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Operator: Ladies and gentlemen, thank you for standing by. Hello, and welcome to XPLR Infrastructure First Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Kanghee Jeon, Director of Investor Relations. Please go ahead. Kanghee Jeon: Thank you, Dustin. Good morning, everyone, and thank you for joining our first quarter 2026 financial results conference call for XPLR Infrastructure. With me this morning are Alan Liu, President and Chief Executive Officer of XPLR Infrastructure; and Jessica Geoffroy, Chief Financial Officer of XPLR Infrastructure. Alan will walk through our business highlights, and Jessica will provide an overview of our financial results. After that, our executive team will be available to answer your questions. On this call, we'll be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements if any of our key assumptions are incorrect or because of other factors discussed in today's earnings news release, in the comments made during this conference call, in the Risk Factors section of the accompanying presentation or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website, www.xplrinfrastructure.com. We do not undertake any duty to update any forward-looking statements. Today's presentation also includes references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today's presentation for the definitional information and reconciliations of historical non-GAAP measures to the closest GAAP financial measure. With that, I'll turn the call over to Alan. Alan Liu: Thank you, Kanghee. Good morning, everyone. We delivered a solid start to 2026. Performance across the business was consistent with our expectations as we continue to advance our strategy to simplify our capital structure and maximize the value of our portfolio. The portfolio continues to deliver steady performance, and the team continues to execute in a disciplined manner with progress across our key focus areas. Our repowering program continues to progress well. To date, we have completed approximately 30% of the repowering projects planned for 2026. The remaining projects are on track and are expected to enhance output and longevity of XPLR's fleet and support overall portfolio performance over time, while positioning XPLR for the future in this growing power demand environment. We also completed the final expected draw from our project financing commitments secured in 2025, successfully funding certain of our repowering investments with long-term and low-cost asset level financing. With the successful execution of planned refinancing and recapitalization activities in 2025, we have a relatively modest financing plan ahead of us with the next major corporate refinancing activity not expected until 2027. With respect to the previously announced interconnection sale and battery storage co-investment agreement with NextEra Energy Resources, XPLR completed its evaluation and exercised its options to co-invest in the storage projects. XPLR will participate with a 49% expected interest in each of the four projects, which are expected to add approximately 200 net megawatts of battery storage capacity to our portfolio by year-end 2027. As a reminder, after asset level financing proceeds, the net equity required for XPLR is expected to be approximately $80 million, which XPLR plans to fund through the sale of certain interconnection assets and rights to NextEra Energy Resources and to the four to-be-formed joint ventures. We believe that the structure for the joint ventures represents a disciplined and capital-efficient way to add incremental growth, leveraging our existing platform while maintaining a focus on balance sheet strength. Lastly, we continue to see improving power market fundamentals that we believe are supportive of the value and the optionality of our assets, and those favorable market dynamics are starting to translate into tangible opportunities. We recently recontracted roughly 90 megawatts at an existing wind site at a rate that is roughly $25 per megawatt hour higher than realized pricing on that project's generation over the past year. It's a small project, but the revenue uplift is meaningful on a percentage basis. And more importantly, we are optimistic that this is an early example of a broader opportunity set as legacy contracts expire. Our team is pursuing additional opportunities to recontract and optimize existing contracts across multiple markets where there is strong demand growth. With that, let me turn it over to Jessica, who will review our first quarter 2026 results in more detail. Jessica Geoffroy: Thank you, Alan, and good morning, everyone. Let's begin with XPLR Infrastructure's detailed results. For the first quarter of 2026, XPLR portfolio generated approximately $435 million in adjusted EBITDA and $89 million in Free Cash Flow Before Growth. First quarter results from existing projects were affected by lower wind resource, which came in at approximately 99% of the long-term average compared to 103% in the prior year period. This impact was partially offset by contributions from repowered assets, which continue to enhance generation and cash flow across the portfolio. Favorable weather and strong execution during the first quarter allowed us to pull ahead planned major component work from later in the year, which was the primary driver of higher year-over-year O&M costs. In addition, the results for both adjusted EBITDA and Free Cash Flow Before Growth reflect the impact of asset dispositions completed in 2025. The year-over-year decline in Free Cash Flow Before Growth was consistent with the company's expectations as it was primarily driven by higher financing costs resulting from the balance sheet simplification and capital plan funding activities in 2025. Specifically, XPLR Infrastructure's First Quarter 2026 Free Cash Flow Before Growth includes approximately $74 million of incremental corporate interest expense from the approximately $1.75 billion of unsecured notes issuances in March 2025. It also includes approximately $12 million higher year-over-year interest expense from project financings raised in 2025. As a reminder, Free Cash Flow Before Growth reflects actual cash interest payments within the measurement period. As a result, quarterly results can vary based on the timing of interest payments, along with the natural seasonality of wind and solar generation. Taken together, these factors typically result in a lighter contribution in the first quarter. Specifically, XPLR's First Quarter 2026 Free Cash Flow Before Growth is expected to represent roughly 12% to 15% of its expected full year results. Additional granularity on the timing of expected interest payments can be found in the appendix of today's presentation. For 2026, we continue to expect adjusted EBITDA of $1.75 billion to $1.95 billion and Free Cash Flow Before Growth of $600 million to $700 million. As always, our expectations assume our usual caveats, including normal weather and operating conditions. Let me close by reinforcing the key elements of the XPLR platform. XPLR is a contracted infrastructure platform generating stable cash flows supported by long-term agreements and high credit quality counterparties. Our strategy remains focused on two priorities: continuing to simplify the capital structure and executing on attractive investments into the existing asset base to create value for unitholders. We believe that consistent execution against these priorities supports both our financial flexibility and our strategic positioning. We believe that the combination of stable cash flow generation and a disciplined capital plan allows XPLR to allocate retained cash flows in a value-maximizing manner over time. That discipline underpins our strategy and positions XPLR to capture long-term value as U.S. power demand continues to grow. That concludes our prepared remarks, and we will now open the line for questions. Operator: [Operator Instructions] We will take our first question from Nelson Ng from RBC Capital Markets. Nelson Ng: Alan, you mentioned there was a small recontracting during the quarter with a $25 improvement in the power price. Are you able to provide the power price prior to the recontracting? I was just wondering what the percentage improvement was. Alan Liu: We didn't provide the prior contract price, so just commercial sensitivity of where the ultimate PPA landed here. But I would say, if you think about it, right, and we've given you some disclosure previously about on average, kind of the uplift. This is in line or even slightly better than kind of the uplift that we would have expected for this market. The opportunities, obviously, we've highlighted before, right? They're generally in SPP and ERCOT, and WACC. So it's a project in one of those markets and in line with where we expected, which is it's a multiple above where the previous price was. Nelson Ng: Okay. And then just on the battery storage front, I think you previously agreed to sell interconnection rights to raise $45 million of the $80 million required for your equity contribution. Have you identified the rest of the projects that you're looking to sell? And then just a follow-up on that. Is there a time line in terms of when there could be another batch of projects that XPLR could co-invest in? Alan Liu: I'll address the first question, which is the funding for the existing storage JV. We're certainly working through a list of potential opportunities with NEER. As a reminder, construction for these projects aren't slated to begin until at the earliest end of this year, but most likely, it's throughout 2027 and then they are COD in late 2027. So we have some time. But with the list and the opportunities that we're looking at, we feel confident we will be able to fund those with additional asset sales. I think your question about will there be additional storage opportunities? I think the right way to think about it is across our 10-gigawatt portfolio, we certainly have multiple gigawatts of surplus interconnection. Those represent potential opportunities. We certainly feel out of that set, there are opportunities for additional co-located storage or other development opportunities. But whether or not those projects are ultimately attractive to XPLR site location specific. It comes down to a lot of factors, including the demand and the pricing that can be achieved for those specific projects. And then ultimately, whether or not we participate or monetize those, the value of that interconnect is going to fall under our existing capital allocation framework, right? It's subject to what else can we do with our money, are there better returning allocations or and then also it's subject to the balance sheet and our cost of financing. So a long way of saying, yes, there's opportunity. We have not committed to any incremental investments at this time, but we'll keep you posted. Nelson Ng: And then just one last question. You mentioned the balance sheet. So looking at the balance sheet, there's about $943 million of cash and equivalents. I presume a lot of that cash is at the project level. But like roughly how much of that cash is readily available at the corporate level? Jessica Geoffroy: Nelson, it's Jessica. So you can see in our SEC filings, we break out the amount of cash held in reserves at the projects. Our 10-Q for this quarter will come out after market close today. But looking back at the last quarter, there's roughly $300 million held in reserves at the projects. Operator: [Operator Instructions] And we will take our next question from the line of Mark Jarvi from CIBC Capital Markets. Mark Jarvi: Just going back to the recontracting opportunity. Can you comment at all in terms of like how big the funnel would be? Like how many megawatts across your portfolio are something you're actively exploring? And we're sort of -- I assume it's more weighted to wind just given the vintage of the contracts and assets. Is that right? Alan Liu: Mark, this is Alan. That is correct. I think that's the right way to think about it. The majority of the opportunity will exist in wind projects and obviously, in the specific markets. We've highlighted this before in prior presentations. In the near term, and we've given you a schedule a rough kind of chart that shows there are increasing opportunities as we get closer to 2030. But there's definitely going to be tangible opportunities that we're working on as we speak. But the majority, I would say, roughly 70% of the kind of opportunity exists beyond 2030. And we're hoping to continue to execute in the next few years leading up to that. Mark Jarvi: And obviously, the pricing you received was attractive. I think NextEra said around $20 a megawatt hour what they got. So that's a good uplift. Just curious in terms of what the tenor of the contracts are out there and sort of that trade-off between price and duration. Alan Liu: I believe it was a 15-year contract, but we'll confirm. Mark Jarvi: But that's generally what the counterparties are looking for, that sort of that term at this point? Or is there a real range out there of shorter duration? Yes. Alan Liu: Yes. So just to confirm, it was a 15-year busbar contract here. And as you know, there's always a trade-off between tenor, right, whether it's hub settled or busbar. And ultimately, for us, this made the most sense, right, between duration of the contract, like the fact that in this particular market, we prefer the busbar over a potentially higher hub settled contract here. Mark Jarvi: Got it. And just on the battery projects co-investment, are the costs all locked down for those projects, like everything locked down in terms of equipment, EPC, all that kind of stuff, just so that you know that the $80 million investment is more or less firm at this point? Alan Liu: So this is a true equity co-investment alongside NEER Energy Resources. So as with any equity investment, we -- if there are cost overruns, we, of course, would be as a partner funding that. But we feel good about this project. It's well advanced. Supply chain, we have the same benefits, right, the benefit of having NEER as a co-investment partner here is that we have access to that supply chain and the equipment. We feel very good about having secured. Operator: There are no further questions on the queue. That concludes our question-and-answer session for today. That also concludes our call for today. Thank you all for joining, and you may now disconnect.
Operator: Sounds like the music for the Titanic. Ladies and gentlemen, thank you for standing by. Welcome to the W&T Offshore, Inc. First Quarter 2026 Conference Call. During today's call, all parties will be in a listen-only mode. Following the company's prepared comments, during the question and answer session, we ask that you limit yourselves to one. This conference is being recorded and a replay will be made available on the company's website following the call. Over to Tracy W. Krohn, our Chairman and CEO. Tracy W. Krohn: Thank you, Al. Good morning, everyone, and welcome to our first quarter conference call for 2026. With me today are William J. Williford, our Executive Vice President and Chief Operating Officer; Sameer Parasnis, our Executive Vice President and Chief Financial Officer; and Trey Hartman, our Vice President and Chief Accounting Officer. They are all available to answer questions later during the call. We started 2026 on a positive note with strong operational and financial results that either met or exceeded our guidance across multiple metrics. Our production was 36 thousand 200 barrels oil equivalent per day, toward the higher end of guidance and flat with 2025 despite some adverse weather impacts in early 2026. The solid quarterly results start with our ability to maintain strong production, and we were aided by our realized prices of $45.08 per barrel oil equivalent, an increase of 26% from the fourth quarter. In March, our realized oil price was $88.61 per barrel. Additionally, our lease operating expense, LOE, was down 11% to $66 million, below the midpoint of guidance. Reductions in our LOE costs were mainly driven by lower base LOE spend, reflecting fourth quarter 2025 cost-saving initiatives that began to materialize in 2026. All these positives helped us generate $55 million in adjusted EBITDA, our highest quarterly number since 2023. We are also very pleased to have generated $21 million in free cash flow, a significant improvement from the fourth quarter of last year. Our ability to execute our strategy has delivered very strong results to start off 2026, including a healthy balance sheet and enhanced liquidity. At the end of 2026, our total debt and net debt were $351 million and $220 million, respectively. Our liquidity was $175 million. We built W&T Offshore, Inc. using a proven and successful strategy that is committed to profitability, operational execution, returning value to our stakeholders, and ensuring the safety of our employees and contractors. We have consistently delivered operationally and financially with low-decline production, meaningful EBITDA, and seamlessly integrating accretive producing property acquisitions during our nearly 45-year history. Capital expenditures in 2026 were $7 million and asset retirement settlement costs totaled $17 million. We continue to expect our full-year capital expenditures to be between $20 million and $25 million, which excludes potential acquisition opportunities. Our budget for ARO remains the same at $34 million to $42 million. Yesterday, we provided our detailed guidance for second quarter 2026 and reiterated our unchanged full-year production and cost guidance. In 2026, we have a planned third-party Mobile Bay natural gas processing facility turnaround that will impact our NGL volumes and temporarily increase our LOE. However, our full-year LOE guidance has not changed. We are forecasting the midpoint of Q2 2026 production to be around 34 thousand 300 barrels oil equivalent per day. This is a decrease of 5% compared to 2026, driven primarily by the turnaround, but the key is that we have not changed full-year guidance. Second quarter LOE is expected to be $71 million to $79 million, up from first quarter actual of $66 million, and this is due to the planned Mobile Bay turnaround as well as higher planned workover and facility maintenance work that is expected to benefit production in 2026. It is important to note that LOE expenses tend to increase and decrease seasonally, with much of the work being accomplished during warmer weather months that also produce less wind. Second quarter transportation and production taxes are expected to be between $7 million and $8 million compared with $9 million in the first quarter, which reflects some of the benefit of the new pipeline we installed for the West Delta 73 field. Second quarter cash G&A costs are expected to remain comparable to our Q1 results. I want to point out that we tend to spend significantly less than our peers in capital expenditures and choose to instead spend more dollars on low-risk, high-rate-of-return workovers and facility optimization. We believe this is a more economic way to invest our operational cash flow back into our business and it is a lower-risk option. We can then build cash flow to help us make accretive acquisitions of producing properties. Over the years, we have consistently created significant value by methodically integrating producing property acquisitions. We look for strong producing assets with meaningful reserves at an affordable price that we can integrate into our vast infrastructure. We primarily spend LOE dollars to work over, recomplete, and upgrade these assets. As a result, we often see additional production uplift from these acquisitions above the rates they were producing when purchased. This strategy makes W&T Offshore, Inc. unique, but it is our ability to execute over and over throughout the years that allows us to add value. With our low-decline production, increasing realized pricing, and continued cost control, we believe that we are well positioned operationally and financially to deliver robust results in 2026 while we examine accretive acquisition opportunities. Before closing, I would like to discuss some regulatory updates in more detail. As we mentioned in yesterday's earnings release, the Department of Interior has proposed some positive regulatory changes that would roll back obligations from a 2024 rule that would require companies to set aside about $6.9 billion in supplemental financial assurance. About $6 billion would have applied to small businesses that make up most of the operators in the Gulf. The proposed changes will better align financial assurance requirements with actual decommissioning risk and reduce industry-wide bonding costs by at least $500 million annually. These proposed revisions have been published in the Federal Register with a 60-day public comment period, which is expected to end May 15. We welcome these changes proposed by the Trump [inaudible] that can further encourage U.S. offshore production growth and increase America's energy independence. Regarding the surety litigation, I am able to report that the district court has rejected the surety's attempt to require W&T Offshore, Inc. to immediately pay their demands—I would call them ridiculous demands—for collateral. The sureties are appealing that ruling and W&T Offshore, Inc. will continue to vigorously defend our position that the surety's demands for collateral were neither appropriate nor lawful. Moreover, W&T Offshore, Inc. prevailed in virtually every respect as it relates to the surety's attempt to dismiss the claims W&T Offshore, Inc. has asserted in the lawsuit. Yesterday, the court granted W&T Offshore, Inc.'s request to file an amended lawsuit, which sets forth broader and other claims against the sureties. This case will go on. As can be reviewed in our court filings, the sureties' conduct caused W&T Offshore, Inc. to incur substantial damages and we intend to seek to remedy the conduct and obtain damages to the fullest extent of the law. In closing, I would like to thank our team at W&T Offshore, Inc. for all their efforts. We are ready and able to add significant value in 2026. W&T Offshore, Inc. has been an active, responsible, and profitable operator in the Gulf of America for over 40 years. We have a long track record of successfully integrating assets into our portfolio and we know that the Gulf of America is a world-class basin, being the second largest basin by production and the largest basin in the USA by area. We have a solid cash position and strong liquidity that enables us to continue to evaluate growth opportunities while continuing to generate strong operational cash flow and adjusted EBITDA. We will maintain our focus on operational excellence and maximizing the cash flow potential of our asset base in 2026 and beyond. Operator, we can now open the lines for questions. Operator: We will now begin the question and answer session. Your first question today comes from Derrick Whitfield with Texas Capital. Please go ahead. Derrick Whitfield: Good morning, Tracy and team, and thanks for your time. Tracy W. Krohn: Good morning, Derrick. Derrick Whitfield: Starting with your guidance, while I understand you are reiterating production guidance for the full year, how would you characterize your desire to further lean into workovers in the favorable environment? Tracy W. Krohn: Yes. Well, that is always a key factor for us. We have always got a good inventory of things to do. As we have acquired assets over the years, we take the time to study them and restudy them, and that allows us to continue doing these workovers. Do expect to see some more of that. We will ramp up a little bit during the summer because the weather is better—late spring and summer, which is about now. In fact, we are moving some things around in the Gulf now to begin that process. Workovers have always been a key strong point for us, along with not only workovers but recompletions. Analyst: Great, Tracy. And then maybe shifting over to the M&A environment, I wanted to get your thoughts on the competitive landscape at present. Is it safe to assume we are in a pencils-down environment for larger packages, or are you seeing reasonable action in the market at present? Tracy W. Krohn: The company has got a very strong liquidity position right now. There has been a dearth of significant transactions for the last several years in the Gulf. We feel pretty good about where we are. We are in different data rooms almost continuously over the years. I think that there is a real good possibility that things are going to start moving around. We certainly have aspirations in that direction and intend to continue to pursue things that will fit our normal financial criteria. That criteria usually starts with cash flow, and then also what is the reserve base. What are the things that we can do to increase cash flow near term, such as workovers and recompletions and facilities upgrades, that will generate those numbers near term. Analyst: Great update. Thanks for your time. Tracy W. Krohn: Thank you, sir. Operator: And your next question comes from William Blair. Please go ahead. Analyst: Hey Tracy, this is actually Neil. Just had two quick ones for you. How are you doing? And nice to be back on the call. Tracy W. Krohn: Good, Neil. Analyst: My first question, Tracy, I know part of the upside for you all is converting a lot of the 2P to primary reserves. It seems like with the plan you have laid out, there is still a lot of that going on. Could you tell us what you think the timing of that would be? Tracy W. Krohn: The really cool part about our 2P reserves is that a lot of those reserves come to us in the form of cash and then later on booked reserves. As time moves forward, we see that first as cash flow. That is cash flow and reserves that we do not have to spend any CapEx on, and that has been a real focal point of the company over many years. It is why we have traditionally very low decline rates, and that shows up as massive amounts of cash and reserves over time. It has always seemed to have been that way for the company since we started, and I try to reiterate that to investors in just about every presentation that we do. There are additional reserves that are probables that we do have to spend some CapEx on. We look forward to doing that in the near future. We have not been doing a lot of drilling lately because we have not needed to. One of the hallmarks of the company is making sure that we try to continue the cash flow stream. If any time I can acquire reserves as opposed to drilling for them at approximately the same price, then that is what we are going to do. We are going to take the risk out of it and do that, and that is one of the reasons why we are still here after 40-something years. That is a great question, Neil. I appreciate it. Analyst: I love that upside. Secondly, as you said, not that you are going to have to go drill much, but you have a very low CapEx guide. Does that factor in the workovers that Derrick talked about? Are service costs holding in right now, or what are you seeing for service? Tracy W. Krohn: Part of that is exactly what you suggested—holding on and making judicious decisions about workovers and recompletions. Part of it is to make sure that we maintain really good liquidity. I think there will be opportunities going forward in the market for us to make additional acquisitions. Again, it is not that we do not have wells to drill. We do. We have a pretty good inventory of exploration opportunities and, in fact, even proven reserve opportunities that are substantial. It is not because we do not have inventory; it is because management, including myself, believes that opportunities to do additional acquisitions are good, and we like the way that we are positioned in this market and we have good liquidity. Analyst: Perfect. Thank you much, sir. Operator: Your next question comes from Jeff Robertson with Water Tower Research. Please go ahead. Analyst: Thank you. Tracy, just to follow up on your previous comments. W&T Offshore, Inc. has a pretty low reinvestment rate when you think about cash flow from operations in 2026, and yet production is expected to stay relatively flat for the year from where you were in the first quarter based on your midpoint guidance. To your point about the capital-light business model, is a lot of that production performance just related to, as Neil talked about, moving 2P reserves into PDP without any capital? And is that something that goes on for 2026, 2027, and beyond just based on your reserve profile and performance of your assets? Tracy W. Krohn: The short answer to that is yes. Again, with probable reserves, because of the quirks around the booking of those via the SEC, we have to wait a while before we can put them back in as proved reserves, and often those are just additions to proved producing. We get a dual effect of not only increasing the reserves, but also increasing our borrowing capacity as well. That is a double plus for us. This is normal. These are the actions of the corporation. I have done this illustration in just about every investor meeting we have ever had. I have an illustration in the deck that shows you the effects of the probable reserves and how they get to be producing reserves over time. We generally book them again as cash flow and reserves over time. It is not that we do not have inventory to drill—we do—but it is nice to have that additional bit of reserves. In Europe, they look at this as companies are valued more on the 2P basis than they are just 1P, and our regulators have been a little bit slow to do that. That has always been a complaint and I do not understand the rationale behind it. It seems ridiculous to me because we have proven it over and over again that we definitely increase reserves and cash flow over time without additional CapEx. Analyst: When you think about acquisitions, two-part question. One, are you able to buy on a 1P basis? And then secondly, you spoke about the regulatory environment and some of the things that are coming down the road. Will that have an impact on M&A activity in the Gulf of Mexico, do you think? Tracy W. Krohn: That is a pretty good two-part question, Jeff. To answer your question on 1P, it is really a bunch of different factors. It is not just necessarily 1P. We do look at the entire reserve stack, and again, we like to see acquisitions that have cash flow and a reserve base that we can forecast, but also we like to see some upside too, where we can do some work or drill some wells, that sort of thing. They are all a little bit different. In the Gulf, you have to take into consideration what are the retirement obligations. That is a very important part of what we do. We manage that very well. The company has done more plug and abandonment decommissioning on those AROs than anyone. We have spent over a billion dollars doing that decommissioning work over the years. We think that we are the expert in that market. We understand it very, very well, and that is one of the things that we always look at closely in determining value. As far as the other things that we are looking for, yes, we are in a mode where we are looking around for things that are going to fit our financial criteria, and we have been in data rooms for quite a while. Analyst: Thank you. Tracy W. Krohn: Thank you, sir. Operator: Seeing no further questions, this concludes our question and answer session. I would like to turn the conference back over to Tracy W. Krohn, Chairman and CEO, for any closing remarks. Tracy W. Krohn: Thank you, operator. We appreciate everybody listening, and I look forward to every day. I never know what is going to happen with regards to the markets, and it seems that with the war in Iran, it has been a little bit more difficult to think about it in terms of going forward. On the other hand, we are very pleased that the company is doing well and positioned to do even better. Thank you for listening, and we look forward to talking to you again soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings. Welcome to Orion Properties Inc. First Quarter 2026 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the call over to Paul C. Hughes, general counsel. Thank you. You may begin. Paul C. Hughes: Thank you, and good morning, everyone. Yesterday, Orion Properties Inc. released its results for the quarter ended March 31, 2026, filed its Form 10-Q with the Securities and Exchange Commission, and posted its earnings supplement to its website at onlreit.com. During the call today, we will be discussing Orion Properties Inc.'s guidance estimates for calendar year 2026 and other forward-looking statements, which are based on management's current expectations and are subject to certain risks that could cause actual results to differ materially from our estimates. The risks are discussed in our earnings release as well as in our Form 10-Q and other SEC filings, and Orion Properties Inc. undertakes no duty to update any forward-looking statements made during this call. We will be discussing non-GAAP financial measures such as funds from operations, or FFO, and core funds from operations, or core FFO. These non-GAAP financial measures are not a substitute for financial [inaudible]. Paul H. McDowell: [inaudible] and fully committed to pursuing any action proposals that maximize shareholder value. We are conducting this process in a customary and thorough manner and it will take time to conclude. While we have made significant progress so far, we are not yet in a position to comment on any specifics. We also cannot comment on when the process will conclude, though we are working as expeditiously as possible. I also want to emphasize that the execution of our business plan continues to be positive. Our improving results reflect ongoing confidence in our standalone prospects should the strategic review determine that is the best path forward. We appreciate your patience while we work through the strategic options and will have more to say at the appropriate time. The remainder of today's call will focus on our operating performance and the meaningful progress we continue to make on our business plan. Our strategy remains centered on the stabilization of the portfolio through increased leasing activity, the timely disposition of noncore assets, managing leverage, and very selective capital recycling into new DUA assets. We expect these efforts to result in core FFO per share growth in 2026 and beyond. During the first quarter, we continued to build on the 2 million square feet we leased over the past two years by completing 355 thousand square feet of leasing activity. The leasing highlight for this quarter is a 172 thousand-square-foot full building lease of 12 years at our previously vacant Irving, Texas property. During 2024 and 2025, we strategically invested capital of about $5 per square foot to enhance the common areas and improve the overall appearance of this core property, importantly enabling us to launch an aggressive leasing effort and secure a full building tenant. Our weighted average lease term, or WALT, averaged nearly 12 years on new leases signed during the quarter. Overall, the average WALT for the consolidated portfolio continues to move in the right direction and is approaching six years. Cash rent spreads on the first quarter renewals were up for the fourth consecutive quarter at 2.5%. As we have said many times before, rent spreads can and will be volatile quarter over quarter, though we feel positive about current trends overall. Our leasing efforts and noncore asset dispositions have resulted in our consolidated portfolio occupancy rate rising to 83.1% at the end of the first quarter, up from 73.7% in the first quarter of last year. Like rent spreads, our occupancy will show some volatility quarter to quarter as we have leases roll in our largely single-tenant portfolio, though we see occupancy continuing to improve overall in coming years. Beyond the leasing completed year to date, our pipeline remains in excess of 1 million square feet that is in either discussion or documentation stages. This includes several full building leases as well as some possible longer-duration renewals and new leases with terms materially greater than the average of our portfolio. Overall, we are quite pleased with leasing velocity to start the year. A second part of our strategy towards stabilization has been through the timely and strategic sale of noncore properties. Since our spin-off, we have sold 38 properties totaling 4.1 million square feet. This includes first quarter sales of two vacant Northeast properties, one in Massachusetts and one in Pennsylvania, for aggregate gross proceeds of $13.1 million, as well as second quarter sales of the 37.4-acre Deerfield, Illinois properties for $13.1 million and a 120 thousand-square-foot property in Glen Burnie, Maryland for $22.5 million. Regarding the Glen Burnie disposition, this was a very successful and accretive disposition for Orion Properties Inc., as the tenant's lease was terminated a few days prior to the sale, and pricing represented a 5% cap on expiring rent, or $188 per square foot. In addition, we are currently under contract to sell an additional three properties for gross proceeds of $46 million, nearly all of which will be used to reduce debt. Our overall focus on selling properties primarily with difficult releasing prospects and high carrying costs has proven very effective. These sale transactions continue to substantially reduce the carry costs associated with vacant properties. Our 2025 and 2026 vacant or near-term vacant property sales are estimated to save more than $12 million in annual carrying costs. Our ongoing targeted disposition efforts are expected to enable us to continue to reduce debt levels while still funding vital tenant improvement allowances, leasing commissions, and other capital expenditures in support of our strong leasing activity. Beyond continuing to reduce leverage, we also continue to search for and actively evaluate opportunities to recycle a modest percentage of asset sale proceeds into accretive cash-flowing acquisitions. We employed this targeted approach with the $15 million acquisition of the Barilla America headquarters and R&D facility in Northbrook, Illinois during the first quarter. It remains our intention to continue shifting our portfolio concentration towards dedicated use assets where our tenants perform work that cannot be replicated from home or relocated to a generic office setting, and away from traditional suburban office properties. These property types include medical, lab, R&D, flex, and government properties, all of which we already own. Our experience is that these assets tend to exhibit stronger renewal trends, higher tenant investment, and more durable cash flows. At quarter end, approximately 37.1% of our consolidated portfolio by annualized base rent consisted of dedicated use assets versus 32.2% at the end of the first quarter 2025, and we expect this percentage will continue to increase over time through disposition activity of traditional office and targeted acquisitions of DUA properties. We continue to evolve the portfolio toward stabilization and have positioned the company for meaningful per-share core FFO growth in the coming years. For the balance of 2026, our benchmarks will be to remain focused on improving portfolio quality, lengthen WALT, renew tenants, and fill or sell vacant space, all while prudently managing expenses and leverage as we work to maximize Orion Properties Inc.'s value for investors and potential strategic partners. With that, I will now turn the call over to Gavin B. Brandon for the financial results. Thanks, Gavin. Gavin B. Brandon: For 2026 compared to 2025, Orion Properties Inc. had total revenues of $36.3 million compared to $38 million, net loss of $0.24 per share compared to $0.17 per share, and core FFO of $0.21 per share compared to $0.19 per share. The $0.21 per share of this quarter's core FFO includes a one-time expected lease termination payment of $1.9 million associated with our East Syracuse, New York property. Adjusted EBITDA was $17.2 million compared to $17.4 million. G&A came in as expected, at $5.1 million compared to $4.9 million, with the increase primarily driven by approximately $100 thousand of legal expenses related to the ongoing strategic option review process and activist shareholder relations costs. CapEx and leasing costs were $18.7 million compared to $8.3 million. The increase in CapEx in 2026 was primarily due to the completion of landlord and tenant improvement work relating to the acceleration in our leasing activity. As we have previously discussed, CapEx timing is dependent on when leases are signed and work is completed on properties. We expect to allocate more capital to CapEx over time as leases roll and new and existing tenants draw upon their tenant improvement allowances. Our net debt to annualized most recent quarter adjusted EBITDA was a relatively conservative 6.36 times at quarter end. As of March 31, 2026, we had total liquidity of $148.5 million, including $60.5 million of cash, cash equivalents, and restricted cash, and $88 million of available revolver capacity. Orion Properties Inc. continues to manage leverage while maintaining significant liquidity to support our ongoing leasing efforts and provide the financial flexibility needed to execute on our business plan for the next several years. Since our spin and including a recent repayment, we have repaid a net $166 million of outstanding debt. As previously announced, during the first quarter, we entered into a new senior secured credit facility revolver, which refinances our original credit facility revolver and extends the maturity date until February 2029, inclusive of two six-month borrower extension options. The updated terms of the agreement have also right-sized our borrowing capacity and lowered the interest rate on our borrowings. As of March 31, we had $127 million outstanding and $88 million of borrowing capacity under our new credit facility revolver. Subsequent to the quarter, we repaid $25 million and now have $113 million of available borrowing capacity. As communicated previously, we also successfully amended our CMBS loan in the first quarter. The loan modification agreement extends the maturity to August 2030, inclusive of two borrower extension options for a total of 18 months. During all extension periods, the fixed interest rate on the CMBS loan remains at 4.971%, and excess cash flows will be used by the lender to prepay the outstanding principal balance of the loan and to fund an all-purpose reserve, which we can use to pay leasing costs and capital expenditures. As of March 31, we had $352.3 million outstanding under the CMBS loan and $46.1 million in reserves. Turning to our unconsolidated joint venture. While we have written our investment in the JV down to zero and recorded a loan loss reserve for the full amount of our member loan due to the uncertainty around the mortgage debt financing, we continue to believe that the portfolio, which is performing with an occupancy rate of 100% and a weighted average lease term of 6.1 years, has positive equity net of the mortgage debt and our outstanding member loan. We intend to continue to work with our partner and lenders to maximize the value of the portfolio and recover both our member loan and as much equity as possible. As part of these efforts, we are working on a disposition plan with our partner and the lenders and continue to explore refinancing options. The joint venture has entered into an agreement to sell one of the properties in the portfolio, and if it closes, we intend to use the net proceeds from the sale to reduce the principal balance of the mortgage debt. As for the dividend, on May 5, 2026, Orion Properties Inc.'s board of directors declared a quarterly cash dividend of $0.02 per share for 2026. Turning to our 2026 outlook. As our recent leasing and capital initiatives begin to translate into improved recurring earnings power for 2026 and beyond, we believe the positive trajectory will continue to take hold as we move ahead. Accordingly, we are affirming our previously announced guidance. Core FFO for the year is expected to range from $0.69 to $0.76 per diluted share. G&A is expected to range from $19.8 million to $20.8 million. Excluding noncash compensation, we expect 2026 G&A will be in line or slightly better than 2025. We also do not expect G&A to rise significantly in future periods, including noncash compensation. As a percentage of revenue and total assets, our G&A remains in line with other similarly sized public REITs. Net debt to adjusted EBITDA is expected to range from 6.5 times to 7.3 times. We will now open the call for questions. Operator? Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the keys. Our first question comes from the line of Matthew Erdner with Jones Trading. Please proceed with your question. Analyst: Hey, good morning, and thanks for taking the question. You touched on the pipeline of about 1 million square feet that you are talking to right now. How much of that is leases that are going to expire this year versus next year? What should we expect in terms of momentum as we progress throughout the year? Paul H. McDowell: Good morning. A lot of the renewals that we are working on are summer 2026, but most are for 2027 and even beyond that into 2028 as well. As you know, we do not have too much lease rollover for the remainder of this year, and we have good momentum on the rollover for next year. We also have good momentum on filling some of our vacant space. We have a number of leases where we are in discussions with potential tenants for our vacancies. In general, we feel pretty good about our pipeline, and it has been roughly the same size for the past few quarters, which is reflected in our overall leasing momentum that we had in 2024 and 2025 and now 2026. Analyst: Got it, that is helpful. And then shifting to the guidance, you reaffirmed and came in at $0.21 this quarter. On an annualized basis that would put you above the guidance. Were there any kind of one-time items we should be thinking about that will drive that a little bit lower compared to that $0.21? Paul H. McDowell: Sure. Gavin, why do you not answer that? Gavin B. Brandon: Hey, Matt, Gavin here. This quarter we had a $1.9 million lease termination payment that came in during the first quarter. We also had a reimbursement from some of our G&A for our GSA work we did in Lincoln, Nebraska. The one-time reimbursement for the Lincoln, Nebraska work will be straight-lined versus recognized in full in the period quarter. So the $1.9 million for the lease termination really drove up the first quarter in our model. As far as the remainder of the year goes, we have not accrued for or are expecting a significant amount of lease termination income coming in. Analyst: Got it. That is helpful. Appreciate the comments. Operator: Thank you. Our next question comes from the line of Mitch Germain with Citizens JMP. Please proceed with your question. Mitch Germain: Thanks very much. Paul, what is the profile of the buyers of these vacant properties, and are most of them being repurposed to other uses? Paul H. McDowell: Good question, Mitch. The profile is mixed. The Walgreens properties, as you know—the property in Deerfield, Illinois; we call it the Walgreens properties, their former headquarters—we actually tore the buildings down there and sold raw land to a developer. The Glen Burnie property that we sold at such a terrific premium was sold to a user who happened to be a next-door neighbor, so that property was very valuable to them. Over our sale process over the past few years, the best outcomes are from people who are going to either repurpose the property into something else or users. When you have somebody who is just buying as an investor hoping to re-lease it, those are the most challenging buyers, but sometimes they are the only ones in the market. Mitch Germain: Gotcha. That is helpful. You only have three vacant assets remaining, which is quite an accomplishment considering I think that metric has been kind of double-digit for you the last couple of years. Is the goal for those three remaining to be sale candidates, or are some of them part of your leasing pipeline as well? Paul H. McDowell: We hope to lease all three of those properties, Mitch. We have made a lot of progress, obviously, in the property in Buffalo with moving Ingram Micro into that property. The property in Tulsa, Oklahoma is a very high-quality Class A building and is currently vacant, but we have started to get some good leasing momentum there. We are in discussions and negotiations on a few leases in that property. Our goal is to lease up that vacancy. But as you may have noticed over the past year or so, given our accelerated disposition volume, we are taking a very hard look, quickly, at whether leasing interest is going to turn into true signed leases in buildings. If we conclude that it is, we are going to lease these properties up. If we conclude that leasing is stalling, we will take a hard look and perhaps sell those assets. But to be clear, the vacant assets we have remaining, for the most part, we expect to be able to lease up. Mitch Germain: That is super helpful, which then leads me to: it seems like the next phase of dispositions is going to be some of your stable properties that have some WALT, fairly decent tenant, but may not fit the critical use criteria that you mentioned. Is that a way to think about the next phase if there is a go-forward plan for you? Paul H. McDowell: I think that is pretty good. We look at things, as you know, as everything is for sale. We will comment on it probably next quarter, but one of the properties we are announcing that we have under contract for sale is where the tenant is interested in buying the property, and they offered us a price we frankly could not refuse. If you are willing to pay a price, it makes sense for them because they are already in the building; it makes sense for us because they are paying us significant value for the real estate. We will look at sales opportunistically and then, to the extent we get those proceeds, we will look at what we do with those proceeds. In the case of the property I just mentioned, we are going to utilize it to pay down debt. In the future, we will utilize some of those sales to recycle capital into dedicated use assets, just as you described. Mitch Germain: Alright, that is it for me. Thank you. Paul H. McDowell: Thank you. Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. McDowell for any final comments. Paul H. McDowell: Thank you all for participating in the call today, and we look forward to further updates at the end of the second quarter. Have a good day. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to Gran Tierra Energy Inc.'s conference call for first quarter 2026 results. My name is Tanya, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the initial remarks, we will conduct a question-and-answer session for securities analysts and institutions. Instructions will be provided at that time for you to queue up for questions. I would like to remind everyone that this conference call is being webcast and recorded today, Friday, 05/08/2026, at 11:00 a.m. Eastern Time. Today’s discussion may include certain forward-looking information, oil and gas information, and non-GAAP financial measures. Please refer to the earnings and operational update press release we issued yesterday for important advisories and disclaimers regarding this information and for reconciliations of any non-GAAP measures discussed on today’s call. Finally, this earnings call is the property of Gran Tierra Energy Inc. Any copying or rebroadcasting of this call is expressly forbidden without the written consent of Gran Tierra Energy Inc. I will now turn the conference call over to Gary Guidry, President and Chief Executive Officer of Gran Tierra Energy Inc. Mr. Guidry, please go ahead. Gary Guidry: Good morning, and welcome to Gran Tierra Energy Inc.’s first quarter 2026 results conference call. My name is Gary Guidry, Gran Tierra Energy Inc.’s President and Chief Executive Officer. With me today are Ryan Paul Ellson, our Executive Vice President and Chief Financial Officer, and Sebastien Morin, our Chief Operating Officer. On Thursday, 05/07/2026, we issued a press release that included detailed information about our first quarter 2026 results, which is available on our website. Ryan and Sebastien will make a few brief comments, and then we will open the line for questions. Immediately following this earnings call at 10:00 a.m. Mountain Time, 12:00 noon Eastern Time, we will be holding our Annual General Meeting of stockholders. During the meeting, I will give a brief overview of Gran Tierra Energy Inc. and where the company is heading. We invite you to join us; dial-in instructions can be found on our website. I will now turn the call over to Ryan to discuss our financial results. Ryan Paul Ellson: Thanks, Gary. Good morning, everyone. Our first quarter performance marks a solid start to 2026. With production aligning within expectations and capital spending coming in under plan, we highlighted disciplined execution across the organization. With the Simonette asset disposition and bond exchange completed during the quarter, we materially strengthened the balance sheet as we exited the quarter with $125 million in cash and extended maturities. Additionally, we signed an exploration, development, and production sharing agreement with the state oil company of the Republic of Azerbaijan, which provides access to a world-class, proven basin with established infrastructure and contiguous acreage with significant development, appraisal, and exploration opportunities. Lastly, we entered a strategic partnership with Ecopetrol, where Gran Tierra Energy Inc. expects to earn a 49% working interest in the Tiscorama block, located in the Middle Magdalena Valley Basin of Colombia. Combined with our existing Acordionero-operated operations, this expands our operated position in the basin and is expected to drive operating synergies and enhance long-term value. From a hedging standpoint, oil volumes are hedged throughout the year using a mix of three-ways, collars, and puts, with an average ceiling of approximately $76 per barrel. For gas, we have AECO swaps covering an average of 15.6 thousand GJs per day at approximately $2.71 per GJ for 2026. We continue to evaluate market conditions and will add to our hedge position where options align with our established hedging policy and support our objectives of protecting cash flow while maintaining exposure to higher commodity prices. As a result of our strategic developments and the evolving market environment, our 2026 guidance has been revised to reflect how our portfolio and the market have changed since our original guidance announced in December 2025. The primary drivers of our revised guidance were higher commodity price assumptions, our completed Simonette disposition, the addition of the Tiscorama block through our partnership with Ecopetrol, and incremental hedges put in place after the original guidance was announced. Despite higher oil prices improving the backdrop, the benefit is partially offset by hedging losses forecast between $70 million and $72 million, the loss of Simonette production, and incremental capital spend tied to our new portfolio additions. At an approximately $84 Brent average for the year, we are guiding to production of 40 to 45 thousand barrels of oil equivalent per day, EBITDA of $345 million to $395 million, and free cash flow of $95 million to $115 million, with a capital program of $130 million to $170 million. Turning now to our financial results for the first quarter 2026, Gran Tierra Energy Inc. incurred a net loss of $119 million compared to a net loss of $141 million in the prior quarter and a net loss of $19 million in first quarter 2025. The net loss position was primarily the result of non-cash charges such as unrealized hedging losses and the remeasurement of equity compensation plans, coupled with nonrecurring charges such as a senior note exchange and severance. Ecuador pricing lagged during the quarter due to our M-minus-1 structure, reducing revenue by approximately $16 million versus the average Brent. With Brent moving higher in April and May, we expect the timing effect to reverse and support stronger realizations from Ecuador in the second quarter. The company generated adjusted EBITDA of $74 million versus $52 million in the prior quarter and $85 million in first quarter 2025. Funds flow from operations was $43 million, or $1.21 per share, up 60% from the prior quarter and down 20% from first quarter 2025. Gran Tierra Energy Inc.’s capital expenditures of $45 million were lower than the $53 million in the prior quarter and $95 million in the first quarter 2025. During the quarter, the company spud three development wells in Colombia and three development wells in Canada in the Santa Ana area, which was disposed of in March 2026. Gran Tierra Energy Inc. recouped the costs associated with the drilling of the Montney wells through the purchase price adjustment related to the transaction, as the effective date was January 1. At quarter end, Gran Tierra Energy Inc. had a cash balance of $125 million, total gross debt of $606 million, and net debt of $481 million. Furthermore, we repurchased approximately $9.2 million face value of the company’s 9.75% senior notes due 04/15/2031. The repurchase represents a discount of 12% to the face value of the repurchased bonds. Alongside the $145 million of cash as of 03/31/2026, the company currently has approximately $54 million of undrawn credit and lending facilities. Gran Tierra Energy Inc. generated oil sales of $172 million, which was up 2% versus first quarter 2025 and up 32% from the prior quarter, primarily due to a 24% increase in Brent price and a 12% increase in sales volume as a result of higher sold volumes in Ecuador, partially offset by higher differentials. On a per-BOE basis, operating expenses decreased by 3% when compared to first quarter 2025 due to lower workover activities, which were partially offset by higher lifting costs with the inventory fluctuations resulting from the Ecuador sales. With the portfolio changes and current market conditions, we remain focused on generating free cash flow, reducing debt, and maintaining the flexibility to adjust capital allocation as conditions evolve. I will now turn the call over to Sebastien to discuss some of the operational highlights. Sebastien Morin: Thanks, Ryan. Good morning, everyone. From a production perspective, Gran Tierra Energy Inc. delivered first quarter 2026 average working-interest production of approximately 45.5 thousand barrels of oil equivalent per day, which was 2% lower than fourth quarter 2025 and 2% lower year-over-year. This was primarily driven by the timing of waterflood optimization responses in Colombia and the disposition of our Simonette assets, partially offset by strong performance from the Conejo wells in the Tiple block and incremental volumes from Perico. Turning to operations in Colombia, we continued to execute efficiently across our development program. We drilled the Raahu-2 well at Cohembi and initiated infill drilling of three wells on Pad 6 with the drilling of Cohembi-29. Together, these two wells were drilled with a total cost of $7.5 million, approximately 18% below budget, reflecting continued capital discipline. We are currently in the final execution phases of the Cohembi program and expect completion by the end of Q2. In Ecuador, we commenced water injection at Tenanke in early February, with early results exceeding expectations and reinforcing our reservoir management approach. In addition, we finalized all injectivity tests and regulatory submissions to initiate waterflooding operations in late Q2 to early Q3 at the Iguana and Perico blocks. With waterflooding operations full steam ahead in Ecuador, we expect to see both an incremental oil uplift and significant water disposal cost reductions. As Ryan previously mentioned, on the strategic front, we entered into a partnership with Ecopetrol to earn a 49% working interest in the Tiscorama block in Colombia’s Middle Magdalena Valley Basin. The block contains approximately 364 million barrels of original oil in place and has seen limited historical recovery of approximately 7%, or 25 million barrels. This represents a clear opportunity to apply our waterflood expertise gained at Acordionero to enhance recovery and extend field life in the Tiscorama block. By comparison, Acordionero, which has a similar original oil in place of 338 million barrels, is directly adjacent and analogous to the Tiscorama block and has achieved a current recovery factor of 16%, or 53 million barrels, and has a 2P recovery factor of 27%, or an additional 35 million barrels to recover. We expect to initiate operations at Tiscorama in 2026. We also signed an exploration, development, and production sharing agreement in Azerbaijan, securing a 65% working interest across approximately 400 thousand gross acres in a proven basin with established infrastructure and long-term development potential. The agreement includes a five-year exploration and appraisal period followed by a 25-year development term. Overall, the quarter reflects disciplined execution across the base business, supported by capital-efficient operations and targeted portfolio additions that enhance our long-term growth profile. I will now turn the call back to the operator, and Gary, Ryan, and I will be happy to take questions. Operator, please go ahead. Operator: Thank you. Ladies and gentlemen, we will now conduct the question-and-answer session for securities analysts. If you have a question, please press star-1-1 on your touch-tone phone. You will then hear an automated message advising that your hand is raised. Your questions will be polled in the order they are received. Please ensure you lift the handset if you are using a speakerphone before pressing any key. One moment, please. Our first question will be coming from Massimiliano Pallotta of Stifel. Your line is open. Analyst: Good morning. Thank you for taking my questions. Actually, two. Firstly, 2026 CapEx guidance has increased slightly. Can you elaborate on that, and could you confirm if there is any potential incremental spending if prices stay this high? How should we be thinking about a normalized CapEx level going forward? Secondly, on regional mix, most of the activity recently has been in Colombia and Ecuador. What prices do you need to see to ramp up activity in Canada? Ryan Paul Ellson: Great, thanks for the questions. With respect to the 2026 guidance and capital, there is a slight increase, and that really reflects us securing the Tiscorama block, where we expect to spend $15 million to $20 million this year in the Tiscorama block in order to get water in the ground and start the injection project where we earn into the base production in Tiscorama. With respect to increasing capital with higher oil prices, we are going as fast as we can. We are happy with the capital program. I think it is well thought out, and we are getting water in the ground in Ecuador, so we are really going with the most capital-efficient way we could spend the money this year. We have already started our planning for 2027 and 2028. Regarding Canada, AECO prices continue to struggle. With Shell LNG fully ramping up, there has been more and more activity on the LNG front, and we expect AECO prices to firm. We need to see AECO north of $3 in order to allocate capital in Canada on the gas side. Analyst: Thank you very much. Operator: Gentlemen, there are no further questions at this time. Please continue. Gary Guidry: I would once again like to thank everyone for joining us today. We look forward to speaking with you next quarter on our ongoing progress. Please join us for our Annual General Meeting of stockholders, which will commence at 10:00 a.m. Mountain Time, 12:00 noon Eastern Time, where I will give a brief overview of Gran Tierra Energy Inc. and where the company is heading. Dial-in instructions can be found on our website. Thank you very much.
