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Operator: Greetings, and welcome to The PNC Financial Services Group, Inc. Q1 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I will now turn the conference over to Bryan Gill, Executive VP and Director of Investor Relations. Thank you, Bryan. You may begin. Bryan Gill: Good morning. Welcome to today's conference call for The PNC Financial Services Group, Inc. I am Bryan Gill, the Director of Investor Relations for The PNC Financial Services Group, Inc. Participating on this call are The PNC Financial Services Group, Inc.’s chairman and CEO, Bill Demchak, and Rob Reilly, executive vice president and CFO. Today's presentation contains forward-looking information. Cautionary statements about this information, as well as reconciliations of non-GAAP measures, are included in today's earnings release materials as well as our SEC filings and other investor materials, and are all available on our corporate website pnc.com under Investor Relations. These statements speak only as of 04/15/2026, and The PNC Financial Services Group, Inc. undertakes no obligation to update them. I would like to turn the call over to Bill. Bill Demchak: Thank you, and good morning, everyone. As you have seen, we are off to a really strong start this year. We achieved a great deal this quarter and we continue to build upon the strength of our franchise. We completed the acquisition of FirstBank early in the quarter and we are well on our way to a mid-June conversion. Our financial performance was solid. Organic loan growth hit a three-year high, net interest margin expanded meaningfully, and we had 13% year-over-year fee income growth. Credit quality remains strong, and we returned significant capital to shareholders. Importantly, beyond the financial results, we continue to see strong momentum across our businesses with notably increased client activities. We continue to make meaningful investments in our technology and our branch network. While we recognize that there are many market concerns out there—from energy prices to AI to private credit—we are not seeing anything that suggests these issues are broadly impacting our customers or our credit quality in the near term. Specifically regarding the increased attention on banks’ exposure to nondepository financial institutions, Rob is going to walk through some of the details as it relates to our exposure, but the sound bite you ought to walk away with here is that we do not see any loss content in this book and certainly do not see any exposure to a systemic event, which, by the way, we do not expect. But were there to be one, a systemic event in private credit, I cannot speak to what other banks have in this category as the definition seems to capture random things. We are very outsized in our corporate receivables financing relative to others, which is a low-spread business with negligible risk. Importantly, the bulk of our loans actually have nothing to do with private credit despite the regulatory category in which they reside. Overall, our focus remains on disciplined execution of our strategy, which is clearly reflected in our results this quarter. Looking ahead, we are entering into the second quarter with a lot of momentum, and we continue to be excited about the opportunities in front of us. Finally, as always, I want to thank our employees for everything they do for our company and our customers. With that, I will turn it over to Rob to take you through the numbers. Rob? Rob Reilly: Thanks, Bill, and good morning, everyone. Our balance sheet is on Slide 4 and is presented on an average basis. As Bill mentioned, during the first quarter, we successfully completed our acquisition of FirstBank, and as a result, our overall balance sheet growth includes the impact of the acquisition, which represented $15 billion in loans and $22 billion in deposits. For the linked quarter, loans of $351 billion grew by $23 billion, or 7%. Investment securities of $145 billion increased $2 billion, or 2%. Deposit balances were up $19 billion, or 4%, and averaged $458 billion. Borrowings increased by $3 billion, or 4%, to $63 billion. Our tangible book value was $109.42 per common share, down 3% linked quarter due to the acquisition, but up 9% compared with the same period a year ago. We continue to be well positioned with capital flexibility. During the quarter, we returned $1.4 billion of capital to shareholders. Common dividends and share repurchases were approximately $700 million each, and we continue to expect quarterly repurchases to be in the range of $600 million to $700 million going forward. We remain well capitalized with an estimated CET1 of 10.1%, down 50 basis points from year-end 2025. The decline was primarily driven by the FirstBank acquisition, accounting for roughly 40 basis points, with the remainder attributable to strong loan growth. Regarding the recent Basel III proposal, we expect the changes to be a net positive for our CET1 ratio relative to the current framework. Our initial assessment reflects a reduction of approximately 10% of our RWAs, or $45 billion to $50 billion. The reduction amount is the same under both the revised standardized and the expanded methodologies, in line with our previous expectations. Slide 5 shows our loans in more detail. Loan balances averaged $351 billion in the first quarter, an increase of $23 billion, or 7% linked quarter. The growth reflected both higher commercial and consumer balances. Compared to the same period a year ago, average loans increased $34 billion, or 11%. The total average loan yield of 5.5% decreased 10 basis points linked quarter. On a spot basis, loans increased $29 billion, or 9% from year-end, including $15 billion from the FirstBank acquisition and $14 billion of growth in legacy The PNC Financial Services Group, Inc. loans. Specific to our legacy business, C&I loans increased $15 billion, driven by broad-based growth across businesses, reflecting strong new production and higher utilization rates. CRE balances reached an inflection point and increased approximately $100 million; we expect moderate growth through the remainder of the year. Consumer loans declined $1 billion due to lower residential mortgage balances. Slide 6 covers our deposit balances in more detail. Average deposits were $458 billion, up $19 billion, or 4%, driven by the addition of FirstBank balances partially offset by a reduction in brokered CDs. Excluding those items, deposit trends were consistent with typical seasonality as growth in consumer balances more than offset a seasonal decline in commercial deposits. DDAs continue to represent 22% of total deposits. Our total rate paid on interest-bearing deposits decreased 18 basis points to 1.96% in the first quarter, reflecting lower rates. Turning to Slide 7, we highlight our income statement trends comparing the first quarter to the most recent fourth quarter, and again including the impact of the FirstBank acquisition. Total revenue was $6.2 billion and grew $94 million, or 2%. Noninterest expense of $3.8 billion increased $165 million, or 5%, of which $97 million was integration expense. Excluding integration costs, noninterest expense increased 2% and PPNR grew 1%. Provision was $210 million and our effective tax rate was 19%. As a result, our first quarter net income was $1.8 billion, or $4.13 per common share, and $4.32 when adjusted for integration costs. Turning to Slide 8, we detail our revenue trends. First-quarter revenue increased $94 million, or 2%, compared to the prior quarter. Net interest income of $4.0 billion increased $230 million, or 6%. The growth was driven by the addition of FirstBank as well as lower funding costs and commercial loan growth. Our net interest margin was 2.95%, an increase of 11 basis points. Noninterest income of $2.2 billion decreased $136 million, or 6%. Inside of that, fee income decreased $44 million, or 2% linked quarter. Looking at the details, asset management and brokerage increased $9 million, or 2%, due to higher average equity markets and client activity. Capital markets and advisory revenue declined $26 million, or 5%, reflecting lower M&A advisory activity off elevated fourth-quarter levels, partially offset by higher underwriting and trading revenue. Card and cash management increased $5 million, or 1%, as higher treasury management revenue was partially offset by seasonally lower credit card activity. Lending and deposit services decreased by $2 million, or 1%. Mortgage revenue decreased $30 million, or 20%, largely attributable to a $31 million decline in MSR valuations given the heightened rate volatility during the quarter. Other noninterest income of $125 million included $32 million of Visa derivative costs, as well as negative private equity valuations, partially offset by $28 million of net securities gains. Compared to the same period a year ago, we demonstrated strong momentum across our franchise. Importantly, fee income grew $240 million, or 13%, driven by broad-based growth in our businesses. Turning to Slide 9, first-quarter expenses increased $165 million, or 5% linked quarter, which included $97 million of integration costs. Noninterest expense excluding the impact of integration expense increased $68 million, or 2%, as the addition of FirstBank’s operating expenses more than offset lower legacy The PNC Financial Services Group, Inc. expenses. We remain focused on expense management, and as we have previously stated, we have a goal to reduce costs by $350 million in 2026 through our continuous improvement program, which is independent of the FirstBank acquisition. This program will continue to fund a significant portion of our ongoing business and technology investments. Our credit metrics are presented on Slide 10. Overall credit quality remains strong. Our NPL and delinquency ratios each improved on both a linked-quarter and year-over-year basis, reflecting the strong credit quality we continue to see across our portfolio, and the linked-quarter growth in balances was entirely attributable to the addition of FirstBank. Nonperforming loans increased $25 million, or 1%, and represented 0.62% of total loans, down from 0.67% last quarter. Total delinquencies increased $115 million to $1.6 billion, and our accruing loans past due declined to 0.43%, down from 0.44% last quarter. Total net loan charge-offs of $253 million included $45 million of purchase accounting related to the acquisition. Excluding these acquired charge-offs, our NCO ratio was 24 basis points. At the end of the first quarter, our allowance for credit losses totaled $5.5 billion, or 1.52% of total loans. I want to take a moment to cover the details of our NDFI loans, which are highlighted on Slide 11. We have discussed this topic at recent investor conferences, and importantly, nothing has changed in terms of the composition of the book or the underlying risk. NDFI loans continue to represent our lowest risk loans. Approximately 90% of our NDFI loans are investment grade or investment grade equivalent, and all have robust collateral monitoring requirements. Because there has been a lot of focus on the regulatory reporting category of business credit intermediaries, we have further broken out the components in detail on the slide. This category for The PNC Financial Services Group, Inc. includes asset securitizations, primarily trade receivable securitizations, of which The PNC Financial Services Group, Inc. is an industry-leading provider. These are loans to bankruptcy-remote subsidiaries of corporate borrowers secured by diversified pools of receivables. These loans represent approximately 80% of the business credit intermediaries category for The PNC Financial Services Group, Inc. The remaining 20% of our business credit intermediaries category—approximately $7 billion—is mostly comprised of CLOs secured by private credit provider assets. These are well-structured assets all supported by senior positions with substantial excess collateral. We have been in these businesses for a long time and have experienced virtually no losses going back 25-plus years. We feel very good about the risk content of our NDFI loans and, based on the composition of these low-risk assets, expect zero losses going forward. To summarize, The PNC Financial Services Group, Inc. reported a strong first quarter and we are well positioned for the remainder of 2026. Regarding our view of the overall economy, our base case assumes GDP growth to be approximately 1.9% in 2026 and the unemployment rate to drift slightly higher to 4.6% by year-end. We do not expect the Federal Reserve to cut rates during 2026. Our outlook for 2Q 2026 compared to 1Q 2026 is as follows: We expect average loans to be up 2% to 3%, net interest income to be up approximately 3%, fee income to be up 2.5%, and other noninterest income to be in the range of $150 million to $200 million. Taking the component pieces of revenue together, we expect total revenue to be up approximately 3.5%. We expect noninterest expense, excluding integration expenses, to be up approximately 2%. We expect second-quarter net charge-offs to be approximately $225 million. Considering our first-quarter operating results, second-quarter expectations, and current economic forecast, our outlook for the full year 2026 compared to 2025 results is as follows: We expect full-year average loan growth to be up approximately 11%. We expect full-year net interest income to be up approximately 14.5%. We expect noninterest income to be up approximately 6%. Taking the component pieces of revenue together, we expect total revenue to be up approximately 11%. Noninterest expense, excluding integration expenses, to be up approximately 7%, and we expect our effective tax rate to be approximately 19.5%. As a reminder, our expectation for nonrecurring merger and integration costs is approximately $325 million. We recognized $98 million in the first quarter and anticipate approximately $150 million in the second quarter, with the remaining balance to be recognized in the second half of the year. With that, Bill and I are ready to take your questions. Operator: Thank you. We will now open the call for questions. Our first questions come from the line of Ebrahim Poonawala with Bank of America. Please proceed with your questions. Ebrahim Poonawala: Hey, good morning. I guess maybe Rob, Bill, just if you could talk about deposit growth as we think about a period—we have not been here in the better part of the last 15 years—where rates are higher for longer. I think, as you mentioned in the forward curve, we may not get any rate cuts. Just give us a sense of the algorithm to grow core deposits in this environment. How do you think about it? What is the approach? And how difficult do you think it is going to be for The PNC Financial Services Group, Inc. and the industry to actually grow low-cost core deposits? Bill Demchak: I would frame it a bit differently and talk about growth in DDA accounts and retail clients broadly, which in turn causes deposits to grow. Think about the average balance somebody holds as a function of how high rates are and how competitive outside alternatives are. Think about total shots on goal as the number of retail clients we have. Our focus has been on growing retail clients, which is the key to growing deposits long term. In a period where rates are steady for a time and people are fighting to expand, you see at the margin—and you have heard competitors talk about this—that in certain price categories, people are paying up to maintain balances and/or attract new clients. But look, we are opening branches. We have opened eight so far this year. We are going to—what is our total for the year—another 50 or something? 55. Our digital acquisition has been really strong, and we just need to continue that. That ultimately will lead to deposit growth. Rob Reilly: And we do, Ebrahim. Just as a reminder, we do have deposit growth expectations for the year. Sort of staying at these levels—we had a good first quarter—with some incremental growth in 2026. Ebrahim Poonawala: Understood. Got it. And I guess separately, around customer sentiment—think all sorts of risks over the last month including speculation on what higher oil prices and energy prices would mean for the consumer. Did we see some decline in sentiment over the course of the last month, or are you as constructive when you think about the growth outlook? Obviously, the guidance suggests nothing has dramatically changed, but we came in with a lot of excitement around the tax incentives for businesses and consumers. Is all of that more or less mostly intact? Bill Demchak: I do not know that we can square for you the headline surveys on consumer confidence or small business confidence, which are all not great, with what we actually see. When you look through spending patterns, growth in savings, activity levels, loan growth—what we see day to day in our business is almost at complete odds with the surveys you see on confidence. Rob Reilly: I would just add to that. In terms of sentiment, obviously there has to be a higher level of concern, but to Bill's point, the activity has not changed. Bill Demchak: Spending has accelerated. Ebrahim Poonawala: That is actually good color. Thank you. Operator: Sure. Thank you. Our next questions come from the line of Scott Siefers with Piper Sandler. Please proceed with your questions. Scott Siefers: Good morning, guys. Thanks for taking the question. I wanted to follow up on that sentiment question and also about what it suggests for loan growth. You had pretty good performance in the first quarter, and when I look at the guide, it does not necessarily imply much growth in future quarters off the first-quarter base. But I inferred at least that your commentary on utilization rates sounded good. It sounds like they are increasing. Do you see anything specifically that would cause you to be conservative, or you are sort of approaching with an abundance of caution? Rob Reilly: Sure, Scott. Clearly, we saw more than what we expected in terms of loan growth in the first quarter, and on an average basis that is going to pull into the second quarter. On a spot basis going into the second quarter, we actually see it staying flattish because we do have some paydowns that are coming that will offset continued new production. That gets you through the second quarter. When you look at the back half of the year, we are pointing to growth, but not at the rate that we have seen in the first quarter nor that we expect in the second quarter. To your point, that is related to concerns that ultimately end up reducing the visibility of what can happen in the second half. Bill Demchak: Long story short, you have followed us long enough—we are never going to go out there and say loan growth is going to be this big number. We cannot predict it, but we banked some in the first quarter, so we put that in the authority base and go forward, and if we are pleasantly surprised, that will be great. Rob Reilly: And that will be accretive. Scott Siefers: Perfect. Okay. Thank you. And then, Rob, maybe just some expanded thoughts on how capital management might change, should these Fed proposals or NPRs indeed come through. How much more aggressively might you think about things, or what are the governing factors you think about? You get this big relief, but then it is unclear the ratings agencies are necessarily on board. What are the puts and takes you see, or the factors as you walk through that? Rob Reilly: Sure, Scott. Under both methodologies, we see a reduction in RWA of about 10% as I mentioned in the opening comments, which is good. We are still in the proposal or comment stage, so we have to work through the nuances. But at first blush, because AOCI is blended in under both methodologies over the five years upfront, there is no AOCI; that is close to a full point of capital for us. Bill Demchak: The other issue—you mentioned the rating agencies—and inside of their rating methodologies, they look at risk-weighted assets. I have not actually thought through the notion of, “Hey, we have less, so does this actually just pull through to how they are going to look at us as well?” But I think it will. Rob Reilly: We have not had that discussion point with the rating agencies, but they had adjusted their expectations with the change of these proposals, so they have worked the numbers down under the current framework. It is logical to expect that it would extend into the new methodology. Scott Siefers: Okay. Perfect. Thank you very much. Operator: Sure, Scott. Thank you. Our next questions come from the line of Manav Ghisalya with Morgan Stanley. Please proceed with your questions. Manav Ghisalya: Hey, good morning. Thanks for taking my questions. On the capital question, you noted that ERBA adoption benefit is similar to adopting the revised standardized approach. Would it still make sense to adopt the ERBA as it relates to maybe the flexibility that it could give you in managing the business going forward—maybe if you wanted to lean in on the investment grade credit side or lower LTV CRE? Just wanted to know how to think about this going forward. Rob Reilly: I think you are right. On the surface, the ERBA—because of the benefit coming through investment grade equivalent loans, which are our wheelhouse—makes that methodology appealing. But we are still in the analysis stage here. There are still a lot of nuances to figure out, and obviously potential changes after the comment period. But you are on the right track. Manav Ghisalya: Got it. And maybe if I can ask the loan growth question and compare it to the NII guide. You are pretty close to the 3% NIM number you had indicated, and you are taking the loan growth guide up by three percentage points. The NII guide is going up, but maybe to a lesser extent. Is there anything that we should be thinking about on loan spreads or deposit rates that you are baking in now that is different to where we were at the start of the year? Rob Reilly: The short answer is loan mix on the new production piece. If you go back to January when we called for 8% average loan growth, we used average spreads on the new production through 2026. Where we find ourselves today after the first quarter is we have generated, on a relative basis, much higher volume of higher credit quality deals, which by definition carry relatively lower spreads. Still attractive spreads, still attractive returns, particularly given the non-credit portion of those relationships. It is just a mix change that, when we look out for the full year, will have higher volume on relatively lower spreads, and as you point out, that results in higher NII than we thought in January. Manav Ghisalya: Which is a good thing. Rob Reilly: As far as NIM, we might as well cover NIM because someone will ask the question. We saw a nice increase in the first quarter relative to our expectations. We still expect to go above 3% in the second half. As you pointed out, we are at 2.95%, so if we are going to be above 3% in the second half, you can do the math in between. Most of the expansion is still coming from the fixed-rate asset repricing. That continues to be very strong. Manav Ghisalya: That is great color. Thank you. Operator: Thank you. Our next questions come from the line of John Pancari with Evercore. Please proceed with your questions. John Pancari: Good morning. Bill Demchak: Morning, John. John Pancari: On the fee side, I know your capital markets revenues decreased a bit off the particularly solid fourth quarter, particularly on the M&A front. Can you update us on the outlook here in terms of pipelines and how you will be thinking about M&A and your other capital markets revenue, given the current backdrop? Thanks. Rob Reilly: Sure. Harris Williams had a strong quarter in the first quarter. It was off the elevated levels of the fourth quarter but higher than what we expected. The good news is their pipelines are strong. Going into the second quarter, we expect them to be at the levels they were at in the first quarter, which again is more than what we thought. Strong activity there, and that is leading to the guide. In the second quarter, we have capital markets essentially being at the same level, and more importantly, for the full year still up double digits. John Pancari: Got it. Okay, great. And then on the capital front, appreciate the buyback color in terms of the plans for the second quarter. Maybe more broadly, can you talk about capital allocation priorities, and Bill, give us an update on where you stand on M&A interest given the backdrop and regulatory posture to deals? Bill Demchak: Real simply, we like to use our capital on clients and our business. We have increased our buyback given capacity to do so. We have—and you should expect that we will continue to have—healthy dividends. In the ordinary course, we will otherwise be giving back more capital to shareholders than perhaps we have in the last handful of years. The M&A side—the noise and activity levels, forgetting about us, just what I see going on around us—seems to have died down. We are focused on growing our company organically. We have great momentum on that. We keep our eyes open, but I do not think there is going to be a lot of M&A activity, particularly with us. People are happy to do what they want to do, and we are not going to push on a string, nor do we need to. John Pancari: Got it. Thanks, Bill. Appreciate it. Operator: Thank you. Our next questions come from the line of Ken Usdin with Autonomous Research. Please proceed with your questions. Ken Usdin: I was wondering—obviously we see the outlook for costs still intact for the year, and then higher first to second. Can you remind us of the expected conversion of FirstBank and then the magnitude of saves you are expecting and how that cascades to a run rate as you get through the rest of the year? Rob Reilly: Sure, Ken. Our full-year guide holds in terms of expenses up 7%, which includes the operating expenses of FirstBank. Relative to the first quarter, we spent a little less than we expected; that will fall into the second quarter, largely around technology investments and the timing of those investments. On FirstBank itself, everything is going well. We are still planning to convert mid-June. We expect approximately $325 million of integration charges. We will see the decline of their run rate in 2026. There will be some residual integration charges in the second half, but the majority will be completed in the second quarter, which will be about $150 million. That is all in our guidance, on track, and we feel good about it. Ken Usdin: Got it. So then we would assume that the cost saves would run rate by the fourth quarter and then that gives you a good starting point to think about next year? Rob Reilly: That is a good place to start. Ken Usdin: Cool. Great. And Rob, can you dig on that point a little bit? There is a push-off of some spending from first to second. Does that demonstrate the flexibility that you have? Rob Reilly: We of course have flexibility, but that was not what drove it. It was just timing. Some items slipped into the second quarter versus what was planned for the last couple weeks of the first quarter. Nothing major. Ken Usdin: Okay. Got it. Thanks a lot. Operator: Thank you. Our next questions come from the line of David Schieterini with Jefferies. Please proceed with your questions. David Schieterini: Hi, thanks for taking the question. On deposit pricing competition, are there any differences in competitiveness by geography in your footprint? Rob Reilly: Not really. Bill Demchak: In a retail memo, there were comments on the Midwest being tight with high promo offers by a few competitors. But it depends—some parts of the country people are doing big promo CDs, in other parts, they are focused on money market funds. People are fighting for deposits, and people are fighting for clients. Rob Reilly: Not particularly harder in any geography. David Schieterini: That is fair. It sounds like it is mostly stable, so that is good. Shifting to the loan side, can you talk about borrower sentiment, pipelines, and competitiveness on the loan pricing front? Rob Reilly: The quarter was really strong. It is always competitive. As I said, our new production was skewed toward higher credit quality, lower spread, and the pipelines look strong—a continuation of that into the second quarter. Bill Demchak: The only thing we have really seen on spread widening is in leveraged lending. We do not do much of that. In business credit, we have seen spreads move. Our partnership with TCW on cash flow lending—those spreads have gapped 50 basis points on new production because of the scare around what is going on in the process. Rob Reilly: The other thing to mention around loans is that we reached the inflection point on our commercial real estate balances, which we called for in 2026. As you know, that has been a headwind for a number of quarters, and we have reached that inflection point as we expected. David Schieterini: Great. Thank you. Operator: Thank you. Our next questions come from the line of Chris McGratty with KBW. Please proceed with your questions. Chris McGratty: Great. Good morning. Rob, you talked a lot about your confidence in the credit of the private credit portfolio and NDFI lending. Where would that rank in the wall of worry within the company? It seems like the market is, to your point, overestimating the loss content. Where in the risk curve does that live? Bill Demchak: It is not even on the curve. If you go through that whole bucket, the riskiest piece in the whole thing is that little $5 billion slice that is to REITs, leasing, and this and that. A AAA CLO senior tranche—static maturity—to my memory, there has never been a loss in the history of the product. The BDC exposure is really small. Even if that whole market blows up, which I do not think it is going to, that just causes that product to early amortize. You would have to have massive corporate defaults at low recovery rates to ever get hit on that. Remember when we highlighted our real estate book—we said we were worried about office, we are through it, we reserved a lot of it. This NDFI stuff is not even on the page of what we are looking at. It is nothing. It is a great business. It does not worry me. I worry about trucking companies, and I worry about people who are dependent on fuel and what is going to happen