not indicative of what we would expect for our fixed annuity spread. It was 1.34% in the quarter, and we are targeting a number higher than that. For us, the core fixed income portfolio—which is the workhorse of the portfolio—is performing quite well. The core book yield is up 23 basis points year over year. Our new money yields were 5.38% for the core investment-grade fixed income portfolio. I have been impressed with the investment team’s ability to continue to find attractive investments without taking excessive risk. We are going to stick to our knitting, look for slightly better LP returns that were modestly below our expectations—they came in at 7% versus the 8% we would expect—and we will watch commercial mortgage loans carefully. I would not expect the 1.34% to repeat; I would expect it to improve from here. Wilma Jackson Burdis: Okay. Thank you. Operator: Thank you. We have the next question from the line of Matt Galetti from JMP Securities. Please go ahead. Matt Galetti: Marita, I might ask you to follow on part of your last answer, specifically around auto and the environment we are in. Can you talk about how you are using the agency to help manage the environment? We can see the PIF numbers in the supplement and understand those are just on Horace Mann Educators Corporation paper. Has the agency been more active? Have you been placing more business with partners as the environment changes? Can you help us understand how you use it as a tool? Marita Zuraitis: Yes, thanks for that, Matt. The Horace Mann Educators Corporation General Agency was started with the idea that if we had an educator customer or someone who served the community and they needed coverage that we either did not have an appetite for—think nonstandard—or a higher-valued home, and if we did not have the pricing sophistication and had no intention of building that, why send them down the road to an independent agent who, if that agent is good, is going to say, “When was the last time someone looked at your life insurance needs? Can I sell you something else?” So it was a very defensive strategy, and it has worked quite well. We are not seeing a large ramp-up in HMGA sales because of the competitive environment. Our close ratios have remained relatively consistent during this time. It is working as intended. We have said before we are a large agent of Progressive and have a good relationship with Progressive. They have a broad appetite and go well beyond our educators and others who serve the community, so they are there for us. We have other very strong partners. We have not seen a big change in the use of HMGA. It works very well for us and allows us to keep that educator household. If circumstances change and that customer is no longer nonstandard, we can pull that auto customer back. We have seen “win backs,” where we are bringing some of those customers back to the Horace Mann Educators Corporation portfolio when it makes sense and when they match our appetite. We look at that book often to do just that. I would say it is pretty consistent, as intended, and working as a good strategic lever for customer retention, which is what it was set up to be. Matt Galetti: Great. Thank you for the color. Appreciate it. Operator: Thank you. That was the last question. This concludes our question and answer session. I would now like to turn the conference back over to Rachael Luber for any closing remarks. Rachael Luber: We appreciate everyone joining us on the call today, and we look forward to speaking with you. Thank you. Have a great day. Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the APA Corporation First Quarter 2026 Financial and Operational Results 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 this session, you will need to press 11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Stephane Aka, Managing Director of Investor Relations. Sir, please go ahead. Good morning. Stephane Aka: And thank you for joining us on APA Corporation’s first quarter 2026 financial and operational results conference call. We will begin the call with an overview by CEO, John J. Christmann. Ben C. Rodgers, CFO, will share further color on our results and outlook. Stephen J. Riney, president, and Tracey K. Henderson, executive vice president of exploration, are also on the call and available to answer questions. We will start with prepared remarks and allocate the remainder of time to Q&A. In conjunction with yesterday’s press release, I hope you have had the opportunity to review our financial and operational supplement, which can be found on our investor relations website at investor.apacorp.com. Please note we may discuss certain non-GAAP financial measures. A reconciliation of the differences between these measures and the most directly comparable GAAP financial measures can be found in the supplemental information provided on our website. Consistent with previous reporting practices, adjusted production numbers cited in today’s call are adjusted to exclude noncontrolling interest in Egypt and Egypt tax barrels. I would like to remind everyone that today’s discussion will contain forward-looking estimates and assumptions based on our current views and reasonable expectations. However, a number of factors could cause actual results to differ materially from what we discuss on today’s call. A full disclaimer is located with the supplemental information on our website. And with that, I will turn the call over to John. Good morning, and thank you for joining us. John J. Christmann: Today, I will review our first quarter 2026 results, highlight our execution against APA Corporation’s strategic priorities, and share our outlook for the remainder of the year. I want to first acknowledge the ongoing events in the Middle East. The escalation in geopolitical tensions and the human impact of the conflict are deeply concerning. Our thoughts are with those affected. Our teams in Egypt continue to operate safely and without disruption. We remain in close coordination with our partners and government stakeholders. We have a long track record of operating in the country, and our priority remains the safety of our people and the reliability of our operations. The increased volatility in global energy markets reinforces the importance of a sound long-term strategy. At APA Corporation, our strategy is very clear. We will deliver top-tier operational performance across our assets, we will build and grow a high-quality portfolio, and we will maintain financial discipline. These principles have guided our strategic direction and capital allocation priorities over the last several years and continue to shape our path forward. Our operational focus has never been stronger. In the Permian, we have significantly improved capital efficiency while delivering resilient oil production volumes, all with fewer rigs and lower capital intensity. Our improving execution is driving cost leadership across key operational categories, with great momentum and clear visibility to further progress ahead. In Egypt, we have strengthened base production reliability through targeted waterflood investments, a more efficient workover program, and increased uptime, all of which have helped moderate effective base decline rates. At the same time, we are expanding our gas development activity to build a more durable total production foundation. Across the broader portfolio, we have continued to high-grade our key assets and build long-term optionality. First, in the Permian, we have repositioned the asset base to be entirely unconventional, establishing more than a decade of economic inventory with meaningful upside. Second, in Egypt, we have enhanced the value of our assets through improved fiscal terms and a more gas-weighted activity mix. Third, in Suriname, we are advancing a world-class development toward first oil. And finally, we are building future growth opportunities through exploration. With respect to financial discipline, we have streamlined our corporate overhead to drive sustainable structural efficiencies. This lower cost base combined with disciplined capital allocation across our high-graded portfolio supports more steady free cash flow generation through commodity cycles. Alongside our highly profitable gas trading business, this positions us to deliver meaningful shareholder returns while accelerating progress toward the $3 billion net debt target we set just nine months ago. Together, these actions demonstrate consistent execution of our strategy, which is to drive strong operational performance, position the portfolio to deliver long-term value, and maintain balance sheet strength. Turning to the specifics of our first quarter performance, I would like to highlight several notable achievements. Across the portfolio, our teams executed exceptionally well and delivered capital spend and operating costs below guidance, despite inflationary pressures. In the Permian, operational efficiencies and improved uptime drove oil production above guidance, while gas volumes were curtailed due to weak Waha pricing. In Egypt, continued success in the gas program, including on our newly acquired acreage, is underpinning the delivery of our ambitious 2026 targets. Longer term, we remain excited about the extensive prospectivity of the Western Desert. Robust asset performance, complemented by favorable commodity prices, generated nearly $500 million in free cash flow during the quarter. Ben will discuss the steps we are taking to further strengthen our balance sheet in the current price environment. Looking ahead, we are carrying significant operational momentum into the balance of the year. In the U.S., we are raising our full-year oil production outlook to 122,000 barrels per day, reflecting our confidence in continued strong performance. In Egypt, despite gross production volumes above previous expectations, our adjusted volume guidance has been lowered to reflect the PSC impacts of higher commodity prices. We remain focused on capital discipline and cost management, with no change to our upstream capital or LOE guidance. In closing, our first quarter results reflect continued execution across our Permian and Egypt assets. In the current higher commodity price environment, we are prioritizing free cash flow generation over incremental activity and maintaining a sustained focus on cost reductions to drive long-term value. We remain rigorous in our capital allocation across our foundational assets in the Permian and Egypt, which are poised to deliver consistent production volumes for the next several years, providing a stable and durable base for free cash flow generation. Organic high-margin oil production growth is expected to come from Suriname Grand Morgue, which remains on track for 2028 first oil. This is a clear differentiator relative to our peers, representing a significant free cash flow growth engine for the long term. We remain committed to our capital returns framework with a clear path to further debt reduction and share repurchases supported by our current free cash flow outlook. I will now turn the call over to Ben. Ben C. Rodgers: Thank you, John. For the first quarter, under generally accepted accounting principles, APA Corporation reported consolidated net income of $446 million or $1.26 per diluted common share. Consistent with prior periods, these results include items that are outside of core earnings. The most significant after-tax item impacting adjusted earnings was $37 million of unrealized derivative instrument losses. Excluding this and other small items, adjusted net income for the first quarter was $489 million or $1.38 per diluted share. APA Corporation generated $477 million of free cash flow in the first quarter, of which $88 million was returned to shareholders. John already covered key elements of our outlook for the rest of the year, so I will focus on a few additional items. For the second quarter, our outlook for U.S. BOEs assumes continued natural gas curtailments through the end of the second quarter, driven by the current forward strip for Waha gas pricing. No price-related curtailments are assumed in our U.S. BOE production guidance for the second half of the year. For Egypt adjusted total production, about two-thirds of the second quarter decline from the first quarter is related to higher Brent prices. As a reminder, while higher prices increase profitability, they reduce adjusted volumes under the PSC cost recovery mechanism—an accounting impact rather than a change in underlying gross production volumes. The remainder reflects the successful recovery of backlog costs from our 2021 PSC modernization, which was completed in the first quarter. As John mentioned, our full-year upstream capital guidance remains unchanged at $2.1 billion. We expect to incur approximately 55% of this spending in the first half of the year, largely driven by the cadence of activity in the U.S. We anticipate most of our Permian turn-in-lines to occur in the second and third quarters, sustaining oil production volumes through the second half of the year. We have also updated our guidance for current taxes to reflect higher pricing assumptions relative to our prior outlook. We now expect 2026 U.S. and U.K. current tax expense to be approximately $230 million, nearly all of which is in the U.K., where we are subject to a 78% effective tax rate. Looking at our oil and gas trading portfolio, based on current strip pricing, we expect these activities to generate approximately $1.1 billion of pretax cash flow in 2026. This is inclusive of commodity hedges and reflects significantly wider Waha basis and higher LNG prices since our last update. Turning now to the balance sheet. We ended the first quarter with approximately $4.1 billion in net debt, compared to $4 billion at the end of 2025. This slight increase is attributable to a large use of working capital, almost all of which was driven by two factors: first, an increase in total company receivables due to the significant rise in oil prices late in the quarter; second, the payout of incentive compensation accrued throughout 2025, consistent with our usual practice. As outlined on page 8 of our supplement, we have repaid $634 million of near-term bond maturities year to date, including $555 million in April. Combined with the deleveraging steps taken in 2025, this results in interest savings of more than $60 million versus last year. Compared to 2024, we now expect annual interest expense to be approximately $150 million lower on a run-rate basis at the end of 2026. With no debt maturities until December 2029, we have significant financial flexibility to manage our decommissioning liabilities in a deliberate and efficient manner while maintaining our broader capital allocation priorities. Moving now to our cost reduction initiatives, where we are continuing to make progress across capital, LOE, and G&A. We remain on track to achieve our $450 million target for cumulative run-rate savings by the end of 2026, which is reflected in our current guidance. Building on the significant strides made last year on capital and operational efficiencies, our focus this year will span all three categories, with the same discipline and focus that enabled the results we delivered in 2025. Including the previously noted interest savings, we expect run-rate cash costs to be $600 million lower exiting this year compared to 2024. While commodity prices have been volatile since the start of the conflict, the strength of our execution and contributions from our gas trading portfolio position us to generate significant free cash flow this year. Currently, as outlined on slide 9 of our supplement, we expect to generate approximately $2.2 billion of free cash flow for the full year. This level of cash generation meaningfully advances our progress toward achieving our $3 billion net debt target in the near term while supporting shareholder returns. In closing, these results mark another quarter of consistent, predictable performance across our asset base, underscoring the disciplined execution we have demonstrated for more than a year. We remain well positioned to deliver significant free cash flow this year and beyond, supported by continued execution and structural cost improvements. We will continue to allocate capital with rigor, balancing shareholder returns, balance sheet strength, and investments in future growth through exploration. With that, I will turn the call over to the operator for Q&A. Operator: Thank you. To ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. We ask that you please limit yourself to one question and one follow-up. One moment while we compile our Q&A roster. Our first question will come from the line of Doug Leggate with Wolfe Research. Your line is open. Please go ahead. Doug Leggate: Hello. Thanks. Good morning, guys. I guess, Ben, maybe for you first, the gas trading number is pretty meaningful. I think if I go back maybe about six or nine months ago, you talked about a $300 million kind of run rate, but now we have GCX expansion and a bunch of things going on in Midland coming online. With what you know today, given what has happened with 2026, what tools do you have to maybe protect some of that? That is my first question. My second question, if I may, is, John, a quick one on Alaska exploration. My understanding is you have been waiting on the seismic, and you now have the seismic. I am just wondering what that informs for your views on the existing discoveries and what your running room is for the upcoming drilling program. Thanks. Ben C. Rodgers: Sure. Thanks, Doug. When you look at the marketing book, the $1.1 billion this year, a lot of that is coming from the pipeline transport side. About $300 million is coming from LNG for the remainder of the year. And the bulk of the pipeline transport really is through the summer, where we see very wide basis differentials. To your point, that starts to compress, at least per the curve, given GCX expansion, the Blackcomb pipeline, and GCX Hidalgo coming online in the second half of the year. We watch that, and we will see how the basis trades given the different dynamics with gas production in the basin—higher GORs, a lot deeper targets being drilled with more gas cut than other wells. Basis does, at least per the curve, continue to tighten into 2027. The good thing is that with the elevated LNG prices this year, that does carry through into next year, and, at current strip, we are just above $400 million of expected pretax cash flow in 2027, at strip for both basis and TTF. So still another good year expected next year. We will monitor that. We have hedges on just the basis for this year. We do look at other options to hedge 2027 both on the LNG and the basis side. We have not done any of that, but we monitor that daily and, if we find the right opportunity, we will look to lock some of that in. But even next year, around $400 million, it is still looking to be another good year for us. John J. Christmann: And on the Alaska question, yes, we took this winter off to reprocess the seismic. If you go back, when we drilled Sockeye, we said we went to Sockeye not because it was our biggest prospect, but because it was where we had the best seismic picture. Taking the results from Sockeye and King Street and integrating those into the new reprocessed seismic was really the right thing to do. We and our partners are all thrilled that we took that pause. It now looks like we did not drill Sockeye even in the thickest place, and we will be coming back this winter with a two-well program. We are in the process of assuming operations, and you will see us come back with an exploration well and an appraisal well. We are very, very excited about Alaska. Doug Leggate: Great stuff. Thanks, John. Operator: Thank you. And one moment for our next question. Our next question will come from the line of John Freeman with Raymond James. Your line is open. Please go ahead. John Freeman: Good morning. Hi, guys. The first question, obviously, it was nice to see you be able to take advantage of the macro backdrop and retire all those near-term maturities, and buybacks took a pause. When I think about the rest of the year, should we assume, given that the next maturity is not until 2029 and those are not callable yet, that the majority of the free cash flow goes toward buybacks? I know Ben mentioned the decommissioning obligations. I was not sure if that meant that maybe some of those get accelerated. Any color on uses of the free cash flow? And then a follow-up on Egypt: the flexibility between gas and oil—given the roughly 50% gas-focused activity and the $4.25 gas price—how do oil versus gas prices influence the allocation of activity currently and into next year? John J. Christmann: It is a great question and a good observation. I would start by saying we are living in unprecedented times. We remain committed to our 60% returns framework that we initially outlined in 2021. Since the inception of that framework, we have returned 71% of our free cash flow to shareholders. There have been times when we leaned in. We also, nine months ago, outlined a net debt target of $3 billion, and that is also a priority for us. The beauty of today is we have commodity exposure to WTI, Brent, LNG, and Waha basis. That puts us in a position where, rolling forward, we have a very robust free cash flow outlook for the remainder of the year. While we have made progress on the balance sheet, we are going to continue to be very thoughtful about how we deploy that. We like where the valuation is, but we also want to be thoughtful. Ben C. Rodgers: Sure. To reiterate, given the current price environment and the opportunity we have to improve the balance sheet, we took some of those steps through April. We think the responsible thing to do is evaluate how we deploy our free cash flow for the remainder of the year. We are committed to our framework, as John said. Starting from fourth quarter 2021 when we put the framework in place, cumulative through year-end 2025, we have returned more than 75% to shareholders through dividend and buybacks, and $3.2 billion of that was in buybacks. On the debt side, since year-end 2021, we have reduced debt by $3.6 billion. Being only two months into the conflict, and given the immense volatility over the past two months, we are going to be patient. The responsible thing to do is evaluate how we deploy the significant amount of free cash flow we expect to generate this year. To be clear, this is not a view on the valuation of our equity; it is solely how we would deploy the free cash flow for the remainder of the year. We will pay down debt, we will pay our dividend, and we will buy back shares. The mix is what we are evaluating. At these prices, that is the right thing to do. It is a great position to be in, where we have an increasing free cash flow picture and we are going to be thoughtful on how to deploy it. On decommissioning, we raised guidance on decommissioning spend this year by $20 million. To be really clear, that is not an increase in cost of planned activity; that is all increase in planned activity. There are some more platform wells in the Gulf of Mexico that we want to go ahead and get after, and we will do that this year. John J. Christmann: On Egypt allocation, first, when we negotiated the increased gas price, we geared it towards a $75 to $80 Brent price inclusive of infrastructure investment. We have been fortunate to bring a lot of our new gas discoveries online without a lot of infrastructure spend. There have been some lines that we have laid. We are in a position today where it is still very attractive. With the new acreage we brought on last year, we have new wells to drill there. You are going to continue to see the program about fifty-fifty. They need gas. What we are providing right now is saving about two LNG cargoes a month on the gas side. We are in a pretty good place and will monitor how things play out over time. Stephen J. Riney: I would just add that we are basically splitting rig counts fifty-fifty between gas and oil. In a mid-cycle price environment, we are agnostic between gas and oil. We are not in a mid-cycle price environment today, and it is certainly more volatile, but we feel like this is the right split at this point in time. I would also remind people that while we are getting an average of $4.25 for gas, the actual marginal price on new gas is higher than that. Operator: Thank you. And one moment for our next question. Our next question is going to come from the line of Chris Baker with Evercore ISI. Your line is open. Please go ahead. Chris Baker: Hey, guys. My first question: clearly a lot of great progress on the cost-saving front. Some good first-quarter numbers around LOE and other costs. You mentioned inflationary pressures, I am presuming in the Permian. Any additional color you can add in terms of what you are seeing there? And second, as you make significant progress toward the $3 billion net debt target, what does that unlock in terms of strategic priorities—cash returns, buybacks, dividends, or longer-cycle investments? John J. Christmann: I think the teams are doing a really good job. We came into the year in the Permian with higher power costs that we outlined. You are seeing diesel on the rise here and globally as well, but we came into the year with most of our services under contract, so we are in a pretty good place. You have seen a little bit on tubulars. Power and diesel would be the main items, but in general our teams have done a good job, which is why we did not raise the cost outlook due to those inflationary pressures. Ben C. Rodgers: On the net debt target, last year when we outlined the $3 billion net debt target, we said that at mid-cycle prices we would expect to get there in three to four years. If we were below mid-cycle, it might take toward the end of the decade. If we were above, one to two years. It is now in the crosshairs of being achievable in the near term. Once we achieve that, we will look at our priorities. We have a strong debt maturity runway with no maturities due until the end of the decade, which allows flexibility to prudently manage ARO and decommissioning. We have exploration on the horizon, and we will continue to invest in the future. Last year and this year, exploration spend was less than $75 million. This year’s guidance is still at $70 million—about $20 million for ice roads in Alaska and another $50 million for exploration in Suriname. In 2027, with additional exploration in Suriname and wells being drilled in Alaska, we will see more exploration spend and that number will tick up next year. We will balance all of those priorities if we reach the net debt target. In the near term, we will reevaluate at that time and likely set another target below that. Operator: Thank you. And one moment for our next question. Our next question will come from the line of Neal Dingmann with William Blair. Your line is open. Please go ahead. Neal Dingmann: Morning, John. Thanks for the time. My first question is on Suriname. I know first oil production you talked about from the Grand Magoo project in Block 58 is scheduled for mid-2028. You also mentioned there are various other exploration projects either in Block 58 or 53. Anything you would talk about here in the near term? And second, on Egypt, how many workover rigs are you currently running, and would you consider boosting the workover count to take advantage of higher oil prices? John J. Christmann: Both us and our partner are excited about the additional exploration we have in Block 58. If you remember back when we announced the appraisal wells at Crab Dagu, I said those not only appraised Crab Dagu, but they derisked an entire exploration play from a seismic perspective. We have a number of prospects. The plan is, when we get the rigs out there, to start drilling some exploration wells that at a minimum could extend plateau or potentially even look for incremental infrastructure. We are very excited about getting back to exploring in Suriname. On Egypt workovers, we are in a pretty good place. We have been investing in secondary projects and waterflood performance. We have maintained a pretty flat profile for several quarters, so in pretty good shape. Stephen, anything to add? Stephen J. Riney: I do not know the exact count of workover rigs today. It is somewhere in the mid to high teens, as it has been for quite some time. It got higher than that for a while, but remember, we use workover rigs for completing new drilling wells as well as for workover activity. Operator: Thank you. One moment for our next question. Our next question will come from the line of Kevin McGrude with Pickering Energy Partners. Your line is open. Please go ahead. Kevin McGrude: Hey. Good morning. Thanks for taking my question. I wanted to touch on oil realizations. The international oil realizations were quite good in the first quarter. I realize we are in a very volatile environment right now, but is there any outlook you can provide for the second quarter and maybe the back half of the year for Egypt and North Sea realizations relative to Brent? Ben C. Rodgers: Sure. On both of our oil commodities, Brent and WTI, the current market is giving a premium for spot prices. We sell on dated Brent for our North Sea oil as well as our Egypt cargoes. That dated Brent differential to the futures price you see on the screen has varied pretty widely in the first quarter and into the second quarter—kind of $8 to $10 in the second quarter. That compresses through the year. Based on current strip, it is about a $5 to $10 premium for dated Brent versus the futures Brent. Similar on WTI, there are a couple of factors that go into getting the forward price to a spot price. When you put those together, it is about a $2 to $5 premium on WTI that producers are realizing for the barrels sold in Midland as well. Operator: Thank you. And as a reminder, if you would like to ask a question, please press 11. Our next question will come from the line of Leo Mariani with Roth. Your line is open. Please go ahead. Leo Mariani: I wanted to follow up on LOE. It looks like your LOE has come in below guide the last couple of quarters. Can you provide some color around the drivers there? And do you see inflationary pressures rolling through LOE the rest of the year as well? Also, on Egypt oil, you have talked about a modest decline in gross oil volumes. Looking at late 2025, you did not see a decline, though it ticked down a little in 1Q. Are we still looking at a modest decline for the rest of 2026, or can you stabilize it more? Finally, given energy security, could you consider doing a bit more Egypt oil in coming years if prices are supportive? Ben C. Rodgers: In the first quarter, coming in below guidance on LOE was really cost savings in the U.S., with a little bit of timing. For the full year, keeping guidance at $15.25, we do see inflationary pressures mainly on diesel in Egypt—diesel usage and higher diesel prices pushing up Egypt LOE. Those are offset by other savings we are realizing and expect to continue to realize through the rest of the year, predominantly in the U.S. We have talked about the $100 million of spend this year on LOE uptime projects in the Permian. Those are going according to plan, and when you bake in savings from that, as well as additional work the field is doing in the U.S., it offsets inflationary pressures in Egypt. So full-year LOE guidance is unchanged. Stephen J. Riney: On Egypt gross oil, both are true: over the long term, we are on a slight decline, but recent performance has been stable. Adjusting for the small concession we exited earlier this year, we did four quarters in a row right around 121,000 barrels per day—basically flat. For the next three quarters of this year, you will see something closer to flat around 118,000 barrels of oil per day—about a 2.5% to 3% decline from the prior four-quarter average. That reflects a slight year-to-year decline. Quarter to quarter, you can have noise. We are drilling some very nice gas wells in Egypt; some of those are rich gas and come with condensate, which counts as oil volumes. Some success on the gas side is helping with the oil decline rate. Also note: when we first talked about a slight oil decline several years ago, we were running basically 12 rigs drilling for oil. Today, we are running 12 rigs—half drilling for oil, half for gas—and we are still talking about only a slight annual decline. That speaks to oil that comes with gas and more efficiency on the oil drilling side. John J. Christmann: [inaudible] Today, we are in a good place with what we are executing on the projects. We have new acreage where we are drilling prospects. We do have oil and gas prospects there, and more success in the program could drive what we do. Right now, they need both commodities, and we are doing what we can on both fronts. Stephen J. Riney: I would echo that ending comment by John. Egypt is importing LNG now. From an energy security perspective for the country, they are just as interested in gas as they are in oil, because they can import both oil or refined products, which they do. Operator: Thank you. I am showing no further questions at this time. I would like to hand the conference back over to John Christmann for closing remarks. John J. Christmann: Thank you. In closing, we delivered an excellent first quarter, with continued execution across our asset base driving strong operational and financial performance. In this current price environment, our focus remains on free cash flow generation through disciplined capital allocation and continued cost reductions. We continue to make significant progress toward our $3 billion net debt target and will continue to balance further debt reduction and meaningful capital returns to shareholders through the cycle. Finally, we are well positioned to sustain production volumes across the Permian and Egypt over the next several years, providing a durable foundation for free cash flow generation. Suriname Grand Morgue remains on track for first oil in mid-2028 and is expected to drive meaningful organic oil production and free cash flow growth over the longer term. With that, I will turn the call back over to the operator. Thank you. Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.
Operator: Good morning, ladies and gentlemen, and welcome to the Lifetime Brands, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ remarks, there will be a question-and-answer portion of the call. If you would like to ask a question at that time, please press star, then 1 on your touch tone telephone. Please also note that this conference is being recorded. I would now like to introduce our host for today’s conference, Jamie Kirchen. Mr. Kirchen, you may go ahead now. Jamie Kirchen: Good morning, and thank you for joining the Lifetime Brands, Inc. first quarter 2026 earnings call. With us today from management are Rob Kay, Chief Executive Officer, and Larry Winoker, Chief Financial Officer. Before we begin, I would like to remind you that our remarks this morning may contain forward-looking statements that relate to the future of the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act. These statements are not guarantees of future performance, and factors that could influence our results are highlighted in our earnings release, as well as in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update such statements. Our remarks this morning and in our earnings release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in our release is a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP. With that introduction, I would like to turn the call over to Rob Kay. Please go ahead, Rob. Rob Kay: Thank you, and good morning. Continuing trends from the prior quarter, Lifetime Brands, Inc. reported year-over-year growth in both top and bottom line. While 2025 was a difficult year for our industry, the actions Lifetime Brands, Inc. implemented on pricing, cost, supply chain, and new product development have contributed to these results and continue to produce strong results, which have exceeded expectations and most of our peer companies. Our first quarter results have continued this performance. I will walk you through what drove the quarter, where we see the business heading, and the framework for our full-year guidance, which we are providing today. Q1 results reflected year-over-year growth. Net sales and EBITDA grew year over year. We outperformed most of our public peers and exceeded analyst consensus, and Larry will speak to this in more detail shortly. These results reflect, in part, the actions and strategies that we have implemented over the past two years. We have been consistently focused on the things we can control: cost discipline, pricing execution, new product investment, and operational efficiency. In a quarter where many in our space continued to struggle, these efforts contributed to our performance. I would like to provide additional context. The pricing increases we implemented throughout 2025, which had a near-term impact on volumes, are now reflected in our pricing structure and our customer relationships. Due to the staggered nature of the tariff policy implementation, we are now seeing a more complete impact of those actions in 2026 compared to 2025, when they were being phased in. We expect these factors to continue to support our performance. There are a few main factors that have been driving growth. Kitchen tools remains our largest category and had a strong quarter. Farberware continues to perform well across all channels. KitchenAid, where we absorbed a meaningful market share reset at Walmart over the past two years, is recovering. We have relaunched the Farberware kitchen tool line with new product and have recently introduced KitchenAid storage, and early acceptance has been strong. Trajectory is improving, and we expect continued progress through the balance of 2026. Home Decor also had a very strong quarter and continued to grow. This is a business that was essentially de minimis for us a few years ago. We have been deliberate about product development with brands including Mikasa and Elements, and that investment is generating real results. The club and dollar channels have become meaningful drivers here as well. Their sell-through on our Home Decor programs has been strong, and when Circana data reflects that performance, other retailers take notice, which creates pull-through demand. Our Home Solutions segment, which includes Home Decor, grew 22.9% in the quarter, driven by higher sales in the dollar channel and warehouse club programs. The Dolly Parton brand, which we have discussed on prior calls, continues to be a meaningful contributor to growth across Home Decor, cutlery, dinnerware, and kitchen tools. We shipped approximately $18 million under Dolly Parton in 2025 and expect substantial growth in the brand in 2026. Finally, as we have discussed previously, we continue to see a rebound in our sales of flatware from the disruption in 2025 related to tariff implementation, which resulted in lost shipments for 2025. We saw shipments normalizing beginning in the fourth quarter and into 2026. E-commerce declined at the start of the quarter, driven by annual negotiations with Amazon, as well as a reduction in advertising spend during the quarter as we evaluated our 2026 plans. Trends improved in March as these actions were completed, and we are seeing continued improvement into the beginning of the second quarter. We expect e-commerce to be a contributor to growth for the full year. In cutlery, which has been a growth category for us for a couple of years, we had a year-over-year decline in the quarter. Build A Board, a product line we launched two years ago, continues to contribute to profitability and remains a strong, profitable business. However, we saw some normalization in the quarter. The underlying business remained stable. We are introducing new products in the cutlery line, and we expect that category to remain attractive and support overall growth. Our international business grew year over year in the quarter and continued its trajectory of improving profitability. This growth occurred despite challenging end-market conditions in Europe, particularly in the UK, and reflects, in part, our efforts to expand our sales footprint to national accounts from the legacy sales focus on independent retailers. We are not yet at breakeven on the bottom line internationally, but we have made progress. The final phase of Project CONCORD, our international restructuring initiative, encountered some legal and structural delays in 2025. We expect those to be fully resolved in the first half of this year, and we expect the completion of this work to contribute to improved financial performance. I want to address the macro environment directly because I know it is top of mind. We have been managing tariff exposure proactively and systematically for over two years. During this period, we have expanded our sourcing footprint away from China to other geographies. We were among the first in our space to