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Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0 and a member of our team will be happy to help you. Good afternoon, everyone. Welcome to the Ares Commercial Real Estate Corporation's First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded on Thursday, May 7, 2026. I will now turn the call over to Mr. John W. Stilmar, Partner of Public Markets Investor Relations. Please go ahead, sir. John W. Stilmar: Good afternoon, everyone, and thank you for joining us on today's conference call. In addition to our press release and the 10-Q that we filed with the SEC, we have posted an earnings presentation under the Investor Resources section of our website at arescre.com. Before we begin, I want to remind everyone that comments made during the course of this conference call and webcast, as well as the accompanying documents, contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by words such as anticipates, believes, expects, intends, will, should, may, or similar expressions. These forward-looking statements are based on management's current expectations of market conditions and management's judgment. These statements are not guarantees of future performance, condition, or results and involve a number of risks and uncertainties. The company's actual results could differ materially from those expressed in the forward-looking statements as a result of a number of risk factors, including those listed in its SEC filings. Ares Commercial Real Estate Corporation assumes no obligation to update any such forward-looking statements. During this conference call, we will refer to certain non-GAAP financial measures. We use these as measures of operating performance, and these measures should not be considered in isolation from, or as a substitute for, measures prepared in accordance with generally accepted accounting principles. These measures may not be comparable to like-titled measures used by other companies. Now I would like to turn the call over to our CEO, Bryan Patrick Donohoe. Bryan? Bryan Patrick Donohoe: Thanks, John. Good afternoon, everyone, and thank you for joining us. I am here today with Jeffrey Gonzales, our CFO, Tae Sik Yoon, our COO, as well as other members of the management and Investor Relations teams. During the first quarter, the commercial real estate market exhibited relative stability despite broader macroeconomic and corporate credit market uncertainty. Fundamentals in commercial real estate showed strength as limited forward supply supported modest valuation growth. The combination of reset valuations and what we believe is the beginning of capital rotation into the asset class helped create what, in our view, is an attractive investment environment. With this backdrop, we continue to make progress against our strategic objectives of reducing risk in our portfolio while investing in attractive, high-quality commercial real estate loans. We closed three new loan commitments totaling $294 million during the first quarter, collateralized by multifamily, mixed-use, and retail properties. This origination activity supported steady growth in the loan portfolio for the second consecutive quarter. At the end of the first quarter, the portfolio of loans held for investment grew to 35 loans and $1.7 billion, an increase of $110 million quarter-over-quarter. Notably, 37% of the investment loan portfolio balance was originated in the past twelve months. We believe today's commercial real estate environment offers the opportunity to originate at attractive attachment points with stronger credit structure and risk-adjusted returns. ACRE is committed to approximately $780 million in new loans in the last twelve months, with more than 75% of the dollars committed through co-investments alongside other Ares Management affiliated vehicles. This represents just a portion of the nearly $10 billion in new loan commitments across the Ares real estate debt platform in the last twelve months. The scale of the Ares real estate debt platform and capital base is a key differentiator, enabling disciplined selectivity and access to high-quality opportunities while providing ACRE with co-investment opportunities, enhanced portfolio diversification, and support for efficient capital deployment. We believe that this deployment reflects success against our goals for the portfolio that we laid out one year ago. As of 03/31/2026, we have increased the outstanding principal balance of the portfolio by 22% year-over-year while improving portfolio diversification and reducing the office loan balance by nearly 25%. Consistent with our strategic objectives, the reduction in office loans was reallocated and redeployed into other attractive property types, including industrial, multifamily, select retail, and self-storage. We also continued to improve portfolio quality through active resolution efforts on our risk-rated four and five loans. During the quarter, we accelerated the resolution and exit of a legacy $28 million Pennsylvania multifamily loan, contributing to a year-over-year and quarter-over-quarter decline in the number of risk-rated four and five loans. With respect to the total portfolio of loans held for investment, 31 of our 35 loans carry a risk rating of one through three. There were no negative credit migrations during the first quarter within the risk-rated one to three loan portfolio. While the majority of the loan portfolio continues to exhibit sound credit performance, certain idiosyncratic risks persist in the sector and ACRE’s portfolio. These cases are driven by discrete local market dynamics or property-specific factors that may not align with the aforementioned commercial real estate trends. Now let me walk you through the largest two of these; four loans comprise more than 90% of the outstanding principal balance of the total risk-rated four and five loans as of 03/31/2026. The largest of these loans is a risk-rated five Chicago office loan. This loan remains on non-accrual but continues to make its contractual interest payments, which are applied to the basis. Property fundamentals remain stable, with occupancy above 90%, a weighted average lease term of approximately eight years, and positive net cash flow. We remain engaged with the borrower on their ongoing sales process. It is unfortunately taking longer than we anticipated. We increased our CECL reserve for this loan by approximately $5 million to reflect our most current market indications for the potential sale of this property. The second largest risk-rated four and five loan is a risk-rated four residential condominium loan located in Brooklyn, New York. This loan also remains on non-accrual. The preliminary condominium sales process began earlier this year; as a reminder, initial sales proceeds will be used to pay down debt associated with the project, while subsequent sales are expected to generate cash flow back to the company. As the project nears completion and with increased visibility into final construction costs, we have incorporated incremental costs and adjusted the timing into the business plan. These updates are also reflected in the CECL reserve for the first quarter and, combined with the reserve increase for the risk-rated five office loan, were the primary drivers of the overall CECL reserve increase during the quarter. As it relates to our North Carolina office REO, we began the formal sales process for this property this quarter. This decision was supported by improved property fundamentals and capital markets activity. Notably, in 2025, we recognized a gain related to the partial sale of this property. As of the end of the first quarter, the remaining property was reclassified as held for sale. In closing, we remain highly focused on our current objectives of reducing our risk-rated four and five loans and addressing office and REO loans while opportunistically investing into new loans. Let me now turn the call over to Jeff, who will provide more details on our first quarter results. Jeffrey Gonzales: Thank you, Bryan. For the first quarter of 2026, we reported a GAAP net loss of approximately $9.6 million, or $0.17 per diluted common share. Our distributable earnings for the first quarter of 2026 were approximately $3.2 million, or $0.06 per diluted common share. This includes the impact from the realized loss of $3.3 million, or $0.06 per diluted common share, related to the exit of the risk-rated five Pennsylvania multifamily loan. Distributable earnings for the first quarter, excluding this loss, were approximately $6.5 million, or $0.12 per diluted common share. Additionally, during the first quarter, we collected $2.1 million, or $0.04 per diluted common share, of cash interest on loans that were on non-accrual, which was accounted for as a reduction in our loan basis. We continued to maintain our strong balance sheet position with moderate leverage, which supports further resolutions of underperforming loans and future growth. We ended the first quarter with a net debt-to-equity ratio, excluding CECL, of 1.9 times. Our portfolio of loans held for investment reached $1.7 billion as of 03/31/2026, with the majority of our loans collateralized by multifamily and industrial properties. Looking at the $294 million of new loan commitments made in the first quarter, $225 million of these new loan commitments are classified as loans held for investment and $69 million are classified as held for sale as of 03/31/2026. The $69 million loan classified as held for sale corresponds to a larger $144 million senior loan commitment collateralized by a retail property in California. $75 million of this loan will be retained by ACRE and is classified as held for investment. The remaining $69 million of the loan is expected to be sold to either an Ares affiliated fund or a third-party investor during the second quarter. Notably, until the sale is completed, ACRE will accrue interest and fee income associated with this loan. Let me take a minute to discuss the strategy behind this action. We believe this specific loan structure provides a strategic opportunity for ACRE to selectively deploy its available liquidity on a short-term basis, capturing attractive economics on high-conviction loans that we intend to hold a portion of on a long-term basis while still maintaining diversity across the broader portfolio. Ultimately, we believe this strategy is another example of how ACRE can leverage the robust capabilities and broad market presence of the Ares real estate platform. As we reshape the portfolio through resolutions and new investments, we continue to prioritize strong liquidity and disciplined liability management. During the first quarter, we collected $94 million in repayments, further strengthening our liquidity position. As of 03/31/2026, our available capital was $163 million, including $86 million of cash. In addition, during the quarter, we increased our borrowing capacity by $300 million, subject to future available collateral, as well as reduced our borrowing costs through three distinct actions. First, we upsized the Morgan Stanley facility to $350 million, an increase of $200 million from the prior quarter, and extended the facility by three years. Second, we upsized the Citibank facility to $425 million, an increase of $100 million from the prior quarter. Lastly, as mentioned on our last earnings call, we reduced the cost of our borrowings through the redemption of our FL4 CLO securitization. We believe these actions reflect the strength and scale of our lender relationships, driven by the Ares platform, and position us well to access attractive financing and to support future growth initiatives. Additionally, our financial flexibility allows us to further address our higher risk-rated loans as well as invest in new loans, resulting in what we believe is a more stable portfolio. As Bryan mentioned, we exited a risk-rated five loan and had no negative credit migrations in the risk ratings across the portfolio in the first quarter. Turning to our CECL reserve, the total CECL reserve increased to $138 million as of 03/31/2026, an increase of approximately $11 million from the CECL reserve as of 12/31/2025. This increase was primarily driven by a $15 million combined increase in the reserves for our risk-rated four and five loans, specifically the two largest loans Bryan previously mentioned, as well as a $2 million reserve increase related to the new loans closed in the quarter. These increases were partially offset by the previously mentioned realized loss in connection with the exit of the risk-rated five Pennsylvania multifamily loan and other macroeconomic and loan-specific attributes. The total CECL reserve at the end of the first quarter of $138 million represents approximately 8% of total outstanding principal balance of our loans held for investment. Ninety-four percent of our total CECL reserve, or $129 million, relates to our risk-rated four and five loans, and approximately half of the total CECL reserve is attributed to the only risk-rated five loan in the portfolio. Overall, the $129 million of reserves attributed to our risk-rated four and five loans represents approximately 35% of the outstanding principal balance of those risk-rated four and five loans. Our book value is $8.89 per share, which includes the $138 million CECL reserve. Our goal remains to prove out book value over time while advancing our efforts to rebuild earnings and cover our dividend, which we believe is achievable. So far in the second quarter, we have continued to execute against our objectives with the closing of $95 million of new loan commitments collateralized by multifamily and self-storage properties. These are both high-conviction property types across the Ares real estate platform, and both loans represent co-investment loan opportunities. To conclude, the Board declared a regular cash dividend of $0.15 per common share for the second quarter of 2026. The second quarter dividend will be payable on 07/15/2026 to common stockholders of record as of 06/30/2026. At our current stock price on 05/04/2026, the annualized dividend yield on our second quarter dividend is approximately 11.5%. With that, I will turn the call back over to Bryan for some closing remarks. Bryan Patrick Donohoe: Thank you, Jeff. As we sit here today with the first quarter of 2026 under our belts, we are excited about the opportunities that lay ahead. We believe ACRE is uniquely positioned to capitalize on Ares’ powerful and growing real estate platform, depth of capabilities, and robust pipeline to create shareholder value. As always, we appreciate you joining our call today, and we would be happy to open the line for questions. Operator: Thank you, Mr. Donohoe. Ladies and gentlemen, at this time, if you have any questions, please press 1. Additionally, you can remove yourself from the queue by pressing the appropriate key. We will go first today to Jade Joseph Rahmani with KBW. Jade Joseph Rahmani: Thank you very much. Do you have any updated thoughts as to potential timeline for resolution on the Chicago risk five, and also over what time period do you expect the Brooklyn condo risk five to be amortized down based on condo sales? Is that going to take, do you think, two years, three years? If you could just provide any commentary on that. Thank you. Bryan Patrick Donohoe: Yes. Thanks for the question, Jade. I think, as you can tell from our prepared remarks today and in prior quarters, these assets remain one of our primary focus points. I think the short answer is we are getting closer, and the outcomes have certainly narrowed. We do need a functioning market, which I think we have seen over the past six to nine months, with some return of capital back into the office sector and a process that is well underway, but that is a little bit outside of our control. With respect to the Brooklyn condominium asset, as you heard in the remarks as well, we are largely through the construction phase and began the sales process last quarter. So that will be a function of demand for the product, which we think is fairly priced for the landscape in which we are all operating. Sellout can obviously vary, but it is fair to say it is inside of two years would be the general expectation for a similarly sized project. Jade Joseph Rahmani: And then just more broadly, in terms of how Ares is looking at the debt capital markets in commercial real estate, where do you see the best opportunities, risk-adjusted, at this point? Thematics, if it is sector, property type, geography, or if it is participation in certain capital structures, any nuances that you care to provide? Bryan Patrick Donohoe: Of course. I think that as it relates to ACRE, we have talked over the past five years about the disadvantages of being subscale, but certainly when we think about the broad landscape of opportunities in real estate credit across the U.S., and you are talking about a roughly $5 trillion market opportunity, there is plenty to do. The overall theme that you and I have covered in the past still relates to banks being less driven to provide capital and back leverage, and that has provided us the opportunity to really go lower on the risk spectrum but still create ROEs that are in keeping with our historical norms. As it relates to sectors, you have seen us pivot at times through logistics, student housing, multifamily, seniors to some degree, and obviously underweight office as we sit here today and on a go-forward basis. So our focus remains on lower CapEx cycle asset classes, and then we are looking at the fundamentals both from supply-demand and otherwise and a geographical focus that has really ebbed and flowed over the past three or four years. I know there have been questions on Sunbelt assets for some different operators and different lenders in the space, and I think location continues to matter, as does vintage. So you will see us find, given the broad landscape in which we participate, plenty to do given the size of ACRE's balance sheet. Operator: Thank you. We will go next to Christopher Muller with Citizens Capital Markets. Christopher Muller: Hey, thanks for taking the question. I guess on the $3.3 million realized loss—and sorry if I missed this in your prepared remarks—but can you just break that down for me? Is that related to the REO property being reclassified for sale, or the resolution of the five-rated loan? Or is it a combo of both of those? Jeffrey Gonzales: Thanks for the question, Chris. Yes, it is related to the Pennsylvania multifamily loan—all of it is. As we disclosed in our filings, when we transferred the REO office property to held for sale, there was no impairment loss associated with that. So it is all related to that multifamily loan. Christopher Muller: Got it. That is helpful. And it is nice to see no downward credit migration in the quarter. Do you feel that credit has largely stabilized? And then how are you thinking about new originations in 2026? Is 1Q a decent run rate for deployment? Bryan Patrick Donohoe: The overall market is certainly constructive. I said earlier that we have seen capital flow back into the sector broadly speaking, both debt and equity. We have seen stability in values or modest appreciation, and that is obviously in the face of rates that have risen in the U.S. and certainly across Europe as well. So I think people believe in the fundamental story of hard assets with low degrees of obsolescence, and I think those capital flows are supportive of valuations. So we have a pretty constructive backdrop in which to invest right now. What does that mean for forward originations? I think largely that will be dictated by the repayment schedule of the loans that are in the portfolio today, alongside the resolution of those focus assets that you heard about earlier and you have heard about in prior quarters as well. Christopher Muller: Got it. That is very helpful. Thanks for taking the questions and congrats on the continued progress. Bryan Patrick Donohoe: Thanks for the questions. Operator: We will go next now to Gabe Poggi with Raymond James. Gabe Poggi: Hey, good afternoon. Thanks for taking the question. Kind of piggybacking on the last one, how do you think about leverage while you are working through the four and the five loans and REO? Is there a leverage level that you are comfortable going to while you wait for resolutions there? You have gone from kind of one turn in 3Q25 to now two turns. Can we see another full turn of leverage, even if the watch list loan capital/REO capital is still in TBD zone? Bryan Patrick Donohoe: It is a great question, Gabe. I would say the answer probably lies somewhere in between. We have taken a bifurcated approach to the portfolio, as you have seen over prior quarters, where we wanted to have—and we have proven we did have—the flexibility to accelerate resolutions on assets where we wanted to move on. I think the life science asset of a few quarters ago, you saw us do that—not the outcome that we had hoped for, but one that we think looks better today than it even did then, given the headwinds in that sector by way of reference. So we maintain almost this lower-leverage approach to the legacy assets—things that we touched on in terms of those focus assets of fours and fives, etc. But we have, I think, proven that there is ample capital available to leverage new originations and to do so very accretively. So as we increase that confidence interval on the resolution of those fours and fives, as we touched on, you will see that de novo portfolio—really the assets that are post-2024/post-2025 environment—be a larger percentage of the portfolio, and with that will come higher leverage. So certainly, as we move towards that to get towards the historical three turns of leverage, you will see a push in that direction over time. Gabe Poggi: That makes sense. Thanks. And then a quick follow-up just so I understand. On the $144 million retail loan in California, that was a co-invest with Ares, and then the REIT is splitting the $144 million with Ares. Is that an A-note/B-note? Is that the way to think about it? Jeffrey Gonzales: Nothing senior-sub. All the sharing is on a pari passu basis, but it is a larger loan overall and shared across different vehicles within the Ares family, I would say. Operator: Thank you. And gentlemen, it appears we have no further questions today. Mr. Donohoe, I would like to turn things back to you for any closing comments. Bryan Patrick Donohoe: Yes, thank you. I just want to thank everybody for their time today and the team for all the work this quarter. We appreciate your continued support of Ares Commercial Real Estate Corporation and look forward to speaking with you all on our next earnings call. Thank you, and have a good afternoon. Operator: Thank you, Mr. Donohoe. Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of the conference will be available approximately one hour after the end of this call through 06/07/2026 to domestic callers by dialing 1-808-394-016 and to international callers by dialing +1 (402) 220-7240. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website. Again, thanks so much for joining us, everyone. We wish you all a great day. Goodbye.
Operator: Good morning, and welcome to Palomar Holdings, Inc. First Quarter 2026 Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference line will open for questions with instructions to follow. As a reminder, this conference call is being recorded. I would now like to turn the call over to Chris Uchida, Chief Financial Officer. Please go ahead, sir. Chris Uchida: Thank you, operator, and good morning, everyone. We appreciate your participation in our earnings call. With me here today is Mac Armstrong, our Chairman and Chief Executive Officer. Additionally, Jon Christianson, our President, is here to answer questions during the Q&A portion of the call. As a reminder, a telephonic replay of this call will be available on the Investor Relations section of our website through 11:59 p.m. Eastern Time on 05/14/2026. Before we begin, let me remind everyone that this call may contain certain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans, and prospects. Such statements are subject to a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. We do not undertake any duty to update such forward-looking statements. Additionally, during today's call, we will discuss some non-GAAP measures which we believe are useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to their most comparable GAAP measure can be found in our earnings release. I will now turn the call over to Mac for prepared remarks. Mac Armstrong: Thank you, Chris, and good morning, everyone. I am very pleased with our first quarter results as they reflect a strong start to the year and are another example of our team's ability to deliver consistent, profitable growth. Our results reinforce the durability of our model and the uniqueness of our specialty product portfolio and its ability to generate compelling risk-adjusted returns. Our book consists of a broad array of specialty products and is truly diverse. The following breakdown of Q1 in-force premium illustrates this diversity: a 57/43% split between admitted and E&S premium; a 60/40 split between property, including earthquake, and casualty premium; a 45/55 split between residential and commercial property; and 90% of the Q1 premium is from lines not impacted by the traditional P&C market cycle. Our differentiated portfolio is intentionally built to perform through any market cycle. We are well positioned to deploy capital toward more desirable opportunity while reducing exposure in areas where market conditions or loss trends are less favorable. Our strong first quarter results reflect this capability. Looking closely at the quarter, gross written premium increased 42% year-over-year. Importantly, growth was broad-based across all five product categories, including earthquake. Profitability and capital efficiency also remained strong, highlighted by adjusted net income growth of 23%, an adjusted combined ratio of 76%, and an adjusted return on equity of 27%. These results mark our fourteenth consecutive quarterly earnings beat, extending the track record of consistent performance in our business. In recognition of our belief in the long-term opportunities we possess, our ability to execute the Palomar 2x strategic imperative, and what we feel is a depressed value of our shares, we repurchased 190 thousand 255 shares in the quarter. Furthermore, our Board authorized a new two-year $200 million share repurchase program on 05/06/2026. I would like to briefly talk about the current market conditions in our business. The marketplace is constantly changing and pricing varies significantly between different segments. In the property sector, competition remains strong, especially for larger commercial accounts where prices are still declining by double digits. Our residential business lines continue to offer rate stability and balance, notably with double-digit rate increases. Casualty pricing varies, with some lines like healthcare liability experiencing strong increases, while other casualty lines like cyber face intense competition from new entrants or standard carriers returning to the market. We maintain disciplined underwriting practices and are prepared to nonrenew accounts if pricing fails to align with our return requirements. Uncorrelated growth vectors in the surety and credit and crop space fortify this conviction. Overall, we believe our portfolio of specialty products is well positioned. Turning to our earthquake franchise, which is 58% residential and 63% admitted, we delivered 3% year-over-year gross written premium growth despite continued pressure on commercial earthquake. Pricing in commercial earthquake remains competitive, with rates decreasing approximately 18% on renewals and new business coming in at a higher average annual loss than the existing portfolio. We are pursuing opportunities outside peak zones and are willing to increase line size on high-quality existing large accounts at renewal when returns are compelling. Importantly, we remain committed to underwriting discipline and are not willing to pursue premium at the expense of profitability, especially on new business. Our residential earthquake business is performing well. As with our other admitted property products, market conditions remain favorable with steady new business production, stable rates, constructive engagement with the California Earthquake Authority and its participating insurers, and a healthy partnership pipeline. The balance of this line of business is clearly seen in our stellar premium retention, which was approximately 97% on our flagship admitted product in the first quarter. Looking ahead, we remain confident in our earthquake outlook and our ability to deliver growth as well as strong profitability for full year 2026. The balance of our specialty portfolio across inland marine and property also performed well. Gross written premiums grew 47%, up from 30% in Q4. A residential/commercial lines split of 34/66, as well as admitted and E&S products at a 70/30 split, is fueling the success of this line. As it pertains to our commercial product suite, builder's risk remains a key contributor, with standout performance this quarter from our admitted portfolio. We are expanding our underwriting footprint, including the recent opening of an underwriting office in the Northeast. As well, we are pleased with the progress of our newly launched construction engineering line. With strong reinsurance backing, new team members, and enhanced infrastructure, our first quarter results are performing well above our initial plan. As a reminder, this business provides an entry point into the data center market, which we view as an exciting long-term growth opportunity. The excess national property and large county and E&S property lines face the most intense competitive pressure, with rate decreases remaining in a range of 12% to 15%. Overall, our commercial property book is generating attractive risk-adjusted returns. Our seasoned underwriters are focused on retaining renewals and selectively writing new business. Our residential property practice was led by the Hawaii hurricane business. Lahaina continues to perform well, benefiting from limited competition, strong rate adequacy, and embedded growth that will be maintained by a recently approved 12.5% rate increase. We are encouraged by the progress of our flood partnership with Neptune. The growth and improved spread of risk from Neptune allowed us to endure elevated flood activity in Hawaii. Fortunately, prior period catastrophe gains offset flood losses, so our $8 million to $12 million annual catastrophe load was not subsumed by the catastrophe activity in the first quarter. Turning to casualty business, gross written premium increased approximately 55% year-over-year, reflecting slower sequential growth from 2025. Strong performing lines include environmental liability, primary general liability, and contractors general liability. Overall casualty growth in the quarter was driven by geographic and distribution expansion, recently added underwriting talent getting to scale, rate increases, as well as the launch of a sports and entertainment general liability program with a long-standing MGA partner. Our MGA strategy is founded on forming partnerships with a carefully selected group of established market leaders in business lines where we possess internal expertise. This approach allows our programs to be effectively managed by and seamlessly integrated with our in-house underwriting teams. As I mentioned earlier, conditions remain dynamic and increasingly nuanced in the casualty space. We continue to see rate increases in healthcare liability, primary contractors general liability, E&S casualty, and environmental liability. That said, the rate increases are moderating in several lines due to increased competition from market carriers and new market entrants. Since our entry into the market, we have actively managed limits, attachment points, and exposures, with a focus on lower net line sizes and avoiding more volatile classes with elevated severity risk. We are comfortable pulling back where underwriting conditions deteriorate. In addition, we maintain conservative reserving with more than 85% of casualty reserves held as IBNR. The increased ceding commissions earned on our casualty reinsurance renewals this year reinforce our confidence and validate the quality of underwriting in the portfolio. In an evolving market, we take confidence in the expertise of our casualty underwriting team. We diligently manage our portfolio, maintain disciplined approaches to pricing and limit management, and rigorously apply clear walk-away criteria for each individual account. Turning to crop, we are off to a strong start for the year. Gross written premiums rose 82% year-over-year. Over the course of last year, we added marketing, underwriting, and claims professionals who focused on crop products and territories that are written in the first and fourth quarters of the year. The 2026 first quarter benefited from this experienced talent who drove strong production in winter wheat and other off-cycle crop insurance products. Lastly, we are benefiting from strong sales of our Enhanced Coverage Option products, driven by higher demand resulting from increased subsidies under the Farm Bill. Commodity prices established in February remain generally in line with last year. We do not expect any meaningful impact from higher energy prices or tariffs. Current drought conditions put pressure on results in winter wheat in states such as Oklahoma and Kansas and PRF products in Mountain West and Plains states. That said, these results should be partially mitigated by our risk-sharing structure. Importantly, most of our retained exposure is tied to Midwest corn and soybeans, where planting is just beginning. Looking ahead, we now expect to deliver 35% growth, up from the previously expressed level of 30%, and nice profitability in 2026. Surety and credit, our newest product category, increased by 131% year-over-year. This segment includes our FIA and Gray Surety along with other surety and credit insurance we write on an assumed reinsurance basis. The integration of Gray, which is now rebranded as Palomar Casualty and Surety, is going well, providing a strong foundation to build a leading franchise. The Palomar Surety leadership team has acclimated well to our organization, and they continue to bolster their already strong team of underwriters with key hires and targeted expansion. A key milestone Palomar Surety achieved this quarter was the receipt of a de-listing authority for the group of more than $72 million. This will create an exciting long-term opportunity to write more bonds on federal projects in the years to come. That level of authority will increase our relevance to a larger distribution channel and attract new talent. We now have a surety platform with meaningful scale and geographic reach and a clear path to becoming a top-20 surety market in time. As previously mentioned, surety and credit alongside crop further diversifies our earnings base and reduces volatility caused by the traditional P&C cycle. In reinsurance, we completed six placements—three casualty and three property treaties—all with better economics, and successfully issued our latest Torrey Pines Re catastrophe bond. On the property side, we were able to secure incremental capacity for the builder's risk, including construction engineering and excess national property lines of business. Besides the strong economics earned through the treaty, this added capacity further expands our ability to offer larger limits and opens new admitted market retail distribution channels in the case of builder's risk. The casualty quota shares renewed at higher ceding commissions while maintaining their expiring session percentages—again, a testament to the performance of these casualty lines. Last week we completed our seventh Torrey Pines Re catastrophe bond issuance, securing $410 million of fully collateralized multi-year reinsurance protection for California earthquake and, for the first time, a stand-alone Hawaii hurricane. On a risk-adjusted basis, pricing was down 15%, which is in line with the assumption at the higher end of our adjusted net income guidance range. Before concluding, I want to touch on our organizational effort to leverage AI across Palomar Holdings, Inc. As a highly regulated and asset-intensive business, we view AI not as a source of obsolescence, but rather, to the contrary, as an important tool to enhance efficiency, strengthen decision-making, and support our people. AI-enabled processes and tools are in use across departments such as underwriting, actuary and analytics, reinsurance, customer service and operations, technology, and claims. They are enhancing operational workflows, improving risk selection, accelerating system development times, and automating more clerical and perfunctory tasks. Our approach combines the use of innovative third-party tools with internally developed solutions, and these initiatives are already generating measurable gains. Advancing AI capabilities will remain a key strategic priority as we continue to scale the business. In summary, we are confident in our strong start to 2026 and our ability to sustain profitable growth and attractive returns in this market, or any for that matter. As a result, we are increasing our adjusted net income guidance from $260 million to $275 million to $262 million to $278 million. As an aside, this marks our eighth adjusted net income guidance increase since 2024. With that, I will turn the call over to Chris to discuss our financial results and guidance assumptions in more detail. Chris Uchida: Thank you, Mac. Before I begin, please note that during my portion of the call, when referring to any per-share metrics, I am referring to per diluted common share calculated using the treasury stock method. This methodology requires us to include common share equivalents, such as outstanding stock options, during profitable periods and exclude them in periods when we incur a net loss. For the first quarter of 2026, our adjusted net income was $63.1 million, or $2.31 per share, compared to adjusted net income of $51.3 million, or $1.87 per share, in the first quarter of 2025, representing adjusted net income and EPS growth of 23%. Adjusted underwriting income for the first quarter was $62.8 million, an increase of 22% compared to $51.6 million in the prior-year quarter. Our adjusted combined ratio was 76%, compared to 68.5% in the first quarter of 2025 and compared sequentially to 73.4% in the fourth quarter of 2025. The increase in the adjusted combined ratio was primarily driven by a higher loss ratio, offset by a slightly lower adjusted expense ratio associated with the growth and mix. For the first quarter, our annualized adjusted return on equity was 26.6%, in line with our ROE reported last year. Our first quarter results continue to validate our ability to sustain profitable growth while maintaining returns well above our Palomar 2x threshold of 20%. Gross written premiums for the first quarter increased 42% to $629.8 million as compared to the prior year's first quarter, further demonstrating the strong momentum that we have across our unique, diversified specialty portfolio. Looking at our key specialty insurance products, it is important to remember the seasonality of our crop segment given the majority of the premium is written and earned in the third quarter of each year, with only modest premium in the second and fourth quarters. We will provide more information during the year on the expected impact of seasonality throughout our specialty portfolio. Net earned premiums for the first quarter grew 59% year-over-year to $261.4 million. As expected, our ratio of net earned premiums as a percentage of gross earned premiums increased to 51.9% in the first quarter, compared to 43.7% in the first quarter of 2025 and compared sequentially to 48.2% in the fourth quarter of 2025. The year-over-year increase in this ratio is reflective of our improved excess-of-loss reinsurance at the last renewal; growth of our lines of business that use quota share reinsurance, such as our crop business where we retain more premium than previously as we continue to leverage our growing balance sheet; and the acquisition of Gray Surety. With the timing of our core excess-of-loss reinsurance program renewal, and the majority of our crop premiums written and earned during the third quarter, we continue to expect the third quarter to be the low point of our net earned premium ratio, increasing throughout the remainder of the reinsurance treaty year in a similar pattern to last year. Losses and loss adjustment expenses for the first quarter increased to $87.1 million compared to $38.7 million in the first quarter of 2025. Losses for the quarter were comprised of $86.8 million of attritional losses and $0.3 million of catastrophe losses. The total loss ratio for the quarter was 33.3%, compared to 23.6% in the first quarter of 2025 and compared sequentially to 30.4% in the fourth quarter of 2025. In line with our expectations and guidance, the increase in the loss ratio was driven primarily by higher attritional losses associated with the growth in casualty and crop. Our losses for the quarter include $3 million in catastrophe losses from the flooding event in Hawaii in March. Additionally, our first quarter results include $10.3 million of favorable prior-year development—$7.6 million of attritional and $2.7 million of catastrophe. Favorable prior-year development was primarily from our short-tail inland marine and other property lines of business. As we have discussed previously, favorable development reflects our longstanding conservative approach to reserving. We continue to establish reserves with appropriate margin, which allows for modest releases over time as claims mature, particularly in our short-tail lines. Similar to the favorable development we saw during 2025, this quarter is another good example of the conservative approach to reserving and where we are seeing continued reserve releases. Our acquisition expense as a percentage of gross earned premiums for the first quarter was 14%, compared to 12.3% in the prior-year quarter and compared sequentially to 13% in the fourth quarter of 2025. The increase was driven primarily by business mix, notably surety, which has a higher acquisition expense and lower loss ratio, and our increasing retained business resulting in lower ceding commissions. The ratio of other underwriting expenses, including adjustments, to gross earned premiums for the first quarter was 8.5%, compared to 7.5% in the first quarter of 2025 and compared sequentially to 8.1% in the fourth quarter of 2025. These results include two months of Gray's underwriting expenses. As we have consistently communicated, we remain committed to investing in talent, technology, and systems to support the scalable platform we are building. While these investments create some near-term pressure, we continue to expect operating leverage over time as the organization grows within our Palomar 2x framework. Our net investment income for the first quarter was $18 million, an increase of 49% compared to $12.1 million in the prior-year quarter. The year-over-year increase was primarily due to higher yields on invested assets and a higher average balance of investments held due to cash generated from our operations, including the Gray acquisition. Our yield in the first quarter was 4.9%, compared to 4.6% in the first quarter last year. The average yield on investments made in the first quarter was over 5%. At quarter-end, cash and invested assets totaled approximately $1.6 billion, and the weighted average duration of the fixed maturity portfolio was just over four years. At the end of the quarter, our net written premiums-to-equity ratio was approximately 1.1 to 1. At 03/31/2026, stockholders' equity was $959 million, reflecting continued earnings generation offset by shares repurchased and transaction fees incurred during the quarter. Our balance sheet remains strong and well positioned to support continued growth across the portfolio. From a modeling perspective, we do not expect to see anything different from what we shared with you on the last call. Our full year 2025 net earned premium ratio was 44.9%; we expect that ratio to increase into the upper 40s for 2026. On a gross earned premium basis, our full year 2025 acquisition expense ratio was 12.1% and our adjusted other underwriting expense ratio was 8%. We expect slight improvements in both ratios for 2026. Similar to last year, the acquisition expense ratio and the other underwriting expense ratio will be higher in the first half of the year and lower in the second half of the year with the crop earned premium influence. We expect our loss ratio, including catastrophes, to be in the mid-to-upper 30s for 2026. Our full year 2025 adjusted combined ratio was 72.7%. We expect our adjusted combined ratio for 2026 to be in the mid-70s, as demonstrated in the first quarter. These expectations reflect our expected growth, business mix, integration of Gray Surety, and use of capital as we build our specialty insurance platform. Turning to our 2026 adjusted net income guidance, we are increasing our full year guidance to $262 million to $278 million. This range still includes $8 million to $12 million of catastrophe losses in addition to mini-catastrophes that we have historically included in our guidance. The midpoint of the range represents 25% year-over-year earnings growth, more than doubling 2024 adjusted net income in two years and an ROE north of 20%. Lastly, during the quarter, we repurchased 190 thousand 255 shares at a cost of $23.1 million as our shares have continued to trade well below what we believe to be fair value. Through 05/05/2026, we have repurchased an additional 38 thousand 875 shares at a cost of $4.2 million. Additionally, our Board of Directors authorized a new two-year $200 million share repurchase program, replacing the previous plan effective 05/06/2026. At recent valuations, we are buyers of our stock, especially for a company with an earnings CAGR of over 30% since 2023 through the midpoint of our 2026 guidance, and that consistently beats the Street and raises earnings guidance. With that, I would like to ask the operator to open the line for any questions. Operator? Operator: Thank you. And with that, we are now entering our question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove yourself from the queue. For any participants using speaker equipment, it may be necessary to pick up the handset before pressing star keys. One moment while we poll for questions. And our first question comes from the line of Andrew Anderson with Jefferies LLC. Please proceed with your question. Andrew Anderson: Hey, good morning. As casualty pricing maybe moderates a bit here, how are you thinking about the interplay with retention decisions? And does a moderating price environment on long tail kind of slow the pace at which you are thinking about increasing the net retentions? Mac Armstrong: Andrew, it is Mac. It is a good question. What I would say is across the portfolio, the term we have used is that it is nuanced. We are seeing rate increases hold, if not actually intensify, in healthcare liability. In certain lines, E&S casualty—kind of in the low excess layers—it is moderating some. As I mentioned in the call, we had in the quarter a few casualty quota shares renew, and they renewed at favorable economics, and we held the cessions flat. I think right now, especially as the books in many instances are still somewhat immature—one, two, three years of development experience—we are more inclined to hold the retentions flat. So I think you should expect to see that. The other thing I would add is there are certain lines of business where rates are not moderating but rather might be soft, and that is where we are taking a more proactive stance toward triaging. An example would be a participatory front we have in cyber where we take a modest retention—call it less than 10%. In that market we have tried to push rate, changed eligibility requirements, as well as increased sublimit utilization. But if the market is not going to take those—if the market does not bear that—we are more than happy walking away from business. So, long-winded answer, but simply put, expect cessions to remain consistent with where they are right now, and also expect to see us in many instances walk away from business and, in fact, prune books too. Andrew Anderson: Thank you. And then on commercial earthquake, I think I heard minus 18% price. That is a bit worse than where the fourth quarter was. How are you thinking about the pricing pressure on the commercial quake line throughout the rest of the year, and maybe kind of going all the way up to just total earthquake premium volume trends? Mac Armstrong: Yes, Andrew. I would say it was maybe a bit worse, but it is account-specific. In the first quarter we probably had a little bit more large commercial business renewing than small commercial, percentage-wise. Also, we did not see rate pressure in 2025, so this was really the last quarter where you were renewing accounts for the first time in this soft commercial property market. On the whole, we expect rate decreases to persist for the commercial quake market through 2026, and we think that is going to be offset by the strong performance on the residential side that will allow us to grow earthquake for the year. The other thing I would add is on the residential quake side we are seeing strong new business production. Even at the start of this quarter, we had a record new business day over the last 365 days. It is providing a nice anchor. We will benefit from reinsurance savings across the earthquake portfolio, but with the stability of the residential quake book, we expect to see margin expansion, and you will see it increase as an overall percentage of the quake mix. Residential will be a growing percentage. Operator: Thank you. And our next question comes from the line of Analyst with Evercore ISI. Please proceed with your question. Analyst: Hey, good morning. Thanks for taking my question. My first one on the casualty book: you noted having 85% of the casualty reserves in IBNR. I am just wondering if you could talk about how this has changed over the accident years. I know you have been expanding into geographies and new product lines, so it may not be a clean compare, but I am just wondering if this has shifted around at all. Thanks. Mac Armstrong: I would say the IBNR has been north of 80% basically since we started our casualty practice, and it probably ticked up slightly this quarter. As newer lines come on—the new sports and entertainment general liability, for example—that is going to be near 100% IBNR in its first year. That might push it up some. But on the whole, IBNR is, if not the totality, the strong lion's share of the reserve base. Chris? Chris Uchida: No, I think obviously we have talked about this a lot—that we take a very conservative approach to reserving up front. That is shown in that metric where, as Mac mentioned, it has been improving. I think last quarter we were just above 80%. Now we are above 85%. So the majority of these losses—or the reserve base—is sitting in IBNR where we do not have claims in yet. We are taking a conservative approach where we are not reducing that reserve base; if anything, we are adding to it. We have talked about this too, that we are going to react quickly to bad news where we take reserves up, but we are not going to release any of that reserve to offset that. You can see some of that with some slight unfavorable on the casualty side, but overall nothing that is causing any major concerns or large changes in the accident year expectations. The book is performing well. We are seeing strong growth, and it is still very profitable as you can see through the overall combined ratio and the additional underwriting income that we are adding to the bottom line. Mac Armstrong: And the only thing I would add is just a reminder: the net reserves on the casualty book are less than 19% of surplus. Analyst: Great, thanks so much for that detail. And then just as a follow-up to the earlier question on quake growth: you said you are expecting the commercial quake decreases to persist. In your outlook for quake, is that expecting them to maintain where they are or continue decelerating—declining like they worsened in the first quarter relative to last quarter? And, sorry if I missed it, but could you potentially call out the growth in the residential book and how that looked? Mac Armstrong: The assumption we are using is that the rate decreases will maintain at a similar level—think mid-to-high teens. We have not broken out the detailed residential quake versus commercial quake, but you can back into it when you know that rates are down ~15% on commercial, the overall earthquake book grew 3%, and residential quake is just under 60% of the mix. You can do better math than I can, but it speaks to residential being close to double-digit growth. Operator: Thank you. And our next question comes from the line of Mark Hughes with Truist Securities. Please proceed with your question. Mark Hughes: Thank you. Chris, the amortization of the intangibles was about $6.1 million this quarter. Is that going to be an ongoing line item, and where does it show up? Chris Uchida: Yes. The amortization of the intangibles will be ongoing based on the acquisitions we have done over the last two years—we have three acquisitions. Obviously, the largest of those happened in the first quarter with the Gray Surety acquisition. So there are intangibles with that book that we are amortizing. As you have probably seen at other insurance companies, there is something called VOBA. We do have some of that that we are amortizing. We are including what is called the profit component of that in our add-backs. That is a large component of the differential between the straight GAAP combined ratio and what we are calling our adjusted combined ratio, to get you level-set with a normalized year-over-year calculation. The amortization is sitting in other adjusted underwriting expenses, and that is where we would expect it to sit. Assuming no other acquisitions over the next couple of years, the dollar amount should decrease as some of the pieces amortize quicker. But overall, yes, we expect that to remain for, call it, the next five to ten years as you look at those books of business that we were able to acquire. Mark Hughes: Appreciate that. And then, Mac, the inland marine—it sounds like you have some good growth initiatives there. Generally speaking, how is the pricing and the competitive dynamic more broadly within inland marine? It has been a great contributor. What should we think about that going forward? Mac Armstrong: Good question. First and foremost, it has been a great contributor, and you should expect it to be so on a go-forward basis. When you break down that book, around a third is residential business. That includes flood, where we are getting rates on renewals; Hawaii, where we are getting rate on renewals; and our Texas homeowners book, where you have seen rate increases and stable performance. That is a nice anchor to offset what is really a fraction of the book that is seeing the rate pressure—layered and shared large excess national property accounts, as well as E&S layered and shared builder's risk accounts. The balance of the book—including, and I think it is worth highlighting, the admitted builder's risk—has very stable rates. It is also reaping the benefit of geographic expansion, new capacity from third-party reinsurers, and our growing balance sheet, which means we can take more net. That is going to drive performance in addition to what you are seeing on the residential side. It is the breadth of the portfolio, the mix of admitted and residential business, and the infrastructure-driven growth that will more than offset pressure in a small segment of that book. Mark Hughes: And you had alluded to the potential to get involved in the data center line. Is that something you are not doing now but have visibility for, and what is the timing there? Mac Armstrong: Thanks for asking. We have hired Matt and a team of underwriters in the construction engineering practice. Our approach right now with data centers is to write it more from a builder's risk standpoint than as a stabilized asset standpoint. We have put reinsurance in place—both the existing builder's risk G+ back or auto-fac relationships—that allow us to write large limits on a gross basis that net down modestly with what we retain. So our data center focus right now is more builder's risk than it is on the stabilized asset side. Chris Uchida: And I would add that we have a strong, experienced team of underwriters in the builder's risk segment that are geographically spread where the markets are opportune. Similarly, Matt and the team on the engineering construction side are long-tenured underwriters with great experience in larger types of projects. Mark Hughes: Very good. Thank you. Operator: And as a reminder, if you would like to ask a question, please press 1 on your telephone keypad. That is 1. Our next question comes from the line of Meyer Shields with KBW. Please proceed with your question. Meyer Shields: Great, thanks so much. Mac, just one really basic question to start with. You mentioned drought as an issue for crop. Was that something that impacted first quarter results, or is that something that we should see based on what we know so far in the third quarter or the rest of the year? Mac Armstrong: Meyer, the drought would impact our winter wheat products, but it would ultimately manifest itself over the course of the year. As I mentioned, those winter wheat products are heavily reinsured. What is really going to drive the underwriting year results will be the Midwestern soybeans, corn, and wheat. On the whole, we are watching Oklahoma and Kansas and the impact on winter wheat, but elsewhere the rainfall seems to be in line. Meyer Shields: Okay, that is helpful. And you sort of alluded to, I guess, inflationary pressures maybe stemming from the Middle East. I am hearing some concern specifically about fertilizer, and I was wondering how the farmers that you are insuring are thinking about that and how we should think about any exposure there. Jon Christianson: Hey, Meyer, this is Jon Christianson. I can take that one. As we think about how the insurance product for crop responds, we do not see at this time for the growing season any kind of impact as may be a consequence of any fertilizer disruption. While it may impact farmers across the globe on more of a long-term basis, as we think about the growing season in 2026, it has not emerged as an issue for us. Mac Armstrong: Meyer, the simplest way to frame it is that it may impact the cost to run the farm, but not necessarily the yields, which is what we are insuring against. Meyer Shields: Okay, I did not know whether there was enough concern for yield to ultimately be impacted, but that is helpful. For the time being, I assume that the guidance update does not contemplate any change to reinsurance attachment points at June 1? Mac Armstrong: Yes, Meyer, that is correct. Our guidance range assumes 10% to 15% down on a risk-adjusted basis. You could say the high end of the guidance range would assume a 15% rate decrease. We have not made any changes to retentions in those assumptions. Meyer Shields: Okay, perfect. Thanks so much. Mac Armstrong: Thank you. Operator: And our next question comes from the line of Mark Hughes with Truist Securities. Please proceed with your question. Mark Hughes: This is just more for my own curiosity. If you are insuring yields and the farmers do not use as much fertilizer, does that have an impact, or is it based on broader industry aggregates when you are looking at yield performance? Jon Christianson: Mark, a lot of the fertilizer that goes into the 2026 growing season had been secured by many of these farmers prior to a lot of the pressure that we have seen come on in the last month or two. Mark Hughes: Is that a thing, though? Is that something to consider as you are looking at underwriting—the potential for different usage of fertilizer? Jon Christianson: On a long-term basis, that could be considered as we look year to year as we underwrite crop insurance. We do not see that emerging as an issue this year. A similar argument could have been made last year coming out of some of the tariff discussions on April 1, and ultimately it was near-record yields for the 2025 growing season. Mac Armstrong: The market would also reflect this in the commodity prices that would be reset next year. The commodity prices are set for this year based on the cost of fertilizer that Jon was referring to. The market is efficient; if there is pressure on the cost of fertilizer and that impacts the cost to produce, it will be reflected in the commodity prices that will be reset in February/March 2027. Mark Hughes: Very good. Thank you. Operator: Thank you. And our next question comes from Pablo Singzon with JPMorgan. Please proceed with your question. Pablo Singzon: Hi, thank you. Did you change any of your initial loss picks in casualty or crop relative to last year, or is the year-over-year change in attritional purely mix? Chris Uchida: Sorry, Pablo, could you repeat that question? You kind of broke up there for us. Pablo Singzon: Yep, sorry. I was asking if you changed any of your initial loss picks in casualty or crop relative to last year, or is the year-over-year trend in attritional purely mix? Chris Uchida: That is a good question. No, at this stage, we have not changed any of our initial loss picks for our business. As we said earlier, we still remain very conservative on these lines of business. We obviously evaluate how everything is performing, but at this stage there has been no reason for us to change any of our overall loss picks on our attritional lines of business. Pablo Singzon: Okay. And then the second question I had is about residential earthquake. Can you talk about the broad competitive environment there? Are you seeing or hearing about new competitors, and how do you think your offering is differentiated? Thanks. Mac Armstrong: Hey, Pablo. We remain the market leader in residential earthquake outside of the California Earthquake Authority. We remain a very collegial competitor with the California Earthquake Authority in bringing solutions to their participating insurers that need a more robust and comprehensive product offering. A traditional competitor in the market is GeoVera—they remain a good competitor. But there has been plenty of opportunity for us to continue to drive growth. The uniqueness of our product—in terms of coverages, the flexibility in deductible options, and the ability to bespoke coverage and pay a price that you want—remains distinct. As I said, we had a record new business day in the quarter, and our retention was 97%. We think we are in a good spot there. Operator: Thank you. And with that, there are no further questions at this time. I would like to turn the floor back to Mac Armstrong for any closing comments. Mac Armstrong: Thank you, operator, and thank you to all the participants on the call this morning for your time. We greatly appreciate your support and interest. Thank you to the Palomar Holdings, Inc. team for your continued hard work and excellent execution. Our sustained strong results are a reflection of all you do to make us a market leader in the insurance space. Lastly, I want to reiterate the conviction we have in our plan and the results we will achieve. As such, we will use the tools that we have to enhance our returns and take advantage of what we feel is an undervalued, underappreciated stock and story right now. We look forward to sharing our success with you next quarter and those to come. Have a great day. Operator: Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful rest of your day.
