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Operator: Greetings, and welcome to the Xponential Fitness, Inc.’s First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Patricia Nir, Investor Relations. Please go ahead. Patricia Nir: Thank you, Operator. Good afternoon, and thank you all for joining our conference call to discuss Xponential Fitness, Inc.’s First Quarter 2026 Financial Results. I am joined by Michael M. Nuzzo, Chief Executive Officer, and Robert Julian, Interim Chief Financial Officer. A recording of this call will be posted on the investors section of our website at investor.exponential.com. We remind you that during the conference call, we will make certain forward-looking statements, including discussions of our business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our results to differ materially from such expectations. For a more detailed description of these risks and uncertainties, please refer to our most recent Annual Report on Form 10-K for the year ended 12/31/2025, filed with the SEC, and subsequent filings with the SEC. We assume no obligation to update the information provided on today's call except as required by applicable law. In addition, we will be discussing certain non-GAAP financial measures on this conference call. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered in conjunction with the GAAP measures that we provide. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release that was issued earlier today prior to this call and in the investor presentation available on our website. We are not able to provide a quantitative reconciliation of forward-looking non-GAAP measures without unreasonable efforts to the most directly comparable GAAP measures due to the high variability, complexity, and low visibility with respect to certain items. Please also note that all numbers reported in today's prepared remarks refer to global figures unless otherwise noted. As a reminder, in order to ensure period-over-period comparability, and consistent with our reporting method since IPO, we present all KPIs on a pro forma basis, meaning for the full KPI history presented, we only include brands that are under our ownership as of the current reporting period. For the period ended 03/31/2026, this includes BFT, Club Pilates, Pure Barre, StretchLab, and YogaSix. I will now turn the call over to Michael M. Nuzzo, CEO of Xponential Fitness, Inc. Michael M. Nuzzo: Thanks, Patricia. Good afternoon and thank you all for joining us today. Before I discuss the quarter, I would like to highlight three important leadership additions. During the first quarter, we welcomed Robert Julian as Interim CFO and Eric Quaid as Chief Information Officer. Robert brings over 30 years of proven financial leadership with experience guiding high-growth consumer brands including The RealReal, Sportsman’s Warehouse, and Callaway Golf. Eric brings extensive hands-on experience across the full spectrum of multi-site technology disciplines, scaling enterprise capabilities for consumer brands such as Tilly’s, Hot Topic, and Billabong. Finally, in mid-May, we will be welcoming Steph So as our new Chief Marketing Officer. Steph was most recently Chief Growth Officer at Shake Shack and has led brand-building and performance marketing efforts in senior roles at Ralph Lauren, Estée Lauder, and Cover FX. Collectively, these highly accomplished leaders will strengthen execution across the organization and we are very happy to welcome them to the Xponential Fitness, Inc. team. Now I will turn to a more detailed discussion of the quarter. In Q1, we continued focusing on operating in a more integrated way, aligning marketing, operations, technology, and brand building to drive stronger performance and set the foundation for continued operational improvement. These organic growth priorities, coupled with our sustained unit expansion, established brands, and industry tailwinds, highlight the potential beyond our existing platform today and position Xponential Fitness, Inc. strongly for future success. With that backdrop, an overview of Q1 is as follows. Domestically, we opened 23 net new units, and internationally we opened 17 net new units, consistent with our midpoint expectation of 160 net new openings globally for 2026. We finalized Club Pilates unit expansion deals with two major domestic franchisee partners, securing commitments for approximately 160 future studio openings. Internationally, Club Pilates opened its first studios in three new countries: Mexico, Belgium, and Thailand. We also recently finalized the development agreement in the Philippines. Overall, our Club Pilates growth pipeline remains robust and we have an expectation to expand to over 2,100 studios domestically. Internationally, we currently have 189 open studios across 14 countries with committed licenses for more than 499 additional studios in major markets in Europe and Asia, capitalizing on the growing Pilates wave across the world. We also see studio growth potential across our other brands; we will provide more updates as we move through 2026. Our Q1 same-store studio sales were down 6% overall and down 4% for Club Pilates, which was a modest change from the fourth quarter decrease of 3% in Club Pilates. These sales results, while below our standard, were expected given several factors I will discuss shortly in addition to the challenging year-over-year comparison with Q1 2025, which included 6% total company and 9% Club Pilates same-studio sales. Importantly, we have seen signs of stabilization as we reaffirm our 2026 guidance. Specifically, with front-loaded marketing spend in Q1, we saw paid lead growth with a combination of enhanced national and local paid marketing match efforts. While still early, we expect ongoing improved performance and continued momentum as we further enhance organic top-of-funnel member acquisition capabilities and meaningfully improve our digital experience. Operationally, we also made progress in Q1, including the following initiatives: completed the transition to a new national marketing and digital agency with extensive expertise in the rapidly changing performance, social, and AI marketing landscape; we are seeing quick improved performance in our paid performance marketing efforts; launched an automated email CRM program which is now being used across all our brands and major new member cohorts, with a second phase that includes the development of member retention outreach; accelerated critical work on all our brand digital properties that I am convinced is a key element to organic growth; our websites in particular are long overdue for upgrades to design, navigation, user experience, and AI SEO. Initial improvements recently completed for a pilot group of StretchLab studio microsites are yielding a high single-digit initial booking lift. Once we expand this new navigation experience to our national site and full studio chain, we anticipate it will have a real impact on StretchLab trends. I also recently saw the new proposed Club Pilates site redesign and it is a significant change that will position us with best-in-class fitness digital experiences. I cannot wait to leverage this work for all of our brands’ web, mobile, and app properties. We expect it to transform our top-of-funnel experience. Nationally, we saw the recently launched Club Pilates Circuit Class gain quick adoption across our chain and popularity with members. We will also be launching a new Y6 Core class for our YogaSix brand, which incorporates elements of hot mat Pilates. We kicked off our remodel program in Club Pilates, with Pure Barre planned as a fast follow. All new Club Pilates studio openings will feature our new design experience. We meaningfully enhanced our YogaSix, Pure Barre, and BFT brand assets and introductory offers across all marketing channels; leveraged the pricing work we completed in Q4 to plan actions in upcoming quarters, including targeting an inflationary price adjustment in early Q3; and we continue to expand our engagement with studio operators with our field support teams, with a focus on improving lead-to-new-member conversion. These teams are providing more hands-on support through targeted sales coaching, enhanced marketing tools, and newly developed KPI dashboards. Most importantly, this represents our scaled effort to deliver consistent in-market support, particularly for new studio openings, staff transitions, and underperforming locations, which we believe will be a key driver of improved studio-level performance over time. This is all positive progress, but let me talk more about our same-studio sales, where we have spent considerable time focusing on the drivers of our trends. First, importantly, our existing members are showing even more affinity and loyalty to our modalities and brand proposition. In fact, in Q1 year-over-year, company-wide member retention improved 36 basis points, and March marked our best member retention month since Q1 2024. In particular, this strong member retention in Club Pilates continues to produce one of the strongest three-year member LTVs at over $2,300, and recent surveys continue to indicate that approximately 80% of members expect to continue taking classes over the next six to 12 months. Clearly, our strong member retention provides a foundation for driving organic growth. So with stronger existing member retention, we are laser-focused on accelerating top-of-funnel and new member conversion as the major opportunity. Here we see the following factors at play. First, across all our brands, we have seen lower digital traffic driven by industry-wide platform changes at Meta and Google. Meta represents a major share of our local marketing—specifically direct franchisee spend with company-approved local agency partners. Starting in mid-2025, Meta began transitioning to Andromeda. This AI-driven ad approach replaced focused audience targeting, which shifted the platform toward a more broad-based, consolidated spend model. This challenged the efficacy of our structure of many distinct agency arrangements supporting individual studio markets. Essentially, we were not realizing the scale advantage with our Meta spend, and we believe this started to affect lead flow in late 2025 into 2026. Also in 2025, organic search—primarily Google—underwent significant AI-driven changes that have been widely reported to reduce traditional organic click-through rates across every sector by nearly 30%. Increasingly, search results now yield AI-generated content instead of clickable links or ads, a shift many of you have experienced firsthand. Because virtually all prospective members begin their journey on our web and mobile platforms, these changes had a major impact on our organic website traffic and in turn our new member lead generation. Second, our ability to convert new leads to members was impacted as changes to member privacy systems created confusion at the studio level and complicated lead outreach. In addition, we had the anticipated transition period from our brand-based sales structure to our new field-based support team. The good news is that all these factors are within our control, and we are actively taking steps to address and capitalize on them. On Meta, we are working to enhance our local account structure to better realize scale benefits from individual franchisee spend. On Google, short term, we are addressing organic traffic pressure with a more front-loaded increase in paid media spend, which you will see in our financial results, while our major planned website improvement projects across all brands will include a focus on all the ways to drive better AI SEO results. As the industry leader in the space, we expect to be at the forefront of making meaningful progress quickly. On lead-to-member conversion, we have already addressed our studio system-related deficiencies created by privacy-related changes and we are continuing to integrate our field ops team, who are rolling out tools in support of driving our franchisees’ success. In addition, we expect that our recently launched automated email program will support these, and we will also evaluate other technology tools to improve introductory class booking and membership close rates. My goal in all of this is to become best in class in partnering with our franchisees to generate new member lead flow, create the most seamless digital engagement, and offer the best-supported membership purchase process. With strong member retention as a foundation, by bringing more advanced resources to lead generation with paid performance marketing, new member digital experience improvement, and incremental in-studio membership conversion support, we plan to help our franchisee partners provide a best-in-class member experience. As we look ahead, our focus is on restoring sustainable organic growth through a more disciplined and repeatable execution framework. We also remain focused on retention through ongoing class innovation, our studio remodel programs, and enhanced brand positioning. I want to thank our franchisees and studio teams for their partnership and continued focus on delivering a great member experience every day. Finally, I would like to thank Chelsea, Jair, and Bruce for their service to our Board, and welcome our newest Board member, Nicole. With that, I will turn the call over to Robert for a review of the financials. Robert Julian: Thank you, Mike, and good afternoon, everyone. I would like to begin by expressing my excitement to be stepping into the Interim CFO role here at Xponential Fitness, Inc., and supporting the process for selecting and onboarding a new permanent CFO. It has been a pleasure for me to work with Mike again and to meet and work with the executive leadership team here at Xponential Fitness, Inc. Over the past couple of months, I have had the opportunity to work closely with Mike and the team here to gain a deeper understanding of the business and our financial priorities. I look forward to leveraging my 30-plus years of financial leadership experience to support the company with disciplined financial oversight and focused execution moving forward. It is really great to be here. I will now turn to an overview of our first quarter performance and then discuss our 2026 guidance, which we are reaffirming. While my remarks today will be more streamlined, we encourage you to review the earnings press release and the financial overview section of the investor presentation available on our website. I would also like to mention that, unless otherwise stated, all financial remarks refer to 2026, and all comparisons will be year-over-year comparisons versus 2025. With that, let us turn to the results. We ended the quarter with 3,137 global open studios, opening 66 gross new studios during Q1, with 43 in North America and 23 international. There were 26 global studio closures in the first quarter, in line with historic trends and concentrated primarily within StretchLab, BFT, and Pure Barre. Moving forward, we expect unit closure rates to decline to the low- to mid-single-digit range. We sold 28 licenses globally during Q1, including 16 internationally and 12 in North America. In April, we completed the FDD update for the 2026 cycle as part of the normal renewal process. As of 03/31/2026, we had more than 780 licenses contractually obligated to open in North America and 750 international master franchise obligations. While we continue to pursue terminations of inactive licenses, Q1 terminations were impacted by the annual FDD renewal process, and we expect slightly higher termination revenue and EBITDA over the next couple of quarters. First quarter North America system-wide sales of $437 million were up approximately 2% year over year, and same-store sales were negative 6.2%, both on a pro forma basis adjusting for divestitures. The increase in system-wide sales was driven primarily by growth from net new studio openings. Mike addressed in his earlier comments the challenges around the negative same-store sales performance in Q1 and the strategic actions that we are taking to address and improve these trends moving forward. On a consolidated basis, revenue for the quarter was $60.7 million, down $16.2 million, or 21%, compared to Q1 2025. Approximately $6.8 million of the year-over-year decline was in equipment revenue, which is related to new studio openings and largely a timing issue. $5.6 million of the decline is from our transition from an in-house merchandising model, where we previously recorded the full value of items sold as merchandise revenue, to an outsourced model under which we now record only the royalty or net profit from retail items sold on the merchandise revenue line. Franchise revenue was down $2.7 million from the prior year primarily due to a decrease in same-store sales coupled with the brand divestitures in 2025. The remaining $1.1 million of revenue shortfall was split evenly between marketing fund revenue and other services revenue. Adjusted EBITDA was $20.4 million in Q1, down $6.9 million, or 25%, compared to the prior year. Adjusted EBITDA margin was 34% in Q1 2026, down from 36% in the prior-year period. Approximately $2.9 million of the year-over-year decline in Adjusted EBITDA is related to the timing of incremental marketing spend, net of marketing fund revenue, as we front-loaded more in Q1 2026, and approximately $2.1 million of the decline is associated with the timing of new studio openings in equipment revenue that I mentioned earlier. Turning to the balance sheet, as of 03/31/2026, cash, cash equivalents, and restricted cash were $21.5 million, down from $42.6 million as of 03/31/2025. During the quarter, we entered into and paid lease settlement agreements of approximately $300,000. As of 03/31/2026, we had approximately $8 million of lease liabilities remaining to be settled. We anticipate most of the remaining liabilities will be settled during the remainder of this year. During Q1, we also paid out $12.5 million related to our agreed settlement in the franchisee lawsuit. For the remainder of the year, we anticipate approximately $16.4 million in additional payments related to the settlement of both the franchisee and FTC cases. Although we expect to fund these payments from normal operating cash flow, out of an abundance of caution, in April we drew $10 million on our $25 million revolving credit facility to ensure maximum operating flexibility. This is a short-term timing issue, and we do not anticipate making further draws on the revolving line of credit this year. We expect to pay down the line through our normal healthy cash flow generation by year end or shortly thereafter. In the meantime, we have substantially reduced regulatory and legal uncertainty in the business. Total long-term debt was $523.7 million as of 03/31/2026, compared to $379.1 million as of 03/31/2025. The increase in total long-term debt is primarily due to retiring the convertible preferred security during 2025. Let us now discuss our outlook for 2026. Based on current business conditions and our expectations as of the date of this call, we are reiterating guidance for 2026 as follows. We expect global studios open, net of closures, to be in the range of 150 to 170. We expect the number of closures to be 3% to 5% of the global system this year as a percentage of total open studios. We project North America system-wide sales to range from $1.72 billion to $1.8 billion. Total 2026 revenue is expected to range from $260 million to $270 million. Adjusted EBITDA is expected to range from $100 million to $110 million. This translates into 39.6% Adjusted EBITDA margin at the midpoint. In closing, we are encouraged by the early traction on the organic growth initiatives Mike outlined, and we remain focused on disciplined execution to drive more consistent performance. Our priorities are straightforward: stabilize lead generation, improve lead-to-member conversion, and support our franchisees and field teams with tools and operating rigor that translate into stronger studio-level results. Before opening the call to questions, I would like to note that we are actively engaged in the company’s recently announced review of strategic alternatives. We will not be addressing questions regarding that initiative at this time but will provide additional information on the process when appropriate. Thank you all for your time today. We will now open the call for questions. Operator? Operator: Thank you. At this time, we will be conducting a question-and-answer session. The first question we have is from John Heinbockel of Guggenheim Partners. Please go ahead. John Heinbockel: Hey, Mike, can you talk to the health of the Club Pilates member base and their behavior—in terms of growth in members, packages that they are buying, visitation—speak to that. And then, when do you think—I know the comps are not going to grow very much—but when do you think you at least return to a flattish trend line? Michael M. Nuzzo: Yeah. Hey, John. Thanks for your question. I would start by saying one of the things we feel really good about around the Club Pilates business specifically is the member retention that we called out in our prepared remarks. We have always had really strong member retention, and to even have it increase in the quarter was a really good sign. That, to me, shows continued affinity and loyalty to the brand. When we dig into our member statistics, again, we see broad-based participation in the brand. We see what I would say is very good concentration in what I would call the middle-aged customer, and these are members that tend to be very loyal, as I said before, with very high frequency. So when we were doing the pricing work, we were identifying that these members tend to come to us between eight and 13 times, and I think just under half of them are on our unlimited plan. Those are all great signs—clearly signs of a very healthy member base. We also see it in our new studio openings. Our new studio openings continue to be really strong; each cohort just seems to be getting a little bit better than the previous one. I am also feeling better that, you know, we talked a lot about this sort of top of funnel, and I feel better that we have been able to identify it as the major opportunity in the business. We have seen better results in our paid media investment with our new agency partner, which is a really good thing. And then we have seen, with very modest changes in one of our digital properties for StretchLab, better results. So this tells me that we are clearly on the right track, and focusing on the top of funnel—specifically the organic traffic that comes to our digital properties—is really what we need to continue to do good work around. I think if we do that, we will obviously see that return to better comp results than we had in the quarter. John Heinbockel: Other than the timing issues around marketing and equipment—that was, I guess, $5 million in the quarter—aside from that, what do you need to do to get to your EBITDA target for the year—any changes? And you referenced this third quarter inflationary adjustment or something to that effect. What does that entail? Michael M. Nuzzo: I will take it in two parts. You are right on the question about the expectation for full-year EBITDA. We anticipated that there would be roughly four things that would impact our Q1 EBITDA. One was, you called it out, front-loaded marketing spend. The second was lower terminations—that is related to the FDD renewal process that we did. Lower equipment sales, and then you know this and we knew it—we would have the toughest comparison from a comp standpoint. So we shaped the full-year expectation assuming improvement in each of these line items and, most importantly, that the sales trend would improve to that negative low single-digit comp level that we used to base the guidance on. So that is obviously the focus for us. Around the pricing question, I will go back and talk a little bit about the work that was done there. We did a comprehensive pricing analysis in Q4. It was really helpful on a lot of levels. We are now in what I would call the planning and implementation stage related to that. I would emphasize we are not getting aggressive around price increases. That is probably the worst thing anybody can do in the current pricing environment. The way I would think about it is this is pricing hygiene that probably should have been part of our structure and process before. So we are looking at the pricing tiers—we have probably too many pricing tiers, and so we are going to try to narrow those down a little bit. We are going to provide some additional coaching around tier opportunities within markets. We are setting up a structure that would allow our franchise partners to do inflationary price increases—again, we are talking modest, consistent with the market. And then we are also looking at the discounts that we provide across our business, especially when it comes to new studio openings. We were giving some pretty generous legacy founder “forever” discounts, and we realized we do not have to do as much of that. I think it is good work. I think it will benefit us on the top line for our studios and for us. But, again, I want to put it in context. Operator: The next question we have is from Richard Magnuson of B. Riley Securities. Please go ahead. Richard Magnuson: Hello. Thank you for taking our call. I was wondering if you could provide an update—maybe more specifics on how you are using tools like CRM to target specific audiences, such as older adults. I think you talked a bit about that last time, but have there been any more metrics that showed improvement around conversion, or can you provide any other results? Michael M. Nuzzo: Yeah, Richard. Thanks for the question. I would say that in our switch to a new national agency, that was all part of the work that we did—working very closely with them to understand a lot better our target markets, our target member base, and to really create assets and outbound material that would appeal to them through all of our channels. The other piece that we have done specifically around the CRM front is national coordinated email campaigns that automate emails to a number of our key lead cohorts. For example, if you fill out a lead form but do not show up for that introductory class, we are now outbounding to you to get you to come in for that class. We are starting to see conversion from some of that email work, and it is going to be a huge focus for us over the next couple months. We have started to see better performance from our paid media spend, and I think we are doing as much as we can—and a better job—of making sure that our messaging is much more targeted to the appropriate member for our different brands. Obviously, a StretchLab customer is going to be a little bit different than Club Pilates and Pure Barre and YogaSix, etc. Operator: The next question we have is from Chris O’Cull of Stifel. Please go ahead. Chris O’Cull: Hey, good afternoon, guys. Mike, thanks for the details regarding the Meta and Google advertising issues. Do you have a timeline for those issues being addressed? And what gives you confidence that the company will not need to make marketing investments in the back half of the year to support lead generation? Michael M. Nuzzo: Good question, Chris. I will take the second question first. We planned heavier spend in Q1 and part of Q2. We are going to have to judge based on the ROI. If we are getting good ROI from that, that will help judge how much more we spend over the back part of the year. But I would expect that in the middle to back part of the year, we will start to make some meaningful progress around both the Meta and the Google issues, which will meaningfully help our organic top of funnel, because we really need that to work for us. You cannot do what we do around member acquisition with just paid. There is always a big part that is organic. So fixing that is a major focus. I think we can make some really good progress over the next couple of quarters. Chris O’Cull: I had a question about franchisee consolidation that seems to be occurring across the Club Pilates system. Has the number of franchisees in that system fallen during the past year? Is there a goal in terms of the number of franchisees you would like to see in that system? And lastly, how do you see that impacting your ability to manage and grow the brand? I would assume it would make it easier. Michael M. Nuzzo: I would not characterize that we have lost a lot of franchisees from the brand at all. But what we are doing is we are fortifying our relationships with some of our larger franchisee partners. We completed two deals after the quarter, and we have another couple in the works. Those relationships with larger franchisees continue to pay dividends. They are great operating partners. They partner with us very closely around the real estate side of the business—identifying new studios, whitespace opportunities, fill-in opportunities. It benefits us a lot when it comes to the growth of the brand. However, again, I think that for that brand and its success, there will always be a mix of smaller-scale franchisees and some larger franchisees, and I think the dynamics there create a really healthy overall franchise base. Operator: Next question we have is from Arpine Kocharyan of UBS. Please go ahead. Analyst: Hello. This is Daren Sesikan on behalf of Arpine. Thanks for taking this question. You had previously guided to approximately a 4% decline in same-store sales continuing into the first quarter, but the actual performance appears to have come in somewhat softer than that expectation. Could you walk us through the key drivers behind this variance, particularly how much of the change was driven by pricing versus volume? Michael M. Nuzzo: We guided for 2026 to a low single-digit negative comp. If you take a look at the comparison to the 2025 comp performance, we knew that Q1 was going to be the biggest anniversary—anniversarying the strongest quarter from last year. So the comp performance there did not necessarily surprise us. I called out the factors: most of it is around the top of funnel—the new member acquisition side being the bigger contributor to it. That should give you some insight there. Operator: Ladies and gentlemen, [inaudible]. The next question we have is from Owen Rickert of Northland Capital Markets. Please go ahead. Analyst: Hi. This is Keaton on for Owen. On the innovation side, which newer formats or studio refresh initiatives are generating the strongest early engagement from members and franchisees? Michael M. Nuzzo: That is a good question. I will talk a little bit about the work that we are doing there. We just launched the Club Pilates refresh efforts, so we are now engaging with franchisees around that refresh format. We are also going to utilize that for all of our new studio openings, so we are excited about it. Anytime you have a chance to go out and refresh studios—especially as we have some studios that are up in age—I think that is going to be a really big opportunity for us. In my past, when you do that, you do not always expect a big uplift, but I am usually surprised that oftentimes that is exactly what you see—better member acquisition and better member retention just from having a new studio environment. We are also making progress on a similar refresh program for Pure Barre, and I have seen some of the initial designs for that and it looks great. So studio refresh is a really big focus for us. On the innovation front, we have launched the Circuit class in Club Pilates that at this point is at about 75% of the chain, which is great. Then we have new classes in both YogaSix and Pure Barre that will be launching and rolling out in the next couple of months. The more we can do to keep our brands fresh and new—and changing for the members—the better. It is an area that I have a lot of passion around, and I know the teams and the franchisees get excited to see these new elements roll out. Operator: We have reached the end of the question and answer session. I would like to turn the call back to Michael M. Nuzzo for closing remarks. Michael M. Nuzzo: I want to thank you all for your questions and for joining us today. We appreciate the continued interest in Xponential Fitness, Inc., and we look forward to updating you on our progress as we move through the year. Thank you. Operator: That concludes today’s conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good day, and welcome to the Quest Resource Holding Corporation First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode for the duration of the call. After today's presentation, there will be an opportunity to ask questions. To withdraw a question, please press star then 2. Please be aware that today's call is being recorded. I would now like to turn the call over to Ryan Coleman with Investor Relations. Please go ahead. Ryan Coleman: Thank you, operator, and thank you, everyone, for joining us for the Quest Resource Holding Corporation first quarter 2026 earnings call. Before we begin, I would like to remind everyone that this conference call may include predictions, estimates, and other forward-looking statements regarding future events or future performance of the company. Use of words like anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify those forward-looking statements. Such forward-looking statements are based on the company's current expectations, estimates, projections, beliefs, and assumptions, and involve significant risks and uncertainties. Actual events or the company's results could differ materially from those discussed in the forward-looking statements as a result of various factors, which are discussed in greater detail in the company's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such statements and to consult SEC filings for additional risks and uncertainties. The company's forward-looking statements are presented as of the date made and the company undertakes no obligation to update such statements unless required to do so by law. In addition, this call may include industry and market data and other information as well as the company's observations and views about industry conditions and developments. Data and information are based on the company's estimates, independent publications, government publications, and reports by market research firms and other sources. Although Quest Resource Holding Corporation believes these sources are reliable and the data and other information are accurate, we caution that Quest Resource Holding Corporation does not independently verify the reliability of the sources or the accuracy of the information. Certain non-GAAP financial measures will also be disclosed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. Unless it is otherwise stated, it should be assumed that any financials discussed in this call will be on a non-GAAP basis. Full reconciliations of non-GAAP to GAAP financial measures are included in today's earnings release. With that, I would like to turn the call over to Perry W. Moss, Chief Executive Officer. Perry W. Moss: Thanks, Ryan. Thanks everyone for joining this afternoon. Our first quarter marked a steady monthly sequential improvement in the business from the fourth quarter, which was consistent with the seasonal trend we typically observe, though slightly better than the prior year. Revenue from our industrial customers increased primarily due to seasonality, though we did see some incremental revenue from certain customers above the usual seasonal acceleration. However, the industrial portfolio as a whole remains challenged as a result of the softer manufacturing environment. Meanwhile, non-industrial parts of the business performed largely in line or better than anticipated as our focus to diversify the business into sectors like restaurants, hospitality, and retail helped to partially offset the lower industrial volumes. Notably, our performance improved from month to month throughout the quarter and we ended the quarter with an encouraging trend. While it is far too early to determine the durability of this trend, we are cautiously optimistic given the exit rate of the quarter. This is tempered in part by recent geopolitical events as well as the risk of an extended period of elevated fuel prices. As we continue to communicate, we are acutely focused on what we can control. We continue to demonstrate a firm grasp on the operations of the company as our operational excellence initiatives deliver improved performance across the business, from exception management, wallet share expansions, billing and collections, and overall productivity and cost containment efforts. We are controlling costs very well and taking proactive measures to give ourselves incremental financial flexibility as macroeconomic conditions approve. We are very encouraged by our progress on each front and expect these initiatives to drive additional efficiencies going forward. These efforts also began to deliver important sales momentum during 2025, which included the launch of a significant expansion of an existing retail customer, the onboarding of a new full-service restaurant customer, and expanded share-of-wallet wins with two major customers. While each of these wins were delivering incremental revenue shortly after their announcement, the one-time costs associated with onboarding these clients had been masking their profitability contributions. I am pleased to report that each of these recent wins finished the first quarter as full contributors to our financial results, as we have completed the onboarding period of one-time costs to execute the service change-outs to serve these new or expanded programs. Our new sales pipeline remains active and we continue to engage with several exciting opportunities to add large national companies to our portfolio. While the overall macroeconomic environment continues to slow the overall decision-making process for many of these prospective customers, we are encouraged by the discussions we are having as the Quest Resource Holding Corporation value proposition continues to resonate with key prospective customers. We ended 2025 with better momentum, though saw opportunities get pushed into 2026. We remain very engaged with these prospects and believe that we will be able to successfully win and onboard our share of these potential customers as the macro backdrop improves and confidence returns. Just recently, we won a new contract with one of the largest franchisees in the quick-service restaurant industry. This customer is a large national operator that carries plenty of white space for wallet share expansion as we execute effectively. It also marks another important win to diversify the business and will help to offset the seasonal fluctuations of our larger industrial customers. We onboarded this new customer on May 1 with minimal service change-outs. We also remain encouraged by the number and size of share-of-wallet opportunities with existing customers, which remains a central focus of ours. Last year, we heightened our focus on this sales channel and structured more robust internal systems and processes to track, evaluate, and pursue these opportunities. We are very happy with the early successes we have had and we have broadened the number of waste streams that we are handling for some clients, added new value-added services, and captured a larger share of customer locations. Our growing pipeline of opportunities across both new sales and wallet share expansions leaves us confident that these initiatives will contribute to greater levels of organic growth for us going forward and be strong contributors to gross profit dollar growth as we continue to execute our land-and-expand strategy and optimize service levels. We also continue to diversify the portfolio as we grow in non-industrial end markets like retail, hospitality, grocery stores, and expand into new markets like health care and more. Our technology and capabilities continue to be key differentiators for us and are driving improved customer service levels and vendor management practices. Our technology platform's ability to identify exceptions in vendor invoices is central to our value proposition of cost avoidance, cost reduction, and improved service levels. The platform's ability to identify these exceptions continues to improve and, importantly, we have invested in automated no-touch capabilities to enable our team to effectively rectify these exceptions. Customer- and vendor-facing advancements like these create real value and make it easier to do business with Quest Resource Holding Corporation, but also help to optimize our internal processes and overall profitability. Overall, macroeconomic conditions and a softer industrial environment continue to flow through to reduced volumes from our large industrial customers. However, we continue to make very encouraging progress streamlining our overall business and growing in non-industrial end markets. We remain as confident as ever that we are on very solid footing for when conditions improve and as our softer year-over-year revenue is a function of volume and not one of customer attrition. The operational improvements we have implemented over the past year will drive higher leverage when conditions normalize. We are encouraged by the trend we finished the first quarter on and cautiously optimistic as we look out to Q2 and the rest of 2026. Looking ahead, our key priorities remain unchanged in 2026. We remain focused on growing the business with new and existing customers, driving margin improvements as we execute our operational excellence initiatives, continuing the development of our operating platform, improving cash generation, and reducing our debt balance. With that, I would like to turn the call over to Brett to review our first quarter financial results in greater detail. Brett W. Johnston: Thanks, Perry. Good afternoon, everyone. Revenue for the first quarter was $61.7 million, a 10% decrease from one year ago, but a sequential increase of 5% compared to the fourth quarter. The year-over-year decline was primarily driven by ongoing headwinds from certain clients in the industrial end market, which reduced revenue by approximately $4 million compared to the prior year. These headwinds are mostly confined to a few clients and are primarily related to lower waste volumes and services that are directly tied to the clients' lower production volumes. Notably, the year-ago period also included $3 million of revenue from our mall-related business, which was divested in 2025. Excluding these specific headwinds, the business continued to grow by approximately $2 million, mostly related to new clients and the expansion of client business, or wallet share, during 2025. This growth in business was partially offset by client attrition of $1.7 million, primarily related to a single client loss in 2025. While this growth was modest, it speaks to the efforts of the entire team to offset the impact of the industrial headwinds. It also speaks to what should be less noisy comparable year over year, as we have now sunset the higher-than-normal attrition experienced in 2024 and 2025. As a reminder, this attrition was isolated and mostly related to customers that were acquired and absorbed into the incumbents' waste solution. Since then, we have returned to normalized customer retention rates, which have been very sticky historically. On a sequential basis, the improvement was driven by higher seasonal volumes from our industrial customers and continued growth across much of our non-industrial portfolio, with performance strengthening across the quarter. Moving on to gross profit, in the first quarter, gross profit dollars totaled $9.7 million, a decline of almost 12% compared to the prior year but a sequential increase of 6%. This resulted in a gross margin of 157%. The declines in both gross profit and gross margin compared to the prior year were primarily isolated to the headwinds from the select industrial clients, which contributed to lower volumes as well as isolated margin pressure. These declines were slightly offset by both improved gross profit and gross margins across the remainder of the business as operating initiatives matured and margins from new clients and wallet share expansions continued to take hold. The sequential improvement was in line with our expectations provided last quarter and representative of the seasonal improvement from industrial customers as well as the contribution of recent onboarded customer wins and share-of-wallet expansions, as we have cleared the one-time costs associated with those launches. As we look ahead to Q2, we expect sequential growth in gross profit dollars as recent new business wins and wallet share expansions finished Q1 as full contributors to our financial results. Additionally, the new quick-service restaurant customer we will launch in Q2 is expected to begin ramping fairly quickly, as it requires fewer associated service provider change-outs, which means minimal startup costs and thus should contribute gross profit dollars more quickly than a typical new client win. While we expect to continue to experience some margin pressure in 2026, both in a challenged industrial volume environment as well as from the mix impact of our land-and-expand strategy, we anticipate we will be able to help offset these pressures through optimizing service levels, growing our share of wallet with existing clients, optimizing the client wins from the previous years, and continuing to drive operational improvements across the business. Moving on to SG&A, which was $8.4 million and better than our SG&A estimate for the quarter that we provided on the last call. Sequentially, SG&A grew 9% driven mainly by the resumption of our bonus expense. Our operational excellence initiatives continue to deliver strong productivity and cost containment results, and we remain focused on maintaining this discipline going forward. To that, compared to the prior year, SG&A has decreased by $3 million, a 26% reduction year over year. Moving on to a review of the cash flows and balance sheet, we ended the quarter with $1.1 million in cash and approximately $63.4 million in net notes payable. As a reminder, in March, we refinanced our ABL with Texas Capital Bank to replace the prior ABL with PNC. Concurrently, we negotiated with Monroe Capital, who holds our term debt, to provide both fixed charge and leverage covenant easements across 2026 and into 2027. Those combined efforts will provide ample cushion to operate in this challenging operating environment while we continue to focus on the execution and completion of our initiatives to drive additional efficiencies and operating leverage across the business, while also investing in driving growth through new clients and wallet share. Additionally, the new arrangement with Texas Capital Bank gives us more flexibility to use the excess availability on our ABL to make voluntary early payments on our high-interest term debt, which is currently about a 500-basis-point spread between the two credit facilities. Accordingly, during the first quarter, we made a $2 million early payment on the Monroe term debt, which will reduce interest expense and should free up additional cash to allocate toward debt paydown. We anticipate executing similar early payments as appropriate throughout the year as we work to reduce our overall cost of debt and strengthen our balance sheet. Our operating cash flow in the quarter was slightly positive, roughly $0.2 million. This was a sharp improvement compared to the prior year despite lower revenue and gross profit dollars and was driven by the ongoing optimization of our billing and collections process and our improved vendor payment processes, which both continue to drive improvements in our cash cycle. This progress was partially offset by some of the moving pieces of the ABL refinancing, which used a modest amount of cash at the time of the transaction. Our DSOs finished the quarter in the mid-70s, which was largely unchanged from the fourth quarter. Accounts receivable was up $3 million and in line with the sequential increase in revenues, but the overall trend in DSOs remains downward, falling from the 80s one year ago, and we continue to implement measures to improve our cash cycle. We remain committed to reducing DSOs going forward and believe we have incremental initiatives in our control to drive improvement. During the first quarter, we also reduced the number of working capital days to 11.5, roughly an eleven-day improvement from a year ago. Our financial strategy remains focused on managing our cost structure, leveraging our operational excellence initiatives to drive cash flow, and paying down debt. We also continue to seek ways to elevate our billing and collection and further optimize working capital. We expect these measures, along with our focus on continuous improvement, to improve our cash cycle, strengthen our balance sheet, and provide incremental financial flexibility as the operating landscape improves. With that, I will turn the call back over to Perry for some closing comments before we open it up for Q&A. Perry W. Moss: Great. Thank you, Brett. Our first quarter saw improved performance from the fourth quarter, with results getting better throughout the quarter. Some of this was the typical seasonal acceleration, but it was modestly better than the prior year. It is also clear that the business is benefiting from the team's strong execution, and it is evident in the numbers driven by the now fully onboarded recent new wins and wallet share expansions. It remains a difficult operating environment, but we are confident that we are better positioned to drive improved financial performance. We believe that with continued execution, we will be well on our way to delivering improved shareholder returns and achieving a valuation that is more reflective of the inherent value of the business. With that, I would like to turn the call over to our operator to move us to Q&A. Operator? Operator: We will now open the call for questions. At this time, we will pause just momentarily to assemble our roster. Our first question will come from Aaron Michael Spychalla with Craig-Hallum. Please go ahead. Aaron Michael Spychalla: Yes. Good afternoon, Perry and Brett. Thanks for taking the questions. Maybe first for us, on the new win in QSR, congrats on that. Could you give details you can give on size, number of locations? You talked a little bit about white space for land and expand, so just curious on how many waste streams. And then it sounded like minimal service provider changes, so it sounds like that can ramp pretty quickly as well. Perry W. Moss: Yes, that is right, Aaron. As you know, we do not give specific details about these clients, but this is consistent with all of our new growth targets being seven- to eight-figure. So this is a seven-figure account. We landed a little over 50% of the portfolio, so there is plenty of room for continued expansion. This came from another asset-light provider, so they saw value in the Quest Resource Holding Corporation program over the program they were currently on. Early reports indicate the other award winner was also an asset-light company, and some early indications are that our launch process and transition is much smoother than our competitor, so that leaves me optimistic that there is some growth potential there. The material streams here are typical municipal solid waste and recyclables. Aaron Michael Spychalla: Understood. And then on the share-of-wallet initiatives, is there a way to think about just potential growth you see there, whether it is penetration rates or average number of waste streams? It just seems like you saw good success coming out of the last year and are optimistic moving forward. Perry W. Moss: Yes. As you know, we put some additional focus and discipline around our share of wallet beginning last year. We do not really talk about all of the share-of-wallet wins that we have had. We have had several dozen of those wins, but some of them are not material enough to really mention. The share-of-wallet opportunities that we typically talk about again fall into that same category as new business, so these are large opportunities to expand. We have, I would say, five or six opportunities with some of our largest customers to bring on a whole other segment of their business, and we are in very opportunistic discussions with them. We have rolled out plans on how to implement this new business. The business has not been sold yet, but the conversations are very positive, and I expect to see a lot more growth in the share-of-wallet sector. If you recall, because of the uncertainty in the general economy, we decided that instead of only focusing on new business, which we are still doing, we would put added emphasis on share of wallet because these are existing relationships. These are customers that already trust us; they already know that we execute. So it is an easier yes than with a new prospect. I would tell you that we do not give the value of our pipelines. The new business pipeline is very robust; the share-of-wallet pipeline is about 50% of the size of the new business pipeline, so it is significant. Aaron Michael Spychalla: Alright. Thank you for the color there. And then just maybe one last one. What are you seeing on inflation across the commodity space on the business? Any impact to customer decisions or your vendor network, just how you are managing that and thinking about it moving forward? Perry W. Moss: Yes, it is a really good question. Certainly with the current fuel situation, we got out in front of this and started working with our vendors and our customers before this really fast ramp-up in fuel. We have good protection in our contracts where uncontrollable costs can be passed through. But one of the value propositions that we deliver to our customers is we always fight on their behalf. So instead of simply just taking on cost increases and passing them through, we do everything within our capabilities to push those off or to minimize them. I would say that we have not seen anything significant to affect the business so far, but we have been proactively working on plans should significant cost increases come through. But so far, so good. Aaron Michael Spychalla: Thank you for taking the questions. I will turn it over. Operator: Our next question will come from Gerard J. Sweeney with ROTH Capital. Please go ahead. Gerard J. Sweeney: Good afternoon, Brett and Perry. Thanks for taking my call. Do you ever disclose, or even directionally, how big the industrial business is for you guys in terms of revenue? Brett W. Johnston: No, Jerry, not directly. We have tried to do a good job over the last year or so to call out the variance that is taking place with those select customers within the industrial group. As a reminder, the industrial group is larger than the clients that are driving the variances. We are only speaking to the select couple of clients that sit in an isolated industry market as the variance, but we have not called that out largely. Gerard J. Sweeney: Got it. Alright. The reason I ask is we are starting to see data from the ISM that is turning positive for the first time in years. I think there is some freight data that is showing maybe some price increases, indicating a real goods economy is, dare I say, starting to expand a little bit. These are maybe forward-looking indicators. I am just curious if you have any thoughts on that, or are some of these industrial clients sort of in their own little select world that may not be benefiting from what I am talking about? Perry W. Moss: Jerry, I think these few customers that Brett referenced are in a specific category of the industrial manufacturing sector that has really been pretty soft. I think we have said they operate in the ag sector. If we look at sequential volume increases from Q4, they were largely what we would expect. But if you compare the increase to last year, the increases that we realized in Q4 this year were slightly better. We are not predicting any significant increase in volume yet. We are cautiously optimistic. We did see some good trends. We do not control our customers' production volumes. If they continue to perform like they did, particularly in March, I think we will see some nice trending. We have built this business over the last year to take every advantage of any tailwind that we can get. We just have not had any. March, we may have had a little breeze, and I think we took advantage of it. So if those early indicators flow through to these specific customers in the ag sector, I think we will benefit from that. Brett W. Johnston: I would also remind you, from a year-over-year perspective, if you look back at when we started really talking about those struggles on the industrial side, it was in Q1 of last year. So from a year-over-year comparison, we are kind of sunsetting some of those challenges. We did see some additional reductions across last year, but the bulk of the decline in those clients came largely in 2024 and even 2025. Despite some continued pressure there, maybe we do not get back to the same volumes we had a year and a half ago, but from a year-over-year comparison, it is not going to hold us back from showing growth. Gerard J. Sweeney: Got you. Switching gears, the QSR win. I think you talked a little bit about it, but I do not know if I caught all of it. You said, I think, you had 50% of the portfolio, and it sounded like another asset-light company got the other 50% of the portfolio. I am just wondering if that is stores or locations, or was it service lines? Perry W. Moss: Jerry, that is a good question. Those represent locations. I do not have that based on service lines. I would expect that it would probably be linear, that we got a little over half the locations as well as a little over half of the service lines. Gerard J. Sweeney: Got it. Is that QSR in meat, fish, or chicken? Perry W. Moss: The answer is yes. These are major brands that are very recognizable. In fact, our end came from a referral from one of our corporate customers who operates some of those brands and made the recommendation that this franchisee should look at our model. Gerard J. Sweeney: Got it. Alrighty. I will jump back in queue. Thanks a lot. Operator: This concludes our question and answer session. I would like to turn the conference back over to Perry Moss for any closing remarks. Perry W. Moss: Great. Thank you, operator. Thanks to all of you for joining this afternoon. We always appreciate your support and continued interest in Quest Resource Holding Corporation, and we look forward to updating you all next quarter. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Alarm.com Holdings, Inc. first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the Q&A, please press star 11 on your telephone; you will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to your speaker today, Matthew Zartman. Please go ahead. Matthew Zartman: Thank you. Good afternoon, everyone, and welcome to Alarm.com Holdings, Inc.’s first quarter 2026 earnings conference call. Please note that this call is being recorded. Joining us today are Steve Trundle, our CEO, and Kevin Bradley, our CFO. During today’s call, we will be making forward-looking statements, which are predictions, projections, estimates, and other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. We refer you to the risk factors discussed in our Form 8-K and the associated press release which were filed with the SEC earlier today. The call is subject to these risk factors and we encourage you to review them. Alarm.com Holdings, Inc. assumes no obligation to update forward-looking statements or other information that speak as of their respective dates. In addition, several non-GAAP financial measures will be discussed on the call. A reconciliation of GAAP to non-GAAP measures can be found in today’s press release on our Investor Relations website. I will now turn the call over to Steve Trundle. Steve? Steve Trundle: Thank you, Matt. Good afternoon, and welcome to everyone. We are pleased to report first quarter results that exceeded our expectations. Our SaaS and license revenue in the first quarter was $181.5 million, up 10.8% year-over-year. Our adjusted EBITDA in the quarter was $49.6 million. Our results continue to reflect contributions from across our businesses, with nearly every area running at or slightly above the plan we set out for the year. We had a bit of revenue in the EnergyHub business move forward from the third quarter, but aside from this modest anomaly, the results are a broad-based reflection of how our various business units performed. While our results are more than solid, there were a few bumps along the way in the quarter. First, in January and February, we saw new homebuilding and other business activity impacted by the long spell of snow and ice due to the extreme cold weather that impacted much of the U.S. Installation activity was greatly reduced for about three weeks and then bounced back strong and accelerated through March, reflecting the durability of demand. Toward the end of the first quarter, we also began to deal with supply chain volatility related to standard memory availability as manufacturers shifted more production to sell into the HBM category for AI data centers. This has led to the widely reported substantial cost increases for the memory we use in cameras and other products. We are actively working to manage both supply chain availability of memory and the cost expansion caused by this market dynamic and expect these challenges to continue until the memory market corrects. As a reminder to investors, the portfolio of businesses that we consolidate into our quarterly results spans multiple markets at different stages of development. Our commercial business includes Alarm.com for Business, OpenEye, CHeKT, and Shooter Detection Systems. These commercial businesses are all growing as the security and access control markets evolve toward integrated, cloud-based, AI-driven solutions. Our energy business, EnergyHub, continues to be a meaningful growth contributor and represents a growing share of our overall revenue mix. The EnergyHub platform provides mission-critical distributed IoT management solutions that help utilities address long-term structural pressures on grid reliability and infrastructure. Our core residential business provides a large, durable foundation with a large TAM and a highly productive service provider channel. Structurally high revenue retention is due to the wide range of physically installed devices that subscribers interact with through our application every day. In each business, we deliver software that orchestrates connected devices at scale. This enables us to leverage AI to improve ease of use, unlock new use cases, and make our solutions increasingly essential to both security and operational workflows. In our commercial offerings, where an enterprise may have dozens or even hundreds of video cameras installed, AI-driven use cases are particularly valuable. OpenEye, our enterprise commercial video business, released several capabilities during the quarter that fit this profile. One is a powerful new capability called AI Visual Check. AI Visual Check can detect and issue real-time notifications when a fire exit is blocked, a shelf needs restocking, or a security post is unattended. Customers managing large properties or multisite environments can use AI Visual Check to reduce reliance on manual safety protocol oversight, enabling faster responses to operational issues and improving security compliance across geographically disparate locations. OpenEye also introduced AI Visual Search. This allows security personnel to describe what they are looking for using natural language and retrieve relevant forensic results. They can quickly locate specific moments, objects, or activities across their broad video environment. Both capabilities are included in OpenEye’s premium video subscription service, and end-customer adoption of that service is rapidly growing. Before I hand things over to Kevin, I want to discuss our share repurchase program. During the last two quarters, we purchased over 800 thousand shares of our common stock, including over 400 thousand shares during the first quarter. Last week, our board authorized the purchase of up to an aggregate of $150 million of our outstanding common stock over the next two years. As I expressed on last quarter’s call, we believe that AI is primarily an opportunity for Alarm.com Holdings, Inc., and we will therefore seek to take advantage of any SaaS universe dislocations in the market while still maintaining balance sheet capacity to also pursue acquisitions opportunistically, as we have done over the last several years. In summary, I am pleased with our first quarter results. We remain focused on creating long-term value for our service providers and their customers across residential, commercial, and energy markets, and in the process creating value for our long-term shareholders. I want to thank our service provider partners and our team for their hard work and our investors for their continued trust in our business. With that, I will turn things over to Kevin Bradley to review our detailed financials for the quarter and our updated guidance. Kevin? Kevin Bradley: Thanks, Steve. I will begin by reviewing highlights from our first quarter financial results, and then close with our updated guidance for the second quarter and full year 2026, including several moving parts in our hardware outlook. A few months into the year, I am pleased to report results that continue to demonstrate the durability and resilience of our target markets and business model. We are fortunate to have partnerships with thousands of talented operators who time and again prove their ability to navigate complex and dynamic market environments while delivering mission-critical IoT-based services across the globe. SaaS and license revenue grew 10.8% year-over-year to $181.5 million during the quarter, exceeding the midpoint of our guide by $5.6 million. A driving factor here is our revenue retention rate of over 95% for the quarter, one of the highest readings on this metric in the past ten years. Another factor contributing to the SaaS beat is the continued outperformance at EnergyHub. As a reminder, EnergyHub revenue recurs on an annual basis, and seasonality can vary based on utility program activity and other factors. Hardware and other revenue totaled $83.7 million, up 11.5% year-over-year, and total revenue grew 11% year-over-year to $265.2 million. As you will recall, on January 1, we began passing through the higher tariff rates that had been implemented under the International Emergency Economic Powers Act. Approximately $5 million of our Q1 hardware revenue is from those pass-throughs. We continue to charge those fees today, consistent with the rates we paid to U.S. Customs and Border Protection upon import for the inventory we are currently selling. I will address the expected impact of the February Supreme Court ruling on hardware revenue when I provide our updated guidance for full year 2026. Hardware gross margin came in to the upside at 25.2%, which can be attributed to the mix of products sold skewing toward commercial products generally, and in particular in the commercial video business. Total operating expenses, excluding depreciation and amortization, as well as stock-based compensation and other items we adjust from G&A for non-GAAP purposes, were $125.1 million, a 9.3% increase year-over-year. Note that sales and marketing expense in the quarter includes our presence at ISC West, our largest trade show presence of the year. The event moved from the second quarter last year into the first quarter this year. R&D expense in the quarter, inclusive of stock-based compensation, was $72.1 million, a 5.4% increase year-over-year. The total number of employees we have in R&D functions at the end of Q1 2026 was 1.14 thousand, up 1% year-over-year. Non-GAAP adjusted EBITDA was $49.6 million, slightly higher than we anticipated due to the revenue outperformance we saw during the quarter. GAAP net income was $23.6 million in the first quarter, down from $28 million in the prior year. The primary driver here is lower interest income because we are holding less excess cash after retiring $500 million of convertible notes in January 2026. Non-GAAP adjusted net income was $34.7 million in the quarter, an increase from $32.2 million in the year-ago quarter. We produced $0.65 of earnings per diluted share, which is up 14% year-over-year. We ended the quarter with $497.4 million of cash on the balance sheet and produced $49.7 million of free cash flow. We repurchased 428 thousand shares of stock during the quarter for $20 million, bringing our total share repurchases since the beginning of 2025 to 1.2 million shares. As Steve mentioned, our board recently authorized $150 million of repurchases over the next two years. Before turning to our financial outlook, I wanted to comment on an improvement that we have made to the definition of our non-GAAP profitability metrics. Several times in the past year, you have heard us refer to results being impacted by mark-to-market gains or losses on equity positions included in our treasury portfolio. Because we are not in the business of active investing, we have determined that the fluctuations in market value of these securities do not relate to the operating performance of the business from period to period. As such, we will be excluding these fluctuations from our non-GAAP profitability metrics prospectively, including any reference to comparable periods in the past. Under this new definition, for example, our non-GAAP adjusted EBITDA during fiscal year 2025 would have been $201.3 million rather than $206 million. Our non-GAAP adjusted net income would have been $142 million versus $145.7 million, and our non-GAAP earnings per diluted share would have been $2.55 versus $2.62. I will reiterate that we clearly articulated this $4.7 million non-GAAP adjusted EBITDA tailwind for 2025 on our last earnings call and have been disclosing it in our quarterly filings as well, and we currently plan to continue providing similar disclosures in our filings. I will turn now to our financial outlook. For the second quarter of 2026, we expect SaaS and license revenue of between $185.5 million and $185.7 million. For the full year of 2026, we are raising our SaaS and license revenue outlook to between $749.5 million and $750.5 million. This is an increase from prior guidance of $6 million at the midpoint. We are raising our total revenue outlook for 2026 to be between $1,059.5 million and $1,070.5 million, which includes hardware and other revenue of between $310 million and $320 million. The modest reduction at the midpoint on the hardware line since our February update reflects a couple of exogenous dynamics. The primary factor in our updated hardware outlook follows the Supreme Court ruling in late February 2026 that tariffs implemented using the International Emergency Economic Powers Act were unauthorized. While it does not change the fact that we paid those tariffs on products imported through that date, it does mean that once we have sold that product subjected to those tariffs, we will be lowering our tariff pass-through fees to reflect the new lower tariffs that the administration put into place immediately following that ruling. As a general rule of thumb, those new tariffs are about half of what the old ones were, as of right now. We anticipate that change occurring toward the end of Q2. So if we were running at $5 million of tariff pass-through fees per quarter in Q1, this represents approximately $5 million less in tariff pass-through fees during the second half of the year relative to our prior outlook. A second factor is something that Steve just mentioned, and that is that we are monitoring the turbulence in the memory market and evaluating the impact to our hardware business. The cost impacts that we are seeing there will require that we increase prices for our products that use memory, and we do not yet know if or how these price increases will affect demand. As such, our outlook on the hardware revenue line is cautious at this point in the year, despite the outperformance in Q1. We are raising our non-GAAP adjusted EBITDA outlook for 2026 to between $215 million and $216 million, a $1.5 million increase at the midpoint. The 20.2% adjusted EBITDA margin implied by the midpoint is consistent with our prior guide and represents 30 basis points of margin expansion year-over-year. Non-GAAP adjusted net income for 2026 is projected to be $151.5 million to $152 million, or $2.81 to $2.82 per diluted share, a 10% year-over-year increase. EPS is based on approximately 56.9 million weighted average diluted shares outstanding for the year. We currently project our non-GAAP tax rate for 2026 to remain at 21% under current tax rules. We expect full year 2026 stock-based compensation expense of between $35 million and $37 million. In closing, I am pleased with the broad-based momentum in the business that we have seen so far this year. We delivered a solid quarter against our plan, and we believe we are well positioned to deliver continued revenue growth and profitability while investing to expand our long-term growth opportunities. With that, operator, please open the call for Q&A. Operator: Thank you. We will now open the call for questions. To ask a question, please press star 11 on your telephone. If your question has been answered, you will be removed from the queue. Adam Hotchkiss: I guess, Steve, with the widest beat I can remember on the SaaS and license line in at least a number of years, what would you say drove that? It is particularly interesting to see that line reaccelerate when I know historically we had been talking about ADT being a couple hundred basis-point headwind. It does not really seem like that is showing up in your numbers. So maybe just walk us through the moving pieces and what is driving the maintenance of that roughly 10% growth rate here. And then as a follow-up on OpenEye in the commercial space, how fast is the broader market moving on software and hardware with AI use cases versus what OpenEye is doing? When you are talking to customers, what does demand look like around AI capabilities? Are they patient and willing to wait, or do they tend to go with the first mover? Steve Trundle: Sure, Adam. At a high level, everything was slightly above plan, so we had a bit of a tailwind against our plan. The big drivers were the revenue retention rate, which was unusually high versus our traditional range—we were at about 95.4%—and a little bit of revenue that moved from the third quarter on the EnergyHub side into the first quarter as we had one meaningful agreement adjusted in its structure. Those are the primary drivers. On OpenEye and AI demand, purchasing behavior has changed a bit. Our pipeline looks very solid. We are seeing broader awareness of what a commercial customer can do with AI to enhance not only security but also business operations—delivering business value in addition to security value as we derive insights from rich video content. Customers are looking at products through an AI lens and asking which product solves a problem best with AI. For example, with a large specialty grocery retailer, their highest-margin item is sushi, and it must be freshly stocked between 4 PM and 7 PM. AI Visual Check is now being used to monitor stockouts in that case using an existing security camera view of the sushi refrigerator. It is a good illustration of how customers are thinking about devices and the business insights they can glean. We feel solidly positioned versus competitors in AI capabilities in this domain. Kevin Bradley: I will add a few numbers on the first part. The difference between running at 95.4% revenue retention versus about 94%, the high end of our historical range, is roughly $2 million to $2.5 million per quarter, which is the biggest chunk of the beat. The EnergyHub component was another couple of million dollars, with about half of that pulled forward from Q3. In retrospect, we were probably slightly too conservative on modeling revenue retention going into the year, and we have accounted for that somewhat in our guidance. Matthew Filek: Can you talk a little bit about the gross margin profiles across your growth segments and how those compare to consolidated gross margins? Just trying to get a sense of what continued growth at EnergyHub and the others could mean for consolidated gross margins over the mid to long term as the revenue mix continues to shift toward those faster growing parts of the business. And then on R&D, do you still expect it to remain roughly flat as a percentage of revenue in 2026? Over the next couple of years, where do you see the biggest opportunities for operating leverage across the business? Kevin Bradley: Sure. If you look at our two public reporting segments, in Q1 the SaaS gross margins in the Alarm.com segment are about 87% to 88%. In the “Other” segment, which is where EnergyHub currently sits, they were closer to 60% for Q1, which is probably a bit low due to temporary depression related to the RGS acquisition. Longer term, you are more likely to see gross margin in the “Other” segment at about 65% to 70%, and the Alarm.com segment staying in the 87% to 88% range. So as you model those two components going forward, that is how I would think about the profiles. On R&D, we see it roughly flat as a percentage of revenue for the remainder of this year. As AI unfolds, the question is whether we do more with the same people or the same with fewer people. Our view is to remain very competitive and continue to pursue evolving market opportunities, so we are not betting on massive R&D leverage right now. As growth initiatives mature and reach scale, we expect natural operating leverage from areas that currently drag down consolidated operating margin; that is the primary place we see operating margin expansion. Jack Vander Aarde: Congrats on the solid results and strong retention rate. On EnergyHub, how do you see the number of utility partners and your wallet share with them growing over the next couple of years? It sounds like you have a lot of blue sky left there. And as a follow-up, any updates on the PointCentral business? Steve Trundle: On EnergyHub, after completing the RGS acquisition and adjusting how we categorize utilities, we now work with over 155 utilities, which we define as entities with more than 100 thousand meters in their territory. We are working with utilities that service roughly 75 million to 77 million meters, out of about 130 million total meters we would like to reach. The next game is driving up enrollment within each territory: what percentage of consumers have connected thermostats and, among those with connected thermostats or other devices—EV chargers, batteries, solar inverters—how many get enrolled into programs. We feel we are in a good position on TAM coverage and solution completeness, and we are focused on increasing device attachment and enrollment with our utility partners. On PointCentral, it continues to ramp at a double-digit growth rate, contributing positively to consolidated EBITDA, though it is not a massive consolidated growth driver at the moment. We believe PointCentral is likely number two in the multifamily space, and we are well into six digits of apartments or multifamily units serviced. We remain committed and are probably taking share, but it is not growing at 30% right now. Jack Vander Aarde: And for Kevin, a couple of quarters ago you provided exit-year 2027 targets for hardware margin and adjusted EBITDA margin. Any updates to those? I think you were targeting about a 21% adjusted EBITDA margin. Kevin Bradley: No changes. We are still anticipating and working toward exiting 2027 at about a 21% adjusted EBITDA margin. Hardware margins are harder to pin down and will depend on tariffs and memory prices, but we will manage through that volatility while still targeting the 21% adjusted EBITDA margin. Eleanor Smith: First on EnergyHub, as you think about your internal projections, what does growth look like across expanding within existing customers, cross-selling new products, and adding new logos? And second, what synergies, if any, exist between EnergyHub and your security business, and to what extent have you tapped into those cross-sell synergies? Steve Trundle: We do not break out EnergyHub’s exact growth rate, but you can deduce it is a strong contributor to our growth initiatives, which we have said we expect to grow 25% to 30% this year including any inorganic activity. Inside EnergyHub, growth is a mix of adding new logos, expanding programs within existing utility customers, and driving up device enrollment. Originally, much of the VPP capability came from modest adjustments to residential thermostats. Today the software supports a broader set of edge resources—batteries, EV chargers, solar inverters—which utilities increasingly need as supply becomes more variable. That drives program expansion with existing customers, alongside ongoing new-logo wins and higher consumer enrollment in programs. On synergies, our core residential business is smart security or smart home, and many properties today get connected thermostats through our service providers. Each one of those is an opportunity for the customer to become an EnergyHub participant, which creates natural synergy. We have an R&D sandbox to test features that increase engagement or enhance thermostat-level capabilities that create downstream utility value. There is also channel synergy, helping our service providers offset costs of other consumer services we deliver. In terms of how far along we are, I would say we are in the third inning. We are seeing security increasingly defined to include “energy security”—certainty of energy supply. Some of our security partners are moving beyond generators to batteries. We expect more synergy to develop over time. Operator: I am not showing any further questions at this time. This does conclude today’s presentation. You may now disconnect, and have a wonderful day.