implement price increases during this period, which had a near-term impact on volumes in 2025; however, it supported our margin structure. Our supply chain is designed to provide flexibility to shift production across geographies as trade economics evolve. While we have established meaningful manufacturing capacity outside of China, in 2025 we sourced a majority of our product supply from China as the tariff-adjusted cost of goods sold was more favorable. We expect this will evolve, and over time, we expect sourcing from other established geographies to increase. On cost of goods sold more broadly, we have not experienced a material impact from resin or freight costs related to recent geopolitical developments. We maintain long-term freight contracts and, while these provide some protection in periods of acute rate escalation, we believe we are positioned to mitigate and respond to changes in freight costs, including those related to developments in the Middle East. We may experience a reduction in sales to the Middle East as a result of disruptions related to the war in this region, but our sales to this region are insignificant, being below $1 million a year. The relocation of our East Coast distribution center to Hagerstown, Maryland is on schedule. The facility, approximately 1,000,000 square feet, adds approximately 327,000 square feet of incremental capacity compared to our current New Jersey facility, and the facility is now operational. Capital and operational costs for this project are tracking below our estimates. We will implement our warehouse management system in the new facility, which we had previously implemented in our West Coast distribution center, where it contributed to improved labor efficiency. The establishment of the Hagerstown distribution facility is expected to position Lifetime Brands, Inc. for future growth and cost efficiency. Let me spend some time discussing our view of the full year. Detailed in our earnings release this morning, we expect net sales of between $650 million to $700 million, adjusted EBITDA of $53.5 million to $56 million, and adjusted net income of $16 million to $17.5 million. This guidance reflects continued top line growth, the full-year benefit of 2025 pricing actions, and a cost structure that has been reset to a lower base. It also reflects the costs associated with the Hagerstown transition, which are running through our P&L this year. We are continuing to invest in new product. Dolly Parton sales grew by approximately 150% in fiscal 2025, and we expect substantial growth again in 2026. As discussed, this growth is across four of our product categories. This year, we will see an expansion of the value line beyond the dollar channel to several additional retailers across a couple of channels. On M&A, we continue to monitor the environment. We have observed reduced activity from financial buyers and lower valuation levels in certain segments. We are seeing real deal flow from businesses that need a larger platform for supply chain, systems, and the infrastructure required to navigate the current trade environment. We are actively evaluating opportunities. As has been our practice, we will remain disciplined in our approach and only move forward with opportunities that provide returns that meet our investment criteria. We will provide additional information when we have something definitive to report. We plan to host an Investor Day later this year, targeting the fourth quarter. We look forward to providing a more comprehensive view of our multi-year strategy and the growth drivers we see ahead. Finally, we entered 2026 with momentum, a cleaner cost structure, and better visibility than we have had in some time. The actions we took over the past two years—decisions that were not easy and that carried real short-term costs—are the reason we are standing here with a business that is growing on both the top and bottom line. We are focused on sustaining that. With that, I will turn the call over to Larry to review the financials in more detail. Thanks, Larry. Larry Winoker: As we reported this morning, net loss for the first quarter 2026 was $4.8 million, or $0.22 per diluted share, compared to a net loss of $4.2 million, or $0.19 per diluted share, in 2025. Adjusted net income was $800,000 for the quarter, or $0.04 per diluted share, compared to an adjusted net loss of $5.3 million, or $0.25 per diluted share, in 2025. Loss from operations was $2.2 million in 2026, compared to income from operations of $1.1 million in the 2025 period. Adjusted income from operations for 2026 was $5.4 million, compared to a loss from operations of $900,000 in the 2025 period. The 2026 and 2025 periods exclude acquisition intangible amortization of $4.4 million. Also, the 2026 period excluded expenses of $2.0 million for restructuring, $1.1 million for due diligence, and $100,000 for East Coast warehouse relocation. The 2025 period excluded a $6.4 million nonrecurring gain related to a litigation settlement. Adjusted EBITDA for the trailing twelve-month period ended 03/31/2026 was $52.7 million. Adjusted net income, adjusted income from operations, and adjusted EBITDA are non-GAAP measures which are reconciled to our GAAP measures in the earnings release. The following comments are for 2026 and 2025 unless stated otherwise. Consolidated net sales increased by 2.4% to $143.5 million. U.S. segment sales increased by 1.7% to $130.7 million. The increase includes the higher selling prices that went into effect during 2025 to mitigate the impact of tariffs imposed on foreign-sourced products. Within the segment, product line increases primarily came from Home Solutions, attributable to Home Decor products in the dollar channel and warehouse club programs. This was partially offset by a decrease in tableware products. International segment sales increased by 10.6% to $12.8 million. Excluding the impact of foreign exchange translation, the increase was 2.5%, driven by higher sales in the Asia Pacific region and to UK nationals. Overall, gross margin increased to 37.7% from 36.1%. U.S. segment gross margin increased to 37.9% from 36.2%. The improvement in the gross margin percentage was attributable to favorable product mix and higher selling prices, partially offset by higher tariffs. International gross margin increased to 36.7% from 35.3%, driven by favorable customer and product mix. U.S. segment distribution expenses as a percentage of goods shipped from our warehouses was 10.9% versus 11.9%. The improvement was attributable to higher sales resulting in a favorable impact on fixed expenses, lower variable labor as unit sales declined but were more than offset by higher dollar volume from higher selling prices, and lower facility supply expenses. This improvement was partially offset by higher freight rates. International segment distribution expenses as a percentage of goods shipped from its warehouses improved to 23.2% from 25% last year. The improvement was due to higher sales resulting in a favorable impact on fixed costs and a decrease in inventory levels at third-party operated distribution facilities. This decrease was also partially offset by higher freight rates. Selling, general, and administrative expenses increased by 16.8% to $36.8 million. U.S. segment expenses decreased by $1.8 million to $28.2 million. The decrease was attributable to lower employee expenses, a lower provision for doubtful accounts, and lower advertising expenses. As a percentage of net sales, expenses decreased to 21.6% from 23.3%. The decrease was due to the impact of fixed costs on higher sales volume. International SG&A remained the same at $3.7 million. Decreases in employee expenses and commissions were offset by foreign currency loss on non-sterling denominated net liabilities, and as a percentage of net sales, expenses decreased to 28.9% from 31.9%. Unallocated corporate expenses were $4.9 million, compared to income of $2.2 million in 2025. Excluding $1.1 million of due diligence expenses in the current period and a nonrecurring legal settlement gain of $6.4 million last year, corporate expenses would have been $3.8 million in the current period versus $4.2 million, a decrease of $400,000. Restructuring expenses were $2.0 million in 2026, of which $1.2 million was for employee severance related to exiting the New Jersey distribution facility, $100,000 for the UK Project CONCORD, and $700,000 to downsize our sterling silver manufacturing operations in Puerto Rico. The high price of silver has made the sterling silver flatware business no longer viable. The facility will focus on ornaments and other profitable sterling silver products. Interest expense, excluding mark-to-market adjustments for swaps, decreased by $400,000 due to lower average outstanding borrowings, partially offset by higher interest rates. Income tax rates for the current and prior periods were 26% and 33.3%, respectively. The difference in the 2026 rate compared to 2025 is primarily driven by nondeductible expenses and foreign losses for which no tax benefit is recognized, partially offset by federal tax credits. Our balance sheet strengthened during the 2026 quarter. During the period, we generated free cash flow of $30 million. This enabled us to reduce our net debt to $170 million, and at quarter end, the adjusted EBITDA to net debt ratio improved to 3.2 times. At quarter end, our liquidity was approximately $110 million, which included cash plus availability under our credit facility and receivable purchase agreement. Lastly, we are pleased to report that our new East Coast distribution facility in Hagerstown, Maryland is in operation and beginning the process of receiving and shipping goods. We previously reported that the cost of the move to the new facility was on plan. We now feel confident that the spending will be favorable to that plan. This concludes our prepared comments. Operator, please open the line for questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star, then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star, then 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. One moment, please, while we poll for questions. Our first question comes from Matt Coranda with Roth Capital. Please go ahead. Matt Caranda: Hey, guys. Congrats on a nice quarter. Maybe just starting with the guidance for 2026, I wanted to hear a little bit more about the pricing assumption that you embedded in the growth for sales, and then any additional color on the way to think about demand between the U.S. versus international? Rob Kay: For pricing, we did not bake into our 2026 view any incremental pricing related to further fluctuations. The pricing that we did in 2025 was all related to tariffs. That is an evolving situation, but it has stabilized, and there were phases of it. Throughout 2025, we reacted to that. We aim to be margin dollar neutral in passing through prices, not necessarily margin percent neutral, and we did that effectively. So in 2026, you get the full-year impact of those pricings, whereas in 2025 they were phased in. In terms of international, it is a small part of our business. The bulk of our financial results are based on North America and the U.S. There is a tremendous overlap in products. As we restructured the business, we aligned the product offerings and product development. The fastest growing brand internationally is KitchenAid, where those products are designed in the U.S.—the same products we are selling throughout the world—and that is the fastest growing area. There is now much more alignment than we have ever had in the past. Does that answer the question, Matt? Matt Caranda: That helps, Rob. Thank you. And then on the margin expansion contemplated in the full-year guide, at least on the adjusted EBITDA line, I wanted to hear about how you built the expectations for margin expansion—contribution from cost cutting you have done and the flow-through in the U.S. from growth. How does that feed into the expansion assumption for the full year? And also, is there any headwind that you are baking in from higher oil prices, component costs, or shipping in the 2026 guide? Rob Kay: In terms of margin expansion, I believe you are talking about EBITDA and bottom line as opposed to gross margin, but I will comment briefly on gross margin. We look at things on a bottoms-up basis. Any fluctuations, particularly in any given quarter with actual results and as we look at the full year and what is baked into our guidance, are a function of channel mix and product mix. As we introduce new product, even if it replaces existing product, the new SKU may have a different margin, so that gets factored in. Channels also differ—club, off-price, mass, independent—so there is differentiation. We add it up, and then it is what it is. If you look at the bottom line, while it is not terribly material to the whole, there is bigger improvement percentage-wise in the international business because that business was not making money, and we are driving that to make money. The U.S. business has always been highly profitable, and the majority of the increase in our bottom line—our EBITDA growth—is coming from the U.S. business. In both businesses, as we continue to grow the top line with a very streamlined infrastructure, a disproportionate amount is going to fall to EBITDA and cash flow. We get the benefit of using our overhead more efficiently. The challenges we had in the UK included too much overhead. The restructuring is addressing that overhead. The infrastructure has changed to make it profitable, and that has been the anchor we are addressing with Project CONCORD. On headwinds, we are not seeing a COGS impact; the bigger driver is the global supply-demand imbalance. If you are sourcing product, you still have leverage, particularly when you can provide growth and more volume to factories that are looking for volume. However, we are seeing increased freight both domestically and ocean freight. Container rates are starting to go up. Unless there is a settlement in terms of the Middle East—which we are not predicting—it seems container rates will continue to increase driven by oil costs. We have baked that into the current analysis as best we can see it. Matt Caranda: Appreciate the detail there, Rob. Maybe just one more from me. Have you seen any changes in behavior from your retail customers since the Iran conflict broke out in early March? Any more reticence to take inventory, or is it relatively business as normal? What are you seeing in demand trends from retail customers over the last couple of months? Rob Kay: We have not really seen anything notable. Most retailers are very sophisticated with finance teams that track the general trends of the economy. We saw in 2024 and 2025 a lot of retailers change safety stock levels, which hurt shipments while they managed inventories more tightly. We are not seeing that now; that seems to have passed. There are channel differences—some retail channels are doing very well, some are not—but we have not seen anything incremental. We have seen more impacts on the supply side. There is a lot of competition, but some suppliers are hurting. Our continued investment in new product development—at a time when there is less new product in the market—has helped us gain placement and position at our customer base, which we are seeing in our results now. Operator: Our next question will come from Anthony Lebiedzinski with Sidoti & Company. Please go ahead. Anthony Lebiedzinski: Good morning, and thanks for taking the questions, and nice to see the better-than-expected start to 2026. First, I wanted to follow up on the last comments you mentioned, Rob, regarding new products. Would you say that new product as a percentage of overall sales is meaningfully up versus where it had been historically? Help us understand the relevance of new products and how that impacted not just the quarter but your guidance for this year. Rob Kay: We did not slow down our new product development through the gyrations of the last two to four years. Product development is a continuous cycle, and we believe we have positioned ourselves favorably as a result. If you look at Build A Board, which we talked about, its first big year was 2024, and it significantly grew our cutlery business. We are constantly looking at what is next for Build A Board, but there is not as much new product there in 2026. It went from zero in 2023 and grew to eight figures, so you are not seeing as much new growth there in 2026. In Home Decor, there has been a lot of new product introduced that has been driving substantial growth. Throughout our portfolio we look at where we can bring new product, everything from highly disruptive to incremental. For example, if white-handle knives become popular, we introduce white-handle knives, now white-handle with some trim, on a knife we have always made. The buckets may have changed, but overall, the mix in terms of new product has not necessarily changed, except for calling out newness like Dolly Parton. Dolly Parton was nothing in 2023, then we had a little bit in 2024, $18 million in 2025, and it continues to grow—this is all a plus-one opportunity for us. Anthony Lebiedzinski: That is very helpful color. Did you give the sales number for Dolly Parton for the first quarter? Rob Kay: We did not. We were down in the Dolly Parton dollar channel in the first quarter. It is just timing. Anthony Lebiedzinski: Got it. I also wanted to follow up about pricing. I know your guidance for the full year does not include any additional pricing increases, but when we look at the first quarter of this year versus the first quarter of last year, can you speak to pricing versus volumes for the first quarter alone? Larry Winoker: Units were down but were made up for in dollar sales. The unit decline was in the single-digit percentages. The second quarter of 2025 was very soft on a volume basis, and that is past us. Anthony Lebiedzinski: Lastly, as far as potential AIPA tariff refunds, how are you thinking about that? I assume it is not included in your guidance, but any color would be helpful. Rob Kay: It is not included in our guidance, and we think appropriate GAAP is not to recognize any impact to the financial statements. We did pay $41.7 million, and we are, according to the Supreme Court of the United States and the Court of International Trade, entitled to a refund. While that may be done by June, the administration could appeal. There are tax implications as well. We have a refund of the tariffs that we paid, subject to a refund, of $41.7 million. Anthony Lebiedzinski: That is definitely a very meaningful number. Thanks very much, and best of luck. Rob Kay: Thanks, Anthony. Operator: This concludes our question-and-answer session. I would now like to turn the call back over to Rob Kay for any closing remarks. Rob Kay: Thanks, everyone, for listening in, for your interest, and for your support of Lifetime Brands, Inc. We look forward to future communication. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, greetings, and welcome to the Texas Pacific Land Corporation First Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shawn Amini, VP of Finance and Investor Relations. Please go ahead. Shawn Amini: Thank you for joining us today for Texas Pacific Land Corporation's first quarter 2026 earnings conference call. Yesterday afternoon, the company released its financial results and filed its Form 10-Q with the Securities and Exchange Commission. It is available on the investor section of the company's website at texaspacific.com. As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events. For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our recent SEC filings. During this call, we will also be discussing certain non-GAAP financial measures. More information and reconciliations about these non-GAAP financial measures are contained in our earnings release and SEC filings. Please also note, we may at times refer to our company by our stock ticker, TPL. This morning's conference call is hosted by Texas Pacific Land Corporation's Chief Executive Officer, Tyler Glover, and Texas Pacific Land Corporation's Chief Financial Officer, Chris Steddum, and Executive Vice President of Texas Pacific Water Resources, Robert Crain. Management will make some prepared comments, after which we will open the call for questions. Now I will turn the call over to Ty. Tyler Glover: Good morning, everyone, and thank you for joining us today. Texas Pacific Land Corporation's first quarter 2026 marked a strong start to the year as Texas Pacific Land Corporation generated record quarterly total revenue, net income, and free cash flow. Oil and gas royalty production averaged approximately 37,001 barrels of oil equivalent per day, roughly flat sequentially and up roughly 19% year over year. In our water segment, both water sales and produced water royalties are the second-best volume numbers in our history. And now, with crude oil prices spiking dramatically over the last few months, Texas Pacific Land Corporation is poised to benefit directly through our oil and gas royalties and indirectly through our diversified exposure across surface and water. Regarding the macro impact for the Permian Basin overall, from our vantage point we have only seen a marginal uptick in recent operator activity. Although oil prices at these current levels would generally stimulate a more robust response, there is still a lot of industry uncertainty around the duration of this oil supply shock. However, as this major supply disruption has persisted longer than initially anticipated, and given that global oil and product inventories are rapidly depleting, oil prices could very well remain elevated for quite some time even if the supply disruption were to be resolved in the near term. If so, we would expect the industry to ramp rig and frac spread activity over the coming quarters. With an immense, unmatched amount of undeveloped well locations, the Permian could readily support robust volume growth so long as the price signal persists. For Texas Pacific Land Corporation, we have always viewed a strong balance sheet as our hedge against low commodity prices. Despite declining oil prices over the last three years, we maintained a strong net cash position throughout and did not need to hedge to protect the balance sheet. Today, with our unhedged commodity position, we are fully exposed to the direct upside from elevated oil prices. In addition to the upward-trending momentum in our legacy oil and gas business, we have also made tangible progress with our NextGen endeavors. Starting with power generation and data centers, during the quarter we entered into an agreement to sell a small section of land for $43 million, which is structured into annual payments over a 20-year period. We have entered into a separate commercial agreement to supply water for this same development. Given the broader commercial details for the project are still being finalized, we are currently limited in providing additional details. We hope to provide additional information in the coming months. Speaking more broadly about our efforts on this front, our commercial activities continue to pick up speed. Virtually every major hyperscaler and AI lab are evaluating large-scale plans in Texas, and our sense is that urgency to lock up power and compute continues to rise. I would add that it is important to not over-extract deal structure and terms from any one deal. Virtually all of our ongoing discussions and negotiations have substantially different makeups. Every developer needs something different, and depending on where in the region a development is planned for, Texas Pacific Land Corporation has varying capabilities for capturing commercial opportunities. For some deals, the land piece will be the primary value driver. For other deals, it may be water or aggregates. Given our scale, our unique capabilities across surface, water, and energy, and our relationships across multiple industries, we have significant flexibility to solve problems for developers. These projects often represent tens of billions of dollars of capital, so naturally, across parties, final investment decisions will take time to unfold. It is clear to me that Texas will become a dominant global hub for large-scale power and compute over the short, medium, and long term. We are excited to get this first agreement, and we hope to provide updates on other significant opportunities as we progress throughout the year. On Texas Pacific Land Corporation's produced water desalination efforts, our Phase 2B 10,000-barrel-per-day facility is nearly complete. The refrigeration inspection is planned for later this month, and we expect to begin flowing inlet water barrels in the coming weeks. This project represents a pathway towards a meaningful solution for the Permian's growing produced water volumes. This test facility will allow us to evaluate whether produced water desalination can work economically at scale while also providing an opportunity to empirically demonstrate commercial potential for waste heat capture, cooling colocation, and utilization of outlet freshwater and concentrated brine streams. Turning to our upcoming shareholder office and field tour visit in Midland on May 18, 2026, for those of you that have submitted an RSVP, you should have received an email a couple of weeks ago with event details and a schedule. If you have not received that email, please reach out to investor relations. We look forward to hosting and seeing everyone in Midland. On a final note, I wanted to comment on Murray Stall's passing. Most of you know Murray's firm, Horizon Kinetics, along with its predecessors, has been Texas Pacific Land Corporation's largest shareholder for many decades. Murray himself has been a tremendous longtime advocate for Texas Pacific Land Corporation. He believed in the company while it was still a thinly traded, little-known trust that owned royalties and surface in West Texas. Murray understood the virtues of real property combined with patience, and he was a rare combination of an independent thinker and dedicated practitioner. Over the years, as horizontal drilling and fracking began to unlock the latent potential of West Texas land, and as our commercial efforts expanded, Texas Pacific Land Corporation grew to become one of the largest publicly traded energy companies in the world. Through it all, as Texas Pacific Land Corporation's share price began to reflect the immense value of our assets, Murray's and Horizon Kinetics' conviction and devotion to Texas Pacific Land Corporation remained unrivaled. While other shareholders would come and go as our share price rose and fell, Murray and Horizon steadfastly remained our largest owner and our biggest fan. Despite these recent tragic events, I am confident that Murray's legacy will live on. Over the years, we have also gotten to know many of Murray's colleagues at Horizon Kinetics who share his principles and investment philosophy. It is plainly obvious how much Murray is revered and respected by his colleagues. We continue to maintain a close relationship with Horizon Kinetics, and we believe that our combined ongoing stewardship will allow Texas Pacific Land Corporation to attain the full potential Murray envisioned. On behalf of Texas Pacific Land Corporation, I offer our condolences to Murray's colleagues, friends, and family. And with that, I will hand over the call to Chris. Chris Steddum: Thanks, Ty. Consolidated revenues during the first quarter of 2026 were approximately $237 million. This represents a quarterly all-time high as well as a 12% sequential increase and a 21% increase over last year's first quarter. Consolidated adjusted EBITDA was $181 million, which was up 2% sequentially and 7% over last year. Free cash flow was $136 million, which was up 15% sequentially and up 8% over last year. The continued strong performance of our royalties position was primarily driven by strong completion activity in the Delaware Basin by Occidental, BP, and Devon in Loving and northern Reeves counties, and in the Midland Basin by Exxon in Martin County. With the high volatility and uncertainty related to global oil prices, I would like to provide some color regarding our commodity price sensitivities. As Ty mentioned earlier, Texas Pacific Land Corporation remains fully unhedged. Using our royalty production volumes for fiscal year 2025 as an illustrative guide, roughly 5 million barrels of annual oil production means that every $10 per barrel increase in oil realizations would equate to approximately $50 million. Our oil price realization last year averaged $65 per barrel. For natural gas liquids, we received production volumes of roughly 3.8 million barrels, which means every $5 per barrel increase to our NGL realization would equate to an additional $17 million of annual revenue. Moving to our well inventory, as of quarter end, Texas Pacific Land Corporation had 5.8 net permitted wells, 9.6 net drilled but uncompleted wells, or commonly referred to as DUCs, and 5.2 net completed but not producing wells. That amounts to 20.7 net line-of-sight wells, which represents a 6% sequential increase. We continue to see operators push longer laterals, with our new permits and new spuds both having an average lateral length in excess of 13,000 feet. On a net normalized basis, after factoring in longer lateral lengths, our line-of-sight inventory is up 11% sequentially. We continue to see strong permitting and drilling activity across our Delaware and Midland positions. And with that, operator, we will now take questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, please press star and 1 on your telephone keypad. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Operator: We will wait for a moment while we poll for questions. We will take the first question from the line of Derrick Whitfield from Texas Capital. Please go ahead. Derrick Whitfield: Good morning, all, and congrats on a really strong quarter across the board. And also, Ty, thanks for your comments on Murray and Horizon, as I know many of your investors will appreciate that. Starting with, I guess, first, the land and water agreement with a gas power generation project. While I realize you may be limited in what you can say this morning, any color that you can paint around the kind of counterparty and scale of this development? It would seem to us it is safe to assume that it is not BOLT given the timeline of the development. And I would also love your thoughts on whether desalinated produced water could be part of the equation for the data center. Tyler Glover: Thanks, Derrick. Not a whole lot that we can say beyond what we put in the release and what I said in the prepared remarks. But this project is not BOLT-related. We have several projects that we are working with BOLT on, but we also have several that are not BOLT-related. I cannot comment on the size or the counterparty. This is one that will likely use brackish water to start, but we are in talks around produced water and using desalinated water at some point on this project and others. Derrick Whitfield: Great. And maybe just shifting back to the 30,000-foot level, it seems in your messaging that there is certainly a heightened urgency year over year among the hyperscalers. Could you help frame how that opportunity has changed and what it can mean for Texas Pacific Land Corporation really above and beyond today's announcement? Tyler Glover: I think speed to power has been the key to these projects all along. Substantially all of the grid power has been taken at this point, and I think a lot of these hyperscalers and developers are now focusing on behind-the-meter gas power generation. That makes a lot of our acreage more viable. And I think the water usage, when you are talking about a gas-fired power plant colocated with a data center, will be much higher. We see that as a net benefit, not only from a revenue standpoint, but also in unlocking additional acreage for Texas Pacific Land Corporation overall. Operator: Thank you. We will take the next question from the line of Timothy Rezvan from KeyBanc Capital Markets. Please go ahead. Timothy Rezvan: Good morning, folks, and thank you for taking our questions. There was not a lot of color on the desalination release. I appreciate your comments at the start of the call here. I was hoping to get a bigger picture overview of where you are going. You have given some parameters on OpEx and CapEx around a theoretical 100,000-barrel-per-day facility. So what exactly are you looking for as you start up this first facility to assess the feasibility of moving forward? And then, I know you need to take a first step before you take a second step, but how would you think about funding projects? I believe you talked about like a $100 million CapEx per 100,000-barrel-per-day facility. Are there discussions going on about a potential partner to help defray those costs? Thanks. Robert Crain: Yeah, sure. This is Robert. Thanks for the question. I will start with what the goals of the facility are, and I think we have said them for a while. We call this research and development at scale. We knew the industry had to move from pilot phasing to something that we would call commercial sizing at the smallest scale, and from the industry perspective, that is usually 10,000 barrels a day. So strictly from a functional aspect, before we get into colocation, we want to see how this operates 24/7, day in and day out, at scale. That is really going to prove the economic viability strictly from an upstream market. Now, when we look at colocation, when you start combining these desal facilities with natural gas generation and waste heat capture colocation, yes, there is great benefit for the hyperscalers from a sustainability standpoint. But also, we have to look at the colocation piece for everything we can do to lessen that upstream cost to the operator to make these commercial. We believe in desal strictly from a need from the upstream perspective, minus what we see for colocation benefit. To be determined on what commercial looks like—there are a lot of structures that we are evaluating. Some focus just on that upstream, and then the benefit of colocation as well. Timothy Rezvan: Okay. I guess we will have to stay tuned throughout the year. And then, as my follow-up, touching on the legacy segments, we saw a step down in revenues in SLEM and in the Water segments from record high levels. If you strip out that one-time land revenue, it is almost flattish quarter over quarter. As we look at the trends here, would you say that 2025 was an upside aberration, or do you think the first quarter was a little bit low? And where I am going with this is, how should we think about the revenue trend across these legacy segments throughout this year, given the volatility in the last couple of quarters? Thanks. Tyler Glover: I can touch on SLEM, but Robert can start with water. Robert Crain: On water, when you look at Q4, for the produced segment you have some accrual noise in there. But really, when you look at produced, you have to look at it more as a three-quarter trend. When you start looking at that three-quarter trend, we think that is much more reflective of the contractual and functional nature of what we have been doing to drive volumes. We are still very bullish on the produced water space. You are going to see some noise in activity levels and movement of volumes. You are going to see some accrual noise. Again, when you look at that kind of three-quarter trend, that is where we see it, and we still see excitement in the produced water space. Tyler Glover: And I would just add, on the SLEM front, I would not read too much into any single quarter. SLEM can get pretty lumpy. We may have a few big infrastructure projects hit within a quarter, and it was pretty strong last year with some of the gas pipe buildout that we were seeing. So again, I would not read too much into any one quarter on the SLEM front. Operator: Thank you. We will take the next question from the line of Oliver Wong from TPH and Company. Please go ahead. Oliver Wong: Good morning, Ty and team, and thanks for taking our questions. For my first question, I was wondering if there is any color on which direction the BOLT partnership is headed from a power generation source perspective. Would the initial phase be going down the path of a CCGT-type infrastructure, or are you thinking about something that could be more modular based? And for my second question, given all the conversations that you are having, looking out over the next five or so years, what do you think the total gigawatts deployed to data centers in the Permian might be, or asked another way, where do you see the TAM of the market potentially headed? And what type of market share could Texas Pacific Land Corporation grab given your land and water infrastructure footprint? Tyler Glover: It is still a little early to tell. We are looking at both options on a couple of different projects, depending on end-user design. I would not rule either out. On the broader outlook, it is hard to say on a total Permian basis. For us, we feel like multiple multi-gigawatt energy campuses on our acreage are viable, and that is definitely the goal. We continue to be very pleased with our progress on that front and very excited about the opportunities. Operator: Thank you. Ladies and gentlemen, with that, we conclude the question and answer session and also conclude today's conference call of Texas Pacific Land Corporation. Thank you for your participation. You may now disconnect your line.