Operator: Ladies and gentlemen, thank you for your interest in Loar Holdings Inc. conference call. Please continue to stand by. The presentation will begin momentarily. Greetings, and welcome to the Loar Holdings Inc. 2026 Q1 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian McKillop, Director of Investor Relations. You may begin. Ian McKillop: Thank you, Barak. Good morning, everyone, and welcome to the Loar Holdings Inc. 2026 Q1 Earnings Conference Call. Presenting on the call this morning are Loar Holdings Inc.’s Chief Executive Officer and Executive Co-Chairman, Dirkson R. Charles; Executive Co-Chairman, Brett N. Milgrim; Treasurer and Chief Financial Officer, Glenn D’Alessandro; as well as myself, Ian McKillop, the Director of Investor Relations. Please visit our website at loargroup.com to obtain a slide deck and call replay information. Before we begin, we would like to remind you that statements made during this call that are not historical in fact are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to our website and latest filings with the SEC, available through the Investor Relations section of our website or at sec.gov. We would also like to advise you that during the call, we will be referring to adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted earnings per share, each of which is a non-GAAP financial measure. Please see the tables and related footnotes in the earnings presentation for the most directly comparable GAAP measures and applicable reconciliations. To begin today, I will now turn the call over to Dirkson. Dirkson R. Charles: Thanks, Ian. Good morning, everyone. I am Dirkson, Founder, CEO, and Executive Co-Chairman of Loar Holdings Inc. As you all know, Loar Holdings Inc. was founded with the mission and vision to build an aerospace industrial cash compounder wrapped in a culture that all our mates can be proud of. Thirteen weeks ago, I shared with all of you how excited I was about what we would accomplish in 2026. I stated that we planned on achieving record financial results through consistent and resilient performance. The results for 2026 Q1 are all quarterly records for sales, adjusted EBITDA, and adjusted EBITDA margins. More importantly, our cash conversion coverage to net income was 230%. Our strong Q1 provides a resilient foundation for 2026, positioning us to break all our annual records. Strengthened orders from our customers resulting in a book-to-bill ratio of greater than 1.2 times, the tremendous progress we have made towards launching new business, and continuing to successfully execute on our value drivers also strengthens our confidence in achieving a record-breaking 2026. But first, let us take a moment to check two of the boxes we shared with you during our IPO process. Two years ago, we said in a short period of time, we would achieve 40% adjusted EBITDA margins. In a word, check. We also stated that we had a balanced and resilient portfolio of products, platforms, and end markets which would allow us to perform in spite of most headwinds in the industry. Again, check. During the first quarter, we had reduced sales in our defense end market, which we have always said can fluctuate unexpectedly. The year-over-year decline reflects a deviation from our customers’ normal ordering pattern for the F-18 brakes and RC-135 autothrottle. These proprietary products supplied exclusively by us are shipped at the discretion of our customers and are significantly sensitive to the ebb and flow of the defense end market. Q1 highlighted reduced demand for these proprietary products. However, if history provides any indication, we expect our customers to return to the habitual, albeit somewhat unpredictable, ordering patterns for the remainder of 2026. I will emphasize that despite the Q1 decline in sales, our book-to-bill ratio in the defense end market was the highest of our end markets during 2026, and we ended the quarter with record backlog for our defense products. With that said, the Q1 defense sales results were more than offset by the strength in our commercial OE and aftermarket end markets. This quarter allows us to demonstrate what we always say: we realize financial success in all the end markets we support. We do not take a razor–razor blade approach in our business model and take into account the totality of all the sectors we supply. So during a quarter when our highest growth end market was commercial OE, we achieved record adjusted EBITDA margins. Once again, I love it when the numbers prove what we say. In addition, I am happy to say that collaboration across our business units continues to drive increasing opportunities for top line growth. As a result, our new business pipeline is at a record high of approximately $700 million. Today, Ian will take you behind the curtain of our new business pipeline so you can get a greater appreciation for why we believe we will grow our new business sales organically at the higher end of our long-term growth of 1% to 3% each year for the next few years. With that said, Loar Holdings Inc. is a family of companies with a simple approach to creating shareholder value. First, we believe that providing our business units with an entrepreneurial and collaborative environment to advance their brands will generate above-market growth rates. Since our inception in 2012 through the end of calendar year 2025, we have grown sales and adjusted EBITDA at a compound annual growth rate of over 30% and 40%, respectively. Second, we execute along four value streams. We identify pain points within the aerospace industry and look to solve those problems through organically launching new products. In calendar year 2026, we expect that new product growth will be the number one driver of our organic growth as we qualify new parts in the first half of the year, fueling increased sales starting in 2026. We focus on optimizing the way we manufacture, go to market, and manage our companies to enhance productivity. Each year we identify initiatives that allow us to continually improve our performance. Historically, we focus on one or two major efforts that are expected to expand margins. We continuously investigate ways to improve how we mine, collect, gather, and utilize data, enhancing our management ERP and other systems and processes which allows us to efficiently leverage such data and drive financial and operational efficiencies. Year over year, we achieved more price than our cost of inflation. Executing this strategy results in continuously improving margins on an annual basis, except for the occasional temporary dilution due to acquiring a business with dilutive margin. Lastly, and more importantly than anything else, we are committed to developing and improving the talent of all our mates because our success is solely a result of their dedication and commitment. So thank you to all my mates. With that, let me turn it over to Brett to walk you through the key characteristics of our portfolio. Brett N. Milgrim: Thanks, Dirkson. As you can see on Slide 6, a key driver of our consistent performance is Loar Holdings Inc.’s diverse portfolio of products that cover essentially all end markets, platforms, and customers and is also balanced across the OE–aftermarket spectrum. Said another way, we have content on virtually anything that flies today and that is by design, as opposed to relying on any particular platform, end market, or type of product that may produce short- or intermediate-term benefits at the expense of the long-term consistency and growth we strive to produce. Our portfolio is designed to be balanced, resilient, and have wide exposure across a very large and overall growing aerospace and defense market. Our performance really starts with the proprietary nature of our products, which creates high barriers to entry and attractive margins in addition to forming embedded customer relationships that foster cross-selling opportunities and other revenue synergies for both new businesses we acquire as well as our organic new business pipeline. Effectively, proprietary products not only produce great margins, as you can see by our results, but they position us to capture the 20-, 30-, 40-, or even 50-year annuity that any one particular platform may provide whether that is a commercial aircraft, military aircraft, or general aviation aircraft and whether that aircraft is coming off the production line or well into its aftermarket cycle. Our proprietary product portfolio is not only growing as a percentage of our total portfolio, but it is also growing in the aggregate as we have a demonstrated 14-year history now of supplementing our organic growth with M&A activity. I will repeat something I mentioned last time, which is that we continue to have a large pipeline of opportunities, but it is still an M&A market that requires an appropriate amount of discipline to ensure we continue adding high-quality, proprietary products that meet the return thresholds we seek from the businesses we acquire. That discipline is something we continue to be very focused on and is evident in our two most recent acquisitions, LMB and Harper Engineering, both of which exemplify the types of businesses we like and both of which are off to a great start. From looking at the chart on page 7 and from past experience in the aerospace and defense market, I do also want to add that we think we have created a very powerful, very differentiated, unique business model that will generate and sustain exceptional financial performance over the long term. Adding to that, we will remain an active acquirer of assets, and given the market size and opportunity set, have very high confidence that our cadence of one to two deals a year over the past 14 years will continue for the upcoming decade and beyond and continue to expand our breadth and capabilities and generate the outsized and consistent long-term returns we have seen in our first 14 years. Ian McKillop: We include this slide each quarter because it captures the breadth of Loar Holdings Inc. More than 25 thousand unique part numbers across the group. But the real key takeaway here is not any one single product; it is the set of capabilities behind them. We are not simply a collection of businesses that manufacture a wide range of components; we are an integrated platform that combines engineering, design, qualification, and production expertise across disciplines to deliver tailored customer-specific solutions. Those capabilities show up most clearly in our organic new business pipeline. Before we get into the specific opportunities, let me define for you what we mean by new business at Loar Holdings Inc. We see it coming through two primary channels. First, new products or technologies for new or existing customers. Think clean-sheet designs and meaningful product enhancements. Second, existing products expanded to new customers. Think market share gains and new platform wins. Across the group, our organic pipeline now totals approximately $700 million of revenue potential expected to convert over the next five years, up roughly $100 million from what we shared with you in February. As the chart shows, slightly more than half of these opportunities are tied to the commercial end market, with general aviation and defense each representing roughly a quarter. The slide includes examples of the product families that we are pursuing today, but our development and growth efforts extend well beyond what is shown. Simply, every Loar Holdings Inc. business is actively engaged in capturing new organic opportunities. Expect this pipeline to continue to expand as we add capabilities, broaden customer relationships, and support additional platforms, and importantly, it does not take a large capture rate for this to be meaningful. Converting less than 15% of the current pipeline over time would be sufficient to support our targeted 3% annual growth from new business. I will now pass it over to Glenn. Glenn D’Alessandro: Thank you, Ian. Good morning, everyone. Let me start by discussing sales by our end markets. This comparison will be on a pro forma basis as if each of our businesses were owned as of the first day of the earliest period presented. This market discussion includes the acquisition of Beadlight in Q3 2025, LMB Fans and Motors in Q4 2025, and Harper Engineering in Q1 2026. We achieved record sales during 2026 Q1. In total, our sales increased to $156 million, which is an 11% increase as compared to the prior year. This increase was driven by strong performances in commercial OEM and commercial aftermarket, partially offset by slightly lower defense sales. Our commercial aftermarket sales saw an increase of 11% in Q1 2026 versus Q1 2025. This is primarily driven by the continued strength in demand for commercial air travel and an aging commercial fleet. Our total commercial OEM sales saw an increase of 18% in Q1 2026 versus Q1 2025. This increase was driven by higher sales across a significant portion of the platforms we supply along with the continuing improvement in the production environment for commercial OEMs. Defense sales saw a decrease of 2% in Q1 2026 as compared to the prior year. As Dirkson said in so many words, defense sales are lumpy given the nature of the ordering patterns of our end customers for our products. Let me recap our financial highlights for 2026 Q1. Our net organic sales increased by 11% versus the prior-year quarter. Our gross profit margin for Q1 2026 decreased by 130 basis points as compared to the prior year. This decrease was primarily due to the higher non-cash amortization of acquired intangible assets and the non-recurring non-cash recognition of an inventory step-up adjustment, both related to the LMB and Harper Engineering acquisitions. The total of these two non-cash items was $11 million. Excluding these two adjustments, our gross profit would have increased to 57.6% as a result of our operating leverage, the execution of our strategic value drivers, as well as a favorable sales mix. Our decrease in net income of $4 million in Q1 2026 is primarily due to higher interest as well as the two non-cash items discussed above. We have added a new metric this quarter: adjusted net income. Adjusted net income excludes the non-cash amortization of acquired intangible assets and certain other non-recurring charges. We believe this metric provides a more consistent view of our earnings. Adjusted net income increased $5 million, or 20%, in Q1 2026. This increase is due to our strong financial performance during the quarter, partially offset by higher interest expense. Adjusted EBITDA was up $20 million in Q1 2026 versus the prior-year quarter. This is primarily due to our operating leverage and the execution of our strategic value drivers. Again, in Q1 2026, we achieved a record 40.5% adjusted EBITDA margin. This is an increase of 290 basis points from Q1 2025. From 2020 through 2026, we will have increased our EBITDA margins by 910 basis points. We have achieved this growth through operating leverage, winning new profitable business, executing on productivity initiatives, and value-based pricing, all while fully absorbing the negative impact of costs related to Sarbanes–Oxley compliance and additional organizational expenses to support being a public company. Let me now turn the call back over to Dirkson to share our revised outlook for 2026. Dirkson R. Charles: Thanks, Glenn. Based on what we have said today, it should come as no surprise that, in spite of the temporary—and again I say temporary—uncertainty that may be created by the geopolitical challenges the world is facing today, we are increasing our guidance for 2026. But before I share the details, let us take a moment to remind everyone that we operate with the tailwinds of a secular growth industry which captures the increasing human need to travel, move products from point A to point B, and to defend our American liberties driving secular demand. These things have been proven to be true since the beginning of aviation and will continue to be so for the foreseeable future. As a result, Loar Holdings Inc. will continue to grow at an above-average industry rate. Here is what we are currently experiencing by end market in 2026. Demand in the commercial aftermarket remains strong as reflected by a book-to-bill of greater than one in 2026. To date, our customers have maintained moderate reaction to the temporary impact of higher fuel costs. In fact, our challenge is ensuring that we continue to increase our capacity to keep up with the secular growth in this end market. We do recognize that airlines are rationalizing their capacity given the elevated cost of fuel, which will result in a temporary reduction in unit demand. However, that rationalization typically takes a few quarters before it will impact any of the demand for our products. Given our portfolio of proprietary products, and execution of our value drivers, we fully expect to mitigate any financial impact and anticipate continued growth of 10% plus organically for the foreseeable future, as we continue to expect the age of the active fleet not to peak until the end of the decade. Looking at the commercial original equipment end market, our customers continue to report significant backlog supporting multi-year deliveries. Both Airbus and Boeing have approximately 9 thousand and 7 aircraft in backlog respectively. This represents over ten years of production at today’s stated rates. As the supply chain continues to improve capacity and quality, we expect sales for our proprietary products that align and fit on these aircraft to generate increased sales for us as production ramps. This is clearly reflected in the growth in this end market at 18%. The defense market has been heavily influenced by the current geopolitical environment. As I have stated before, European nations have increased their military spending to the highest percentage of GDP in decades. In addition, the U.S. defense budget has seen considerable growth. While the timing of orders and sales can fluctuate significantly, over the long term we are well positioned to benefit from these upward trends going forward. Given our balanced portfolio of approximately 50% aftermarket, the broad spectrum of our products across all end markets, combined with executing all our value drivers, let me say it again: we expect to continue to grow sales at 10% plus organically and adjusted EBITDA at 15% plus annually into the foreseeable future. Now, we are excited to share our upward revision to our 2026 outlook. As each of our end markets are experiencing strong demand tailwinds, our focus is on executing our value drivers to continue to position Loar Holdings Inc. to at least triple adjusted EBITDA every five years, including acquisitions, as we have done consistently since our inception except during COVID. As always, our view is on a pro forma basis, assuming we owned all of our business units since the beginning of 2025. With that said, we still expect commercial OE and aftermarket growth to be low double digits in 2026 for all the reasons I highlighted earlier, while our defense end market sales will be up mid-single digits in 2026, driven by a record backlog of orders at the end of Q1. These market assumptions, along with the strong performance of our two most recent additions to our family of companies, LMB and Harper, and our continued execution of our value drivers, allow us to increase our guidance by $5 million of sales and $4 million of adjusted EBITDA. And of course, we expect to meet or exceed this increased guidance for calendar year 2026. Our increased range for net sales is now between $645 million and $655 million; adjusted EBITDA between $257 million and $262 million with adjusted EBITDA margin of approximately 40%. GAAP net income will be in the range of $53 million to $57 million reflecting the non-cash acquisition-related charges that Glenn referred to earlier. Adjusted EPS will be between $1.26 and $1.30 per share. In addition, capital expenditures will be in line with our historical rate of 3% at around $19 million. There is no change to our full-year interest expense, effective tax rate, depreciation, or fully diluted share count. Amortization is up $5 million to reflect non-cash related charges, while non-cash stock-based compensation is up $1 million to $18 million. Please note that all the amounts I have just outlined for you relating to calendar year 2026 performance assume no additional acquisitions. However, as we have noted and as Brett has said just earlier, our drumbeat is to complete one or two acquisitions each year. We just cannot predict the timing of such acquisitions. With that, Brock, let us open for questions. Operator: Thank you. We will now open the call for questions. Our first question today comes from Kristine T. Liwag of Morgan Stanley. Please proceed with your question. Kristine T. Liwag: Hey, good morning, Dirkson, Glenn, and Ian. I just wanted to follow up on your discussion of the $700 million revenue potential over the next five years, up $100 million from February. I recognize you tend to be conservative, but it seems like a 15% conversion over this timeline seems conservative and fairly reasonable for you to hit your 3% targeted annual growth from new business. When you look at your capabilities, what is a reasonable conversion of this opportunity? How much of these existing opportunities do you have line of sight on regarding the customer wanting you as a supplier, like some sort of pull mechanism? And is 50% a reasonable number? Any color you could provide there would be helpful. Dirkson R. Charles: Hi. Good morning, Kristine, and thanks for the question. We have line of sight on all $700 million. I would describe it as more pull than push because we have a customer attached to it. We have plans to either certify the part or the part is already certified, and we have had conversations not just with engineering, but also operations in terms of how we have operationalized the design—typical for these products. The reason that we say 15% is because we guide to 1% to 3% annual growth from new business, and 15% conversion would take us to the 3%. Should we do better? We should. However, things in this industry often move to the right for timing reasons—an FAA delay, for example, which has happened twice since we have been public and has slowed down certification of some of our products. Timing can move to the right, but the opportunity set will not change. Could we win 50%? Why not? But it may not happen within the exact time window we lay out. The great news about the pipeline is it is a living, breathing entity and it continues to grow—from $600 million to $700 million and beyond. That is probably the most powerful news. Kristine T. Liwag: Thanks, Dirkson. As a follow-up, what are the milestones to watch? Is the gating factor FAA approval of your offering, or some sort of contracting mechanism from the customer? And once you get that approval, when does revenue begin—immediately, as a run rate for the following year, or phased in over time? Dirkson R. Charles: Great question. I will give you a couple of examples. On FAA approvals: for brakes, we have 11 platforms that we are looking to certify. We have done seven. There are another four that we expect to complete within the next 12 to 18 months. The available market for those 11 platforms is hundreds of millions of dollars. We will not win all of that, but for brakes, FAA certification is a gating item. Another example: we are collaborating across five of our business units for an opportunity that a customer brought us because it is a big pain point for them. We have the capability across those five business units to solve this in a way no one else has; others would have to go to outside suppliers. We have been working on this for the last three months. The customer would like it done by year-end, but for a number of reasons unrelated to certification, things can move to the right—this industry can move slowly, especially around engineering. So the best way to measure success is our organic growth. Over the next couple of years, the biggest driver will be new business. As we get into the second half of the year, into 2027 and beyond, we expect our organic growth to ramp. That is how you can judge it. Operator: Thank you. The next question is from John Gordon of Citi. Please proceed with your question. John Gordon: Hey, thanks for taking my question. I wanted to ask about the portfolio mix. There is a concern out there that some of the higher-margin aftermarket companies are over-earning, and perhaps that margin profile is at risk if there is a slight shock to aftermarket demand and traffic growth. I know you do not hold that view, but I wanted to give you an opportunity to address that. Dirkson R. Charles: Thanks for the question, John. We do not take a razor–razor blade approach to any of our product lines. We have roughly 25 thousand part numbers, and none get that treatment. We believe we should get paid for what we supply—OE, aftermarket, military—across all of them we make good money; some better than good. I hope this quarter helps people see that, given that commercial OE was our largest growth sector and we still had record margins. I do not care where the growth comes from—aftermarket, defense, or commercial OE—we are going to make good margins regardless of which grows faster. Operating leverage, price over inflation, and focusing on the right parts with the right pricing will continue to drive margins higher. John Gordon: Very helpful. And if we could spend a moment on defense: there is a lot of activity globally. Are you seeing clear signs of that picking up, and what might that mean for the portfolio if this activity continues—or if it stops? Ian McKillop: You are marrying up demand signals—we see the same thing. There is a lot of conflict, a lot of aircraft flying. Then you have inventory levels and our ability to meet that demand over time. Operations in the Middle East and globally will drive demand for our parts. The trouble is saying whether that hits Q1, Q2, Q3, or Q4—it is challenging to time. For example, the F-18 brakes did not repeat orders this year as they did last year; the military often buys in bulk and burns down inventory, then comes back. Conflict breeds demand, but timing varies. Dirkson R. Charles: To add to that, we are currently working on a number of military opportunities that are not yet in our backlog. That gives us great comfort that, as we think about 2026 and beyond, the military end market will be very strong. John Gordon: Understood. One more: you have bizjet/general aviation exposure and commercial aftermarket exposure. Any differences in demand signals between those two given macro volatility? Dirkson R. Charles: We do not see anything zigging or zagging differently. General aviation is typically most sensitive to the economy, but it has remained fairly strong for the parts we are shipping. No significant weakness in backlog there. Operator: The next question is from Analyst at Goldman Sachs Asset Management. Please proceed with your question. Analyst: Hey, good morning everyone. Can we talk more about these margins? It is a pretty big year-over-year and sequential lift. That is despite folding in some newly acquired revenue—although LMB is high margin, maybe that is part of it. How did you get margins there? Was anything favorable in the quarter? The guidance for the rest of the year implies you are kind of flat or maybe down a little. Is that right? And beyond this year, Dirkson, you talked about the algorithm of top-line organic 10%, EBITDA organic 15%. From where margins are today, that implies close to 200 basis points of annual expansion. You have done that in the past, but it is not what consensus has. I just wanted to make sure I understood that. Dirkson R. Charles: Thanks for the question. You are right that LMB started out with very good margins that were accretive. Harper, on the other hand, was significantly dilutive at the outset. Margin growth is coming from price over inflation and operating leverage. We have 38 people on the corporate team; when we are twice the size, we may have maybe 45. We take costs seriously—you must add value. Productivity initiatives are continual and must show up in margin; we define productivity as the improvement in margin excluding the effects of price and inflation. If it does not show up in margin, we do not believe it. Also, about 90% of what we do is proprietary. That gives us the ability to flex our value drivers and continue to grow 10% top line and 15% EBITDA organically. We are highly confident margins are going up from here. I am not going to commit to 200 basis points per year. Analyst: Appreciate that. You alluded to it earlier, but could you elaborate on what you are hearing from customers regarding geopolitics and higher crude? It sounds like changes by airlines so far are small. Why do you think that is, and what is the threshold for them to take further action? Dirkson R. Charles: Conversations with customers have been rational. Everyone is trying to judge how long the conflict lasts. The current view is that it should not be many months. Approximately 2.5% of our revenue comes from the area where the conflict is. In Q1, we saw no impact in sales or orders. If we wake up in 13 weeks and we are still in this malaise, my answer may change slightly, but that would be followed by the fact that we have proprietary products our customers need and we can flex our value drivers to continue to grow 10% top line and 15% EBITDA. Operator: The next question is from Analyst at Jefferies. Please proceed with your question. Analyst: Hi, this is Jack Ewell on for Sheila. Following up on margins: in a higher-for-longer fuel environment where we potentially see a lagging volume headwind, you are noting that you will be able to offset any of that through your value drivers. Can you talk about what drives Loar Holdings Inc.’s pricing power—whether that is through contracts or otherwise? Dirkson R. Charles: A quick example: for the F-18 brakes referenced earlier, we do the needling and the heat treat for the brakes that do not have our name on them. If we moved that equipment across the street, our customer would have to re-certify that brake and aircraft. When we say proprietary, we mean there is nowhere else for you to go—certainly not within 12 months. We will flex our value drivers to offset any reduction. The reduction people are talking about now is low single digits, consistent with capacity reductions. Where we may see more flex is at a distributor or two who may reduce inventory for cash flow reasons; when they return to ordering, it will be at higher prices. Quarterly noise does not change the 5-year trajectory: a bigger, better business with greater proprietary content and more new business. Analyst: Very helpful. And a quick follow-up: you have a disciplined M&A approach targeting one or two acquisitions a year and looking for high-IP suppliers that can double EBITDA within three to five years. Can you talk about the M&A pipeline now and Loar Holdings Inc.’s appetite in the medium term? Brett N. Milgrim: The appetite is high and the pipeline remains large and very active. As I mentioned in my discussion around the slides, while the pipeline is large and active, it requires discipline. Over the last year or two, there has been a lot of capital markets activity around aerospace that filters through the supply chain, particularly to potential sellers. We are seeing a wider array of businesses with a more disparate range of quality. You have to be careful to ensure the businesses you buy can generate the returns you referenced, have the proprietary content we like, and the requisite dynamics to generate the growth and financial performance you have seen from us over the last 14 years. The challenge is not a dearth of opportunities—there are too many. We must prioritize the things we like, that are a good fit, and, most importantly, that we can execute on. Operator: The next question is from Ken Herbert of RBC Capital Markets. Please proceed with your question. Ken Herbert: Good morning, Dirksen and team. To level set us on the aerospace aftermarket, how much of your business is backlog-driven versus book-and-ship? As you head into the second or third quarter, how much visibility do you have, and what percentage of the aftermarket mix is basically book-and-ship? Dirkson R. Charles: Great question. For aftermarket products, we typically enter a month with about half in backlog and the other half book-and-ship. We are very good at forecasting the book-and-ship because we are the exclusive provider for many parts. We can start a quarter and know pretty closely where we are going to be. For OE and defense, lead times are longer and we have quarters of visibility ahead. So, roughly 50% in backlog when we start a month for aftermarket. Ken Herbert: Thanks. And on the new business opportunity—the $700 million—your estimates seem conservative given wins and momentum. How should we think about phasing this in for 2026 versus potential upside in 2027 and 2028? Dirkson R. Charles: We are comfortable reiterating that new business will be 1% to 3% of annual growth, and over the next few years closer to 3%. The number 4 is closer to 3 than 1—so could it be 3% plus? Yes. Two-thirds of that $700 million is OE and one-third is aftermarket. The two-thirds OE is what excites me most because it means repetitive future aftermarket sales for decades. When we win, it is not “win and ship and that is it.” It is “win, ship, and then replace and repair,” creating the annuity stream we seek. The same discipline we use in acquisitions we also use in our new business pipeline—we have choice, and we target great margins, long-term growth, and positioning as supplier of choice. We are conservative mainly because timing—like acquisitions—is the hardest thing to predict. So we will stick with 1% to 3%, closer to 3%, at this time. Operator: There are no further questions at this time. I would like to turn the floor back over to management for closing comments. Dirkson R. Charles: Thank you, everyone, for taking the time to hear our story today. Hopefully, we have clarified some of the things on your mind. We are excited about what we are going to accomplish in 2026 and beyond. We are building that aerospace and defense cash compounder that we dreamed of 14 years ago, and I am looking forward to speaking to you in 13 weeks. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.
Operator: Welcome to the Fortuna Mining Corp. Q1 2026 Financial and Operational Results call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to your host, Carlos Baca, Vice President of Investor Relations. You may begin. Carlos Baca: Thank you, Holly. Good morning to all, and welcome to Fortuna Mining Corp.'s call to discuss our financial and operational results for 2026. Hosting today's call on behalf of Fortuna Mining Corp. are: Jorge Alberto Ganoza, President, Chief Executive Officer, and Co-Founder; Luis Dario Ganoza, Chief Financial Officer; David Edward Whittle, Chief Operating Officer, West Africa; and Cesar E. Velasco, Chief Operating Officer, Latin America. Today's earnings call presentation is available on our website at fortunamining.com. Statements made during this call are subject to the reader advisories included in yesterday's news release, the webcast presentation, our Management Discussion and Analysis, and the risk factors outlined in our annual information form. All financial figures discussed today are in U.S. dollars unless otherwise stated. Technical information presented has been reviewed and approved by Eric Chapman, Fortuna Mining Corp. Senior Vice President, Chemical Services, and a qualified person as defined by National Instrument 43-101. I will now turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer, and Co-Founder of Fortuna Mining Corp. Jorge Alberto Ganoza: Thank you, Carlos, and good morning, and thank you for joining us today. 2026 marked an exceptionally strong start to the year for Fortuna Mining Corp. We delivered strong operational and financial performance, and importantly, we achieved these results with zero recorded lost time injuries during the period. This extends our safety performance to five consecutive quarters free of lost time injuries. Financially, the quarter delivered record results across our key metrics. Sales reached a record $342 million, reflecting higher realized gold and silver prices. Adjusted net income was $111 million, or $0.36 per share, a quarterly record for the company. Adjusted EBITDA totaled $219 million, also a record. And free cash flow from ongoing operations reached $174 million, representing our strongest quarterly cash generation to date. These results underscore the quality of our asset base, disciplined operational execution, and strong leverage to the gold price environment. Operationally, this financial performance was supported by solid execution across our portfolio. We produced 72,900 gold equivalent ounces in the quarter, and based on performance year to date and current operating conditions, we remain well positioned to meet our full-year 2026 guidance. With that as context, let me step back and focus on the bigger story for Fortuna Mining Corp. We are working to deliver approximately 60% growth in annual gold production over the next 24 months, taking us to approximately 0.5 million ounces of annual gold production, by expanding our Seguela mine in Côte d’Ivoire and by bringing our Diamba Sud project in Senegal into production. The key message I want to emphasize is that we control this growth. This growth is driven by two projects already within our portfolio, not dependent on acquisitions or exploration success. Both Seguela and Diamba Sud are technically straightforward, benefit from strong social acceptance, and are financially de-risked. These are executable growth projects supported by our strong balance sheet and our operating track record in West Africa. And both demonstrate robust economics at long-term gold prices below $3,000 per ounce. As these projects advance over the next 24 months, we expect this growth to translate into meaningful increases in production and free cash flow per share while maintaining discipline in execution, costs, and capital allocation. Our growth plans are also underpinned by the recently published update to mineral reserves and mineral resources on April 23, which shows growth across all categories of resources and reserves. Proven and probable mineral reserves increased by 50% year over year after depletion, to 3 million gold ounces. Indicated mineral resources increased by 56% to 2.1 million gold ounces. And inferred mineral resources increased by 4% to 2.2 million gold ounces. This growth speaks to the mineral potential of our assets, and our potential not only to expand production, but also to support decade-plus mine lives across our operations. Looking ahead, there are several near-term milestones that we believe are important for investors to watch. Both the Diamba Sud feasibility study and the Seguela expansion study are expected to be completed in May, providing greater technical and economic visibility on our growth plans. In parallel, we are expecting environmental approval for Diamba Sud imminently, followed by the final mining permit shortly thereafter. All this as we continue to advance the Diamba Sud early works with a 2026 budget of $100 million. Our strong cash generation continues to strengthen the balance sheet. At quarter-end, we had approximately $816 million of total liquidity, including $493 million in net cash, positioning Fortuna Mining Corp. among the stronger balance sheets in our peer group. This financial strength allows us to comfortably fund approximately $330 million of total exploration, sustaining, and non-sustaining capital in 2026, entirely from internal cash flow. Of this $330 million figure, 56% is allocated to growth and exploration. At the same time, we are returning capital to shareholders. Year to date, we returned $40 million via the repurchase of 4.2 million shares. For the quarter, we repurchased $20 million, which represents 11% of our free cash flow from operations. Before handing over for more detailed operational commentary, I want to briefly address all-in sustaining cost in the first quarter: $2,107 per gold equivalent ounce. Of that amount, approximately $122 per ounce is attributable to external factors, primarily the impact of higher gold prices on royalties, and higher share-based compensation associated with our share price performance during the period. These factors are not reflective of underlying operating execution, which remains solid across the portfolio. With that, I will now turn the call over to David Edward Whittle for West Africa operations. David Edward Whittle: Thank you, Jorge. Seguela delivered a successful first quarter, with strong production results and importantly zero LTIs reported. During the quarter, Seguela produced 42,016 ounces of gold, representing a 14% improvement over the previous quarter and finishing ahead of the mine plan. A total of 393,000 tonnes of ore were mined at an average gold grade of 3.69 grams per tonne, together with 5.46 million tonnes of additional material, resulting in a strip ratio of 13.9 to 1. The processing plant treated 430,000 tonnes of ore at an average gold grade of 3.21 grams per tonne, with throughput averaging 212 tonnes per hour. Production was sourced primarily from the Antenna, Fiery, and Koula pits, while waste mining progressed well at the Sunbird pit, positioning the operation for future ore contribution from that area. Seguela’s strong operating performance resulted in a cash cost of $679 per ounce and an all-in sustaining cost of $10.06176 million per ounce of gold. In terms of projects underway at Seguela, substantial progress was achieved in the first quarter. The 6-megawatt solar power plant project is nearing completion and is expected to be commissioned this quarter, with power sourced from the solar power plant providing approximately a 35% per-unit cost saving on power provided from the grid. In April, we announced a 34% increase in mineral reserves and a 55% increase in resources from the Sunbird deposit, based on drilling completed through to the end of the first quarter. This further enhances the Sunbird underground project and reinforces its importance as a future source of ore for Seguela. A joint permitting committee has been established with Côte d’Ivoire’s Ministry of Mines with the goal of permitting the underground mine by 2026. Initial development is then targeted for 2027. We have also decided to develop and operate the Sunbird underground mine on an owner-operator basis, with an incremental increase in budgeted CapEx of $25 million to undertake this project. Orders for primary mining equipment are expected to be placed during the second quarter. Access to the underground mine will be established from the southern section of the Sunbird pit rather than through the originally contemplated dedicated boxcut excavation. This section of the Sunbird pit was not scheduled to be mined until 2027. While accelerating this mining has the effect of increasing Seguela’s forecast AISC towards the upper end of guidance, this decision provides a cost improvement of more than $7 million on the project by reducing underground development requirements and avoiding additional waste volumes associated with the boxcut option. Mining of the Sunbird South pit has now commenced. Studies for the proposed processing plant expansion continued throughout the first quarter. Lycopodium, which designed and constructed the current processing plant, presented several expansion options and is now progressing detailed studies on the selected option, which includes the addition of a ball mill as well as increased thickening, leaching, and gravity circuit capacity. The current primary crushing capacity is expected to be sufficient to support the planned throughput increase. Exploration drilling at Seguela is ongoing with additional drill rigs being mobilized to site, bringing the exploration drilling fleet to seven rigs. The drilling program is focused on further conversion and expansion of the Sunbird and Kingfisher resources, as well as testing below the southern extent of the Antenna pit and the newly discovered near-surface footwall opportunity. At the Diamba Sud early works, programs and exploration activities continue to advance successfully during the quarter. Approval of the ESIA is expected imminently, and the feasibility study remains on track for completion, including the first-time reporting of mineral reserves in support of the construction decision by mid-year. Thank you. Back to you, Jorge. Jorge Alberto Ganoza: Thank you, David. Now we will move on to Latin America. Cesar? Cesar E. Velasco: Thank you, Jorge, and good morning, everyone. In the first quarter, our Latin American operations delivered a strong and stable performance, underpinned by disciplined execution, solid safety performance, and clear progress on key operational priorities. At Lindero in Argentina, the quarter was defined by strong operating delivery and the successful execution of a critical maintenance milestone, which positions the operation well for the rest of the year. We mined 1.7 million tonnes of ore at a favorable strip ratio of 1.35 to 1, and placed 1.5 million tonnes on the leach pad at an average head grade of 0.62 grams per tonne of gold, containing an estimated 30,538 ounces of gold, in line with our mine plan. As a result, gold production reached 21,545 ounces, representing a 12% increase compared to 2025. From an operational standpoint, the mine performed as expected with improving momentum. The most important development in the quarter was the completion of the primary crusher foundation replacement. I want to highlight three things: we delivered it on time, we stayed within budget, and we executed it with strong safety performance. Crucially, crushing operations resumed on May 1, as planned, and the plant returned immediately to stable operating conditions, supporting throughput going forward. Now turning to financial performance, Lindero delivered a very strong quarter financially, generating $101.5 million in sales, with a strong EBITDA margin of 69% of sales, increasing by 28% and 59.5%, respectively, compared to 2025, reflecting higher gold prices, strong cost discipline, and solid operational execution. On costs, we reported cash cost of $1,208 per ounce and an AISC of $1,783 per ounce. As expected, these costs were slightly affected primarily due to temporary and non-recurring factors such as equipment rentals and temporary crushing solutions associated with the primary crusher project, maintenance interventions, and macroeconomic pressures in Argentina, particularly high inflation and a stronger-than-expected peso, which increases dollar-denominated costs. However, these pressures were partially offset by higher production volumes, a lower stripping ratio, and ongoing operational efficiencies. Looking ahead, we expect a clear and steady cost reduction throughout the year as temporary measures are removed, capital work is completed, and efficiency gains are fully realized. As a result, we continue to expect AISC to move toward $1,300 per ounce by the fourth quarter. Finally, on growth, we continue to advance both near-mine and regional exploration. At Lindero, as previously indicated, we have initiated drilling below the current pit limits, targeting conversion of 400,000 ounces of inferred resources to higher confidence categories. These resources are located beyond the limits of the current final pit design. In parallel, we have multiple regional exploration programs underway, including Cerro Lindo, where activities started in March with camp construction completed and drilling now underway. During April, we also began the first phase of our 2026 drilling program at Alisaro. This 11,400-meter program is designed to test for deeper, fertile, intrusive centers and proximal magnetic anomalies, followed by resource expansion. And finally, as of today, exploration work has started at the Rio Negro properties in Southern Argentina. Surface mapping and sampling is underway. Drilling is planned for September after the winter break. Let me now turn to Caylloma in Peru. Caylloma continued to stand out as a very consistent and reliable operation, delivering predictable performance quarter after quarter. In the first quarter, mining and processing volumes were fully in line with plan, and we benefited from higher head grades, particularly in silver and base metals. This translated into higher silver production of 258,000 ounces, up 3.5% quarter over quarter, and strong and stable base metals output of 11.5 million pounds of zinc and 8.2 million pounds of lead. Mine production totaled 136,007 tonnes of ore in the first quarter, which continues to come from well-established mining zones from the Animas vein, Pumoid vein, and Ramal Carolina vein, which supports operational stability and predictability. From a financial perspective, Caylloma also delivered a strong quarter, generating sales of $34.6 million and maintaining a solid EBITDA margin of 62% of sales. This reflected the combination of higher realized metal prices and disciplined cost management. On costs, we reported cash cost of $30.26 per ounce and AISC of $44.36 per ounce of silver equivalent, similar to 2025. This was mainly explained by the increased impact of higher prices on the silver equivalent conversion, while production costs remained in line with plan for the quarter. The underlying operating cost base remains stable and well controlled. Finally, on exploration, the 2026 campaign commenced in February, targeting extensions to ore shoots three and four at the Animas zone where mineralization remains open. Thank you, and back to you, Jorge. Jorge Alberto Ganoza: Thank you. We will now go over the financial highlights with our CFO, Luis. Luis Dario Ganoza: Yes, thank you. I will provide a brief review of our consolidated financials. Attributable net income, as highlighted by Jorge, for the quarter was $111 million, or $0.36 per share. That is up 64% versus the prior quarter and up 200% versus the prior year. Our strong performance was driven by record metal prices with cost per ounce in line with our full-year guidance. Our average realized gold price was $4,884 per ounce, compared with $4,166 per ounce in 2025, and $2,884 per ounce in 2025. Cash cost per gold equivalent ounce was $951, broadly consistent with the prior quarter and slightly above 2025. A brief comment on inflationary trends and indicators: we have not seen any material impact on our cost structure to date. In Q1, we saw higher input costs for certain materials, though not consistently across all regions. For fuels specifically, we have seen rising prices at our Peruvian operations, while in Argentina and in Côte d’Ivoire, we have not yet seen any meaningful pass through from higher oil prices. We will continue to monitor the situation. A few comments on the financial statements. General and administration expenses were $27.8 million, up $3.9 million year over year, primarily due to higher year-end bonuses and the timing of corporate and subsidiary expenses. We recorded a foreign exchange loss of $2.1 million, driven primarily by modest depreciation of the euro and the West African franc against the U.S. dollar from January through March, together with our net monetary asset position, including cash balances and VAT receivables. Our effective tax rate was 33% for the quarter, compared with 28% in 2025. The increase reflects an inflection point in our deferred tax position at Lindero in Argentina. In the current metal price environment, we are utilizing existing tax shields at a faster pace and transitioning from a deferred tax asset to a deferred tax liability position. As a result, we expect to begin recording deferred income tax expense for Lindero in 2026. This is an accounting charge only, as we do not expect to incur current income taxes in Argentina until 2027, with first cash tax payments likely in 2028. At the consolidated level, we expect the effective tax rate to step up in the remaining quarters of 2026 such that the full-year rate ends up in the high-30% range. This compares with roughly the 28% to 30% level we have reported over the past few quarters. Moving to our cash flow statement, we generated $174 million of free cash flow from ongoing operations, which excludes new development projects and growth initiatives. We also expect to pay approximately $140 million of taxes in 2026, with the majority paid in Q2 and Q3, about 50% in Q2 and 35% in Q3. As a result of this timing, and all else being equal, we should expect somewhat lower free cash flow over the next two quarters. In the investing section, additions to property, plant, and equipment were $45.3 million, including approximately $28 million of sustaining capital and $17 million of non-sustaining spend. The non-sustaining total included $8.8 million at the Diamba Sud project and $8.6 million in brownfields and greenfields exploration. Turning to the balance sheet, we ended the quarter with $665.9 million of cash, and net cash of $493 million after financial debt. Net cash increased by $111 million versus year-end, reflecting strong free cash flow from operations partially offset by $17.4 million of growth capital and $24.5 million of share buybacks. Total liquidity was $816 million including the full $150 million undrawn amount under our revolving credit facility. Thank you, and back to you, Jorge. Jorge Alberto Ganoza: Thank you. Carlos? Carlos Baca: We would now like to open the call to questions. Holly, please go ahead. Operator: Certainly. At this time, we will begin a question and answer session. 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 before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from National Bank. Analyst: Hi, Jorge and team. Thanks for taking my question. Maybe if I can start with Seguela. During the quarter, you reported cash cost around $678, which is below the guidance of $735 to $815. Would you be able to give us a little bit of color on what is leading to that cost out? Understanding that you produced 42,000 ounces, but is there any improvement in the unit mining cost or unit processing cost that you are seeing, and any commentary as well as impact on fuel in country would be very useful. Thank you. Jorge Alberto Ganoza: David, do you want to tackle the question? David Edward Whittle: Yes, I can. There are probably three main drivers behind the cash cost for the first quarter. The first one, obviously, which you have already mentioned, is that we increased our gold output compared to previous quarters, moving to 42,000 ounces, so probably about a good 14% to 15% higher than previous quarters. The other drivers would be an accounting aspect. Depending on the schedule, the stripping is defaulting to the OpEx component or is part of the sustaining CapEx, which obviously does not form part of the cash cost per ounce. The third component is with regard to the scheduling within the mine plan. Stripping ratio within the quarter was 13.9, which was a little bit lower than our forecasted strip ratio for the year, which at the moment is scheduled to be a little bit over 16. So those are the three components: a simple accounting one in terms of which property the cost falls into, a lower strip ratio for the particular quarter, and then the additional ounces produced. Analyst: Thank you. That is very helpful. And maybe on unit cost pressure in country, are you seeing anything on fuel or diesel side, or anything impacting your mining or processing cost? David Edward Whittle: Not materially at this stage. We are starting to see some increases in grinding media, but nothing that is material. In terms of power costs, power costs are controlled by the Côte d’Ivoire government, and at this point in time, we have not been informed of any significant increases in gazetted power costs. Analyst: Great, thank you. And maybe the second question on Diamba Sud. I know that the technical report for that is likely due or an update due by May. What is the status of the permit with the central government? Do you have any update on that? David Edward Whittle: With regard to the permitting of Diamba Sud, the ESIA was submitted towards the end of last year. As we said in the commentary, we are expecting to receive the approval on that potentially within the next week or so, certainly very imminently. The exploitation permit we would expect to be in the middle of this year. So everything seems to be progressing pretty much in line with what we have outlined. Analyst: Thank you. I will get back in queue. Operator: Your next question is from Sternella. Analyst: Thank you so much for taking my call. I had a question around the cash and acquisition mandate. Specifically, when you are evaluating a West Africa acquisition, particularly an asset with existing processing infrastructure that you might toll mill or integrate with Seguela, how deep does your operational technology due diligence go on the target control systems? Specifically, under the SEC 2023 cyber disclosure rules, any material incident at an acquisition asset becomes your disclosure obligation under Form 8-K within four business days of determining materiality. So here is the question: if you are buying someone else’s mill, their system, their plant control, and their operational network come with it. Have you built a formal cyber due diligence framework into your M&A process that specifically assesses whether a target has undisclosed incidents or legacy vulnerabilities in their operational and technology stack that could become your problem—your disclosure obligation—the moment the deal closes? Thank you. Jorge Alberto Ganoza: The short answer is no. We have not been looking at targets at that level of development. Our latest acquisitions have focused more on pre-development stage opportunities, like we have done with the acquisition of Chesser Resources, which brought the Diamba Sud project to our portfolio back in 2023. We have made other investments. For example, we expanded our presence to Guyana that was announced a few weeks ago through an option agreement to form a joint venture, but that is also at the pre-research stage. Our acquisition and M&A mandate right now is focused more on pre-development stage opportunities, and I would have to refer to my lawyer to answer your question in more detail. Analyst: Thank you. Operator: Your next question for today is from Eric Winmill with Scotiabank. Eric Winmill: Jorge and team, thanks for taking my questions. Congrats on a good quarter. Maybe on Guyana, if you do not mind, just walking through a bit about what attracted you to the region. Do you see an opportunity potentially to accelerate your investments there, or maybe do more in-country in Guyana? Jorge Alberto Ganoza: Hello, Eric. Absolutely. We have been monitoring the Guiana Shield in general for some time—over a year. It has been on our watch list. As you well know, the geologic setting is very familiar to what we have in West Africa. We have been monitoring and searching for opportunity, and this recently announced Quartz Stone option agreement, I believe, is a very exciting entry point into the Guiana Shield. I was in Guyana only a few weeks ago and had the opportunity to meet with the Director of Mines, the Secretary or Ministry of Natural Resources and Environment, and the President of the country. There was a very consistent pro-business message from state authorities. Quartz Stone is, on its own, a very exciting opportunity. If we want to look at it from the proximology lens, it is roughly 30 to 35 kilometers away from where G2 has its exciting discovery, and we are in a very similar geologic setting—metasediments and metavolcanics against an intrusive through a big structure that hosts gold over a 26-kilometer stretch within the property. So lots of exciting geology there, and we have an exciting program there for us. Right now, we are very much focused not only on Quartz Stone, but also on expanding our presence in Guyana. We are looking at opportunities in Suriname as well. I would say those two places are where we find more opportunity and areas of focus for us right now. Eric Winmill: Okay, fantastic. Thank you. Maybe just one more if you do not mind. You are now planning to access Sunbird Underground from the open pit instead of a boxcut. That is going to start probably next year. Is it fair to say you will be drilling from underground there starting next year, or what are some of the critical path items you are looking for in the development path in Sunbird Underground? Jorge Alberto Ganoza: There was a bit of interference on the line, but I understand you are referring to exploration drilling and the start of underground development. Drilling will continue to take place from surface all through 2026 and very likely well into 2027. We are drilling deep holes right now. It would certainly be more efficient to drill from underground, but it will be some time until we can develop that infrastructure—probably late into 2027 is when we will be in a position like that. For now, we are enjoying a lot of success with our drilling at Sunbird Deep. We are planning the underground mining and will continue to pursue that over the next at least 18 months, perhaps 24, from surface. Eric Winmill: Okay. That is helpful. I will hop back in the queue, but congrats again. Thanks. Operator: Your next question for today is from Adrian Vincent Day with Adrian Day Asset Management. Adrian Vincent Day: Good afternoon. How are you? A couple of general questions, if I may, and I will ask them together because they are connected. First, could you give us an overview of current exploration activities, particularly greenfields exploration—not the work at Seguela you have already talked about, but mostly greenfields? And how do you view greenfields exploration versus taking equity stakes in existing companies, because you have a couple of those you have done recently? And then that brings us to Guyana. In your minds, how do you view taking on an additional mine in an additional country—would you look at that as an opportunity to diversify your risk, or would you be more cautious on just adding one more country with its own needs and requirements? I am trying to see how you view all these different activities. Jorge Alberto Ganoza: Good questions, and I will start from the end. On diversifying risk, we are quite clear that Fortuna Mining Corp. has a business model where we sometimes play in the frontier. For us, mining has always been a frontier business, and we are happy to play in the frontier. We are designed for that. Everybody here is experienced with that. What do we ask in exchange for taking the higher perceived geopolitical risk? We must be asking for something in exchange when we take on that higher perceived geopolitical risk, and what we ask in exchange is what we are enjoying right now in Senegal. Our time to cash flow is very short. As David pointed out during his intervention, we submitted our Environmental and Social Impact Assessment to the government in September, and we are expecting the approval of the environmental study imminently. So that is going to be seven to eight months to get full environmental and social approval from authorities to move ahead into construction. Those are the types of things we ask in exchange for that higher perceived geopolitical risk. We do not buy into the idea that there is unmanageable geopolitical risk. If you see the NAV of the company, it does not sit in one large asset. Our mines are not concentrated in one country. We have a good diversification of our mines and projects and, therefore, our NAV. It is not at risk in any one jurisdiction. That also brings managing the geographic dispersion. As you know, we are centered in West Africa and in Latin America, and we manage the business from hubs: West Africa is managed from Abidjan, where David Edward Whittle is our Chief Operating Officer looking after the business there, and in LATAM from the Lima office, where Cesar E. Velasco looks after the business. We believe we can provide efficient cover to the regions from these management hubs and manage the complexities and demands of the different jurisdictions. With respect to Guyana, just some facts about doing business there: once you are granted an exploration license, the drilling permits come already granted with that. There is no additional permitting required to carry on with exploration. Again, it is a new jurisdiction; it is not necessarily a proven mining jurisdiction, but it offers tremendous opportunities not only on geologic endowment but also on ease of doing business. We will likely be reducing dramatically our presence in Mexico. We are not seeing a significant change in business climate in Mexico, and our work to date has not yielded anything that meets our investment criteria. You will likely see us transferring resources from what we have been doing in Mexico into the Guiana Shield—basically Guyana and Suriname right now. Quartz Stone is a good anchor for our project, and we would certainly look to expand our presence with new opportunities in those two countries for now. On greenfields versus equity stakes, we do not have a set budget to make equity investments. Our assessment of equity investments is more by appointment. If there is geology we like, and a team we like—that is very important. We spend a lot of time not only knowing the geology but also the people behind the programs. We would be willing to make an equity investment, just like we did with Awalé in Côte d’Ivoire. We are the largest shareholder of Awalé Resources; we own 15% of the company, and Awalé has a very exciting discovery and continues expanding in geology that is of a lot of interest to us. Our greenfields are focused within the regions. We are active in Côte d’Ivoire, Guinea, and Senegal; we are retreating from Mexico and moving resources into Guyana; and we are active in Argentina and always looking for opportunities in Peru. We will make investments more by appointment rather than as a specific strategy and budget to make equity investments. Operator: As a reminder, if you would like to ask a question, please press 1. Once again, if there are any questions or comments, please press 1. We have reached the end of the question and answer session, and I will now turn the call over to Carlos for closing remarks. Carlos Baca: Thank you, Holly. If there are no further questions, I would like to thank everyone for joining us today. We appreciate your continued support and interest in Fortuna Mining Corp. Have a great day. Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, everyone. My name is Sofia, and I will be your conference operator. Welcome to BBB Foods Inc. First Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session after the speakers' remarks and instructions will be given at that time. Please ensure that your full name is displayed correctly on Zoom. If not, please take a moment to edit your display name. Also, please note that this call is for investors and analysts only. Questions from the media will not be taken, nor should the call be reported on. Any forward-looking statements made during this conference call are based on information that is currently available to us. Today, we are joined by BBB Foods Inc. chairman and chief executive officer, Anthony Hatoum, and chief financial officer, Eduardo Pizzuto. I will now turn the call over to Anthony. Please go ahead. Anthony Hatoum: Good morning, and thank you for joining us today. I will begin with a review of our operating results for the quarter and will be followed by our CFO, Eduardo Pizzuto, who will provide an overview of our financial performance. We will conclude with a Q&A session to answer the questions you may have. We delivered another quarter of excellent performance and started the year with strong momentum. Let me briefly highlight a few key results from the quarter. We opened 123 net new stores in the quarter for a total of 3,469 stores, bringing LTM net store openings to 580. As of the end of the quarter, we had 20 distribution centers up and running. Our same-store sales grew 16% versus 2025. Revenues in 2026 increased by 33% year over year to $23 billion pesos. Reported EBITDA in the first quarter was $554 million pesos. If we exclude non-cash share-based compensation, EBITDA increased by 39% to reach $1.3 billion pesos. Finally, for the first three months of 2026, cash flow generated from operating activities reached $2 billion pesos, a 64% increase year over year. When we look at store openings, we opened 123 net new stores in the first quarter. For the last twelve months, we opened 580 net new stores, a 20% growth compared to the number of stores reported in March 2025. Our expansion strategy remains consistent. We continue to densify existing regions while gradually expanding into new ones. Revenue growth remained strong. We continue to be one of the fastest-growing retailers globally. Total revenue in the first quarter reached $23 billion pesos, an increase of 33% year over year. We have seen very strong same-store sales growth of 16%. This growth is driven in large part by the ongoing improvement in our value proposition to customers and also by stronger brand recognition of BBB Foods Inc. that we see every day getting stronger. When we compare our same-store sales performance with Antad, the gap remains notable at more than 14 percentage points, and that is despite operating with very low internal inflation. I will now turn it over to Eduardo. Eduardo Pizzuto: Thank you, Anthony. Good morning, everyone. Selling expenses as a percentage of revenue increased by 5 basis points to 10.3% year over year in the first quarter of 2026. Most expense lines showed operating leverage, with a slight increase mainly driven by utilities, permitting, and higher D&A. Admin expenses excluding share-based payment remained unchanged. In 2026, we continued our investments in new regions and additional talent to support our growth. Separately, 2025 included a one-time expense of $54 million pesos related to the secondary follow-on. With respect to share-based payment expense, these charges are non-cash and already reflected in our fully diluted share cap. Additional details are available in the appendix of this earnings release where we also provide projections for this non-cash expense. EBITDA for 2026, excluding non-cash share-based payment expense, increased 39% to $1.3 billion pesos, primarily driven by strong sales growth. The adjusted EBITDA margin increased by 22 basis points year over year. As you know, we do not drive to an EBITDA target; it will continue to increase over time driven by the work we continue to do. Our business model generates significant negative working capital, which in turn supports strong operating cash flow. In 2026, adjusted negative working capital reached $9.4 billion, compared to $6.5 billion COP in 2025, excluding IPO proceeds. This represents approximately 11.3% of total LTM revenue, also excluding IPO proceeds. Our accelerated growth continues to be self-funded. I will now turn the call back over to Anthony for some final remarks. Anthony Hatoum: This is a very strong start to a 2026 that looks very promising. We operate a high-growth business model that is resilient and that performs well across economic cycles. It is a business that offers very attractive unit economics, generates cash, and becomes more competitive as it scales. The market potential is enormous, and the runway for opening stores is very long. I am excited and remain confident about the future of BBB Foods Inc. Thank you for joining us today. We will now open the call for questions. Operator: We will now conduct a Q&A session with Anthony Hatoum and Eduardo Pizzuto. If you would like to ask a question, please press the raise your hand button located at the bottom of the screen. We remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be given permission to speak. You will then be able to unmute yourself and ask your question. Our first question comes from the line of Héctor Maya. Please state your company name and ask your question. Héctor Maya: Hi, Anthony, Eduardo. Thank you very much and congratulations on the results. We saw a key competitor implementing some adjustments, which they said led to better results in March. Have you seen anything different in the competitive dynamics? Particularly, could you comment if you have seen any change or impact on your sales in March and April? And also a quick clarification from your press release and different filings: we have seen that the expiration of the lockup period is coming on August 6 of this year, but in your 20-F we saw that it expires on July 8. So just to double-check, when exactly does the lockup expire and how should investors think about it in terms of stock overhang? Thank you very much. Anthony Hatoum: Hi, Héctor. Good to hear from you. To be super clear, the expiration of the lockup is August 6. In terms of competition, as you know, this is a very competitive market and always has been. Specifically, if we have seen anything different this quarter, the answer is no. Eduardo Pizzuto: Héctor, we will amend the 20-F to be specific on the August 6 date, just so you know. Operator: Our next question comes from the line of Andrew Rubin. Please state your company name and ask your question. Andrew Rubin: Hi. Andrew Rubin from Morgan Stanley. One of the items you mentioned as a same-store sales driver was brand recognition that continues to improve. I am curious first how you measure and identify this. And second, we know it is a minimal marketing approach, so if you can talk about brand building as you move into newer regions and how you compare that brand recognition in your newer versus more dense markets, that would be interesting. Thank you. Anthony Hatoum: Hi, Andrew. Let me start with the latter part. Brand recognition is an interesting topic. To be very concrete, we conduct large-scale surveys every year. Roughly 15,000 customers and non-customers across a wide geographical area are polled, which gives us a good sense of what the BBB Foods Inc. brand means to most people that are relevant to us. Because of our expansion strategy, which is stretching, by the time we get to a new region, people already know us because we are not jumping to a completely new region. It has been a gradual stretching of the areas in which we operate. That helps a lot when entering something new, as people already know you and might have already shopped at an existing store. In terms of what we spend, you are absolutely right—we have minimal spend on advertising, and it is mostly word-of-mouth and social media. If you search for BBB Foods Inc. on the Internet, you will see a slew of materials talking about BBB Foods Inc. and its products. A large part of it is not us; it is our customers posting about us, and that helps a lot. Operator: Our next question comes from the line of Bob Ford. Please state your company name and ask your question. Bob Ford: Hey. Good morning, everybody. This is Bob at Bank of America. Anthony, how advanced are you in the process of building out the skill sets and the redundancy in your central administrative staff? Could you also provide us a short update on the progress of the new ERP and the window for your expected deployment? Lastly, I am really excited about your “Irrepetibles.” How are they evolving, and how are you thinking about merchandising in the second quarter, particularly for things like Mother’s Day and the World Cup? Anthony Hatoum: Great. Let me start with “Irrepetibles” as it is fresh in my mind. “Irrepetibles” are very important and add a lot of excitement to the shopping experience in our stores because, as most of you know, these are products that change roughly every two weeks. There is always a treasure-hunt and wow effect in these baskets. We have sold a lot of things in these “Irrepetibles” baskets—bicycles, white and brown goods, clothing—and we continue to do so. It is a very exciting category for us, with tremendous potential and growth. Do not be surprised if you see this continuing to evolve and take more participation within BBB Foods Inc. sales. In terms of hiring and what is happening in central offices, we are very focused on increasing the density of talent as we firmly believe that is what drives everything at the end of the day. If you are going to punch above your weight and move at the speeds at which we move, the key ingredient is talent. We will continue to invest in talent this year and probably through 2027. At some point it tapers off in relation to the total size of the company, but at this stage consider that we are in growth mode, and we think it is an excellent investment for the future. The deployment of the ERP is well underway, and I am very happy with the progress we are seeing. As mentioned in previous calls, it is a three-year project, and we are about halfway through now. Bob Ford: Will you deploy in modules? Will there be functionality introduced to the stores before final completion? And when it comes to changing functional POS systems or the hardware at the point of sale, how should we think about that time period? Anthony Hatoum: Yes, deployment is gradual and modular. That is the low-risk way to do it: you deploy, you test, then you expand it. Regarding POS systems and hardware, the deployment is planned to be gradual to minimize risks. You will see it appear in one region, then it will be fine-tuned and refined, and once it is bulletproof, it will be deployed to the rest of the company. Operator: Our next question comes from the line of Alejandro Fuchs. Please state your company name and ask your question. Alejandro Fuchs: Alejandro Fuchs from Itaú. Thank you for the space for questions, and congratulations on a very strong start to the year. Two brief ones: First, for Eduardo, could you break down the same-store sales growth between traffic and ticket so we can get a bit more color? Second, for Anthony, could you provide more details on how you are seeing new stores perform outside of central Mexico? How has the relative performance been this quarter between regions, and any differences across parts of Mexico? Eduardo Pizzuto: Hi, Alejandro. Two-thirds is coming from volume—which is transactions and number of SKUs per ticket—and one-third from average price per SKU. To be clear, the latter is largely driven by a better mix because our internal inflation remains very low. So again, it is two-thirds from volume and one-third from average price per SKU. Anthony Hatoum: Hi, Alejandro. We have seen very consistent performance across the board in new stores, irrespective of geography. We believe the reason is that we are selling basic goods, and consumption behavior for basic goods tends to be quite similar across the board. We all consume roughly the same amount of toilet paper irrespective of where we live. It has been fairly consistent with no notable changes by region. Operator: Our next question comes from the line of Lorena Romanato. Please state your company name and ask your question. Gabriela Lamy: Hi, everyone. This is Gabriela Lamy from Goldman Sachs. I would like to explore SG&A dynamics in the context of the minimum wage increase and the reduction in the workweek in Mexico. Are there measures you have implemented to address the continued increase in labor costs? Also, G&A came broadly stable year over year with revenues. We know there is a variable component as you accelerate expansion. How should we think about that trajectory during the course of the year? Thank you. Eduardo Pizzuto: Hi, Gabriela. Multiple questions here. On labor, yes, it is a component, and as you saw in my remarks, for selling expenses we saw leverage in most line items, including labor. Looking at expenses as a percentage of revenue, this continues to decrease. Comparing last year versus this year, labor decreased as a percentage of revenue. The reason is twofold: our sales continue to increase, and we run a number of initiatives in stores and distribution centers. As we have mentioned before, we measure everything in hours worked, so we are always implementing initiatives to reduce hours worked at the store level. Even with the increase in minimum wage, we saw leverage on that line item. Regarding the reduction of hours worked, yes, we have been testing and considering it, and when it happens next year, it is not a big concern for us. We will continue to drive efficiencies at the store level to cope with that eventuality. In terms of overall SG&A for the year, we do not provide guidance. In the long run, SG&A should continue to decrease as a percentage of revenue. For this year, G&A should be fairly stable versus last year. As you heard from Anthony, we will continue to increase our talent pool at headquarters, and as we add more distribution centers this year, that also contributes to admin expenses. Operator: Our next question comes from the line of Froylan Mendez. Please state your company name and ask your question. Froylan Mendez: Hello, Eduardo, Anthony. Froylan Mendez from J.P. Morgan. Eduardo, could you give a little more granularity on the sources of gross margin expansion during the quarter? You mentioned this was mainly coming from commercial margin, but was it improved terms, product mix, or operational efficiencies? And secondly, you mentioned those big surveys you do every year. What have been the key findings from this year’s survey compared to last year regarding changes in consumer habits and preferences, and how is this influencing your strategic decisions at the store? Anthony Hatoum: Let me take the survey question, Froylan. The surveys ask where you shop, how you shop, why you shop, how you make decisions, where you spend your money, and what you think of the brand—what it means, etc. Over time we see increasing brand recognition of BBB Foods Inc. and what it stands for. We also see shifts in decision making—where do you shop first versus second—and the tendencies favor BBB Foods Inc., with a very strong favorable trend over the last five years. In terms of influencing decisions, yes. There are shifts in consumption patterns—some categories gain strength and some lose strength. For example, post-COVID and during COVID, anything related to pets strengthened, and anything related to alcohol consumption decreased. We see those trends and adapt, focusing more on categories with more promise. We do that continuously. Eduardo Pizzuto: On gross margin, yes, we mentioned commercial margin increases. It is both mix and efficiencies with our suppliers, but it continues to be volatile. This specific quarter, it is both—mix and supplier-driven efficiencies. Anthony Hatoum: I will add that as you scale, you improve purchasing power across the board. Not only ours, but our suppliers’ purchasing power and efficiencies improve, and those translate partially into margin and partially into price, driving a virtuous circle. Operator: Our next question comes from the line of Antonio Hernandez. Please state your company name and ask your question. Antonio Hernandez: Hi. Good morning. Congrats on your results. This is Antonio Hernandez. Just a quick one regarding which categories were best performing during the quarter, and regarding your recent pilots, any findings you can share? Anthony Hatoum: Across the board, all categories performed extremely well this quarter. Looking at some subcategories, we have seen a decrease in sweets and beverages driven by a new tax on sweeteners that took effect in January, but it was more than compensated for by the non-sweetened beverage subcategory. Net-net, an increase across the board in all categories. Regarding pilots like fridges, frozen, and other new product categories in the store, they are doing extremely well. We do not launch a new category unless it has been extensively—maybe obsessively—tested. By the time we launch, we are fairly certain it will do extremely well, and these categories are extremely promising. Joe Thomas: Good morning, Anthony and Eduardo. It is Joe Thomas here from HSBC. Could you talk about the FRESH trial specifically, any sales uplift associated with it, and the opportunity to extend or retrofit existing stores? And on a related topic, CapEx for the year—could you give an update on that and how you expect it to be phased over the quarters? Thank you. Anthony Hatoum: It is worth stepping back and saying that at any point in time there are about 60 different products or new lines being tested in our stores in parallel. Some make the final cut and are then deployed across the company. In fruits and vegetables specifically, results are promising. The test has been running, fine-tuned, and refined, and we remain optimistic that it is a worthwhile category to have. In test stores, when you add fruits and vegetables, you do see an uplift in ticket—it is normal. We remain excited about this category. Eduardo Pizzuto: On CapEx, as we disclosed in our 20-F, it is about $5.2 billion pesos. That includes the number of stores we guided, additional distribution centers, and all related equipment, including trucks and cars. We are comfortable with that number and executing on it for the balance of the year. Operator: Our next question comes from the line of Alberto Rodriguez. Please state your company name and ask your question. Please unmute yourself to ask your question. Alberto Rodriguez: No question here. Operator: Thank you. We have a follow-up question for Héctor Maya. Please ask your question. Héctor Maya: Hi again. Héctor from Scotiabank. Thank you for the chance for another question. I recall that the penetration of private label last quarter was 58% of sales. Could you give us an update on the level this quarter? Also, is there a threshold at which the business starts structurally changing with higher penetration? Would everything remain the same if you operate at 60% private label compared to 70% or 80%? Beyond margin, how would things change with suppliers and their scale? How do you think about development of new SKUs and how you arrange them in the store with higher penetration? Thank you. Anthony Hatoum: Hi, Héctor. We update this number once a year, but you can imagine the trend continues upwards. Do we see a change in how we operate with more private label? No, not really. Look at BIM, which has been in this market longer than we have; it is like a time machine that gives you a good answer as to what things might look like a few years down the road. For us, there is no structural change if you go from 50% to 60% to 70%. Regarding suppliers, things change naturally as you get bigger. If you are selling 30% more, you are buying 30% more. Everyone has to march in lockstep to sustain that growth, and that has been the case for the last ten years. It will continue in terms of planning ahead, projecting growth and procurement needs, etc. We plan well ahead of time, which has allowed us to sustain growth rates above 30% for over twelve years without hiccups. To do that, you need to be very strong in execution and planning, and I expect that to continue. Operator: Our next question comes from the line of Guli Arshad. Please state your company name and ask your question. Please unmute yourself to ask your question. Guli Arshad: Can you hear me now? Anthony, congratulations on your usual strong results. I know that a strong IT department is one of the pillars of the BBB Foods Inc. growth story. How are you incorporating AI mentality and processes inside the company? Is it relevant? Anthony Hatoum: Great to hear from you, Guli. Earlier there was a question about SG&A and expenses, and I mentioned our investment in talent. A big chunk of that is in IT, with the firm belief that a lot of our future growth is driven by executing across the board on an IT strategy. Sometimes I joke internally that we are an IT company selling groceries. There is a strong component of artificial intelligence starting to take root in the company, similar to many companies. You can already see effects in improved efficiency and time savings across the board. This tendency will continue and get stronger as companies provide better and better tools. The speed of improvement has been staggering, so expect this to become part of normal life at BBB Foods Inc. Operator: Our next question comes from the line of Federico Galasi. Please state your company name and ask your question. Federico Galasi: Hi, guys. Federico Galasi here, Recruiting Group. In the last year to year and a half, the corporate business—for more information to the ADR, the new console, etc.—was one of the teams that dragged margins, taking out the operational side. Do you believe that you have the structure necessary to grow in the next eight years? Anthony Hatoum: Sorry, Federico, let me confirm I understood your question. You are asking whether we have built the right central structure to sustain our growth rates going forward beyond the operational side. The answer is yes. We will continue to grow new stores, and our philosophy of planning ahead has served us extremely well and explains how we can sustain such rapid growth over time without hiccups. That applies to everything, including the corporate structure—what talent we need, how many people, and in which areas—so we can execute on our plans and raise performance across the team. We have planned for this, we are executing on it, and we are in very good shape to sustain future growth. We have a strong belief that the team makes the difference. Everyone knows how to sell groceries; it is a question of how well and how fast you execute. Operator: We have run out of time for further questions. I would now like to hand the call back over to Anthony Hatoum for his closing remarks. Anthony Hatoum: Thank you, everybody, for participating and joining us today. I would like to thank all our investors, current and future, for believing in us, and I would like to thank all the analysts who joined us today for their continued coverage and excellent questions. Thank you again, and we look forward to talking to you on the next earnings call. Operator: Thank you. You may now disconnect.
