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Operator: Welcome to Sensus Healthcare, Inc. First Quarter 2026 Financial Results Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Leigh Salvo with New Street Investor Relations. Please go ahead. Leigh Salvo: Good afternoon. And thank you all for joining today's call to discuss Sensus Healthcare, Inc.'s First Quarter 2026 Financial Results. Joining me from Sensus Healthcare, Inc. are Joseph C. Sardano, Chairman and Chief Executive Officer, Michael J. Sardano, President, Chief Commercial Officer and General Counsel, and Javier Rampolla, Chief Financial Officer. As a reminder, some of the matters that will be discussed during today's call contain forward-looking statements within the meaning of federal securities laws. All statements other than historical facts that address activities Sensus Healthcare, Inc. assumes, plans, expects, believes, intends, or anticipates, and other similar expressions such as will, should, or may occur in the future, are forward-looking statements. The forward-looking statements are management's belief based upon current available information as of the date of this conference call, 05/07/2026. Sensus Healthcare, Inc. undertakes no obligation to revise or update any forward-looking statements except as required by law. All forward-looking statements are subject to risks and uncertainties as described in the Company's Forms 10-K, 10-Q and other SEC filings. During today's call, references will be made to certain non-GAAP financial measures. Sensus Healthcare, Inc. believes these measures provide useful information for investors, yet they should not be considered as a substitute for GAAP, nor should they be viewed as a substitute for operating results determined in accordance with GAAP. A reconciliation of non-GAAP to GAAP results is included in today's press release. With that, I would like to turn the call over to Joseph C. Sardano. Joe? Joseph C. Sardano: Thank you, Leigh, and good afternoon, everybody. We appreciate you joining us today. 2026 represents an important transition period for Sensus Healthcare, Inc. With the dedicated CPT codes for superficial radiotherapy now in effect as of January 1, we are operating in a fundamentally different environment than ever before. We are tasked with the responsibility of helping our entire industry pivot to the new reality. For quite some time, two factors weighed heavily on our business: customer concentration and the absence of reimbursement clarity. Today, we believe both of those factors are beginning to shift in a meaningful way. I would like to frame our discussion around five priorities that we believe will define our progress in 2026 and provide a clear framework for tracking our execution over the course of the year. Number one, educate the market on the new reimbursement and train them on how to utilize the codes. Two, drive customer adoption following CPT code implementation. Three, grow our recurring and utilization-based revenue streams. Four, diversify and strengthen the commercial model. And last, number five, deliver sustainable profitability. Our entire first quarter was dedicated to helping existing customers and new prospects better understand the new reimbursement coding. Initial results are excellent. The coding is simple and straightforward, and for those who have billed CMS under the new coding, they are already seeing a smooth transition by the payers as our users receive reimbursements. Both physicians and patients will continue to grow in confidence that SRT is receiving full funding. Which brings us to customer adoption and CPT impact. One of our strategic priorities is converting the new reimbursement environment into broader customer adoption and a more diversified installed base. During the first quarter, we began to see the benefits of the new CPT codes move from concept to commercial reality. With reimbursement now clearly defined and physician economics significantly improved, including approximately a 300% increase in the per-fraction delivery code, we are seeing increased inquiry levels, stronger pipeline development, a growing pipeline of qualified opportunities as of quarter end, and greater engagement from dermatology practices and hospital systems. We shipped 14 SRT systems during the quarter, including 10 direct sales and four placements under the Fair Deal Agreement program as well as rental arrangements. Importantly, these shipments reflect continued progress in broadening our customer base and meaningfully reducing historical customer concentration. We were able to match our sales from Q4, which we believe we will improve upon quarter over quarter for the balance of the year and into 2027. We saw strong momentum coming out of several major dermatology conferences during the quarter where physician interest and engagement levels were among the highest we have experienced. These events continue to be a critical driver of our pipeline growth and customer education as awareness of the new reimbursement environment increases, in addition to the benefit of SRT as a non-invasive alternative to Mohs surgery. Patients are deciding more and more their preference to avoid surgery. Recurring revenue growth and the FDA plus software. Another priority is expanding recurring revenue streams tied to utilization of our installed base and new prospects. There are still groups who prefer a shared service program, as indicated by the four of 14 units shipped in Q1. We are confident this will continue to grow. Our Fair Deal Agreement program continues to be a driver of utilization-based revenue. During the quarter, treatment volumes increased 8% over 2025, and we continue to increase the number of patients. We ended the quarter with 18 active FDA sites and nine pending activations. As we have said previously, FDA placements often serve as a bridge to system ownership, and we continue to see that dynamic play out as customers better understand the economics under the new reimbursement environment. Importantly, we are now taking additional steps to expand recurring revenue through software and services. The introduction of SensusLink represents an important evolution of our model, enabling enhanced workflow, treatment documentation, and operating intelligence across our installed base, while creating a scalable recurring revenue opportunity tied to treatment activity. We view this as an important step in evolving our business model toward a more predictable and recurring revenue profile in the future. Over time, we expect recurring revenue including FDA, service, and software to represent an increasing percentage of total revenue, which historically has been about 10%. Commercial expansion and diversification. Our next priority is broadening commercial reach through access to our technology and reducing volatility by creating more ways for customers to acquire and use Sensus Healthcare, Inc. systems. We are seeing increased interest across a wider range of customers including independent dermatology practices, group networks, hospital systems, and private equity-backed platforms. To support this, we recently launched Sensus Healthcare Financial Services, which provides a streamlined pathway for customers to acquire our systems through flexible financing options. Since launch, we have begun actively engaging with prospective customers to utilize this platform and are seeing improved conversion rates on late-stage opportunities. We are also seeing a shift in customer preference towards purchase compared to prior periods where Fair Deal Agreement program participation was the primary entry point. We now have to ask the question: Why do you want to give up 50% of your revenue when one patient procedure per month represents your breakeven? Profitability. Our priority is translating stronger demand, a growing recurring revenue base, and disciplined expense management into profitability. We are entering this new phase with a strong balance sheet, including $18.3 million in cash and no debt. While our first quarter results continue to reflect transition away from historical customer concentration, we believe the combination of improved reimbursement, a more diversified customer base, expanding recurring revenue streams, and disciplined expense management positions us to deliver improved financial performance over the balance of 2026 with the objective of achieving full-year profitability. With that, I will turn the call over to Michael to provide more detail on our commercial execution and growth initiatives. Michael? Michael J. Sardano: Thanks, Joe. I will focus on how our commercial model is evolving and how we are executing against the priorities Joe just outlined. The most important change we are seeing is that reimbursement clarity has fundamentally reshaped how customers evaluate and adopt SRT. Importantly, this is shifting SRT from a considered option to a financially actionable decision for more and more practices. Customers now have multiple pathways to adoption, including outright purchase, leasing structures, and the Fair Deal Agreement program. In the first quarter, approximately 70% of systems shipped were purchased versus FDA. Average breakeven for customers is now two patients per month, and we are seeing a higher percentage of customers electing ownership earlier in the adoption cycle. From a pipeline perspective, we are seeing increased conversion activity across the board as customers move from evaluation to decision making. A key driver of this momentum has been our participation in several major dermatology conferences during the quarter. These conferences generated new leads, physician engagements and demos, and a meaningful increase in follow-up activity and site evaluations. Importantly, our decision to refine our conference and trade show strategy to prioritize high-yield events where purchasing decisions are actively being evaluated is paying off in our pipeline. Physicians are becoming more aware of the new CPT codes and improved economics of SRT. On the recurring revenue side, our focus is on increasing utilization across the installed base and expanding monetization through additional capabilities. SensusLink is an important part of this strategy, as it enables us to bring advanced functionality to both new and existing systems while also creating a pathway for ongoing service and software revenue tied to treatment workflows. On the installed base, total SRT systems now stand at approximately 965 units globally. We expect the rollout of SensusLink, which provides advanced operating capabilities to our SRT-100 installed base, to begin to take shape and increase interest in SRT significantly this year. Over time, we believe this will support increased utilization, improve customer retention, and create a recurring revenue stream tied directly to system usage. International markets continue to represent an important growth opportunity for Sensus Healthcare, Inc. We are seeing continued demand in key markets such as China and expect additional diversification over time as we expand into new regions. International sales also provide attractive margin characteristics due to lower servicing requirements. Domestically, we are taking a disciplined approach to scaling our sales organization in 2026. Our focus is on expanding selectively, increasing market education, and improving conversion efficiency. Overall, the underlying performance of our business will continue to improve as a combination of reimbursement clarity, expanded adoption pathways, and a more diversified commercial strategy positions us well for sustained growth and profitability. With that, I will turn the call over to Javier for a review of the financials. Javier Rampolla: Thank you, Michael, and good afternoon, everyone. I will briefly review our financial results for 2026, starting with revenue. Revenue for the quarter was $3.4 million compared to $8.3 million in the prior-year period. The year-over-year decrease was primarily driven by the absence of sales to our historically largest customer as well as a lower number of total units shipped. As a reminder, the prior-year period included a significant number of direct sales to that customer. In the current quarter, we had no sales to that customer, which reflects our ongoing transition towards a more diversified customer base. Importantly, excluding sales to that customer in the prior-year period, revenue increased compared to $2.7 million, demonstrating underlying growth driven by a broader mix of customers. In addition, a portion of systems shipped during the quarter were under the Fair Deal Agreement program and rental arrangements, where revenue is recognized over the term of the agreement rather than at the time of shipment. As a result, these placements contribute to revenue over time rather than upfront. Turning to cost of sales. Cost of sales was $2.4 million compared to $4.0 million in the prior-year period. The decrease was primarily driven by lower unit volumes, again reflecting the absence of sales to our historically largest customer, as well as the shift towards FDA and rental placements. Moving to gross profit and margin. Gross profit was $1.0 million compared to $4.4 million in the prior-year period, and gross margin was 29.2% compared to 52.2% in 2025. The decline in gross margin was primarily driven by product mix. This includes a higher proportion of international shipments, which carry lower average selling prices, as well as costs associated with the new system placements under our Fair Deal Agreement program. As utilization increases, these arrangements are expected to contribute more meaningfully to revenue and margin over future periods. Turning to operating expenses. General and administrative expense was $2.0 million compared to $2.2 million in the prior-year period, with the decrease primarily driven by lower professional fees. Selling and marketing expenses were $1.7 million compared to $2.2 million in the prior-year period. The decrease was primarily due to our decision to lower trade show-related spending to focus on events with the highest potential for sales generation. Research and development expense was $1.6 million compared to $2.6 million in the prior-year period. The decrease reflects lower lobbying costs related to reimbursement efforts as well as reductions in headcount and product development spending for next-generation systems. Adjusted EBITDA for 2026 was negative $4.2 million compared with negative $2.5 million for 2025. Adjusted EBITDA, a non-GAAP financial measure, is defined as earnings before interest, taxes, depreciation, amortization, and stock compensation expense. Please see our earnings release issued earlier today for a reconciliation of GAAP and non-GAAP financial measures. Other income was $0.1 million compared to $0.2 million in the prior-year period and relates primarily to interest income. Net loss for the quarter was $2.6 million, or $0.16 per share, consistent with the prior-year period. Finally, we continue to maintain a strong balance sheet, ending the quarter with $18.3 million in cash, no debt, and inventory of $16.5 million, an increase from $14.6 million as of 12/31/2025. This inventory level positions us to continue to meet demand in the coming quarters for both direct and for placements under the Fair Deal Agreement program. Before I turn the call back to Joe, I would like to provide some perspective on how we are thinking about the remainder of the year. We expect second quarter revenue to be higher than first quarter, and we also expect revenue in the second half of the year to be higher than the first half as we continue to build on the momentum we are seeing in our pipeline and customer engagement. From a margin perspective, as discussed earlier, first quarter gross profit and margin reflect the impact of product mix, including a higher proportion of international shipments, as well as costs associated with new system placements under our Fair Deal Agreement program. As utilization under these arrangements increases and revenue is recognized over time, we expect these dynamics to evolve over the course of the year. With that, I will turn the call back to Joe. Joseph C. Sardano: Thank you, Javier and Michael, for those updates. Before we open the call for questions, I want to reiterate that we believe SRT is increasingly being viewed as a compelling noninvasive treatment option that allows practices to expand patient access, improve workflow efficiency, and offer an alternative for treating patients with non-melanoma skin cancer. The new dedicated CPT codes for superficial radiotherapy significantly improve physician reimbursement and support broader adoption of our technology while benefiting patients with certainty of coverage for noninvasive treatment options. As we move through 2026, we remain focused on executing against our five priorities: education and training, accelerating customer adoption, expanding recurring revenue, broadening our commercial reach, and driving Sensus Healthcare, Inc. toward profitability. We believe we are still in the early stages of this transition and look forward to updating you on our progress throughout the year. Thank you for your continued support. Operator: We will now open the call for questions. Your first question today comes from Anthony V. Vendetti with Maxim Group. Anthony V. Vendetti: Joe, how are you doing? Hey, Mike. My first question is a two-part question. Your largest customer, which I think you had 15 units sold to in 2025, so with zero in first quarter 2026, it is not too surprising that revenue is down over 50%. When you said second quarter should be higher than first quarter, should we look at your largest customer, who is not buying any units right now, as upside if they come back? Are you internally assuming they do not come back, and if they do, it is upside? And then I have a follow-up question. Joseph C. Sardano: If they do come back, it is upside. We have not included them in our model for this year, but that does not mean they cannot figure out the new model they have to come up with so that they can remain strong in the market. Anthony V. Vendetti: Okay. So it is still a possibility. Then, with the new CPT codes that took effect January 1 and the approximately 300% increase in the per-fraction delivery code, are you seeing that translate into shorter sales cycles or a bigger pipeline of new business? If there is a pipeline, has it just not yet converted into revenue and you expect it to in time, or is it taking a while for the pipeline to build even though the code has significantly increased? Joseph C. Sardano: I will give you an overview, and then I will let Michael handle it since he was responsible for working directly with CMS to gain those codes. What we are seeing on an overall basis is that interest has increased significantly because of the dedicated and guaranteed coding system for SRT for dermatology. In the past, that did not exist. They were orphan codes that mostly came from ASTRO, and these new codes are specific to dermatology and to SRT. So we are excited for all of that. Regarding the interest from the field, more and more offices are contemplating bringing SRT into their practice because of those codes. Very clear, very obvious. Many are deciding whether they want to go with an FDA, an outright purchase, or a fair market value lease. They are taking it seriously because now all of these sites can consider this a long-term decision for their practice since those codes are in place. Michael? Michael J. Sardano: Sure. Thanks, Anthony. Great question. Joe covered most of it. The thing I will add is that on January 1, 2026, all of the codes took effect, but when it comes to coding and reimbursement, you do not know whether you are going to get paid or how the structure works until after you bill that patient and wait the four to six weeks. So people were not able to see the EOBs of these patients until mid-February to early March when you started treating patients. With those EOBs coming in, now we have actual proof, like Joe said, that we are getting paid. Private insurance, Medicare, Medicaid, CMS, etc., are paying these new codes the way they are supposed to. Now that we have that black-and-white proof, it is in our sales team’s hands, and we are giving it to the market. A big point we did not touch on is that our largest show of the year, AAD, took place March 27 to 31. Those leads could not close in Q1, so they are moving into Q2. I am very confident going into Q2 compared to Q1. As I said on the call, we expect to continue to grow and improve throughout the year, quarter over quarter. As Javier mentioned, we have more recurring revenue shipments than we have ever had before. From an FDA standpoint and also this rental model, as we get 10 rental contracts, then 30, then 40 or 50, we are quickly transitioning to a more recurring revenue base that will require patience. We are transitioning in a way investors have asked for over the last ten years—more recurring revenue, not solely focused on one revenue source—and now we are achieving that. I think we will see improvement on that. Anthony V. Vendetti: That makes sense. As best you can, can you timeline it for us? As you build this pipeline of recurring revenue and the Fair Deal Agreement, do you feel like, whether this quarter, next quarter, or sometime in 2026, you lap that pipeline and then it is easier to see revenues grow? Is there an inflection point you are looking for? Michael J. Sardano: As the education continues to roll out, for instance, we just had two or three more meetings this past April with large roll-up groups in addition to Florida-, Arizona-, and California-based meetings. As that happens, you are going to see education expand. The black-and-white codes greatly help us. This is the first time in our sixteen years that I have been able to go in a room and tell a doctor that these are black-and-white codes with no gray area. As that comes in, you will see a lot of people who were not interested over the last ten years now become interested because their accountants and lawyers can make sense of it. That is about education. The longer you give us, the more we can educate, and more people will adopt SRT. It is here to stay now. CMS has given us exclusive codes for SRT for the first time ever. We do not have to go to Washington as much anymore, which is good for time and money. We are excited. The sales team is fired up. We have already hired three more salespeople into territories—some new and some rehires. We are very excited to keep going. Joseph C. Sardano: Let me add one thing to your question about the recurring revenue piece. One of the codes involves radiation physics and the consults for radiation physics. This code has to be applied to every patient, and our introduction of SensusLink is a main focus for our customer base. They can charge that code once per week. For example, if their protocol uses 20 treatments at two treatments per week over ten weeks, this radiation physics code can be charged at an average of $93.85 per week across the country. That is ten weeks of treatment, or about $930. With our software, we will be sharing that revenue with our customers. The only way that they can access that reimbursement is through SensusLink. That is an important piece of our business that we did not have before. Anthony V. Vendetti: When did SensusLink officially go live? Joseph C. Sardano: It is live now and performing in several accounts already. Anthony V. Vendetti: Great. That was great color. Thanks. I will hop back in the queue. Appreciate it. Michael J. Sardano: Thanks, Anthony. Operator: Seeing no additional questions, this concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Joseph C. Sardano: I think everybody heard where we are headed this year. We believe we are going to have a profitable year, with each and every quarter being better than the previous. We have a very solid start to the year and are looking for increased revenues throughout. With that being said, we look forward to a very successful second quarter and to talking to you again at the next earnings call. Thank you so much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Tandem Diabetes Care, 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. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Susan Morrison, Executive Vice President and Chief Administrative Officer. Ma’am, please go ahead. Susan M. Morrison: Hello, and welcome to Tandem Diabetes Care, Inc.’s First Quarter 2026 Earnings Call. Today’s discussion will include forward-looking statements. These statements reflect management’s expectations about future events, our product pipeline, development timelines, financial performance, and operating plans, and speak only as of today’s date. There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements, which are described in our press release issued earlier today and under the Risk Factors portion of our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Today’s discussion will also include references to both GAAP and non-GAAP financial measures. Unless otherwise noted, the financial metrics discussed today will be on a non-GAAP basis. Please refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of these measures to their most directly comparable GAAP financial measures and other information regarding our use of non-GAAP financial measures. John F. Sheridan, Tandem Diabetes Care, Inc.’s President and CEO, will be leading today’s call, and he will be joined by Leigh A. Vosseller, Executive Vice President and Chief Financial Officer. Following their prepared remarks, the operator will open up the call for questions. Thanks in advance for limiting yourself to one question before getting back into the queue. With that, I will hand the call over to John. John F. Sheridan: Thanks, Susan, and welcome, everyone. In the first quarter of 2026, we delivered strong financial and operational performance, setting the stage for another successful year. This momentum reflects the dedication of our team and our commitment to our strategic objectives. Building on these results, we actively advanced several key initiatives that position Tandem Diabetes Care, Inc. for both immediate impact and long-term growth. By modernizing our commercial operations, reshaping our business model, and introducing new technologies, we are not only achieving notable short-term gains, but also laying the foundation for sustained growth, profitability, and innovation. I will now walk you through updates on each of these initiatives, beginning with the modernization of our commercial organization. Globally, we have assembled a talented and impressive team. The group is deeply committed to bringing the benefits of our technology to people living with diabetes, and we are working to further support them by strengthening our systems, infrastructure, and processes. For example, in the United States, we continue upgrading our sales and customer management infrastructure as part of our multiyear system investment to optimize sales efficiency, enhance effectiveness, and drive deeper customer insights. Internationally, a key first-quarter highlight was our launch of direct commercial operations in the UK, Switzerland, and Austria. By doing so, we are better positioned to serve our customers, strengthen HCP relationships, and drive continued growth. The transition has been progressing smoothly, and we plan to continue expanding our direct operations later in 2026 and again in 2027. This approach deepens our engagement with the diabetes community while providing Tandem Diabetes Care, Inc. greater ASP and improved margins. The second key initiative I will be discussing today is reshaping our U.S. business model through our transition to a multichannel strategy. On our last call, we discussed how adopting pay-as-you-go, or PayGo, in the pharmacy channel provides us the opportunity to bring significant advantages to customers, health care providers, and payers, while delivering favorable economics to Tandem Diabetes Care, Inc. Throughout March, we began executing contracts adapted for PayGo, covering both t:slim and Mobi pump supplies, and continued to expand access with an increase to approximately 40% formulary coverage today. It is an important leading indicator for how quickly we can transition our business. Operationalizing PayGo in the pharmacy channel is an end-to-end change in the way health care providers prescribe our technology, the way we service customers, and the way we process and fill orders. We knew this transition would take time. It is still early in the process, and we are working to improve our efficiency and customer satisfaction by enhancing the pharmacy experience. Our early introduction of PayGo through the pharmacy reinforces our conviction in the meaningful opportunity this transition presents for our business and for our customers. Finally, I will provide an update on our new technology across our portfolio. In March, we were excited to announce that Tandem Mobi, the world’s smallest durable automated insulin delivery system, is fully available for use with Android smartphones in the U.S. By expanding to Android, we are bringing the benefits of Tandem Mobi to even more people living with diabetes, underscoring our commitment to delivering choice in diabetes technology. In the second quarter, we are on track to deliver on a number of exciting new offerings. In April, we received FDA clearance for use of Control-IQ+ in pregnant women with type 1. This is significant, as it makes the t:slim X2 and Mobi the first and only commercially available AID systems cleared for use during pregnancy in the U.S. We are also awaiting CE Mark for this indication in Europe. Pregnancy requires a much tighter glycemic range, and we have demonstrated that Control-IQ+ is designed to effectively support the unique therapy needs of pregnant women, in addition to women considering pregnancy. We will be hosting a product theater highlighting pregnancy management with Control-IQ+ at the upcoming American Diabetes Association meeting in June. We are also preparing for the international launch of Abbott’s FreeStyle Libre 3+ integration with the t:slim, starting in select European countries in Q2 and scaling to additional countries throughout the year. This integration with Abbott’s latest-generation sensor will allow even more CGM users to access the life-changing benefits of our Control-IQ technology. Additionally, in Q2, we will begin the commercial rollout of Tandem Mobi outside the United States. This brings together the best-in-class outcomes users have come to expect with Control-IQ+ and the benefits of Mobi’s form factor. Rounding out our Q2 launches, we will be upgrading both t:slim and Mobi for compatibility with Dexcom’s G7 15-day sensor, ensuring we continue to provide our customers with the latest-generation technologies. It is also exciting because this software update will enable Tandem pumps to provide CGM data directly to our Sugarmate app, with future plans to add insulin data. This provides visibility to sensor information across our device platforms for users and their loved ones. These launches are designed to be global and deployable to all markets where the relevant system combinations are available, which represents an important accomplishment by our team. While progressing these new offerings to commercial availability, we also made great strides with our pipeline products. We are particularly excited about Mobi Tubeless, our novel infusion-site option for the existing Mobi pumps that transforms it into a tubeless AID system, allowing for interchangeability between tubed and tubeless wear with one platform. This will be Tandem’s first tubeless pump offering and the world’s first with extended wear technology. We plan to file our 510(k) submission for the Mobi Tubeless in the second quarter. Finally, we continue to make good progress preparing our pivotal study for Tandem’s first fully closed-loop system and remain on track to start it this year. As you can see, we continue to make meaningful progress across the business while demonstrating strong financial results, which Leigh will now discuss. Leigh A. Vosseller: Thanks, John. As a reminder, unless otherwise noted, the financial metrics discussed today will be on a non-GAAP basis. In this quarter’s performance, we continued the momentum from last year by achieving new first-quarter records for pump shipments and sales, as well as robust margin improvement and solid cash generation. We are reaffirming our annual 2026 guidance as we continue to execute on our bold business model transformation in both the U.S. and international markets. We set new first-quarter records with more than 29,000 pump shipments worldwide and $247 million in sales. Our U.S. performance drove this achievement, where we shipped more than 19,000 pumps, representing approximately 10% year-over-year growth. Renewals continue to account for more than 50% of our shipments, and new starts were predominantly MDI patients, representing roughly two-thirds of new customers. As John discussed, a key milestone in the quarter was our March launch of PayGo in the pharmacy channel. Throughout the month, we successfully increased our formulary access outside of the traditional cycles for PBMs and payers. Adoption was within our range of assumptions in these first few weeks. Fewer than 5% of customers ordered a pump through their pharmacy benefit. Similarly, less than 5% of our installed base purchased their supplies through this channel. Our transition and pricing assumptions for the full year of 2026 remain unchanged. U.S. sales were $161 million, growing 7% year over year, also representing our highest first-quarter U.S. sales. This reflects the headwind of approximately $1 million from the adoption of PayGo, as well as slight pressure in infusion set sales due to a key supplier’s shortages. Overall, pharmacy sales represented 6% of sales in the U.S., which was significant based on our volume. Looking ahead to the second quarter, we are confident in our ability to deliver pump shipment growth with a seasonal curve similar to 2025, and expect U.S. sales of approximately $175 million. This factors in an increasing PayGo headwind, the magnitude of which will depend on our pace of execution. Turning to our international performance, we shipped more than 10,000 pumps and are executing well on our go-direct strategy. International sales totaled $86 million, representing 3% growth year over year. Direct channel sales increased to approximately 11% of total international sales from less than 5% historically. This is the highest international sales quarter in our history, due in part to favorable currency dynamics. Also, as a reminder, the first quarter of 2025 included a $5 million benefit from timing of distributor orders, creating a tougher point of comparison. Our international business had a few puts and takes during the quarter compared to our original assumptions, including a delay in timing of expected headwinds from going direct, a one-time benefit in Switzerland related to the buyout of existing customer rental contracts from our former distributor, and the same infusion set shortage I referenced in the U.S. In the second quarter, we expect that international sales will be approximately $80 million. This steps down from the first quarter due in part to the delayed impact of $3 million to $4 million headwinds associated with our go-direct transition. This also incorporates expected order phasing tied to Mobi availability as we scale launch, with some distributor demand shifting into the third quarter. Turning to margins, gross margin for the quarter exceeded expectations at 55%, an improvement of nearly five percentage points year over year and the highest first-quarter gross margin in the company’s history. Notably, we started the year higher than our full year 2025 average, reflecting continued execution on our key drivers, including pricing discipline and product cost improvements. Both operating and adjusted EBITDA margin reflect a meaningful improvement year over year due largely to $75 million IPR&D costs in the prior year. Beyond that charge, we demonstrated leverage as operating expenses of $154 million remained essentially flat year over year. This included a slight reduction in R&D spending that offset increased commercial investments in support of global growth initiatives. As a result, adjusted EBITDA was approximately 1% of sales, an improvement of 32 percentage points based on the IPR&D charge alone and an additional three points of operating leverage. Operating margin improved even more substantially by 40 points to negative 7% of sales. This was due largely to a reduction of stock-based compensation expense from 11% of sales in 2025 to 6% this quarter. With our focus on cost discipline and achieving our profitability goals, we generated $5 million in free cash flow this quarter. We also completed a convertible debt financing in February, yielding net proceeds of $276 million with 0% interest, to further strengthen our balance sheet and provide flexibility as we execute against our strategic priorities. As a result, we ended the quarter with $570 million in total cash and investments. Overall, we remain confident in our ability to deliver on our goals for 2026 and are reaffirming our 2026 financial guidance. Worldwide sales are expected to be in the range of $1.065 billion to $1.085 billion. This includes U.S. sales in the range of $730 million to $745 million and international sales in the range of $335 million to $340 million. For the second quarter, worldwide sales are expected to be approximately $255 million. We expect gross margins of 56% to 57% and adjusted EBITDA of 5% to 6% for the year. Second-quarter margins are expected to remain consistent with the first quarter. Further details on our guidance and assumptions for the year can be found in the earnings call slide deck posted in the Investor Center portion of our website. With that, I will turn the call back to you, John. John F. Sheridan: Thanks, Leigh. Before I wrap up our prepared remarks, I would like to extend my thanks to the full Tandem team. Your unwavering dedication, commitment to innovation, and teamwork have been the driving force behind our achievements. I also appreciate your resolve as we continue to navigate challenges from our infusion set supplier. While they may only impact a small percentage of our customers, the impact on them and the health care providers is significant. I appreciate the extra care and service that you are providing during this time. Thank you, everyone, for all you do. In conclusion, we are encouraged by the start to the year and are confident in the strategic direction that we have set. Our operational and commercial goals are firmly in focus, and we are committed to providing best-in-class technology to our customers in a more efficient and cost-effective way while advancing our global business model and driving meaningful long-term value for our shareholders. Thank you again for joining us today. We are excited about our opportunities ahead and look forward to sharing our progress in the upcoming quarters. Operator: Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In fairness to all, we ask that you please limit yourself to one question. If you have additional questions, please reenter the queue, and we will answer as many questions as time allows. One moment for our first question. Our first question is going to come from the line of Matthew Stephan Miksic with Barclays. Your line is open. Please go ahead. Matthew Stephan Miksic: Great. Thanks so much, and congrats on a really solid quarter here. Appreciate all the color and exciting to see you turn the corner here into PayGo. So I had one question on just the, as you, I am sure you noticed, one of the other companies in the space talked a little bit about the market, some tone or seasonal, I do not know what it was exactly, but maybe sounded like some temporary slowness. So great to get your perspective on that, what you have seen, and then also any way that you would characterize the major drivers of the growth in the quarter, whether it is uptake in type 2, whether it is uptake through pharmacy, whether it is new sensor and the integration. I hate the “all of the above” answer, but anything you can do to give us a sense of the major drivers for the quarter? John F. Sheridan: Matt, I will just start off and talk a little bit about the market and whether it is growing or not. I think you know it is still large and very underpenetrated. It is great to have type 2 as part of the market for us now. We are excited about the fact that we are bringing a great deal of new technology and business model changes that we believe will really help us grow new starts from MDI. If you look back in 2025, there are a number of pump companies in the market and I think they all did pretty well. I would say it definitely appears to us that the market is growing. We are very excited about this year in particular because we have so much technology and business model modifications that are really going to position us for growth this year and beyond. I will let Leigh answer some of the questions about seasonality. Leigh A. Vosseller: Sure. I will just say that we did not see anything unusual or different from what we typically see in the DME space starting off the year. Our pump shipments came in line with where we expected, which was about a 30% sequential decline in the U.S. from the fourth quarter. Nothing really to note there. Unfortunately or fortunately, the answer to your question about the major drivers is it really is a little bit of all of the above. We have a lot of things, as John suggested, working in our favor this year with our new product launches and our business model transformations. As we start to gain traction, everything is coming together to drive us towards a very successful and strong growth year altogether. Matthew Stephan Miksic: Thanks, guys. Operator: Thank you. One moment for our next question. Our next question will come from the line of Christopher Thomas Pasquale with Nephron Research. Your line is open. Please go ahead. Christopher Thomas Pasquale: Thanks. I was hoping you could dig in a little bit on the international business. International pump revenue was up despite pump shipments in that segment being down. You talked about a couple of one-time items. So were those two things related? And could you maybe unpack some of the one-timers that you had this quarter, just so we can think about the go-forward run rate? Leigh A. Vosseller: Sure. You are right. There were a lot of moving parts internationally, and the answer varies depending on if you are comparing to last year or to expectations. I will touch on a few of those. Year over year, a significant part of the growth was coming from currency fluctuation, so there was favorability in the environment that helped that growth. Looking at last year’s first quarter versus second quarter, it is a tougher comparison for us because last year there was a shift in timing of sales that was more favorable by about $5 million in the first quarter versus second quarter. As we go into Q2, it will be an easier comparison for us. Within the quarter, compared to when we set our guidance expectations, there were also a few moving parts. One was that we had estimated a headwind of approximately $5 million for going direct in certain international markets, and we are seeing a bit of a timing difference there. We realized about $1 million of that, and we expect $3 million to $4 million to push into the second quarter. Also, we did have some favorability in our Swiss market—a one-time accounting benefit—which was largely offset by some of the infusion set noise as we managed through shortages in the quarter. Overall, we are very excited about the international operations. We still see strong demand in the market for our products, and in the markets where we have gone direct, we are already hearing a very positive reception as we are closer now to the physicians and the patients. Christopher Thomas Pasquale: Okay. Thank you. Operator: Thank you. One moment for our next question. Our next question will come from the line of Matthew O’Brien with Piper Sandler. Your line is open. Please go ahead. Matthew O’Brien: Good afternoon. Thanks for taking my question. On Mobi Tubeless, I know filing here in Q2, still nothing expected for revenue in 2026. If you do get the approval late this year, is it fair to think you do not want to disrupt the typically stronger DME part of the year, so more of a bigger launch next year and in 2027, so no real disruption from launching Mobi Tubeless or as people are expecting it? I just do not want an air pocket in any of the quarters as people are waiting for that system. Thank you. John F. Sheridan: Thanks, Matt. When it comes to our submission, we are on track to submit this quarter. We also plan on getting clearance in the second half. There is some uncertainty with the FDA, but they have been doing a really nice job lately in getting things done quickly. As you know, when it comes to guidance, we typically do not include new products until they are actually in the market. If we get clearance in the second half, we have a phased commercialization process where we observe the product in small groups first, then increase the size of the group, and ultimately get to full commercial launch once we are confident there is nothing we need to address. This is a practice we have used from the beginning. While we do an excellent job of testing, you cannot find everything until you use it over time with larger groups. We will go through that process. If we can get it to the market before the fourth quarter starts, I think we would want to do that, but we will have to wait and see when clearance occurs. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Michael Holden Kratky with Leerink Partners. Your line is open. Please go ahead. Michael Holden Kratky: Hi, everyone. Thanks for taking our questions, and congrats on a great quarter. It looked like U.S. sales through the pharmacy maybe ticked down slightly from 7% in the fourth quarter to 6% in the first quarter. Can you talk about how that lined up with your expectations, what factors contributed to that, and what you have seen so far this quarter to support your confidence in the 15% for the year? Leigh A. Vosseller: Great question. Most importantly, you really cannot compare our pharmacy experience this year in 2026 to what we saw in 2025. It is a whole different world with the change in the business model. Last year, our pharmacy contracts included reimbursement for the pump that was a premium to even what we received in DME, so it is a very different environment. In the first quarter, we had two major workstreams. One is building up coverage, and we are pleased to report that we are already at approximately 40% formulary coverage. We expect to increase that across the year. The other piece is operational—implementing an end-to-end change in our workflows. It changed how physicians prescribe, how we engage with patients, and how we process and fulfill orders. That execution really started late in the first quarter, in the last few weeks, so we are at the very early stages. So far, we are excited about the opportunity. Nothing has changed our conviction in our ability to grow and scale that across the year. We look forward to future quarters when we can report the headwinds that are coming from the volumes we are bringing through. Michael Holden Kratky: Understood. Thanks, Leigh. Operator: Thank you. One moment for our next question. Our next question will come from the line of David Harrison Roman with Goldman Sachs. Your line is open. Please go ahead. David Harrison Roman: Great. This is Phil on for David. Thanks for taking our questions. I think maybe touch on pricing. I saw on the slides that it was reiterated, and I think I heard in your comments as well, Leigh. We heard from a competitor yesterday that so far it sounds like everybody is acting rationally or fairly. Can you talk about how negotiations around pricing have gone so far and what is baked into that $3.50 number for the year? What level of conservatism is in there? Thanks. Leigh A. Vosseller: Sure. I would agree that we are all behaving rationally when it comes to pricing. We are excited to be in this market and take advantage of the pricing opportunity that was already set in the pharmacy channel for insulin pump products. When we set expectations for the year, I would call them modeling assumptions because it is new for us and it is an early experience. We said to expect about $3.50 per month per patient as they order supplies. What is factored into that is an array of contracts with varying rebate structures. At this point, we do not have enough experience to say what that mix will look like on a sustainable basis. That is the baseline we have set for now. It is still the right way to think about it, and as we start delivering more volumes and gain more traction and experience, we will update those assumptions. David Harrison Roman: That is great. Thanks. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Richard Samuel Newitter with Truist Securities. Your line is open. Please go ahead. Richard Samuel Newitter: Hi. It is Ravi on for Rich. Thank you for taking the questions. Two for me, and I will ask them both upfront. First, on the infusion set shortage, would you mind quantifying that and suggesting what the impact might be in Q2? It looks like you are guiding a little bit below consensus for Q2 but reiterating the full-year guide, so curious if there is any impact there. Second, on the salesforce expansion, this seems to be a theme running across your peers and now Tandem Diabetes Care, Inc. as well. Can you talk about what the opportunity is that the salesforce is going after and what patient population they can unlock? John F. Sheridan: I will talk about the infusion sets and Leigh can address guidance. It is unfortunate. Our supplier has had some capacity challenges that began in the fourth quarter and continued to pressure us in the first quarter, both in the U.S. and internationally. We have been working very closely with them—practically daily calls with the operational and executive teams—and it is a top priority for us. It is a small number of SKUs that are really subject to the capacity shortages, but for those people who are impacted and the HCPs who support them, it is significant. We are doing everything we can to be creative—options in terms of lengths, colors, and other details—to provide intermediate solutions until this is resolved. We are also managing inventory to provide as broad coverage as possible. Unfortunately, this is something that probably will not be resolved for a quarter or two. We expect to see some progress in the second half of the year, but that is what we are dealing with right now, and we are taking it very seriously. Leigh A. Vosseller: From the perspective of the impact, all we are sharing is that it was a modest impact in the quarter, both U.S. and internationally, and we factored that same level of impact into our expectations for the second quarter. As John said, we are managing it closely. We see a line of sight to the end of this in the longer term. Operator: Thank you. One moment for our next question. Our next question will come from the line of Jeffrey D. Johnson with Baird. Your line is open. Please go ahead. Jeffrey D. Johnson: Hey, guys. Good afternoon. Leigh, I will follow up on the comment you made on the infusion set impact. I know you are not quantifying it, but let me go after it this way. Supplies missed our model by about $11 million this quarter. It could be we are just bad modelers. If our model missed by $11 million, does a lot of that get attributed to the shortfall, and is it also that you are assuming a similar shortfall in Q2 even though you are trying to move patients over to other infusion sets? I am trying to understand: does the year-over-year impact stay the same in Q2 as it was in Q1, and am I anywhere near the ballpark based on my model points? Thank you. Leigh A. Vosseller: Thanks for the question, Jeff. I would say that is on the high side for the impact. We would put it as more modest than that. There are a couple of ways to think about the size. There are backorder situations, but as John noted, some of the ways we are helping solve the problem for patients involve offering alternatives. Just because we had some backorders does not mean that we have not recovered sales in other ways to satisfy patient needs. It is not near that big. We expect it to be a bit disruptive again in the second quarter, but it is something we can work through. We can continue to talk more about modeling assumptions in supply sales—price or other pieces that might not be working there. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Matthew Charles Taylor with Jefferies. Your line is open. Please go ahead. Matthew Charles Taylor: Hi, good afternoon. Thanks for taking our question. This is Matt on for Matt Taylor. I wanted to ask on product expansion. First, on your clearance for type 1 pregnant women—can you help us frame the size of that opportunity and how incremental that could be? And second, on adding Android capability, is there any analog we can look at for thinking how that adds incremental growth in your coming quarters? John F. Sheridan: We are very excited to have received pregnancy clearance just a few days ago. It was based on data from the CRISTAL trial that was published in JAMA recently. We are the first and only AID system approved for pregnancy in the U.S. for both Mobi and t:slim using Control-IQ. We also expect CE Mark this quarter. In the clinical data, the Control-IQ group experienced a 12.5% improvement in time in a tighter range of 63 to 140 mg/dL, which is about three more hours per day, sustained for the length of the pregnancy—really substantial improvement. When it comes to the size, it is pregnant women and also women considering pregnancy. It is not a really large group, and I cannot put a number on it at this point, but it is a meaningful and important group, and we are very happy to have this. We are kicking off training and events for HCPs, including a symposium at ADA. Relative to Android, roughly 60% of our mobile app users for t:slim are on iOS, so Android represents a big opportunity. Many users have been waiting for Android availability. It is another meaningful opportunity to drive MDI growth in 2026 and beyond. Operator: Thank you. As a reminder, please limit yourself to one question before reentering the queue. Our next question will come from the line of Joanne Karen Wuensch with Citi. Your line is open. Please go ahead. Joanne Karen Wuensch: Thank you so much. Sticking with the one-question rule, with Mobi Tubeless being submitted to the FDA in the second quarter and on track for second-half approval, and assuming there is nothing in your guidance for it, how do we think about kicking off 2027 launching that product, and how are you preparing for it? Thank you. John F. Sheridan: For launching the product, as I mentioned, we have a phased commercial process. We are hoping to get it on the market this year, but timing will dictate. When you think about the market today, there really is a tubed market and a tubeless market. The tubed market is growing low single digits, whereas the tubeless market is growing in the ~20% range. That is a significant opportunity. Looking at competition, we are in the pharmacy now, we will have a tubeless device, and we believe we have a better algorithm. There is a big opportunity for us to drive MDI conversions to our device and also competitive conversions. It is a big opportunity, we recognize that, and we are really excited about it. Operator: Thank you. One moment for our next question. Our next question will come from the line of Suraj Kalia with Oppenheimer. Your line is open. Please go ahead. Suraj Kalia: Sorry about that. John, can you hear me alright? John F. Sheridan: We can. Yes. Suraj Kalia: Perfect. John, I am going to cheat and sneak in a two-parter if I could. To Joanne’s question, how would you define the low-hanging fruit for seven-day Mobi Tubeless? Would there be a price differential? Leigh, if I could quickly, U.S. sales were up 5%, pump units up roughly 12%, and then there is a 6% PBM contribution. Can you help us thread the needle here? Thank you. John F. Sheridan: I think the financial benefit, Suraj, is that the infusion patch lasts seven days, whereas an infusion set lasts three today. There is a margin benefit from extended wear. It is also a substantial customer-experience improvement, as they do not have to change as frequently. All of this adds up. We are doing everything we can to get gross margin up, and this certainly helps. The real benefit is customer experience, and that is our focus. Leigh A. Vosseller: To your question on the first quarter in the U.S., on a rounded basis the actual growth rate in pump shipments was 10%. The spread between the shipment growth and sales growth is not as substantial as it might seem. It really is pricing that is the differential. Operator: Thank you. One moment for our next question. Our next question will come from the line of Lawrence H. Biegelsen with Wells Fargo. Your line is open. Please go ahead. Lawrence H. Biegelsen: Thanks for taking the question. Leigh, I will ask the new-start question. By my math, it looks like new starts were down slightly year over year in Q1 and down modestly sequentially. Is that right, and do you still expect new starts in the U.S. to grow in 2026? Leigh A. Vosseller: Thanks, Larry. Yes, your math is accurate year over year, and they were down sequentially, mostly due to the regular seasonal impact we see. This is how we structured the year in our modeling assumptions: a slight decline in the first quarter with a return to growth as we look ahead. We are very convicted in the ability to return to growth because we have been seeing improvement over the last few quarters from our low in the middle of last year. It is the traction we are seeing on our new product launches. We look forward to pharmacy making a real difference now that we have removed the upfront cost barrier so more people can move to pump therapy without worrying about upfront cost. As we build on pharmacy and drive these launches, we expect a return to growth this year. Operator: Thank you. One moment for our next question. Our next question will come from the line of Michael Polark with Wolfe Research. Your line is open. Please go ahead. Michael Polark: Hey, good afternoon. I am interested in learning about the process to convert someone in the base to pick up supplies at pharmacy. I get the incentive for a new user with no upfront, but for that compliant, happy user through DME, how do you get them to the pharmacy? What does the outreach from you to them look like? What is the outreach from you to a physician? And on the financial incentive, how different is patient out-of-pocket for supplies only in DME versus pharmacy? Thank you. Leigh A. Vosseller: Glad you asked. There is work involved. First, when a customer comes in to place their order, which is usually quarterly, we check their benefits to see if we have on-formulary coverage. We then share out-of-pocket benefits. That is the true motivator—out of pocket is typically lower, or with copay assistance can be lower. Once they are ready to move forward, it requires a new prescription, which requires reaching out to the physician. Getting their attention and time can be a factor since many want to focus on customers who have not yet moved to pump therapy. It is a process and one of the key drivers as we look ahead to maximize the pharmacy opportunity. It is not only bringing more patients to Tandem Diabetes Care, Inc., but also converting the existing base. If you think about moving potentially 300,000 people and getting that price benefit, that makes a significant difference on our revenue growth and margins. It is a major focus area for us. Operator: Thank you. One moment for our next question. Our next question will come from the line of Analyst with UBS. Your line is open. Please go ahead. Analyst: Hey, thanks so much for the question. Really nice to see the cash flow generation in the quarter. Q1 has typically been a heavy cash burn quarter for you. Would love to hear about what changed this quarter and how sustainable this level of cash generation is going forward. Thanks so much. Leigh A. Vosseller: Thanks. A lot of this comes from our cost discipline. While we are focused on growing revenue, we are equally focused on driving improved margins. This year, we demonstrated a 1% positive EBITDA in the first quarter, and I believe that is the first time we have done that since 2022. Q1 is a tougher quarter because of seasonal dynamics in our business, so it is meaningful that we showed positive EBITDA and cash flow generation. We appreciate you noticed that. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Elaine Cui with Raymond James & Associates, on behalf of Jayson Tyler Bedford. Your line is open. Please go ahead. Elaine Cui: Hi, this is Elaine on for Jason. Thanks for taking my question. I had a question on the gross margin and how you are thinking about the cadence for the year. You gave us guidance for Q2 and Q4, and we can get to an implied Q3. Why would it stay relatively flat for the first three quarters, according to my math? And when we think about the year-over-year expansion, how much of it is driven by Mobi scaling versus the pharmacy transition? Thank you. Leigh A. Vosseller: Great question. First, Q1 to Q2 being relatively flat is really product mix. From Q1 to Q2, both U.S. and internationally, more of the step-up is coming from supplies. Globally, supplies still have a lower gross margin than pumps today, even though supplies will eventually have a better gross margin in the U.S. with our new pharmacy reimbursement model. That mix drives relative flatness into Q2. It should then start to step up from there, scaling toward about 60% in the fourth quarter. The step-up will come from pricing benefits both with our direct operations outside the U.S. continuing to build and with the pharmacy benefit as we convert more customers’ supplies to pharmacy in the U.S. Price will be a very prominent driver of gross margin this year. We are also continuing to see benefit from Mobi as it scales. For pumps, we started seeing that in 2025. For supplies, we will really start to see that difference this year, contributing to gross margin improvement across the year. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Jonathan Block with Stifel. Your line is open. Please go ahead. Jonathan Block: Great, guys. Thanks. Maybe I will follow up on an earlier international question. When I look at international pump ASP, the ASP seemed to step up nicely from recent quarters. Leigh, any color on how much is FX, how much is the direct transition? Does this trend higher from the current 1Q result as the percent of business that is direct continues to increase? Maybe most importantly, any way to think about an exit-’26 pump ASP as we head into the following year? Leigh A. Vosseller: The assumption we have made in guidance for the year is that pump ASPs outside the U.S., with changes from going direct, should land somewhere in the $2,800 to $2,900 range. We did see extra benefit in the first quarter because of a one-time accounting benefit in Switzerland. We were able to recognize a higher level of revenue there because of the acquisition of certain existing customer rental contracts from our distributor. This one-time benefit is what really drove the incremental pump ASP in the first quarter. Otherwise, it should settle into that $2,800 to $2,900 range for the rest of the year. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Anthony Charles Petrone with Mizuho Financial Group. Your line is open. Please go ahead. Anthony Charles Petrone: Thanks. Good afternoon, everyone. Maybe on the U.S. side, a competitor had a recall announcement and the FDA came out in April reporting more adverse events on one of the primary competitors. What is the chatter out there? Is that creating any opportunities for share capture, certainly as you look to Mobi or otherwise? A little bit on the competitive dynamics in the quarter. And then a follow-up on spend as you get ready for the Mobi Tubeless launch—thinking about DTC— is there a big DTC campaign planned around Mobi Tubeless? Thanks. John F. Sheridan: Regarding recalls, it is unfortunate, but that is one of the things that happens in this marketplace. The intent of a recall is to ensure the diabetes community is aware of safety issues that might impact product use. It happens to everybody. When it happens to us, we do our best to assure patients are safe and understand the risks. I do not think that gives us any benefit. You do not like to see it happen, but you recognize it as part of dealing in a market with life-saving technology. On competition generally, it is a large and expanding underpenetrated market with new entrants. Q1 was consistent with our expectations. It is highly competitive, but nothing specific to point to that changed. We are very confident in our ability to deliver new technology. The team has done an amazing job in the last several quarters. Moving to the pharmacy benefit, where out of pocket is substantially lower, will also be a big benefit. We feel very good about where we are heading competitively. Specifically to the marketplace today, it is very competitive, and nothing has really changed. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Mathew Blackman with TD Cowen. Your line is open. Please go ahead. Mathew Blackman: Good afternoon, everybody. Can you hear me okay? John F. Sheridan: We can. Mathew Blackman: Great. Thanks for taking my question. Leigh, I think I heard you say 40% formulary coverage to date. I am trying to figure out the proper context. That feels like a lot of progress for being a quarter or quarter and a half into the year, but I do not know how to frame it relative to where you need to be at the end of the year to hit your goals. Could you frame that relative to expectations? Is the next step—say from 40% to 60%—a heavier lift? Any framework to think about where you are to date and where you need to be by year-end to hit pharmacy mix goals? Thank you. Leigh A. Vosseller: Happy to add context. Typically, new formulary additions happen on a January 1 or July 1 cycle. We are very excited that we have been able to add coverage across the quarter—off-cycle—which shows the receptivity to us moving to PayGo and the acceptance of our products in the channel. The team is not stopping. I regularly see announcements of new formulary additions, some bigger and some smaller. We are working to drive that up across the year. In order to achieve our pharmacy goals this year, we are right on pace with where we need to be. I am not going to share a specific coverage target, but we are very well positioned to drive pharmacy access to hit the targets we have set. Operator: Thank you. One moment for our next question. Our next question will come from the line of William John Plovanic with Canaccord Genuity. Your line is open. Please go ahead. William John Plovanic: Hi. It is Zachary on for Bill. Thank you for taking the question. As for the type 2 ramp, can you give more context as to how that is going? You have talked about in the past difficulties you have with the C-peptide testing requirements. Can you give us an update on what is happening there? John F. Sheridan: First of all, we are really excited about type 2. It is a big opportunity, even less penetrated than the type 1 market in the U.S. and internationally. Our focus is on market development at this point. I am not going to talk specifically about numbers today. We want to see sustained trends before reporting numbers. It is early for us. There are many positive sources of growth happening now and in the near future. We expect tailwinds from FreeStyle Libre 3, from Mobi Android, Mobi Tubeless, pharmacy—those are all great. We anticipate positive news from Medicare access, and we think they are going to get rid of the C-peptide requirement, but we will have to wait and see. As a company, we are focused on creating awareness clinically and on product benefits. Big market, underpenetrated, with a lot of positive dynamics. We anticipate seeing growth in type 2 MDI starts this year. Operator: Thank you. One moment for our next question. Our next question is going to come from the line of Travis Lee Steed with Bank of America. Your line is open. Please go ahead. Travis Lee Steed: Hey, thanks for the question. Maybe focus on March 2026 where you are moving PayGo into the pharmacy. Help us understand how that went. Are you seeing an increasing ability to ramp into April and May? And the 40% coverage that you have, how much of that is tier 1 at this stage? John F. Sheridan: I will answer the first part. Our early experience reinforces our conviction that this is a great opportunity for the business and for our customers. We are moving forward aggressively—it is our top priority. Operationalizing pharmacy involves a lot of change: physician processes, how we service our customers, and how we process and fulfill orders. We are working to improve the experience. There is behavioral change, a learning curve, and efficiency opportunities. We are very focused on these, and we have a strong team making good progress. It starts off slow and will gradually increase as we get through the year. This will be a meaningful part of our business by the end of this year and as we move into 2027. Leigh A. Vosseller: On tiering, we have a variety of contracts across different tiers. The difference to us is the amount of rebate we pay in various tiers and the influence on out of pocket and the amount of copay assistance we might have to use. We are not sharing any breakdown of individual contracts. We are on tier 1 in some, tier 2 in some, and tier 3 in some. It varies across the board. Travis Lee Steed: Okay. Thanks a lot. Operator: Thank you. One moment for our next question. Our next question comes from the line of Shagun Singh Chadha with RBC Capital Markets. Your line is open. Please go ahead. Shagun Singh Chadha: Great. Thank you so much. I just had a quick one on Mobi Tubeless, and I apologize if it has been asked. Can you talk about how you think about the mix between the products you will be selling with Mobi Tubeless coming on board, how we should think about pricing, how you expect to compete with the current patch form factor—more from MDI conversions or competitive share gains—and anything you can share on the go-to-market strategy that you have not already discussed? Thank you. John F. Sheridan: The first important point is that we already have about 325,000 customers in the U.S. A significant portion of those use the pump today already, and this is an infusion set option for them to choose. We think there will be pretty good conversion among those people. Many will try both ways and see what they like. For new starts, now that we will have a tubeless product in the market, we expect to benefit because tubeless is very important to people as a form factor. We expect to see a lot of progress there. Leigh A. Vosseller: To your question on pricing, because it is the Mobi pump, it is the same pump hardware regardless of which infusion set they choose. Pricing for the pump is the same. On supplies, you can think about pricing as being similar to other lease supplies. It is a supply pricing discussion, not a pump pricing change. Operator: Thank you. This will conclude today’s question-and-answer session. Ladies and gentlemen, this will also conclude today’s conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.