to discretionary spending. This is not in that list. Rob Reilly: Just as a follow-up, that real estate piece that you pointed to—that is the most risk—is still very little risk. That is on a relative basis. I think we had one loss back in 2014 in that category, and we are still talking about it. Bill Demchak: I get that the end of the market has seen liquidity events in a small slice of what is private credit, and it has scared everybody. Rob Reilly: Because a lot of people focus on that category of business credit intermediaries. The vast majority of ours are trade securitizations, so people sometimes mistakenly call that whole category private credit, and for us it is quite the opposite. Bill Demchak: To hammer on this point—way back in the financial crisis when corporate receivable securitizations used to be done through CP, it all stopped with the reversal at money funds. A handful of us started doing it on balance sheet. Really high credit quality, not a great spread, great return on economic risk, kind of lousy return on liquidity, decent return on regulatory capital. We are by far the market leader in it, and that is what is blowing up that category for us when you look at comparisons of how much we have in the book. But it is not risky. It is a great business and we are going to keep doing it, and we are going to have some conversations with the regulators on the uselessness of what they have defined as NDFIs. Chris McGratty: Great color. Thank you. Just my follow-up: the $350 million you talked about as the savings. I am interested beyond this year—you have the cost savings from this program and also the FirstBank deal. Is there more potential to cut costs as you couple of years go by, as the narrative around AI and technology investments evolves? Is there another benefit that yields? Bill Demchak: Yes is the short answer. I do not know that it is a standout structural change in the efficiency of banks in the sense that we have been automating for years and have largely kept our headcount flat as we doubled or tripled the size of the company. That continues. AI allows that to continue. Maybe it accelerates through time. Maybe you can establish a competitive advantage early on and be a leader in it, but everybody is eventually going to catch up and get to a place where banking follows the same trend we have been on forever and ever. The winner is going to be the low-cost provider of really good products with trust behind it. We are going to squeeze costs out of the production of what we offer to customers. You are going to need to do that to win in a consolidated industry. Rob Reilly: But that is likely over multiple years. For 2026, our continuous improvement $350 million of savings is part of our guide, which is up 7%. Operator: Thank you. Our next questions come from the line of Matt O'Connor with Deutsche Bank. Please proceed with your question. Matt O'Connor: Good morning. Can you talk about your interest rate position right now and how you are thinking about hedging? I feel like the best hedges are put on when the market does not really know where rates might go, which is kind of where we are right now. Where are you right now, and what are you more concerned about protecting—downside or upside? Bill Demchak: Sort of technical answer: we are basically economic value of capital flat—duration is zero in our equity. We are flat to overall rate movement inside of our balance sheet. Having said that, we have continued the process, as you have seen us do last year and this year, of locking in forward curve rates, particularly when we see some volatility to the upside in the belly of the curve. We have done that and it gives us greater certainty around some of our comments for 2026, but even 2027 and into 2028 as we lock down some of these rates. So neutral in 2026 and looking to lock in some in 2027 and 2028 similar to what we did last year. Rob Reilly: Yes. Bill Demchak: Part of this discussion, of course, is do not confuse that—we are going to have really good NII trajectory for the next couple of years. We are going to do that despite being flat total rate exposure, which means we are not trading our future five years out for the ability to produce really strong NII in the first couple of years. Matt O'Connor: That is helpful. Specifically within some of these MSR hedges, residential and commercial—I understand this is not the broader interest rate risk management—but anything to read through there? You have had pretty strong net gains the last several quarters, and this time it was more offsetting. Anything interesting to point out there? Bill Demchak: We got chopped up. That is a massively negative convexity book and you are short options every which way you try to hedge it, and realized vol was way higher than implied. As we tried to hedge out that risk, we got chopped up. It happens, and you are exposed to it anytime you have rate swings as aggressively as we saw in the first quarter around some of the news. Through time, that tends to be an income-producing line item for us—usually we are plus, I do not know, $10 million. It is not a driver, to your point. We just got chopped this quarter. Rob Reilly: This quarter, the heightened rate volatility was the driver of an unusually large negative for us. Bill Demchak: But it was not like anybody screwed up. It was not a trading thing. Literally, realized volatility was higher than what was implied. Anything that has optionality in it gets hurt in that environment. Matt O'Connor: Okay. I realize the residential and commercial essentially offset each other, so that is not too bad getting chopped up. Operator: Thank you. Our next questions come from the line of Mike Mayo with Wells Fargo. Please proceed with your questions. Mike Mayo: To the extent that RWA with Basel III might be 10% less, how would you plan to use that extra capital, and when might you start leaning into using more capital—or maybe you are doing so already? Clearly, you are leaning into using capital with the loan growth that you had and expect. But maybe more buybacks, a deal—how do you think about using that excess capital and when? Thanks. Bill Demchak: It is down the road. We have increased our buyback. We have seen good deployment to our growth in the franchise. We will see when this gets approved and done after comments, and then it will be a whole new environment and we will figure out what we do at that point in time. It is a nice problem to have. We are going to drop a point of capital into our pocket. We will figure it out when it shows up. Mike Mayo: How do you see competition? It seems like the industry is all playing offense. You have been growing unused commitments, and that is playing out to a certain degree. You have already been competing, but others are coming back more in force. How do you see competition generally, especially with regard to loan growth? How are you getting so much more loan growth than the industry? To what degree are you competing on price? It just seems like everyone has excess capital and in those situations historically you have seen competition swing a little too far. Bill Demchak: That is not our story. We are bringing all these new markets online. We have more shots on goal. We are seeing more opportunities as opposed to trying to rebid the same deal I have been in for 22 years in our local market. That is a big part of it, and that is why when we went through the Southeast, now it is accelerating—BBVA and FirstBank markets. The other issue is we have much more specialty lending—do not read that as high risk—but we are in a lot of lending products that are not commodity capital. Whether it is our corporate receivables business or asset-based lending or equipment finance, we are in a lot of things that are not simply throwing money out as a generic good. At the margin, that always helps us outperform. Rob Reilly: The other piece is the expansion of the new markets—what we call our expansion markets—for our market-based corporate loans. Our national businesses aside, they are now more than half our loans and growing at twice the pace. That is a big driver. Mike Mayo: I missed what you said there. What is half your loans? Rob Reilly: More than 51% of our market-based loans. We have national businesses that are not market-based, but in all the markets that we have entered within the last 12 years, half of our corporate loans are in those markets. Mike Mayo: That is interesting. And what was that percentage a few years ago? Rob Reilly: I do not have it, but it probably started in the 30s, depending on where you are. Mike Mayo: And it is growing at two times the rate. Generally speaking, do you want to call out any of the expansion markets as being stronger than others? Rob Reilly: We have done very well in the Southeast, where we have been the longest. With the Southwest—Texas and California, Colorado now—we are online there. California has been, in some ways, shockingly strong. Bill Demchak: It is a target-rich environment. The amount of commercial middle market clients within the ZIP codes of California—great clients, great fee. And we have not done this by just doing loans. Our fee income percentage in these new markets is actually equal to or higher than our legacy markets. It is not like we are running out throwing money at people. It is an integrated relationship. We are really good at it, and we are growing. Mike Mayo: That is helpful. Thank you. Operator: Thank you. Our next questions come from the line of Gerard Cassidy with RBC Capital Markets. Please proceed with your questions. Gerard Cassidy: Hi, Bill. Hi, Rob. Bill, on your comments about the focus on organic growth, can you share an update? I think at the BAP Conference in November, Robin Gunner gave details about the retail expansion you are undertaking. How is that going? What are you learning from the process? Are you pleased with the pace? Bill Demchak: I am chuckling because Alex is going to be amused that his older brother gave the presentation. First of all, it is working. What have we learned? It is actually hard to build 60 or 100 branches a year. The site location, the teams that you need in each market to pull this off—we have created a production factory around it. We have learned a lot about how to create a massive buzz around a new branch opening, particularly when we are trying to get our fair share in a newer market where we are building a lot of branches. We have not leaned into pricing to attract new customers necessarily, which is an accelerant if we want to use it. But they are working really well. Gerard Cassidy: On the metrics, have you crystallized what you need in deposits or the type of deposits to bring a branch up to breakeven, and how long does it take to reach that point? Rob Reilly: Everything is on track, Gerard, and as Alex pointed out back in November, we pencil in three years to get to breakeven. We are running a little better than that right now. Everything is on plan and we are excited about it. Gerard Cassidy: Pivoting away from this growth, there has been a change in the leveraged lending guidelines by the FDIC and OCC. Have you been able to optimize any of your lending now that these restrictions went away in December? Are you seeing benefits where you are winning new business because you have more flexibility? Bill Demchak: Most of our struggle with that was that it was capturing business we were going to do anyway because it was really good business and they just had the definition wrong. Maybe at the margin we have seen some acceleration, but mostly it opened the window for banks to do good, smart business and not try to write a four-paragraph description of what is a good or a bad loan, which you just cannot do today. Gerard Cassidy: Very good. Operator: Thank you. Our next questions come from the line of Erika Najarian with UBS. Please proceed with your questions. Erika Najarian: Hi, good morning. A few quick follow-ups. Bill and Rob, I know you were asked a lot about the deposit opportunity. Just pulling up—if the Fed does not cut this year, how do you think deposit costs behave? Do you think that you could hold the line on deposit costs if the Fed does not cut? Rob Reilly: Yes. If the Fed does not cut, which is our expectation, deposit costs are fairly steady through the second quarter and then, by our estimates, maybe go up 1 or 2 basis points. Generally speaking, the pressure up is not from competition but rather repricing back book as things roll—back book customers to a closer-to-market level—which at the margin will cause our deposit cost to go up over the next period if the Fed does not move. It is all in our guidance, it is not material, and we will still hit the 3% NIM. That back book repricing is a dynamic that has been in place for a while; that is not new. There is obviously a risk if loan growth continues to exceed and there is pressure on those deposits, but that would be a good thing. Erika Najarian: Got it. Finally, one of your peers, David Solomon, talked about widening spreads in certain pockets of NDFI lending. Are you observing similar spread expansion in certain NDFI-type credits? Bill Demchak: Inside of NDFIs, the spot everybody is focused on is private credit. Inside of our bucket, the $7 billion is 90% CLOs. AAA tranches I imagine have widened. Facilities to BDCs are going to widen as the fear factor steps in. We have like $500 million—even less—of BDC exposure. The odds of me figuring out that there is a spread movement in there is unlikely because we are huge in the trade receivables flow business. Erika Najarian: Got it. Perfect. Thank you. Operator: Thank you. Our next questions come from the line of John McDonald with Truist. Please proceed with your questions. John McDonald: Hi, thanks. Good morning. Rob, as loan growth is picking up here, your reserve ratios look solid, but any need to start to provide a little for loan growth as we look ahead? Rob Reilly: That will be part of it. If you take a look at our provision increase quarter over quarter, that was largely driven by the loan growth we saw. That comes along with loan growth. These tend to be higher credit quality, so it is not as much, but I would expect provision expense to go up with the growth amount. John McDonald: On ROTCE, any updated thoughts? I think you talked earlier about exiting the year at kind of an 18% ROTCE heading higher next year. Any updates there? Rob Reilly: Same as what we said back in January. We finished 2025 at approximately 18% ROTCE—that was elevated a little by the tax reserve release in the quarter. We said, and still believe, we are going to go down during 2026 because of the FirstBank acquisition and the impact on that. Then when we deliver everything that we intend to deliver in 2026 along our guidance, we will be back to approximately 18% in the fourth quarter of 2026. The important part is we would expect to drift higher as we go into 2027. That is still the plan. John McDonald: Got it. And that is a function of operating leverage and growth next year in terms of moving higher? Rob Reilly: That is right. You bet. Operator: Thank you. We have reached the end of our question and answer session. With that, I would like to turn the floor back over to Bryan Gill for closing comments. Bryan Gill: Thank you all for joining our call today and for your interest in The PNC Financial Services Group, Inc. Please feel free to reach out to the IR team if you have any additional questions. Operator: Ladies and gentlemen, thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time and enjoy the rest of your day.
Operator: Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Equity Bancshares, Inc. 2026 First Quarter Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number 1. If you would like to withdraw your question, press star 1 again. At this time, I would like to turn the conference over to Brian Katzfey, Vice President, Corporate Development and Investor Relations. Please go ahead. Brian Katzfey: Good morning. Welcome, everyone, and thank you for joining Equity Bancshares, Inc.'s first quarter earnings call. A quick note before we dive in. Today's call is being recorded and is available via webcast at investor.equitybank.com with our earnings release and presentation materials. Today's presentation contains forward-looking statements, which are subject to certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed. After the presentation, we will open the floor for questions and further discussion. Thank you for being here with us today. We have a lot of exciting news to share. Joining me are Rick Sems, our bank CEO, and Chris Navratil, our CFO. With that, let me turn the call over to our Chairman and CEO, Brad Elliott. Brad Elliott: We hit the ground running in 2026, welcoming new customers and team members in Nebraska on January 1. Entering the Nebraska market has been a strategic priority for us, and I could not be more excited about what we will accomplish for the communities we now have the privilege to serve. The Frontier acquisition drove a 20% increase in assets and contributed to record quarterly revenue. It will be a great organic driver setting us up for an exceptional 2026 and beyond. As we grow the teams in Nebraska, as we have been growing the teams throughout our entire footprint, this is going to be a great strategic platform for us to grow organically. In February, we completed the Frontier core system conversion on time and on plan. The ability of our team to align vendors, allocate resources, and execute complex integrations is a genuine competitive advantage. Julie Huber, David Pass, and every team member who worked with them and made this possible, I want to say thank you. As reflected in the year-over-year changes, we have accomplished a great deal over the past twelve months. Compared to March 2025, our asset base has grown by more than 40%. While driving that level of growth through strategic acquisitions, we have grown tangible book value per share by 5% and just posted a quarter with core EPS of $1.32 and a core return on average tangible equity of 16.1%, exceeding the same period of 2025 by 324 and 6%, respectively. Core net income for the quarter grew faster than model expectations for the combined company. When you put this with less tangible book value dilution than we expected, the result is an exceptional start to 2026. Having added Oklahoma City, Omaha, Lincoln, Des Moines, and many other exceptional community markets to our legacy markets, we are positioned to continue to provide exceptional shareholder returns. Beyond merger-driven momentum, our bankers entered 2026 with purpose and energy, focused on our mission: creating opportunities for growth, rolling out new products and processes to better serve our communities, staying laser focused on delivering outstanding returns, and driving a more efficient company. Serving our customers is the core of what we do, and we never lose sight of it. We are leveraging technology and continuously monitoring performance to ensure we are meeting the needs of every customer who relies on us. In the first quarter, we opened a record number of DDA accounts as a result of our retail teams, led by Jonathan Root, prioritizing customer needs and delivering differentiated, exceptional service. We began 2026 with a larger, stronger balance sheet and earnings that meet even our own expectations. We are deploying capital with conviction, driving toward our mission of being a premier community bank in our market while delivering exceptional returns for our shareholders. The market is competitive, but our value proposition is intact, and our balance sheet gives us the runway to execute. Capital is strong, capital generation capacity is at an all-time high, and we remain confident in our $5 per share target for 2026. Our board, leadership, and team are aligned for continued growth. We are operating at a high level as the additional opportunities on the horizon come into view, and I am very excited about what lies ahead. Now let me hand it over to Chris to walk you through the numbers. Chris Navratil: Last night, we reported net income of $17 million, or $0.80 per diluted share. Adjusting for noncore items in the quarter, including merger expense of $5.7 million and Frontier-related provisioning of $6.1 million, adjusted earnings were $26.2 million, or $1.23 per diluted share, up from adjusted earnings of $23.3 million, or $1.21 per diluted share, in the prior quarter. Purchase accounting accretion on the loan portfolio was $3.3 million in the current period, compared to $2.3 million in Q4 2025. Excluding the after-tax impact of core deposit intangible amortization of $1.5 million and $1.0 million, respectively, adjusted earnings on tangible common equity were $27.7 million versus $24.3 million. Adjusted return on average tangible common equity was a strong 16.1% for the quarter. Net interest income was $73.7 million, up $10.2 million linked quarter. Margin came in at 4.33% versus 4.47% last quarter. That dynamic—higher earnings, slightly lower margin—reflects the expected impact of integrating Frontier's balance sheet. Purchase accounting accretion came in $800 thousand ahead of forecast. Normalizing for that, margin would have been 4.29%, right in line with expectations. Noninterest income held steady at $9.5 million. Expanding fee lines, including debit card, credit card, mortgage, insurance, and trust and wealth, offset declines in securities transaction losses and swap fee revenue for the period. Noninterest expenses for the quarter were $55 million. Adjusting for M&A charges in both periods and the prior period's litigation settlement accrual, noninterest expenses were $49.2 million versus $44.1 million, an 11.5% increase linked quarter driven by the Frontier integration. On a normalized basis, adjusted noninterest expense as a percentage of average assets improved 25 basis points to 2.57%. Pretax pre-provision net revenue, excluding M&A costs and $748 thousand in provisioning for unfunded commitments, was $34.7 million, or $1.63 per share, up from $28.8 million, or $1.56 per share, in the prior quarter. Comparing to the same period in 2025, the ratio has improved from $1.23 per share, or 33.1%. The effective tax rate for the quarter was 23.7%, impacted by periodic items not expected to recur; we continue to forecast a full-year effective rate of 22% to 23%. Our GAAP net income included a $6 million provision for loan losses attributable to loan balances added through the Frontier acquisition. Ending ACL coverage was 1.18%. The ending reserve ratio, inclusive of merger-related discounts, closed at 1.77%, up from 1.67%. During the quarter, we were active under our repurchase authorization, buying back 500 thousand shares at a weighted average cost of $44.74. A total of 327 thousand 662 shares remain under the board's September 2025 authorization. TCE closed the quarter at 9%, while CET1 and total capital were 11.5% and 14.4%, respectively. At the bank level, the TCE ratio closed at 9.8%. Now let me hand it to Rick to walk through asset quality. Rick Sems: Q1 delivered strong underlying credit. Nonperforming assets closed at $58.3 million, up $11.6 million, primarily attributed to the addition of Frontier. As a percentage of total assets, they moved just three basis points higher to 0.8%. Nonaccrual loans rose similarly to $52.4 million from $40.3 million, again primarily driven by the addition of Frontier assets. Our nonaccrual exposure is granular, with only four relationships exceeding $1.5 million. Charge-offs reflect continued resolution activity on credits we previously flagged. Loans past due and nonaccrual as a percentage of end-of-period loans increased to 1.86% from 1.53% linked quarter. The move is primarily in the 30- to 59-day bucket, concentrated in one acquired market. It is a merger process issue, not a credit issue. These bankers are simply navigating a new renewal process post-conversion. We anticipate full resolution in Q2. We see nothing systematic that would suggest that this becomes the new normal for our portfolio. Net charge-offs annualized were 10 basis points for the quarter as a percentage of average loans, up three basis points linked quarter. Looking ahead, we remain confident in our credit trajectory. Despite macro uncertainty, credit quality trends across our portfolio are stable and running below historic norms. The Frontier portfolio is granular and well underwritten, as evidenced by their track record, and we do not expect a meaningful impact on our credit quality going forward. Chris Navratil: As I mentioned, margin closed the quarter at 4.33%, ahead of expectations. Loan purchase accounting contributed $3.3 million, or 19 basis points, in the period. Absent near-term payoffs on acquired loans, we anticipate purchase accounting normalizing to approximately $2.5 million in future quarters. Adjusting March results for anticipated accretion yields a normalized margin of 4.29%. Frontier contributed a funding portfolio with a higher cost of funds as compared to legacy Equity Bancshares, Inc., improving future liability sensitivity while creating the anticipated near-term margin tightening. The addition of Frontier balances drove average interest-earning asset growth of 22.2%, average interest-bearing liability growth of 25.6%, and the ending interest-bearing liabilities to interest-earning assets ratio of 76.4%. Our loan-to-deposit ratio closed the quarter at 86%. We continue to expect full-year results consistent with our outlook in the slide deck, including margin in the 4.20% to 4.35% range, with periodic variability tied to purchase accounting. Rick Sems: Before I get into loan production, I wanted to take a moment to recognize the extraordinary effort of the Equity Bank team over the last 180 days. This has been a truly transformational period for our company, and it would not have been possible without the best community bankers in the business showing up every single day. As we enter 2026, we operate in six states, including seven major metros and a deep network of strong communities. We have the tools, the products, and the motivated teams to deliver outstanding performance. During Q1, our production teams continued to fire on all cylinders across the footprint. Loan production was $267 million, up 21.7% linked quarter. Originations came on at an average rate of 6.87%, continuing to drive accretion to current coupon yield, with a 10 basis point increase versus the prior period. Both our metro and community legacy markets contributed positively to the production outcome and were net positive for loans in the quarter. As we discussed, the first nine to twelve months following a merger involves intentional portfolio optimization and planned integration-related attrition, a dynamic we have managed proactively. We have recruited and hired new bankers in Wichita, Oklahoma City, Lincoln, and Omaha, and we will keep adding talent across the footprint. The opportunity to deepen commercial relationships—both loans and deposits—across these new markets is significant, and our teams are locked in on growing our organic engine. Our pipelines continue to build throughout the banker network. At quarter end, our 75% pipeline stands at $517 million. Line utilization was up slightly for the quarter at approximately 56%, with unfunded positions rising alongside production growth, and the addition of Frontier creating meaningful opportunity going forward. Total deposits increased approximately $1.2 billion during the quarter. In addition to the contribution of Frontier, the majority of our legacy markets saw growth, as our retail teams continue to gain traction and execute on our aggressive goals. Outside of our administrative and Nebraska cost centers, balances increased $191 million, including more than 5% growth in five of our community markets. I want to specifically call out our North Central Missouri market, including Kirksville, which saw a 7% increase in balances in the quarter. Acquired in 2024, I am excited to see Norman Baylis and his team finding success to kick off the year. Frontier carried brokered funding positions that are now part of our balance sheet. We have a clear, disciplined plan to reprice and replace those with core relationship deposits over time. Noninterest-bearing accounts are 20.2% of total deposits. Our retail teams are off to a terrific start in 2026, opening record levels of DDAs and executing on the company's goal of deepening wallet share and delivering exceptional service. Heading into 2026, we are well positioned to deploy available liquidity and drive growth across our markets. We continue to anticipate mid-single-digit organic loan growth. The addition of NBC and Frontier adds asset generation depth to our footprint while our community markets continue to provide strong funding opportunities. Management and team members are aligned and bought in. I am genuinely excited about what we will deliver in 2026. Brad? Brad Elliott: I take enormous pride in everything this team continues to accomplish. Growing our asset base by more than 40% across two transactions, both fully converted and integrated, is a remarkable achievement that speaks directly to the caliber of our people. I have never been more confident in what we will build together in 2026. We are committed to empowering our people, serving our customers and communities with excellence, and delivering strong, consistent returns for our shareholders. Our board and leadership team are fully aligned, and we are ready to keep executing on our mission. Sourcing, negotiating, and integrating franchise-accretive M&A transactions is a core competency of Equity Bancshares, Inc. Our team has significant experience in this area given the number of transactions we have completed, and I am proud to announce that we are consistently achieving results better than what was expected at the time of announcement. This is a testament to the team's hard work and prudent and realistic modeling assumptions. This outperformance allows us to drive enhanced earnings and shorter tangible book value earnbacks. We fully appreciate the importance of tangible book value growth over time as a key metric for shareholders' performance and are committed to executing M&A transactions that align with our goals. We are putting the right tools, strategies, and people in place to drive both organic and acquisitive growth, and I genuinely believe we are setting ourselves up