Operator: Good morning, and welcome to the Heritage Insurance Holdings, Inc. First Quarter 2026 Earnings Conference Call. Please note today’s event is being recorded. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. I would now like to turn the conference over to Kirk Howard Lusk, Chief Financial Officer for the company. Please go ahead, sir. Good morning, and thank you for joining us today. Kirk Howard Lusk: We invite you to visit the Investors section of our website at investors.heritagepci.com where the earnings release and our earnings call will be archived. Materials are available for replay or review at your convenience. Today’s call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon management’s current expectations and are subject to uncertainty and changes in circumstances. In our earnings press release and our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, and we have no obligation to update any forward-looking statements we may make. For a description of the forward-looking statements and the risks that could cause our results to differ materially from those described in the forward-looking statements, please refer to our Annual Report on Form 10-K, earnings release, and other SEC filings. Our comments today will also include non-GAAP financial measures. Reconciliations of, and other information regarding, these measures can be found in our press release. With me on the call today is Ernesto Jose Garateix, our Chief Executive Officer. I will now turn the call over to Ernesto Jose Garateix. Ernesto Jose Garateix: Thank you, Kirk, and good morning, everyone. I want to start by putting this quarter in the proper context because it is the direct result of the strategy we have been executing for several years. When I became the CEO, our focus was very clear: we needed to achieve rate adequacy, tighten underwriting, reduce volatility, and protect the balance sheet. What you are seeing today is a result of that work, and the beginning of the next phase of our strategy, which is opening for new business to prudently grow and further diversify our business while maintaining acceptable margins. Our first quarter was strong and in line with our expectations. We earned $36.5 million, or $1.19 per share, making this the most profitable first quarter that the company has delivered since becoming public in 2014. We also reported the lowest first-quarter net loss ratio since 2015. These results reflect steady underwriting execution, the full impact of our prior rate action, and disciplined expense management. The improvement in the net loss ratio was driven by favorable attritional loss performance, lower weather-related losses, higher favorable loss development, and the continued positive impacts of the underwriting and pricing actions we have taken over the past several years. Retention is strong, and rate adequacy is firmly in place throughout our book of business. Our personal residential in-force premium grew 1.4% over the prior-year quarter, while our commercial residential in-force premium declined 7.8% as we continue to see competitive pricing pressure in the Florida commercial market. Heritage Insurance Holdings, Inc. has been in the commercial residential market for over ten years and has built a well-performing portfolio managed by a deep bench of experienced underwriters and claim adjusters for that product. However, we will not waver from our commitment to achieve adequate margins. To the extent competitors offer commercial residential products that are inadequately priced, we will not follow suit. Instead, we are leveraging the expertise of our commercial residential team to expand this product into other states, most recently Hawaii, where we can achieve appropriate risk-adjusted returns. We achieved rate adequacy across 90% of our geographies and continue our efforts to ramp up new business and prudently grow our book of business while maintaining underwriting discipline, maintaining profitability, and managing risk. Over the last five years, we deliberately took actions designed to improve the quality of our book of business and charge adequate rates, which ultimately reduced our policy count. This trade-off benefited our shareholders and stabilized our results. Given our current position, we are in the process of expanding our product offering and identifying new opportunities for Heritage Insurance Holdings, Inc. to meet the needs of our policyholders and agents. As we enter this next phase of responsible growth, we continue to evaluate our markets to meet our customers’ needs for coverage at competitive pricing. Loss costs have fallen, and we expect the cost of reinsurance to also decline, which will benefit our policyholders through premium reductions while we maintain margins. At the same time, we continue to cultivate agent relationships in our reopened territories. The early results are encouraging, with new business written up 62.7% from 2025 and over 30% from 2025. We are encouraged by our results this quarter and remain optimistic that our initiatives will result in growth throughout the year. Importantly, our policy count trends continue to improve sequentially. While we are seeing a few states with double-digit policy count growth, others are beginning to ramp up, and we are overall seeing positive growth rates. The management-driven policy count reduction over the last several years continues to moderate and points to a growth inflection in the coming quarters. Retention also remained strong at approximately 88%, reinforcing our confidence that we are on a solid path toward sustainable growth in our policy count. As we discussed last quarter, we are exploring additional strategic growth opportunities, including our planned entry into Texas on an excess and surplus lines basis. Our significant market research indicates this addition to our product line, which we expect will be modest in the first year, nicely aligns with our strategic initiatives. Production will focus primarily on Tier 1 and select Tier 2 geographies, which are coastal regions within our risk tolerance. We will leverage both existing agent relationships and new distribution partners. Consistent with our approach of delivering regional expertise, we intend to have underwriting, claims, and marketing professionals located in Texas to remain closely aligned with local market dynamics. This provides us with the speed, flexibility, and market knowledge of a regional company with the economies of scale of a super-regional company. As always, we will maintain a strong focus on underwriting discipline, exposure management, and rate adequacy. Heritage Insurance Holdings, Inc. is now performing well with a diversified book of business, a strong balance sheet, significant cash from operations, and flexibility to take advantage of emerging opportunities. We have built a culture and infrastructure that generates a sustainable competitive advantage by focusing on data-driven decisions, execution, and disciplined processes. Our focus is on opportunities that strategically align with our core capabilities and provide solutions in challenging or dislocated insurance markets. Any potential business opportunity must meet our strict financial and risk-based criteria. We require a deep understanding of the target market, including loss history, regulatory environment, reinsurance implications, and key risk drivers, and we will only pursue opportunities that are expected to generate returns in excess of our cost of capital. Importantly, we are focused on prudent exposure management and ensuring that any transaction does not introduce undue enterprise or reputational risk. While competition has increased, our view is that not all operators in our space will be able to effectively manage the complexities of the market cycles. To the extent that consolidation opportunities emerge, we believe our scale, balance sheet strength, experienced workforce, and local expertise position us well to selectively evaluate opportunities that meet our disciplined criteria. Before I wrap up, I want to briefly touch on technology and artificial intelligence, which are important enablers of our strategy. We are actively deploying AI tools across the organization to improve efficiency and customer service as well as provide better tools for decision-making while maintaining appropriate controls and oversight. AI will continue to reduce manual effort, improve accuracy, assist with better quality control, and provide analytics that will assist us in aligning staffing needs to customer demands. We expect that we will continue to enhance these capabilities for improved quality and customer service. Additionally, we continue to see the benefits of tort reform as industry loss expectations for Hurricane Milton have been steadily falling, largely due to reduced litigation, which benefits not only us but our panel of reinsurers. Given the improved litigation environment in Florida, the lack of catastrophe losses in our markets during 2025, and the reinsurance capacity entering the traditional and insurance-linked securities markets, we remain optimistic that reinsurance pricing will continue to improve in 2026. We believe that favorable reinsurance terms will benefit the consumer with respect to the cost of insurance. To conclude, this quarter reflects the steady execution of the strategy we put in place several years ago. We delivered strong results, maintained underwriting discipline, and have firmly positioned the company to pursue controlled, profitable growth going forward. I would also like to reiterate our dedication to navigating the complexities of our market with a strategic focus that prioritizes long-term profitability, shareholder value, and customer service driven by our dedicated workforce, whom I would like to personally thank for their efforts. Kirk, over to you. Kirk Howard Lusk: Thank you, Ernesto, and good morning, everyone. Starting with our financial highlights, we reported net income of $36.5 million, or $1.19 per diluted share, for the first quarter of 2026 compared to $30.5 million, or $0.99 per diluted share, in the first quarter of last year. This is a great start to the year, considering that this is the highest first-quarter earnings in our history despite weather losses in the Northeast combined with the seasonality of our earnings. Since we gained profitability footing in 2023, the first quarter has made up 23% of our annual earnings. This bodes well for the rest of the year. The increase in our first-quarter earnings was primarily driven by lower net losses incurred and higher investment income, partially offset by higher operating expenses. The earnings generated an ROE of 28.5%, while average shareholders’ equity increased by 65.5% from the prior-year quarter. Premiums in force totaled $1.427 billion, down 0.4% from $1.432 billion in the prior-year quarter. The decline continues to be primarily driven by competitive market conditions in the Florida commercial residential market, where we remain disciplined and focused on rate adequacy and adequate margins, as Ernesto noted. While we continue to see opportunities, we will only write policies that meet our pricing and underwriting standards. Gross premiums earned were $153.6 million, essentially flat with $353.8 million in the prior-year quarter. Lower commercial residential activity was largely offset by growth in the personal residential lines. Net premiums earned totaled $199.7 million, also consistent with the prior year as ceded premiums were relatively flat. Gross premiums written were $346.7 million, down 2.6% quarter over quarter, primarily reflecting the reduction in Florida commercial residential business. Our net loss ratio improved to 45.9%, a 3.8-point improvement from 49.7% in the prior-year quarter. The improvement was driven by lower net losses and loss adjustment expenses, including lower weather losses and continued favorable attritional loss performance. Additionally, we experienced higher favorable prior-year loss development this quarter. These results reflect the positive impact of sustained underwriting and rate actions taken over the past several years. The net expense ratio increased modestly to 35.2% from 34.8% in the prior-year quarter, driven primarily by higher human capital-related costs, with net premiums earned remaining relatively flat. As a result, the net combined ratio improved to 81%, a 3.5-point improvement from 84.5% in the first quarter of last year, reflecting the improvement in loss ratio partially offset by the higher expense ratio. Net investment income increased to $9.9 million, up 15.1% from $8.6 million in the prior-year quarter, driven by higher invested assets with relatively stable returns. We continue to maintain a high-quality, conservative investment portfolio that is well matched to our liabilities. The effective tax rate for the quarter was 25.6%, compared to 23.8% in the prior-year quarter. As a reminder, we calculate income tax expense during interim periods based on estimates, which can fluctuate as assumptions are updated throughout the year. Unknown Speaker: The risk of placing the directly impacted naphtha processing equipment and examining the entire facility at caution. The event, which cost us over $30 million of lost opportunity given the elevated margins at the end of the quarter, is now behind us. The plant is running about 50 thousand barrels per day and has done so most of April. I appreciate the team managing through this complex situation safely and urgently. Turning to slide seven and our Specialty Products and Solutions segment. Our underlying business remains strong. We generated $44.3 million of adjusted EBITDA during the period compared to $56 million generated in Q1 2025. We believe that the unique elements of our business model—integrated assets that provide optionality combined with commercial excellence to capture value—are well suited for periods of extreme volatility like we are in today. As a comparison, today’s business environment is similar to 2022 when we saw similarly elevated crack spreads and specialty margins. In that year, the company generated over $400 million of adjusted EBITDA. Our integrated business allows us to produce fuels and take advantage of the attractive high-margin fuel environment. Using current strips, the 2026 full-year 2-1-1 is over $42 per barrel, nearly double the average over 2025. In addition, in our specialties business, we have now posted six consecutive quarters of sales volume exceeding 20 thousand barrels per day. This was accomplished despite the outage at Shreveport, which primarily impacted our fuels business. Specialty margins during the period were temporarily compressed due to the extreme spike in crude oil price. The commercial team has been quickly pushing through numerous price increases to offset the impact of rising feedstock costs. We put in place more than 20 price increases to date and anticipate seeing the future benefit of this in the second quarter. These price increases plus the elevated fuel margin environment position us well for what we believe will be a strong second quarter, where we expect to generate additional cash flow during this attractive margin environment. To add to that, and to fortify our ability to achieve our deleveraging targets, we have entered into crack spread hedges for portions of 2026 and 2027 fuels production. We currently have hedges in place for approximately 10 thousand barrels per day, or around 25% of our fuels production, on the 2-1-1 crack spread. We entered into—a portion of these 2026 hedges at around $22 per barrel of the 2-1-1 crack using a grade or CBOB for the gasoline leg of the hedge. Note that CBOB trades at a $3 to $4 discount to Gulf Coast 87. Those hedge positions were put in place at attractive historical levels even before the large run-up driven by the conflict in the Middle East and cost us around $6 million of realized hedge losses during the period. The next tranche, which was added recently, was 10 thousand barrels of production for 2027 at levels closer to $27 per barrel, also on a CBOB basis. How these hedges end up is a function of what happens here in the Middle East. For us, it is about making sure we deliver on our strategic objective, which is to generate strong cash flows to accelerate deleveraging and de-risking a portion of our fuels production at these extraordinarily high margins. This puts us in a place to support that goal, while also leaving plenty of room for upside on our remaining fuels production. Turning to slide eight in Performance Brands. We also continue to benefit from our commercial excellence strategy in this segment and a truly premium brand in TrueFuel. We reported $12.6 million of adjusted EBITDA. The results were partially impacted by margin compression and the normal price lag associated with a more retail-oriented customer base. While we have been implementing price action, this branded space takes about 60 to 90 days to fully reflect the increases compared to the less-than-one-month lag in our STS business. Taking a closer look at adjusted EBITDA on a like-for-like comparison basis, we have seen continued growth. As a reminder, the results of our Royal Purple Industrial business are reflected in the 2025 financials when we owned that portion of the business and are not included in the current period following the divestiture in March. Our commercial and operational teams, in less than a year, have successfully offset the lost EBITDA associated with the Royal Purple Industrial business through disciplined cost controls, growth of our trusted brands, and our strong customer relationships. We announced that our TrueFuel business in February had posted record monthly results, and that momentum continued throughout the entire quarter as we posted record sales volume. We posted another monthly volume record in April. Customers continue to place a premium on the value of our engineered fuels, our innovative packaging options, and overall product reliability and convenience. Turning to slide nine and on Montana’s Renewables segment. Adjusted EBITDA with tax attributes was $10.2 million for the quarter, compared to $3.3 million in Q1 2025. Renewables EBITDA with tax attributes on a Calumet-owned 87% basis was $8.8 million. As Todd mentioned, we have delivered the MaxSAF 150 expansion on time and on budget. With our new capacity, we are stepping into a market with significant tailwinds from a transformational product mix shift between renewable diesel and SAF that will deliver a four- to five-fold increase in SAF volumes on an annual run-rate basis. The business is incredibly well positioned as we ramp up production, with the new RVO and a diversified portfolio of customers with a contractual SAF premium of $1 to $2 per gallon over renewable diesel, all of which is underpinned by our industry-leading low cost structure. As these dynamics further take hold, our renewables business is at a positive inflection point, and we leverage the strategic investments we have made in the business over the last several years with an expectation of meaningful cash flow generation. As Todd mentioned, following the 2023 RVO and trough-like margins, the industry managed through, but look no further than the RINs pricing in 2026 to see that the recovery was already in process prior to the extremely constructive RVO announcement in March from the current administration. Finally, capital expenditures during the quarter within MRL were approximately $15 million and funded entirely by cash within MRL on the balance sheet. Before leaving this segment, our Montana asphalt results were in line with the prior year as first quarter 2026 reflected typical seasonality and price-lag impacts in our wholesale asphalt business. We are moving into a seasonally stronger period in Q2 as well as an extremely supportive crack environment for fuels also in this segment. As we have routinely said, we expect the site to produce $30 million to $50 million of annual EBITDA in a normal environment, and we look forward to the opportunity at hand in today’s stronger margin environment. I will now turn the call back to Todd for his concluding remarks. Thanks, David. And before I turn the call back to our operator for questions, I wanted to remind those joining that we have filed our proxy materials and the voting window is open. For all shareholders listening, we appreciate your support. It is almost two years since our conversion from an MLP. We set out to create a stock with much higher liquidity and a broader investor base. Over the past few years, we appreciate the new investors that have joined us as our daily trading volume has increased over tenfold. Our strategy is focused on creating shareholder value, and Roy is available to our investors to further discuss our proxy materials and our business strategy. Thank you for joining us today, and I will turn the call back to Andrea for questions. Unknown Speaker: Andrea? Operator: We will now open the call for questions. The next question comes from Karol Krzysztof Chmiel with Citizens. Please go ahead. Karol Krzysztof Chmiel: Yes. Thank you. Good morning. I have two questions. The first one is regarding the catastrophe weather losses. Can you just confirm that all of those are from the Northeast winter storms, or is there more to it? Ernesto Jose Garateix: No. Those are all the Northeast winter storms—Hernando, Gianna, Fern. Yes, those are all related to that. Karol Krzysztof Chmiel: Is there a particular state that was hit the hardest? Ernesto Jose Garateix: It is mostly mixed between New York and New Jersey, with a little bit in Rhode Island as well as Connecticut. It was, [inaudible], yes. Karol Krzysztof Chmiel: Great. Thank you. And then my second question is regarding the new repurchase authorization. So you had the $25 million prior, you used about $12 million of it year to date, and now you have a new $50 million. So the net increase in your authorization is about $38 million. Is that correct? Kirk Howard Lusk: No. The $25 million authorization is terminated. We have a new authorization for $50 million. So the authorization between now and the end of the year is $50 million. Karol Krzysztof Chmiel: Okay. But the $25 million was fully used? Kirk Howard Lusk: No. We used $12 million of the $25 million. Karol Krzysztof Chmiel: So the $12 million would be in addition to the new $50 million. Got it. And then can you just comment on how much was repurchased so far in Q2? Kirk Howard Lusk: It would have been about—well, it was just after the first. We did $10 million in the beginning of the year, and then an additional $2 million. So of the new authorization, we have not purchased any. Karol Krzysztof Chmiel: Got it. Understood. Operator: Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Ernesto Jose Garateix for any final remarks. Ernesto Jose Garateix: Thank you for joining the call, and we hope everyone has a great weekend. Operator: The call has now concluded. You may now disconnect. Unknown Speaker: But other than that, we feel like we are positioned pretty well and are really looking forward to the opportunity the market is offering. Analyst: Thank you, Todd. The next one for me is on the SAF side of the story. In your SAF contracts where you are getting the $1 to $2 premiums, how long are these in place for? And then, when these renew, do you think you will be able to get similar or better terms? Unknown Speaker: Hey, Evan. It is Chris. Thank you for the question. The term contracts are evergreens. The notice periods—we have a distribution of those at this point because we have been selling SAF for three years now, and as we step into these, we will have different notice period dates. What I can tell you is the ones that rolled have renewed within that guidance range. The new ones are a portfolio of various next notice dates going forward, and then they stay with us as evergreen relationships. On average, these are typically two- to three-year type evergreens. So far, they have all continued to roll forward. As far as the margin environment and ability to renew, we feel quite comfortable with where those have been as we have rolled forward contracts historically. We have certainly not had a problem re-upping them and adding additional supply as we have been doing here recently over the last six months or so. We have not seen any step back in margins. We think that the underlying fundamental support is there given all of the demand for the renewable energy credits, the underlying scope credits, etc. So we are pretty bullish on the outlook there and our ability to continue growing our marketing. Analyst: Good to hear. That is all I have. I will step back in the queue. Thank you so much. Operator: The next question comes from Connor Fitzpatrick of Bank of America. Please go ahead. Analyst: Good morning, everybody. Thanks for taking my question. I wanted to dig a bit into an update or refresh on the second phase of SAF capacity expansion. It is still a ways away, and it could maybe take a more modular form. But I was wondering if there was any update on CapEx build parameters, engineering, and obviously the contracts coming in for this first phase are pretty bullish, pretty supportive of continued demand. Sounds like there is still the opportunity there to expand at a similar profitability to the first phase. Unknown Speaker: Connor, thanks for the question. It is Todd. We have been focused on the current phase. Obviously, we are just now commencing operations, so it is very exciting where we are at. We want to stay focused there. We have our team heads down, focused on operations. At the same time, we do have an independent project team that is certainly looking at the next phase of a modular opportunity. Probably a little bit too early to get ahead of ourselves on announcing that. We hope to be able to talk more specifically to that soon. In the past, we have said let us get a chance to get up, get through this commissioning, ramp up over the next couple of months, and we will certainly be out, and we are looking forward to doing so in the not too distant future to talk about what is next and how the steps can play. To your point, we certainly are bullish about the opportunity to continue to expand. The opportunity is there, it is readily available, and we are not seeing any demand gaps that would hinder that. We are going to take it one step at a time here, but hope to be able to talk about our acceleration plan and next steps pretty soon. Analyst: Great. Thank you. And as a follow-up, it looks like there are maybe still some impediments to biodiesel capacity ramping to full or peak rates again, with various reasons like feed cost, basis in the Midwest, diesel pricing and biodiesel pricing in different regions of the U.S., and the ability to have the actual cash inflow from 45Z credits soon enough to incentivize production. How far are we from marginal biodiesel producers that will be needed to supply the market returning to profitability so that they can ramp up fully? Unknown Speaker: Hey, Connor, it is Bruce. That was a good frame of what some of the issues and drivers are. There are two fundamental questions you asked: what about their volume and what about the economics that follow from that? Our supply stack says we are solidly back into a market environment where the prices are going to have to accept the small biodiesel guys, the independent ones. Remember, some of them are run—everybody has their own specific unique situation. That is why those stacked cost bars have a range to them. The question on volume is how fast and how many. Have these been permanently abandoned? History shows us that it is kind of ghost capacity, but it can come back faster than you think unless somebody just gave up and removed it. We are going to find that out. A lot of the analysts are calling for getting back into the 90% utilization range of biodiesel capacity by toward the end of this year. Analyst: Okay. Thanks for the color. That is all I have. Operator: The next question comes from Josiah Knight of Goldman Sachs. Please go ahead. Analyst: Hey, team. Good morning. Thanks for taking our question. Maybe on the feedstock side of the equation for MRL, how much pressure are you seeing, and can you remind us of MRL’s relative advantage and feedstock flexibility in navigating these costs? Thanks. Unknown Speaker: Hey, Josiah, it is Bruce. Thank you for the question. We have essentially unlimited feedstock flexibility. We set it up that way on purpose, and the pretreater capability is what allows us to follow the market dynamics and pricing volatility. We are pretty aggressive at our monthly re-optimization. We exist in the middle of a feedstock-long area, so there has never been a question of any kind of physical shortage. We seem to do better on optimization and re-optimization when we look at our capture percentages versus an industry index. Analyst: Got it. That is helpful. And then a follow-up, maybe on the base business, how are you thinking about the earnings outlook in the near and medium term, especially given some of the recent volatility for commodity prices? Unknown Speaker: We are pretty confident in the outlook. The fuel margin is incredibly positive right now. There is meaningful supply disruption. We do not think this is something that just returns in a very short period of time. It obviously is not something that lasts forever, but it feels a lot like 2022 when you see the shock in the market and you look at inventories that are depleted not only here, but throughout the globe. On the specialty side, we talked about our ability to push price increases through rapidly—our commercial team did over 20 of them across the product line. At current costs, we are quite bullish on the outlook for both fuels and specialties. We could see increased volatility from here, and if we do, we have demonstrated that we can react accordingly. Big picture, the market is pretty constructive on a margin outlook basis no matter where you look. Our specialties business has a domestic supply chain and access to feedstock, and you just cannot say that on a global basis right now. We will continue to serve the market. Operator: The next question comes from Greg Brody of Bank of America. Please go ahead. Analyst: Good morning. You referenced 2022 as a way to think about specialty material margins and the environment you are in. Those margins got up to the $90 range during that period. You have mentioned you have been able to pass price through. Is that the type of environment we are in right now, or do we need more steps to get there in terms of price increases? Unknown Speaker: Hi, Greg. I do not think right now we would look and say we are at $90 specialty margins going forward. When we talk about 2022, we are looking at analogies to the whole demand pair. Increasing crude costs create a little bit of lag in specialty business. Back in 2022, we were able to overcome that in a hurry. We have done the same here. We will see what happens with volatility in the back half of the year. As we sit right now, I would say specialty margins are a tad lower than 2022, and fuel margins are a tad higher than 2022. If you blend those together, then it is probably a good period. We are not trying to draw too tight of an analogy; we are just saying the market feels pretty similar where supply shocks are going to drive margins that are sustained for a period of time and provide the ability to generate some excess cash flow and accelerate our deleveraging plan. Analyst: That is helpful. Are you seeing any response from the consumer as a result of the price spikes? Unknown Speaker: We really have not right now as far as demand. Everybody is getting their arms around these rapid cost increases. There is such supply disruption throughout the space that consumers need our products. A lot of our products go into consumer necessities and staples and not things that have massive price elasticity. We do not expect dramatic demand declines. We even saw record growth in some of the downstream performance brands—we talked about a TrueFuel record, etc. We have seen consumer demand continue to stay strong throughout the space. How long that continues is a function of general consumer sentiment and market volatility, but as it sits right now, we are pretty positive on the outlook. Analyst: Shifting to the organic chlorides issue, which is in the past—do you have any remedies to make to the facility to fix any damage that was done, or are you just going forward with the risk of something happening again? Unknown Speaker: It is a good question. There is no further work needed at the facility. We took the event extremely seriously. We inspected the facility thoroughly. We made quite a few repairs at the time, and in a very conservative fashion. We were not taking any risks with the situation. We took a big chunk of our naphtha train out of service and replaced it. We have installed redundancy in sampling and quality monitoring throughout the system to ensure that this cannot happen again. Typically, in these scenarios, chlorides in small amounts can do a lot of harm—sneak in with crude supply and bypass the upfront QC checks. We think that is what happened here. We are still fully investigating the details. We would be very aggressive with any culprit that created that. As far as the current go-forward position, the facility is operating really well. There is no sustained damage. We aggressively addressed any repairs that needed to be made, and we have been up and running strong for over a month now. Analyst: With respect to the deleveraging plan, you highlighted that you will use cash to deleverage. You are clearly set up for a windfall from both restricted group assets and MRL. Does that change the way you are thinking about potentially monetizing MRL to pay down debt at the restricted group, or is that still the plan? Unknown Speaker: The plan still remains as it has been. Ultimately, we think that Montana Renewables is going to present an opportunity to monetize at some point. We are well on track to accomplish that. The recent RVO was a major step in the right direction. No game plan changes there. We think the next step is showcasing the earnings power of this business with both the MaxSAF project up and running and a really positive RVO market. That is what we are focused on for the next quarter or two, and we will go from there. Operator: The next question comes from Jason Gabelman of TD Cowen. Please go ahead. Analyst: Thanks for taking my questions. You mentioned you are in a validation process of the MaxSAF expansion right now. Can you talk about the steps to get it to a steady state, or if it is already at steady state? And in this type of margin environment, since the asset has been running, what type of margin are you seeing coming out of it? Unknown Speaker: Hey, Jason, it is Bruce. On margins, the renewable diesel index margin hit over $3 per gallon at the end of the quarter. We are not calling for it to stay there. If you look at our supply stack, we think the renewable diesel industry’s equilibrated structure should be a bit north of $2, with feedstock and SAF premium overlays above that. In terms of operational performance, we re-streamed the unit after the extended turnaround plus capital projects—those are the modifications we call MaxSAF 150. We had a sidestep on an unrelated electrical power interruption to the site, so we had to re-stream a second time. With that behind us, we are finishing the ramp-up. We have a performance test design that is maybe four weeks out. The catalyst comes with performance guarantees; we modified the hardware, and we want to test that we have delivered the engineering expectations. We will have more intelligence in a few weeks. Nothing we see gives us any reason to think we have underachieved. We are excited about the go-forward. Analyst: Can you also remind me, from an OpEx standpoint, if there is any change on unit OpEx relative to where the initial MRL was at? Unknown Speaker: Our track record of improving controllable costs got us down to something like $0.38 per gallon—that is the chart we publish occasionally. It is pretty compelling. We do not think we have any reversal on that just because we are fractionating more kerosene out of the total reactor product. Analyst: Maybe turning to liquidity—there has been a lot of volatility in the market, and we have seen in some of your refining and biofuel peers working capital and derivative hedging headwinds related to that commodity volatility. Have you seen that to a large extent? Can you talk through impacts on cash flow as a result of volatility and if you would expect that to reverse over time? Unknown Speaker: We feel good about our liquidity position and the cash we are generating in the current environment after some of the operational things we saw in Shreveport during the quarter. We have seen a big run-up in crude price. That impacts us in a couple of ways: inventory cost that we need to buy—there is a little bit of a lag as we buy into the market—and also accounts receivable. We were up over $100 million as the prices getting passed through at a premium to crude roll into our AR. There was a big draw on working capital during the period from that run-up that was exacerbated by the downtime at Shreveport. We are already seeing almost a total unwind of that in April; there will be a little bit more into May. On the liquidity path, we did a tack-on for $150 million earlier in the year. We thought about that as a way, at a pretty cost-neutral even at a premium, to pay off some of our 2028s when the call protection steps down in July. In this current volatile environment—we do not know how long it will last—we were in an attractive position to take from the market, pre-reduce that debt, and use that extra cash to balance the spike in crude. As we move forward, we will still use that cash to pay down debt. We will reevaluate what the market looks like closer to July when the call protection steps down and what is happening in the world. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to John Kompa for any closing remarks. Unknown Speaker: Thank you, Andrea. On behalf of Todd and the entire management team, I would like to thank everyone for their time today and interest in Calumet. Have a great rest of the day. Thank you. Operator: The conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect.
Operator: Good morning, and thank you for joining us today for Concentra Group Holdings Parent, Inc. earnings conference call to discuss the first quarter 2026 results. Speaking today are the company's Chief Executive Officer, Keith Newton, and the company's President and Chief Financial Officer, Matthew DiCanio. Management will give you an overview and then open the call for questions. Before we get started, we would like to remind you that this conference call may contain forward-looking statements regarding future events or the future financial performance of the company, including without limitation, statements regarding operating results, growth opportunities, and other statements that refer to Concentra Group Holdings Parent, Inc.'s plans, expectations, strategies, intentions, and beliefs. You are hereby cautioned that these forward-looking statements may be affected by the important factors, among others, set forth in Concentra Group Holdings Parent, Inc.'s earnings release and in reports that are filed or furnished with the SEC. Consequently, actual operations and results may differ materially from those discussed in the forward-looking statements. These forward-looking statements are based on information available to management today, and the company assumes no obligation to update these statements as circumstances change. At this time, I would like to hand the conference call over to Keith Newton. Thanks, operator. Keith Newton: Good morning, everyone. Welcome to Concentra Group Holdings Parent, Inc.'s first quarter 2026 earnings call. We have continued our momentum from 2025 and are pleased with a strong start to the year. Total company revenue was $569.6 million in Q1 2026 compared to $500.8 million in Q1 of the prior year, representing 13.7% growth year over year. Excluding contributions from the Nova and Pivot acquisitions in both current and prior year where applicable, revenue was $520.3 million in Q1 2026, resulting in a 6.3% increase over the prior year. Total patient visits increased 6.7% to an average of more than 54 thousand visits per day in the first quarter. Our workers' compensation visits per day increased 9.6% and employer services visit volume increased 4.8% relative to prior year. Excluding the impact from the acquisition of Nova, total visits per day increased 2.9% in the first quarter; workers' compensation visits increased 6.2% and employer services increased 0.7%. We believe the stronger performance in our workers' compensation business has been a result of a combination of events. Most importantly, we have seen the continued improvement of our patient satisfaction with the experience they have in our centers along with the implementation of new technologies to help strengthen the account management and retention of our existing employer customers along with enhanced prospecting efforts for new employer customers. The service level metrics we track at our centers, including average patient time in the centers, Google ratings, and patient net promoter scores, are all at or close to historical bests. Additionally, Q1 2025 was the easiest comp of all the quarters in 2026 due to a relatively dry winter last year compared to more ice and snow winter events this year that led to more slips and falls and resulting injuries. On the rate front, revenue per visit grew 3.1% during the first quarter relative to prior year. The growth was driven by a 2% increase in workers' compensation and a 2.7% increase in employer services revenue per visit. The California workers' compensation rate increase took effect on March 1, so we anticipate upside to the workers' compensation rate growth over the remainder of the year. Adjusted EBITDA was $120.7 million in the quarter versus $102.7 million in the same quarter of the prior year, or a 17.6% increase. Adjusted EBITDA margin increased 69 basis points from 20.5% in Q1 2025 to 21.2% in Q1 2026. With our strong Q1 performance, our trailing twelve month adjusted EBITDA is now $450 million, up $85 million, or 23%, from our trailing twelve month adjusted EBITDA at the time of our IPO in July 2024. Adjusted net income attributable to the company was $51.5 million and adjusted earnings per share was $0.40 for the first quarter 2026, representing strong growth over prior year of $42.2 million and $0.33 respectively. Quick update on 2025 acquisitions. Regarding our March 2025 acquisition of Nova, we have completed our integration efforts and captured all the synergies that we expect to capture. We are comfortably ahead of where we anticipated we should be approximately one year into this deal, and we are tracking well towards the original objective of reaching a transaction multiple below 7.5 times adjusted EBITDA. With our June 2025 acquisition of Pivot, we have a similar story. Integration is complete, performance is strong, and we are ahead of our original estimate of a transaction multiple of below 9 times adjusted EBITDA. Regarding other growth efforts during the quarter, we added three centers via acquisition and one de novo center outside of Atlanta. On the de novo front, we continue to expect to open a total of eight to ten centers this year, with planned locations in Arizona, Idaho, Missouri, Illinois, Virginia, South Carolina, and Florida. With respect to additional small bolt-on M&A, we have several opportunities actively underway and look forward to sharing more detail in the future. Finally, I would like to take a moment to recognize and thank Doctor John Anderson, our Chief Medical Officer since 2014, who, as previously disclosed, has announced his well-deserved retirement at the end of the year. Known affectionately across Concentra Group Holdings Parent, Inc. as Doctor A, he has been the foundational part of our organization for nearly five decades, including his time with predecessor companies. Over his career, Doctor Anderson has helped shape our mission, vision, and values, built a comprehensive clinical orientation and training program that supports long-term success in occupational health, embedded a strong patient-first mindset into our daily operations, and developed our best-in-class clinical model. His decades of service, leadership, and clinical expertise have been invaluable, and we are deeply grateful for the lasting impact he has made on our organization. We are fortunate to have a strong pipeline of both internal and external candidates and will be conducting a thorough evaluation process with the expectation of filling the role in the coming months. To support a smooth transition, we expect to enter into a consulting agreement with Doctor Anderson for a period of time. I will now turn the call over to Matthew DiCanio for additional details on our financial results for the quarter and updated outlook for 2026. Matthew DiCanio: Thanks, Keith, and good morning, everyone. In our occupational health operating segment, total revenue of $519.9 million in Q1 2026 was 9.9% higher than the same quarter of the prior year. Total visits per day increased 6.7% over the same quarter of the prior year and revenue per visit increased 3.1% from $147 in Q1 2025 to $151 in Q1 2026. Workers' compensation revenue of $337.7 million in Q1 2026 was 11.8% higher than prior year. Workers' compensation visits per day increased 9.6% from prior year during the quarter, and workers' compensation revenue per visit increased 2% from $209 in Q1 2025 to $213 in Q1 2026. Employer services revenue of $172.4 million increased 7.6% in Q1 2026 from prior year. Employer services visits per day increased 4.8% from the same quarter prior year. And finally, employer services revenue per visit increased 2.7% from $94 in Q1 2025 to $97 in Q1 2026. As with past quarters, here are the same stats for Q1 excluding the impact of Nova to help isolate the core business from our Q1 2025 acquisition. This is the last quarter we plan to break out Nova as its contribution will be fully embedded in both Q2 2025 and Q2 2026 P&L. Total revenue within the occupational health center operating segment was $487.8 million in Q1 2026, a 5.7% increase over the prior year. Total visits per day increased 2.9% over the same quarter prior year and revenue per visit increased 2.7% from $147 in Q1 2025 to $151 in Q1 2026. Workers' compensation revenue of $317.8 million in Q1 2026 was 7.5% higher than prior year. Workers' compensation visits per day, excluding Nova, were 6.2% higher than prior year during the quarter, and workers' compensation revenue per visit was 1.3% higher than prior year during the quarter. Employer services revenue of $160.7 million in Q1 2026 increased 3.2% from prior year. Employer services visits per day, excluding Nova, were 0.7% higher than prior year during the quarter, and employer services revenue per visit was 2.4% higher than prior year during the quarter. I would like to take a moment to reemphasize an important distinction in our business mix. Our workers' compensation segment generates significantly higher revenue per visit and contribution than our employer services offering. Employer services remains an important part of our service offering, and it often is the initial point of entry with employer customers, but those services are typically completed at much lower contribution margins. As you can see, workers' compensation is the primary engine of our business, accounting for approximately two-thirds of our total center revenue. As a result, in a low-hire, low-fire macroeconomic environment like the one we are experiencing today, employer services can show muted trends while the company continues to perform well overall. While this may be obvious to some, we felt it was important to underscore this dynamic given the significant growth disparity between employer services and workers' compensation visits this quarter. Moving on from our occupational health centers, our on-site health clinics operating segment had another strong quarter with reported revenue of $37.2 million in Q1 2026, a 125% increase from the same quarter of prior year. This was largely driven by the acquisition of Pivot On-site Innovations in Q2 2025. Excluding the impact from that acquisition, our on-site health clinics operating segment revenue grew 20.9% year over year during the quarter. On-site health clinics total revenue is nearing a run-rate of $150 million, up from $64 million in 2024. We are encouraged by the continued strong organic growth in this business. We have a robust pipeline of opportunities across both occupational medicine and advanced primary care supported by a highly capable team following last year's Pivot acquisition that is well positioned to execute on our growth strategy. We remain excited about this segment given the meaningful cross-selling opportunities within our existing customer base, an expanding margin profile, the direct employer-paid revenue model, and the growing and sizable market opportunity. We estimate the serviceable addressable market to be between $15 billion and $20 billion with only a small portion currently penetrated. This significant white space combined with our best-in-class service gives us strong conviction in the long-term potential of the business. And finally, other businesses, which include telemedicine, our pharmacy operations, and other occupational health related services businesses, generated $12.5 million in the quarter, a 10.4% increase against the same quarter prior year. We are impressed by the team's execution in these areas and the opportunities that exist to continue to grow at attractive growth rates. Moving on to expenses, cost of services was $399.1 million, or 70.1% of revenue, in Q1 2026, an improvement from 71.3% of revenue for the same quarter prior year. We continue to realize incremental improvements in staffing efficiencies within centers, resulting in nice gains in center-level margin. Our total general and administrative expenses were $55.3 million, or 9.7% of revenue in Q1 2026, compared to 9.3% of revenue in the same quarter prior year. Excluding items that are added back for the purpose of calculating adjusted EBITDA, including equity comp expense, one-time select separation costs, and M&A transaction costs, G&A expense was $50.2 million for the quarter, or 8.8% of revenue, compared to 8.2% of revenue in the same quarter prior year. The increase is predominantly driven by planned additions to our team and IT infrastructure resulting from our separation from Select. As a result, adjusted EBITDA margin increased from 20.5% in Q1 2025 to 21.2% in Q1 2026. To quickly comment on the separation, we continue to track very well and have now hired more than 95% of the total expected new FTEs. Over the next month or so, we will complete several significant back-office technology separation milestones resulting in functional separation from Select by the end of this summer, well ahead of the November 2026 deadline. Now to touch on cash flows. In Q1, we generated $21 million in operating cash flow. This compares to $11.7 million in 2025, with the year-over-year increase largely resulting from higher earnings in Q1 2026. Investing activities used $14.8 million of cash in the first quarter and were driven by the acquisition of three net centers in California as well as investments in de novo centers, relocations, renovations, maintenance, as well as IT investments. Free cash flow, or cash flow from operations less cash flow from investing activity excluding business combinations, totaled $9.9 million, an increase from prior year first quarter free cash flow of negative $4 million. This was driven by a combination of higher cash flow from operations and lower capital spend in Q1 2026. Finally, financing activities during the quarter resulted in net cash outflows of $24.4 million as we repurchased approximately 661 thousand shares totaling $15 million and paid $8 million in dividends. At the end of the first quarter, we had approximately $65 million remaining under the repurchase program authorized by the Board of Directors. We ended the quarter with a total debt balance of $1.58 billion and a cash balance of $61.7 million. Our net leverage ratio per credit agreement at March was 3.4 times, down slightly from year end. Q1 is typically our lowest free cash flow quarter, so we expect to see an acceleration in the decline in our leverage ratio over the remainder of this year. Finally, we are pleased to announce continuation of our dividend this quarter, with the Concentra Group Holdings Parent, Inc. Board of Directors declaring a cash dividend of $0.0625 per share on 05/05/2026. The dividend will be payable on or about 06/09/2026 to stockholders of record as of the close of business in May 2026. Moving on to 2026 guidance. Given the strong start to the year, we are revising our 2026 guidance, including increasing the low and high end of our revenue target range by $25 million to $2.275 billion to $2.375 billion; the low and high end of our adjusted EBITDA range by $10 million to $460 million to $480 million; and the low end of our free cash flow target range by $15 million and the high end by $10 million to $215 million to $235 million. Our CapEx range of $70 million to $80 million remains unchanged. With respect to net leverage, given the increase to both adjusted EBITDA and free cash flow guidance, we expect to end the year comfortably below three times. Overall, a great start to the year, and our team is excited about initiatives we have in place to continue our trajectory. That concludes our prepared remarks, and we thank everyone for the time today. I will now turn the call back to the operator to open the call for questions. Operator: Certainly. We will now open the call for questions. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. Your first question for today is from Ann Hynes with Mizuho. Great. Good morning, and thank you. Ann Hynes: So, depending on who you look at, you beat consensus adjusted EBITDA estimates by 10% to 11%. What was your internal beat versus what consensus was? And what surprised you the most on the upside beat? Operator: Thanks. Matthew DiCanio: Yeah. Good morning, Ann. Hey, it is Matt. So I think, when you look at our results, what really drove the results in Q1 was the workers' compensation visits and also our cost of service and cost control. Our teams did a great job from a staffing perspective across the centers, and the visit volume was higher than expected. We are not necessarily going to comment on our internal budget, but those were the two main drivers of our performance in Q1. Ann Hynes: And I know in your prepared remarks, you talked about weather. So was weather actually a positive impact in the quarter? And if it was, can you quantify how much it was? Keith Newton: Yeah, Ann, this is Keith. Weather can be both negative and positive to us. We think that in this quarter, it was a net positive. In our business, ice and snow, depending upon the extent you get it and how long it is around, can create lots of slips and falls. The individuals that are coming to our centers typically, a lot of them are having to work during those time frames—either maintenance workers, street workers, whatever—and so we see quite a bit during the wintertime, the slips and falls. When you look back at 2025, it was a relatively mild, dry winter. Our Northeast region, when you look at them geographically, was by far the region that was most up over the prior year, so indicative of weather. We certainly had center days where we had closures, but we have always been extremely aggressive about limiting that as much as possible because we are here to keep America working. So we are very aggressive about getting our centers open. There are people out there needing care as a result of those injuries. So we think overall, based on the extent of the weather this year compared to last year and our ability to minimize the number of days our centers are actually closed, that overall, it was a net gain. Ann Hynes: Alright. Great. Thank you. Operator: Your next question for today is from Justin Bowers with Deutsche Bank. Justin Bowers: Good morning, everyone. Keith, just on that note of keeping America working, can you give us your perspective on economic activity based on what you are seeing with your customers and some of the prospects that you mentioned Concentra Group Holdings Parent, Inc. is doing? And then part two of that would just be, how are those trends correlating with the BLS and JOLTS data? I know those relationships had decoupled from historical patterns before and just curious if you are seeing any different trends. Keith Newton: Yeah. So, I think coming out of last year and early part of this year, it has kind of been, as Matt mentioned earlier, the continued no-hire, no-fire type situation. So from a hiring perspective, we saw that early in the year. Now it seems like things are starting to accelerate a little bit. We are optimistic about that. I believe we have had the first two months in a row, including this month, with net job gains. So that definitely is a positive for the future. The second half of the question— Matthew DiCanio: Yeah. I would just add a couple comments on the economic data. We saw some positive news today. Total employment continues to grow, especially blue collar, which is the patients that walk in our centers every day. There are fewer layoffs compared to prior year. So we are seeing stability. Obviously, with our employer services visit volume, it is still below historical averages, but the good news for us is total employment continues to grow and clearly we are gaining market share within the categories that we compete. Keith Newton: The quit rates are usually indicative of growth in our employer services. Those still remain relatively stable or below norm. So we have not really seen much there. It seems to be more just straight new job growth that we are starting to see in the last, say, sixty days or so. I do not know if we would really change our opinion as far as what we have said in the past as far as the disconnect a little bit with what has been out there, but we are optimistic it starts to narrow. And again, workers' compensation is typically indicative of what is going on with total employment, and we are seeing blue collar continue to trend up. Justin Bowers: Understood. Thank you. Appreciate it. Operator: Your next question is from Benjamin Hendrix with RBC Capital Markets. Benjamin Hendrix: Hey. Thank you. I may have a bad connection, but I am going to try to get this in here. Just any comments on your free cash flow guidance? Seems like the low end came up higher than EBITDA. You still continue to have really strong free cash flow conversion. Any thoughts on timing dynamics through the capital or other durations there? Thanks. Matthew DiCanio: Yeah. Sure. Good morning, Ben. So we raised our free cash flow guidance. We obviously raised our EBITDA guide. So from a profit standpoint, we are moving higher. The CapEx was a little lower in Q1, but we still expect it to be between $70 million and $80 million for the full year. So really, we are just pushing up that guide there equivalent to what we saw from an EBITDA standpoint. Operator: Thank you. Your next question is from Stephen Baxter with Wells Fargo. Stephen Baxter: Hi. This is Mitchell on for Steve. Just on the rate side and workers' comp, I know you mentioned California rate taking effect in March. Just trying to understand what led to the revenue per visit being below your typical rate increase in Q1, and are you still on track for the 3% for the year? Matthew DiCanio: Thank you. Yeah. Sure. I will take that. So overall, revenue per visit was up 3.1%. You will see in our investor deck workers' comp was up 2%, and employer services was up 2.7%. So there are some differences there because of visit mix. That is why the overall revenue per visit is higher than the individual components, with workers' comp visits growing faster than employer services in Q1. Keith mentioned the California rate increase went into place on March 1. So we did not have a couple months of that outsized rate increase, but that is now in effect, and we will see it for the rest of the year. Also, there was some visit mix within the workers' comp rate growth. So it would have been higher than 2% if the visit mix was consistent with prior periods—maybe 2.3% to 2.4%. But overall, we are on track, and we had some more updates in April, and so we expect 3% potentially higher for the full year. Keith Newton: Yeah. And the 3% that we have quoted in the past is really what we have seen on average through the years. There is going to be some a little higher, like last year, some a little lower. But again, this year, we feel pretty good about where it is going to end up—just some timing of when. And we are also, as Matt mentioned, seeing a little bit of mix going on with it also. Operator: Great. Thank you. Your next question for today is from Joanna Gajuk with Bank of America. Joanna Gajuk: Hey. This is Joaquin already got on for Joanna. So I just wanted to ask any update on the New York rates? And when do you expect to have a final if you do not have one already? And then once you know the rates, how quickly do you plan to expand to New York? Keith Newton: I will take that one. No new update. I am not sure when we are going to hear something, but anticipate it will happen this year and that January 1 something will go into play. Right now, as we mentioned in the past, it is focused on the E&M codes, the evaluation and management codes that doctors use as far as coding level of service, and PT was not adjusted at all. So it definitely took a step forward. It is in an area where we could consider doing something now, albeit still not as attractive as what we want and what we see in other states. But we will continue to work on that. We can move pretty quickly. We have done a lot of analysis in the state. We know where we want to be. We know what we want to do. But we also have a pretty good pipeline already built, so we can be selective when we start and when we pull the trigger there in New York. In the meantime, we are going to continue on the de novos that we talked about earlier that are already in the pipeline this year, and we have a robust pipeline built next year for additional de novos and small organic M&A out there. There are certain things we will look at as we get further out in the year that could be a little bigger than those things, but we have tabled those for now, as we have mentioned in the past, as we get through the final decoupling from Select here in the near future, and we continue to delever a little bit more. Joanna Gajuk: Thanks. And then just touching up again on the activity. So you have always highlighted onshoring as a tailwind for your business. What industries do you mainly have your eyes on? And then what portion of your de novos are targeted within this theme? Thanks. Keith Newton: Well, as far as onshoring, manufacturing naturally is going to be the fit with what we do, so we will continue to watch what is going to happen there. But as far as onshoring manufacturing, that is going to take some time because typically that requires some sort of capital deployment that is not going to happen overnight. So we hope to see that in the future as we continue to hear about the trillions of dollars that potentially are going to get invested in the United States over coming months and years. The second part of the question, I did not catch that. Matthew DiCanio: Joaquin, can you repeat the other part of your question? Joanna Gajuk: Yeah. So it was just what portion of de novos were being targeted at this theme in the future. Thanks. Matthew DiCanio: Yeah. So our de novo strategy is spread pretty much across the country. We track economic activity, industrial pockets of growth, things like that. So it is pretty spread all across the country. We have got a new state of Idaho that we are entering. We are growing in Texas, Florida, a lot of areas where you see continued infrastructure build-out and growth trends. The other thing I would add to what Keith was saying about onshoring is the construction industry will be important for us as well, especially with all the AI build-out. We are seeing pockets of that across the country that we believe are going to help our business as well. Operator: Thank you. Your next question is from Benjamin Rossi with JPMorgan. Benjamin Rossi: Hey, good morning, and thanks for taking my questions here. Just following up on the rate side and workers' comp, you mentioned some of that mix shift in workers' comp and then California went into effect on March 1. I know historically, you said most workers' comp fee schedule adjustments occur in Q1. So you got one month of California in the first quarter. But did this one include the bulk of your 2026 fee schedule benefit? Should we expect any other meaningful step-ups over the course of the year, like in October or later? Thanks. Keith Newton: I believe we have said in the past approximately 75% to 80% of what we see typically is happening during the first quarter at some point in time, and that is pretty much what we saw this year. We have got Tennessee that is going to be happening in the second quarter that will be meaningful for us. And then there will be some annual updates that other states do throughout the summer and early fall, like in Arizona. At this point in time, we really do not know what they will be doing, but would not anticipate anything too material other than potentially inflation-adjusted activity around their fee schedule. But that is what we really see happening for the rest of the year. Benjamin Rossi: Understood. I guess this is just a follow-up on the on-site side and talk about the current opportunities that were in there in your opening comments. When you are assessing opportunities for your on-site health clinics, where do you see the current largest white space opportunities across things like new geographies, new employer relationships, deeper wallet share, or service line expansion? And do you think about sequencing here in the coming quarters? Keith Newton: I would say D, all of the above. Where we are really gaining some traction is in the area of advanced primary care, which we have talked about in the past. We deployed Epic as the electronic medical record within the on-sites a year and a half or so ago. We are really starting to gain some traction there, which is a white space we typically did not play in just because we did not have the capabilities and the technologies to support that type of delivery of care. We are extremely competitive, definitely have the support and awareness of the broker world that supports a lot of the employer decisions around this. We definitely have a seat at the table. Because of our infrastructure and footprint across the United States, it makes us extremely competitive with those that have historically focused on that. In addition to that, with our size now with the acquisition of Pivot, that combination has gone extremely well. We have had a lot of our employer base that we supported with those traditional more Occ Med type on-sites wanting to shift or wanting to expand into further sites. So we have got what we call the internal organic growth within existing employers and have been very successful as far as starting to add sites there across the United States. We are really pulling all the levers—prospecting new, going after RFPs, expanding existing—and again, focusing on the advanced primary care type of on-site is probably the biggest white space that we historically did not play in. Matthew DiCanio: And Ben, I will just add a couple comments just to reiterate in case people missed it in the opening remarks. Our on-site portfolio, excluding the Pivot acquisition, grew 20% in Q1, and the total on-site portfolio is now approaching $150 million in revenue, up from $64 million in 2024. So the teams are doing an unbelievable job, the leadership from our organization, but also the acquisition of Pivot which, as Keith mentioned, is ahead of schedule. We are really excited about the trends there and the upside for the future. Benjamin Rossi: Great. I appreciate all the additional comments. Operator: We have reached the end of the question and answer session, and I will now turn the call over to Keith Newton for closing remarks. Keith Newton: Thank you, operator, and we appreciate everybody joining us today. We will talk again next quarter. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the first quarter 2026 The E.W. Scripps Company Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Becca McCarter, Senior Director, External Communications. Please go ahead. Becca McCarter: Thank you, Didi, and good morning, everyone. Thank you for joining us for a discussion of The E.W. Scripps Company's financial results and business strategies. You can visit scripps.com for more information and a link to the replay of this call. A reminder that our conference call and webcast include forward-looking statements based on management's current outlook and actual results may differ materially. Factors that may cause them to differ are outlined in our SEC filings. We do not intend to update any forward-looking statements we make today. Included on this call will be a discussion of certain non-GAAP financial measures that are provided as supplements to assist management and the public in their analysis and valuation of the company. These metrics are not formulated in accordance with GAAP and are not meant to replace GAAP financial measures and may differ from other companies' uses or formulations. Reconciliations of these measures are included in our earnings release. We will hear this morning from Chief Financial Officer Jason P. Combs, then Scripps President and CEO, Adam P. Symson. Here is Jason. Jason P. Combs: Good morning, everyone, and thank you for joining us. We are coming into this morning's call with strong momentum and good news about our financial performance and other activity. Here are a few of the highlights. We are progressing rapidly on executing our comprehensive transformation strategy, which has helped drive significant improvement in our first quarter net leverage to under four times. Our Local Media division delivered a strong performance with industry-leading 7% core advertising revenue growth, driven by our unique live sports strategy. We launched the Scripps Sports Network, a premium free streaming channel. We are entering a midterm election cycle with strategic market exposure in key battleground states. And we continue to optimize our portfolio through strategic asset transactions, generating $123 million in gross proceeds from recent sales of two stations. We also continue to work towards the closing of our station swaps with Gray and pursue additional M&A activity to support debt reduction and enhance operating performance. In addition to those recent highlights, we are pleased to have just successfully completed a new affiliation agreement with our largest network partner, ABC, covering 17 ABC affiliates. With that overview as a backdrop, I would like to review our first quarter financial results, and then I will discuss second-quarter guidance, followed by details on our improving debt position. I will conclude with a review of our EBITDA improvement plan. I will present our first quarter Local Media division results on a same-station or adjusted combined basis, removing the Q1 2025 results of the two TV stations that we have now sold and reflecting our addition of the Lexington ABC affiliate. During the first quarter, our Local Media division revenue was $331 million, up 5.8% from first quarter 2025. Core advertising increased 7%. Our services, automotive, and gambling categories all grew in the quarter. Local core advertising year-over-year growth was largely driven by advertising sales tied to our National Hockey League telecasts. We saw a strong contribution from the addition of our newest rights agreement with the Tampa Bay Lightning, and beyond this new partnership, we also saw strong growth in our existing NHL deals with the Vegas Golden Knights, Utah Mammoth, and Florida Panthers. Our strategy is designed to drive year-over-year growth across both our existing deals and new partnerships. And last month, we announced a fifth full-season NHL sports rights agreement with the Nashville Predators to start this fall. The Winter Olympics and the Super Bowl also contributed to our Q1 core advertising growth. Political advertising revenue was nearly $9 million as we begin what is expected to be a record-breaking spending cycle for the midterm elections. This year, we forecast strong spending in our markets due to U.S. Senate and gubernatorial races in Arizona, Colorado, Michigan, Nevada, Ohio, and Wisconsin. We also are watching growing competitive situations in Florida and in Montana. Local Media distribution revenue increased 2% again, on a same-station basis. Expenses for the division increased about 2.4% year over year. Excluding the impact of our expenses tied to our new NHL team deal, expenses were flat. Local Media segment profit was $44 million compared to $32 million in Q1 2025. For the second quarter, we expect Local Media division revenue to be up low single digits. We expect core advertising to be down low single digits, without the benefit of live sports for most of the quarter. We expect Q2 Local Media gross distribution revenue to be impacted by our impasse with Comcast, which ran from March 31 to May 5. Based on that timing, we still expect full-year gross distribution revenue to grow in the low single-digit range but now expect net distribution revenue to grow in the low double-digit range, a slight change from our previous guidance. We expect second-quarter Local Media expenses to be flat to 2025. Now let us review the Scripps Networks division first quarter results and second-quarter guidance. Once again, I will be presenting the results on an adjusted combined basis, in this case adjusting for the impact of the Court TV sale. In the first quarter, Scripps Networks revenue was $174 million, down 9.5% from Q1 2025. Connected TV revenue was up 26% from the same quarter last year. The division's expenses for the quarter were $126 million, up 1%. Scripps Networks segment profit was $47.5 million compared to $66.8 million in the year-ago quarter. For the second quarter, we expect Scripps Networks division revenue to be down about 10%. The networks are facing a softer market from macroeconomic conditions impacting the direct response marketplace and external measurement pressure from Nielsen due to recent methodology changes. Adam will talk more about this in a moment. We expect Scripps Networks Q2 expenses to be up in the low single digits. Turning to the segment labeled Other, in the first quarter we reported a loss of $6 million. Shared services and corporate expenses were $26.6 million. In the second quarter, we again expect that line to be about $27 million. Higher medical claims and increased insurance premiums are causing that line to go higher than usual. For the first quarter, the company is reporting a loss of $0.20 per share. The loss included a $30 million gain on the sales of Court TV and two television stations, WFTX in Fort Myers, Florida, and WRTV in Indianapolis. These sale transactions decreased the loss attributable to shareholders by $0.25 per share. In addition, the preferred stock dividend has a negative impact on earnings per share even when we do not pay it. This quarter, it reduced EPS by $0.18. We had $20 million outstanding on our revolving credit facility at the end of the quarter. On April 30, we entered into an agreement to extend the July 7, 2027 maturity date of our revolving credit facility to July 7, 2029 with commitments of $200 million. For the first quarter, cash and cash equivalents totaled $84 million. Net debt was $2.2 billion as defined in our credit agreement. Also during the quarter, we paid down $10.2 million on our B-2 term loan. In addition, we paid down $20.4 million on our B-3 term loan. Since the end of the quarter, we have paid down an additional $30 million on the B-2 term loan, for a total of just over $60 million in term loan paydowns since the beginning of this year. Net leverage at the end of the quarter was 3.9 times, per the calculations in our credit agreement, which includes certain pro forma adjustments relating to our transformation efforts. As we announced in February, our company transformation plan includes growing enterprise EBITDA by $125 million to $150 million. Our EBITDA improvement plan balances rightsizing our current expense structure with implementing new ways to grow revenue and profitability. You will start to see the financial benefits of our plan in the second half of this year. We expect total in-year EBITDA impact of $20 million to $30 million and an annualized run rate of about $75 million as we move into next year. And now here is Adam. Adam P. Symson: Thanks, Jason, and good morning, everybody. At Scripps, we are in the midst of executing a significant transformation, moving now from the detailed planning stage into execution, and I am pleased to report that we are right on track. I like to say that this transformation is a refounding of the company. We are bringing the values, ethics, and mission of our founder, Edward Willis Scripps, forward 150 years to set the company up in a way I would like to think he would were he here today. I have been doing a lot of research on our founder. E.W. was fiercely protective of his newsroom journalism and editorial independence. He was entirely committed to serving the people in the communities where he operated, and he was well known, maybe even notorious, for his dedication to operating with efficiency to ensure he would have the margin to carry out the mission. A hundred and fifty years ago, E.W. focused on his consumers' problems and commercialized the solution. The assets that make up our company may be different today, but our transformation is grounded in the same customer-first focus. Here is an example of what this is looking like. In our newsrooms, we have already been changing the model. We are moving from a broadcast-centric operation that has historically served our audiences during defined time periods to news operations that leverage automation, AI, and technology to serve consumers when and where they expect to get their local news, especially as they have moved to streaming. Leveraging technology has allowed us to deepen our commitment to local news, getting more of our teams out of the newsroom and into the community, putting more reporters in the field to live in the geographic areas where they cover. All of it is in service to our vision: we create connection. This is not incremental change. It is a complete realignment of our newsroom operations, our business models, and our culture around the opportunities we see clearly: streaming platforms, productivity-enabling technologies, and our unrivaled ability to create connection for the people and the businesses in the communities we serve. This is just one example at Scripps of how we are upending what needs to be changed, fueling the fire where we see top-line growth, as we see in streaming, and going farther and faster with what is working well, like our sports strategy. Let us talk about sports. In Local Media, our live sports helped Scripps deliver an industry-leading core advertising performance in the first quarter, up 7%. As Jason said, this came from new partnerships and from organic growth in every one of the markets where we are executing the strategy. And we are far from done. Just a few weeks ago, we announced the new full-season local broadcast agreement with the NHL's Nashville Predators, and I expect more core growth-fueling opportunity to come. Now for the second quarter, the live sports action shifts to our Scripps Networks and the WNBA and the NWSL. The WNBA's preseason game between the Indiana Fever and the New York Liberty on April 25 was ION's most watched preseason game ever. Tonight, the WNBA regular season tips off with a doubleheader on ION, with tremendous excitement about the return of Caitlin Clark and this year's class of exceptionally talented draft picks. Scripps Sports will once again broadcast the most WNBA games of any network, bringing a WNBA doubleheader every Friday night all season long to fans nationwide. Advertiser demand is high for women's basketball, as well as for our full slate of women's sports. It is now clear that Scripps is the leader in women's sports, showcasing women's athletic achievement with rights for the WNBA, NWSL professional soccer, PWHL hockey, MLV volleyball, Athlos track, college basketball, pro cheer, and our newest partner, PBR's premier women's rodeo, which we will be bringing to our network GRYT and ION. We recognized early that Americans were embracing the quality and professionalism of women's sports, and we are pleased to have become the go-to platform for the brands that want to connect with fans. Next week, the Professional Women's Hockey League's Walter Cup finals will begin on ION. We are very pleased to bring this to national television for the first time and to have Amica serving as our presenting sponsor and Discover as an additional sponsor. They are just two of the hundreds of blue-chip advertisers we have brought onto our platform through our sports strategy. In March, to capitalize on the marketplace growth and our success in connected TV revenue, we launched the Scripps Sports Network, a new streaming channel that leverages our existing sports rights, some efficiently acquired new rights, and sports-themed programming. We are streaming more than 100 live games a year along with original sports programming, documentaries, and talk shows. And we have secured broad distribution across the major streaming platforms, including Roku, LG, and Samsung, making it easy for fans to find the sports, teams, and players they love. Connected TV continues to be a growth driver for Scripps, up 26% in the first quarter, and I expect we will continue to leverage our premium programming and live sports to make this a differentiator for us among our peers and competitors. While we expect to capitalize on live sports on ION in Q2 just as we have with our Local division in Q1, we are navigating some external challenges with national advertising revenue. As Jason mentioned, we are seeing some market softness due to the volatile economy. Networks' direct response ad spending, in particular, has been impacted as consumers feel the pain of higher prices, especially now at the pump. We have also been affected by a recent Nielsen audience measurement change that has artificially shifted household viewership weighting in favor of cable networks. Because all Scripps networks are distributed over the air, this change has negatively impacted audience delivery. Nielsen's new methodology is inexplicably resulting in frustratingly inaccurate reports of ratings declines for over-the-air viewing and streaming. This disproportionately impacts the measurement of our multicast network viewers who are most vulnerable to affordability issues, including those in rural communities, people of color, and older Americans. The fact is that we have seen no let-up in the demand for our advertising products in the general market, and sales execution is on point. But Nielsen's overnight change suddenly impacted our supply of impressions, impacting our revenue. We began seeing a revenue impact from Nielsen's methodology change in March, and since then, our team has been advocating aggressively for Nielsen to make a public disclosure outlining the magnitude of the discrepancy in their data. Of course, I cannot end the discussion on advertising without at least a nod to what we expect to be this year's political revenue windfall as a result of our excellent station footprint, our focus on sales execution, and the record amount of money expected to be spent on the upcoming midterms. We are off to a good start and expect political to be a great story on top of this year's industry-leading core revenue performance we are putting up this year. I would like to take a moment now to celebrate some important recognition of the work we do on behalf of our viewers and communities. Scripps has received recent awards and recognitions from three important national organizations. We were honored with six nominations for national News and Documentary Emmy Awards, including five for Scripps News and one for WEWS in Cleveland. Scripps News also was recognized with three prestigious National Headliner Awards, including a Best in Show honor, and two Deadline Club finalist nominations. Our local station KNXV in Phoenix also received three National Headliner Awards and WTMJ in Milwaukee received one. We are proud of the recognition of our commitment to journalism that improves the lives of those we serve, holds the powerful accountable, and upholds the tenets of our democracy. Serving our democracy is one of the things Scripps has done best for nearly 150 years. There is a lot of uncertainty in the world today, from macroeconomic to the media sector. At Scripps, we are acting with urgency on what we can control by employing new technologies to create operational efficiencies, capitalizing on accessible growth areas such as sports and CTV, and improving our balance sheet. This is the essence of our transformation plan, and you are beginning to see how this plan will carry us into the next bountiful chapter of our long history. We will now open the call for questions. Operator: As a reminder, to ask a question, please press 11 on your telephone. Our first question comes from Daniel Louis Kurnos of Stifel. Your line is open. Daniel Louis Kurnos: First and foremost, Jason, thanks for the recast; super helpful. Just a couple of housekeeping questions. The guide that you gave for Q2, that is relative to the adjusted combined recast, not the as-reported from February last year, correct? And then, Adam, on Scripps Sports Network—super smart—you have been leading the charge in CTV. You had your upfront in late March and launched the network before then. You picked up PWHL, PBR, and now women’s PBR. You have got a real leadership position on the women's side. Can you give us your thoughts on advertiser feedback and commits as we look ahead? And you have been very clever with rights acquisition in an inexpensive manner. Sometimes there is confusion between what you can show on streaming and what you can show on traditional broadcast, so help us think through that equation too. Jason P. Combs: That is off of the adjusted combined recast that we provided. Adam P. Symson: First and foremost, Dan, I like to think that we have embraced women's sports, not put it into a stranglehold, but I appreciate what you are getting at. We have been very intentional in the way we have been acquiring sports, both on the local side and the national side, and see our opportunity as recognizing the value of the distribution we bring to the table. Whether it was with our initial deal with the WNBA, the NWSL, or any of these other sports deals we have done, we have been looking for partners who recognize that we bring the opportunity to showcase their league, their games, their athletes, on the most ubiquitous platform available, because ION is uniquely positioned to be available on OTA, on pay TV, and on streaming. The launch of Scripps Sports Network is a continuation of that strategy because it not only positions certain parts of our broadcasts in additional new real estate in the streaming space through simulcasts—allowing us to take some of ION's most premium time periods and now simulcast them on streaming platforms, essentially expanding the reach of those games and our network—it also allows us to carefully and efficiently acquire new rights for insurgent or ascendant leagues looking to get distribution for their games and allows us to test and learn. For example, many of the PWHL games and Major League Volleyball are available on the Scripps Sports Network, and then the finals end up being broadcast on ION. Our move to put all of that on ION has been about really serving the advertising environment. We see significant demand from advertisers looking to invest behind women's sports, and we went to the marketplace knowing there was already demand for the assets we were acquiring. That will benefit us in linear and in the streaming space. We will continue to be careful and efficient in the way we acquire rights but also really aggressive in the way we demonstrate the value of our distribution. Relative to the ad marketplace, there has been no let-up in demand for live sports. When you look at our performance relative to general market cable and broadcast networks, you see the benefit of our sports strategy. We are just now moving into the second quarter where we have that benefit going into the summertime; we did not see that in the first quarter. Nevertheless, there has been some softness in the national ad market, and I think Jason can provide a little more color on the national ad marketplace and even a midterm view of what we expect from Networks margins. Jason P. Combs: We guided to down 10% for Scripps Networks in Q2, and that is driven by a couple of things: ratings declines tied to changes in Nielsen methodology that Adam talked about, as well as macroeconomic and geopolitical conditions that are driving uncertainty and have created a weaker marketplace for national advertising. Networks that over-index on over-the-air carriage are seeing pressure versus cable networks that are generally seeing significant ratings increases under the new methodology, and we will continue to engage because we believe that methodology is flawed. Beyond that, the current macroeconomic environment is impacting performance-driven advertisers in the direct response space. Inflationary pressure and higher fuel costs continue to weigh on the American consumer, and geopolitical instability has created some hesitation and ripple effects. In the short term, that has created a drag on revenue and margin in our segment. We worked hard to get Networks back to a 30% margin business. As you look at the implied guide for Q2 and our results for Q1, I would expect our second-half margin to be higher than our first half. Q3 is the heaviest sports quarter in terms of inventory, and Adam talked about the excitement we continue to see for premium sports inventory. Q4 also brings in seasonal healthcare ad dollars, and you will start to see some impact from the transformation efforts in the second half as well. We remain committed to the Networks business as a 30% margin business. Daniel Louis Kurnos: Understood. On monetization, we are seeing more live sports move towards programmatic, especially in CTV. How do you think about pushing deeper into DSP relationships, leaning into the ad tech ecosystem, and getting better fill—even if CPMs come under pressure—to ultimately improve monetization? Adam P. Symson: I would argue we are operating a best-in-class CTV platform. Going back to the earliest years of digital and CTV, we have been focused on maximizing the opportunity with direct sales and programmatic. The leadership we have at the Networks level focused on monetizing our CTV across the enterprise is second to none, and we are well invested. You can see that in the 26% growth, following significant growth in prior years. We have not just been riding market growth; we have been catalyzing our own opportunity—improving our programmatic stack, strengthening ad tech relationships, and leveraging our significant position with distributors. We represent some of the most watched premium channels in the CTV marketplace, which gives us leverage to negotiate terms and partnerships that benefit us and the platforms. There is incremental opportunity ahead, including leveraging technology to improve monetization in CTV and local CTV, and significant opportunity with political in CTV. We are already seeing that this year, allowing us to sell connected TV advertising out of our political office outside of the markets where we have local stations. Today, we sell nationwide, and a fair amount of the connected TV political advertising we saw in the first quarter came from outside our markets. We are off to a really good start there and will keep the pressure on. Operator: Thanks, Dan. Our next question comes from Craig Anthony Huber of Huber Research Partners. Your line is open. Craig Anthony Huber: Thank you. Can you give us an update on the $125 million to $150 million transformation program—specifically where you think the annualized run rate will be at year-end and any changes on that front? Jason P. Combs: Last quarter, we gave an annualized run rate of $60 million to $75 million for this year. We adjusted that this earnings cycle up to about $75 million, and we would say we are making good progress. I will also point out the move we had in leverage this quarter and explain that a bit. When we announced the transformation initiative, we did a lot of work to lock down our bankable plan of initiatives expected to be implemented over the next 12 months. Per the terms of our credit agreement, we are able to reflect those retroactively back into our trailing eight-quarter EBITDA for purposes of leverage calculation. That is the driver behind the move in leverage this quarter down to 3.9 times, tied to initiatives we expect to have fully implemented by the end of Q1 next year. Adam can talk a bit more about the bigger picture. Adam P. Symson: We are executing a comprehensive plan that allows us to rethink everything about how we deliver service to our customers—both audiences and advertisers. We spent months examining the opportunity to remake the company across every corner of the business, front office and back office, and now we are in implementation. I received a lot of comments about how confident I sounded last quarter when I said “take it to the bank.” I am as confident today that we are going to improve EBITDA by more than 30% to emerge a stronger, more nimble, and more aggressive company oriented for growth. It is all about our customer, and it is being done through the lens of our vision: we create connection. Much of it involves technology, AI, and automation and is oriented toward growth. Importantly, we are on track to achieve exactly what we set out to do. Craig Anthony Huber: On AI, can you give a bit more flavor on how you are using it for services and efficiency? Is it possible to quantify how much of the $125 million to $150 million improvement comes from AI? Adam P. Symson: I cannot quantify that yet. As we roll out different initiatives, when they are in the rearview mirror, we can provide more color. Broadly, technology has opened the door for all companies to be more effective and efficient. Traditionally, the broadcast industry has been too slow to adopt these technologies. We are now stepping back and rebuilding the company in both the front office and back office. Several years ago, we pioneered a new way of producing newscasts that leveraged technology to reallocate resources—putting more reporters in the field and paying higher wages. That became the basis for our neighborhood news strategy and geographic beats. We continue to have more reporters in the field than competitors, which is what consumers care about, and we are leveraging AI and automation to facilitate that. We also see significant top-line upside from technology in revenue yield management and account executive productivity—tools that let AEs spend more time prospecting and closing and less on administrative work. These are not themes; they are plans with real business cases developed by our employees. Even the cost savings opportunities will improve our product—both content and advertising—improving service to audiences and advertisers and generating additional top- and bottom-line value. Craig Anthony Huber: Lastly, on the macro environment, is it letting up or getting worse? Any categories beyond direct response that you would call out? And in Q1, did you see changes tied to geopolitical events, and has that continued? Jason P. Combs: On the Networks side, the impact is tied to macroeconomic conditions and geopolitical conditions—inflation, gas prices, all those things—which are creating headwinds in national advertising. We have not really talked about the Local ad marketplace yet. In Q1, Local core was up 7%, the best in the industry. For Q2, we guided to down low single digits, which is better than our peers. Unlike Q1, Q2 does not have the same level of premium sports inventory, and we are seeing a little noise in some categories, but all in all, from a Local core perspective, things are pretty stable. Operator: Thank you. Our next question comes from Avi Steiner of J.P. Morgan. Your line is open. Avi Steiner: A couple of questions on the ad environment. Can you refresh us on your exposure to direct response advertising and how quickly it typically snaps back in prior down cycles? Is it leading or lagging? Jason P. Combs: It varies by network, but we do have a material portion of Networks revenue tied to direct response advertising. DRA is tied to broader macro trends and can both downturn quickly and bounce back quickly as well. We are seeing some noise now tied to macroeconomic and geopolitical factors and the Nielsen methodology changes impacting ratings. Adam P. Symson: From a speed perspective, it snaps around quickly. A good example is what we saw in the fourth quarter: at the beginning, we were a little soft with DRA due to the government shutdown’s impact on employment and Medicare enrollment. When the shutdown ended, it snapped back. Uncertainty is not good for the American consumer; the greater the certainty, the easier things will be in the ad marketplace. Avi Steiner: On the enterprise value growth via cost savings and revenue growth initiatives, what is the cost to achieve for the transformation initiatives and timing? Jason P. Combs: We guided to EBITDA lift of $125 million to $150 million. We estimate $40 million to $50 million of cost to achieve, with the largest portion falling in the back half of this year. Avi Steiner: The recast financials in the supplemental disclosure were helpful. Could you provide the LQ8 EBITDA for the same base of assets underlying that disclosure? And what is left to close, and dollars in and out? Jason P. Combs: The LQ8 that supports the 3.9x leverage calculation is $568 million. We are awaiting closure of our swaps with Gray and also have a transaction with Inyo before the FCC and DOJ. On dollars, I do not have the specific number readily available on this call. The transformation-related cost savings embedded into that LQ8 are a little over $100 million annualized; in our most recent announcement, we cited $53 million, with the exact contribution dependent on timing. Operator: Thank you. Our next question comes from Shanna Qiu of Barclays. Your line is open. Shanna Qiu: Thanks for taking my questions. Could you give us a sense of how much of the Scripps Networks top-line guide decline in Q2 is related to the overall macro and ad environment versus the Nielsen methodology change? Jason P. Combs: We are not breaking it down specifically, but both are driving a material impact to the revenue guide. Adam P. Symson: On the Networks side, we sell impressions, and the impressions are determined by your currency. In mid-February, overnight, Nielsen's methodology change did not impact sales execution or demand; it impacted how many impressions we had to sell. We are working with Nielsen to right that ship and making changes on the marketing and programming side to bolster our programming strategy and increase impressions. That is separate from some of the macro softness in DRA. The general market has held up nicely, likely due to our sports strategy and strong sales execution. Shanna Qiu: You mentioned you expect full-year gross distribution revenue growth of low single digits. Any thoughts on the pending Charter–Cox merger, and is that reflected in your gross distribution guide? Jason P. Combs: We do not generally talk about specific contracts, but we feel good about that guide. We went through an impasse in the second quarter with Comcast and were able to maintain our guide on gross and make only a small change in our net guide from low teens to low double digits. While it creates a short-term blip in Q2 financials, we are pleased with what that deal means in the midterm and long term for us. Operator: We have a follow-up from Craig Anthony Huber of Huber Research Partners. Your line is open. Craig Anthony Huber: On the Nielsen change, are you willing or able to talk about the percent hit to impressions and how you view it? And has Nielsen provided any recast numbers? Adam P. Symson: I do not think quantifying it publicly benefits us. You have heard similar references from other companies with national broadcast network exposure. This is something all the broadcast networks and streamers are dealing with. We are working with Nielsen to address this so the ad marketplace can make decisions with a methodology that reflects what is actually happening. It is obviously not the case that cable is growing while streaming and OTA are declining. Everyone recognizes changes have to be made to improve accuracy. As for recasts, I cannot speak for Nielsen. The changes went into effect in mid to late February, and we have not seen public recasts. Operator: Thank you. Our next question comes from Steven Lee Cahall of Wells Fargo. Your line is open. Steven Lee Cahall: Thanks for fitting me in. Jason, can you help us understand the sequential change in Local core ad growth going from plus 7% to down low single digits? There is the change in local sports and the Comcast blackout. What does the underlying core look like within that—how much of the deceleration is sports versus underlying trends? Jason P. Combs: Q1’s up 7% had a significant benefit tied to our NHL deals and also the Olympics in the marketplace. If you take out the sports impact, the overall core marketplace is pretty consistent and not significantly impacted by broader economic factors. The down low singles we guided to for Q2 is better than most in our industry, which have guided down low to mid singles. From that standpoint, core is a strength right now. Adam P. Symson: I hope investors and analysts recognize that our first quarter performance is cause to celebrate because we are executing a strategy that creates significant growth opportunity—cyclical as it may be. As we move to Networks in Q2 and Q3, we will see that benefit there. Running a strategy that allows you to vacuum up more core revenue in a local market comes with cyclical dynamics tied to sports windows. Steven Lee Cahall: On Networks growth, Q3 is the biggest for sports, but sequentially 1Q to 2Q has more sports as well with WNBA restarting. If the market has not changed as we get past Q3, do we see a big drop-off in the rate of decline, or are there other levers—programming or pricing with the upfront—you will pull in the back half? Jason P. Combs: From a margin perspective, we expect the second half to be higher than the first half. We have some sports in Q2, yes, but they ramp to a full quarter in Q3. I would expect year-over-year changes to improve in the back half. You also pull in healthcare in Q4, and transformation benefits will start to roll through. Even though we are trending below the 30% target now, we remain committed to making the decisions needed to get Networks back to a 30% margin. Adam P. Symson: It is too early to talk about upfront volume or pricing. While Nielsen’s change may have negatively impacted impressions for OTA and streaming, the ad marketplace is responding very well to our upfront message: our distribution platform that grows OTA and streaming and our differentiated programming—live sports, specifically women’s sports. Advertisers recognize what is going on in cable and are shifting dollars into more premium products. That is behind significant new advertisers coming onto our platform, like Amica as presenting sponsor for the Walter Cup finals on ION, historically not an advertiser on our platform but now moving spend to reach their audience with our product and distribution. Steven Lee Cahall: Lastly, on leverage and preferreds: you are able to take advantage in your credit agreements of the transformation initiatives, which gives you some breathing room. Does that mean you can start to devote this year’s free cash flow toward the accumulated pref dividends or otherwise negotiating the pref? How are you thinking about it? Jason P. Combs: We were already well under our covenants, so while the transformation provides a benefit to our leverage calculation, there was already significant cushion. On the Berkshire preferred dividend, based on last year’s refinancings, we cannot pay the dividend until 2027 unless our leverage is below 4.25x—which we are—and we have less than $50 million outstanding on the B-2 term loan. Think of it this way: those are the requirements to begin paying the dividend. Once we meet them, we would intend to start paying the dividend again. Once we get leverage into the low to mid 3x, we would begin looking to address principal, not all at once but likely in $60 million increments. Operator: This concludes our question-and-answer session and today’s conference call. Thank you for participating, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2026 Results Conference Call and Webcast. 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, please press star 11 on your telephone. You will then hear an automated message indicating 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 turn the conference over to Martha Wilmot, Director of Investor Relations. Please go ahead. Martha Wilmot: Thank you, Michelle, and welcome, everyone, to South Bow Corporation’s First Quarter 2026 Earnings Call. With me today are Bevin Mark Wirzba, President and Chief Executive Officer; Van Dafoe, Senior Vice President and Chief Financial Officer; and Richard J. Prior, Senior Vice President and Chief Operating Officer. Both our SEDAR+ profile and our SEC filings contain more detailed information. Today's discussion will also include non-GAAP financial measures and ratios that may not be comparable to those presented by other entities. With that, I will turn it over to Bevin. Bevin Mark Wirzba: Thank you, Martha, and good morning, everyone. We appreciate you joining us. South Bow Corporation delivered solid first quarter results underpinned by strong operational performance and stable cash flows, despite heightened geopolitical and market uncertainty. During the quarter, we advanced the strategic priorities we laid out for the year. These included placing the BlackRock Connection project into commercial service, continuing remedial pipeline integrity work on our Keystone pipeline, and conducting the open season for Prairie Connector, which I will address in a moment. Throughout this work, we remained focused on safe and reliable operations and disciplined capital allocation. Before I turn it over to Richard and Van, I want to address Prairie Connector directly and set expectations for today's call. We closed bids for the open season at the end of March as planned, and we are currently in a 60-day evaluation period. As you can appreciate, these are significant decisions for South Bow Corporation and our customers, being made against a complex macro, regulatory, and policy backdrop. We intend to use the full 60-day evaluation period to reach a commercial determination. So, while I expect our analysts will have many ways to ask about it on today's call, we do not have anything further to add beyond what we have already disclosed. At the conclusion of the 60 days, we will communicate the outcome of the open season and outline potential next steps if the project continues to be advanced. As a reminder, the concept behind Prairie Connector is to move Canadian crude oil from Hardisty, Alberta, to the Canadian-U.S. border, where it could connect with downstream pipeline systems serving multiple U.S. markets, including Cushing, Oklahoma, and destinations on the U.S. Gulf Coast. Last week, a presidential permit was issued to Bridger Pipeline for cross-border facilities that would transport the Canadian crude oil we are proposing to move into the United States. This represents a meaningful development in the permitting process for cross-border energy infrastructure, and one that has understandably attracted its fair share of attention. That said, we are continuing to work diligently to ensure any project we advance is within our risk preferences, and that risks are allocated appropriately among the parties best positioned to manage and mitigate them. Our team brings deep pipeline development experience across multiple jurisdictions and projects, some more famous than others, and we are applying all those learnings to find an allocation of risk that makes sense for all stakeholders. Recent global events have reinforced that secure, reliable energy and the infrastructure that delivers it truly matter. At South Bow Corporation, we are encouraged to be part of the conversation and to support our customers in increasing competitive, responsible Canadian energy in a world that continues to need more of it. With that, I will turn it over to Richard. Richard J. Prior: Thanks, Bevin, and good morning. I will start with safety and pipeline integrity, which remain top priorities. During the quarter, we continued to progress our remedial work related to the mild post-01/1971 incident, including a combination of in-line inspections and integrity digs across the Keystone system. In parallel, we are working closely with our in-line inspection technology providers to enhance tool performance and detection capabilities, including advancing the development of a new phased-array ultrasonic tool, which we have now completed three successful runs with. We are encouraged that this tool enhances our overall detection capabilities and will be an important component of our ongoing integrity program. Overall, we are pleased with the progress we have made under the remedial work plan. Based on the work completed to date, we expect pressure restrictions to be lifted in a phased manner, with the process beginning later this year. Turning to operations, our first quarter throughput was driven by strong operational performance and ongoing optimization of our systems. The Keystone pipeline operated with a 95% system operating factor, enabling us to transport more than 600 thousand barrels per day during the quarter, providing customers with an opportunity to move makeup barrels as well as limited spot movements. As the quarter progressed, we started to see strong demand for capacity on our assets, most notably on the U.S. Gulf Coast segment, with recent geopolitical events driving an increase in demand for export barrels. With the modest widening of Cushing-to-U.S. Gulf Coast differentials, we have been seeing higher throughput on our MarketLink asset in the second quarter. I will finish with a brief comment on growth. With broad macro changes supporting an increasing production outlook in the Western Canadian Sedimentary Basin, we continue to evaluate smaller-scale, customer-led opportunities within our existing footprint. These include either expanding interconnectivity that would direct more barrels onto our systems or deliver barrels off our systems into new destinations. As Bevin noted, we will advance these opportunities with the same level of discipline that we are applying to Prairie Connector and to our inorganic growth strategy. With that, I will turn it over to Van to walk through our financial performance and outlook. Van Dafoe: Thanks, Richard, and good morning. South Bow Corporation delivered normalized EBITDA of $257 million in the first quarter of 2026, which was in line with market expectations and modestly higher than 2025. While normalized EBITDA in our Keystone segment declined due to lower maintenance activity in the period, this was more than offset by higher contributions from our Marketing segment. Our expectations for 2026 remain unchanged, and we are reaffirming our normalized EBITDA outlook of $1.03 billion within a range of 2%. Based on our current outlook, any potential upside from the Marketing segment reflecting current market dynamics is expected to fall within our guidance range. Distributable cash flow of $168 million increased quarter over quarter, driven primarily by lower current taxes in the period. We continue to maintain our full-year distributable cash flow outlook of $655 million that we will use to fund our dividend, strengthen our balance sheet, and, where appropriate, allocate capital towards growth. Turning to leverage, we exited the quarter with a net debt to normalized EBITDA ratio of 4.7 times. That is unchanged from December 31 and in line with our expectations. As BlackRock cash flows begin to ramp in the second half of the year, our leverage profile will improve modestly through the balance of 2026. Lastly, the board of directors approved our quarterly dividend of $0.50 per share yesterday. As we have said consistently, the dividend remains a foundational component of South Bow Corporation’s total return proposition. Switching briefly to growth and building on Bevin and Richard’s comments, we have received a number of questions on how we think about funding growth at South Bow Corporation. At a high level, our approach is straightforward. Any growth we pursue will be evaluated through a disciplined capital allocation lens. At our Investor Day in November, I outlined a range of potential financing alternatives for large-scale growth opportunities, including cash on hand, issuance of capital, and new equity, depending on the opportunity and the associated risk profile. Importantly, I also walked through the financing criteria that guide our decision-making. These include adhering to our capital allocation priorities, protecting our dividend sustainability, preserving our investment-grade credit profile, maintaining leverage neutrality, and delivering per-share accretion. Bevin Mark Wirzba: Thanks, Van, and thanks, Richard. To close, I want to come back to something I have said before, because it really does define South Bow Corporation. We operate critical and enduring energy infrastructure in a corridor that connects one of the strongest and most secure supply basins in the world to some of the most attractive refining and demand markets. That positioning matters, and it matters to our customers. Canadian producers have clear ambitions to materially grow their asset bases. With our customer-led strategy, our focus is on putting forward the most competitive solutions to support that growth while staying firmly aligned with our capital allocation principles and risk preferences. As we have said consistently, growth at South Bow Corporation will be balanced with financial discipline. We are committed to maintaining a strong balance sheet and delivering a meaningful and sustainable dividend while investing in growth. That balance is central to how we run this company, and it is fundamental to our strategy. We will now open the call for questions. Operator: Thank you. To withdraw your question, please press star 11 again. Our first question is from Sam Burwell with Jefferies. Your line is open. Sam Burwell: Hey, good morning. I appreciate the disclaimer around Prairie questions, but I will give it a shot. I want to better understand what the key hurdles are remaining to making a call on whether to advance Prairie. What is nonnegotiable prior to making a call before the end of the evaluation period relative to what could get sorted out prior to an FID down the line? Bevin Mark Wirzba: Thank you, Sam. There is a lot to consider in evaluating the proposals received. When we review what our customers have submitted, we have to confirm a number of things among our partners to ensure that we are all aligned on whether we execute on those agreements and move forward to the next step. That next step is really to prepare for a potential investment decision on the project. The typical elements you would evaluate for FID include ensuring that your contracting strategy, your supply chain procurement, your cost estimates, and the execution plan are all in line. We are also kicking off significant permitting efforts across the system in the United States as well as doing the preliminary work in Canada. One thing I want to remind everyone of from my remarks is that there are other elements that remain in the project outside of just commercial risk. We need to ensure that we manage and mitigate any last-mile risk that could occur on the project in the future. We are seeing great alignment in both Canada and the United States, but we cannot expose our shareholders to risks that they cannot bear, nor can we. Those would be the key gating items, Sam. Sam Burwell: Okay, perfect. As a follow-up, what is the current max capacity on the Gulf Coast portion of Keystone, and how easily and cost-effectively could that potentially be expanded? Richard J. Prior: Sure. We are able to move in excess of 800 thousand barrels per day on the Gulf Coast leg. It was originally designed as part of what was going to be the Keystone XL system, and so it could move 830 thousand plus. I would say at this point, it is pretty much at max design. There may be modest amounts of optimization or using things like reducing agent that could top that up a little bit, but it is at the upper end of what it can move. We are seeing very strong throughput on it here in the second quarter, and I think when we release our second quarter results, you will see what kind of top-end capacity we are able to move on the Gulf Coast section. Sam Burwell: Alright. Awesome. Thank you. Operator: Thanks. The next question will come from Maurice Choy with RBC Capital Markets. Your line is open. Maurice Choy: Thank you, and good morning, everyone. Sticking with the theme about the U.S. Gulf Coast segment of Keystone, you mentioned the second quarter being a little bit higher than the first quarter because of higher demand. How do you think about the durability of this higher demand for the remainder of the year? And more importantly, are you seeing any different submarkets within this region that are asking South Bow Corporation to consider expanding into? Bevin Mark Wirzba: Maurice, I will start, and maybe I will ask if you could repeat the last part of your question. I think neither Richard nor I really caught that. We are seeing volumes, as Richard has pointed out, flowing very high on our Gulf Coast segment right now. Just to remind everyone, Cushing volumes are what drive that arb and those flows, and Cushing volumes are reducing. Our outlook is that much of the volume growth we have seen has been macro driven of late, and we do not anticipate seeing that level of strength through the back half of the year. Could you repeat the last part of your question, please? Maurice Choy: Just thinking about as this part of the pipeline extends south, are there any customers or submarkets within the U.S. Gulf Coast asking South Bow Corporation to expand more connectivity, like additional fingers and toes? Richard J. Prior: Great question. We are in constant dialogue with our customers about increasing the amount of connectivity, both on the receipt end of our pipeline and certainly on the delivery end in the Gulf Coast. We are trying to make sure that our customers that move barrels on the pipeline can as efficiently as possible reach end-market destinations, whether that be refineries or additional marine terminals. We are in a number of discussions about adding additional connectivity at the southern end of our pipeline so we can continue to serve as many markets and end users as possible. Maurice Choy: Thank you. And just to finish off, Van, you mentioned that any potential upside from Marketing is expected to fall within your guidance range. How would you characterize the market conditions and the landscape that underpin this view? Is that a CSFOO-type of environment, or more of an extended year-end type of environment? Van Dafoe: Thanks, Maurice. For Marketing, if you remember, when we spun out we reduced the sandbox that Marketing plays in. This quarter, the $9 million in EBITDA took advantage of some market volatility, and the team was able to capture some value there. I would not expect that to progress throughout the rest of the year. We would rather have our customers take those volumes, and so our Marketing group is the shipper of last resort when no one else will take it. Operator: Thank you. The next question will come from an analyst with Goldman Sachs. Your line is open. Analyst: Hey, team. Good morning. Thank you for the time. I will try one on Prairie Connector—feel free to punt if needed given the disclaimer. I would be curious to hear your thoughts on what the overall structure could look like. Are you planning—or is this part of the process—to think through forming a total JV where you would own not just the portion of the line down to the border, but interests south of the border as well? There are moving pieces, but could you walk us through what the structure could look like over time? Bevin Mark Wirzba: We are still baking the cake on a few elements of that. As I mentioned in my remarks, we are not going to add much further today. We have our system that we were just talking about at length in terms of the Gulf Coast segment that we operate and own. We also have the permitted right-of-way and existing pipe that has been constructed in Alberta, and we are working with partners to determine the balance of the scope in the right way. We are looking to execute this with as little risk as possible, and that is key to structuring our arrangements with our partners. Analyst: That is fair. Second one for me: you got BlackRock online—good example of what you can do on that portion of the system. Understand it is still early days after the oil price spike, but what have conversations been around next potential projects up there? Has the pace of conversations picked up with where oil has gone? Bevin Mark Wirzba: That is a great question. While there has been a lot of focus on Prairie Connector, we have been focused on the balance of the increased egress potential out of the basin, which is great for our customers. Peers are moving west and east to satisfy or fill those expansions, including our own. There will be a need to expand intra-Alberta systems. Our team has been looking at our pre-invested corridor in the Grand Rapids, as you pointed out, where BlackRock is. That corridor is permitted, and we would look to see if there is opportunity to attract barrels into that system. I recently visited the site at the Heartland facility where it was prebuilt for receiving those barrels and then delivering them. We have a connection directly to TMX off that Grand Rapids route. We are looking at solutions intra-Alberta. It was great to see our customer IPC be so successful with their first phase and encouraged by their comments on their quarter that they are evaluating phase two as well. These are all constructive elements to leveraging our pre-invested corridors intra-Alberta. Operator: Thank you. The next question will come from Jeremy Tonet with J.P. Morgan. Your line is open. Jeremy Tonet: Hey, good morning. This is Eli on for Jeremy. I wanted to touch on the pressure restriction lifting process on Keystone. Can you remind us of the key milestones there, where you are at, and how we should expect that to progress through the rest of the year? Richard J. Prior: Thanks. We are making very good progress and are very pleased with the work to date on our remedial action program. Our view at this time is that later this year we are going to be able to start removing pressure restrictions in a phased manner, likely on a segment-by-segment basis. The process to remove all of the pressure restrictions on the pipeline will probably go into 2027 until we can lift them in their entirety. The process is segment by segment: running in-line inspection tools, analyzing the data, completing associated digs, verifying the integrity in each segment, completing the engineering analysis, and in certain cases working with the regulator to lift those pressure restrictions. Jeremy Tonet: Got it. That is helpful. For the outlook for interruptible volumes on Keystone, whether that is later this year or next year, can you remind us of the key differentials that make that economic for shippers, and how you see volumes above contracted resuming throughout this decade? Richard J. Prior: We were able to move in excess of our contracted volumes in the last quarter. We had very high operational performance and a more measured amount of maintenance work in the first quarter, so we were up at about 615 thousand barrels per day, which is beyond contracted capacity. A lot of that in the first quarter was makeup rights, though we did move a few spot batches. As this year continues and into next year, we see differentials continuing to widen as more crude production comes on in Alberta, and we would see demand increasing for uncommitted space on the pipeline. Once we get all of the pressure restrictions removed, I think we will be back up in that roughly 625 thousand-barrel-per-day throughput that we would be able to move. Operator: Thank you. The next question will come from Benjamin Pham with BMO. Your line is open. Benjamin Pham: Good morning. You touched on some of the regional pipe outlook, which seems quite positive. With all the export projects on egress being announced, including yourselves, do you get a sense there could be meaningful pent-up demand for a regional pipeline buildout, assuming one or more of these projects are sanctioned? Bevin Mark Wirzba: Thanks, Ben. As I have mentioned, we do see encouraging signs. If you look at the growth CAGR of the basin over the last ten years, it has been around 3%, and then this last year and this year, another growth of about 100 thousand to 150 thousand barrels per day per annum. By the end of this year, we see that egress will be tapped, and expansions are being contemplated to address the outlook. If you add up what we are hearing from customers, it may not be a 3% growth CAGR, but even a 2% growth CAGR is what we have been hearing. Over the next five to seven years, that looks like another 1 million barrels per day, and that is what is underpinning the expansion potential we are seeing. Those barrels have to move, and they are originating in the oil sands. There are a number of operators that have systems that can collect those barrels. We will try to put forward the most competitive solutions. We may have a bit more of an advantaged position on the west side as opposed to some peers who have great positions on the east, but we will still look to see how we can participate broadly in that growth. Benjamin Pham: That ties to your balance sheet. Thinking about any project you sanction today, timing of CapEx, and how that translates to years from now—you probably do not have a big need for CapEx if you announce a growth project. More specifically, as you think about the balance sheet in a couple of years, how much CapEx do you think you can take on before considering asset sales, equity, or partnerships? Bevin Mark Wirzba: I will start, and then pass it to Van. When we spun, our number one capital allocation priority was to reduce leverage. We had a target of getting down to 4 times within five years. We are a little bit ahead of that schedule based on the current base plan, and Van can provide details. We reserved around $150 million per year of free cash flow to invest in the business, and that will now grow to closer to $180 million with BlackRock coming on. Right now, we are not deploying significant capital, so we are building up cash on the balance sheet. Van Dafoe: Thanks, Ben. First and foremost, we keep an eye on our investment-grade rating and making sure that is maintained, with a view to get to BBB flat over time. We will take that into account when financing projects. Our original value proposition at that 2% to 3% growth, we view as being fundable through our distributable cash flow. We have additional free cash flow to do that. It is the bigger, chunkier opportunities where we would consider different financing besides our cash flow. Bevin Mark Wirzba: And when you think about the types of projects we are investing in, they are aligned with our risk preferences. When you are building long, contracted, take-or-pay style investments, the financing is more straightforward than something that has a lot of merchant or shorter-tenor risk on it. Benjamin Pham: Okay. That is great color. Thank you. Operator: Thank you. The next question will come from Sumantra Banerjee with UBS. Your line is open. Sumantra Banerjee: In the press release, you mentioned that you expect WCSB crude supply to still grow modestly throughout the rest of the year. Given the recent geopolitical events, what are the puts and takes you are looking at, and what could potentially change this view down the road? Bevin Mark Wirzba: It is a great question. We brought forward the Prairie Connector opportunity to customers to address what we saw as optimization-driven growth within the basin—additional technology our customers are using, extended well pairs, those types of things that did not need a significant amount of capital—as well as regulatory reform. If you look at the releases by our customers in the past week, they have pointed to ensuring that the policy and regulatory environment, particularly around emissions, is resolved in order for them to invest significant capital to grow the basin to meet the global desire for Canadian crude. The next gating item beyond what we could service with Prairie Connector would be more clarity in the regulatory and policy environment. Sumantra Banerjee: Got it. As a quick follow-up, you mentioned leverage ticking down through the rest of the year, especially with BlackRock cash flows ramping up. Are there any other puts and takes we should consider there? Van Dafoe: If you think about the normalized net debt-to-EBITDA ratio, there are two components. Year over year, our EBITDA would increase from 2025 to 2026. On top of that, we are paying down debt or accumulating cash on our balance sheet. We currently have limited growth capital in our guidance for this year, so that would put more cash on our balance sheet. It is that combination of increased EBITDA year over year and increased cash or decreased net debt. Sumantra Banerjee: Got it. That is helpful. I will hand it over. Operator: Thank you. There are no further questions in the queue at this time. I will now turn the call back over to Bevin for closing remarks. Bevin Mark Wirzba: Thank you, Michelle, and thank you to all the analysts who joined and asked questions. We really value your continued interest in South Bow Corporation, and we look forward to connecting with you again soon. Have a great day. Operator: This does conclude today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, and welcome everyone to Granite Ridge Resources, Inc fourth quarter and full year 2025 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 you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now turn the call over to James Masters, vice president, investor relations. James Masters: Thank you, operator, and good morning, everyone. We appreciate your interest in Granite Ridge Resources, Inc. We will begin our call with comments from Tyler Parkinson, our president and chief executive officer, who will review the quarter's results and company strategy, along with an overview of 2026 financial and operating guidance, and introduce our newly announced chief financial officer, Kyle Kettler. He will then turn the call over to Kyle to review our financial results in greater detail. Tyler will then return to provide closing comments before we open the call for questions. Today's conference call contains certain projections and other forward-looking statements within the meaning of federal securities laws. These statements are subject to risks and uncertainties that may cause actual results to differ from those expressed or implied. We ask that you review the cautionary statement in our earnings release. Granite Ridge Resources, Inc disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on these statements. These and other risks are described in yesterday's press release and our filings with the Securities and Exchange Commission. This call also includes references to certain non-GAAP financial measures. Information reconciling these measures to the most directly comparable GAAP measures is available in our earnings release on our website. Finally, this call is being recorded, and a replay will be available on our website following today's call. With that, I will turn the call over to Tyler. Tyler Parkinson: Thank you, James, and good morning, everyone. We are proud to report results for our third full year as a public company. While much has changed since the company went public in 2022, our commitment to pursuing the highest risk-adjusted rate-of-return projects and creating durable shareholder value remains the same. It is that commitment that drove our evolution from a traditional non-operated company pursuing a diversified investment strategy to a capital allocator focused on the Permian Basin, backing proven management teams to acquire and develop high-quality assets—a strategy shift that is the driving force behind our results. For the fourth quarter and full year 2025, average daily production increased 27% year over year to 35,100 barrels of oil equivalent per day. Total production for the year increased similarly to 32,000 barrels of oil equivalent per day. Adjusted EBITDAX for the quarter was approximately $70 million and $315 million for the full year. Capital expenditures for the fourth quarter were $127.5 million, split approximately half to development and half to inventory acquisitions. Our full year CapEx was $401 million. Finally, we maintained our quarterly dividend of $0.11 per share, which continues to demonstrate our commitment to return meaningful capital to shareholders. Since going public, we have significantly increased production while maintaining a conservative balance sheet. That capital-efficient growth is a result of consistently hitting our underwriting targets and increasing our capital allocation to operated projects, thanks to a structural opportunity we identified in the market. Over the past decade, private capital retreated from the natural resources sector in a major way, fundamentally changing the landscape for energy development. Private equity fundraising declined dramatically and the remaining capital focused on fewer teams chasing larger opportunities. This left a scarcity of capital and competition in the unit-by-unit operated market. At the same time, proven operating teams who had built and sold successful companies increasingly lacked access to aligned capital partners. Granite Ridge Resources, Inc recognized the opportunity and stepped into the gap by developing our operated partnership model. We first partnered with Admiral Permian Resources, a Midland-based operator with multiple successful exits and deep ties in the community. Central to our strategy was that the Delaware Basin—containing some of the highest quality shale resource in the world—is now controlled by a small number of large asset managers overseeing vast, overlapping land positions. These land positions come with a variety of complications like lease expirations, fragmented working interests, and inventory management issues that can turn into high-return drilling opportunities for the right partner. Granite Ridge Resources, Inc, through Admiral, has become that partner. Over the past three years, we have executed over 50 transactions in the Permian Basin and have grown net production to nearly 10,000 BOE per day. Granite Ridge Resources, Inc and Admiral have become preferred counterparties and inventory additions continue to outpace our two-rig development program. We have also signed up three additional operator partners, each pursuing a different strategy in the Permian. We have been deliberate about limiting public disclosure of these partners to preserve their competitive positioning. Each team has successfully built and exited private equity-backed companies in the Permian and has significant personal capital invested alongside us, creating meaningful alignment. We look forward to sharing their progress and demonstrating the scalability of the operator-partner partnership strategy. These partnerships greatly expanded our proprietary deal flow, which was already a competitive strength. Last year, we reviewed nearly 700 opportunities with a capture rate of just 15%. In 2025, we invested $122 million across 107 transactions, securing approximately 20,500 net acres and 331 gross or 77.2 net locations, almost exclusively split between two buckets: non-operated in the Utica Shale, and operated partnerships in the Permian. Because we focus on short-cycle opportunities underwritten at strip pricing, our entry costs remain notably low relative to large-format transaction comps. In the Permian, our average acquisition cost per net location was just $1.4 million, far below recent public market transactions. This is a through-cycle strategy. We target 25% full-cycle returns at strip pricing, compound production and cash flow growth, and protect downside through disciplined leverage. Since our first operator partnership investment with [inaudible], we have fundamentally transformed our business from passive non-op to controlled capital with scale, growing production and high-quality near-term inventory, the results of which are becoming clear in our financials and outlook. Granite Ridge Resources, Inc came public with cash on the balance sheet and no debt, but was subscale. In the years since, we deliberately used leverage to achieve sufficient scale to support our next evolution: sustainable free cash flow. We are getting close. We see 2026 as a year of transition. Production growth is moderating, and development capital expenditures are aligning more closely with expected cash flow. At current strip prices, we expect to achieve free cash flow from operations in 2027. The midpoints of guidance for production and capital for this year are as follows. We expect annual production to average 35,000 barrels of oil equivalent per day, representing a 9% increase over 2025, and we expect our exit in 2026 to be essentially flat or modestly up from exit in 2025. We forecast oil volumes to be approximately 51% of total production. Development capital expenditures are projected at $315 million, with an additional $20 million to $30 million for acquisitions that we currently have in the pipeline. Approximately 90% of the capital invested in 2026 will be focused on operated projects. To summarize, we will spend roughly 15% less than last year to achieve production growth of approximately 9%. At current strip pricing, we anticipate a modest outspend in 2026. One of our expressed goals for the business is to generate alpha through the expansion of cash flow above maintenance capital. We currently estimate maintenance capital of approximately $250 million, which provides room for disciplined growth above that level. We built our business for capital-efficient growth and free cash flow visibility at $60 oil. In response to the geopolitical shocks of the past week, we have added oil hedges and will continue to closely monitor the market. Recent events aside, we have been encouraged by the market resilience shown to date and remain bullish on the medium-term outlook. Should prices fall below $60 per barrel for a sustained period, we retain flexibility with our partners to adjust the development schedule and moderate capital deployment. Finally, let me expand on two recent announcements. Alongside Diamondback Energy, we partnered with Conduit Power to support the development of 200 megawatts of natural gas-fired power generation in ERCOT, scheduled to come online fully in 2027. This transaction will effectively provide a synthetic hedge to our Permian gas realizations and is expected to enhance value by approximately $1 to $2 per Mcf on our gas exposed to this contract. We think similar opportunities may exist to further improve our gas realizations, and we will be diligent in pursuing them. Second, we recently announced the appointment of Kyle Kettler as our chief financial officer after a six-month search. We went through a thoughtful, diligent process to find the right person who can help guide us through this next season of growth. Our business has matured, and the challenges and opportunities are much different than they were a few years ago. We were looking for an oil and gas professional with tremendous experience in capital markets, but also someone with creativity and a track record of creating value—somebody who could be a thought partner as we grow the business. We could not be happier that Kyle decided to join us. He brings significant capital markets expertise, an extensive network, and a keen strategic perspective that will be critical as we transition towards sustainable free cash flow in the next phase of Granite Ridge Resources, Inc’s development. I am thrilled to welcome him to the team in his first earnings conference call. Kyle? Kyle Kettler: Thank you, Tyler, and good morning, everyone. It is my pleasure to join my first Granite Ridge Resources, Inc earnings call, and I look forward to spending time with our analysts and investors in the months ahead. Granite Ridge Resources, Inc is building something truly different, allocating capital and creating value from a platform that is unique in public and private E&P. I am excited to be here. Tyler covered the strategic highlights and 2026 outlook, so I will focus on the fourth quarter and full year financial results and our capital position. For the fourth quarter, oil and natural gas sales totaled $105.5 million. Revenue was essentially flat compared to the prior-year quarter because of commodity pricing; however, production grew an impressive 27% year over year. Our average realized oil price was $55.49 per barrel, compared to $65.53 per barrel in the same period last year. Natural gas averaged $1.81 per Mcf in the quarter, or 48% of Henry Hub. These weak realizations, particularly in the Permian Basin, had a meaningful impact on revenue and, by extension, EBITDAX and operating cash flow. As a result, adjusted EBITDAX for the quarter was $69.5 million and operating cash flow totaled $64.5 million. For the full year, oil and natural gas sales totaled $450.3 million, with production increasing 28% year over year to 31,984 barrels of oil equivalent per day. Full year adjusted EBITDAX was $315 million and operating cash flow was $296.4 million. The takeaway is straightforward: our asset base is scaling, oil remains roughly half of the mix, and volume growth is industry leading. Pricing, especially in the Permian Basin, was a swing factor in fourth quarter revenue and cash flow. That dynamic reinforces the importance of initiatives like the Conduit Power transaction Tyler mentioned, which we expect will help improve Permian gas realizations over time. On the cost side, lease operating expense in the fourth quarter was $7.72 per BOE. That is higher than last year, driven primarily by our increasing focus on the Permian Basin. Service costs—primarily saltwater disposal—increased, a dynamic that is structural in the basin. For the full year, LOE averaged $7.27 per BOE. Our 2026 guidance for LOE is $6.75 to $7.75 per BOE. Production and ad valorem taxes ran just under 6% of revenue in the quarter, and G&A was $8 million, including $1.4 million of non-cash stock compensation. On a full-year basis, cash G&A was what we expected. Annual guidance for these metrics is the same as last year: production taxes of 6% to 7% of revenue and cash G&A of $25 million to $27 million. Turning to capital, this is where the strategic shift Tyler described really starts to show up in the numbers. We invested $127.5 million in the fourth quarter, roughly half into development and half into acquisitions. For the full year, total capital was $401 million, including $279 million of drilling and completion capital and $122 million of property acquisitions. That acquisition capital was not large-format M&A; it was nimble, repetitive, unit-by-unit inventory capture—high-graded and underwritten at strip. Our acquisition strategy gives us control over timing and capital intensity. We are not locking in multiyear development programs irrespective of commodity price. Operationally, we placed [inaudible] gross wells online during the quarter and [inaudible] gross wells for the year. That activity underpins the 28% annual production growth we delivered in 2025. Now onto the balance sheet. We exited the year with $350 million outstanding on the 2029 senior notes, and $50 million drawn on the revolver. Liquidity totaled $339.5 million at year end. Net debt to adjusted EBITDAX was 1.2 times, inside of our long-term range. Looking ahead to 2026, we are deliberately shifting gears. The plan is to grow production while reducing capital spending. 2026 production is expected to average 34,000 to 36,000 BOE per day, with oil just under half the mix. Development capital is projected at $300 million to $330 million, and total capital is $320 million to $360 million including acquisitions. The key point is this: growth is moderating, capital intensity is coming down, and development spending is aligning much more closely with expected cash flow. That transition from scale-building to cash-flow durability is the financial inflection point for the company. And through the transition, we are maintaining our $0.11 per share quarterly dividend. Stepping back, the last three years have been about scaling the platform and capturing inventory, while 2026 is about capital efficiency, balance sheet discipline, and positioning Granite Ridge Resources, Inc to generate sustainable free cash flow. With that, I will turn it back to you, Tyler. Tyler Parkinson: Thanks, Kyle. Let me close with a few high-level points. First, 2025 was a transformational year for Granite Ridge Resources, Inc. We scaled the operator partnership model, expanded our controlled inventory in the Permian, and grew production 28% year over year. We leaned into an opportunity set that is structurally advantaged and difficult to replicate. Second, we are now shifting from outsized growth to durability. Our 2026 plan reflects a moderation in growth, tighter alignment of development capital with cash flow, and a clear path towards sustainable free cash flow generation in 2027. Third, our competitive advantage is our structure and business development engine. By underwriting unit-by-unit at strip pricing, partnering with proven operators, and maintaining capital flexibility, we consistently hit our investing underwriting targets, which has resulted in significant growth in production and asset value. Finally, we remain committed to balanced shareholder returns. The dividend remains a core component of our framework. As we cross into free cash flow, we will have increasing optionality around capital allocation. We appreciate the continued support of our shareholders, partners, and employees, and look forward to the year ahead. Operator, we are ready to take questions. Operator: We will now open the call for questions. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Phillips Johnston with Capital One. Your line is open. Please proceed with your question. Phillips Johnston: Hey, thanks for the time. First, a question for Kyle. Your fourth quarter realized oil and gas prices as a percentage of NYMEX were a little bit lower than usual in the fourth quarter, especially on the gas side. I think in your comments you alluded to weak Waha prices as the driver on the gas side, so that makes sense and is not surprising. But is there anything to call out on the oil side? And as a follow-up, what should we be thinking about for our models in 2026 in terms of both oil and gas differentials? Kyle Kettler: Yes, thanks. Yes, the fourth quarter was weak on natural gas realizations, and that was driven by Waha pricing. We have a substantial portion of natural gas coming from the Permian Basin, and that Waha basis widened out during the quarter on us. Going forward, we have modeled that. You can see the strip; we are utilizing that as a way to predict what Waha prices will be over the next year. Those prices are pretty low early in the year, and they tighten up a little bit towards the back end of the year. In 2027 and going forward, the strip is much better, but still negative around a dollar or so. On the oil side, there is not anything in particular that sticks out. There is a bit of a negative difference between realized and benchmark prices, but we have that in our model going forward as well. Phillips Johnston: Could you maybe give us a sense of how many net wells are planned for 2026 relative to the 38 that you brought online last year? And would you expect any significant change in the mix for this year? I think last year’s mix was close to 85% in the Permian with most of the balance in Appalachia, Haynesville, and the DJ. I just wanted to get some color there. Kyle Kettler: You bet. Last year was 38 net wells turned online. Towards the end of the year, it got a little gassier with some Haynesville wells coming on. We see 2026 being about 29 net wells coming online, and the relative mix of gas and oil should tilt back towards oil as the year goes on with more Permian Basin activity. Tyler Parkinson: On the oil point, if you look at oil production growth from 2025 to 2026, we actually see 12% growth there—so a little more oil growth from 2025 to 2026 versus gas. Phillips Johnston: Yeah, and I guess that implies your oil mix kicks back up to 51% from 49% in Q4 here. Alright. Great. Thanks. Tyler Parkinson: That is right. Operator: Your next question comes from the line of Derek Whitfield with Texas Capital. Your line is open. Please proceed with your question. Derek Whitfield: Good morning, guys, and congrats on the acquisition success you had in 2025. I wanted to start on slide 14. As you think about the business’s transition to sustainable free cash flow in 2027, are you outlining that this morning as a business objective in 2027 based on your desire to lower leverage, or is this based on your current view of the opportunities ahead of you? I am not trying to pin you guys down as we live in a dynamic environment—just trying to understand the driver and how firm the message is. Tyler Parkinson: It is not an opportunity-set driver; it is a leverage driver. We have been very consistent about wanting to run the business at roughly one to one and a quarter times leverage to execute the base business plan. We have said that we would go north of that for something more strategic, but to operate the base business plan, think of that as around one and a quarter times. We have planned this year and next year in more than a $60 oil environment. That is the lens we are looking through when we are thinking about 2027 and free cash flow. Obviously, with higher prices there is going to be some additional capacity that we could take in 2026 and 2027 to continue to prosecute additional capture or additional development drilling and still be able to deliver some free cash flow. Derek Whitfield: Great. And as my follow-up, I wanted to focus on your operated partnerships. We certainly appreciate what you are highlighting with Admiral in today’s presentation, but could you offer some color on general activity and inventory levels across your other operated partnerships? Tyler Parkinson: I would love to fill in some blanks there. We have spoken publicly about our first two. Admiral had the benefit of getting a head start on our other three partners, so they are the most mature and steady state of the four partners. The Admiral story is pretty clear in the public domain: they are focused on Delaware Basin unit-by-unit inventory capture from some of the larger asset managers in the basin. That story has been successful. We are running a couple of rigs there, and we are adding inventory faster than the development base, so we hope to replicate the same evolution with the other three partners. Partner two is actually PetroLegacy—we have mentioned that before—former EnCap-backed. That team is focused on the northern Midland Basin, Dean play. They have captured a position there, and we will probably get started on some selective development of that position this year. That market has gotten extremely competitive, as everyone knows, so I am not sure how much additional running room we will have there. The PetroLegacy team is also looking at some other opportunities in the basin and potentially out of the basin. We hope to have some drilling results from them this year. Our third team, which we have not disclosed, is another successful team that exited private equity. They are focused on some of the emerging plays in the Permian Basin—think Woodford, Barnett. Those transactions will probably look a little more blocky from an acreage perspective—larger chunks of acreage that come with some appraisal to figure out exactly what we have. If that is successful, that will add a lot of medium-term inventory for us and start to fill in some of the development drilling in 2028 and beyond. Team four is our newest team. They are also a Midland-based team with a successful exit from private equity. They look a lot like the Admiral team, except they are mainly focused on Midland Basin opportunities. I think they will be sourcing opportunity from the larger asset managers on a unit-by-unit basis. We are about six months into that one, so it is very new, but they have already started to capture inventory. Typically, it takes us maybe 12 to 18 months to get enough inventory to have about 18 months to two years of inventory in front of the team in order to justify picking up a rig. I probably would not expect a whole lot of development activity from that team this year, but as we move into 2027, I think we will see them start to fill in some development. Operator: Your next question comes from the line of Jerry Giroux with Stephens. Your line is open. Please proceed with your question. Jerry Giroux: Hey. Good morning, guys. Thanks for taking my question. My first question is in regard to the move to generating free cash flow in 2027 versus continuing at the same growth rate you have been doing the last couple of years. How did you decide to generate free cash flow versus growing? And the second part is—though I know it is early—if this free cash flow will be returned to shareholders, and if so, in what form are you thinking? Or will this just be cash that goes on the balance sheet for maybe a good opportunity? Tyler Parkinson: It is probably TBD on the second part, obviously. We have a lot of options there, so when we get there, we will see what the best option is at that time. On the first part, we want to transition the business into something that is more durable and long term. We think we have done a good job of gaining scale over the past handful of years, maturing the business and the strategy. We still see a ton of opportunity in front of us from an inventory capture standpoint, but being able to show some free cash flow and keep our leverage around our target—still very conservative at one and a quarter times—will give us a lot of opportunity to pursue additional inventory capture if we wanted to accelerate some. Kyle Kettler: I would just add that the growth rate has been pretty significant over the last couple of years, and it will still be high single digits going into next year. So there will still be pretty good growth. A lot of the capital spending is through operated partnerships, based on a development plan we have coordinated with them. That puts us in this modeling position where we think we can see into 2026 and 2027 and turn into free cash flow in the 2027 time period. Jerry Giroux: Thanks for the color. And then one more question—just about slide nine. Could you give a little more color on that slide? You talked about Granite Ridge Resources, Inc retaining 92% of the 10-year projected cash flows, and then also the Hamburglar well or pads that achieved the hurdle reversion. Can you give more details on this case study? Kyle Kettler: You bet. What we did here was give you an example of what the economics are between us and our operated partners. We had some questions from investors over time on this. The real thrust of it is to show that while we do have some reversions in the reserve database, they are effectively not very punitive at all. They are relatively very small on a multiple-of-capital basis, and that is really what we are trying to achieve with this slide. Operator: Your next question comes from the line of Noah Hungness with Bank of America. Your line is open. Please proceed with your question. Noah Hungness: Morning. For my first question, I was hoping you could touch on the opportunity set and the competitiveness you are seeing to add inventory. In 2025, you were able to add locations well below what we saw from going market price. How do you see those dynamics today? Tyler Parkinson: Good question. That opportunity still exists for us. Our operator teams are still executing on transactions that look exactly like that. We have roughly $25 million of acquisition CapEx scheduled right now—that is basically what we have captured or have line of sight to now. If we wanted to continue to add inventory and increase that budget, that opportunity is still available to us. As I said in the remarks, that has been a very good opportunity for us over the past couple of years, and we see the operator partnership inventory capture having a number of years in front of us. As far as the rest of deal flow, we have still seen very strong deal flow. I think we had a record last year on deal flow that we screened, and that is continuing. The distributed wellbore market is still very strong. We do not participate in that market very much—returns there are not something that we would underwrite to—but it is a very strong market. The larger marketed packages are still out there, with lots of divestiture targets from a lot of the consolidation. We do not really participate in that market either. Lastly, on some of the smaller marketed processes for non-op, we are seeing probably the least amount of deal flow and trending down a bit; that has been a little weak, but again, that is not an area that we typically source opportunity from. Finally, in the Appalachia Utica Shale Basin, we are still seeing a ton of opportunity. That is a traditional non-op play for us. We have been very successful over the past year and a half leasing there. We actually added probably another couple thousand net acres in the Utica play in Q4 and are continuing to see lots of opportunity there. Noah Hungness: That is helpful color. For my second question, Tyler, could you talk about how we should think about the oil cadence through 2026? And what does exit-to-exit production growth look like for oil? Tyler Parkinson: Sure. Exit-to-exit oil production growth is 12%—that is Q4 2025 to Q4 2026. Oil growth over the year will be down a little bit in the first half—low single-digit decline in Q1 and Q2—and then increasing in the second half. But from Q4 to Q4, we expect 12% growth. Operator: There are no further questions at this time. That concludes the conference call for today. We thank you for your participation and ask that you please disconnect your line. Have a great day.