Operator: Good afternoon, everyone. And thank you for participating in today's conference call to discuss Nature's Sunshine Products, Inc.'s financial results for the first quarter ended March 31, 2026. Joining us today are Nature's Sunshine Products, Inc. CEO, Kenneth Romanzi, CFO, L. Shane Jones, and General Counsel, Nathan G. Brower. Following their remarks, we will open up the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Brower as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Nathan, please go ahead. Nathan G. Brower: Thank you, Marissa. Good afternoon, and thanks for joining our conference call to discuss our first quarter 2026 financial results. I would like to remind everyone that this call is available for replay via telephonic dial-in through May 21, and via a live webcast that will be posted in the Investor Relations portion of our website at ir.naturesunshine.com. The information on this call contains forward-looking statements. These statements are often characterized by terminologies such as believe, hope, may, anticipate, expect, will, and other similar expressions. Forward-looking statements are not guarantees of future performance, and the actual results may be materially different from the results implied by forward-looking statements. Factors that could cause the results to differ materially from those implied herein include, but are not limited to, those factors disclosed in the company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, our earnings release issued today, and other reports filed with the Securities and Exchange Commission. The information on this call speaks only as of today's date, and the company disclaims any duty to update the information provided herein. Now I would like to turn the call over to the CEO of Nature's Sunshine Products, Inc., Kenneth Romanzi. Ken? Kenneth Romanzi: Thank you, Lee. Good afternoon, everyone. Thank you for joining our first quarter earnings call. I am very pleased to report we delivered a very strong first quarter, growing sales 9% and EBITDA 33%, reflecting continued momentum across our key strategic initiatives. We generated sales growth across all regions, led by North America with over 9% constant currency growth, driven by our digital channel strategy, with strong engagement from both new and returning customers. A healthy increase in our active consultants across the globe also drove solid growth. Our first quarter performance underscores our focus on disciplined execution, strengthening consultant and customer acquisition, expanding our digital capabilities, accelerating adoption of our Autoship subscription programs, and improving gross margin. As we look ahead, we are confident that the key strategies of our vision for growth will drive accelerated sustainable growth and long-term shareholder value. I will update you on the progress we have made in developing our vision for growth a bit later in the call, after our CFO, L. Shane Jones, provides the details of our strong Q1 performance. Shane? L. Shane Jones: Thank you, Ken. We are very pleased to report another outstanding quarter, with growth in constant currency terms across all our business units: North America, Asia, Europe, and Latin America. This growth continues to be bolstered by our expansion into new digital channels, strong adoption of our subscription Autoship programs, exceptional new customer acquisition, and strong partnerships with our independent consultants across the globe. Our efforts to modernize the business, expand digital capabilities, and strengthen engagement with both our customers and our independent consultants continue to drive momentum in the business. Now diving into specific financial performance. Net sales in the first quarter were $122.9 million, representing our strongest first quarter in company history and our third largest quarter ever. This represents a 9% increase versus the year-ago quarter, or a 7% increase excluding the impact of foreign exchange rates. Growth was driven by continued acceleration in North America, combined with strength in Asia Pacific and Europe. We continue to closely monitor the geopolitical tensions in Iran given the expected impact on inflation and potential short-term impact on consumer buying patterns. However, as of yet, consumer demand remains strong, as reflected in the robust sales growth that we are seeing. Looking at our results in more detail, starting with regional performance. In North America, we are building strong momentum, driven by rapid growth in digital while maintaining our core business across specialty retailers, practitioners, affiliates, and independent consultants. Q1 sales grew 9% year over year to $38.3 million, our best growth in over five years. Our digital business continues to produce very robust year-over-year growth, increasing 42% in Q1. This was fueled by continued strength in customer acquisition, coupled with robust adoption of our subscription Autoship program, leading to better retention and frequency from returning customers. Similar to the exceptionally strong growth that we have seen over the last several quarters, new digital customers increased 60% in Q1. Likewise, subscription Autoship continued to perform very well in Q1, accounting for 48% of the digital sales coming through our website. As we have highlighted before, continued improvement in this metric is a leading indicator for future growth and profitability, since the lifetime value of customers that utilize subscription Autoship is more than three times higher than other customers. We are also very excited about the growth of our social commerce business within digital. While still relatively small, in Q1 this business grew triple digits year over year. Also, while subscription Autoship in this channel just launched in the second half of last year, it already makes up 23% of total social commerce revenue. We are excited to see the fundamentals of this business continue to move in the right direction, validating the strategic investments we are making and strengthening our confidence that we will meet and exceed the goals we have set. As we have said many times, digital momentum is a key component of our broader transformation and represents an important long-term growth lever for our business. Given the very strong momentum in digital, we expect continued mid- to high-single-digit revenue growth in North America throughout 2026. Moving to our business in Asia Pacific, sales grew 7% year over year to $52.2 million, or 6% growth on a constant currency basis. This performance was driven by outstanding execution in China, Japan, and Korea, where sales increased [inaudible], 16%, and 14%, respectively, excluding the impact of foreign exchange. As outlined in our late last earnings call, the turnaround in China has been driven by very strong adoption of our subscription Autoship program, which has grown from nothing at this time last year to more than 25% of total revenue today, combined with a double-digit increase in independent consultants. During Q1, these fundamental drivers were combined with a strong response to our field activation efforts, yielding exceptional results. While we continue to be encouraged regarding the fundamentals of the China business, the 40% growth seen in Q1 is unlikely to be repeated in the coming quarter. The double-digit growth seen in Japan and Korea during Q1 came as a result of a very successful launch of our Lemara skincare products, along with strong year-over-year increases of independent consultants. We are very pleased with the commitment and strong execution from our independent consultants in these markets and believe that our focused, differentiated products along with our knowledgeable, passionate consultants position us well for continued growth in the APAC region. We are also pleased with the continued strength in our European business, where Q1 sales increased 9% versus the prior year to $26.4 billion, or 6% growth on a constant currency basis. These outstanding results were driven by 11% growth in Eastern Europe in local currency terms. The strength in Eastern Europe has been fueled by improved product availability as we have worked to ensure appropriate in-stock levels for our key products where we see high demand. This improvement was combined with outstanding execution from our independent consultants and some economic stabilization in the region. This remarkable growth is a testament to the perseverance and commitment of our staff in that area, given the continued war in the region. For the remainder of 2026, we expect continued mid-single-digit growth in Europe. Now turning to gross margin. We continue to build on the progress we have made over the past several quarters, as gross margin increased 116 basis points to 73.2% compared to 72.1% a year ago. This improvement represents the benefit of our ongoing gross margin initiatives and favorable market mix. These initiatives include renegotiating logistics contracts, better conversion costs to improve manufacturing efficiency, improved sourcing, more disciplined pricing, and other cost-saving measures. Despite some uncertainty regarding the short-term impact of the situation in Iran on inflation, we still anticipate continued modest improvement in gross margin. Therefore, during 2026, gross margins are likely to average around 73%, which represents a significant step up from where we have been historically. Volume incentives as a percentage of net sales were 30% compared to 30.8% in the year-ago quarter. The decrease was primarily due to the strong growth in our digital business as well as changes in market mix. Selling, general, and administrative expenses during the first quarter were $43.5 million compared to $40.6 million in the year-ago quarter. As a percentage of net sales, SG&A expenses were 35.4% for the first quarter compared to 35.8% a year ago. The $3 million increase versus prior year was primarily related to variable costs associated with the sales increase and compensation costs. While Q1 spend was less than the quarterly SG&A range communicated last quarter due to the timing of certain strategic investments, we expect quarterly SG&A of $45 million to $47 million for the remainder of the year as we ramp up these initiatives. Operating income increased 53% to $9.5 million, or 7.8% of net sales, compared to $6.2 million, or 5.4% of net sales in the year-ago quarter. GAAP net income attributable to common shareholders for the first quarter was $5.1 million, or $0.28 per diluted common share, compared to $4.7 million, or $0.25 per diluted common share in the year-ago quarter. Adjusted EBITDA, as defined in our earnings release, increased 33% to $14.6 million compared to $11 million in the year-ago quarter. The increase was primarily driven by the growth in sales and improvement in gross margin. Our balance sheet remains clean with cash and cash equivalents of $87.6 million and zero debt. Inventory decreased to $67.1 million at the end of the first quarter, a $1.2 million decrease versus Q4 last year. We expect to see a moderate increase in inventory during 2026 to ensure appropriate in-stock levels and fulfill continued strong demand. Net cash used by operating activities was $1.8 million compared to cash provided of $2.6 million in the prior-year period. We repurchased 20 thousand shares for approximately $500 thousand, or $24.54 per share, during the first quarter ended March 31, 2026, with $16.9 million remaining on our share repurchase program. Looking beyond share repurchases, our healthy capital allocation structure positions us well to continue our digital transformation and other strategic initiatives. Now turning to our 2026 outlook. We are reiterating the guidance issued last quarter, expecting full-year 2026 net sales to range between $500 million and $515 million, compared to $480 million for 2025. This equates to year-over-year growth of 4% to 7%. For adjusted EBITDA, we are guiding to a range of $50 million to $54 million, representing year-over-year growth of up to 19%. This incorporates a cautious stance regarding the potential impact of the Iran conflict on both demand and cost. Also, as communicated previously, this guidance includes measured investments to improve our technology infrastructure, drive further customer acquisition, advance geographic expansion, expand penetration in existing markets, and accelerate product innovation. These investments will ramp in Q2 and Q3 of this year, thereby temporarily reducing the double-digit EBITDA growth rate seen historically and in Q1 2026. We continue to see strong momentum in the business and believe that now is the time to make these key investments in order to position the company for sustained rapid growth in 2027 and beyond. Overall, we believe the business is well positioned to capitalize on current opportunities in a growing market and remain very optimistic about our ability to continue to unlock the substantial growth prospects that we see. Strategic initiatives we have been implementing are working, and we are confident in our ability to continue to accelerate growth in sales, profitability, and free cash flow. Now I will turn it back to Ken for some further commentary. Kenneth Romanzi: Thank you, Shane. Well done. As I reviewed on our earnings call last quarter, Nature's Sunshine Products, Inc. has a very strong foundation driving today's results and one upon which we can build an accelerated vision for growth. The key pillars of this foundation include two very strong brands steeped in heritage and quality, Nature's Sunshine Products, Inc. and Synergy, operating in the large, global, and rapidly growing category of natural health supplements; a globally diverse business operating in over 40 countries around the world; exceptional product development capabilities sourcing and blending hundreds of nature's best ingredients from around the world and scientifically verifying their effectiveness; an army of independent consultants passionately representing our products every day around the world; a rapidly growing digital business penetrating new channels driven by a subscription model that enables consistent recurring revenue streams; a rock-solid balance sheet, with nearly $100 million in cash and no debt; and last but not least, a passionate mission-driven organization dedicated to elevating people's lives globally through improving their health and economic well-being, while delivering industry-leading results for our shareholders. To build upon this foundation, we have developed what we call Nature's Sunshine Products, Inc.'s Vision for Growth, with the goals of doubling our sales to $1 billion and to leverage our infrastructure to achieve a 15% EBITDA margin over time. Key elements of our vision for growth plan include: one, continued rapid expansion of our digital business; two, explore distribution in select U.S. brick-and-mortar retail channels, working in a complementary, harmonious manner with our existing business; three, deeper penetration in our direct selling markets. The U.S. and China, the world's largest consumer markets, are two markets where we see terrific opportunities. For example, our Asian brand Synergy is very small in the U.S. but rapidly growing, so we are doubling down to expand U.S. Synergy distribution as a key growth driver; four, expansion into new high-value markets. This year, we will enter Germany, our largest new market that we have entered since China in 2016, and the largest supplement market in Europe. Looking ahead, we plan to expand to attractive new Asian markets utilizing our very powerful Synergy Asia sales system; five, we will drive growth through sharper brand positioning and product innovation behind both the Nature's Sunshine Products, Inc. and Synergy brands. Our new product pipeline is very strong over the next two years, and we will share the details of these new product launches as their launch dates draw near; six, leveraging our supply chain for scale efficiency. With excess capacity in our manufacturing facility, we can drive higher variable margins with volume growth. In addition, we will be investing in automation to drive further efficiencies; and lastly, seven, with nearly $100 million in cash and a debt-free balance sheet, we are well positioned to pursue bolt-on accretive acquisitions and to leverage efficiencies in our manufacturing plant. By executing this vision for growth, we believe $1 billion in sales is within our grasp. We believe the sun has never shined brighter for Nature's Sunshine Products, Inc., and I look forward to sharing more about our vision for growth in the near future. Thank you for your time today and your continued support of Nature's Sunshine Products, Inc. I would now like to turn the call back to the operator for questions. Operator? Thank you. Operator: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. Just a moment for your first question. And your first question comes from Susan Anderson with Canaccord Genuity. Susan Kay Anderson: Nice to see another really strong quarter. Maybe if you can talk about the 15% EBITDA margin longer term. I am just curious if you could give us an idea of the building blocks to get there. How much is driven by gross margin expansion versus SG&A leverage? Or should we think about it as being equal between the two? Thanks. Kenneth Romanzi: I will let Shane—Susan, great to hear your voice, and hopefully we will catch up soon personally. I will give you a general answer, and then Shane has a very laddered approach to how we are going to do this. It is really through scale. If we get the volume growth accelerated and we have good cost discipline, we can get the scale, and it comes in several areas. It is not just one big idea. It comes in several areas up and down the P&L. L. Shane Jones: Okay, great. To get a little more specific for you, we are basically today a little over 10%. As we look at what we need to do to get there, there are three blocks. About one point of that is going to be coming from gross margin. That is continuing to do what we are doing, as well as, as Ken talked about, the scale portion as we put more volume through our manufacturing plant. We are underutilized today, so we will be able to be more efficient and drive efficiencies there. So that is about one point. About two points of that is through our volume incentives line. As you can see, we have brought that down significantly over the last year, and really the biggest push of what is making that happen is our digital business, where we do not pay commissions or do not pay as much commission as we do in other parts of our business. As we mix more to digital, that will continue to come down. So that is about two points. And then the final piece is just leveraging our SG&A as we continue to grow. That is also another two points. As we talk about it, that is not reducing headcount or anything like that. It is really just leveraging as we grow. It is a one, two, and two. Susan Kay Anderson: Perfect. That is really helpful. And then maybe I saw you appointed a new chief technology officer. Digital has obviously been very strong and very successful, particularly in the U.S. Does this signal that you are going to continue to focus in that area and maybe even continue to expand the product offered on the DTC site as you see a lot more opportunity there longer term? Kenneth Romanzi: Yes. The hiring of a CTO is crucially important. We have a really good IT group here. However, technology, as you know, in every business is a game changer these days, everywhere from your base infrastructure all the way to the use of AI. We needed a leader that came from very different experiences in industry, both for evolving our base ERP system as a company—we face some end-of-life dates in five or six years on our Oracle ERP system, so we have to figure out what is the next step there in our ERP system—to absolutely putting the pedal to the metal on digital growth. There is so much more we can do there and in the use of AI, as well as how we digitally enable our independent consultants. For instance, we just launched an app that allows independent consultants to do their entire business by phone, and there is so much more we can be doing with that. We just launched it, but there is so much more we can be doing. And John Hanasek, our new CTO, has a lot of experience in doing things like that. We are really taking technology and driving it across base infrastructure, digital growth, direct to consumer, as well as how we digitally enable the tens of thousands of independent consultants we have around the world. A lot of our investments this year, as we talked about regarding why we are not continuing the most recent double-digit EBITDA growth and only doing single-digit EBITDA growth this year, are because we are making enhanced investments. A lot of it is in technology. Susan Kay Anderson: Okay, great. And then last question, if you could just give some color on the brands and products that drove this strong growth in each region, and how you are thinking about new products. Do you expect to roll out new products to each of the regions this year? Thanks. Kenneth Romanzi: I do not want to get specific about new products too much in advance. We will let you know as they occur. But when you think about what brands drove the growth, Nature's Sunshine Products, Inc. is our brand in the U.S., in North America, Latin America, Europe, and in China. And then the rest of the Asia Pacific region—Korea, Taiwan, Japan, Southeast Asia—that is Synergy. So when we say APAC growth, it is both brands, because Nature's Sunshine Products, Inc. is in China and the rest of Asia has Synergy. Hopefully, that will give you a little bit of indication as to what brands are driving the growth. Both brands drove great growth in this quarter and continue to do so over time. Regarding new products, there is a smattering. We do not do the same new product everywhere. They are all on different time frames. We do have a very promising product that we are launching for the first time ever as a pan-Asian launch, meaning our three biggest Asian countries—Korea, Japan, and Taiwan—are all going to be launching the same product, the same formulation, at the same time through our very powerful Asia sales system. It has never been done before, so they are gearing up for that. As we get closer to the date, we will say what that product actually is. It is a way to leverage the power of that system unlike we have ever done before. Susan Kay Anderson: Okay. Excited to see what that is. Thank you so much for all the details. Operator: Thank you. At this time, this concludes our question and answer session. I would now like to turn the call back over to Mr. Romanzi for closing remarks. Kenneth Romanzi: Thank you, Marissa. We would like to thank everybody for listening to today's call, and we look forward to speaking with you when we report on our second quarter 2026 results. Have a great night. Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to Zymeworks Inc. First Quarter 2026 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that 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, Shrinal Inamdar, VP of Investor Relations. Your line is open. Shrinal Inamdar: Thank you, operator. Good afternoon, everyone, and thank you for joining our first quarter 2026 results conference call. As usual, I would like to remind you that we will be making a number of forward-looking statements during this call, including, without limitation, those forward-looking statements identified on our slides and the accompanying oral commentary. These forward-looking statements are based upon our current expectations and various assumptions and are subject to risks and uncertainties, including those associated with companies in our industry and at our stage of development. For a discussion of these risks and uncertainties, we refer you to our latest SEC filings as found on our website and as filed with the SEC. In a moment, I will hand over the call to Kenneth H. Galbraith, our Chair and CEO, who will provide an overview of recent business updates. Kenneth H. Galbraith will then hand the call over to our Chief Financial Officer to discuss our cash position and financial results for the first quarter 2026. Paul A. Moore will then provide a brief summary of new preclinical data disclosed at AACR on our pan-RAS ADC platform, and following this, Sabeen Mekan, our SVP and Chief Medical Officer, will provide progress updates on both the Phase 1 clinical trial of ZW191 and ZW251. At the end of the call, Kenneth H. Galbraith, our CFO, Sabeen Mekan, and Paul A. Moore will be joined for a Q&A session by Scott Pashton, our Chief Business Officer, and Adam Sherwitz, Head of R&D. As a reminder, the audio and slides from this call will also be available on Zymeworks Inc. website later today. I will now hand the call over to Kenneth H. Galbraith. Kenneth H. Galbraith: Thank you, Shrinal, and good afternoon, everyone. We are pleased to be reporting on further progress this quarter on both our wholly owned and partnered assets. The PDUFA date of 08/25/2026 for zanatumab in first-line GEA in the U.S., together with the completion of an sBLA filing in China for first-line GEA, marks an important inflection point and near-term foundational value-driving opportunity for Zymeworks Inc. These regulatory milestones provide increasing visibility toward commercialization in first-line HER2-positive GEA, accompanied by continued clinical development in additional settings such as breast cancer, helping to establish a clear baseline for zanatumab’s value. If you did not get a chance to tune in, we would urge you to listen to Jazz’s disclosures within their earnings call earlier this week on preparedness and launch activities for GEA in anticipation of an FDA approval later this year on or before the PDUFA date. With our partners Jazz and BeiGene bringing established commercial capabilities, we believe zanatumab is well positioned to translate potential approvals and label extensions into meaningful uptake, significant milestone payments, and durable royalty revenues. This includes near-term milestone payments of $250 million upon approval in the U.S. for GEA from Jazz and $15 million upon approval in China for GEA from BeiGene. Importantly, this momentum also illustrates the broader strength of our business model. Recent data presented at the American Association for Cancer Research Annual Meeting, alongside this continued regulatory progress for zanatumab, reinforce the strategic advantage of integrating our R&D portfolio with royalty participation within a single organization. We will continue to be intentional about maintaining a portion of our R&D portfolio unencumbered, preserving optionality for future transactions, and aiming to capture upside beyond structured royalty streams. Advances across our ADC portfolio at AACR, including the presentation of three new preclinical RAS-targeting ADC candidates featuring proprietary payloads, as well as encouraging Phase 1 data for ZW191, highlight the scalability of our platform and its ability to generate multiple potential future value drivers. Taken together, we believe this integrated model, anchored by near-term catalysts such as potential global approvals for zanatumab and supported by a productive and innovative pipeline that provides future optionality for our emerging royalty portfolio, positions us to deliver durable compounding returns for shareholders over time. Over the past quarter, we have also strengthened our leadership team with the addition of our CFO and the full-time appointments of Scott and Adam, who bring deep experience in strategic capital allocation, investment, and dealmaking. We are also pleased to announce the appointment today of Mr. Paul Schneider, who joins us as General Counsel from Pfizer. All of these appointments enhance our ability to systematically identify, structure, and execute opportunities that align with our long-term value creation framework. With that, I would like to hand the call over to our CFO, who will provide an overview of our financial highlights for 2026. Unknown Speaker: Thank you, Ken. Having now spent my first month at Zymeworks Inc., what stands out for me is the potential for us to build a novel strategy of royalty aggregation and growth—one that is differentiated by the integration of our productive R&D engine with a quality portfolio of royalty interests. My focus as I step into this role is to ensure we execute with discipline, particularly in how we allocate capital, prioritize programs, and evaluate external opportunities. That includes maintaining a high bar for investment, strengthening operational rigor, and leveraging our integrated model to drive both near-term visibility and long-term compounding value. I am excited to join the team to build on this momentum and position Zymeworks Inc. as a leader in this emerging model. As part of this, we are evaluating ways to potentially evolve our financial reporting in order to provide better visibility into returns on invested capital and the performance of both our R&D and royalty portfolios. We intend to build on the OpEx framework we introduced last quarter, adding greater transparency around how that investment translates into key value drivers for shareholders. I will now talk through the financial results for 2026. Total revenue was $2.4 million for the three months ended 03/31/2026, compared to $27.1 million for 2025. The decrease was driven mainly by the achievement of nonrecurring clinical milestones in 2025, as well as continued declines in development support and drug supply revenue from Jazz. Revenue in the current-year period reflects ongoing collaboration activity and increased royalty revenue, which is expected to grow over time as commercial sales of Zanidatumab (Zahera) increase. Overall operating expenses were $49.5 million for the three months ended 03/31/2026, compared to $52.7 million for 2025. The decrease in research and development expenses was primarily driven by lower third-party program costs following reduced activity on later-stage and discontinued programs, partially offset by increased investment in early-stage clinical and preclinical programs, as well as increased unallocated costs related to leadership transition. The decrease in general and administrative expenses was primarily driven by lower professional fees, consulting, and information technology-related costs, partially offset by higher salaries and benefits reflecting the previously disclosed leadership transition. Net loss was $44.2 million for the three months ended 03/31/2026, compared to a net loss of $22.6 million in 2025. The change in 2026 was primarily due to a decrease in revenue driven by the nonrecurring clinical milestones earned in 2025. Despite the year-over-year change in earnings, we ended the quarter with a strong cash position, providing flexibility to fund operations and our capital allocation strategy. Turning to capital allocation, we have made progress on our share repurchase program, which reflects our commitment to disciplined capital allocation and enhanced long-term shareholder return. As of 05/06/2026, the company has utilized approximately $95.8 million of the approved $125 million repurchase program to acquire approximately 3.93 million shares at an average price of $24.37 per share, exclusive of commission expense and estimated excise tax. As of 05/06/2026, the company had approximately 73 million common shares outstanding. As of 03/31/2026, we had $403.8 million of cash resources consisting of cash, cash equivalents, and marketable securities, compared to $270.6 million as of 12/31/2025. Based on our current operating plans and assuming full execution of the $125 million share repurchase plan, we expect our existing cash resources as of 03/31/2026, when combined with the anticipated regulatory milestone payments of $440 million related to the potential approvals of Zanidatumab (Zahera) in GEA in the U.S., Europe, Japan, and China, to fund our planned operations beyond 2028. This anticipated cash runway does not take into account any contribution from additional future milestone payments or royalties related to Zanidatumab (Zahera) or other current licensed product candidates, or contributions from future partnerships and collaborations. For additional details on our quarterly results, I encourage you to review our earnings release and other SEC filings available on our website at www.zymeworks.com. I will now pass the call over to Paul, who will provide a summary of our preclinical presentations at AACR. Paul A. Moore: Thank you. It has been another busy AACR for Zymeworks Inc. with six poster presentations, an oral presentation for ZW191, and two invited talks from our research leadership team—one covering multispecifics and the other ADCs. For the call today, I wanted to focus on the pan-RAS ADC platform that we unveiled at AACR, which has attracted a lot of attention over the last few weeks. You may recall at our R&D day in 2024, we first outlined our plans to pursue novel payloads, and so it is particularly satisfying to now see that intention translated into clear execution. Against that backdrop, the decision to focus on RAS payloads reflects both the strength of the screening outcomes and the quality of the candidates identified. It marks a meaningful step forward in delivering on the strategic direction originally outlined. As you are aware, we have also been encouraged by the continued progress of our proprietary TOPA payload—purpose-built for ADCs—from the preclinical setting into the clinic, which Sabeen will talk about in a few minutes. Based on that foundation, our focus has been on what comes next. As we think about the next generation of ADCs, we have been intentional in addressing certain core aspects: deploying additional mechanisms of action through payload selection, enhancing efficacy, overcoming resistance, and further improving safety. These priorities have guided our investment in both novel targets and novel payloads, particularly as resistance can emerge through multiple mechanisms, including target evolution or following sequential ADC treatments. In parallel, RAS inhibitors have generated significant interest given recent developments in the field; however, toxicity remains a key limitation. We believe an ADC-based approach offers a compelling way to address this by improving targeting and enabling more sustained tumor exposure, with the potential to enhance efficacy while reducing systemic side effects. This profile may also better support combination strategies. To explore this, we generated and functionally characterized more than 117 novel pan-RAS inhibitors derived from our scaffold work in-house. For this first thesis for our TOPA payload, our selection criteria extended beyond potency alone. We prioritized molecules with properties best suited for an ADC modality, and as shown in our AACR dataset, they support potent efficacy in xenograft models, favorable pharmacokinetics, meaningful bystander activity, and a tolerability profile in nonhuman primates that collectively support further development. From a safety perspective, our lead payload candidate, evaluated in the context of a life-size pan-RAS ADC, demonstrated encouraging results in nonhuman primates with no observed body weight loss, skin toxicity, or GI toxicity at doses up to 120 mg/kg, representing the maximum dose tested. The dataset also highlights the ability of an ADC approach to sustain tumor-targeted inhibition of the RAS pathway over an extended period, and how it differentiates both in distribution and biological effect from a pan-RAS small molecule inhibitor delivered orally. Following a single dose of RAS ADC in a mouse xenograft model, we observed sustained accumulation of the RAS payload in the tumor at levels higher relative to those observed in normal organs. This differential exposure is also reflected in the durable RAS pathway inhibition, as measured via DUSP6 levels, in the tumor out to 14 days, with clear differentiation between tumor and normal tissue. In contrast, while the small-molecule pan-RAS inhibitor delivered orally achieves RAS pathway inhibition, the magnitude of inhibition in tumors overlaps with that observed in normal tissues such as skin, liver, and colon, consistent with the broader distribution and uptake pattern of the small molecule relative to the tumor-targeted design of the pan-RAS ADC. Again, for the pan-RAS ADC, what we see is a more selective inhibition of the RAS pathway in tumor relative to skin, in contrast to the small molecule that shows activity across both skin and GI, aligning with the toxicity profile observed clinically for pan-RAS inhibitors. Taken together, we believe that this differentiation underscores the potential for ADCs to fundamentally reshape how RAS-targeted therapies can be deployed in patients. As far as the mechanism goes, we have not divulged full details, but it is a RAS on-inhibitor. Our focus so far has been on the functional behavior of the molecules and how the overall design translates into pathway modulation and tolerability. At AACR, we also presented the application of this platform across three different therapeutic candidates. We chose our targets with intent to reach deeply into cancers where RAS mutations drive disease at scale, including non-small cell lung cancer, pancreatic cancer, and colorectal cancer, ensuring both relevance and impact. All candidates incorporate the bystander-active pan-RAS payload. On the antibody side, we leverage our antibody engineering expertise to optimize internalization, tumor penetration, and kinetic properties to determine whether this modality delivers on its promise to provide target-driven, tumor-selective RAS inhibition. The candidates include ZW439, a Claudin 18.2-targeting pan-RAS inhibitor ADC for the treatment of RAS-mutated pancreatic cancer; ZW427, a L1CAM-targeting ADC carrying a novel pan-RAS inhibitor payload for the treatment of RAS-mutated cancers, including colorectal, pancreatic, and non-small cell lung cancer; and ZW418, a biparatopic PTK7-targeting ADC incorporating the same RAS inhibitor payload for the treatment of non-small cell lung cancer. The data we have seen so far across these three candidates—targeting PTK7, L1CAM, and Claudin 18.2, respectively—that we shared at AACR reinforce both the design of the payload and the broader principles underpinning our ADC platform. I will leave it there for now and am happy to go into more detail during the Q&A session. Sabeen, I will now hand over to you to run through the updates on our clinical development program for ZW191 and ZW251. Sabeen Mekan: Thank you, Paul. As in the data presented at AACR, we observed strong antitumor activity for ZW191 across both ovarian and endometrial cancers. Starting with ovarian cancer, we observed tumor regression of at least 30% in 68% of patients and, importantly, some degree of tumor shrinkage in 85% of patients. Disease control was achieved in 94% of patients, with an overall response rate of 56% across all dose levels. When we look at the clinically relevant dose range of 6.4 to 9.6 mg/kg, disease control was observed in all patients, with a confirmed ORR of 61%. It is important to underscore that this ovarian cohort represents a particularly challenging population who are heavily pretreated. All of these patients were resistant to carboplatin therapy, the majority had prior PARP inhibitor exposure, and there was no limit to the number of lines of therapy. This makes cross-trial comparisons difficult and, in our view, highlights the strength of the antitumor activity of ZW191. In relapsed or refractory endometrial cancer, we observed tumor regressions of at least 30% in 50% of patients, with 70% experiencing some degree of tumor shrinkage. Disease control was achieved in 80% of patients, with an overall response rate of 40% across all dose levels. At the 6.4 to 9.6 mg/kg dose range, ORR increased to 57% with disease control in 86% of patients. Across both tumor types, responses were observed starting at 3.2 mg/kg, and importantly, activity was seen regardless of expression level, including in low or negative tumors. Median follow-up time was approximately seven months, with a number of patients still on treatment, supporting the durability of signals we have discussed. Turning to safety, ZW191 is being evaluated at higher doses than some other programs in the space. Regardless, we are pleased with the safety profile we are observing at these doses, which mainly consists of cytopenias and GI events at low rates that are very manageable and in line with the total ADC class. Importantly, no unexpected or new safety signals were observed with longer follow-up. The 6.4 and 9.6 mg/kg doses are being further evaluated in a larger dataset in dose optimization. As previously reported, this approximately 60-patient cohort is fully enrolled, and the results should assist in defining the optimum dose to move forward into subsequent clinical studies. Given the consistency of efficacy across the active dose range, we believe there is flexibility to optimize dose to further refine tolerability without compromising activity. We also believe the profile remains compatible with combination approaches, with appropriate dose selection and monitoring. At AACR, we presented a poster on preclinical combinations with ZW191. In nonclinical studies, ZW191 demonstrates activity across all levels of FRα expression and shows promising combination potential with standard-of-care therapies, supported by a favorable tolerability profile. These data provide an important translational foundation for the clinical observations of activity in lower or negative FRα-expressing tumors and support the breadth of activity we are beginning to see emerge in the clinic. In addition, the combination data reinforce the potential to position ZW191 in earlier lines of treatment. We believe these combinations should be feasible with appropriate dose selection and monitoring. Overall, we view these data as supporting a compelling and increasingly well-defined benefit-risk profile for ZW191. We look forward to the opportunity to present additional updates on our Phase 1 study at future medical meetings, including at ESMO GYN in Denmark during June, where we will be presenting efficacy analyses plus folate receptor alpha expression levels from the Phase 1 study. I also want to touch briefly on the protocol updates for our ongoing trial for ZW251. As we think about expansion opportunities beyond our initial indication for hepatocellular carcinoma, GPC3 expression provides a compelling biological rationale across multiple tumor types. Across published datasets, we see GPC3 expression in approximately 86% of hepatocellular carcinoma and, more broadly, in a range of 60% to 100% depending upon the tumor subtype, staining methodology, and patient population. Notably, in squamous non-small cell lung cancer, GPC3 expression has been observed in roughly 60% of tumors, which supports the inclusion of squamous non-small cell lung cancer as a relevant population for further exploration. We are also exploring germ cell tumors, where high GPC3 expression has been reported, particularly in nonseminomatous subtypes such as yolk sac tumors and choriocarcinoma. While pediatric germ cell tumors are relatively rare, expanding into adult germ cell tumors meaningfully broadens the addressable population and introduces more mixed histologies. Importantly, in these mixed tumor settings, the bystander activity associated with our ADC may be particularly relevant, as it has the potential to address both GPC3-positive and adjacent antigen-low or -negative tumor cells within the same lesion. In our Phase 1 study, we are assessing GPC3 expression retrospectively from available tumor samples. This approach allows us to better understand the distribution of GPC3 expression across tumor sites without restricting enrollment and helps inform future patient selection strategies. Overall, we believe the addition of these tumors positions us to efficiently map GPC3 expression across tumor types and identify those settings where the biology and mechanism of action are best aligned. Our Phase 1 dose-escalation study continues to recruit on schedule, and we look forward to having the opportunity to share the clinical data at the appropriate time at a future medical meeting. I will now hand the call back to Kenneth H. Galbraith for closing prepared remarks. Kenneth H. Galbraith: Thank you very much, Sabeen. Looking ahead at the potential catalysts for 2026, we remain on track to deliver on the majority of these objectives and continue to see opportunities for a steady cadence of data and pipeline progress. As I mentioned earlier, with the near-term U.S. PDUFA date set for zanatumab and the sBLA submission in China, there is greater visibility to near-term milestone payments from Jazz and BeiGene and more meaningful royalty revenues upon potential launches in the U.S. and China. We also continue to follow progress from our collaboration partner, Johnson & Johnson Innovative Medicines, with respect to their broad clinical development program for pasotuxizumab, a novel KLK2 T-cell engager for prostate cancer patients. I do want to highlight that we are now guiding to an IND in 2027 for ZW1528 compared to our prior expectation of 2026. As we have continued to evaluate the IL-33 biology across the competitive landscape, we see an opportunity to further deepen our understanding and refine the clinical development strategy as recent clinical data outcomes are disclosed at upcoming medical meetings. Given the novelty of the target, we believe taking this additional time positions us to enter the clinic with a more focused and differentiated plan. However, the core preclinical package, including GLP toxicology, is largely complete and compelling. More broadly, we are also evaluating how partnerships and collaborations can support the advancement of our R&D pipeline. As we think about capital allocation and execution, we do see opportunities to bring in external partners where, in doing so, we can enhance speed, scale, or probability of success. We remain very encouraged by the progress of ZW209 as well as the broader TriTCE portfolio behind it. ZW209 is IND-ready and still maintained as a potential IND in 2026, which we believe should provide confidence in both the maturity of the program and its underlying safety profile. We have multiple additional targets in development within the TriTCE platform, and we continue to view this as a key driver of long-term value. We have demonstrated our ability to repeatedly extract high-quality assets from a single platform. Our asymmetric platform enabled the development of zanatumab, supported partner programs such as pasotuxizumab, and continues to drive our wholly owned pipeline, including our TOPA ADC programs built on optimized antibodies and our RAS-targeting ADC candidates, as well as our multispecific antibody product candidates behind ZW209 and ZW1528. Importantly, we believe this capability is transferable beyond our internally generated R&D pipeline. We have the ability to supplement and scale our existing capabilities through acquisitions, rapidly apply our technologies, and efficiently advance novel candidates into the clinic, as we have consistently demonstrated. We have been very active in external processes to assess potential acquisitions and feel well funded to do so with the proceeds of the Royalty Pharma note and the upcoming expected GEA approval milestones and enhanced royalty income from zanatumab, but we are also remaining disciplined in our approach to acquisitions to ensure we find the right opportunities for our long-term strategic objectives at the right price. At the same time, our capital allocation framework remains disciplined and highly focused on per-share value creation. Since initiating our share repurchase program in 2024, we have retired approximately 8.3 million shares through the deployment of roughly $155.8 million in capital for a weighted average repurchase price of approximately $18.70 per share. This represents over 10% of our common shares outstanding. Notably, our average repurchase cost remains at a meaningful discount to today’s share price, reinforcing our view that these buybacks have represented an attractive and accretive use of capital on behalf of shareholders. Over time, our repurchases are designed to continue to reduce our share count while increasing each remaining shareholder’s participation in the future economics of the business. We believe these repurchases have represented an attractive use of capital given the disconnect we have seen between our market valuation and the long-term value of our commercial royalty interests and development pipeline. This balanced approach of pairing growing and durable royalty revenues with opportunistic share repurchases and a disciplined investment strategy is designed to enhance intrinsic value per share and support increasing total shareholder return over time. With key leadership appointments recently completed, we are well positioned to execute with focus and discipline. We look forward to advancing our strategic priorities and providing clear updates on our progress in the quarters ahead. Overall, while we are being thoughtful in how we sequence and advance programs, we remain confident in the depth of the pipeline and the opportunities it presents. With those closing remarks for the prepared portion, I would like to thank everyone for listening, and I will turn the call over to the operator to begin the question-and-answer session. 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 star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question. Please stand by while we compile the Q&A roster. Our first caller is from Eva Fortea-Verdejo with Wells Fargo. Your line is open. Eva Fortea-Verdejo: Congrats on the program, and thanks for taking our questions. A couple from us. First, how should we be thinking about cadence of data for some of your internal pipeline in the next 12 months? The second question is on the pan-RAS ADCs. Can you provide some color on timing to reach the clinic and whether you plan to pursue the early clinical stages of development yourself? Kenneth H. Galbraith: Thanks for that question, Eva. I will take the first one, and then I will pass the second one to Paul to answer, and then happy for Adam to add to Paul’s comments as well. I think we have tried to provide as much guidance as we can on the cadence of data. Obviously, we presented some additional updates on ZW191 at AACR, and we also just had an abstract accepted for ESMO GYN in June in Copenhagen. So we will continue to have a cadence of updates as we understand our data, and then we will present that always in a peer-reviewed format, because we think that is best practice. You should expect that at oncology meetings throughout the course of 2026 you will see additional progress on both clinical and preclinical programs in our oncology portfolio. Until we provide guidance about accepted abstracts—just as we are doing now with the ESMO GYN conference coming up next month—that will be the only forward guidance we will provide. I will turn it over to Paul to answer your second question. Paul A. Moore: Yes. I think your second question, Eva, was on the timing of the RAS ADCs and when they could be in the clinic. At AACR, we shared the strength of our conviction in the choice of the targets, the choice of the payload, and the mechanism. There are certain IND-enabling activities that you still need to do—manufacturing and CMC readiness for Phase 1—but we are well positioned from here to enter into that phase. As Ken alluded to, and maybe Adam can also expand upon, our balance of what we can push internally as well as through partnerships is very much at the front of our mind, and that will also be a factor in driving when they enter the clinic. But certainly, they are well positioned to enter into the IND-enabling stage and be ready shortly for clinical testing. Eva Fortea-Verdejo: Very helpful. Thanks. Kenneth H. Galbraith: Adam, would you like to add, or are you okay with that? Adam Sherwitz: No, I think that is well said. We have a lot of belief in these compounds—super exciting coming out of AACR—and we are moving them forward as we can. As soon as we have a definitive date, we will share with you. Operator: Thank you for your question. Our next question comes from Charles Yue-Wen Zhu with LifeSci Capital. Your line is open. Charles Yue-Wen Zhu: Hello. Can you all hear me alright? Kenneth H. Galbraith: Yes, Charles. Charles Yue-Wen Zhu: Perfect. No technical difficulties this afternoon. Thank you very much for taking our questions, and congrats on all the progress. Two quick ones from me. One, it sounds like you amended the protocol for ZW251 to include additional tumor types. As you head towards initial clinical data for that asset, how important would it be to include some of those other tumor types beyond liver cancer as part of that initial clinical data package? Second, on the IND filing for ZW1528, your IL-33/IL-4 receptor alpha bispecific has been pushed out a bit. It sounds like you are waiting to see a little bit more about the IL-33 biology. Could you help us understand what you are looking for in the full data, and maybe also remind us on your asset—are you able to block both oxidized and reduced forms of IL-33? Kenneth H. Galbraith: Great questions, Charles. We will take your second one first. I will make a brief comment and pass it to Paul for more of the technical question, then we can go back to ZW251 with Sabeen. We saw some data results last year with respect to IL-33 antibodies and other programs that were not successful, and we tried to understand what that meant and why. This year, as you mentioned, we have seen a top-line data release of a positive Phase 3 study outcome in IL-33 in a patient population similar to what we would like to study. We have not seen the detailed data yet presented at a medical congress. We would like the opportunity to understand that data when it is presented and discuss it with our clinicians who are helping us with our planning around the clinical development program we have in mind for ZW1528. It is prudent to make sure we understand the differences between some of the negative studies and what is being seen as a positive study before we dive into the clinic. Paul? Paul A. Moore: Thanks, Charles. Your question was about the blocking of IL-33—both the oxidized and the reduced forms. We have been characterizing that and we feel that we have the potential to block both pathways. We are still dissecting more of the mechanism, but we clearly have a very potent IL-33 blocker, and it works very well also in the context of the bispecific. There is biology associated with having the IL-33 binder in a bispecific format with IL-4 that we are very excited about, and we think it really differentiates our approach from others. To your point, we feel that on the IL-33 side, we will be able to block both forms. Sabeen Mekan: To your question regarding ZW251 and inclusion of additional tumor types such as squamous non-small cell lung cancer and germ cell tumors, our rationale is as follows. We initially entered the clinic with ZW251 in hepatocellular carcinoma due to the high unmet need, high levels of GPC3 expression in this tumor type, and very little expression on normal tissue. Over time, as we have gained confidence with our ADCs—particularly with our folate receptor alpha ADC where we saw activity at lower levels of target expression—we became more comfortable exploring other tumor types as well. We have reviewed the literature and our internal data for GPC3 expression in squamous non-small cell lung cancer and germ cell tumors and feel comfortable including these tumors in our study. It is fairly common for dose-escalation studies to include multiple solid tumors, which is what we are doing at this stage. Charles Yue-Wen Zhu: Thank you very much for taking our questions, and congrats on everything. Operator: Thank you. Our next question is from Jonathan Miller with Evercore. Your line is open. Jonathan Miller: Hi, thanks so much for taking my question, and congrats on all the progress. I would like to ask about the novel pan-RAS ADCs. In your criteria for selecting the pan-RAS payload you ended up choosing, it looks like you looked at a number of different molecules across a variety of characteristics. It is notable that most other second-gen or next-wave pan-RAS programs have prioritized high potency, and it does not seem like that was your priority next to other things. Could you give a little more granularity on what you were selecting for in the payload and why you did not think pushing potency as far as it could go was the key to success? Paul A. Moore: Thanks, Jonathan. To clarify, it may have come across that we emphasized compatibility as ADC payloads and de-emphasized potency. We definitely had a potency bar that we wanted to achieve, and you can see it in the data we shared—for example, in target-matched comparisons, our RAS ADC shows very strong potency. There was definitely a potency threshold we required in the ADC context. But because it is a payload class with known liabilities, there are other attributes we needed to factor in, including bystander activity, pharmacokinetic properties, and the balance of tolerability. What we have identified gives us a very impressive window: activity in xenograft models in the ~1 mg/kg range, with tolerability in nonhuman primates at up to 120 mg/kg. Taken together, that is a compelling profile and gives us a lot of excitement about the platform, especially because we can then plug and play across different targets. Jonathan Miller: Makes sense. As a follow-up on the NHP tolerability comment—you are citing ADC dose levels. We are used to looking at tox profiles for other pan-RAS programs with naked small molecules. Can you give a sense of the relative amount of payload you are delivering preclinically so we can think about it? Paul A. Moore: These are DAR-8 ADCs, which can help you estimate relative payload delivery. Our focus has been to show the differences in distribution and tolerability enabled by the ADC versus a small molecule—hence the experiments comparing tumor versus normal tissue distribution. That is the key here. We think this allows us to dose quite high and still maintain tolerability. We have therefore focused on demonstrating that differentiation rather than attempting direct mole-to-mole comparisons with small molecules. Operator: Thank you. Our next question is from Yigal Dov Nochomovitz with Citigroup. Your line is open. Yigal Dov Nochomovitz: Hi, thanks, and congrats on all the progress. Two questions. Jazz commented on their earnings call regarding some MFN pricing headwinds associated with the ex-U.S. launch of Zahera. Can you comment on that with respect to your royalty base for your ex-U.S. royalty stream for Zahera and how that factored into your thinking about underwriting the $250 million note with Royalty Pharma? And second, regarding the second interim for overall survival for Horizon GEA, which is coming in the middle of the year—will that be included in the label, or would that be a post-approval update? And can you comment on what the threshold is for that second interim? Kenneth H. Galbraith: Thanks, Yigal. On your first question, I do not think we want to comment further than Jazz’s observation about Zahera potentially having more pricing pressure outside the U.S. than inside the U.S. That is not unexpected for Zahera or any pharmaceutical in today’s market. The way we modeled out Zahera—and, I would assume, the way Royalty Pharma modeled it—would have taken into account pricing pressures that may be more significant outside the U.S. than inside. We will have to wait and see how the GEA launch goes. There is a tremendous clinical benefit already seen with the second-line biliary tract cancer opportunity with Zahera and the clinical data for GEA, and that clinical value is typically reflected in pricing and reimbursement. On the second question, other than the fact that Jazz continues to guide that the next interim analysis would be by midyear, we are not able to comment further on regulatory strategy related to that dataset. Operator: Thank you for your question. Our next question comes from Mayank Mamtani with B. Riley Securities. Your line is open. Analyst: Hi, this is Paulo on for Mayank. Thank you for taking the questions. On the FRα program, what is the specific durability or subpopulation edge that distinguishes it from competitors enough to drive a deal? And on RAS, to expand on the internal versus partnership balance, can you speak specifically on the partnership funnel post-AACR? Has the data driven incremental inbound interest, and if so, which one of the three molecules is leading those discussions? Kenneth H. Galbraith: Thanks. I will cover the second part first, then ask Sabeen to comment on where we think ZW191 might be differentiated. We are open to and have active conversations across our R&D portfolio—from the most advanced clinical asset like ZW191 to some of the earliest opportunities. We are looking for ways to share capital, share risk, move more quickly to keep up with competition, and manage the breadth of our R&D pipeline. We have a range of discussions ongoing, but we will not provide further details until we have completed transactions, after which we will discuss the rationale and next steps. Sabeen? Sabeen Mekan: In terms of ZW191 being differentiated from other ADCs, we clearly see that ZW191 activity is much higher than current standard of care in platinum-resistant ovarian cancer. Compared to the approved folate receptor alpha ADC, we are showing stronger response rates as well as a well-differentiated and improved safety profile. Versus other emerging ADCs in development, we are, at least numerically, showing the strongest response range, and we have observed encouraging durability in Phase 1. We are dosing at higher dose levels than many others in the space, yet we maintain a very manageable safety profile—low rates of cytopenias, no prophylactic growth factors—and overall good tolerability. We believe delivering higher dose intensity with manageable safety will translate into better efficacy at scale and help differentiate us. Operator: Our next question is from Rene Benjamin with Citizens. Your line is open. Rene Benjamin: Good afternoon, and congratulations on all the progress—great AACR for you. For Sabeen, on the ESMO GYN conference coming up, what should we expect—further follow-up from existing patients, or might we see updated or initial data from the fully enrolled cohorts? Relatedly, in the AACR data, can you talk through rates of discontinuation and dose reduction, especially in the context of Project Optimus? And for Paul, can you walk us through the decision-making process when determining whether to make a biparatopic antibody versus not? For the pan-RAS payloads, you have one that does and two that do not—how do you make that decision? Sabeen Mekan: For ESMO GYN, we will be presenting folate receptor alpha expression level analyses from our Phase 1 dose-escalation study for ZW191. Data from the dose-optimization cohorts will be presented later when mature; we just finished enrollment of that cohort. Regarding AACR, dose reductions are common with ADCs, and our dose reduction rate was expected given longer-term follow-up. Most reductions occurred later in treatment. Despite these, we still see strong efficacy, indicating patients received high dose intensity as we moved through dose levels. Discontinuations likewise occurred with longer follow-up; our median follow-up was over seven months, with some patients much longer. Paul A. Moore: On selecting biparatopic versus monoclonal, we empirically screen for the vehicle that gives the best delivery with the payload: internalization, tumor penetration, and activity, while maintaining favorable pharmacokinetics. If a monoclonal achieves optimal delivery, we use it. For ZW191, our monoclonal outperformed other FRα antibodies we had, and adding biparatopic binding did not add benefit. For targets like PTK7, the structure is amenable to biparatopic binding with multiple binding sites, and we found biparatopics delivered activity beyond what we could get with a monoclonal. We also compare against known or published antibodies where possible; for PTK7, our biparatopic outcompeted prior clinical antibodies in our hands. Operator: Thank you. Our next question is from Stephen Douglas Willey with Stifel. Your line is open. Stephen Douglas Willey: Thanks for taking the question. How are you thinking about the scope of incremental development you are willing to independently pursue with ZW191? Do you want to generate more data in other tumor types besides ovarian? Do you want to initiate combo trials? How are you thinking about ROI associated with additional work on this asset? Kenneth H. Galbraith: Thanks, Steve. As with all programs, we are thoughtful about staging investments to understand strategic and competitive positioning and how datasets inform further investment. With ZW191, we were encouraged by dose-escalation data, funded additional patients to achieve the AACR dataset, and moved quickly to invest in dose-optimization cohorts of ~30 each (rather than 20) to gain additional insight. We will let those data mature and proceed from there. It is a very competitive landscape in gynecologic tumors, with multiple competitors ahead of us in ovarian and endometrial cancer. Without a partner, it would be hard to move quickly to fully leverage ZW191’s properties. We will present dose-escalation data next month, let dose-optimization mature, and then decide on further Zymeworks Inc. investment versus prioritizing a partnering transaction to support larger studies. Operator: Our next question is from Yaron Werber with TD Cowen. Your line is open. Yaron Werber: Thanks. First, as you think about developing the next targets, how do you determine between an oncology target or an inflammation target, given the platform’s flexibility? Second, regarding the RAS inhibitor payload itself—was that chemistry developed completely in-house, or did you use a known scaffold that you then varied? Kenneth H. Galbraith: Historically, Zymeworks Inc. focused initially on solid tumor indications. As we expanded into ADCs, we stayed within solid tumors, but we have since become more open to targets relevant in heme-onc and autoimmune/inflammation, and we have increased our efforts there. We are largely therapeutic area-agnostic; we look for areas where our approach can deliver superior patient benefit. We let opportunities guide us rather than preallocating effort by therapeutic area. Paul A. Moore: For initial proof of concept, we used a published pan-RAS inhibitor to demonstrate that an ADC approach could work. We then generated a large panel of novel payloads in-house, focusing on properties compatible with ADCs—chemistry, linkerability, stability—while maintaining potency. These are novel structures created by modifying and optimizing for ADC use rather than repurposing an existing small molecule as-is. Operator: Thank you for your question. Our next question is from JPMorgan. Your line is open. Analyst: I am curious if you could give us directionally how to think about your development strategy for your pan-RAS ADC approaches. You have different targets carrying a pan-RAS payload—how should we think about positioning, and whether it makes the most sense to go after pancreatic cancer first, or lung, or colorectal? Do you have a sense of which target has the best probability of success based on where you are today? Kenneth H. Galbraith: Thanks for the question. As you saw at AACR, we do not like to do things one at a time. We believe in applying the technology to multiple opportunities simultaneously to create optionality in ordering and prioritization, and to pay attention to competitive dynamics. Paul can add color on target and indication rationale. Paul A. Moore: Our strategy is to design ADCs with the tumor in mind—leveraging targets that provide strong coverage in RAS-mutated populations across tumor types, which gives us a broad “universe” to pursue without being constrained by a single target. Each ADC may have strengths in particular tumor types. For instance, PTK7 has high penetrance in RAS-mutated non-small cell lung cancer; Claudin 18.2 is relevant in pancreatic cancer; L1CAM provides coverage in CRC and PDAC. The molecules provide optionality for different development paths, whether internally or via partnerships. We are not discussing specific sequencing today, but our selections were driven by expression penetrance, internalization, and delivery characteristics that position us well in lung, pancreatic, and colorectal cancers. Operator: This does conclude our question-and-answer session. I would now like to turn it back to Kenneth H. Galbraith for closing remarks. Kenneth H. Galbraith: Thank you, everyone, for joining us. I know it is a very busy earnings season this week in particular, so we really appreciate you taking the time to listen to our progress. We very much look forward to reporting progress over the weeks and months ahead. Thank you very much for your participation in today’s conference. This does conclude our program. Operator: You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. My name is Duncan, and I will be your conference operator for today. I would like to welcome you to Absci Corporation first quarter 2026 business update. All lines have been placed on mute to prevent any background noise, and after the speakers’ remarks, there will be a question and answer session. Now I would like to turn the conference over to Alex Khan. Please go ahead. Thank you. Alex Khan: Absci Corporation released financial and operating results for the quarter ended 03/31/2026. If you have not received this news release, or if you would like to be added to the company’s distribution list, please send an email to investorsasci.com. An archived webcast of this call will be available for replay on Absci Corporation's Investor Relations website at investors.avsci.com for at least 90 days after this call. Joining me today are Sean McClain, Absci Corporation's Founder and CEO; Zach Jonasson, Chief Financial Officer and Chief Business Officer; and Ronti Somerotne, Chief Medical Officer. Before we begin, I would like to remind you that management will make statements during the call that are forward-looking within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. These include statements regarding the development and clinical progress of our pipeline programs, including ABS-201; the design, enrollment, product, and timelines of our ongoing Phase 1/2a headline trial of ABS-201 in androgenic alopecia; anticipated timing of interim proof-of-concept data readout for ABS-201 in 2026; the potential advancement of ABS-201 into Phase 3 development; anticipated initiation of a Phase 2 clinical trial of ABS-201 for endometriosis in 2026, and a potential proof-of-concept readout in 2027; the anticipated characteristics and product profile of ABS-201 as a drug product; our target product profile and its attributes; the potential for an expedited development pathway, including the possibility of advancing directly from Phase 1/2a into Phase 3; our plan to engage with the FDA regarding development strategy; and the potential market opportunity and commercial prospects for ABS-201. Certain statements may also include projections regarding potential market opportunity. These estimates are based on various assumptions, including potential regulatory approval, the final approved label, and the evolving competitive landscape, any of which could cause our actual addressable market to differ materially from these projections. In addition, certain research findings discussed today reflect participant responses to a hypothetical product profile and do not represent clinical results for ABS-201. Additional information regarding the risks and uncertainties that could affect our forward-looking statements is set forth in the press release Absci Corporation issued today, our most recent annual report on Form 10-K, subsequent documents, and reports filed by Absci Corporation from time to time with the SEC. Except as required by law, Absci Corporation disclaims any intent or obligation to update or revise any financial or product pipeline projections or other forward-looking statements because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast on 05/07/2026. With that, I will turn the call over to Sean. Sean McClain: Good afternoon, everyone. Thanks for joining us. Today, I will cover three things: where we are on ABS-201, a new addition to our prolactin pipeline, and the strategy driving both. 2026 is going to be a data-rich year for Absci Corporation with multiple readouts in front of us. Ronti will go through the headline trial and discuss early PK modeling that supports our targeted dosing frequency. At a high level, the Phase 1/2a is on track. We expect to share preliminary safety, tolerability, and PK data next month; interim 13-week hair regrowth data in the second half of this year; and full 26-week proof-of-concept data early next year. ABS-201 is not intended to compete with minoxidil. We are aiming to create a new category of hair regrowth therapy—a targeted biologic against the prolactin receptor that provides durable hair regrowth from a few injections. If successful, ABS-201 could represent the first new mechanism of action in androgenic alopecia in nearly three decades and a fundamentally different treatment paradigm for patients. In parallel, we continue to advance towards initiation of a Phase 2 endometriosis trial in the fourth quarter. We recently launched our endometriosis Clinical Advisory Board with leaders from Yale, UCSF, Duke, and Mayo Clinic. They bring deep expertise across reproductive medicine, fertility, and translational research and will help guide ABS-201’s endometriosis program. Endometriosis has the same kind of opportunity as AGA—large, underserved, and underexplored—and ABS-201 has the potential to open up a new category of therapy there as well. As Zach will discuss, our top strategic priority is using our platform to create novel, differentiated assets. ABS-201 in AGA and endometriosis is the clearest expression of that. We go after hard problems, novel biology, and large patient populations with real unmet need. Our platform is built for this, and our philosophy has always been simple: follow the science, and follow the data. One of the places this has taken us is prolactin biology. Prolactin biology is underexplored, underappreciated, and often misunderstood. Even inside the medical community, the name prolactin can read as narrow, and some still think of it as a lactation hormone. It is much more than that. The more mechanistic insight we have generated on prolactin, the prolactin receptor, and related pathways, the more opportunity we see for this target—well beyond AGA and endometriosis. We have started sharing some of these insights with the medical community as part of a broader education effort. Today, we are announcing another anti–prolactin receptor antibody, ABS-202, for an undisclosed I&I indication. ABS-201 in AGA, ABS-201 in endometriosis, and now ABS-202 in I&I are just the start of our prolactin pipeline. The reason we can do this comes back to our people and our platform, OriginOne. We figured out early that having a good platform is not good enough on its own. We need the people who know how to push it, and in this industry, you also need the assets—novel and differentiated programs that can make a real difference in patients’ lives. The places where unmet need is largest tend to be where biology is most complex and underexplored, and that is exactly where our platform and our people excel. That overlap is also where the potential return on investment is highest, both for patients as well as our shareholders. Our focus remains being an AI-native company dedicated to developing and delivering novel, differentiated therapeutic assets for patients. As we roll out our agentic AI workflows across Absci Corporation, each of our functions is scaling. Across Research, SG&A, and other functions, we are unlocking real efficiencies and new capabilities. That is the focus, and that is what we are committed to delivering. With that, I will turn it over to Ronti, who will walk through the ABS-201 clinical program. Ronti? Ronti Somerotne: Thanks, Sean, and good afternoon, everyone. As Sean mentioned, we are pleased to share that our ongoing Phase 1/2a headline trial for ABS-201 is progressing well and tracking according to plan. As a reminder, this trial is a randomized, double-blind, placebo-controlled study. The primary endpoint is safety and tolerability, while secondary endpoints include PK, PD, immunogenicity, target area hair count, target area hair width, and target area darkening or pigmentation. We will also collect patient-reported outcome data from this study. In the headline trial, we have now finished dosing all four planned healthy volunteer single-ascending-dose cohorts and initiated dosing in the first multiple-ascending-dose cohort. To date, emerging safety and tolerability data remain favorable. Additionally, preliminary PK modeling from this clinical trial supports ABS-201’s targeted dosing interval of two or three injections over a months-long period. Next month, we anticipate sharing blinded preliminary safety, tolerability, and PK data from the SAD cohorts. In that update, we plan to share clinical data that support the safety profile and anticipated ABS-201 dosing interval. In the second half of this year, we plan to disclose interim proof-of-concept data, followed by full proof-of-concept data in early 2027. The 13-week interim is, by design, a directional view. The 26-week time point is the trial’s full POC readout. Given the regenerative nature of the mechanism and our targeted dosing interval, the biology may continue to drive hair growth beyond that point, which is consistent with the long-acting profile we are working towards. Zach will speak to how this positions ABS-201 well for commercial success. We also continue to explore plans to execute our targeted, efficient clinical development strategy, which could enable expedited clinical development with the potential of advancing directly to registrational trials following this Phase 1/2a study. With that, I will pass it over to Zach to discuss our business strategy and to provide an update on our financials. Zach? Zach Jonasson: Thanks, Ronti. We remain focused on creating and developing therapeutic programs that offer the highest potential return on investment. Our strategic priority is the execution of the ABS-201 headline trial, which supports our future registrational study plans for AGA and our Phase 2 clinical trial plan for endometriosis. As Ronti mentioned, we plan to share an interim POC readout, including 13-week hair regrowth data, in the second half of this year. Based on the mechanism and our preclinical data, we anticipate the 13-week interim readout will give a directional view of hair growth, with the 26-week full POC providing the trial’s primary efficacy readout. Given the regenerative nature of the mechanism, we anticipate hair growth to continue beyond the 26-week time point. Conversations with the scientific and medical community, as well as patients, continue to affirm our view of the significant return-on-investment potential for ABS-201 in AGA and endometriosis. We estimate that the capital required to advance ABS-201 through registrational AGA trials will be a fraction of the clinical costs required for other large indications, such as oncology and IBD. Moreover, we expect to be able to leverage the SAD and MAD portions of the current headline trial to support Phase 2 initiation in endometriosis, thereby saving time and cost. Considering the significant potential market opportunities of AGA and endometriosis in conjunction with our efficient development strategy, we believe that ABS-201 offers a unique and compelling ROI. Our market research supports a significant commercial opportunity for ABS-201. In our surveys of AGA consumers and dermatologists, we evaluated a target product profile consisting of 2.5 years of hair growth following three injections of ABS-201, with a hair growth effect of approximately 35 hairs per cm² versus baseline, similar to high-dose oral minoxidil. Results from our market research support a potential total available market exceeding $25 billion annually in the U.S., with meaningful potential upside if hair growth exceeds the survey threshold. ABS-201 has the potential to significantly expand the overall AGA market as a new premium category of durable, regenerative hair growth therapy. Our market research indicates the ABS-201 target product profile would attract not only AGA consumers dissatisfied with current standard of care, but also those who elect to use ABS-201 alongside existing standard of care, such as oral minoxidil or new formulations of oral minoxidil. Similarly, in endometriosis, ABS-201 has the potential to define a new category of therapy that has the potential to address not only pain, but also underlying disease. Endometriosis is prevalent in up to 10% of women worldwide, including an estimated 9 million women in the U.S. We believe ABS-201’s differentiated profile could support potential peak sales in excess of $4 billion. As Sean mentioned earlier, our second priority is building and prioritizing an early pipeline of differentiated programs that offer the highest potential return on investment. Accordingly, today, we are pleased to announce the deepening of our pipeline with the addition of a new anti–prolactin receptor antibody, ABS-202. This program, which leverages our prolactin biology expertise and our AI platform, enables us to expand into new indications where we believe prolactin receptor inhibition will offer a novel and efficacious treatment option. Conversely, we have determined that certain programs no longer fit within our strategic scope, and so we will be deprioritizing development of ABS-301 and ABS-501. We will no longer commit internal capital or resources to further development of these programs. Our capital and resources will be directed toward programs that offer the greatest potential ROI within our strategy. In addition to the two previously discussed strategic priorities, we continue to advance partnering discussions associated with our other internal programs, which are at various stages of preclinical and clinical development. Overall, our strategy remains focused on executing the development of ABS-201 in AGA and in endometriosis, and then further building a pipeline of differentiated programs that provide optionality for internal development or partnering. Turning now to our financials. Revenue in the first quarter was $200 thousand, as we continue to progress our partnered programs. Research and development expenses were $19.3 million for the three months ending 03/31/2026, as compared to $16.4 million for the prior-year period. This increase was primarily driven by advancement of Absci Corporation’s internal programs, including direct costs associated with external preclinical and clinical development of ABS-201. Selling, general, and administrative expenses were $9.1 million for the three months ending 03/31/2026, as compared to $9.5 million for the prior-year period. This decrease was primarily due to a reduction in personnel-related costs. Cash, cash equivalents, and marketable securities as of 03/31/2026 were $125.7 million, as compared to $144.3 million as of 12/31/2025. Based on our current projections, we believe our cash, cash equivalents, and marketable securities will be sufficient to fund our operating plans into 2028. Our current balance sheet supports our execution of key upcoming catalysts, including potential proof-of-concept readouts for both AGA and endometriosis, and continued progress of our early-stage pipeline. We also remain focused on opportunities to generate additional non-dilutive cash inflows that could come from early-stage asset transactions and/or new platform collaborations with large pharma. In particular, we believe our early pipeline programs may offer attractive partnering opportunities. At the same time, we are aggressively implementing agentic AI workflows across our organization, including in business and scientific functions. These implementations are already creating meaningful efficiency gains as well as capability gains. Going forward, we expect to continue to realize cost savings and productivity gains from advancement of our agentic workflows. With that, I will now turn it back to Sean. Sean McClain: Thanks, Zach. Before we open up for questions, I want to thank the team at Absci Corporation for the work they put in each and every day. The catalysts ahead this year are: one, preliminary safety and PK data for ABS-201 next month; two, interim 13-week proof-of-concept hair regrowth data in the second half of this year; three, initiation of a Phase 2 endometriosis trial in Q4, subject to data and regulatory review; and last, continued progress on our early-stage pipeline, including our newest prolactin program, ABS-202. Looking into early 2027, we expect full 26-week proof-of-concept data for ABS-201 in AGA. We will now open the call for questions. Operator: If you would like to ask a question, please press star followed by one. Thank you. Your first question comes from the line of Brendan Smith from TD Cowen. Your line is now open. Please go ahead. Brendan Smith: Hi, guys. Apologies. Can you hear me now? Sean McClain: Yes. Brendan Smith: Thanks for taking the questions, and congrats on everything going on here. I guess maybe just a quick follow-up on the 202 conversation. Can you help us understand a little bit more, even on a mechanistic level, the most important distinctions versus 201 in terms of why it would make sense for some indications versus others, and whether there is a difference to product profile or something about actual mechanism that makes sense for that distinction? Thanks. Sean McClain: Yes, absolutely. With ABS-202, we are creating a differentiated profile, and we also want to position this outside of AGA and endometriosis for other indications where there may be pricing differences. With regard to prolactin biology, we are very interested in how prolactin is driving some autoimmune diseases. It appears to sit on a stress–inflammatory axis and is also driving some interesting B-cell biology. You see prolactin receptor expression throughout the body—bone, immune system, endothelial cells, synovium—so we are continuing to expand the biology there as well as going into other indications with ABS-202, and additionally looking at bispecifics that could be synergistic with this mechanism. Brendan Smith: That is super helpful. And then maybe just quickly on the upcoming MAD efficacy readout with 201. Appreciate the color on how you are thinking about some of this data. Given how the space has evolved in recent months, are you thinking comparable efficacy with clean safety and differentiated dosing is enough to win given how big the market is, or do you think you will need to show superior efficacy? Help us understand those dynamics. Sean McClain: Yes, absolutely. Zach can touch on this more from the consumer quant study we did, but we believe having comparable efficacy to oral minoxidil with infrequent dosing would be a home-run product. That convenience factor with equivalent efficacy is compelling, and any efficacy above that increases the overall TAM of the opportunity. Zach? Zach Jonasson: I would be happy to comment. As you know, we conducted sizable consumer surveys and surveys with dermatologists. The takeaway is that the profile of ABS-201 would establish a brand-new category of therapy based on durability, infrequent dosing, and a truly regenerative mechanism. When we test a profile with efficacy consistent with at least some reports of high-dose oral minoxidil—around 35 hairs per cm² in target area hair count—we see massive potential for adoption, and that is how we get to a potential $25 billion TAM on a TPP that looks like that. We think this product would expand the overall AGA market. Many patients dissatisfied with current standard of care would come to ABS-201, and over a third of males and females we surveyed said they would come first line, even before trying a nutraceutical. We also saw many patients would elect to use both—an oral minoxidil in combination with ABS-201. As a premium, new category of therapy, ABS-201 is very well positioned. Analyst: Good afternoon, and thanks for taking our questions. A little bit of a similar question as it relates to ABS-201 and ABS-202. Are there differences in pharmacokinetics or binding? Is there anything you can tell us about upgrades in ABS-202? And I have a follow-up on the ABS-201 program after this. Thanks. Sean McClain: At this point in time, we are not disclosing the specific profile we are looking to achieve for ABS-202, other than the fact that we are planning to take this into a different indication. Analyst: Fair enough. As it relates to the 13-week readout, another company noted “appreciable improvement” at two months. It is a qualitative measure at an early time point. Is this what we should be expecting at 13 weeks, or should we be expecting something more methodical? Thank you. Sean McClain: The 13 weeks is really a directional readout. We want to see hair growth, and the 26-week is where we expect to see the oral minoxidil hairs-per–cm² effect. That is the final readout. The 13-week is directional, and given differences in hair growth and the mechanism, we want to reserve the 26-week as the final definitive readout. Arseniy Shabashvili: Hi, this is Arseniy on for Vamil. Thanks for taking my questions, and congrats on all the progress. You previously talked about 90% receptor occupancy being necessary to achieve the full therapeutic effect with the prolactin mechanism. Has anything you have seen in the trial so far shifted that perspective in any way, and do you think it is ultimately achievable with the dosing schedule that you need? Sean McClain: So far, what we are seeing supports that as achievable. Ronti? Ronti Somerotne: We are not looking at anything like hair growth in the SAD study, and we designed the dosing paradigm conservatively. In our scaling, we are confident we can hit that 90% receptor occupancy. This is something to look forward to with the MAD data and then the hair growth data. Arseniy Shabashvili: One more follow-up. Do you expect variability in therapeutic response among patients you enrolled—because of biomarker profile, age—or is there something about this mechanism where you think essentially every patient will respond at least to some degree? Ronti Somerotne: At this point, we seem to have a balanced enrollment of the various stages of the Norwood classification. There is nothing from a biomarker perspective that I would expect to predict a variation in response in the AGA population. It is a reasonably sized, randomized study, and in terms of baseline hair characteristics, we are pleased with how patients are distributing amongst the arms. At this point, I am not worried about something else causing inter-subject variability in the mechanism of action itself. Sean McClain: We have not seen any such signals in the in vivo or ex vivo experiments we have run to date either. Analyst: Hi, how is it going? This is Alex on for Kripa. Really exciting time at Absci Corporation. Two questions from us. One, when can we expect to learn more about the mechanism and the properties and indication for ABS-202? And then also, in your consumer survey, did you specifically test for patient preference and desire for combination therapy for ABS-201 and other currently approved products? Thanks. Sean McClain: At the moment, we are not planning on disclosing more than we have on ABS-202’s mechanism of action, though we are very excited about the overall opportunities. As we get closer to the clinic, we will disclose more, but from a competitive standpoint, we are not disclosing at this time. Zach, do you want to take the second question? Zach Jonasson: Yes, absolutely. In the survey itself, we did not specifically segment by combination-therapy questions. What we did see, which was really exciting, is very high intent to seek out the product if available: 87% of men and 69% of women said extremely or very likely. In subgroups already on standard of care, such as oral minoxidil, those numbers went up dramatically—to 92% for men and 89% for women. We clearly see stronger interest among those already using standard of care, supporting the new-category definition where patients will look to ABS-201 either to replace standard care they are dissatisfied with or to use on top of standard care. Debanjana Chatterjee: Hi, thanks for taking my question. I have a question on the endometriosis program. I know pain is a very common endpoint for these trials, but historically the high placebo response has been an issue with pain studies. What structural elements would you implement in this trial to control placebo response? And I have a follow-up. Ronti Somerotne: Thanks for the question. I learned a lot in my time at Vertex overseeing the pain program there. The pain aspect of these studies is ultra important. The crux is how you execute the trial. We will spend a lot of time making sure the sites are carefully chosen, the investigators are carefully chosen, and all partners understand how to mitigate placebo response. Placebo training is really important. We will be surveilling the blinded data for evidence of a placebo response. There is a lot of operational work that is not in the protocol because these are things you have to do in execution. We have also engaged the FDA on how we are approaching mitigation of placebo response. It is really important, heavily operational, and done behind the scenes. Debanjana Chatterjee: That is helpful. For ABS-202, I know for competitive reasons you cannot share many details, but is that something for internal development, or would you partner it given pricing differences for I&I indications? Sean McClain: We are open to both options for ABS-202. The current plan is to pursue it ourselves, but given the opportunity and market size, we are considering both internal development and partnering. Analyst: Hey, guys. Can you hear me? Sean McClain: Yes, we can. Analyst: Thanks for taking my question this afternoon. When you talk about the hair growth benchmark for success, you have guided to that for the AGA MAD portion. Can you clarify whether that benchmark is what you expect at the end of the 26th week? And if it is, can you help us think about what you would expect to see at the 13-week mark based on preclinical work? Sean McClain: Great question. Where we want to be at 26 weeks is definitely where oral minoxidil sits. At 13 weeks, we are not putting an official guide on that; we want to see directional hair growth. Given the biology and the new mechanism, we do not want to set unrealistic expectations. The best lens is the 26-week readout, where we want to be around oral minoxidil with infrequent dosing. Zach Jonasson: To add, our survey shows that if we have a TPP with an effect size similar to high-dose oral minoxidil—think in the 30s—with convenient dosing and durability, that is a home-run, category-defining product. There is still a product with efficacy below that as well, but the research suggests that threshold is fantastic. Analyst: Got it. Maybe going back to the PK data you have seen so far. You said the modeling supports a few-times-a-year dosing regimen. Can you give more color on the key parameters driving that conclusion? Ronti Somerotne: We are assessing PK from all SAD cohorts. We just started dosing the MAD cohorts, so we do not have MAD PK yet, but the SAD cohorts are developing nicely. We feel pretty good about being able to dose at least every eight weeks subcutaneously. We will have more color and a more refined estimation of dosing frequency in a few weeks when we share the data. Sean McClain: From the preliminary half-life and PK, we are feeling very optimistic and look forward to sharing the full data in June. Swayampakula Ramakanth: Thank you. Good afternoon, Sean and Zach. I have a couple of questions. One, you stated that you are deemphasizing oncology products. What are the reasons behind that, and what interest are you seeing from outside for these novel drugs? Sean McClain: From a strategy standpoint, ABS-201 in AGA is a direct-to-consumer type of product, and we want to build out products that support this. I&I makes a lot of sense in that context. Oncology does not support that particular go-to-market strategy we want with AGA. We have deprioritized oncology and will not fund those programs internally, putting focus on assets that support the lead asset, ABS-201, in AGA and endometriosis. Swayampakula Ramakanth: On partnerships, you have been talking about generating partnerships, including with large-cap pharma, but the cadence has been slower than in previous years. Are large-cap companies building their own tools, or are the economics not viable for you? Sean McClain: Our focus is driving the clinical development of ABS-201. We are continuing to look for pharma partnerships around our pipeline, but they have to make sense for us. We are a limited team and want synergy, so we are selective about who we partner with and how they help build the portfolio and support ABS-201’s go-to-market strategy. It is a focus, but it has to be strategically sound. Zach? Zach Jonasson: Internally, we have the capability to generate assets, and we believe we have a leading platform focused on challenging targets, as well as leadership in areas like prolactin biology. Our internal analysis shows we can generate better economic terms on partnerships focused on an asset—even at a preclinical stage—versus tying up resources for target-based platform partnerships. We have a number of assets coming toward DC this year, and several are earmarked for partnering to generate non-dilutive cash flow. The risk-adjusted NPV from creating assets and partnering those is a multiple of what it would be for platform target-based deals on a target- or program-by-program basis. The economics point us in that direction. Analyst: Hey, guys. You mentioned adopting more agentic AI into your business. How is this impacting your drug discovery process and business operations, and any near-term cost savings you can point to? Zach Jonasson: We are aggressively implementing agentic AI workflows throughout Absci Corporation, including in Science and R&D and across SG&A. We are already seeing significant efficiency gains and expect to realize those in cost reduction as well as capability gains on a go-forward basis. Even over the next few months, we should start realizing some of those gains. Arseniy Shabashvili: Hi, it is Arseniy on for Vamil. One more on the hair repigmentation opportunity. You previously talked about it as roughly the same size as the AGA market. What do you expect to see there that would be clinically meaningful? Would you consider pursuing it as a separate indication with additional studies, or as an extra claim in the label in addition to the AGA indication? Sean McClain: We are really excited about the potential for repigmentation. We see it as creating an even bigger market opportunity. Right now, it is an exploratory endpoint, and we will see how the readouts go at 13 and 26 weeks and then determine how to proceed. Ronti Somerotne: The repigmentation data emerging elsewhere are interesting and exciting. Mechanistically, it makes sense as a potential finding. We will see what we can see and plan accordingly. Operator: We have reached the end of the question and answer session. This also concludes our call for today. Thank you, everyone, for attending this call. You may now disconnect. Goodbye.