for sustained long-term success across the entire footprint. Thank you for joining us today. We are happy to take your questions. Operator: Thank you. We will now open the call for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We will go first to Jeff Rulis at D.A. Davidson. Jeff Rulis: Thanks. Good morning. Just a question on the acquired loan balance. Do you have the Frontier loan balance at acquisition in millions? I know you said $1.3 billion, but also at acquisition and at quarter end, trying to get back into sounds like some decent organic growth. But if you had those Frontier balances, that would be great. Chris Navratil: Yeah, Jeff. It was about $1.28 billion in terms of acquired assets pre-purchase accounting mark. The decline period over period, excluding that—about $40 million we talked about yesterday, and Rick can expand on here—is effectively what we saw in some short-term optimization decline in the Frontier footprint, offset by what is positive production everywhere else in the footprint. So really a good outcome for us in our minds in terms of periodic production, but some of those headwinds exist at the beginning of the integration of that Frontier footprint. Jeff Rulis: But maybe put another way, do you have—it is a combined company as of January 1—but do you have, like, a legacy organic growth that you could also identify, or is that difficult to carve out? Rick Sems: On the loan side specifically, we grew just under 1% in our nonacquired markets—so if you take out Oklahoma and you take out Nebraska—on a point-to-point basis. So just under that, call it roughly 3% to 4% annualized, in those legacy markets on the loan side. Jeff Rulis: Okay. Appreciate it. And then maybe a similar question on the nonaccrual increase. I think roughly $8 million added from Frontier, $4 million from sort of the legacy unit. And maybe if you could put any color on the type of loans that were brought on? And then second piece to that—I think, Rick, you mentioned, sorry, I missed the piece about the—sounded like there was a past due. If you could just outline the balance of that one that was brought on that sounds like it has a quick resolution ahead. Rick Sems: It really was not a single loan. We have one specific market from Nebraska that did not understand how to get renewals done and manage those during that time. Those are all correcting themselves or already have been corrected at this point, Jeff. Brad, what was the balance of those loans? Brad Elliott: It is a little over $30 million. But it is not one loan. It is about 30 or 40 different relationships. Jeff Rulis: Okay. And then maybe last one, if I could. The margin—maybe, Chris, you kind of talked about a 4.29% core. Do you know what that core NIM was for the month of March? It sounds like you have an opportunity to kind of alter Frontier's funding mix a bit, and it sounded more leaning upward than not. But do you have a March figure that would compare to the 4.29% core for the quarter? Chris Navratil: Yeah, Jeff, March actually compares pretty consistently with that 4.29% figure. There are still some potential tailwinds as we look into Q2 and beyond as we are working to reprice some of those Frontier deposits. But that was happening throughout the quarter and really accelerating towards the end of the quarter, so we are not seeing that benefit in March. We will see more of it in April and beyond. The range that is provided in the outlook—I have some optimism that we can hit the high end of that range based on some of those dynamics. But I think because of the periodicity of accretion and the challenges of continuing to work through a balance sheet, there is a risk there as well. So somewhere in that range is fully accomplishable. I think the high end is also accomplishable based on some of those dynamics, but we have to execute on it. Jeff Rulis: Great. Makes sense. Thanks. Operator: We will move next to Adam Kroll at Piper Sandler. Analyst: Hi. I am on for Nathan Race. Good morning, and thanks for taking my question. Maybe starting on funding costs—you know, with deposit costs rising this quarter with the Frontier acquisition, and I know they had a piece of brokered deposits—so I guess I am curious if you could provide some additional color into repricing opportunities you have on the deposit side from both DDA and nonmaturity. Chris Navratil: I think there is an ample amount of repricing capacity. For some color, they had about $100 million that did get repriced in Q1. That was at a weighted average cost of 4.50%. So that is an aspect of their cost of funds that, again, accelerated towards the end of the quarter, that we have been able to reposition into what is comparatively cheaper. Even the newly issued brokered in the period is about 3.75%, so you are picking up 75 basis points on $100 million. They brought in a relatively higher overall cost of funding base, so we will continue to see opportunities to reprice. Some of that did have some duration on it—there is some lockout—so we will continue to have some heavier cost over time, but we are going to continue to see opportunities to bring some of those things down and anticipate being able to do so. Analyst: Got it. I appreciate the color there. Maybe moving to capital management. It is nice to see the step up in the buyback during the quarter, and you have obviously been active on the M&A front with the two deals over the past year. Do you expect to continue to be active on the buyback, and are you seeing opportunities on the M&A front as well? Brad Elliott: We look at capital utilization all the time. Yes, we continue to look opportunistically at buybacks, and we also think we have plenty of capital for continued M&A. We have good capital ratios. We are building capital at a little over $25 million of capital generation a quarter, so we have good capital generation from the operating company. We have different prospects and lots of different opportunities we are talking to on the M&A front, and we will remain active on the buyback side if it works. Analyst: Got it. Thanks for taking my question. Operator: We will go next to Matt Olney at Stephens. Analyst: Wanted to ask more about the expense outlook from here and get some updated thoughts around deal cost savings from Frontier with that conversion now behind us. I am curious how the cost savings are looking compared to the original expectations, and would just love to get some thoughts on when you expect to get the fully loaded cost savings this year. Chris Navratil: A couple of things on that, Matt. On the technology side—the integration as well as some of the people that we maintained through that conversion date—all of those items have been fully taken out of run rate at this point. The cost savings on technology and people are in line with what we expected, and we will start to realize that. We started to realize it at the back end of the first quarter, and we will fully realize it in the second quarter. Generally speaking, as it relates to the cost saves around this transaction, they were relatively conservative—something around 23% on expected cost savings—and I think our execution will realize that or better as we think into Q2 and beyond. So we anticipate being in line to a little bit ahead of where we originally anticipated as we contemplated the transaction. Analyst: And I guess the other part of that is there was a mention about reinvestments, new producer hires—just maybe an update on what you are seeing thus far, new producer hires, and what is in the pipeline? Rick Sems: We have hired probably about 10 additional new bankers between Oklahoma City, Omaha, and Lincoln. Some are replacements and others are adds. All real positive there. The pipeline remains kind of consistent with where it was at the end of the year, and that number really bodes well for second and third quarter. Production numbers look really good. We are seeing a number of additional projects and things that both Brad and I are getting out to see customers and prospects on. It looks like fairly robust opportunities for us. As we have mentioned before, pricing always comes into play on this, and you never count it until it is in. We do have a couple of competitors pricing aggressively on things, but for the most part people are coming back to a little bit more in line with where we are on pricing. So that is positive. That bodes well. Operator: We will take our next question from Damon Del Monte at KBW. Damon Del Monte: Good morning, guys. Hope everybody is doing well. Thanks for taking my questions. Probably for Chris on the reserve and the provision outlook. The reserve came down six basis points quarter over quarter even though there were purchase marks against the acquired loans. Just trying to get a feel for where you are comfortable with where the loan loss reserve can trend over the coming quarters? Chris Navratil: Yeah, Damon, I would look at it as being consistent with where it is on a relative-to-asset basis. As we start to see depletion of those purchase accounting marks and look at the total position relative to the portfolio, there may be opportunity or need to build back up to, call it, a 1.23% type of reserve. But I think in the near term, thinking about it as 1.18% from here plus whatever production is makes sense. My anticipation for need to provide—absent any significant specific reserve items or specific deterioration in credits—is that it is going to account for the production in the portfolio. As we grow the portfolio, so too will we grow the reserve. Damon Del Monte: Okay. So the $6 million to $8 million guidance for 2026 for the total provision—if you back out the one-time CECL impact in the first quarter—we kind of just extrapolate the remaining three quarters to fall in between that range? Chris Navratil: Maybe a little bit less, Damon. I think thinking about it as kind of a $1.5 million to $2 million run rate depending on growth is a good way to continue to think about it. Damon Del Monte: Got it. Okay. That is helpful. And then lastly, on the fee income side of things, can you talk about some of the opportunities to tap into the Frontier franchise and what products and services you think have the best opportunity to ramp up revenues for you? Rick Sems: First and foremost, treasury management. We have brought in a new head of treasury management, and we see that as a real opportunity. That was not something that was really at the forefront of what they were doing. Second, they had a decent-sized mortgage business, and we are continuing to see some potential for mortgage fees going forward. We see that across the footprint—continuing to get the team built out—and we use that as a product for our core customers and for bringing in core customers. We are not really a mortgage shop just to bring in mortgages. Third is wealth management. We are already seeing some real positive results there and being able to grow wealth management. We are looking to add a couple of additional people in our markets. We do really well in the community markets, so in Nebraska—Falls City, Pender, Norfolk, and Madison, where we are—we see those as real opportunities for growth in the future as well. Operator: As a reminder, if you would like to ask a question, press star 1. At this time, we have no further questions. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning. Welcome to Morgan Stanley's First Quarter 2026 Earnings Call. On behalf of Morgan Stanley, I will begin the call with the following information and disclaimers. This call is being recorded. During today's presentation, we will refer to our earnings release and financial supplement, copies of which are available at morganstanley.com. Today's presentation may include forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Morgan Stanley does not undertake to update the forward-looking statements in this discussion. Please refer to our notices regarding forward-looking statements and non-GAAP measures that appear in the earnings release. This presentation may not be duplicated or reproduced without our consent. I will now turn the call over to Chairman and Chief Executive Officer, Ted Pick. Ted Pick: Thank you, and good morning. Thank you for joining us. Morgan Stanley entered 2026 from a position of strength. Amidst increased geopolitical uncertainty, the firm generated a record quarter with revenues of $20.6 billion and EPS of $3.43. The top and bottom line results are an ongoing demonstration of the capabilities of our integrated firm in periods when clients and markets are active. The first quarter's return on tangible of 27% evidences the operating leverage of Morgan Stanley's business model, a leading wealth and asset manager alongside a leading global investment bank. The consistent execution of the last 2 years plus is the proof of Morgan Stanley's ability to deliver on a higher plane of performance against different mini and macro backdrops of uncertainty. Wealth Management demonstrated continued momentum with growing durable fee-based revenues and increasing margins. Our client acquisition funnel remains unrivaled in driving industry-leading growth with $118 billion of net new assets and $54 billion of fee-based flows. With long-standing relationships across banking and markets, the investment bank was well positioned to serve clients around the world, underscored by a record $10.7 billion in quarterly revenues, inclusive of $5 billion plus in equities. A well-diversified investment management business continues to attract strong demand for Parametric. Across wealth and investment management, total client assets exceed $9 trillion on the road to $10 trillion plus. In the first quarter, we deployed resources to support client activity and opportunistically bought back stock. Our reported CET1 ratio of 15.1% against the capital requirement of 11.8% translates into a capital buffer of over 300 basis points. We are encouraged by this period of enhanced regulatory transparency and balance as we move through rule-making comments toward the finalization of Basel. It is worth noting that over the last 9 quarters, we have accreted $15 billion of capital. During the quarter, we also closed our acquisition of Equity Zen. As discussed in our annual letter, we remain mindful of the known unknowns of 2026, the accelerating adoption of AI at the enterprise level and the ongoing military conflict in the Middle East. Against this backdrop, our approach is one of measured confidence. Our institutional wealth clients demonstrate continued resilience and as much as ever seek the depth and breadth of content and market access that Morgan Stanley provides. At the same time, we remain vigilant in the context of higher asset prices, tight credit spreads and interest rate path uncertainty. We will endeavor to navigate the upcoming period with the same level of intensity and execution that has defined our performance over the last 9 quarters. The end of the end of history is now at hand and alongside accelerating AI development, we are committed to staying in our strategic lane to execute with rigor, humility and partnership and to be prepared to tactically pivot on the ongoing military disruption or technology adaptation warrant. Morgan Stanley strategy and client-centric culture is set to raise manage and allocate capital with excellence, to invest in our clients and technology across the integrated firm and to grow assets and compound earnings in a capital-efficient way. Now I will turn it over to Sharon to discuss the quarter. Thank you, Sharon. Sharon Yeshaya: Thank you, and good morning. The firm produced record revenues of $20.6 billion and record EPS ex DVA of $3.43. Our ROTCE was very strong at 27.1%. The results this quarter demonstrated the strength of our integrated model and the scale of our global platform. Clients increasingly turned to our trusted advisers across the firm, particularly when market volatility became more pronounced. For the quarter, our efficiency ratio was 65% reflecting strong operating leverage and disciplined execution as we continue to invest strategically across the firm. Improved efficiency includes $178 million of severance charges. Now to the businesses. Institutional Securities delivered record revenues of $10.7 billion. Strength was broad-based across asset classes in both banking and markets and in all regions. The year began with optimism supported by solid economic growth in the U.S., significant strategic and financial assets waiting to transact and AI-driven transformational opportunities. AI themes followed by geopolitical uncertainty and market dispersions continued to — contributed rather, to strong client engagement throughout our quarter. Our global team across the integrated investment bank led as a trusted and long-standing partner to advise clients in an increasingly complex environment. Investment banking revenues increased year-over-year to $2.1 billion, led by growth in the Americas. Investments in our talent are yielding results. And despite ongoing geopolitical volatility, capital market activity remains resilient and boardroom dialogue remains active. Advisory revenues of $978 million increased 74% versus the prior year, driven by higher completed activity in the Americas. Building on the momentum in the back half of last year, M&A activity broadened across sectors with notable strength in technology and industrials. Equity underwriting revenues were solid at $396 million, led by higher issuance across IPOs and convertibles compared to the prior year. Fixed income underwriting revenues were $742 million. Outperformance was driven by record issuance in the investment-grade market on the back of higher event-driven activity. Looking ahead to the remainder of the year, investment banking pipelines remain steady, supported by ongoing strategic activity from both corporates and sponsors and increasing needs for strategic capital formation. Our integrated investment bank remains global, diversified and well positioned to effectively support clients. Turning to equity. Revenues surpassed previous records reaching $5.1 billion for the first time. The performance reflected year-over-year growth across businesses and regions on the back of very strong levels of client activity. Our continued investment in technology is supporting scale and access across our global franchise. Prime brokerage revenues increased versus the prior year, driven by higher average balances that outperformed market indices, particularly in Asia with investor interest across the region. Cash results increased against the prior year, driven by higher volumes across regions. Derivative results were also a standout, up versus the prior year, driven by robust client activity across products and regions. Fixed income revenues were postcrisis record at $3.4 billion. Our performance this quarter highlights our business mix and our ability to capture market opportunities. Micro results increased meaningfully year-over-year, driven by securitized products and credit corporates. Macro results were solid, reflecting declines in foreign exchange, which benefited from a more favorable trading environment last year. Results in commodities increased significantly compared to the prior year. The business navigated elevated volatility in energy markets well, benefiting from increased flow and structured client activity. Turning to Wealth Management. Record revenues and robust margins in the first quarter reflected the scale of our platform that continues to drive exceptional performance. Retail clients were engaged across channels. Net new assets of $118 billion, fee-based flows of $54 billion and growth of bank lending balances all showcased that our investments supporting both advisers and clients are working. Revenues reached a record of $8.5 billion. The business delivered a PBT margin of 30.4%. Asset Management revenues grew year-over-year to $5.1 billion, reflecting higher market levels and the cumulative impact of consistently strong fee-based flows. We are setting the industry standard in fee-based flows, generating $54 billion this quarter, a new record, excluding prior acquisitions. Transactional revenues were $1.1 billion, Daily average trades reached the second highest level on record as clients remained active in volatile markets. Results were supported by ongoing demand for our diversified alternative offering, which had record sales this quarter. This was driven by significant growth in private equity and real assets highlighting the benefits of our scaled alternatives platform. Bank lending balances increased $5 billion quarter-over-quarter to $186 billion, driven by securities-based lending and steady growth in mortgages. Household penetration of lending products is now at 18%. This is up from 14% just 5 years ago. Through ongoing investments in technology, adviser and client education and an expanded product set. Sequentially, total period end deposits grew to $419 billion and net interest income increased to $2.2 billion. NII growth in the quarter was supported by both lending balances and higher average sweeps, which more than offset the impact of the 2 rate cuts in the fourth quarter. Continued growth in lending has supported a steady build in NII over the past 6 quarters. Looking ahead, we expect NII to build over the course of the year, with a modest increase in the second quarter compared to the first. Net new assets were very strong at $118 billion, the growth showcases our diverse asset gathering capabilities, which benefited from contributions across channels. Workplace stood out as having sourced clients who continue to aggregate assets onto our platform and benefit from stock [inaudible] investing events. Finally, while driving exceptional quarterly results, we remain focused on long-term growth opportunities. We closed the acquisition of Equity Zen, enhancing our leadership position in the private credit markets ecosystem and further deepening market access for clients. We launched our digital asset pilot through our partnership with Zero Hash, enabling select clients to buy and sell several major digital currencies through eTrade and we are investing in the development of our agendic infrastructure. Most importantly, our investments in the funnel are servicing client needs and illustrating the value of advice. Since 2020, we have generated over $400 billion of new adviser-led assets from relationships that originated from either workplace or E-TRADE. Today, inclusive of workplace assets on our platform prior to the acquisition of E-TRADE, the total value of adviser-led assets sourced from Workplace and E-TRADE exceeds $1.2 trillion. This represents roughly 20% of our current $5.8 trillion of adviser-led assets. The scale of our client acquisition funnel is already powerful and combined with our ability to invest in the future, uniquely positions us as a category of one. Moving to Investment Management. Revenues were solid at $1.5 billion. Asset management and related fees that were up 3% year-over-year on the back of higher AUM were offset by declines in accrued carried interest in our private funds. Long-term net flows were $3.3 billion, driven by ongoing demand for our Parametric solutions and fixed income strategies, which help offset equity flows. Total AUM now stands at $1.9 trillion. Turning to the balance sheet. Total [inaudible] assets were $1.6 trillion, we strategically deployed leverage-based capital this quarter to help facilitate client activity in our markets franchise. Standardized RWAs increased quarter-over-quarter as we actively supported clients. We ended the period with a standardized CET1 ratio of 15.1%. During the period, we opportunistically bought back $1.75 billion of common stock. Our first quarter tax rate was 19.6%. The lower rate was driven by share-based award conversions which largely take place in the first quarter. We continue to expect our 2026 tax rate to be between 22% and 23%, which similar to prior years, will exhibit some quarterly volatility. Our integrated firm has proven critical through this period. Clients are engaged relying on our advice in an increasingly complex environment. We are well positioned to continue to support clients as they navigate fast-moving markets, and we have the capital and the resources to do so. With that, we will now open the line up to questions. Operator: [Operator Instructions] We will take our first question from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: Maybe, I guess we can start with all things, private credit. So heard your prepared remarks, there were 2 things, given kind of where Morgan Stanley interacts with private credit, you had the fund that you talked about, where we had some redemptions during the quarter. But just talk to us, Ted, your perspective on what is going on with the private credit market, how does that change or inform your view on how you deal with the business? And specifically, if it has caused you to rethink how to distribute some of these products through the retail channel in wealth? Ted Pick: Well, I think what is important over the last number of days is that there is more balance in the conversation. As you know, private credit as a sub-asset class has come of age over the last number of years as a new set of lenders has stepped in post the financial crisis in the place of Wall Street. While it is still a growing class, it is having a learning moment. We call it an adolescent moment where both the lenders and the borrowers are being looked at carefully. But the reality is it is credit and credit is going to broadly perform when the economy is in the kind of good shape it is in right now. And the fact that it is called private credit has sort of taken on a bit of it — took on a bit of a life of its own for a while. But now I think now we are all seeing that there is resiliency in the underlying product that the structures and the terms on collateral are very well thought through. And that this is a market that over the long term has extraordinary growth potential, it is just a question of time and working through economic cycles. Our own participation in this is in line with The Street. As a distributor, bear in mind, Ebrahim, as you know, alts are about 5% of our total FA phasing wealth management pile. So quite small, that is all alts. That would include real estate, private equity, private credit infrastructure. And then private credit is 1%. So even smaller there. And in fact, as you have seen spreads widen a bit, either there has been an institutional bid and others from the highly sophisticated institutional community on the private wealth side have come in and stepped in and we have seen net buying across these sub-asset classes in the first quarter. And then with respect to investment management, private credit is less than 1% of our total AUM, well under $20 billion of $1.9 trillion. So our exposures are small, are modest, but it is an asset class that I think there was a lot of learning around over the last couple of weeks. I think that is very healthy. But we just need to sort of remember the headline point here, which is credit should perform during periods when the economy is performing. This will be no different. Some portfolios may be overloaded in a particular sector or a particular type of name in which case, there will be winners and losers among asset managers but credit generally is going to perform as the economy performs. And right now, we are not talking about the R word, and that is positive for broad credit. Ebrahim Poonawala: Super clear. And I guess maybe one for you, Sharon, just around liquidity management. To the extent you can — if you can help us understand the reorg that was approved by the Fed for the German bank into the U.S. entity, like what does that mean in terms of adding liquidity and there are things that you may be able to do going forward? Just how should we think about the impact of that to the P&L. Sharon Yeshaya: Sure. I would say — remember, it is a bank reorg and in terms of the bank reorganization, basically, we moved over $100 billion of assets over the course of the quarter on to the bank. When looking at that, that will allow us to fund assets more effectively and make us more competitive, more broadly like our peer set and make us sort of fit for purpose as you think about how we play versus our peers in being able to distribute various products. The 100 [inaudible] that we moved over, over the course of the quarter, you can think of about 30% of those assets at this point, being able to be better funded from — you can compare unsecured funding to sort of a wholesale deposit rate. The math in being able to think about what the opportunity is that you will see just for that asset — those assets over the course, say, starting in 2027, but it is really not just a 2027 story. This is something that over time, as I said, we were formed differently as a bank than some of our peers, and we are playing now at a different playing field with our peer set. And we should be able to see more assets and more growth and more competitive pricing and certain types of product sets that we offer to our clients, which should enable us to grow within our risk envelope in the same way with just a better funding structure. Operator: We will move to our next question from Dan Fannon with Jefferies. Daniel Fannon: Sharon, was hoping you could expand around your comments on organic growth within the wealth channel. You highlighted workplace, but any additional context around that strength would be helpful. Sharon Yeshaya: Sure. I think that that is a fantastic question, mainly because I think what you have seen is quite encouraging over the course of this [inaudible]. Sometimes there we call out numbers over $100 billion of NNA, and we talk about a single driver or something that is really changed the profile of that particular quarter. In this quarter, there was no one single driver that you can really point out. You still had really high levels of engagement across the adviser-led platform. But what I tried to point out in my prepared remarks is that workplace is becoming a bigger and bigger contributor and a more effective sort of thoughtful way of where we are actually seeing new client engagement. Specifically, with this quarter, you will see that often and not surprisingly, that in the first quarter, you will see unvested assets vest. And what we saw in workplace this quarter is greater retention of