Michael Judd: [Presentation] Hi, everyone. Welcome to Opendoor's Q1 2026 Financial Open House Earnings Live Stream. I'm Michael Judd, Opendoor's Head of Investor Relations. A few quick housekeeping guidance before we get started. Like all things Opendoor, we're going to do this faster. Details of our results and additional management commentary are available in our earnings release, which can be found at investor.opendoor.com. The following discussion contains forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking, including, but not limited to, statements regarding Opendoor's financial condition, anticipated financial performance, business strategy and plans, market opportunity and expansion and management objectives for future operations. These statements are neither promises nor guarantees, and undue reliance should not be placed on them. Such forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Additional information that could cause actual results to differ from forward-looking statements can be found in the Risk Factors section of Opendoor's most recent annual report on Form 10-K for the year ended December 31, 2025, as updated by our quarterly report on Form 10-Q for the quarter ended March 31, 2026, and other filings with the SEC. Any forward-looking statements made on this webcast, including responses to your questions, are based on management's reasonable current expectations and assumptions as of today, and Opendoor assumes no obligation to update or revise them, whether as a result of new information, future events or otherwise, except as required by law. The following discussion contains references to certain non-GAAP financial measures. The company believes these non-GAAP financial measures are useful to investors as supplemental operational measurements to evaluate the company's financial performance. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP metric, please see our website at investor.opendoor.com. And with that, let's get into the open house with Kaz and Christy. Kasra Nejatian: Good afternoon, everyone. I opened the Q4 financial open house by showing you a clip from the Q3 financial open house. I did this because I think among the most important things you can do to build trust is to just do what you said you would do. Don't promise and moon and deliver dust. Just do what you said you would do. Our last open house might as well have been called the look at the October cohort open house. With that in mind, let's once again take you back to our last financial open house. That the October cohort is going so well is not a plan, it's a proof point. The product launches I'm going to talk to you about aren't promises of things that might work. They're the explanation for why October happened and why it's repeatable. Now look, because we're committed to transparency, let me get ahead of a couple of things. October was not our largest cohort by volume. But it was about double the size of what we were doing just a few months ago. We're not getting lucky on a few homes in a friendly market. And given how the past few weeks have gone, I believe we're on track to significantly increase our acquisition size as we said we would do. What October shows is that the structural changes we made under Opendoor 2.0 are working. And then we're compounding those learnings into every single cohort going. During that call, I told you that Opendoor 20 cohorts would perform fundamentally differently than Opendoor 1.0. And back then, some folks said, October was a fluke or that we'd fall apart when the markets got harder or the sample set got larger. And one of my favorite investors said, look, 1 month does not make a trend. That was fair. Fair enough. So here are the facts. We now have a few more months of data, and we should compare the first full 4 months of Opendoor 2.0 against the last couple of years of Opendoor 1.0. Don't pay attention to me. Look at the chart. These are the cohort arrival curves. They show what happens when a group of homes margins on the y-axis as that group of homes sells on the X-axis. Every one of those purple lines is an old Opendoor cohort. They all do the same thing. They bleed margin as we sell through. Now look at the blue curves. Margin doesn't drop the way it used to. This is a step function change in how this company operates. 4 consecutive months tell us something October alone could not. This isn't an accident. This isn't small sample luck. Mortgage rates are still far too high and the listings are at all-time highs. But in a housing market that was supposed to break us, our cohorts are delivering. October wasn't a fluke. It was just the first month we could see it. We've now sold through over 80% of the October cohort and our trends have continued. Margins for our core cash products have come down only 90 basis points from where they were at 10% sold to over 80% sold. Last year, that same journey cost us over 260 basis points. So we've seen about a 3x improvement. And then November, December, January, they all showed the same pattern 4 months in a row. In fact, Q4 of '25 and January '26 cohorts have the best combination, the best combination of margin, margin stability and resale velocity of any cohort in Opendoor history, obviously, excluding the COVID era. Our cohort curves or the slope of our margins as homes sell-through are basically flat. And we're doing this at great speed. Every single cohort from October through January is selling faster than any corresponding cohort since COVID. And we're meaningfully scaling growth. In Q1, we entered into contract in over 5,000 homes. That's 2x bigger than Q4 and 3x bigger than Q3. In fact, when it comes to contracts, this was our single best quarter since 2022. Cohorts are performing better, resale velocity is improving, and we're scaling growth. But how can we do this? Well, let's talk about it for a second. Two quarters ago, I laid out the blueprint and told you exactly what we were going to do. Underneath this all, there was one simple goal, make Opendoor faster. Last quarter, we graded ourselves and we're green across the board, and I promise we will do this every single quarter. So let's do that. Step one, profitability, breakeven by the end of 2026. We're on track. We'll be ANI positive on a forward 12-month basis by the end of the year. And as of April 1, Opendoor is adjusted EBITDA profitable on a forward 12-month basis. Step two, unit economics that make the model work, positive contribution margin while increasing velocity. We're on track. Our contribution margin has increased every single month since we bottomed out in September and October, November, December and January cohorts. They're all selling faster than any corresponding cohort since COVID. We're improving margins, speeding up clearance, and we're doing all of it in a worst market. Acquisitions are growing. In Q1, we entered into contracts in over 5,000 homes, 2x what we did in Q4, 3x Q3. And our Q1 DTC acquisition contracts are up more than 4x compared to Q3 '25. This was our single best contract quarter since 2022. Step 4, we're making really good progress on our capital-light products for sellers and transacting directly with buyers. Opendoor Checkout has now helped us sell homes in a bunch of states and more than 1/3 of our acquisition contracts in Q1 were cash now more later. This time last year, that number was exactly 0. That's our scoreboard. We're green across the board. This quarter, the scaffolding came down and what's underneath is a company that finally knows exactly what it is and how it wins. For a long time, the core assumption of Opendoor was that we had to be better at predicting the future than the rest of the world. We operated like a front desk. We looked at the macro and made directional bets based on where we thought the prices were going to be in 3, 6, 9 months. And then we pushed billions of dollars on to the table. The issue was never the people and not the model. The problem was a wrong problem to solve. Even if our models had been perfect, they were still pointed in the wrong direction. Everything flowed from a single question, where are home prices going? That one guess drove everything. It set the spread, which set what we bought and determine whether or not we made money. And when we got the answer wrong, we blamed the market every single time. Macro became our excuse for everything. Look, when predicting the future is your North Star, a reflex in the down market is always the thing, widen spreads, slow down, pull back, wait for the market to recover. Every defensive move said the thing that was actually killing us. We were playing prevent defense when we were down by touch down. So of course, we were losing. We widened the spread to protect ourselves, but in doing so, we changed their funnel. We changed the thing that was making the company work. We got worse homes. Worse homes meant worse margins. Worse margins went back into the model. The system got more conservative and spreads widened even more. We didn't just have risk that we could not calculate. We actually built a machine that amplify it. Every move made everything worse. That was our fatal flaw. In a business where time is risk, the old model got us to slow way down. And once that reflex exists, every department in the company, product, operations, finance, everyone starts running the same defensive operating system. The default everywhere was slow down just to protect ourselves. Look, I'm a nerd's nerd. I think models are really cool, but they're incredibly worthless when you had the wrong strategy. So what we did wasn't just improve the pricing model. We changed the question that it was meant to answer. A year ago, the most important input into every decision was our home price appreciation forecast. Today, it's how fast we can sell the home we're looking to buy. Market makers do not win by being right about direction. They win by controlling their exposure to being wrong. They win by being right about time. When a prop that gets scared, it pulls right back. That's how the spiral starts. When a market maker sees risk, it does the exact opposite. It speeds up and prices to clear. The faster you move, the less any single home can hurt you. And velocity is how we know our pricing is right. A home that fits doesn't give us any signal. It just increases risk. Opendoor 1.0 was a Kobayashi Maru. It wasn't a game we should have played. Without fundamentally changing it, we will just totally kill the company. You don't beat that game by getting better at simulation. You beat it by changing the program. So we're now running on a velocity OS. The difference is totally structural. We have rebuilt our engine around a totally fast team of high-frequency thinkers. Our signal intelligence officers, hedge fund quants and they're all maniacally focused on data loops. They have a mandate, ship a change every single week, optimized for both margin and velocity. And as our models get better and they're getting better every single week, the whole machine moves faster. The whole company runs faster. We now run on a weekly cadence across the company. Products ship every single week. We don't need to be perfect in order for this business to work. We just need to be faster with hundreds of acquisitions a week, we see pricing signals, renovation costs and clearance patterns faster than anyone else in this market. Every home keeps to something. And every single day, we shave hold times, our capital turns go up and our returns go up. Speed. Speed pays for everything. In a bad market or a great one, the variable thing that actually matters is time. So when you ask what has made the change? What makes this whole thing work? It's one word. Faster. I wear a T-shirt at every financial open house that says one thing, Faster. You can see it. I'm wearing one right now. Most of you think it's just a personality quote, right? A founder nerd thing, a costume of a wartime CEO. It's really not. Look, we used to be in a business that lived or died and whether we got the future right. Now we're in a business that lives or die and whether we move fast. Faster isn't just our competitive advantage. It's an absolute moral imperative. Let me just say this again, so you don't think I'm being subtle about it. Faster is not just our competitive advantage. It's our whole reason for being here. It's our moral imperative. Every day, someone is stuck and cannot move is a day in their life that they cannot move on. They're on hold. If we're in the business of helping people move, then days matter. It's a job offer they haven't accepted, a planned retirement put on hold and finally not started. The traditional home sale process is more than just inconvenient. It holds these people back. 40 million homeowners in this country want to move in the next 12 months, but only 1 in 5 think they can actually do it, not because moving is too expensive, but because everything about it is just too uncertain. There's a simple test for any system. Would you design it this way if your family had to live in it? The legacy real estate system fails to test. It's our job to fix this. Every product decision Opendoor goes through does goes to one single filter. We only care about one thing. Are we returning time to people. Last week, across all sellers, Opendoor gave back over 100 years of time, over 100 years of time, over 500 families said yes to an Opendoor offer and reach certainty about 90 days sooner than they would have in a traditional process. You do the math. In just 1 week, we got rid of a century of human waiting, time that got returned to families who got to move on. Faster is a moral imperative. It is a good in and of itself, and that is what this company is for. Every product launch ultimately serves one question. How do we move faster for sellers, for buyers, for Opendoor for everyone? So let me run through some product launches. This quarter, we expanded cash down more later coverage. Every week, hundreds of families who would have heard, sorry, we can't help you are now getting the real offers. We totally rebuilt the foundations of our buyer apps. We acquired Doma's Escrow division. Noah, our AI underwriter, prices normal homes in Phoenix now. We rebuilt every message a buyer gets from us, 6 different systems became just one conversation. We rebuilt our offer page, giving customers the type of information they would have gotten from an expert who was at their kitchen table. We also built a portable assessment scheduling. You can now get your home assessment done on your own terms. More than half of our assessments are now seller-led, 6,000 in March alone. We migrated our component library to an AI-native front end. While we were in there, we killed our legacy cake service, a transition that had failed 3 times in 4 years, finished in 6 weeks. The platform is what makes everything else faster. Talk to any Opendoor engineer, and they'll tell you this is a really big deal. We built an AI audit tool that automatically reconciles inspection scopes with actual repair decisions, giving our field teams real actionable feedback to improve operating compliance and cost discipline. At title intake, it used to take us up to 5 hours. It now takes 15 minutes. We launched Opendoor Mortgage in Colorado. One of our marketing managers replaced our $0.5 million life cycle legacy e-mail system with one Claude skill. A field manager in our Southeast division runs 5 states on Claude. Afinance team turned 20 hours of SOX deliverables into 1-minute query. None of these people, by the way, were engineers. We also tripled our Cash Now, More Later product. Our voice bots dropped seller contract time from 30 minutes to 5. We replaced 72 manual exports a month with 1 pipeline. We built a new listing operated consoles in 8 days, we merged 8 different HR systems into one and end process. We built dozens of point solutions. Now that's not the full list. It's just what I had time for before they play to walk me off stage music. As you can tell, we've changed a lot, but I also want to tell you what we haven't figured out. Look, I'm a Leafs spin. I know what it feels like to we promise lots of things and get absolutely none of them. I know what it feels like to watch the same group of people over and over again, give you false hope and give you nothing. I thought about this more than I probably should, but I've decided that the promise is not the same thing as a proof. You do not get credit for what should have happened. You only get credit what actually did. I know what it feels like to have momentum in March and tears in May, which is why this t-shirt says faster and not done. Faster is a setting. It's not a destination. We don't get to celebrate signals. Every quarter is just another shift for us. We're not done. We're not even close. Mortgage is live, and the early data is honestly going a lot better than I thought it would go. We're getting really good attach rates and our customers love it. But look, it's early. We don't fully know how the product is going to work across different market conditions in different home price tiers. We have a thesis. It's working really well, but we haven't proven it at scale. Cash Now, More Later, it's growing really fast. It's over 1/3 of our growing pie. And that's just really remarkable for a product that didn't exist a year ago. And that was totally reworked just 3 months ago. We're iterating how it works. We're fine-tuning it, trying to get the balance right between what the seller gets and what Opendoor keeps. But let me be honest with you. Every product that Opendoor ships has to earn its place in our portfolio. Cash Now, More Later is earning it, but we're not done changing it. And like we said earlier, the housing market, look, it just remains what it is. We believe the model we have built on faster works across macro cycles. We're no longer dependent on the macro. We control our own destiny. October, November, December, January cohorts, they were all bought during the most aggressive expansion in our history in a market that I don't think anyone would describe as favorable, and this is the best evidence we have. But that's just what it is. It's evidence. It's not proof. Proof will take more time, more reps, more shifts, more aggression, more products shipped faster. And we've said this before, and you'll always hear us saying this. We're not asking you to take our word for it. We're asking you to watch and to hold us accountable. Christy is going to walk you through the numbers in a minute. But before she does, I want to close with this. I've been asked a lot what Opendoor is. We changed our LinkedIn profile from real estate to software, but software is too generic. Look, Opendoor is on a mission. Our job is to get people who are stuck moving. We're a machine that helps America move. When I joined Opendoor, I did it because the home ownership matters. It is the thing. It is the single thing that leads to better families, better neighborhoods. When people buy a home they love, they're buying a share in this country. We don't buy homes at Opendoor to hold them. We buy them. We buy them so we can get them into a next family faster, with less friction at a better price. And every family we help move is a family that is clear down roots. It's a neighborhood, we're getting better. It's children that get to grow up in a home that their parents love. Faster is what this company was built to do. This T-shirt, that's just a reminder. The Opendoor machine is now running and every day it runs, every single day it runs, friction disappears and people move. We do not need a better market. We just need a better machine. Last week, we gave back over 100 years. That's 100 years of human pain just gone. That's not corporate dragon. That's just families moving and building better lives. Please track it. Please hold us accountable. Christy? Christy Schwartz: Thank you, Kaz. I'm not wearing a T-shirt, but I promise I'll match the pace. Three things to know about Q1 before we get into the details. One, we reduced aged inventory from 51% to 10% in 2 quarters. The book is the freshest it's been in nearly 4 years. Two, margins bottomed out in September and have improved every month for 6 months straight. Q1 closed at 4.4%, up 3.4 points quarter-over-quarter, and we expect the upward trend to continue into next quarter. Three, acquisitions are up 45% from Q4, and Q1 was our strongest quarter for signed contracts since Q2 2022. And the headline behind those 3, starting in Q2 2026, we expect to be adjusted EBITDA profitable on a 12-month go-forward basis. The machine is working. Let's get into it. As a reminder, we are executing against 3 management objectives on our path to profitability. The table in our earnings release shows our progress on each. Let me walk through the highlights. First, scale acquisitions. We purchased 2,474 homes in Q1, up 45% from Q4. This is the second consecutive quarter of meaningful growth. And signed acquisition contracts, our leading indicator, tell an even stronger story. March was our highest single month for signed contracts since June 2022, and Q1 was our highest quarter since Q2 2022. An acquisition contract will typically close about a month later. Q1's 2,474 purchases are mostly from late Q4, early Q1 contracts. Late Q1 contracts will close primarily in Q2. Also, we want to be clear, we don't close on every home we go into contract on. Under Opendoor 2.0, we're deliberate about which contracts we take all the way to purchase. So the funnel narrows between contract and close. So more contracts mean more opportunities to be selective and the trajectory matters. In a short period of time, we've gone from our lowest contract volume since COVID to our highest since 2022. This is the tempo required to achieve the goals we set for ourselves, and we're building the volume and the discipline at the same time. You can continue to track our weekly progress on accountable.opendoor.com. Volume only counts if the quality holds, and our second management objective is the scorecard for whether we're delivering the right kind of growth. The second, improve unit economics and resale velocity. This is where the work really shows up, and there are 3 data points I want to highlight. One, resale contribution margin has improved every month since September 2025, closing Q1 at 4.4%, up 3.4 percentage points quarter-over-quarter. Two, our Q4 2025 and January 2026 cash acquisition cohorts have the best combination of margin, margin stability and resale velocity of any corresponding cohort in company history, excluding the COVID era. And three, the percentage of homes on the market for more than 120 days fell to 10%, down from 33% at year-end and 51% at the end of Q3, a 41 percentage point improvement in just 2 quarters. Let me stay at this point for a moment. Two quarters ago, more than half of our homes had been sitting on the market for over 120 days. At the end of Q1, that number was 10%. That is the lowest it's been since Q2 2022. To put it in perspective, the broader market was at 23% 2 quarters ago and rose to 33% at the end of Q1. We are now carrying a book that is materially fresher and healthier than the market. Inventory health is both a leading indicator of forward margin and evidence that our approach is working. A faster-moving book means lower holding costs, less market exposure, better resale outcomes and more efficient use of capital, and that's exactly what's showing up in our margins. This didn't happen because the market got friendlier. It happened because of tailored underwriting, disciplined close to listing workflows and resale systems designed to move homes quickly while protecting unit economics. Third, build operating leverage. Fixed operating expenses were $33 million in Q1, down $2 million quarter-over-quarter and down $6 million year-over-year. Our trailing 12-month operations expense as a percentage of trailing 12-month revenue held steady quarter-over-quarter at 1.3%. We are holding the fixed cost base flat while simultaneously investing in the AI and infrastructure that powers our product, and it's worth pausing here for a minute. We're going all in on AI, and we're doing it responsibly. There's a lot of noise right now about companies blowing their 2026 budgets on AI before the second quarter. That's not us. We're focused on results, not token leaderboards. We have an internal Slack channel called Default to AI, where teams celebrate measurable impact. Some highlights in addition to what Kaz shared earlier: an AI-powered repair negotiation tool cut our buyer fall-through rate by over double digits; field managers are using AI scoping feedback, helping to reduce pre-list renovation spend by up to 10% to 20% per home in pilot markets; and a ticket triage automation, redeployed 3 full-time employees from classification to resolution. What's notable is that most of these tools were built by operators, not engineers using the AI infrastructure we've invested in. We're cutting waste and reallocating into capabilities that move the business. Our flat fixed operating expense is the output of that discipline, not the absence of investment. 3 objectives, 3 quarters of consistent progress. The plan is working. Turning to the balance sheet. We ended the quarter with $999 million in unrestricted cash, our highest cash balance in years. That's a product of 2 things: the strength of our parent level capital position following the work we did last fall and the health of our inventory book. We held 3,420 homes in inventory at quarter end, representing $1.1 billion in net inventory. Our nonrecourse asset-backed borrowing capacity remains robust at $7.1 billion with $1.5 billion committed. Between liquidity, facility capacity and the quality of what we're financing under those facilities, we have meaningful flexibility to execute against our plans. Now let me give you the guidepost for Q2. Acquisitions. You can continue to track our acquisition contracts on accountable.opendoor.com. We've updated our contract road map for the remainder of the year. The ranges reflect our current outlook, inclusive of typical seasonality, and we'll continue to update them each quarter as we learn more. Revenue. Our Q1 increase in home acquisitions will start to flow through to resales, leading to expected revenue growth of approximately 25% quarter-over-quarter. Contribution margin. Our contribution margin bottomed out in September and has been improving every single month since then. We expect the contribution margin for Q2 2026 to fall in the middle of our 5% to 7% goal we shared in the first Opendoor 2.0 financial open house. Adjusted EBITDA. We expect Q2 adjusted EBITDA to be breakeven, plus or minus a few million dollars, and we see Q2 as an inflection point. We expect to be adjusted EBITDA profitable on a 12-month go-forward basis starting in Q2. In closing, last quarter, I said you can't build a great business in a spreadsheet. You build it by shipping product, operating with discipline and learning from the market. Q1 is what that looks like when the machine starts to work. Acquisitions, margin, resale velocity, inventory health and cost all moved the right way at the same time. That's not a lucky coincidence. That's a system that's working. Two quarters ago, we laid out our plan. Every quarter since we graded ourselves against it and delivered. We have a lot left to prove. We intend to keep doing exactly that. With that, Michael, I'll turn it over to you for questions. Michael Judd: Great. Thanks, Christy. Our first question comes to us via video submission from Mike Alfred. Mike Alfred: It's Mike Alfred, Founder and Managing Partner of Alpine Fox LP as well as Board Director in IREN and Bakkt. Great job on the execution side. I really like the way the business is integrating AI into everything you're doing. My question is about the longer-term implications of AI. Do you believe when you look at the strategic direction of the company that we are well prepared for all the things that AI is likely to change about the way the real estate market operates in the coming years? Kasra Nejatian: That's a great question. Look, I think the answer to this is like in a bunch of layers. And I can't think about the layers, so let me just go through them. Layer 1 is like the earnings call answer. AI is important. We're leaning right in. We're spreading across the entire business. If you kind of hear that from every corporate CEO. I mean it's true, but it tells you like nothing actually useful. Layer 2 is actually important. That's like the software leverage story. Like the original SaaS era, the insight was that you could take a CRUD database, wrap business logic around and some workflow around it. And then you'd find that people could do a lot more, right? Software would get cheaper, people could do a lot more because you could encode the rules and the processes and decision-making into software. And the leverage was just insane. AI extends that by quite a bit because you're now encoding judgment on top of rules and the leverage becomes really high. Like that's real and it's important. And we're capturing a lot of this. But that's just the story of software broadly. It doesn't say anything specific about Opendoor. We just happen to be honestly just really good at this. Layer 3 is actually fundamentally more interesting. It's like the automation versus the collaboration split. AI as collaboration software is very misunderstood. Let me talk about that for a second. Look, our goal isn't to use AI to cut 15% of our expenses by doing the same things we're doing just cheaper, right? Like that's the automation applied to cost. And the goal isn't like a black box replaces a human process end-to-end. That's just not what we doing. Like what we want to do, given everything AI can do is to rebuild our processes from scratch, from a blank piece of paper so that we can use AI to have a fundamentally different process. Layer 4 is actually our complexity as a structural advantage. This one is important to understand, and this is why we're not afraid of AI is the way like some software incumbents are. Real estate is atoms and risk and not just bits, it's also some bits. The underlying transaction involves a level of complexity and condition and local dynamics and human emotion and all of it like makes the system very complex, and that's actually our advantage, right? AI doesn't eliminate this complexity. It just makes navigating it a lot easier. So what we don't need to do here is just stick to some hypothetical end state. We just need to be meaningfully better than the alternative and the legacy process at every step. Like this is a Red Queen's Race dynamic, and it works in our favor here. Look, we've been running in this very complex environment for years, and we have a craft ton of operational knowledge, and that is deeply, deeply useful. The last -- I promise this is the last layer. I like 5-layer cakes. The fifth layer is about what AI does to the other side of the transaction. So there are 2 parts to this, right? What the customer feels and sees and what it does to the category. On the customer side, look, the traditional real estate process is defined by information asymmetry, right? That's just not an accident. That's the foundation of the whole process, but experts who know the market make profit from transaction friction because the parties themselves can't navigate it. AI totally dissolves this asymmetry, right? What that means is the customers are being like upgraded. We can build AI concierge that feel to the customer like the expert is sitting at the kitchen table, right? That's an incredibly important thing, and it's what we're doing. On the category side, this is the actual metabit, right? Every major Internet transition, every industry has had winners that didn't just jam the Sears catalog into a browser, they actually helped with the transaction, travel, retail, fintech, that's been true across of Internet. It just hasn't happened in real estate and real estate is like honestly, the last major holdout, not because the category is fundamentally immune from this, but because the underlying complexity made it a little too messy to transact at scale. AI just totally removes this constraint. I think I should actually start the answer by saying yes. But yes, we believe we're well positioned. It's honestly on the inside, it feels as though our business was built waiting for this mana to fall from heaven, and it now has. Michael Judd: Great. We got a few questions submitted via Say Technology that all kind of clustered around profitability. So I wanted to pull out 2. The first comes from Heejun C., who's asking, you said in the last earnings call that turning profitable by the end of the year was achievable. Now the first quarter has passed and interest rates remain high. Is that still a realistic goal? Also, Arun Jacob V. asks, how confident are you today in the Q2 positive EBITDA and year-end profitability forecast? And what are the key swing factors from here, which might influence it? Christy Schwartz: So great questions. Thank you. We reconfirmed our goal and expectations earlier on the call, and I'll say it again here. We expect Opendoor to be breakeven or profitable, adjusted net income profitable, by the end of this year on a 12-month go-forward basis. And Arun, to answer your question, we also shared in the call earlier that we're going to reach an important milestone on that path to profitability in that starting in Q2 2026, we expect to be adjusted EBITDA profitable on a 12-month go-forward basis. Our management objectives that we report every single quarter are the 3 legs to the stool that help ensure we're on the right path, and we're building momentum. Acquisition closes are up. Acquisition contracts, the leading indicator to closes, are also up. In fact, Q1 2026 had over 5,000 contracts. That's the highest quarter of contracts since Q2 2022. Retail contribution margin has improved every single month since September, and we guided Q2 to the middle of our 5% to 7% targeted CM range. Long-held inventory went from 51% to 10% in 2 quarters. And we did all of this while holding fixed OpEx down. The last time acquisition contracts exceeded 5,000 in a quarter, our fixed OpEx was double where it is right now, yes, double. And that's the AI investments and operator empowerment that we talk about every single quarter, that's what's happening here in fixed OpEx. We have made meaningful changes to what is required to run Opendoor 2.0, and we are beginning to demonstrate that those changes are durable as the volumes return. We're clear on our profitability goals, and we will continue to check back in every quarter with updates. Kasra Nejatian: Can I add something here? I think Warren Buffett famously said you find out who's swimming without shorts when the tide goes out. I have 4 kids, and they actually sometimes go swimming and I have to worry about them wearing shorts. So I feel for Warren. But right now, like the tide is out in housing, right? In the real estate market, the tide is out. And most CEOs will tell you that they wished conditions were friendlier. I'm telling you the opposite. When I took this job, I knew the tide was out. That was the entire point. I didn't take this job because I was hoping macro would turn and would bail us out. Like I wasn't looking for a company of sunshine patriots. I think Kelly Clarkson famously retweeted Nietzsche and said, what doesn't kill you actually makes you stronger. We chose -- I chose hard mode. We choose hard mode because that's what's going to make us stronger. Look, we do not need permission from the Fed to put on our shorts to go swimming. Everything we've accomplished so far, everything has been done in the face of an unforgiving macro. And I think we've told you how it looks like when we're winning. And some of you are watching this. But I think I should tell you what it would look like if we were losing, if we could not do the things Christy said we will do. This is the thing most company CEOs don't do because they're afraid they're going to end up losing and they want to be able to hide it, but I want you to hold us accountable. Here's how you would know. Cohort curves start looking like they did with the purple lines. They would start high, would have massive losses as we went through. Contracts would plateau at the low end of our range or below the low end of our range for a whole bunch of weeks and homes greater than 120 days in the market would go back to what we had in Q4. If those 3 things happen, if all those 3 things happen, then we're not doing what we said we would do, right? It's all about slope, acquisition, inventory health. That's the business. Those 3 things. Look, I don't think any of those 3 things are going to happen. I don't think all 3 of them are going to happen together because we believe we've built a model that works better. Faster is the key. We can't ignore the macro. We're not stupid, but it will never be our excuse. Good excuses don't make great companies, right? We control our own destiny. We don't need the market to recover. We don't need rates to fall. We don't need perfect conditions. We just need to keep moving more families faster and faster through a machine that's already working. So as I've said before, look, we're not asking you to take our word for it. We're just asking you to watch those 3 things that Christy talked about. Michael Judd: Great. The next question, Andrew L. asks, as you accelerate acquisition velocity, how are you ensuring that underwriting quality remains high and that you won't need to raise equity to fund this expansion? Christy Schwartz: Thank you for the question, Andrew. It's important to know that we're not accelerating acquisitions by driving like blunt spread compression. It is driven by a combination of tailored underwriting that allows us to give really compelling offers to high-quality homes, product expansion through our Cash Now, More Later product, geographic expansion and just conversion improvements realized from such things as making improvements to the offer page. While we've removed the requirement for an in-person visit from pre-contract to post contract, we still perform an in-person inspection before we purchase the home. This sequencing change helped remove friction from the contracting process, and it saved the cost of an in-person inspection for higher intent sellers. without compromising our understanding of the home we're about to acquire. But what I just described isn't proof that our underwriting quality remains intact and high. The proof is in the cohorts themselves. Our October, November, December and now January cohorts are each coming in with higher contribution margin, improved margin stability, increased resale velocity compared to their prior year cohorts. On the capital question, our cash position actually grew as we acquired more inventory, which reflects the underlying health of our inventory book. Younger homes with shorter days on market are structurally easier to finance, and we have sufficient warehouse capacity to more than keep up with our acquisition pace and plans. We also have warrant structures that provide additional capital optionality. To the extent any future capital decision is made, we expect to be opportunistic rather than necessary, and we will continue to evaluate the capital stack with an eye toward minimizing dilution. Kasra Nejatian: I say a couple of things here. Like first, there's a persistent myth that to move fast, you have to be sloppy. I just fundamentally reject this. Look, there was a rumor when I joined Opendoor that Opendoor was the best buyer of homes with foundation issues. Like whether or not that was true, it's definitely not true anymore. Today, we use AI to remove this toil we had accrued. We no longer have 11 people touching every single home so that one person that does touch it can actually do their job well, right? That's actually all I want to say about underwriting because I don't want to give away all of our secrets. But on the equity piece, let me add to what Christy said. I said it in my very first earnings calls, but I want to repeat it. I despite dilution. If we issue a share, it has only one job to make every other share worth more for our existing shareholders. We will never issue shares to extend the runway. That's not what we're going to do. The goal is for Opendoor to never be in a position where it has to raise money to survive. In the history of this company, it has raised way too much money. We're going to stop doing that. The discipline we need going forward is that we're going to fund this business from the cash flow we generate. I'm not interested in like building a company that needs a life graph every time. I'm interested in building a ship that actually floats, right? What Christy talked about isn't the best case scenario. It's the only way we were going to run this company. Michael Judd: Great. Our next question comes from Heejun C., who asks, I'm interested in your 4.99% mortgage promotion currently exclusive to Colorado. Are there plans to expand this offer to other regions or states soon? If so, please provide an estimated time line or a list of upcoming locations. Kasra Nejatian: Well, look, first of all, it wasn't a promotion. I want to be clear about that. That was the actual rate. We don't run rate connect here. We charge what the math allows us to charge, right? Look, mortgage is early right now. We're live in Colorado and loans are doing well without any optimization, right? Attach rates are above even my most optimistic expectations. And I'm not going to give you a launch calendar for every market, but we're in flight on licensing in about just over 20 states right now, and we expect to kind of roughly double that by the end of Q3, and we're rolling this out as fast as we can. But we've gotten some early feedback that I think is helpful. One of the customers told us that our rates blew the other lenders out of the water. And I want to talk about our math and why our rates below other lenders out of water, right? The math is simple. Big bank lenders take about 340 basis points in revenue per loan. Most of that is just a toil tax on the borrower, right? It pays for branch offices, loan officers, manual underwriting, paper shuffling, terrible ads and like expensive lunches. We've built an AI-native mortgage platform from day 1. No legacy system, no commission-driven sales force, right, as few humans as possible to get the job done. So we're not just discounting our way to a lower rate. We're actually building our way towards this. That structural advantage means that the regular mortgage on our homes will always be the lowest rate the customers can get, right? Today, our rates are running about 100 basis points below the market average. And that translates to about 10% to 15% lower mortgage rates per month. And that's the gap, right? Our job is to just chip away at this to make sure that we actually make housing affordable in this country. Michael Judd: Great. James M. on Say asks, tokenization of real estate? Kasra Nejatian: What's the question? That's the whole thing? Michael Judd: That's the question. Kasra Nejatian: Okay. Well, I think this is a question that gets asked frequently, and I have a rule of not announcing product launches before they're ready. I think the worst thing tech companies do is they make software for PowerPoint presentations, and that's just stocks, that's what makes people hate software companies. Opendoor exists to tilt the world in favor of homeowners, right? Simpler, faster, fairer, and you do that by reducing the friction tax. Like the embedded friction tax in the system today on a given transaction is a double-digit percentage of the home's value. And tokenization is an incredibly important way of reducing this. Here's like how I think about it. And it's important to be mindful of this. The patterns that we treat today as the natural order of things are usually just the last hack that someone installed on our machines, right? This is when Judd starts rolling his eyes. But it matters, so I'm going to talk about my favorite topic, history of money. Look, we went from barter to coinage to build an exchange to checks to ACH to SWIFT, right? And it really does feel like we're living in the future. But the entire system of money that we rely on runs on banks running COBOL software. This is a programming language from 1959. So the infrastructure powering our banking system that moves trillions of dollars is older than the moon landing. And we feel like we're in a stable place, but the people who were bartering also felt like they were in a stable place, right? These are not permanent solutions. None of them are permanent because of the following. They all require intermediaries between people to get anything done, right? That cannot be the end state. Onchain settlement is the first time in the history of money where you don't need permission from other people to move value between 2 parties. This isn't an incremental improvement. It's like an inevitable category end, right? And within our lifetime, we're going to see what it does and everything we do today will seem antiquated. And title is the same story. It's just about 100 years behind, right? Like animals mark their territory physically and humans mostly have done the same thing for most of history, right? The real innovation here was in Medieval England. We formalized this with a clot of dirt and some witnesses, and now we have some paperwork. All that has happened between then and now is that some of these are searchable on the Internet. That's the entire innovation that these paper records that live in courthouses are now searchable. Look, the fact that there is a lobbying group, defending the current way of doing things is the most reliable evidence that we'll do for the next thing. It's like the petition of the candle makers against the sun. When I look at the housing transaction, I find it really hard to imagine that title to the most expensive asset in our lifetime does not live on chain. It's hard to imagine that we have 3 transactions doing the same thing, Title, insurance, mortgage, and they all have data trapped in silos. These will all move on chain. Now look, I'm not announcing any of this today, but we are doing work that's on the green path to end. Our acquisition of Doma's escrow business is one example, right? We're taking the closing infrastructure of America, building checkout for real estate. And this is not tokenization, but it's clearly the step in the right direction. And in that world, title and mortgage and insurance, all of it can move on chain, and this all gets better. Operator: Thanks, Kaz. I can't wait for the TED Talk. Our next question comes to us from Dae Lee from JPMorgan. Kaz, you've now been leading Opendoor for over half a year and have had time to implement meaningful changes across the product and operations. As you reflect on the moves you've made, which specific change do you believe is having the most measurable impact on seller conversion rates and acquisition volumes today? And what does the data tell you about that's compounding across your markets? Looking ahead, where do you see the biggest opportunity to structurally drive more homes purchased per market without proportionately scaling OpEx? Kasra Nejatian: Dae, I want you to know that I noticed that was 2 questions. Let me answer them one at a time. On what's actually moving the numbers? Look, I don't think any single thing we shipped is moving anything by itself, but the real structure change in our system is, right? Like think about the classic sell me this pen story. The old Opendoor was the guy who would say, this pen is amazing. It's so smooth. It's lovely. The guy who would aggressively show up and give you one choice. Like that was the old cash offer world. We'd show at your door, give you one choice, say, yes or no. That's not how people transact, right? The new Opendoor starts by asking the customer what they want. What do they actually need? What are they worried about? How much cash they want upfront? What do they want later, what time line they want? Cash Now, More Later isn't a single offer. It actually allows the customer to change Opendoor's business logic so that it works for them, right? The new offer page also does the same thing. It is the digital equivalent of sitting down with someone and explain to them the realities of their neighborhood, their home instead of just flashing a headline number, right? We want the customer to have the full picture and make the right choice that is best for them, and we want to be helpful in that process. And most people think that in order to do that, you need a human at a kitchen table. I think that's just wrong. Most people just want the information themselves so they can decide for themselves what's best for themselves. That's the shift. That's driving the conversion improvement. We also used to believe we would need boots on the ground everywhere we had homes. I actually insisted on launching every state in the Lower 48 because I want to test this hypothesis. It turned out that if you have a good underwriting model, a good product and a good partner network, you can buy homes anywhere, like we closed a home in South Dakota this week, and we have 0 employees in South Dakota. So that actually helps a lot. And to your second question on OpEx, I mean, I think we've already answered a lot of this. But the same machine does both of these things, right? More offer types mean more sellers, more sellers per market means we can have more transactions without adding headcount city by city. But the big price, obviously, is the tens of millions of people who want to move who can't, right? Between supply and demand, there is friction, right? If you reduce friction, you move both supply and demand lines. I actually saw this every day at Shopify. We made entrepreneurship easier. Therefore, we created more entrepreneurs. The same dynamic is true in housing, right? As we make things easier in buying a house, selling a house, mortgage, title and eventually insurance, all of this will increase the demand and increase the supply. And none of this requires like significant incremental headcount. Now, look, now this works if the underlying engine isn't good, but I think we've shown you that we're no longer peanut buttering spread across cohorts. And we've shown you we have now 4 cohorts of data and Q1 was our largest contract quarter in years. The last time we had this many homes in contract, our fixed OpEx was twice as high. So I think that answers your second question. Michael Judd: Great. Andrew from Citizens is curious to help us understand a little bit more about seasonality kind of through the balance of the year. Christy Schwartz: I'm happy to provide some color on seasonality, and I'm sure Kaz will be happy to add something as well. Each quarter, we provide a series of macro charts, and those charts show a consistent pattern in every macro, strong macro, neutral macro, challenged macro, one thing remains the same, and it's the seasonal pattern. They present themselves year after year. Macro changes the level of the curve and seasonality is the shape of the curve. The selling season kicks off shortly after the Super Bowl, peaks in early summer, then tapers through fall and bottoms out in December. This affects our resale velocity, which is considered in our spreads and therefore, impacts our acquisition cadence. Days on market lengthens in the back half, margins compress in Q4. Our acquisition cadence runs inversely to market resale activity. We acquire less in late spring when we'll be selling into weaker demand, and we build inventory throughout the fall in anticipation of the spring selling season. You'll now see seasonality more reflected in our estimates on accountable.opendoor.com. We've updated our projected acquisition range with the shape easing through spring and summer and building through the fall. Kasra Nejatian: I will add something. Look, seasonality is just like gravity. It's like a rule of nature. You don't blame gravity and if you try to fight it, you tend to lose. We know how to fly planes. We don't do it by fighting gravity. We just build math to fly them, right? And while we can't flatten the curve entirely, we can collapse the impact over time, and that's what we're working on. Opendoor is like a retail like Walmart, like Home Depot, like Amazon, like Shopify, these retailers have known seasonality, but obviously, Q4 is a better quarter for them because of Christmas. And Q1 numbers are always lower than Q4. But no one would argue that Walmart's strategy has failed because January sales were lower than December sales. That would just be insane. The shape is just like the shape. The same general seasonal shape that shows up in housing in 2021 when the market was on fire, in 2022 when the rates spiked and in 2025, when delistings like hit record highs, that's the shape, the different macro environments, but the same calendar like since Pope Gregory invented it, I guess. Opendoor knows more about the shape of the curve than almost anyone else in the world, and we shape our underwriting engine around it, right? We underwrite homes based on when we plan to sell them. That's what our underwriting engine does. And I think it is working better and better every day. Look, I want to end this answer with what I said earlier. We committed to being ANI profitable on a go-forward 12-month basis at the end of this year. Hard macro or not, we will do that. Our floor model assumes this hard macro will continue. If there's an interest rate cut or the macro improves, our floor will be higher. So I think we're running out of time. So let me just close with this okay. Look, we're not asking you to believe in vibe here. We're asking you to watch the scoreboard, the cohort slope, acquisition contracts, inventory health. That's it. Those are the tells, right? If we keep moving the way we moved this quarter, then the machine is doing exactly what we said it would do. The market didn't bail us out here. Rates didn't save us. The team just did the work. They rebuilt the company's operating system. They shipped products. They cleaned up the book. They grew contracts, and they did it way more efficiently than anyone thought we could do it. That doesn't just give me optimism. It gives me confidence. we will have a lot left to prove, and we always will. When we reach profitability, the next part is how much? It just won't stop, right? We're going to keep shipping. We're going to keep showing you the data, and we're going to keep moving faster because families matter. Okay. That's it. Thank you. Thank you, and see you all next quarter.