Operator: Good day, and welcome to Coeur Mining, Inc.'s First Quarter 2026 Financial Results 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 Mitchell J. Krebs, Chairman, President and CEO. Please go ahead. Mitchell J. Krebs: Hello, everyone, and thank you for joining our call to discuss Coeur Mining, Inc.'s first quarter results. I will kick off with some highlights from the quarter followed by an update on several key strategic priorities in the wake of the recently completed New Gold transaction. I will then turn it over to Thomas S. Whelan for a recap of our first quarter results before opening it up for questions with the team who is here with me. Before we start, please note our cautionary language regarding forward-looking statements and refer to our SEC filings on our website. The highlights on Slide 4 showcase our strong start despite the first quarter being the softest quarter of the year. Our record results also reflect just 11 days of contributions from the recently acquired New Afton and Rainy River mines. First quarter silver and gold production increased 1,811% year-over-year, respectively, driving quarterly revenue to $856 million. EBITDA increased 12% versus the fourth quarter and nearly fourfold year-over-year to a record $475 million. We generated a very strong $267 million of free cash flow despite over $200 million of quarter-specific and one-time items that Thomas S. Whelan will describe in more detail shortly. These accelerating cash flows continue to supercharge our balance sheet with cash and equivalents increasing nearly 11-fold over the past year to $843 million and growing. A real shout-out to the team for getting us out of the gates cleanly and safely in 2026. The production summary on Slide 5 provides the clearest portrait of what we expect will be a truly watershed year for the company. Among many other positive catalysts on tap, the remaining three quarters will reflect full contributions from New Afton and Rainy River, rising production and cash flow from Rochester, and a strong rebound at Wharf now that its rebuilt crushing circuit is back up and running thanks to a tremendous effort by the team there following a fire in the building last November. Putting that all together along with consistent performance from our three other operations and taking the midpoint of our guidance ranges, we expect to produce approximately 750,000 ounces of gold, over 20 million ounces of silver, and nearly 60 million pounds of copper in 2026. The two new Canadian operations are the main drivers behind an expected 80% increase in our 2026 gold production compared to last year while also introducing copper into our metals mix and driving down our overall cost profile. The 20+ million ounces of silver production we expect to generate this year represents about a 13% increase over last year driven by a full year of contribution from Las Chispas, which was added in mid-February last year through the Silvercrest acquisition, as well as a further expected step-up in production at Rochester. This level of silver production should keep us in the top five of all silver producers globally and is expected to represent over 30% of our revenue this year based on recent prices. It is also important to highlight that 100% of our 2026 gold, silver, and copper production will come from North America with about 70% of our revenues coming from the U.S. and Canada. A couple of other quick updates. You likely saw on March 23 that we provided a corporate update following the closing of the New Gold transaction that laid out an enhanced financial policy reflecting our priorities of establishing and maintaining a flexible balance sheet and reinvesting back into our assets, all while returning capital to shareholders through a substantially increased share repurchase program and an inaugural dividend, which Thomas S. Whelan will talk more about shortly. On the integration front, we are very pleased with where we are after seven weeks since the closing. There has been an incredible amount of planning, effort, and collaboration throughout the combined organization which deserves a big thank you. The teams are engaging in the work of integrating the two companies and everyone is excited about the stronger and larger platform we have created and the tremendous potential that lies ahead. Before turning it over to Thomas S. Whelan, one final note from me. We published our 2025 responsibility report on April 15, which is summarized on Slide 23. Coeur Mining, Inc.'s approach has always been grounded in driving sustainable growth and long-term value creation, and we focused this year's report on clearly tying our sustainability priorities to underlying business value. Thomas, over to you. Thomas S. Whelan: Thanks, Mitch. I will begin with a brief review of our first quarter financial results as presented on Slide 9. Record quarterly performance in revenue, EBITDA, and GAAP net income are just the latest signs of the emerging power and consistency of Coeur Mining, Inc.'s combined portfolio. Key headline financial results included a seventh consecutive quarter of free cash flow and an eighth consecutive quarter of positive earnings per share. This consistent track record of positive earnings and free cash flow, along with our new dividend policy, bodes well for future additional index inclusion. Our first quarter is always a little choppy, with our traditionally seasonally low first quarter operating performance and significant working capital outflows. Add in the complexity of closing a transaction during the quarter, this led to a lot of moving parts in the quarterly results. We included a waterfall chart on Slide 11 where we called out quarter-specific and one-time items totaling over $200 million. However, with the tailwinds of stronger realized prices and a focus on monetizing the opening inventory balances at our newly acquired Canadian operations, we managed to achieve our second-highest free cash flow in company history at $267 million. Our day-one integration efforts have paid off, leaving us set up for a memorable 2026 as we emerge as the new go-to North American-only precious metals company. Slide 8 highlights the incredible turnaround story of our balance sheet. With last-twelve-month adjusted EBITDA increasing by over $1 billion compared to the same point one year ago, and an overall net cash position, along with the new, modernized, and materially upsized $1 billion revolving credit facility, the balance sheet and overall liquidity levels are in great shape. Of note, our cash balance increased by almost $300 million during the quarter, more than offsetting the $272 million of net debt that was assumed at the closing of the New Gold acquisition. I would also highlight that we received multi-notch upgrades from our rating agencies as we completed the acquisition. It is external validation of the immense progress and stability we have built. A couple of final notes on the balance sheet. The obligor exchange related to New Gold’s 2032 bonds that we launched on the transaction closing was completed on April 22. This innovative transaction has allowed us to novate over 96% of the outstanding New Gold notes to become Coeur Mining, Inc. notes, which will provide significant benefits, including no restrictions on our ability to return capital, additional U.S. tax shield, and lower filing and compliance costs. And on April 30, we repaid the bulk of our remaining $45 million of capital leases early to further reduce our overall interest expense going forward. With our 2026 guidance reaffirmed, using our 2026 budget prices, we expect to generate more than $3 billion of EBITDA and $2 billion of free cash flow as shown on Slide 7, even with only nine months and 11 days of contributions from New Afton and Rainy River. This overall confidence in the portfolio was the basis of the updated financial policy as outlined on Slide 10 for the company, including our return of capital strategy that we announced on March 23. As a brief reminder, our Board-authorized capital return strategy is comprised of a $750 million buyback program, which allows for the possibility of continuous activity even during blackout periods, as well as a discretionary component to allow us to execute repurchases opportunistically based on our underlying share price and valuation. We look forward to executing on this program following several months of inactivity due to blackouts. And Coeur Mining, Inc.'s Board has also approved an inaugural dividend policy of $0.02 per share semiannually, with payments expected in the second and fourth quarters. This amount was selected to make the dividend sustainable for the long run even under extreme low-case pricing scenarios and allows for potential dividend growth over time. Two final comments from me. Slide 12 includes our usual snapshot of inflationary pressures that we keep a close eye on every day as we manage the business. In the wake of the recent surge in oil prices, we wanted to highlight that diesel represents approximately 6% of Coeur Mining, Inc.'s total operating costs, and our 2026 cost guidance assumes a diesel price of $3.19 per gallon. A 10% increase in diesel prices would typically increase our cost by about $10 million, which equates to roughly a 1% to 2% increase in our CAS per unit. So while we are not immune to this cost pressure, it is less acute than most people might think. During the March 23 call, I highlighted several accounting nuances that impact our CAS guidance with a special focus on the fair value uplift of opening inventory that arise from the purchase price allocation from the New Gold acquisition. With all of Rainy River and New Afton’s Q1 2026 sales coming from opening inventory, the CAS for the quarter at those mines approached current spot prices as required under U.S. GAAP, as those inventories were recorded at their fair market value. As a reminder, the associated $85 million non-cash impact on CAS during the quarter from this pointy-headed accounting matter is the same concept that we saw at Las Chispas last year. Our overall company-wide adjusted gold CAS would have been $689 less per ounce to give everyone a sense of the significant accounting impact of this non-cash item. The champagne problems of having so much opening inventory. This nuance will carry throughout 2026 at Rainy River as we are fortunate to inherit an approximate 2 million ton short-term stockpile. We will likely have some tweaks to the final non-cash impact of this fair value uplift that we will clarify with our Q2 2026 interim results as we finalize New Gold purchase price allocation. With that, I will now pass the call back to Mitch. Mitchell J. Krebs: Thanks, Tom. Before opening it up for Q&A, as shown on Slide 20, our key strategic priorities for the year ahead remain unchanged. I am very proud to report that Coeur Mining, Inc. finished 2025 as the safest mining company among our peers in the United States for the fourth consecutive year based on MSHA data. Congratulations to the entire team for having the courage to care and for always pursuing a higher standard when it comes to our commitment to keeping everyone safe. I am also extremely pleased to announce that both New Afton and Rainy River received the John T. Ryan regional safety trophy for lowest reportable injury frequency earlier this week at the annual CIM conference. New Afton has received this award 11 out of the past 12 years while Rainy River is a first-time recipient. Our leadership in the safety and environmental areas are two great examples of how we at Coeur Mining, Inc. set the bar high and then strive to exceed our expectations. As we look out over the remainder of the year, we will continue working tirelessly to complete a smooth integration of New Gold and to deliver consistent and predictable performance across our expanded and strengthened platform of seven North American operations. Another key priority will be to continue bolstering our liquidity while making the transition to returning capital to shareholders through our new share repurchase program and initial dividend policy. Carrying out the largest exploration investment in the company’s history and delivering impactful results from these programs will remain a top focus over the remaining nine months of the year. This includes continued drilling at the Silvertip project in British Columbia, where the higher silver price, Canada’s strong support for critical minerals projects, and our own ability to advance this one-of-a-kind silver asset are all coming together to create a potential window of opportunity. Much work remains to be done and we look forward to sharing our progress there later in the year after the busy summer drilling season. Starting with this current quarter, we are excited to begin delivering the tremendous potential of the company that we have built through our recent investments in exploration and expansions and two well-timed, high-impact M&A transactions. I cannot think of a better-positioned company in our sector given our production and cash flow profile, metals mix, growth, geographic footprint, trading liquidity, balance sheet, and, most importantly, the team to deliver it. We will now open the call for questions. Operator: We will now begin the question and answer session. First question comes from Cosmos Chiu with CIBC. Please go ahead. Cosmos Chiu: Great. Thanks, Mitch and Tom and team, a very good presentation. Maybe my first question is on the free cash flow. You kind of touched on it, some Q1-specific items, $200 million, and it is in Slide 11. But could you maybe elaborate on it? I just want to make sure that these are nonrecurring. It will not come up again in Q2. Maybe it will come up in Q1, the Mexican taxes. But certainly will not be recurring for Q2, Q3, and Q4. Mitchell J. Krebs: Yes. Hi, Cosmos. It is Mitch. Thanks for the question. I will ask Tom to say something here in a second. Just high level and you referenced Slide 11 which is a great place to talk about this. Each first quarter, you are really not going to get away from the Mexican tax payments, the interest, and the Rochester property tax. The others were one-time. I mean, the incentive payment is variable year to year. Strong performance last year led to a larger annual incentive payment in the first quarter of this year. And obviously, the tax payments were higher than they have been in recent years due to the last season last year and just overall strong performance from both Palmarejo and Las Chispas. But Tom, anything else you want to add to that? Thomas S. Whelan: Yes. The only thing I would add is just the way we time the interest on the notes. Those will happen in Q1 and Q3. But the rest are only going to happen in Q1. And obviously transaction costs were a one-time. Cosmos Chiu: Perfect. Thank you. And then maybe if I can ask about the capital return program. And Mitch, great to see the dividend now in place and now the $750 million repurchase program in place. I went through the MD&A. It does not seem like you have utilized the share buyback program just yet. Is that something that you look forward to doing sometime in 2026? Is it dependent on free cash flow coming in, dependent on Coeur Mining, Inc. share price levels and— Thomas S. Whelan: I guess, number one, to confirm that it has not been used, number two, would— Cosmos Chiu: —would it get used sometime in 2026? Mitchell J. Krebs: Yes. Thanks for the question. Absolutely. We look forward to enacting that enhanced repurchase program. We have been constrained with blackouts from the New Gold transaction and from the first quarter. Those now will lift after today. So we look forward to becoming more active here starting in the second quarter and beyond on that repurchase program. Cosmos Chiu: Understood. Sorry to come back to this PPA in terms of purchase price accounting to inventory, but I am just trying to wrap my head around it. I understand it has been marked up to market, but the New Afton number over $4,000 in CAS, again Rainy River over $4,000 in CAS, that seemed fairly high. So as we go into Q2, Q3, Q4, is it going to be dependent on how much is being drawn out of inventory versus how much fresh ore you are supplementing the inventory production with? Is that going to be determinant in terms of what CAS looks like each and every quarter? And the 11 days of over $4,000 an ounce CAS was just a function of it being all inventory and maybe just an anomaly over 11 days? Mitchell J. Krebs: Yes, you got it. And no need to apologize for the question. You made Tom's day. Tom, do you want to take that? Thomas S. Whelan: Sure. So let us go asset by asset. For New Afton, think of that as pretty much we have flushed everything out there from the opening WIP and finished goods through those first 11 days. So that $20 million impact, which was $25.60 on the CAS and $3.10 on copper because it is co-product, should be in the rearview mirror. But again, as I referenced at Rainy, it is the champagne problem. We inherited, just to give you a sense, like 30 thousand ounces of gold in finished goods and doré balances at the end of the quarter on acquisition, as well as, as I referenced, a 2 million ton stockpile. So that is well over $400 million of fair value of gold. And as I mentioned, we are finalizing that purchase price allocation exercise here in the second quarter as we are allowed to. So $65 million of that flowed through. There will be a continuing impact through Q2 and Q3, and as we get a little bit more visibility on exactly how quickly we will draw that down and chew through that stockpile, we will be able to give you a little bit more guidance. But I just want to keep going back to this is just pointy-headed accounting. It definitely impacts our earnings, but does not impact free cash flow. Cosmos Chiu: Great. Thanks, Tom. And maybe one last question in terms of operations. Q1, Rochester and Wharf were impacted by certain issues—maintenance at Rochester and, of course, the fire at Wharf. Just to confirm, it sounds like the issues are behind you. It sounds like all the fixes have now been put in place. And so for Q2, Q3, and Q4, should we expect more normalized levels in terms of tonnage and throughput at Rochester and Wharf? Mitchell J. Krebs: Yes. I will start, and then Mick can clean up anything that needs to be cleaned up. If you go back to the guidance that we put out in February in that investor deck, we laid out the production profile by quarter by mine. For Wharf, you could see the first quarter was by far the weakest and then continuing strength throughout the rest of the year. Looking at our results from the first quarter, Wharf was actually just a little ahead of that profile that we laid out back in February. The team has done an amazing job there of getting back up and going. We feel good about that continued progression through the remaining three quarters of the year to land within the full-year guidance range that we put out back in February. Similar story at Rochester. It was a little ahead of plan when you look at expected first quarter versus actual. When you think about some of the things going on on the ground there from the crushing standpoint, the first quarter has fewer days in it than any other quarter, there was some scheduled downtime for maintenance, and there was a lot of over-liner being crushed in the first quarter to go out onto the Phase 2 Stage 6 leach pad. A few of those things were going on in the first quarter, but we expect to see things continue to build there as well through the year to land within the guidance ranges that we put out in February. Mick, anything I failed to mention? Mick Routledge: No. Perfect. [inaudible] building momentum throughout the year as per that quarterly breakdown in the plan. Particularly at Wharf, the team did a fantastic job at that recovery curve and got really a couple of weeks ahead and already right on plan for the year. At Rochester, we knew that was going to be a shorter quarter with a little bit less grade, and we will see that picking up throughout the year. Right on plan and super happy. Cosmos Chiu: Great. Thanks again, Mitch, Tom, and Mick, for answering all my questions. Congrats on getting the deal done and a strong start to 2026. Mitchell J. Krebs: Thanks a lot, Cosmos. Appreciate it. Operator: The next question is from Joseph Reagor with Roth. Please go ahead. Joseph Reagor: Hey, Mitch and team. Thanks for taking my questions. Some of them were just answered, but I did have one question, which is probably for Tom. On the balance sheet, the deferred income tax jumped from $300 million to $3.15 billion. I am assuming it is all related to deferred income tax that New Gold had on their balance sheet previously, but is there anything we should think about there? And then with the accounting around the change in the notes, is there any impact to deferred income taxes accounting? Thomas S. Whelan: I am blushing with all the accounting questions. It is exciting. Thanks. On the debt, good astute observation. It is carried on the books at $425 million, but the face value is only $400 million. Again, the rules require you to estimate the fair value and so, just given that higher coupon that those notes bear at 6.875% versus what our market rate would be, you record that at a little higher value. But the bigger impact is what you talked about: deferred tax liability. Again, this is all driven by the accounting rules. For the purchase or the mineral interests that we have acquired and all the various equipment, etc., those have been recorded at very high value as we went through our valuation exercise. But the tax basis of those assets remains at whatever New Gold’s tax basis was. So that creates a difference between the accounting value and the tax value. You take that difference and multiply it by the Canadian tax rate, and there you have it. So that liability is going to reverse over time similar to what we saw last year at Las Chispas where we had a large tax liability, and that will reverse slowly but surely as the accounting values and the tax values get closer and closer. But that will take literally ten years to reverse out. Thanks for the question. I hope I gave you a good explanation. This is not additional hidden taxes in New Gold’s books or anything like that. It is just driven by the accounting for the purchase price. Joseph Reagor: That was very helpful. And then, big picture, you do have a plan of how to redeploy capital. If you look at the balance sheet, slightly net cash as of the end of the quarter, how aggressive do you want to be on reducing the rest of the debt? Mitchell J. Krebs: Yeah. I think both of the notes, the New Gold notes and then our 5.125%, are pretty low interest, pretty patient, pretty flexible. As you think about allocating capital to the highest returns, those are not going to be anywhere near the top of the list. For now we are fine and comfortable leaving them alone, letting cash build up a bit, getting to a more appropriate level of overall liquidity, and then keeping an eye out for ways to reinvest the excess cash back into the business. We talked about our largest exploration program in company history, so we are being aggressive on that front. We will look at things like Silvertip, of course, K-Zone out there in the future. But as far as those outstanding notes, we are comfortable leaving those alone for now at least. Joseph Reagor: Okay. Thanks. I will turn it over. Mitchell J. Krebs: Okay. Alright. Thanks, Joe. Operator: The next question is from Joshua Wolfson with RBC. Please go ahead. Joshua Wolfson: Thank you very much. I guess my questions are on the New Gold assets. I know there is not a huge amount of data here to go through given the short period between closing and the end of the quarter. First question just on Rainy. Within the data that was reported, production looked relatively good. Grade was lighter relative to what the recent technical report would have discussed. I think it was something like 1.2, 1.3 grams, and the processed material is only 0.9. How should we think about the quarters going forward? Or is there some change on stockpile processing versus what the technical report says? Thank you. Mitchell J. Krebs: Sure, Josh. Thanks for the question. I will start and the team can fill in. On Rainy River specifically, late in the second half of last year Rainy River had some really high-grade open pit material that drove some exceptional performance in the third quarter and the fourth quarter. Our grade profile this year reflects a lower grade open pit profile but increasing over the year. The other big theme is seeing the underground mining rates step up over time and transition to more of a balance in the second part of the year between open pit and underground. As far as those open pit grades in particular, yes, a little bit lower to start the year, according to plan. As you said, very small dataset there with just the 11 days, but that should build a bit over the remainder of the year. Thomas S. Whelan: I would point back to the guidance in February where we give it by quarter. You will see Rainy should have a bit stronger second quarter than third quarter and then a pretty solid fourth quarter based on the mine plan as it stands. It is going to be a very significant free cash flow generator, and we are really excited. Mick Routledge: And just from a technical report perspective, clearly technical report grades are on an annual basis, and we try to break that out into the quarterly profile to help show how we are going to perform from one quarter to the next. From Q2 to Q4 post-close, we expect to be around the grade profile that was planned. Joshua Wolfson: Got it. Okay. Good to hear. And then on New Afton, with the C-Zone final draw bell blast done, how should we be thinking about the ramp-up there? Anything you can walk us through in terms of expectations—maybe execution risks and how the company is managing that? Thank you. Mitchell J. Krebs: Also a back-half year expected there at New Afton on the back of that C-Zone ramp up with B-Zone now behind them as of the end of last year. The target is to be approaching that 16 thousand ton-per-day throughput as we end the second quarter. We started in March and early April more around 11 thousand tons per day. We will be targeting 16 thousand tons per day in the coming months, and that will drive a much stronger back half of the year there to land within the gold and copper guidance ranges that we issued. Mick, anything else there? Mick Routledge: Mitch nailed it. Since the close, it has actually trended up a little bit, so it is definitely gaining momentum. We got around a 13 thousand ton-per-day average post-close alone. It is getting stronger, and we expect to be in and around 16 thousand tons per day at the end of Q2, the way it is trending at the moment. Joshua Wolfson: Great. Those are all my questions. Thank you. Mitchell J. Krebs: Okay. Thanks, Josh. Operator: The next question is from Brian MacArthur with Raymond James. Please go ahead. Brian MacArthur: Good morning and thank you for taking my question. Can I just go back to the— I hate to do this—the accounting again? You talked about how everything at New Afton flushed, which is good. But then you made a comment too that you had 30 thousand ounces on the books of gold as well as material on the pad at March 31. Those 30 thousand ounces—is that going to be additional cash flow that you liberate out of working capital over the next few quarters? I.e., it is over and above the guidance that you have given this year for Rainy River, just so I am clear on this? Thomas S. Whelan: I will go ahead. No. The guidance includes the monetization of this stockpile and the work in process. So no, stick with the guidance; that is in there. The key, of course, is that those ounces that come out of the inventory are going to be at the higher CAS rate, but it is not going to impact free cash flow. Brian MacArthur: Right. So you are just going to bring them up. There is no extra cash being liberated is what I am getting at here. Mitchell J. Krebs: Correct. Brian MacArthur: Perfect. Thank you. Second thing, you also made a comment about, with restructuring the New Gold debt, it helped your tax structures. I did not quite hear that clearly. Is that U.S. tax structure? Or by doing that, does that help you on your Canadian side as well? Thomas S. Whelan: Again, the obligor exchange that closed on April 22 will novate the 2032 New Gold bonds out of the Canadian entity and into the U.S. entity. We will get that tax shelter against our U.S. income, not the Canadian asset. Brian MacArthur: Traditional U.S. Okay. That is what I was trying to figure out. Mitchell J. Krebs: Thanks very much. And again, this is going to make— Thomas S. Whelan: —it is going to make the rating agencies' lives easier because they are not going to have to rate two bonds. Most importantly, it has removed constraints; we have full financial flexibility around return of capital. If not, it was going to be a little cumbersome to deal with those two different indentures. Great work by our treasury and legal teams who executed that extremely swiftly, and we are really pleased to have seen such a large uptake on the amount of folks who took advantage of it. Brian MacArthur: Great. Thanks very much, Tom. That is very clear. Operator: Next question is from Wayne Lam with TD Securities. Please go ahead. Wayne Lam: Yes, thanks, guys. Just a couple of follow-up questions. First one, some really good color that you provided on the overall diesel exposure. But more specifically at Rochester, that would seem to be where you would have the most exposure just given the scale of the mine. What kind of cost pressures might you be seeing there specifically on the energy front? And do you have any more detail on the timing of planned maintenance activities on the crushers through the year? Mitchell J. Krebs: Yes. Thanks, Wayne. I appreciate the questions. Tom and Mick, I will throw it over to you on the Rochester-specific diesel question, and then maybe you can also hit Wayne’s second question around maintenance timing relating to the crusher out there. Mick Routledge: Yes. On the diesel front, the biggest exposures are the open pits: Rochester, Wharf, and Rainy River. But the overall impact around the total cost—and Tom can weigh in on the percentages here—is not too significant. We are not seeing too much from Q1 flowing through into Q2, but clearly we are watching that very carefully. On Rochester’s maintenance program, the bigger shutdown is toward the early part of Q4 of this year where we are going to do some work around feeders on the secondary of the crusher. That is also built into the profile and the plan, so you will see that in the quarterly profile. The Q4 projection is accurate. The rest are short routine maintenance shutdowns—one, two, three days to change cones and other bits and pieces that are all planned and will continue each year. Thomas S. Whelan: And Wayne, the only thing I would add is absolutely Rochester and Rainy River are the two assets where we spend the most money to produce all the amazing amounts of gold and silver that we are forecasting. We have a team that is laser-focused on monitoring this—robust monthly reviews, cost reviews, looking out ahead, understanding when contracts are expiring—to keep a really close eye on that. I feel really comfortable that we are monitoring it as best we can. So far, so good. Wayne Lam: Okay. Perfect. Maybe just to follow up on that one. You said there was maintenance planned in Q4, and that is already baked into the quarterly guidance where you have a pretty big step change in production in the last quarter of the year. Mick Routledge: Correct. Wayne Lam: Okay. Perfect. And then my only other question was on the labor cost front. Again, a lot of good detail on the inflation that you are seeing. What kind of exposure or breakout on the labor cost pressures are you seeing between the U.S. operations versus Mexico? Mitchell J. Krebs: I will start, Wayne. The inflationary cost pressure slide in the deck, Slide 12, that bottom-left bar chart shows year-over-year increase of something like 15%. A decent amount of that is incentive comp, higher year-over-year. I just wanted to flag that. As far as labor pressures in Mexico versus the U.S., I think we are seeing it more in the U.S. context versus Mexico. But Mick, Tom, do you want to provide any more detail or context? Mick Routledge: General levels of turnover and who we need to recruit—no shortfalls in labor availability. It is just that general mining turnover rate and recruitment performance is normal. Not feeling too much pressure there at the moment. From a cost perspective, as Mitch said, we are focused on that and seeing a little bit of increase in cost, but nothing unusual for Mexico. Thomas S. Whelan: And the first quarter is the quarter where you implement base salary increases. Those have happened. Typically, if you have really undercooked salary increases, people get their bonus and then head off the other way. We are feeling really comfortable for now. For what it is worth, we do a midyear review just to make sure that we are keeping an eye on labor rates. As we all know, you need the bodies to deliver all this production safely and profitably. Mitchell J. Krebs: Good point, Tom. And Mick, on the turnover rates, we have not seen an uptick at all. In fact, we have seen things go the other way. Wayne Lam: Yep. Okay. Perfect. Well, hopefully we see that same year-over-year share price performance, so you will be paying out those incentive bonuses again next year. Congrats on a good quarter, guys. Mitchell J. Krebs: Thanks, Wayne. Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Krebs for any closing remarks. Mitchell J. Krebs: Thank you for your time and all the great questions today. We look forward to getting back together again this summer to talk about our second quarter results, which should really start to reflect the power of the platform, and we can share our progress on what should be a record-breaking 2026. Thanks again for your time. Have a good day. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good morning, and welcome to the Matrix Service Company Conference Call to discuss results for 2026. Currently, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the conference over to John Hewitt, President and CEO for Matrix Service Company. Good morning, everyone. John Hewitt: Before we get started, I want to take the opportunity to introduce two individuals joining our call today for the first time. First is Patrick Roberts, who has added investor relations to his current role, which also includes corporate development and strategic planning. Next is Sean Payne, currently chief operating officer, who, as you know, will take the reins as president and CEO on July 1. Sean is currently at a major project kickoff in Houston and will not be with us for the Q&A portion of this earnings call but will be joining us at upcoming investor conferences and on other scheduled calls. With that, I will turn the call over to Patrick. Thank you, and good morning, everyone. Welcome to Matrix Service Company's third quarter fiscal 2026 earnings call. Patrick Roberts: As John mentioned, participants on today's call include Chief Executive Officer, John Hewitt; Chief Operating Officer, Sean Payne; and Chief Financial Officer, Kevin Cavanah. Following our prepared remarks, we will open the call up for questions. The presentation materials referred to during the webcast today can be found under Events and Presentations on the Investor Relations section of matrixservicecompany.com. As a reminder, on today's call, we may make various remarks about future expectations, plans, and prospects for Matrix Service Company that constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements because of various factors, including those discussed in our most recent Annual Report on Form 10-K and in subsequent filings made by the company with the SEC. The forward-looking statements made today are effective only as of today. To the extent we utilize non-GAAP measures, reconciliations will be provided in various press releases, periodic SEC filings, and on our website. Related to investor conferences and corporate access opportunities, Matrix will be participating in the Sidoti MicroCap Virtual Conference in May and will also be participating in the Stifel Cross Sector Insights Conference in June in Boston, and the Northland Growth Virtual Conference on June 23. If you would like additional information on these events or would like to have a conversation with management, I invite you to contact me through the Matrix Service Company Investor Relations website. Turning now to safety. As we begin our earnings call, I want to recognize that May is Mental Health Awareness Month. At Matrix, we believe that safety goes beyond physical well-being. Mental health is just as important. In our industry, the pressures of strenuous work and extended periods away from home can take a significant toll. Unfortunately, the construction industry faces some of the highest rates of suicide, making it critical for us to address these challenges directly. But whether you work in the construction industry or elsewhere, each of us faces challenges in life that can put our mental health at risk, and we need to know that resources are available and it is okay to ask for help. Matrix is committed to reducing the stigma surrounding mental health. We strive to foster an environment where everyone feels comfortable seeking support, and we provide resources to help our employees take care of themselves and each other. By prioritizing both physical and mental safety, we reaffirm that every aspect of our team's well-being is paramount. We encourage each of you to do the same. Together, we can make a difference and ensure that no one feels alone. I will now turn the call over to John. John Hewitt: Thank you, and good morning again, everyone, and thank you for joining us. I want to highlight many of the key events that have happened in the quarter that will provide clarity on the progress we are making on our win, execute, and deliver strategy. First, the business returned to profitability in the quarter as we earned $0.13 per fully diluted share on an adjusted basis despite revenue levels being impacted by client-related delays and weather during the quarter. We expect revenues to decline in Q4 and profitable performance to continue. The lower revenues in Q3 principally came in our book work caused by abnormal and unforeseeable weather events and late client deliverables. These delayed revenues are moving into later quarters. This profitable outcome was driven by the quality backlog, good operating performance against that backlog, and organization streamlining that has occurred over the past twelve months. As it relates to our revenue guidance, the revenue movement I mentioned contributes to a 2.2% reduction in the midpoint of our guidance range from what was $900 million to a new midpoint of $880 million. Even with the slight reduction in the midpoint of the guidance range, the revenue in the fourth quarter is expected to turn upwards and supports our continued profitability. During the quarter, we reached positive resolution on two legacy legal issues. The first was a collection issue from an industrial client working toward commercial viability and the other, a contract dispute with a midstream company for whom we built a crude terminal during the COVID outbreak. The collective result was in line with our balance sheet position, will increase our cash balance by nearly $20 million, and will allow us to reduce our legal spend in the future. These two items present final closure to the remaining significant legacy disputes that have distracted the organization these past few years. Our opportunity pipeline remains strong at $6.9 billion, which represents not only our traditional LNG business, but the addition of more opportunities in mining, minerals, power generation, and data center–related activities. The awards in the quarter were below our expectations, affected mostly by timing of client decision-making. Activity in the quarter and the month of April do contain some key strategic wins for the company. First, following the close of the quarter, we received a limited notice to proceed for a major mining construction project for a client in the Western United States. Second, over $30 million of our electrical-related awards received in the quarter are directly related to the build-out of data centers and enhanced power demand. Book-to-bill in our electrical business for the quarter was well over 1.0. We expect to see continued growth in both of these markets. The impact of the Iran conflict on our business has been minimal to date. However, we believe it will only serve to emphasize that as countries around the world look to find secure, reliable oil, gas, LNG, and NGLs, the United States can play a major role in filling that need. This will continue to support the infrastructure designed and constructed by Matrix Service Company. Finally, in the quarter, we continued our organizational realignment that started nearly twelve months ago. As previously disclosed, Sean Payne, our chief operating officer, will succeed me as CEO on July 1. I have had the privilege of working with Sean in various capacities and companies for more than thirty years. He is a seasoned strategic leader with strong values and a deep operations and finance background that position him well to lead the company forward. Last week, we announced that Kevin Cavanah, our chief financial officer, will depart the company in September. Kevin has been with Matrix Service Company for more than 22 years, fifteen of which have been as our CFO. Kevin has built a strong and experienced finance organization with a deep bench of talent and well-established financial and control processes. The company has begun a comprehensive internal and external search for our next CFO, and Kevin will ensure a smooth and seamless transition through the completion of our fiscal year-end reporting. In addition, while not a public-facing role, Nancy Austin, who has served as our chief administrative officer and has been with Matrix Service Company for twenty-six years, will also be departing the company. Nancy has been instrumental in establishing a strong foundation for key support services, most importantly focused on ensuring that we can attract and retain the needed labor resources. Nancy's responsibilities are being redistributed and the position will not be backfilled, reflecting the company's commitment to flattening our organization structure while ensuring we remain efficient and responsive to the needs of our customers and partners. Before moving on, I want to thank them both for their many years of dedication, hard work, and leadership. The transition to Sean's leadership of the business, including these changes, as well as his vision on organizational structure and operational priorities, has already commenced. The core elements of our win, execute, and deliver strategy, of which he is the principal architect, contain guiding principles for the company that are already positively impacting the bottom line and will be the focus moving into 2027. Most of the executive leadership will soon be operating out of our Houston office, which has the added benefit of putting us closer to many of our top energy clients. The organization is now better prepared for growth, has enhanced focus on our priority markets, is more competitive, and will have a more consistent execution approach. I am excited for this new group of leaders to continue our journey and drive continued success and value creation across the business. I want to turn the call over to Sean for a few words on the recent mining award and his focus areas. Sean Payne: Thank you, John. Good morning, everyone. As John mentioned, our profitable third quarter results show the progress we are making with our Win, Execute, Deliver strategy. These results demonstrate that the execution improvement initiatives related to the execute pillar of our strategy are driving clear, measurable gains in profitability. We are bringing the same disciplined approach to the win pillar of our strategy, where we are continuing to strengthen our leading EP position for critical LNG and NGL infrastructure, as well as expanding into new and reemerging markets across North America. This approach is building real momentum in our sales pipeline and has already led to early successes across several areas. One example is a limited notice to proceed that we received for an important mining sector project that we are kicking off today, which John mentioned earlier. The project is expected to start in Q4 and continue throughout fiscal 2027. After nearly a decade of limited capital spending, increases in demand and rising nonferrous metal prices are starting to support new development activity. As a result, our project opportunity pipeline in the sector has grown significantly. We have a strong history in mining, and reestablishing our presence as the market rebounds is a key part of our strategy. Moving forward, as I get ready to assume the CEO role, I have taken several early steps this quarter to continue shaping how the organization operates. These changes are intended to create a more efficient and operationally focused organization that can make decisions faster and respond more quickly to market opportunities and our clients. Examples of recent changes include streamlining, as well as the decision not to add a COO back into the organization once I become CEO. With operations reporting directly to me, we eliminate unnecessary handoffs and sharpen our organizational alignment around what matters most: our clients, our projects, and the safety of our workforce. Over my first hundred days, my focus will be on implementing a clear roadmap for how we drive higher growth and continue improving profitability. I will provide additional insight into those priorities on our fourth quarter earnings call. Before I turn the call over to Kevin to review our third quarter results, I want to say how grateful I am for the opportunity to build on our strong foundation and lead this organization into the future. Kevin? Kevin Cavanah: Thank you, Sean. Revenue increased to $206.7 million in the quarter as compared to $200.2 million in the third quarter last year. The growth was driven by the Storage and Terminal Solutions segment, partially offset by reduced revenue in the Process and Industrial Facilities segment. Gross margin was $17.2 million, or 8.3%, in the quarter compared to $12.9 million, or 6.4%, for 2025. I will discuss specific drivers for that improvement when I get into the segment results, but on an overall basis, gross margin improved from both higher direct project margins and lower under-recovered overhead. Moving on to SG&A, which was $15.2 million in the third quarter, compared to $17.7 million for the prior year. The decrease is due in part to lower compensation-related expenses resulting from continued efforts to improve organizational efficiency. Additionally, stock compensation expense was lower as a result of executive separations during the quarter. For 2026, the company produced net income of $0.8 million, or $0.03 per diluted share, compared to a net loss of $3.4 million, or $0.12 per diluted share, in 2025. The company incurred restructuring charges of $3 million in the quarter. Excluding those restructuring charges, adjusted earnings were a positive $0.13. Adjusted EBITDA improved to $4.9 million in the quarter compared to breakeven performance in the prior year third quarter. Moving to the segments. Storage and Terminal Solutions segment revenue increased 16% to $111.6 million in the third quarter, compared to $96.1 million in 2025. This is the highest quarterly revenue level for the Storage and Terminal Solutions segment in six years. We expect this growth trend to continue, driven specifically by specialty vessel storage projects, including projects for LNG, ethane, and butane. The growth is also reflected in the segment gross margin, which increased to 7% in 2026 compared to 3.9% in 2025. Utility and Power Infrastructure segment third quarter revenue was $60 million, compared to $58.7 million last year. Project execution was strong throughout the segment, including peak shaving and electrical, producing a 13.6% gross margin in the quarter compared to 9.4% in the third quarter last year. Process and Industrial Facilities segment revenue decreased to $35.1 million in the third quarter compared to $45.4 million last year. Gross margin was 2.5% in 2026 compared to 8.3% for 2025, a decrease of 5.8%, primarily due to mix of work and the settlement of a legacy legal matter discussed earlier. We expect revenue and margins in this segment to rebound in fiscal 2027 due in large part to the mining project previously mentioned. Moving to the balance sheet. Our cash balance increased $34 million in the quarter. We ended the quarter with cash of $258 million, which also drove an increase in liquidity, which was $297 million at the end of the quarter. The growth in cash and liquidity was primarily due to the timing of cash flows on projects, as well as positive earnings. While we expect the timing of cash flows on projects will utilize some cash as we complete fiscal 2026 and move into fiscal 2027, the financial position of the company remains strong. I will now turn the call back over to John Hewitt. John Hewitt: Thank you, Kevin. Before taking questions, here are the five critical takeaways from this call. First, the return to profitability in Q3 demonstrates the strength and credibility of our operating model and strategy even on lower revenues. Second, the Q3 revenue shortfall is due to timing issues from customer and weather-related delays that moved book work out of the period. Third, our balance sheet is strong and supports our financial growth and strategic objectives. Fourth, our book-to-bill is driven by timing with a strong backlog at over $1 billion. We expect awards in key sectors like mining, minerals, and LNG infrastructure to drive book-to-bill higher in fiscal 2027 and support continued profitability. And fifth, the leadership and organization transition currently underway is planned, delivered, and controlled, ensuring strong continuity. The CFO search is in motion, and you can expect Sean to share his first hundred-day roadmap as Matrix Service Company's CEO on the next earnings call. That concludes our prepared remarks. We will now open the call for questions. Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, please press 1-1 and wait for your name to be announced. To withdraw your question, please press 1-1 again. Our first question comes from John Franzreb from Sidoti. Please go ahead. John Franzreb: Congratulations on the return to profitability. Thank you. I guess I want to start with the just-reported quarter itself. There was a drop sequentially in the revenue in the utilities segment. There is a sizable increase in the gross margin of that business on a sequential basis. Can you walk us through the puts and takes on what is going on there? Kevin Cavanah: Yes. If you look at the profitability, there was really good performance throughout the segment. The power delivery business outperformed what we expected from a margin standpoint, and we also saw the same in the peak shaving work. It was really good performance there. It shows when you have good performance throughout a segment what that can do to gross margin. Now, the revenue level did come down, and we expected that. We have been doing some work on a peak shaver project for well over two years now that still has more work to do, but the manpower required for that project is coming down a bit, and that is driving the revenue down. If you look at the funnel for the company, peak shaving opportunities should continue to provide a lot of revenue into the future. We see a good piece of that in the funnel. It will take us a little bit of time to book the next one, so you will probably see the revenue for the utility segment level out for a while until that next peak shaver project is booked. John Franzreb: Got it. And you mentioned, and I might have missed this, the restructuring charge that you incurred in the quarter—what was that for? Kevin Cavanah: It related to a couple of primary things. One is our CEO transition. We also had a lease—because we have tried to become more efficient in what offices we have—that we are getting out of. We thought we were going to be able to sublease, but the market has not been as strong for a sublease on that facility as we had planned, and so we had to take a charge related to the lease, a lease impairment charge. John Franzreb: Got it, Kevin. And just on the backlog, we had two years of elevated bookings and backlog; in the last four quarters, it has been drifting lower. What is the confidence level that the new projects you have been writing are of sufficient profitability to maintain profitability into fiscal 2027? John Hewitt: I will hit that one. The backlog level is still at a billion dollars and contains solid margin work. Recall we booked two pretty major projects fairly close together that drove backlog up, and then it took a while for those projects to get started to really start burning revenue. We still feel really good about our opportunity pipeline, our expected award cadence over the next couple of quarters, and the award momentum we think will build as we move through fiscal 2027. Our expectation is to maintain a strong revenue level and profit on that revenue. John Franzreb: On that note, I will get back into queue. Thank you. Operator: Thank you. Our next question comes from Ted Jackson from Northland. Your line is open. Ted Jackson: Thank you very much. Excuse me. A couple of questions. Let us start with the restructuring and what is going on. I know there are many moving parts, and you have been working for a long time to make it more efficient and improve its margin. When we think about this company at a steady state, with the management team in place and the restructuring efforts behind you, what is the pro forma business model? Where do you see, with this restructuring, a standard gross margin, operating margin, and net margin for Matrix when you are done and the business is mid-cycle? Kevin Cavanah: I will give you a preliminary answer, and I would expect that as we bring in a new CFO, the new team will take a fresh assessment. John and I have published long-term metrics that we have been striving to achieve, and I would imagine the new team will reevaluate and put their own out there. Carrying on from the current metrics, the changes we are making to streamline the business will allow us to achieve the SG&A target we have out there, but at a much lower revenue level. You will see us around 6.5% SG&A in fiscal 2027, in my expectation. The gross margin target we have out there has proven viable. The direct margins we are seeing in the business are meeting or at times beating 10% or better, and we are seeing improvement in the recovery of overheads, which has been a drag on earnings the past few years. As we take cost out and continue to grow the business, that will continue to get better. We are tracking to achieve those targets, and the organizational changes we have put in place are helping us get there. It lowers the breakeven level and the level of revenue required to get to full recovery. In effect, these changes increase the earnings power of the business. Ted Jackson: My next question is about backlog and the pipeline, which remains robust. Your commentary suggests that you expect to see a turnaround in terms of bookings and backlog growth and a regrowth of backlog as we get into 2027. Previously, you indicated that would start to turn around mid–fiscal year. Does that scenario still hold, and given the size of projects in the funnel, what kind of bookings reacceleration could we anticipate? John Hewitt: Our current backlog and what we see as the award cadence—what we have said in the past is we expect our awards to be wrapped around our normal day-to-day business plus some smaller and midsize projects. That will allow us to continue to burn backlog and maintain a revenue level that, as Kevin said, sustains our profitability as we move into and through fiscal 2027. Our expectation on the big project awards—the big chunk projects—is that they will be entering into our proposal pipeline sometime probably in mid–fiscal 2027 and would be coming to awards later on in 2027. We feel good about where our backlog is and where our opportunities are. The award cadence and momentum, not only for the big projects but also for some of the smaller ones, will help us maintain a good quality backlog with good margins and maintain a revenue level that supports improving profitability. As some of those bigger projects enter our backlog and we start to burn that revenue, that will start to expand our margins. Kevin Cavanah: I would add, peak shaving opportunities and specialty storage really drove the prior backlog growth, and those opportunities are still there. Now we have other emerging markets we can add, including the mining we talked about on the call. There are construction-only opportunities we are pursuing and opportunities related to the continued expansion of electrical infrastructure. There are a number of areas that will add to the markets that drive backlog. We also see a lot of opportunity in the power generation market, even if it is working as a construction partner with some of the bigger EPC firms. We have a deep resume in power generation that has been on the shelf for the last five to seven years. With the return of higher demand across gas power generation—backup, peak shaving, simple cycle, or combined cycle—our resume applies strongly. We expect sometime in fiscal 2027 to be adding those kinds of projects into our backlog to support revenue. Ted Jackson: Switching to the oil and gas market, with the situation in the Middle East and oil around $100 a barrel, and potential for more drilling in the U.S., how do you see that benefiting Matrix? Are you seeing any pickup in dialogue because of the changed global environment? John Hewitt: We have a continuing client dialogue. Our view is that countries around the world are looking to ensure secure and reliable places to get their needed energy supplies—not only given what is going on in the Persian Gulf but also in Ukraine. Whether that is natural gas in the form of LNG or NGLs for chemical production, like ethane or ethylene, we believe this will create more investment in the U.S. for export and for the production of those energy assets. Those fit right within our wheelhouse. Construction of LNG facilities and natural gas liquids facilities are things we do day in and day out. We think these macroeconomic and global issues will drive increased investment in the United States in those energy assets, and Matrix Service Company is well positioned to take advantage of that. Ted Jackson: Final question: in your discussion about legal matters, you said you would see reduced legal spend going forward because of those settlements. Is that material enough to notice within the financial statements? How much were you spending, and what kind of expense is being removed with these resolutions? John Hewitt: Those disputes were contract-related, project-related, so that expense hit in what we call construction overhead, and it was one of the things driving some under-recovery of overhead. It should make us more efficient in fully recovering our overhead. We have not disclosed the dollar amount of legal expenses, but lawyers are not cheap. Operator: Thanks. John Hewitt: Thank you. Operator: As a reminder, to ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. Our next question comes from John Franzreb from Sidoti. Your line is open. John Franzreb: Yes. I have a question about the deferred jobs. Do you expect them to fall into Q4, or are they deferred into fiscal 2027? John Hewitt: Both, frankly. When we are waiting for permits or engineering, you are just pushing, for instance on the labor, your hiring and manpower levels down the road. Where we might have had in the quarter on a job—making numbers up—100 craftspeople that would have ramped up to 200 in the fourth quarter, now that 100 is happening in the fourth quarter and the 200 is happening in Q1. I am just giving you a sense that we are not going to make up for all of those delays in one quarter because it pushes the whole job down the path. We certainly expect, as we said and based on our guidance, that revenues will climb in Q4 and the business will stay profitable in Q4 because of the quality of the work, the quality of our execution, and the level of revenues. Part of the message is that Q4 revenues are going to increase, and this pushes more revenue into 2027. John Franzreb: Got it. And, John, how much revenue was actually deferred out of Q3? John Hewitt: I would say it was probably $20 million to $25 million. The biggest piece was the weather, but there were some permitting issues too. John Franzreb: Got it. And if I understood your commentary to one of my questions earlier, Kevin, it sounds like near-term the utility segment will be kind of flattish with potential to recover in 2027, for the reasons John outlined. To hit your midpoint, that might suggest that the storage business will have a strong Q4. Am I interpreting that properly, or are there other puts and takes I am not thinking about? Kevin Cavanah: You are 100% right. I would expect the Process and Industrial Facilities segment and the Utility and Power Infrastructure segment to be relatively flat from Q3 to Q4. The growth is going to come in Storage and Terminal Solutions. John Franzreb: Okay. Thank you for the clarity. I appreciate it. Operator: I am showing no further questions at this time. I would now like to turn it back over for closing remarks. Patrick Roberts: Thank you. As a reminder, we will be participating in the virtual Sidoti MicroCap Virtual Conference in May. We will also be attending the Stifel Cross Sector Insights Conference in June in Boston and the Northland Growth Virtual Conference on June 23. Additionally, if you would like to have a conversation with management, please contact me through the Matrix Service Company Investor Relations website. You may also sign up to receive MTRX news by scanning the QR code on your screen. Thank you for your time. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Welcome to the Liquidity Services, Inc. 2026 financial results conference call. My name is Daniel, and I will be your operator for today's call. Please note that this conference call is being recorded. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Michael Patrick, Liquidity Services, Inc. Vice President and Controller. Michael Patrick: Good morning. On the call today are William P. Angrick, our Chairman and Chief Executive Officer, and Jorge A. Celaya, our Executive Vice President and Chief Financial Officer. They will be available for questions after their prepared remarks. The following discussion and responses to your questions reflect management's views as of today, 05/07/2026, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in today's press release and in our filings with the SEC, including our most recent Annual Report on Form 10-K. As you listen to today's call, please have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, management will discuss certain non-GAAP financial measures. In our press release and in our filings with the SEC, each of which is posted on our website, you will find additional disclosures regarding these non-GAAP measures, including the reconciliations of these measures with their most comparable GAAP measures as available. Management also uses certain supplemental operating data as a measure of certain components of operating performance, which we also believe is useful for management and investors. This supplemental operating data includes gross merchandise volume and should not be considered a substitute for or superior to GAAP results. At this time, I will turn the presentation over to our Chairman and CEO, William P. Angrick. William P. Angrick: Thank you, and good morning. Against the backdrop of global tariffs, weather disruptions, and geopolitical tensions, I am pleased to report that Liquidity Services, Inc. continued to grow its market share and create value for customers and shareholders during our March quarter. Our second quarter results were fueled by our broad industry coverage, robust buyer liquidity, and improved operating leverage, which drove an 18% year-over-year increase in our consolidated segment direct profit and a 37% year-over-year increase in our consolidated adjusted EBITDA. Our asset-light business model continued to generate strong operating cash flow in excess of adjusted EBITDA, and we ended the quarter with $204 million in cash and zero financial debt. We expect to allocate capital to high-quality internal growth initiatives, complementary acquisitions, and targeted share repurchases. Our diversified marketplace portfolio continues to show strength in uncertain times, and our performance reflects disciplined execution across each segment of our business. Our RSCG segment continues to leverage our enormous data flows, analytics, and domain expertise to dynamically match increased product flows with the right buyer channels to improve recovery and drive meaningful operating leverage. Our retail segment GMV and direct profit were up 10% and 29% year over year, respectively, as higher consignment flows in our retail segment were driven by several top 20 retail accounts following the peak holiday return season. Our D2C marketplace, RetailRush, more than doubled its GMV sequentially during Q2 and continues to establish new records on a month-over-month basis. Geographically, we have continued to grow our retail buyer and seller base in Canada, Mexico, and Brazil, and expect these markets to be fertile ground for our RSCG marketplace. In GovDeals, the impact of significant winter weather events resulted in lower-than-expected GMV growth of 5%. However, GovDeals segment direct profit grew 12% year over year, and we set a number of new records in Q2 for GovDeals reflecting the strong position of our market-leading business, including a record number of new accounts signed, which is up 30% year over year, a record number of unique sellers in a single quarter, too, and a record number of unique bidders in a single month. Yes. We continue to see significant expansion opportunities in the $3 billion GMV public sector personal property market, as the majority of large cities and counties still use some form of high-cost, full-service takeaway auctions. Our lower-cost, flexible solution provides clients a superior net recovery. We are very excited about the growth opportunity to continue to bring value to these government agency clients. Q2 GMV in our CAG segment increased 3%, and direct profit increased 11% year over year, driven by growth in high-margin consignment flows within our CAG industrial client base and our continued strength in heavy equipment categories with recurring sellers. We have continued to grow our CAG buyer base as segment unique bidders grew 36% year over year. The outlook for CAG is quite good. We have a record backlog of new business from existing and new clients with particular strength in energy, biopharma, and heavy equipment. Machinio continued its strong trajectory with 8% revenue growth and is approaching $20 million of annual recurring revenue with 90% plus direct profit margins, reflecting the successful transformation of Machinio into a valued solutions provider of digital commerce offerings to equipment dealers, including lead generation, hosted websites, inventory management, customer management and marketing tools, and service quote pricing and related financing. Machinio's expansion into the marine industry vertical is going exceptionally well. We have more than doubled the number of new marine customers and revenues sequentially in Q2. Across Liquidity Services, Inc., we continue to use technology, software, and data analytics to optimize recovery and operations. For example, we continue to enhance our inventory scanning, classification, image quality, and asset descriptions to maximize recovery. We have also leveraged AI tools to improve seller asset management, valuations, and customer service. Our marketplace continues to scale in size and engagement. We now serve 6.3 million registered buyers, an increase of 8% year over year, with 983 thousand auction participants during the last quarter and 280 thousand completed transactions, each demonstrating the growing relevance and liquidity of our platform. Looking forward, we are a well-differentiated marketplace in the $100+ billion circular economy with outstanding liquidity in every major asset category. Our scaled, technology-driven platform, which is now approaching a $1.8 billion GMV run rate, brings transparency and efficiency as the market leader for sellers and buyers in every segment of the economy. We will continue to create value by growing supply and demand within our existing and new asset categories, geographies, and service areas such as auction software and our Machinio dealer service offerings. Thank you for your confidence and continued support. We are well positioned to build on our early momentum in fiscal 2026 and deliver another year of profitable growth. Now I will turn it over to Jorge A. Celaya for more details on the quarter. Jorge A. Celaya: Good morning. During the fiscal second quarter of 2026, compared to the same period last year, we continued to grow GMV and revenue, while also growing our total segment direct profits 18% and adjusted EBITDA by 37%, resulting in our total adjusted EBITDA as a percent of segment direct profits at 30% for the quarter. As we have commented before, our Rule of 40 is calculated as the growth in the sum of our segment direct profits and our adjusted EBITDA as a percent of segment direct profits. On that basis, while our total fiscal year 2025 Rule of 40 was 42% and our 2020 was 46%, our 2026 was 48%, showing continued performance against our long-term goal for balancing growth and profitability. Our results reinforce how we can sustain long-term profitable growth through the diversified markets we serve and a scalable model with profitability enhanced by operating leverage. Strong buyer demand, expanded participation, and disciplined execution continue to support our model designed for continuing profitable growth, creating compelling long-term value. Our approach enables us to efficiently match assets and product flows with the right buyers at scale, improving engagement and enhancing the economics for all users of our platform and services. With our strong year-over-year profitability growth in the fiscal second quarter, our trailing twelve-month performance for net income and non-GAAP adjusted EBITDA surpassed $30 million and $70 million, respectively, with operating cash flow over the same period exceeding $86 million. Our long-term effort to carefully select a diversified set of target markets for sustainable growth and to invest in transformative, tech-enabled services leveraging scalable solutions continues to pay off. The reliability and best-in-class performance for our sellers and buyers alike remains a pillar of strength, anchoring client relationships for over 25 years. Our consolidated results for the fiscal second quarter of 2026 included GMV of $389.9 million, up 6%, and revenue of $120.7 million, up 4%, while GAAP earnings per share were $0.23, up 5%. Non-GAAP adjusted earnings per share were $0.35, up 13%, and non-GAAP adjusted EBITDA was $16.7 million, up 37%. GAAP EPS grew at a lower rate than non-GAAP adjusted EPS, primarily due to the year-over-year increase in performance-based stock compensation expense. Both GAAP EPS and non-GAAP adjusted EPS grew at a slower rate than non-GAAP adjusted EBITDA principally on the increase in income tax expense associated with the lower tax benefit from stock compensation. Our effective tax rate was slightly up this fiscal second quarter, also partly due to the effect of equity comp. We ended the fiscal second quarter of 2026 with $204 million in cash, cash equivalents, and short-term investments. We continue to have zero debt, and we have $26 million of available borrowing capacity under our credit facility. At the end of this fiscal second quarter, we had $50 million remaining from our authorization to perform additional share repurchases. Turning to segment performance compared to the same quarter last year, our RSCG segment increased GMV by 10%, revenue by 1% due to the expected shift in mix compared to last year, and direct profit by 29% from a high volume of low-touch seller inflows in high demand and a variety of client programs during the seasonally high fiscal second quarter of our retail segment, as well as realizing operational efficiencies. Our GovDeals segment increased GMV 5%, revenue by 11%, and direct profit by 12%, reflecting continued growth in sellers and buyers, higher vehicle volumes, the effect of expansion of service offerings, and operational efficiencies resulting in a higher revenue-to-GMV ratio. Our CAG segment increased GMV by 3%, revenue by 12%, and direct profit also 12%. Growth was broad based across the key industry verticals in North America we serve, supported by continued expansion of our recurring seller base of heavy equipment assets. Our Capital Assets Group also continues to leverage global customer outreach, resulting in a strong auction pipeline across key verticals targeted for their broader-base growth potential. Machinio and Software Solutions combined to increase revenue by 12% and direct profit by 10%, reflecting Machinio's expansion of its offering to marine dealers and Software Solutions focused on expanding its recurring SaaS business. We now enter what has traditionally been our seasonally high fiscal third quarter. Our guidance for the fiscal third quarter of 2026 anticipates year-over-year growth to continue and includes execution on the strong pipeline at CAG, including in energy, and continued high volume in our retail segment, despite coming off its seasonally high fiscal second quarter while expecting some mix shift in product flows sequentially. GovDeals is expected to continue to grow GMV as it enters its typical seasonally high quarter and onboards new clients. Our Machinio and Software Solutions businesses are expected to continue to grow as we expand service offerings and further develop recurring revenue streams. On a consolidated basis, consignment GMV for the fiscal third quarter is expected in the low to mid-80s as a percent of total GMV, with purchase GMV sequentially stable. Consolidated revenue as a percent of GMV is expected to be in the mid to high 20s, and total segment direct profit as a percent of consolidated revenue is expected to again be in the mid- to high-40% range. These ratios can vary based on overall business mix, including asset categories, in any given period. Management's guidance for the fiscal third quarter of 2026 is as follows. We expect GMV to range from $425 million to $465 million. We estimate non-GAAP adjusted EBITDA to range from $17 million to $20 million. GAAP net income is expected in the range of $7 million to $10 million, with corresponding GAAP diluted earnings per share ranging from $0.21 to $0.30 per share. Non-GAAP adjusted diluted earnings per share is estimated in the range of $0.30 to $0.39 per share. Both GAAP and non-GAAP earnings per share are expected to reflect a higher effective tax rate approaching the mid-30s for the fiscal third quarter of 2026. For non-GAAP earnings per share, the effect of non-GAAP adjustments is also reduced by an increase in our effective tax rate. The GAAP and non-GAAP earnings per share guidance assumes that we have approximately 33 million fully diluted weighted average shares outstanding for the fiscal third quarter of 2026. Capital expenditures are expected to remain consistent with recent levels of approximately $2 million per quarter. Thank you, and we will now take your questions. Operator: We will now open the call for questions. Operator: If you have a question, please press 11 on your telephone. If you wish to be removed from the queue, please press 11 again. If you are using a speakerphone, you may need to pick up your handset first before pressing the numbers. Please stand by while we poll the Q&A roster. Our first question comes from Gary Prestopino with Barrington. Your line is open. Good morning, Bill and Jorge. Gary Frank Prestopino: Couple of questions here. First of all, and these pertain to GovDeals, with what the weather impact that you experienced last quarter, does that snap back rather sharply here going into this quarter, Bill? William P. Angrick: In terms of were there delayed auctions or delayed product flows? Yes, Gary. Those items, principally vehicles and heavy equipment, that were not loaded in the March quarter did not go anywhere, so they will work their way through the system and we will get credit for that. And I would just point out what was sort of the headline of the quarter, which is our largest segment had this exogenous factor that limited production, i.e., the weather, and yet the breadth and diversity of our portfolio pushed through that to deliver stronger results. Gary Frank Prestopino: K. And then just a follow-up there. It seems like the last couple of quarters, you have really increased your account base and I think you are up 30% this quarter as well. What are you doing differently, or have you just really added to the sales force and you are just attacking the market, you know, full bore? William P. Angrick: We have made investments in growing the size of the sales organization within GovDeals, and we are complementing that with very productive software and AI-related tools that make that sales organization more productive—targeting the right people at the right time with the right message—and that is improving conversion. Gary Frank Prestopino: K. That is good. And then just lastly, backlog in CAG is at a record. Are you at liberty to discuss the size of that backlog? And how long will it take for that backlog, you know, to start working its way through the system? William P. Angrick: Well, I think I can, in broad strokes, say that we have several hundreds of millions of GMV in backlog and we continue to win global mandates from Fortune 500, even Fortune 50, organizations that are looking at Liquidity Services, Inc. on a multiyear basis to manage, value, and sell equipment. And we have noted that we have had strong results in energy, biopharma, health care, transportation, and, you know, heavy equipment. So, you know, I think with more objects in the pipeline, with recurring sellers, we have a very strong position. Gary Frank Prestopino: Okay. Thank you. William P. Angrick: Thank you. Jorge A. Celaya: Thank you. Operator: Our next question comes from George Sutton with Craig-Hallum. Your line is open. George Frederick Sutton: Thank you. Nice results. So, Bill, I wondered if we could talk from a two-sided marketplace thought process. You have done an incredible job of getting more registered buyers, more auction participants. We always have the vagaries of the supply in any specific quarter. I am curious if you are making investments, or if you can kind of define some of the investments you are making, to build up the supply side separately? And then is that also an area you are contemplating more actively from an M&A perspective? William P. Angrick: Thank you. Yes. We continue to have a multipronged approach to attracting supply in a couple different areas. One, we want to go deeper with existing accounts. We want to get every asset in the supply chain, every asset on the balance sheet identified, valued, and on the platform. And that means making sure that our account management functions within government, within industrial, within retail are just providing more data analytics to our clientele so they know that we can sell everything in their portfolio, and that includes new, used, salvage, and scrap—so more assets coming out of existing accounts. Two, we are obviously adding accounts, which we just discussed. I think we are becoming more productive in converting prospects to active sellers. Three, we are adding geographies to our platform. Within the U.S., we have gone to larger metro areas, larger counties, and westward expansion. We have gone into Canada. And then through the work that we have done, particularly in our retail segment and our Capital Assets Group segment, we are building more international clientele—clientele that can list and sell directly to the platform. We do not have to open up facilities. We just give them access to the buyer liquidity and these, you know, very effective tools to quickly describe the assets, enhance the descriptions, and do that in a self-managed way. And then our buying community loves accessing, you know, that new supply even outside the United States. And then finally, services. I think we are adding services that clients value and pay for, both within sort of the transactional marketplaces—things like financing, variations of asset valuations—and then our auction software tools, which allow some of our clients to license our applications to create white-label marketplaces and then cross-list the assets within our aggregated marketplace. And Machinio, which is targeting the dealer community, has gone from what it was when we first started, George, in 2018 as sort of a lead generation platform that created a lot of, you know, value to allow buyers and sellers to get connected on a particular piece of equipment and close the deal. We have evolved to a comprehensive digital solutions platform, which is allowing the dealer to move everything into the cloud—their inventory management, mobile-responsive website, email management, customer management, digital marketing tools, and then financing tools—and the ability for dealers to also monetize their services as well as their inventory by selling and pricing their services with various quote tools to buying customers, and that is where a lot of the margin for dealers is. And then we have taken that digital solution stack and have expanded into the marine vertical—you know, boats and water vessels—which is a huge dealer community that is showing a high propensity to buy the Machinio services. So we are excited about expanding services broadly. George Frederick Sutton: You talked about dynamically matching flows in the retail segment. I wonder if you could just give us a bit of a picture as to that matching process. And then also address RetailRush; you know, the numbers are growing very quickly there. We have looked at you as a potential Shopify alternative to some extent. Can you just give us a broader update there? William P. Angrick: Sure. Well, just think of a river of returns coming every day from the retail—particularly online retail—activities, and so the job is to quickly use decision support tools for each item by seller to determine what it is worth and who is the right buyer net of costs. So, by being able to create a catalog by customer of their entire inventory supply chain and then mapping that to historical sales, which we have been doing for over 20 years, you then create a decision on where to allocate that item. Should that item be sold in a pallet-to-truckload quantity based on its condition and item retail and resale value, or should it be spotlighted and sold in a single unit through a direct-to-consumer channel like RetailRush? And we also do manage third-party consumer-facing marketplaces for our clients. And so that ability to make the right disposition decision based on data—and that data is updated daily—is what allows us to extract more and more value over time. And the RetailRush example, which is still nascent but we think has a lot of significant value in the industry, is allowing us to route higher-value, in-demand product, based on these decision support tools, to a consumer buyer who would then have it visible in an online setting, bid for and buy the item, and then essentially self-fulfill the item by visiting the location, going inside the RetailRush pickup location, getting a scanned barcode or QSR on where the item is on the aisle on the shelf, and then picking it up and then putting it into their car and driving away. So it is an elegant way to reduce the fulfillment cost and get the right items to a consumer buyer who will pay more money for the item. And so it helps build the flywheel, and we think that the RetailRush channel, which is powered by our own auction software and powered by our data analytics, can proliferate throughout, you know, North America in strategic locations and just give more value to the entire retail supply chain. And it is a very low-cost way to bring value to all participants. George Frederick Sutton: Beautiful. Thank you for the thoughts. Appreciate it. William P. Angrick: Thank you. Operator: I am showing no further questions at this time. This concludes today's conference call. Thanks for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the U.S. Physical Therapy, Inc. First Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. In order to ask a question during the session, please press star. Please be advised that today's conference is being recorded. I would now like to turn the call over to Christopher J. Reading, Chairman and