Operator: Good afternoon, and welcome to HubSpot, Inc.'s first quarter 2026 earnings call. My name is Liz, and I will be your operator today. At this time, participant lines are in listen-only mode, and there will be an opportunity for questions and answers after management's prepared remarks. If you would like to enter the queue for questions, you may do so by dialing star followed by 11 on your telephone keypad. I would now like to hand the conference over to Head Director of Investor Relations, Charles MacGlashing. Please go ahead. Charles MacGlashing: Good afternoon, and welcome to HubSpot, Inc.'s first quarter 2026 earnings conference call. Today, we will be discussing the results announced in the press release that we issued this afternoon. With me on the call this afternoon are Yamini Rangan, our Chief Executive Officer; Dharmesh Shah, our Co-Founder and CTO; and Kathryn Bueker, our Chief Financial Officer. Before we start, I would like to draw your attention to the safe harbor statement included in today's press release. During this call, we will make forward-looking statements within the meaning of the federal securities laws, including statements regarding our financial guidance for the second fiscal quarter and full year 2026, future financial performance, business outlook, and strategy. These statements reflect our views only as of today and, except as required by law, we undertake no obligation to update or revise them. Please refer to the cautionary language in today's press release, our Form 10-Q, and other SEC filings for discussion of the risks and uncertainties that could cause actual results to differ materially from expectations. During the course of today's call, we will refer to certain non-GAAP financial measures as defined by Regulation G. Reconciliations to the most directly comparable GAAP measures can be found in today's press release. Now it is my pleasure to turn the call over to HubSpot, Inc.'s Chief Executive Officer, Yamini Rangan. Yamini? Yamini Rangan: Thank you, Chuck, and welcome to everyone joining us today. I will start with our Q1 2026 results and share what is driving our performance. Then I will walk through our strategy and the progress we made with our Spring Spotlight product update, and how they are delivering real outcomes for our customers. I will close with how we are balancing growth and profitability as we transform as an AI-first company. Let us dive in. Q1 was a solid quarter for HubSpot, Inc., with revenue growing 18.2% year over year in constant currency. We delivered 4 points of non-GAAP operating margin expansion year over year, bringing our operating margin to 17.8%. Q1 marked a meaningful milestone for HubSpot, Inc., as our total customer count reached nearly 300,000 globally, driven by 10,800 net customer additions in the quarter. I am pleased with how our AI strategy is translating into measurable growth outcomes for our customers. We came into this year with clear levers to drive growth, and they are working. Our core growth levers of upmarket, multi-hub and platform consolidation, and pricing tailwinds remain solid. At the same time, our emerging AI monetization levers of core seats and credits are gaining traction. Let me walk you through each one and how they drove Q1 performance. Upmarket momentum continues to be strong. Larger customers are consolidating on HubSpot, Inc. to drive AI innovation and reduce total cost of ownership. In Q1, deals over $60,000 in annual recurring revenue grew 37% year over year, and deals over $120,000 ARR grew 64% year over year. Our partner ecosystem remains a core competitive moat, with partners sourcing and co-selling many of our largest deals. AI adoption in B2B starts with clean data and unified context. That is what is driving our multi-hub and platform momentum. Customers who bring together Marketing, Sales, and Service on HubSpot, Inc. get a single, connected view of their customers and unified growth context that AI can act on. That value proposition is resonating. In Q1, 63% of new Pro Plus customers landed with multiple hubs, up 3 points year over year, and 42% of our Pro Plus installed base by ARR now owns four or more hubs, up 6 points year over year. Bottom line is this: customers are choosing HubSpot, Inc. as the data and AI foundation for their go-to-market. In addition, our pricing model changes from 2024 continue to benefit overall growth. We lowered the price to get started and removed seat minimums to give customers a frictionless path to upgrade as they see value. That shift is largely complete. About 90% of our installed base customers have migrated to the new pricing models, and more than 50% of our ARR has gone through their first renewal. We expect this pricing tailwind to continue as remaining customers come up for renewal and new customers upgrade based on the value we deliver. Now beyond our proven core levers, our AI monetization with core seats and credits is picking up pace. In 2025, we added significant AI data and platform value to the core seat. Brief Assistant, Smart Starts, Projects, and company enrichment data are all now included. We also unbundled the Smart CRM so customers can start with just a core seat. Our vision is to make core seat an essential foundation for every go-to-market employee, and the momentum backs up that strategy. Active core seat users grew 90% year over year, and over 25% of Pro Plus customers have now purchased additional core seats, up over 12 points year over year. Credit consumption is accelerating. Total credits consumed grew 67% quarter over quarter. The top use cases in Q1 were Customer Agent at 53% of credits consumed, Prospecting Agent at 17%, Data Agent at 16%, and 12% [inaudible]. Customer Agent has found clear product-market fit, and now Prospecting Agent and Data Agent are gaining momentum, broadening the base of how customers get value. Customers are not just trying AI; they are building it into how they work. Core seats and credits are becoming real growth levers, and as more use cases mature, we expect both to compound. Now let me shift to the momentum from Spring and the progress on our strategy. Our AI strategy is simple: make AI work for growth companies. We have always won by deeply understanding the customer segment we serve and democratizing sophisticated technology for them, and that is exactly what we are doing with AI. Today, companies are not struggling to find new AI tools; they are struggling to drive real growth outcomes. The difference comes down to context. AI without the right context produces output; AI with the right context produces outcome. That is the gap HubSpot, Inc. is built to close. The foundation of our platform is growth context—the specific knowledge that makes AI useful for go-to-market teams. It knows who the best customers are and why they buy. It knows how the best reps work and how deals close. It knows what progress pipeline looks like and where deals get stopped. HubSpot, Inc. captures all of this business, team, process, and customer context across nearly 300,000 businesses in every industry. This becomes the shared foundation for agents to do real work and drive growth outcomes, as many of you saw at our investor webinar last month. We are not building AI features on top of CRM. We are building an agentic customer platform where growth context is the engine—agents can run on HubSpot, Inc., and agents can run HubSpot, Inc. Running on HubSpot, Inc. means any agent—ours or anyone else’s—can plug into HubSpot, Inc.’s data, context, and capabilities as a building block. Running HubSpot, Inc. means agents can operate the platform end to end through our APIs, MCP server, and whatever access methods come next. This openness is a strategic choice. The more agents that run on HubSpot, Inc., the more valuable our context becomes. And the more valuable our context, the stronger our platform gets. At Spring Spotlight, we launched key innovations to help customers drive outcomes with AI. Let me share the momentum we are seeing with our top agents. Prospecting Agent handles the full prospecting life cycle—monitoring buying signals, identifying high-intent prospects, and crafting personalized outreach. Nearly 14,000 customers have activated it, up 33% quarter over quarter. Jotform, an online form builder used by over 35 million people worldwide, trained Prospecting Agent on their brand positioning and messaging and moved to a fully automated setup, purchasing 625,000 credits per month to power it. In a direct test at Jotform, Prospecting Agent qualified leads on par with human reps, freeing the team to focus on customer meetings and closing deals. Next, Smart Deal Progression brings to life our vision of self-updating CRM. It listens to conversations, suggests CRM updates, drafts follow-up emails, and recommends next steps so sales reps can focus on closing deals, not updating records. Customers are seeing a 10x improvement in CRM update accuracy, and we are seeing 75% repeat weekly usage. Data Agent, which we launched last fall and updated at Spring Spotlight, is gaining significant traction. It enriches customer records, surfaces buying-intent signals, and prioritizes best-fit accounts, giving marketing a better foundation for campaigns and sales a clearer view of prospects. We are seeing significant growth in adoption—over 9,000 customers have activated Data Agent, up 122% since last quarter—and weekly usage is also up. We also enhanced Customer Agent and expanded it to email to help customers scale support with AI. We now have over 9,000 customers, and the average resolution rate has climbed to 70%, up 5 points from last quarter, with some customers exceeding 90% resolution rates. At the same time, we are reimagining marketing for the AI era. We launched HubSpot AEO at Spring Spotlight to help marketers see how their brand appears in AI tools like ChatGPT, Gemini, and Perplexity, and take actions to improve it. Early momentum is strong across paid, earned, and owned, with campaign activities earning millions of impressions. This is beginning to drive trials and purchases of both standalone AEO and Marketing Hub Pro. Customer outcomes across all of our updates this year speak for themselves. Limelight is booking meetings with Prospecting Agent at the same rate as their SDRs. Synergent is resolving 85% of support conversations autonomously. And Sandler grew leads 160% with our new AEO tools. Across Sales, Service, and Marketing, our agents are doing real work and driving outcomes—exactly what we want to see. The confidence we have in our product strategy is also reflected in how we are evolving pricing. We believe AI value should be measured on outcomes, so we recently updated our pricing for agents to match. Customer Agent has moved to consuming credits based on resolved tickets, and Prospecting Agent has moved to qualified leads recommended for outreach. Both agents now come with free 28-day trials so customers can see the value before they commit. This is outcome-based pricing in its simplest form—customers pay when the agent works. We expect both our product updates at Spring Spotlight and pricing changes to accelerate adoption, because when value is easy to observe, the decision to expand is easy to make. Let me close with how we are balancing growth and profitability as we transform as an AI-first company. We are transforming how we build, how we grow, and how we operate, and that transformation is showing up in our results. On how we build, 100% of our engineers now use AI tools, and we have seen a 73% increase in lines of code updated per engineer. We are shipping better products faster because we built the shared platform underneath our agents. Every new capability or skill we add makes the whole platform more powerful and our advantage compounds. On how we grow, we now have an agent-first go-to-market motion—from demand generation to prospecting to customer success—and it is working. On how we operate, we are moving from individual productivity to team-level transformation to what we call institutional productivity, where the context and processes of the company are encoded and available to everyone when they need it. We are investing aggressively in AI innovation while expanding operating margins at the same time. We not only beat our Q1 operating margin target, but also expect to deliver 2 points of operating margin expansion in 2026. That is a meaningful step up, and it reflects the operating leverage we are building as an AI-first company. In closing, our core growth drivers of upmarket momentum, multi-hub adoption, and pricing remain strong and durable. AI is adding two incremental levers—core seat and credit monetization. Together, they give us confidence in our ability to deliver durable growth while expanding profitability. With that, I will hand it over to our CFO, Kathryn Bueker, to walk you through our financial and operating results. Kathryn Bueker: Thanks, Yamini. Let us turn to our first quarter 2026 financial results. Q1 revenue grew 23% year over year as reported and 18% in constant currency. Q1 subscription revenue grew 23% year over year, while services and other revenue increased by 22%, both on an as-reported basis. Domestic revenue grew 18% year over year in Q1. International revenue growth was 29% as reported and 18% in constant currency, representing 49% of total revenue. As Yamini mentioned, Q1 marked a major milestone for HubSpot, Inc., as our total customer count climbed to nearly 300,000, a 16% year-over-year increase. This was fueled by the nearly 10,800 net new customers we added during the quarter, with particular strength in Starter customer additions, up 6 points year over year as reported. Average subscription revenue per customer was $11,700 in Q1, up 2 points in constant currency. We continue to expect quarterly net additions in the 9,000 to 10,000 range along with low- to mid-single-digit ASRPC growth in constant currency, with growth ramping throughout 2026. Customer dollar retention remained healthy in the high eighties, while net revenue retention was 103%, down sequentially as expected but up over half a point year over year. As a reminder, we typically see a seasonal step down in net revenue retention in Q1 following peak upgrade activity in Q4. For the full year 2026, we continue to expect net revenue retention to expand by 1 to 2 points year over year, driven by a combination of seat expansion and increasing consumption of credits. Q1 calculated billings were $912 million, growing 19% year over year as reported and 17% in constant currency. Non-GAAP operating margin was 18%, up 4 points compared to the year-ago period. This expansion reflects our disciplined approach to hiring and the benefit from FX movements and our partner commissions program change, partially offset by strategic investments in AI initiatives to drive both customer value and internal operating efficiencies. GAAP operating margin was 3% in Q1 compared to a negative operating margin of 4% in the year-ago period. This 7 points of expansion reflects our non-GAAP operating income expansion and a 3-point reduction in stock-based compensation expense as a percentage of revenue. Non-GAAP net income was $143 million, and non-GAAP net income per diluted share was $2.72, up [inaudible] year over year, respectively. GAAP net income was $33 million in Q1, and GAAP net income per diluted share was $0.62. In the first quarter, the company generated $154 million of free cash flow, or 17% of revenue. Our cash and marketable securities totaled $1.8 billion at the end of March. During the quarter, we bought back $211 million of stock under our current $1 billion share repurchase program. Our continued strong cash position provides us with the flexibility to return capital to shareholders while maintaining our focus on investing in organic innovation and opportunistic M&A, underscoring our conviction in our long-term opportunity. Before turning to guidance, I want to share a bit more color on a couple of shifts we are seeing in our business. First, as we continue to move upmarket, we have seen a shift in linearity in our quarters to a more back-end-loaded bookings cadence. We saw this dynamic again in Q1, and expect it will continue. Second, AI is transforming our selling motion. Customers want pricing more directly tied to outcomes, and they are increasingly looking for proof of value earlier in the sales process. In April, we made several pricing and packaging changes that are aligned with these customer expectations. We believe these are the right actions to drive adoption and usage of our platform and ultimately long-term growth. These include lowering the price of Customer Agent, moving to outcome-based pricing for Customer and Prospecting Agents, and introducing 28-day free trials for our agents and HubSpot AEO. In the near term, these changes may extend sales cycles as customers evaluate our agents and AEO as part of broader purchases. In addition, we made a deliberate investment in April to train our sales reps on the Spring Spotlight innovations and the shift to credits, which reduced sales capacity during the month. As a result, Q2 got off to a slow start, and we have reflected these dynamics in our guidance. We are confident that we have the right product and pricing strategy to drive durable growth and margin expansion over time as we transform as an AI-first company. With that, let us dive into guidance for the second quarter and full year of 2026. For the second quarter, total as-reported revenue is expected to be in the range of $897 million to $898 million, up 18% year over year on an as-reported basis and 16% in constant currency. Non-GAAP operating income is expected to be between $173 million and $174 million, representing a 19% margin. Non-GAAP diluted net income per share is expected to be between $3.00 and $3.02. This assumes 51.2 million fully diluted shares outstanding. For the full year of 2026, total as-reported revenue is now expected to be in the range of $3.70 billion to $3.708 billion, up 18% year over year on an as-reported basis and 17% in constant currency, up 40 basis points from our previous guide. Non-GAAP operating income is now expected to be in the range of $762 million to $766 million, representing a 21% margin. Non-GAAP diluted net income per share is now expected to be between $13.04 and $13.12. This assumes 51.8 million fully diluted shares outstanding. Before we turn to some modeling notes, I would like to provide context on our margin expansion trajectory. As Yamini shared, we are balancing growth and profitability as we transform as an AI-first company. We are transforming how we build, grow, and operate, and this creates the opportunity for more meaningful margin expansion going forward. This is reflected in our updated 2026 guidance, which now places us firmly within our 20% to 22% non-GAAP operating margin range, reaching our 2027 targets a year ahead of schedule. This progress gives us even greater conviction in our ability to meet or exceed the targets we laid out at Analyst Day at an even faster pace. We will have more to share on our margin expansion expectations at our Analyst Day this fall. We are also focused on driving GAAP operating margin expansion over time as we drive stock-based compensation as a percentage of revenue down. In 2026, we expect SBC as a percentage of revenue to decline approximately 3 points to 14%, and we see the opportunity to bring this down further over time. As you adjust your models, please keep in mind the following. We continue to expect our legacy Clearbit business to be a 40 basis point headwind to full-year 2026 revenue growth. Finally, we continue to expect CapEx as a percentage of revenue to be 5% to 6% for the full year of 2026, and now expect free cash flow to be about $750 million. With that, I will turn the call back over to the operator for questions. Operator: Thank you. If you would like to ask a question, please dial star followed by 11 on your telephone keypad now. If you change your mind, please dial star followed by 11 again to exit the queue. When preparing to ask your question, please ensure your phone is unmuted and limit yourself to one question per person. First question today is from Samad Samana with Jefferies. Hi, good evening, and thanks for taking my questions. Samad Samana: Yamini, I wanted to pull on the thread around the pricing model change for AI credits that you did in April. Completely makes sense, driving better ROI for customers. I was wondering—at the Spring Spotlight, you hosted the webinar that gave some usage statistics—but if you tie it to the change, how has the pricing change impacted customer adoption and utilization? And then maybe I will incorporate a component to the question as well where customer feedback suggests there is some meaningful spend growth coming from those that are consuming credits already. Any color that you can share on what the NRR for that cohort of customers looks like as well, just as we think about how the model evolves over time? Thank you so much. Yamini Rangan: Yeah, thanks a lot, Samad, for that question. You are absolutely right—at Spring Spotlight we launched a number of product innovations that showcase the agent capabilities as well as how growth context is driving the outcome for our customers. The way we think about it is pricing is one of the clearest signals that we can send about how much we believe in our product. With all of the announcements, agent quality improved, growth context improved, outcomes are clear, and we have high confidence. We did two things coming into the quarter to drive agent adoption. First, customers want proof of value earlier in the process before turning on agents. That is understandable because we are no longer just providing applications that can drive adoption that can then drive growth—we are actually delivering work outcomes. So we added a 28-day trial for key use cases like AEO, Prospecting, and Customer Agent. Second, customers really want to see pricing that is clearly tied to the outcome, and they want predictability of that spend. We dropped the price of Customer Agent and moved it to per resolved conversation so that when customers pay, it is actually based on what we have delivered as an outcome. Similarly, for Prospecting Agent, we are tying it to the qualified leads that we are delivering. Both of these are in response to customer feedback—both in terms of proving value and in terms of understanding how that is tied to the pricing. They are the right decisions that we have intentionally made and will have a clear impact in terms of adoption. The feedback is very early days—only about three weeks—but it has been clearly positive. We are methodically removing every blocker in terms of AI adoption so that our customers have confidence in adopting AI and driving outcomes. Kathryn, maybe you want to answer the NRR question. Kathryn Bueker: Yeah, sure thing. Samad, we are not going to talk about cohortized net revenue retention, but what I would share is that we continue to believe that we can expand net revenue retention 1 to 2 points in 2026, and if you think about the drivers of that expansion, they are very much tied to our emerging growth levers of core seats and credits. We are looking at credit adoption as a key driver of net revenue retention, especially in 2026. Operator: Next question comes from Mark Murphy with JPMorgan. Mark Murphy: Thank you so much. Yamini, I am wondering how commonly you are seeing a scenario in which a customer would elect to use the Customer Agent rather than having to go out and hire more people, and where the credit consumption for that Customer Agent ends up meaningfully above what the, you know, Service Hub subscription would have cost—say a $1,000 or $2,000 type of level. I am just trying to get at whether it is clear to you how often you will net out quite positively by selling an agent rather than that traditional subscription. Yamini Rangan: Mark, thank you so much for that question. Our thesis—and what we are seeing in early adoption—is clearly that not only are we delivering great software that humans can use to drive productivity within go-to-market, but agents can deliver work. On Customer Agent, we are seeing two or three common use cases. First, customers use it for after-hours or weekend augmentation to their support team. Second, they are using it for tier-one support tickets so that their teams can spend time on much more complex customer resolution and leave the tier-one support to our Customer Agent. I gave a couple of examples at the investor webinar. In one case, the customer turned on Customer Agent, used up the included 5,000 credits pretty quickly in the first couple of days, and then turned it on for more of the augmentation use case. They are now on the path of going from 100,000 credits to 300,000 credits on a monthly basis. That is clearly above and beyond what we would have gotten from a Service Hub seat, and we are seeing this pattern over and over again—customers going beyond included credits and using it to resolve tickets—which then increases our TAM. That is what we are leaning into, and that is exactly why we are making the set of pricing changes, because we are so confident in the resolution of tickets that we are ready to put our product strategy to work. That increases our ability to drive adoption of these agents as customers get comfortable with it. Dharmesh Shah: And just one quick add to Yamini’s comments—this is one of those examples where, as the frontier model companies make the models better and better, Customer Agent and other AI features within HubSpot, Inc. get better and better as well. As the models improve, we will see Customer Agent move from just tier-one support to higher-level support, with increased resolution rates. As the tide lifts what the frontier models are capable of, HubSpot, Inc. gets increased leverage, and our customers get increased value. We are super excited about that. Operator: Next question is from Analyst with Barclays. Analyst: Thank you. Can you talk a little bit about the retraining for the sales organization? Doing that in April seems a little bit off because usually that is what you do in the January–February time frame when you have the sales kickoff. It does feel like the product got ready later, but can you speak to the timing there and also the impact a bit more? You mentioned it a little bit, but a bit more detail. Thank you. Yamini Rangan: Yeah, absolutely. This was really tied to our Spring Spotlight innovation. At Spring Spotlight, we launched a number of agents and we also changed our pricing mechanism as we just talked about. We had the planned time to get the sales team enabled on both the innovation and the pricing model change. Typically, yes, we would do it at kickoff, which happened earlier in Q1, but we are really taking the time to get the whole organization behind the new selling motion. We are helping our customers adopt and transform with AI. Specifically, we trained the entire sales organization to drive proof of value earlier within the sales process, because that is what customers need. They want confidence that our AI capabilities and agents will work in their environment, and that requires our sales teams to be clear and articulate with proof of value earlier in the process. Second, we want them to establish agentic use cases and set them up for expansion. This is a learning curve as we get our entire organization to land with the right value and set it up for expansion, and that is exactly what we took the time to do. We are changing a lot. We have high confidence in our product strategy—it is showing up in early adoption of agents—and we are evolving the pricing and go-to-market model to reflect customer feedback. We know there is a huge opportunity to be the trusted AI partner for our customers, and that is what we are leaning into. Operator: Next question is from Analyst with Truist. Analyst: Thanks for taking my question. I wanted to talk about the credit growth and how to think about that. I think Kate talked about potentially it is the second half where it really picks up, but it was 67% quarter-over-quarter growth in Q1. That seems strong. How do we think about the ramp of that growth into Q2 and beyond? And what do you all see as maybe the next big breakout agent beyond Customer Agent at a 53% attach or adoption rate? Thank you. Yamini Rangan: Thank you for the question. We are definitely starting to see real usage beyond included credits, happening because customers are getting clear, measurable value and outcomes. We were pleased to see total credits consumed up 67% quarter over quarter, but more importantly, consumption is becoming much more balanced across use cases. Customer Agent, Prospecting Agent, and Data Agent are all growing, which we like. In the current set of agents, we are focused on improving the quality of outcomes. For Customer Agent, a proven use case, the focus is to improve the quality of resolution as well as expand the number of channels. Resolution rate has gone up from 20% last year to 70% now—one of the highest in the industry—and some customers are even higher. We are working to expand the email channel and increase volume over time. Similarly, for Prospecting and Data Agents, it is about the quality of what these agents deliver and the outcomes they can drive. Beyond this, there are a handful of other agents we will continue to work on, but we have high confidence in the set we are driving. One word on AEO, which was part of Spring Spotlight and will begin consuming credits: AEO is a big opportunity, and we are leaning hard into it. Organic traffic for our customers is down 27% this year, so almost every B2B marketer is looking for additional sources of leads, and AEO is an effective, nascent, but fast-growing one. We launched AEO at Spring Spotlight and now have over 15,000 Pro Plus customers who activated it in trials. Trials are a month, so it will take a little time to convert, but activity is great. We are innovating at an accelerated pace with our first-party agents, we are seeing adoption beyond included credits, and we are delivering even more as an open platform. We are pretty excited about what we are seeing. Operator: Next question is from Jackson Ader with KeyBanc Capital Markets. Jackson Ader: Great, thanks for taking our questions. The one I had was about what sounds like a message shifting more toward margin delivery and away from top-line growth. You have talked about net new ARR growing above revenue for six quarters coming into this quarter. I am curious where that metric fell this quarter. And do we still expect to see acceleration in the subscription revenue line this year, or are the go-to-market and pricing changes or some of these April disruptions going to shift some of the growth trajectories out this year? Kathryn Bueker: Thanks, Jackson. First, you should not note this as a shift away from a focus on growth to a focus on margins. We have always been committed to balancing growth and profitability, and we remain committed to balancing growth and profitability. On net new ARR, what we shared last quarter was that we expected net new ARR growth to be above constant currency revenue growth for the full year of 2026, and we continue to believe that we have all the ingredients to deliver net new ARR in excess of constant currency revenue growth for 2026. Q1 net new ARR growth was a bit below constant currency revenue growth—against a more difficult comp than Q4—and the sales enablement and sales motion changes we discussed do challenge net new ARR growth in the short term. But they are the right things to seed and grow those agent use cases. We think the combination of our core growth drivers—upmarket momentum, multi-hub adoption, and pricing—along with the increasing contribution throughout the year of core seats and credits, are the ingredients we need to deliver net new ARR growth in excess of constant currency revenue growth this year. Operator: Next question is from Alex Zukin with Wolfe Research. Alex Zukin: Hey, thanks for taking the question. Yamini, at a high level, you are seeing some of your peers do things around headless and make motions around becoming an agent-first platform, plugging into third-party agents that want that rich context to accomplish tasks across front-office workflows. How are you thinking there? How did the new pricing model touch on that dynamic? And then, Kate, I have a quick follow-up for you. Dharmesh Shah: Hi, thanks for the question. This is Dharmesh. I will take this one. We are big believers in the idea of headless—not big believers in the notion of humanless. The right platform for go-to-market for our customer base is going to be a combination of serving humans with a very personalized modern experience, and supplementing that with a really good agentic experience—opening up APIs, opening up MCP, opening up CLIs. We were the first company to launch MCP last year, first to build connectors for ChatGPT and Claude, the major AI apps. As usage shifts, we see increased adoption of these agentic-based consumer use cases. The platform will be open. We are essentially ambivalent as usage shifts from human usage to agentic usage—whether it runs on our runtime agents that we have built or if there are third-party apps and agents that have been built. All of those agents are going to need a common foundation and the growth context we talk about on this common platform. We think this is a massive opportunity for us in the agentic era because there is going to be a need for an agentic customer platform—exactly what HubSpot, Inc. is building. Operator: Next question is from Arjun Bhatia with William Blair. Arjun Bhatia: Thank you. Following up on headless and how credit consumption evolves as HubSpot, Inc. provides context to third-party agents: do you have a preference whether a dollar of credit consumption is used for a third-party agent versus your own proprietary agents? Does that make a difference for the feedback loop back into HubSpot, Inc.’s data and future improvements in the context you can provide, depending on which agent you are powering? Yamini Rangan: Hey, Arjun. I really like that follow-up. Our vision is simple: agents run on HubSpot, Inc., and agents run HubSpot, Inc. For us, any agent—first-party, second-party, or third-party—can plug into HubSpot, Inc. data and intelligence as a building block, and we welcome that. That is our ecosystem strategy. This week, we shared our complete API strategy—how we want to be open and what our API will deliver to first-, second-, and third-party agents. We think about the API as two layers. First is the data layer—this has always been there. You can get contacts, companies, deals, activities; they are open and accessible and already power thousands of integrations. We have a very open ecosystem stance—bringing data into HubSpot, Inc. is free, and the customer should have full confidence and trust that their data is theirs. What is exciting is we are adding an intelligence layer, bringing our growth context into that layer. Practically, today a sales manager can go to an LLM and say “pull pipeline information from HubSpot” and stage/amount data will go in. They can ask, “what is the risk?” but the LLM has no sense of what is normal in the last 30 days, what is normal across the industry, or whether something is changing with the champion and the conversations. That is the intelligence from our growth context. To make it tangible, you can now make a single API call that returns a precomputed risk score. Over time, people can continue to get the data, but more and more, both second- and third-party agents will pull on this intelligence layer. The way we monetize that intelligence layer will be commensurate with the value we deliver, because it will be valuable. So it is a two-part API strategy: continue to take data; when you need more intelligence, take the growth context. That is the vision, and we are excited about what this means for a thriving ecosystem. Operator: Next question is from Brian Peterson with Raymond James. Brian Peterson: Thanks for taking the question. I appreciate all your comments on capacity and margins, but as we think about the rest of the year, any help on unpacking some of the moving parts or assumptions that are underpinning the outlook? Thank you. Kathryn Bueker: I appreciate the question. Let me take you through the math and assumptions underlying our guidance. In Q1, we beat our guidance by $18 million, and we raised our full-year guidance by $9 million. In addition, we anticipate about $4 million of lower benefit from FX versus when we guided the full year in February. All this implies an organic raise of about $13 million, so we have passed through roughly two-thirds of the beat to our full-year revenue guidance. Overall, Q1 was a solid quarter. We had strong business results that were supported by our consistent core growth drivers—upmarket, multi-hub, and pricing—and that gives us the confidence to raise the full-year guide. As a result, we raised our constant currency revenue growth by 40 basis points from 16.2% to 16.6%. You also heard that we are seeing early traction from agents and AEO, and we made an intentional choice to better align our pricing and packaging with customer expectations. That will help us seed and grow those important agent use cases. Those decisions will have a near-term impact to net new ARR, but will drive durable growth in the future. Our updated guidance implies a step down in constant currency revenue growth to 16% in Q2 and then a modest acceleration for the remainder of the year. This reflects momentum across our core growth drivers, while taking into account the offset from pricing and packaging dynamics and the slow start to Q2. We approach guidance consistently and want to put forward guidance that we feel good about across a variety of scenarios. Our guidance for 2026 does not mandate that we see a re-acceleration in net new ARR in the back half of the year to hit this. Operator: Next question is from Keith Bachman with BMO. Keith Bachman: Thanks very much. You are assuming pricing and packaging contribute in the second half of the year, though expectations are modest. You have only had a couple weeks to synthesize data. What is the risk profile on not being able to meet the improvement in growth rate associated with the second half? And you said you are not assuming net new increases in the second half to meet the targets—could you speak to your confidence interval there, as presumably that would impact the following year if you cannot meet net new growing in the second half? Kathryn Bueker: Thank you for the question. There is a lot going on. I will start by reiterating that there is a set of core growth drivers that have been delivering consistently over the last six to eight quarters. We have talked about them every quarter: strong and consistent upmarket momentum, a consistent trend toward multi-hub adoption, and the benefit from the pricing change we made in 2024. We also expect an increasing impact of seats and credits over time, but that is just one piece of the overall growth equation. When you think about our guidance, we want to put forward guidance we feel great about across a variety of scenarios. Our guidance does not assume that we must see net new ARR acceleration from where we are in the back half of the year in order to deliver the 16.6% full-year constant currency revenue guide. Operator: Next question is from Tyler Radke with Citi. Tyler Radke: Hi, thanks for taking the question. Can you give us an updated view of whether the stack ranking of growth drivers has changed this year? One area you called out that has not been asked as much about is the core seat, which I think grew over 90% this quarter. Can you give some color on how you expect that trend to play out amid a greater focus on agents as well? Thank you. Yamini Rangan: Absolutely. Let me walk through each of the drivers and how we are setting up for durable growth. On core drivers, upmarket momentum and multi-hub are at the top. We have seen this consistently. The number of customers with 500 or more seats has grown over 450% year over year. Product meets the needs of upmarket customers, brand awareness is great, and the ecosystem is tuned in. Multi-hub adoption is really solid. Another core driver we have seen in operation for the last couple of years is pricing. We lowered pricing, removed seat minimums, and we have seen that dynamic play out—we know how this trends, and it remains a driver. On emerging growth drivers, as you pointed out, it is core seats and credits—that is how we think about AI monetization. We have consistently added value into core seats: Brief Assistant, which is consistently rated highly, and adding company enrichment data into core. Over 25% of Pro Plus customers upgraded to more core seats. Why? Because it is the gateway for all of our AI features—the foundation to get started. It includes credits and is the gateway by which customers begin to turn agents on. From that foundation, we build on agents. We are listening to customers and removing friction—giving proof of value, trial periods, and outcome-based consumption. The growth formula is intact. The stack rank is upmarket and multi-hub, followed by pricing, then core seats and credits. Combine that with product quality, pace of innovation, and how quickly we are driving adoption—that is the story. We are just getting started with this big transformation. Customers are asking us to be the data and AI platform for their transformation, and we are leaning into this moment to be the partner of choice. Operator: Next question is from Analyst with Cantor. Analyst: Good afternoon, thanks for taking the questions. I wanted to dive deeper on some of the longer sales cycles you are talking about. How much of that is driven by the longer trial period with agents, second by understanding price and packaging and total cost of ownership, and third by sales folks being out for training and partners needing more training? How short-lived might this be as training happens versus customers continuing to take longer to evaluate what the platform brings? Yamini Rangan: That is a really good question. It is a combination of three things. First, as customers look at AI, they want to see how AI and agents in their environment will drive outcomes—that is proof of value. The best way to show proof is to turn it on and give them a trial period, which is exactly what we have done with AEO, Customer Agent, and Prospecting Agent. We are confident in our product strategy; as they see value, timing will moderate. Second, on sales enablement—the folks are back in seat and fully trained. We are moving fast, and there is a slightly different sales motion that people will adapt to. The pricing changes help them because it is now easy to say, “we deliver outcomes, and our pricing is tied to that value.” All of this is reflected in the guidance. We had a solid Q1, and we have made changes that lean into customer feedback. This gives us confidence that we have the right seed-and-expand motion for agentic use cases. We are leaning into the AI adoption motion. Operator: Next question is from Analyst with Piper Sandler. Analyst: Perfect, thank you for fitting me in. The net customer adds were nicely above the directional range provided last quarter. It was the second-best quarter for customer adds in seven quarters, and there is a narrative that it has become harder to add net new customers in software broadly. What are you seeing in real time around adds? Is this better execution from HubSpot, Inc., or timing of lands and customer adds? Kathryn Bueker: I appreciate the question. Two comments. We are pleased with net adds in Q1. Q1 tends to be our highest Starter-add quarter, and we saw that again. We expect that to moderate back to the 9,000 to 10,000 range in Q2 and beyond. Your observation is right—many companies are finding it harder to add new customers. Our ability to consistently add new customers and retain top of funnel is the result of investing to diversify our top of funnel for a number of years. In 2022, we bought The Hustle. We bought Mindstream, which has an AI-focused newsletter driving lots of demand for us, along with YouTube and other media outlets. We made two incremental acquisitions in Q1—Starter Story and Futurepedia. We keep leaning into diversification of top of funnel, which helps retain our customer acquisition motion. We were early in experimenting with AEO internally; the team continues to grow AEO as a contributor to top-of-funnel demand. It is still relatively smaller in our overall demand equation, but it is highly effective and converts about 3x higher than other leads for HubSpot, Inc. We continue to focus on building a durable demand engine as part of the overall HubSpot, Inc. equation. Yamini Rangan: Thank you. Operator: This concludes the HubSpot, Inc. first quarter 2026 earnings call. Thank you to everyone who was able to join us today. You may now disconnect your lines.
Operator: Thank you for standing by. My name is Liz, and I will be your conference operator today. At this time, I would like to welcome everyone to the Outset Medical, Inc. First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the call over to James S. Mazzola, Head of Investor Relations. Please go ahead. James S. Mazzola: Good afternoon, everyone, and welcome to Outset Medical, Inc.’s first quarter 2026 earnings call. Today’s speakers are Leslie L. Trigg, Chair and Chief Executive Officer; Derek Elliott, EVP of Commercial; and Renee M. Gaeta, Chief Financial Officer. The company issued a news release after the close of the market today which can be found on the investor pages at investors.outsetmedical.com. This call is being recorded and will be archived on the Investors section of the Outset Medical, Inc. website. All forward-looking statements made during today’s call are intended to be protected under the Private Securities Litigation Reform Act of 1995. Outset Medical, Inc. assumes no obligation to update these statements. For a list and description of the risks and uncertainties associated with the business, please refer to Outset Medical, Inc.’s public filings with the Securities and Exchange Commission, including its latest annual and quarterly reports. Leslie L. Trigg: Thanks, Jim. Good afternoon, everyone, and thank you for joining us. The first quarter reflected consistent execution across console utilization, new customer additions, gross margin expansion, and disciplined cash management. While variability in capital order timing impacted our capital sales performance in the quarter, we remain confident in our growth plan for the year, supported by the upcoming launch of the next-generation Tableau, a deep sales pipeline, and the addition of an experienced commercial leader in Derek Elliott, who I am pleased to personally introduce to you today. Beginning with the quarter, revenue of $27.9 million was down slightly from the fourth quarter due to the lumpiness of capital sales, but we are confident in our growth plans for the full year. Treatment and service performed exactly as we expected, and we achieved excellent gross margin expansion with product margin reaching over 52%, the result of our ongoing margin expansion programs and mix. More broadly, our end markets remain healthy and providers continue to allocate capital to projects that deliver clear benefits like those we offer. We are reaffirming our annual guidance today because we remain very confident in the depth, diversity, and maturity of our pipeline. In particular, we are in the late stages of closing several large new deals and also an emerging refresh opportunity with existing customers who have older Tableau consoles and intend to buy replacement units in future quarters and years. We had several key wins during the quarter and managed successful go-live implementations at both new customer sites and with existing customers expanding Tableau insourcing to new facilities within their network. A very recent example occurred just a few weeks ago in Texas. Over the course of two days, our team set up dialysis service lines at multiple hospitals owned by one of the largest health systems in the country. These facilities had a total of approximately 400 beds and required support to train the nursing staff, ensure replicable procedures were in place, and prepare the internal team to manage the new service line. Our service and implementation teams are truly the shining stars of Outset Medical, Inc. Extending our unique dialysis clinical expertise to customers, these teams ensure nurses are well trained, policies and procedures are in place, and that customers have a reliable, seamless transition from their outsourced provider to an insourced model. Here in the second quarter, our team is replicating this success with go-live implementations occurring at more than 30 facilities involving nearly 200 consoles. From an operational perspective, we are well prepared for the initial transition to next-generation Tableau later this quarter. We believe this platform is the first dialysis system cleared under the FDA 2025 cybersecurity requirements, and includes hardware and software enhancements that improve performance and system reliability. A dialysis system that meets FDA’s cybersecurity guidance helps protect hospitals by reducing the risk of compromise, limiting the risk of spread, and safeguarding patients. We view Tableau’s Secure by Design principles, layered access controls, and controls intended to reduce the risk of unauthorized access as a significant new competitive advantage. It provides yet another compelling value proposition on top of the cost savings and clinical outcomes improvements associated with insourcing that we believe will be recognized by health systems amid ever-increasing concerns over cybersecurity, continuity of care, and patient safety. We plan to begin with a limited release extending into the third quarter, then ramp to a full launch. In early customer discussions, there has been strong reception to the cybersecurity benefits and other enhancements that next-generation Tableau will provide. We are very excited for the rollout and will share additional details on our August call. Finally, I would like to reiterate our strong cash position and unwavering focus on reaching profitability. During the quarter, we expanded margins to record levels and remained disciplined in our spending, both of which contributed to a lower-than-expected use of cash. I am proud of the progress our team continues to make streamlining our supply chain and manufacturing operations, strengthening our service organization, becoming more efficient in every corner of the business, and expanding our partnership and presence with acute and post-acute care providers. Before Renee walks through the financials, I want to take a minute to introduce our new commercial leader, Derek Elliott. Derek has been on the job for a month and is already making an impact through his deep customer relationships, sales and marketing expertise, and disciplined approach to pipeline management. I would like to invite Derek to say a few words about himself and his priorities. Derek? Derek Elliott: Thanks, Leslie, and good afternoon, everyone. As Leslie said, I joined Outset Medical, Inc. about one month ago and spent that time conducting a deep dive into the business. I have met with our leadership and sales teams, conducted thorough reviews of our pipeline and forecast methodology, and visited many customers. One month in, I can say with confidence that we have a great team, a strong and differentiated product fit, and customers who are deeply interested in improving the dialysis experience for their patients and organizations. When Leslie first approached me about this position, it became clear that my background was a unique fit for Outset Medical, Inc. I have spent more than 30 years serving many of the same customers in sales leadership positions, including 17 years at Stryker across national accounts, capital equipment, and professional services. More recently, I have worked closely with customers to sell EMR connectivity, software, and data analytics across hospitals and health systems nationwide. It is all very similar to Outset Medical, Inc.’s business, customer call points, and value proposition. My near-term priorities include working with our commercial team to prepare for the launch of next-generation Tableau and being very involved at the customer level as we advance and close business in 2026. We have a meaningful opportunity to improve the lives of patients and the providers who serve them. I see how that mission motivates people across Outset Medical, Inc., and I am proud to now be a part of this team. With that, I will turn the call over to Renee. Renee M. Gaeta: Thank you, Derek, and good afternoon, everyone. Revenue in the first quarter was $27.9 million, a 6% decrease from $29.8 million in 2025, largely due to some lumpiness in the timing of capital orders. Product revenue was $18.6 million, down 13%. We anticipated this year-over-year dynamic on our last earnings call and also saw about $1 million in capital deals shift from the first quarter that are expected to close later in the year. Capital sales were $5.4 million, and consumable sales were a bit stronger than anticipated at $13.2 million. We remain very focused on our forecasting methodology for treatments, which, as I mentioned last quarter, now includes closer collaboration with our largest customers on their ordering patterns. Service and other revenue of $9.3 million grew 10% from $8.5 million in the prior-year period. Recurring revenue from the sale of Tableau consumables and service was $22.5 million, roughly flat sequentially and with 2025, both as we anticipated. Next, I will walk through gross margin and operating expenses for the quarter. Please refer to the table in today’s earnings release for a reconciliation of GAAP to non-GAAP measures. Non-GAAP gross margin expanded 620 basis points from last year, reaching 43.8% for the quarter. Product gross margin was driven by sales mix and increased 400 basis points to 52.4% from 48.4% in 2025. Service and other gross margin was 26.7%, increasing again sequentially and growing more than 1.6 thousand basis points compared to 10.3% in 2025. This reflects strong execution and keeps us on track for the next milestone of 50% company-wide gross margin. Moving to operating expenses, non-GAAP operating expenses increased nearly 4% to $25.6 million compared to $24.6 million in 2025, driven by investments in systems and people. Non-GAAP operating loss was $13.4 million, even with the prior-year period. Non-GAAP net loss of $15.4 million improved 32% compared to $22.8 million in 2025. These results reflect continued progress as we work to achieve profitability. Moving to our balance sheet, we ended the quarter with $161 million in cash, cash equivalents, short-term investments, and restricted cash. We used approximately $12 million during the quarter, which is less than we previously forecast due to ongoing expense discipline and working capital management. As we look ahead to our cash needs for the remainder of the year, we now anticipate using less than $40 million, which is roughly 15% better than we previously expected. Turning to our guidance for 2026, we continue to expect revenue to be in the range of $125 million to $130 million, a 5% to 9% increase over 2025, with the majority of the 2026 growth coming in the third and fourth quarters. For non-GAAP gross margin, guidance assumes that as we ship more consoles, gross margin will approach the lower end of the range, just as a higher mix of consumables will move gross margin towards the higher end of the range. Balancing these two factors, we continue to expect gross margin to be in the low- to mid-40% range for the full year. With that, I will turn the call back to Leslie for closing comments. Leslie L. Trigg: Thanks, Renee. I want to close by emphasizing Outset Medical, Inc.’s strong market position. With more than 1 thousand facilities using Tableau and more than 3.5 million cumulative treatments performed, we continue to gain ground as the leader of dialysis insourcing. We expect next-generation Tableau, as the only dialysis system we believe to have been cleared under the FDA’s rigorous guidelines for cybersecurity, will continue to solidify and extend that position. There are now more than 8 trillion data points in our cloud platform, which helps fuel our analytics and innovation engine, improve the customer experience, and ultimately enhance patient care. With insights from this data repository and our strong suite of professional implementation services, Outset Medical, Inc. is increasingly recognized as the trusted partner. We improve dialysis patient care while reducing costs and streamlining operations, and we get to see the results every day for customers of all sizes. For example, a regional 400-bed multisite health system reported an approximately six-fold decrease in their dialysis costs during their first year of insourcing with Outset Medical, Inc. and Tableau. This health system performs approximately 2 thousand dialysis treatments per year; the cost savings are substantial. As meaningful, they saw no central line bloodstream infections, improved their documentation and Joint Commission readiness, and operationalized a more sustainable staffing model. All of the progress we have made provides a powerful foundation for value creation over the long term, which we look forward to demonstrating in the coming quarters and years. We will now open the call for questions. Operator, please open the lines. Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We will pause for just a moment to compile the queue. Your first question comes from the line of Rick Wise with Stifel. Please go ahead. Rick Wise: Good afternoon, everybody. Hi, Leslie. You will not be surprised that I am hoping you can give us a little more color on, as you described it, the capital order variability and lumpiness. Just when I look back to the fourth quarter, you characterized the pipeline as building positively — sounds like it still is — and a healthy balance of larger and smaller deals, new and existing customers, and I doubt that has changed. What resulted in lumpiness? Why the delay? And maybe help us better understand when we are likely to see those sales happen or what you are expecting. Leslie L. Trigg: Yes. Hi, Rick. Good to hear your voice. Let me start with the capital order variability and the pipeline. The pipeline did continue to grow in Q1 as well. We saw good sequential growth in new opportunities that were added to the pipeline. As you remember from Q4, the way we look at the health of the pipeline, of course, is in terms of its size, depth, the diversity, the size of each deal, new customers versus existing customer expansions, and then the maturity — the stage that the deals are in in that pipeline. Across all these dimensions, the pipeline for 2026 and beyond is robust. We, in particular, are in the late stages of several large new deals that we do expect to close in 2026, and are also at the cusp of an emerging refresh opportunity with existing customers who have older Tableau fleets and have conveyed an intent to buy replacement units in future quarters and in future years. In terms of the lumpiness of the capital order sales cycle, it is less predictable for us than Tableau utilization. We have talked in the past about the stability and predictability of the utilization of the consoles once sold and installed. That continues to serve us well — it served us well in Q1 — and yet again, the lumpiness of the capital sales cycle makes it less predictable. It is really around the close timing, which might be stating the obvious. Beyond that, all the other areas of our business performed exactly as we expected, and we do remain on track with our guidance for the year, because the couple of deals that we saw slip out of the quarter are expected to close here in the Q2 through Q4 timeframe. That gives us a lot of confidence in the guidance range, in addition to a couple of new tailwinds coming later in Q2 and through Q3 and Q4 in the form of the next-generation Tableau launch and the additional firepower our new commercial leader is going to bring to our organization. All of those things make us very bullish about executing Q2 through Q4. Rick Wise: Gotcha. Maybe just a second one for me. There is a lot to unpack here. But just on a more mundane level, help us think through the quarterly phasing — the quarterly flow. It sounds like it is going to be a more back half–loaded year based on your comments, or at least what we should assume today for the moment. It could happen sooner — some of those delayed orders, for example. But the second quarter — does the second quarter, as opposed to stepping up like it did sequentially the way it did last year — is it flat with the first quarter or down? And since you are holding guidance constant, if we take the midpoint of your $125 million to $130 million range, do we evenly step it up in the third, fourth quarter? And again, last year both were around $29 million. Are these going to be roughly equal quarters and whatever the remainder is to get to the midpoint of the guide? Help us think through the phasing. Thank you. Renee M. Gaeta: Sure, Rick, I am happy to give some color here. As we sit here today with just one quarter in, we have spent a lot of time looking at not only the pipeline, as Leslie mentioned, but of course all of the factors that roll up into our full-year guidance. At this point in time, we would say that Q2 would be a modest step up, and then, as we indicated on the call, Q3 and Q4 will see the larger percentage of the growth. Whether or not Q3 and Q4 are flat, you might continue to see some step up — it will again be based on the timing of the close of these capital orders and pull-through. But as 70% of our revenue is coming from consumables and service and other, that part we expect to see stable. The 5% to 9% growth that we are expecting for the top line would certainly be across all of those categories. Rick Wise: So just to sum it up, modest step up in the second quarter, and it is not like you are saying that all of the remainder to get to the — just to focus on the midpoint of the guide — it is not all in the fourth quarter. You will see sequential step up in each quarter. Renee M. Gaeta: Correct. I think that is a good way to think about it. Rick Wise: Great. Thank you very much. Renee M. Gaeta: Thanks, Rick. Operator: Your next question comes from the line of Colin Clarke with TD Cowen. Please go ahead. Colin Clarke: Hi, thanks for taking my questions. First, on the delayed orders in the first quarter, I am curious — you talked about having several large orders in the pipeline expected to get landed in the February period. What is driving your confidence there? What about those orders in size and scale and the stage of that process is driving the reiteration of guidance here? Thank you. Leslie L. Trigg: Sure, I am happy to take that. I have had the opportunity to remain extremely close to all of our largest deals and forecast for 2026. First and foremost, we look at the staging of those deals. We have talked in the past about the stages of our sales process, and so we look at how many of those deals are in the later stages of the pipeline. We now have the ability to use historical data to inform the probability of close between, let us say, Q2, Q3, and Q4. The confidence, to answer your question, is informed by the data that we have about where these customers are — both new customers and existing customers that, based on their financial and clinical results with Tableau, are choosing to expand into new facilities. Informed by that probability-of-close data, we feel we have a good understanding and a good handle on which of those deals are likely to land in Q2, Q3, and Q4. In addition to that, I just alluded to next-generation Tableau, which we will be in full launch mode with in the second half of the year, and we do expect next gen to be a demand driver as hospitals and health systems continue to tell us that cybersecurity is at or very near the top of their priority list. As we believe we have the only dialysis system in the market to meet these very stringent FDA requirements, we believe that will be a demand driver based on how well this is resonating thus far in our early sales conversations. We view that as an incremental tailwind for the second half of the year. Colin Clarke: Understood. That is very helpful. I am curious on the next-gen system — does it have the potential, do you think, to accelerate these trade-in timelines as far as replacing older-generation Tableaus? Leslie L. Trigg: That is an excellent question. The short answer is yes, I think it could. Colin Clarke: Perfect. One final one from me. Thank you for hosting the webinar this afternoon with the dialysis supervisor at Reid Health — we found it really helpful. We were interested in what she said about bidirectional integration of Tableau into the EMR. Can you talk about the functionality that enables and what that does for your revenue recognition when Tableau not only uploads data to the EMR, but the operators have the potential to input orders from the EMR to Tableau? Leslie L. Trigg: Sure. Thank you for listening to the webinar — I appreciate that. Yes, Reid Health has had a lot of very positive benefits clinically and financially through insourcing with Tableau. To fill other listeners in, what is being alluded to is a potential future capability for bidirectional data transfer. Today, what we offer is uniquely one-way data transfer. We are directly integrated with Epic and Cerner and many other EMRs, which again is unique to Tableau. Health systems use that today to directly transmit or upload all of the treatment data from Tableau after every treatment up to their EHR. There is an opportunity to add a new feature in the future that would allow prescription data or information to be transmitted directly from the EMR to Tableau. That is something we are excited about as a future direction and that we have heard — and it sounds like you heard from Reid Health — would deliver quite a bit of value to our customers. When we think about our recurring revenue foundation that Renee alluded to — roughly about 70% of our total revenue — our overarching revenue strategy is to drive the highest possible percentage of our total revenue from recurring revenue sources. It is visible and very predictable. EMR is an example of a recurring revenue layer that we have added around service and around consumables, and we have had good early success with selling EMR both in terms of upfront implementation and recurring maintenance fees annually. Were we to add new features like bidirectional, we would view that as an incremental revenue opportunity, further fueling the recurring revenue foundation that we enjoy. Colin Clarke: That is very helpful. Thank you. I will hop back in the queue. Leslie L. Trigg: Thank you. Operator: We have no further questions at this time. I will now turn the call back over to Leslie L. Trigg for more closing remarks. Leslie L. Trigg: Terrific. Thank you to everybody for joining today. I would like to close by thanking our customers and our team for the difference that they make every day in the lives of dialysis patients. Have a great evening, everyone. Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to the Q1 2026 Akamai Technologies, Inc. Earnings Conference Call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, you may press star and then two. Please note that this event is being recorded. I would now like to turn the conference over to Mark Stoutenberg. Thank you, and over to you. Mark Stoutenberg: Good afternoon, everyone, and thank you for joining Akamai Technologies, Inc.’s First Quarter 2026 Earnings Call. Speaking today will be F. Thomson Leighton, Akamai Technologies, Inc.’s chief executive officer, and Edward J. McGowan, Akamai Technologies, Inc.’s chief financial officer. Please note that today's comments include forward-looking statements that include revenue and earnings guidance. These forward-looking statements are based on current expectations and assumptions that are subject to certain risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied. The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments, and other risk factors identified in our filings with the SEC. The statements included on today's call represent the company's views on 05/07/2026, and we assume no obligation to update any forward-looking statements. As a reminder, we will be referring to certain non-GAAP financial metrics during today's call. A detailed GAAP to non-GAAP reconciliation is available in the Investor Relations section of akamai.com under financials. With that, I will now hand the call over to our CEO, F. Thomson Leighton. F. Thomson Leighton: Thanks, Mark. I am pleased to report that Akamai Technologies, Inc. is off to a strong start to the year. In just a few months, we have achieved major milestones for our cloud computing strategy, marking a definitive turning point in the growth and evolution of our business. Akamai Technologies, Inc. has long been known for operating the world's largest distributed platform for delivery and security solutions at global scale, with a reputation for reliability, quality, and trust. Now we are leveraging our global footprint and years of experience supporting the world's largest enterprises to become an industry infrastructure provider for the AI-driven economy. At GTC in March, we unveiled the industry’s first global-scale implementation of NVIDIA’s AI grid, and we announced the rollout of thousands of NVIDIA RTX Pro 6000 GPUs. By integrating NVIDIA AI infrastructure into Akamai Technologies, Inc.’s massive distributed platform and by leveraging intelligent workload orchestration across our network, we intend to move the market for AI beyond isolated AI factories toward a unified, distributed grid for AI inference. By pushing AI inference to the edge, and combining it with our massive deployment of CPUs for delivery, security, and functions as a service, we are enabling customers to run complex models within milliseconds of their end users, with the responsiveness of local compute and the scale of the global web, optimizing performance while reducing latency and cost. Those who attended GTC heard NVIDIA position Akamai Technologies, Inc. as a vital player in the industry's ecosystem for AI infrastructure, and we have seen very positive market reaction to our rapidly expanding capabilities from a wide spectrum of enterprises. Today, we are very excited to announce another major milestone for our cloud computing strategy and the evolution of Akamai Technologies, Inc.: the signing of a landmark seven-year $1.8 billion commitment for our cloud infrastructure services by a leading frontier model company. This is the largest customer deal in Akamai Technologies, Inc. history, and it comes on the heels of the $200 million CIS deal we announced in February with a major U.S. tech company also at the forefront of the AI revolution. These leaders in AI have chosen Akamai Technologies, Inc. because their AI workloads need the scale, performance, and reliability that our cloud platform provides. Many other enterprises have chosen Akamai Technologies, Inc. for similar reasons. For example, since the start of the year, a leading cloud and digital infrastructure provider in Asia chose our GPUs to support their low-latency live streaming media service. An AI company in the U.S. chose our GPU platform to power their voice-first solution to optimize business operations. An AI-powered video intelligence platform in India chose our GPU platform to scale video analytics and computer vision workloads for retailers. A consumer AI platform in the U.S. chose Akamai Technologies, Inc. Cloud to run and scale live personalized agents. An AI commerce company in India chose our distributed inference platform to power their ad personalization engine. And two premier global retail brands chose our distributed data capabilities to improve the performance and resilience of their online retail applications. But all this is just the beginning. We have a large and rapidly expanding pipeline of prospects that are looking to Akamai Technologies, Inc. for cloud solutions, including some with very large needs. To satisfy this strong and growing demand for our cloud infrastructure services, we expect to continue to build out both our physical infrastructure and our cloud sales and support teams. And as Ed will talk about in a few minutes, we now anticipate significant acceleration of our overall revenue growth heading into 2027 and beyond. Turning to security, I am pleased to report that Q1 was also strong for our security portfolio, where revenue grew 11% year over year as reported and 9% in constant currency. Our security growth was led by strong demand for our market-leading web application firewall, API security, and Guardicore segmentation solutions. Our WAF, in particular, is seeing growing interest from customers eager to deploy the latest defenses for vulnerabilities that could be exposed by the ever-strengthening frontier models and AI-powered attacks. Frontier models are changing vulnerability management, and we are proud to be one of the industry's must-have security providers partnering with the frontier model companies to help ensure the safe, rapid deployment of AI-enhanced defenses. With our early access to their vulnerability detection programs, we are applying our expertise to help keep major enterprises and critical infrastructure safe. Of course, and this is important to understand, attackers will also be using more advanced AI technology to develop even more potent ways to cause harm. This means that major enterprises will need Akamai Technologies, Inc. security solutions even more than before. For example, there are many legacy systems and billions of deployed devices that cannot be patched. They will become a lot more vulnerable with the advances in AI and they will need our security solutions to keep them safe. For the devices and systems that can be patched, the patching process still takes time, often days or weeks, and they will need our protection until that is done. We have seen this happen before when zero-day attacks emerged, and with the advances in AI, we can expect zero-day attacks to occur much more frequently. There is also an increasing challenge with scale. Because AI is enabling attackers to take over more devices and create enormous bot armies, we are now seeing attacks with unprecedented volumes. Just in the last few weeks, we neutralized a series of app-layer attacks with millions of malicious requests per second from millions of widely distributed IPs. Akamai Technologies, Inc. can defend against such attacks because of our widely distributed platform. Our WAF runs in 4,300 locations across 700 cities to intercept the attack traffic right where it enters the internet and well before it can coalesce onto the target. Having a great WAF with the needed defenses for the latest attacks is obviously important, but that alone is not enough in the coming age of AI. The WAFs need to be deployed across a vast distributed platform, and this need provides a unique advantage for Akamai Technologies, Inc. when compared to the competition. In summary, we believe that Akamai Technologies, Inc.’s security portfolio will be needed more than ever before as attackers take advantage of the advances in AI. That is because of our massive platform scale to absorb attacks, our unparalleled access to real-time attack data, our tight integration with the early warning ecosystem to provide up-to-the-minute defenses for the latest zero-day attacks, our large and very experienced human security operations team that is equipped with the latest AI tools to enhance visibility and minimize response times, and our innovative, rapidly evolving and AI-enabled product suite to help prevent penetrations and to limit the damage when penetrations do occur. Customers who selected Akamai Technologies, Inc. in Q1 for that kind of protection for their APIs included one of the largest telecom groups in Africa, a major investment management company in South America, one of the premier investment banks in the Middle East, and one of the world's leading fintech companies in the U.S. Customers who added or expanded their use of our Guardicore segmentation solution in Q1 included the leading telecom carrier and media company in South Korea, one of the largest banking groups in Europe, and a leading healthcare company in the U.S. Many of the large renewals we signed in Q1 also included expansions of our security services. For example, after we protected one of America's leading retailers from unwanted bots during the holiday shopping season, they increased the use of our services in a contract worth $24 million. We signed an expansion contract worth $80 million over two years with one of the world's largest video game companies. We signed an expansion contract worth more than $20 million with a global consumer electronics company in Korea. And one of the largest global professional services companies in the world expanded their use of our ZTNA solution to secure large-scale remote access as they move critical applications to a zero trust model. Our security solutions continue to receive top recognitions from the major analyst firms for their effectiveness. For example, last quarter, Akamai Technologies, Inc. achieved a 99% recommendation rating as Customers’ Choice at Gartner’s Peer Insights report on microsegmentation. And last month, Akamai Technologies, Inc. was the only provider to be named Customers’ Choice in Gartner’s Peer Insights report on API protection. In closing, we are thrilled by the way our growth strategy has taken hold and is generating transformative opportunities for our business. We believe that Akamai Technologies, Inc. is uniquely positioned to enable and benefit from the development of the AI-driven economy. By bringing powerful compute directly to the data and the users at the edge, Akamai Technologies, Inc. is enabling and securing the next generation of agentic AI. With each quarter, the massive opportunity we see ahead becomes more evident, and we are making bold investments to capitalize on that opportunity and enable Akamai Technologies, Inc. to do for cloud and AI what we have done for security and CDN to generate significant future growth for our business. Now I will turn the call over to Ed for more on our results and our outlook for Q2 and the year. Ed? Edward J. McGowan: Thank you, Tom. Before I get started, and to build on Tom’s remarks, I want to personally underscore my excitement regarding the $1.8 billion new customer win announced today. This is a powerful validation of the Akamai Technologies, Inc. value proposition in the age of AI and a clear indicator of the scale at which we can operate. To fully capitalize on this momentum and support the accelerated growth we anticipate, we will be investing slightly ahead of revenue. You will see this reflected in the updated capital expenditure and operating margin outlook I will discuss during the guidance portion of my remarks. We view these investments in our CIS portfolio as critical to ensure we have the foundation to meet the significant demand we see on the horizon. Also, driven by today's announced $1.8 billion win, the $200 million four-year CIS deal we announced last quarter, and our rapidly accelerating pipeline, we now expect total company annual top-line revenue growth to reach double digits in 2027. We look forward to sharing more details in the coming quarters. Clearly, this is an incredibly exciting time for Akamai Technologies, Inc. With that, let us dive into the Q1 results. We delivered strong first quarter results with total revenue of $1.074 billion, which was up 6% year over year as reported and 4% in constant currency. Cloud infrastructure services, or CIS, revenue got off to a robust start to the year with revenue of $95 million, up 40% year over year as reported and 39% in constant currency. As Tom noted, we are seeing CIS wins across a wide spectrum of industries, geographies, and use cases. Even more encouraging, the pipeline for AI-specific use cases is building rapidly. We also maintained very strong momentum in security with revenue of $590 million, up 11% year over year as reported and 9% in constant currency. The strength in the first quarter continued to be driven by our fast-growing API security and Guardicore segmentation solutions along with strong growth from our largest product, web application firewall. Moving to delivery and other cloud applications. Revenue was $389 million, down 7% year over year as reported and down 8% in constant currency. These results were in line with expectations, driven by the wrap-around impact of the Edgeio transaction in 2025. We expect this effect and the rate of decline to moderate throughout the remainder of the year. International revenue was $530 million, up 9% year over year or up 5% in constant currency, representing 49% of total revenue in Q1. Foreign exchange fluctuations had a positive impact on revenue of $2 million on a sequential basis and a positive $19 million on a year-over-year basis. Moving to profitability. In Q1, we generated non-GAAP net income of $239 million or $1.61 of earnings per diluted share, down 5% year over year as reported and in constant currency. These results include our expanded colocation investments, higher depreciation, and increased headcount costs, all tied to our strategic investment in cloud infrastructure services during the first quarter. Our non-GAAP operating margin for Q1 was 26%, in line with our expectations. We expect operating margin to remain in this range for the remainder of this year as we ramp up our investment to capture the exciting growth opportunities ahead of us. Our Q1 CapEx was $206 million, or 19% of revenue. First quarter CapEx was slightly below our guidance, primarily driven by timing and favorable pricing. Specifically, some expenditures shifted from Q1 into Q2, and we benefited from some lower-than-expected component costs. Moving to cash and our capital allocation strategy. During the first quarter, we spent approximately $206 million to buy back approximately 2 million shares. We ended the first quarter with approximately $975 million remaining on our current repurchase authorization. Our intention with capital allocation remains the same: to continue buying back shares to offset dilution from employee equity programs over time and to be opportunistic in both M&A and share repurchases. As of March 31, we had approximately $1.7 billion of cash, cash equivalents, and marketable securities. Now, before I provide Q2 and full-year 2026 guidance, I want to touch on a few housekeeping items. First, for Q2, CapEx is expected to jump significantly as we start to take delivery of the NVIDIA GPUs we discussed on our last quarterly earnings call, and we catch up on some of the CapEx that pushed from Q1 into Q2. Second, we expect to see an increase in operating expenses in the second quarter due primarily to continued investments in go-to-market and the impact of our annual employee merit cycle that went into effect in April. We anticipate revenue from the $1.8 billion customer win to start to ramp in Q4, and we expect to generate approximately $20 million to $25 million of revenue in the fourth quarter. Finally, regarding CapEx for this win, we expect to spend a total of approximately $800 million to $825 million over the next twelve months to support this customer. We expect to deploy roughly $700 million of that total in 2026, with the remaining balance falling into 2027. Moving now to guidance. For the second quarter, we are projecting revenue in the range of $1.075 billion to $1.1 billion, up 3% to 5% as reported and in constant currency over Q2 2025. If current spot rates hold, foreign exchange fluctuations are expected to have no material impact on Q2 revenue compared to Q1 levels, and a positive $2 million impact year over year. At these revenue levels, we expect cash gross margins of approximately 70% to 71%. Gross margin is impacted by the significant increase in colocation as we accelerate the growth in our CIS business. Q2 non-GAAP operating expenses are projected to be $346 million to $357 million. We anticipate Q2 EBITDA margin of approximately 38% to 39%. We expect non-GAAP depreciation expense of $140 million to $144 million. We expect non-GAAP operating margin of approximately 25% to 26%. And with the overall revenue and spend configuration I just outlined, we expect Q2 non-GAAP EPS in the range of $1.45 to $1.65. This EPS guidance assumes taxes of $47 million to $54 million based on an estimated quarterly non-GAAP tax rate of approximately 18.5%. It also reflects a fully diluted share count of approximately 146 million shares. Moving to CapEx. For the reasons I highlighted earlier, we expect to spend approximately $433 million to $453 million in the second quarter. This represents approximately 40% to 41% of total revenue. Looking ahead to the full year 2026, we expect revenue of $4.445 billion to $4.55 billion, which is up 6% to 8% as reported and up 5% to 8% in constant currency. For cloud infrastructure services, we are raising our outlook to at least 50% year-over-year growth in constant currency. We expect momentum in CIS to continue to build throughout 2026, driven mainly by the scaling of our AI opportunities and the impact of the two very large transactions we announced in Q4 and today. Also, we continue to expect security revenue growth in the high single digits on a constant currency basis in 2026. And for delivery and other cloud apps, we continue to expect a decline in the mid-single digits year over year on a constant currency basis. At current spot rates, our guidance assumes foreign exchange will have a positive $20 million impact on revenue in 2026 on a year-over-year basis. Moving to operating margin. For 2026, we are estimating a non-GAAP operating margin of approximately 26% as measured at today’s FX rates. Turning to CapEx. At this time, we anticipate our full year capital will be approximately 40% to 42% of total revenue, including the $700 million impact from the $1.8 billion contract we mentioned earlier. Before I move on, I want to provide some additional color on our CapEx outlook. As Tom noted, the demand we are seeing for CIS, including our GPU deployments, is exceptional. Our current pipeline for GPUs significantly exceeds our existing and projected inventory, meaning we may place additional GPU orders in the second half of the year to meet this demand. This is not factored into our current annual CapEx guide. We will update CapEx guidance on a subsequent earnings call if we place another GPU order before year end. Moving to EPS. For full year 2026, we expect non-GAAP earnings per diluted share in the range of $6.40 to $7.15. This EPS guidance includes the impact from the very large win. This non-GAAP earnings guidance is based on a non-GAAP effective tax rate of approximately 18.5% and a fully diluted share count of approximately 147 million shares. With that, I will wrap things up, and Tom and I are happy to take your questions. Operator? Operator: We will now begin the question and answer session. To ask a question, you may press star and one on your touch-tone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and two. At this time, we will pause momentarily to assemble our roster. We have the first question from the line of Roger Boyd from UBS. Please go ahead. Roger Boyd: Congrats on the landmark deal there. Maybe if you can, Tom, just broad strokes about the competitive set to win that deal. Are you going toe to toe with hyperscalers or neo-clouds? And anything you can provide on the use cases—inference, is it agentic workloads? And as you think about your compute-enabled PoPs, how is this customer leveraging the Akamai Technologies, Inc. network as a whole? F. Thomson Leighton: I cannot give any more details about this specific deal. But in general, yes, we do compete with the hyperscalers and the neo-clouds with our cloud infrastructure services. That is the primary competition. They select Akamai Technologies, Inc. because of our proven ability to manage and scale complex distributed systems, our ability to get the necessary data center space in locations around the globe, to interconnect that with the world's largest and best-performing delivery network and leading security solutions. We offer the best in terms of latency and scalability. We probably deal with more data center companies than anybody, with being in 4,300 locations across 700 cities and 130 countries. So, yes, we have significant competition. Every deal is competitive, but we also have unique capabilities, which is, I think, why our pipeline is so strong and why we are winning some very large deals. Roger Boyd: And on security, could you unpack what you are seeing from a demand perspective there? With the nice result in the first quarter, what are you seeing around conversion rates, sales cycles? Are you seeing more urgency from organizations that are thinking about ways to limit the blast radius and defend against an AI-fueled attack landscape? F. Thomson Leighton: I do not think I have ever seen the CSOs more agitated and feeling more of a sense of urgency than they are now. Over the last several weeks, couple of months, I have had the chance to meet with a lot of the world's biggest company CSOs, in many cases the CEOs and senior executives, and they are very concerned about what happens when the attackers get access to advanced AI with the latest AI frontier models, which it seems that they will. This is going to uncover a lot more vulnerabilities. We are going to see the equivalent of a lot more zero days, and they are literally scrambling now, in many cases, to make sure all their applications, their agents, their APIs are protected by Akamai Technologies, Inc. You can imagine most of the world's major banks rely on us for security, and they are looking at a pretty big wave of new attacks coming their way. I do not know of a comparable time where there is this much concern about what is going to happen with security, and also this much appreciation for what Akamai Technologies, Inc. provides with our security platform. Operator: Thank you. We have the next question from the line of Patrick Edwin Colville from Scotiabank. Please go ahead. Patrick Edwin Colville: Thank you so much for taking my question. This one is for Dr. Tom. When I think about Akamai Technologies, Inc., the value prop for the last 30-plus years has been the distributed architecture—700 cities, 130 countries. When I think about this mega deal, is that a highly distributed use case, or should we think about it as being served from a few, like, sub-10 type data centers? And then a follow-up for Ed on CapEx: you gave a CapEx guide and then made a subtle point that you might have to increase CapEx further. Help us understand why there might be an increase midyear and what that might mean. F. Thomson Leighton: I am not at liberty to talk about the recent deal. However, I think when you are thinking about Akamai Technologies, Inc.’s value proposition, you hit a very key point with our really unparalleled distributed architecture. I did reference a bunch of use cases in the prepared remarks, and, yes, they very much rely on our distributed platform, where you want to get the agents and the applications, the business logic, close to users and close to the data so you get low latency and scalability. Particularly anything to do with video processing or video generation needs a lot of scale, and Akamai Technologies, Inc. is unique there. So I think what we are able to offer is very compelling. Edward J. McGowan: Thanks for the question, Patrick. What I had mentioned was we have a very, very strong pipeline for our GPU platform, and we are just starting to get the bulk of those chips up and running now, and we have a very large pipeline that exceeds what we have in inventory. Obviously, we want to prosecute that pipeline, start winning those deals, converting that into contracts, etc. The reason I hedged a little bit is, one, we want to fulfill that pipeline, and two, there is some time that it takes to get the chips. So even if we were to place an order, it may slip into next year. I want to give it another quarter, and if, in fact, we are in a position to place an order and receive that by year end, we will certainly do that and let you know. I see that as a very bullish comment, and I just did not want to surprise you with another, whatever it is, couple hundred million dollars or whatever the order may be, without at least giving you some color behind that. Operator: Thank you. We have the next question on the line of John DiFucci from Guggenheim Securities. Please go ahead. John DiFucci: Thanks for taking my question. My first question is for Ed, and I have a quick follow-up for Tom. Ed, thanks for all the detail on CapEx. But when I think about the CapEx for this mega deal—this is over a long time, seven years—are you accountable for, for example, higher memory costs if those rise in the future? When you locked in this deal, do you also have the supply locked in, or are you exposed if that were to happen two years from now? Edward J. McGowan: Great question. I was fortunate enough to work very closely with the team on both sides of this transaction. We have been able to get the supply chain ready. We anticipate receiving all the goods that we need to deliver this service over the seven years within the next twelve months, with the majority of it this year, as I broke out. We anticipate receiving a significant portion. There is always the potential for some slippage and delays, but we have mechanisms in our contracts to deal with changes in prices if, for example, six months from now prices were to go up. We have taken that into consideration. From a revenue perspective, the way to think about this deal is it is a set amount of capacity that we are deploying. There is no usage component; it is a straight committed deal over seven years. As soon as we ramp all the capacity up, we will start taking the revenue for a full year. I expect a little bit this year and then next year we will get a partial year as we receive the remainder of what is to be deployed, and then from there it will go on for the remaining six-plus years. John DiFucci: So even though it is consumption-related technology, it will look like a subscription. Is that accurate? Edward J. McGowan: Exactly. That is exactly the way to think about it. John DiFucci: And Dr. Tom, a component of your delivery business is video streaming. In March, OpenAI confirmed they shut down their AI video generation system, Sora. Do you expect that to have any effect on your delivery or compute business forecast? F. Thomson Leighton: No. We partner with OpenAI on security vulnerabilities, helping define them and protecting our customers for the associated attacks, but OpenAI is not and has not been a customer of Akamai Technologies, Inc. So there is no impact on us at all. Operator: Thank you. We have the next question on the line of Jackson Edmund Ader from KeyBanc Capital Markets. Please go ahead. Aidan Daniels: Hi, this is Aidan Daniels on for Jackson Edmund Ader. Thanks for taking our question. With this big deal, as you allocate capacity going forward, how should we think about the impact on any amount of on-demand GPU capacity you are able to offer? How are you balancing what you have committed from this deal with maintaining flexibility for newer incremental demand going forward? And as a quick follow-up, while you cannot talk about the deal specifically, how should we think about the proportion of CPU versus GPU inference cloud going forward? F. Thomson Leighton: We support both on-demand, per-token or per-VM-hour access to our platform, and we also support large tranche deals. It is not really a matter at this point of trading off, and as we need more GPUs, as Ed said, we would purchase more. On the mix, in general with inference and AI, you need both CPU and GPU. Part of the value we provide is that we can help provide the computational resource that is most appropriate for the workload, which might be CPU or might be GPU, because you want to be as efficient as possible and have it be as close as possible to the user so you get the best performance. It is a mix, and every application is different in the mix of CPU versus GPU that it needs. Operator: Thank you. We have the next question from the line of Fatima Boolani from Citi. Please go ahead. Fatima Boolani: Good afternoon. Thank you for taking my questions. A higher-level strategic question: you have opted to take more of a dedicated capacity approach in terms of satisfying demand and supply constraints. Why steer the network and platform more towards larger customers, longer commits, and more dedicated capacity, given spot rates for rental or GPU-as-a-service can be more attractive? And as a follow-up for Ed, on sources of funds for potentially larger CapEx: can you fund intrinsically from the business, or should we expect you to tap other sources of capital? F. Thomson Leighton: We do both. The larger deals with long-term commits are more attractive in many ways because you have the commit. In big deals, pricing would be lower, but we also support on-demand where you can buy by the token or the hour at higher pricing, though there can be more expense associated with that. Both are attractive, and we support both. It is not a matter of us doing one or the other. Edward J. McGowan: The customers are really driving that. A lot of customers want to have dedicated capacity because there is scarcity in the marketplace. Rather than going on a pure consumption basis, they can get slightly better pricing and lock in capacity for themselves. On funding, so far no issues financing these buildouts from our own capital. We are very profitable and produce a lot of cash. In years when we are investing big, cash flow will be a bit lower, but these things have phenomenal free cash flow after the initial deployment. We have $1.7 billion in cash and equivalents on the books today, a $1 billion line of credit we can tap if needed, and excellent credit should we decide to access capital markets. So far, we have used our own funds. Operator: Thank you. We have the next question on the line of Arti Vula from JPMorgan, for Mark Murphy. Please go ahead. Arti Vula: Great to see the momentum you are having with large CIS deals with companies on the AI technology frontier—one last quarter, another this quarter that dwarfed the one before it. At a high level, has this been brewing for a while in the pipeline, or have these been faster? What changed that brought this business to your doorstep seemingly quickly? And as you dedicate financial and operational resources to CIS and these large deals, does it change how you think about other business segments? F. Thomson Leighton: This has been the strategy all along, and we are pleased to be executing against it. The goal has been to deploy a distributed inference and compute platform that would be desired by enterprises across the spectrum, including many large customers. Akamai Technologies, Inc.’s customer base features many of the world's largest enterprises; they spend 10x or more on compute than they do on our traditional delivery and security services. This is exactly what we said we were going to do, and now we are delivering those results. The platform is at a point where we can do that, and I think you will see more of this going forward. Operator: We have the next question from the line of Sanjit Singh from Morgan Stanley. Please go ahead. Sanjit Singh: Congrats on the largest deal in company history. On the $1.8 billion contract, is that more of a public cloud opportunity, or was it specifically for Akamai Technologies, Inc. Inference Cloud? And second, on the delivery business, with potential billions of agents, has the team revisited the thesis around secular growth prospects in delivery, or is it still a business you are mostly looking to harvest for profitability to fund security and compute? F. Thomson Leighton: We really cannot talk more about this particular deal. More broadly, we have signed contracts across the spectrum for our inference cloud and our cloud capabilities for both GPUs and CPUs. Our value is bringing the right hardware for the application and placing it where you get the best benefit. On delivery, the biggest driver for growth in an agentic future will be the compute platform and then security. AI and agents are a whole new vulnerability surface, and there is a real tailwind for our security technology group. There will be some delivery traffic that used to be human-generated now agent-generated, but that does not make a huge swing in bits delivered unless agents are dealing with video or generating video, which can drive a lot of traffic. We are in early days there. The biggest impact for us is in cloud and next in security. Delivery remains important, synergistic with our platform, and generates a lot of cash that we are plowing into growth of the cloud business. Operator: Thank you. We have the next question from the line of Michael Joseph Cikos from Needham. Please go ahead. Michael Joseph Cikos: Thanks, and congratulations on the strong quarter and customer win. On mechanics: you signed a seven-year $1.8 billion commitment. Can we expect the full $1.8 billion to show up in RPO, is that all take-or-pay, and anything else to understand the mechanics? Edward J. McGowan: This is more of the dedicated capacity model. As soon as we get the capacity set up, we will take the revenue ratably over the contract. We will get some revenue this year and a partial year next year as we are still building and getting capacity live. In RPO, you will see most of that next quarter, and by the time we get everything delivered, it will all be in RPO. There are some mechanics in the first twelve months relating to how we are receiving the goods and our pricing mechanism for potential price moves, so there is a bit of nuance. But once fully up and running, you will see it in RPO—some next quarter, and then it will build from there. Michael Joseph Cikos: For Dr. Leighton, it is great to hear that your largest security product, WAF, is seeing stronger growth. What is driving that? Is it really this heightened environment? F. Thomson Leighton: There are real advances in AI, and it is getting much better at finding vulnerabilities and helping attackers penetrate enterprises and take over devices. You need our defenses now more than ever. There are billions of devices that you cannot patch, and the adversary can find ways into those devices and take them over. We are seeing much bigger attacks than before—application layer attacks from millions of distributed IPs with millions of attacks per second. You cannot defend against that with just a WAF in a data center. You need the vast platform that we have to intercept and separate the bad from the good at scale. Our platform is needed more than ever for security services, and customers know that. AI helps on defense but does not solve the problem; net-net, this is a very challenging time for CSOs, and that is why they are turning to us. Operator: Thank you. We have the next question from the line of Frank Garrett Louthan from Raymond James. Please go ahead. Frank Garrett Louthan: A follow-up on the $1.8 billion—does all of that come in as revenue, or will any be counted as paid-for upfront CapEx? And how many locations do you have Inference Cloud built out to currently, and what is the plan? Edward J. McGowan: It is all revenue. There is no offset to CapEx. F. Thomson Leighton: The Inference Cloud covers all of our 4,300 locations with functions as a service running in a serverless way in all 4,300. We have our managed container service running in well over 100 cities and can run in all 700 cities; it is active in well over 100 today. We have full IaaS capabilities in several dozen cities, and a couple dozen of those are equipped with the new 6000-series GPUs. The goal is to have all this orchestrated so that when an application or an agent needs to be run, it is run on the most computationally efficient resource as close as possible to the user. Our orchestration layer is designed to make that possible, aligned with the AI grid vision from NVIDIA—think of AI like an electrical grid, and that is what Akamai Technologies, Inc. is building. Operator: Thank you. We have the next question from the line of William Power from Baird. Please go ahead. William Power: Congrats on the massive deal. Two questions. First, a clarification: when you talk about needing additional GPUs, do you need more to satisfy the new deal, or is that more related to the building pipeline? And any framework for overall cost and timing? Second, how should we think about gross margin and operating margin impacts as we look into 2028 relative to today? Edward J. McGowan: All the CapEx we need to satisfy the $1.8 billion deal is in the guidance—separate from my comment around potential additional GPU purchases tied to the broader pipeline. Demand is very strong with opportunities ranging from a couple hundred GPUs to a thousand or more per customer. The last incremental GPU order we discussed was around $250 million in CapEx; I do not have a size for a potential next order yet. On margins: for these larger dedicated-capacity deals, the biggest cost driver is depreciation over the period. Cash gross margin costs (colo, bandwidth, networking, some personnel) scale well, so over time you would expect cash gross margin and EBITDA margin to expand. Operating margin will depend on mix. We may do very large deals at margins below the 30% operating margin, while GPU-as-a-service/rental tends to be much higher than company average. We will focus over the next year or two on capitalizing on growth, not margin expansion, but over time free cash flow margins should improve naturally with scale. Operator: Thank you. We have the next question from the line of James Fish from Piper Sandler. Please go ahead. James Fish: Given prior discussions around power—large sites having five to 10 megawatts and smaller sites a fraction of that—it puts you above 300 megawatts, but revenue does not align with that. How much of that power is for noncompute services? Is that why you need to bring on another roughly 40 megawatts for this deal, or can you walk us through megawatts and the plan? Edward J. McGowan: Your math is not right in terms of what would be required to deliver this particular deal; it is significantly lower. For capacity, CDN and security use a small fraction of power—think kilowatts and, in some big CDN deployments, maybe a megawatt or two. Compute needs are a lot greater, especially for customers wanting a few thousand GPUs in particular locations or across 20–30 locations with a lot of CPU. Our typical large core compute locations are five to 10 megawatts, expandable to 20–30. We can get bigger, and there is plenty of opportunity to get additional colo. We expect to light up a lot more going forward. We are not concerned about access to power or colo. We have great relationships with data center providers, excellent credit, and we are not a DIY hyperscaler. GPUs draw more power than CPUs; equipment type matters for efficiency. We factor power into any deal and ensure profitability. James Fish: On security, you normally give API and zero trust versus core—how did that trend? And how did compute trend in the quarter? Edward J. McGowan: We did not break out API and Guardicore, but they remain the majority of what is driving growth, with growth rates similar to last quarter when you back out the impact of license revenue. On compute, think about enterprise compute as CIS, which we break out separately—CIS grew 40% year over year, and we expect that to accelerate. Operator: Thank you. We have the next question from the line of Jonathan Frank Ho from William Blair and Company. Please go ahead. Jonathan Frank Ho: Given the types of mega customers that you are bringing onto your platform, is there more opportunity to upsell once they are on your platform? Are there potential additional services, or could they come back if they continue to expand? F. Thomson Leighton: Demand for AI is rapidly increasing, and we are really early. I would expect plenty of room to grow the existing base and, of course, add other customers of that scale. Operator: Thank you. We have time for one last question from the line of Jeffrey Van Rhee from Craig-Hallum. Please go ahead. Jeffrey Van Rhee: Two quick ones. First, Tom, there is a lot of blowback nationally against AI data centers and their power consumption. As you step into deals of this magnitude, how do you think about staying out of the crosshairs of that community pushback? Second, on security, given AI becoming a tailwind, would you think this year is likely a floor in terms of growth rate, with potential reacceleration into 2027 and beyond? F. Thomson Leighton: I do not think we have a profile in the popular press anything like the giant hyperscalers, so I do not think that is really an issue for us. We are not worried about that yet—maybe that is a good problem to have once we are much larger than we are today. Edward J. McGowan: On security growth, we gave guidance for the year and are pleased with what we saw in the first quarter. We like what we see, especially around API security—still early days with low penetration—and Guardicore is growing very consistently. We will update you as we go. Operator: This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, welcome to Natera, Inc.'s First Quarter 2026 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question and answer session. To ask a question at that time, please press star followed by one, or star zero for operator assistance. As a reminder, this conference call is being recorded today, May 7, 2026. I would now like to turn the conference over to Michael Brophy, Chief Financial Officer. Please go ahead. Michael Brophy: Thank you for joining our conference call to discuss the results of 2026. On the line, I am joined by Steven Leonard Chapman, our CEO, Solomon Moshkevich, President, Clinical Diagnostics, and Alexey Aleshin, General Manager of Oncology and our Chief Medical Officer. Today's conference call is being broadcast live via webcast. We will be referring to a slide presentation that has been posted to investors.natera.com. A replay of the call will also be posted to our IR website as soon as it is available. Starting on Slide 2, during the course of this conference call, we will make forward-looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook, market size, partnerships, clinical studies and expected results, opportunities and strategies, and expectations for current and future products, including product capabilities, expected release dates, reimbursement coverage, and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including our most recent Forms 10-K or 10-Q and the Form 8-Ks filed with today's press release. Those documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward-looking statements. Forward-looking statements made during the call are being made as of today, May 7, 2026. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Natera, Inc. disclaims any obligation to update or revise any forward-looking statements. We will provide guidance on today's call but will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. We will quote a number of numeric or growth changes as we discuss our financial performance, and unless otherwise noted, each such reference represents a year-on-year comparison. And now I would like to turn the call over to Steve. Steven? Steven Leonard Chapman: Thanks, Mike. Let us get to the highlights. We had another excellent quarter as you can see here. We posted revenues of $697 million in Q1, 39% growth over last year. Even at our scale, Q1 shows we are still in rapid growth mode. It was just a short while ago that we celebrated a milestone by delivering 1 million units in a year. Q1 was our first to deliver 1 million units in a single quarter, headlined by excellent volume performance in women's health and another record growth quarter for oncology. We feel like we are just getting started. On women's health, the core business grew exceptionally well and we had a very successful launch of our Fetal Focus product. The Fetal Focus launch is exceeding expectations based on the strength of our technology and data from the prospective blinded multi-site EXPAND trial. We are winning new customers and experiencing high client retention rates. We are approaching a run rate of nearly 200 thousand Fetal Focus orders, which is impressive given our recent launch date. In oncology, we processed 249 thousand clinical oncology units in the quarter, which is 55% growth over last year and yet another record, with roughly 24 thousand units over the Q4 results. This is the biggest increase we have ever achieved. In February, we guided to full-year gross margins of 64% at the midpoint, and we are pleased to have exceeded that level in Q1 with gross margins coming in at just under 65%. The rapid increase in volumes in Q1 actually harmed margins by roughly two percentage points because we had more samples in process in the lab at the close of the quarter than normal, impacting our received versus reported ratio. This will resolve itself as we move forward. We believe we are in a very good position relative to the guide. Given the fantastic start to the year, we are pleased to fully reset the revenue guide range by more than $120 million and increase our gross margin guidance to 65% at the midpoint. Enrollment in oncology clinical trials, including new interventional MRD trials and a FIND ECD study, are well ahead of schedule, so we are going to bump R&D expectations by $50 million, primarily to pull forward these trials. Of note, on the FIND ECD study, we are pleased to announce that we should be fully done enrolling in Q3 of this year, which is super exciting given the huge opportunity that provides as we look to a 2027 launch. Okay, let us unpack some of these trends on the next few slides. On volume, I want to thank our team for getting us over 1 million units in a quarter. Natera, Inc. employees are very passionate about our mission to improve health, and it shows in our performance. Thank you for what you do every day. We fired on all cylinders in Q1 with another strong organ health quarter to go alongside record units in oncology and a very strong women's health quarter. While we do expect Q1 to be strong due to seasonality, this was really an incredible quarter and nearly the most unit growth we have seen since I took over as CEO. We have seen a lot of new account momentum with the launch of Fetal Focus, as we will describe on the next slide. As a reminder, Fetal Focus is our next-generation single gene NIPT and it is powered by our ultrasensitive linked-SNP technology and enables direct assessment of fetal cell-free DNA across 21 genes associated with serious early-onset conditions. We continue to see strong interest from clinicians, particularly given the test's ability to address a common gap in prenatal care, specifically when paternal screening is not available. That demand is now transitioning into meaningful scale. As shown on the slide, we are approaching an annualized run rate of approximately 200 thousand test orders, reflecting strong adoption across OBGYNs and MFMs. For clarity, we do not count these Fetal Focus orders in our tests processed numbers when Horizon is negative for one of the 21 conditions tested. When we say we saw an incredible growth quarter, we are really referring to the core Horizon and Panorama testing and not including the majority of these Fetal Focus orders, which would boost our numbers even higher. Importantly, this growth is supported by a strong clinical foundation. The EXPAND trial has been a major success and was selected for an oral plenary presentation at the Society of Maternal-Fetal Medicine meeting, a rare distinction that underscores both the quality of the data and its clinical relevance. As a reminder, the EXPAND trial is a prospective blinded multicenter study that has definitive genetic outcomes on all participants, both positives and negatives. The goal is to enroll about 2 thousand patients into the study, and this has been ongoing now for several years. The EXPAND results were recently submitted for peer-reviewed publication, and we believe we will continue to see Fetal Focus emerge as a meaningful contributor to growth in the women's health business. The next slide shows our clinical MRD volume progression over time. First, let us look at the total number of MRD tests. Getting nearly 250 thousand tests is an incredible number, and we are now on a run rate of over 1 million MRD tests annually. We were able to grow by approximately 24 thousand units in Q1, which was another record for our team. It is amazing to think we are still in the early stages of what MRD can become. In the volume, we are continuing to see strong growth in the core indications of colorectal and breast cancer while seeing increasing contributions from other cancer types. I would like to cover some of those growth drivers here on the next slide. The Q1 growth was a result of some major milestones in 2025, where we had a steady cadence of important data readouts and publications across uterine, breast, colorectal, and lymphoma. A major highlight was our bladder cancer data being presented at ESMO and then being published in the New England Journal of Medicine. We are still seeing the impact of this data in our volumes, in bladder cancer and beyond, as it always takes time to see new data translate into real behavioral changes in the doctor's office. In addition to the new data, we launched the integration with OncoEMR across their network of 4.5 thousand physicians, creating a much more seamless ordering experience. You will recall that we also expanded our commercial footprint last year, and I think we are seeing those reps start to contribute in a real way. We also differentiated our platform with the acquisition of Foresight Diagnostics. The Foresight integration is going well, and their deep research and clinical relationships have also been a tailwind for Signatera adoption in a clinical setting. Many hematologists are starting to order Signatera MRD for their lymphoma patients, and the biopharma interest has really been picking up in both heme and solid tumors based on the value of the phased variant technology. We are pleased to see this working well thus far. We have also listed some of the wins from the first few months of the year on this slide, and we believe that will drive future MRD growth across tumor types. Solomon will discuss a few of these later in the call, including a recent dataset showing how Signatera may enable surgery avoidance as well as the exciting new data from the ALPHA3 trial. Okay, more detail on our revenue progression is here on the next slide. In addition to the strong volume growth, revenue growth is being amplified by realized average selling prices continuing to climb. We spent a lot of time detailing all the hard work and investment we put into obtaining reimbursement for covered services, and those efforts continue to bear fruit. Unit ASPs were up across the board in women's health and organ health, and Signatera ASPs reached another high, now at roughly $1,250. Mike will spend more time on this in his section. The second driver to realized pricing growth is worth watching as well. Even as women's health continues to grow, the rapid expansion of organ health and oncology units being a contributing increasingly large share of total revenues, this trend is a further amplifier of revenue and gross margin growth in the future. As a reminder, in Signatera we have many histologies in submission to Medicare and are currently engaged in the standard cycle of coverage review, which represents additional ASP runway in the second half of this year. As we talked about in the past, we previously set out a long-term Signatera ASP target of $2,000 per test. We think we are still on track to hit that goal as more private payers start to pay and a broader set of indications gets covered. Just at our current annualized volumes, a $2,000 ASP would generate an additional $750 million in revenue and gross profit per year. The next slide is our standard gross margin progression quarter by quarter going back two years. In addition to the ASP growth this quarter, COGS per unit in the lab were clean, largely holding steady with a very strong Q4 performance. Layered on top of these unit COGS were a couple of factors that we think are transient that impacted margin in the quarter, and without these, we would have been about 2% higher. First, we took a larger than usual stock-based comp charge to COGS as part of the close of the Foresight acquisition in Q4. Second, a larger impact was just the amount of work in progress we held in the lab at March quarter-end. We only billed out recognized revenue on about 92% of our cases received in the quarter, while that ratio is normally 95% to 96%. Since we take cost charges as we use materials and labor to process cases in the lab, we have got a larger than usual bolus of cases hitting COGS but not revenue in the quarter. This happened because the volume coming into the lab was so high, particularly at the end of the quarter, which is, of course, a good sign for us. I expect this factor to normalize in the subsequent quarters. Mike will spend more time on these dynamics in his section, but we are sufficiently encouraged on gross margins to meaningfully raise the full-year guide. With that, let me turn it over to Solomon to discuss more details from the quarter. Solomon? Solomon Moshkevich: Thanks, Steve. In my section, I want to highlight several new sources of clinical and economic utility that we are observing with Signatera. There is a big new story emerging about the ability to use Signatera in certain patients to determine who might avoid surgery. On this slide, we have three examples where data was presented or published in the first quarter of the year showing that certain patients, if they test Signatera MRD negative, can forego surgery. In bladder cancer, data presented at the ASCO GU conference showed that Signatera MRD-negative patients who avoided cystectomy had similar outcomes as those who had the surgery. The investigators concluded that ctDNA-negative patients may avoid immediate cystectomy. This is a huge deal, as bladder-sparing approaches are in extremely high demand due to the heavy impact on quality of life. In rectal cancer, a paper was published in the journal Cancers showing that after neoadjuvant therapy, Signatera MRD-negative patients who chose to avoid surgery had excellent outcomes. Again, sparing the rectum could have a huge impact on quality of life, so it looks like Signatera can really change the risk-benefit equation and potentially drive massive clinical and economic benefit. Finally, in breast cancer, a paper was published in Clinical Cancer Research showing that women 70+ with early-stage ER-positive disease who tested Signatera MRD negative at diagnosis were able to forego surgery and remain progression free. The authors wrote that this can facilitate surgical de-escalation. The broader implication here is important. MRD testing is not only about finding recurrence earlier. It can also help avoid overtreatment, including major surgeries as well as systemic therapy. Physicians are very enthusiastic about this new data and the opportunity to de-escalate surgery, and as a reminder, Signatera is already covered by Medicare in all of these indications. We look forward to proving this out in other cancer types and continuing to build out the value proposition. Moving on now, I want to highlight the recently announced interim analysis from the ALPHA3 trial. Sponsored by Allogene Therapeutics, ALPHA3 is the first randomized study in large B-cell lymphoma to identify patients with positive MRD following frontline therapy and to intervene with an experimental second-line treatment while the disease burden remains low. As shown on the slide, the data demonstrated a clear separation between the trial arms. MRD clearance was 58% in the treatment arm versus 17% in the observation arm, representing a 41-point absolute delta. We also observed quantitative molecular responses, with median ctDNA levels decreasing 98% from baseline in the treatment arm while increasing 27% in the observation arm. I will note that this interim futility analysis leveraged MRD clearance as an endpoint in addition to MRD status for patient enrollment. As a reminder, this trial was already underway when we acquired Foresight Diagnostics in December. On the basis of this positive readout, we congratulate our colleagues from Foresight and from Allogene. We look forward to completing the trial and hopefully enabling a valuable new therapy in the arsenal for patients with B-cell lymphoma. With this data plus the 15 abstracts presented at the ASH conference, we are seeing a growing wave of interest from biopharma in hematology and beyond—an exciting time. While this trial drives treatment on MRD based on a single time point after the completion of first-line therapy, we are seeing the TOMER concept really take off across the board. INVIGOR011 was a TOMER trial as well, in that case with up to seven time points in the first year post-surgery. So it is worth spending a minute on the magnitude of the TOMER opportunity. Treatment on MRD creates a new paradigm, enabling both earlier, more aggressive interventions for patients destined to recur as well as deferred interventions for patients with low likelihood of recurrence. In the surveillance setting today, patients are usually monitored but not treated until recurrence is visible on a scan. TOMER changes that by using MRD to trigger earlier treatment and intervention when disease is first detected in the blood, which is usually before it becomes detectable on a scan. We are seeing this idea play out in multiple pharma-sponsored trials, including ALPHA3 in lymphoma, STELLAR316 in colorectal cancer, TREAT-ctDNA and DARE in breast cancer, and INVIGOR011 in bladder cancer. We look forward to launching more of these. In the adjuvant setting, instead of treating all comers with systemic chemo or immunotherapy, TOMER allows MRD-negative patients to avoid potentially toxic therapy and continue surveillance. If they later become MRD positive, treatment can be escalated at that time. To that point, perhaps the most important finding from our perspective from the INVIGOR011 trial was that patients who delayed initiation of immunotherapy until they turned MRD positive enjoyed the same high level of therapeutic benefit as those who started immunotherapy right after surgery. That unlocks a major sea change in how patients are treated. In INVIGOR011, 47% of patients were persistently MRD negative over the course of the first year and avoided adjuvant systemic therapy completely, achieving excellent long-term outcomes, including two-year overall survival of 97%. We estimate that a course of adjuvant immunotherapy can cost around $196 thousand per year, not to mention the cost of managing adverse events. So avoiding this cost in approximately half of bladder cancer patients can be extremely valuable to the patient and to the system. We think the value proposition in bladder cancer holds up even with the advent of new perioperative treatment approaches, like with EV+pembro, where many doctors are telling us that they will consider withholding the EV in patients who test MRD negative after surgery. The EV component itself is estimated to cost over $100 thousand per patient and to be more toxic than pembrolizumab. We see a similar story playing out across disease types, with TOMER translating into meaningful clinical and economic utility. In colorectal cancer, for example, at least two different health economic studies have been presented in the past—one by a Blue Shield plan and one by a large private payer in the UK called Bupa—showing that MRD-guided treatment in stage II and III colorectal cancer can result in meaningful cost savings to the system ranging 21% to 43%. With that, I will turn it over to Alex to provide an outlook on upcoming data readouts and our launch in Japan. Alex? Alexey Aleshin: Thanks, Solomon. Turning to ASCO this year, we have a powerful opportunity to reinforce Natera, Inc.'s leadership in MRD. The headline is clear: breadth, scale, and momentum. We will have 35 abstracts spanning TOMER, pan-cancer MRD, phased variant technology, real-world evidence, and trials in progress. That level of output matters because it shows Signatera is not a single tumor, single use case, or single study story. We are building the evidence base for MRD across the full oncology landscape and doing it at a scale that we believe is unmatched. The presentation I would highlight is the pan-cancer MRD meta-analysis. This is an important step forward because it moves the discussion beyond individual tumor-type wins to a broader platform-level statement. Across 18 published studies, more than 3 thousand patients, and 15 solid tumor types, ctDNA positivity was strongly associated with recurrence risk in both the MRD window and surveillance settings. These data reinforce the clinical relevance of tumor-informed ctDNA across cancers and support the idea that MRD is becoming a foundational tool in oncology. That message is also reflected across the broader ASCO program. We will be presenting data in colorectal cancer, bladder, breast, lung, lymphoma, melanoma, ovarian, uterine, sarcoma, and other tumor types, showing the expanding role of Signatera across settings from adjuvant decision-making to surveillance, treatment response monitoring, and treatment on molecular recurrence. The TOMER data are particularly exciting because they point to where oncology is heading—moving from reactive treatment after radiological relapse to earlier, more precise interventions at the molecular recurrence stage. And our phased variant technology presentations in lung cancer and lymphoma further highlight how our technology platform continues to advance, pushing sensitivity in settings where detection is especially challenging. Together, these data reinforce three core messages: Signatera is broadly clinically actionable today; our technology platform continues to advance; and our evidence generation engine is operating at unmatched scale. Looking at the next slide, it is remarkable to see how we have continued to launch important trials that we believe deliver compelling data to advance MRD testing in breast cancer. What you are seeing here is the scale and depth of the clinical work we have built spanning every stage of disease from early to metastatic. We have continued to expand our evidence base with 22 peer-reviewed publications and 84 presentations at leading medical meetings, reflecting both the momentum and growing interest from the clinical community. At the same time, we continue to advance our prospective trial pipeline with high-impact studies across multiple settings, including interventional randomized studies like SAFE-D, DARE, and HEROES, each answering an important question—including de-escalation, TOMER, and treatment optimization in exceptional responders, respectively. And underpinning all of this is a substantial investment now exceeding over $250 million in breast cancer trials alone, reflecting both the opportunity we see and the barrier to entry it creates for others trying to build a comparable dataset. So when you zoom out, the breast cancer program is really strong, and we look forward to announcing additional game-changing trials in the near future. We are expanding the evidence base, deepening clinical utility, and investing ahead of what we believe will be long-term adoption. Now I want to talk about two major areas of upside for Natera, Inc.: early cancer detection and the Japan Signatera launch. First, turning to early cancer detection. FIND CRC is one of the most exciting milestones ahead for Natera, Inc. This is our FDA-enabling colorectal cancer screening study targeting approximately 25 thousand to 40 thousand average-risk adults, including about 70 CRC cases and roughly 1.4 thousand advanced adenomas. Enrollment is progressing above plan, and we are now on pace to complete enrollment for the PMA submission in Q3 2026, supporting the path forward for an FDA PMA readout in 2027. What makes this especially compelling is that we are not starting from a blank slate. In FORESITE CRC, a prospectively enrolled study of average-risk asymptomatic participants, we previously demonstrated 22.5% sensitivity for advanced adenomas at 91.5% specificity. That is important because these were not easy-to-detect lesions. Nearly all were under 30 millimeters, and more than 90% were under 20 millimeters. In other words, we are seeing encouraging performance in exactly the kind of challenging precancerous lesions where blood-based screening has historically struggled. That matters because the biggest opportunity in colorectal cancer screening is not just finding cancer earlier; it is helping prevent cancer by detecting advanced adenomas before they progress. This is where we believe Natera, Inc. can be differentiated. And strategically, CRC screening is only the first step. As we advance FIND CRC, we are also building the foundation for a broader early detection platform, including development of a multi-cancer early detection assay. So, again, we are ahead of plan here with trial enrollment. Finally, a note about the outlook for our launch in Japan. Japan is one of the most exciting near-term growth opportunities for Signatera and, importantly, it has the potential to become a meaningful volume accelerator. PMDA approval remains on track for Q2 2026, and commercial launch preparations are advancing for a broad commercial launch shortly after. The CRC opportunity alone is significant. Japan has a similar absolute number of colorectal cancer diagnoses as the United States, and we estimate that a launch could effectively double Signatera's annual CRC volume TAM. Over time, expansion into additional histologies could make Japan a broader platform market, with MIBC submission being the next prioritized use case given the INVIGOR011 data. What gives us confidence is that the market is already being seeded. Through CIRCULATE-Japan and GALAXY, Signatera has been used across more than 150 institutions, giving hundreds of oncologists firsthand experience before commercialization. In addition, both JASMO and JASCO have issued supportive clinical practice guidelines for MRD testing, creating a favorable clinical backdrop for adoption. That familiarity could help volumes ramp faster than our base-case assumption. Japan’s structure also supports rapid adoption. With a single national payer, one positive reimbursement decision can open broad access across the country. So the message is clear: Japan can be a step-change opportunity, expanding our global MRD market, accelerating commercial volumes, and reinforcing Natera, Inc.'s leadership worldwide. With that, let me turn it over to Mike to review the financials. Mike? Michael Brophy: Great. Thanks, Alex. The next page is just a summary of the financials compared to last year. On revenues, we had another good quarter of sequential ASP progress across the board. We had about $60 million in revenue growth this quarter, in line with Q4 and, of course, smaller as a percentage of revenue compared to Q4. Given the longer history we now have with improved realized pricing, we took a modestly more aggressive approach with accruing higher prices for selected payers and products that have strong payment track records. This is just an incremental shift from our historical approach, and we will continue to turn the dial on ASPs if the cash receipts continue to exceed our expectations. Signatera ASPs are now roughly at $1,250 as Steve described. We achieved that just by continuing to execute our playbook of driving better alignment with the smaller Medicare Advantage plans and grinding out more consistent reimbursement for covered services in the biomarker states. In addition to those factors, we got a bump from the improved bundled pricing CMS announced at the beginning of the year, which has more than offset the modest decline in ADLT rates we spoke about on the November call. While the new bundled pricing is fully reflected in the revenue results, that change in the bundled pricing actually caused a temporary delay in cash for Signatera, as we had to take some time to update our list pricing for each covered tumor type, reload each bundled price back into the system with all of our payers, and revalidate the engineering. So that caused a modest step up in DSOs this quarter. We have now gotten the new prices largely loaded in and have seen the delayed cash arrive in April, so collections for Signatera are back on track. Okay, good. Let us get to the guide on the next slide. We are really pleased with the start to the year and happy to be completely resetting the revenue guide up $120 million at the midpoint. The guide is a lot higher, and the underlying drivers look achievable to us at this point in the year. On volumes, we continue to expect quarterly growth in Signatera along the lines of the trailing twelve-month average as we have described in the past, and we expect to see organ health continue to grow on its current trend line. The revenue guide also bakes in the seasonality in volumes typically seen in women's health, where Q1 is our strongest quarter, Q2 the slowest, and then we see recovery in the second half of the year. As Steve mentioned, we have got a pathway to continue grinding ASPs higher. For example, the original guide contemplated getting $50 in ASP gains on Signatera this year. The new revenue guide implies we anticipate exiting 2026 at roughly $1,275, and, of course, we are pushing to be higher than that. There is significant opportunity among the private payers and from expanding Medicare coverage to new indications. I think we can get to the $1,275 ASP without additional coverage decisions, so these would be upside to our guide. Steve covered gross margins in some detail in his section, but I would just reiterate that we are feeling good given the per-unit COGS we saw in Q1. We should have some tailwind in the send-to-receive ratio in the next few quarters. Given those factors, current ASP trends, and the Q1 actuals baked into the annual number, we think resetting the midpoint at 65% still leaves room for upside as we progress through the year. As a reminder, when guiding to future periods, we do not include the impact of revenue true-ups, so those would represent further upside to the guide. On OpEx, we are holding SG&A steady as planned in March. We are pleased with the progress so far with all the growth initiatives we have in place in sales and marketing and continue to get scale in our operations that are not needing to grow anywhere near as fast as revenue. We have deployed a significant amount of AI capability around the business in the last year, and I think we are well positioned to drive more efficiency over the near term. On R&D, I am pleased to see the FIND study progressing faster than expected, and we have been very glad to invest in more clinical trials for Signatera that have become available to us just this spring. We have a long track record of generating high ROICs in our R&D effort, and our plan is to stay ambitious to maintain our leadership position across the portfolio. Okay, and with that, let me open it up to 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 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is 1 to join the queue. Our first question comes from the line of Douglas Anthony Schenkel with Wolfe Research. Your line is open. Douglas Anthony Schenkel: Good afternoon, and thank you for taking my questions. I will keep them to two, and they are both financial. First, on gross margin, you had a really nice quarter even normalized for catch-ups. You bumped up full-year guidance by about a point. That said, it does seem like you could have gone further than that. Are you holding back largely because of things like MRD mix and trying to get a better handle on how that is going to play out given it is only May? Second, on spending, specific to the SG&A line, it jumped up a bit as a percentage of sales relative to what we saw in the fourth quarter. Were there any timing dynamics or things that you would consider one-timers that we should contemplate as we evaluate spending discipline in the quarter and update our models? Thank you. Michael Brophy: Hey, Doug. Thanks for the questions. On gross margins, I think this is just a philosophical point with respect to our guide. We do feel biased towards the upside as it relates to our gross margin trajectory through the course of the year, but we are always looking out for those potential risk factors to gross margin. As we talked about in the prepared remarks, if you dial down to the unit economics—strip out the Foresight equity and things like that we paid out as part of the deal—and just look at cost per unit and ASPs, those are looking really clean. I laid out in my section a couple of the drivers for ASPs going forward, particularly related to Signatera, which we are excited about. We did not include all of the potential drivers in the guide, so I agree there could be upside there. On SG&A, Q1 is often elevated as it relates to sales and marketing expenses. We had a number of those in the quarter that do not repeat. We had a couple of true one-timers related to balance sheet adjustments that related to non-cash charges in the quarter. I am roughly estimating those were worth about $25 million just in the quarter. When you back that out and normalize that, that is what gives me confidence around the SG&A guide for the rest of the year. Just a general comment on OpEx generally is that our posture is to marry up the spending discipline that we have talked about, while still remaining opportunistic, recognizing that we have got a huge growth runway ahead of us. If these higher ROIC opportunities come in the door, we are not going to hesitate—we are going to keep our foot on the gas and be aggressive to ensure we maintain leadership across all these businesses. Operator: Our next question comes from the line of Daniel Gregory Brennan with TD Cowen. Daniel Gregory Brennan: Great. Thanks for the questions. Maybe first one is just on volumes. Steve, I think you called out this idea that 92% of tests got recognized in the quarter, atypical versus 95% to 96%. How unusual is that? If you just apply 95% to 96% this quarter, that would be like another 10 thousand tests—maybe a real Signatera blowout. Is that factored into Q2? Should we see a big bump there? And then the second question is just related to MolDx. You called out again the opportunity there. What is the latest thinking on pan-cancer potential? Is that something we could potentially see this year or next year, or do you think it is going to be single cancer by single cancer? Steven Leonard Chapman: Thanks. I will take the MolDx comment, and then Mike can talk about the received-to-reported ratio, which should be more favorable in Q2. We are feeling really good. We said previously we have something like seven additional histologies or submissions that are in, and those went in right around Q4. We have already had one round of back and forth with MolDx on those, and these are all following the standard process that we have seen, so we are feeling positive. These in submission right now would make up the vast majority of the remaining non-covered business for us, and as we said, that would have a value in a similar range to what you have outlined. It could be very meaningful for us, both from getting the Medicare payment and also now with commercial payers starting to slowly comply with the biomarker state laws. Ultimately, we do think we are on a trajectory to get to around a $2,000 ASP, and if you just multiply that by our volume today, that would be worth something like $750 million in revenue and margin. We are working on those paths to unlock. Michael Brophy: Send-to-receive is usually about 95% to 96%. It is not at all unusual to have a very high ratio in Q4 and a low ratio in Q1—that is actually kind of our typical experience. The factor is similar to what Steve described in the prepared remarks. When the women's health business is rocking like it did in Q1, that is just a very high-volume enterprise at this point. If you bring in a ton of units in the last week or two of the quarter, you are going to end the quarter with a lot of units in process that have not been reported out yet. We have to take the COGS as they come in the lab, so we are taking COGS on most of those units, but we cannot recognize revenue until they are reported out. It is a work-in-process transient issue, and I expect it to normalize over subsequent quarters. I think that was about a 1.5% plus gross margin headwind in the quarter which, spread out over the balance of the year, is another factor that gives us confidence in bumping the gross margin guide at this point. Operator: And our next question comes from the line of Tycho W. Peterson with Jefferies. Your line is open. Tycho W. Peterson: One on Fetal Focus—did you notice any specific share trends relative to the broader market for this quarter? What are you seeing in terms of pricing pressure or competitive intensity in core women's health overall? And then the second question is around Latitude. Following the CRC data in January, you talked about additional tumor types. Have you worked out what that looks like later this year? And in terms of the reflex testing strategy, how frequently now is Latitude being used as a reflex when tissue is insufficient, and how do you see the Latitude volumes in the long term working out this year? Steven Leonard Chapman: Thanks. On Fetal Focus, we feel very good, very positive both on the quality of the data and the volume that we are seeing. We had a very strong Q1 in women’s health. We said it was the second-highest number of units that we have added sequentially between Q4 and Q1 since I took over as CEO. We added 63 thousand units in women's health just between 2025 and 2026. We think this compares very favorably when we look at others in the women's health field. On Latitude, we are doing very well with the CRC rollout and seeing a lot of interest from physicians. We think the majority of physicians prefer the tumor-informed products, but in the limited cases where they are not able to get tissue, it is great that we have Latitude available. We have had a lot of great data come out there. Physicians are happy with the product. We are in a position now to reflex pretty quickly in a setting where the tissue becomes not available. We have built this technology platform that allows us to expand beyond CRC to other histologies, and we will be doing that in the future, and we will give you updates as that progresses. Operator: And our next question comes from the line of Analyst with Citi. Your line is open. Analyst: Hey, guys. Thank you for taking the question. On the Signatera side, nice to see the sequential build. You have talked about looking at the trailing four quarters on the build. Can you talk about the momentum you saw throughout the quarter and the right way to think about that build going forward as that number continues to step up every quarter? Steven Leonard Chapman: Thanks a lot. What we have seen in Signatera is consistent growth in new patients, and that continued very strongly throughout the end of the quarter, which is a positive sign. We also look at patients that are on surveillance and repeat rates; that also continues to be strong. There are a couple of dynamics now that are driving growth in the business. First, doctors that have used the product become more comfortable with it and start to expand their usage. That can be either deeper within a histology—for example, within colorectal—or expanding laterally to other histologies within their practice. Second is new customers that have never tried Signatera before. Our latest update previously indicated something like 45% to 50% of oncologists had tried Signatera in the quarter. That means there is still about half that have not, and we are targeting that half. Every quarter, we are seeing more and more doctors use the test. As more data comes out—we had several slides on the strength of the data in Q4 and the beginning of Q1—that drives both new customers and expansion within accounts. Roughly 250 thousand tests is a lot of tests, and we are feeling really good about the impact we are making on patient care, but it is also just the beginning. We have invested in clinical trials and product enhancements. We have some exciting things coming out at ASCO and some exciting technology advancements launching later this year, and we are in a very good position. Operator: And our next question comes from the line of Subhalaxmi Nambi with Guggenheim. Subhalaxmi Nambi: I have just one. One of the leading players in the rare disease market has had challenges with reimbursement and mix. Is this dynamic relevant for you? And bigger picture, how is Zenith ramping, and how are you differentiating there? Should we expect data readout end of this year, or would that be early next year? Steven Leonard Chapman: Thanks a lot. We launched our rare disease product called Zenith. It is going really well so far. Volumes are relatively low at this early stage in the launch, but we feel really good about the product offering and the feedback we have gotten from physicians. We are not really impacted by the dynamics that others have highlighted because we are pretty early on, so it is all upside to us at this point. There is a lot of opportunity there, and it is a new growth factor for us. Another one that is really near term and very large is early cancer detection for CRC. Alex talked about that a little bit in the prepared remarks, but we are going to be done with the trial in a couple of months, and that is going to put us in a great position to commercialize in the near future and be submitting to FDA in 2027. The PMA data will be read out from the definitive trial in 2027. Operator: And our next question comes from the line of Analyst with Evercore ISI. Your line is open. Analyst: Hi, guys. This is Mackenzie on for Daniel. Thanks for taking my questions. Could you talk a little bit more about the CRC launch in Japan? It sounds like that could come in the back half of this year. Can you talk about visibility to adoption and what that ramp might look like? And then can you give us an update on any momentum or other developments in the biomarker states? Steven Leonard Chapman: That sounds good. I want to clarify one thing I mentioned earlier too. On women's health, we grew 63 thousand units quarter over quarter from Q4 2025 to Q1 2026, and that really does not count Fetal Focus orders that we have received. Only a couple of thousand Fetal Focus orders are counted in that number. The vast majority of that 63 thousand are just Panorama and Horizon orders, because if Horizon is negative and Fetal Focus is ordered, we do not actually count that in our numbers. We could be counting the growth as a number that is much higher, but that 63 thousand is really just the core women's health business—Panorama and Horizon—growing between Q4 2025 and Q1 2026, which we think is very significant, especially when you look at the competitive readouts that have come over the last couple of days in the women's health space. On Japan, Japan has the same number of CRC diagnoses per year as what we see in the United States. We have been waiting to be in this position where we will have regulatory approval, reimbursement, and our commercial launch, and now all that is happening. I think we are less than six months away from that and being off to the races in Japan. We have had a lot of really good conversations, and things are on track. Initially, the goal is to have that initial time point covered and then move on, and down the road get surveillance covered and be off to the races. Solomon Moshkevich: This is Solomon. Two elements here. Given MRD already being recommended in several major Japanese guidelines, we do expect pretty significant adoption post approval and post reimbursement. It is hard to say exactly right now what the units might look like; we will provide that in the future as we tighten up the models. On the pricing side, there is strong health economic rationale in addition to clinical rationale, so we think we are in a good position to negotiate solid pricing with the Japanese ministry. That would happen post regulatory approval, so sequentially. We will provide updates on that once we have clarity towards the end of the year ahead of our launch. We are really looking forward to making a big impact and helping CRC patients in Japan. Regarding biomarker states, we continue to see gradual improvement as commercial payers begin to comply with the laws, which we believe will support ongoing ASP progress for covered services. Operator: And our next question comes from the line of Analyst with Morgan Stanley. Analyst: Mike, could you help us understand how the cost ramp could look for the screening asset—between R&D and the commercial costs down the line too? It is a different cost profile to the core business, but help us split the two and how we could expect that to shape through 2026 and beyond. And then on Signatera, can you talk through what momentum you are seeing in terms of same-store sales versus new additions—depth versus breadth? Michael Brophy: Got it. There are two components to the cost for the ECD launch. One, you have the R&D cost associated with the FIND trial; and second, you have commercialization and launch costs, which would be SG&A. For the FIND trial itself, we are way down the path now. You heard the update about how close we are to completing enrollment, and then we have to make the spend to run the samples. That, we think, is largely reflected now in the guide. We bumped the guide in R&D this quarter specifically because the ramp of enrollment was much quicker than anticipated, which is a great sign. Beyond that, on R&D, the only variable would be if there are additional things we can do to further accelerate; we will be opportunistic. A lot of that spend will be incurred this year and perhaps early next year in terms of running the samples, within the context of our normal R&D budgeting. On the commercialization front, we feel like we have good channels to leverage in the commercialization of the assay. In terms of building out a larger commercial channel specific to primary care, we will leg into this—build incrementally as we deliver volume. Our experience in the primary care call point via the OB/GYN channel gives us a ton of experience in terms of understanding where to build first, and we will build on top of that sales team on the back of success, the same way we did in women's health and then in oncology. On Signatera depth versus breadth, we are seeing healthy same-account expansion as clinicians increase use by indication and by cadence, alongside steady growth in new ordering accounts, so both vectors are contributing. Operator: And our next question comes from the line of Casey Woodring with JPMorgan. Your line is open. Casey Woodring: Thanks for taking my questions. Steve, you mentioned in your prepared remarks that you are seeing the reps that you added last year start to contribute to MRD growth in a real way. Where are you with getting that cohort of new MRD reps up to speed and fully productive, and how much more runway is there for Signatera growth from those reps ramping? Steven Leonard Chapman: I would say we are probably between 50% and 75% ramped. They are really starting to become productive mid and through Q1 and turning the quarter into Q2, so there is still a little bit more juice to squeeze there. That is contributing to targeting new customers and helping with cross-selling, with some specialization on some of those reps. We are also investing in medical education and that is going well. We had record numbers and continue to see very strong growth leaving the quarter—we are seeing the same strong trajectory. Also, a lot of growth is starting to come from new areas like lymphoma, for example, which is a big market that by itself would be its own company—and we have many of those. As those start to get going and the flywheel turns, there are bigger opportunities. The other thing I will mention is initiatives within pharma. Some of the reps that we added are focusing on Natera, Inc.'s data business, where we have a unique capability; reps focusing on our AI tools, where we have a unique capability that nobody else can touch; or reps focusing on our pharma sales in oncology. We are seeing an incredible amount of momentum there. There has been hiring there, and they are starting to hit their stride. You can expect to hear more as that continues. There is tons of interest, expanded by the acquisition of Foresight and the extreme ultrasensitive levels we are getting with the phased variant technology, so that is another area of excitement. Operator: Our next question comes from the line of Catherine Schulte with Baird. Catherine Schulte: Maybe first, we have heard some others in the space calling out weather as an impact in the quarter. Clearly, volumes were very strong for you, but did you see any winter storm impact? And then for Signatera, what portion of patients would you say are adhering to the surveillance schedule that you have laid out? Is there some untapped utilization there in the surveillance setting? Steven Leonard Chapman: Good question. We did see impact from storms that hit in January. There was a step down in units and we tried hard to recover a lot of those, but we were not able to get the full recovery. Despite having a record quarter across the board and record growth in oncology, it would have been much faster had we not had those storms, but we did not call it out because we did so well despite them. On surveillance adherence, we have seen pretty consistent usage over time. It depends how many years out the patient is. In colorectal, a common protocol is four times a year for the first year and then two times a year thereafter, mirroring CEA. Not everybody stays on that, as some patients recur, unfortunately some pass away, or some feel they have moved on and do not want continued monitoring. We do see good adherence and we always try to increase it. Some doctors do not believe in surveillance yet—that is an upside opportunity for us as more data comes out. Many do believe in it and try hard to keep their patients on a consistent protocol, and that is a big reason you are seeing the growth. Operator: And our next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: First on prior authorization—there has been some news lately from CMS and some larger payers on prior authorization. How often do you see prior authorizations on Signatera or other products, and to what extent do you think payers reducing prior authorization would be a tailwind for you this year? And then on Foresight, are you launching any Signatera with phased variants yet in the clinic? Any reception or feedback? Steven Leonard Chapman: On prior auth, that has definitely been a tool that payers have used to not pay even for covered services. Any action that limits prior auth for covered services is going to help our ASPs, so we commend strategies to make access to care easier for covered services. We do think that is an upside opportunity for us. On Foresight performance and phased variants, I will let Solomon jump in. Solomon Moshkevich: We are planning to launch an updated version of the Signatera genome-based assay that will include phased variants later this year. It is already available in the research setting for pharma and for academic researchers. That has driven a lot of excitement and additional conversations. We already have at least one more major pharma-sponsored trial contracted leveraging that capability. On the clinical side, I do not think this is holding anyone back. Especially hematologists treating patients with lymphoma are excited to be able to order Signatera for their patients. We showed strong data at ASH in December on the performance of the current Signatera assay for patients with lymphoma, and together with our partnership with Foresight and their reputation in that setting, we have already seen an inflection in willingness and enthusiasm to order MRD for those patients, especially given that it is in guidelines. We are feeling good about this area. Operator: And looks like we lost our caller. Ladies and gentlemen, that will conclude our question and answer session and today's call. We thank you for your participation, and you may now disconnect.