Operator: Hello, everyone. Thank you for joining us, and welcome to the Hudson Pacific Properties, Inc. first quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Laura Campbell, Executive Vice President, Investor Relations and Marketing. Laura, please go ahead. Laura Campbell: Morning, everyone. Thanks for joining us. With me on the call today are Victor J. Coleman, Chairman and CEO; Mark T. Lammas, President; Harout Krikor Diramerian, CFO; and Arthur X. Suazo, EVP of Leasing. This morning, we filed our earnings release and supplemental on an 8-K with the SEC, and both are now available on our website along with an audio webcast of this call for replay. Some of the information we will share on the call today is forward looking in nature. Please reference our earnings release and supplemental for statements regarding forward-looking information as well as the reconciliation of non-GAAP financial measures used on this call. Today, Victor will discuss our first quarter results and current market trends. Mark will provide detail on our office and studio operations. And Harout will review our financial results and updated 2026 outlook. Thereafter, we will be happy to take your questions. Victor? Victor J. Coleman: Thanks, Laura. Good morning, and welcome, everyone, to our first quarter call. 2026 is off to a strong start. Building on decisive actions we took last year, we delivered improvement in both occupancy and cash flow, sequentially growing FFO, in total and on a per share basis. We signed over 500 thousand square feet of office leases, our third consecutive quarter of occupancy gains, supported by leasing pipelines that remain robust. On the studio side, prime locations are performing and operational streamlining at Coyote continues to drive annualized savings. We also achieved substantial year-over-year reductions in G&A, maintained total liquidity in excess of $930 million with our credit facility fully undrawn, and advanced an active pipeline of FFO-accretive dispositions. From a macro perspective, a record $267 billion of venture capital was deployed in the first quarter, fueled by large-scale AI financings and broad investment across adjacencies. That capital is translating into leasing activity. Well-funded tech and AI-focused companies are accelerating demand across our West Coast markets while more traditional office users are reengaging on either new leases or expansions. The Bay Area obviously is leading. San Francisco had a record 2.3 million square feet of positive absorption, capping the strongest six-quarter run of occupancy growth to date. Leasing activity reached 4.1 million square feet and AI-related tenants accounted for nearly 60% of total volume, and asking rents rose close to 4% year over year. Silicon Valley extended its momentum with a sixth consecutive quarter of occupancy growth. The Peninsula is also showing further signs of positive inflection, particularly in Redwood City and Foster City where our assets are concentrated. The Puget Sound posted its second consecutive quarter of positive absorption. Downtown Seattle is beginning to capture its share of AI and tech demand, and our portfolio quality positions us to benefit as activity further extends from the Eastside to the urban core. In Los Angeles, fundamentals remain challenged, but with our own limited near-term availability concentrated in one well-leased top-tier asset, we can be patient as conditions strengthen. Turning to studios, U.S. production activity remains subdued, but the flight to quality is real. Our Hollywood stages are 97% leased, and Sunset Pier 94 reached 100% leased within the first quarter of operations. The leasing results made it clear these are the right assets in the right locations. We are actively refining our studio portfolio to focus on the highest performing assets and lines of business. And on Coyote, we are making the necessary and, quite frankly, difficult decisions. As announced, Coyote will wind down leased soundstage facilities and Atlanta-area operations. We remain committed to ensuring Coyote is earnings-neutral by year end. On capital recycling, we are in various stages on asset sales targeting $200 million this year, and these are all FFO-accretive non-core dispositions. We have a buyer and agreed price at 10950 Washington as well as another asset under contract. As we look ahead, both occupancy and our leasing pipeline should remain strong. We are making the hard calls and continue to ensure our overhead is controlled, our disposition pipeline remains on track, and we have ample liquidity and a clear, executable path to FFO growth through the balance of the year. I will now turn the call over to Mark. Mark T. Lammas: Thanks, Victor. Our leasing momentum continued to translate into tangible occupancy gains in the first quarter. We signed 554 thousand square feet of leases, 49% of which were new leases, driving our in-service office portfolio occupancy to 77.8%, up 150 basis points sequentially, and our lease rate to 78.4%, up 140 basis points sequentially. Occupancy improved across our core regions, except for Vancouver, where the lease percentage increased 110 basis points to 94.3%. On lease economics, GAAP rents increased 1.8% while cash rents declined 2.4%, representing sequential improvement in these metrics by 140 and 660 basis points, respectively. Net effective rents rose 4% sequentially though were down 2% year over year, with the latter comparison influenced by the large prior-year lease with the City and County at 1455 Market. We have excellent visibility into continued occupancy growth. Our leasing pipeline increased again to 2.4 million square feet, up 13% year over year, and we had 2.2 million square feet of tours in the quarter, up over 30% year over year. Our third lease with the City and County of San Francisco, which effectively absorbs the remaining vacancy at 1455 Market, remains on track to be finalized in the second quarter. We have close to 60% coverage—deals and leases, LOIs or proposals—on approximately 600 thousand square feet expiring for the remainder of the year, including full coverage on PayPal at Fourth & Traction and 80% coverage on Dell at 875 Howard. At Washington 1000, tenant interest has increased meaningfully. We now have coverage for approximately 60% of the project. To meet demand for prebuilt space, we will deliver 70 thousand square feet of move-in-ready suites in the second quarter. We are in late-stage negotiations with an amenity provider for the first and second floors to further enhance the property's marketability. Beyond that, we are in negotiations with seven office-using tenants, primarily growth-oriented tech and tech-enabled companies, with requirements ranging from under 10 thousand to over 100 thousand square feet. Turning to studios, our in-service stages were 72.8% leased over the trailing three months. Excluding Pier 94, which was placed in service this quarter and where stages went from 0% to 100% leased during the quarter, our in-service stages would have been 78.2% leased, up 370 basis points sequentially, driven by the lease-up of Sunset Las Palmas. As Victor noted, our Hollywood stages—Sunset Bronson, Gower and Las Palmas—were 97% leased over the trailing three months, up 280 basis points. Studio revenue was off $2.4 million sequentially, attributable to lower demand for Coyote's Lighting and Grip, Pro Supplies and Fleet. Despite expenses being $2.1 million lower, this led to a sequential $300 thousand decrease in studio NOI to $1.5 million. That said, Sunset Studio NOI, excluding Coyote, increased $1 million sequentially and was up $1.8 million year over year to $7.4 million, driven by the lease-up at Sunset Las Palmas and increased production activity at Sunset Bronson. On Coyote, the wind down of leased soundstage facilities and Atlanta-area operations would equate to approximately $5.8 million of annual cash NOI improvement. Finally, we continue to actively explore adaptive reuse opportunities across our portfolio. In the second quarter, we will submit for re-entitlement of 901 Market's 164 thousand-square-foot office component as residential with expected resolution by year end. We are also evaluating the potential to redevelop excess surface parking at select assets across Palo Alto, Redwood Shores, and Foster City as mixed use. These initiatives, along with others under evaluation, allow us to better align our portfolio with market demand while leveraging our deep entitlement and redevelopment expertise. Victor J. Coleman: Thanks, Mark. I will now turn it over to Harout for the financials and outlook. Harout Krikor Diramerian: Thanks, Mark. I will walk through our first quarter results and updated 2026 outlook. Total revenues were $181.9 million compared to $198.5 million in the prior year, primarily due to the sale of Element LA and office tenant move-outs, most specifically Uber's departure from 1455 Market midway through 2025, with studio production activity remaining stable. G&A declined 32% to $12.6 million compared to $18.5 million in the prior year, further reflecting the progress we have made to streamline our cost structure. Core FFO increased to $16.5 million, or $0.25 per diluted share, up from $12.9 million, or $0.61 per diluted share, in the prior year. Adjustments to FFO totaled $1.5 million, or $0.02 per diluted share, compared to $9.8 million, or $0.47 per diluted share, in the prior year. Same-store cash NOI was $85.2 million compared to $92 million in the prior year, driven by lower office revenues from tenant move-outs—again, largely Uber's departure at 1455 Market—partially offset by higher studio revenue from increased production activity at our Hollywood assets. On our balance sheet, total liquidity of $933 million includes $138 million of cash and full availability of $795 million on our credit facility. Interest expense was 13% lower year over year, representing $5.5 million of savings, and all of our debt was fixed or capped. We continue to work with our partner on a resolution for the Hollywood Media portfolio loan maturity. Conversations with the lender as well as those with Netflix regarding their long-term space needs are productive and ongoing. Turning to our updated 2026 outlook, we are increasing our full-year core FFO range to $1.10 to $1.18 per diluted share, up from the prior range of $0.96 to $1.06. This revised range reflects two key drivers. First, approximately $0.04 of outperformance in the first quarter compared to our initial expectations. Super Bowl parking revenue, lower repairs and maintenance expense, and favorable CAM reconciliations account for the outperformance. Second, a $0.09 benefit from the reclassification of Coyote's leased soundstages and Atlanta-area operations as discontinued operations beginning in 2026. Note, the $0.09 benefit is based upon projections for the discontinued operations included in our previously provided full-year outlook. As always, our outlook excludes potential dispositions, acquisitions, or capital market activity. Victor? Victor J. Coleman: Thanks, Harout. Let me bring it together. The first quarter demonstrates that our markets are recovering, but importantly, the deliberate decisions we are making ensure Hudson Pacific Properties, Inc. can capture this recovery better than most. Our outlook is up. Occupancy is growing. Prime studios are performing, and Coyote's drag is being addressed. And we are doing all this while keeping our liquidity and balance sheet intact. Each of these actions reinforces the same outcome: a clear and credible path to FFO growth through the balance of 2026. That is what we are committed to do. Thank you for your continued interest in HPP. Operator, now I would like you to open the line for any questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, please press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we assemble our roster. Your first question is from Dylan Burzinski with Green Street. Please go ahead. Dylan Burzinski: Hi, thanks for taking my questions. Can you talk about what you are seeing in the overall capital markets environment? Has pricing changed at all, and are you seeing any change to buyer appetite? And then, on the deal where you said you have pricing set, I think in the past you talked about various ways that could go, but it sounds like you are now going to fully dispose of that piece. Is that correct? Victor J. Coleman: Yeah. Dylan, thanks. We will take the second question first. On 10950 Washington, we are fully disposing of it. We indicated on our last call we had a series of offers on JVs and on outright sales. On the outright sale number that we have agreed upon and are about to go under contract with, the diligence time frame has been clicking. It is a deal that we felt was a good enough price—better than good enough—and it exceeded our expectations to where a JV structure would have been more applicable. So yes, we are selling that asset, and currently that is going very well. In terms of the overall marketplace, I can give you a high level in the three markets that we are in. Starting in Seattle, 505 First is an example—had a series of people that were interested at a fairly high price per foot on a leased asset where probably 50% of it needs repositioning in the marketplace. We were pleasantly surprised at the activity around that. There have been a couple of deals in Bellevue that are priced relatively aligned to what we would say is the new market cap rate pricing in the 5.5% to 6.5% range for stabilized, walled assets. And then people are looking right now at a couple assets in Seattle that are more buying vacancy. I think that trend started in the Bay Area, where we have seen quite a number of assets trade that are vacant assets and more inclined for value-add upside than we used to see with walled assets. But the material numbers in both those markets are still nowhere near peak activity. There are a few more coming to market—120 NDAs signed and a lot of activity—on a value-add asset in the Bay Area. So I think that is indicative of where the market is. Closer to home in Los Angeles, we are really seeing very little activity on the Westside, very little activity in all of the markets—even in the South Bay—of sales at this time. There are a couple of deals being tossed around at some good price-per-foot numbers, but not good yield numbers right now in the Southern California marketplace. Dylan Burzinski: That is helpful, Victor. Appreciate the color. And then on overall demand, it sounds like things continue to pick up and you are seeing increased activity in Seattle coming out of Bellevue. What is causing the continued acceleration in leasing activity across your footprint? Victor J. Coleman: As I mentioned in my prepared remarks, and Mark followed up on it, 50% plus of it is tech- and AI-related leasing activity. In Silicon Valley—from Foster City, Redwood City, Redwood Shores through Palo Alto, Mountain View, and even North San Jose—we are seeing an influx of larger tenants. Last quarter our team said there were six transactions over 100 thousand square feet, and two were 450 thousand square feet. That activity is taking space off the market. The kind of space getting taken is twofold: built-out, ready-to-occupy space, and space with energy efficiencies and additional power. Fortunately, we have an asset like that in North San Jose getting interesting activity because we have a lot of power there. In San Francisco, we see the same tech and AI-related trends. In Seattle, we are finally seeing Puget Sound’s positive absorption. It was led by Bellevue, and we are seeing activity consistently pick up quarter after quarter. In Los Angeles, it has definitely bottomed out. We have little exposure there, but what we do have is very active. We have a couple hundred thousand square feet of proposals in the marketplace today, and rates are as good as we have seen since 2019. Art, anything to add? Arthur X. Suazo: I think you covered it. Dylan Burzinski: Great. Thanks. Operator: Your next question is from Alexander Goldfarb with Piper Sandler. Please go ahead. Alexander Goldfarb: Good morning, and great to see vibrancy back in office. Two questions. First, Harout, can you go through the mechanics on the Coyote wind down and the $0.09 of discontinued ops—how that impacts guidance? I understand the outperformance, but just want more clarity on the $0.09. Harout Krikor Diramerian: Sure, Alex. Good morning. In our previous guidance, we had assumed $0.09 related to the items we are specifying and winding down. All we are doing is removing that from our continuing operations or core FFO. So on a go-forward basis, that is no longer going to drag earnings. Alexander Goldfarb: Got it. Second, Victor, bigger picture on Netflix—there was news a few weeks ago about possibly buying the Hackman CBS studio. Any color on what that would mean? I would appreciate your perspective. Victor J. Coleman: With conversations around Netflix, out of deference to the tenant and our discussions with them, I cannot talk about what is going on, but suffice to say our relationship is intact and positive. On the Radford situation, it is a 21-soundstage facility really directed to production and creative production as a campus. There is very little office on that campus right now, and the office that is intact is leased to CBS for a long period. Whether or not they buy it is up to them, and it is going to be a campus facility for soundstages. It is not going to interfere with our relationship with them and our conversations going forward. Alexander Goldfarb: Thank you. Operator: Your next question is from Seth Berge with Citi. Please go ahead. Seth Berge: Hi, thanks for taking my question. On Washington 1000, you mentioned increased activity, which is positive. Can you give some color on what stages those negotiations are in? Victor J. Coleman: I will talk top level and let Art jump in. The activity has increased dramatically. We mentioned on our last call we were in the final phase this month of opening up our spec suites there, and activity around those has been very strong. We have a couple floors in negotiations. Ready space is getting interest because people want to move in quickly. The building is in phenomenal shape. The amenities we are putting in are well received. We are starting to see not just 15 thousand to 40 thousand-square-foot tenants, but now four or five over 100 thousand square feet where we are a first, second, or third choice. Art? Arthur X. Suazo: Demand in Seattle has picked up tremendously. We are benefiting from tightness in Bellevue and from diminishing trophy sublease space that had been on the market. Tenants that were greater Puget Sound are now focusing on the downtown core. Tours have increased more in Seattle than anywhere else—up 20% quarter over quarter—and now Seattle represents 25% of our entire pipeline, which speaks to depth of demand and our team’s ability to pull deals forward. Washington 1000 is benefiting. We have seven deals in negotiation; four are on the move-in-ready suites Victor mentioned. Those suites deliver this month, and tenants are getting more excited as delivery approaches. These are high-growth tenants, mainly tech. On stages, they are all in negotiations. Two of the ready-built suite deals are in later-stage negotiations. We are not in leases yet, but with current momentum, we are hopeful to execute on the ready-built suites in the coming quarters. Seth Berge: More broadly on the pipeline, how much is AI tech demand, what is the average deal size, and any changes in conversion speed or late-stage versus early-stage? Arthur X. Suazo: It varies by market, but we are seeing a mix. Smaller deals include early-stage funding tenants, and we have captured some larger deals—50 thousand square feet or greater—but the bread and butter is closer to 10 thousand to 15 thousand square feet. Many smaller tenants want high-end, second-gen, ready-built, highly amenitized space, which is our wheelhouse. AI tenants have increased in our portfolio from about 10% of deals in negotiation or pipeline to about 25% of all tech deals, and it is higher in the Valley and San Francisco. Victor J. Coleman: As I mentioned earlier, in the Bay Area we are benefiting from larger deals that finally came to fruition. Six deals were completed last quarter at big numbers, taking a lot of space off the market, which helps our portfolio and peers. We are seeing that impact immediately. Seth Berge: Great. Thank you. Operator: Your next question is from Ronald Kamdem with Morgan Stanley. Please go ahead. Ronald Kamdem: Two quick ones. First, on same-store NOI guidance, can you talk about cadence for the rest of the year and whether it is primarily driven by commencements? Harout Krikor Diramerian: Hey, Ron. Good talking to you. We previously said the first quarter would be our weakest, primarily driven by 1455 Market—Uber specifically—moving out last year, and that showed up. We expect the rest of the year to improve. We expect the second quarter to improve, maybe a bit weaker in the third quarter, then improve again in the fourth quarter. That is the cadence—overall much stronger than the first quarter. Ronald Kamdem: Got it. On AFFO, it was negative because of elevated recurring CapEx. Any line of sight on when that CapEx run rate moderates, and how should we think about it? Mark T. Lammas: Hi, Ron. Looking at the latest estimates, for the rest of the year it looks like it will average pretty close to where first-quarter TI/LCs and recurring CapEx shook out. If you do the math on core FFO for the balance of the year, it points to higher FFO per quarter than we posted in the first quarter. Assuming TIs/LCs/recurring are close to first-quarter results but FFO is modestly higher, our expectation is that AFFO for the balance of the year should be at least as good, if not modestly better, than first-quarter results. Ronald Kamdem: Makes sense. Thank you. Victor J. Coleman: Thanks, Ron. Operator: Your next question is from Rich Anderson with Cantor Fitzgerald. Please go ahead. Richard Anderson: Thanks. Good morning. Any impact from your disposition activity on the occupancy and lease-yield gains you saw during the quarter? Mark T. Lammas: Not dispositions. As we announced a quarter ago, we are repositioning and re-entitling 901 Market, so we took footage off for repositioning just on the office component, and 6040 likewise is going to be fully repositioned. It was used for decades as a post-production facility. Neither of these assets is particularly big. They were in our fourth-quarter results and are not in our first. If you remove them to give an apples-to-apples comparison, you are still sequentially higher. The 150-basis-point lease-percentage increase drops to 140 if you pull 6040 and 901 out of the fourth quarter, and the 100-basis-point sequential occupancy increase drops to 80 without those two assets. Richard Anderson: Okay, so 10 or 20 basis points of impact. On the wind down of Coyote, you mentioned $5.8 million of upside from exiting the leases. Are there potential one-time lease termination fees or other costs that could make it a nonlinear process? Mark T. Lammas: We are going to wind down revenue and expense and manage that as cost-effectively as we can. Getting out of leases early often entails some kind of payment, so over the course of the year we will be incurring some expense associated with discontinuing those ongoing leases and other wind-down expenses toward that number. Richard Anderson: At the end of the day, should we think of you keeping the fleet but not the leases, outside of Atlanta? Mark T. Lammas: So far, based on what we have announced as discontinued ops, the fleet is still part of our continuing operations. Richard Anderson: Last for me. You mentioned 60% coverage on the remaining 600 thousand square feet. How quickly can that ramp to triple digits—say, by next quarter—given the 2.4 million-square-foot pipeline? Arthur X. Suazo: The pipeline has grown to 2.4 million square feet. Of the remaining roughly 606 thousand square feet, about 70% is second half of the year. We are engaged earlier with smaller tenants averaging about 6 thousand square feet. Once we start negotiating with those tenants, we feel good we can increase that number, but some smaller tenants wait until closer to expiration. The good news is that we are engaged with them now, whereas during the pandemic there was little early discussion. They feel more confident today. Victor J. Coleman: I would also emphasize we are just announcing first-quarter numbers. We have three more quarters. The expirations are spread out, and we have consistently increased occupancy quarter over quarter and signed at least a half-million-plus square feet a quarter. Matched to what we have done and foresee, the gap to June is not that material. Richard Anderson: Fair enough. Thank you. Operator: Your next question is from Andrew Berger with Bank of America. Please go ahead. Andrew Berger: Good morning, and congratulations on the strong quarter. On Seattle, you have said it is typically 12 to 18 months behind San Francisco. How much of the improvement in Seattle is existing tenants getting more active versus new-to-market tenants? And are you seeing smaller AI tenants already in your Bay Area portfolio grow into Seattle? Victor J. Coleman: Good question. We look at it on two levels. Name-brand tenants are entering or expanding in Seattle—Apple is in the marketplace, REI is in the marketplace. You are looking at Microsoft in the city and in Bellevue. Amazon has been contracting, but the big-name guys—xAI as an example—are in the marketplace. Now you are seeing a shift because of the labor pool, with smaller tech and tech-affiliated companies and support companies expanding. Bellevue has populated to a point where there is not a lot of quality space left, so they are coming to the city—in the core areas of South Lake Union, Denny, and Pioneer Square. In our pipeline, we have more tenants in the 15 thousand to 40 thousand range than we have had in a long time. There are a couple of large 100 thousand-square-footers, and their ability to execute quickly is tied to immediate access to space, which we are trying to accommodate. I have said on prior calls that Seattle is 12 to 18 months behind San Francisco. I would lean more to the 18 months than 12 months, but we are seeing it and it is on a positive trend. We should see it blossom this summer. Andrew Berger: Thanks. On Bellevue, given the momentum there and the spillover to Seattle, is Bellevue a market you would like to have a presence in over the medium term? How would you think about strategy to enter? Victor J. Coleman: For us to enter that marketplace, every time we have looked at it, the market has popped, and when we held off, it went the other way. As an owner in the area—we are a top-four owner in Seattle—it would make logical sense to eventually enter Bellevue at the right time. Right now, there is not a lot of product; what is there is being held and leased. Our goal in Seattle is to lease up our portfolio, and we are on track. Once we get through that, we will address expansion if that is the direction we want to go. Bellevue has proved to be very strong, and its benefactors have done well. We are hoping to see more flow to the city. Operator: A reminder to analysts: if you wish to ask a question, please press star 1 to raise your hand. Our next question will be from Caitlin Burrows with Goldman Sachs. Please go ahead. Caitlin Burrows: Hi, good morning. Staying on Seattle and Washington 1000, you mentioned seven deals in process, four for spec suites. For the other potentially larger leases—say, 100 thousand square feet or more—if they signed near term, how long would build-out take before move-in? One, six, twelve months? Victor J. Coleman: Twelve months, call it. Caitlin Burrows: Earlier you mentioned potential surface parking redevelopments in the Bay Area. Can you talk more about that? Is it retail-type outparcels, ground leases, or what are you thinking? Mark T. Lammas: Many California cities are undersupplied on housing and are working with landowners to add density where there is land availability. We have several locations—Palo Alto, Redwood Shores, Foster City—where land configuration and municipal goals to add density line up well. We are exploring opportunities primarily to add density where we can. There may be limited opportunities for conversion, but the emphasis is on densification. Caitlin Burrows: Thanks. Operator: Your next question is from John Kim with BMO Capital Markets. Please go ahead. John Kim: Thank you. On your resi conversion at 901 Market, is it safe to assume you are planning to entitle for residential development and then sell to a developer? Can you discuss timing as well as other resi conversions you see either in your portfolio or in the city center? Mark T. Lammas: We mentioned in our prepared remarks the timing for securing entitlements—we are targeting around year end. Victor J. Coleman: John, we like 10950 and we are looking at Palo Alto; we will address our decision tree based on when we get entitlements. It will be worth a lot more once entitlements are in place. As Mark said, the process is ongoing and we feel good about year end. At that time, we will look at the market, the amount of product coming to market, and whether a JV, sale, or doing it ourselves makes the most sense, and make that determination then. John Kim: Can you clarify the statement on the City of San Francisco taking your remaining space at 1455 Market? What is the confidence level on signing, and does it impact your occupancy guidance for the year? Victor J. Coleman: We have talked about that deal extensively. The impact on occupancy has been outlined. In terms of status, I do not see the pen in the hand of the mayor yet, but we hope it gets to that point relatively soon, and we are confident we will execute as we said this quarter. John Kim: Thank you. Operator: There are no further questions at this time. I will now turn the call back to Victor Coleman, Chief Executive Officer and Chairman, for closing remarks. Victor J. Coleman: Thank you very much for participating in today's call. I appreciate the team at Hudson Pacific Properties, Inc. for all the hard work. We look forward to talking to everybody next quarter. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to 2026. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. We will facilitate a question-and-answer session towards the end of the presentation. To pose a question at any time, please press star then one on your touch-tone phone. I would now like to turn the presentation over to the host for today, Mr. Martin A. Jarosick with CF Industries Holdings, Inc. Investor Relations. Sir, please proceed. Martin A. Jarosick: Good morning, and thanks for joining the CF Industries Holdings, Inc. earnings conference call. With me today are Christopher D. Bohn, President and CEO; Bert A. Frost, Executive Vice President and Chief Commercial Officer; and Richard Hoker, Vice President, Interim CFO, and Chief Accounting Officer. CF Industries Holdings, Inc. reported its results for 2026 yesterday afternoon. On this call, we will review the results, discuss our outlook, and then host a question-and-answer session. Statements made on this call and in the presentation on our website that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available on our website. Also, you will find reconciliations between GAAP and non-GAAP measures in the press release and posted in the slides. Let me introduce Christopher D. Bohn. Christopher D. Bohn: Thanks, Martin. Good morning, everyone. Yesterday afternoon, we posted results for 2026 in which we generated adjusted EBITDA of $983 million. These results reflect a continued focus on safety, operational excellence, and disciplined execution by our team. Starting with safety, our trailing twelve-month recordable incident rate at the end of the quarter was 0.16 incidents per 200,000 hours worked. This is a direct result of how our team lives our “Do It Right” culture every day. Operationally, we had another strong quarter, running available ammonia capacity at nearly 100%, and our commercial, logistics, and distribution teams ensured we met customers’ requirements leading into the North American spring application season. Our performance in the quarter also reflected the tight global nitrogen supply-demand balance that carried into 2026. Late in the quarter, the conflict with Iran severely tightened the global nitrogen market, a dynamic we expect to continue for some time. Lost production cannot be recovered. Damaged nitrogen and upstream feedstock capacity must be restored, and global trade flows will require time to recalibrate. In addition, the Russia-Ukraine war continues to disrupt nitrogen production at Russian facilities. From a macro perspective, we believe recent geopolitical disruptions are driving a fundamental shift in our global industry’s risk-return framework. First quartile producers have historically been defined by low natural gas costs alone. Recent supply disruptions from the Middle East and Russia show that low-cost feedstock is no longer enough. As a result, we see a clear divide within the first quartile. North America, where we have intentionally invested billions of dollars over decades to build the leading nitrogen manufacturing and distribution network, is low cost and low risk, representing premium-grade assets. This is in stark contrast to approximately 50% of first quartile capacity that is fragile and exposed, with low natural gas costs that are offset by extreme geopolitical exposure. We believe the geopolitical risk premium that fragile and exposed producers face will be an enduring structural headwind, increasing the cost of capital and adding costs and uncertainties for moving product to customers. In our view, this has strengthened mid-cycle economics across the nitrogen industry, with a higher urea price now required to incentivize investment in new capacity in the Middle East to offset geopolitical risk or to build in higher-capital-cost, low-risk regions. With that, I will turn it over to Bert to discuss the global nitrogen market environment. Bert? Bert A. Frost: Thanks, Chris. As we have discussed in our last several earnings calls, the global nitrogen supply-demand balance has been structurally tight for more than a year. Global nitrogen demand has been robust. At the same time, supply has been constrained by geopolitical conflicts, elevated natural gas prices in Europe, export restrictions, and declining natural gas availability in several key producing regions. The conflict with Iran and the closure of the Strait of Hormuz introduced a significant supply shock into this already tight market. Exports of urea and ammonia from the region have been severely limited, removing a meaningful portion of low-cost supply during peak nitrogen season. Additionally, producers that use imported LNG for production have curtailed or shut down facilities due to fuel availability issues. These dynamics have substantially raised the global clearing price to meet nitrogen demand. During this period, our focus has been on our long-standing North American customer base, which includes retailers, wholesalers, and cooperatives. We have been moving product to our customers for the spring 2026 planting season since July 2025. Based on what we see today, inventory for both pre-plant and post-plant applications appears well covered. We continue to work with our customers to meet the last layers of demand for this season. This includes leveraging our manufacturing, logistics, and distribution capabilities to increase nitrogen availability this spring. For example, we temporarily delayed a turnaround at Donaldsonville, allowing us to produce about 100 thousand additional tons of urea for the season. We also repurposed Yazoo City rail assets to move urea from Donaldsonville into the Corn Belt and to ship ammonia from Medicine Hat, Canada, into our U.S. distribution network. We continue to evaluate all our operations and distribution channels to ensure product availability through the end of the season. While CF Industries Holdings, Inc. has flexibility to support our customers, globally there are not many options to overcome a supply disruption of this magnitude. Indeed, we are seeing several nations restrict exports, further removing supply from global trade flows. China remains focused on ensuring its domestic agricultural industry is well supplied, with exports of nitrogen largely restricted. While we expect controlled and limited urea exports to begin later in the second quarter, volumes are unlikely to fully offset lost Middle Eastern supply. Russia has also implemented export restrictions to prioritize domestic agriculture, and this week, Egypt moved to apply a $90 per metric ton duty on nitrogen fertilizer exports. With global nitrogen supply constraints, there will be intense competition for available supply. We expect India, which entered 2026 with low inventories, to lead the way. Given urea volumes not delivered under a previous tender and lower-than-expected domestic urea production, we believe India’s urea import requirements will be substantial in 2026, potentially rising to 10 million to 12 million metric tons. This would be approximately 10% to 30% higher than 2025 and nearly double its 2024 imports. In this environment, we expect to see unmet demand in certain parts of the world. We believe Latin America, Africa, and Southeast Asia are areas where we will see lower fertilizer consumption. As application volume per acre decreases globally, yields will decline, which we expect to result in higher prices for corn, wheat, rice, cotton, and sugar. Looking ahead, even with some incremental supply later in the year, we expect global nitrogen markets to remain tight through 2026 and into 2027. We also expect further structural tightening through the end of the decade as new nitrogen capacity under construction today falls short of the traditional nitrogen demand growth rate. With that, let me turn it over to Rich. Richard Hoker: Thanks, Bert, and good morning, everyone. For 2026, the company reported net earnings attributable to common stockholders of approximately $615 million, or $3.98 per diluted share. EBITDA was approximately $1 billion and adjusted EBITDA was $983 million. These results reflect a gain of approximately $170 million from a previously disclosed litigation settlement with Orica and Nelson Brothers. We recorded the gain in the first quarter and received the proceeds in April. As a result, it will be reflected in our cash flow statement next quarter. On a trailing twelve-month basis, net cash from operations was approximately $2.7 billion and free cash flow was approximately $1.65 billion. We continue to efficiently convert EBITDA to free cash flow at industry-leading margins, positioning the company well to continue to invest in accretive growth and return capital to shareholders. Our capital expenditure projection for 2026 remains approximately $1.3 billion on a consolidated basis. CF Industries Holdings, Inc.’s portion of this is approximately $950 million, which includes $550 million for sustaining CapEx for our existing network plus approximately $400 million relating to both the Blue Point joint venture and the Blue Point common infrastructure we are building at the site. Construction on the Blue Point ammonia plant is expected to commence this year once applicable permits have been received. We continue to be pleased by the progress that has been made on this high-return project that will add over 1.5 million tons of gross ammonia capacity in the United States when it begins operation late in 2029. Finally, we repurchased approximately 150 thousand shares of our common stock for $15 million in the first quarter. We expect to continue to be opportunistic and disciplined as we execute the remainder of our current share repurchase program. With that, Chris will provide some closing remarks before we open the call to Q&A. Christopher D. Bohn: Thanks, Rich. I want to thank CF Industries Holdings, Inc. employees for their commitment and dedication during 2026. They worked safely, delivered outstanding operational performance, and stayed closely engaged with our customers as industry dynamics evolved rapidly. CF Industries Holdings, Inc. is well positioned for the near, medium, and long term. Our North American footprint, operational excellence, and consistent industry-leading free cash flow conversion set us apart. Alongside our structural and operational advantages, we are realizing decarbonization opportunities today that provide incremental free cash flow. And our Blue Point complex and additional opportunities within our existing network provide a robust growth platform for the future. With our capital allocation strategy to grow our production base, enhance network margins, and return capital to shareholders, we expect to continue to create substantial value for long-term shareholders. As a result, the intrinsic value of CF Industries Holdings, Inc.’s assets, durable advantages, and growth initiatives has increased. That value proposition is becoming even more relevant against the current global backdrop. The conflict with Iran represents the third major supply and demand shock to the global nitrogen market in the last six years and has exposed the fragile nature of the global nitrogen supply chain. This fragility is not limited to production assets. It includes feedstock assets such as LNG and logistical assets such as shipping that are essential to the way our global industry operates. In an environment of frequent geopolitical disruptions, we see distinct value in the true stability of our hard-to-replicate network and superior assets, strengthening mid-cycle expectations and the predictability of the substantial free cash flow we generate. As we continue to execute our strategy, we believe this CF Industries Holdings, Inc. premium will become increasingly evident. We will now open the call for questions. Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you will press star then one on your touch-tone phone. The first question comes from Kristen Owen with Oppenheimer. Kristen Owen: Good morning. Thank you for taking the question. I wanted to start with this CF Industries Holdings, Inc. premium idea and frame a longer-term position where, if we are in the scenario of higher-for-longer sustained energy arbitrage advantage in the U.S., how are you thinking about the calculus on your Blue Point economics as you think about the export opportunity and, given the excess cash generation, how that all factors together into those unit economics for that new capacity? Thank you. Christopher D. Bohn: Related to the structural changes with the longer natural gas differentials that you are talking about, all it does for our Blue Point project is increase the return profile that we have put in place. We are always very disciplined in our investment decisions and almost to the point of being conservative. What we are seeing is a structural shift in how the world views low cost. Low cost is not just low-cost feedstock like what we have, but it is also other costs involved from transport costs to operational efficiency. What we see is an increased return profile and, if anything, the conflict is highlighting the strength of our strategy: being very intentional about where we build and expand our assets here in North America. That allows us not only low-cost inputs but also the ability to move product throughout the world, whether for export or up into the Midwest where it is required. Bert A. Frost: And regarding the premium, we are seeing that today in the market as we have brought on our low-carbon product—ammonia and upgraded products—in Donaldsonville, and then the future Blue Point will be 95% or more decarbonized. We are seeding the market today, building those relationships, putting in place those contracts, all with a premium on the current market, and we are seeing very significant uptake and positive receptivity to our program. Kristen Owen: Thank you. Operator: The next question comes from Michael Sison with Wells Fargo. Michael Sison: Good morning. Thank you. In terms of your outlook, you mentioned that you felt supply-demand would remain pretty tight for nitrogen. Given the conflict and the damage occurring in the Middle East, how tight do you think it will be? Do you think nitrogen and prevailing products will stay above the average, and how should we think about the longevity of this elevated pricing? Thank you. Christopher D. Bohn: Thanks, Mike. I will start, and then Bert will add some color. We expect a longer tail. Even if the Strait opens up and product flow resumes, as you mentioned, there are damaged assets that will have to be assessed. Vessel movement itself is going to take time. Normal transport would be 30 to 40 days, and you can add to that to get assets back. The quality of the product on those particular vessels is going to be questioned. Assets shut down but not damaged will still take time to bring back up. We are likely to see longer-lasting increases in costs related to inflation, risk premiums, and vessel insurance. That underpins our view that mid-cycle urea costs increase. Bert can speak to the 2027 supply-demand balance. Bert A. Frost: An informal comparison is that the world has been operating like a Ferrari—running on all cylinders, just-in-time delivery. Supply moved efficiently to all parts of the world and bid a common number for a global market. All that is disrupted. You have a large number of vessels stuck behind the Strait that must be untangled, plus the repairs Chris mentioned. On the demand side, stocks-to-use ratios for corn and other nitrogen-related crops remain tight. Demand is elevated. Due to lack of LNG, Bangladesh, India, and Pakistan—reliant on LNG—have had suboptimal operating levels for nitrogen and will have to import more, bidding in price. As a result, we see 2027 ahead of the average pricing we have expected over the last several years. Operator: The next question comes from Joel Jackson with BMO Capital Markets. Joel Jackson: Good morning. Maybe, Bert, you could opine. As we get into the spring season, we are seeing interesting behavior in domestic urea markets. NOLA has come down a fair bit—seasonality, the Middle East, and commentary that U.S. imports in Q1 were stronger than many thought. Can you give your opinions on the bifurcation we are seeing in U.S. nitrogen prices versus offshore pricing, seasonality, and the strength of imports into the U.S.? Bert A. Frost: Morning, Joel. It is an interesting dynamic in that the U.S. is the lowest-price market in the world today. If you look at pricing offered this week of plus or minus $600 per short ton, or $650 to $660 per metric ton, compare that with North Africa, which is producing and shipping at over $800 per metric ton—a gigantic differential. North America is well supplied for spring. Product for the 2025 through 2026 season has been produced, shipped, and is in place for the retail sector to supply the farmer. At retail and co-ops, it is an inventory liquidation dynamic. Prices are high by historical standards, and many do not want to take additional open risk without a buyer on the backside, i.e., the farmer. So you have inventory liquidation now; then for second and third applications, retailers will come back to us to buy at market. Spring has been well supplied. Anxiety about supply availability has been overexpressed. The average price to retail and to the farmer this year has been, on a historic level, pretty good. As we come out of this into Q3 and the rest of the year, we still see a very tight market and likely a higher-priced market, and we expect the NOLA market to come into more equalization with the world price. Operator: Thank you. The next question comes from Vincent Andrews with Morgan Stanley. Vincent Andrews: Thank you, and good morning. On the buyback in the quarter, it was $15 million. Were you buying throughout the quarter? Were you locked up in some way? And if you were not, how should we think about buybacks for the rest of the year? Is there a share price level where you are more comfortable than others? Christopher D. Bohn: We continue to be a buyer of our shares. As I mentioned in the prepared remarks, we think they are trading below intrinsic value, not only given recent events but what has been occurring over the last couple of years—our assets accruing more value due to consistent free cash flow. We have $1.7 billion remaining on our open authorization, and our intention is to execute that as we have historically. In Q1, we generally set a grid; we kept that grid in place. When the conflict broke out, we were uncertain of its duration, so we were a little lighter during that time frame. That has no bearing on how we see our shares’ value. We still have $1.7 billion open, and our intention is to execute before the authorization expires. Vincent Andrews: Thank you. Operator: Next question comes from Benjamin M. Theurer with Barclays. Benjamin M. Theurer: Hi, good morning, and thanks for taking my question. Two quick ones. First, with China restrictions on exports, Egypt’s duty, etc., how do those actions impact global pricing and the benefits you might have, particularly in North America? Second, you mentioned shutdowns of facilities that might not be damaged. Assuming the conflict ends tomorrow, how long would it take for those nitrogen facilities to be properly operational again? Bert A. Frost: This is Bert. It is an interesting nationalistic move that many supply countries are making to restrict exports for their citizens. China’s exports remain restricted in 2026, with some exports expected to come in Q2. In 2025, about 5 million tons came out of China. We need all of that and more to balance. I do not think that will be possible given what is going on in the Gulf and capacity that is offline, damaged, destroyed, or not operating. I would expect China to come out like last year, maybe June through October, a million-plus tons a month. We also mentioned Egyptian restrictions or costs and Russian restrictions. Plants in India are operating suboptimally—estimated at about 70%—driving additional import needs. Today, available North Africa supplies are $800 to $850 per metric ton. The global market expects some price moderation in the back half, but I cannot estimate that price today. Christopher D. Bohn: On operations and shutdowns, there are two parts. First, getting equipment back up—there is a lot of rotating equipment. If these were shut down and preserved, you are looking at one to three months depending on maintenance and parts procurement. Second, many plants had loaded inventory before they shut down. Vessel movement is disrupted, and you could be months away from getting vessels back in position to deplete inventory and then ramp production. That is why there will be a longer tail and knock-on effects. To quantify, it is estimated that 31 ammonia plants in the Middle East have been directly impacted or shut down; 49 plants in India, Pakistan, and Bangladesh are curtailed or shut due to constrained feedstock; and in Russia, at least 20 to 21 plants have been impacted by drone activity. The impact is widespread. Benjamin M. Theurer: Thank you very much. Operator: The next question comes from Christopher S. Parkinson with Wolfe Research. Christopher S. Parkinson: Thank you so much. There is debate over the degree of the free cash flow windfall you will have by year-end and further into 2027–2028. The U.S. Secretaries of Treasury and Agriculture are pleading for new capacity, and by my count, at least six or seven other blue or gray nitrogen facilities have been canceled or suspended. Considering these factors, how are you thinking about Blue Point number two? Is there anything else the industry should be doing to work with U.S. policymakers? Christopher D. Bohn: You characterized it well. The market was already tight coming into 2026, and now with additional fundamental costs and risk considerations, we needed new capacity before and probably need even more now. There will be increased costs for where capacity goes globally, which makes our decision to move forward with Blue Point look even better. As I said earlier, we will likely see a higher return profile than we thought. We continually evaluate production expansion. There are still things we want to understand with Blue Point number one before moving into number two. Whatever decision we make will be a very disciplined investment decision. Given our efficiency in converting EBITDA to free cash flow, cash generation will be significant over the next several years. We see opportunities within our network or elsewhere to enhance margins or increase production with high returns. Christopher S. Parkinson: A quick follow-up on summer fill prices. Given international versus domestic dynamics, assured supply, and the balance between urea and UAN availability, are you thinking about things differently this year? Bert A. Frost: We ask ourselves that every day. Every year is different. Over my 18 years at CF Industries Holdings, Inc., our approach to fill—timing, communication, and execution—has varied. Last year, Mike Ham and his team communicated openly and early about our launch date, giving customers time to prepare on volume and price expectations—it was a very successful campaign. We will likely replicate that thematically. Price and timing are variables in a highly volatile world. Internally, we look at the best use of the nitrogen molecule—ammonia, urea, UAN, ammonium nitrate, DEF—where is the highest value, what is the need, our inventory position, and export opportunities. Then we align on a plan. I expect fill to be a Q3 event. Operator: Next question comes from Edlain S. Rodriguez with Mizuho. Edlain S. Rodriguez: Thank you. Good morning, everyone. As nitrogen prices have moved higher, what do you think farmers can or will do to lower the fertilizer cost basket? And in a typical year, how much of the nitrogen needs do farmers prepay earlier in the year? Bert A. Frost: Very good question, especially in a high-priced, high-cost environment. The best thing that could happen is a rally in corn. Under-application in some parts of the world could lead to underperforming yields—Brazil’s second crop planted in January–February, or a weather event like El Niño in Argentina. End prices are high and can impact demand, but nitrogen is the one nutrient you cannot skip. In North America, where the majority of our tons are consumed, we are talking with our retail and cooperative partners as well as agribusiness partners like ADM. Looking at corn opportunities today, you can cut costs or increase yield to improve revenue per acre. We do not expect cuts in North America given the yield opportunity on both dry and irrigated land, and we are seeing that in purchasing and positioning of nitrogen. Ammonia can be applied in the fall—we had an extremely good fall ammonia season in November 2025—and we have had a very good spring ammonia season this year. That communicates farmer planning, yield expectations, and that they bought lower-cost product priced earlier. Then it comes to secondary and third applications added for yield. We had a phenomenal yield in 2025 of about 187 bushels per acre; we expect that to fall a little, but we are hoping for farmers to make money and to do that with nitrogen. Operator: The next question comes from Lucas Charles Beaumont with UBS. Lucas Charles Beaumont: Thanks. Good morning. Can you follow up on the outlook for nitrogen pricing over the next couple of quarters? There has been no improvement yet in trade flows, and a significant portion of global production is offline. As we get past peak Northern Hemisphere demand, there may be less incentive to restock than normal, offset by Brazil demand picking up in Q3 and shortages elsewhere. How do you see these factors playing out sequentially over the next few months? Bert A. Frost: Lucas, we are at the peak of movement for North America, and CF Industries Holdings, Inc. is focused on supplying our North American customers and communicating daily to ensure adequate spring supply. For Q3 and Q4, we see prices higher than normal. The timing of Middle Eastern capacity coming back matters—it is 30% of global urea and 20% of LNG. Many nitrogen producers depend on LNG, and we think you will lose some of that capacity. In a 56 million-ton export-traded market, if you take out an annualized 18 million tons—call it 1.5 to 2 million tons per month from March, April, and May—you could conservatively be short about 5 million tons. You need all of China to come out aggressively to balance that; we do not think that is possible. Importing countries like India, which has imported 6 to 9 million tons in recent years, are expected to be 10 to 13 million tons due to low operating rates at LNG-dependent plants. South America’s import needs likely do not go down unless they accept an impact on grains and oilseeds. Trade flows now involve longer hauls to cover immediate needs, and freight rates are much higher—probably double. The outlook for nitrogen pricing is higher than normal for longer. Restocking may not be completed in time without severe disruptions such as demurrage at Brazilian ports or late arrivals elsewhere. There will be shortages. Christopher D. Bohn: That is why we are confident this tightness pushes into 2027. Nationalism and regionalism of energy are important—will countries export what they historically have to fill gaps in an already tight market? We see this persisting through 2027, supporting significant free cash flow generation. Operator: The next question comes from Andrew D. Wong with RBC Capital. Andrew D. Wong: Good morning. On expansion, given elevated nitrogen prices now and into the future, plus tightness in feedstock and a better return profile for North American nitrogen, does that change how you think about expansion? Could you accelerate plans to add more capacity? Christopher D. Bohn: We review this consistently and have quite a bit underway beyond Blue Point. Given our bandwidth, we see higher return profiles on projects in motion or under consideration. We continue to evaluate what we would do at the Blue Point site; it is expandable over time. We want to get permitting through and gain experience on the first unit. A second plant would see efficiencies from existing infrastructure—dock, tanks, offsites. We are considering it, but nothing is imminent. Our capital allocation philosophy has not changed. We will be extremely disciplined on investments. With the cash generated so far and what we expect over the next several years, we also have excess free cash flow that we expect to return via share repurchases or dividends. Andrew D. Wong: Great. Thank you very much. Operator: The next question comes from Jeffrey John Zekauskas with JPMorgan. Jeffrey John Zekauskas: Thanks very much. A speculative question: Given the confusion over CBAM and carbon dioxide emissions generally, and given shortages in nitrogen markets, do you expect new U.S. plants to be steam methane reformers again rather than autothermal reactors, or is it too difficult to tell? Christopher D. Bohn: The confusion over CBAM may be overstated. CBAM is in place today, and, if anything, policy direction has strengthened. We view decarbonization as providing incremental opportunity that does not exist for others. With 45Q, premium shipments into Europe, and our recent announcement with Pepsi and other CPG companies, decarbonization creates value. For us, autothermal reforming to recover as much CO2 as possible aligns with that value. I cannot speculate for others, but our path forward is clear, and we are accruing value today. Jeffrey John Zekauskas: Thanks for that. Have the contractual terms for ammonia with industrial customers changed over time, and is there room to make those terms more attractive to producers as nitrogen markets have tightened? Bert A. Frost: We segment our business—most tons go to agriculture, then exports, and then a fairly ratable industrial portion. We reassess annually to place tons where they are most valued, ensuring relationships contribute on both sides. Many conversations occur regarding contractual terms, but the actual terms have not changed materially. What has changed is the implementation of low carbon and the premium we receive, which we communicate consistently to industrial customers and export customers facing CBAM. As industrial companies look to improve their scope emissions—Pepsi is a good example, as is POET—we are seeing a positive reset and desire to align with CF Industries Holdings, Inc. It is a growth platform that is economically attractive, returns well, and aligns thematically and environmentally with our goals and our customers’. Jeffrey John Zekauskas: Great. Thanks. Operator: The next question comes from an analyst with Rothschild. Analyst: Thank you. Just a follow-up on gas costs. Q1 came in at $4.50. What would you expect the trajectory to be during the rest of the year? Thank you. Christopher D. Bohn: In the first quarter, both January and February saw elevated Henry Hub gas costs—February even settled over $7 per MMBtu. Since then, we have seen gas come down significantly. Today it is trading around $2.60, and the curve flattens further out. Our expectation is that our gas cost for the remainder of the year will be very close to the NYMEX strip. Bert A. Frost: And we are not hedged on a forward basis, so we are open and receiving prices represented in NYMEX. Analyst: Thank you. And just a follow-up on product volumes. Earlier in the year, you communicated the intent to switch to UAN from urea to take advantage of better production margins. Has that strategy been reversed with urea prices having surged much higher than UAN? Bert A. Frost: Our capabilities allow us to switch on a shift—an eight- to ten-hour shift—coordinated by our team on economic value. As urea values increased and exceeded UAN opportunities, you would expect us to adjust production to capture that value, consistent with each plant’s capabilities. Operator: The next question comes from Kristen Owen with Oppenheimer. Kristen Owen: Thank you for taking my follow-up. I did not think I was going to get one. On your maintenance schedule, you made public comments about possibly delaying some maintenance to ensure domestic supply. Can you help us with how you are thinking about maintenance for the rest of the year? Christopher D. Bohn: The maintenance we shifted—after evaluating that we could do it safely—was at one site. It was scheduled for late May; we moved it to late June. It was not a large shift, but it allowed us, as Bert mentioned, to get another 100 thousand tons of urea into the market for this application season. Other than that, our maintenance is consistent with our typical historical cadence, which you can use as a benchmark. Operator: Ladies and gentlemen, that is all the time we have for questions today. I would like to turn the call back over to Martin A. Jarosick for any closing remarks. Martin A. Jarosick: Thanks, everyone, for joining us, and we look forward to seeing you at upcoming conferences. Operator: Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Thank you.