Operator: Greetings. Welcome to The Trade Desk, Inc. First Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to your host, Chris Toth. Chris Toth: Thank you, operator. Hello, and good afternoon to everyone. Welcome to The Trade Desk, Inc. First Quarter 2026 Earnings Conference Call. On the call today are CEO and Co-Founder, Jeffrey Terry Green, and our Interim Chief Financial Officer and Chief Accounting Officer, Tahnil Davis. A copy of our earnings press release is available on our website in the Investor Relations section at thetradedesk.com. Please note that aside from historical information, today’s discussion and our responses during the Q&A may include forward-looking statements. These statements are subject to risks and uncertainties and reflect our views and assumptions as of the date such statements are made. Actual results may vary significantly, and we expressly disclaim any obligations to update the forward-looking statements made today. If any of our beliefs or assumptions prove incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. For a detailed discussion of risks, please refer to the risk factors mentioned in our press release, and our most recent SEC filings. In addition to our GAAP financial results, we present supplemental non-GAAP financial data. Reconciliation of the GAAP to non-GAAP measures is available in our earnings press release and investor presentation. We believe that presenting these non-GAAP measures alongside our GAAP results offers a more comprehensive view of the company’s operational performance. With that, I will now turn the call over to CEO and Co-Founder, Jeffrey Terry Green. Jeffrey Terry Green: Thanks, Chris, and good afternoon, everyone. Thank you for joining us. As you have seen from our press release, we delivered a solid quarter once again. This fall, we will celebrate our ten-year anniversary as a publicly traded company. Similar to the last ten years, we remain solidly profitable. The core of our business remains resilient, and I am proud of our team and their dedication to supporting our clients, especially in what continues to be a dynamic macro environment for large brand advertisers. We remain as confident as ever in the long-term opportunity for our business and for programmatic advertising as a whole. The business model we established when we founded the company is the same, in part because it is more proven than ever. Advertising is over a trillion-dollar TAM, and it is growing. At end state, we continue to believe most, if not all, of those ad dollars will be data-driven. We are convinced that the lion’s share of the market will belong to a scaled, objective, and independent platform. By that standard, we are the company in the best position to win. The expanding TAM continues to grow as we predicted, but there are some new areas of growth that have caused the TAM to grow even faster than predicted, like retail media and the chatbots and AI search engines. Linear television moving to CTV is still at the early stages alongside the rapid growth of retail media, and over time, the emergence of new high-intent search-like opportunities as AI reshapes legacy search. We believe these trends are big opportunities for The Trade Desk, Inc. and reinforce the long-term opportunity for our business. Today, I have organized our prepared remarks into three topics. First, the state of the macro environment. Second, the state of the global advertising market and our place in it. And third, the innovation on our platform and in our company to upgrade and scale our business. The macro environment has certainly become more complex in 2026. Geopolitical tensions have increased. All advertisers and agencies are navigating a rapidly evolving landscape. Global economic pressures, wars, and tariffs have created an environment that is harder for some brands and some brand categories to grow. Still, this environment also creates lots of opportunity for change and upgrade. The most sophisticated brands in the world are using these moments to get more deliberate and more data-driven. When marketers get more data-driven, The Trade Desk, Inc. tends to add more value and as a result grow. Many brands and agencies are using this moment to work with us to upgrade long-standing problems in digital advertising. Common examples include bad measurement methodologies and an overreliance on cost-cutting. Outside the United States is growing much faster both in advertising and at The Trade Desk, Inc. Our choice to invest in nearly all of the major markets around the world is proving to be wise in moments like this. We are aware of the trends and the opportunity and are positioned well to benefit from this. Switching gears from the macroeconomic environment to the global advertising market, the macro conditions plus AI innovations are making the global advertising ecosystem as dynamic and changing as ever. Because at The Trade Desk, Inc., we often set the pace of change, we are in the best position to benefit from this current environment. In 2025, the advertising ecosystem globally added more supply than perhaps any year previously. It is probably the most lopsided market in advertising history, with multiples more supply than demand. This supply-demand imbalance creates the biggest buyers’ market in the history of advertising. Buyers have the option to be selective, but they need to leverage data and great real-time technology to know what they are buying. Premium advertisers and premium publishers often have been at odds for most of the internet’s history. But at this moment, both are heavily invested in making the supply chains and market dynamics of the premium open internet successful. In this buyers’ market, some publishers are mistakenly copying the Facebook and YouTube walled garden business model. For most of them, it has a couple of years, and then it hits a scale ceiling. The walled garden strategy only works when a publisher is massive, and a must-have on a media plan. Most marketers now have a clear definition of the open internet that includes media beyond the browser. The best of movies, TV, sports and all live events, journalism, and music are all the anchor tenants of the open internet. As a result of this dynamic, the open internet is thriving and evolving very fast. We are convinced that the evolution and changes being made in the open internet today will make it soon become a place where, consistently, an advertiser’s first dollar is spent, not the walled garden leftovers. Once the open internet consistently gets the first dollar, most of the walled gardens will open up their inventory and join the open internet. I view this as inevitable, and I am optimistic at the changes being made in our space. Currently, there are a few dozen companies on both the buy side and the sell side of media and advertising that define the future. Let us talk about a couple of the sell-side companies first. Some of these premium publishers or content owners include Spotify, NBCU, Disney, and Netflix. These companies are shaping the future and are part of the reason why the open internet is thriving today. They influence the pace and design of the open internet. Disney has one of the largest ad businesses of any publisher in CTV. They have learned in recent years the benefits of biddable programmatic, low ad loads, and a close direct relationship with The Trade Desk, Inc. The Trade Desk, Inc. and Disney both have business models that benefit the supply chains of the open internet getting more efficient. They have made clear that their growth and higher CPMs will come from better data, more relevant ads, and less waste. Biddable and marketplaces are the only way to get the best of all premium inventory, but especially sports inventory. This is a great setup for both of us. Switching to audio, by the end of this year, Spotify is likely to have the largest and arguably most successful subscription program in the world. They have provided amazing consumer surplus. However, just over 10% of Spotify’s revenue has come from ads. They need a variety of ads, a scale of ads, and a quality of ads that only a very large open market can provide. I still believe that audio, including Pandora and others, represents the most on-sale part of the open internet. When I consider the gap between time spent and ad budgets, I see substantial upside for these companies and The Trade Desk, Inc. We have seen these gaps many times before, and they always get filled. I am very bullish on the ad opportunities for Spotify and audio. NBCU, including FreeWheel, is leaning into initiatives that improve supply chains, CTV price discovery, and better signals for advertisers to spend against. NBCU has institutionally embraced that better signals and better options will move more dollars to CTV. We exceeded our own spend stretch goal for NBC at the Winter Olympics, providing yet another case study on the power of the open internet and the benefits of decisioning for both buyers and sellers on the most premium content in the world, including on the most premium live events in the world. Last but not least, on the content side, Netflix continues to model how rolling out an ad experience methodically preserves the user experience and attracts advertisers. We continue to make technological enhancements to our partnership that enable better advertising efficacy. Our partnership with Netflix is a source of optimism for us but also for the open internet. Biddable and premium are inseparably connected. By this standard, we are also optimistic that the LLMs and AI search engines like ChatGPT, Perplexity, and Gemini will eventually unlock more inventory in the future. Because highly detailed prompts can create a willingness to see even video ads and higher levels of engagement that is way beyond what, quote, legacy search and keywords could provide, we are optimistic that, over time, the TAM that was once locked up by search will be unlocked by a more premium and more competitive environment. The walled garden strategy has only worked at scale when advertisers are chasing cheap reach and willing to buy large amounts of user-generated content like Instagram, TikTok, and YouTube. None of those attributes apply to the chatbots and AI search engines. Also, the walled garden playbook only works when grading one’s own homework. It is tolerated by advertisers. Which is a good segue to the next trend in the state of advertising, and I placed this topic between buy-side and sell-side commentaries because it impacts both buyers and sellers. In the current state of the market, both buyers and sellers agree that measurement is broken. This is such a great setup for the open internet because most measurement companies and media mix model, aka MMMs, have mostly relied on last touch and last-view attribution models. This tradition is bad for everyone except for bottom-of-the-funnel walled gardens. I have never seen more discussion in the history of our space about how broken these methods are to measurement. The resolve and commitment for the industry is higher than ever, partially because fixing open internet measurement is required for many AI-backed initiatives to work. The state of measurement is bad for branding. It is bad for premium, and all top-of-the-funnel ad inventory like CTV and audio. Improving measurement is required to unlock the next phase of growth for the open internet and the thousands of companies that are working on it today. Now to discuss the state of the state on the buy side, most of today’s leaders in marketing for the biggest brands are looking at this moment as an opportunity to upgrade their entire marketing operation—both tech and people. Both advertisers and publishers have a growing understanding and vision for the open internet. They are investing in and leveraging AI tools like Koa. They are using and protecting their own data and leaning into the objective media buying platform at The Trade Desk, Inc. to make advertising dollars more effective and better distributed throughout the entire funnel. While a small number of brands have responded to the pressures of this moment by focusing on reducing costs, reducing media budgets, and doubling down on cheap reach, there are trends among the most forward-thinking CMOs and marketing leaders that are very positive for The Trade Desk, Inc. These are the leaders helping to shape the future of advertising. The best CMOs in the world are focused on the question, how do I grow, not how do I cut costs. Of course, they want to avoid waste. But they know that quality and cheap tend to have very little overlap. They also know, often by experience, that cost-cutting does not fuel growth. One leader of programmatic at a top 20 brand said it best. He said that his brand has become convinced that the most expensive ads are often the best value and highest performing. He elaborated that chasing cheap reach is one of the biggest landmines a CMO or digital marketer can pursue. We are also seeing a shift toward more effective creative. Advertising is about connecting and making people feel something. Most of digital advertising history has been about touches led by bad measurement. That is changing. Great marketers know that to be remembered in a sea of ads and the battle for attention you have to create an emotional connection. Our memories as human beings are anchored on our emotions. So when one marketer shared with me that 95% of their social ads are seen for less than two seconds, I was not surprised to learn that their focus was now on enhancing strong connections with consumers via CTV and audio ads. Another common theme is strong dialogue across the C-suite. Many CEOs and CFOs know little to nothing about the complex and esoteric world of programmatic advertising. Great CMOs and marketing leaders are consistently thinking about how to share the difficult concepts of programmatic without just viewing three-letter acronyms and industry jargon. The strength of great brands can be assessed by how well the dialogue is going with the CMO and the rest of the C-suite. At the same time, most great marketing leaders have a good relationship with their agencies. Very few global brands can do all their own media buying. They depend on agencies. Most great marketers have JBPs or MSAs directly with their buying platform, but they also have clear models of engagement with their agency partners. The best outcomes happen when brands, agencies, and DSPs are all aligned and winning together. Measurement is also top of mind for nearly every marketer I speak to. They realize that measurement and goals have to change. I recently met with one CMO to a top 20 global brand. She opened our meeting by acknowledging that all global marketers, including her team, have been through a lot in the last few years. But she quickly oriented the meeting on leveraging data, making holistic decisions, and thinking about the lifetime value of every customer. I learned a lot from her. But my favorite takeaway from the meeting was when she said, racing to the bottom of the funnel is racing to the bottom of your business. That mindset is what is driving the shift toward more data-driven decisions. AI is another area leading marketers are leaning in. They are not avoiding its use and they are not simply hyping it in the abstract. They are looking for low-hanging fruit on the AI tree today. That said, they know that there are no quick fixes and that AI is a race. But it is a long race. They know that quality data matters more in an AI world than ever before, and they know that they have to protect it and activate it. An example of this is we announced the first of many partnerships with one of the up-and-coming large agencies, Stagwell. Our partnership is to leverage agentic AI to create, edit, and modify campaigns. After these basics, we will move to agentic optimizations. Great marketing teams are agile and active. Relatedly, we recently had partnership discussions with a smaller AI-first company. While we have been partners for years, we are looking to expand now. And they shared a few things with us that I want to share today. One is that The Trade Desk, Inc. is the only company that gives them enough data from their buying to power their future. We are working together to further ensure they are getting all that they need to train their models while protecting the data of brands and consumers. The other thing that they reminded us of was a quote from one of the greatest F1 drivers of all time: you cannot overtake 15 cars in sunny weather, but you can when it is raining. Which is a good segue to the next point. Many marketers are also using this moment—this moment of change—to gain share. CPGs and, to a lesser degree, autos have some headwinds. The macro environment is more difficult for some in these two categories. But the state of measurement is a headwind for all brand builders. However, the track conditions are the same for everyone. Now is a moment to compete and to pull ahead. Whether it is rain or any other unexpected event in the race, there are moments in every race where the standings will change. Between the macro, the state of measurement, and AI, this is one of those moments. And new leaders can emerge. There is also a growing recognition that ads are not fungible. You cannot just take any collection of ads from a deal and make it perform. Ads selected at random will lose every time. Programmatic and digital ads tend to cost more. So choosing them wisely is the only way to win. Buying in bulk or buying cheap fixed-price deals that essentially allow sellers and publishers to offload the leftovers do not earn their keep. Brands that are growing are considering millions of ads a second, and selecting the best suited for their brand. They are not outsourcing decisioning to sellers, publishers, or the platform offering the cheapest platform rate. We are seeing these behaviors translate directly into business. March was our biggest month on record for JBP signings. We signed 45 JBPs in March alone. For Q1, our total JBP count grew 55% year over year. And excluding renewals, new JBP deal spend grew 40% year over year during the quarter. To highlight one of these deals, our pharma team recently went head-to-head against Amazon for one of the largest pharmaceutical advertisers in the world. Lured by seemingly low rates, this brand shifted some investment to PG on Amazon last year. Over the past nine months, our team delivered consistent partnership and focused on driving real business outcomes for the client. In Q1, our team won back the business and signed a JBP for 2026 that will increase their spend on our platform by 114% year over year. So stepping back, all of this reinforces a final point. Objectivity matters more than ever. In the best buyers’ market in history, it is important that your DSP does not own inventory. At The Trade Desk, Inc., our differentiation is that we operate on the open internet and we are objective. We do not own media. We do not have conflicting incentives. The technology we have built is all informed by our objectivity. And our objective position allows our AI models to evaluate every opportunity on its merits across the entire ecosystem and optimize purely for each advertiser’s goal. On to our third topic, innovating and upgrading The Trade Desk, Inc. We will spend a lot more time in coming quarters talking about our upgrades to the product and the company. But suffice to say, we are extremely focused on improving the inputs that feed our objective AI-fueled advertising machine for buyers. Those enhancements include improving measurement, improving data-driven decisioning, improving data and price discovery of data itself, and making our supply chain to inventory and data more efficient. Over the last five years or so, we have created the world’s largest and richest marketplace of retail data. Combined, we believe the retailers in our data marketplace represent more than 80% of sales from top U.S. retailers, compared to Amazon, who represents less than 15% of U.S. retail spend. This is a huge advantage for us. For example, a leading travel brand recently ran a test to evaluate campaign performance with and without activating our new product Audience Unlimited. The results across all KPIs were fantastic. Audience Unlimited delivered 30% lower CPMs on media, 38% lower data costs, a 75% more efficient CPA, and a 2.7x increase in conversion rate compared to the control group. Most importantly, Audience Unlimited increased campaign performance while simultaneously reducing manual effort in the audience selection process. We are also beginning to unlock on-site retail media. Sponsored listings are among the most powerful and effective advertising formats on the internet and are even more powerful when part of an omnichannel strategy. We have begun integrating with partners like Criteo, and even more recently, Dollar General, and we expect more retailers to enable programmatic access to sponsored listings in 2026. We were also recently chosen by Lyft Ads to power their off-site rider experience, or mobility media as Lyft calls it. This is a good example of how media teams are increasingly turning to The Trade Desk, Inc. not just for access, but for the ability to bring together first-party data, measurement, and cross-channel execution. This allows platforms like Lyft to take more relevant ad experiences to their users even when they are not actively taking a Lyft, while helping advertisers better understand and optimize performance campaigns across channels. Of course, our objectivity is critical in all of this. Retail media and Audience Unlimited are both part of a much bigger effort we are undertaking to reform objective measurement. For years, digital advertising has relied too heavily on last touch or last-click attribution. This often over-credits the lower funnel or retargeting impressions while undervaluing the awareness and consideration strategies that actually create demand in the first place. You have to plant seeds, water them, and then harvest them. Last touch ignores how consumers really behave today, especially across channels like CTV and audio where influence happens well before any final action. As a result, marketers end up optimizing for what is easiest to measure and not what actually drives brand recognition, loyalty, and incremental growth. Over the last few months, we have had deeper conversations with our partners and clients around new approaches to measurement and attribution. As we look ahead, our focus is very clear. We are committed to continuing to execute for our clients, helping them navigate an increasingly complex environment and deliver measurable outcomes. We see the premium internet more aligned than ever. Premium advertisers and premium publishers want a more efficient supply chain for the open internet. The Trade Desk, Inc. is leading this work, but we are far from alone in these efforts. We will continue to invest in the areas that matter most to the future of the open internet, including AI-driven decisioning, retail media, CTV, and identity. And we will continue to strengthen our platform and our organization so that we can scale with discipline and sustain our leadership position for many years to come. We recognize that at this moment, where the macro is more uncertain and we are evolving parts of our business, it requires clarity, accountability, and strong execution. These are areas where we have a proven track record, and we are committed to continuing to earn the trust of our investors, our partners, and our customers. I have said before that trust is one of the most important assets we have. It is not something we take lightly. And it is something we work to earn and maintain every single day. Our conviction in the long-term opportunity has not changed. If anything, it has strengthened. Advertisers are demanding more transparency, more performance, and more control, and we believe we are uniquely positioned to lead that effort with our objective platform, our scaled data, and our AI-driven decisioning that helps our clients grow and own their future. The role of data and AI in advertising is increasing, and the need for objective, outcome-driven platforms has never been greater. We believe all of those trends are working in our favor. And importantly, we believe we are still early in this opportunity. As a result, our best days are ahead of us. Thank you. And with that, I will hand it over to Tahnil to cover the financials. Tahnil Davis: Thank you, Jeff. Good afternoon, everyone. Our team remains disciplined and focused on our shared vision for programmatic advertising and the open internet. CTV growth remains strong, fueled by the continued shift away from linear TV and expanding decisioned inventory at the world’s largest publishers. Advertisers are increasingly using retail data from our marketplace to tie ad spend to real-world sales. Our independence and objectivity continue to be key differentiators, especially in this AI-powered era of advertising, as brands seek trusted, results-driven partners. The start of 2026 has brought unique challenges, including geopolitical uncertainty that our clients are currently navigating. As we navigate these dynamics in the near term, we remain focused on the long-term opportunity. Few companies are in the fortunate position to operate with the trillion-dollar addressable market, with a strong balance sheet and cash generation, and durable differentiation as an objective, unbiased platform. With this opportunity in mind, we will continue to innovate through disciplined investments in our business, positioning ourselves to create value for advertisers and help our clients grow their businesses. With that, on to our results. In Q1, we delivered revenue of $689 million, representing 12% year-over-year growth. We generated $206 million of adjusted EBITDA during the quarter, representing a 30% margin. Our growth in Q1 was driven by strong trends across CTV and audio. Video, which includes CTV, represented a low-50s percent of our business in Q1 and continues to grow as a percentage of our channel mix. Mobile represented a high-20s percent share of the business during the quarter, while display represented a low double-digit share. Audio represented around 6% of the business and grew year over year at a rate higher than any other channel in Q1. Geographically, the United States represented approximately 82% of our revenue in Q1, and international represented approximately 18%. Our strong momentum in both EMEA and APAC reflects the investments we have made in these regions over the last several years as well as momentum in CTV across these markets. Among verticals that represent at least 1% of our business, we saw particularly strong growth in medical health, automotive, and events. We continue to see some pressure in the home and garden and food and drink sectors as CPG brands navigate geopolitical uncertainty, consumer softness, and input cost inflation. Automotive remains an area of strength overall, though we believe this business could be growing faster absent the impact of increased tariffs on the industry. Q1 operating expenses were $622 million, up 11% from a year ago. Excluding stock-based compensation, Q1 operating expenses were $513 million, up 18% from a year ago. During the quarter, we continued to make investments in our team and platform, particularly in areas like platform operations as we optimize our platform infrastructure and implement more AI-powered tools in our platform. Income tax expense was $39 million in the first quarter, driven primarily by our profitability and the impact of stock-based awards. Net income for the quarter was $40 million, or $0.08 per diluted share, or about 6% of revenue. Adjusted net income for the quarter was $134 million, or $0.28 per diluted share. Net cash provided by operating activities was $392 million, and free cash flow was $276 million in Q1. We ended the quarter with a strong cash and liquidity position. Our balance sheet had about $1.4 billion in cash, cash equivalents, and short-term investments at the end of the quarter. In Q1, we used $164 million of cash to repurchase our Class A common stock via our share repurchase program. Given our strong balance sheet and consistent cash flow generation, we plan to continue opportunistic share repurchases while also offsetting dilution from employee stock reissuances. Turning to our outlook for the second quarter, for Q2, we expect revenue to be at least $750 million. We estimate adjusted EBITDA for Q2 to be approximately $260 million. In terms of our operating plan for the remainder of 2026, we continue to expect headcount growth to remain below revenue growth, reflecting our focus on productivity and operating leverage. We plan to be deliberate in prioritizing investments that directly support revenue growth and AI-driven innovation. Taken together, we continue to expect our full-year 2026 adjusted EBITDA margin percentage to be at least 40%, approximately in line with 2025. Looking ahead, we remain the leading independent platform in a rapidly growing industry, delivering profitable growth and innovation. With strong execution across key initiatives such as CTV, retail media, agentic AI, supply path optimization, and growth outside the U.S., we remain confident in our ability to capitalize on the significant opportunities ahead of us. That concludes our prepared remarks. Operator, please open up the call for questions. Operator: Certainly. Thank you. At this time, we will be conducting a question-and-answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll. Please press star 1 if you have a question. The first question comes from Shyam Patil with Susquehanna. Please proceed. Shyam Vasant Patil: Hey, guys. Good afternoon. Jeff, I had a couple of questions. First one, can you provide some comments on the Publicis discussions? And then second, can you talk about the factors that you see driving the decel in your Q2 outlook? Thank you. Jeffrey Terry Green: Thanks, Shyam. I appreciate the question. And I appreciate you asking about Publicis, although I have less to say about that than I do the second part of your question. But I am really glad to be able to address it head-on. There has been a lot said about conflict, and often it is framed in the most conflict-rich language that the press provide, and I think that has been overdramatized, and I am hopeful that we are nearing the end of this public discussion, so I am hopeful that our discussion today puts an end to it. But I will say that since 2018, we have done billions of dollars of business with Publicis through the agreement that we have. And we continue to have great dialogue with Publicis about the next chapter of our partnership. Our negotiations are ongoing. It is probably not prudent for me to say more about it in this forum, so I will just leave it at that on Publicis. As it relates to the factors that are driving deceleration, as you put it, in Q2, first, I just want to say that we feel really good about the long-term structural drivers of our business and the future of the open internet. I hope you could hear that conviction in our prepared remarks. Secondly, I just want to remind everybody that we are uniquely one of the few large companies that are focused on being a buying platform for large companies. Most of our revenue comes from Fortune 500 companies and their brands, and, of course, they respond differently to macro factors than smaller companies or local businesses, especially when the headwinds are macro and global in nature. As to the specifics, some of the fast-growing verticals we believe would be growing even faster if they were absent the current macro uncertainty, where there is geopolitical instability, there are tariffs, there are broader consumer pressures that are impacting growth. But what gives me confidence, really, is that nearly every major brand we speak with is focused on the right question right now, which is how do we get back to growth as a brand? So it is actually in that context that I am so positive. It is the reason you could hear that positivity in our prepared remarks. Because I think we are in a position now to build a much bigger business than we have ever been before. And that all of the things that we are seeing across the landscape, including the pressures, are actually opportunities. When I look at all the things that are teed up for us nicely, first of all, the discussion around measurement right now is the best thing that could be teed up for a very bright future for the open internet, let alone The Trade Desk, Inc. You look at all the progress that we have made in retail data as we highlighted. We have partnered with more retailers than we have not, in the sense that a greater percentage of retailers are now partners than are not. We talked a lot about our agentic partnership with Stagwell. And of course, there are many others to come. We really do see that the future of The Trade Desk, Inc. is to be a bit of a hub for all the innovation on the open internet, including and especially inside of agentic AI. We are seeing more cooperation from the biggest publishers in the world, as they are highly in tune with the fact that they need higher CPMs that come from biddable, and there is not really any way out for them in terms of raising prices or adding to the ad load. The much better path for them that does not result in subscribers going away is to actually make their ad environment more effective. That is true for Disney, Spotify, Paramount, NBC, Fox, Netflix, and hundreds of others. Of course, we are also seeing great partnership discussions with our operating system for CTV called Ventura. I expect that you will hear more about that in the years to come. We have talked about our new product, Audience Unlimited. We talked so much about the discussions that the industry itself is having on measurement. But overall, I would just highlight that I view all of these pressures as opportunities. And so while there are clearly near-term headwinds and a cloudier macro environment, we continue to believe that the long-term opportunity for our business remains extremely strong. Thanks for the question, Shyam. Shyam Vasant Patil: Thanks, Jeff. Operator: Next question is from Vasily Karasyov with Cannonball Research. Vasily, your line is live. Vasily Karasyov: Can you hear me? Jeff, there was a very interestingly timed piece in the industry press today before you reported. Adweek announced that your Chief Strategy Officer, Samantha Jacob, is leaving the company to join OpenAI. So now that it is public, I was wondering if you could share the details around this event. Thank you. Jeffrey Terry Green: Thanks for the question, and I agree with you that this was interestingly timed. But I will just confirm what the article asserted, which is that Samantha is taking a role at OpenAI. On a personal level, I am excited for her, and I am extremely confident in her abilities to have an impact there just like she has had here. I will also say on a personal level that working with Samantha has been one of the highlights of my career. And I am glad on some level that it is not over. She is smart and humble, and she is just generally amazing. And I am really sad to see her go in her full-time role, but she is not leaving us fully. As you may know, she is on our board of directors. She will stay on our board of directors and will continue to give us strategic advice and guidance. She has asked me to share that she is a strong believer in The Trade Desk, Inc. and our mission and continues to invest in ensuring that we are successful. Obviously, her passion for the open internet is big, and it continues. I will also highlight—which is something that has not been highlighted enough publicly—is that we have quietly been assembling a very strong team of meaningfully senior leaders who will bring deep operational experience and are aligned with where the company is going. And despite some of the noise that you read in ad tech headlines, we have a team that really understands where this industry is heading, and understands how to take the position that we are in and help this company become a bigger company than we have ever been before. We are extremely optimistic about the future in large part because of our recent recruiting efforts, and that continues today. Some of the source of my biggest optimism is actually the team that we have assembled and the things that we have in the pipeline. Thanks for the question. Operator: Next question comes from Matthew Swanson with RBC. Please proceed. Matthew John Swanson: Great. Thank you for taking the question. Jeff, maybe expanding on your answer to the first question on the Q2 decel. There has obviously been a lot of noise, both macro and The Trade Desk, Inc.-specific lately. But when thinking about the cyclical and secular variables that impact your business, how do you think about revenue reacceleration and which aspects of it are in your control? Jeffrey Terry Green: Thank you for the question. I actually really like the way you framed it because those are words that I think are just important to underline. It is important to separate what is cyclical from what is structural. The structural drivers of our business are extremely strong, and we think that the opportunity for the open internet is better than it has ever been before. So reacceleration is not really about reinventing ourselves. It is about executing against the larger, expanding opportunity. Of course, we highlighted before there are a number of macro effects, but it is in these macro effects where the pressures actually help the industry evolve in a healthy way. That is what is happening right now, even though it does not show up in results today. While all of that is true, the macro does matter too. When conditions stabilize, I think that provides a natural tailwind that is not there right now. But again, when I look at things like Audience Unlimited, advancements in measurement, CTV adoption, and the continued expansion of the retail data partnerships, and of course, all the innovations that we have injected into our platform and our partnerships brought to you via various forms of AI—maybe agentic being the one I am the most excited about—there is just so much opportunity ahead for us and the open internet. We know we can improve our growth. In the near term this is about execution, and we believe that we are really well positioned as all of these factors come together. Operator: Next is Justin Patterson with KeyBanc. Please proceed. Justin Tyler Patterson: Great. Thanks. Good afternoon. I am curious to hear more about investment priorities against that 40% EBITDA margin target. Obviously, revenue and margins are both off to a softer start in the first half. I am curious how we should think about the levers to achieve that target. Thank you. Jeffrey Terry Green: I will just first say that 2026 is a really important year of disciplined reinvestment, but I will ask Tahnil to go first, then I will wrap up. Tahnil Davis: As a company, we have always been very disciplined around hiring and reinvestment in the business. 2026 is a year of disciplined reinvestment for us. We expect our full-year adjusted EBITDA margin percentage to be at least 40%, approximately in line with last year. We again expect headcount growth to remain below revenue growth, reflecting continued operating discipline and increasing productivity across our business. At the same time, we will continue investing in areas where we see the highest long-term ROI, particularly around platform innovation, AI, retail media, and measurement. One advantage of our model is that we generate strong cash flow and can maintain significant flexibility in how we pace our investments and expenses, which allows us to maintain those high levels of profitability. So our focus is clear: maintain strong profitability, invest where ROI is the highest, and continue positioning the business for greater leverage over the long term. Jeffrey Terry Green: And I will just add that maintaining strong profitability has always been a part of our culture at The Trade Desk, Inc., even when we were a much smaller company. In fact, I was very obsessed when I founded the company with racing to profitability. It was my view that that is how we could own our future, but it is also how we could establish a culture that was extremely disciplined. I believe that focusing on profitability and maintaining that profitability was not only critical to us owning our own future, but also developing the company values that we wanted to have. We have spent a lot of years developing a very durable business model that throws off a lot of cash every single year. We think this is especially important during periods of cyclical pressure like the one that we are in, to make certain that we renew our commitment to that and maintain 2026 as a year of disciplined reinvestment because we believe that this will define the company for many years to come. Thank you. Operator: The next question comes from Benchmark. Please proceed. Analyst: Thank you. Jeff, just maybe specifically on Q2. I am curious if there is any agency-related weakness outside of macro that might account for that deceleration. Obviously, the industry, or at least industry expectations for digital and video growth, are above 8% this year. And we all know that those projections are not often right. But given that it is pointing to below industry growth, just curious if there is any one-time related or maybe one-to-two quarter related items in there. And then I think you guys started talking about CPG and auto in March being weak. I am just curious if we start to see potentially easier comps there in the third quarter or fourth quarter of this year. Thanks. Jeffrey Terry Green: Thanks for the question. As it relates to agencies—and I imagine you are partly asking because of the way that I opened the questions around Publicis, which we have received just so many on that—I will just say at a high level, there is not really anything incremental to add on the agency front beyond what I covered earlier as it relates to the Q2 guide or anything else related. As it relates to CPGs and autos, yes, I do think that is true. Of course, if you go through a year with continued pressure on specific categories, you then start to create easier comps for them. However, I also think the more impressive part of the narrative is not the easy comps. It is actually the amount of discipline that those companies are starting to implement or have implemented in that year where they are just thinking about brand building, thinking about media buying in more sophisticated ways. In some ways, having the headwind really does force companies to get disciplined and think about what they have to change. I have never seen the biggest brands in the world more focused on growth than they are right now. That is not disconnected from the fact that many of them are under pressure. So this creates a great moment, a great opportunity for us to pass 15 cars, if you will. Thank you. Operator: The next question comes from Youssef Squali with Truist Securities. Youssef Houssaini Squali: Jeff, you talked in your prepared remarks about LLMs, AI search, and the opportunity there. Could you maybe flesh that out a little bit for us? What are the gating factors to start making that a reality and have it start impacting the P&L? How do you see your role within that ecosystem, and where are you in your conversations with the obvious key players there? Thanks. Jeffrey Terry Green: I will not speak publicly to the discussions that we are in with the key players, but I will talk about the opportunity. A lot has been discussed about the amount of CapEx that has gone into these companies and the amazing products that they have all created. I believe they are in a very similar position to Netflix in the way that we talked about them five to ten years ago, when I started asserting that they would eventually have to show ads even at times when Netflix was saying they were not going to show ads. I made that assertion in part because I knew how expensive their content was. The LLMs, chatbots, AI search companies have a very similar dilemma. They have very expensive content. I think some people have wrongly assumed that their monetization will look like, quote, legacy search. Legacy search was born when the average search query was less than two words. No good AI prompt is two words or less. They are much more detailed. And when you have many sentences and are asking a very specific question or prompt, obviously, the answer often is much more valuable as well to the user. So it is not unreasonable to think that many of the LLMs are going to try to get as much ad monetization as possible. If you look at it as there is a subscription, which is quite expensive, and that either needs to be offset or substituted by an ad experience that is extremely profitable, that extremely profitable ad experience cannot just be keyword-based or like legacy search. In fact, in order to make the most amount of money, it might, in some cases, need to include video. If there is a lot of compute cost that goes into that answer, it probably is somewhat correlated to the value of the response to the user, which might make it easier to put on the other side of a video. In both of those cases, I do believe that it can unlock a greater amount of TAM for the LLMs in the sense that they can participate in top-of-the-funnel activity and bottom-of-the-funnel activity, which is different than what search has done. Especially in a world where there is more discussion about measurement, I believe this way of thinking about it is the right way for the LLMs to be thinking about their future. I do think that unlocks TAM for us that we previously, a decade ago, said was not likely to change inside of search. So I think this represents a tremendous opportunity for us. That is the hub that I am speaking of, and I do believe is the place where more and more innovation can take place. I mentioned in the prepared remarks that there was one AI-first company that commented that they really could not run their business if we were not in the ecosystem. That is largely because about a decade ago, Google made the decision to stop sharing ad log-level data. It is actually in those insights, in that grain, where a whole bunch of companies can build. Of course, in order to be an AI company, you need a lot of data, and you need a lot of quality data. Because The Trade Desk, Inc. has historically always said to the biggest brands and to their agencies, we want you to keep your data, we want to make certain that we protect it. That is different than most of the big platforms who are asking brands and agencies to surrender their data and to pool their data with their other customers. We say all the time internally, things like data leakage are exponentially more expensive in a world of AI. Coming to the second part of your question, which was about should The Trade Desk, Inc. get into the supply side: the reason we have not is not because we could not technologically. It is not because it would not further shorten the supply chain. It is because we do not want to create the conflict of interest of saying to one group of customers, we want you to get the lowest CPM cost, we are looking for value, and then going straight from advertisers to publishers saying, we want to give you the highest CPM possible, and then trying to serve two masters. This is the flaw of every ad network business model, which, by the way, hundreds of companies are trying to replicate in a lot of ad tech business models today—the flaws of the ad network business model that we disproved twenty years ago. This is a lesson that unfortunately not enough have learned. That said, there are hundreds of publishers who want to do their own yield management, and many companies in CTV are doing their own yield management. They built their own tech to do this, and we plug into that tech directly. This is the reason we built OpenPath in the first place: to plug into companies like that who want to do their own yield management. So we will absolutely look for that opportunity. But as it relates to going all the way to the sell side and doing the yield management for them, we will never do that. Now, that said, we will continue to build more tools to facilitate that. We will make it easier for others to do. If we can tee up a number of other AI companies to do that, we will. I think there is tons of opportunity for efficiencies to be gleaned. I think the inefficiencies of the supply chain of programmatic are one of the biggest bottlenecks to the open internet itself growing. That is something we are incredibly focused on fixing for the betterment of the entire ecosystem. That is one of the reasons why moments like this, where there are macro headwinds, we are very focused on making those changes—because now is the moment where you can. That is also part of the reason why 2026 is a year of disciplined reinvestment for us. Thanks. Operator: Next question comes from Jessica Reif Ehrlich with Bank of America. Please proceed. Jessica Reif Ehrlich: Thank you. Jeff, you said early in the call in your prepared remarks you mentioned the partnership with Stagwell. It just seems like you would not have brought that up if it was not important. I know it is early days, but when do you think agentic trading will become the dominant dynamic in programmatic media, and how will The Trade Desk, Inc. be impacted by this? Jeffrey Terry Green: Thanks. First, I like the way you word the question because it gives me an opportunity to just correct it a little bit. I think there is often a mindset that if your company is older than five years old, then you think that you will be, quote, impacted by AI instead of leading it. We fundamentally believe that we will lead the agentic revolution in programmatic advertising. I have said on a number of stages in our industry recently that I do not think there is an industry in the world that is better suited to be upgraded from agentic AI than programmatic advertising. I do think programmatic will benefit tremendously from agentic. AI in general is changing the world, and we are still in the very early phases of that. What that will look like, though, is a little bit different than the way I think you are hearing most companies in our space talk about agentic. Most companies that are focused on agentic in our space are just talking about plugging into these tiny pools of inventory—one advertiser connects to one publisher. In doing so, you more or less create another ad network, where you have hundreds of thousands of ad networks, because of the combination of advertiser to one publisher and agents talking to each other, and it gets rid of the opportunity for you to look at everything at once and then make holistic decisions and compare all of those. That is part of the reason also in the prepared remarks that we talked about why it is so important to look at all of the QPS that we do and to maintain decisioning so that you can look at those—currently 20 million ad opportunities every single second—and then choose carefully the 300 or 400 the biggest brands in the world should be buying. Agentic will facilitate that. One of the things that our industry has been hurt by is that when a campaign needs to move from $500,000 to $1 million, you can immediately be faced with thousands of potential ways to expand your campaign. In order to even execute the buy, you need to change frequency caps—how many times per day do you show the ad—or your targeting parameters—“I need to show it to a new group of users than what I was before at $500,000.” There are so many variables in terms of new ways that you could spend that incremental money that you are faced with an overwhelming number of decisions. One simple way to explain agentic AI is that it is a layer on top of the API that can reason—or, said simply, an API that can reason—while simultaneously creating productivity. What we started with Stagwell is the ability to create and edit campaigns in the most basic form. That will, of course, evolve into optimizations. The agentic layer can help reason with: if you are expanding the campaign, there is a whole bunch of ways to do it; let us talk about the ways that we can help you do that optimally. Agentic can help that process that has been overwhelming for users since the inception of digital advertising. It represents an opportunity to scale and be more productive and more effective that I am not sure we would have gotten to nearly as fast without the rise of agentic. So I am super excited about what that represents for our space. Jessica, thanks for the question. Operator: And our final question comes from Jason Helfstein with Oppenheimer. Jason, please proceed. Jason Helfstein: Thanks. I just want to follow up on that and then have a quick yes-or-no question. Jeff, this is the non yes-or-no question: Is the path to agentic more about solving the technology or getting the right kind of commercial terms with the agentic platforms, or both? Feel free to go however detailed you want on that. And then the yes-or-no question: Do the record JBP signings in March have anything to do with the previously discussed agency disagreements? Thanks. Jeffrey Terry Green: On your first question, if I understand it correctly, the opportunity for agentic is really to make optimizations and campaigns perform better. I think the optimization questions, which are much more about the variables and how you engage in the transaction, are more the issue being solved than the commercial terms, so to speak. I think there will be a lot of frameworks that are decided beforehand, then we will repeat that using agents millions, billions, even trillions of times subsequently. As it relates to the JBPs, I cannot really comment on whether it is relevant or not to any of the agency discussions that we have had, but we are optimistic about the continued agency discussions that we are having. Thank you. Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and welcome to Definitive Healthcare Corp.'s Q1 Fiscal Year 2026 Earnings Call. Later, we will conduct a question and answer session. Now I would like to turn the call over to your host. Jonathan Paris: Good afternoon, and thank you for joining us to review Definitive Healthcare Corp.'s financial results. Joining me on today's call are Kevin D. Coop, our Chief Executive Officer, and Casey Heller, our Chief Financial Officer. Before we begin, I would like to remind you that today's discussion may include forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These statements include, among others, statements about our market opportunity, future performance, growth and financial guidance, the benefits of our data and healthcare commercial intelligence solutions, our competitive position, customer behavior, adoption, growth, renewals and retention, planned investments and operating strategy, value creation for customers and shareholders, and the expected impact of macroeconomic conditions on our business, customers, and the healthcare industry. Forward-looking statements are based on our current expectations and assumptions as of today, and are subject to risks and uncertainties that could cause actual results to differ materially. For more information, please refer to the cautionary statement in today's earnings release as well as the risk factors and other information included in our filings with the SEC, including our most recent Form 10-Ks and Form 10-Q. You should not place undue reliance on these statements, and Definitive Healthcare Corp. undertakes no obligation to update them except as required by law. During the call, we will also discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures, along with related definitions and limitations, are included in today's earnings release and investor presentation, each of which is available on the Investor Relations section of our website. For any forward-looking non-GAAP measures, the earnings release also explains why a quantitative reconciliation is not available without unreasonable efforts and identifies the relevant unavailable items. With that, I turn the call over to Kevin D. Coop. Kevin? Kevin D. Coop: Thank you, Jonathan, and thanks to all of you for joining us this afternoon to review Definitive Healthcare Corp.'s first quarter 2026 financial results. On today's call, I will provide highlights from our first quarter performance and give an update on the progress we continue to make on our key strategic priorities for this year. Let me begin by reviewing our financial results for the first quarter, which were at or above the high end of our guidance ranges on both the top and bottom line. Total revenue was $55.9 million, down 6% year over year. Adjusted EBITDA was $15.3 million, representing a margin of 27%, which was $2.3 million above the high end of our guidance. The outperformance is a reflection of our ongoing success in driving expense discipline across the business while investing in initiatives that we believe will return the business to top-line growth. Additionally, the quarter benefited from a timing benefit that will be neutral to the year and slightly lower R&D expense in the P&L as we shifted more investment to innovation, which is reflected in the capitalized software development spend. We continue to generate solid cash flow, delivering approximately $50 million of unlevered free cash flow for the trailing 12 months. We are off to a solid start for 2026 that puts us on track to meet or exceed the full-year financial targets we provided to investors at the beginning of the year. Before getting into specifics, let me give you a high-level overview of where the business stands. Our diversified and provider businesses, which combined represent over 60% of total revenue, have again demonstrated modest growth after returning to growth last quarter. This is an important achievement and gives us confidence that our efforts are having the expected impact, and we are investing to make this growth durable. Conversely, our life sciences businesses, which make up the remaining portion of revenue, continue to decline and are seeing slower response to the changes we are making. This segment has disproportionately been impacted by the claims disruption we have highlighted in the past, as well as a challenging macro environment. We continue to see positive data points in critical areas. First, net dollar retention rate improved year over year in the first quarter on a trailing 12-month basis, and we are increasingly confident that this will continue to be sustained for the full year. Second, we had our highest win-back quarter in over three years in the first quarter, which we believe is another positive sign that our product, go-to-market, and customer success investments are making the expected impact. Several six-figure win-backs in diversified and medtech highlight common themes we see emerging. First, other vendors continue to fall short in matching the breadth and quality of our datasets, leaving customers with an incomplete view of the market and an unacceptable trust deficit. Second, even customers who were particularly price sensitive and thought alternative vendors would be “good enough” recognize that the cost of an inferior dataset far outweighed the trade-off, and this reinforces the need to remain vigilant on both data quality and service. While there is still more to be done to achieve our objective of returning to overall growth, these data points strengthen our conviction that we are focusing on the right things and that those areas of focus are responding. Importantly, these are areas of focus that are within our control. I would now like to provide an update on our operational progress against our four strategic pillars. As a reminder, these pillars are data differentiation, integrations, customer success, and innovation. Let me begin with data differentiation. Our fall expansion pack release improved the breadth and quality of our claims data, and its release was met with overwhelmingly positive feedback. As you know, data is at the heart of our value proposition, and we are continuing to make investments to source new proprietary data types and extend our lead with our core reference and affiliation datasets. We are increasingly focused on leveraging AI to increase the velocity of data collection and quality assurance. Our data differentiation was key in a six-figure, multi-year win with a life sciences customer who had previously been using a generic multi-vertical data source to target providers treating oncology and rheumatology patients. This customer was frustrated by its limited visibility into affiliation data, prescription patterns, and key opinion leader identification. By deploying Definitive Healthcare Corp., they have meaningfully reduced time spent on research, improved their KOL identification efforts, and improved their sales strategy through better physician targeting. Our second pillar is focused on seamless integrations. Making it as fast and simple as possible for customers to access our data alongside any other data source they need is critical in delivering value and creating durable customer relationships. In the first quarter, we completed nearly 50 new integrations for customers and reduced the time to integrate by nearly 50% year over year. We are continuing our investments in developing new and enhanced integrations. We recently introduced a new HubSpot integration that will enable HubSpot users to access Definitive Healthcare Corp.'s reference, affiliation, financial, and clinical data directly within their HubSpot CRM, giving sales teams a detailed view of contacts and accounts. This is in addition to the enhancements we added in Q4, where we enhanced Salesforce integrations to include our healthcare provider data directly into a customer's Salesforce instance, thereby improving their sales team's ability to identify, segment, and engage physicians. Our data continues to show that customers who integrate Definitive Healthcare Corp. directly into their systems of record and systems of insight utilize Definitive Healthcare Corp. more often. We become a stickier, more strategic component of their day-to-day operations, which in turn strengthens our renewal rates. Turning to our third pillar, customer success. We are witnessing the impact of investments in this area bear fruit. The alignment of all functional teams that support the customer journey has led us to be a more proactive and engaged organization with our customers, which in turn has led to earlier identification of issues before they become problems and a better understanding and responsiveness in identifying opportunities where we can do more for customers. A great example of this in action was an upsell win this quarter with a biopharma customer who is an existing MONACO user. This customer was recently acquired by a larger organization, which gave our team the opportunity to educate the acquirer on the value we are delivering and how it can help the integration efforts of the two organizations by streamlining data sharing across the two groups. Finally, we continue to make progress against our fourth pillar, innovation, and our focus on digital engagement, which is a critical component to our return-to-growth strategy. With the progress made in our first pillar, which fortified our foundation in quality and service, we are shifting more effort to this pillar in 2026. We continue to make progress developing our AI capabilities and expect to launch our first AI-enabled solutions to market later this quarter. Our focus is on embedding a next-gen AI-driven interface in our existing platform that will leverage natural language to allow customers to simply and intuitively query our data to uncover new insights that can then be actioned through our persona-driven workflows. Let me give you a couple of examples. To effectively identify top physicians, a requirement is access to highly accurate reference and affiliation data to resolve treating doctors and verification of roles. Then claims data, leveraging both Rx and MX data, is needed for procedure volumes and patient journeys. Our human-in-the-loop research data, which is also being enhanced with AI, confirms the HCP and HCE status and job functions. It is this breadth and depth, coupled with architectural expertise, that makes this possible. Claims vendors alone, which use modeled reference and affiliation data tied to billing IDs, not treating MDs, or horizontal event data vendors which lack clinical activity entirely, would not be able to achieve the same result. To give customers the right answers to these types of questions requires that contextual expertise as well as longitudinal data, and only our data can provide this. This is the foundation on which our AI-native investments will begin to enhance this coming quarter. In the digital activation area, we now have more than 30 agencies signed up, with more than half of them actively generating bookings for Definitive Healthcare Corp. This is up from roughly a third over the last quarter. Importantly, we are also seeing increased utilization from existing direct and agency customers alongside continued new customer adoption. We are encouraged by the very positive market feedback on audience performance, and with a recent benchmark by a leading biopharma solutions company which showed our audiences delivered a 63% higher click-through rate than a leading competitor. While it takes time for this agency activity to generate revenue, the growing number of active customers gives us confidence that we will be able to start scaling our activation business later this year in 2026 and beyond. To summarize, we are off to a solid start in 2026, and we are tracking well against our full-year objectives. We remain focused on those things within our control, and we are driving improvement across all aspects of the business. We will continue to be opportunistic in investing in high-value areas that we believe will best position Definitive Healthcare Corp. to improve retention and return the company to consistent, predictable revenue growth over time. With that, let me turn the call over to Casey to review the financials in more detail. Casey? Casey Heller: Thank you, Kevin. In all my remarks, I will be discussing our results on a non-GAAP basis unless otherwise noted. As Kevin mentioned, we delivered a solid quarter with our performance at or above expectations across our key metrics. I will walk through the financial results in more detail, including our revenue trends, margin performance, and outlook. In the first quarter, we delivered revenue of $55.9 million, down 6% year over year, adjusted EBITDA of $15.3 million reflecting a 27% margin and expanding approximately 260 basis points year over year, and adjusted net income was $8.5 million resulting in $0.06 of non-GAAP earnings per share in the period, all of which were at or above the high end of our guidance for the quarter. We also delivered $18 million of unlevered free cash flow in the quarter, and nearly $50 million on a trailing 12-month basis. Turning to our results in more detail. Revenue of $55.9 million was at the upper end of our guidance range and represents a 6% decline year over year. Consistent with last quarter, the revenue decline is driven by life sciences. Both diversified and provider end markets, which make up 60% of our business, continue to grow year over year. Overall subscription revenues of $53.6 million declined 7% year over year. Given the timing of when we began revenue recognition on our data partnership agreement last year, we still had about two points of benefit in the first quarter and will be fully wrapped on the benefit in Q2. We did deliver improvement in our renewal rates in the first quarter year over year and quarter over quarter, and we are pleased to share that we saw improvement year over year in our net dollar retention on a trailing 12-month basis, as Kevin mentioned earlier. Professional services revenue in the quarter was strong, up 25% year over year, driven by a combination of delivering on traditional analytics engagements as well as a ramp-up in our digital activations activity. Adjusted gross profit in the quarter was $45.2 million, which is down 4% year over year. As a percentage of revenue, the adjusted gross profit margin of 81% expanded nearly 150 basis points year over year, primarily benefiting from the short-term gap between removing one data source and onboarding an additional source that I mentioned last quarter. And as I mentioned earlier, adjusted EBITDA was $15.3 million and reflects a 27% margin, expanding 260 basis points versus prior year. Despite the continued top-line pressures, we have continued to prudently manage the business and focus investments on the initiatives that will return Definitive Healthcare Corp. to revenue growth over time. Q1 adjusted EBITDA margin expansion was driven by the timing gap on the data source changes I mentioned just moments ago, and the shift in our product development efforts, which is driving a reduction in R&D expense but an increase in capitalized software development spend. Broader operating efficiencies also supported margin expansion and exceeded expectations. This provides additional flexibility to accelerate investments for growth as opportunities arise as we move through the year. Turning to cash flow. Our business continues to generate strong free cash flow due to our high margin model, upfront billing, and low recurring CapEx requirements. Operating cash flows on a trailing 12-month basis were $39.3 million, and we generated nearly $50 million of unlevered free cash flow over a trailing 12-month basis. Our conversion rate of trailing 12-month adjusted EBITDA to unlevered free cash flow was 70%, which is down about 20 points year over year, primarily reflecting unique items that benefited the prior year. This cash generation provides flexibility to continue investing in growth. Consistent with last quarter, we continue to make organic product investments with an emphasis on expanding our AI capabilities, and saw another quarter of increased capitalized software development spend, totaling nearly $3 million, up over $1.5 million from the prior year. At the end of Q1, deferred revenue of $99 million was down 12% year over year, and total remaining performance obligations declined 18% year over year. Current remaining performance obligations of $161 million declined 12% year over year. Total remaining performance obligations and current RPO year-over-year declines are similar to what we reported exiting Q4 and continue to be driven by the shift towards single-year deals versus multiyear commitments that we discussed last quarter. To quickly recap the drivers behind the RPO decline: in 2025, we saw a greater percentage of our new logo additions sign one-year versus multiyear commitments than in prior years. This impacts both RPO as well as CRPO. Last quarter, we explained that if you went back to the end of 2024, there was approximately $100 million of RPO on our books related to commitments that extended beyond 2025. As the year progressed, a portion of this would flow into CRPO this quarter as the contracts progressed. Now, as we fast forward to a year later at the end of 2025, we have $15 million less CRPO tied to multiyear deals expiring after 2026. This makes up a substantial portion of the CRPO year-over-year decline, and this dynamic holds true as we exit Q1. Before moving to our guidance discussion, there is one additional accounting item to mention. The recent stock price decline has caused us to book a further $197 million goodwill impairment charge as of March 31. That write-down also generated approximately $6.6 million of gain on the remeasurement of the TRA liability and a $3.6 million deferred income tax benefit. As a reminder, these are non-cash accounting charges and do not impact our debt covenants and are excluded from our adjusted earnings. We had a solid start to the year and continue to make progress against our financial and operational objectives. Now turning to guidance for the second quarter. We expect total revenue of $55 million to $56 million, a revenue decrease of 8% to 9% year over year compared to Q2 2025. The year-over-year decline worsens modestly versus what we just reported for Q1 largely as a result of the full wrap on the initial contributions from the data partnership. Within the revenue guide, we expect to continue to deliver double-digit professional services revenue growth through the year. This results in expected adjusted operating income of $10.5 million to $11.5 million, adjusted EBITDA of $13 million to $14.5 million, or 24% to 26% adjusted EBITDA margin in the second quarter, and adjusted net income of $5 million to $6 million, or approximately $0.03 to $0.04 per diluted share on 144.2 million weighted average shares outstanding. For the full year 2026, we expect revenue of $220 million to $226 million for a 6% to 9% decline year over year. This remains consistent with the guidance provided on our last call. We have continued to proactively manage our cost base, making targeted investments in growth areas. As we just discussed, higher capitalized software development spend is shifting costs from development spend to CapEx. This is a classification shift and is cash neutral. Translating that into dollars in 2026, we now expect adjusted operating income of $43.5 million to $47.5 million, adjusted EBITDA of $55 million to $59 million for a full-year margin of 25% to 26%. This guide increases the midpoint by $1.5 million and reflects the strong start to the year and our ongoing commitment to maintaining strong margins while investing in our key growth areas. Adjusted net income is expected to be between $23 million to $27 million, and earnings per share are expected to be $0.16 to $0.19 on 144.9 million weighted average shares outstanding. As we wrap up, I want to reiterate that while we are navigating ongoing top-line pressures, we remain focused on sustaining non-GAAP profitability and a strong margin profile while continuing to invest thoughtfully to support a return to growth. We believe our strategy is sound, and we are making steady progress against our key initiatives, which we expect will enhance retention, reaccelerate growth, and drive long-term shareholder value. We will now open the call for questions. Operator: If you would like to ask a question, please press 1 on your phone now, and you will be placed into the queue in the order received. Please be prepared with your question and please limit yourself to only one question and one follow-up. Our first question today comes from Morgan Stanley. Analyst: Hi. This is Jay on for Craig Hettenbach. Thanks for taking my question. Just on the growth side, I understand that life sciences continues to be pressured while diversified and provider have seen some modest growth. So just wondering if you can share your thoughts on whether 2027 could be a return to growth, and if you expect some margin improvement from there? Kevin D. Coop: Yes. Our growth prospects and the progress that we have made on our strategic pillars give us a great deal of confidence that we are focusing on the right things. While improvement has actually occurred across all verticals, it is especially showing up initially in provider and diversified, and that reinforces that confidence. While life sciences is taking a little longer, we think that the shift now from our original focus on data quality, integrations, and service—which is translating into these improved results—toward innovation and digital efforts will help us address some of the challenges that still remain in our life sciences segment. In particular, we think digital is going to start to impact that, and the claims remediation with our fall pack going into the data supply chain—which has put us back to at or above historical levels on claims data—will start to show up in that channel as well. As Casey mentioned, we have seen early indications most pronounced initially in provider and diversified, and we expect life sciences to be a fast follow. Operator: Next, we have Brian Peterson of Raymond James. Johnathan M. McCary: Hi. Thank you. This is Johnathan M. McCary on for Brian. One for you, Kevin. On the integrations, it is good to hear the HubSpot progress building on the Salesforce work last quarter. How far along are we in terms of taking care of those integrations? Are we basically through the low-hanging fruit now and in the later stages, or how would you characterize the progress thus far? Kevin D. Coop: As you know, we have talked about materially higher retention rates in customers that are integrated versus those that are not, which is why we made this such a big focus area. A couple of data points are particularly helpful. First was improving the speed of our integrations. Last quarter, we mentioned we had brought down the average days for integration from over 100 days to 73 days in Q4, and we are pleased to report that continued to improve. Our average number of days in Q1 was approximately 45 days. So we have radically improved the integration timeline from over 100 days to 45 days. In addition, by making this more of a focus with our go-to-market and customer-facing teams, our velocity has also improved. We have completed 75% more integrations over the last six months than we had in the prior six months. So not only are we doing more integrations, we are doing them faster and getting that in the hands of our customers. On productizing integrations, most recently with HubSpot, that enables HubSpot users to access Definitive Healthcare Corp.'s reference, affiliation, financial, and clinical data directly from their HubSpot CRM, giving a quicker, detailed view of contacts and accounts. That adds to bringing physicians data into Salesforce last quarter, and we are continuing to make that a priority. So it is a combination of speed and velocity, making sure integrations happen much faster, and increasing the number of ways customers can access our data in the most effective and efficient way possible. Johnathan M. McCary: Very helpful. And maybe this could be for Casey or Kevin. On the new AI tools you are rolling out later this quarter, how are you thinking about monetization? Is it more of a retention driver, an incremental SKU, or more of a pricing lever? Kevin D. Coop: Great question. We know this will allow us to democratize access more effectively across users. Even though the product is intuitive, it still requires some training to use our UI/UX today, and if customers are getting data through an API or lake-to-lake, that is a different path. With SaaS access, the AI agentic layer allows more people to more easily access that data, which will unlock more value. The most immediate impact will be improved retention and increased value. Since we have always licensed based on value, that fits our model. In the second stage, as we bring out more feature functionality over time, we expect to see more pricing power. Even the democratization layer improves renewal value and has a positive impact to the revenue profile. There is no downside. Retention improves, we deliver more value supporting higher yield on existing solutions, and as we bring new solutions online, they will be easily integrated into the installed base, driving upsell and cross-sell opportunities. Operator: From BTIG, we have David Larson. Jenny Shen: Hi. This is Jenny Shen on for Dave. Thanks for taking my question. On the biopharma demand environment, a large CRO we cover commented that they are seeing green shoots on the emerging biopharma side, with some of the smaller players seeing improved funding, while spending remains more conservative at large pharma. Have you seen that dynamic or any notable changes on your side, or has it been pretty consistent? Kevin D. Coop: Thanks, Jenny. It is helpful to segment the space appropriately. Some providers cover both first-stage and second-stage clinical assets—early-stage R&D and drug trials versus later commercialization. Definitive Healthcare Corp. primarily plays in second-stage commercialization. We have a marquee installed base with very large biopharma customers, which is great, but even if there are green shoots with smaller emerging providers, it is difficult to offset larger customers who are shifting dollars from commercialization to early-stage clinical investment and R&D. We are still seeing second-stage commercialization efforts somewhat muted, which is natural in this type of macro environment and happens cyclically in biopharma. We see more incremental dollars invested in R&D budgets to bulk back up product portfolios, with factors like patent expirations also impacting spend. This presents a potential growth opportunity, as those assets move toward commercialization over time—that is when demand returns for us. In the meantime, our focus on the integration pillar, which seamlessly integrates our data without sacrificing data quality, allows us to offset bundled offerings from other vendors by combining higher quality with ease of use. The fact that we won back 160 customers last year and moved more than 50 this quarter demonstrates that the strategy is working. As those integrated customers move into commercialization, that will start to show up in our life sciences segment as well. Operator: Next, we will hear from Stephens Inc. Jeffrey Garro: Yes, good afternoon. Thanks for taking the question. I want to go further on the life sciences end market. The two highlighted wins in the release are both life sciences or biopharma-related, and you also gave several more examples on the call. Clearly, you have proof points of value with large and sophisticated customers, which contrasts with the broader decline you have described for that segment. Could you elaborate on the overall demand environment, the recent win rate within that segment, and lastly, when the claims disruption will stop being a factor? Kevin D. Coop: I will start with the last point. We have returned to historical levels of claims data and, in the first quarter, are now above historical levels. Often, customers were buying data based on records and size of data payload; when you have, for example, a 30% decline in records, that drove down-sell pressure, which we have largely worked through. Now that we have returned to those historical levels, we expect customers we are entitling today will not experience the same level of down pressure when they come up for renewal. We started to see that shift as we were repairing the claims dataset later last year, but many buying decisions were made earlier than we were able to get that into market. We think we are seeing the tail of it now. We have repaired the data supply chain, and going forward it should be significantly improved. On commercialization, you have to work through the R&D Stage 1 cycle to get to Stage 2, and we do not control that. What we can do is make sure that customers still actively working with our data to commercialize current products—including through our digital activation and ad tech—are maximizing value in the short term while we wait for that spending to return. Operator: From Deutsche Bank, we have George Hill. George Robert Hill: Hey, good afternoon. Thanks for taking the question. There is a lot of talk about AI. How are you using AI to change how you package and productize the data assets that you have? How does it change how clients consume or ingest that data? And do you expect AI to have an inflationary or deflationary impact on your ASPs? Kevin D. Coop: In healthcare, the technology itself is not sufficient to maneuver effectively in a very complex environment. Domain and contextual expertise matter a lot, along with proprietary data. That combination is a durable advantage for Definitive Healthcare Corp. The complexity includes understanding relationships among physicians, practice locations, affiliated locations, pathways to surgery centers and other care sites, and mapping reference data to technographics, insurance networks, and consumer personas. With domain expertise and differentiated, longitudinal data, we are applying AI initially to accelerate what we already do, both internally and externally. Internally, our engineering and development teams are extensively using AI and ML, and we have deployed AI in operational efficiencies for customer success and internal teams. On product, the first elements are coming out this quarter, with more later this year. We have a tremendous amount of diverse data used in multiple ways—e.g., HCP targeting and market share analysis. Our next-generation product architecture that leverages AI will enable customers to more rapidly unlock insights they already rely on, in a more democratic fashion. We believe this will increase usage and access, thereby driving more value, which at the very least protects current revenue and, as we bring more capabilities online, allows for incremental pricing through cross-sell and upsell rather than deflation. Operator: And we will hear from Stifel. David Michael Grossman: Great, thank you. I think there are various dynamics affecting year-over-year compares as we move through the year—on revenue, margin, and also CRPO and RPO. Can you briefly summarize what those are to make sure we have them all? Casey Heller: Sure, David. Starting with CRPO, it is declining 12 points year over year, consistent with where we exited Q4. A significant portion is driven by having sold fewer multiyear deals and seeing a shift toward single-year deals, creating about a $15 million headwind year over year, which is about half of the total CRPO decline. That explains why CRPO is declining at a greater rate than our top-line outlook. Another component of the disconnect between CRPO and revenue is that we continue to expect double-digit growth throughout the year in professional services revenue—a combination of professional services and analytics plus digital activation—which generally does not show up in CRPO because we do not see those bookings until much closer to recognizing that revenue. From a top-line perspective, in Q1 we still had a couple of points of benefit from the data partnership we signed back in 2024; we did not start revenue recognition on that until partway through Q1 last year, so there was a little lift in Q1. We now fully anniversary that, so it is no longer a compare element as we hit second quarter and beyond. David Michael Grossman: Is that reflected in the sequential revenue in the second quarter—the two-point benefit you got in 1Q? Are you losing about that sequentially? Casey Heller: We are not actually losing revenue sequentially because that was the way it showed up last year, from a compare standpoint. If you look at the midpoint of our guide, total revenue is roughly flat as you move through the remainder of the year, with more of a sequential increase at the higher end of the guide. David Michael Grossman: Right, got it. So that is just in the base last year and had nothing to do with the first quarter, right? Kevin D. Coop: Correct. David Michael Grossman: On the CRPO duration dynamic, when do you think you comp out the shift toward shorter duration? Casey Heller: We expect that to live with us for the next several quarters. We can provide more color as we get closer to the end of the year, but we do continue to expect double-digit declines in CRPO for the next couple of quarters, given the multiyear dynamic and when that laps. David Michael Grossman: Does that mix shift continue into 2027 in terms of the year-over-year compare? Casey Heller: It depends on the mix of signings we deliver in the back end of this year and whether there are more multiyear components. If the current shift holds, we are probably another couple of quarters of this, and then I would expect more stabilization and a tighter correlation of CRPO to revenue. David Michael Grossman: Final one on claims disruption. Kevin, you said you are back above historical levels. Does that suggest it is no longer a headwind as we move through 2026? Casey Heller: The new claims data source came online in the early part of Q4, and by then many customers had already made renewal decisions. We do over 30% of our annual renewals in December and January, so adding the new data source did not really have the ability to influence those decisions. In addition to bringing on an additional new data source that will come into product shortly, we think it certainly will not be the headwind it has been as we move forward. We need to see how the next couple of quarters of renewals play out, but we are confident we have taken the right actions to get incremental claims data back into product and into customer hands. Operator: We have no further questions at this time. I will turn the program back over to our host for any additional or closing comments. Casey Heller: Thank you, everybody, for joining this afternoon. We appreciate the questions and look forward to talking to you again in 90 days. Operator: That concludes our meeting for today. You may now disconnect.
Operator: Hello, and thank you for standing by. I will be your conference operator today. At this time, I would like to welcome everyone to the AerSale Corporation Q1 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 withdraw your question, press 1 again. I would like to now turn the call over to Christine Padron, Vice President, Global Trade and Compliance. Christine, please go ahead. Good afternoon. Christine Padron: I would like to welcome everyone to AerSale Corporation’s first quarter 2026 earnings call. Conducting the call today are Nicolas Finazzo, Chief Executive Officer, and Martin Garmendia, Chief Financial Officer. Before we discuss this quarter’s results, we want to remind you that all statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the federal securities laws, including statements regarding our current expectations for the business and our financial performance. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in the Risk Factors section of the company’s Annual Report on Form 10-K for the year ended 12/31/2025 filed with the Securities and Exchange Commission, SEC, on 03/10/2026, and its other filings with the SEC. These filings identify and address other important risks and uncertainties that could cause actual events and results to differ materially from those indicated by the forward-looking statements on this call. We will also refer to non-GAAP measures that we view as important in assessing the performance of our business. A reconciliation of those non-GAAP metrics to the nearest GAAP metric can be found in the earnings presentation material made available on the Investors section of AerSale Corporation’s website at investors.aersale.com. After our prepared remarks, we will open the call for questions. With that, I will turn the call over to Nicolas Finazzo. Nicolas Finazzo: Thank you, Christine, and good afternoon, everyone. Thank you for joining us today. I will begin with an overview of our first quarter performance and key operational developments, and then discuss how we are progressing against our strategic priorities for 2026. I will then turn the call over to Martin to walk through the financials in more detail. This quarter, our team stayed focused on executing our strategy across Asset Management and TechOps: prioritizing (1) disciplined acquisition and monetization of flight equipment and used serviceable material—you will hear me say USM; (2) expanding and optimizing our MRO capabilities; and (3) building a recurring and more predictable revenue base through MRO services and leasing while maintaining our high standards for safety, quality, and on-time performance. First quarter revenue was $70.6 million, an increase of 7.4% from the prior-year period. Adjusted EBITDA also increased by $4.2 million, or 131.9%, to $7.4 million from the prior-year period. Excluding flight equipment sales, which tend to be volatile quarter to quarter, revenue increased 2.2% year-over-year, reflecting growth in leasing and increased demand across our [inaudible] compared to the prior-year period. We placed an additional Boeing 757 freighter aircraft into service, ending the quarter with three aircraft on lease and one additional aircraft under a letter of intent for lease. We continue to engage in discussions with potential customers, as increased demand for cargo continues to make us bullish on deploying the remaining four 757 freighters reconverted in 2026. We also expanded our engine lease portfolio, ending the quarter with 18 engines on lease compared to 16 engines in the prior-year period. Higher average lease rates and improved utilization contributed to stronger asset yields across both aircraft and engines, and reflect our continued progress toward building a larger and more consistent recurring revenue base. Partially offsetting the increased leasing revenue was a decrease in USM sales resulting from the internal consumption of engine material for our own engine builds. At present, we have multiple engines in work where most of the material required has come from our own inventory, and our decision to utilize this USM results from our determination that we will achieve a higher value and total dollar margin consuming this material rather than selling USM piece parts to third parties. Across our TechOps platform, we continue to make progress on several strategic growth initiatives. At our on-airport MRO facility in Millington, Tennessee, we commenced work under a recently awarded long-term, multi-line aircraft maintenance agreement for a fleet of CRJ700 and CRJ900 regional jets. In addition, operations began at our expanded facility located in Hialeah Gardens, Florida. Both initiatives contributed to higher TechOps revenue in the quarter. As expected when ramping up operations at new facilities, we incurred incremental training costs and early-stage operating inefficiencies that created margin pressure during the quarter. We view these impacts as temporary and expect margins and throughput to improve as volumes continue to increase and operations stabilize. TechOps was also impacted by lower MRO parts sales in the quarter. Lastly, our Roswell facility experienced revenue and gross profit declines due to fewer aircraft in storage during the quarter. Related to our Engineered Solutions products, AirSafe continues to remain strong in advance of a Federal Aviation Administration November 2026 compliance deadline for the Fuel Quantity Indication System airworthiness directive related to fuel tank safety systems. We closed the quarter with a backlog of $15.3 million, of which the majority will close in 2026. In addition, we continue to market our revolutionary enhanced flight vision system, AeroWare, to select interested customers. We are also continuing our efforts to educate our U.S. regulators and the agencies responsible for the safety of our air transportation system on how the unique features of AeroWare can improve safety and provide economic efficiency to the industry. During the quarter, we deployed $25.1 million in feedstock acquisitions to support future leasing and monetization opportunities. We remain disciplined in our acquisition approach and continue to focus on assets where we see strong long-term demand and attractive risk-adjusted returns. Our win rate in the quarter was 6.3% compared to 10.4% in 2025, which shows our commitment to discipline on pricing as we continue to evaluate opportunities to redeploy and monetize inventory in ways that improve velocity and cash conversion without compromising value. Looking ahead, our priorities for the remainder of 2026 remain consistent with those we have previously outlined. These include increasing the number of assets deployed in our lease pool, including the placement of the remaining four 757 freighters during this year; continuing to monetize our inventory through USM sales; filling available capacity across our MRO network; and improving overall operational profitability as recent expansion initiatives continue to gain scale. Despite the expected start-up costs incurred in the first quarter, we remain confident in our ability to deliver improved financial performance as we progress throughout the year. With a strong inventory position, an active leasing pipeline, and expanded operational capabilities, we believe AerSale Corporation is well-positioned to deliver more consistent and growing earnings. With that, I will turn the call over to our Chief Financial Officer, Martin Garmendia. Thanks, and good afternoon, everyone. Martin Garmendia: I will walk through additional details on our first quarter financial performance, then touch on cash flow, liquidity, and our outlook for the remainder of 2026. Revenue for the first quarter of 2026 was $70.6 million compared to $65.8 million in the prior-year period. Flight equipment sales totaled $5.2 million and consisted of one engine sale compared to $1.8 million from one engine sold in 2025. Excluding flight equipment sales, revenue increased 2.2% year-over-year, driven by growth in leasing activity, partially offset by lower USM and MRO parts sales. As we note each quarter, flight equipment sales can vary meaningfully from period to period. As a result, we believe performance is best assessed over time with a focus on feedstock acquisition, monetization of those investments, and profitability trends. Adjusted EBITDA for the quarter was $7.4 million, or 10.4% of revenue, compared to $3.2 million, or 4.8% of revenue, in the prior-year period. The EBITDA dollar and margin increase was primarily driven by higher leasing revenue and flight equipment sales during the quarter. Asset Management Solutions revenue increased 10% year-over-year to $43.1 million in the first quarter. Excluding flight equipment sales, revenue grew modestly, supported by an expanded lease pool and favorable engine mix, but partially offset by lower USM volumes. We ended the quarter with 18 engines and three Boeing 757 freighters on lease compared to 16 engines and one freighter on lease in the prior-year period. Technical Operations revenue increased 3.4% year-over-year to $27.5 million, driven primarily by higher on-airport MRO activity. Growth was led by increased activity at our Goodyear and Millington facilities, including the initial ramp-up of CRJ work at Millington. These gains were partially offset by lower MRO parts sales during the quarter. Gross margin for the quarter was 26.7% compared to 27.3% in the same period last year. The modest and temporary decline reflects start-up and training costs related to the CRJ line in Millington and the Aerostructures expansion, as well as higher labor costs at Goodyear as we maintained elevated staffing levels in anticipation of increased demand expected later in the year. We expect these margins to normalize and begin to improve as we increase labor and facility utilization. Selling, general, and administrative expenses were $22.2 million in the first quarter, down from $24.6 million in the prior-year period. The decrease reflects the benefits of our ongoing efficiency initiatives and the absence of one-time severance costs incurred last year. Current-year expenses included $1.8 million of share-based compensation expense compared to $1.2 million in the prior year. Net loss for the first quarter was $3.5 million compared to a net loss of $5.3 million in the prior-year period. Adjusted net income was approximately breakeven compared to an adjusted net loss of $2.7 million last year. Adjusted EBITDA for the quarter was $7.4 million compared to $3.2 million in the prior-year period, benefiting from a higher-margin product mix and lower expenses. Year-to-date cash used in operating activities was $26.7 million, primarily related to feedstock acquisitions of $25.1 million as we continue to make disciplined investments to grow the Asset Management segment. We ended the quarter with inventory of $369.5 million and aircraft and engines held for lease of $121.5 million. Available liquidity at the end of the quarter was $41.8 million, which included $2.1 million in cash and $39.7 million of availability in our $180 million asset-backed revolver, which can be expanded to $200 million. This available liquidity, growing performance, and our strong inventory position provide us with the tools needed to continue to grow our business through the remainder of 2026 and beyond. In conclusion, we remain focused on monetizing the investments that we have made. In a competitive market, we have built a strong inventory position that will allow us to continue to grow our leasing and USM activities. The commencement of a multi-line maintenance program at our Millington facility and new work commencing at our expanded Aerostructure facility put us on a positive trajectory to exceed the incremental $50 million revenue expectations for our expansion initiatives, with the expectation that margins will improve as we increase utilization of our additional capacity and start-up initiatives mature. All of this will allow us to continue to grow both our revenue and profitability in a more predictable and recurring manner quarter over quarter. With that, operator, we are ready to take questions. Operator: We will now open the call for questions. Thank you. At this time, I would like to remind everybody that in order to ask a question, please press star followed by the number 1 on your telephone keypad. Our first question comes from the line of Kevin Liu with RBC Capital Markets. Your line is open. Analyst: Hey, good afternoon, Nicolas and Martin. Thanks for taking the question. Could you talk about what you are hearing from customers in light of the ongoing conflict in the Middle East as it relates to your business, whether that is in USM, spare parts, or lease rates? Nicolas Finazzo: Hi, Kevin. Thanks for the question. We are not really hearing much from our customers at this point, and that is something we ask internally: how is the Middle East situation going to affect us in the short run? We are not seeing it yet. What do we expect? We expect that if this continues for a prolonged period of time and we see airlines park more aircraft, the result will be more aircraft in storage, which would benefit us, and there may eventually be a downturn in the demand for used serviceable material parts. However, as I have said, every quarter this question gets asked: is there enough USM out there to support demand? And the answer is, for the proper amount of USM—I do not mean every part from every engine, but the parts that sell from an airframe or engine—there continues to be more demand than available inventory. Until that eventually equalizes, if a number of airplanes are grounded—certainly during the COVID environment there were enough airplanes on the ground that there was very little requirement for USM because aircraft could be cannibalized for parts, and engines were not going into the shop because engines on wing were being cannibalized to keep other aircraft flying. Over time, if this prolongs, if fuel costs stay high, and that results in a substantial grounding of the fleet, then we expect that will have an impact. But I do not know when that would be. I believe that impact would still be years off unless you had a COVID-type event where a substantial amount of the fleet is grounded. So the short answer is we are not seeing an effect at this point, and based on the type of USM that we sell, we do not expect there to be an effect, certainly not in the short run. Analyst: Okay. Got it. Thank you. That is helpful. And then on a separate note, could you give us an update on your current capacity additions in MRO and talk about the potential impact to revenues in your business, both this year as well as in 2027? Martin Garmendia: Sure. As stated in the prepared remarks, Millington has come online and we have started a CRJ line there. We have gone through some start-up costs and a learning curve, but right now that is potentially going to expand to three aircraft that will be at full capacity at the Millington location, under a very profitable contract with a very good customer to whom we can provide multiple services. At our Goodyear facility, we continue to ramp up work, especially from the lows incurred last year after a long-term contract had finalized, and we continue to be bullish there. We continue to serve multiple operators, including Spirit, and we are seeing a ramp-up of return-to-service work for them with some of those overall aircraft. Based on the recent news, we expect that to accelerate during the remainder of the year. At our Roswell facility, we primarily do storage work. We have seen a decline in aircraft being stored, but if, for some reason, the war in the Middle East continues and there is an overall reduction in aircraft operating, we could potentially see aircraft being returned into that location from a storage perspective. On our component MRO side, our Aerostructures facility came online during the first quarter, and we are ramping up there. That is a 90 thousand-square-foot facility. We have a lot of capacity to fill. We have made a lot of inroads with customers, getting that process finalized, so we expect to quickly start ramping up demand there. Our landing gear shop has also been doing extremely well. We are starting two agreements—one with an OEM and one with an international carrier—that are expected to significantly increase our volume at that facility as we progress through the quarter. And our component shop has also seen increased demand, and we continue to pursue additional initiatives to fill that capacity because we have a good amount of available capacity there. As the market continues and there is overall demand, we are poised to grow and to fulfill some of those leads. Analyst: Got it. And just one last follow-up. As you are selling this capacity today, could you give us more color on what kind of margins you are getting on this new capacity and how we should think about the potential EBITDA contribution? Martin Garmendia: On the on-airport MRO side, there is still a need and a limited supply of available slots, so we have been seeing margin improvement in that area. Overall, as I mentioned, in the quarter margins were temporarily impacted by the Millington start-up, but as Millington comes fully online, we expect gross profit margins to be in excess of 20%. And at our Goodyear facility, as we increase return-to-service work—depending on the type of work—we definitely expect margins to be better than they have been historically. Operator: There are no further questions at this time. I would like to turn the call back over to Nicolas Finazzo, Chief Executive Officer, for closing remarks. Nicolas Finazzo: Thanks. Despite nonrecurring start-up costs from our facilities expansion projects in the first quarter, our operating business has continued to improve. These results validate our unique multidimensional and fully integrated business model, and as these units continue to develop and mature, we will be in an excellent position to achieve substantial growth in the years ahead. I want to thank Kevin for his insightful questions today, which I think provide good insight into our business model and will help our investors better understand how we are performing. To all the rest of you, I very much appreciate your interest in listening to our call today and look forward to bringing you up to date during our next earnings call. I wish you all a good evening, and thank you.