CEO. Please go ahead, sir. Christopher J. Reading: Thank you. Good morning, and welcome, everyone, to our 2026 first quarter earnings call. With me on the line this morning are Jason Curtis, our Interim CFO and Senior Vice President, Finance and Accounting; Eric Joseph Williams, our President and COO; our Executive Vice President and General Counsel; and our Vice President and Controller. Before we discuss results for the quarter, as usual, we need to cover a brief disclosure statement. So, if you would, please. Unknown Speaker: Thank you, Chris. Today's presentation includes forward-looking statements, which involve certain risks and uncertainties. These forward-looking statements are based on the company's current views and assumptions. The company's actual results may vary materially from those anticipated. Please see the company's filings with the Securities and Exchange Commission for more information. This presentation also includes certain non-GAAP measures, as defined in Regulation G, and the related reconciliations can be found in the company's earnings release and the company's presentations on our website. Chris? Thank you. Christopher J. Reading: Let me start off by covering some of the key objectives that we are neck-deep in and working on, and that we established as priorities prior to the start of the year. These objectives include semi-virtualization of our front desk, which will produce savings in both labor as well as overall efficiency and improved authorization consistency, the latter of which ultimately has an impact on rate; AI-assisted ambient listening documentation technology, which will help our clinicians spend less head-down time on their computers and more time interfacing with our patients—this obviously has a potential impact on productivity and rate through unit capture, again with direct patient interface; reengagement with remote therapeutic monitoring for our traditional Medicare population after CMS revised the rules in late 2025, beginning January 2026; expansion of our cash-based programs across a great number of our top partnerships. We initially rolled this out last year in the top 30 to 40 partners where a significant part of our growth and income comes from, and surrounding that were growth opportunities—one of those was cash-based program deployment, and that is rolling out as we speak; and finally, a strong investment and effort directionally to create opportunity with large hospitals and systems similar to the two that were previously announced, including NYU and another one in the Gulf Coast region. Those efforts are going very well. In fact, we just started the NYU transition process for our initial set of clinics, and we will be rolling facilities in over the next few months across both opportunities. These initiatives are on track and we believe will produce the results we have discussed as the year progresses. This, in combination with the continuing ramp-up of visits across the company, gives us the confidence to reaffirm our original guidance. In fact, we finished Q1 right on budget. First quarter highlights include revenue increase in physical therapy of 7.2% with a 2.5% same-store increase. This was driven from a 6.9% bump in patient volume, which for the quarter increased our visits per clinic per day to 31.8. Demand was strong this Q1. We lost over 31,000 visits to weather, which impacts not just revenue, but means that many of our highest paid people we have to pay to sit at home during these events, which has a drag on margins. All of that is now in the rearview mirror as we ramp into the busiest period of the year. The net rate for the quarter rose to $106.49, up from $105.66 in the prior year. The biggest positive influencers there include a 3.4% year-over-year increase in the commercial rates coupled with a small Medicare pricing increase we are ramping into as the year begins. Going against that a little bit, on a blended basis, was a small drop in our Medicaid rate. We are going to have to watch that as the year progresses. Injury prevention saw a number of good things for the quarter. Revenue increased 11.8%, which included a partial-quarter contribution from our latest IIP New York-based acquisition earlier announced. Same-store revenue increased 8.2% while margin increased 180 basis points compared to our Q1 2025 numbers. On the development front, in addition to the New York City-based IIP deal, we added a nice therapy partnership in the Pacific Northwest that is going to do very well for us. In addition, we opened seven de novo clinics in the quarter. We have more to come in both the hospital area as well as acquisitions. We completed the renegotiation of our five-year credit facility which, in addition to providing even better pricing and terms compared to what we had before (which was already a very favorable facility), allowed us to expand our capacity so that we can continue to invest in growth opportunities without compromise. Finally, in the quarter, as Jason will later discuss, related to the credit facility and our borrowings, we repurchased equity in two very strong partnerships with a total spend of a little more than $14 million, where we continue to have strong founding partners who are taking some chips off the table due to their extraordinary growth over time; in one case another at a point of planned retirement with a strong owner bench still intact. Our strong capital structure allows us to be flexible and take advantage of these opportunities without compromising our ability to run the company or pursue a variety of growth opportunities. For that reason, we feel confident in our ability to continue to grow through organic as well as acquisition-related partner-centric development. We have a great balance sheet. As we discussed, our improved and expanded credit facility gives us the dry powder to make good decisions about our growth and provides us with the resources and capital that we need to run the company, grow and expand where it makes sense in PT and industrial injury prevention, and invest in new technologies, resources, and people to make our growth plan happen—all of which we are doing in real time. This, along with our continued high demand for our services and our progress across key initiatives, gives us the confidence to reaffirm our guidance for 2026. As I wrap up my prepared comments, as I always do, it is important to say our clinicians and partners are doing a great job around the country every day to make a difference in the lives of our patients and our injury prevention clients and their workers, keeping them safe and healthy. All of that helps us to attract the kinds of new opportunities, including our hospital partners like NYU and others, which will be an accelerant to our growth rate as we finish this year and look forward, especially into 2027. Jason, please go ahead and walk through the financials in a little bit more detail before we open it up for questions. Thank you. Jason Curtis: Thanks, Chris, and good morning, everyone. Turning to the details of the first quarter 2026 income statement: Total revenue was $198 million, a 7.9% increase versus 2025. Daily visits per clinic increased to 31.8 in the first quarter 2026 compared to 31.2 in Q1 2025. Total patient visits in the first quarter 2026 were 1.543 million, a 6.9% increase versus last year. Net patient revenue per visit was $106.49 in the first quarter 2026, an [inaudible] increase versus the prior year. This growth was driven by a 3.4% increase in commercial revenue per visit. This lift is made even more meaningful by the fact that commercial payers represent nearly 50% of our total payer mix. We also benefited from the early impact of our expected 1.75% Medicare rate increase. As a reminder, the majority of the benefit from the hospital initiatives will impact net revenue per visit, and first quarter results do not yet include any impact from these affiliations. Total first quarter 2026 physical therapy revenue was $168 million, a 7.2% increase versus prior year first quarter. Mature clinic revenue increased 2.5% in Q1 2026, continuing the sequential quarter-over-quarter build from 2025. Adjusted physical therapy payroll cost per visit was $64.20 in the first quarter 2026, compared to $63.53 in the first quarter 2025. Adjusted physical therapy operating costs per visit were $90.31 in 2026, compared to $88.77 in the first quarter 2025. Adjusted Physical Therapy margin decreased to 16.1% in Q1 2026 compared to 16.8% in Q1 2025. IIP revenue was $31 million in Q1 2026, an 11.8% increase versus the prior year. Excluding the Q1 2026 IIP acquisition, IIP revenue increased 8.2%. IIP margin increased to 20.4% in Q1 2026 compared to 18.6% in Q1 2025. Adjusted corporate expense as a rate to revenue was 8.8% in Q1 2026 compared to 8.5% in Q1 2025. We continue to make progress on our Workday ERP implementation that we expect to go live at the end of 2027. We are implementing Workday in both human resources and finance and are looking forward to modernizing our systems, increasing efficiency, and improving the user experience. Interest expense was $2.8 million in the first quarter 2026 compared to $2.3 million in Q1 2025. The increase was driven by cash usage associated with the two first quarter acquisitions, as well as $14 million in purchases of noncontrolling interest, as Chris mentioned. Income tax in Q1 2026 was 32.3% compared to 28.1% in Q1 2025. The Q1 2026 tax rate is elevated due to the negative impact of discrete tax items on comparatively lower pretax income. Adjusted EBITDA in Q1 2026 was $20.2 million, a $700,000 increase compared to Q1 2025. Operating results per share were $0.46 in the first quarter 2026, compared to $0.48 in the first quarter 2025. Net income attributable to U.S. Physical Therapy, Inc. shareholders was $5 million in Q1 2026, compared to $9.9 million for Q1 2025. Included in pretax income for Q1 2026 was a loss on change in fair value for contingent earnout considerations of $2 million versus a gain of $4.8 million in Q1 2025. The Q1 2026 loss was driven by stronger performance in recent acquisitions, which increases our earnout liability. GAAP loss per share was $0.12 in the first quarter 2026 compared to earnings per share of $0.80 in the first quarter 2025. Per-share metrics were negatively impacted by revaluation of redeemable noncontrolling interest compared to a benefit in Q1 2025. Under GAAP, increases or decreases in the value of redeemable noncontrolling interest are not included in net income, but are included in the calculation of per-share metrics. Stronger performance in Q1 2026 increased the value of these ownership interests, negatively impacting per-share metrics. As Chris mentioned, we completed two significant acquisitions in the first quarter. In January, we acquired a 50% interest in an eight-clinic physical therapy practice with $8 million in revenue and 60,000 visits. In January, we also acquired a 70% interest in an industrial injury prevention business with $7 million in revenue. Turning to the balance sheet: Cash and cash equivalents at the end of Q1 2026 were $28 million compared to $36 million at year-end 2025. Borrowings on our credit facility were $204 million in Q1 2026 compared to $162 million at year-end 2025. As noted, the increase in borrowings was driven by our two first quarter acquisitions as well as the $14 million in purchases of noncontrolling interest. On 04/15/2026, we announced a five-year $450 million credit facility with a maturity date of 04/14/2031. Based on strong lender support, the facility was upsized from its initial $400 million launch amount, and we achieved improved pricing compared to our previous facility. Our lender group consists of Bank of America, Regions, JPMorgan Chase, Citizens, U.S. Bank, and BankUnited. This larger facility, compared to our previous $325 million facility, provides us with additional flexibility as we continue to grow our portfolio of partnerships and return capital to shareholders. The June 2027 maturity date for our existing interest rate swap remains unchanged. Our first quarter results were in line with our expectations, and we expect the impact of the 2026 objectives which Chris discussed to ramp up throughout the course of the year. As such, we are reaffirming our full-year 2026 adjusted EBITDA guidance of $102 million to $106 million. With that, I will turn the call back to Chris. Christopher J. Reading: Thanks, Jason. Great job. Operator, let's go ahead and open up the line for questions. Operator: We will now open the call for questions. We can take our first question from Joanna Sylvia Gajuk with Bank of America. Your line is open. Joanna Sylvia Gajuk: Hey, good morning. Thanks so much for taking the question. So first, on Q1, the guidance build—you said the weather was $3 million to $4 million of revenues, but then you cut your costs. How should we think about the EBITDA headwind? And importantly, was this quarter as you had included in your guidance? Because I think when you gave the guidance, you kind of knew about the January weather situation. Can you explain how this quarter came versus your general expectations, and how should we think about what was the actual headwind to EBITDA from that situation? And then, how do we think about the ramp-up the rest of the year? Q1 EBITDA was about, call it, 19% of the full-year guidance, versus above 20% the last couple of years. If we assume typical seasonality, we get to maybe less than $100 million for the year. Then there are the hospital alliances—you talk about $7 million but that is fully annualized—so how much is in this year? And the acquisitions—were they already in guidance and how much do they add for the rest of the year? Essentially, I am trying to bridge from Q1 to get to your $102 million to $106 million, because I am getting a couple of million dollars short, and I am thinking maybe that is hospitals and acquisitions. Thank you. Christopher J. Reading: Yes. First of all, importantly, the quarter came in almost exactly where we had budgeted it to be. There were a couple of puts and takes, but at the end of the day, from an earnings perspective, we came in right where we expected to be. We lost about 31,000 visits, some of those coming in high net rate markets like New York, which also impacted our injury prevention acquisition right out of the gate a little bit with weather and mobile units there. If you use our blended average rate, it is somewhat north of $3 million—about $3.3 million. We have to pay most of our folks regardless—our salaried people get paid regardless—so there is margin drag. The demand was high for the first quarter. It was a tough weather quarter, but that is behind us. Demand has continued to build, meaning volumes have built, and we are not going to have weather anymore. We also made and continue to make some investments in these initiatives—both people and products—and those are in the cost numbers as well, but we feel confident those are going to bear the fruit we expect as things ramp up. The acquisitions which closed in January and February were included in our guidance numbers. We gave our guidance in late February or early March, and those were included. We have more activity to come that has not been included. On the hospital ramp-up, we gave the 2027 number on the full-year basis. We had to estimate when these would begin. We began to phase in our very first Metro facilities into the NYU deal literally this week. Things are going well, but we have a lot more to do. On the Gulf Coast opportunity, depending upon how things go over the next couple of weeks, that could begin in June or July. There are several million dollars worth of additional hospital contribution, but we are not getting a full year—at most a partial half-year—and we have to layer in facilities over a few months, particularly in Metro’s case. All of that was fully baked into our guidance when we did it originally. We do not guide by quarter, so I cannot give you more granularity there. Jason Curtis: Yes. We talked about there being a portion of the annualized $7 million impact. The way I would think about it, Joanna, is we are in the process right now in the second quarter of converting these clinics to the hospital affiliations. We expect to be materially complete by the end of the third quarter. So in the fourth quarter, you will begin to see something like the full quarterly run-rate impact of the $7 million. The benefit will ramp up sequentially quarter over quarter throughout 2026. Joanna Sylvia Gajuk: All right. Thank you so much. Analyst: Good morning, you guys. It is Jeff from Jefferies here. Maybe one to needle a little bit on the numbers. The rent, supplies, and other line ran a little hot to what we were expecting, as did corporate expenses. Anything to call out in terms of what is driving year-over-year growth in those expense lines? Christopher J. Reading: Yes. Q1 had a little bit worse weather impact, so a little bit lighter revenue than we expected, although in balance we came out where we thought we would. We did have, in a few partnerships, a little bit more contract labor than we expected to deal with volume in those particular partnerships, and that was part of the expense carry. Jason Curtis: We are also making some upfront investments in our 2026 initiatives that are going to pay off as we ramp up the benefit throughout the balance of the year. The weather impact would have a greater impact in terms of deleveraging on the fixed costs you mentioned. That will not continue as we enter into the spring and summer season and do not have these weather headwinds. Analyst: Got it. Appreciate that. And maybe one more to follow up—Chris, the messaging sounded very positive on your confidence in potentially more hospital partnerships and on the M&A front. Any way to think about the cadence, or more color on what is driving the level of confidence? Christopher J. Reading: The cadence is not going to be absolutely predictable—good opportunities can take time to bring together. I do feel confident, given the number, depth, and range of conversations we are having, that we are going to have more things done on the hospital side. You will see us continue to be active on acquisitions as well. These hospital opportunities are chunky and make a really nice difference. They take a little while to put together because we are dealing with big institutions, lots of constituents, and big legal teams. As we continue to add more of these, I think you will understand the impact as we go forward. Analyst: Got it. Appreciate the color. Thanks, guys. Christopher J. Reading: Thanks. Operator: We will move next to Lawrence Scott Solow with CJS Securities. Your line is open. Lawrence Scott Solow: Hey, good morning, Chris. Following up on the hospital alliances and timing—which is hard to predict—but ultimately, if you do the math, it is like 10% today for these two initial alliances. What is the potential over a three- to five-year period that you could line up with big hospital organizations? And on the volume growth you can potentially drive as you join up with these hospitals—your EBITDA assumptions are based on current volumes, right? Can you give a little more color on potential volume growth as you line up with these partners? Christopher J. Reading: It is a little bit of a tricky question. If you took what we have done just in the last year—Metro was 550,000 to 600,000 visits in a year, probably significantly more by the end of this year—and the other group is a 10-clinic group. If you could do that level every year over three to five years, it is a pretty good increase. We are looking to do these where it makes sense and where we can generate interest, and so far it has been strong. I think it will get to be a decent chunk of what we do in the foreseeable future. Lawrence Scott Solow: The pricing also—revenue per patient was up less than 1% and commercial was really strong. Medicare sounds like you got a little bit, not the full benefit, and Medicaid is a much smaller piece. Is that drag continuing for the year, and could the pricing outlook improve? Christopher J. Reading: Blended rate came in a little less than we expected. Medicare was not the full benefit of the 1.75%. Medicare patients pay more slowly at the first of the year as they sort out deductibles; there is a lag as the new fee schedule is uploaded and payments flow, so we expect to see the full 1.75% build as the year progresses, as we saw last year. Medicaid was down a few percent; it is a single-digit move and not a big part of our business. We need to see in Q2 whether it was regional mix or pricing changes in certain states. Commercial remains strong. Overall, we do not think Medicaid will swing our number very much, particularly as Medicare and commercial are fully in there. Lawrence Scott Solow: Got it. Appreciate the color. Christopher J. Reading: Thanks, Larry. Operator: We will now move to Benjamin Michael Rossi with JPMorgan. Your line is open. Benjamin Michael Rossi: Good morning. Thanks for taking my question. Thinking about PT operating costs on a cost-per-visit basis—just north of $90 a visit during 1Q—as we think about the back-half ramp, how should we think about the run rate for operating cost per visit into 2Q and into the back half as volumes normalize and technology and hospital initiatives scale? And can you break down the 31,000 weather-lost visits by month, and how volumes trended exiting the quarter and into April? Christopher J. Reading: I think you will see operating cost per visit come down to a more normal rate. Q1 was a little bit high. We will not have any of the weather we experienced in Q2, and activity picks up beyond that. One thing we worked hard on is recruiting and, importantly, retention. For the first quarter, turnover is now sub-18%, which is as low as we have ever had since we have been measuring it. Hanging on to our people will make a difference during the busiest months, like Q2. We have invested at corporate in some of these initiatives—both people and resources—so while there is a displacement between when revenue begins and when resource allocation has to come in, those will catch up. On monthly breakdown, I do not have it at my fingertips, but visits have rebounded nicely in April and progressed within the month. Benjamin Michael Rossi: Got it. Appreciate the commentary. Operator: We will go next to Constantine Davides with Citizens. Your line is now open. Constantine Davides: Hey, good morning. One more follow-up on the hospital and health system side. When you look at the pipeline, are there other NYU-sized opportunities in there, or is the Gulf Coast deal more representative of the scale of partnerships you are exploring right now? And could you also flesh out the cash-based program initiative a bit more—what programs have been deployed and the traction there? Christopher J. Reading: There are bigger opportunities than NYU in terms of enterprise scale. Part of the reason the impact to us from NYU appears smaller is that we only own 50% of that business. In other partnerships where we own 70%, 80%, even 90%, dropping in an NYU-sized opportunity would have a much more significant impact to us. There are markets where we think the opportunity is going to be even greater than the NYU deal, and not necessarily a small lift like the Gulf Coast deal. On cash-based programs, I will kick it to Eric. Eric, you and Graham are front and center on this initiative. Eric Joseph Williams: Yes, sure. This is something we have really been pushing with all of our partners. It was a main point for the partner meeting that we held in April, and we had 30 of our top 40 partnerships in Houston for a list of items, including the rollout of welcome wear and AI documentation. The other centerpiece was cash-based programs. The two that people are most excited about and that have the most traction are laser programs and shockwave. Those are cash-based services not reimbursed by insurance. Dry needling is another service we have been doing for a while, and we have more partners being trained on it. Those are the three biggest ones that people are latching on to right now. We have partners who have been enormously successful, driving hundreds of thousands of dollars a year in cash-based services, starting from zero. Partners hear others talking about how they implemented these programs, got clinicians to buy in, and generated patient interest. After the partner meeting, we had a number of partners who had not launched cash programs reach out to learn about lasers, where to get them, and how to launch. We will continue to push this. We are certainly not the only ones in the industry pushing it, but we have a good approach to expand. Christopher J. Reading: Let me just say this—this is important. The reason to do this is because it works for patients. It has great patient response and demand. Patients see others getting treatment and talking about the difference it made, and they want to sign up. Sometimes it takes a while for insurance companies to get the drift; they do not want to pay. There are technologies that are very clinically effective—that is why they are used—and secondarily, we are able to monetize that because it works. The clinical efficacy behind these programs is well supported and documented, and that is the first thing presented to our partners. Constantine Davides: Thanks, guys. Appreciate the color. Operator: There are no additional questions at this time. I would like to turn the program back to Christopher J. Reading for any other comments. Christopher J. Reading: Thanks, everybody. Jason and I have follow-up meetings with a number of you over the next several days. We are happy to spend time on the phone—let us know. We thank you for your time and attention today, and we hope you have a great rest of your week. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good morning. And welcome to Fidelity National Financial, Inc.'s First Quarter 2026 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 Michael Joseph Nolan, CEO, and Anthony John Park, CFO. We look forward to addressing your questions following our prepared remarks. F&G's management team, including Christopher Blunt, CEO, and Connor Murphy, President and CFO, will also be available for Q&A. 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. I will now turn the call over to Michael Joseph Nolan. Michael Joseph Nolan: Thank you, Lisa, and good morning. Our combined business continued to deliver outstanding financial results through the first quarter. Starting with Title, we delivered adjusted pre-tax Title earnings of $268 million, up 27% over 2025. This generated an industry-leading adjusted pre-tax Title margin of 13.1% for the first quarter, an increase of 140 basis points over 11.7% in 2025. Our first quarter results reflect continued strong performance across the business, highlighted by strength in our direct commercial, refinance, and agency businesses. Additionally, our disciplined expense management drove strong incremental margins. Looking at our Title results more closely, on the purchase front, we saw typical first quarter seasonality with sequential improvement coming off the fourth quarter. While existing home sales remain well below the historical average, our daily purchase orders opened were up 2% over 2025, up 25% over 2025, and up 4% for the month of April versus the prior year. Our refinance volumes continue to be responsive to 30-year mortgage rates. This boosted refinance orders opened to 2,000 per day in the first quarter as mortgage rates moved into the low 6% level. Volumes subsequently moderated to 1,600 per day in the month of April as mortgage rates moved higher. Our refinance orders opened per day were up 52% over 2025, up 16% over 2025, and up 13% for the month of April versus the prior year. For commercial, volumes continued to be strong, with direct commercial revenue of $338 million in the first quarter, up 15% over $293 million in 2025. This was driven by a 22% increase in national revenues and an 8% increase in local revenues. We continue to see growth in both national and local market daily orders, with each up 5% over 2025. Total commercial orders opened were 906 per day, up 5% over 2025, up 11% over 2025, and up 9% for the month of April versus the prior year. We also have a strong inventory of commercial deals slated to close, diversified across a broad set of asset classes including industrial, data centers, multifamily, affordable housing, retail, and energy. To bring it all together, total orders opened averaged 6,400 per day in the first quarter, with January at 5,900, February at 6,500, and March at 6,600. For the month of April, total orders opened were 6,200 per day, which was up 7% over the prior year. As we enter the second quarter, I want to address a question we hear: How do we think about our 15% to 20% targeted annual range for adjusted pre-tax Title margin? Let me start with what we have already demonstrated. Existing home sales have been near 4 million units for more than three consecutive years, among the lowest levels in three decades, while mortgage rates have remained elevated. And yet, we delivered an industry-leading full-year 2025 adjusted pre-tax Title margin of 15.9%. That is a direct result of our scale, decades of investment in technology and automation, and our disciplined operating model that have continued to strengthen the earnings power of this business. We are confident that we can continue to deliver within our 15% to 20% annual range even if total residential volumes remain at current levels over the near term. Once mortgage rates improve, we believe residential purchase and refinance activity will accelerate and trend toward historical levels. This recovery represents additional earnings power, given the operational leverage that we have built into our model. Beyond our residential volume recovery, the benefits of our continuous investments in technology and AI have the potential to further enhance our business. I want to spend a few minutes on AI—what we are doing and what it means for our business. Fidelity National Financial, Inc. and the Title industry hold a unique position in real estate transactions. We do not sit next to the real estate transaction; we sit inside the transactions, orchestrating complex multi-party settlements, safeguarding the movement of funds, and mitigating fraud in every transaction. By embedding AI tools into these workflows, we can drive significant value by enhancing efficiency and our customers' experience, reducing risk, and strengthening fraud prevention across real estate transactions. These gains come from having highly curated, deep sets of transactional data to augment AI. We have built our proprietary data by closing and insuring transactions. It cannot be replicated by simply digitizing public records regardless of how sophisticated technology becomes. As we build out our AI capabilities, we are leveraging this proprietary data alongside our deep experience and historical knowledge. And this is what sets Fidelity National Financial, Inc. apart. Usage of AI tools by our employees is growing, with more than half of our workforce using AI tools regularly, and we are deploying customized solutions across our Title and escrow operations as well as within ServiceLink, LoanCare, our real estate technology companies, agency operations, and software development. Importantly, we are focused on implementing AI responsibly and compliantly with appropriate governance, human oversight, and risk and regulatory controls in place. We have deliberately avoided a concentrated bet on any single model or platform. Instead, we are deploying AI directly with the data and workflows each team already owns inside or alongside the technology they already use. While we already have a highly automated process for searching county records, we believe AI will have a meaningful benefit to other significant areas of real estate transactions as we integrate AI capabilities end-to-end throughout the entire Title and settlement process. We are confident that our scale, our proprietary data, our fully deployed technology, and our financial strength will continue to position Fidelity National Financial, Inc. as an industry leader and place us at the forefront of shaping changes in our industry in a way that continues to bring value to our customers, shareholders, and employees. Turning now to our F&G segment. F&G's assets under management before reinsurance have grown to nearly $75 billion at March 31, up 11% over the prior year. On a standalone basis, F&G 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 acquisition. F&G's diversified self-funding capital model is supported by its annual in-force capital generation and third-party capital through their reinsurance sidecar and strategic flow reinsurance partnerships. Together, these sources of capital provide financial strength and flexibility to invest for growth and return capital to F&G shareholders through dividends and opportunistic share repurchases. We are very pleased with F&G as they continue to execute on their strategy toward a more fee-based, higher-margin, and less capital-intensive business model, with a focus on growing the core business and creating long-term shareholder value. Before I turn the call over to Tony, I want to take a moment to recognize our employees. I would like to extend my sincere thanks for their continued dedication to our customers, their focus on execution, and their embrace of the innovation and technology that is driving this business forward. They are the foundation of everything we are building. With that, let me now turn the call over to Anthony John Park to review Fidelity National Financial, Inc.'s first quarter financial performance and provide additional insights. Anthony John Park: Thank you, Mike. Starting with our consolidated results, we generated first quarter total revenue of $3.2 billion. Excluding net recognized gains and losses, our total revenue was $3.3 billion, as compared with $3 billion in 2025. We reported first quarter net earnings of $243 million, including net recognized losses of $78 million, compared with net earnings of $83 million, including net recognized losses of $287 million in 2025. Adjusted net earnings were $249 million, or $0.93 per diluted share, compared with $213 million, or $0.78 per share, in 2025. The Title segment contributed $197 million. The F&G segment contributed $80 million, and the Corporate segment adjusted net earnings were zero before eliminating $28 million of dividend income from F&G in the consolidated financial statements. Turning to first quarter financial highlights specific to the Title segment, our Title segment generated $2.1 billion in total revenue in the first quarter, excluding net recognized losses of $46 million, compared with $1.8 billion in 2025. Direct premiums increased 14% over the prior year, agency premiums increased 16%, and escrow, title-related and other fees increased 12%. Personnel costs increased 11%, and other operating expenses increased 9%. All in, the Title business generated adjusted pre-tax Title earnings of $268 million, up 27% over $211 million in 2025, and a 13.1% adjusted pre-tax Title margin in the quarter versus 11.7% in the prior-year quarter. Our Title and Corporate investment portfolio totaled $4.8 billion at March 31. Interest and investment income in the Title and Corporate segment was $99 million, excluding income from F&G dividends to the holding company. For the remainder of 2026, we expect a range of $90 million to $95 million in interest and investment income per quarter during 2026, assuming no Fed rate cuts in the remainder of the year and stable cash balances. In addition, we expect approximately $28 million per quarter of common and preferred dividend income from F&G to the Corporate segment. Our Title claims paid of $57 million was $5 million lower than our provision of $62 million for the first quarter. The carried reserve for Title claim losses is approximately $31 million, or 2% above the 4.5% of total Title premiums. Next, turning to financial highlights specific to the F&G segment. Since F&G hosted its earnings call earlier this morning and provided a thorough update, I will provide a few key highlights. F&G's AUM before reinsurance increased to $74.5 billion at March 31, up 11% over the prior year. This includes retained assets under management of $56.4 billion, up 3% over the prior year. F&G reported gross sales of $3.2 billion for the first quarter, as compared with $2.9 billion in 2025. This reflects core sales of $2 billion for the first quarter, which includes indexed annuities, indexed life, and pension risk transfer, as well as $1.2 billion of funding agreements and multiyear guaranteed annuities—two products we view as opportunistic depending on economics and market opportunity. F&G'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. Adjusted net earnings for the F&G segment were $80 million for the first quarter, reflecting our approximate 70% ownership stake, compared with $80 million in 2025, which reflected our approximate 84% ownership stake. F&G's operating performance from their underlying spread-based and fee-based businesses continues to be strong. F&G continues to provide an important complement to our Title business. The F&G segment contributed 32% of Fidelity National Financial, Inc.'s adjusted net earnings for the first quarter, as compared with 38% in 2025. From a capital and liquidity perspective, Fidelity National Financial, Inc. continues to maintain a strong balance sheet and balanced capital allocation strategy. Our track record has generated a steady level of free cash flow, allowing us to continue to invest in our business through attractive acquisitions and technology as we manage the business and continue to build for the long term. Fidelity National Financial, Inc. has returned approximately $222 million of capital to our shareholders in the first quarter, as compared with $161 million in 2025. This reflects $140 million of common stock dividends and $82 million of share repurchases in the current period. We have remained active with share repurchases in the second quarter. From a capital allocation perspective, we ended Q2 2025 with $659 million in cash and short-term liquid investments at the holding company. During the first quarter, our cash position and cash generation funded $140 million of common dividends paid, $25 million of holding company interest expense, and $82 million in share repurchases, all while keeping pace with wage inflation and funding the continued higher spend in risk and technology required in today's landscape. We ended the first quarter with $495 million in cash and short-term liquid investments at the holding company. 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, a confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. 