Operator: Good day, and welcome to Ring Energy, Inc.'s first quarter 2026 earnings conference call. All participants will be in listen-only mode. Please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations. Please go ahead. Al Petrie: Thank you, operator, and good morning, everyone. We appreciate your interest in Ring Energy, Inc. We will begin our call with comments from Paul D. McKinney, our Chairman of the Board and CEO, who will provide an overview of key matters for 2026. We will then turn the call over to Sanu Joel, Ring Energy, Inc.'s Executive Vice President, Chief Financial Officer and Treasurer, who will review our financial results. Paul will then return with some closing comments before we open up the call for questions. Also joining us on the call today are James Parr, Executive Vice President and Chief Exploration Officer; Alexander Dyes, Executive Vice President and Chief Operations Officer; and Shawn Young, Senior Vice President of Operations. During the Q&A session, we ask you to limit your questions to one and a follow-up. You are welcome to reenter the queue later with additional questions. I would also note that we have posted an updated corporate presentation on our website. During the course of this conference call, the company will be making forward-looking statements within the meaning of federal securities laws. Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct. Ring Energy, Inc. disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in today's press release and our filings with the SEC. These documents can be found in the Investors section of our website located at ringenergy.com. Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially. This conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in yesterday's earnings release. Finally, as a reminder, this conference call is being recorded. I would now like to turn the call over to Paul D. McKinney, our Chairman and CEO. Paul D. McKinney: Good morning, everyone, and thank you for joining us. As many of you may know, Ring Energy, Inc.'s stock has performed well year-to-date, and we believe, as do others, that Ring Energy, Inc. may qualify for inclusion in the Russell 2000 Index this year. We understand the list of companies that will be joining the index will be published later this month and become effective at market close on 06/26/2026, and we look forward to this. Because we know others are anticipating our inclusion as well, and may be joining us for the first time, we intend to begin this earnings call a little differently. We want to take the opportunity to introduce ourselves and point out where we operate, the distinguishing aspects of our asset base, the strategy that we are pursuing that differentiates us from our peers, and how the current macro and geopolitical environment impacts our business. So before we get into the quarterly results, we want to take a step back and introduce the company. For those of you who are existing investors and know our story, I thank you in advance for your patience. Hopefully, you too will learn something new since we are a dynamic and growing company where things change at a fast pace. To help me with this endeavor are James Parr, our Chief Exploration Officer, and Alexander Dyes, our Chief Operations Officer. Each brings a different perspective to the Ring Energy, Inc. story: James on the asset base and technical opportunity, and Alexander on the operations and execution. Afterwards, Sanu and I will cover the first quarter results and expand on our financial strategy, capital allocation, and investor perspectives. So on a high level, Ring Energy, Inc. is an oil-weighted upstream energy company focused on the Texas portion of the Permian Basin. We are not built around the high-decline shale model that many investors associate with our basin. Our business is built on commercializing historically overlooked, once believed to be uneconomic, conventional assets by applying recently developed technologies and perspectives with an exploration mindset. Distinguishing aspects of our core assets are long-life wells with shallow base declines, highly oil-weighted with high operating margins and netbacks, interest and undeveloped opportunities with relatively low drilling and completion costs, with significant returns and low breakeven costs. Our existing 10-plus-year inventory of conventional assets in the Central Basin Platform and the Northwest Shelf includes a deep set of undeveloped wells, recompletion, workover, and optimization opportunities capable of sustainable year-over-year cash flow generation. Our asset profile is important. It gives us a durable production base, a lower maintenance capital requirement, and the ability to generate free cash flow through commodity cycles. Our strategy is not to chase production growth for its own sake. Our strategy is to protect the balance sheet, allocate capital to the highest return opportunities in the portfolio, and convert our resource base into sustainable cash flow over time. This is why we believe Ring Energy, Inc. is particularly well positioned in the current environment. With that context and before we get into the quarterly results, we want to ground everyone listening with us today with the virtues of our asset base. To understand Ring Energy, Inc., you must understand where we operate and why those assets are unique. So with that, let me turn this call over to James Parr to walk us through our asset base, why the Central Basin Platform and Northwest Shelf are so important to Ring Energy, Inc. and our shareholders, and how your Ring Energy, Inc. team continues to unlock value across the portfolio. James? James Parr: Thanks, Paul. As you stated, to understand Ring Energy, Inc., you really have to understand the asset base. Our core positions in the Central Basin Platform and the Northwest Shelf are long-lived, oil-weighted conventional assets, and the important thing to remember is our existing operating footprint has significant remaining potential. These two well-established areas are literally at the heart of the Permian Basin petroleum system, the focal point of oil migration from the adjacent Midland and Delaware basins into multiple stacked conventional reservoirs that were the original targets of the Permian. In many cases, these reservoirs were initially developed decades ago using older technology, limited subsurface data, and less advanced completion and production techniques, which resulted in low recovery factors, particularly in deeper and lower quality conventional reservoirs, leaving much of the original oil in place behind. Since then, the industry has overlooked these two areas for the past several years while modern technology has developed to commercially exploit low-permeability shale reservoirs. Utilizing modern technologies and methods in these prolific conventional areas has created an attractive opportunity set for Ring Energy, Inc. that is different from the high-intensity shale plays which have higher decline rates due to their intrinsically poorer reservoir properties. As a result, we have a promising portfolio of stacked, lower-decline, oil-bearing conventional reservoirs with multiple development targets and a wide range of project types from horizontal and vertical drilling to recompletions, workovers, and well reactivations. That diversity gives us flexibility to allocate capital where we see the best risk-adjusted returns at any point in the cycle. Our technical expertise is understanding the rocks, pores, and fluids, understanding the production history, then applying modern subsurface and engineering techniques to improve recovery and reduce uncertainty. We are not trying to reinvent these fields. We are trying to optimize them. As a result, we see a multiyear inventory of attractive commercial opportunities across our acreage that will support stable production, shallow decline rates, and durable cash flow. That asset base is the foundation of Ring Energy, Inc.'s strategy and underpins what we do operationally and financially. With that, I will turn it over to Alexander to talk about how we are executing against an opportunity set in the field. Alexander? Alexander Dyes: Thanks, James. From an operations standpoint, our focus is simple: execute safely and consistently. Keep driving structural cost reductions and convert the opportunity set James covered into reliable and sustainable results. Last quarter, I walked through the strategy we have been executing: accretive, complementary acquisitions; disciplined integration; organic growth; and a cost structure that keeps getting more durable. In Q1 2026, we delivered proof of these points and built momentum for the rest of 2026. First, cost. Q1 LOE was $18.1 million, or $10.41 per BOE, below the low end of guidance for the fourth quarter in a row. This is more than $1.7 million per month lower than pro forma Q1 2025 and over $2 per BOE better. This highlights our operating team's continued focus on cost reduction, commitment to adding value, and margin expansion. Second, execution. We drilled five horizontal wells and one vertical well, with horizontals representing over 80% of the Q1 program. In the Northwest Shelf, we improved our drilling efficiency by reducing spud-to-TD times by 15% versus the 2025 average, with further efficiency gains expected as we shift to longer laterals and co-development opportunities going forward. Third, well performance results. Recent Crane County horizontal completions continue to outperform expectations. After successfully testing multiple horizontal benches in a historically vertical-developed area, we see a clear path to improving returns through longer laterals and selective multi-bench co-development. In addition, in 2025, over 100 horizontal wells were drilled by offset operators within just a couple of miles of our core acreage, providing further evidence of the future potential we see as described by James earlier. To support that plan, we accelerated targeted infrastructure in Q1. Just over $5 million, or about 15% of our total capital in the quarter, was directed to work on our saltwater disposal wells, frac water infrastructure, and production facilities. These investments expand our flexibility and provide needed infrastructure to unlock longer laterals and multi-bench horizontals later this year and beyond. Our approach is relentless continuous improvement: drill faster and more efficiently, maintain a structurally lower cost base, and sustain a predictable low-decline foundation. The investor takeaway is that longer laterals, multi-bench co-development, and disciplined execution will keep driving capital efficiency and translate into more durable free cash flow across commodity cycles. With that, I will turn it over to Paul and Sanu to walk through the financial results. Paul D. McKinney: Thank you, Alexander. Now let us turn our attention to the quarter. As I said in our earnings release, we successfully delivered on our sales guidance. The big story for the quarter is that through the continued efforts of our office and field operating teams, we handsomely beat LOE and improved the capital efficiency of our drilling program. Way to go team. The management team and Board of Directors thank you once again for your hard work and perseverance safely keeping our operating costs low and our production up. Another point to make is shortly after the Iranian crisis broke out, we began the process of identifying investment opportunities to accelerate because we believe the cost and competition associated with certain key investments are likely to increase very soon. This is because we believe the market has yet to acknowledge the long-standing impacts of the supply-side disruptions we are experiencing in the Middle East and that, in our view, oil prices are likely to be higher for longer than what the market is currently implying. We are not alone in this belief. With higher oil prices comes higher costs for goods and services and increased competition. Investments we are accelerating are focused on increasing the capital efficiency of our long-term capital program and helping ensure optionality and the potential to meaningfully expand our drilling inventory. The shift in capital spending caused us to temporarily pause debt reduction this quarter, and we are steadfast in our belief that these accelerated investments are in the best interest of our stockholders. We intend to resume debt reduction in the following quarters of the year and are likely to revise production guidance once the impact of these and other potential capital changes are evaluated. Regarding our operations, our oil sales were 12,276 barrels of oil per day and our total sales were 19,351 barrels of oil equivalent per day, both essentially at the midpoint of guidance despite the challenges we faced with the winter storm and the sale of approximately 200 barrels of oil equivalent per day of non-operated production. Production from our recently acquired Limbach assets, as well as the new wells drilled so far this year, continue to meet or perform better than expected. We deployed $34.5 million in capital spending during this quarter, which was slightly above the high end of our guidance range. As we shared earlier, the capital spending was focused on accelerating certain key projects in addition to drilling and completing the wells planned. Ring Energy, Inc. drilled and completed six wells during the first quarter and completed one DUC drilled previously for a total of seven completions. Five of the new wells were one-mile horizontal wells drilled in the Northwest Shelf with an average working interest of 91%. One vertical well was drilled and completed in Crane County, and the DUC, also in Crane County, had 100% working interest. At this point, I would like to turn this call over to our Executive Vice President and Chief Financial Officer, Sanu Joel. He will provide insight and details of our first quarter numbers and financial position. Afterwards, I will return to share more about our priorities and outlook for the future. Sanu? Sanu Joel: Thanks, Paul. In the interest of time, I will focus my comments on the key performance drivers and notable financial items from the quarter, rather than walking line by line through the income statement. Overall, first quarter results were in line with guidance and demonstrate the resilience of Ring Energy, Inc.'s operating model in a quarter marked by significant weakness in natural gas and NGL pricing and oil price strength that emerged late in the quarter. From a pricing standpoint, the quarter was very much a tale of two parts. The year began in a weaker pricing environment, and we positioned the business accordingly. As the quarter progressed, particularly in March, oil prices strengthened meaningfully due to macro and geopolitical developments. Given where prices were for much of the quarter, our first quarter results largely reflect that earlier environment. As we move into the second quarter, our exposure to commodity pricing increases materially as our hedges roll off. Assuming current oil price levels persist, this creates a very different earnings and cash flow profile going forward than what is reflected in our Q1 results. Against that backdrop, overall realized pricing improved quarter over quarter to $42.30 per BOE for the first quarter, driven primarily by higher oil realizations of $68.07 per barrel. This improvement was partially offset by continued weakness in Permian natural gas and NGL markets, where processing and transportation fees resulted in a negative realized gas price of $2.54 per Mcf. On the cost side, lease operating expenses averaged $10.41 per BOE, below the low end of our guidance for the fourth consecutive quarter. These results reflect continued progress on cost control initiatives and operational efficiencies, and we view these reductions as structural improvements. Reported net income for the quarter was impacted by two non-cash items. First, we recorded a $77 million unrealized derivative loss driven primarily by changes in the forward oil curve during the quarter. On a cash basis, hedge settlements were relatively modest, with oil hedges settling at a loss of approximately $6 million partially offset by $800,000 of gains on natural gas hedges. Second, we recorded a $162.1 million non-cash ceiling test impairment under the full cost accounting methodology. Because this test relies on a trailing twelve-month average of the first-day-of-the-month SEC prices, it can diverge meaningfully from current market conditions, particularly when commodity prices move sharply late in the quarter as they did this quarter. Most importantly, this impairment does not reflect the underlying performance, margin structure, or cash-generating ability of our assets today. If current pricing levels persist, we would expect the trailing average price deck used in the ceiling test to increase meaningfully going forward, which would substantially reduce the risk of further write-downs. Excluding these items, adjusted net income was $7.4 million and adjusted EBITDA totaled $38.3 million. Given the timing of the oil price recovery and the level of hedge protection in place during the quarter, these results are more reflective of the pricing environment earlier in the period, with the earnings impact of higher oil prices expected to become more apparent as we move into the second quarter. Capital allocation remained disciplined during the quarter. We invested $34.5 million of capital, slightly above the high end of guidance, and as both Paul and Alexander mentioned earlier, we accelerated certain key investments we believe are subject to price increases and increased competition. These investments were largely directed toward facility and infrastructure projects and investments designed to secure optionality and the potential to increase our long-term drilling inventory. We believe these investments are in the best interest of our stockholders. We are also proud to report our 26th consecutive quarter of positive free cash flow. Now turning to the balance sheet. We exited the quarter with $160 million of liquidity under our credit facility. During the quarter, we intentionally paused debt paydown, with borrowings increasing by approximately $6 million. Leverage ended the quarter at roughly 2.4 times, and we remained in full compliance with all bank covenants, with no near-term maturities. The balance sheet is well positioned to support continued deleveraging. Our objective remains to reduce leverage to approximately 1.25 times as cash flow strengthens. On hedging, our portfolio is intentionally structured to balance risk with upside participation. While we have 72% of oil volumes hedged at an average ceiling price of $73.27 for the remainder of 2026, a meaningful portion of production remains unhedged and fully levered to current oil prices. Our natural gas hedges, at an average floor price of $3.78 per Mcf, cover 73% of expected volumes and are designed to stabilize cash flow. In summary, while reported results were impacted by non-cash accounting items, the underlying fundamentals of the business remained strong. We are reaffirming guidance for the next three quarters as disclosed in the press release. We encourage you to check out our investor presentation on our website and quarterly financials for additional details. Back to you, Paul. Paul D. McKinney: Thanks, Sanu. As you have heard from James, Alexander, and Sanu, Ring Energy, Inc.'s strategy is built around a clear set of priorities: long-lived, oil-weighted assets; disciplined operational execution; free cash flow generation; and balance sheet flexibility. That framework, along with our ability to remain nimble and respond to market conditions, is important in any commodity environment and especially in a period of elevated volatility like we are experiencing today. We believe we have built a company that can adapt and thrive through cycles and capitalize on opportunities as they emerge, with a focus on creating long-term value for our shareholders. In 2026, the oil market has moved faster than sentiment. We entered the year with the market broadly focused on oversupply risk and the potential for prices to remain under pressure. Our response was disciplined. We protected the business, used hedges to support our development program, and positioned Ring Energy, Inc. to continue executing in a low-price environment, including scenarios below $60 WTI. Since then, the macro backdrop has evolved, with geopolitical developments increasing focus on supply reliability, spare capacity, and the security of physical barrels. We believe that dynamic is slowly being reflected in the forward curve and reinforces our view that the market is placing greater value on dependable, low-decline barrels. We chose to accelerate certain key capital investments to get ahead of rising costs and competition. The benefit to shareholders is straightforward: advancing work that is expected to improve capital efficiencies and lead to stronger organic growth that is not dependent on future A&D. We are using the flexibility of our asset base to improve the durability and timing of value creation without compromising capital discipline. We look forward to the results of our capital program later this year and early next that we firmly believe will lead to increased capital efficiency and organic production growth, especially as it pertains to 2027 and beyond. We will now open the call for questions. Operator? Operator: Thank you. We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please do so now. The first question today comes from Poe Fratt with Alliance Global Partners. You may go ahead. Poe Fratt: Yes. Would you expand on the investments you made in the first quarter and just confirm that the number was about $5 million as far as the impact on the budget? Hey, good morning. Paul D. McKinney: Hey, Poe. Yes, I can do that, and I will get a couple of other people who might have a few more details than I do. There were several things that occurred during the quarter that led to these additional investments. We have talked about the infrastructure investments. One of the big things that we are doing right now that significantly impacts our ability to increase the capital efficiency of our future wells is providing water for our frac jobs. We have invested quite a bit of money and accelerated this so that we can position our drilling program to drill longer laterals that require much larger volumes of water. I think the best experts to turn this over to would be Alexander and then Shawn. Would you guys like to jump in on that? Alexander Dyes: Yes. Hi. Good morning, Poe, and thank you for your question. The fundamental shift to think about is that we are going from vertical to horizontal development in a lot of these fields. Those investments include saltwater disposal wells that we need to clean out, building infrastructure to supply water for bigger fracs, and facilities buildouts. Those are the things that went into the $5 million. We are transitioning from vertical to horizontal, and we are also trying to drill longer horizontal wells. With that, I would like to hand it over to Shawn for a little more detail. Shawn Young: As both Paul and Alexander mentioned, we are really focusing on getting these assets set up for a horizontal development program. Up to this point, development has been more or less vertical in these areas. There is a significant amount of money that has to be spent to get the infrastructure to support the completions, and the production facilities also need to be upgraded and expanded. That is where the majority of that capital went. Paul D. McKinney: That is right. In addition to that, for the first five wells we drilled this year in Yoakum County, we were able to acquire one of our working interest partners’ position in those five wells. Not only did we purchase their working interest, but we also had to cover their capital portion. That was a little over 30%, almost 35%, of those five wells. So we took on about 35% more capital plus we had to buy them out. When you add all these things together, they exceed the amount of money that we had to borrow. With these accelerated investments, first of all, we are very happy with the five Yoakum County wells and think we made a very good deal there. The investments that we are making in our infrastructure for providing water for our frac jobs are going to pay dividends as we transition. I know it is a painful transition, and many of our shareholders do not have the opportunity to really understand that yet because we are in the early phases, and we cannot wait to start sharing some of the results of what we are doing. That will be borne out later this year and early into next year when the full benefit occurs. We know these investments are in the best interest of our shareholders. The bottom line is that because we accelerated some of these investments this quarter, we are still going to pay down the same amount of debt this year that we have been saying we will pay down. It is just going to come in a different profile. We will pay down a lot more debt as we exit this year than at the beginning of the year because of these accelerated investments, and some of these accelerated investments are spilling over into the second quarter. That is just the reality. I know that we have a lot of shareholders whom I have an extreme amount of respect for who really want us to focus on debt reduction, and we are still focused on debt reduction. But the opportunity before us in this first half of the year to prepare for what we believe is going to be a sustainably higher price environment than what we were in before the Iran conflict occurred makes this the right thing for our shareholders. We are confident we are doing the right thing, and shareholders will realize a real benefit as we exit this year. There is no doubt in my mind. Does that answer your question, Poe? Poe Fratt: That did. That was very thorough. Thank you. And then could you, Paul, just talk about the timing of the wells that you completed in the first quarter? Were those all online for, say, a month of the quarter? I am trying to figure out the cadence of production and what kind of benefit we should see from those wells. Have we already seen it, or should we see it more in the second quarter? Paul D. McKinney: Yes. You will have the full impact in the second quarter from the first quarter wells drilled, for sure. We started out at the beginning of the year with a drilling rig in Yoakum County and drilled those five wells. Then we went south and drilled our vertical well. When you look at scheduling the fracs and all that, they were all coming on in mid-February into March. We have not seen the full impact in the first quarter. When you begin January 1, you have to drill them first, then frac them. There is a natural delay. The full impact will be in the second quarter. It is a consequence of a lumpy phased drilling program. You get surges of production when the wells come on, and there is a typical delay. Alexander, anything you want to add? Alexander Dyes: Yes, one more thing. This always happens: we typically lay down the rig toward the end of the year. At year-end 2025, there was a little bit of a lag going into the beginning of a new year. By the time we pick up the rig, get the wells drilled, complete them, and then they slowly start cleaning up and ramping up, we typically start really seeing the benefit in the second and third quarter. Poe Fratt: Great. Thank you. Thank you. Operator: At this point, we have no more questions. I would like to turn the conference back over to Paul D. McKinney for any closing remarks. Paul D. McKinney: Thank you, operator. On behalf of the entire team and the Board of Directors, I want to once again thank everyone for listening and participating in today’s call. We are pleased to have posted solid operational and financial results for 2026, and our outlook for the remainder of the year remains very strong. We will continue to keep everyone apprised of our progress, and thank you again for your interest in Ring Energy, Inc. Have a great day and a great weekend. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Welcome to the Gold Royalty Corp. First Quarter 2026 Results Conference Call. Participants will be in listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to David Garofalo, Chairman and CEO. Please go ahead. David Garofalo: Thank you, operator. Good morning, ladies and gentlemen, and thank you for participating in today's call to review our first quarter 2026 results. Please note for those not currently in the webcast, a presentation accompanying this conference call is available on the presentation page of our website. Some of the commentary in today's call will include forward-looking statements, and I would direct everyone to review Slide 2 of the presentation, which includes important cautionary notes. All dollar values mentioned on today's call are expressed in U.S. dollars unless otherwise noted. Speaking alongside me this morning will be our President, John Griffith; Andrew W. Gubbels, Chief Financial Officer; and Jackie Przybylowski, Vice President, Capital Markets and Sustainability. The first quarter was another strong quarter for Gold Royalty Corp. as we reported another record quarterly revenue and adjusted EBITDA, and as we continue to have a positive outlook for our business going forward. Before we dive into the results, I wanted to start with an important announcement. I am delighted to announce two appointments this morning. John Griffith has been named President in addition to his role as Chief Development Officer. The title is a true reflection of the value that John has brought to Gold Royalty Corp. over the company's life. We recently celebrated the five-year anniversary of our listing and the tremendous accomplishments in building Gold Royalty Corp.’s peer-leading portfolio, and John was absolutely instrumental in making Gold Royalty Corp. what we are today. His new role as President reflects a leadership position that John already fills in the company and will continue to fill going forward. We have also transitioned the responsibility for sustainability from Catherine R. Blaster, our outgoing Vice President of Sustainability, to Jackie Przybylowski, who will be Vice President, Capital Markets and Sustainability effective July 1, 2026. We want to thank Catherine for her valuable contributions to Gold Royalty Corp. She has been with Gold Royalty Corp. in a part-time capacity since 2022, which is a great example of the overhead savings that we realized with our shared services model. Catherine will continue to work with Uranium Energy Corp. and Uranium Royalty Corp. moving forward, and Jackie will manage sustainability at Gold Royalty Corp., adding no additional personnel to our team as a result of this transition. I will now pass the call over to our President, John Griffith. John Griffith: Thanks, Dave. The past five-plus years at Gold Royalty Corp. have been both personally and professionally rewarding as we have grown the company from 18 royalties and zero revenue in 2021 to over 250 royalties and meaningful revenues and cash flows today. The depth, breadth, and quality of the portfolio that we have assembled exceeds my expectations, and I am so proud of the work that our team has done to get to this point. But our story is really just beginning. After celebrating our five-year anniversary in the first quarter, we are incredibly encouraged by our growth outlook for the next five years as well. The guidance that we provided on March 18, 2026 shows that Gold Royalty Corp. expects production to grow to 28,000 to 34,000 GEOs by 2030. At the midpoint, this represents nearly 500% growth compared against our 2025 actual results of 5,173 GEOs. This growth is all from royalties and streams already fully bought and paid for in our portfolio, and I would emphasize that if we did nothing at all—if we only sat on our hands for the next five years—we still would have peer-leading growth. Of course, we are not planning to sit on our hands for the next five years. Our team continues to investigate acquisition opportunities each and every day. In the current environment with strong gold prices, we are seeing less emphasis on balance sheet repair. Most of the opportunities we are seeing now are sales of existing third-party royalties where sellers could potentially be looking to take advantage of the high commodity price environment that I mentioned earlier. We are committed to accretive transactions, and we will stay disciplined to ensure we are not overpaying for the sake of growth. We continue to look for double-digit returns using conservative commodity price assumptions, and we continue to favor precious metals in low-risk jurisdictions. With that in mind, I look forward to continuing to build upon the great platform we have built in our first five years. I will now pass the call to our CFO, Andrew W. Gubbels, to discuss the details of our first quarter results and our outlook on Slide 5. Andrew W. Gubbels: Thank you, John, and good morning, everyone. We are pleased to report new records for revenue and adjusted EBITDA in the first quarter. Total revenue, land agreement proceeds, and interest was $9.4 million, translating to 1,920 gold equivalent ounces in the quarter. Adjusted EBITDA was $7 million, up from $3.2 million in the previous quarter and up from $1.7 million in the comparable quarter in 2025. Our results for the first quarter include contributions from the Pedra Branca royalty, which we acquired in December 2025, and our second royalty on the Borba Rama mine, which was acquired through a 50-50 partnership with Taurus Funds in January 2026. Due to the structure of this partnership, we are equity accounting for the contribution from this royalty. In other words, revenue from the second Borba Rama royalty, a net 0.75% NSR to Gold Royalty Corp., is not included in the IFRS revenue line on our income statement but is included in other operating income on the income statement and has been added to the $9.4 million total revenue, land agreement proceeds, and interest reported in the quarter. Our balance sheet also continues to strengthen. We exited the first quarter with over $13.6 million of cash, no debt, and a fully undrawn $150 million credit facility. As we continue to generate cash, our portfolio is expected to generate consistent positive free cash flow, positioning Gold Royalty Corp. well to self-fund its business going forward. With a clean balance sheet, we now have the flexibility to execute our long-term strategy. Our current intent is to maintain a modest cash balance and to allocate additional cash generated from operations toward growth opportunities where appropriate. As our cash flows continue to grow, capital returns will become increasingly topical for us. This is a subject that we intend to evaluate in more detail later this year. I will now pass the call to Jackie Przybylowski to review our guidance and to talk about some of our key assets. Jackie Przybylowski: Thanks, Andrew. Looking at our portfolio in more detail, we reported 1,920 gold equivalent ounces in the first quarter of 2026. If we simply annualize our Q1 results, we would reach 7,680 GEOs in the year, above the low end of our guidance range of 7,500 to 9,300 GEOs in 2026. We are already very encouraged with this result because we expect that volumes will be more heavily weighted to the second half of the year as Faros and County Line ramp up to their full production run rates through the year. And just a quick reminder that our 2026 guidance was set at a gold price of $5,150 per ounce for the full year. Lower gold prices would work in our favor, as conversion of the land agreement proceeds and interest and conversion of revenue from copper and other metals would translate to higher GEO values at lower gold prices. Please see our 03/18/2026 press release for a table showing the sensitivity of our guidance to gold prices. And, reiterating John's comment from earlier, Gold Royalty Corp. expects production to grow to 28,000 to 34,000 GEOs by 2030, or approximately 6x our actual 2025 result, from assets already fully bought and paid for in our portfolio. Our extensive portfolio continues to offer exciting news flow and catalysts, and we have a number of exciting asset updates in our earnings report. I will just highlight a few on this call. i-80 announced a complete recapitalization, which means the company is now fully funded for Phases 1 and 2 of its development plan, which includes the Granite Creek underground and open pit operations, on which Gold Royalty Corp. holds a 10% NPI. Acquisition of the Pedra Branca mine by Corax was completed on April 2, 2026. Gold Royalty Corp. holds a 25% NSR on gold and a 2% NSR on copper on all material mined at Pedra Branca East and Pedra Branca West, and we are looking forward to working with Corax as it optimizes operations at what will be an important asset for Gold Royalty Corp. Blackrock Silver published a PEA for the Tonopah West project, on which we hold a 3% NSR, and U.S. GoldMining published a PEA on its Whistler project, on which we hold a 1% NSR. And a few notes to watch for over the next couple of months: Orla Mining continues to plan to start construction on South Railroad in mid-2026, pending receipt of final permits, and that mine could be in production in late 2027 or early 2028. We hold a 0.44% NSR in South Railroad. DPM Metals has restarted the Varus mine, on which we have a stream on all copper produced. The operator expects to reach its full production run rate by year-end 2026, but in the meantime, it is important to note that the processing plant will be shut down for approximately 20 days in the second quarter for installation tie-ins for the second tailings filter. Please see our earnings release for additional asset updates. With over 250 assets in our portfolio, we continue to expect a steady stream of exciting, positive news flow. I will pass the floor back to David for closing remarks. David Garofalo: Thank you, Jackie. There is indeed lots to get excited about as you look across our portfolio and the various high-quality assets ramping up and entering production. We continue to see compelling upside to our share price as our portfolio assets continue to develop, and as the market gives us credit for this organic growth. Our valuation could be further boosted by accretive growth, but we emphasize that we will remain patient and disciplined as we consider any acquisitions and as we review our capital allocation options going forward. We continue to prioritize accretive growth, as always. However, as we continue to build cash, we view a modest capital return as a signal to the market that we will remain disciplined on our growth and that we have matured as a company. We reached first positive free cash flow in mid-2025. We expect to continue to strengthen our balance sheet with higher GEO volumes, stronger gold prices, and lower costs, as we have eliminated the interest costs and as we continue to rationalize our G&A. Our share price has now been comfortably above our warrant exercise price for some time, and I think it is prudent to highlight this to any warrant holders on today's call. As of 03/31/2026, the company had approximately 14.7 million outstanding share purchase warrants, with each warrant exercisable into a common share at a $2.25 exercise price per share. The warrants are listed on the NYSE American under the symbol GROY.WS and expire 05/31/2027. For more information on exercising warrants, please see our first quarter earnings press release. Thank you everyone for tuning into the earnings call, and we invite you all to join our Annual Capital Markets Day in Toronto and online on June 18, 2026. We will now open the call for questions. Operator: We will now begin the question-and-answer session. There are no questions at this time. I would like to turn the call back over to David Garofalo for any closing remarks. David Garofalo: Thank you. I appreciate it is a very busy time for all of you, and if, in the fullness of time, you have follow-up questions, please do not hesitate to reach out to any one of us. I think you all know how to reach us, and we would be delighted to answer any questions you have. Thank you for your kind attention today, and we will see you shortly. Thank you. Operator: 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 Remitly Q1 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, David Beckel. Please go ahead. David Beckel: Good afternoon, and thank you for joining us for Remitly's First Quarter 2026 Earnings Call. Joining me on the call today are Sebastian Gunningham, Chief Executive Officer of Remitly; and Vikas Mehta, Chief Financial Officer. Results and additional management commentary are available in the earnings release and presentation slides, which can be found at ir.remitly.com. Please note that this call will be simultaneously webcast on the Investor Relations website. Before we start, I would like to remind you that we will be making forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding Remitly's future financial results and management's expectations and plans. These statements are neither promises nor guarantees and can involve risks and uncertainties that may cause actual results to vary materially from those presented here. You should not place undue reliance on any forward-looking statements. Please refer to the earnings release and SEC filings for more information regarding the risk factors that may affect results. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and Remitly assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. The following presentation contains non-GAAP financial measures. We will reference non-GAAP operating expenses, adjusted EBITDA and free cash flow in this call. For a reconciliation of non-GAAP financial measures to the most directly comparable GAAP metric, please see the earnings press release and the appendix to the earnings presentation, which are available on the IR section of our website. Now I will turn the call over to Sebastian to begin. Sebastian Gunningham: Thank you, everyone, for joining our first quarter 2026 earnings call. Q1 was another exceptional quarter for Remitly. We delivered record revenue and adjusted EBITDA, both above the high end of our guidance ranges and another quarter of record adjusted EBITDA margin and net income, and adjusted EBITDA exceeded $100 million for the first time. These results reflect 3 durable characteristics of our business. First, a resilient business model, which led to another quarter of share gains; second, growing contributions from new businesses and categories; and third, continued expense and capital allocation discipline. Each of these durable characteristics continue to compound, giving me great confidence in our ability to generate sustainable long-term growth in revenue, profits and free cash flow. That confidence was reflected in nearly a fourfold increase in the pace of share repurchases this quarter. I want to use my time today to reflect on what I've learned in my first 90 days, discuss our evolving approach to delivering customer value through new products and offerings, and expand how we plan to use AI to drive growth and continued operating efficiencies. In my first 90 days as CEO, I've been very focused on gaining a deeper understanding of the business. I traveled to a number of our global offices, spent time with teams on the ground and conducted internal deep dive spanning product, engineering, marketing, finance and operations. I also spent time talking directly with our customers to understand firsthand what they value most of our product. It's been an intense 90 days. My goal was straightforward: understand what is working, what can work better, and learn as much as I can about the people and the culture that built this great company. I've also made some important people, product and operational changes that are quickly helping accelerate the trajectory of the business. From this period of listening and learning, a clear set of operating priorities has emerged. I have already begun putting them into action. We rely on smaller teams to drive ownership and autonomy. We will distinguish clearly between our core remittance business and newer growth initiatives, allowing each to operate with the speed, focus and rigor as required by the stage of maturity. We will adopt a disciplined approach to building products, starting with customer needs and working backwards. We will embed AI across everything we do, and we have designed the company so that speed is the default. My time with employees and customers also reinforce 3 things I believed about Remitly before joining. First, the culture is genuinely distinctive. There is a missionary energy here and a sincere belief that moving money across border should be reliable, fast and fair, especially for a community that has historically been overcharged and underserved. What sustains that culture is the caliber of the people who carry it. Across every function and every country I visited, I encountered talented, deeply committed individuals who bring real energy and care to this mission every day. That culture and those people are a real competitive asset, and I intend to protect and amplify both. Second, our core strengths, trust, network breadth, and operating scale put us in a strong position to continue gaining share and growing our offerings to better serve the cross-border needs of our customers. My conversations with customers reinforce that trust is the most consequential of these strengths. These are people sending money for life-changing events, supporting family members, covering medical bills, building a future from a distance. For them, knowing the money will arrive reliably, quickly and fairly is paramount. And if things do go wrong, it is important that they know there is an instant 24/7 global structure in place to fix it. As financial services become increasingly automated and digitized, trust becomes more valuable, not less. Our disbursement network, customer support excellence and compliance capabilities create a trust and safety advantage, a durable, hard-to-replicate edge that protects our customers in every corner of the world and strengthens our global platform. Third, I believe AI and stablecoins will accelerate our growth and not just incrementally. Companies like Remitly with trusted customer relationships, complex regulatory dependencies and a proprietary network infrastructure will be great beneficiaries of AI tailwinds. The company now knows I'm somewhat obsessed with this newly found intelligence into our business. As I will explain, we are moving quickly to ensure we take full advantage of AI to move faster, lower costs, improve product quality and compress product development time lines. Stablecoins are a different kind of opportunity, not a universal solution, but a targeted one. In corridors where they offer a clear cost or speed advantage, stablecoins gives us another tool to reduce FX costs, improve settlement speed and efficiency and deliver better outcomes for our customers. With that as context, let me turn to how I'm thinking about the opportunity ahead and why I believe we are only beginning to scratch the surface. When I joined Remitly, I was asked whether I plan to change Remitly's strategy as the new CEO. The answer is no. The vision, the customers we serve, the focus on cost, speed of delivery and trust are right, and they will not change. What I differ, is the pace with which we can achieve our vision and execute our strategy. I have full confidence Remitly will be a large, more diverse provider of cross-border financial services and the most important app for those that send or receive money internationally. To explain why, let me share a framework I've used internally. I think about our opportunities a 4x4 matrix, 4 customer categories on one axis and the 4 primary ways we can deliver value to those customers on the other. The 4 categories are: one, our core senders, our established base who send money for critical nondiscretionary reasons; two, highly valued senders, a fast-growing category with significant untapped share for Remitly; three, businesses, a massive and underserved category for which we are seeing rapid traction even with a very early feature set for this customer. And the fourth category is receivers, the 30-plus million people around the world who receive money through Remitly, most of whom are not senders today. For each of these customers, we are grouping 4 categories of product offerings, broadly defined around sending money, borrowing money, spending money and saving money. At the intersection of the 4 customer and product categories are many unique opportunities to serve our customers with products they need to live their cross-border financial lives. Each customer category and product offering reinforces the others, drawing on shared infrastructure and data to create compounding benefits as we scale. Core Send comprises the vast majority of our revenue today and is the base from which all our offerings are built, leveraging 14 years of experience, network depth and optimized cost structure as well as a DNA of trust and speed that is difficult to replicate. Everything outside of Core Send, we think of as growth accelerators. Our Borrow, Spend and Save products fuel a flywheel around sending money by addressing a broad set of cross-border financial needs. A more complete financial services experience, in turn, drives improved loyalty, higher remittance volumes and diversifies our revenue sources. This matrix is not a change, but a refinement of the strategy we presented at Investor Day. It provides a blueprint for execution and a disciplined lens for prioritization. We will go deep where the opportunity is largest and where we have the clearest right to win. And when I look at where we stand today, we have honestly only just started addressing a handful of these opportunities. I'll provide a brief update on recent progress and initiatives across each of our key near-term opportunities, starting with Core Send. In Core Send, we improved our distribution through new or expanded integration with WhatsApp and ChatGPT and deepened our network reach across every region we serve, improving reliability, speed and access for customers around the world. On the Receive side, in Latin America, we integrated Bre-B, Colombia Central Bank-backed instant payment rail and added Banco Bolivariano as a direct bank partner in Ecuador. In Asia, we added KBZPay in Myanmar, Rocket in Bangladesh and Coins.ph in the Philippines, extending our reach to tens of millions of users with near instant fiat and stable coin wallet-based payouts. And in Africa and the Middle East, we launched new Receive markets, including the UAE, bringing total received countries to 170. On the Send side, we enabled Discover card acceptance and launched access to FedNow and RTP in the U.S., allowing customers to fund transactions instantly from bank accounts while lowering our costs. Underpinning all of this, continued innovation in our payments and fraud system drove card acceptance and authorization rates globally in Q1, reinforcing network strength while improving speed, reliability and the customer experience. In the near term, we are focused on using AI to deliver real-time automated pricing across our 5,000-plus corridors, enabling regional leaders to capture incremental demand by delivering more customer value. We will also apply AI across the Remitly experience to improve the moments that matter most to customers, how long that transfer takes to arrive, how they pay and how we keep them coming back. And we will accelerate the pace of geographic expansion, bringing our leading digital remittance experience to some of the largest, fastest-growing Send and Receive countries in the world. This quarter, we updated our definition of high-value senders to include only those who send 5,000 or more in a single transaction, which better aligns our strategy, focus and resources with the specific needs of these who send higher transaction amounts. This customer needs a high-touch, certainty-first experience. And when we earn that trust, they generate substantially more value per customer than our core senders. In Q1, we continue to remove friction and improve the experience for these customers by increasing send limits with network partners and simplifying the onboarding experience. Our near-term focus for this category is to streamline pay-in methods and improve our risk assessment process while better targeting and addressing the specific and diverse needs of customers within this category. Our business offering continues to scale, growing volumes 30% quarter-over-quarter ahead of expectations. In Q1, we launched our Business Receiver product in 5 new countries, allowing freelancers and contractors in parts of Latin America and Asia to request and receive payments from clients in 26 countries around the world. We also launched a new feature that allows businesses to initiate the payment process by sending a link to the recipient's e-mail or phone, eliminating cumbersome data management and trust issues that often cause friction for small businesses. Our near-term focus for our business offering is continued improvements on the onboarding experience, geographic expansion and a steady drumbeat of features that appeal uniquely to small- and medium-sized businesses sending money internationally. Our Receiver strategy targets the more than 100 million people in the world who receive money in one currency and spend in another. Last month, we reported our first Receiver transaction following the launch of our Receiver & Request product in 6 countries, creating a new source of cross-border volume in countries where we already have a strong Send presence. With this launch, we also introduced a wallet that enables receivers to hold funds in USD or USDC stablecoins and withdraw to local bank accounts, mobile wallets or cash pickup locations. Our near-term focus for receivers is country expansion and enabling widespread access to stablecoin across our wallet offerings. Moving to Borrow, Spend and Save. Last year, we announced a range of products aimed at supporting these use cases, Send Now, Pay Later for our customers' liquidity needs and wallet and card for sending, spending and saving money with benefits. We have seen strong traction with these offerings as we continue to build, test and iterate with revenue more than doubling year-over-year. Building on these learnings and experience, this quarter, we will expand our offering for customers who have a need to Send Now, Pay Later, Spend and Save. For a low monthly fee plan, these customers will receive access to a global debit card to spend, a wallet to save, a short-term line of credit offered by a bank partner for remittances and benefits to reward loyalty, remittance use and the timely payment of credit balances. We believe there is a strong preference among customers with short-term liquidity needs for a card-based experience, where loyalty and rewards are a central feature. This will be the first of our Remitly card offerings that target specific use cases, addressing the unique needs of a broad cross-section of our customers. We have a long list of ideas for our card platform beyond Send Now, Pay Later that we plan to execute over the coming quarters. Our goal is to make the Remitly card the most versatile and best debit card in the world for the 300 million international migrants and 80-plus million small businesses worldwide. Our strategy is simple: expand the value and capabilities we deliver to the broad range of people and businesses sending money globally. Investors should expect a meaningful acceleration in the pace of product enhancements as we expand our offerings, guided by the operating principles we have put in place around clear ownership, distributed accountability and a bias for speed. Finally, I want to touch on the benefits we expect to derive from AI. Over the past several months, many of our peers have reported significant AI-driven gains in productivity and cost efficiencies. The pace of AI advancement is real and the impact is substantial. Remitly is fully part of the shift, and I will lead that effort aggressively. We have organized our thinking around 3 types of AI benefits. The first is the cost benefit, which drives greater operating efficiency and long-term cost savings. We've gone methodically through the organization function by function, to identify where we can use AI going forward to drive efficiency gains while maintaining or improving productivity. Through this process, we have identified opportunities to streamline our organization, building on the more than 250 headcount reductions and over 50 roles redeployed through efficiency gains year-to-date. That is a deliberate choice grounded in our confidence that AI-driven efficiencies can allow us to do the same work and in most cases, more work with a leaner organization. The second benefit of AI is speed, which helps unlock a faster operating cycle. Throughout our product and engineering teams, a new profile of skill set is emerging that combines product design, engineering depth and AI fluency in one person. We are calling them knowledge development engineers, and they are helping us disrupt the decades-long bottlenecks of product ideation, building, testing and launching from months and years to days. I would note that eliminating one bottleneck quickly reveals the next. So, as a company, we are actively rethinking every step in the process to deliver products that are, that move seamlessly from idea to customer value to deliver exceptional products and services. The speed AI benefit is harder to quantify than the cost benefit, but we believe its potential compounding effect on our ability to build, ship and iterate will be an enormous structural tailwind. The third and most consequential benefit of AI in the long run is the trust benefit. For our customers, trust means safety and comfort, speed and fair pricing and a high-quality person to talk to when things go wrong. AI can improve our ability to deliver on all 3. Take localization at scale. With AI giving us a broader and deeper understanding of our customers, we can now tailor the experience across every corridor with a level of personalization that wasn't previously possible. That relevance builds trust and trust underpins everything we do. 3 to 4 years from now, I believe this company will generate significantly more revenue with roughly the same number of people. The AI benefits is how I believe we will generate the investment capacity to get there, and we intend to put a large portion of that capacity back into growth. Let me close with this. Q1 was an exceptional start of the year; record results above guidance and a business that continues to demonstrate its resilience and its upside. But what energizes me most is not what is behind us. It is what lies ahead. We have a core business that is growing and improving. We have a strong portfolio of growth accelerators that are at the very early stages of what they can become. The early benefits of AI are beginning to create real measurable capacity for investment. And we have a team and a culture, I believe, is among the most mission-driven I've encountered in my career. I want to thank every member of the Remitly team. The execution, the energy and the commitment to our customers that shows up every day are what makes these results possible. And I want to thank our investors for their continued confidence and trust in this company. With that, I will turn the call over to Vikas. Vikas Mehta: Thank you, Sebastian, and good afternoon, everyone. We delivered another quarter of profitable growth and strong free cash flow, reflecting continued share gains and solid execution. First quarter revenue was $453 million, up 25% year-over-year and $16 million above the midpoint of our guidance. Revenue outperformance this quarter was driven by a number of factors. Recent regulatory changes in the United States drove an increase in customers' use of digital remittances, resulting in record new customer acquisitions. We also benefited from elevated demand associated with higher tax refunds in the U.S. and favorable market conditions in key corridors. Adjusted EBITDA was $102 million, $19 million above the midpoint of our guidance. Adjusted EBITDA outperformance was driven by higher-than-expected revenue, lower-than-expected transaction losses, and short-term pause in hiring following in-quarter headcount reductions. Now let me share an overview of our first quarter results and then provide our outlook for the second quarter of 2026 and our updated guidance for the full year. Unpacking revenue growth drivers for Q1, Send volume grew 37% to $22.1 billion. Supporting this strong volume growth, Send volume per active customer increased to nearly $2,300 or 14% year-over-year growth, a record on both an absolute and percentage growth basis. This was driven by growth in both transactions per active customers and record growth in average transaction size as we continue to win share and gain traction with high-value senders and business customers. Quarterly active customers grew 20% year-over-year to over 9.6 million, ahead of our expectations. QAU growth accelerated quarter-over-quarter, reflecting the shift in offline to online conversions associated with recent regulatory changes in the United States. Our Skip the Line campaign, highlighting the lower cost and convenience of digital remittances has been effective in attracting new customers seeking alternatives to traditional cash-based remittance methods. QAU growth was further supported by improved retention, reflecting enhancements in the core product to improve speed, reliability and the overall customer experience. As expected, volume and revenue exceeded QAU growth, as we saw a greater mix of Send volume from high-value senders and businesses. Our take rate this quarter was 2.05%, in line with expectations. The year-over-year change was driven primarily by growth in volume from high-value senders and business customers as well as a higher digital payout mix, which improved by more than 250 basis points year-over-year. As I have discussed in previous quarters, take rate is heavily influenced by mix, so it is not a great metric for analyzing our underlying business performance. We believe RLTE dollar growth and RLTE per active user are more indicative of our success than take rate when analyzing our performance. Now let me dive deeper into our revenue performance from a geographic and new products perspective. From a Send perspective, U.S. revenue grew 25%, driven by continued share gains. Rest of the World grew 31% year-over-year, showcasing the geographic diversification of our business. Our broad footprint means no single corridor disproportionately dictates our outcomes. Notable highlights from the Rest of the World this quarter include continued strength in the UAE, where we saw a meaningful increase in activity. Send volumes in the UAE rose over 150% year-over-year due in part to a short-term surge in volumes during a period of heightened regional uncertainty. On the Receive side, revenue from transactions to regions outside of India, the Philippines and Mexico grew faster than the overall revenue growth and now comprise over half of our revenue mix, further diversifying our business. I'll now move to discuss the performance of our growth accelerators. As a reminder, growth accelerators include all customer categories and offerings outside of core Send. Now let me dive deeper into a few notable highlights for Q1. As Sebastian shared earlier, this quarter, we are simplifying our structure for defining customers based on average transaction size. High-value senders are now those who send a transaction of $5,000 or more. This change reflects a refined focus on customers whose needs are specific to larger transaction amounts. In Q1, high-value senders volume grew 73% year-over-year, reflecting a 220 basis point year-over-year increase in mix. We continue to see outsized growth from high-value senders as we improve the customer experience and expand and refine our targeting of this customer category. And we'll continue to build on this momentum with product enhancements that further reduce friction and cater to the specific needs of these senders. Remitly business continues to scale ahead of expectations. We ended Q1 with over 20,000 Remitly business users and more than 30% quarter-over-quarter growth in business Send volume. Send volume and RLTE contribution per business customer was more than 2x higher than our core during the quarter. We launched our Receiver product this quarter, enabling direct access to the more than 30 million individuals and businesses who receive funds today from Remitly senders, but are not yet themselves Remitly customers. While nascent, we are very optimistic about this new offering. Now moving to Borrow, Spend and Save initiatives. Revenue from these offerings more than doubled in Q1. This quarter, we are expanding our Send Now, Pay Later offering, the comprehensive and simpler card-based experience for customers who have a need to Send Now, Pay Later, spend and save. This evolved offering will provide customers with a global debit card, a wallet, a short-term credit line for remittances funded by a banking partner and rewards for timely payments, all for a low monthly plan fee. As with prior Send Now, Pay Later offerings, this product will be made available only to existing Remitly customers with demonstrated repayment behavior. Unit economics for this product are expected to be strong as it will generate plan and interchange fees and float income. The short-term loans will be issued by a bank partner and the lines of credit tend to perform better than non-recourse advances. Moving forward, we expect the majority of growth in our Send Now, Pay Later borrowing solution to come from this card-based format. Continue to expect revenues from new products as we previously defined to more than double this year. High-value senders are expected to be additive to prior expected growth ranges associated with new products. Now including high-value senders, revenue from all growth accelerators is expected to be around 5% of total revenue in 2026 and exceed 10% of total revenue by 2028. These growth accelerators address customer needs that are adjacent to core senders, providing an efficient means of diversifying our business revenue base, while driving cost synergies from the shared use of our technology. Turning to our focus on driving profitable growth on Slide 13. As I noted earlier, Revenue Less Transaction Expenses or RLTE, is a useful indicator of our business model's long-term success. RLTE dollars grew 28% to $308 million, outpacing revenue growth and reflecting strong customer activity, improved partner economics, routing optimization and economies of scale. RLTE as a percentage of revenue this quarter was 68%, improving 156 basis points year-over-year. We remain focused on long-term RLTE dollar growth as we continue to attract new customers, innovate with new products and scale. Transaction expenses this quarter were $145 million and as a percentage of revenue was 32%. Excluding provisions for transaction losses, other transaction expenses were $124 million, improving 114 basis points year-over-year as a percentage of revenue and reflecting improved network economics. Provision for transaction losses was $21 million or 9.3 basis points as a percentage of Send volume, better than our expectations as we continue to benefit from efficiencies afforded by the AI-driven fraud prevention and detection model deployed late last year. With that, let me walk you through the specific non-GAAP expense categories. Notably, we delivered leverage across all expense categories once again in Q1. In Q1, we reduced our corporate workforce by more than 10% as a part of a broader effort to sharpen our organizational focus and drive efficiencies across the business. These were not easy decisions but were necessary to ensure we continue driving operating efficiencies as we scale our growth accelerators. Marketing investments remain disciplined and growth focused. We spent $82 million on marketing in Q1, up 20.7% year-over-year. As a percentage of revenue, marketing expense was 18.2%, improving more than 67 basis points year-over-year due to continued efficiencies. Marketing spend per active customer was $8.56, up 0.7% year-over-year, in line with our expectations. This quarter, we launched a Skip the Line campaign, a strategic initiative targeting off-line senders in the U.S. who historically relied on in-person cash agents to send money to Latin America. By meeting these customers where they already are, whether on WhatsApp or on billboards in their neighborhoods, we were able to drive meaningful growth in new customer acquisition from a category that is difficult to reach. Campaign results across our targets show strong lifts in Remitly awareness, consideration and intent to try. Our Lifetime Value to customer acquisition cost ratio was above 6x, while our payback period remained under 12 months. Continued efficiencies reflect growth in customer acquisition through unpaid channels and word of mouth. As a reminder, our marketing investments drive returns for many years beyond our initial investment given our growing base of repeat users. Customer support and operations expense were $25 million and as a percentage of revenue was 5.5%, improving 69 basis points year-over-year and continuing a multiyear trend of steady operating leverage. Today, over 97% of transactions are completed without any agent contact, a remarkable milestone that reflects both the reliability of our service and the sophistication of our AI-driven support capabilities. That customers do need help, our AI-based assistants are meaningfully reducing the need for human intervention, and early customer satisfaction scores tell an encouraging story with AI-led interactions performing as well as human agent interactions. Technology and development expense was $58 million and as a percentage of revenue was 12.7%, improving by 127 basis points year-over-year. Technology and development expenses grew 14% year-over-year, meaningfully below the pace of our revenue growth. We are beginning to see the benefits from embedding Agentic AI deeply into our engineering and product development teams. Our engineers are using AI-assisted code generation and automated testing to compress development cycles, ship faster and reduce the cost per feature delivered. We are still in the early innings and expect AI to be a durable contributor to technology-related operating leverage going forward. G&A expense was $41 million, growing only 2% year-over-year, our lowest growth rate ever as a public company. We delivered significant leverage, 209 basis points as a percentage of revenue year-over-year, reflecting deliberate and disciplined attention to our cost structure. In total, expense efficiencies this quarter reflect both benefits of operating leverage and a pause in hiring as we optimize our organization to better enable Sebastian's operating principles. Moving forward, we expect AI benefits to contribute significantly to the funding of our growth accelerators. Strong revenue growth, combined with efficiency and discipline, led to adjusted EBITDA of $102 million. We also delivered $49 million of GAAP net income, more than 300% growth compared to $11 million of net income in the first quarter of 2025. As we noted at Investor Day, our North Star is driving free cash flow growth while managing dilution and Q1 demonstrated continued progress on both fronts. Free cash flow grew to over $70 million in Q1. The difference between adjusted EBITDA and free cash flow is explained by working capital, capital expenditure and restructuring payments. Outstanding shares were 210 million, down quarter-over-quarter for the first time in our company's history, reflecting our disciplined approach to dilution management, including an elevated pace of share repurchase activity. Stock-based compensation was down 23% year-over-year, coming in at 6.1% of revenue, approximately 382 basis points lower than the first quarter of 2025. This benefit was partially aided by forfeitures associated with headcount reductions in Q1. For all of 2026, we expect stock-based compensation to increase in absolute terms year-over-year, but decrease as a percentage of revenue, as grants associated with recent leadership changes are partially offset by higher forfeitures. Q2 stock-based compensation will be elevated, reflecting both hiring activity that shifted out of Q1 and challenging year-over-year comparisons, as forfeitures in prior year were concentrated in Q1. We were meaningfully more active in repurchase of shares in Q1, opportunistically buying back $44 million or 2.8 million shares, nearly double the shares we repurchased since launching the program in the second half of last year. This reflects conviction in our long-term growth opportunities and a view that share repurchases are an attractive use of capital. We'll continue to be disciplined and opportunistic in how we deploy capital towards buybacks. We ended the quarter with around $650 million of cash. As a reminder, cash and access to liquidity are strategic assets in scale global money movement businesses like ours. This quarter, cash on hand, along with our revolving credit facility were optimally used to fund customer transactions and satisfy regulatory safeguarding requirements across thousands of corridors and regulatory jurisdictions. Our top priority for free cash flow after inorganic investments and customer prefunding requirements remains the repurchase of shares. With that, I'll move to our outlook. For the second quarter of 2026, we expect revenue of $483 million to $485 million or 17% to 18% growth. Second quarter growth reflects the shifting in timing of Ramadan and Easter to earlier in the year, elevated U.S. tax refunds benefiting Send volumes in Q1 and increase in volumes late in Q1 associated with geopolitical events and tougher comps. We continue to see strong momentum in our core, and we expect the continued shift towards digital remittances, share gains and the scaling of our growth accelerators to contribute to total company revenue growth of around 20% in the second half of the year, an increase relative to prior expectations. Breaking down our revenue growth expectations. In Q2, we anticipate Send volume growth to exceed revenue growth and revenue growth to be in line with quarterly active customer growth. Send volume per active customer is expected to grow in the mid- to high single-digit range, supported by a shift in mix toward high-value senders and businesses. For the full year, we expect revenue between $1.96 billion and $1.975 billion, reflecting a growth rate of 20% to 21%. As noted, we expect growth to accelerate in the second half of the year, reflecting strong demand in our core and additional contributions from our growth accelerators. Now let us pivot to profitability and expense guidance. Starting with RLTE, we expect Q2 RLTE margins to be modestly higher year-over-year, driven primarily by normalization of transaction losses. As a reminder, Q2 of last year was impacted by an outsized transaction loss stemming from a sophisticated fraud attack in May. For the full year, we expect R LTE margins to be broadly in line with 2025 on a normalized basis. As always, transaction loss rate may fluctuate quarter-to-quarter, and we remain disciplined about optimizing customer lifetime value while rigorously managing risks across our platform. Shifting to marketing. We expect continued marketing efficiencies in 2026 as we prioritize high ROI marketing opportunities. For Q2, we expect marketing spend per QAU to be slightly higher year-over-year as we engage customers around the timing of the World Cup, expanding our Skip the line Campaign to select countries and launch brand marketing in the UAE. Putting this all together, we expect Q2 adjusted EBITDA to be between $86 million and $88 million, translating to an adjusted EBITDA margin around 18%, an expansion of around 250 basis points year-over-year. For the full year, we expect adjusted EBITDA to be between $370 million and $385 million, representing an adjusted EBITDA margin of around 19%, also an expansion of around 250 basis points year-over-year. This improved EBITDA outlook reflects a more favorable outlook of revenue and our commitment and ability to balance growth and profitability, leveraging the benefits of AI as we continue to invest in driving top line growth. Our outlook also assumes normal levels of transaction losses for the remainder of the year. We expect to generate positive GAAP net income each quarter this year and strong year-over-year growth in GAAP net income and free cash flows. To summarize, in Q1, we delivered another quarter of exceptional results across our key financial metrics, achieving 25% revenue growth and 22% adjusted EBITDA margins. We also delivered record GAAP profitability and strong free cash flow, underscoring the power and scalability of our business model. With that, Sebastian and I will open up the call for your questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang: Nice results here. I want to, if you don't mind, Vikas, I know you went through this in the guidance, but maybe can you drill down a little bit more in the upside factors in the quarter, the thinking for the second quarter and the balance of the year. There's a lot of moving pieces with the tax refunds being higher and the remittance tax, and you talked about some of the geopolitical favorable market conditions and whatnot. So how does this impact your thinking on seasonal trends for the second quarter and second half? What new risk might there be here versus upside opportunity that may have been different than, say, 90 days ago? Vikas Mehta: Tien-Tsin, first of all, thank you for the question. And as I shared on the call, Q1 was an exceptional quarter, really strong highlights across the board, all the way from record new customer acquisition to record Spend per quarterly active users. Some of the highlights in the quarter included just the positive impact that we got from remittance tax and the shift from offline to online customers that aided our record new customer acquisitions. In addition to that, the higher U.S. tax refunds as we have seen, especially in the core sender segment, this is a really positive impact that we saw. Again, a lot of it is art and science, but clearly, there was some correlation there, especially in the late March time frame. Beyond that, as we highlighted, holiday timing, both Easter as well as Ramadan moved up a couple of weeks earlier in the year, which gave us a positive overall Q1 shape. Finally, as we noted, the global uncertainty with regards to geopolitics, especially in the Middle East corridors, created an upside on the UAE volumes, which grew north of 150%. So overall, really strong quarter. And as you know, Q1 becomes the foundation for full year. And with the record new customer acquisition, that creates a nice follow-through in out quarters. As we highlighted, the full year guidance is north of 20%, which means that in the second half of the year, there is a reacceleration that happens. And especially this is driven by both the strength in our core business as well as propelled by the growth accelerators Sebastian talked about. So overall, we remain very confident as we start the year. And just the overall business model that we have, which drives predictability, resilience as well as diversification gives us more and more confidence. Operator: Our next question comes from the line of Ramsey El-Assal with Cantor Fitzgerald. Ramsey El-Assal: I wanted to ask about your M&A approach. It seems like in the last several quarters, the kind of growth vectors in your business have just exploded just in terms of product proliferation, monetizable services. Is that changing the way you're looking at M&A to have so many more opportunities to sort of accelerate these different growth paths through M&A? And then also, if you could just clarify one point, Vikas, on Tien-Tsin's last question. How should we think about that 1% cash remittance tax impact, which has been positive trending through the rest of the year? Is it something that you guys are counting on? Or is it something that you're seeing now? Are you're not sure you'll continue to see? Just a finer point on that, too. Sebastian Gunningham: Yes. So let me take the acquisition question. Clearly, as we see all the growth in these new customer categories, the high-value senders, the business senders, and the receivers, the volume, we are starting to analyze acquisitions a little bit different. As you know, we have not been a very acquisitive company. We don't, we are starting the process to understand what does it mean to have this kind of growth in these categories and where can we accelerate that. On the core business, I don't, as of right now, standing here today, I don't see anything obvious on the horizon. But I do, but we are, we're building up the muscle to learn how to do this, and I anticipate that sometime in the future, we will probably be able to answer this question more specifically. On the 1%, we don't have any science behind the 1%. We've got a lot of anecdotes, and we saw this in Q1, I suspect it's probably going to continue for the remainder of the year. It's hard to tell whether we captured a lot of it now or a lot of it is coming. There still is a fairly large group of people that transact in cash. I think it's inevitable that this will continue. Maybe it will take a couple of years, maybe it will take the remainder of this year. But as I said, we take it as an article of faith that it was one of the tailwinds to our business, and we expect it to continue for the rest of the year. Vikas Mehta: And just to add a point or two to Sebastian's thoughts. We'll continue to invest in the Skip the line campaign. We have seen a lot of success coming through that. And secondly, the product enhancements, we want to meet where the customers are. As we shared earlier in the quarter, we came out with enhancements to WhatsApp. We launched a ChatGPT integration. So we feel that by creating strong product enhancements, we can continue to drive the offline to online shift. Operator: Our next question comes from the line of Darrin Peller with Wolfe Research. Darrin Peller: Look, I want to back out, if we take out of the equation, the, let's call it, the remittance tax, the Mid East impact or the, even tax refunds, just anything that might be shorter term and not a business model opportunity for you guys. When I think of the sustainable drivers of upside, the growth accelerators effectively, help us understand where they came in versus your prior expectations. I mean if you looked at high-value senders or business or receivers or even some of the borrow on Spend and Save areas, I'm curious to know where they're trending versus what you initially thought. And then maybe a little more on go-to-market around high-value senders and business just because it seems like such a great, I mean, it's really contributing to the volume growth rate. And I know it's an area of real focus for you guys. So I'm curious where you see that going from here in terms of your ability to invest in it and ensure that it stays a key contributor. Sebastian Gunningham: Yes. So I'll make the comment that, first of all, these are not segments that we invented. As we looked at all the data and we looked at the customers coming to Remitly, we started to see this high value greater than $5,000 transactions, $10,000, $50,000. And so it was customers finding us and starting to use the platform. And so we've done, this is not, we have a lot of ideas to make the product that much better. So without much investment we've started, we see a lot of growth in this area, and it's overachieved all our plans so far. As of right now, we've now dedicated a full team. We have a full engineering team. So we're launching new features for that customer daily at this point. The business, the same thing happened. We started to see small businesses using the Remitly infrastructure. As you know, if you're a small business in the U.S., it's very painful to move money across the world. And so we've done the same thing. That business continues to overachieve our plans. We've now dedicated a team. We have a full engineering team. We have a new, that's a different go-to-market model. We have more partnerships. So we are also seeing week-to-week improvements. And as you know, that's a very large market. We don't, you don't need to be, you don't need to win that much to make it a pretty big business. I was in Manila last week, and I was talking to a group of freelancers, and this is a very active group of people who are requesting money to be paid from the U.S. the virtual assistants, virtual salespeople, and this is happening all over the world. So we see a lot of traction there. And then the final category is a little bit more unknown. That's these 30 million customers around the world who receive money from Remitly. We've launched our first set of products. It's very early days. I don't, that's not contributing much yet. We think it's a big opportunity, but that we have to navigate our way through that, see what the right products are. So overachievement in high-value senders, and we're doubling down on that, overachievement on the business side, and we're doubling down with that. And on the receiver side, seems a very exciting market, TBD. Operator: Our next question comes from the line of Cris Kennedy with William Blair. Cristopher Kennedy: Just wanted to follow up on the Remitly, the business initiative. Clearly, it's outperforming your expectations. But is there any way to frame kind of how that business is ramping relative to the high-value send initiative that was launched maybe 18 months ago? Sebastian Gunningham: Yes. I think from; the high-value sender is an extension of our core sender market. So if you look at the product needs of that sender, it's a close cousin to all the needs of the core sender. The business sender is different, has different requirements. They need bulk send, they need different integrations to their ERPs and payment systems. So it's a bit of a different customer. So the, it's a little bit of an unfair comparison because the go-to-market is going to be different. And we've seen the overachievement without much go-to-market investment yet. And so I'd say that if you were to look at the numbers, it's probably pretty, it's a pretty similar ramp of growth between the high-value senders and the business senders, but quite different potential as to what we need to do to continue to accelerate that growth. Operator: Our next question comes from the line of Aditya Buddhavarapu. Aditya Buddhavarapu: Could you just give an update on the rollout of the wallet and card? The U.S. was, of course, the first market, but any update on maybe the rollout into other markets during 2026? And also maybe somewhat related to that, the rationale behind focusing on the card as the main channel for Send Now, Pay Later product. What did you see which made you take that route? Sebastian Gunningham: Yes. Well, first, I'll start by for the last year, we've been experimenting with this Send Now, Pay Later idea, which is a short-term liquidity loan and we've had a very, very strong signal. So we, this is a killer idea, we think. And we're going to, customers have told us that the use of a card is extremely valuable. So we're wrapping up a number of ideas under this card construct, which obviously are going to help the economics and allows us to really simplify how we go to market with this. Remember that the Send Now, Pay Later is an invite only. The customer already sent once on Remitly. We know some stuff. So we think it's a very interesting product. The signals of all the testing over the last year are very good. And so we see that launch as quite a lot of potential. We've obviously got a long list of things that we're going to add to a card to make it, to make customers use it and loyalty, and you can imagine all the things that we can add to a card. It is U.S.-focused first. We're doing it with a bank partnership. But our ambition is to make this global. But as of right now, we're going to go for the next few quarters with a U.S. launch only. Operator: Our next question comes from the line of David Scharf with Citizens Capital Markets. Unknown Analyst: This is Zach on for David. Congratulations on another strong quarter. I wanted to dig in a little bit on the mix with the high-value senders. So obviously, as it's ramping up, it sounds like over 10% of revenue by 2028. I want to see if there's any kind of commentary or anything to kind of highlight in terms of how that shift will impact any kind of geographic mix or concentration or any expectations for loss rates versus the kind of core senders book? Vikas Mehta: Yes. Thank you for the question. As we highlighted, we're very excited about the high-value senders customer category. And as we highlighted, this used to be part of just our core Send, but we are increasing our focus putting a dedicated organizational structure and muscle behind it, putting a product thought process as well as marketing focus around it. And as we do that, we see the potential is massive, right? So we're super excited for the potential here. Even as we do that, in parallel, we are seeing very strong performance. As you saw this quarter, the high-value senders volume grew 73%. And as we look at a lot of product enhancements, increasing our Send limits, we feel that the volume, especially on the, call it, 10,000 plus, 25,000 plus, 50,000 plus, a lot of those are really big greenfield opportunities for us where we can start attracting more and more customers. If you even think about our marketing message, that is more generic. And as we try to make it more targeted and focused towards these customers, we feel the awareness as well as the overall service that we provide should resonate really well. So very excited about it. The availability is across the globe, same as what our core sender availability is. So from a mix, from targeting the customers, we believe that it should be a global adoption and global growth, and that makes it even more exciting for us. Operator: Our next question and final question comes from the line of Zheqian Deng with KeyBanc Capital Markets. Zheqian Deng: This is Zheqian on behalf of Alex Markgraff. And I was wondering if you could provide more context on Remitly in ChatGPT, any financial consideration in it? And also a question on WhatsApp expansion. How can we assume Remitly to expand on this? Obviously, there's more geo coverage, but seems there's also an opportunity on the Receive side partnership as well. Sebastian Gunningham: Yes. Thank you. Good question. So no financial interchange with ChatGPT. These are early days. We're clearly entering a time where customers are probably going to interface with all their financial services with different interfaces and be it WhatsApp and WeChat and ChatGPT, all the LLMs and the chats and eventually agents also. So we're, we have a lot of experiments going on. We've announced the WhatsApp integration, which allows customers to interact directly with Remitly through WhatsApp. ChatGPT is an early experiment. We see some use there, and it's growing day by day. I follow that every day. And we have a long list of ideas to make sure that all the Remitly infrastructure and all the benefits of the cost efficiencies, the speed and the service behind moving money is available and relevant if these evolutions in how people interface with money movement changes. So early days, good signals so far, and we'll keep you posted on what the next set of ideas are. Operator: Thank you. This concludes the question-and-answer session. Thank you for participating in today's conference. This concludes the program. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Hello, and welcome to the Taseko Mines Limited 2026 First Quarter Earnings Conference Call. Please note that this call has been placed on mute to prevent any background noise. I would now like to turn the conference over to our Vice President of Investor Relations, Brian Bergot. Please go ahead. Brian Bergot: Thank you, and welcome, everyone, to the Taseko Mines Limited 2026 First Quarter Conference Call. The news release and regulatory filing announcing our financial and operational results was issued yesterday after market close and is available on our website at tasekomines.com and on SEDAR+. I am joined today in Vancouver by Taseko Mines Limited's President and CEO, Stuart McDonald, Taseko Mines Limited's Chief Financial Officer, Bryce Hamming, and our COO, Richard Tremblay. As usual, before we get into opening remarks by management, I would like to remind our listeners that our comments and answers to your questions will contain forward-looking information, and this information by its nature is subject to risks and uncertainties. As such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, I encourage you to read the cautionary note that accompanies our first quarter MD&A and the related news release, as well as the risk factors particular to our company. These documents can be found on our website and also on SEDAR+. I would also like to point out that we will use various non-GAAP measures during the call. You can find explanations and reconciliations regarding these measures in the related news release. Finally, all dollar amounts we will discuss today are in Canadian dollars unless otherwise specified. Following opening remarks, we will open the phone lines to analysts and investors for questions. I will now turn the call over to Stuart for his remarks. Stuart McDonald: Thank you, Brian, and welcome, everyone, to our first quarter earnings call. As usual, I will start with an overview of our recent operating results, and Bryce can then review the financial performance. It was an exciting quarter for us with the startup at Florence and first copper from that new operation, but I will start today with our Gibraltar mine, which had another solid quarter. Steady production that we saw in the second half of last year continued into the first quarter. The mine produced 30 million pounds of copper and just over 700 thousand pounds of molybdenum, which was generally in line with our expectations. Head grade of 0.25% was slightly above our life-of-mine reserve grade, and copper recoveries of 83% also benefited from the higher-quality ore from the lower benches of the Connector Pit. Mill throughput was slightly lower this quarter as we focused on optimizing copper recoveries from the higher-grade ore, and we also had some unplanned mill downtime. Overall, it was a good production quarter at Gibraltar. We did see some operating cost increases in the period as Gibraltar's C1 cash cost increased to $2.63 US per pound produced. That is about 6% higher than the previous quarter and was impacted by inflation in a few areas, most notably diesel prices and explosives. With the situation in the Middle East, diesel prices have increased about $0.50 per liter compared to last year—those are Canadian cents—which represents $0.15 US per pound of copper at Gibraltar. We are also seeing higher costs for explosives as the market for ammonium nitrate has been affected by a plant outage in the US. Repairs and maintenance was also higher this quarter, although that was more of a timing issue related to some key repairs, and we do not expect that level of spend to continue for the rest of this year. Offsetting those factors was a strong quarter from molybdenum production, which continues to provide a meaningful by-product credit, and we expect similar moly grades for the remainder of this year. Gibraltar's SXEW plant also contributed 733 thousand pounds of copper cathode production in Q1, and we were able to keep that plant running through the winter months, which was a positive. We stopped leaching operations at Gibraltar in April to complete the tie-in of a second leach pad, and that should support higher cathode production going forward. Turning to Florence now, it was a major milestone that we achieved in late February with first copper cathode production. This is a testament to the perseverance and technical expertise that our project team demonstrated over the last decade to bring this project through the PTF test program, permitting, a well-executed capital project, and now finally into commercial production. In Q4, we started injection of solutions into the wellfield, and the initial flow rates were higher than expected. This allowed for faster acidification of the ore body, and solution grades increased faster than planned, reaching targeted levels in January. The commissioning of the SXEW plant was completed in mid-February—it was a few weeks behind schedule—and by that time, we had built up an inventory of copper in solution, and we harvested 1.5 million pounds of cathode over the remainder of Q1. In recent weeks, our operating team has done an excellent job of stabilizing the whole circuit from wellfield through to cathode production. We now have approximately 90 production wells producing copper at a consistent daily rate in the range of 55 thousand to 60 thousand pounds a day. This is in line with our expectations for the initial wells at this stage and represents another significant de-risking step for the project. Now our focus is on ramping up, which means expanding the wellfield to increase flow rates and copper production. We currently have five drill rigs operating, and after a slow start, we have seen drilling productivities improve in the last few weeks. This month, an additional 20 production wells will come online. Then later in the summer, an additional group of 26 new wells will begin producing, and further groups of wells will be added every month for the remainder of the year. As the wellfield expands, we will see higher solution flows and PLS grade, which will allow us to achieve a 30 to 35 million pound target for the year. It is important to note that production will not be perfectly correlated to the number of wells, as each ore block has a slightly different ramp-up profile, and the new wells added to the perimeter of the wellfield will improve the performance of the existing inner wells. We continue to expect 30 to 35 million pounds of copper production from Florence this year, with production weighted to the second half as new wells are put into production. Our target is still to achieve 80 to 85 million pounds of copper production next year, in 2027, which is the steady-state capacity of Florence. Lastly, a quick update on Yellowhead. Our project team remains quite busy advancing environmental assessment work, and following on from the community open houses that we hosted last fall, we are now incorporating feedback from stakeholders to complete the detailed project description. We expect to file that this summer, which will lead towards a readiness decision and the next phase of work. Also, just last week, the Government of British Columbia announced the addition of new major projects to its priority projects list, and Yellowhead Copper was included. This is a clear message that the province recognizes the value of our Yellowhead project. We are continuing to work closely with the Simpcw First Nation, the Province of BC, and the Government of Canada to move the permitting process forward as efficiently as possible. I will now turn the call over to Bryce. Bryce Hamming: Thank you, Stuart, and good morning, everyone. Overall, despite some cost inflation at Gibraltar, the strong production and sales translated to another strong financial performance in the quarter. As Stuart mentioned, Gibraltar copper sales were 27 million pounds in the quarter, lower than the 30 million pounds that we produced due to shipment timing. This included 938 thousand pounds of cathode sales. This build-up of concentrate inventory is expected to be sold in the second quarter. Moly sales were 708 thousand pounds and benefited from higher moly grade in the Connector Pit. Together, copper and moly sales generated $237 million of revenue in the quarter, which is the highest quarterly revenue generation for the company to date. Moly revenues were more than double the same period in 2025, benefiting from the higher production levels and roughly 25% higher moly price, and today it is over $28 per pound. Total site costs in the first quarter were $142 million, which includes $15 million of capitalized stripping costs. This is 13% higher than Q4 last year and includes the cost inflation that we talked about. For the quarter, Taseko Mines Limited generated $94 million of adjusted EBITDA, $115 million of earnings from mining operations, and $94 million in cash flow from operations. Net income in the quarter was $17 million, or $0.05 per share, and on an adjusted basis was $28 million, or $0.08 per share, after removal of unrealized fair value adjustments. Financial performance and adjusted earnings were impacted by the copper collars we currently have in place. We put these collars in place last year to support our project finance and our ramp-up of Florence Copper. These collars reduced our effective selling price to $5.40 US per pound in the current quarter, as compared to the LME, which averaged around $5.83 in the quarter. As a reminder, these collars roll off in June, with 27 million pounds remaining for the second quarter, at which point we will begin realizing the full LME price up to a much higher level of $7.50 and $8.50 US per pound. There is no limit after Q3 at the moment. It is also worth noting that as Florence begins to generate free cash flow later this year, we will likely revert to our previous practice of just purchasing out-of-the-money copper price puts with shorter time horizons—say, a quarter or two out—which is to protect against shorter-term copper price volatility. That lower strike will have a modest payment of premium to provide that downside protection, and that strategy of purchasing copper puts outright does not limit our copper price upside. Now that we are getting to the end of our development and ramp-up of Florence, Florence Copper reported sales of 600 thousand pounds of cathode in the quarter, with a balance of production of 900 thousand pounds in finished inventory. We also had 600 thousand pounds of copper in solution as what we call work-in-progress inventory. Direct costs associated with the cathode production at Florence in the quarter were $10 million, which is split across these inventory amounts. Our operating segment note—refer to Note 22 in our financials—now shows our revenue and cost of production at Florence, and it showed $4.5 million for the quarter, so no initial profit was recognized on our first sales of Florence cathode. In the first quarter, we capitalized $21 million of commissioning and start-up costs incurred at Florence. We also capitalized wellfield development costs of $18 million for new wells being constructed. These drilling and well development costs will continue to be capitalized as sustaining capital throughout the operation’s mine life, and they will be depreciated over the useful life of the well on a units-of-production basis from the copper recovered. Next quarter, with increasing production from Florence’s SX facility, we will see much less capitalized site operating costs, with most of the operating cost expensed as cost of production as cathode is sold. We ended the quarter with total available liquidity of $322 million, including $169 million of cash. With stable cash flows being generated from Gibraltar combined with our rising production and cash flow from Florence, our liquidity should be maintained in the second quarter and begin increasing in the second half. As our liquidity grows, we will look to begin opportunities to reduce debt and delever later this year. I will now turn the call back to the operator for questions. Operator: We will now open the call for questions. A quick reminder before we start the Q&A: press star and the number one on your telephone keypad to raise your hand and enter the queue. If you would like to withdraw your question, simply press star one again. We will take our first question from Dalton Baretto from Canaccord Genuity. Please go ahead. Dalton Baretto: Thank you, operator. Good morning, Stuart and team. I am trying to unpack this whole diesel and asset exposure a little bit more. I know you have some context on that. Let us start with the diesel. I know you highlighted the impact on C1 cost, but outside of that, when you look at your cap strip at Gibraltar and then the wellfield deployment at Florence, what sort of impact would you anticipate there? Thank you. Stuart McDonald: Hi, Dalton. It is Stuart here. In total, across Gibraltar, we are using roughly 40 million liters of diesel a year across capital and operating. We have seen about a $0.50 Canadian per liter increase—roughly $20 million Canadian year-over-year is what you are seeing across that. Of course, at Florence, it is a very different type of operation. We do not really use any diesel or any fuel to speak of, so that is the impact on diesel. Dalton Baretto: And then just on the assets, Stuart, it is great to see you guys are locked up for the rest of this year. Are you starting to have conversations with your suppliers about next year yet, both around availability as well as around pricing? Richard Tremblay: Yeah, Dalton, Richard here. We have maintained contact with our current supplier and, obviously, discussions around next year are on the agenda, but nothing in any kind of formal or detailed or specific way. We are definitely watching the market and seeing what is happening. Dalton Baretto: But have you been given any comfort around availability? I mean, I am assuming pricing is a separate conversation, but just around availability. Richard Tremblay: Yes, and availability seems like it will be there. It will be more of a price discussion. Dalton Baretto: Great. Thanks, guys. That is all from me. Operator: Star and the number one on your telephone keypad. Again, that is star and the number one on your telephone keypad. We will take our next question from Craig Hutchison from TD Cowen. Please go ahead. Mr. Hutchison, you might be muted on your device. Craig Hutchison: Good morning, guys. Thanks for that. Just on Florence, I appreciate you guys have given some guidance around back-half weighted, but can you provide any more clarity in terms of what we can expect for the cadence? Should we expect a material uplift in Q2, or something similar to Q1? Just anything in terms of what we should be modeling from a cadence perspective would be appreciated. Thanks. Stuart McDonald: Hi, Craig. As I mentioned in my remarks, we are running right now at a daily production rate around 55 thousand to 60 thousand pounds a day—about 1.5 to 1.8 million pounds a month. That is kind of April and May. We will have new wells coming on in May, which will start to produce copper in June, but generally I would not expect a major uplift in production in Q2 from that kind of monthly rate. I think you will start to see a much bigger increase in Q3 and Q4 when we have additional, larger portions of the wellfield starting to open up. That is why we have indicated it is quite heavily weighted to the second half of the year. Craig Hutchison: Okay, great. Maybe shifting to Yellowhead. You guys mentioned it is on the new major projects list for British Columbia. What does that mean from your perspective? Does that mean there is going to be some effort to fast-track permitting? Is there certain financial support you will get from the province? And I guess you also mentioned dialogue with the federal government as well. Anything in terms of where you see permitting going and what kind of support you are receiving from different levels of government? Thanks. Stuart McDonald: Thanks. We certainly appreciate that it was good recognition to be included on that list, but the reality is we do not see any significant change in the permitting process. We have been working closely with all levels of government for the last couple of years, and between the Simpcw First Nation, the Province of BC, and the Government of Canada, everyone is focused on trying to have an efficient permitting process and not have duplication of work across different agencies. That is really where our focus has been. We do not see much changing on the permitting track as a result of that announcement. On government support more broadly, we do think we have good support from the Province and the Government of Canada, and we have some dialogue ongoing as well. Yellowhead would be a major new copper mine—it has the potential to be the second-biggest copper mine in Canada—and that, of course, is getting attention. Nothing tangible yet to announce, but certainly progressing on some good discussions across governments. Craig Hutchison: Okay, great. Maybe one last question would be just New Prosperity. Anything new on that front in terms of moving that project forward? Thanks. Stuart McDonald: No major updates to report. We are focused on expanding our relationship with the Tŝilhqot’in Nation, continuing to work with them following on the dialogue that we completed last year, but otherwise no significant updates there. Operator: We have reached the end of the Q&A session. I will now turn the call back over to management for closing remarks. Stuart McDonald: Great. Thanks, everyone, for joining today, and we will talk to you next quarter. Thank you. Operator: The meeting has now concluded. Thank you all for joining, and you may now disconnect.