Operator: Good day, ladies and gentlemen, and welcome to the 2026 First Quarter Genpact Limited Earnings Conference Call. My name is Carmen, and I will be your conference moderator for today. At this time, all participants are in a listen-only mode. As a reminder, this call is being recorded for replay purposes. The replay of the call will be archived and made available on the IR section of Genpact Limited's website. I would now like to turn the call over to Kyle Bergstrom, Head of Investor Relations at Genpact Limited. Please proceed. Kyle Bergstrom: Good afternoon, everyone, and welcome to Genpact Limited's Q1 2026 Earnings Conference Call. We hope you have had a chance to read our earnings press release posted on the Investor Relations section of our website, genpact.com. Today, we have with us Balkrishan Kalra, president and CEO, and Michael Weiner, chief financial officer. Balkrishan will start with an overview of our results, and then Michael will discuss our financial performance in greater detail before we take your questions. Please note that during this call, we will make forward-looking statements including statements about our business outlook, strategies, and long-term goals. These comments are based on our plans, predictions, and expectations as of today, which may change over time. Actual results could differ materially due to a number of important risks and uncertainties, including the risk factors in our 10-Ks and 10-Q filings with the SEC. During this call, we will discuss certain non-GAAP financial measures. We have reconciled those to the most directly comparable GAAP financial measures in our earnings press release. These non-GAAP measures are not intended to be a substitute for our GAAP results. More details on constant currency growth rates can also be found in the earnings press release and fact sheet posted to our Investor Relations website. And finally, this call in its entirety is being webcast from our website, and an audio replay and transcript will be available on our website in a few hours. With that, I would like to turn it over to Balkrishan. Thank you. Balkrishan Kalra: Hello, everyone, and thank you for joining us today. Q1 was a record start to the fiscal year. I want to be unequivocal. I believe we are in the early innings of something that will fundamentally reshape this company's trajectory. It is rare to see the convergence of a structural shift in the market, a differentiated capability set, and the right strategic positioning all happening at the same time. When they do, and when a company has the discipline and courage to act on it, the resulting advantage compounds in ways that are difficult to replicate. That convergence is what we are experiencing right now. Not at the moment, but as a sustained momentum we see reinforced in our pipeline, our client conversations, and our early results. A new Genpact Limited is taking shape. Our Q1 results demonstrate we are on a clear path as a leader in agentic and advanced technology solutions. Disciplined execution with healthy and increasing demand drove total revenue growth of 6.7% year-over-year to 1.296 billion dollars. Advanced Technology Solutions revenue growth accelerated to 24% year-over-year as we continue to rapidly deliver compelling innovation across our client base. Gross margin expanded for the twelfth quarter in a row, up more than 100 basis points year-over-year, further enabling significant investments for long-term growth. And adjusted diluted EPS again grew faster than revenue, up 16.7% year-over-year. Our intentional focus and prioritization on driving high-quality, sustainable growth is showing up both in our top- and bottom-line results, and in future indicators of growth across bookings, pipeline, and inflows. Clients, including some of the world's largest corporations, are choosing Genpact Limited as a long-term strategic partner to reshape and run their mission-critical operations. We signed six large deals in the quarter, and we have a healthy pipeline of other large transformational deals, setting us up for continued strength through the year. We are contractually changing the game. We are capturing more multi-year opportunities with annual recurring revenue streams, creating a robust durable base we can continue to build on. We are seeing strong early signs of scale, with headcount growth decoupling from revenue as we deeply leverage agentic and AI to make our delivery more productive. Momentum in advanced technology is rapidly building. Over the last 90 days, our pipeline has grown more than 30% as demand for our agentic solutions and data and AI expertise continues to meaningfully increase. Advanced Technology Solutions is becoming an increasing proportion of our bookings, adding to our record backlog, and it is contributing more to total revenue. As I said, it grew 24% year-over-year and now accounts for 27% of total revenue. These solutions continue to create more value for our clients and generate high-value revenue for Genpact Limited. At Investor Day last June, we framed it as 2x 2x, 70/70. What this means is Advanced Technology Solutions deliver more than two times the revenue per headcount, and two times the revenue growth of the total company, with 70% amortized revenue and 70% from non-FTE commercial models. All of these metrics are tracking ahead of what we reported last year, further underscoring the high-quality and sticky nature of this business. What I continue to be most proud of is our exceptional momentum with agentic. These are not one-off projects. We are building a meaningful long-term, utilized business with our own IP that is deeply integrated into our client operations. Our agentic solutions growth is accelerating. This quarter alone, we nearly doubled the total contract value of our agentic solutions from all of 2025. We are fundamentally and rapidly transforming how businesses operate, and long-term demand for our agentic solutions is gaining significant traction. More and more, new clients are choosing Genpact Limited for our differentiated domain-driven offerings, bringing us into their operations because of the expertise and outcomes we uniquely provide. Existing clients, having known us for running mission-critical operations, are experiencing a surge of innovation from us, and they are actively integrating our agentic offerings, expanding scope, volume, or both, as they move confidently towards outcome-driven, non-FTE-led operations. This momentum is quickly building a meaningful recurring annual revenue base for Genpact Limited, with expanding margins that continue to improve as the business scales. With accounts payable, record-to-report, source-to-pay, insurance, and our robust future roadmap, we are quickly becoming the agentic transformation partner of choice to move clients from digital operations to agentic operations. We are moving clients to a collaborative model between agents and human experts. Agents can now autonomously execute tasks and reimagine processes, while our last-mile experts validate exceptions, train and advance models, and reinforce learnings, all within the guardrails of our responsible AI framework. We call this agentic operations. Over the past couple of years, the significant investments we have made to expand our advanced technology capabilities have effectively created a flywheel that builds to agentic operations and scalable autonomy. This incredible momentum would not have been possible without decades of experience running our clients' mission-critical operations. Core business services is a key element of our growth model. For our clients, our process intelligence and our ability to codify it continues to be the differentiating factor that brings their artificial intelligence to life, allowing them to achieve real scale across their global organization. Core business services revenue increased 1.4% in Q1, as we intentionally disrupt to create exponential value for our clients. Demand is healthy and growing. Our bookings and pipeline continue to demonstrate that our deep domain and industry experience is amplifying our broader portfolio. We are taking our extensive roadmap to our clients and seeing them rapidly rotate and also shape our future agentic solutions. This is allowing us to make deliberate decisions to double down on scaling our agentic and AI-led offerings, prioritizing higher-quality, long-term growth that continues to build over time for Genpact Limited. Clients across the globe are now choosing Genpact Limited for more than just our operational expertise. They are choosing us for our technology and our ability to codify and scale process context. While our U.S. client traction continues to be strong, let me share two global examples, and both are new. First, from Europe: This quarter, we entered a new strategic partnership with a global leader in insurance and financial services to support their transformation into global verticals. We will be running and optimizing their mission-critical operations while building functions of the future, entrusted to address the needs of all stakeholders, including their customers, employees, and shareholders. We are partnering to reimagine how their key functions operate and scale at an enterprise level, embedding agentic and AI-driven capabilities at the very core of our global enterprise transformation. We are integrating Genpact Limited's agentic finance IP solutions like accounts payable and record-to-report, as well as other AI-led offerings. The result is a fundamental shift for these functions to become predictive business partners while reducing transaction costs and improving compliance. The combination of understanding the business context at the last mile, bringing the latest agentic innovations, and strong cultural and people alignment with outcome orientation creates an incredibly strong foundation for the strategic partnership. The next example comes from one of our new NextGen clients, which represents the next generation of market disruptors. Bendigo Bank, one of Australia's leading banks, is transforming its operating model to create a leaner, more resilient operating backbone, allowing investments to be redirected into customer experience, data, and product innovation. Bendigo Bank entered into a strategic multiyear partnership with Genpact Limited to drive greater productivity with stronger risk and control outcomes across core operations. Bendigo Bank selected Genpact Limited given our ability to combine deep Australian banking operation expertise, proven innovation as demonstrated through real AI and agentic case studies, and a risk-balanced mindset critical in regulated environments. Both of these examples underscore our unique positioning and a clear flywheel effect: decades of experience translating into codified domain knowledge, combined with expanding advanced technology capabilities and agentic operations—and all of these are compounding. What we also hear from clients is that their data infrastructure, systems, and processes are complex. They need help navigating rapid technology changes, and they need partners who can connect across the broader ecosystem. We continue to deepen and expand our partner relationships with differentiated offerings leveraging our clear domain expertise and connecting the dots for clients. In Q1, our partner-related revenues grew 35% year-over-year, now accounting for nearly 13% of total revenue. We continue to make meaningful progress against our partner strategy, and this week marks a significant milestone. We just announced a strategic alliance with Google to create agentic and AI-led solutions for the office of the CFO. This is not just a partnership announcement. It is a deepening of our relationship that is already delivering real results for clients. Just two weeks ago at Google Next, Google spotlighted Genpact Limited's finance solutions, showcasing how we are enabling finance users to gain actionable insights from revenue and P&L data through natural language conversations in Gemini Enterprise. The thesis is simple. Genpact Limited's context-rich process intelligence, combined with Google Cloud's AI infrastructure, allows us to drive agentic transformation across the office of the CFO. Let me bring that to life with a client example. Cardinal Health manufactures and distributes medical and health care products, operating in 30 countries and serving 90% of U.S. hospitals. We have a long-standing relationship with Cardinal Health, working on transformation across both finance and supply chain. The company wanted to streamline manual processes further to drive meaningful quality, cost, and productivity gains using AI. We collaborated with Google Cloud to launch an AI-led innovation leveraging deep process intelligence to pinpoint the right starting point. The results, for example from credit memo processing, are clear. Our agentic solutions are driving a meaningful increase in touchless processing, faster cycle times, and a significant improvement in cash flows. This is the kind of transformational change Genpact Limited is enabling as we scale with partners across enterprise operations. I opened today by describing something rare, a moment when a structural shift in the market, a clear opportunity, and a company's unique positioning all converge at the same time. Quarter one makes the case that 2026 is proving to be that moment, and Genpact Limited is not just watching it unfold. We are shaping it. Our strategy is clear. Our momentum is measurable. And increasingly, the market is seeing a different Genpact Limited. For decades, we have been trusted for deep process intelligence and running mission-critical operations at scale. That foundation has only strengthened. What has changed is what clients are now asking us to do with that foundation. Today, they come to us to bring together processes, technology, data, and organizations to deliver outcomes that simply were not possible before. Because of that, we are winning new kinds of work, engaging in new kinds of conversations, and expanding the addressable market in front of us. Agentic operations is at the center of this. We are building, orchestrating, and responsibly governing agentic systems across the most essential parts of our clients' businesses. We are combining AI with decades of domain expertise in a way that is incredibly difficult to replicate. This is not just a concept for us. It is live, it is scaling, and it is showing up in our results. You can see the effect on the quality of the business. The shape of our business is changing in ways that matter. We are building revenues that are high-quality, more durable, and harder to displace. The margin profile is structurally richer. We are leaning in hard behind our most strategic priorities, and that is opening up a daylight between Genpact Limited and the market around us. This quarter is not an aspiration. It is a proof point. A new Genpact Limited is here, and we are just getting started. With that, let me turn the call over to Michael. Michael Weiner: Good afternoon, everyone, and thank you for joining us today. We delivered another strong quarter, highlighting the tremendous momentum we have seen as we set a new standard for agentic transformation. Total revenue grew 6.7% year-over-year to 1.296 billion dollars with accelerating growth in Advanced Technology Solutions. Advanced Technology Solutions, which includes data and AI, digital technologies, advisory, and agentic, grew 24% year-over-year, reaching 345 million dollars, with significant strength in data and AI and agentic. Demand for our Advanced Technology Solutions is growing rapidly, and our strategic investments are paying off. Our advanced tech capabilities continue to grow with clear innovation across agentic and AI-led offerings. We are expanding our total addressable market, delivering more value to clients across end-to-end workflows, and driving high-value revenue for Genpact Limited. As Balkrishan mentioned, we continue to make tremendous progress building a sticky, high-quality business. For Advanced Technology Solutions, 2x 2x, 70/70 is just getting better. In agentic operations, we are quickly becoming the partner of choice to move clients from traditional digital operations to agentic. This quarter alone, we nearly doubled the total contract value of our agentic solutions relative to 2025, with more than 50% of our cumulative awarded contract value coming from new clients. This is a clear indication of our increasing TAM and expanding wallet share. For existing accounts that are rotating from traditional to agentic delivery, net revenue growth and gross margin expansion are both notably above what we reported at our Investor Day in June. This momentum in agentic across both new and existing clients is building a stronger annual recurring revenue base for Genpact Limited with higher gross margins that continue to improve with scale. Core business services, which includes digital operations, decision support services, and technology services, grew 1.4% to 951 million dollars in the first quarter, reflecting continued client trust and ongoing demand for our deep domain and industry experience, as well as deliberate focus on driving high-quality long-term growth for Genpact Limited. Sales execution and demand remain strong across Advanced Technology Solutions and core business services as we continue to make progress with both new and existing clients. Net revenue retention remains accretive, and we feel good about our pricing as we continue to deliver meaningful ROI to our clients through their transformational journeys. Our large-deal momentum also continues. We signed six large deals in Q1, and we have a strong pipeline of additional large deals, which combined with our record backlog, puts us in a very strong position for the remainder of the year. As a reminder, large deals are 50 million dollars or greater in total contract value. Non-FTE revenue represented 48% of total revenue in Q1, reflecting a strategic shift to fixed-fee consumption and outcome-based models. With the tremendous momentum we are seeing in agentic, we are building a meaningful recurring annual revenue base decoupled from FTEs. We are effectively shifting away from productivity-dependent commercial models of the past. At a segment level, High-Tech and Manufacturing grew 8%, followed by Consumer and Healthcare growth of 6.1%, and Financial Services growth of 5.4%. Turning to profitability, gross margin expanded once again, up approximately 110 basis points to 36.4%, strengthening our ability to invest for long-term growth. Our consistent track record of margin expansion reflects our disciplined approach to operations and pricing, as well as an increasing contribution from high-value Advanced Technology Solutions revenue. Importantly, we are also seeing strong early signs of revenue growth decoupling from headcount as we embed AI and agentic solutions in our own operations and delivery. Moving on to the rest of the P&L, SG&A expense as a percentage of revenue was 20.9%. Adjusted operating income was 224 million dollars with adjusted operating income margin of 17.3%, as we continue to self-fund our strategic investments. Our effective tax rate in the first quarter was 23.7%. Net income for the first quarter was 148 million dollars and diluted EPS was 0.86 dollars. Adjusted diluted EPS increased 16.7% to 0.98 dollars, growing significantly faster than revenue yet another quarter. Turning to cash, we utilized 24 million dollars of cash in operations, which is in line with typical first quarter trends, and ended with 578 million dollars in cash and cash equivalents, up 16 million dollars from a year ago. We also returned 102 million dollars to shareholders in Q1 through 70 million dollars in share repurchases and 32 million dollars in dividends. Turning to our outlook, our backlog, pipeline, and inflows are at record levels with exceptional strength in agentic and Advanced Technology Solutions, putting us in a strong position for the remainder of the year. As a result, we continue to expect to deliver at least 7% growth for 2026 on an as-reported basis. Given the accelerating momentum in agentic, our strengthening partnerships, and healthy demand we are seeing for data and AI, we now expect Advanced Technology Solutions to grow at least 20%. In core business services, we expect growth to continue, even as we help clients accelerate their AI-led transformation through agentic operations and increase our focus on driving sustainable growth through advanced technology innovations. On margins, we continue to expect full-year gross margin to expand by 50 basis points to 36.5%, with adjusted operating income margin expected to increase 25 basis points to 17.7%. This reflects our continued commitment to self-fund investments for growth. We expect adjusted diluted EPS to grow over 10%, again faster than revenue. Turning to the second quarter, on an as-reported basis, we expect to deliver total revenue between 1.324 billion and 1.336 billion dollars, or 6% growth at the midpoint. We expect Advanced Technology Solutions to grow at least 20% year-over-year, and we expect continued growth in core business services. We expect gross margin to expand to 36.4% and adjusted operating income margin to increase to 17.4%. Finally, we expect adjusted diluted EPS of 0.96 to 0.97 dollars for the second quarter. In closing, as Balkrishan made clear, the shape of our business is changing. We are reshaping how businesses operate, building on the strength of our deep domain and industry experience with significant investments in Advanced Technology Solutions. We are differentiating our position in the market, expanding our TAM, accelerating high-quality revenue growth, and consistently expanding margins, all of which allow us to continue to deliver double-digit growth in adjusted diluted EPS and long-term value for clients and Genpact Limited alike. With that said, let me turn the call back over to Kyle. Kyle Bergstrom: Great. Thank you, Michael. Operator, we are ready to go ahead and take questions. Operator: Thank you so much. Ladies and gentlemen, to ask a question, simply press 11 on your telephone and wait for your name to be announced. To remove yourself, press 11 again. One moment for our first question. Our first question comes from the line of Bryan C. Bergin with TD Cowen. Please proceed. Bryan C. Bergin: Hi, all. Good afternoon. Thank you. So my first question, really at a high level, is a status update on client decision-making and spending trends from a macro standpoint, given it certainly picked up in April and May. Pipeline and large deals, sales activities seem pretty solid, but just wanted to test any areas by impact, vertical, or geography. I will ask my second question upfront here. Just as it relates to CBS-to-ATS migration, can you dig in a little bit more on the level of change between the segments as you modernize your delivery and recategorize? Balkrishan Kalra: Thanks, Bryan. I will take it. Overall, demand environment across the board—be it cohorts of Advanced Technology Solutions or core services, or new clients and existing clients, or previous segments that we have, or geos—continues to be very strong. Our pipeline and inflows continue to be at record levels, so really pleased with that. On your second question, I think our flywheel effect has begun to show results. The flywheel effect actually starts from core business services where demand continues to be strong. Our context-rich process intelligence that we have harnessed for decades is the core which, in combination with modern data, reimagined workflows, cleaner architectures, and how we are bringing all of this together to deliver superior outcomes for our clients, is beginning to show results, and it is showing in a disproportionate way in Advanced Technology Solutions. We are getting engaged in newer kinds of conversations and focused not just on meeting clients where they are, but also getting them where they want to be at a much faster pace. Really pleased with where we are and how we are shaping the new Genpact Limited. Bryan C. Bergin: Alright. Thank you. Operator: Thank you. One moment for our next question, please. Our next question comes from Sean Michael Kennedy with Mizuho. Please proceed. Sean Michael Kennedy: Hi, everyone. Thanks for taking my question. Congrats on the ATS acceleration—really impressive. I was wondering about the visibility in that business and how dependent ATS is on partner-related revenue growth, and the runway you see there, being 13% of revenue at the moment. Thank you. Balkrishan Kalra: Thanks, Sean. I will make three points. First, as I mentioned, 2x 2x, 70/70— a high proportion of all of Advanced Technology Solutions is amortized, so we have pretty strong visibility into it. Second, I would not say it is only partner solutions. Yes, partner solutions are taking shape, but what is gaining more and more traction is agentic as well as data and AI. We leverage partner solutions as I enumerated in my prepared remarks as well. We feel really good about Advanced Technology Solutions visibility as well as core business. Michael Weiner: The only thing I would add is, particularly of note, the 70% of that business being annuitized gives us very good ability to predict the business. It is also supported by a really strong pipeline and inflows that are growing. We feel great about it. Sean Michael Kennedy: Great. Thank you. Appreciate all the color. Good luck for the rest of the year. Balkrishan Kalra: Thank you. Operator: Thank you. Our next question comes from Surinder Singh Thind with Jefferies. Please proceed. Surinder Singh Thind: Thanks. On Advanced Technology Solutions and the 2x revenue per headcount, is that what you are initially seeing at this point, and how should we expect that to evolve over the coming years? I am trying to understand when a client shifts from core operations to more agentic operations, what percentage of those revenues is more IT-based, and then how do we think about the human component there and the ongoing maintenance and recalibration that is often required? Balkrishan Kalra: There are many questions in that, Surinder, so let me take them. First, at a business level, we are seeing early signs of decoupling and creating more leverage where revenue will grow faster than headcount, and it has begun to show results. I will still say we are in the early stages of that. Second, to your specific question: for agentic, those revenues have no bearing on headcount. It is all IP-based revenues, amortized with minimum volume commitments, and it is recurring. So it has zero bearing on headcount. Obviously, there are people deployed, but as we drive more efficiency, the revenue per headcount will only increase. Last point on overall Advanced Technology Solutions: it is greater than 2x, and we expect it to continue to grow better than 2x—better numbers, better numerics. Surinder Singh Thind: That is helpful. And then on the earlier commentary on demand, it seems like relative to 60 or 90 days ago, nothing has really changed. Is that the messaging here? Because peers and the industry are seeing a bit more weakness and delays in client decisioning. Are you seeing a different picture because of the nature of your work? Balkrishan Kalra: We hear some of that commentary too, but in our pipeline and inflows, we believe we have begun to demonstrate that we are separating from the pack. We see record levels of pipeline across cohorts, as I mentioned earlier, and more of that flywheel effect taking shape because of our context-rich process intelligence. We have been working on it for decades, and the time has possibly come to show what it means as we supplement it with technology investments and ramps in our strategic areas, demonstrating meaningful results to the world's largest companies as these agents go live in their environments. Operator: Thank you. As a reminder, if you do have a question, simply press 11 to get in the queue. Our next question is from Puneet Jain with JPMorgan. Please proceed. Puneet Jain: Hi, thanks for taking my question. Balkrishan, I was wondering if you can talk about the specific drivers for such strong traction in agentic services you are seeing this quarter. Was it related to evolution in AI models, especially cloud and open-topic, which could be driving clients to embrace some of these models, or is it that with new budgets clients have new urgency to push ahead? Balkrishan Kalra: As we mentioned in our prepared remarks, we nearly doubled the agentic bookings, and all of these are in annualized recurring revenues, relative to what we did in all of 2025. I would not attribute it only to improved models—though those help, and we use them. Fundamentally, what has begun to show in both our existing and new clients is the structural advantage driven by context-rich process intelligence. I have always said there is no artificial intelligence without process intelligence, and it is beginning to show in our results. Technology is becoming more ubiquitous and available. Process is more intense, and that is where we live. That is the intersection of AI. That is where we see the outcomes, and we are delivering superior outcomes. That structural advantage has begun to show—early days. Puneet Jain: Got it. And if you can also talk about the operational structure of these agentic deals. Do you purchase tokens, decide which models are relevant for clients, and manage change management and governance constraints that have kept adoption low in the past? Balkrishan Kalra: There are a couple of parts to your question. We live in these client environments. We understand their data, friction points, process flows, how upstream and downstream processes work, and how change dynamics have to work. Therefore, we handhold our clients holistically to drive and embed into the agentic system, and not just hand over software and move on. On models, there is a structured process for what to use and when. We do not need to expose clients to tokens or low-level details. Clients care about outcomes. We structure the commercial model as annualized recurring revenues with minimum volume commitments. Operator: Thank you so much. As I see no further questions in the queue, I will conclude the Q&A session and pass it back to management for closing comments. Balkrishan Kalra: Thank you, Carmen. I want to extend my sincere gratitude to all of our employees around the globe whose dedication and innovation make everything we are building possible, and to our esteemed clients for continuing to choose Genpact Limited as their partner for agentic-led transformation, and to our shareholders for their ongoing support. You are seeing a new Genpact Limited, and we look forward to showing you even more. Thank you. Operator: This concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Thank you for standing by. My name is Pryla, and I will be your conference operator today. At this time, I would like to welcome everyone to the Karat Packaging Inc. First Quarter 2026 Financial Results 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, please press star one again. Thank you. I would now like to hand the conference over to Roger Pondel. Please go ahead. Roger Pondel: Thank you, operator. Good afternoon, everyone, and welcome to Karat Packaging Inc.’s 2026 First Quarter Conference Call. I am Roger Pondel with Pondel Wilkinson, Karat Packaging Inc.’s investor relations firm. It will be my pleasure momentarily to introduce the company’s Chief Executive Officer, Alan Yu, and its Chief Financial Officer, Jian Guo. Before I turn the call over to Alan, I want to remind our listeners that today’s call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to numerous conditions, many of which are beyond the company’s control, including those set forth in the Risk Factors section of the company’s most recent Form 10-K as filed with the Securities and Exchange Commission and copies of which are available on the SEC’s website at sec.gov, along with other company filings made with the SEC from time to time. Actual results could differ materially from these forward-looking statements, and Karat Packaging Inc. undertakes no obligation to update any forward-looking statements, except as required by law. Please also note that during today’s call, we will be discussing adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share, and free cash flow, all of which are non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of the most directly comparable GAAP measures to the non-GAAP financial measures is included in today’s press release, which is now posted on the company’s website. And with that, I will turn the call over to CEO, Alan Yu. Alan? Alan Yu: Thank you, Roger. Good afternoon, everyone. We began 2026 with a robust first quarter. Year-over-year sales increased almost 13%, with momentum building throughout the quarter. Our performance during the quarter accelerated significantly, starting with modestly impacted growth in January to growth exceeding 20% in March, which included some pull-forward of orders. The acceleration reflected improving demand, strong execution across the organization, and continued gains in market share. Notably, our online sales, which are typically at a higher contribution margin, returned to robust growth this quarter after we pivoted to grow and fulfill our own online sales on our company storefront and third-party platforms. Compared to the prior-year quarter, online sales increased almost 10% to $19.5 million in 2026 from $17.8 million in the prior-year quarter, with momentum building steadily throughout the first quarter, achieving 19% year-over-year growth in March 2026. Gross margin remained resilient at 35.5% despite the continued impact of higher tariffs. This performance demonstrates the effectiveness of our diversified sourcing strategy and was further supported by a favorable product mix and pricing. As we look ahead, we are closely managing a dynamic cost environment. Given the sharp increase in oil prices and the resulting impact on product costs, we are implementing price increases on select plastic items beginning in the middle of this month. While certain sourced product costs are rising, we expect tariff savings under current trade policy to begin reducing cost of goods sold this month. These savings should partially offset inflationary pressure and, together with our pricing action, we expect to support gross margin stability. Importantly, we are well positioned to continue gaining market share amid ongoing resin supply challenges. Our strong inventory position and disciplined supply chain execution give us confidence in our ability to consistently serve customers and meet demand. Turning to innovation and sustainability, our paperback product category continues to expand steadily, driving a year-over-year increase in eco-friendly product sales of 16.9% in the first quarter. We also successfully closed another national chain account for paperback during this quarter, further strengthening our leadership position and reinforcing our long-term strategy in sustainable packaging solutions. Our sourcing diversification initiative continues to deliver tangible benefits. We have proactively rebalanced import volumes across geographies in response to evolving tariff structures, strengthening our cost competitiveness and consistent product availability. In this quarter, we increased domestic purchases to 18% compared to 14% in the prior-year quarter, and increased sourcing from Malaysia and Vietnam to an aggregate of 17% from 12% in the prior-year quarter. At the same time, we reduced purchases from Taiwan in the current quarter to 46% compared to 54% in the prior-year quarter, and reduced sourcing from China to 11% compared to 18% in the prior-year quarter. Additionally, we expanded our sourcing footprint by adding a new supplier in the Americas, which further reduces geographic risk and enhances supply chain flexibility. We remain focused on providing responsive customer service and disciplined execution, which are a hallmark of Karat Packaging Inc., while advancing operational efficiencies. These efforts are reflected in better operating cost leverage, which decreased to 28.3% in 2026 from 31.8% in the prior-year quarter. In summary, we delivered a strong start to the year, maintained margin resilience in a challenging environment, and continue to invest in growth areas that align with our customer demand and long-term industry trends. I will now turn the call over to Jian Guo, our Chief Financial Officer, to discuss the company’s financial results in greater detail. Jian? Jian Guo: Thank you, Alan. I will begin with a summary of our Q1 performance, followed by an update on our guidance. Net sales for the 2026 first quarter increased to $116.9 million, up 12.9% from $103.6 million in the prior-year quarter. The increase primarily reflected $12.1 million in volume and mix and a $2.0 million favorable impact from pricing. Sales to chain accounts and distributors, our biggest sales channel, were up by 15.1% in the 2026 first quarter. Online sales, as Alan discussed earlier, rose almost 10% over the prior-year quarter, and sales to the retail channel declined 12% from the 2025 first quarter. Cost of goods sold for the 2026 first quarter increased 20% to $75.4 million from $62.9 million in the prior-year quarter. The increase was driven primarily by sales growth and higher import costs of $7.3 million, primarily as a result of higher import duty and tariffs, which increased from $3.4 million for the three months ended March 31, 2025 to $10.5 million for the three months ended March 31, 2026. Gross profit for the 2026 first quarter increased to $41.5 million from $40.8 million in the prior-year quarter. Gross margin for the 2026 first quarter was 35.5% compared with 39.3% a year ago. The year-over-year decline in gross margin reflects the expected impact from higher import costs, which increased to 13.8% of net sales from 8.6% in the prior-year quarter, as well as elevated inventory adjustments as a percentage of net sales. These impacts were partially offset by lower product costs as a percentage of net sales. Operating expenses in the 2026 first quarter increased to $33.1 million from $32.9 million last year. The increase was primarily driven by higher rent expense of $0.6 million associated with the opening of the company’s new Chino distribution center in March 2025, along with a $0.6 million increase in salaries and benefits. These increases were partially offset by a $0.7 million reduction in online platform fees resulting from a shift away from third-party fulfillment of online orders, as well as a $0.4 million decrease in shipping and transportation costs due to lower online shipping rates. Operating income in the 2026 first quarter increased 8.2% to $8.5 million from $7.8 million in the prior-year quarter. Total other income (net) decreased $2.9 million for the 2026 first quarter from $1.1 million in the prior-year quarter. Net income for the 2026 first quarter increased 4.8% to $7.1 million from $6.8 million for the prior-year quarter. Net income margin was 6.1% in the 2026 first quarter compared with 6.6% last year. Net income attributable to Karat Packaging Inc. for the 2026 first quarter increased 5.2% to $6.7 million, or $0.34 per diluted share, from $6.4 million, or $0.32 per diluted share, in the prior-year quarter. Adjusted EBITDA for the 2026 first quarter rose to $12.5 million from $11.9 million for the prior-year quarter. Adjusted EBITDA margin was 10.7% compared with 11.5% for the 2025 first quarter. Adjusted diluted earnings per common share increased to $0.34 for the 2026 first quarter from $0.33 per share in the comparable prior-year period. We executed strong working capital management during the first quarter, generating operating cash flow of $7.2 million and free cash flow of $6.3 million, despite continued heavy duty and tariff payments discussed earlier. We paid out a regular quarterly dividend of $0.45 per share to shareholders on February 27, 2026. As of March 31, 2026, we had $90.7 million in working capital and $36.4 million in financial liquidity, with another $45.7 million in short-term investments. On May 5, 2026, our Board of Directors approved a regular quarterly dividend of $0.45 per share, payable May 28, 2026 to shareholders of record as of May 21, 2026. Looking ahead to the 2026 second quarter, we expect net sales to increase by approximately 8% to 10% from the prior-year quarter. As Alan noted earlier, some timing shift of orders in March contributed to a softer start in April. Since then, we have replenished inventory, and we are confident in our ability to achieve our sales target. We expect gross margin for the 2026 second quarter to be within 35% to 37% and adjusted EBITDA margin to be within 11% to 13%, excluding potential tariff refund impact under the current trade policy. For the full year 2026, we expect net sales to grow in the low double-digit range over the prior year. We expect gross margin for the full year 2026 to be within 34% to 36% and adjusted EBITDA margin to be within 11% to 13%, excluding potential tariff refund impact under the current trade policy. As Alan mentioned earlier, we are seeing accelerated growth in our pipeline, reflecting our strong market positioning and initiatives to continue gaining market share in a dynamic trade and supply chain environment. We expect to continue to drive top-line growth, sustain our gross margin, and continue to deliver strong profitability with enhanced operational efficiency and disciplined cost management. Alan and I will now be happy to answer your questions, and I will turn the call back to the operator. Operator: Thank you. We will now open the call for questions. If you have dialed in and would like to ask a question, please press star then 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, please press star then 1 again. Your first question comes from the line of George Staphos with Bank of America. Please go ahead. Kyle Benvenuto: Hi. This is Kyle Benvenuto on for George. Thank you for taking my question. You noted the sharp increase in oil prices is pressuring costs across sourced products and plastics. Within both your Q2 2026 margin guidance ranges, what oil price assumptions are embedded, and at what point would the mid-May plastic price increases no longer be sufficient to protect the 34% margin floor for the year? Alan Yu: Well, here is what we see on the oil prices. Yes, you are correct. Oil prices have gone up, and raw materials have gone up sharply. But we were able to negotiate with our vendors to support less increase versus the full increase impact of the oil prices, so the majority of our partner vendors overseas have absorbed the majority of the increases. That is where we are seeing that we are giving minimal increases in the May 15 to June area. Is this going to escalate more? Right now, we see that the resin price has stabilized in Asia. It has come down a little bit also. So we do not see, at this point, that the raw material price will go up even higher from this point. Kyle Benvenuto: Thank you, Alan. And then one more question for you, and I will turn it over. Your guidance points to 8% to 10% sales growth for Q2. How much of this is driven by the expansion of new national accounts versus organic volume growth from your existing customer base? Thank you. Alan Yu: We are seeing a sharp increase in our online sales portion of our business. For example, last month, April, we topped our record with double-digit online sales growth, and we do foresee that this quarter we will have record online sales as well. Last year, we did about $72 million to $73 million in online revenue, and this year we are on track for $100-plus million in online revenues. So a big chunk of the growth is from online sales revenue. From our national chain accounts, yes, we do see some of the national chain pipeline converting to revenues. That is also a segment where we see growth, especially in the summer season. Most of these chains are going to increase their orders for their drink cups and carriers, as well as the to-go part of our foodservice segment of our business. These are all organic growth. Unknown Speaker: Right away. Kyle Benvenuto: Thank you, and congrats on the quarter. Alan Yu: Thank you. Operator: The next question comes from the line of Ryan Meyers with Lake Street Capital Markets. Please go ahead. Ryan Meyers: Hey, guys. Thanks for taking my questions. First one for me, and I just want to make sure I understand this dynamic correctly. Alan, you had called out the 20% growth that you saw in the month of March, and then, obviously, the second-quarter guidance is only 8% to 10% revenue growth. So it sounds like you guys saw some pull-forward in order demand that drove the strength in March, and then things kind of stabilized a little bit in the second quarter. That is where that delta is between that 20% and that 8% to 10% growth. It is not necessarily that the business is slowing? Alan Yu: No, it is not. And we want to be conservative in terms of our growth numbers. We do expect our full-year guidance to be in range with what we have guided earlier this year. For the second quarter, we saw some softening in April because of the pull-forward from March, and so far this month we are seeing very positive revenue growth in May. But we want to be conservative and cautious to make sure that we meet or exceed the guidance. Ryan Meyers: Yep. Fair enough. That makes sense. And then thinking in terms of pricing, you called that out in the prepared remarks. How much price do you feel needs to be taken for you to preserve your gross margins? And then, industry-wide, what do your price increases look like compared to competitors? Are you still feeling like you are priced below where the market is, allowing for some of those share gains? Alan Yu: Yes. Our price announcement was 5% to 15%, depending on category. Our peer group seems to have price increases of 8% to 12%, so we are in the lower range among our peer group. We understand this is a difficult environment, with foodservice having a challenging year and beef prices going up, so we want to support our partners. We are announcing a lower price increase, and because of some help with tariffs—over the past six to nine months we were paying a 20% tariff, and now we are down to a 10% tariff—this reduction is helping our gross margin a lot. So that is where we see it. We do see a stronger gross margin for this quarter versus the prior quarter. That is why we are seeing that our net sales should be intact and on track with our guidance. Ryan Meyers: Okay. Got it. Thank you for taking my questions. Alan Yu: Thank you, Ryan. Operator: The next question comes from the line of Ryan Merkel with William Blair. Please go ahead. Analyst: Hey. Good afternoon. Thanks for the questions. This is Ben Schmidt on for Ryan. First question here, just to put a finer point on March and April, is there any way to size the pull-forward impact in March? It sounds like April might have been down, so just a finer point there would be great. Alan Yu: I would think that about $2.0 million was pulled forward from April into March. Analyst: Okay. Got it. Thank you. Analyst: And then last one for me. I know you mentioned a win this quarter, but any other updates on the pipeline of potential wins you discussed last quarter? Alan Yu: We are working with a few very large chains that might convert this quarter or at least next quarter. This quarter, we are converting some existing customers by adding additional SKUs to those customers, such as items in the eco-friendly product line and paper bags. That is what we are seeing right now. Analyst: Alright. Got it. That is all for me. Thanks, guys. Alan Yu: Thank you. Operator: We have no further questions at this time. I would like to turn it back to Alan Yu for closing remarks. Alan Yu: Thank you, everybody, for joining our first quarter Karat Packaging Inc. earnings conference call. We look forward to speaking with you next time. Thank you very much, and have a wonderful day. Bye-bye. Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.
Operator: Good afternoon and welcome to 10x Genomics, Inc.'s First Quarter 2026 Earnings Conference Call. All participants are in a listen-only mode. After the speakers' remarks, we will conduct a question and answer session. To ask a question at this time, you will need to press star. As a reminder, this conference call is being recorded. I would now like to turn the call over to Cassie Corneau, Senior Director, Investor Relations and Strategic Finance. Thank you. Please go ahead. Cassie Corneau: Thank you, and good afternoon, everyone. Earlier today, 10x Genomics, Inc. released financial results for the first quarter ended 03/31/2026. If you have not received this news release or would like to be added to the company's distribution list, please send an email to investors@10xGenomics.com. An archived webcast of this call will be available on the company's website at 10xgenomics.com for at least 45 days following this call. Before we begin, I would like to remind you that management will make statements during this call that are 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, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the press release 10x Genomics, Inc. issued today and in the documents and reports filed by 10x Genomics, Inc. from time to time with the Securities and Exchange Commission. 10x Genomics, Inc. disclaims any intention or obligation to update or revise any financial projections or forward-looking statements, whether because of new information, future events, or otherwise. Joining the call today are Serge Saxonov, our CEO and Co-Founder, and Adam Taich, our Chief Financial Officer. We will host a question and answer session after our prepared remarks. We ask analysts to please keep to one question so that we may accommodate everyone in queue. With that, I will now turn the call over to Serge. Serge Saxonov: Thanks, Cassie, and good afternoon, everyone. What a really nice start to the year, with solid sales momentum, a step-change advance in our product roadmap, and strong execution across the business. Revenue for the first quarter was $151 million, representing 9% growth over Q1 2025 when excluding the nonrecurring settlement revenue in the prior-year period. In single cell, we again saw double-digit growth in consumable reaction volumes, driven by FLEX and FLEX Apex. As we have been seeing over the past several quarters, our new products with more accessible pricing have been unlocking new waves of single cell demand. Similarly, in spatial, we again delivered double-digit growth in consumables revenue, which was driven by Xenium momentum. Spatial biology remains in the very early stages of adoption, and the vast majority of the opportunity is still untapped. The biggest highlight since our last call is without question the launch of our new instrument platform, Atara. Atara represents the most significant product introduction in our history. Among many other benefits, it enables, for the first time, spatial whole transcriptome analysis with single cell sensitivity at scale. We believe Atara is poised to redefine how biology is measured and understood. We went into the launch expecting a very strong response from researchers and the broader scientific community, and what we have heard so far has been extraordinary. Before I talk about what Atara is and what it does, I want to spend a moment on why we built it. The central challenge of biology is that it is very complex. It is complex in just about every system, in just about every sample. Biological systems comprise massive numbers of molecules, themselves interacting with each other in a bewildering diversity of ways. Addressing this complexity requires tools that can measure biology at large scale and high resolution. Historically, technologies available to researchers have lacked the necessary scale and resolution. Furthermore, the toolset of biology has been very fragmented. We have used one set of technologies for analyzing tissues, another for measuring cells, and yet another for working with molecules. But that is not how biology works. It works by specific cells expressing specific molecules at specific locations within tissue. That has always been the promise of spatial biology. It represents the convergence of the different tools for analyzing biological systems. It entails measuring molecules, cells, and tissues together, preserving the full context at massive scale and incredibly high resolution. However, until now, despite many advances, spatial biology has been fundamentally constrained by the limitations of existing technologies. Researchers have been forced into frustrating trade-offs between the critical attributes they care about—throughput, specificity, sensitivity, scale, performance. If they gain in one area, they have to compromise in others. We built Atara to address all of these trade-offs and to unlock the full potential of spatial biology. Atara is the product of a long, helicon book about where biology needed to go and years of deliberate work to get there. It is poised to become the large-scale discovery engine—whether for basic research, AI-driven science, or translational applications. We believe that now spatial will increasingly become the default approach for analyzing biological samples. It is important to appreciate that Atara brings together a set of capabilities that until recently were not even thought possible for a single platform. It delivers very high levels of plex, including whole transcriptome, at sensitivity comparable to FLEX Apex, the gold standard for single cell analysis. Enabled by refined probe chemistry, it delivers high specificity and data quality—nonnegotiable for researchers and their collaborators to be able to trust the data. And Atara delivers step-change throughput, with a single instrument capable of processing up to 800 whole transcriptome, one-centimeter-squared samples per year—more than 3 thousand if using the targeted Atara Select panels. This increase in throughput now enables large cohort studies at a pace and scale that were not previously feasible. Equally important is the user experience. Atara builds on a proven Xenium workflow, which is already highly robust and widely and well regarded by our customers. Atara runs on standard, off-the-shelf glass slides, which makes the platform inherently scalable across labs and experiments and enables distributed sample collection. Using standard slides also allows customers to access archived samples from biobanks and other repositories. In addition, Atara uses a universal sample preparation approach that works across tissue types, supporting different sample types on the same slide to provide extra flexibility and scalability. We have also developed powerful computation and software tools so that customers can effectively work with the data. To handle spatial biology at this unprecedented scale, the most computationally intensive part of the workflow—image processing—is performed directly on the instrument, driven by high-performance onboard GPUs and optimized algorithms. Data is processed efficiently at the source and translated into actionable biology in real time. From there, customers have the flexibility to use their own on-premise infrastructure or leverage our 10x Cloud platform for analysis and collaboration, ensuring that Atara is not just generating more data, but also making that data easy to use. We built Atara to be a long-duration upgradable platform, and we intend to continue delivering new capabilities over the years ahead. The roadmap on the platform includes workflow automation, designed to enable true sample-in/data-out capability; protein multiomics; in situ sequencing for spatial mutation and variant detection; and continued development of our 10x Cloud platform for multisample analysis and collaboration. As I mentioned, the early customer response has been extraordinary. We had high expectations coming into this launch, and the reception has exceeded even those expectations. One customer told us that this was the largest technology leap they had seen in their career. Another called the Atara data capabilities “the holy grail.” Others, to convey their enthusiasm, have used the kind of language that would not be appropriate for me to repeat in this forum. And this enthusiasm is translating directly into demand, as we take preorders ahead of initial shipments expected in 2026. Even in a challenging capital equipment environment, customer conversations have immediately centered on how to incorporate Atara into their research programs, not whether to buy it. In many cases, the discussion starts from the assumption that this is a must-have platform and quickly moves to multiyear programs, large cohort studies, and the scale of insight generation that is now within reach. Atara fundamentally expands our addressable market across three high-growth segments. In discovery research, initiatives like the Human Cell Atlas can now map entire organs and tissues at unprecedented scale and speed. In translational research, clinical cohorts can be comprehensively characterized to understand patient response patterns—something our collaborators are already validating, as shown by Carl June at AACR. And, critically, large AI models represent an entirely new opportunity, where Atara’s billion-cell-per-year capability enables creation of virtual models at a new level of scale and sophistication. Each segment unlocks distinct applications while reinforcing our position as the essential platform for spatial biology. As we have been saying for some time, we believe AI represents a significant and structural tailwind for our business. The potential to transform our understanding of biology is enormous, but progress depends critically on generating vastly more of the right kinds of data. From the beginning, we have built our platforms precisely for that purpose. Products like FLEX Apex and now Atara exemplify this imperative and are seeing intense interest from customers building AI models of biology. The partnerships we have announced over the past year reflect and reinforce these trends, including the Chan Zuckerberg Initiative on the Building Cell Project, the Arc Institute around the Virtual Cell Challenge, and Zira Therapeutics to build the largest perturbation dataset ever reported. And just last month, we announced a partnership with Biooptimus, an AI-focused biotech company. Biooptimus is building Stella, a global initiative aiming to profile up to 100 thousand patient tissue specimens across three continents. The goal is to build a data backbone for a world model of biology. The initiative is starting this effort on our Xenium platform and plans to expand to Atara over time. And just last week, the Chan Zuckerberg Biohub announced its new $100 million virtual biology initiative. The goal of the effort is to build AI models that can accurately simulate cells and tissues in silico. This initiative is an incredibly ambitious undertaking that would not have been conceivable even a few years ago. Now, because of progress in AI and in technologies for measuring biology, there is a path to that vision. There is increasing evidence that scaling laws apply in biology just like they do in other domains. What we now need is many orders of magnitude more data—specifically of molecules, cells, and tissues across vast numbers of contexts. This initiative is galvanizing the broader scientific ecosystem with an aligned view that this direction is the next grand challenge for advancing science and medicine, analogous to the Human Genome Project and its role in catalyzing the genomics era. Taken together, these programs are exactly the type of large, multiyear initiatives our single cell and spatial platforms are built to enable. AI is poised to fundamentally reshape how science is done, and large-scale, high-quality biological data sits at the center of that transformation. As AI models improve, we expect an exponential increase in the demand for the kind of data our technologies produce. This reinforces our conviction in the importance of what we are building and the vast size of the opportunity ahead. Building on another theme that has become increasingly prominent in our business, we are seeing growing interest in translational applications across both academia and biopharma. Customers are increasingly focused on identifying human-relevant drug targets and, critically, biomarkers of response for therapies that only work in subsets of patients. There is now a growing body of evidence of the value of single cell and spatial approaches in uncovering these signals. At the same time, our recent product advances have made these technologies far more practical to deploy in translational settings. In single cell, FLEX Apex has been a game changer for large-scale translational studies, because of strong performance on FFPE samples, streamlined workflows, and a cost profile that enables large cohorts. In spatial, Xenium has proven to be a robust and powerful platform for extracting meaningful insights from clinical samples. Atara is now poised to extend that momentum by enabling much larger studies with significantly more information content per sample. While our technologies are relevant across the drug development continuum, a particularly large opportunity lies in later-stage translational settings where biomarker strategies are essential to understand patient response and potential toxicity. This is where our solutions can meaningfully improve the probability of success and where we are increasingly focused. Over time, these trends also reinforce the potential for single cell and spatial in diagnostics applications. To realize that potential, the critical next step is the generation of robust clinical evidence on large patient cohorts. As we have discussed previously, we are pursuing two parallel paths: one, we are continuing to support our customers in their studies and will partner with them to enable clinical deployment in the future; and two, we are advancing our own internal efforts to generate clinical evidence for specific high-value applications. We are making progress in the two previously announced areas—tissue-based spatial profiling for oncology and blood-based single cell monitoring in autoimmune disease. Stepping back, this quarter has been emblematic of the great work by the whole 10x team. We launched a game-changing new platform, saw continued sales momentum, and engaged in powerful partnerships with our customers to drive the future of research and health care, all while maintaining laser focus on tight execution. This progress continues to reinforce our strategy and puts us in a great position for the opportunities ahead. With that, I will turn the call over to Adam. Adam Taich: Thanks, Serge. Before walking through the detailed financials, I want to reflect on the last 12 months. A year ago on our Q1 call, we were operating in a highly uncertain macro environment after drastic changes to government research funding that led us to withdraw our full-year guidance. Since then, and despite persistent challenges in the macro environment, we have consistently executed, improved our operating profile, and have grown our cash balance by over $100 million. The business is in a meaningfully stronger position today. With that, I will now walk through our first quarter 2026 financial results in more detail. Unless otherwise noted, all growth rates referenced reflect year-over-year comparisons. We had a solid start to 2026. Revenue for the first quarter was $150.8 million. Excluding the impact of nonrecurring settlement revenue in the prior-year period, revenue for the first quarter was up 9% year over year. This reflects continued momentum in the key drivers of our business, as well as some benefit from orders received late in the fourth quarter that shipped in early January. Total consumables revenue was up 13%, with growth in both single cell and spatial. Single cell consumables revenue was up 6%, supported by double-digit growth in reaction volumes, and FLEX continued to be the most popular assay by volume in the quarter. Spatial consumables continued to perform well in the quarter with revenue up 31%, driven by Xenium consumables. Total instrument revenue declined 24%, with Chromium instrument revenue down 12%, and spatial instrument revenue down 32%. Looking at revenue by geography, excluding the impact of license and royalty revenue in 2025, Americas revenue was up 9%. EMEA and APAC grew 165%, respectively. Turning to the rest of the P&L, gross margin was 70% for 2026, as compared to 68% for the prior-year period. The increase was primarily driven by lower warranty costs and lower inventory write-downs, partially offset by a decrease in license and royalty revenue. Total operating expenses decreased 15% in the quarter, primarily driven by lower outside legal expenses and lower personnel costs. As a reminder, Q1 2025 included a one-time gain on settlement related to patent litigation. Excluding this impact in the prior-year period, operating expenses decreased 20%. We ended the quarter with $540 million in cash, cash equivalents, and marketable securities, up $113 million year over year and up $16 million sequentially. Turning to our outlook for the rest of the year, we are maintaining our full-year outlook and expect 2026 revenue to be in the range of $600 million to $625 million. Excluding upfront revenue related to patent litigation settlements in 2025, this represents 0% to 4% growth over the full year 2025. At the midpoint, our outlook remains consistent with what we provided in February, including double-digit growth in both single cell consumables reactions and spatial consumables revenue. We built our initial outlook with the Atara launch in mind, reflecting our expectation that some customers may delay additional purchases of our current spatial products in anticipation of Atara. Looking at our quarterly cadence, as previously discussed, first quarter revenue represents a higher proportion of our expected full-year revenue, driven in part by orders received late in 2025 that shipped in January. We expect second quarter revenue to step down sequentially from Q1, reflecting lower spatial sales as customers wait for Atara to start shipping. We anticipate the third quarter to be broadly similar to the second quarter. In the fourth quarter, we expect Atara shipments to begin contributing meaningfully to revenue, though initial production capacity for Atara will be limited in 2026 as we ramp production. Looking ahead, we remain focused on customer success, disciplined execution, and strengthening our financial position, which support continued investment in innovation across our portfolio. With that, I will turn the call back to Serge. Serge Saxonov: Thanks, Adam. Before we open it up for questions, I want to pick up on Adam's earlier remarks and reflect on how much difference a year makes. While our internal conviction never wavered, the external circumstances a year ago put incredible pressure on our 10x team. Yet we executed with relentless discipline, met every challenge, and significantly improved our operating profile, all while launching multiple critical products including FLEX Apex, to change the world of single cell, and now Atara, the biggest product introduction in our history. To the 10x team, I could not be more proud or thankful for how you responded and what you have delivered. Thank you. Thank you for everything that you do. With that, we will now open the call for questions. Operator? Operator: Thank you. As a reminder, to ask a question, please press star. In the interest of time, we ask that you please limit yourself to one question. Thank you. Our first question comes from Patrick Donnelly from Citi. Please go ahead. Your line is open. Patrick Donnelly: Hey, guys. Thank you for taking the question. Maybe on Atara—you know, Serge, a lot of color there, appreciate it—could you talk about the early conversations in terms of the funnel? What end customer you are seeing the highest reception or interest level from, and then secondly, also on Atara, just how we should think about the launch timing and what that impact is on the portfolio? It sounds like you guys are preparing for some customers to delay other spatial purchases in Q2 and Q3. Would love just a little more color on how you are thinking about that. Thank you, guys. Serge Saxonov: Thanks, Patrick. Thanks for the question. Like I said earlier in my prepared remarks, we are really excited about Atara. We had really high expectations going into the launch, and it has been incredibly gratifying to see the response from customers, which I would say has probably exceeded our really high expectations. As far as how that translates into demand and the preorders, that has been really encouraging and really strong, and the interest is coming from everywhere. I cannot point to any particular area of the market or any particular area of our customers that are not expressing interest in this. Our efforts are on customers who can quickly scale, serve demand for others like service providers, and generally evangelize the platform for the future. That is how we are approaching the market and the signal has been resounding. Now, as far as the second part of your question, obviously Atara is a really compelling product. We have known that for a long time. We have been anticipating and planning for this launch for a long time, and we also anticipated there would be some changes to ordering from our customers. Overall, it is going very much in accordance with our expectations. We have lots of experience with past product launches and new versions of things and new capabilities, and we have been prepared. Naturally, customers adjust their thinking about future projects in light of Atara, which puts some pressure on some of our spatial business like we talked about earlier, but all of that is incorporated into our guide. At the same time, while people are starting to contemplate the future with Atara, right now our customers are running their experiments because they have established workflows, ongoing studies, grants and budgets. They are used to the workflows and really like the data. Our spatial products are leading. There is a lot of great resonance with them among customers. Also, realistically, if people are just now deciding whether to go forward with Atara, they probably will not be getting their instruments until well into 2027, most of them. So the existing spatial products continue on a robust base consistent with our expectations. We feel really good about that, and I think all of that information has been incorporated into our guide pretty well. Operator: Our next question comes from Matthew Larew from William Blair. Please go ahead. Your line is open. Matthew Larew: Everyone—Serge, you called out one of the new TAMs around AI. I think last quarter you mentioned that was a relatively low percentage of revenue, but you referenced today a number of new initiatives you are involved in, both on the single cell and spatial side. As you have had those discussions and gotten some sense for how customers are going to be building out their plans, what is your sense for what ultimately that TAM could look like and how it might grow over time? Thank you. Serge Saxonov: That is a really good and really important question. A couple of things. We fundamentally believe and are seeing that AI is a structural tailwind to our business. With the progress in AI and the emergence of increasingly large models that are more powerful in making predictions and inferences, what they universally need is large amounts of data across many different kinds of contexts and, specifically, the right kinds of data. For biology, measuring the right biology means molecules, cells, and tissues, and being able to measure them at large scale and high quality is imperative. That is precisely what we have built. In fact, that is the central premise of the mission of the company. It is an exciting moment for us because the emergence of these models and AI capabilities resonates strongly with our mission and strategy from day one. As to how that translates into revenue and what the TAM is, the fact is when you look at our customers and how AI is used and what it is driving, it is really pervasive at this point across our customer base and applications. I do not think at this stage there is a large project where AI is not a big driver, if not the biggest driver. Even smaller-scale experiments are often performed with an eye toward feeding data into AI models and scaling up down the road. So when we look at our business, this AI wave is lifting all of it across products and applications, and in many ways, that is by design. Operator: Our next question comes from Douglas Schenkel from Wolfe Research. Please go ahead. Your line is open. Madeline Mollman: Hi. This is Madeline Mollman on for Doug. Gross margin in the quarter, I think, came in a little better than we and the Street were expecting. As we think about the full year, are you anticipating any impact to gross margin from increased inflationary pressures related to memory or petroleum-based plastics? And then thinking about Atara ramping up as the year goes on, should there be any dilution to margins from the Atara launch? Adam Taich: Hey, Madeline. Thanks for the question. We are absolutely monitoring costs closely—the couple that you mentioned, and other input costs that have inflationary pressure. The team is managing that quite well, so we are still anticipating margins for the year to be in the mid-60s. To your question on Atara specifically, as that launch progresses—we mentioned we start shipping units in the second half and it will be heavily weighted towards Q4—and as has been typical in our portfolio, the instrument margins will come in at margins that are less than that of our standard portfolio. I would anticipate as that starts to move in, particularly in Q4, we will see a little bit of margin pressure, but we still feel highly confident that we will end up in the mid-60s for the full year. Operator: Our next question comes from Mason Carrico from Stephens. Please go ahead. Your line is open. Mason Carrico: Hey, guys. Just wondering if you could provide a bit more detail on spatial instrument revenue this year. How material is the Q1 to Q2 sequential decline? How many Atara instruments do you ultimately expect to place in Q4? And then as a follow-up, how many placements do you think production will be able to support in 2027 as you ramp production? Adam Taich: Sure. As I mentioned in the prepared remarks, we are anticipating a step down from Q1 to Q2 and Q3. We will continue to sell Xenium, but it will be at a lower rate than what we saw last year, particularly over the next two quarters. We built that into the guidance, as Serge mentioned earlier. As it relates to total number of Atara, we are ramping up production right now and anticipate between Q3 and Q4 we will sell approximately 40 units. That is all factored into the guidance range we have provided, and those will be mostly weighted towards Q4. Operator: Our next question comes from Barclays. Please go ahead. Your line is open. Analyst: Great, thanks for the question. I want to talk about the pricing strategy and positioning with Atara versus Xenium and the rest of the spatial portfolio. You are calling it the biggest launch in the history of the company. As you look toward spatial, is this where you will launch Atara and then cannibalize or essentially put all the other platforms and applications that customers use onto one box? Or are you trying to segment the market here? It seems like there is risk of cannibalization versus Xenium. Serge Saxonov: Thanks for the question. First, yes, calling this the most significant launch in our history was intentional, and I am very aware of our history and success with single cell. I do think this is a platform that will change how we measure biology and will fundamentally reshape many aspects of science. As far as where this is headed, in the short term we planned carefully for the dynamics and incorporated them into the guide. We feel confident about that and about what Atara opens up as we look into next year. Atara is poised to break open a lot of markets, opportunities, customer samples, and new users by removing constraints that kept existing spatial users from running more and others from entering spatial. To list a few technical enablers: whole transcriptome capability addresses constraints around customization and tissue types—people can move forward confidently across applications; throughput has been a huge constraint—now you can run full large cohorts and studies; and with off-the-shelf slide capability, there is access to archived samples and biobanks that multiply the availability of samples. This feedback is consistent with what we are hearing from customers and points to a fundamental expansion of TAM and potential for these platforms. Our pricing thinking is consistent with enabling this expansion across discovery, translational research, and AI-driven applications. People really like Xenium and Visium—powerful products and capabilities—and we expect them to be robustly used for the foreseeable future. Further out, more applications, customers, and samples will migrate to Atara, and that will be a great thing for us. Operator: Our next question comes from Dan Brennan from TD Cowen. Please go ahead. Your line is open. Analyst: Hey, good afternoon. This is Kyle on for Dan. Thank you for taking my question. I wanted to ask on your OpEx. OpEx was down quite materially year over year and quarter over quarter. You mentioned it a few times, but can you talk about where the jumping-off point is for OpEx going forward, given SG&A and R&D were down quite a bit year over year? Adam Taich: Sure. We have been managing our costs in a very disciplined way and are on a good trajectory. Keep in mind last year had the one-time gain on settlement. Excluding that, OpEx is down 20% year on year. We are still anticipating, and giving ourselves some flexibility, to continue to invest in the business, and we anticipate that OpEx year on year will be roughly flat. Operator: Next question comes from Kyle Mikson from Canaccord. Please go ahead. Your line is open. Kyle Mikson: First, could you talk about the spatial instruments in the quarter? It seemed a little bit weaker than what we had, and I thought I heard you had some benefit in January or something like that. How should we think about that line going forward, especially with potential market freezing? And secondly, Adam, on the guidance for Q2, are you talking about a mid-single-digit decline quarter over quarter or more like a low single digit? Thanks. Adam Taich: Let me take the second part first. Think about a low single-digit decline quarter over quarter—that is how we are thinking about Q2, and then fairly similar for Q3, with the balance getting us there on the guide in Q4. For spatial instruments in Q1, there was significant anticipation regarding what we were going to announce in April. As you may recall, we did a campaign at AGBT, word started to spread, and we were working with early-access customers under NDA to make sure we were going down the right track. Customers that would have been adding either a new Xenium or to their Xenium fleet decided in Q1, and will decide, to wait for Atara. We do not see the macro backdrop being meaningfully different for CapEx than where it has been—it is still fairly constrained—but the predominant rationale for Q1 spatial instrument performance was anticipation of the product launch. I would also echo what Serge said earlier: the enthusiasm around Atara is extremely high. Even in a constrained capital environment, customers are finding CapEx. We have orders, and this is the type of launch where folks go out and find money. We were thoughtful about timing to ensure it is built into budgets, whether for customers with fiscal year-ends in the fall, customers that need to get this into grant submissions, and to ensure customers are well positioned as they think about their 2027 budgets and earmark funds for Atara. Operator: Our next question comes from Michael Ryskin from Bank of America. Please go ahead. Your line is open. Analyst: Hi. This is Ivanka on for Mike. Thank you for taking our question. On Atara manufacturing capacity, you noted initial production would be limited in 2026. What are the primary bottlenecks to scaling from here, and how quickly do you think you can ramp toward meeting the level of demand you will see? Thank you. Serge Saxonov: The question is around scaling up production of instruments. This is a really sophisticated instrument, and we want to be very smart and measured around how we build and test it. We are very careful with these kinds of launches. We feel good about what we can do in 2026, and we will keep ramping production as we exit the year into next year. Operator: Our next question comes from Subhalaxmi Nambi from Guggenheim Securities. Please go ahead. Your line is open. Thomas VonDerVellen: Hi, guys. This is Thomas on for Subbu. Thanks for taking our question. There has been a lot of focus on spatial—some on single cell here. Can you share any color on what pricing headwind you may have experienced, if any, in the quarter from Apex, and what you are anticipating for the second quarter? Thank you. Serge Saxonov: The general trend has been similar to what we saw in Q4 as far as mix and pricing dynamics around FLEX Apex. I would point out it is still very early in the launch—we only have a partial Q4 and then Q1, so just a bit over one quarter. We are very happy with the progress—great feedback from customers and large scaling up of volumes. Overall, we feel good about single cell and how it is proceeding. It is still early, but all in all, a really strong trajectory. Operator: Our next question comes from Deutsche Bank. Please go ahead. Your line is open. Analyst: Hi. This is Sam Martin on for Justin Bowers at Deutsche Bank. I want to ask a couple of quick questions around the Visium platform. I think last quarter you mentioned Xenium had become the spatial platform of choice. Now with the launch of Atara, another upgrade within the spatial realm, can you share your updated thoughts on customer demand for Visium year to date with the launch of Visium HD just over two years ago? And your thoughts on the future of the Visium platform and whether it still has a place in your portfolio? Thank you. Serge Saxonov: As I have been saying for the past several quarters, there is clearly a trend in the market toward imaging-based readout and, in particular, toward Xenium. There has been huge resonance for the Xenium platform within spatial. With the launch of Atara, we anticipate that trend to be reinforced. That said, Visium has its place as well. Many customers absolutely love the platform and run it very robustly and consistently across large numbers of samples. We expect it to continue to have its place. It is a great assay for many applications and well regarded by many of our customers. We will continue to support it and ensure customer success. Operator: Our next question comes from Puneet Souda from Leerink Partners. Please go ahead. Your line is open. Puneet Souda: Hi, Serge. Thanks for taking my questions. Does the Atara launch have any additional impact or maybe accelerate a decline in Visium usage? If so, what can you do to mitigate that before the launch? And is there a desire from customers to pull the launch forward given the high level of interest? Serge Saxonov: There is going to be some effect—Atara is a spatial platform, and there has been a trend of converting toward Xenium that will continue with Atara’s arrival. There is definitely a place for Visium—customers really like the data and will keep running it. While the launch of Atara will put pressure on both spatial platforms, including Visium, that is all incorporated into our guide. One thing people sometimes underestimate is the built-in stickiness with products—ongoing projects, established workflows, and data customers are used to and really like. That is what we are seeing in the field—robust use of these products and capabilities. As for Atara and demand, customers are very interested, and the team is working really hard to deliver the instrument to the world as fast as possible. We are being very deliberate and rigorous, and we are excited to get it out there. Operator: Our next question comes from Jefferies. Please go ahead. Your line is open. Analyst: Hi, guys. This is Priya on for Tycho. Thanks for taking our question. On clinical adoption, you mentioned Atara can analyze up to 3 thousand core biopsies per year. What is the specific feedback from biopharma partners regarding the platform's readiness for integration into large-scale phase 2 and phase 3 clinical trials? Thank you. Serge Saxonov: When I talked about the number of samples a platform can process, I specifically referred to one-centimeter-squared areas. It is possible to put more samples onto a slide if you are doing tissue microarrays and similar formats, so there is additional scaling depending on biopsy format and measurement interests. The platform enables really massive scaling. Conversations with biopharma have been very encouraging. Both Apex and Atara have been resonant by opening up translational applications, sample types, and scaling. All are very enabling, and we feel this will be a big driver, especially as we think about next year and beyond. Operator: And last question today comes from Dan Arias from Stifel. Please go ahead. Your line is open. Analyst: This is Paul on for Dan. Thanks for the questions. There has been some messaging of Atara as providing sensitivity at the level of single cell sequencing. Obviously there will still be lots of use cases for single cell, but on the margin, do you expect any FLEX volumes over time to potentially move to Atara? And on a related point, you mentioned in your prepared remarks that the double-digit Chromium reaction volume growth was driven by FLEX Apex. Just wondering if reaction volume is growing at what kind of level excluding FLEX Apex? Serge Saxonov: As far as single cell relative to Atara, it is a reasonable question, but not something we are expecting to be an issue in the near term, nor is it anything we are hearing from customers. The configuration of the products, capabilities, pricing, and workflows are sufficiently different. We do expect in the long run there will be really massive experiments with single cell that will be possible with Atara that had not been previously possible, but we see that as the future. We are not seeing any effect on our single cell business at this stage or in the near term. In terms of reaction growth, we are seeing it across multiple applications. Since this was the last question, I want to finish with a couple of closing thoughts. I am personally very excited about the setup we have for 2027 and beyond. Through the product lens, 2027 will be the first full year of Atara—really the year of Atara. For FLEX Apex, by that point it will have gained widespread adoption and pricing on the single cell side will stabilize, so growth in volume will naturally translate into growth in revenue. Through the market lens, we expect an exponential increase in AI-driven research and scaling of translational cohorts to really take off as we look to next year. From the macro perspective, at the very least we will have good compares, and to the extent conditions improve, we should see an acceleration to all the other trends. Operator: This will conclude today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Gevo, Inc. Quarter One 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, we will now open the call for questions. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. Thank you. I would now like to turn the call over to Eric Frey. Please go ahead. Eric Frey: Good afternoon, everyone, and thank you for joining us on today’s call to discuss Gevo, Inc.’s first quarter and full year 2026 results. I am Eric Frey, Vice President of Finance and Strategy at Gevo, Inc. With me today, we have Paul D. Bloom, our Chief Executive Officer; Oluwagbemileke Agiri, our Chief Financial Officer; and Unknown Speaker, Executive Vice President of Operations and Engineering. Earlier today, we issued a press release that outlines our first quarter 2026 results and some of the topics we plan to discuss. Copies of the press release are available on our website at gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of our alcohol-to-jet project; the potential expansion and debottlenecking of our Gevo, Inc. North Dakota plant; the potential expansion of our carbon sequestration well; our expected future adjusted EBITDA; our agreements with Ara Energy; and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and GAAP reconciliations may be found in our earnings release which can be found on our website at gevo.com in the Investor Relations section. Following the prepared remarks, we will open the call for questions. I would like to remind everyone that this conference call is open to the media, and we are providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company’s Investor Relations page at gevo.com. I would now like to turn the call over to the CEO of Gevo, Inc., Paul D. Bloom. Paul? Paul D. Bloom: Thanks, Eric. Good afternoon, everyone, and thanks for joining us. This quarter was about advancing execution and strengthening the foundation for scale. Our team continued to build on the momentum of last year, strengthening our core business while advancing the next phase of our growth. We made measurable progress on our ATJ 30 project and our planned debottlenecking and expansion of Gevo, Inc. North Dakota. We continued to improve the performance of our existing business and refine our financing strategy. 2026 was our fourth consecutive quarter delivering positive non-GAAP adjusted EBITDA that reflected better than expected results with improved margins on top of solid production volumes. Our carbon business continued to deliver strong returns from low carbon ethanol compliance markets. In Q1, we sold approximately 57% of our carbon attributes attached to fuel. We also generated nearly 20 thousand tons of engineered carbon dioxide removal credits, or CDRs, to be sold into the voluntary carbon market and continue to see steady demand and relatively strong credit pricing for low carbon ethanol sales in markets where we participate. Our customers for CDRs continued to grow in Q1, including purchases and retirements by Amgen, Bank of Montreal, and PayPal, while continuing to advance more sizable long-term CDR deals. Importantly, we see continued growth this year even before our debottlenecking at Gevo, Inc. North Dakota comes into effect. Last year, we reported approximately $16 million adjusted EBITDA. For 2026, we expect approximately $30 million of adjusted EBITDA as we progress towards our previously stated target of achieving $40 million of adjusted EBITDA on an annualized run-rate basis from existing operations by the end of this year. The impact of our debottlenecking and other growth plans is incremental to this target. To further support our efforts, we have launched a corporate-wide initiative we are calling the EBITDA Challenge. This is about unlocking new revenue growth, improving operational performance, and managing costs across our organization. We look forward to providing more updates as we make progress on this critical initiative. Now let me turn to our alcohol-to-jet project that we call Project NorthStar, since I know that is top of mind. As previously announced, we made the decision to withdraw from the DOE financing process following a conversation with them around certain new requirements for the loan guarantee, including enhanced oil recovery as a business objective. These requirements did not align with our duty to maximize value for our stakeholders, from both an economic and timeline perspective. Withdrawing from the DOE process allows us to fully engage with a broader group of private capital providers while adding greater certainty and flexibility to our financing efforts. I am pleased to report that we have received nonbinding indications of interest from multiple lenders, which supports our goal of securing financing for Project NorthStar by the end of 2026. As a reminder, we are pursuing a combination of non-dilutive project-level debt and strategic capital options for Project NorthStar. Beyond financing, we are making good progress on our other key milestones that include engineering and offtake agreements. On engineering, we talk about front end loading, otherwise known as FEL, for which stage two has been completed. We remain on track to complete FEL 3 this quarter, which will further refine our capital cost estimates and position us to move forward to detailed engineering. Regarding offtake, we have already secured approximately half of the financeable long-term contracts for synthetic aviation fuel and carbon attributes for the project. Currently, we are at the term sheet stage for additional contracts which, upon completion, we expect will meet our financing requirements. We see a clear path to final investment decision, or FID, and based on our progress, continue to believe that Project NorthStar can deliver approximately $150 million of adjusted EBITDA per year once fully commissioned and online. Switching gears to our expansion projects, on March 30, we announced our intent to expand the capacity of Gevo, Inc. North Dakota by up to 75 million gallons per year, bringing our total capacity to an expected 150 million gallons per year. This expansion would effectively double the carbon capture and low carbon ethanol production and all the value that comes with that, from our original acquisition of the plant last year. To help finance the expansion, we entered into a preliminary agreement with Ara Energy, a global private equity and infrastructure firm focused on industrial decarbonization, to co-invest in the project. We still have to finalize the details, but we believe partnering with experienced capital providers will allow us to move faster than our balance sheet alone would support, while maintaining a disciplined approach to capital projects, avoiding dilution, and optimizing risk-adjusted returns. We expect construction of that expansion to take approximately 18 to 24 months following final investment decision. Lastly, let me touch on the debottlenecking and other site improvements that are currently in progress at Gevo, Inc. North Dakota. As previously announced, the volumes unlocked by our debottlenecking efforts should expand adjusted EBITDA in the Gevo, Inc. North Dakota segment by an anticipated 10% to 15%. We are on track to deliver the debottlenecking and operational reliability projects by the end of 2026. Site improvements are underway, and Unknown Speaker will talk more about that and our other operational and engineering highlights. But first, I will turn it over to Oluwagbemileke Agiri to run through the financial performance for the quarter. I will come back at the end to recap. Oluwagbemileke Agiri: Thanks, Paul. During Q1 2026, we reported revenue of $43 million compared to $29 million in Q1 last year, net loss attributable to Gevo, Inc. of $22 million, or $0.09 per share, which is coincidentally the same as it was in Q1 of last year. I would emphasize that first quarter results include debt extinguishment and modification of $11 million, and non-GAAP adjusted EBITDA of $9 million compared to a loss of $15 million in Q1 last year. Adjusted EBITDA largely reflects contributions from our carbon capture, low carbon ethanol and RNG operations, and corporate expenses. While our adjusted EBITDA for full year 2025 was $16 million, we continue to see adjusted EBITDA growth in 2026 and are excited to reaffirm our target of reaching an annualized run-rate adjusted EBITDA of $40 million this year. During the 12 months of 2026, we expect $30 million of adjusted EBITDA. Our first quarter results were better than expected due to strong production and margin performance, in spite of typical seasonal softness in ethanol margins. We are optimizing value from monetizing carbon, commodity, and tax credits, in addition to our strong focus on fiscal discipline and cost management. As Paul mentioned, we launched a corporate-wide initiative that we are calling the EBITDA Challenge. This is not just a cost-cutting exercise. This is about unlocking new revenue growth, improving operational performance, and managing costs across our organization. Going forward, we continue to expect some quarter-to-quarter variability in adjusted EBITDA, but overall, we reaffirm our targets. I also note that we see some potential upsides to our targets across a number of fronts, including unlocking revenue from expected new low carbon fuel pathway approvals we have been working on for over a year. Turning to cash flow and the balance sheet, we ended the quarter with approximately $39 million of cash and cash equivalents. We reported negative operating cash flow of $21 million. This reflects timing-related impacts, including $17 million of tax credits that have been generated but have not yet been monetized, and roughly $4 million of one-time costs tied to debt refinancing and extinguishment. Adjusting for these factors, operating cash flow would have been close to neutral, in line with our expectations and consistent with our path toward achieving our 2026 cash flow objectives. Refinancing our growth, we are taking a disciplined and methodical approach. Our priority is to ensure that any capital we raise aligns with our long-term strategy, preserves flexibility, and supports sustainable value creation for our shareholders. Regarding ATJ 30, we are actively evaluating indications of interest that we have received from private capital providers. This process is focused not only on securing funding, but partnering with capital providers who understand the strategic position of our project, share a commitment to our execution timeline, and help minimize dilution. On debottlenecking and other asset enhancement projects, we expect to spend $26 million this year that we plan to fund internally, as we have said previously. And as Paul mentioned, we expect to finance our expansion project with capital partners like Ara Energy. Overall, we believe our cash and cash flow put us in a strong place to execute this year and confidently pursue our long-term objectives. And now I will hand it over to Unknown Speaker to talk about operations. Unknown Speaker? Unknown Speaker: Thanks, Oluwagbemileke. From an operations standpoint, we saw consistent performance across our asset base in the first quarter. At Gevo, Inc. RNG, we produced about 92 thousand BTUs of renewable natural gas compared to about 80 thousand during the same quarter last year, or a 15% increase. Last quarter saw improved reliability as a result of our continued focus on operational stability. At Gevo, Inc. North Dakota, the plant delivered 18 million gallons of low carbon ethanol, plus 16 thousand tons of dry distillers grains, 51 thousand tons of modified distillers grains, and 5 million pounds of corn oil co-products. This was even better than expected as a result of our continued focus on operational excellence. The team remains focused on executing the debottlenecking and asset reliability projects that are expected to unlock incremental volumes and expand margins. During a planned shutdown in April, we succeeded in making the process tie-ins we need for these improvements. We believe we will not need any additional or unplanned outages to complete and commission the debottlenecking. That is great because we can start adding long-term production capacity without sacrificing our short-term volume this year. We are currently in construction of a new fermenter, liquefaction tank, beer degassing system, and a new milling building, which are all part of our plans to increase the plant capacity to around 75 million gallons per year of low carbon ethanol starting in 2027. For comparison, the current nameplate capacity is 67 million gallons per year, which we are already exceeding. We budgeted $26 million in capital expenditures this year for the debottlenecking and site improvements, funded by Gevo, Inc. North Dakota operating cash flows, as Oluwagbemileke mentioned, and we continue to expect about that level of capital spend. On our plant expansion from 75 to 150 million gallons a year, we are repurposing much of our work, design, and team from our previous ethanol project that was originally planned for South Dakota. We believe these efforts, while working with our existing network of partners, including Fluid Quip Technologies, will accelerate the expansion. Finally, on ATJ 30, we are on schedule to complete FEL 3, which will bring us to a plus or minus 10% estimate on the capital cost of the project, including the modularization work being done by Praj along with the Gevo, Inc. engineering team in India. Our U.S. engineering team and engineering partners are focused on completing the balance of plant design and integration of the entire project. In summary, we are focused on delivering operational excellence while also positioning our assets to support the next phase of growth. Now I will turn it back to Paul. Paul D. Bloom: Thanks. As you can see, we are in a much stronger position than we were a year ago. We have a solid operating base, a clear path to improving profitability, and multiple opportunities to scale our business in a meaningful and repeatable way. In addition, the conflict in the Middle East has highlighted, among other things, the relative inelasticity of jet fuel supply and demand, underscoring the critical importance of renewable alternatives like SAF. With the expected increase in global demand for jet fuel in the future, Gevo, Inc. has seen increased interest in our SAF and franchise strategy, both in our carbon management and our anticipated ability to supplement regional supply with our modular approach to deploying alcohol-to-jet capacity. Let me finish by saying our focus is clear. First, expand our cash-generating business. Second, secure a durable capital structure. Third, deliver our first commercial-scale SAF project. And lastly, build a repeatable platform for growth. With that, I will turn it back over to the operator to take your questions. Thank you. Operator: We will now open the call for questions. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from Amit Dayal from H.C. Wainwright. Please go ahead. Amit Dayal: Thank you. Good afternoon, everyone. Thank you for taking my questions. Good to see all the progress, Paul. On the debottlenecking front, should we assume that the impact from these efforts will reflect in the financials in 2027? Paul D. Bloom: Hi, Amit. Thanks for the question. Yes, that is the plan here because, like Unknown Speaker mentioned, we have already got the tie-ins done for the expansion. We are working on that construction today. That will be done at the end of the year, so that should immediately start in 2027 in Q1 to start delivering that extra 10% to 15% that we are talking about compared to where we end the year. Amit Dayal: Understood. Thank you for that. And with the efforts with Ara, does that require any capital commitment from you, or will that also be project finance? I am just trying to think through whether that puts any burden on the balance sheet or whether you have optionality to fund that through project financing and outside sources. Oluwagbemileke Agiri: Thanks for the question. High level, we are going to arrange project-level debt to complete the capital stack. So the combination of cash that we have on hand with capital from Ara Energy completes all the capital we need to complete that expansion project. Paul D. Bloom: Yes, we were really excited about that, Amit, to say we found what we think is a really good partner in Ara Energy. We are looking forward to getting that finalized so we can get started because the clock is ticking, and we want to get that done as soon as possible. Like we mentioned, we have a timeline of 18 to 24 months to get that completed, and that effectively doubles what we have at Gevo, Inc. North Dakota. That is a pretty exciting project for us, and we just cannot go fast enough. Amit Dayal: On that front, Paul, can we assume that if everything closes in a timely manner, work on the buildout starts this year in 2026 itself? Paul D. Bloom: Absolutely. We have already started to work on this project because, Amit, we had a lot of the team working on ethanol plant design back when we had the South Dakota greenfield plant. We have done a lot already, so we are repurposing the team. Unknown Speaker mentioned we are already working with Fluid Quip, for example. So we have already started. How do we get this done? What does that engineering look like on site? We started talking about that right after we got the acquisition done of the Red Trail assets, now Gevo, Inc. North Dakota. So this has been in the works and in the planning for some time, and we are ready to hit the ground running. Amit Dayal: That is good to hear. Just last question. Did not hear too much about Verity. Just wondering how that is progressing and if you are seeing traction with potential customers on that front? Paul D. Bloom: Sure. Thanks for the question on Verity. We love Verity. Verity has become part of our core franchise business for one because if you look at a bottle of Jet A and a bottle of SAF, they look the same because the molecules are essentially identical. The only difference is how we got there: what was the source of the feedstock, how we produced it, and the carbon intensity score, and customers want that proof. So as we build out our business, we will have Verity inside everything that we are doing, whether it is low carbon ethanol or on the SAF side. On Verity specifically, we have more customers. We had a couple of partnerships that we announced over the past few months. One was with Bushel, who basically services about 50% of the grain elevators in the United States and Canada. We think that is a really good way to take Verity and combine it with another software platform and get out to the market faster. We have also been working with a company called Cboe, and Cboe really helps with data acquisition, boots on the ground. We have signed up 8 customers so far. We are really excited about this. The one thing that we need to still see for Verity—because we designed this to take the benefits from the field to the fleet, or the field to the seat on the aircraft—is ag benefits, the 45Z ag benefits specifically included into 45Z. We have been waiting for that. We think we are getting closer, but we really need to see that, and I think that is a catalyst for Verity to really take off and grow in the marketplace because we have a tool that was designed to do that. Amit Dayal: Understood. Thank you, Paul. That is all I have. I will step back in the queue. Paul D. Bloom: Great. Thanks. Operator: Your next question comes from Jeffrey Grampp from Northland Capital Markets. Please go ahead. Jeffrey Grampp: Afternoon, guys. I am curious, with respect to the project finance opportunities for both the expansion project and ATJ, given that the timelines could potentially coincide a bit, are you evaluating perhaps a single source of capital for both projects? Does it make sense to have varying capital for different projects? Just curious how you are evaluating funding since it seems like there is perhaps some overlap. Oluwagbemileke Agiri: Thanks for the question. High level, we are evaluating all executable project financing plans, and some of the current project capital providers that we are talking to have expressed appetite in both projects. At the end of the day, we have a decision to make in terms of how we prioritize the capital providers that optimize our return for each of the various projects we have in front of us. We are really excited about the opportunities and the engagement that we have so far. Stay tuned. We will be sharing more definitively in terms of what those selection criteria are and the parties that we are going to be developing those projects with, especially ATJ 30, in due course. Paul D. Bloom: Thanks, Oluwagbemileke. Just to add on to that, Jeff, one of the things that we want to make sure of is we go as fast as we can on these projects. Making sure that we have the right options, whether they are together or independent, could change timelines on some things. Like we said, we are looking at all the options and are really excited and happy about the response that we have at this point. Jeffrey Grampp: For my follow-up, somewhat related to the financing but more specific to ATJ. It sounds like you have half the offtake in place and you are working on additional offtake. Is it safe to assume that is a prerequisite to closing anything on that side? And are there any other major obstacles or negotiating points outside of the offtake beyond just normal terms and conditions? Paul D. Bloom: The offtakes are the major gating item that we are still working through here, Jeff. We are focusing on delivering those bankable contracts that everybody is comfortable with on the financing side. We are pretty far along. We just need to finish up a few things that are at the term sheet stage. We will get that completed here, hopefully in the near future. I do not want to have everything under contract either for the ATJ 30 project. Project NorthStar we believe is going to be very accretive, and we want to make sure that we have some free to sell in the market so we can be opportunistic with those sales because who knows what those carbon values and jet fuel prices are going to be in the future. We will get enough to get where we need to be for the financing and go from there. Jeffrey Grampp: Understood. If I can sneak one more in related to that last point, what is that right mix? I understand there is not a single right number, but what kind of spot exposure makes sense for you? Oluwagbemileke Agiri: Ideally, you effectively do the math to understand what amount of contracted offtakes underpin the investments from our capital providers. It is a negotiation that we are going through. Typically, when you look at capital projects like ours, you see facilities under contracted offtakes somewhere between 70% to 80%. Maybe we will be in that mix. Maybe we can expose our volumes to more spot offtake volumes. That is yet to be determined. Did I address your question? Jeffrey Grampp: Yes, that is perfect. I will turn it back. Thank you, guys. Oluwagbemileke Agiri: Thanks. Operator: Before we proceed, again, if you would like to ask a question and join the queue, simply press star 1. Your next question comes from Derrick Whitfield from Texas Capital. Please go ahead. Derrick Whitfield: Good afternoon all, and congrats on the strong quarter. Paul, I am sure a lot of this was in process with your team before, but you have hit the ground running with this release. Paul D. Bloom: Thanks. We have been busy. It is a busy group. Derrick Whitfield: On the EBITDA Challenge, could you speak to the scale and scope of the program and what it could reasonably yield on the current platform before accounting for debottlenecking and expansion? Paul D. Bloom: Sure thing. We are pretty excited about this. It is focused on getting us to the run-rate of $40 million in adjusted EBITDA per year as soon as possible. We said we are going to do it, and the main thing is: how are we going to do it and measure it? We put process and an initiative in place for all Gevo, Inc. colleagues where we are capturing the metrics of what we are putting in place. It is part of an incentive plan that all employees have to drive EBITDA, not just to that $40 million but well beyond that. Think of this as phase one. It is getting us all to think about how we work, how we do our jobs the most efficient way, and deliver value—whether unlocking revenue, managing our costs, or coming up with better operational projects. We have a whole list already, and that list will continue to grow. I think it will go well beyond the $40 million that we set as a target by the end of the year. If you look at the investor presentation, after $40 million, we will have the debottlenecking. After debottlenecking, we are looking at the terminal for third-party CO2, and then we have the expansion with Ara Energy, and then monetizing that pore space fully. That gets to over $100 million in adjusted EBITDA that we are targeting. Again, think of it as a phased approach. We will continue this challenge. The challenge never ends; it will just go in phases as we work through it. Oluwagbemileke Agiri: One of the key points is we are targeting sustainable EBITDA growth. As we look at cost management, we also look at opportunities for investment to expand margins. Those are aspects that we hope to translate into recurring EBITDA growth and drive shareholder value. Paul D. Bloom: One other thing to reinforce: we have a number of fuel pathways today where we are selling low carbon fuel with the carbon attributes attached in compliance markets as part of our carbon business. Some of those recognize the value of carbon capture and sequestration, or the CCS value; some do not. We have made sure with our sustainability team that we have optionality to sell that value with or without the fuel, and we are getting more approvals. We expect additional approvals this year that should unlock substantial value. That is an example of a revenue unlock that could be quite substantial for us going forward. Derrick Whitfield: Along the same lines, are you seeing opportunities to further improve your ethanol netbacks? Ethanol is, globally, the cheapest octane in the world at present, and the global product markets are exceptionally tight. It seems like there are ways to make more economics just on the brown molecule as well. Paul D. Bloom: Absolutely. A couple of things are going on. We will see where the farm bill gets with E15, but that could increase ethanol demand by 5% just right there if we go to year-round E15. We have also seen other markets that are pulling for export, just extra demand. We see demand growth in Japan as they think about E10 and then moving on to E20. We look at marine markets where there has been a lot of talk and potential expansion. We are going to stay focused on the markets that we service really well because those are great markets for us, and we see new low carbon fuel markets open up. Hawaii just announced a low carbon fuel standard. We have New Mexico that is starting to take shape. The Canadian market is really strong today on their credit pricing and demand, and they are a large importer of U.S. ethanol. We are well positioned to take advantage of that growth. Unknown Speaker: I would add, as we look inside the fence and drive operational excellence, we are very focused on energy consumption—how we can be more energy efficient—and also how we can drive value in our co-product valorization. One project is how we can be even better with our corn oil recovery. Paul D. Bloom: That operational excellence piece is important. The Red Trail assets and the team there have done a phenomenal job over time. We are bringing our team and combining forces now as Gevo, Inc. North Dakota to drive operational excellence. These are not just small incremental amounts. These are step-change kinds of improvements we could see. Corn oil recovery is a big one. As we look at things like D4 RINs, we will see how that continues to drive values for things like distillers corn oil as the D4 RINs in the recently announced RVO have gone up. That is also good for potentially jet fuel in the future because we believe that RVO increase, with SAF anticipated to qualify for a D4, is all moving in the right direction. Derrick Whitfield: With respect to project financing plans, how much of the total project CapEx could you reasonably cover with project financing? And should we think about the cost of financing as, let us call it, 200 to 300 basis points wide of DOE funding? Is that the right way to think about it? Oluwagbemileke Agiri: We are targeting a leverage ratio of around 60% of the total project cost for ATJ 30. That is our target, and our engagement with private capital providers is on that basis. We think that tracks what the market will bear and what we are going to transact. On pricing, what you are triangulating is close to fair. The cost of debt that the DOE brought to us will erode a little bit as we engage with private capital providers. Some of those reasons you know: the subsidized capital and the guarantee structure that DOE had does not exist with other parties, and they have to charge closer to what the market rate is. The range you gave is close to where we might end up. Derrick Whitfield: Fantastic. Great update, guys. Thanks for your time. Operator: There are no further questions at this time. I would now like to turn the call back over to Paul D. Bloom for the closing remarks. Please go ahead. Paul D. Bloom: Thanks again, everybody, for joining us for this quarter’s update. We are really happy with the team’s performance. We are headed strong, and you will see continued focus on our EBITDA growth, which is one of the critical things for us. Stay tuned for more updates on our ATJ 30 financing—Project NorthStar—as we get that done by the end of this year. Again, great quarter. Really pleased with the progress that everybody is making, and thanks for joining us. Operator: Ladies and gentlemen, thank you all for joining. That concludes today’s conference call. All participants may now disconnect. Thank you.