the assets invested. So that is the first right, in this kind of funnel concept of what is going on with Workplace. The first is we retain those assets, and we will see — in this particular quarter, we saw greater asset retention from Workplace, which translated into NNA. And then over time, and this is what I was highlighting at the sort of conclusion of my Wealth Management comments is we are seeing channel migration, and that is technology and investment where those workplace assets are now actually seeking advice and that migration is something that has helped to contribute to over $1 trillion of total assets in our adviser-led strategy. Daniel Fannon: That is helpful. And then sticking with Wealth. There has been a lot of discussion around client cash optimization and — so longer term, I was hoping you guys could talk about how you think about your ability to earn NII on client cash as there are more tools available to move cash around more efficiently? Sharon Yeshaya: Yes. I think that is a great question and certainly very topical. The Wealth Management team with Jed and Andy at the helm, have always been there sort of thinking about ways to disrupt and continue to think about disrupting ourselves and what tools will be available in the new frontier. As you know, for us, and as you think about the current client sweep balances, those sweeps we have largely said have behaved — there are certain places that are similar where they are looking for yield-seeking behavior. But then there is also a transactional nature to that cash itself. And that is what you have seen bottom out. So that is right now in the near term. Over the long term, we are moving towards thinking about ways and in this new world, you actually have value of advice. So if you talk all — where do you work through a tokenized world? How do you think of an on chain world where you can move assets quickly. The same way you would be able to move those liabilities quickly, we would be there to offer different types of products on the asset side. So what type — what kinds of things might exist on the lending side for on-chain advice? And then how do you also move and think about all of those digital assets, be that things that are yield seeking or like we said on the asset side that you are also able to get advice. So how do you actually act and execute. So I think that as things move on, there is a lot of creative space in terms of the advice-driven model. We do, as you know, currently also offer ways to move around cash that is currently yield-seeking in nature. Operator: We will move to our next question from Steven Chubak with Wolfe Research. Steven Chubak: So Sharon, I was hoping you could speak to the Fed's new Basel III capital proposal. And given you should benefit from long overdue changes, notably to the G-SIB surcharge calculation removal of double accounting in the stress test, how that might inform where you could be comfortable running on CET1 longer term versus, say, the older legacy framework? Sharon Yeshaya: Yes. So let us just take a step back and just talk about what is actually been proposed. There are 3 proposals that I think about. One is — one, the models that obviously, we have put comments in II Basel and III G-SIB. So first, taking G-SIB and [inaudible], that is the most obvious quantitative metric. If you look at the 3.5% G-SIB bucket buffer that we were in at the end of the fourth quarter. That number in the new framework, as proposed currently would be 2.2%, and that gives you a sense of just the base in terms of the rebates from where you would be from G-SIB. But as you know, very well, Steve, you would also be in a position that you would see RWA inflation associated with the Basel proposal. And we would hope that there will also be some comments taken from the stress testing models in terms of PPNR and the way you think about income-based modeling sort of for fee-based assets and the wealth management business as well as expenses. If you take all of that together, we would expect that we are modestly up here, either where we are today from capital neutral to modestly positive in terms of the overall amount of capital that we should have. But we will have to see to quantify that, really where all 3 of those land and the interplay between them. In terms of the actual CET1 metric, you will see that we are using excess capital. We did see specifically, we had the relaxation or the change, I should say, the overall change of SLR. We deployed SLR and leverage-based capital over the course of the quarter, and we continue to increase our RWAs to support our client base. Ted Pick: Yes. The only thing I would add is that the firm view is that we hope to work well with the regulator, along with the rest of the group to get Basel finalized. We have a window here and the big picture is let us put the puck on the ice once and for all. And not everyone is going to get everything they want that is, by definition, the way these things would be. But that take as much of the lot that is reasonable to balance that, which ensures ongoing stability amongst these firms, but also allows us to the pivotal role that we do in helping to power the real economy. So with that in mind, it is absolutely critical that we keep the momentum going and we land this. Steven Chubak: That is great. And for my follow-up, if I could just double click a little bit more into some of the organic growth opportunities. You talked about leaning more heavily into markets. We certainly saw a nice uptick in loan growth in the quarter. Just want to get a better sense as we start to look under the new proposal, what are some opportunities that might be more compelling just given the strength of your capital position that you might be more inclined to lean into here? Ted Pick: I think you just have to go to the business model as it exists. The 3 segments, the TAMs are all growing at 2x GDP organically, and our share, depending on the space is somewhere between 10% and 15%. So that alone, knowing what we do and getting after it is critical. It is interesting when Sharon gave the earlier answer with respect to how the funnel is working. That is an accelerating phenomenon inside of wealth. But it also gives cause for the corporate coverage Officer and Investment Banking to talk to the CEO or talk to CFO and ask her how the stock administration plan is going and how employees feel about that. And now their coverage under the Wealth Management model. So there is a lot of really interesting work that can be done within the frame of the integrated firm. I think the decisions with respect to how we deploy capital really has to be around client selection, where we think that there is a long-term reward and wallet setup that is appropriate against our risk parameters. I would also point out that the Investment Bank is really a global investment bank coming of age now. If you see the growth that has been experienced in Asia, not just in Greater China. And of course, Japan, where, as you know, we have a special relationship with our partners, MUFG, who own one quarter of the firm, but also the growth we have seen in the re-equitization of India and then, of course, the AI connectivity that exists in Korea and Taiwan. So too, we are now putting in incremental management strength in places like Germany and the core of Continental Europe, which is looking to reindustrialize given everything that is going on. So being a global firm and doing it the way we have done it, but also to stick — it is why I reiterated very simply in the opening that we stick to our strategic knitting, which is that we raise manage and allocate capital for institutions and individuals and that we keep it that way. And on the organic front, assuming the economy continues to grow, we think we have got a ton of opportunity to put top line up and continue to carry margin. Operator: We will move to our next question from Brennan Hawken with BMO Capital Markets. Brennan Hawken: I would love to circle back on some of the comments 1 you made on cash. You spoke to on-chain. I do not know if you guys saw, but a competitor in the annual report, JPMorgan put out that they are planning to reduce some of the friction on brokerage cash. Is it right that in your comments around on-chain that that is the direction you guys are thinking of going as far as reducing that friction? And then relatedly, it is — today is the 15th tax day tends to be a big event seasonally for you in your wealth business, how should we think about cash and then net new? And what the expected impact is on that this year? Sharon Yeshaya: Thanks so much, Brennan. So going first, just to cash, we continue to offer our clients different ways to access cash, talk about cash, talk about the cash management. And as we have talked about before, there are a lot of different places for people to think through. And we have been talking to our clients around various cash management over time, just given what is gone on over the course of the last 5 years. But we are obviously, as you know, always looking at ways to continue to enhance conversations that we have with various clients. As it relates just to Tax Day and what we have seen so far this quarter, so far, right now, taxes are as we would have expected, but it is worth noting that from an SBL perspective, we have started the quarter strong. So the lending growth that we have talked about even at the beginning of this year continues. And we have put in a lot of resources towards lending products more broadly. So digital tools, digital enhancement and using automation to be able to help with the paper backlog associated with some of the various lending products more broadly. Brennan Hawken: Got it. And Ted, you spoke to an adolescent moment for private credit, which I thought was an interesting way to put it. You also flagged as a distributor, 1% of client assets in private credit, obviously, very small. But curious, but you do have great touch points across your Wealth Management business. And clearly, all the attention here is around wealth specifically given these vehicles. What are you hearing from the field around the temperature on some of these non-traded BDCs. Is the concern coming from more of the FA population or the investor side? And is there any emerging signs of looking at other asset classes besides credit? Ted Pick: Yes. Adolescent I mean to say sort of coming of age. The asset clients did not exist. And when the private lenders stepped in effectively in the place of the traditional Wall Street firms, it was new and of course, became part of the story for private and also public asset managers. We have to remember that this class is real. It is at anywhere between $1.5 trillion, $1.7 trillion, high yield, similar size, levered lending, similar size. But the IG market, obviously, is enormously bigger at $13 trillion to $15 trillion. So it is just one piece of the credit stack. And the reality is that with spreads having widened out a bit, there is an institutional bid. And we have seen this now in the last week where a number of the top asset managers have underwritten, and we have been very happy to act as underwriter on some benchmark issuances, they have been actually 2 over the last couple of days, wherein the — at the asset manager level, at the BDC level, our real capital has been raised at quite reasonable rates to help get at the refinancing phenomenon that will exist in the years ahead. Now the reality is some asset managers are going to outperform other asset managers, and that is just the nature of product selection and diversification. Part of the reason that the FAs do such a brilliant job with our clients is that they very much preach this idea of durably growing your portfolio in a risk-managed way, taking into account your liquidity needs in every imaginable scenario. And then importantly, to think about how alts over time, over decades, generations and even lifetimes can be an additive part of your portfolio. And even with that, through the decades of alt being introduced into the system. This is going back to the financial crisis, through COVID through BREIT a number of years ago. These products have sort of sustained the test of time. And even now, the penetration is only 5%. So on the one hand, it is material. On the other hand, it is still an area of growth. And the key is to be selective in how you have put that capital across different alternative selections, whether it is PE, private credit infrastructure, and do — or just straight private equity and then real estate, the 4 big ones and how you have selected managers on a diversified basis on the basis of where they have expertise by sector, what their history is of deployment, what their history is of return on capital, and that is part of the learning. And I think that has been taking place. And the data point that I would put to you, which we have heard elsewhere too is that during the quarter, notwithstanding all of the press and discussion, the system was a better buyer of alts. And so that is an important indicator that folks want to be participating at the right price with the right manager. And then over time, the asset managers that perform will generate terrific results. And the ones that perform less or — less well will underperform, and that becomes part of the asset manager selection dynamic. Operator: We will move to our next question from Devin Ryan with Citizens Bank. Devin Ryan: Question on Wealth Management. Stocks obviously sold off several times during the quarter on AI feature announcements the customer cash sweep optimization. I think to Dan's question was one of the events about other automation tools, I think, and just potential implications on revenue models. So the market seems like it is currently weighing AI as a negative for wealth towards a risk. And I suspect you do not agree with that. So it would just be great to hear more about your view on some of the biggest implications of AI on the business. I know you guys have been investing for a number of years here. Ted Pick: Yes, I want to weigh in on that one. AI is our friend, okay? It is just the latest generation of technology that is going to be part of the ecosystem. And we are at an important moment. We are working with Claude mythos, the beta version, and we are looking at different places inside of infrastructure, where we will just continue to — there will just be continuous improvement and that is going to go on with the firms that have the history that we have of cybersecurity infrastructure as the number one priority. This is not a new phenomenon. What is new is that we are beginning to evolve from pure efficiency exercises where you could have effectively replacements of what might have been a a call center or what might have been an operational function to automate routine tasks like moving money to something that over time becomes a productivity phenomenon. And that efficiency and effectiveness transform is super compelling. The efficiency you talked about, but what about the effectiveness where you can have the historical context as between the financial adviser and the client where she is well aware of the past interactions and how that might drive against certain market dynamics, future action. And so that co-piloting, I think, is something that Jed Fin under the leadership of Andy Saperstein is spending a lot of time on where they effectively have corridors or super agents they are going to be working to drive, again, efficiency and effectiveness across the portfolio in wealth. I would also say that this phenomenon is taking place inside of our equities business, where, as you know, we have a leadership business where we are able to take some of the complex questions that are asked, but sort of of the technical type and they can be answered directly by a client agent inside of the electronic trading platform. And then, of course, there are the numerous examples inside of core infrastructure, where efficiency around classic operational flow and surveilling is afoot. So there will be the continuous arms race of one AI platform versus another, but this is not new, and this is something we consider to be additive to what we have, which is world-class technology, world-class cyber defense and then the best trusted advisers sitting with the client. That is ultimately, again, the secret sauce, whether it is the investment banker, the asset manager coverage Officer or importantly, the wealth management and financial adviser. That is the key. Devin Ryan: I appreciate that color. As a follow-up, I want to touch just on Asia, 45% of the firm sequential revenue improvement came from Asia. It is only 16% of firm-wide revenues. I know a lot of that delta is from prime brokerage, but can you just expand a bit on the momentum in Asia? How sustainable is it further growth opportunity in the region, just given the big step-up we have been seeing here? Ted Pick: Well, it is a question of people. The person who runs Asia for Morgan Stanley is Gogo Leroy, who is a plus or minus 3-decade veteran of the firm. And he is one of the trusted leaders of the firm. He is also the co-head of equities with [inaudible] Thomas, and they have done a phenomenal job in equities. But the Asia strategy has been one where we have really integrated the effort as between the bankers and the sales and trading unit inside of Institutional Securities for the last many years, there is a firm that has been a leader in Hong Kong from the '90s right through SARS and the handover and through recent years, but the game changer for us, of course, was during the depths of the financial crisis to be effectively married to our friends at MUFG and the senior management team of the firm travels to Tokyo 3, sometimes 4, times a year to meet with our partners they in turn, join us, they have 2 seats on our board. So we are deeply sconced in Japan with 2 ventures that were formed 20 years ago. We expanded our capability across our research, integrating the research and equities trading platform now we help MUFG monetize through the old Bank of Tokyo, foreign exchange spot flow, which is incredibly powerful. So this is one of the classic cases where a great idea somewhat out of necessity was nurtured through management teams through the years of Mr. Gorman and now this management team has really gone even further to think about what Align 3.0 could look like, which is to really tap into the demography and opportunity that is inside of Japan. So the ecosystem works. We also have a world-class wealth business inside of Hong Kong that caters to the Asia Pac region. That is quietly a $1 billion business. And then the last piece I would say is some of this is location strategy. We decided years ago to exit a number of places. We exited the Russia ecosystem. We lightened up on non-core parts of the emerging world. But we really doubled down on places like Korea and Taiwan and then importantly, in India, where we not only have 15,000 people as an infrastructure phenomenon, but we have a world-class investment banking trading business. So this is not sort of the region [inaudible], this is a region where we have had a leadership position. Actually, I think we have attracted some incremental competition into the space. So in a way that actually makes the challenge harder now, because I think people have seen the success, but that is the nature of our business, and we just keep on going. As these countries re-equitize, they take great companies and they want to list them and they want to effectively also deal with the issues around a lack of energy independence or where they sit in the AI ecosystem. You can expect some very interesting M&A and hybrid activity. And that is right in the sweet spot for corporate finance coverage. So we like that region very much, and we like the growth potential and it is, of course, also very closely risk-managed. Operator: We will move to our next question from Glenn Schorr with Evercore. Glenn Schorr: I wonder if we could talk about and equity pipeline for a second, usually when the markets are this strong. It is a little bit better, but I know it is building, and I know there are some really big ones out there that might — that are talked about coming. But thought one of the interesting angles on this was also that it seems like some of these big IPOs are very partial towards having a big retail allocation. And just curious if you thought that is true, how you use E-TRADE as part of your selling process? And then just talk about the overall pipeline in general would be helpful. So appreciate that. Sharon Yeshaya: Yes. So it is a great question. And I think that you do continue to see the democratization sort of products more broadly. That is one of the reasons when you actually think about the acquisition of Equity Zen and what we are trying to do, right? So a place where there is stuff within the private domain that is actually already beginning to transact. We see that as a technology that can help us. We have already begun to see offerings come through that platform, and we would expect that to continue. So that is a market, as you know, it is growing. There are a lot of places within the retail channel, the different companies are looking to attract, and we have that channel and those capabilities. you have it already existing on the adviser side, you have an existing to some degree when you think about the underlying E-TRADE side, but what you really need is to make sure that you also have the private market ecosystem necessarily before you see an IPO come through the marketplace that you are able to have different access and different corporate relationships. And those are the pieces that Jed and Andy have really begun to lay the foundation and build over time. So it is not just one thing. I would say that it is a build across the other. And I think we have that offering to many of these companies that are looking for ability to transact within retail. Glenn Schorr: And do you have any numbers that you could throw at the pipeline or some soft details, we have been all been waiting for years on the sponsor-led pipeline, but in general, it feels like a backdrop that should be improving. Just curious on your take. Ted Pick: Yes, Glenn, what I would say on that is, as you know, the PE firms are sitting on $1 trillion plus of dry powder. There are 1,500 companies plus that are privately held with an average duration of 5 years that are worth $1 billion plus. And the entire ecosystem of private companies, hard to know. Is it — are they worth $3 trillion or $5 trillion, but they are — there were multiple trillions. And so the question now is, do they come and how do the markets feel? And I think the reality is I give you a balanced answer on this. I think that on the one hand, you see the earnings power of the large-cap group, the balance sheets and the earnings growth. And of course, now if the war is contained, 7,000 S&P and NASDAQ working its way back to. So pretty constructive backdrop. The fact is that the sponsors, as you know, would like to crystallize some of this portfolio, especially the publicly traded ones so they can keep this process going of effectively deploying and raising. I do think that not every company is going to be able to make it as an IPO in this environment. Some — there is going to be some selection. And what we are seeing is that the largest asset managers, the largest private equity firms, some of whom have very high-quality companies are likely to be the first to move. And the data point I would give you is that there are increased numbers of bake-offs with sponsors. And again, think of it the way Dan Simkowitz would describe it is think about sort of corporates think about public asset managers, private asset managers. There is effectively competition and horizontal to see where capital clears is the way I would put it. And a number of these bake-offs are two track, can we make a sale or can we list? And I think if we can get to a period now where we resume some of the narrative that we had going into 2026, which was a very strong one. I think what you will see is effectively the resumption of pipeline hitting the marketplace, whether it is through outright sales to other sponsors or likely to strategics or partial sales through IPOs, which is kind of a call that we collectively made going into the year. But I do think there is some selection. There are going to be mid-cap or small and mid-cap companies that are not going to be ready to make it as public companies because the reality is that the bar is very high for public manager and investors, as you know, against the resiliency that has been demonstrated across sectors in the C-suite through COVID and now this period. So the comps in a sense are tougher. But I do think that the desire for private equity sponsors to begin steadfastly to liquefy chunks of their portfolio in order to get to the next, which is to deploy capital into the next leg of the cycle. I think that has increased. And I think what you should expect to see is a reasonable drumbeat of leading sponsor and leading companies hitting either the private or public markets if the macro environment permits. Operator: We will move to our next question from Mike Mayo with Wells Fargo Securities. Michael Mayo: Can you elaborate more on the financing business within trading? I assume that is for both private credit and liquid markets, and that is just been growing so much the last year for this decade and a comment on the resiliency of that. Does that mean trading is less volatile than it used to be or if and when we get a bear market, does this shrink back down? Sharon Yeshaya: Sure. Thank you so much, Mike, for the question. There is a stabilizer, I would say, over the course of the last 10 years. I mean you have been covering us nearly 2 decades, I think. The last decade in fixed income has been marked by refocusing our business on clients and also creating durable sources of revenue. What you point out to is one of those sources of revenue. It is, to some degree, the intent is to be more stable on a balanced business. But as Ted said, it is a credit risk business. So overall, all of those types of products are looking at underlying credit, looking at counter-party risk, understanding both risk limits as well as the diversification, the structural protections that you might have, the various haircuts. What I think is important, specifically about the private credit business we started the call is that you also have this ability to look down on a loan-by-loan basis and we have the ability to both mark and margin across that. So there is a lot there within the ecosystem. But yes, that has been a stabilizing factor within our fixed income revenue results. Ted Pick: What I would add to that is I think the durability of the lending business is good. Of course, it kind of speaks to the proposition around valuation is repeatable P&L. But one of the things that Sharon and I have observed over the last number of quarters, the leadership groups in both and this is, I think, part of your underlying question, Mike, as well, in equities and fixed income have both really looked to try to build a well-governed classic trading business, effectively the moving of inventory market making, taking the world-class content that Katy Huberty has and getting it to clients in all kinds of different forms, not just traditional big conferences, but finding curated ways to get institutions to effectively act on bespoke ideas in a moment where you had to take a view when we had so-called Good Vol at the beginning of the year, and we have the content available for you to express that view. And then we effectively take that content and offer market access. And that market access is to be on the cash desk where the equities guys did a fantastic job. And then importantly, in the derivatives business, that has really grown into a classic market-making, risk management business around Morgan Stanley's content. Similarly, in fixed income, again, contain risk alongside of — largely it being a financing business, but doing that around clients wanting to express a view. So one of the things we kind of look at is having enough of the durable financing revenues throughout these businesses, and by the way, similarly in Wealth Management. There is an element of wanting to expand the lending product, but also we are looking very closely at DARTs and other indicators of just transaction activity, whether it is in cash form or derivatized form. And the answer is we want both because there are going to be periods where the markets are not going to be conducive to activity where either it will be risk off or just people sort of set in what they want to do, in which case, the financing revenues are the kind of durable P&L that allow you to sort of sustain the balance of the firm. But at the same time, we want to have the right levels of activity around times when Morgan Stanley content matters. When we are delivering something that actually is differentiated and importantly can be acted upon. And then we wish to try to find a way to express that through liquid markets and market access. So it is an excellent question because I think one does not want to go too far to one end of the continuum or the other. But the fact that we really have built this financing business with some of our smartest people throughout the firm and that we have these credits as well structured and focused on as we have over the last number of years allows us to have an interesting activities based business alongside of it. And that, again, is not just in the Institutional Securities business, very much in the wealth business as well. Michael Mayo: Sticking — sticking to that topic of risk and following up on the other question. all I have are the headlines in the paper about Anthropic and the [inaudible] model. And the article said only a few players had that model. It sounds like you said you have the beta version of the Anthropic [inaudible] model. And again, the articles said that you guys were summing down to D.C. and that people are extremely concerned. And you say AI is your friend and you should be a beneficiary, not a victim. But I am just wondering about the cyber risk and how that may have increased and what extra steps you are taking now that you are looking to the model if you are allowed to disclose what you have learned? Ted Pick: Well, we have the regular way meetings in Washington, the Financial Services Forum. So we happen to have been down there, and the press as reported, we all got together. This is not new. We have gotten together before cyber resiliency, as you know, has been a top priority at this firm and other firms. And yes, we are permissioned on — I think the official name is Claude Mythos preview. And certainly, the reality is that cyber risk is in the ecosystem, Mike, as you know, an increasing threat broadly. And so our ability to, along with others, I assume, continue to act a stalwart defense in our industry is important. So we will, I would imagine, collectively get better via that, and then there will be other competitive products. This is another step in kind of the long tail technology transformation that we have been talking about that is once in a generation, and now it is here. And as you have heard others say, cyber resiliency is a top priority at institutions like ours across all of our businesses. And if the ecosystem risk is likely increasing because of the quality and muscularity of the model than we do need to get our gloves up and take it to another level, and that is exactly what you would expect, and we very much intend to do so. But I want to say on the back end, that a lot of the good that AI is going to bring both as an efficiency and effectiveness matter should not get dismissed because that is an important phenomenon that is going to continue to transform this firm. Operator: We will take our last question from Erika Najarian with UBS. Erika Najarian: Sorry to prolong an already long call, but just wanted to ask one question? Ted Pick: Erika, for you. We are very happy to take that last question. You stepped in there, you stepped in there. What was that $25 ago. Erika Najarian: Hopefully, some people are still listening. So anyway, can you hear some my question. Ted Pick: It may just be you and me, but I am going — I know exactly. We are good. We are good. Erika Najarian: You talked about organic growth opportunities in wealth you talked about broad-based drivers for NNA. You talked about AI being your friend and you talked about advisers really being empowered by AI. As we think about the pretax margin of 30% in a quarter where wealth comp had some upward pressure. Should we think about the low 30s as sort of a high level where you can sustain? Or is there potential for upward pressure given all of the dynamics that you mentioned? Sharon Yeshaya: Yes. Thank you so much for the question, Erika, and thank you for noting all the places that we are investing. We reaffirmed our targets at 30% in the strategy deck. And we did that for good reason, mainly because we want to be in a position that we can invest and so we have never really managed the margin quarter-by-quarter. We have said that multiple quarters. We always said when we were below 30% that could cut our way very quickly to a 30% margin. But for us, what is most important is that we are constantly investing and there are so many places within this best business to invest and it is paying off. And over time, we will continue to move up the margin on its own organically. The most important thing for us is to continue to put dollars to work to service both our clients and advisers and continue to be a category of one in this business. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you, everyone, for participating. You may now disconnect, and have a great day.