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 comes from Mark Christian DeVries with Deutsche Bank. Please state your question. Mark Christian DeVries: Yeah, thank you. Good morning. First question maybe for Tony. How are F&G's earnings tracking to your expectations, and are there any disconnects that you observed between your expectations and where we in the analyst community have been modeling after these earnings? Anthony John Park: Yeah, thanks for the question. I am probably going to turn that over to the F&G guys because it has been a bit of a frustration that the analyst expectations seem to assume a return on alternative investment, and yet when we report, they are maybe not picking up that piece. And so there seems to be a larger delta than what we see, which is actually earnings that were pretty close to in line with what we thought the consensus was. But maybe Christopher and Connor, you can weigh in a little bit here. Christopher Blunt: Yeah, this is Chris. I would say Tony hit it. Other than there is usually a little bit of first quarter seasonality, we were actually pleased with the results. I think they were on expectation. And I do think the disconnect is around alternatives, which have obviously underperformed. Industry standard is to normalize for that, so I think in some cases it is either being normalized too high or not normalized at all. And I think our outlook there has been fairly consistent. We have redefined alts to be focused on what you actually think of with alternatives—private equity interests, anything equity-related. That is about $4 billion. So it is really not that hard to model if you look at your long-term expectation. I think we gave a range of 12% to 14% of what you think over time that should kick in from an earnings perspective. But in terms of base spread, own distribution, reinsurance, operating leverage of driving down expenses, it has been consistent and growing. We had a little bit of noise this quarter—the fixed income yield was down. Probably two-thirds of that was more timing and one-offs as opposed to anything permanent. So— Mark Christian DeVries: Okay, got it. And then maybe a question for Mike. On technology, I know you are kind of optimistic as this could return. How often could you see some margin lift over the next couple of years even if the market size holds its current levels? Michael Joseph Nolan: Yes, Mark, you did cut out a little bit, but I think the question is what benefits we expect to see from AI on the margin side even if the market stays flat? Was that it? Mark Christian DeVries: Yes. Yes. Thank you. Michael Joseph Nolan: I cannot cite a number, but we absolutely expect margin improvement in the same-size environment over time with technology tooling like AI, just like we have seen with Title automation that we have implemented over the last couple of decades. That has been a big driver behind our margin improvement and the fact that we can get the kind of margins we are getting now in low transactional environments. But I cannot give you a number. I think that will become more apparent as we go through the balance of the year and probably see smaller wins with AI investments and AI tooling, and then bigger wins as we move into 2027 and get more advantage out of really embedded tooling in the more full settlement process. Mark Christian DeVries: Okay. Are there specific tools that you are building on that you are more optimistic about that can more meaningfully move the needle that are worth calling out? Michael Joseph Nolan: I do not know that I will get into specific tools, but maybe as I think of parts of the business: We said from the beginning a four-part process for us relative to AI. It first begins with really building out a risk and governance framework, which we have done and worked on the past year and a half. I think that is very important to have in place given both the opportunities for AI and the risks that come with AI tooling. Second is building literacy and diffusing the tools across the entire company. As we talked about, more than half of our employees are now using these tools regularly. Third are individual solutions inside ServiceLink, LoanCare, etc., as we talked about on the call. And then the fourth is really the area that I think will have the biggest impact, and that is when you embed tools into workflows like SoftPro and inHere that we have built at scale that no one else has. We will get more benefit on the settlement side where you really have more of your labor and your cost in terms of the process inside the business. Mark Christian DeVries: Got it. Thank you. Thanks. Operator: Our next question comes from Bose Thomas George with KBW. Please state your question. Bose Thomas George: Just sticking to the margin discussion, can you go through margins by segment, and just curious how the commercial margins look especially compared to previous peaks? Anthony John Park: Yes, thanks, Bose. As you know, we reported 13.1% pre-tax Title margin up against 11.7%. If you break that down into our various operations or divisions, our Direct ops had roughly a 20% margin, up about 100 basis points. Agency, about a 7% margin on gross, up about 100 basis points. Our National Commercial units—so this is just the 20 or so large operations that handle exclusively commercial transactions—had a 27% margin in the quarter, up against 24% in the prior year. Our loan subservicing was down a little bit but still had a 20% margin in that business. Our home warranty business had a 16% margin versus 14% in the prior year, and our ServiceLink business, which is centralized refinance and default, had a 23% margin up against 18% in the prior-year quarter. So really, almost to a unit, a positive improvement over the prior-year quarter. And if I just add one thing to that, Bose, in our centralized refi business inside ServiceLink, the margin lift just shows the power we have in the model—we had a 23% first-quarter margin up against 9% last year. So a little bit of extra volume can go a long way inside the efficient model that we built for the centralized platform. Bose Thomas George: Okay, great. That is great color, thanks. And then I wanted to just ask about the buybacks. You noted it remained strong in April. Just curious how we should think about that relative to what you did last year, or just ways to think about a range this year? Anthony John Park: Yeah, thanks, Bose. It is hard to know exactly where we will land in terms of buybacks. I did say that we remain active, and we will remain active—I firmly believe that. We bought $82 million of shares back in the first quarter, almost 2 million shares. Certainly, if we see signs of weakness, we are more active. But I would expect that once blackout windows lift, we will be back in the market on a regular cadence. Last year’s second quarter, we came in really strong—I would not necessarily expect that. That might have been to the tune of about $250 million. But having said that, I do expect that we are going to be active throughout the year. Bose Thomas George: Okay. Great. Thanks. Operator: Our next question comes from Mark Hughes with Truist Securities. Please state your question. Mark Hughes: Yeah, thank you. Good morning. Michael Joseph Nolan: Good morning. Mark Hughes: On F&G, the question about returns—and we chatted about this on the conference call earlier—but I just wanted to make sure I am on the right track. The return on assets in the quarter was 76 bps; if you take into account the unusual items or the underperformance on the alts, you get up to about 110 bps. When we model that on a go-forward basis, would it just make more sense at this point to model it more at the 80-basis-point level and factor that into the Fidelity National Financial, Inc. earnings rather than, I think, kind of the longer-term target, which was 110, but it has been dampened here recently? Just wanted to get your sense on the best approach. Christopher Blunt: Yeah, Mark, this is Chris. I think that would be a very conservative way to model it, but not an inappropriate way to model it. So, yeah, I think 80 bps is probably a little low as a jumping-off point, but if you said that is a jumping-off point for just pure spread income at current alts levels, then, yeah, you are more likely to have tailwinds coming from alts. We have been normalizing, and it has been five years since we have seen meaningful realizations, and every year we come in expecting that it is going to be the year of the IPO and then something happens externally. So I think we are still confident that we will see that when things normalize. But, yeah, I do not think that is an unreasonable way to think about it; it would just be a conservative way, I believe, to model it. Connor, if you agree with that? Connor Murphy: Yeah, I think that is fair. And as we talked about some of the things that happened this quarter, there were some temporary elements this quarter—was probably about 10 basis points that we do not expect to continue, aside from the alts differential. Mark Hughes: And just to be clear, it is been kind of that difference—between the 34 basis points this quarter—is kind of the difference in what leads to some misinterpretation or volatility perhaps, thinking back to the earlier question? Christopher Blunt: Yeah, I think what Connor is saying is there was probably 10 bps of some other one-time effects, but if you look at it over time, quarter by quarter, alts is the big one—that is the disconnect of how do you think about that normalization. And my guess is neither stock gets a whole lot of credit for it given how long it has been since we have had realizations. But again, still optimistic that if we do start to see transaction activity pick up, that should actually become a tailwind for us. Mark Hughes: When we think about the purchase business, moving on to Title, the growth in open orders in Q1 and a 4% for April, if I heard properly—sounds like Fidelity National Financial, Inc., at least relative to the public peers, is doing a little bit better. Is that a geographic issue, an execution issue? It may just be a few points here and there, but I am curious if there is any driver to that a little better performance. Michael Joseph Nolan: Yeah, Mark, it is Mike. It is hard to know, but we were very pleased to see a 25% sequential improvement in the first quarter. That is above historical averages, even though we are still in an overall low environment. The 4% up in April—I do not know if it is a geographic issue or not. I do know that our recruiting has been incredibly strong, and it was very strong last year. We just had a phenomenal first-quarter recruiting effort, maybe our best ever, and we are attracting a lot of talented people to the company and they bring volume with them. So whether that is playing into those numbers, I cannot say for sure. But I am very pleased with what the field is doing in terms of just building more talent inside this organization. Mark Hughes: Is there a kind of structural reason for that—maybe in a softer market people want to be in a bigger organization—or is it just more company specific? Curious on that. Michael Joseph Nolan: Again, it is hard to know. I would say our recruiting is broad-based. It is across a lot of other players in the industry. Perhaps people see that we continue to invest in the business consistently regardless of the macro environment—building technology, creating good marketing tools, inHere digital transaction platform. I think we are doing a lot of things that lead this industry, and hopefully people at other organizations see that and want to be a part of it. Mark Hughes: If I could just squeeze in one more—there is a discussion about the process to look at a way to optimize value in the owned distribution within F&G. I was curious if there is any sense of timing on process—when we might hear more about that. Christopher Blunt: Yeah, it is probably premature to comment on the exact timing. But again, to just go back to the rationale, we have invested about $700 million in owned distribution. We see substantial opportunity to grow what we already have and make more investments. And so it is really just an exercise of what is the best way to fund that growth opportunity. Is it still underneath F&G? Is it consolidated, deconsolidated? So that is the exercise we are going through. But I would imagine the next couple of quarters we would probably have a bit of an update for you there. Mark Hughes: Thank you very much. Operator: A reminder to all participants, to ask a question please press star and 1 on your telephone keypad. Our next question comes from Analyst with Stephens Inc. Please state your question. Analyst: Hey, good morning. My first one is on F&G. In mid-March, F&G announced the $100 million buyback program, which was right after the December distribution of F&G shares to Fidelity National Financial, Inc. shareholders. And I think during the F&G earnings calls today, it was mentioned that $29 million of the program was deployed in Q1. One would think that if Fidelity National Financial, Inc. has no plans to sell shares in the open market, the buyback could increase Fidelity National Financial, Inc.'s ownership stake in F&G. So how should we be thinking about this? Anthony John Park: Yeah, it is a good question. Clearly, the reason for the distribution back in December was to get more float out into the marketplace. And so we went from roughly an 82% ownership down to a 70% ownership. But F&G shares were under pressure, and the float was not really helping, at least in the early phases of having those shares out there. I think F&G saw an opportunity to buy back their shares at a discount—real significant, almost a silly discount. And so Fidelity National Financial, Inc. does not take a position that we need to own X number of shares. We are just trying to really have value out there for the respective shareholder base. And so if that means that we close that gap from 70% to 80%, or wherever it might be, that is very possible. But again, there is no target necessarily for where Fidelity National Financial, Inc. might end up in that ownership percentage. Analyst: Yes, alright. That is very helpful. And then turning to Title, starting with the fee per file, what can you share on what you are seeing in terms of the trajectory of fee per file for both residential and commercial? Michael Joseph Nolan: Yes, thanks for the question. I would say that the residential fee per file has been pretty consistent year-over-year—actually flat with the first quarter of last year—and I think we have seen pricing moderate to the most extent over the past few years, so we are seeing a little bit more stability there. We saw, again, a strong, particularly national commercial fee per file in the first quarter—up almost $1,000 over the first quarter of last year. Local was up a bit as well, maybe about $500 on a fee-per-file basis. So I would say fairly stable in residential and still upside in commercial. Analyst: Thank you. And just one last one on the outlook. Looking at the residential outlook since your last earnings call, the MBA and Fannie Mae have revised their forecast down, and they are now calling for existing home sales to be between 4.1 and 4.2 million seasonally adjusted for the year in 2026 and around 4.5 million in 2027. What is your take on that? Do you view those assumptions as conservative, or are they too aggressive? Michael Joseph Nolan: I do not think they are aggressive. Our base case as we came into the year for residential was really upside purchase and refi with the fact that we had lower, more stable rates to start the year. Then the macro environment as we got into March and into April kind of upset the apple cart a little bit, and that is probably when Fannie and MBA revised theirs down because their 2027 forecast now looks a lot like their 2026 forecast that they had 60 days ago. It is just hard to say. What we do see, though, is—and I have commented on this before—just more sensitivity to lower rate movements than we probably have seen in prior vintages. I think it really comes down to if things stabilize, the macro environment gets a little calmer, and rates stabilize maybe in that lower-6% environment, we are going to have upside in the back half of the year in residential. And if they do not, we will probably continue on this current trajectory. I am very pleased we had a 4% increase in purchase opens in April, and we are still driving, we think, really strong margins. Our first quarter margin, absent the 3% mortgage years, is really one of the best first quarters we have ever had. So we will perform well regardless of the environment, and we will manage the business to whatever order environment we have. We are very confident in our position. Analyst: And if I can squeeze just one last one on capital allocation—what are you seeing in the M&A pipeline, and has there been any notable shift in activity since last quarter? Anthony John Park: Yes, thanks. My impression is even though we have not made many acquisitions over the course of the last 12 to 15 months or so, I get the sense there is more opportunity, especially on the Title agent side. I feel like we are hearing a lot more about it. We are having more discussions, and I would expect that we have more activity this year and next than we have seen in the last two years. Michael Joseph Nolan: I would agree with that, Tony. I think there are more conversations, I think there are more opportunities, but you never know if you are going to strike a deal. I would say just stay tuned on how that plays out over the next couple of quarters. Analyst: Great. Thank you so much. Thanks. Operator: And this will conclude our question and answer session. I will now turn the conference over to CEO, Michael Joseph Nolan, for closing remarks. Michael Joseph Nolan: Thanks for joining our call this morning. We delivered strong first quarter results with our complementary businesses executing well in a dynamic environment. The Title segment is performing well in what remains a low transactional environment and is capitalizing on stronger commercial activity. We are delivering industry-leading margins and remain well positioned to benefit from a recovery in residential volumes should mortgage rates move lower. Our focus on technology and AI is contributing to our performance today, and we see potential to further enhance our business. Likewise, F&G is executing on its strategy and is focused on balancing continued growth in its spread-based business alongside the fee-based flow reinsurance, middle-market life insurance, and owned distribution strategies as they focus on delivering long-term shareholder value. Thanks for your time this morning. We appreciate your interest in Fidelity National Financial, Inc., and 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: Greetings and welcome to the W.W. Grainger, Inc. First Quarter 2026 Earnings Conference Call. At this time, 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. It is now my pleasure to introduce Kyle Bland, Vice President of Investor Relations. Thank you. You may begin. Kyle Bland: Good morning. Welcome to W.W. Grainger, Inc.’s first quarter 2026 earnings call. With me are Donald G. Macpherson, Chairman and CEO, and Deidra Cheeks Merriwether, Senior Vice President and CFO. As a reminder, our comments today may include forward-looking statements that are subject to various risks and uncertainties. Additional information regarding factors that could cause actual results to differ materially is included in the company’s most recent Form 8-Ks and other periodic reports filed with the SEC. This morning’s call includes non-GAAP financial measures, which reflect certain adjustments in previous periods as noted in the presentation. There were no adjusting items in the first quarter 2026 period. We have also included organic revenue adjustments in the presentation, which normalize sales growth to reflect our exit from the U.K. market, including the Cromwell divestiture and the closure of Zoro UK, both of which were completed in 2025. Definitions and full reconciliations of our non-GAAP financial measures with their GAAP measures are found in the tables at the end of this presentation and in our earnings release, both of which are available on our IR website. We will also share results related to MonotaRO. Please remember that MonotaRO is a public company and follows Japanese GAAP, which differs from U.S. GAAP, and is reported in our results one month in arrears. As a result, the numbers discussed will differ from MonotaRO’s public statements. Now I will turn it over to Donald G. Macpherson. Donald G. Macpherson: Thanks, Kyle. Good morning, everyone, and thank you for joining today. We are off to a strong start in 2026 with both our business segments performing well. Despite the ongoing tariff uncertainty and the broader geopolitical climate, we are encouraged by the positive signals we are seeing in the demand environment. By staying focused on what we can control, we continue to drive performance through solid execution and by consistently delivering value to our customers. I had the opportunity to experience this firsthand on a recent visit with a major agricultural customer. While many of our large customers are complex, our approach is simple: start with the customer, stay curious about how their operation works, and then bring our full suite of capabilities to solve their MRO challenges end to end. What differentiates W.W. Grainger, Inc. with this customer and with other contract customers where we are seeing growth is our ability to deliver highly coordinated capabilities beyond the products themselves. That same coordinated approach was on display at our most recent W.W. Grainger, Inc. sales meeting in March. This event showcased the breadth of our products, services, and solutions, with more than 10 thousand customer, supplier, and team member attendees; the event demonstrated the power of listening, asking good questions, and staying focused on the problem the customer is trying to solve. We invest in this meeting because it results in stronger teams, stronger partnerships, and ultimately improved performance. Earning trust and building strong relationships is also at the core of how we approach our workplace and culture. While awards are not the goal, they serve as useful signals that we are executing the right way. In recent weeks, W.W. Grainger, Inc. was once again recognized as a top workplace, this time being named one of the Fortune 100 Best Companies to Work For and a 2026 Platinum Employer on the Where You Work Matters list, which is powered by the American Opportunity Index. We do not take recognition like this for granted; we are proud that it reflects the experiences we create for team members and the outcomes we deliver to our stakeholders. On the subject of team members, you may have seen that several of our senior leaders recently took on new roles within the organization. We are fortunate to have a broad and deep set of leaders at W.W. Grainger, Inc., a clear strategy, and a high-performing company. Having such a strong foundation allows us to provide leaders with new experiences to develop for the future. Now moving to Q1 results. We delivered a strong quarter of profitable growth, meaningfully outpacing the expectations we communicated back in February. Results benefited from healthy price realization, strong operational execution across both segments, and improved market demand. The broader MRO market showed positive momentum as we moved through the quarter and appears to have sustained that strength in April. At the same time, our high touch growth engines are gaining traction and the Endless Assortment segment is continuing to power the flywheel. Total company reported sales for the quarter were up 10.1%, or 12.2% on a daily organic constant currency basis. Operating margin was strong at 16.7%; diluted EPS finished the quarter up over 18%. Operating cash flow came in at $739 million, which allowed us to return a total of $345 million to W.W. Grainger, Inc. shareholders through dividends and share repurchases. I also want to mention that we recently announced a 10% increase to our quarterly dividend, marking the 55th consecutive year of dividend increases. This reflects our continued commitment to returning cash to shareholders through a balanced and return-focused approach. Overall, the quarter finished ahead of expectations; we are increasing our 2026 guidance to reflect the strong start and continued momentum we are seeing. I will now turn it over to Deidra Cheeks Merriwether for the financial results. Deidra Cheeks Merriwether: Thanks, DG. As mentioned, we had a great start to the year, with total company sales up 10.1%, or 12.2% on a daily organic constant currency basis, which included strong growth across High-Touch Solutions and Endless Assortment. Gross margin for the quarter was healthy at 40%, up 30 basis points versus the prior-year period as we saw expansion in both segments. Operating margin was up 110 basis points year over year as gross margin flow-through and leverage in both segments helped drive results. Both gross margin and operating margin benefited from the exit of the U.K. market. Overall, we delivered diluted EPS for the quarter of $11.65, up 18.2% versus 2025. Moving to segment-level results. The High-Touch Solutions segment delivered sales growth of 10.5% on a reported basis, or 10% on a daily constant currency basis. Sales growth included roughly equal contributions from price and volume. From an end-market perspective, we believe that MRO market demand gained momentum in the period. This view is supported by various market indicators as well as the activity we are seeing on the ground with customers. For W.W. Grainger, Inc. specifically, we saw broad-based acceleration across end markets with strong contributions from manufacturing, government, and contractor customers. On profitability, gross margin finished the quarter at 42.6%, up 20 basis points versus the prior year as positive mix and freight were partially offset by the impact of the annual W.W. Grainger, Inc. sales meeting. We also continued to experience LIFO inventory valuation headwinds in the quarter. Relative to our verbal guide, gross margin results exceeded expectations for the quarter as price/cost was roughly neutral, feeling better than anticipated on stronger price realization. Further, we saw cost timing favorability compared to expectations on lower sell-through of certain SKUs within our private label inventory. We anticipate this cost pressure will now hit in the second quarter. On SG&A, we gained nice leverage year over year as we benefited from strong sales, productivity, and a tailwind from the W.W. Grainger, Inc. sales meeting. This more than offset continued marketing investment and higher payroll and benefits expense, including higher incentive-based compensation given our strong start to the year. This helped drive operating margin for the segment to 18.3%, up 60 basis points versus the prior-year period. All told, it was a great start for the High-Touch segment and we are excited about the momentum we have as we move through the rest of the year. Now focusing on the Endless Assortment segment. Sales increased 19.6% on a reported basis, or 21.9% on a daily organic constant currency basis, which normalizes for the closure of the Zoro U.K. business and the impact of foreign currency exchange. Zoro U.S. was up 18.7% on a daily basis, while MonotaRO achieved 24.3% in local days/local constant currency. At a business level, Zoro saw strong growth from its core B2B customers along with improving customer retention rates. The team continued to deliver on core foundational capabilities, improving the customer experience across pricing, fulfillment, and website functionality. At MonotaRO, sales were strong with continued growth from enterprise customers, coupled with solid acquisitions and repeat purchase rates with small and mid-sized businesses. Additionally, MonotaRO continued to benefit from an increase in web traffic stemming from a competitor cyber outage, which provided a meaningful tailwind to sales in the period. As expected, this impact waned as we moved through the quarter. On profitability, operating margins increased 190 basis points to 10.6%, with favorability across the segment. MonotaRO margins remained strong at 12.9%, up 90 basis points, and Zoro margin improved to 7.3%, up 210 basis points, with both businesses benefiting from healthy top-line leverage. Overall, it was another strong quarter for the Endless Assortment team. Before moving on, I wanted to share a brief update on the inflationary environment as we navigate tariffs and geopolitical cost pressures. We continue to manage the business with the goal of maintaining price/cost neutrality over time. With this, we passed further price increases in January, in response to previously delayed tariff inflation and to offset annually negotiated cost increases with our suppliers, which were largely in effect as of February 1. These actions were net of a partial rollback on certain Chinese tariffs announced at the end of last year. As it relates to the recent Supreme Court ruling on IEPA tariffs, we are only anticipating a modest impact on the business since the tariff rate differential with prevailing Section 122 duties is minimal. With this, our May pricing actions were net neutral in total. Where we have seen modest cost reductions, namely on products that W.W. Grainger, Inc. is directly importing, we adjusted prices as part of our May update. For the remainder of our assortment, we are working with supplier partners to assess cost reduction opportunities and will take subsequent pricing actions as warranted. Moving forward, the team is busy evaluating further inflationary pressures from recently announced tariff changes and the knock-on effects from the conflict in the Middle East. On fuel, we are working with our supplier and transportation partners to minimize cost headwinds that have risen as diesel prices remain pressured. We ultimately strive to pass these costs through to customers, but there is some leakage since a number of our customers do not fully pay for partial shipping. While currently only modest in total, these heightened costs are pressuring our margins and this will likely continue until our next pricing window. We have included this fuel impact in our updated guidance. On the recently announced Section 232 modifications, given the significant complexity, we are still working to understand what the full impact might be across our assortment, but our initial analysis suggests it is likely minimal. Separately, we are starting to see supply pressure from the conflict in the Middle East related to certain raw material inputs on some categories like nitrile-based gloves. As of now, this is minimal in the U.S. business, but we are starting to see more strain in Japan given the region’s reliance on energy inputs which move through the Strait of Hormuz. We will continue to assess the situation and are working with our suppliers and manufacturing partners to minimize supply impacts, including changing our sourcing strategy where needed. Despite these challenges, we are not anticipating a step change in cost inflation from these pressures at this time, and thus have not included any impact in our updated guidance. However, if the conflict persists, these impacts could result in incremental costs for the business and this will be felt more quickly in the U.S. based on LIFO accounting. Lastly, we are also monitoring for the potential recovery of previously paid IEPA tariffs where W.W. Grainger, Inc. is the importer of record, but the timing and the magnitude of any recovery remains uncertain at this time. As you might imagine, the broader inflationary landscape remains highly fluid, as it has been for the last several quarters. Importantly, our team is staying agile, and we continue to be confident in our ability to maintain supply for our customers while adhering to our core pricing tenets. Now turning to our guide. As a result of our strong start and continued momentum, we are raising our full-year 2026 guidance. On the top line, our new outlook includes expected daily organic constant currency sales growth between 9.5% and 12%, reflecting first-quarter strength, continued strong execution, and improved MRO market demand. Our operating margin expectations for the full year have ticked up slightly at the midpoint to incorporate our first-quarter outperformance. This is partially offset by headwinds from higher incentive-based compensation and leakage related to increased fuel costs. While incremental margins remain healthy, you will see that the added revenue dollars for the balance of the year are less profitable because of these transitory headwinds. Taking all this together, EPS is expected to be between $44.25 and $46.25, representing nearly 15% year-over-year growth at the midpoint. This represents a $1.75 improvement at the midpoint versus the prior guidance range. We have also updated our supplemental guidance in the appendix, which includes an increase in total company operating cash flow compared to the prior guide. We have continued our strong momentum into the second quarter, with preliminary April sales up north of 13% on a daily organic constant currency basis. This start supports our expectations for second-quarter sales north of $4.9 billion, or approaching 12% on a daily organic constant currency basis, which is 330 basis points lower on a reported basis when normalizing for the U.K. market exit and currency headwinds. We expect operating margins will be down sequentially in the second quarter compared to the first quarter. Beyond normal seasonality, we expect this step-down will be exacerbated by headwinds from fuel costs, along with increased costs on our private label inventory, the latter of which is in line with what we had expected to hit in the first quarter. All told, we anticipate second-quarter operating margins will be in the low-15% range for the total company. With that, I will hand it back over to DG for his closing remarks. Donald G. Macpherson: Thanks, Dee. Overall, we feel good about how the business is operating and are confident in our strategy. I am encouraged by our ability to continue to grow profitably in this ever-evolving environment while staying focused on creating value for the long term. Looking ahead, we will continue to focus on what matters most for our customers and earn their trust through strong execution, differentiated capabilities, and a consistent focus on doing the right thing. We recognize significant uncertainty in the macro, but we will stay nimble to serve customers and perform well in any environment. We will now open the call for questions. David John Manthey: Good morning. First off, I appreciate that you finally moved away from the myopic quarter-to-quarter share gain discussion, particularly in a quarter where you could have taken a major victory lap. So thanks for that. We will draw our own conclusions. My first question is on price. Could you just tell us in simple terms what was price contribution by each segment and overall? Deidra Cheeks Merriwether: Dave, thank you for the question. When you look at North America, we are about five points of price. David John Manthey: Okay. All right. And then, Dee, maybe you could update us on the pacing of margins through the year. When I look back to last quarter, you said seasonally, gross margin would deviate from its normal pattern. You had LIFO, price/cost, and the show impacting that. And you said that first-half gross margins would be at or slightly below the annual guide and then rebounding in the back half, and operating margins would follow a similar trajectory. I was just wondering if you could give us an update on your view there. Deidra Cheeks Merriwether: Yes. I would say now we believe it is going to have more of a U shape. Part of that is because Q1 performance did very well from a price realization perspective, as price continued to build based upon the changes that we made in 2025 and then, of course, the change we made in January. You heard in prepared remarks that we had expected to sell through more of our private label inventory in Q1, which would have created a drag. Not as much sold through; we are starting to see that sell through already in Q2, so we expect that negative impact to hit in the second quarter. We also have the normal seasonality decline that happens from Q1 to Q2 because we take a larger price increase in January and that bleeds off through the year. As you also heard us talk about, the impact that we have related to fuel will build. That was not necessarily anticipated in the original guide, so that is new news here that we have added to the guide. The challenge that we have with the majority of our very large customers is free parcel shipping in their contracts, and as a result of that, it is more difficult for us to pass on accessorials and other fuel charges to them. That is going to take us some time. We noted that we will have some leakage and then we are going to have some timing implications. However, we are confident that we will find a way to work through that—i.e., the U shape—and as the year goes on, we will have a means to pass some of that price onto those customers and some of our broader customers while still remaining competitive in the marketplace. Jacob Frederick Levinson: Good morning, everyone. It might be a little too early to really see any impact here, but if we look at Japan, I think that is probably a blind spot for a lot of us on this call. Is the team at MonotaRO seeing anything to be concerned about? I know they have certainly borne quite a bit of the energy shock here. Donald G. Macpherson: You are right that East Asia, in particular, bears more of the brunt here given most of their oil and natural gas, frankly, comes through the Strait of Hormuz. What we have seen is some price pressure with some products there, and we have seen a little bit of buying at the end of the first quarter of those products that are potentially at risk. It has not been material yet, but it could become so depending on how long it goes. Jacob Frederick Levinson: Okay. That makes sense. And just on the private label side, I assume no news is good news, but that was a potential concern last year. Have you been able to adapt that business given the tariff environment? It is kind of hard for us to know what all the moving pieces are there. Donald G. Macpherson: It is not a simple challenge either. There have been some private label products where the cost spread between them and the national branded products has compressed, and we have seen some impact there and some more buying of national branded versus private brand. Some of that will probably work its way out over time, and we think we will get back to having an appropriate gap and having very high-quality products at reasonable prices for customers in a private brand. I would also note we are having tremendous success with leveraging the W.W. Grainger, Inc. brand for certain areas of our private brand as well, so we are pretty excited about the path there. Overall, we are still very confident in our private brand path, but there has been some impact for sure. Ryan James Merkel: Nice job this quarter. Question is just on the demand environment. DG, what was the surprise for you on revenue in the quarter? Was it just better end-market demand, or is the company-specific story also a part of it? Donald G. Macpherson: I think it is a bit of three things. One is the end-market demand. We did flip; it had been negative for several years, and most signals would suggest volume growth in the market turned slightly positive. That is a benefit. Our price realization has been higher than we had anticipated to start the year, so that is a benefit. And our share gain has been strong as well. All of that has conspired to create a really strong demand environment for us. Ryan James Merkel: Got it. That is great. Okay. And then second question is on gross margin for Dee. You did 40%. I think you thought it would be 39%. So is all of the beat this mix/timing? What drove the mix/timing? And then can you unpack why in the second quarter the cost increase in the private label is a negative? Thank you. Deidra Cheeks Merriwether: We achieved better price realization in the first quarter than what we had anticipated, based upon some of the SKUs that customers were purchasing. That was very helpful to us. On the private label inventory, we had assumed that with some of this growth, we would be selling through much more of our lower-cost private label inventory and have that impact in Q1. We sold through a lot less than anticipated, and we are now seeing it come through already in April; it will hit in the second quarter. In addition, we have normal seasonality with gross margin because of the price increase that we take in January that then normally subsides as we go through the year. Donald G. Macpherson: While we are mostly on LIFO, our private brand inventory is on FIFO, which adds complexity. That has always been the case; it is just that in the last year it has become more necessary to talk about. We did not sell through layers yet that are higher cost, and now we are. Christopher M. Snyder: Thank you. I appreciate the question. Could you talk about the impact that the leading on the price/cost—primarily on the private brands—had on Q1 gross margin? Deidra Cheeks Merriwether: It was about 20 basis points in the first quarter. Christopher M. Snyder: Thank you. And then on the price conversation, to make sure I am understanding it right: you did the typical January start-of-year price increase, and then there was another round in May. Was May in response to all the inflation we are seeing now between metal, freight, tariffs, everything? Could you provide any relative sizing for either of those two? Donald G. Macpherson: January 1, May 1, and September 1 are our normal price cycles. The May 1 action was not in response to anything in particular; that is simply the timing at which we can take it, and we incorporated relevant factors in that cycle. Deidra Cheeks Merriwether: January incorporated any lag we had from being able to take tariff actions from 2025 plus what we were negotiating late in the year that would impact us in 2026. That was a slightly positive pricing action and net of certain Chinese tariff rollbacks announced in November. May, which is a normal time to take pricing actions, was really net neutral—true-ups and corrections related to January, incorporation of 122 actions, offset by IEPA rollback for our private label products that we directly source where we know the standard price changes. Christopher D. Glynn: Thanks. Good morning. You talked in the past few quarters about an elevated backdrop for a chunkier contract cycle. What pace are you seeing those rolling into the outgrowth, and how long is the tail for a more elevated cycle for chunkier wallet share pickup? Donald G. Macpherson: I would not describe it as significantly chunkier than the past. Our contract business has been net positive to start the year. We have had a number of successes in implementations. We are seeing a lot of customer