Operator: [inaudible] Welcome to Warner Music Group Corp.'s Second Quarter Earnings Call for the period ended March 31, 2026. At the request of Warner Music Group Corp., today's call is being recorded for replay purposes. If you object, you may disconnect at any time. Now I would like to turn today's call over to your host, Kareem Chin, Head of Investor Relations. You may begin. Good afternoon, and welcome to Warner Music Group Corp.'s fiscal second quarter earnings call. Kareem Chin: Please note that our earnings press release, earnings snapshot, and Form 10-Q are available on our website. On today's call, we have our CEO, Robert Kyncl, and our CFO, Armin Zerza, who will take you through our results and then answer your questions. Before our prepared remarks, I would like to remind you that this communication includes forward-looking statements that reflect the current views of Warner Music Group Corp. regarding future events and financial performance. We plan to present certain non-GAAP results, including metrics that are adjusted for notable items, during this conference call and in our earnings materials, and have provided schedules reconciling these results to our GAAP results in our earnings press release. All of these materials are posted on our website. Also, please note that all revenue figures and comparisons discussed today will be presented in constant currency unless otherwise noted. All forward-looking statements are made as of today, and we disclaim any duty to update such statements. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs, or projections will be realized or achieved. Investors should not rely on forward-looking statements as they are subject to a variety of risks, uncertainties, and other factors that can cause actual results to differ materially from our expectations. Information concerning these risk factors is contained in our filings with the SEC, and with that, I will turn it over to Robert. Hello, everyone, and thank you for joining us today. Robert Kyncl: Our strong Q2 results prove that our strategy is working. With a 12% increase in total revenue, a 24% increase in adjusted OIBDA, and over 200 basis points of margin expansion, we are demonstrating the benefits of our transformation. This growth is underpinned by an increase in recorded music subscription streaming revenue of 15% on an adjusted basis. This was bolstered by the combination of broad-based strong execution by our operating units, and by the successful implementation of contractual PSM increases that began in the quarter. We continue to make progress on our three strategic pillars: growing our market share, increasing the value of music, and becoming more efficient and effective. And we use AI to help us achieve all three of these, which I will touch on throughout my remarks. Starting with market share growth, which remains a primary objective, we are driving gains through developing new talent and delivering consistent creative success with emerging and established artists and songwriters across multiple geographies, improved monetization of our catalog, and increased focus on distribution. Our execution across all of these has delivered strong year-over-year share growth in our fiscal Q2. Overall, U.S. streaming share grew 1.1 percentage points, and U.S. new release share grew 2.7 percentage points. Our creative success is evident in recent high-profile wins, including Bruno Mars dominating four Billboard charts simultaneously, PinkPantheress securing her first Global 200 number one, and Don Toliver scoring his first number one album. Like Bruno, many of our current superstars are homegrown—Dua Lipa, Charli XCX, and many more—and you can go back decades in our history to artist discoveries like Led Zeppelin, Grateful Dead, Madonna, Prince, and many others, who have launched and sustained highly successful careers at our labels. Flash forward to today, we continue to introduce the world to breakout chart-topping stars like PinkPantheress, Sombra, Billa Kay, The Marías, and Alex Warren. These are just a few of the many examples of our outstanding track record in artist development. We have successfully transferred this capability around the world, delivering a string of number ones with local artists in Italy, Poland, Sweden, France, Spain, and Mexico. Our rising Mexican star Junior, for example, just launched at number one on both the Spotify Global and U.S. Top Album Debut charts. Turning to catalog, which represents about 65% of our recorded music streaming revenue, we have delivered growth across shallow and deep vintages. Our always-on marketing approach, reimagined for today's younger generation, is yielding results as we find new ways to continuously revitalize our timeless repertoire. In addition, we have great success introducing iconic artists to younger audiences through new releases. Madonna is just one great example. She became a Warner Music Group Corp. artist more than four decades ago, and we are about to release her 14th studio album, Confessions II. As a result of our catalog marketing campaign leading into the new album, we have seen her weekly streams increase 24% versus baseline, with under-28-year-old fans accounting for 35% of her Spotify streams. Her new duet, Bring Your Love, with Sabrina Carpenter arrived last Friday and is Madonna's highest-charting track yet on Spotify, and fueled her biggest-ever streaming day on the platform. Additionally, our catalog is home to over 1 million tracks from more than 70 thousand artists. AI tools that we have developed make it possible for us to stimulate engagement with this vast treasure trove of content quickly and cost effectively through the use of motion art, visualizers, lyric videos, and many more. At the same time, we are using our proprietary model to determine where our marketing activities should be focused. Our ability to create these assets quickly and inexpensively, combined with our focused marketing activities, enables better and deeper monetization of our catalog, ultimately amplifying our market share growth. Enhancing our distribution offerings through strategic partnerships and investments is an important driver of our market share growth strategy. Our recent deal with TwoStream, a leading independent force in the música Mexicana space, and our acquisition of Revelator, which Armin will discuss in more detail, not only enhance our capabilities, but also help us to establish a powerful pipeline of emerging talent and catalog while creating new pathways into our global ecosystem. Our publishing business grew 10% this quarter, continuing its strong momentum. From our songwriters Mac and Scott Dittrich contributing to Bad Bunny's number one song on the Billboard Hot 100, to our deals with Grammy winner Levy, R&B hitmaker and Grammy-winning producer Dre Harris, and chart-topping singer Ernest, Warner Chappell's hot streak continues. We have also expanded our global presence by launching publishing operations in India. A brand-new way for us to drive share is through long-form programming. Last quarter, we announced a multiyear first-look deal with Netflix to produce documentaries. And today, we announced a multiyear first-look deal with Paramount to produce theatrical live-action and animated feature films. I would like to give big thanks to our partners at Unigram and at William Morris Endeavor who helped us structure both partnerships. I look forward to our continued collaboration. These agreements represent new and exciting ways to tell amazing stories about the lives, music, and legacies of our most popular artists and songwriters. In doing so, we are introducing them to new fans all around the world, building their brands, and expanding engagement with their music. Moving to our next pillar of growing the value of music, when I joined the company, I identified the need to increase the value of music. Today, we are doing this in a number of ways. These include PSM increases, deals with emerging AI platforms like Suno, and premium tier offerings with traditional DSPs that feature AI. We have made meaningful progress in several of these areas. First, after more than a decade of volume-driven growth, we are now seeing PSM increases, which contributed to our mid-teens subscription streaming growth in the quarter. These increases provide greater certainty around our economics, irrespective of retail pricing. Beyond traditional streaming, AI represents an important step towards enhancing the value of music. There has been a lot of discussion about whether AI will have an accretive or dilutive impact on our industry. Numerous DSPs have reported that the ever-growing volume of AI music being uploaded is seeing very limited engagement and therefore has minimal dilutive impact. Of course, we are closely aligned with our DSP partners to ensure that contractual protections are in place to prevent or limit dilution. We have taken a leadership role in creating new monetization frameworks with emerging AI companies, and our pragmatic, experimental approach will deliver new revenue streams. Our partnership with Suno serves as a proof point for AI and incremental value creation. Suno's 2 million subscribers are paying an average of $12.50 per month, clear evidence of the willingness of superfans to pay more for interactivity. Not only are we building an ongoing consumption-based revenue model that enables us to scale as our partners do, we are also ensuring that AI models respect copyright, name, image, likeness, and voice to protect our artists and songwriters. Implementing clearly drawn boundaries is enabling us to harness AI technology for licensed models that ensure fair compensation to artists and songwriters. In fact, we were just named one of Time Magazine's 100 Most Influential Companies for our leadership through this AI era. Additionally, we are actively engaged with our traditional DSP partners to launch new AI-powered premium tiers that will benefit our artists and songwriters by allowing fans to engage more deeply with their music. We continue to believe that our industry-leading and thoughtful approach to AI will drive one of the biggest incremental value-creation opportunities for our industry. We look forward to sharing updates on future initiatives. Turning to becoming more efficient and effective, our ongoing journey to become more efficient is unlocking our ability to invest more in our core business. This drives our market share growth, which translates into improved top- and bottom-line acceleration and cash generation, and ultimately, shareholder value. We are not shying away from making tough decisions and doing the difficult foundational work necessary to drive a step change in our operational effectiveness. Our strategic reorganization and focused investments in tech, as well as the successful rollout of our financial transformation program, have enabled the profitable growth that is reflected in our results. For the second consecutive quarter, we have now delivered margin expansion above our full-year target of 150 to 200 basis points—further proof that our strategy is working. We are excited about our release schedule, which includes new music in Q3 from Charli XCX, Lizzo, Alex Warren, Sombra, Tiësto, Teddy Swims, Kehlani, and many more. In summary, our momentum is strong, our strategy is working, and there is a lot of runway. We are driving successful results by focusing on our three strategic pillars—growing market share, increasing the value of music, and becoming more efficient and effective—while using AI to power all three. The building blocks are in place to deliver on our growth targets, and we have established a growth culture to continue our momentum and to accelerate long-term value creation for our artists, songwriters, and shareholders. Before I hand it over to Armin, I want to share that starting tomorrow, in addition to continuing to serve as our CFO, he will also serve as our COO. His expanded remit will now include corporate development, central marketing, business and market intelligence, and WMX. I want to thank Armin for the impact he has had on the organization and business in a short period of time, and I look forward to continuing to partner with him to deliver operational excellence, growth, and value creation. Congrats, Armin. Over to you. Armin Zerza: Thank you, Robert. In my new expanded role, I look forward to partnering with you and the team to continue driving top- and bottom-line growth while strengthening our operational, commercial, and financial excellence at the company. I also want to start by thanking our teams for delivering an exceptional second quarter and first half of the fiscal year. We are seeing incredibly strong business momentum. Our second quarter was highlighted by acceleration in revenue growth, robust margin expansion, and strong cash generation. This is the fourth consecutive quarter where we have delivered growth in line with or above our sustainable growth model, led this quarter by a step change in growth in subscription streaming revenue. Total revenue grew 12% in the quarter, reflecting double-digit increases across both recorded music and music publishing. Recorded music revenue grew 13%, led by subscription streaming, which accelerated to 15% growth on an adjusted basis. Ad-supported streaming also was strong, growing 11% on an adjusted basis. Both subscription and ad-supported streaming benefited from healthy market growth and global market share gains. Subscription streaming also saw the benefit of PSM increases. Physical revenue increased 18%, driven by strong releases in the quarter, as Robert discussed. Artist services and expanded rights revenue increased 33%, driven by concert promotion revenue primarily in France, as well as higher merchandising revenue. Music publishing revenue grew 10%, led by 16% streaming growth. Total company adjusted OIBDA growth was 24%, and margin expanded by 230 basis points, ahead of the high end of our full-year target for the second quarter in a row, reflecting strong operating leverage, robust subscription streaming growth, and cost-savings delivery. In an ongoing effort to provide greater transparency around our performance, we will be disclosing adjusted net income and adjusted EPS moving forward. In the second quarter, adjusted net income increased 41%, and adjusted EPS of $0.44 increased 38%. We generated operating cash flow growth of 83% in the second quarter. Through the first half of the year, our conversion ratio is at 66% of adjusted OIBDA. As of March 31, we had a cash balance of $741 million, total debt of $4.7 billion, and net debt of $4 billion. In summary, our strategy is working, and our teams are executing with excellence. Looking forward, we are well positioned to continue delivering on a sustainable growth model, which is anchored in high single-digit total revenue growth, double-digit adjusted OIBDA and adjusted EPS growth, and 50% to 60% operating cash flow conversion as a percentage of adjusted OIBDA. As Robert mentioned, we will achieve this by focusing on our three strategic pillars to drive future growth, which I will discuss in more detail. First, on growing our market share, our priority remains investing into our core business—organically and inorganically—to accelerate shareholder value creation. We do this by focusing our investments on: first, the most valuable repertoire markets with the highest growth potential globally; second, high-margin, accretive catalogs, also leveraging our joint venture with Bain; and third, distribution capabilities, which enable us to serve the independent community profitably. We have made significant progress against each of these areas. On organic investments, we are growing market share broadly across DSPs, labels, and regions, with the exception of APAC, where we just recently appointed a new leader. On inorganic investments, following the upsizing of our joint venture with Bain, I am pleased to share that the joint venture has deployed $650 million to acquire a number of heavyweight catalogs which have an attractive return profile. We continue to maintain a strong pipeline of potential opportunities and look forward to sharing more updates in the future. On distribution, we have signed an agreement to acquire cutting-edge independent digital music platform Revelator, in line with our approach to pursue bolt-on acquisitions that elevate our distribution offering. With cloud-based tools that streamline operations and financial reporting for artists, labels, and distributors, Revelator will provide powerful infrastructure to help us better serve the critically important independent community. This will be an accelerant for profitable distribution revenue growth and market share expansion. Importantly, across our portfolio of organic and inorganic investment, we have now institutionalized a globally coordinated deal evaluation process. This process involves our creative, commercial, and operating teams, and allows us to look across our entire global portfolio of potential investments to target the largest and highest ROI opportunities. This disciplined approach to capital allocation has enabled us to generate returns of approximately 20% on these investments. Finally, in addition to driving enhanced shareholder value through our investments, we continue to return capital to shareholders through a quarterly dividend and an opportunistic share buyback program. Second, we see increasing the value of music as critical to growing our company. We are pursuing innovative partnerships with traditional DSPs and emerging AI platforms across several avenues, including: first, PSM increases on existing tiers; second, licensing agreements with innovative emerging AI platforms; and third, collaborating with scaled DSP partners on AI-centric premium tiers. In Q2, we began to see the impact of these PSM increases, which contributed 3 percentage points to our subscription streaming growth of 15% on an adjusted basis. Additional PSM increases across other DSPs will roll in throughout the balance of the fiscal year, providing further support for this important metric. In addition to driving value through existing streaming tiers, we see AI as an important driver of future growth as we partner with both AI platforms and existing DSPs on higher ARPU offerings. Our recent licensing deals with leading AI platforms, including Suno—which is currently generating $300 million in annualized revenue and has announced that it is planning to launch its fully licensed offering later this year—will begin to contribute materially to subscription streaming revenue growth starting in fiscal 2027. At the same time, we are actively engaged with our largest DSP partners around AI-centric offerings that will support higher-priced premium tiers, enhancing consumer experience and value creation for our industry. Third, turning to becoming more efficient and effective, we are focused on: first, our ongoing cost-savings program; second, driving profitable growth with a priority on core streaming growth; and third, operating leverage. I do want to spend some time today on our organizational redesign and related cost-savings initiatives. They are not only delivering on schedule, but at the same time accelerating growth, which is a testimony to our team's execution excellence around the world. Based on this, we now expect to achieve the high end of our 150 to 200 basis points margin expansion target in fiscal 2026. The success of this reorganization has made identifying and driving cost efficiency a part of our organization's DNA. We will share more details about our ongoing cost-savings initiatives in the coming quarters, but at a high level, the implementation of our global/regional/local organization model and ongoing transition to a more standardized data architecture and operating processes enables us to leverage AI more effectively across the company for process automation and better real-time decision making. This, in turn, has been freeing up more resources to focus on value-added work, ultimately leading to incremental growth at lower cost. As an example, we have started on this journey with our finance teams, leveraging our financial transformation initiative to use AI tools for advanced real-time forecasting and reporting, which has significantly accelerated decision making. Again, based on the progress we have seen here, we plan to use new AI-driven tools more to further streamline finance and other functions. These tools, in combination with our relentless focus on profitable growth, will contribute to our margin targets of mid-20s in the short term and high-20s over the longer term, further improving cash flow productivity. In closing, successful execution across our three strategic pillars—namely, growing market share, increasing the value of music, and becoming more efficient and effective—has enabled us to accelerate profitable growth, creating a flywheel effect that frees up more capital to invest at attractive returns, driving better results and enhanced shareholder value creation. At the same time, we are leading the industry in AI initiatives, which we believe will be a material contributor to our top- and bottom-line growth starting in fiscal 2027. All of this, combined with highly disciplined capital allocation and return thresholds, as well as rigorous cost and cash management, gives us confidence in our ability to continue delivering against our sustainable growth model in 2026 and beyond. We remain excited about the prospect of creating significant shareholder value and look forward to providing updates on our progress. With that, we will take your questions. Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. If you would like to withdraw your question, simply press 1 again. Your first question comes from Peter Supino with Wolfe Research. Your line is open. Peter Lawler Supino: Hi. Good afternoon. An important piece of your conference call, your prepared remarks, was your successful market share developments, and looking back at the last year, you have had several quarters of improved market share. I wanted to ask if you could expand on your prepared remarks about what you are doing differently and how much of that feels sustainable versus the result of things—smart decisions done in the past—that might not be part of a repeatable process. Thank you. Robert Kyncl: Thank you, Peter. Before I answer your question, I want to take a small pause and recognize where our company is today. After years of doing hard, unsexy foundational work, after making tough organizational decisions and redesigns, and just doing lots of really tough, difficult decisions while growing the business, we have now hit our stride. You can see it—you said it yourself—fourth consecutive quarter of growth, printing solid numbers. I would say the numbers today are far more than solid—amazing. And it feels really good to be at Warner Music Group Corp. Because none of this is short term. This is a result of long, proactive work. And our team is amazing. Our infrastructure is getting stronger and stronger. We buy when we need to, but we do it prudently so we are not overspending. And we are having amazing creative success. We are firing on all cylinders, and it is amazing to be able to say that. And it is amazing to have the team that we have that underpins all of this. Our gains are not in one region or one country or one sales channel; it is broad based—other than APAC, as Armin mentioned—which is amazing to be able to say. And value is contributing to growth in addition to volume—that is amazing to be able to say. All of the things that we set out to do, we are doing, and they are showing up in our numbers. And they are showing up in our creativity. Our disciplined capital allocation is yielding results. Strong leadership is yielding results. And we feel incredibly confident about the present and about the future. Looking forward, we are really confident about our prospects because of three things. One, we have very strong pipeline management. That means we are looking at new release, catalog, artist deals, acquisitions, partnerships—all of that—holistically. And when we do that, we deploy resources to the best possible ROI opportunities. Two, we have a very focused catalog optimization program in flight, and it is yielding results. Catalog is 65% of our revenue; therefore, very important—it deserves all the attention that it gets. Within that, we have a new always-on marketing approach reimagined for today's young people. We are introducing iconic artists to younger generations through new releases, and we have developed AI tools that help us manage not only a small sliver of the top few hundred titles in our catalog, but the entire thing through the use of AI. We also have developed a model that helps us prioritize all this work. It is amazing to be able to drive gains this way. And three, we have a disciplined and strong focus on distribution. It has been a meaningful contributor to our growth. We continue to build features, acquired Revelator to accelerate in that area, and we have had a lot of success signing new partnerships. All of this makes us confident about the future and why we will continue to grow and gain share. Operator: Your next question comes from Benjamin Black with Deutsche Bank. Your line is open. Benjamin Thomas Black: Great. Good afternoon. Thanks for taking my question. I have one for Armin, please. Could you deconstruct your subscription streaming growth performance—how much did PSM increases, market share, and the fact that you had a somewhat easier comp versus the prior year contribute? And then looking ahead, how should we think about the growth rate there for the rest of the year? Thank you. Armin Zerza: Hey, Ben. First, I want to start where Robert started and say a big thank you to the team for the progress we have been making and the consistent growth in delivering top and bottom line. It is incredible to see the broad-based progress not just on growth, but also on margin and cash. So thank you again to our team around the world. To your question, if I deconstruct 15% growth: first, if you look at subscriber growth around the world, we think that is around 6% to 7%. Pricing this quarter, as I mentioned, contributed about 3 percentage points of growth. We think market share was about 3 percentage points of growth. You mentioned a lower base last year; we also think that is worth about 2 to 3 points. So if you take that out, we probably delivered about 12% to 13% growth on an apples-to-apples basis. We are very excited about the growth we have been delivering, as Robert and I mentioned, but we think there are many more opportunities going forward to continue to deliver growth for the company because, remember, this is really just based on subscriber growth and pricing. One, there is more pricing to come over the course of the year, as I mentioned before. Two, there is really no contribution from M&A in our numbers, and as you know, we have just deployed $650 million from our joint venture, and that will come to fruition over time. Three, as Robert mentioned, we have been acquiring a distribution capability through a company called Revelator that will start to show up within this calendar year. And then last but not least, we have done several deals with AI companies, and we are in the process of doing deals with DSPs to grow our business profitably—not just in DSPs and higher tiers but also with new AI companies. So we are really excited about the opportunity going forward and are very confident that we can continue to deliver numbers that are consistent with, and potentially higher than, our sustainable growth model. Benjamin Thomas Black: Great. Thank you, and congratulations on the expanded role. Operator: Your next question comes from Jason Bazinet with Citi. Your line is open. Jason Bazinet: Thanks. I just had three AI questions for Robert. First, you mentioned in your prepared remarks your agreements that limit dilutive impact from AI-generated music, but have you seen any so far? Second, is there any update you can give us on when you think Suno might launch their licensed offering? And then third, any color you can give us on when you think traditional DSPs might take advantage of the agreements with you to offer consumers the ability to create their own songs off of your IP? Thanks. Robert Kyncl: Thank you. Obviously, we are prudent in all of our negotiations, and we are building protections into those. But to answer your question directly: no, we have not seen dilution. We have been expanding our share consistently for the last four quarters, and so we have not been affected by it. I will use public data from Deezer and Apple. On Deezer, 75 thousand AI-generated tracks are uploaded every day, which makes up roughly 44% of daily uploads, but results in 1% to 3% of streams, and an even much smaller fraction of royalties—tiny—and 85% of those streams were actually fraudulent. So, no impact. On Apple, it is less than half a percent of listening. Those are two public stats I can quote. In general, we think that consumers like offerings that blend creation and consumption, which is why our DSP partners are looking into it, and we are talking to them about creating that. We love that future because it increases engagement with content, with artists and songwriters, and it drives our business. So it is a positive development for us, and we are excited about it. Nothing new to announce, but we are working on it with our partners. Operator: Your next question comes from Kannan Venkateshwar with Barclays. Your line is open. Kannan Venkateshwar: Thank you. Armin, maybe one for you. Can you provide a bridge on how you will achieve your longer-term margin targets and efficiency plans? And how much did savings versus operating leverage contribute to margin performance in Q2? Then longer term, some of those market share gains you have had over recent quarters—can the catalog deals help you make this structural and sustain this over time? Because in the industry, the market shares tend to be mean reverting over longer time periods. Can you actually sustain this over time? Thanks. Armin Zerza: Hi, Kannan. Let me start with margin. We are obviously very happy with the progress. Fiscal year-to-date, we are delivering ahead of our targets, and we are now confident to increase our outlook for the year to the high end of our target. In terms of drivers, the first one is really focus on profitable growth. I have said this many times: it is really important for us to ensure that we grow each of our businesses in a highly profitable way, and you see that in the streaming growth that we are delivering across the company. The second one is a continuous, ongoing focus on cost savings, and I mentioned this in my prepared remarks. There is really a culture of productivity now in the company that we are excited about—not just for the purpose of productivity, but also to be able to reinvest into growth and accelerate shareholder value creation, as I mentioned. And the third one is we are very disciplined in making sure that we do not add people when we grow; we drive operating leverage. That will continue in the years to come, not just next year. In addition to that, we have additional drivers that we are leveraging. One, you mentioned our catalog business. Catalog is not just about acquisitions. Robert talked about that. It is 65% of our business. We are now growing share in our catalog business without any acquisitions, and that is really critical to understand. This is a business which can grow for years to come at very, very high, above-average margins. It is part of our profitable growth strategy. The second big area we are focused on is how we innovate, create new business models, and drive pricing up. Robert has been championing pricing for the industry for many years. It is finally happening. And, frankly, he has also been championing us leaning forward on AI, and we believe that starting next year, we will see material benefits from that, not just on our growth but also on our margin. When I started here, margins in our industry were way too low—in the low 20s. Year-to-date, we are around 24%, so we are getting towards the short-term mid-20s target. I am very confident we can get to the high-20s target in the medium to long term. On your question on catalog, frankly, M&A is a very small contributor overall. What is more important for us over the long term is that we find new and innovative ways to grow catalog—on the larger ones that we are acquiring and growing now, and, as Robert mentioned, over the long term we are not just leveraging human manpower but also AI to better identify the opportunities and then support them. Net, we are really confident about the prospects that we have for our entire business. Operator: The next question comes from Kutgun Maral with Evercore ISI. Your line is open. Kutgun Maral: Good afternoon, and thanks for taking the questions. Armin, congrats on the expanded remit. I wanted to see if you could talk about your approach to capital deployment—what has enabled you to deliver returns in line with your targets, and what processes have you implemented since joining a year ago? Thank you. Armin Zerza: Thank you, Kutgun. In simple terms, we are driving productivity in everything we do, and we are using the same approach to capital allocation. How do we do that? It is really focused on three things. One, making sure we have a clear strategy and a clear growth model—we call that SGM, or sustainable growth model. Two, ensuring that we manage our portfolio tightly as a company. And three, creating a culture where people feel proud about spending less, including on A&R or M&A deals. Let me talk about each of them. On the strategy side, our priority is very simple: invest in our core music business organically and inorganically, and ensure that we are focused on the largest repertoire markets around the world where we see the biggest growth potential, and as we do that, also ensure we look at the biggest, most profitable, and most realistic opportunities. That is number one. Number two, on portfolio management, we are very focused not just on one individual deal—we are much more focused on ensuring that we optimize our portfolio overall. The benefit of that is it is like you as an investor—you are not investing in just one company; you are investing in a portfolio of companies. The benefit is that the outcome of our investment is much more predictable. So we actually know pretty well what the impact on top-line growth is, bottom-line growth and cash, cash conversion. Therefore, we can more predictably invest and double down on our growth strategy. The second important outcome for us is that as we look at our portfolio of deals versus just individual deals, we can work with our operating and creative teams to ensure that we optimize our portfolio and do not just chase one expensive deal. The third component is all about culture and operations—being proud about spending less and ensuring we deliver better returns. We are now working with our creative, commercial, and operating teams to review our portfolio basically every other week and have a view of somewhere between 12 to 36 months, ensuring they understand and develop a culture of how we spend less money while still delivering the growth. That culture is now perpetuating throughout the entire company. That is really our approach these days, and we are very confident with the outcome. As I mentioned in the prepared remarks, we are now delivering returns that are about 20% across our portfolio. Kutgun Maral: That is very helpful. Thank you. Operator: Your next question comes from Ian Moore with Bernstein. Your line is open. Ian Moore: Hi. Maybe for Armin. Can you detail the expected annualized revenue and adjusted EBITDA contributions you expect for the catalogs you acquired through the Bain JV, and maybe any return targets for those assets? Thank you. Armin Zerza: We generally do not disclose specifics around those deals since we have confidentiality agreements in place. But what I can say is we are very, very happy with our partner and the progress we are making. As I mentioned in my prepared remarks, we have deployed about $650 million of the $1.65 billion of JV capacity that we have. Those investments are very focused on iconic, high-margin catalogs, and importantly, those catalogs where we see growth potential. It is important for us to ensure that we deliver above-average returns. The return thresholds are very much the same that I just discussed on any investments, so we make them part of our overall portfolio analysis, and those returns are very attractive for us and our shareholders. Finally, it is not just about acquiring those catalogs—it is equally, if not more, important to ensure that we have a dedicated team in place that can grow those catalogs. Robert did something brilliant: he appointed a global catalog leader, Kevin Gore, who has been growing our catalog share over the last 12 months, and that is excellent to see because these are high-margin businesses that we love to grow. Operator: Thanks. Your next question comes from Doug Creutz with TD Cowen. Your line is open. Douglas Creutz: Hey. Thank you. One for Robert. I get questions from clients sometimes about the attractiveness of the distribution business, given that at least notionally they are lower margin. Can you talk a bit about how your distribution business fits into your overall business in terms of economic value creation and maybe address how Revelator and TwoStream deals fit into that strategy? Thank you. Robert Kyncl: Thank you. First, I think Armin mentioned the importance of portfolio management, and it does not just mean a portfolio of deals, but also a portfolio of deal types. We are very focused on this two-dimensional portfolio management, and distribution within that second dimension of deal types plays a significant role. It is a large part of the industry, and we have been investing into it on the technology side and on the talent side. About a year ago, we appointed Alejandro Duque to run ADA, our distribution arm. Alejandro actually has two jobs—ADA and Latin America. The Latin American market is very distribution-heavy. He has cut his teeth on that, and he has managed to run that territory on a margin which is the same as our company’s. He is the right person for the job, and he is already a year into it—he has proven it. It takes talent, technology, partnerships—the whole village—to really deliver this. What really underpins it is our holistic portfolio management and making sure that we are driving growth in distribution while also achieving our margin objectives, which are obviously important, and Armin has outlined those both in the short term as well as the longer term. We also focus on acquisitions, but we are very prudent in the way we deploy capital. One of those is Revelator, which is a technology and capability acquisition. The other one is TwoStream, which is focused on Mexican music and has a very significant position there. Overall, we are very happy with our progress here. We have great momentum and a very strong growth rate. It fits into our margin profile as discussed with you. Douglas Creutz: Perfect. Thank you. Operator: Your next question comes from Mike Morris with Guggenheim Securities. Your line is open. Michael C. Morris: Thank you. Good afternoon, guys. I wanted to ask first about the comment about the strong ad environment that you noted and showed up in your numbers. I am curious if you could expand on that because there has certainly been some inconsistency in growth across the industry, and with the Middle East conflict. Are you seeing strength from any particular partners or geographies? I would love to hear any outlook for the sustainability there. And then second, Armin, congratulations on the expanded role. I would like to direct the question to Robert, though. Robert, how do you see Armin further contributing to the business’ success with this new role, and how do you make sure that the financial function he is instrumental in strengthening remains strong? Thank you. Armin Zerza: Let me take the ad question, Mike. It is different across partners. There are some partners that have very, very strong ad revenue growth—that is the comment around the market—and we are growing share with that partner, so obviously we are seeing even stronger growth. There are some partners that are not doing well yet in ads, although there is a strategic intent to improve that, and I am sure you know who I am talking about. We are actually very confident that that specific partner will do that, so we are hopeful that they can contribute more to our growth in the future to continue to accelerate it. We are also growing share on that platform. On the social platform side, as you know, we did a new deal with one of our partners, and that is also contributing to ad growth. A lot of that is structural. We also believe that one of our partners will do a much better job in the future, and, therefore, we are confident this will become a bigger contributor to our growth. That is really important because we have billions of consumers that we serve around the world. With that, I will hand it over to Robert to talk about my work plan for the next 12 months. Robert Kyncl: I love this because I can do Armin's 360 review in front of everybody in a fully transparent manner. This is fun. First, Michael, great question. You should know I do not make decisions suddenly. This is something that has kind of been in practice, so this is nothing new—it is just the title change that reflects how we have been operating. Armin has added responsibilities along the way over the last 12 months, one by one. We do not make any change or announcement until things work. Now we have hit our stride. We feel really strong about what it is that we do here, how we got here, and, more importantly, our prospects for the future. We really feel like we need to double down on operational excellence across the company and simplification that then leads to a lot of automation through AI. That allows us to deliver more for artists and songwriters with the same team and grow our business rapidly. Having a strong alignment between our financials, our budget management, forecasting—it is all very closely tied to the operation of the company, and a role like that makes sense. It is reflective of how we have been already operating, so we are just making it official. Michael C. Morris: That is it. Thank you. Appreciate it. Operator: That is all the time we have for questions. I will turn the call to Robert Kyncl for closing remarks. Robert Kyncl: In closing, it feels great to be at Warner Music Group Corp. It feels great to work hard for years and now have consistent delivery and acceleration, and it feels great to have confidence about the future. As you know, I do not say this lightly. This is truly the work of a lot of people around the company. These are not isolated incidents. It is systemic. We have a growth-oriented culture in the company—very entrepreneurial—but at the same time mindful that we need to deliver on our margin expansion, have profitable growth, and innovate for the sake of our artists, songwriters, and shareholders. Thank you for your confidence. Thank you for your time, and we will see you next time. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Thank you for standing by. My name is Janice, and I will be the operator assisting today. At this time, I would like to welcome everyone to the Clearway Energy, Inc. First Quarter 2026 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a Q&A session. If you would like to withdraw your question, press 1 again. I would now like to turn the conference over to Akil Marsh. Please go ahead. Akil Marsh: Thank you for taking the time to join the Clearway Energy, Inc. first quarter call. With me today are Craig Cornelius, the company's President and CEO, and Sarah Rubenstein, the company's CFO. In addition, we have other members of the management team in the room to answer your questions if needed. Before we begin, I would like to quickly note that today's discussion will contain forward-looking statements, which are based on assumptions that we believe to be reasonable as of this date. Actual results may differ materially. Please review the safe harbor in today's presentation as well as the risk factors in our SEC filings. In addition, we will refer to both GAAP and non-GAAP financial measures. For information regarding our non-GAAP financial measures and reconciliations to the most directly comparable GAAP measures, please refer to today's presentation. In particular, please note that we may refer to both offered and committed transactions in today's oral presentation and also may discuss such transactions during the question-and-answer portion of today's conference. Please refer to the safe harbor in today's presentation for a description of categories of potential transactions, and related risks, contingencies, and uncertainties. With that, I will hand it off to Craig. Craig Cornelius: Thanks, Steve. And good evening, everyone. I will begin on Slide 5 where we outline our business update. Clearway Energy, Inc. remains firmly on track to deliver best-in-class growth in the near and long term. We are reiterating our 2026 CAFD guidance and our 2027 CAFD per share target of $2.70 or better, which continues to be supported by execution across all our growth pathways. What has evolved meaningfully since our November update is the scale and visibility of growth investments we now see in the medium and long term. Based on work completed over the last several months, we now expect to deploy 20% more corporate cash between 2026 and 2029 relative to our prior outlook. This increase reflects successful commercialization and stronger execution across our enterprise. Power demand tied to co-located digital infrastructure continues to represent a growth opportunity that we are advancing deliberately. Progress includes new equipment purchases, a design and delivery partnership with our friends at Quanta and Blattner, and ongoing engagement with hyperscaler customers across multiple complexes in our development program. While we remain disciplined in what we will move forward on and when, these developments increase our confidence that digital infrastructure will represent a sizable long-term growth opportunity that is additive to our existing robust outlook. In parallel, we have also strengthened our capital allocation framework during the quarter with the approval of the share class simplification proposal. Taking these factors together, we are now increasing our focus towards delivering the top end or better of the 2030 CAFD per share target range of $2.9 to $3.1 per share that we set just six months ago, reflecting the potential growth investment visibility that we achieved in recent months. Additionally, the continued success heightens our confidence that we will be able to set a growth target in 2031 later this year that translates to the top end of our 5% to 8%+ long-term growth range in 2031. Turning to Slide 6. Fleet optimization remains one of our most capital-efficient growth pathways, and we continue to make meaningful progress on two fronts: revenue enhancements in our existing Texas wind fleet and our repowering program. Starting with our Texas fleet, during the quarter, a previously awarded PPA with a hyperscaler has now been executed, and we expect two additional awarded PPAs to be executed later this year. These contracts extend contracted tenors across three operating assets and significantly enhance long-term revenue and cash flow visibility. Turning to repowerings. Our program continues to move forward on schedule. From a capital perspective, we continue to expect to deploy approximately $600 million of corporate capital across the repowering program at 11–12% CAFD yields, while extending asset lives and improving the quality and durability of cash flows well into the next decade. Overall, these fleet enhancements further solidify the pathway to potentially exceed our 2030 financial objectives. Turning to Slide 7. During the quarter, we seamlessly closed the Cardinal acquisition, formerly referred to as Dureva. We continue to expect a CAFD yield in excess of 12% on the transaction, and the acquired assets are performing in line with expectations. Cardinal is highly complementary to Clearway Energy, Inc.'s existing fleet, along with presenting clear avenues for upside value creation. Looking ahead, we continue to evaluate additional M&A opportunities with discipline. At a high level, our core requirements include near-term accretion and long-term CAFD yields of approximately 10.5% or better, a strong strategic fit with upside value creation potential, and deal sizing that aligns with our broader capital allocation framework. Importantly, potential future M&A remains upside to our existing targets rather than a requirement to achieve them. Turning to Slide 8. For the 2026 and 2027 vintages, we are 100% commercialized on sponsor-enabled growth projects, with construction progressing as planned. In the 2028 COD vintage, we have made substantial progress as well, with contracts signed or awarded for over 70% of the megawatts we plan to bring online, putting us well placed to achieve the top end or better of our 2030 target from investments planned for 2028. Turning to Slide 9. We are also confident in the strength of our 2029 COD vintage as a key driver of our long-term growth outlook. Our development pipeline for that vintage is sizable and diverse, underscoring both the scale of the opportunity and the depth of our execution capabilities. Within the 2029 pipeline, we have advanced priority projects that total over 4 GW and include an approximately 2 GW solar-plus-storage project in the late stages of development. Importantly, what our enterprise is developing in the 2029 COD has meaningfully more capacity than is required to meet our 2030 financial objectives. This provides resiliency and optionality as we continue to progress commercialization, allowing us to be selective and disciplined while preserving upside. Turning to Slide 10. Since November, we have materially increased our line of sight to investment opportunities in the near term, with total corporate capital deployment over 2026 to 2029 now expected to be $3 billion. The green portion of the chart represents committed and identified investments, while the darker blue shade represents future late-stage growth opportunities that we expect to identify on future earnings calls as commercialization progresses. This increasing visibility provides us with conviction that we can achieve the top end or better of our 2030 target. The capital plan outlined on this slide excludes further upside from third-party M&A or co-located digital infrastructure investments that we may execute on from a position of strength. Turning to Slide 11. We have confidence not just in meeting our 2030 target, but in achieving the top end or better given the visible and abundant growth outlook discussed earlier and illustrated in this walk. Starting from our reaffirmed 2027 target, the investments already committed and identified across the 2027 through 2029 COD vintages provide a clear path to meeting our 2030 target, with future growth investments enabling us to get to the top end or better of the target. This presented walk incorporates conservative assumptions around corporate financing and our base portfolio, consistent with our historical practice of under-promising and over-delivering in the way we set long-term objectives for the enterprise. In our flexible generation fleet, we assume long-term market price outcomes grounded in a conservative set of assumptions around California's regulations and market design. If long-term pricing of capacity and energy attributes from those facilities is consistent with historical equilibrium prices, that would lead to CAFD per share above the target range in 2030 and beyond. As always, future and uncommitted third-party acquisitions are not included in our long-term goals. And the emerging opportunity set for co-located digital infrastructure investments would also present upside opportunity relative to these goals. Taken together, this robust outlook allows us to now aim for the top end or better of the 2030 CAFD per share target range of $2.9 to $3.1 that we set just six months ago. Turning to Slide 12. During the quarter, we also made tangible progress across several fronts in our business program and digital infrastructure assets. We are increasingly optimistic that our incumbency, our pre-existing development assets, and natural advantages as a developer-operator of mission-critical power assets will position Clearway Energy, Inc. to be a mainstay provider of power and powered land to satisfy our country's needs in this domain. Our acceleration of work during the past quarter included progress across site development, commercialization, and delivery preparation that together sets the stage for construction of differentiated and large-scale co-located generation and powered land for data centers later in this decade. Completed equipment purchases for the first phase of generation at our complex in Wyoming are targeting first load served as soon as 2028. We established a design and delivery partnership with our longtime friends at Quanta and Blattner, who are now advancing our work across the three complexes in our pipeline. We signed PPAs with a data center development entity and entered the queue for a priority interconnection position at our complex in MISO. And our preparation of our Montana complex is also now coming into view, with first generation targeted for 2030 or sooner, and 500 MW of PPAs now signed and awarded. Across all of the complexes we have in development, we are seeing active and constructive engagement from our country's largest hyperscalers, who see in Clearway Energy, Inc. a partner they can trust to deliver powered land that they need at scale, and with a generation mix that addresses their goals. As a reminder, the co-located digital infrastructure opportunity represents incremental upside to our goals. Illustratively, one complex alone could provide Clearway Energy, Inc. with a $1 billion or greater capital deployment opportunity weighted towards 2030 and beyond. As always, any upside investment would be aligned with our stringent underwriting criteria for near- and long-term value creation. Turning to Slide 13. Based on our strongly accelerating development activity in our historical core business, we see potential for at least $1 billion of corporate capital deployment in 2030, which in turn could allow for us to sustain the high end of 5% to 8%+ CAFD per share growth into 2031. Our sizable 4 GW of 2030-vintage projects under development across our enterprise are strategically positioned, qualified for tax credits, and represent volumes in excess of what is needed to achieve our financial objectives. On top of this, we have conviction that part of one or more of the co-located data center complexes will eventually be commercialized, providing an upside investment opportunity. Taken together, the progress we are making across Clearway Energy, Inc.'s multiple redundant growth pathways reinforces our confidence in the results that Clearway Energy, Inc.'s best-in-class growth engine will deliver for years to come. With that, I will turn the call over to Sarah, who will walk through our financial summary. Sarah Rubenstein: Thanks, Craig. Turning to Slide 15, I will cover our first quarter financial results and our reaffirmed outlook for 2026. For the first quarter, Clearway Energy, Inc. delivered adjusted EBITDA of $257 million and CAFD, or free cash flow, of $70 million. From an operating perspective, our solar and battery fleet had strong performance across the portfolio and delivered results in line with budgeted expectations. The same was true in our flexible generation segment, which delivered solid operational execution during the first quarter. In our wind fleet, resource was lower than budgeted expectations in certain regions due to lower wind resource and availability, the most meaningful impact coming from Alta. The first four months of the year have seen meteorological conditions that have led to below-average resource levels for the wind industry across the Western U.S. compared to historical norms. Also evident in our first quarter results was the impact on availability from a turbine enhancement program that Vestas North America is executing at Alta 2, 3, 4, and 5. We initiated the program in 2025 in conjunction with establishing a performance-based contract mechanism, with a goal of returning those units to their historical availability levels of 95%+ in 2026. Moving to the full-year outlook, we are reaffirming our full-year 2026 CAFD guidance range of $470 million to $510 million, as we continue to believe we are well positioned to meet our 2026 financial objectives based on growth commitments tracking on schedule and expected operational performance for the remainder of the year. As per our usual practice, the guidance range reflects the potential distribution of outcomes tied to operating performance, energy pricing, and the timing of growth, in addition to assuming P50 resource for the remainder of the year. As always, our P50 resource expectation within our guidance assumes normalized weather conditions consistent with long-term historical averages. Turning to Slide 16. As disclosed last week, our share class simplification proposal was approved at our annual meeting, reflecting investors' clear preference for simplification and a more straightforward public structure. The simplification eliminates complexity by moving to one publicly traded security and positions us to broaden shareholder depth. Consistent with what is shown on the slide, we expect that one class of publicly traded shares will have higher average daily trading volumes, and the larger public float will make it a more attractive security for public investors. Lastly, the simplification allows for greater flexibility to support our capital funding strategy. To meet our long-term CAFD per share and payout ratio goals, the efficient deployment of accretive capital is a key part of our strategy. Our core strategy to support the funding of growth for Clearway Energy, Inc. continues to include enhancing our position of strength over time by lowering our payout ratio to fund more growth with retained cash flows, while also utilizing corporate debt as a funding source. But as we have noted in past quarters, the issuance of equity only when accretive will also be a funding tool to ensure we prudently meet our financial objectives. While a core reason for implementing the simplification was to honor investor feedback and simplify our public structure, a larger public float with greater trading liquidity has the second-order impact of putting the platform in an improved position to utilize equity to fund attractive growth while ensuring it is issued without price disturbance. Overall, we view this simplification as value enhancing for shareholders and supportive of our long-term financial objectives. With that, I will turn the call back over to Craig. Craig Cornelius: Thanks, Sarah. To recap, we entered 2026 with a clear set of objectives, which I am pleased we are on track to achieve. We are on pace to deliver our 2027 CAFD per share target, and beyond 2027, we have increasing line of sight towards achieving the top end or better of our 2030 CAFD per share target. Equally important, we are building durability into that growth with our prudent funding strategy and long-term payout ratio objectives. Beyond 2030, our work is increasingly focused on extending the growth runway for our enterprise well into the next decade. Over the coming quarters, and specifically as part of our third quarter earnings update, we plan to advance initiatives that will enable us to roll forward our explicit CAFD per share growth target into 2031, targeting the high end of 5% to 8% annual growth from the midpoint of our 2030 target. This includes continued advancement of our traditional development pipeline as well as thoughtful commercialization of gigawatt-scale energy complexes to serve data center demand, which will present upside to the goals that we set based on our planned investments in our historical core business. In summary, we believe Clearway Energy, Inc. is executing extremely well and is laying a foundation for durable long-term value creation. With that, operator, we are ready to take questions. Operator: We will now open the call for questions. 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. Your first question comes from the line of Justin Clare of ROTH Capital Partners. Please go ahead. Justin Clare: Hey, good afternoon. Thanks for taking our questions here. I wanted to start on the digital infrastructure. Could you speak to the potential timing for the first investment in digital infrastructure? It looks like these projects are potentially moving a little bit faster than expected. The Wyoming data center could begin operating in 2028. Is there a possibility that Clearway Energy, Inc. could make an investment in that 2028 time frame, or what do you think is the most likely scenario? Craig Cornelius: Yeah. The possibility does exist. I think we are in the fortunate position, Justin, of having a broadening array of opportunities that are being advanced by the Clearway Group sponsor entity. In historical core businesses, you saw where grid-tied projects that serve both utilities and corporate or hyperscaler customers are maturing in our pipeline and in a position to enable the amount of capital that Clearway Energy, Inc. would plan to deploy to hit the top end of its targets in the medium and long term. So these digital infrastructure campuses put us in the position to augment a core business pipeline that is already in great health relative to the goals that we set for the public entity. So what we will be doing over the course of the next few years is making a determination in any given vintage around what is optimal as a complementary additional fit for Clearway Energy, Inc., assessing its position in capital markets, and determining what is really going to be most value accretive for the shareholders of Clearway Energy, Inc. in terms of investment tempo and fleet composition. But the acceleration of opportunity around those digital infrastructure campuses really just puts us in the fortunate position that we can think about accumulating a fleet of significant size, and the time that each individual asset may find its way into Clearway Energy, Inc. is ultimately going to be paced by what is most accretive to the public entity. So yes, it is possible that some of the first investments in generating technology that would go into those campuses could be available to Clearway Energy, Inc. as soon as 2028, and it will be alongside other investment opportunities in the core business. Justin Clare: Got it. That is really helpful. And then just following up, how should we think about the relative attractiveness based on what you are seeing today in the digital infrastructure assets relative to traditional utility-scale investments? Would you anticipate CAFD yields to be similar, or are there meaningful differences? And are there any other factors you are considering in terms of relative attractiveness? One could be just the size of investments could be quite substantial, and there could be benefits there. Maybe help us understand that. Craig Cornelius: I think it is still early for us to speak specifically to the individual structures that could be employed for deployment of capital by Clearway Energy, Inc. into infrastructure of this kind, and it will vary from one complex to another and from one customer to another. But the way that we are generally thinking about it is that we are looking to fashion projects which exhibit the same technical and commercial characteristics as those we routinely build for other grid-tied settings. When we present Clearway Energy, Inc. with an opportunity to deploy capital into those complexes, we aim to present it with an opportunity to deploy that capital with a similar risk profile, a similar tenor, a similar CAFD yield, and a similar long-term risk-adjusted return proposition. There very well may be additional infrastructure that is developed and transferred either to a partner utility or to the hyperscaler technology company themselves as part of one of these sizable complexes. But we most certainly aim for the total scope of the complex to present ample opportunities for Clearway Energy, Inc. to deploy its capital with a risk profile and a return similar to what it sees from the grid-tied projects we prepare for it. Operator: Your next question is coming from the line of Mark Jarvi of CIBC. Please go ahead. Mark Jarvi: Craig, you mentioned the word tempo—investment tempo. Clearly, you are not short of investment opportunities and ability to deploy capital. When you think about the medium-term targets, and you are tracking at or above the 8% level through 2030, what holds you back from trying to push that above 8% and maybe closer to 10% on the upper end of the range? Is it funding that you just do not want to get ahead of yourself on, or is there anything else that would temper expectations for you right now? Craig Cornelius: Thanks for asking the question, Mark. I think what has put our company in the great standing that it enjoys is that we put one foot in front of the other and make our growth happen through a progressive evolution in capital allocation framework and deployment of capital. When we think about the velocity of new investments and CAFD per share growth, we think first and foremost around the capital allocation framework we have set to maintain a prudent leverage ratio between 4.0 and 4.5 times, drive the payout ratio in the business down into the 70s as we approach the end of the decade, and to have the pace of growth matched with our public investors' appetite for that growth. You are absolutely right that we want to be thoughtful about the pace that we present new investment opportunities for Clearway Energy, Inc. so that the extent to which it accesses equity markets is entirely digestible. We are very proud of the way that we approached that work over the last year where there was no noticeable price disturbance for the amount of equity that we did issue through the ATM. We are also proud of how the simplification proposal that has now been adopted and effectuated should allow that kind of equity issuance through at-the-market instruments to happen in a way that, as Sarah noted, will not disturb share price. But there is still a very reasonable pace that we think makes sense from a crawl-walk-run perspective. So we do not intend to rush things. The opportunity set, as we build it out at the Clearway Group level, gives us the ability to really pace things based on a speed that feels most comfortable for our public investors. In terms of the actual resulting CAFD per share levels, certainly other factors in the overall portfolio and the refinancing of our future debt maturities will also be factors that present themselves over time as we continue to extend contracts on our existing fleet and roll maturities. But again, I think our track record of planning that prudently and then beating those assumptions on the upside is well demonstrated. Our hope would be that each year we build a pace that we think is sensible, we match it to appetite from our public equity investors and bondholders for forming capital for new growth investments, and as our fleet continues to mature over time, we harden the base volume of CAFD and the CAFD per share contributions, and we continue to drive upwards to the top end or better of each new target range that we set. So I think it is about making sure that we are deliberate in the pace that we approach both the bond and equity issuances that are needed to fund the growth of the business, but we feel quite good about continuing the track record we have, which made each new issuance well received. Mark Jarvi: Makes sense. And just to follow up, it does feel like the market is receptive to the strategy and execution and the plan you put ahead. The ATM does not seem like a headwind now. As you look ahead to continue to accelerate the growth and expand on the growth, is there anything else beyond maybe going a little harder on the ATM that you are contemplating—selective asset sales, anything in the corporate structure like hybrid securities—or do you want to keep it very much a plain-vanilla capital structure at this point? Craig Cornelius: When we look out through the plan to deliver up to the top end or better of our business plan just through our core business, the quantity of equity that would need to be issued in any given year is not a tremendously large number. It is digestible and consistent with what you see premium-growth utilities—who we aim to emulate—routinely issuing through instruments like that. So we do not right now see a need to undertake the use of some other structure for raising capital that is more exotic than that. As we contemplate larger upside opportunities that we have denoted here that would be most likely to materialize further out in the 2029–2030 and beyond time frame, we will be a bigger company. The size of our float will be larger. The amount of retained CAFD in the business will be greater. The amount of leverage capacity in it will also be greater. Those things all work in a mutually reinforcing way that should hopefully allow us to continue to grow above scale without needing to look beyond the vanilla instruments we use today to fund that growth. But certainly, we will be thoughtful about what is available in the market at that time, and the way that we choose to fund growth will be informed by the same virtues of prudence in capital formation and risk avoidance in capital structure that have put us here. Operator: Your next question is coming from the line of Hannah Velásquez of Jefferies, on for Julian Dumoulin-Smith. Please go ahead. Hannah Velásquez: Hey, everyone. Thanks for the update, and congrats on the quarter. To kick off, I had a follow-up on the data center—or rather the large complex. I understand you are targeting a mix of resources across renewables and conventional. How do you think about “overbuilding” your renewables? I have read that if you were to provide solar to cover a data center need—because of the roughly 25% capacity factor—you would need a 4x overbuild on solar in that example. Is that the right way to think of it? And if so, does that imply that Clearway Group would perhaps bias more towards conventional? Craig Cornelius: It is an interesting ratio that you are referencing. I do not think that is representative of the way that we have been designing these complexes, or the way that we have engaged with customers for the generation they provide. We are proud of the pragmatic perspective we have maintained—really since the inception of Clearway Energy, Inc. and its predecessor incarnation as NRG Yield—where we have seen that gas generation and renewables, and now storage, together can play a very complementary set of roles in a generation stack. The way that they get mixed together most definitely varies from one location to another based on whether you have a system that peaks in the winter or a system that peaks in the summer, or the relative resource attributes and net capacity factor of one technology or another. That is what you see in the design of the different complexes that we are building, where you might see more or less solar nameplate capacity or more or less natural gas-fueled nameplate capacity in one location or another. We are not looking at an “overbuild” ratio like that. The way this works out is that we are identifying what the least-cost, best-fit technology is in a location, assessing local site constraints, determining how much generation that technology can provide during the 24 hours of the day in any 12-month period, and—after determining what is cost-effective and consistent with land-use expectations in that community and at the federal level—making sure there is an appropriately sized gas or battery generator at that location to assure that we can provide firm supply to the data center at that location or to the load-serving entity that is going to play a vital role in balancing the system. I would not say that rule of thumb is something we see and, for example, in the case of the Montana complex, you would not see that kind of a ratio of solar generation to gas capacity. Hannah Velásquez: Thank you. And as my follow-up, perhaps on the health of the tax equity capital markets. We have heard that a few of the larger institutional tax equity investors have paused in response to some of the FEOC ambiguity. Is that impacting your sponsor in any way? I know perhaps Clearway Group is good about a domestic-first strategy in terms of procurement, but anything to comment there—and perhaps even if the impact is overstated in the market? Craig Cornelius: I am not in a position to address the broad market, but I can address our experience. I am proud to say I do not think we have been executing with tighter financing at size at any point in our history. For us, the markets for project debt, construction debt, tax equity, and tax credit transfer are the most robust we have ever seen them. We are organizing extremely efficient financing. The size of the projects that we are now organizing financing for—which are principally pointed to the 2028 vintage because everything pointed to 2027 is largely complete already in financing—are some of the biggest projects that we have ever financed. We just closed a $1 billion tax equity facility—that is the largest we have ever closed. The banking community likes doing work with us because the projects we put together exhibit a strong risk-adjusted profile, and they trust us with their capital. Part of the reason we are on such good footing is that the safe harbor program we built for Clearway Group is really at the top of the industry in terms of organization, rigor, and planning. The projects we are completing now do not need to wrestle with the foreign entity of concern requirements that you are noting might have been difficult for some because of when they safe harbored those projects, but the equipment we purchased would comply anyway. The combination of our domestic-first supply chain, the planning we had for safe harboring, and the quality of Clearway Group as a sponsor has made this a very routine and robust period of time for us in financing projects. The last thing I will note, because you asked about safe harbor, is that we are proud of how we have planned that program for our development pipeline well out into the 2030s. The same planning that put us in a position to be routinely financing projects right now for completion in 2027 and 2028 has put us in a position to look out well past 2030 with projects that will be eligible for tax credits and compliant with existing statute and guidance. All in all, our finance team is doing a tremendous job. They have already organized billions of dollars in financing this year, are committed, and have billions more to go. This is really the best financing environment we have ever seen. Hannah Velásquez: Got it. Thank you, and congrats again. Operator: I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. Your next question is coming from the line of Heidi Hauch of BNP Paribas. Please go ahead. Heidi Hauch: Hi. Good afternoon. Congrats on the update. I have another question on the digital infrastructure projects. We are hearing natural gas projects today can be more expensive and complicated to build, given EPC constraints and equipment constraints. How should we think about the return premium that Clearway Group would need to earn on these complexes relative to complexes that are renewables-only? Is it possible—or should we think—that some of that premium trickles down to a higher CAFD yield on those specific natural gas complexes? Craig Cornelius: I think the word “complex” becomes the most important word for purposes of Clearway Energy, Inc.’s investment opportunity. Our goal is to have the novelty and scale of these facilities give the combination of Clearway Group and Clearway Energy, Inc. investment opportunities that produce great risk-adjusted returns, and we are focused as much on longevity and risk in structure as we are on the nominal return that a project can produce. We are thinking about both of those together. As far as the gas generator in most of these complexes goes, it remains quite possible that the owner of that gas generation would not be a Clearway company or affiliate, but instead a utility who is interconnecting the full basket of resources, or the technology company themselves. Which entity owns the firming gas generation is a reflection of which entity is going to be in the best position to balance the co-located load and generation. We think of our role here as assembling a set of generator technologies that can allow someone to run, at a very high level of reliability, some very important digital computation infrastructure—not to own a gas plant per se. In all of these cases, some type of gas generation—either there at the site or delivered through the system—is vital to balancing it. There is certainly a value proposition for both Clearway Group and Clearway Energy, Inc. as a source of long-term capital in providing that kind of firming generation. Whether that is something that Clearway Energy, Inc. ultimately sees in the form of a very long-dated, low-risk return or a premium return is something that we will sort through in the future. What we are focused on today is creating these projects so that we have the opportunity to have that kind of thoughtful engagement, and we are doing very well at that right now. Heidi Hauch: Thank you. And on the updated corporate funding strategy, how would you think through funding as we go into 2030+? If you targeted the 1.7 GW of incremental growth to 2029 that is not currently in the $3 billion plan, we are seeing you upping your investment and, in tandem, accretive external equity. How should we think about funding the next leg of growth? Do you expect that, if you pursue incremental growth for 2029, you would have more retained cash flow or more debt capacity relative to equity? Why not increase the percentage coming from corporate debt or the nominal amount from corporate debt and retained cash flow as you increase your full investment target? Craig Cornelius: I think I understand your question. I can address it from the standpoint of basic principles, and then Sarah, I will turn to you and you can share an example of how we think about incremental increases in corporate capital investment opportunity being capitalized as we grow. We are most definitely going to follow, as the corporate capital deployment opportunity set grows, the same algorithm that we have communicated for years. We look first to retained cash flow as a preferred first source of capital for investment and growth, and then second to the bond markets and debt capital within a prudently managed capital structure. We have talked about 4.0 to 4.5 times as the prudent leverage ratio that we look to as a business, and that is a range that has been in place going back for the entirety of our life as a public enterprise. As we grow our fleet, both the amount of retained cash flow—especially into 2030 and beyond—will be growing, and our debt capacity, managed to that midpoint of that leverage ratio, for example, will be growing also. We will certainly plan to make use of those sources of funding first. Beyond that, there is a basic formulaic relationship between the dollars of new corporate capital that we could deploy and the fraction of those that would be funded from debt or equity. Sarah, I will turn to you to provide a basic rule of thumb. Sarah Rubenstein: Sure. The amount of capital that we plan to deploy to meet our 2030 target has already assumed that we will use all available retained CAFD. Then we will fund the amount that we are able to through the issuance of corporate debt, which—within our leverage ratio—looks like about 45%. That means for the incremental investment above the baseline that we indicated we will need to get to our target range—which was that $2.5 billion of corporate capital we already talked about—once we get above that, we are able to issue corporate debt at about that 45%, but the balance of roughly 55% is going to have to come through the issuance of equity. Because we are talking about achieving above the high end of the range, we believe we will be able to do that from a position of strength without causing significant disruption to the price. Craig Cornelius: That last point is the most important point, which is that we are in the fortunate position to have an opportunity set for Clearway Energy, Inc. that allows us to think about setting our sights above the long-term goals we articulated just six months ago. To the extent that we are thinking about, in a measured way—one quarter after another, one year after another—increasing the tempo or the scale of corporate capital deployment, we would be doing that because it is evident that the cost of that funding makes each new investment accretive, that our public investors welcome the proposition of our deploying that extra capital and issuing the securities that we need to issue to fund that. It is not a necessity. We feel fortunate to be in the position we are in where that is a choice we can make rather than an obligation, and it is something that we can move through one step at a time. We will not surprise anyone with that because your question is oriented around a vintage that is three to four years from now, and we will all be able to get there together one step at a time. Operator: There is no other question in queue. That concludes our Q&A session. I will now turn the conference back over to Craig Cornelius for closing remarks. Please go ahead. Craig Cornelius: Thank you, everyone, for joining us today and for your ongoing support of Clearway Energy, Inc. We are proud of the work we are doing to deliver new generating capacity in markets across our country with an array of diverse energy resources that are critical to the country's needs. Operator, you may close the call. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to Gilead Sciences, Inc.'s First Quarter 2026 Earnings Conference Call. My name is Rebecca, and I will be today's host. In a moment, we will begin our prepared remarks followed by our Q&A session. Please note that the process for queuing questions has changed this quarter. To ask a question, press 1. To withdraw your question, press 1 again. I will now hand the call over to Jackie Ross, Senior Vice President, Treasurer and Head of Investor Relations. Jackie Ross: Thank you, Rebecca. Just after market close today, we issued a press release with earnings results for 2026. The press release, slides, and supplementary data are available on the investors section of our website at gilead.com. The speakers on today's call will be our Chairman and Chief Executive Officer, Daniel O'Day, our Chief Commercial and Corporate Affairs Officer, Johanna Mercier, our Chief Medical Officer, Dietmar Berger, and our Chief Financial Officer, Andrew Dickinson. After that, we will open the call to Q&A, where the team will be joined by Cindy, the Executive Vice President of Kite. Let me remind you that we will be making forward-looking statements. Please refer to slide two regarding the risks and uncertainties relating to forward-looking statements that could cause actual results to differ materially. With that, I will turn the call over to Dan. Daniel O'Day: Thank you, Jackie, and good afternoon, everyone. I am pleased to share highlights from Gilead Sciences, Inc.'s first quarter, which has extended our consistent track record of commercial, clinical, and financial execution. Our strong financial performance and increase in sales guidance reflects the depth and quality of our portfolio, the numerous launches underway, and our continued focus on financial discipline. As we execute on the strongest pipeline in our history, Gilead Sciences, Inc. is also taking steps to further strengthen the company's position for the future. We are looking forward to sharing much more on our select oral, and tubulose in the coming quarters. Our HIV business grew 10% year-over-year, reflecting 7% growth for Biktarvy and an impressive 87% growth for our U.S. PrEP business. The ongoing success of the Esthugo launch is a key driver of this growth in HIV prevention, with first quarter sales growing 72% sequentially. Looking forward, with no major LOEs until 2036, Gilead Sciences, Inc.'s HIV business is poised for strong, durable growth supported by up to seven potential new HIV product launches by 2033. The first of these potential launches is bictegravir plus lenacapavir, an investigational once-daily oral regimen for virally suppressed people with HIV. This is now under priority review, and we expect an FDA decision in August. Other upcoming HIV milestones include Phase 3 updates later this quarter from the ILLAND-1 and -2 studies evaluating a potential first once-weekly oral for virally suppressed people with HIV. We shared encouraging Phase 1 data at CROI in February for a long-acting integrase inhibitor GS-3242. Later this year, we plan to share additional data that support the combination of GS-3242 with lenacapavir as a potential twice-yearly injectable treatment regimen. The time frame for potential launch is between 2031 and 2033. In oncology, first quarter Trodelvy sales were up 37% year-over-year, reflecting growing demand for Trodelvy. We anticipate regulatory decisions on extending into first-line metastatic triple-negative breast cancer in the second half of this year. Ahead of these decisions, Trodelvy has already received NCCN category 1 recommendations across the first line and is the leading ABC and second-line metastatic TNBC treatment. We are also expecting Phase 3 updates from the EVOQUE-3 trial in first-line metastatic non-small cell lung cancer and the ASCENT GYN trial in second line-plus metastatic endometrial cancer in the second half of this year. The pending acquisition of Tubulus is another significant milestone in building Gilead Sciences, Inc.'s oncology franchise. The company brings a clinical-stage candidate, TUV-40, which we believe has the potential to be a leading ADC in ovarian cancer and a next-generation ADC platform with a promising early pipeline. At the upcoming ASCO meeting, we look forward to additional Phase 1 data on TUV-40 in platinum-resistant ovarian cancer. Additionally, we are expecting a regulatory decision on anitocel, our potential best-in-disease BCMA CAR T, in December. Our acquisition of Arcellx, which closed on April 28, reflects our conviction in the potential of anitocel as a differentiated option for patients with multiple myeloma. Given the significant opportunity in fourth line as well as earlier lines of therapy, we believe anitocel could become a foundational therapy for multiple myeloma, driving growth in our cell therapy business in 2027 and beyond. The Arcellx platform will leverage Kite's industry-leading capabilities and could further strengthen our future in oncology and inflammation. In liver disease, Libdelzi revenue for second-line primary biliary cholangitis more than tripled year-over-year. We are expecting an update from our Phase 3 IDEAL study for Libdelzi in the second half of this year. If positive, the IDEAL study could support a label update and expand the second-line PBC addressable population. Additionally, we expect a regulatory decision and potential U.S. launch of Hepcludex for chronic hepatitis delta virus infection later this quarter. In inflammation, the potential acquisition of Oral Medicines will add to our portfolio with gamgurtamig, a BCMA-CD3 T cell engager in multiple B cell-driven autoimmune diseases. We will also share Phase 2 updates for our oral IRAK4 inhibitor and oral alpha4beta7 small molecule this year. These commercial and clinical updates demonstrate the strength of our execution today underpinned by our continued commitment to financial discipline. As we look to the remainder of 2026, we see many exciting opportunities to further expand our impact on the patients and communities we aim to serve. With that, I will hand it over to Joanna. Johanna Mercier: Thanks, Dan, and good afternoon, everyone. It has been a remarkable start to the year from a commercial perspective, reflecting the innovative nature of our portfolio and our strong execution. Beginning on slide seven, first quarter total product sales excluding Veklury were $6.8 billion, up 8% year-over-year, driven by continued growth across our key products in HIV, breast cancer, and PBC, partially offset by HCV and cell therapy. Including Veklury, first quarter total product sales were $6.9 billion, up 5% year-over-year. Sequentially, sales were down 12%, in line with normal first quarter seasonality. Moving to slide eight, our HIV commercial team delivered first quarter sales of $5.0 billion, up an impressive 10% year-over-year. This growth was driven by strong demand across Biktarvy, Yes2Go, and Descovy, as well as pricing favorability. Sequentially, HIV sales were down 13%, primarily driven by Q1 seasonality, in line with our expectations. These typical first quarter factors included inventory drawdown following a year-end build in the prior quarter, and lower average realized price due to channel mix. Looking at HIV treatment in more detail on slide nine, Biktarvy sales of $3.4 billion were up 7% year-over-year driven by higher demand and average realized price, partially offset by inventory drawdown. Sequentially, sales were down 15%, reflecting the first quarter seasonality that I just discussed. Biktarvy continues to lead as the regimen of choice for both naive and switch patients across major markets. In the U.S., Biktarvy's share was once again more than 52%, continuing its record of year-over-year gains in every quarter since launch. This market leadership is a testament to Biktarvy's differentiation and continued physician confidence. We also continue to innovate with bictegravir plus lenacapavir, or Biclen, our once-daily single-tablet regimen. We are targeting a potential launch in late August for people with virally suppressed HIV, including those on complex regimens. Building on our longstanding track record of delivering highly effective, differentiated therapies for people with HIV, we believe that Biclen is an exciting addition to our HIV treatment portfolio and has the potential to further expand Gilead Sciences, Inc.'s leadership in the switch market. Moving to slide 10, our U.S. HIV prevention, or PrEP, business grew 87% year-over-year, comprised of the market-leading branded daily oral Descovy and the first and only twice-yearly injectable Yes2Go. This performance was driven primarily by commercial execution and the strong product profiles of Descovy and Yes2Go. We believe we have the most compelling portfolio of PrEP products on the market and expect to retain and grow our leadership in the rapidly expanding PrEP market in both the near and long term. In the first quarter, the U.S. PrEP market grew approximately 14% year-over-year, and we look forward to further growth as we expand the reach of HIV prevention over time. Descovy first quarter sales of $807 million were up 38% year-over-year, driven by higher average realized price and demand growth. Sequentially, Descovy sales were down 1%, due to typical first quarter seasonality and partially offset by favorable channel mix. Specifically within PrEP, which accounts for about 80% of Descovy's business, first quarter U.S. sales were up approximately 50% year-over-year. Yes2Go continues to show an unprecedented launch trajectory for a new long-acting PrEP product. First quarter sales of $166 million were up 72% sequentially, exceeding our expectations. I am pleased to share we continue to see strong performance across our key Yes2Go launch metrics. This includes access, where now approximately 95% of individuals are covered in the U.S., of which 95% can access Yes2Go with $0 copay; market share, where we are now the leading long-acting injectable in switch, and we continue to see a higher-than-expected number of naive PrEP users initiating on Yes2Go with early signs of growing momentum in this segment; persistency, where our initial experience of return users is encouraging. Although it is still early, we expect Yes2Go persistency to be the highest in the HIV prevention category; and the impact of our direct-to-consumer campaign, where we are creating strong brand awareness and interest in Yes2Go through our omnichannel approach focusing on communities and geographies with the highest needs. Given the outperformance of Yes2Go in the first quarter and our growing confidence in the trends we are seeing, we are increasing our 2026 Yes2Go guidance to $1 billion, potentially achieving blockbuster status in its first full year. Beyond 2026, we continue to expect a steady and durable build in sales over many years as we work to eliminate stigma associated with HIV PrEP and broaden adoption to all communities and individuals who can benefit. Both Yes2Go and Descovy for PrEP sales are expected to meaningfully grow in 2026. Reflecting this increase to our Yes2Go guidance, in addition to first quarter strength across HIV, we are now expecting 2026 total HIV sales including both treatment and prevention to grow approximately 8% year-over-year compared to the 6% previously shared in our February guidance. This is inclusive of headwinds of approximately 2% associated with the drug pricing agreement with the U.S. government to lower Medicaid pricing for some of our products and proposed changes to the Affordable Care Act. Turning to slide 11, Libdelzi sales of $133 million were more than tripled year-over-year as the launch continues to generate strong and growing demand in the U.S. as well as across Europe. Demand growth continues to be driven by expansion in prescriber adoption, confidence in Libdelzi’s clinical profile, and broader utilization among appropriate second-line PBC patients. Sequentially, sales declined 11%, largely driven by inventory drawdown. As we previously highlighted, fourth quarter sales included a bolus of switches associated with the discontinuation of a competing product, which has normalized in the first quarter. As we enter the second quarter, Libdelzi’s rapid market capture continues to impress, maintaining its position as market leader with more than 50% share of the U.S. second-line PBC market. More broadly in liver disease, first quarter sales of $767 million were up 1% year-over-year, primarily reflecting the continued launch of Libdelzi, partially offset by inventory drawdown across the portfolio and lower HCV patient starts. Sequentially, sales were down 9%, reflecting seasonality, partially offset by higher average realized price for HCV products. Moving to Trodelvy on slide 12, sales of $402 million were up 37% year-over-year and 5% sequentially, with growing demand across breast cancer indications in all regions. Trodelvy is already approved in over 60 countries and has been firmly established as the leading regimen in second-line metastatic TNBC across major markets. Turning to the first-line metastatic setting, in the Phase 3 ASCENT-03 and -04 trials, Trodelvy demonstrated highly statistically significant and clinically meaningful improvements in progression-free survival over the standard of care, both as a monotherapy in PD-L1–negative patients and in combination with pembrolizumab in PD-L1–positive patients. Ahead of potential FDA decisions, the NCCN updated their guidelines with category 1 recommendations across first-line metastatic TNBC, which reinforces the strength of the data in first line and a potential launch in the U.S. in 2026. Moving to cell therapy on slide 13, and on behalf of Cindy and the Kite team, first quarter cell therapy sales were $407 million, down 12% year-over-year and down 11% sequentially, reflecting the expected ongoing in-and-out-of-class competition across regions. We continue to pursue expanding access and global reach of our cell therapies. For example, in April, Tecartus received full FDA approval in adult relapsed or refractory mantle cell lymphoma, adding data on patients who are BTK inhibitor–naive. This important work of increasing awareness and physician comfort with CAR T helps set the stage for the potential launch of our next-generation products. Turning to anitocel, and with the close of the Arcellx acquisition last week, we are ramping up our detailed launch preparations for what we believe could be a best-in-disease multiple myeloma therapy. Adding Kite's end-to-end expertise in cell therapy to anitocel’s demonstrated deep, durable efficacy and differentiated safety profile positions anitocel to maximize its potential in the $3.5 billion fourth-line-plus CAR T market. With a late December PDUFA date and factoring in the time needed for site activation, we expect revenue from anitocel to begin in early 2027. As we wrap up the first quarter and look forward to up to four additional launches this year, shown on slide 14, I want to recognize our commercialization teams for their exceptional execution in driving another strong quarter in Q1, and thank them for their commitment to growing patient impact in the second quarter and beyond. And with that, I will hand the call over to Dietmar. Dietmar Berger: Thank you, Joanna, and good afternoon, everyone. I am pleased to share that the strong momentum across our research and clinical programs has accelerated since our full-year earnings in February. This is supported by disciplined portfolio prioritization and strong execution. With the close of the Arcellx acquisition, our pipeline now consists of 47 clinical programs spanning our portfolio of first-in-class or best-in-class assets. The completed acquisition of Arcellx and pending acquisition of Oral Medicines and Tubulis add potential best-in-class CAR Ts, T cell engagers, and antibody-drug conjugates as well as capability-expanding technologies through the novel D-domain binder and next-generation ADC conjugation platforms. Starting with HIV on slide 16, we shared 60 abstracts at CROI in February, continuing our track record of showcasing our comprehensive and innovative HIV pipeline at this conference. This year, we highlighted new data across our suite of lenacapavir-based regimens for treatment and prevention, as well as our other investigational programs for HIV treatment. Updates across our HIV portfolio include our once-daily oral bictegravir plus lenacapavir, or Biclen, for treatment of virally suppressed people with HIV, which has been filed with FDA, and we expect a regulatory decision based on priority review in August. At CROI, we highlighted that Biclen demonstrated viral suppression in people switching from a multi-tablet regimen in ARTISTRY-1 or from Biktarvy in ARTISTRY-2 with no clinically meaningful emergent resistance. Moving to our once-weekly oral programs, we continue to target updates from the Phase 3 ILLAND-1 and -2 trials, in collaboration with Merck, later this quarter. These trials are evaluating islatravir plus lenacapavir for virally suppressed people with HIV, and if successful, this could result in the first ever long-interval oral treatment regimen. We also continue to develop a wholly owned weekly oral treatment regimen combining a capsid inhibitor with an integrase inhibitor for treatment of people with HIV. With multiple alternative molecules in our portfolio, we are finalizing the selection of the capsid inhibitor and integrase inhibitor for the new combination and look forward to updating you in due course. Moving to even longer-acting options, we are excited to be initiating a Phase 2 trial combining our investigational integrase inhibitor, GS-3242, with lenacapavir in the second half of this year. This follows Phase 1 data shared at CROI that showed potential for injectable dosing every four months. The higher-dose Phase 1 cohorts with potential for twice-yearly dosing are ongoing. In HIV prevention, we continue to drive innovation building on the exceptional clinical profile of Yes2Go, and I am pleased to share that enrollment in our Phase 3 PURPOSE-365 study evaluating once-yearly intramuscular lenacapavir is complete. This registrational study is testing PK, safety, and tolerability across a diverse set of participants indicated for PrEP. We expect these data, along with the unprecedented efficacy and safety results from PURPOSE-1 and -2, to form the basis of regulatory submission, with target U.S. approval in 2028. Transitioning to oncology and starting on slide 17, we have announced several strategic investments over the last few months that we believe further strengthen our ADC and cell therapy capabilities and portfolios. ADCs are one of the most promising modalities in cancer today, as highlighted by the incredible impact Trodelvy has demonstrated for patients with second-line metastatic triple-negative breast cancer and pretreated hormone receptor–positive HER2–negative metastatic breast cancer. We continue to expect regulatory decisions from FDA in first-line metastatic TNBC in 2026, and we now also anticipate European Commission decisions later this year. Further, we continue to expect Phase 3 updates from EVOQUE-3 in first-line PD-L1–high non-small cell lung cancer, and ASCENT GYN in second line-plus metastatic endometrial cancer, in the second half of this year. Given our foundational ADC experience with Trodelvy, we are excited to expand our portfolio and capabilities with the acquisition of Tubulis. The lead asset, TUB-40, is a potential first-in-class NaPi2b-directed ADC that we believe has transformative potential in platinum-resistant ovarian cancer, a challenging and aggressive condition with a poor prognosis for many women. At the ESMO conference last year, TUB-40 Phase 1 data showed early treatment responses that deepened over time in a broad ovarian cancer population without any biomarker selection. This is potentially meaningful differentiation from other approved ADCs. Also, in the shared data, TUB-40 was generally well tolerated across a wide therapeutic index with no clinically relevant bleeding, pneumonitis, ocular toxicities, stomatitis, or neuropathy observed. In the immediate future, we look forward to more mature Phase 1 data on TUB-40 in ovarian cancer at this year's ASCO meeting in June, and expect to enter registrational Phase 3 studies for platinum-resistant ovarian cancer in 2027. Looking longer term, TUB-30, a potential first-in-class ADC targeting 5T4, is being evaluated in a Phase 1 basket trial in multiple solid tumors, including head and neck cancer and non-small cell lung cancer. Further, Tubulis has multiple preclinical assets that utilize its next-generation ADC platform. We are excited by the potential to develop ADCs incorporating novel payloads, including ones developed by Gilead Sciences, Inc.'s industry-leading medicinal chemistry group. Moving to cell therapy on slide 18, and on behalf of Cindy and the Kite team, we are pleased to have closed our acquisition of Arcellx in April, which formally brings anitocel’s entire program and the broader D-domain binder portfolio into our R&D organization. We have long believed anitocel has the potential best-in-disease profile in multiple myeloma, and this is supported by clinically meaningful, deep, and durable efficacy as well as a differentiated safety profile. This includes no delayed or non-ICANS neurotoxicities and enterocolitis in our clinical program. Given our confidence in anitocel’s clinical profile, we are evaluating anitocel in earlier treatment lines, including second- to fourth-line relapsed or refractory multiple myeloma in the Phase 3 IMagine-3 trial. This trial is recruiting ahead of expectations, with enrollment completion expected in the second quarter. We are also planning to develop anitocel in newly diagnosed multiple myeloma. Beyond anitocel, the Arcellx acquisition brings an array of promising research assets, and we are particularly excited to explore the broader applications of the unique D-domain binder platform across a variety of targets in oncology and autoimmune diseases, notably for in vivo cell therapies. With our increasingly differentiated cell therapy pipeline, we look forward to bringing CAR T to even more patients in the years ahead. Moving to slide 19, our inflammation pipeline has nearly doubled since 2019, and now consists of 10 clinical-stage assets spanning small molecules, antibodies including bispecifics, and cell therapies that enable a diverse array of approaches to address challenging autoimmune diseases. We are excited about the pending acquisition of Oral Medicines and its lead asset gembritomig, a clinical-stage subcutaneously administered BCMA-CD3 bispecific T cell engager we expect to develop in collaboration with Galapagos. Together with Kite's portfolio of anitocel and next-generation bias-tuned CAR Ts, we believe we could achieve durable immune reset, shifting some autoimmune diseases from chronic symptom control to a transformative long-term treatment effect. Each asset offers unique potential advantages that could allow us to target different patient populations. Specifically, gembritomig has shown rapid, deep, and sustained plasma and B cell depletion while maintaining low rates and low-grade CRS with no ICANS to date in over 60 patients with immune-mediated diseases. We are focusing first on orphan autoimmune indications with established proof of concept and high unmet need, including autoimmune cytopenias, pemphigus, and idiopathic inflammatory myopathies. We are targeting Phase 3 registrational trials in select autoimmune diseases as early as 2027. Longer term, we believe gembritomig has potential in more than 20 autoimmune diseases that are driven by pathogenic B and plasma cells. Additionally, this year we plan to share updates from our broader inflammation portfolio, including the Phase 3 IDEAL study evaluating Libdelzi in PBC patients with incomplete response to UDCA, the Phase 2 SWIFT study evaluating GS-1427 or envistigraf, our investigational oral alpha4beta7 inhibitor for inflammatory bowel diseases, and the Phase 2a COSMIC study evaluating usertib, our investigational IRAK4 kinase inhibitor, in cutaneous lupus erythematosus. Finally, reviewing our 2026 pipeline milestones on slide 20, we remain on track across all our key deliverables. We expect an FDA regulatory decision for bulevirtide as a treatment for chronic HDV infection later this quarter. Bulevirtide has been approved as Hepcludex in the EU since 2020, and we look forward to making this available to patients in the U.S. Additionally, we expect FDA regulatory decisions for Biclen in August and anitocel in December, as well as Phase 3 updates for ILLAND-1 and -2 in the first half of this year, and for EVOQUE-3, ASCENT GYN, and IDEAL in the second half. With that, I would like to thank our research and development teams and our partners, whose continued strong clinical execution are driving the progress we have seen across our pipeline. Now I will turn over the call to Andy. Andrew Dickinson: Thank you, Dietmar. Good afternoon, everyone. As you have heard, Gilead Sciences, Inc. delivered strong first quarter results with continued commercial outperformance and disciplined operating execution. As shown on slide 22, our base business grew 8% year-over-year, to $6.8 billion, driven by continued growth in sales for HIV products, Trodelvy, and Libdelzi, partially offset by lower sales of HCV and cell therapy products. Sequentially, sales were down 12%, reflecting typical seasonal inventory dynamics in line with our expectations. Total product sales of $6.9 billion were up 5% year-over-year, reflecting lower Veklury sales due to fewer COVID-19–related hospitalizations. Moving to our non-GAAP first quarter results on slide 23, product gross margin was 87%, in line with our full-year guidance and up two percentage points year-over-year, due to the expiration of a longstanding TAF-related royalty obligation in addition to product mix. R&D expenses were $1.4 billion, relatively flat year-over-year, reflecting higher investments in virology clinical manufacturing, offset by lower oncology clinical study activity. Acquired IPR&D expenses were $107 million, primarily driven by an upfront payment related to our Genhouse licensing deal. Additionally, we have now closed the acquisition of Arcellx, and the acquisitions of Oral Medicines and Tubulis are expected to close later this quarter. The upfront payments related to these transactions are expected to be recorded in our second quarter acquired IPR&D and have been reflected in our full-year EPS guidance, which I will discuss shortly. Back to our first quarter results, SG&A expenses were up 12% year-over-year, primarily reflecting higher selling and marketing expenses related to the Yes2Go launch. First quarter operating margin was 47%, reflecting our continued focus on operating expense discipline and delivering top-quartile margins. The non-GAAP effective tax rate was 18.3% in the first quarter. And finally, non-GAAP diluted EPS was $2.03, up 12% year-over-year. This reflected higher product sales and lower IPR&D expenses incurred this quarter, partially offset by higher tax and SG&A expenses. Moving to our full-year guidance, we are pleased to share our updated expectations for 2026, reflecting revenue outperformance in the first quarter and expected momentum through the rest of the year. As a result, we are increasing our revenue ranges by $400 million. With regards to operating expenses in 2026, and as discussed on our transaction call a few weeks ago, we continue the careful prioritization of operational spend, consistent with our track record over the last several years. For R&D, we expect a transaction-related modest and manageable dollar increase compared to our start-of-the-year guidance. And in SG&A, we are effectively absorbing incremental expenses associated with the acquisitions in our prior guidance. Upfront IPR&D of approximately $11.5 billion, together with transaction financing expenses collectively amounting to about $9.50 per share, are reflected in our updated EPS guidance. We are pleased to note that, excluding these transaction-related costs, we are effectively maintaining our start-of-the-year non-GAAP EPS guidance, highlighting the flexibility in our operating model and our agility as we flex to accommodate the needs of the business. Looking at the details starting on slide 24, reflecting strength across our HIV businesses, we now expect 2026 HIV sales to grow 8% year-over-year, ahead of our prior guidance of 6% growth. Within HIV, we now expect Yes2Go sales of approximately $1 billion, up from $800 million at the start of the year. As a result, we are increasing our 2026 base business guidance and now expect a range between $29.4 billion and $29.8 billion. This increase of $400 million results in 5% to 6% year-over-year growth, up from the 4% to 5% growth expectation we shared in February. As we highlighted last quarter, our guidance includes a roughly 2% growth headwind from policy-related changes this year, primarily related to the drug pricing agreement announced in December 2025 and the Affordable Care Act. Absent this headwind, base business growth would be expected to be 7% to 8%. Our full-year Veklury guidance remains unchanged at approximately $600 million, contributing to expected 2026 total product sales between $30.0 billion and $30.4 billion, an increase of $400 million. Moving to the non-GAAP P&L for the full year 2026, we are adjusting our guidance to reflect the Arcellx, Oral Medicines, and Tubulis acquisitions. Specifically, we expect R&D expenses to increase a mid-single-digit percentage from 2025, slightly higher than the low-single-digit percentage increase shared in our February guidance. This is primarily driven by our investment in clinical programs related to the announced acquisitions of Tubulis and Arcellx. Overall, we expect R&D expense as a percentage of total product sales to be less than 20% in 2026. We expect acquired IPR&D investments of approximately $11.8 billion for the year, which includes the upfront payments associated with our recently announced acquisitions. We expect SG&A expenses to remain in line with our February guidance of a mid-single-digit percentage increase compared to 2025. And we expect full-year 2026 operating income of $2.4 billion to $2.9 billion. Full-year 2026 effective tax rate is expected to be between 140% and 190% reflecting the nondeductible expenses from the Arcellx, Oral Medicines, and Tubulis transactions. Excluding the $11.5 billion in upfront payments related to these recent transactions, operating income would be between $14.0 billion and $14.5 billion, or $200 million higher than our February guidance. On slide 25, you can see that we now expect full-year 2026 non-GAAP loss per share in the range of $1.05 to $0.65 per share. This includes an expense of approximately $9.50 per share relating to the upfront payments and financing costs associated with the Arcellx, Oral Medicines, and Tubulis transactions. Excluding this impact, our non-GAAP diluted EPS would be $8.45 to $8.85, or in line with the non-GAAP EPS guidance we shared back in February. We are pleased to note that the strength in our commercial business, reflected in the $400 million increase in product sales, is effectively offsetting the impact, primarily R&D, of the three deals on an EPS basis. On slide 26, we returned greater than $1.4 billion to shareholders in 2026, including over $400 million of share repurchases. Combined with our dividend, we returned approximately 60% of our free cash flow to shareholders in 2026. Looking ahead, given the pace of our activity in 2026, our business development focus in the near term will be closing and successfully integrating these programs, and maintaining strong clinical momentum. At the same time, we will continue to pursue ordinary course business development transactions. It is less likely that we will pursue more sizable M&A this year, although we will always leave the door open to consider strategic acquisitions if a compelling opportunity emerges. Overall, we are pleased with Gilead Sciences, Inc.'s consistent strong performance highlighted by solid clinical and commercial execution, and supported by our disciplined operating model. We continue to be very well positioned for both near-term and long-term growth and fully focused on executing our strategic commitments. With that, I will invite Rebecca to begin the Q&A. Operator: Thank you, Andy. At this time, we will invite your questions. Please be courteous and limit yourself to one question so we can get to as many analysts as possible during today's call. Again, to ask a question, press 1. And to withdraw your question, press 1 again. Our first question comes from Akash Tewari at Jefferies. Go ahead. Your line is open. Analyst: Hey, thanks so much. Can you talk a bit more about the Tubulis deal? How much of that NPV was driven by ovarian and the signal you are seeing there for 040 versus the potential to take this into lung given the amount of NaPi2b expression there? And, additionally, we are kind of seeing two steps forward, one step back with the PD-1/VEGF. You guys have not been in that class so far. What additional validation would you need to see from the class at ASCO to look forward towards combination approaches with your ADC platform? Thank you. Daniel O'Day: Yeah. Thanks for the question, Akash. I will invite some of my colleagues to comment as well. Let me just frame this, and the other transactions. As I have said before, we have one of the strongest portfolios ever in Gilead Sciences, Inc.'s history—in fact, the strongest—before these acquisitions, and each of these contributes to different aspects of strengthening our business. Tubulis in particular, and we will get to that, is not only TUB-40, as you have heard in the prepared remarks, and TUB-30, but also the strength of the platform overall. I will invite Dietmar to comment a little bit further on how he sees the uniqueness of this platform. And then, Andy, if you have any additional comments, please, I welcome them as well. Dietmar, over to you. Dietmar Berger: Thanks, Akash, for the question. The Tubulis platform, to just expand a bit on what Dan has said, we see the value of the front-runner molecule, which has what we think is unprecedented data in ovarian cancer. When you look at the data they presented at ESMO in platinum-resistant ovarian cancer, the durability of the response and also the tolerability in the patients treated really stand out and, on top of that, this is not in a biomarker-selected population. So we really see a lot of value there, obviously also with the objective to take this into earlier lines of therapy, especially into platinum-sensitive ovarian cancer. Then there is a second clinical program with the 5T4-targeted TUB-30 program with broader potential in different tumor types, currently in dose escalation, but already with encouraging findings when you look at expression of 5T4 and some of the early data. And then, talking about the platform, there are really two technologies we are especially excited about. One is the P5 technology that is a linker technology that, from a chemical perspective, is entirely new, allows for very stable linkage, and allows for delivery of the payload directly at the tumor site with limited general toxicity. The toxicity profile that we see with the molecule—with at this point in time no lung toxicity, no ocular toxicity, etc.—really underpins that biological story. And then the second part of the platform being the ALCO-5 platform, which allows linking different types of payloads, and this is also where the synergy between Tubulis and Gilead Sciences, Inc. comes in, developing novel payloads, both from a Tubulis but also from a Gilead Sciences, Inc. perspective using our medicinal chemistry capabilities. We have been scouring the world for really attractive ADC technologies. We have good experience obviously with Trodelvy, and we wanted to add to that and expand beyond that. And the Tubulis technology is really the first that convinced us to add that to our portfolio because it is so transformational and has so much opportunity. Regarding your second question with the VEGF/PD-1, obviously it is an interesting mechanism that we follow closely. The combinations need to be, in my mind, very targeted to the individual tumor type, so you need to really evaluate does the PD-1 mechanism play a role, does the VEGF mechanism play a role? And we are also obviously looking at the data that are coming out with these different molecules currently in development across different tumor types. Andrew Dickinson: And Akash, it is Andy. Maybe I would just add, following what you heard from Dietmar and Dan, there are clearly numerous sources of value in the acquisition that we are excited about. I think I said on our call a couple weeks ago, the ovarian opportunity alone is very large. The data are really encouraging. The financial return for our company and the shareholders on ovarian cancer alone can justify the transaction price. You are absolutely right, there is upside in lung cancer potentially. We will see as the data develop. And all of these products have the potential to be a pipeline in a product, but just the ovarian cancer opportunity alone is very exciting. So we will leave it at that for now. Operator: As a reminder, we ask that you please limit yourself to one question so we can get to as many analysts as possible on today's call. Our next question comes from Terence Flynn at Morgan Stanley. Terence, go ahead. Your line is open. Analyst: Great, thanks so much and congrats on all the progress. This is a question for Joanna and it is one question, I promise. Just on the Yes2Go launch, can you provide the latest mix of switch versus naive, buy-and-bill? And then anything new on the adherence assumption that is embedded in the $1 billion guidance? Thank you. Johanna Mercier: Thanks for the question. We are really excited about what we are seeing with the strong performance in the first quarter, and that is really across all of the launch metrics that you were referring to. I would start with growing confidence with health care professionals as the access pathways are getting a lot easier, the logistics and the experience are growing, and we are really seeing that pickup, as well as new prescribers of Yes2Go being added every single week. From an access standpoint, we are now at about 95% coverage, with 95% of those having $0 copay, so we are in a really good situation, which I think is what you are seeing—that growth post the January 1 play—because of the updates in the prescriber fee schedule for J-code and everything else coming into play. On the market share front that you were referring to, we are obviously tracking both the naive and switch share. Switch share is greater than the naive, but naive is coming along really quite nicely, and we are seeing strong momentum there as well. Within the switch share, we see a bit of a split—basically a third/third/third—across long-acting other LAI injectables, Truvada generics, as well as Descovy. We are seeing a little bit of a play there. And then we are seeing really strong market growth at about 14%. That is driving not just Yes2Go; that is obviously helping Descovy as well. On persistency, it is early days, as you think about the volume only really starting in Q4, but what we are seeing we are really pleased with—very encouraging. Health care professionals are finding the second injection easier; access is easier; the experience and confidence in the injection and the experience for the people getting the injection are better as well, based on what we are hearing anecdotally. We do expect Yes2Go’s persistency to keep growing over time and to be the highest in the overall HIV prevention market. That sums up our first quarter for Yes2Go—an incredibly strong performance—and explains why we have updated our guidance to the $1 billion opportunity for 2026. Our next question comes from Salveen Richter at Goldman Sachs. Go ahead. Analyst: My question is with regard to users who have not yet returned for the second dose. Do you have a sense of what is driving this? How it breaks down between users who are stopping PrEP versus switching to another option or just delayed in coming back for the second dose? And maybe just speak to the DTC efforts as well. Thank you. Johanna Mercier: Sure, thanks, Salveen. We are tracking the claims data pretty closely. It is not perfect data, to be honest, so I do not have the level of detail you are referring to. What we are seeing, however, is really good comeback on the second dose and within a reasonable timeframe. So as long as you give it a couple of weeks, plus or minus, what we are seeing is positive and encouraging, and we are hearing the same from our research with health care professionals. The DTC only adds to that. We have a lot of efforts going on with persistency. We leverage our specialty pharmacies to make sure they call and remind people to make their appointments well ahead of time. The DTC helps that as well. Our DTC started in late February, and we have seen a huge increase in brand awareness and visibility for Yes2Go, and it also helps remind people to come back for their injection. It is still really early—we just launched in late February. We are seeing social media awareness ramp up because of those efforts, but it takes six to twelve months before we really see the outputs of the DTC. Analyst: Hi, thank you very much for taking my question. Hope your BD team got some rest from the crazy first quarter. My question is regarding the attractiveness of Biclen in treatment here as you are about to launch. So 5% to 6% of the HIV market could still be a sizable opportunity. Could you please help us understand the opportunity here and how big this product could be even in the switch market? Thank you. Johanna Mercier: Thanks, Mohit. We are really excited about Biclen with the PDUFA date around the corner in late August. We see two opportunities. One is what you referred to: with ARTISTRY-1 showing—among virologically suppressed people on complex regimens—there are still about 5% to 6% of people living with HIV who are on multiple pills—five, six, seven, eight pills—daily, and this is an opportunity to simplify their regimen and move to one pill once a day. We will be very focused on that at launch. In addition, in the switch market—which is dynamic at about 20% switching annually as people move to the next innovation—we see opportunity for Biclen. Biktarvy will continue to remain the standard of care for many years to come with an LOE out to 2036. Some people do switch off Biktarvy and right now they are switching to competitor products. We believe Biclen gives us an opportunity to play in that switch market and capture those patients if they are going to switch anyway. Bictegravir as the integrase inhibitor standard of care and lenacapavir as a really innovative capsid inhibitor—two orthogonal mechanisms with high resistance barriers and no cross resistance—make for a very appealing option. Given a late August approval, access will need to ramp, so revenues in 2026 will be modest, with a nice ramp in 2027 and beyond. Analyst: Great, good afternoon. Thanks for taking the question. Another one on Yes2Go adherence. Joanna, I appreciate your framing of adherence as highest in the category. Is it fair to assume those comments are anchoring on aperture adherence around 50% still, and are there any reasons, based on the early days, that the greater than 80% adherence you outlined at HIV Day eighteen months ago is not still in play with the once-yearly offering? Johanna Mercier: Thanks, Carter. You are referring to adherence, not persistency, at 80%, and we still believe adherence is much greater because you are at 100% for six months. On persistency, we believe with a Q6-month regimen—and what we are seeing in early days—it is definitely stronger than what current competition is seeing. That is what is encouraging: seeing people come back for their second injection and potentially third later this year. We are tracking logistics and scheduling closely and working with clinics and specialty pharmacies to keep everything on time. There is strong potential for Yes2Go to be very persistent over time, while recognizing it is a prevention market, so it will never be 100%. Analyst: Hey, everyone. Congrats on the quarter, and thanks for the question. One on anitocel. As you approach the launch and look to development in earlier lines, what is your perspective on the safety advantage among CAR Ts? Would we expect it to narrow or widen as you treat patients upstream that are perhaps less heavily pretreated? Thank you. Cindy Perettie: Thanks, Jeff. We actually agree with the statement you just made. We are really excited about the potential for anitocel going into earlier lines, whether it is newly diagnosed multiple myeloma or even smoldering where patients are not technically diagnosed with the disease—safety really matters at that point. It is a combination: the efficacy profile we have seen to date coupled with the safety profile. We think it will be a really important option for patients in earlier lines. We are working now on the trial designs in newly diagnosed myeloma and will share more information as available. We think there is an opportunity based on both exceptional efficacy and a differentiated safety profile. Analyst: Obviously this year you have had three new acquisition integrations running simultaneously alongside multiple commercial launches. How should we think about margins in the near term and the long term? Is there room for continued margin expansion, particularly in the 2027 to 2028 time frame? Thank you. Andrew Dickinson: Hey, Alex. Thanks for the question. In the first quarter, we delivered a 47% operating margin—significant strengthening from last year. The business continues to perform really well; you see that in our updated guidance, including the increase in revenue guidance. You also see the ability to absorb all three of these deals—essentially offsetting with revenue outperformance the incremental expenses we expect this year. Of the roughly $400 million in incremental expenses, a little over $200 million are R&D this year and the remainder are financing expenses. With revenue outperformance and disciplined expense management, we can offset those when you exclude IPR&D and look at EPS on an apples-to-apples basis. We expect in 2027 to find room in our portfolio and P&L as well. We spent a lot of time planning for this as we looked at the transactions, so we feel very comfortable navigating the incremental expenses. Beyond 2027, our expectation was that we would have more room in our portfolio in any event, as we have been wrapping up a number of Phase 3 trials across the portfolio. So 2026 and 2027 are modest, manageable increases. 2028 and beyond, we needed to add to the portfolio in any event, and these are high-quality assets to add. You should still expect very strong financial performance—top line and bottom line. There is room to strengthen the margin over time. Of course, it can vary quarter to quarter, but we feel like we are in a great spot today and really excited about what lies ahead. Analyst: Thank you, guys. I was really looking forward to a possible update on your Phase 2 ulcerative colitis trial of the oral alpha4beta7. I think ClinTrial says it wrapped up in March. How should I interpret the lack of any update there? Thank you. Dietmar Berger: Umer, thank you for the question. We are really excited about the oral alpha4beta7, and we are very much looking forward to updating you in due course. Do not read anything into the timeline. We are looking at the data, and we will update you very soon. Analyst: Hey, guys. Thanks very much. For Yes2Go, can you discuss what regions in the U.S. you are seeing the greatest uptake so far in the launch and how you expect that to evolve in the coming months and years? Johanna Mercier: Sure, Tyler. Where we are seeing the greatest uptake is where we had already penetrated the HIV market—cities such as San Francisco, Los Angeles, New York, and areas of Florida. Those are areas where prescribers were more comfortable with PrEP, so it is more of a switch market there. In parallel, we are very focused on the naive market—creating awareness in areas of high unmet need with high HIV incidence, for example the rural South of the United States. That will build over time, but we are already seeing more naive prescriptions coming through there as well. Analyst: Great, thank you. On GS-3242, you had some great data at CROI recently. Your competitor seems to think that they are ahead, publicly stating a 2030 type time to market, and you are saying 2031 to 2033. Can you talk a little bit about your timing and what drives the difference between 2031–2033 and how you are thinking about that program? Thanks. Dietmar Berger: Thanks for the question. As you saw at CROI, we are currently in the dose-escalation phase, looking at pharmacokinetics for different doses. We are very comfortable with the every-four-month dosing. Our ambition, and we are encouraged by the data we have seen, is to bring this to once-every-six-months dosing. So I am confident moving forward there. The 2031 to 2033 window is really a conservative reflection of the different trial designs and clinical plans we are working on. We will try to bring this forward to patients as quickly as possible. We feel once-every-six-months injectable treatment on the basis of 3242 will really make a difference for patients. Analyst: Okay, great. Thanks for taking my question. I wanted to ask your thoughts on how you are thinking about the impact to Trodelvy sales in triple negative, in particular, in the case that Astra and Daiichi’s datopotamab is approved—I think they have a PDUFA in June—and they are claiming a superior overall survival benefit relative to chemotherapy in patients that are not eligible for immunotherapy. Does that change what you think the market opportunity is in this indication for Trodelvy? Thanks. Johanna Mercier: Thanks, Tazeen, for the question. We are really excited about Trodelvy’s performance. In Q1, we delivered 37% year-over-year growth, driven by growing physician confidence. We have established Trodelvy as the standard of care in second-line metastatic TNBC. Since publication and the NCCN guideline updates to category 1 for both first-line PD-L1–negative as well as PD-L1–positive patients, we have seen nice uptake in earlier lines, including first line, with spontaneous use. We feel very confident in Trodelvy’s overall profile—the data are practice-changing, as recognized at ASCO and ESMO when both studies were presented—and we are excited about the potential approvals of both first line and second line toward the later Q3 of this year. More to come. Analyst: Great, sorry—was muted before. I just wanted to come back to anitocel and launch dynamics as we look out to 2027. Specifically, do you think you are going to need the second-line IMagine-3 data before you can broadly convert over practices, or do you think there is an ability to ramp this product just based on the initial later-line approvals? Thank you. Cindy Perettie: Thanks a lot for the question, Chris. We feel really confident about the anitocel launch. It offers a one-and-done treatment that cell therapy provides, with stellar efficacy without compromising on safety—and that matters in every line. We are excited to bring it forward in fourth line. We are hearing strong enthusiasm from our KOLs and many of our authorized treatment centers. That shows up in two ways: first, enrollment for IMagine-3 went faster than we expected, and second, we expect to have a majority of our authorized treatment centers activated within 2027 based on their enthusiasm. There is a substantial opportunity at a patient level. The market in fourth line plus is $3.5 billion, so there is substantial opportunity there. We also think anitocel offers the differentiated efficacy and safety profile that patients and physicians are looking for. Operator: That completes the time that we have for questions. I will now invite Dan to share any closing remarks. Daniel O'Day: Thanks, everybody, for joining. I just want to wrap up a very strong quarter and thank the Gilead Sciences, Inc. teams for another impressive performance. The performance you are seeing at Gilead Sciences, Inc. today is clearly driven by the quality of our portfolio—enhanced by acquisitions since the beginning of the year—the numerous launches underway, and our continued focus on disciplined financial management, which you heard today, and our ability to add to the portfolio while maintaining disciplined financial management. Underpinning all this is the dedication of our teams and the people and communities we serve. We will continue to stay very focused on commercial and clinical execution, as you have seen us do in past quarters. As we look to the remainder of 2026, in addition to the two really strong launches underway right now with Yes2Go and Libdelzi, we have up to four potential upcoming launches before the end of the year and up to five Phase 3 updates this year. There are many opportunities on the horizon to increase our impact, and we look forward to keeping you informed on the progress throughout the year. As usual, if you have any additional questions that you were not able to get answered today, please reach out to our investor relations group. We are happy to help you and support you in any way possible. Thank you for your attention and focus on Gilead Sciences, Inc. today.
Operator: Good morning, ladies and gentlemen, and welcome to the Real Brokerage First Quarter Ended March 31, 2026, Earnings Call. [Operator Instructions] I will now turn the call over to Alexandra Lumpkin at The Real Brokerage. Ma'am, the floor is yours. Alexandra Lumpkin: Thanks, and good morning. Thank you for standing by, and welcome to the Real Brokerage Conference Call and Webcast for the first quarter ended March 31, 2026. We appreciate everyone for joining us today. With me on the call today are Tamir Poleg, our Chairman and Chief Executive Officer; Jenna Rozenblat, our Chief Operating Officer; and Ravi Jani, our Chief Financial Officer. This morning, Real published an earnings press release, including results for the first quarter ended March 31, 2026. The press release, along with the consolidated financial statements and related Management's Discussion and Analysis for the quarter have been filed with the U.S. Securities and Exchange Commission on EDGAR and with the Canadian securities regulators on SEDAR. Before we get started, I'd like to remind everyone that statements made on this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements. Our actual results may differ materially from these forward-looking statements and the risk factors that could cause these differences are detailed in our Canadian continuous disclosure documents and SEC reports. Real disclaims any intent or obligation to update these forward-looking statements, except as expressly required by law. With that, I'd like to turn the call over to Chairman and Chief Executive Officer, Tamir Poleg. Tamir, please proceed. Tamir Poleg: Thank you, Alex, and good morning, everyone. I will cover our Q1 results and the RE/MAX transaction. Jenna will provide an update on key brokerage initiatives. Ravi will walk through our financials in greater detail, and then I'll come back to close. I'll start with a quick overview of our results. Real delivered another impressive first quarter, and I think the numbers speak for themselves. Revenue of $466 million, up 32%. Operating loss of $3.4 million improved by $1.8 million year-over-year. Adjusted EBITDA of $14.9 million increased 80%, and our unrestricted cash and investments balance increased by $30 million in the quarter to a record $62.9 million. All of this occurred in one of the softest markets we've seen in years. U.S. existing home sales were essentially flat at trough levels, and Canadian home sales activity declined mid- to high-single digits. Despite this, our agents closed nearly 42,000 transactions, up 25% year-over-year. Gross profit grew faster than operating expenses, and adjusted EBITDA grew 2.5x faster than revenue. That is the model working exactly as we designed. We ended the first quarter with approximately 33,500 agents. And as of May 6, that number has grown to over 33,900. This is happening while agents across the industry are struggling, transaction volumes are down and productivity is under pressure. The fact that we are both growing rapidly and improving retention in that environment demonstrates the value the platform delivers for agents. On our ancillary businesses, the progress we're making is starting to become very tangible. On Real Wallet, revenue more than tripled year-over-year to $436,000. We now have 8,000 active agents on the platform, which represents 23% of our total agent base, including 40% of those agents who generate over $150,000 in annual gross commissions. Weekly debit card spend has now exceeded $1 million a week, while deposit balances have grown to over $25 million. We ended the quarter with approximately $9 million of credit extended to agents across Canada and the U.S. and we are now seeing early data showing a direct link between wallet adoption and lower agent churn. We're still in the early stages of what Real Wallet can become, but I'm very excited to bring it to even more agents and following the RE/MAX closing franchisees across the country. On One Real Title, revenue increased 22% in the quarter. That is the strongest quarterly growth we have seen since Q1 of last year. We now operate 13 title joint ventures across 19 states, and we expect to open Colorado in the second quarter, bringing the total to 20 states. The state-based JV model is the right model to efficiently scale, and I am pleased that we are starting to see that play out in the numbers. On One Real Mortgage, revenue increased 20% year-over-year. Kate Gurevich, who joined as CEO in January, is focused on realigning the loan officer base with our current agent footprint while improving the cost structure. We are migrating to a new loan origination system in Q2, which will meaningfully reduce our per-file cost. Meanwhile, we are actively evaluating new lender partners to ensure we are offering clients a more comprehensive range of competitive financing options. I think mortgage is on the right track, and we will continue to see that reflected in the numbers as the year progresses. Now on RE/MAX. Last week, we announced a definitive agreement to acquire RE/MAX Holdings, Inc. in a transaction that implies an enterprise value for RE/MAX of approximately $880 million as of the transaction announcement date. I know this is top-of-mind for everyone on the call, so let me tell you why we announced this transaction and why now. At its core, Real RE/MAX Group will unite an iconic real estate brand and franchise network with our innovative technology and the fastest-growing major public real estate brokerage. Real has built the platform, the technology and the agent-aligned community and economics. RE/MAX has the brand recognition, the global network and decades of trust with some of the most productive agents in the business. Together, we believe we can create a platform that is genuinely differentiated and purpose-built to be a leading presence in this industry for the next generation of real estate professionals and entrepreneurs. The financials are compelling. Based on 2025 results, RE/MAX generated approximately $94 million of high-margin adjusted EBITDA, mostly from recurring franchise fees, representing a transaction value of roughly 9x trailing Adjusted EBITDA or about 7x post-synergies. As a reminder, these figures are based on results at the bottom of the housing cycle. Last year, the combined Real and RE/MAX networks closed over 700,000 transaction sites in the United States alone. That reflects a significant opportunity to grow our ancillary title and mortgage businesses. To put some numbers around what that means, we estimate a 1% attachment rate on One Real Mortgage across that addressable transaction base would generate approximately $25 million of high-margin revenue for the combined company post-closing. Similarly, we estimate a 1% attachment rate on Title would generate over $10 million of revenue for the combined company. Our goal over time is to be much higher than 1%, so you can see how these numbers can genuinely transform the P&L over time. We also see significant opportunity to utilize our AI-powered consumer home search portal, HeyLeo, to further nurture and monetize the 1 million annual leads generated across remax.com and remax.ca given the brand's strong trust with consumers. RE/MAX is a brand built on production. The average RE/MAX agent closes over 10 transactions a year, roughly double the industry average. These are exactly the kind of high-producing full-time professionals that our technology platform and ancillary businesses are designed to support. Meanwhile, the cost-synergy opportunity of $30 million is grounded in real visible, and duplicative costs, 2 public company cost structures, shared services, vendor contracts, nothing that we believe is aspirational. We are standing up our integration team now, and we will keep investors updated as we make additional progress. I also want to speak directly to agents on both sides of this combination because I know there are questions about what this means for you. The answer is straightforward. Real and RE/MAX will continue to operate as separate brands with separate and distinct value propositions. If you are a RE/MAX agent who thrives working in office, side-by-side with your Broker-Owner and your team, that is not changing. What you can look forward to is access to new technology tools and services that Real has built, which will be available to you upon closing. And if you are a real agent, you will continue to have all the flexibility and benefits of our model. Nothing about that changes. These are complementary businesses, each serving different agents in different ways, soon to be operating under one roof. When you have reZEN as your single system of record, Leo AI helping you run your business every day, Real Wallet getting you paid faster with access to lines of credit and integrated title and mortgage services, all inside one ecosystem, it's really hard to walk away from that. Every tool we add makes the platform more valuable and every agent who joins makes the community stronger. And I think Q1 is showing exactly that. With that, I'll hand it over to Jenna. Jenna Rozenblat: Thank you, Tamir, and good morning. We have several exciting updates on the brokerage operations front. Starting with leadership. In March, we named Jason Cassity as Chief Growth Officer, a newly-created executive role designed to accelerate agent growth and continue building one of the industry's most innovative, collaborative agent communities. Before joining our executive team, Jason spent 13 years as a top-producing REALTOR and team leader in San Diego. He also served as a growth ambassador for Real, working closely with agents and leadership to attract top talent and strengthen community engagement. Jason stepped away from his personal production to ensure that every agent who joins Real and soon the Real RE/MAX Group has the tools, the technology and the community they need to achieve their own greatness. Jason will own agent acquisition, activation and engagement strategy across our markets, partnering closely with our Growth Ambassador network and top teams and agents. We are very excited to welcome him into this role. Second, on operations, you will notice from our press release that our headcount efficiency ratio, defined as the number of agents per full-time brokerage employee was 85:1 at the end of the first quarter. For context, during the quarter, we onboarded 34 full-time employees into roles that were previously performed by outside contractors, primarily in brokerage operations and compliance. From a P&L standpoint, this conversion is expected to be largely neutral, but from a practical standpoint, bringing these roles in-house means our agents get better service, better support and more hands-on local expertise. And importantly, our new full-time brokers are being incentivized not just on agent satisfaction, but also on driving ancillary attachment rates in their markets. That aligns their personal success directly with the growth of One Real Title, One Real Mortgage and Real Wallet, which is exactly the kind of structural change that compounds over time. Third, HeyLeo. In March, we officially beta launched HeyLeo, our consumer home search portal and AI relationship management platform to our agent base, and I want to share some early data. As a reminder, HeyLeo ingests live MLS data to allow buyers and agents to search, explore, and interact natively throughout the platform. We now have ingested 357 MLS and are on track to reach 400 plus by the end of Q2 with full Canadian coverage already live. Today, HeyLeo already covers over 85% of our agents' geographic distribution. That data foundation is what makes AiRM genuinely useful. We currently have 450 agents in the beta test with another 4,500 on the waitlist. This phased rollout is deliberate as we want agents and their clients to have a great experience before we open the flood gates. We are seeing early success with HeyLeo re-engaging and providing tools for agents to nurture dormant leads, while early engagement data is also encouraging. We are seeing many client conversations with HeyLeo running to 10, 15, even 20-plus messages covering property details, neighborhoods, schools and ownership costs. These are typical high-quality buyer interactions that our agents no longer have to manually respond to around the clock, and I'm very excited about rolling the platform out to our entire agent base as the product matures. And finally, on RE/MAX. I have taken on the role of Chief Integration Officer for the combined company, and I want to share why I am so confident that we can deliver significant value, both at the company level and at the individual office level. That confidence comes from our DNA. We have spent over a decade using technology to streamline brokerage operations at scale, building reZEN, deploying Leo AI and automating workflows that used to require manual intervention. We know how to run a lean technology-enabled brokerage efficiently, and we know how to bring agents onto a platform in a way that enhances their businesses without disrupting what they have built. That experience is directly transferable to RE/MAX franchisees, and it is the foundation of our on-the-ground integration approach. The RE/MAX franchise network is filled with thousands of franchisees who have built incredible businesses and who deserve the best tools, the best support and the best technology the industry has to offer. I genuinely look forward to working with the RE/MAX team, agents and franchisees to build the technology-enabled real estate platform of the future together. The opportunity in front of us is significant, and I believe we have exactly the right team and foundation to capture it. With that, I'll turn it over to Ravi. Ravi Jani: Thank you, Jenna, and good morning, everyone. Consolidated revenue for the first quarter was $466 million, up 32% year-over-year. Growth was led by our North American Brokerage segment, where closed transactions rose 25%, substantially outperforming the U.S. and Canadian home sales markets. Ancillary revenue of $3 million grew 34% year-over-year, with growth across the board. Real Wallet generated $436,000 in revenue in the first quarter, up nearly 250% from Q1 2025. One Real Title returned to double-digit growth despite the year-over-year headwind resulting from the shift to state-based joint ventures, which will anniversary in the second half of the year. Gross profit increased 24% to $42.2 million in the first quarter compared to $33.9 million in the same period last year. Gross margin was 9.1%, compared to 9.6% in the prior-year first quarter. The primary year-over-year driver was transaction mix as approximately 40% of our closed transaction size came from capped agents, up approximately 200 basis points year-over-year. Total operating expenses, including G&A, marketing, R&D and acquisition-related costs were $45.6 million in the first quarter, up 17% from $39.1 million last year. Operating expenses included approximately $300,000 in expenses related to the RE/MAX acquisition. As a percentage of revenue, operating expenses improved to 9.8%, down approximately 130 basis points from 11.1% a year ago, reflecting our commitment to grow OpEx at a slower pace than revenue and gross profit. I do want to flag that we expect Q2 operating expenses to reflect a more material step-up in RE/MAX acquisition-related costs. We will break these out as non-recurring items in our disclosures. Operating loss improved to $3.4 million in the first quarter compared to an operating loss of $5.2 million in the first quarter of 2025. Operating margin improved to negative 0.7% for the quarter from negative 1.5% in the prior year period, reflecting strong growth and operating leverage. On a non-GAAP basis, adjusted EBITDA rose to $14.9 million in the first quarter, an 80% improvement from $8.3 million in Q1 2025. Real generated cash flow from operating activities of $23.3 million in the first quarter and ended the quarter with $62.9 million in unrestricted cash and short-term investments and continue to carry no debt. While we don't provide formal guidance, we expect Q2 revenue to improve sequentially, consistent with normal seasonal patterns in the housing market. Gross margin will follow a similar trajectory to prior years, declining through the year as more agents reach their annual commission caps, which is a natural function of our model. On operating expenses, we expect Q2 to reflect a step-up in acquisition-related costs, which we will disclose as non-recurring items. But on an underlying basis, we remain focused on the same discipline that drove our Q1 results, managing fixed costs to deliver continued year-over-year improvement in adjusted EBITDA. More details on our results and key operating metrics can be found in the earnings press release and investor presentation that accompany this call. I'll now turn it back to Tamir. Tamir Poleg: Thank you, Ravi, and thank you, Jenna. I'd like to ask you all to imagine a world where buying a home is as seamless as any other digital experience. where a buyer talks to an AI that knows every listing, every neighborhood, every school and every mortgage rate. And when the right property hits the market, that buyer is connected instantly to an experienced real-estate agent who is ready and prepared to serve them, where that agent then manages and closes the transaction on one platform, gets paid through it, finances their business through it and offers integrated closing services without ever having to leave the ecosystem, where every step of the most important financial decision of that client's life is connected, intelligent and has less friction. That is the platform we are building, and that has been our vision since Day 1. We didn't have to pivot to AI. We didn't white-label our way into fintech. We've built the infrastructure transaction by transaction, agent by agent, year after year because we knew that someday technology would catch up to the vision. That day has arrived. And with the RE/MAX transaction, we will soon have the network and the reach to bring it to life at a scale that we believe can transform how people buy and sell homes. You cannot vibe-code this. You have to dream it, build it, and earn it. And we have spent over a decade doing exactly that. I speak to you today as CEO, as a co-founder, and as one of the largest individual shareholders of this company. I have never been more excited about our future than I am right now. The opportunity in front of us is generational, and I deeply believe the best days of this company are ahead of us. Operator, please open the call for questions. Operator: [Operator Instructions] Your first question is coming from Naved Khan from B. Riley Securities. Naved Khan: Congrats on the results. Just a couple of questions from me, please, and both are related to ancillary. So first question is, what kind of attach rates are you seeing from agents who are part of the JVs? How is that trending? And then secondarily, just in terms of participation of the agents on the JVs title, where does that stand? And what are the steps you're taking to take that higher? Tamir Poleg: Thanks for the question. The attach rates on the JVs, we're seeing some JVs with attach rates of 40%, 50%. We have seen a couple with as high as 80%. So the trajectory is obviously encouraging. And as you know, the JVs are only on the title side. The participation of agents, I'm not sure I understood the question. Are you asking about how many agents actually opt into the JVs? Or was it? Naved Khan: Yes, that was the essence of the question, like what are you doing on your end to increase more agents per and become part of the JV so that there's more volume flowing through it? Tamir Poleg: Sure. So we want to make sure that the JVs are valuable and that we're driving meaningful transactions to them. So we are opening them up to the most productive team from the most productive agents, and then we're trying to add more and more. But typically, it's based on production, and we're happy that currently the ones that actually opted in are the ones that carry most of the transactions in each market. So it's still an effort to add more, but it starts with the top producers in every market. Naved Khan: Okay. And then did you say in your prepared remarks that the number of title JVs is going to 20? Tamir Poleg: No, we said that Title is operating in 19 states, and we will be opening in Colorado soon. So that will be 20, and we have 13 JVs at the moment. 13 out of the 19 carry JVs. Naved Khan: Is there a gating factor in terms of why you can't have JVs in all of these 19 states? Tamir Poleg: No, that's the intention. go ahead. Ravi Jani: The state based JVs do have span across more than one state. So it's not to... Operator: Your next question is coming from Stephen Sheldon from William Blair. Stephen Sheldon: First, I just wanted to see -- I know it's very early, but just what you can share about the feedback you've received so far from RE/MAX franchisees on the deal? Has there been much pushback? And then I guess, how much interest have they shown -- again, I know it's earlier, how much interest have they shown in potentially adopting reZEN and your broader technology platform since that's something that won't be mandated upon them? I guess what's kind of the early feedback you're hearing from that network? Tamir Poleg: Sure. Thanks, Stephen. So RE/MAX management has been working very closely with the RE/MAX network and the franchisees. And the initial feedback, I think, was a little bit of a mixed excitement and surprise. I think that naturally, people don't really like change. So at the beginning, there was a need to heavily communicate and provide them the background and how management looks at the combination of the 2 companies. I think that very quickly, it shifted to a lot of excitement on the RE/MAX network side. And we also heard that many of them are starting to look into reZEN, trying to understand. We received some calls from Real agents who received calls from RE/MAX agents who wanted to learn more about the technology. So there's definitely a lot of interest and a lot of excitement, and we will need to continue and communicate and make sure that there's a lot of clarity around the combination of the company and the time line -- the companies and the time line and what will be available to the RE/MAX network and when. But I think that there is a lot of support to the combination and the merger of the 2 companies. Stephen Sheldon: Yes, it's really good to hear. Maybe then with -- for Ravi, on gross margins, I know there are always a lot of moving pieces. But just generally, how are you thinking about the trajectory over the rest of the year? I heard the comment you expect it as normal to trend lower sequentially. But how should we be thinking about year-over-year trends? And gross margins were down a little bit in 1Q relative to last year. How should we think about -- should it continue to step down, I guess, year-over-year as we think about the rest of the year? Ravi Jani: Yes. Thanks, Stephen. I appreciate the question. I think in Q2, you would expect to see year-over-year decline probably similar order of magnitude as you saw in Q1. As we get to the second half of the year, I think that the year-over-year pace is likely to be a little bit more flattish than relative to what you saw in the first half with respect to the decline. And that's just because of the significant step-up we saw in post-cap transactions in the second half of last year. We wouldn't expect that same order of magnitude of year-over-year change. I think last year was a bit of a step change across the industry where you saw the highest producing agents take an outsized share of transactions. And while it could modestly pick up this year, I don't think it would be as impactful as you saw in the second half of last year. So we would expect that year-over-year trend to dissipate in the second half of this year. Stephen Sheldon: And then if housing activity picks up and you start to see productivity spread out across the agent base, then that could maybe start to support a better trajectory in Gross Profit when housing activity does pick up. Is that kind of the right way to think about it? Ravi Jani: Yes, absolutely. And I think if you rewind the clock back to better markets, you did see higher gross margins because you saw a bigger percentage of the transaction pool being transacted by agents who are pre-cap. And so you saw a greater mix of revenue coming in at that 15% Gross Margin rather than that post-cap Gross Margin, which is in the single digits. And so that's been our thesis. I mean the history proves that, that is typically what happens. I'd say the other thing that we would expect to be a tailwind in the second half of the year is our ancillary businesses will continue to grow. And you saw this year, ancillary growth modestly actually outpaced the brokerage. And so ancillaries were a 10 basis point gross-margin tailwind in the quarter. So those are the 2 things that if you do see a market pickup in the second half of the year and beyond, you'll see just a greater contribution from pre-cap agents and transactions as well as from ancillary services, which come at significantly higher margins than the brokerage. Operator: Your next question is coming from Jason Weaver from JonesTrading. Jason Weaver: I believe that you held an internal town hall on the date of the announcement of the combination. Can you speak about any of the early reads or concerns on agent perceptions around the combination with RE/MAX and if you think that might influence any significant churn in the population? Tamir Poleg: Thank you, Jason. So yes, one of the first things we did on that morning was to speak to our agent community and invite everybody to our town hall, where we presented the transaction and answered a lot of questions. I think that overall, there was just immense enthusiasm and excitement around the transaction. And obviously, agents wanted to understand a little bit better what does it mean for them? Is the model changing? Is anything changing on the technology side? Is there anything changing on the Revenue Share Program, on the Stock Purchase Program? We told them that nothing changes for now. It's business as usual, obviously, but we also indicated that this combination will allow us to invest even more in growth in technology and more in just strengthening the value proposition, both on the Real side or on the Real model and on the RE/MAX model. So the initial feedback was very supportive from Real's agent community. Jason Weaver: Good to hear. And then I was wondering if you could speak to any thoughts of further over the horizon expected synergies upon the longer-scale integration of both companies. Tamir Poleg: Ravi, do you want to take that? Ravi Jani: Yes, sure. And I'll let Tamir talk on some of the top-line synergies, which he addressed in his prepared remarks. But I think as you've seen in other M&A transactions in the sector, what you underwrite the transaction to is based on -- from a synergy standpoint, is based on what you can see before you own the combined company and you can look under the hood. And kudos to Compass, they've done a great job of executing on their synergies in a very short-period of time. And I think you've seen in transactions in this sector and other sectors that once 2 players combine, there's always more opportunity than you think going in. And so, we underwrote the transaction with $30 million of synergies. If -- once we own the businesses and we get the best athletes together and figure out how the go-forward business looks, for the next decade, could that synergy number change? Yes, of course. And I think we'll be vigilant and thoughtful in how we execute on that path. But needless to say that Real is a very efficient organization, and we will continue to be very efficient as Real RE/MAX Group. Tamir Poleg: As I mentioned on my prepared remarks, we think that there's tremendous opportunity in just expanding Title, Mortgage and Real Wallet to the RE/MAX network. Just with the 700,000 annual transactions in the U.S., just capturing a portion of that will be huge for revenue at a high margin. remax.com and remax.ca generate roughly 1 million leads a year. Those are high-intent leads. Those are folks that visit the website looked at properties and wanted to receive more information. We want to put Leo to work on those websites. So Leo can actually nurture the leads and then hand them over to an agent who is ready to transact and take the buyer through the process. So we think that there is a potential to monetize significantly over there. And just generally speaking, I think that coming in with Real's growth mindset and just a stronger value proposition for the RE/MAX side, I think, will help change the trajectory of the growth in agent count in the U.S. and Canada. We believe that with a stronger value proposition and the right messaging and the right energy, we can get RE/MAX back to growing their agent count in North America and obviously create a platform where every agent in North America can find a home where there is no better alternative for anyone. They can choose either to be on the Real Model or on the RE/MAX model, but they don't need to search anywhere else for brokerage. Operator: Your next question is coming from Nick McAndrew from Zelman & Associates. Nick McAndrew: Maybe I just want to start. I think just given the franchising model of the RE/MAX business, and assuming you're planning on keeping the RE/MAX fee structure in place, do you see this as a way to reduce the cyclicality of the business? And I guess just how different is the productivity profile of a legacy RE/MAX agent versus a more mature Real agent today? Tamir Poleg: Ravi? Would you want me to take it? Ravi Jani: Sure. If you want to address the productivity point. And Nick, the question was on the RE/MAX fee model and cyclicality. I think -- I can take that and Tamir can address the second part. But for sure, I think the franchise model, and you've seen RE/MAX's results have been incredibly resilient throughout what's been a 4-year downturn at this point. They've done an incredible job of protecting the bottom line, which reflects that franchise model, which is just stable and largely recurring with long-term contracts with franchisees. And so we think it's a really attractive model. It does reduce cyclicality. It does generate high margins in an asset-light nature. And so look, there are a million reasons we're excited about the RE/MAX transaction in the RE/MAX business and the less cyclicality in the margins and revenue stream is one of the many. Tamir Poleg: Yes. On the productivity profile, RE/MAX agents in 2025 closed around 10.3 transactions per agent on average. Real Title was around 6. And I believe we were #3 in the industry. So obviously, the RE/MAX agent productivity is way up there and by far, the best in the industry. And this is significantly important when we're talking about the potential for ancillary services attachment because every agent that opts into a title JV or uses One Real Mortgage is a potential to drive 2x more transactions compared to a Real agent or any other agent in the industry on average. So we don't necessarily only think about the number of agents that RE/MAX has. We think about the number of transactions that those agents are bringing. Nick McAndrew: Great. That's really helpful. And then maybe just one on the cost side, just thinking about the headcount efficiency. I think moving to 85:1 from 94:1 last quarter. And I guess just when you think about transitioning RE/MAX franchisees and agents on to reZEN, does the scale of the RE/MAX network meaningfully accelerate some of the internal AI investments you've already done in brokerage ops, just given that larger agent base? Ravi Jani: I don't think they're necessarily related, right? Because the technology we're building is really quite scalable, right? It's already being used by 30,000-plus agents across North America and bringing on another 75,000 in North America, it's not going to require a commensurate increase in our investment. I mean technology is scalable by definition. I think the continued business will continue to invest heavily in AI and tech because that's in our DNA, and that's our competitive moat. But I don't think it's going to significantly change the level of intensity of investment, and that's because it's already quite intense relative to peers and relative to our own budget. With that being said, on the headcount efficiency ratio, I did want to just point out that it is going to be largely P&L neutral. It was a conversion of certain contractor roles to full-time employees, which Jenna mentioned in her script, is really to drive better service, better local market expertise. And also the brokers that we brought on as full-time employees, a portion of their compensation is going to be tied to driving ancillary attachment in their market. So I think it's a win-win for our brokers, for our agents and for the company. Operator: [Operator Instructions] Your next question is coming from Michael Rindos from Benchmark StoneX. Michael Rindos: Can you talk a little bit about what the firm is doing to stimulate agent growth in markets with higher median sales prices? Tamir Poleg: Sure. Michael, as we communicated, we added Jason Cassity as our Chief Growth Officer about 2 months ago. So Jason is now overhauling the entire growth strategy. We're starting to do more outreach. In the past, all of our agent growth has been organic, and we've been fielding inbound inquiries. And now we're starting to be a little bit more strategic in outreach and nurturing relationships with teams and individual agents in markets that we think are strategic for us. We also have the Luxury Division where the Luxury Division focuses on the high-end properties in each market. So we're venturing slowly, slowly into higher-price-points in every market. So I hope that answers the question. I also have to mention that following the announcement of joining forces with RE/MAX, we have seen tremendous inbound inquiries related to growth and a lot of interest and our agents are having a lot of conversations with people that are interested in joining. We believe that once we close the transaction or even before that, we will see an uptick in growth, and that uptick will very likely also be coming from agents that are more productive, care more about the branding, care more about being affiliated with a more established name. And I think that, that move establishes us as obviously one of the top brokerages, but it gives a lot of comfort to agents that are on higher-end markets. Operator: There are no further questions in the queue. I'll now hand the floor over to CFO, Ravi Jani, for questions from retail investors. Ravi Jani: Great. Thank you, Matthew. So now that we've completed the analyst Q&A, I'd like to address some of the questions that were submitted through the Say Technology shareholder portal. We received a number of great questions this quarter, so I appreciate everybody who participated. Tamir, you addressed this a little bit in your prepared remarks, but how will Real increase revenue from the RE/MAX acquisition? Tamir Poleg: Thanks for the question. We believe that it starts with improving the value proposition for agents and franchisees. And as you know, Real has been one of the only major publicly traded brokerages who consistently delivered strong organic growth through both strong and weak housing markets. And we believe that comes from the combination of our technology platform, our flexible model and highly collaborative agent community. So by bringing tools like reZEN and Leo AI, Real Wallet and our integrated services into the arsenal of RE/MAX franchisees and agents, we believe we can help drive stronger agent attraction, retention, and franchise growth. But beyond that, as I noted in my prepared remarks, the scale of the combined network creates a meaningful opportunity to grow our high-margin mortgage, Title, and Fintech businesses while creating the new revenue streams from website leads and just monetizing those website leads. And while the transaction economics don't depend on these revenue opportunities, we certainly will be focusing on delivering them. Ravi Jani: Thanks, Tamir. I'll take the next question. Are you concerned about taking on debt? And what is the time line to pay it down? So we're approaching leverage very conservatively, and we're encouraged because both businesses are highly cash generative. They're asset-light. RE/MAX brings recurring franchise revenue, which creates a lot of visibility into the future Free Cash Flow of the company. And so our first capital allocation priority post-close will be deleveraging, and we expect to reach the 2x net debt to adjusted EBITDA by the end of the second full fiscal year following close. And as we delever, we'll see both a stronger balance sheet and stronger earnings as we reduce the associated interest expense. And so we think the debt balance is quite manageable. Even pro forma post-close, the leverage of the business will be lower than RE/MAX stand-alone. And so that's on a net leverage ratio basis. And so we'll continue to have the ability to invest in our Agents, in our Franchisees, in the tech platform, and ancillary businesses. So full speed ahead on that while having significant cash to de-lever. Next question for Jenna. What is the plan to transition RE/MAX agents onto the Real platform? Will there be any changes to the model? Jenna Rozenblat: Thanks, Ravi. These are great questions. So first, Real and RE/MAX are going to continue operating as distinct brands with their distinct models and value propositions. There's not going to be any forced migration of RE/MAX agents or franchisees onto the Real model. They'll stay completely separate. What this does open up, though, however, is access to the technology and services that we've built to help make agents' jobs easier and more efficient. That includes our proprietary software reZEN, Leo AI, Real Wallet, ancillary services, and consumer lead-generation tools. And these tools are the same tools powering Real's operations. So franchisees stand to benefit from the same operational efficiency that we've built into our own business. Ravi Jani: Thanks, Jenna. And last question for Tamir. What is the projected time line to complete the acquisition of RE/MAX? And what are your 3 largest hurdles pertaining to the deal during this period of time? Tamir Poleg: Great question. On time line, we expect to file the necessary documents over the next few weeks. The transaction, as you know, requires shareholder approvals on both sides and standard regulatory clearances. So based on typical time lines for transactions of this type, we are targeting a close in the second half of the year as we communicated before, and we will provide a more specific window as we get further into the process. On the 3 biggest things we are focused on, first, it's ensuring agent and franchisee retention through the transition. RE/MAX Network has built very deep relationships with the franchisees over many, many decades. The most important thing we can do between signing and closing is to communicate very clearly and demonstrating to RE/MAX agents and franchisees as well and also Real Agents that their businesses are going to be better and not disrupted by this combination. And if we do that well, we hope that retention piece will just take care of itself. Second, operational stability on day 1. when we close, agents and franchisees on both sides of the combination need to wake up and find their businesses running exactly as they were the day before. This is a non-negotiable for us at this point, and we are doing the integration planning work now before we close so that the day of close is going to be a boring day in the best possible way. And then I would say, third, just being laser-focused on delivering the synergies. We were targeting $30 million in run-rate savings grounded in zero duplicative overhead and corporate costs, but synergies don't realize themselves. We need to work for that. They require thoughtful decisions. They require disciplined execution and organizational alignment. We have a clear road map, and we are holding ourselves accountable to it. So those are the 3, and we think about them, honestly, all day every day. Ravi Jani: All right. Thanks, Tamir. With that concludes our shareholder Q&A. Matthew, could you please provide replay instructions and close the call? Operator: Certainly. Ladies and gentlemen, this concludes today's conference call. Today's conference call will be available for replay. Our replay phone number is (877) 481-4010. The replay code is 53761. And once again, the replay phone number is (877) 481-4010. The replay code is 53761. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.