Operator: Good morning, and welcome to the American Strategic Investment Company's Fourth Quarter and Year-End 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Curtis Parker, Senior Vice President. Please go ahead. Curtis Parker: Thank you, operator. Good morning, everyone, and thank you for joining us for ASIC's fourth quarter and year-end earnings call. This event is also being webcast in the Investor Relations section of our website. Joining me today on the call to discuss this quarter's results are Nicholas Schorsch Jr., American Strategic Investment Company's Chief Executive Officer; and Mike LeSanto, the Chief Financial Officer. The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are subject to risks and uncertainties. Please review the forward-looking and cautionary statements section at the end of our fourth quarter 2025 earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. Should one or more of these risks or uncertainties materialize, actual results may differ materially from those expressed or implied by the forward-looking statements. We refer all of you to our SEC filings, including the Form 10-K filed for the year ended December 31, 2025, to be filed on April 15, 2026, for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this call are only made as of the date of this call. As stated in our SEC filings, ASIC disclaims any intent or obligation to update or revise these forward-looking statements, except as required to do so by law. Please note that all fourth quarter 2025 financial information is unaudited. Also during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial and operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release, which is posted on our website. Please also refer to our earnings release for more detailed information about what we consider to be implied investment-grade tenants, a term we will use throughout today's call. I'll now turn the call over to Nick Schorsch, Chief Executive Officer. Please go ahead, Nick. Nicholas Schorsch: Thanks, Curtis. Good morning, and thank you for joining us. Today, we will discuss our results for the fourth quarter and full year 2025. We remain committed to operating and unlocking value at our current assets with a focus on tenant retention, property improvements and cost efficiency, while simultaneously pruning our exposure to non-core assets. For the year, we executed 13 new and replacement leases totaling 117,000 square feet. We continue to focus our leasing efforts on securing tenants in resilient industries, such as well-capitalized financial service companies, medical institutions and government agencies. At year-end, our $382.6 million, 0.7 million square foot portfolio consisted of 5 real estate assets throughout New York City, primarily in Manhattan, with office properties located in submarkets in close proximity to major transportation hubs. The portfolio had occupancy of 80.3% and a weighted average remaining lease term of 6.1 years as of December 31, 2025. Our New York City-centric portfolio features a mix of large investment-grade tenants, of whom the top 10 tenants are 69% investment grade or implied investment grade rated based on straight-line rent with a weighted average remaining lease term of 6.9 years. Investment-grade tenants in our portfolio include CVS, Marshalls and government agencies. Our calendar year 2026 lease expirations are 5% of annualized straight-line rent and 57% of our leases now extend beyond 2030, up from 56% last quarter. We believe that this term, coupled with a high-quality, largely investment-grade tenant base provides significant portfolio stability. As discussed on last quarter's call, we completed the disposition of our 1140 Avenue of the Americas office property during the fourth quarter. We also pursued a cooperative consensual foreclosure with the lender. And in connection with that transaction, we removed the related assets and liabilities from our balance sheet and recognized a gain of $46.6 million that is reflected in the statements of operations for the year. We remain committed to strengthening our existing portfolio of real estate assets as we explore additional income-generating investments. We believe with the completion of past sales and the reinvigorated effort to sell 2 additional properties, we will be better positioned to take advantage of opportunities to invest in the long-term future of our portfolio. It is our intention to build a portfolio that we believe will be accretive to shareholders. With that, I'll turn it over to Mike LeSanto to go over the fourth quarter and full year 2025 results. Mike? Michael LeSanto: Thank you, Nick. Revenue was $43.3 million for the year ended December 31, 2025, compared to $61.6 million in 2024. The year-over-year change is primarily related to the disposition of properties, notably the dispositions of 9 Times Square in the late fourth quarter of 2024, and the 1140 Avenue of the Americas in fourth quarter 2025. Revenue for the fourth quarter 2025 was $6.5 million compared to $14.9 million in the fourth quarter of 2024. The company's full year GAAP net loss attributable to common stockholders was $21.2 million compared to a net loss of $140.6 million in 2024. Net loss for the quarter was $6.7 million, in line with the $6.7 million we recorded in the fourth quarter of 2024. Adjusted EBITDA for 2025 was $0.3 million and $1.2 million for the fourth quarter. Cash NOI for the full year was $16 million and $1.8 million in the fourth quarter. As always, a reconciliation of GAAP net income to non-GAAP measures can be found in our earnings release, supplemental and Form 10-K. The company's balance sheet includes 100% fixed rate debt and prudent net leverage of 47.5%. We ended the fourth quarter with net debt of $249.7 million at a weighted average effective interest rate of 4.5% and a weighted average remaining debt term of 1.5 years. Importantly, all of our debt is fixed rate or swapped to fixed rate after we locked in interest rates while they were broadly at historic lows. With that, I'll turn the call back to Nick for some closing remarks. Nicholas Schorsch: Thanks, Mike. We continue to focus on enhancing operational flexibility through efforts such as targeted dispositions. We are also assessing strategies for our properties at 123 William Street and 196 Orchard to generate the greatest long-term value for our portfolio, including potentially selling the properties. If sold, these sales would generate additional cash that we believe can be deployed into higher-yielding assets, creating future value for the portfolio. Simultaneously, our team is focused on leasing up available space, evaluating options for replacing maturing debt, renewing leases with existing tenants and maintaining tight controls on expenses. One final note. Please be on the lookout for a notice about our Annual Meeting of Shareholders, which will be distributed to you in the coming months. Thank you for joining us today. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation.
Operator: Good day, and thank you for standing by. Welcome to the VEF 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 speaker today, David Nangle, CEO. Please go ahead. David Nangle: Super. Thank you very much, operator, and good morning, good afternoon, everybody, and thanks for joining us in our First Quarter '26 Results Call and Presentation. As per usual, I have my colleague and CIO, Alexis Koumoudos, with me, and we'll spend the next 15, 20 minutes just running through all the events and key numbers and parts that made up the quarter for VEF as was. And all the details are online as well from a presentation point of view, and that will be available as well after this call. And the key events of the quarter, looking at Slide #2, and I think bigger picture, we're all very cognizant and aware of the geopolitical-driven volatility, the world that we're living in, the first order effect, the potential second order effects. We're not going to delve into all of that here because it's well documented by many people elsewhere, but we will give you a bit of a flavor of how life at VEF has been affected by that, while we marry in all the micro level delivery of the first quarter. I think the first point is the NAV itself. Obviously, we had a bit of a headwind in Q1. And naturally, when 30% of your portfolio is mark-to-model and you have a market sell-off. So the NAV was up 5.8% quarter-on-quarter in dollar terms, a bit less in SEK terms. Fundamentally, portfolio is doing very well. Currencies were in our favor, but multiples on some key names drove the NAV quarter-on-quarter down. And more specific and back to the micro level and performance, exits continue. And we had another secondary in Juspay in 1 quarter '26, and this is our Series D follow-on, $50 million at $1 billion-plus valuation, company we invested in $100 million a few years back from a total valuation point of view. But yet again, we use the opportunity to top slice our position there and taken nearly $15 million of gross proceeds, at a healthy IRR of 34% and still having a decent stake in the company. I think most important for us and our narrative to the market is that was an exit, not at NAV plus/minus. That was an exit above NAV. So continue to turn our NAV, our companies into dollars at the valuation that we say plus or minus. And coming back a bit macro level, I think from an exposure point of view, we're getting a lot of questions, obviously, from the geopolitics of the world and how we are or aren't affected, even though. I think everybody is affected in some way, shape or form. We are actually in a relatively good, and I'd say, relative macro position in terms of our exposure geographically with 80% of our portfolio plus/minus being Latin American exposure, which is a relatively safe haven part of the world. And Brazil alone is over 50%, maybe 60% with Creditas being our key asset. And we're obviously the commodity trade that Brazil is a bit of a safe haven status with high interest rates, commodities and just geographically well placed. We're seeing markets there rally, currency, index, et cetera. and we're indirect and direct benefits of that exposure. And I'll get into that in the presentation. And more micro level, back to Creditas, it's been a really good window in the last -- we've enjoyed the last 15 to 18 months of Creditas quarter-on-quarter-on-quarter, the fundamental story continues to improve in terms of accelerating growth and there's a new layers of positivity been coming into the story. Now it's more around AI-driven efficiency, you get nice operating jaws from a top line volume revenue growth and efficiency coming through. Healthy guidance looking forward. And those kind of catalysts that everybody likes to see around raising capital, nice valuations, getting a bank license. So it's a nice window. We're enjoying us. They are delivering, and that's most important for us as an investment company. And then finally, a more macro again, away from geopolitics, but more in the tech side and the AI adoption. We would kind of stayed away from overly talking about AI from a investment portfolio point of view. But I think the pace and progress of these models now has really become game changing. All of our companies are engaging. It's gone from theory to reality. We're enjoying seeing what they're starting to do, and some is already starting to feed through to the numbers like Creditas. And I guess we just wanted to put a marker down this quarter, and we'll be updating you as we go on this front because it's been a very exciting next wave of efficiency growth, costs, operating jaws that we can see coming through in our portfolio. Going into the presentation proper, just a few numbers. This has all been flagged earlier on in our release, but our NAV is at $408.6 million for the quarter, up 5.8% in U.S. dollar terms. As I said, the SEK and SEK per share is down less, because of the weakness in the local currency, and that's down minus 2.8% in the quarter. I'll skip over Slide 4, and I'll move directly to bringing Alexis into the call and for Slides 5 to 9, where he'll talk us through valuation moves in the quarter and a little bit more about the exits that I talked about in Juspay and beyond. Alexis, over to you. Alexis Koumoudos: Thanks, Dave, and hi, everyone. Yes. So as Dave mentioned, in the first quarter of '26, 70% of the portfolio is valued at latest transaction and 30% mark-to-model. Within the portfolio, as Dave mentioned as well, Juspay completed the $50 million Series D follow-on at a 16% dollar premium to the Series D of 2025, in which we took $14.6 million in secondary sold for cash, and we hold a 6.4% remaining stake priced here at the secondary price. You'll see that the net impact from the NAV of -- is the net impact of $10.8 million markup from the up round that happened and selling $14.6 million for cash, which reduces our NAV for Juspay in the mark value by $3.8 million in the quarter. The other thing to point out on this slide on Slide 5 is Solfacil rolled off a recent transaction to mark-to-model as it completed 12 months from the transaction. And Solfacil, Konfio and Nibo valuations under mark-to-model valuation methodology were impacted by the March sell-off in comps across tech, fintech and SaaS. And outside the impact of the comps, each of these businesses continue to deliver in line with or ahead of our business plan. So the markdowns were purely a symptom of market moves. Getting into this in a bit more depth on Slide 6. We show the breakdown of the dollar NAV evolution over the quarter. And you can see the biggest impact on the NAV in the quarter was really the sell-off in comps and there are multiple impact on the mark-to-model portion of the portfolio. This impacted our NAV to the tune of $14 million and it's reflected in the valuations of the companies and the mark-to-model methodology, names like Konfio, Solfacil, and Nibo. And the -- this was offset to some extent by the portfolio performance, which had a $10 million positive impact on the NAV. Under the latest transaction portion of the portfolio, you'll see like a negative $4 million move in this section of the portfolio. And that is purely the $10 million uplift in the Juspay valuation, offset by selling $14.6 million in Juspay. And the corporate cash increases $10 million, that is predominantly from the proceeds of the sale of Juspay offset in part by OpEx and coupon payments in the quarter. Overall, the FX impact was neutral in the quarter. And the net impact of all of these moves was, as Dave mentioned, the 5.8% contraction in NAV quarter-over-quarter. On Slide 7, we continue to -- we just want to reiterate that we continue to feel more and more confident in our -- in the quality of the portfolio and its ability to compound from here. We see our portfolio growing at 25% to 30% year-on-year from a profitable base with our large late-stage top 3 holdings driving much of this on a self-sustaining basis. And we're encouraged by the deal activity we're seeing across our geographies and feel proud of our companies and their ability to continue attracting fresh capital, which drives real value growth and creates liquidity options. And we're also proud to find opportunities to continue converting slices of our NAV to cash at or above the marks we hold them at whilst delivering benchmark returns like we did in the Juspay round. So moving to Slide 8. We just wanted to reflect a little bit and update everybody on what Juspay is as a business, our history with the company and where we stand after this transaction. So Juspay is the leading payment orchestrator in India with a dominant market share. Juspay powers some of the largest enterprises in India and now has a large payment infrastructure business, powering UPI apps and bank infrastructure. Juspay has also now launched an international business, and they have offices across Asia, Europe, the Middle East, U.S. and Brazil. And by the numbers, Juspay powers over $450 billion of annualized TPV, representing about 70 million average daily transactions, and it's growing its top line in over 50% year-on-year and the business quality is high with near 0 churn over 80% gross margins and it's been profitable for over a year now. Juspay was our first investment in India. And we made 2 -- we wrote 2 checks into the business, 1 of $13 million in early 2020 and $8.1 million in December 2021. And since our first investment, revenues have grown over 10x and the company has raised money in rounds led by Tier 1 investors, including SoftBank, Kedaara and WestBridge. And if we include the 2 realizations of $29.4 million, our invested capital has grown from $21.1 million to $94.9 million representing a 4.5x MOIC in USD terms. And the proceeds of our latest secondary sale, the Series D follow-on represents 6.6x MOIC and a 38% IRR in U.S. dollar terms. As we mentioned, we retain a Board seat at Juspay post this transaction and a 6.4% stake in the business. And Juspay really operates at the bleeding edge of tech by any standards, and we continue to be very excited about the potential of the business and the path that it's on. We believe they will be in a position to announce some more international success very soon. And we've become -- and it's become one of the strongest AI native companies across the fintech ecosystems that we've seen with a product road map to reflect that. We're excited to continue our journey with Vimal and Sheetal into the future. On Slide 9 we just wanted to update our summary of exits of the last 18 months in a slide. And so since November 2024, we've delivered 4 exits totaling $52 million. We continue to target opportunistically converting our NAV to cash at or above our marks to strengthen our balance sheet and improve optionality in an environment where we see plenty of opportunity. Overall, the $52 million in exits represented by the BlackBuck IPO in sale, the Gringo sale to Corpay and the 2 Juspay partial sales to Kedaara and WestBridge, were executed at an 8% premium to the pre-transaction NAV marks on these companies. A 1.4x aggregate MOIC and 11% gross IRR over a 3.5-year holding period. And if we include the retained stake in Juspay, the total value of these investments would represent a 2.5x MOIC and 24% gross IRR, including the unrealized gains at Juspay. And we continue to work towards more exits of a similar standard going forward. Dave, back to you. David Nangle: Thank you very much, Alexis. I mean, look, a few slides to wrap up, and then we'll open up to Q&A for anybody who wants. But leaning on from where Alexis talked about the exit there, most notably Juspay, the most recent one. A lot of this has been about strengthening our balance sheet from a period of 2 years ago where we had a debt position. We're long a portfolio of private EM assets, and we start making promises to the market about being focused on exits, delivering those exits close to NAV, then getting that capital in, strengthening our balance sheet, looking at our debt, start to pay that down as a priority, then looking at our equity and everything that extrapolates from there. And where we're at as of the end of Q1, approximately we're cash neutral in that we've got $25 million approximate of cash from the exit and the buildup over the last 12 to 15 months. And our debt outstanding at current FX is about $25 million. So our capital position is in a much more, let's call it, healthy position, but work to be done. We're still very much focused on strengthening the balance sheet. And I think capital allocation and ideology, what would I share with you today, I think what you saw last year was Capital Allocation Policy 101. As funds came in, we paid down half our debt. We showed the market we were serious about that. So deleveraging the balance sheet, strengthening our position. And then we nibbled at our shares and bought back a couple of percent at what are significantly low valuations, especially as we're realizing at NAV positions as we go. At this moment in time, we're out there talking to our investors, talking to the market, we're listening and we're logical as we go. So we've got a priority. We've got a bond falling due at year-end. We already pay that down or roll it, but that's in our focused vision. And then after that, you have the natural hurdle of your shares trading at a deep discount, and it will be very hard for the dollar to work beyond that in the near term with incremental capital coming in. At this point, it's all theoretical because we are in a capital position we are in. But as more capital comes in, we'll start to shape this out and give the market more color where we think. But the bonds, our own shares is definitely where our head space is. It's where our head space was last year, that's how we acted. So just by our actions as we go. Moving back to a macro level. I talked about this at the start, but I saw the slide of our exposure as an investment company. And geographically, we are exposed heavily to Latin America and then India with some small snippets elsewhere in the emerging world. We're very cognizant. We're not complacent of what's going on in the Middle East. We've seen this many times before. We know there are the first order immediate effects of these things as commodity prices spike and people look at the most obvious things. But then there's second and third order depending on the longevity and the depth of this situation as it feeds into global macro inflation, interest rates from a holistic point of view, but also on individual markets. I guess what we can say today being close to our countries and our company, the focus is that we're in a relatively good position, and it's all relative in the world that we live in. But Latin America is a strong point and Brazil specifically. It is a size commodity-producing country, both food and hard and soft commodities. It is benefiting, obviously, from the spike as well insulated from a lot of the issues given the geography. What we've seen is the Bovespa being one of the most impressive or best-performing markets year-to-date. Also the BRL, the local currency, I think as of today, it's about 10% versus U.S. dollar year-to-date. And I was just reading about BlackRock, Brazilian ETFs are seeing record inflows. So some of these are read across from what we are in exposure that we have, but some of them are actually fundamental as in the BRL. We are directly exposed by Creditas, Solfacil and Nibo and to the local currency. It's a nice tailwind for what we do. And we're not a macro fund, but we do take the macro benefits when they come. So we're well situated at this time. We're watchful of countries like India who are net importers of commodities. But through the prism of all our companies, we see no issues to share with you to date. We have some small exposure in the Middle East via Abhi, mainly a Pakistani company, a small growing part of the business with no issues today. And so I think geography, geopolitics, we feel well positioned. We are watchful, and we will continue to share as we go. And getting on to Creditas on a micro level, so we're talking back and forth between macro and micro because it's that kind of quarter. But what you're seeing at Creditas is, as I said at the start, we're liking the compounding nature quarter-on-quarter-on-quarter of both news flow and performance. I think the loan portfolio year-on-year growth, we started talking about this early last year, how it's starting to accelerate, but nothing is real until you see it. And you're seeing the acceleration of the loan book near 20% year-on-year as of Q4. I expect that to continue into Q1. That feeds into revenue growth. And probably as exciting, something that we didn't predict when we start talking about Creditas, return to growth status back at the start of 2025 was the efficiency drive and the second order benefits we're now seeing from AI and it is becoming an AI-first or native company when it comes to a lot of parts of its business, and that's really driving elements like the CAC falling, and we're seeing more growth versus cost, revenue growth should exceed cost. There's a lot of positive starting to feed in there, which we'll get into gradually over time. We share some metrics here around origination growth being 2x versus the percentage growth in OpEx, which is very nice to see. And just on AI, what I'd say here is we're kind of putting a flag down this quarter. We're starting to share on AI. Alexis talked about Juspay and its initiatives. I'm seeing it personally through Creditas really around the CAC, the customer acquisition cost, which was running at 20% of originations only a few years ago, it's now fallen below 10%, so record low levels. A lot of what they're doing is around collateral underwriting, their go-to-market customer service, fraud, you've seen the same in Konfio in Mexico. But where these things become real and where we can start sharing and get excited and get you excited is when they start to hit the numbers. So the CAC is one example that Creditas shares openly with the market. The operational efficiency, where we've got 2x growth in originations and only 25% of OpEx in the last 2 years. And finally, the headcount, which peaked at over 4,000 is now below 2,000 and moving. So there's a lot of nice trends here -- excuse me one second. Yes, a lot of nice underlying trends that we're seeing from the AI-driven efficiency drive. And this goes well beyond the top 3 companies in our portfolio. And then moving to the last slide, Slide 14. Just to wrap up, what would I say, very similar to what we've said in previous quarters with some tweaks. We like to be consistent and evolve our messaging, nothing too dramatic. But it always comes back to portfolio. We're very happy with our portfolio. It's a very focused portfolio. Cash flow profiles are very positive there, getting to that neutral position and then moving into positivity, growing again. We want growth in this environment. Efficiency drives are kicking in some names. We get nice jaws starting to evolve it early and raising fresh capital, as Alexis said, new marks for Juspay, for Creditas, best-in-class companies raise capital inside in these markets. And I think the exit is something that you're going to hear from us again and again and again, because we're very happy and proud of the fact that we're delivering them. They're hard. We're delivering them at the right price. And then you build that cash pile, you strengthen your balance sheet and then it's what you do with it. I think so far, our experience has been around focusing on debt and looking at our shares and looking forward. I don't see that being too much different. It's just a matter of which we prioritize and when with what cash balance that comes at us and watch this space, we will be communicating, but we get what we should be doing. We're listening to the market. It's obvious. And finally, pipeline, I think this is a long-term story at VEF that continues. We are well situated in the world