Operator: Thank you for standing by, and welcome to Howard Hughes Holdings Inc. First Quarter 2026 Earnings Conference Call. Currently, 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. To remove yourself from the queue, you may press star 11 again. I would now like to hand the call over to Joe Vilain, general counsel. Please go ahead. Joe Vilain: Morning, and welcome to the Howard Hughes Holdings Inc. First Quarter 2026 Earnings Call. With me today are William Albert Ackman, Executive Chairman; Ryan Michael Israel, Chief Investment Officer; David R. O’Reilly, chief executive officer; Carlos A. Olea, chief financial officer; Jill Chapman, who leads investor relations at Pershing Square; and Mark Grandison, who joined the Howard Hughes Holdings Inc. board just yesterday. Before we begin, I would like to direct you to our website, howardhughes.com, where you can download both our first quarter earnings press release and our supplemental package. The earnings release and supplemental package include reconciliations of non-GAAP financial measures. Howard Hughes Holdings Inc. believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions; we can give no assurance that these expectations will be achieved. See the forward-looking statement disclaimer in our first quarter earnings press release and the risk factors in our SEC filings for factors that could cause material differences between forward-looking statements and actual results. We are not under any duty to update forward-looking statements unless required by law. I will now turn the call over to our Executive Chairman, William Albert Ackman. Thank you, Joe. William Albert Ackman: Those of you on the call probably have seen a presentation we put out providing some perspectives on how we think about Howard Hughes Holdings Inc. from a valuation perspective. The company is going through a transition in terms of its business model, and I think there has been a pretty meaningful transition, or at least the beginning of the transition, in our shareholder base. We thought this was a good time for us to share how we think about the company and to provide some, I would say, better metrics to think about valuation going forward. So our plan for the call is we are going to start with David R. O’Reilly giving a comprehensive brief update on the quarter. I will talk a bit about KPIs. Ryan will speak briefly about valuation, introduce Mark to the group, and then we will leave the substantial majority of the time for Q&A. So why do we not start with David? Go ahead, David. David R. O’Reilly: Thank you, Bill. Good morning, everyone. I am going to start with the first half of the presentation, and as you probably saw, it is organized into two parts. The first part really focuses on the first quarter results of Howard Hughes Holdings Inc. Communities’ real estate business. Using the slides from the supplemental, I am going to be covering the four key performance areas of our communities: master planned communities, operating assets, condominiums, and then other expenses along with our debt and liquidity position. As you saw, we are introducing several new KPIs this quarter, and we believe these better reflect how we manage the business and how long-term value accrues within each segment. I will reference those as I cover the results. Then we will turn to the second half of the presentation, where, as Bill mentioned, he and Ryan will do a deeper dive in what those new metrics reveal about our current valuation and the long-term growth of this platform. The goal is always to give investors a more complete picture of where Howard Hughes Holdings Inc. is headed, and why we believe the stock represents a compelling opportunity. I am also sure you noticed that our earnings release no longer includes annual guidance. Given the pending acquisition of Vantage, we have elected to remove annual guidance expectations and will instead shift our focus to longer-term objectives by platform, consistent with how we allocate capital and measure success internally. With that said, the first quarter results I am about to review, and specifically our land sales and MPC EBT, were ahead of our expectations. And if not for the transaction, we would have increased MPC EBT guidance for the year. With that, let us talk about the first quarter performance, starting on slide four with the company highlights. It was a strong start to 2026. The real estate engine did exactly what we needed it to do: it grew cash, it provided pricing power, and it converted more land into long-duration income. We saw strong MPC earnings growth, continued leasing momentum across the operating assets, and the company ended the quarter with substantial liquidity. On slide five, as part of this new supplemental, we are providing a simpler road map to show how performance of our communities connects to the overall valuation of this platform. We will be focusing on the following four key areas that we will step through in turn: Master Planned Community EBT and margin-affected residual land value; operating asset adjusted maintenance free cash flow; condo gross profit; and other expenses, which includes G&A and net interest expense. So let us start on slide six with the MPCs. Earnings before taxes was $84 million in the first quarter, up 33% year-over-year driven by higher residential land sales. In Bridgeland, we closed 62 acres at an average price of $60.188 million per acre. That compares to 37 acres and $605,000 per acre last year, with net new home sales in Bridgeland up 12%. In Summerlin, custom lots averaged $7.2 million per acre, and super pads averaged $1.8 million per acre. New home sales in Summerlin were up 6%. The point is not just that volumes were higher. The point is that we are converting scarce entitled, developer-ready land into cash at an increasingly attractive price in markets where we effectively control supply. We are not selling land. We are harvesting scarcity. As our communities mature, price becomes a primary driver of MPC value, which means we can generate more cash from fewer acres while protecting the long-term economics of the land bank. Shifting to operating assets on slide seven. Our operating asset NOI grew 2% year-over-year and 7% on a trailing twelve-month same-store basis. Within the portfolio, multifamily and office were the primary drivers of same-store growth, supported by continuing leasing activity and the burn-off of rent abatements. More important than the quarterly print is what this segment represents for the holding company we are building. Operating assets are the steady cash flow engine. As we move land into vertical development and lease-up, we convert one-time MPC proceeds into a growing, recurring base of NOI diversified by asset type, tenant, and market. This quarter, we are also introducing adjusted maintenance free cash flow because we believe this metric gives a cleaner read on the recurring property-level cash flow that is actually available to redeploy. Turning to condos on slide eight. At Ward Village, we completed ‘Ōlana and broke ground on Lē‘ahi, which is already 70% presold. Across the platform, we have approximately $5 billion of estimated future GAAP revenue at sell-up. Condo gross profit was roughly breakeven in the first quarter as expected and will increase meaningfully in the second quarter with Park Ward Village closings. Condo profit is always going to be recognized in large blocks when towers deliver, so the quarterly pattern is going to remain lumpy even though the underlying economics are largely locked in through presales. These projects are largely de-risked well in advance of GAAP recognition. We typically presell the majority of the units, fund construction with buyer deposits and nonrecourse construction loans, and lock in our margins years before delivery. Estimated future condo gross profit—the total projected gross profit from condo towers under construction or in active predevelopment, the vast majority of which are already presold—highlights the embedded condo cash flow well ahead of when it appears on the income statement. I want to spend a minute because I think the capital mechanics here are worth walking through. They make the economics of condo development unusually compelling. Our primary contribution to these projects is land, along with a modest amount of cash. We contribute that land, and that modest cash is our equity. From there, buyer deposits are collected at signing, often years before towers deliver, and they fund a meaningful portion of construction cost. Nonrecourse construction financing covers the majority of the remaining required capital. The result is that we are delivering towers worth hundreds of millions of dollars with very little of our own cash actually at risk. When units close, buyers pay the full purchase price, we repay the construction loan, and the profit flows to us. It is a model where our buyers and lenders are essentially financing the construction and we collect the upside at the end. That is what we mean when we say condos are a self-financing capital recycling tool. And it is why this business generates returns that are difficult to replicate. Beyond condos, projects like 1 River Row, 1 Bridgeland Green, and others in our pipeline follow that same land-to-income pattern: convert entitled land into durable NOI, grow the recurring cash engine, and raise the long-term earnings power of the platform. On slide nine, we will turn to other expenses. G&A expense was $25.8 million in the quarter, including $3.8 million of Pershing fees and $3.4 million of Vantage-related transaction costs. Net interest expense declined year-over-year due primarily to the amount of interest income we received from our invested cash balances during the quarter and on a trailing twelve-month basis. On slide 10, I will turn to the balance sheet and wrap up. We completed a $1 billion refinancing at the tightest credit spreads in the company’s history during the first quarter. Importantly, this execution occurred after announcing the Vantage acquisition, which we view as a strong external validation of both our balance sheet and our strategy. The transaction extended our maturities and added $230 million of incremental liquidity. We also closed on a $300 million mortgage at Downtown Summerlin. At the end of the quarter, we finished with $1.8 billion of cash, comprised of $[inaudible] at the HHH level, and $929 million at the HHC level, and significant additional liquidity. That position, combined with the Pershing preferred commitment, fully funds the Vantage acquisition and supports our current development pipeline, while continuing to preserve our flexibility for future capital allocation decisions. So the overall takeaway for the quarter: the real estate foundation of Howard Hughes Holdings Inc. is doing its job. It is generating strong cash flow, demonstrating pricing power in our MPCs, expanding our base of recurring NOI, and recycling capital in a way that supports our evolution into a multi-engine holding company. The first quarter performance primarily reflects the resilient demand in our communities that lead to bottom-line results. MPC earnings will continue to be lumpy quarter to quarter depending on when large parcels close. But what matters for us, and what I encourage you to focus on, is the multiyear growth in recurring cash flow and the value embedded in the land and condo pipeline, rather than the precise results of any given quarter. The new metrics Bill and Ryan are going to walk through in a minute are designed with exactly that in mind: to make it easier to connect reported results to intrinsic value. And with that, I will turn it over to Bill. William Albert Ackman: Thank you, David. So what we are doing here—maybe just to back up for a second. I think historically, the company had tried to create a quarterly number that shareholders could annualize and maybe put a multiple on. The vast majority of companies are valued that way. Analysts estimate earnings, the market assigns a multiple based on the inherent growth and predictability of that earnings stream, and that helps people come to a value. The problem with that metric is it does not really work for Howard Hughes Holdings Inc. We really have three different segments. Perhaps one of them, the operating asset segment, you could certainly value at a multiple of a metric. But the other two are a bit unusual. Our MPC business is really a business of owning land, and the goal of these communities is to make them really attractive places to live. And we have developed assets to meet that demand in our operating asset segment. Over time, what that has done is bring more residents into the communities, increase demand for land. That has led to continuous—well in excess of inflation—increases in the value for our land portfolio. But putting a multiple on the GAAP profit from a portion of the land sales for a quarter is not a particularly helpful metric. What really matters is: how much cash do we generate from our land sales during the quarter, and what is the value of our remaining land? And so our new metric is going to focus on those two levels. What is interesting about these communities is every acre of land, we know for a certainty we are going to sell. We do not know precisely which quarter we are going to sell it in. And so what matters to you is: how much cash do we generate during the quarter; what price did we achieve; and what is the value of the remaining land that we own? So that will play into the metrics we are talking about. With respect to operating assets, adjusted maintenance free cash flow—what are we doing here? We are starting with NOI and we are getting to an actual “free money we can spend” metric after all the costs associated with owning these assets. Our condominium business—so we do not have an infinite supply of land in Honolulu. We have a finite supply of land. We have an amazing team, and that team is actually a valuable asset of the company that we are not today assigning value to. We do think over time we will have more opportunities to access more land and continue that business. But today, for the purpose of keeping these metrics simple to understand and also conservative, what we are saying is: we have a finite amount of land today, and on the basis of that finite amount of land, we intend to build a certain number of condominiums. We estimate a gross profit. That is how we get—and we present value that today to keep track of the remaining value of that portfolio. So if we go to page 13 on the new metrics, we are going to give you the residual value of our remaining acreage, undiscounted and uninflated. What we mean to say is if we sell acres for $1.8 million in Summerlin, we are going to use that to value the remaining residential land portfolio at the end of the quarter. Now that, I believe, is a conservative metric because land values have compounded at rates well in excess of the cost of capital that you should discount them at at Howard Hughes Holdings Inc. And let me just make my case for that for a second. We have compounded land values at the teens in Summerlin. Correct? Correct. Okay. So let us pick a number. It has been what over the last five years? 15%? Five years, it has been just under 15% in Summerlin, and it has been, okay, 6% to 8% in Woodlands Hills—in Bridgeland. Okay. So in Summerlin, which is a further built-out community, you have got land that has appreciated at 15% per annum. Again, because it is a certainty we will sell this land—because these are fully developed communities—the discount rate I would use there would be a relatively modest spread over Treasury. So using today’s value for the land is one that I think is a very conservative measure of remaining land. If the land continues to appreciate at these kinds of levels and you discount them back at lower levels, the land values are even greater than what we are showing. For operating assets, adjusted maintenance free cash flow: we are starting with NOI and getting to the free cash after all the costs associated with maintaining assets and leasing. Then we project the profits from our remaining condominium deliveries. It is pretty straightforward to do this because, for example, for the units that we have under contract, we know exactly what price we are selling for. We generally have GMP contracts; we lock in, for the most part, the cost to build them; and then it is a present value calculation. With that, we are not going to take you through every page of the deck because we want to leave a lot of time for answering questions. Ryan is just going to focus on some summary valuation pages. We will start with today’s value and how we get to thinking what is possible over the next five years. Ryan Michael Israel: Sure. Thank you. So what we wanted to do, as Bill mentioned, in the pages that we provided that we will not walk through all the detail on this call, is show you how, using the metrics that we believe are the right way to think about long-term value—what we use in our own internal evaluation as well as tracking our progress over time. I will just highlight on page 27 the takeaway. We believe today, using those metrics, and as Bill mentioned, conservatively trying to come up with a value for Howard Hughes Holdings Inc., we think that the intrinsic value of the business based on those metrics is about $104 a share, which is more than 60% higher than the roughly $65 share price today. And when you look at that in detail, nearly 80% of that is coming from the Howard Hughes Holdings Inc. Communities real estate business, and about 20% of that is coming from the economic ownership percentage that Howard Hughes Holdings Inc. will have in Vantage, which we are on track to close very shortly. So we believe that the shares are very undervalued relative to our estimate today. If you go to page 42, what you will see is really our benchmark for how we believe we can grow the intrinsic value of Howard Hughes Holdings Inc. over the next five years. And we actually think that we have the ability—and it is one of the reasons we are so excited to have Mark join us, as he will be very helpful as we achieve these metrics—to grow the intrinsic value of the business to roughly more than $200 a share. We have about $211 that we have derived conservatively for our valuation in 2030, which is about 3.3 times the current share price of $65, or a 233% increase. And what is interesting about that metric is today, nearly 80% of the value of Howard Hughes Holdings Inc. is coming from the real estate business. But we actually think over the next five years we are going to have much more of the value coming from Vantage, other insurance, and some of the high durable growth companies we seek to acquire. So that ratio will shift to about two-thirds coming from things that are not related to real estate. And the way that we get there at a very high level is that we will be looking at the Howard Hughes Holdings Inc. Communities real estate business, and we will be using a lot of the excess cash we do not think is needed for reinvestment into the communities that could be allocated to higher returns in other parts of the business, particularly insurance. We have about $2.5 billion to $3 billion of cash that we are expecting we will be able to generate over the next five years, which can be somewhere in the order of 65% to 80% of the current market cap of the company, and we believe the insurance business—particularly having Mark’s help—will be a very valuable place to put that. With Vantage, which we are very excited about given the business and given the team that is there, we believe we can improve the returns on equity from something in the low to mid-teens to something that could be in the high teens or even better. If we can do that, we can allocate a significant portion of that $2.5 billion to $3 billion of free cash flow over the next five years to build up the capital base. And as the returns on equity at Vantage improve, the multiple that the market—and we—would assign to Vantage for being a higher return on equity business should also increase. As a reminder, we are buying this business at a headline purchase price of 1.5 times book value, but we believe by the time we close, given the accretion of the book value, it will be about 1.4. We think we can increase the intrinsic value of this business to something that is worth north of two times over the next five years. And so that is going to be a significant reason why the value at Vantage will be growing so quickly over the next five years and will really help become the driving force of the increase in intrinsic value of Howard Hughes Holdings Inc.’s equity over time and make Vantage really the leading asset that we will have in insurance—a key focus of that business. William Albert Ackman: Thank you, Ryan. I thought to introduce Mark Grandison, and he will be available, obviously, to answer questions. We actually began a conversation with Mark well more than a couple years ago in connection with an investment that Arch made in the Pershing Square management companies. We got to know Mark a bit there. Then we learned of his departure when we read about it in the press when Mark stepped down from being CEO of Arch Capital Group. In light of our plans for Howard Hughes Holdings Inc., a year ago we started a conversation with Mark. He was still otherwise encumbered at the time, and he was trying to decide what he wanted to do with his life and thinking about all kinds of different things. We kept the conversation going. We took a very significant step in signing an agreement to acquire Vantage, and we kept talking to Mark. Our thoughts here are, well, Ryan and I—other members of the Pershing Square team—have analyzed insurance companies from the perspective of an investor. Neither one of us has any operating experience in the insurance industry, and it is an industry where you can make a lot of money and it is an industry where you can lose a lot of money if you do not know what you are doing. While we are buying a company with a very capable team, I think it is as important that at a board level, we have one or more directors who really understand the industry. Mark was by far our number one choice—there really was not a close second—in terms of, without embarrassing him, really the iconic executive of the last, I would say, couple decades. Almost twenty-five years at Arch building one of the most profitable, most successful insurance platforms. We thought that experience was incredibly relevant. We were delighted to bring Mark to Howard Hughes Holdings Inc. So maybe, Mark, could you just give a little background because not everyone knows who you are, and then we will open it up for questions for the group? Mark Grandison: Well, thanks, Bill, for all the wonderful comments. I feel very honored and privileged to be part of the group. I am very happy that we got to this landing, and I am looking forward to help the whole team really develop your vision—your collective vision—of having a diversified platform with insurance being an anchor. I think, like you, I firmly believe if you do it well, it can really lead to wonderful results. I also like the fact that you are collectively wanting to wait for it. There is a timing issue going along, and it is not a quick hit, and it is really if we deliberately build it the right way, this will be a formidable business. I have been thirty-five years in the business. I was most recently ACGL CEO. I was one of the founding members back in 2001 after the terrible events of 9/11, with a very similar vision that you would hear me talk about all the time, which is about underwriting excellence, focusing on the cycle, focusing on allocating capital to the right places where it gives good returns, and really surrounding yourself with a good team—good talented individuals—focusing on underwriting expertise. The difference between a top quartile performer in insurance and the bottom quartile is 20% to 30%—meaning the ones at the bottom are actually losing and actually going by the wayside, and we have seen many of them. Bill just alluded to that. I am excited to join because I like the vision. I am here to help the board to understand the business, to demystify some of the things. I know it is not as easy to understand from the outside world. It can be opaque. A lot of the investors and shareholders of Howard Hughes Holdings Inc. have built, perhaps, no expertise or exposure to insurance, and we are going to make sure—or try to make sure collectively—that we are bringing you along into that journey altogether. What else am I going to bring to the table? Looking forward to working with everyone here, obviously, and also with Greg and his team. I have known Greg for twenty-five years. We were neighbors in Bermuda, and he is a great executive. The platform they built at the right time, right after the market turn in 2019—beautiful timing. Hard E&S legacy. It was highlighted in the package before, and it is really hard to create that kind of platform, and they did a very, very good job. It is both insurance and reinsurance, so it allows the company to really participate across the board in as many opportunities as possible—and again, being selective on the underwriting. I am very much looking forward to help demystify, help teach the board and the investors, and it is going to be a long-term play for everyone here. I have seen it before, and I think the playbook is there. It has worked. I have seen it work. I think we have all the elements to make it one of the best emerging and surging insurance platforms, alongside the real estate platform and whatever else Bill and Ryan will find along the way, to create something very unique and once in a lifetime. I am very excited to be here. Thanks for having me here, Bill. William Albert Ackman: Thank you, Mark. We will now open the call for questions. Operator: Star 11 on your telephone. To remove yourself from the queue, you may press 11 again. Our first question comes from the line of Anthony Paolone of JPMorgan. Your line is open, Anthony. Anthony Paolone: Great. Thanks. Good morning. First question, maybe for Bill. I am not that close to all the different things happening at Pershing Square and the specifics around that. Can you talk to whether anything on the capital-raising side there has any direct implications back to Howard Hughes Holdings Inc.—whether mechanically you have to buy shares or whether there is a greater commitment—or just anything we should think about related to Howard Hughes Holdings Inc. from the activities at Pershing Square? William Albert Ackman: Sure. Last week, we did two listing transactions: an IPO of an entity called Pershing Square USA, which is a U.S.-listed closed-end investment company listed on the New York Stock Exchange, and we also did a direct listing, in effect, of the management company that some people might call the GP of Pershing—the entity that receives fees from various funds that we manage. As part of the IPO pitch for Pershing Square Inc., we pointed out that it is a bit of an unusual alternative asset management company. Think analogies would be Blackstone or KKR or others, in that we are small relative to others in terms of scale, but the capital base is very unusual in that 98% of our assets are in permanent-capital vehicles. The three examples we gave were our London-listed entity, an entity called Pershing Square Holdings; Pershing Square USA, which is this new entity we launched; and then Howard Hughes Holdings Inc., which we put in the same camp. It is not an investment company per se; it is an operating company, a C-corp. But it is a very important, I would say, leg to a three-legged stool. I would say the significance of that transaction is not that we are—we actually cannot buy more stock in Howard Hughes Holdings Inc. We are contractually—our agreement with the board is to stop at 47%. But I would say the importance of Howard Hughes Holdings Inc. to the Pershing Square platform was something we emphasized to a great degree as part of the IPO transaction. We described Pershing Square—this is a permanent holding. We intend to be a forever owner of Howard Hughes Holdings Inc., and our goal is to build a valuable, diversified holding company led by this insurance platform over the next many decades. That is the idea. Anthony Paolone: Okay. Thanks for that. And then my second question is you show the demonstration of value and how much insurance plays a role in that. With it being such a big driver, why continue to hold things like multifamily or some of the other assets in real estate, and should we see that kind of move over to potentially add more to the insurance side over time? William Albert Ackman: Sure. If you look at Howard Hughes Holdings Inc. over the fifteen years we were a dedicated real estate company, basically every dollar of cash we generated we reinvested in real estate. For example, we bought another MPC as a result of having excess cash that we actually could not deploy in our existing MPCs. What the transaction accomplished a year ago is it widened the aperture of things that we could do. I think what we have learned over time is a dedicated pure-play real estate development MPC business is not one that the market will assign a high value to—or another way to think about it, the market assigns a very high discount rate to those kinds of cash flows. All that being said, as demonstrated by our expectations of $2.5 billion of cash that we are going to generate from that business over the next five years, it is a meaningful cash flow generator. So I think the pivot we are making is we are not going to reinvest every dollar of excess cash into things only in real estate. But our definition of excess cash is not just free cash flow. We intend to continue to build out—“the golden goose” for the real estate company is that we want The Woodlands, we want Summerlin, we want these communities to continue to be amazing—ranked in the top handful of places to live in America. In order to do that, we are going to be building apartments; we need more apartment buildings. We are going to be building office buildings; we need more office buildings. But there are some number of assets that may be non-core—that are not critical for us to own—that we are going to look at and examine and say, does it make sense for us to own this asset forever because it is critically important to our market share—say, in The Woodlands in office space—or is it a tertiary asset where there is a buyer who will pay a much higher price than our cost of capital would allow? That is an examination that we are going to do over time. The nature of the Howard Hughes Holdings Inc. real estate business is it is sort of self-liquidating, in a manner of speaking, in that we have a finite amount of land that over the next whatever number of decades we are going to sell. We have a finite amount of condominium development land, and we are going to build out those units and generate a bunch of cash. We have cash flows that come from our operating asset portfolio. We would expect those cash flows to grow on a same-store basis, and we expect them to grow because we are going to continue to develop whatever the communities need to make them really attractive places. But I would say, on the margin, if it is not critical and core, it becomes something that, if a stabilized asset is better owned by someone else, we will sell. Operator: Thank you. Our next question comes from the line of Alexander David Goldfarb of Piper Sandler. Your line is open, Alexander. Alexander David Goldfarb: Hey. Good morning, Bill and David, and welcome aboard, Mark. First, I want to say I love the new disclosure—much more streamlined, much more to the point, and much easier to comprehend. Thank you. Bill, on the Vantage deal, is there anything that could delay a second quarter closing? Any regulations, paperwork, anything like that, or are we on track that this will close in the second quarter? William Albert Ackman: This will close in the second quarter. We have a scheduled hearing date, which is May 19, with the Delaware regulator. Transactions typically can close within a couple weeks of that hearing date. I think we will beat our quarter-end estimate absent something unexpected happening, but I do not expect the unexpected here. Alexander David Goldfarb: Okay. Second question is I think you said the value of the company currently, as you do your math, is $104 a share. Bill, you bought your stock into the company at $100 a share. Is that the delta versus what you previously disclosed—$118 a share for the company’s value? I was a little surprised by the $104, but maybe it is just the math on the dilution. I would assume you guys have better insight into the value of the company versus what we estimate from the outside. William Albert Ackman: Yeah. I think, number one, we are being conservative because of the way we are looking at the— I mean, the true value of the company, you would build a DCF on the MPC community, and you would compound the land values over time and discount them back at a discount rate that I believe would be lower than the rate at which you would appreciate them. What we are saying is: let us come up with a simple metric that is hard to argue against. We are also—with the value of the commercial land—we are assuming a sale to a third party. Obviously, when you sell land to a third party, you are giving up the opportunity for a development profit and everything else. If we develop that land ourselves, we get the benefit of that development profit. So this is a quite conservative way to think about the value of the company. There is obviously some dilution associated with our $100 a share primary investment. Ryan, do you want to add anything else? Ryan Michael Israel: The $104 figure—another way to look at this. We tried to give a very conservative snapshot. Outside of the Howard Hughes Holdings Inc. context, when we value businesses at Pershing Square, we often think about what the business will produce over the next five years, and then we think about that as a value. We might discount that future value back to today. One thing you would note on page 42: we conservatively estimate $104, but we also then roll forward—we believe by 2030 the value will grow to $211, which is a 16% growth rate in intrinsic value over that period. The way to think about that is focus on the $211 and discount that back. I think we would argue that you should discount that back at a substantially lower rate than 16%, given the high-quality nature and the increasing predictability and high growth of the business. If you were to do something like that—using a more modest discount rate—you could get to numbers that are easily 25% to 30% higher than the $104 figure. So, to Bill’s point, there are a lot of different ways to look at this. The $104 would be by far the most conservative way to look. We just wanted to lay out a very simple explanation for people as to how they could start to think about the most conservative value for Howard Hughes Holdings Inc. relative to the current share price. William Albert Ackman: Another way to say it is I think of $104 as basically like a liquidation value of the company. It is after tax, after all various expenses. As opposed to almost like a going-concern type value where the expectation would be we would be building out all the commercial land, embedding a certain profit margin, assuming that we would be selling land at higher prices in the future and discounting it back at much lower discount rates. Those would all accrue to a higher value. But I think this is a very fair way to think about the company and provides a relatively straightforward metric for us to judge the company every quarter. It makes everyone’s life easier. I think simplifying the way people think about the company—in particular, the real estate assets of the company—will go a long way to making this a more ownable stock by a broader array of investors. Alexander David Goldfarb: That is helpful. And then the final question for you. Obviously, data centers are a huge topic these days. You guys have a lot of land. I realize the value of Summerlin or the Houston portfolios may not make sense to add a data center to that. But when I think about West Phoenix, you have a huge amount of acreage, and it would seem like that would be potential to have a colocated power generation/data center, etc. As you look at your land holdings and what is per-sellable for residential versus potentially if there is a bid from a tech company to do data center or a power plant combo, is that at all an option? Or is the view that residential is still the highest and best use, and as far as maximizing the MPC, you want to stick with the formula you have to date versus trying something new? Ryan Michael Israel: Yeah. I would say we have an extremely open mind with respect to West Phoenix. William Albert Ackman: It is an amazing asset. It has all the attributes that you have talked about—access to power, access to water—in a very, I would say, pro-business, favorable environment, and we have enormous scale. We bring a lot of value to any one of those players. There are AI companies raising money at trillion-dollar valuations. In the context of that, you look at this very, very valuable land we own—it might be an interesting transaction to ask someone not only where they want to build data centers or power, but there are some pretty aspirational people in the technology world that want to build cities, and they want to build a community around the company that they are building. One great outcome for us is we bring in a partner who writes a big check, and then we become an asset-light developer of whatever that community is. We make it an ideal place to live in the way that the company has historically built communities—for example, The Woodlands or Summerlin. We do the same in Phoenix. But the anchor is someone for whom having access to everything from nuclear power—to these small nuclear reactors—and all the interesting technology, and they do it with a blank sheet of paper. I think it is a pretty good opportunity. That is something we are totally open to and something that could be transformative in terms of value creation for the company. We are valuing that asset at cost in this context. We bought that asset, what, six years ago or so? David R. O’Reilly: Just over three years ago. William Albert Ackman: Three years ago. Okay. It seems like six years. But the world has changed, I would say. The world has moved at least six years in the last three years in terms of what that property can be used for. Alexander David Goldfarb: Thank you. Operator: Sure. Okay. Next question, please. Thank you. Once again, to ask a question, press 11 on your telephone. Our next question comes from the line of John P. Kim of BMO Capital Markets. Please go ahead, John. John P. Kim: Thank you. I have had some technical issues, so apologies if you have already addressed this. On the KPIs that you introduced as far as MPC residual value and the condo remaining profits, does that essentially incentivize you to maximize price going forward and, in essence, not sell and not generate as much current cash flow? William Albert Ackman: Our goal—we, and maybe David can speak to our approach—we generally take an approach to optimize the combination of volume and price and make sure that we are not stuffing—we do not want a bunch of homebuilders with excess land inventory, and we do not want to manage the supply in a manner where we can continue to grow the per-acre value of the assets. It is not critical to us whether we sell X dollars of land in any particular quarter. What matters to us is we are building these amazing communities, and we are managing our scarce asset in a thoughtful way. But, David, maybe you want to speak to that. David R. O’Reilly: I think, Bill, you summarized it perfectly, which is we are not selling assets to maximize any metric. We are selling assets to maximize the value of the company. We do that by selling just enough land to homebuilders to keep up with underlying home sales. Sell them too much land and they are oversupplied, and in a downturn, they will make a terrible decision that will negatively impact the rest of our dirt. Sell them too few, and we are going to strangle affordability in our communities. So we are tracking underlying home sales in each of our communities daily, making sure that we are preparing the right amount of lots to keep up with those home sales to maintain equilibrium as best we can across our communities. William Albert Ackman: Said another way, simply because we are changing the KPI, that is really just to help the market better understand the company—understand our progress in creating intrinsic value—but it has really no impact on how we think about how we auction land each quarter. John P. Kim: Okay. Makes sense. The KPIs—that information was already there before, but you just want us to focus more on the remaining values of your land and condo profits. William Albert Ackman: Look, one of the concerns I had is that people were looking at the company and saying, “I want to put a multiple on a next-twelve-month estimate of MPC EBIT.” It is really just not the right way to think about an asset like land, which you are going to sell over time and where the land values are going to appreciate over time. The right way to think about an asset like that is either on a present value basis or—maybe the simplest way to think about it is—how much did we sell during the quarter, how much cash did we take in, and what is the remaining land worth? It is a bit like we have oil in the ground. Unlike oil in the ground, which is incredibly volatile, our oil gets more valuable over time as people move into the communities. But there is a finite amount of it, and we want to be smart—kind of like OPEC. We do not want to dump it on the market at any one time. We want to be thoughtful about how we extract it and how we convert it into cash over time. But we do not want you to put a multiple on the amount of drilling that happens in any one quarter, because that is really just a function of, sometimes, rates. Sometimes rates back up a bit, and there may be a pause in sales. One thing is certain: people want to live in The Woodlands. People want to live in Summerlin. They want to live in our communities, which means we will sell this land, and the land just gets more desirable over time. We are at a place in The Woodlands now where there are really no more residential lots; it is only commercial acreage. We will get there at some point in Summerlin as well, which means we are going to sell every acre of residential land over time in Summerlin. I cannot tell you exactly what date, but I am confident that the land we sell in future years is going to be worth a lot more than land we sell today. That is why we are never in a rush. We would certainly not want management thinking about, “Oh, I put out a guidance number, and I want to make the number—let’s just discount the land a bit.” We want people to be focused on the things that matter for growing the value of the company. So these metrics are as much for internal use as they are for external observation. John P. Kim: And when you talk about allocating more capital to Vantage rather than reinvesting back into MPCs, besides selling stabilized assets that you mentioned before, what are some of those investments that you would have made that are now either being deferred or removed going forward in the MPC business? William Albert Ackman: I do not know that we—we had already arrived at a place where we had excess cash flow expected to be generated from condo sales and other parts of our business. But if we were a pure-play real estate company, we would have tried to figure out other places to put that money in real-estate-related assets. What we are doing now is we are saying, well, now we have a really good place to put that money. We think the driver of value in the slide that Ryan showed you is, one, the nature of the insurance business—a profitable insurance operation with assets managed by us for no cost—we think is approaching a 20%+ ROE business. Those are returns very hard to achieve in a relatively low-leverage kind of real estate company. So, one, the returns are higher. Two, the business we are buying here for effectively 1.4 times book value becomes worth something comfortably north of two times book value if we can achieve our objectives. Every dollar we can put in Vantage appreciates both because the ROE is higher and the value that the market will assign to that capital invested in Vantage is much higher. Therefore, our incentive is to invest every marginal dollar in Vantage as opposed to buying another MPC. If we had had this business plan three years ago, instead of buying West Phoenix, we would have put an extra $600 million into Vantage. John P. Kim: Thanks. Operator: Thank you. I would now like to turn the call back over to William Albert Ackman for closing remarks. Sir? Operator: Okay. Ending early. William Albert Ackman: I guess my closing remarks are the company is going through an important transition that we think is going to create a lot more value for shareholders over time. We are incredibly excited about it. We think we have all of the things needed to achieve that objective. We have a great core, very profitable business, and I think the team is thinking about it the right way, and the numbers are great. We have mayors around the country that are great for— including in New York City—sending people to business-friendly communities that are pro-business and pro-capitalism, and we happen to own assets in states that are aligned with that objective. So I think Howard Hughes Holdings Inc. owns real estate assets in the right places, and we are going to generate a lot of cash from that business. Now we have a very good place to put that capital. The Vantage transaction, I expect, will close earlier than the end of the quarter. We are excited about that. We are excited about the Vantage team. I think they are excited to be part of a permanent, long-term business. In insurance, you want to have a long-term owner, and we have achieved that. With Mark’s addition to the board, I think the board is now very well positioned to help oversee this important transformation. I think the only thing that is missing in the share price is some new shareholders, because I think we have scared away some of the real estate shareholders, and hopefully we will start to attract people who are excited about the business plan going forward. With that, absent any further questions, we will end the call. Hearing no further questions, thank you so much, and have a great day. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
Operator: Good morning and welcome to the Prospect Capital Corporation Third Quarter 2026 Earnings Release and Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to John Barry. Please go ahead, sir. Thank you, Drew. John Barry: Joining me on the call today are Michael Grier Eliasek, our President and Chief Operating Officer, and Kristin Van Dask, our Chief Financial Officer. Kristin? Kristin Van Dask: Thanks, John. This call contains forward-looking statements that are intended to be subject to Safe Harbor protection. Future results are highly likely to vary materially. We do not undertake to update our forward-looking statements. For additional disclosure, see our earnings press release and 10-Q filed previously and available on our website prospectstreet.com. Now I will turn the call back over to John. John Barry: Thank you, Kristin. In the March quarter, our net investment income, or NII, was $78 million, or $0.16 per common share. Our NAV was approximately $3 billion, or $6.05 per common share. At March 31, our net debt to total assets ratio was 27%. Unsecured debt plus unsecured perpetual preferred was 88% of total debt plus preferred. We are announcing monthly common shareholder distributions of $35 per share for each of May, June, July, and August. Since our IPO nearly 22 years ago, through our August 2026 declared distribution we will have distributed approximately $4.8 billion, or $22.07 per share. Our preferred shareholder cash distributions continue at their contract rates. We continue to progress our strategic priorities including rotation of assets into an increased focus on our core business of first lien senior secured middle market loans, with our first lien mix increasing 790 basis points to 72% since June 2024. We are focusing on new investments in companies with less than $50 million of EBITDA, including companies with smaller funded private equity sponsors, independent sponsors, and no third-party financial sponsors. Number two, reduction in second lien senior secured middle market loans with our second lien mix decreasing 404 basis points to 12.4% since June 2024. Number three, exiting subordinated structured notes, with our subordinated structured notes mix decreasing 837 basis points to near zero since June 2024. Number four, exiting targeted equity-linked assets, including real estate, with five additional properties sold in the current fiscal year and certain corporate investments, including the exit of Echelon Transportation in February 2026, with other exits targeted and in progress. Number five, enhancement of portfolio company operating performance and profitability, including through adoption of artificial intelligence and automation initiatives focused on enhancing revenues and reducing costs. And number six, utilization of our cost-effective floating-rate revolver, which significantly matches our floating-rate assets. Thank you. I will now turn the call over to Michael Grier Eliasek. Michael Grier Eliasek: Thank you, John. Over the past two decades, Prospect Capital Corporation has invested approximately $13.4 billion in over 350 exited investments out of over $22 billion invested in over 450 total investments that have earned a 12% unlevered investment-level gross cash IRR to Prospect Capital Corporation. This multi-decade time period predates and includes the GFC, and has been dominated in general by low prevailing market interest rates. In Prospect Capital Corporation’s primary business of middle market lending, over the same nearly 22-year time period, Prospect Capital Corporation’s exited investments resulted in an investment-level exited gross IRR of approximately 14.4%, based on total capital invested of approximately $11.4 billion and total proceeds from such exited investments of about $14.7 billion, with an annualized realized loss rate of 20 basis points. In Prospect Capital Corporation’s core targeted business of middle market lending to companies with less than $50 million of EBITDA, over the same nearly 22-year time period, Prospect Capital Corporation’s exited investments resulted in an investment-level exited gross IRR of approximately 16.9%, based on total capital invested of around $6.5 billion and total proceeds from such exited investments of about $8.6 billion, with an annualized net realized loss rate of 10 basis points. Prospect Capital Corporation’s EBITDA-to-interest coverage for our primary business of middle market lending is about 205%, which increases to around 230% for Prospect Capital Corporation’s core targeted middle market lending to companies with less than $50 million of EBITDA. As of March 2026, we held 89 portfolio companies across 31 different industries, with an aggregate fair value of $6.3 billion. Our portfolio at fair market value included 2.5% of investments in software companies, which is significantly less than the 23% average across BDCs with publicly traded unsecured bonds from a Wall Street fixed income research report in the last couple of months. We primarily focus on senior and secured debt, which was 84% of our portfolio at cost as of March. Our middle market lending strategy is the primary focus of our company, with such strategy, as of March, representing 85% of our investments at cost, an increase of 875 basis points in our business mix from June 2024. Middle market lending comprised 94% of our originations during the March quarter, with a continued focus on first lien senior secured loans. Investments during the quarter included follow-on investments in existing portfolio companies to support acquisitions, working capital needs, organic growth initiatives, and other objectives. We have essentially completed the exit of our subordinated structured notes portfolio as of March, with such portfolio representing nearly 0% of our investment portfolio at cost and representing a reduction of 837 basis points from 8.4% in June 2024. Our real estate property portfolio at National Property REIT Corp., NPRC, totaled 14% of our investments at cost as of March and continued to focus on developed and occupied cash-flow multifamily investments. Since inception of this strategy 14 years ago, in 2012, and through March 2026, we have exited 57 property investments, earning an unlevered investment-level gross cash IRR of 24% and a cash-on-cash multiple of 2.4x. We exited five property investments in the current fiscal year through March 2026, earning an unlevered investment-level gross cash IRR of 18% and a cash-on-cash multiple of 2.3x. The remaining real estate property portfolio included 53 properties and paid us an income yield of 5.2% for the March quarter, providing an opportunity for potential income enhancement at Prospect Capital Corporation from a portfolio rotation strategy into more corporate first lien senior secured middle market originations. Prospect Capital Corporation’s aggregate investments in NPRC included a $229 million unrealized gain as of March. We expect to continue to redeploy future real estate property exit proceeds primarily into more first lien senior secured loans, with selected equity-linked investments. Our interest income for the 12-month period ending March 2026 was 92% of total investment income, reflecting a strong recurring revenue profile of our business. Payment-in-kind interest income for the last 12-month period ending March 2026 was reduced by 41% from the prior 12-month period and was 11% of total investment income for the quarter. Non-accruals, as a percentage of total assets as of March, stood at around 0.7% based on fair market value, consistent with the prior quarter. Investment originations in the March quarter aggregated $115 million and consisted of 94% middle market investments, with a significant majority first lien senior secured loans. We also experienced $222 million in repayments and exits as a validation of our capital preservation objective, resulting in net repayments of $107 million. Thank you. I will now turn the call over to Kristin. Kristin? Kristin Van Dask: Thanks, Grier. We believe our prudent leverage, diversified access to matched-book funding, substantial majority of unencumbered assets, weighting toward unsecured fixed-rate debt, and avoidance of unfunded asset commitments all demonstrate balance sheet strengths, as well as substantial liquidity to capitalize on attractive opportunities. Our company has locked in a ladder of liabilities extending 25 years into the future. On 10/30/2025, we successfully completed the institutional issuance of approximately $168 million in aggregate principal amount of senior unsecured 5.5% notes due 2030, which mature on 12/31/2030. Our unfunded eligible commitments to portfolio companies total approximately $28 million, of which $17 million are considered at our sole discretion, representing approximately 0.4% and 0.3% of our total assets as of March 2026, respectively. Our combined balance sheet cash and undrawn revolving credit facility commitments stood at $1.8 billion as of March, and we held $4.2 billion of our assets as unencumbered assets, representing approximately 65% of our portfolio. The remaining assets are pledged to Prospect Capital Funding, a non-recourse SPV. We currently have $2.12 billion of commitments from 48 banks, demonstrating strong support of our company from the lender community with a diversity unmatched by any other company in our industry. The facility does not mature until June 2029 and revolves until June 2028. Our drawn pricing continues to be SOFR plus 2.05%. Outside of our revolver, we have access to diversified funding sources across multiple investor types and have successfully issued securities in an array of markets. Prospect Capital Corporation has issued multiple types of unsecured debt: institutional non-convertible bonds, institutional convertible bonds, retail baby bonds, and retail program notes. All of these types of unsecured debt have no asset restrictions and no cross-defaults with our revolver. We have tapped the unsecured term debt market on multiple occasions to ladder our maturities and to extend our liability duration out 25 years, with our debt maturities extending through 2052. With so many banks and debt investors across so many unsecured and nonrecourse debt tranches, we have substantially reduced our counterparty risk. At 03/31/2026, our weighted average cost of unsecured debt financing was 4.71%. Now I will turn the call back over to John. John Barry: Kristin, thank you very much. We will now open the call for questions. Operator: Thank you, sir. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Again, it is star then 1 to ask a question. At this time, we will pause momentarily to assemble our roster. This concludes our question and answer session. I would like to turn the conference back over to John Barry for any closing remarks. John Barry: Thank you, everyone. Have a wonderful day and a wonderful weekend. Bye now. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, everyone, and welcome to the Johnson Outdoors Inc. second quarter 2026 Earnings Conference Call. Today’s call will be led by Helen P. Johnson-Leipold, Johnson Outdoors Inc.’s Chairman and Chief Executive Officer. Also on the call is David W. Johnson, Chief Financial Officer. Prior to the question-and-answer session, all participants will be placed in a listen-only mode. After the prepared remarks, the question-and-answer session will begin. If you would like to ask a question during that time, please press star then the number 11 on your telephone keypad. This call is being recorded. Your participation implies consent to our recording this call. If you do not agree to these terms, simply drop off the line. I would now like to turn the call over to Allison Gitzaro from Johnson Outdoors Inc. Please go ahead, Ms. Gitzaro. Allison Gitzaro: Good morning, and thank you for joining for a discussion of Johnson Outdoors Inc.’s results for the 2026 fiscal second quarter. If you need a copy of today’s news release, it is available on our website at johnsonoutdoors.com under investor relations. I also need to remind you that this conference call may contain forward-looking statements. These statements are made on the basis of our current views and assumptions and are not guarantees of future performance. Actual events may differ materially from those statements due to a number of factors, many beyond Johnson Outdoors Inc.’s control. These risks and uncertainties include those listed in our press release and filings with the Securities and Exchange Commission. If you have any additional questions following the call, please contact David W. Johnson or Patricia G. Penman. It is now my pleasure to turn the call over to Helen P. Johnson-Leipold. Helen P. Johnson-Leipold: Thanks, Allison. Good morning, everyone. I will begin by sharing perspective on our second quarter and year-to-date results as well as give an update on each business. David will review the financial highlights, and then we will take your questions. Improved retail conditions and ongoing success of our product innovation helped drive 15.5% revenue growth in the second quarter, with all business segments contributing to the improvement. Operating income for the second quarter was much improved versus the prior-year second quarter due to increased sales volume, and our cost-savings initiatives continued to boost profitability as well. Year to date, our net sales are 21.5% higher than last year’s fiscal six-month period, with operating income and gross margin also up for the fiscal year-to-date period. We are pleased with our second quarter and year-to-date results and are particularly proud of our market-leading brands, which continue to resonate with consumers and reinforce our leadership position across our portfolio. Our Fishing business delivered strong results in the second quarter, driven by improved trade conditions, continued robust demand for Humminbird’s Explorer Series and MEGA Live 2 fish finders, and Minn Kota’s full lineup of trolling motors, as well as pricing action. These factors combined to reinforce our momentum and position in the marketplace. We remain focused on investing in innovation to deliver fishing technology that sets the standard for anglers worldwide. In Camping and Watercraft, growth during the quarter was supported by our expanding digital and e-commerce capabilities, with Old Town and Jetboil maintaining their leadership position in competitive categories. During the quarter, Jetboil also launched TrailCook, a new innovation designed to expand the brand beyond boiling water into broader backcountry cooking. In both brands, we will continue to build on our strengths to drive sustained growth through innovation and deep engagement with outdoor enthusiasts. Lastly, in our Diving business, improved conditions across the global markets and continued growth in e-commerce helped drive a solid increase in second quarter sales. Digital engagement continues to play an increasingly important role, enhancing connectivity between our SCUBAPRO brand, retail partners, and consumers. As we continue to lean into digital channels and strengthen our global footprint, we are optimistic about SCUBAPRO’s ability to grow and further reinforce its position in the market. Overall, we are pleased with the quarter and year-to-date results. By investing in and executing our strategic priorities—consumer-driven innovation, digital and e-commerce excellence, and operational efficiencies—we are strengthening our market position and taking the right steps to navigate macroeconomic uncertainty while building long term. Now I will turn the call over to David for more detail on the financials. David W. Johnson: Thank you, Helen. Good morning, everyone. Our strategic cost-savings program remains critical and continues to deliver meaningful benefits to our bottom line. Gross margin for the second quarter improved to 38.8%, up 3.8 points from the prior-year quarter. Overhead absorption from higher volumes and cost savings were the main drivers of the improvement in gross margin. Year to date, gross margin is 37.9%, up 4.9 points from the prior year-to-date period. Operating expense increased 11.2 million from the prior-year second quarter, due primarily to increased sales-volume-related costs as well as increased variable compensation costs. Profit before income taxes for the second quarter was 10.2 million compared to 4.2 million in the previous-year quarter, driven mostly by the improvement in operating income. As we prepare for the upcoming selling season, we modestly increased inventory levels. Our inventory balance at the end of the second quarter was 186.9 million, up about 6.8 million from the previous year’s second quarter. Our balance sheet remains debt-free, and we continue to pay a meaningful dividend to shareholders, with the Board approving our most recent dividend announced in February. Looking ahead, despite ongoing economic uncertainties, we remain firmly focused on financial discipline and actively managing the business to balance near-term pressures while continuing to invest in priorities that support sustainable growth. Now I will turn the call over to the operator for the Q&A session. Operator: Thank you, ladies and gentlemen. If your question has been answered and you wish to remove yourself from the queue, please press 11 again. One moment for our first question. Our first question comes from Anthony Chester Lebiedzinski with Sidoti. Your line is open. Anthony Chester Lebiedzinski: Thank you, and good morning, everyone. Certainly nice to see the really strong revenue growth, especially in Fishing. So as it relates to Fishing, how much was revenue helped by pricing versus better market conditions and a stronger competitive position? David W. Johnson: We saw strong unit volume growth in our business, and that was a big driver for the quarter. Pricing certainly helped, and we are also seeing really strong demand for our broad line of trolling motors. That is very helpful. Anthony Chester Lebiedzinski: Gotcha. Thanks, David. So do you think this is perhaps a sort of replacement cycle from the bump from COVID, or is there something else going on? Helen P. Johnson-Leipold: The market is very hard to predict, but we have innovation that continues to drive purchases. Consumers are a little cautious with all the things going on, but innovation is the catalyst to get things moving. We are hoping this is the beginning of an upward trend, but it is going to be challenging, and innovation will be the key going forward. Anthony Chester Lebiedzinski: Gotcha. Okay. Thanks for that. So as far as the other two segments, you highlighted the increased sales through e-commerce. Can you expand on that a little bit and, if possible, give us some numbers as it relates to the growth you saw in the quarter? And how are you thinking about the rest of fiscal 2026 as it relates to Diving and Watercraft and Camping? Helen P. Johnson-Leipold: E-commerce is one of our growth initiatives, and we have put a hard core press on that. It reaches a much broader consumer base, and we are really excited about it. Our bricks-and-mortar partners remain important, and both channels complement each other. We have been up and running in a true digital mode for only about a year, so it is early, and we have a lot to learn, but it is a good opportunity to reach a broader audience. I think it will continue to grow. It is a smaller piece of the pie than our other sales, but from a growth standpoint it is helping us. We do not do a lot of forward-looking commentary, but as we look at the third quarter, the signs in the second were good and better than they have been in the past. The world is complicated, and consumers have a lot going on, but it comes back to the product line, the brand, and our positioning in the market. We feel really good about where we are as a brand and as a company, and we are hoping the markets cooperate as well. It is good to have a quarter that feels very strong. Anthony Chester Lebiedzinski: That is very helpful context. As far as the world out there, as you talk to your retail customers, since the Iran conflict started in late February, gas prices have gone up quite a bit. From the point-of-sale data you can access, have you seen any notable impact for your brands? David W. Johnson: I would say not yet, Anthony. We have not seen a direct impact, but like a lot of companies, we are looking at inflationary pressure and higher input costs. Helen P. Johnson-Leipold: And we are mindful of worried consumers whose confidence levels are down. David W. Johnson: So far it is okay; we have not seen a direct impact, but we are looking at things in a neutral fashion over the next couple of quarters. Anthony Chester Lebiedzinski: Understood. As far as gross margin, you had a strong improvement versus last year. You talked about fixed-cost absorption and cost savings. Was that kind of a 50/50 split? And second, regarding cost pressures, how should we think about gross margins for the rest of the fiscal year? David W. Johnson: Most of the improvement was operating—so fixed-cost absorption. Our cost-savings program is also critical and helped as well. We are seeing cost pressure going forward. Like many companies, electronic industry component costs are dynamic for us, and that is something we have our eye on and are monitoring. That could be a bit of a headwind over the coming quarters, so it is a good thing we have our cost-savings efforts in place to help offset that. Anthony Chester Lebiedzinski: Got it. In terms of operating expenses, they came in higher than we expected. Roughly, how much of the year-over-year increase came from sales-volume-related costs versus incentive compensation? And how should we think about operating expenses for the rest of the fiscal year? David W. Johnson: A decent portion was volume related—probably about a third—and then we had some variable compensation accrual adjustments that made up about a third. There are some other items in there that we did not call out, like certain health care costs and consulting expense. But the two big ones were the volume-related items and the variable compensation. Anthony Chester Lebiedzinski: And do you expect that to continue near term? Any general comments there? David W. Johnson: The expense structure will probably settle down a little bit. Volume drives some of that, but in terms of our spending and our ability to manage, I think it will settle down over the next couple of quarters. Helen P. Johnson-Leipold: We are investing and putting foundational systems in place, and we are investing against our key priorities. It is good spend, and it may not be long term. As David said, it will settle down, and we are investing in the right things to set us up for long-term success. We will get more efficient on the other side of this. David W. Johnson: Agreed. We expect to be more efficient as these investments mature. Anthony Chester Lebiedzinski: Lastly from me, the tax rate came in lower than we expected. David, can you address that and how we should think about the tax rate for the balance of the fiscal year? David W. Johnson: Because we have the valuation allowance on the U.S. income right now, the tax rate will be up and down depending on the mix of profits we see in the quarter and what we are forecasting for the full year. A practical way to think about it is probably 4 to 5 million of tax expense for the year. How that is spread over the quarters depends on the mix of profit, so it is hard to give you a rate quarter by quarter. Anthony Chester Lebiedzinski: Understood. That is definitely helpful. Thank you very much, and best of luck. David W. Johnson: Thanks, Anthony. Operator: I am not showing any further questions at this time. I would like to turn the call back over to Helen P. Johnson-Leipold. Helen P. Johnson-Leipold: Thank you, everyone, for joining us today. If you have additional questions, please contact David W. Johnson or Patricia G. Penman. Have a good day. Thank you. Operator: Thank you, ladies and gentlemen. This concludes today’s presentation. You may now disconnect, and have a wonderful day.