Operator: Good day, and welcome to the InfuSystem Holdings, Inc. Reports First Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Glenn Axward, Investor Relations. Please go ahead. Glen Akselrod: Good morning, and thank you for joining us today to review InfuSystem's First Quarter 2026 Financial Results ended March 31, 2026. With us today on the call are Carrie Lachance, Chief Executive Officer; and Barry Steele, Chief Financial Officer. After the conclusion of today's prepared remarks, we will open the call for questions. Before we begin with prepared remarks, I would like to remind everyone certain statements made by the management team of InfuSystem during this conference call constitute forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, this conference call may contain forward-looking statements that involve risks and uncertainties, some of which are detailed under the Risk Factors in the documents filed by the company with the Securities and Exchange Commission, including the annual report on Form 10-K for the year ended December 31, 2025. Forward-looking statements speak only as of the date the statements were made. The company can give no assurance that such forward-looking statements will prove to be correct. InfuSystem does not undertake and specifically disclaims any obligation to update any forward-looking statements, except as required by law. Now I'd like to turn the call over to Carrie Lachance, Chief Executive Officer of InfuSystem. Carrie? Carrie Lachance: Thank you, Glen, and good morning, everyone. Welcome to InfuSystem's First Quarter Fiscal Year 2026 Earnings Call. Thank you all for joining us today. I will provide a first quarter overview, highlighting key initiatives and updating our progress on strategic priorities. Then Barry will provide a detailed summary of our financial results. I will then come back with some closing comments before opening the line to questions. Today, we reported first quarter of 2026 revenue of $33.7 million. This represented a decline from our prior year of just over $1 million on a GAAP basis, but a 1.7% increase on a pro forma basis. The GAAP reduction was mainly driven by the restructuring of our biomedical services contract with GE Healthcare, which reduced revenue by $1.6 million during the first quarter and is the basis for the adjustment to providing pro forma revenue. As we reported on our last two earnings calls, this restructuring improves our earnings because it allowed for an even larger reduction in direct contract expenses. Despite the decline in revenue, we generated approximately $6.4 million in adjusted EBITDA this quarter. Roughly in line with the prior year, resulting in a modest improvement in adjusted EBITDA margin to 18.9%, up from 18.2% in the first quarter last year. Behind these results are two very important initiatives that warrant the progress update. First, we continue to expand our wound care product category. During the first quarter, Wound Care net revenue came in at $2.1 million. While the number is still small, representing only 6% of our total quarterly revenue, we are excited about the growth rate, which was more than double the prior year at just under 112%. About 60% of the growth came from our compression device product line, which we recently added during the third quarter of last year. This product line was expanded with the launch of a second compression device supplier during the first quarter of 2026. The first manufacturer relationship brought us pneumatic compression devices or PCDs, which use sequential compression technology to treat patients with lymphedema and similar disease states. The additional supplier now adds adjustable compression wraps, which feature vicryl closures that are easier for patients with limited mobility as compared to traditional products such as compression stockings. Adjustable compression wraps represent a significant expansion of our addressable market as they serve a diverse patient demographic ranging from simple postsurgical recovery to lifelong management of chronic disorders that may not qualify for other treatments such as PCDs. The second key initiative I'd like to update you on reached a very important milestone during the first quarter. Sunday, March 1, 2026, was a very busy day for the team here at InfuSystem. After 20 months of intense meetings, data compilation and endless process analysis and testing, live transactions started running in our newly installed enterprise resource planning system, our ERP. As is fairly typical for these type of projects, the first month wasn't entirely seamless, and we continue to work out initial bugs and make the necessary adjustments to stabilize the system. However, I'm happy to report that we successfully cleared the go-live hurdle and are charging forward to secure the benefit of the new system that we have been looking forward to implementing over these many months. This marks a very significant milestone for InfuSystem. After putting this application in place and retiring several legacy systems, much of our data is now integrated, workflows are connected and the many processes supporting our various business lines run through a common platform, not multiple disparate systems. While we continue to make final adjustments, resolve open items on the punch list and get over the learning curve, we are starting to focus on capturing the benefits that we anticipate will start to pay back our investment. These benefits are expected to come in many forms and include improved ability to complete tasks with greater productivity, better cost and margin analysis to focus on high-return cost optimization initiatives, improved visibility to support pricing decisions, improved utilization of our medical device fleet and optimization of working capital levels. Additionally, we are already working to identify system enhancements and we will implement those that provide the fastest payback and highest investment returns. As we look forward to the rest of the year and after adjusting for the expected $7.1 million lower annual revenue related to the GE Healthcare contract restructuring, on a pro forma basis, we continue to anticipate annual revenue growth in the range of 6% to 8%. Additionally, we continue to anticipate that our adjusted EBITDA margin will remain in the low to mid-20% range. This is inclusive of the impact of costs related to our ongoing information technology systems upgrade. We are excited about the opportunities ahead, and we'll look to update you again in future quarters. Now I'll turn it over to Barry for a detailed review of the first quarter financial results. Barry? Barry Steele: Thank you, Carrie, and thank you, everyone, on the call for joining us today. I'm going to give details of the current quarter's results, provide a few updates on the ERP spend and update you on our current financial position and how it changed during the quarter. Now let me start with our financial results for the period. During the first quarter of 2026, our net revenue totaled $33.7 million, representing a $1 million or 3% decrease from the prior year first quarter. Adjusting for the GE Healthcare contract restructuring, our pro forma net revenue grew by 1.7%. Patient services net revenue increased by $1.3 million or 6.4% and included increased patient treatment volumes in oncology and wound care. Oncology net revenue increased by approximately $450,000 or 2.4% and wound care treatment volumes revenue grew by $1.1 million, which represented an increase of nearly 112%, driven by compression devices, as Carrie mentioned. Device Solutions net revenue decreased by $2.3 million or 17%. Nearly 70% of the decrease was attributable to the GE Healthcare contract restructuring. The remaining amount of the decrease, which was about $760,000 was due to lower rental revenues and lower equipment sales of $432,000 and $1 million, respectively. Both of these decreases are related to a large customer rental buyout that began in the prior year. The buyout, which started during the prior year first quarter, elevated the amount of equipment sales in the prior year and reduced quarterly rental revenues during the subsequent quarters, including the current 3-month period. These reductions were partially offset by an increase in the non-GE related biomedical services revenue of $340,000 and higher disposable medical supplies revenue, which also increased by $340,000. Breaking down the biomedical services revenue a little further, we see that our field-based services grew by nearly $600,000 after adjusting out the GE Healthcare revenue decline. This underlying increase demonstrates partial success in replacing lost GE revenue. Furthermore, as you will see when I get to discussing gross margin, the benefit to earnings for this trade-off was rewarding. Despite the decrease in net revenue, gross profit for the first quarter of 2026 was $19.7 million, representing an increase of $515,000 or 3% over the prior year first quarter. The gross margin percentage at just over 58% increased by 3.2% from the prior year amount. At the segment level, patient services gross profit increased by $1.3 million and gross margin increased by 1.3% to 64.8%, driven by the higher sales and reduced pump disposal and maintenance expenses. Device Solutions gross profit declined by $623,000, mainly due to the lower amounts of rental and equipment sales revenue, but the gross margin increased by 3.4% to 46.3%. The greatest contributor to this improvement was the aforementioned trade-off between GE Healthcare and smaller field service projects, which despite resulting in an overall decline in revenue netting to just over $1 million, contributed nearly $400,000 of additional gross margin, resulting in a more than 7% increase in device services gross margin. This benefit was partially offset by unfavorable revenue mix and higher wage and employee health care expenses, which reduced the gross margin by nearly 2% and 2.5%, respectively. Selling, general and administrative expenses for the first quarter of 2026 totaled $17.9 million and was $418,000 or 2.2% lower than the prior year first quarter amount. The prior year amount included a nonrecurring expense related to the departure of our former CEO of $1 million. Additional reductions included a $300,000 reduction in the accrual for management bonuses, lower accounting fees totaling $200,000 and $100,000 in reduced travel expenses. These decreases were partially offset by increases in other expenses, including $400,000 in increased expenses related to information technology and business applications upgrades, including the replacement of the company's ERP that Carrie discussed. Additional personnel directly related to increased Patient Services net revenue, including revenue cycle personnel totaling $300,000, a $100,000 increase in stock-based compensation expenses and cost inflation impacts from increased employee wage rates and higher health care expenses totaling $400,000. The ERP system upgrade project expenses were higher during the current period due to the higher intensity of activities related to the go-live phase of the project, which, as Carrie mentioned, occurred on March 1, 2026. While additional costs are expected to be incurred during the post go-live phase to support system stabilization and enhancement activities, project expenses are expected to begin to taper down during the future quarterly periods. Similar to impacts to gross margin and selling and marketing expenses, higher wages were the result of typical annual merit and cost of living increases. However, the increase in cost of health care benefits, which in total increased by $374,000 during the quarter were significantly higher than the increases experienced in the prior years. Adjusted EBITDA during the 2026 first quarter was $6.3 million, which, despite the lower net revenue was about the same amount as the prior year first quarter. This represented 18.9% of net revenue for 2026, which was slightly above the prior year rate of 18.2%. These amounts included the spending on our ERP project, which, again, is expected to start to decrease by the end of the second quarter here in 2026. Now a few comments on our financial position and capital reserves. During the first quarter, we generated operating cash flow of $970,000, which was $817,000 less than the prior year first quarter, mainly due to higher increases in working capital in 2026. Our net capital expenditures were $1.3 million during the 2026 first quarter, which represented a decrease from $2.6 million spent during 2025. This decrease was attributable to our overall capital spending requirements being lower as compared to amounts in prior years as the sources of our revenue growth have been more weighted towards less capital-intensive revenue sources, including additional wound care revenues. We expect moderate amounts of capital expenditures to continue in 2026 similar to 2025. We remain well positioned to fund continued net revenue growth with a strong cash flow from operations backed by significant liquidity reserves available from our revolving line of credit and manageable leverage and debt service requirements. Our net debt increased slightly by $1.1 million during the quarter, and we repurchased over -- just over 800,000 of our common stock during the quarter through our stock repurchase authorization. Our available liquidity continues to be strong and totaled just over $57 million as of March 31, 2026. At that time, our ratio of net debt to adjusted EBITDA was a modest 0.56x. Our debt consists of $20 million in borrowings on our $75 million revolving line of credit with no term payment requirements and a maturity date of July 2030. We continue to benefit from an outstanding interest rate swap, which fixes our interest rate on the $20 million of our outstanding borrowings at a below market rate of 3.8% until April 2028. I will now turn the call back over to Carrie. Carrie Lachance: Thanks, Barry. As I reflect on the progress we have made during the first quarter, the update shared with you today and what we are focused on as we move through the rest of 2026, I hope you will agree that we continue to be diligent in pursuing the strategic priorities previously laid out for our shareholders. Those priorities are to execute with discipline, deliver profitable growth and drive long-term value creation for shareholders. Operator, we are ready for the Q&A portion of the call. Operator: [Operator Instructions] And the first question will be from Anderson Schock from B. Riley. Anderson Schock: Congrats on all the progress. So first, the ERP went live at the start of March. Can you talk about how the conversion is going? Have you seen any billing or collections disruption or impact on the working capital? And when do you expect the cost step down to begin showing in the P&L? Is it more second or third quarter weighted? Barry Steele: Yes, I'll take that one, Carrie. The -- as any ERP implementation, we definitely had our glitches that we dealt with. It affected a number of different areas. We do not think that anything is going to cause any disruptions in our cash flow or billings or anything like that. So we think we're pretty good. It's more kind of working out some of our processes and making them as efficient as they are expected to be. As far as the long-term outlook for the impact of the system, Carri mentioned a lot of the benefits that we can see sort of from a summary perspective. We believe that still going through the learning curve, still fixing a few glitches. By the end of the year, we'll be able to, I think, articulate very well and have plans in place for going and getting the cost savings that the system should be able to provide to us. And I believe that next year, we'll see some of that actually pay off, and we'll start seeing the expenses that we have today reverse to the actual proceeds from the reduced reduction in costs. Anderson Schock: Okay. Got it. And then on the last call, you indicated oncology would begin migrating to the Apollo-based RCM platform in the back half of the year. Now that the ERP is live, is the time line for oncology RCM migration shifted? Carrie Lachance: Yes. No, it should still be -- thanks for the question, Anderson. It should still be kind of second half of the year. That is some of the progress and why we decided to be second half of the year and delay that just a little bit to get the ERP behind us and some of those continued kind of processes through the ERP improvements in the system. So it is on track to hopefully finish up by the end of the year, but we've started to begin that process. Barry Steele: I would just add, we use a lot of internal resources for the ERP. There are a lot of the same resources that this other conversion will require. So that's why we had to stagger that. Anderson Schock: Okay. Got it. That's helpful. And then on the new oncology customers signed in the back half of last year, could you give us a sense of the typical ramp curve for a new hospital system? And specifically, how much of the contract volume signed in the back half of '25 has shown up in the first quarter versus what's still to come? Carrie Lachance: Yes. We can see sometimes in a new oncology account, they could have several hundred patients. A lot of times, that process will -- the newer patients will start to come on board, but the older patients that are on their older device, say, in elastomeric, for instance, they'll finish out their continued therapy and the rest of their cycles on that same device. So it can take from a month or two depending on how many new patients they have through a few months. We are pretty well on board with that newer customer from last year. Operator: The next question will be from Jim Sidoti with Sidoti & Company. James Sidoti: So with regards to lymphedema, this isn't the first time you've been in that market. Why do you think you're doing better this time than in previous attempts? Carrie Lachance: Yes, it's a great question, Jim. The difference today is really our partnerships. So we have a new partner that came on board, as we mentioned, third quarter -- fourth quarter, excuse me, of last year, really strong partnership with them. They bring us the PCDs. The partnership that we had a few years ago when we tried this, we need the paperwork. We need clean referrals. We need all of the ability to bill those claims, and we weren't receiving that during that prior start of our PCD and compression go-live. And so the new partner that we -- that we onboarded in Q4 of last year has been very strong. We continue to grow and stabilize and even improve that relationship. As well as Q1 this year, we have another compression opportunity there and very, very strong relationship there, and we're looking forward to growing them for the rest of the year. James Sidoti: Great. And can you talk a little bit about pain management? I know there's some reimbursement changes. Have you seen any impact from that? And where do you think pain goes in 2026? Carrie Lachance: We haven't yet seen. There's definitely been some changes in that market. We're pretty excited about that. We do work with our current manufacturers that are in that space to continue to grow. We're working closely with one of our partners on one of the pumps. They're growing their pain team and including some of our third-party payer opportunities as part of their bag and what they're offering for their customers. So we're excited for the year. We haven't seen a lift as of yet. We did add a decent-sized customer over the past couple of months in Q1 of this year. So we continue to be excited for pain management and see what the changes in the market will hold this year. James Sidoti: And I know you don't like to give quantitative guidance on cash flow. But just qualitatively, I mean, can you just give us some direction? Do you think it will be up materially from last year, about the same? Barry Steele: I would say about the same. I think that the operating cash flow and how we spend it probably be similar. Operator: And the next question will come from Matt Hewitt with Craig-Hallum Capital Group. Tollef Kohrman: This is Tall Kohrman on for Matt Hewitt. Apologies if you already stated it. I've been going through different calls here this morning. So can you provide an update on Chemo Mouthpiece, please? Carrie Lachance: I sure can. So Chemo Mouthpiece did not receive their current application for coding that was submitted in 2025 was due out in early of 2026. They did not receive approval for that code. So as we mentioned, as you may remember last year, we did take that out of kind of our pipeline moving forward. It was not in our guidance for this year. So we do still have clinics that do love the program. CMP continues to work on reimbursement opportunities for them. So we are still providing that device to patients. We're working with them currently and some of the patients, but I wouldn't expect it in our guidance. And they are looking -- we may look to slow down on some of the referrals for that just until they get some coding. Operator: [Operator Instructions] The next question will be from Benjamin Haynor with Lake Street Capital Markets. Benjamin Haynor: First off for me, just with Wound Care, nice to see the trajectory you guys are on there. With it being 6% of revenue now, it looks like that's on its way to double digits. How should we think about that? How quickly does it get there? What could this ultimately be? Any sort of color that you could provide there would be very helpful? Carrie Lachance: Yes, that's a tough question, Ben. We're really excited for the growth and the opportunities that we're seeing ahead. Again, a few new partnerships in compression have been really beneficial for that product line there. I would say with the lymphedema Patient Treatment Act that came out in reimbursement, we are seeing and the market is seeing some growth in that compression space and a good CAGR for that market. So we are looking forward to continuing into that as far as Barry. Barry Steele: I would only add that when we gave our guidance, obviously, the Wound Care is a very important element to the growth that we're expecting for this year. And as we look at where we would fall into our range, if we fall into the higher end of the range, it's probably going to be PCDs or the compression devices that help us get there, very important for us. Benjamin Haynor: Okay. Got it. That's helpful. And then just with the CMS putting the prior auth requirement in or policy in, I think it kicked in April 13 for these PCDs. Is that something that has impacted you guys in any way, collecting the paperwork? I know that was an issue historically with prior partners, but any issues on that front? Carrie Lachance: No, I think that's so great about our current partnerships that we do have in that space. We are receiving the appropriate paperwork that we need to build. The nice part is it's not a change for our current customers that we have. Again, we're a little bit newer to this space. So it's not a change we're going to ask for something that's abnormal for us to ask for. So it's just part of the process that we're really kind of growing with. So no hesitations from us there. Operator: And ladies and gentlemen, this concludes today's question-and-answer session. I would like to turn the conference back to Carrie Lachance for any closing remarks. Carrie Lachance: Thank you, and thank you, everyone, for joining today's call. We look forward to speaking with you again on our second quarter call, where we will provide an update on our results and progress. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to the Fortuna Mining Q1 2026 Financial and Operational Results Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Carlos Baca, Vice President of Investor Relations. You may begin. Carlos Baca: Thank you, Holly. Good morning to all, and welcome to Fortuna Mining's conference call to discuss our financial and first quarter of 2026. Hosting today's call on behalf of Fortuna, our Jorge Ganoza Durant, President, Chief Executive Officer and Co-Founder; [ Lzaro and Osa ] Chief Financial Officer; David Wille, Chief Operating Officer, West Africa, and Cesar Velasco, Chief Operating Officer, Latin America. Today's earnings call presentation is available on our website at fortunamining.com. Statements made during this call are subject to to the reader advisories included in yesterday's news release, the webcast presentation or management discussion and analysis and the risk factors outlined in our annual information form all financial figures discussed today are in U.S. dollars unless otherwise stated. Technical information presented has been reviewed and approved by Eric Chapman Fortuna's Senior Vice President, Technical Services and a qualified person as defined by national instrument for 1 I will now turn the call over to Jorge cartoanosa, President, Chief Executive Officer and Co-Founder of Fortuna Mining. Jorge Durant: Thank you, Carlos, and good morning, and thank you for joining us today. The first quarter of 2026 marked an exceptionally strong start to the year for Fortuna. We delivered strong operational and financial performance. And importantly, we achieved these results with 0 recorded lost time injuries during the period. This extends our safety performance to 5 consecutive quarters free of lost time injuries. Financially, the quarter delivered record results across our key metrics. Sales reached a record $342 million, reflecting higher realized gold and silver prices. Adjusted net income was $111 million or $0.36 per share, a quarterly record for the company. Adjusted EBITDA totaled $219 million also a record. And free cash flow from ongoing operations reached $174 million, representing our strongest quarterly cash generation to date. These results underscore the quality of our asset base, disciplined operational execution and strong leverage to the gold price environment. Operationally, this financial performance was supported by solid execution across our portfolio. We produced 72,900 gold equivalent ounces in the quarter -- and based on performance year-to-date and current operating conditions, we remain well positioned to meet our full year 2026 guidance. With that as context, let me step back and focus on the bigger story for Fortuna. We're working to deliver approximately 60% growth in annual gold production over the next 24 months, taking us to approximately 0.5 million ounces of annual gold production by expanding our Seguela mine in Cote d'Ivoire and by bringing our Dambasut project in Senegal into production. The key message I want to emphasize is that we control this growth. This growth is driven by 2 projects already within our portfolio, not dependent on acquisitions or exploration success. Both Seguela and Dambasut are technically straightforward benefit from strong social acceptance and are financially derisked. These are executable growth projects supported by our strong balance sheet and our operating track record in West Africa and both demonstrate robust economics at long-term gold prices below $3,000 per ounce. As these projects advance over the next 24 months, we expect this growth to translate into meaningful increases in production and free cash flow per share while maintaining discipline in execution, cost and capital allocation. Our growth plans are also underpinned by the recently published update to mineral reserves and mineral resources on April 23, which shows growth across all categories of resources and reserves. Proven and pro mineral reserves increased by 15% year-over-year after depletion to 3 million gold ounces. Indicated mineral resources increased by 56% to 2.1 million gold ounces and inferred mineral resources increased by 4% to 2.2 million gold ounces. This growth speaks to the mineral potential of our assets and our potential not only to expand production, but also to support decade-plus mine lives across our operations. Looking ahead, there are several near-term milestones that we believe are important for investors to watch. Both the [ Bambas ] feasibility study and CEE expansion study are expected to be completed in this month of May. Providing greater technical and economic visibility on our growth plans. In parallel, we're expecting environmental approval for the Amba suit imminently, followed by the final mining permit shortly thereafter. All this, while we continue to advance the Amba early works with a 2026 budget of $100 million. Our strong cash generation continues to strengthen the balance sheet. At quarter end, we had approximately $816 million of total liquidity, including $493 million in net cash positioning Fortuna among the stronger balance sheets in our peer group. This financial strength allows us to comfortably fund approximately $330 million of total exploration, sustaining and nonsustaining capital in 2026, entirely from internal cash flow. Of this $330 million figure, 56% is allocated to growth and exploration. At the same time, we are returning capital to shareholders year-to-date, we returned $40 million via the repurchase of 4.2 million shares. For the quarter, we repurchased $20 million which represents 11% of our free cash flow from operations. Before handing over for more detailed operational commentary, I want to briefly address costs. All-in sustaining cost in the first quarter were $2,107 per gold equivalent ounce. Of that amount, approximately $122 per ounce is attributable to external factors, primarily the impact of higher gold prices on royalties and higher share-based compensation associated with our share price performance during the period during. These factors factors are not reflected of underlying operating expense operating which ratio remains solid across the portfolio. With that, I will now turn the call over to the operating quarter in more detail. David? Unknown Executive: Can you maybe give us your review Thanks, Jorge. Segala, delivered a successful first quarter with strong production results and importantly, 0 LTIs recorded. During the quarter, Segala produced 42,016 ounces of gold, representing a 14% improvement over the previous quarter and finishing ahead of the mine plan. A total of 393,000 tonnes of ore were mined at an average gold grade of 3.69 grams per tonne, together with 5.46 million tonnes of additional material resulting in a strip ratio of 13.9:1. The processing plant treated 430,000 tonnes of ore at an average gold grade of $3.21 per ton with throughput averaging 212 tons per hour. Production was sourced primarily from the antenna [ as and ] cooler pits, while waste mining progressed well at the Sunbird pit, positioning the operation for future or contribution from that area. Segala's strong operating performance resulted in a cash cost of $679 per ounce and an all-in sustaining cost of $1,760 per ounce of gold. In terms of projects underway at Segala, substantial progress was achieved in the first quarter. The 6-megawatt solar power plant project is nearing completion and is expected to be commissioned this quarter with power source from the solar power plant, providing approximately a 35% per unit cost savings on power provide from the grid. In April, we announced a 34% increase in mineral reserves and a 55% increase in resources from the Sunbird deposit. Based on drilling completed through to the end of the first quarter. This further enhances the Sunbird underground project and reinforces its importance as a future source of Board for Segala. Joint permitting committee has been established with what he was Ministry of Mines with the goal of permit in the underground mine by the end of 2026. Initial development is then targeted for the first half of 2027. We have also decided to develop and operate this on the funded ground mine on an operated owner-operator basis with an incremental increase in budgeted CapEx of $25 million to undertake this project. Orders for primary mining equipment are expected to be placed during the second quarter. Access to the underground mine be established from the southern section of the Sunbird pit, rather than through the originally contemplated dedicated open excavation. This section of the Sundbird bit was not scheduled to be mined until 2027, whilst accelerating this mining has the effect of increasing Seguela's forecast as towards the upper end of guidance. This decision provides a cost improvement of more than $7 million on the project by reducing underground development requirements and avoiding additional waste volumes associated with the box of option. Mining of the Sunbird Pit commenced studies for the proposed processing plant expansion continued throughout the first quarter. Lycopodium, which design and construct of the current prices plan presented several expansion options and is now progressing detailed studies on the selection -- selected option, which includes the addition of the ball mill as well as increased thickening reaching a revenue circuit capacity. The current primary crushing capacity is expected to be sufficient to support the planned out increase. Exploration drilling, it's again ongoing with additional doings being mobilized to site, bringing the exploration rural fleet will inflate to 7 weeks. The drilling program is focused on further conversion and expansion of the Sunbird and Kingfisher resources as well as testing below the southern extent of the antenna fit and the newly discovered a Service portal opportunity at Sunbird. At BMS, early works programs and exploration activities continued to advance successfully during the quarter. Approval of the ESIA is expected imminently, and the feasibility study remains on track for completion, including the first time reporting in mineral reserves in support of the construction decision by mid this year. Thank you and back to you over. Jorge Durant: Thank you. David, now will move on to LatAm. Cesar, please? Cesar Velasco: Thank you, Jorge, and good morning, everyone. In the first quarter, our Latin American operations delivered a strong and stable performance, underpinned by disciplined execution, solid safety performance and clear progress on key operational priorities. As been there in Argentina, the quarter was defined by strong operating delivery and its successful execution of a critical maintenance milestone, which positions the operation well for the rest of the year. We mined 1.7 million tons of ore at a favorable strip ratio of 1.35:1 and placed 1.5 million tons on the leach pad at an average head grade of 0.62 grams per ton of gold containing an estimated 30,538 ounces of gold, in line with our mine plan. As a result, Gold production reached 21,545 ounces, representing a 12% increase compared to the fourth quarter of 2025. So overall, from an operational standpoint, the mine performed as expected with improving momentum. But the most important development in the quarter was the completion of the primary crusher foundation replacement. I want to highlight 3 things. We delivered it on time, we stayed within budget, and we executed it with strong safety performance. Crucially, crushing operations resumed on May 1 as planned, and the planned return immediately to stable operating conditions, supporting throughput going forward. Now turning to financial performance. Lindero delivered a very strong quarter financially, generating $101.5 million in sales with a strong EBITDA margin of 69% of sales increasing by 28.5% and 9.5%, respectively, when compared to the fourth quarter of 2025, reflecting higher gold prices strong cost discipline and solid operational execution. On costs, we reported cash cost of $1,208 per ounce and an ASIC of $1,783 per ounce. As expected, these costs were slightly affected primarily due to temporary and nonrecurring factors, such as equipment rentals and temporary crushing solutions associated with the primary crusher project maintenance interations, and macroeconomic pressures in Argentina, particularly high inflation and a stronger-than-expected peso, which increases dollar-denominated costs. However, these pressures were partially offset by higher production volumes, a lower stripping ratio and ongoing operational efficiencies. Looking ahead, we expect a clear and steady cost reduction throughout the year. As the temporary measures are removed, capital work is completed and efficiency gains are fully realized. And as a result, we continue to expect ASIC to move toward the $1,300 per ounce by the fourth quarter. Finally, on growth, we continue to advance both near mine and regional exploration. As Lindero, as previously indicated, we have initiated drilling below the current pit limits, targeting conversion of 400,000 ounces of inferred resources to higher confidence categories. These resources are located beyond the limits of the current final pit design. In parallel, we have multiple regional exploration programs underway, including Serino where activities started in March with construction completed and drilling now underway. During the second half of April, we also began our first phase of our 2026 drilling program at Arizaro. This 11,400 meter program is designed to test for deeper fertile intrusions and proximal magnetic anomalies, followed by resource expansion. And finally, as of today, exploration work has started at the Rio Negro properties in Southern Argentina, where surface mapping and sampling is underway. Drilling is planned for September after the winter break. Let me now turn to Caylloma in Peru. Caylloma continued to stand out as a very consistent and reliable operation, delivering predictable performance quarter after quarter. In the first quarter, mining and processing volumes were fully in line with plan, and we benefited from higher head grades, particularly in silver and base metals. This translated into higher silver production of 258,000 ounces, up 3.5% quarter-over-quarter and strong and stable base metals output of 11.5 million pounds and 8.2 million pounds of zinc and lead, respectively. Mine production totaled 136,700 tonnes of ore in the first quarter which continues to come from well-established mining zones from the Animas Vein, Simo Dean and Ramal Carolina vein, which supports operational stability and predictability. From a financial perspective, IONA also delivered a strong quarter, generating sales of $34.6 million and maintaining a solid EBITDA margin of 62% of sales. This reflected the combination of higher realized metal prices and disciplined cost management. Now on costs, we reported cash costs of $30.26 per ounce and ASIC of $44.36 per ounce of silver equivalent similar to the fourth quarter of 2025. This was mainly explained by the increased impact of higher prices on the silver and swivel conversion, while production costs remained in line with plan for the quarter. So the underlying operating cost base remains stable and well controlled. Finally, on exploration. The 2026 campaign commenced in February, targeting extensions to our shot 3 and 4 at the animal zone where mineralization remains open at depth. Thank you, and back to you, Jorge. Jorge Durant: Thank you. We'll now go over the financial highlights with our CFO. Luis? Luis Durant: Yes. Thanks. We'll provide a brief review of our consolidated financials. -- attributable net income. As highlighted by Jorge for the quarter was $111 million or $0.36 per share. That's up 64% versus the prior quarter and up 200% versus the prior year. Our strong performance was driven by record metal prices with cost per ounce, in line with our full year guidance. Our average realized gold price was $4,884 per ounce compared with $4,166 per ounce in Q4 of 2025 and 2,884 per ounce in Q1 of 2025. We Cash costs per gold equivalent ounce was $951 broadly consistent with the prior quarter and slightly above Q1 of 2025. A brief comment on inflationary trends and indicators. We have not seen any material impact on our cost structure to date. In Q1, we saw higher input costs for certain materials, though not consistently across all regions. For fuel, specifically, we have seen rising prices at our Peruvian operations, while in Argentina and at Ivory Coast, we have not yet seen any meaningful pass-through from higher oil prices. We will continue to monitor the situation. A few comments on the -- on the financial statements, General and administration expenses were $27.8 million up $3.9 million year-over-year, primarily due to higher year-end bonuses and the timing of corporate and subsidiary expenses, we recorded a foreign exchange loss of $2.1 million, driven primarily by modest depreciation of the euro and the West African franc against the U.S. dollar from January through March together with our net monetary asset position, including cash balances and VAT receivables. Our effective tax rate was 33% for the quarter compared with 28% in Q1 of 2025. The increase reflects an inflection point in our deferred tax position at Lindero in Argentina. In the current metal price environment, we are utilizing existing tax shields at a faster pace and transitioning from a deferred tax asset to a deferred tax liability position. As a result, we expect to begin recording deferred income tax expense for Lindero in 2026. This is an accounting charge only as we do not expect to incur current income taxes in Argentina until 2027 with first cash tax payments likely in 2028. At the consolidated level, we expect the effective tax rate to step up in the remaining quarters of 2026, such that the full year rate ends up in the high 30% range. This compares with a roughly 28% to 30% level we reported over the past few quarters. Moving to our cash flow statement. We generated $174 million of free cash flow from ongoing operations, which excludes new development projects and growth initiatives. We also expect to pay approximately $140 million of taxes in 2026 with the majority paid in Q2 and Q3, about 50% in Q2 and 35% in Q3 as a result of this timing and all else being equal, we should expect somewhat lower free cash flow over the next 2 quarters. In the investing section, additions to property, plant and equipment were $45.3 million, including approximately $28 million of sustaining capital and $17 million of nonsustaining spend. The nonsustaining total included $8.8 million Jamba sad project and $8.6 million in brownfields and greenfields exploration. Turning to the balance sheet. We ended the quarter with $665.9 million of cash and net cash of $493 million after financial debt. Net cash increased by $111 million versus year-end, reflecting strong free cash flow from operations, partially offset by $17.4 million of growth capital and $24.5 million of share buybacks. Total liquidity was $816 million including the full $150 million undrawn amount under our revolving credit facility. Thank you, and back to you, Jorge. Jorge Durant: Thank you Carlos. Carlos Baca: We would now like to open the call to questions. Adi, please go ahead. . Operator: [Operator Instructions] Your first question for today is from Mohamed Sidibe with National Bank. Mohamed Sidibe: Maybe if I can start with a -- during the quarter, you reported a cash cost around $678, which is below the guidance of $735 million and $815 million -- would you be able to give us a little bit of color on what's leading to that cost outlook like understanding that you produce 42,000 ounces, but -- is there any improvement in the unit mining costs or unit processing costs that you're seeing with -- and any commentary as well as impact on fuel in country would be very useful. Jorge Durant: David, do you want to answer Mohamed question? Unknown Executive: I Touch on a couple of the factors there. There's probably 3 main drivers of the cash cost for the first quarter. The first one, obviously, which you already mentioned is that we increased our gold output compared to previous quarters, moving to 42,000 ounces, so probably about a 14%, 15% higher than previous quarters. . The other drivers would be an accounting aspect depending on the schedule. Stripping the falls into the OpEx component? Or is part of the sustaining CapEx, which obviously is important part of the cash cost per ounce. The other component was just with regard to the scheduling within the mine plan. Our stripping ratio within the quarter was $13.9 million which was probably a little bit lower than our forecast over the year stripping ratio, which at the moment is scheduled to be around a little bit over 16% for the year. So those are the 3 components or simple accounting 1 in terms of which can you pause into a lower strip ratio for that particular quarter and then the additional ounces produced. Mohamed Sidibe: That's very helpful. And maybe on the unit cost, the unit cost pressure in country, are you seeing anything on a fuel diesel side or anything impacting your mind on our processing costs? Jorge Durant: Not materially at this stage. We're starting to see some increases in grinding media, but nothing that's material. -- in terms of power costs, power costs are controlled by the [ Cedar ] government. And as at this point in time, we haven't been informed of any significant increases in at our costs. Mohamed Sidibe: Great. And maybe a second question on the [indiscernible] as I know that the technical report for that is -- like did you -- or an update you by the end of the value -- what's the status of the permit with the syngas government? And do you have any updated outcome? Jorge Durant: Well, with regard to the permitting of the undercut. So the ESIA, it is was submitted towards the end of last year. As we said in the commentary, we are expecting to receive the approval on that potentially within the next week or so. Certainly very imminently. The rotation permit, we would expect to be sort of in the middle of this year. So everything seems to be progressing pretty much in line with. Operator: Your next question is from Sidney Beckman with Sterne. Unknown Analyst: ' I had a question around the cash and acquisition mandate. Specifically, when you're evaluating a West Africa acquisition, particularly in asset with existing processing infrastructure that you might to mill or integrate with Savella? How deep does your operational technology due diligence go on the target control systems, specifically under the SEC 2023 cyber disclosure rules, any material incident an acquisition asset becomes your disclosure obligation under Form 8-K within 4 business days as a terming materiality. So here's the question. if you're buying someone else's mill, their SCADA system, their plant control and their operational network come with it. Have you built a formal cyber due diligence framework into your M&A process that specifically assesses whether a target has undisclosed incidence or legacy vulnerabilities in their operational technology stack. That could become your problem and your disclosure obligation the moment the deal closes. Thank you. Jorge Durant: The short answer, I think, is no. We have not been looking at targets that are at that level of development, our latest acquisitions have focused more on predevelopment stage type opportunities like we have done with Chesser with the acquisition of Chesser Resources which brought the Amba project to our portfolio back in 2023. That was a predevelopment stage opportunity. We have made other investments. For example, we expanded our presence to Ulyana that was announced a few weeks ago through an option agreement to form a joint venture -- but that's pre-research type opportunities. So our acquisition M&A mandate right now is focused more on predevelopment stage opportunities. And I would have to refer to my lawyer to answer your question in more detail. Operator: Your next question for today is from Eric Winmill with Scotia Bank. Eric Winmill: And congrats on a good quarter. Just maybe on Guyana, if you don't mind, just walking through a bit about what attracted you to the region. Obviously, his perspective, do you see an opportunity potentially to accelerate your investments there or maybe do more in a country and together? Jorge Durant: Yes, Eric. Absolutely. We've been monitoring the Guiana Shield in general, for some time for over a year. It's been in our watch list -- as you well know, the geologic setting is very familiar to what we have in West Africa. So we've been monitoring and searching for opportunity and this recently announced cartstone auction agreement I believe, is a very exciting entry point into the Guiana Shield. I was in Guyana only a few weeks ago, had the opportunity to meet with the Director of Mines, the Director of the Secretary or Minister of Natural Resources and environment in the president of the country. There was a very consistent probusiness message from state authorities. So under Quartstone and Quartstone is on its own, a very exciting opportunity. If we want to look at it from the proximology lens, it's some 30, 35 kilometers away from where G stone G2 sit with their exciting discovery. And we are in a very similar geologic setting metasediments, metavolcanics ramp gains an intrusive through a big structure that hosts gold or a 26-kilometer stretch within the property. So lots of exciting geology there, lots of gold, and we have an exciting program there for us. And right now, we're very much focused not only on Corston, but expanding our presence in Guyana. We're looking at opportunities in Surinam as well. So I would say that those 2 places are where we find a bit more of opportunity and areas of focus for us right now. Unknown Analyst: Okay. Fantastic. Maybe just 1 more, if you don't mind. So you're now planning to access Sunbird underground from the open head right instead of the box cut. That's going to start probably next year. And is it fair to say you'll be drilling from underground there starting next year? Or what are some of the critical to are you looking for the development path in summary underground? Jorge Durant: There was a bit of interfere here on the line that I understand. You're referring to drilling exploration drilling or you're referring to the start of development underground development. Unknown Analyst: Yes. Just wondering about sequencing there, some of the critical path items and whether we should expect drilling from underground there as well. Jorge Durant: Drilling will continue to take place from surface all through 2026 and very likely well into 2027. We're drilling deep holes right now. It would certainly be more efficient to drill from underground, but it will be some time until we can develop that infrastructure probably late into 2027 is when we will be in a position like that -- for now, we are enjoying a lot of success with our drilling at Samberg deep, where we're planning the underground mining. And we'll continue to pursue that over the next at least 18 months, perhaps 24 from surface. Operator: Your next question for today is from Adrian Day with Adrian Day Asset Management. . Adrian Day: Couple of questions -- general questions if I may, and I'll ask them together because they're kind of a connected -- so first of all, I don't know if you could give us a sort of overview of current exploration activities, particularly greenfield exploration, not to stop a Segala you've already talked about, but mostly greenfields. And how do you view greenfield's exploration versus taking equity stakes in existing companies because you've got a couple of those that you've done recently? And then that brings us to Guyana in your minds, how do you view taking on an additional -- if you were to take on a mine in additional country, would you look at that as an opportunity to diversify your risk -- or would you be more cautious on just adding 1 more country with its own needs and requirements et cetera. I'm just trying to see how you view all these different activities. Jorge Durant: Yes, and good questions, and I will start from the end replying, Adrian from your last -- the last question, diversifying risk. We are quite clear that Fortuna has a business model where we play in -- sometimes in the frontier. For us, mining has always been a frontier business, and we're happy to play in the frontier. We're designed for that. Everybody here is experienced with that. And what do we ask in exchange for taking the higher perceived geopolitical risk. We must be asking for something in exchange when we take on that higher geopolitical risk. And what we're asking is exchange, for example, is what we are enjoying right now in Senegal or time to cash flow is very short. As David pointed out during his intervention, David Whittle, we submitted our environmental impact and social assessment to the government in the month of September. And we are expecting the approval of the environmental study imminently. So that's going to be 7, 8 months to get full environmental and social approval from authorities to move ahead into construction, right? So -- those are the type of things we ask in exchange for that higher perceived in my mind, geopolitical risk. But we are not blind to the fact that there is geopolitical risk, right? So -- we have -- if you see our NAV, the NAV of the company does not sit in 1 large asset. Our mines are not concentrated in 1 country. So I believe we have a good diversification of our mines, our projects and therefore, our NAV is not if you will, at risk in just in any 1 jurisdiction, right? So -- that also brings the -- I believe, what was your point, managing that geographic dispersion. As you know, we are centered in West Africa and in Latin America. And we manage the business from hubs. West Africa is managed from a where David Will, is our Chief Operating Officer, looking after the business there. And then on LatAm, from the Lima office where [ Severelasco ] looks after the business. So we believe we can provide efficient cover to the regions from these management hubs and manage the complexities and demands of the different jurisdictions. With respect to Guyana, just some facts about doing business there. In Guyana, for example, once you are granted an exploration permit, the drilling permits once you are granted an exploration license, the drilling permits come already granted with that. There is no additional permitting required to carry on with exploration. So again, once again, it's a new jurisdiction. It's not necessarily a proven mining jurisdiction. But again, it offers tremendous opportunities not only on the geologic endowment, but also on the east to do business. We will likely be reducing dramatically our presence in Mexico. We are not seeing a significant change in business climate in Mexico and our work to date has not yield anything that meets our investment criteria. So you will likely see us transferring resources from what we have been doing in Mexico into the Guyana Shield basically Guyana Surinam right now. Corston is a good anchor project, and we would certainly look to expand our presence to new opportunities in those 2 countries for now, right? And then you asked about greenfields versus equity stakes. We do not have a set budget or to make equity investments or assessment of equity investments is more like, I would say, by appointment. If there is something a geology we like and a team we like, that's very important. We spend a lot of time not only knowing the geology, but also the people behind the programs. We would be willing to make an equity investment, just like we did with Ajuale in Cote d'Ivoire, we are the largest shareholder of hale Resources. We own 15% of the company. And [ aware ] has a very exciting discovery and continuous expanding in geology that is of a lot of interest to us, right? We continue to have a success -- so our greenfields are focused within the regions. No, we are active in [ Cadia ], we're active in Guinea. We're active in Senegal. -- we are retreating from Mexico, moving resources into Guyana and we're active in Argentina. We're always looking for opportunities in Peru -- so those are the areas where we're playing, and we'll make investments more by appointment rather as a specific strategy and budget to make capital or equity investments. That was a long-winded answer. I don't know, if I had addressed your... Operator: [Operator Instructions]. We have reached the end of the question-and-answer session, and I will now turn the call over to Carlos for closing remarks. Carlos Baca: Thank you, Holly. If there are no further questions, I'd like to thank everyone for joining us today. We appreciate your continued support and interest in Fortuna Mining. Have a great day. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to The Pennant Group First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Kirk Cheney. Please go ahead. Kirk Cheney: Thank you, Michelle. Welcome, everyone, and thanks for being with us today. Joining me are Brent Guerisoli, our CEO; John Gochnour, our President and COO; Lynette Walbom, our CFO; and Andy Rider, President of our Senior Living segment. Before we get started, I have a few housekeeping items. Yesterday, we filed our earnings press release and Form 10-Q. The release is posted in the Investor Relations section of our website at www.pennantgroup.com. A replay of today's call will also be available on our website until 5:00 p.m. Mountain Time on May 6, 2027. We also want to remind anyone listening by replay that all statements are made as of today, May 7, 2026, and we do not intend to update these statements after this call. In addition, any forward-looking statements we make today reflecting management's current expectations, assumptions and beliefs regarding our business and the operating environment. These statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Listeners should not place undue reliance on forward-looking statements and should review our SEC filings for a fuller discussion of factors that could affect our results. Except as required by federal securities laws, Pennant and its affiliates undertake no obligation to publicly update or revise any forward-looking statements due to new information, future events, changing circumstances or otherwise. Further, The Pennant Group, Inc. is a holding company and does not have direct operating assets, employees or revenues. Certain independent subsidiaries, collectively referred to as the service center, provide administrative services to our other operating subsidiaries pursuant to contractual arrangements. Reference is dependent. The company, we are and us meeting The Pennant Group, Inc. and its consolidated subsidiaries. Each of our operating subsidiaries and the service center is operated as a separate independent company with its own management team, employees and assets. Accordingly, references in this presentation to the consolidated company and its assets and activities as well as the use of we, us, are and similar terms should not be understood to suggest that The Pennant Group, Inc. directly employs operating personnel or that any subsidiary is directly operated by The Pennant Group. We also supplement our GAAP results with certain non-GAAP measures. We believe these measures when considered alongside our GAAP results can help provide a more complete view of our performance. However, they should not be considered in isolation or as a substitute for GAAP reporting. A reconciliation of GAAP to non-GAAP measures is included in yesterday's press release and is also available in our 10-Q. With that, I'll turn the call over to our CEO, Brent Guerisoli. Brent? Brent Guerisoli: Thanks, Kirk. Good morning, everyone, and welcome to our first quarter 2026 earnings call. To start, I want to acknowledge the dedication of Pennant's people through different cycles and environments, during rapid growth, changing macroeconomic conditions and more, our teams consistently rise to meet the moment. I am proud to work alongside you. We're pleased to report another excellent quarter with strong results across our businesses, including revenue of $285.4 million, up $75.5 million or 36%; adjusted EBITDA of $21.7 million, up $5.3 million or 32.6%; adjusted EBITDA prior to NCI of $23.5 million, up $6.4 million or 37.2%; and adjusted diluted earnings per share of $0.32, up $0.05 or 18.5% each over the prior year quarter. Across both segments, we continue to build momentum and drive relentless operational improvement. As we've discussed on prior calls, 2025 was a year of dramatic acquisitional growth. And in 2026, we are committed to improving our operational performance in both new and mature operations. One clear indication of progress is our same-store segment adjusted EBITDA margins, which are on a substantial upward trajectory as we deliver exceptional results for patients, attract the best leaders and create a culture of excellence in our agencies and communities. We will continue to unlock meaningful value in our operations. A key to our success, as we have repeatedly emphasized, is attracting and developing exceptional leaders. Without this focus, the type of growth we have experienced would not have been possible. The large acquisitions we completed in 2025 called upon us to stretch our leadership recruitment and development muscles like never before. We rose to the challenge. In 2025, we added 101 CEOs and training to our development program, and we have followed with 47 more in 2026 year-to-date. Also in 2025, we elevated 11 local CEOs and 24 other local C-level leaders. Our leadership pipeline remains robust and positions us well for additional growth in the future. With the addition of leaders recognized thus far in 2026, we now have 55 CEOs and 92 other C-level leaders in operations, driving our results across the business. The transition of Tennessee, Alabama and Georgia operations from UnitedHealthcare continues to progress. We have transitioned 2 of 5 operational waves fully into our systems and we'll continue this process through October. As this occurs, we anticipate improved operational performance and incremental reduction in expenses, including those under the transition services agreement. The leaders of each agency continue to work closely in clusters with experienced tenant partners to unleash the full potential of our locally driven operating model. Despite the anticipated challenges of maintaining census during an EMR transition, lower seasonal admission trends over the holidays and severe weather events in January, we have successfully rebounded and increased total census above the levels at the time of acquisition. Even as we continue to implement our systems and operating model and anticipate some additional disruption, we are pleased that the transition is progressing consistent with our expectations. The future is bright for Pennant in the Southeast. In sum, the first quarter was a tremendous start to the year, and we are well situated to deliver positive results throughout 2026 and beyond. With only one quarter behind us and substantial additional transition work on the near horizon, we are not adjusting guidance at this time, but would point you to the upper end of our guidance range. Now I'll turn the call over to John Gochnour, our President and COO, to share additional details on our first quarter operating performance. John? John Gochnour: Thank you, Brent, and good morning to everyone on the call. I'm pleased to report strong first quarter performance across both operating segments, driven by our continued focus on operational excellence, margin improvement, organic growth, clinical excellence and leadership development. Our Home Health and Hospice segment extended its exceptional growth trajectory, delivering quarterly revenue of $229.1 million, an increase of $69.2 million or 43.3% over the prior year quarter. Segment adjusted EBITDA of $33.6 million, up $8.5 million or 33.7%. And segment adjusted EBITDA prior to NCI of $35.4 million, up $9.5 million or 36.6%, each over the prior year quarter. This performance reflects consistent growth in existing operations and effective transitions in our newer operations. Total Home Health admissions reached 30,721, an increase of 62.7% while Medicare Home Health admissions rose to 13,303, an increase of 75.1%, each over the prior year quarter. These strong total growth metrics include same-store admission growth of 5.8% and same-store Medicare admission growth of 9.2%, each over the prior year quarter. Our Hospice business also continued its robust growth. Average daily census reached 5,199, an increase of 37%. And same-store hospice average daily census grew to 3,952, an increase of 10.2%, each compared to the prior year quarter. This momentum is driven by strong clinical outcomes, including positive reimbursement adjustments based on our Home Health value-based purchasing performance, deepening relationships with payers and our local leaders' ability to serve as trusted community resources for patients, employees and partners, even amidst significant transition activity and despite a 1.3% reduction in our Medicare Home Health base rate and continued wage pressure on the labor front. Our local leaders focus on operational excellence drove same-store segment adjusted EBITDA margin prior to NCI to 17.2%, a 110 basis point improvement over the prior year quarter. Overall, segment adjusted EBITDA margin prior to NCI, decreased to 15.5%, 70 bps, reflecting the expected impact of transitioning more than 50 new operations to our systems and the temporary higher cost of the ongoing transition services agreement. The new store margin performance was consistent with the expectations we set out in our guidance. And as Brent noted, as we fully integrate our new operations and talented local teams adopt our operating model, we expect these operations and our total segment margins to move toward our 18% target, though progress will not be immediate or perfectly linear. On the regulatory front, in April, we received the proposed 2026 hospice rule, which includes a 2.4% rate increase to the hospice daily rate. This aligns with our guidance assumptions and should provide an additional tailwind in the fourth quarter. Our Senior Living segment also delivered meaningful progress. Revenue of $56.3 million, increased $6.3 million or 12.6%. Adjusted EBITDA of $6.4 million, increased $1.5 million or 30.6%. And segment adjusted EBITDA margin improved to 11.8%, a 190 basis point increase, each over the prior year quarter. Since the pandemic, we have steadily expanded segment margin into the double digits with significant opportunity remaining. Same-store occupancy rose to 81%, up 180 basis points, while all store occupancy reached 78.6%, up 10 basis points, each over the prior year quarter. Sequentially, we saw a 200 basis point decline in our all store occupancy, which was driven almost entirely by our recent acquisitions of low occupancy communities along with some typical holiday-related seasonality. We have seen a rapid rebound from the holiday seasonality and expect some continued volatility in our all-store occupancy as we add underperforming, but high potential Senior Living communities to our portfolio. Turning to growth. We completed the transition of 54 Home Health, Hospice and Home Care operations in Tennessee, Alabama and Georgia in the fourth quarter of 2025. Throughout quarter 1, our service center and segment leaders dedicated substantial time to integrating these operations into our systems and the unique tenant operating model. As Brent described, results have been consistent with our expectations, and we anticipate completing the transition by the end of the third quarter. We are very excited about the progress and the potential to unlock significant value in these operations and as we grow in the Southeast. While integration remains our primary focus, we continue to evaluate a pipeline of Home Health and Hospice tuck-ins and potential joint ventures with integrated health care systems. As we find opportunities that meet our disciplined criteria and will not distract from our integration efforts, we expect to pursue them in the coming months. In Senior Living, we completed 4 acquisitions after quarter end. On April 1, 2026, we acquired the operations and real estate of Lavender Lane Senior Living, which includes 43 assisted living and memory care units and 25 independent living units. This addition strengthens our growing Phoenix area portfolio where we have deep leadership talent and a robust continuum of care across Home Health, Hospice, Home Care and Senior Living. Additionally, on May 1, 2026, a Three more senior living communities joined Pennant through triple net leases with trusted capital partners, a 100-unit community in Glendale, Arizona, now operating at Saguaro Senior Living and 2 Wisconsin communities, 45 units and 50 units now operating as Cardinal Lane Senior Living and Harbor Haven Senior Living. These additions further expand our presence in 2 of our most strategic markets. We continue to review multiple Senior Living opportunities. and supported by strong operational performance and investments in leadership development, expect to remain active acquirers throughout the year. With that, I'll turn the call over to Lynette to walk through the financial results. Lynette? Lynette Walbom: Thank you, John, and good morning, everyone. Additional detail on our financial performance for the 3 months ended March 31, 2026, is included in the Form 10-Q and press release filed yesterday. Some additional highlights for the quarter compared to the prior year quarter include the following: GAAP revenue of $285.4 million, an increase of $75.5 million or 36%; GAAP net income of $8.5 million, an increase of $0.7 million or 9.6%, 'adjusted net income of $11.5 million, an increase of $1.9 million or 19.8%; GAAP diluted earnings per share of $0.24, an increase of $0.02 or 9.1%; and adjusted diluted earnings per share of $0.32, an increase of $0.05 or 18.5%. Additional selected metrics for the 3 months ended March 31, 2026, include $72 million outstanding on our revolving line of credit and $98.8 million outstanding on our term loan for a total of $170.8 million outstanding under our credit facility. We had $4.9 million in cash on hand at quarter end and a net debt to adjusted EBITDA ratio of 1.93x. Cash flows used in operations were $3.4 million, an improvement of $17.8 million versus the prior year quarter. I'd now like to highlight a few leaders across our organization who have delivered exceptional outcomes. Their examples illustrate the meaningful progress that can occur when local leaders build strong cultures and develop high-performing teams of C-level leaders within their operations. Riverside Home Health and Hospice and Grants Pass Oregon is led by Chief Executive Officer; Will Johns, Chief Marketing Officer, Sabrina Zage; and future CCOs, Jennifer Doman and Heather Raj. Riverside is a provider of choice in Southern Oregon with a Home Health star rating of 4.5 stars, Hospice composite score of 100% and Hospice visits in the last day of life of 84% versus the national average of 48%. This clinical quality has resulted in exceptional financial performance. Since taking the helm in 2024, Will and the Riverside team have doubled revenue from $2.5 million in Q1 2024 to $5 million in Q1 2026. Tripled EBITDA and improved agency level operating margin by more than 1,100 basis points over the same period. With a broad rural service area, Riverside story demonstrates once again that our unique operating model can support tremendous success outside of large population centers. And Home Health and Hospice are critical components in the health care continuum and rural communities. At Capitol Hill Senior Living, newly appointed CEO, Rodney Washburn; and CCO, Britanee Plascencia; and CMO, Roxy Romero, provided carrying an attractive home for over 100 residents in downtown Salt Lake City. With low turnover, and high employee satisfaction, it is clear that Capitol Hill's culture contributes to a positive resident experience. As a result, occupancy has increased over 2,300 basis points. Revenue has increased 46% and EBITDA has increased over 238% each over the prior year quarter. Capitol Hill was one of our first real estate acquisitions, which we purchased in 2024 and as an underperforming asset in an attractive location for a compelling price. By improving the operations, the Capitol Hill team has now added value to the operation to the real estate and most importantly, to the residents and community. With strong demand for its services, Capitol Hill is now adding units to its upper floor, further expanding the business' financial opportunity going forward. With that, I'll hand the call back to Brent for closing remarks. Brent Guerisoli: Thanks, Lynette. As we wrap up, I want to again thank our operators, clinicians and service center partners who like the individuals highlighted, provide truly life-changing service to our patients and residents every day. We are grateful for all you do. With that, we'll open the line up for questions. Michelle, would you please provide the audience with the Q&A instructions? Operator: [Operator Instructions] And our first question is going to come from Brian Tanquilut with Jefferies. Brian Tanquilut: Congrats on a good quarter. So maybe I'll start. If you can speak to the integration progress that you're seeing with the Amedisys United assets and how should we think about the cadence of kind of like the impact of that on margins for the remainder of the year? And then if you can share with us kind of like KPIs and labor and payer retention? Just think along those lines. John Gochnour: Brian, thanks for the question. And like as Brent stated in the call, we're really excited about where we stand in the integration to date. We have been able to move through the first 2 waves of our integration process, moving those agencies onto our systems. We've begun the third wave. The third and fourth wave are the largest of the 5 waves. And so we're sort of in the heart of getting those operations over. We have been in the process of moving through the leadership development aspect. In some cases, that has meant leaders that came into our program in Q4 and even earlier made it through our CEO development program and have now been placed as executive directors. In other cases, we found some really amazing and talented people in Visa Metasys and United locations, who qualified for our CIT program and have either begun training or have already completed training in our unique operating model and stepped in as Executive Directors and future CEOs. So we're really excited about where we stand on kind of those 2 fronts. From a KPI standpoint, as Brent mentioned in the call, we have rebounded during the transition period as we guided and sort of according to our expectations, we expect modest blips in the census as we transition the EMR. We experienced those and have rebounded, particularly in those agencies where we have completed the integration. We also made it through a unique January where, in addition to the typical holiday seasonality, you saw some winter storms in Tennessee in particular, that really prevented us from admitting patients. And so it's really great to see that census above where it was. As far as margin goes, we're really right on target. We have the added costs as we've telegraphed of transition services agreement in addition to