of emerging market fintech, well connected. We're seeing a lot of good companies that we would like our and your capital in. There will be a time for that, and we're positioning ourselves for that always. And so I'll stop there and very happy to open up for questions from the floor. Operator: [Operator Instructions] We will now take the first question from the line of Linus Sigurdson from DNB Carnegie. Linus Sigurdson: I hope you're good. Starting with a question on Creditas. And anything you can say about the growth outlook. I mean, Sergio talks about accelerating to over 25% this year. And I think you wrote 25% to 30% plus in your presentation today. How much of, say, blue sky scenario is this? Or rather, how should investors think about the visibility on this number? What are the main moving parts on the revenue side? David Nangle: Yes. Linus, thanks for the question. And it was good, we have Sergio in Stockholm. It's good to have him out there meeting people like yourselves and telling the story. He does talk a range in fairness to them, 25% to 30%. I think 25% is a level he would think he can achieve and 30% is the level that he wants to aspire to in the current environment. I think you'd rather do multiple years of compounding at these levels, not speaking for him, but just getting the read from him as opposed to accelerating to 50% to 100% growth given what they did in the past and burning to get there. We'd rather do it on a cash-neutral basis and nice sustainable, because that obviously feeds into an IPO narrative where you've got compounding growth that seems logical and forecastable to the market as opposed to highs and lows in those trends. So I think that's the way he's thinking. And I think if you look at the year-on-year growth of the loan book into Q4, what, 19%, 20% and just keep on moving up quarter-on-quarter through the year, you can see 20% plus in Q1, I'd like to think we'll see and how that extrapolates. I think the caveat here, Linus, are everybody is going to caveat everything with global geopolitics and macro. And if that turns or changes, it could change everything everywhere. That's just one caveat that's natural. The other is around Brazil and interest rates staying high. We had our first 25 bps rate cut earlier this year. We're hoping for more, but I understand why the Central Bank of Brazil held a little bit higher for longer, given what's happening in the world and the risks to inflation. And then in Q4 in Brazil, we have elections, which are always interesting to say the least, the far left and far right going off against each other, which is the natural order of play. So it can get a bit noisy and nuanced in Q3 into Q4, things may slow down before they pick up again. So there's a few caveats here and there. But given everything we and he sees through the business, I think he's confident enough to go out with those numbers and he wouldn't say them unless he think he could achieve them. Linus Sigurdson: That's good color. And then, I just wanted to ask on with Creditas and Juspay now at latest transactions, I guess, Konfio will be key here in the next coming quarters and the sort of 2026 story. Could you just double-click a bit on operations and how you think about the outlook for this year in Konfio? David Nangle: Yes, that's fair. Like I think there's many ways of looking at the first part, what you said, there's many ways of looking at our -- what's important and what's key for this year. And obviously, for us, the performance of Creditas, Juspay, Konfio, and then Nibo is all key. But we're less likely to see a markup in Creditas or Juspay given that they just raised even though one never knows. So Konfio, I think, is where you're leaning on in that regard in terms of mark-to-model or a raising capital. But to answer your question specifically on Konfio, it is business-as-usual. They are also accelerating growth like Creditas. They didn't reach the 20% highs that Creditas got to from a near no growth at the start of last year. I think Konfio from memory, got 15%, 16% year-on-year growth. But they would be in a similar trajectory or aspirational category to Creditas in terms of growing the loan book in that 20% to 30% in 2026. And margins are healthy, and they are cash flow positive on the bottom line. So they're building a bit of cash. So it's nicely self-sustaining. We always allude to the bank license, which is an ongoing process. And we like the fact that they've been given out in Brazil or Mexico to many aspiring entities. We like the fact that Konfio is towards the top of the list, but it's very hard to put a mark on when it happens. But the underlying business is in rude health. And I'd say it's just tracking Creditas, but maybe 3, 6 months behind in terms of getting to that growth level. Operator: We will now take the next question from the line of Stefan Knutsson from Redeye. Stefan Knutsson: I hope you are well. Just a question on the balance sheet. I see now that at the recent transaction, you are close to have a neutral situation in the net debt maybe your 1 exit away from, yes, being able to be deploying capital again. But just hypothetically, if you were to do another exit, how would you prioritize the capital that you would gain? David Nangle: Yes. Stefan, it's -- yes, look, there's different ways that we can deploy capital right now and let's be honest, I'd like to get rid of the debt. And I think that's the most obvious thing we shouldn't be funding long-term, long-duration private assets and emerging markets with short duration sector. It serves as purpose, and we're very happy and proud of the Swedish market supporting us with the debt. But we're down to a manageable level that we'd rather pay off, and we don't want our need, I think we may to do that market again in the future. But -- so I would edge towards the prior prioritization of that. And given the small amount of debt that it is, it's very hard to pay down some, but not all. You got to roll it all or you pay it off. So I think it's a little bit binary. So we had a decent other exit probably that, but I don't give me 100% on that. And then you look at your own shares. It does hurt us. We are shareholders. We work very hard for this company. We see how our portfolio is doing. We report everything we see to the market. We get exits at NAV in the market is what it is. But the market isn't going to reward our shares with that delivery and those exits at NAV plus/minus, we'll just do it ourselves, buy back our shares all day. So it's very hard to look beyond your shares. So -- the easier to answer in a normal world where I had all the choices you do a bit of both. But given how that markets work, it's probably lean into your debt clearing it before you start to eat away at your shares. Stefan Knutsson: Perfect. And regarding exits, how are you thinking strategically on portfolio concentration, like we have seen you exit a few of your smaller holdings concentrating into the top holdings. Is that the way forward? Or are you also looking to maybe decrease the size of the exposure for Creditas that is over 50% now? David Nangle: Yes. There's a little bit of strategy here, and there's a little bit of the markets give you what they give you as you try and do a lot of things at the same time. But strategically, we are definitely trying to shrink and focus the portfolio. We don't have a small amount of winning names. That's good for us from the opportunity cost over time, and it's good for communicating to the market. Within that, I don't mind, I'm very comfortable with concentration. Once concentration is on quality, where I believe it is today, so that makes me sleep well at night. And we'll continue to try and clean up or exit position some smaller names for sure. And then on the top names, they're just constant work streams where we may have done 2 exits from Juspay in the last 12 months, but they could have easily been Konfio or Creditas or other names, had the market and the opportunity being there at the time. So these are work streams across a number of names that are leading us to a smaller number of holdings, a more concentrated quality portfolio and what excess capital that comes in being delivered to deleverage the balance sheet and buy back our shares at these beautiful levels. Operator: Thank you. There are no further questions at this time. I would now like to turn the conference back to David Nangle for closing remarks. David Nangle: Yes. Thanks, Andre, and thank you, everybody, as always, for joining us on this call. Very happy with what we're seeing at VEF irrespective of what is a very noisy and volatile world. We will continue to deliver and focus on all the right things, and we'll continue to listen to our investors and our partners as we go. And looking forward to talking to you again next quarter. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the VEF 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 speaker today, David Nangle, CEO. Please go ahead. David Nangle: Super. Thank you very much, operator, and good morning, good afternoon, everybody, and thanks for joining us in our First Quarter '26 Results Call and Presentation. As per usual, I have my colleague and CIO, Alexis Koumoudos, with me, and we'll spend the next 15, 20 minutes just running through all the events and key numbers and parts that made up the quarter for VEF as was. And all the details are online as well from a presentation point of view, and that will be available as well after this call. And the key events of the quarter, looking at Slide #2, and I think bigger picture, we're all very cognizant and aware of the geopolitical-driven volatility, the world that we're living in, the first order effect, the potential second order effects. We're not going to delve into all of that here because it's well documented by many people elsewhere, but we will give you a bit of a flavor of how life at VEF has been affected by that, while we marry in all the micro level delivery of the first quarter. I think the first point is the NAV itself. Obviously, we had a bit of a headwind in Q1. And naturally, when 30% of your portfolio is mark-to-model and you have a market sell-off. So the NAV was up 5.8% quarter-on-quarter in dollar terms, a bit less in SEK terms. Fundamentally, portfolio is doing very well. Currencies were in our favor, but multiples on some key names drove the NAV quarter-on-quarter down. And more specific and back to the micro level and performance, exits continue. And we had another secondary in Juspay in 1 quarter '26, and this is our Series D follow-on, $50 million at $1 billion-plus valuation, company we invested in $100 million a few years back from a total valuation point of view. But yet again, we use the opportunity to top slice our position there and taken nearly $15 million of gross proceeds, at a healthy IRR of 34% and still having a decent stake in the company. I think most important for us and our narrative to the market is that was an exit, not at NAV plus/minus. That was an exit above NAV. So continue to turn our NAV, our companies into dollars at the valuation that we say plus or minus. And coming back a bit macro level, I think from an exposure point of view, we're getting a lot of questions, obviously, from the geopolitics of the world and how we are or aren't affected, even though. I think everybody is affected in some way, shape or form. We are actually in a relatively good, and I'd say, relative macro position in terms of our exposure geographically with 80% of our portfolio plus/minus being Latin American exposure, which is a relatively safe haven part of the world. And Brazil alone is over 50%, maybe 60% with Creditas being our key asset. And we're obviously the commodity trade that Brazil is a bit of a safe haven status with high interest rates, commodities and just geographically well placed. We're seeing markets there rally, currency, index, et cetera. and we're indirect and direct benefits of that exposure. And I'll get into that in the presentation. And more micro level, back to Creditas, it's been a really good window in the last -- we've enjoyed the last 15 to 18 months of Creditas quarter-on-quarter-on-quarter, the fundamental story continues to improve in terms of accelerating growth and there's a new layers of positivity been coming into the story. Now it's more around AI-driven efficiency, you get nice operating jaws from a top line volume revenue growth and efficiency coming through. Healthy guidance looking forward. And those kind of catalysts that everybody likes to see around raising capital, nice valuations, getting a bank license. So it's a nice window. We're enjoying us. They are delivering, and that's most important for us as an investment company. And then finally, a more macro again, away from geopolitics, but more in the tech side and the AI adoption. We would kind of stayed away from overly talking about AI from a investment portfolio point of view. But I think the pace and progress of these models now has really become game changing. All of our companies are engaging. It's gone from theory to reality. We're enjoying seeing what they're starting to do, and some is already starting to feed through to the numbers like Creditas. And I guess we just wanted to put a marker down this quarter, and we'll be updating you as we go on this front because it's been a very exciting next wave of efficiency growth, costs, operating jaws that we can see coming through in our portfolio. Going into the presentation proper, just a few numbers. This has all been flagged earlier on in our release, but our NAV is at $408.6 million for the quarter, up 5.8% in U.S. dollar terms. As I said, the SEK and SEK per share is down less, because of the weakness in the local currency, and that's down minus 2.8% in the quarter. I'll skip over Slide 4, and I'll move directly to bringing Alexis into the call and for Slides 5 to 9, where he'll talk us through valuation moves in the quarter and a little bit more about the exits that I talked about in Juspay and beyond. Alexis, over to you. Alexis Koumoudos: Thanks, Dave, and hi, everyone. Yes. So as Dave mentioned, in the first quarter of '26, 70% of the portfolio is valued at latest transaction and 30% mark-to-model. Within the portfolio, as Dave mentioned as well, Juspay completed the $50 million Series D follow-on at a 16% dollar premium to the Series D of 2025, in which we took $14.6 million in secondary sold for cash, and we hold a 6.4% remaining stake priced here at the secondary price. You'll see that the net impact from the NAV of -- is the net impact of $10.8 million markup from the up round that happened and selling $14.6 million for cash, which reduces our NAV for Juspay in the mark value by $3.8 million in the quarter. The other thing to point out on this slide on Slide 5 is Solfacil rolled off a recent transaction to mark-to-model as it completed 12 months from the transaction. And Solfacil, Konfio and Nibo valuations under mark-to-model valuation methodology were impacted by the March sell-off in comps across tech, fintech and SaaS. And outside the impact of the comps, each of these businesses continue to deliver in line with or ahead of our business plan. So the markdowns were purely a symptom of market moves. Getting into this in a bit more depth on Slide 6. We show the breakdown of the dollar NAV evolution over the quarter. And you can see the biggest impact on the NAV in the quarter was really the sell-off in comps and there are multiple impact on the mark-to-model portion of the portfolio. This impacted our NAV to the tune of $14 million and it's reflected in the valuations of the companies and the mark-to-model methodology, names like Konfio, Solfacil, and Nibo. And the -- this was offset to some extent by the portfolio performance, which had a $10 million positive impact on the NAV. Under the latest transaction portion of the portfolio, you'll see like a negative $4 million move in this section of the portfolio. And that is purely the $10 million uplift in the Juspay valuation, offset by selling $14.6 million in Juspay. And the corporate cash increases $10 million, that is predominantly from the proceeds of the sale of Juspay offset in part by OpEx and coupon payments in the quarter. Overall, the FX impact was neutral in the quarter. And the net impact of all of these moves was, as Dave mentioned, the 5.8% contraction in NAV quarter-over-quarter. On Slide 7, we continue to -- we just want to reiterate that we continue to feel more and more confident in our -- in the quality of the portfolio and its ability to compound from here. We see our portfolio growing at 25% to 30% year-on-year from a profitable base with our large late-stage top 3 holdings driving much of this on a self-sustaining basis. And we're encouraged by the deal activity we're seeing across our geographies and feel proud of our companies and their ability to continue attracting fresh capital, which drives real value growth and creates liquidity options. And we're also proud to find opportunities to continue converting slices of our NAV to cash at or above the marks we hold them at whilst delivering benchmark returns like we did in the Juspay round. So moving to Slide 8. We just wanted to reflect a little bit and update everybody on what Juspay is as a business, our history with the company and where we stand after this transaction. So Juspay is the leading payment orchestrator in India with a dominant market share. Juspay powers some of the largest enterprises in India and now has a large payment infrastructure business, powering UPI apps and bank infrastructure. Juspay has also now launched an international business, and they have offices across Asia, Europe, the Middle East, U.S. and Brazil. And by the numbers, Juspay powers over $450 billion of annualized TPV, representing about 70 million average daily transactions, and it's growing its top line in over 50% year-on-year and the business quality is high with near 0 churn over 80% gross margins and it's been profitable for over a year now. Juspay was our first investment in India. And we made 2 -- we wrote 2 checks into the business, 1 of $13 million in early 2020 and $8.1 million in December 2021. And since our first investment, revenues have grown over 10x and the company has raised money in rounds led by Tier 1 investors, including SoftBank, Kedaara and WestBridge. And if we include the 2 realizations of $29.4 million, our invested capital has grown from $21.1 million to $94.9 million representing a 4.5x MOIC in USD terms. And the proceeds of our latest secondary sale, the Series D follow-on represents 6.6x MOIC and a 38% IRR in U.S. dollar terms. As we mentioned, we retain a Board seat at Juspay post this transaction and a 6.4% stake in the business. And Juspay really operates at the bleeding edge of tech by any standards, and we continue to be very excited about the potential of the business and the path that it's on. We believe they will be in a position to announce some more international success very soon. And we've become -- and it's become one of the strongest AI native companies across the fintech ecosystems that we've seen with a product road map to reflect that. We're excited to continue our journey with Vimal and Sheetal into the future. On Slide 9 we just wanted to update our summary of exits of the last 18 months in a slide. And so since November 2024, we've delivered 4 exits totaling $52 million. We continue to target opportunistically converting our NAV to cash at or above our marks to strengthen our balance sheet and improve optionality in an environment where we see plenty of opportunity. Overall, the $52 million in exits represented by the BlackBuck IPO in sale, the Gringo sale to Corpay and the 2 Juspay partial sales to Kedaara and WestBridge, were executed at an 8% premium to the pre-transaction NAV marks on these companies. A 1.4x aggregate MOIC and 11% gross IRR over a 3.5-year holding period. And if we include the retained stake in Juspay, the total value of these investments would represent a 2.5x MOIC and 24% gross IRR, including the unrealized gains at Juspay. And we continue to work towards more exits of a similar standard going forward. Dave, back to you. David Nangle: Thank you very much, Alexis. I mean, look, a few slides to wrap up, and then we'll open up to Q&A for anybody who wants. But leaning on from where Alexis talked about the exit there, most notably Juspay, the most recent one. A lot of this has been about strengthening our balance sheet from a period of 2 years ago where we had a debt position. We're long a portfolio of private EM assets, and we start making promises to the market about being focused on exits, delivering those exits close to NAV, then getting that capital in, strengthening our balance sheet, looking at our debt, start to pay that down as a priority, then looking at our equity and everything that extrapolates from there. And where we're at as of the end of Q1, approximately we're cash neutral in that we've got $25 million approximate of cash from the exit and the buildup over the last 12 to 15 months. And our debt outstanding at current FX is about $25 million. So our capital position is in a much more, let's call it, healthy position, but work to be done. We're still very much focused on strengthening the balance sheet. And I think capital allocation and ideology, what would I share with you today, I think what you saw last year was Capital Allocation Policy 101. As funds came in, we paid down half our debt. We showed the market we were serious about that. So deleveraging the balance sheet, strengthening our position. And then we nibbled at our shares and bought back a couple of percent at what are significantly low valuations, especially as we're realizing at NAV positions as we go. At this moment in time, we're out there talking to our investors, talking to the market, we're listening and we're logical as we go. So we've got a priority. We've got a bond falling due at year-end. We already pay that down or roll it, but that's in our focused vision. And then after that, you have the natural hurdle of your shares trading at a deep discount, and it will be very hard for the dollar to work beyond that in the near term with incremental capital coming in. At this point, it's all theoretical because we are in a capital position we are in. But as more capital comes in, we'll start to shape this out and give the market more color where we think. But the bonds, our own shares is definitely where our head space is. It's where our head space was last year, that's how we acted. So just by our actions as we go. Moving back to a macro level. I talked about this at the start, but I saw the slide of our exposure as an investment company. And geographically, we are exposed heavily to Latin America and then India with some small snippets elsewhere in the emerging world. We're very cognizant. We're not complacent of what's going on in the Middle East. We've seen this many times before. We know there are the first order immediate effects of these things as commodity prices spike and people look at the most obvious things. But then there's second and third order depending on the longevity and the depth of this situation as it feeds into global macro inflation, interest rates from a holistic point of view, but also on individual markets. I guess what we can say today being close to our countries and our company, the focus is that we're in a relatively good position, and it's all relative in the world that we live in. But Latin America is a strong point and Brazil specifically. It is a size commodity-producing country, both food and hard and soft commodities. It is benefiting, obviously, from the spike as well insulated from a lot of the issues given the geography. What we've seen is the Bovespa being one of the most impressive or best-performing markets year-to-date. Also the BRL, the local currency, I think as of today, it's about 10% versus U.S. dollar year-to-date. And I was just reading about BlackRock, Brazilian ETFs are seeing record inflows. So some of these are read across from what we are in exposure that we have, but some of them are actually fundamental as in the BRL. We are directly exposed by Creditas, Solfacil and Nibo and to the local currency. It's a nice tailwind for what we do. And we're not a macro fund, but we do take the macro benefits when they come. So we're well situated at this time. We're watchful of countries like India who are net importers of commodities. But through the prism of all our companies, we see no issues to share with you to date. We have some small exposure in the Middle East via Abhi, mainly a Pakistani company, a small growing part of the business with no issues today. And so I think geography, geopolitics, we feel well positioned. We are watchful, and we will continue to share as we go. And getting on to Creditas on a micro level, so we're talking back and forth between macro and micro because it's that kind of quarter. But what you're seeing at Creditas is, as I said at the start, we're liking the compounding nature quarter-on-quarter-on-quarter of both news flow and performance. I think the loan portfolio year-on-year growth, we started talking about this early last year, how it's starting to accelerate, but nothing is real until you see it. And you're seeing the acceleration of the loan book near 20% year-on-year as of Q4. I expect that to continue into Q1. That feeds into revenue growth. And probably as exciting, something that we didn't predict when we start talking about Creditas, return to growth status back at the start of 2025 was the efficiency drive and the second order benefits we're now seeing from AI and it is becoming an AI-first or native company when it comes to a lot of parts of its business, and that's really driving elements like the CAC falling, and we're seeing more growth versus cost, revenue growth should exceed cost. There's a lot of positive starting to feed in there, which we'll get into gradually over time. We share some metrics here around origination growth being 2x versus the percentage growth in OpEx, which is very nice to see. And just on AI, what I'd say here is we're kind of putting a flag down this quarter. We're starting to share on AI. Alexis talked about Juspay and its initiatives. I'm seeing it personally through Creditas really around the CAC, the customer acquisition cost, which was running at 20% of originations only a few years ago, it's now fallen below 10%, so record low levels. A lot of what they're doing is around collateral underwriting, their go-to-market customer service, fraud, you've seen the same in Konfio in Mexico. But where these things become real and where we can start sharing and get excited and get you excited is when they start to hit the numbers. So the CAC is one example that Creditas shares openly with the market. The operational efficiency, where we've got 2x growth in originations and only 25% of OpEx in the last 2 years. And finally, the headcount, which peaked at over 4,000 is now below 2,000 and moving. So there's a lot of nice trends here -- excuse me one second. Yes, a lot of nice underlying trends that we're seeing from the AI-driven efficiency drive. And this goes well beyond the top 3 companies in our portfolio. And then moving to the last slide, Slide 14. Just to wrap up, what would I say, very similar to what we've said in previous quarters with some tweaks. We like to be consistent and evolve our messaging, nothing too dramatic. But it always comes back to portfolio. We're very happy with our portfolio. It's a very focused portfolio. Cash flow profiles are very positive there, getting to that neutral position and then moving into positivity, growing again. We want growth in this environment. Efficiency drives are kicking in some names. We get nice jaws starting to evolve it early and raising fresh capital, as Alexis said, new marks for Juspay, for Creditas, best-in-class companies raise capital inside in these markets. And I think the exit is something that you're going to hear from us again and again and again, because we're very happy and proud of the fact that we're delivering them. They're hard. We're delivering them at the right price. And then you build that cash pile, you strengthen your balance sheet and then it's what you do with it. I think so far, our experience has been around focusing on debt and looking at our shares and looking forward. I don't see that being too much different. It's just a matter of which we prioritize and when with what cash balance that comes at us and watch this space, we will be communicating, but we get what we should be doing. We're listening to the market. It's obvious. And finally, pipeline, I think this is a long-term story at VEF that continues. We are well situated in the world of emerging market fintech, well connected. We're seeing a lot of good companies that we would like our and your capital in. There will be a time for that, and we're positioning ourselves for that always. And so I'll stop there and very happy to open up for questions from the floor. Operator: [Operator Instructions] We will now take the first question from the line of Linus Sigurdson from DNB Carnegie. Linus Sigurdson: I hope you're good. Starting with a question on Creditas. And anything you can say about the growth outlook. I mean, Sergio talks about accelerating to over 25% this year. And I think you wrote 25% to 30% plus in your presentation today. How much of, say, blue sky scenario is this? Or rather, how should investors think about the visibility on this number? What are the main moving parts on the revenue side? David Nangle: Yes. Linus, thanks for the question. And it was good, we have Sergio in Stockholm. It's good to have him out there meeting people like yourselves and telling the story. He does talk a range in fairness to them, 25% to 30%. I think 25% is a level he would think he can achieve and 30% is the level that he wants to aspire to in the current environment. I think you'd rather do multiple years of compounding at these levels, not speaking for him, but just getting the read from him as opposed to accelerating to 50% to 100% growth given what they did in the past and burning to get there. We'd rather do it on a cash-neutral basis and nice sustainable, because that obviously feeds into an IPO narrative where you've got compounding growth that seems logical and forecastable to the market as opposed to highs