Operator: Good day, and welcome to the Reinsurance Group of America, Incorporated First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to J. Jeffrey Hopson, Head of Investor Relations. Please go ahead. J. Jeffrey Hopson: Thank you. Welcome to Reinsurance Group of America, Incorporated’s first quarter 2026 conference call. I am joined on the call this morning by Tony Cheng, Reinsurance Group of America, Incorporated’s President and CEO; Axel Philippe Andre, Chief Financial Officer; Jonathan William Porter, Chief Risk Officer; and Jason Bronchetti, Chief Investment Officer. A quick reminder before we get started regarding forward-looking information and non-GAAP financial measures: some of our comments or answers may contain forward-looking statements. Actual results could differ materially from expected results. Please refer to the earnings release we issued yesterday for a list of important factors that could cause actual results to differ from expected results. Additionally, during the course of the call, the information we provide may include terms that are discussed on our website along with reconciliations to GAAP measures. Throughout the call, we will be referencing slides from the earnings presentation, which is posted on our website. I will now turn the call over to Tony Cheng for his comments. Tony Cheng: Good morning, everyone, and thank you for joining us for today’s call. We appreciate your continued interest in Reinsurance Group of America, Incorporated. As you have seen from our first quarter results, we delivered a strong start to the year with excellent performance across many regions and businesses. The quarter reflects disciplined execution, strong underlying fundamentals, and the benefits of the diversified global platform we have built over time. Building on our strong 2025 performance, we believe our results this quarter further demonstrate that we are successfully executing on our strategy. Our focus remains on well-balanced earnings growth, capital allocation, and delivering attractive returns over the long term. Looking at the financial results, the strength in the quarter was broad-based across our regions and products. I will highlight a few specifics in the quarter. Asia Pacific had another strong quarter, driven by ongoing growth and strong execution. We closed a number of notable transactions in the region, particularly in Japan, spanning both in-force and flow deals that include both asset and biometric risk. EMEA’s earnings continue to reflect good new business, with results exceeding expectations. Performance was supported by favorable overall experience and continued momentum in longevity. We closed additional longevity transactions during the quarter by leveraging deep, long-standing client relationships, and we remain optimistic given our leadership position and differentiated competitive strengths. In the U.S., adjusted operating performance was strong, supported by favorable claims experience and the contribution from recent new business. Activity in U.S. individual life remains robust, demonstrating sustained momentum in large part driven by our strategic underwriting initiative. I am pleased with our U.S. group results, which are in line with our 2026 expectations. Moving to claims experience in the quarter, our economic claims experience was favorable across all regions. While one quarter of claims experience should not be overly emphasized, when considered as part of the cumulative experience since 2023, the favorable experience demonstrates the strength of our pricing, underwriting, and risk selection. Additionally, we continue to see profit emergence from business written and capital deployed over recent years. This profit emergence is tracking in line with expectations as asset portfolios are repositioned prudently over time and claims continue to be in line with expectations. This quarter was another demonstration of the strategic optionality in our global platform. Most of the deployment into in-force transactions was in Asia, where we saw the most attractive opportunities from a risk-reward perspective, primarily driven by our range of innovative solutions. Additionally, we continue to have very good momentum with our flow business in the U.S., where our value-added underwriting solutions and outsourcing efforts set us apart from competitors. Equally important to our flexibility is that we are comfortable not proceeding with transactions that do not meet our risk-return trade-off. That discipline continues to be a key feature of both our strategy and our culture. Now I want to take a brief step back from the details of the quarter and reinforce how we think about Reinsurance Group of America, Incorporated’s positioning and strategy. At its core, our approach is straightforward. We focus on life and health risk. We operate globally, and we deploy capital selectively where we believe we have competitive advantages and can earn attractive risk-adjusted returns. Specifically, Reinsurance Group of America, Incorporated has several unique strengths, including strong biometric expertise, asset management capabilities, a global platform, a market-leading brand, and flexibility to partner across the industry. What is critical is that these strengths do not operate in isolation. They reinforce one another, creating a competitive advantage that is difficult to replicate. When we combine this competitive advantage with a proactive business approach, we create win-win transactions, generating higher returns for Reinsurance Group of America, Incorporated and greater value for our clients. Let me share a few examples from this quarter. In North America, we extended a long-standing U.S. client relationship into Canada, where the client was seeking a reinsurer to partner on evolving product offerings. Our global platform enabled an exclusive relationship while our biometric expertise and collaborative partnership model differentiated us and drove a successful outcome. In Asia, we closed multiple coinsurance transactions by leveraging our ability to reinsure both sides of the balance sheet, combining asset management and biometric expertise. These wins across both flow and in-force transactions reflect the strength of our local presence and our position as a trusted counterparty. Lastly, in EMEA, we completed an exclusive transaction with an insurance company that leveraged our biometric expertise to unlock value from its in-force portfolio. The structure generates incremental capital to support the partner’s growth, and we expect to replicate this model in EMEA and other parts of the world going forward. On the capital front, we again repurchased shares, allocating $50 million this quarter. A balanced use of excess capital is an important part of our strategy to generate long-term shareholder value. Looking ahead, our confidence in the outlook for 2026 and beyond remains high. The fundamentals of our business are strong. Our pipeline is healthy. Our competitive advantages are durable. And our strategy is consistent with what has driven value creation at Reinsurance Group of America, Incorporated for the past five decades. We are confident that our disciplined execution of our strategy will enable us to deliver on our intermediate-term financial targets and long-term value for shareholders. With that, I will turn the call over to Axel Philippe Andre to walk through the financials in more detail. Axel Philippe Andre: Thanks, Tony. Reinsurance Group of America, Incorporated reported pretax adjusted operating income of $611 million for the quarter, or $6.97 per share after tax. For the trailing twelve months, adjusted operating return on equity, excluding notable items, was 16.2%. We delivered another strong quarter, reflecting disciplined execution across our businesses. Results were driven by continued earnings emergence from business written in recent years, favorable underlying experience, and solid investment performance. As Tony mentioned, we continue to leverage our strategic advantages, reinforcing our confidence in delivering on our targets in 2026 and beyond. We deployed $338 million into in-force transactions in the quarter. We remain selective in our capital deployment and are pleased with the quality and expected returns of new business generated. On the traditional side, our premium growth was 5% compared to prior year, which benefited from good growth across EMEA and APAC. In the U.S., traditional premium growth was up approximately 1% over prior year, as the strategic recapture of certain treaties as a result of management actions in 2025 impacted results. Overall, we continue to see very strong momentum in our strategic underwriting initiatives, including record volumes in the quarter and pipeline opportunities for block transactions, which reinforce Reinsurance Group of America, Incorporated’s biometric expertise advantage. It is worth reminding everyone that the premium generated from the Equitable transaction last year is included in our Financial Solutions results and not reflected in the traditional premium growth metrics. We completed $50 million of share repurchases in the quarter, bringing total repurchases to $175 million since we reinstated buybacks in the third quarter of last year. Our capital position remains strong, and we ended the quarter with estimated excess capital of $2.4 billion and estimated next twelve months deployable capital of $2.9 billion. The effective tax rate for the quarter was 24.4% on adjusted operating income before taxes, above the expected range due to the jurisdictional mix of earnings and an increase in the valuation allowance on tax credits. Turning to biometric claims experience, economic claims experience was favorable by $117 million in the quarter, with a corresponding favorable current-period financial impact of $4 million. Over half of the economic experience was driven by U.S. individual life, and every region had favorable experience. Most of this experience was deferred to future periods due to uncapped cohorts, and the portion included in the current-period income was partially offset by unfavorable experience in EMEA traditional capped cohorts. Claims experience in U.S. group was in line with updated expectations, and we continue to believe that our remedial actions taken last year will generate solid results in 2026. Taking a step back, since the beginning of 2023, economic claims experience for the total company has been favorable by $343 million. As a reminder, the favorable economic experience that has not yet been recognized through the accounting results will be recognized over the remaining life of the business. On slide seven, we highlight certain key considerations for the quarter, including actual-to-expected biometric claims experience, variable investment income, and other key items. After considering these impacts, we view run-rate EPS for the first quarter at approximately $6.70 per share. As a reminder, for 2026, we are assuming a 7% variable investment income return. This is below our longer-term expectations of 10% to 12%, primarily due to a still muted environment for real estate sales, which is when income from these investments is recognized. As indicated in this table, there were no material in-force management actions in the quarter. We remain active in managing our in-force blocks, but the timing and size of these actions is difficult to predict. Moving to the quarterly segment results, the U.S. and Latin America Traditional results reflected favorable claims experience in individual life and good individual health results. As mentioned, experience in U.S. group was in line with expectations. The U.S. Financial Solutions results were in line with our expectations. Canada Traditional results reflected favorable individual life and group claims experience, while the Canada Financial Solutions results were in line with expectations. In the Europe, Middle East, and Africa region, the Traditional results reflected the timing benefit on an annual premium treaty, partially offset by unfavorable claims experience in capped cohorts. Economic claims experience was favorable. EMEA Financial Solutions results reflected the contribution from recent new business and favorable overall experience. Turning to our Asia Pacific region, Traditional had another good quarter, reflecting favorable overall experience and the benefits of ongoing growth. Financial Solutions results reflected the timing impact of new business portfolio repositioning and unfavorable foreign currency impacts. Finally, the Corporate and Other segment reported an adjusted operating loss before tax of $65 million, primarily due to the timing of certain compensation expenses and slightly unfavorable variable investment income. Moving to investments, the non-spread book yield, excluding variable investment income, was 4.85% in the first quarter. While the new money rate was lower at 5.64% in the quarter, primarily driven by tactical allocation towards high-quality public corporates, it remains above our portfolio yield, thus providing a continued tailwind to our overall book yield. Total company variable investment income was modestly below our 7% yearly return expectations, by around $8 million. Overall, our portfolio quality remains high, and credit impairments are favorable relative to our long-term expectations. Before moving on, I want to spend a couple of minutes discussing our private credit strategy. We included updated information on our portfolio in the earnings presentation. Our allocation to private credit has been a measured and important part of our long-term investment strategy for many years, and we manage this exposure through a rigorous asset-liability management framework. We invest selectively in a diverse range of private credit assets when they are a good match for our stable liability profile and deliver attractive risk-adjusted returns through incremental illiquidity premiums with greater downside protection. Private credit represents approximately 9% of our total portfolio and is highly diversified across many issuers and multiple asset categories, including investment-grade private placements, private asset-backed securities, fund finance, infrastructure debt, and middle market loans. The majority of our private assets are rated investment grade. In addition, the vast majority of our below-investment-grade private assets are comprised of first-lien senior secured loans underwritten by our experienced internal team, which provides better visibility into underwriting, tighter covenants, stronger downside protection, and more control over credit selection. Overall, fundamentals across the portfolio remain healthy. Credit performance has been in line with expectations, and we manage this portfolio with the risk discipline you expect from Reinsurance Group of America, Incorporated. Turning now to capital, our excess capital ended the quarter at an estimated $2.4 billion, and our next twelve months deployable capital was an estimated $2.9 billion. It is important to note that we manage capital across multiple frameworks, including internal economic capital, regulatory capital, and rating agency capital frameworks. We maintain ample regulatory capital across jurisdictions we operate in while supporting strong ratings that underpin our counterparty strength. Across these frameworks, we remain very well capitalized. Additionally, we will continue to balance capital deployed into the business with returning capital to shareholders through quarterly dividends and share repurchases. We intend to remain opportunistic with share repurchases and expect total shareholder return of capital to range between 20% to 30% of after-tax operating earnings over the long term. We also expect to allocate $400 million of excess capital to reduce financial leverage during 2026. During the quarter, we continued our long track record of increasing book value per share. As shown on slide 16, our book value per share excluding AOCI and the impact from B36 embedded derivatives increased to $167.92, representing a compounded annual growth rate of 9.9% since the beginning of 2021. To summarize, this was another strong quarter for us, and we are confident in our ability to achieve our intermediate-term financial targets. The underlying fundamentals across our business are solid, new business momentum is healthy, and investment performance continues to support earnings growth. Capital deployment remains disciplined, focused on transactions that meet our return thresholds and fit our risk framework, while continuing to return capital to shareholders. Our priorities are unchanged: deliver attractive, sustainable returns while appropriately managing risk and deploying capital where we see the best long-term value. This concludes our prepared remarks. We will now open the call for questions. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit yourself to only one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Suneet Kamath with Jefferies. Please go ahead. Suneet Kamath: Great. Just wanted to start on capital deployment. In the past, we have spoken about needing $1 billion of deployment to hit the 8% to 10% EPS growth. Considering the debt maturity that is coming, your excess is $2 billion, your deployable is $2.5 billion. Do you think you have enough opportunities to meet or exceed that $1.5 billion, or is that still the base case for this year? Axel Philippe Andre: Thanks, Suneet. When we look at capital deployment for the quarter, we are tracking right in line with our expectations. As always, we will continue prioritizing quality over quantity, just as we did this quarter. We are pleased with the types of transactions and the return expectations that we are generating. We have strategic optionality embedded in our platform, and we will continue to allocate capital towards the most compelling opportunities across the globe, as well as returning capital to shareholders. We believe that we can achieve our financial targets through this combination of capital deployment and return of capital to shareholders. Suneet Kamath: Okay. And then on the Equitable transaction, now that Equitable and Corebridge are planning to merge, does that impact your flow reinsurance agreement that you have with Equitable, and are there any other concentration issues that we should think about as those two companies come together? Axel Philippe Andre: Thank you for the question. We do not want to comment too much on any one client. Obviously, we have a strong partnership with Equitable and expect this to continue. We remain very pleased with the transaction executed last year and do not expect any impacts as a result of this news, either on the in-force or the flow transaction. Tony Cheng: To bring it up a level, for the U.S. overall, we remain very confident as we continue to benefit from our strategic positioning around our biometric and underwriting strengths. Operator: The next question comes from Analyst with UBS. Please go ahead. Analyst: Hi. Thank you. Good morning. Just wondering if you could dig into the mortality favorability in the U.S. It has persistently been surprisingly favorable. I feel like you must have among the best data across the space in terms of the underlying trend. Could we dig into that a little bit? Jonathan William Porter: Hi. I am happy to address that. Speaking to our own experience, our Q1 claims experience was favorable, and that was due to a lower frequency of claims, both large claims and non-large claims. Uncapped cohorts were favorable and capped cohorts were in line. I would say there are no other significant trends to call out in our own data or experience that we saw in the quarter. Bringing it up to a population level, the flu season was more moderate this year than last year based on CDC data and peaked in December. Population mortality, when you look over 2024–2025, continues to be modest. We are seeing reasonable trends there. Analyst: What I really mean is, over a longer-term period, Axel mentioned a $300 million economic benefit that you have not recognized yet. I know there is probably an element of COVID pull-forward and there are GLP-1s coming on. That was more of what I meant. Jonathan William Porter: Certainly, we are pleased to see that there are some favorable tailwinds in the future on the horizon. You mentioned GLP-1s specifically. To reiterate, we have not made any material changes to our assumptions due to GLP-1s, but the benefit we expect to see does give us more confidence that our existing mortality improvement assumptions will be realized in the future. We continue to see signs of positive momentum related to GLP-1s in 2026, including the recent approval of oral GLP-1s reducing prices and broadening access, including Medicare and Medicaid coverage in the U.S. That is a trend we continue to follow and, if and when appropriate, we would reflect that in our assumptions. Analyst: Thanks. And on the excess capital, I saw in the slide deck you mentioned there was a $200 million negative impact from a correction to subsidiary regulatory capital. Could you run through that math and what drove it? Axel Philippe Andre: Happy to take that. Each year, we update our excess capital estimates as part of the completion of our annual regulatory and rating agency capital models. The adjustment discussed on the slide reflects, first, a correction in one of our subsidiary regulatory capital calculations; second, annual experience and assumptions updates; and third, changes to subsidiary excess capital from finalizing year-end calculations as well as additions to the entities included in the analysis. Importantly, we remain very well capitalized across all our legal entities and capital frameworks. That provides us with significant financial flexibility to deploy capital into the business and return capital to shareholders. Operator: The next question comes from Wesley Collin Carmichael with Wells Fargo. Please go ahead. Wesley Collin Carmichael: Good morning. My first question is on earnings seasonality. In the past, especially before LDTI, we thought about the first quarter as being weaker from an earnings perspective, particularly from mortality in the U.S. In a post-LDTI world, how should we think about the seasonality in terms of the first quarter versus the rest of the year? Jonathan William Porter: Thanks for the question. We do expect some higher claims in the winter months, as you point out, both from the flu and from other causes. Our assumptions reflect the seasonality, which is incorporated into our reserves. An average flu season is essentially built in as a higher Q1 claims expectation. Under LDTI, we would expect any differences to that higher expectation to be partially offset from an earnings perspective, although this is dependent on how the experience emerges by type of cohort. This seasonality assumption is something we routinely review as part of our annual assumption process. Because we take the seasonality into account, it largely levelizes what you would expect from an earnings perspective, other than potentially some seasonality that comes through on uncapped cohorts. Under LDTI, there should be less earnings impact from that than you would have seen in the past. Operator: The next question comes from Wilma Jackson Burdis with Raymond James. Please go ahead. Wilma Jackson Burdis: Good morning. Just to make sure I understand correctly, the $26 million benefit will slip to be negative, ending the year at zero. Is that correct on the margin? And then will it come out evenly across the next three quarters? Help us understand that piece a little bit. Thanks. Axel Philippe Andre: Hi, Wilma. For the EMEA segment, this relates to an annual premium treaty where the premium from an accounting perspective is recognized all in the first quarter, while the claims come through the four quarters. This is something that we had already last year and before. Assuming those treaties stay in place, that pattern of earnings would continue in the future. Wilma Jackson Burdis: Thank you. And could you talk a little about what you are seeing on new in-force block transactions? There has been a lot of strong interest in the market in general, but maybe some ebbs and flows. What are you seeing on spread expectations and the level of interest in more complex deal structures? Tony Cheng: Sure. There is a lot there. Let me start with our pipeline. We see the pipeline remain strong, high quality, and, very importantly, diversified across the globe. In Asia, activity continues to be strong both in product development—serving the middle class—and in Financial Solutions as clients adjust to new capital frameworks in markets such as Japan and Korea. In the U.K. longevity market, we continue to be a market leader and are seeing continued business momentum driven by our immensely strong team. In the U.S., we continue to benefit from strategically repositioning around our biometric and underwriting strengths, as well as the industry realignment that is taking place. I want to reiterate that our focus is very much on our sweet spot, which combines both biometric and asset capabilities, and we will not hesitate to walk away from any transactions that do not meet our risk-return trade-off. Operator: The next question comes from Thomas George Gallagher with Evercore ISI. Please go ahead. Thomas George Gallagher: Good morning. First question is on the slower growth you saw in U.S. Traditional. Can you talk about what is going on in that market more broadly? Is the market slowing somewhat? Are companies ceding less, or has that been stable? I am wondering if the broader industry is becoming more constructive on mortality and whether companies might look to retain more themselves. Thanks. Axel Philippe Andre: Hi, Tom. I can get started and pass it to Tony for more color. In 2025, we had some strategic recaptures as part of management actions that reduced ongoing premiums, making the year-over-year comparison more challenging. This is a good thing, because the recaptures tended to be lower quality and less profitable blocks, and this also reduces volatility. Let me remind you that the premiums associated with the Equitable block are now reported in the Financial Solutions segment. Ultimately, we are pleased with our U.S. Traditional business as we continue to improve the overall risk profile and as we see strong momentum in our strategic underwriting initiatives. We are confident that this performance will be reflected in our results over time. Tony Cheng: Not much to add to what Axel said, except that we had a very strong 2025 in U.S. Traditional. The type of transactions we focus on leverage our underwriting and biometric capabilities. That momentum continues into 2026. We remain very optimistic about our prospects in U.S. Traditional—winning very high-quality business at very good returns and adding a lot of value to our client partnerships. Thomas George Gallagher: Do you have any sense of cession rates for the industry more broadly? Has that been stable or changing? Tony Cheng: We do not have that at our fingertips. We focus on delivering comprehensive solutions—product development, underwriting solutions, and more. By focusing on solving our clients’ problems and creating win-win solutions, we feel we can control our own destiny, independent of broad cession rate trends. Operator: The next question comes from Joel Robert Hurwitz with Dowling Partners. Please go ahead. Joel Robert Hurwitz: Earlier this year, you brought up the prospect of potentially launching a sidecar for complex liabilities like long-term care and universal life with secondary guarantees. Could you provide an update on that potential vehicle and whether you are seeing parties interested in committing capital to it? Axel Philippe Andre: Thanks, Joel. Third-party capital remains a core element of our capital management strategy. It enhances our flexibility to fund growth and return capital to shareholders, while also generating incremental fee income for shareholders over time. Our current focus is on fully deploying Ruby Re, which is still expected this year. There are pros and cons to various sidecar structures and types of liabilities, but it is too early to be specific as we focus on completing Ruby Re capital deployment. We will update you as appropriate. As it relates to ULSG and long-term care risks, these risks are less than 10% of our balance sheet today, and we expect it to remain this way going forward. Joel Robert Hurwitz: On Ruby Re, how much capital do you have left to deploy this year? Axel Philippe Andre: We have the last piece of capital identified in terms of the blocks of business that are going to go to the sidecar, and we are in the process of getting that approved by the investors and working through the process with our regulator. Operator: The next question comes from Analyst with JPMorgan. Please go ahead. Analyst: Thank you. First, there is a widely held view that as the P&C cycle softens, the large multiline European reinsurers tend to be more competitive on the life side. Do you agree with that view? If so, how do you think competition from that part of the market unfolds given price softening in P&C? Tony Cheng: I have heard both sides of that view as P&C cycles soften or harden. Addressing competition more broadly, in our sweet spot—transactions with both biometric and asset risk—competition continues to be very stable. We focus on this area by leveraging our key strengths, our strong local presence and relationships. In some ways, we feel Reinsurance Group of America, Incorporated is unique—one of one—in that space. In addition, with our global platform, we have strategic optionality to pursue the best risk-adjusted opportunities around the world. With that in mind, we remain very excited about our business momentum and disciplined positioning in the reinsurance market. Analyst: My second question is also about competition but from a different angle. An increasing number of U.S. primary insurers are setting up internal reinsurance captives to generate capital efficiencies, and some have started writing third-party business. Some have set up sidecars not that different from Ruby Re. What is your view on this trend? Is it just enormous market opportunity, or is it an ambiguous sign of more competition entering this space? Tony Cheng: We have definitely seen increased competition in various markets, but that competition is really more for vanilla asset-intensive transactions. That is what many of those vehicles are being set up for. Our sweet spot is transactions that have both asset and biometric risk. We feel we are uniquely positioned to do that. Whether in Japan, where the market is large, or in the U.S., we are very optimistic about our ongoing momentum. Q1 was a strong proof point of our success in executing on our strategy in this area. Operator: The next question comes from Analyst with Barclays. Please go ahead. Analyst: Good morning. On in-force management actions you have done over time, it felt like there was a heightened element over the last few years. Where are we in that time frame—still more to do, or more normal course now? Specifically on older-age experience, are you still seeing the need to do actions on those blocks? Axel Philippe Andre: Managing our in-force business is a core part of our strategy and will continue to be. We have had very good success with these efforts over the past several years. In the first quarter, we did not have any notable in-force management actions. We expect to remain active going forward, but the timing and size of these actions are unpredictable. We are projecting a more limited financial impact compared to recent experience in the near term. Analyst: Thanks. Second, in the U.K., there is proposed regulation around captive reinsurance and limiting some uses of that. Is there anything around that that could be an opportunity or a risk to your structures? How might that impact you? Jonathan William Porter: I believe you are referring to the recent PRA information related to counterparty charges. It is very new, but at this point we do not expect it to have a big impact on our business. It is related to funded reinsurance, and the majority of our longevity business in the U.K. is done on a swap basis, where we take just the longevity risk and not the asset risk. About 90% of our in-force longevity block is on a swap basis. Initial industry takeaways are that there might be a compression of overall economics for ceding companies due to the higher charge, but there will also be increased linkage to reinsurer credit quality and collateral strength that should favor strong counterparties like Reinsurance Group of America, Incorporated. Operator: There is a follow-up question from Wesley Collin Carmichael with Wells Fargo. Please go ahead. Wesley Collin Carmichael: Apologies. Can you hear me? My follow-up is on the economic biometric experience—the $343 million that is going to be recognized in future periods. Is it material over the next twelve months? How much of that comes in, or is the duration longer so that it is probably pretty small? Axel Philippe Andre: Thanks for the question. The difference between the economic claims experience that has not yet been recognized through the accounting results has grown in recent periods and will come through the accounting results over a long time period. The current annual impact to future earnings is baked into our expectations. It is approximately $20 million a year. Wesley Collin Carmichael: Got it. Thanks, Axel. And a regulatory follow-up: over the past year and a half, the NAIC has worked on Actuarial Guideline 55 on asset adequacy testing for reinsurance. I think it is disclosure only, but is there any impact to Reinsurance Group of America, Incorporated? Is this material for the industry? Axel Philippe Andre: In the U.S., our standard business practice utilizes our flagship U.S. entity, RGA Re, as a reinsurer facing clients. As an onshore entity, our clients can confidently transact with a AA-rated counterparty and be exempt from AG 55. We believe that is an attractive option for our clients, especially combined with our broader solutions and the partnership mindset that we bring to long-term reinsurance relationships. We constantly model transactions across a variety of accounting and capital frameworks and have an open dialogue with our regulators on the expected impact of any regulations. Our business model does not rely on any particular regulatory regime, so the additional requirements of AG 55 are really just an extension of our existing practices from a regulatory perspective. We do not expect it to have a material impact for Reinsurance Group of America, Incorporated. Operator: This concludes our question and answer session. I would like to turn the conference back over to Tony Cheng for any closing remarks. Tony Cheng: Thank you for your continued interest in Reinsurance Group of America, Incorporated. We are pleased with the strong start to the year, and we look forward to continuing to deliver in the future. This concludes our Q1 conference call. Thank you. Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
Operator: Good day, and welcome to the Plains All American Pipeline, L.P. and PAGP First Quarter 2026 Earnings 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, you will need to press star 11 on your touch-tone telephone. Please note this call is being recorded. I would now like to turn the call over to Blake Fernandez, Vice President of Investor Relations. Please go ahead. Blake Michael Fernandez: Thank you, Michelle. Good morning, and welcome to the Plains All American Pipeline, L.P. First Quarter 2026 Earnings Call. Today’s slide presentation is posted on the Investor Relations website under the News and Events section at ir.claims.com. An audio replay will also be available following today’s call. A condensed consolidating balance sheet for PAGP and other references are in the appendix. Today’s call will be hosted by Willie Chiang, Chairman, CEO and President, and Al P. Swanson, Executive Vice President and CFO, along with other members of our management team. With that, I will turn the call over to Willie. Wilfred C.W. Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. This morning, we reported first quarter adjusted EBITDA attributable to Plains All American Pipeline, L.P. of $730 million. Al will cover the details on our results in his portion of the call. Let me start with the macro environment, which has changed significantly since our last call. Recent geopolitical events have reiterated the importance of reliable, secure, and responsibly produced energy. The closure of the Strait of Hormuz has significantly disrupted global shipping channels and Middle East supply, contributing to stronger commodity prices over the past couple of months. In response, excess floating storage has been drawn down, and strategic petroleum reserves are being released globally. While this helps balance the market deficit on a short-term basis, we are seeing a more constructive oil market developing on a longer-term basis. We expect this destocking environment to continue over the next number of months and ultimately drive a restocking phenomenon longer term, as countries replenish depleted strategic petroleum reserves globally. Post-war, we would not be surprised to see several countries restock their SPRs above pre-war levels, essentially creating an additional layer of demand into the future, which should support prices and incent producer activity. On the supply side, OPEC production capacity post-war remains uncertain, but we suspect spare capacity will be tighter based on a slower recovery of shut-in production and infrastructure damage during the war. We believe the conflict shifts the focus towards more geopolitically stable regions to ensure security of supply. Against this backdrop, North America, including the Permian, remains well positioned to play a critical role in meeting global demand. As this occurs, the value of existing infrastructure in the ground should continue to increase over time. For these reasons, we believe Plains All American Pipeline, L.P. is well positioned for both the near-term volatility and longer-term macro environment. Based on these market dynamics and the growth trajectory that we see for our business, we have increased our initial 2026 EBITDA guidance. As highlighted on slide four, we are increasing the midpoint of our full-year 2026 adjusted EBITDA guidance by $130 million to $2.88 billion. The NGL segment EBITDA is now expected to be $170 million, following first quarter outperformance of $45 million and the updated divestiture timing now in May 2026. Our trajectory of growth this year is underpinned by three key drivers: the sale of our NGL assets, Cactus III synergy capture and streamlining. The growth of our EBITDA is paced with the execution of these initiatives and is enhanced by capturing optimization opportunities that have been substantially secured over the next three quarters. We are also seeing increased producer interest in both Canada and the United States for additional connections to our system. The combination of all these factors will ramp up through the year and position us well into the future. Our premier crude oil footprint continues to support stable fee-based cash flows in a variety of macro backdrops. As global markets turn to North America for long-term energy supply, we are well positioned across key producing basins and downstream markets to drive multiyear growth. We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our assets, maintaining a flexible balance sheet, and continuing to return cash to unitholders via our disciplined capital allocation framework. With that, I will turn the call over to Al to cover our quarterly performance and other financial matters. Al P. Swanson: Thanks, Willie. Slides five and six contain adjusted EBITDA walks that provide additional detail on our performance. For the first quarter, we reported crude oil segment adjusted EBITDA of $582 million, which was broadly in line with our internal estimate and includes a full-quarter contribution from the Cactus III acquisition, offset by a number of one-off items including winter weather impacts in the Permian, system maintenance, and timing of minimum volume commitments. Moving to the NGL segment, we reported adjusted EBITDA of $145 million, reflecting a stronger-than-expected contribution from higher straddle production and improving frac spreads in March. A summary of 2026 guidance and key assumptions is on slide seven. Growth capital remains $350 million, while maintenance capital was increased to $185 million reflecting ownership of the NGL assets into May. Regarding the $130 million increase in EBITDA guidance, key drivers are outlined in the waterfall on slide eight. The NGL segment increased by $70 million, driven by outperformance in the first quarter along with ownership of NGL assets into May. The oil segment was increased by $60 million, driven by captured optimization opportunities, FERC tariff escalators, increased spot tariff volumes, and increased West Coast volumes. To the extent that the elevated commodity environment persists into the second half of the year, we would expect to capture incremental opportunities. For 2026 guidance, we continue to assume Permian crude oil production to be relatively flat year over year. While we have yet to see a meaningful shift in U.S. producer behavior, any increase in activity would likely benefit 2027 and beyond. We expect an improving back end of the crude oil curve and removal of natural gas takeaway constraints as new egress projects start up later this year to drive incremental activity throughout the year. As illustrated on slide nine, we remain committed to generating significant free cash flow and returning capital to unitholders while maintaining financial flexibility. For 2026, we expect to generate $1.85 billion of adjusted free cash flow excluding changes in assets and liabilities, and excluding sales proceeds from the NGL divestiture. Our pro forma leverage at the end of the first quarter was 4.1x, reflecting the Cactus III acquisition. First quarter leverage pro forma for the NGL sale would decrease to approximately 3.5x, and we would expect leverage to migrate towards the low end of our target range of 3.25x to 3.75x by the end of the year. We expect net proceeds from the NGL sale to be approximately $3.3 billion, which is approximately $100 million higher than our prior estimate. Our acquisition of Cactus III last year has mitigated the tax liability of the unitholders resulting from the NGL divestiture. As a result, we no longer expect to pay a special distribution following the closing of the NGL sale. Before handing it back to Willie, I would note that both current and deferred taxes are elevated on the statement of operations this quarter because of the restructuring activities associated with the NGL sale. There was no cash tax impact in the quarter, as payment of the related taxes will be made in conjunction with closing or in future periods. With that, I will turn the call back to Willie. Wilfred C.W. Chiang: Thanks, Al. In the midst of volatile energy markets, we remain steadfast and focused on executing our three initiatives for 2026: closing the NGL sale, driving synergies on Cactus III, and advancing our streamlining initiatives. Our efficient growth strategy has positioned us well to execute through a range of market environments, generating durable cash flow and creating long-term value. Importantly, the improving oil macro environment is starting to present additional organic investment opportunities with strong returns. We continue to evaluate both organic and inorganic opportunities in a disciplined manner. Capital investments help underpin long-term EBITDA growth, but they must meet our return thresholds and provide visibility into future return of capital to unitholders. Our transition to a pure-play crude midstream company, coupled with the acquisition of Cactus III, is proving timely as tensions in the Middle East position North America as a key source of global energy supply into the future. Before I turn the call over to Blake, I would like to make a brief comment about our pending transaction with Keyera. In terms of timing, as reported by both Keyera and Plains All American Pipeline, L.P. in separate releases earlier this week, we are targeting to close the transaction this month. While it is unfortunate that the Competition Bureau has chosen to challenge the transaction, their lawsuit does not prevent the parties from closing the transaction, which both Plains All American Pipeline, L.P. and Keyera are committed to do. I realize you may have some additional questions, but I hope you understand it would be inappropriate for us to comment any further on this matter, so we would appreciate it if you would refrain from asking questions regarding the transaction. Blake, I am now going to turn it over to you to lead us through Q&A. Blake Michael Fernandez: Thanks, Willie. As we enter the Q&A session, please limit yourself to two questions. This will allow us to address as many questions as possible from participants in our available time this morning. With that, Michelle, we are ready for questions. Operator: Thank you. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. Our first question comes from Brandon B. Bingham with Scotiabank. Your line is open. Brandon B. Bingham: Thanks. Good morning, everybody. I just wanted to ask on the new guide. If I look at your sensitivity and the new crude price expectations, it would imply that, at least on price movements alone, the crude contribution should probably be higher than what is currently shown. Could you just walk us through what is baked into the new guide and maybe the embedded outlook in there? Al P. Swanson: Sure, Brandon. Our original guidance for the year assumed a $60 to $65 environment for 2026, so roughly a $62 midpoint. We came into the year highly hedged at roughly those levels. The $85 environment that we are talking about for the future is roughly the strip from June through December when we looked at it. So there would be some benefit based on crude prices on our PLA, but because we had hedged quite a bit before entering the year, that sensitivity we give is just a raw sensitivity. In order to make it more meaningful, we would have had to have disclosed to you the hedge position at the beginning of the year, which we have not historically done. So what I would say is that the first quarter performance and the nine months of our guide are very minimally impacted by actual PLA pricing. Brandon B. Bingham: Very helpful, thank you. And then maybe just wanted to ask about, in light of some of the commentary in your prepared remarks about a more constructive longer-term market and just the whole macro environment as it stands today, how are you thinking about the potential for the EPIC expansion at this point? Jeremy L. Goebel: Brandon, good morning. We are excited about the opportunities around our entire long-haul portfolio and are having constructive dialogue with existing customers and new customers looking for secure supply from the United States. That results in some spot activity, but longer term the expectation is to contract at higher rates than maybe before, with potentially new counterparties. That would pertain to recontracting existing pipeline capacity and expansions as well. We are looking at all of the above and hope to have updates in the coming quarters on how that looks. Brandon B. Bingham: Okay. Great. Thank you. Operator: Our next question comes from Gabriel Philip Moreen with Mizuho. Your line is open. Gabriel Philip Moreen: Hey, good morning, everyone. Maybe I will just ask the Permian macro question, Willie, in terms of your best outlook. I think previous years you talked about 200 thousand-ish barrels a day year-over-year growth. Best venture at this point, I realize there are a lot of things in play and things are changing quickly, but do you think that goes significantly higher from here, 400 thousand, 500 thousand in 2027? I am just curious what your latest thoughts are there. Wilfred C.W. Chiang: Yeah, Gabe. Jeremy may have some additional comments, but I will give you my thoughts. U.S. producers have remained very disciplined as far as capital allocation, and they are looking at the back end of the curve to see where it goes. WTI is roughly $70, and our view is when you start getting into $75 and above, increased activity happens. There are also some other short-term operating constraints that are limiting production a bit. The Permian has some natural gas takeaway constraints. There are new lines that are being built and being commissioned as early as later this year, so the thought is that alleviates itself. Our assumption for the Permian this year was flat, and if there is some upside, obviously we benefit from it. We are not giving a formal guide, but we would expect growth going forward and probably some momentum of volumes that will increase production, maybe with a little bit of a flush later this year or early next year. I think it really depends on the back end of the curve, but the systems are ready to go. Gabriel Philip Moreen: Thanks, Willie. And then maybe if I can ask on the sustainability of some of the marketing opportunities you are currently seeing. Can you talk about some of the spreads that you are seeing and also the value of dock space, the extent you are debating internally maybe terming some of those out at higher prices? And then, the steepness of the curve and backwardation—how that is playing with your storage. Is that helpful? Is that a hindrance? Jeremy L. Goebel: Gabe, without getting into specific strategies, time, location, and quality spreads—all that volatility—we benefit from all of those because we have the assets, the supply position, and the trading function to capture those opportunities. It is hard to forecast those when they arrive. That could be time spreads—do you sell a barrel now and buy it back later by emptying a tank? Differences in grades between Canada and the United States, differences in Gulf Coast grades—all of those are strategies and things we can take advantage of with our integrated system. We are excited about those opportunities. What we have put in the forecast has been substantially captured over the next three quarters. This is a very volatile period; we have only been in this sixty to seventy days, so it is hard to forecast that to continue. But if it continues, we would expect to capture more opportunities going forward. And just to add on, we estimate there is close to 200 thousand to 300 thousand barrels a day of oil that is behind pipe in the Permian Basin. So that flush production Willie referenced is substantial, and a lot of that is in the more constrained areas of the Delaware Basin, where we have a broader footprint, including New Mexico and other places. If you look at the Waha spread, flat price in Waha has been largely negative since last September. That is what is accumulating all of this to go, and as gas prices recover, productive capacity is already there to add. As you add more, that puts more pressure on potentially long-haul spreads and the ability to term up contracts at greater rates. We are seeing more demand from new customers, and we are seeing potentially flush production. Those should all help convert short-term opportunities into longer-term opportunities. Wilfred C.W. Chiang: And if you look at our numbers, long-haul has increased and margins on that have also improved. I think we are moving to a more structurally full-pipe situation as we go forward, which should be constructive for us. Gabriel Philip Moreen: Appreciate it. Thanks, guys. Operator: Our next question comes from Manav Gupta with UBS. Your line is open. Manav Gupta: Good morning. I just wanted to focus a little bit on the weather impact. I think it is about $49 million quarter over quarter. I am trying to understand, since you mention timing of minimum volume commitments, is there a possibility some of this can be reversed in 2Q—some of what you lost in the current quarter comes back into the second quarter? If you could talk a little bit about that. Jeremy L. Goebel: Yes, Manav. Those are two different things. With regard to weather, weather is just production shut in for a period—you cannot make that back, but the flush production does come back. With regard to the timing of MVCs, that is continuous in our process. If you look at some of the earnings calls from others about their dock performance or other things in the first quarter, freight was really expensive and margins did not have people moving, so long-haul volumes were down across the industry. But that has completely reversed in timing. So you would absolutely expect that to be recovered—it is just a question of those MVCs accrued versus when they are paid. All the pipelines are full again, and the MVCs are being reversed. Wilfred C.W. Chiang: Manav, if you are referring to slide five, I think the point of your question is on that negative $49 million. There are a bunch of one-time events in there that you are absolutely correct will not occur again as we go forward. Manav Gupta: Perfect. And if you could also talk about the very strong results from the NGL segment in the first quarter versus the last quarter—some of the drivers of what helped you deliver much stronger earnings in that segment quarter over quarter? Thank you. Jeremy L. Goebel: Sure, Manav. Higher border flows than expected—you had very full storage in Canada and continued production, which required volumes to be exported, and those were exported through our Empress asset. So higher border flows lead to more straddle production, and that would all be unhedged and impact results. In addition, higher frac spreads towards the end of the first quarter contributed. I would say those two, and that has continued into the second quarter, which is reflected in the increase in guide for the NGL business through closing. Manav Gupta: Thank you. Operator: Thank you. Our next question comes from Michael Jacob Blum with Wells Fargo. Your line is open. Michael Jacob Blum: Thanks. Good morning, everyone. My question is on the guidance, the crude segment. It sounds like most of the increase is optimization that you have already locked in, and then maybe the rest is PLA. I just want to make sure I understood that. And then, if prices stay elevated for the balance of the year, would there be upside to the guide in the crude segment, or is that already baked into the numbers? Wilfred C.W. Chiang: Thanks, Michael. Great question. Our assumptions are that the numbers in there are really what we have captured that will roll off through the year as we actualize optimization efforts. And you are correct—if we have a stronger macro environment and higher prices, there definitely is upside. Michael Jacob Blum: Great. Thank you. Operator: Our next question comes from Jeremy Tonet with JPMorgan Securities. Your line is open. Jeremy Tonet: Hi. Good morning. Just wanted to see what you are seeing locally, ear to the ground there, as far as producer activity—whether rigs are being picked up by the independents or larger drillers as well—and what would be needed across the strip to gain the comfort to do that? How do you think production could uptick here, and what do you see? Jeremy L. Goebel: Jeremy, good morning. You have already seen about 15 rigs added back, and we would expect some to continue. But as Willie mentioned, there is a bit of a throttle right now—you cannot add more natural gas to the system if flaring is not allowed. Productive capacity is there; rigs being added now would impact 2027. I think there was a bit of confusion in the market in that the products market and the physical crude market are substantially tighter than the financial markets would indicate, which means the back end of the curve has to come up. It is very difficult, even if you opened the Strait of Hormuz tomorrow, to get everything back in order the way it was. It is going to take a while for shipping to start. You have to empty tanks before you can start back up production. Products markets are just empty in some places. There is a real dislocation that will take time. Some integrators have stated for every day it is down, it is three days to get back up. So it is potential for months to get out of this even if it were resolved today. I think that is the part producers are waiting on—more assurance in the back end of the curve to bring rigs on. At this point, the service companies have stacked equipment. It takes capital and commitments to bring those back. Producers need commitment from prices that they will be there, and the longer this goes, the more likely that will occur. But the dislocation in the back end of the curve right now is maybe causing some hesitancy, which is going to prolong the problem. Jeremy Tonet: Got it. That is helpful. How do you think that impacts basis over time and what it could mean for future egress expansion? Jeremy L. Goebel: It is constructive for basis—more production and more demand on the water. Specifically in the Corpus market and some of the more efficient docks, you are seeing higher pricing relative to even the screen. On a prolonged basis, that says there are new buyers coming to America. Vessels that used to be pointed at other locations intend to come back and forth to the United States for a while. You are seeing that on the NGL side, you will see it on the LNG side, and on the crude side. More buyers and more demand is generally constructive for spreads, and we would expect to match either our suppliers or our customers with that and, hopefully, offer service at a higher rate. Wilfred C.W. Chiang: Jeremy, you are aware that on Cactus III we have expansion capacity. As we have always said, we are going to pace that with market demand and commercial contracts. As we have gotten to know the project and assessed it, we have the ability to do that in a phased approach. It is fairly flexible for us to get additional volumes. It is not a binary big expansion—there are ways to do it in phases which should match customer demand. Generally speaking, in a higher price environment, there are more opportunities because there is a pull on the whole system, and optimization opportunities become more prevalent versus a lower price environment where less is moving. Jeremy Tonet: That is helpful. Thank you. Operator: Thank you. Our next question comes from Jackie Kalidas with Goldman Sachs. Your line is open. Jackie Kalidas: Hi, good morning. Thank you so much for the time. First, I was wondering if you could comment on the progress of your cost reduction initiatives. Are these on track with expectations at this point, and is there any potential for upside capture here? When should we expect Plains All American Pipeline, L.P. to realize more significant efficiencies through the year? Christopher R. Chandler: Good morning, Jackie. We are on track to capture the efficiencies—$50 million by the end of 2026 and an additional $50 million in 2027. We have already made a number of changes, some unrelated to the NGL transaction and some in anticipation of the NGL transaction. We feel confident in the number. There is always upside—we are always looking for additional opportunities, and we will certainly pursue any that we find. We are not prepared at this time to change the $100 million target we have through 2027, but we are on track and things are going well. Jackie Kalidas: Thank you. And then one on capital allocation. With debt reduction as a near-term focus, particularly following the pending NGL sale, when can we expect a shift—or what would allow a shift—from debt paydown to a larger focus on potential buybacks or preferred paydowns? Al P. Swanson: Clearly, with the proceeds from NGL, we intend to take that and pay down a little over $3 billion of debt, which would be the term loan, the outstanding CP we have, and a $750 million note that matures later this year. Post that, we expect to be right at the midpoint of our leverage range—around 3.5x—and expect that to migrate down, which will then bring us back to where we have been for the last number of years prior to the EPIC acquisition, with leverage towards the low end of our range. Our capital allocation, first and foremost, is focused on maintaining distribution growth, funding investments—whether organic or M&A-related—as well as looking at taking out preferreds should leverage remain at or below the bottom end of the range, and opportunistic share repurchases. So, once we get through the NGL sale and deployment of the proceeds, we return to the framework we have been operating under for the last several years. Jackie Kalidas: Great. Thank you. Operator: I am showing no further questions at this time. I would like to turn the call back over to Willie Chiang, President, CEO and Chairman, for closing remarks. Wilfred C.W. Chiang: Michelle, thanks. We appreciate everyone’s support and attention, and we look forward to seeing you on the road. Stay safe. Thank you very much. Operator: Thank you for your participation. You may now disconnect. Everyone, have a great day.