the system transitions, which take a lot of training time, take people out of the field from delivering care, but we've got an amazing team providing that support. And so we see a lot of opportunity as those transition services agreement costs roll off. As folks roll into our systems as we improve clinical outcomes and continue to deliver for that margin improvement, that we've sort of built into our guide to occur throughout the year. So that's a little bit about the KPIs we're looking towards. Brian Tanquilut: No, that's really helpful. Maybe just a follow-up on that. As I think about the CapEx spend for the quarter, obviously, a little bit of elevation here as you built the infrastructure here in the South. So just curious how we should be thinking about CapEx trend over the course of the year? Brent Guerisoli: We talked in the call earlier about some of the acquisitions that we had come on at the end of Q4 for the Senior Living side. Some of those were having significant CapEx spend in the first part of the year. And so I think we will see heavier spend in the first part of the year with CapEx spend probably ending up in that $15 million to $18 million for the year. Brian Tanquilut: Got it. And then maybe my last question, if you don't mind. As I think about where the hospital stands today, whether it's the team model being rolled out for some of the JVs that you've announced. I mean how do we think about the receptivity of the hospital population, especially with -- in the markets that you're in to sign JVs with you guys on the Home Health side? John Gochnour: We've had now 6 years of experience working in joint ventures with premier integrated health care systems. And through that, we've built a track record of being able to help them take generally underperforming parts of their business that are critical to their continuums of care, right? They need to decamp the hospital in many cases so that they can take higher acuity patients. They need chronic condition patients to receive the care in the home that keeps them out of the hospital. And so we've been able to partner with them in building really effective home health programs, hospice programs that reduce their mortality rates, that improve their readmission rates and return to acute rates. And so -- as a result, we -- there's a lot of receptivity out there. I think as hospitals have experienced some of the struggles that we've all in health care experienced from a labor standpoint as there need to pull acuity and serve those most acute patients that can only receive care in that setting, they've seen the value of partnering with an expert partner. And we think we've built a pretty impressive track record of being that partner. And so as I talked about in the call, those conversations are ongoing. We're a very disciplined partner, and we don't move faster than we're able. And so we're not out talking to every health care system in the country and say, we'll do this for you, we'll do this for you. But when we see the right situation with the right partners with the kind of commitment to clinical excellence, financial performance and the development of excellent culture, we're going to take advantage of those opportunities and partner to create special joint ventures. Operator: And the next question come from Raj Kumar with Stephens. Raj Kumar: Maybe I just wanted to look at some of the same-store trends in Home Health. Medicare admission growth continues to be strong. Just wanted curious to see what you're seeing at the market level in terms of if it's a function of just enrollment shift dynamics kind of given MA tapping out from a mix perspective relative to the entire Medicare population or if it's still just a gradual kind of more idiosyncratic market-level wins from a referral standpoint. And maybe if you've seen any acceleration on that front as you kind of get more ingrained within your markets? John Gochnour: It's a great question, Raj. And I think we're still a little bit early to see how sort of some of those macroeconomic factors are affecting that number. What we're seeing is we're continuing to be chosen. Our goal in every operation is to create the provider of choice and the employer of choice in the community. And when we're able to attract the talent and we have the staff, we have the opportunity to serve those communities. And I think our local teams and our local leaders have executed in an extraordinary way. Our model is built around the idea that we can be the solution of choice. And I think as you've seen some adjustment in the marketplace, you've got several of our largest competitors who have become affiliated with one provider that's less space for an independent provider with extraordinary clinical outcomes and commitment to local communities to step in and execute. And so I think those are macroeconomic trends that we're watching. Is this sort of a longer-term trend where there's more patients that are on the traditional Medicare that are participating in traditional Medicare? And therefore, we will see our mix start to shift back the other direction? Or is this short-term sort of market share execution? But we're very optimistic and really pleased with just the way we're being chosen in the community and the growth that it's helping us drive. Raj Kumar: Great. And then maybe kind of thinking about Hospice and look at the same-store growth trends there. I think there's a pretty wide graph between ADC and total admit. So just kind of curious on that front, where do you think -- are you kind of comfortable with the length of stay profile that you have right now, maybe anything around CAP? And then incrementally, I guess, anything you've kind of seen on the fuel front, any kind of headwinds from that kind of macroeconomic pressure to call out? Or anything that you kind of foresee or embed within the kind of maintained guidance? John Gochnour: Yes. From a hospice ADC standpoint, like we called out in the script, I think we had a 10.2% improvement in ADC even as we had softer admission trends overall, we have a discharge length of stay that actually decreased. But of course, length of stay is a factor of those patients that are coming on service, and we continue to improve relationships across the continuum of care, which we think is part of what's driving that impressive increase in same-store hospice ADC. It's really about execution. It's really about delivering exceptional care and the community choosing us and giving us the opportunity to serve patients. I think one of the macro trends I would point to, there was just data released in the last few weeks that showed that when patients elect hospice 5 days earlier, it can save the Medicare Trust Fund $1.5 billion. And that just goes to show that as we do a better job educating, as we do a better job partnering and collaborating with referral sources and get people on to hospice sooner, that benefit has the potential to be a solution to some of our Medicare Trust Fund rose. On the cap side, we saw a significant reduction quarter-over-quarter in -- or I should say, over the prior year quarter in CAP. And we continue to work on that. That really is a local situation. Some of our agencies, particularly in California, the reimbursement is higher than the CAP allows. And so they're only able to provide care for a certain number of days. That's going to continue to be something that we're watching very closely. But what I think I would call out is we've had excellent partnership with our expert finance resources in the service center. They built models that help our local executive directors understand where they sit relative to CAP limitation and understand from a business development perspective, how to partner with, shorter length of stay, referral sources where they can navigate that mix and make sure that we don't get caught in those CAP situations. And finally, on the fuel situation. I think that's -- again, another macroeconomic indicator that is early in the process. Certainly, if gas prices stay elevated the way they are, we'll begin providing what we've done in the past is we've provided stipends or we've adjusted our mileage rates to account for that to make sure that our employees are not left in bad situations. Currently, we still view this as a short-term flux. And so we're watching that closely, but we hope that it's going to pass and that as things settle down over in the Middle East that there's going to be a retreat in gas prices. So we're not building into our current comments on guidance, significant fuel expense or mileage increases. Operator: And our next question will come from David MacDonald with Truist. David MacDonald: Congratulations. Just a couple of questions. I guess, first, just at a high level, I was wondering if you guys could talk about just conversations with payers, any early conversations around just the expansion into the Southeast, some of the opportunities that you're seeing there? And then secondly, I was wondering if you could also comment just on the increased market focus on waste, fraud and abuse and what that may mean around market share gain opportunity over time. Brent Guerisoli: Yes. Great question, Dave. So I'll take the question on the payer front. So one of the things that we have seen is as we've expanded, obviously, in the Southeast, we've got relationships in the Northeast. We've become much more of a natural player. So we've also progressed a lot of the conversations with these big payers on a broader basis. And the other thing that we've done is we've made significant investment in that -- in our team to help in that regard, and we're making a ton of progress there. So we're in -- I would say this is an ongoing conversation, but it's been really positive. And ultimately, what our payer partners are looking for is somebody that can be consistent and provide high quality of care. And so from the beginning, we've talked about the importance of our clinical product and the quality solutions we're providing at the local communities, but that's also expanding to the national communities as well. And so it is creating a significant opportunity for us. And even with some of the managed care conversations, we have consistently seen positive results in terms of getting better contracts, getting Medicare-like reimbursement. And so we expect that to continue as we make these investments as we expand across the country and also as we continue to perform well clinically. John Gochnour: And David, I'll just take the fraud, waste and abuse question. I think this is a really unique time. We have an administration that is commendably very focused on rooting out fraud, waste and abuse, particularly from our industries. And we're grateful -- we've been grateful for the opportunity that we've had to have a voice and to partner in that effort. I think some of the tools that they are using or thinking of using are fairly blunt instruments. And we continue to encourage a nuanced approach to that dialogue. But what we do see is a couple of different things. First, we feel like we're differentiated in -- if we have a provider number under review or where there's a question in a community, we have invested heavily in developing an industry-leading compliance program where every one of our provider numbers undergoes and audit every year. We are -- and that's a claims audit. It is an on-site audit. So there's a very thorough review process. The second thing I'd say is, as there's been, particularly, for example, in California or Arizona, where there's been aggressive enforcement action, that's opened up new opportunities or reopened opportunities for our agencies that are long-standing parts of those communities that have delivered excellent clinical quality, deep compliant partnership. And so there's opportunities for us as bad actors are sort of rooted out. And so we see that as a potential opportunity. At the same time, we will continue to work closely to have a voice with the administration through our partner -- through our industry partnerships with the alliance to make sure that there is nuance and there is thoughtfulness in how we continue to root out fraud, waste and abuse. But we think at the end of the day, this is a commendable effort because it will result in the dollars that are there for our Medicare Trust Fund beneficiaries going to providers who are delivering exceptional care, high-quality clinical outcomes and improving the lives of the patients we serve. David MacDonald: Okay. And then just appreciate that. And then just 1 quick follow-up on integration timing. I think, John, you said 2 of the 3 large -- the 2 largest of the remaining 3 waves you guys are integrating right now. So just when we think about pacing between now and October when you finish up, is it fair to assume that the bulk of the heavy lifting is going to be done in the second quarter and then it ramps down somewhat noticeably from there? John Gochnour: Yes. I think you're going to see the heart of it is really this third and fourth wave. The third wave has already begun. The fourth wave is coming. And so I think through the second quarter and the early -- very early part of the third quarter is when the bulk of it is going to -- the bulk of the transition is going to occur. And then we would expect September and October, really, we're just going to be winding down that final wave. And so you'll start to see TS expenses significantly drop, and you'll start to see the opportunity for those agencies and local teams to use our systems to improve their clinical, financial and community results. Operator: And the next question is going to come from Ben Hendrix with RBC Capital Markets. Benjamin Hendrix: Just wanted to quickly follow up on the hospice discussion from earlier. I sound like you guys have some really strong systems in place for monitoring CAP. But one of your competitors in the past decided competition for short stay admissions as a headwind when it comes to CAP management. Are there any particular markets that you're operating in right now where even if you are monitoring the CAP dynamic, you could have a heightened competition that could kind of box you out of a short-stay admission access that could be a headwind? Unknown Executive: Yes. I mean that's always going to be the case, especially in markets with higher reimbursement. So California would be an example of that in our case. So -- and really, what it boils down to is you think about our model, again, John referenced this. There are going to be CAP pressures depending upon the local operation. And so -- but in those operations, they're coming up with multiple different tactics, right? And one of those things is finding those short length of stay. But really, it boils down to ensuring that the patient appropriateness and that those teams are very proactive in having a robust outreach to the entire community. And so I mean, there are a number of different ways to attack the CAP. The most important thing, though, is that we're tracking it at every single operation, every team is aware of their circumstances. And there are best practices out there to help them to drive improvement there. Benjamin Hendrix: Great. And then shifting over to senior housing. I was just wondering if you could talk about some of your newer acquisitions, kind of the status of those of those assets. Kind of how much quality improvement you expect to get out of those and kind of where you could take the performance of those new platforms? Unknown Executive: Yes. Thanks for the question, Ben. This is Andy. I think we're pretty excited about the latest group of acquisitions that we're currently integrating and also the ones that we brought on towards the end of last year all have pretty large upside but are pretty much all distressed assets. And so as we step in, there's always going to be lumpiness both in occupancy in the new store margin and just some of the pressures that exist with integrating these types of opportunities. On the long haul, they have tremendous upside. We're getting favorable pricing, and we're really excited about kind of the long-term view and we're getting better. The past couple of years, we've had some opportunity to integrate and to kind of get our hands dirty and learn. And so as we continue to go through the process, we're getting better and better, and those turns are happening faster and coming together. I think the story Lynette highlighted at Capitol Hill, Senior Living is a good example of what we can do in a couple of years' time over an 8-quarter period or so in really transforming an operation and getting it up to our standards. And so yes, this last -- this group that we just brought on, we're excited to roll up our sleeves and get to work. Operator: And the next question will come from Stephen Baxter with Wells Fargo. Stephen Baxter: Good to hear the guidance pushing towards the upper end. I was hoping to get a little bit more color on that one. I guess first, when we think about the first quarter, it sounds like you probably outperformed maybe your internal expectations. So I guess I'm wondering how much of the sort of nudge up on the guidance is really just flowing through the first quarter upside? And is there any element of carrying anything about the first quarter forward into the rest of the year? Whether that's maybe better same-store growth in Home Health and Hospice or maybe better same-store margins that you've made some effort to highlight? Brent Guerisoli: Yes, Stephen, I'll let Lynette speak maybe a little on the more detailed aspects of the guidance. But what I would just say is as we've integrated these new businesses in the Southeast, with any transition, there is going to be some lumpiness in results. And as you think about the various waves, especially where we're in Wave 3 and we're going into Wave 4, we feel really good about where we stand. We're, what, 7 months into the transition, but we don't want to declare victory just yet, right? And so we're seeing the progress. We'd really like to get another quarter under our belts before we make any adjustments because this next quarter will be kind of very insightful in terms of where we're going to end up through the end of the year. So that's part of the reason why we're just holding out. And we'll look, obviously, based on performance through the end of Q2 to make adjustments if that's appropriate. Lynette Walbom: I'd say talking more specifically about some of the same store, we continue to expect that same-store improvements that we've made in this quarter to continue. And just that performance of those existing operators, they're hitting their stride on really making sure that they're trying to drive in every way possible, additional margin to the bottom line. But again, as Brent said, we'll give you further updates as to guidance probably in Q2. Brent Guerisoli: Yes. And to that point, I might just add 1 additional. Like one of the things -- and I think we've shared this in the past, but -- the way that we do the integrations is we support them with other operations, other clusters or partners scattered across the organization. And so it was really -- that's why our same-store results in Q1 were even that more impressive is because that was in the midst of a reduction in our Home Health reimbursement. And all of this additional support going into our -- the transition in the Southeast yet. Our current operators continue to perform really well. And so that's a good sign that we're able to integrate and keep the kind of that momentum of operations going forward. So again, we just want to get a little bit more experience with this transition before we make any changes. Operator: [Operator Instructions] The next question is coming from Jared Haase with William Blair. Jared Haase: I'll actually maybe stick with the point that you just alluded to in sort of the impressive margin performance on a same-store basis. But I wanted to ask about that because I think you mentioned the sort of same agency prior to NCI was up, I think, 110 basis points year-over-year. And so I just wanted to kind of understand specifically where you're finding the biggest levers for operating leverage, again, considering that there's maybe a little bit of duplicative work related to the transition. And I also heard you call out where there's still some pressures on the labor side. So I just wanted to kind of understand, again, what's working from an efficiency standpoint that's driving that same agency margin? John Gochnour: Yes. Thanks, Jared. I appreciate the question. And I think what we're most excited, Brett highlighted some of the headwinds that we faced. But what's been most impressive is, I think our model is about -- it's about people and it's about ownership and it's about owning things at the local level and having cluster partners that care deeply about each other, diving in and helping each other. And I think there's been a few things certainly from an efficiency standpoint that have helped drive that. One is we were able to offset some of that revenue decline through strong performance in Home Health value-based purchasing. We've been able to move from a business development standpoint when we ask every operation to come up with their plan for how they would offset the initial 6-plus percent. The client that was proposed. Part of it was how do we work in the community more effectively? How do we work with institutional partners? How do we get early referrals? And in those areas, we saw significant improvement this quarter. And so we were able to see some meaningful same-store revenue per episode growth, even though we faced the base rate decrease. On the efficiency side, though, we saw exceptional care planning. The utilization of best practices, our clinical team has been working relentlessly to make our EMR more efficient to allow our nurses and our other clinicians to spend their time with the patient and to cut the amount of time that it takes them to document while still ensuring that everything is documented and shown as is required by regulation. And so we saw some meaningful progress there. That allowed us to reduce visits per episode in a pretty meaningful way. And so we are continuing to see better productivity, reduced visits per episode. We're managing the revenue side as well in a meaningful way. And so I think that's really where you see margin driving. And then, of course, we view this as a single segment. And so when you see some of that improvement, we view each local team as building a continuum. So often they have Home Health and Hospice together. So sometimes when you face Home Health pressure, if you can grow your Hospice, census in your Hospice business that can help you offset some of those cuts as well. And so the strong ADC growth also helped to drive same-store margin improvement. Brent Guerisoli: Yes. And Jared, I would just add 1 additional element. We've talked about this in the past. The tools and the resources available at our -- our local team is the technology stack that we have available to us, those are some of the elements that are helping our teams to get better information and understand how to drive efficiencies in their business. And certainly, as we look forward, the continued investment in technology and creating solutions that will allow us to efficiently drive positive outcomes. That's a big emphasis for us. And it will continue to be in the future because as we all know, this reimbursement environment can be difficult. And so we're looking to the future to provide opportunities for each of our local teams to be as efficient, but as effective as possible. Jared Haase: Got it. That's super helpful. And then I'll just ask 1 quick follow-up on the Senior Living segment. We've seen the Medicaid mix tick up just a little bit over the last couple of quarters, and we certainly saw that again. I think it was maybe plus 300 basis points year-over-year. So just wanted to ask if there were any call-outs as to what specifically was driving that? And then just what are your latest thoughts about the durability of some of the Medicaid waivers that are out there in light of potential for same budget over the next couple years? John Gochnour: Yes. Great question. I think we like was just highlighted on the Home Health and Hospice side. Similarly on the Senior Living side, we push operators to drive and to make plans to connect with their local government agencies and to understand all of the opportunities out there and serve the populations that need the assistance regardless of payer source. They're responsible for the financial outcomes. And so it's very driven at a local level. From a kind of a broad senior housing environment, we're seeing kind of the Class A properties really from a pricing standpoint accelerate. And so we're playing a lot in the kind of Class B or Class C space in terms of acquisitions. And so we may see some of that continue to tick up. But we continue to adjust state by state depending on how the -- what the pressures look like. We have seen just a little bit of some of the pressures from the administration's push against kind of fraud, waste and abuse. But by and large, I think we're really confident in the Medicaid programs and in the areas that we specifically play in, in the Medicaid programming. They all save the state significant money. We're a low-cost provider in terms of the services that we render. It's the lower cost of care along the continuum. We can help both prevent and reduce hospitalization. And ultimately, we're one of the -- we believe we're one of the better options in terms of being fiscally responsible from a government standpoint. And so we're confident, we're excited about the continued growth in kind of any area of our business as we continue to pull on those levers and empower our local operators to make the right financial decisions to drive margin growth and to take care of the residents there. Brent Guerisoli: Yes. And Jared, I would just maybe expound a little bit more on the waiver programs. Oftentimes, these are seen as sort of negative or less than from a reimbursement perspective. But what we found in many of the states that we work that these programs are actually -- have healthy reimbursement or appropriate reimbursement for the services that are provided. And so in some ways, it's actually driving some of our acquisition strategy. So in the case of Wisconsin and Arizona where we've just acquired new buildings, we have a great relationship with the state and the payers in the state. And so that's why you can see the -- our turnarounds that Andy alluded to earlier, why they're going so quickly or so much better as we can come in. And there's a need. That's the other thing about this population. It's a very vulnerable population. And in many cases, the states are looking for solutions to place these residents that are very vulnerable. And so we can acquire these buildings come in and be a solution because we take those waivers. They're already prenegotiated rates so we know what we're getting as soon as we step into those buildings. And it becomes a great opportunity for us to quickly expand and improve occupancy and create a benefit in the communities where we enter into. Operator: I am showing no further questions in the queue at this time. I will now turn it back over to Brent for closing remarks. Brent Guerisoli: Well, thank you, Michelle, and thank you, everyone, for joining us on the call today. Have a great day. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, everyone, and thank you for participating in Magnolia Oil & Gas Corporation's first quarter 2026 earnings conference call. My name is Danielle, and I will be your moderator for today's call. At this time, all participants will be placed in a listen-only mode as our call is being recorded. I will now turn the call over to Magnolia Oil & Gas Corporation's management for the prepared remarks which will be followed by a brief question and answer session. Tom Fitter: Thank you, Danielle, and good morning, everyone. Welcome to Magnolia Oil & Gas Corporation's first quarter 2026 earnings conference call. Participating on the call today are Christopher G. Stavros, Magnolia Oil & Gas Corporation's Chairman, President and Chief Executive Officer, and Brian Michael Corales, Senior Vice President and Chief Financial Officer. As a reminder, today's conference call contains certain projections and other forward-looking statements within the meaning of the federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied in these statements. Additional information on risk factors that could cause results to differ is available in the company's Annual Report on Form 10-K filed with the SEC. The full Safe Harbor can be found on Slide 2 of the conference call slide presentation with supplemental data on our website. You can download Magnolia Oil & Gas Corporation's first quarter 2026 earnings press release as well as the conference call slides from the Investors section of the company's website at magnoliaoilgas.com. I will now turn the call over to Christopher G. Stavros. Christopher G. Stavros: Thank you, Tom, and good morning, everyone. Thank you all for joining us today for this discussion on our first quarter 2026 financial and operating results. I plan to briefly speak on our first quarter results, which provided a strong start to the year and consistent performance across our financial and operating metrics. I will then highlight what turned out to be a busy quarter for bolt-on oil and gas property acquisitions for Magnolia Oil & Gas Corporation, adding to our working interest and royalty interest in both of our operating areas by closing several deals during the quarter. I will finish by speaking to Magnolia Oil & Gas Corporation's 2026 capital and operating plan, which is well positioned during this period of product price volatility, driving incremental free cash flow and improving our financial flexibility. Brian will then review our financial results in greater detail and provide some additional guidance before we take your questions. Starting with Slide 3 in our quarterly investor presentation, Magnolia Oil & Gas Corporation delivered another strong and consistent quarter of execution across our financial and operating metrics, centered around our disciplined business model characterized by a low reinvestment rate, high operating margins, and moderate production growth. For the first quarter 2026, total company production volumes grew by 6% year over year to 102,600 barrels of oil equivalent per day, with oil production growing by 4% and averaging 40,700 barrels per day. Production in Giddings was the primary growth driver for the company with total Giddings production increasing 9% year over year and oil production showing growth of 8% over the same period. Giddings production volumes were a record for the company in the quarter. Giddings production currently accounts for approximately 82% of Magnolia Oil & Gas Corporation's total company volumes. The quarter was equally solid around our financial metrics, supported by growth in our oil and gas production and higher oil prices, for which our production is entirely unhedged. Our first quarter net income was approximately $101 million or $0.54 per diluted share with adjusted EBITDAX of $253 million. Drilling and completion capital for the period was roughly $129 million, providing a reinvestment rate of 51% of our adjusted EBITDAX. Pretax operating margins averaged 36% for the quarter. Our low reinvestment rate and high operating margins demonstrate our capital spending discipline, proactive cost management, and further capture of operational efficiencies. Magnolia Oil & Gas Corporation generated approximately $146 million of free cash flow during the first quarter and returned $83 million to our shareholders through a combination of our base dividend and our share repurchase program, where we bought back just over 1% of Magnolia Oil & Gas Corporation's outstanding shares during the period. Additionally, EnerVest, Magnolia Oil & Gas Corporation's original private equity shareholder, completed the sale of their remaining ownership position during the quarter. This action simplifies our capital structure through the elimination of any remaining Class B shares outstanding at the end of the first quarter. As shown on Slide 4, the first quarter turned out to be a busy period for acquisitions as we completed the purchase of several small bolt-on oil and gas property acquisitions in both our Karnes area and Giddings totaling $155 million. These transactions, which closed in the latter part of the first quarter, include roughly 6,200 net acres and approximately 500 BOE per day of low-decline PDP, about 45% oil, and with significant undeveloped upside opportunities located in highly productive areas where we currently operate and understand well. In our Karnes area, the acquired acreage creates a sizable and largely contiguous 10,000 gross acre block, primarily undeveloped and highly attractive acreage in the core of the Eagle Ford trend across both Karnes and Gonzales Counties. The acquired tracts increased our working interest in the area to approximately 93% with an average NRI of around 80%. At our current development pace in the Karnes area, this acquisition adds years of development locations and blocks up a large contiguous position in both Karnes and Gonzales Counties, allowing for longer lateral development. In Giddings, our successful ground game continues to increase our working interest and royalty interest by acquiring new acreage in and around our current operated position. The Giddings transactions increased our interest in approximately 45,000 gross acres in addition to adding some new contiguous acreage, furthering our strategy of buying more of what we already own. Each of these transactions leverages deep technical knowledge we gained from our drilling and completion activities in the field, while meaningfully extending our already robust inventory of high-return drilling locations, increasing our working interest in existing assets, and adding valuable duration to our overall resource portfolio. This further demonstrates our ability to deploy a portion of Magnolia Oil & Gas Corporation's excess cash flow into high-quality targeted opportunities. Our goal in pursuing these is intended to not simply replace produced reserves, but to expand our long-term opportunity set and reinforce the sustainability of our strong financial returns. We continue to actively seek out additional asset acquisition opportunities that improve our business using our technical experience in developing the Austin Chalk and Eagle Ford formations in South Texas that provide us with a clear competitive advantage. As I often mention, Magnolia Oil & Gas Corporation's primary goal is to be the most efficient operator of our best-in-class oil and gas assets to generate the highest return on those assets while spending the least amount of capital on drilling and completing wells. Magnolia Oil & Gas Corporation's high-quality assets and the strategy of discipline around capital spending should continue to serve us well during periods of product price volatility. Our capital allocation priorities, which include a low reinvestment rate and returning a significant amount of our free cash flow to shareholders, remain unchanged. We are maintaining our original activity plan of running two rigs and one completion crew, which is expected to deliver total production growth of approximately 5% in 2026 and within the same range of drilling and completion capital we outlined earlier this year. Some of this year's activity is expected to occur on the recently acquired acreage. Oil price differentials have narrowed significantly in recent weeks, which should provide us with higher oil price realizations in the second quarter and similar to the Magellan East Houston benchmark, which is currently higher than the price of WTI. Beyond the benefit of higher oil prices, Magnolia Oil & Gas Corporation is well positioned for success through the consistent execution of our business model. The absence of commodity hedges on all our production is expected to translate into higher earnings and free cash flow in the current quarter, adding to our significant financial flexibility. I will now turn the call over to Brian to provide further details on the quarter and some additional guidance. Brian Michael Corales: Thanks, Chris, and good morning, everyone. I will review some items from our first quarter results and refer to the presentation slides found on our website. I will also provide some additional guidance for 2026 before turning it over for questions. Beginning on Slide 6, Magnolia Oil & Gas Corporation delivered an excellent quarter as we continue to execute on our differentiated business model. During the first quarter, we generated net income of $101 million or $0.54 per diluted share. Our adjusted EBITDAX for the quarter was $253 million with total capital associated with drilling, completions, and associated facilities of $129 million, representing 51% of our adjusted EBITDAX. First quarter production volumes grew 6% year over year to 102,600 barrels of oil equivalent per day, while generating free cash flow of $146 million. Looking at the quarterly cash flow waterfall chart on Slide 7, we started the quarter with $267 million of cash. Cash flow from operations before changes in working capital was $247 million with working capital changes and other small items impacting cash by $23 million. During the quarter, we paid dividends of $31 million and allocated $53 million towards share repurchases. We incurred $128 million on drilling, completions, associated facilities, and leasehold, and added $155 million of small bolt-on acquisitions comprised of additional acreage, working interest, and royalties. We ended the quarter with $124 million of cash. Looking at Slide 8, this chart illustrates the progress in reducing our total outstanding shares since we began our repurchase program in 2019. Since that time, we have repurchased 83.7 billion shares, leading to a change in weighted average diluted shares outstanding of 28% net of issuances. Magnolia Oil & Gas Corporation's weighted average diluted share count declined by approximately 2 million shares sequentially, averaging 185.9 million shares during the first quarter. We currently have 11.6 million shares remaining under our repurchase authorization, which are specifically directed toward open market repurchases. Turning to Slide 9, our dividend has grown substantially over the past few years, including a 10% increase announced in early 2026 to $16.5 per share on a quarterly basis. Our next quarterly dividend is payable on June 1 and provides an annualized dividend payout rate of $0.66 per share. Our plan for annualized dividend growth is an important part of Magnolia Oil & Gas Corporation's investment proposition and supported by our overall strategy of achieving moderate annual production growth, reducing our outstanding shares, and increasing the dividend payout capacity of the company. Magnolia Oil & Gas Corporation continues to have a very strong balance sheet and we ended the quarter with $124 million of cash. Our $400 million of senior notes does not mature until 2032. Including our first quarter ending cash balance of $124 million and our undrawn $450 million revolving credit facility, our total liquidity is approximately $574 million. Our condensed balance sheet as of March 31 is shown on Slide 10. Turning to Slide 11 and looking at our per-unit cash costs and operating income margin, total revenue per BOE declined approximately 4% year over year due to the decline in NGL and natural gas prices, partially offset by a small increase in oil price. Our total adjusted cash operating costs, including G&A, were $11.57 per BOE in 2026 and our operating income margin for the first quarter was $13.84 per BOE, 36% of our total revenue. Turning to guidance, second quarter D&C capital is expected to be between $120 million and $125 million, and we are reiterating our full-year budget we outlined in February of $440 million to $480 million. In addition, we are reiterating our full-year 2026 outlook for total production growth of approximately 5%. Total production for the second quarter is estimated to be approximately 105,000 BOE per day. Oil realizations have improved and we are anticipating prices for the second quarter to be similar to Magellan East Houston benchmark pricing. Magnolia Oil & Gas Corporation remains completely unhedged for all its oil and natural gas production and is benefiting from the improvements to oil prices. The fully diluted share count for 2026 is expected to be 185 million shares, which is 4% lower than second quarter 2025 levels. We expect our effective tax rate to be approximately 21% and our cash taxes for 2026 to be in the mid-single-digit range. We will now open the call for questions. Operator: We will now open the call for questions. If at any time your question has been addressed and you would like to withdraw your question, please follow the prompts. The first question comes from Neal Dingmann from William Blair. Please go ahead. Neal Dingmann: Good morning, guys. Nice quarter. Chris, my first question is on the very interesting recent bolt-ons that you have done. Specifically, could you talk about any color on how much you are able to add on the Karnes side and whether doing this changes upcoming activity plans specifically in that play? Christopher G. Stavros: Good morning, Neal. Thanks. The important takeaway for me and for us on the Karnes transaction specifically is that we were able to pull this together. It was really a tactical commercial transaction that was a bit unique. We were able to create this 10,000-acre contiguous block of acreage. It is largely undeveloped, very high working interest, advantageous NRI, located in a very good area. The undeveloped contiguous nature of the acreage really provides us with multiple years of drilling. Now I could probably count it on my hand in terms of what it adds to us as far as years and beyond. It is sort of a blank canvas, the way I would describe it, and allows us to optimally develop the asset. Regarding our plans going forward, it is not going to change our overall allocation around activity or capital or proportional view, but it is going to be easily worked into our drilling program, and I would imagine sooner rather than later. Neal Dingmann: Perfect. And then my second question on Giddings development: could you talk a bit about what the average pad size and well cost is in that play? Would you consider that you are now in full development in that play, and if so, how do the economics today compare to a couple of years ago when you were newer in the play and doing more testing and drilling more one-off wells? Christopher G. Stavros: On the pad size, we have been pretty close to optimizing that. Occasionally some of the pads are a little higher or a little lower, but on average they are three- to four-well pads and that is over the full development of that 240,000-acre development area that we speak of. Occasionally there could be a five-well pad or a six-well pad or a three-well pad or a two-well pad, but on average, about three to four is optimal. As far as the economics, they are better than they were earlier because we have gotten more capital efficient. We know the play better, we have tightened some things up, and we are drilling and completing faster. We continue to do that, so I think the economics are broadly better. Operator: The next question comes from Phillip Jungwirth from BMO. Please go ahead. Phillip Jungwirth: Thanks. Good morning. Coming back to the Karnes bolt-on, having this large 10,000-acre undeveloped contiguous block, could you talk about how you see the development scheme here, whether it is wells per DSU, lateral lengths, or the zones you can target, given there is generally a lot of resource in this area? Christopher G. Stavros: We are getting around the wells per DSU. We are still not quite there yet. The laterals will be approaching 10,000 feet in some cases and beyond. That is substantially more than what we have typically been able to do in the Karnes area generally. Phillip Jungwirth: Okay, great. And you noted an active quarter for A&D and that you will actively seek out additional acquisition opportunities to improve the business and leverage technical expertise. Given that you have grown the company significantly over the years, is there an upper limit on transaction size, and could you remind us on balance sheet parameters if you would consider larger-sized transactions? Christopher G. Stavros: It really depends on what is out there. We do look at everything, but the plan is not to shock and awe. It is not about that. You are not going to wake up one day and find us looking at out-of-basin deals. My objective is to run a public company prudently, building trust and faith within our shareholder base in terms of what we are doing. All of what we look at is really what we understand and within our ability to manage in and around our neighborhood. We should know it well. The size really depends on what is out there and how it fits into our art of the possible, if you will. As you would imagine, with pricing doing what it has done, there are probably more things available, but it depends on how it looks and how it fits. Phillip Jungwirth: Makes sense. Thanks. Operator: The next question comes from Peyton Rogers Dorne from UBS. Please go ahead. Peyton Rogers Dorne: Hey, guys. Thanks a lot for getting me on. You are keeping the budget unchanged here. I know the preference is not to add rigs or crews writ large. I am curious about the opportunity to maybe accelerate some workovers or timing at the tails across the asset base to take advantage of the higher oil prices we have seen year to date. Thanks. Christopher G. Stavros: We could certainly consider some of those things, whether it is a little bit more appraisal or maybe even an exploration well. The arithmetic on drilling faster or adding more activity at current oil prices is certainly not lost on me. I get it. I have been doing this for a long time. I view this more as a marathon, not a sprint. You never know what is right around the bend. With every barrel we accelerate and pull forward, it simply means I have to replace that barrel that much quicker, and it creates a little bit of added tension in terms of the higher rate of decline that we face. We are planning to grow about 5% this year, which is probably a little higher than most. We have a reasonable chance of surprising a little higher because of good well performance. I would probably take the over on that one. If we were to add anything new, as you said, it would probably be a little bit more on the appraisal work side. Maybe workovers, less incremental, or maybe even an exploration well. But I would not expect a dramatic shift or change because of the price per se. However, at current oil prices, it also would not surprise me to see a little bit more non-op activity as well. Peyton Rogers Dorne: Okay, great. And then knowing the recent acquisition and some of the past transactions, you highlighted the pickup of some royalty interest across the leasehold. Could you quantify the total royalty acreage you have right now? And do you see acquisitions of royalties or mineral interests becoming a larger part of the acquisition strategy on a go-forward basis? Christopher G. Stavros: If you are speaking to something where acquiring royalties is really more of an event that leads to monetization or a financial opportunity, the answer is not really. This is about enhancing our own economics. Brian Michael Corales: If you look at it, we do have relatively high NRI, especially at Giddings. It is definitely 5-plus thousand BOE per day in terms of production that is straight from royalties, and that really enhances our margin. The ultimate goal is to control as much as you can and have the highest margins you can. Whether it is royalties or higher working interest, we want to own more of what we have. That is helpful and makes sense from an economic perspective. Peyton Rogers Dorne: Thanks for having me on. Operator: The next question comes from Carlos Escalante from Wolfe Research. Please go ahead. Carlos Escalante: Hey, good morning, Brian, Chris, and Tom. I wanted to circle back on the deal. You have gotten a lot of questions this morning, but I am curious to hear your perspective on how you thought this deal cleared at this price, because you typically do not see M&A at peak oil prices if you believe this is the peak or we are close to some kind of peak. So if acreage of this quality is clearing at this price, what does that say about the broader bid-ask in Karnes and also Giddings? And how deep is the pipeline of similar opportunities relative to when we last talked to you last quarter, considering the move in commodity pricing? Christopher G. Stavros: Good morning, Carlos. Thanks for the question. I never said that it cleared at current prices. We were in conversations around this for a period of time, and sometimes it is better to be fortunate than good. What I would tell you about the bid-ask is, as you can imagine, it is clearly easier if you are a seller to come to market now with the hope or belief that you will find willing acquirers of assets. There are lots of things out there. It is really—I would not say a seller's market so much—but in terms of availability or opportunities coming, whether they are in processes or one-off opportunities, there is a lot to be had if you want it. The way I think about it is it has to make sense. When we look at anything for Magnolia Oil & Gas Corporation, it needs to support our business model, have characteristics that look similar to what we already are, and frankly improve us. I always joke a little bit: the objective of any acquisition is to make you better, not worse. There can be unique one-off opportunities, irrespective of the price that it may clear at, that still work for some, depending. Carlos Escalante: That is helpful on motivation and timing. As a follow-up, on realizations as a whole: I am looking for some validation that the second half of this year, when we bring so much Permian gas to market, that the sell points you use for your gas will not be affected. You have had thoughtful commentary around that before, but as we get close to those pipelines coming to market, do you have any new perspectives on what the dynamics will be on the natural gas front? Christopher G. Stavros: The new perspective is really gained through the experience of the old perspective or the old outcome. Oftentimes we get these questions on infrastructure that comes on, that could create changes in realizations or free up supply. Specific to what you are talking about, last year when Matterhorn came on, there was concern that it would have an impact, yet it did not. You are seeing what is going on in Waha most recently, and here we are. I do not know the true answer, but my experience suggests that it may not be all that different than what occurred a year ago, irrespective of what is happening right now. Brian Michael Corales: I would also add, for both oil and gas, we sell our products at the market, on the water, very close to where our products are sold. The tolling fees are less and the pricing is attractive. You are seeing that in the oil market today at Ship Channel. We are happy with the markets where we sell. Carlos Escalante: Always appreciate the color. Thank you. Operator: The next question comes from Analyst from Goldman Sachs. Please go ahead. Analyst: Yes. Good morning, Chris and team. First question is around capital returns to shareholders, specifically the repurchase. You bought back another 2 million shares in the first quarter. Your perspective on the buyback here and how it fits into the tools you have to create shareholder value? Christopher G. Stavros: It has been part of the model, and frankly its compounding effects are enormously beneficial in terms of helping us with dividend growth and growth per share in the dividend by reducing the actual cash outlays while you grow the dividend on a higher per-share rate. It is part of the same ABCs of what we do in our model, and I see it as part of a consistent plan for us. I do not see that going away. I think it is at a size that is appropriate for what we are and what we are capable of doing and delivering consistently. Our shareholders like it. It rewards the remaining holders, of which I am one, and I enjoy it too. I think it is a good way to create shareholder value over time. Analyst: Got it. As a follow-up on the dividend: you talk about at least 1% of the stock getting bought back every quarter over the long term, and a 10% long-term dividend growth rate. How do you feel about that double-digit level, and is there potential for upside if we end up in a higher-for-longer environment, given the strength of the balance sheet? Christopher G. Stavros: I try to catch myself on creating targets. The target is somewhat artificial in a way, but it is designed to speak to what the business is capable of doing. If the business grows mid-single digits, which I would define as 4%, 5%, 6%, and then you are buying back 1% of your shares per quarter, it is built into the investment proposition of what we are doing. The dividend growth is an outcome of what I just said around the volume growth and the share repurchases. It sort of just falls out of the model. Analyst: Makes sense, Chris. Thanks. Operator: This concludes our question and answer session, and the conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day. Welcome to Sempra’s first quarter earnings call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Louise Bick. Please go ahead. Louise Bick: Good morning, and welcome to Sempra’s first quarter 2026 earnings call. A live webcast of this teleconference and slide presentation are available on our website under the Events and Presentations section. We have several members of our management team with us today, including Jeffrey Walker Martin, Chairman and Chief Executive Officer; Karen L. Sedgwick, Executive Vice President and Chief Financial Officer; Justin Christopher Bird, Executive Vice President of Sempra and Chief Executive Officer of Sempra Infrastructure; Caroline A. Winn, Executive Vice President of Sempra; E. Allen Nye, Chief Executive Officer of Oncor; and Diane Wold, Vice President, Controller and Chief Accounting Officer, along with other members of our senior management team. Before starting, I would like to remind everyone that we will be discussing forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward-looking statement we make today. The factors that could cause our actual results to differ materially are discussed in the company’s most recent 10-Q filed with the SEC. Earnings per common share amounts in our presentation are shown on a diluted basis, and we will be discussing certain non-GAAP financial measures. Please refer to the presentation slides that accompany this call for reconciliation to GAAP measures. We also encourage you to review our 10-Q for the quarter ended 03/31/2026. I would also like to mention that forward-looking statements contained in this presentation speak only as of today, 05/07/2026, and it is important to note that the company does not assume any obligation to update or revise any of these forward-looking statements in the future. With that, please turn to Slide 3. Let me hand the call over to Jeffrey Walker Martin. Jeffrey Walker Martin: Thank you all for joining us today. We are pleased with our first quarter financial results and the progress we have made against our 2026 value creation initiatives. Let me start by walking through the key developments from the quarter. Recall, our first initiative is to invest approximately $13 billion in T&D energy infrastructure while also emphasizing improved financial returns. 2026 has started on a positive note with Sempra deploying $3 billion of investment capital in the first quarter, which keeps us on track to meet our annual target. As for improving returns, Oncor received approval from the PUCT for the settlement of its base rate review. This decision comes with a higher authorized equity layer at 43.5%, higher return on equity at 9.75%, and a higher cost of debt set at 4.94%. Additionally, Oncor is permitted to surcharge the difference between the new billing rates and Oncor’s current rates for the period January 1 to 06/01/2026. Based on the final order received last month, the surcharge will be made through a separate filing with recovery expected over the remainder of the year. Ultimately, this outcome is expected to better align rates with Oncor’s current cost structure and support improved financial strength and credit metrics during a period of elevated capital investment that helps support Texas’ growing energy needs. For more information on the improved decision, please refer to Slide 11 in the appendix. I also want to note that Oncor submitted its inaugural UTM filing last month to incorporate $4.4 billion of T&D assets that were placed into service since 01/01/2025 into rates. Importantly, the UTM helps meaningfully reduce regulatory lag by allowing recovery on these assets and, going forward, can be filed every 365 days. We anticipate a final order and updated rates in 2026. In combination, the rate case approval and periodic UTM filings put Oncor in a better position to earn closer to its authorized ROE across the plan period. In California, SDG&E filed an uncontested offer of settlement in its TO6 proceeding with FERC, which establishes the authorized framework for SDG&E’s cost to own, operate, and maintain high-voltage transmission infrastructure. Similar to improving financial returns at Oncor, the offer of settlement is important because it would also increase SDG&E’s authorized base return on equity to 10.28% with a hypothetical capital structure of 54% equity, among other items. The terms of the settlement remain subject to FERC approval, which is expected to occur in the second half of this year. Importantly, if approved, the settlement terms would be retroactive to 06/01/2025. Now turning to Sempra Infrastructure. We declared COD at Cimarron Wind during the quarter. At ECA LNG Phase 1, we introduced feed gas from the GRO pipeline into the facility and began the startup process. We continue to expect to produce first LNG next month, and we are targeting substantial completion this summer. At that point, we will begin recognizing LNG revenues, with long-term contracted sales and full commercial operations commencing shortly thereafter. Port Arthur LNG Phase 1 and Phase 2 construction projects continue to progress on time and on budget. Another one of our top priorities for the year is to close the SI Partners transaction and use the associated proceeds to reinvest in our utility businesses. We are making progress toward completing the transaction and have recently received key approvals from FERC and antitrust regulators. We expect to close the transaction in 2026. We also remain focused on simplifying Sempra’s business model to concentrate our future investments on our utilities, which we previously projected would grow rate base at roughly 11% annually through 2030. That is why we are continuing to advance our capital recycling program. Consistent with this initiative, the previously announced Ecogas sale remains on track to also close in the second or third quarter of this year. As you know, we also have a relentless focus on modernizing operations to support improving our cost structure and building out our execution capabilities. In that regard, Oncor continues to make strides diversifying its supply chain while reducing execution risk. Currently, they are growing their supply base across multiple sourcing categories, securing labor and materials, expanding logistics and warehousing capacity, and strengthening physical security. Lastly, we continue to prioritize community safety, affordability, and operational excellence across the enterprise. As an example, during January’s winter storm Fern, SoCalGas’ natural gas storage facilities helped both SoCalGas and SDG&E customers avoid approximately $120 million in higher potential energy cost by withdrawing natural gas purchased months earlier. The effective use of these assets highlights the clear value of natural gas storage and how it can be used successfully to support customer affordability. Additionally, the California Earthquake Authority published its natural catastrophe resiliency study in April. It outlined several potential pathways to improve affordability in the state and improve community safety. We are encouraged by the report and will closely monitor developments informed by the study’s findings as the year progresses. Now please turn to the next slide where Karen will walk through our financial results. Karen L. Sedgwick: Thank you, Jeff. Earlier today, Sempra reported first quarter 2026 GAAP earnings of $1.37 million or $1.58 per share. This compares to first quarter 2025 GAAP earnings of $906 million or $1.39 per share. On an adjusted basis, first quarter earnings were $991 million or $1.51 per share. This is an increase to our first quarter 2025 earnings of $942 million or $1.44 per share. I would also note that the positive financial impact for the first quarter of Oncor’s base rate review will be primarily recognized in the second quarter, given the PUCT order was not issued until April. We are pleased with our financial results for the quarter and look forward to building on them for the remainder of the year. Please turn to the next slide. Experiences in the first quarter 2026 adjusted earnings compared to the same period last year can be summarized as follows. At Sempra Texas, we had $25 million of higher equity earnings from the UTM, higher invested capital, and customer growth, partially offset by higher interest expense, depreciation, and O&M. Turning to Sempra California, we had $44 million of increased earnings primarily from higher CPUC base operating margin net of operating expenses. Sempra California also had $48 million of lower income tax benefits and higher net interest expense. At Sempra Infrastructure, earnings increased by $34 million primarily from lower depreciation due to the classification as held for sale, partially offset by other items. At Sempra Parent, we had $6 million of higher losses from higher net interest expense and net investment losses, partially offset by other items. Please turn to the next slide. With solid first quarter results and progress against our key initiatives, we are affirming our full-year 2026 adjusted EPS guidance range of $4.8 to $5.3 and 2027 EPS guidance range of $5.1 to $5.7. We are also affirming our projected long-term EPS growth rate of 7% to 9%. We remain focused on achieving the key milestones we have laid out for the remainder of the year, including closing the SI Partners transaction and recycling that capital back into our utilities, continuing to simplify the business with the completion of the Ecogas sale, and strengthening the balance sheet post-close through parent debt paydown and the deconsolidation of SI Partners, as well as working with the rating agencies as we continue to improve our credit profile. In addition, we are executing on a record $65 billion capital plan that supports strong projected rate base growth across the plan period. Also, a central feature of our capital plan is that we are investing more in Texas, where we expect to derive a majority of our rate base by the end of the decade. What is more, we have improving visibility into approximately $9 billion incremental capital opportunities beyond the base plan, which is also primarily concentrated in Texas. In short, Sempra is well positioned to achieve our projected long-term EPS growth rate of 7% to 9%, which is one of the highest in the utility sector. We look forward to building on our early momentum and continuing to execute our corporate strategy, which aims to provide investors with a compelling mix of current yield, durable earnings growth, and long-term capital appreciation. Operator: We will now open the call for questions. Please limit your questions to one question and one follow-up. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. Please make sure your mute function is turned off. We will pause for just a moment to allow everyone to signal for questions. Our first question will come from Shahriar Pourreza from Wells Fargo. Your line is open. Shahriar Pourreza: Hi. Good morning, team. It is actually Constantine on for Shar. Thanks for taking our questions. Maybe starting off on the progress at Oncor with the 127 gigawatts qualifying load. Do you view the quality as comparable to the prior 39 kind of high-confidence number? And do you envision any rule changes that could move that number lower? Just maybe talking about how you envision the timeline for converting that into CapEx. Is that within the five-year plan or mostly outside? Jeffrey Walker Martin: Let me try to address this from a couple of different perspectives. I think that number is quite solid. You recall just over a quarter ago, it was closer to 38 gigawatts. I think Allen and his team have made substantial progress in confirming and meeting the requirements for that to move into the RTP. I will provide a little bit of high-level commentary, and then I will pass it to Allen to update us on where they are at in the Batch 0 process as well as the regional transmission plan and see if that will answer your question. My starting point here, Constantine, is I think the terminology I have heard a lot in our industry is the United States really is in the middle of an arms race. And it is a race to build the infrastructure that we are talking about, artificial intelligence, and continuing to improve America’s standing as a technology leader in the world. And when you think about it, and we study all the other states in the country, Texas truly is ground zero for this opportunity, and that is why I think there will be opportunities to grow Oncor’s plan beyond the base plan, beyond the incremental $10 billion of CapEx, well into the middle part of next decade. It is also why we and our Oncor friends are following the ERCOT Batch 0 process so closely, as well as the regional transmission plan. So, Allen, mind giving a little bit of a procedural update about where we are at with Batch 0 and your views on RTP? E. Allen Nye: Yeah, sure, Jeff. As we all know, ERCOT has been developing the process for Batch 0 through stakeholder workshops that recently concluded. Protocol revisions are now proceeding through ERCOT committees to get to Board approval, hopefully on June 1, followed by PUC approval. The timeline as we understand it right now is we will finalize the inclusion criteria in July 2026; a batch study would occur between July 2026 through January 2027; load commitment period beginning probably for 30 days in February 2027; followed by a refinement study from March to May 2027; and RPG submission in June 2027. That is what we know about the schedule right now. It is obviously subject to changes as we have seen. We are very involved and will continue to be throughout the process. And I think it is good, Jeff, that you kicked it to me for both these issues because they do overlap to a certain degree. In fact, there was some discussion as recently as 30 minutes ago at the open meeting in Austin this morning about the RTP and the batch process. With regards to the 2026 regional transmission plan, I have said on previous calls that we had what I said was high confidence—you mentioned it with regards to 38 gigawatts—and I also said that it would likely increase by our April 1 filing for the regional transmission plan. As you have seen, our total queue right now for large load is at 289 gigawatts, of which 271 gigawatts are data-center related. For Oncor’s 2026 RTP filing, we submitted 102.22 gigawatts of load—that is load 75 megawatts or higher. We also submitted 5.2 gigawatts of medium-sized load, which is load greater than 25 megawatts but lower than 75 megawatts. Together, that constitutes what is known as substantiated load pursuant to the ERCOT compliance plan. To your question about the quality variance between the 38 and the 127, they are effectively the same. The 127 that we submitted as part of the RTP meets all the requirements of SP6 as they were at the time. So we feel very good about those numbers. How they can change—there was literally a discussion this morning about what the Commission is going to do with regards to Batch and RTP—so we will have to see. But that is where we are right now on large load. Jeffrey Walker Martin: And, Allen, I would just follow up, Constantine, and summarize a couple of things I think are most important for investors. Recall that Oncor is growing earnings at 30% annually through the midpoint of its 2027 guidance. Second, I would remind you that they have a $47.5 billion capital plan that is solid—it does not turn on whether there is more or less large data-center or large-load customers coming on the grid. Number three, as I indicated earlier, they have identified this $10 billion of incremental CapEx, and Allen and Don and the team have been working quite aggressively to try to firm that up, and I am confident that we will be able to give you an update on that incremental CapEx bucket later this year. And finally, we keep using this term of 127 gigawatts of large-load customers—the bottom line is it is going to lead to higher levels of capital spending in Texas. And interestingly, internally, Constantine, we refer to this as the incremental to the incremental—in other words, it is beyond our incremental capital program, or what we refer to as I squared. And we expect the I squared will show up in continued levels of record capital spending at Oncor well through the middle part of the next decade. Shahriar Pourreza: Thanks for that. Really appreciate it. Really staggering numbers here. And maybe in a little bit more detail, ERCOT has been moving forward with some of the local transmission upgrades supporting near term—I think they have announced more than $2 billion of projects already awarded. Is that upside to the current plan? Is that a part of that $10 billion? And more holistically, how are you tracking versus that $10 billion number, and maybe the trigger for the next update? E. Allen Nye: Sure. You are 100% correct. About two weeks ago, and I referenced this on a prior call, in addition to Batch and RTP, we have also been pursuing some projects at ERCOT that were going through the regular RPG process. We had 4 gigawatts that we referred to as South Dallas 4 gigawatts, and about 10 gigawatts elsewhere throughout the system. Approximately two weeks ago—Thursday or Friday, I do not remember—ERCOT released those 4 gigawatts of South Dallas projects, and they had an estimated cost around $2.9 billion. They are not all in South Dallas; there are some other projects that they released as well. But given that the majority of them are in South Dallas where we serve, the majority of those projects would be ours. Costs associated with those projects are presently in what is our incremental opportunities bucket. Jeffrey Walker Martin: I think this is an important point, Constantine, because, as I indicated in my first response, they are working aggressively right now to firm up that $10 billion bucket. This is a great example of progress they made just two weeks ago. We would certainly like to be in a position later this summer, perhaps on the Q2 call, to provide more visibility into how this is firming up. Now remember, you have to get CCNs, you have to get rights of way—there are things out there—but we have a process by which what we put into the base capital plan is firm and rock solid. I think Allen is making a great point. We have made tremendous progress on the $10 billion of incremental capital just in the last 90 days, and I think there are some more things we can do between now and our Q2 call in August. We look forward to coming back to the Street and updating you. Shahriar Pourreza: Really appreciate that. Very impressive. Thank you. I will put you back in the queue. Operator: Thank you. Our next question will come from Steven Isaac Fleishman from Wolfe. Your line is open. Steven Isaac Fleishman: Good morning. A less exciting question. On the Sempra Infrastructure closing, what steps do you still have to achieve to close that? Jeffrey Walker Martin: We said a few things in our prepared remarks in terms of progress we have made. Justin, why do you not recap the progress since the announcement and what the remaining items are that we will resolve here in short order? Justin Christopher Bird: Thank you, Jeff, and hello, Steve. As Jeff said in the prepared remarks, we remain on track for closing in the second or third quarter of this year. Thus far, we have gotten FERC approval, competition approval from Korea, we have reached the end of the HSR period, we have received antitrust approvals in Mexico, and we have received the majority of our third-party consents. We are currently working with the Cameron partners and the Japanese export credit agencies who finance Cameron to get their consents. At the same time, our teams are working on finalizing the pre-transition and transition services, with those closing activities remaining on track. Our relationship with KKR remains strong, and we are working closely with them to close the transaction in Q2 or Q3. I think we are in great shape, Steve. Steven Isaac Fleishman: Good. And then just to follow up on that, I think Karen mentioned the rating agencies and completing their review after Sempra Infrastructure—potentially. Is that the key milestone, or are there other things that the rating agencies are looking at related to the negative outlook maybe going away? Jeffrey Walker Martin: Karen, please go ahead. Karen L. Sedgwick: Yes, Steve, that is the main catalyst for some changes in our thresholds from the rating agencies. We have spoken with all of them, and they have all talked about improving our thresholds once the deal is done. But I do not expect that to be immediate, so it is not just that. For example, Moody’s also wants to see some further progress on our construction projects, so they are tracking pipe installation and those things. I anticipate our thresholds improving post-close of the project, but probably closer to the end of the year once we reach some of those construction milestones—end of the year or early 2027. Jeffrey Walker Martin: The way I think about it, Steve, is closing plus six months. That will give us time to pay down some parent debt; obviously a big part of it is deconsolidating Sempra Infrastructure from our financials and improving the overall credit profile of the company. That will go into what Karen is referring to as an adjustment in terms of downgrade thresholds. Steven Isaac Fleishman: Okay. And then one last question: your confidence in moving to California on getting changes to the wildfire liability law this session? Jeffrey Walker Martin: This is something, Steve, that I have been personally involved in with Caroline A. Winn. One of the things I have said on prior calls is the right people that are supposed to be addressing the issues are around the table. The right issues are being discussed. From my perspective, and I will pass it to Caroline for some additional commentary, I can see this legislative session oriented around how we as a state improve the livability of the state for its citizens. I think there is a continued prioritization from the Governor’s office in growing the economy. I think this session, you will see a big focus on the affordability of housing, the availability of insurance, reduction in sales taxes in some areas, and I certainly think what you are asking about—SB 254—falls in that category as well. We were pleased with the CEA and laying out different paths to reduce wildfire risk and set up improved recovery mechanisms. I have reasonable confidence that we will get something done this legislative session. I do not think it is going to cross a couple of years. I think there is a lot of momentum to get something done that will be helpful to our industry. Caroline, could you provide some commentary on what your priorities are this session? Caroline A. Winn: Sure. Maybe I will highlight three areas of the report that I think were very helpful. One is that the wildfire risk is really framed appropriately as a whole-of-society problem, not just a utility problem. The second piece is that there is a clear acknowledgment that the current framework is neither durable nor adequate. Third, there is significant cost of inaction. As Jeff mentioned, the report includes a menu of different options that provides a solid base of facts that will inform the legislature. From our perspective, we are focused on three priorities: first, we need to put wildfire victims first; second, we need to implement a more coordinated statewide approach to risk mitigation; and third, we need to make meaningful progress within this legislative session. Ultimately, this is about improving California’s wildfire framework. It is about keeping the communities that we serve safer, making California more affordable to live in, and ensuring that recovery is faster and fairer when wildfires do occur. We are seeing that the Governor and the legislative leadership are moving, and to that point, they will start informational hearings next week. So I do think there is a lot of activity and alignment on this issue. Jeffrey Walker Martin: The only other thing I would add to Caroline’s comment is I think what is different is you do not want to go to the legislature and be talking about bespoke issues. What is really important right now is the state conversation is around a dialogue of improving the livability of the state. What you and I are talking about on this call with SB 254 is just one element of that. I think the focus is on the right issues, and I think we have a lot more people aligned around action. The CEA report is certainly helpful in that regard. Steven Isaac Fleishman: Great. Thank you very much. Jeffrey Walker Martin: Thank you, Steve. Operator: Thank you. Our next question will come from David Keith Arcaro from Morgan Stanley. Your line is open. Jeffrey Walker Martin: Hi, David. David Keith Arcaro: Hey, thanks so much for taking my questions. Circling back to the Texas landscape, we heard earlier today from an IPP in Texas who was more cautious on the physical ability for all that data-center capacity to come online. I am curious about your confidence level—what you are seeing on the ground, physical progress, and any limiting factors that you see realistically for the load growth outlook? Jeffrey Walker Martin: Let me make a couple comments, and then I will pass it to Allen. I think there is something, David, that is unique about Sempra and the Oncor story. You will be reading and following different earnings calls where people are having challenges with the RTO or talking about leaving markets. What we are talking about is we have a base capital plan that is largely indifferent to whether these things happen or do not happen. We have an industry-leading story that is largely unrelated to the number of data centers that come online. The great news is Sempra is an opportunity where you can have leading growth, and the data-center story, as it matures, becomes significant upside beyond our capital plan. I just want to keep putting that out there. This is a plan upon Texas’ economic activity and the need to build the superhighway of high-voltage transmission, and that informs roughly 70% of Oncor’s existing base plan. They have a solid plan in this area, and I believe they have an improving view of how many data centers will come online. You are making a great point: having the right matching of generation capacity that will be choreographed with that growth will be important. Allen, can you talk about what you are seeing on the ground and whether you see continued progress on the generation side? E. Allen Nye: Sure. Thanks, Jeff. It is a very reasonable question. The numbers—especially ours alone, but when you look at ERCOT as an aggregate—are very, very large. That is why it is important that ERCOT and the PUC are going through the exercises that they are right now with the Batch process and how they are handling the 2026 RTP. As a state, we are going to need to coordinate and phase this very well. There is going to have to be a lot more transmission built to serve any significant amount of this load. There is sufficient excess generation right now. There is 164 gigawatts installed—nameplate—versus an 85.5 gigawatt peak. But we have, as a state, about 450 gigawatts or so of generation in the queue—somewhere within that 164 gigawatts trying to connect to us in some manner right now. In discussions with people on the generation side, I think they are looking for price signals to put more steel in the ground, and this could certainly cause that. Jeffrey Walker Martin: What is interesting, Allen, is the choreography between the RTP process and the Batch process. You are really trying to match up load with capital investment in transmission, and you start unlocking that 450-gigawatt queue of generation. There is a loading order here, David. We continue to think that Oncor’s capital plan is really positioned for what we think is the anchor investment that unlocks this, which is high-voltage transmission. David Keith Arcaro: Great. Thank you for that helpful color as we try to figure out what is going on on the ground in Texas. Shifting over to California, we are close heading into the GRC period, and I know your filing is coming soon. Any preview of your priorities and how you are positioning the GRC filings—what we should expect to see there? Jeffrey Walker Martin: Caroline and her team have been doing work on this for well over a year. We are expecting to make our filing later in Q2. Caroline, it might be helpful to talk about your priorities as we put the GRC together. Caroline A. Winn: Sure. As a reminder, our last rate case was filed in 2022 and we received our final decision in December 2024. As Jeff mentioned, we will be filing next month. It will take into consideration lessons learned from prior GRCs as well as others in the state. You can expect our filing to focus on three key areas: continued necessary investments in safety and reliability; technology innovation; and modernization of services and our infrastructure to support customer needs. I would also note that we have done great work on the affordability of our services recently by modernizing our organizational structure and rightsizing our business. We are focused on efforts that will support our ability to make critical investments while also improving the affordability of our services. David Keith Arcaro: Very helpful. Thanks so much. I appreciate it. Operator: Thank you. Our next question will come from Aiden Kelly from JPMorgan. Your line is open. Jeffrey Walker Martin: Hi, Aiden. Aiden Kelly: Hey, thanks for the time today. Just one question on my end. Now with the Texas base rate case, can you remind us of the expectations for ROE by year as far as what you contemplate in the plan? And then high level, how should we be thinking about the key components in your UTM filing? Jeffrey Walker Martin: I would start by saying that just over 18 months ago, we had been forecasting earned ROEs at Oncor just below 8%. There was a lot of work done by Allen and his team to create the right legislative environment and the right stakeholders to support the UTM process, which was designed to reduce regulatory lag, which was even more important in a period of much higher growth in capital deployment. Behind that, the base rate review increased both the ROE, the equity layer, and the expected cost of debt. In combination, what we have said publicly is it is expected to move their earned ROE on average much closer to their new authorized ROE of 9.75%. Allen, would you like to make any other comments in terms of the schedule for the UTM? E. Allen Nye: Sure. I am glad to address the UTM. It is going well. We made our filing on April 22. We got a revised procedural schedule yesterday which would call for testimony of the parties—intervenors, Staff, and Oncor—to be filed in July, with a potential hearing on August 20. We expect a final order and new rates to go into effect during 2026. We have the opportunity to get interim rates on or about October 4 if we do not have an order before then. We are constructive on the schedule and will work with the parties moving forward. And just as a reminder, we can file once every 365 days. Jeffrey Walker Martin: Aiden, the only thing I would add is these developments were very important to Sempra. We knew there was going to be growth in the state. We knew that Oncor had an increased opportunity to deploy a lot more capital. As we started to see these developments take place—that is why, under Justin’s leadership and Karen’s leadership—we took the opportunity to load the balance sheet. So the timing—I think Steve Fleishman referenced this—the timing of getting the KKR transaction closed and the improvement in financial returns, which, by the way, was the number one priority for our value-creation initiatives last year and it is the number one priority this year. That progress and improved expectation of returns in Texas has really unlocked what I think is a leg of capital. You are seeing that show up in their earnings growth. Aiden Kelly: Great. Thanks for the insight. Operator: Thank you. Our next question comes from Julien Dumoulin-Smith from Jefferies. Your line is open. Julien Dumoulin-Smith: Hi, this is actually Andrew on for Julien. Thank you for the time. Two questions. One, on Texas execution: the disclosure was helpful that you have contract slots for your base plans through 2028. Can you talk a bit more about the progress of securing that for the remainder of your base plan as well as more specifically for your upside plan? Are you looking to secure those slots throughout the rest of the year, or are you waiting for more visibility on those opportunities? Jeffrey Walker Martin: Thank you for joining the call. I would refer you and our listeners to Slide 13. We wanted to lay out something that Allen has been leading at Oncor since the COVID days, which is the opportunity in Texas to deploy economies of scale in how they resource their business. Slide 13 does a good job of showing their progress to date. Allen, if you could, maybe talk about the work you have done to support the base plan and why you think we are in good shape with the Board support for you to keep contracting forward. E. Allen Nye: You bet. Thanks, Jeff. We are in excellent shape. As I have said on prior calls, we have what we need for the first three years of the base plan. For the outer two years, we have line of sight—we have understandings or agreements, not yet papered or executed, for those same suppliers to provide what we need. Some of our suppliers will only execute three-year contracts with us. But we have what we need for the first three, and we believe we are in excellent shape for the outer two years for the base plan. We are constantly working on supply chain—diversifying and securing slots—and, to Jeff’s point about Board support, several years ago, probably five years ago, the Board gave us authority to start securing things outside of what we were then planning for. We have been doing that for a number of years now. That is how we got in the good position we are in with regards to the 765-kV equipment that we have ordered or acquired. We are always looking beyond the five-year horizon into our incremental buckets to see what we need, and the Board has given us the ability to go ahead and secure those slots or products. Jeffrey Walker Martin: Andrew, I would just add that over a long period of time there have been discussions in the industry about the value of scale. In this case, Oncor really is a case study in that. It has been proactive planning over the last five years, and they are in a position that has created a competitive advantage in the industry to be so far along in their supply-chain management. Thank you for joining our call. Julien Dumoulin-Smith: Thank you. That was very helpful. Maybe one quick one on LNG as well. Given the backdrop we are in, can you talk about how you are thinking about LNG as a long-term component of your business strategy versus, historically, more a source of capital? Has that changed over time, and how has the conversation been with potential offtakers for your backlog projects? Jeffrey Walker Martin: I will make a couple comments on the macro environment and then pass it to Justin to talk about conversations with current bilateral customers as well as project status. You may recall back in 2018 there were a lot of people challenging Sempra on its perspectives on LNG. We came out in front of the industry and said we firmly believe there is going to be a second wave of LNG opportunity. We really tried to build a business where we put the Mexican platform together with our LNG platform, and obviously we have marked the value of that business multiple times now, including most recently in the transaction. The LNG trade today, which is about 60 million tons per annum—about 60 Bcf annually—really is attempting to balance supply and demand both in Asia and Europe. When you see the stress that the global energy markets are in today, it really points to markets that have a competitive advantage and fundamentals. The United States has deep capital markets, ample natural gas reserves, and probably most importantly, low price volatility and the rule of law. It is times like this that America’s competitive advantage shows up. I am very bullish on the LNG trade long term because, as the IEA recently commented, buyers will continue to pay a premium for taking risk off from their supply market. This is being demonstrated with the issues that Qatar is facing. The United States will continue to not only be the largest exporter of LNG; I think it is going to take market share. Justin, you might want to talk about how that is informing some of the conversations with buyers and cap it off with a quick recap of where you are with your projects. Justin Christopher Bird: Thanks, Jeff, and hello, Andrew. The fundamentals of the market really matter when there is stress, and we think this is a key reason why the U.S.—and, frankly, our LNG portfolio with access to both the Pacific and Atlantic coasts—continues to be well positioned from a supply perspective. In the short term, these items are translating into positive momentum around our additional volumes at Port Arthur LNG Phase 2 and additional LNG development opportunities around our expansion projects. We are actively engaged in discussions for the remaining offtake at Port Arthur LNG Phase 2 and are constructive on securing our remaining volumes under long-term contracts with prices that will bolster SI’s economic return. Along with our SI partners and our Cameron partners, we are very bullish on the prospects of LNG—U.S. LNG—and our dual-coast LNG portfolio. We think there is an opportunity to supply the market with the demand that is going to be there. Following on project status: at ECA, as Karen mentioned, we have achieved mechanical completion. We recently introduced first gas into the system, which began the startup process and pre-commissioning activities. We continue to expect to produce LNG next month, which supports our target of achieving substantial completion this summer. Once we reach substantial completion, we begin recognizing revenues from LNG cargoes, and once the commissioning process is complete, long-term contracted sales and full commercial operations will begin. Overall, the project is moving along, and we look forward to upcoming project milestones. Jeffrey Walker Martin: The only other thing I would add, Andrew, is we have revised our corporate strategy. We are going to be a pure-play utility business. So to the heart of your question, we would expect to be reducing our capital allocation to the LNG space. As one example, in addition to our $65 billion capital plan, we have circled about $9 billion of upside—almost all of that is in Texas. About $1 billion of that could come from the LNG side. To be clear, we think the opportunity for U.S. LNG is expanding, and the opportunity for Sempra Infrastructure is also expanding. But Sempra’s corporate strategy is moving to a lower-risk profile focused on our U.S. utilities, with a big emphasis on Texas. By the end of this decade, we expect to have almost 60% of our rate base in the state of Texas. Julien Dumoulin-Smith: Very clear. Thank you very much. Operator: Thank you. We have time for one last question today. Our last question will come from Carly S. Davenport from Goldman Sachs. Your line is open. Carly S. Davenport: Thanks so much for taking my question. Just one from me, and it is a follow-up to an earlier question. We are hearing more about emerging labor constraints, and I know you laid out the supply-chain diversification in Texas. Could you talk a little more about the labor side, specifically beyond 2028, and how you think about labor availability as you contemplate upside opportunities to the capital plan? Jeffrey Walker Martin: As you frame that question, you think about the high-class problem where we have tremendous growth—which is fantastic—and you are really on point: supply chain becomes more and more important as you try to de-risk your capital plan. Allen, perhaps you could talk about some of the great work that Jim Greer did and now Alan Buck, and the work you are doing with contractors. E. Allen Nye: Excuse me, Carly. I think one of the really important features of our supply chain with regards to labor is this: we have so much to build, and we have so much in our pipeline, that it is very attractive to labor to come work for us and be able to know you are going to be working in one place for the next multiple years—as opposed to having to move your family or jump from region to region to do the work. Is it tight? Certainly, it is. Have we had a tremendous response from our partners? We have. We feel very good about where we are. We have increased the number of contract labor we use over the years significantly—we have almost tripled it. It has helped us in a number of ways, but one of the features I think is very important is our backlog or our future flow of work is very attractive to people in the field to come work for us for an extended period of time. Carly S. Davenport: Okay. That is really helpful color. Thank you so much. Justin Christopher Bird: Thank you, Carly. Operator: Thank you. That concludes today’s question-and-answer session. At this time, I would like to turn the conference back to Jeffrey Walker Martin for any additional closing remarks. Jeffrey Walker Martin: As we close, I would like to thank everyone for joining us today. We appreciate you making time to participate, and we are very excited to be getting on the road to meet with investors. We look forward to seeing many of you in Arizona at AGA. We also have investor trips planned to San Francisco, Los Angeles, and Boston over the next three or four weeks. If there are any follow-up items, please do not hesitate to reach out to our IR team with your questions. This concludes our call. Operator: Thank you for your participation. You may now disconnect.
Operator: Good morning. Thank you for standing by, and welcome to the Madison Square Garden Entertainment Corp. Fiscal 2026 Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Ari Danes, Senior Vice President, Investor Relations and Treasury. Please go ahead. Ari Danes: Thank you. Good morning, and welcome to MSG Entertainment's Fiscal 2026 Third Quarter Earnings Conference Call. On today's call, David Collins, our EVP and Chief Financial Officer, will provide an update on the company's operations and review our financial results for the period. After our prepared remarks, we will open up the call for questions. If you do not have a copy of today's earnings release, it is available in the Investors section of our corporate website. Please take note of the following. Today's discussion may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Please refer to the company's filings with the SEC for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call. On Pages 4 and 5 of today's earnings release, we provide consolidated statements of operations and a reconciliation of operating income to adjusted operating income, or AOI, a non-GAAP financial measure. And with that, I'll now turn the call over to David. David Collins: Thank you, Ari, and good morning, everyone. We're now in the final stretch of fiscal 2026, and I'm pleased to say that demand for our live entertainment offerings remain strong. For the company's fiscal third quarter, we generated revenues of $246 million and adjusted operating income of $46 million. Behind these results were a number of important drivers, including continued momentum in our concert business at the Garden, growth in marketing partnerships and suites and the last shows of this past season's record-setting Christmas spectacular run. Looking ahead, we expect to close out fiscal '26 on a positive note, led by a significant increase in the number of concerts at the Garden in our fiscal fourth quarter compared to last year. And we remain on track to deliver robust full year growth in revenue and AOI. What's especially encouraging is that we already see this momentum carrying into fiscal '27 with our concert calendar filling up, including Harry Styles 30-night residency at the Arena and the 2026 Christmas Spectacular production currently on sale. Let's now walk through some of the key operational highlights from the third quarter. During the quarter, our venues welcomed over 1.4 million guests at more than 165 events, reflecting the breadth and diversity of events we are bringing to our venues. That included a year-over-year increase in the number of concerts at the Garden, highlighted by several notable multi-night runs. That growth was partially offset by a decrease in the number of concerts across our theaters. From a demand standpoint, we continue to see the vast majority of concerts at our venues sell out. In addition, food and beverage per caps at concerts were up in the quarter, while merchandise per caps were down, both of which we primarily attribute to the mix of events. In our family show category, we welcomed back the Westminster Kettle Club to the Garden for the Dog shows 150th anniversary. And on the sports booking side, we had a busy quarter with college basketball, including St. John's and the Big East tournament along with boxing, professional bull riding and WWE. On the special events front, we faced a tough comparison against the prior year quarter, which benefited from Saturday Night Live's multi-day takeover of Radio City for its 50th anniversary special. However, we are looking forward to hosting the Tony Awards at the venue next month. Turning to the Christmas Spectacular. The show's 92nd holiday season concluded in January with a record-setting run, generating approximately $195 million in total revenues across 215 paid performances. 16 of those shows took place in our fiscal third quarter, delivering year-over-year growth in per show ticketing revenue. As I mentioned earlier, sales for the 2026 holiday season are now underway. With 230 shows currently on sale, we believe the production is well positioned to deliver growth again next fiscal year. Our fiscal third quarter also included the continuation of the Knicks and Rangers '25, '26 regular seasons at the Garden. And once again, we saw higher per game revenues across our various revenue and profit sharing arrangements with MSG Sports as compared to the prior year. And lastly, on the marketing partnerships and premium hospitality front, fiscal 2026 has been highlighted by several notable sponsorship announcements, while we have also seen strong new sales and renewal activity for Suites at the Garden this year. We remain on track for growth across both of these businesses in fiscal '26. Now let's turn to our financial results. For the fiscal '26 third quarter, we reported revenues of $246.3 million, an increase of 2% as compared to the prior year quarter. This reflected an increase in revenues from entertainment offerings, partially offset by lower arena license fees and other leasing revenues as well as a decrease in food, beverage and merchandise revenues. The increase in revenues from entertainment offerings primarily reflected growth in suite license fee revenues, including amounts subject to the sharing of economics with MSG Sports. As we discussed earlier, we also benefited from strong growth in the number of concerts at the Garden during the quarter. In addition, revenues from our Christmas Spectacular production increased year-over-year, primarily due to higher per show ticket revenue and one additional performance in the quarter, both as compared to the prior year period. The overall increase in revenues from entertainment offerings was partially offset by a decrease in revenues from other live entertainment and sporting events. This reflected a decrease in the number of events at our venues, including the absence of Saturday Night Live's 50th anniversary special and the final shows of Annie's extended holiday run in the prior year quarter. Additionally, as mentioned earlier, we saw a decrease in the number of concerts at the company's theaters this quarter. Arena license fees and other leasing revenues decreased year-over-year, primarily due to the Knicks and Rangers playing fewer home games during the fiscal third quarter, partially offset by higher other leasing revenues. Similarly, the modest decrease in food, beverage and merchandise revenues mainly reflected the impact of fewer Knicks and Rangers home games during the current year quarter, which was partially offset by higher food and beverage sales at concerts. Third quarter adjusted operating income of $46 million decreased $12 million as compared to the prior year quarter. This primarily reflects higher direct operating and SG&A expenses, partially offset by the increase in revenues. Turning to our balance sheet. As of March 31, we had $323 million of unrestricted cash, up from $157 million as of December 31. This increase reflects strong cash flow generation as well as an increase in cash due to promoters, primarily due to future events at the Garden. In addition, our debt balance at quarter end was $587 million. As a reminder, we have repurchased approximately 623,000 shares of our Class A common stock for $25 million fiscal year-to-date. We have approximately $45 million remaining under our current buyback authorization. And going forward, we will continue to explore ways to opportunistically return capital to shareholders. So in summary, as we approach the end of the fiscal year, we remain on a clear path to delivering a robust fiscal '26 and believe we are well positioned to drive long-term value for our shareholders. I will now turn the call back over to Ari. Ari Danes: Thanks, David. Operator, can we now open up the call for questions, please? Operator: [Operator Instructions]Your first question comes from the line of Peter Henderson with Bank of America. Peter Henderson: So there have been several press reports recently around the Penn Station redevelopment. I think including some commentary from President Trump in the New York Post indicating that his preferred path for the project is to keep the Garden where it currently sits. And can you just update us on your conversations related to the Penn Station renovation and the impact to the Infosys theater? David Collins: Yes. Peter, thanks for the question. While I really don't want to comment on press reports, here's what I will share with you. The U.S. Department of Transportation and Amtrak, they continue to reiterate their intended project schedule. And based on that reported time line, RFP submissions were recently due from the three shortlisted bidders. So Amtrak is now expected to select a master developer this month and to announce the preliminary design in June. So as redevelopment of the area continues, we are fully committed to collaborating closely with all the stakeholders. But with that said, we don't really have much more to report than that, but we will certainly keep you posted as their progress. Operator: Your next question comes from the line of Stephen Laszczyk with Goldman Sachs. Stephen Laszczyk: David, I was hoping you could give us an update on how you're thinking about the opportunity for capital returns. I think in the past, you've mentioned that you would think about taking an opportunistic approach to buybacks. It doesn't sound like there was stock bought back in the March quarter. Curious if there's been an opportunity since or if there's any more color you could provide on how you're thinking about either buybacks or dividends moving forward? David Collins: Sure, Stephen. Thanks for the question. In terms of buying back stock, we take a number of factors into account in determining when we repurchase shares. And that includes the forward outlook for our business, which remains very positive. However, sometimes even including subsequent to our last earnings call in February, opportunities to repurchase shares present themselves when we don't find ourselves in an open window period. So that said, if you look at our track record since our spin-off, you'll see that we have bought back a substantial amount of stock. And going forward, we will continue to look for opportunities within the context of our three broader capital allocation priorities, which once again, are maintaining a strong balance sheet, having appropriate flexibility to pursue growth opportunities when and if they arise and also opportunistically returning capital to our shareholders. Stephen Laszczyk: Great. And then maybe just on expenses. The underlying cost structure came in a bit elevated in the quarter. I was just hoping you could unpack some of that for us and then how we should be thinking about the expense lines or margins as we think into the balance of the year? David Collins: Sure. Great. Yes. No, there certainly were a number of moving parts this quarter. So let me walk you through it. To start, this past quarter included the impact of several million dollars of unanticipated costs spread across both direct and SG&A expense. This was driven by a few different items. For example, we incurred higher-than-expected health care benefit expenses due to generally higher overall health care costs as well as increased claims activity. You can see in today's results that our venue operating costs increased $2.4 million year-over-year, which reflects those higher health care expenses, including the impact of truing up some costs to our most recent estimate. In addition, the increase in direct operating expenses reflects the mix of events across our venues. For example, the year ago quarter had a number of multi-night runs, which came with lower costs and higher margins, for instance, the Saturday Night Live's 50th anniversary special at Radio City. So that was really a mix of events. In terms of SG&A expense, we also saw the impact of those higher health care costs there. And even excluding those costs, our SG&A expense grew this quarter was still elevated and above what we would expect our long-term expense growth rate to be. And that includes the impact of higher employee compensation, which is pretty consistent with what we've said in the past about higher labor costs this fiscal year. So I would say, overall, as we look ahead, we expect SG&A expense growth to begin to normalize on a year-over-year basis in our June quarter and also expect that to carry over into the start of our fiscal '27. Operator: Your next question comes from the line of Cameron Mansson-Perrone with Morgan Stanley. Cameron Mansson-Perrone: You highlighted a bit in the prepared remarks, but I was wondering if you could just elaborate on how concert bookings are pacing in the fiscal fourth quarter and maybe through the rest of the calendar year? David Collins: Sure. Great, Cameron. Thanks. First, I'd like to say again that we are headed for a strong end to fiscal 2026 at the Garden, and that will reflect a significant growth in the number of concerts at the Arena in our fiscal fourth quarter. In terms of the first half of fiscal '27, we continue to see a number of positive signs in concert bookings. At this stage, we have substantial visibility into the September quarter, where we are pacing well ahead at the Garden. In fact, we remain on track to shatter our record for number of concerts in any quarter at the venue, which, of course, includes the impact of the Harry Styles residency. And at our theaters, I would say we are currently pacing behind for the September quarter. However, as we've said in the past, the bookings window in our theaters is typically 3 to 6 months in advance. So we still have some time and are working to narrow that gap. Looking at the December quarter, it's still a bit early to discuss pacing for our theaters given the shorter booking window I just mentioned. But at the Garden, we are again pacing ahead. So all in, we are pleased with how our concert bookings are pacing so far for fiscal '27, and we continue to believe that Garden is likely headed towards another year of strong concert growth in fiscal '27. And while still very early, we see potential to drive growth for our theaters as well in the fiscal '27. Operator: Your next question comes from the line of David Karnovsky with JPMorgan. David Karnovsky: Maybe just given some of the recent macro rise in energy prices, it would be good to get your expanded view on demand, both as it relates to current or forward ticket sales or maybe what you're seeing in per caps? David Collins: Sure, David. We certainly are always keeping a close eye on the macro environment with everything going on in the world. And I have to say we continue to see strong consumer demand. A number of factors that support that. As I mentioned earlier, a vast majority of our concerts at our venues were again sold out this past quarter and overall F&B per cap spending at our concerts was up year-over-year. Year-to-date, we have continued to see concerts perform better than we initially expected. A number of our upcoming acts across our venues have also added additional shows due to strong demand. And when we look at the next 2 quarters, the sell-through rate for concerts is currently pacing ahead of where it was at the same time last year. So I would say, given all this, watching the macro environment, we continue to see strong demand from consumers. David Karnovsky: Okay. And then I just wanted to see if you could update on your residency pipeline, both for the Garden and then maybe also the tears? Ari Danes: David, you came in a little staticky from our end, but I think you were asking about the residency pipeline. So we'll go ahead and answer that. David Collins: Sure. Sure, David. As far as residencies go, first, I'd like to reiterate that we are off to a strong start in terms of concert bookings for fiscal 2027. And that, of course, includes the Harry Styles residency at the Garden for 30 nights. I'd also like to add that we have Bonjovi for a 9-show residency and Fish for a 5-show residency at the Garden this summer. And at our theaters, Joe Hisaishi will be doing a 7-night residency at Radio City in August. Seth Meyers and John Oliver recently extended their long-running residency at the Beacon Theater into this fall. So you can see that we believe there's a great value in bringing residencies to our venues as we believe it builds more of a recurring base of business and also increases our visibility into the forward calendar. So I would say residencies remain an important area for our booking business. And while it's early to discuss fiscal 2028 and beyond, we are continuing to have discussions with other artists about future residencies at all the venues, including the Garden, and we will certainly keep you updated on our progress. Operator: Your next question comes from the line of David Joyce with Seaport. David Joyce: Given the Knicks strong progress in the playoffs again this year, can you discuss the benefits or headwinds to the Knicks advancing to the MSG Entertainment business? David Collins: Sure, David. Thanks for the question. I have to say we are excited to see the Knicks in the second round of the playoffs, and they are off to a great start. As you know, we benefit from playoff games at the Garden through our agreement with MSG Sports in a few ways. We share in revenue streams like F&B and merchandise as well as single night suite sales. As you know, we operate and manage the F&B services during all team events for which MSG shares 50% of the net profits with the Knicks and Rangers. We also operate and manage the team merchandise sales at the Garden and retain 30% of net revenues. And we also earn a commission on the sales of single night suites at the Garden during Knicks and Rangers games. So we benefit during the playoffs here. One other thing to point out as well is that we believe that strong team performance like the Knicks are having right now will benefit next year in the form of continued strong arena attendance, which will further benefit those shared revenue streams that I just mentioned with sports. I'd also mention from the bookings side, booking concerts during the playoff window continues to be an opportunity that we've been targeting to drive utilization at the Garden. And we've had success this fiscal year at doing so. As I mentioned earlier, we are expecting significant year-over-year growth in the number of concerts at the Garden in our fiscal fourth quarter, and that includes an increase in the number of concerts that we booked during the playoff window. So that's something that we're going to strive to continue to do. Operator we have time for one last caller. Operator: Your next question comes from Joe Stauff with Susquehanna. Joseph Stauff: The value of your Christmas Spectacular asset, obviously, is important, continues to grow nicely. You're increasing show count this year 7%. How do you assess demand versus that 7% show count? This is going to be the third year in a row, certainly that you're increasing show count. So there is pretty significant, obviously, demand that continues to grow. How do you think about that? And you had mentioned advanced ticket sales. How much or how many of those tickets are sold already? And how does that evolve towards the opening of the show in the December quarter? David Collins: Thanks, Joe. Yes. So we see -- we definitely see growth potential for next year's Christmas spectacular through both more shows, as you mentioned, and higher average ticket yields. As you mentioned, we are on sale for 230 performances for the next holiday season, up from 215 last year, which translates, as you mentioned, mid-single-digit percentage increase in show count year-over-year. One of the things that's important to remember and where we see growth is that the Christmas spectacular continues to be a premium entertainment product, and we believe it's still priced well below average ticket prices for comparable entertainment options. So I think as we add shows, we will be thoughtfully managing marketing and pricing our ticket inventory to maximize revenue for each show. And in terms of advanced ticket sales, we initially went on sale just in March, and we'll begin marketing the production over the summer. So I think it's a little bit early in the sales cycle to discuss pacing as of now. But again, we are confident in the growth opportunity for this '26 holiday season. Operator: We have reached the end of the Q&A session. I will now turn the call back to Arie for closing remarks. Ari Danes: Thank you all for joining us. We look forward to speaking with you on our next earnings call. Have a good day. Operator: And this concludes today's call. Thank you for attending. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the ams-OSRAM Conference Call on First Quarter 2026 Results. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Juergen Rebel, Head of Investor Relations. Please go ahead, sir. Juergen Rebel: Good morning, everyone. This is Juergen speaking. Welcome to today's call on first quarter 2026 results. Aldo, our CEO, will comment on business performance and our strategic progress. Rainer, our CFO, will then walk you through the financials. Please refer to the Q1 earnings call presentation that is available on our website. Aldo, how did we perform in the first quarter following the launch of our Digital Photonics strategic realignment? Aldo Kamper: Thank you, Juergen, and good morning, everyone. Turning to Slide 3 here. Overall, we delivered a very strong first quarter and made further tangible progress towards our ambition of becoming a focused Digital Photonics powerhouse. On a like-for-like basis, our semiconductor core portfolio grew by 9% year-on-year, clearly underlining that the strategic focus is the right one. Revenue came in well above the midpoint of our guidance range. Adjusted EBITDA reached the upper end. Design win momentum continues unabated across all end markets. From a Digital Photonics perspective, we achieved 2 important milestones in this quarter. First, we are in the process of extending our portfolio of optical components that are decided for the system performance of AI-enabled augmented reality smart glasses covering key functional building blocks. Second, in AI photonics, we signed a development agreement for highly parallel micro emitter array-based so-called slow and wide optical interconnects targeting hyperscaler AI data centers. In parallel, we advanced on execution topics. The simplified transformation program is well underway, and our balance sheet deleveraging plan progressed as planned. The sale of the Entertainment & Industrial lamps business to Ushio closed in early March and cash proceeds were received. The divestment of our non-optical sensor business to Infineon remains well on track with unchanged timing for mid-'26. Finally, we delivered positive free cash flow in Q1. As expected, divestment proceeds offset the seasonally high interest payments that typically occur in the first quarter. With that, let look at the details. Turning to Slide 4. Q1 performance came in stronger than initially expected. Group revenue came in with EUR 796 million, well within the upper half of the guidance spend. Adjusted EBITDA reached 16.5% at the upper end of the guidance, driven mainly by the OS division and a very strong automotive lamps performance. Year-on-year, revenues declined slightly, entirely due to the weaker U.S. dollar with a top line impact of roughly EUR 15 million. On a like-for-like basis, at constant currencies, the group would have grown by approximately 8%. Adjusted EBITDA recently declined modestly year-on-year solely due to the deconsolidation of the specialty lamp business despite the FX headwinds. Let's turn to segment performance on Slide 5. OS held up very well in a typically soft first quarter. Revenues were almost flat quarter-on-quarter. We experienced supply constraints in select product lines due to short-term order increases. Without those, even the sequential growth would have been possible. Margin declined sequentially due to higher gold prices, annual price downs effective January 1 and FX effects. However, it was 2 percentage points higher year-on-year, reflecting higher production volumes that are not fully visible in reported revenues due to the weaker U.S. dollar. CSA delivered a solid performance in the seasonally weakest quarter. Results were driven by continued strong demand for custom sensor products in consumer handheld and a recovery in Industrial & Medical. Revenues were slightly lower year-on-year solely due to declining contribution from exited noncore portfolio activities. Profitability follows typical revenue fall-through dynamics, however, was down year-on-year, which is due to higher R&D expenses to fund growth projects and FX headwinds on top. Lamps & Systems again delivered a very strong quarter. Aftermarket demand remained elevated, including short notice ordering following financial difficulties at a major competitor. Specialty Lamps contributed for only 2 months. Please keep that in mind. The deconsolidation explains why reported revenue did not increase year-on-year. Strong production loading in Q1 supported profitability. Overall, it was mostly a strong quarter across the portfolio. Turning to Slide 6. Adjusting for the weaker dollar and the exited noncore portfolio contribution, the clean core portfolio grew 9% year-on-year. The noncore portfolio is now largely wound down with only residual contribution in the order of magnitude of EUR 10 million. Looking at the markets, Automotive was broadly flat versus a typical seasonal slowdown. After a lackluster start early into the year, we saw a clear ordering uptick in February and March. Given the declining underlying vehicle production outlook, we interpret it as a partial restocking after a prolonged period of very limited inventories, combined with some level of precaution due to the turbulences in the Middle East. All regions performed sequentially better, except China, where end market demand remains softer and competitive intensity is elevated. Industrial & Medical showed a clear recovery. Horticulture had a seasonal low point, but professional lighting demand was solid. Order intake improved materially and order patterns at the end of the quarter point to a solid seasonal upswing into Q2. Consumer followed typical seasonal patterns sequentially. Year-on-year, the decline is explained by FX and the phaseout of noncore portfolio elements. Turning to Slide 7. Q1 is typically the weakest quarter for design win activity, yet momentum remains solid. Total design wins amounted to around EUR 850 million. Naturally design wins are geared towards automotive, but the other verticals also contributed well. In our classic semiconductor core business, automotive remains the backbone with triple-digit million euro contribution across the portfolio and strong momentum in forward lighting. Industrial showed very good traction, particularly professional lighting with customers in the U.S. and Europe, while horticulture performed materially better year-on-year. Consumer continued to see recurring sensor design wins in Android-based smartphones, particularly in display management. On the Digital Photonics side, progress was equally encouraging. EVIYOS continued to add platforms, taking the number of awarded platforms to well above 60. And interest for new designs remain strong, especially in China. Augmented reality, several of our existing components such as ambient light and spectral sensors are already designed into smart glass models available in the market. AI photonics, well, product development for micro-emitter arrays for highly parallel AI optical interconnects has started. And we are not doing this alone. We have signed a collaboration agreement with a strong AI infrastructure partner. We will now look at these Digital Photonics themes in more detail. Turning to Slide 8. Augmented reality, smart glasses are a key Digital Photonics growth theme. While the category is still at an early stage, adoption is accelerating even with today's limited functionality. AI is a game changer, making the glasses potentially in the midterm a replacement of our smartphones. Some of our sensors and LEDs are already designed into several commercially available smart glass models today. Our current and future portfolio covers key functional domains, health and well-being, sensors enabling measurement of parameters such as medicine levels via blue light, heart rate and UV exposure. Privacy and camera performance, spectral and flicker sensors as well as high-performance LEDs. Display engine, today, our LEDs eliminate LCOS displays. Going forward, micro LED arrays can enable sustainably higher brightness resolution and better power efficiency. World sensing compromise gesture and 3D Time-of-Flight sensing. HMI, today, we supply our proven proximity sensors. Tomorrow, we have super tiny optical for sensing buttons in store. And eye tracking can be done with our integrated optical sensing solutions. This illustrates our strategy of focusing on the size of system components built on our core technologies. Content estimates naturally vary depending on volumes, life cycle stage and computer -- customer implementation choices. For this, however, we see content potential between EUR 50 and EUR 100 per device, which underpins the triple-digit million annual revenue opportunities we outlined when launching our Digital Photonics strategy. On to the next highlight today, turning to Slide 9. Our progress in AI photonics is accelerating. I have 3 slides for you. First, where our products will sit in the data center; second, how do we fit in our structure; and third, which components are we targeting. We believe that the so-called slow and wide optical interconnect based on highly parallel micro-emitter arrays can play an important role in future AI data center architectures. And here, slow is relative as we're talking about 8 gigabit switching speed and hundreds of parallel channels. Initially, the focus is on short distance scale-out interconnects achieved between the racks, then scale-up connections within the rack, replacing copper over distances of up to several tens of meters. Over time, chip-to-chip connections, for example, between GPU and high-bandwidth memory could become addressable as well, a really great market potential for us. Turning to Slide 10. It's important to distinguish between integration content and the optical engine technology itself. On the integration side, today's solutions on the upper right rely on pluggable transceivers or active optical cables with energy consumption of up to 30 picojoules per bit. And these solutions, not only longer -- the long copper traces, but typically also signal shaping chips consume quite a lot of power. ToF sensor near port optics can reduce this to roughly 5 to 10 picojoules per bit. The optical engine moves much closer to the ASIC. Co-packaged optics shown on top left, promises further reductions towards 1 to 5 picojoules per bit over time. The optical engine moves as close as possible to the ASIC. Put simply, the closer the optical engine sits to the chip, the lower the electrical losses and the associated thermal load. The slide illustrates this distance comparisons. Independent of the integration approach, optical engines can be implemented either as fast and narrow or slow and wide. Fast and narrow is today's established technology based on indium phosphide lasers, often EMLs and silicon photonics integration concepts. We believe in future slow and wide architectures, highly parallel micro-emitter array-based optical engines that transmit light pulses at chip speed without need for power hungry serializers and deserializers. Key advantages include substantially higher bandwidth density, very low power consumption per bit and inherent redundancy through parallelism. If one micro-emitter fails, no problem, there are enough channels for backup, an important consideration for hyperscale customers. Turning to Slide 11. On the left, you see our prototype, which helped accelerate the signing of a development agreement with our ecosystem partner, a leading AI infrastructure supplier. The table in the center illustrates the simplified technology stack for highly parallel optical interconnects. In essence, you can think of the transmitter side, the receiver side and advanced packaging technology that glues everything together. Our current development focus is on the transmitting side, micro-lens and micro-emitter arrays. Given our CMOS and sensor capabilities, we're also evaluating opportunities on the receiver side. We'll keep you updated as development progresses. With that, let me hand over to Rainer for an update on selected financial aspects. Rainer Irle: Thank you, Aldo. Good morning, everyone. I'm on Slide 12. We generated EUR 37 million free cash flow in Q1, which includes EUR 90 million divestment proceeds. The cash inflow from the sale of the specialty lamps was received early March. Operating cash flow was a breakeven, reflecting the seasonally high interest payments on our senior notes. Higher than a year ago after the EUR 500 million tap we did last summer. CapEx remained disciplined and well below our full year guidance of 8% of revenue. With that, let us take a quick look at the Simplify program that we launched with Q4 announcement in February 10. Turning to Slide 13. Last quarter, we reported that the Re-establish the Base delivered savings 1 year early. The implementation of the remaining measures that had been identified continued. Re-establish the Base program delivered EUR 237 million savings, really a great success. Now in February, we launched a successor Simplify program, which is a broader transformation program aimed at reshaping our operating model and delivering another EUR 200 million of additional annual savings by '28. Happy to announce that all saving measures have been identified and at least 90% of those have already today a high maturity level. Cost, speed, agility are our guiding principle as we reshape our operating model. Implementation started immediately. And after just 1 quarter, the teams have already delivered EUR 5 million of savings, demonstrating disciplined execution continuity. Now, let's have a quick look at liquidity and capital structure on Page 14. In Q1, the interest payments for senior notes were due with the cash proceeds from the sale of the specialty lamps, free cash flow was positive such that our cash on hand position only reduced because we paid back EUR 200 million nominal of the convertible note. And the cash position now stands at EUR 1.3 billion at quarter end. With that, the available liquidity position closed accordingly at EUR 2 billion. It is backed by a diversified mix of instruments, cash revolver and bilateral lines. The sale and leaseback value moved up in line with currency swings and the quarterly interest accrual. And with that, let us zoom in on the coverage of the upcoming short-term maturities on the next slide, which is Page 15. Now we have EUR 1.3 billion cash on hand, and that will be enriched with EUR 570 million from the Infineon deal upon closing somewhere midyear. That gets us to a total of EUR 1.9 billion pro forma cash, and that completely recovers all the near-term maturities, and that is the remaining outstanding convertible bond, which as we paid EUR 200 million is now sitting at EUR 560 million. When we received the money from Infineon, we have 120 days to offer the amount related to the guarantor assets as part to noteholders approximately EUR 130 million. And second, there are some business needs for the transition effects in '26. Basically saying the cash flow will be negative. The EBITDA will be somewhat lower because we are selling business, and there will be some stranded costs that we will be cleaning up. And then there's quite a bit of transformation costs and talking cash flow, the cash outflows from the Simplify program. And then we will be repaying USD 100 million in customer prepayments, and we will reduce because we have so much cash, roughly [ USD 100 million ] in factoring. Now excluding the disposal proceeds, expect the cash flow to be something triple-digit million negative. However, and once we are through that in '27, the free cash flow will be substantially better. And if business remains strong as it is, we expect it to move to positive territory, excluding any additional disposal proceeds and even that we also next year, still have to repay a similar amount of customer prepayments. So excluding disposal proceeds, we expect that next year to be in positive territory. And third, what we will be paying from the existing cash on hand is the tendering of the Osram minority shares after the final verdict, there's no news, but we still have it -- assume that it will come this year. And that should then leave once everything is taken care of at least EUR 500 million cash on hand. And that is the very important point. All upcoming near-term maturities are fully covered. And that obviously then now that is covered, we now have started to focus conceptually on optimizing the cost and the maturity profile of our '29 senior notes, where, as you know, the interest rates are higher than I would love to, and we will keep you posted with what our plans are. And with that, let me hand back to Aldo for the summary and the outlook. Aldo Kamper: Thanks, Rainer. And let me summarize today's call. I'm on Slide 16. In Q1, we beat again our revenue and profitability guidance. The core semiconductor business grew 9% like-for-like. Free cash flow was positive at EUR 37 million. We completed Re-establish the Base with EUR 237 million savings a year early and started executing Simplify. In Digital Photonics, we continue to progress on the comprehensive component portfolio for AI-enabled smart glasses, giving us a content opportunity between EUR 50 and EUR 100 per smart glass. We initiated the product development of micro-emitter array-based AI optical interconnects together with the commercialization partner. We also progressed in balance sheet deleveraging the Specialty Lamp transaction closed and proceeds were received and the Infineon transaction remains on track. No changes to the indicated closing timeline of mid of this year. Now to the outlook for the second quarter. We expect revenues between EUR 725 million and EUR 825 million, with adjusted EBITDA around 15.5% plus/minus 1.5 percentage points based on euro-dollar of 1.17. The traditional auto lamps business will show the usual seasonal slowdown in view of the overall rate in the aftermarket. Remember, all non-automotive business was transferred to Ushio. We still have EUR 10 million revenue in Q1 and 0 in Q2, obviously. Semis will make a step forward in Q2 more than typical seasonality. We see strong order intake and book-to-bill higher than previous quarters. Our full year 2026 outlook remains unchanged at the moment. Group revenues modestly softer given the divestment and FX. Adjusted EBITDA of around 15.5%, plus/minus 1.5 percentage points, assuming euro-dollar of 1.17. Adjusted EBITDA will be negatively impacted by several one-offs, the divestments, stranded costs, precious metal prices and other factors. Free cash flow, we expect above EUR 300 million, including divestment proceeds. Into 2027, we see a path to positive free cash flow without any divestment proceeds even with repaying a similar amount of customer prepayments. And with that, we are through the presentation, and we're happy to take your questions. Operator: [Operator Instructions] And we have the first question coming from Harry Blaiklock from UBS. Harry Blaiklock: The first one is just on the micro LED optical networking opportunity. I think previously, you said it's kind of a 2030 plus revenue opportunity for you. But given the announcement today and then also kind of industry announcements about commercializing solutions as early as 2027. How are you thinking about the timelines on when you could see revenues? Aldo Kamper: Yes. Thanks, Harry. That's a very good question. The industry is hyper quick and really waiting for solutions here. We're working very hard on those solutions together with our partners. And I think timing-wise, we are definitely before 2030. Whether it's as early as 2027, I can't tell you yet, but we definitely see this as an opportunity in the next few years, not in the far future. Harry Blaiklock: Okay. Great. And just maybe a follow-up on that. It was good to see that you're addressing kind of multiple elements of the full solution. If you look at kind of the elements that you have in development and consideration, so the emitter, the lens and the diode array, how -- are you able to give kind of like a rough split of like what your -- like what percent -- so yes, the relative kind of content size for you of each of those? What would be the -- yes, what would be the biggest content for you? Aldo Kamper: Well, let me answer it this way. I think we have said that by 2030, we see this as a triple million dollar opportunity, and we continue to see that at least. And that was a statement based on just the micro-emitter array and the micro lens array on top. So if we actually add more to that, if we also do the photodiodes or the amplifier or the driver underneath the LED, that would be further revenue potential for the group. Harry Blaiklock: Super helpful. And then just maybe a quick one on the short term. The guide for Q2 of typical seasonal decline in the semiconductor business, given the portfolio changes over the years, it's kind of tough for us to know what exactly seasonal is. Wondering whether we could get a little bit of help on that. Aldo Kamper: I think automotive will do quite well in the second quarter. Also horticulture will start to pick up ahead of the season. So those are positives. And also with the little precaution that we also mentioned in the text before that at the moment, we are still a bit uncertain on how to interpret this good order intake at the moment. The number of cars, of course, are not going up, it's going down probably being built globally. Yes, content per vehicle is rising, but the order intake at the moment is quite strong. So we do think that it's part of restocking and not taking risk out of the supply chain given the global uncertainties. But at the moment, encouraging, and we hope it continues that way. Obviously, consumer goes down quarter-on-quarter, that is normal and then Q3, of course, being usually the strongest quarter for consumer. Professional lighting, pretty steady, I would say, and lamps, automotive lamps, in principle down. I mean the lighting season is over. Obviously, that is always Q4, Q1. So Q2 will be lower there. But here, we benefit from the financial troubles of our major competitor and also see here additional orders coming in that might limit the negativity of the normal seasonality in this. Operator: The next question comes from Sebastien Sztabowicz from Kepler Cheuvreux. Sébastien Sztabowicz: You mentioned in the press release some tough competition in the automotive business in China. At the same time, we are seeing capacity getting a bit tighter in many areas of the market and some peers raising prices. I'm just curious about how do you see prices trending at AMS for the coming months? And the second one is on the free cash flow. You mentioned for this year free cash flow to be significantly negative excluding divestments. Could you please help us quantify the kind of cash burn we can expect for this year? Do you have some building blocks to understand a little bit the magnitude of the range of negative free cash flow we can expect for 2026? Aldo Kamper: Yes. On the pricing side, I would say on the one hand, competitive pressure in China is increasing. Our customers are under a lot of pressure. Vehicle volumes are going down, so that puts them even more under pressure. And of course, they're looking to the supply chain as well to contribute. And that has somewhat limited our ability to pass on the cost increases that we also spoke about last quarter. At the moment, we see in the LED space, neither from us nor from others price increases, but we do see more limited price declines than we otherwise would have seen. So kind of an indirect effect that you see there. In the sensor business, actually, we are selectively raising prices like others as well. And also in the automotive lamp business, we are selectively raising prices for increased input costs. So that's kind of the overall pricing dynamic, I would say. Towards China, perhaps important. The remark I made before on the vials, I think that's really nice to see. Yes, of course, on the more standard parts, there is competitive pressure. However, China is also now really an innovation-driven market for us and our innovations like these high-pixelated headlamps are really designed in much more widely also in China now, and that gives us good hope that we will continue to see a strong market position for us in China. On top of that, by the way, we, of course, are also grabbing share, mainly from our international competitors. You probably know that the Samsung has exited the market. We've got quite a bit of share there. Also, other American competitors are struggling, and that helps us to expand our position. In that sense, we look with confidence in the future. But it's -- yes, at the same time, not an easy market. Rainer Irle: Yes. And Sebastien, on the cash flow. So maybe if you try to build a bridge compared to last year, first of all, I mean, the public funding will be significantly less. Last year, we got like 2 tranches. This year, we only get one. Number two, we're repaying customer prepayments, which is roughly $100 million or EUR 80 million. Number three, from the new Simplify savings program, where we want to achieve EUR 200 million of savings. I mean that also comes with a onetime cost of more than EUR 100 million. I mean trying to pay as much as possible of that this year, so to have as much as possible behind us. And finally, then the factoring, which I mean cost a lot of money also given the high cash position, we want to reduce that. Let's say the EUR 100 million, and that is obviously also then an element of the free cash flow. Then when it comes to the business, yes, the EBITDA will be down, and that also certainly then ends in a bit lower cash flow. That is from the divested businesses, right? We said that the divestment of those businesses plus the stranded cost would be on an annualized basis, something like around EUR 75 million. The stranded costs we are obviously working on. But then on the positive side, as Aldo pointed out, the business is certainly improving. I think the guidance for Q2 is quite optimistic if you compare it to the last year Q1 to Q2 bridge, right? So business is running well. We are getting NREs from customers. So there's also a lot of positives in there. But I mean, if you count it together, free cash flow will be significantly negative this year. Operator: The next question comes from Janardan Menon from Jefferies. Janardan Menon: I just have -- I have 2 questions, one on your AI-related photonics business and one on your AR glasses. On the AI side, on your press release, you -- on the front page, you had said that you have signed a development agreement with a leading AI data center infrastructure partner. And on the second page, you've said that you've signed it with a leading AI photonics industry partner. I'm just a bit confused because when I hear the word AI data center infrastructure partner, I sort of think of a hyperscaler. And when I think of an AI photonics partner, I think of someone like a Lumentum or maybe even [ CNM ] or someone like that. So can you give us some clarity on what exactly is the nature of this partner that you have got a development agreement with? And secondly, in a development agreement, is it that they pay you money and you do all the development? Or is it that you're sort of sitting in their premises as well or they're doing half the development, you're doing half the development. Just an understanding on how that works. And I have a follow-up on the AR glasses. Aldo Kamper: Yes. To start with the second part of your question. I mean all these systems are still so new that it requires development on both sides. I mean we have to optimize and design our part of the system and develop that to the right performance and reliability levels. At the same time, it needs to be well integrated into the larger solution to really be effective. So in that sense, both parties have to contribute here and be in close alignment. And that's why in these new fields, it's so important that you find lead customers that you can together design and optimize the systems with that just tremendously increases your likelihood of success and your ability to be fast. Much more detail on the kind of partner that we have, we cannot give. But obviously, it is about photonics. We are about photonics. It's clear that the data rates and the energy they require is a major topic. So anything we can do to optimize that, this is highly welcome, and we expect also then this technology to scale with other partners as well in the future. Janardan Menon: Yes. So you can't give a nudge on whether this partner is someone who builds the data center. Aldo Kamper: Sorry. Janardan Menon: Okay. And then on the AR glasses, you're saying that you already are shipping some of these components into the market right now. So I'm just wondering what needs to change when you are going to get that triple-digit million euro kind of revenue number? Is it that you need a big customer to start volume production with your components and today, you're selling to smaller customers? Or is it that you need the microLED array itself to start shipping because that might be a high-value component in contrast to LCOS trajectory or something like that? I mean what is the change that we're waiting for to get that triple-digit million euro? Aldo Kamper: Yes. Both factors will kick in. We will -- for the LCOS, we supply some high-power LEDs. That's nice, but it's not a major value driver yet. The move to microLED-based engines will be the major step-up for us. And of course, I mean, these glasses are now in being utilized more and more, and there will be a significant demand increase, we feel with next-generation smart glasses. They just are getting better and better from generation to generation, more and more attractive. So we expect the volumes to go up significantly. And at the moment, the majority of AI glasses is sold without a display. Now, our first simple displays with LCOS are being sold with the microLED, we think that the glasses will gain a lot of more momentum with picture quality being better, bigger field of use and so on, smarter designs. So we think this category will do quite well. And with the rising volumes and a higher content per phone, that will help. However, at the same time, I think also beyond that, there's interesting potential as we outlined. It is not only the light engine. Also other parts we feel we are quite well positioned in. And they, of course, will also then scale with more customers and higher volumes of the sales of the smart glasses in total. Janardan Menon: And again, any kind of time horizon for the triple digit? Is that -- is there a chance that, that could happen in '27? Or are we looking beyond that? Aldo Kamper: I can't really comment on that because as you can understand, our customers are always quite tight on timing of their launches. But it's going to be good this decade. Janardan Menon: It's definitely closer than the AI. Aldo Kamper: Yes. Operator: The next question comes from Craig Mcdowell from JPMorgan. Craig Mcdowell: My first one was just a reminder, please, on your smartphone exposure. It seems to be an end market that could be challenged in '26, maybe '27 as well. Just if you could give your revenue exposure to smartphone and then how that is trending? And then my second question, just on the Kulim-2 sale process and just any update there? It seems like the industry is scrambling for capacity, and this seems like it could be an interesting asset for a buyer. But if you're able to give any update on the process, that would be helpful. Aldo Kamper: Yes. If you -- on the smartphone side, we're probably talking EUR 600 million, EUR 700 million revenue that is tied to that space. We have to now at the moment, look very much of who is getting memory and who isn't. And you can imagine that the top cell phone makers that we often bet with are the ones that are getting the memory and the lower and midrange phones get less of it or struggle more with the prices that memory at the moment commands. So yes, I agree with you, there might be somewhat of an impact. But so far, we're not really seeing it given the positive customer mix in this aspect. On Kulim-2, yes, nothing really changed. We keep having inbounds. We keep having good discussions, but we also cannot say that the timing is around the corner. So yes, we'll inform you as soon as something gets more tangible. But yes, at the moment, no real change to versus what we've said last quarter. Craig Mcdowell: And can I just -- sorry, a brief follow-up, but just can I ask on the Q2 guidance, whether that includes any divestment from the Infineon disposal? Or is that only impacting Q3? Rainer Irle: Yes. Craig, the guidance assumes the closing of the transaction midyear. So the impact of the disposal would then be seen in Q3. The Q2 guidance, though includes the disposal of the traditional lamps business, right? So in a way, if you subtract the revenue that we are losing from the traditional business and you look at midpoint compared to Q1, you could say that it's more or less flat. Operator: The next question comes from Robert Sanders from Deutsche Bank. Robert Sanders: Maybe just a question on the AI opportunity. I mean, obviously, there's a lot of development happening on co-packaged optics at the moment. I would say most of those solutions are relatively mature, so probably a bit more insertion for you guys. Is the idea to -- in the CPO side to insert in a later version? Or is it more as we transition to optical IO that you're going to get sort of broad-based adoption? And then just secondarily, in terms of your thoughts about triple-digit million by 2030, is that based on a couple of hyperscalers that are clearly championing microLED? Or is it based on a portion of the indium phosphide market that you think you're going to penetrate? Aldo Kamper: Well, I think the overall AI opportunity is huge. And there's a lot of, I would say, sub applications or spaces where optical technology will be helpful in getting higher bandwidth at lower energy consumption. Obviously, CPO and indium phosphide lasers are the coming waves that are heavily being invested in. However, we feel that not all of the system -- not the whole system architecture can be optimally addressed with that. So there will be significant pockets that we feel this technology that we are developing will find a place besides or beyond fast and narrow. So it's -- the estimate of the revenue contribution really comes from us finding the right spots in this overall market. And the customer discussions show that clearly that they also see that indium phosphide is a good solution, but there are places where narrow and wide has a limit and where wide and fast actually can play out the advantages. And especially, I think in the longer term, the chip-to-chip communication, I think this is definitely a space where slow and wide can do a lot of good. Robert Sanders: And would you be open to a kind of strategic relationship like you had with your microLED relationship in the past on the consumer side? Or is this something you just want to sell lots of merchant LEDs to different players like Avicena and others that are creating the module? Aldo Kamper: No, we want -- we clearly want those relationships ourselves. Besides my private life, I'm very open for multiple relations. And here, we -- I think we'll see that different -- first of all, it's important that we find the right lead customer for the right type of application. In the AI space, I think we will see different parts of the application being potentially spearheaded by different people. So also in that case, even within AI, I can imagine that at the end of the day, we will have one with several partners to develop specific solutions for specific parts of the whole chain. Once we normally develop with our partners, then of course, we first want to fully support them and scale with them. But usually, we have a common interest to scale beyond that first partner because that brings overall volumes up and cost down, which is then good for everybody. So that's kind of the thought model that we have been using already in the early days in automotive, are now using it in the AR opportunities, and we'll do so also with the opportunities in AI in a similar fashion. Operator: There are no more questions at this time. I would now like to turn the conference back over to Juergen Rebel for any closing remarks. Juergen Rebel: Yes. Thank you, speaker. I'd like to thank everyone for dialing-in today. Thanks to the analysts for your questions. And as always, we are ready for follow-on questions from the Investor Relations team, just reach out to us. And with that, we wish you a great rest of the week and speaking to you soon or latest in the next quarter. Thank you, and goodbye. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