Operator: Good afternoon, everyone, and welcome to the Caris Life Sciences, Inc. Q1 2026 Earnings Call. My name is Steven, and I will be your coordinator today. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone and you will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand it over to J. Denton at Caris Life Sciences, Inc. Please go ahead. Thank you. Earlier today, Caris Life Sciences, Inc. released financial results for the quarter ended 03/31/2026. Joining from Caris Life Sciences, Inc. today are David Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; Bobby Hill, our Chief Commercial Officer; and Luke Power, our CFO. Before we begin, I would like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our annual report on Form 10-Ks filed with the SEC. Except as required by law, Caris Life Sciences, Inc. disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events, or otherwise. The information discussed in this conference call is accurate only as of the live broadcast. This call will also include a discussion of non-GAAP financial measures, adjusted to exclude certain specified items. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is available in the press release Caris Life Sciences, Inc. issued today. A copy of today's presentation materials can be found on our Investor Relations website. I will now turn the call over to Brian. Thanks, J. Denton, and thank you all for joining our first quarter 2026 earnings call. Brian Brille: This is a strong start to the year, and we are pleased to report continued growth, profitability, and cash generation, which will continue to support our investment strategy focused on MCED launch, the broader product pipeline, and commercial platform expansion. As illustrated on Slide 3, our platform continues to expand across technology, scale, and commercial breadth. We are now supporting more than 6,100 ordering oncologists with approximately 70% of orders coming through our EHR and portal channels. In the first quarter, we completed 52,800 cases, up 15% year-over-year. We are very excited about the initiatives that our CCO, Bobby Hill, is driving, and we began to see the benefits of these in February and March. With this clinical activity, our dataset has surpassed 1.07 million profiled cases, including more than 677,000 whole exomes, 728,000 whole transcriptomes, and roughly 790,000 matched profiles. We also reached another important milestone with the recent addition of the 100th Precision Oncology Alliance member, UC San Francisco. We have launched two exciting products, Caris ChromaSeq and Caris MI Clarity. ChromaSeq is a therapy selection assay for hematological cancers which expands the breadth of our offerings and features a cutting-edge whole-genome technology. ChromaSeq was launched on April 1. In addition, we launched Caris MI Clarity, an exciting prognostic test designed to deliver insight into both early and late distant recurrence risk for breast cancer via digital pathology. Finally, and importantly, we are making progress with Caris Detect multi-cancer early detection and we are getting ready for commercial launch with Everlywell, with plans to add additional channel partners. Our philosophy is a long-term strategic orientation to develop the best offerings on the market and to pursue this innovation while generating profitable growth and maintaining financial strength. We had a strong first quarter with total revenues increasing 79% year-over-year to $216 million. As demonstrated on Slide 4, this result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $211 million in the first quarter, representing an increase of 85% year-over-year. In summary, across the board, we had a very productive first quarter, illustrated by the quarter highlights on Slide 5. This strong revenue performance, combined with the operating leverage inherent in our business model, has produced continued positive financial results while we ramp up investments, including revenue growth of 79%, which was driven by volume growth of 15% and a 61% increase in clinical ASP. This revenue growth has led to improved gross margins of 65% on a GAAP basis, up from 47% in the first quarter last year. We have invested significantly this quarter while maintaining financial discipline. This approach has produced positive adjusted EBITDA of $26 million as well as positive free cash flow of $22.5 million. This is our fourth straight quarter of positive adjusted EBITDA and positive free cash flow, and provides us with valuable strategic flexibility for ongoing investment in our tech platform for new products as well as the ability to develop new channels such as MCED. In addition, our balance sheet continues to strengthen with cash on hand growing to slightly above $825 million, an increase of $23.4 million in the quarter. Finally, as a result of this profitability profile, we were able to proactively refinance our credit facility. The new $400 million debt facility led by Blue Owl and Blackstone offers many advantages: lower costs, saving approximately $6 million in annual interest; an extension of the maturity date three years, from January 2028 to April 2031; and a committed delayed draw term loan of $300 million on the same terms for any potential strategic acquisition. We believe that our financial performance gives us unique strategic flexibility which supported our investment program in the first quarter. We are continuing to invest in our product pipeline, importantly in our MCED business, which Dr. Spetzler will describe in detail, as well as the expansion plan for our sales organization. We believe that our commercial channel is highly differentiated and has many strategic edges. Bobby Hill is bringing enhanced discipline and alignment to the overall platform. We are committing new resources to expand the commercial footprint with important hires across the platform, expanding the number of territories covered, and building product-focused sales teams. As stated previously, our strategy is to maintain financial strength through a strong balance sheet and profitability. These financial pillars of strength will allow us to realize our mission of making precision medicine a reality to benefit patients and support physicians. I will now turn the presentation over to Bobby to provide an update on our commercial business and related strategic initiatives. Bobby? Bobby Hill: Thanks, Brian. I will provide a brief update on our molecular profiling business along with our progress on the initiatives for the commercial teams in 2026. On Slide 6, this shows our strong molecular profiling revenue performance for this quarter, with revenues increasing 85% to $211 million. This revenue growth was driven by a 15% year-over-year growth in clinical case volumes, to approximately 52,800 profiles, and a 61% increase in ASP for our comprehensive profiling tests, reflecting our market access and billing teams’ continued excellent execution. We continue to see the benefits of ASP driven by our successful launch of MyCancerSEQ last year, and these benefits are reflected on the slide. Our tissue ASP increased by 70% to over $4,300 and our blood ASP increased by 14% to just under $2,500, driven by billing, our PLA code, and improved payment for Caris Assure. Luke will discuss the breakdown of this further during the financial update. Moving on to Slide 7, I will spend a minute on the commercial changes we made at the beginning of the quarter and why we feel good about the trajectory coming out of the quarter. We completed the realignment of the sales teams in January 2026 that included expanding our territory structure from 82 to 146 territories and continuing to build out the field organization. We made those changes deliberately to improve coverage, sharpen accountability, and create a stronger footprint for execution across both MyCancerSEQ and Caris Assure, along with setting us up well for product launches. January was a transition month, as expected, given the scale of the realignment and expansion. Following the realignment, activations in February and March grew approximately 20% year-over-year compared with the same two-month period last year, and full quarter activations increased 17% year-over-year. That reinforces our confidence in the underlying demand trajectory and, based on the completion cadence in February and March, supports a quarterly exit run rate of roughly 56,000 completed cases. For Q1 overall, we completed approximately 52,800 therapy selection cases, up 15% year-over-year, including approximately 43,600 tissue cases and approximately 9,200 Caris Assure cases. The key point is that demand accelerated as the quarter progressed due to the great work of the sales team, while completed case recognition reflected normal timing between activation and completion. Beyond overall volume, the broader commercial engine continued to perform well. Caris Assure volume grew 58% year-over-year. More than 70% of orders were submitted electronically. Over 3,000 physicians are using EMR integrations. And we ended the quarter with more than 270 sales representatives, progressing toward our approximately 300-person goal. Overall, we feel very good about how the team has performed with the initiatives, and I will now turn it over to Dr. Spetzler to continue with our progress on our product pipeline, in particular around Caris Detect. David Spetzler: Thanks, Bobby. I wanted to start with an important milestone for the quarter for Caris Life Sciences, Inc., which is the final readout for ACHIEVE-1 for Caris Detect, described on Slide 8. At a high level, these data points serve as our CLIA validation clinical accuracy study and reinforce our conviction that our whole-genome sequencing approach to early detection is fundamentally differentiated. In the ACHIEVE-1 data, Caris Detect delivered a 60.3% stage I and stage II sensitivity, with a 99.2% asymptomatic specificity across a 3,014-subject high-risk cohort. This is a meaningful result in early detection, particularly when you consider both the size of the evaluable cohorts and the complexity of the underlying biology we are trying to detect. What gives us confidence in these results is not just the top-line numbers, but the platform underneath them. Caris Detect is built on the foundation of Caris molecular profiling data which now includes more than 1 million processed cases and over 50 billion molecular markers. That breadth and depth of data matters. It is what allows our AI models to identify difficult-to-detect biological signals associated with early-stage cancer with a level of resolution that we believe is differentiated in the field. When you look at performance by stage, the pattern is exactly what you would see in a high-performing assay: sensitivity increases consistently with stage—56.8% in stage I, 67.7% in stage II, 79% in stage III, and 98.6% in stage IV. We also reported 96% benign tumor and high-risk patient specificity alongside the 99.2% asymptomatic specificity results. We split the population of patients without cancer into two different groups because a false positive in a patient with a benign tumor or precancerous lesion should have a very different implication than a false positive in a healthy person. Taken together, those data show a strong balance between sensitivity and specificity across clinically relevant populations. Importantly, the cancer-type readouts were also encouraging in the total stage I and II data sets: we saw sensitivity of 53.7% in breast, 74.1% in prostate, 73.4% in lung, 60.6% in uterus, 61.8% in bowel, 81.3% in head and neck, and 70% in pancreatic cancer. And maybe the most important strategic point on this slide is that these results were generated using only one of nine potential pillars. In other words, we believe there is still room to improve from here, as additional pillars may further strengthen overall performance over time. We have been doing a beta launch the last few weeks and still anticipate commercial launch later in Q1 with Everlywell. Moving to Slide 9, this reflects the status of our robust pipeline. First, as Brian mentioned, Caris ChromaSeq is now launched with MolDX coverage. This is a whole-genome heme therapy selection solution designed for AML, MDS, MPN, and suspected myeloid malignancies. The assay is differentiated by greater than 200x depth of coverage across the whole genome, the ability to detect the full range of clinically relevant genomic alterations, and approximately 1.6 billion reads per patient. Second, we have also launched the digital AI-only version of Caris MI Clarity. Caris MI Clarity is designed for postmenopausal patients with HR-positive, HER2-negative, node-negative early-stage breast cancer at the time of diagnosis. We see this as an important extension of our platform into recurrence risk assessment designed to support better decision-making and reduce unnecessary therapy. Third, in MRD tumor-naïve, we continue to focus on colorectal cancer. This solution uses the Caris Assure platform as tumor-naïve by its design and is intended to support minimal residual disease detection from a whole-blood sample. We are currently compiling additional data for the MolDX technical assessment. Fourth, in MRD tumor-informed, development and launch planning have made progress. This is a pan-tumor opportunity intended for stage I, II, and III disease. It uses tumor-normal whole-genome sequencing to identify trackers, with a proprietary approach designed to minimize false negatives and maximize tracker counts to achieve ultra-low sensitivity. Finally, we recently completed our submission to New York State for Caris Assure, and we will provide an update once we hear back. We have had a very productive few months so far in 2026 with newly launched solutions and are continuing to generate additional data and multiple avenues to extend the same molecular and AI foundation across therapy selection, recurrence risk, early detection, and MRD. With that, I will turn it over to Luke for the financial update. Luke Power: Thanks, David. Turning to Slide 10, we delivered another strong quarter financially with total revenue of $216 million, up 79% year-over-year. The main driver remained molecular profiling, which grew 85% versus Q1 of last year on continued ASP improvement and volume growth. Therapy selection completed volume was up 15% in the quarter, and as Bobby discussed, we were very pleased with how we exited the quarter. While completed cases came in modestly below our initial expectations due to timing, activations improved sequentially for the quarter for both tissue and blood following the January realignment, and that stronger case intake we saw exiting the quarter gives us great confidence in Q2 and the balance of the year. Turning to Pharma and Research revenue, this was $5.4 million versus Q1 2025 revenue of $6.8 million and was due to the deliverable movement of our Discovery and Data businesses under contract, which will flow through over the balance of the year and is supported by improved contract activity. Overall, our revenue continued to translate into a strong bottom line, with positive adjusted EBITDA and positive free cash flow for the fourth consecutive quarter, reflecting the disciplined approach we continue to take as we invest in the business. As I stated on the last earnings call, we intend to utilize this financial strength to fund the pipeline and commercial investments throughout 2026. You can start to see that in the numbers. Operating expenses were $130 million in Q1, up from $132 million in Q4, as we continue to prepare for pipeline launches, including early detection, and purchases of property and equipment for just over $10 million, up from $5.1 million in Q4, while still delivering positive adjusted EBITDA of $26 million in the quarter and positive free cash flow of $23 million in the quarter, which also included our annual bonus payments of $30.5 million. Turning to Slide 11, Q1 continued to validate the strength of our molecular profiling business with molecular profiling revenue of $211 million in the quarter, up 85% versus Q1 of last year. Reported revenue and ASP continued to benefit from favorable collections across both MI Profile and Caris Assure. As the chart on the right shows, we have seen a meaningful buildup in the underlying revenue base over the last seven quarters, with additional upside where collections have exceeded prior accrual assumptions as we continue to have collection success from the excellent work via our billing and market access teams. At the assay level, MI Profile base ASP was $4,091 in Q1, and Caris Assure base ASP was $4,421, showing the benefit from payer contracting in progress and stronger collection experience. With regards to our ASP, I also want to spend a minute on the reimbursement framework because there has been some confusion on this point recently. For us, both assays are CDLTs and not ADLTs. That means these are reported under PAMA, and the 2026 PAMA reporting window runs from May 1 through July 31, based on data from 01/01/2025 through 06/30/2025, with any related fee schedule update becoming effective 01/01/2027. As an update, we submitted our PAMA data on May 1 and do not expect any downward adjustments from that. We also continue to support the broader CRUSH efforts and do not view that as changing our underlying reimbursement position. Turning to Slide 12, this highlights the key commercial and reimbursement tailwinds supporting the business in Q1 and demonstrates our approach of always focusing on the technology first. Starting with MI Profile, we continue to benefit from MyCancerSEQ and the steady improvement we have seen through 2025 and into 2026. That progress has been supported by our contracting and payer collection experience, as demonstrated on the previous slide. At this point, we are above 225 million covered lives for MyCancerSEQ, which we expect to continue to increase throughout the course of this year, and the assay represented more than 75% of our tissue volume in Q1. As touched on before, we also delivered about 9% completed volume growth in MI Profile in the quarter compared to 2025, including a record February and March period following the sales realignment that also drove stronger sequential activations versus Q4, achieved by the great work done by our sales team following the realignment. On the Caris Assure side, this came in line with our expectations, with Assure’s volume growing 58% year-over-year, and importantly, volume also increased 7% sequentially. We continue to see traction in blood as we grow our penetration there with a differentiated solution. This continued leverage resulted in molecular profiling services gross margin of 65% in Q1 compared with 47% in Q1 of last year, an improvement of over 1,800 basis points year-over-year. Finally, moving to guidance on Slide 13, you can see we are reaffirming our guide from February, and I will address two key components prior to opening up the call to questions. Starting with volume, based on the February and March trends, we remain confident in the full-year volume framework. We continue to expect tissue growth in the low teens and blood growth in the high 50s to low 60s. The stronger activation trend exiting Q1 supports our guide view, and the timing gap between activations and completed cases should normalize as we move into Q2 and throughout the year with the realignment completed. With respect to the pipeline, we have launched Caris ChromaSeq, which was approved by MolDX and priced at $3,228, and also MI Clarity. After Q2, we will evaluate and incorporate the contribution from those launches along with any incremental impact from our continued sales strategies and commercial expansions. On revenue, while Q1 performance points us toward the higher end of the range with a beat on our expectations for the quarter, we are reconfirming guidance today and will evaluate after Q2 with the additional history of the new launches and continued execution. I will stop there and turn it back over to the operator for questions. Operator? Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please standby, we will compile the Q&A roster. Our first question comes from the line of Michael Ryskin of Bank of America. Your line is now open. Michael Ryskin: Hi. This is Alexa Chan on for Mike. Thank you so much for taking our questions. I just have a couple here. Maybe to start, can you talk about the impact that the sales realignment might have had on tissue volumes this quarter? And then as a follow-up, can you discuss your confidence in achieving the 20% volume growth target for the year given the softer start? We appreciate that the sales force is realigned and that trends improved in February and March, but it still appears to require a significant ramp from here. Thank you. Bobby Hill: As anytime when you realign a sales organization and put them into new territories, we saw a little bit slower start at the very beginning of the year. The beginning of the year is sometimes slower; that is why we chose to do it then. But what we saw with tissue volume each month after that, and what we are trending at, gives us confidence. Luke Power: One of the reasons why we also disclosed the exit rate on the completions for February and March is that it gives us confidence. You can see based on those numbers we have improved dramatically on the tissue front from where we were running on a monthly rate last year, with over 15,500 on average from February and March. We believe that continued trend is going to benefit us as we go into Q2. So we feel good about the low-teens guidance. Operator: Thank you. Our next question comes from the line of an Analyst at TD Cowen. Your line is now open. Analyst: First question is on clinical volumes in the first quarter. Did weather hold back clinical volumes at all? And if so, by how much? And could you discuss traction in blood testing—what has been the strategy impact, and where are you having the most success in types of accounts? Luke Power: Weather was not a factor. We have gotten the cases in the door. The reason we are reaffirming the guide from a volume standpoint is that you will see an improvement in sequential growth from Q1 to Q2. We were initially expecting about 7% sequential growth from Q1 to Q2; now that is going to be 10%. Those cases will flow through in the second quarter, and it will be caught up by the end of the second quarter as we progress into the second half of the year. Bobby Hill: We expanded our liquid product specialist team before Q1—individuals highly skilled at helping the appropriate patients get blood testing. We saw 135% growth in their targets quarter-over-quarter. Because of that growth, we are going to double the size of that team again in Q2. Tissue profiling was our base business, and now we are getting good at selling blood profiling. For the right patients, we will continue to do that and take those learnings to the rest of the sales force. It is also worth noting that the version of Assure that we submitted to New York State significantly increases the amount of RNA profiling we are doing, going up to about 600 million reads from 5 million reads. Operator: Thank you. Our next question comes from the line of Vijay Kumar of Evercore. Your line is now open. Vijay Kumar: Hi, thank you for taking my question. A big-picture question. Luke, you brought up the CRUSH initiative. The space has been under pressure and investors are nervous about reimbursement. Is there risk to the space on the reimbursement front? If so, how is Caris Life Sciences, Inc. differentiated when it comes to reimbursement? Luke Power: It is the reason we called it out in our script—there has been some confusion. We went through the CDLT process. Our codes are CDLT, not ADLT. We submitted our PAMA submission last week based on the timeframe. We feel good about it. There are already mechanisms in place outside of CRUSH for pricing review, and PAMA is the key one for us. Based on our submission, we do not expect any downward adjustments. We are supportive of CRUSH. We have been at this a long time and feel we are set from a pricing standpoint. Vijay Kumar: Just to be clear, are you making a distinction between CDLT and ADLT—maybe CDLT having more visibility on pricing if there is any risk to the space? Luke Power: The way we priced both MyCancerSEQ’s PLA code and Caris Assure’s PLA code did not go through the ADLT pathway. MyCancerSEQ was priced through crosswalk, and Caris Assure through gap-fill. Because we did not do ADLT, we are subject to the three-year PAMA cycle. As I said, we put our data into PAMA on May 1 and feel very good about price stability. Vijay Kumar: On guidance, you mentioned 10% sequential growth for Q2. Was that volume or revenue? And can you clarify what were true-ups in Q1, what was underlying gross margin ex-true-ups, and how to think about gross margin progression? Luke Power: Gross margin came in exactly in line with our expectations in the mid-60s. Our focus this year is more on investment. As we progress later this year and into next year, we will focus more on improving margins. From a true-up standpoint, that was very minimal compared to last year. We continue to execute and appeal on the reimbursement front and have success. As we progress through 2026, those true-ups will get smaller as we see the uptick in underlying ASP. The 10% is a volume comment. About 2.5% that would have completed in Q1 will flow into Q2. Our expectation for Q2 is over 58,000 cases, which would be 10% sequential growth from Q1. Operator: Thank you. Our next question comes from the line of Subhalaxmi Nambi of Guggenheim. Your line is now open. Subhalaxmi Nambi: Hi, this is Ricky on for Subbu. Thank you for taking our question. Maybe one for Bobby. You ended the quarter with over 270 sales reps, and earlier in the year you said you would increase headcount by 20% to 25%. It sounds like you still have more reps left to hire. Could you give us some color on how that hiring is progressing and how the 20 or so new reps you have brought on year-to-date have been ramping up? Thank you. Bobby Hill: We are progressing right on track. We made territories smaller, going from 82 to 146, and we will continue to grow. We have the first wave hired, they are through training, already out making calls, and we have significantly revamped our training program. We are on track to hit the approximately 300 number and hire them all in Q2. We feel very good about the ramp and the changes made. Operator: Our next question comes from the line of Casey Woodring of JPMorgan. Your line is now open. Casey Woodring: Hello. This is Martha Zrambat on for Casey. Thank you for taking my question. How should we think about 2Q volumes for tissue and blood—any color you can share there? Also on the Pharma R&D revenues? And on the initial MCED test uptake—are you assuming any contribution this year? Thank you. Luke Power: Our expectation is for a 10% sequential improvement from Q1 to Q2 in volume, which gets you above 58,000 cases. You will see tissue cases flow into Q2—we would expect roughly 47,500 tissue cases and approaching over 10,000 blood cases. We feel confident about those for Q2. From a revenue standpoint for Q2, our expectations based on the initial guide we put out in February was for about 32% growth in total revenue. On contribution from Caris Detect, we still plan to launch in Q2 and are progressing nicely; we will assess the contribution as we get into the Q2 earnings and the second half of the year. Operator: Thank you. Our next question comes from the line of Patrick Donnelly of Citi. Your line is now open. Patrick Donnelly: Hey. This is Albert Hu on for Patrick. Thanks for the 2Q color. On profitability for both 2Q and for the year—you previously had noted a certain cap for EBITDA, and it has been updated to positive. What can you share on the EBITDA assumption for 2Q and for the full year? I know you have some investments—perhaps share what those are as well. Luke Power: From an EBITDA and free cash flow standpoint, we will utilize the financial profile we have. We will get pretty close to neutral free cash flow in Q2. With the early detection launch, there will be an increase in Q2 CapEx—we are expecting about $30 million of property and equipment purchases, including NovaSeq Xs that we are ramping up. We also started to ramp up inventory purchases ahead of the detection launch. You are going to have additional spend there. Our goal in Q2 is to utilize the free cash flow we are generating to fund preparation for the Detect launch, along with pushing MI Clarity and Caris ChromaSeq. We are not guiding to EBITDA because the key focus is pushing the pipeline and commercial activities. For Q2, we have about 32% revenue growth and expect gross margin in the 60%–65% range. We will also ramp up OpEx from $136 million to over $140 million, which would get you a small EBITDA, but it is not our primary focus for Q2. Patrick Donnelly: And on MRD—you mentioned it is still in preparation for launch. What is the priority in the pipeline? Is that something you aim to launch late this year or next year? What can you share on MRD and timeline? David Spetzler: Now that we have these other product launches done and behind us, MRD is the next priority, and we will be focusing on that quite heavily. Operator: Our next question comes from the line of Mark Massaro of BTIG. Your line is now open. Mark Massaro: Thank you for taking the question. On ChromaSeq—now that you have MolDX approval and it is launched—can you speak to the unmet need in myeloid? David Spetzler: Today, those patients get a lot of small panel tests across a combination of different technologies. It is not comprehensive, and they often miss things. Those tests are also not designed to pick up resistance components. With our approach, we are able to, in one fell swoop, identify all of the components that allow optimal therapy selection and also identify when that therapy is no longer effective. It is a truly comprehensive approach to hematological malignancies, not the hotspot testing that is being done today, and with a turnaround time that gets patients a complete answer faster than they would get with multiple different tests. Mark Massaro: On early detection, breast cancer is one of the important indications. How should we think about the landscape progressing over time as you think about screening for various cancer types? David Spetzler: Breast cancer is one of the more common types of cancer and is already highly screened for, but mammography has its limitations. It is important that we service that patient population very well. The performance we have shown in ACHIEVE-1 is already superior to mammography. It is inevitable that older technologies are going to be replaced by future superior technologies, and that is what is happening now. Operator: Our next question comes from the line of an Analyst at Goldman Sachs. Your line is now open. Analyst: Thanks for taking my questions. On the quarterly run-rate you gave for February and March of 56,000 tests relative to the 52.8 you reported for the quarter—you said that was up 20% year-over-year relative to February and March last year. Can you talk through the split between tissue and blood, and how durable you think the acceleration in volumes is post the sales force realignment? Was there pent-up demand in the latter half of the quarter? And any update on M&A and capital allocation strategy? Bobby Hill: The split followed our normal pattern as we went from January into February and March. We saw ramp-ups in both products and are excited about the speed of the turnaround. As Luke discussed for Q2, we feel very confident we will achieve the guidance we set forth, and we expect both products to continue their growth. Brian Brille: On M&A and capital allocation, there are no gaps—our strategy has been to pioneer organically and build our technology platform. There is nothing in particular we think we need. On the other hand, we are very strong financially, and our new debt facility gives us additional flexibility. We are in a position to be flexible and tactical if we see the need. Operator: Thank you. Our next question comes from the line of an Analyst at Jefferies. Your line is now open. Analyst: Thanks. On the Pharma R&D business, it came in a few million dollars light of consensus. How are you thinking about commercial investment in that business? Can you speak to orders or backlog performance that justifies maintaining the guide? And any thoughts on implications from a competitor’s recent ODAC outcome for a liquid biopsy-informed drug trial? Luke Power: As we stated on the last earnings call, Q1 and Q3 are typically the lower quarters for Pharma; it is a natural cadence. The revenue delta from Q1 is based on contracts already in place. For example, the Genentech deal we publicly disclosed had revenue dollars move from Q1 into Q2, and the same with some of our data partners under contract. We will deliver that data in the next quarter or two. We feel confident maintaining guidance given that cadence—Q2 ramps up, Q3 comes down, and Q4 ramps up. Regarding ODAC, that was more about one specific mutation, not liquid in general. There is still strong clinical utility for liquid profiling. The lack of approval for an ESR1-targeted agent does not impact the broader utility of profiling. Operator: Thank you. Our final question comes from the line of Kyle Mikson of Canaccord Genuity. Your line is now open. Kyle Mikson: Hi. This is Oscar Capo on for Kyle. Congratulations again on the ChromaSeq approval and launch. What is the rate you got for this test? And from a dollars-and-cents perspective, what is the addressable market? Luke Power: The price is $3,228 from MolDX. Bobby Hill: From a market standpoint, there are about 50,000 patients that meet the three indications set forth in MolDX for AML, MDS, and MPN. There are existing medical policies for commercial lines of business. We believe that when we submit to payers, we will gain coverage because of the depth and performance of our assay. We are already deploying the team to talk to payers, and where we are already contracted with MyCancerSEQ, it gives us the opportunity to add this coverage as well. Kyle Mikson: Thank you. One more—you spoke to the expansion of your Precision Oncology Alliance and plan to host your summit on the eve of the ASCO conference. On ASCO, can you elaborate on what types of data you will be presenting for pipeline and recently launched products, including MCED and MRD? David Spetzler: We have a lot of data that we will be presenting. It is embargoed until the conference, so we cannot discuss it now, but there is going to be a lot of it. Operator: This does conclude the Q&A session and the program. I would like to thank you for your participation. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to TechTarget, Inc. First Quarter 2026 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. I would now like to turn the conference call over to Charles D. Rennick, General Counsel and Corporate Secretary. Please go ahead. Charles D. Rennick: Thank you, and good afternoon, everyone. The speakers joining us here today are Gary Nugent, our Chief Executive, and Daniel T. Noreck, our Chief Financial Officer. Before turning the call over to Gary, we would like to remind you that in advance of this call, we posted a press release to the Investor Relations section of our website and furnished it on an 8-K. You can also find these materials on the SEC's website at sec.gov. A replay of today’s conference call will be made available on the Investor Relations section of our website. Following the opening remarks from Gary and Dan, they will be available to answer questions. Any statements made today by TechTarget, Inc. that are not historical, including during the Q&A, may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties, are based on assumptions and are not guarantees of our future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our most recent periodic report filed on Form 10-Q and the forward-looking statement disclaimer in our earnings release filed earlier today. These statements speak only as of the date of this call, and TechTarget, Inc. undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after this conference call, except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most directly comparable GAAP measures, to the extent available without unreasonable efforts, accompanies our press release. And with that, I will turn the call over to Gary. Gary Nugent: Thank you, Charles, and good afternoon, everyone. As always, we appreciate you taking the time to join us today. I am pleased to share our Q1 2026 results which demonstrate continuing progress with our strategy and our commitment to delivering top- and bottom-line growth on an ongoing sustainable basis. In Q1 2026, we delivered revenues of $106 million, representing a 2% increase year over year, whilst achieving an adjusted EBITDA of $7.4 million, an increase of 27% year on year. These results reflect the durability of our business model, a model that is built upon our proprietary first-party market data and our permissioned member data. They are also the reflections of the early returns of our combination program completed in 2025. For today, we also report the results of our two operating segments, Intelligence and Advisory and Brand to Demand, offering deeper insight into the makeup of the business and the key drivers of growth. I see durability as Q1 results and I suspect the remainder of this year are set against a backdrop of ongoing geopolitical and macroeconomic uncertainty, in addition to the broader digital transformation that is accelerating across B2B markets as AI changes how buyers are informing their buying journey and how sellers are reaching out and trying to stand out to prospects and customers. I spent much of Q1 and April on the road meeting with clients and colleagues. It is always my favorite thing to do. In the main, our clients, who are B2B technology vendors, are in good health. However, they continue to prioritize capital to R&D investment as they seek to stay current with the AI arms race. This is subduing investment elsewhere for now, specifically in go-to-market. However, as future indication, demand for our businesses is incredibly positive. And ultimately, they will need to seek a return on those R&D investments. Our story of the indispensable partner with the breadth and scale to enable our clients and address their ambitious growth objectives resonates loudly. And it is clear that we are only just scratching the surface in terms of how and where we can help them accelerate their growth and in doing so drive our own growth. The trends we are observing and the needs and wants of our clients directly correlate to our strategic focus. First, our clients are themselves experiencing the impact of the shift from a search engine economy to an answer engine economy. And as such, their ability to raise awareness and generate demand by and of themselves is becoming more difficult. And with that reality, they are increasingly recognizing the value of working with a partner that itself has direct reach and relationships and influence with the prospects and customers. Second, there is a growing realization that better marketing outcomes are achieved when the marketing efforts are aligned and integrated across the lifecycle from strategy through to execution, and that the breadth and scale of TechTarget, Inc. makes us one of the few companies that can deliver value across that lifecycle. This is encapsulated in our unified demand playbook that we launched at the beginning of Q1 and which has been very well received in the marketplace. And finally, we are seeing clients prioritize working with partners that can integrate seamlessly with their sales and their martech landscape and join the dots in terms of attribution to demonstrate measurable performance and return on investment from their marketing investments. Again, that is something that we can provide and are getting increasingly good at, further differentiating us from others. In numbers, revenues from our strategic focus on our largest customers, who are the largest players in the industry we serve, were up double digits as a result of this focus and the investments in products, sales, delivery, and customer success in Q1. Daisy Golota, our new CMO, has gotten her feet well and truly under the table, launching our bold and ambitious marketing strategy designed to raise awareness and generate demand in the broader $20 billion addressable market. As a part of this, we recently leveraged the Forrester B2B Summit in Phoenix to showcase how we are leveraging the breadth and scale of TechTarget, Inc. to partner with our clients and transform their go-to-market and deliver tangible results. One example of this was the work that we have been doing with Tanium. Tanium are a cybersecurity company that helps enterprises manage and protect mission-critical networks. Tanium partnered with TechTarget, Inc. to move beyond a fragmented, siloed marketing approach towards a fully integrated, always-on go-to-market model, choosing us not just as a vendor, but as a strategic partner for our unmatched audience access, high-quality intent data, and ability to influence buying groups before their sales teams are engaged. By activating our platform across Portal, BrightTALK, content syndication, and targeted editorial environments, they were able to precisely identify and engage in-market accounts at scale. The results were substantial. Over 5 thousand leads delivered, equating to $1.2 billion of influenced pipeline, and ROI of over 2.8 thousand x. And importantly, this has translated directly into real revenue growth. As a result, they signed a new two-year deal immediately following the program, representing over a 50% increase in their annual investment. On the subject of our membership, our audience members, as buyers increasingly rely on AI-powered research and zero-click search behaviors, we fundamentally adapted our operational approach to meet them where they are. Our content creation and distribution strategy is now prioritizing AI discoverability while maintaining the editorial excellence and thought leadership that our audiences have come to expect. With a focus on quality over quantity, and engagement over acquisition, this dual focus continued to deliver for us in Q1, with our permissioned membership continuing to grow in low single digits, and our active membership in priority personas such as Chief Information Officers and Chief Information Security Officers up high single digits in the quarter, this all being despite ongoing disruption to traffic. In addition, we added four leading UK media-based brands to our portfolio through the period: Accountancy Age, The CFO, Bob’s Guide, and The Global Treasurer. This expands our first-party permissioned members in the financial services and fintech space, and it is in line with our strategy to grow by extending our vertical audiences into new geographical markets. We are already seeing strong engagement from these new community members. And in recognition of the power and the value of our authoritative, trusted, and original content in the age of AI, our editorial teams recently won three coveted awards at the B2B industry’s Oscars, the Neal Awards, and we have also been shortlisted for 15 awards at the forthcoming ASB Nationals. On the product front, investment in the product pipeline continues to bear fruit. By popular demand, we launched the new BrightTALK Nurture demand product, with 12 customers piloting this new offering in Q2. We also announced to the market the commercial partnership and technical integration of our NetLine demand product with the Demandbase ABM platform. In direct response to the shift from a search-based to an answer-based economy, we have leveraged all of our experience as a digital publisher to launch our AI LLM content audit and consulting services, designed to help clients understand how discoverable and citable content is and to work with them on how to improve upon it. And only last week, we launched the Omnia AI Search Assistant, a further example of how we are leveraging AI technology to improve our products, to improve upon how our customers discover and consume our original authoritative content, and extract maximum value from their subscriptions. The Omnia AI Search Assistant enables our clients to submit natural language queries to the Omnia Knowledge Center and receive answers that are an intelligent composite of all Omnia’s data and analysis. They can also return those answers in over 70 languages, increasing the global applicability of our product. This launch builds upon what were already very encouraging KPIs in the Omnia business, with users, user engagement, and the Net Promoter Score all up double digits in the first quarter. And as we move through to the second and the third quarters, you will see more examples of how we are applying AI technology, specifically conversational interfaces, to our data and content that will improve discoverability, ease consumption, and unlock value for our clients and our members. And in June, our AI search for our audience members will undergo a significant upgrade based upon the lessons learned from the pilot of the past six months. Rather than improving the audience experience, we are also leveraging automation and AI technology and tools extensively across the business to improve upon our productivity and quality in marketing and sales and research and editorial and operations, and our experience is that this is a game of continuous improvement, and we are already banking clear benefits. By way of example, in Q1 our time to first lead for our core demand products decreased by 30% year on year, accelerating time to value for our customers and accelerating time to revenue for ourselves. I think Q1 demonstrates delivery to our plan—financially, strategically, and operationally—growing our revenues and adjusted EBITDA, simplifying and focusing the business, embracing and capitalizing upon the opportunities that AI presents. Our priorities for 2026 are clear: deliver value to our customers and growth for our shareholders. This will give us the momentum and put us in a strong position to continue to invest in innovation and build upon our core strengths of trusted expertise, proprietary market permissioned audience data, and a unified portfolio of products with the breadth and scale to deliver for customers across their lifecycle. We are wholly committed to this plan and to growing revenues and adjusted EBITDA in 2026. I look forward to updating you on our continued progress in the quarters ahead, and now I will turn the call over to Dan to discuss our financial results and guidance in a little more detail, and then we will be happy to take your questions. Daniel T. Noreck: Thanks, Gary, and good afternoon, everyone. In Q1 2026, we delivered revenue of $106 million, representing approximately 2% year-over-year growth compared with 2025. While market demand remains subdued and the environment cautious, our results reflect solid execution and early benefits from our sharpened operating focus following the combination and organizational realignment. As Gary mentioned earlier, we are now reporting our results through two operating segments. In Brand to Demand, or the B2D segment, which represented around 70% of total revenues and is where we generate revenues by providing clients with services that help them raise brand awareness, engage with buyers, and target more qualified potential customers, we saw good revenue growth of around 5% year over year, with particular strength in our unified demand offering. In Intelligence and Advisory, or the I&A segment, which represented around 30% of total revenues and is where we generate revenues primarily through subscription services to our intelligence products including first-party data and specialist analyst research content, as well as advisory services that provide clients with strategic support and bespoke solutions, our revenues were around 4% lower year over year, primarily reflecting a decrease in our go-to-market strategic consulting. Both segments improved profitability in terms of segment operating income, which we define as being revenue less allocated direct and indirect costs but prior to unallocated costs such as central functions, facility, and related overhead expenses. Operating margin also improved for both segments. Encouragingly, we delivered company adjusted EBITDA growth of 27% year over year to $7.4 million, an adjusted EBITDA margin of 6.9% compared with 5.6% in the prior year. This improvement reflects continuing cost discipline, the streamlining of operations, and the initial realization of integration efficiency following last year’s combination plan, even as we continue to invest selectively in growth, product innovation, and go-to-market capabilities. On a GAAP basis, our net loss narrowed to $70.8 million. This included $45 million of technical non-cash impairment of goodwill, as well as ongoing acquisition and integration costs and other non-cash charges. Turning to the balance sheet and liquidity, we are in a strong financial position. We ended the quarter with cash and cash equivalents of $47 million and had almost $130 million undrawn on our $250 million revolving credit facility, giving us liquidity of approximately $178 million. Our net debt at March of around $72 million represented around 0.8x adjusted EBITDA for the prior twelve months, similar to the leverage level at 2025 and 2024. Our free cash flow in the quarter reflected the seasonal dynamics of the business as well as the phasing of integration and restructuring activities from 2025. On an adjusted basis, we delivered meaningful cash flow, demonstrating the attractive underlying cash generation characteristics of our business model. Turning to guidance, we are reiterating our commitment to deliver growth in 2026. To this end, we are maintaining our full-year 2026 adjusted EBITDA guidance of $95 million to $100 million. We are pleased with the progress we have made simplifying the business, improving operational efficiencies, and positioning the company for growth. While the macro environment remains uncertain, we continue to see opportunities to expand customer engagement, increase wallet share, and improve margins as the year progresses. In summary, Q1 represented a solid start to 2026 with revenue growth, adjusted EBITDA improvement, and continued progress integrating the business and sharpening our operating focus. We believe we are well positioned to execute through the remainder of the year and deliver on our financial objectives. As a reminder, our financial model is built to scale efficiently. As we return to growth, every additional dollar of revenue delivers substantial incremental margin, giving us the ability to grow profitability and free cash flows significantly over time. And with that, we are now happy to answer your questions. Operator, will you please open up the line for Q&A? Operator: Thank you, ladies and gentlemen. We will now open the call for questions. Once again, that is star one should you wish to ask a question. Your first question is from Bruce Goldfarb from Lake Street Capital. Your line is now open. Bruce Goldfarb: Hi. It is Bruce. Congratulations on the solid quarter, and thanks. So the first is, are there any inflationary pressures in the business that would put your $95 million to $100 million EBITDA guide at risk? Daniel T. Noreck: Bruce, thanks for the question. I do not think we are seeing any out of the ordinary from inflation that would put that at risk right now. We are still very confident, which is why we reiterated the $95 million to $100 million adjusted EBITDA target. Bruce Goldfarb: Great. Thank you. And then how are growing AI search volumes impacting your membership sign-ups and paid subscriptions? Gary Nugent: I will take that one, Bruce. Nice to talk to you. We have certainly seen the shift in traffic and the mix of traffic that we receive as a business as searches become disrupted and answer engines are becoming more prominent. We continue to see that answer engine traffic converts at a much higher rate to membership than search traffic used to. But interestingly, we are also seeing search traffic conversion rates improve as well. I think that is largely as a result of the fact that what we are now getting from search is more qualified. Effectively, what you are beginning to see in an answer engine environment is that it qualifies out people who are not really serious researchers and serious buyers. So whilst traffic may be disrupted and down, because conversion rates are up, we are still seeing solid membership, and therefore our membership is modestly growing. And in particular, the membership and the activity of members who are the key personas is growing quite nicely. Bruce Goldfarb: Thank you. And my next one, how are churn rates trending in the small to medium enterprise market segment? Daniel T. Noreck: Hi, Bruce. So from a churn perspective, we obviously do not show those metrics, but what I would say is that churn is still higher, clearly because our portfolio accounts have grown. So we are seeing a bit more churn at the lower end of the range. But what I would say to that is we are starting to see a stabilization of that, and so it gives us confidence as we look out for the rest of the year as it relates to those particular client segments. Bruce Goldfarb: Great. And my last question, how is business trending internationally in EMEA and APAC? Gary Nugent: I will pick up a little bit of highlights. I spent a couple of weeks on the road; I was actually in APAC traveling through Singapore and then through Shenzhen and Beijing in China before finishing off in Seoul in Korea. I would say that the actual environment was encouragingly optimistic and building. The vast majority of our business in that part of the world is the Intelligence and Advisory business, and there is certainly a huge amount of demand from APAC companies to grow their business internationally and to expand into markets such as the United States and Europe, and that is a great opportunity for us. And similarly, there is still an appetite from big American brands to build their business, particularly in markets like Japan and Korea. So generally speaking, I was actually really encouraged by the demand there, and I would say that the business has been trading in line with the rest of the business in the first quarter, no sort of material in-pattern. The one obvious exception to that is the Middle East and Africa region as a result of the ongoing situation in Iran. There we have definitely seen customers begin to slow down their investments and slow down their decisions. That would make sense. Bruce Goldfarb: Well, thank you. Congrats again on a solid quarter. Thanks for taking my questions. Operator: Thank you. Your next question is from Jason Michael Kreyer from Craig-Hallum. Your line is now open. Analyst: Hey guys, this is Thomas on for Jason. Thanks for taking my questions. I know you touched on it a little bit, but could you give a little more commentary on the environment you are seeing for software sales, particularly like a Priority Engine that has more of a recurring nature to it? Do you feel like tech companies are still sort of hesitant to lock in longer-term deals? Gary Nugent: I might actually pick up on that subject more broadly. I would certainly say that we have definitely seen the multiyear environment is not as strong as it was two years or so ago. That is definitely true. We are seeing customers—and we have said for some time that customers were shortening their contractual commitments—really through 2025, and I do not think that has really picked up in 2026. It is interesting enough in what is potentially an inflationary environment, because usually there is a bit of tension in the marketplace between customers wanting to lock in pricing for multiple years vis-à-vis making those long-term commitments, so it will be interesting to see how that plays out. I think generally in terms of commitments to software in the end of course of the marketplace, I have not really seen a lot of change in the customers’ appetite. But one of the things that we have spoken about is the need for us to actually integrate our data directly into our customers’ platforms, especially in the intent space. As customers’ martech stacks and sales tech stacks have become more mature and more settled, it is absolutely imperative that you are able to play nicely with their environment. So you heard us talk about this a lot when we are talking about the investment in the intent product: a lot of our investments are now on the subject of integration, and integration not just with API but also increasingly with MCPs in the AI world. And that is really where I think the game is being played now and the game will be played in the future in 2027. Analyst: Great. That is helpful. And then maybe just one follow-up. With the moves you made to position NetLine in a more down market, does that carry any incremental churn or volatility? Or do you still have pretty good visibility into NetLine production? Gary Nugent: NetLine continues to perform incredibly well for us. It is a very exciting story within the company, and it is going from strength to strength. As we have said, we have done a very thorough, forensic analysis to see whether it was cannibalizing any of the business elsewhere, and actually that is not the case. These are different customers. They are different personas within our existing customers. They are different budget pools. It forms part of the unified demand portfolio, and in actual fact the unified demand story that we are now telling, where we have I think the broadest portfolio of demand products to meet any demand problem a customer might have, is playing really nicely for us. Analyst: Great. Thank you, guys. Appreciate it. Thank you. Operator: Thank you. There are no further questions at this time. Ladies and gentlemen, the conference has now ended. Operator: Thank you all for joining. Operator: You may now disconnect your lines.