and lows in those trends. So I think that's the way he's thinking. And I think if you look at the year-on-year growth of the loan book into Q4, what, 19%, 20% and just keep on moving up quarter-on-quarter through the year, you can see 20% plus in Q1, I'd like to think we'll see and how that extrapolates. I think the caveat here, Linus, are everybody is going to caveat everything with global geopolitics and macro. And if that turns or changes, it could change everything everywhere. That's just one caveat that's natural. The other is around Brazil and interest rates staying high. We had our first 25 bps rate cut earlier this year. We're hoping for more, but I understand why the Central Bank of Brazil held a little bit higher for longer, given what's happening in the world and the risks to inflation. And then in Q4 in Brazil, we have elections, which are always interesting to say the least, the far left and far right going off against each other, which is the natural order of play. So it can get a bit noisy and nuanced in Q3 into Q4, things may slow down before they pick up again. So there's a few caveats here and there. But given everything we and he sees through the business, I think he's confident enough to go out with those numbers and he wouldn't say them unless he think he could achieve them. Linus Sigurdson: That's good color. And then, I just wanted to ask on with Creditas and Juspay now at latest transactions, I guess, Konfio will be key here in the next coming quarters and the sort of 2026 story. Could you just double-click a bit on operations and how you think about the outlook for this year in Konfio? David Nangle: Yes, that's fair. Like I think there's many ways of looking at the first part, what you said, there's many ways of looking at our -- what's important and what's key for this year. And obviously, for us, the performance of Creditas, Juspay, Konfio, and then Nibo is all key. But we're less likely to see a markup in Creditas or Juspay given that they just raised even though one never knows. So Konfio, I think, is where you're leaning on in that regard in terms of mark-to-model or a raising capital. But to answer your question specifically on Konfio, it is business-as-usual. They are also accelerating growth like Creditas. They didn't reach the 20% highs that Creditas got to from a near no growth at the start of last year. I think Konfio from memory, got 15%, 16% year-on-year growth. But they would be in a similar trajectory or aspirational category to Creditas in terms of growing the loan book in that 20% to 30% in 2026. And margins are healthy, and they are cash flow positive on the bottom line. So they're building a bit of cash. So it's nicely self-sustaining. We always allude to the bank license, which is an ongoing process. And we like the fact that they've been given out in Brazil or Mexico to many aspiring entities. We like the fact that Konfio is towards the top of the list, but it's very hard to put a mark on when it happens. But the underlying business is in rude health. And I'd say it's just tracking Creditas, but maybe 3, 6 months behind in terms of getting to that growth level. Operator: We will now take the next question from the line of Stefan Knutsson from Redeye. Stefan Knutsson: I hope you are well. Just a question on the balance sheet. I see now that at the recent transaction, you are close to have a neutral situation in the net debt maybe your 1 exit away from, yes, being able to be deploying capital again. But just hypothetically, if you were to do another exit, how would you prioritize the capital that you would gain? David Nangle: Yes. Stefan, it's -- yes, look, there's different ways that we can deploy capital right now and let's be honest, I'd like to get rid of the debt. And I think that's the most obvious thing we shouldn't be funding long-term, long-duration private assets and emerging markets with short duration sector. It serves as purpose, and we're very happy and proud of the Swedish market supporting us with the debt. But we're down to a manageable level that we'd rather pay off, and we don't want our need, I think we may to do that market again in the future. But -- so I would edge towards the prior prioritization of that. And given the small amount of debt that it is, it's very hard to pay down some, but not all. You got to roll it all or you pay it off. So I think it's a little bit binary. So we had a decent other exit probably that, but I don't give me 100% on that. And then you look at your own shares. It does hurt us. We are shareholders. We work very hard for this company. We see how our portfolio is doing. We report everything we see to the market. We get exits at NAV in the market is what it is. But the market isn't going to reward our shares with that delivery and those exits at NAV plus/minus, we'll just do it ourselves, buy back our shares all day. So it's very hard to look beyond your shares. So -- the easier to answer in a normal world where I had all the choices you do a bit of both. But given how that markets work, it's probably lean into your debt clearing it before you start to eat away at your shares. Stefan Knutsson: Perfect. And regarding exits, how are you thinking strategically on portfolio concentration, like we have seen you exit a few of your smaller holdings concentrating into the top holdings. Is that the way forward? Or are you also looking to maybe decrease the size of the exposure for Creditas that is over 50% now? David Nangle: Yes. There's a little bit of strategy here, and there's a little bit of the markets give you what they give you as you try and do a lot of things at the same time. But strategically, we are definitely trying to shrink and focus the portfolio. We don't have a small amount of winning names. That's good for us from the opportunity cost over time, and it's good for communicating to the market. Within that, I don't mind, I'm very comfortable with concentration. Once concentration is on quality, where I believe it is today, so that makes me sleep well at night. And we'll continue to try and clean up or exit position some smaller names for sure. And then on the top names, they're just constant work streams where we may have done 2 exits from Juspay in the last 12 months, but they could have easily been Konfio or Creditas or other names, had the market and the opportunity being there at the time. So these are work streams across a number of names that are leading us to a smaller number of holdings, a more concentrated quality portfolio and what excess capital that comes in being delivered to deleverage the balance sheet and buy back our shares at these beautiful levels. Operator: Thank you. There are no further questions at this time. I would now like to turn the conference back to David Nangle for closing remarks. David Nangle: Yes. Thanks, Andre, and thank you, everybody, as always, for joining us on this call. Very happy with what we're seeing at VEF irrespective of what is a very noisy and volatile world. We will continue to deliver and focus on all the right things, and we'll continue to listen to our investors and our partners as we go. And looking forward to talking to you again next quarter. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Jim Kavanagh: Hello, and welcome to ASML's Q1 2026 results video. Welcome, Christophe and Roger. Jim Kavanagh: Roger, if I could start with you and ask you to give us a summary of our Q1 2026 results. R.J.M. Dassen: For the quarter, total net sales came in at EUR 8.8 billion. That was within guidance. Included in the EUR 8.8 billion was EUR 2.5 billion for Installed Base revenue. That was a little bit above the guidance. If you look at the gross margin for Q1, 53%. That was at the high end of the gross margin that we guided. If you look at the Installed Base business, as I just mentioned, the Installed Base business was higher than we anticipated. But also if you look at the components in the Installed Base business, there were components in there that actually come in at quite some strong gross margins. So as a result of that, a pretty high gross margin at 53%. Net income for the quarter, EUR 2.8 billion. Jim Kavanagh: Can you also provide us with a guide for Q2 '26 results, please? R.J.M. Dassen: For Q2, we expect EUR 8.4 billion to EUR 9 billion of total net sales. Included in there, again, EUR 2.5 billion of Installed Base business. We expect the gross margin to be between 51% and 52%. Jim Kavanagh: Christophe, if I can switch to you. And can I ask you to give us an outlook on the market and how you're seeing things at the moment? Christophe Fouquet: Well, I think we see that the semiconductor industry growth continued to solidify. This is still very much driven by investment in AI infrastructure. So this translates into a lot of demand for advanced memory, for advanced logic. And we expect, in fact, that the supply will not meet the demand for the foreseeable future. So this is creating a strong constraint in the end market from AI to mobile and PC. And as a result, our customers are strongly invited to create more capacity. So if we look at memory, what our customers tell us is that they are sold out for 2026 and their supply constraint will last beyond 2026. For advanced logic, we see our customer building capacity for several nodes, while they also continue to ramp 2-nanometer in order to address the AI products. Jim Kavanagh: So then I guess it's fair to say, a lot of those capacity additions are adding positively to our own outlook? Christophe Fouquet: Well, absolutely, we see our memory and logic customers increasing their capital expenditure and trying to accelerate basically their capacity ramp in 2026 and beyond. What's also very interesting is that a lot of this demand is supported by long-term commitment at their customer. On top of that, we see both memory customers, DRAM customers and advanced logic customers continuing to increase their adoption of EUV but also immersion. So this translates basically into higher litho intensity and a higher litho demand for ASML. So we're going to continue to work very closely with our customers to increase our capacity. We are doing that in 2026. We'll continue to do that in 2027. Jim Kavanagh: And then maybe Roger, just adding on to that, can you provide a little bit more color or details on what we are actually going to do in terms of adding capacity to support market demand? R.J.M. Dassen: So I think Christophe said it right. We're very clearly working with our customers, fully aligned with customers to give them what they need, and that is in a combination of capacity in terms of new shipments, making sure that systems, that the performance of systems is upgraded as best as we can and also provide Installed Base products. So in that combination, we try to give customers what they need, specifically when it comes to our own capacity. What we're looking at for this year for 2026, we believe we can drive an output for this year of at least 60 systems for EUV Low NA. That's what we currently have. That's what we're currently driving. And added to that, we're looking at deep UV for 2026. As I mentioned a couple of months ago, when it comes to immersion deep UV, we actually had a bit of a slow start because in the course of last year, we decided to actually -- we were looking at a significantly lower demand for immersion. That has now reversed itself. And I would say in spite of that slow start, we're still for this year expecting to get pretty close to the immersion sales that we had last year in terms of unit numbers. So that's for 2026. When it comes to 2027, in terms of capability, we're increasing our move rate really quarter-on-quarter. And then when you look specifically at EUV Low NA, we expect that we're able to get to an output for 2027. Again, if customer demand really underpins that, we think that we can get to at least 80 Low NA EUV units. And we're also looking at having the non-EUV business being in line with what customers are asking for, for all of their nodes. Jim Kavanagh: And then specifically on 2026. Can you give us an update then on our own business then for the full year? R.J.M. Dassen: Yes. So clearly, 2026 is panning out very nicely. It's a very strong year. We're looking at a strong growth year. And based on all the customer dynamics that Christophe was talking about, we are actually narrowing the window and also increasing the window of our expectation to EUR 36 billion to EUR 40 billion for this year. If you look at the different moving parts as we already expected, EUV is strong this year. So EUV in combination of Low NA and High NA, strong year there. On the non-EUV business, previously, we were expecting that to be flat in comparison to last year. Right now, what we're looking at is, in fact, an increase of demand there as well. So increased revenue on the non-EUV business is what we're expecting. I already mentioned what we're doing on immersion, but also the dry business is doing quite nicely and also the application business. So we believe in contrast to where we were a couple of months ago, we're looking at an increase for the non-EUV business. When it comes to the Installed Base business, strong growth there because obviously, it is a very fast way for our customers to increase their capacity to cater to the demand that Christophe was talking about. And I would say that within the guidance that we provided, the EUR 36 billion to EUR 40 billion, we believe we can accommodate potential outcomes of the export control discussions that are currently ongoing. Jim Kavanagh: And how about the gross margin then for 2026? R.J.M. Dassen: For the gross margin, we maintain our expectation of 51% to 53%. Jim Kavanagh: Switching gears a bit to technology. Christophe, can you give us some insights and latest updates on how we're progressing with the technology and our road map? Christophe Fouquet: Yes, I think we continue to execute very nicely on our technology road map. I think every year, we use the SPIE conference to give a bit of an update to the entire world about what we have achieved. A few, I think, important news this year. The first one was our demonstration of the 1,000-watt source. And this is very important because it means that we can secure the extendibility of Low NA EUV for many, many years. It means, in fact, that in 2031, we'll be able to run this tool at 330 wafers per hour, which is a major step-up from what we have today. Now the progress on EUV also has a good impact on the short term. We have been able to increase the throughput of our NXE:3800E from 220 to 230 wafers per hour, which is also helping on the short term with capacity. Our customers are very happy to be able to get more wafers out on any tool. And we are also increasing the specs of our next system, the NXE:3800F to 260 wafers per hour. It used to be 250 wafers per hour, and this will help us also with capacity around 2028. Jim Kavanagh: And I think also at SPIE, there were some updates on our High NA platform progress. Can you share a little there? Christophe Fouquet: Yes. And I think what was good about SPIE is that our customers start to talk about High NA. And they reported a few things. The first thing is, of course, the fact that High NA can allow them to reduce the number of masks significantly. DRAM and logic customers were talking about going from 3 to 1 mask for EUV using High NA. And they also mentioned that this can reduce the number of process steps from 100 to 10, which is, of course, significant. That's, of course, the reason why we have High NA. I think we have seen also great progress on the ecosystem, some good presentation with some of our resist partners, pointing to the fact that High NA can be extended when it comes to logic to 18-nanometer line and space pitch. And when it comes to memory to 28-nanometer hole size. So it means basically that not only High NA is getting ready for prime time, but we already know that High NA can be extended mostly for 3, 4 nodes, which is, of course, very important for our customers. And finally, maturity of the tool is important. We continue to see better availability data, more wafers per day, more wafers out. And this is just, of course, becoming more and more important as we see our customers starting to test High NA on real products. Jim Kavanagh: So I'd like to thank you both for joining us today. And yes, thanks very much. R.J.M. Dassen: Pleasure.
Operator: Good day, and thank you for standing by. Welcome to the Gloo Fiscal Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Oliver Roll, Chief Marketing and Communications Officer. Please go ahead. Oliver Roll: Thank you, operator. And thank you to all of you for joining our fiscal third quarter 2025 earnings conference call. We will be discussing Gloo's performance for the third quarter ended October 31 2025, as well as providing guidance for the fiscal fourth quarter 2025 and fiscal year 2026. Joining me on today's call are CEO and Co-Founder, Scott Beck, and CFO, Paul Seamon. Our Board Chair and Head of Technology, Pat Gelsinger, will also join the Q&A session. Before we begin, please be reminded that this call will contain forward-looking statements which are based on Gloo's current expectations, but which are subject to risks and uncertainties relating to future events and/or the future financial performance of Gloo. Actual results could differ materially from those anticipated in these forward-looking statements. A discussion of some of the risks that could cause actual results to differ materially from our forward-looking statements can be found in today's press release and elsewhere in our filings with the Securities and Exchange Commission, including our Prospectus dated November 18, 2025 and our subsequent quarterly report on Form 10-Q that we expect to file later this week. Both will be available on Gloo's investor relations website at investors.gloo.com and the SEC's website. In addition, during today's call, we will discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP metrics to the most directly comparable GAAP metrics, as well as the definitions of each measure, their limitations and our rationale for using them, are included in today's press release and in our Form 10-Q. And now, I will turn the call over to Scott. Scott Beck: Thanks Oliver, and thank you all for joining us today, for our first earnings call as a public company. Q3 has been a solid start to this next chapter of our journey. Revenue grew 432% year-over-year, and 101% compared to Q2. This reflects strong demand across our platform and meaningful growth through acquisitions that have strengthened our business and expanded our capabilities. We also delivered sequential adjusted EBITDA improvement. And we expect additional EBITDA improvement in Q4, and we expect the pace of that improvement to accelerate, beginning in Q1 2026. We are executing on our growth plan, and expect revenue in excess of $180 million in fiscal year 2026. Moreover, we are committed to achieving positive adjusted EBITDA by the end of Q4 2026. Because this is our first earnings call as a public company, I'd like to take a few minutes to provide an overview of Gloo, our mission, the value we deliver, and our strategy for long-term growth. Gloo is building the leading technology platform that connects and serves the faith and flourishing ecosystem. This ecosystem is one of the oldest, largest, and most resilient in the world, yet one that remains highly fragmented and significantly underserved by modern technology. Let me briefly describe the two core parts of this ecosystem. You will hear us refer to them often. First, there are churches and frontline organizations, actually there are more than 315,000 churches in the United States and over 100,000 other nonprofits organizations serving people and communities on critical social issues, such as recovery, anti-human trafficking and many more. Second, there are Network Capability Providers, the organizations that develop the tech, content, solutions and services that equip those churches and the frontline practitioners. Importantly, Gloo serves both sides of this ecosystem. The Gloo platform includes technology infrastructure, advertising tech, marketing services, and consulting solutions. Gloo also has a marketplace for churches and ministries. All of this is offered directly by us, and by our subsidiaries, which we refer to as Gloo Capital Partners. Additionally, values-aligned AI capabilities are embedded across the Gloo offerings, ensuring that AI can be harnessed for good, helping people flourish and communities thrive. Our platform benefits from a powerful Flywheel effect. The platform becomes more valuable to churches and frontline leaders every time a new Network Capability Provider joins. And as more churches and frontline leaders engage on the platform, the distribution opportunity becomes more valuable to Network Capability Providers. This mutually reinforcing model strengthens the Network effects and increases the platform stickiness over time. Becoming a public company helps us accelerate this flywheel, giving us greater ability to invest in both organic growth and strategic acquisitions. As we have announced we recently closed two new acquisitions. The first is Igniter, a 15 year old media innovator that serves over 10,000 churches with content and media subscriptions. The second is XRI Global, a leader in AI, delivering advanced voice and language translation tech. I will also note that since our IPO the pipeline and pace of our M&A opportunities has increased. Through acquisitions, we bring the best-in-class Network Capability Providers into Gloo as capital partners which expands our offerings, deepens the value of our platform, and further reinforces the flywheel as we scale. For example, earlier this year we acquired Masterworks, a leading ad tech, marketing and fundraising company. They help organizations grow their impact, accelerate their mission, and deepen donor relationships. Today we are also super excited to announce our definitive agreement to acquire Westfall Gold, a leader in major donor engagement. This latest planned acquisition is another powerful example of our flywheel in action. Westfall Gold will deepen our role in helping organizations build sustainable, mission-aligned funding models. They provide donor development capabilities for non-profit organizations engaging high capacity and high impact donors. They do this with data driven insights and world class donor experiences. This is particularly significant because donor management is the very heart of the faith and flourishing ecosystem. Together with Masterworks, this extends our core competency in the central economic engine of this ecosystem, increasing donations. Masterworks and Westfall Gold with decades of proven success, also create significant cross sell and up sell opportunities with one another, as well as with our Barna and Gloo 360 offerings. We expect the acquisition to contribute approximately $20 million in revenue in fiscal year 2026 and contribute positive 2026 EBITDA as well. We intend to close this transaction before our fiscal year-end on January 31, 2026. Now I'd like to turn to our AI strategy. Gloo is developing vertical-specific, values-aligned AI. It is designed to serve the unique needs of the faith and flourishing ecosystem. As I mentioned earlier, this quarter we expanded our AI capabilities through the acquisition of XRI Global. XRI has pioneered advanced voice AI and multilingual technologies that engage people across thousands of languages, including low-resource languages that most AI models can't serve. This acquisition significantly strengthens our AI stack. It also increases the revenue opportunity for Gloo AI and Gloo 360, a few of our subscription-based enterprise offerings. As we advance these capabilities, we are also building and equipping a broader community of developers to innovate on top of the Gloo platform. The developer response has been strong. This year Gloo AI Hackathon brought together more than 700 developers to create faith-aligned AI applications leveraging our platform. We continue to take a leadership role in shaping AI for good. This includes developing a comprehensive benchmarking framework, so that developers and organizations can measure how the leading large language models perform in accordance with the seven dimensions of human flourishing. Earlier this week, we introduced the Flourishing AI Christian Benchmark, a new tool that provides insight into how various models support the Christian Worldview. Overall we've seen good customer momentum across both sides of the ecosystem, churches and frontline organizations, and the Network Capability Providers who serve them. So far in 2025 we have secured 20 customers that will contribute over $1 million in annual contract revenue, and we expect this pace to accelerate in 2026. Notable engagements include a multi-faceted, multi-year, enterprise-level engagement with American Bible Society for both Gloo 360 and Masterworks. Gloo 360 will support their technology infrastructure to enhance reliability, scalability, and long-term efficiency. Masterworks will serve as their mass fundraising and marketing agency, supporting their brand vision and revenue growth objectives. We are also very excited to announce a new initiative to develop the world's first biblically aligned AI, with YouVersion as a key partner. Working with YouVersion, who recently reached one billion installs across their Family of Bible Apps, we'll ensure this becomes a trusted tool for users worldwide. This will combine machine learning with centuries of biblical wisdom to help people engage with scripture safely, deeply, and accurately. Other customer wins in Q3 include expanded agreements with Biblica, United Way of Greater Atlanta, and Project Rescue. Looking ahead our long-term ambition is to extend our position as the trusted infrastructure for technology-enabled impact across the faith and flourishing ecosystem. We remain committed to harnessing technology for good, so that we can serve those who serve, and through them, more people can flourish and organizations and communities can thrive. Paul will now take you through Q3 results in more detail, cover our guidance for Q4, and provide preliminary growth and profitability metrics for 2026. Paul, over to you. Paul Seamon: Thank you Scott. It's good to be with you for our first earnings call as a public company. Building on the strategic context Scott just shared, I'll walk you through our financial performance for the quarter. This was a solid first quarter as a public company and our results reflect good execution across the business and a significant inflection point for revenue growth. As Scott highlighted demand across both sides of the ecosystem combined with the early impact of our acquisitions, contributed to strong top-line growth. Revenue for the quarter was $32.6 million, an increase of 432%, compared to the same period. Last year, and 101% sequential growth compared to Q2. Year-over-year results were driven by solid organic growth across our portfolio, as well as acquisitions of several Capital Partner businesses, most notably Masterworks and Midwestern. Our Platform revenue includes advertising, marketplace and subscription offerings. Platform revenue totaled $19.8 million, an increase of $13.7 million from Q3 of last year, and 127% sequential growth. Much of this growth was driven by advertising revenue from Masterworks as new clients signed in Q2, fully ramped in Q3. This reflects the strong go-to-market execution referenced earlier. During the quarter, we also closed the acquisition of Igniter, which had a small impact on revenue in the quarter. Going forward, Igniter's subscription media products will primarily contribute to Platform revenue and align well with the broader platform strategy Scott described. Our Platform Solutions revenue includes technology, consulting and marketing services, primarily delivered by our Capital Partners, Masterworks, Midwestern and Servant. Platform. Solutions revenue was $12.7 million, up 71% sequentially, supported by strong performance from both Masterworks and Midwestern. Masterworks experienced a shift in timing, with some revenue typically associated with the fourth quarter taking place in the third quarter. Midwestern continues to see strong demand for development services and is expanding its sales capacity to meet that interest. As a reminder, Masterworks provides advertising offerings reported in Platform revenue and marketing and consulting services reported in Platform Solutions revenue. Midwestern provides technology consulting, also reported in Platform Solutions. Cost of revenue was 76%, an improvement from 81% in the prior year period. The improvement was due to increases in Subscription revenue and Platform Solutions revenue which carry higher margins, partially offset by the shift of revenue timing at Masterworks, affecting the quarter's margin mix. We see clear visibility to cost of revenue declining to below 50% over time. Adjusted EBITDA improved sequentially at negative $19.2 million, a [ $500 thousand ] improvement from Q2. This improvement reflects incremental gains across nearly all our Capital Partners. As a reminder, our adjusted EBITDA calculation includes expenses associated with acquisitions that other companies may consider one time in nature. As of October 31st, 2025, we had $15.1 million of cash and cash equivalents. Our November IPO added approximately $72.3 million after underwriting discounts and expenses, significantly strengthening our balance sheet and converting the significant majority of our debt to equity. I'd like to now turn to our Q4 2025 outlook. We expect revenue to be between $28 million and $30 million. This represents a more than tripling revenue growth year-over-year. Our fourth quarter guidance assumes continued strong demand across the platform, partially offset by the shift in Masterworks timing I mentioned earlier, and the normal slower December and January seasonality in this ecosystem. For Q4, adjusted EBITDA loss is expected to be between negative $19.5 million and negative $18.5 million, reflecting continued cost discipline. Westfall, which is expected to close in early 2026, is an adjusted EBITDA positive business and will play a positive role in our path to profitability. As a business in excess of $20 million in revenue, we expect a modest revenue contribution