Operator: Greetings, and welcome to Smartstop Self Storage REIT Inc Q1 2026 Earnings Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to David Corak, senior vice president of corporate finance and strategy. Thank you. You may now begin. David Corak: Before we begin, I would like to remind everyone that certain statements made during today's call, including statements about our future plans, prospects, and expectations, may be considered forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act. Forward-looking statements are subject to numerous risks and uncertainties as described in our filings with the Securities and Exchange Commission, and these risks could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in our earnings release that we issued last night, along with the comments on this call, are made only as of today. The company assumes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, we will also refer to certain non-GAAP financial measures. Information regarding our use of these measures and a reconciliation of these measures to GAAP measures can be found in our earnings release and supplemental disclosure that we issued last night and are available for download on our website at investors.smartstopselfstorage.com. In addition to myself, today, we have H. Schwartz, founder, chairman, and CEO, as well as James Barry, our CFO. Now I will turn it over to Michael. H. Schwartz: Thank you, David, and thank you for joining us today for our first quarter earnings call. We posted strong same-store revenue growth of 1.5%, NOI growth of 2%, and maintained average occupancy of 92.5% while facing our toughest quarterly comp of the year. Operationally, we posted very strong results despite recent geopolitical news. With that said, 10 of our top 15 markets posted positive same-store NOI growth and good expense control led to a 30 basis point growth in our same-store operating margins. Likewise, other areas of our business outperformed expectations. We reported FFO as adjusted per share of $0.49, up 19.3% year over year. In February, we completed the recast of our $500 million syndicated bank facility at an all-in cost of about 30 basis points below the previous facility. Additionally, we acquired a parcel of land in Canada that we intend to develop into Class A storage in our SmartCentres joint venture. Lastly, in March, we entered into a strategic joint venture with Axxess Capital focused on providing bridge capital to self-storage sponsors across the United States. In terms of guidance, we are now narrowing our same-store revenue growth from a range of negative 0.5% to 2% to a range of negative 0.25% to 1.75%. Additionally, we are reducing our overall OpEx growth range from 2% to 4% to 1.75% to 3.75%. The result is an increase of our NOI growth midpoint from negative 40 basis points to negative 25 basis points. Additionally, we are narrowing our FFO as adjusted per share from $1.93 to $2.05 to a range of $1.94 to $2.04. Turning to operations, January and February were strong months for us, slightly above our initial expectations. In March, we saw a pullback in demand that directly coincided with the geopolitical news. This played through from March until about April when things really started to turn for the better. Demand has returned, and it appears rental season is upon us. We are still very early in the year, and in the self-storage business, rental season can end up impacting annual results. That said, we are certainly encouraged going into the rental season. With that, I will turn it over to James to discuss the quarter. James Barry: Starting with our operating performance, our same-store pool posted year-over-year revenue growth of 1.5%, with operating expense growth of 60 basis points, leading to an NOI increase of 2% with quarter-ending occupancy of 92.3%. While we did increase promotional utilization during the quarter, we were able to hold a solid average occupancy level of 92.5% with limited increases in marketing spend in the first quarter. Our achieved move-in rates per square foot were down 7% on average, while our move-in rates per unit were actually up 2% year over year during the quarter. As we moved into April, we grew our occupancy, ending April at 92.6%, only down 45 basis points year over year and notably up 30 basis points from March. We were pleased with our operating expenses as well, with year-over-year growth of only 60 basis points in the same-store pool. This expense control led to an increase in our same-store margins of 30 basis points, the first year-over-year margin increase since 2023. We experienced a tailwind from FX during the quarter for the first time in a long time. Our 13 Canadian same-store assets posted same-store revenue growth of 4.1% and negative 50 basis points on a constant currency basis. These results were in line with our expectations, as the GTA had a 7% constant currency revenue comp in 2025, far and away our toughest comp of the year. In terms of our Asheville portfolio, our occupancy gap has narrowed dramatically since December, averaging down 260 basis points year over year in the first quarter. And as of April, we are only down 130 basis points year over year at 92.2% occupancy. That is notably up 200 basis points from December 2025. On the external growth front, we acquired one parcel of land in Toronto within our Smart joint venture that we intend to develop into Class A storage. Turning to our third-party management platform, we ended the quarter with 227 properties under management, in line with our expectations. The result of all of this is that for 2026, we posted fully diluted FFO as adjusted per share and unit of $0.49. Lastly, turning to the balance sheet, during the quarter, we completed the recast of our $500 million syndicated bank facility, as H. Schwartz mentioned earlier. That facility matures in February 2030 and has a one-year extension option, and the credit agreement has built-in language that would allow for a further pricing step-down upon reaching an investment-grade rating from S&P and Moody's rating services. At quarter-end, our Canadian FX exposure is fully hedged naturally from a cash flow standpoint, and 94% of our outstanding debt was fixed as of quarter-end. Smartstop Self Storage REIT Inc's balance sheet is positioned to access a wide variety of attractive capital sources, both in terms of debt and equity, to execute on future growth opportunities. And with that, operator, we will open it up to questions. Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Our first question comes from the line of Todd Thomas with KeyBanc Capital Markets. Your line is open. Please go ahead. Todd Thomas: Alright. Hi. Thanks. Good afternoon. I appreciate some of the details on April. I was wondering if you could just provide a little bit more detail on the move-in rent trends that you saw in April and how the promotional activity trended. David Corak: Hey, Todd. It is Corak. So as James mentioned, at April, our occupancy was at 92.6%, down 50 basis points year over year. Our move-in rates on a unit basis were up about 1% year over year in April, while the move-in rents on a per square foot basis were down about 6.5% on a year-over-year basis. April ended up being a pretty good month overall even with a sort of a slower start. We had a record number of web reservations, over 10,000 for April, up 25% over last year with a really nice low abandonment rate, something that we take a lot of pride in. The team has done a really good job of managing receivables, which is just a really good overall practice, but also creates more unit availability for rental season, which is a nice positive for us. So I think we are really encouraged as we are getting into rental season here. Do you want to talk a little bit about Canada? H. Schwartz: Yeah. Absolutely. Thank you, David. From a Canadian perspective, on a constant currency basis, the same-store revenue was down about 50 basis points in Q1. The comp that we had for Q1 2025 was 7%. So we had a much tougher comp than in the United States. However, that is still 6.5% growth over a two-year period, and so I think in this environment, we think that is an excellent result. If you look at our joint venture properties that would meet our same-store definition, they actually did even better at around 10% year-over-year revenue growth on a constant currency basis. At April, our GTA same-store occupancy was 93.1%. That was flat year over year but slightly higher than the states, and meanwhile, our in-place rates were actually up 1.5% year over year in April. So our outlook for the full year in our GTA portfolio is that it will perform slightly better than our United States portfolio in 2026 even with the tougher comps. Todd Thomas: Okay. And in the quarter, can you speak to the increase in vacate activity that you experienced? What was that attributable to? Was there anything notable that occurred on the move-out side during the period? James Barry: Yeah, Todd. This is James. I will jump in and just say, first of all, there are a couple of things going on with the increase in vacates. First and foremost, we were coming off a tougher comp. 2025 was down year over year in vacates, and so there is a cycling of that comp. In addition, as we mentioned in our prepared remarks, we did see an uptick in vacates really starting in March, with some of the geopolitical uncertainty and some consumer decisions. That has abated since the first two weeks of March. But that is what is driving the first quarter increase in vacates. Todd Thomas: Okay. Alright. Thank you. David Corak: Thanks, Todd. Operator: Your next question comes from the line of Viktor Fediv with Scotiabank. Your line is open. Please go ahead. Viktor Fediv: Thank you. Good afternoon, everyone. I have a question on the Argus Professional Storage Management platform. You have a full quarter in Q1 now. How has the operational integration gone, and were you able to identify potential synergies for SMA as a whole? And what is the expected timing for those? James Barry: I will jump in first. This is James. On the expense side and integration, clearly, it has been six months since the close, and we have been doing a lot of processes in terms of migrating employees over into the Smartstop Self Storage REIT Inc platform. In addition, as it relates to the first quarter results and our expenses there, there is a lot of seasonal effect. We had multiple conferences that all take place in the first quarter, including our owners conference, which we talked about on our last earnings call. That does not happen over the next couple of quarters. That is an annual event. And so we would expect the margins to increase from here. I think it is still going to take a handful of quarters and even into 2027 before we start to really see the operating margin synergies, although we are starting to see them in smaller pockets such as Denver where we have quadrupled our overall store count between Smartstop Self Storage REIT Inc managed, Smartstop Self Storage REIT Inc legacy, as well as the private label properties under the Argus platform. H. Schwartz: I was going to jump in there and just say that I think the integration has been going well. There has been a significant amount of technology upgrade for our third-party owners, which has been incredibly positive. We actually have signed up our first Canadian property in the Greater Toronto Area, and we have a nice pipeline of existing private label owners who now see the power of Smartstop Self Storage REIT Inc with respect to the top of the funnel. Those properties that we ported over, those owners are incredibly successful. Some of them are generating more leads than they ever have on a private label basis. We think over the next 12 months we will start to see a strong migration from our private label platform to either the legacy or the full-blown Smartstop Self Storage REIT Inc platform. We are really pretty excited about the integration, the people, and the ability to keep growing this in the future. Viktor Fediv: Thank you for the additional color. And I have a follow-up on move-out trends. I appreciate the details on move-in side in terms of the sizes of units that are involved there. Can you provide some additional details on move-outs in terms of what sizes were more heavily impacted in Q1? James Barry: When we look at the move-outs in terms of the average size, it is really in line with our portfolio average. What is unique is that the move-ins are skewing more toward the larger units, but the move-outs are not matching that same disconnect on a year-over-year basis. It is pretty consistent on a year-over-year basis, Q1 2026 versus Q1 2025, in terms of the size of the units. Viktor Fediv: Understood. Thank you. Operator: Your next question comes from the line of Eric Luebchow with Wells Fargo. Your line is open. Please go ahead. Eric Luebchow: Great. Thanks for taking the question. Maybe you could talk a little bit about the acquisition environment. I know you are a little more restricted in what you can do, wholly owned on balance sheet this year, but maybe update us on the discussions around an institutional JV partnership, and how those conversations are trending. H. Schwartz: Let me just start by saying that I have been doing this a very long time, and from an acquisition perspective, I think this is one of the single greatest opportunities to transact in self-storage since the Great Recession on a risk-adjusted basis. You have a lot of markets that have readjusted from a rate perspective down 25% to 35%, and so we think that there is a really nice recovery of acquiring at really solid cap rates with either management upside and/or rate upside. There are a lot of groups out there that acquired at very aggressive cap rates in 2021, 2022, and probably half of 2023 at 4%. They had short-term debt, and some of them even had bridge loans, and they have had to extend those loans. Now you are facing an environment where lenders are no longer willing to extend and pretend, and this is creating a really nice wave of high-quality properties that are coming to sale because the owners are currently out of options. We are seeing a lot of attractive opportunities on the stabilized front now in the United States and also Canada. The deals that we have closed, I think, are great examples of this, and we are continually encouraged about the current pipeline and deal flow out there. There are some larger portfolios out there, but there are also enough onesies and twosies. I just want to emphasize that a lot to us may not be a lot to others. For every $300 million that we can acquire, it increases our market cap by approximately 10%. As you are probably well aware, we acquired about $370 million in February 2025, about $500 million since 2024, and that is meaningful growth for us, and it is enough for us to move the needle, and it obviously benefits our size. We are still seeing a healthy amount of aggregate opportunities, so from that perspective, we feel pretty good. As for the second part of your question, around institutional JV and how those discussions are coming along, those discussions are ongoing, and I think they are coming along nicely. Obviously, as you know, we have a very solid institutional joint venture with SmartCentres on the development of self-storage in Canada, and we are looking to expand that for existing, either lease-up or stabilized properties. We are out there trying to find the right partner, but as you can imagine, we currently have a lot that we are doing on a daily basis, and so we are going to take our time to find the right capital partner for the long term. Eric Luebchow: Great. And just one follow-up on the shaping of same-store revenue growth this year. I know you have some tough comps in Asheville, although it sounds like you have gotten a lot of that occupancy back, some hurricane comps in markets like Tampa, and then the LA rent restrictions. Maybe putting it all together, could you talk about the shaping of same-store revenue growth the next couple quarters embedded in your guide and some of the callouts on those items? David Corak: Thanks for the question, Eric. It is Corak. When you look at the comps last year, the first quarter was our toughest comp at 3.2%. The comps are significantly easier in the second and third quarter and then get a little bit harder in the fourth quarter. Just on that alone, one would think that second and third quarter will probably be our best quarters of revenue growth year over year, but obviously, that is not exactly what the guidance would imply at this point on the midpoint. The other two things that are impacting the cadence of same-store revenue growth are, as you pointed out, Asheville and the ECRI restrictions in LA. In Asheville, we were coming off of a really strong year, and we lapped that comp. As you get into the first quarter, we were still positive in terms of rates, negative in terms of occupancy. However, as you get into the second quarter, the rates will turn negative on a year-over-year basis and will continue to be negative through the second and third quarter, again on a year-over-year basis, and then the comp gets a lot easier in the fourth quarter. The other element is, of course, the LA restrictions. We are not assuming that the restrictions will be lifted for 2026. So there is a compounding effect that happens where the second quarter impact is worse than the first quarter, and then the third quarter, fourth quarter, and so on. Those are the other things impacting the shape of the curve overall. Asheville is in an interesting spot. Michael, do you want to talk a little bit about where Asheville stands today? H. Schwartz: Yeah. Absolutely. In the fourth quarter, we talked about Asheville. As we position where we are at today, Asheville was our best-performing market in 2025. We had 6% same-store revenue growth year over year, and so we are obviously facing some tough occupancy comps in 2026, but the year-over-year occupancy gap has narrowed dramatically, and I think James discussed this a little bit. Since December, our average is down only 260 basis points year over year. In the first quarter, our occupancy was at 91.6%. At April, we were only down 130 basis points and we are settling at 92.2%. That is a great position to be in as we move into the busy season, notably up 200 basis points from December and generally in line with the rest of our United States portfolio, which is positioned nicely also. This is a fairly traditional cadence of occupancy for a natural disaster of this kind, and we are now at a post–natural disaster stabilized occupancy level. Overall, we still expect Asheville to be a relative underperformer in 2026, specifically through the end of the third quarter. That being said, the portfolio is performing slightly better than expected through April. That says a lot about our technology and our process. We were able to capture that upside with respect to occupancy and rate, and then as occupancy pulled back, we were able to refill that funnel, stabilize the physical occupancy, and get it prepared for the busy season. Eric Luebchow: Alright. Thank you, guys. Operator: Your next question comes from the line of Michael Mueller with JPMorgan. Your line is open. Please go ahead. Michael Mueller: Yeah. Hi. So two questions. First, can you talk about the move-in rate expectations for the balance of the year compared to, I think, about 6.5% down, you said, in April? And then from a higher-level perspective, how should we be thinking about a bridge loan pref program, how it fits into the business, can it be a needle mover going forward, etcetera? David Corak: Hey, Michael. I will give you the operating assumptions. We went over these slightly last quarter, but I will review them. They really have not changed. From a move-in rent standpoint, we have a handful of markets that have already turned positive this year and other supply markets still somewhat negative. Our assumption is that by the end of rental season—call it August or September—we will, on the whole, be largely back to a neutral kind of inflection point. If we do not get back there, it does not have a material impact on the rest of the year, but it will have some impact on the third and fourth quarter. From an occupancy standpoint, we are modeling fairly flat to slightly positive relative to 2025 with the exception of Asheville. For the rest of the portfolio, think fairly flat to maybe slightly positive. ECRIs we are modeling at or better levels than in 2025. Those are basically what we have been doing given the strength and the health of the existing customer, the exception being the California wildfire impacted properties, which we assume are going to be impacted for the full year. I will remind you, our length of stay is actually up year over year, which is a trend that we and some of our peers are seeing, which is really good from that perspective. On the supply front, we are assuming that the supply impact decreases throughout the year. In terms of your second question on Axxess and the bridge lending: Access is a portfolio company of Conversant Capital. For some background, they run an institutional commercial real estate finance platform. H. Schwartz and the principal of Axxess have a very long-standing relationship. This was well thought out for a long time. Axxess’s role in this relationship will be to help us source, structure, and service bridge loans and investments, and they will be a 5% participant in the JV’s investments. The partnership gives us the horsepower to grow our bridge lending business efficiently without burdening our G&A. We are really excited at the potential of the partnership and the synergistic relationship the program will have on third-party management and our overall external growth trajectory. The pipeline overall is very strong. We are actively looking at over $100 million of deals with average yields of 10% to 14%. Obviously, like an acquisitions pipeline, we are not going to close on all of those deals, but our pipeline is filled with really strong deals in markets that we like with sponsors that we generally like. We are typically looking at some sort of mezz or pref position on a deal that already has senior debt on it or is in market with senior debt. We would also do an A-note, B-note approach, but the pipeline is really dictating the former strategy. The pipeline is a mix of recaps, acquisition financing, and development deals, though I will note we are particularly selective on any new development deals. There is a ton of potential on this front, obviously working off of a very small denominator. We really like the risk-adjusted returns on a lot of these deals that we are going after, but are certainly sensitive to the quality of the property, the quality of the sponsor, the impact on our leverage, and the overall quality of our earnings. H. Schwartz: I would just add that it is also opening up additional third-party property management assignments. Michael Mueller: Got it. Okay. Thank you. Operator: Your next question comes from the line of Mason Guel with Baird. Your line is open. Please go ahead. Mason Guel: Hey. Thanks for taking my question. On the expense side, what drove some of the favorable expense growth, and then what is driving the higher expected growth for the remainder of the year compared to the first quarter? James Barry: I will jump in there. In the first quarter, we had a good number on our property tax line item, which is obviously our single largest expense line item. That came in at a pretty nominal level. As we have talked about, on the insurance front we have not only realized the benefits of a strong general liability renewal that took place in November 2025 and is carrying forward for a full year, in addition, we also had a very strong property renewal that took place in April. It is not in our Q1 numbers, but it is part of the outlook and is the main reason behind our OpEx guide down—those savings on the property and insurance renewal. Part of the offset and part of the reason we were still positive is we had some weather-related expenses both in utilities and R&M, and our payroll is at a nominal level, call it in the low- to mid-single digits. I will also note that advertising was up about 1.9% for the quarter on a year-over-year basis, but that is a lever that we want to potentially be strategic with in terms of the trade-off in getting new rentals between concessions, pricing, and marketing. That is something we want to keep flexibility on. That is the overall shape of OpEx, but we felt really good about the property insurance renewal, and that allowed us to reduce the OpEx guide. Mason Guel: Great. And then can you talk about what drove the higher managed REIT EBITDA guide and how that segment has been performing? James Barry: Overall, the recurring revenues from that portfolio in the managed REIT platform—as a reminder, those assets are largely unstabilized—grew at an outsized pace relative to, for example, our same-store portfolio growth rate. Those revenues came in higher than our expectations. Cumulatively, we are talking about an annualized run-rate in the first quarter on revenues in the managed REIT platform of just over $16 million on an annualized basis. That is a really powerful base of recurring revenues for Smartstop Self Storage REIT Inc. Mason Guel: Got it. Thank you. Operator: There are no further questions at this time. I would now like to pass the call over to H. Schwartz, chairman and CEO, for closing remarks. Please go ahead. H. Schwartz: Thank you. It has been a solid first quarter for us. I want to thank you for your time and interest in Smartstop Self Storage REIT Inc, the smarter way to store. Have a great day. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Hello everyone. Thank you for joining us, and welcome to Royal Gold, Inc. 2026 First Quarter Conference Call. After today's prepared remarks, we will host a question and answer session. Please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Alistair Baker, Senior Vice President, Investor Relations and Business Development. Alistair, ahead. Alistair Baker: Thank you, Operator. Good morning, and welcome to our discussion of Royal Gold, Inc.’s first quarter 2026 results. This event is being webcast live, and a replay of this call will be available on our website. Speaking on the call today are William Heissenbuttel, President and CEO; Paul Libner, Senior Vice President and CFO; and Martin Raffield, Senior Vice President of Operations. Other members of the management team are also available for questions. During today's call, we will make forward-looking statements, including statements about our projections and expectations for the future. These statements are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are discussed in yesterday's press release and our filings with the SEC. We will also refer to certain non-GAAP financial measures, including adjusted net income, adjusted net income per share, adjusted EBITDA, and cash G&A. Reconciliations of these measures to the most directly comparable GAAP measures are available in yesterday's press release, which can be found on our website. William will start with an overview of the quarter, Martin will provide portfolio commentary, and Paul will give a financial update. After the formal remarks, we will open the lines for a Q&A session. I will now turn the call over to William. Good morning, and thank you for joining the call. I will begin on slide four. 2025 was a transformational year for Royal Gold, Inc., and the benefits of last year's activity William Heissenbuttel: are clearly seen in this quarter's results, with materially higher records for revenue, operating cash flow, and earnings. Quarterly revenue was $469 million, operating cash flow was $294 million, and earnings were $281 million. These were increases of 143%, 115%, and 148%, respectively, over the first quarter of last year. After adjusting for unusual items, net income was $233 million, or $2.72 per share, an 80% increase over last year. Gold contributed 71% of total revenue for the quarter. This is lower than what we have seen over the past few quarters, but it was driven by very strong silver prices during the quarter, and not weakness in gold revenue. Our adjusted EBITDA margin remained high at 83% for the quarter, reflecting our low and stable cash G&A. We paid dividends of $40 million to shareholders in the quarter at our new annual rate of $1.90 per share, and we repaid $300 million on the revolver during the quarter, raising our total available liquidity to $1.1 billion. During the quarter, we also completed the restructuring of the Bear Creek debt and equity investments. In keeping with our strategy, we plan to rationalize noncore assets acquired through the Sandstorm transaction and, where possible, convert those into holdings that are more consistent with our royalty and streaming business. The Bear Creek restructuring was a multistep transaction, and we were successful in converting those interests into cash, Calibre Silver shares, and royalties on the Corani project and Mercedes mine. We sold the Highlander shares during the quarter, leaving us with the royalty interest only, which is in line with our core business. With respect to capital allocation, we provided an overview of our framework during our Investor Day in March, which is to reinvest in our business, maintain a strong balance sheet and liquidity, and pay a growing and sustainable dividend. We believe our outlook remains strong with healthy metal prices and good growth within the portfolio, but we also believe in being flexible and prepared for changing market conditions. With that in mind, we have added two new tools to keep us positioned to continue growing our per-share metrics depending on circumstances. The first is a new $600 million accordion feature under our revolver. If exercised, this effectively increases the total revolver capacity to $2 billion. We do not see a need to use this today, but we are in a healthy business development environment, and this additional source of nondilutive capital may be helpful if more large transactions come to market. The second is the authorization by the Board of a $500 million share repurchase program. At times, we believe Royal Gold, Inc. shares trade at a discount to what we perceive to be a fair value, and putting this program in place now will allow us to act quickly if we see a significant disconnect between the market value of Royal Gold, Inc. shares and our view of that intrinsic value. I want to be clear that we view these tools as ones that will be used separately and in different circumstances, and we do not plan to use expanded revolver capacity to buy back shares. We are putting both in place today to make sure we are positioned to respond to opportunities quickly and help us continue to execute our capital allocation strategy and grow per-share value in any market environment. I will now turn the call over to Martin to discuss portfolio performance in the quarter. Alistair Baker: Thanks, William. Martin Raffield: Turning to slide five. Portfolio performance was solid for the quarter. Volume was 96,300 GEOs, with record revenue of $469 million, which included the first full quarter from the Sandstorm Horizon interests. Royalty revenue was up by 120% from the prior-year quarter, to $156 million. We saw very strong revenue from Peñasquito, and at Cortez from both the legacy zone and the CC zone. Stream revenue was also up strongly by 155% from the prior year to $313 million. We saw higher contributions from all our stream interests with materially higher sales year-over-year from Pueblo Viejo, Zhaojin, Rainy River, Mount Milligan, and Cobre Panama, Compañía Minera Coimolache, and Bisha, and a strong contribution from Kansanshi. Metal sales are tracking well at this point compared to our 2026 guidance, although Q1 copper revenue was better than expected. This was led by strong performance at Antamina due to higher grade and lower deductions, and from Caserones and Chapada due to generally strong operating performance. I will now turn to slide six and give some high-level commentary on notable developments within the portfolio. I gave detailed updates on several assets during the Investor Day in March, so I will limit my comments to more recent developments. At Mount Milligan, Centerra reported that Q1 gold and copper were in line with the PFS mine plan and are on track to meet full-year guidance. At Peñasquito, first quarter revenue was strong, but Newmont expects that the ramp-down of mining at Peñasco Phase 7 will lead to lower production of gold, lead, and zinc, and higher silver in 2026 compared to last year. Newmont expects to increase processing of stockpiles during the transition from Phase 7 to Phase 8, with higher grades expected to begin in 2028. At Greenstone, Equinox completed a technical report which targets average gold production of 320,000 ounces per year over the next decade, based on a sustained milling capacity of 27,000 tons per day. Equinox believes there is scope to further optimize production and increase throughput towards 30,000 tons per day and to incorporate higher grade underground resources into the mine plan. At Voisey's Bay, Vale reported record production in Q1 at the Long Harbour Refinery supported by stable operations at the new underground mines. At Zhaojin, IGO expects gold production to be weighted towards the second half of the year as upgrades to ventilation and cooling infrastructure become fully operational. IGO also expects gold concentrate sales to be higher over the remainder of the year with drier conditions following the end of the rainy season. At Kansanshi, First Quantum confirmed 2026 production guidance and reported that S3 throughput increased steadily during the quarter, driven by higher operating time, strong utilization, and milling rates stabilizing approximately 25% above the design capacity. At Coimolache, MMG reported that the expansion to 130,000 tons of copper per year remains on track for concentrate production in 2028, and work started on a PFS for the next expansion phase up to 200,000 tons of copper per year. At Wassa, Chifeng announced an investment agreement with a subsidiary of Zijin Mining. Zijin Gold will invest approximately $1.2 billion of new capital and take operating control. Approximately half of this amount is earmarked for investment in Chifeng's overseas operations, including Wassa. Projects at Wassa identified for investment include infill drilling, expansion and upgrade of the existing processing plant, and further development outside Wassa mine, including construction of a decline at the Father Brown deposit, open pit development at Benso, and a new processing plant in the southern area. All of these are covered by our stream agreement. Zijin is one of the world's largest mining companies and we think this investment agreement is a positive development for the future of Wassa. At Platreef, Ivanhoe reported continued progress towards expanded production with Shaft 3 construction completed on schedule and the phase two concentrator on track for completion at the end of the year. We expect to see our first revenue from Platreef in the current quarter. At Hod Maden, SSR reported on Tuesday that the strategic review of its Hod Maden joint venture ownership is continuing, and it intends to incur minimal capital costs at the project while that review is ongoing. We will continue to fund our 30% of project costs through this period, but we expect these to be relatively low and not significant compared to our expected cash flow. Finally, with respect to development projects, Solaris received technical approval of the Warintza EIA in April and is targeting receipt of full permits by the end of 2026 and a final investment decision in 2027. I will now turn the call over to Paul. William Heissenbuttel: Thanks, Martin. Paul Libner: Turn to slide seven for an overview of the financial results for the quarter. For slides seven and eight, I will be comparing the quarter ending 03/31/2026 to the prior-year quarter. Revenue for the quarter was up strongly by 143% to $469 million, which is a new record. The strong increase was driven by higher volumes from some of our largest legacy interests, new contributions from our latest portfolio additions, and increased metal prices. Metal price increases were significant: gold up 70%, silver up 165%, and copper up 38% over the prior year. Gold remains our dominant revenue driver, but given the significantly higher increase in the silver price during the quarter, the split of our gold revenue decreased to 71% and silver rose to 16%, as compared to the prior-year contributions of 75% and 12%, respectively. Copper revenue was approximately 10% and in line with last year. Turning to slide eight, I will provide more detail on certain financial line items for the quarter. G&A expense was $17.5 million, approximately $6.5 million higher than the prior year. The higher expenses this period were mostly due to higher corporate costs. These corporate costs included employee-related costs, legal, audit, and other minor costs that were attributable to 2025 transactions but with the service or expense recognized in the first quarter. We expect that first quarter G&A costs, including noncash compensation expense, will be the highest for the year, and our total G&A expense for the year will finish near the high end of the $50 to $60 million range we provided on our last call. Our DD&A expense increased to $91 million from $33 million in the prior year. On a unit basis, this expense was $944 per GEO for the quarter, compared to $488 per GEO last year. The overall expense is in line with our guidance and is mainly driven by the higher carrying values of the Kansanshi Gold Stream and the Sandstorm Horizon interests we acquired in 2025. These increases were partially offset by lower gold sales and depletion rates at Mount Milligan. We recognized a $14 million gain on the sale of marketable securities during the quarter, most of which was due to the sale of the Highlander Silver shares that William mentioned in his remarks. We have made substantial progress on divesting the equity positions we inherited from Sandstorm, and most of the remaining position is the block of Entrée Resources. As we said during our Investor Day, we do not see this position as a core investment, but it may have some strategic value, and we are happy to hold it until there is more clarity on what may happen at Oyu Tolgoi between the government of Mongolia, Rio Tinto, and Entrée. Interest and other expense increased to $13.2 million from $1.2 million, primarily due to higher average amounts outstanding on the revolving credit facility in the current quarter. Tax expense for the quarter was $25 million, resulting in an effective tax rate of 8%, compared to tax expense of $10 million in the prior year. We recognized a $33.7 million discrete benefit during the quarter, and excluding this benefit, our effective tax rate was approximately 19.5%. We continue to expect our effective tax rate for the full year will range between 17% and 22%. Net income for the quarter was $281 million, or $3.30 per share, which compares to $113 million, or $1.72 per share, in the prior year. The increase in net income was largely due to higher revenue and gains from the sale of marketable securities, offset by the higher cost of sales, DD&A, interest, and income tax expense. After adjusting for the fair value changes in equity securities, the gain on sale of equity securities, and the discrete tax benefit, adjusted net income was a record $233 million, or $2.72 per share. Finally, our operating cash flow this quarter was $294 million, up significantly from $136 million in the prior year. The increase was primarily due to higher stream and royalty revenue, offset by higher income tax payments, cash G&A costs, and interest payments. In summary, it was a very strong financial quarter that reflects a significant increase in the scale of our business. On that note, and recognizing the challenge of accurately estimating the quarterly performance of our larger portfolio, we will make a change to our disclosure heading into quarterly results. Starting with the next quarter, sometime during the third full week after each quarter end, we expect to issue a press release that will provide more detail on notable financial items, including revenue estimates from both our Stream and Royalty segments. We hope this provides further transparency to the market in the weeks leading up to the release of our full quarterly results. I will turn to slide nine and summarize our financial position. We have quickly rebuilt our liquidity. At March 31, we had total available liquidity of $1.1 billion between the available amounts on the revolver and $295 million of working capital. After quarter end, we continued our focus on debt servicing. In April, we made a $75 million repayment and we intend to make an additional $100 million repayment next week. Upon next week's payment, we will have $425 million outstanding and $975 million available under the credit facility. As I said during our Investor Day, we expect to fully repay the outstanding balance by sometime in the fourth quarter, based on current metal prices and absent further significant acquisitions. With respect to financial commitments, at March 31, we had $100 million of funding outstanding for the Warintza acquisition. We made a $50 million payment in April upon technical approval of the EIA and expect to fund the remaining $50 million on the transaction closing date in May, subject to the satisfaction of outstanding conditions. The only other financial commitment is the funding of our share of any Hod Maden project costs during the year in order to maintain our 30% ownership interest. That concludes my comments on our financial performance for the quarter, and I will now turn the call back to William for closing comments. William Heissenbuttel: Thanks, Paul. I wanted to close with a brief overview of our thoughts on our post-acquisition progress, changes in our business development environment, and capital allocation. At our Investor Day in March, we attempted to provide the market with both a sense for the scale and cash flow generating ability of our expanded company as well as the diversification and growth prospects of the company. In the first quarter, we achieved record revenue, earnings, and cash flow, and no one asset contributed more than 12.5% of total revenue. While it is only one quarter of results, I think we are off to a good start. We are encouraged by events in our sector's investment opportunities. Larger scale investments like Kansanshi as well as the opening of new potential markets like Australia bode well for our business. Our re-established accordion feature under our revolving credit facility positions us well to take advantage of attractive opportunities. And while we are now in the twenty-fifth year of paying a higher dividend to our shareholders, we have added another capital allocation tool—our share repurchase program—that allows us to act opportunistically in the event we see a valuation dislocation in our share price. Finally, at our Investor Day, we spoke of an investment in Royal Gold, Inc. as being one through all cycles, and I believe this is a time for our sector to be of interest to investors. We are not directly exposed to the price of diesel, to tariffs, or to inflation in general. The flight to the shares of operating companies in a rising gold price environment within the last year always came with a downside risk of compressing margins, and the operators may start seeing margin compression in the coming quarters with higher energy costs. I hope our stable cost structure against the backdrop of gold price volatility highlights the strength of our business model and attractiveness as a gold investment. Operator, that concludes our prepared remarks. We will now open the call for questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask you pick up your handset when asking a question to allow for optimum sound quality, and if muted locally, please remember to unmute your device. Please stand by while we compile the Q&A. Our first question comes from Larry Liu with CIBC. Your line is open. Please go ahead. Larry Liu: Hi, William, Paul, Martin, Alistair, and team, thank you for taking my question. I guess my first question, I will start out by asking about the guidance. I noticed within the press release you compared 2026 Q1 results to the full-year guidance, but there was not really mention of the five-year or the long-term guidance. Is that considered as a reiteration, or how should we look at it? William Heissenbuttel: Yeah. Larry, thanks for the question. Updating for the annual guidance is something we have done for a number of years and will continue to do throughout this fiscal year. When we gave the five-year guidance at our Investor Day, the one thing that we were very clear about was that we were giving it on that day, but we would not be updating it. Through the year or really at any point, the next time that we are going to talk about a longer-term guidance number will be when we give five-year guidance for 2031 at some point next year. So the fact that we did not mention the 2030 guidance was on purpose. It was intentional, and it just reflects our view that we are not going to update those figures. Larry Liu: No. For sure, William. That makes sense. And I think it leads well to my next question. I know within your guidance, you mentioned that deferred silver ounces potentially at Pueblo Viejo are not included within your guidance. So can you remind us—kind of a three-part question here—what is the outstanding balance at this point, and what are some of the criteria that, under the agreement, need to be hit before these deliveries will contribute to Royal Gold, Inc.? William Heissenbuttel: Yeah. I mean, the criterion is recovery, and what we need is for recovery—I think the number is 52.5%—recovery has to go above 52.5% for us to start clawing back some of those deferred ounces. As you may have seen in the technical report from PV, they are not expecting that for a number of years. And to just go on tabulating the figure from quarter to quarter, right now there is no expectation that we are going to see it anytime in the near term. It just was not deemed to be, if you will, material. If that turns around and the recovery goes up, and we get some deferred ounces back, we will update the market on the balance. But at this point, we are just going to let that number sort of sit there and grow over time. There just does not seem any need to be talking about it. Larry Liu: Sounds good. I guess moving on to another asset on that end. William, I know your commentary mentioned earlier that Hod Maden is considered one of the financial commitments outstanding at this point. But I realized from your financial statements, there has been a cash call under the equity investment of $14.7 or $15 million this quarter. What kind of additional commitments do you have outstanding for the remainder of the year, and how should we look at it from a model perspective that way? William Heissenbuttel: Well, maybe what I will do is I will turn it over to Paul to take you through the accounting first, and then maybe I will come back and talk about expectations. Paul, is that okay? Paul Libner: Yeah, sure. Thanks, Larry, for the question. High level, you are right. The accounting for that Hod Maden joint venture is done under the equity method. There are two primary items with this equity method accounting each quarter. The first is what you already pointed out: the cash call for our portion of the ongoing development costs at Hod Maden. This quarter, we had a $14 million cash call, and so the equity method investment on our balance sheet would increase by that amount, with the offset being cash, which for your benefit goes through the investing activities on the statement of cash flows. The second piece each quarter is our 30% pickup of any losses in our equity investment in Hod Maden. This quarter, our portion of losses was just over $1 million—I think it was $1.3 million—and that does go through our P&L each quarter. So this quarter, $1.3 million went through the nonoperating section of our income statement, and I believe it was in interest and other expense. The offset is a decrease to that equity investment on our balance sheet. If you are interested in some further light reading, our 10-Q and 10-K provide a little bit more information on that, but that is really the high level for the accounting. William Heissenbuttel: Thanks, Paul. And then, just for the question of what the number might be, I would say give us a little time. As you know, SSR has announced that they are trying to rationalize the investment. The spending is not going to be that high in the immediate term while the partners try to figure out the way forward there. I think they announced the strategic review in early March, so you would have had a couple months where there was really an effort to bring this thing forward, and now I think things are just a little bit quieter. So once this gets rationalized, I think we will be able to give you a better sense for what the spending is going to be this year. Larry Liu: Perfect. Sounds good, William. I am glad I am a CPA; I understand everything that Paul just mentioned earlier. I promise I have one last question. It is not as technical; it is more focused on the revolving credit facility. I know, as you mentioned earlier as well, it increased by about $600 million this quarter. And just drawing historical records as well, the last time you increased it is when—right before—you did the Kansanshi stream as well as the Sandstorm Gold and Horizon Copper acquisition. What is the kind of read-through here? You have done billion-dollar deals in the past. Is it time to see more billion-dollar deals coming from Royal Gold, Inc. again? William Heissenbuttel: Yeah. I would not read through anything. I know we just established we had the accordion, and then we exercised it in very short order, but I would not read anything into it. I think it is just a reflection—and you have seen some large transactions in our sector—there seem to be more of them, more opportunities. And we love the revolving credit. We think our business is great in terms of being able to service debt. It is nondilutive, and we just want to be ready. As I have said before, even though gold has come off, it is still at a level where every GEO you buy is probably more expensive than it was five years ago. So it is just being prepared. That is the only read-through I would ask you to take from it. Larry Liu: For sure. And thanks again, William, Paul, Martin, and Alistair, and team for taking my questions today. William Heissenbuttel: Thank you. Operator: Our next question comes from Daniel Major with UBS. Your line is open. Please go ahead. Daniel Major: Hi. Yeah. Thanks so much for the questions. The first question is on the buyback option and how we should think about that relative to the balance sheet. Is there kind of a level of net cash or net debt that we should be thinking about that increases the probability of buybacks? And is the emphasis of the buyback ultimately kind of to normalize the share count from the Sandstorm deal? William Heissenbuttel: No. It is not to try to normalize the share count relative to the Sandstorm deal. And I would not take it as a net cash trigger—if we have got excess liquidity, that is something we are going to turn to. This is about what we see as a value dislocation. And I will really take you back to November, December, where I think the view amongst everybody on our management team was we just should not be trading at these levels. We are very undervalued, and I quite frankly wish we had had the program in place back then. This is kind of a reaction to that, where if, from a valuation multiple perspective—and that is where it starts—we think there is a dislocation, we may very well use the program. But at the same time, you have to understand we have other priorities as well. We still have debt outstanding. We would love to pay off the debt; that may remain a priority. And, again, to the extent the business development pipeline looks healthy, we may want to retain that liquidity. So we are not looking at it going, okay, for this valuation multiple we are automatically going to go out and use the buyback program. It is really a balance of priorities, and it is what we would view as a real dislocation in value. Daniel Major: So it is an option in the capital allocation tool chest. Okay. Just a second question, just a specific one. When would you expect to receive the second payment from the Mount Milligan cost support program? Wherever that falls. William Heissenbuttel: That is a good question. I cannot answer it. Daniel, do you recall when we expect Greenstone to hit the next target? Is it later this year? Daniel Breeze: Yeah, William. Hi, Daniel. Thanks for the question. And we were just looking at the results from Equinox overnight. Based on what we are seeing from their production and guidance, it looks like it will be sometime in Q3 of this year. William Heissenbuttel: Okay. Perfect. Thank you. Daniel Major: That is useful. And then just last question, just the general one on the pipeline and what you are seeing in terms of potential opportunities. Obviously, we have seen some consolidation in precious metal pricing, but as you say, still at a good level. Any high-level insights on what you are seeing in the pipeline? William Heissenbuttel: Daniel Breeze, I might have you keep going and cover that subject. Daniel Breeze: Yeah. Happy to, William. Look, I think we certainly like what we see in the pipeline right now, and I think as we look at the market, the volatility and the geopolitical risk that we are seeing across the board right now does not seem to be slowing interest from counterparties to consider deals, at least currently. And, obviously, we have seen a number of deals already this year, so it looks pretty good to us, and very much like previous quarters. I think the deals that we have seen announced this year are kind of like what we see in the pipeline right now—those arbitrage opportunities, the base metal producers looking to sell into a good market with the noncore precious metals that they hold. I think there is more interest now given the Antamina–Wheaton deal that we saw. I think that stimulated interest from base metal companies to consider monetizing those by-products. And certainly, in our deal flow last year, we saw that from First Quantum and Solaris over their assets that we were able to stream as well. So we like that. The third-party royalty market looks pretty healthy as well. And then new project development—all of it looks pretty good. And, again, we are still in that $300 to $400 million size; I think that is still a good range to think about for deals. Daniel Major: Great. Thanks a lot. William Heissenbuttel: Thanks for the questions. Operator: Our next question comes from Tanya Jakusconek with Scotiabank. Your line is open. Please go ahead. Tanya Jakusconek: Everybody, thank you for taking my question. Paul, I am not an accountant, so I am going to start with that. I just want to simplistically understand how I should be thinking of it. So there are really two components to this Hod Maden that I need to understand. One is something that will go through the income statement, which seems to be something in the $1.5 million expense per quarter. And then there is the second component, which is the capital calls that go through the cash flow, and that depends on the capital outlay that is required from the joint venture and your 30% interest. Is that how I should think of it? Paul Libner: That is correct, Tanya. Thanks for the question. I am happy to give you a bit more color there too on the pickup of the losses in the joint venture—the 30% pickup. I will just tell you that over the average of the last four or five quarters, those losses have ranged really between about $600,000 and $700,000. So that is also another guide for you. This quarter was $1.3 million, but if you factor that in, I would say over the last four or five quarters it has been $100,000 to $700,000. And you are correct, that does go through the P&L, and that will show up in the nonoperating section, and I believe we include it within interest and other expense. Tanya Jakusconek: And then whatever the capital call is—if it is this per month—then your 30% of that will go through the cash flow statement. Paul Libner: Correct. As an investing activity, so not operating cash flow. And then the offset is the increase of that equity investment on the balance sheet. Tanya Jakusconek: Alright. That is clear. Thank you for that. And we will wait. I think the guidance had been about $15 million a month. Is that what you are thinking within your projections until otherwise noticed? William Heissenbuttel: Tanya, I do not even know if it will be that. Again, as in my response to the other question, just give us a bit of time to sort out the strategic review by SSR. Tanya Jakusconek: Okay. Alright. So then my second question, I do not know who wants to take this one, but I think Paul again. You mentioned that we are going to get, I think, sometime the second or third week after the quarter—I forgot what you mentioned—we will be getting some additional information ahead of the full financials. You mentioned revenue. Did I hear streams and the royalty segment broken out? Is that what we are going to get? I did not understand what exactly we are getting. Paul Libner: Hey, Tanya. Yes. You may recall that we previously had provided the metal stream sales release shortly after the quarter end. So, really, you are going to get a bolt-on to that. It will include the stream sales information, but we will also provide a dollar range of the royalty segment as well. As you may appreciate, we do have to estimate some of these, and so this release will hopefully tie all this together for you from both segment standpoints. Tanya Jakusconek: Okay. So GEOs from streams and then the royalty segment. Paul Libner: Correct. Tanya Jakusconek: Got it. And with that, I know we had initially spoken about 48/52 first half/second half performance. But I think I had been thinking originally that we were supposed to have a Q1 similar to Q4, which had been about 91,000 GEOs, and you came in at 97. Should I be thinking that we are probably more equal for the next three quarters? William Heissenbuttel: Paul, do you want to take that one? Paul Libner: Yeah. I think as of right now, it is still that 48/52. I think that is still what we are guiding to. We did have a few royalties this quarter and streams that had better than expected production, but I think you can expect the 48/52 for the rest of the year, and maintaining that guidance that we provided earlier as well. Tanya Jakusconek: Okay. If someone wants to take on the share buyback—and maybe William, this is for you if I could—and then someone to take my final question on the transaction environment. So just on the buyback, you have mentioned a few times that where you see a valuation disconnect with the market. When you think of a valuation disconnect, are you looking at it—let us say, your NAV versus where you see your NAV versus where the share price is trading? What valuation metrics are you using to see that or clarifying that discount? William Heissenbuttel: Yeah. I think you are going down the right road. It starts with P/NAV and price to cash flow, and looking at others in our sector. That, I think, is where the analysis starts. But, again, as I mentioned, that is not an automatic trigger to either do something or not do something. There are other priorities that we have to manage in that process. But it is definitely valuation multiples where we will start the analysis. Tanya Jakusconek: Okay. So you would see—and I am saying that because I am trying to understand whether your price to NAV or price to cash flow is a certain spread versus peers, and that is where you look at it and say, okay, that is disconnecting. If we have the cash flow, we have the cash, let us buy back shares. William Heissenbuttel: That is where it starts. But it is also, do we have debt to pay down? Do we have new investments we want that should be put in before? Tanya Jakusconek: Yep. For sure. If we have the cash, all else being equal. Thank you for that. And then just my last question, and you gave us a little bit of a flavor for what is out there. It is the $300 to $400 million range, is what you were looking at. Maybe someone can confirm that I heard. I am just trying to understand—you know, a couple of others have said there is a set of very large deals still out there. Potential syndication—would that be something that you would consider? Data deals as well? William Heissenbuttel: Yeah. I mean, I will answer the syndication part of the question. Sure, we would love to syndicate. We would love to be part of it. We would love to lead it. The thing I would just caution people is if you want a transaction, you want a transaction for a reason, which means that maybe your structure is different than everybody else’s. Maybe your pricing is more competitive than everybody else’s. So you would have to find somebody else willing to do the transaction that they potentially lost to. It is not something that we syndicate ahead of time. You have to close the deal and then syndicate it, but we are totally open to the concept. That just makes the whole diversification side of what we were talking about at the Investor Day even better. So that is the syndication side. Daniel Breeze, is there anything else you want to add on the market in general? Daniel Breeze: Yeah. Tanya, I would just say—and I did mention $300 to $400 million—and there is always a range in there, even up to $500 million, let us say, in that range. But the third-party royalties that we see in the pipeline tend to be smaller, as you know—sort of a $100 million plus or minus type sizes. I think the range we always give you, Tanya, still holds. Tanya Jakusconek: And, Daniel, are you seeing more silver opportunities? Daniel Breeze: Yeah. I think the answer, Tanya, is very similar to what I shared with you in Zurich last month at the mining forum, which is we are kind of seeing a bit of everything right now. Maybe it is a bit more silver than we have seen, say, a year ago, but it is still a mix of silver and gold across the board and producing assets and development assets and whatnot. So it is really hard to say that there is one type of opportunity that is outweighing the rest. It is pretty broad, at least from our pipeline's perspective. Tanya Jakusconek: Okay. Thank you very much for that, and thank you for the color on some of these things. And, Paul, thank you for having patience with my nonaccounting background. Paul Libner: No problem, Tanya. Always happy to talk. Operator: Our next question comes from Derek Ma with TD Cowen. Your line is open. Please go ahead. Derek Ma: Thanks, and I want to thank the team in advance for the future disclosure on preliminary numbers for royalties and streams. I think that is going to be quite helpful for the investment community. In terms of SSR and Hod Maden, are there opportunities to work collaboratively there to achieve your own stated goals of disposing or converting your 30% interest? And are you having those types of conversations right now? William Heissenbuttel: When you say collaboratively, any rationalization of our ownership was going to involve the partners one way or the other. You were either going to sell to them or you were going to sell to a third party, but with their consent effectively. So that has always been the approach. I do not think—I said at the Investor Day—I think SSR’s strategic review complicates what we are trying to do here. It is not a step that we envisioned when we set that goal. It is still our goal, but it is only going to be done with the partners, working with the partners. Derek Ma: What can investors expect in terms of timing and then ultimate outcome from the situation then? William Heissenbuttel: I think you are going to see an answer in the near term. I do not want to put months on that, but I think you are going to see something happen relatively soon, because, again, SSR—I think SSR actually put a time frame on it—the next few months. So I would try to stick with that. This is not going to be a long, drawn-out process. Derek Ma: And a complete disposal, or do you think some partial conversion is still possible here? William Heissenbuttel: Do not know. Derek Ma: Do not know. Okay. Derek Ma: And then just finally, on the share repurchase program, I know we touched on it a lot already, but it sounds like the plan is to self-administer the program and not have it automated via a broker. Is that correct? William Heissenbuttel: Well, it is not going to be automated in the sense that we pick a price and sell it. We have to figure out how we are going to implement it because we do want discretion as to if and when the program gets utilized. So I do not imagine giving a bank Derek Ma: six months at a price and just exercise William Heissenbuttel: if it hits that price. There is going to be more to it than that. Alistair Baker: Got it. Derek Ma: Okay. Thank you. Operator: Our next question comes from Joshua Wolfson with RBC Capital Markets. Your line is open. Please go ahead. Joshua Wolfson: Thank you very much. I figured it would only be appropriate if I also asked on the buyback as I have done historically. We have seen a lot of volatility historically with shares, and in some of those prior calls, there has been justification to not proceed with the buyback just due to the stock trading at a premium. I am wondering what has changed, or how is the company looking at things or potential scenarios that could justify this now being something that is pursued versus the historical comments? William Heissenbuttel: Well, again, Josh, I think I go back to—again, I will take you back to November, December. I think we were trading at a P/NAV of less than 1.4 times for a little while. What we have to do is say, okay, if you can buy back your shares at 1.4 times, and investments in the sector are being priced at 1.7 times, we should know our assets better than anything new we are going to add to the portfolio. So if we are going to use capital, is that a better use of capital? The buyback really came from that period of time when I just sat down and kind of wished we had the buyback because now is the time to buy shares. We also saw almost ten years ago, when Thompson Creek was having financial difficulties and people were not sure the Mount Milligan stream was going to survive, we felt very comfortable that it was. But there was a very significant value disconnect, and again at that time, if we had had a program, I think we probably would have done something under that program. Joshua Wolfson: Got it. Okay. And then maybe getting into some of the asset specifics. Cortez had a pretty good quarter. I know there is not a lot of visibility on the asset quarter to quarter, and there is because the differences in percentages—what Barrick reports versus what you report—can vary. I am just wondering if the company can provide a bit more understanding of Q1 and then, if it is available, what the expectation is over the course of the year. William Heissenbuttel: Josh, I am going to turn that to Martin. I will just caution you, I think Barrick usually comes out before us, which makes it a little bit easier for us to talk about the assets. So I am not sure what we can share. But, Martin, is there any comment you could make about what we saw at Cortez in the first quarter? Martin Raffield: I think I would say, William, that we should just wait for Barrick to come out on Monday. I would not like to front-run anything that they are going to say at this stage. William Heissenbuttel: Got it. Alright. Joshua Wolfson: And then just on Coimolache, some of the challenges in the first quarter, and then looking at the impact of Zone 5 North and understanding the differences there. How should we be thinking about how the proportion of that zone is processed and what the outlook is for Royal Gold, Inc. in that context? William Heissenbuttel: Martin, do you want to take a shot at that? Martin Raffield: Yeah. Look, they had some issues last year as they switched over their mining contract, moving to the Chinese contractor. I think anytime that you have got a big contractor change at an underground mine, it is going to have an impact. They do seem to have been stabilizing fairly well as we moved towards the end of last year and move through this year. Obviously, their focus at the moment is on building the expansion, building the new processing plant, finishing the design for that, and getting into construction, building an underground backfill plant so that they can start backfilling, reduce the amount of pillars that they leave behind, and improve the recovery of the resource. That seems to be going pretty well at the moment. But as to Zone 5 North and Mango and the other pieces of the puzzle put together, that is still in development at the moment. We know the new plant is going to process mainly Zone 5 material, and we have a strong understanding that that is going to improve our throughput and our silver recovery. Joshua Wolfson: And maybe just to clarify, for Zone 5 North specifically, has the mining from that area been accelerated versus what the prior plan was? Maybe I am misinterpreting things. Martin Raffield: They have not started mining Zone 5 North yet, Josh. They are mining Zone 5 Main with the three declines. Zone 5 North, Mango, and the others are part of the expansion that they are going to be starting to develop over the coming period. Joshua Wolfson: Got it. Great. Thank you. Operator: Our final question comes from Brian MacArthur with Raymond James. Your line is open. Please go ahead. Brian MacArthur: Good morning. Sorry, most of my questions have been answered. But I know this is difficult. Just following up on Josh’s asset question, Antamina had $13 million this quarter. You commented about grade. But just ballpark—I realize NPIs are difficult—is that a reasonable number going forward at these commodity prices, or was there cap allocation or something that made that number different than what you might think would be going forward? I mean, it is Daniel Breeze: first quarter. We have really got to take a look at this. William Heissenbuttel: Yeah. I will ask one thing real quick, and I think $13 million was more than the annual revenue received in certain years in the past. So, yeah, I agree with you, NPIs are impossible to estimate. Martin, is there anything you would say that makes the first quarter unique or a signal of things to come? Martin Raffield: No. It was essentially low deducts and high prices. So we cannot really project what is to come. We are not changing our outlook in terms of what we expect for the year. But, yeah, it is capital allocation and deductions, and we have almost no visibility into that, Brian. Brian MacArthur: Fair enough. Brian MacArthur: And just a second question while I have you. One asset that has been sitting around for years, but obviously we are in a higher price environment. Is anything happening—I do not know if I remember how to say it—at Ilovica, the Euromax asset in North Macedonia, because that has a potential to be a decent size going forward too. William Heissenbuttel: Yeah. But I do not think there is anything to report there. The last we really looked into it, I think they were still working on consolidating mining licenses, and the government changed ten years ago, and it has been an uphill battle for them. So I do not have anything to update you on. Brian MacArthur: Perfect. Thank you. Operator: We have reached the end of the Q&A session. I will now turn the call back to William Heissenbuttel for closing remarks. William Heissenbuttel: Thank you very much for taking the time to join us today. We certainly appreciate your interest, and we look forward to updating you on our progress during our next quarterly call. Take care. Operator: This concludes today's call. Thank you for attending. You may now disconnect.