Operator: Hello, ladies and gentlemen. Welcome to Himax Technologies, Incorporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Ms. Karen Tiao, Head of IR and PR at Himax. Ms. Tiao, please go ahead. Karen Tiao: Welcome, everyone. My name is Karen Tiao, Head of IR/PR at Himax. Joining me today are Jordan Wu, President and Chief Executive Officer; and Jessica Pan, Chief Financial Officer. After the company's prepared comments, we have allocated time for questions in a Q&A section. If you have not yet received a copy of today's results release, please e-mail hx_ir@himax.com.tw or HIMX@mzgroup.us or download a copy from Himax's website. Before we begin the formal remarks, I would like to remind everyone that some of the statements in this conference call, including statements regarding expected future financial results and industry growth, are forward-looking statements that involve a number of risk and uncertainties that could cause actual events or results to differ materially from those described in this conference call. A list of risk factors can be found in the company's latest SEC filings, Form 20-F, in the section entitled Risk Factors as may be amended. Except for the company's full year 2025 financials, which were provided in the company's 20-F and filed with SEC on March 27, 2026, the financial information included in this conference call is unaudited and consolidated and prepared in accordance with IFRS accounting. Such financial information is generated internally and has not been subjected to the same review and scrutiny, and may vary materially from the audited consolidated financial information for the same period. On today's call, I will first review Himax's consolidated financial performance for the first quarter 2026, followed by our second quarter outlook. Jordan will then give an update on the status of our business and after which we will take questions. You can submit your questions online through the webcast or by phone. We will review our financials on an IFRS basis. Despite the typical seasonal slowdown during the Lunar New Year holidays, we are pleased to report that our Q1 profit exceeded the guidance range announced on February 12, 2026, while both revenue and gross margin were at the high end of the projected range. First quarter revenues registered $199.0 million, representing a slight sequential decline of 2.0%, reaching the high end of our guidance range of a decline of 2.0% to 6.0%. Gross margin was 30.4%, also at the high end of our guidance of flat to slightly down from 30.4% in the previous quarter. Q1 profits per diluted ADS was $0.046, exceeding the guidance range of $0.02 to $0.04. Revenues from large display driver came in at $24.2 million, representing an increase of 11.7% from the previous quarter, outperforming our guidance range of a single-digit increase sequentially. This was primarily driven by better-than-expected restocking of high-end TV ICs by a leading panel maker. Sales of large panel driver ICs accounted for 12.2% of total revenues for the quarter, compared to 10.7% last quarter and 11.6% a year ago. Revenue from the small and medium-sized display driver segment totaled $135.8 million, reflecting a slight decline of 2.4% sequentially amid a typical low season. In line with guidance, Q1 automotive driver sales, including both traditional DDIC and TDDI, declined double digits sequentially, reflecting Lunar New Year seasonality, customers' inventory control following 2 consecutive quarters of restocking, and the tapering of automotive subsidy programs in major markets including China and the U.S. In contrast, revenues for smartphone, covering both LCD and OLED products, increased sequentially primarily due to the new OLED solutions that began mass production with a top-tier panel maker for a leading smartphone brand's mainstream model. Q1 tablet IC sales also increased sequentially, driven by renewed demand for mainstream models from leading customer following several quarters of softness, as well as the commencement of IC shipments for a customer's new premium OLED tablet. The small and medium-sized driver IC segment accounted for 68.2% of total sales for the quarter, compared to 68.5% in the previous quarter and 70.0% a year ago. Q1 non-driver sales reached $39.0 million, a 7.7% decrease from the previous quarter, reflecting a decline in ASIC Tcon shipments to a leading projector customer, along with a moderation in automotive Tcon shipments following several quarters of solid growth. However, underlying demand for automotive Tcon business remains robust, supported by a strong pipeline of hundreds of design-win projects poised to enter mass production in the coming quarters. Non-driver products accounted for 19.6% of total revenues, as compared to 20.8% in the previous quarter and 18.4% a year ago. First quarter operating expenses were $50.3 million, a decrease of 8.4% from the previous quarter, but an increase of 9.9% compared to the same period last year. Both the quarter-over-quarter and year-over-year changes were primarily driven by differences in tape-out expenses, reflecting the timing of major project tape-outs. The year-over-year increase was also attributable to salary expenses and the appreciation of the NT dollar against the U.S. dollar. Against a backdrop of ongoing macroeconomic challenges, we continue to maintain strict cost and expense discipline, while strategically investing in selected non-driver IC areas with compelling growth potential, some of which are poised to ramp meaningfully starting in 2027. First quarter operating profit was $10.2 million, representing an operating margin of 5.1%, compared to 3.4% in the previous quarter and 9.2% for the same period last year. The sequential increase was the result of the lower operating expenses. The year-over-year decline reflected the lower sales and gross margin, coupled with higher operating expenses. First-quarter after-tax profit was $8.0 million, or $0.046 per diluted ADS, compared to $6.3 million or $0.036 per diluted ADS last quarter, and down from $20.0 million or $0.114 in the same period last year. Turning to the balance sheet, we had $287.6 million of cash, cash equivalents and other financial assets as of March 31, 2026. This compares to $281.0 million at the same time last year and $286.2 million a year ago. As of March 31, 2026, we had $27.0 million in long-term unsecured loans, with $6.0 million being the current portion. Our quarter-end inventories as of March 31, 2026, were $151.7 million, slightly lower than $152.7 million last quarter, but higher than $129.9 million the same period last year. Having maintained lean inventory levels in prior years, we made a strategic decision about a year ago to selectively loosen inventory control in response to an industry-wide shift toward tight supply. Accounts receivable at the end of March 2026 was $190.9 million, down from $200.9 million last quarter and $217.5 million a year ago. DSO was 86 days at the quarter end as compared to 88 days last quarter and 91 days a year ago. First quarter capital expenditures were $2.9 million, versus $4.0 million last quarter and $5.2 million a year ago. First quarter CapEx was mainly for R&D-related equipment for our IC design business. Prior to today's call, we announced an annual cash dividend of $0.252 per ADS, totaling $44 million and payable on July 10, 2026 with a payout ratio of 100% of the previous year's profit. The high payout ratio reflects our healthy balance sheet and positive outlook for cashflow generation over the next few years. For business areas where we have in-house manufacturing capacity such as WLO and LCoS, existing capacity is in place to support the strong growth anticipated for the next few years. Himax will continue to focus on maintaining a healthy balance sheet and driving sustainable long-term growth, while delivering shareholder value through high dividends and share repurchases. As of March 31, 2026, Himax had 174.4 million ADS outstanding, unchanged from last quarter. On a fully diluted basis, the total number of ADS outstanding for the first quarter was 174.4 million. Now turning to our second quarter 2026 guidance. We expect Q2 revenues to increase 10.0% to 13.0% sequentially. Gross margin is expected to be around 32%, mainly reflecting a more favorable product mix, with increased sales from higher-margin non-driver products and reduced sales from lower-margin products. Q2 profit attributable to shareholders is estimated to be in the range of $0.086 to $0.103 per fully diluted ADS. I will now turn the call over to Jordan to discuss our Q2 outlook. Jordan, the floor is yours. Jordan Wu: Thank you, Karen. The rapid rise in AI demand is placing unprecedented strain on memory chip supply, impacting many non-AI applications. This, in turn, has led to capacity tightness across foundry, packaging, and testing in mature process nodes where we are anchored, putting upward pressure on our cost structure. Rising gold prices have further compounded these cost pressures. With cost pressure expected to persist, we are actively working with customers on pricing adjustments to share rising costs, with some price increases already taking effect in Q2. Market conditions remain dynamic, compounded by ongoing geopolitical tensions, and the market's visibility remains limited on both consumer electronics and automotives for the second half of the year. That said, as indicated in our last earnings call, the first quarter marked the trough with the second quarter recovery tracking as anticipated, primarily driven by customer inventory restocking. We expect upward momentum through the remainder of 2026, supported by a meaningful number of new automotive projects scheduled to enter mass production in the second half, a view consistent with our outlook from last quarter's call. The positive outlook is also supported by the anticipated growth in our non-driver IC businesses, particularly Tcon and WiseEye AI. In our display IC business for automotive, we remain confident in our long-term growth prospects, as automotive is an area relatively insulated from memory price impact compared to consumer electronics products such as smartphone and notebook. The long-term positive outlook is underpinned by our leading technology portfolio, broad and diversified customer base, strong design-win pipeline across DDIC and TDDI, and substantial lead over competitors. Our display IC portfolio spans a comprehensive range of solutions which enable novel and stylish automotive displays. Such technologies include automotive Tcon with advanced local dimming functionality, LTDI for ultra-large displays, advanced Tcon solutions for state-of-the-art head-up displays, as well as automotive OLED and Micro LED technologies. Customer adoption of these advanced display technologies continues to accelerate across new vehicle models, driving higher content value per vehicle for us and creating new growth momentum for Himax's automotive display IC business in the years ahead. Despite ongoing macro uncertainty, Himax continues to expand beyond its traditional display IC business, focusing on key growth areas including smart glasses, ultralow power AI and CPO. These emerging technologies present significant growth opportunities that help diversify our revenue base into areas with attractive gross margin profiles and profitability while also strengthening our overall competitiveness. Starting with smart glasses, a key strategic focus area we are quite optimistic about. Himax is uniquely positioned as one of the few companies with both ultralow power AI capabilities and microdisplay, both critical for smart glasses. WiseEye provides ultralow power always-on AI sensing capabilities, targeting a broad range of smart glasses, while our LCoS microdisplay solutions enable display functionality critical for AR glasses with see-through displays. We are pleased to share that a leading brand has adopted our WiseEye for its smart glasses, with mass production expected later this year and additional prominent brands are expected to follow. In microdisplays for AR glasses, built on the debut of our proprietary Front-lit LCoS microdisplay at Display Week last year, Himax returned to Display Week 2026 with a new-generation upgrade that significantly enhances contrast, dynamic range, and optical efficiency. These advances, driven by Himax's proprietary technologies, deliver a substantial increase in contrast performance while effectively eliminating the postcard effect commonly seen for microdisplays in dark environments. Himax's Front-lit LCoS solution offers an optimal balance among weight, size, resolution, image quality, power consumption, and cost, positioning it as a compelling choice for AR glasses. For both WiseEye and LCoS microdisplay, supported by expanding customer engagements across technology heavyweights and smart glasses specialists globally, we are increasingly optimistic about the new space, even compared to just a few quarters ago. We expect revenues from AI and AR glasses applications to grow substantially over the next few years. Now I would like to provide a brief update on our progress in CPO. Together with FOCI, our strategic partner, we continue to make steady progress on both the Gen 1 and Gen 2 products as planned. Our Gen 1 solution, supporting 1.6T and 3.2T transmission bandwidth, is now ready with small quantity shipments expected to commence in the second half of this year. Meanwhile, our Gen 2 solution, targeting 6.4T bandwidth with significant volume potential, is nearing completion of customer product validation for AI data center applications. Building on this momentum, our main goal for 2026 is to achieve mass-production readiness, with only limited shipments expected during the year, followed by an accelerating volume ramp starting 2027. At the same time, in close partnership with FOCI, we continue to advance multiple future-generation high-speed optical transmission technologies and CPO architectures in collaboration with leading global customers and partners, focusing on higher fiber channels, more advanced optical designs, and enhanced optical precision to meet the explosive bandwidth demands of HPC and AI data center applications. In early March, FOCI completed a TWD 3.16 billion rights issue to support R&D, equipment purchases and preparations for CPO mass production. Himax, already a shareholder through 2 earlier tranches of share offerings in 2023 and 2024, participated in the rights issue, which not only demonstrates our continued support for our partner and further strengthens collaboration between the 2 companies, but also underscores that advancing CPO technology requires highly integrated efforts through close collaboration and joint development. With an average acquisition cost of TWD 120.6 per share, our equity stake, representing 5.36% of FOCI, now totals TWD 4.96 billion or USD 156 million as of May 7 when the market closed at TWD 815 per share. As a reminder, our FOCI investment has been booked as a so-called "financial asset measured at fair value through other comprehensive income" on the balance sheet since day 1 of investment. As such, based on accounting rules, FOCI's share price fluctuations are recognized in our books as so-called "accumulated other comprehensive income", a balance sheet item under owners' equity, and do not affect our profit and loss. Likewise, upon disposal, any resulting gain or loss will be recognized only on the balance sheet through change of retained earnings and, again, will have no impact on the profit and loss. This accounting treatment we chose underscores our long-term commitment to the FOCI investment. We expect CPO to become a major revenue and profit contributor in the years ahead. With that, I will now begin with an update on the large panel driver IC business. In Q2, large display driver IC sales are expected to decrease by high-teens quarter-over-quarter, attributable to customers pulling forward their inventory purchases for TV applications in prior quarters. In contrast, both monitor and notebook IC products are poised for sequential increases due to higher legacy product shipments to key customers. Looking ahead to the notebook market, our focus is on premium models featuring OLED displays and LCD displays with touch functionality. We offer a full spectrum of IC solutions for both LCD and OLED notebooks, including DDIC, Tcon, touch controller, and TDDI, enabling us to provide customers with a comprehensive one-stop solution while increasing our content per device. We continue to see strong design-in momentum, particularly in OLED for notebooks, where rising memory prices are depressing lower-end demand and accelerating the shift to premium segments. The scheduled ramp-up of new Gen 8.6 OLED fabs later this year and in 2027 in China adds another tailwind, further driving higher OLED adoption in notebooks. Turning to the small and medium-sized display driver IC business. In Q2, small and medium-sized display driver IC business is expected to increase high-teens from last quarter. Q2 automotive driver IC sales, including TDDI and traditional DDIC, are set to increase by a double digit quarter-over-quarter. Both DDIC and TDDI sales are expected to increase sequentially, driven mainly by the broad-based replenishment from panel customers with lean inventories, as well as the ramp-up of new TDDI and DDIC projects for a leading panel customer. Despite global softness in automotive sales, our long-term competitive position remains solid, supported by hundreds of design wins already secured across TDDI, DDIC, Tcon, and an expanding OLED portfolio. In addition, Himax is deepening its well-established supply chain in Taiwan while expanding across China, Singapore, Japan, Korea and Malaysia. This ensures production flexibility and cost competitiveness, while also addressing customers' geopolitical considerations. We continue to lead the global automotive display market with a 40% share in DDIC, well over half in TDDI, and an even higher market share in local dimming Tcon. We also continue to lead in automotive display IC innovation, pioneering solutions across a wide range of panel types while addressing diverse design requirements and cost considerations. Recent evidence of such efforts is our LTDI technology for ultra-large touch displays where multiple projects have entered mass production in several car brands across different continents. After years of engagement with customers globally, we expect meaningful revenue contributions from LTDI starting this year. Our integrated single-chip solution combining TDDI and local dimming Tcon represents another such innovation. Targeting smaller and lower resolution automotive touch displays, it delivers a compelling option for cost- and space-constrained applications without compromising performance. Design-in activities continue to expand globally, with multiple projects underway across leading panel customers, Tier 1s and OEMs. Looking ahead, the accelerating adoption of OLED displays in automotive creates significant opportunities for Himax. Our ASIC OLED DDIC and Tcon solutions have already been in mass production for several years, with continued customer adoption. We now also offer new standard DDIC and Tcon products to support scalable deployment. In parallel, collaborations are underway with leading panel makers on new custom ASICs, positioning us well to address diverse customer requirements across a wide range of automotive display applications. Together, these efforts position Himax to capture increasing semiconductor content as premium automotive displays evolve from LCD to OLED. In addition, Himax's advanced OLED touch ICs are a key pillar of our automotive OLED portfolio, delivering industry-leading signal-to-noise performance and high-precision multi-finger touch capability, enabling reliable operation even when wearing thick gloves or with wet fingers. Our OLED touch ICs started mass production in 2024. Since then, they have been increasingly adopted by leading panel makers and end customers across Korea, China, the U.S., and Europe. Multiple new projects are poised to enter mass production in the coming quarters. Moving to smartphone IC sales, we expect Q2 smartphone revenue, covering both LCD and OLED products, to decrease quarter-over-quarter following the initial ramp up of an OLED IC for a leading smartphone brand's mainstream model in the prior quarter. For tablet ICs, Q2 sales are expected to increase sequentially, driven by customers' early pull-in demand against the backdrop of rising memory price sentiment in the market, with ongoing shipments for a customer's premium OLED tablet also contributing to sequential growth. I'd like to now turn to our non-driver IC business update where we expect Q2 revenue to increase by double-digit sequentially. First for an update on our Tcon business. We anticipate Q2 Tcon sales to increase by double-digit quarter-over-quarter. Our automotive Tcon business is expected to deliver decent double-digit growth in Q2, driven by shipments from prior design-wins across the board. Despite automotive market headwinds, Himax continues to enjoy strong growth momentum in automotive Tcon. Particularly in solutions featuring local dimming functionality, backed by hundreds of secured design-wins across a broad and diversified customer base, we are well positioned for sustained growth. In Q2, we expect Tcon to account for over 12% of total sales, with more than half contributed by automotive Tcon. Meanwhile, head-up displays are poised to become an integral part of new-generation smart cockpits, driving demand for sophisticated Tcon technologies, an area where Himax holds a strong leadership position. Our multifunctional Tcon not only delivers excellent contrast, eliminating the so-called postcard effect often seen in HUDs, it also supports full-area selectable local de-warping to correct image distortion caused by windshield curvature and/or projection angle. In addition, integrated On-Screen Display function ensures that critical safety information remains visible even when the system is malfunctioning and/or powered down. Together, these features make our Tcon a compelling solution for customers' HUD applications, as evidenced by fast expanding design-in activities with leading panel makers and Tier 1 players. This growing HUD pipeline positions us well for broader deployment and meaningful revenue contribution starting in 2027. Switching gears to the WiseEye product line, a cutting-edge ultralow power AI sensing total solution, targeting endpoint device markets. WiseEye stands out due to its industry-leading, ultralow power design, operating at merely a few milliwatts, combined with an extremely compact size, on-device AI inferencing, and 24/7 always-on image and voice sensing. This combination enables advanced AI capabilities in endpoint devices that were once constrained by power and size limitations and has already been widely adopted across a wide range of applications, including notebooks, surveillance systems, access control devices, palm vein authentication, smart home solutions, and smart glasses, with further customer engagements currently underway. On the WiseEye modules front, design-in activities continue to expand, driven by their plug-and-play architecture, combined with ultralow power consumption and on-device AI capabilities. These features help developers accelerate innovation and scale their products from prototypes to commercial deployment. This broad applicability has led to adoption across a wide range of domains, including smart access control, space management, computer monitor, automotive, and bicycle applications. In particular, our PalmVein module is rapidly securing design wins, offering a touchless, high-security solution with high accuracy and advanced liveness detection. Combined with GDPR-compliant architecture, one of the world's strictest data privacy laws, our PalmVein solution ensures robust data privacy and protection of user biometric information through privacy centric on-device processing. We are seeing growing PalmVein module adoption across applications such as smart access control, workforce management, and smart door locks, with multiple projects progressing toward mass production in the coming quarters. As mentioned earlier, WiseEye is gaining broad market recognition in smart glasses as a compact, ultralow power, always-on perceptual front end. WiseEye supports both outward-facing environmental sensing, mainly object classification and scene understanding, and inward-facing capabilities, including eyeball tracking and iris authentication, delivering environment-aware vision AI and responsive, low-latency human-machine interaction for smart glasses. This combination of capabilities makes WiseEye ideally suited for wearable devices requiring real-time responsiveness with minimal battery impact and is a key factor driving design-in momentum among smart glasses players. Moving on to our latest advancements in LCoS microdisplay technology. At Display Week 2026 this week in Los Angeles, we showcased our ultra-luminous, high-contrast miniature Dual-Edge Front-lit LCoS microdisplay. We were also invited to deliver an in-depth presentation at the symposium, highlighting Himax's recognized expertise and leadership in LCoS microdisplay technology. Our LCoS solution is a full color microdisplay that integrates illumination optics and LCoS panel into an exceptionally compact form factor of just 0.09 cc and 0.2 grams, delivering up to 350,000 nits of brightness and 1 lumen output at just 200 mw total power consumption. It can also be configured for high-brightness, low-power, green-only mode and frictionlessly switched back upon command from the central processor, allowing for improved power efficiency across different ambient light conditions while supporting customers' cost targets. In addition, its ultra-high luminance ensures excellent visibility in bright environments, while our proprietary technologies significantly enhances contrast and reduce the postcard effect frequently observed in low-light conditions. Himax is currently working closely with multiple waveguide partners across China, Europe, Israel, Japan, Taiwan, and the U.S. to bundle these technologies into display systems for AR glasses, streamlining system integration and driving future design-in opportunities. We will provide further updates in due course. That concludes my report for this quarter. Thank you for your interest in Himax. We appreciate you joining today's call and are now ready to take questions. Operator: [Operator Instructions] We'll have our first question, Donnie Teng, Nomura. Donnie Teng: I have 2 questions. The first question is regarding your automotive business. So wonder if, Jordan, if you can give us a full year outlook regarding your automotive-related business growth. And also what could be the possible quarterly revenue pattern into the second half this year? Because it looks like customers still maintain pretty low inventory. So I'm not sure whether it will be still like restocking, destocking coming off for the coming quarters. And the second question is regarding to the CPO. So you have mentioned about the Gen 1 and Gen 2 products. Wondering if you can share with us regarding to the competition landscape for the Gen 1 product and Gen 2 products. Are you seeing different competitors? And also another thing is I'm curious is like the overall optical communication supply chain is facing supply tightness at upstream, like indium phosphide substrate for lasers, et cetera. Are you seeing other components are facing the short supply as well? For example, whether the micro lens will be under shortage. Jordan Wu: Thank you, Donnie. If I may, I will address your second question first on CPO on competition or potential supply shortage of other components, et cetera. They are not really our major concern to be honest because for now, once the mass production gets started and is successful, what we're seeing is with the multiple customers we have already in hand, I'm talking about major customers that we really, really focus on, they are actually other customers. I mean they are all very big match, but they are still, so to speak, priorities internally. So with their demand, actually based on the opportunity [ made ] is much, much bigger than what we can supply for now. So we are not worried about competition. I'm not saying whether they are good or whether they exist. What I'm saying is we just need to focus on our completion of validation and that's mostly enter mass production. And once that happens, the customers have put all right to us that the potential demand in the early stage and that actually much always what we can supply. So I think competition, I mean, for now is not really an issue. I mean I can say the same to answer your question on the potential shortage of other components. And I think, I said in the prepared remarks earlier that 2027 is likely we can see meaningful revenue contribution for us. So well, I like to manage that even before the official mass production, early shipments for engineering rise were already have positive impact on our financials. And as I said earlier, the customer demand almost always what we can supply. So once all the shipments get started, the drills will likely be explosive because of demand driving this there. And one small production in case we believe CPO will deliver the strongest growth among all our product lines, a drill that is likely to sustain for the years to come. So that is my answer to your CPO question and automotive. For the full year outlook, I mean bear in mind, we don't actually provide full year guidance. So I'm not going to give numerical projections. But we can say quite comfortably we are well-positioned to see sales growth for the year, obviously gross margin compared to last year, and that is primarily among other things driven by automotive outlook. So the overall automotive industry outlook, as we all know, remains muted which I think most market surveys project for a flattish, normally a shipment year-over-year. However, I think we believe we will be able to outperform the market like we did last year. And I did say in the prepared remarks that we expect sales automotive to grow quarter-by-quarter this year. So that is a response to your question. Yes, the customers' inventory level remains fully, but even that they seem to historically handle automobile and then [indiscernible] such a cycle, but I cannot predict whether this cycle will repeat this year in the second half, but our confidence level for the after quarter drills comes mainly from a few major projects with our customers, which are 24 months for exchange second half. Maybe they are after years of design-in [indiscernible]. So we are now also projecting some growth for this year's automotive sales. And again, I think our automotive business is well positioned to beat the market like last year in terms of growth. Donnie Teng: And a follow-up on CPO -- the power and CPO is like are you able to quantify the sales contribution for this year and next year potentially? And I'm also curious that are you -- do you require to expand the capacity for the demand coming in 2027 or you will utilize the existing sale first? Jordan Wu: Well, you realize how this is [Indiscernible], which actually is fully utilized for this application, can already generate hundreds of millions of annual sales for us with a very decent profit. Our partner, FOCI, actually, I cannot comment on their behalf, but they did say in their prospectus issued a few months back in their recent rights issue that -- I mean, they too have plan to continually spend a capacity. As we all know, the positive purpose for the right to issue recent deals to build capacity for this purpose for mass production. So in the prospectus, that is something you would rely on to -- given the right conditions, they would certainly continue to expand the capacity. And that is what they say in their prospectus. And, I mean, certainly beyond that, I cannot say anything more on their behalf. But what I can say is our capacity actually outweighs their capacity. So, to be honest, they have to expand first. But given where they are at the moment, I think we again feel confident that somehow [indiscernible] mass production progressing, they will sort the issue as well. But yes, our capacity is more than sufficient to support up to hundreds of millions of annual sales for us. And with that, I'm afraid I am not able to quantify sales contribution for this year or next for now. But this year is still small. They are primarily sampling and engineering shipments. They are not -- I mean quarter-over-quarter, good growth, but they come from a very small base. So for overall group perspective, they are still not meaningful. But next year, as I said, regardless of when mass production will commence, so like the -- even before mass production, the engineering runs will contribute meaningfully to our top line and especially bottom line growth. Operator: Thank you. And there are no questions at the moment. We thank you for all your questions. I'll pass the call back to Mr. Jordan Wu. Thank you. Jordan Wu: As a final note, Karen Tiao, our Head of IR/PR, will maintain investor marketing activities and continue to attend investor conferences. We will announce the details as they come about. Thank you and have a nice day. Operator: Thank you, Mr. Wu. And ladies and gentlemen, this concludes first quarter 2026 earnings conference. You may now disconnect. Thank you again. Goodbye.
Operator: Ladies and gentlemen thank you for standing by. My name is Desiree, and I will be your conference operator today. At this time I would like to welcome everyone to the Six Flags Entertainment Corporation 2026 First Quarter Earnings Call. [Operator Instructions] I would now like to turn the call over to Six Flags' management for opening remarks. Go ahead please. Michael Russell: Good morning and welcome to Six Flags Entertainment Corporation's First Quarter 2026 Earnings Conference Call. I'm Michael Russell Six Flags' Head of IR. On the call with me today are John Reilly President and Chief Executive Officer; Brian Witherow; and Dave Hoffman Chief Accounting Officer and Interim Finance Lead. Before we begin I would like to remind everyone that certain statements made during this call may be forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described. Please refer to our earnings release and SEC filings for a discussion of those risks. Today's call will begin with prepared remarks from John followed by Dave after which John will return for closing remarks. We will then open the call for questions. With that I'll turn the call over to John. John? John Reilly: Thank you Michael and good morning. Before discussing the quarter I want to address the leadership changes we announced this morning. We have made targeted adjustments across key areas of our senior leadership team including finance administration and marketing to better align our organization with our strategic priorities going forward. We thank Brian for his many years of service and contributions to this company. Dave Hoffman our Chief Accounting Officer will step in on a temporary basis to lead the finance organization. I am confident Dave will help make this a smooth transition. Since stepping into the role of CEO I've worked with the team to take deliberate actions to strengthen the company's strategic and financial positioning including the sale of noncore assets, monetization of excess land and refinancing of our balance sheet. These actions, together with the leadership actions we are implementing, position us to execute against our core operating objectives. Turning to the quarter. We delivered meaningful year-over-year improvement driven by higher attendance, increased guest spending and disciplined cost management. While the first quarter is seasonally limited with only a subset of parks open, including our parks in California, Mexico and Texas, the strong first quarter results demonstrate the resilience of our operating model and progress against our priorities. Before getting into the drivers of the quarter, I do want to acknowledge that results benefited from the earlier timing of Easter and spring break as well as more normalized operating conditions in California relative to the disruption that we experienced in the prior year. While these factors helped, first quarter performance also reflects the cumulative impact of the foundational work we have put in place over the past year. This includes the integration of our ticketing platforms, enhancements to our digital and commercial capabilities, and operational improvements across our parks. Together, these efforts are driving measurable gains in consumer engagement and demand. A key component of that progress has been our decision to allocate additional resources to our revenue management efforts, supported by enhancements to our consumer-facing digital platforms. As part of this initiative, we have embedded pricing and revenue management expertise into the organization and redesigned our platforms to better guide guests towards the best value for their needs. In the first quarter, we saw the benefits in higher conversion rates, improved capture and increased migration toward higher-value season pass products. New for 2026, we've introduced regional access benefits across select pass tiers, allowing guests to visit multiple parks within a defined region. This new regional pass offering is gaining traction as guests are demonstrating a clear preference for greater flexibility and broader access, driving product upgrades and increased cross-park visitation. We are encouraged by the early response, including improved pass sales trends, a more favorable product mix and strong guest interest in visiting more than one park. The regional pass has also enabled us to enter the core of the season with a larger and more engaged pass and membership base, which we expect will support visitation and spending through the peak operating period. Once guests arrive at our parks, we saw strong in-park spending trends during the quarter, reflecting the earlier timing of the Knott's Boysenberry Festival, a high per cap event as well as improved food and beverage offerings and higher park utilization driving incremental ancillary spend. To restore localized decision-making, we have reintroduced park presidents at our largest parks. We've done this to improve accountability, accelerate decision-making and drive greater consistency across the portfolio. We remain disciplined in our capital allocation. Our priority is to invest in parks that offer the highest returns, particularly at our larger properties with a focus on enhancing the guest experience through targeted investments in rides, food and beverage, and the overall environment. Residual free cash flow will be directed toward operations and towards debt reduction. As an extension of this strategy, we have completed the sale of select parks and progressed on the sale of noncore land assets. These actions are expected to enhance margins, sharpen focus and improve returns to shareholders. With that, I'll turn the call over to Dave. Dave? David Hoffman: Thanks, John. For the first quarter, attendance increased 4%, per capita spending increased 6% and net revenue increased 12% compared to the prior year. Through April, which normalizes for the Easter shift, trends in attendance and revenue remain positive. Our teams also delivered strong cost control with first quarter operating costs down meaningfully year-over-year. Taken together, we drove a $48 million improvement in adjusted EBITDA, reflecting improvements across demand, guest spending and cost discipline. Performance was driven by pricing and product structure changes, improved marketing and messaging and strong in-park operations. Consistent with John's remarks, we are seeing the impact of our pricing and revenue management initiatives contributing to improved pricing and product mix. This is reflected in the 3% increase in admissions per capita and the 10% increase in in-park product per capita spending achieved alongside attendance growth, underscoring the quality of demand. We strengthened our balance sheet during the quarter through refinancing, improved liquidity and extending maturities. May and June are key selling periods for our season pass and membership products, and we expect greater visibility into full season trends as we move through those months. Finally, we completed the sale of select noncore parks during the quarter and have provided additional details within the earnings release to assist with modeling those disposals. As we think about the first quarter, it's important to keep a few factors in mind. Results benefited from timing and more normalized operating conditions in California. It's also important to remember that only a portion of our parks are open in the first quarter. As such, the quarter represents approximately 6% to 8% of full year attendance and revenues, and the company usually operates at a loss in the first quarter because most of our seasonal parks are closed. As a result, we would caution against extrapolating first quarter performance to the full year. Lastly, we are not providing formal earnings guidance or long-term targets at this time. Instead, we are focused on consistent execution across the operating levers that drive long-term value. We believe investors are best served by transparency around demand trends, per capita spending, cost discipline, liquidity and capital structure, areas where we have strong visibility and are already seeing progress. While we're not providing guidance, we remain committed to regular transparent communication. As the season unfolds and visibility improves, we will continue to provide clear qualitative context around performance trends, key initiatives and progress against our strategic priorities. With that, I'll turn the call back over to John. John Reilly: Thanks, Dave. Before we move to closing remarks, I'll ask Brian to share a few brief comments. Brian Witherow: Thanks, John. As this is my final earnings call, I want to say what an honor it has been to serve as the CFO of Six Flags and our predecessor company, Cedar Fair. Over the last 31-plus years, I've had the opportunity to work with an incredible group of colleagues, execute numerous M&A transactions, including the most important merger in our industry and lay the foundation for the future of the new Six Flags. I'm proud of everything we've accomplished during that time, and I'm confident that Six Flags is well positioned to continue to succeed and provide engaging and entertaining experiences for our guests for years to come. John? John Reilly: Thank you, Brian. We appreciate your contributions, and we wish you our best. Turning to the quarters ahead. We are entering the most important part of our operating season with encouraging early momentum, particularly around consumer demand, and we're excited about our new park offerings. Our 2026 capital program was highlighted by the addition of Tormenta, the world's tallest dive coaster at Six Flags over Texas as well as the return of MonteZOOMa at Knott's Berry Farm, one of the park's iconic attractions. Meanwhile, we're focused on the family market at Six Flags Great Adventure in New Jersey with the first phase of a new boardwalk area and at Six Flags Magic Mountain north of Los Angeles with the introduction of Looney Tunes Land, a fully reimagined themed area that will be the home of our Looney Tunes characters, including Bugs Bunny, Daffy Duck and others. These park enhancements are aimed at expanding our addressable audience and complementing the park's core thrill business. At Kings Island, our new Phantom Theater experience blends immersive storytelling, animatronics and multisensory effects to create a highly engaging indoor attraction. And earlier this week, we announced plans to expand the entertainment offerings at 3 parks, including a reimagined lineup of summertime shows at Kings Dominion and the return of Holiday in the Park at Six Flags Great Adventure and Six Flags over Georgia. These are strategic decisions based on thorough analysis and consumer research. Strategically, these types of offerings broaden our reach. They allow us to attract guests who may not typically visit during our traditional operating season, while reinforcing the value of our season pass and membership programs by extending the number of meaningful use opportunities throughout the year. As our seasonal parks have begun to open, we're encouraged by the positive trends we're seeing in both consumer demand and operational execution. While we are still early in the season, the momentum we are building reflects the actions we've taken across pricing, product design and park-level execution. As we move through the year, we're mindful of several dynamics, including more competitive comparisons related to last year's marketing activity, promotional cadence and early cost synergy benefits. These are factors we understand well and have planned for, and they are embedded in how we are managing the business going forward. Against this backdrop, we remain focused on disciplined execution. We believe the underlying improvements we've made across demand generation, monetization and cost control position us well to navigate these dynamics and continue building momentum through the balance of the season. More importantly, we believe these actions are strengthening the foundation of the business in a way that supports sustainable growth, margin expansion and long-term value creation. Operator, that concludes our prepared remarks. Dave and I are ready for questions. Operator: [Operator Instructions] Our first question comes from the line of Ben Chaiken with Mizuho. Benjamin Chaiken: Brian best of luck. It's been great. On the operating day strategy the operating days year-to-date down year-over-year I would imagine part of the strategy -- that's part of the strategy to help control costs. I guess how do you think about operating days for the remainder of the year and other opportunities to control costs? And then one quick follow-up. John Reilly: Sure. Ben this is John and I'll start out here. So we approach this issue market by market and some of the efficiency we saw in January benefited us on the cost side and then we were pleased with the results the attendance per day as we talked about earlier. So we'll approach this with agility as we go forward. And even in Q1 for example we were adding days in Mexico City while we were adjusting the other way for some of the parks. Part of that dynamic in the first quarter is the loss of the winter events just to carry over the first week in January. And then going forward I'll turn this over to Dave and he has the numbers for you for the year to go. David Hoffman: Ben this is Dave. So you read the 24-day reduction in Q1. We expect to remove another 16 days in Q2 and then add 60 days in the balance of the year. So overall we expect to add 20 days to the calendar. You know that that is subject to change as we get deeper into the year but that's what the plan is. Benjamin Chaiken: Okay. That's very helpful. And then just one question on kind of the 1Q and the year-to-date. I know you mentioned in the prepared remarks that Easter I believe you said was a benefit to 1Q. I think just stepping back and thinking historically I would imagine that Easter being earlier was a marginal headwind to the year-to-date attendance numbers just given the seasonality around park openings I guess. Is that correct like that logic? And then if so how much can you give us to kind of have a ballpark or a round number of what that impact was on a year-to-date standpoint recognizing that you said it was a benefit to 1Q specifically? John Reilly: Yes. We -- I don't know that we would characterize the timing of it as a headwind at all. I think it can be a headwind when it's very early like in March. But it just happened to be very late in 2025. So the April comparison give us comfort that we navigated through the March plus April comps favorably. Operator: Next question comes from the line of Steve Wieczynski with Stifel. Steven Wieczynski: So John, I want to ask about the cost structure. I mean that was a pretty big surprise in the quarter. And look, I understand there are gives and takes in terms of year-over-year comparability. But wondering if you can help us think about the longer-term margin opportunity in terms of what you kind of see as you work your way into that job, John, I would say, especially now with some of that -- the lower-margin parks removed from the portfolio. John Reilly: Yes. Thanks, Steve. So the cost work that we've been able to execute on is part of a plan that we've implemented in the company, and we have various levers, including organizational changes in our corporate offices in Charlotte and in Arlington. We've made changes there while supplementing the parks. That's one key lever. We did benefit somewhat from changes that were made in '25 in Q1. And then we have since executed other changes, as I've said, reducing the overhead centrally and increasing the resources at the park level for a net reduction. We see considerable opportunity on the procurement front going forward. We've engaged in calls and negotiations with our top 75 vendors, and then we have begun outreach to the next 400 vendors to really remind them of the scale of what we offer as North America's largest regional operator, the benefit of working with us on our contracts and asking them for help and efficiencies. The early returns have been encouraging. But we have a lot of -- we see -- we believe we have a lot of opportunity to mine on the procurement front. And then there's a number of other initiatives we talked in the last quarter about automation and efficiency and ideas from the field. We are executing on those ideas now as well that should yield cost savings going forward. And I think also the structure where we have park presidents now is going to help accelerate the impact of those kinds of initiatives. And then to conclude, I would just go back up to something that we also said last quarter, look, in 2025, we finished at 27% EBITDA margin. Clearly, it was a difficult year. But to have the scale that we have and to be at 27%, we've said before, is not something that we accept, and we're working hard to improve upon it. And you can see the comps in the industry, but certainly in the 30% ranges, 30-plus percent ranges are -- it's proven that regional operators can execute in that space. So we see opportunity. We're not going to put a number on it, but we're unhappy with 27%, and we have a plan to improve it over time. Steven Wieczynski: Okay. And then second question, I want to ask about the entire park portfolio at this point. I mean, obviously, you guys have sold a number of parks over the past couple of months. And I'm wondering as you kind of look across the portfolio at this point, John, if you see other opportunities to whether sell or shut down underperforming parks. And then maybe help us think about what, in your mind, the optimal number of parks is eventually going to look like over the longer term. John Reilly: Yes. Thanks. So the -- we executed on what we said we would, which is the sale of 6 parks that have been closed in the U.S. that were some of our smaller parks. And then we have Montreal that we expect to close in the second quarter. So we've executed on what we said. The first thing I think it's important to say that we've said to our consumers and our pass members and our prospective visitors is that we have no other plans in 2026. If you're buying a pass, if you're thinking about a pass, the portfolio is the portfolio, and we're focused on the summer and execution. I think that's a very important message for people who want to come and experience the summer in our parks. That said, we are seeing the benefits of focus since the disposal of the 6 parks and the pending sale of Montreal. We're seeing the benefits of focus in our strategy. And we're really focused on execution, on demand generation, on pricing and operational execution. And the more we can focus that on the highest yield parks, the biggest parks, the better off we'll be. So we'll approach this with flexibility, and we'll be willing to look at it again in the future. Operator: Next question comes from the line of James Hardiman with Citi. James Hardiman: I wanted to start out by saying, Brian, it's been a pleasure working with you and learning from you through the years. I want to say you'll be missed and good luck with the next chapter. And then -- so following up on sort of the previous line of questioning, the slimmed down portfolio, it looks like from some of the disclosures here, you're losing about 10% to 11% of attendance, only about 6% of EBITDA. Maybe help us think through the cash flow implications of that slimmed down portfolio, both quantitatively, if you can give us sort of updated numbers in terms of CapEx and interest and taxes, but then qualitatively, right, that renewed focus on the parts that really moved the needle. I'm assuming you can now dedicate more of the CapEx budgets to what's left and hopefully, what could get sort of those incremental returns and ideally drive incremental upside from what's left. But maybe walk us through some of those items. John Reilly: So James, this is John. The -- we did provide a table in the earnings release that walks you through that quarter-by-quarter for the year, the revenue, the EBITDA impact quarter-by-quarter because we know that's something that will be important as you model our performance. The -- you're correct, and I think we had it on the earlier question, too, that it can help drive margin improvement because these are generally lower margin parks than our higher scaled parks. Additionally, with CapEx allocation, the way you characterized it, is, I think, generally accurate that this gives us more flexibility with CapEx toward parks with higher returns. So we see it in the same way. If there's a specific, I guess, cash flow or tax question, I think Dave can take that. David Hoffman: I guess I would just reiterate, it's really more about reallocating to higher return parks. So just kind of calling out some of the numbers, James. We're still expecting $425 million to $450 million of CapEx for the year. The first quarter CapEx was a little bit lighter than that, just given the cadence of some of the projects, but we still expect to get within that range. Cash interest is still expected to be $300 million to $320 million, and that includes the impact of the refinancing, of course. And we expect cash taxes to be somewhere in the neighborhood of $25 million to $30 million for the year, and that's before consideration of a significant income tax refund that we claimed on the most recent tax return. James Hardiman: Got it. That's all really helpful color. And then, I guess, specifically, as we think about the 2Q opportunity, looking back to last year, that's really when sort of the wheels fell off. Obviously, on the attendance side, you guys had impossibly difficult weather as we think about late May and into June. But also on the cost side, if memory serves, you really leaned into marketing with a significant amount of discretionary spending in the second quarter. Is there a way to think about once we lap those 2 items -- obviously, we won't really know what the weather is until we get there, but is there a way to think about, I don't know, operating costs year-over-year in the second quarter or as a percentage of sales, however you guys think about it, what's the cost opportunity in 2Q? And where would you like to see the active pass base heading into the second half? Obviously, that was another big part of why the second half of last year was such a struggle just being so far behind in active pass base. John Reilly: Sure. James, this is John, and I'll take that. So although we won't -- we aren't going to guide a cost number for Q2 or for remainder of the year, I'll make just a couple of points. Number one, we -- as we mentioned in the context of Q1, we have a cost savings program and efficiency program underway. I've been very encouraged by the receptivity of our team, by their execution, by their willingness to embrace targets with guardrails in specific areas. And so we're executing on that. We will continue to execute in Q2. On the comments that we made at the beginning of the call to your marketing question for the second part is yes, there was a big spend in marketing last year and in Q2, and we've listed that as one of the factors that we need to sort out and we need to think about the comps going into Q2. So the -- and we'll be agile in terms of our approach to that. The other thing I would mention is we do have some pressure in maintenance costs. And I expect from the reviews that we're doing at a park level, we expect some maintenance cost pressure in Q2. And it's an important spend for us because we're committed to do a better job with our ride uptime and with the number of trains and cars available on all of our rides. So that's something that we're going to -- when we see a need, we're going to execute against it. So I would mention the marketing and the maintenance that you mentioned are probably good factors to think about. The -- as we think about the summer and the active pass base, we continue to be encouraged by this Gold Pass, this regional pass that has been rolled out and really accelerated our sales since the rollout. People are really enjoying the benefit of being able to cross-visit parks that has appeal for the sale and then also for additional attendance within regions like Texas or the East Coast or within California. So we're encouraged by that. As we think about the summer, we're going to continue focusing on the regional pass. We are also seeing a benefit from the reintroduction of membership and the higher renewal rates that we see on that, and that's part of the reason for the increased pass base that we talked about. Operator: Next question comes from the line of Patrick Scholes with Truist Securities. Charles Scholes: Question for you regarding pass sales. When I look at the comparable 1Q earnings release from a year ago, and I'm just trying to match things up sort of apples-to-apples to figure out how they're going. The KPI metric in a year-ago press release was that the 5-week period ending May 4, 2025, season pass sales were up 6%. I don't think when you say in this most recent quarter, active pass base up 6%, that's an apples-to-apples. Do you have an apples-to-apples metric that we can compare to that 5-week period that you said a year ago to help us understand how the pass sales are trending? And I apologize if it -- go ahead, sorry. John Reilly: Yes. We don't have that prepared like a 5-week view on that for you. But what I would say is back to the issue -- back to the positive impact that we're seeing from both membership and the regional pass, the membership has a higher renewal rate, and that has an effect in growing our pass base. So the more we lap the reintroduction last year of membership, we should see more people staying in the fold. And so that's a combined factor along with the sales rate on season passes. Charles Scholes: Okay. And then going back to the CapEx, correct me if I'm wrong, I think you said this year, not so much change. But how do we think about like a run rate here? I think you're running like $400 million. After this year, once those passes, you're not -- those parks are no longer being operated or being used by your pass members. How do we think about sort of the run rate again after this year CapEx? John Reilly: Yes. So in terms of the pass, I think we mentioned we've guided to $425 million. It could be at $450 million for this year. We're not going to guide long range on it, but the visibility we have for now is in that $425 million range. And as Dave mentioned before, it would be a reprioritization, reallocation of the CapEx that would have gone to the parks that were sold to parks with higher and better returns. Operator: Next question comes from the line of Lizzie Dove with Goldman Sachs. Elizabeth Dove: I want to echo. Brian, it's been great to work with you. Really appreciated your help all the years. So good luck with the next chapter. In terms of -- I'd love to just touch on the consumer for a second. There's been a lot of cross-currents for the last few months. We've got higher gas prices for the consumer, yet your pickup trends have looked really good the last 2 quarters, but maybe some of that shoulder season comparability. So maybe it would be great just to hear from you what you're seeing there on the ground consumer-wise. John Reilly: Yes. This is John, Lizzie. Thanks for the question. We're focused on what we can control, the levers in the business. And for us, we're not really able at this point to attribute performance trends to those kind of external factors. And the reasoning is we think there's a lot of opportunity in the business to execute. And so the work that we mentioned before that we're doing in our commercial area with revenue management, with pricing, with upgrading our visitors to higher pass products that have a lot more value to them, that's where we see the real opportunity. And our belief is to execute well against that, increase our capabilities going forward in that area. That's some of the reason for the marketing changes that we mentioned today that the opportunity there is a good one for us. So our focus is execution, focusing on what we can change, what we can do, and we've got our heads in the business. And of course, we'll monitor external factors, and we'll be agile, and we have other levers in the business that we can go after if we need to. But our focus is on what we've laid out so far. Elizabeth Dove: Got it. And then I appreciate you're not giving guidance at this point for the year, but high level, it would be great to just get a refresh on how you're thinking about the kind of building blocks for this year and in terms of particularly like the attendance, recapture opportunity and how you're kind of balancing that in terms of per caps. John Reilly: So yes, demand generation is a real key for us, and we want profitable attendance in the parks. There's excess capacity in the business to grow attendance, but we want to do it profitably. And the initiatives we have underway thus far are working in that area. The regional pass with the access to parks, the increase in cross-park visitation, the appeal that has to sales, that's been a positive for demand generation. We believe there's further opportunity there and the leadership structure that we announced with the -- with having someone dedicated both to demand generation in our brand on the CMO side and then our commercial operation, which is conversion, price and yielding supporting that as well. So we -- demand generation is important to us going forward as is pricing, which thus far, we're seeing good results there due to the trade-up in the past years. Operator: Next question comes from the line of David Katz with Jefferies. David Katz: Brian, I appreciate all the time and attention, and all the best. I wanted to dig just a little bit deeper into the regional pass, which is interesting in a good way, I mean, to ask. What data you've looked at or what trends you looked at? And can we potentially interpret this as a step in the direction of a more specific set of passes across the system over time? John Reilly: Yes, this is John. I'll -- so in terms of the regional pass, the program in the future -- I think what I would say is the regional pass we have now available at what we're calling the gold level across the parks, there's considerable opportunity to further mine that. And we're also developing our membership program and other things. But the -- this has just been introduced, and we believe it's an opportunity to continue to mine going forward. When you think about it, we're seeing cross-park visitation much higher. And if you look at the appeal of that, for example, a guest in San Antonio, who's a pass member, a Gold Pass member at Fiesta, Texas, can go ride Tormenta in Arlington this summer. The same thing with a pass member at Knott's can go see the new Looney Tunes area at Magic Mountain, and that has a tremendous appeal. There are implications for that in how we think about our catchment areas, our media spend, our pricing and other areas as we go forward. And of course, we're going to mine that, but we're really in the early stages and see considerable opportunity to continue to optimize that. David Katz: Okay. And then one quick follow-up. The park presidents, can you just provide a little more color on those? Were those people who had worked with the parks before, people within the parks who were elevated? Did they come from other parks? I'm just curious. And I imagine the answer is some version of all of the above, but I'm curious just a little more color on that. John Reilly: You're right. It's all of the above. We're really pleased with the talent level we have there at the parks with park presidents and also our parks with park managers. It's one of the things that I found to be very encouraging as we travel around, we visit the parks and we work with them on their plans. We have people who are committed, entrepreneurial and understand the imperative of execution right now. So in some parks, we have people who rejoined us. In some parks, we have people that have come over from a competitor. But in most cases, these were internal promotions and the talent level internally was very good to feed these promotions. Operator: [Operator Instructions] Our next question comes from the line of Arpine Kocharyan with UBS. Robert Henry: This is Rob Henry on for Arpine. I wanted just to go back to the pass product. It seems like you might have kind of turned the corner there with units up 6%. Can you just give any color on pricing and maybe mix shifts that you're seeing within the pass product? John Reilly: If you look at the mix of the pass products, we have the Silver Pass, we have the Gold and then we have the Elite and we have membership. And we're -- as we've said, the real power we're seeing is a trade-up into Gold, but we also have people trading up into the premium categories. As we see that, we're constantly monitoring and adjusting where we need to in terms of price or promotional strategy to optimize the distribution across those tiers. But the real strength in the program right now, the power in the program right now is driven by 2 factors. One, the availability of visits to these sister parks that are nearby. We're seeing people are willing to drive and to visit. But secondly, the improvements we've seen because we have revenue management expertise embedded in the organization and the combination of the experts and the talent we have on our team, like Chris Meyering, whose promotion we announced this morning. They're really delivering in terms of the conversion, the merchandising, the consideration and the conversion on our website. So we're seeing improvement in our website performance along with the appeal of the product architecture. Robert Henry: That's really helpful color. And then just kind of as a follow-up, on the specified parts, it looks like it's a bit of a tailwind here in Q1 given that there was a bit of a drag on EBITDA. It seems like given kind of the table that you've laid out, kind of the rest of the year might be a bit of a headwind with the lost EBITDA there. And so is that still kind of fair to think about in that way? Or how should we consider that as we move forward? John Reilly: That cost is included in the Q1 results. I mean we've mapped out the impact for you over the course of the year. So the tailwind would presumably be in Q1 of 2027. Operator: Next question comes from the line of Chris Woronka with Deutsche Bank. Chris Woronka: Brian, I appreciate all the guidance and insights over the years. So all the best. I was hoping we could maybe talk for a minute about marketing. And I know that your plans are fluid and they're long term and you're going to adjust and adapt. But John, maybe just a thought or 2 on kind of where you are this year versus where you think you can get to in terms of reach and effectiveness of some of the marketing changes, things like going to more social media and bringing in some partners and some sponsors, like where you are in that process? And do we get more benefit this year or next year, do you think? John Reilly: Yes. I would answer that by saying, one, we've applied learnings from lessons that we identified from 2025, including how we were presenting our retail message, how we were marketing our passes, how we're merchandising them on the website. And also in terms of our creative, we've made big changes in our creative. That said, this is the key growth lever for this company, at least in the near term in terms of demand generation, in terms of evolving our brands. And as you say, in terms of properly leveraging emerging channels to drive demand. And that's precisely the reason that we're bringing Amy Martin Ziegenfuss on board to work to evolve our marketing program. We're in the early innings. Chris Woronka: Okay. Okay. That's great to hear, John. And then just as a follow-up, when we think about your properties, you've obviously gotten through a slug of noncore sales. You're working on some land parcels, it sounds like. But question is on hotels. You have 2, what I would think would be very core hotels at Knott's and Cedar Point. Then you have kind of a handful of other smaller hotels in the surrounding areas. Should we think about those as being core longer term or possibly not? John Reilly: We like the synergy of the lodging business, especially in terms of bringing people in from drive markets. We have research that supports that. But even in regional parks, there's a market for people who want to come in from a longer drive. The model that we have, as you said, at Cedar Point and Knott's Berry Farm is very powerful. The hotels are fantastic. They're updated. They're modern. And that's working for us. So we don't see any reason to walk back from the lodging programs that we have elsewhere. Operator: And our last question today comes from Eric Wold of Texas Capital Securities. Eric Wold: I guess two questions. The first kind of going back on the question a couple ago on pricing. I know you mentioned that kind of the pricing on the passes and daily is kind of dynamic and kind of you're driving it based on demand. But as you start the season, can you give us a sense of kind of what's embedded in kind of the pricing of the daily and pass prices versus last year to start the season? John Reilly: So the pricing versus last year, we're -- a lot of the growth that we're seeing is from the trade-up in the tiers and from the movement into membership because it's a higher yield product for us. So it's not necessarily an increase at the pass level. And we really want to bring people back into our parks. We're really focused on providing a good value, providing a suite of benefits that's compelling like the regional pass. And for that, as we said earlier, we want to grow profitable attendance. We want to grow profitable visitation to the parks, and that's the balance. But the principal lift that we're seeing, Eric, is from the trade-up within the tiers or the membership. Eric Wold: Got it. And then as you kind of enter the core season, maybe give us a sense of the hiring environment you're seeing out there in terms of availability, wage rate compared to last year and how that plays into your plan to staff appropriately as demand ramps? John Reilly: Our team is doing an excellent job staffing the parks. As we move into Memorial Day weekend, our stats tell us where we need to be, 90-plus percent of target. So we don't see any significant headwinds in that area. Like many other things we've mentioned, we take an agile approach. And if there's one position like lifeguards in one park, we make an adjustment and we address that. But we don't see any global issue. Operator: That concludes the question-and-answer session. I'll now turn it over to Michael Russell for closing remarks. Michael Russell: We appreciate you joining us today. Our next earnings call will be in August when we report our financial results for the 2026 second quarter. That concludes our call today, Desiree. Thank you, everyone. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good afternoon. I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the company's remarks, there will be a question and answer session. And if you would like to withdraw your question, press 1 again. Thank you. Before we begin, I would like to remind everyone that today's call may contain forward looking statements within the meaning of the federal securities law, including but not limited to statements about BridgeBio Pharma, Inc.'s future operating and financial performance, business plans and prospects, and strategy. These statements are based on current expectations and assumptions that are subject to risk and uncertainties, which could cause actual results to differ materially from those expressed or implied in these forward looking statements. For a discussion of these risks and uncertainties, please refer to the disclosure in today's earnings release and BridgeBio Pharma, Inc.'s periodic reports and SEC filings. All statements made here are based on information available to BridgeBio Pharma, Inc. as of today, and the company undertakes no obligation to update any forward looking statements made during this call except as required by law. With that completed, BridgeBio Pharma, Inc., you may begin your conference. Chinmay Shukla: Good afternoon, everyone, and thank you for joining BridgeBio Pharma, Inc.'s first quarter 2026 earnings call. I am Chinmay Shukla, Senior Vice President, Strategic Finance. With me are Neil Kumar, our CEO, Matthew Outten, our Chief Commercial Officer, and Thomas Trimarchi, our President and Chief Financial Officer. On today's call, Neil will walk through our commercial pipeline and business updates, with Matt providing additional commercial detail and Tom covering financials. Following our prepared remarks, we will open the call for questions. For the Q&A session, we will be joined by Ananth Sridhar, Anna Wade, and Justin To who will lead our program with BCP-418, and encaleret, respectively. With that, I will turn it over to Neil. Neil Kumar: Thanks, Chinmay, and thanks, everyone, for joining us today. As always, this is a forum in which we communicate salient aspects of our business that are of interest to investors, and we welcome your questions and feedback along the way. I want to spend the bulk of my time today talking about three things. The first is the Atruvio franchise, and I want to talk about our continued commercial momentum there and how we think about clinical differentiation. Importantly, these two things, plus the economics associated with the Part D orphan drug channel, underpin our confidence that Atruvio will continue to grow even past 2032. The second thing I want to discuss is launch readiness across the three exciting first-in-class or best-in-class brands we have in ADH1, LGMD2I, and achondroplasia. Although there are no major near-term clinical catalysts for any of these brands, there is a tremendous amount of activity going toward ensuring expeditious and high-quality approvals and launches. In its history, BridgeBio Pharma, Inc. has demonstrated across now three approved products, with hopefully three more to come, the ability to take on post–Phase III regulatory submission activities at very high quality, and we intend to build on this tradition with these new brands. I will end my comments addressing the current gap between our intrinsic value and where our shares trade today. I have heard from investors in the past that too much NPV talk is not what people tune into these calls to hear. At this point, it is my responsibility to discuss matters related to capturing the value that investors who have been in our stock for a long time have helped create. Our focus at BridgeBio Pharma, Inc. has always been on long-term value creation, and on reliably being able to take in money to do more work over time. And by the way, our activities across the greater bio ecosystem show that there are many more of these R&D opportunities out there. But this model is reliant on capturing the value of the work for investors, which is why today I will be discussing a share buyback program that will commence immediately. Let me begin my comments by talking about Atruvio. As many of you have read in the press release, we had $180.6 million in U.S. Atruvio net product revenue this quarter, which represents 24% growth from the last quarter and 392% growth year over year and is consistent with the brand globally becoming a blockbuster in 2026. Our focus continues to be on winning in the frontline. We believe a 95% stabilizer that preserves the native tetramer is not only the optimal solution, but even against combinations is the only solution one should start with, as it provides the highest degree of management of TTR monomer deposition, provides impact more quickly, is consistent with the pharmacokinetics of TTR stabilization, and ultimately achieves all of this in a cost-efficient and easy-to-access manner. Parenthetically, our data suggests a tripling in combo use with Atruvio with the various knockdowns, suggesting that the message that one should reach for a better stabilizer, even in combination, is resonating. As it relates to the frontline, our major competition continues to be Pfizer, and our best understanding of our share is that it has grown from the NBRx share I quoted at the JPM talk of 25% even furthermore, but still remains behind what Pfizer has been able to accomplish in the frontline. We believe that in this quarter, total new patient starts in the category were in excess of 6,100 new patients. We believe that for the first time, we are convincingly the second brand by volume in the space. There is more work to be done, but all of these trends continue to be in the right direction for us. So how do we pour some gasoline on these growing sales? The obvious way to do that in our mind is through clinical differentiation. We began to see reasonable inclines in the second derivative of our growth as the serum TTR story began to evolve in the marketplace, with multiple papers suggesting that higher levels of serum TTR are associated with lower levels of mortality at 30 months. As a reminder, every mg per deciliter of incremental increase in serum TTR seems to correspond to a 5% decrease in mortality risk at 30 months, meaning a more potent stabilizer should lead to better outcomes for the patients that we serve. We do not hear from many physicians quibbling with the fact that Atruvio is a near-complete stabilizer. Building on that, we are now beginning to explore and are confident in the outperformance of acoramidis versus tafamidis in the real-world setting. There were only really two real-world evidence studies reported to date, survival studies done in Colombia and by Dr. Mazri, that showed outperformance of acoramidis; both those were comparing our trial data and not, at that point, classic real-world data because we did not have enough time in the market to demonstrate anything in the classic real-world evidence setting. That is now changing. At ACC, an independent real-world evidence study presented by the Valley Health System of Nevada revealed statistically significant outcome improvements associated with acoramidis as compared to tafamidis. Building on this, we have a study in medRxiv that we will publish shortly in a major journal showing that Atruvio reduces diuretic intensification by 43% as compared to tafamidis. We intend to continue studying and publishing on differentiation in the real-world setting and are glad to see the cardiology community doing so independently. Interestingly, one of the benefits of acoramidis that was identified in the independent real-world evidence study was a lower incidence of acute kidney injury. As I mentioned in my J.P. Morgan talk, we are driving toward what we believe will be a seminal publication with potential impact for patients, physicians, and even on our label, as it discusses an observed rapid hemodynamically mediated renal protective effect, which is unique to Atruvio as opposed to the other stabilizers and knockdowns in the space. We continue to present and publish on acoramidis at major medical meetings as well. At ACC recently, we presented long-term efficacy and safety data from our Phase III open-label extension showing sustained clinical benefit from acoramidis at month 54, including a remarkable statistically significant risk reduction of 45% in all-cause mortality with a p-value of less than 0.0001, and a 49% reduction in cardiovascular mortality, again with a similar p-value, versus placebo. I would like to turn to the rest of the pipeline now. On LGMD2I, as I alluded to in my earlier comments, our team was able to go from top-line data to NDA submission in 155 days, consistent with our ethos that every minute counts and the fast pace that we have previously set with regard to our TTR regulatory submissions. We continue to work closely with the agency and foreign regulators to bring this medicine as expeditiously as possible to the patients who need it. I had the opportunity to attend the top-line results presentation recently in Orlando at the MDA meeting. It was a trip I will not soon forget. I was struck by the excitement our data generated not only within the LGMD2I community, but more broadly, given the striking results associated with BCP-418, suggesting that functional improvement is possible targeting well-described conditions at their source. Given the already ~500 genetically confirmed patients in the United States today, the highly engaged patient community, and physician education being conducted by the team, all of this augurs well for a positive launch dynamic. Moving to ADH1, I will be leaving from here to a very similar gathering—top-line presentation of our CALIBRATE Phase III data—at the European Congress of Endocrinology in just a matter of days. Here again, we will be looking to drive excitement into the broader physician community and to educate the patient community and establish a base of data that, together with our publication of our data, can ensure market-building exercises continue with high fidelity. Importantly, BridgeBio Pharma, Inc. has been supporting via grant family genetic testing events in the United States that continue to identify new patients with relatively high yield. Although we will be launching at a time when the majority of patients with ADH1 have not been identified yet, the combination of genetic testing, ICD-10 codes, and broad disease awareness education, plus our belief that we will be able to find ever more patients in need of this compelling drug product, supports the opportunity. Furthermore, our Phase III in chronic hypoparathyroidism will be commencing this summer and is bolstered by recent published work that illuminates the central role the calcium-sensing receptor in the kidney plays in regulating calcium metabolism. Finally, moving to achondroplasia, the results from this trial came after LGMD2I and ADH1, but I suspect given the strength of the results, prominence of the condition, and the remarkable KOLs we are privileged to partner with, that the Phase III manuscript will be forthcoming in a major medical publication and we anticipate presenting the full PROPEL 3 data set at a medical conference in 2026. Early commercial research here suggests unaided awareness in excess of 40% of the prescribing physician community, which for those of you who have commercialized brands know is a very high starting point and certainly higher than we have seen before in our own portfolio. Finally, I want to touch on the share repurchase program that we announced today. To do so, I would like to go back to BridgeBio Pharma, Inc.'s founding principles. The company was built on two things: to help as many patients as possible, and to establish a corporate and financial model that creates and captures value in predictable, responsible ways. That value capture has always been part of the mission. We talk about NPV, and while we anchor to intrinsic value, we try to make the right economic decision at every port. The reason for that is because if we capture value, more capital flows into drug development over time, and more patients get served, by us and others employing our decentralized, diversified model. Unfortunately, at this moment, we have not adequately captured value for the investors we serve, given the large disconnect between our NPV per share and our firm's intrinsic value. Even with the revision of Invitae’s entry from 2035 to mid-2031 or early 2032, our intrinsic value remains markedly higher than where our shares trade today for investors. To that end, the board has authorized a $500 million share repurchase program. These repurchases should allow our shareholders to concentrate their ownership in a portfolio whose risk profile has fundamentally improved. Of note, we have employed this technique in the past some six times. In aggregate, even accounting for the pre–Part A buyback, we have driven substantial returns for investors with our share repurchases. While we have this lever, we still believe in putting capital into our launches and advancing our clinical trials. Repurchases are additive and opportunistic, not substitutive, and are a direct result of our strong balance sheet. On the balance sheet point, we will always size deployment such that we preserve full flexibility to finance every critical program and activity in our portfolio. Plenty of liquidity and the ability to easily service our liabilities is a requirement before we deploy dollars into the buyback. With that, I will turn the call over to Matt to talk more about our commercial efforts. Matthew Outten: Thank you, Neil, and good afternoon, everyone. Q1 was another strong quarter for Atruvio, delivering an impressive 24% increase in net sales from Q4 and a 392% year-over-year increase from Q1 2025. Growth was driven by our existing and expanded sales teams accelerating new patient starts and first-line share gains. There are several factors which contributed to these results. Market momentum has remained strong. New-to-brand market share hit its fastest quarter-over-quarter growth since Q1 2025, and first-line patients have increased each and every month of the launch. Fill rates, app rates, gross-to-net, compliance, and persistency all continue to remain in line with expectations. Insurance reauthorization dynamics have been a topic of industry discussion this quarter; I want to address them directly. Atruvio did not experience reauthorization disruptions for two reasons. Part D, as in David, is a continuous plan-based model which avoids the annual renewal friction of Part B, as in boy. That structural advantage matters. In addition, in 2025, the average copay for Atruvio patients was only $190 for the entire year, with many patients paying $0 out of pocket as well. Our field teams executed with exceptional discipline to keep patients on therapy without interruption. We hire exceptional people, and those people make sure that any patient who wants a near-complete stabilizer can get Atruvio and, importantly, can stay on Atruvio. Turning to our pipeline, we are encouraged by early indicators across our three anticipated near-term launches on LGMD2I R9, ADH1, and achondroplasia. In LGMD2I R9, we are entering a disease area where no approved therapy exists. We have onboarded a commercial leadership team and have set up a specialized patient identification and field reimbursement infrastructure. Our goal is simple: find every patient who can benefit and be ready to serve them from day one of approval. In ADH1, our claims analysis has already identified nearly 2,000 in the U.S., and that number continues to grow. We have built a dedicated sales leadership team and patient infrastructure tailored to this community. In CALIBRATE, we will be the first medication to target the disease mechanism correctly and it is orally administered. Physician excitement is high, and we are ready to move immediately at approval. In achondroplasia, we are preparing for a global launch with a truly differentiated clinical profile. Infigratinib is the first medication to demonstrate statistically significant improvement in body proportionality, not just improvements in average height velocity, and the only oral option in the category. For families seeking an alternative to injectables, or returning to treatment after a negative experience, the clinical profile and route of administration of infigratinib is very compelling. To summarize, Q1 continues to reflect a durable growth trajectory for Atruvio and proof of the commercial capability we have built at BridgeBio Pharma, Inc.