in Q4 with minimal EBITDA effect. As Scott noted, Westfall is a strategic fit for the platform given the critical importance of donor management to the faith and flourishing ecosystem. For Q4, we expect a weighted average share count of approximately 66 million shares normalizing to approximately 81 million shares in Q1 following the IPO, debt conversion, and recent M&A issuance. Importantly, $143.1 million of debt converted into equity, which left us with approximately $36.7 million of debt on the balance sheet. $17.0 million of this is owner financing from several acquisitions, $12.9 million is senior secured notes that did not convert as part of the IPO, and the remainder is from other notes payables. This significant reduction will meaningfully reduce interest expense moving forward. As part of this successful debt conversion related to the IPO, we incurred a number of meaningful non-routine direct and non-cash expenses totalling $11.2 million, that do not continue after the IPO. These charges are adjusted out of our non-GAAP net loss attributable to members of $26.7 million. Additionally, $12.3 million of non-routine, non-cash financing matters are reflected as deductions attributable to members. The combination of these two sets of non-routine costs results in a non-GAAP net loss of $39.0 million available to stockholders. This amount available is used to calculate non-GAAP loss per unit, which is negative $4.71 for Q3. Looking ahead, our financial approach is focused on building a scalable business by expanding our core offerings, integrating strategic acquisitions, and managing costs responsibly. With significant foundational investments already made, we believe we can now leverage our cost base more effectively to grow the top-line and improve profitability. We are experiencing an exciting financial turning point for the company and are issuing early guidance for 2026 to provide investors with a roadmap for our growth. We expect to nearly double revenue in 2026 to over $180 million. We are experiencing strong organic growth across the Gloo platform, including Gloo 360 and other offerings. We are also assuming that $40 million of the $180 million will come from incremental acquisitions. Our acquisition of Westfall contributes approximately $20 million of that $40 million. We have a robust and actionable M&A pipeline and expect M&A to be front half weighted next year. Additionally, we are firmly committed to achieving positive Adjusted EBITDA profitability in Q4 2026 and expect meaningful sequential improvement in Adjusted EBITDA to begin in Q1 2026 as cost savings actions combined with revenue growth will begin to flow through at that point. With that, I will turn the call back to Scott for some closing comments. Scott Beck: Thank you, Paul. Let me close by saying thank you to our team, our partners, our investors, and all the organizations and the people that we serve. Together, we've spent more than a decade laying the groundwork for Gloo, investing heavily in our technology, our partnerships, and our mission. Q3 marks a key inflection point in our business. We're now continuing this hockey-stick growth phase that we've been building toward, setting us up for a very strong 2026. Our goal is simple, to build a large, profitable, mission-driven company that serves those who serve and the Faith and Flourishing ecosystem so that these organizations can scale and thrive and the people that they serve can flourish, and we're doing this for the decades that are ahead. You have our commitment that we will execute with discipline. We will communicate transparently, and deliver on doing what we say we're going to do. Over to you, operator for Q&A. Operator: [Operator Instructions] Our first question for the day will be coming from Richard Baldry of ROTH Capital. Richard Baldry: Congrats on a great quarter. You essentially hit my 6-month out revenue target, so it makes life a little easier. I want to start with the more than 20 customers that should ramp to be over $1 million in annual contract value each. Can you walk through what they're buying? Are they multiproduct, multiservice buys? Or are they large scale within one of the offerings? Sort of where those buckets are coming in because that's obviously a good driver, an important driver of your organic growth. Scott Beck: Thank you, Rich. This is Scott Beck. It comes from a couple of different areas. Obviously, our Gloo 360 offering is a very significant offering to be able to bring advanced technologies to take over the infrastructure for many of these ministries and organizations that just have a hard time keeping up with that. In many instances, they can be decades behind and our ability to come in and to now be able to provide next-generation AI-powered infrastructures is a very significant driver of this. But in addition to that, we also got a lot of that from the Masterworks side where we've got major agreements and relationships as we're basically helping them develop from a donor standpoint, helping those organizations be able to reach more people, be able to get them powering the different organizations that they serve with greater donor engagement. We talked about earlier, a good example of that being ABS, American Bible Society, which we're working with on both the Gloo 360 side as well as on the Masterwork side. So those things are significant contributions as well. In addition, one other area, Rich, would be what we're doing with Midwestern. Midwestern has been a great partner of ours, being able to bring next-generation technologies, leveraging our platform to be able to build tech for other businesses and other ministries in this ecosystem. So I keep going and the pipeline is really strong as we look at 2026, but we're super excited and to be able to be delivering at scale, important technologies to the space and human flourishing ecosystem with many customers in excess of $1 million for the year. Richard Baldry: And maybe drilling underneath that a little bit, can you talk about what the factors are that gate how quickly those turn from deals to revenue? Sort of what pace is that are they all sort of similar or some that ramp quickly, some that take a little more time, so we get sort of an idea of our backdrop to how quickly those impact organic growth? Patrick Gelsinger: Yes. This is Pat, and I'll give a little bit of color on that. And what we've seen is an acceleration of those opportunities this year. And we're definitely seeing some of these deals now that we have solid proof points across different categories. For instance, in the bible translation category, the ADS example that we gave, where we had very [indiscernible] earlier in the year. So that's caused acceleration to other bible translators. We have multiple in the campus state area. So we've seen acceleration in that category. We've now seen the university segment is now turning on and accelerating as well. So as we see the first proof points, we're able then to see acceleration for the subsequent closures. So I would say that everything that we're indicating is that the sales pipeline is robust, growing and closing faster than we would have expected. And the results that we already are seeing this quarter would be indicative of that accelerating pipeline. Richard Baldry: Got it. And I'll just ask one more, as I don't want to hog the call too much. But with the pace of growth, you're doubling revenue sequentially. Obviously, acquisitions have been important to that. And the pace has been fast enough that I don't think anyone thinks you should have realized all your synergies out of that yet. Can you talk about just how much in synergy realization you should be able to see going forward from what you've put together, sort of how far along you are maybe ones that you've done a year ago versus ones that are just about to close? Just so we get an idea for how big a driver that can be of your move to adjusted EBITDA positive? Patrick Gelsinger: It is a factor for us next year as we look at our drive to profitability next year and accelerating quarter-by-quarter improvements in EBITDA next year, the synergy realizations across the acquisitions that we've done, but also our current core businesses become an increasing important role in accomplishing that EBITDA. Now that we have a solid platform in place, offerings like 360 in place, we're seeing the acceleration in those benefits. But it is an area of cost discipline that we have to put in place across everything that we're doing. Those efforts are already underway as we would say, and thus we have confidence in the next year because we've already initiated quite a number of those synergy realization and cost improvements. So we think we're quite good for those. They're accelerating. You'll see those showing up somewhat next quarter, but on an accelerated basis in Q1 and beyond. Scott Beck: I would add that the synergies both on the cost side as well as we were pointing out on the revenue side. Those revenue side synergies are super important. One of the things that we're so excited about, that's going on with Midwestern and what's happened there with MasterWorks, all of those basically create channel and partnership and synergy on the revenue side, which is also super important to accomplishing that Rich. Operator: And our next question will be coming from the line of Yun Kim of Loop Capital Markets. Yun Suk Kim: All right. Scott, Pat, Paul, first, super congrats on a strong first quarter out of the gate. Scott, if you can give us some update on what type of investments you are making in regard to your Gloo 360 business in terms of both sales, headcount growth and overall service delivery capability? Scott Beck: Sure. Thanks for the question. Pat, why don't you give us your perspective on the investment in Gloo 360 and [indiscernible] is that. Yes. And [indiscernible] for it, it really fits into 3 different dimensions. One is sales capacity, as you suggest, and we are ramping up our sales force and that is giving us more capacity to reach more segments, that hiring is underway. We're able to find very good candidates who have proven records in sales, software sales, enterprise software that want to join a faith and values-based organization like Gloo. So we're ramping up the sales capacity. Second, many of the Gloo 360 customers, we are taking on their staff. So immediately, we get the infusion of their talent, which we're rightsizing, upskilling and being able to add to our focus of resources for delivery. And then third is very targeted capabilities in areas like specific staff application, specific areas like security and IT services, but maybe most importantly, augmenting for AI and agentic capability that allow us to bring more margin to those relationships. So across that full set of capabilities, we're adding talent and seeing a very wide market for 360. But I'd also emphasize that it's not just 360 proper, but when we have a beachhead of 360, we're able to deliver AI services. We have the opportunity to become their marketing partner with Masterworks. And in many cases, the teams that we have at service and Midwestern become the project teams but also are being further as a result of those relationships. So we see those 360 or enterprise relationships really being the beachhead for us to be able to service the network providers at scale across the full value proposition of Gloo. Yun Suk Kim: Okay. Great. And given that the sales cycle related to Gloo 360 is probably fairly long given the size of those deals, should we expect a typical seasonal back-end loaded kind of linearity for next year 2026 in terms of overall booking performance where majority of the bookings could happen more likely in the second half of the year? Patrick Gelsinger: Actually, the behavior that we're seeing is not the we are seeing the acceleration in the pipeline and the acceleration of deal closure for 360. So while exactly the characteristics that I would have expected is what you described, we're not seeing that. Once you have proof points in the category, we're seeing the category sales occur quickly, and we're seeing the ability then for those accounts to come on board on an accelerated basis. So I think you're going to see nice quarter-by-quarter improvements in our revenue and in our EBIT contribution as a result of those accounts. And I'd also say that just emphasizes the value that Gloo brings to this ecosystem. They have technology gaps. They have deep needs for capabilities and our ability to now have improvement cases like the ABS example that American Bible Society, example that we gave on the call is an evidence that we have capabilities that are desperately needed, desired and accelerating this ecosystem. Yun Suk Kim: Okay. And then one last question for me. Pat, in regard to the overall AI efforts, obviously, there's a lot of talk about a capacity issue in the market. Are you running into any capacity issue? And if you are, what are the steps you're taking to minimize that impact? Patrick Gelsinger: Overall, our AI [indiscernible] at scale yet that we're hitting any of those capacity issues. However, we do see one of our opportunities to be the values aligned provider to the ecosystem, build the cost structure and scale, which is the question that you're really asking, and we're making sure that we're building all 3 of those. We're going to build a great platform. We have a leading-edge capability. We have values aligned with capacity and cost to serve this ecosystem, and we're planning carefully to make sure we have enough capacity in '26 and beyond to satisfy the ecosystem requirements. So a very active topic. But so far, we don't see any constraints in our ability to deliver. Operator: And our next question will be coming from the line of Jason Kreyer of Craig-Hallum. Jason Kreyer: Wonderful. Great quarter. So I want to go back to the $20 million customers. As you look across the platform today, how many customers that you are currently engaged with have the potential to be $1 million customers? Patrick Gelsinger: Yes, great question. I mean we've been working, as you know, in this ecosystem for over a decade. And those relationships run substantially deep. When you look at our pipeline, our pipeline includes a lot of those long-term relationships, people that we've been working with as well as a lot of current customers. So I think from our perspective, it's a pretty unbelievably large set of potential customers and current customers that can scale to over $1 million. Now if you remember, we've got 2 sides of this ecosystem that we serve, right? One side are the churches and the frontline organizations. That's not where we're going to see $1 million customers. That's where we're being able to scale. We're adding paying customers over there at scale, super excited and happy with that growth rate. But that's not where your $1 million customers come from. Your million customers come from the Network Capability Providers, right? The folks that are basically out there providing services like Westfall Gold or MasterWorks itself, the organizations that are the not-for-profit on the front line, whether it's the campus ministries, whether it's the child development organization, the different bible translation organization on and on and on. So when you look at that as well as combining that with the customer base that Midwestern has got, the current customer base that 360 is working against, we see a very, very significant customer base opportunity in million plus. Scott Beck: I would just add 2 other quick points. One is you measure the [indiscernible] available for those network capability providers. They are in the $60 billion range. So this is a very large market with tens of thousands of brands in that segment. So we see that there's just many customers for us to reach for it. I'd also say that the $1 million customers, we see increased penetration inside those customers as well. So even as we are happy with the $20 million or the $20 million over $1 million, we see that there's increased opportunity inside every one of those customers. Jason Kreyer: I appreciate that. And then can you just maybe kind of compare and contrast the services or the capabilities that you're getting from Masterworks versus what you're bringing in with Westfall. And then maybe like if you look at the last several months since you've had Masterworks, it seems like a very logical cross-sell. And I'm just curious if there's any pushback and if kind of Westfall can help fill in some of those gaps in terms of where there might be pushback. Patrick Gelsinger: Yes. Thanks for sure. These are incredibly synergistic. As we said, the donor is the heart of this ecosystem, right? The donors whether they're small donors into a church or the bigger donors into the different major ministries that are out there, it's at the heart. And this is a very good set of synergies. You can think about Westfall Gold, which we're delighted to be bringing into the Gloo family today is really the top end of the donor pyramid. They do amazing data-driven, create incredible experiences, the best-in-class to be able to nurture major donors into multi-hundred thousand, multimillion dollar types of commitments. They do this better than anybody in the ecosystem. However, after those events that they do and how do you keep nurturing those organizations between those major events. That's when a Masterworks shows up who's excellent at being able to do that nurture in between the events as well as the nurture for the smaller donors that then can become the larger donors. So both of those are really core to what we're thinking about in terms of going forward. We're delighted with it and they're delighted with one level. I mean the folks at Masterworks are so excited that we've got Westfall Gold and the folks at Westfall Gold likewise are so excited to be able to partner at a deeper level with Masterworks. Operator: And our next question will be coming from the line of Dan Kurnos of The Benchmark Company. Daniel Kurnos: Great. Obviously, I will echo congratulations to you guys coming out strong out of the blocks. And Scott and Pat, since this is your guys' first call, and I know you've touched on pieces of this, but can you guys spend a little bit more time just kind of talking through the [ doctrine ] or guidelines that's informing the M&A for you guys, whether it's what you're paying, the price that you're willing to pay, the synergy opportunities that you see? And Pat and Scott, you both mentioned that the opportunity, the pipeline is probably better than you anticipated that it was. Is there anything that would sort of incentivize or make you guys be willing to be more opportunistic if the right particular product sets or capabilities broke your way? Scott Beck: Sure. Yes. So from our standpoint, it's important to realize that on the M&A front, we start with organizations that are already connected to our platform. We have been working with Masterworks for years. We've been working with Westfall Gold for years as an example. Midwestern, which was a very significant acquisition we have been working. So these are not strangers. Our pipeline is very strong and it's significant as we described. When you look at the prioritization, there's a couple of different categories that they drop into one of these capabilities around being able to serve the churches and those frontline organizations around donor, around marketing, around content that can add into the overall AI engine that we're doing. But we're also looking for things that are accretive. They're accretive from the standpoint of revenue and help us to build our revenue base. They're accretive in terms of EBITDA and EBITDA moving us and accelerating us to EBITDA profitability. And they're accretive from the standpoint of continuing to build the synergies within the Gloo platform, which strengthens the overall moat that we have in positively serving this ecosystem. But we're also looking for technology as an important part of that. Pat why don't you talk about that. Patrick Gelsinger: XRI acquisition is a great example of that. And acquisitions like that will definitely be part of the thesis going forward, strengthening offers that we already have deepening them in the marketplace. And the customer that we announced American Bible Society does Bible translation. And now we have maybe the leading logistics capabilities in the world with XRI in the AI-driven logistics area. So those are the areas that continue to excite us in strengthening the platform. Clearly, with 360, we're expanding the number of services, the range of services that we're offering. So we want to strengthen our capabilities there. And as Scott said, accretive. We're incredibly focused on getting the profitability as Paul will keep reminding us. And with that, we want to keep a high discipline on both the multiples that we apply and being able to rapidly see accretion in the financials that we result in. So those factors and a great pipeline of opportunities give us a lot of flexibility both exercise [indiscernible] but also opportunity. Daniel Kurnos: Got it. That's really helpful. And then just to kind of follow up on, I think, Jason's question and maybe your answer, Scott, as we go into '26, and we know that you're adding capabilities all the time here, how should we think about growth from upsell and conversion from the existing customer base versus how much growth might come from new customers? And just to be clear, I don't think it does, but does the '26 guidance include any major wins or major deals like we saw with [indiscernible] in the prior year? Scott Beck: Couple of questions there. Number one, we're not seeing in our 2026 numbers, any big specific campaigns or it's the run of the middle of what we do. Gloo 360, more of that, MasterWorks, more of that, Midwestern, more of that, our media network, more of that. So there isn't anything in there except grinding it out good, solid organic growth with what we've already got. And then we had a little bit of M&A in that $180 million number. But we already just booked $20 million of that, right? So that number might have been $40 million that we were thinking about moving forward on a go-forward basis. $20 million of that is already in the bank. So we feel really good about that. But no, we don't see any major engager or one-timers that are coming through. Obviously, if something shows up, we would take advantage of it, but that's not what's driving our numbers. Daniel Kurnos: And the question, Scott, just on new versus existing upsell, cross-sell? Scott Beck: Yes, sure. A balance between those for sure. We're going to be adding to the current customers that we've got. But when you look at a lot of the things, in particular, Gloo 360, a lot of that is going to be new. If you look at Masterworks, I think a lot of that is going to be able to be able to upsell. A perfect example of that upsell is the Westfall Gold being now be available to a Masterworks customer. So I think we've got a good balance between both of those. Patrick Gelsinger: Yes. And as I was indicating earlier, for us, additional customers within a category where we have proven success and we're able to move, I'll call it, horizontally within the category as opposed to vertically into a new category, that's a very efficient sale for us. And you get lots of synergies, essentially a Bible translator works with another Bible translator. Today they want us to be working with both of them. So we see a lot of affinity there. So it's deepening in the category as well. It's a very efficient sale for us, and we're seeing that very much in the realization of that growing sales pipeline and the accelerating sales pipeline. And we're just beginning to open up entirely new categories of that like we do with the Christian University segment, which we're starting to see some success. So we do think that we have the opportunity to go deeper with existing accounts bring more of the Gloo offering into those accounts, move within the segments that we're in, but then also begin to open up new categories as well. Scott Beck: We operate in a very collaborative ecosystem right now. And it's not one that we take lightly. I mean we love the work that these folks are doing. I mean what's better than being able to help more Bible translation is get to more places in the world. What's more being able to help the organizations that are out there on campuses help people that today are so much in need of community. And so not only are they collaborative, but that sets us up to be able to serve them well so that they can help more people and they can help the communities thrive. Operator: And the next question will be coming from the line of Eric Wold of Texas Capital Securities. Eric Wold: A couple of questions. One, kind of a follow-up. Talk about the -- Scott, you talked about the pipeline for next year, the pipe of acquisition has obviously gotten stronger since the IPO. And you talked about next year being front half weighted and now you've done basically half of the $40 million already with Westfall. What would you need to see to maybe bring something from a '27 pipeline of acquisitions into '26 or accelerate that? And how much of that decision is really on your side, meaning you don't want to put too much on your plate, you want to wait for something to make sure it's accretive versus one of your partners on the platform, maybe not think it's the right time for them to be acquired and kind of waiting a little bit longer before taking that step? Scott Beck: Number one, discipline in strategy, right? We're going to be very strategic in terms of the investments and the acquisitions that we make. We're going to be very strategic and be very disciplined. We've been able to bring these partners in, been able to help them scale at this point, and we're going to continue to be hold that in check. And at the same time, we're going to be available to opportunities. The right partners and the right acquisitions come along. As long as they're being super accretive, we feel like we've got the right synergy and we can integrate them in a good way, we'll move on that. But strategic and disciplined. All of this ultimately then helps develop more moat and more synergies amongst themselves. And it also is then driving us towards that intense focus on EBITDA profitability in Q4. We're not going to let things get in the way of that. We're only going to be doing things that are going to be supportive of that. But it's got to fit from a strategic standpoint, and we've got to be disciplined. Eric Wold: Got it. And then kind of following up on that, as you think about an acquisition taking place and the company moving from an existing partner, NCP on your platform to an acquired company within Gloo Capital Partners. I guess how long has it typically taken? Obviously you've done a number of acquisitions in the past couple of years. How long does it typically take from that target to move from kind of the current revenue run rate to kind of actually seeing some synergies, revenue synergies kind of a boost to organic growth occur, I guess, for example, the $20 million you noted for Westfall in '26. How different is that from their current revenue run rate in terms of kind of expecting kind of meaningful organic growth on top of that to get to that $20 million? Scott Beck: We have a disciplined process of presenting business case and those business cases with synergies, both on the revenue and on the cost side. We're conservative in terms of how we build our business cases and what kind of revenue acceleration and cost acceleration we expect. We do not want to get ahead of ourselves on that. So we plan on that being very conservative and then we aggressively get after it. So in that $20 million, there isn't a lot of synergy built in. We believe that there is a lot of opportunity for synergy, but we don't build that in. If you look at the organizations that we've gotten involved with, we had on an overall basis, when we look at it cumulatively, we had very nice growth. In order to get to our number this year of $180 million, in addition to the $40 million of acquisitions that we've talked about and you guys have got a lot of them in your numbers, there is a lot of organic growth in that. And that organic growth is coming both from the Gloo platform offering as well as helping to organically grow [indiscernible] positions. Operator: And the last question for the day will be coming from the line of Ryan Meyers of Lake Street Capital Markets. Ryan Meyers: Congrats on your first quarter as a public company. First one for me. I don't think you called this out in the prepared remarks, but what was the mix of recurring revenue during the quarter? Unknown Executive: Ryan, good to talk with you. We don't break that out specifically within it. It really lines up with the revenue categories we break out in the [indiscernible] subscription, marketplace, advertising and platform solutions. But we don't have that detail right now. Ryan Meyers: Okay. And then just kind of as a follow-up on that, if we think about the 2026 revenue guide, I know you guys don't break it out by segment. But directionally, how should we be thinking about the mix across those 4 areas being subscription, marketplace, advertising and Platform Solutions, just so we can get a good idea of what to expect for '26. Scott Beck: Yes. I think that what you're going to see is as we're continuing on M&A as well as growing what we've got right now, Gloo 360, which is a big grower of ours is in that subscription area. There's some of the stuff that we brought in, let's say, like with Westfall Gold that's going to be a little bit more on the Platform Solutions side. So I think that you'll be able to see a continued trend in terms of what we've seen. You saw the platform grew faster than Platform Solutions as a percentage in this last quarter. And I think that, that is what we would expect to continue to see as we go through the year where the platform grows faster than the Platform subscription. But a little bit of that is also going to depend on M&A and where we ultimately go with that and how that fits in the mix. Our organic growth from [indiscernible] definitely geared towards platform and Platform and Subscription. Operator: Thank you. And this does conclude today's conference call. Thank you all for participating. You may now disconnect.