Operator: Thank you for your continued patience. Your meeting will begin shortly. Good morning, ladies and gentlemen, and welcome to the First Quarter 2026 Arbor Realty Trust, Inc. 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. If you want to remove yourself from the queue, please press 2. Please be advised that today's conference is being recorded. I would now like to turn the call over to your speaker today, Paula Eliano, Chief Financial Officer. Please go ahead. Ivan Paul Kaufman: Thank you, Stephanie, and good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust, Inc. This morning, we will discuss the results for the quarter ended [inaudible]. Some of those short reports appear to have provoked investigative interest from regulators, as well as class actions and derivative claims from plaintiffs' law firms. We have steadfastly maintained that these attacks and claims made against us were baseless and misleading. We are pleased to report in that regard that we believe any pending investigations that were initiated in the wake of the short reports have now been closed without any action against us. Additionally, and very recently, our motion to dismiss the class action lawsuit against us was granted and the claims dismissed without prejudice. We have been very pleased with these developments. Although our management team never lost sight of our shareholders and their interests during this challenging period, we are happy to put this chapter behind us and focus on creating shareholder value free of these costly and unwarranted distractions. On our last earnings call, we discussed at length how we feel we are at the bottom of the cycle, have ring-fenced the majority of our nonperforming and subperforming loans, and are working exceedingly hard at accelerating the resolution of these loans into performing assets, which will allow us to start to build back our run rate of interest income for the future. This is our top priority, as these loans are having a tremendous drag on our earnings. We also mentioned that if rates went down, the process would accelerate, and if rates increased, it would lead to a longer period of time needed to resolve these loans. Unfortunately, given the geopolitical landscape, the 5-year and 10-year have actually increased roughly 50 basis points in the first quarter, which is certainly pushing our timetable out a little bit. Despite these challenges, we continue to make progress in working through our assets, and again, we believe we have a clear line of sight on resolving a bulk of these assets over the next several quarters. We ended the first quarter with approximately $500 million in delinquent loans and around $500 million of REO assets for total nonperforming assets of roughly $1 billion. These numbers are down approximately $100 million from the last quarter, or a 9% reduction in risk. Again, our goal is to continue to accelerate the resolution of our non-interest-earning assets and redeploy the capital into performing loans and grow our run rate of income. We had $200 million of resolutions, which is consistent with our goal of continuing to shrink our total delinquencies each quarter. Additionally, we have line of sight on roughly another $200 million to $300 million of delinquencies we expect to resolve in the second and third quarters, in addition to another $100 million we believe we have the potential to resolve by the end of the year. We also remain optimistic that we can reduce our REO assets to around $200 million to $300 million by the end of 2026, even adding an additional $100 million of REO assets over the next few quarters, which were already reflected in our delinquency numbers as of March 31, 2026. We have been actively marketing several of these assets for sale, which will go a long way toward helping reduce the drag on earnings and increase our run rate of income for the future. As we discussed in detail last quarter, we continue to focus heavily on our legacy portfolio, which currently sits at approximately $5 billion. Approximately $500 million of these loans are delinquent, which we are working through very aggressively, and approximately $1.5 billion continue to perform in accordance with their original terms. The other $3 billion have modified to pay-and-accrue features, of which only half of these loans we are accruing the full rate of interest on. We continue to make progress in reducing the amount of accrued interest outstanding on certain loans by resetting the rates to today's market spreads and requiring that the borrowers pay down a large portion of the outstanding accrued interest as part of the modified terms. In fact, we are currently working on several loans totaling approximately $400 million that we think we can modify in the second and third quarters, which will result in receiving approximately $19 million in back accrued interest, reducing the loans' outstanding accrued interest down to around $1.1 billion. This is a very effective strategy that will also put these loans in a much better position to cover our debt service from property operations and is resulting in improved terms from our line lenders. This, combined with having the proper guarantees and requiring the borrower to commit significant additional capital to support the deals, gives us comfort about how these loans will perform going forward and will greatly limit the potential risk of future losses. As Paul will discuss in more detail, we produced distributable earnings of $0.18 per share in the first quarter. Clearly, our earnings are being greatly affected by the significant drag of our non-interest-earning assets as well as from resetting legacy loans to today's market rates. This is something we believe will improve in the next several quarters. We continue to make progress in resolving our legacy issues and growing our business volumes. Our first-quarter numbers were also affected, as we expected, by a normally slow start in the agency business from the seasonal nature of that platform, which was also impacted by the increase in rates. On our last call, we mentioned we would continue to evaluate our dividend policy based on how quickly we think we could resolve our delinquent loans and subperforming loans and reduce that drag on earnings. With the recent increase in rates as well as the expectation that rates can continue to remain volatile, we are now predicting a slightly longer timeline in resolving these loans. As a result, the Board has decided to reset our quarterly dividend to $0.17 per share. We believe this is the dividend we will be able to cover from earnings for the rest of the year, with the potential for growth in the later part of the year and in 2027, as we work aggressively to reduce the earnings drag from our legacy assets and improve our run rate of interest income. We also believe it is very prudent in the current environment to retain our capital to fund the growth of the platform and to buy back stock where appropriate, which generates strong risk-adjusted returns on our investment. Turning now to the production numbers for the first quarter in our different business lines. In our agency platform, we originated approximately $[inaudible] million in volume, in addition to our first CMBS brokerage transaction of $88 million, for total first-quarter volume of $795 million. These numbers were in line with our previous guidance, as we normally experience a lighter first quarter due to the seasonal nature of the business. Despite the challenging rate environment, we are seeing an influx of new opportunities that are increasing our current pipeline significantly. We are off to a good start for the second quarter with approximately $350 million of volume closed through May 2026, and we still feel we could produce similar volumes as last year with a strong second half of the year, which is obviously great for our platform. In our balance sheet lending business, we originated $400 million of volume in the first quarter. This business continues to be incredibly competitive, and as a result, we are being highly selective and are focusing our attention on launching deals with high-quality sponsors. The bridge lending business is a very important part of our overall strategy as it generates strong levered returns on our capital in the short term while continuing to build up a pipeline of future agency deals. With the significant efficiencies we continue to see in the securitization market and with our line lenders, we are able to produce strong returns on our capital despite the competitive landscape. In fact, in the first quarter, we issued another CLO with very attractive pricing and terms. We priced the deal at 1.73% over the index and 88% leverage with a 2.5-year replenishment feature. This was an incredible accomplishment, especially in light of the fact that we priced the deal during the height of the Iranian conflict. We continue to have access to this market and are a leader in this space, which allows us to finance our new originations with nonrecourse, non-mark-to-market debt to drive higher returns on our capital. In our single-family rental business, we experienced an unusually slow start to the year, which was primarily driven by the noise surrounding the housing bill being considered. This bill, in its current form, surprisingly does not have a full carve-out for the build-to-rent business as initially expected and definitely kept folks on the sidelines due to this uncertainty. There has been a tremendous amount of talk lately that this bill will not get passed in its current form and that there will be serious considerations to building in the appropriate carve-outs for the build-to-rent business, including removing the for-sale provisions in year seven that currently exist in the proposed legislation. As a result, things are starting to loosen up as people believe this will occur, and we expect to see a real uptick in our new originations in this platform going forward. We originated approximately $125 million in the first quarter and expect we will see a significant increase in new volume numbers over the next few quarters. This is a great business as it offers us returns on our capital through construction, bridge, and permanent lending opportunities and generates strong levered returns in the short term, providing significant long-term benefits by further diversifying our income stream. In our construction lending business, we continue to see our share of high-quality deals with very experienced developers. We closed one deal for $113 million in the first quarter and are expected to close another $250 million in the second quarter. Our pipeline continues to grow each day, giving us comfort in our ability to hit our target of between $750 million and $1 billion of production in 2026. In summary, we are laser-focused on resolving our legacy book as quickly as possible, which will reduce the significant drag that these assets are having on our earnings. We believe we have a clear path to resolving the majority of these over the next several quarters, which will set us up nicely to build our earnings base heading into 2027. We also continue to focus on growing the many different verticals we have and generating strong returns on our capital that are being enhanced by the significant improvements in efficiencies we continue to create on the right side of our balance sheet. We will continue to work exceedingly hard through the bottom of this cycle, and as always, we remain focused on maximizing shareholder value. I will now turn the call over to Paul to take you through the financial results. Paul Anthony Elenio: Thank you, Ivan. In the first quarter, we produced distributable earnings of $37.4 million, or $0.18 per share, excluding one-time realized losses of $23 million in the resolution of certain delinquent and REO assets. On our last quarter earnings call, we guided to around $10 million of realized losses in Q1, all of which we had previously reserved for. We had some success resolving some loans ahead of schedule, resulting in an additional $13 million in losses in Q1. We will continue to do our best to give guidance on expected resolutions, although it is a very fluid process and often hard to predict the exact timing of these resolutions. Having said that, our best estimate is a range of approximately $15 million to $25 million of realized losses a quarter for the balance of the year that we will continue to reserve for as we receive more price discovery on these assets. As Ivan mentioned, our first-quarter numbers were in line with our expectations, especially given the light first quarter we usually experience in our agency business. We also expect it will take a little longer to work through our legacy book given the current rate environment, which will likely keep our earnings in a similar range for the next few quarters before we start to see an increase in our run rate towards the end of the year as we reduce the drag on our earnings from our underperforming assets. This should put us in a position to start to show growth in our earnings in 2027 as we realize the full benefit of converting our delinquent assets into performing loans. With that said, the second and third quarters of this year are likely to be our low watermark and hover around $0.17 per share as we continue to reset certain subperforming loans to lower rates that will affect our earnings run rate for the next few quarters. We do expect this number to grow in the fourth quarter with further upside potential in 2027 as we are working diligently to resolve nearly all of our nonperforming assets over the next several quarters. We are estimating the second quarter will actually come in around $0.15 per share, as there is roughly $0.02 per share of unusual drag from some inefficiencies related to our financing costs that are resulting in a temporary overlap of interest for a few months. This includes the $100 million ramp feature in our new CLO that we expect to be able to fully utilize by May 2026, and the timing of redrawing on our repo lines to pay off our 4.5% unsecured notes last week, as we used some of the proceeds from the December bond issuance to temporarily pay down higher-cost repo debt until the April notes came due. Given the nonrecurring nature of this expense, combined with the expectation that we will resolve the bulk of our delinquent loans by the end of the year, we believe we will be able to start to grow our earnings in the fourth quarter, with additional upside expected in 2027 as well. In the first quarter, we recorded an additional $12 million of OREO impairments to properly mark these assets to where we think we can effectuate a sale. We have engaged brokers to sell the bulk of these OREO assets quickly and create interest-earning loans for the future. As Ivan mentioned, we are expecting to take back roughly another $100 million of assets as we work to the bottom of the cycle, $50 million to $75 million of which will likely happen by the end of the second quarter of 2026. Most of these assets are already reflected in our delinquent numbers. Again, we are working very diligently to dispose of these assets quickly, with an estimated $100 million to $150 million of sales scheduled in the second quarter and another $200 million to $250 million expected in the third and fourth quarters. This should put our OREO assets between $250 million and $300 million by the end of 2026 and greatly improve our run rate of income for the future. We also booked another $9 million of specific reserves on our balance sheet loan book, for total OREO impairments and specific reserves of approximately $21.5 million in the first quarter. We expect to book similar levels of reserves and impairments over the next few quarters, which is consistent with our strategy of accelerating the resolution of problem loans as we look to mark certain loans that we are marketing for disposition to where we think we can execute a sale. In our GSE agency business, we originated approximately $[inaudible] million in volume and had $671 million in loan sales in the first quarter. The margins on these loans were very healthy at 1.86% this quarter compared to 1.36% last quarter, which was mostly due to a shift in product mix and loan size, with some larger deals in Q4 that contained lower margins. We also recorded $10 million of mortgage servicing rights income related to $734 million of committed loans in the first quarter, representing an average MSR rate of 1.32%. Our fee-based servicing portfolio was approximately $36.3 billion at March 31, 2026, with a weighted average servicing fee of 35.5 basis points and an estimated remaining life of six years, continuing to generate a predictable annuity of income going forward of around $129 million gross annually. In our balance sheet lending operation, our investment portfolio was approximately $12 billion at March 31, 2026, with an all-in yield on that portfolio of 7.03%, compared to 7.08% at December 31, 2025. This was mainly due to resetting rates on certain legacy loans and from the slight decline in SOFR. The average balance in our core investments was approximately $12.04 billion this quarter compared to $11.84 billion last quarter, reflecting the full effect of our fourth-quarter growth. The average yield on these assets increased to 7.5% from 7.38% last quarter, mainly due to significantly more back interest and default interest collected in Q1 on loan resolutions, which was partially offset by a decline in SOFR in the first quarter. Total debt on our core assets was approximately $10.7 billion at March 31, 2026. The all-in cost of debt was approximately 6.4% at March 31, 2026, versus 6.45% at December 31, 2025, mainly due to a reduction in SOFR along with a lower rate on our new CLO issuance in March 2026. The average balance on our debt facilities was approximately $10.4 billion for the first quarter compared to $10.1 billion in the fourth quarter, mainly due to funding our fourth-quarter growth and from a full quarter of the new unsecured debt issued in December 2025. The average cost of funds in our debt facilities was 6.52% in the first quarter, down from 6.66% for the fourth quarter, excluding interest expense from leveraging our OREO assets, the debt balance of which is separately stated in our balance sheet and therefore not included in our total debt on core assets. This decrease is mostly due to a reduction in SOFR, which was partially offset by the unsecured debt we issued in December 2025. Our overall spot net interest spreads were flat at 0.63% at both March 31, 2026, and December 31, 2025. In summary, we continue to make steady progress in resolving our delinquencies and are extremely focused on completing the process as quickly as possible, which will significantly reduce the drag on our earnings. This, combined with growing our origination platforms, will go a long way toward allowing us to increase our run rate of income in 2027. That completes our prepared remarks for this morning. I will now turn it back to the operator. Operator: We will now open the call for questions. We will take our first question from Jade Rahmani with KBW. Please go ahead. Your line is open. Jade Joseph Rahmani: Thank you very much. Could you comment on the outlook for SFR originations picking up and also if you can give any color on the types of borrowers that you are dealing with, the number of properties they hold, what their intended hold period is, and how the financing terms from counterparties are changing the cap rates and return profile of that business? Ivan Paul Kaufman: Can you repeat the first part of that question? It did not come clearly. Jade Joseph Rahmani: Yes, sorry about that. Could you comment on the outlook for the single-family-for-rent originations business? If you could provide some color on the types of borrowers you are dealing with, whether they are institutional or whether they are smaller, the number of properties they hold and their hold period, and about your comments regarding the housing legislation and how that is changing that business? Ivan Paul Kaufman: Sure. Let me respond to that thought first. Let us talk about the legislation because I think the business got frozen a little bit initially with the concern and the fear. But the consensus now, a very strong consensus, is those prohibitions that were put into that bill restricting closing the sale are not going to be put in the bill. As a result, we have seen real momentum over the last couple of weeks in that business. We already have approximately $200 million and we expect to exceed approximately $300 million for the quarter. So we are back in line and back in pace. Enthusiasm is back in the business. Most of the people we are dealing with—many of their investors are institution-based. A lot of them have anywhere between five and thirty assets. That seems to be the typical profile of what we are dealing with. Some have high-net-worth families, but a lot of them are institution-based. As for cap rates, returns, and how we are seeing the financing side of that business, the credit markets are extremely aggressive right now, and the cap rates are very aggressive. It is a very well-liked business. We think there is a lot of momentum in the business. So it is still viewed very favorably. Anything that is completed and goes to a bridge loan is priced extraordinarily competitively, and the agencies—Fannie and Freddie—as well as the CMBS market love this product. Jade Joseph Rahmani: Great, and that is really good to hear in terms of the resiliency of that asset class. Just turning to the outlook on credit, I think you touched on it that the 5-year and 10-year move this year is kind of slowing the pace of resolution. My main question would be if there are any new delinquencies or new defaults you would expect as a result of where the 5-year and 10-year are. I imagine that there is at least some cohort of borrowers that have been kind of on the fence as to what they are going to do, and the outlook for rates makes a huge difference in their consideration. So if you could just comment on how the 5-year/10-year move this year has affected the credit outlook? Ivan Paul Kaufman: I think it is very clear from management’s standpoint that we have taken a look at the change in the rate environment. In the fourth quarter, we clearly had a drop in rates and there was a lot of liquidity flowing into the sector and a lot of enthusiasm. Now, with the Iran situation and rising rates, and with the view that rates will remain a little bit higher, we have adjusted our philosophy. We are getting ahead of where we think the market is, and that is why we adjusted our dividend to reflect a more difficult environment. We do not want to be sitting here in the second and third quarters making the adjustments. We think that this rate environment is going to slow the resolution, it is going to slow liquidity into the sector, and it is going to slow where these resolutions go. In fact, as Paul has guided in his comments, we are expecting to continue to have reserves going in the second, third, and fourth quarters, and it is reflective of where this new environment is. So we have made the adjustments. I am not sure everybody else has, but we do think that this new rate environment is going to affect the balance of the year, and that is what we are reflecting in our comments. Jade Joseph Rahmani: Thanks for taking the questions. Operator: Thank you. We will take our next question from Citizens Capital Markets. Please go ahead. Your line is open. Analyst: Hey, guys. Thanks for taking the questions. I was having some connection issues, so apologies if you already hit on some of this. Looking at originations in the bridge portfolio, average loan size looks to be about $128 million versus $38 million in the fourth quarter. I think Ivan touched on this a little bit, but was this more opportunistic, or are you intentionally moving up the loan-size spectrum and should we expect to see more of this going forward? Ivan Paul Kaufman: I think it is a great question. We are definitely going into a larger loan size, but the market is extremely competitive. It is to the point where, on each individual loan, you have to make certain credit decisions in order to bring those loans on. So we have chosen to go to larger sponsors and larger deals and be more selective in that sense, to put more management attention on each and every loan that we do, and the larger loans give us the ability to do that. Analyst: Got it. That makes a lot of sense. And then, I guess, gain-on-sale margin stepped up quite a bit in the quarter to 1.86% from 1.36%. Can you just remind me if there was a large deal in 4Q numbers, or is something else driving that dynamic? Ivan Paul Kaufman: That is exactly right. A couple of things happened. If you go back and look at our margins—look at 3Q, 4Q, and even 2Q of last year—if you look at 1Q and 2Q of last year, the margins were actually very strong. A 1.86% margin is very healthy. We did approximately 1.75% in the first quarter of last year and approximately 1.70% in the second quarter of last year. In the third and fourth quarter, you saw that dip to approximately 1.15% and 1.36%. In the third and fourth quarter, we had some really large off-market deals that we were able to get over the line, and we also had a lot more Freddie Mac business in the fourth quarter, which is a different type of business. In the first quarter, we had a lot more Fannie Mae business and a lot more smaller deal size, so we were able to extract the higher margin. It all depends on what is in our pipeline. We do have a lot of large deals in our pipeline that we are working through. Our pipeline is growing each and every day, so you could see that number dip a little bit in the second quarter and the third quarter depending on deal size. It is deal size and mix, and to your point, the fourth quarter did have some really large deals in it. Analyst: Got it. That makes a lot of sense. Appreciate you guys taking the questions this morning. Operator: Thank you. We will take our next question from Richard Barry Shane with JPMorgan. Please go ahead. Your line is open. Richard Barry Shane: Hey, guys. Thanks for taking my questions this morning. A couple of different things. In prior calls, you had talked about some fairly substantial capital investments in REO properties. I am curious how much you have spent life-to-date in terms of that CapEx and what you expect going forward, given your sort of expectations for additional REO? Ivan Paul Kaufman: Sure, Rick. I think we look at it a couple of different ways. We break down the REO book. As I said in my commentary, we have been in the process recently of engaging brokers and really trying to find people that are interested in these assets, that are experts in that particular market with that particular asset. We are doing a really nice job, I think, of getting a significant amount of bids. There is certainly more capital out there now chasing deals, so we have seen a real influx of opportunities to dispose of the assets quicker, which is why we are guiding to getting our REO book down to roughly $250 million to $300 million. I would say that from a CapEx perspective, there are certain assets that we expect to hold on to. There is a subset of assets within that $250 million to $300 million that we expect to hold on to a little longer and stabilize, and we are feeding those assets with CapEx. In the quarter, I think we put about $8 million to $10 million of CapEx into certain assets. As for life-to-date, we can follow up with precise numbers, but that gives you a sense of the recent pace. Richard Barry Shane: I appreciate you referencing the comment about working with the brokers. That is actually what precipitated my question. I am curious if there is a little bit of a change in strategy here, which, instead of investing and trying to potentially optimize outcome on a longer timeline, you are taking a first-loss, best-loss approach here and accelerating the disposals. Ivan Paul Kaufman: A lot of it is loan-specific. If we feel we can get to market with an asset fairly quickly without putting CapEx in, we will do it. Early on, there were certain assets that really required CapEx to put them in a better position, so it is really an asset-specific situation. That said, we are leaning toward, as you referenced, resolving assets on an accelerated basis at our mark if we can. We have had a few of those this quarter as part of that $23 million of realized losses, and we continue to push that way. It is asset-specific, but we are definitely leaning toward quicker resolutions where appropriate. Richard Barry Shane: Got it. Okay. That actually relates to something that someone pinged me about, which is during the quarter, you sold a property for $25 million and provided a $24.5 million bridge loan, which seems like a fairly aggressive financing structure. As you are resolving the REO, is part of the intention to provide financing for those transactions? Is that type of advance rate going to be typical of how you are approaching things, and how should we think about that from a credit perspective? Ivan Paul Kaufman: Once again, it is asset-specific, but a lot has to do with loss structures as well. While it may be a high advance rate, there are capital commitments and guarantees that are required on those loans from the people who are stepping into those transactions. We will look at our recoveries and our returns fitted on each particular case. Many times these are sponsors we have done a lot of business with, with strong balance sheets, and while we may give them a high level of leverage going in to create a very seamless process, their commitment to maintain that asset with the right guarantees—CapEx, interest guarantees—helps to offset that high leverage. Richard Barry Shane: Got it. Okay. Last question. If we think about dividend policy going forward—again, you have clearly trued the dividend up to distributable earnings. I know different commercial mortgage REITs talk about distributable earnings ex realized losses. I am curious, as we are looking at our models, what do you think we should use as the guidepost for the dividend? Is it distributable earnings, or is there something else? I want to make sure we are looking at the right metrics so that we catch any inflections either up or down going forward. Ivan Paul Kaufman: Good question. We clearly look at it as distributable earnings excluding the one-time realized losses that we have already provided for and that have already reduced book value. That is how we look at it—what are we earning from a cash perspective. In this quarter, we put up $0.18 excluding the losses. What we have guided to is a bit of a low watermark in the second and third quarters. Richard Barry Shane: Absent the $0.02 one-time drag, that probably puts me at $0.15 for the second quarter. Ivan Paul Kaufman: We are really at $0.17 if you add that back in Q2 and $0.17 in Q3. Then what we have guided to is, if we can execute our business strategy very effectively—which we are laser-focused on—and really start to turn a lot of these nonperforming assets into performing assets, we will start to see growth in the fourth quarter in that distributable earnings number. So we have set the dividend where we think we can earn it for the rest of the year, and we have set it to where we think distributable earnings will be, excluding those one-time losses. Richard Barry Shane: Got it. Okay. Thank you, guys. Operator: Thank you. We will take our next question from Raymond James. Please go ahead. Your line is open. Analyst: Roughly 40% of your loan portfolio is in Texas and Florida, where there is quite a bit of housing supply across multifamily, SFR, and single-family housing. Can you please provide some updated commentary on what you are seeing on the ground in those geographies? Ivan Paul Kaufman: What we are really seeing is being at the bottom of the market. Over the last 24 months, there has been an extreme amount of softness that we are seeing firming month by month. I think some of the issues that we faced in the Texas market and in the Florida market in particular, and also in the Atlanta market—issues with immigration and the issue with the eviction/ICE rates—have really had a negative impact on the portfolio and accelerated some of the delinquencies. We have had assets that were 90% occupied see periods where occupancy dropped to 75% overnight. Over the last 12 months, I think the eviction dynamics had a negative impact in those markets. That is getting behind us at this point, and we are seeing a reset of rental rates and occupancy rates. We also saw, for a period of time, real slowness and issues with respect to the credit of our tenants and the inability to remove nonpaying tenants from occupancy. That has changed; the court system has sped up, and the software and discipline that have been put in place to catch fraud and put the right tenant base in place have improved dramatically as well. The other thing we are seeing is that we are accelerating our efforts in terms of assets that are not performing properly. We are requiring management changes and/or taking control of these assets. It is generally the case when assets are cash-starved that they get poorly managed. We have taken very aggressive steps to make those corrections. That is reflected a little bit in our forecast because we are taking control of those assets either directly or indirectly. During that period of time, we are going to have a little bit of a drag on our earnings while we are doing it, but we are seeing the benefit of our efforts by seeing a real stabilization in these assets and a growth back in occupancy and operating income. Analyst: Great. Thank you. Operator: Thank you. We will take our next question from Jade Rahmani with KBW. Go ahead. Your line is open. Jade Joseph Rahmani: Thank you. I wanted to ask you about the CECL reserve or the credit loss reserve. It currently stands at $131 million, which is 1.1% of the portfolio. You said you expect realized losses of about $15 million to $25 million a quarter for the next three quarters, so that is up to about $70 million. Assuming that comes out of CECL, there would be a remaining $60 million of CECL, which is 0.6% of the portfolio. So, I think the question is if you are going to be taking additional CECL reserves in future quarters, and if there is a normalized CECL reserve ratio that should be on this portfolio. You mentioned that there is about $1 billion of nonperforming assets including REO and nonaccruals. Ivan Paul Kaufman: Sure. Jade, I think you cannot look at it just on the nonperforming assets and the delinquencies. You have to look at it with the REO assets as well. Yes, we have approximately $130 million of CECL on the balance sheet loan book and approximately $481 million of delinquency on the balance sheet loan book. We also have approximately $520 million of REO assets, on which we took another $12.5 million of impairment this quarter, up from $20.5 million the prior quarter. Before those loans were transferred to REO, we had booked CECL reserves on those, so there is about $85 million of reserves effectively sitting in the REO book. That REO book has been written down by about $85 million. You have to take that $85 million and the $130 million and divide it over the REO plus delinquency book, which puts your ratio more around 1.7% to 1.8%. That is probably the right ratio. To your second question: yes, we have guided to $15 million to $25 million in realized losses going forward, but not all of those will be delinquencies; some of those will be REO. You have to look at those buckets together—that is how we look at it. We are also guiding that in this market—given the interest rate environment and given the fact that we have engaged brokers and are getting more price discovery on assets—it is hard to sit here and tell you exactly what the numbers will be, but based on recent experience, we think that range is appropriate. As for the portfolio yield you referenced—6.49% weighted average cash pay rate or current pay rate—yes, 6.49% is the pay rate, but another roughly 25 basis points of that is origination and exit fees that we accrete over time, so that is cash, and then approximately $25 million is PIK. On PIK, during the quarter we booked just about $5 million of PIK interest on our bridge loans. We have about $2 million of PIK interest on our mezzanine and preferred equity—standard for those products. On the bridge business, the PIK for the quarter was down to $5 million; a year ago it was about $18 million. SOFR has dropped, we worked out a lot of loans and reset them at current rates, and the PIK has been paid or recovered and does not continue going forward. As we work these loans out, they will not be PIK. I think that $5 million a quarter on balance sheet loans goes down to probably around $4 million a quarter. Jade Joseph Rahmani: Okay, great. Thanks for the color. Operator: I am showing no additional questions at this time. I would like to now turn the conference back to you, Ivan Kaufman, for any additional or closing remarks. Ivan Paul Kaufman: Thank you, everybody, for your participation today, and have a great weekend. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Welcome to the Olin Corporation First Quarter 2026 Earnings Conference Call. All participants will be in a listen-only mode. To ask a question, please press star, then 1 on your touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded. I would now like to turn the conference over to Steve Keenan, Olin Corporation's Director of Investor Relations. Please go ahead, Steve. Steve Keenan: Thank you, Nick. Good morning, everyone. We appreciate you joining us today to review Olin Corporation's first quarter 2026 results. Please keep in mind that today's discussion, together with the associated slides, as well as the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance. Please note these are forward-looking statements, and that Olin Corporation's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described, without limitation, in the Risk Factors section of our most recent Form 10-Ks and in yesterday's first quarter earnings press release. A copy of today's transcript and slides will be available on our site in the Investors section under Past Events. Our earnings press release and related financial data and information are available under Press Releases. With me this morning are Ken Lane, Olin Corporation's President and CEO, and Todd Slater, Olin Corporation's CFO. We will start with some prepared remarks, then we will look forward to taking your questions. I will now turn the call over to Olin Corporation's President and CEO, Ken Lane. Ken Lane: Thanks, Steve, and thank you to everyone for joining us today. We appreciate your time and your continued interest in Olin Corporation. Let's start on Slide 3 for a review of our first quarter highlights. Amid a very dynamic operating environment in the first quarter, the Olin Corporation team executed with discipline, maintaining focus on running our assets safely and reliably, removing structural costs through our Beyond two fifty program, and preserving liquidity, all while staying firmly committed to our value-first commercial approach. That discipline translated into positive results in the first quarter and sets the stage for stronger earnings in the coming months. During the first quarter, our epoxy business returned to profitability, and we saw early signs of demand growth for Winchester commercial ammunition. The Iran conflict introduced significant disruption across global petrochemical supply chains. Sharply higher crude oil prices and freight rates disproportionately impacted non-U.S. producers, further reinforcing the structural cost advantage of U.S. Gulf Coast assets such as Olin Corporation's. While these dynamics did not materially benefit our first quarter results due to normal pricing lags, they meaningfully improved the outlook for the second quarter. Looking ahead, the near-term backdrop has shifted more in favor of U.S. producers than where we were at the beginning of the year. While the duration of Middle East disruptions remains uncertain, we believe the full impact is still unfolding as global supply chains continue to tighten. We are seeing significant inventory drawdowns and deferred maintenance temporarily helping bridge supply gaps. This creates a more constructive environment as the year progresses. Olin Corporation is well positioned to navigate this dynamic environment, supported by our advantaged asset base, improving cost structure, and strong cash generation. As regional customers increasingly prioritize security of supply, we have the flexibility to increase operating rates and capture value while maintaining our value-first commercial approach. Now let's turn to Slide 4 for a deeper review of Chlor Alkali Products and Vinyls (CAPV). First quarter results reflected lower operating costs driven by Beyond two fifty and lower-than-expected maintenance turnaround costs. Merchant chlorine demand was seasonally soft but improved from the fourth quarter with year-end customer destocking behind us. We saw chlorine demand into water treatment and crop protection rebound nicely in mid-March as U.S. temperatures warmed. Caustic soda continues to be the stronger side of the ECU. Global demand is stable against the backdrop of tightening supply and a rising cost curve for non-U.S. producers, which sets up for improved earnings as we move through the year. Several Asian vinyls producers have declared force majeure due to limited access to feedstocks and rapidly increasing costs. This disruption constrained chlor-alkali production, reducing the availability of co-produced caustic soda. While China has been less affected given significant coal-based vinyls production, the net impact has been a meaningful reduction in global supply. Trade publications estimate that 6% to 9% of annual vinyls capacity is impacted globally. All of this drove a sharp spike in global pricing in late March, with levels now moderating as inventories are depleted. U.S. export EDC prices have significantly increased since January. We expect EDC and caustic soda pricing to stabilize at higher levels compared to earlier in the year as shortages persist and production costs remain high. Olin Corporation has announced a total of $185 per ton in domestic caustic soda price increases for implementation in 2026. We continue to aggressively implement the balance of our price announcement. Slide 5 provides a look at our epoxy results. First quarter 2026 marks an important milestone, as our epoxy business returned to profitability. We expect full-year epoxy performance to be meaningfully improved, with our return to profitability driven by several well-executed actions. Our epoxy team has grown our European business in the wake of regional rationalizations. Our new European cost structure is on course to deliver $40 million to $50 million of annual cost improvement. Our formulated solutions portfolio continues to provide a high-margin platform for growth with a strategic focus on electronics, semiconductors, and power generation. And our recent plant closure in Guarulhos, Brazil will further improve our cost structure and strengthen supply integration. In addition to these actions, we are focused on raising prices, which have been significantly depressed due to subsidized Asian supply. Olin Corporation announced March and April epoxy resin price increases totaling more than $1,200 per ton in North America, and €1,300 per metric ton in Europe. We expect these increases to offset the higher feedstock and transportation costs. Let's now turn to Slide 6 for an update on our Winchester business. Winchester's first quarter performance was a significant improvement. The team took decisive actions in the second half of last year to rebalance channel inventories and position the business for improved commercial volume and price. As a result, we have regained commercial pricing traction and retail shipments are moving back into alignment with out-the-door sales. As retailer purchases align, we would expect to realize a commercial volume uplift of mid- to high-single digits year-over-year. Raw material costs remain a headwind, particularly copper, as well as brass and propellants. We expect that our pricing actions, once implemented, will offset the majority of 2026 cost inflation; however, we expect to continue to see cost pressure as we go through the year. We are continuing to operate a disciplined make-to-demand model that aligns to our value-first commercial approach. As a result, we are building a strong commercial backlog while tightly managing our working capital. Winchester is a core part of Olin Corporation's portfolio. With its iconic global brand, long-standing relationships with leading retailers, the U.S. military, and a broad base of international customers, the business is well positioned to deliver durable, long-term growth and value creation. I will now turn the call over to Todd for a look at our financial highlights. Todd Slater: Thanks, Ken. Let's review our cash flow, liquidity, and financial foundation. Our top priority continues to be generating strong cash flow to preserve and further enhance liquidity. In February, we took proactive steps to amend our bank credit facilities, providing greater covenant flexibility through late 2027. As a result, we maintain full access to our revolving credit facility and 1.3 billion of available liquidity. Our debt structure is well organized, with manageable tranches and staggered bond maturities over the coming years, and no maturities before 2029. As is typical with seasonal working capital needs, net debt and leverage increased in the first quarter. We expect net debt to rise during 2026 as we make payments to resolve legacy litigation matters. Now let me take a moment to discuss our outlook for expected uses of cash in 2026. First, regarding cash taxes, we anticipate receiving refunds from prior years related to clean hydrogen production tax credits under Section 45V as part of the Inflation Reduction Act of 2022. Factoring in these refunds, we expect 2026 to essentially be a cash-free tax year, plus or minus $20 million. We are proactively managing our capital spending, targeting approximately $200 million, with a focus on funding sustaining capital expenditures to ensure safe and reliable operations of our assets. We expect to continue our nearly century-long history of uninterrupted quarterly dividend payments. As we further strengthen our financial resilience, any remaining excess cash flow after the preceding capital allocation priorities will be used to reduce our outstanding debt. We remain firmly committed to managing our balance sheet in a way that maximizes our financial flexibility for the future. We anticipate ending the year with a debt leverage ratio of just above four times. Looking forward, our goal remains to average below two times leverage across the cycle. Our team's focus is on generating cash, strict cost control, and advancing our Beyond two fifty structural cost reduction program and a value-first commercial approach. Before I turn the call back to Ken, I want to comment on Beyond two fifty. The program is designed to permanently remove structural costs, not simply trim around the edges. We have a clear line of sight to more than 250 million of cumulative savings by 2028. We delivered $44 million of structural savings last year and expect to deliver an incremental $100 million to $120 million in 2026. Every day, we continue to expand our Beyond two fifty scope with a focus on people and processes. We are making great progress on safety, with record performance in the first quarter. Our efficiency gains are well socialized and measurable. For example, we have nearly doubled our Freeport, Texas time on tools. We have transformed our maintenance planning by leveraging historical data and AI tools to evolve from a reactive, time-based scheduling to a proactive, risk-based approach. We streamlined the organization, reducing site headcount by 15% while reducing our reliance on contractors and improving reliability. To sum up, we are preserving a durable balance sheet, generating healthy cash flows, and maintaining a prudent capital structure to drive long-term shareholder value. Ken, let me hand the call back to you. Ken Lane: Thanks, Todd. Let's finish up with Slide 8 and our outlook for the second quarter. With improved pricing and seasonally higher demand, we expect to realize significantly improved earnings in our CAPV business. Our second quarter outlook includes an estimated impact from an unplanned vinyls outage at our Freeport, Texas plant. We are expecting to restart these assets late next week. Olin Corporation's value-first commercial approach has preserved our ECU values through an extended trough and provides an attractive starting point as we begin the next cycle. Looking out a little further, the chlor-alkali supply-demand dynamics are favorable, with limited additional capacity, a likelihood of further asset rationalization, and a still-to-come housing and construction demand recovery. Chlor-alkali is well positioned to rebound from this historic trough. In our epoxy business, we expect to see earnings improvement with higher seasonal demand, improved pricing, and continued cost improvements. We are realizing the benefits of being a strong, integrated, local producer as customers seek reliable supply in the face of tremendous uncertainty. Winchester's second quarter results are also expected to improve sequentially with higher commercial ammunition volume and pricing, and higher military sales. With that, we expect to deliver second quarter adjusted EBITDA in the range of $160 million to $200 million, a significant sequential improvement. Operator, we are now ready to begin Q&A. Operator: Thank you. We will now open the call for questions. To ask a question, please press star, then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. In the interest of time, please limit yourself to one question. The first question will come from Hassan Ahmed with Olympic Global. Please go ahead. Hassan Ahmed: Morning, Ken and Todd. Just a question on the guidance. Obviously, you did about $86 million in EBITDA in Q1 and are guiding to, if I were to take the midpoint, call it $180 million in Q2. So I am just trying to get a better sense of bridging that $100 million or so in incremental EBITDA. How much are you getting from Beyond two fifty? How much of that is some of these opportunities you see via the conflict in the Middle East? How much from incremental caustic and EDC export opportunities? Ken Lane: Good morning, Hassan. Thank you for the question. The bridge between Q1 and Q2 has a lot of variables contributing to it. The largest one is going to be improvement in CAPV from the first quarter, driven by improved pricing and higher volumes as assets are running again. We will continue to have some headwinds related to turnaround costs, but both higher pricing and higher volume in the second quarter for CAPV will drive a big part of the uplift. We will also continue to see benefits from improved costs in the second quarter, again netting out the impact from the turnaround. We have also built into that outlook the impact we currently estimate related to the unplanned outage in the vinyls assets at Freeport. We are expecting to have those assets restarted late next week, and that is reflected. Unfortunately, that takes a little bit out, and we want to make sure we get that done timely and safely because it is important to get those assets back up when we are seeing the pricing environment that we are for those products. If you look at epoxy and Winchester, we will continue to see improvements in the epoxy business, including the normal seasonal uplift, so improving demand. As I said in the prepared remarks, the team did an outstanding job positioning Olin Corporation as the last integrated epoxy producer in Europe and leveraging that into a stronger market position with respect to volume growth in 2026 versus 2025, and that will continue into the second quarter. The momentum we saw building from Winchester, and the actions Winchester took late last year to rebalance things—last year was sort of the perfect storm with higher costs, lower demand, and high inventories—have largely corrected with the exception of the cost side. Inventories are back to a much more comfortable level, and demand has started to come back, so we are seeing year-over-year growth for the first time in over a year. All of those things combined create the uplift, but again, the biggest uplift is coming out of CAPV. Operator: The next question will come from Frank Mitsch with Fermium Research. Please go ahead. Frank Mitsch: I wanted to get your thoughts on pricing as we exit Q2. I think you have a fairly good line of sight on where you stand today and your plans in terms of getting price increases in June. As you think about the average Q2 price across your company versus where you are going to exit the quarter, I would imagine that sets you at a higher level for Q3. Any way you can give us some orders of magnitude around expectations on the momentum on the pricing side? Ken Lane: Good morning, Frank, and thanks for joining. Starting with CAPV, in the first quarter we were already seeing momentum with caustic pricing coming out of the fourth quarter into the first quarter before everything started happening around the world late in the first quarter. We are going to see that improvement really start to hit in Q2. Even with the lag that we see in some product lines and businesses, there will be good momentum continuing into the third quarter, and I expect that to carry through the year. For CAPV, caustic and EDC are the two big needle movers; those price levels are going to continue to be elevated versus where we thought they would be at the beginning of the first quarter, and we see that continuing into the third quarter. We had a very fast run-up in prices and then saw them moderate a little bit. People who had inventory, as you would expect, pushed a lot of that volume into the market when prices were spiking. We see that coming down, and once that plays through—remember even today, with talk about a ceasefire in the Middle East, Brent crude is still over $100 a barrel, and U.S. natural gas is around $2.70 to $2.80—that is still a sizable advantage for U.S. producers. In addition, you have effectively taken out of the market sanctioned oil that was going into assets in Asia at a significant discount and creating a distortion. That is now gone, which is constructive for pricing as we go into the third quarter. Generally speaking, you will start to see it in Q2 but really see it even more later in the year. Operator: The next question will come from Mike Sison with Wells Fargo. Please go ahead. Mike Sison: When you think about Q2, the $160 million to $200 million, how would you describe the earnings levels? Are we approaching a mid-cycle number? It does not feel like peak, particularly on volume. As you think about where pricing is going to set up longer term, do you think some of this is sustainable where maybe 2027 will have structurally higher pricing and margins for the industry? Ken Lane: Good morning, Mike, and thanks for joining. Thinking back to what we said at Investor Day, we are not anywhere near what we would consider our normalized level of earnings. We have seen an improvement from where we were at the beginning of the first quarter, no doubt. But even with the step-up in earnings we will see in Q2 and later in the year, it reflects what we emphasized at the 2024 Investor Day: there is a lot of leverage in Olin Corporation's portfolio. When you start to see demand come back and the supply-demand balance get more normalized, there is a lot of leverage to the upside. We are not close to a normalized or mid-cycle level of earnings; that is still out in the future. Once we start to see things like housing recovery and infrastructure and general construction coming back in both Europe and the U.S.—which is going to happen—the outlook is constructive. The setup for chlor-alkali supply and demand, the limited additional capacity being added, and the rationalization that has happened and will likely continue is really constructive for us. There is still much more leverage in Olin Corporation to come; you are just seeing the beginning of it now. On long-term sustainability, yes, we are in the trough, and we are going to come out of it. The markets we are in and serve are set up well to see that sooner than maybe others. Operator: The next question will come from Patrick Cunningham with Citi. Please go ahead. Patrick Cunningham: You alluded to some price normalization, obviously EDC being top of mind. First, what sort of sensitivity should we expect on EDC prices, or perhaps you could help with the price levels embedded within the outlook? And in terms of volume uplift or value, how much is embedded within the Braskem arrangement versus how much opportunistic volume do you have to sell here? Ken Lane: Good morning, Patrick, and thank you for the question. We manage the portfolio to have optionality, especially around our chlorine outlets, and we want a diverse set of options because these markets recover at different rates. EDC is clearly important for us. The strategic relationship with Braskem is accretive through the cycle, but that represents only part of our EDC volume. We continue to have part of the EDC portfolio with spot exposure, but we are balancing it. We do not want everything spot or everything in long-term contracts. We are doing that to optimize and create the highest value we can for Olin Corporation through the cycle. That is our strategy. Operator: The next question will come from Kevin McCarthy with Vertical Research Partners. Please go ahead. Kevin McCarthy: Thank you, and good morning. Ken, can you provide an update on your EDC and VCM operations at Freeport? Last quarter, I think you flagged the major triennial planned turnaround. In your prepared remarks this morning, I heard reference to an unplanned outage. Are those related or unrelated? Can you talk through the operational outlook there in the quarter? Ken Lane: Sure, thanks for the question, Kevin. In the second quarter, we completed the turnaround we discussed on the last earnings call, which bridged across the end of the first quarter and the beginning of the second quarter. We successfully completed that and restarted the VCM assets in Freeport. The team did an outstanding job executing that turnaround safely, a little ahead of schedule, and on budget. Unfortunately, we recently had an unplanned event that brought down the vinyls assets at Freeport. We are in the middle of our root cause analysis, making sure we have everything established to restart those assets safely. The current plan is to restart late next week. I am confident the team will do that as well as they did with the turnaround. All of that looks to be coming back into good condition and shape in the next week or so. Operator: The next question will come from Josh Spector with UBS. Please go ahead. Josh Spector: Good morning. On caustic dynamics, you are going for additional pricing and have alluded to that. Looking at Asia pricing relative to U.S. pricing, the U.S. seems to have moved to a bit of a premium. Typically, caustic production increases as PVC production increases over the next few months. How do you expect North America prices to move higher if North America is going to have more caustic to deal with in a few months, and the manufacturing backdrop is not that strong? What am I missing on the pricing dynamic that pushes it higher from here? Ken Lane: Good morning, Josh, and thank you for joining us. There are a lot of dynamics in the caustic market that I think people underestimate. Thinking linearly—what happened in the past will happen now—does not capture today’s environment. Freight rates are higher, and there are supply chain disruptions. For example, there used to be caustic coming into the East Coast from Europe and into the West Coast from Asia; that is pretty much gone now. Pricing is driven as much by availability as by arbitrage. You have a big step-up in freight costs as well. Those dynamics will drive the market for the foreseeable future. Backing up to the first quarter, even between Q4 and Q1, with stable demand, we were already seeing price momentum with caustic. There was an overcorrection last year; the market was tighter than people believed, and you saw recovery even before the current Middle East situation. All of that is constructive for caustic pricing. Capacity has come off, demand is relatively stable, costs are higher—prices should go up in that environment. Operator: The next question will come from Matthew Blair with TPH. Please go ahead. Matthew Blair: Thanks, and good morning, Ken and Todd. Ken, you mentioned that 6% to 9% of global vinyl capacity is currently offline due to the Iran war. Is that also a good estimate for global ECU capacity that is offline? And in terms of duration, how quickly could these assets return and supply chains normalize if there were a true ceasefire announced tomorrow? Ken Lane: Good morning, Matthew. Starting with duration, a ceasefire has already been announced and it is still disruptive. This will linger for quite a while. Supply chain disruptions are not a light switch; ships are out of position, and feedstocks are not available for a period of time. That lingers for weeks and months, typically. That is why I am optimistic about structural support for higher prices and benefits for companies like Olin Corporation with assets in regions with good access to low-cost energy and raw materials. I do not see that reversing in the short term. On your first question, the 6% to 9% reported for vinyls capacity offline is a good proxy for ECU production constraints—if you do not have a place to put the chlorine, ECUs are not going to be produced. Operator: The next question will come from David Begleiter with Deutsche Bank. Please go ahead. David Begleiter: Thank you, and good morning. Ken, on your vinyl strategy, has the conflict in the last two months influenced your thinking on how you pursue a vinyl strategy down the road? And as a housekeeping item, on Slide 15, the turnaround expenses—does the Q2 forecast of $42 million include the unplanned outage? If not, how much is that unplanned outage in vinyls? Ken Lane: Good morning, David, appreciate you joining us. The vinyl strategy is not impacted by what is going on in the world today. It is still an important market for us and one on which we remain focused longer term to ensure we have access. When we think about all of the options we have discussed, extending the current agreement we have with our fence-line customer at Freeport is still a priority for us, but there are other good options we are evaluating. This environment makes some partnership options more attractive, especially to potential partners we are working with, which is a positive. But it does not change our focus on wanting to grow in vinyls longer term. On the turnaround expenses, the Q2 forecast does not include the unplanned event at Freeport. That would be an incremental impact in the second quarter, and we have reflected that in the outlook we gave. Operator: The next question will come from Arun Viswanathan with RBC Capital Markets. Please go ahead. Arun Viswanathan: Good morning. Thanks for taking my question. My main question is on the duration of the earnings power here. You are guiding to about $180 million for Q2. Various peers have given different timelines for normalization between three to six months. Is that how you are looking at things? You also have some capacity entering the industry in the next six to twelve months from debottlenecking, as well as a new plant coming on maybe in a few years. Are you still feeling that caustic is going to be tight through that period, or will we settle into a bit of an oversupplied situation? Putting that together, are we looking at a year that is roughly twice your first half, or do you see upside to that? Ken Lane: Good morning, Arun. I am not going to speculate on exactly how long this goes. I did say earlier I believe the impacts will carry through this year. Costs are going to be higher, and I think people will expect a higher security-of-supply premium, particularly where product from other regions had been dumped into Europe and the U.S. We are seeing a premium for local supply, and I think that will continue. Even if energy prices settle down, there will be longer-term hangover effects that are beneficial to Olin Corporation. Stepping back to the broader trough recovery and supply-demand outlook for chlor-alkali, it is more positive than you may be thinking. You have to factor in the pluses and minuses over the last year or two: assets have closed in Europe, the U.S., Latin America, and even Asia. There is very little new capacity coming online between now and the end of the decade. I feel very bullish about the outlook for the markets we are in and see no reason to change that view. Operator: The next question will come from John Roberts with Mizuho. Please go ahead. John Roberts: Thank you. For your export EDC business, how are you thinking about the competition from China? Most of their coal-based capacity is inland, and their coastal capacity is probably ethylene-constrained. How do you think the dynamics there will play out in the next few months? Ken Lane: Good morning, John, very good question and important for us. We are going to see a step-up in EDC volume in the second quarter, and prices have moved up significantly from last year’s levels. Prices had dropped far more quickly than warranted by fundamentals; things have since improved to a healthier level. Because much of China's coal-based capacity is inland, the cost to get that EDC to market is higher. Our costs have gone down, not up, so we are able to serve the market more competitively at a better price, which is constructive for us into the second and third quarters. I think that continues through the end of the year. Pricing is getting back to what I would consider a more normal level for where we are in the supply-demand environment because things were overdone. As I mentioned earlier, sanctioned oil that had been sloshing around the market and distorting costs has been curtailed; while the volume is still there, it will be priced much higher than previously. That is beneficial to us. Operator: The next question will come from Vincent Andrews with Morgan Stanley. Please go ahead. Vincent Andrews: Thank you. Chemours indicated they signed an agreement with you for the 2028-plus period instead of building the plant they announced back in December 2024. Could you help us understand the impact to you? Are those tons going to be more profitable, less profitable, or about the same as how you are monetizing them today? Ken Lane: Good morning, Vincent, and thank you for joining us. Anytime we can do a strategic partnership like we have done with Chemours—similar to Braskem, where we are working with an industry leader—it is accretive for Olin Corporation. This is a long-term supply deal that will start in 2028. These are the sorts of optionality we want in our portfolio to give us the ability to generate stronger earnings through the cycle. We are very happy with the relationship with Chemours and look forward to expanding that in 2028. As you can imagine, we will not disclose further details around the agreement, but it is a win-win for both Olin Corporation and Chemours. Operator: As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ken Lane for closing comments. Ken Lane: Thank you very much. We appreciate everybody's time this morning and your interest in Olin Corporation, and we look forward to giving you an update at our second quarter earnings call later this year. Thank you very much, and have a safe weekend. Operator: Thank you for attending today's presentation. You may now disconnect.