demand to serve them on-site in ways that are important to them. There is less labor with many of our customers, so we are being asked to do more things, and we are providing more services on-site than we have historically. It is not a significant departure from the past, but we have had success in growing our large customer volume in the last six months. Christopher D. Glynn: And what are you now seeing in terms of the most productive use cases for AI? Donald G. Macpherson: There are many use cases. I would put them in a couple of categories. First, use cases that drive productivity in the business—customer service tools assisting our agents, finance and back-office applications, and supply chain applications to drive more one-piece flow in our warehouses. Second, customer experience use cases that are critical for long-term success—improving search and merchandising capabilities. It is pervasive and will be even more so. Pointing at the right things to create advantage, in addition to driving productivity, is really important. Christopher D. Glynn: Zoro—website functionality as a driver—what are the implications for margin and outgrowth as that normalizes, implementing lessons learned? Donald G. Macpherson: Website changes and improvements are in process; we probably have not seen too much benefit yet from those. We have seen a lot of benefit from improving repeat business and the quality of customer acquisition, and the business improved both margins and growth rate as a result. The website improvements will be a fast follow and drive a lot of benefit too. We are excited about what they are building. Analyst: Can you hear me? Donald G. Macpherson: Yes, we can. Analyst: Question on the guidance range. A lot of debate on the stock has been about your ability to push pricing, and I think gross margin this quarter reflects success. But most of the raise reflects the beat in the quarter. How should we think about sustainability of this pricing momentum into the second half? Donald G. Macpherson: That debate has not been happening internally. As we went through the tariffs, we said we would lag in terms of getting to price neutrality; we did it—you see that in the first quarter. Now there are some things—fuel and private label timing—that may cause the U shape and we will do it again, and that is partly because we are on LIFO. The fundamental of price/cost is strong and very stable. As for not flowing through more for the second half, it is the things we talked about—potential fuel costs, private brand costs coming through, and seasonality. You can argue whether we are being conservative on increased fuel cost—there is a lot of uncertainty. If the conflict ended and the Strait opened quickly, that would be great, but we are forecasting some challenge with fuel and that is the reality. Analyst: Could you size the LIFO impact this quarter relative to other quarters, just directionally? Deidra Cheeks Merriwether: LIFO never goes down; it normalizes and subsides. From Q4 to Q1 at the total company level, we think it is about 70 basis points. Stephen Volkmann: Good morning, everybody. A couple of growth questions. On your slide where you show the various end markets—pretty nice inflection. Would you say any of these were specifically benefiting from share gains more than the others, or is it more broad-based? Donald G. Macpherson: It is more broad-based in terms of share gain. Share gain for us typically comes from providing great service, helping customers find the right product, and providing on-site support for inventory management. It is a set of core things that we do, and generally those impact most segments at the same time if we are performing well. That is what is reflected here. Stephen Volkmann: Any potential that you saw some customers buying a little extra inventory given uncertainty around price and availability? Donald G. Macpherson: Not in the U.S. We have also not seen customers stop projects given the uncertainty. Things are kind of normal status in the U.S. We mentioned in Japan at the end of the first quarter we saw a little buying ahead to secure petroleum-based products, but not in North America. Stephen Volkmann: Competitively, we hear pockets of availability issues. Are you seeing competitors do more or less pricing, be able to pass through diesel, or having issues getting anything? Donald G. Macpherson: It is too early to really know that. In North America, we do not anticipate challenges. If there were challenges, it would be things going on in Southeast Asia where we are all procuring the same things. So far, we have not seen trouble getting product in the U.S., and we have not seen any unusual competitor behavior. Deane Michael Dray: Good morning, everyone. What was the benefit to margin in the quarter from the two European exits, and what would be the benefit for the year? Deidra Cheeks Merriwether: Year over year, it is about 45 basis points, equally split between gross margin and SG&A. As it relates to top line, Cromwell sales are about a 210-basis-point impact on total company and a 110-basis-point impact on Endless Assortment for the Zoro U.K. exit. Deane Michael Dray: For DG, is free shipping on partial shipments non-negotiable—just part of the service you need to offer? What is the impact—small sliver or meaningful? Donald G. Macpherson: It is a meaningful portion of the total. It is very common to build free partial shipping into contracts with large customers in our space. We have the ability to do certain things to mitigate this over time depending on how long it goes, so we are not concerned about it; in the short term, it creates a headwind. Part of the issue with large customers is their average order value is significantly higher, so parcel costs as a portion of the overall are pretty small relative to smaller customers. Guy Drummond Hardwick: Hi, good morning. Excellent results—congratulations. You have had about six months now, if you include April, of better-than-expected trading and are guiding to double-digit organic growth this year. DG, does that give you room for investing more for organic market share gains, or do the inflationary pressures preclude that? Are your marketing/investment budgets for this year set, or subject to change? Donald G. Macpherson: If we have the ability to invest profitably for growth, we will do it. We do not have a cash problem. I do not expect our budgets this year to change much. We set our budgets based on what we have seen from a cause-and-effect basis in areas like marketing and Salesforce coverage. In general, added growth does not mean we will invest more mid-year, and in difficult times you often will not see us invest much less either—if something is worth doing for the long term, we will do it to be successful through anything. Guy Drummond Hardwick: And for Dee, on SG&A growth of 6%, is that a sensible number to use for the rest of the year? Deidra Cheeks Merriwether: Five and a half to six is what we look at, so for the rest of the year that is a fair range. Patrick Michael Baumann: When you are looking at the sequential move in margin into the low-15% range for the second quarter, is all of that decline coming from gross margin sequentially? Could you bridge the drivers between seasonal versus the private label costs, fuel costs, or meeting timing? Deidra Cheeks Merriwether: It is about a one-point difference on gross margin. Roughly 60 basis points is normal seasonality. About 20 basis points relates to the increased cost of private label inventory moving from Q1 to Q2. The remainder is leakage we expect from increased fuel costs. Some of that is timing because fuel hits now and we are not in a pricing cycle to address it; our next pricing cycle is when we can start to recoup some of that back. That gets you from about 40% gross margin to about 39%. On operating margin, we also have normal seasonality in stock comp and merit, where we delever from Q1 to Q2. Patrick Michael Baumann: That would imply SG&A growth goes from about 6% to high single digits, but you said 5.5% to 6% for the year. What is the difference? Deidra Cheeks Merriwether: If we continue to grow, we still have investments that we are making through the year. On average, we expect 5.5% to 6%. Patrick Michael Baumann: What is embedded now for the guide for the year in terms of market outlook and for price? Donald G. Macpherson: Market outlook is around 0% to 1% volume growth—we think it will be positive for the year. Price probably moderates and goes down from maybe five in the first quarter to around four for the year. Thomas Allen Moll: Good morning and thank you for taking my questions. DG, you made some comments at the Annual Shareholder Meeting last week on sales force adds. I think you added 110 last year across two geographies. Is that a gross or a net add number, and what do you have baked in for this year? Donald G. Macpherson: That is a net number. We have been adding fairly consistently over the last several years, probably between 3% and 4% to the Salesforce every year, and we expect this year to be in the same general area. Some of the value from having better customer data has allowed us to identify places we can fill in coverage. We have been doing it region by region. We should be mostly done with those changes by 2027. Thomas Allen Moll: On your distribution network, you commented on the progress in Houston and in the Northwest facility. Looking ahead, are there other big geographies where you are contemplating a greenfield opportunity or a substantial increase in an existing footprint? Donald G. Macpherson: Portland is going live this year; it is ramping up as we speak. Houston will go live in 2028. It is a very big building, which expands our capacity in the Texas market, which is important. As we go forward based on our growth, there may be other areas where we add to existing positions or scale from midsized to much larger positions. We are not really missing geographies at this point. There will still be investments, but they are more likely to be expansions or moves rather than fully new greenfields. Operator: Thank you. There are no further questions at this time. I will hand the floor back to management for any final remarks. Donald G. Macpherson: Thank you for joining the call. We really appreciate your time. We feel good about the way things are going. There is uncertainty in the world, but our job is to perform through that uncertainty and to make sure we are building for the future. We are focused on doing those things, we are a resilient business, and we are in good shape. We are optimistic about where we are headed. Thank you, and have a great rest of the week. Operator: Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the American Homes 4 Rent First Quarter 2026 Earnings Call. Operator: At this time, 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 conference over to your host, Nicholas Fromm, Vice President of Investor Relations. Thank you. Please begin. Nicholas Fromm: Good morning. Thank you for joining us for our first quarter 2026 earnings conference call. With me today are Bryan Smith, Chief Executive Officer; Christopher Lau, Chief Financial Officer; and Lincoln Palmer, Chief Operating Officer. Please be advised that this call may include forward-looking statements. All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC. All forward-looking statements speak only as of today, 05/07/2026. We assume no obligation to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package. As a note, our operating and financial results, including GAAP and non-GAAP measures, are fully detailed in our earnings release and supplemental information package. You can find these documents, as well as SEC reports and the audio webcast replay of this conference call, on our website at amh.com. With that, I will turn the call over to our CEO, Bryan Smith. Bryan Smith: Welcome, everyone, and thank you for joining us today. 2026 is off to a good start. Our strong first quarter was characterized by solid seasonal demand and excellent execution by our field and asset management teams. Against the backdrop of political and economic uncertainty, our results demonstrate the resiliency of single-family rentals and the strength of the American Homes 4 Rent platform. Seasonal demand picked up as expected in the back half of the first quarter despite a slightly later start this year. This resulted in record leasing volumes for March and continued momentum through April. The recent occupancy and new lease spread trajectories put us in a good position as we move through the remainder of peak leasing season. The teams did a great job in meeting the accelerating demand, efficiently turning homes in a period of heightened lease expirations, and their ability to control the controllables drove an impressive reduction in same-home core operating expenses year over year. This resulted in strong same-home core NOI growth of 3.7% for the quarter. For April, the leasing momentum from March continued, further improving new lease spreads to 1.2% and same-home average occupied days to 95.6%, representing a 30 basis point sequential improvement. On the investment front, we continue to execute on our 2026 capital plan. During the quarter, we delivered over 500 high-quality purpose-built American Homes 4 Rent development homes at a 5.3% average initial yield. As a reminder, this year's moderated on-balance sheet development activity will be match-funded with proceeds from our disposition program. Our asset management team did a great job identifying noncore assets and recycling capital in the first quarter, selling over 700 homes for approximately $200 million of net proceeds. Importantly, we continue to see strong MLS demand across all of our markets, demonstrating the resilient value of single-family housing to end user homebuyers. And finally, we continue to remain active on share repurchases, taking a thoughtful and strategic approach to capital deployment. Over the past six months, we have repurchased approximately $360 million of common stock, which represents roughly 3% of total shares and units outstanding. Before I close, I would like to provide a brief legislative update. The discussions in Washington around the 21st Century Road Act are continuing as we speak. Our focus remains on ensuring that the role of single-family rental housing is well understood and appropriately represented. We are actively engaged alongside industry partners to support policies that encourage housing supply. We will keep you informed as developments unfold. Most importantly, millions of Americans call single-family rentals home, and our focus on providing quality housing with an exceptional resident experience is unwavering. With our leading operating platform and vertically integrated development program, American Homes 4 Rent is well positioned as an industry leader to adapt and respond effectively in all environments. With that, I will turn the call over to Chris. Christopher Lau: Thanks, Bryan. Good morning, everyone. Like usual, I will cover three areas in my comments today. First, a review of our quarterly results. Second, an update on our balance sheet and recent capital activity. And third, I will close with a few thoughts around our unchanged 2026 guidance. Starting off with our operating results, the teams delivered a good quarter with solid execution across the board, generating net income attributable to common shareholders of $128 million, or $0.35 per diluted share. On an FFO share and unit basis, we generated $0.48 of core FFO, representing 4.6% year-over-year growth, and $0.45 of adjusted FFO, representing 8% year-over-year growth. From an investment perspective, we continued executing on our moderated 2026 development plan, delivering a total of 539 homes to our wholly owned and joint venture portfolios during the quarter. Specifically, for our wholly owned portfolio, we delivered 457 homes for a total investment cost of approximately $187 million. Additionally, we saw another quarter of robust disposition activity, generating total net proceeds of nearly $200 million at an average economic disposition yield in the 4% area. Next, I would like to quickly turn to our balance sheet and recent capital activity. At the end of the quarter, our net debt, including preferred shares, to adjusted EBITDA was 5.3 times. We had approximately $63 million of cash available on the balance sheet, and we had a $390 million drawn balance on our $1.25 billion revolving credit facility. Additionally, during the quarter, we repurchased 3.7 million common shares for a total of $115 million at an average price of $31.49 per share. And subsequent to quarter end, we repurchased an additional 3.2 million common shares for a total of $94 million at an average price of $29.37 per share. Over the past six months, we have repurchased a total of $360 million of common shares, representing approximately 3% of total shares and units outstanding, and continue to have over $400 million remaining on our existing share repurchase authorization. Lastly, before we open the call to your questions, I wanted to briefly touch on our 2026 outlook. As contemplated in our guidance, after a slower start to January and February, leasing season is now fully underway with healthy demand and strong activity. Additionally, as we saw in the first quarter, the team is doing an excellent job controlling the controllables on expenditures. As a reminder, however, it is still early in the year, with the majority of spring leasing activity and move-out season still ahead of us. With that in mind, we have left our 2026 guidance unchanged and continue to remain optimistic on our position moving forward. As demonstrated by this quarter's results, our operating platform is clearly firing on all cylinders. The positive inflection in April new leasing spreads is a great reminder of the resilient demand for single-family rentals, and our prudent approach to capital management continues to create value into the balance of 2026 and beyond. Thank you again for your time. We will now open the call for questions. Operator: If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. 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 the star key. To allow for as many questions as possible, we ask that you each keep to one question. Thank you. Our first question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question. Analyst: Hi, this is Connor on with Jamie. Thank you for taking my question. New leases experienced a solid 200 bps acceleration versus 1Q. Can you unpack what drove that inflection? How would you describe this spring leasing season versus typical seasonality? Are there certain markets that are key drivers? And how are May trends comparing so far? Lincoln Palmer: Hi, Connor. Appreciate the comments on new leases. As Christopher mentioned in his prepared remarks, we are pleased with the way the season has kicked off. What you are seeing in new leases is driven primarily by a balanced approach to our revenue management strategy. We have seen great activity at the beginning of the year that has driven improvements in both occupancy and rate. As we mentioned, it got off to a slightly slower start, but April and May results have shown great leasing activity. Think of that in terms of roughly 15% incremental activity over last year. On the seasonality piece, we expect to continue to build rate and occupancy into the season. We are right in the thick of it, and we expect May and June to build occupancy incrementally. Rate will follow. Our objective is to maximize the top line. We will take the first half of the year to capture as much rate and occupancy as we can and, as we have discussed in the past, we will control the controllables and hold as much of that occupancy as possible. May is feeling really good so far with no change in the strong activity we have seen to start the year, so we are encouraged by the season. Operator: Our next question comes from the line of Eric Wolfe with Citi. Eric Wolfe: Hey, you mentioned a second ago that you expect occupancy to continue to build into future months here. With occupancy coming up so much, are you starting to be a little bit more aggressive on the renewal side, or do you expect to stay around this sort of 3% level and build occupancy? How are you thinking about pricing going forward versus trying to build more occupancy into the back half of the year? Lincoln Palmer: Thanks, Eric. What we are seeing on renewals so far this year is part of a consistent and balanced approach to our revenue plan. You can see the results of that in the top line. We have had great retention this year relative to renewal offers that we have sent out. As a reminder, for the year we contemplated renewals in the 3% area in our guide. First quarter landed at 3.2%. Notably, we are seeing pickups into May and June on renewal rates, so Q2 should land very similar to Q1. We are mailing into Q3 now in the mid-3%s, so we are comfortable with the way that is moving. We will continue to find additional opportunity in the back months of the year if that is available to us. Operator: Thank you. Our next question comes from the line of Juan Carlos Sanabria with BMO Capital Markets. Please proceed with your question. Analyst: Hi. This is Robin Hanalem sitting in for Juan. I was just curious on the latest on the regulatory front and the probability of stripping out build-for-rent hindrances. Bryan Smith: Thanks, Robin. The latest on the regulatory front, up to the minute, is that the House is working on a response to the Senate housing bill, which specifically addressed build-to-rent and had some restrictions. That remains in discussion today. It is difficult to predict the timing or the exact outcome, but it is important to note that everybody's objective is the same—the policymakers, ours, and the industry—and that is addressing housing affordability. The initial bill that was passed by the House, the 21st Century Act, did just that by facilitating the development process and making it a little bit more efficient. Some of the additions from the Senate have caused public concerns, not only from single-family rentals but across the homebuilder space, and there has been a lot of headline risk against that. The House is taking that into consideration. It remains to be seen on timing and outcome, but from American Homes 4 Rent’s perspective, this regulatory attention has really highlighted the importance of having a scalable operating platform and a development platform that we believe can create additional opportunities for us going forward. We think we are in a good place, but the outcome remains to be seen. Operator: Thank you. Our next question comes from the line of Steve Sakwa with Evercore ISI. Please proceed with your question. Analyst: This is Manas on for Steve. Just wondering if you could touch on how you feel today on additional buybacks, which you were obviously active on, versus development. How do you think about capital allocation currently and what you expect for the next month? Christopher Lau: Morning, Manas. As we think about buybacks more broadly, the right place to start is that we very much believe in the business and we believe in the stock. You can see that clearly demonstrated by the fact that we have been active consistently repurchasing stock over the past six months. We were active during the fourth quarter, active during the first quarter, and now into the beginning of the second quarter as well. As mentioned in my prepared remarks, cumulatively we have repurchased about 3% of total shares and units outstanding. Looking forward, we continue to have over $400 million remaining on our existing repurchase authorization. As we talked about at the start of the year, we came into 2026 with our capital plan contemplating $100 million of incremental capital capacity for additional repurchases without taking leverage above the mid-5s, and not all of that has been deployed yet. More broadly, like we discussed last quarter, we continue to have a great opportunity as we think about leaning into dispositions, just like we did in 2025, to potentially free up additional layers of capital as we evaluate further repurchases to complement the strategic and long-term value being created by our development program. Operator: Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed with your question. Analyst: Hi. This is Mike on with Haendel at Mizuho. How are concessions trending by market, in particular Arizona, Texas, and Florida? What is the current level of concessions in terms of weeks in those markets? Lincoln Palmer: Thanks, Mike. As we have said in the past, in general we do not offer concessions on the rent side, and we have not been doing that for quite some time, especially in our new development communities. We have the ability to match our deliveries with demand, so we do not build inventory that would necessitate concessions. We do watch concessions in the broader marketplace that may be competitive with ours, and there has been a lot of that, but our product is moving very well and is positioned well, so we are not going to use concessions. Operator: Our next question comes from the line of Analyst with Bank of America. Please proceed with your question. Analyst: Thank you, and congrats on a nice start to spring leasing. Is there any change in move-outs to buy, whether increasing or decreasing, in any of your markets? Lincoln Palmer: Thanks. Move-out to buy has remained really consistent where it has been for the last several quarters—just sub-30%. As a reminder, that is essentially where it has been for most of our history. We have seen it come down slightly from the low-30%s as homeownership dynamics have shifted a bit, but it continues to be one of our largest reasons for moving out, and we do not anticipate changes to that in the near future. Operator: Thank you. Our next question comes from the line of Analyst with Green Street. Please proceed with your question. Analyst: I have a few questions to better understand the quality of the dispositions over the last few quarters. Directionally, can you give a sense of square footage per home, average age of home, and rent versus average rent, relative to the rest of the portfolio so we understand how low-quality these homes have been? Bryan Smith: I do not have the exact numbers in front of me, but for the dispositions in Q1, they were generally characterized by slightly smaller square footage than the rest of the portfolio. Age-wise, they are older homes, especially when you consider that we are maintaining a pretty good hold on average age because we are delivering brand-new houses into the portfolio. They could be characterized by slightly lower rent as well. The key factor is that in the vast majority of cases these are noncore assets—noncore due to location or demand characteristics at a minimum. I also want to remind everyone that we had a number of houses freed up last year when we paid off the securitizations that we had not had access to in a while, with maybe a slightly higher weight in the Texas markets. You are seeing some of those lower-end homes work through the system. Christopher Lau: Just to point out one number you may have noticed: the average net proceeds per property we sold in the quarter were roughly $200,000 per door, reflecting some of the attributes Bryan was talking about. Importantly, those homes still generated an average disposition yield in the 4% area, representing a really attractive form of recycled capital. Equally important is the opportunity to asset manage—make smart decisions and optimize the portfolio at a granular, unit-by-unit level. Operator: Thank you. Our next question comes from the line of Rich Hightower with Barclays. Rich Hightower: Good morning. A multipart on development: with the price of certain commodities going up quite a lot recently, what is your estimate of the interplay between that and prospective development yields on the pipeline in place? And help us understand the pace of development going forward given the cloud of uncertainty that currently exists on the legislation front. Bryan Smith: Thanks, Rich. On inflationary effects starting to creep into the marketplace, we are watching it closely. The good news for us is that on current developments we are pretty well locked in on price. To put it in perspective, our expectation for vertical costs of deliveries this year is right on top of, if not slightly down from, last year. The team has done a great job controlling those costs. At a global level—supply chain and the like—it is difficult to predict the effect. Lumber has gone up in the near term. If we do see an effect, it would likely be later in the year, and there may be counterbalancing effects as well. We liken it to how we handled tariffs last year—tariff pressure was counterbalanced by reduced activity from some homebuilders that put downward pressure on labor costs. There are a lot of moving parts. If inflation persists, we probably would not see it play out in costs until 2026 or 2027. We will be in a better position to discuss that on the next call. Relative to our development plans and capital allocation strategy this year, we have anticipated a reduced number of deliveries in 2026 relative to 2025. One of the benefits of owning a mass development program is the flexibility to flex up or down in response to market conditions. In this case, some regulatory uncertainty and cost of capital considerations drove us to this output expectation for 2026. As things get worked out in Washington, depending on the outcome, there may be nice opportunities that could provide a catalyst for the development program. Having that flexibility by owning the full stack in-house is important right now. Operator: Thank you. Next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question. Adam Kramer: I just wanted to ask about same-store expense growth. I think it decreased modestly in the quarter. What were the drivers—any one-time factors or expense shifting to another part of the year? And an update on insurance and any early nuggets on property taxes would be helpful. Christopher Lau: Morning, Adam. On property taxes, in general no major updates. As everyone recalls, first quarter is a quiet time of year for new property tax information. Our full-year outlook remains unchanged in the 3% area. The bulk of assessed values come back over the summer months, and tax rates are typically released later in the year—late third quarter into the fourth quarter. On insurance, our renewal was completed at the end of February and was contemplated in our full-year outlook. The market has continued to recognize the outperformance of our program, reflected in the success of this year's renewal, where we saw our 2026 insurance rates decrease by about 10%. On controllable expenses in the quarter, it was a combination of a little bit of timing in year-over-year comps and, more importantly, really great execution from the teams, especially notable given the increased level of scheduled expirations we had this quarter due to the ongoing maturity in the lease expiration management program. That translated into a slightly higher level of move-outs, which you can see in quarterly turnover on the same-store page, and the team still delivered a year-over-year decrease in controllable expenses even with that uptick. Operator: Thank you. Our next question comes from the line of Analyst with Zelman and Associates. Please proceed with your question. Analyst: Your guidance implies an occupancy lift through the end of the year. Historically, only 2020 did not see occupancy moderate from 2Q to 4Q. It seems like you still have some wood to chop on new move-in pricing to get to flat for the year based on where you are through April. Are you still expecting move-in pricing to be flat, and what gives you confidence you can achieve stronger-than-seasonal occupancy and new move-ins in the back half? Lincoln Palmer: Thanks for the question. You are correct to notice a slight difference this year in how we are thinking about seasonality and the curve. Again, the front half is to build occupancy and rate; the back half is to hold as much as we can. There are a few notable differences this season. First, we are contemplating flattish new lease rate growth for the year in support of our overall optimized revenue strategy intended to support occupancy. Second, our lease expiration profile in the back half of the year is extremely low compared to the past, which should help. We are also watching supply carefully and are hoping for a slightly improving supply picture. There are a lot of different things this year that are different than previous years, and we think we have a good plan. Christopher Lau: Just to make sure we are all on the same page on the shape of new leases, new leases are very much tracking according to plan. We built occupancy in the first quarter with modestly negative new leases, translating to a positive inflection in the second quarter that we expect to build a touch more into May. As we get into the back part of the year, we still expect new leases to reflect the typical seasonal curvature, and it would be natural to expect some moderation in the third and fourth quarters. Operator: Our next question comes from the line of Analyst with UBS. Please proceed with your question. Analyst: You mentioned the initial yield on development of 5.3%. What is the stabilized yield, and what spread are you targeting versus your cost of capital? Bryan Smith: Hi. The 5.3% yield I cited is the going-in yield upon delivery. We are actively delivering communities and have active construction sites, which gives a good indication of demand for our product. Earlier, Lincoln was asked about concessions. We are unique in that we do not offer them, and we do not need to. One interesting thing we have leaned into this year is preleasing. We have designed our program to offer homes well in advance of the certificate of occupancy, and the uptake has been fantastic. If I remember correctly, even though this program is still in its infancy, we leased over half of our new deliveries before they were ready—for the month of March, we preleased over half of our new deliveries. There is great demand, but I want to make sure we look at this from the perspective of the going-in yield. Upon stabilization—which we have defined in the past as a completed community that has been through one turn cycle—we have seen nice yield improvement. The best way to think about that momentum is to compare it against the scattered-site same-home pool. The behavior of the new development communities relative to the scattered-site portfolio is right on top of each other in terms of occupancy today. Rate growth is similar, so from the revenue side it is similar. The stark contrast is the total cost to maintain. We are operating these new development homes at a fraction of what it costs to operate scattered-site homes—maintenance, churn, and CapEx. You can see the effect as more of these come into the same-home pool, with total cost to maintain going down by 5% since 2023. Although we are not in position to give exact stabilized yields due to moving pieces, performance is as expected and we look forward to more good things to come. Operator: Thank you. Our next question comes from the line of Bradley Barrett Heffern with RBC Capital Markets. Please proceed with your question. Bradley Barrett Heffern: It feels like regulatory uncertainty is having an impact on future supply. When do you think we will start to notice that in the fundamentals, and is that likely to stick around regardless of the regulatory outcome? Bryan Smith: Thanks, Brad. It definitely has affected supply. It has been widely discussed how headlines this year have impacted capital coming into the space. I think it will have a more immediate effect on build-to-rent projects. Many projects already in sight will get completed, but the outlook has changed. This highlights the importance of scale and having an operating platform that can be nimble and adjust to regulatory changes. We do not expect to immediately see the effect on supply in the data, but depending on what gets passed, anything that restricts supply is going to be bad for housing affordability. Existing rental units may be looked at with a premium. We are optimistic that will not be the final outcome. In a nutshell, we have seen an effect today; we do not know how long-lasting it will be. Putting that into the context of an already improving supply profile puts us in a good position as we move through this year and next. Operator: Our next question comes from the line of Analyst with Deutsche Bank. Analyst: Thank you. Most of my questions have been answered, but I wanted to follow up. You commented earlier that the rate of expirations is a little bit lower in the fourth quarter this year. What caused that shift, and is that something you expect to continue in future years? Lincoln Palmer: Thanks. What you are seeing is the result of our intentional alignment of our lease expiration schedule. We have talked about shifting expirations from the back half of the year to the front half, where we have more opportunity to lease, gain occupancy, and build rate. Think of the balance now as roughly two-thirds in the first half and one-third in the second half. That has been very intentional relative to what we know about seasonality and activity in the back half. We will continue that effort and make refinements as we lean into lease expiration management at the community level to get more precise on months, days, and weeks of expiration. Operator: Thank you. Our next question comes from the line of Analyst with KBW. Analyst: Hi. This is Jason on for Jade. Have you seen any movement in pricing from sellers or in development yields based on the uncertainty from regulation or the rate environment? Bryan Smith: Some of the uncertainty this year has really put a pause on a lot of the transaction market. What we have seen is more willingness from some midsize operators to discuss ways they could partner with us. Nothing has happened yet because of the overhang, but we believe it creates opportunities going forward. It goes back to the value of having the operating platform and, in our case, the development platform. Things might be a little on pause in the transaction market, but we are optimistic that will change eventually. Operator: Our next question is a follow-up from the line of Analyst with Green Street. Analyst: Chris, there has been a lot of churn in the same-store pool from dispositions and then homes getting added to the held-for-sale bucket. How much lift to full-year 2026 expected same-store revenue growth comes from that disposition/held-for-sale activity? Christopher Lau: You are right that at the start of any year we are resetting the pool. This year, the pool grew by about 1,500 units, which is largely newly constructed homes delivered over the last couple of years that have now stabilized and matured their way into the same-home pool. Each quarter, as homes vacate, we can inspect them and finalize the decision as to whether they are appropriate disposition and capital recycling candidates. On same-store revenue growth, keep in mind that when we reset the pool, we reset both the current and prior-year pool. Any changes—whether new homes coming in at the annual reset or identifying homes for disposition—are reflected in both periods. Also, if a home is an appropriate disposition candidate, more likely than not it would have been occupied in the prior period. So it is apples to apples by the time you reset the pool and have the same composition of properties in both the current and prior period for comparison. Operator: Thank you. Our next question comes from the line of Analyst with UBS. Please proceed with your question. Analyst: What do you think led to the slightly later-than-normal start to the peak leasing season—weather, general lumpiness, or another factor? Lincoln Palmer: Thanks. The shape of every year is a little bit different, and there are many factors. Weather can definitely play a part. There was some weather this year, with an abnormally cold season across many parts of the country where we operate. Some of it can be uncertainty—regulatory, global events, or financial uncertainty. We are not sure exactly what drives it from period to period. We are encouraged that despite the late start, we are seeing excellent activity now and expect that to continue throughout the season. Regardless of what happens period to period, we are prepared to respond with appropriate operational adjustments. Operator: Our next question comes from the line of Analyst with Zelman and Associates. Please proceed with your question. Analyst: Thanks for the follow-up. You mentioned the supply profile is already improving. Any color you can provide, particularly in the more supply-burdened markets, on supply potentially clearing up? Lincoln Palmer: Thanks for the follow-up. We do see supply generally improving across most of our markets. We are encouraged by the level of demand in the marketplace during leasing season, which helps consume standing supply. We have also talked about moderation in starts and deliveries. For example, John Burns released an outlook on apartment deliveries for 2026 showing a 40% reduction year over year. That is encouraging. The same type of trend is happening on the BTR side, especially with regulatory uncertainty and the cost of capital environment. There is still some standing inventory in parts of the country that needs to be consumed, and the rate at which it gets consumed will vary market by market depending on inventory levels and demand profiles. We still see heavy inventory in Arizona and Texas, and it will take a bit longer to work through that, but we are also seeing great signs of life in many of our markets. Almost all our markets are running north of 95% with continued incremental improvements into the season. We will see how it plays out market by market, but we are encouraged while recognizing there is still work to do in a couple of markets. Operator: Thank you. Our next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your question. Austin Wurschmidt: Piggybacking on the last question: with supply potentially starting to improve in some markets, would you expect the spread between your Midwest markets and the Sunbelt markets to start to converge over the next 12 to 18 months? Lincoln Palmer: Thanks, Austin. I think convergence has more to do with what happens in the Sunbelt than in the Midwest. Performance in the Midwest is projected to be very strong for the next several years—rate growth, migration, and supply all have great profiles. As the other markets improve, we should see some convergence, but it probably depends more on improvement outside the Midwest, which continues to be very strong. Operator: Thank you. That concludes our question-and-answer session. I will turn the floor back to management for any final comments. Bryan Smith: I want to thank you for your time today. I hope everyone has a good weekend, and we look forward to seeing many of you at NAREIT next month. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to the Kimbell Royalty Partners, LP First 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, Rick Black. Thank you. You may begin. Rick Black: Thank you, operator, and good morning, everyone. Welcome to the Kimbell Royalty Partners, LP conference call to review financial and operational results for the first quarter, which ended 03/31/2026. This call is also being webcast and can be accessed through the audio link on the events and presentations page of the IR section of kimbellrp.com. Information recorded on this call speaks only as of today, 05/07/2026, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay listening or transcript reading. I would also like to remind you that the statements made in today's discussion are not historical facts, including statements of operational expectations or future events, or future financial performance, and are considered forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call, which by their nature are uncertain and outside of the company's control. Actual results may differ materially. Please refer to today's earnings press release for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including adjusted EBITDA and cash available for distribution. Reconciliations to the nearest GAAP measures can be found at the end of today's earnings release. Kimbell Royalty Partners, LP assumes no obligation to publicly update or revise any forward-looking statements. I would now like to turn the call over to Bob Ravnaas, Kimbell Royalty Partners, LP Chairman and CEO. Bob Ravnaas: Thank you, Rick, and good morning, everyone. We appreciate you joining us this morning. With me today are several members of our senior management team, including Davis Ravnaas, our President and Chief Financial Officer; Matthew S. Daly, our Chief Operating Officer; and Blaine Rinesberger, our Controller. To start off, we are pleased to report strong first quarter results and robust drilling activity across our acreage. Our production exceeded the midpoint of our guidance, demonstrating once again the resilience of our high-quality, diversified, and low-decline production base. Our active rig count remains strong with 85 rigs drilling across our acreage, representing a market share of U.S. land rigs at 16%. This favorable first quarter performance allowed us to declare a Q1 2026 distribution of $0.41 per common unit, up 11% from Q4 2025, as we continue to focus on returning value to unitholders. This distribution reflects an annualized tax-advantaged yield of approximately 11% based on yesterday's closing price. As we look to the remainder of 2026, higher oil prices should support a modest uptick in activity across our oil-weighted basins. Many operators are likely to accelerate the completion of DUCs to capture improved pricing while gradually increasing rig counts over time. While oil prices have been volatile in recent weeks due to macro uncertainty stemming from the Middle East conflict, they remain elevated when compared to historical levels, and we believe the current forward strip is conducive to incremental activity. We remain bullish about the U.S. oil and natural gas royalty industry and our role as a leading consolidator in the sector. We are encouraged by the opportunities in front of us and look forward to continuing our growth as we strive to expand our industry-leading portfolio of assets. I would like to thank all of our employees for their hard work and dedication in driving Kimbell Royalty Partners, LP forward and for their role in helping to generate long-term unitholder value. I will now turn the call over to Davis. Davis Ravnaas: Thanks, Bob. Good morning, everyone. As Bob mentioned, this is another strong quarter for Kimbell Royalty Partners, LP. I will now start by reviewing our financial results for the first quarter. Oil, natural gas, and NGL revenues totaled $82.9 million during the first quarter, and run-rate production was 25,522 BOE per day, which exceeded the midpoint of our guidance. On the expense side, first quarter general and administrative expenses were $9.4 million, $5.3 million of which was cash G&A expense, or $2.31 per BOE, well below our guidance range, a reflection of our continued operational discipline and positive operating leverage. Total first quarter consolidated adjusted EBITDA was $68 million. You will find a reconciliation of consolidated adjusted EBITDA and cash available for distribution at the end of our news release. This morning, we announced a cash distribution of $0.41 per common unit for 2026. We estimate that approximately 72% of this distribution is expected to be return of capital and not subject to dividend taxes, further enhancing the after-tax return to our common unitholders. This represents a cash distribution payment to common unitholders that equates to 75% of cash available for distribution, and the remaining 25% will be used to pay down a portion of the outstanding borrowings under Kimbell Royalty Partners, LP's secured revolving credit facility. I would also like to point out that during the first quarter, we repurchased and canceled 500 thousand units of the company's common stock for an aggregate purchase price of approximately $7.3 million at an average price of $14.60 per unit. This reflects our confidence in the underlying strength of the business and our view that the shares were trading below intrinsic value, making the repurchase an efficient use of capital while maintaining balance sheet discipline. Moving now to our balance sheet and liquidity. At 03/31/2026, we had approximately $440.9 million in debt outstanding under our secured revolving credit facility, which represented a net debt to trailing twelve-month consolidated adjusted EBITDA of approximately 1.6 times. We also had approximately $184.1 million in undrawn capacity under the secured revolving credit facility as of 03/31/2026. We continue to maintain a conservative balance sheet and remain very comfortable with our strong financial position and enhanced flexibility. Today, we are also affirming our financial and operational guidance ranges for 2026. As a reminder, 2026 guidance outlook was included in the Q4 2025 earnings release. We remain confident about the prospects for continued development in 2026 given the number of rigs actively drilling on our acreage, especially in the Permian, as well as our line of sight wells exceeding our maintenance well count. In closing, we are excited about our position as a leading consolidator in the highly fragmented U.S. oil and natural gas royalty sector, which we estimate exceeds $850 billion in size. Long-term demand for U.S. energy is expected to continue to grow, and we are well positioned to benefit through our diversified portfolio of high-quality royalty assets across the leading U.S. basins. With that, operator, we are now ready for questions. Operator: Thank you. We will now be conducting a question and answer session. 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 the star keys. The first question is from Timothy A. Rezvan from KeyBanc Capital Markets. Please go ahead. Timothy A. Rezvan: Good morning, folks. Thank you for taking our questions. I know about two thirds of your line-of-sight wells are in the Permian, and there is sort of a group think that that will be the basin that would be the first mover, given the call for oil globally. I was curious what you are seeing elsewhere in your portfolio. Are you seeing any increases in other places such as the Mid-Con where there are less natural gas constraints? Davis Ravnaas: Absolutely. We are seeing activity. Strangely enough, we are seeing an uptick in the Bakken for the first time in a while. We are seeing activity in the Eagle Ford. Yes, on the Mid-Con, which is, on a relative basis, a larger contributor to our overall portfolio. We would expect to see the preponderance of increased activity in the Permian. Timothy A. Rezvan: Good to know. Thank you. When I last spoke with you all in March, you gave the comments that your peers have echoed that higher oil prices should bring sellers to the table and help with M&A. We saw a large peer announce a sizable transaction earlier this week. Can we get your lay of the land on the M&A front, what you are seeing, and what has you excited? Davis Ravnaas: Great question. There are a couple of packages in the market now. We try to look at everything that we can. We would like to believe that we get a look at pretty much every sizable acquisition out there. Nothing imminent to report, but we are actively evaluating opportunities. I would say that the increase in oil price, to your point, makes sellers more willing to transact. At the same time, working against that to a certain extent is the volatility. We have seen a few groups walk away because they have a more bullish view on what oil prices are going to do versus others. I think what we will see happen is once we reach some sort of minimized level of volatility and people have a little bit more of an agreement between the buy side and the sell side on where the new equilibrium is, that is when you will start seeing a larger volume of transactions occur. Timothy A. Rezvan: That makes sense. If I could sneak one last one in: we noticed the repurchases in the first quarter. If we see where the stock is today, it has been a tough month for the industry. It is trading below the average of the first quarter repurchase price, and we also see WTI at $91 here. How are you thinking about repurchases versus debt paydown in the next couple of quarters? Davis Ravnaas: Great question. We want to be opportunistic. We have seen periods of time where our stock has traded down for inexplicable reasons, and we had a conversation at the management and board level about putting a program in place. Obviously, we started with a relatively modest repurchase, but we do have the authorization to do something more meaningful. So we will be opportunistic over time, trying to take advantage of inefficiencies and dislocations in our stock price where we believe that our shareholders would benefit on a long-term basis from a repurchase. I will say that we do not intend to divert the 75% payout to our dividends for repurchases. It would be a trade-off between debt paydown and repurchases of our stock with the 25% component of our free cash. That is what we are going to be weighing going forward. Timothy A. Rezvan: Appreciate the answers. Thank you. Operator: Thank you. The next question is from Nicholas Armato from Texas Capital. Please go ahead. Nicholas Armato: Good morning, all, and thanks for taking my questions. For my first one, on your outlook for the remainder of the year, you delivered a strong quarter on both the oil and gas side, which puts you roughly at the midpoint for the full-year guide. Do you think there is some upside to this given your strong performance in the first quarter and the stronger commodity environment that we are seeing? Davis Ravnaas: I do. I would like to believe that you will see increased activity. We are certainly hearing from other operators in their comments this quarter that they expect some improvement in drilling rates over the course of this year. I think some are more in a wait-and-see approach, others are being a little bit more aggressive. We are hearing from private operators that they are going to be more aggressive than the public operators, which has traditionally been the case historically. So, yes, we try to be conservative when issuing guidance and when reaffirming it, but given the precipitous rise in oil prices this year, all things being equal, we could expect to see increased drilling activity across our portfolio. Nicholas Armato: Perfect. Thanks for all the color. For my follow-up, how do you generally think about the cycle times for the conversion of DUCs to production and permits to DUCs? More specifically, do you think the stronger commodity environment will change those timelines versus maybe six months ago? Davis Ravnaas: That is a great question. Historically, we have seen DUCs come online on average within six months, and permits up to a year on an average basis. In a higher price environment, at least in the past, we have seen those timelines accelerate. We have also seen more rapid permitting activity in higher-priced environments. Our net DUC and permit inventory, by the way, does not even include our minor properties, which may contribute up to an additional 20% to our inventory. So we feel very good about the near-term line of sight on development on the properties and feel even better in today’s higher oil price environment that those numbers could improve and that the timelines could accelerate. But, Bob, anything you would add on development cadence in this environment? Bob Ravnaas: I agree with everything you said. Nicholas Armato: Perfect. Super helpful. Thanks for taking my questions. I will turn it back to the operator. Operator: Thank you. This concludes the question and answer session. I would now like to turn the floor back over to Bob Ravnaas for closing comments. Bob Ravnaas: We thank you all for joining us this morning, and we look forward to speaking with you again next quarter. This completes today’s call. Operator: This concludes today’s teleconference. You may disconnect your lines.
Operator: Thank you for standing by. This is the conference operator. Welcome to Intrepid Potash, Inc. first quarter 2026 Results Conference Call. 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. Should you need assistance during the conference call, you may signal an operator by pressing star. I would now like to turn the conference over to Ryan Schulz, interim investor relations manager. Please go ahead. Good morning, everyone. Ryan Schulz: Thank you for joining us to discuss and review Intrepid Potash, Inc.’s first quarter 2026 results. With me today is Intrepid Potash, Inc.’s CEO, Kevin S. Crutchfield, our chief accounting officer, Chris Engold, our VP of sales and marketing, Zachry Adams, and our VP of operations, Rick Kim. Please be advised that comments we will make today include forward-looking statements as defined by U.S. securities laws. These are based upon information available to us today, are subject to risks that are described in the reports we file with the SEC, and could cause our actual results to be different from those currently anticipated. We assume no obligation to update them. During today's call, we will also refer to certain non-GAAP financial and operational measures. Reconciliations to the most directly comparable GAAP measures are included in today's press release and along with our SEC filings. SEC filings are available at intrepidpotash.com. I will now turn the call over to our CEO, Kevin S. Crutchfield. Kevin S. Crutchfield: Thank you, Ryan, and good morning, everyone. We appreciate your interest in joining today’s earnings call. I am pleased to report that 2026 is off to a strong start, with solid first quarter results. Our adjusted net income from continuing operations for the first quarter of $8.2 million and adjusted EBITDA of $19 million is a significant improvement from last year's first quarter adjusted net income of $3.9 million and adjusted EBITDA of $14.6 million, and we are looking forward to capitalizing on this momentum for the rest of the year. Our performance is a reflection of the hard work of all of our employees, and I would like to thank our entire team for their commitment to safety and consistent execution across our core fertilizer business. Our first quarter performance was driven by several factors. First, supportive pricing and resilient demand across our fertilizer products. In the first quarter, our average potash net realized sales price was $353 per ton, and our average Trio net realized sales price was $387 per ton. This represents a 13% increase year over year for potash, up from $312 per ton, and a 12% increase for Trio, up from $345 per ton. Second, sales volumes remained strong with our second-highest quarterly sales total since idling the West Mine in 2016. Combined potash and Trio sales volumes were 211,000 tons in the first quarter, with potash sales volumes of 105,000 tons and Trio sales volumes of 106,000 tons. Finally, successful execution on key projects and operational efficiencies supported improved cost margins. Trio delivered its highest quarterly segment margin since 2022 and per-ton cost improved 5% compared to the fourth quarter. Before I pass the call to Zach, I want to highlight a few key developments and operational updates. On 04/01/2026, we sold the majority of the assets of the Intrepid South Ranch to HydraSource Logistics LLC for total consideration of $70 million, which included the $8 million deposit we received in December 2025. We were able to transact on the ranch at a favorable valuation, unlocking decades worth of cash flows in a single transaction that will allow us to refocus our efforts exclusively on our fertilizer assets. The sale will also allow us to utilize a portion of our sizable deferred tax assets to offset the tax impact of the one-time gain. On lithium, our partners continued to advance FEL-3 engineering and associated permitting. We remain confident in this project and look forward to sharing further details of the project economics as they develop. Overall, we are looking forward to a strong year. Continued steady support for our core business and a solid cash position will allow us to capitalize on our unique position in the market and capture additional upside from opportunities like lithium, among others. I will now pass the call to Zach to provide some commentary on the market. Go ahead, Zach. Zachry Adams: Thanks, Kevin. Potash saw a good subscription during the winter fill program, with customers securing orders to meet most of their first quarter requirements. Following the closure of the order window, posted potash prices increased by $20 per ton, a change reflected in second quarter spot transactions. Trio demand remains resilient as customers value the individual components—particularly sulfate, due to ongoing disruptions in raw sulfur supply from the Middle East—along with the low-chloride potassium component. Trio pricing was increased by $15 per ton in late March, with this adjustment realized on spot second quarter sales. Globally, potash fundamentals have been supported by consistent production, broadly stable pricing, and solid demand. Brazil and China imported potash at record levels in the first quarter, contributing to a balanced market and reinforcing a constructive outlook for the second half of the year. Turning to agriculture markets, U.S. corn exports are on track to reach record levels for the 2025–2026 marketing year. Commodity prices for corn, soybeans, and cotton have strengthened in recent weeks driven by weather concerns, supportive demand, and geopolitical tensions affecting market stability. We do recognize the concerns regarding the financial health of growers within the U.S. market, particularly as affordability challenges have been intensified by volatility in input costs arising from the conflict in the Middle East. We anticipate growers will continue to make input decisions carefully. Potash, whose prices have stayed comparatively stable relative to other nutrients, remains a critical input as growers look to maximize yields. I will now turn the call over to Rick Kim for an operations update. Thanks, Zach. Rick Kim: Our Trio segment, the commissioning of a new continuous miner has already increased our tons per operating hour and increased operational efficiency. Additional improvements in our mill have boosted recovery, and increased operating hours per shift continues to drive higher production of both granular and premium products. We benefited from these improvements in the first quarter, and we expect to continue realizing further improvements through the rest of the year. In our potash segment, we have seen promising returns this spring from the HB mine with higher mill recoveries and improved pond deposition, extending our expected run time before our summer shutdown. Moab also continues to see improvements in overall plant efficiency, driving higher throughput and recovery. Early-season evaporation looks promising, and we anticipate making up the tons lost due to last year's late-season rain events. At Wendover, we expect to commence construction on Primary Pond A this summer, which will expand our evaporative area, and we anticipate increased production in 2028 as a result. We also expect Primary Pond 7 to start contributing more production this year. Overall, our focus on operational improvements and execution has resulted in higher production and reduced unit cost year over year in both potash and Trio. I will now turn the call over to Chris. Chris Engold: Thank you, Rick. Intrepid Potash, Inc. delivered a strong first quarter. Our continued focus on driving production to increase revenues and improve unit economics is visible in our first quarter results. Potash production was 104,000 tonnes in the first quarter, compared to 93,000 tonnes in 2025. As Kevin and Rick mentioned, this production is due to operational improvements across our mines. First quarter potash sales were $46.1 million, up $2.5 million from the prior quarter, driven primarily by higher realized pricing. Potash gross margin was $3.1 million versus $2.5 million last year as a result of higher realized pricing, partially offset by higher costs on a similar volume. We sold 105,000 tons at an average net realized sales price of $353 per ton, compared to $312 per ton in 2025. Higher production from higher-cost sites increased our average potash segment cost of goods sold to $334 per ton in 2026, compared to $313 per tonne in 2025, and $332 per ton in 2025. For 2026, we expect our annual potash production to be at the upper end of our guidance of 270,000 to 285,000 tons given recent improvements at HB. Turning to Trio, first quarter production was 69,000 tons, a 10% increase versus last year. This increase is largely attributed to a new continuous miner commissioned during the quarter and ongoing plant optimization projects. Sales were $52.5 million, up $2.7 million from the prior year, driven by a 12% increase in our average net realized sales price per ton. This offset a 4% decline in tons sold. Overall, Trio margin was $14.8 million for the quarter, up $4.4 million from last year. This was the highest quarterly segment margin since 2022, due to higher realized pricing and an improvement in COGS offsetting the slight decline in sales volume. COGS per ton saw an improvement year over year and quarter over quarter, with $229 per ton versus $235 per ton in Q1 last year and versus $242 per ton in 2025. For 2026 Trio production, we are expecting to reach 285,000 to 300,000 tonnes with COGS of around $230 per ton. This is the expected result from our improvements with the new miner, increased recoveries, and more operating hours per shift. In terms of second quarter guidance, we expect another solid quarter as spring application winds down and our potash facilities enter the summer evaporation season. For potash, we expect our sales volumes to be between 50,000 to 60,000 tonnes at an average net realized sales price in the range of $380 to $390 per ton. In Trio, we expect our sales volumes to be between 70,000 to 80,000 tons at an average net realized sales price in the range of $390 to $400 per ton. For our 2026 capital program, we expect to spend $40 million to $50 million, with most of our spend related to sustaining capital—specifically at our East Mine—and for the beginning of a new primary pond at Wendover, which we expect will begin contributing to Wendover's production in 2028. We continue to consider investment opportunities that will upgrade our assets and optimize future production and efficiency. We are currently evaluating a number of additional high-return growth and productivity investment initiatives over the next 18 to 24 months. In summary, 2026 is off to a strong start, and we are excited to see the results from the initiatives we put in place meaningfully pay off in the form of increased production and improving costs. Operator, we are now ready for the Q&A portion of our call. Operator: Thank you. We will now open the call for questions. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 1. We will pause for a moment as callers join the queue. Operator: Your first question comes from the line of Lucas Charles Beaumont from UBS. Please go ahead. Lucas Charles Beaumont: Hi. Good morning. Thanks very much. I just wanted to start on the sale of the South Ranch. It sounded like you are indicating that potentially you get the full $70 million cash net of the DTA benefits. Is that correct? And then what are you intending to do with the proceeds? Are you going to sit on it to put towards projects going forward? Do you see repurchases as attractive at the current level, or where would you like to use that? Kevin S. Crutchfield: I am sorry, Lucas. What was the last part of your question? What are we going to do with the cash? Look, it is a good question, and let me just give you some context on how we are thinking about that right now. As I have mentioned a bunch of times before since I joined, this is a regular conversation amongst our board, i.e., how to think about capital allocation, and frankly, it is becoming even more topical given the improved performance that we have seen over the last 18 months and the cash build that we are experiencing on the balance sheet at the moment. So let me just reiterate some priorities that I have discussed before so we are clear and you get a sense of how we think about this. As I laid out early in my tenure here, the first order of business was to reestablish an intense focus on the core assets. The goal was to make them more predictable, more reliable, more resilient. I think we can all agree that we have seen improvements on that front, but we are not done there, and I would address that momentarily. From there, we wanted some time to look at our sustaining capital needs for the business over a reasonable period of time, say, five years or so. We are pretty much through that process now and believe long-term core operations should require something on the order of $35 million to $40 million a year of sustaining capital, with an add-on every few years for larger sustaining items like making a new cavern or building a new pond like we are doing at Wendover right now. Notably, I will just give you a heads up that 2027 is expected to be one of those years. We can talk about that a little later. And then, also importantly, we are really focused across the company on ways we can increase volumes and reduce our cost. This effort is being ingrained into the culture of Intrepid Potash, Inc. It is simply the way we need to think about our business. To be frank, we do not see any silver bullets to increase production substantially in the short term, but we do see numerous opportunities to add incremental tons to the portfolio with effects on cost and efficiencies, and I think a good example of that is what is happening at Carlsbad now. You can see that result improved over the past several quarters. As I have also mentioned in the past, we wanted to review our portfolio to determine if there were assets that we held that might make sense in the hands of somebody else, and the South Ranch fit that bill. As you saw, we monetized that asset and brought forward decades of cash flows and, frankly, put that asset into a better set of hands than us given the dynamics of what is happening with water in the Permian Basin. So now that the core assets are performing better and we have taken a look out into the future and assessed our capital needs, we want to be thoughtful about maintaining an adequate amount of dry powder for organic projects or opportunities that exist across our portfolio, and through continued performance to, frankly, earn the right to consider adjacency opportunities that might make strategic sense for the company. And then last but not least, we want to retain adequate liquidity to buoy us through any rough times that might come our way. For those of you that have been around this sector for a while, you will know exactly what I am talking about. I know that was a lot, Lucas, but I thought it was important for you and others to hear how we think about capital allocation priorities. Suffice it to say, I think we have made great progress over the year and a half, and what I want to leave you with today is the following: there have been a lot of requests that we could return capital to shareholders. We hear you loud and clear. We always have. We simply had some work to do before this conversation could be had in earnest. Our board is convening later this month to discuss a variety of matters, and what I will leave you with is just know that this topic is chief among them. I will just leave it at that for now, and hopefully that gives you some nuggets on how we think about it and what might be on the near-term timeframe. Lucas Charles Beaumont: Right. That is very helpful. And then on the markets as we look forward here, you are pointing to a $10 to $15 sequential improvement in pricing into 2Q. Sulfur markets have been impacted significantly globally from the Middle East disruption, raising production costs and the cost curve against synthetic production. How do you see that flowing into the Trio market and impacting pricing? Is there more of an impact to come as 2026 progresses, or is that incorporated in what you are expecting for the year now? Zachry Adams: Thanks for the question. It is important to remember that customers typically lock in the majority of their spring requirements pretty early to start the year for Trio and potash, and most of those commitments were made ahead of the Iran conflict beginning and certainly before the full extent of it was realized. We expect to start seeing more and more of that realization in spot opportunities here in the second quarter. For the balance of the year, we expect Trio to benefit from a constructive outlook amid a tightening global supply environment in sulfur, which should keep sulfate values firm, and you should see that roll through our realized pricing as we move through the rest of the year. Lucas Charles Beaumont: Right. Thanks. And then just on potash production, how do you see the trajectory beyond this year to push back above 300,000 tonnes over time? Rick Kim: You want me to take that, Kevin? Yeah. This is Rick. We see a number of different incremental opportunities at the core assets. As Kevin mentioned, the past 12 to 18 months have really been focused on operational improvements—identifying those and executing on them. We continue to see opportunities at HB. We are starting to realize those already, as I mentioned earlier. We are seeing similar opportunities around Wendover and in Moab as well. The addition of a new primary pond at Wendover will start contributing in 2028. Primary Pond 7, which was commissioned a couple of years ago, will really start to see its full productive capacity come online throughout this year, with the intent of getting that operation back up in the 75,000 to 80,000 ton per year run rate that it has historically operated at. Kevin S. Crutchfield: And in addition to what Rick said, as we talked about before, we have the Amax Cavern. It still needs more work. We want to be very thoughtful about how we approach that. To the extent that it proves out, that would represent a meaningful upside opportunity for us. But we still have work to do there, and we will keep you posted in the coming quarters on that project. Lucas Charles Beaumont: Alright. Thanks. And then on the lithium project, could you share how you see the timeline on milestones as we move through this year and beyond, and when we might have a better view on unit cost economics? Kevin S. Crutchfield: Good question. I do not want to front-run our partners. The key milestone coming early this summer will be FEL-3. That is when you have a pretty high degree of precision around your engineering of the build, the cost of the build, and where your operating costs are going to come out. We have a sense of what those are, but it would be premature for me to start talking about that. Given the concentrations that we have relative to a lot of these other brine projects, we kind of got a head start when it comes down to it. We feel good about the initial volumes coming out of the project—in a couple of years, 5,000 tons LCE. We continue to work very closely with our partners, assisting them with the footprint of their operations, assisting with permitting, getting through the regulatory hurdles, etc., all of which is going pretty well. The big milestone again is FEL-3, and once that is done, we will be prepared to talk to the market about more precision around timing, cost to build, and cash operating and full operating costs. Hopefully, that is incrementally helpful, Lucas. Lucas Charles Beaumont: That is great, thanks. And then maybe one on the cost side. How are you seeing any cost pressures flowing through the business from the current inflation environment? Is that impacting either potash or Trio, and how would you see that evolving as the year progresses? Lastly, is there any small residual impact left after the South Ranch sale—any trailing costs we should think about? Kevin S. Crutchfield: Maybe hitting the last part of your question first, to the extent I understood it properly. We had an oilfield services segment when we had South Ranch. We will still have some oilfield services activity, but that will get subsumed into the Other segment, and we will discontinue the oilfield services segment. In terms of clean-up post deal, I think it is pretty clean and you are not going to see any sort of tail effects permeating through the P&L or the balance sheet after the sale was concluded. Very minimal costs left behind that will be absorbed into the other parts of the business. On the cost question, yes, we are seeing pressures, but nothing I would characterize as material. Fuel is the biggest nemesis and it is highly volatile—it is bouncing all over the place. We have some natural gas exposure; over time that has actually been pretty well contained given the winter risk of a potential spike. Beyond that, we are not seeing anything material. Rick Kim: I agree with Kevin. One thing that is important to call out is while we do see fluctuations in fuel, the nature of our mining processes means we are probably not as impacted or exposed to those fuel fluctuations as traditional surface or underground miners. Our solution mining process does insulate us a bit from that. Operator: Your next question comes from the line of Justin Pellegrino from Morgan Stanley, on behalf of Vincent Andrews. Please go ahead. Justin Pellegrino: Thanks. I just wanted to double click on a couple of items. First, on capital allocation, in the meantime, should we expect the cash to generate some interest income on your P&L? Kevin S. Crutchfield: Yes, it will. Those cash balances are placed in very safe federal types of securities, so you will see some interest income start to leak through the P&L as we move ahead. We built up a pretty hefty balance as of the end of the first quarter. Clearly, the incremental $62 million from the ranch transaction came in after the end of the quarter, and we have built some additional cash too. I think current cash balance stands on the order of $170 million or so, so you will definitely start to see some interest flow through. Justin Pellegrino: Perfect, thank you. And then one more on COGS for the rest of the year. Can you give us some cadence for COGS per ton in potash throughout the balance of the year? I know the press release mentioned some higher-cost mix in production toward higher-cost sites. Chris Engold: Yes. Justin, typically, COGS will fluctuate throughout the year, especially in our solar sites, largely due to production volumes. We are finishing up our harvest season here within the next few weeks, and each of the sites will go into their summer shutdown. That does have an impact on the COGS that we will report for the next two quarters, or we anticipate seeing that. Once we get later in the year, we expect to see the operational efficiencies that we have talked about start to materialize, in both production and cost. Especially in the latter half of the year, we will start to see those materialize. Justin Pellegrino: Great. Thank you. That is all the questions I had. Operator: Your next question comes from the line of Jason M. Ursaner from Bumbershoot Holdings. Please go ahead. Jason M. Ursaner: Good afternoon. Thanks for taking my questions. Congrats on the quarter and the sale. I have asked you about capital allocation pretty much every quarter since you joined. I appreciate the answers to Lucas. I am not going to hammer too much on it, but you said the cash balance as of April is around $170 million? Kevin S. Crutchfield: Correct. Plus or minus. Jason M. Ursaner: Any rationale why you did not include it in the press release for this quarter, given you have included that month-end cash balance in prior quarters? Kevin S. Crutchfield: That is a fair question. The press release pertains to the first quarter, and the deal on the ranch did not close until the day after the first quarter. Technically, we took the view that we were going to discuss everything inside the first quarter. Perhaps it would have made sense to address cash on hand and liquidity more poignantly in the press release, but we were not trying to hide from it—we were just focused on the quarter. Jason M. Ursaner: And just any update on the XTO/Exxon permitting process—where the BLM stands with that? Kevin S. Crutchfield: I am sorry, we actually do not have any information that is useful. We see what is going on in that part of the world where we operate—it is super busy, lots of activity—but we do not have any insights as to Exxon's near-term plans. We continue to be bullish on their Big Eddy development process, and it is going to come; we just do not know exactly when. Jason M. Ursaner: That is it for me. Appreciate all the color you gave on the capital allocation side. Kevin S. Crutchfield: Thank you, Jason. Operator: A reminder, if you would like to ask a question, please press star then 1 on your telephone keypad. At this time, there are no further questions. I would like to turn the conference back over to Kevin S. Crutchfield for any closing remarks. Kevin S. Crutchfield: I would like to give one final thank you today before we conclude to our team here in Denver and our teams in Utah and New Mexico for their hard work and dedication over the last quarter and, frankly, the last couple of years. And to those of you who attended the call today, thank you for joining, and we look forward to keeping you posted in the future. Thank you, everybody. Have a great day. Operator: This concludes today's conference call. Thank you for participating, and have a pleasant day. You may now disconnect your lines.