Operator: Welcome to Oportun Financial Corporation's first quarter 2026 earnings conference call. All lines have been placed on mute to prevent background noise. After the speakers' remarks, there will be a question and answer session. Today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to Dorian Hare, Senior Vice President of Investor Relations. Dorian, you may begin. Dorian Hare: Thanks, and hello, everyone. With me to discuss Oportun Financial Corporation's first quarter 2026 results are Doug Bland, our Chief Executive Officer, and Paul Appleton, our Interim Chief Financial Officer, Treasurer, and Head of Capital Markets. Kate Layton, Oportun Financial Corporation's Chief Legal Officer, and Gaurav Rana, our Senior Vice President and General Manager of Lending, will also join for the question and answer session. I will remind everyone on the call or webcast that some of the remarks made today will include forward-looking statements related to our business, future results of operations, and financial position, including projected adjusted ROE attainment and expected originations growth, planned products and services, business strategy, expense savings measures, and plans and objectives of management for future operations. Actual results may differ materially from those contemplated or implied by these forward-looking statements, and we caution you not to place undue reliance on these forward-looking statements. A more detailed discussion of the risk factors that could cause these results to differ materially is set forth in our earnings press release and in our filings with the Securities and Exchange Commission under the caption Risk Factors, including our upcoming Form 10-Q filing for the quarter ended 03/31/2026. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events other than as required by law. Also on today's call, we will present both GAAP and non-GAAP financial measures, which we believe can be useful measures for period-to-period comparisons of our core business and which will provide useful information to investors regarding our financial condition and results of operations. A full list of definitions can be found in our earnings materials available at the Investor Relations section of our website. Non-GAAP financial measures are presented in addition to, and not as a substitute for, financial measures calculated in accordance with GAAP. A reconciliation of non-GAAP to GAAP financial measures is included in our earnings press release, our first quarter 2026 supplement, and the appendix section of the first quarter 2026 earnings presentation, all of which will be available at the Investor Relations section of our website at oportun.com. In addition, this call is being webcast, and an archived version will be available after the call along with a copy of our prepared remarks. With that, I will now turn the call over to Doug. Doug Bland: Thanks, Dorian, and good afternoon, everyone. Thank you for joining us. I am honored to be speaking with you for the first time as CEO of Oportun Financial Corporation. I was drawn to Oportun Financial Corporation because it stands out: a technology-driven platform with a critical mission and proven ability to responsibly improve the financial lives of people who are too often overlooked by traditional lenders. I also saw a business known for high-quality customer service, uniquely positioned to seamlessly engage with both English- and Spanish-speaking members across its retail, contact center, and mobile app. My initial meetings with team members across the company and with key stakeholders have only reinforced this view. I look forward to working with our team and board to strengthen the business, build deeper relationships with our members, and deliver long-term value for shareholders. I am optimistic about what we can achieve together. I joined Oportun Financial Corporation on April 20, so I have been in the role for less than three weeks. I am not going to use my first earnings call to declare a new strategy before I have completed a deeper review. What I can say from my early assessment is that the team has made real progress strengthening the foundation of the business, particularly profitability, liquidity, and funding costs. While important work remains to improve through-cycle credit performance and rebuild a durable growth engine, the 2026 plan was already in motion before I arrived. Based on my review so far, I support reiterating the full-year guidance. I will now hand it over to Paul for a review of how we are executing against our current strategy and our first quarter financial results. He will also provide our Q2 guidance while updating you on our full-year outlook. Paul Appleton: Thank you, Doug, and good afternoon, everyone. I would like to start by updating you on our strategic priorities, which include improving credit outcomes, strengthening business economics, and identifying high-quality originations. Starting with improving credit outcomes, we have remained in a tight credit posture, maintaining an emphasis on returning members amid an uncertain macroeconomic outlook for low- and moderate-income households. Our annualized net charge-off rate was 12.65% in Q1, at the midpoint of our guidance range. In Q1, the proportion of originations to returning members was 79%, 16 percentage points higher than the 63% recorded in the prior-year quarter. Importantly, our Q1 30+ delinquency rate of 4.5% met the expectations we set on our February earnings call, down 38 basis points sequentially and 18 basis points year over year. We expect the second quarter's 30+ delinquency rate to improve further to a range between 4.1% and 4.2%, which is 22 to 32 basis points lower than Q2 2025 and 30 to 40 basis points lower sequentially than the first quarter. These proof points support our continued confidence that Q1's 12.65% annualized net charge-off rate should be the highest of 2026. As also mentioned on our February earnings call, a key focus this year is continuing to invest in our credit decisioning capabilities to accelerate model training, deployment, and effectiveness. In Q2, we are introducing the latest iteration of our primary underwriting model, B13, which features an enhanced model architecture designed to better capture both long-term and more recent emerging trends. The model also incorporates new alternative data sources to improve predictive power and reduce adverse selection risk. Turning to business economics, we remain committed to improving on full-year 2025 17.5% adjusted ROE and 6.8% GAAP ROE, making progress toward our objective of 20% to 28% GAAP ROEs on an annual basis. A key component of this is continuing our expense discipline. During Q1, total operating expenses declined 1% year over year to $91 million, in line with the substantially flat expectation we set for the full year. Another important part of our efforts to attain our ROE goal is exploring the launch of risk-based pricing. As discussed on our last earnings call, this effort would reintroduce pricing above 36% for shorter-term loans and higher-risk segments, including some customers we are not able to approve today. We have made good progress with this initiative, including signing a letter of intent with a new bank partner. As a result, we continue to expect to roll this initiative out in the second half of the year. Last month, we launched another initiative, a payment protection offering, that we expect will provide more certainty for our members and a positive financial contribution to Oportun Financial Corporation in future years. Payment protection is an opt-in offering that members can elect during the loan application process, which provides protection against unforeseen events like involuntary unemployment, death, or disability by completely or partially paying off the loan. The offering is currently available to loan applicants in several states, and in coordination with our bank partner, we expect to introduce the offering across most of our footprint in the coming months. Due to the phased rollout, we are currently assuming only a modest financial benefit from the payment protection initiative in our 2026 guidance. However, at scale, we see potential for profit enhancement in future years due to lower credit losses on enrolled loans and fees earned. Lastly, regarding identifying high-quality originations, in Q1, originations declined by 11%. This was in line with our expectations, reflecting typical seasonality and the higher mix of returning borrowers I referenced a moment ago. We continue to expect to grow originations in the mid-single-digit percentage range this year. Expanding our secured personal loan portfolio secured by members' autos remains a key pillar of our responsible growth strategy. Partially offsetting the unsecured personal loan originations decline, in Q1 secured personal loan originations grew 12% year over year, and the secured portfolio grew 30% year over year to $233 million. As a result, secured personal loans now represent 9% of our owned portfolio, up from 7% last year. Importantly, average losses on secured personal loans continued to run substantially lower than unsecured personal loans in the first quarter. Turning now to Q1 highlights on Slide 6, we recorded our sixth consecutive quarter of GAAP profitability with net income of $2.3 million and diluted EPS of $0.05 per share. We also generated adjusted net income of $10 million and adjusted EPS of $0.21 per share. Total revenue of $229 million declined by $7.1 million, or 3% year over year, which again was in line with our expectations and driven by the 11% year-over-year decline in originations I mentioned a moment ago. Net decrease in fair value was $86 million this quarter due to $85 million in net charge-offs. The net decrease in fair value was $13 million higher than the prior period, which benefited from a favorable $12 million mark-to-market adjustment on loans. First-quarter interest expense was $48 million, down $9 million year over year. This improvement reflects recent balance sheet optimization initiatives that I will share shortly. Net revenue was $90 million, down $11 million year over year, as the impact of lower total revenue and fair value offset the benefit from lower interest expense. Operating expenses were $91 million, down $1.3 million, or 1% year over year, reflecting continued cost discipline. Adjusted EBITDA, which excludes the impact of fair value mark-to-market adjustments on our loan portfolio and notes, was $29 million in the first quarter. This reflects a year-over-year decrease of $4.2 million as lower total revenue and higher net charge-offs more than offset lower interest expense and adjusted operating expense. Adjusted net income was $10 million, down $8.4 million year over year due to lower net revenue, partially offset by lower adjusted operating expense. Adjusted EPS declined year over year from $0.40 per share to $0.21 per share. Finally, GAAP net income of $2.3 million was similarly down $7.4 million year over year. Turning now to capital and liquidity as shown on Slide 9, we continue to strengthen our debt capital structure through continued balance sheet optimization by further reducing higher-cost corporate debt, lowering our overall cost of capital, and enhancing liquidity. I am pleased with the progress we made deleveraging, ending the quarter with a 6.8x debt-to-equity ratio. That is down from 7.6x a year ago and materially lower than the peak leverage of 8.7x we reported in Q3 2024. The improvements achieved since then and through the end of the first quarter include consistent GAAP profitability, a $69 million, or 21%, increase in shareholders' equity, and a $70 million, or 30%, reduction in our high-cost corporate debt. Q1 interest expense was $48 million, which was $9 million, or 16%, lower than the prior-year quarter, supporting our sustained profitability. This was driven by corporate debt repayments as well as actions taken related to our ABS notes and warehouse facilities. Also supporting our strong liquidity position, our cash flow has enabled us to continue to grow our unrestricted cash balance to $130 million as of the end of Q1 2026, up $25 million from year-end 2025 and up $52 million year over year. With this strong cash position, we paid down another $30 million of high-cost corporate debt following the end of the first quarter, lowering our remaining corporate debt principal balance to $135 million. Corporate debt repayments since the facility's October 2024 inception now total $100 million, reducing outstandings from the initial $235 million balance to $135 million, resulting in $15 million in annual run-rate expense savings. On the capital markets side, we completed a $485 million ABS transaction at a 5.32% yield in February. Over the last 12 months, we have issued $1.9 billion in ABS bonds at sub-6% yields, demonstrating our sustained access to capital on favorable terms. Next, I would like to turn to our updated guidance as shown on Slide 10. While our member base remains resilient, inflation above Federal Reserve targets, uneven job creation, policy uncertainty, and higher gas prices continue to create a cautious environment for low- to moderate-income consumers. We are particularly monitoring the impact of high fuel prices on our members, and while we have not seen any deterioration in our metrics as a result, we understand the pressure this can place on our customers if higher prices persist. Consequently, our outlook prudently assumes we maintain a tight credit posture through the balance of the year. We remain well positioned to adjust quickly as conditions evolve. Our outlook for the second quarter is total revenue of $227 million to $232 million, annualized net charge-off rate of 12.2% plus or minus 15 basis points, and adjusted EBITDA of $34 million to $39 million. At the midpoint, our Q2 revenue guidance implies a modest sequential increase from Q1 and a lesser year-over-year decline driven by higher originations from first-quarter levels. Our Q2 annualized net charge-off rate midpoint guidance of 12.2% implies 45 basis points of sequential improvement from the first quarter, supported by the favorable 30+ delinquency trends I discussed earlier. At the midpoint of $37 million, our Q2 adjusted EBITDA guidance implies strong sequential growth and a return to year-over-year growth of $5 million, or 17%, driven primarily by lower interest expense along with ongoing operating expense discipline. We are fully reiterating our full-year 2026 guidance, including total revenue of $935 million to $955 million, annualized net charge-off rate of 11.9% plus or minus 50 basis points, adjusted EBITDA of $150 million to $165 million, adjusted net income of $74 million to $82 million, and adjusted EPS of $1.50 to $1.65. Our full-year 2026 guidance continues to be underpinned by our expectations for a 1% to 2% decline in average daily principal balance, a reduction in interest expense of at least 10%, and substantially flat operating expenses. Also, our full-year annualized net charge-off rate midpoint guidance of 11.9% continues to indicate slight year-over-year improvement. Midpoint growth of 16% in adjusted EPS and 6% in adjusted EBITDA, even amid macro uncertainty for low- to moderate-income consumers, reflects the resilience of both our members and our business model. Before I turn it back to Doug, let me conclude with a brief summary of our unit economics progress. Although our long-term targets are GAAP targets, I will reference adjusted metrics because they remove non-recurring items and better reflect our future run rate. As shown on Slide 11, we generated 10.5% adjusted ROE during the first quarter. With ramping originations and lower credit losses embedded in our full-year guidance, we expect to improve on our first-quarter adjusted ROE performance in the balance of the year and outpace last year's 17.5% adjusted ROE. I am encouraged by the positive fundamentals we exhibited in Q1, particularly year-over-year improvement in cost of funds and operating expense efficiency. Our balance sheet optimization initiatives drove improvement in our cost of funds from 8.2% to 7%, a level well below our 8% target. And expense discipline enabled improvement in our adjusted OpEx ratio from 13.3% to 12.7%, nearing our 12.5% target. Our North Star remains delivering GAAP ROEs of 20% to 28% annually. We plan to achieve this by driving positive credit outcomes, growing the owned loan portfolio, and effectively managing operating expenses. We also intend to continue to drive our debt-to-equity leverage ratio this year toward our 6x target by reducing our debt outstanding and continuing to grow GAAP profitability. With that, Doug, back over to you. Doug Bland: Thanks, Paul. To close, I would like to emphasize that while Oportun Financial Corporation's foundation is stronger than it was, we need to establish predictable outcomes that result in durable growth. My focus now is on disciplined execution, deeper assessment, and coming back to you on our second quarter earnings call with a clearer view of the path forward. I want to underscore that Oportun Financial Corporation's mission to empower members to build a better future will continue. I see a tremendous opportunity to accelerate this mission. It is my focus to partner with our teams to determine ways to accomplish this. I am energized by what is ahead. With that, we will now open the call for questions. Operator: We will now open the call for questions. You may press 2 if you would like to remove your questions from the queue. It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Brendan McCarthy with Sidoti. Please go ahead. Brendan McCarthy: Great, thanks, everybody, for taking my questions, and welcome, Doug. I just wanted to start off on the outlook here. Originations were down 11% year over year. That makes sense considering your tighter underwriting position. How does the new risk-based pricing initiative fit into the 2026 guidance that calls for a mid-single-digit increase for the year? Paul Appleton: Thanks, Brendan. I appreciate the question. When it comes to the risk-based pricing initiative, as I mentioned in my comments, we are making good progress rolling out that program. As you know, for most of Oportun Financial Corporation's history, we did price above 36%. As we reintroduce this pricing regime, we certainly want to be thoughtful about the glide path and what it looks like. For guidance, we have embedded a little bit of benefit in there for 2026, but just a small amount given we want to test into it and the program is not live yet. Brendan McCarthy: Understood. I appreciate the color there. Looking at interest expense, it looked like a pretty steep year-over-year decline, and if you annualize Q1 it looks like you are trending well under that target for a 10% reduction in interest expense for full-year 2026. Do you see room there to boost margins over the course of the year? Paul Appleton: Possibly, yes. I see what you are looking at when you look at the run rate there. We are obviously pleased with the progress in paying down the corporate debt. As I mentioned in my comments, we are down $100 million from the initial balance of the corporate loan, and that is driving a $15 million annualized interest expense run-rate benefit. As I mentioned as well, we paid down another $30 million after the end of the quarter, which is included in that $100 million. So yes, there may be a bit of opportunity there, especially given some of the ABS execution we have had recently. Brendan McCarthy: That makes sense. And as a follow-up on leverage, I think you mentioned you are at about 6.8x leverage at this point. You are trending pretty quickly toward your 6x target. How can we think about your capital allocation once you reach that target? How might capital allocation change going forward? Paul Appleton: Great question, Brendan, thank you. The capital allocation priorities we have right now are continuing to invest in profitable growth and paying down the corporate debt. When we pay that down, that comes with a certain return—we know exactly the expense we are going to save, and the corporate debt has a high price to it. We are at that 6.8x leverage you mentioned. As we said on our last earnings call, we do expect to trend toward that 6x by the end of the year. For now, those are going to remain our two priorities, and then we can look beyond that once we reach the target. Brendan McCarthy: That is great. Thanks, Paul. Thanks, Doug. That is all for me. I will hop back in the queue. Operator: Thank you. Next question comes from the line of Analyst with Jefferies. Please go ahead. Analyst: Good afternoon, and thank you for taking my question. Welcome, Doug. I was just wondering if you have seen any changes to demand trends given the high fuel prices. Has this driven more borrowing given cash constraints? Thank you. Paul Appleton: In the first quarter, we continued to see demand outpace our originations, so there is certainly continued robust demand in the market. Analyst: Great, thank you. And then just a second question—thinking about the current mix of digital versus branch originations. Do you plan to evaluate any changes moving forward, and how should we expect this to trend in the future? Gaurav Rana: Thank you. The trends that we have today you can expect to continue through the course of the year. As Paul alluded to, we are still guiding toward mid-single-digit growth in originations, and we have lined up our marketing spend accordingly to drive that growth. Operator: Thank you. Next question comes from the line of Brendan McCarthy with Dougherty. Please go ahead. Brendan McCarthy: Great, thank you. Just a quick follow-up here. On the net charge-off guidance, I think hitting the 11.9% midpoint for the full year assumes a pretty nice step-down in the net charge-off rate to an average of around 11.6% for the rest of the year. How confident are you that you can really hit the midpoint there? What specific credit indicators are you looking for? Paul Appleton: Thank you for the follow-up question, Brendan. As you know, the 12.65% net charge-off rate we reported in the first quarter was elevated but expected—it was the midpoint of our guidance, and we achieved that. As we mentioned on prior earnings calls, the reason for that spike in net charge-offs was due to the mix shift that we experienced in 2025 when new loan originations accounted for a greater share of the mix than they do now. We have since shifted the mix back to returning borrowers, which is a positive tailwind for credit. Then you look at the guidance we set for the second quarter—we are doing that very informed by what we are seeing in roll rates. Late-stage roll rates that will contribute to second-quarter charge-offs are improving. The third positive trend is 30+ day delinquency that I mentioned in the comments, where those are trending lower than the first quarter. All those signs point to continued improvement. As you no doubt have factored in, when you put in the 12.65%, the 12.2%, and the 11.9% target for the full year, that does imply we are at the 11-handle for the second half of the year, in line with our 9% to 11% target. Operator: Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Doug Bland, Chief Executive Officer, for closing comments. Doug Bland: Thank you, everyone, for joining today's call. Before we close, I want to say a special thanks to the team, in particular Kate, Paul, and Gaurav, for working through the transition. Transition is, even under the best circumstances, never easy, and I think the team has done an excellent job continuing to drive this business focused on discipline, as you heard from the results they achieved during this quarter. I want to thank this team and look forward to working with them as we move forward. We appreciate your continued interest in Oportun Financial Corporation and look forward to speaking with you again soon. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Welcome to GSI Technology, Inc.’s Fourth Quarter and Fiscal Year 2026 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, we will provide instructions for those interested in joining the Q&A queue. Before we begin today’s call, the company has requested that I read the following safe harbor statement. The matters discussed in this conference call may include forward-looking statements regarding future events and future performance of GSI Technology, Inc. that involve risks and uncertainties that could cause actual results to differ materially from those anticipated. These risks and uncertainties are described in the company’s Form 10-K filed with the Securities and Exchange Commission. Additionally, I have also been asked to advise you that this conference call is being recorded today, 05/07/2026, at the request of GSI Technology, Inc. Lee-Lean Shu, the company’s chairman, president, and chief executive officer will be hosting the call today. With him are Douglas M. Schirle, chief financial officer, and Didier Lasserre, vice president of sales. I would now like to turn the conference over to Lee-Lean Shu. Please go ahead, sir. Lee-Lean Shu: Good afternoon, and thank you for joining us. To review our fourth quarter and fiscal year 2026 financial results. Fiscal 2026 was a year of meaningful progress for GSI Technology, Inc., marked by strong performance in our SRAM business, continued advancement of Gemini II to commercialization, and the initiation of the PLATO design. While I am pleased with the progress we have made on several fronts, significant work remains. Our team is executing our key milestones and advancing business development for the APU, and I have had several encouraging conversations on numerous fronts in these amounts. We end fiscal 2027 with continuous momentum, promoting the APU and building our customer traction. With that, I will now hand the call over to Didier. Didier Lasserre: Thank you, Didier. Let me start by stepping back and framing where we are today. Because I think the context is important. Our SRAM business performed well in fiscal 2026 and remains the revenue foundation of the company, providing cash for APU development. For the full year, the SRAM business grew 22% year-over-year and gross margins rose to 55% from 49%. The SRAM business has benefited from increased demand from our customers that support high-performance AI chip development and manufacturing. We recently announced that we concluded our strategic review and determined that continuing to execute our standalone strategy is the best path forward for delivering long-term shareholder value. The stronger SRAM business and a strengthened balance sheet, along with non-dilutive R&D funding, are providing the resources to support our go-forward plan. With this financial foundation in place, we are now seeing real progress with Gemini II and PLATO. Over the past several months, we have reached a point where we are seeing both technical validation and early program-level engagement of Gemini II, including the Sentinel drone surveillance POC, the U.S. Army SBIR award, and a new Phase One smart city project I will discuss in a minute. On the technical side, in a bake-off for the Sentinel POC, Gemini II’s performance contributed to winning the contract award by achieving a time to first token of roughly three seconds at 30 watts of system power on Gemma 312B multimodal workloads at the edge. In this use case, time to first token is a critical metric for drone surveillance systems because it reflects how quickly the system can respond in real-world applications where response time directly affects critical decision making. We are working closely with the G2 Tech team on the Sentinel program. We have completed the software deliverables and continue to target a June demonstration of the Gemini II powered drone. This demonstration is planned for the Department of Defense and an international defense agency. In mid-April, we were notified that we had been awarded Phase One of a smart city project. The project leverages our work done for the drone-based surveillance POC and marks an important step forward towards commercial deployment. In this application, Gemini II will process inputs from distributed camera systems to provide near real-time detection of events such as fires and other public safety risks. This project demonstrates how our platform can scale across real-world infrastructure. We expect to share additional details on the smart city program around the time of a planned media event in late May hosted by the municipality. Currently, we are working on several projects in tandem. What matters most for GSI Technology, Inc. at this time is not just the number of early-stage trials and demonstrations we have, but also how these early-stage engagements are helping us identify where our APU architecture provides a clear advantage, particularly in delivering low-latency performance within a constrained power envelope. We are also leveraging our deployment work in two ways. First, we are applying what we have developed for the drone security application to a smart city application. While the end markets are different, the underlying development carries over, giving us a meaningful head start in a new use case rather than starting from scratch. Secondly, as we complete the Sentinel POC and Phase One of the smart city program, we can build on those results to pursue additional opportunities with new customers in those markets. We view this as a repeatable model where each engagement helps accelerate the next. What is exciting for us is that we see the end markets for low-latency, low-power AI at the edge expanding as AI workloads continue to move closer to where the data is generated. These applications favor the APU architecture that can deliver higher compute per watt. Gemini II is ideal for these power- and latency-constrained edge deployments, where real-time response and energy efficiency are critical. Where we are winning is where Gemini II is tested against conventional architectures requiring significantly higher system power for similar or slower responsiveness. We believe Gemini II best addresses this gap and positions us well to win as more AI loads shift towards distributed, power-constrained environments. Consistent with this, we are encouraged by our progress within defense agency programs, as evidenced by our recent U.S. Army SBIR progressing from Phase One into Phase Two. This project is about enabling real-time in-field AI deployment on small, low-power systems typically operating in challenging conditions. As part of this program, we will build and test a ruggedized node containing the Gemini II for real-world mission-critical environments. This SBIR positions us within a broader shift in defense spending, with approximately $13 billion proposed in fiscal 2026 budgeted for AI and autonomous systems, and creates a potential pathway to follow-on programs and future opportunities to supply Gemini II-based systems. So how do we move from where we are today to design wins and ultimately revenue? From a commercial standpoint, we are still in the early stages. Our focus is on advancing our current engagements and working closely with partners to integrate Gemini II into their systems, with the goal of moving into design-level discussions. Given the complexity of these deployments, we are focusing our resources on a small number of high-value opportunities where we believe we have a clear advantage. Although the number of engagements remains limited, we are seeing a meaningful increase in the depth of these engagements and our ability to leverage our prior Gemini II deployment work for new related applications. Looking ahead, our priorities are to advance current POCs and awarded programs and to leverage what we have learned from each of these engagements to drive additional design opportunities. At the edge, performance matters most when it can be delivered within real-world power and latency constraints. That is where we believe Gemini II’s advantage lies. With that, I would like to hand the call over to Doug. Go ahead, Doug. In the earnings release issued today after the close of the market, you will find a detailed summary of our financial results for the fourth quarter and full fiscal year 2026. Douglas M. Schirle: Rather than walking through the numbers again, I will focus my comments on the key drivers behind the results and provide more context and explanation to help you better understand the business. Let me start with the results for fiscal year 2026, ended 03/31/2026. As Didier mentioned, fiscal 2026 revenue increased 22.4% to $25.1 million, reflecting continued strength in our SRAM business, particularly with customers supporting chip design and simulation for AI applications. We experienced solid growth in this customer segment throughout fiscal year 2026. We do see variability in customer orders, and sales can fluctuate from quarter to quarter. However, barring any significant change in underlying AI chip demand that would affect SRAM orders from these customers, we expect this business to remain relatively stable in fiscal year 2027. The higher level of revenue and product mix helped to lift fiscal year 2026 gross margin to 54.5%, a notable gain from the prior year gross margin of 49.4%. Operating expenses in fiscal 2026 rose to $31.2 million compared to $21 million in fiscal 2025. Operating expenses increased year-over-year primarily driven by higher R&D spending on the PLATO chip design. It is also important to note that the prior year included a $5.8 million gain from the sale of assets, which makes year-over-year comparisons appear more pronounced. We also continue to offset a portion of our R&D expenses through non-dilutive funding, SBIR contract funds, and POC-related funding. The majority of our R&D is dedicated to APU. The R&D offset in fiscal 2026 and fiscal 2025 was $1 million and $1.2 million, respectively. Higher operating expenses increased the total operating loss for fiscal 2026 to $17.5 million compared to an operating loss of $10.8 million in the prior year. The fiscal 2026 net loss included interest and other income of $4.1 million, primarily from interest payments on the increased cash balance from the capital raise completed in October 2025, and $3.4 million of other income consisting of a $6.2 million non-cash gain from the change in the fair value of prefunded warrants, partially offset by $2.8 million in issuance costs associated with the registered direct offering in October 2025. Switching now to the fourth quarter. Revenue was $6.3 million with a gross margin of 52.4%. As we have seen in prior periods, quarterly gross margin can fluctuate with the product mix and revenue levels. The fourth quarter gross margin reflects slightly lower semiconductor sales sequentially compared with the prior-year quarter. From a customer perspective, we did see some variability across accounts during the quarter, including lower shipments to certain customers and higher shipments to others. At the same time, defense-related sales increased to approximately 46% of total shipments, reflecting continued demand in that segment. Again, you will find a full breakdown of sales in today’s earnings release. Operating expenses increased from the prior year primarily due to continued investment in our Gemini II and PLATO development programs. These investments align with our strategy to advance our APU roadmap while maintaining discipline in cost management. Last quarter, we expanded quarterly earnings disclosures to help investors better understand the company’s cash consumption and cash generation. This information will complement the condensed consolidated statement of cash flows included in our Forms 10-K and 10-Q. Cash flows for the quarter ended 03/31/2026 were as follows: cash and cash equivalents as of December 31 were $70.7 million; net cash used in operating activities in the quarter was $5.5 million; net cash used in investing activities was approximately $100,000; and net cash provided by financing activities was $2.1 million. Cash and cash equivalents as of 03/31/2026 were $6.2672 billion. From a cash flow standpoint, spending in the quarter continued to reflect our investment in Gemini II and PLATO development. We expect cash usage to remain elevated as we progress through this development phase. As a general reference point, we expect the cash usage to be approximately $4 million per quarter, or about $16 million annually, although this may vary depending on development timing and program activity. We ended the quarter with $67.2 million in cash and no debt. This is a notable improvement from the prior-year cash balance of $13.4 million and is associated with $46.9 million, net of fees, registered direct offering proceeds that closed in October 2025. The absence of debt and the improved cash balance provide us with the flexibility to continue investing in APU while maintaining a disciplined approach to capital allocation. We believe our current cash position provides sufficient runway to support the initial commercialization of Gemini II and the completion of the PLATO tape-out, both expected late fiscal 2027. Before I hand the call over to the operator for Q&A, I would like to provide the first quarter fiscal 2027 outlook. For the upcoming quarter, we expect net revenues in the range of $5.9 million to $6.7 million with gross margin of approximately 54% to 56%. Overall, our strong cash position and continued support from non-dilutive funding give us a runway to advance Gemini II into early commercialization and the PLATO chip design. Operator, at this point, we will open the call for questions. Operator: Thank you. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Once again, it is star 1 to ask a question. The first question is from Tony Brainard, retail investor. Analyst: Hello, gentlemen. How are you? Lee-Lean Shu: Good. Thank you. Analyst: Yes. Can you share some color on the size—like, if you do get the design wins—the size of the market we are looking at? Lee-Lean Shu: On which market? Analyst: On the Gemini II. Didier Lasserre: Okay. That is a pretty broad question. So the markets we are going after initially, you know, some of them are government, military-based, specifically these drone programs. And as we talked about, we are limited in detail now. We will give you more detail on the smart city at the end of May. But both of those markets are multibillion-dollar markets. Lee-Lean Shu: Okay. Analyst: Yep. Analyst: That is fair enough. And that is my only question for today. Thank you very much. Douglas M. Schirle: Alright. Thanks, Tony. Analyst: Thank you. Operator: The next question comes from Robert Christian, Private Investor. Robert Christian: Yes. I would like to know why the PLATO project has moved up from 2027 to late fiscal 2027. Didier Lasserre: Actually, it has not been pushed out. It might have been a mixture of calendars and fiscal quarters. When we had first talked about it, we were targeting the beginning of calendar 2027 to have the part taped out, and we are still on schedule for that. Tape-out means that the design will be done in the first quarter, and that would give us silicon because we have to make the mask sets that are used for the wafer fabs at TSMC. So we will see our first wafers in hand in summertime of calendar 2027, and I believe that has always been our schedule. Lee-Lean Shu: Yeah. I think we mentioned fiscal year 2027. That is the beginning of the 2027 calendar year. Didier Lasserre: That is a good point. So the end of fiscal 2027 is March of calendar 2027. Okay. That would be great. And the second question I have is, Gemini II taped out over two and a half years ago. Is it going to take that long to see expected sales, say, of PLATO? Didier Lasserre: So that is a great question. You have two components to sales. You have the hardware component, which is the chip and any kind of board, and you have the software side. The software side actually lagged the hardware on Gemini II. With PLATO, we are trying to align the two more closely. The good news is some of the software work that is being done for Gemini II can be used for PLATO, while with Gemini I it was a completely new effort. In that respect, we can leverage some of the work from Gemini II for PLATO, and then we are also lining up the resources to be able to bring in the software with PLATO. Robert Christian: Well, the chip is genius, and I wish you guys godspeed. Lee-Lean Shu: Thank you. Didier Lasserre: Thank you. Operator: At this time, we show no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Lee-Lean Shu for closing statements. Lee-Lean Shu: Thank you again for joining today’s call. As a reminder, Didier will be at the LD Micro Conference on May 19. Contact LD Micro if you would like to attend this presentation or take a one-on-one meeting. We are encouraged by the progress we are making with Gemini II, and we remain focused on successfully executing against the opportunities in front of us. We look forward to speaking with you again on our fiscal 2027 first quarter earnings call. Thank you. Operator: This concludes today’s conference. Thank you for attending. You may now disconnect.
Operator: Welcome to the Q1 2026 ICF International, Inc. earnings conference call. My name is Lauren Cannon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I will now turn the call over to Lynn Morgen of Advisory Partners. Lynn, you may begin. Lynn Morgen: Thank you, Lauren. Good afternoon, everyone, and thank you for joining us to review ICF International, Inc.'s first quarter 2026 performance. With us today from ICF International, Inc. are John Wasson, Chair and CEO; Anne Cho, President; and Barry M. Broadus, Chief Operating and Financial Officer. During this conference call, we will make forward-looking statements to assist you in understanding ICF International, Inc. management's expectations about our future. These statements are subject to a number of risks that could cause actual events and results to differ materially, and I refer you to our 05/07/2026 press release and our SEC filings for discussions of those risks. In addition, our statements during this call are based on our views as of today. We anticipate that future developments will cause our views to change. Please consider the information presented in that way. We may, at some point, elect to update the forward-looking statements made today but specifically disclaim any obligation to do so. I will now turn the call over to ICF International, Inc. CEO, John Wasson, to discuss first quarter 2026 performance. John? John Wasson: Thank you, Lynn, and thank you all for joining us this afternoon to review our first quarter results and discuss our business outlook. The first quarter represented a solid start to the year. We executed well across our client set, reflecting successful strategic initiatives to diversify our business model and our track record of delivering positive outcomes for our clients. This track record is a function of ICF International, Inc.'s deep domain expertise paired with cross-cutting capabilities in technology, digital transformation, complex program management, and engagement. By going to market with this unique combination of capabilities and experience, we continue to maintain healthy win rates, record industry-leading book-to-bill ratios, and build our business development pipeline — all metrics that underpin ICF International, Inc.'s future growth potential. Key takeaways from 2026 include: First, an 8.6% sequential increase in our revenues from federal government clients, representing a strong indication that this part of the business has stabilized and is on the upswing. As we noted last quarter, we expect to see sequential improvement in our revenues from federal government clients through the third quarter of this year, with year-on-year growth in this client category anticipated for the 2026 fourth quarter. Second, a 17% year-on-year increase in revenues from international government clients, which was a strong showing tied directly to recent contract wins, many of which are single-award contracts. Third, of the total of $12 million in revenues that shifted out of the first quarter through the timing of project work for commercial and international government clients, we expect one-half to be recognized in the second quarter and the remainder to come through the second half. And lastly, we continue to win north of 90% of our recompetes. New business, including modifications, represented 65% of this quarter's awards, a strong indication of how well our qualifications are aligned with client demand. ICF International, Inc. was awarded $450 million in contracts in the first quarter, maintaining our 12-month book-to-bill ratio at a healthy 1.21. After this quarter's awards, our business development pipeline stood at $8.5 billion. Also, we were pleased with our strong margin performance in the first quarter, which we achieved while continuing to invest organically in areas we have identified as drivers of long-term growth for ICF International, Inc., namely commercial energy, disaster recovery, and federal technology modernization. There are several important secular trends supporting our growth expectations for these areas, including rapidly growing demand for electricity in North America highlighting the importance of energy efficiency and grid modernization programs; increased frequency and severity of natural disasters, including hurricanes, wildfires, and other extreme weather events, which often result in major damage to homes, businesses, and critical infrastructure; and the tremendous need for digital and AI-driven technology modernization to improve mission delivery across federal civilian agencies. ICF International, Inc. is well positioned to capture more than our fair share of growth in these markets, which supports our confidence that ICF International, Inc. will return to mid- to high-single-digit organic growth in 2027, and continued growth beyond. When you layer on the potential for accretive acquisitions, you see a clear path to return to double-digit growth. Given our expectations for continued favorable business mix and our ongoing internal efficiencies, many of which are coming from AI and other tools, we expect our earnings growth to continue to outpace revenue growth as we look forward. I know that investors are concerned about the impact of AI tools on the technology modernization work that is being done at federal government agencies. While we understand the concerns, we are doing work in this market every day, and over the last two years we have adjusted our offerings to strengthen our resilience to just that concern. For example, we focus on longer-term demand drivers including AI-augmented application development, foundational modernization, and AI governance and orchestration. Here are several insights that are relevant to ICF International, Inc. First, 80% of our technology modernization work for federal clients is fixed-price or outcome-based, and our civilian agency clients require a lot of support in this area. As AI-augmented methods enable us to complete projects in less time and at a lower cost, we will simply move on to the next project more quickly than in the past. Technology is moving quickly, and there is a substantial backlog of modernization work to be done to address the existing technical debt in the federal civilian arena. Second, as our clients move to advance AI at enterprise scale, we anticipate even greater demand for foundational data, cybersecurity, and cloud services. This is the foundation that determines whether AI deployments produce reliable, secure, and scalable outcomes or fail in production. We are prepared to help our clients continue on their journeys to improve and modernize their data and cloud architectures in order to capitalize on the promise of AI. Third, these AI capabilities also open up a larger technology market. We will see new opportunities for smarter workflow automation as agencies reimagine what is possible. Also, people will address legacy technical debt that was heretofore too expensive to address through traditional modernization. Finally, we will help our clients in addressing new challenges with AI governance, orchestration, and platform optimization that are all emerging as we speak. These areas we talk about require technology and domain expertise combined with human judgment and oversight to get it right. The upside is that the government technology market is expanding in scope, shifting in shape, and asking more of its partners than it did before AI. ICF International, Inc. is positioned to lead and grow through this evolution. Before turning the call over to Anne Cho, our President, who will provide a more detailed business review, I want to comment on M&A. Last year, we were fully concentrated on building our capabilities across our non-federal client base and on tightly managing our federal government business in light of the volatility that we experienced in 2025. This year, we are taking a more aggressive stance with respect to M&A given the substantial opportunities we see in our key growth markets, and in particular, commercial energy. We remain disciplined, but if we find an acquisition that meets our criteria for driving revenue synergies in growth areas and for being accretive soon after completion, we will move forward. Acquisitions have been an important part of ICF International, Inc.'s growth chassis over the last 25 years. We have a great track record of using free cash flow to pay down debt quickly. I will now turn the call over to Anne to discuss first quarter business performance across our client set. Anne? Anne Cho: Good afternoon, everyone. I am pleased to be presenting our business review on my first official call as President of ICF International, Inc. During my 30-year tenure, I have had the opportunity to work in many areas of the company, which makes it very exciting for me to be able to speak to you about the totality of the business. First quarter revenues were led by commercial, state and local, and international government clients, accounting for over 58% of total first quarter revenues, and are on track to exceed 60% of our full-year 2026 revenue. Taking a closer look at our client categories, I will start with commercial energy. There continues to be strong underlying demand for our utility programs, which include energy efficiency, flexible load management, and electrification. These programs represent approximately 80% of the trailing 12-month commercial energy revenue. The addressable market for these services is large, and ICF International, Inc. is a market leader. We continue to gain share, receiving plus-ups on existing contracts reflecting the results we are delivering, introducing new services, and then winning contracts from competitors. Our commercial energy advisory work delivered mid-teens growth in the first quarter. This growth reflected considerable demand for our market assessment and due diligence work, which supports client M&A; the expansion of the grid reliability and protection work; and increasing demand from data center developers. In addition, our engineering support to utilities working to accommodate data center loads continues to accelerate, as those clients expedite the development of new substations. Many of these engagements draw on our proprietary tools like Energy Insights, SightLine DER, and ClimateSite Energy Risk. We pair these model outputs with actionable decision support within the confines of the regulatory and stakeholder environment. From a Q1 perspective, as John noted, there was a timing shift affecting our work on several fixed-price energy efficiency programs that must be completed in 2026. Without this shift to the right, commercial energy revenues would have increased 8.3% in the first quarter instead of the reported 2%. Next, I am going to talk about our state and local portfolio. Q1 state and local government revenues were stable. For the full year, we expect revenues in this client category to increase at a mid-single-digit rate. ICF International, Inc. is a recognized market leader in disaster management and recovery services, which continue to account for about 45% of this client category's revenue. In February, we announced the award of a comprehensive management services contract by the State of Florida, which positions us to compete for a broad portfolio of projects that extend beyond disaster management to include habitat conservation planning and agricultural land conservation. We are also encouraged that, following the confirmation of the new Secretary of the Department of Homeland Security in late March, DHS went on to approve the obligation of $730 million Hazard Mitigation Grant Program funding, signaling the continued intent to fund rebuilding efforts that mitigate future disaster loss. DHS also recently indicated its intent to restart the FEMA Building Resilient Infrastructure and Communities, or BRIC, program that we have historically supported. The combination of these events supports our confidence that disaster management and recovery services will continue to be a driver for ICF International, Inc. over the mid and long term, and will expand our efforts well beyond the current 75 disaster recovery programs in 22 states and territories that we support today. Technology has always played an important role in our work for state and local government clients, and we have expanded our offerings there to include advanced technology solutions and services as well. As we discussed in our last call, our international portfolio is growing nicely. International government revenues increased 17.5% in the first quarter, reflecting the significant contracts that ICF International, Inc. has been awarded over the last 18 months by the European Union and UK clients. The additional $4 million that shifted into the second quarter and second half of this year represented the timing of pass-through revenues that are associated with outreach and marketing events that are under fixed-price contracts requiring the work to be completed in this year. Sales continue to be strong across our international portfolio, winning key recompetes and securing new contracts with international government clients to support growth for the next several years. Finally, I will talk about our work for U.S. federal clients. Our federal business has stabilized, and we continue to expect consecutive revenue growth in Q2 and Q3 and then year-over-year growth in Q4, as we execute on the nearly $1 billion in federal government contracts that we have won over the last 12 months. We are pleased to see procurement activity pick up in the first quarter. Some opportunities that were paused or canceled last year have re-entered the market. We have seen a restart of some of the work we were awarded in the past, such as support of a grant program for the Department of Energy. The procurement environment has changed in the last year, and we have pivoted, focusing more on rapid prototyping and demonstration of capabilities than ever before. Several sweet spots exist at the intersection of the administration's priorities, the agencies' gaps in manpower, and our expertise. These include applying AI and advanced analytics for fraud prevention and supporting child and family services, transportation safety, grid reliability, and technology modernization. A good example of how we combine deep domain expertise and advanced technology with human judgment is our work modernizing the Center for Medicare and Medicaid Quality Improvement and Evaluation System. The program involves the transition of more than 278 million clinical assessments into a national repository, enabling real-time monitoring of care standards across skilled nursing facilities, home health agencies, and hospitals. This work advances the administration's priorities around quality of care, fiscal responsibility, and system resilience. In summary, the trends underlying our business are aligned with our expectations. Our leaders are leaning in across the full portfolio with a winning mindset and eagerness to emerge as a partner of choice as our clients navigate what is a really fast-moving and exciting time. Now I will turn the call over to our Chief Operating Officer and Financial Officer, Barry M. Broadus. Barry M. Broadus: Thank you, Anne. Good afternoon, everyone. I am pleased to provide additional details on our first quarter 2026 financial performance and the factors shaping our results, as well as our outlook for the remainder of the year. At a high level, first quarter results reflect solid execution across our diversified client base. Margins remain strong, contract awards resulted in a book-to-bill above one, we continue to have a healthy pipeline of opportunities which we are pursuing, and, as Anne mentioned, procurement activity in the federal space is showing signs of improvement. In fact, in the federal space, we submitted nearly $400 billion of bids in the first quarter, the majority of which were for new opportunities. While first quarter total revenue came in below our expectation, this was entirely due to timing of certain commercial energy and international government contract work. We fully expect to recover these revenues throughout the balance of the year, with half expected in the second quarter. I would also note that our first quarter tax rate came in above our expectations, which I will address in more detail shortly, but our full-year outlook for a tax rate of 20.5% remains unchanged. Before discussing the first quarter financial metrics, I want to highlight some of the strategies that are supporting margin improvement and helping to drive shareholder value. First, cost optimization has been a key theme as we work to manage our infrastructure costs while funding growth initiatives. We continue to invest in modernizing our ERP systems and our back-office operations while implementing AI tools. These ongoing investments have and will continue to make us more efficient, providing us the ability to scale over time by offering both operational and financial benefits. From a strategic financial standpoint, we continue to focus closely on capital allocation. To that end, organic projects, share repurchases, and acquisitions are top of mind. In the first quarter, we repurchased slightly more than 217,500 shares, and we will continue to opportunistically repurchase additional shares. Further, as outlined by John, we are actively pursuing acquisitions given our strong cash flow and borrowing availability, which was expanded as part of the refinancing we completed last month. In summary, we are executing on our strategic plan and remain on track to return to growth in 2026, and deliver on our full-year top and bottom line guidance. With that context, I will now review our first quarter financial results. Total revenue in the first quarter was $437.5 million, a decline of 10.3% compared to 2025. As we discussed on our fourth quarter call, both first quarter and full-year 2026 revenue comparisons will reflect the impact of federal contract cancellations that occurred between February and May 2025. First quarter revenues were approximately $12 million below our expectations, reflecting a push to the right of roughly $8 million in project work for commercial energy clients on fixed-price contracts and $4 million in international government. The timing of the work simply shifted later in the year. We will recover all of these revenues over the balance of the year, approximately half expected in the second quarter. As a result, we are reiterating our expectation that revenues from commercial, state and local, and international clients will grow at a double-digit rate and represent over 60% of total revenues for the full year, supported by strong underlying demand from utility clients, continued ramp-up of international contract wins, and growing state and local revenues. In our federal government business, we were encouraged to see revenues grow 8.6% sequentially to $182.3 million, which was aligned with our expectations. The sequential improvement was supported by our technology modernization work, which we are well positioned to win and deliver in the current procurement environment. Subcontractor and other direct costs were $102.7 million, representing 23.5% of total revenues, up from 22.7% in the prior-year quarter due to higher pass-throughs on certain non-federal contracts. Despite the year-over-year decline in revenues, gross margin rose 10 basis points to 38.1%, highlighting our favorable business mix and a contract mix that remains largely comprised of fixed-price and time-and-materials contracts. Fixed-price and T&M contracts represented approximately 93% of first quarter revenues, with cost-reimbursable contracts accounting for only 7%. Indirect and selling expenses were $118.8 million, a decline of nearly 10% year over year and representing 27.2% of total revenues. As I mentioned previously, as we optimize our indirect spend, we will continue to invest in high-growth areas, including energy and technology modernization, while preserving our core capabilities in the programmatic side of the federal business, ensuring ICF International, Inc. is well positioned when the market recovers. First quarter EBITDA was $47.3 million compared to $52.1 million last year. Adjusted EBITDA totaled $48.9 million with an adjusted EBITDA margin of 11.2%, stable compared to the 11.3% reported in last year's first quarter, demonstrating the effectiveness of cost management initiatives and the structural improvement in our business mix. We continue to expect adjusted EBITDA margin expansion of 10 to 20 basis points for the full year. Net interest expense in the first quarter was $6.7 million, down 8.5% year over year, reflecting a meaningful reduction in our average debt balance compared to the prior-year period. Our first quarter tax rate was 25.1%, above our expectations due to less-than-expected deductible equity-based compensation expense. This compares to 10.5% in the prior-year quarter, which, as a reminder, included a one-time tax benefit. We continue to expect a full-year tax rate of approximately 20.5%, with each of the next three quarters expected to see a lower tax rate than the first quarter, the largest offsetting benefit expected to be in the third quarter. To close out on taxes, I should note that the higher-than-expected first quarter tax rate had an unfavorable impact of $0.07 on GAAP EPS and $0.09 on non-GAAP EPS in the first quarter. But given that we still expect a full-year tax rate of approximately 20.5%, the Q1 tax rate does not change our outlook as to how taxes will impact our full-year EPS guidance. Net income in the first quarter was $20.5 million, or $1.12 per diluted share, compared to $26.9 million, or $1.44 per diluted share, in the prior-year period. Non-GAAP EPS was $1.50 compared to $1.94 per diluted share in 2025. As noted, both GAAP and non-GAAP EPS for the first quarter of this year reflected the unfavorable tax item that I previously described. We remain confident in our full-year outlook, which calls for 3% revenue growth at the midpoint of our guidance range, supported by recent contract activity and the strength of our backlog and pipeline. Our backlog stood at $3.4 billion at quarter end, approximately 51% of which is funded, and our business development pipeline remains healthy at $8.5 billion. Taken together, these metrics provide good visibility for the year. Now turning to our balance sheet and cash flows. We used $3.1 million in operating cash flow during the first quarter, a meaningful improvement compared to the $33 million used in last year's first quarter, reflecting improved receivables collections and working capital management. Days sales outstanding were 74 compared to 81 days in last year's first quarter. Capital expenditures totaled $2.8 million compared to $3.5 million in the first quarter of last year. We ended the quarter with net debt of $436 million, down considerably from the $499 million at the end of last year's first quarter, and approximately 40% of our current debt is at a fixed rate. Our adjusted leverage ratio was 2.23 turns versus 2.25 turns at the end of last year's first quarter. Subsequent to the end of the first quarter, we refinanced our credit facility and remain well positioned to invest in organic growth, repurchase shares, and pursue strategic acquisitions in our key markets while maintaining our dividend. Today, we announced a quarterly cash dividend of $0.14 per share, payable on 07/10/2026 to shareholders of record as of 06/05/2026. To wrap up, we are pleased to reaffirm our guidance for a return to revenue and EPS growth in 2026, with our revenues expected to range from $1.89 billion to $1.96 billion, representing 3% growth at the midpoint; GAAP EPS from $5.95 to $6.25; and non-GAAP EPS from $6.95 to $7.25, or 5% growth at the midpoint. To further help you with your financial models, please note the following for the full year 2026: both depreciation and amortization, and amortization of intangibles are expected to continue to be $22 million and $24 million, respectively. Likewise, we continue to expect full-year interest expense to be between $27 million and $29 million. As I mentioned earlier, our full-year tax rate expectation remains unchanged at approximately 20.5%. In the second quarter, the rate is estimated to be around 23%, with a significant reduction in the third quarter. We anticipate capital expenditures to total $24 million to $26 million. Given share repurchases in the first quarter, we now expect our year-end fully diluted share count to be 18.3 million shares compared to our prior expectation of 18.5 million shares. And we continue to expect operating cash flow of $135.15 billion for the full year. With that, I will turn the call over to John for his closing remarks. John Wasson: Thank you, Barry. We are pleased that 2026 is shaping up as we expected — to be a year in which ICF International, Inc. returns to growth. In many ways, the trials of 2025 have made us a stronger company. We are more diversified, more efficient, and more agile. As we look to the future, we see a clear path to return to mid- to high-single-digit growth in 2027 and continued growth beyond. The dedication of our professional staff has been critical in helping us navigate dynamic business conditions, pivot to take advantage of new opportunities, and set the stage for ICF International, Inc.'s future growth. We appreciate their support. We will now open the call for questions. Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your questions, please press 11 again. Our first question comes from the line of Jason Tilgin with Canaccord Genuity. Your line is now open. Jason Tilgin: Good afternoon, and thanks for taking my question. I believe in the prepared remarks you talked about the advisory business for commercial energy growing mid-teens year over year in the quarter. I am wondering if you could help give us some additional color on where you are seeing the most activity today as it relates to the data center opportunity, how those conversations are evolving, and what exactly, as it relates to your skills and capabilities, is giving you an edge to continue to win business in that area. Thanks. And then one additional follow-up. High level, in terms of some of the investments that you are making today in the ERP system and other technology, I am wondering if you could help frame how much of those investments today are offsetting some of the benefits from recent cost optimization efforts, and how we should be thinking about the cadence of maybe more substantial gross or operating margin expansion over the coming quarters and years? Thanks. Anne Cho: Sure. When I mentioned the advisory side and that growth, it is important to point out the work we are doing expanding our client portfolio. A couple of years ago, we acquired a firm called CMY, which added engineering capabilities. We have been able to expand our client set in that area, providing those engineering skills to utilities, for instance, that are trying to build out capacity to support data centers in their area. Our power modeling team has been benefiting from a resurgence of work from renewable developers across a suite of technologies — not just wind, but solar, storage, etc. — and then increased demand from data center developers as well. Barry M. Broadus: Yes. This is Barry M. Broadus. From an overall perspective, we have had a program for the last few years where we are modernizing our ERP systems, and that is driving efficiencies. We do this in a balanced way whereby we are receiving benefits — becoming more efficient and able to process and work faster internally. In addition to ERP systems, we are also implementing AI in many of our back-office processes, which is continuing to drive additional efficiencies. We have the ability to deliver more margin, but we are using dollars we save to invest in long-term growth initiatives in the areas that John Wasson and Anne Cho mentioned as part of their opening comments. We do this in a balanced way, and I do not see it detracting from our ability to continue to improve margins as we move forward. Operator: Thank you. Our next question comes from the line of Samuel Kusswurm with William Blair. Your line is now open. Samuel Kusswurm: Hey, everyone. Thanks for taking our questions here. To start on the commercial energy business, it grew 2%, but I think you shared it would have grown 8% if we were to add back the $8 million in project work that got pushed out. At the start of the year, you shared you were expecting at least 10% organic growth for the year in this business. Do you still expect that, and what are you seeing in your backlog that is really supporting it? And then also, can you comment on how the residential and utility energy piece of the business performed versus more of the commercial and industrial energy piece? John Wasson: I will start off. We remain confident in 10% growth for our commercial energy business. We have a strong backlog and a strong pipeline. Those markets are growing high single digits, and we have been benefiting from plus-ups and takeaways that increased our growth rate above the market average. We remain confident that we will continue to do that. In terms of residential versus industrial and commercial, we are the market leader in residential energy efficiency programs. We have about 35% market share and think we can continue to expand that. We are also placing significantly on the commercial building side, where we have about 15% to 20% market share. Anne Cho: I do not have an update beyond what we discussed on the last call in terms of the share of residential versus commercial. One more thing to underline what John Wasson mentioned about the long-term growth trajectory: upstream of these programs we run, we also provide regulatory and consulting support to utilities, which gives us a good sense of the programs coming down the pike. That is another indicator supporting strong sales for both recompetes and wins on the program side. Barry M. Broadus: Historically, in our commercial energy business, we typically recognize roughly 47% of our annual revenues in the first half. The back half is when we typically hit certain milestones with regard to energy incentives, which creates a natural uptick in the back half versus the front half. Samuel Kusswurm: Got it. I appreciate the color. I think I will ask about the federal business next. There was something that caught my ear in the prepared remarks — capturing more of the federal opportunities aligned with the administration's priorities. Could you expand upon that more? From an operating standpoint, what does it mean to pivot in that direction? Are there any recent successes you could point to, or is it still early? Anne Cho: There is definitely a different way of selling in this environment in the federal space — more focus on showing what we can do. We come in with prototypes and good ideas that we can demonstrate, and where we can demonstrate the ability to take a client to a relatively quick win. That is an example of pivoting in capture and business development. In terms of new opportunities, we have been successful winning in new areas and offices at agencies where we have worked before — for instance, the Department of State, Department of Labor, and Department of Defense. We recently won a large BPA with the Defense Counterintelligence and Security Agency, and that is one where we incorporate AI-driven components to modernize very complex operational processes, with human oversight and deep expertise. Those are the kinds of places where our skills resonate. John Wasson: I would also add the administration wants work to be outcome-based or fixed-price, and the vast majority of our work is in that category. We are in the single digits now on cost-plus, and that has been declining. There is a real focus on AI-first. We have our ICF fathom AI platform, which allows us to do rapid prototyping and other work for federal agencies. We also have a real capability around waste, fraud, and abuse at CMS that came to us with the Semantic Bits acquisition. It is a material part of our technology business and our HHS work, and that is an area where there is a lot of focus and we are seeing a lot of opportunity. Operator: Thank you. Our next question comes from the line of Tobey Sommer with Truist. Your line is now open. Tobey Sommer: Thank you. I was hoping you could give us a sketch of what your M&A could look like given the pressures in the federal space. The valuation in your own stock and the group largely has declined. How do you think about multiples and leverage in this context? How engaged and active do you expect to be? Also, from a commercial energy perspective, I understand some work was pushed to the right. What kind of growth cadence do you expect this year, and how quickly will the year-over-year or sequential growth resume? And you talked about a resurgence of renewables — could you give us more context around that in a little more detail? John Wasson: As you know, M&A has been a key part of our strategy over the last 20 years as a public company. There have been three or four times where we have levered up and then, within a year or 18 months, paid down the debt. It has been quite successful for us in terms of both organic and inorganic growth. It remains a priority for us. Generally, we are focused on opportunities in our key growth areas. Right now, energy is first among equals, and the primary focus on the M&A front is on the commercial energy side. We would look for opportunities aligned with our core energy business — bringing us additional geographies, scale, capabilities, and clients. We will also look at adjacencies with more of an engineering focus. Anne Cho mentioned CMY, which brought grid engineering and large-load capabilities; that is an adjacency where there could be real synergies for us. At a high level, we want any acquisition to be accretive in the first year, with strategic and cultural fit, and we would need to see material revenue synergies to achieve those goals. On multiples, the energy arena for our current business retains premium multiples, so we need the right fit with the right synergies to meet our criteria. On leverage, historically when we have levered up, we have gone to about 3.0x to 3.5x — maybe 3.75x at the peak with Semantic Bits and ITG before that. I do not see us going higher than that. We want something we could pay down quickly with our strong cash flow — within a year or 18 months. Barry M. Broadus: On the commercial energy cadence, you could expect mid- to upper-single digits as we move into the next quarter or so, and then it will go beyond that and continue to ramp up as we move throughout the second half. The fourth quarter continues to be the strongest growth period as many energy incentives are realized during that time. Anne Cho: On the resurgence of renewables, there is renewed interest, and “all of the above” is really more of a thing. Hyperscalers have made commitments to provide renewable energy to support their data centers, creating opportunities for us to support the analysis. That can include stakeholder engagement and crisis communication, as well as siting and interconnection analysis. With developers, we are doing siting analysis, expanding renewable facilities, looking at brownfields repurposing with an eye on potential renewables, and gas procurement strategies are still in there. Understanding interconnection applications and speed to power is really important. Battery storage is much more in the forefront now, and that has always been part of our work, but it is now of much greater interest to our clients. Operator: Thank you. Our next question comes from the line of Kevin Steinke with Barrington Research Associates. Your line is now open. Kevin Steinke: Great, thank you. From a housekeeping perspective, can you expand on what resulted in the later timing of some revenue in both the commercial energy and international markets? And in the federal space, you mentioned you submitted $400,000,000 worth of bids in the first quarter. Can you give us more flavor around the type of work you are predominantly bidding on? John Wasson: In terms of the shift of revenue to the right, it was a confluence of events on a handful of projects where we did not ramp up the work quite as quickly as expected, both for ICF International, Inc. and our subcontractors. These are all fixed-price contracts; it is all in backlog, and it all has to be recognized in 2026, but we have to meet certain milestones to book the revenue and that was pushed out a bit. Our fees are performance-related when we meet specific energy production goals, and those were pushed out. It was just a confluence of events that pushed to the right for a handful of projects. There are no underlying challenges or problems with the projects. On federal bids, within HHS, CMS remains an area where we are seeing opportunity, and that was a key part of those figures. We are bidding more opportunities on the technology front at the Department of Defense. We have won several IDIQ contracts in the last year or 18 months, and we are seeing more opportunity for the types of skills we have. The Department of Homeland Security is also an area of opportunity that we are pursuing. We work at FEMA and other DHS agencies. Other civilian clients include NASA and EPA. Barry M. Broadus: On that most recent Department of Defense vehicle John Wasson mentioned, we recently won our first task order on that too, which was good to see. Kevin Steinke: Thanks. One more — you mentioned the target of returning to mid- to high-single-digit revenue growth in 2027. Does that contemplate a return to year-over-year growth in the federal government space? John Wasson: Yes. That would assume a return to growth in the federal space. We have 60% of our business — commercial, state and local, and international — growing 10% or more collectively, and we believe that is a long-term trend. We have indicated that our IT modernization business will return to low-single-digit growth this year. That gets 80% of our business to grow. Our guidance this year for the remaining 20% of our federal business is down mid- to high-teens given difficult comps from last year’s impacts. We think we have bottomed out and are stabilizing there. If that stabilizes and the other 80% is growing, that gets us to mid-single-digit or better organic growth. The upside would be doing better than stabilization in that remainder or higher growth in IT modernization and the other 60%. And, of course, acquisitions could move us to double-digit growth. Operator: As a reminder, to ask a question, press 11 on your telephone and wait for your name to be announced. Our next question comes from the line of Marc Riddick with Sidoti. Your line is now open. Marc Riddick: Hey, good afternoon, everyone. I wanted to touch on what you are seeing on the state and local government activity levels as far as RFPs and demand, as well as the disaster side of things. And could you also touch on what you are seeing internationally as far as the opportunity set? Anne Cho: On the state and local front, beyond disaster, our environmental services to state and local governments have been buoyed by a focus on new broadband fiber installations and opportunities in the mining sector where gold and critical minerals are in high demand. We have won some recent engagements in broadband and see more coming. For state transportation and metropolitan planning organizations, we won a suite of separate but related projects that address the resilience of transportation infrastructure to extreme weather and also focus on safety and mobility. That work is interesting, utilizes proprietary ICF International, Inc. models and deep expertise, and focuses on providing actionable, investable recommendations. We are also seeing opportunities to support states with advanced technology solutions akin to what we do for federal modernization. For a major state client, we are working on a legacy modernization project where we have the opportunity to pilot the use of generative modernization code to speed the process. That pilot is showing promise and is a new place for us to engage on the state side. On disaster, much of the work has shifted to states over the past several years, and we support state and local governments in proactive resilience. Leaning in to increase resilience before a storm is less expensive than responding after a storm. That is a priority of this administration. Programs like BRIC, and others in that proactive resilience front, are important. Internationally, we are very focused on delivery — we have won a lot in Europe and the UK in the last couple of years and are ramping up large contracts. Procurement activity there has been exciting. We continue to see strong recognition of ICF International, Inc.’s brand with UK and EU government clients. With 17.5% growth in the first quarter, there is momentum, and we continue to expect strong growth over the course of the year. John Wasson: Two points to add: our expectation is our state and local business will grow mid-single digits this year, and international will be strong double-digit growth. Marc Riddick: Thank you for the details. One follow-up: on the prioritization of federal areas like fraud prevention, do you anticipate or are you beginning to see any of that type of work at the state and local level as well, or other examples where states are moving in the same direction as federal? Anne Cho: Some states are more focused in areas that are priorities for the federal administration, and others are focused in areas that are not priorities for the administration. In both directions, we have skills that can support state agencies. Some states are trying to fill gaps they see left by the administration shifting away from certain priorities, while other states are aligning directly with administration priorities. We are following those cues accordingly. Operator: I am showing no further questions at this time. I would now like to turn it back to John Wasson for closing remarks. John Wasson: Thank you for participating in today's call. We look forward to seeing you all at upcoming conferences and meetings. Thanks again for attending. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Thank you for joining us, and welcome to the nLIGHT, Inc. first quarter 2026 earnings call. To ask a question, please press star 1. To withdraw your question, please press star 1 again. I will now hand the conference over to John Marchetti, Vice President of Corporate Development and Head of Investor Relations. John, please go ahead. John Marchetti: Good afternoon, everyone. Thank you for joining us today to discuss nLIGHT, Inc.’s first quarter 2026 earnings results. I am John Marchetti, nLIGHT, Inc.’s VP of Corporate Development and the Head of Investor Relations. With me on the call today are Scott H. Keeney, nLIGHT, Inc.’s Chairman and CEO, and Joseph Corso, nLIGHT, Inc.’s CFO. Today’s discussion will contain forward-looking statements including financial projections and plans for our business, some of which are beyond our control, including the risks and uncertainties described from time to time in our SEC filings. Our results may differ materially from those projected on today’s call, and we undertake no obligation to update publicly any forward-looking statement except as required by law. During the call, we will be discussing certain non-GAAP financial measures. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures in our earnings release and in our earnings presentation, both of which can be found on the investor relations section of our website. I will now turn the call over to nLIGHT, Inc.’s Chairman and CEO, Scott H. Keeney. Scott H. Keeney: Q1 represented an exceptional quarter for nLIGHT, Inc. with total revenue, gross margin, and adjusted EBITDA comfortably beating our expectations. First quarter revenue of $80 million grew 55% year over year and was driven by aerospace and defense revenue of $55 million, which grew 69% year over year. I am particularly pleased with the continued expansion of our product gross margin and record adjusted EBITDA in the quarter. Product gross margins were a record 44%, an increase from 33% in the same quarter a year ago, and our adjusted EBITDA was a record $14 million in the quarter. The expansion in our gross margins and the record adjusted EBITDA demonstrate the leverage that is inherent in our model and reinforces our commitment to growing the business profitably. I would like to focus my prepared remarks today on important developments within our directed energy market, which continues to be the most strategic and highest growth opportunity for nLIGHT, Inc. Directed energy remains a key priority for the U.S. and allied governments, driven by the need for highly scalable, low cost per shot solutions to counter a rapidly evolving threat environment. Our focus remains on supporting customers across a broad range of power and mission profiles, and we are increasingly engaged not only as a laser supplier, but also as a system-level partner. Importantly, we are seeing growing customer demand for solutions that emphasize the three keys to success in directed energy: power scaling, high brightness, and atmospheric correction—areas where we believe our two-decade investment in laser technology provides a meaningful competitive advantage and where we have consistently delivered for our customers. Today, we officially launched our Hades portfolio of scalable beam-combined high energy lasers and effectors with integrated atmospheric correction. Production-ready Hades is designed around nLIGHT, Inc.’s vertically integrated laser technology stack encompassing semiconductor laser diodes, fiber amplifiers, beam combination, and atmospheric correction. The platform architecture enables system growth to hundreds of kilowatts while maintaining pristine beam quality through advanced atmospheric correction, providing defense customers with a common modular foundation that scales from near-term operational deployments to higher power systems capable of addressing increasingly sophisticated and demanding threats. Each system can be integrated with existing beam directors, sensors, and battle management architectures, enabling rapid deployment across a broad range of military platforms and battlefield environments. One example of this power scaling is the work we are doing on the production of the one megawatt CBC high energy laser as part of HELSI 2. We remain on track for this program, and importantly, this laser is based on the same architecture that we use across all our Hades portfolio of CBC lasers, demonstrating the scalability of the platform to deliver solutions that address a wide range of mission scenarios—counter-UAS, counter-cruise missile, and more. We also continue to make progress on the U.S. Navy’s HELL CAP program where we are combining the 300 kilowatt CBC laser that we delivered under the HELSI 1 program with a nLIGHT, Inc. advanced beam control system that incorporates our proprietary adaptive optics for atmospheric correction. This work will help accelerate the development and deployment of future multi-100 kilowatt systems over the coming years. Looking ahead, we remain encouraged by the pipeline of directed energy opportunities, including follow-on production content, upgrades to existing platforms, and new prototype programs that should position us for continued growth over the next several years. Importantly, we have seen the U.S. government follow up on these program successes with increases to budgets associated with directed energy. There is currently nearly $400 million in each of fiscal 2027 and 2028 budgeted for directed energy prototypes and procurement. The overall annual budget for directed energy laser weapons increases to approximately $1 billion in each of the two fiscal years with the inclusion of high-power multi-100 kilowatt directed energy prototypes that are expected to be funded through the science and technology portion of the budget. We continue to believe that our differentiated CBC high power laser technology, combined with our advanced atmospheric correction capabilities and our U.S.-based manufacturing, positions us favorably to win meaningful new awards in the coming months and years. The growing pipeline of opportunities in our directed energy markets was a primary driver behind our decision to raise additional capital through a follow-on equity offering during the quarter. We raised over $190 million after fees and expenses, which combined with our existing cash leaves us with approximately $330 million on our balance sheet. We intend to use a portion of these proceeds to build out and equip our new 50,000 square foot manufacturing facility in Longmont, Colorado, invest ahead of our demand and supply chain, and increase staffing to help accelerate new directed energy product development. In summary, our strategy remains consistent: leverage our vertically integrated technology platform, execute with discipline on existing programs, and invest to accelerate and support long-term growth and value creation. We believe this approach positions nLIGHT, Inc. well not only for the remainder of 2026, but for the multiyear opportunities ahead. Let me now turn the call over to Joseph to discuss our first quarter financial results. Joseph Corso: Thank you, Scott. We had a very strong first quarter. We delivered our fifth consecutive quarter of product revenue growth, and exceptional operational execution enabled us to generate record product gross margins in the quarter. Continued operating expense discipline enabled much of the incremental gross margin to fall through to adjusted EBITDA, which was also a quarterly record. At the same time, our continued focus on working capital management and targeted CapEx enabled us to generate positive operating cash flow for the third consecutive quarter. We significantly strengthened our balance sheet through a well-received equity offering in February, and we remain on healthy financial footing to pursue the growth opportunities we have in front of us. Turning to the numbers. Total revenue in the first quarter was $80.2 million, an increase of 55% compared to $51.7 million in 2025 and down 1% compared to the fourth quarter of 2025. Aerospace and defense revenue was $55.1 million in the quarter, up 69% year over year. A&D growth was driven by record A&D product revenue, which grew 98% year over year and 10% sequentially. Development revenue of $22 million grew 38% year over year as we continue to execute on multiple directed energy and laser sensing programs. The quarter-over-quarter decline of 16% was primarily due to the successful delivery of our 50 kilowatt DEM shorehead high energy laser effector in 2025, partially offset by continued increases associated with our work on HELSI 2. First quarter revenue from our commercial markets, which include industrial and microfabrication, was ahead of our expectations at $25 million, an increase of 32% year over year. Revenue from our microfabrication markets was slightly better than our expectations at $13 million. Revenue of $12 million from our industrial markets benefited from increased demand for additive manufacturing products and an increase in sales associated with last-time buys for our cutting and welding products. As we announced last quarter, we are exiting our legacy cutting and welding markets, and we do not expect to generate material revenue from these markets after the second quarter. Total gross margin in the first quarter was 33.1%, compared to 26.7% in 2025 and 30.7% last quarter. On a non-GAAP basis, excluding the costs associated with stock-based compensation, total gross margin in the first quarter was 34.4%, up from 27.8% in the same period last year and 31.6% last quarter. Product gross margin in the first quarter was a record 43.6%, compared to 33.5% in 2025 and 37.3% last quarter. First quarter product gross margin was positively impacted by favorable customer and product mix, driven by record product revenue from our A&D markets, and an overall increase in volume. Non-GAAP product gross margin in the first quarter was 44.6%, compared to 35.1% in 2025 and 38.6% last quarter. Development gross margin was 5.1%, compared to 11.5% in the same quarter a year ago and 16.8% last quarter. The variability in development gross margin is primarily the result of contract mix and the timing of program deliverables in any given quarter. Non-GAAP development gross margin in the quarter was 7.2%, compared to 11.5% in the same period a year ago and 16.8% last quarter. GAAP operating expenses were $27.2 million in the first quarter, compared to $23.4 million in 2025 and $30.4 million in the prior quarter. The year-over-year increase in GAAP operating expenses is primarily due to higher stock-based compensation. Non-GAAP operating expenses were $17.1 million in the quarter, down from $17.8 million in 2025 and down from $18.4 million last quarter. We expect non-GAAP OpEx to remain in the $17 million to $19 million range for the balance of the year. The company achieved positive GAAP net income in the first quarter of $645,000, or $0.01 per diluted share, compared to a net loss of $8.1 million, or $0.16 per share, in the same quarter a year ago and a loss of $4.9 million, or $0.10 per share, in the fourth quarter of 2025. On a non-GAAP basis, net income for the first quarter was $11.8 million, or $0.20 per diluted share, compared to a non-GAAP net loss of $1.9 million, or $0.04 per share, in 2025 and non-GAAP net income of $7.8 million, or $0.14 per diluted share, last quarter. Adjusted EBITDA for the first quarter was a record $13.9 million, compared to $116,000 in the same quarter last year and $10.7 million in the fourth quarter of 2025. We ended the first quarter with total cash, cash equivalents, restricted cash, and investments of $332.9 million, which includes approximately $191 million of net proceeds from our February follow-on offering. While revenue growth remains the primary objective for nLIGHT, Inc., we also want to manage working capital so that, over time, we can grow profitability and cash flow faster than revenue. In the first quarter, our cash flow conversion days were 97 compared to 125 days during 2025. We generated $9.7 million in cash from operations during the quarter. Turning to guidance. Based on the information available today, we expect revenue for the second quarter of 2026 to be in the range of $75 million to $81 million. The midpoint of $78 million includes approximately $58 million of product revenue and $20 million of development revenue. We expect sequential growth from our A&D markets in the second quarter. Overall gross margin in the second quarter is expected to be in the range of 29% to 33%, with product gross margin in the range of 37% to 41%, and development gross margin of approximately 8%. As we have mentioned previously, in a vertically integrated manufacturing business, gross margin is largely dependent on production volumes and absorption of fixed manufacturing costs. Finally, we expect adjusted EBITDA for the second quarter of 2026 to be in the range of $8 million to $12 million. With that, I will turn the call over to the operator. Operator: We will now open the call for questions. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A. Your first question comes from the line of Peter Arment with Baird. Your line is open. Please go ahead. Analyst: Good afternoon, Scott, Joe, and John. Nice results. Scott, I was wondering if you could maybe give us—you touched upon the funding environment, and you called out a few things around directed energy. How should we think about the timing of all that and how you are expecting it? I know timing around all this can be lumpy, but what are your thoughts? Scott H. Keeney: Thanks for the question. As we noted, the budget provides some insights into the importance of directed energy, and the data that we are showing is the President’s budget. It will take time to work its way through Congress, but I do think that there is signal there. Notably, we are seeing increases from OSD within the core directed energy—the Principal Director—and various programs that are going on there, and I think that we do have insights into the priorities that have been put forward that further reinforce this. As you know, the budget process takes time to work its way through Congress, and we hope to have more insights in the coming quarters there, and certainly you can read the comments from leadership with respect to directed energy. Analyst: Got it. And just as a quick follow-up, the Hades scalable high energy lasers family that you launched today—can you talk a little bit about the positioning there versus some of your other products and how you are thinking about that? Scott H. Keeney: Thanks for asking that. It is something that we have been working on, and we are very excited about this product family. It is our platform for scaling to higher power, and so we are starting with the greater-than-50 kilowatt class, but it will continue to scale, and that is one of the key benefits to coherent beam combining. It also provides for a brighter beam, a laser beam that can be focused more effectively, and then finally, it provides for the ability to correct for the atmosphere. All three of those features we believe are very important, and it also is in a form factor that is smaller than other products, and one that we have integrated into the Stryker as we have talked about, and can be integrated in other platforms. It is an exciting announcement, and we will be making further announcements as we continue to migrate that product family. Analyst: Appreciate the color. I will jump back in the queue. Thanks. Operator: Thanks. Your next question comes from the line of Louis DePalma with William Blair. Your line is open. Please go ahead. Analyst: As a follow-up to the question on Hades, can the Hades platform be integrated into aircraft, as there was a defense contractor in Israel that recently discussed the incorporation of high energy lasers into aircraft and helicopters? It would seem to be a large addressable market. You mentioned how Hades can be incorporated into the Stryker and other platforms. Could you provide some potential color on those other platforms? Scott H. Keeney: Absolutely. The platforms that we have talked about in more detail are the Army, the Stryker—and by the way, that is just one platform. What ultimately will be the right platforms is to be determined, but I think it is a challenging platform to integrate; it is a very small space. Certainly, the Navy has a number of opportunities for integration, and so the small size of Hades is important for those, but as you noted, it becomes even more important as you look at airborne applications. One of the topics that we talked a bit about is our leadership with respect to SWaP—size, weight, and power. We have leading performance in that area, and that provides a very good foundation for airborne platforms also. Obviously, you would engineer the product to be different in those platforms, but we do have leadership with respect to SWaP also. Analyst: Thanks. There also seems to have been progress with the Army’s 30 kilowatt Enduring High Energy Laser program. Is there the opportunity for you to serve as a supplier for that program or other programs below the 70 kilowatt threshold that you have established with Hades? And related to this, how do you view competition between the 70 kilowatt and above class versus the class of lasers below 70 kilowatts? Scott H. Keeney: That is a very good question. The short answer is yes. We are excited about the work that we are doing with partners in the lower power space like the 30 kilowatt, where we provide key components that go into that, and it is indeed different from Hades. It does not require the same level of sophistication with respect to the coherently combined sources for higher power. So we are partnered with others to provide those components at the lower power level, and as the requirements go up to higher power, that is where Hades comes in. I think we are uniquely positioned there to provide not only the higher power, but also the higher beam quality and the atmospheric correction for those threats that require a more sophisticated laser source. Analyst: Thanks for the color. Thanks, Scott, Joe, and John. Operator: Your next question comes from the line of Jonathan Siegmann with Stifel. Your line is open. Please go ahead. Analyst: Hey, good afternoon, Scott, Joe, and John. Thanks for taking my question. Sales and margins were fantastic. It sounds like within products, both sensing and directed energy were increasing. Just hoping to get a sense on which horse was leading the pack in the quarter, and then thinking about how margins demonstrated 500 basis points of upside relative to your own high end of your guidance range for products—should we think of that as just being the operating leverage of the higher sales, or how much was mix contributing? Thank you. Joseph Corso: Great, thanks for the question, Jonathan. We had a good quarter across the board. All of our products fared well during the quarter—from directed energy to laser sensing—and even if you look at the end markets, our industrial and microfabrication markets performed well. As you think about the upside relative to the guidance, about half of it was just volume-related—leveraging overhead and selling more through the factory and keeping the factory more occupied—and then the other half was a combination of slightly higher margin mix. There can be a pretty big mix within any given quarter, and this quarter we saw very nice mix as we continue to control costs. So I think, again, it was a good quarter that we were firing on all cylinders. Analyst: Thank you. And maybe I will slip one on Hades too, which has to be one of the best franchise names in defense right now. You have talked a lot about how coherent is differentiated and scalable over high power, but you introduced the 30 and the 10 kilowatt systems and talked about having proprietary beam quality that would not be coherent. Can you talk a little bit about what is differentiated in that class of power and what is your company’s right to win in those areas? Scott H. Keeney: Thanks for the question. Just to replay, there are only two ways to combine lasers to preserve a very bright coherent laser source: spectral beam combining and coherent beam combining. We have a very strong position that, as you go up in power, coherent beam combining is the best way to scale to higher power, to provide a brighter source, and to also more effectively allow for atmospheric correction. For lower power, we do provide spectral beam combined sources, and again, we work with other partners to provide components and combined laser sources there. We do not integrate it into the full effector with the beam director in that space. We have, as I mentioned, leading SWaP—size, weight, and power. We have high reliability. We have lasers that are serviceable. There is a whole host of differentiation that we have that is the result of 25 years of building lasers for a broad range of industrial and defense applications that allows us to serve that market well, but we do not integrate as far forward in the lower power space. Does that help answer your question? Analyst: Thank you. I think I misunderstood the website. I thought the 10 were new products. Appreciate the clarification. Operator: Your next question comes from the line of Greg Palm with Craig-Hallum. Your line is open. Please go ahead. Analyst: Good afternoon. Thanks for taking the questions. Going back to segment results, what drove—most of the upside was actually in the industrial segment. Can you just maybe talk about what surprised you there? Joe, you talked about some last-time buys. Presumably, maybe that continues into Q2. But what are we now expecting for the full year relative to that $25 million to $30 million number you gave last quarter? Joseph Corso: Thanks, Greg. The upside in industrial was a little bit better than we expected around producing revenue and taking orders for last-time buys in our cutting and welding business, but the brighter upside spot really was additive manufacturing. We had a nice quarter in additive manufacturing, and we are seeing that business continue to show better growth than we had anticipated going into the quarter and into the balance of the year. As you know, it is difficult to predict. We do not guide on a full-year basis because we do not have the amount of visibility that we do in the defense business. But I think relative to what we said during our last earnings call, things have gotten better, and so we are starting to chip away at that hole that we talked about. There is still a lot of work that we need to do as we go through the year to really close that. Analyst: Okay. And then, Scott, going back to some of the budget items—and I want to go back to some of the comments in the last call as well—talking about a number of new real prototypes that you are going after at different power levels. Can you give us maybe an update on when we should hear more on some of those programs that you alluded to last quarter? Scott H. Keeney: I would like to predict how Congress will work this year, but I have enough experience to know that there are error bars around that. The budget numbers that we provided were the President’s budget requests, and that will work its way through the appropriations process in the coming quarters. We should have more insights this fall, but those can be delayed. More specifically, there are opportunities for specific programs in the current budget that we certainly will announce when we are able to do so. The higher-level budgets will take time for that process to work itself out. Analyst: But just to be clear, the prototypes that you alluded to last quarter—was that not current fiscal year budget, or was that for 2027? Scott H. Keeney: That was for 2027. Analyst: Okay. Alright. Thanks for the color. Operator: As a reminder, if you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your next question comes from the line of Troy Jensen with Cantor Fitzgerald. Your line is open. Please go ahead. Analyst: Hey, gentlemen. Congrats on the stellar numbers here. Maybe just a question for anyone. Are there any capacity constraints? What I am getting to is $81 million in revenues in December, $80 million in March. The high end of guide here is $81 million for June. What needs to happen for you to break through that level? Joseph Corso: Short answer, Troy, is we are not capacity constrained today. We have done a great job of improving both the capacity on the lasers that we are building as well as the efficiency with which we are building those lasers. We talked about what we were adding in Longmont. So today, capacity really is not an issue. What we need to continue to break through that $80 million threshold is demand signals from our customers, U.S. government, etc., which we are starting to get, but we have no concerns at all today on capacity. Analyst: Got it. So new wins will be easy to fulfill as they come in. And just, Joe, on the gross margin guidance—you started the call highlighting 44% product gross margins and it seems like it should stay around this level. What would get it down to the lower end of the guidance range, or do you think it starts to creep higher here? Joseph Corso: The primary factor of our margin is really volume—both the volume that we are putting through the factory and what we are selling through to the customer in any given quarter. Beyond that, it is really just the mix of the products as we go through the quarter. On average, as we have gotten out of China and narrowed our focus—particularly with the last-time buys with customers in cutting and welding—the overall product margins, or the band on the margins of the products that we are selling, are becoming less variable, but there is still some variability as we go quarter to quarter, and that will also have an impact. We are not talking about huge numbers here, so the margins can swing a couple hundred basis points, and there is really not all that much to read into it. We are happy that we have been able to get to a point today where we are consistent at 40% or above product gross margins. Analyst: Great. Last one here for Scott. If I remember correctly, I think the delivery date for the one megawatt laser was sometime in 2026. Correct me if I am wrong. What is the highest power you have shown to date, and thoughts on hitting the deadline? Scott H. Keeney: Thanks, Troy. You are referring to the HELSI 2 program that is targeting a megawatt-class laser. In HELSI 1, we exceeded 300 kilowatts in that program, which led to the award for HELSI 2. We are tracking to that program; however, it is not a delivery of a product—it is a demonstration of that technology. As soon as we are able to provide more insights into that, we will certainly do so. I am comfortable saying that we are on track, there is progress, and we are learning a lot from what it takes to scale to much higher power levels. Things are on track and going well. Analyst: Great. Great. Keep up the good work. Operator: There are no further questions at this time. I will now turn the call back to John Marchetti for closing remarks. John Marchetti: Thanks, everyone, for joining us this afternoon and for your continued interest in nLIGHT, Inc. We will be participating in several investor conferences over the next several weeks. We look forward to speaking with you during those events and throughout the remainder of the quarter. Have a great afternoon. Operator: This concludes today’s call. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Eastman Kodak Company Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. I would like to hand over the conference to our first speaker today, Denise Goldbark. Denise Goldbard: Thank you, and good afternoon, everyone. I am Denise Goldbard, Eastman Kodak Company’s chief marketing officer. Welcome to Eastman Kodak Company’s first quarter 2026 earnings call. At 04:15 this afternoon, Eastman Kodak Company filed its Form 10-Q and issued its release on financial results for 2026. You may access the presentation and webcast for today's call on our Investor Center at investor.codec.com. During today's conference call, we will be making certain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. We intend for these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Investors are cautioned not to unduly rely on forward-looking statements and such statements should not be read or understood as a guarantee of future performance or results. All forward-looking statements are based on Eastman Kodak Company’s expectations and various assumptions. Future events or results may differ from those anticipated or expressed in the forward-looking statements. Important factors that could cause actual events or results to differ materially from these forward-looking statements include, among others, the risks, uncertainties, and other factors described in more detail in Eastman Kodak Company’s filings with the U.S. Securities and Exchange Commission from time to time. All forward-looking statements attributable to Eastman Kodak Company or persons acting on its behalf only apply as of the date of this presentation and are expressly qualified in their entirety by the cautionary statements included or referenced in this presentation. Eastman Kodak Company undertakes no obligation to update or revise forward-looking statements to reflect events or circumstances that may arise after the date made or to reflect the occurrence of unanticipated events. In addition, the release just issued and the presentation provided contain certain measures that are deemed non-GAAP measures. Reconciliations to the most directly comparable GAAP measures have been provided with the release on our website in our Investor Center at investor.codec.com. Speakers on today's call are James V. Continenza, Eastman Kodak Company’s Executive Chairman and Chief Executive Officer, and David Edward Bullwinkle, Eastman Kodak Company’s chief financial officer and senior vice president. We will not be holding a formal Q&A during today's call. As always, the Investor Relations team is available for follow-up. I will now turn the call over to James V. Continenza. Thank you, and have a great day. James V. Continenza: Welcome, everyone, and thank you for joining the first quarter 2026 investor call for Eastman Kodak Company. The story of the first quarter is a story of consistency, stability, and growth. This reflects our transformation over the last seven years and our focus on execution and our continued investment in the business. I am pleased to see strong year-over-year performance over the last three consecutive quarters. Let me give you some highlights from the first quarter. Consolidated revenue was up 7% to $265 million compared with $247 million for the first quarter 2025. Revenue increased in both our key businesses, Print and AM and C. We had a gross profit percentage of 22%. That is three percentage points, or 16%, higher than the first quarter 2025. Operational EBITDA was $15 million compared with $2 million for the first quarter 2025, up $13 million. Moving on to Advanced Materials and Chemicals, we saw AM and C revenue grow by $2 million, or 3%, which was driven by a $3 million increase in film and chemicals, partially offset by $1 million lower in inks and consumables. Let us talk about our still films. We have invested heavily back into film, and we are starting to see great results from that. An example in still film: we recently launched a professional film sold directly to distributors. Our objective is to stabilize the market and continue to meet demand. I am really proud to see Motion Picture continue to increase. We launched a new film called Virita 200D, which was used in Euphoria season three. A lot is going on. Many Oscar-winning movies, including One Battle After Another and Sinners, were shot on Eastman Kodak Company film, and the long-anticipated Christopher Nolan’s The Odyssey is also shot on Eastman Kodak Company film. We remain committed to film and maintaining supply for our customers. A quick update on our pharma business. Our new CGMP pharmaceutical manufacturing facility is up and running. I am really proud to say we recently opened the Eastman Kodak Company Advanced Electrophysiology Lab in partnership with SUNY Geneseo. The lab will enhance our research capabilities and support future product development. We continue to work towards obtaining Class II certification to manufacture more complex, high-margin products in the United States. Moving on to some highlights from our commercial print business, we continue to provide a full range of print solutions to our customers. Our revenue increased by 9%, even in the difficult times we are going through. There are some supply issues on aluminum. There are issues on delivery and logistics. A lot is going on. Prices have increased greatly on raw materials such as aluminum, but yet we are still able to maintain our revenue and supply our customers. As our commitment to print continues and we continue to invest in innovation, I am pleased to announce we recently launched the Sonora Ultra XR Plate in Europe, which will expand our Sonora Ultra portfolio. As I stated last quarter, I will state it again: as we continue to fix the balance sheet, invest in the infrastructure of the business, and focus on key products, our next steps are growth. We must continue to grow our business. We have built a stable, growing Eastman Kodak Company by consistently executing our long-term plan. We stay on track regardless of all the events happening around us. We are leveraging our core strengths. We are strengthening our balance sheet. We are investing in growth products. As we continue to invest in operational excellence and execution, we continue to diversify our portfolio by using the different technologies and skill sets we have in the business. As we stated before, our goal is to continue to work on the balance sheet. I am proud to say today, we are net debt positive. But one of the most important aspects is meeting our customers’ needs, and the only way we can do that is by continuing to focus on operational excellence. We have to be better than everyone else, and we are going to continue to keep investing and getting better every single year. Now I am going to turn it over to David Edward Bullwinkle to discuss our first quarter financial results. Dave? David Edward Bullwinkle: Thanks, James V. Continenza, and welcome to the call, everybody. Thanks for joining us today. This afternoon, the company filed its Form 10-Q for the quarter ended 03/31/2026 with the SEC. As I do on each and every call, I encourage you to read the filing in its entirety as there is a plethora of information contained in the materials we have provided publicly. As a reminder, references made during my remarks are included in the company’s earnings press release and Form 10-Q filed today. Let us begin with the key financial highlights for 2026. We delivered strong financial performance despite sharp commodity swings and persistent inflationary pressure. The results reflect substantial year-over-year improvement in revenue, gross profit, and operational EBITDA, underscoring our disciplined execution and progress against our long-term goals. In fact, this is the third consecutive quarter of year-over-year growth for these measures. Revenue was $265 million, an increase of $18 million, or 7% year over year, with increases in Print and Advanced Materials and Chemicals. On a constant currency basis, revenue grew $11 million, or 4%. Gross profit was $57 million, which is up $11 million, or 24%, year over year. Our gross profit percentage increased to 22% compared to 19% in the prior-year quarter, reflecting our operational execution. Operational EBITDA for the quarter was $15 million, an increase of $13 million compared to the prior-year quarter, primarily driven by improved pricing, partially offset by higher manufacturing costs and higher silver and aluminum prices. For the quarter, we reported a GAAP net loss of $16 million compared with a GAAP net loss of $7 million in the prior-year quarter, an increase of $9 million. Let me walk you through the main factors behind this result and share with you some additional helpful information. $12 million of the loss was driven by a change in the fair value of an embedded derivative related to our Series B preferred stock. This accounting impact resulted from a previously announced amendment to the Series B agreement, and the change in fair value was primarily caused by the increase in our stock price during the quarter. This is fully disclosed in our Form 10-Q. $5 million of the loss relates to stock-based compensation expense, which is a non-cash expense and does not impact our liquidity. We also recognized $4 million of non-cash pension income this quarter. This reflects an $18 million decrease compared to the prior-year quarter. This is driven by the termination of the CREP pension plan, which we completed in 2025. As a result of the plan termination, we expect pension income to be lower year over year in each quarter of 2026, so we will see this reoccur every quarter this year. Partially offsetting these items, GAAP net loss benefited from an $8 million year-over-year reduction in interest expense, mainly due to term loan repayments resulting from the pension plan termination and reversion. While these items affect comparability, they reflect deliberate actions we took to strengthen our balance sheet, reduce debt, and build long-term value. Now that I have explained some of the key drivers of the year-over-year change in our net loss, I have also included a simple reconciliation in today’s materials to explain how the GAAP net loss translates to operational EBITDA. We have received feedback from investors and questions about this, so we are covering it here. EBITDA measures the profitability of our business by excluding its components of interest, taxes, and non-cash charges like depreciation and amortization—as you know, EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. To arrive at operational EBITDA from net loss, we start by adding back those standard items of interest expense, tax expense, and depreciation and amortization expense. In addition, to arrive at operational EBITDA for Eastman Kodak Company, we remove those non-operational items shown on the waterfall slide. Number one, nonrecurring and other items. This category primarily contains the $12 million expense we booked in the quarter for the fair value change in the preferred stock derivatives. This derivative is the value of the conversion option for our stock. We expect to fair value this every quarter, and the changes will be recognized in our income statement. The second category is non-cash items of expense or income. In this case, it is a net expense item. This represents an adjustment to remove stock-based compensation expense, which we talked about earlier, and it is almost fully offset by the corporate component of pension income, which we also discussed earlier in my remarks. As I have said, these adjustments remove the impact of items that can cause GAAP volatility but do not reflect day-to-day operations. Therefore, we consider them nonoperational. The resulting operational EBITDA provides a clear view of how our underlying business is performing. We have consistently used this metric as our segment measure as well, which is disclosed in all of our earnings releases and fully reconciled in that material. I hope this provides helpful context of the company’s performance and financial statements. If you have further questions, please do not hesitate to contact us. Moving on to our cash performance for the first quarter, we ended the quarter with $299 million of unrestricted cash, a decrease of $38 million from 12/31/2025. Let me briefly walk through the key drivers of our quarter-end cash position. First, as expected, we received $46 million in cash proceeds from the redemption of hedge fund investments related to the CREP pension reversion during the quarter. Second, working capital was impacted by a $38 million increase in inventory, with $35 million of this increase occurring within our AM and C segment. This was largely driven by average commodity cost of silver more than doubling from year-end and increases in the volume of silver we carry on the balance sheet due to supply terms. Inventory in AM and C also increased as we built ahead of our planned second-quarter plant shutdown for maintenance. Partially offsetting these impacts within working capital, accounts payable increased by $9 million and accounts receivable decreased by $9 million, both helping to partially counter the inventory increases. Last, as required under the term loan amendment, we made a $50 million principal payment on our higher-rate term loans in March. This was funded primarily by [inaudible]. The company’s net debt positive position increased from $128 million at 12/31/2025 to $139 million at 03/31/2026. This is an $11 million improvement in the quarter. This reflects further strengthening of our financial position. As I conclude, I want to leave you with a few clear takeaways from our first quarter results. Number one, financial results were strong. We delivered solid year-over-year growth in revenue, gross profit, and operational EBITDA, and this is for the third consecutive quarter. We did this despite economic headwinds in commodity pricing and inflationary impacts as well. Most notably, our operational EBITDA increased sharply even as the business managed through those impacts. Again, as I talked about earlier, we fully reconciled for you; operational EBITDA is our key internal measure of profitability. It is how we measure and disclose the results of our segments in our public filings as well. Finally, I am proud to say that our balance sheet is stronger than it has been in many, many years, as we continue to see the benefit of the decisions we have made to reinforce our foundation. With $299 million of unrestricted cash, we are in a net debt positive position relative to our short- and long-term debt, and this is for the second consecutive quarter. We have also continued to delever the balance sheet, paying down $50 million of higher-rate interest debt in the quarter. Thank you for your time and attention. I will now return it back to James V. Continenza. James V. Continenza: Thank you, David Edward Bullwinkle. In summary, we have built a strong, stable Eastman Kodak Company over the last several years by consistent execution of our long-term plan and making the appropriate changes as the environment changes around us. We have delivered three consecutive strong quarters year over year. We continue to invest in AM and C and Print and grow those products. We focus on operations, but more importantly, three key areas that we always focus on: manufacturing, selling, and service. Everyone in the company is geared around focusing on those three areas. The goal is to deliver long-term value to our shareholders, our customers, and our employees. With that, I want to thank everyone for their time and for listening to the Eastman Kodak Company first quarter 2026 investor call. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the PAR Technology Corporation first quarter financial results. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chris Byrnes. Senior Vice President, Investor Relations and Business Development. Please go ahead. Thanks, Antoine. Chris Byrnes: Good afternoon, everyone, and thank you for joining us today for PAR Technology Corporation’s 2026 First Quarter Financial Results Call. Earlier today, we released our financial results. The earnings release is available on the Investor Relations page of our website at partech.com, where you can also find the Q1 financials presentation as well as in our related Form 8-Ks furnished to the SEC. Before we begin, please be advised that our remarks today will contain forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. For additional information on these factors, again, refer to our earnings release and our other reports filed with the SEC. In addition, we will be discussing or providing certain non-GAAP financial measures today, which we believe will provide additional clarity regarding our ongoing performance. For a full reconciliation of the non-GAAP financial measures discussed in this call to the most comparable GAAP measure in accordance with SEC regulations, again, see our press release furnished as an exhibit to our Form 8-Ks filed this afternoon and our supplemental materials available on our website. Joining me on the call today is PAR Technology Corporation’s CEO, Savneet Singh, and Bryan A. Menar, PAR Technology Corporation’s Chief Financial Officer. I would now like to turn the call over to Savneet for the formal remarks portion of the call which will be followed by general Q&A. Savneet? Savneet Singh: Thank you, Mr. Byrnes. I would like to start today with a core conviction. PAR Technology Corporation has fundamentally been miscast in the public market. Historically, we have been heads down, but starting today, for the first time, we will be providing additional forward-looking financial guidance along with our previously stated mid-teens ARR growth target, because we believe in the power of what we have built and how we are building to drive true shareholder value. Today, you will see that we are not focused on sleight-of-hand announcements, financial engineering, or AI-washing results. We are focused on execution, focused on the dollars and cents that are going to drive real value to our investors and to our customers. We fundamentally believe that our business is in an amazing position to capitalize on our future AI vision of PAR Intelligence. We have a strong foundation shielded from perceived AI market incursions, and the pipeline we have ahead of us is going to drive material upside to our financials. Now turning to our Q1 performance. Q1 marks a good start to the year, and a purposeful shift in PAR Technology Corporation’s operating strategy and execution. Our goals are clear: one, materially improve PAR Technology Corporation’s profitability via sustained operating leverage, and two, utilize PAR Intelligence to expand TAM and long-term growth. In Q1, we scaled our AI-first restaurant and retail platform, eliminated structural cost inefficiency, expanded recurring revenue, and delivered meaningful year-over-year improvement in profitability. Total revenue for the quarter was $124 million, representing 19% year-over-year growth driven primarily by strength across subscription services and hardware. Importantly, we improved adjusted EBITDA by nearly 2x year over year, reflecting tighter cost discipline and stronger operating leverage. This theme will continue throughout the year. OpEx will decline sequentially every quarter in 2026 while ARR, gross profit, and EBITDA all continue to grow simultaneously. In Q1, ARR reached $330 million, up 16% year over year with organic growth of over 11%. This performance reinforces the durability of our SaaS-based model and the increasing strategic value customers place on our omnichannel data-driven platform. Importantly, we continue to grow year over year while managing out the low-priced customers we referenced last quarter. While gross margin was impacted by hardware-related tariff and cost pressure, we are making real progress expanding profitability. Further, we are seeing improved success employing AI across G&A functions. OpEx as a percentage of revenue declined from 50% to 43% year over year, with Sales and Marketing at 9%, R&D at 16%, and G&A at 18%, respectively. As we scale and improve our fundamentals, our progress with AI has become an increasingly important driver of momentum, especially on the product side. PAR Technology Corporation serves multi-unit restaurant and retail operators competing in complex, margin-sensitive environments, and that is exactly where our Better Together and PAR Intelligence strategy is focused. Driving our competitive wins is not any single feature. It is the combined value of a core platform with expanded feature depth via Better Together integrations, as well as the premise of PAR Intelligence functioning as an agent harness that drives profitable actions. Together, we see our PAR Intelligence AI vision as an amplifier of our platform and future growth. In particular, we are more bullish than ever in our ability to drive sustained profitable growth through AI. Brands moving away from legacy solutions consistently tell us the same thing: fragmented technology stacks slow them down. When your core data lives in one platform like PAR Technology Corporation’s, you unlock the ability to deploy agents across the entire tech stack, not just with a single siloed product. Our multi-product enterprise deals are precisely possible because of the binding power of a modern point of sale tying together all the facets of the data tech stack. That is a structural advantage. Context equity is the cornerstone of winning in the AI era. Customers are signing near decade-long multi-product deals with PAR Technology Corporation precisely because they know the difference between an agentic platform based on deep workflows and shallow dashboarding. We believe these long-term contracts are a key proof point that we are becoming the trusted AI partner for our category. Let us dig into the Q1 performance in detail. On the Operator Cloud side, momentum was led by PAR POS and Data Central, with continued execution against the Burger King rollout and wins such as &pizza, Tijuana Flats, Charcoal Japan, and Pizza Factory. The PAR POS Burger King implementation is running at a sustained pace of over 400 sites per month, and we have a strong plan into more than 3,000 additional sites that will go live this year. We continue to work in lockstep with our most recent tier-one win, Papa John’s, as we kick off their dual POS and Data Central implementation plan late this year for all of their U.S.-based restaurants, and the full system will be live by 2027. We are seeing exciting pipeline traction in the pizza vertical, with this sector poised to be disrupted as the market is fragmented, lacking new entrants, and primarily run off legacy, custom-built tech stacks. PAR POS is the foundation of our platform, and we are quickly progressing with agentic OS capabilities. Across the portfolio, attach rates are the story, as nearly 90% of new Operator deals in Q1 were multi-product, yet the average customer still uses fewer than two of our core software solutions. PAR Technology Corporation is not reliant on home run tier-one deals to meaningfully drive growth. The continued expansion of multi-product cross-sell into existing accounts by itself provides meaningful runway. On the Engagement side, ARR growth is driven by cross-sell, upsell, and pricing actions, as well as the initial contribution from Bridge. In the quarter, Punch had a one-time strategic contraction that we previously called out on last quarter’s call. This offboarding of customers was necessary due to the materially unfavorable legacy pricing deals in place and the lack of pricing flexibility amongst a very small set of customers. In most cases, the pricing was an 80% discount from our standard subscription pricing. The proof point is that our organic ARPU in Engagement increased by 27% year over year. Another long-term benefit will be the reduced OpEx and more efficient gross margins over time. This represents another shift in our mentality from revenue at any cost to profitable growth. Excluding this, Punch had a solid growth quarter with a greater than 50% win rate on competitive deals. More than 80% of Engagement deals this quarter were multi-product, and the exciting thing is that it is becoming the norm. In Q1, PAR Ordering closed three brand new deals, all including multi-product attachment. The quality and scale of these wins matter. One of these wins is particularly notable. This was a competitive win taking share directly from the largest legacy ordering provider. It is a 70-plus unit brand driving meaningful ARR. That is exactly the profile we want: scale, intentional platform selection with the ability to sell in additional functionality, and meaningful economics. Another important example is the selection by Pizza Factory. This was an all-PAR full platform deal across 100-plus locations. Adding Ordering to our bag gives a strategic weapon versus POS- or loyalty-only players. Full platform plus pizza is a powerful combination and it is a strong validation of how well our solutions work together in a high-throughput, complex environment. We continue to see strong demand from brands migrating off legacy online ordering providers and standardizing on PAR Ordering. Moving to Retail. We continue to see strong momentum in our retail business in the fuel and convenience space, most notably with the success of Q1 launches of Stinker Stores, H&S Energy, and Parker’s. Pipeline for the remainder of the year remains strong, with several tier-one enterprise brands in active negotiation. In Q1, we released our Touchpoint self-checkout, including loyalty extension, and we are excited about the market opportunities as we expand our footprint inside the four walls of the C-store. On the AI front, PAR Intelligence is now live across nearly 1,700 retail sites, including enterprise-scale deployments at Parker’s Kitchen and Cumberland Farms. We are currently in discovery mode, using real-world operator data to refine our models and eliminate hallucinations. Our roadmap is aggressive. Following this initial scale-up, we will move into the action phase, introducing agentic program management and automated campaign creation—combining the agentic insights with the autonomous ability to act instantly—showcasing the power of AI orchestration, the agentic operating system, and our vertical software. Looking further ahead, we will add a strategy layer incorporating external signals like weather and market conditions to guide site-level management automatically. We are exceedingly confident that we will be the AI partner for our customers in this vertical. Overall, Q1 reflects continued progress in retail, and as we scale our customers, extend our product capabilities, and embed intelligence to the platform in ways that support ARR expansion and long-term value creation. Briefly on Hardware. Q1 was a remarkably strong quarter. We are ahead of plan, and the full year is tracking nicely. While tariffs continue to pressure margins at the edges, demand remains strong, and our PAR Wave terminal continues to serve as the enterprise standard during a major refresh cycle. Crucially, we are seeing continued partnership with Opsio and McDonald’s across both hardware and services sales. I also want to update you on our acquisition of Bridge, which is an integral part of the PAR Intelligence platform. Bridge is an identity resolution platform that enables multi-unit operators to unlock the value of first-party data by resolving identity across their entire transaction base, not just loyalty members. Today, most retailers only see a fraction of transactions through loyalty programs, which limits measurement, personalization, and ultimately monetization to a fraction of a retailer’s customer base. The value Bridge delivers to customers is best evidenced by our work with a large national retailer with over 15,000 sites, where our identity resolution supports a marketable base of 100 million customers and contributed to a reported 44% sales lift. Even in the brief time since we closed on the deal, we now have a strong pipeline across tier-one restaurants and other national retailers—existing PAR Technology Corporation customers. Bridge is crucial in our ability to drive AI outcomes for customers that we can monetize versus the basic dashboarding of our peers. Before turning the call over to Bryan for a deeper dive into the numbers, I want to emphasize the importance of PAR Intelligence for our customers. PAR Intelligence is not a new point solution, and it is not a generic AI tool. It is an agent harness that sits across and above the PAR Technology Corporation platform, unifying data, reasoning on real operator economics, and orchestrating outcomes across the business without adding additional headcount, hours, or manual effort. Traditional platforms stop at dashboards and alerts; PAR Intelligence moves from data to outcomes. PAR Intelligence unites data across point of sale, ordering, loyalty, payments, back office, retail, and third-party systems. All this is powered by something incredibly hard to replicate: PAR Technology Corporation’s ability to process more than 12 billion annual transactions and 640 million guest profiles in over 20 years as a data backbone of the largest restaurant and retail operations in the world. PAR Intelligence leverages enterprise-level context for its reasoning—unit P&L, labor constraints, menu performance, and guest interactions. It executes actions through agents, always within the defined rules of the operator. Adoption of PAR Intelligence is accelerating because the use cases are clear. The platform is moving from reporting what happened to recommending, and in some cases, automating what to do next. Customers like Parker’s Kitchen, a 100-plus unit C-store chain, are seeing immediate ROI, with Parker’s CEO highlighting, “Better outcomes are being driven by PAR’s agentic operating system.” Because PAR Intelligence sits across and above the PAR Technology Corporation platform, it is ultimately enhancing value, thereby the stickiness of our beachhead products. Importantly, PAR Technology Corporation does not have the same pricing exposure as some of our SaaS peers who have a per-seat monetization construct that can be undercut by AI and has a potential impact on customer team sizes. PAR Technology Corporation overwhelmingly contracts on a per-store basis. The viability of this model is tied to enterprise site counts, which remain stable, versus customer staffing levels. AI is not a separate initiative for PAR Technology Corporation. It is an embedded capability that expands our platform value and supports long-term profitable growth. PAR Intelligence will not cannibalize existing per-site software revenue. Rather, the continued introduction of intelligence-driven capabilities serves as a fully incremental revenue stream. Our confidence here comes strictly from the deep engagement we have with our customers and their rapid early adoption of our first set of tools. With that, Bryan will dive into numbers in greater detail. Bryan A. Menar: Thank you, Savneet, and good afternoon, everyone. Q1 marked a strong start executing to our 2026 operating plan. We continue to drive organic growth across our products and the verticals we serve, and our disciplined management of OpEx allowed the margin contribution to flow through to the bottom line. For the fifth quarter in a row, adjusted EBITDA has grown sequentially, with reported Q1 adjusted EBITDA of $8.9 million, a $4.4 million improvement compared to Q1 of the prior year, and we are well positioned for an accelerated trajectory as we continue to refine our operating model. Now to the financial details. Total revenues were $124 million for Q1 2026, an increase of 19% compared to the same period in 2025, including 15% subscription service revenue growth. Net loss from continuing operations for 2026 was $16 million, or a $0.39 loss per share, compared to a net loss from continuing operations of $25 million, or a $0.61 loss per share, reported for the same period in 2025. Non-GAAP net income for 2026 was $3.9 million, or $0.10 earnings per share, an improvement of $4.2 million compared to a non-GAAP net loss of $0.2 million, or a $0.01 loss per share, for the prior year. Adjusted EBITDA for 2026 was $8.9 million, an improvement of $1.9 million sequentially from Q4 2025 and $4.4 million compared to Q1 2025. Now for more details on revenue. Subscription service revenue was reported at $79 million, an increase of $10 million, or 15%, from the $68 million reported in the prior year, and represents 63% of total PAR Technology Corporation revenue. ARR exiting the quarter was $330 million, an increase of 16% from last year’s Q1, with Engagement Cloud up 20% and Operator Cloud up 12%. Total organic ARR was up 11% year over year. Sequentially, Q1 organic ARR was flat versus Q4 2025. The incremental ARR from our continued successful rollouts of tier-one Operator Cloud customers was offset by planned exits in Engagement Cloud. As we previously messaged, this quarter we managed planned exits for select legacy Engagement Cloud customers who were using a portion of our Engagement platform as a component of their solution. This has enabled us to increase ARPU and de-risk forward churn by exiting these low-priced, non-platform customers. As a result, organic Engagement Cloud ARPU increased 27% year over year. To connect overall ARR, please note at the end of Q1, we completed the acquisition of Bridge, which includes approximately $14 million of ARR. Hardware revenue in the quarter was $29 million, an increase of $7 million, or 34%, from the $22 million reported in the prior year. The increase was driven by both client refresh programs and partnership expansion with our legacy customer, as well as additional penetration of hardware attachment into our expanding software customer base. Professional service revenue was reported at $16 million, an increase of $3 million, or 19%, from the $14 million reported in the prior year. The increase was primarily driven by an increase in installation revenue associated with the rollouts of tier-one Operator Cloud customers. Now turning to margins. GAAP gross margin was $54.5 million, an increase of $6.2 million, or 13%, from the $48.3 million reported in the prior year. The increase was driven by subscription service, with gross margin dollars of $44 million, an increase of $4 million, or 11%, from the $40 million reported in the prior year. GAAP subscription service margin for the quarter was 56% compared to 58% reported in Q1 of the prior year. Excluding the amortization of intangible assets, stock-based compensation, and severance, non-GAAP subscription service margin for Q1 2026 was 66%, compared to 69% in Q1 2025. As we have discussed previously, our subscription service margin continues to reflect the impact of a fixed-profit contract we acquired from one of our 2024 acquisitions. The year-over-year decrease in margins reflects a shift in revenue mix driven by growth in this contract in 2025. Excluding margin related to this contract, which is not reflective of core operational performance, non-GAAP subscription service margin was 71% for the quarter, in line with what we have seen consistently in recent quarters. Hardware margin for the quarter was 22%, versus 25% in the prior year. The decrease was driven by a shift in hardware product mix and higher costs related to tariffs and increased demand in processor and memory chips. Pricing enhancement plans initiated in 2025 have partially mitigated these cost increases. We continued to expand the pricing plans in Q1 and will continue to evaluate our pricing strategy on a quarterly basis. We expect hardware margin percent to stabilize in the lower 20s moving forward. Professional service margin for the quarter was 28% compared to 25% reported in the prior year. The increase in margin year over year was primarily driven by improved margin as a result of reduced third-party spending and improved cost management. In regard to operating expenses, GAAP Sales and Marketing was $12 million, relatively flat from the $12 million reported in the prior year, as the benefits of cost reduction actions implemented during the quarter were largely offset by nonrecurring severance costs related to the restructuring events. GAAP G&A was $30.7 million, an increase of $21.4 million from the $9.3 million reported in the prior year. The increase was substantially driven by nonrecurring severance costs. GAAP R&D was $22 million, an increase of $2 million from the $20 million reported in the prior year. The increase reflects continuing investment in product development, including acceleration of PAR Intelligence innovation. Operating expenses excluding non-GAAP adjustments were $54 million, a modest increase of $2 million, or 4%, versus Q1 2025. Exiting Q1, non-GAAP OpEx as a percent of total revenue was 43.3%, a 650 basis point improvement from 49.8% in Q1 of the prior year, demonstrating our ability to scale efficiently and drive operating leverage. As mentioned in our prior earnings call, the realignment of our business teams into two verticals and the accelerated adoption of our operating AI toolset across our organization has enabled us to rethink the operating model within our OpEx teams. The realignment plan is two-pillared: simplify the organization and simplify the operations. We finalized the realignment plan at the beginning of Q2. The phasing of this plan will predominantly be in Q2, with the remaining transitions in Q3. Operational efficiencies and additional scale are already being realized. As such, we expect operating leverage to continue to improve throughout this year, driving continued expansion of adjusted EBITDA trajectory. Now to provide information on the company’s cash flow and balance sheet position. As of 03/31/2026, we had cash and cash equivalents of $77 million. For the three months ended March 31, cash used in operating activities from continuing operations was $17 million, unchanged from the prior year. Cash usage this quarter was primarily driven by seasonal net working capital needs, which included annual variable compensation of $13 million and a sequential increase in current receivables, driven by an $8 million increase in March billings versus December. In addition, as in prior demanding macroeconomic climates, we have strategically increased inventory $4 million to lock in pricing of chips and stabilize hardware margins for the year. As previously estimated, our DSO stabilized in Q1 and we are seeing meaningful improvement in Q2 as we execute our working capital improvement plan. We expect operating cash flow to improve meaningfully to positive quarterly operating cash flow for the remainder of the year, driven by continued profitability and the benefit from working capital with improved DSO and modest improvement in DIO. Said differently, our cash flow will receive a tailwind from working capital and continued profitability. Cash used in investing activities was $3 million for the three months ended March 31 versus $6 million for the prior year. Investing activities primarily included capital expenditures of $2 million for developed technology associated with our software platforms. Cash provided by financing activities was $18 million for the three months ended March 31 versus $11 million for the prior year. The financing activities primarily consisted of net proceeds from the 2031 notes of $257 million, of which $206 million was used to repurchase a portion of the 2027 notes and $33 million was used to repurchase shares of the company’s common stock. To recap our performance, Q1 marked meaningful profit improvement while continuing to grow the top line. This momentum is evident across the following key financial metrics: revenue grew 19.4% year over year; subscription services revenue up 15%; non-GAAP OpEx as a percent of total revenue improved 650 basis points from Q1 2025; and adjusted EBITDA was $8.9 million for the quarter, an improvement of $4.4 million from Q1 2025. Now let me share our expectations going forward. As Savneet mentioned, we are initiating formal financial guidance for the second quarter and full year of 2026. This reflects the increasing visibility we have into our business, the durability of the recurring revenue base, and our confidence in the operating model we have built. We are committed to providing guidance that reflects both our visibility into the business and the discipline we apply to our operating plan. For Q2 2026, we expect total revenue in the range of $122.5 million to $127.5 million and adjusted EBITDA in the range of $9.5 million to $11.5 million. For the full year 2026, we expect total revenue in the range of $500 million to $515 million and adjusted EBITDA in the range of $44 million to $47 million. A few points of context on our outlook. Our healthy backlog and pipeline provide us with strong visibility into revenue growth. On hardware, we expect continued momentum from tier-one rollouts and refresh activity, with margins stabilizing in the low 20s as our price actions continue to offset tariff and component cost pressures. On profitability, our adjusted EBITDA outlook reflects a meaningful step up from 2025, driven by both continued top-line growth and a structurally lower cost base. The reorganization we executed at the end of Q1 and early Q2, together with a simpler AI-enabled operating model, are expected to drive a step down in our organic operating expense run rate beginning in Q2 and continuing to the back half of the year. As a result, we expect adjusted EBITDA margins to expand sequentially from the Q1 starting point, with the full impact of our cost actions more meaningfully reflected in the second half. At the same time, we continue to invest in our highest return opportunities, most notably, PAR Intelligence and our agentic platform. But we are doing so within a disciplined framework that prioritizes durable, profitable growth. Our full year 2026 guidance also includes approximately $10 million in subscription service revenue from the recently completed acquisition of Bridge. The acquisition will have minimal impact on adjusted EBITDA. I will now turn the call back over to Savneet for closing remarks prior to moving to Q&A. Savneet Singh: Thanks, Bryan. At PAR Technology Corporation, AI is not just a customer-facing strategy. Internally, AI is fundamentally transforming everything we do as a company. One example is our ability to rapidly enhance our procurement function and pinpoint areas of vendor waste, with millions of in-year savings. Crucially, AI is also enhancing our development velocity and we are now seeing this translate into tangible output across the business. In our Engagement platform alone, the roadmap we committed this year is five times larger than last year, and we are delivering roughly twice as many incremental noncommitted features quarter over quarter. Capacity simply did not exist before. At the same time, speed and productivity are improving. Time to ship is down more than 25%. In parallel, we are investing in what we call an agentic software factory. An internal platform designed to orchestrate planning, development, and testing through autonomous agents—effectively enabling end-to-end backlog execution and improving daily developer output by 20% without sacrificing quality. This is not just about adopting AI tools faster than others. It is about building a fundamentally different development engine—one that we believe will become a durable competitive advantage over time. PAR Technology Corporation’s strategic value lies in the fact that we power some of the most complex, high-volume restaurant and retail operations in the world—technology that is both mission-critical and deeply embedded. As the industry continues to consolidate around fewer, more capable platforms, we believe PAR Technology Corporation is uniquely positioned to be a long-term system of record for our customers. PAR Intelligence unlocks a fully agentic operating model for every multi-unit operator. Our in-year adoption target for PAR Intelligence is greater than 50,000 sites. Aligned to this is our progress towards the Rule of 40. This is the clearest external measure that we are building a business that can both grow and compound value over time. For us, it is not about optimizing a single quarter, or choosing growth at the expense of profitability, or vice versa. It is about steadily improving the underlying economics of the model. The progress you are seeing today reflects deliberate execution, not financial engineering, and we believe sustained improvement in Rule of 40 performance is a strong indicator that PAR Technology Corporation is becoming a more durable and higher-quality software company. This quarter does not mark the finish line, but it does mark progress. We believe the market has us miscast today, and we intend to let consistent execution, quarter by quarter, correct that. Over the coming quarters and years, we will prove that PAR Technology Corporation offers an irreplaceable solution to brands, PAR Technology Corporation is adapting to the times of AI, and PAR Technology Corporation will deliver transformative results. With that, Operator, we can open up the call for questions. Operator: Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while I compile the Q&A roster. Our first question comes from Mayank Tandon from Needham. Please go ahead. Mayank Tandon: Thank you. Good evening. Savneet, Bryan, and Chris. Good to hear from you, and congrats on the print and also the guidance framework. I think that is very helpful. Savneet, let me just start with your expectations on ARR. Could you just unpack the various levers you have? So thinking about ARR, how should we think about pricing, location growth, and then also have you reflected any tier-one wins in your expectations of the reacceleration in ARR growth over the balance of 2026? Savneet Singh: Great question. We continue to target mid-teens ARR growth without the inclusion of any large mega deals in there. We continue to be conservative. Until those happen, we will not throw it into that target. In terms of levers of driving our growth, we really have two levers today: new site count and upsell into the base, i.e., ARPU. Where we are seeing really strong success is now being able to sell multi-product at the time of the initial sale, so more growth is being driven by the new customer motion, but that is primarily driven by the success of the co-sell/cross-sell motion that we have. At the same time, we are still upselling into our existing base, but I think it shows just how early we are in our TAM that new sales are still the majority of our revenue growth. Mayank Tandon: Got it. And then I have to get an AI question in, so let me ask you. You talked about the efficiencies with AI, but on the revenue side, as you launch PAR Intelligence, which I know is very recent, I am just curious, have you gotten any feedback from clients—what the interest level is? And is there a way to monetize this? Is that something we will see potentially in 2026, or is this more of a longer-term initiative to be able to drive revenue off this? Savneet Singh: Let me answer the second part because I think it is an important one. We would not be putting so much emphasis on it if we did not think we can monetize it. I think we feel far more convicted this quarter than we did last quarter or the quarter before that given our engagement with customers, we think not only that they enjoy the product, but they will pay for it. The way we think about it is today’s products give them, call it, AI discovery—the ability to interact, chat, and pull reports. But tomorrow’s products will give them predictions, and the future products will give them automated actions, meaning, can you run your store on autopilot? As we get to that point, we will absolutely get to monetize it. We look at AI as an incremental revenue stream that will happen this year. We do not assume massive assumptions within our guidance, but the mandate to our product teams and to our general managers is that revenue must come this year. The reason we are so excited about it is we believe it is going to be an incremental lever of revenue growth, not replacement and certainly not something that will cannibalize the value of the core products we have today. That confidence candidly just comes with the fact that we launched our retail product as an example this quarter and we had 1,700 stores already up and running on it. When we launch a product, it is adopted so much faster and it makes the entire base stickier. So, long answer, but it is something we will monetize, and it is something we expect to start monetizing this year. Mayank Tandon: Great. Thank you so much. Savneet Singh: Thanks, Mayank. Operator: Thank you. Our next question comes from George Sutton from Craig-Hallum. Please go ahead. George Sutton: Thank you. Savneet, you talked about an upcoming strategy layer. I wondered if you could just walk through what that might mean for you. Savneet Singh: It is related to what we are doing on Drives, which is in our retail suite, but I think strategy will eventually stretch across everything we do. The way we think about AI today, as I mentioned, is you have a first wave of AI tools within enterprise software which is ostensibly giving you that ChatGPT-like experience on the front of the product. I think it moves from there to the predictability of your business—“This is going to happen; you want to do this”—and then it moves to actions and autopilot—“Hot dogs are running out; it will automatically go order those hot dogs for you.” Where I think it is really exciting is this idea down the road where it becomes more of a strategic partner for you. It says, “There is a snowstorm coming next week; you want to load up on hot chocolate,” or it takes into account weather, traffic patterns, competitive dynamics, and promotions and builds out a strategy layer. We are building that out today. As I mentioned, we are still testing other models. We are still working through hallucinations. But we will be in market this year with a strategy component for our customers. It is really becoming a partner to our customers that live every single day in that store. George Sutton: Could you give us an update on the tier-one opportunities in your pipeline in terms of your level of confidence? Any sense of timing or move forward from the prior quarter? Savneet Singh: We continue to make tremendous progress there. There have been some good movements as it relates to personnel at these organizations that I think look fairly upon PAR Technology Corporation. We expect to have the outcomes in the second half of this year, and we continue to feel pretty good about it. Tier-one deals are always 50/50, in my experience. What I think I am excited about is we feel very confident about the move in those organizations, but, as I said, what we are even feeling more confident about is the ability to drive more growth through pushing multi-product to the customer base outside of that. The revenue growth side of PAR Technology Corporation is what is exciting us as we turn the first quarter here. George Sutton: Awesome. Thank you very much. Operator: Thank you. Our next question comes from Stephen Hardy Sheldon from William Blair. Please go ahead. Stephen Hardy Sheldon: Hey. Thanks, and I will echo: very good to see some formal guidance now. First, as we think about ARR, just any rough sense you can provide on the drag to ARR this quarter from offboarding those customers you mentioned? Was that predominantly around Punch, or was there any notable offboarding around other solutions? And then are you effectively through that process, or is there more to go in the coming quarters as we think about the ARR trajectory? Savneet Singh: We are through it. Think about it as deals that were lapsing at the very end of last year or the beginning of this year—January or February. We are through it. You will not see that impact again. It was heavily levered towards Punch—one particularly large customer. As you can see, ARPU jumped 27%. That is not because we repriced the base at a 27% increase. It is because we removed multiple customers that were at 80% discounts. We are through it, and I think it is amazing we still grew in double digits given the impact of that. What is great is we do not have any more of that, and as I said, the growth motions are still moving forward really, really nicely. Bryan A. Menar: Stephen, I will just add to that too. This acted like a pull-in of churn for us for this year. Over 60% of our churn for this year was in Q1, and so we were able to manage that out effectively, but we do not expect to have a higher rate of churn this year than we recently typically have. Stephen Hardy Sheldon: Okay. Got it. That is good to hear. And then just, as a follow-up, it would be great to get an update on your overall traction with convenience stores on the retail side. It sounds like you have multiple tier-one opportunities there that you are going after. So curious how convenience store revenue has been trending and the outlook for expanding that monetization beyond the primary source right now, which I think is still just predominantly loyalty. Savneet Singh: It is an optimal question. I would say we are very bullish on what is happening at C-store. Our loyalty product continues to grow. We have a strong tier-one pipeline, as I mentioned—multiple deals in negotiation, including within the major oil space. That is a business that, similar to Punch, we are the 800-pound gorilla where we have the best product, the best team, and the best outcomes. I think that will continue to grow at or above company rates. What is exciting is, for the first time, we have now expanded beyond that. We launched our Touchpoint product in Q1. Touchpoint, if you recall, we carved out the assets of a kiosk-like product about a year ago, and that brings loyalty in the store. Think of a screen in the store where you can engage loyalty, upsell, promotions, and so on. We will hopefully have our first customers on that this year. That will be an extension of loyalty, but more in the sense that it can also provide self-checkout. The really exciting part that I think we have discovered within retail is on the AI front where PAR Drive—our first product that is the agentic layer across C-store—already has 1,700 stores on it. We are using real data to refine that model, and I think we are going to have tremendous success pushing that through the retail side of the business. Our retail leadership is all-in on AI. We have rebuilt our product teams and engineering teams to be focused on it. I think you will see the retail side, if we are successful on this AI endeavor, grow at faster rates than the restaurant side. Stephen Hardy Sheldon: Great. Thanks for taking my questions. Operator: As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. Our next question comes from Maxwell Michaelis from Lake Street Capital Markets. Please go ahead. Maxwell Michaelis: Hey, guys. A few from me. First, can we go to Punch—50% win rate, I think you mentioned in the quarter. What is resonating with the customer base right now when you go to market? And then also, can you share historically what Punch win rate has been? Savneet Singh: Absolutely. The core reason we are winning has historically always been that Punch is the best product in the market. Obviously, I am subjective there, but I think objectively, through data, we are the largest product and continue to grow faster than market. That is not only the depth of the product, but the breadth of the product and what we can do with that product. Loyalty is a very robust initiative. It is millions and millions of profiles. If you are a large restaurant organization, or a retail organization for that matter, you are not going to go with something you have vibe-coded or a startup. You need something that has reliability, stability, and security that you need for that scale. We think we are the best in market, and we continue to take share. The other part is, as I mentioned on the call, this ability to sell ordering and payments alongside of it. It makes the product more seamless for our customers and gives them a single digital cockpit to manage their menus. It is a real unlock for our customers. What has been exciting about that is I think the ability to have a real ecommerce or online ordering product alongside Punch will help increase the win rates for both because it simplifies the journey for our customers. Again, in an AI world, I think you want your data for both those products in one place so that you can let agents run. I am pretty excited by the continued success there. Historically, win rates have been at, I would say, 35–40%. This is definitely a step up, and hopefully, that continues. Maxwell Michaelis: Perfect. And then last one for me. Obviously, you are going to be monetizing PAR Intelligence, but curious to know how you plan on pricing that when you go to your customers. Is that going to be subscription-based, or do you plan on instituting a usage-based model? Savneet Singh: It is a great question. One of the cool things that I mentioned on the call that we realized is at PAR Technology Corporation we price on a per-site basis. We are not tied to the amount of humans using a product. In fact, it is one of the reasons I think our AI products could be even higher margin than our core products because as we deploy AI at the corporate level, you need less and less people to engage with it. Specifically, the first products we are thinking will be SaaS-like billing because that is what our customers are used to. That is how we can upsell and bundle it into the existing contracts that we have. The customers that we are engaging with today—the customers that are letting us test their data—we have communicated that that is how we will be pricing it. As we move to this world where we are the strategic recommendation engine for them or running their stores on autopilot, we could explore other forms also as we figure out what the cost model will be. Right now, we are thinking about it as a SaaS model. Maxwell Michaelis: Awesome. Thanks, guys. Operator: Our next question comes from Andrew James Harte from BTIG. Please go ahead. Andrew James Harte: Hey. Thanks for the question. Can you hear me? Yeah. Thanks for the question. Just one from my end. Savneet, if you could just talk about how you feel the business is standing on better ground today than it was a few quarters ago, and what really gave you the confidence to provide quarterly guidance and annual guidance? Thank you. Savneet Singh: I think we feel incredibly confident about our market positioning today. We are, I think, unquestionably the furthest ahead when it comes to AI within the restaurant and within the C-store. We printed a $9 million EBITDA quarter, and as Bryan mentioned, we think that is going to expand meaningfully for the rest of the year. As Bryan mentioned, we are going to be cash flow generating—operating cash flow—for the rest of the year, and that puts us in a position that we have never been before. Our products are winning at rates they never won before. Our agentic capabilities are far ahead of our peers. We have a cash flow engine that we can use to create shareholder value. As we sit today, that confidence comes from market positioning but also, candidly, the scale of the business, the ability to generate cash, and nothing feels better than winning—winning in our category. We feel incredibly strong about where we are today. It will all come down to our ability to deliver products to our customers in this AI world that we can monetize and show the value there, and that is why we feel so confident. Andrew James Harte: Thank you. Operator: This concludes the question-and-answer session. I will now turn it over to Chris Byrnes for closing remarks. Chris Byrnes: Thanks, Antoine, and thanks to everyone joining us this afternoon. We look forward to updating you and speaking with you further in the coming weeks. Have a good night. Operator: Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.