—an organization that knows how to launch, scale, and build franchises. We remain focused on execution for patients, for families, for prescribers, and for long-term value creation. I will now turn the call over to Tom. Thomas Trimarchi: Thank you, Matt, and good afternoon, everyone. I will now walk through our financial results for 2026. Our commentary will focus on GAAP financials unless otherwise noted. Total revenues for 2026 were $194.5 million compared to $116.6 million for the same period in 2025. The $77.9 million increase was primarily driven by a $143.9 million increase in Atruvio net product revenue. Atruvio net product revenue in the quarter was $180.6 million compared to $36.7 million in the same period last year. Royalty revenue increased by $9.3 million to $9.5 million, primarily earned from net product sales of acoramidis in Europe and Japan. License and services revenue was $0.4 million compared to $79.7 million for the same period last year. The decline reflects recognition of a one-time $75 million regulatory milestone from the prior year. Total operating expenses for 2026 were $290.5 million compared to $218.4 million in the same period last year. The $72.1 million increase was due to deliberate and disciplined investment in Atruvio and preparations for three upcoming launches. SG&A expenses were $163.9 million, an increase of $57.5 million compared to the same period last year, reflecting measured investment in our commercial capabilities. R&D expenses were $126.6 million, an increase of $15.2 million, driven by investments in medical affairs and CMC in support of our next three launches. On the operating line, in the first quarter, we recorded a $106 million operating loss. For the last five quarters, our loss from operations has narrowed by more than 50%, reflecting OpEx discipline and strong execution on Atruvio. Looking at the quarterly trend, if we back out one-time milestone payments, we have seen improvement in the operating line every quarter since the Atruvio launch. Looking ahead, we expect the trend in loss from operations to flatten over the next two quarters as we ramp up launch readiness activities for the next few products, and continue narrowing toward the end of this year as we transition to a P&L breakeven, followed by cash flow positivity, which we expect to be sustainable from that point on. Turning to the balance sheet, we ended the first quarter with $940.2 million in cash, cash equivalents and marketable securities compared to $587.5 million at the end of last year. We believe our current cash position provides us with significant runway to fund our operating activities, advance our three late-stage programs to approval and launch, and continue to invest in Atruvio’s growth, all while maintaining financial discipline. With that, I will turn the call back over to Chinmay. Chinmay Shukla: Thank you, Neil, Matt, and Tom. Operator, please open the line for questions now. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press star 1 again. In the interest of time, we kindly ask everyone to limit themselves to one question only. We will pause for a moment to compile the Q&A roster. Thank you. Our first question comes from the line of Tyler Van Buren with TD Cowen. Please go ahead. Tyler Van Buren: This is Sam on for Tyler. Thanks very much for taking our questions, and congrats on another strong quarter. I was just wondering, can you talk about what is driving the continued IQVIA acceleration? And specifically, what you are seeing in those treatment-naive patients? Thank you very much. Matthew Outten: We are definitely excited about the continued performance of Atruvio. I think the acceleration you are referring to is being driven by a few things. The first is physicians’ desire to use the only near-complete stabilizer on the market. Stabilization is the backbone of therapy in ATTR cardiomyopathy, and near-complete stabilization, along with Atruvio’s speed in showing separation from placebo, is attractive to patients and HCPs. They want something that is going to work quickly, and Atruvio has shown that it can do that. And recently, as you heard from Neil in his original remarks, the real-world evidence has backed all of these points up for both the treatment-naive patients and the switch patients, and that is helping to drive our share upwards. Neil Kumar: Maybe the only thing I would add there is the serum TTR story. You saw a bevy of papers both from us, but then importantly from others, with the numbers that I put forth—each mg/dL increase associating with pretty remarkable decreases in mortality downstream. As a reminder, when we put patients on acoramidis following administration of tafamidis, coming out of our Phase III trial, you saw a 3.4 mg/dL increase and every patient increased their serum TTR level. So it does not really matter how you measure it—you are getting increases in serum TTR. The question outstanding was never whether acoramidis is a better stabilizer; I think most people can understand that even if they cannot understand a specific in vitro assay. The bigger question was how much more is that buying in terms of downstream results? The serum TTR work was just the first part of that. I think you can see a lot more of that in the coming 12 to 24 months, really just because we have enough patients now with enough duration that we can start to ask and answer those questions. Operator: Our next question comes from the line of Mani Foroohar with Leerink Partners. Please go ahead. Matthew Outten: Hey, Manny. Thanks for the question. So the clarity on where the IP sits is clearly a meaningful positive for BridgeBio Pharma, Inc. and Atruvio. We now have at least six years of runway before generics, which is more than enough time to reach peak share, and obviously this all materially reduces any tail risk to the NPV of the program. I do not think the resolution really changes our commercial strategy. We have always been focused on establishing Atruvio as the treatment of choice in ATTR cardiomyopathy, given its differentiated profile, and we are executing against that. You heard both Neil and me talk about the value of the literature that we are producing as well as all the commercial activities we are undertaking to really reinforce that differentiation and drive share. We have shared our belief that Atruvio will be a $4 billion drug; we said that last year in our Q1 2025 earnings call. I do not think we have ever been more confident in that estimate. If anything, there might be some room for potential upside. As Neil mentioned in his prepared remarks, Atruvio is likely to keep going even after 2032 given the ecosystem and channel dynamics that exist here with Part D. That is what is driving our confidence. Neil Kumar: Maybe I will add to that. I personally did think—and I said it—that it would be 2035, so obviously I was wrong on that. That is a little bit of a discount, but not material, as I mentioned in my comments. The bigger thing is, all of these differentiating studies that we are running are really starting to resonate with clinicians, in addition to the fact that access programs are superior. I guess what your question really relates to is: will we run a double-blind head-to-head? We still might; we reserve the option to do that. Certainly, we would be excited to do that in the context of either TTR levels or NT-proBNP. But how we size a hospitalization study is difficult if you look at the number of events. We are going to have a strong look at the placebo arm of the upcoming APOLLO-type trial to really understand what those event rates look like in the context of clinical trials to see if there are some double-blind head-to-head opportunities. But there is nothing obvious right now, so let us continue doing the real-world evidence studies, which I think are the best characterization of the differential competitive dynamic. Operator: Our next question comes from the line of Biren Amin with Piper Sandler. Please go ahead. Biren Amin: Can you walk us through the board's decision to authorize the $500 million share repurchase program and how you are thinking about balancing that against your investment in new launches and pipeline? And what, if any, considerations are there for additional business strategic initiatives with this share repurchase program now being announced? Thanks. Neil Kumar: I can take that. Right now, the focus is on focused execution against the pipeline that we have. We have ample growth that has not been valued in the context of this company today—the LGMD2I launch that I referred to, the ADH1 launch, the achondroplasia launch even in its totality. We are projecting market share numbers well in excess of what typically a third mover gets in that space. Then you think about the consequential additional indications, both in terms of hypochondroplasia and, importantly, in terms of chronic hypoparathyroidism that we are kicking off, and then we have the Canavan program. That constellation of activities is more than enough to drive long-term growth for any company, and that is what we are focused on. Can we fully finance all of that comfortably? We feel like we can. Therefore, beyond that, what do we do with excess capital? We think the best relative return way that we can deploy capital right now is into our own shares, given the disconnect between intrinsic value and where we are trading. That is what the discussion came down to. I know the normal way that a biotech would grow is to say, who cares if share price is low, let us go ahead and dilute everyone and just keep going after science that we believe in. That is not a reliable, sustainable long-term model in my belief, nor is it one that we intend to employ here at BridgeBio Pharma, Inc. Operator: Our next question comes from the line of Cory Kasimov with Evercore ISI. Please go ahead. Cory Kasimov: I want to follow up on the real-world evidence that was referenced in both the press release and the prepared remarks that reinforces Atruvio differentiation versus tafamidis. Can you unpack what this real-world data is showing and how it compares with what was demonstrated in the clinical trial setting? Is anything different now than it was, or just more of it? Thank you. Neil Kumar: It is pretty different because recall that we had a significant left shift in our clinical trial. Our placebo outperformed the on-drug arm of ATTR-ACT. So there is no way for us to actually, apples to apples, go across things like diuretic intensification. And by the way, even the use of diuresis and renin-angiotensin control meds and SGLT2i use in this population—all of that has changed pretty markedly. It almost made it impossible, excepting the in-trial comparisons we can make between tafamidis and acoramidis with all the available caveats there—where acoramidis has outperformed tafamidis in all aspects, which you did not see in HELIOS-B. I think real-world evidence is the right way to do this within systems or across a constellation of systems that we know have a lot of integrity in terms of clinical studies. Here, you are seeing things like what we mentioned in terms of diuretic intensification. We certainly did not look at downstream kidney effects like the Nevada system did, but it is all resonant with the advantages that we think Atruvio has versus tafamidis in terms of mortality and hospitalization. It is nice to see it actually play out in the real world. Operator: Our next question comes from the line of Salim Syed with Mizuho. Please go ahead. Salim Syed: Congrats on another great quarter. Just one from us maybe on infigratinib and PROPEL 3. Since you have had that read, I am sure you have done some market share work or at least spoken to additional folks in the achondroplasia community, both on the clinician side and family side. What has the feedback been, and how has additional feedback informed your expectations for the commercial opportunity? I believe you said previously you think about achondroplasia as being a $2.5 billion TAM and maybe hypochondroplasia the same. Just curious if you have any other color to offer on the commercial opportunity. Thank you. Matthew Outten: Thanks for the question. The feedback from clinicians has been overwhelmingly positive. HCPs are telling us that they are constantly being asked by families when the oral is coming—not only by families on treatment today, but more importantly, those that stayed on the sidelines, which as a reminder makes up about 70% to 80% of the U.S. market. The consistent best-in-class profile is continuing to resonate with clinicians. They understand that AHI is best in class, height score is best in class, we have the most attractive safety profile, and, importantly, proportionality. The proportionality data point is the one that is resonating most with clinicians because this is the only product that has a statistically significant result in proportionality in a 3- to 8-year-old population. This demonstrates how directly targeting FGFR3 impacts more than just height. On that note, we will be releasing more data on how infigratinib is benefiting more than just height in medical conferences later this year, some of which has never been seen before in a 52-week placebo-controlled trial. Ultimately, all this reinforces our belief that we will have a big market share—actually, more than 65% market share—as validated by our market research. Operator: Our next question comes from the line of Eliana Merle with Barclays. Please go ahead. Eliana Merle: Thanks for taking the question—two from me. First, on limb-girdle, you submitted the LGMD NDA very quickly—from our math, about 155 days from top line—which is very fast compared to average. Can you walk us through where you stand on launch readiness and how you are preparing to get this drug into the hands of the limb-girdle community from day one? And then a second question on the ATTR space: how are you thinking about what we will see from CardioTransform specifically, and what hazard ratio do you think could be competitive? Anna Wade: Thanks for the question, Eliana. We are really excited. We have our commercial and sales leadership onboard, and we are getting ready to have the sales reps hired later this year. We also now have our medical leadership in place as well as a seasoned MSL team with neuromuscular and rare disease experience. In Q1, our major catalyst was the NDA conference that Neil mentioned in March, where Dr. Kathy Matthews, a leading KOL in the field, presented our Phase III interim analysis data. We got incredibly positive feedback at the meeting about the compelling data package. Since MDA, we have heard about significant patient outreach to neuromuscular centers, and internally, we have received many inbound inquiries from both patients and physicians. Our focus right now is driving awareness of the Phase III data, as well as emphasizing the importance of genetic diagnosis leveraging sponsored testing programs that are currently available, so that on day one of launch, we are ready to get patients on therapy. Neil Kumar: Let me address your second question on CardioTransform. We agree it is a super well-powered trial. Against the primary it should be good, and even in the subpopulations, taking the same point estimate from 0.05 or less, they are pretty well powered. I actually expect that they will hit on almost everything they are interrogating. Then it comes back to how to cross-trial compare and how to understand this knockdown technology. Part of that will be how much knockdown they get and whether they are able to improve on the PK profile because I think the reason that vutrisiran performed similarly to eplontersen in HELIOS-B has to do with the timing it takes to get to mean mass knockdown; it took a lot longer than I would have expected. We will see if that is the case with their drug. Overall, honestly, CardioTransform has more to do with the commercial dynamics with Alnylam than it does with us, especially given the combo data that I just told you about. I think people are going to reach for stabilizers first line anyway. Number one. Number two, I think when they are failing stabilizers, they are going to want a better stabilizer onboard in combination. So if that trial does hit, I do not see it having a meaningful effect for us. From a biochemical standpoint, you always want to preserve the native tetramer. We are seeing more and more information about that. I am surprised people have not been looking at the publicly available FAERS database and what things look like when you are knocking things down versus actually stabilizing, which is consistent with the 225,000-plus patient studies out there suggesting that higher levels of serum TTR are better for you. I understand that in a short trial those signals are not necessarily resolvable, but over the longer period of time, stabilizers will continue to be frontline and, in combination, will have a pretty good stay there too. On your hazard ratio question, we think the bar is relative risk reduction of 42% and risk reduction of 50% on hospitalization, which I suspect—if this study is consistent with the rest of the modern studies—will be where a vast majority of the events lie. So that 50% reduction in hospitalization is what I will be looking for. Operator: Our next question comes from the line of Anupam Rama with J.P. Morgan. Go ahead. Anupam Rama: Congrats on the quarter. Quick one here. I know the NDA is on track for the first half of this year, and the press release highlighted nearly 2,000 now identifiable patients with an ICD-10 code. Can you give us an update about further patient identification efforts and how this sets up how we should all be thinking about the initial launch curve? Thanks so much. Neil Kumar: Good to hear from you. The foundation of everything we are doing around patient identification is really awareness—awareness of the disease as an important distinct subset within hypoparathyroidism, and then, of course, awareness of our drug encaleret and the wonderful effect we can have for these patients. A major catalyst for awareness will be the upcoming presentation at ECE next week, followed by U.S. presentations later in the year, then hopefully a very high-impact publication as well. In the background, there are some important tactics and strategies. First, as you mentioned, the ICD-10 code is a huge advantage. Many rare diseases do not have an ICD-10 code; we likely will have one that has been in place for a couple of years already, so there is a good amount of data. That lets us take our analytics capabilities, put them on top of this, and really deploy our field-based medical and commercial leadership in a more surgical way to go to offices, spread awareness, and also make sure the patients they think they have are appropriately diagnosed with sponsored genetic tests or other commercially available genetic tests. Third, and this has been a bigger driver of identification than I would have thought, is family tracing. It makes sense when you consider this is a dominant condition, so there is a 50% chance of passing it on. When we find one person with this condition, if they look and go to a family event, we find out that many of their brothers, cousins, aunts, uncles may be affected. That has been a valuable source of patient identification as well. We will continue all these efforts and accelerate them as we approach launch. Operator: Our next question comes from the line of Derek Archulo with Wells Fargo. Please go ahead. Derek Archulo: Congrats on the progress. Just to follow up on infigratinib: some recent commentary and some of the early KPIs from the Voxzogo launch seem positive and maybe early validation of this market expansion thesis. How do you think about infigratinib’s profile versus the injectables, and how could this further accelerate the market expansion potential? Thanks. Matthew Outten: Thanks, Derek. Most physicians and families are excited about the total package of infigratinib—not just one thing. It starts with a 2.1 cm change from baseline in annualized height velocity, the largest effect shown across any of the three Phase III programs, which was remarkably consistent across the age groups. Then, as I mentioned earlier, the only statistically proven proportionality benefit—a demonstration of the importance of directly engaging FGFR3. Then you have a differentiated safety profile—no injection site reaction, no symptomatic hypertension, no hypertrichosis. I think the safety differentiation is further playing out given these increasing and concerning signals of SCFE and femur fractures, which are both looking like potential CNP class effects. On top of this, we are a daily oral. Based on historical benchmarks, we know that when an oral enters a market with only injectables, it expands the market on average by 3 to 4 times at year five after launch. Ultimately, families will have a choice of either 365 injections a year, 52 injections a year, or zero—and I know which one they prefer. Operator: Our next question comes from the line of Paul Choi with Goldman Sachs. Please go ahead. Paul Choi: Hi, thank you and good afternoon, and thanks for taking the question. Sticking with infigratinib, I want to ask with regard to the PROPEL infant and toddler study in patients who are newborns or up to two years old. Can you comment on your updated thoughts on enrollment timing and when that might potentially be completed in the wake of your positive results from the PROPEL study, and how you think about timing for that potentially being completed and added to the label? Thank you. Matthew Outten: Thanks for the question, Paul. There is a lot of excitement from sites following the efficacy in the Phase III PROPEL 3 data. What we know from the field shows that the earlier you intervene, the more likely you impact central outcomes. We will provide an update on timing later on once we have more clarity as this program progresses. Operator: Our next question comes from the line of Analyst with Jefferies. Please go ahead. Analyst: Hey. Thanks for all the updates. Congrats on execution. I have a bigger-picture question on your broader pipeline. Now that you have succeeded across four major programs all the way through Phase III, as investors think about the sustainability of your R&D engine, can you talk about how you are currently thinking about the next wave of development beyond your portfolio, how open you are to adding more to the pipeline in the near term, and what indication areas you could be interested in? Thank you. Neil Kumar: Thanks for the question. Right now, our comments and actions have always been consistent with being very focused on the opportunity in front of us. It is not often that a biotech will launch three different products in three different indication settings alongside a pretty competitive market at the same time, and that is going to take, certainly against our lean backbone, all of the focus that we have. I also mentioned earlier that we have significant additional opportunities associated with every single one of our drug products, including some that we have not talked about vis-à-vis Atruvio. There is some pretty interesting stuff to do. We have an internal pipeline—programs in ADPKD, eliminating polyketide monomers, and the complement antibody program in ATTR cardiomyopathy. Those are programs that are very capital efficient. We also have backup programs against all of our current pipeline programs so that we can do what is right for the patient and physician community to continue to serve them as long as possible. All of those things together represent the menu of activities that we are interested in the near term. Obviously, we are students of the genetic disease space. BridgeBio Pharma, Inc. has a significant stake in another company called Bonum Therapeutics, which is one of our sister companies and has 17 programs ranging from Phase II all the way back to the preclinical setting—small molecules, ASOs, antibodies, all targeting well-described genetic conditions at their source. We are happy for that to be an off-balance-sheet R&D exercise for now, as is BridgeBio Oncology Therapeutics, and really to focus on what we need to focus on here: continued prosecution of our pipeline programs, delivery of these important medicines to patients, and ultimately the capturing of the value that we have created for the investors that have backed us for many years. Operator: Our next question comes from the line of Danielle Brill Bongero with Truist. Please go ahead. Danielle Brill Bongero: Congrats on the great quarter. Neil, I believe you mentioned in your prepared remarks that there were 6,100 new patient starts across the class in the quarter. If I recall correctly, this represents a meaningful step up from prior quarters where I think it was more in the 4,000 new patients range. What is driving this step up, and moving forward, how should we think about the size of the quarterly patient pool that you are actively competing for? Thank you. Neil Kumar: I think this market continues to grow to somewhere between 5,000 and 6,000 a quarter in terms of new patient starts or new-to-brand patients. I do not think we had 4,500 last quarter; I think it was above 5,000. A little bit of this math has to do with us guessing for our competitors what the inventory holdback was or what the inventory buys were and things of that nature—so we can never get it fully right. We can get our own patient numbers fully right. But that does suggest continued growth. Will it continue to grow? I think so. There are 250,000 patients with a cardiomyopathy at the low end in the U.S., and I think we are doing a better job of three things. One is making sure that the algorithms are in the EMR so that people look for these patients. There is the Tracer AI stuff that we have been doing and other algorithms that individual health care systems have been putting forth to get people to think, “Ah, maybe this is a TTR-CM patient.” Second is driving genetic testing into variant-heavy populations; that has been helpful as well. Third, and probably the best, is broad physician awareness and education through speaker bureaus, really getting out into the academic practices and the community practices to educate them more. All of that is positive. On the negative side, we have heard quite a bit about this PYP shortage—the technetium scan is one of the ways to get a definitive diagnosis—so we have to keep an eye on that. We heard about that before in 2025, I think in the second or third quarter; the market continued to grow. That is resolvable. There are three major suppliers, and I expect in the years going forward we should not see much more of this supply chain iteration around PYP availability. Long story short, I believe you should see superlinear growth in identification, given the number of patients that we believe have a cardiomyopathy coupled with the number of sponsors in the playing field and the availability of reasonable testing. I would expect that positive trend to continue, with some error bars quarter to quarter. Operator: Our next question comes from the line of Jason Zemansky with Bank of America. Please go ahead. Jason Zemansky: Good afternoon. Congrats on the great progress, and thanks for taking our question. Maybe one more on encaleret, if we may. As you look beyond the ADH1 opportunity to the broader chronic hypoparathyroidism opportunity, how are you thinking about encaleret’s positioning relative to the parathyroid hormone replacement therapies? Is there a particularly attractive subgroup to target, or are you looking at the broader opportunity as a whole? And maybe talk about some of the pricing implications of pursuing a market that maybe looks a little bit like 25,000 patients in the U.S. and EU versus 200,000? Thanks. Matthew Outten: Hey, Jason. Great to hear from you, and thank you for the question. We look forward to seeing you next week at the conference. In chronic hypoparathyroidism, when we did our market research, three things drove our excitement. First, this will be the first oral option available in the chronic setting. The ability to give patients freedom from injection-site reactions and all the pain that comes with it resonates very well. Second, if you look at the current options available, you do see an effect in terms of blood calcium normalization, but you do not really see an effect on urine calcium normalization. With encaleret, we have a very unique profile where we could normalize potentially both blood and urine calcium, and we saw that in our, albeit small, Phase II trial, where around 80% of the patients normalized both blood and urine calcium—these are patients who are very sick and did not have the parathyroid gland or any amount of the hormone. Third, there is a potential safety risk in terms of bone resorption from giving PTH at high levels for the whole day. We could completely avoid that. The ADH1 readout significantly de-risks and highlights the therapeutic profile for encaleret. Those three things—oral administration, urine calcium normalization, and potential benefit on safety—are why we think we can compete and get a reasonable share even in the chronic hypoparathyroidism market, obviously assuming the trial works. Operator: Our next question comes from the line of Analyst with Morgan Stanley. Please go ahead. Analyst: This is Morgan on for Sean. Thanks for taking our question. Can you remind us specifically for infigratinib in achondroplasia what kind of, if any, commercial preparations are taking place from BridgeBio Pharma, Inc.? Thank you. Matthew Outten: Thanks for the question. We have built strong commercial and medical leadership, bringing on both sides of the business with experience in second and third launches with superiority data, especially with launch and global experience as well. Ultimately, we are making sure we get the word out not just to leading geneticists and ASCs, but also to the broader community of pediatric endocrinologists who are excited about having an oral option, especially for families who are not seen at super-specialized centers of care and are more interested in something that is easier for families to administer. There is a lot of education going on that front. Also remember, we have a lot of the teams in place from the Atruvio launch that can help with future launches across indications—market access with the payers, specialty pharmacies—these are the same individuals. We have relationships with all of those people and are able to launch quickly as a result, and get access and coverage. Operator: Our next question comes from the line of John Boyle with William Blair. Please go ahead. John Boyle: Hi, team. Thanks so much for taking our question and congrats on a strong quarter. Patient advocacy groups for achondroplasia seem to have a pretty big voice in the indication. Have you had interactions with them and can you speak to how the infigratinib profile is resonating there? Matthew Outten: Thanks for the question. That has been a core tenet of how we have developed since the very beginning. We have been working alongside advocacy groups both in the United States and internationally, making sure that their input and voice are implemented in our development program and how we think about endpoints. For us, being able to target FGFR3 directly addresses their concerns of being able to look at not just height outcomes, but health outcomes as well, which is something we expect to play out in the longer term and in our clinical extension program. They have been wonderful partners with us, and we anticipate that persisting through commercialization and launch as well. Operator: Thank you. Ladies and gentlemen, that concludes our Q&A session. I will now turn the call back over to the BridgeBio Pharma, Inc. team for closing remarks. Chinmay Shukla: Thank you, everyone, for your questions today. We really appreciate your interest and look forward to updating you again next quarter. Operator: Ladies and gentlemen, that concludes our conference call. You may now disconnect your lines. Have a pleasant day.
Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2026 Xenon Pharmaceuticals Inc. 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, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I will now turn the call over to Colleen Alabiso, Senior Vice President of Corporate Affairs at Xenon Pharmaceuticals Inc. Please go ahead. Colleen Alabiso: Good afternoon. Thank you for joining us on our call and webcast to discuss Xenon Pharmaceuticals Inc.’s first quarter 2026 financial and operating results. Joining me today are Ian Mortimer, President and Chief Executive Officer; Christopher John Kenney, Chief Medical Officer; Darren S. Cline, Chief Commercial Officer; and Thomas Kelly, Chief Financial Officer. After completing our prepared remarks today, we will open the call up for your questions. Please be advised that during this call, we will make a number of statements that are forward-looking, including statements regarding the timing of and potential results from clinical trials; the potential efficacy, safety profile, future development plans in current and anticipated indications; addressable market, regulatory success, and commercial potential of our and our partner’s product candidate. The strength of our clinical trial designs; our ability to successfully develop and achieve milestones in our clinical development programs, including the anticipated filing of INDs and NDAs; the timing and results of those filings and our interactions with regulators; our ability to successfully obtain regulatory approval; anticipated timing of top line data readouts for our clinical trials of AZET2 calendar and other candidates; and our expectation that we will have sufficient cash to fund operations into 2029. Today’s press release summarizing Xenon Pharmaceuticals Inc.’s first quarter financial results and the accompanying quarterly report on Form 10-Q will be made available under the Investors section of our website at xenon-pharma.com and filed with the SEC on SEDAR+. I will now turn the call over to Ian. Ian Mortimer: Thanks, Colleen, and good afternoon to everyone joining us today. We are excited to recap an exceptional quarter for Xenon Pharmaceuticals Inc., where we made tremendous progress toward our goal of becoming a fully integrated neuroscience company delivering life-changing medicines to patients. In March, we reported results from our Phase 3 XTOL-2 study of azetu calder, or AZK, in focal onset seizures that exceeded our expectations. Now with these positive data in hand, we are focused on our NDA submission to the FDA expected in 2026, and we also continue to work on increasing AZK awareness and education through our scientific engagement amongst HCPs, as well as our commercial readiness activities. In addition, we continue to broaden the therapeutic opportunities for AZK beyond epilepsy with potential neuropsychiatric indications where we have strong preclinical, clinical, and genetic evidence. Our three Phase 3 depression studies in major depressive disorder and bipolar depression continue to enroll and we are on track to deliver top line results from EXNOVA-2 in 2027. Successful studies in MDD, BPD, or both would serve to benefit patients and substantially expand the commercial opportunity for AZK. Finally, we remain focused on expanding our pipeline through the advancement of our promising earlier-stage ion channel programs, with exciting candidates that provide the potential to drive our long-term growth. This includes completion of our first-in-human studies for XEN1701, targeting Nav1.7, and XEN1120, targeting Kv7, later this year, with the intent to advance both programs to Phase II proof-of-concept studies in pain. As we continue to execute our clinical programs and prepare for the anticipated approval and launch of AZK, we also continue to prioritize maintaining a strong balance sheet. So today I am going to focus most of my comments on AZK and epilepsy, and then I will turn the call over to Chris, Darren, and Tucker. As you all know, in Q1 we announced positive top line results from the XTOL-2 study in focal onset seizures, which exceeded our expectations by surpassing the already strong results from the Phase 2b XTOL study and, to our knowledge, demonstrated the highest placebo-adjusted median percent change in monthly focal seizure frequency ever seen in a pivotal FOS study. Similar to XTOL, we observed a rapid onset of efficacy, strong and dose-dependent responder rates, and a consistent safety and tolerability profile. Following the top line announcement, we were excited to present the data as a late-breaking oral presentation at the American Academy of Neurology Annual Meeting in Chicago. Around these two milestones, we have engaged with hundreds of epileptologists and neurologists and the feedback we have received has been incredibly positive. HCPs are enthusiastic about the magnitude of the efficacy benefits seen in our two randomized trials; the breadth and consistency of our safety and tolerability data; the impressive rates of seizure freedom in the OLE; and the key differentiating attributes of AZK. This includes a novel Kv7-targeting mechanism of action, no titration, once-daily dosing, and no dose adjustments for other ASMs. If approved, this profile would add a meaningful new medicine to their toolkit and provide the opportunity for rational polytherapy. We feel increasingly confident in AZK’s potential to become a preferred ASM for the significant number of patients who do not achieve seizure freedom with initial treatment. We are working hard to submit our new drug application to the U.S. Food and Drug Administration in 2026. Our base case assumption is a standard review period followed by DEA scheduling, which would put the anticipated launch timing at 2027 or early 2028. At the same time, we are focused on building out our commercial infrastructure and finalizing our go-to-market strategy, and Darren will speak to this a little bit later on the call. Beyond FOS, we are encouraged by the potential of AZK in primary generalized tonic-clonic seizures, and our Phase 3 EXACT study continues to enroll. Positive results in EXACT would enable us to submit a supplemental NDA for an additional epilepsy indication, which would meaningfully increase our addressable patient population. Outside of epilepsy, we are making good progress enrolling our three ongoing neuropsychiatry studies: EXNOVA-2 and EXNOVA-3 in major depressive disorder, and EXEDE in bipolar depression. There is strong rationale for Kv7 openers in depression. Several preclinical and clinical studies, including our own NOVA study, have shown promising signals of antidepressive effects for the Kv7 mechanism. Additionally, in bipolar depression, there are genetic links with Kv7, including evidence of Kv7 downregulation. We look forward to sharing our first top line Phase 3 data set in MDD in the first half of next year. We also continue to progress our early-stage programs, including our first-in-human studies with XEN1701, targeting Nav1.7, and XEN1120, targeting Kv7. These are both compelling targets to treat pain with non-opioid approaches. These programs are exciting as they leverage our deep expertise in ion channel science and the strength of our discovery capabilities, and would address large unmet medical needs. Acute and chronic pain affects more people than diabetes, heart disease, and cancer combined, yet effective non-opioid options are scarce. There is a significant opportunity for Xenon Pharmaceuticals Inc. to be a leader in unlocking the next generation of pain therapeutics. We are also excited about our early-stage epilepsy programs, including our Nav1.1 program in Dravet syndrome. IND-enabling studies are ongoing, and we continue to showcase our encouraging preclinical findings at large congresses, such as the recent AAN meeting. Our collaborators at Neurocrine are also progressing a Phase 1b study for 121,355. This is an investigational selective inhibitor of voltage-gated sodium channels Nav1.2 and Nav1.6, which is being investigated as a potential treatment for certain types of epilepsy. Data from this study are expected next year. Finally, I want to highlight another major accomplishment for Q1, which was the completion of our $747.5 million financing. It significantly extends our cash runway into 2029, allowing us to transition to a commercial-stage company and advance our depression and pain programs to key data milestones. Now with that overview, I will turn it over to Chris to provide an update on our activities at AAN and our broader clinical program. Chris? Christopher John Kenney: It has been a really exciting time at Xenon Pharmaceuticals Inc. since we reported our top line XTOL-2 data. As you would imagine, there is a great deal of enthusiasm in the epilepsy community with the prospect of a new anti-seizure medicine that could address many of the gaps in today’s treatment paradigm, including the limited number of mechanisms available. With the strong XTOL-2 data that exceeded all expectations, coupled with the long-term OLE data showing sustained effects and impressive seizure freedom, I am incredibly excited about the potential for AZK to positively impact the lives of patients in the near future and for decades to come. Recently, our team spent a week in Chicago at the American Academy of Neurology Annual Meeting, where we gave several important clinical, preclinical, and real-world data presentations, which collectively underscored the significance for AZK and our growing leadership within epilepsy. I will start by highlighting the XTOL-2 data that were featured as a late-breaking science presentation. Every year, AAN receives more than 300 late-breaking science submissions, and this year they selected just 18 abstracts for data that they viewed as warranting expedited presentation and publication to their neurologists. Dr. Jackie French of NYU and chair of the XTOL-2 steering committee presented the XTOL-2 data in both an oral platform presentation as well as a poster. The reactions were very positive, with the session moderator from Harvard University and Massachusetts General Hospital characterizing the data as outstanding, and Dr. French highlighting rapid onset of efficacy and no titration as key differentiating aspects of AZK that will appeal to physicians. Our XTOL-2 presentation reinforced the positive top line data we announced in March, including that the study met its primary endpoint of median percent change in monthly FOS frequency from baseline to Week 12 in both the 25 mg and 15 mg AZK dose groups compared to placebo. Specifically, we observed an MPC reduction of 53.2% for 25 mg, 34.5% for 15 mg, and 10.4% for placebo, results which were highly statistically significant and actually outperformed the Phase 2b XTOL study. We also observed early dose-dependent MPC in weekly FOS from baseline to Week 1, which was sustained through the double-blind period with both AZK doses, reinforcing AZK’s rapid and sustained anti-seizure activity. These efficacy results are even more impressive when you consider that XTOL and XTOL-2 included the most treatment-resistant FOS population ever trialed. At baseline, patients in XTOL-2 were experiencing a median of 13 seizures per month, had been treated with a median of five prior ASMs, and more than half were already using three concomitant anti-seizure medications. About 60% were on or had already tried and stopped cenobamate, and still they had not achieved seizure control. We also provided additional data from our responder rate analysis, where we observed dose-dependent increases in the proportion of participants with at least 75% and 90% reductions in monthly seizure frequency through the double-blind period. We also presented 100% responder rate data, which demonstrated that a 100% reduction in seizures over the double-blind period was attained by a greater proportion of participants with AZK 25 mg than placebo, results which were highly consistent with the results of XTOL. While AZK has a rapid onset of efficacy, it also takes a few weeks to reach steady-state levels, and we have seen in other instances, such as the XTOL OLE, that efficacy continues to build over time. Therefore, we also conducted a post hoc analysis of the XTOL-2 data to see if a greater proportion of participants experienced a 100% reduction in seizures over time. Indeed, the 100% responder rate increased steadily over the last eight, six, and four weeks. For example, the 100% responder rate over the 12-week double-blind period for 25 mg was 6.5%, but over the last six weeks it increased to 11.3%, and over the last four weeks it increased further to 13.7%. We are looking forward to continuing to follow this trend in the Phase 3 OLE. This brings me to our other key AZK presentation at AAN: our 48-month XTOL OLE data, where the trend of efficacy building over time is even more compelling. The OLE is also where we are best positioned to evaluate whether patients are truly achieving seizure freedom, which has been a consensus definition of no seizure for 12 months or more. This definition also aligns to practical, real-world outcomes for patients, as in many states 12 months without seizures means they are able to drive again. Our long-term OLE data demonstrated continued reductions in focal seizures, with a 91% reduction in monthly seizure frequency for those treated for at least 48 months. Those who entered the study taking one or two ASMs demonstrated a 100% reduction in monthly seizure frequency, compared with an 82% reduction in seizure frequency among those taking three ASMs at baseline. With regard to seizure freedom, among patients treated for at least 48 months, almost 40% were seizure-free for at least 12 months, and one in four were seizure-free for at least two years. If you consider how treatment-resistant the overall patient population was at baseline, this is truly remarkable. Based on feedback from our investigators, we understand some of these patients have never experienced seizure freedom before taking AZK, and their stories fuel our desire to bring AZK to patients and clinicians as quickly as possible. Finally, I will also note that our AZK data at AAN continue to support a generally well-tolerated profile. The safety data are remarkably consistent between XTOL and XTOL-2 in terms of types of treatment-emergent adverse events, the frequency at which they occurred, the number and types of serious adverse events, and the events that led to discontinuations. The most common treatment-emergent adverse events across both studies in the AZK dose groups were dizziness, somnolence, headache, and fatigue. With more than 800 patient-years of safety and exposure data, we are comfortable that this profile is consistent with other well-tolerated ASMs and with a drug that is potent and active in the central nervous system. We will continue to add to these robust safety and tolerability data with our ongoing Phase 2 and Phase 3 OLEs in epilepsy. Another focus for Xenon Pharmaceuticals Inc. at AAN was education around unmet needs in epilepsy care, including the impact that titration has on both patients and HCPs, the opportunity for no-titration options to improve treatment experiences, outcomes, and healthcare resource utilization. We presented real-world data that captured the challenges reported by patients around medication schedules, daily life, and quality of life during titration periods, while physicians reported challenges related to treatment complexity and cross-titration. When questioned on their perceptions of ASMs without titration, most patients noted that they either agree or strongly agree that initiating an ASM without needing to titrate to a stable dose would boost their confidence, reduce anxiety, and improve adherence. Physicians noted that no titration would increase simplicity, as many patients are already on complex drug regimens. These findings suggest using ASMs that do not require titration may reduce stress and simplify FOS management, and we heard this echoed in our discussions at AAN as well, especially for general neurologists who value ease-of-use attributes in prescribing decisions. We rounded out our AAN scientific program with an oral presentation of preclinical data from our Nav1.1 program in Dravet syndrome. These data demonstrated that selective potentiation of Nav1.1 channels in Dravet mice improves motor function, suppresses spontaneous seizures, prevents sudden unexpected death from epilepsy, increases long-term potentiation (which is a potential cellular correlate of learning and memory), and produces more mature dendritic spine morphology. The data continue to support our belief that targeting Nav1.1 with a small molecule could potentially address the underlying cause and symptoms of Dravet syndrome. IND-enabling studies for this program are currently ongoing. All in all, we are very proud of our scientific contributions at AAN, as well as how positively they were received by the community. Moving on to our other clinical programs, we have had a lot of activity as we continue to enroll three Phase 3 studies in depression and two Phase 1 programs in pain. Depression is an area where the differentiated profile of AZK, including its novel mechanism of action, rapid onset of action, and potential benefits on anhedonia, could meaningfully benefit patients. Like epilepsy, the depression landscape has experienced a dearth in innovation for some time, and new mechanisms are urgently needed. Our clinical development team has made great progress with EXNOVA-2 and EXNOVA-3, which are ongoing and enrolling patients with major depressive disorder. As Ian previously stated, we anticipate sharing top line data from EXNOVA-2 in 2027. In addition, EXEDE, a Phase 3 clinical study evaluating AZK in patients with bipolar I and bipolar II depression, also continues to enroll. This is another area where there is significant unmet need for safe and effective therapies due to nonadherence related to side effects and other factors. The physicians that we have spoken with are keenly interested in AZK’s novel selective Kv7 mechanism of action, potential benefit on anhedonia, rapidity of onset, and differentiated safety profile. To round out my remarks, pain continues to be an area of growing focus and we are looking forward to completing our first-in-human studies for our novel pain programs this year. There remains a strong desire for non-opioid pain therapies given the limited efficacy of current options and substantial risk of abuse and dependency tied to opioids. We know that analgesics can act along multiple different points of the pain pathway and interrupt the pain signal on its way to the brain, and we believe in the potential for Nav1.7 inhibitors and Kv7 potentiators to play important roles at multiple points in this pathway, including in the initial transduction of pain stimuli into pain signals, the transmission of those pain signals along nociceptive neurons, and the relay from peripheral sensory neurons to spinal cord neurons in the central nervous system. We believe Nav1.7 is the best genetically validated pain target, with striking genetic data in patients with loss-of-function mutations that have no ability to feel pain. Gain-of-function mutations have also been identified that drive pain disorders, further underscoring the critical role Nav1.7 plays in pain signaling. With XEN1701, as well as other Xenon Pharmaceuticals Inc. programs in preclinical development, we believe we have solved for some of the critical limitations of prior Nav1.7 compounds. Kv7 is also a compelling target to modulate neuronal hyperexcitability at multiple points along the pain pathway, and we believe Kv7 potentiators have the potential to treat a range of pain conditions. This is supported by high levels of Kv7 expression throughout the pain pathway, and our preclinical data show that Kv7 is enriched in the C and A-delta subtypes of sensory neurons. In addition, Kv7 openers can block action potential firing in both DRG and spinal cord neurons, thereby significantly inhibiting pain signals from reaching the brain. Evidence supports that dysfunction or downregulation of Kv7 activity has been observed in altered pain states. We are excited to be advancing an optimized Kv7 opener with our XEN1120 program. We are really encouraged by our Nav1.7 and Kv7 work in pain and look forward to providing more details later in the year. With that, I will turn it over to Darren to provide an update on our path to commercialization, including interactions and discussions at AAN. Darren? Darren S. Cline: Thank you, Chris. I would like to reinforce the comments from Ian and Chris regarding the strong interest in our XTOL-2 data since we first reported the results in early March. Since then, we have seen sustained engagement and interest from a broad group of epileptologists and neurologists attending AAN. Across these interactions, they reiterated the strength of our XTOL-2 and OLE datasets and AZK’s differentiated profile, and we consistently heard enthusiasm about the potential to use AZK in clinical practice. Physicians highlighted the importance of efficacious therapies that are also straightforward to incorporate into routine patient care. AZK’s unique mechanism and its expected profile of once-daily dosing, an effective starting dose, no drug interactions, and no dose adjustments with other ASMs remain among the most frequently cited and most compelling attributes. Looking ahead, we plan to increase our understanding through primary research, advisory boards, and one-on-one meetings as we continue to deepen our insight of AZK in advance of potential approval and launch. Based on our growing engagements with this audience, we believe AZK has the potential to become the preferred branded ASM for general neurologists. We also continue to hear that AZK’s profile may support greater confidence in treating a broader range of epilepsy patients within community practices, rather than referring patients to a level three or four epilepsy center after exhausting existing available options, which could contribute to broader adoption, improve patient outcomes, and meaningful prescription growth over time. Launch readiness remains a key enterprise priority. Over the past several months, we have focused on increasing our scientific engagement with epilepsy specialists, neurologists, and advanced practice providers, while continuing to expand our field-based capabilities, including the recent addition of several medical science liaisons. In parallel, we have initiated discussions with payers to introduce Xenon Pharmaceuticals Inc., better understand unmet needs, and communicate the potential value proposition of AZK. In March, we attended the Pharmaceutical Care Management Association, or PCMA, meeting for the first time and held a number of productive introductory discussions with pharmacy benefit managers and payers. The timing of these conversations alongside our XTOL-2 data release helped drive interest and momentum. We plan to participate in several national payer meetings this year, and in the coming months, we expect to expand our field-based payer team to continue dialogue with this important constituency and further strengthen our launch preparedness. As we execute on these launch readiness priorities, we remain focused on building an experienced launch and lifecycle management organization, advancing innovation across channels and patient services, and increasing awareness across our customer universe. Our commercial objective is to establish Xenon Pharmaceuticals Inc. as a leader in epilepsy, and we believe we are making meaningful progress toward that goal. We are highly motivated by the opportunity to deliver meaningful benefits to patients and the physicians who care for them. With that, I will turn the call over to Tucker to review our financial results. Thomas Kelly: Thank you. As Ian mentioned, the exceptional results in XTOL-2 allowed us to complete a highly successful public offering of nearly $750 million, which fortified our balance sheet as we move toward potential approval and launch. We ended Q1 with cash, cash equivalents, and marketable securities of $1.3 billion, compared to $586 million as of December 31. Based on our current operating plans, this provides cash to fund operations into 2029. Given our strong balance sheet and fiscal management, we are well positioned to support AZK’s U.S. launch, multiple registrational programs for AZK, and the continued maturation of our early-stage pipeline. I would refer you to our press release and our 10-Q filed today for further details on our financial results. Overall, it is a very exciting time at Xenon Pharmaceuticals Inc. as we continue to build momentum in our pipeline spanning epilepsy, depression, and pain, and make progress against our critical priorities, with our first priority being the submission of our NDA for AZK to the FDA in 2026, as well as the advancement of our commercial readiness activities to support a strong launch in FOS. We also remain focused on broadening the therapeutic opportunities for AZK beyond FOS, and we continue to make good progress enrolling our studies in major depressive disorder and bipolar depression, with the readout of our first depression study anticipated in 2027. Lastly, we are pleased with the momentum in our early-stage pain programs, and we anticipate completing the first-in-human studies for 1701 targeting Nav1.7 and 1120 targeting Kv7 later this year, and we seek to advance both programs to Phase II proof of concept. We are in an excellent position to execute our priorities due to our strong cash position, and we are feeling very optimistic about a bright future as we begin to transition to a commercial-stage company delivering meaningful medicines to patients. With that, we will now open the call for questions. Operator: At this time, I would like to remind everyone that in order to ask a question, please press star then the number one on your telephone keypad. We will pause for just a moment. Your first question comes from the line of Paul Matteis with Stifel. Your line is open. Paul Matteis: Great. Thanks very much. Congratulations on everything from the first quarter. I wanted to ask a couple of questions on the pain programs, if that is okay. First, as it relates to the Nav1.7 compound, I was wondering if you could talk about where you have gotten to in your Phase I program at this point, and how much you feel like you have de-risked some of the safety issues that have plagued other drugs? And then separately, can you maybe speak to more specifics around these Phase II plans in acute pain? What would the size and scope of those studies potentially look like, assuming the Phase I data later this year lets you advance? Thank you. Ian Mortimer: Thanks, Paul. Chris, I am happy to start and then you can provide your perspective, especially on the future clinical development. At JPMorgan earlier this year in January, we discussed progress we had made on both Nav1.7 and Kv7. You asked specifically around Nav1.7. At that time, we said that we already felt that we were at high enough exposures to get receptor occupancy that would mimic the human genetics, so we had already made good progress in those early cohorts of dose escalation. Bringing it forward to today, we have continued to enroll additional healthy volunteers in that Phase 1 study. Sitting today, we feel really good that we can safely dose, have the appropriate therapeutic index, and give this mechanism a real shot to show proof-of-concept data in Phase II. Based on what we know today, our plans are to move forward into a Phase II acute pain proof-of-concept study. Obviously, on the acute pain side, we are looking at studies like bunionectomy or abdominoplasty. We have not yet fully designed the studies. We would want to have them of sufficient size and power, and these would be placebo-controlled studies to show a difference between active and placebo. The question we continue to think about internally is how many arms, active comparators, how many doses—those things we are still planning. That will become clearer as we finish Phase 1 and we have a really good idea of what we are seeing in terms of the dose response and safety profile in those Phase 1 healthy volunteer studies. Chris, any color to add on additional details for future development? Christopher John Kenney: I will just double down on your point that we think we have what we need to go forward into Phase II on both programs, and we have not worked out exactly what the plan would be after the proof of concept that would be with abdominoplasty and/or bunionectomy. Paul Matteis: Alright. All good. Thank you very much. Unknown Speaker: Thank you. Operator: Your next question comes from the line of Tessa Thomas Romero with JPMorgan. Your line is open. Tessa Thomas Romero: Hey, thanks so much for taking our question, and congratulations from us on all the progress. Ian and Chris, I was wondering if you could provide your perspectives on how the seizure freedom data that you have shared at 12 weeks from XTOL-2 compares to what we know about XCOPRI on a cross-trial basis numbers-wise. How do you think doctors will approach thinking through the seizure freedom data that we have for these two assets, given that nearly 60% of the patient population were taking or had already discontinued XCOPRI in XTOL-2, and, of course, that XCOPRI has to be titrated? Thank you. Ian Mortimer: Thanks, Tessa. I will start. Chris can provide perspective, but I also want Darren to weigh in because we have had a huge amount of interaction with HCPs and the feedback that they are providing us. Chris mentioned in the prepared remarks that the consensus definition of seizure freedom is really having no seizure for 12 months, and so when we talk about our seizure freedom data with prescribers, we focus more on our open-label data than our double-blind data. In the double blind, you will hear us use terms like RR100, which is the percentage of patients that had a 100% reduction over the double blind. You asked for a comparison between AZK and cenobamate. It is a cross-trial comparison and it is challenging, but I will make a couple of comments. One, it was a materially different patient population. As Chris walked through and as you have seen in our publications and posters, we believe that both in XTOL and XTOL-2 this was the most refractory population ever trialed in a pivotal FOS study. When we look at the cenobamate double-blind trials done over a decade ago, that was a significantly less refractory population. So we are comparing two different clinical populations within FOS. You also mentioned another key factor, which is because cenobamate is titrated, when they look at their RR100 during their double blind, they only report over the maintenance period, which is the last six weeks of dosing. One of the reasons why we provided a breakdown of the last eight, six, and four weeks is to enable a better comparison. Another point on the cross-trial comparison is that often they show their data at their 400 mg dose, which—based on feedback and real-world data—patients rarely reach. If you look at their 200 mg dose and you look at the last period within our double-blind period—within the last six weeks or four weeks of our data—I would actually say that our RR100 is higher than the cenobamate data seen at their 200 mg dose. Then the last point you made is important: we actually had a cenobamate-refractory population in our trial, with close to 40% of patients on background cenobamate and approximately another 20% who had tried it and failed it either for efficacy or tolerability and were no longer on the drug. Overall, I think our data stack up really well, and I have not even talked about the open-label data. That is just a cross-trial comparison during the double-blind period. I will pass it to Chris to talk about the open-label seizure freedom data and then to Darren on how that is being pulled through into the real world. Christopher John Kenney: Thanks, Tessa. In the epilepsy field, there is a bit of a disconnect. If you talk to epileptologists and neurologists and ask them what they are hoping to achieve, they talk about seizure freedom on a long time horizon—at least six months, more like a year, sometimes more. Yet, in the same conversation, they will ask what was your seizure freedom over a month or two or three months. As you make comparisons, the details matter. If you are talking about seizure freedom with cenobamate at 400 mg, with hardly anybody taking 400 mg, and many patients treated at 200 mg or lower, it is important to think about dose. Also, when they talk about seizure freedom in cenobamate, they are excluding the first six weeks of the trial period, which is why we provided those different cuts of seizure freedom to allow a better comparison. Zooming out, general neurologists want something easy to use. With AZK, you do not have to worry about titration, drug-drug interactions, or manipulating other medications to reach therapeutic dose. To wrap up on seizure freedom, what really matters is what happens in the long term. In the data we just presented at AAN, among patients treated for four years or more, we are seeing about 40% with seizure freedom for a year or more. That is what really matters—not so much what happened over one, two, or three months. Thanks. Darren S. Cline: Thanks, Tessa. I would reiterate what Ian and Chris said. When we engage with physicians—both epileptologists and general neurologists—at AAN and other forums, XCOPRI is largely an epileptologist drug. When we query about seizure freedom at 400 mg, very few, if any, patients get to the 400 mg dose. As it relates to their own experience, seizure freedom at those doses is not as compelling in the real world. XCOPRI does add benefit, but physicians are not seeing anywhere near what is shown at 400 mg. General neurologists have struggled with using it; many try it once and are done. What differentiates AZK—and what we believe will make this a tremendous opportunity—is the ease-of-use attributes: lack of titration, once-daily dosing, and no DDIs. These really resonate, and general neurologists look forward to incorporating AZK in their practice. Operator: Your next question comes from the line of Cory William Kasimov with Evercore. Your line is open. Cory William Kasimov: Hi. This is Addy on for Cory. Just on the earlier question asked on the pain assets, can you confirm if investors should anticipate any data this year? I believe earlier it was mentioned that maybe Phase 1 SAD/MAD data might be presented. Should we anticipate that data? Thank you. Ian Mortimer: Thanks. We are very comfortable saying that the Phase 1 healthy volunteer studies for both 1701 and 1120 will complete this year. In terms of how much of those data we provide publicly—for competitive reasons—we will certainly communicate that we believe we have enough receptor occupancy, exposure, and coverage to have a really good shot at seeing an analgesic effect in a proof-of-concept study. It is to be determined whether we will broadly show the Phase 1 data publicly. We are comfortable that those studies will wrap up this year. Operator: Your next question comes from the line of Analyst with TD Cowen. Your line is open. Analyst: Hi, thanks for taking our questions. Have you scheduled or had a pre-NDA meeting yet? If you have had the meeting, can you talk about any feedback you have received from the FDA? Then on scheduling, can you walk us through the timeline and your expectations for DEA scheduling if you get approved? Christopher John Kenney: What we have guided is that we had top line XTOL-2 in March. We expect about a six-month period between that and submitting the NDA. We are expecting a standard review of 12 months, and then DEA scheduling is expected to be three months, which is why Ian stated that we expect approval in 2027 or early 2028. Pre-NDA meetings are standard. We expect that to occur between the top line data and the NDA submission in the fall, but we have not provided specifics on timing. We have had thoughtful and timely interactions with FDA, we think we have a good reputation with them, and we have not foreseen any problems up to this point. We look forward to future interactions. Analyst: Great. Thank you. Operator: Your next question comes from the line of Andrew Tsai with Jefferies. Your line is open. Andrew Tsai: Hey, good afternoon. Thanks for taking my questions. This is Matt Barkis on for Andrew Tsai. Can you give us a little flavor on what other Phase 3 data analyses you might share later this year, especially at AES in December, which can further showcase AZK’s potential differentiation? Ian Mortimer: Thanks. Chris, do you want to walk through our thinking around AES and additional analyses? Christopher John Kenney: We have spent a lot of time digging into the Phase 3 data and are working through what we intend to submit as potential abstracts at AES. As you know, you submit and they may or may not be accepted. We are focusing on analyses that combine efficacy and safety from our two pivotal FOS trials—XTOL and XTOL-2. We may also revisit seizure subtypes as we did in XTOL. And of course, we will update the XTOL OLE data, as we do each year. Those will happen for sure; we are working through whether there will be anything else. Ian Mortimer: That was great. Thanks, Chris. Operator: Your next question comes from the line of Brian Skorney with Baird. Your line is open. Brian Skorney: Hey, thanks for taking the question. This is Charlie on for Brian. Thinking about your Nav1.1 in Dravet—obviously a preclinical space—how do you see this compound and mechanism differentiating from the field, especially considering there are other therapies out there addressing this issue in epilepsy? And one more on pain: what are you thinking about long term in terms of chronic pain versus acute pain, and how each asset might fit into that paradigm? Thank you. Ian Mortimer: Thanks. I can start on Nav1.1 and then Chris can add, and we can touch on pain strategy. In Dravet syndrome, these children are haploinsufficient in Nav1.1, so they have about 50% of the protein. Currently approved drugs address seizures—like clobazam, Epidiolex, or FINTEPLA—aim to reduce seizure burden. We believe the field is also moving toward correcting the underlying genetics. There are ASO approaches you are aware of. We see an opportunity for a small molecule that is orally administered and can be titrated or weight-based dosed across a wide range of pediatric weights. By potentiating the channel and increasing current through the wild-type channel, there is potential to correct underlying disease physiology. The preclinical data Chris described—presented at AAN, including in haploinsufficient genetic models that mirror the human phenotype with spontaneous seizures and SUDEP—are quite remarkable. We see not only seizure reduction but also potential disease modification, including protection from death and improvements in long-term potentiation. We are now in tox studies. There is a huge need for better therapies in Dravet, and we think this could fit in nicely, though it is still early days. On pain, our first proof-of-concept studies will be in acute pain—bunionectomy or abdominoplasty. There is nothing in the genetics of Nav1.7 or the mechanism of Kv7 that suggests they should only work in acute versus chronic, or nociceptive versus neuropathic pain. If these programs look promising in PoC, the plan would be to go broad in late-stage development. Christopher John Kenney: Maybe it is slightly crowded, but this is a devastating disorder and it is good that multiple groups are working on it. We think we are differentiated because we are advancing a small molecule that addresses pathophysiology in a manner analogous to ASOs targeting the mechanism, but delivered orally rather than intrathecally. Think about the SMA analogy: gene therapy, ASOs, and then orals—all played roles. We think we can offer something meaningful. On pain, we are focused on getting out of first-in-human and into PoC; we still need to figure out chronic versus acute and other parameters in the coming months. Brian Skorney: Great. Thank you for all the color. Really helpful. Operator: Your next question comes from the line of Myles Minter with William Blair. Your line is open. Myles Minter: Thanks for taking the question. One on the commercial side: it is interesting that we are all comparing to XCOPRI when that is not the number one branded product—BRIVIACT is, and I think that went generic at the start of the year. Is that a headwind to marketing a newly branded ASM because costs are coming down in general neurology, or is it a tailwind because you no longer have to compete for that branded slot and can come in and take the market within general neurology? Darren S. Cline: Thanks, Myles. On the contrary, we think AZK’s attributes—particularly the novel mechanism—stand out after generations of SV2A, sodium channel blockers, and GABAergic approaches. The novel Kv7 mechanism is a benefit. Our ease-of-use attributes that we have outlined and receive positive feedback on—no titration, once-daily dosing, no DDIs—are compelling. Considering the timing, when we ultimately launch it will be almost a decade of what I would characterize as stagnation in focal epilepsy innovation. Along with our clinical data and profile, we see a great opportunity. BRIVIACT is another “me too” mechanism following a wildly successful parent in Keppra; that is a completely different market and opportunity than what we have with AZK as we look to the future and prepare to launch. Operator: Your next question comes from the line of Analyst with Deutsche Bank. Your line is open. Analyst: Hi, thanks for taking my questions. On the commercial side, given the strong balance sheet you have now, how do you think about leveraging that to ensure the best commercial launch for AZK in focal epilepsy? For example, would you increase the number of sales reps you field? And a competitor is doing a monotherapy study, arguing that weaning patients off background meds could allow earlier-line use. Have you thought of a study like that, and would it be helpful for AZK? Ian Mortimer: Thanks. I am happy to start with a bit of historical context, and then Darren can go through launch preparation details, and Chris can address monotherapy and labeling. Since the XTOL data in 2021, we have invested in commercial preparation at risk. This is a generational, paradigm-shifting opportunity. Given our confidence heading into the XTOL-2 Phase 3 readout, we started commercial prep already. Darren was hired almost a year ago. We have had field medical—MSLs—engaging in scientific exchange; this summer it will be two years since that team has been in the field. Darren’s leadership team is in place. We have had access personnel in place for years. Early investment gives us an opportunity for real success in the early days of commercialization. Darren? Darren S. Cline: Thanks. Successful launches share a few ingredients. First is early investment, which was in place when I joined. Second is the team: we have commercial leaders with deep epilepsy experience, relationships, and launch experience—which gives us a leg up. Third, we will be a highly desirable place for epilepsy-dedicated professionals; there has been little new for years, so when we post roles we expect the best talent. On the product, from brand positioning to pricing commensurate with value to services and distribution, we are thinking creatively to extract value and, most importantly, deliver the best patient and physician experience. Creating demand is only part of it; converting to paid scripts, persistency, and compliance complete the equation. All those variables are being put in place, and with AZK’s clinical profile, we are extremely excited and bullish on the launch. Chris, on monotherapy? Christopher John Kenney: To be blunt, I do not see the upside of doing a monotherapy study. From a labeling perspective, current labels do not specify adjunctive; they state the indication. I do not see upside from a labeling perspective. If, for whatever reason, I did see upside, I would design a pure monotherapy study—drug versus placebo—from the start. Manipulating background ASMs, trying to back off, and then interpreting efficacy and safety is likely very challenging. Operator: Your next question comes from the line of Analyst with Wells Fargo. Your line is open. Analyst: Yes, this is Orpheus on for Ben. Good afternoon, and congrats on the progress. As we look forward to XTOL-3 data and a potential ex-U.S. launch, how are you thinking about commercialization in ex-U.S. territories? I know in the past you have shared you would look to partner in such geographies. Any updates you can share? Thank you. Colleen Alabiso: I am happy to address that. Ian Mortimer: We are conducting clinical development to meet regulatory requirements around the world. We have been clear that the clinical program should meet requirements in Europe. An update over the last couple of quarters was our interaction with PMDA and the incorporation of Japanese sites and subjects into XTOL-3 to meet requirements in Japan without having to run a separate Phase 3 program there. We have done what is needed to drive global clinical development and value. We have also been clear that we are not going to build market access and commercial infrastructure outside the U.S. When the time is right, we will engage with potential partners to access those markets. Right now, we are focused on global clinical development. Analyst: Very helpful. Thank you very much. Operator: I will now turn the call back over to Ian Mortimer for closing remarks. Ian Mortimer: Thanks very much, operator, and thanks to everyone for joining us today. I know there were other questions in the queue, so if we did not get to yours, we will reach out to you directly to connect. We look forward to providing continued updates as we advance our programs and deliver on important milestones throughout the remainder of the year. Operator, we can now end the call. Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.