John Silas: Good morning, and thank you for joining us. My name is John Silas, a member of the Investor Relations team for Goldman Sachs BDC, Inc., and I would like to welcome everyone to the Goldman Sachs BDC, Inc. First Quarter 2026 Earnings Conference Call. Please note that all participants will be in listen-only mode until the end of the call when we will open the line for questions. Before we begin today’s call, I would like to remind our listeners that today’s remarks may include forward-looking statements. These statements represent the company’s belief regarding future events that, by their nature, are uncertain and outside of the company’s control. The company’s actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements as a result of a number of factors, including those described from time to time in the company’s SEC filings. This audiocast is copyrighted material of Goldman Sachs BDC, Inc. and may not be duplicated, reproduced, or rebroadcast without our consent. Yesterday, after the market closed, the company issued an earnings press release and posted a supplemental earnings presentation, both of which can be found on the homepage of our website at goldmansachsbdc.com under the investor resources section and which include reconciliations of non-GAAP measures to the most directly comparable GAAP measures. These documents should be reviewed in conjunction with the company’s quarterly report on Form 10-Q filed yesterday with the SEC. This conference call is being recorded today, Friday, May 8, 2026, for replay purposes. I will now turn the call over to Vivek Bantwal, Co-Chief Executive Officer of Goldman Sachs BDC, Inc. Vivek Bantwal: Thank you, John. Good morning, everyone, and thank you for joining us for our first quarter earnings conference call. I am here today with David Miller, our Co-Chief Executive Officer, Tucker Greene, our President and Chief Operating Officer, and Stanley Matuszewski, our Chief Financial Officer. I would like to begin by providing important context on the composition of our portfolio, followed by sharing perspective on the current macro backdrop and our rigorous approach to valuation, particularly around our commitment to transparent mark-to-market accounting. I will then highlight our perspective on why we continue to see private credit as a highly attractive asset class and why our GS platform is uniquely positioned to thrive in the current investment landscape, particularly over time as we transition away from the legacy portfolio. I will then turn the call over to David and Tucker, who will dive into our first quarter results, portfolio activity, and performance before handing it off to Stan to take us through our financial results. And finally, we will open the line for Q&A. As we have discussed on prior calls, since Goldman Sachs BDC, Inc.’s integration into the broader direct lending platform in 2022, we have been on a deliberate path to leverage the differentiated sourcing, underwriting, and portfolio management oversight provided by access to the full Goldman Sachs private credit ecosystem where we have a 30-year track record. What you are seeing in our results today is the natural transition of our balance sheet. We are moving out of older positions from the legacy setup and into new opportunities that benefit from our enhanced sourcing and deeper origination funnel. Currently, about 58% of our portfolio consists of these more recent originations, while the remaining 42% represents older positions. The results of this strategic shift are clear. The 58% of the portfolio originated under our current underwriting capabilities is performing in line with expectations. In fact, we have seen low losses and only one name representing less than 0.5% of our total nonaccrual at cost. While we have seen some modest unrealized moves here, we believe those are primarily a reflection of broader market spread widening, not a sign of credit deterioration. This gives us immense confidence in our current credit selection process. As we have discussed, the 42% of the book consisting of legacy positions is where we see the bulk of our current credit volatility, accounting for roughly 72% of losses this quarter and over 99.5% of our total nonaccruals at cost. We added two of these names to nonaccrual status this quarter, 1GI LLC and 3SI Security Systems, Inc., which we view as idiosyncratic situations that we have been monitoring closely. Our internal workout teams are deeply engaged with these borrowers to maximize recovery. This brings me to a critical distinction that we believe is essential for our investors to understand: the difference between mark-to-market fluctuations and actual credit impairment. When the market price of risk increases, as evidenced by today’s widening credit spreads, the mark-to-market value of existing loans naturally declines. This decline is not a reflection of the borrower’s ability to pay, but rather a result of current market demand for higher returns on the same level of credit risk. If the credit remains sound and ultimately repays at par, the investor recovers the full principal amount regardless of any interim price volatility through the life of the loan. On the other hand, true credit impairment occurs when a borrower’s financial condition deteriorates to where they can no longer meet their obligations, resulting in a permanent loss of capital. This distinction is especially important in periods of heightened volatility when mark-to-market valuations will fluctuate to reflect market sentiment, but underlying credit risk and borrower solvency remain stable. We view the losses we are seeing in the post-integration portfolio as the former type, mark-to-market in nature, while the credit impairment we are addressing is concentrated in the legacy portfolio. Looking back on the first quarter, the extent to which the market was affected by global geopolitical uncertainty, AI disruption across the software sector, and a softer-than-anticipated M&A landscape is clear. The return of M&A activity in 2025 resulted in an increased number of deal closings in 2026. However, volumes were heavily skewed toward a small number of large-cap deals, with sponsor activity continuing to lag and remaining below 10-year averages. Despite the growing backlog, the risk-off sentiment across the market in Q1 drove the total U.S. private equity deal value down to the lowest since Q2 2025 levels. Although a more stable rate environment could help over time, any immediate recovery, particularly in the middle market, remains uncertain. In times like these, when market uncertainty leads to increased volatility, our financial position, including valuation, remains our top priority. Goldman Sachs BDC, Inc.’s quarterly valuation process, which aligns with our broader BDC complex, is conducted by three independent sources: the private credit investing team; our valuation oversight group, which is independent of the investment decision-making process; and independent third-party valuation advisers, all of whom are subject to oversight by our independent board of directors. This multistep approach is intended to provide robust checks and balances and to support fair value determinations that are consistent, well documented, and aligned with applicable regulatory standards. As we look across the landscape of early 2026, we believe the fundamental health of the private credit industry remains strong. Despite recent headlines, the data tells a story of continued resilience, amidst some manager performance dispersion that is expected to continue. Default rates across both public and private credit markets remain at relatively low levels. To put this in perspective, the payment default rate for broadly syndicated loans in the public market stood at just 1.44% as of March 2026. This is well below the 10.8% peak default rate witnessed during the global financial crisis. Performing senior secured credit portfolios benefit from fixed maturities and change-of-control provisions that generate par repayments and natural liquidity, further underscoring the structural advantage from a risk perspective of holding senior debt. We now expect to have the ability to reinvest proceeds from recent exits at wider spreads and more attractive risk-adjusted levels in the current environment. We would also note that recent media coverage of private credit has, at times, lacked necessary nuances. There is a tendency to conflate distinct segments of the credit markets, creating the impression of a broad “private credit problem,” where in reality, stress is focused on certain pockets of the market. Looking ahead, if economic conditions were to soften, we would naturally expect to see an increase in nonaccrual rates and a greater performance divergence among managers. We believe the best way to prepare for such a shift is through the same disciplined underwriting culture and rigorous investment process that have guided our platform for 30 years. In periods of heightened market uncertainty, these principles are not just our foundation; they are our greatest competitive advantage. Another key focus for us has been the deliberate reduction of annualized recurring revenue, or ARR, loans within our portfolio relative to the legacy setup. Within Goldman Sachs BDC, Inc., we have successfully lowered our ARR exposure from nearly 39% of the portfolio at Q3 2022 fair value to under 10% today. This shift is highly intentional and aligns with broader market trends we have highlighted earlier. While ARR lending served a purpose during the rapid growth cycles of previous years, the current environment demands a more rigorous approach. We are seeing a clear market-wide rotation away from revenue-based metrics in favor of traditional cash flow–supported structures. We are proactively managing our legacy ARR positions through strategic exits or by facilitating conversions to EBITDA-based loans as these companies mature, and we are very selective in underwriting new ARR deals that are brought to market. By prioritizing these cash flow–centric assets, we are helping to ensure that our portfolio remains resilient and well positioned to deliver durable value to our investors. With heightened focus surrounding the software industry in recent months, our framework has continued to evolve as the landscape develops. While we are not immune to the fears of AI disrupting the software landscape, we remain confident in our ability to thoughtfully assess and help mitigate AI-related risks across both our current portfolio and new investment opportunities. With that, let me turn it over to my Co-Chief Executive Officer, David. David Miller: Thanks, Vivek. I would now like to turn to our first quarter results. Our net investment income per share for the quarter was $0.22, and net asset value per share was $12.17 as of quarter end, down approximately 3.7% from the fourth quarter, driven primarily by an increase in unrealized losses. NII this quarter was also impacted by higher incentive fee accrual under our shareholder-friendly fee structure. As a reminder, Goldman Sachs BDC, Inc.’s incentive fee is subject to a three-year total return lookback, which ties our adviser’s compensation directly to the cumulative economic value delivered to shareholders, including both income and the impact of gains and losses, rather than income alone. While this weighed on reported NII in the quarter, it underscores a strong alignment between Goldman Sachs and our shareholders. The Board declared a second quarter 2026 base dividend of $0.32 per share, payable to shareholders of record as of 06/30/2026. We ended the quarter with a net debt-to-equity ratio of 1.37x as of 03/31/2026, as compared to 1.27x as of 12/31/2025. We have maintained a conservative liability profile with no near-term unsecured maturities and a deliberately laddered bond maturity schedule. Our liquidity is underpinned by a diversified, committed revolving credit facility across 15 bank lenders, structured with no mark-to-market exposure. Market confidence in our platform remains durable, as evidenced by the continued strong oversubscription on a recent bond issuance. We consistently look to enforce proactive capital management to ensure we remain well positioned to execute our strategy regardless of broader market volatility. During the quarter, we made new commitments of approximately $46.5 million across 17 portfolio companies, comprised of six new and 11 existing portfolio companies. Approximately 91.6% of our originations during the quarter were in first-lien loans, which reflects our bias to investments that are at the top of the capital structure. Turning to portfolio composition, as of 03/31/2026, total investments in our portfolio were $3.23 billion at fair value, comprised of 98.7% in senior secured loans, 1% in a combination of preferred and common stock, 0.3% of unsecured debt, and a negligible amount in warrants. With that, let me turn it over to Tucker to discuss repayments, fundamentals, and credit quality. Tucker Greene: Thanks, David. I will first discuss the portfolio in more detail. At the end of the first quarter, the company held investments in 173 portfolio companies operating across 40 different industries. The weighted average yield of our total debt and income-producing investments at amortized cost at the end of the first quarter remained flat at 9.9% compared to the fourth quarter. Importantly, our portfolio companies have continued to have both top-line growth and EBITDA growth quarter over quarter and year over year on a weighted average basis. The weighted average net debt to EBITDA of the companies in our investment portfolio increased slightly to 6.0x during the first quarter compared to 5.9x during the fourth quarter. At the same time, the current weighted average interest coverage of the companies in our investment portfolio at the end of the first quarter slightly decreased to 1.9x compared to 2.0x during the fourth quarter due to rounding. Our repayments during the first quarter totaled $82.8 million. Over 53% of this repayment activity was from pre-2022 vintage loans, demonstrating effective management of our assets. On the prepayment side, we continue to selectively pursue opportunities that support prudent leverage management with the goal of reducing leverage over time. On May 6, 2026, the Board approved and authorized a new 10b5-1 stock repurchase program to allow the company to repurchase up to $75 million of shares of the company’s common stock, subject to certain limitations. The company expects to enter into this 10b5-1 stock repurchase program once the 2025 10b5-1 plan has been fully utilized or expires. And finally, turning to asset quality, we ended the first quarter with nonaccruals at approximately 4.7% of the portfolio at amortized cost, up from 2.8% in the prior quarter. While we never like to see this metric move upward, it is important to look at what is driving this change. The increase was primarily driven by two specific legacy investments that we have been monitoring closely, 1GI LLC and 3SI Security Systems, Inc., which were placed on nonaccrual status due to financial underperformance. We view these as idiosyncratic situations rather than a reflection of broader portfolio stress. If you look at our new vintage originations, those made since 2022, which now represent 58% of our fair value, credit performance remains sound with minimal nonaccruals. I did want to be clear about one thing: we do not view the legacy portfolio as a category that is migrating wholesale toward nonaccrual. In fact, subsequent to quarter end, we favorably restructured one of our legacy positions, leading to higher cash pay and improved seniority in the capital structure, and received a full repayment at par on a separate legacy holding. The firm continues to maintain a proactive approach to monitoring, managing, and resolving any associated credit issues. I will now turn the call over to Stan to walk through our financial results. Stanley Matuszewski: Thank you, Tucker. We ended Q1 2026 with total portfolio investments at fair value of $3.2 billion, outstanding debt of $1.9 billion, and net assets of $1.4 billion. As David mentioned, our ending net debt-to-equity ratio as of the end of the first quarter was 1.37x. At quarter end, approximately 62.5% of our total principal amount of debt outstanding was in unsecured debt. As of 03/31/2026, the company had approximately $974 million of borrowing capacity remaining under the revolving credit facility. As discussed last quarter in our Q4 earnings call, we wanted to remind investors of recent activity that occurred during Q1. On 01/15/2026, we borrowed $[inaudible] under the revolving facility and used the proceeds together with cash on hand to repay the 2026 notes plus accrued and unpaid interest in full satisfaction of our obligations under the 2026 notes. Additionally, on 01/28/2026, we issued $400 million of three-year investment grade unsecured notes with a coupon of 5.1%. We also hedged the issuance by swapping the coupon from fixed to floating to match Goldman Sachs BDC, Inc.’s floating rate investments. Over 100 investors participated in the company’s day of live deal marketing, resulting in the peak order book being 7.3x oversubscribed on our $300 million starting size. Subsequent to quarter end, in early May, we closed our amend-and-extend on the Truist revolving credit facility, reducing the size of the facility to $1.5 billion from approximately $1.7 billion, extending the maturity date to May 2031 from June 2030, removing the 10 bps credit spread adjustment from the drawn margin and reducing undrawn fees by 5 bps, as well as adding flexibility to unsecured debt baskets, among other borrower-friendly changes. Before continuing to the income statement, as a reminder, in addition to GAAP financial measures, we also reference certain non-GAAP or adjusted measures. This is intended to make our financial results easier to compare to the results prior to our October 2020 merger with Goldman Sachs Middle Market Lending Corp, or MMLC. These non-GAAP measures remove the purchase discount amortization impact from our financial results. For the first quarter, GAAP and adjusted after-tax net investment income were $24.8 million and $24.7 million, respectively, as compared to $42.2 million and $41.8 million in the prior quarter. On a per share basis, GAAP net investment income was $0.22, equating to an annualized net investment income yield on book value of 7.2%. While net investment income for the quarter was below our quarterly dividend, we utilized a portion of our undistributed taxable net income to provide a consistent dividend to our existing shareholder base. Total investment income for the three months ended 03/31/2026 and 12/31/2025 was $78.8 million and $86.1 million, respectively. Our remaining undistributed taxable net income as of 03/31/2026 was approximately $94 million, or $[inaudible] on a per share basis, providing meaningful cushion to support our dividend going forward. With that, I will turn it back to Vivek for closing remarks. Vivek Bantwal: Thanks, Stan, and thanks to everyone for joining our earnings call. We are excited to continue turning over the portfolio into new attractive opportunities using the full breadth of the Goldman Sachs platform while continuing to navigate through this market environment with humility and continued heightened discipline. We will now open the call for questions. Operator: If you are using a speakerphone, please make sure the mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We will pause for just a moment to allow everyone the opportunity to signal for questions. We will take our first question from Arren Cyganovich with Truist Securities. Arren Cyganovich: Good morning. Thanks. In terms of the pipeline of investment activity, maybe touch a little bit on what you are seeing there, what sponsors are saying, how they are adjusting to wider spreads and tighter documentation, and how long it might take to rotate out of the legacy and have more of the newly originated loans in the portfolio? Unknown Speaker: Hi, Arren. Thanks for the question. I would say a few things. Obviously, you mentioned some of the private equity–specific dynamics out there. Beyond that, there is geopolitical uncertainty and other factors, too. On the one hand, relative to where we were at the end of last year, deal activity is a little bit quieter overall. On the other hand, with some of the retail pullback you have seen from the non-traded BDCs, for the deals that are getting done, the pendulum seems to be swinging back in the direction of lenders in terms of spreads and leverage coming down a little bit, documentation, etc. On the deals that we are competing on right now, we really like those deals, we like the spreads we are getting, and we find far less competition than there was, particularly as you got into the end of 2025. That is the dynamic we are excited about, notwithstanding some of the broader noise. In terms of the second part of your question, that legacy percentage keeps ticking down. We expect it will continue to tick down, and as it does, we will be able to redeploy not just with the benefit of the post-integration platform, but also with the benefit of the better spread environment we are seeing today. Thanks. Arren Cyganovich: And with the two new credit nonaccruals that popped up, maybe you can provide a little bit of detail about whether these are older vintage, something specific or COVID-related, etc., and how much of the NAV decline in the quarter was related to those two nonaccruals? David Miller: Yes. This is David. From a credit mark perspective, about 60% of the marks that we saw were credit-specific events, those two being big ones, plus some other legacy assets that we marked down during the quarter, including some names that we have talked about in the past. With those two events, one is in the PPM space. As you know, that space has been challenged over the last number of years. We are continuing to work with the sponsor to optimize recoveries for the lenders there, and those conversations are ongoing. The other one, 3SI, if you look back over the past, had made some acquisitions; not all of the acquisitions have worked out like they thought. So leverage is elevated at this point in time, and that is why we put it on nonaccrual, and once again we are in active dialogue with the sponsors and our other lenders to optimize recovery. Operator: We will take our next question from Ethan Kaye with Lucid Capital Markets. Ethan Kaye: Hey, good morning. Thanks for taking the question. Appreciate the commentary on the pre-integration legacy assets versus the newly originated. Could you talk about the outlook for rotating out of some of these legacy assets, particularly the underperformers? Do you have any visibility there? David Miller: Yes. If you see in the results, we had relatively light repayments in the first quarter. As we look into the second quarter, we have had an acceleration. We have already got over $100 million in repayments from a number of legacy names, so we are encouraged by that. We will continue to address that proactively as they come up. We have some maturities in the next 12 to 18 months of those legacy names, so we are going to be working hard to cycle out of them and redeploy into the OneGS ecosystem we are operating in today with our new origination system and, frankly, better spreads we are seeing out here today. We are optimistic. It is really hard to pinpoint when these will be rotated out, but we have made decent progress, albeit slower than we would like, and we will continue to work on that in the coming quarters. Vivek Bantwal: I would just add, I think the power of the OneGS ecosystem is even more powerful in this environment, particularly with what you are seeing going on with retail flows in the non-traded BDC space. For us, the vast majority of our platform is institutional drawdown capital, about 83%. Our entire BDC complex is something like 17%. For Goldman Sachs BDC, Inc., which is an important part of our broader complex, it is going to be able to compete in a more scaled way than it could if it was just a stand-alone entity. There are very few, if any, out there right now, as we are competing on deals, that are showing up with the type of scale we have in terms of solving capital needs for clients on new deals. There are fewer new deals overall, but for the deals that are happening, our ability to source them on a differentiated basis and provide entire capital structure solutions, because we are not as levered to some of the phenomena out there, is really going to help us. But to your point, it is going to be a little bit of a process as we continue to roll out of some of these older names. Ethan Kaye: Great. That is good color. And then one other on the dividend. You maintained the dividend in Q2. You talked about using spillover this quarter to cover the shortfall. How long are you comfortable doing that, and what are some of the levers you feel you have to get dividend coverage back to a more sustainable level? David Miller: Yes, very fair point. If you look at our results this quarter, they were negatively impacted by an outsized incentive fee. As a reminder, we have a three-year lookback that is very shareholder friendly on that incentive fee, which was elevated this quarter. If you roll that forward over the next couple of quarters, we view a more muted incentive fee as a result of the same policy, which will certainly support the dividend in the near term. It is our intent—subject to consultation with our Board—to maintain our dividend in the near term. Operator: There are no further questions at this time. I will turn the conference back to Vivek for any additional or closing remarks. Vivek Bantwal: Thanks, everyone, for joining. We appreciate your support and look forward to continuing the dialogue. Have a great weekend.
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, I will be your conference operator today. At this time, I would like to welcome everyone to the Essent Group Ltd. First Quarter Earnings 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. Star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. And I would now like to turn the conference over to Philip Stefano, Investor Relations. You may begin. Thank you, Abby. Philip Stefano: Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO, and David Weinstock, Chief Financial Officer. Also on hand for the Q&A portion of the call is Chris Curran, President of Essent Guaranty. Our press release, which contains Essent Group Ltd.’s financial results for 2026, was issued earlier today and is available on our website at essentgroup.com. Operator: [inaudible] Mark Casale: Supply constraints and increasing pent-up demand will be positive for housing and our MI business when affordability improves. As of March 31, our mortgage insurance in force was $248 billion, a 1% increase versus a year ago. Twelve-month persistency was 84.7% reflecting the ongoing impact of the rate environment. Nearly 50% of our in-force portfolio carries a note rate of 5.5% or lower, a dynamic that we believe will support persistency at elevated levels. Credit quality of our insurance in force remains strong with a weighted average FICO of 747 and a weighted average original LTV of 93%. Our portfolio default rate was effectively flat quarter over quarter, and we continue to believe that the embedded home equity of our in-force book should mitigate ultimate claims. Outward reinsurance in our MI business continues to play an integral role in credit risk and capital. During 2026, we entered into an excess of loss transaction with a panel of highly rated reinsurers, providing forward protection for our 2027 business. We remain pleased with the execution of our reinsurance strategy, ceding a meaningful portion of our mezzanine credit risk and diversifying our capital sources. On the title front, we continue to transition the business from a stand-alone operation to an adjacency of our mortgage insurance franchise by leveraging our customer base and providing title solutions. The coordination between our MI and title teams continues to build momentum in expanding the number of Essent title customers, but we note this business is rate sensitive and results will continue to improve as origination volumes recover. On the Essent Re front, we expanded our P&C reinsurance platform in the first quarter. Our Lloyd’s program will generate approximately $120 million of written premium in 2026 against a $50 million deposit at returns comparable to our MI business. During the first quarter, we also executed a whole-account quota share covering a cedent’s casualty and specialty book, which will generate approximately $200 million of written premium in 2026. Combined, we expect that the near-term earnings impact will be immaterial, while over the longer term, growing income and the capital benefits of rating agency diversification will be key drivers in generating shareholder value. Our consolidated cash and investments as of March 31 totaled $6.6 billion, with an annualized aggregate yield for the first quarter of 4.2%. New money yields on our core portfolio in the first quarter were nearly 5%, holding largely stable over the past several quarters. We continue to operate from a position of strength with $5.7 billion in GAAP equity, access to $1.1 billion in excess of loss reinsurance, and $1.1 billion in cash and investments at the holding companies. With a trailing twelve-month operating cash flow of $827 million, our franchise remains well positioned from an earnings, cash flow, and balance sheet perspective. We remain committed to a measured and diversified capital strategy that looks to optimize shareholder returns over the long term while preserving optionality for strategic growth opportunities. With that in mind, year to date through April 30, we repurchased approximately 3.5 million shares for over $200 million. Furthermore, I am pleased to announce that our board has approved a common dividend of $0.35 for 2026. Now let me turn the call over to Dave. David Weinstock: Thanks, Mark, and good morning, everyone. Let me review our results for the quarter in a little more detail. For the first quarter, we earned $1.82 per diluted share, compared to $1.60 last quarter and $1.69 in the first quarter a year ago. Our consolidated net premium earned and operating expenses each increased from last quarter due to our P&C reinsurance activity, which began effective January 1. The consolidated provision for losses and loss adjustment expenses also includes amounts related to P&C activity. My comments today are going to focus primarily on our mortgage insurance segment results. There is additional information on our reinsurance segment and corporate and other results in Exhibits D, E, and O of the financial supplement. Our mortgage insurance portfolio ended the first quarter with insurance in force of $247.9 billion, essentially flat compared to December 31, and an increase of $3.2 billion, or 1.3%, compared to $244.7 billion at March 31, 2025. Persistency at March 31, 2026 was 84.7%, compared to 85.7% at December 31, 2025. Mortgage insurance net premium earned for the quarter was $216 million. The average base premium rate for the mortgage insurance portfolio for the first quarter was 41 basis points, consistent with last quarter, and the average net premium rate was 35 basis points, up 1 basis point from last quarter. Our mortgage insurance provision for losses and loss adjustment expenses was $37.6 million in the quarter, compared to $55.2 million in the fourth quarter of 2025 and $30.7 million in the first quarter a year ago. At March 31, the default rate on the mortgage insurance portfolio was 2.54%, essentially unchanged from December 31, 2025. Mortgage insurance operating expenses in the first quarter were $37.6 million and the expense ratio was 17.4%, compared to $34.3 million and 16.1% last quarter, and $40.9 million and 18.8% in the first quarter last year. Consistent with prior years, operating expenses in the first quarter of each year are typically higher due to payroll taxes on incentive compensation, as well as higher stock-based compensation expense. At March 31, Essent Guaranty’s PMIERs sufficiency ratio was strong at 174%, with $1.6 billion in excess available assets. Turning to our Reinsurance segment, net premium earned, provision for losses and loss adjustment expenses, and acquisition costs each increased from last quarter due to the P&C reinsurance activity, which began effective January 1. Consistent with Mark’s comments, the pretax earnings for our P&C activity were immaterial for the quarter, and the pretax earnings for the reinsurance segment in the first quarter predominantly reflect the underwriting results for our GSE and other mortgage risk share activity. Consolidated net investment income and our average balance of cash and available-for-sale investments in the first quarter were largely unchanged from last quarter due to the use of operating cash flows to repurchase shares. Income from other invested assets was $10.2 million in the quarter, compared to $3.9 million last quarter and $7.4 million in the first quarter a year ago. Higher results this quarter are primarily due to increased favorable fair value adjustments in the quarter. As Mark noted, our total holding company liquidity remained strong and includes $500 million of undrawn revolver capacity under our committed credit facility. At March 31, we had $500 million of senior unsecured notes outstanding, and our debt-to-capital ratio was 8%. At quarter end, Essent Guaranty’s statutory capital was $3.7 billion with a risk-to-capital ratio of 8.6 to 1. Note that statutory capital includes $2.6 billion of contingency reserves at March 31. As of April 1, Essent Guaranty can pay ordinary dividends of up to $330 million in 2026. In April, Essent Guaranty paid its first dividend of 2026 to its U.S. holding company of $50 million. During the first quarter, Essent Re paid a dividend of $100 million to Essent Group Ltd. Also in the quarter, Essent Group Ltd. paid cash dividends totaling $32.6 million to shareholders and we repurchased 2.6 million shares for $157 million. In April 2026, we repurchased 934 thousand shares for $57 million. Now let me turn the call back over to Mark. Mark Casale: Thanks, Dave. In closing, Essent Group Ltd. is a well-capitalized, high-quality franchise with strong and consistent cash flow generation. Our core mortgage insurance business remains well positioned to serve our lenders throughout this period of housing market transition, and our Reinsurance segment continues to create value by deploying capital efficiently across both mortgage and non-mortgage risk. We remain confident in our ability to grow book value per share, return capital to shareholders, and invest in opportunities that build a stronger franchise for the long term. Now let us get to your questions. 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 1 on your telephone keypad to raise your hand and join the queue. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your questions. Again, it is 1 to join the queue. Our first question comes from the line of Bose George with KBW. Your line is open. Bose George: Hey, good morning, everyone. Actually, first, can we just talk about your updated thoughts on what you are seeing in terms of consumer credit? Any early signs of weakness on higher gasoline prices, or just things you are keeping an eye on? Mark Casale: Hey, Bose. I would say right now, we are not seeing any real cracks. You are seeing it a little bit in the lower-end consumer. If you take a peek at the FHA delinquencies, keep in mind our book has much higher FICO, around a 747 average FICO, and average income of about $130 thousand per household. These are the consumers that are really driving the economy, along with significant AI spending. So we are not seeing it. When you think about our defaults having gone up, take a step back and really look at the seasoning of the book. At roughly 39 months, the book is seasoned; peak default is 36 to 60 months. So there is really a normalization of the credit. We are not seeing an acceleration of that against roughly 20 thousand defaults, and the book is not really growing in terms of policies. I would say the consumer is in good shape. When you mention inflation, again, that is much more likely to hit the lower-end consumer. It is certainly something we are watching. Bose George: Okay. Great. Thanks. And then, on competitive trends in the market? Mark Casale: No real differences in terms of competitive trends. You are starting to see, with the lack of affordability, some lenders starting to reach a little bit. On the MIs, it is a small market and the books are not growing, so you are starting to see a little reach here and there. There was a bid card that we passed on recently where we saw a little bit of an extension of credit and we priced for it and did not get it. You are seeing a little around the edges, but nothing alarming. The longer this pause is—this pause started probably back in 2022, then 2023, 2024, 2025, and now into this year—I think the industry has done a good job being patient and thoughtful. You are always going to see a crack here and there. From our standpoint, we look at it a little bit differently in terms of really focusing on the unit economics. When you look at where our NIW was for the quarter versus the number one mortgage insurer, the difference is relatively small. Our view is that additional NIW is probably at the lower end of our return hurdles, so we look at other options to allocate that capital. Lloyd’s is a good example. The Lloyd’s leverage and the returns there are comparable. I will also point you to our other invested assets. We were able to put money to work there in the first quarter that we think will be easily mid-teens returns over the next few years. So it is a choice. From a competitive standpoint, nothing alarming, and it remains a small market, so it is difficult to separate much when it is such a small market. Bose George: Great. Thanks for the color. Operator: Our next question comes from the line of Terry Ma with Barclays. Your line is open. Terry Ma: Just wanted to follow up on credit. As we look at results for the quarter, anything to call out? New notices were at least sequentially a little bit more muted compared to the seasonality that you saw the last few years. Anything to call out there? And as we look out to the rest of the year, should we assume normal seasonality holds? Mark Casale: I would. I would expect, Terry, as you and investors focus on it, that, given the seasoning of the portfolio and peak default being 36 to 60 months, you are going to see defaults continue to increase. I do not think the rate is accelerating; it is a seasoning aspect. Keep in mind, we paid about $13 million of claims in the first quarter. Going into default does not necessarily mean they are going to roll to claim. Big picture, 800 thousand policies and 20 thousand defaults is normal given the age for defaults to season and new notices to tick up a little bit. Terry Ma: Great. And then just a housekeeping question. I think I missed it in the prepared remarks, but the provision on the reinsurance segment—that was related to the net premium written in the quarter, right? As we look forward, should that in a sense normalize compared to past few quarters? Mark Casale: Yes, it is a big change this quarter because we wrote Lloyd’s, which hit in the first quarter. We also wrote the retro quota share, which we wrote in the first quarter but is effective back to January 1. These are run at higher combined ratios, and you are combining with mortgage, so modeling can be a little tricky; we can help you offline. Bottom line, it is not going to drive a lot of income in 2026, but it does set the stage for a little bit down the road. The counter to that is the mortgage book within Essent Re is not really growing. We have a pause for growth on the MI side. The GSEs are buying reinsurance higher up in the capital structure, and they are optimizing their capital model. There is less rate on line because there is less risk, and they are reinsuring less overall. If there is a change—think privatization of the GSEs and a more normal risk-share program—we could see that growth resume. Right now, it is going to be a little bit of P&C earnings replacing mortgage earnings over the next few years. Terry Ma: Got it. Thank you. Operator: As a reminder, it is star one if you would like to ask a question. Our next question comes from the line of Geoffrey Dunn with Dowling & Partners. Your line is open. Geoffrey Dunn: Thanks. Unfortunately, I think you just said you would do this offline, but could you break down the loss ratio in the reinsurance business between the P&C and the mortgage business? Mark Casale: High level, the loss ratio on mortgage is basically zero, so most of the losses are flowing through P&C. For modeling, I would look at mid- to high-90s for P&C together. It is Lloyd’s and quota share; the majority of it is specialty and casualty. There is a little property in there from Lloyd’s, but it is D&F, not property cat. The Lloyd’s combined ratio will probably be mid-90s, but the quota share is probably in the higher 90s, so it will balance out. For a company that writes at a 35% combined ratio in MI, it is an adjustment to write at those higher P&C levels, but there is different leverage. There is a lot more premium leverage within P&C, and when rates went up a couple of years ago, that leverage made a lot more sense. We are fortunate that we have the franchise in Essent Re to do it. The S&P capital model helps; our AAA access that we write to is on the order of about $850 million. So for us to write $200 million, there is really no additional capital, and it probably helps us from a capital diversification rate. We are not taking capital from repurchases and putting it in P&C; we are effectively double-levering the capital a bit within Essent Re, which over time will be accretive to earnings. Geoffrey Dunn: That is helpful. Thank you. Operator: Our next question comes from the line of Mihir Bhatia with Bank of America. Mihir Bhatia: Hi. Good morning. Thank you for taking my question. I wanted to start by asking about the cure rate. I know the number of new defaults is up, but the cure rate really fell off a cliff this quarter, and I do not know if I am just missing something obvious. David Weinstock: Hey, Mihir. Thanks for your question. I would not characterize it that way. If you look at the supplement and our data on how much of our new defaults are curing, it has been pretty consistent quarter after quarter, generally in the 30% range. It has been very consistent, I would say, quarter over quarter. Mihir Bhatia: Okay. Maybe I will take that up offline. Mark Casale: Mihir, I think you may be missing something there, so let us take that offline because it did not really fall off a cliff. It is actually relatively normal if you go back and look at our past. Mihir Bhatia: Thank you. And then in terms of the reserve releases, they were close to zero. Given the commentary about stability and portfolio seasoning, what would have to change for the prior-period reserve releases to go down? What indicators should we be looking for that would suggest reserve releases will slow down? Mark Casale: I would look at the unemployment rate. With an average FICO of about 745–747 and strong average incomes, this is a strong borrower unless they lose their job. You saw that in COVID. Employment is pretty strong, and I think it will continue to be strong. Also remember, home prices still provide a lot of embedded equity in the portfolio, especially in the pre-2022 book. Just because a loan goes into default does not mean it will roll to claim—again, we paid about $13 million of claims in the first quarter. Stepping back, the company’s cash flow generation over the last twelve months was $827 million. On a yield basis versus book value, the cash flow returns are high. We continue to have a lot of excess cash at the holdco, even after the share repurchases. We are in a good position, and capital begets opportunities. We are allocating capital within Essent Re and into other invested assets to improve returns and make it more accretive to shareholders. Title, which we do not talk a lot about, is starting to come into its own as an adjacency to the MI business. We have momentum around coordination between the MI platform and the title team, and we have seen some nice customer wins. You have to stack all that, just like we did when we built the MI business, and you clearly need rates to come down. We are starting to see some green shoots throughout the organization, and that is during a pause. Demographically, you have 4 to 5 million potential first-time homebuyers coming of age every year. Affordability is the issue. It will be solved with continued job and income growth and some moderation of rates, and there could be some changes in HPA. There are pockets of weakness, which I have said before I think are healthy. Big picture, we are in good shape. I would caution investors not to focus only on short-term metrics like defaults and new notices. Right now, this is a well-oiled cash flow machine, and we will look to allocate that capital effectively. Mihir Bhatia: Got it. That is helpful for sure. And a follow-up on title—did you see intra-quarter benefits from lower rates early in the quarter, from a persistency and title perspective? Mark Casale: You broke up a bit, but yes, we did. We saw a spike in the fourth quarter and in the first quarter, which we took advantage of, and we are better situated to take advantage as we build scale. We are putting in a new system, very similar to how we did it back in the MI days. The company we bought had outsourced IT, and you do not just drop that into our structure overnight, so we are investing in the system and being patient, and our expense efficiency allows us to invest. We are starting to see it. It is more important for the post-2022 book; I said half the book is at 5.5% and below, which is not likely to refinance. It will be the newer, higher-rate book that starts to refinance, which can drive renewed growth. I am not necessarily seeing rates come down this year given oil prices and inflation, but it is another potential tailwind if rates move. Mihir Bhatia: Got it. Thank you for taking my question. Operator: With no further questions, I will now turn the conference back over to management for closing remarks. Mark Casale: I would like to thank everyone for joining us today, and have a great weekend. Operator: Ladies and gentlemen, this concludes today’s call, and we thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Willdan Group First Quarter Fiscal Year 2026 Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, Al Kaschalk, Vice President. Please go ahead, sir. Al Kaschalk: Thank you, Terry. Good afternoon, everyone, and welcome to Willdan Group's First Quarter 2026 Earnings Call. Joining our call today are Mike Bieber, President and Chief Executive Officer; and Kim Early, Executive Vice President and Chief Financial Officer. Our conference call remarks will include both GAAP and non-GAAP financial results. Reconciliations between GAAP and non-GAAP measures can be found in today's press release and in the presentation slides, all of which are available on our website. Please note that year-over-year commentary or variances on revenue, adjusted EBITDA and adjusted EPS discussed during our prepared remarks are on an actual basis unless otherwise specified. We will make forward-looking statements about our performance. These statements are based on how we see things today. While we may elect to update these forward-looking statements at some point in the future, we do not undertake any obligation to do so. As described in our SEC filings, actual results may differ materially due to risks and uncertainties. With that, I'll hand the call over to Mike, who will begin on Slide 2. Michael Bieber: Thanks, Al, and good afternoon to everyone on the call. We had a strong start to 2026, continuing the momentum we've been building with solid execution and expanding margins across the business. In the first quarter, normalized for that extra week we had last year in Q1, contract revenue grew 10%, net revenue grew 17% and adjusted EBITDA increased 35% year-over-year. Overall, the business is performing well, and we remain at the center of several long-term energy trends that are driving growth. With a solid Q1 behind us and good visibility on what we believe will be a very strong performance over the next few quarters, we have improved visibility on 2026 compared to our last quarterly call. That is all before the announcement of our latest acquisition. On Monday of this week, we closed the acquisition of Burton Energy Group, which I'll discuss next. On Slide 3. Burton Energy Group is a trusted adviser, serving mainly Fortune 500 customers throughout the United States. Willdan has been working with Burton for more than 10 years under our Con Edison program and elsewhere around the country. Burton brings a highly complementary set of capabilities, including energy management, energy efficiency and energy procurement services. They help manage the energy at more than 60,000 client sites. Burton expands our capabilities in energy cost management and procurement, deepens our relationships with large enterprise clients and adds a high percentage of recurring revenue to our business, usually contracted under multiyear agreements. Burton generated approximately $103 million in contract revenue, $15 million in net revenue and $7 million in EBITDA in 2025. The acquisition is expected to be accretive to our margin, earnings and EPS this year '26. Burton opens an almost entirely new market to Willdan with Fortune 500 clients. We're excited to welcome the Burton team, and we're particularly optimistic about the cross-selling opportunities with this group since we've known them for so long. On Slide 4. When I became CEO at the beginning of 2024, I talked about our strategy to significantly expand into the commercial sector. We described then that we believe diversification would add long-term stability and would provide Willdan with the opportunity to earn higher margins. These pie charts show that in 2024, commercial revenue was 7% of our business. 2 years later, on a full year pro forma basis after Burton, commercial revenue is expected to be about 25% of revenue this year. The diversification has also contributed to our higher margins and to the reset of our long-term margin targets that Kim will present in a few slides. On Slide 5. This chart shows that Burton is headquartered outside Atlanta, Georgia and helps fill in Willdan's presence in the Southeastern and Midwestern states. With Burton, Willdan now has active projects in all 50 states. We now have permanent offices in 26 of the 50 states plus a presence in Puerto Rico and Canada. Next on Slide 6. We've used this triangle diagram before to show that in problem solving, upfront analysis of a client's problem leads to the engineering of a solution and then to the program management of the solution implementation. Burton's services fall into all 3 categories. Burton often starts with the study of a client's energy usage, energy costs and carbon generation. That usually results in the design of a program that helps lower cost, improve resilience and achieve a client's unique objectives. Burton will usually manage the teams of contractors that will address a client's energy usage to achieve that client's objectives. Each of these phases of work is usually conducted through multiyear contracts that lead to the long-term client engagements of more than 10 years. On Slide 7. We've had another solid stretch of contract wins, and here are a few examples since our last earnings call. For Southern California Edison, SCE, we received a 2-year extension and another $100 million of funding for our commercial energy efficiency program. This expansion would extend the program through the end of 2027. For the Dormitory Authority of the State of New York, DASNY, we won a $54 million project to upgrade the central plant at a college in New York City. I'm very pleased that we were awarded the $27 million 3-year New York Accelerator program. This is a new contract, which has been held for many years by one of our strongest competitors. We started pursuing this contract several years ago, and we're able to win this key program, which helps the city of New York accelerate the decarbonization of buildings in the city, a very cool win. Next, we were awarded Ciro One project in Puerto Rico, a $24 million battery energy storage system. This project is one of several on the island designed to help improve power grid resiliency in Puerto Rico, a major issue there. And lastly, we were awarded 2 small contracts with National Grid for New York City and Long Island to implement small business energy efficiency programs. It was a good quarter for New wins, and our pipeline of opportunities continues to grow. On Slide 8. Each quarter, we try to take a step back and look at macro changes to electricity demand and its effect on the grid and Willdan's market. We've talked a lot about how AI is driving a long-term increase in electricity demand due to new data centers. Previously, we presented some of our work for the state of Virginia, the largest data center market in the world. Recently, we studied electricity demand increases across the Western U.S., so I'll present a few highlights from those studies. Work like these keeps Willdan at the very forefront of trends in the energy markets, helping us to navigate this period of rapid change. Slide 8 shows a few examples of electricity demand across the Western U.S. On the left of the slide, in the Pacific Northwest, the scale of the new electricity generation is insufficient to meet forecasted demands by 2030. To the right, the Southwestern U.S. needs 25 gigawatts. California alone needs 20 gigawatts of additional generation capacity by 2030. The growth in electricity demand is largely driven by new data centers. On Slide 9, this slide from the same study shows that in the Northwestern U.S., when you take into account retiring electricity generation, the pace of new generation will increase by 4 to 5x the pace of historical generation development. The sum of integrated resource plans, IRPs indicates that most of this electricity is forecasted to come from solar, wind and battery storage given the supply chain constraints around gas turbines. This more complex future generation stack complements Willdan's capabilities. The sustained load growth and increased investment are driving long-term demand for grid infrastructure, engineering and energy solutions, areas where Willdan is well positioned. As we've mentioned before, energy efficiency is one of the most quickly available, least cost electricity resources. We believe these trends will drive our business for years to come. Overall, we're pleased with our performance to start the year. Operational strength and the addition of Burton set Willdan up to have what we believe will be another very strong year. As Kim will detail, we are now anticipating that we will grow adjusted EBITDA by 26% to 32% year-over-year, an outstanding result. Kim, over to you. Creighton Early: Thanks, Mike, and good afternoon, everyone. We delivered a strong start to 2026, exceeding expectations with solid performance across our businesses and continued margin expansion. Strong underlying demand for our services and greater productivity in our utility programs and performance engineering projects drove higher profitability in the quarter. Slide 11 shows the key metrics for the quarter. Contract revenue increased 2% year-over-year to $155 million, while net revenue grew 8% to $92 million for the quarter. But as a reminder, the first quarter of 2025 included an additional week. Excluding this impact, contract revenue grew 10% year-over-year and net revenue 17%, reflecting the continuing continued health of the business. An improvement in gross margins was the key driver behind the 25% increase or 35% when 2025 is normalized in adjusted EBITDA over the prior year. The $18.1 million in adjusted EBITDA was a first quarter record and represented 19.6% of net revenue. Expense control and a 2026 tax benefit versus the smaller tax expense in the prior year enabled adjusted earnings per share to increase 44% over last year's first quarter to $0.91 per share compared to $0.63 in 2025. To provide a little more detail on the components of the earnings improvements, our gross margin expanded to 40.7%, up from 37.8% in the prior year, reflecting the expanding volume, improved productivity and a favorable service mix as we continue to focus on quality and profitability. The improved margin performance was derived from productivity improvements in sales and reduced costs under our utility programs and further aided by margin improvements in our performance contracting projects, including those from the acquisition of APG a year ago. G&A expenses increased 10% year-over-year or 19% when normalized for the additional week in 2025, primarily reflecting higher noncash charges for the amortization of intangibles derived from acquisitions of $1 million as well as stock compensation increases reflecting the higher stock price compared to a year ago, up $1.3 million. Salary and benefit costs also increased consistent with the acquisitions and the growth of core revenues and earnings, while interest expense was $1 million lower than a year ago, reflecting the lower leverage from our strong cash flows. Thus, our pretax income grew by 40% to $7.3 million for the 13-week first quarter of '26 compared to $5.2 million in the 14-week period a year ago. We recognized a $1.3 million tax benefit in the quarter compared to a $500,000 tax expense in 2025. The tax benefit was driven by Section 179D energy efficiency deductions and discrete items related to stock-based compensation. So on the bottom line, net income increased 82% to $8.5 million, 96% when normalized or $0.55 per diluted share on a GAAP basis compared to $4.7 million or $0.32 per diluted share in the prior year. And again, adjusted earnings per share increased 44% to $0.91 per share this quarter compared to $0.63 a year ago. Earnings were very good with solid growth and improving margins in what historically has been our weakest quarter of the year. Turning to cash flow and the balance sheet on Slide 12. Cash flow used in operating activities was $24 million in the quarter compared to a positive $3 million in the prior year. On a trailing 12-month basis, cash flow from operations was a positive $52 million, which would have been $18 million higher should one client have paid us 2 weeks earlier. From a free cash flow perspective, we used approximately $1.71 per share in the quarter but generated $2.81 per share on a trailing 12-month basis. We continue to expect strong cash flows from operations, aided by the carryforward of $28 million in deferred tax assets on our balance sheet generated by the 179D deductions and other incentives to offset future tax liabilities well into 2027 and beyond. On a long-term basis, we would expect free cash flow to exceed 70% of our adjusted EBITDA on an annual basis. We ended the quarter with $28 million of unrestricted cash to net against the $48 million outstanding under our term loan, resulting in a 0.2x leverage ratio of net debt to adjusted EBITDA over the trailing 12 months. There were no borrowings outstanding on our $100 million revolving credit facility at the end of the quarter. But subsequent to year-end or quarter end, we drew $30 million on the revolver to fund a portion of the Burton acquisition, which would increase the leverage ratio to 0.6x. Given our expected earnings for the remainder of the year, we would expect the revolver to be fully repaid by year-end and continue to provide us low leverage and high liquidity with significant expansion capacity under the $100 million revolver and the $50 million delayed draw term loan facility to support continued organic growth and strategic acquisitions. Turning to Slide 13. Last year, we exceeded our long-held goal of delivering adjusted EBITDA in excess of 20% of net revenue. Based on our recent performance and the underlying drivers in the business, including improved productivity, favorable revenue mix and additional operating leverage, we are now raising our long-term margin goal to expect the adjusted EBITDA to net revenues margin to be in the high 20s. We'll continue to focus on the volume, productivity and cost control efforts required to achieve that goal as we continue to grow the business. Now to Slide 14. Based on our strong start of the year, we're raising our full year 2026 financial targets. I'll note that the increase in guidance is roughly double the Q1 beat plus the expected contribution of Burton, reflecting the strength of our core business. We now expect net revenues to be in the range of $410 million to $425 million, adjusted EBITDA in the range of $100 million to $105 million and adjusted diluted earnings per share between $4.90 and $5.05. This outlook assumes approximately 15.9 million diluted shares outstanding at year-end and a 0% effective tax rate for the year, reflecting the higher expected pretax income and reduced estimates of discrete tax benefits derived from stock compensation. And on Slide 15. It was a strong start to FY '26, fueling our optimism for continued growth and expanding margins. The acquisition of Burton a few days ago further fuels that optimism, expanding our addressable markets and creating numerous opportunities for collaboration and cross-selling. We continue to enjoy low leverage and high liquidity even after this investment, and we are raising our guidance and increasing our goal for adjusted EBITDA margins. It was a good quarter. Operator, we're now ready to take questions. Operator: [Operator Instructions] And our first question will come from Craig Irwin with ROTH Capital Partners. Craig Irwin: Congratulations on a strong quarter here. Mike, I wanted to start off the top by asking if you could help us with maybe a little bit more color on why your fundamental profitability levels are going up, right? You're raising your base EBITDA guidance targets and raising your guidance for this year on that as well. Clearly, there's things that are working for you. I know you've had a number of initiatives internally at the company to improve profitability. We're also seeing an environment where reserve margins are likely to fall. So your customers will look pretty desperate to stop brownouts and other problems that you prevent with your services. How would you help us understand what the opportunity is? And is this really just a first step? Is there potential room in the future for this number to keep moving higher? Michael Bieber: Yes, Craig. If you look back 5 years ago, we wouldn't have thought this possible. But we're performing very well, and we've got a lot of confidence that we'll be able to get this into the high 20s. If you just model out our guidance for this year, we'll be potentially north of 24% already this year. So there's really 4 things that are driving it. Number 1 is growth and back office cost absorption. We've been able to control costs as we grow the business, especially on the back office at a fraction of the rate of the growth rate of the company. So that's number 1. We need to keep growing. Number 2, you're right, energy demand plays a part in this. The price of energy is going up. Resources are becoming more constrained. So the value of our services are going up to those customers who need us. The third is probably that we've moved up the value chain. We've got a much more differentiated set of services that we provide compared to 5 years ago. And that continues to go in the right direction. The last thing is probably the percentage of commercial work. The state and local tends to be the lowest margin opportunity. And when that was almost 50% of the business several years ago, there just wasn't that kind of opportunity to grow north of 20% and now there is. With, I'll call it, a balanced portfolio of the 3 customer groups and commercial being 25% now, we have the opportunity to drive margins. Those customers tend to want the solution immediately like yesterday, but they are willing to pay for that, unlike government customers that take a little more modest approach to schedules. So those are the 4 things driving it. And we think this reset of expectations for margins is very achievable. We're going to make good progress on that this year. Craig Irwin: Fantastic. So I wanted to ask about APG and the setup that you have providing services building power blocks primarily for data centers. This business, you've talked about it growing extremely quickly, potentially doubling this year. Is there any update or any color you can give us on specific wins in there, new customers, diversification? What should we look for over the next couple of quarters as you scale that business? Michael Bieber: That has been a good acquisition. They are doing outstanding. Yes, they're going to more than double. They might even approach tripling this year. They're just performing outstanding. And it's already work we've won and are executing, and we're really looking towards the pipeline of '27 and '28 right now. The biggest thing driving that is a few big power blocks for large data centers. Those tend to be confidential projects. So that's why you haven't seen them announced. But the biggest project that APG has going and what's going to drive the next couple of quarters for them and really most of the year is a very large data center located in the Southwestern United States, where we're providing the substation, essentially, the interconnect and all of the power blocks. So there are several more projects in the pipeline that look just like that. They've also diversified. They were the ones that won the battery storage project down in Puerto Rico. So they do that type of work. That's good as well. It's been very good. Mount SAC was a great collaboration. We announced that project. That was with the rest of Willdan. It's been one of the most synergistic acquisitions that we've made because of their level of collaboration with the rest of the company. Craig Irwin: Excellent. Last question, if I may. Amber and her team at E3 have incredible visibility on demand, demand for services like Willdan's and the overall outlook for CapEx for utilities and commercial infrastructure for power. It's interesting that you guys are buying Burton that you've tucked them into the team. And obviously, this is something similar in character to the core of your business. Do you see the Northwest as maybe a new frontier for Willdan, something that could potentially be as interesting or as substantial as your work on the West Coast and the East Coast, where you generate quite a large portion of your revenue? Michael Bieber: I don't -- I wouldn't really focus on the Northwest so much as that happened to be a study of all of the Western states, the Northwest being a particular focus area. It also covered California. It was a regional study that we did. So we just pointed that out as new data that all points to what we're seeing across the country, which is that the demand for electricity is increasing. In some cases, we're not keeping up with that demand. So CapEx is going to have to go up substantially. How do you do that in an equitable way without raising rates? Rates are going up across the country. And so it's a complex equation that's happening all across the United States. I wouldn't single out the Northwest more than in other places, though. Craig Irwin: Well, that's good to hear, it's broad-based. Congrats on another solid quarter. I'll hop back in the queue. Operator: [Operator Instructions] We'll go next to Tim Moore with Clear Street. Timothy Michael Moore: Very impressive EBITDA growth and margin in the seasonally low quarter despite one last week last year. And despite probably not benefiting from the Los Angeles Water & Power award yet, I enjoyed your head fake of conservative guidance in late February. Can you just update us maybe on the timing or visibility for maybe when the Los Angeles Water & Power contract might kick in? I mean that's quite a large contract, I don't know, maybe $16 million of gross revenue a quarter run rate. Any visibility on when that might start? And is that part of your recent guidance upgrade? Michael Bieber: It didn't really drive the guidance upgrade that much. We had a very small contribution in Q1, but we did have revenue for the first time in a while. That's going to increase pretty substantially in Q2, but it's still a small number. We have bigger expectations for the back half of this year. I would characterize it as sort of the first inning of a ball game. We're ramping up the program. Every week is better than the previous. In addition to all that ramp-up, though, there are some future opportunities we hope to share with the group that may drive that contract even larger. We haven't nailed that down yet, but the customer is discussing those with us. So the ball is rolling. It's not driving current results nor did it really drive the upgrade of our forecast, but we think there may be more to come there. Timothy Michael Moore: That's very helpful color. To have that in your back pocket and it seems like it will be more of a contributor for next calendar year as it ramps up and maybe play some catch-up on that 5-year contract. Just switching gears. If you can maybe just share a little color on how many months did you evaluate or negotiate maybe the Burton Energy Group? And maybe if you can just provide a little color on your acquisition funnel. I mean you have so much liquidity and barely any net debt. It seems like you could absorb a few more acquisitions over the coming quarters. Just any thoughts on that? I know you're still really focusing a bit more on the commercial side for targets? Michael Bieber: Well, Burton was extremely deliberate in their discussions with us. It took a long time. We were in detailed discussions with them for, I'm thinking, I don't know, 7 or 8 months, something like that, took a long time, and we got to the right spot. So we're very pleased with the Burton deal. We had known that company for more than 10 years. And when they decided that they wanted to make a move and potentially sell the company, they called us, in fact, even though we had known them. So we very much appreciate them for doing that. We've respected Burton for a long time. And sometimes what happens with our teaming partners and people we're working with out in the industry, they know what we're after. And when the time is right, sometimes we get that call and they come to us. That's what happened with Burton. And it's characteristic of something we're also seeing in our pipeline. We're one of the few strategic buyers out there in this marketplace. We're competing with a lot of private equity that often will pay more. And some of these groups that we're working with won't sell to private equity at any price. They want to go with a strategic partner like Willdan. And so that makes us a buyer of choice. And if you look at our pipeline right now of what we're evaluating for the back half of the year and into next year, that's the case. I'd point to the same focus areas that we've had. Electrical engineering is hard to find. It's also very expensive. It's being bid up. But boy, we'd sure like to have it. And the success we've had in electrical engineering with APG demonstrates that we're willing to move into that space. Commercial, more commercial would be helpful. We're looking at that in our core services, but we're getting to a point where that's more balanced with the other areas. And the front end of our business is still undersized. We would love to have more science and front-end evaluation work, more data analytics, more software, very differentiated solutions, we're looking there as well. So those are still 3 of the focus areas. Timothy Michael Moore: That's great, Mike. And I think you kind of beat me a little bit to my next question. I'm just trying to think about what you would maybe -- you and Kim think about maybe as a limiter to organic growth. I mean, you mentioned all the states you're in. I mean you're definitely largely in California and New York, and you got some Florida and Texas and some other good scale. I mean there's just high demand for what you offer, and you're really the go-to consultants and experts on this, especially with E3 and everything else you have. Is there any kind of limitation now on really accepting more large contracts that would start in the next 12 months? Michael Bieber: We always hate to say that labor is going to limit our ability to grow organically. And I don't think it is in a big area. There are some niches where we're hiring. And we're looking for people, just go to our website. That area around APG, our electrical engineering and construction management that's very specialized there needs to significantly increase its workforce. But I wouldn't say it's a constraint point at this point. Would you? Creighton Early: No, I don't see that as a constraint. And the pipeline of opportunities that our various business units are pursuing is pretty robust. So I don't see a cap on what that potential might be. But when you're dealing with large programs and large projects, timing is everything and exactly predicting how that and when that might occur is more difficult. But we don't have a limitation on resources or even supply chain at this point that really is going to limit that potential. Timothy Michael Moore: That's really good granularity. That's it for my questions. Congratulations on all the terrific progress. Operator: And this now concludes our question-and-answer session. I would like to turn the floor back over to Mike Bieber for closing comments. Michael Bieber: Great. Well, thank you for your interest in Willdan, and we look forward to speaking with you next quarter. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.