Operator: Thank you for standing by. At this time, I would like to welcome everyone to the Kodiak AI, Inc. Common Stock first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Today, we ask you to limit to one question and one follow-up. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Thank you. I would now like to turn the call over to Daniel Goff, Vice President of External Affairs. You may begin. Daniel Goff: Thank you, and welcome to Kodiak AI, Inc. Common Stock’s first quarter 2026 earnings call. On the call today are Don Burnette, Founder and Chief Executive Officer of Kodiak AI, Inc. Common Stock, and Surajit Datta, Chief Financial Officer of Kodiak AI, Inc. Common Stock. A press release and an earnings presentation were issued earlier today and are posted on the Investor Relations section of our website. This call is being broadcast live via a webcast and a replay will be available on our website after the call. Before we begin, I would like to remind you that during today’s call, Kodiak AI, Inc. Common Stock will be making forward-looking statements within the meaning of the federal securities laws about financial performance and future events, including our guidance for fiscal second quarter and full fiscal year 2026, as well as our long-term goals. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-K and the Form 8-K filed with today’s press release, for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements. Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended 03/31/2026. We disclaim any obligation, except as required by law, to update or revise any financial or operational guidance and long-term goals or our other forward-looking statements, whether because of new information, future events, or otherwise. Any forward-looking statements made on this call speak only as of the date of this call. Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we also refer to certain non-GAAP financial measures. For more detailed information on our non-GAAP financial disclosures, including reconciliations to the most comparable GAAP measures, please refer to our earnings release, which can be found on our Investor Relations website. I will now turn the call over to Don. Please go ahead. Don Burnette: Good afternoon, and thank you for joining us. Before getting into our Q1 results, I am excited to highlight that today we announced a $100 million capital raise. With our strengthened balance sheet, we believe we have extended our liquidity into 2027, which will enable us to support the next phase of growth as we scale our driverless deployments. Now I would like to turn to our Q1 results. In the first quarter, we increased both the scale and productivity of our growing driverless deployment, expanded our partner ecosystem across the long-haul, industrial, and defense verticals, and made meaningful progress toward our driverless long-haul launch targeted for late 2026. We also made significant progress maturing our physical AI-powered technology and product while maintaining financial discipline and capital efficiency. We deployed eight additional trucks in Q1, for a total of 28 driverless trucks, further expanding our industry-leading driverless truck deployment. As of quarter end, those trucks have driven more than 23,500 paid driverless hours, a 120% increase from the end of Q4 of last year. These hours are equivalent to over a decade of working as a truck driver. Further, the hours driven in Q1 exceeded all the driverless hours driven in 2025. Over the same period, cumulative loads delivered increased to more than 15,600, representing approximately 24% growth. That includes more than 200,000 tons of freight, approximately the weight of the Sears Tower, delivered in Q1 alone. We believe these results demonstrate that we are successfully scaling our product and delivering increasing value to our customers. Because Kodiak AI, Inc. Common Stock’s integrated platforms are powered by a single autonomous stack, the capabilities we develop, the miles driven, and the new customers and partners we work with create a compounding flywheel effect, benefiting long-haul, industrial, and defense applications. In the first quarter, we made strong progress on strategic partnerships and customer engagements as industry leaders continue to choose the Kodiak AI, Inc. Common Stock driver to enable their autonomous future. I would like to highlight one exciting announcement we made earlier today: a strategic partnership with General Dynamics Land Systems, or GDLS, to collaborate on autonomous military ground vehicles. GDLS, part of the Fortune 100 General Dynamics Group, manufactures critical platforms such as the M1A2 Abrams tank and the Stryker combat vehicle. Working with GDLS will allow us to extend our reach into the core of the defense ecosystem. It also demonstrates our flexible approach to defense engagements. We are working with industry leaders to support paths to production and revenue, while simultaneously contracting directly with the Pentagon as we have done with the Marines’ Rogue Fires program. Our work with General Dynamics Land Systems is already generating results. In March, we unveiled the first vehicle we developed in collaboration with GDLS: the Leonidas autonomous ground vehicle. The Leonidas AGV combines a Kodiak AI, Inc. Common Stock driver with Everest’s cutting-edge high-power microwave system for counter-drone operations, supported by GDLS’ system integration expertise. We continue to make significant progress on our core technologies. Driving this progress is our increasingly aggressive adoption of AI tools that are proving to be true force multipliers across our company. AV developers are only as good as the tools they use, and AI is enabling us to develop new, powerful tooling that is already transforming how we work. In Q1, we launched company-wide Model Context Protocol, or MCP, servers that allow AgenTeq AI tools to connect to all of our company data sources, allowing the entire company, not just engineering, to develop new bespoke AI-powered tools tailored specifically to individual needs. In layman’s terms, these MCP servers and related data pipelines empower our team to use plain English to build AI tools and proliferate AI agents that massively increase our productivity, efficiency, and problem-solving capabilities. This, in turn, is driving a transformation in how we run our business. For example, we have used our MCP services to develop PRISM, a flexible new tool that allows anyone in the company to search across thousands of hours of unstructured driving data using only text prompts, surfacing patterns and root cause analyses that previously required dedicated engineering effort. PRISM can explain the Kodiak AI, Inc. Common Stock driver’s behavior in intuitive ways to both technical and nontechnical teams using natural language. We have used this new capability to tune the Kodiak AI, Inc. Common Stock driver in ways that would not have been possible before. For example, we used PRISM to not only identify commonalities among challenging highway scenarios, but even identify potential improvements that we have since adopted. But these tools are not only about software. They also help to drive improvements in hardware, manufacturing, and beyond. On the hardware side, we announced that Kodiak AI, Inc. Common Stock will use the NVIDIA DRIVE Hyperion architecture in the next generation of Kodiak AI, Inc. Common Stock driver-powered trucks. We believe this will increase our ability to deploy even more capable and efficient driverless trucks over time. Additionally, at CES in January, we laid out our vision for industrializing the Kodiak AI, Inc. Common Stock driver through our strategic collaboration with Bosch, one of the world’s leading automotive suppliers. Through this collaboration, we will leverage Bosch’s manufacturing expertise to deploy driverless vehicles at scale. This week, at ACT Expo, we demonstrated the progress we have already made together, exhibiting an early Kodiak AI, Inc. Common Stock SensorPod outfitted with Bosch camera and radar sensors. Taken together, these partnerships enhance the ecosystem needed to efficiently scale simultaneously across all three verticals, from vehicle platforms to industrialized hardware to AI compute. With that, I would like to discuss our progress toward our targeted driverless long-haul launch in late 2026. As of April, our long-haul autonomy readiness measure increased to 86%, reflecting steady progress in launch readiness. As we leverage our increasing investments in our team and AI tooling, we believe that our ARM progress will accelerate in Q2 and beyond. Over the course of the quarter, we completed numerous safety case claims, including claims covering our driverless long-haul sensor field-of-view requirements and our redundant braking subsystems. As a reminder, completing a safety case is about collecting sufficient evidence to demonstrate safety, and Kodiak AI, Inc. Common Stock is one of only a small handful of AV companies that have successfully built a safety case and launched driverless operations. We continue to hone our safety case structure as we refine our safety processes and implement our learnings from our long-haul, industrial, and defense operations. To reach an ARM of 100% and unlock long-haul driverless operations, we will continue to gather evidence to close our remaining claims. That work leverages the safety methodology, testing, and documentation processes we established over our nearly 18 months of driverless operational experience in the Permian. In addition to our work on the safe launch of our long-haul driverless product, we continue to expand our long-haul commercial operations, delivering freight with leading shippers and carriers from our Dallas hub. This afternoon, we announced that we launched service with a new carrier, Roehl Transport. Through our collaboration, we are hauling freight with Roehl Transport between Dallas and Houston four times a week. Roehl Transport is one of North America’s safest trucking companies as recognized by the American Trucking Associations, or ATA. They are a recent recipient of the ATA’s President’s Award, the trucking industry’s highest safety honor. They specifically chose Kodiak AI, Inc. Common Stock because of our shared commitment to safety. During Q1, we also began freight services between Dallas and El Paso in cooperation with one of our long-term customers. This freight lane is our second route beyond a single Hours of Service after Dallas to Atlanta. It is just the kind of long-haul lane where the Kodiak AI, Inc. Common Stock driver can offer the most value given the challenges fleets face staffing these routes. These true long-haul freight operations are critical to helping us build a product that meets our customers’ needs. We are working closely with all of our long-haul customers to prepare them for driverless operations in the coming quarters. While preparing for long-haul driverless represents our core focus for 2026, our industrial business demonstrates how our driverless technology is continuing to deliver value to our customers and expanding to other geographies and use cases. Today, I am excited to announce our planned pilot operations with West Fraser, one of the world’s largest wood products companies, to demonstrate the Kodiak AI, Inc. Common Stock driver in logging operations in Canada. This will mark our first pilot in the forestry industry, our first international expansion, and initial operations with flatbed trailers. Logging routes, like oil and gas routes we see in the Permian, are among the most demanding environments in trucking. We believe this pilot will further demonstrate the versatility of our system across geographies and trailer types and expands the range of industrial use cases where the Kodiak AI, Inc. Common Stock driver can deliver value. In addition to our new pilot in Canada, we continue to make meaningful progress on our Atlas deployment. Since we are not reliant on HD maps, we can quickly add new routes to our operational design domain. To date, we have delivered on over 15 unique routes with Atlas, each with its own complexities. We also expect to continue to execute against our initial 100-truck commitment with Atlas over the next several quarters and expect to exit Q2 with driverless trucks in the mid-thirties. Atlas is evaluating deploying the Kodiak AI, Inc. Common Stock driver on a new OEM for the remaining trucks. This transition, beginning in Q3, will include a shift to a more economical day cab from a sleeper berth, which we believe will be the predominant configuration for driverless operations across both industrial and long-haul. We believe our modular, platform-agnostic architecture positions us well to support this transition efficiently, and we are working closely with Atlas to meet their evolving fleet requirements. We view this as an exciting opportunity to demonstrate the ease of integration of our technology on an additional truck platform. Delivery timing will remain closely aligned with our customer needs and will depend on factors such as procurement of the new truck platform, fleet planning, deployment schedules, and critical hardware and truck availability and lead times. As a result of this platform transition and associated procurement timelines, we now expect to deliver a similar number of trucks in 2026 as we expect to deliver in the first half. As the new platform scales, we expect deployment to accelerate. We anticipate completing Atlas’s initial 100-truck commitment in the first half of 2027. Now turning to defense. With General Dynamics Land Systems and beyond, we continue to add wins in the defense vertical. Reliability and performance in complex environments are mission-critical. At the broadest level, we are seeing the defense autonomy ecosystem evolve from experimentation to deployment, as ongoing geopolitical instability forces both the Pentagon and our allies to accelerate their timelines for frontier technologies like autonomy. Underlining this increased interest, the President’s 2027 defense budget includes over $50 billion in funding across land, air, and sea for defense autonomous warfare groups, up from just $225 million in 2026. We therefore expect to see increased revenue-generating opportunities in 2027 and beyond. Our recent successes in defense demonstrate the maturity and adaptability of our system in mission-critical environments, and we believe will position us well as the Pentagon increasingly turns to commercial partners to accelerate autonomous ground vehicle deployments. Moving on from defense, Q1 saw continued regulatory progress for the autonomous vehicle industry. We are encouraged by continued momentum toward a more consistent federal approach, which we believe will further support broader adoption over time. At the state level, California recently published final statutes and regulations that will allow us to deploy the Kodiak AI, Inc. Common Stock driver in our home state, thereby enabling us to offer coast-to-coast driverless service. These regulations will provide us with additional regulatory certainty. We plan on submitting our application for a California testing permit in the coming weeks. Similarly, Texas also launched its new AV permitting program. After submitting our first responder interaction plan to state officials, we received our Texas AV authorizations. We continue to engage with regulators at both the state and federal level. One engagement of note was our participation in a grant-funded public demonstration in cooperation with DriveOhio, the Ohio Department of Transportation’s hub for smart mobility technology. Our work with DriveOhio represents Kodiak AI, Inc. Common Stock’s first operational deployment outside of the Sunbelt and enabled us to demonstrate our long-haul autonomous solution to policymakers and industry leaders in Ohio and Indiana. As we prepared for this engagement, we passed an exciting milestone: we added our 25,000th mile to our commercial network, which is more than the circumference of the Earth. The massive size of our network underlines the flexibility of our routing technology, which enables us to quickly add new routes across a range of geographies and deployment types. In closing, we believe our $100 million equity financing combined with our continued product maturation and driverless deployments position us to scale Driver-as-a-Service across long-haul, industrial, and defense in a disciplined and capital-efficient way. We are well on our way to scaling Kodiak AI, Inc. Common Stock into a sustainable business that provides real value to customers, and I am excited by the opportunity ahead. I would like to take a moment to thank all of the Kodiak AI, Inc. Common Stock team members who worked so hard in the first quarter to drive us forward. Autonomous driving is the first wide-reaching application of physical AI. This is just the beginning. Now over to Surajit. Surajit Datta: Thank you, Don, and good afternoon, everyone. I am pleased to share Kodiak AI, Inc. Common Stock’s financial results for 2026. We delivered a strong first quarter across both operational and financial metrics, successfully executing against our strategic priorities: scaling driverless deployments, growing recurring revenue, and maintaining disciplined spending. We ended Q1 FY 2026 with 28 driverless trucks, in line with our expectations, as we continue to broaden our deployment with our existing industrial customer. Q1 revenue was $1.8 million, representing 74% growth quarter-over-quarter. This performance was primarily driven by continued expansion in Driver-as-a-Service revenue enabled by growth in customer-owned driverless trucks. GAAP operating loss for the first quarter was $37.9 million. Non-GAAP operating loss, which excludes stock-based compensation, was $31.8 million, primarily reflecting continued investment in R&D and operational support as we scale our deployments. We incurred capital expenditures of approximately $5.5 million, primarily related to AV hardware that we deploy on our customers’ trucks. Turning to cash flow. Q1 free cash flow was negative $35 million, outperforming our expectations. This reflects continued investment in R&D, operational scaling, and AV hardware deployment, partially offset by improving operating leverage. For 2026, we expect driverless trucks to increase to mid-thirties. We expect free cash flow of negative $39 million to negative $41 million, with the increase primarily driven by non-recurring spend for hardware unit cost improvements and incremental CapEx to support driverless long-haul testing and development. For the full year fiscal 2026, we are improving our free cash flow guidance and now expect free cash flow to be in the range of negative $155 million to negative $165 million. This improved outlook reflects continued growth in revenue, expected lower AV hardware costs due to a slower pace of deployment, and sustained discipline in operating expenses. We ended Q1 with cash and cash equivalents and marketable securities of $90 million. Today, we further reinforced our liquidity position with a successful common stock financing from existing and new investors, raising $100 million of gross proceeds. After fees and expenses, net proceeds are approximately $95 million. On a pro forma basis, this brings our Q1 cash, cash equivalents, and marketable securities to approximately $185 million. The successful financing strengthens our balance sheet and extends our liquidity into 2027. In summary, Q1 reflects a strong start to 2026. We delivered solid revenue growth, continued scaling of driverless deployments, and outperformed our free cash flow expectations while improving our full-year free cash flow outlook. We believe that we are well positioned to scale our business, progress towards profitability, and generate free cash flow over time. Operator, please open the line for questions. We will now open the call for questions. Operator: And your first question comes from Andres Sheppard-Slinger with Cantor Fitzgerald. Please go ahead. Andres Sheppard-Slinger: Hey, everyone. Good afternoon, and congratulations on all the great progress and the capital raise. Lots to unpack, so again, kudos to everyone. Don, I was just wondering if you can maybe give us a little bit of cadence in terms of how we should think about deployments for this year. Surajit, I think you alluded to Q2, what to expect. Just curious for maybe the remaining part of the year, how should we think about those deployments ramping up in the second half and maybe through next year? Thank you. Don Burnette: Thanks, Andres. As we said in the remarks, we expect the second half of 2026 to look very similar to the first half of 2026 in terms of raw numbers, and we do expect the ramp of the trucks to accelerate quarter-over-quarter through 2027. Andres Sheppard-Slinger: Got it. Okay. Very helpful. And just curious if you can maybe expand a little bit further on Canada. What kind of opportunities do you look forward to there, and maybe remind us what is the regulatory environment there for those that are not as familiar? Thank you. Don Burnette: Sure. This is a really exciting development for us. As we have been talking about for some time, we see our industrial and unstructured driving applications as being manyfold. You have the oil and gas industry, of course, which we have talked about at length. There is mineral and resource mining in many other countries, and then there is forestry and logging in the Pacific Northwest, both here in the U.S. and Canada and beyond. We are really excited to announce West Fraser as a pilot opportunity that will execute in Q3. These are very difficult, unstructured, remote locations, which have a lot of the same challenges that you will find in some of the other applications that we have already been pursuing, including in the Permian. As it relates to the regulatory framework, this is something that we are working on currently. We will be operating initially on private land in Canada, which allows us to deploy driverlessly without anybody in the cab, independent of the regulatory framework. We continue to work with regulators at the province level and at the national level in Canada to ensure a free and clear path to deploy driverless trucks at scale beyond those environments. That is a development that we are working on, and we expect to have progress over time. Operator: Thanks, Andres. Your next question comes from the line of Colin Rusch with Oppenheimer. Please go ahead. Colin Rusch: Thanks so much, guys. Could you talk a little bit about the dexterity that you have in terms of managing autonomy across multiple form factors? It looks like you are going to be able to deal with multiple types of vehicles in different environments, and I just want to understand how quickly that sort of capability can get put out into the field. Don Burnette: Sure. We have held the belief for a long time that generalized AI is always going to win out over specialized implementations. From the very beginning of the company, we wanted to be platform-agnostic and adaptable to many different form factors—not just makes and models of a vehicle, but also additional form factors. You are seeing the fruits of that labor as we deploy into the defense space with tracked vehicles and various form factors there, large trucks like you see on the highways, heavy-duty trucks that we implement in our unstructured environments like the Permian, and also logging trucks, which are slightly different themselves. Kodiak AI, Inc. Common Stock implements a single AI system behind all of these different products and applications. So the core underlying software that runs on these vehicles is actually the same across each one of them. That allows us to leverage the learnings, the data, the training, and all of the development costs across each one of those verticals without having to have specialized teams or specialized AI or specialized training that goes into each of them. The more experience that we gain as a company, the more that the Kodiak AI, Inc. Common Stock driver gains as a system, the stronger the AI becomes and the more utility we get out of it across all of the different verticals and applications that we supply to our customers. Colin Rusch: That is super helpful. And then you have announced the partnership with Bosch, you are obviously working very closely with them, but there has also been a reasonable evolution of some of the perception solutions that are out in the field. I am just curious about your capacity to integrate some of those innovations and really monetize them, and how much efficiency you might get out of them, thinking particularly around LiDAR as well as some of the other sensors that are out there. Don Burnette: We are always evaluating new sensors. We use LiDAR, cameras, and radars in our system today. We feel like that sensor stack is the appropriate balance of cost and performance. You can always add more sensors to your system; of course, that makes it more expensive. In our business, we can absorb a more expensive hardware solution that increases the safety and utility of the system. We continuously evaluate all of the products out there on the market from providers both here in the U.S. and abroad. That is true of the LiDAR space, radar space, and camera space. We did just demonstrate at the ACT Expo in Las Vegas with Bosch the concept of the next generation of our SensorPod, which includes Bosch’s in-house radar and camera sensors. We are really excited to continue to develop a much more mature, reliable, and scalable system with Bosch as our tier-one supplier. Operator: Your next question comes from the line of Itay Michaeli with TD Cowen. Please go ahead. Itay Michaeli: Great. Thanks. Hi, everybody. Maybe just to continue on the last question with Bosch. Can you maybe size a little bit how you see the cost-cutting opportunity in the second generation versus where we are today? Maybe just some updates. I think I also heard a mention around some Q2 investments for hardware cost improvement. Maybe you can just elaborate on that. Don Burnette: Sure. I will start, and then maybe Surajit can speak to that as well. There are a couple of different factors that go into reducing the cost of your system. Obviously, you can engineer it to be cheaper. You can drive scale and volume, which ultimately reduces the cost of the various components, and certainly your manufacturing processes as you scale up into higher quantities can be optimized for significantly cheaper production. From the engineering perspective, we are putting in R&D resources behind driving down the cost—the BOM cost being one of the main drivers of COGS for our solution. We expect to start to see those costs coming into effect in the next several quarters. Surajit Datta: Just to add to what Don mentioned, for us, it is a three-pronged approach. Don talked about the design enhancements we are starting to undertake, and there will be some NRE spend in Q2 as we referred to on the call. That goes on the sensor side of things and on the redundant systems—those are areas we are working on. Second is increasing the scale of production with Bosch and Rausch—Rausch able to provide high-quality assembly, Bosch able to provide high-scale assembly across the breadth of the hardware—and we expect that to drive cost optimization over time. Lastly, we are enhancing and will continue to work on building a global supply chain organization. As we scale, we should be able to procure more effectively, and that will drive down costs. The strength of our system is to be pretty much hardware-source agnostic, and that allows us to be much more efficient on cost over time. Itay Michaeli: That is very helpful. As a follow-up, a lot of announcements with West Fraser and some defense. Don, as you look out a couple of years, how would you rank these opportunities in terms of what could have the biggest impact on the company going forward—what you want to be most focused on as you continue to expand your verticals? Don Burnette: That is a great question. I think it is going to shift over time. I think defense is a bit of a wildcard because it is very difficult to predict the timing of various contracts and the spend. As I mentioned in the remarks, we are very excited about what we are seeing in the FY 2027 budget, with billions and billions of dollars put towards the autonomous vehicle group within the Department of Defense. That is the level of funding that we just have not seen in the past. We are optimistic that there will be tailwinds for us to take advantage of in the next 12 to 24 months. We expect that to contribute meaningfully. At the same time, we are growing our industrial business today, both with Atlas and continuing to bring on additional customers such as West Fraser, and we see steady growth in that industry. That is an existing business we will continue to scale. The third one is the long-haul opportunity. It is certainly the largest by a significant margin relative to the other areas. As we prove out the safety case, close out our ARM to 100, deploy the driverless highway product, and start to deploy trucks into customer fleets, we think that ultimately that will be the largest contributor down the line to our revenues and to our growth. Where that transition point happens is a little bit hard to pinpoint at this exact moment, but it will be in the next couple of years. Operator: Your next question comes from the line of James McIlree with Chardan. Please go ahead. James McIlree: Yeah, thank you, and good afternoon. The deal with Roehl, is that on your trucks or their own trucks? And is there an observer in the cab, at least initially? Don Burnette: Today, it is with our trucks, similar to the way we operate with other carriers. This is a transportation-as-a-service that we offer third-party fleets, and we move freight on their behalf as a third-party capacity provider. We will work with Roehl in the same capacity that we do with other trucking carriers and trucking companies that we work with, and yes, there is an observer still behind the wheel for now. James McIlree: Great, thank you. And can you address a little bit the product migration, particularly with your collaboration with NVIDIA? Don Burnette: We have been a customer of NVIDIA for a long time, as most of the industry has, and we have been working very closely with them on the development of their newest and latest products. We are excited about the Thor platform that will be in the next generation of our product. The NVIDIA DRIVE Hyperion is an ecosystem of components that you can put together to build a fully reliable automotive-grade autonomy compute system. We are working closely not only with NVIDIA but also with tier-one suppliers to build that into the next-generation system that we can build at scale. We have been an NVIDIA partner for a considerable amount of time, and we continue to be excited to work with them. We are excited about what they are bringing into the future of low-power compute for applications such as self-driving trucks. James McIlree: Okay. Does this $100 million get you to cash flow breakeven? Surajit Datta: As we mentioned during the prepared remarks, this provides us liquidity into 2027. We will continue to be opportunistic about additional capital raises, and we expect to become S-3 eligible, and that provides us with additional flexibility in accessing capital markets. Also, this $100 million has come from both existing investors, including Ares, who was a SPAC sponsor, and also new investors. We believe this demonstrates confidence in our strategy and execution and the long-term opportunity. We expect to get access to additional capital to get to breakeven. Operator: Thanks, Jim. And your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead. Ravi Shanker: Great, thanks for taking my question. So just on the defense opportunity, who is your competitor there, if you have any at the moment? And what do you know about the program so far? Is it just the amount that is in the defense budget, or do you know if there is going to be an RFP and the size of the program, or even what the specs of the program are at this point? Don Burnette: In terms of competitors, there is a long list of companies that play in the defense space. The more prominent, well-known ones are companies like Forterra and Overland AI that have been pretty established in this space. I think what Kodiak AI, Inc. Common Stock brings uniquely to the table is that we are a commercially mature technology stack. We have actual driverless deployments in the hands of customers today, and we understand how to build safe and reliable systems that we can ultimately bring to military use cases to help save lives on the front line. In terms of the program itself, the budget is not specific to one program or one RFP. We are already working with General Dynamics Land Systems to bid on future programs. It is great to have a partner like them to take this technology to a much more mature and much more credible level. We will continue to work with them on new RFPs and new contracts and new programs as they come about. The budget underpins a number of programs that both exist today and are being conceived of and created in the near- and long-term future. Ravi Shanker: Got it. That is helpful. Maybe as a follow-up, just on Atlas and the new OEM, can you unpack that decision? Was that at their request or your request, and why that changed? Is it just the cab configuration or something else? Don Burnette: There are many factors there. The cab consideration, as we mentioned in the remarks—generally speaking, for fleets and trucking companies at large, companies like to diversify their fleets. Usually, you do not want to be a single-platform fleet. The request came from the Atlas team, and of course we are very excited to support the bring-up of a new platform—not only to help support their ultimate goals of rolling out autonomy at scale within their business, but also to prove out the modularity and adaptability of our system on other platforms and to establish close relationships with additional OEMs, which we have been working on for quite some time. Bringing up a new OEM from our perspective is nothing but a win-win, and this is also a form factor, make, and model that we can bring to other customers in other jurisdictions as well. It gives customers more flexibility and optionality, and that is better for the market. It shows that Kodiak AI, Inc. Common Stock is ready to scale and ready to be flexible and meet the customer where it is. The request came from the Atlas side, and we were very excited to support that request and to meet their fleet deployment needs. Operator: Your next question comes from the line of Walter Piecyk with LightShed. Please go ahead. Walter Piecyk: Thanks. Hey, can we just get some more specific terms on the $100 million and why you elected to do a PIPE with warrants? I know Aurora had success historically with an ATM—well, I guess success in that they were able to raise the money, but obviously at different prices. What other things did you look at in terms of cost of capital? And if we can get the terms of that $100 million, it would be great. Surajit Datta: Happy to, Walter. Our priority was to secure committed capital from high-quality investors with speed and certainty. This helps strengthen our balance sheet to support our growth plans and enhance our liquidity. This gets us liquidity into 2027. PIPE transactions of this nature are typically priced at a discount. We believe these terms reflect market conditions, the range we are seeing in the market for similar transactions, and, most importantly, the strategic value that capital provides us with extended liquidity. At a high level, the transaction raised $100 million in gross proceeds. The issuance price was $6.50, and we issued warrants along with that. We have more details you can find in our recently filed 8-K and the upcoming 10-Q. The warrants are priced at $6. Walter Piecyk: And there was not an alternative source of capital that was less dilutive? I mean, the stock is obviously at $9 now. You had a lot of announcements today. What were some of the alternatives that you looked at in terms of raising that capital? Surajit Datta: We always look for opportunistic financing. We will have more options available as we expect to become S-3 eligible, and that will give us more additional options on financing. Walter Piecyk: So what was the reason for the timing now as opposed to waiting until the end of Q3? Surajit Datta: We had announced that we had liquidity into 2026. This gets us an additional approximately six months of liquidity. Don Burnette: And I would just note that ATMs are not available before you are S-3 eligible, so that is not available to Kodiak AI, Inc. Common Stock at this time. Walter Piecyk: Understood. Thanks. And then on the operational side, we are noting these flatbed loggers, whatever. It just occurred to me—you are pitching this kind of modular approach, and when we see other autonomy companies come out with a new vehicle, there is some period of time where it has to adjust, and they have to have it learn to the new vehicle. How does your process differ? I know it is modular—you can bolt it on to the military or a logger or whatever—but presumably carrying sand is going to be different than carrying a bunch of logs or boxes of retail stuff when you hit the highways. How does that work with your driver in terms of new vehicle, different type of load, and how the programming has to adapt to make that work? Don Burnette: Thanks for the question. I cannot speak to the differences of how others do it, but we have continuously expanded and pushed the limits of what the system is capable of doing. For instance, in our last call, we talked about our expansion into double and triple trailers. Triple trailers are incredibly complicated—very small margin for error. There are lots of dynamical challenges that occur when you have a snake of trailers behind you, especially at heavy loads like the 275,000 pounds that we are pulling. The Kodiak AI, Inc. Common Stock driver has learned how to handle the various different distributions of load, both from single trailers that are partially filled all the way to triple trailers that are fully filled. Yes, the dynamics are different, but the system understands those dynamics, and we see logging as a natural extension to what we are doing in the Permian. It will be a single trailer to start. Logs are strapped down tightly, as is the sand in the trailer, so it is not a dramatic difference. All of our training data from multiple sources—both structured environments like highways and surface streets and unstructured environments like what we find in the Permian, what we find in Alberta, what we find in our military testing at various sites around the country—is brought together along with generative AI techniques that allow us to style-transfer other types of data that we may not be able to collect directly into a single AI system that we then deploy across the fleet, which is able to drive in all of the different scenarios and applications that we serve across different platforms. There is definitely testing and validation with every platform, but it is the same software that runs across both our Permian application for trucks that are owned by Atlas and ultimately the trucks that will be owned and operated by West Fraser. Operator: Ladies and gentlemen, that concludes our question-and-answer session. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss SUI Group Holdings Limited's financial and operating results for the first quarter ended 03/31/2026. Joining us today are SUI Group Holdings Limited's Chairman of the Board, Marius Barnett; Chief Investment Officer, Stephen Mackintosh; Chief Executive Officer, Douglas Polinsky; and Chief Financial Officer, Joseph Geraci. By now, everyone should have access to the company's first quarter 2026 earnings press release, which was issued this afternoon at approximately 4:05 PM Eastern Time. The release is available in the Investor Relations section of the company's website at suig.io. This call will also be available for webcast replay on the company's website. Following management remarks, we will open the call for your questions. Please be advised this conference call will contain statements that are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions, that could cause actual results to differ materially from those reflected in the forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements. For important risks and assumptions associated with such forward-looking statements, please refer to the company's SEC filings. I will now turn the call over to the company's Chairman of the Board, Marius Barnett. Marius Barnett: Thank you, and good afternoon, everyone. As many of you know, markets experienced significant dislocation in the fourth quarter of last year. What began as a macro-driven shock, driven in part by unexpected tariff policy developments in October, quickly evolved into a large-scale derivatives unwind. Approximately $19 billion in leveraged crypto positions were liquidated within a very short period of time, driving a sharp repricing across crypto and equity markets. Bitcoin declined materially from its highs, and risk assets more broadly adjusted to tighter liquidity conditions and weaker sentiment—dynamics that carried into the early part of this year. We view this period as a structural reset rather than a breakdown in the system. Unlike prior cycles, particularly 2022, this volatility was not driven by institutional failures or misconduct. We believe the underlying infrastructure performed as intended. Stablecoin markets, now at a record scale of over $300 billion, remain functional, and institutional participation across ETFs, treasury strategies, and regulated derivatives provided a stabilizing presence that has not existed in previous downturns. We believe the long-term use case for digital assets is resilient. Regulatory clarity is improving, institutional engagement is increasing, and the asset class is entering a more mature phase of development. Periods like this tend to reward disciplined capital allocation, conviction in the asset, and a long-term perspective. Our decision to anchor SUI Group Holdings Limited's strategy around the SUI blockchain reflects that mindset. We believe SUI represents a meaningful advancement in blockchain architecture. Its object-centric design and the use of the Move programming language enable parallel transaction execution, allowing the network to process transactions simultaneously rather than sequentially. This results in sub-second finality, horizontal scalability, and performance characteristics that are well suited for real-world applications at scale. These capabilities are already being validated by growing activity across decentralized finance, gaming, artificial intelligence, and stablecoin infrastructure. SUI Group Holdings Limited is uniquely positioned within the ecosystem as the only publicly traded company with an official relationship with the SUI Foundation. That positioning provides differentiated access, credibility, and the ability to deploy capital alongside ecosystem growth. We are not approaching this as passive holders of an asset. We are building an operating platform that participates directly in the expansion of the network. Our objective is to grow SUI per share for our shareholders by actively deploying capital into high-quality opportunities within the ecosystem. This includes supporting leading protocols, providing liquidity, and helping scale infrastructure that generates on-chain economic activity. We have established a scalable framework that aligns our balance sheet with the growth of high-impact protocols and emerging financial infrastructure. The early initiatives we have taken are intended to demonstrate how this model can be expanded over time with an emphasis on consistency, selectivity, and long-term value creation. Bringing this together, the volatility we have seen in recent months has reinforced several key aspects of our strategy. Institutional infrastructure is proving more resilient. On-chain utility continues to grow through cycles. The latest wave of crypto hacks are short- and medium-term headwinds. Disciplined capital deployment during periods of dislocation can create meaningful long-term value. SUI Group Holdings Limited aims to be at the center of that opportunity. We hold a treasury of over 108 million SUI tokens and are actively deploying it within the ecosystem to build partnerships with protocols that are creating durable utility on one of the most scalable blockchain platforms in the market today. We are committed to increasing SUI per share in a disciplined, transparent manner with a long-term orientation that reflects the nature of this asset class. With that, I will turn the call over to Stephen to walk through our first quarter operational performance. Stephen Mackintosh: Thank you, Marius, and good afternoon, everyone. I want to begin with an update on our SUI treasury position. As of 05/04/2026, we hold approximately 108.7 million SUI, including digital asset loans. The majority of this position is actively staked, generating roughly 5,200 SUI per day. Since initiating our treasury strategy in July 2025, staking and lending activity have generated approximately $300,000 in cumulative income. While this base yield is important, we view it as the foundation of our return profile, not the upper bound. Our strategy is focused on deploying capital that can generate returns above the native staking rates. We partner with institutional-quality teams across the SUI ecosystem, structure transactions that produce incremental yield denominated in SUI, and build a portfolio of protocol-linked economics designed to compound alongside network growth. Our work with Bluefin and Ember Protocol, along with our role in launching the SUI–USDE stablecoin infrastructure, are clear examples of this approach in action. Each initiative is designed to outperform passive staking while expanding our participation in the ecosystem's financial layer. The ecosystem itself continues to evolve in meaningful ways. Total value locked on SUI increased significantly. In February, SUI became the fifth digital asset accessible through a spot exchange-traded product, joining Bitcoin and Ethereum in regulated investment vehicles, as well as recently launched trading on the CME. In March, the network introduced Hashi, a Bitcoin-native lending and borrowing protocol developed by [inaudible] Labs with participation from leading institutional players. This initiative is designed to bring institutional-grade BTC collateral into on-chain credit markets. These developments reflect a rapidly maturing ecosystem with increasing institutional relevance. I also want to detail why we believe SUI is particularly well positioned for what may be the next major phase of on-chain activity, which is agentic artificial intelligence. By the end of this year, we expect that a significant majority of enterprises will invest in autonomous software systems capable of planning, transacting, and coordinating with limited human inputs. These systems require a settlement layer with specific characteristics, including sub-second finality, parallel execution, programmable access controls, and reliable stablecoin infrastructure. SUI was designed with these capabilities in mind. We are already seeing practical applications emerge. Autonomous trading systems that operate across decentralized markets require the ability to process concurrent transactions without delay, which is enabled by SUI's parallel execution model. More complex financial workflows, where software agents manage capital allocation and settlement across multiple protocols, require clear state management and predictable execution. SUI's object-centric architecture provides that foundation. In addition, native tools such as SEAL for programmable data access and Walrus for decentralized storage support the memory and coordination requirements of these systems. Stablecoin transfer volume on SUI passed $1 trillion in the first quarter, which highlights the level of settlement activity that these applications can build upon. We believe SUI Group Holdings Limited is positioned at the intersection of these trends. We hold a scale and productive treasury on a network that is rapidly building out both financial and computational infrastructure. We are deploying that treasury into the protocols driving the most meaningful activity within the ecosystem. And we are doing so with a clear objective of compounding SUI per share over time through disciplined and transparent capital allocation. I will now turn the call over to Douglas Polinsky to provide an update on our specialty finance operations. Douglas Polinsky: Thank you, Stephen, and thank you all for joining today's call. Our legacy specialty finance platform continues to serve an important role within SUI Group Holdings Limited, even as our strategic focus has shifted toward digital assets. As we have discussed in prior periods, this business was built on a foundation of selective underwriting and structured lending. We continue to focus on opportunities where we have strong visibility into collateral, cash flow, and borrower quality while maintaining a conservative posture on how we deploy capital. At the same time, the relative contribution of this segment to our overall financial profile has evolved. As our SUI treasury strategy has scaled, digital asset-related activities have become the primary driver of both our balance sheet and our forward-looking strategy. The legacy portfolio remains in place and is now intended as a complementary component rather than the core engine of the business. The specialty finance platform is designed to provide a base level of cash generation while our digital asset strategy offers exposure to higher-growth opportunities within the SUI ecosystem. Though this quarter saw increased credit risk and uncertainty regarding borrower delinquencies, we believe the specialty finance platform can help create a balanced framework as we continue to transition SUI Group Holdings Limited toward a more integrated digital asset platform. While we are optimistic in specialty finance, our strategic center of gravity is firmly aligned with building a differentiated, institutionally oriented digital asset treasury platform anchored to the SUI blockchain. With that, I would like to turn the call over to our Chief Financial Officer, Joseph Geraci, to take you through our financial results. Joseph Geraci: Thank you, Doug. A quick reminder as we review our first quarter financial results: all comparisons and variance commentary refer to the prior-year quarter unless otherwise specified. Due to our strategic shift on 07/31/2025 from our specialty finance business toward blockchain-native treasury management, our historical financial condition and results of operations for the periods presented may not be comparable. Total adjusted revenue, including investment income and other income, for 2026 increased to $1.4 million compared to approximately $778 thousand in 2025. This increase was primarily driven by the generation of staking revenue and digital lending interest income from our SUI digital asset treasury strategy, which had not yet commenced in 2025. Our first quarter 2026 results include approximately $71 million of non-cash losses on digital assets and receivables. The unrealized loss reflects mark-to-market adjustments driven primarily by a decline in the price of SUI during the period. The realized loss relates to the transfer of SUI tokens to Galaxy Digital, in its capacity as our asset manager, resulting in derecognition of the assets and recognition of the difference between carrying value and fair value at the time of transfer. These U.S. GAAP-required accounting treatments reflect changes in estimated fair value and strategic deployment of digital assets and do not represent an actual cash outflow or impact our liquidity. As a result, total operating expenses, including net realized and unrealized (loss) on investments in Q1 2026, were $61.1 million compared to approximately $117 thousand in Q1 2025. Excluding the aforementioned unrealized and realized non-cash loss on digital assets and stock-based compensation, operating expense for 2026 was $5.6 million. Net loss for 2026 was $71 million, or $0.88 per diluted share, compared to net income of approximately [inaudible] and $[inaudible] per diluted share in Q1 2025. As of 03/31/2026, cash and cash equivalents were $15 million compared to $21.9 million as of 12/31/2025. This concludes our prepared remarks. We will now open the call for questions. Operator, back to you. Operator: Thank you. We will now be conducting a question-and-answer session. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Our first question comes from the line of Brian Kinstlinger with Alliance Global Partners. Please proceed with your question. Analyst: Hi, thanks for taking my questions. First, a couple of numbers questions, if I could. Could you tell us, at the end of the quarter, what cash was, what the first quarter cash used from operations was, and what the share count was? Joseph Geraci: Hi, Brian. The share count including prefunded warrants is approximately 80.9 million shares. Total cash, including all stablecoins, was approximately $15 million. Income from operations was approximately $1.6 million. [inaudible regarding tax and adjustments] Analyst: So when you add back the unrealized losses, it was an income of $1.6 million? Joseph Geraci: The $1.6 million was separate from the unrealized losses. That was income from staking and from the specialty finance business. Analyst: Got it. Okay. And then can you discuss any developments either on Google's AP2 or any other exciting development activity that is either already improving transaction volumes on the SUI blockchain or that you expect to? Stephen Mackintosh: Hi, Brian. I can answer that question. At SUI Live today in Miami, Adeni, the Chief Product Officer of SUI, announced a compelling vision for how SUI is going to be the home of agentic finance. There were a few developments related to your question. First was his keynote introducing payment intents, which is about tackling complex atomic transactions on-chain. This is very different from the crypto UX we have today, where users must choose chains, bridge assets, hold gas, understand swaps, manage slippage, and find various transactions. Payment intents remove this complexity entirely. The inspiration comes from the team's background at Facebook—WhatsApp made messaging free to everyone around the world, and SUI wants to do the same with payments so payments can be free and highly scalable globally. Payment intents are important for agents because you can scale a machine-readable economic layer that deals with atomic transactions through SUI's novel architecture and programmable transaction blocks, and allows for verifiability using a core infrastructure development that was also released in the past couple of weeks called mWOL, which is related to the Walrus protocol. This is targeted at agentic workflows. It lives within the Walrus flagship decentralized data storage protocol built on the SUI network and allows for context and reasoning retention, multi-agent collaboration, and, most importantly, verifiable and programmable data such that agents can use storage to scale complex agentic workflows. I also noticed a number of interesting industry partners, including the Google team, present today. Development is continuing, and it is a very exciting time. Analyst: Last, I know your goal is to increase the yield. Maybe you can provide a pipeline on what kind of deals you are reviewing. Are there dozens? Are there only a couple? And maybe what you hope to exit 2026 with in terms of yield. Stephen Mackintosh: That is an interesting question. First, just on DeFi at the moment, it is well documented there have been over, I believe, 18 DeFi protocols that have had hacks or been penetrated in the last few weeks. Having spoken deeply with the market and the SUI team, this is across different protocols, with major hacks on platforms like Drift, which are EVM-based protocols. There is a notion that hackers and various actors are learning to use AI to identify potential breaches. We took the precaution to remove all our SUI that were in DeFi ecosystems directly onto DeFi protocols out of an abundance of caution. We do not want any losses in pursuit of yield. We have always taken a risk-based approach. We did that over the last few weeks as soon as we saw these hacks coming through. We expect to end the year at approximately 3% to 4%. We had planned to end the year slightly higher, but there have been significant changes in the DeFi ecosystems at the moment, and we are constantly monitoring that from a yield perspective. From an investment perspective, we are constantly looking at different investments. The Bluefin loan that we did was very well structured, and we continue to see an excellent deal out of that loan. We are looking to advance a few other loans on that basis and hope to announce a few things in coming quarters of similar types of transactions. We are also looking at making some equity investments, which will not be material in terms of the greater balance sheet, but we believe they could move the needle. Those relate to the AI sector, which we believe is the greatest unlock for blockchains. Analyst: Great. Thanks, Stephen. Thanks, Marius. Stephen Mackintosh: Thank you. Operator: Our next question comes from the line of Devin Ryan with Citizens Bank. Please proceed with your question. Analyst: Hey, guys, this is Neil Eloff here for Devin. I would love to talk about what you are mentioning on partnerships. Can you give us more insights on how you decide on these partnerships and what goes into that decision-making process? Then beyond the AI target, are there any other specific parts of the chain that you are looking to invest in, whether that be loans or other aspects? Stephen Mackintosh: Sure. First of all, when we look at partnerships, the fundamental is risk—how much risk we are taking, what the risk of losses are, the right risk-reward profile, and how it fits strategically into the business on a long-term basis. On loans, we are constantly looking, but we have taken a risk-based approach. We still have some loans to institutional clients where we are taking counterparty risk that are not in DeFi ecosystems. Those continue to yield well, and with some of them we have parent guarantees where we lower the rate. It is always a risk-based approach, and we continue to look to expand that part of the business. From an equity investment perspective, we are looking at things being built in the ecosystem, and there are four main sectors we are focused on: AI, stablecoins, prediction markets, and real-world tokenization. We think those will be key areas that advance and are core fundamentals of the blockchain sector going forward. In terms of how we invest, we are looking for bold initiatives, not just another protocol. In AI, we are not only investing in AI but also in companies that are AI-centric that we can bring to blockchain and that can build on the blockchain—how they integrate with the blockchain—looking into the future and how that can evolve. We have always thought that, long term, the promise of the sector is that there is not “Web3” and “Web2,” but another technology integrated into the real world together. Analyst: Thanks. Maybe the second question is related to policy. Obviously, the big movement is the Clarity Act. Can you give us thoughts on how you expect that to be a catalyst for the industry and for SUI particularly? Marius Barnett: Steve, do you want to add to that? Stephen Mackintosh: Yes. The industry is anticipating a significant development with Clarity passing the Senate Banking Committee. I believe it is a matter of the industry pulling together and getting it signed while there is an opportunity now, and not having it pushed out into the future. I believe there is substantial institutional participation coming from asset managers and the sell-side investment banks. I experienced that specifically in the form of Bitcoin Hashi. Bitcoin Hashi is an exciting protocol that was introduced this year. It is basically for institutions and qualified custodians to put their Bitcoin to work by using MPC technology and ZK technology on the SUI blockchain, with SUI validators running Bitcoin light clients and nodes, such that stablecoins can be minted against Bitcoin holdings in qualified custody. The amount of institutional participation I have seen for this protocol, which is trying to tackle the fact that only 1% of Bitcoin is used in DeFi through wrapped Bitcoin—which is not only a security issue but also a taxable event—has been notable. The Bitcoin Hashi introduction was well received by the institutional community and continues to be widely anticipated here at SUI Live in Miami. It is a testament to the anticipation that many stakeholders in the industry have around clarity. In regard to price appreciation in the token, following the liquidation cascade last year, and with the Bitcoin price peaking in October and many of the four-year cycle believers, there is some expectation that altcoins and Bitcoin can reprice to the upside at some point in 2026. It might take a couple of months to start building momentum. We are cautiously optimistic, and we look at all the data and signals to make interesting investments from the SUI Group Holdings Limited balance sheet. Analyst: Awesome. Appreciate it, guys. Thanks. Stephen Mackintosh: Thank you. Operator: We have reached the end of the question-and-answer session, and this also concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation. Thank you, and have a great day.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Runway Growth Finance Corp. First Quarter 2026 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Quinlan Abel, Assistant Vice President, Investor Relations. Please go ahead. Quinlan Abel: Thank you, Operator. Good evening, and welcome to the Runway Growth Finance Corp. conference call for the first quarter ended 03/31/2026. Joining us on the call today from Runway Growth Finance Corp. are David Spreng, chief executive officer and chief investment officer of Runway Growth Capital LLC, our investment adviser, Thomas B. Raterman, chief financial officer and chief operating officer, and Carmela Thompson, our senior vice president, finance and accounting. Runway Growth Finance Corp.'s first quarter 2026 financial results were released just after today's market close and can be accessed from Runway Growth Finance Corp.'s investor relations website at investors.runwaygrowth.com. We have arranged for a replay of the call to be available on the Runway Growth Finance Corp. web page. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, without limitation, market conditions caused by uncertainties surrounding interest rates, changing economic conditions, and other factors we identify in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof, and Runway Growth Finance Corp. assumes no obligation to update the forward-looking statements or events. To obtain copies of SEC-related filings, please visit our website. With that, I will turn the call over to David. David Spreng: Thank you, Quinlan, and thank you, everyone, for joining us this evening to discuss our first quarter 2026 results. Today, I will highlight notable developments from the quarter, provide an update on recent leadership appointments, and offer additional color on our approach to software investments. Then Thomas will take a deeper dive into our financial performance and portfolio metrics. I want to start by saying I am truly excited about the closing of the SWK transaction last month. It is a milestone moment for our investors and our team. In tandem with the closing of the deal, we are pleased to welcome JD Thomas as a managing director of health care and life sciences investing, where he will leverage his extensive expertise to further strengthen our investment platform. This acquisition has already strengthened our position in health care and further diversified our portfolio. JD's appointment is both a logical progression and a great opportunity as we further optimize our portfolio in the coming quarters. I would also like to congratulate Avisha Kubani on her promotion to chief credit officer of our investment adviser Runway Growth Capital. Since joining Runway in 2018, she has held a range of roles across portfolio monitoring and management analytics and valuation, bringing a deep understanding of our portfolio and credit discipline to this position. In addition, we are announcing today that Thomas B. Raterman, our CFO and COO, who joined me shortly after I started the firm, will become vice chairman of Runway Growth Capital effective 06/30/2026. He will be stepping back from his day-to-day roles at the BDC, including as CFO and COO, to focus on strategic initiatives that include portfolio optimization, platform-level M&A, capital market transactions, and capital formation. Thomas will continue to play an integral role for the BDC serving on our investment committee and assisting with special situation assets. In tandem with this news, we are very pleased to share that Carmela Thompson, our SVP finance and accounting, will become CFO at that time. Carmela joined our firm in June 2021 from KPMG and played an integral role in our IPO later that year. Since then, Carmela has contributed meaningfully to our financial reporting processes and capital raising efforts and has managed important aspects of portfolio accounting and operations. Carmela's experience and expertise give her a strong understanding of Runway's financial strategy, capital structure, and portfolio construction as we enter our next phase. Lastly, I am energized to be returning to the role of chief investment officer of our adviser. Our efforts since joining the BC Partners Credit platform have put the right pieces on the chessboard, and now we are going to work with this refreshed team to maximize returns for our shareholders. To that end, I would like to thank Greg Greifeld for his dedication over the years at Runway and wish him well in his future endeavors. We are confident in this experienced leadership team and the contributions JD, Avisha, and Carmela will make strengthening our origination and investment capabilities and financial operations and supporting our ability to deliver superior risk-adjusted returns. Turning to our portfolio activity for the quarter, it is important to note that as we worked to close the SWK transaction, we temporarily slowed our evaluation of new opportunities in the pipeline to focus on integrating the SWK portfolio and post-transaction balance sheet. With the transaction now behind us, we are positioned to be very selective in capitalizing on a robust pipeline moving forward. We are even more confident in our ability to source high-quality investments across our core sectors: technology, health care, and select consumer products and services. In the first quarter, Runway delivered total investment income of $29.5 million and net investment income of $10.6 million. During the quarter, we completed four investments in new and existing portfolio companies representing $17.6 million in funded investments. We also completed an additional debt commitment of $46.3 million, which will be partially funded during 2026. These investments included the following: First, the completion of a new $7.5 million investment to HR Pharmaceuticals, a founder-owned medical products platform specializing in the development, manufacturing, and supply of branded consumable products serving the acute and home care markets. We funded $5.5 million at close along with $2 million of preferred equity financing. Second, we completed an additional debt commitment of $46.3 million to [inaudible], a digitally native fragrance brand, which we expect will be partially funded during 2026. Finally, we completed three follow-on investments with an aggregate amount of $10.1 million to three existing portfolio companies. Subsequent to the first quarter, we continue to evaluate compelling opportunities that meet our high standards while strategically increasing our exposure to innovative health care and life science companies with durable long-term business models. We look forward to updating you on these opportunities in further detail as appropriate. Turning to the ongoing market dynamics facing the sector, as discussed during our fourth quarter 2025 earnings call, the recent debate around software and AI disruption has contributed to increased scrutiny of private credit and has been further compounded by headlines around elevated redemptions in evergreen funds. While media coverage has leaned into this narrative, it has failed to recognize the resilience of actual credit performance despite macro and rate headwinds over the last few years. Underlying fundamentals remain solid with default rates at manageable levels and broader credit metrics showing stability rather than stress. In terms of the venture market specifically, PitchBook/NVCA finds that activity remains modest overall and robust at the top end of the market with record levels of capital deployed. The data also points to resilience in early-stage investing and sustained interest in high-growth areas like AI. This suggests that while the market is selective, there are clear pockets of strength and opportunity underpinning venture activity. Overall, we believe we are well positioned for strong long-term performance despite the current sentiment, supported by our rigorous investment approach and our seasoned leadership team which brings decades of venture capital experience. Our confidence is supported by our expanded platform which is supported by the expertise of BC Partners Credit and further enhanced by the acquisition of SWK Holdings. With the closing of the SWK acquisition, we have meaningfully reconstructed our portfolio with attractive diversification in key sectors like health care, with stronger future earnings power. Today, we have a more diversified, balanced, and enhanced portfolio with the health care and life sciences sector comprising 32% of the portfolio at fair value. This transformation is an important context as we discuss the quarter's results. With respect to our software portfolio and approach to software investing, we maintain our long-term thesis on software and technology, our diligent approach to portfolio construction, and emphasis on risk mitigation. Across multiple economic cycles and market dislocations, our focus on high-quality late-stage companies with proven fundamentals has contributed to the resilience of our portfolio over time. We remain confident in our existing software positions and continue to evaluate compelling opportunities in the sector. Our software investments are high-quality, late-stage businesses characterized by mission-critical functions, long diligence and implementation cycles, and strong competitive moats, which include deep domain expertise, high switching costs, and diversified customer bases. We believe these attributes position our portfolio companies to not only coexist with AI but to leverage it to optimize operations and accelerate market penetration. We apply the same exceptional level of diligence and rigor in underwriting our software investments that we do to our portfolio at large. We remain confident in our pipeline and optimistic about the year as we realize the benefits of integrating the SWK portfolio and drive stronger outcomes for both our borrowers and our shareholders. Now, Thomas, over to you. Thomas B. Raterman: Thank you, David. In the first quarter, we generated total investment income of $29.5 million and net investment income of $10.6 million, a decrease compared to $30 million and $11.6 million in 2025. Our weighted average portfolio risk rating increased to 2.67 in 2026 compared to 2.45 in 2025. Our weighted average risk rating changed primarily as a result of moving two loans, Marley Spoon and BlueShift, to category five in nonaccrual status. Our weighted average risk rating calculated without these two specific loans moved from 2.67 to 2.37. Our rating system is based on a scale of one to five where one represents the most favorable credit rating. Our total investment portfolio had a fair value of $886.3 million, a decrease of 4.4% from $927.4 million in 2025. As of 03/31/2026, Runway Growth Finance Corp. had net assets of $438.2 million, decreasing from $485 million in 2025. NAV per share was $12.13, a decrease of 9.6% compared to $13.42 as of 12/31/2025. The NAV per share disclosed subsequent to quarter end in connection with the SWK closing of $11.93 primarily reflected estimated transaction costs of $7.7 million. In discussing our NAV for the quarter, it is important to contextualize our go-forward portfolio and the financial benefits of the SWK acquisition. On a pro forma basis, our portfolio is $1.1 billion, more than offsetting the impact of repayments in the Runway portfolio during 2025. It also drives diversification in terms of both industry exposure and the reduction of average loan size by 11%. Health care and life sciences will now account for 32% of our portfolio and 30% of our debt portfolio compared to [inaudible], respectively, at the end of the first quarter, and we expect to see a positive contribution to the portfolio's return profile over the balance of the year. Beyond financial contributions, our strengthened origination capabilities enhance our ability to source high-quality investments and selectively upsize existing commitments. Moving back to the quarter, we delivered $0.29 per share of net investment income and a base dividend of $0.33 per share. At quarter end, we had spillover income of approximately $0.65 per share. Net investment income this quarter was impacted by the acceleration of one-time deferred debt costs as well as a smaller average portfolio size due to elevated prepayments in 2025, the effects of which were further compounded by slower originations ahead of the deal close as we described earlier. Looking ahead to next quarter, we expect contributions from the fully integrated SWK portfolio and a lag in associated management fees to benefit NII by approximately $0.03 per share. However, we expect this benefit will be more than offset by the impact of Marley Spoon and BlueShift being placed on nonaccrual late in Q1. The full-quarter earnings impact of these new nonaccruals of $0.06 per share will be reflected in Q2. We are actively working with the management teams at Marley Spoon, BlueShift, and Mingle Healthcare and seek to achieve optimal outcomes for the portfolio. These situations are dynamic, and in the case of Marley Spoon, very complex, and as we have seen in the past, can take time to fully resolve. We do not see any thematic drivers to these recent credit downgrades. These are situations we have been monitoring and decided this was the prudent course of action to take at this time. Although our team puts maximum effort into avoiding these situations, some level of defaults are unavoidable, and we are working diligently to resolve them. With respect to the dividend, we believe that it is currently set at an appropriate level. We are committed to delivering for our shareholders, and our Board continues to evaluate future distributions with the goal of maintaining consistency while maximizing returns. Our debt portfolio generated a dollar-weighted average annualized yield of 14.2% for 2026, consistent with 14.2% in 2025 and declining from 15.4% in the same period last year. Moving on to expenses, total operating expenses were $18.8 million, an increase from $18.4 million in 2025. We recorded a net realized gain on investments of $1.3 million during 2026 compared to a realized loss on investments of $380,000 during 2025. During the first quarter, we experienced one full repayment and one partial repayment totaling $15 million, scheduled amortization of $1.9 million, and $2.5 million in equity proceeds. We remain focused on maximizing value over both the short and long term and continue to monitor the portfolio closely. Overall, we believe that downside risk is manageable and that our portfolio is well positioned to deliver stable results. Our confidence in the portfolio is supported by several key metrics which support a more balanced and right-sized mix of investments. Prior to the closing of the SWK transaction, our top 10 investments accounted for 54% of the portfolio and now account for only 43%. Looking at the breakdown of verticals within the portfolio, they are now more balanced across technology, financials, health care, and select consumer products and services, and over half of our portfolio companies are cash flow positive, underscoring the strong fundamentals our portfolio is built on. Within our software portfolio specifically, 62% of the companies are cash flow positive, 100% of our loans have financial covenants, and the weighted average fair value as a percent of cost, excluding nonaccruals, was 97%, and 94% of the loans in our software portfolio are sponsored. Each position in our portfolio undergoes a comprehensive evaluation process internally on a quarterly basis and periodically by a third party. For perspective, every material software investment in our portfolio was reviewed by a third-party valuation specialist in Q1. The portfolio was constructed intentionally with 98% first-lien exposure and well-diversified exposure across end markets. These results underscore the strength of our software portfolio and the diligence we apply to loans in the space. Please refer to our earnings presentation for additional detail on our software. As of 03/31/2026, our leverage ratio and asset coverage ratio were 0.98 and 2.02, respectively, compared to 0.90 and 2.11, respectively, at the end of 2025. Our total available liquidity was $372.3 million, including unrestricted cash and equivalents. We have borrowing capacity of $370 million under our KeyBank credit facility. On a pro forma basis, immediately following the SWK transaction close, our leverage ratio, asset coverage ratio, and total available liquidity were approximately 1.20, 1.84, and $231.8 million, respectively. As of 03/31/2026, we had a total of $179.2 million in unfunded commitments, which was comprised of $156.3 million to provide debt financing to our portfolio companies and $22.8 million to provide equity financing through our JV with Canma. Approximately $23.3 million of our unfunded debt commitments are eligible to be drawn based on achieved milestones. On 05/05/2026, our Board declared a regular distribution for 2026 of $0.33 per share. While there may be some variability in earnings on a quarter-to-quarter basis, we are confident in the long-term trajectory of our return profile and the strength of our combined portfolio. Finally, today, we are announcing a new share repurchase program for $15 million which will expire on 05/07/2027. Thoughtful capital allocation remains a priority, and at current levels, we believe Runway Growth Finance Corp.'s common shares present a highly attractive opportunity. We expect repurchases to be partly funded by proceeds from loan repayments in the coming quarters. With that, Operator, we will now open the call for questions. Operator: Thank you. As a reminder, to ask a question, you will need to press 1-1 on your telephone. To remove yourself from the queue, you may press 1-1 again. Again, that is 1-1 on your telephone to ask a question. Please stand by while we compile the Q&A roster. Our first question comes from the line of Erik Zwick of Lucid Capital Markets. Your question please, Erik. Erik Edward Zwick: Thanks. Good afternoon, everyone. First, David, you mentioned a lot of personnel changes and promotions, and I know Thomas is on the line. So, Thomas, congratulations on your next position, and congrats to any of those else listening online. One, I wanted to start maybe with a question for Thomas. Just trying to potentially understand the kind of one-time expenses that may have been recorded in the quarter related to both the SWK acquisition and also, I think you mentioned, some accelerated debt expense as well. Just trying to drill down to maybe what a more kind of core run rate might have been. Thomas B. Raterman: Yes. There was about $0.02 or $0.03 related to the early redemption of our baby bonds. If you recall, in January–February, we did a new baby bond offering, and we redeemed our 8% notes. So that is the number there. There were no SWK expenses directly. Most all of those would be capitalized into the transaction. There could be some modest amount just in terms of allocation of personnel that caused our allocations to the BDC to change a little bit, but it would be a rounding error. Erik Edward Zwick: Got it. That is helpful. Thanks. Thomas B. Raterman: Thanks for the congrats. Erik Edward Zwick: You are welcome. The other one I wanted to ask, just along the lines of the new share repurchase authorization, given BlueShift Labs and Marley Spoon moving to nonaccrual and creating a little bit of earnings headwind, just how do you weigh, in your mind, how you evaluate the use of capital in terms of investing into new portfolio companies that would generate income versus buying back shares? Thomas B. Raterman: Yes, it is always a tough balancing act between those two because purchasing shares at this level, at this percent of NAV, is immediately accretive. What really guides that is our excess borrowing base, if you will, and our leverage ratio that we calculate. We want to keep those two in check. We want to make sure we maintain adequate dry powder. We will be biased towards the deals that come in for those that have the best risk-return trade-off, choose the higher-yielding ones, probably the smaller-size transactions, all within our stated risk parameters. Erik Edward Zwick: Great. Thanks for taking my questions. Operator: Thank you. Once again, to ask a question, you will need to press 1-1 on your telephone. To remove yourself from the queue, you may press 1-1 again. Our next question comes from the line of Christopher Nolan of Ladenburg Thalmann. Your line is open, Christopher. Christopher Nolan: Hi, and echo congratulations, Thomas, on your next move, and congratulations to everyone who got the step. What was the driver for the unrealized depreciation charges again? I think you addressed it in the comments, but I missed it. Thomas B. Raterman: So the changes in fair value of the impact on NAV were really related primarily to two buckets. About a third, or just under a third, was related to declines in the market multiples. But the majority of it was related to the watch list names, primarily BlueShift and Marley Spoon. Christopher Nolan: Great. And I think you mentioned that the drag on earnings from those two would be roughly $0.06 a quarter. Thomas B. Raterman: That is correct. And our watch list is about six names. A number of them are marked at that 50% range, and we think those are very fair marks. Those workouts will take varying times to sort through. They have different levels of complexity, and so it will take a little bit of time to replace those with earning assets. But there is a game plan for each of them that is being fully adjudicated. Christopher Nolan: Okay. And then turning to SWK, I know you mentioned earlier that it would be accretive to earnings. Do you have any sort of time frame when you expect it to be accretive to EPS? Thomas B. Raterman: It should begin to be accretive to EPS in Q2, and then fully accretive in Q3. And the reason I say partially accretive is because it closed on April 6 as opposed to March 31. Christopher Nolan: Great. Thank you. Operator: I would now like to turn the call back over to David Spreng for closing remarks. Sir? David Spreng: Thank you, Operator. And thank you all for joining us today. We look forward to updating you on our second quarter financial results in August. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good day, and welcome to The Joint Corp. First Quarter 2026 Financial Results Conference Call. All participants will be in a listen-only mode. After today’s presentation, to ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Richard Land, Alliance Advisors Investor Relations. Please go ahead. Richard Land: Thank you, Danielle, and good afternoon, everyone. This is Richard Land with Alliance Advisors Investor Relations. Joining us on the call today are President and CEO, Sanjiv Razdan, and CFO, Scott Justin Bowman. Please note we are using a slide presentation that can be found on The Joint Corp.’s IR website. This afternoon, The Joint Corp. issued a press release for the first quarter ended 03/31/2026. If you do not already have a copy, it can also be found on the company’s website. Please be advised that today’s discussion, including any financial and related guidance to be provided, consists of forward-looking statements as defined by securities laws. These statements are based on information currently available to us and involve risks and uncertainties that could cause actual future results, performance, business prospects, and opportunities to differ materially from those expressed in or implied by these statements. Important factors that could cause such differences are discussed in the risk factor section of The Joint Corp.’s filings with the Securities and Exchange Commission. Forward-looking statements speak only as of the date the statements are made, and the company assumes no obligation to update them except to the extent required by applicable securities laws. Management uses non-GAAP financial measures such as EBITDA, adjusted EBITDA, free cash flow, and system-wide sales. Descriptions of these measures are included in the press release issued earlier this afternoon and reconciliations to the most directly comparable GAAP measures are included in the appendix to the presentation and press release, both of which are available in the Investors tab of our website. With that, I will now turn the call over to Sanjiv Razdan. Sanjiv, please go ahead. Sanjiv Razdan: Thank you, Richard. Good afternoon, everyone. Alongside the strong first quarter results we reported today, we continue to make meaningful progress with our Joint 2.0 initiative, the first phase of our transformation journey. In April, we entered into an agreement for the sale of 45 company-owned or managed clinics in Southern California. When combined with the two other signed refranchising agreements that are pending closing, just three clinics out of our entire portfolio remain company-owned or managed. That is down from 135 at the start of this process. This is a defining milestone. With our refranchising efforts effectively complete, The Joint Corp. is now, in every meaningful sense, a pure-play franchisor. And as we continue to implement heightened cost discipline across our operations, our financial results are benefiting. These benefits include higher profitability and free cash flow conversion, which we are in part allocating for the benefit of our shareholders, including through our continued share repurchases, as well as through recent RD territory buybacks. On slide five, let me touch on the Q1 financial highlights before walking through the details of our transformation. Revenue from continuing operations grew 13% year-over-year to $14.8 million. Adjusted EBITDA from continuing operations was $2.2 million compared to $46 thousand in Q1 2025, underscoring the operating leverage we are generating as we shift toward more royalty- and fee-based franchise revenue. Net income from continuing operations was $1.1 million compared to a net loss of $506 thousand in Q1 2025. And cash flow from operating activities improved by $2.2 million from 2025, helping to drive a $2.3 million improvement in free cash flow over the same period. On slide six, now I will walk through our recent refranchising activity in more detail. In March 2026, we signed a letter of intent for the sale of five company-owned or managed clinics. Then in April, subsequent to quarter end, we signed an asset purchase agreement for the sale of 45 company-owned or managed clinics for a total of $2.3 million. When completed, these two transactions, along with the asset purchase agreement announced in December, will bring our company-owned clinic count down to just three, which compares to 135 corporate clinics at the start of our Joint 2.0 initiative. Completing this journey ahead of schedule is a testament to the strength of our operator relationships and the attractiveness of The Joint Corp. franchise model. In addition to our success with refranchising, we also recently completed buybacks of three regional developer territories, allowing us to capture a greater share of long-term royalty economics in those markets. Now that we have bought back these RD territories, it allows us to provide strong direct support to our franchisees and drive growth over time. On slide seven, with The Joint Corp.’s 2.0 transformation efforts nearing completion, I want to share our thinking about what comes next. We are increasingly focused on The Joint Corp. 3.0, the next phase of our journey, which will begin in earnest in 2027. That phase will prioritize growth through new channels, including B2B, expansion into underpenetrated U.S. markets, and potential entry into our first international market. Underpinning this is a powerful set of consumer trends, including growing interest in longevity, health span, mindfulness, sleep quality, and noninvasive whole-body care. Chiropractic care and The Joint Corp.’s unique model are exceptionally well positioned against this backdrop. We see significant opportunity to evolve our brand positioning not just around the theme of pain relief, but also around moving better, with quantifiable patient outcomes through the creation of the Joint Move Score feature. In line with this positioning, we are exploring signature treatments, nutritional supplements, and orthotics. On slide eight, now turning to our marketing efforts and how we are driving top-line momentum. Our messaging continues to center on chiropractic care for pain relief, helping patients improve their mobility and get back to doing the things they love. This message tends to attract patients who stay with us longer. Our national marketing and advertising program, which was launched in November, is now several months in. We have seen sequential improvement in member growth each month since launch, which is encouraging. On the digital side, our ongoing SEO and AI visibility optimization work is driving higher organic traffic and lead quality, with our AI visibility score improving to between 78 and 80, up from about 70 at the beginning of the process. We now exceed the industry benchmark. Meanwhile, all local clinic microsites have been migrated to the new optimized template, and we are seeing continued positive trends in traffic and high-intent actions, including new inbound phone calls and form submissions. During Q1, we benefited from new sales initiative tests, including the introduction of a new three-month minimum term commitment program and new, more flexible offerings to drive conversion and longer-term retention, and we signed our first B2B partnership program, which gives our partners’ employees access to care at The Joint Corp. In addition, we have started to roll out our new CareCredit program nationwide, which provides patients with deferred payment options on higher-ticket packages and plans, improving their access to care. It also enables access to 12 million members in the CareCredit program network. Lastly, our pricing optimization efforts continued during the quarter, with $5 to $10 price increases now rolled out across approximately 300 clinics, with the rest of the portfolio starting to implement this pricing beginning in the third quarter. Feedback to date indicates no meaningful patient pushback, and we are using this data to ensure pricing changes support revenue optimization without impacting patient acquisition or retention. Turning to slide nine, I will speak to comp sales and patient engagement. Q1 comp sales of negative 4.2% reflected the impact of continued macro headwinds, such as general cost of living pressures across the entire market. However, comp sales are expected to consistently improve throughout the balance of the year, as Scott will speak to shortly. Beginning with January, we have now had four consecutive months of month-on-month improvement in active member count per clinic. We expect comp sales trends to improve throughout the balance of the year as our national campaign matures, SEO improvements compound, and pricing optimization rolls out more broadly. Growing our active member base remains a central driver of comp sales improvement, and we will drive growth through stronger lead generation, better in-clinic conversion, and improved retention, along with the benefit of optimized pricing. Our patient retention rate has improved over the prior year, supported by more flexible offerings and longer contract minimums. This gives us a stronger foundation from which to accelerate growth. With that, I will turn it over to Scott, our CFO. Scott Justin Bowman: Thanks, Sanjiv. To start, let us discuss our operating metrics. System-wide sales in the first quarter were $126 million, a decline of 4.9% compared to the same period last year. Comp sales were negative 4.2%, consistent with the headwinds Sanjiv discussed earlier. Meanwhile, adjusted EBITDA from consolidated operations grew 22% to $3.5 million, demonstrating our profitability improvements. Turning to slide 12, I will review our results from continuing operations for the first quarter unless otherwise specified. Revenues grew 13% to $14.8 million, reflecting the early benefits of transitioning clinics to continuing operations as part of refranchising. Cost of revenues was $2.7 million, down 8% compared to the same period last year, primarily due to lower regional developer royalties. Selling and marketing expenses were $3.7 million, up 6% compared to the same period last year, driven by the transition of clinics to continuing operations. Meanwhile, G&A expenses increased 2% to $7.1 million, of which approximately $300 thousand relates to expenses that will not be incurred upon the completion of our refranchising strategy. Overall, we expect G&A to decline as a percentage of revenue as we complete the transition of company-owned clinics to franchise clinics. Net income from continuing operations was $1.1 million compared to a net loss of $506 thousand in the same period last year, while consolidated net income was $1.3 million compared to $1 million in the prior-year period. And lastly, adjusted EBITDA from continuing operations was $2.2 million compared to $46 thousand in the same period last year, a clear reflection of the operating leverage we will have in our pure franchise model. On slide 13, let us discuss our clinic count. Total clinic count was 943 at the end of the first quarter, compared to 960 at year-end 2025. During the first quarter, we opened three clinics and closed 20, resulting in 868 franchise clinics and 75 company-owned or managed clinics. This reflects our previously discussed strategy to optimize the portfolio for quality and performance. As Sanjiv noted, the asset purchase agreement signed in April, combined with the letter of intent signed in March, will reduce our company-owned clinic count to just three when the transactions close. Meanwhile, our work to improve new clinic performance through enhanced preopening protocols continues to drive faster time to breakeven for new openings. Now I will review our balance sheet and capital allocation. Unrestricted cash at the end of the first quarter was $20.7 million compared to $23.6 million at year-end 2025. We maintain our $20 million line of credit with JPMorgan Chase, which remains fully undrawn and is available through August 2029. In early May, we extended the maturity of our credit facility by two years from August 2027 to August 2029. During the quarter, we repurchased approximately 137 thousand shares for total consideration of $1.1 million at an average price of $8.35 per share. We now have $4.5 million remaining under the $12 million authorization approved in November 2025. As Sanjiv mentioned, we also completed three RD territory buybacks recently, which will further optimize our portfolio economics. Through these buybacks, we expect to realize approximately $450 thousand in reduced RD royalties on an annualized basis, partially offset by internal costs to manage these territories. On to slide 15, we are reiterating our full-year 2026 guidance, as originally provided in March 2026. We expect system-wide sales of $519 million to $552 million, comp sales in the range of negative 3% to positive 3%, consolidated adjusted EBITDA in the range of $12.5 million to $13.5 million, and new franchise clinic openings in the range of 30 to 35. As Sanjiv noted, we expect comp sales trends to improve throughout the year, with a general cadence of slightly negative comps in Q2, followed by positive comps in Q3 and Q4, with the fourth quarter expected to be higher than the third quarter. New clinic openings will continue to be offset by closures as we reshape the portfolio around stronger operators and healthier sites, meaning that on a net basis, our clinic count at the end of 2026 will be lower than 2025. This clinic portfolio optimization leaves us with a stronger foundation to grow from, and we continue to believe that there is potential for more than 1,800 franchise clinics in the U.S. alone. On slide 16, we continue to work towards our pure-play franchisor model, which will be capital-light with lower G&A expense and higher profitability margins. Once refranchising is complete, we expect to achieve this model starting in 2026. Keep in mind that these are not our long-term targets. They are just a starting point once the full benefit of refranchising is realized, which we intend to build on in 2027 and beyond. For the model, gross margin is expected to be 83% to 85% of revenues, compared to 90% in 2025. G&A expense is expected to be 40% to 42% of revenues, compared to 64% in 2025. Capex is expected to be approximately 3% of revenues, and free cash flow conversion, which we define as free cash flow divided by adjusted EBITDA, is expected to be 60% to 70%. These assumptions would result in an estimated adjusted EBITDA margin of 19% to 21% and net income margin of 13% to 15%. Finally, on slide 17, I will speak to our capital allocation. As highlighted by our activities in Q1, we remain committed to a disciplined capital allocation framework that prioritizes investments in growth initiatives, share repurchases, and opportunistic repurchase of RD territories. With that, I will turn it back over to Sanjiv. Thanks, Sanjiv. Sanjiv Razdan: On slide 19, Q1 was another quarter of continued progress toward reigniting growth. The financial results, with 13% revenue growth from continuing operations and 22% consolidated adjusted EBITDA growth, are starting to reflect the franchisor model we have been building. The Joint Corp. 2.0 transformation is now nearing complete, and we are securing a strong foundation to launch The Joint Corp. 3.0 as a capital-light pure-play franchisor with a growing national brand, improving patient acquisition trends, and a pipeline of new B2B initiatives. Meanwhile, our capital allocation, including share repurchases, RD buybacks, and disciplined investment in growth initiatives, reflects our conviction in the long-term value of this business and our commitment to delivering returns for stockholders. And finally, we are also building a business that is well aligned with where healthcare and wellness are heading. Consumer demand for longevity, health span, and noninvasive whole-body care is growing, and The Joint Corp. is uniquely positioned to meet that demand at scale. With that, operator, we are ready for Q&A. Operator: We will now open the call for questions. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. The first question comes from Jeff Van Sinderen from B. Riley. Please go ahead. Jeff Van Sinderen: Hi, everyone. Just wondering on the timeframe to close the refranchising transactions. I think you said second half, you expected those to be completed. So it sounds like they are closing in the next month or so, couple months? Scott Justin Bowman: Yes. The timing on those is dependent on getting the leases assigned to the new owners, and so that is an ongoing process. Over the next couple of months, we should be very near completion of that lease assignment process. Sanjiv Razdan: Jeff, in addition to that, what I want to make sure is clear is that all but six or seven of those clinics now are being operated by the buyers of these clinics. Either those leases have already been transferred to them and they are owning and operating those clinics, or they are operating them under a management services agreement, which, for all intents and purposes, mirrors the economics of a pure franchisor model. So the only mechanical piece that needs to be complete to conclude these deals is to reassign those leases, which we are confident will happen here in the next couple of months. We do have one other small cluster of four or five clinics in Northern California that are under a letter of intent where an APA is expected to be signed shortly. And that then leaves us with three clinics that we are also addressing. I hope that clarifies. Jeff Van Sinderen: I am sorry, that last cluster you mentioned, how many clinics is that? Sanjiv Razdan: The last cluster is five. Jeff Van Sinderen: Got it. And then I am just, I know you went through a bunch of different things in the prepared comments, but I am trying to get a better sense of what you think are the main drivers of getting the same-store sales turned around. It sounds like you feel like you are on the right path to that, but maybe you could just delve a little bit more into that and how you see that coming about. Scott Justin Bowman: Yes, absolutely. Sanjiv Razdan: First of all, I think what I did not say in my prepared comments, but I do not want this point to be lost. As we have now practically concluded refranchising, it is going to allow this entire team here to be single-mindedly focused on growth outcomes. What gives us confidence that we will continue to see the sequential improvement we are seeing is based on the work that we started late last year, which, to recap: one was to pivot the external messaging to pain relief; secondly, we transferred $500 per clinic per month from local marketing to national advertising to invest more on the brand awareness side; three, we got caught up on search engine optimization and now have optimized for AI search where we are slightly ahead of the industry benchmark and we are being rated well there. So that is work that we have already done, and that impact is compounding. In addition, our patient retention is improving. It is significantly better than last year. That is happening as a result of two things. One is that we have extended the minimum contract term from two months to three months, and we have had zero pushback from patients on that. The other thing we have done is create a new offering to help extend the lifetime value of patients. Patients who are on our wellness plan that gets them four visits a month, should they wish to cancel, we are offering them the option of a plan called AlignOne, which gives them one visit per month at $35 a month or $39 a month depending on what part of the country they are in. That gets them one visit per month and then the ability to buy incremental visits. We find that people are, on balance, quite happy to extend their membership with us on that plan, and we are seeing significantly lower attrition on that plan. Even though it is a one-visit-per-month plan, we are seeing the actual uptake closer to two visits per month. Those are some of the things that are giving us confidence. Plus the pricing, Jeff, that was rolled out to 300 clinics — we now feel very confident extending that to the rest of the enterprise, and that is expected to happen early in the third quarter. Jeff Van Sinderen: Okay, good to hear. And then can you just remind us how many RD rights you still have left to buy back if you wanted to buy those back? Sanjiv Razdan: Yes, and just as a reminder, we have now bought back four RD rights in the last 12 months or so, which equate to about $1.3 million in RD royalties, which we are now going to be able to recover. One of those four was done last year, and three we have just concluded and shared with you on this call. I am going to let Scott answer what exactly how many RD territories are left. Scott Justin Bowman: Yes. Remaining, we have 12 RD territories. We will continue to evaluate those opportunities and work with the RDs. Jeff Van Sinderen: Okay, great. Thanks for taking my questions. I will take the rest offline. Sanjiv Razdan: Thank you, Jeff. Operator: The next question comes from Jeremy Hamblin from Craig-Hallum. Analyst: This is Will on for Jeremy. Thanks for taking my questions. First, I was just wondering if you could give us a sense of the demand elasticity you have seen in geographies where you have taken the most price, and then also what you have seen in terms of comp impact from that $10 raise. Scott Justin Bowman: Yes. It is interesting. We have done the analysis looking at the trends, and we coupled that with conversations with the local operators just to understand the dynamics of the price increases. One thing I will start off by saying is that these price increases are just for new patients. Everybody that was already on a plan continues at that same price. It is just for new patients. We have seen little or no pushback. Even with a little bit of an increase in price, we still provide tremendous value. A couple of metrics that we look at are our conversion rate, to see if that has gone down — it has not; no meaningful movement in conversion — and our attrition rate has actually improved. The metrics tell us that it is working, the operators confirm that, and so that gives us the confidence to roll it out further. Analyst: Okay, that is helpful. And then I was just wondering how we should be thinking about SG&A dollars here post-refranchise for the remainder of 2026, and when you would expect to hit stride with the new go-forward run rate. Scott Justin Bowman: The go-forward run rate — we should be mostly on that new model in the back half of this year. As Sanjiv talked about, we signed some agreements late in the quarter making those transitions, which do take a little time to get fully transitioned over. In many ways, they are mimicking the franchise model with the services agreements that they are under, but it is going to be in the back half where we will start to see that model come into play, based on the model that I put out there. From a G&A standpoint, in the materials we show that we were $7.1 million in G&A for the quarter, and that is continuing operations. We will likely see some reductions in that number for the remaining quarters. But keep in mind, that is a continuing operations number. Sanjiv Razdan: In addition, Will, what I would like to add is that the slide that Scott shared on this call about where we expect to land in mid-2026 — that is exactly that. We expect to be there in the back half of this year. As we start to hit that run rate, we expect our ability to bring even more resources to drive growth on the top line and equally optimize our cost structure. Over time, we expect that those numbers we have shared for mid-2026 will only continue to strengthen as we get into 2027 and beyond. Analyst: Okay, that is super helpful. And then just last one from me: wondering how the new clinic pipeline is shaping up — any new interest from new franchisees versus existing — and the cadence of openings for the remainder of the year to get to the guidance. Sanjiv Razdan: Yes. Our guidance of 30 to 35 — we have confidence to get to that guidance, which is why we have reiterated it. The cadence of openings is skewed toward the back half of the year. In terms of when those openings are happening, they will be second half, more heavily loaded. What we are seeing is two things. One, the new openings we had in 2025 — if you recall, we had 29 openings — those 29 openings have outperformed our run rate of prior openings and are tracking to breakeven times at half the time of the run rate. The two clinics that opened very early this year are tracking, at the moment — it is very early days — at an even faster run rate. We are very optimistic about the new clinic openings because of who is opening these clinics — stronger franchisees — strong diligence on site selection and approval, and very robust on-the-ground new clinic opening protocols, which we believe is yielding these results. We are seeing interest from new franchisees coming into the system as well as existing franchisees. An area of focus for us is to grow and develop in the Northeast, where we have been traditionally underpenetrated, and we have had some great early successes there. And even our Southern California corporate clinic bundle we have just sold to a franchisee that is completely new to our system. So we are very excited and encouraged by existing franchisees doubling down on investing in the brand as well as new franchisees being attracted to the brand. Once we publish our franchise disclosure document, we will be able to share some of these numbers more publicly with potential franchisees, and we are optimistic about the impact that will have on our pipeline. Analyst: Understood. Thanks for taking my questions. Operator: As a reminder, if you have a question, please press star then 1. The next question comes from George Kelly from ROTH Capital. Please go ahead. George Kelly: Hey, everyone. Thanks for taking my questions. First one is on pricing. Maybe I missed it in your prepared remarks, but did you settle on a $10 pricing increase? Do you expect to take some kind of price across the entire base by year end, or by Q3? Scott Justin Bowman: We are leveraging a $10 price increase more, and looking at the analytics and working with the operators, that is the preferred increase that we have right now. We expect to take that price across the base by Q3. George Kelly: And then you mentioned the four consecutive months of improved active members. Could you give a sort of comp trend over that same timeframe? Where did you exit the quarter, and what kind of comp growth did you generate? I think you said it was slightly negative. Could you just quantify where comps are trending currently? Scott Justin Bowman: Yes. To end the quarter, they were similar to the full quarter, negative 4.2% — right in that range. However, once we got into April, we did see some improvement, and so quarter-to-date we are running about negative 3%. As Sanjiv mentioned, we are seeing some good signs and month-over-month improvement in our active member growth. That improvement is better trends in attracting new patients, the conversion of those patients, and improvement in our patient retention. Those three areas are what we look at as KPIs to drive active member growth, and we have seen improvement in all three. George Kelly: Two other quick ones. Back to the prior question about your G&A, go-forward G&A. If I look at the $7.1 million in Q1, you mentioned that there was $300,000 of nonrecurring — post-refranchising — that is expected to come out. Was that a quarterly number? And there was also a $600,000 restructuring charge in the quarter — did that fully hit G&A? If I take those two amounts out, is the go-forward G&A run rate somewhere in the low six range? Scott Justin Bowman: Yes, the $300 thousand — you are right — that was a quarterly number, which will go away with one portfolio we refranchise. The restructuring — most of that was in G&A and then was added back for adjusted EBITDA. George Kelly: Last question for me. You mentioned the FDD and your optimism around messaging when that comes out, I presume shortly. If you could, the question I have is just on four-wall margin. Has that stabilized? Do you still hear a lot of input from your franchisees about labor inflation and other aspects of inflation, or do you have a sense that four-wall margin is holding in? Sanjiv Razdan: George, two things. One, of course the FDD is due out shortly, so prospective franchisees and anybody who looks at it will get transparency to the Item 19 and some of the numbers there. What we are seeing now is stabilization. For quite some time — by which I mean several months, almost a year — the labor wage inflation that we were seeing in this business has stabilized, and that is not growing at the same rate that it was in the post-pandemic period. Our input cost structure is relatively stable. As active members keep growing and our ability to transfer some of that cost that we have not transferred on to consumers — we found with these 300 clinics where we have taken the price increases, there has really been no impact to conversion or retention. We are optimistic that will help start to shore up some of the unit-level economics as the new pricing starts to kick in early Q3. George Kelly: Okay. I appreciate it. Thank you. Operator: This concludes our question and answer session. I would like to turn the conference back over to Sanjiv Razdan for closing remarks. Sanjiv Razdan: Thank you all for joining us today. Have a great day. And remember, at The Joint Corp., we always have your back. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Greetings, and welcome to HA Sustainable Infrastructure Capital, Inc.'s First Quarter 2026 Earnings Conference Call and Webcast. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Aaron Chew, Senior Vice President of Investor Relations. Aaron Chew: Thank you, Operator, and good afternoon to everyone joining today for HA Sustainable Infrastructure Capital, Inc.'s First Quarter 2026 Conference Call. Earlier this afternoon, HA Sustainable Infrastructure Capital, Inc. distributed a press release reporting our first quarter 2026 results, a copy of which is available on our website along with a slide presentation we will be referring to today. This conference call is being webcast live on the Investor Relations page of our website, where a replay will be available later today. Some of the comments made in this call are forward-looking statements, which are subject to risks and uncertainties described in the Risk Factors section of the company's Form 10-Ks and other filings with the SEC. Actual results may differ materially from those stated. Today's discussion also includes some non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is available in our earnings release and presentation. Joining us on the call today are Jeffrey A. Lipson, the company's President and CEO, as well as Charles W. Melko, our Chief Financial Officer. Also available for Q&A is Susan D. Nickey, our Chief Client Officer. To kick things off, I will turn it over to our President and CEO, Jeffrey A. Lipson, who will begin on slide three. Jeff? Jeffrey A. Lipson: Thank you, Aaron, and welcome to our first quarter 2026 earnings call. We are pleased to report a strong start to 2026 with outstanding financial results and a positive outlook for the business. In Q1, adjusted EPS was $0.77, driven by growth in revenue across the board along with zero new share issuance from our ATM. Adjusted ROE was 15.7%, the highest quarterly level in our history. Adjusted recurring net investment income was up 29% year-over-year to $101 million, and our managed assets were up 13% year-over-year to $16.4 billion. As we continue to execute on our 2026 business plan, we are reaffirming our 2028 guidance of $3.50 to $3.60 adjusted earnings per share and adjusted ROE of 17%. Moving to slide four, it is important to highlight how our Q1 results represent particularly strong performance in light of the ongoing volatile geopolitical and macroeconomic developments impacting financial and energy markets. Most notable, of course, is the Iran war, creating volatility, particularly in oil prices and jet fuel availability. Separately, the increase in power prices in the U.S. has created affordability challenges. Additionally, credit and liquidity challenges have emerged in the private credit sector, with implications across financial and credit markets. Despite these challenges impacting the economy, our business has remained consistently profitable, with ongoing earnings growth as we effectively address this volatility. In fact, certain of these developments reinforce the value of renewable energy and HA Sustainable Infrastructure Capital, Inc.'s investment thesis. For example, once installed and operational, renewable energy projects have minimal operating costs and do not depend on an ongoing supply of fuels but instead are powered by naturally replenishing resources. Renewable energy projects are less vulnerable to geopolitical volatility and bolster energy independence and national security, and they provide a high degree of cost certainty and visibility. The intermittency of renewables can be increasingly improved by continued storage development. In addition, beyond the implications for renewable energy, the recent geopolitical and macroeconomic uncertainty has also served to accentuate the prominent attributes underpinning HA Sustainable Infrastructure Capital, Inc.'s business model of offering differentiated capital solutions to clients supported by project cash flows. This business model results in HA Sustainable Infrastructure Capital, Inc. offering our investors low-risk, diversified exposure to growth in U.S. energy transition infrastructure, stability and visibility of long-term predictable revenue, and a proven track record of exceptional risk-adjusted returns. In the face of this backdrop, we continue to demonstrate the resilience of our business and our ability to execute at a high level with strong operating results. Turning to page five, we closed more than $460 million in new transactions in the quarter that will be held at CCH1 and on our balance sheet, and we increased fee-generating assets 130% year-over-year to $1.1 billion. In terms of the returns on these investments, new asset yields on portfolio transactions closed in the quarter remain over 10.5% for the eighth quarter in a row. Supported by the increase in new asset yields over this period, our portfolio yield rose 90 basis points year-over-year to 9.2%. Finally, we continue to optimize our balance sheet in 2026. As Chuck will provide greater detail on shortly, we were active issuing low-cost, long-duration debt and redeeming higher coupon debt while issuing no ATM shares in the quarter. Turning to slide six, we highlight the investment activity for the quarter, including a robust Q1 total volume of $637 million, of which $462 million will be held by CCH1 and on our balance sheet. This volume keeps us on pace for the $2 billion to $3 billion expectation for 2026 that we discussed on the Q4 call. The investments were well diversified and underwritten with attractive risk-adjusted returns. Our investment platform is continuing to deliver on our goals and fueling the continued growth in our profitability. Turning to page seven, on Monday, we jointly announced with Ameresco the creation of Neogenix, a newly formed joint venture representing the spin-off of Ameresco's biofuels business. We are excited about co-investing in what we expect to be the premier developer and owner-operator of biofuels projects. Ameresco has been a partner of HA Sustainable Infrastructure Capital, Inc. for over 20 years across more than 60 investments, and we have tremendous familiarity and confidence in Mike Bakas and their team. This investment fits well into the HA Sustainable Infrastructure Capital, Inc. business model, as it includes a very strong partner; an asset class, renewable natural gas, in which we have extensive experience; operating projects that we were able to diligence; a business model well suited to current and expected future market demand; and a structure that provides a priority position on cash flows. Neogenix's existing portfolio of operating projects allows the company to have scale from day one and a strong pipeline of identified development opportunities that will facilitate future growth. Our investment in the venture is initially $400 million, and we will own 30% of the enterprise with a priority position on cash distributions until a hurdle return is achieved. Our long-term expected return on investment is higher than our typical investment given the large upside potential of the business. Turning to page eight, our pipeline remains greater than $6.5 billion as end-market dynamics, including consolidation, continue to result in a wide variety of developers and sponsors seeking project-level capital. In addition, power demand continues to result in an elevated level of development activity and policy items are well understood and workable. I also want to mention a definitional change. We first introduced the concept of what we call the next frontier on our Q4 2024 call to illustrate the tremendous growth opportunities for the business. We continued to pursue certain of these asset classes, and we will disclose closings as they occur. However, from a presentation perspective, we have recategorized these into the three existing core segments and an other sustainable infrastructure category as appropriate, in order to simplify our disclosure. And with that, I would like to turn the call over to Chuck to discuss our financial results and funding activity in greater detail. Charles W. Melko: Thanks, Jeff. We are continuing to build off the success achieved in 2025 and have had a great start to the year. We have increased our adjusted EPS to $0.77 per share in the first quarter compared to $0.64 per share in the same period last year. Our adjusted earnings increased 31% from Q1 last year to $102 million in Q1 this year. This increase is predominantly driven by the growth in our investments in CCH1 and our portfolio. Our focus on being more efficient with the deployment of equity capital has contributed to our higher adjusted ROE this quarter at 15.7% compared to 12.8% in the same period last year. The marginal ROE that we are generating is making an impact, and we are benefiting from the reduction of share issuances that we need to fund the growth of our business. While we achieved growth in our adjusted EPS, our GAAP results included an HLBV loss related to the timing of tax credit sale proceeds distributed to tax equity investors, and we expect this HLBV accounting will fully reverse next quarter. On the next slide, we have seen growth in our adjusted recurring net investment income of 29% to just over $100 million, and this source of income is not only generating a good base of recurring earnings, but is also growing into a larger component of our overall earnings relative to our other sources of income, as we illustrated on last quarter's call. Our gain on sale this quarter was $23 million, and as we often highlight, our gain on sale income does not increase quarter to quarter on a trend line. While we do expect full-year gain on sale to be similar to last year, because of the higher level of gain on sale this quarter it is reasonable to expect lower levels of gain on sale for the remaining quarters of the year. The other component of our revenues that consist of upfront fees from CCH1 and other advisory-related fees continue to increase and contributed $9 million to our earnings this quarter. On the next slide, as we close transactions, they become managed assets, which are held either on our balance sheet directly or indirectly through CCH1. These transactions can also be held in securitization trusts where we typically hold a residual interest. We generate upfront and ongoing income from these transactions, and a growing base results in more earnings. Our managed assets are now at $16.4 billion, up 13% year-over-year. We are continuing to see the high-quality performance of these assets that are reflective of our prudent underwriting, with an average annual realized loss rate of less than 10 basis points. The portfolio continues to be well diversified, and in addition to the diversity of asset classes, each of the individual investments also typically consists of multiple projects with uncorrelated cash flows. The earnings power of our portfolio, demonstrated by our portfolio yield, has increased to 9.2% and is a result of the continued closing of transactions into our portfolio at higher yields. The CCH1 assets in which we hold 50% of the equity in our portfolio are now $2.3 billion and are providing a growing stream of ongoing management fees. We also just recently completed a private debt placement at CCH1, in which the notes were priced at a spread of 195 basis points to the 10-year Treasury, a tighter spread than the previous issuance. This is further validation of the quality of the assets that we are investing in and a contributor to the increasing returns on our investments in CCH1. On the next slide, we are continuing to realize a lower cost of capital and successfully manage our liability structure, as demonstrated through the transactions that we executed in February. We issued a total of $1 billion in bonds, between a $400 million senior bond priced at 6% and a $600 million junior subnote priced at 7.125%. The proceeds of these transactions were used to retire our remaining $450 million senior bonds due 2027 with an 8% coupon and create additional liquidity for the upcoming $600 million maturity. The outcome of these transactions resulted in a lower cost of capital, as the spread on our senior bonds improved 50 basis points and the subordination premium on the junior subnotes improved by 48 basis points from the most recent issuances. The maturity profile of our debt platform was significantly extended, the senior bond offering a 10-year maturity and on our junior subnote, a 30-year maturity. Adjusting for the upcoming 2026 maturity, which we have already reserved for with our existing liquidity, the weighted average maturity of our corporate term debt extended from 7.9 years to 12.8 years. On the next slide, I have already made some brief comments on the topics outlined here, but these items really emphasize the benefits of our capital platform. First is our liquidity position. It is a real strength to our business to have the flexibility and timing to access the market and raise capital opportunistically and reduce our costs. We currently have $2.3 billion available, a portion of which we plan to use to pay off the $600 million of remaining notes due in June. After this maturity, our next corporate bond is not due until 2028. Lastly, with our focus on funding more investment with the need for less additional equity, the use of CCH1, issuance of junior subnotes, and the higher reinvested portfolio cash resulted in no additional shares issued through our ATM in the first quarter, and we are on track to issue a minimum amount in 2026 based on our current funding expectations. When coupled with the growth in our managed assets, we are on track to meaningfully accelerate our profitability. I will now turn the call back to Jeff. Jeffrey A. Lipson: Thanks, Chuck. Turning to slide 14, we display our sustainability and impact highlights noting our cumulative carbon count and water count numbers, reflecting the significant impact of our investment strategy. Let us wrap up on slide 15. We reiterate the themes of strong returns in the business, coupled with ongoing access to low-cost capital, that will continue to drive our business towards achieving our guidance levels. I will conclude by addressing the management changes announced today. First, I would like to welcome Christy Freer to our executive team as our Chief Legal Officer and look forward to working with Christy. Next, I want to acknowledge Marc T. Pangburn for his tremendous contribution to HA Sustainable Infrastructure Capital, Inc. over the last 12 years, as Marc has been instrumental in closing countless important transactions that have led to our success. In his new role at GoodFinch, we will continue to work closely with Marc, and he will continue to provide value for HA Sustainable Infrastructure Capital, Inc. by optimizing our SunStrong business. Our prosperity has always been a function of numerous dedicated and talented individuals. The four executives identified in today's press release are all enormously talented and have already built teams and contributed significantly to HA Sustainable Infrastructure Capital, Inc.'s success. I have full confidence in each of them and their expanded roles, and I am thrilled we have this depth of talent in our organization. Anne Marie Reynolds, who recently closed Neogenix, and Manny Halli Miriam, who recently closed SunZea, are extremely well qualified to be our Co-Chief Investment Officers. They both possess outstanding leadership qualities and significant commercial acumen as well as a track record of success. Daniella Shapiro, who has grown our BTM business significantly over the last four years, and Vero Amon, who has upgraded our risk management infrastructure, are both accomplished leaders who will do a tremendous job as our Co-Chief Risk Officers and Investment Committee members. They both possess leadership, credit, and commercial skills extremely well suited to their critical roles. I am very excited by these executive appointments, and I congratulate all. Operator, please open the line for questions. Operator: We will now open the call for questions. We will now begin the question and answer session. If you would like to ask a question, please press star and one. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question comes from Vikram Bagri with Citi. Please state your question. Vikram Bagri: Good evening, everyone. To start off, I wanted to dig into this new JV with Ameresco. I understand the return on that project is higher than where you have been tracking recently. Could you clarify what the yields or returns are on that investment? Also, if you can clarify, relative to your 30% equity interest, what would be the initial cash flow for your take of cash flow initially? And then finally, how do you see this JV evolve? Is this going to be a vehicle for consolidation or organic growth? Do you envision this JV to take the company public at some point, or Ameresco buys you out in the long term? And then I have a follow-up. Thank you. Jeffrey A. Lipson: Sure, Vikram. Thanks for the question. I would say the venture is primarily focused initially on organic growth. There may be consolidation over time in terms of buying other platforms, but that is not the principal objective. There is a critical mass of operating projects going in day one, and there is a very strong pipeline that the team there has developed, so it is a little bit more focused on organic growth. In the long term, whether we someday jointly take this public is much too early to say. We are kicking it off this month, so again, we are focused on building this up into something very special, but the exit strategy is a little premature to talk about. In terms of our cash flow, the initial investment based on the operating projects is roughly $100 million. The other $300 million will go in as additional projects are developed. And then you asked about our cash flow coming back. That is not something we would disclose. Obviously, we have an expectation based on contracts of a certain amount of cash coming back, and it has a very strong cash yield, but we will not disclose that specifically. Vikram Bagri: Got it. And then as a follow-up, I see you moved two receivables from category one to category two. Can you provide more details on that? Fully understanding that this is relatively small for you, I am just trying to understand in which market you are seeing some stress. Are these residential solar assets, utility scale, RNG? Are both the assets in the same sector? Any color you can share on that would be helpful. Thank you. Charles W. Melko: Hey, Vikram. This is Chuck. To set the stage here, you definitely hit on the point that we have very small amounts in that category. It is not often you see too much moving into that category, and we still have 98% of our portfolio in the category one bucket. The item that moved in there is a project that is having some technical challenges with some of the equipment, and it needs a little bit more investment to correct the issue at hand with the equipment itself. There are various plans to get that project where it needs to be on our original economics, and we certainly think there is a good outlook for that. We track projects every quarter, and when we see something moving in one direction that we need to pay attention to, we will not hesitate to put it in category two because we are paying attention to it. Operator: Our next question comes from Christopher J. Dendrinos with RBC Capital Markets. Please state your question. Christopher J. Dendrinos: Great. Thank you. Maybe to follow up on Vikram’s question and ask this more directly. There are some challenges going on in the residential space right now, and a few other folks have highlighted some credit challenges. Are you seeing any of that on your end, and is there any kind of risk exposure there that you could speak to? Jeffrey A. Lipson: I would say generally, no. There is a bit of an uptick in some delinquencies in the residential sector generally. We are seeing a little bit of that in our portfolio as well, but it is tracking well within our original underwriting expectation of charge-offs, and our loans there are all performing. Literally, 100% of the loans in residential are performing. So, again, it is well within our underwriting guidelines, and we are not seeing stress in that portfolio. Christopher J. Dendrinos: Got it. Thanks. And then, maybe as a follow-up here, the tightness in the tax equity markets has been broadly highlighted. Some of the banks are maybe taking a step back near term, waiting for Treasury clarity. Is that translating to any sort of funding opportunity for you where maybe there is a hole in the cap stack and you are able to fill it here? Jeffrey A. Lipson: I am going to respond to the part about the tightness in the market in terms of refilling gaps in the capital stack. That is usually not the dynamic. Tax equity obviously serves a specific purpose in terms of the tax attributes, and it would be hard to substitute traditional HA Sustainable Infrastructure Capital, Inc. capital for that tranche. For the first part of the question around the tightness of tax equity, I am going to ask Susan to address it. Susan D. Nickey: Thanks. A couple of comments. First, regarding tightness, it is important to note that reports from last year indicate the tax equity market actually grew significantly. The Crux platform tracks some of that data, and the total market increased 26% to $63 billion. Very importantly, the tax transfer market, which is still in its third year, grew 50% to $42 billion. At the end of the year, some corporates—now nearly 25% of Fortune 1000 companies are in the market—were dealing with their own understanding of where their corporate tax bill would settle with the change in the tax laws. As we move into this year, some of that tightening that has been reported is easing, and we are seeing and hearing from stakeholders, including Crux, that there is starting to be more liquidity as corporate buyers know where they are settling out, providing some uplift. The second issue, which is a bit different, concerns the FEOC rules related to clean energy tax credits being transferred and not to foreign entity of concern ownership. That relates to 2026 tech-neutral tax credits, not 2025 or before, where substantial safe-harbored pipelines through 2023 will cover many players who already have their inventory set. We expect the IRS and Treasury to continue issuing guidelines; people are waiting for that guidance to be clarified on tax credit ownership. There is precedent, but ambiguity leads some tax equity investors and banks to wait for clarity, which should come. That guidance is important for the whole industry—nuclear, carbon capture, geothermal, all the technologies need that guidance. Lastly, we want to keep working to expand the tax credit market given continuing growth in supply with all the different projects being built across technologies and manufacturing. HA Sustainable Infrastructure Capital, Inc. is working with the industry and American Clean Power to develop standardization documents to help facilitate growing the corporate tax credit market. Christopher J. Dendrinos: Thanks. Maybe just a quick follow-up: will this have any bearing on the investment pace that you are going at right now? Susan D. Nickey: Not in our pipeline. As we discussed, our sponsors—certainly across grid-connected, and as Sunrun and others have mentioned—have safe-harbored their pipelines through 2030, if not the next two years. So it would not directly impact what we are seeing in terms of growth. Operator: Our next question comes from Benjamin Joseph Kallo with Baird. Please state your question. Benjamin Joseph Kallo: Hi. Good evening. My first question is just on CCH1 and the capacity left there under that agreement. And then, following that, has anything changed with your partner in their appetite to invest more after that first tranche? Jeffrey A. Lipson: Thanks, Ben. On the second part of the question, no. Our partner has continued to express significant enthusiasm around the partnership, and as evidenced by the upsize late last year, has shown a strong willingness to continue to invest. As we disclosed on page 11, the assets are $2.3 billion. The commitments are a bit higher than that for some things that are in CCH1 that just have not funded yet. As we mentioned last quarter, as structured right now and given our pipeline, we certainly have enough capacity for this year. And we are working on a CCH2. We have started to commence some activity there. I cannot say too much in terms of detail, but we certainly intend to have that up and going by the time CCH1 capacity has been utilized. Charles W. Melko: I will also add some context for the capacity that we have. We have roughly about $5 billion of capacity available, and that is comprised of the equity commitments between us and KKR of roughly about $3 billion. As we mentioned on our call here, we have issued some debt at CCH1. Keeping our leverage ratio at CCH1 under 1x—anywhere between 0.5x to 1.0x debt to equity—gets you to a total of $5 billion, compared to the $2.3 billion that we currently have in there. Benjamin Joseph Kallo: Okay, great. On your cost of capital, could you talk about how much you think you can reduce your cost of capital? I know you have done a lot. But going from 2025, I think on slide 17 you had 5.8% interest expense over average debt balance; it ticked up in Q1. Could you explain that a bit, and how much more you think you can reduce your total cost of capital going forward? Charles W. Melko: The uptick you are seeing in Q1 is largely attributable to the issuance that we have done on the junior subordinated notes. They carry a little bit higher of a coupon, but from an overall cost of capital standpoint, because we get 50% equity credit for purposes of our leverage ratios with the rating agencies, we issue fewer shares. So while we are paying a slightly higher coupon in interest expense, we are issuing less equity. Overall, it is a benefit to our cost of capital. If you took out from that 6.1% the interest expense related to those hybrids, the debt cost is relatively flat, around 5.8% or so compared to last year. On how much further it can go, we have seen a benefit from reduction of spreads on the debt that we are issuing, in large part due to our efforts getting out there and talking to the investment grade investor market. We have had some success with that. We are still relatively new to the market, so there is a little bit of improvement we could see on the spread. But as you know, spreads across the board are a little tight in the investment-grade market, and they can only go so far. With the guidance we have out there, do we need this to go lower? No, we absolutely do not. With the margins and the yields we are seeing on our assets and the equity efficiency we are achieving, we do not need it to go down further to increase our returns. Operator: A reminder to all participants: to ask a question, please press star and one on your telephone keypad. Our next question comes from Maheep Mandloi with Mizuho Securities. Please state your question. Maheep Mandloi: Thanks for taking the questions. Maybe just on the investment with Ameresco’s Neogenix, if you could talk about the rationale—what motivated you to invest? Is it somewhat similar to what we have seen with the residential solar side, which helps with ITC, or something else that helps you capture more value for the RNG assets? Jeffrey A. Lipson: Sure. Thanks, Maheep. As I mentioned in the prepared remarks, some of the attributes that really attracted us here were, first and foremost, the partnership we have with Ameresco and the trust and familiarity we have with their team. It is very consistent with how we have built the business with programmatic partners. Here, we were able to diligence all of the investments day one. RNG is something we are very familiar with, and we have been very active in RNG, as you know, so it is an asset class we well understood. There was great alignment with the Ameresco team on what we want to do with this business going forward—what the relative structure of the parties would be in terms of ownership and cash flows. It is a real opportunity for us to do something perhaps slightly different than we have done in the past, but with very similar attributes, and with more upside than most of what we do at the project-level investing. Maheep Mandloi: Appreciate it. On the risk of overcomplicating it, Ameresco talked about $2 million to $4 million of net income to you for this year from Neogenix. Is that the framework we should think about and build upon going forward, or how should we think about the modeling here? Jeffrey A. Lipson: From a HA Sustainable Infrastructure Capital, Inc. perspective, our accounting, of course, is different than Ameresco’s. Our accounting here will be simply an equity method investment, consistent with what we have done in the past. We underwrote this in terms of cash-on-cash IRR, and we are going to account for it consistent with how we have accounted for our other equity method investments. There is no pass-through of direct income as part of our accounting. Charles W. Melko: Maheep, I think Ameresco’s release for that number simply took 30% of the total EBITDA expectations for the project. As we have mentioned, this is an investment that is very similar to what we do, where it is a structured equity investment. When you have structured equity investments, we are focused on the cash-on-cash returns. There are targeted returns that we go after, and it is not as simple as just taking 30% of the total project EBITDA. Operator: Our next question comes from Noah Duke Kaye with Oppenheimer & Co. Please state your question. Noah Duke Kaye: Thanks for taking the questions, and hope you are all well. First, on the 12-month pipeline—you replenished this quarter over quarter, still greater than $6.5 billion. It looks like the largest percentage increase, and therefore dollar increase, was in grid-connected assets, which tracks with the increase in grid-scale renewables being deployed. Can you comment on what drove that uptick? Are these primarily mezz debt, pref equity, or of a different nature? Jeffrey A. Lipson: Thanks, Noah. I always caution against too much precision on pipeline disclosure—it is greater than $6.5 billion and it is a 12-month pipeline, so there is always a little bit of judgment involved. But to answer your question, grid-connected does have a very strong pipeline. The vast majority of it is with programmatic partners that HA Sustainable Infrastructure Capital, Inc. has worked with before, and the majority is preferred equity on solar projects. That is the majority of that slice of the pipeline. Noah Duke Kaye: Very helpful. Thanks. This was a quarter with zero ATM issuance. The progress from the company on becoming more capital-light—we are all seeing it. I think the deck says minimal equity issuance expected for 2026. Not asking you to put a finer point on that, but from an equity perspective, how close do you feel this business is to a self-funding model? Jeffrey A. Lipson: I would say very close. You can interpret “minimal” as, if the volume of fundings this year is within the expectation that we set, that could very well be zero. If we are a little more successful than that estimate and end up doing $4 billion to $5 billion, then certainly you would see us issue more equity—but that is accretive equity, and that would reflect a really big year in terms of new originations. That is a good scenario as well. But if we hit the expectation range that we established, we are already self-funding. Charles W. Melko: I will also add that we have seen an uptick in transaction closings, and looking forward, we do expect some growth in that number. If you go back to the slide we prepared last quarter showing how far each dollar of equity goes, we are making much better progress on how little equity we need to issue when making our fundings. In the future, if we are issuing equity, the percentage of that equity relative to total fundings should be a much lower percentage than you have seen historically. Operator: Ladies and gentlemen, that was the last question for today. The conference call of HA Sustainable Infrastructure Capital, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.